10-QPeriod: Q3 FY2009

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported a mixed financial performance for the quarter ended September 30, 2009. While Net Income (controlling interest) saw a modest increase of 8% to $17.8 million compared to the prior year's quarter, driven by improved investment and other income and lower taxes, the nine-month period showed a significant decline of 58% in Net Income (controlling interest) to $34.9 million. This decline was primarily attributed to a substantial decrease in revenue, down 25% and 36% for the quarter and nine months respectively, largely due to a significant drop in average assets under management, reflecting the ongoing impact of market conditions and negative net client cash flows. Operating expenses also decreased but at a slower pace than revenue, impacting profitability. Despite the revenue challenges, AMG demonstrated strong liquidity. The company's cash and cash equivalents stood at $225.3 million as of September 30, 2009, and it had no outstanding borrowings under its senior bank debt facility. The company maintained compliance with its debt covenants. AMG continues to pursue its growth strategy through investments in new and existing affiliates, managing approximately $199.3 billion in assets under management as of the end of the quarter, showcasing resilience and strategic focus amidst a challenging market environment.

Financial Highlights

23 data points
Beta

Net Income

$17.77M

EPS (Diluted)

$0.40

Cash & Equivalents

$225.25M

Free Cash Flow

$79.72M

Financial Statements
Beta
SG&A Expenses$26.86M
Operating Expenses$154.43M
Operating Income$63.03M
Interest Expense$16.15M
Net Income$17.77M
EPS (Basic)$0.42
EPS (Diluted)$0.40
Shares Outstanding (Basic)41.85B
Shares Outstanding (Diluted)44.27B

Key Highlights

  • 1Net Income (controlling interest) increased by 8% to $17.8 million for the three months ended September 30, 2009, compared to $16.5 million in the prior year's quarter.
  • 2Total revenue decreased by 25% to $217.5 million for the three months ended September 30, 2009, compared to $290.8 million in the prior year's quarter, primarily due to a 17% decrease in average assets under management.
  • 3Average assets under management across all segments decreased by 17% to $186.2 billion for the three months ended September 30, 2009, compared to $225.4 billion in the prior year's quarter.
  • 4Operating expenses decreased by 19% to $155.9 million for the three months ended September 30, 2009, compared to $193.6 million in the prior year's quarter, outpacing the revenue decline.
  • 5The company maintained a strong liquidity position with $225.3 million in cash and cash equivalents and no outstanding senior bank debt as of September 30, 2009.
  • 6Total assets under management reached $199.3 billion as of September 30, 2009, showing a recovery from the previous quarter.
  • 7The company recently acquired a majority interest in Harding Loevner LLC, further expanding its investment management capabilities.

Frequently Asked Questions

The primary driver for the decrease in revenue was a significant decline in average assets under management, down 17% year-over-year. This decline was largely attributed to the prevailing conditions in global equity markets and negative net client cash flows, which impacted the total assets managed by AMG's affiliates.

AMG successfully reduced its operating expenses by 19% year-over-year. This decrease was achieved through several factors, including lower compensation and related expenses driven by revenue-sharing arrangements at affiliates, a significant drop in selling, general and administrative expenses partly due to insurance recoveries and non-recurrence of acquisition-related fees, and a decrease in sub-advisory and distribution expenses.

AMG maintains a strong liquidity position with $225.3 million in cash and cash equivalents as of September 30, 2009. Importantly, the company had no outstanding borrowings under its senior bank debt facility at that date, having repaid its term loan earlier in the year. The company also remains in compliance with its debt covenants.

Yes, on August 26, 2009, AMG completed the acquisition of a majority interest in Harding Loevner LLC, an asset management firm specializing in various investment strategies. This acquisition is part of AMG's strategy to expand its investment management capabilities and enhance its business.