Exhibit 99.2
Affiliated Managers Group, Inc.
Financial Highlights
(in millions, except per share data)
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 3/31/12 | | 3/31/13 | |
| | | | | |
Revenue | | $ | 417.7 | | $ | 502.2 | |
| | | | | |
Net income (controlling interest) | | $ | 37.4 | | $ | 62.4 | |
| | | | | |
Economic net income (A) | | $ | 83.5 | | $ | 124.2 | |
| | | | | |
EBITDA (B) | | $ | 114.1 | | $ | 175.0 | |
| | | | | |
| | | | | |
Average shares outstanding - diluted | | 52.9 | | 54.2 | |
| | | | | |
Earnings per share - diluted | | $ | 0.71 | | $ | 1.15 | |
| | | | | |
Average shares outstanding - adjusted diluted (C) | | 52.9 | | 54.7 | |
| | | | | |
Economic earnings per share (C) | | $ | 1.58 | | $ | 2.27 | |
| | December 31,
2012 | | March 31,
2013 | |
| | | | | |
Cash and cash equivalents | | $ | 430.4 | | $ | 335.0 | |
| | | | | |
Senior bank debt | | $ | 325.0 | | $ | 150.0 | |
| | | | | |
Senior notes | | $ | 340.0 | | $ | 340.0 | |
| | | | | |
Senior convertible securities | | $ | 450.1 | | $ | 454.0 | |
| | | | | |
Junior convertible trust preferred securities | | $ | 515.5 | | $ | 516.3 | |
| | | | | |
Stockholders’ equity | | $ | 2,084.2 | | $ | 2,130.9 | |
(more)
1
Affiliated Managers Group, Inc.
Reconciliations of Earnings Per Share Calculation
(in millions, except per share data)
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 3/31/12 | | 3/31/13 | |
| | | | | |
Net income (controlling interest) | | $ | 37.4 | | $ | 62.4 | |
| | | | | |
Average shares outstanding - diluted | | 52.9 | | 54.2 | |
| | | | | |
Earnings per share - diluted | | $ | 0.71 | | $ | 1.15 | |
Reconciliations of Average Shares Outstanding
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 3/31/12 | | 3/31/13 | |
| | | | | |
Average shares outstanding - diluted | | 52.9 | | 54.2 | |
Dilutive impact of 2008 Senior convertible securities shares | | — | | 0.5 | |
Average shares outstanding - adjusted diluted (C) | | 52.9 | | 54.7 | |
(more)
2
Affiliated Managers Group, Inc.
Operating Results
Assets Under Management
(in millions)
Statement of Changes
| | Institutional | | Mutual
Fund | | High Net
Worth | | Total | |
| | | | | | | | | |
Assets under management, December 31, 2012 | | $ | 254,337 | | $ | 121,874 | | $ | 55,556 | | $ | 431,767 | |
Client cash inflows | | 10,889 | | 12,068 | | 3,174 | | 26,131 | |
Client cash outflows | | (4,967 | ) | (7,288 | ) | (1,922 | ) | (14,177 | ) |
Net client cash flows | | 5,922 | | 4,780 | | 1,252 | | 11,954 | |
Investment performance | | 8,846 | | 8,081 | | 2,514 | | 19,441 | |
Other (D) | | (626 | ) | — | | (3 | ) | (629 | ) |
Assets under management, March 31, 2013 | | $ | 268,479 | | $ | 134,735 | | $ | 59,319 | | $ | 462,533 | |
Financial Results
(in millions)
| | Three
Months
Ended
3/31/12 | | Percent
of Total | | Three
Months
Ended
3/31/13 | | Percent
of Total | |
Revenue | | | | | | | | | |
Institutional | | $ | 206.8 | | 50% | | $ | 223.8 | | 45% | |
Mutual Fund | | 175.7 | | 42% | | 227.6 | | 45% | |
High Net Worth | | 35.2 | | 8% | | 50.8 | | 10% | |
| | $ | 417.7 | | 100% | | $ | 502.2 | | 100% | |
| | | | | | | | | |
EBITDA (B) | | | | | | | | | |
Institutional | | $ | 66.8 | | 59% | | $ | 104.1 | | 60% | |
Mutual Fund | | 37.1 | | 32% | | 55.0 | | 31% | |
High Net Worth | | 10.2 | | 9% | | 15.9 | | 9% | |
| | $ | 114.1 | | 100% | | $ | 175.0 | | 100% | |
(more)
3
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in millions)
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 3/31/12 | | 3/31/13 | |
| | | | | |
Net income (controlling interest) | | $ | 37.4 | | $ | 62.4 | |
Intangible amortization and impairments | | 35.0 | | 38.4 | |
Intangible-related deferred taxes | | 9.9 | | 12.0 | |
Imputed interest and contingent payment arrangements | | 0.6 | | 9.1 | |
Affiliate equity expense | | 0.6 | | 2.3 | |
Economic net income (A) | | $ | 83.5 | | $ | 124.2 | |
| | | | | |
Cash flow from operations | | $ | 52.5 | | $ | 202.2 | |
Interest expense, net of non-cash items | | 16.8 | | 21.7 | |
Current tax provision | | 8.0 | | 21.2 | |
Income from equity method investments, net of distributions | | (14.1 | ) | (32.9 | ) |
Changes in assets and liabilities and other adjustments | | 50.9 | | (37.2 | ) |
EBITDA (B) | | $ | 114.1 | | $ | 175.0 | |
Holding company expenses | | 21.9 | | 22.8 | |
EBITDA contribution | | $ | 136.0 | | $ | 197.8 | |
(more)
4
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(in millions, except per share data)
| | Three Months Ended | |
| | March 31, | |
| | 2012 | | 2013 | |
| | | | | |
Revenue | | $ | 417.7 | | $ | 502.2 | |
| | | | | |
Operating expenses: | | | | | |
Compensation and related expenses | | 181.1 | | 214.5 | |
Selling, general and administrative | | 85.0 | | 92.3 | |
Intangible amortization and impairments | | 30.4 | | 32.9 | |
Depreciation and other amortization | | 3.4 | | 3.5 | |
Other operating expenses | | 9.0 | | 8.5 | |
| | 308.9 | | 351.7 | |
Operating income | | 108.8 | | 150.5 | |
| | | | | |
Income from equity method investments | | 14.5 | | 50.6 | |
| | | | | |
Other non-operating (income) and expenses: | | | | | |
Investment and other income | | (10.4 | ) | (4.5 | ) |
Interest expense | | 18.6 | | 24.2 | |
Imputed interest expense and contingent payment arrangements (E) | | (2.5 | ) | 14.2 | |
| | 5.7 | | 33.9 | |
| | | | | |
Income before income taxes | | 117.6 | | 167.2 | |
| | | | | |
Income taxes (F) | | 24.6 | | 37.5 | |
Net income | | 93.0 | | 129.7 | |
| | | | | |
Net income (non-controlling interests) | | (55.6 | ) | (67.3 | ) |
| | | | | |
Net income (controlling interest) | | $ | 37.4 | | $ | 62.4 | |
| | | | | |
Average shares outstanding - basic | | 51.6 | | 52.7 | |
Average shares outstanding - diluted | | 52.9 | | 54.2 | |
| | | | | |
Earnings per share - basic | | $ | 0.72 | | $ | 1.18 | |
Earnings per share - diluted | | $ | 0.71 | | $ | 1.15 | |
(more)
5
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in millions)
| | December 31, | | March 31, | |
| | 2012 | | 2013 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 430.4 | | $ | 335.0 | |
Investment advisory fees receivable | | 255.5 | | 256.7 | |
Investments in marketable securities | | 128.9 | | 135.5 | |
Unsettled fund shares receivable | | 40.1 | | 275.9 | |
Prepaid expenses and other current assets | | 57.4 | | 61.2 | |
Total current assets | | 912.3 | | 1,064.3 | |
| | | | | |
Fixed assets, net | | 81.5 | | 83.1 | |
Equity method investments in Affiliates | | 1,031.3 | | 984.5 | |
Acquired client relationships, net | | 1,585.5 | | 1,535.4 | |
Goodwill | | 2,355.2 | | 2,342.1 | |
Other assets | | 221.3 | | 215.7 | |
Total assets | | $ | 6,187.1 | | $ | 6,225.1 | |
| | | | | |
Liabilities and Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable and accrued liabilities | | $ | 324.7 | | $ | 237.0 | |
Unsettled fund shares payable | | 39.8 | | 279.2 | |
Payables to related party | | 11.3 | | 23.0 | |
Total current liabilities | | 375.8 | | 539.2 | |
| | | | | |
Senior bank debt | | 325.0 | | 150.0 | |
Senior notes | | 340.0 | | 340.0 | |
Senior convertible securities | | 450.1 | | 454.0 | |
Junior convertible trust preferred securities | | 515.5 | | 516.3 | |
Deferred income taxes | | 497.1 | | 503.6 | |
Other long-term liabilities | | 164.7 | | 172.0 | |
Total liabilities | | 2,668.2 | | 2,675.1 | |
| | | | | |
Redeemable non-controlling interests | | 477.5 | | 512.0 | |
| | | | | |
Equity: | | | | | |
Common stock | | 0.5 | | 0.5 | |
Additional paid-in capital | | 868.5 | | 817.7 | |
Accumulated other comprehensive income | | 79.1 | | 58.0 | |
Retained earnings | | 1,350.7 | | 1,413.1 | |
| | 2,298.8 | | 2,289.3 | |
Less treasury stock, at cost | | (214.6 | ) | (158.4 | ) |
Total stockholders’ equity | | 2,084.2 | | 2,130.9 | |
| | | | | |
Non-controlling interests | | 957.2 | | 907.1 | |
Total equity | | 3,041.4 | | 3,038.0 | |
Total liabilities and equity | | $ | 6,187.1 | | $ | 6,225.1 | |
(more)
6
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in millions)
| | Three Months Ended | |
| | March 31, | |
| | 2012 | | 2013 | |
| | | | | |
Cash flow from operating activities: | | | | | |
Net income | | $ | 93.0 | | $ | 129.7 | |
Adjustments to reconcile Net income to net cash flow from operating activities: | | | | | |
Intangible amortization and impairments | | 30.4 | | 32.9 | |
Amortization of issuance costs | | 1.8 | | 2.5 | |
Depreciation and other amortization | | 3.4 | | 3.5 | |
Deferred income tax provision | | 13.4 | | 12.7 | |
Imputed interest expense and contingent payment arrangements | | (2.5 | ) | 14.2 | |
Income from equity method investments, net of amortization | | (14.5 | ) | (50.6 | ) |
Distributions received from equity method investments | | 36.8 | | 93.9 | |
Tax benefit from exercise of stock options | | 0.4 | | 0.6 | |
Share-based compensation | | 8.2 | | 8.9 | |
Affiliate equity expense | | 2.2 | | 5.2 | |
Other adjustments | | (6.0 | ) | 0.9 | |
Changes in assets and liabilities: | | | | | |
(Increase) decrease in investment advisory fees receivable | | (12.5 | ) | 3.7 | |
Increase in prepaids and other current assets | | (9.1 | ) | (7.4 | ) |
Increase in other assets | | (0.5 | ) | (0.1 | ) |
Increase in unsettled fund shares receivable | | (45.2 | ) | (238.4 | ) |
Increase in unsettled fund shares payable | | 41.6 | | 242.0 | |
Decrease in accounts payable, accrued liabilities and other long-term liabilities | | (88.4 | ) | (52.0 | ) |
Cash flow from operating activities | | 52.5 | | 202.2 | |
| | | | | |
Cash flow from (used in) investing activities: | | | | | |
Purchase of fixed assets | | (1.3 | ) | (4.6 | ) |
Purchase of investment securities | | (9.5 | ) | (2.6 | ) |
Sale of investment securities | | 12.9 | | 0.2 | |
Cash flow from (used in) investing activities | | 2.1 | | (7.0 | ) |
| | | | | |
Cash flow used in financing activities: | | | | | |
Borrowings of senior bank debt | | — | | 20.0 | |
Repayments of senior bank debt | | — | | (195.0 | ) |
Issuance of common stock | | 15.1 | | 29.2 | |
Repurchase of common stock | | (32.7 | ) | — | |
Excess tax benefit from exercise of stock options | | 3.5 | | 7.5 | |
Note and contingent payments | | (0.2 | ) | (37.8 | ) |
Distributions to non-controlling interests | | (82.0 | ) | (125.4 | ) |
Affiliate equity issuances and repurchases | | (16.9 | ) | 15.8 | |
Cash flow used in financing activities | | (113.2 | ) | (285.7 | ) |
| | | | | |
Effect of foreign exchange rate changes on cash and cash equivalents | | 2.8 | | (4.9 | ) |
Net decrease in cash and cash equivalents | | (55.8 | ) | (95.4 | ) |
Cash and cash equivalents at beginning of period | | 449.5 | | 430.4 | |
Cash and cash equivalents at end of period | | $ | 393.7 | | $ | 335.0 | |
(more)
7
Affiliated Managers Group, Inc.
Notes
(in millions, except per share data)
(A) Under our Economic net income definition, we add to Net income (controlling interest) amortization (including equity method amortization) and impairments, deferred taxes related to intangible assets, non-cash imputed interest expense (principally related to the accounting for convertible securities and contingent payment arrangements) and certain Affiliate equity expenses. We consider Economic net income an important measure of our financial performance, as we believe it best represents operating performance before non-cash expenses relating to the acquisition of interests in our affiliated investment management firms, and it is therefore employed as our principal performance benchmark. This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net income; Economic net income is not a liquidity measure, and should not be used in place of liquidity measures calculated under GAAP.
We add back amortization and impairments attributable to acquired client relationships because these expenses do not correspond to the changes in the value of these assets, which do not diminish predictably over time. The portion of deferred taxes generally attributable to intangible assets (including goodwill) is added back because we believe it is unlikely these accruals will be used to settle material tax obligations. We add back non-cash imputed interest expense and reductions or increases in contingent payment arrangements to better reflect our contractual interest obligations. We add back non-cash expenses relating to certain transfers of equity between Affiliate partners when these transfers have no dilutive effect to shareholders.
(B) EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. This supplemental non-GAAP liquidity measure is provided in addition to, but not as a substitute for, cash flow from operations. As a measure of liquidity, we believe EBITDA is useful as an indicator of our ability to service debt, make new investments and meet working capital requirements. EBITDA, as calculated by us, may not be consistent with computations of EBITDA by other companies. In reporting EBITDA by segment, Affiliate expenses are allocated to a particular segment on a pro rata basis with respect to the revenue generated by that Affiliate in such segment.
(C) Economic earnings per share represents Economic net income divided by the adjusted diluted average shares outstanding. In this calculation, the potential share issuance in connection with our convertible securities is measured using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the value of the contingently convertible securities and the junior convertible trust preferred securities in excess of par, if any, are deemed to be outstanding. We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation. This method does not take into account any increase or decrease in our cost of capital in an assumed conversion. Economic earnings per share is not a liquidity measure, and should not be used in place of liquidity measures calculated under GAAP.
(more)
8
(D) Other includes assets under management attributable to Affiliate product transitions, new investment client transitions and transfers of our interests in certain Affiliated investment management firms, the financial effects of which are not material to our ongoing results.
(E) In the first quarters of 2012 and 2013, we adjusted our estimate of our contingent payment obligations and, accordingly, recorded a gain attributable to the controlling interest of $5.0 ($3.3 net of tax) and an expense attributable to the controlling interest of $8.2 ($5.3 net of tax), respectively.
(F) Our consolidated income tax provision includes taxes attributable to controlling interests, and to a lesser extent, taxes attributable to non-controlling interests, as follows:
| | Three Months Ended | |
| | March 31, | |
| | 2012 | | 2013 | |
Current income taxes | | $ | 8.0 | | $ | 21.2 | |
Intangible-related deferred taxes | | 9.9 | | 12.0 | |
Other deferred taxes | | 2.9 | | 0.9 | |
Taxes attributable to controlling interests | | 20.8 | | 34.1 | |
Taxes attributable to non-controlling interests | | 3.8 | | 3.4 | |
Total income taxes | | $ | 24.6 | | $ | 37.5 | |
| | | | | |
Income before taxes (controlling interests) | | $ | 58.2 | | $ | 96.5 | |
| | | | | |
Effective tax rate* | | 35.7 | % | 35.3 | % |
* Taxes attributable to controlling interests divided by controlling interest share of the consolidated income before taxes.
9
