Company Quick10K Filing
Affiliated Managers Group
Price82.94 EPS2
Shares58 P/E44
MCap4,852 P/FCF8
Net Debt1,390 EBIT172
TEV6,242 TEV/EBIT36
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-04
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-01
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-04
10-Q 2015-03-31 Filed 2015-05-05
10-K 2014-12-31 Filed 2015-02-23
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-06
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-06
10-Q 2013-03-31 Filed 2013-05-07
10-Q 2012-09-30 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-08
10-K 2011-12-31 Filed 2012-02-23
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-01
8-K 2020-06-09
8-K 2020-06-02
8-K 2020-05-11
8-K 2020-04-28
8-K 2020-04-27
8-K 2020-02-03
8-K 2019-10-28
8-K 2019-07-29
8-K 2019-05-29
8-K 2019-05-06
8-K 2019-05-01
8-K 2019-03-21
8-K 2019-03-20
8-K 2019-02-04
8-K 2019-02-01
8-K 2019-01-18
8-K 2018-10-29
8-K 2018-07-30
8-K 2018-06-12
8-K 2018-05-29
8-K 2018-05-25
8-K 2018-04-30
8-K 2018-03-08
8-K 2018-01-29

AMG 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 amg03312020exhibit101.htm
EX-31.1 amg03312020exhibit311.htm
EX-31.2 amg03312020exhibit312.htm
EX-32.1 amg03312020exhibit321.htm
EX-32.2 amg03312020exhibit322.htm

Affiliated Managers Group Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
0.70.50.30.2-0.0-0.22016201720182020
Rev, G Profit, Net Income
0.50.2-0.0-0.3-0.5-0.82012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
(Mark One)
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to          
Commission File Number 001-13459
 
amglogoa72.jpg
AFFILIATED MANAGERS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
04-3218510
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer Identification Number)
777 South Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices)
(800345-1100
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock ($0.01 par value)
 
AMG
 
New York Stock Exchange
5.875% Junior Subordinated Notes due 2059
 
MGR
 
New York Stock Exchange



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer 
 
Non-accelerated filer 

 
Smaller reporting company
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
There were 47,238,457 shares of the registrant’s common stock outstanding on April 30, 2020.
 



FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
(unaudited)
 
For the Three Months Ended March 31,
 
2019
 
2020
Consolidated revenue
$
543.1

 
$
507.3

 
 
 
 
Consolidated expenses:
 
 
 
Compensation and related expenses
228.2

 
207.8

Selling, general and administrative
95.6

 
90.3

Intangible amortization and impairments
29.6

 
20.6

Interest expense
18.2

 
19.5

Depreciation and other amortization
5.2

 
5.1

Other expenses (net)
11.0

 
11.0

Total consolidated expenses
387.8

 
354.3

 
 
 
 
Equity method loss (net)
(358.1
)
 
(113.2
)
 
 
 
 
Investment and other income
8.0

 
2.4

Income (loss) before income taxes
(194.8
)
 
42.2

 
 
 
 
Income tax expense (benefit)
(61.8
)
 
2.2

Net income (loss)
(133.0
)
 
40.0

 
 
 
 
Net income (non-controlling interests)
(67.8
)
 
(55.6
)
Net loss (controlling interest)
$
(200.8
)
 
$
(15.6
)
 
 
 
 
Average shares outstanding (basic)
51.9

 
47.8

Average shares outstanding (diluted)
51.9

 
47.8

 
 
 
 
Loss per share (basic)
$
(3.87
)
 
$
(0.33
)
Loss per share (diluted)
$
(3.87
)
 
$
(0.33
)
The accompanying notes are an integral part of the Consolidated Financial Statements.

2


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
For the Three Months Ended March 31,
 
2019
 
2020
Net income (loss)
$
(133.0
)
 
$
40.0

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation gain (loss)
7.5

 
(52.9
)
Change in net realized and unrealized gain (loss) on derivative financial instruments
1.2

 
(1.0
)
Other comprehensive income (loss), net of tax
8.7

 
(53.9
)
Comprehensive loss
(124.3
)
 
(13.9
)
Comprehensive income (non-controlling interests)
(74.4
)
 
(39.4
)
Comprehensive loss (controlling interest)
$
(198.7
)
 
$
(53.3
)
The accompanying notes are an integral part of the Consolidated Financial Statements.

3


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
 
December 31,
2019
 
March 31,
2020
Assets
 
 
 
Cash and cash equivalents
$
539.6

 
$
592.2

Receivables
417.1

 
437.3

Investments in marketable securities
59.4

 
54.6

Goodwill
2,651.7

 
2,621.8

Acquired client relationships (net)
1,182.0

 
1,133.8

Equity method investments in Affiliates (net)
2,195.6

 
2,038.7

Fixed assets (net)
92.3

 
88.9

Other investments
211.8

 
222.9

Other assets
304.0

 
292.1

Total assets
$
7,653.5

 
$
7,482.3

Liabilities and Equity
 
 
 
Payables and accrued liabilities
$
634.6

 
$
414.0

Debt
1,793.8

 
2,044.9

Deferred income tax liability (net)
450.2

 
393.4

Other liabilities
359.1

 
539.3

Total liabilities
3,237.7

 
3,391.6

Commitments and contingencies (Note 7)


 


Redeemable non-controlling interests
916.7

 
581.8

Equity:
 
 
 
Common stock ($0.01 par value, 153.0 shares authorized; 58.5 shares outstanding in 2019 and 2020)
0.6

 
0.6

Additional paid-in capital
707.2

 
860.7

Accumulated other comprehensive loss
(108.8
)
 
(146.5
)
Retained earnings
3,819.8

 
3,789.1

 
4,418.8

 
4,503.9

Less: Treasury stock, at cost (10.4 shares in 2019 and 11.3 shares in 2020)
(1,481.3
)
 
(1,523.9
)
Total stockholders' equity
2,937.5

 
2,980.0

Non-controlling interests
561.6

 
528.9

Total equity
3,499.1

 
3,508.9

Total liabilities and equity
$
7,653.5

 
$
7,482.3

The accompanying notes are an integral part of the Consolidated Financial Statements.

4


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
Three Months Ended March 31, 2019
 
Total Stockholders’ Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2018
 
$
0.6

 
$
835.6

 
$
(109.0
)
 
$
3,876.8

 
$
(1,146.6
)
 
$
677.5

 
$
4,134.9

Impact of adoption of new accounting standards (ASU 2018-02)
 
 
 
 
 
 
 
(6.6
)
 
 
 
 
 
(6.6
)
Net income (loss)
 

 

 

 
(200.8
)
 

 
67.8

 
(133.0
)
Other comprehensive income
 

 

 
2.1

 

 

 
6.6

 
8.7

Share-based compensation
 

 
8.8

 

 

 

 

 
8.8

Common stock issued under share-based incentive plans
 

 
(33.0
)
 

 

 
26.9

 

 
(6.1
)
Share repurchases
 

 

 

 

 
(90.6
)
 

 
(90.6
)
Dividends ($0.32 per share)
 

 

 

 
(16.8
)
 

 

 
(16.8
)
Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
2.2

 

 

 

 
8.5

 
10.7

Issuances
 

 
(0.9
)
 

 

 

 
11.0

 
10.1

Repurchases
 

 
4.6

 

 

 

 

 
4.6

Changes in redemption value of Redeemable non-controlling interests
 

 
(12.9
)
 

 

 

 

 
(12.9
)
Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(47.3
)
 
(47.3
)
Capital contributions and other
 

 

 

 

 

 
0.4

 
0.4

Distributions to non-controlling interests
 

 

 

 

 

 
(104.6
)
 
(104.6
)
March 31, 2019
 
$
0.6

 
$
804.4

 
$
(106.9
)
 
$
3,652.6

 
$
(1,210.3
)
 
$
619.9

 
$
3,760.3

Three Months Ended March 31, 2020
 
Total Stockholders’ Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2019
 
$
0.6

 
$
707.2

 
$
(108.8
)
 
$
3,819.8

 
$
(1,481.3
)
 
$
561.6

 
$
3,499.1

Net income (loss)
 

 

 

 
(15.6
)
 

 
55.6

 
40.0

Other comprehensive loss
 

 

 
(37.7
)
 

 

 
(16.2
)
 
(53.9
)
Share-based compensation
 

 
8.2

 

 

 

 

 
8.2

Common stock issued under share-based incentive plans
 

 
(33.4
)
 

 

 
27.0

 

 
(6.4
)
Share repurchases
 

 

 

 

 
(69.6
)
 

 
(69.6
)
Dividends ($0.32 per share)
 

 

 

 
(15.1
)
 

 

 
(15.1
)
Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
2.8

 

 

 

 
13.8

 
16.6

Issuances
 

 
(1.8
)
 

 

 

 
13.9

 
12.1

Repurchases
 

 
34.7

 

 

 

 

 
34.7

Changes in redemption value of Redeemable non-controlling interests
 

 
143.0

 

 

 

 

 
143.0

Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(5.1
)
 
(5.1
)
Capital contributions and other
 

 

 

 

 

 
4.9

 
4.9

Distributions to non-controlling interests
 

 

 

 

 

 
(99.6
)
 
(99.6
)
March 31, 2020
 
$
0.6

 
$
860.7

 
$
(146.5
)
 
$
3,789.1

 
$
(1,523.9
)
 
$
528.9

 
$
3,508.9

The accompanying notes are an integral part of the Consolidated Financial Statements.

5


AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
For the Three Months Ended March 31,
 
2019
 
2020
Cash flow from (used in) operating activities:
 
 
 
Net income (loss)
$
(133.0
)
 
$
40.0

Adjustments to reconcile Net income (loss) to cash flow from (used in) operating activities:
 
 
 
Intangible amortization and impairments
29.6

 
20.6

Depreciation and other amortization
5.2

 
5.1

Deferred income tax benefit
(86.0
)
 
(19.2
)
Equity method loss (net)
358.1

 
113.2

Distributions of earnings received from equity method investments
96.5

 
124.4

Share-based compensation and Affiliate equity expense
19.5

 
24.8

Other non-cash items
(4.4
)
 
9.0

Changes in assets and liabilities:
 
 
 
Purchases of securities by consolidated Affiliate sponsored investment products

 
(26.0
)
Sales of securities by consolidated Affiliate sponsored investment products
1.5

 
25.2

Increase in receivables
(131.3
)
 
(32.7
)
(Increase) decrease in other assets
(0.7
)
 
10.8

Decrease in payables, accrued liabilities and other liabilities
(172.9
)
 
(209.6
)
Cash flow from (used in) operating activities
(17.9
)
 
85.6

Cash flow from (used in) investing activities:
 
 
 
Investments in Affiliates
(34.1
)
 
(0.7
)
Divestments of Affiliates
28.8

 

Purchase of fixed assets
(3.0
)
 
(2.6
)
Purchase of investment securities
(8.7
)
 
(11.9
)
Sale of investment securities
16.9

 
31.1

Cash flow from (used) in investing activities
(0.1
)
 
15.9

Cash flow from (used in) financing activities:
 
 
 
Borrowings of debt
336.3

 
250.0

Repayments of debt
(385.0
)
 

Repurchases of common stock (net)
(71.0
)
 
(80.2
)
Dividends paid on common stock
(17.0
)
 
(15.3
)
Distributions to non-controlling interests
(104.6
)
 
(99.6
)
Affiliate equity repurchases and issuances (net)
(6.0
)
 
(84.4
)
Other financing items
3.6

 
(8.2
)
Cash flow used in financing activities
(243.7
)
 
(37.7
)
Effect of foreign currency exchange rate changes on cash and cash equivalents
4.0

 
(11.2
)
Net increase (decrease) in cash and cash equivalents
(257.7
)
 
52.6

Cash and cash equivalents at beginning of period
565.5

 
539.6

Effect of deconsolidation of Affiliates and Affiliate sponsored investment products
(2.6
)
 

Cash and cash equivalents at end of period
$
305.2

 
$
592.2

The accompanying notes are an integral part of the Consolidated Financial Statements.

6

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1.
Basis of Presentation and Use of Estimates
The Consolidated Financial Statements of Affiliated Managers Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for full year financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair statement of the Company’s interim financial position and results of operations have been included and all intercompany balances and transactions have been eliminated. Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 includes additional information about its operations, financial position and accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
All amounts in these notes, except per share data in the text and tables herein, are stated in millions unless otherwise indicated.
2.
Accounting Standards and Policies
Recently Adopted Accounting Standards

Effective January 1, 2020, the Company adopted the following new Accounting Standard Updates (“ASUs”):

ASU 2016-13, Measurement of Credit Losses on Financial Instruments

The adoption of this standard did not have a significant impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In December 2019, the FASB, issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The standard is effective for interim and annual periods beginning after December 15, 2020 for the Company and its consolidated Affiliates and for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022, for the Company’s Affiliates accounted for under the equity method. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
3.
Investments in Marketable Securities
The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of Investments in marketable securities:
 
December 31,
2019
 
March 31,
2020
Cost
$
57.9

 
$
61.6

Unrealized gains
2.1

 
0.4

Unrealized losses
(0.6
)
 
(7.4
)
Fair value
$
59.4

 
$
54.6


For the three months ended March 31, 2019 and 2020, the Company received proceeds of $15.1 million and $26.2 million, respectively, from the sale of investments in marketable securities and recorded net gains (losses) of $0.5 million and $(1.0) million, respectively.
As of December 31, 2019 and March 31, 2020, Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $38.1 million and $33.2 million, respectively.
4.
Investments in Affiliates and Affiliate Sponsored Investment Products

7

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards and significant terms of each of its Affiliates and other investments to determine if an investment is considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”). An entity is a VRE when the total equity investment at risk is sufficient to enable the entity to finance its activities independently, and when the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact its economic performance. An entity is a VIE when it lacks one or more of the characteristics of a VRE, which, for the Company, are Affiliate investments structured as partnerships (or similar entities) where the Company is a limited partner and lacks substantive kick-out or substantive participation rights over the general partner. Assessing whether an entity is a VRE or VIE involves judgment. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a VRE or a VIE.

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the entity. When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the entity under the equity method. Other investments in which the Company does not have rights to exercise significant influence are recorded at fair value, with changes in fair value reflected within Investment and other income on the Consolidated Statements of Income.

The Company consolidates VIEs when it is the primary beneficiary of the entity, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Substantially all of the Company’s consolidated Affiliates considered VIEs are controlled because the Company holds a majority of the voting interests or it is the managing member or general partner. Furthermore, an Affiliate’s assets can be used for purposes other than the settlement of the respective Affiliate’s obligations. The Company applies the equity method of accounting to VIEs where the Company is not the primary beneficiary, but has the ability to exercise significant influence over operating and financial matters of the VIE.

Investments in Affiliates

Substantially all of the Company’s Affiliates are considered VIEs and are either consolidated or accounted for under the equity method. A limited number of the Company’s Affiliates are considered VREs and most of these are accounted for under the equity method.

When an Affiliate is consolidated, the portion of the earnings attributable to Affiliate management’s equity ownership is included in Net income (non-controlling interests) in the Consolidated Statements of Income. Undistributed earnings attributable to Affiliate managements’ equity ownership, along with their share of any tangible or intangible net assets, are presented within Non-controlling interests on the Consolidated Balance Sheets. Affiliate equity interests where the holder has certain rights to demand settlement are presented, at their current redemption values, as Redeemable non-controlling interests on the Consolidated Balance Sheets. The Company periodically issues, sells and repurchases the equity of its consolidated Affiliates. Because these transactions take place between entities that are under common control, any gains or losses attributable to these transactions are required to be included within Additional paid-in capital in the Consolidated Balance Sheets, net of any related income tax effects in the period the transaction occurs.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method loss (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets. Deferred taxes recorded on intangible assets upon acquisition of an Affiliate accounted for under the equity method are presented on a gross basis within Equity method investments in Affiliates (net) and Deferred income tax liability (net) in the Consolidated Balance Sheets. The Company’s share of income taxes incurred directly by Affiliates accounted for under the equity method is recorded within Income tax expense in the Consolidated Statements of Income.
The Company periodically performs assessments to determine if fair value may have declined below related carrying value for its Affiliates accounted for under the equity method for a period that the Company considers to be other-than temporary. Where the Company believes that such declines may have occurred, the Company determines the amount of impairment using valuation methods, such as discounted cash flow techniques. Impairments are recorded as an expense in Equity method loss (net) to reduce the carrying value of the Affiliate to its fair value.
The unconsolidated assets, net of liabilities and non-controlling interests of Affiliates accounted for under the equity method considered VIEs, and the Company’s carrying value and maximum exposure to loss, were as follows:

8

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



 
December 31, 2019
 
March 31, 2020
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
Affiliates accounted for under the equity method
$
1,141.4

 
$
1,843.0

 
$
1,127.8

 
$
1,838.3



As of December 31, 2019 and March 31, 2020, the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $2,195.6 million and $2,038.7 million, respectively, including Affiliates accounted for under the equity method considered VREs of $352.6 million and $200.4 million, respectively.

Affiliate Sponsored Investment Products

The Company’s Affiliates sponsor various investment products where they also act as the investment adviser. These investment products are typically owned primarily by third-party investors; however, certain products are funded with general partner and seed capital investments from the Company and its Affiliates.

Third-party investors in Affiliate sponsored investment products are generally entitled to substantially all of the economics of these products, except for the asset and performance based fees earned by the Company’s Affiliates or any gains or losses attributable to the Company’s or its Affiliates’ investments in these products. As a result, the Company does not generally consolidate these products unless the Company’s or its consolidated Affiliate’s interest in the product is considered substantial. When the Company’s or its consolidated Affiliates’ interests are considered substantial and the products are consolidated, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values reflected in Investment and other income. Purchases and sales of securities are presented within purchases and sales by consolidated Affiliate sponsored investment products in the Consolidated Statements of Cash Flows and the third-party investors’ interests are recorded in Redeemable non-controlling interests. When the Company or its consolidated Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated with only the Company’s or its consolidated Affiliate’s investment in the product reported from the date of deconsolidation.

The Company’s carrying value, and maximum exposure to loss from unconsolidated Affiliate sponsored investment products, is its or its consolidated Affiliate’s interest in the unconsolidated net assets of the respective products. The net assets of unconsolidated VIEs attributable to Affiliate sponsored investment products, and the Company’s carrying value and maximum exposure to loss, were as follows:
 
December 31, 2019
 
March 31, 2020

Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
Affiliate sponsored investment products
$
2,282.1

 
$
0.9

 
$
2,161.2

 
$
0.9


5.
Debt
The following table summarizes the Company’s Debt:
 
December 31,
2019
 
March 31,
2020
Senior bank debt
$
449.7

 
$
699.7

Senior notes
743.8

 
744.1

Junior convertible securities
310.6

 
311.4

Junior subordinated notes
289.7

 
289.7

Debt
$
1,793.8

 
$
2,044.9



9

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The Company’s senior notes, junior convertible securities and junior subordinated notes are carried at amortized cost. Unamortized discounts and debt issuance costs are presented in the Consolidated Balance Sheets as an adjustment to the carrying value of the associated debt.

Senior Bank Debt

The Company has a $1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $450.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”). The revolver matures on January 18, 2024, and the term loan matures on January 18, 2023. Subject to certain conditions, the Company may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. The Company pays interest on any outstanding obligations under the credit facilities at specified rates, based either on an applicable LIBOR or prime rate, plus a marginal rate determined based on its credit rating. For the three months ended March 31, 2020, the interest rate for substantially all of the Company’s borrowings under the credit facilities was LIBOR plus 1.1% for the revolver and LIBOR plus 0.875% for the term loan. As of December 31, 2019 and March 31, 2020, the Company had no outstanding borrowings and $250.0 million of outstanding borrowings under the revolver, respectively.
6.
Derivative Financial Instruments
The Company and its Affiliates may use derivative financial instruments to offset exposure to changes in interest rates, foreign currency exchange rates and markets.

In 2018, the Company entered into two separate pound sterling-denominated forward foreign currency contracts (the “forward contracts”) with a large financial institution (the “counterparty”). Concurrent to entering into each of the forward contracts, the Company also entered into two separate collar contracts (the “collar contracts”) with the same counterparty for the same notional amounts and expiration dates as each of the forward contracts. The combinations of the forward contracts and the collar contracts were designated as net investment hedges against fluctuations in foreign currency exchange rates on certain of the Company’s investments in Affiliates with the pound sterling as their functional currency.

In March 2020, the Company terminated the forward contracts and the corresponding collar contracts, and upon settlement received net proceeds of $24.9 million. The net proceeds from the termination of the contracts are presented within sale of investment securities in the Consolidated Statements of Cash Flows. The Company’s forward contracts and collar contracts with the counterparty were governed by an International Swaps and Derivative Association Master Agreement, which provided for legally enforceable rights to set-off. The terms of the contracts also required the Company and the counterparty to post cash collateral in certain circumstances throughout the duration of the contracts. As of December 31, 2019, the Company held $8.7 million of cash collateral from the counterparty, and the counterparty held no cash collateral from the Company.

In March 2020, the Company entered into an interest rate swap contract (the “interest rate swap”) with a financial institution (the “swap counterparty”), which will expire in March 2023. The interest rate swap, which is designated as a cash flow hedge, is used to exchange the Company’s LIBOR-based interest payments for fixed rate payments. The Company receives payments based on a one month LIBOR and makes payments based on an annual fixed rate of 0.5135% on a notional amount of $250.0 million. The terms of the contract also require the Company and the swap counterparty to post cash collateral in certain circumstances throughout the duration of the contract. As of March 31, 2020, the Company held no cash collateral from the swap counterparty, and the swap counterparty held $0.6 million of cash collateral from the Company.

Certain of the Company’s Affiliates use forward foreign currency contracts to hedge the risk of foreign exchange rate movements, which were not significant for the three months ended March 31, 2019 and 2020.

Changes in the fair values of cash flow hedges are reported in Change in net realized and unrealized gain (loss) on derivative financial instruments in the Consolidated Statements of Comprehensive Income. Upon termination of the interest rate swap or the repayment of the Company’s outstanding LIBOR-based borrowings, any gain or loss recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets will be reclassified into earnings. Changes in the fair values of the effective net investment hedges are reported in Foreign currency translation gain (loss) in the Consolidated Statements of Comprehensive Income. Upon the sale or liquidation of the underlying investment, any gain or loss remaining in Accumulated other comprehensive loss related to the forward and collar contracts will be reclassified to earnings. The Company assesses hedge effectiveness on a quarterly basis.


10

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The following table summarizes the Company’s and its Affiliates’ derivative financial instruments measured at fair value on a recurring basis:
 
 
December 31, 2019
 
March 31, 2020
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Forward contracts
 
$
23.8

 
$
(1.0
)
 
$
1.2

 
$
(0.4
)
Put options
 

 
(31.0
)
 

 
 

Call options
 
15.1

 

 

 
 

Interest rate swap
 

 

 

 
 
(0.8
)
Total
 
$
38.9

 
$
(32.0
)
 
$
1.2

 
$
(1.2
)


The forward and collar contracts included a set-off right and were, therefore presented on a net basis in Other assets and were $5.6 million as of December 31, 2019. The Company and certain of its consolidated Affiliates have also entered into contracts that do not include set-off rights and are, therefore presented on a gross basis in Other assets and Other liabilities and were $2.2 million and $1.0 million, respectively, as of December 31, 2019 and $1.2 million and $1.2 million, respectively, as of March 31, 2020.

The following tables summarize the effects of derivative financial instruments on the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Income:
 
 
For the Three Months Ended March 31,
 
 
2019
 
2020
 
 
Gain (Loss) Recognized in Other Comprehensive Income
 
Loss Reclassified from Accumulated Other Comprehensive Loss into Earnings
 
Gain Recognized in Earnings from Excluded Components(1)
 
Gain (Loss) Recognized in Other Comprehensive Income
 
Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings
 
Gain Recognized in Earnings from Excluded Components(1)
Forward contracts
 
$
(16.8
)
 
$
(0.1
)
 
$
3.5

 
$
65.0

 
$
0.1

 
$
2.8

Put options
 
17.9

 

 

 
(47.7
)
 
 

 

Call options
 
(7.5
)
 

 

 
(1.3
)
 
 

 

Interest rate swap
 

 

 

 
(0.8
)
 
 

 

Total
 
$
(6.4
)
 
$
(0.1
)
 
$
3.5

 
$
15.2

 
$
0.1

 
$
2.8

___________________________

(1) 
The excluded components of the forward contracts were recognized in earnings on a straight-line basis over the respective period of the contracts as a reduction to Interest expense on the Consolidated Statements of Income.
7.
Commitments and Contingencies
From time to time, the Company and its Affiliates may be subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Any such matters are subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals, as necessary, for matters for which the outcome is probable and the amount of the liability can be reasonably estimated.
The Company has committed to co-invest in certain Affiliate sponsored investment products. As of March 31, 2020, these unfunded commitments were $127.0 million and may be called in future periods.
As of March 31, 2020, the Company was contingently liable to make payments related to the achievement of specified financial targets by certain of its Affiliates accounted for under the equity method, of which $150.0 million may become payable in 2021, $77.5 million in 2022 and $62.5 million from 2023 through 2025. As of March 31, 2020, the Company expected to make payments of approximately $48 million. The Company expects to make no payments in 2020. In the event certain financial targets are not met, the Company may receive payments of up to $12.5 million and also has the option to reduce its ownership interest and receive an incremental $25.0 million.

11

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Affiliate equity interests provide holders with a conditional right to put their interests to the Company over time. See Note 14. In connection with one of the Company’s investments in an Affiliate, a minority owner has the right to elect to sell a portion of its ownership interest in the Affiliate to the Company annually. If the minority owner sells its interest to the Company, then the Company will continue to account for the Affiliate under the equity method. In the fourth quarter of 2019, the Company was notified by the minority owner that it had elected to sell a 5% interest in the Affiliate to the Company. In the three months ended March 31, 2020, with the consent of the Company, the minority owner rescinded this notice. As of March 31, 2020, the minority owner maintains a 14% ownership interest in the Affiliate.
The Company and certain of its consolidated Affiliates operate under regulatory authorities that require the maintenance of minimum financial or capital requirements. Management is not aware of any significant violations of such requirements.
8.
Fair Value Measurements
The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:
 
 
 
Fair Value Measurements
 
December 31,
2019
 
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Financial Assets
 
 
 
 
 
 
 
Investments in marketable securities
$
59.4

 
$
24.4

 
$
35.0

 
$

Derivative financial instruments(1)
7.9

 

 
7.9

 

Financial Liabilities(2)
 
 
 
 
 
 
 
Affiliate equity repurchase obligations
$
19.8

 
$

 
$

 
$
19.8

Derivative financial instruments
1.0

 

 
1.0

 

 
 
 
Fair Value Measurements
 
March 31,
2020
 
 
 
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
Significant Other Observable Inputs (Level 2)
 
Significant Unobservable Inputs (Level 3)
Financial Assets
 
 
 
 
 
 
 
Investments in marketable securities
$
54.6

 
$
23.9

 
$
30.7

 
$

Derivative financial instruments(1)
1.2

 

 
1.2

 

Financial Liabilities(2)
 
 
 
 
 
 
 
Affiliate equity repurchase obligations
$
115.1

 
$

 
$

 
$
115.1

Derivative financial instruments
1.2

 

 
1.2

 

__________________________
(1) 
Amounts are presented within Other assets.

(2) 
Amounts are presented within Other liabilities.
Level 3 Financial Assets and Liabilities
The following tables present the changes in level 3 liabilities:

12

AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


 
For the Three Months Ended March 31,
 
2019
 
2020
 
Contingent Payment Arrangements
 
Affiliate Equity Repurchase Obligations
 
Contingent Payment Arrangements
 
Affiliate Equity Repurchase Obligations
Balance, beginning of period
$
1.9

 
$
36.2

 
$

 
$
19.8

Net realized and unrealized losses(1)
0.1