10-QPeriod: Q2 FY2008

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 11, 2008For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a decrease in revenue for the three months ended June 30, 2008, compared to the same period in 2007, driven by investment performance and net client cash outflows, although revenue remained flat for the six-month period due to increased performance fees. Net income also saw a decline in both the quarter and year-to-date periods, primarily due to lower revenues and investment income, partially offset by reduced operating and interest expenses. Despite the revenue dip in the quarter, the company continued to make strategic investments, announcing agreements to acquire majority interests in Harding Loevner LLC and Gannett Welsh & Kotler, LLC. The company also reported an increase in cash and cash equivalents and managed to maintain a healthy leverage ratio. However, investors should note the ongoing risks associated with global financial market volatility, which can impact asset under management and fee generation.

Key Highlights

  • 1Revenue for the three months ended June 30, 2008, decreased by 7% year-over-year, totaling $309.0 million, while for the six months ended June 30, 2008, revenue increased slightly by 0.4% to $644.0 million.
  • 2Net income for the three months ended June 30, 2008, decreased by 16% to $35.3 million, and for the six months ended June 30, 2008, decreased by 13% to $68.1 million, compared to the prior year periods.
  • 3Total operating expenses for the three months ended June 30, 2008, decreased slightly by 1% to $205.0 million, but increased by 5% to $424.6 million for the six months ended June 30, 2008.
  • 4The company's cash and cash equivalents increased to $193.2 million as of June 30, 2008, from $222.9 million as of December 31, 2007.
  • 5Senior bank debt increased to $573.0 million as of June 30, 2008, from $519.5 million as of December 31, 2007.
  • 6The company announced agreements in July 2008 to acquire majority interests in Harding Loevner LLC and Gannett Welsh & Kotler, LLC, further expanding its asset management capabilities.
  • 7Diluted earnings per share decreased to $0.89 for the three months ended June 30, 2008, from $1.04 in the prior year period, and to $1.79 for the six months ended June 30, 2008, from $1.97 in the prior year period.

Frequently Asked Questions

AMG experienced a decline in revenue and net income for the quarter ended June 30, 2008, compared to the same period in the previous year. Revenue decreased by 7% to $309.0 million, and net income fell by 16% to $35.3 million. This was primarily attributed to market conditions affecting assets under management and net client cash flows.

AMG's senior bank debt increased from $519.5 million at the end of 2007 to $573.0 million at June 30, 2008. The company also has significant amounts of other convertible securities outstanding. Despite these obligations, the company reported a leverage ratio of 1.1:1 as of June 30, 2008.

AMG continues to pursue a growth strategy through internal growth and strategic transactions. Notably, in July 2008, the company announced agreements to acquire majority interests in two investment management firms: Harding Loevner LLC and Gannett Welsh & Kotler, LLC, which are expected to expand its asset management capabilities.

The company explicitly states that its performance is directly affected by changing conditions in global financial markets, particularly equity markets. Declines or lack of sustained growth in these markets can lead to decreased advisory fees and performance fees, negatively impacting operating results and cash flows from its Affiliates.