10-QPeriod: Q3 FY2010

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 9, 2010For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported strong top-line growth for the nine months ended September 30, 2010, with revenue increasing by 57% to $937.5 million compared to the same period in 2009. This growth was primarily driven by a 37% increase in average assets under management, largely due to strategic new investments in Artemis, Aston, and Pantheon, along with positive investment performance. The company also saw a significant increase in Net Income attributable to controlling interest, up 119% to $76.6 million for the nine-month period. Despite robust revenue growth, operating expenses also rose significantly, with compensation and related expenses increasing by 41% and selling, general, and administrative expenses more than doubling. Amortization of intangible assets also saw a substantial increase due to new acquisitions. The company successfully managed its debt obligations, with leverage ratios well within covenants. Key financial events during the period include the conversion of all zero-coupon senior convertible notes and strategic investments that expanded AMG's global reach and product offerings.

Financial Highlights

44 data points
Beta

Net Income

$34.00M

EPS (Diluted)

$0.65

Total Assets

$4.95B

Cash & Equivalents

$255.40M

Free Cash Flow

$166.17M

Financial Statements
Beta
SG&A Expenses$73.40M
Operating Expenses$258.80M
Operating Income$95.60M
Interest Expense$16.30M
Net Income$34.00M
EPS (Basic)$0.66
EPS (Diluted)$0.65
Shares Outstanding (Basic)51.20M
Shares Outstanding (Diluted)51.90M

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2010, surged by 57% to $937.5 million, driven by a 37% increase in average assets under management.
  • 2Net Income attributable to controlling interest more than doubled, increasing by 119% to $76.6 million for the nine months ended September 30, 2010.
  • 3The company completed significant new investments in Artemis, Aston, and Pantheon during the first and second quarters of 2010, expanding its asset management capabilities and diversification.
  • 4Operating expenses saw substantial increases, with compensation and related expenses up 41% and selling, general, and administrative expenses up 114% for the nine-month period.
  • 5Amortization of intangible assets rose by 60% due to recent acquisitions, reflecting the ongoing impact of strategic growth.
  • 6All zero-coupon senior convertible notes were converted to common stock during the second quarter of 2010, reducing future interest obligations.
  • 7The company maintained compliance with its debt covenants, with leverage ratios well within the required limits.

Frequently Asked Questions

AMG's revenue growth was primarily driven by a 37% increase in average assets under management, which was significantly boosted by new investments in asset management firms (Artemis, Aston, and Pantheon) and positive investment performance across its diversified portfolio.

Operating expenses increased substantially, with compensation and related expenses rising by 41% and selling, general, and administrative expenses more than doubling (up 114%). These increases were largely attributable to the operational costs associated with the new Affiliate investments and higher bonus payouts tied to revenue growth.

AMG's debt load increased with $371 million in senior bank debt outstanding and significant amounts of convertible securities. However, the company successfully managed its leverage, with key ratios well within covenants. The conversion of all zero-coupon senior convertible notes in Q2 2010 was a positive development, reducing future interest expenses and potentially diluting shares. The company has a substantial amount of debt maturing in future years, primarily in 2036-2038.

Yes, during the first and second quarters of 2010, AMG completed strategic investments in Artemis Investment Management, Aston Asset Management, and Pantheon Ventures Inc. Additionally, an agreement to acquire a majority interest in Trilogy Global Advisors was announced in September 2010.