x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-3434400 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Yes | x | No | o |
Yes | x | No | o |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | |
Emerging growth company o | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Yes | o | No | x |
Page | ||
Part I | ||
FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | ||
OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Item 1. | Financial Statements |
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Investment in AB | $ | 1,534,935 | $ | 1,544,704 | |||
Total assets | $ | 1,534,935 | $ | 1,544,704 | |||
LIABILITIES AND PARTNERS’ CAPITAL | |||||||
Liabilities: | |||||||
Other liabilities | $ | 629 | $ | 1,154 | |||
Total liabilities | 629 | 1,154 | |||||
Commitments and contingencies (See Note 8) | |||||||
Partners’ capital: | |||||||
General Partner: 100,000 general partnership units issued and outstanding | 1,386 | 1,411 | |||||
Limited partners: 97,928,820 and 96,361,989 limited partnership units issued and outstanding | 1,601,958 | 1,590,776 | |||||
AB Holding Units held by AB to fund long-term incentive compensation plans | (31,718 | ) | (15,174 | ) | |||
Accumulated other comprehensive loss | (37,320 | ) | (33,463 | ) | |||
Total partners’ capital | 1,534,306 | 1,543,550 | |||||
Total liabilities and partners’ capital | $ | 1,534,935 | $ | 1,544,704 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Equity in net income attributable to AB Unitholders | $ | 65,388 | $ | 47,947 | $ | 131,086 | $ | 97,613 | ||||||||
Income taxes | 6,931 | 6,206 | 14,469 | 11,962 | ||||||||||||
Net income | $ | 58,457 | $ | 41,741 | $ | 116,617 | $ | 85,651 | ||||||||
Net income per unit: | ||||||||||||||||
Basic | $ | 0.59 | $ | 0.43 | $ | 1.19 | $ | 0.89 | ||||||||
Diluted | $ | 0.59 | $ | 0.43 | $ | 1.19 | $ | 0.89 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 58,457 | $ | 41,741 | $ | 116,617 | $ | 85,651 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments, before reclassification and tax | (7,429 | ) | 2,643 | (3,981 | ) | 5,842 | |||||||||
Less: reclassification adjustment for (losses) included in net income upon liquidation | (36 | ) | — | (36 | ) | — | |||||||||
Foreign currency translation adjustments, before tax | (7,393 | ) | 2,643 | (3,945 | ) | 5,842 | |||||||||
Income tax (expense) benefit | (5 | ) | 97 | (25 | ) | 52 | |||||||||
Foreign currency translation adjustments, net of tax | (7,398 | ) | 2,740 | (3,970 | ) | 5,894 | |||||||||
Unrealized gains on investments: | |||||||||||||||
Unrealized gains arising during period | — | 9 | — | 4 | |||||||||||
Less: reclassification adjustments for gains included in net income | — | — | — | — | |||||||||||
Changes in unrealized gains on investments | — | 9 | — | 4 | |||||||||||
Income tax benefit | — | 3 | — | 2 | |||||||||||
Unrealized gains on investments, net of tax | — | 12 | — | 6 | |||||||||||
Changes in employee benefit related items: | |||||||||||||||
Amortization of prior service cost | 1 | 8 | 1 | 10 | |||||||||||
Recognized actuarial gain | 57 | 421 | 19 | 533 | |||||||||||
Changes in employee benefit related items | 58 | 429 | 20 | 543 | |||||||||||
Income tax benefit (expense) | 1 | (4 | ) | (40 | ) | (31 | ) | ||||||||
Employee benefit related items, net of tax | 59 | 425 | (20 | ) | 512 | ||||||||||
Other | 134 | — | 133 | — | |||||||||||
Other comprehensive (loss) income | (7,205 | ) | 3,177 | (3,857 | ) | 6,412 | |||||||||
Comprehensive income | $ | 51,252 | $ | 44,918 | $ | 112,760 | $ | 92,063 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 116,617 | $ | 85,651 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Equity in net income attributable to AB Unitholders | (131,086 | ) | (97,613 | ) | |||
Cash distributions received from AB | 167,861 | 120,816 | |||||
Changes in assets and liabilities: | |||||||
Decrease in other liabilities | (525 | ) | (72 | ) | |||
Net cash provided by operating activities | 152,867 | 108,782 | |||||
Cash flows from investing activities: | |||||||
Investments in AB with proceeds from exercise of compensatory options to buy AB Holding Units | (8,314 | ) | (9,246 | ) | |||
Net cash used in investing activities | (8,314 | ) | (9,246 | ) | |||
Cash flows from financing activities: | |||||||
Cash distributions to Unitholders | (154,064 | ) | (109,371 | ) | |||
Capital contributions from AB | 1,197 | 589 | |||||
Proceeds from exercise of compensatory options to buy AB Holding Units | 8,314 | 9,246 | |||||
Net cash used in financing activities | (144,553 | ) | (99,536 | ) | |||
Change in cash and cash equivalents | — | — | |||||
Cash and cash equivalents as of beginning of period | — | — | |||||
Cash and cash equivalents as of end of period | $ | — | $ | — |
1. | Business Description, Organization and Basis of Presentation |
• | Institutional Services – servicing its institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as AXA S.A. (“AXA”), AXA Equitable Holdings, Inc. ("EQH") and their respective subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles. |
• | Retail Services – servicing its retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles. |
• | Private Wealth Management Services – servicing its private clients, including high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds, mutual funds and other investment vehicles. |
• | Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options. |
• | Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities; |
• | Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies; |
• | Passive management, including index and enhanced index strategies; |
• | Alternative investments, including hedge funds, fund of funds and private equity (e.g., direct real estate investing and direct lending); and |
• | Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds. |
EQH and its subsidiaries | 63.3 | % |
AB Holding | 35.9 | |
Unaffiliated holders | 0.8 | |
100.0 | % |
2. | Cash Distributions |
3. | Long-term Incentive Compensation Plans |
4. | Net Income per Unit |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands, except per unit amounts) | ||||||||||||||||
Net income – basic | $ | 58,457 | $ | 41,741 | $ | 116,617 | $ | 85,651 | ||||||||
Additional allocation of equity in net income attributable to AB resulting from assumed dilutive effect of compensatory options | 115 | 137 | 259 | 313 | ||||||||||||
Net income – diluted | $ | 58,572 | $ | 41,878 | $ | 116,876 | $ | 85,964 | ||||||||
Weighted average units outstanding – basic | 98,368 | 96,061 | 97,673 | 96,150 | ||||||||||||
Dilutive effect of compensatory options | 272 | 430 | 303 | 482 | ||||||||||||
Weighted average units outstanding – diluted | 98,640 | 96,491 | 97,976 | 96,632 | ||||||||||||
Basic net income per unit | $ | 0.59 | $ | 0.43 | $ | 1.19 | $ | 0.89 | ||||||||
Diluted net income per unit | $ | 0.59 | $ | 0.43 | $ | 1.19 | $ | 0.89 |
5. | Investment in AB |
Investment in AB as of December 31, 2017 | $ | 1,544,704 | |
Equity in net income attributable to AB Unitholders | 131,086 | ||
Changes in accumulated other comprehensive income (loss) | (3,857 | ) | |
Additional investments with proceeds from exercise of compensatory options to buy AB Holding Units | 8,314 | ||
Cash distributions received from AB | (167,861 | ) | |
Capital contributions from AB | (1,197 | ) | |
AB Holding Units retired | (39,704 | ) | |
AB Holding Units issued to fund long-term incentive compensation plans | 67,579 | ||
Change in AB Holding Units held by AB for long-term incentive compensation plans | (16,545 | ) | |
Impact of ABLP's adoption of revenue recognition standard ASC 606 | 12,549 | ||
Other | (133 | ) | |
Investment in AB as of June 30, 2018 | $ | 1,534,935 |
6. | Units Outstanding |
Outstanding as of December 31, 2017 | 96,461,989 | |
Options exercised | 488,513 | |
Units issued | 2,471,307 | |
Units retired | (1,392,989 | ) |
Outstanding as of June 30, 2018 | 98,028,820 |
7. | Income Taxes |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
(in thousands) | ||||||||||||||||||||||
Net income attributable to AB Unitholders | $ | 181,665 | $ | 135,103 | 34.5 | % | $ | 365,861 | $ | 275,040 | 33.0 | % | ||||||||||
Multiplied by: weighted average equity ownership interest | 36.0 | % | 35.5 | % | 35.8 | % | 35.5 | % | ||||||||||||||
Equity in net income attributable to AB Unitholders | $ | 65,388 | $ | 47,947 | 36.4 | $ | 131,086 | $ | 97,613 | 34.3 | ||||||||||||
AB qualifying revenues | $ | 643,009 | $ | 586,478 | 9.6 | $ | 1,345,927 | $ | 1,132,655 | 18.8 | ||||||||||||
Multiplied by: weighted average equity ownership interest for calculating tax | 30.2 | % | 29.7 | % | 30.2 | % | 29.6 | % | ||||||||||||||
Multiplied by: federal tax | 3.5 | % | 3.5 | % | 3.5 | % | 3.5 | % | ||||||||||||||
Federal income taxes | 6,794 | 6,099 | 14,204 | 11,750 | ||||||||||||||||||
State income taxes | 137 | 107 | 265 | 212 | ||||||||||||||||||
Total income taxes | $ | 6,931 | $ | 6,206 | 11.7 | $ | 14,469 | $ | 11,962 | 21.0 | ||||||||||||
Effective tax rate | 10.6 | % | 12.9 | % | 11.0 | % | 12.3 | % |
8. | Commitments and Contingencies |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||
(in thousands, except per unit amounts) | ||||||||||||||||||||||
Net income attributable to AB Unitholders | $ | 181,665 | $ | 135,103 | 34.5 | % | $ | 365,861 | $ | 275,040 | 33.0 | % | ||||||||||
Weighted average equity ownership interest | 36.0 | % | 35.5 | % | 35.8 | % | 35.5 | % | ||||||||||||||
Equity in net income attributable to AB Unitholders | 65,388 | 47,947 | 36.4 | 131,086 | 97,613 | 34.3 | ||||||||||||||||
Income taxes | 6,931 | 6,206 | 11.7 | 14,469 | 11,962 | 21.0 | ||||||||||||||||
Net income of AB Holding | $ | 58,457 | $ | 41,741 | 40.0 | $ | 116,617 | $ | 85,651 | 36.2 | ||||||||||||
Diluted net income per AB Holding Unit | $ | 0.59 | $ | 0.43 | 37.2 | $ | 1.19 | $ | 0.89 | 33.7 | ||||||||||||
Distribution per AB Holding Unit(1) | $ | 0.62 | $ | 0.49 | 26.5 | $ | 1.35 | $ | 0.95 | 42.1 |
(1) | Distributions reflect the impact of AB’s non-GAAP adjustments. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands, except per Unit amounts) | ||||||||||||||||
AB non-GAAP adjustments, before taxes | $ | 7,541 | $ | 16,958 | $ | 42,850 | $ | 17,548 | ||||||||
AB income tax expense on non-GAAP adjustments | (292 | ) | (1,077 | ) | (1,135 | ) | (1,088 | ) | ||||||||
AB non-GAAP adjustments, after taxes | 7,249 | 15,881 | 41,715 | 16,460 | ||||||||||||
AB Holding’s weighted average equity ownership interest in AB | 36.0 | % | 35.5 | % | 35.8 | % | 35.5 | % | ||||||||
Impact on AB Holding’s net income of AB non-GAAP adjustments | $ | 2,609 | $ | 5,637 | $ | 14,946 | $ | 5,842 | ||||||||
Net income – diluted, GAAP basis | $ | 58,572 | $ | 41,878 | $ | 116,876 | $ | 85,964 | ||||||||
Impact on AB Holding’s net income of AB non-GAAP adjustments | 2,609 | 5,637 | 14,946 | 5,842 | ||||||||||||
Adjusted net income – diluted | $ | 61,181 | $ | 47,515 | $ | 131,822 | $ | 91,806 | ||||||||
Diluted net income per AB Holding Unit, GAAP basis | $ | 0.59 | $ | 0.43 | $ | 1.19 | $ | 0.89 | ||||||||
Impact of AB non-GAAP adjustments | 0.03 | 0.06 | 0.16 | 0.06 | ||||||||||||
Adjusted diluted net income per AB Holding Unit | $ | 0.62 | $ | 0.49 | $ | 1.35 | $ | 0.95 |
• | Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations: AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control. |
• | Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs: Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates. |
• | The outcome of litigation: Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a pending or future legal proceeding could be significant, and could have such an effect. |
• | The possibility that we will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases. |
• | Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues: Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues. |
• | Our Relocation Strategy: While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include: |
• | the amount and timing of employee relocation costs, severance and overlapping compensation and occupancy costs we experience; and |
• | the timing for execution of each phase of our relocation implementation plan. |
• | Our 2020 Margin Target: While our 2020 Margin Target is presented with numerical specificity, and we believe the target to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which the 2020 Margin Target is based create a significant risk that these assumptions may not be realized. These assumptions include: |
• | the levels of positive net flows into our investment services; |
• | the level of growth (in terms of additional AUM) in our alternatives product business; |
• | the rate of increase in our fixed costs due to inflation and similar factors, the transitional costs related to our relocation strategy and the timing of such costs, the success we have in achieving planned new cost reductions (including those relating to our relocation strategy) and the timing of such cost reductions, and the investments we make in our business; and |
• | general conditions of the markets in which our business operates, including modest appreciation in both equity and fixed income total investment returns. |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of AB Holding Units Purchased | Average Price Paid Per AB Holding Unit, net of Commissions | Total Number of AB Holding Units Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of AB Holding Units that May Yet Be Purchased Under the Plans or Programs | |||||||||
4/1/18 - 4/30/18(1) | 510 | $ | 25.75 | — | — | ||||||||
5/1/18 - 5/31/18(2) | 617,800 | 27.93 | — | — | |||||||||
6/1/18 - 6/30/18(2) | 540,146 | 28.95 | — | — | |||||||||
Total | 1,158,456 | $ | 28.40 | — | — |
(1) | During the second quarter of 2018, AB purchased from employees 510 AB Holding Units to allow them to fulfill statutory withholding tax requirements at the time of distribution of long-term incentive compensation awards. |
(2) | During the second quarter of 2018, AB purchased 1,157,946 AB Holding Units on the open market pursuant to a Rule 10b5-1 plan to help fund anticipated obligations under our incentive compensation award program. |
Period | Total Number of AB Units Purchased | Average Price Paid Per AB Unit, net of Commissions | Total Number of AB Units Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of AB Units that May Yet Be Purchased Under the Plans or Programs | |||||||||
4/1/18 - 4/30/18 | — | $ | — | — | — | ||||||||
5/1/18 - 5/31/18 | — | — | — | — | |||||||||
6/1/18 - 6/30/18(1) | 2,600 | 28.66 | — | — | |||||||||
Total | 2,600 | $ | 28.66 | — | — |
(1) | During June 2018, AB purchased 2,600 AB Units in private transactions. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
99.1 | |
101.INS | XBRL Instance Document. |
101.SCH | XBRL Taxonomy Extension Schema. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |
101.LAB | XBRL Taxonomy Extension Label Linkbase. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase. |
Date: July 26, 2018 | ALLIANCEBERNSTEIN HOLDING L.P. | ||
By: | /s/ John C. Weisenseel | ||
John C. Weisenseel | |||
Chief Financial Officer | |||
By: | /s/ William R. Siemers | ||
William R. Siemers | |||
Chief Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q of AllianceBernstein Holding L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: July 26, 2018 | /s/ Seth P. Bernstein | |
Seth P. Bernstein | ||
Chief Executive Officer | ||
AllianceBernstein Holding L.P. |
1. | I have reviewed this quarterly report on Form 10-Q of AllianceBernstein Holding L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: July 26, 2018 | /s/ John C. Weisenseel | |
John C. Weisenseel | ||
Chief Financial Officer | ||
AllianceBernstein Holding L.P. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: July 26, 2018 | /s/ Seth P. Bernstein | |
Seth P. Bernstein | ||
Chief Executive Officer | ||
AllianceBernstein Holding L.P. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: July 26, 2018 | /s/ John C. Weisenseel | |
John C. Weisenseel | ||
Chief Financial Officer | ||
AllianceBernstein Holding L.P. |
June 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 628,758 | $ | 671,930 | |||
Cash and securities segregated, at fair value (cost: $1,288,801 and $816,350) | 1,288,867 | 816,350 | |||||
Receivables, net: | |||||||
Brokers and dealers | 351,085 | 199,690 | |||||
Brokerage clients | 1,646,767 | 1,647,059 | |||||
AB funds fees | 201,008 | 212,115 | |||||
Other fees | 108,671 | 124,164 | |||||
Investments: | |||||||
Long-term incentive compensation-related | 57,031 | 66,034 | |||||
Other | 448,606 | 377,555 | |||||
Assets of consolidated company-sponsored investment funds: | |||||||
Cash and cash equivalents | 23,693 | 326,518 | |||||
Investments | 301,625 | 1,246,283 | |||||
Other assets | 8,178 | 35,397 | |||||
Furniture, equipment and leasehold improvements, net | 151,115 | 157,569 | |||||
Goodwill | 3,066,700 | 3,066,700 | |||||
Intangible assets, net | 91,824 | 105,784 | |||||
Deferred sales commissions, net | 16,762 | 30,126 | |||||
Other assets | 281,424 | 211,893 | |||||
Total assets | $ | 8,672,114 | $ | 9,295,167 | |||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL | |||||||
Liabilities: | |||||||
Payables: | |||||||
Brokers and dealers | $ | 378,402 | $ | 237,861 | |||
Securities sold not yet purchased | 25,796 | 29,961 | |||||
Brokerage clients | 2,713,377 | 2,229,371 | |||||
AB mutual funds | 56,153 | 82,967 | |||||
Accounts payable and accrued expenses | 398,398 | 515,660 | |||||
Liabilities of consolidated company-sponsored investment funds | 6,972 | 698,101 | |||||
Accrued compensation and benefits | 494,805 | 270,610 | |||||
Debt | 515,129 | 565,745 | |||||
Total liabilities | 4,589,032 | 4,630,276 | |||||
Commitments and contingencies (See Note 13) | |||||||
Redeemable non-controlling interest | 108,524 | 601,587 | |||||
Capital: | |||||||
General Partner | 40,886 | 41,221 | |||||
Limited partners: 270,222,414 and 268,659,333 units issued and outstanding | 4,135,950 | 4,168,841 | |||||
Receivables from affiliates | (11,705 | ) | (11,494 | ) | |||
AB Holding Units held for long-term incentive compensation plans | (88,317 | ) | (42,688 | ) | |||
Accumulated other comprehensive loss | (103,915 | ) | (94,140 | ) | |||
Partners’ capital attributable to AB Unitholders | 3,972,899 | 4,061,740 | |||||
Non-redeemable non-controlling interests in consolidated entities | 1,659 | 1,564 | |||||
Total capital | 3,974,558 | 4,063,304 | |||||
Total liabilities, redeemable non-controlling interest and capital | $ | 8,672,114 | $ | 9,295,167 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Investment advisory and services fees | $ | 596,870 | $ | 531,163 | $ | 1,170,468 | $ | 1,029,453 | ||||||||
Bernstein research services | 106,211 | 109,470 | 220,611 | 222,211 | ||||||||||||
Distribution revenues | 105,118 | 100,149 | 213,122 | 196,703 | ||||||||||||
Dividend and interest income | 21,194 | 19,348 | 49,409 | 33,404 | ||||||||||||
Investment gains (losses) | 213 | 24,113 | 26,295 | 49,314 | ||||||||||||
Other revenues | 27,264 | 24,265 | 54,292 | 46,630 | ||||||||||||
Total revenues | 856,870 | 808,508 | 1,734,197 | 1,577,715 | ||||||||||||
Less: Interest expense | 12,132 | 6,195 | 21,672 | 10,485 | ||||||||||||
Net revenues | 844,738 | 802,313 | 1,712,525 | 1,567,230 | ||||||||||||
Expenses: | ||||||||||||||||
Employee compensation and benefits | 358,248 | 327,862 | 702,073 | 649,610 | ||||||||||||
Promotion and servicing: | ||||||||||||||||
Distribution-related payments | 106,301 | 100,632 | 216,455 | 194,845 | ||||||||||||
Amortization of deferred sales commissions | 6,113 | 8,307 | 12,711 | 17,386 | ||||||||||||
Trade execution, marketing, T&E and other | 59,259 | 55,359 | 113,302 | 105,727 | ||||||||||||
General and administrative: | ||||||||||||||||
General and administrative | 108,836 | 117,462 | 230,070 | 231,683 | ||||||||||||
Real estate charges | 6,909 | 20,747 | 6,645 | 20,745 | ||||||||||||
Contingent payment arrangements | 52 | 178 | 105 | 355 | ||||||||||||
Interest on borrowings | 2,629 | 2,254 | 5,241 | 4,122 | ||||||||||||
Amortization of intangible assets | 6,927 | 6,975 | 13,788 | 13,908 | ||||||||||||
Total expenses | 655,274 | 639,776 | 1,300,390 | 1,238,381 | ||||||||||||
Operating income | 189,464 | 162,537 | 412,135 | 328,849 | ||||||||||||
Income taxes | 7,538 | 10,265 | 23,363 | 20,322 | ||||||||||||
Net income | 181,926 | 152,272 | 388,772 | 308,527 | ||||||||||||
Net income of consolidated entities attributable to non-controlling interests | 261 | 17,169 | 22,911 | 33,487 | ||||||||||||
Net income attributable to AB Unitholders | $ | 181,665 | $ | 135,103 | $ | 365,861 | $ | 275,040 | ||||||||
Net income per AB Unit: | ||||||||||||||||
Basic | $ | 0.66 | $ | 0.50 | $ | 1.34 | $ | 1.01 | ||||||||
Diluted | $ | 0.66 | $ | 0.50 | $ | 1.34 | $ | 1.01 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 181,926 | $ | 152,272 | $ | 388,772 | $ | 308,527 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment, before reclassification and tax | (20,656 | ) | 7,355 | (10,735 | ) | 16,356 | ||||||||||
Less: reclassification adjustment for (losses) included in net income upon liquidation | (100 | ) | — | (100 | ) | — | ||||||||||
Foreign currency translation adjustments, before tax | (20,556 | ) | 7,355 | (10,635 | ) | 16,356 | ||||||||||
Income tax benefit | — | 134 | — | — | ||||||||||||
Foreign currency translation adjustments, net of tax | (20,556 | ) | 7,489 | (10,635 | ) | 16,356 | ||||||||||
Unrealized gains on investments: | ||||||||||||||||
Unrealized gains arising during period | — | 26 | — | 10 | ||||||||||||
Less: reclassification adjustment for gains included in net income | — | — | — | — | ||||||||||||
Change in unrealized gains on investments | — | 26 | — | 10 | ||||||||||||
Income tax benefit (expense) | — | — | — | (2 | ) | |||||||||||
Unrealized gains on investments, net of tax | — | 26 | — | 8 | ||||||||||||
Changes in employee benefit related items: | ||||||||||||||||
Amortization of prior service cost | 5 | 6 | 11 | 12 | ||||||||||||
Recognized actuarial gain | 286 | 264 | 568 | 523 | ||||||||||||
Changes in employee benefit related items | 291 | 270 | 579 | 535 | ||||||||||||
Income tax benefit (expense) | 2 | (3 | ) | (116 | ) | (79 | ) | |||||||||
Employee benefit related items, net of tax | 293 | 267 | 463 | 456 | ||||||||||||
Other | 374 | — | 374 | — | ||||||||||||
Other comprehensive (loss) income | (19,889 | ) | 7,782 | (9,798 | ) | 16,820 | ||||||||||
Less: Comprehensive income in consolidated entities attributable to non-controlling interests | 220 | 18,042 | 22,887 | 34,436 | ||||||||||||
Comprehensive income attributable to AB Unitholders | $ | 161,817 | $ | 142,012 | $ | 356,087 | $ | 290,911 |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 388,772 | $ | 308,527 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Amortization of deferred sales commissions | 12,711 | 17,386 | |||||
Non-cash long-term incentive compensation expense | 14,825 | 21,337 | |||||
Depreciation and other amortization | 35,626 | 33,313 | |||||
Unrealized (gains) losses on investments | (3,257 | ) | 2,636 | ||||
Unrealized (gains) on investments of consolidated company-sponsored investment funds | (20,463 | ) | (18,550 | ) | |||
Other, net | (1,907 | ) | 5,712 | ||||
Changes in assets and liabilities: | |||||||
(Increase) in segregated cash and securities | (472,517 | ) | (131,552 | ) | |||
(Increase) in receivables | (213,529 | ) | (50,545 | ) | |||
(Increase) in investments | (59,219 | ) | (37,978 | ) | |||
Decrease (increase) in investments of consolidated company-sponsored investment funds | 965,121 | (57,045 | ) | ||||
Decrease in deferred sales commissions | 653 | 1,923 | |||||
(Increase) in other assets | (116,890 | ) | (68,430 | ) | |||
(Decrease) increase in other assets and liabilities of consolidated company-sponsored investment funds, net | (663,910 | ) | 161,195 | ||||
Increase in payables | 682,703 | 70,082 | |||||
(Decrease) in accounts payable and accrued expenses | (8,816 | ) | (11,189 | ) | |||
Increase in accrued compensation and benefits | 225,571 | 201,417 | |||||
Net cash provided by operating activities | 765,474 | 448,239 | |||||
Cash flows from investing activities: | |||||||
Purchases of investments | — | (11 | ) | ||||
Proceeds from sales of investments | — | 10 | |||||
Purchases of furniture, equipment and leasehold improvements | (11,458 | ) | (14,023 | ) | |||
Proceeds from sales of furniture, equipment and leasehold improvements | — | 39 | |||||
Net cash used in investing activities | (11,458 | ) | (13,985 | ) | |||
Cash flows from financing activities: | |||||||
Issuance (repayment) of commercial paper, net | 20,058 | (33,709 | ) | ||||
(Repayment) proceeds of bank loans | (75,000 | ) | 30,000 | ||||
(Decrease) increase in overdrafts payable | (28,952 | ) | 68,504 | ||||
Distributions to General Partner and Unitholders | (466,522 | ) | (339,139 | ) | |||
(Redemptions) of investments in consolidated company-sponsored investment funds, net | (515,856 | ) | (72,732 | ) | |||
Capital contributions to non-controlling interests in consolidated entities | — | (7,869 | ) | ||||
Purchase of non-controlling interest | — | (1,833 | ) | ||||
Capital contributions to affiliates | (1,178 | ) | (280 | ) | |||
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units | 8,340 | 9,246 | |||||
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net | (34,864 | ) | (127,472 | ) | |||
Purchases of AB Units | (105 | ) | (684 | ) | |||
Other | 105 | (807 | ) |
Net cash used in financing activities | (1,093,974 | ) | (476,775 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (6,039 | ) | 11,179 | ||||
Net (decrease) in cash and cash equivalents | (345,997 | ) | (31,342 | ) | |||
Cash and cash equivalents as of beginning of the period | 998,448 | 994,510 | |||||
Cash and cash equivalents as of end of the period | $ | 652,451 | $ | 963,168 | |||
• | Institutional Services – servicing our institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as AXA S.A. ("AXA"), AXA Equitable Holdings, Inc. ("EQH") and their respective subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles. |
• | Retail Services – servicing our retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles. |
• | Private Wealth Management Services – servicing our private clients, including high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds, mutual funds and other investment vehicles. |
• | Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options. |
• | Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities; |
• | Alternative investments, including hedge funds, fund of funds and private equity (e.g., direct real estate investing and direct lending); and |
EQH and its subsidiaries | 63.3 | % |
AB Holding | 35.9 | |
Unaffiliated holders | 0.8 | |
100.0 | % |
2. | Significant Accounting Policies |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands) | ||||||||||||||||
Subject to contracts with customers: | ||||||||||||||||