The Edelman Financial Group Reports Second Quarter Earnings from Continuing Core Operations of $0.09 Per Share

HOUSTON, Aug. 9, 2012 /PRNewswire/ -- The Edelman Financial Group Inc. (NASDAQ: EF) ("TEFG" or the "Company") today reported second quarter earnings from core continuing operations of $2.7 million, or $0.09 per share. In the year earlier quarter, it earned $0.06 per share from continuing core operations. Total earnings from continuing operations were $1.8 million, or $0.06 per share. Costs associated with its take-private transaction were $0.04 per share in the quarter. 

The expansion of the Company's Edelman Financial Services division continued to track plan.  Client assets at Edelman Financial Services rose by $90 million to $7.9 billion at the end of the second quarter. The net cost of the expansion in the quarter was $0.02 per share, in line with prior periods. Two new Edelman Financial Services offices were opened in the period.

The Company's other wealth management units added $90 million of net new client assets, excluding the impact of market changes. However, the overall decline in equity prices in the quarter reduced portfolio values by $364 million in the period. The Edelman Financial Group's total client assets were $17.5 billion at the end of the quarter (including Edelman Financial Services' $7.9 billion) versus $17.7 billion three months earlier.

Revenue grew 7% to $45.3 million in the quarter. Lower commission turnover had a mild adverse effect on revenue, although 84% of the Company's revenue is fee based.

The Company previously announced its intention to go private and expectation that the transaction will close during the third quarter of 2012, subject to customary closing conditions, including receipt of shareholder approval. Following anticipated completion of the transaction, The Edelman Financial Group will become a privately held company owned primarily by Lee Equity Partners and members of management, with its stock no longer trading on the Nasdaq Stock Market.

About The Edelman Financial Group

The Edelman Financial Group is a wealth management company that manages approximately $17.5 billion in client assets. Client assets include the gross value of assets under management directly or via outside managers and assets held in brokerage accounts for clients by outside clearing firms. The Edelman Financial Group has approximately 500 employees in 21 states. Additional information is available at www.edelmanfinancial.com.

About Lee Equity Partners

Lee Equity Partners is a middle-market private equity investment firm managing more than $1 billion of capital. Lee Equity was founded by Thomas H. Lee and focuses on control buyouts and growth capital financings, typically investing $30 million to $150 million per transaction in companies with enterprise values of $100 million to $500 million. The firm seeks to partner with top-tier management teams to build companies with differentiated market position and high growth potential. Target sectors include business services, consumer/retail, distribution/logistics, financial services, healthcare services, and media.

Cautionary Statement Regarding Forward Looking Information

This press release contains forward looking statements which may be identified by words such as "may," "could," "should," "would," "estimate," "expect," and similar expressions or statements of current expectation, assumption or opinion. These are "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. There are a number of risks and uncertainties that could cause actual results to differ materially from these forward looking statements, including the following: (1) TEFG may be unable to obtain the shareholder approval required for the transaction; (2) conditions to the closing of the transaction may not be satisfied or waived; (3) the transaction may involve unexpected costs, liabilities or delays; (4) the business of TEFG may suffer as a result of uncertainty surrounding the transaction; (5) TEFG may be adversely affected by other economic, business, and/or competitive factors; (6) legislative developments; (7) changes in tax and other laws; (8) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (9) the failure to receive the necessary debt financing set forth in the commitment letters received in connection with the transaction, and (10) other risks to consummation of the transaction, including the risk that the transaction will not be consummated within the expected time period or at all. Additional factors that may affect the future results of TEFG are set forth in its filings with the SEC, including its recent filings on Forms 10-K, 10-K/A, 10-Q, and 8-K, including, but not limited to, those described in TEFG's Form 10-K for the fiscal year ended December 31, 2011 and TEFG's Form 10-Q for the fiscal quarter ended March 31, 2012. These forward looking statements reflect TEFG's expectations as of the date of this press release. TEFG does not undertake any obligation to update any forward looking statement, except as required under applicable law.

Additional Information and Where to Find It

This press release may be deemed to be solicitation material in respect of the proposed acquisition of TEFG by Lee Equity. TEFG filed a preliminary proxy statement on Schedule 14A with the SEC on April 16, 2012, as amended on May 16, 2012, and July 6, 2012. When completed, a definitive proxy statement and a form of proxy will be mailed to the shareholders of TEFG. TEFG and Parent also intend to file other relevant materials with the SEC. INVESTORS AND SECURITY HOLDERS OF TEFG ARE ADVISED TO READ THE PRELIMINARY PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, INCLUDING TEFG'S DEFINITIVE PROXY STATEMENT, BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The definitive proxy statement will be mailed to shareholders of TEFG seeking their approval of the proposed transaction. This communication is not a solicitation of a proxy from any security holder of TEFG.

Investors and security holders may obtain a free copy of the definitive proxy statement when it becomes available, and other documents filed by TEFG with the SEC, at the SEC's website at http://www.sec.gov. Free copies of the proxy statement, when it becomes available, and TEFG's other filings with the SEC may also be obtained from TEFG by directing a request to TEFG, Attention: Corporate Secretary, Susan Bailey, or by calling [phone]. Such documents are not currently available. You may also read and copy any reports, statements and other information filed with the SEC at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 or visit the SEC's website for further information on its public reference room.

TEFG and its directors, executive officers, and other members of its management and employees may be deemed to be soliciting proxies from TEFG's shareholders in favor of the proposed acquisition. Information regarding TEFG's directors and executive officers is available in its Annual Report on Form 10-K/A for the year ended December 31, 2011, filed with the SEC on April 30, 2012. Additional information regarding the interests of TEFG and its directors and executive officers in the proposed acquisition, which may be different than those of TEFG's shareholders generally, is included in the preliminary proxy statement filed with the SEC and will be included in the definitive proxy statement and other relevant documents filed with the SEC when they become available.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012		2011			2012		2011
Revenue	$	45,343	$	42,826		$	87,799	$	84,420
Expenses		41,198		39,855			81,417		75,762
Net		4,145		2,971			6,382		8,658
Equity in income of limited partnerships		1,038		6,078			1,953		9,538
Income from continuing operations before income taxes		5,183		9,049			8,335		18,196
Provision for income taxes		(1,472)		(2,525)			2,185		(5,023)
Income from continuing operations, net of income taxes		3,711		6,524			6,150		13,173
Loss from discontinued operations, net of income taxes of
$(655), $(287), $(688) and $(766) respectively		(1,580)		(449)			(1,714)		(1,196)
Net income		2,131		6,075			4,436		11,977
Less: Net income attributable to the noncontrolling interest		(1,919)		(2,234)			(4,220)		(5,298)
Net income attributable to The Edelman Financial Group Inc.	$	212	$	3,841		$	216	$	6,679
Basic earnings (loss) per common share:
Continuing operations	$	0.06	$	0.14		$	0.07	$	0.26
Discontinued operations		(0.05)		(0.01)			(0.06)		(0.03)
Net earnings	$	0.01	$	0.13		$	0.01	$	0.23
Diluted earnings (loss) per common share:
Continuing operations	$	0.06	$	0.14		$	0.06	$	0.25
Discontinued operations		(0.05)		(0.01)			(0.05)		(0.03)
Net earnings	$	0.01	$	0.13		$	0.01	$	0.22
Weighted average shares outstanding:
Basic		29,331		29,150			29,282		29,159
Diluted		29,931		30,174			30,090		30,086
Amounts attributable to The Edelman Financial Group Inc. common
shareholders:
Income from continuing operations, net of tax	$	1,792	$	4,218		$	1,930	$	7,646
Loss from discontinued operations, net of tax		(1,580)		(377)			(1,714)		(967)
Net income	$	212	$	3,841		$	216	$	6,679
GAAP to Non-GAAP Reconciliation	Three Months Ended					Six Months Ended
	June 30, 2012					June 30, 2012
Net operating income from core activities:	Amount		Diluted EPS			Amount		Diluted EPS
Income from continuing operations, net of tax, attributable to
The Edelman Financial Group Inc.	$	1,792	$	0.06		$	1,930	$	0.06
Adjustments:
Costs associated with take-private transaction		1,159		0.04			2,169		0.07
Change in valuation of GFS contingent consideration		-		-			184		0.01
Loss associated with lease amendment		262		0.01			262		0.01
Investment portfolio gains, net of tax		(537)		(0.02)			(922)		(0.03)
Net operating income from core activities	$	2,676	$	0.09		$	3,623	$	0.12
Weighted average shares outstanding				29,931					30,090
	Three Months Ended					Six Months Ended
	June 30, 2011					June 30, 2011
Net operating income from core activities:	Amount		Diluted EPS			Amount		Diluted EPS
Income from continuing operations, net of tax, attributable to
The Edelman Financial Group Inc.	$	4,218	$	0.14		$	7,646	$	0.25
Adjustments:
Loss on note receivable held for sale		2,752		0.09			2,673		0.09
Investment portfolio gains, net of tax		(2,137)		(0.07)			(3,130)		(0.10)
Net operating income from core activities	$	4,833	$	0.16		$	7,189	$	0.24
Weighted average shares outstanding				30,174					30,086
Balance sheet data:
Cash and cash equivalents	$	35,836
Other tangible net assets		71,958
Tangible net assets		107,794
Shareholders' equity	$	250,842

 

		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2012		2011			2012		2011
Revenue:
	Mass Affluent	$	25,983	$	23,044		$	50,953	$	44,250
	Other Wealth Management		16,147		17,996			31,978		38,455
	Wealth Management Total		42,130		41,040			82,931		82,705
	Corporate Support and Other		3,213		1,786			4,868		1,715
	Total	$	45,343	$	42,826		$	87,799	$	84,420
Income (loss) from continuing operations before equity in income of limited partnerships and income taxes:
	Mass Affluent	$	6,423	$	6,023		$	12,516	$	10,804
	Other Wealth Management		5,508		6,083			10,732		12,904
	Wealth Management Total		11,931		12,106			23,248		23,708
	Corporate Support and Other		(7,786)		(9,135)			(16,866)		(15,050)
	Total	$	4,145	$	2,971		$	6,382	$	8,658
Equity in income (loss) of limited partnerships:
	Mass Affluent	$	-	$	-		$	-	$	-
	Other Wealth Management		(207)		180			276		2,798
	Wealth Management Total		(207)		180			276		2,798
	Corporate Support and Other		1,245		5,898			1,677		6,740
	Total	$	1,038	$	6,078		$	1,953	$	9,538
Income (loss) from continuing operations before income taxes:
	Mass Affluent	$	6,423	$	6,023		$	12,516	$	10,804
	Other Wealth Management		5,301		6,263			11,008		15,702
	Wealth Management Total		11,724		12,286			23,524		26,506
	Corporate Support and Other		(6,541)		(3,237)			(15,189)		(8,310)
	Total	$	5,183	$	9,049		$	8,335	$	18,196
Net (income) loss attributable to the noncontrolling interest:
	Mass Affluent	$	(1,531)	$	(1,445)		$	(2,994)	$	(2,593)
	Other Wealth Management		(858)		(1,234)			(1,951)		(3,708)
	Wealth Management Total		(2,389)		(2,679)			(4,945)		(6,301)
	Corporate Support and Other		470		445			725		1,003
	Total	$	(1,919)	$	(2,234)		$	(4,220)	$	(5,298)

 

SOURCE The Edelman Financial Group Inc.

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