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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
 
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
Date of Report (Date of Earliest Event Reported): July 19, 2016
 
PZENA INVESTMENT MANAGEMENT, INC.
 
 
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware
 
001-33761
 
20-8999751
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification Number)
 
320 Park Avenue, New York, New York
10022
 
(Address of Principal Executive Offices)
 
Zip Code
 
 
 
 
Registrant’s Telephone Number, Including Area Code: (212) 355-1600
 
 
 
(Former Name or Former Address, If Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act.
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act.
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.






ITEM 2.02
RESULTS OF OPERATION AND FINANCIAL CONDITION.
 
On July 19, 2016, Pzena Investment Management, Inc. (the “Company”) issued a press release reporting its financial results for the second quarter of 2016. Copies of the press release and related attachments are furnished as Exhibit 99.1 to this Current Report.
 
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS.
 
 
 
(d) Exhibits
 
 
 
99.1 Press release, dated July 19, 2016, of Pzena Investment Management, Inc.






SIGNATURES

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 hereunto duly authorized.
 
 
 
PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
Dated: July 19, 2016
By:
/s/ Jessica R. Doran
 
 
Name: Jessica R. Doran
 
 
Title: Chief Financial Officer
 
 
 






EXHIBIT INDEX

Exhibit No.
Document
99.1
Press release, dated July 19, 2016, of Pzena Investment Management, Inc.



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit




PZENA INVESTMENT MANAGEMENT, INC.
REPORTS RESULTS FOR THE SECOND QUARTER OF 2016

2016 revenue was $26.4 million for the second quarter.

2016 GAAP operating income was $11.3 million for the second quarter.

2016 GAAP diluted earnings per share was $0.09 for the second quarter. For the same period, non-GAAP diluted earnings per share was $0.10.

Declared a quarterly dividend of $0.03 per share.

NEW YORK, NEW YORK, July 19, 2016 - Pzena Investment Management, Inc. (NYSE: PZN) reported the following U.S. Generally Accepted Accounting Principles (GAAP) and non-GAAP basic and diluted net income and earnings per share for the three and six months ended June 30, 2016 and 2015 (in thousands, except per-share amounts):
    

GAAP Basis
 
Non-GAAP Basis
 
For the Three Months Ended
 
For the Three Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
 
(unaudited)
 
 
 
 
 
 
 
 
Basic Net Income
$
1,406

 
$
1,922

 
$
1,531

 
$
1,951

Basic Earnings Per Share
$
0.09

 
$
0.15

 
$
0.10

 
$
0.15

 
 
 
 
 
 
 
 
Diluted Net Income
$
6,465

 
$
8,531

 
$
6,590

 
$
9,312

Diluted Earnings Per Share
$
0.09

 
$
0.13

 
$
0.10

 
$
0.14

 
 
 
 
 
 
 
 
 
GAAP Basis
 
Non-GAAP Basis
 
For the Six Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
 
(unaudited)
 
 
 
 
 
 
 
 
Basic Net Income
$
3,028

 
$
3,544

 
$
2,970

 
$
3,557

Basic Earnings Per Share
$
0.20

 
$
0.27

 
$
0.19

 
$
0.27

 
 
 
 
 
 
 
 
Diluted Net Income
$
12,974

 
$
16,458

 
$
12,916

 
$
17,397

Diluted Earnings Per Share
$
0.19

 
$
0.24

 
$
0.19

 
$
0.26

 
 
 
 
 
 
 
 



1



The GAAP results for the three and six months ended June 30, 2016 and 2015 include adjustments related to the Company's deferred tax asset, valuation allowance and the associated liability to its selling and converting shareholders. GAAP results for 2015 also include adjustments related to certain non-recurring charges recognized in operating expenses associated with our former corporate headquarters. Management believes that these accounting adjustments add a measure of non-operational complexity which obscures the underlying performance of the business. In evaluating the results of operations, management also reviews non-GAAP measures of earnings, which exclude these items. Excluding these adjustments, non-GAAP diluted net income and non-GAAP diluted earnings per share were $6.6 million and $0.10, respectively, for the three months ended June 30, 2016, and $9.3 million and $0.14, respectively, for the three months ended June 30, 2015. Non-GAAP diluted net income and non-GAAP diluted earnings per share were $12.9 million and $0.19, respectively, for the six months ended June 30, 2016, and $17.4 million and $0.26, respectively, for the six months ended June 30, 2015. GAAP and non-GAAP net income for diluted earnings per share generally assume all operating company membership units are converted into Company stock at the beginning of the reporting period, and the resulting change to Company GAAP and non-GAAP net income associated with its increased interest in the operating company is taxed at the Company's effective tax rate, exclusive of the adjustments noted above and other adjustments. When this conversion results in an increase in earnings per share or a decrease in loss per share, diluted net income and diluted earnings per share are assumed to be equal to basic net income and basic earnings per share for the reporting period.

Management uses the non-GAAP measures to assess the strength of the underlying operations of the business. It believes the non-GAAP measures provide information to better analyze the Company's operations between periods and over time. Investors should consider the non-GAAP measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.




2



Assets Under Management (unaudited)
 
 
 
 
 
 
 
 
 
 
($ billions)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Twelve Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
June 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
Institutional Accounts
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period
 
$
14.5

 
$
14.9

 
$
15.9

 
$
15.9

 
$
15.1

          Inflows
 
0.4

 
0.4

 
0.3

 
2.7

 
3.3

          Outflows
 
(0.3
)
 
(0.7
)
 
(0.6
)
 
(2.5
)
 
(2.6
)
          Net Flows
 
0.1

 
(0.3
)
 
(0.3
)
 
0.2

 
0.7

          Market Appreciation/(Depreciation)
 
(0.3
)
 
(0.1
)
 
0.3

 
(1.8
)
 
0.1

     End of Period
 
$
14.3

 
$
14.5

 
$
15.9

 
$
14.3

 
$
15.9

 
 
 
 
 
 
 
 
 
 
 
Retail Accounts
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period Assets
 
$
11.6

 
$
11.1

 
$
12.0

 
$
12.1

 
$
11.9

          Inflows
 
0.2

 
0.8

 
0.3

 
1.5

 
1.8

          Outflows
 
(0.7
)
 
(0.3
)
 
(0.6
)
 
(1.7
)
 
(2.1
)
          Net Flows
 
(0.5
)
 
0.5

 
(0.3
)
 
(0.2
)
 
(0.3
)
          Market Appreciation/(Depreciation)
 

 

 
0.4

 
(0.8
)
 
0.5

     End of Period
 
$
11.1

 
$
11.6

 
$
12.1

 
$
11.1

 
$
12.1

 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
  Assets
 
 
 
 
 
 
 
 
 
 
     Beginning of Period
 
$
26.1

 
$
26.0

 
$
27.9

 
$
28.0

 
$
27.0

          Inflows
 
0.6

 
1.2

 
0.6

 
4.2

 
5.1

          Outflows
 
(1.0
)
 
(1.0
)
 
(1.2
)
 
(4.2
)
 
(4.7
)
          Net Flows
 
(0.4
)
 
0.2

 
(0.6
)
 

 
0.4

          Market Appreciation/(Depreciation)
 
(0.3
)
 
(0.1
)
 
0.7

 
(2.6
)
 
0.6

     End of Period
 
$
25.4

 
$
26.1

 
$
28.0

 
$
25.4

 
$
28.0


















3



Financial Discussion

Revenue (unaudited)
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
For the Three Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2016
 
2016
 
2015
 
 
 
 
 
 
Institutional Accounts
$
19,169

 
$
18,997

 
$
21,492

Retail Accounts
7,266

 
6,841

 
8,018

    Total
$
26,435

 
$
25,838

 
$
29,510

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2016
 
2015
 
 
 
 
 
 
Institutional Accounts
 
 
$
38,166

 
$
42,461

Retail Accounts
 
 
14,107

 
15,702

    Total
 
 
$
52,273

 
$
58,163


Revenue was $26.4 million for the second quarter of 2016, an increase of 2.3% from $25.8 million for the first quarter of 2016, and a decrease of 10.4% from $29.5 million for the second quarter of 2015.

Included in these amounts for the first quarter of 2016 and second quarter of 2015, were performance fees recognized of $0.1 million and $0.3 million, respectively. No performance fees were recognized during the second quarter of 2016. In general, performance fees are calculated on an annualized basis over the contract's measurement period, which, for the majority of our performance fee arrangements, extends to three years.

Average assets under management for the second quarter of 2016 were $26.1 billion, an increase of 4.0% from $25.1 billion for the first quarter of 2016, and a decrease of 7.8% from $28.3 billion for the second quarter of 2015. The increase from the first quarter of 2016 primarily reflects market appreciation over the period partially offset by net outflows. Assets under management ended the second quarter at $25.4 billion with market depreciation occurring primarily toward the end of the quarter resulting in higher average assets under management for the quarter. The decrease from the second quarter of 2015 primarily reflects market depreciation.

The weighted average fee rate was 0.405% for the second quarter of 2016, decreasing from 0.411% for the first quarter of 2016, and from 0.418% for the second quarter of 2015.

The weighted average fee rate for institutional accounts was 0.526% for the second quarter of 2016, decreasing from 0.539% for the first quarter of 2016, and from 0.535% for the second quarter of 2015. The decrease from last quarter and the second quarter of last year primarily reflects a shift in the mix of assets toward our expanded value strategies which generally carry lower fee rates, partially offset by the addition of assets in certain non-U.S. strategies that generally carry higher fee rates.

The weighted average fee rate for retail accounts was 0.253% for the second quarter of 2016, increasing from 0.247% for the first quarter of 2016, and decreasing from 0.263% for the second quarter of 2015.  The increase from the first quarter of 2016 is driven by an increase in assets in certain strategies that generally carry higher fee rates, while the decrease from the second quarter of 2015 primarily reflects a decrease in retail performance fees.


4




Total operating expenses on a GAAP basis were $15.2 million for the second quarter of 2016, decreasing from $15.5 million for the first quarter of 2016 and from $16.3 million for the second quarter of 2015. The decrease in operating expenses on a GAAP basis from the first quarter of 2016 primarily reflects a decrease in compensation and benefits expense partially offset by an increase in general and administrative costs during the second quarter of 2016. General and administrative expense in the second quarter of 2015 included $1.5 million in losses and expenses we do no expect to recur, associated with the exit from, and retirement of certain assets at our former headquarters. These expenses are included in general and administrative expenses on a GAAP basis and excluded on a non-GAAP basis. Excluding the impact of these non-recurring expenses, the increase in operating expenses on a non-GAAP basis from the second quarter of 2015 is primarily driven by the increase in general and administrative expenses. Details of operating expenses and a reconciliation of GAAP to non-GAAP operating expenses are shown below:

Operating Expenses (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Compensation and Benefits Expense
 
$
11,699

 
$
12,498

 
$
11,800

General and Administrative Expense
 
3,475

 
3,044

 
4,490

    GAAP Operating Expenses
 
15,174

 
15,542

 
16,290

One-Time Adjustments
 

 

 
(1,488
)
Non-GAAP Operating Expenses
 
$
15,174

 
$
15,542

 
$
14,802

 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
 
June 30,
 
June 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Compensation and Benefits Expense
 
 
 
$
24,197

 
$
23,870

General and Administrative Expense
 
 
 
6,519

 
8,093

    GAAP Operating Expenses
 
 
 
30,716

 
31,963

One-Time Adjustments
 
 
 

 
(1,834
)
Non-GAAP Operating Expenses
 
 
 
$
30,716

 
$
30,129



As of June 30, 2016, employee headcount was 93, up from 90 at March 31, 2016 and from 89 at June 30, 2015.

The operating margin was 42.6% on a GAAP basis for the second quarter of 2016, compared to 39.8% for the first quarter of 2016, and 44.8% for the second quarter of 2015. The operating margin was 49.8% on a non-GAAP basis for the second quarter of 2015.


5



Other income/ (expense) was income of approximately $0.3 million for the second quarter of 2016, an expense of $0.7 million for the first quarter of 2016, and income of $0.2 million for the second quarter of 2015. Other income/ (expense) includes the (losses)/ gains and other investment income recognized by the Company on its direct investments, as well as those recognized by external investors on their investments in investment partnerships that the Company consolidates. A portion of (losses)/ gains and other investment income associated with the investments of outside interests are offset in net income attributable to non-controlling interests. For the second quarter of 2016, other income/ (expense) also includes income of $0.7 million reflecting a decrease in the Company's liability to its selling and converting shareholders resulting from a decrease in expected future tax benefits described in income tax expense below. Changes in the liability to selling and converting shareholders associated with changes in the realizability of the deferred tax asset generated expenses of $0.9 million and $0.7 million in the first quarter of 2016 and the second quarter of 2015, respectively. Details of other income/ (expense), as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:

Other Income/ (Expense) (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
 For the Three Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Net Interest and Dividend Income
 
$
125

 
$
86

 
$
308

(Losses)/ Gains and Other Investment Income
 
(506
)
 
104

 
460

Change in Liability to Selling and Converting Shareholders¹
 
700

 
(878
)
 
(672
)
Other Income/ (Expense)
 
24

 
(30
)
 
65

    GAAP Other Income/ (Expense)
 
343

 
(718
)
 
161

Change in Liability to Selling and Converting Shareholders¹
 
(700
)
 
878

 
672

Outside Interests of Investment Partnerships²
 
68

 
5

 
(370
)
    Non-GAAP Other (Expense)/ Income, Net of Outside Interests
 
$
(289
)
 
$
165

 
$
463

 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
 
June 30,
 
June 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Net Interest and Dividend Income
 
 
 
$
211

 
$
428

(Losses)/ Gains and Other Investment Income
 
 
 
(402
)
 
475

Change in Liability to Selling and Converting Shareholders¹
 
 
 
(178
)
 
(917
)
Other Expense
 
 
 
(6
)
 
(114
)
    GAAP Other Expense
 
 
 
(375
)
 
(128
)
Change in Liability to Selling and Converting Shareholders¹
 
 
 
178

 
917

Outside Interests of Investment Partnerships²
 
 
 
73

 
(310
)
    Non-GAAP Other (Expense)/ Income, Net of Outside Interests
 
 
 
$
(124
)
 
$
479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Reflects the change in the liability to the Company’s selling and converting shareholders associated with
    the deferred tax asset generated by the Company’s initial public offering and subsequent unit conversions.
2 Represents the non-controlling interest allocation of the loss/ (income) of the Company's consolidated
     investment partnerships to its external investors.


6




The Company recognized income tax expenses of $2.2 million for the second quarter of 2016, $0.2 million for the first quarter of 2016, and $0.6 million for the second quarter of 2015. Income taxes for the second quarter of 2016 included a $0.8 million income tax expense associated with an increase in the valuation allowance recorded against the Company's deferred tax asset related to the basis step ups created by operating company unit exchanges. This adjustment generated $1.1 million and $0.8 million in income tax benefits in the first quarter of 2016 and second quarter of 2015, respectively. Details of the income tax expense, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:
Income Tax Expense (unaudited)
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
Non-GAAP Corporate Income Tax Expense
 
$
910

 
$
816

 
$
925

Non-GAAP Unincorporated and Other Business Tax Expenses
 
512

 
465

 
575

     Non-GAAP Income Tax Expense
 
1,422

 
1,281

 
1,500

         Change in Valuation Allowance1
 
825

 
(1,061
)
 
(790
)
         Less: Effects of One-Time Adjustments2
 

 

 
(144
)
GAAP Income Tax Expense
 
$
2,247

 
$
220

 
$
566

 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
 
June 30,
 
June 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Non-GAAP Corporate Income Tax Expense
 
 
 
$
1,726

 
$
1,811

Non-GAAP Unincorporated and Other Business Tax Expenses
 
 
 
977

 
1,106

     Non-GAAP Income Tax Expense
 
 
 
2,703

 
2,917

         Change in Valuation Allowance1
 
 
 
(236
)
 
(1,087
)
         Less: Effects of One-Time Adjustments2
 
 
 

 
(176
)
GAAP Income Tax Expense
 
 
 
$
2,467

 
$
1,654

 
 
 
 
 
 
 
    1 Reflects the change in the valuation allowance assessed against the deferred tax asset established
         as part of the Company's initial public offering and subsequent unit conversions.
    2 Reflects the tax effect of non-recurring lease expenses on Corporate Income Tax Expense and Unincorporated and Other
        Business Tax Expenses for the second quarter of 2015 of $108 thousand and $36 thousand, respectively, and $25 thousand
        and $7 thousand for the first quarter of 2015, respectively, which are excluded from Non-GAAP results.



7



Details of the net income attributable to non-controlling interests of the Company's operating company and consolidated subsidiaries, as well as a reconciliation of the related GAAP and non-GAAP measures, are shown below:

Non-Controlling Interests (unaudited)
 
 
 
 
 
 
($ thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
June 30,
 
March 31,
 
June 30,
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
 Operating Company Allocation
 
$
8,019

 
$
7,741

 
$
10,523

Add Back: Effects of One-Time Adjustments1
 

 

 
1,197

         Non-GAAP Operating Company Allocation
 
8,019

 
7,741

 
11,720

 Outside Interests of Investment Partnerships2
 
(68
)
 
(5
)
 
370

         Less: Effects of One-Time Adjustments1
 

 

 
(1,197
)
 GAAP Net Income Attributable to Non-Controlling Interests
 
$
7,951

 
$
7,736

 
$
10,893

 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended
 
 
 
 
June 30,
 
June 30,
 
 
 
 
2016
 
2015
 
 
 
 
 
 
 
 Operating Company Allocation
 
 
 
$
15,760

 
$
20,564

Add Back: Effects of One-Time Adjustments1
 
 
 

 
1,475

         Non-GAAP Operating Company Allocation
 
 
 
15,760

 
22,039

 Outside Interests of Investment Partnerships2
 
 
 
(73
)
 
310

         Less: Effects of One-Time Adjustments1
 
 
 

 
(1,475
)
 GAAP Net Income Attributable to Non-Controlling Interests
 
 
 
$
15,687

 
$
20,874

 
 
 
 
 
 
 
 
 
 
 
 
 
 
    1 Reflects the effects of non-recurring lease expenses on non-controlling interests.
    2 Represents the non-controlling interest allocation of the (loss)/ income of the Company's consolidated
          investment partnerships to its external investors.

On July 19, 2016, the Company's Board of Directors approved and declared a quarterly dividend of $0.03 per share of its Class A common stock. The following dates apply to the dividend:

Record Date: July 29, 2016

Payment Date: August 25, 2016

During the last twelve months, inclusive of the dividend noted above, the Company declared total dividends of $0.41 per share of its Class A common stock.








8



Second Quarter 2016 Earnings Call Information

Pzena Investment Management, Inc. (NYSE: PZN) will hold a conference call to discuss the Company's financial results and outlook at 10:00 a.m. ET, Wednesday, July 20, 2016. The call will be open to the public.

Webcast Instructions: To gain access to the webcast, which will be "listen-only," go to the Events page in the Investor Relations area of the Company's website, www.pzena.com.

Teleconference Instructions: To gain access to the conference call via telephone, U.S./Canada callers should dial 855-319-2215; international callers should dial 336-525-7134. The conference ID number is 46011297.

Replay: The conference call will be available for replay through August 3, 2016, on the web using the information given above.

About Pzena Investment Management

Pzena Investment Management, LLC, the firm's operating company, is a value-oriented investment management firm. Founded in 1995, Pzena Investment Management has built a diverse, global client base. More firm and stock information is posted at www.pzena.com.

Forward-Looking Statements

This press release may contain, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements provide the Company’s current views, expectations, or forecasts of future events and performance, and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Among the factors that could cause actual results to differ from those expressed or implied by a forward-looking statement are those described in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the Company's Annual Report on Form 10-K, as filed with the SEC on March 14, 2016 and in the Company's Quarterly Reports on Form 10-Q as filed with the SEC. In light of these risks, uncertainties, assumptions, and factors, actual results could differ materially from those expressed or implied in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this release.

The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward-looking statements to reflect circumstances existing after the date of this release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward-looking statements will not be realized.

Contact: Gary Bachman, 212-583-0225 or bachman@pzena.com.



9



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (in thousands)
 
 
 
 
 
 
 
 
 
 As of
 
 
 
June 30,
 
December 31,
 
 
 
2016
 
2015
 
 
 
 (unaudited)
 
 
 ASSETS
 
 
 
 
 
 Cash and Cash Equivalents
 
$
24,838

 
$
35,417

 
 Restricted Cash
 
3,466

 
3,552

 
 Due from Broker
 
626

 
297

 
 Advisory Fees Receivable
 
21,516

 
22,248

 
 Investments
 
18,594

 
27,452

 
 Prepaid Expenses and Other Assets
 
2,904

 
2,445

 
 Deferred Tax Asset, Net of Valuation Allowance
 
 
 
 
 
      of $58,565 and $53,968, respectively
 
14,740

 
14,995

 
 Property and Equipment, Net of Accumulated
 
 
 
 
 
     Depreciation of $1,742 and $1,202, respectively
 
7,459

 
7,903

 
      TOTAL ASSETS
 
$
94,143

 
$
114,309

 
 
 
 
 
 
 LIABILITIES AND EQUITY
 
 
 
 
 
 Liabilities:
 
 
 
 
 
 Accounts Payable and Accrued Expenses
 
$
14,987

 
$
7,885

 
 Due to Broker
 
382

 
30

 
 Securities Sold Short, at Fair Value
 
2,496

 
2,231

 
 Liability to Selling and Converting Shareholders
 
16,310

 
15,075

 
 Deferred Compensation Liability
 
1,762

 
2,896

 
 Other Liabilities
 
826

 
730

 
      TOTAL LIABILITIES
 
36,763

 
28,847

 
 
 
 
 
 
 
 Equity:
 
 
 
 
 
 Total Pzena Investment Management, Inc.'s Equity
 
16,129

 
18,422

 
 Non-Controlling Interests
 
41,251

 
67,040

 
      TOTAL EQUITY
 
57,380

 
85,462

 
      TOTAL LIABILITIES AND EQUITY
 
$
94,143

 
$
114,309








10



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 
 
 
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per-share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 REVENUE
 
$
26,435

 
$
29,510

 
$
52,273

 
$
58,163

 
 
 
 
 
 
 
 
 
 
 EXPENSES
 
 
 
 
 
 
 
 
 Compensation and Benefits Expense
 
11,699

 
11,800

 
24,197

 
23,870

 General and Administrative Expense
 
3,475

 
4,490

 
6,519

 
8,093

 
 TOTAL OPERATING EXPENSES
 
15,174

 
16,290

 
30,716

 
31,963

 Operating Income
 
11,261

 
13,220

 
21,557

 
26,200

 
 
 
 
 
 
 
 
 
 
 Other Income/ (Expense)
 
343

 
161

 
(375
)
 
(128
)
 
 
 
 
 
 
 
 
 
 
 Income Before Taxes
 
11,604

 
13,381

 
21,182

 
26,072

 
 
 
 
 
 
 
 
 
 
 Income Tax Expense
 
2,247

 
566

 
2,467

 
1,654

 Consolidated Net Income
 
9,357

 
12,815

 
18,715

 
24,418

 
 
 
 
 
 
 
 
 
 
 Less: Net Income Attributable to Non-Controlling Interests
 
7,951

 
10,893

 
15,687

 
20,874

 
 
 
 
 
 
 
 
 
 
 Net Income Attributable to Pzena Investment Management, Inc.
 
$
1,406

 
$
1,922

 
$
3,028

 
$
3,544

 
 
 
 
 
 
 
 
 
 
 Earnings per Share - Basic and Diluted Attributable to
 
 
 
 
 
 
 
 
 Pzena Investment Management, Inc. Common Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net Income for Basic Earnings per Share
 
$
1,406

 
$
1,922

 
$
3,028

 
$
3,544

 Basic Earnings per Share
 
$
0.09

 
$
0.15

 
$
0.20

 
$
0.27

 Basic Weighted Average Shares Outstanding
 
15,832,806

 
12,946,168

 
15,512,659

 
13,001,633

 
 
 
 
 
 
 
 
 
 
 Net Income for Diluted Earnings per Share
 
$
6,465

 
$
8,531

 
$
12,974

 
$
16,458

 Diluted Earnings per Share
 
$
0.09

 
$
0.13

 
$
0.19

 
$
0.24

 Diluted Weighted Average Shares Outstanding
 
68,903,766

 
68,223,560

 
68,597,999

 
68,109,058


11



 PZENA INVESTMENT MANAGEMENT, INC.
 
 
 
 
 
 
 
 
 
 
 UNAUDITED NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per-share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Basis
 
Non-GAAP Basis
 
 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 REVENUE
 
$
26,435

 
$
29,510

 
$
52,273

 
$
58,163

 
 
 
 
 
 
 
 
 
 
 EXPENSES
 
 
 
 
 
 
 
 
 Compensation and Benefits Expense
 
11,699

 
11,800

 
24,197

 
23,870

 General and Administrative Expense
 
3,475

 
3,002

 
6,519

 
6,259

 
 TOTAL OPERATING EXPENSES
 
15,174

 
14,802

 
30,716

 
30,129

 Operating Income
 
11,261

 
14,708

 
21,557

 
28,034

 
 
 
 
 
 
 
 
 
 
 Other (Expense)/ Income, Net of Outside Interests
 
(289
)
 
463

 
(124
)
 
479

 
 
 
 
 
 
 
 
 
 
 Income Before Taxes and Operating Company Allocation
 
10,972

 
15,171

 
21,433

 
28,513

 
 
 
 
 
 
 
 
 
 
 Unincorporated and Other Business Tax Expenses
 
512

 
575

 
977

 
1,106

 Allocable Income
 
10,460

 
14,596

 
20,456

 
27,407

 
 
 
 
 
 
 
 
 
 
 Operating Company Allocation
 
8,019

 
11,720

 
15,760

 
22,039

 Income Before Corporate Income Taxes
 
2,441

 
2,876

 
4,696

 
5,368

 
 
 
 
 
 
 
 
 
 
Corporate Income Tax Expense
 
910

 
925

 
1,726

 
1,811

Non-GAAP Net Income
 
$
1,531

 
$
1,951

 
$
2,970

 
$
3,557

Effect of One-Time Adjustments
 

 
(147
)
 

 
(183
)
Tax Receivable Agreement Income, Net of Taxes
 
(125
)
 
118

 
58

 
170

GAAP Net Income
 
$
1,406

 
$
1,922

 
$
3,028

 
$
3,544

 
 
 
 
 
 
 
 
 
 
 Earnings Per Share - Basic and Diluted Attributable to
 
 
 
 
 
 
 
 
 Pzena Investment Management, Inc. Common Stockholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Net Income for Basic Earnings per Share
 
$
1,531

 
$
1,951

 
$
2,970

 
$
3,557

 
      Basic Earnings per Share
 
$
0.10

 
$
0.15

 
$
0.19

 
$
0.27

 
      Basic Weighted Average Shares Outstanding
 
15,832,806

 
12,946,168

 
15,512,659

 
13,001,633

 
 
 
 
 
 
 
 
 
 
 
      Net Income for Diluted Earnings per Share
 
$
6,590

 
$
9,312

 
$
12,916

 
$
17,397

 
      Diluted Earnings per Share
 
$
0.10

 
$
0.14

 
$
0.19

 
$
0.26

 
      Diluted Weighted Average Shares Outstanding
 
68,903,766

 
68,223,560

 
68,597,999

 
68,109,058



12
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Section 3: EX-99.1 (EXHIBIT 99.1 PDF)

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