01—Abstract
Summary
Summary of the 10-K/A filed March 30, 2016. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 1) for Affiliated Managers Group (AMG) does not contain AMG's own financial statements.
It adds Exhibit 99.1, the separately audited-format financial statements of ValueAct Holdings, L.P. and its Controlled Affiliates, an investment manager in which AMG holds a minority interest. The amendment was filed under Item 15 to supplement the original 10-K filed February 25, 2016. Investors should read it as supplemental disclosure about an equity affiliate, not as an update to AMG's results.
The filing does not state AMG's ownership percentage or its share of ValueAct's earnings. ValueAct's 2015 results were weak. The partnership reported a net loss attributable to partners of $(121.9) million, compared with net income of $556.6 milliona in 2014.
The swing reflected a net loss on investments of $(655.6) million, driven by a $(2.17) billion unrealized loss partly offset by $1.51 billionb of realized gains. Total assets rose to $18.65 billion, largely because redeemable noncontrolling interests (third-party fund capital) grew to $15.94 billion. Partners' capital fell to $1.00 billion from $1.34 billion.
Compensation expense jumped to $166.3 millionc from $34.9 million, including a $92.9 million charge tied to a 2015 modification of equity-based awards. Several caveats matter. The 2015 and 2014 statements are marked "not covered by auditor's report," and the PricewaterhouseCoopers opinion included in the exhibit refers to the 2013 year, which limits how much assurance the exhibit provides.
The ValueAct Funds also posted $315 milliond of collateral on an equity forward contract tied to Baker Hughes, and the notes disclose a $11.1 million forward position that carried a $9.7 million unrealized loss. Overall, the exhibit shows a sharp 2015 drawdown at a key affiliate, with a large amount of fund capital that AMG does not own.
02—Key points
Key Highlights
- The filing is a 10-K/A that adds only Exhibit 99.1, ValueAct Holdings, L.P. financial statements; AMG's own financials remain in the original February 25, 2016 10-K.
- ValueAct reported a 2015 net loss attributable to partners of $(121.9) million, versus net income of $556.6 million in 2014.
- Net loss on investments was $(655.6) million in 2015, driven by a $(2.17) billion unrealized loss partially offset by $1.51 billion of realized gains.
- Total investments in securities were $16.24 billion at year-end 2015, concentrated in large U.S. and Canadian holdings such as Microsoft, Valeant, Twenty First Century Fox, and Baker Hughes.
- Redeemable noncontrolling interests rose to $15.94 billion, showing that most of the partnership's invested capital belongs to third-party fund investors rather than the partners.
- Compensation expense rose to $166.3 million from $34.9 million, including a $92.9 million charge from modifying equity-based awards in 2015.
- The 2015 and 2014 statements are not covered by the auditor's report, and the included opinion refers to 2013, which limits assurance on the figures.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2015filed March 30, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| SG&A Expenses | $443.80M$485.50M | −8.6% |
| Operating Expenses | $1.65B$1.70B | −2.7% |
| Operating Income | $1.12B$815.20M | +37.9% |
| Interest Expense | $88.90M$76.60M | +16.1% |
| Net Income | $509.50M$433.90M | +17.4% |
| EPS (Basic) | $9.37$7.89 | +18.8% |
| EPS (Diluted) | $9.17$7.70 | +19.1% |
| Shares Outstanding (Basic) | 54.30M55.00M | −1.3% |
| Shares Outstanding (Diluted) | 57.20M58.40M | −2.1% |
05—Questions
Frequently Asked Questions
Does this 10-K/A contain AMG's own 2015 financial results?
No. The amendment only supplements Item 15 with Exhibit 99.1, the financial statements of ValueAct Holdings, L.P. and Controlled Affiliates. AMG's consolidated financial statements were filed in the original 10-K on February 25, 2016, and the XBRL data for them was filed previously.
Why does AMG include ValueAct's financial statements?
AMG holds a minority interest in ValueAct, and the exhibit provides investors with the affiliate's standalone financial information. The filing does not explain the disclosure requirement or AMG's ownership percentage, so investors should check the original 10-K or the company's disclosures for that detail.
Why did ValueAct post a net loss in 2015 after strong 2014 results?
The loss came from investment performance. ValueAct recorded a net unrealized loss of $(2.17) billion on its securities portfolio in 2015, after a $1.19 billion unrealized gain in 2014. Realized gains of $1.51 billion partly offset this, leaving a net loss on investments of $(655.6) million. Net loss attributable to partners was $(121.9) million after noncontrolling interest allocations.
Are these ValueAct figures reliable for investors to rely on?
Investors should be cautious. The 2015 and 2014 statements are labeled as not covered by the auditor's report, and the included PricewaterhouseCoopers opinion refers to the balance sheet and results for December 31, 2013. The notes also state that fair value for nonmarketable securities is determined by the General Partner and may differ significantly from market values.
What risks does the filing highlight in ValueAct's 2015 positions?
The notes disclose an equity forward contract entered into on December 2, 2015, with a notional value of $522.4 million on Baker Hughes shares, an unrealized loss of $9.7 million, and $315 million of collateral posted to the counterparty. The partnership also has $10.8 million in term loans and $1.04 billion in withdrawals payable at year-end 2015, which indicates significant redemption pressure.
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