| Cash and cash equivalents were $757.0 million as of September 30, 2011 compared with $621.5 million as of June 30, 2011. Total debt was $1,389.7 million as of September 30, 2011 compared with $1,583.7 million as of June 30, 2011, the reduction reflecting payments of $194.0 million against the credit facility. As of September 30, 2011, the credit facility balance was $644.0 million as opposed to $838.0 million as of June 30, 2011.
Outlook: Some firms expect management to focus on balancing share buyback, liquidity improvement and debt reduction. According to the firms, management’s decision to build cash reserves recounts its interest in incremental acquisitions.
Assets under Management
Total assets under management (AUM) as of September 30, 2011 were $598.4 billion versus $604.5 billion as of September 30, 2010 and $653.7 billion as of June 30, 2011. During 3Q11, long-term net inflows increased AUM by $3.3 billion, while negative market movements decreased AUM by $52.2 billion. Further, the company experienced net outflows in institutional money market funds of $1.1 billion, and decreases in AUM of $5.3 billion due to changes in foreign exchange rates in 3Q11.
Average AUM in 3Q11 was $632.7 billion compared with $583.3 billion in 3Q10 and $652.8 billion in 2Q11.
Long-term net inflows in 3Q11 were $3.3 billion and included net inflows of ETF, UIT and passive AUM of $2.7 billion. Net long-term flows were driven by net inflows into the institutional, retail and high net worth distribution channels of $1.9 billion, $1.0 billion, and $0.4 billion, respectively. The net inflows were primarily in the fixed income, alternatives and balanced asset classes, while equity asset class experienced net outflows of $3.2 billion.
European Infrastructure
The company is undertaking a broad, transformational initiative to build on its strong position in the European market and to position the business for competitive success in light of significant regulatory changes. This initiative is designed to enhance the European business product platform, better leverage cross-border distribution efforts, and align European infrastructure in advance of the new regulation. The company believes that these steps will enhance its ability to deliver comprehensive global investment capabilities to European clients and further strengthen the company’s competitive position in the region.
As a part of this initiative, during 2Q11, the company announced that it would outsource its transfer agency function in Europe that is presently operated internally. This outsourcing activity will likely be completed by December 2012. Management believes that taking steps to outsource the European transfer agency will allow the company to better respond in the future to the pending but still uncertain regulatory environment.
During 3Q11, the company incurred $5.3 million of costs directly related to the implementation of this initiative and would incur total costs of up to $40 million by December 2012. This initiative is expected to generate material ongoing cost savings that will more than fully offset the implementation expenses within three years of completion.
Management anticipates that the project will achieve a cash payback within 2–3 years, and yield an estimated IRR of about 30% to 35% as well as add an estimated $0.02 EPS accretion to FY13 and beyond.
Share Repurchase
During 3Q11, Invesco did not repurchase any share. For the nine months ended September 30, 2011, 13.4 million shares at a cost of $333.0 million were repurchased. As of September 30, 2011, there remains $835.4 million worth of authorization under the company's share repurchase plan.
Outlook: The company expects to repurchase $100 million of shares during 4Q11.
Dividend
On December 7, 2011, Invesco paid 3Q11 dividend of $0.1225 per share to shareholders of record as of November 18, 2011.
On September 8, 2011, Invesco paid 2Q11 dividend of $0.1225 per share to shareholders of record as of August 22, 2011.
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