ALLIANCEBERNSTEIN HOLDING L.P. - Quarter Report: 2008 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
|
T
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
|
ACT
OF 1934
For
the quarterly period ended March 31, 2008
OR
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
|
ACT
OF 1934
For
the transition period
from to
Commission
File No. 001-09818
ALLIANCEBERNSTEIN HOLDING
L.P.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
13-3434400
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
1345
Avenue of the Americas, New York, NY 10105
(Address
of principal executive offices)
(Zip
Code)
(212)
969-1000
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
|
Yes T
|
No £
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “accelerated filer,” “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
|
Large
accelerated filer T
|
Accelerated
filer £
|
|
Non-accelerated
filer £ (Do not
check if a smaller reporting company)
|
Smaller
reporting company £
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
|
Yes £
|
No T
|
The
number of units representing assignments of beneficial ownership of limited
partnership interests outstanding as of March 31, 2008 was
87,404,955.*
*includes
100,000 units of general partnership interest having economic interests
equivalent to the economic interests of the units representing assignments of
beneficial ownership of limited partnership interests.
Index to
Form 10-Q
|
Page
|
||
|
Part
I
|
||
|
FINANCIAL
INFORMATION
|
||
|
Item
1.
|
||
|
1
|
||
|
2
|
||
|
3
|
||
|
4-8
|
||
|
9
|
||
|
Item
2.
|
10-11
|
|
|
Item
3.
|
12
|
|
|
Item
4.
|
12
|
|
|
Part
II
|
||
|
OTHER
INFORMATION
|
||
|
Item
1.
|
13
|
|
|
Item
1A.
|
13
|
|
|
Item
2.
|
13
|
|
|
Item
3.
|
13
|
|
|
Item
4.
|
13
|
|
|
Item
5.
|
13
|
|
|
Item
6.
|
14
|
|
|
15
|
||
Part
I
FINANCIAL
INFORMATION
Item
1. Financial
Statements
Condensed
Statements of Financial Condition
(in
thousands, except unit amounts)
|
March 31, 2008
|
December 31,
2007
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Investment
in AllianceBernstein
|
$ | 1,627,785 | $ | 1,574,512 | ||||
|
Due
from AllianceBernstein
|
2,157 | — | ||||||
|
Other
assets
|
19 | 722 | ||||||
|
Total
assets
|
$ | 1,629,961 | $ | 1,575,234 | ||||
|
LIABILITIES
AND PARTNERS’ CAPITAL
|
||||||||
|
Liabilities:
|
||||||||
|
Payable
to AllianceBernstein
|
$ | — | $ | 7,460 | ||||
|
Other
liabilities
|
9,161 | 314 | ||||||
|
Total
liabilities
|
9,161 | 7,774 | ||||||
|
Commitments
and contingencies (See
Note 7)
|
||||||||
|
Partners’
capital:
|
||||||||
|
General
Partner: 100,000 general partnership units issued and
outstanding
|
1,676 | 1,698 | ||||||
|
Limited
partners: 87,304,955 and 86,848,149 limited partnership units issued and
outstanding
|
1,599,031 | 1,548,212 | ||||||
|
Accumulated
other comprehensive income
|
20,093 | 17,550 | ||||||
|
Total
partners’ capital
|
1,620,800 | 1,567,460 | ||||||
|
Total
liabilities and partners’ capital
|
$ | 1,629,961 | $ | 1,575,234 | ||||
See Accompanying Notes to Condensed Financial
Statements
Condensed
Statements of Income
(in
thousands, except per unit amounts)
(unaudited)
|
Three Months Ended March 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Equity
in earnings of AllianceBernstein
|
$ | 81,997 | $ | 87,834 | ||||
|
Income
taxes
|
9,561 | 9,309 | ||||||
|
Net
income
|
$ | 72,436 | $ | 78,525 | ||||
|
Net
income per unit:
|
||||||||
|
Basic
|
$ | 0.83 | $ | 0.91 | ||||
|
Diluted
|
$ | 0.83 | $ | 0.91 | ||||
See Accompanying Notes to Condensed Financial
Statements
Condensed
Statements of Cash Flows
(in
thousands)
(unaudited)
|
Three Months Ended March 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$ | 72,436 | $ | 78,525 | ||||
|
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
|
Equity
in earnings of AllianceBernstein
|
(81,997 | ) | (87,834 | ) | ||||
|
Changes
in assets and liabilities:
|
||||||||
|
Decrease
in other assets
|
703 | 161 | ||||||
|
(Increase)
in due from AllianceBernstein
|
(2,157 | ) | (3,915 | ) | ||||
|
(Decrease)
in payable to AllianceBernstein
|
(7,460 | ) | (7,149 | ) | ||||
|
Increase
in other liabilities
|
8,847 | 9,353 | ||||||
|
Net
cash used in operating activities
|
(9,628 | ) | (10,859 | ) | ||||
|
Cash
flows from investing activities:
|
||||||||
|
Investment
in AllianceBernstein with proceeds from exercise of compensatory options
to buy Holding Units
|
(4,581 | ) | (17,508 | ) | ||||
|
Cash
distributions received from AllianceBernstein
|
102,086 | 137,475 | ||||||
|
Net
cash provided by investing activities
|
97,505 | 119,967 | ||||||
|
Cash
flows from financing activities:
|
||||||||
|
Cash
distributions to unitholders
|
(92,458 | ) | (126,616 | ) | ||||
|
Proceeds
from exercise of compensatory options to buy Holding Units
|
4,581 | 17,508 | ||||||
|
Net
cash used in financing activities
|
(87,877 | ) | (109,108 | ) | ||||
|
Change
in cash and cash equivalents
|
— | — | ||||||
|
Cash
and cash equivalents as of beginning of period
|
— | — | ||||||
|
Cash
and cash equivalents as of end of period
|
$ | — | $ | — | ||||
|
Non-cash
investing activities:
|
||||||||
|
Change
in accumulated other comprehensive income
|
$ | 2,543 | $ | 592 | ||||
|
Issuance
of Holding Units to fund deferred compensation plans
|
$ | 18,604 | $ | — | ||||
|
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
$ | 71,093 | $ | 36,925 | ||||
|
Non-cash
financing activities:
|
||||||||
|
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
$ | (23,459 | ) | $ | (14,060 | ) | ||
See Accompanying Notes to Condensed Financial
Statements
Notes
to Condensed Financial Statements
March
31, 2008
(unaudited)
The
words “we” and “our” refer collectively to AllianceBernstein Holding L.P.
(“Holding”) and AllianceBernstein L.P. and its subsidiaries
(“AllianceBernstein”), or to their officers and employees. Similarly, the word
“company” refers to both Holding and AllianceBernstein. Where the context
requires distinguishing between Holding and AllianceBernstein, we identify which
of them is being discussed. Cross-references are in italics.
|
1.
|
Business
Description and Organization
|
Holding’s
principal source of income and cash flow is attributable to its investment in
AllianceBernstein limited partnership interests. The condensed financial
statements and notes of Holding should be read in conjunction with the condensed
consolidated financial statements and notes of AllianceBernstein included as an
exhibit to this quarterly report on Form 10-Q and with Holding’s and
AllianceBernstein’s audited financial statements included in Holding’s Form 10-K
for the year ended December 31, 2007.
AllianceBernstein
provides research, diversified investment management, and related services
globally to a broad range of clients. Its principal services
include:
|
|
•
|
Institutional
Investment Services – servicing its institutional clients, including
unaffiliated corporate and public employee pension funds, endowment funds,
domestic and foreign institutions and governments, and affiliates such as
AXA and certain of its insurance company 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 individual clients, primarily by means of retail
mutual funds sponsored by AllianceBernstein or an affiliated company,
sub-advisory relationships in respect of mutual funds sponsored by third
parties, separately managed account programs sponsored by financial
intermediaries worldwide, and other investment
vehicles.
|
|
|
•
|
Private
Client Services – servicing its private clients, including high-net-worth
individuals, 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.
|
|
|
•
|
Institutional
Research Services – servicing institutional clients seeking independent
research, portfolio strategy, and brokerage-related
services.
|
AllianceBernstein
also provides distribution, shareholder servicing, and administrative services
to the mutual funds it sponsors.
AllianceBernstein
provides a broad range of services with expertise in:
|
|
•
|
Value
equities, generally targeting stocks that are out of favor and that may
trade at bargain prices;
|
|
|
•
|
Growth
equities, generally targeting stocks with under-appreciated growth
potential;
|
|
|
•
|
Fixed
income securities, including both taxable and tax-exempt
securities;
|
|
|
•
|
Blend
strategies, combining style-pure investment components with systematic
rebalancing;
|
|
|
•
|
Passive
management, including both index and enhanced index
strategies;
|
|
|
•
|
Alternative
investments, such as hedge funds, currency management, and venture
capital; and
|
|
|
•
|
Asset
allocation services, by which AllianceBernstein offers
specifically-tailored investment solutions for its clients (e.g.,
customized target date fund retirement services for institutional defined
contribution clients).
|
AllianceBernstein
manages these services using various investment disciplines, including market
capitalization (e.g., large-, mid-, and small-cap equities), term (e.g., long-,
intermediate-, and short-duration debt securities), and geographic location
(e.g., U.S., international, global, and emerging markets), as well as local and
regional disciplines in major markets around the world.
AllianceBernstein’s
independent research is the foundation of its business. AllianceBernstein’s
research disciplines include fundamental research, quantitative research,
economic research, and currency forecasting capabilities. In addition,
AllianceBernstein has created several specialized research units, including one
unit that examines global strategic changes that can affect multiple industries
and geographies, and another dedicated to identifying potentially successful
innovations within private early-stage and later-stage high growth
companies.
As of
March 31, 2008, AXA, a société
anonyme organized under the laws of France and the holding company for an
international group of insurance and related financial services companies, AXA
Financial, Inc. (an indirect wholly-owned subsidiary of AXA, “AXA Financial”),
AXA Equitable Life Insurance Company (a wholly-owned subsidiary of AXA
Financial, “AXA Equitable”), and certain subsidiaries of AXA Financial,
collectively referred to as “AXA and its subsidiaries”, owned approximately 1.7%
of the issued and outstanding units representing assignments of beneficial
ownership of limited partnership interests in Holding (“Holding
Units”).
As of
March 31, 2008, the ownership structure of AllianceBernstein, as a percentage of
general and limited partnership interests, was as follows:
|
AXA
and its subsidiaries
|
62.5 | % | ||
|
Holding
|
33.2 | |||
|
SCB
Partners Inc. (a wholly-owned subsidiary of SCB Inc.; formerly known as
Sanford C. Bernstein Inc.)
|
3.1 | |||
|
Unaffiliated
Holders
|
1.2 | |||
| 100.0 | % |
AllianceBernstein
Corporation (an indirect wholly-owned subsidiary of AXA, “General Partner”) is
the general partner of both Holding and AllianceBernstein. AllianceBernstein
Corporation owns 100,000 general partnership units in Holding and a 1% general
partnership interest in AllianceBernstein. Including the general partnership
interests in AllianceBernstein and Holding, and their equity interest in
Holding, as of March 31, 2008, AXA and its subsidiaries had an approximate 63.1%
economic interest in AllianceBernstein.
|
2.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
The
interim condensed financial statements of Holding included herein have been
prepared in accordance with the instructions to Form 10-Q pursuant to the rules
and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the interim results, have been
made. The preparation of the condensed financial statements requires management
to make certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the condensed financial statements and the reported amounts of
revenues and expenses during the interim reporting periods. Actual results could
differ from those estimates. The December 31, 2007 condensed statement of
financial condition was derived from audited financial statements, but does not
include all disclosures required by accounting principles generally accepted in
the United States of America.
Investment
in AllianceBernstein
Holding
records its investment in AllianceBernstein using the equity method of
accounting. Holding’s investment is increased to reflect its proportionate share
of income of AllianceBernstein and decreased to reflect its proportionate share
of losses of AllianceBernstein and cash distributions made by AllianceBernstein
to its unitholders. In addition, Holding’s investment is adjusted to reflect
certain capital transactions of AllianceBernstein.
Cash
Distributions
Holding
is required to distribute all of its Available Cash Flow, as defined in the
Amended and Restated Agreement of Limited Partnership of Holding (“Holding
Partnership Agreement”), to its unitholders pro rata in accordance with their
percentage interests in Holding. Available Cash Flow is defined as the cash
distributions Holding receives from AllianceBernstein minus such amounts as the
General Partner determines, in its sole discretion, should be retained by
Holding for use in its business.
On April
23, 2008, the General Partner declared a distribution of $72.5 million, or $0.83
per unit, representing Available Cash Flow for the three months ended March 31,
2008. Each general partnership unit in Holding is entitled to receive
distributions equal to those received by each Holding Unit. The distribution is
payable on May 15, 2008 to holders of record at the close of business on May 5,
2008.
Compensatory
Option Plans
AllianceBernstein
maintains certain compensation plans under which options to buy Holding Units
have been, or may be, granted to employees of AllianceBernstein and independent
directors of the General Partner. AllianceBernstein uses the Black-Scholes
option valuation model to determine the fair value of Holding Unit option
awards. Upon exercise of Holding Unit options, Holding exchanges the proceeds
for AllianceBernstein Units, thus increasing Holding’s investment in
AllianceBernstein.
|
3.
|
Net
Income Per Unit
|
Basic net
income per unit is derived by dividing net income by the basic weighted average
number of units outstanding for each period. Diluted net income per unit is
derived by adjusting net income for the assumed dilutive effect of compensatory
options (“Net income – diluted”) and dividing Net income – diluted by the
diluted weighted average number of units outstanding for each
period.
|
Three Months Ended March 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(in
thousands, except per unit amounts)
|
||||||||
|
Net
income - basic
|
$ | 72,436 | $ | 78,525 | ||||
|
Additional
allocation of equity in earnings of AllianceBernstein resulting from
assumed dilutive effect of compensatory options
|
170 | 1,269 | ||||||
|
Net
income - diluted
|
$ | 72,606 | $ | 79,794 | ||||
|
Weighted
average units outstanding - basic
|
87,233 | 85,944 | ||||||
|
Dilutive
effect of compensatory options
|
316 | 2,102 | ||||||
|
Weighted
average units outstanding - diluted
|
87,549 | 88,046 | ||||||
|
Basic
net income per unit
|
$ | 0.83 | $ | 0.91 | ||||
|
Diluted
net income per unit
|
$ | 0.83 | $ | 0.91 | ||||
As of
March 31, 2008 and 2007, we excluded 3,667,552 and 1,669,205 out-of-the-money
options (i.e., options with an exercise price greater than the weighted average
closing price of a unit for the relevant period), respectively, from the diluted
net income per unit computation due to their anti-dilutive effect.
|
4.
|
Investment
in AllianceBernstein
|
Changes
in Holding’s investment in AllianceBernstein for the three-month period ended
March 31, 2008 were as follows (in thousands):
|
Investment
in AllianceBernstein as of January 1, 2008
|
$ | 1,574,512 | ||
|
Equity
in earnings of AllianceBernstein
|
81,997 | |||
|
Additional
investment with proceeds from exercise of compensatory options to buy
Holding Units
|
4,581 | |||
|
Change
in accumulated other comprehensive income
|
2,543 | |||
|
Cash
distributions received from AllianceBernstein
|
(102,086 | ) | ||
|
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
(23,459 | ) | ||
|
Issuance
of Holding Units to fund deferred compensation plans
|
18,604 | |||
|
Awards
of Holding Units made by AllianceBernstein under deferred compensations
plans, net of forfeitures
|
71,093 | |||
|
Investment
in AllianceBernstein as of March 31, 2008
|
$ | 1,627,785 |
|
5.
|
Units
Outstanding
|
The
following table summarizes the activity in Holding Units:
|
Outstanding
as of January 1, 2008
|
86,948,149 | |||
|
Options
exercised
|
118,500 | |||
|
Units
awarded
|
46,030 | |||
|
Issuance
of units
|
293,344 | |||
|
Units
forfeited
|
(1,068 | ) | ||
|
Outstanding
as of March 31, 2008
|
87,404,955 |
Units
awarded and units forfeited pertain to restricted unit awards to independent
members of the Board of Directors and Century Club Plan unit awards to
AllianceBernstein mutual fund sales personnel. Issuance of units pertains to
Holding Units issued by AllianceBernstein to fund deferred compensation plan
elections by participants.
|
6.
|
Income
Taxes
|
Holding
is a publicly-traded partnership for federal tax purposes and, accordingly, is
not subject to federal or state corporate income taxes. However, Holding is
subject to the 4.0% New York City unincorporated business tax (“UBT”), net of
credits for UBT paid by AllianceBernstein, and to a 3.5% federal tax on
partnership gross income from the active conduct of a trade or business.
Holding’s partnership gross income is derived from its interest in
AllianceBernstein.
In order
to preserve Holding’s status as a “grandfathered” publicly-traded partnership
for federal income tax purposes, management ensures that Holding does not
directly or indirectly (through AllianceBernstein) enter into a substantial new
line of business. However, if Holding were to lose its status as a grandfathered
publicly-traded partnership, it would be subject to corporate income tax, which
would reduce materially Holding’s net income and its quarterly distributions to
Holding Unitholders.
|
7.
|
Commitments
and Contingencies
|
Legal and
regulatory matters described below pertain to AllianceBernstein and are included
here due to their potential significance to Holding’s investment in
AllianceBernstein.
Legal
Proceedings
With
respect to all significant litigation matters, we consider the likelihood of a
negative outcome. If we determine the likelihood of a negative outcome is
probable, and the amount of the loss can be reasonably estimated, we record an
estimated loss for the expected outcome of the litigation as required by
Statement of Financial Accounting Standards No. 5, “Accounting for
Contingencies”, and FASB Interpretation No. 14, “Reasonable Estimation of the Amount
of a Loss – an interpretation of FASB Statement No. 5”. If the
likelihood of a negative outcome is reasonably possible and we are able to
determine an estimate of the possible loss or range of loss, we disclose that
fact together with the estimate of the possible loss or range of loss. However,
it is difficult to predict the outcome or estimate a possible loss or range of
loss because litigation is subject to inherent uncertainties, particularly when
plaintiffs allege substantial or indeterminate damages, or when the litigation
is highly complex or broad in scope.
On
October 2, 2003, a purported class action complaint entitled Hindo, et al. v. AllianceBernstein
Growth & Income Fund, et al. (“Hindo Complaint”) was filed against,
among others, AllianceBernstein, Holding, and the General Partner. The Hindo
Complaint alleges that certain defendants failed to disclose that they
improperly allowed certain hedge funds and other unidentified parties to engage
in “late trading” and “market timing” of certain of our U.S. mutual fund
securities, violating various securities laws.
Following
October 2, 2003, additional lawsuits making factual allegations generally
similar to those in the Hindo Complaint were filed in various federal and state
courts against AllianceBernstein and certain other defendants. On September 29,
2004, plaintiffs filed consolidated amended complaints with respect to four
claim types: mutual fund shareholder claims; mutual fund derivative claims;
derivative claims brought on behalf of Holding; and claims brought under the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) by
participants in the Profit Sharing Plan for Employees of
AllianceBernstein.
On April
21, 2006, AllianceBernstein and attorneys for the plaintiffs in the mutual fund
shareholder claims, mutual fund derivative claims, and ERISA claims entered into
a confidential memorandum of understanding containing their agreement to settle
these claims. The agreement will be documented by a stipulation of settlement
and will be submitted for court approval at a later date. The settlement amount
($30 million), which we previously expensed and disclosed, has been disbursed.
The derivative claims brought on behalf of Holding, in which plaintiffs seek an
unspecified amount of damages, remain pending.
We intend
to vigorously defend against the lawsuit involving derivative claims brought on
behalf of Holding. At the present time, we are unable to predict the outcome or
estimate a possible loss or range of loss in respect of this matter because of
the inherent uncertainty regarding the outcome of complex litigation, and the
fact that the plaintiffs did not specify an amount of damages sought in their
complaint.
We are
involved in various other matters, including regulatory inquiries,
administrative proceedings, and litigation, some of which allege material
damages. While any proceeding or litigation has the element of uncertainty,
management believes that the outcome of any one of the other lawsuits or claims
that is pending or threatened, or all of them combined, will not have a material
adverse effect on our results of operations or financial condition.
Claims
Processing Contingency
During
the fourth quarter of 2006, AllianceBernstein recorded a $56.0 million pre-tax
charge ($54.5 million, net of related income tax benefit) for the estimated cost
of reimbursing certain clients for losses arising out of an error
AllianceBernstein made in processing claims for class action settlement proceeds
on behalf of these clients, which include some AllianceBernstein-sponsored
mutual funds. We believe that most of this cost will ultimately be recovered
from residual settlement proceeds and insurance. Our fourth quarter 2006 cash
distribution was declared by the General Partner prior to recognition of this
adjustment. As a result, to the extent that all or a portion of the cost is
recovered in subsequent periods, we do not intend to include recoveries in
Available Cash Flow (as defined in the Holding Partnership Agreement), and would
not distribute those amounts to unitholders. As of March 31, 2008,
AllianceBernstein had $10.0 million remaining in accrued expenses related to the
$56.0 million pre-tax charge.
|
8.
|
Comprehensive
Income
|
Partners’
capital is adjusted to reflect certain capital transactions of
AllianceBernstein. Comprehensive income was comprised of:
|
Three Months Ended
March 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(in
thousands, except per unit amounts)
|
||||||||
|
Net
income
|
$ | 72,436 | $ | 78,525 | ||||
|
Other
comprehensive income (loss), net of tax:
|
||||||||
|
Unrealized
gain (loss) on investments
|
(997 | ) | (363 | ) | ||||
|
Foreign
currency translation adjustment
|
3,583 | 982 | ||||||
|
Changes
in retirement plan related items
|
(43 | ) | (27 | ) | ||||
| 2,543 | 592 | |||||||
|
Comprehensive
income
|
$ | 74,979 | $ | 79,117 | ||||
Report of
Independent Registered Public Accounting Firm
To the
General Partner and Unitholders
AllianceBernstein
Holding L.P.
We have
reviewed the accompanying condensed statement of financial condition of
AllianceBernstein Holding L.P. (“AllianceBernstein Holding”) as of March 31,
2008, the related condensed statements of income for the three-month periods
ended March 31, 2008 and March 31, 2007, and the condensed statements of cash
flows for the three-month periods ended March 31, 2008 and 2007. These interim
financial statements are the responsibility of the management of
AllianceBernstein Corporation, the General Partner.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on
our review, we are not aware of any material modifications that should be made
to the accompanying condensed interim financial
statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the statement of financial condition
as of December 31, 2007, and the related statements of income, changes in
partners’ capital and comprehensive income, and of cash flows for the year then
ended (not presented herein), and in our report dated February 22, 2008, we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed statement of financial
condition as of December 31, 2007, is fairly stated in all material respects in
relation to the statement of financial condition from which it has been
derived.
/s/ PricewaterhouseCoopers
LLP
New York,
New York
May 2,
2008
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Holding’s
principal source of income and cash flow is attributable to its investment in
AllianceBernstein limited partnership interests. The Holding interim condensed
financial statements and notes and management’s discussion and analysis of
financial condition and results of operations (“MD&A”) should be read in
conjunction with those of AllianceBernstein included as an exhibit to this Form
10-Q. They should also be read in conjunction with AllianceBernstein’s audited
financial statements and notes and MD&A included in Holding’s Form 10-K for
the year ended December 31, 2007.
Results
of Operations
|
Three Months Ended March 31,
|
||||||||||||
|
2008
|
2007
|
% Change
|
||||||||||
|
(in
millions, except per unit amounts)
|
||||||||||||
|
AllianceBernstein
net income
|
$ | 247.4 | $ | 267.7 | (7.6 | )% | ||||||
|
Weighted
average equity ownership interest
|
33.1 | % | 32.8 | % | ||||||||
|
Equity
in earnings of AllianceBernstein
|
$ | 82.0 | $ | 87.8 | (6.6 | ) | ||||||
|
Net
income of Holding
|
$ | 72.4 | $ | 78.5 | (7.8 | ) | ||||||
|
Diluted
net income per Holding Unit
|
$ | 0.83 | $ | 0.91 | (8.8 | ) | ||||||
|
Distribution
per Holding Unit
|
$ | 0.83 | $ | 0.91 | (8.8 | ) | ||||||
Net
income for the three months ended March 31, 2008 decreased $6.1 million to $72.4
million from net income of $78.5 million for the three months ended March 31,
2007. The decrease reflects lower equity in earnings of AllianceBernstein. See AllianceBernstein’s MD&A
contained in Exhibit 99.1.
Capital
Resources and Liquidity
The
following table identifies selected items relating to capital resources and
liquidity:
|
Three Months Ended March 31,
|
||||||||||||
|
2008
|
2007
|
% Change
|
||||||||||
|
(in
millions, except per unit amounts)
|
||||||||||||
|
Partners’
capital, as of March 31
|
$ | 1,620.8 | $ | 1,552.2 | 4.4 | % | ||||||
|
Distributions
received from AllianceBernstein
|
102.1 | 137.5 | (25.7 | ) | ||||||||
|
Distributions
paid to unitholders
|
(92.5 | ) | (126.6 | ) | (27.0 | ) | ||||||
|
Proceeds
from exercise of compensatory options to buy Holding Units
|
4.6 | 17.5 | (73.8 | ) | ||||||||
|
Investment
in AllianceBernstein with proceeds from exercise of compensatory options
to buy Holding Units
|
(4.6 | ) | (17.5 | ) | (73.8 | ) | ||||||
|
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
(23.5 | ) | (14.1 | ) | 66.8 | |||||||
|
Issuance
of Holding Units to fund deferred compensation plans
|
18.6 | — | n/m | |||||||||
|
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
71.1 | 36.9 | 92.5 | |||||||||
|
Available
Cash Flow
|
72.5 | 78.4 | (7.5 | ) | ||||||||
Cash and
cash equivalents were zero as of March 31, 2008 and 2007. Cash
inflows from AllianceBernstein distributions received were offset by cash
distributions paid to unitholders and income taxes paid. Holding is required to
distribute all of its Available Cash Flow, as defined in the Holding Partnership
Agreement, to its unitholders (including the General Partner). Management
believes that the cash flow realized from its investment in AllianceBernstein
will provide Holding with the resources to meet its financial obligations. See Note 2 to the Holding condensed
financial statements contained in Item 1 for a description of
Available Cash Flow.
Commitments
and Contingencies
See Note 7 to the Holding condensed
financial statements contained in Item 1.
CAUTIONS
REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements provided by management in this report and in the portion of
AllianceBernstein’s Form 10-Q attached hereto as Exhibit 99.1 are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties, and other factors that could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. The most significant of these factors include, but
are not limited to, the following: the performance of financial markets, the
investment performance of sponsored investment products and separately managed
accounts, general economic conditions, future acquisitions, competitive
conditions, and government regulations, including changes in tax regulations and
rates and the manner in which the earnings of publicly-traded partnerships are
taxed. We caution readers to carefully consider such factors. Further, such
forward-looking statements speak only as of the date on which such statements
are made; we undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date of such statements. For further
information regarding these forward-looking statements and the factors that
could cause actual results to differ, see “Risk Factors” in Part I, Item
1A of our Form 10-K for the year ended December 31, 2007 and Part II, Item 1A of this Form 10-Q. Any
or all of the forward-looking statements that we make in this Form 10-Q or any
other public statements we issue may turn out to be wrong. It is important to
remember that other factors besides those listed in “Risk Factors” and those
listed below could also adversely affect our revenues, financial condition,
results of operations, and business prospects.
The
forward-looking statements referred to in the preceding paragraph include
statements regarding:
|
|
•
|
The effect of
current
market turmoil on investments and investment opportunities, and the timing
of a firm-wide resumption of organic
growth: The
actual performance of the capital markets and other factors beyond our
control will affect our investment success for clients and client
asset flows.
|
|
|
•
|
Our backlog of new
institutional mandates not yet funded growing to over $16
billion: Before they are
funded, institutional mandates do not represent legally binding
commitments to fund and, accordingly, the possibility exists that
not all mandates will be funded in the amounts and at the times we
currently anticipate.
|
|
|
•
|
Lower compensation
expense in future periods resulting from a decline in the value of
investments held for employee deferred
compensation plans: The
actual performance of the capital markets and other factors beyond our
control will affect the value of these investments and thus the
level of compensation expense in future
periods.
|
|
|
•
|
Our ability to recover
a substantial portion of costs incurred to conclude employment-related
arbitrations: Our
ability to recover a substantial portion of these costs depends on
the willingness of our insurer to reimburse us under an existing
policy.
|
|
|
•
|
Our estimate of the
cost to reimburse certain of our clients for losses arising out of an
error we made in processing class action claims,
and our ability to recover most of this cost: Our estimate of the
cost to reimburse clients is based on our review to date; as we
continue our review, our estimate and the ultimate cost we incur may
change. Our ability to recover most of the cost of the error
depends, in part, on the availability of funds from the related
class- action settlement funds, the amount of which is not known, and
the willingness of our insurers to reimburse us under existing
policies.
|
|
|
•
|
The outcome of
litigation: Litigation is inherently unpredictable, and excessive
damage awards do occur. Though we have stated that we do not expect
certain legal proceedings to have a material adverse effect on our results
of operations or financial condition, any settlement or judgment
with respect to a legal proceeding could be significant, and could
have a material adverse effect on our results of operations or financial
condition.
|
OTHER
INFORMATION
With
respect to the unaudited condensed interim financial information of Holding for
the three months ended March 31, 2008, included in this quarterly report on Form
10-Q, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated May 2, 2008
appearing herein states that they did not audit and they do not express an
opinion on the unaudited condensed interim financial information. Accordingly,
the degree of reliance on their report on such information should be restricted
in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act of 1933, as amended (“Securities Act”) for their report
on the unaudited condensed interim financial information because that report is
not a “report” or a “part” of registration statements prepared or certified by
PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the
Securities Act.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk
There
have been no material changes to Holding’s market risk for the quarter ended
March 31, 2008.
Item 4. Controls
and Procedures
Disclosure
Controls and Procedures
Each of
Holding and AllianceBernstein maintains a system of disclosure controls and
procedures that is designed to ensure that information required to be disclosed
in our reports under the Securities Exchange Act of 1934, as amended, is (i)
recorded, processed, summarized, and reported in a timely manner, and (ii)
accumulated and communicated to management, including the Chief Executive
Officer and the Chief Financial Officer, to permit timely decisions regarding
our disclosure.
As of the
end of the period covered by this report, management carried out an evaluation,
under the supervision and with the participation of the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the design and
operation of the disclosure controls and procedures. Based on this evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded that the
disclosure controls and procedures are effective.
Changes
in Internal Control over Financial Reporting
No change
in our internal control over financial reporting occurred during the first
quarter of 2008 that materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Part
II
OTHER
INFORMATION
|
Legal
Proceedings
|
See Note 7 to the condensed
financial statements contained in Part I, Item 1.
|
Item 1A.
|
Risk
Factors
|
In
addition to the information set forth in this report, please consider carefully
“Risk Factors” in Part I, Item
1A of our
Form 10-K for the year ended December 31, 2007. Such factors could
materially affect our revenues, financial condition, results of operations, and
business prospects. See also
our cautions regarding forward-looking statements in Part I, Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds
|
There
were no Holding Units sold by Holding in the period covered by this report that
were not registered under the Securities Act.
The
following table provides information relating to any purchases of Holding Units
by AllianceBernstein made in the quarter covered by this report:
ISSUER
PURCHASES OF EQUITY SECURITIES
|
Period
|
(a)
Total Number of
Units Purchased
|
(b)
Average Price Paid
Per Unit, net
of Commissions
|
(c)
Total Number of Units
Purchased as Part of
Publicly Announced
Plans or
Programs
|
(d)
Maximum Number
(or Approximate Dollar Value)
of Units that May Yet
Be Purchased Under the
Plans or Programs
|
||||||||||||
|
1/1/08
- 1/31/08
|
91,471 | $ | 66.39 | — | — | |||||||||||
|
2/1/08
- 2/29/08
|
— | — | — | — | ||||||||||||
|
3/1/08
- 3/31/08
|
5,000 | 59.20 | — | — | ||||||||||||
|
Total
|
96,471 | $ | 66.02 | — | — | |||||||||||
All
Holding Units were purchased from employees to allow them to fulfill statutory
withholding tax requirements at the time of distribution of deferred
compensation awards.
|
Item
3.
|
Defaults Upon Senior
Securities
|
None.
|
Item
4.
|
Submission of Matters
to a Vote of Security
Holders
|
None.
|
Item
5.
|
Other
Information
|
None.
|
Item
6.
|
Exhibits
|
|
|
Letter
from PricewaterhouseCoopers LLP, our independent registered public
accounting firm, regarding unaudited interim financial
information.
|
|
|
Certification
of Mr. Sanders furnished pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
Certification
of Mr. Joseph furnished pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
Certification
of Mr. Sanders furnished for the purpose of complying with Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
Certification
of Mr. Joseph furnished for the purpose of complying with Rule
13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
Part
I, Items 1 through 4 of the AllianceBernstein L.P. Quarterly Report on
Form 10-Q for the quarter ended March 31,
2008.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Date:
May 2, 2008
|
ALLIANCEBERNSTEIN
HOLDING
L.P.
|
|
|
By:
|
/s/
Robert H. Joseph, Jr.
|
|
|
Robert H. Joseph,
Jr.
|
||
|
Senior
Vice President and Chief Financial
Officer
|
||
15