SOURCE: Highbury

August 10, 2009 22:54 ET

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

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.

Contact Information

  • Questions and inquiries for further information may be directed to:
    Richard S. Foote
    President and Chief Executive Officer
    Highbury Financial Inc
    212-688-2341