Business Context and Reporting Period
Company: Affiliated Managers Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: December 7, 2009
Subject: Adoption of new accounting standards in 2009 and retrospective updates to previously reported financial information for the years ended December 31, 2006, 2007, and 2008.
Key Financial Metrics and Adjustments
This filing does not report current period revenue, profit, or cash flow. Instead, it details specific retrospective adjustments to historical financial statements due to the adoption of new accounting standards:
- Convertible Debt (APB 14-1): Incremental non-cash interest expense recognized of approximately $7.4 million (2006), $7.5 million (2007), and $7.5 million (2008).
- Debt Repurchase Gain (APB 14-1): The net gain on the 2008 repurchase of junior convertible trust preferred securities was reduced to $26.5 million.
- Acquisition Fees (FAS 141R): Retrospective expensing of acquisition-related professional fees reduced Net income by $0.7 million in 2007 and $5.9 million in 2008.
- Non-Controlling Interests (FAS 160): Reclassification of minority interest from a reduction of net income to an inclusion within Net income; balance sheet reclassification to Equity; and cash flow reclassification to financing activities.
- Redeemable Securities (Topic D-98): Presentation of Affiliate equity subject to mandatory redemption as "Redeemable non-controlling interests" on the balance sheet.
Material Changes Versus Prior Period
The material changes are strictly accounting in nature, resulting from the retrospective application of FASB Staff Position APB 14-1, FAS No. 141R, FAS No. 160, and EITF Topic D-98. These changes alter the presentation and calculation of historical net income, interest expense, and equity components for 2006 through 2008 but do not reflect changes in the company's underlying operational performance or cash generation during those periods.
Guidance, Outlook, and Risks
Management Commentary: The filing explicitly states it does not update Management's Discussion and Analysis (MD&A) for any events, risks, or trends occurring after December 31, 2008. Investors are directed to the Form 10-Q for the quarter ended September 30, 2009, for more current information.
Updated Documents: Items 6 (Selected Financial Data), 7 (MD&A), and 8 (Financial Statements) of the 2008 Form 10-K have been updated and are included as Exhibit 99.1. The Calculation of Ratio of Earnings to Fixed Charges (Exhibit 12.1) has also been updated.
Investor Verification Checklist
- Review Exhibit 99.1 for the updated 2008 Form 10-K financial statements reflecting the new accounting standards.
- Verify the impact of the $7.5 million annual non-cash interest expense on historical earnings per share calculations.
- Confirm the reclassification of non-controlling interests in the balance sheet and cash flow statement.
- Consult the most recent Form 10-Q (ended September 30, 2009) for operational updates and current financial condition not covered in this retrospective filing.