Company Quick10K Filing
Alliancebernstein
Price-0.00 EPS3
Shares268 P/E-0
MCap-0 P/FCF-0
Net Debt-722 EBIT790
TEV-722 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-28
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-10-24
10-Q 2019-06-30 Filed 2019-07-25
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-13
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-07-26
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-13
10-Q 2017-09-30 Filed 2017-10-25
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-10-26
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-11
10-Q 2015-09-30 Filed 2015-10-22
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-04-30
10-K 2014-12-31 Filed 2015-02-12
10-Q 2014-09-30 Filed 2014-10-23
10-Q 2014-06-30 Filed 2014-07-30
10-Q 2014-03-31 Filed 2014-04-30
10-K 2013-12-31 Filed 2014-02-12
10-Q 2013-09-30 Filed 2013-10-24
10-Q 2013-03-31 Filed 2013-05-01
10-K 2012-12-31 Filed 2013-02-12
10-Q 2012-09-30 Filed 2012-10-24
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-02
10-K 2011-12-31 Filed 2012-02-10
10-Q 2011-09-30 Filed 2011-10-26
10-Q 2011-06-30 Filed 2011-07-29
10-Q 2011-03-31 Filed 2011-05-02
10-K 2010-12-31 Filed 2011-02-10
10-Q 2010-09-30 Filed 2010-10-28
10-Q 2010-06-30 Filed 2010-08-02
10-Q 2010-03-31 Filed 2010-05-03
10-K 2009-12-31 Filed 2010-02-11
8-K 2020-06-11
8-K 2020-06-09
8-K 2020-05-11
8-K 2020-04-28
8-K 2020-04-13
8-K 2020-03-30
8-K 2020-03-10
8-K 2020-02-12
8-K 2020-01-13
8-K 2020-01-13
8-K 2019-12-19
8-K 2019-12-11
8-K 2019-11-21
8-K 2019-11-12
8-K 2019-11-04
8-K 2019-10-24
8-K 2019-10-09
8-K 2019-09-11
8-K 2019-08-13
8-K 2019-07-25
8-K 2019-07-11
8-K 2019-06-21
8-K 2019-06-12
8-K 2019-06-05
8-K 2019-05-13
8-K 2019-04-25
8-K 2019-04-15
8-K 2019-04-02
8-K 2019-03-26
8-K 2019-03-11
8-K 2019-02-13
8-K 2019-01-10
8-K 2018-12-13
8-K 2018-11-20
8-K 2018-11-13
8-K 2018-10-24
8-K 2018-10-19
8-K 2018-10-10
8-K 2018-10-03
8-K 2018-09-14
8-K 2018-08-09
8-K 2018-07-26
8-K 2018-07-20
8-K 2018-07-12
8-K 2018-06-12
8-K 2018-05-11
8-K 2018-05-02
8-K 2018-04-26
8-K 2018-04-24
8-K 2018-04-18
8-K 2018-04-10
8-K 2018-03-13
8-K 2018-02-13
8-K 2018-01-31
8-K 2018-01-11

ABLP 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a33120exhibit311.htm
EX-31.2 a33120exhibit312.htm
EX-32.1 a33120exhibit321.htm
EX-32.2 a33120exhibit322.htm

Alliancebernstein Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
1.00.80.60.40.20.02012201420172020
Rev, G Profit, Net Income
0.70.3-0.1-0.4-0.8-1.22012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to
Commission File No.  000-29961
ALLIANCEBERNSTEIN L.P.
(Exact name of registrant as specified in its charter)
Delaware
 
13-4064930
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
1345 Avenue of the Americas, New York, NY  10105
(Address of principal executive offices)
(Zip Code)
(212) 969-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
 
No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
 
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.





Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
None
 
None
 
None

The number of units of limited partnership interest outstanding as of March 31, 2020 was 269,981,431.




ALLIANCEBERNSTEIN L.P.
Index to Form 10-Q

 
 
Page
 
 
 
 
Part I
 
 
 
 
 
FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Part II
 
 
 
 
 
OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 




Part I
FINANCIAL INFORMATION
Item 1. Financial Statements
ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(in thousands, except unit amounts)
(unaudited)
 
March 31,
2020
 
December 31,
2019
ASSETS
Cash and cash equivalents
$
975,263

 
$
679,738

Cash and securities segregated, at fair value (cost: $2,005,514 and $1,090,443)
2,012,562

 
1,094,866

Receivables, net:
 

 
 

Brokers and dealers
358,028

 
97,966

Brokerage clients
1,814,889

 
1,536,674

AB funds fees
214,672

 
261,588

Other fees
122,300

 
148,744

Investments:
 

 
 

Long-term incentive compensation-related
37,316

 
50,902

Other
225,192

 
215,892

Assets of consolidated company-sponsored investment funds:
 
 
 
   Cash and cash equivalents
87,277

 
11,433

   Investments
443,472

 
581,004

   Other assets
39,538

 
19,810

Furniture, equipment and leasehold improvements, net
138,286

 
145,251

Goodwill
3,088,038

 
3,076,926

Intangible assets, net
49,004

 
55,366

Deferred sales commissions, net
49,280

 
36,296

Right-of-use assets
341,660

 
362,693

Other assets
446,460

 
330,943

Total assets
$
10,443,237

 
$
8,706,092

 
 
 
 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:
 

 
 

Payables:
 

 
 

Brokers and dealers
$
382,632

 
$
201,778

Securities sold not yet purchased
27,629

 
30,157

Brokerage clients
3,653,789

 
2,531,946

AB mutual funds
118,618

 
71,142

Accounts payable and accrued expenses
281,094

 
192,110

Lease liabilities
442,590

 
468,451

Liabilities of consolidated company-sponsored investment funds
104,875

 
31,017

Accrued compensation and benefits
346,445

 
276,829

Debt:


 


EQH Facility
830,000

 
560,000

Other
104,814

 

Total liabilities
6,292,486

 
4,363,430


1


 
March 31,
2020
 
December 31,
2019
 
 
 
 
Commitments and contingencies (See Note 12)


 


Redeemable non-controlling interest
224,900

 
325,561

Capital:
 

 
 

General Partner
40,571

 
41,225

Limited partners: 269,981,431 and 270,380,314 units issued and outstanding
4,109,946

 
4,174,201

Receivables from affiliates
(9,279
)
 
(9,011
)
AB Holding Units held for long-term incentive compensation plans
(81,314
)
 
(76,310
)
Accumulated other comprehensive loss
(134,073
)
 
(113,004
)
Partners’ capital attributable to AB Unitholders
3,925,851

 
4,017,101

Total liabilities, redeemable non-controlling interest and capital
$
10,443,237

 
$
8,706,092

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

2


ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per unit amounts)
(unaudited)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Revenues:
 
 
 
 
Investment advisory and services fees
 
$
621,725

 
$
556,594

Bernstein research services
 
129,223

 
90,235

Distribution revenues
 
130,857

 
100,509

Dividend and interest income
 
20,465

 
27,346

Investment (losses) gains
 
(44,306
)
 
15,735

Other revenues
 
25,511

 
22,206

Total revenues
 
883,475

 
812,625

Less: Interest expense
 
9,319

 
17,163

Net revenues
 
874,156

 
795,462

 
 
 
 
 
Expenses:
 
 

 
 

Employee compensation and benefits
 
362,272

 
339,309

Promotion and servicing:
 
 

 
 

Distribution-related payments
 
140,145

 
105,993

Amortization of deferred sales commissions
 
5,526

 
3,502

Trade execution, marketing, T&E and other
 
55,610

 
49,648

General and administrative
 
122,267

 
117,848

Contingent payment arrangements
 
793

 
54

Interest on borrowings
 
2,834

 
3,983

Amortization of intangible assets
 
6,486

 
6,974

Total expenses
 
695,933

 
627,311

 
 
 
 
 
Operating income
 
178,223

 
168,151

 
 
 
 
 
Income taxes
 
9,474

 
8,921

 
 
 
 
 
Net income
 
168,749

 
159,230

 
 
 
 
 
Net (loss) income of consolidated entities attributable to non-controlling interests
 
(25,571
)
 
10,116

 
 
 
 
 
Net income attributable to AB Unitholders
 
$
194,320

 
$
149,114

 
 
 
 
 
Net income per AB Unit:
 
 

 
 

Basic
 
$
0.71

 
$
0.55

Diluted
 
$
0.71

 
$
0.55


See Accompanying Notes to Condensed Consolidated Financial Statements.

3


ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
 
 
 
Net income
 
$
168,749

 
$
159,230

Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments, before tax
 
(21,396
)
 
2,630

Income tax benefit (expense)
 
73

 
(77
)
Foreign currency translation adjustments, net of tax
 
(21,323
)
 
2,553

Changes in employee benefit related items:
 
 
 
 
Amortization of prior service cost
 
6

 
6

Recognized actuarial gain
 
325

 
267

Changes in employee benefit related items
 
331

 
273

Income tax (expense) benefit
 
(77
)
 
10

Employee benefit related items, net of tax
 
254

 
283

Other comprehensive (loss) income
 
(21,069
)
 
2,836

Less: Comprehensive (loss) income in consolidated entities attributable to non-controlling interests
 
(25,571
)
 
10,096

Comprehensive income attributable to AB Unitholders
 
$
173,251

 
$
151,970

 
See Accompanying Notes to Condensed Consolidated Financial Statements.


4


ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Partners' Capital
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
General Partner’s Capital
 
 
 
Balance, beginning of period
$
41,225

 
$
40,240

Net income
1,943

 
1,491

Cash distributions to General Partner
(2,542
)
 
(1,917
)
Long-term incentive compensation plans activity
2

 
173

(Retirement) of AB Units, net
(57
)
 
(584
)
Balance, end of period
40,571

 
39,403

Limited Partners' Capital
 
 
 
Balance, beginning of period
4,174,201

 
4,075,306

Net income
192,377

 
147,623

Cash distributions to Unitholders
(251,261
)
 
(189,568
)
Long-term incentive compensation plans activity
335

 
16,985

(Retirement) of AB Units, net
(5,706
)
 
(57,756
)
Balance, end of period
4,109,946

 
3,992,590

Receivables from Affiliates
 
 
 
Balance, beginning of period
(9,011
)
 
(11,430
)
Long-term incentive compensation awards expense
184

 
465

Capital contributions from AB Holding
(452
)
 
(701
)
Balance, end of period
(9,279
)
 
(11,666
)
AB Holding Units held for Long-term Incentive Compensation Plans
 
 
 
Balance, beginning of period
(76,310
)
 
(77,990
)
Purchases of AB Holding Units to fund long-term compensation plans, net
(17,750
)
 
(58,452
)
Retirement of AB Units, net
5,763

 
58,340

Long-term incentive compensation awards expense
7,407

 
18,604

Re-valuation of AB Holding Units held in rabbi trust
(436
)
 
(10,005
)
Other
12

 

Balance, end of period
(81,314
)
 
(69,503
)
Accumulated Other Comprehensive Income (Loss)
 
 
 
Balance, beginning of period
(113,004
)
 
(110,866
)
Foreign currency translation adjustment, net of tax
(21,323
)
 
2,571

Changes in employee benefit related items, net of tax
254

 
283

Balance, end of period
(134,073
)
 
(108,012
)
Total Partners' Capital attributable to AB Unitholders
3,925,851

 
3,842,812

Non-redeemable Non-controlling Interests in Consolidated Entities
 
 
 

Balance, beginning of period

 
949

Net income

 
16

Foreign currency translation adjustment

 
(20
)
Balance, end of period

 
945

Total Capital
$
3,925,851

 
$
3,843,757

See Accompanying Notes to Condensed Consolidated Financial Statements.

5



ALLIANCEBERNSTEIN L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
 
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$
168,749

 
$
159,230

 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Amortization of deferred sales commissions
5,526

 
3,502

Non-cash long-term incentive compensation expense
7,591

 
19,070

Depreciation and other amortization
36,156

 
41,892

Unrealized losses (gains) on investments
20,585

 
(10,543
)
Unrealized losses (gains) on investments of consolidated company-sponsored investment funds
52,115

 
(21,930
)
Other, net
(1,324
)
 
6,246

Changes in assets and liabilities:
 

 
 

(Increase) in securities, segregated
(917,696
)
 
(92,624
)
(Increase) decrease in receivables
(615,055
)
 
97,411

(Increase) decrease in investments
(17,557
)
 
449,556

Decrease (increase) in investments of consolidated company-sponsored investment funds
85,418

 
(11,683
)
(Increase) in deferred sales commissions
(18,510
)
 
(3,175
)
Decrease (increase) in right-of-use assets
134

 
(1,000
)
(Increase) decrease in other assets
(118,038
)
 
38,685

Increase in other assets and liabilities of consolidated company-sponsored investment funds, net
54,129

 
3,688

Increase (decrease) in payables
1,492,200

 
(222,472
)
(Decrease) in lease liabilities
(23,968
)
 
(34,914
)
Increase (decrease) in accounts payable and accrued expenses
5,456

 
(29,114
)
Increase in accrued compensation and benefits
70,792

 
40,644

Net cash provided by operating activities
286,703

 
432,469

 
 
 
 
Cash flows from investing activities:
 

 
 

Purchases of furniture, equipment and leasehold improvements
(3,321
)
 
(5,567
)
Acquisition of business, net of cash acquired
(11,473
)
 

Net cash used in investing activities
(14,794
)
 
(5,567
)
 
 
 
 

6


 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from financing activities:
 

 
 

Issuance of commercial paper, net
104,814

 
15,459

Proceeds of EQH Facility
270,000

 

(Repayment) of bank loans

 
(25,000
)
Increase (decrease) in overdrafts payable
85,395

 
(65,352
)
Distributions to General Partner and Unitholders
(253,803
)
 
(191,485
)
(Redemptions) of non-controlling interest in consolidated company-sponsored investment funds, net
(75,091
)
 
(36
)
Capital contributions (to) affiliates
(699
)
 
(932
)
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units
147

 
7,382

Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net
(17,750
)
 
(58,452
)
Other
(504
)
 
(228
)
Net cash provided by (used in) financing activities
112,509

 
(318,644
)
Effect of exchange rate changes on cash and cash equivalents
(13,049
)
 
640

Net increase (decrease) in cash and cash equivalents
371,369

 
108,898

Cash and cash equivalents as of beginning of the period
691,171

 
653,324

Cash and cash equivalents as of end of the period
$
1,062,540

 
$
762,222

 
 
 
 
See Accompanying Notes to Condensed Consolidated Financial Statements.

7


ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2020
(unaudited)

The words “we” and “our” refer collectively to AllianceBernstein L.P. and its subsidiaries (“AB”), or to their officers and employees. Similarly, the word “company” refers to AB. These statements should be read in conjunction with AB’s audited consolidated financial statements included in AB’s Form 10-K for the year ended December 31, 2019.

1. Business Description Organization and Basis of Presentation

Business Description

We provide research, diversified investment management and related services globally to a broad range of clients. Our principal services include:

Institutional Services – servicing our institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as Equitable Holdings, Inc. ("EQH") and its respective subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles.

Retail Services – servicing our retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles.

Private Wealth Management Services – servicing our private clients, including high-net-worth individuals and families, 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.

Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options.

We also provide distribution, shareholder servicing, transfer agency services and administrative services to the mutual funds we sponsor.
 
Our high-quality, in-depth research is the foundation of our business.  Our research disciplines include economic, fundamental equity, fixed income and quantitative research.  In addition, we have experts focused on multi-asset strategies, wealth management and alternative investments.

We provide a broad range of investment services with expertise in:

Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities;

Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies;

Passive management, including index and enhanced index strategies;

Alternative investments, including hedge funds, fund of funds, direct lending and private equity; and

Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds.

Our services span various investment disciplines, including market capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-, intermediate- and short-duration debt securities), and geographic location (e.g., U.S., international, global, emerging markets, regional and local), in major markets around the world.

8



Organization

During the second quarter of 2018, AXA S.A. ("AXA") completed the sale of a minority stake in EQH through an initial public offering ("IPO"). Since then, AXA has completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned less than 10% of the outstanding common stock of EQH as of March 31, 2020.

As of March 31, 2020, EQH owned approximately 4.1% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AllianceBernstein Holding L.P. (“AB Holding Units”). AllianceBernstein Corporation (an indirect wholly-owned subsidiary of EQH, “General Partner”) is the general partner of both AllianceBernstein Holding L.P. (“AB Holding”) and AB. AllianceBernstein Corporation owns 100,000 general partnership units in AB Holding and a 1% general partnership interest in AB.

As of March 31, 2020, the ownership structure of AB, including limited partnership units outstanding as well as the general partner's 1% interest, was as follows:

EQH and its subsidiaries
63.4
%
AB Holding
35.9

Unaffiliated holders
0.7

 
100.0
%


Including both the general partnership and limited partnership interests in AB Holding and AB, EQH and its subsidiaries had an approximate 64.9% economic interest in AB as of March 31, 2020.

Basis of Presentation

The interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The condensed consolidated statement of financial condition as of December 31, 2019 was derived from audited financial statements, but it does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The condensed consolidated financial statements include AB and its majority-owned and/or controlled subsidiaries, and the consolidated entities that are considered to be variable interest entities (“VIEs”) and voting interest entities (“VOEs”) in which AB has a controlling financial interest. Non-controlling interests on the condensed consolidated statements of financial condition include the portion of consolidated company-sponsored investment funds in which we do not have direct equity ownership. All significant inter-company transactions and balances among the consolidated entities have been eliminated.

Reclassifications

During 2020, prior period amounts for the changes in right-of-use assets and lease liabilities previously presented with amounts related to the adoption of ASC 842 in our Condensed Consolidated Statement of Cash Flows, are now presented net of the adoption impact of ASU 842 to conform to the current period's presentation.


9



2.
Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This new guidance relates to the accounting for credit losses on financial instruments and introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which had required a hypothetical purchase price allocation. As a result of the revised guidance, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements that currently exist in GAAP for capitalizing implementation costs incurred to develop or obtain internal-use software. Implementation costs would either be capitalized or expensed as incurred depending on the project stage. All costs in the preliminary and post-implementation project stages are expensed as incurred, while certain costs within the application development stage are capitalized. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted in 2020

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20). The amendment modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early adoption permitted. The revised guidance will not have a material impact on our financial condition or results of operations.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early adoption permitted. The revised guidance will not have a material impact on our financial condition or results of operations.

Goodwill

Goodwill is tested annually, as of September 30, for impairment. Throughout the year, the carrying value of goodwill is also reviewed for impairment if certain events or changes in circumstances occur, and trigger whether an interim impairment test may be required. Such changes in circumstances may be, but not limited to, sustained decrease in AB Holding Unit price or declines in market capitalization that would suggest that the fair value of the reporting unit is less than the carrying amount; significant and unanticipated declines in assets under management, revenues, or lower than expected earnings in the current quarter, next quarter or year. Any of these changes in circumstances could suggest the possibility that goodwill is impaired, however, none of these events or circumstances by itself would indicate that it is more likely than not that goodwill is impaired, they are merely recognized as triggering events for the consideration of impairment and must be viewed in combination with any mitigating or positive factors. A holistic evaluation of all events since the most recent quantitative impairment test must be done to determine whether it is more likely than not that the reporting unit is impaired.

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As of January 1, 2020, we adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which had required a hypothetical purchase price allocation. As a result of the revised guidance, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under this guidance, the goodwill impairment test no longer includes a determination by management of whether a decline in fair value is temporary; however, it is important to consider how the severity and anticipated duration of the current market conditions is reflected in management's determination of fair value. We have determined that AB has only one reporting segment and reporting unit.

As of March 31, 2020, there was $3.1 billion of goodwill recorded on the consolidated statement of financial condition. During the first quarter of 2020, the unit price per AB Holding Unit declined significantly in response to the precipitous decline in the financial markets. As such, we performed an interim impairment evaluation of goodwill utilizing the Market Approach where the fair value of the reporting unit is based on its unadjusted market valuation (AB Holding Units outstanding multiplied by AB Holding’s Unit price). We have considered the results of the market approach analysis performed along with a number of other factors (including current market conditions) and determined that the fair value of the reporting unit exceeded its carrying value as of March 31, 2020. As such, no goodwill impairment existed. We will continue to monitor and evaluate any events that may trigger an impairment of goodwill.

3. Revenue Recognition

Revenues for the three months ended March 31, 2020 and 2019 consisted of the following:

 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
(in thousands)
Subject to contracts with customers:
 
 
 
 
    Investment advisory and services fees
 
 
 
 
        Base fees
 
$
613,587

 
$
552,230

        Performance-based fees
 
8,138

 
4,364

    Bernstein research services
 
129,223

 
90,235

    Distribution revenues
 
 
 
 
        All-in-management fees
 
86,357

 
61,773

        12b-1 fees
 
19,453

 
19,586

        Other
 
25,047

 
19,150

    Other revenues
 
 
 
 
        Shareholder servicing fees
 
20,843

 
17,830

        Other
 
4,672

 
4,018

 
 
907,320

 
769,186

Not subject to contracts with customers:
 
 
 
 
    Dividend and interest income, net of interest expense
 
11,146

 
10,183

    Investment (losses) gains
 
(44,306
)
 
15,735

    Other revenues
 
(4
)
 
358

 
 
(33,164
)
 
26,276

 
 
 
 
 
Total net revenues
 
$
874,156

 
$
795,462



4.
Long-term Incentive Compensation Plans

We maintain several unfunded, non-qualified long-term incentive compensation plans, under which we grant annual awards to employees, generally in the fourth quarter, and to members of the Board of Directors of the General Partner, who are not employed by our company or by any of our affiliates (“Eligible Directors”).

We fund our restricted AB Holding Unit awards either by purchasing AB Holding Units on the open market or purchasing newly-issued AB Holding Units from AB Holding, and then keeping these AB Holding Units in a consolidated rabbi trust until delivering them or retiring them. In accordance with the Amended and Restated Agreement of Limited Partnership of AB (“AB Partnership Agreement”), when AB purchases newly-issued AB Holding Units from AB Holding, AB Holding is required to use the proceeds it receives from AB to purchase the equivalent number of newly-issued AB Units, thus increasing

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its percentage ownership interest in AB. AB Holding Units held in the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AB.

Repurchases of AB Holding Units for the three months ended March 31, 2020 and 2019 consisted of the following:
 
 
Three Months Ended
March 31,
 
 
2020
 
2019
 
 
(in millions)
Total amount of AB Holding Units Purchased (1)
 
0.9

 
2.0

Total Cash Paid for AB Holding Units Purchased (1)
 
$
19.8

 
$
58.6

Open Market Purchases of AB Holding Units Purchased (2)
 
0.8

 
1.9

Total Cash Paid for Open Market Purchases of AB Holding Units (2)
 
$
17.3

 
$
55.2

(1) Purchased on a trade date basis. 
(2) The remainder related to purchases of AB Holding Units from employees to all them to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation award 
Purchases of AB Holding Units reflected on the condensed consolidated statements of cash flows are net of AB Holding Unit purchases by employees as part of a distribution reinvestment election.

Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on our behalf in accordance with the terms of the plan. Repurchases are subject to regulations promulgated by the SEC as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the first quarter of 2020 expired at the close of business on April 27, 2020. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program and for other corporate purposes.

During the first three months of both 2020 and 2019, we granted to employees and Eligible Directors 0.1 million restricted AB Holding Unit awards. We used AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these awards.

During the first three months of 2020 and 2019, AB Holding issued 5,182 and 0.3 million AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $0.1 million and $7.4 million, respectively, received from award recipients as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units.


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5.
Net Income per Unit

Basic net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the basic weighted average number of limited partnership units outstanding for each period. Diluted net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the total of the diluted weighted average number of limited partnership units outstanding for each period.
 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders
 
$
194,320

 
$
149,114

 
 
 
 
 
Weighted average limited partnership units outstanding – basic
 
270,498

 
267,336

Dilutive effect of compensatory options to buy AB Holding Units
 
32

 
72

Weighted average limited partnership units outstanding – diluted
 
270,530

 
267,408

Basic net income per AB Unit
 
$
0.71

 
$
0.55

Diluted net income per AB Unit
 
$
0.71

 
$
0.55



 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
(amounts as shown)
Anti-dilutive options excluded from diluted net income
 
29,056

 
29,056



6. Cash Distributions

AB is required to distribute all of its Available Cash Flow, as defined in the AB Partnership Agreement, to its Unitholders and to the General Partner. Available Cash Flow can be summarized as the cash flow received by AB from operations minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB for use in its business, or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow.

Typically, Available Cash Flow has been the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will be based on adjusted diluted net income per unit, unless management determines, with the concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.

On April 28, 2020, the General Partner declared a distribution of $0.71 per AB Unit, representing a distribution of Available Cash Flow for the three months ended March 31, 2020. The General Partner, as a result of its 1% general partnership interest, is entitled to receive 1% of each distribution. The distribution is payable on May 28, 2020 to holders of record on May 11, 2020.

7.
Cash and Securities Segregated Under Federal Regulations and Other Requirements

As of March 31, 2020 and December 31, 2019, $2.0 billion and $1.1 billion, respectively, of U.S. Treasury Bills were segregated in a special reserve bank custody account for the exclusive benefit of our brokerage customers under Rule 15c3-3 of the Exchange Act.


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8.
Investments

Investments consist of:
 
March 31,
2020
 
December 31,
2019
 
(in thousands)
Equity securities:
 
 
 
    Long-term incentive compensation-related
$
25,655

 
$
36,665

    Seed capital
70,361

 
70,464

    Other
58,423

 
73,202

Exchange-traded options
36,783

 
6,931

Investments in limited partnership hedge funds:
 

 
 

Long-term incentive compensation-related
11,661

 
14,237

Seed capital
30,732

 
33,124

Time deposits
17,303

 
18,281

Other
11,590

 
13,890

Total investments
$
262,508

 
$
266,794



Total investments related to long-term incentive compensation obligations of $37.3 million and $50.9 million as of March 31, 2020 and December 31, 2019, respectively, consist of company-sponsored mutual funds and hedge funds. For long-term incentive compensation awards granted before 2009, we typically made investments in company-sponsored mutual funds and hedge funds that were notionally elected by plan participants and maintained them (and continue to maintain them) in a consolidated rabbi trust or separate custodial account. The rabbi trust and custodial account enable us to hold such investments separate from our other assets for the purpose of settling our obligations to participants. The investments held in the rabbi trust and custodial account remain available to the general creditors of AB.

The underlying investments of the hedge funds in which we invest include long and short positions in equity securities, fixed income securities (including various agency and non-agency asset-based securities), currencies, commodities and derivatives (including various swaps and forward contracts). These investments are valued at quoted market prices or, where quoted market prices are not available, are fair valued based on the pricing policies and procedures of the underlying funds.

We allocate seed capital to our investment teams to help develop new products and services for our clients. A portion of our seed capital investments are equity and fixed income products, primarily in the form of separately-managed account portfolios, U.S. mutual funds, Luxembourg funds, Japanese investment trust management funds or Delaware business trusts. We also may allocate seed capital to investments in private equity funds. In regard to our seed capital investments, the amounts above reflect those funds in which we are not the primary beneficiary of a VIE or hold a controlling financial interest in a VOE. See Note 14, Consolidated Company-Sponsored Investment Funds, for a description of the seed capital investments that we consolidate. As of March 31, 2020 and December 31, 2019, our total seed capital investments were $340.8 million and $358.1 million, respectively. Seed capital investments in unconsolidated company-sponsored investment funds are valued using published net asset values or non-published net asset values if they are not listed on an active exchange but have net asset values that are comparable to funds with published net asset values and have no redemption restrictions.

In addition, we also have long positions in corporate equities and long exchange-traded options traded through our options desk.


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The portion of unrealized gains (losses) related to equity securities, as defined by ASC 321-10, held as of March 31, 2020 and 2019 were as follows:

 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
(in thousands)
Net (losses) gains recognized during the period
 
$
(21,986
)
 
$
13,994

Less: net (losses) gains recognized during the period on equity securities sold during the period
 
(1,395
)
 
3,132

Unrealized (losses) gains recognized during the period on equity securities held
 
$
(20,591
)
 
$
10,862



9.
Derivative Instruments

See Note 14, Consolidated Company-Sponsored Investment Funds, for disclosure of derivative instruments held by our consolidated company-sponsored investment funds.

We enter into various futures, forwards, options and swaps to economically hedge certain seed capital investments.  Also, we have currency forwards that help us to economically hedge certain balance sheet exposures. In addition, our options desk trades long and short exchange-traded equity options. We do not hold any derivatives designated in a formal hedge relationship under ASC 815-10, Derivatives and Hedging.

The notional value and fair value as of March 31, 2020 and December 31, 2019 for derivative instruments (excluding derivative instruments relating to our options desk trading activities discussed below) not designated as hedging instruments were as follows:

 
 
 
Fair Value
 
Notional Value
 
Derivative Assets
 
Derivative Liabilities
 
(in thousands)
March 31, 2020:
 
 
 
 
 
Exchange-traded futures
$
175,080

 
$
1,505

 
$
4,895

Currency forwards
85,003

 
8,414

 
7,943

Interest rate swaps
82,780

 
2,886

 
3,641

Credit default swaps
275,733

 
16,238

 
15,294

Total return swaps
90,608

 
2,351

 
8,283

Option swaps
354

 
1,172

 

Total derivatives
$
709,558

 
$
32,566

 
$
40,056

 
 
 
 
 
 
December 31, 2019:
 
 
 
 
 
Exchange-traded futures
$
171,112

 
$
939

 
$
871

Currency forwards
60,809

 
8,545

 
8,633

Interest rate swaps
92,756

 
1,746

 
2,254

Credit default swaps
168,303

 
2,151

 
5,611

Total return swaps
91,201

 
110

 
1,764

Option swaps
354

 

 
126

Total derivatives
$
584,535

 
$
13,491

 
$
19,259



As of March 31, 2020 and December 31, 2019, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.


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The gains and losses for derivative instruments (excluding our options desk trading activities discussed below) for the three months ended March 31, 2020 and 2019 recognized in investment gains (losses) in the condensed consolidated statements of income were as follows:

 
Three Months Ended March 31,