x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
|
13-3434400
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
Yes
|
x
|
|
No
|
o
|
|
Large
accelerated filer
|
x
|
Accelerated
filer
|
o
|
Non-accelerated
filer
|
o
|
Yes
|
o
|
|
No
|
x
|
Item
1.
|
Financial
Statements
|
|
September
30,
2006
|
December
31,
2005
|
|||||
|
(unaudited)
|
|
|||||
|
|
|
|||||
ASSETS
|
|
|
|||||
|
|
|
|||||
Cash
and cash equivalents
|
$
|
—
|
$
|
89
|
|||
Investment
in AllianceBernstein
|
1,497,060
|
1,376,503
|
|||||
Other
assets
|
258
|
462
|
|||||
Total
assets
|
$
|
1,497,318
|
$
|
1,377,054
|
|||
|
|||||||
LIABILITIES
AND PARTNERS’ CAPITAL
|
|||||||
|
|||||||
Liabilities:
|
|||||||
Payable
to AllianceBernstein
|
$
|
6,397
|
$
|
7,197
|
|||
Other
liabilities
|
177
|
1,011
|
|||||
Total
liabilities
|
6,574
|
8,208
|
|||||
|
|||||||
Commitments
and contingencies (See Note 6)
|
|||||||
|
|||||||
Partners’
capital
|
1,490,744
|
1,368,846
|
|||||
Total
liabilities and partners’ capital
|
$
|
1,497,318
|
$
|
1,377,054
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
|
|
|
|||||||||
Equity
in earnings of AllianceBernstein
|
$
|
82,028
|
$
|
67,237
|
$
|
239,706
|
$
|
182,911
|
|||||
|
|||||||||||||
Income
taxes
|
8,025
|
6,667
|
24,139
|
19,383
|
|||||||||
|
|||||||||||||
Net
income
|
$
|
74,003
|
60,570
|
$
|
215,567
|
$
|
163,528
|
||||||
|
|||||||||||||
Net
income per unit:
|
|||||||||||||
Basic
|
$
|
0.88
|
$
|
0.74
|
$
|
2.57
|
$
|
2.01
|
|||||
Diluted
|
$
|
0.87
|
$
|
0.74
|
$
|
2.54
|
$
|
2.00
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
|
|
|
|||||||||
Partners’
capital - beginning of period
|
$
|
1,472,166
|
$
|
1,351,513
|
$
|
1,368,846
|
$
|
1,295,670
|
|||||
Comprehensive
income:
|
|||||||||||||
Net
income
|
74,003
|
60,570
|
215,567
|
163,528
|
|||||||||
Other
comprehensive income:
|
|||||||||||||
Unrealized
gain on investments, net
|
617
|
531
|
498
|
1,086
|
|||||||||
Foreign
currency translation adjustment, net
|
(273
|
)
|
(2,057
|
)
|
605
|
8,005
|
|||||||
Comprehensive
income
|
74,347
|
59,044
|
216,670
|
172,619
|
|||||||||
|
|||||||||||||
Cash
distributions to unitholders
|
(74,638
|
)
|
(55,356
|
)
|
(224,943
|
)
|
(166,480
|
)
|
|||||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation
plans,
net
|
1,721
|
409
|
(16,648
|
)
|
(6,511
|
)
|
|||||||
Issuance
of Holding Units in exchange for cash awards made by AllianceBernstein
under the Partners Compensation Plan
|
—
|
—
|
47,161
|
—
|
|||||||||
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
(466
|
)
|
2,504
|
36,413
|
35,332
|
||||||||
Proceeds
from exercise of compensatory options to buy Holding Units
|
17,614
|
3,344
|
63,245
|
30,828
|
|||||||||
Partners’
capital - end of period
|
$
|
1,490,744
|
$
|
1,361,458
|
$
|
1,490,744
|
$
|
1,361,458
|
|
Nine
Months Ended
September
30,
|
||||||
|
2006
|
2005
|
|||||
|
|
|
|||||
Cash
flows from operating activities:
|
|
|
|||||
Net
income
|
$
|
215,567
|
$
|
163,528
|
|||
Adjustment
to reconcile net income to net cash used in operating
activities:
|
|||||||
Equity
in earnings of AllianceBernstein
|
(239,706
|
)
|
(182,911
|
)
|
|||
Changes
in assets and liabilities:
|
|||||||
Decrease
(increase) in other assets
|
204
|
(52
|
)
|
||||
(Decrease)
in payable to AllianceBernstein
|
(800
|
)
|
(458
|
)
|
|||
(Decrease)
increase in other liabilities
|
(834
|
)
|
398
|
||||
Net
cash used in operating activities
|
(25,569
|
)
|
(19,495
|
)
|
|||
|
|||||||
Cash
flows from investing activities:
|
|||||||
Investment
in AllianceBernstein with proceeds from exercise of compensatory
options
to buy Holding Units
|
(63,245
|
)
|
(30,828
|
)
|
|||
Cash
distributions received from AllianceBernstein
|
250,423
|
185,975
|
|||||
Net
cash provided by investing activities
|
187,178
|
155,147
|
|||||
|
|||||||
Cash
flows from financing activities:
|
|||||||
Cash
distributions to unitholders
|
(224,943
|
)
|
(166,480
|
)
|
|||
Proceeds
from exercise of compensatory options to buy Holding Units
|
63,245
|
30,828
|
|||||
Net
cash used in financing activities
|
(161,698
|
)
|
(135,652
|
)
|
|||
|
|||||||
Net
(decrease) in cash and cash equivalents
|
(89
|
)
|
—
|
||||
Cash
and cash equivalents as of beginning of period
|
89
|
—
|
|||||
Cash
and cash equivalents as of end of period
|
$
|
—
|
$
|
—
|
|||
|
|||||||
Non-cash
investing activities:
|
|||||||
Other
comprehensive income
|
$
|
1,103
|
$
|
9,091
|
|||
Issuance
of Holding Units in exchange for cash awards made by AllianceBernstein
under the Partners Compensation Plan
|
$
|
47,161
|
—
|
||||
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
$
|
36,413
|
$
|
35,332
|
|||
|
|||||||
Non-cash
financing activities:
|
|||||||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation
plans,
net
|
$
|
(16,648
|
)
|
$
|
(6,511
|
)
|
1.
|
Organization
and Business Description
|
•
|
Institutional
Investments Services - servicing institutional investors, 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, group trusts, mutual funds (sponsored by AllianceBernstein
or
our affiliated joint venture companies), and other investment
vehicles.
|
•
|
Retail
Services - servicing individual investors, primarily by means of
retail
mutual funds sponsored by AllianceBernstein or our affiliated joint
venture companies, sub-advisory relationships in respect of mutual
funds
sponsored by third parties, separately managed account programs that
are
sponsored by registered broker-dealers, and other investment
vehicles.
|
•
|
Private
Client Services - servicing 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 investors desiring
institutional research services including in-depth research, portfolio
strategy, trading, and brokerage-related
services.
|
•
|
Growth
equities, generally targeting stocks with under-appreciated growth
potential;
|
•
|
Value
equities, generally targeting stocks that are out of favor and that
may trade at bargain prices;
|
•
|
Fixed
income, including both taxable and tax-exempt
securities;
|
•
|
Passive,
including both index and enhanced index strategies;
and
|
•
|
Blend
strategies, combining style pure components with systematic
rebalancing.
|
AXA
and its subsidiaries
|
59.5
|
%
|
||
Holding
|
32.8
|
|||
SCB
Partners Inc. (a wholly-owned subsidiary of SCB Inc., formerly known
as
Sanford C. Bernstein Inc.)
|
6.3
|
|||
Other
|
1.4
|
|||
|
100.0
|
%
|
2.
|
Summary
of Significant Accounting
Policies
|
3.
|
Net
Income Per Unit
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
(in
thousands, except per unit amounts)
|
||||||||||||
|
|
|
|
|
|||||||||
Net
income - basic
|
$
|
74,003
|
$
|
60,570
|
$ |
215,567
|
$ |
163,528
|
|||||
Additional
allocation of equity in earnings of AllianceBernstein resulting
from
assumed dilutive effect of compensatory options
|
1,238
|
752
|
3,737
|
2,241
|
|||||||||
Net
income - diluted
|
$
|
75,241
|
$
|
61,322
|
$
|
219,304
|
$
|
165,769
|
|||||
|
|||||||||||||
Weighted
average units outstanding - basic
|
84,444
|
81,707
|
84,037
|
81,317
|
|||||||||
Dilutive
effect of compensatory options
|
2,127
|
1,569
|
2,192
|
1,709
|
|||||||||
Weighted
average units outstanding - diluted
|
86,571
|
83,276
|
86,229
|
83,026
|
|||||||||
|
|||||||||||||
Basic
net income per unit
|
$
|
0.88
|
$
|
0.74
|
$
|
2.57
|
$
|
2.01
|
|||||
Diluted
net income per unit
|
$
|
0.87
|
$
|
0.74
|
$
|
2.54
|
$
|
2.00
|
4.
|
Investment
in AllianceBernstein
|
Investment
in AllianceBernstein as of January 1, 2006
|
$
|
1,376,503
|
||
Equity
in earnings of AllianceBernstein
|
239,706
|
|||
Additional
investment with proceeds from exercises of compensatory options to
buy
Holding Units
|
63,245
|
|||
Other
comprehensive income
|
1,103
|
|||
Cash
distributions received from AllianceBernstein
|
(250,423
|
)
|
||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation
plans,
net
|
(16,648
|
)
|
||
Issuance
of Holding Units in exchange for cash awards made by AllianceBernstein
under the Partners Compensation Plan
|
47,161
|
|||
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
36,413
|
|||
Investment
in AllianceBernstein as of September 30, 2006
|
$
|
1,497,060
|
5.
|
Income
Taxes
|
6.
|
Commitments
and Contingencies
|
/s/
PricewaterhouseCoopers LLP
|
/s/
KPMG LLP
|
Ite
m
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
|||||||||||||||
|
2006
|
2005
|
%
Change
|
2006
|
2005
|
%
Change
|
|||||||||||||
|
(in
millions, except per unit amounts)
|
||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||
AllianceBernstein
net income
|
$
|
253.0
|
$
|
211.9
|
19.4
|
%
|
$
|
741.7
|
$
|
578.4
|
28.2
|
%
|
|||||||
Weighted
average equity ownership interest
|
32.4
|
%
|
31.7
|
%
|
32.3
|
%
|
31.6
|
%
|
|||||||||||
Equity
in earnings of AllianceBernstein
|
$
|
82.0
|
$
|
67.2
|
22.0
|
$
|
239.7
|
$
|
182.9
|
31.1
|
|||||||||
Net
income of Holding
|
$
|
74.0
|
$
|
60.6
|
22.2
|
$
|
215.6
|
$
|
163.5
|
31.8
|
|||||||||
Diluted
net income per Holding Unit
|
$
|
0.87
|
$
|
0.74
|
17.6
|
$
|
2.54
|
$
|
2.00
|
27.0
|
|||||||||
Distribution
per Holding Unit
|
$
|
0.87
|
$
|
0.74
|
17.6
|
$
|
2.54
|
$
|
1.98
|
28.3
|
|
Nine
Months Ended
September
30,
|
|
||||||||
|
2006
|
2005
|
%
Change
|
|||||||
|
(in
millions)
|
|
||||||||
|
|
|
|
|||||||
Partners’
capital, as of September 30
|
$
|
1,490.7
|
$
|
1,361.5
|
9.5
|
%
|
||||
Distributions
received from AllianceBernstein
|
250.4
|
186.0
|
34.7
|
|||||||
Distributions
paid to unitholders
|
(224.9
|
)
|
(166.5
|
)
|
35.1
|
|||||
Proceeds
from exercise of compensatory options
|
63.2
|
30.8
|
105.2
|
|||||||
Investment
in AllianceBernstein
|
(63.2
|
)
|
(30.8
|
)
|
105.2
|
|||||
Purchase
of units by AllianceBernstein
|
(16.6
|
)
|
(6.5
|
)
|
155.7
|
|||||
Issuance
of units
|
47.2
|
—
|
n/m
|
|||||||
Awards
of units by AllianceBernstein
|
36.4
|
35.3
|
3.1
|
I
te
m
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Ite
m
4.
|
Controls
and Procedures
|
Ite
m
1.
|
Legal
Proceedings
|
Ite
m
1A.
|
Risk
Factors
|
Item
2.
|
Unreg
ist
ered
Sales of Equity Securities and Use of
Proceeds
|
(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
|
||||||||||
7/1/06-7/31/06
|
2,430
|
$
|
57.50
|
—
|
—
|
||||||||
8/1/06-8/31/06
|
533
|
65.03
|
—
|
—
|
|||||||||
9/1/06-9/30/06
|
—
|
—
|
—
|
—
|
|||||||||
Total
|
2,963
|
$
|
58.86
|
—
|
—
|
It
em
3.
|
Defaults
Upon Senior Securities
|
Ite
m
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Ite
m
5.
|
Other
Information
|
I
te
m
6.
|
Exhibits
|
Amendment
No. 1 dated February 24, 2006 to Amended and Restated Agreement
of Limited
Partnership of Holding.
|
||
Amendment
No. 1 dated February 24, 2006 to Amended and Restated Agreement
of Limited
Partnership of AllianceBernstein.
|
||
|
||
Letter
from PricewaterhouseCoopers LLP, our Independent Registered Public
Accounting Firm, regarding unaudited interim financial
information.
|
||
Letter
from KPMG LLP 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 September 30,
2006.
|
Dated:
November 8, 2006
|
A
LLIANCE
B
ERNSTEIN
H
OLDING
L.P.
|
|||
|
|
|
||
|
|
|
||
|
By:
|
/s/
Robert H. Joseph, Jr.
|
||
|
|
Robert
H. Joseph, Jr.
|
||
|
|
Senior
Vice President and
Chief
Financial Officer
|
GENERAL
PARTNER
:
|
|||
AllianceBernstein
Corporation
|
|||
|
|
||
By:
|
/s/
Adam R. Spilka
|
||
Name:
|
Adam
R. Spilka
|
||
Title:
|
Senior
Vice President,
|
||
Counsel,
and Secretary
|
GENERAL
PARTNER
:
|
|||
AllianceBernstein
Corporation
|
|||
|
|
||
By:
|
/s/
Adam R. Spilka
|
||
Name:
|
Adam
R. Spilka
|
||
Title:
|
Senior
Vice President,
|
||
Counsel
and Secretary
|
/s/
PricewaterhouseCoopers LLP
|
|
New
York, New York
|
|
/s/
KPMG LLP
|
|
New
York, New York
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of AllianceBernstein
Holding L.P.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including
its
consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report is
being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such
internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a)
|
all
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 8, 2006
|
/s/
Lewis A. Sanders
|
|
|
Lewis
A. Sanders
|
|
|
Chief
Executive Officer
|
|
|
AllianceBernstein
Holding L.P.
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of AllianceBernstein
Holding L.P.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered
by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of
the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision,
to ensure
that material information relating to the registrant, including
its
consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report
is being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such
internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the
period
covered by this report based on such evaluation;
and
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a)
|
all
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which
are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 8, 2006
|
/s/
Robert H. Joseph, Jr.
|
|
|
Robert
H. Joseph, Jr.
|
|
|
Chief
Financial Officer
|
|
|
AllianceBernstein
Holding L.P.
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or
15(d) of the Exchange Act; and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of
the
Company.
|
Date:
November 8, 2006
|
/s/
Lewis A. Sanders
|
|
|
Lewis
A. Sanders
|
|
|
Chief
Executive Officer
|
|
|
AllianceBernstein
Holding L.P.
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or
15(d) of the Exchange Act; and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of
the
Company.
|
Date:
November 8, 2006
|
/s/
Robert H. Joseph, Jr.
|
|
|
Robert
H. Joseph, Jr.
|
|
|
Chief
Financial Officer
|
|
|
AllianceBernstein
Holding L.P.
|
Item
1.
|
Financial
Statements
|
|
September
30,
2006
|
December
31,
2005
|
|||||
|
(unaudited)
|
|
|||||
ASSETS
|
|
|
|||||
Cash
and cash equivalents
|
$
|
576,931
|
$
|
654,168
|
|||
Cash
and securities segregated, at market (cost: $1,378,117 and
$1,720,295)
|
1,378,819
|
1,720,809
|
|||||
Receivables,
net:
|
|
|
|||||
Brokers
and dealers
|
2,586,794
|
2,093,461
|
|||||
Brokerage
clients
|
414,243
|
429,586
|
|||||
Fees,
net
|
498,534
|
413,198
|
|||||
Investments
|
601,062
|
345,045
|
|||||
Furniture,
equipment and leasehold improvements, net
|
272,452
|
236,309
|
|||||
Goodwill,
net
|
2,893,029
|
2,876,657
|
|||||
Intangible
assets, net
|
290,104
|
305,325
|
|||||
Deferred
sales commissions, net
|
196,781
|
196,637
|
|||||
Other
investments
|
130,305
|
86,369
|
|||||
Other
assets
|
127,189
|
132,916
|
|||||
Total
assets
|
$
|
9,966,243
|
$
|
9,490,480
|
|||
|
|
|
|||||
LIABILITIES
AND PARTNERS’ CAPITAL
|
|
|
|||||
Liabilities:
|
|
|
|||||
Payables:
|
|
|
|||||
Brokers
and dealers
|
$
|
1,086,319
|
$
|
1,057,274
|
|||
Brokerage
clients
|
3,137,723
|
2,929,500
|
|||||
AllianceBernstein
mutual funds
|
120,282
|
140,603
|
|||||
Accounts
payable and accrued expenses
|
290,472
|
286,449
|
|||||
Accrued
compensation and benefits
|
731,337
|
357,321
|
|||||
Debt
|
182,039
|
407,291
|
|||||
Minority
interests in consolidated subsidiaries
|
13,640
|
9,368
|
|||||
Total
liabilities
|
5,561,812
|
5,187,806
|
|||||
|
|
|
|||||
Commitments
and contingencies (See Note 5)
|
|
|
|||||
|
|
|
|||||
Partners’
capital
|
4,404,431
|
4,302,674
|
|||||
Total
liabilities and partners’ capital
|
$
|
9,966,243
|
$
|
9,490,480
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
|
|
|
|||||||||
Revenues:
|
|
|
|
|
|||||||||
Investment
advisory and services fees
|
$
|
677,914
|
$
|
545,464
|
$
|
1,994,846
|
$
|
1,591,619
|
|||||
Distribution
revenues
|
103,810
|
95,174
|
311,096
|
300,734
|
|||||||||
Institutional
research services
|
87,908
|
91,191
|
286,306
|
265,654
|
|||||||||
Dividend
and interest income
|
63,680
|
41,378
|
180,470
|
97,104
|
|||||||||
Investment
gains (losses)
|
18,571
|
22,131
|
29,263
|
23,230
|
|||||||||
Other
revenues
|
29,794
|
27,247
|
99,314
|
88,139
|
|||||||||
Total
revenues
|
981,677
|
822,585
|
2,901,295
|
2,366,480
|
|||||||||
Less:
Interest expense
|
46,966
|
27,253
|
137,586
|
64,341
|
|||||||||
Net
revenues
|
934,711
|
795,332
|
2,763,709
|
2,302,139
|
|||||||||
|
|
|
|
|
|||||||||
Expenses:
|
|
|
|
|
|||||||||
Employee
compensation and benefits
|
375,655
|
327,255
|
1,119,782
|
921,016
|
|||||||||
Promotion
and servicing:
|
|
|
|
|
|||||||||
Distribution
plan payments
|
71,414
|
62,184
|
215,254
|
224,944
|
|||||||||
Amortization
of deferred sales commissions
|
21,679
|
32,156
|
71,649
|
103,143
|
|||||||||
Other
|
52,771
|
49,959
|
161,585
|
146,645
|
|||||||||
General
and administrative
|
132,041
|
93,716
|
386,321
|
274,888
|
|||||||||
Interest
on borrowings
|
5,936
|
6,282
|
20,219
|
18,860
|
|||||||||
Amortization
of intangible assets
|
5,182
|
5,175
|
15,532
|
15,525
|
|||||||||
|
664,678
|
576,727
|
1,990,342
|
1,705,021
|
|||||||||
|
|
|
|
|
|||||||||
Operating
income
|
270,033
|
218,605
|
773,367
|
597,118
|
|||||||||
|
|
|
|
|
|||||||||
Non-operating
income
|
3,112
|
12,211
|
16,293
|
24,219
|
|||||||||
|
|
|
|
|
|||||||||
Income
before income taxes
|
273,145
|
230,816
|
789,660
|
621,337
|
|||||||||
|
|
|
|
|
|||||||||
Income
taxes
|
20,171
|
18,888
|
48,011
|
42,905
|
|||||||||
|
|
|
|
|
|||||||||
Net
income
|
$
|
252,974
|
$
|
211,928
|
$
|
741,649
|
$
|
578,432
|
|||||
|
|
|
|
|
|||||||||
Net
income per unit:
|
|
|
|
|
|||||||||
Basic
|
$
|
0.97
|
$
|
0.82
|
$
|
2.85
|
$
|
2.25
|
|||||
Diluted
|
$
|
0.96
|
$
|
0.82
|
$
|
2.83
|
$
|
2.23
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
|
|
|
|
|||||||||
Partners’
capital - beginning of period
|
$
|
4,375,825
|
$
|
4,201,119
|
$
|
4,302,674
|
$
|
4,183,698
|
|||||
Comprehensive
income:
|
|
|
|
|
|||||||||
Net
income
|
252,974
|
211,928 |
741,649
|
578,432 | |||||||||
Other
comprehensive income:
|
|
|
|||||||||||
Unrealized
gain (loss) on investments, net
|
2,629
|
1,442 |
2,182
|
1,243 | |||||||||
Foreign
currency translation adjustment, net
|
(901
|
)
|
(6,526 | ) |
1,471
|
(14,913 | ) | ||||||
Comprehensive
income
|
254,702
|
206,844 |
745,302
|
564,762 | |||||||||
|
|
|
|||||||||||
Capital
contributions from General Partner
|
772
|
884 |
2,281
|
2,328 | |||||||||
Cash
distributions to General Partner and unitholders
|
(257,718
|
)
|
(195,842 | ) |
(774,885
|
)
|
(588,933 | ) | |||||
Purchases
of Holding Units to fund deferred compensation plans, net
|
1,721
|
409 |
(16,648
|
)
|
(6,511 | ) | |||||||
Additional
investment by Holding through issuance of Holding Units in exchange
for
cash awards made under the Partners Compensation Plan
|
—
|
— |
47,161
|
— | |||||||||
Compensatory
Holding Unit options expense
|
651
|
525 |
1,828
|
1,644 | |||||||||
Amortization
of deferred compensation awards
|
10,864
|
13,512 |
33,473
|
42,979 | |||||||||
Additional
investment by Holding with proceeds from exercise of compensatory
options
to buy Holding Units
|
17,614
|
3,344 |
63,245
|
30,828 | |||||||||
Partners’
capital - end of period
|
$
|
4,404,431
|
$
|
4,230,795
|
$
|
4,404,431
|
$
|
4,230,795
|
|
Nine
Months Ended
September
30,
|
||||||
|
2006
|
2005
|
|||||
|
|
|
|||||
Cash
flows from operating activities:
|
|
|
|||||
Net
income
|
$
|
741,649
|
$
|
578,432
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|||||
Amortization
of deferred sales commissions
|
71,649
|
103,142
|
|||||
Amortization
of deferred compensation
|
57,031
|
69,112
|
|||||
Depreciation
and other amortization
|
57,487
|
51,081
|
|||||
Other,
net
|
(15,697
|
)
|
(15,142
|
)
|
|||
Changes
in assets and liabilities:
|
|
|
|||||
Decrease
in segregated cash and securities
|
341,990
|
43,383
|
|||||
(Increase)
in receivable from brokers and dealers
|
(482,204
|
)
|
(772,018
|
)
|
|||
Decrease
(increase) in receivable from brokerage clients
|
22,538
|
(110,067
|
)
|
||||
(Increase)
in fees receivable, net
|
(80,983
|
)
|
(15,765
|
)
|
|||
(Increase)
in trading investments
|
(179,400
|
)
|
(183,027
|
)
|
|||
(Increase)
in deferred sales commissions
|
(71,791
|
)
|
(52,811
|
)
|
|||
(Increase)
decrease in other investments
|
(45,228
|
)
|
5,058
|
||||
Decrease
(increase) in other assets
|
8,810
|
(11,356
|
)
|
||||
Increase
in payable to brokers and dealers
|
25,522
|
540,195
|
|||||
Increase
(decrease) in payable to brokerage clients
|
194,497
|
(114,739
|
)
|
||||
(Decrease)
increase in payable to AllianceBernstein mutual funds
|
(20,330
|
)
|
29,854
|
||||
(Decrease)
increase in accounts payable and accrued expenses
|
(4,342
|
)
|
5,690
|
||||
Increase
in accrued compensation and benefits, less deferred
compensation
|
397,856
|
301,284
|
|||||
Net
cash provided by operating activities
|
1,019,054
|
452,306
|
|||||
Cash
flows from investing activities:
|
|
|
|||||
Purchases
of investments
|
(54,803
|
)
|
(7,362
|
)
|
|||
Proceeds
from sales of investments
|
2,580
|
12,265
|
|||||
Additions
to furniture, equipment and leasehold improvements
|
(74,954
|
)
|
(59,722
|
)
|
|||
Purchase
of business, net of cash acquired
|
(16,086
|
)
|
—
|
||||
Net
cash used in investing activities
|
(143,263
|
)
|
(54,819
|
)
|
|||
Cash
flows from financing activities:
|
|
|
|||||
Issuance
(repayments) of commercial paper, net
|
169,602
|
(150
|
)
|
||||
Repayment
of Senior Notes
|
(400,000 | ) | — | ||||
Cash
distributions to General Partner and unitholders
|
(774,885
|
)
|
(588,933
|
)
|
|||
Capital
contributions from General Partner
|
2,281
|
2,328
|
|||||
Additional
investment by Holding with proceeds from exercise of compensatory
options
to buy Holding Units
|
63,245
|
30,828
|
|||||
Purchases
of Holding Units to fund deferred compensation plans, net
|
(16,648
|
)
|
(6,511
|
)
|
|||
Net
cash used in financing activities
|
(956,405
|
)
|
(562,438
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
3,377
|
(10,304
|
)
|
||||
Net
(decrease) in cash and cash equivalents
|
(77,237
|
)
|
(175,255
|
)
|
|||
Cash
and cash equivalents as of beginning of period
|
654,168
|
1,061,523
|
|||||
Cash
and cash equivalents as of end of period
|
$
|
576,931
|
$
|
886,268
|
|||
Non-cash
financing activities:
|
|||||||
Additional
investment by Holding through issuance of Holding Units in exchange
for
cash awards made under the Partners Compensation Plan
|
$
|
47,161
|
$
|
—
|
1.
|
Organization
and Business Description
|
•
|
Institutional
Investments Services - servicing institutional investors, 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, group trusts, mutual funds (sponsored by AllianceBernstein
or
our affiliated joint venture companies), and other investment
vehicles.
|
•
|
Retail
Services - servicing individual investors, primarily by means of
retail
mutual funds sponsored by AllianceBernstein or our affiliated joint
venture companies, sub-advisory relationships in respect of mutual
funds
sponsored by third parties, separately managed account programs
that are
sponsored by registered broker-dealers, and other investment
vehicles.
|
•
|
Private
Client Services - servicing 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 investors desiring
institutional research services including in-depth research, portfolio
strategy, trading, and brokerage-related
services.
|
•
|
Growth
equities, generally targeting stocks with under-appreciated growth
potential;
|
•
|
Value
equities, generally targeting stocks that are out of favor and
that may
trade at bargain prices;
|
•
|
Fixed
income, including both taxable and tax-exempt
securities;
|
•
|
Passive,
including both index and enhanced index strategies;
and
|
•
|
Blend
strategies, combining style pure components with systematic
rebalancing.
|
AXA
and its subsidiaries
|
59.5
|
%
|
||
Holding
|
32.8
|
|||
SCB
Partners Inc. (a wholly-owned subsidiary of SCB Inc., formerly
known as
Sanford C. Bernstein Inc.)
|
6.3
|
|||
Other
|
1.4
|
|||
|
100.0
|
%
|
2.
|
Summary
of Significant Accounting
Policies
|
•
|
the
reclassification of $4.7 million and $27.9 million of transaction
charge
revenues from investment advisory and services fees to institutional
research services for the three-month and nine-month periods ended
September 30, 2005, respectively;
|
•
|
Gains
on dispositions (previously included in other revenues) and related
expenses (previously included in employee compensation and benefits
and
general and administrative) are now classified as non-operating
income;
|
•
|
dividend
and interest income, investment gains and losses, and broker-dealer
related interest expense, previously included in other revenues,
are now
shown separately; and
|
•
|
shareholder
servicing fees ($23.3 million and $72.9 million for the three-month
and
nine-month periods of 2006, respectively, and $23.8 million and
$75.2
million for the comparable periods of 2005, respectively), previously
shown separately, are now included in other
revenues.
|
•
|
net
cash provided by operating activities of
AllianceBernstein,
|
•
|
proceeds
from borrowings and from sales or other dispositions of assets
in the
ordinary course of business, and
|
•
|
income
from investments in marketable securities, liquid investments,
and other
financial instruments that are acquired for investment purposes
and that
have a value that may be readily
established,
|
•
|
payments
in respect of the principal of borrowings,
and
|
•
|
amounts
expended for the purchase of assets in the ordinary course of
business.
|
|
Three
Months Ended
September
30, 2005
|
Nine
Months Ended
September
30, 2005
|
|||||
|
(in
thousands, except per unit amounts)
|
||||||
SFAS
No. 123 pro forma net income:
|
|
|
|||||
Net
income as reported
|
$
|
211,928
|
$
|
578,432
|
|||
Add:
stock-based compensation expense included in net income, net of
tax
|
482
|
1,533
|
|||||
Deduct:
total stock-based compensation expense determined under fair value
method
for all awards, net of tax
|
(907
|
)
|
(3,052
|
)
|
|||
SFAS
No. 123 pro forma net income
|
$
|
211,503
|
$
|
576,913
|
|||
|
|
|
|||||
Net
income per unit:
|
|
|
|||||
Basic
net income per unit as reported
|
$
|
0.82
|
$
|
2.25
|
|||
Basic
net income per unit pro forma
|
$
|
0.82
|
$
|
2.24
|
|||
Diluted
net income per unit as reported
|
$
|
0.82
|
$
|
2.23
|
|||
Diluted
net income per unit pro forma
|
$
|
0.82
|
$
|
2.23
|
3.
|
Cash
and Securities Segregated Under Federal Regulations and Other
Requirements
|
4.
|
Net
Income Per Unit
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
(in
thousands, except per unit amounts)
|
||||||||||||
|
|
|
|
|
|||||||||
Net
income
|
$
|
252,974
|
$
|
211,928
|
$
|
741,649
|
$
|
578,432
|
|||||
|
|
|
|
|
|||||||||
Weighted
average units outstanding - basic
|
257,838
|
255,100
|
257,431
|
254,711
|
|||||||||
Dilutive
effect of compensatory options
|
2,127
|
1,569
|
2,192
|
1,709
|
|||||||||
Weighted
average units outstanding - diluted
|
259,965
|
256,669
|
259,623
|
256,420
|
|||||||||
|
|
|
|
|
|||||||||
Basic
net income per unit
|
$
|
0.97
|
$
|
0.82
|
$
|
2.85
|
$
|
2.25
|
|||||
Diluted
net income per unit
|
$
|
0.96
|
$
|
0.82
|
$
|
2.83
|
$
|
2.23
|
5.
|
Commitments
and Contingencies
|
6.
|
Employee
Benefit Plans
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
(in
thousands)
|
||||||||||||
|
|
|
|
|
|||||||||
Service
cost
|
$
|
897
|
$
|
975
|
$
|
3,151
|
$
|
3,293
|
|||||
Interest
cost on projected benefit obligations
|
1,122
|
994
|
3,456
|
3,280
|
|||||||||
Expected
return on plan assets
|
(952
|
)
|
(812
|
)
|
(2,848
|
)
|
(2,412
|
)
|
|||||
Amortization
of prior service credit
|
(15
|
)
|
(15
|
)
|
(45
|
)
|
(45
|
)
|
|||||
Amortization
of transition asset
|
(36
|
)
|
(36
|
)
|
(108
|
)
|
(108
|
)
|
|||||
Recognized
actuarial loss
|
42
|
89
|
240
|
413
|
|||||||||
Net
pension charge
|
$
|
1,058
|
$
|
1,195
|
$
|
3,846
|
$
|
4,421
|
7.
|
Income
Taxes
|
8.
|
Acquisition
|
9.
|
Dispositions
|
Cash
Management Services
|
10.
|
Compensatory
Unit Award and Option
Plans
|
|
Holding
Units
|
Weighted
Average
Exercise
Price
Per Holding
Unit
|
|||||
|
|
|
|||||
Outstanding as
of January 1, 2006
|
7,450,204
|
$
|
40.45
|
||||
Granted
|
9,712
|
|
65.02
|
||||
Exercised
|
(1,623,467
|
)
|
|
38.54
|
|||
Forfeited
|
(62,500
|
)
|
|
38.28
|
|||
Outstanding
as of September 30, 2006
|
5,773,949
|
$
|
41.05
|
||||
|
|
|
|||||
Exercisable
as of September 30, 2006
|
4,791,501
|
$
|
41.56
|
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||
Range
of Exercise
Prices:
|
Number
Outstanding
as of
September
30,
2006
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
as of
September
30,
2006
|
Weighted
Average
Exercise
Price
|
|||||||||||||||
|
|
|
|
|
|
|
||||||||||||||
$ |
12.56
|
-
|
$ |
18.47
|
355,400
|
1.05
|
$
|
17.53
|
355,400
|
$
|
17.53
|
|||||||||
25.63
|
-
|
30.25
|
902,500
|
2.81
|
|
28.64
|
900,500
|
|
28.65
|
|||||||||||
32.52
|
-
|
48.50
|
2,289,137
|
5.31
|
|
39.06
|
1,599,001
|
|
41.47
|
|||||||||||
50.15
|
-
|
50.56
|
1,226,700
|
5.17
|
|
50.25
|
946,100
|
|
50.26
|
|||||||||||
51.10
|
-
|
65.02
|
1,000,212
|
4.26
|
|
53.89
|
990,500
|
|
53.78
|
|||||||||||
$ |
12.56
|
-
|
$ |
65.02
|
5,773,949
|
4.45
|
$
|
41.05
|
4,791,501
|
$
|
41.56
|
|
Holding
Units
|
Weighted
Average
Exercise
Price
Per Holding
Unit
|
|||||
|
|
|
|||||
Unvested
as of January 1, 2006
|
1,083,504
|
$
|
38.47
|
||||
Granted
|
9,712
|
65.02 | |||||
Vested
|
(48,268
|
)
|
42.16 | ||||
Forfeited
|
(62,500
|
)
|
38.28 | ||||
Unvested
as of September 30, 2006
|
982,448
|
$
|
38.56
|
|
Holding
Units
|
|||
|
|
|||
Unvested
as of January 1, 2006
|
53,250
|
|||
Granted
|
36,020
|
|||
Vested
|
(25,855
|
)
|
||
Forfeited
|
(2,437
|
)
|
||
Unvested
as of September 30, 2006
|
60,978
|
11.
|
Accounting
Pronouncements
|
/s/
PricewaterhouseCoopers LLP
|
|
New
York, New York
|
|
November
8, 2006
|
/s/
KPMG LLP
|
|
New
York, New York
|
|
November
4, 2005
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
As
of September 30,
|
|
|
||||||||||
|
2006
|
2005
|
$
Change
|
%
Change
|
|||||||||
|
|
|
|
|
|||||||||
Institutional
Investments
|
$
|
417.8
|
$
|
342.2
|
$
|
75.6
|
22.1
|
%
|
|||||
Retail
|
153.9
|
140.4
|
13.5
|
9.6
|
|||||||||
Private
Client
|
87.6
|
72.9
|
14.7
|
20.1
|
|||||||||
Total
|
$
|
659.3
|
$
|
555.5
|
$
|
103.8
|
18.7
|
|
As
of September 30,
|
|
|
||||||||||
|
2006
|
2005
|
$
Change
|
%
Change
|
|||||||||
Growth
Equity:
|
|
|
|
|
|||||||||
U.S.
|
$
|
78.4
|
$
|
77.3
|
$
|
1.1
|
1.4
|
%
|
|||||
Global &
international
|
84.1 | 59.5 |
24.6
|
41.3
|
|||||||||
|
162.5 | 136.8 |
25.7
|
18.8
|
|||||||||
Value
Equity:
|
|
||||||||||||
U.S.
|
112.5 | 104.9 |
7.6
|
7.3
|
|||||||||
Global &
international
|
181.8 | 121.1 |
60.7
|
50.1
|
|||||||||
|
294.3 | 226.0 |
68.3
|
30.2
|
|||||||||
Fixed
Income:
|
|
||||||||||||
U.S.
|
109.2 | 108.9 |
0.3
|
0.3
|
|||||||||
Global &
international
|
63.8 | 54.0 |
9.8
|
18.2
|
|||||||||
|
173.0 | 162.9 |
10.1
|
6.3
|
|||||||||
Index/Structured:
|
|
||||||||||||
U.S.
|
23.5 | 25.1 |
(1.6
|
)
|
(6.6
|
)
|
|||||||
Global &
international
|
6.0 | 4.7 |
1.3
|
26.5
|
|||||||||
|
29.5 | 29.8 |
(0.3
|
)
|
(1.3
|
)
|
|||||||
Total:
|
|
||||||||||||
U.S.
|
323.6 | 316.2 |
7.4
|
2.3
|
|||||||||
Global &
international
|
335.7 | 239.3 |
96.4
|
40.3
|
|||||||||
Total
|
$
|
659.3
|
$
|
555.5
|
$
|
103.8
|
18.7
|
|
Distribution
Channel
|
Investment
Service
|
||||||||||||||||||||||||||
|
Institutional
Investments
|
Retail
|
Private
Client
|
Total
|
Growth
Equity
|
Value
Equity
|
Fixed
Income
|
Index/
Structured
|
Total
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance
as of July 1, 2006
|
$
|
396.0
|
$
|
146.4
|
$
|
82.8
|
$
|
625.2
|
$
|
157.0
|
$
|
272.4
|
$
|
165.8
|
$
|
30.0
|
$
|
625.2
|
||||||||||
Long-term
flows:
|
||||||||||||||||||||||||||||
Sales/new
accounts
|
11.1 | 8.9 | 2.9 | 22.9 | 5.8 | 12.8 | 4.2 | 0.1 | 22.9 | |||||||||||||||||||
Redemptions/terminations
|
(4.3 | ) | (7.2 | ) | (0.6 | ) | (12.1 | ) | (3.6 | ) | (3.9 | ) | (2.7 | ) | (1.9 | ) | (12.1 | ) | ||||||||||
Cash
flow/unreinvested dividends
|
(1.1 | ) | (0.3 | ) | (1.1 | ) | (2.5 | ) | (0.9 | ) | (2.7 | ) | 1.1 | — | (2.5 | ) | ||||||||||||
Net
long-term inflows/ (outflows)
|
5.7 | 1.4 | 1.2 | 8.3 | 1.3 | 6.2 | 2.6 | (1.8 | ) | 8.3 | ||||||||||||||||||
Market
appreciation
|
16.1 | 6.1 | 3.6 | 25.8 | 4.2 | 15.7 | 4.6 | 1.3 | 25.8 | |||||||||||||||||||
Net
change
|
21.8 | 7.5 | 4.8 | 34.1 | 5.5 | 21.9 | 7.2 | (0.5 | ) | 34.1 | ||||||||||||||||||
Balance
as of September 30, 2006
|
$
|
417.8
|
$
|
153.9
|
$
|
87.6
|
$
|
659.3
|
$
|
162.5
|
$
|
294.3
|
$
|
173.0
|
$
|
29.5
|
$
|
659.3
|
|
Distribution
Channel
|
Investment
Service
|
||||||||||||||||||||||||||
|
Institutional
Investments
|
Retail
|
Private
Client
|
Total
|
Growth
Equity
|
Value
Equity
|
Fixed
Income
|
Index/
Structured
|
Total
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance
as of Jan 1, 2006
|
$
|
358.6
|
$
|
145.1
|
$
|
74.9
|
$
|
578.6
|
$
|
146.2
|
$
|
238.2
|
$
|
164.1
|
$
|
30.1
|
$
|
578.6
|
||||||||||
Long-term
flows:
|
||||||||||||||||||||||||||||
Sales/new
accounts
|
37.7
|
33.4 | 10.9 | 82.0 | 26.8 |
39.7
|
14.6 | 0.9 | 82.0 | |||||||||||||||||||
Redemptions/terminations
|
(9.9
|
)
|
(22.6 | ) | (2.0 | ) | (34.5 | ) | (11.4 | ) |
(11.0
|
)
|
(9.1 | ) | (3.0 | ) | (34.5 | ) | ||||||||||
Cash
flow/unreinvested dividends
|
(6.9
|
)
|
(1.0 | ) | (2.5 | ) | (10.4 | ) | (1.6 | ) |
(7.4
|
)
|
(0.4 | ) | (1.0 | ) | (10.4 | ) | ||||||||||
Net
long-term inflows/ (outflows)
|
20.9
|
9.8 | 6.4 | 37.1 | 13.8 |
21.3
|
5.1 | (3.1 | ) | 37.1 | ||||||||||||||||||
Acquisition
|
0.3
|
0.1 | — | 0.4 | 0.3 |
—
|
0.1 | — | 0.4 | |||||||||||||||||||
Transfers
|
7.9
|
(9.1 | ) | 1.2 | — | — |
—
|
— | — | — | ||||||||||||||||||
Market
appreciation
|
30.1
|
8.0 | 5.1 | 43.2 | 2.2 |
34.8
|
3.7 | 2.5 | 43.2 | |||||||||||||||||||
Net
change
|
59.2
|
8.8 | 12.7 | 80.7 | 16.3 |
56.1
|
8.9 | (0.6 | ) | 80.7 | ||||||||||||||||||
Balance
as of September 30, 2006
|
$
|
417.8
|
$
|
153.9
|
$
|
87.6
|
$
|
659.3
|
$
|
162.5
|
$
|
294.3
|
$
|
173.0
|
$
|
29.5
|
$
|
659.3
|
|
Distribution
Channel
|
Investment
Service
|
||||||||||||||||||||||||||
|
Institutional
Investments
|
Retail
|
Private
Client
|
Total
|
Growth
Equity
|
Value
Equity
|
Fixed
Income
|
Index/
Structured
|
Total
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance
as of October 1, 2005
|
$
|
342.2
|
$
|
140.4
|
$
|
72.9
|
$
|
555.5
|
$
|
136.8
|
$
|
226.0
|
$
|
162.9
|
$
|
29.8
|
$
|
555.5
|
||||||||||
Long-term
flows:
|
||||||||||||||||||||||||||||
Sales/new
accounts
|
49.3
|
41.6 | 13.4 | 104.3 | 35.5 | 48.3 | 19.5 | 1.0 | 104.3 | |||||||||||||||||||
Redemptions/terminations
|
(13.0
|
)
|
(29.1 | ) | (2.7 | ) | (44.8 | ) | (16.0 | ) | (13.8 | ) | (11.8 | ) | (3.2 | ) | (44.8 | ) | ||||||||||
Cash
flow/unreinvested dividends
|
(6.4
|
)
|
(1.6 | ) | (3.4 | ) | (11.4 | ) | (2.7 | ) | (6.8 | ) | (0.7 | ) | (1.2 | ) | (11.4 | ) | ||||||||||
Net
long-term inflows/ (outflows)
|
29.9
|
10.9 | 7.3 | 48.1 | 16.8 | 27.7 | 7.0 | (3.4 | ) | 48.1 | ||||||||||||||||||
Acquisition
|
0.3
|
0.1 | — | 0.4 | 0.3 | — | 0.1 |
—
|
0.4 | |||||||||||||||||||
Dispositions
|
(1.3
|
)
|
— | — | (1.3 | ) | (1.0 | ) | — | (0.3 | ) | — | (1.3 | ) | ||||||||||||||
Transfers
|
8.5
|
(9.2 | ) | 0.7 | — | — | — | — | — | — | ||||||||||||||||||
Market
appreciation
|
38.2
|
11.7 | 6.7 | 56.6 | 9.6 | 40.6 | 3.3 | 3.1 | 56.6 | |||||||||||||||||||
Net
change
|
75.6
|
13.5 | 14.7 | 103.8 | 25.7 | 68.3 | 10.1 | (0.3 | ) | 103.8 | ||||||||||||||||||
Balance
as of September 30, 2006
|
$
|
417.8
|
$
|
153.9
|
$
|
87.6
|
$
|
659.3
|
$
|
162.5
|
$
|
294.3
|
$
|
173.0
|
$
|
29.5
|
$
|
659.3
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|||||||||||||||||||
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Distribution
Channel:
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Institutional
Investments
|
$
|
406.7
|
$
|
330.3
|
$
|
76.4
|
23.2
|
%
|
$
|
394.2
|
$
|
318.9
|
$
|
75.3
|
23.6
|
%
|
|||||||||
Retail
|
149.5
|
136.5
|
13.0
|
9.5
|
147.1
|
148.0
|
(0.9
|
)
|
(0.6
|
)
|
|||||||||||||||
Private
Client
|
85.2
|
70.2
|
15.0
|
21.3
|
82.2
|
66.9
|
15.3
|
22.8
|
|||||||||||||||||
Total
|
$
|
641.4
|
$
|
537.0
|
$
|
104.4
|
19.4
|
$
|
623.5
|
$
|
533.8
|
$
|
89.7
|
16.8
|
|||||||||||
Investment
Service:
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Growth
Equity
|
$
|
158.6
|
$
|
130.6
|
$
|
28.0
|
21.4
|
%
|
$
|
157.2
|
$
|
124.1
|
$
|
33.1
|
26.6
|
%
|
|||||||||
Value
Equity
|
283.5
|
214.9
|
68.6
|
31.9
|
269.0
|
202.4
|
66.6
|
32.9
|
|||||||||||||||||
Fixed
Income
|
169.2
|
162.0
|
7.2
|
4.5
|
166.8
|
178.0
|
(11.2
|
)
|
(6.3
|
)
|
|||||||||||||||
Index/Structured
|
30.1
|
29.5
|
0.6
|
2.0
|
30.5
|
29.3
|
1.2
|
4.4
|
|||||||||||||||||
Total
|
$
|
641.4
|
$
|
537.0
|
$
|
104.4
|
19.4
|
$
|
623.5
|
$
|
533.8
|
$
|
89.7
|
16.8
|
|
Three
Months
Ended
|
|
|
Nine
Months Ended
|
|
|
|||||||||||||||||||
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
|||||||||||||||||
|
(in
millions, except per unit amounts)
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net
revenues
|
$
|
934.7
|
$
|
795.3
|
$
|
139.4
|
17.5
|
%
|
$
|
2,763.7
|
$
|
2,302.1
|
$
|
461.6
|
20.0
|
%
|
|||||||||
Expenses
|
664.7
|
576.7
|
88.0
|
15.3
|
1,990.3
|
1,705.0
|
285.3
|
16.7 | |||||||||||||||||
Operating
income
|
270.0
|
218.6
|
51.4
|
23.5 |
773.4
|
597.1
|
176.3
|
29.5 | |||||||||||||||||
Non-operating
income
|
3.1
|
12.2
|
(9.1
|
)
|
(74.5 | ) |
16.3
|
24.2
|
(7.9
|
)
|
(32.7
|
)
|
|||||||||||||
Income
before income taxes
|
273.1
|
230.8
|
42.3
|
18.3
|
789.7
|
621.3
|
168.4
|
27.1
|
|||||||||||||||||
Income
taxes
|
20.1
|
18.9
|
1.2
|
6.8
|
48.0
|
42.9
|
5.1
|
11.9
|
|||||||||||||||||
Net
income
|
$
|
253.0
|
$
|
211.9
|
$
|
41.1
|
19.4
|
$
|
741.7
|
$
|
578.4
|
$
|
163.3
|
28.2
|
|||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Diluted
net income per unit
|
$
|
0.96
|
$
|
0.82
|
$
|
0.14
|
17.1
|
$
|
2.83
|
$
|
2.23
|
$
|
0.60
|
26.9
|
|||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Distributions
per unit
|
$
|
0.96
|
$
|
0.82
|
$
|
0.14
|
17.1
|
$
|
2.82
|
$
|
2.21
|
$
|
0.61
|
27.6
|
|||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating
margin
(1)
|
28.9
|
%
|
27.5
|
%
|
|
|
28.0
|
%
|
25.9
|
%
|
|
|
(1) |
Operating
income as a percentage of net
revenues.
|
|
Three
Months
Ended
|
|
|
Nine
Months Ended
|
|
|
|||||||||||||||||||
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
|||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Investment
advisory and services fees:
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Institutional
Investments:
|
|
|
|
|
|
|
|
||||||||||||||||||
Base
fees
|
$
|
278.4
|
$
|
212.5
|
$
|
65.9
|
31.0
|
%
|
$
|
801.7
|
$
|
591.5
|
$
|
210.2
|
35.5 | % | |||||||||
Performance
fees
|
12.3
|
7.5
|
4.8
|
65.2
|
62.4
|
38.8
|
23.6
|
60.7 | |||||||||||||||||
|
290.7
|
220.0
|
70.7
|
32.2
|
864.1
|
630.3
|
233.8
|
37.1 | |||||||||||||||||
|
|||||||||||||||||||||||||
Retail:
|
|||||||||||||||||||||||||
Base
fees
|
195.9
|
168.5
|
27.4
|
16.3
|
575.5
|
513.8
|
61.7
|
12.0 | |||||||||||||||||
Performance
fees
|
—
|
(0.1
|
)
|
0.1 |
n/m
|
(0.2
|
)
|
—
|
(0.2
|
)
|
n/m | ||||||||||||||
|
195.9
|
168.4
|
27.5
|
16.3
|
575.3
|
513.8
|
61.5
|
12.0 | |||||||||||||||||
|
|||||||||||||||||||||||||
Private
Client:
|
|||||||||||||||||||||||||
Base
fees
|
190.5
|
156.7
|
33.8
|
21.6
|
554.9
|
446.6
|
108.3
|
24.3 | |||||||||||||||||
Performance
fees
|
0.8
|
0.4
|
0.4 |
126.8
|
0.5
|
0.9
|
(0.4
|
)
|
(43.3 | ) | |||||||||||||||
|
191.3
|
157.1
|
34.2
|
21.8
|
555.4
|
447.5
|
107.9
|
24.1 | |||||||||||||||||
|
|||||||||||||||||||||||||
Total:
|
|||||||||||||||||||||||||
Base
fees
|
664.8
|
537.7
|
127.1
|
23.6
|
1,932.1
|
1,551.9
|
380.2
|
24.5 | |||||||||||||||||
Performance
fees
|
13.1
|
7.8
|
5.3
|
69.4
|
62.7
|
39.7
|
23.0
|
57.7 | |||||||||||||||||
|
677.9
|
545.5
|
132.4
|
24.3
|
1,994.8
|
1,591.6
|
403.2
|
25.3 | |||||||||||||||||
|
|||||||||||||||||||||||||
Distribution
revenues
|
103.8
|
95.2
|
8.6
|
9.1
|
311.1
|
300.7
|
10.4
|
3.4 | |||||||||||||||||
Institutional
research services
|
87.9
|
91.2
|
(3.3
|
)
|
(3.6
|
)
|
286.3
|
265.7
|
20.6
|
7.8 | |||||||||||||||
Dividend
and interest income
|
63.7
|
41.4
|
22.3
|
53.9
|
180.5
|
97.1
|
83.4
|
85.9 | |||||||||||||||||
Investment
gains (losses)
|
18.6
|
22.1
|
(3.5
|
)
|
(16.1
|
)
|
29.3
|
23.2
|
6.1
|
26.0 | |||||||||||||||
Other
revenues
|
29.8
|
27.2
|
2.6
|
9.3
|
99.3
|
88.1
|
11.2
|
12.7 | |||||||||||||||||
Total
revenues
|
981.7
|
822.6
|
159.1
|
19.3
|
2,901.3
|
2,366.4
|
534.9
|
22.6 | |||||||||||||||||
Less:
Interest expense
|
47.0
|
27.3
|
19.7
|
72.3
|
137.6
|
64.3
|
73.3
|
113.8 | |||||||||||||||||
Net
Revenues
|
$
|
934.7
|
$
|
795.3
|
$
|
139.4
|
17.5
|
$
|
2,763.7
|
$
|
2,302.1
|
$
|
461.6
|
20.0 |
|
Three
Months E
nded
|
|
|
Nine
Months
Ended
|
|
|
|||||||||||||||||||
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
9/30/06
|
9/30/05
|
$
Change
|
%
Change
|
|||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||||||
Employee
compensation and benefits
|
$
|
375.7
|
$
|
327.2
|
$
|
48.5
|
14.8
|
%
|
$
|
1,119.8
|
$
|
921.0
|
$
|
198.8
|
21.6
|
%
|
|||||||||
Promotion
and servicing
|
145.9
|
144.3
|
1.6
|
1.1
|
448.5
|
474.7
|
(26.2
|
)
|
(5.5
|
)
|
|||||||||||||||
General
and administrative
|
132.0
|
93.7
|
38.3
|
40.9
|
386.3
|
274.9
|
111.4
|
40.5
|
|||||||||||||||||
Interest
|
5.9
|
6.3
|
(0.4
|
)
|
(5.5
|
)
|
20.2
|
18.9
|
1.3
|
7.2
|
|||||||||||||||
Amortization
of intangible assets
|
5.2
|
5.2
|
—
|
0.1
|
15.5
|
15.5
|
—
|
—
|
|||||||||||||||||
Total
|
$
|
664.7
|
$
|
576.7
|
$
|
88.0
|
15.3
|
$
|
1,990.3
|
$
|
1,705.0
|
$
|
285.3
|
16.7
|
|
Nine
Months Ended
September
30,
|
|
||||||||
|
2006
|
2005
|
%
Change
|
|||||||
|
(in millions)
|
|
||||||||
|
|
|
|
|||||||
Partners’
capital, as of September 30
|
$
|
4,404.4
|
$
|
4,230.8
|
4.1
|
%
|
||||
Cash
flow from operations
|
1,019.1
|
452.3
|
125.3
|
|||||||
Purchases
of investments
|
(54.8
|
)
|
(7.4
|
)
|
644.4
|
|||||
Capital
expenditures
|
(75.0
|
)
|
(59.7
|
)
|
25.5
|
|||||
Cash
distributions
|
(774.9
|
)
|
(588.9
|
)
|
31.6
|
|||||
Purchases
of Holding Units
|
(16.6
|
)
|
(6.5
|
)
|
155.7
|
|||||
Issuance
of Holding Units
|
47.2
|
—
|
n/m
|
|||||||
Additional
investments by Holding with proceeds from exercise of compensatory
options
to buy Holding Units
|
63.2
|
30.8
|
105.2
|
|||||||
Issuance
(repayment) of commercial paper, net
|
169.6
|
(0.2
|
)
|
n/m
|
|
September
30, 2006
|
December
31, 2005
|
|||||||||||||||||
|
Credit
Available
|
Debt
Outstanding
|
Interest
Rate
|
Credit
Available
|
Debt
Outstanding
|
Interest
Rate
|
|||||||||||||
|
(in
millions)
|
||||||||||||||||||
Senior
Notes
|
$
|
200.0
|
$
|
—
|
—
|
%
|
$
|
600.0
|
$
|
399.7
|
5.6
|
%
|
|||||||
Commercial
paper
(1)
|
800.0
|
173.9
|
5.4
|
425.0
|
—
|
—
|
|||||||||||||
Revolving
credit facility
(1)
|
—
|
—
|
—
|
375.0
|
—
|
—
|
|||||||||||||
Extendible
commercial notes
|
100.0
|
—
|
—
|
100.0
|
—
|
—
|
|||||||||||||
Other
|
—
|
8.1
|
3.7
|
—
|
7.6
|
4.6
|
|||||||||||||
Total
|
$
|
1,100.0
|
$
|
182.0
|
5.3
|
$
|
1,500.0
|
$
|
407.3
|
5.6
|
(1)
|
Our
revolving credit facility supports our commercial paper program;
amounts
borrowed under the commercial paper program reduce amounts available
for
other purposes under the revolving credit facility on a dollar-for-dollar
basis.
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Item
4.
|
Controls
and Procedures
|