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Affiliated Managers Group Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2012 11:21AM

Affiliated Managers Group Inc. (AMG) filed Quarterly Report for the period ended 2012-06-30. Affiliated Managers Group, Inc. has a market cap of $5.8 billion; its shares were traded at around $117.08 with a P/E ratio of 17.3 and P/S ratio of 3.4. Affiliated Managers Group, Inc. had an annual average earning growth of 4.9% over the past 10 years.



Highlight of Business Operations:

(1)We reduced the carrying value of an indefinite-lived intangible asset at one of our Affiliates by $93.5 million and $102.2 million, in the three and six months ended June 30, 2012, respectively. We also reduced our current estimate of contingent payment obligations and recognized a gain of $47.4 million ($34.6 million attributable to the controlling interest) and $57.3 million ($39.6 million attributable to the controlling interest), in the three and six months ended June 30, 2012, respectively. Excluding these valuation adjustments, Net income (controlling interest) and Earnings per share—diluted would have been $43.1 million and $0.82 in the three months ended June 30, 2012, respectively, and $82.9 million and $1.57 for the six months ended June 30, 2012, respectively. Management believes the disclosure of Net income (controlling interest) and Earnings per share-diluted excluding these valuation adjustments, both non-GAAP measures, provides for a better comparison between current and prior periods. (2)Economic net income and Economic earnings per share, including a reconciliation of Economic net income to Net income, are discussed in "Supplemental Performance Measures" on page 41. (3)EBITDA, including a reconciliation to cash flow from operations, is discussed in greater detail in "Supplemental Liquidity Measure" on page 43.

(1)As described above, our average assets under management considers balances used to bill revenue during the reporting period. Assets under management attributable to investments in new Affiliates are included on a weighted average basis for the period from the closing date of the respective investment. (2)In 2012, we changed our estimate of payments to be made under certain of our contingent payment arrangements. For the three months ended June 30, 2012, we recognized a gain totaling $47.4 million ($34.6 million attributable to the controlling interest) as a result of this change. The controlling interest portion of the gain was allocated $14.4 million, $20.0 million and $0.2 million to our Mutual Fund, Institutional and High Net Worth channels, respectively. For the six months ended June 30, 2012, we recognized a gain totaling $57.3 million ($39.6 million attributable to the controlling interest) as a result of this change. The controlling interest portion of the gain was

Our revenue in the Mutual Fund distribution channel decreased $19.2 million (or 10%) in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, primarily from a 9% decrease in average assets under management from our consolidated Affiliates, and revenue decreased $27.7 million (or 7%) in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, primarily from a 7% decrease in average assets under management from our consolidated Affiliates. These decreases in average assets under management resulted principally from investment performance and net client cash flows at our consolidated Affiliates.

(1)We are required to use the equity method of accounting for certain of our investments and, as such, do not separately report these Affiliates' revenues or expenses (including intangible amortization) in our income statement. Our share of these investments' amortization, $8.2 million and $8.2 million for the three months ended June 30, 2011 and 2012, respectively, and $16.6 million and $16.3 million for the six months ended June 30, 2011 and 2012, respectively, is reported in Income from equity method investments. (2)Our reported intangible amortization, $22.1 million and $114.7 million for the three months ended June 30, 2011 and 2012, respectively, includes $3.4 million and $3.6 million, respectively, of amortization attributable to our non-controlling interests, amounts not added back to Net income (controlling interest) to measure our Economic net income. The reported intangible amortization for the three months ended June 30, 2012 includes a $93.5 million expense associated with the reduction in carrying value of an indefinite-lived intangible asset at one of our Affiliates. Our reported intangible amortization, $44.2 million and $145.1 million for the six months ended June 30, 2011 and 2012, respectively, includes $6.8 million and $7.2 million, respectively, of amortization attributable to our non-controlling interests. The reported intangible amortization for the six months ended June 30, 2012 includes a $102.2 million expense associated with the reduction of carrying value of an indefinite-lived intangible asset at one of our Affiliates. (3)As described in Note (2) above, we reduced the carrying value of certain of our indefinite-lived intangible assets during the three and six months ended June 30, 2012 which resulted in a $3.3 million and $35.5 million, respectively decrease in our intangible-related deferred taxes. (4)Our reported Imputed interest expense and contingent payment arrangements, $8.3 million and ($40.0) million for the three months ended June 30, 2011 and 2012, respectively, include $1.5 million and ($11.7) million of imputed interest attributable to our non-controlling interests, amounts not added back to Net income (controlling interest) to measure our Economic net income. Our reported Imputed interest expense and contingent payment arrangements, $16.6 million and ($42.5) million for the six months ended June 30, 2011 and 2012, respectively, include $2.9 million and ($15.2) million of imputed interest attributable to our non-controlling interests

For the three months ended June 30, 2012, we reduced our current estimate of payments to be made under these agreements and recognized a gain of $47.4 million ($34.6 million attributable to the controlling interest). During the six months ended June 30, 2012, we reduced our estimate of payments to be made under these arrangements and recognized a gain totaling $57.3 million ($39.6 million of which is attributable to the controlling interest). Changes to our projected future payment amounts could materially affect the amount of Imputed interest expense and contingent payment arrangements we recognize in any period. For example, a 1% change in our assumed discount rate or a 1% change in our projected revenue (assuming all other factors remain constant) at Affiliates with these types of arrangements would result in an increase or decrease to our Imputed interest expense and contingent payment arrangements of $0.1 million and $4.2 million, respectively.

Read the The complete Report



Stocks Discussed: AMG,
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