Invesco Reports Results for Three Months Ended September 30, 2008

Business Wire, Oct 29, 2008

ATLANTA -- Invesco Ltd. (NYSE: IVZ) reported net income of $131.8 million for the quarter ended September 30, 2008, as compared to $162.8 million in the quarter ended June 30, 2008 and $167.0 million for the quarter ended September 30, 2007. Diluted earnings per share were $0.33 for the third quarter (second quarter 2008: $0.41; third quarter 2007: $0.41). Operating income was $195.2 million for the third quarter (second quarter 2008: $240.0 million; third quarter 2007: $256.5 million).

"Invesco's singular focus on investment management and a disciplined approach to market challenges produced solid financial results in an extremely difficult environment," said Invesco President and CEO Martin L. Flanagan. "While falling markets will adversely impact company revenues, Invesco's global reach, broadly diversified investment management capabilities and capital strength put us in a strong position to serve clients well and continue to improve our competitive position within the investment management industry."

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Assets Under Management

Assets under management (AUM) at September 30, 2008 were $409.6 billion (June 30, 2008: $461.3 billion). The decline in AUM during the third quarter of 2008 was due to reduced market values, net outflows and the impact of less favorable foreign exchange rates. Average AUM during the third quarter of 2008 were $448.3 billion, compared to $482.6 billion for the second quarter of 2008.

Market declines led to a $29.6 billion reduction in AUM during the third quarter compared to a reduction of $6.0 billion in the second quarter. Long-term net outflows during the third quarter were $3.0 billion compared to $6.2 billion in the second quarter. Total money market net outflows were $8.0 billion in the third quarter compared to net inflows of $4.7 billion in the second quarter. Further analysis of AUM is included in the supplemental schedules to this release.

Earnings Summary

Operating revenues decreased 11.6% to $827.2 million in the third quarter of 2008 (from $935.6 million in the second quarter of 2008) and decreased 15.3% from $976.6 million in the third quarter of 2007. Operating revenues included performance fees of $18.1 million for the third quarter of 2008 (second quarter 2008: $22.2 million; third quarter 2007: $4.0 million). Net revenues were $618.0 million for the third quarter of 2008 (second quarter 2008: $705.3 million; third quarter 2007: $722.4 million). See the Schedule of Non-GAAP Information on page 7 for a reconciliation of operating revenues to net revenues.

Employee compensation costs decreased 6.6% to $264.1 million for the third quarter of 2008 from $282.9 million for the second quarter of 2008, primarily due to lower variable compensation expense. Employee compensation costs decreased 5.0% from $278.1 million for the third quarter of 2007, also driven by a decrease in variable compensation expense.

Third-party distribution, service and advisory costs decreased 9.8% to $220.9 million for the third quarter of 2008 from $244.9 million for the second quarter of 2008, consistent with the decline in investment management and service and distribution fees.

Marketing expenses decreased by 8.9% to $34.8 million for the third quarter of 2008 from $38.2 million for the second quarter of 2008 due to lower marketing support payments and promotional expenditures.

Property, office and technology costs decreased 9.3% to $50.5 million for the third quarter of 2008 from $55.7 million for the second quarter of 2008 primarily due to a downward adjustment in rent costs for sublet office property totaling $3.3 million.

General and administrative costs decreased 16.5% to $61.7 million for the third quarter of 2008 from $73.9 million for the second quarter of 2008. The decrease included a reduction in legal expenses of $5.0 million.

The $10.4 million net loss in other gains and losses during the third quarter of 2008 (second quarter of 2008: a net loss of $1.1 million) included the recognition of an unrealized loss of $9.4 million in investments in collateralized loan obligation (CLO) structures managed by Invesco.

The effective tax rate, after minority interests, decreased to 27.2% for the third quarter of 2008 from 32.2% for the second quarter of 2008 (third quarter 2007: 35.7%) due to the release of $9.9m of our income tax reserve, which was recorded in accordance with FIN 48.

Capital Management

During the third quarter of 2008, the company repaid $15.0 million of its floating rate credit facility (second quarter of 2008: net repayments of $200.0 million). The company had cash and cash equivalents of $740.6 million at September 30, 2008 (June 30, 2008 $644.8 million). During the third quarter, purchases related to the share repurchase program totaled $100.0 million, representing 4.0 million shares.

Beginning in 2008, Invesco declares and pays dividends on a quarterly basis. On October 27, 2008, the company declared a third quarter cash dividend of $0.10 per share to holders of our common stock. The dividend is payable on December 17, 2008, to shareholders of record at the close of business on November 26, 2008. The first, second and third quarter dividends, on an annualized basis, would represent a 4.2% increase over the 2007 total dividend of $0.384 per share.