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Highbury: Highbury Financial Inc. Reports Financial and Operating Results for the Three and Six Months Ended June 30, 2009

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^{Published in Business and Finance on Monday, August 10th 2009 at 19:57 GMT, Last Modified on 2009-08-10 19:57:55 by Market Wire}  

DENVER, CO--(Marketwire - August 10, 2009) - Highbury Financial Inc. (OTCBB: [ HBRF ]) (OTCBB: [ HBRFW ]) (OTCBB: [ HBRFU ])

 -- Company Reports Basic and Diluted EPS of $0.08 and Basic and Diluted Cash EPS of $0.11 for the Second Quarter of 2009 -- Company Reports Basic and Diluted EPS of $0.12 and Basic and Diluted Cash EPS of $0.18 for the Six Months Ended June 30, 2009 

Highbury Financial Inc. (OTCBB: [ HBRF ]) (OTCBB: [ HBRFW ]) (OTCBB: [ HBRFU ]) today reported its financial and operating results for the three and six months ended June 30, 2009.

Net income attributable to Highbury Financial Inc. for the second quarter of 2009 was $712,875 compared to $900,881 for the second quarter of 2008. Cash Net Income was $969,010 for the three months ended June 30, 2009 compared to $1,180,140 for the three months ended June 30, 2008. Basic and diluted Cash Net Income per share ("Cash EPS") for the second quarter of 2009 were $0.11 compared to $0.13 for the second quarter of 2008. Cash Net Income is defined in the attached tables. Basic and diluted earnings per share for the second quarter of 2009 were $0.08 compared to basic and diluted earnings per share of $0.10 for the second quarter of 2008. Adjusted EBITDA for the three months ended June 30, 2009 was $1,216,322 compared to $1,451,437 for the three months ended June 30, 2008. Adjusted EBITDA is defined in the attached tables. For the second quarter of 2009, revenue was $9,231,394 compared to $9,680,469 for the second quarter of 2008.

Net income attributable to Highbury Financial Inc. for the first six months of 2009 was $1,115,812 compared to $1,525,160 for the first six months of 2008. Cash Net Income was $1,628,082 for the six months ended June 30, 2009 compared to $2,086,741 for the six months ended June 30, 2008. Basic and diluted Cash EPS for the first six months of 2009 were $0.18 compared to $0.23 for the first six months of 2008. Basic and diluted earnings per share for the first six months of 2009 were $0.12 compared to basic and diluted earnings per share of $0.17 for the first six months of 2008. Adjusted EBITDA for the six months ended June 30, 2009 was $1,833,876 compared to $2,525,609 for the six months ended June 30, 2008. For the first six months of 2009, revenue was $16,260,061 compared to $18,959,516 for the second quarter of 2008.

As of June 30, 2009, the Company had approximately $5.1 billion of total assets under management compared to approximately $3.9 billion as of March 31, 2009 and approximately $4.8 billion as of June 30, 2008. As of June 30, 2009, mutual fund assets under management were approximately $4.9 billion, compared to approximately $3.8 billion as of March 31, 2009 and approximately $4.7 billion as of June 30, 2008. This aggregate increase in mutual fund assets under management of $1,165 million since March 31, 2009 resulted from a combination of (i) positive market appreciation and other adjustments, including distributions of income and gain, reinvestments of distributions, and other items, of approximately $632 million and (ii) net client inflows, which represent aggregate contributions from new and existing clients less withdrawals, of approximately $533 million, during the three months ended June 30, 2009. During the three months ended June 30, 2009, separate account assets under management increased from $107 million to $132 million.

Richard S. Foote, Highbury's President and Chief Executive Officer, stated "In the second quarter of 2009, Highbury's weighted average assets under management totaled approximately $4.6 billion with a weighted average fee basis of 0.76%."

Mr. Foote continued, "As of June 30, 2009, 87% of our mutual fund assets under management were in funds rated with four or five stars by Morningstar, Inc. compared to 71% at the same date in 2008."

Mr. Foote concluded, "As of June 30, 2009, Highbury had cash and cash equivalents and investments of $15.4 million and no debt outstanding."

Highbury is an investment management holding company providing permanent capital solutions to mid-sized investment management firms. We pursue acquisition opportunities and seek to establish accretive partnerships with high quality investment management firms. Highbury's strategy is to provide permanent equity capital to fund buyouts from corporate parents, buyouts of founding or departing partners, growth initiatives, or exit strategies for private equity funds. This strategy includes leaving material equity interests with management teams to align the interests of management and Highbury's shareholders and, in general, does not include integrating future acquisitions, although Highbury may execute add-on acquisitions for its current or future affiliates. We seek to augment and diversify our sources of revenue by asset class, investment style, distribution channel, client type and management team. We intend to fund acquisitions with our revolving credit facility, other external borrowings, retained earnings (if any), additional equity and other sources of capital, including seller financing and contingent payments.

More information is available at [ www.highburyfinancial.com ].

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to Highbury's future financial or business performance, strategies and expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" and similar expressions.

Highbury cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and Highbury assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in Highbury's SEC filings and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies; (2) changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) terrorist activities and international hostilities, which may adversely affect the general economy, financial and capital markets, specific industries, and Highbury; (4) changing conditions in global financial markets generally and in the equity markets particularly, and decline or lack of sustained growth in these markets; (5) Highbury's business strategy and plans; (6) the introduction, withdrawal, success and timing of business initiatives and strategies; (7) the unfavorable resolution of legal proceedings and/or harm to Highbury's reputation; (8) fluctuations in customer demand; (9) management of rapid growth; (10) the impact of fund performance on redemptions; (11) changes in investors' preference of investing styles; (12) changes in or loss of sub-advisers; (13) the impact of increased competition; (14) the results of future financing efforts; (15) the impact of future acquisitions or divestitures; (16) the relative and absolute investment performance of Highbury's investment products; (17) investment advisory agreements subject to termination or non-renewal; (18) a substantial reduction in fees received from third parties; (19) Highbury's success in finding or acquiring additional investment management firms on favorable terms and consummating acquisitions of investment management firms; (20) the ability to retain major clients; (21) the ability to attract and retain highly talented professionals; (22) significant limitations or failure of software applications; (23) expenses subject to significant fluctuations; (24) the impact, extent and timing of technological changes and the adequacy of intellectual property protection; (25) the impact of capital improvement projects; (26) the extent and timing of any share repurchases; (27) the impact of changes to tax legislation and, generally, the tax position of Highbury; and (28) expenses associated with the formation of the Special Committee and responding to initiatives of dissident stockholders.

Highbury's filings with the SEC, accessible on the SEC's website at [ http://www.sec.gov ], discuss these factors in more detail and identify additional factors that can affect forward-looking statements.

 Highbury Financial Inc. Financial Highlights Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2008 2009 2008 2009 ----------- ----------- ----------- ----------- Revenue $ 9,680,469 $ 9,231,394 $18,959,516 $16,260,061 Net Income attributable to Highbury Financial Inc. $ 900,881 $ 712,875 $ 1,525,160 $ 1,115,812 Cash Net Income (1) $ 1,180,140 $ 969,010 $ 2,086,741 $ 1,628,082 Adjusted EBITDA (2) $ 1,451,437 $ 1,216,322 $ 2,525,609 $ 1,833,876 Average shares outstanding - basic 9,126,628 9,088,014 9,192,309 9,102,603 Earnings per share - basic $ 0.10 $ 0.08 $ 0.17 $ 0.12 Average shares outstanding - diluted 9,126,628 9,088,014 9,192,309 9,102,603 Earnings per share - diluted $ 0.10 $ 0.08 $ 0.17 $ 0.12 Highbury Financial Inc. Financial Highlights December 31, June 30, 2008 2009 ------------ ------------ Cash and cash equivalents and investments $ 14,431,021 $ 15,351,012 Senior debt $ -- $ -- Senior convertible debt $ -- $ -- Mandatory convertible securities $ -- $ -- Other long term obligations $ 805,707 $ 783,223 Highbury Financial Inc. stockholders’ equity $ 40,693,128 $ 40,669,681 Highbury Financial Inc. Average Shares Outstanding Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2008 2009 2008 2009 --------- --------- --------- --------- Average shares outstanding - basic 9,126,628 9,088,014 9,192,309 9,102,603 Effect of dilutive instruments: Warrants - - - - --------- --------- --------- --------- Average shares outstanding - diluted 9,126,628 9,088,014 9,192,309 9,102,603 ========= ========= ========= ========= Highbury Financial Inc. Reconciliations of Performance and Liquidity Measures Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2008 2009 2008 2009 ----------- ----------- ----------- ----------- Net Income attributable to Highbury Financial Inc. $ 900,881 $ 712,875 $ 1,525,160 $ 1,115,812 Intangible amortization -- -- -- -- Intangible-related deferred taxes 233,262 210,214 466,525 420,428 Affiliate depreciation 45,997 45,921 95,056 91,842 Other non-cash expenses -- -- -- -- ----------- ----------- ----------- ----------- Cash Net Income $ 1,180,140 $ 969,010 $ 2,086,741 $ 1,628,082 =========== =========== =========== =========== Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2008 2009 2008 2009 ----------- ----------- ----------- ----------- Net Income attributable to Highbury Financial Inc. $ 900,881 $ 712,875 $ 1,525,160 $ 1,115,812 Provision for income taxes 504,559 457,526 905,393 626,222 Interest expense -- -- -- -- Intangible amortization -- -- -- -- Depreciation and other amortization 45,997 45,921 95,056 91,842 Other non-cash expenses -- -- -- -- ----------- ----------- ----------- ----------- Adjusted EBITDA $ 1,451,437 $ 1,216,322 $ 2,525,609 $ 1,833,876 =========== =========== =========== =========== Highbury Financial Inc. Consolidated Balance Sheets December 31, June 30, 2008 2009 ------------ ------------ (audited) (unaudited) ASSETS Current assets Cash and cash equivalents $ 10,244,469 $ 11,703,812 Investments 4,186,552 3,647,200 Accounts receivable 2,448,572 3,451,269 Prepaid expenses 239,434 127,734 Prepaid taxes 278,444 - ------------ ------------ Total current assets 17,397,471 18,930,015 ------------ ------------ Other assets Fixed assets, net 806,637 715,639 Identifiable intangibles 22,982,000 22,982,000 Goodwill 3,305,616 3,305,616 Deferred tax assets 1,097,620 513,766 Other long-term assets 157,092 123,936 ------------ ------------ Total other assets 28,348,965 27,640,957 ------------ ------------ Total assets $ 45,746,436 $ 46,570,972 ============ ============ LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued expenses $ 3,407,601 $ 4,315,352 Income taxes payable - 12,716 ------------ ------------ Total current liabilities 3,407,601 4,328,068 Deferred rent 805,707 783,223 ------------ ------------ Total liabilities 4,213,308 5,111,291 ------------ ------------ Commitments and contingencies Equity Highbury Financial Inc. stockholders’ equity Preferred stock, $0.0001 par value, authorized 1,000,000 shares; none issued - - Common stock, $0.0001 par value, authorized 50,000,000 shares; 9,118,740 and 9,085,035 shares issued and outstanding as of December 31, 2008 and June 30, 2009, respectively 912 908 Additional paid-in capital 51,818,975 51,589,127 Accumulated deficit (11,126,759) (10,920,354) ------------ ------------ Total Highbury Financial Inc. stockholders’ equity 40,693,128 40,669,681 Noncontrolling interest 840,000 790,000 ------------ ------------ Total equity 41,533,128 41,459,681 ------------ ------------ Total liabilities and equity $ 45,746,436 $ 46,570,972 ============ ============ Highbury Financial Inc. Consolidated Statements of Income Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 2008 2009 2008 2009 ------------ ------------ ------------ ------------ Revenue $ 9,680,469 $ 9,231,394 $ 18,959,516 $ 16,260,061 ------------ ------------ ------------ ------------ Operating expenses Distribution and sub-advisory costs (4,435,366) (4,361,155) (8,786,769) (7,611,394) Compensation and related expenses (1,612,420) (1,459,246) (3,146,604) (3,283,990) Depreciation and amortization (45,997) (45,921) (95,056) (91,842) Other operating expenses (1,327,558) (1,125,307) (2,662,026) (2,531,854) ------------ ------------ ------------ ------------ Total operating expenses (7,421,341) (6,991,629) (14,690,455) (13,519,080) ------------ ------------ ------------ ------------ Operating income 2,259,128 2,239,765 4,269,061 2,740,981 ------------ ------------ ------------ ------------ Other income Interest income 17,280 6,783 71,291 19,248 Investment income (loss) 26,963 36,000 (151,861) 140,323 ------------ ------------ ------------ ------------ Total other income (loss) 44,243 42,783 (80,570) 159,571 ------------ ------------ ------------ ------------ Income before provision for income taxes 2,303,371 2,282,548 4,188,491 2,900,552 Provision for income taxes (504,559) (457,526) (905,393) (626,222) ------------ ------------ ------------ ------------ Net income 1,798,812 1,825,022 3,283,098 2,274,330 Net income attributable to noncontrolling interest (897,931) (1,112,147) (1,757,938) (1,158,518) ------------ ------------ ------------ ------------ Net income attributable to Highbury Financial Inc. $ 900,881 $ 712,875 $ 1,525,160 $ 1,115,812 ============ ============ ============ ============ Weighted average shares outstanding, basic 9,126,628 9,088,014 9,192,309 9,102,603 Net income per share, basic $ 0.10 $ 0.08 $ 0.17 $ 0.12 Weighted average shares outstanding, diluted 9,126,628 9,088,014 9,192,309 9,102,603 Net income per share, diluted $ 0.10 $ 0.08 $ 0.17 $ 0.12 Cash dividend per share of common stock - declared $ 0.00 $ 0.05 $ 0.00 $ 0.10 Cash dividend per share of common stock - paid $ 0.00 $ 0.05 $ 0.00 $ 0.05 Highbury Financial Inc. Consolidated Statements of Cash Flow Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 2008 2009 2008 2009 ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income attributable to Highbury Financial Inc. $ 900,881 $ 712,875 $ 1,525,160 $ 1,115,812 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45,997 45,921 95,056 91,842 Deferred taxes 253,866 227,235 433,543 583,854 Investment (gain) loss (26,963) (36,000) 151,861 (140,323) Net income attributable to noncontrolling interest 897,931 1,112,147 1,757,938 1,158,518 Deferred rent (9,768) (11,756) (19,238) (22,484) Changes in operating assets and liabilities (Increase) decrease in: Accounts receivable (186,534) (936,880) 52,139 (1,002,697) Prepaid expenses 53,945 63,453 146,706 111,700 Prepaid taxes - 467,667 - 278,444 Other current assets - 150,000 - - Other long-term assets - (23,936) - 33,156 Increase (decrease) in: Accounts payable and accrued expenses 269,213 (32,450) (608,180) 2,239 Income taxes payable (95,515) 12,716 (4,858) 12,716 ------------ ------------ ------------ ------------ Net cash provided by operating activities 2,103,053 1,750,992 3,530,127 2,222,777 ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments - - (2,000,000) - Proceeds from sales of investments 902,844 - 3,966,915 679,675 Decrease in other long-term assets 3,767 - 1,348 - Purchase of fixed assets - (844) (2,756) (844) ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities 906,611 (844) 1,965,507 678,831 ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid - (455,155) - (455,155) Distributions paid to noncontrolling interest holders (853,731) (96,371) (1,808,802) (757,258) Repurchase of common stock - (49,453) (1,735,611) (83,727) Repurchase of warrants - (146,125) (1,823,083) (146,125) ------------ ------------ ------------ ------------ Net cash used in financing activities (853,731) (747,104) (5,367,496) (1,442,265) ------------ ------------ ------------ ------------ Net increase in cash and cash equivalents 2,155,933 1,003,044 128,138 1,459,343 Cash and cash equivalents - beginning of period 5,248,750 10,700,768 7,276,545 10,244,469 ------------ ------------ ------------ ------------ Cash and cash equivalents - end of period $ 7,404,683 $ 11,703,812 $ 7,404,683 $ 11,703,812 ============ ============ ============ ============ Supplemental schedule of non-cash financing and investing activities: Dividend declared and not yet paid $ - $ 454,252 $ - $ 454,252 ============ ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid for income taxes $ 346,208 $ - $ 476,708 $ - ============ ============ ============ ============ Highbury Financial Inc. Notes (1) As supplemental information, we provide a non-GAAP performance measure that we refer to as Cash Net Income. This measure is provided in addition to, but not as a substitute for, GAAP net income. Cash Net Income means the sum of (a) net income determined in accordance with GAAP, plus (b) amortization of intangible assets, plus (c) deferred taxes related to intangible assets, plus (d) affiliate depreciation, plus (e) other non-cash expenses. We consider Cash Net Income an important measure of our financial performance, as we believe it best represents operating performance before non-cash expenses relating to the acquisition of our interest in our affiliated investment management firm. Cash Net Income is not a measure of financial performance under GAAP and, as calculated by us, may not be consistent with computations of Cash Net Income by other companies. Cash Net Income is used by our management and board of directors as a performance benchmark. Since our acquired assets do not generally depreciate or require replacement by us, and since they generate deferred tax expenses that are unlikely to reverse, we add back these non-cash expenses to Net Income to measure operating performance. We will add back amortization attributable to acquired client relationships because this expense does not correspond to the changes in value of these assets, which do not diminish predictably over time. The portion of deferred taxes generally attributable to intangible assets (including goodwill) that we do not amortize but which generates tax deductions is added back, because these accruals would be used only in the event of a future sale of Aston or an impairment charge. We will add back the portion of consolidated depreciation expense incurred by Aston because under Aston's operating agreement we are not required to replenish these depreciating assets. We also add back expenses that we incur for financial reporting purposes for which there is no corresponding cash expense because such expenses cause our Net Income to be understated relative to our ability to generate cash flow to service debt, if any, finance accretive acquisitions, and repurchase securities, if appropriate. (2) As supplemental information, we provide information regarding Adjusted EBITDA, a non-GAAP liquidity measure. This measure is provided in addition to, but not as a substitute for, cash flow from operations. Adjusted EBITDA means the sum of (a) net income determined in accordance with GAAP, plus (b) amortization of intangible assets, plus (c) interest expense, plus (d) depreciation, plus (e) other non-cash expenses, plus (f) income tax expense. This definition of Adjusted EBITDA is consistent with the definition of EBITDA used in our credit facility. Adjusted EBITDA, as calculated by us, may not be consistent with computations of Adjusted EBITDA by other companies. As a measure of liquidity, we believe that Adjusted EBITDA is useful as an indicator of our ability to service debt, make new investments and meet working capital requirements. We provide this non-GAAP measure because our management uses this information when analyzing the Company's financial position. (3) Net income attributable to noncontrolling interest on the Company's income statement represents the profits or losses allocated to the Aston management owners for that period. Noncontrolling interest on the Company's balance sheet represents the undistributed profits and capital owned by the Aston management. (4) Cash Net Income per share represents Cash Net Income divided by the diluted average shares outstanding. In this calculation, the potential share issuance in connection with our warrants is measured using a treasury stock method. Under this method, only the net number of shares of common stock equal to the value of the warrants in excess of the exercise price, if any, is deemed to be outstanding. We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are exercised. This method does not take into account any increase or decrease in our cost of capital in an assumed exercise.