10-QPeriod: Q3 FY2008

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 10, 2008For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a decrease in net income for the third quarter and the first nine months of 2008 compared to the same periods in 2007, reflecting the challenging market environment impacting its assets under management and advisory fees. Revenue declined due to investment performance and net client cash outflows across its distribution channels. Despite the revenue pressures, the company managed its operating expenses effectively, with compensation and related expenses decreasing year-over-year. AMG also strengthened its liquidity position, significantly increasing its cash and cash equivalents. The company's financial strategy continues to focus on growth through internal expansion and strategic investments in investment management firms, while maintaining strong relationships with its Affiliates and preserving their entrepreneurial cultures.

Key Highlights

  • 1Net income for the three months ended September 30, 2008, was $24.8 million, down from $42.6 million in the same period of 2007.
  • 2Revenue for the third quarter of 2008 decreased by 16% to $290.8 million compared to $345.6 million in the prior year's quarter.
  • 3Total operating expenses decreased by 14% to $188.1 million for the third quarter of 2008, driven by lower compensation and related expenses.
  • 4Cash and cash equivalents increased significantly to $403.0 million as of September 30, 2008, up from $222.9 million at the end of 2007.
  • 5The company issued $460 million in senior convertible notes in August 2008, increasing its senior convertible securities balance.
  • 6Assets under management decreased across all distribution channels, totaling $207.3 billion as of September 30, 2008, down from $274.8 billion at December 31, 2007.
  • 7Diluted earnings per share for the third quarter of 2008 were $0.59, down from $1.06 in the same period of 2007.

Frequently Asked Questions

AMG's financial performance in the third quarter and first nine months of 2008 was negatively impacted by difficult market conditions. This resulted in a decrease in assets under management due to investment performance and client cash outflows, leading to lower advisory fees and overall revenue. Net income also declined compared to the prior year.

AMG's liquidity position strengthened significantly. Cash and cash equivalents increased to $403.0 million by September 30, 2008, up from $222.9 million at the end of 2007. This increase was primarily driven by strong operating cash flow and strategic financing activities, including the issuance of senior convertible notes.

AMG has actively managed its debt. While senior bank debt decreased significantly, the company issued $460 million in senior convertible notes in August 2008. The company maintains a leverage ratio of 0.9:1 as of September 30, 2008, and it has substantial potential future obligations related to the purchase of Affiliate equity interests.

The outlook remains challenging due to prevailing market conditions. Revenue is directly tied to assets under management, which are sensitive to market fluctuations and client flows. While the company is focused on managing expenses and maintaining its diverse distribution channels and investment styles, significant recovery in revenue and profitability will likely depend on broader market improvement.