01—Abstract
Summary
Summary of the 10-K/A filed March 31, 2017. Cited figures are marked; the original filing is the authoritative source.
This filing is Amendment No. 1 (Form 10-K/A) to Affiliated Managers Group's annual report for fiscal 2016, originally filed February 24, 2017.
It does not contain AMG's own consolidated financial statements. Its purpose is to add Exhibit 99.1, the audited financial statements of AQR Capital Management Holdings, LLC, an affiliate in which AMG holds a minority interest. Investors should read the AQR data as a window into one of AMG's key affiliates, not as AMG's results.
AQR's 2016 results were strong. Total fees rose about 10% to $939.8 milliona, driven by affiliate fees, which grew from $595.1 million to $682.5 million. Total revenues reached $941.5 million, net income was $530.4 million (up from $527.1 million), and operating cash flow was $657.1 million.
Compensation expense grew faster than revenue, rising about 27% to $292.3 millionb, which compressed margins somewhat. Total assets fell to $433.4 million, and members' equity declined to $39.9 million as distributions of $606.1 million exceeded net income. This distribution-heavy model means AQR's economics flow largely to its members, which is relevant to AMG's share of earnings from the affiliate.
AQR's balance sheet shows a shift in receivables. Affiliate fee receivables fell from $188.1 million to $88.5 millionc, which contributed to the operating cash inflow. Debt rose from $15.6 million to $37.8 million, including a $13.0 million Connecticut state loan, while the credit line declined modestly to $42.0 million.
Management reports compliance with covenants. Subsequent events include renewal of the $42.0 milliond credit line at 2.4% and 2.5% into May 2017. The filing notes that AQR's 2014 and 2015 figures, and its 2015 balance sheet, are unaudited.
02—Key points
Key Highlights
- Amendment No. 1 adds only supplemental AQR Capital Management Holdings financial statements (Exhibit 99.1); AMG's own financials remain in the original 10-K filed February 24, 2017
- AQR total fees grew about 10% to $939.8 million in 2016, led by affiliate fees, which rose 15% to $682.5 million
- AQR net income was $530.4 million in 2016, up slightly from $527.1 million, on total revenues of $941.5 million
- Compensation and benefits rose about 27% to $292.3 million, outpacing revenue growth and pressuring margins
- AQR distributed $606.1 million to members in 2016, exceeding net income, which reduced members' equity to $39.9 million
- Operating cash flow was $657.1 million, supported by a $99.7 million decline in affiliate fee receivables
- AQR's total debt increased to $37.8 million, including a $13.0 million Connecticut state loan, and the company reports covenant compliance
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2016filed March 31, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.19B— | — |
| SG&A Expenses | $398.10M$443.80M | −10.3% |
| Operating Expenses | $1.60B$1.65B | −3.3% |
| Operating Income | $1.03B$1.12B | −8.0% |
| Interest Expense | $91.70M$88.90M | +3.1% |
| Net Income | $472.80M$509.50M | −7.2% |
| EPS (Basic) | $8.73$9.37 | −6.8% |
| EPS (Diluted) | $8.57$9.17 | −6.5% |
| Shares Outstanding (Basic) | 54.20M54.30M | −0.2% |
| Shares Outstanding (Diluted) | 57.00M57.20M | −0.3% |
05—Questions
Frequently Asked Questions
Does this 10-K/A include AMG's own 2016 financial results?
No. The amendment states that AMG's financial statements are in Item 8 of the original Form 10-K filed February 24, 2017. This filing adds only the audited financial statements of AQR Capital Management Holdings, LLC, in which AMG holds a minority interest, as Exhibit 99.1.
Why does AMG file AQR's financial statements?
Under SEC rules, a registrant must provide separate financial statements for significant equity-method or minority-owned affiliates. These statements let investors evaluate the affiliate's performance, which affects AMG's reported equity earnings.
How strong was AQR's 2016 performance?
AQR's total revenues rose to $941.5 million from $857.2 million, and net income was $530.4 million. However, net income growth was modest, and compensation expense rose sharply, so profit growth lagged revenue growth.
Is AQR's financial position weakening?
Partly. Members' equity fell to $39.9 million from $59.4 million because distributions of $606.1 million exceeded net income. Debt rose to $37.8 million from $15.6 million. On the other hand, the company generated strong operating cash flow and reduced its affiliate receivables, and it reports covenant compliance on its credit facilities.
Were all of the AQR financial statements audited?
Only the December 31, 2016 balance sheet and the 2016 statements of operations, equity, and cash flows were audited by PricewaterhouseCoopers LLP, which issued an unqualified opinion dated March 30, 2017. The December 31, 2015 balance sheet and the 2014 and 2015 income and cash flow data are presented under Rule 3-09 and are not covered by the auditor's report.
06—Continue