01—Abstract
Summary
Summary of the 10-K/A filed March 31, 2015. Cited figures are marked; the original filing is the authoritative source.
This is Amendment No. 1 to Affiliated Managers Group's (AMG) 10-K for fiscal 2014, filed March 31, 2015.
It does not restate AMG's own financials, which were filed in the original 10-K on February 23, 2015. Its sole purpose is to add Exhibit 99.1, the financial statements of ValueAct Holdings, L.P. and its Controlled Affiliates, in which AMG holds a minority interest. The filing does not state AMG's ownership percentage, so investors cannot isolate AMG's economic share from these figures.
The ValueAct statements show a partnership that grew substantially in 2014. Total assets rose to $17.67 billiona from $14.62 billion, driven mainly by investments in securities of $16.64 billion. Net income was $2.37 billion, but only $556.6 million was attributable to partners, with $1.82 billion going to redeemable noncontrolling interests (third-party investors in the ValueAct Funds).
Net cash used in operating activities was $1.80 billionb, largely reflecting securities purchases, and the partnership took in $1.20 billion of new capital from noncontrolling interests while distributing and paying out $980 million to them. Investors should note the audit coverage limits. The PricewaterhouseCoopers opinion covers only the 2013 balance sheet and 2013 results and cash flows, and it is dated March 28, 2014.
The 2014 statements, and the 2012 comparatives, are marked as not covered by the auditor's report. The filing is therefore best read as supplemental disclosure about an investee rather than as a source of AMG-level financial performance data.
02—Key points
Key Highlights
- Amendment No. 1 adds only Exhibit 99.1 (ValueAct Holdings, L.P. and Controlled Affiliates financials) under Item 15; AMG's own financial statements were previously filed in the February 23, 2015 10-K.
- ValueAct total assets increased about 21% to $17.67 billion at December 31, 2014, with investments in securities at fair value of $16.64 billion, concentrated in large-cap holdings such as Microsoft, Valeant, Twenty First Century Fox, Motorola Solutions, and Adobe.
- 2014 net income of $2.37 billion, of which $1.82 billion was attributable to redeemable noncontrolling interests and $556.6 million to partners, versus $849.4 million attributable to partners in 2013.
- Net cash used in operating activities was $1.80 billion in 2014, compared with cash provided of $115 million in 2013, reflecting heavier securities purchases ($6.29 billion) and a $1.26 billion net decrease in cash.
- Redeemable noncontrolling interests grew to $14.78 billion from $12.45 billion, while partners' capital rose to $1.34 billion from $1.05 billion, indicating substantial third-party capital inflows of $1.51 billion in the year.
- Auditor coverage is limited: PricewaterhouseCoopers' opinion covers only the 2013 statements and is dated March 28, 2014; the 2014 and 2012 figures are marked as not covered by the auditor's report.
- AMG's own ownership percentage in ValueAct and its equity-method accounting impact are not disclosed in this amendment, limiting the direct read-through to AMG's earnings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2014filed March 31, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| SG&A Expenses | $485.50M$427.20M | +13.6% |
| Operating Expenses | $1.70B$1.55B | +9.1% |
| Operating Income | $815.20M$634.10M | +28.6% |
| Interest Expense | $76.60M$87.30M | −12.3% |
| Net Income | $433.90M$360.50M | +20.4% |
| EPS (Basic) | $7.89$6.79 | +16.2% |
| EPS (Diluted) | $7.70$6.55 | +17.6% |
| Shares Outstanding (Basic) | 55.00M53.10M | +3.6% |
| Shares Outstanding (Diluted) | 58.40M56.70M | +3.0% |
05—Questions
Frequently Asked Questions
Why was this 10-K/A filed, and does it change AMG's reported financial results?
The amendment was filed to add supplemental financial statements of ValueAct Holdings, L.P., an affiliate in which AMG owns a minority interest. It does not restate or change AMG's own financial results, which remain as reported in the original 10-K filed February 23, 2015.
How much of ValueAct's 2014 net income actually belongs to the partners?
Of the $2.37 billion of 2014 net income, $556.6 million was attributable to partners, and $1.82 billion was attributable to redeemable noncontrolling interests, which are third-party investors in the ValueAct Funds. The partners' share fell from $849.4 million in 2013, even though total net income was lower in 2014 than in 2013 ($3.98 billion).
Are the 2014 ValueAct financial statements audited?
Not in the way the 2013 statements are. The PricewaterhouseCoopers report covers only the December 31, 2013 balance sheet and 2013 results and cash flows, and its date (March 28, 2014) precedes the 2014 year-end. The 2014 and 2012 amounts are labeled as not covered by the auditor's report, so investors should weigh them accordingly.
What is the scale of ValueAct's investment portfolio relative to its capital base?
Investments in securities were $16.64 billion at December 31, 2014, against partners' capital of $1.34 billion, while redeemable noncontrolling interests were $14.78 billion. Most of the portfolio is therefore funded by third-party capital, and the partnership's own equity is a small fraction of total assets. Level 1 (quoted-price) securities made up about $16.42 billion of the total, with only $215.5 million classified as Level 3.
06—Continue