(Mark One) | ||
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-3218510 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Item 1. | Financial Statements |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Revenue | $ | 429.6 | $ | 541.0 | $ | 847.2 | $ | 1,043.3 | |||||||
Operating expenses: | |||||||||||||||
Compensation and related expenses | 188.1 | 235.4 | 369.2 | 450.0 | |||||||||||
Selling, general and administrative | 88.8 | 99.5 | 173.8 | 191.8 | |||||||||||
Intangible amortization and impairments | 114.7 | 32.6 | 145.1 | 65.5 | |||||||||||
Depreciation and other amortization | 3.6 | 3.3 | 7.1 | 6.9 | |||||||||||
Other operating expenses | 9.4 | 8.8 | 18.2 | 17.2 | |||||||||||
404.6 | 379.6 | 713.4 | 731.4 | ||||||||||||
Operating income | 25.0 | 161.4 | 133.8 | 311.9 | |||||||||||
Income from equity method investments | 13.4 | 36.2 | 27.9 | 86.9 | |||||||||||
Other non-operating (income) and expenses: | |||||||||||||||
Investment and other income | (3.0 | ) | (7.5 | ) | (13.4 | ) | (12.0 | ) | |||||||
Interest expense | 18.5 | 24.3 | 37.1 | 48.5 | |||||||||||
Imputed interest and contingent payment arrangements | (40.0 | ) | 8.4 | (42.5 | ) | 22.6 | |||||||||
(24.5 | ) | 25.2 | (18.8 | ) | 59.1 | ||||||||||
Income before income taxes | 62.9 | 172.4 | 180.5 | 339.7 | |||||||||||
Income taxes | 2.0 | 38.2 | 26.6 | 75.7 | |||||||||||
Net income | 60.9 | 134.2 | 153.9 | 264.0 | |||||||||||
Net income (non-controlling interests) | (54.3 | ) | (69.5 | ) | (109.9 | ) | (136.9 | ) | |||||||
Net income (controlling interest) | $ | 6.6 | $ | 64.7 | $ | 44.0 | $ | 127.1 | |||||||
Average shares outstanding—basic | 51.4 | 53.1 | 51.5 | 52.9 | |||||||||||
Average shares outstanding—diluted | 52.7 | 54.6 | 52.8 | 54.4 | |||||||||||
Earnings per share—basic | $ | 0.13 | $ | 1.22 | $ | 0.85 | $ | 2.40 | |||||||
Earnings per share—diluted | $ | 0.12 | $ | 1.18 | $ | 0.83 | $ | 2.33 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Net income | $ | 60.9 | $ | 134.2 | $ | 153.9 | $ | 264.0 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustment | (9.9 | ) | (9.7 | ) | 4.5 | (32.5 | ) | ||||||||
Change in net realized and unrealized gain (loss) on derivative securities, net of tax | (0.5 | ) | 0.6 | (0.6 | ) | 0.8 | |||||||||
Change in net unrealized loss on investment securities, net of tax | (11.4 | ) | (11.3 | ) | (2.3 | ) | (10.2 | ) | |||||||
Other comprehensive income (loss) | (21.8 | ) | (20.4 | ) | 1.6 | (41.9 | ) | ||||||||
Comprehensive income | 39.1 | 113.8 | 155.5 | 222.1 | |||||||||||
Comprehensive income (non-controlling interests) | (54.1 | ) | (68.5 | ) | (111.4 | ) | (135.5 | ) | |||||||
Comprehensive income (loss) (controlling interest) | $ | (15.0 | ) | $ | 45.3 | $ | 44.1 | $ | 86.6 |
December 31, 2012 | June 30, 2013 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 430.4 | $ | 413.8 | |||
Investment advisory fees receivable | 255.5 | 275.4 | |||||
Investments in marketable securities | 128.9 | 120.1 | |||||
Unsettled fund shares receivable | 40.1 | 104.3 | |||||
Prepaid expenses and other current assets | 57.4 | 59.3 | |||||
Total current assets | 912.3 | 972.9 | |||||
Fixed assets, net | 81.5 | 84.1 | |||||
Equity method investments in Affiliates | 1,031.3 | 964.6 | |||||
Acquired client relationships, net | 1,585.5 | 1,502.3 | |||||
Goodwill | 2,355.2 | 2,334.7 | |||||
Other assets | 221.3 | 214.1 | |||||
Total assets | $ | 6,187.1 | $ | 6,072.7 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 324.7 | $ | 287.0 | |||
Unsettled fund shares payable | 39.8 | 107.1 | |||||
Payables to related party | 11.3 | 29.6 | |||||
Total current liabilities | 375.8 | 423.7 | |||||
Senior bank debt | 325.0 | 100.0 | |||||
Senior notes | 340.0 | 340.0 | |||||
Senior convertible securities | 450.1 | 404.8 | |||||
Junior convertible trust preferred securities | 515.5 | 517.1 | |||||
Deferred income taxes | 497.1 | 505.8 | |||||
Other long-term liabilities | 164.7 | 169.1 | |||||
Total liabilities | 2,668.2 | 2,460.5 | |||||
Redeemable non-controlling interests | 477.5 | 519.8 | |||||
Equity: | |||||||
Common stock | 0.5 | 0.5 | |||||
Additional paid-in capital | 868.5 | 781.5 | |||||
Accumulated other comprehensive income | 79.1 | 38.6 | |||||
Retained earnings | 1,350.7 | 1,477.8 | |||||
2,298.8 | 2,298.4 | ||||||
Less treasury stock, at cost | (214.6 | ) | (143.6 | ) | |||
Total stockholders' equity | 2,084.2 | 2,154.8 | |||||
Non-controlling interests | 957.2 | 937.6 | |||||
Total equity | 3,041.4 | 3,092.4 | |||||
Total liabilities and equity | $ | 6,187.1 | $ | 6,072.7 |
Total Stockholders' Equity | |||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock at Cost | Non- controlling interests | Total Equity | |||||||||||||||||||||
December 31, 2012 | $ | 0.5 | $ | 868.5 | $ | 79.1 | $ | 1,350.7 | $ | (214.6 | ) | $ | 957.2 | $ | 3,041.4 | ||||||||||||
Stock issued under option and other incentive plans | — | (36.5 | ) | — | — | 71.0 | — | 34.5 | |||||||||||||||||||
Tax benefit of option exercises | — | 11.0 | — | — | — | — | 11.0 | ||||||||||||||||||||
Changes in the value of Affiliate equity and other | — | (71.6 | ) | — | — | — | 24.2 | (47.4 | ) | ||||||||||||||||||
Share-based payment arrangements | — | 20.1 | — | — | — | — | 20.1 | ||||||||||||||||||||
Repurchase of senior convertible securities | — | (10.0 | ) | — | — | — | — | (10.0 | ) | ||||||||||||||||||
Distributions to non-controlling interests | — | — | — | — | — | (179.3 | ) | (179.3 | ) | ||||||||||||||||||
Net income | — | — | — | 127.1 | — | 136.9 | 264.0 | ||||||||||||||||||||
Other comprehensive loss | — | — | (40.5 | ) | — | — | (1.4 | ) | (41.9 | ) | |||||||||||||||||
June 30, 2013 | $ | 0.5 | $ | 781.5 | $ | 38.6 | $ | 1,477.8 | $ | (143.6 | ) | $ | 937.6 | $ | 3,092.4 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Cash flow from operating activities: | |||||||||||||||
Net income | $ | 60.9 | $ | 134.2 | $ | 153.9 | $ | 264.0 | |||||||
Adjustments to reconcile Net income to net cash flow from operating activities: | |||||||||||||||
Intangible amortization and impairments | 114.7 | 32.6 | 145.1 | 65.5 | |||||||||||
Amortization of issuance costs | 1.8 | 3.2 | 3.7 | 5.7 | |||||||||||
Depreciation and other amortization | 3.6 | 3.3 | 7.1 | 6.9 | |||||||||||
Deferred income tax provision | (15.5 | ) | 16.1 | (2.0 | ) | 28.8 | |||||||||
Imputed interest and contingent payment arrangements | (40.0 | ) | 8.4 | (42.5 | ) | 22.6 | |||||||||
Income from equity method investments, net of amortization | (13.4 | ) | (36.2 | ) | (27.9 | ) | (86.9 | ) | |||||||
Distributions received from equity method investments | 21.8 | 52.5 | 58.6 | 146.4 | |||||||||||
Tax benefit from exercise of stock options | 0.3 | 0.2 | 0.7 | 0.8 | |||||||||||
Share-based compensation | 7.9 | 8.8 | 16.1 | 17.7 | |||||||||||
Affiliate equity expense | 4.9 | 3.2 | 7.1 | 8.4 | |||||||||||
Other adjustments | 5.4 | 7.6 | (0.6 | ) | 8.5 | ||||||||||
Changes in assets and liabilities: | |||||||||||||||
Increase in investment advisory fees receivable | (11.2 | ) | (17.9 | ) | (23.7 | ) | (14.2 | ) | |||||||
(Increase) decrease in prepaids and other current assets | — | 0.8 | (9.1 | ) | (6.7 | ) | |||||||||
(Increase) decrease in other assets | (0.4 | ) | 0.2 | (0.9 | ) | 0.1 | |||||||||
(Increase) decrease in unsettled fund shares receivable | 35.5 | 171.8 | (9.7 | ) | (66.6 | ) | |||||||||
Increase (decrease) in unsettled fund shares payable | (35.3 | ) | (172.4 | ) | 6.3 | 69.6 | |||||||||
Increase (decrease) in accounts payable, accrued liabilities and other long-term liabilities | 42.4 | 46.3 | (46.2 | ) | (5.8 | ) | |||||||||
Cash flow from operating activities | 183.4 | 262.7 | 236.0 | 464.8 | |||||||||||
Cash flow used in investing activities: | |||||||||||||||
Investments in Affiliates | (405.3 | ) | — | (405.3 | ) | — | |||||||||
Purchase of fixed assets | (3.7 | ) | (4.3 | ) | (5.0 | ) | (8.9 | ) | |||||||
Purchase of investment securities | (1.6 | ) | (2.0 | ) | (11.1 | ) | (4.6 | ) | |||||||
Sale of investment securities | 14.6 | 3.5 | 27.5 | 3.7 | |||||||||||
Cash flow used in investing activities | (396.0 | ) | (2.8 | ) | (393.9 | ) | (9.8 | ) | |||||||
Cash flow from (used in) financing activities: | |||||||||||||||
Borrowings of senior bank debt | 195.0 | 100.0 | 195.0 | 120.0 | |||||||||||
Repayments of senior bank debt | — | (150.0 | ) | — | (345.0 | ) | |||||||||
Repurchase of senior convertible securities | — | (69.0 | ) | — | (69.0 | ) | |||||||||
Issuance of common stock | 7.3 | 6.8 | 22.4 | 36.0 | |||||||||||
Repurchase of common stock | (28.2 | ) | — | (60.9 | ) | — | |||||||||
Issuance costs | — | (7.2 | ) | — | (7.2 | ) | |||||||||
Excess tax benefit from exercise of stock options | 1.3 | 2.7 | 4.8 | 10.2 | |||||||||||
Note and contingent payments | (0.2 | ) | 1.3 | (0.5 | ) | (36.6 | ) | ||||||||
Distributions to non-controlling interests | (37.6 | ) | (54.0 | ) | (119.6 | ) | (179.3 | ) | |||||||
Affiliate equity issuances and repurchases | (6.1 | ) | (11.0 | ) | (23.0 | ) | 4.9 | ||||||||
Cash flow from (used in) financing activities | 131.5 | (180.4 | ) | 18.2 | (466.0 | ) | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (1.6 | ) | (0.7 | ) | 1.2 | (5.6 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | (82.7 | ) | 78.8 | (138.5 | ) | (16.6 | ) | ||||||||
Cash and cash equivalents at beginning of period | 393.7 | 335.0 | 449.5 | 430.4 | |||||||||||
Cash and cash equivalents at end of period | $ | 311.0 | $ | 413.8 | $ | 311.0 | $ | 413.8 | |||||||
Supplemental disclosure of non-cash financing activities: | |||||||||||||||
Notes received for Affiliate equity sales | $ | 2.0 | $ | — | $ | 3.0 | $ | — | |||||||
Payables recorded for Affiliate equity purchases | 2.4 | 12.2 | 13.6 | 21.2 | |||||||||||
Payables recorded under contingent payment arrangements | 24.8 | — | 24.8 | — |
1. | Basis of Presentation |
2. | Recent Accounting Developments |
3. | Investments in Marketable Securities |
Available-for-Sale | Trading | ||||||||||||||
December 31, 2012 | June 30, 2013 | December 31, 2012 | June 30, 2013 | ||||||||||||
Cost | $ | 103.2 | $ | 102.8 | $ | 10.3 | $ | 18.1 | |||||||
Unrealized Gains | 15.3 | 4.1 | 6.5 | 2.4 | |||||||||||
Unrealized Losses | (3.2 | ) | (7.3 | ) | (3.2 | ) | — | ||||||||
Fair Value | $ | 115.3 | $ | 99.6 | $ | 13.6 | $ | 20.5 |
Available-for-Sale | Trading | ||||||||||||||||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||
2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | ||||||||||||||||||||||||
Gains | $ | — | $ | 1.9 | $ | — | $ | 2.1 | $ | 0.1 | $ | 0.3 | $ | 0.6 | $ | 0.4 | |||||||||||||||
Losses | — | — | — | — | — | — | (0.3 | ) | — | ||||||||||||||||||||||
Net realized gains | $ | — | $ | 1.9 | $ | — | $ | 2.1 | $ | 0.1 | $ | 0.3 | $ | 0.3 | $ | 0.4 |
4. | Variable Interest Entities |
December 31, 2012 | June 30, 2013 | ||||||||||||||
Category of Investment | Unconsolidated VIE Net Assets | Carrying Value and Maximum Exposure to Loss | Unconsolidated VIE Net Assets | Carrying Value and Maximum Exposure to Loss | |||||||||||
Sponsored investment funds | $ | 7,186.9 | $ | 0.8 | $ | 7,511.8 | $ | 1.6 | |||||||
Trust preferred vehicles | 9.0 | 9.0 | 9.0 | 9.0 |
5. | Long-Term Debt |
6. | Derivative Financial Instruments |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
Cash Flow Hedges | 2012 | 2013 | 2012 | 2013 | |||||||||||
Interest rate swaps | $ | (0.8 | ) | $ | 1.0 | $ | (0.9 | ) | $ | 1.3 |
Cash Flow Hedges | December 31, 2012 | June 30, 2013 | |||||
Interest rate swaps(1) | $ | (4.0 | ) | $ | (2.7 | ) |
(1) | Presented within Other long-term liabilities. |
7. | Commitments and Contingencies |
8. | Fair Value Measurements |
Fair Value Measurements | |||||||||||||||
December 31, 2012 | |||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Financial Assets | |||||||||||||||
Cash equivalents | $ | 13.5 | $ | 13.5 | $ | — | $ | — | |||||||
Investments in marketable securities(1) | |||||||||||||||
Trading securities | 13.6 | 13.6 | — | — | |||||||||||
Available-for-sale securities | 115.3 | 115.3 | — | — | |||||||||||
Other investments(2) | 155.4 | 15.7 | 20.8 | 118.9 | |||||||||||
Financial Liabilities | |||||||||||||||
Contingent payment arrangements(3) | $ | 31.0 | $ | — | $ | — | $ | 31.0 | |||||||
Obligations to related parties(4) | 77.8 | — | — | 77.8 | |||||||||||
Interest rate derivatives(5) | 4.0 | — | 4.0 | — |
Fair Value Measurements | |||||||||||||||
June 30, 2013 | |||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Financial Assets | |||||||||||||||
Cash equivalents | $ | 20.4 | $ | 20.4 | $ | — | $ | — | |||||||
Investments in marketable securities(1) | |||||||||||||||
Trading securities | 20.5 | 20.5 | — | — | |||||||||||
Available-for-sale securities | 99.6 | 99.6 | — | — | |||||||||||
Other investments(2) | 152.8 | 11.7 | 16.7 | 124.4 | |||||||||||
Financial Liabilities | |||||||||||||||
Contingent payment arrangements(3) | $ | 44.3 | $ | — | $ | — | $ | 44.3 | |||||||
Obligations to related parties(4) | 96.6 | — | — | 96.6 | |||||||||||
Interest rate derivatives(5) | 2.7 | — | 2.7 | — |
(1) | Principally investments in equity securities. |
(2) | Other investments are reported within Prepaid expenses and other current assets and Other assets. |
(3) | Net present value of expected payments under contingent payment arrangements are reported in Accounts payable and accrued liabilities and Other long-term liabilities. |
(4) | Obligations to related parties are presented within Payables to related party and Other long-term liabilities. |
(5) | Interest rate derivatives are presented within Other long-term liabilities. |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||||||
Valuation Techniques | Unobservable Input | Fair Value at December 31, 2012 | Range at December 31, 2012 | Fair Value at June 30, 2013 | Range at June 30, 2013 | ||||||||||
Contingent payment arrangements | Discounted cash flow | Growth rates | $ | 31.0 | 6.0% – 12.0% | $ | 44.3 | 2.4% – 11.0% | |||||||
Discount rates | 14.0% – 18.0% | 14.0% – 18.0% | |||||||||||||
Affiliate equity repurchase obligations | Discounted cash flow | Growth rates | 9.4 | (10.0)% – 17.0% | 27.4 | 4.7% – 9.0% | |||||||||
Discount rates | 15.0% – 24.0% | 15.0% – 17.0% |
Level 3 Financial Assets and Financial Liabilities at Fair Value | |||||||||||||||||||||||||||
Three Months Ended June 30, 2012 | Balance, beginning of period | Net realized gains/losses | Net unrealized gains/losses relating to instruments still held at the reporting date | Purchases and issuances | Settlements and reductions | Net transfers in and/or out of Level 3 | Balance, end of period | ||||||||||||||||||||
Other investments | $ | 107.5 | $ | (0.9 | ) | (1) | $ | 3.6 | (1) | $ | 5.2 | $ | (2.4 | ) | $ | — | $ | 113.0 | |||||||||
Contingent payment arrangements | 83.1 | — | (45.4 | ) | (2) | 24.8 | — | — | 62.5 | ||||||||||||||||||
Obligations to related parties | 77.6 | 0.7 | (3) | (0.2 | ) | (3) | 6.0 | (4.6 | ) | — | 79.5 |
Level 3 Financial Assets and Financial Liabilities at Fair Value | |||||||||||||||||||||||||||
Three Months Ended June 30, 2013 | Balance, beginning of period | Net realized gains/losses | Net unrealized gains/losses relating to instruments still held at the reporting date | Purchases and issuances | Settlements and reductions | Net transfers in and/or out of Level 3 | Balance, end of period | ||||||||||||||||||||
Other investments | $ | 121.9 | $ | (0.9 | ) | (1) | $ | 3.9 | (1) | $ | 2.8 | $ | (3.3 | ) | $ | — | $ | 124.4 | |||||||||
Contingent payment arrangements | 40.5 | — | 3.8 | (2) | — | — | — | 44.3 | |||||||||||||||||||
Obligations to related parties | 90.7 | 0.6 | (3) | 0.6 | (3) | 16.9 | (12.2 | ) | — | 96.6 |
Level 3 Financial Assets and Financial Liabilities at Fair Value | |||||||||||||||||||||||||||
Six Months Ended June 30, 2012 | Balance, beginning of period | Net realized gains/losses | Net unrealized gains/losses relating to instruments still held at the reporting date | Purchases and issuances | Settlements and reductions | Net transfers in and/or out of Level 3 | Balance, end of period | ||||||||||||||||||||
Other investments | $ | 103.4 | $ | (1.7 | ) | (1) | $ | 6.1 | (1) | $ | 10.0 | $ | (4.8 | ) | $ | — | $ | 113.0 | |||||||||
Contingent payment arrangements | 87.1 | — | (49.4 | ) | (2) | 24.8 | — | — | 62.5 | ||||||||||||||||||
Obligations to related parties | 92.0 | 0.5 | (3) | 0.8 | (3) | 20.3 | (34.1 | ) | — | 79.5 |
Level 3 Financial Assets and Financial Liabilities at Fair Value | |||||||||||||||||||||||||||
Six Months Ended June 30, 2013 | Balance, beginning of period | Net realized gains/losses | Net unrealized gains/losses relating to instruments still held at the reporting date | Purchases and issuances | Settlements and reductions | Net transfers in and/or out of Level 3 | Balance, end of period | ||||||||||||||||||||
Other investments | $ | 118.9 | $ | (1.4 | ) | (1) | $ | 6.4 | (1) | $ | 7.7 | $ | (7.2 | ) | $ | — | $ | 124.4 | |||||||||
Contingent payment arrangements | 31.0 | — | 13.3 | (2) | — | — | — | 44.3 | |||||||||||||||||||
Obligations to related parties | 77.8 | 2.0 | (3) | 0.2 | (3) | 32.0 | (15.4 | ) | — | 96.6 |
(1) | Gains and losses on Other investments are recorded in Investment and other income. |
(2) | Accretion and changes to payment estimates under the Company's contingent payment arrangements are recorded in Imputed interest and contingent payment arrangements and foreign currency translation adjustments related to such arrangements are recorded as Other comprehensive income. |
(3) | Gains and losses associated with agreements to repurchase Affiliate equity are recorded in Imputed interest and contingent payment arrangements. Gains and losses related to liabilities offsetting certain investments are recorded in Investment and other income. |
December 31, 2012 | June 30, 2013 | ||||||||||||||
Category of Investment | Fair Value | Unfunded Commitments | Fair Value | Unfunded Commitments | |||||||||||
Private equity fund-of-funds(1) | $ | 118.9 | $ | 75.4 | $ | 124.4 | $ | 71.3 | |||||||
Other funds(2) | 68.9 | — | 73.1 | — | |||||||||||
$ | 187.8 | $ | 75.4 | $ | 197.5 | $ | 71.3 |
(1) | These funds primarily invest in a broad range of private equity funds, as well as making direct investments. Distributions will be received as the underlying assets are liquidated over the life of the funds. |
(2) | These are multi-disciplinary funds that invest across various asset classes and strategies including long/short equity, credit and real estate. Investments are generally redeemable on a daily or quarterly basis. |
9. | Intangible Assets |
10. | Share-Based Compensation |
Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (years) | ||||||
Unexercised options outstanding—December 31, 2012 | 3.8 | $ | 74.04 | |||||
Options exercised | (0.6 | ) | 64.13 | |||||
Unexercised options outstanding—June 30, 2013 | 3.2 | 75.81 | 3.8 | |||||
Exercisable at June 30, 2013 | 2.0 | 70.21 | 3.4 |
Restricted Stock | Weighted Average Grant Date Value | |||||
Unvested units—December 31, 2012 | 0.4 | $ | 84.53 | |||
Units issued | (0.1 | ) | 85.63 | |||
Unvested units—June 30, 2013 | 0.3 | 84.49 |
11. | Affiliate Equity |
Balance, as of December 31, 2012 | $ | 477.5 | |
Issuance of Redeemable non-controlling interests | 3.4 | ||
Repurchase of Redeemable non-controlling interests | (28.7 | ) | |
Changes in redemption value | 67.6 | ||
Balance, as of June 30, 2013 | $ | 519.8 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Net income (controlling interest) | $ | 6.6 | $ | 64.7 | $ | 44.0 | $ | 127.1 | |||||||
Decrease in controlling interest paid-in capital from purchases and sales of Affiliate equity | (2.6 | ) | (19.3 | ) | (8.6 | ) | (24.1 | ) | |||||||
Change from Net income (controlling interest) and net transfers with non-controlling interests | $ | 4.0 | $ | 45.4 | $ | 35.4 | $ | 103.0 |
12. | Income Taxes |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Controlling Interests: | |||||||||||||||
Current tax | $ | 14.3 | $ | 19.8 | $ | 22.3 | $ | 41.0 | |||||||
Intangible-related deferred taxes | (21.5 | ) | 12.3 | (11.6 | ) | 24.3 | |||||||||
Other deferred taxes | 3.3 | 4.0 | 6.2 | 4.8 | |||||||||||
Total controlling interests | (3.9 | ) | 36.1 | 16.9 | 70.1 | ||||||||||
Non-controlling Interests: | |||||||||||||||
Current tax | $ | 3.2 | $ | 2.3 | $ | 6.3 | $ | 5.9 | |||||||
Deferred taxes | 2.7 | (0.2 | ) | 3.4 | (0.3 | ) | |||||||||
Total non-controlling interests | 5.9 | 2.1 | 9.7 | 5.6 | |||||||||||
Provision for income taxes | $ | 2.0 | $ | 38.2 | $ | 26.6 | $ | 75.7 | |||||||
Income before income taxes (controlling interest) | $ | 2.7 | $ | 100.8 | $ | 60.9 | $ | 197.2 | |||||||
Effective tax rate attributable to controlling interests(1) | (144.4 | )% | 35.8 | % | 27.8 | % | 35.5 | % |
(1) | Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest). |
December 31, 2012 | June 30, 2013 | ||||||
Deferred Tax Assets | |||||||
State net operating loss carryforwards | $ | 23.9 | $ | 26.5 | |||
Deferred compensation | 23.9 | 25.6 | |||||
Foreign tax credit carryforwards | 20.1 | 8.9 | |||||
Tax benefit of uncertain tax positions | 17.6 | 16.6 | |||||
Accrued expenses | 6.0 | 10.5 | |||||
Capital loss carryforwards | 1.5 | 1.5 | |||||
Total deferred tax assets | 93.0 | 89.6 | |||||
Valuation allowance | (21.3 | ) | (23.2 | ) | |||
Deferred tax assets, net of valuation allowance | 71.7 | 66.4 | |||||
Deferred Tax Liabilities | |||||||
Intangible asset amortization | $ | (238.2 | ) | $ | (254.9 | ) | |
Convertible securities interest | (189.2 | ) | (191.8 | ) | |||
Non-deductible intangible amortization | (120.1 | ) | (111.7 | ) | |||
Deferred revenue | (18.5 | ) | (11.0 | ) | |||
Other | (2.8 | ) | (2.8 | ) | |||
Total deferred tax liabilities | (568.8 | ) | (572.2 | ) | |||
Net deferred tax liability | $ | (497.1 | ) | $ | (505.8 | ) |
13. | Earnings Per Share |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||||||
Numerator | |||||||||||||||
Net income (controlling interest) | $ | 6.6 | $ | 64.7 | $ | 44.0 | $ | 127.1 | |||||||
Denominator | |||||||||||||||
Average shares outstanding—basic | 51.4 | 53.1 | 51.5 | 52.9 | |||||||||||
Effect of dilutive instruments: | |||||||||||||||
Stock options and restricted stock | 1.3 | 1.2 | 1.3 | 1.2 | |||||||||||
Forward equity sales | — | 0.3 | — | 0.3 | |||||||||||
Average shares outstanding—diluted | 52.7 | 54.6 | 52.8 | 54.4 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||
2012 | 2013 | 2012 | 2013 | ||||||||
Stock options and restricted stock | 1.2 | — | 1.2 | — | |||||||
Senior convertible securities | 3.7 | 3.6 | 3.7 | 3.6 | |||||||
Junior convertible trust preferred securities | 4.1 | 4.1 | 4.1 | 4.1 |
14. | Comprehensive Income |
For the Three Months Ended | |||||||||||||||||||||||
June 30, 2012 | June 30, 2013 | ||||||||||||||||||||||
Pre-Tax | Tax Benefit (Expense) | Net of Tax | Pre-Tax | Tax Benefit (Expense) | Net of Tax | ||||||||||||||||||
Foreign currency translation adjustment | $ | (9.9 | ) | $ | — | $ | (9.9 | ) | $ | (9.7 | ) | $ | — | $ | (9.7 | ) | |||||||
Change in net realized and unrealized gain (loss) on derivative securities | (0.8 | ) | 0.3 | (0.5 | ) | 1.0 | (0.4 | ) | 0.6 | ||||||||||||||
Change in net unrealized loss on investment securities | (18.0 | ) | 6.6 | (11.4 | ) | (16.8 | ) | 5.5 | (11.3 | ) | |||||||||||||
Other comprehensive income (loss) | $ | (28.7 | ) | $ | 6.9 | $ | (21.8 | ) | $ | (25.5 | ) | $ | 5.1 | $ | (20.4 | ) |
For the Six Months Ended | |||||||||||||||||||||||
June 30, 2012 | June 30, 2013 | ||||||||||||||||||||||
Pre-Tax | Tax Benefit (Expense) | Net of Tax | Pre-Tax | Tax Benefit (Expense) | Net of Tax | ||||||||||||||||||
Foreign currency translation adjustment | $ | 4.5 | $ | — | $ | 4.5 | $ | (32.5 | ) | $ | — | $ | (32.5 | ) | |||||||||
Change in net realized and unrealized loss on derivative securities | (0.9 | ) | 0.3 | (0.6 | ) | 1.3 | (0.5 | ) | 0.8 | ||||||||||||||
Change in net unrealized loss on investment securities | (3.7 | ) | 1.4 | (2.3 | ) | (15.7 | ) | 5.5 | (10.2 | ) | |||||||||||||
Other comprehensive income (loss) | $ | (0.1 | ) | $ | 1.7 | $ | 1.6 | $ | (46.9 | ) | $ | 5.0 | $ | (41.9 | ) |
Foreign Currency Translation Adjustment | Realized and Unrealized Losses on Derivative Securities | Unrealized Gain (Loss) on Investment Securities | Total | ||||||||||||
Balance, as of December 31, 2012 | $ | 76.2 | $ | (2.9 | ) | $ | 8.0 | $ | 81.3 | ||||||
Other comprehensive income before reclassifications | (32.5 | ) | 0.8 | (8.7 | ) | (40.4 | ) | ||||||||
Amounts reclassified from other comprehensive income | — | — | (1.5 | ) | (1.5 | ) | |||||||||
Net other comprehensive income | (32.5 | ) | 0.8 | (10.2 | ) | (41.9 | ) | ||||||||
Balance, as of June 30, 2013 | $ | 43.7 | $ | (2.1 | ) | $ | (2.2 | ) | $ | 39.4 |
15. | Segment Information |
Three Months Ended June 30, 2012 | |||||||||||||||
Institutional | Mutual Fund | High Net Worth | Total | ||||||||||||
Revenue | $ | 219.5 | $ | 173.3 | $ | 36.8 | $ | 429.6 | |||||||
Operating expenses: | |||||||||||||||
Depreciation, intangible amortization and impairments | 18.8 | 97.7 | 1.8 | 118.3 | |||||||||||
Other operating expenses | 139.8 | 123.3 | 23.2 | 286.3 | |||||||||||
158.6 | 221.0 | 25.0 | 404.6 | ||||||||||||
Operating income | 60.9 | (47.7 | ) | 11.8 | 25.0 | ||||||||||
Income from equity method investments | 9.3 | 2.8 | 1.3 | 13.4 | |||||||||||
Other non-operating (income) and expenses: | |||||||||||||||
Investment and other income | (3.0 | ) | (0.3 | ) | 0.3 | (3.0 | ) | ||||||||
Interest expense | 10.9 | 5.9 | 1.7 | 18.5 | |||||||||||
Imputed interest and contingent payment arrangements | (17.5 | ) | (22.7 | ) | 0.2 | (40.0 | ) | ||||||||
(9.6 | ) | (17.1 | ) | 2.2 | (24.5 | ) | |||||||||
Income before income taxes | 79.8 | (27.8 | ) | 10.9 | 62.9 | ||||||||||
Income taxes | 18.0 | (18.1 | ) | 2.1 | 2.0 | ||||||||||
Net income | 61.8 | (9.7 | ) | 8.8 | 60.9 | ||||||||||
Net income (non-controlling interests) | (28.4 | ) | (21.6 | ) | (4.3 | ) | (54.3 | ) | |||||||
Net income (loss) (controlling interest) | $ | 33.4 | $ | (31.3 | ) | $ | 4.5 | $ | 6.6 |
Three Months Ended June 30, 2013 | |||||||||||||||
Institutional | Mutual Fund | High Net Worth | Total | ||||||||||||
Revenue | $ | 241.7 | $ | 245.8 | $ | 53.5 | $ | 541.0 | |||||||
Operating expenses: | |||||||||||||||
Depreciation, intangible amortization and impairments | 19.9 | 12.8 | 3.2 | 35.9 | |||||||||||
Other operating expenses | 148.8 | 163.3 | 31.6 | 343.7 | |||||||||||
168.7 | 176.1 | 34.8 | 379.6 | ||||||||||||
Operating income | 73.0 | 69.7 | 18.7 | 161.4 | |||||||||||
Income from equity method investments | 30.0 | 3.9 | 2.3 | 36.2 | |||||||||||
Other non-operating (income) and expenses: | |||||||||||||||
Investment and other income | (3.4 | ) | (3.6 | ) | (0.5 | ) | (7.5 | ) | |||||||
Interest expense | 13.4 | 8.5 | 2.4 | 24.3 | |||||||||||
Imputed interest and contingent payment arrangements | 2.6 | 5.0 | 0.8 | 8.4 | |||||||||||
12.6 | 9.9 | 2.7 | 25.2 | ||||||||||||
Income before income taxes | 90.4 | 63.7 | 18.3 | 172.4 | |||||||||||
Income taxes | 20.7 | 14.0 | 3.5 | 38.2 | |||||||||||
Net income | 69.7 | 49.7 | 14.8 | 134.2 | |||||||||||
Net income (non-controlling interests) | (33.6 | ) | (27.5 | ) | (8.4 | ) | (69.5 | ) | |||||||
Net income (controlling interest) | $ | 36.1 | $ | 22.2 | $ | 6.4 | $ | 64.7 |
Six Months Ended June 30, 2012 | |||||||||||||||
Institutional | Mutual Fund | High Net Worth | Total | ||||||||||||
Revenue | $ | 426.2 | $ | 349.0 | $ | 72.0 | $ | 847.2 | |||||||
Operating expenses: | |||||||||||||||
Depreciation, intangible amortization and impairments | 38.8 | 109.7 | 3.7 | 152.2 | |||||||||||
Other operating expenses | 269.3 | 246.2 | 45.7 | 561.2 | |||||||||||
308.1 | 355.9 | 49.4 | 713.4 | ||||||||||||
Operating income | 118.1 | (6.9 | ) | 22.6 | 133.8 | ||||||||||
Income from equity method investments | 19.8 | 5.4 | 2.7 | 27.9 | |||||||||||
Other non-operating (income) and expenses: | |||||||||||||||
Investment and other income | (8.1 | ) | (4.3 | ) | (1.0 | ) | (13.4 | ) | |||||||
Interest expense | 21.8 | 12.0 | 3.3 | 37.1 | |||||||||||
Imputed interest and contingent payment arrangements | (15.2 | ) | (27.9 | ) | 0.6 | (42.5 | ) | ||||||||
(1.5 | ) | (20.2 | ) | 2.9 | (18.8 | ) | |||||||||
Income before income taxes | 139.4 | 18.7 | 22.4 | 180.5 | |||||||||||
Income taxes | 29.8 | (7.5 | ) | 4.3 | 26.6 | ||||||||||
Net income | 109.6 | 26.2 | 18.1 | 153.9 | |||||||||||
Net income (non-controlling interests) | (57.3 | ) | (42.7 | ) | (9.9 | ) | (109.9 | ) | |||||||
Net income (loss) (controlling interest) | $ | 52.3 | $ | (16.5 | ) | $ | 8.2 | $ | 44.0 |
Six Months Ended June 30, 2013 | |||||||||||||||
Institutional | Mutual Fund | High Net Worth | Total | ||||||||||||
Revenue | $ | 465.4 | $ | 473.7 | $ | 104.2 | $ | 1,043.3 | |||||||
Operating expenses: | |||||||||||||||
Depreciation, intangible amortization and impairments | 39.6 | 26.4 | 6.4 | 72.4 | |||||||||||
Other operating expenses | 289.4 | 308.6 | 61.0 | 659.0 | |||||||||||
329.0 | 335.0 | 67.4 | 731.4 | ||||||||||||
Operating income | 136.4 | 138.7 | 36.8 | 311.9 | |||||||||||
Income from equity method investments | 74.5 | 7.7 | 4.7 | 86.9 | |||||||||||
Other non-operating (income) and expenses: | |||||||||||||||
Investment and other income | (5.9 | ) | (5.4 | ) | (0.7 | ) | (12.0 | ) | |||||||
Interest expense | 27.8 | 16.1 | 4.6 | 48.5 | |||||||||||
Imputed interest and contingent payment arrangements | 6.9 | 14.3 | 1.4 | 22.6 | |||||||||||
28.8 | 25.0 | 5.3 | 59.1 | ||||||||||||
Income before income taxes | 182.1 | 121.4 | 36.2 | 339.7 | |||||||||||
Income taxes | 42.8 | 25.8 | 7.1 | 75.7 | |||||||||||
Net income | 139.3 | 95.6 | 29.1 | 264.0 | |||||||||||
Net income (non-controlling interests) | (64.5 | ) | (56.2 | ) | (16.2 | ) | (136.9 | ) | |||||||
Net income (controlling interest) | $ | 74.8 | $ | 39.4 | $ | 12.9 | $ | 127.1 | |||||||
Total assets as of December 31, 2012 | 3,176.5 | 2,354.8 | 655.8 | 6,187.1 | |||||||||||
Total assets as of June 30, 2013 | 2,919.2 | 2,509.4 | 644.1 | 6,072.7 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
• | our performance is directly affected by changing conditions in global financial markets generally and in the equity markets particularly, and a decline or a lack of sustained growth in these markets may result in decreased advisory fees or performance fees and a corresponding decline (or lack of growth) in our operating results and in the cash flow distributable to us from our Affiliates; |
• | we cannot be certain that we will be successful in finding or investing in additional investment management firms on favorable terms, that we will be able to consummate announced investments in new investment management firms, or that existing and new Affiliates will have favorable operating results; |
• | we may need to raise capital by making long-term or short-term borrowings or by selling shares of our common stock or other securities in order to finance investments in additional investment management firms or additional investments in our existing Affiliates, and we cannot be sure that such capital will be available to us on acceptable terms, if at all; and |
• | those certain other factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012, and in any other filings we make with the Securities and Exchange Commission from time to time. |
• | In the Institutional distribution channel, we manage assets for large institutional investors world-wide including sovereign wealth funds, foundations, endowments, and retirement plans for corporations and municipalities. |
• | In the Mutual Fund distribution channel, we provide advisory or sub-advisory services to mutual funds or other retail-oriented products. These funds are distributed to retail and institutional clients directly and through intermediaries, including independent investment advisors, retirement plan sponsors, broker-dealers, major fund marketplaces and bank trust departments. |
• | Through the High Net Worth distribution channel, we provide advisory services to ultra-high net worth individuals, families and charitable foundations. Direct services to these clients include customized investment counseling, investment management and fiduciary services. |
As of and for the Three Months Ended June 30, | As of and for the Six Months Ended June 30, | ||||||||||||||||||||
(in millions, except as noted and per share data) | 2012 | 2013 | % Change | 2012 | 2013 | % Change | |||||||||||||||
Assets under Management (in billions) | $ | 384.6 | $ | 469.5 | 22 | % | $ | 384.6 | $ | 469.5 | 22 | % | |||||||||
Average assets under Management (in billions) | 353.5 | 468.0 | 32 | % | 352.0 | 458.6 | 30 | % | |||||||||||||
Revenue | 429.6 | 541.0 | 26 | % | 847.2 | 1,043.3 | 23 | % | |||||||||||||
EBITDA(1) | 113.7 | 173.0 | 52 | % | 227.8 | 348.0 | 53 | % | |||||||||||||
Net income (controlling interest)(2) | 6.6 | 64.7 | n.m. (3) | 44.0 | 127.1 | 189 | % | ||||||||||||||
Earnings per share—diluted | 0.12 | 1.18 | n.m. (3) | 0.83 | 2.33 | 181 | % | ||||||||||||||
Economic net income(4) | 87.6 | 121.1 | 38 | % | 171.1 | 245.4 | 43 | % | |||||||||||||
Economic earnings per share(4) | 1.66 | 2.18 | 31 | % | 3.24 | 4.45 | 37 | % |
(1) | EBITDA, including a reconciliation to Cash flow from operations, is discussed in greater detail in "Supplemental Liquidity Measure" on page 31. |
(2) | During the three and six months ended June 30, 2012, we recognized gains related to certain of our contingent payment arrangements and reduced the carrying value of an indefinite-lived intangible asset at one of our Affiliates as described in footnotes 1 and 2 on page 25. |
(3) | Percentage change is not meaningful. |
(4) | 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 29. |
December 31, 2012 | June 30, 2013 | ||||||||||||
(in billions) | Assets under Management | Percentage of Total | Assets under Management | Percentage of Total | |||||||||
Asset Class | |||||||||||||
Equity(1) | $ | 279.5 | 65 | % | $ | 304.7 | 65 | % | |||||
Alternative(2) | 105.1 | 24 | % | 114.0 | 24 | % | |||||||
Fixed Income(3)(4) | 47.2 | 11 | % | 50.8 | 11 | % | |||||||
Total | $ | 431.8 | 100 | % | $ | 469.5 | 100 | % | |||||
Geography(5) | |||||||||||||
Global | $ | 228.0 | 53 | % | $ | 244.2 | 52 | % | |||||
Domestic | 152.5 | 35 | % | 174.5 | 37 | % | |||||||
Emerging Markets | 51.3 | 12 | % | 50.8 | 11 | % | |||||||
Total | $ | 431.8 | 100 | % | $ | 469.5 | 100 | % |
(1) | The Equity asset class includes equity, balanced and asset allocation products. |
(2) | The Alternative asset class includes private equity, multi-strategy, market neutral equity and hedge products. |
(3) | Our Affiliates sponsor money market funds with fund assets representing less than 1% of our assets under management. |
(4) | Investments in sovereign and non-sovereign debt of European countries represent less than 1% of our assets under management. |
(5) | The Geography of a particular investment product describes the general location of its investment holdings. |
(in billions) | Institutional | Mutual Fund | High Net Worth | Total | |||||||||||
March 31, 2013 | $ | 268.5 | $ | 134.7 | $ | 59.3 | $ | 462.5 | |||||||
Client cash inflows | 11.4 | 16.6 | 2.6 | 30.6 | |||||||||||
Client cash outflows | (6.8 | ) | (8.3 | ) | (2.3 | ) | (17.4 | ) | |||||||
Net client cash flows | 4.6 | 8.3 | 0.3 | 13.2 | |||||||||||
Investment performance | (5.0 | ) | (0.2 | ) | (0.4 | ) | (5.6 | ) | |||||||
Other(1) | (0.6 | ) | — | — | (0.6 | ) | |||||||||
June 30, 2013 | $ | 267.5 | $ | 142.8 | $ | 59.2 | $ | 469.5 |
(in billions) | Institutional | Mutual Fund | High Net Worth | Total | |||||||||||
December 31, 2012 | $ | 254.3 | $ | 121.9 | $ | 55.6 | $ | 431.8 | |||||||
Client cash inflows | 22.3 | 28.6 | 5.8 | 56.7 | |||||||||||
Client cash outflows | (11.8 | ) | (15.6 | ) | (4.2 | ) | (31.6 | ) | |||||||
Net client cash flows | 10.5 | 13.0 | 1.6 | 25.1 | |||||||||||
Investment performance | 3.9 | 7.9 | 2.0 | 13.8 | |||||||||||
Other(1) | (1.2 | ) | — | — | (1.2 | ) | |||||||||
June 30, 2013 | $ | 267.5 | $ | 142.8 | $ | 59.2 | $ | 469.5 |
(1) | Includes assets under management attributable to Affiliate product transitions, new investment client transitions and transfers of our interest in certain Affiliated investment management firms, the financial effects of which are not material to our ongoing results. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||
(in millions, except as noted) | 2012 | 2013 | % Change | 2012 | 2013 | % Change | |||||||||||||||
Average Assets under Management (in billions) | |||||||||||||||||||||
Including equity method Affiliates | |||||||||||||||||||||
Institutional | $ | 221.8 | $ | 268.9 | 21 | % | $ | 220.9 | $ | 265.7 | 20 | % | |||||||||
Mutual Fund | 92.0 | 139.6 | 52 | % | 91.5 | 134.4 | 47 | % | |||||||||||||
High Net Worth | 39.7 | 59.5 | 50 | % | 39.6 | 58.5 | 48 | % | |||||||||||||
Total | $ | 353.5 | $ | 468.0 | 32 | % | $ | 352.0 | $ | 458.6 | 30 | % | |||||||||
Consolidated Affiliates | |||||||||||||||||||||
Institutional | $ | 149.7 | $ | 165.8 | 11 | % | $ | 151.2 | $ | 165.5 | 9 | % | |||||||||
Mutual Fund | 75.4 | 111.2 | 47 | % | 75.7 | 107.8 | 42 | % | |||||||||||||
High Net Worth | 30.5 | 48.8 | 60 | % | 29.7 | 47.8 | 61 | % | |||||||||||||
Total | $ | 255.6 | $ | 325.8 | 27 | % | $ | 256.6 | $ | 321.1 | 25 | % | |||||||||
Revenue | |||||||||||||||||||||
Institutional | $ | 219.5 | $ | 241.7 | 10 | % | $ | 426.2 | $ | 465.4 | 9 | % | |||||||||
Mutual Fund | 173.3 | 245.8 | 42 | % | 349.0 | 473.7 | 36 | % | |||||||||||||
High Net Worth | 36.8 | 53.5 | 45 | % | 72.0 | 104.2 | 45 | % | |||||||||||||
Total | $ | 429.6 | $ | 541.0 | 26 | % | $ | 847.2 | $ | 1,043.3 | 23 | % | |||||||||
Net income (loss) (controlling interest)(1) | |||||||||||||||||||||
Institutional | $ | 33.4 | $ | 36.1 | 8 | % | $ | 52.3 | $ | 74.8 | 43 | % | |||||||||
Mutual Fund(2) | (31.3 | ) | 22.2 | n.m.(3) | (16.5 | ) | 39.4 | n.m.(3) | |||||||||||||
High Net Worth | 4.5 | 6.4 | 42 | % | 8.2 | 12.9 | 57 | % | |||||||||||||
Total | $ | 6.6 | $ | 64.7 | n.m.(3) | $ | 44.0 | $ | 127.1 | 189 | % | ||||||||||
EBITDA(4) | |||||||||||||||||||||
Institutional | $ | 66.9 | $ | 96.3 | 44 | % | $ | 133.8 | $ | 200.4 | 50 | % | |||||||||
Mutual Fund | 36.4 | 60.4 | 66 | % | 73.5 | 115.4 | 57 | % | |||||||||||||
High Net Worth | 10.4 | 16.3 | 57 | % | 20.5 | 32.2 | 57 | % | |||||||||||||
Total | $ | 113.7 | $ | 173.0 | 52 | % | $ | 227.8 | $ | 348.0 | 53 | % |
(1) | During the three months ended June 30, 2012, we recognized a gain totaling $47.4 million ($34.6 million attributable to the controlling interest) related to certain of our contingent payment arrangements. The controlling interest portion of the gain was allocated $20.0 million, $14.4 million and $0.2 million to our Institutional, Mutual Fund and High Net Worth channels, respectively. During the six months ended June 30, 2012, we recognized a gain totaling $57.3 million ($39.6 million attributable to the controlling interest) related to certain of our contingent payment arrangements. The controlling interest portion of the gain was allocated $20.2 million, $19.1 million and $0.3 million to our Institutional, Mutual Fund and High Net Worth channels, respectively. During the three months ended June 30, 2013, we recognized a loss totaling $2.1 million (all of which was attributable to the controlling interest) related to certain of our contingent payment arrangements. The loss was allocated $2.0 million and $0.1 million to our Mutual Fund and High Net Worth channels, respectively. During the six months ended June 30, 2013, we recognized a loss totaling $10.3 million (all of which was attributable to the controlling interest) related to certain of our contingent payment arrangements. The loss was allocated $9.6 million and $0.7 million to our Mutual Fund and High Net Worth channels, respectively. |
(2) | During the three and six months ended June 30, 2012, we reduced the carrying value of an indefinite‑lived intangible asset at one of our Affiliates and, accordingly, recorded pre‑tax expenses of $93.5 million and $102.2 million, respectively. |
(3) | Percentage change is not meaningful. |
(4) | EBITDA, including a reconciliation to cash flow from operations, is discussed in "Supplemental Liquidity Measure" on page 31. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||
% Change | % Change | ||||||||||||||||||||
(in millions) | 2012 | 2013 | 2012 | 2013 | |||||||||||||||||
Compensation and related expenses | $ | 188.1 | $ | 235.4 | 25 | % | $ | 369.2 | $ | 450.0 | 22 | % | |||||||||
Selling, general and administrative | 88.8 | 99.5 | 12 | % | 173.8 | 191.8 | 10 | % | |||||||||||||
Intangible amortization and impairments | 114.7 | 32.6 | (72 | )% | 145.1 | 65.5 | (55 | )% | |||||||||||||
Depreciation and other amortization | 3.6 | 3.3 | (8 | )% | 7.1 | 6.9 | (3 | )% | |||||||||||||
Other operating expenses | 9.4 | 8.8 | (6 | )% | 18.2 | 17.2 | (5 | )% | |||||||||||||
Total operating expenses | $ | 404.6 | $ | 379.6 | (6 | )% | $ | 713.4 | $ | 731.4 | 3 | % |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||
(in millions) | 2012 | 2013 | % Change | 2012 | 2013 | % Change | |||||||||||||||
Income from equity method investments | $ | 13.4 | $ | 36.2 | 170 | % | $ | 27.9 | $ | 86.9 | 211 | % |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||
(in millions) | 2012 | 2013 | % Change | 2012 | 2013 | % Change | |||||||||||||||
Investment and other income | $ | 3.0 | $ | 7.5 | 150 | % | $ | 13.4 | $ | 12.0 | (10 | )% | |||||||||
Interest expense | 18.5 | 24.3 | 31 | % | 37.1 | 48.5 | 31 | % | |||||||||||||
Imputed interest and contingent payment arrangements | (40.0 | ) | 8.4 | n.m. (1) | (42.5 | ) | 22.6 | n.m. (1) | |||||||||||||
Income tax expense | 2.0 | 38.2 | n.m. (1) | 26.6 | 75.7 | 185 | % |
(1) | Percentage change is not meaningful. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||
(in millions) | 2012 | 2013 | % Change | 2012 | 2013 | % Change | |||||||||||||||
Net income | $ | 60.9 | $ | 134.2 | 120 | % | $ | 153.9 | $ | 264.0 | 72 | % | |||||||||
Net income (non-controlling interests) | 54.3 | 69.5 | 28 | % | 109.9 | 136.9 | 25 | % | |||||||||||||
Net income (controlling interest) | 6.6 | 64.7 | n.m. (1) | 44.0 | 127.1 | 189 | % |
(1) | Percentage change is not meaningful. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(in millions, except per share data) | 2012 | 2013 | 2012 | 2013 | |||||||||||
Net income (controlling interest) | $ | 6.6 | $ | 64.7 | $ | 44.0 | $ | 127.1 | |||||||
Intangible amortization and impairments(1) | 119.3 | 38.1 | 154.2 | 76.5 | |||||||||||
Intangible-related deferred taxes | (21.5 | ) | 12.3 | (11.6 | ) | 24.2 | |||||||||
Imputed interest and contingent payment arrangements(2) | (17.4 | ) | 5.4 | (16.7 | ) | 14.4 | |||||||||
Affiliate equity expense | 0.6 | 0.6 | 1.2 | 3.2 | |||||||||||
Economic net income | $ | 87.6 | $ | 121.1 | $ | 171.1 | $ | 245.4 | |||||||
Average shares outstanding—diluted | 52.7 | 54.6 | 52.8 | 54.4 | |||||||||||
Dilutive impact of senior convertible securities shares | — | 0.8 | — | 0.7 | |||||||||||
Dilutive impact of trust preferred shares | — | 0.1 | — | — | |||||||||||
Average shares outstanding—adjusted diluted | 52.7 | 55.5 | 52.8 | 55.1 | |||||||||||
Economic earnings per share | $ | 1.66 | $ | 2.18 | $ | 3.24 | $ | 4.45 |
(1) | Our reported intangible amortization includes amortization attributable to our non-controlling interests, amounts not added back to Net income (controlling interest) to measure our Economic net income. Further, for our equity method Affiliates, we do not separately report revenue or expenses (including intangible amortization) in our income statement. Our share of these Affiliates' amortization is reported in Income from equity method investments. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(in millions) | 2012 | 2013 | 2012 | 2013 | |||||||||||
Reported Intangible amortization and impairments | $ | 114.7 | $ | 32.6 | $ | 145.1 | $ | 65.5 | |||||||
Equity method amortization | 8.2 | 10.3 | 16.3 | 20.7 | |||||||||||
Intangible amortization—non-controlling interests | (3.6 | ) | (4.8 | ) | (7.2 | ) | (9.7 | ) | |||||||
$ | 119.3 | $ | 38.1 | $ | 154.2 | $ | 76.5 |
(2) | Our reported Imputed interest and contingent payment arrangements, $(40.0) million and $8.4 million for the three months ended June 30, 2012 and 2013, respectively, includes $(11.7) million and $0.0 million, respectively, of imputed interest attributable to the non-controlling interests, an amount not added back to Net income (controlling interest) to measure our Economic net income. Our reported Imputed interest and contingent payment arrangements, $(42.5) million and $22.6 million for the six months ended June 30, 2012 and 2013, respectively, includes $(15.2) million and $0.0 million, respectively, of imputed interest attributable to our non-controlling interests. |
(in millions) | December 31, 2012 | June 30, 2013 | |||||
Balance Sheet Data | |||||||
Cash and cash equivalents | $ | 430.4 | $ | 413.8 | |||
Senior bank debt | 325.0 | 100.0 | |||||
Senior notes | 340.0 | 340.0 | |||||
Senior convertible securities | 450.1 | 404.8 | |||||
Junior convertible trust preferred securities | 515.5 | 517.1 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(in millions) | 2012 | 2013 | 2012 | 2013 | |||||||||||
Cash Flow Data | |||||||||||||||
Operating cash flow | $ | 183.4 | $ | 262.7 | $ | 236.0 | $ | 464.8 | |||||||
Investing cash flow | (396.0 | ) | (2.8 | ) | (393.9 | ) | (9.8 | ) | |||||||
Financing cash flow | 131.5 | (180.4 | ) | 18.2 | (466.0 | ) | |||||||||
EBITDA(1) | 113.7 | 173.0 | 227.8 | 348.0 |
(1) | The definition of EBITDA is presented under "Supplemental Liquidity Measure." |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
(in millions) | 2012 | 2013 | 2012 | 2013 | |||||||||||
Cash flow from operating activities | $ | 183.4 | $ | 262.7 | $ | 236.0 | $ | 464.8 | |||||||
Interest expense, net of non-cash items(1) | 16.7 | 21.1 | 33.4 | 42.8 | |||||||||||
Current tax provision | 14.3 | 19.8 | 22.3 | 41.0 | |||||||||||
Income from equity method investments, net of distributions(2) | (0.3 | ) | (6.0 | ) | (14.4 | ) | (38.8 | ) | |||||||
Net income (non-controlling interests) | (54.3 | ) | (69.5 | ) | (109.9 | ) | (136.9 | ) | |||||||
Changes in assets and liabilities | (31.0 | ) | (28.8 | ) | 83.3 | 23.6 | |||||||||
Other non-cash adjustments(3) | (15.1 | ) | (26.3 | ) | (22.9 | ) | (48.5 | ) | |||||||
EBITDA | $ | 113.7 | $ | 173.0 | $ | 227.8 | $ | 348.0 |
(1) | Non-cash items include Amortization of issuance costs and Imputed interest and contingent payment arrangements of $(38.2) million and $11.6 million for the three months ended June 30, 2012 and 2013, respectively and $(38.8) million and $28.3 million for the six months ended June 30, 2012 and 2013, respectively. |
(2) | Distributions from equity method investments were $21.9 million and $52.5 million for the three months ended June 30, 2012 and 2013, respectively and $58.6 million and $146.4 million for the six months ended June 30, 2012 and 2013, respectively. |
(3) | Other non-cash adjustments include share-based compensation expense and other adjustments to reconcile Net income (controlling interest) to net cash flow from operating activities. |
(in millions) | Amount | Maturity Date | Form of Repayment | ||||
Senior bank debt | $ | 100.0 | 2018 | (1) | |||
Senior notes | 340.0 | 2022/2042 | (2) | ||||
2008 senior convertibles notes | 406.6 | 2038 | (3) | ||||
Junior convertible trust preferred securities | 730.8 | 2036/2037 | (4) |
(1) | Settled in cash. |
(2) | Settled in cash on or after October 15, 2015 for the 2022 senior notes and August 15, 2017 for the 2042 senior notes. |
(3) | In July, we called all of our outstanding 2008 senior convertible notes as described on page 33. |
(4) | Settled in cash or common stock (or a combination thereof) at our election if the holders exercise their conversion rights. |
2022 Senior Notes | 2042 Senior Notes | ||||||
Issue date | October 2012 | August 2012 | |||||
Maturity date | October 2022 | August 2042 | |||||
Potential Call Date | October 2015 | August 2017 | |||||
Par value (in millions) | $ | 140.0 | $ | 200.0 | |||
Call Price | At Par | At Par | |||||
Stated coupon | 5.25 | % | 6.375 | % | |||
Coupon frequency | Quarterly | Quarterly |
2008 Senior Convertible Notes(1) | 2007 Junior Convertible Trust Preferred Securities(2) | 2006 Junior Convertible Trust Preferred Securities(3) | |||||||||
Issue date | August 2008 | October 2007 | April 2006 | ||||||||
Maturity date | August 2038 | October 2037 | April 2036 | ||||||||
Next potential put date | N/A | N/A | N/A | ||||||||
Par value (in millions) | $ | 406.6 | $ | 430.8 | $ | 300.0 | |||||
Carrying value (in millions)(4) | 404.8 | 300.3 | 216.8 | ||||||||
Denomination | 1,000 | 50 | 50 | ||||||||
Current conversion rate | 7.959 | 0.250 | 0.333 | ||||||||
Current conversion price | $ | 125.65 | $ | 200.00 | $ | 150.00 | |||||
Stated coupon | 3.95 | % | 5.15 | % | 5.10 | % | |||||
Coupon frequency | Semi-annually | Quarterly | Quarterly | ||||||||
Tax deduction rate(5) | 9.38 | % | 8.00 | % | 7.50 | % |
(1) | In July 2013, we called all of our outstanding 2008 senior convertible notes. |
(2) | We may redeem the 2007 junior convertible trust preferred securities if the closing price of the our common stock exceeds $260 per share for a specified period of time. |
(3) | We may redeem the 2006 junior convertible trust preferred securities if the closing price of our common stock exceeds $195 per share for a specified period of time. |
(4) | The carrying value is accreted to the principal amount at maturity over an expected life of five years for the 2008 senior convertible notes and 30 years for each of the junior convertible trust preferred securities. |
(5) | These convertible securities are considered contingent payment debt instruments under federal income tax regulations, which require us to deduct interest in an amount greater than our reported Interest expense. These deductions result in annual deferred tax liabilities of approximately $12.0 million. These deferred tax liabilities will be reclassified directly to stockholders' equity if our common stock is trading above certain thresholds at the time of the conversion of the securities. In the three months ended June 30, 2013, $5.7 million was reclassified to stockholders' equity related to the repurchase of the 2008 senior convertible notes. |
Payments Due | |||||||||||||||||||
(in millions) | Total | Remainder of 2013 | 2014-2015 | 2016-2017 | Thereafter | ||||||||||||||
Contractual Obligations | |||||||||||||||||||
Senior bank debt | $ | 100.0 | $ | — | $ | — | $ | — | $ | 100.0 | |||||||||
2008 senior convertible notes(1) | 816.1 | 8.0 | 32.1 | 32.1 | 743.9 | ||||||||||||||
Junior convertible trust preferred securities | 1,615.8 | 18.5 | 74.1 | 74.1 | 1,449.1 | ||||||||||||||
Senior notes | 786.0 | 10.1 | 40.2 | 40.2 | 695.5 | ||||||||||||||
Leases | 167.7 | 13.9 | 51.3 | 35.8 | 66.7 | ||||||||||||||
Other liabilities(2) | 39.9 | 29.7 | — | — | 10.2 | ||||||||||||||
Derivative instruments | 5.0 | 0.9 | 3.2 | 0.9 | — | ||||||||||||||
Total contractual obligations | $ | 3,530.5 | $ | 81.1 | $ | 200.9 | $ | 183.1 | $ | 3,065.4 | |||||||||
Contingent Obligations | |||||||||||||||||||
Contingent payment obligations(3) | $ | 217.0 | $ | — | $ | 64.8 | $ | 152.2 | $ | — |
(1) | In July 2013, we called all of our outstanding 2008 senior convertible notes, which are expected to be canceled and retired during the third quarter of 2013. |
(2) | Other liabilities reflect amounts payable to Affiliate managers related to our purchase of Affiliate equity interests. This table does not include liabilities for uncertain tax positions or commitments to co-invest in certain investment partnerships (of $21.1 million and $71.3 million as of June 30, 2013, respectively) as we cannot predict when such obligations will be paid. |
(3) | The contingent payment obligations disclosed in the table represent our expected settlement amounts. The maximum settlement amount through 2013 is approximately $161.5 million and $303.5 million in periods thereafter. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) | None. |
(b) | None. |
(c) | Purchases of Equity Securities by the Issuer. |
Item 6. | Exhibits |
AFFILIATED MANAGERS GROUP, INC. (Registrant) | |
August 6, 2013 | /s/ JAY C. HORGEN |
Jay C. Horgen on behalf of the Registrant as Chief Financial Officer and Treasurer (and also as Principal Financial and Principal Accounting Officer) |
Exhibit No. | Description | ||
31.1 | Certification of Registrant's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Registrant's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification of Registrant's Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | Certification of Registrant's Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101 | The following financial statements from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 are furnished herewith, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income for the three and six month periods ended June 30, 2013 and 2012, (ii) the Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, (iii) the Consolidated Statement of Equity for the six month period ended June 30, 2013, (iv) the Consolidated Statements of Cash Flows for the three and six month periods ended June 30, 2013 and 2012, and (v) the Notes to the Consolidated Financial Statements. |
QuickLinks |
1. | I have reviewed this Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ SEAN M. HEALEY | ||
Sean M. Healey Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Affiliated Managers Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ JAY C. HORGEN | ||
Jay C. Horgen Chief Financial Officer and Treasurer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ SEAN M. HEALEY | ||
Sean M. Healey Chief Executive Officer |
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ JAY C. HORGEN | ||
Jay C. Horgen Chief Financial Officer and Treasurer |
Affiliate Equity
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Jun. 30, 2013
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Affiliate Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Affiliate Equity | Affiliate Equity The Company recognized compensation expense related to Affiliate equity of $8.8 million and $15.1 million, respectively ($4.8 million and $7.0 million attributable to the controlling interest) for the three and six months ended June 30, 2012 as compared to $9.1 million and $17.5 million, respectively ($3.2 million and $8.4 million attributable to the controlling interest) for the three and six months ended June 30, 2013. The Company has a conditional right to call and holders of non-controlling interests have a conditional right to put their equity interests at certain intervals. The current redemption value of these interests has been presented as Redeemable non-controlling interests on the Company's Consolidated Balance Sheets. Changes in the current redemption value are recorded to Additional paid-in capital. The following table presents the changes in Redeemable non-controlling interests during the period:
During the three and six months ended June 30, 2012 and 2013, the Company acquired interests from and transferred interests to Affiliate management partners. The following schedule discloses the effect of changes in the Company's ownership interest in its Affiliates on the controlling interest's equity:
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Variable Interest Entities
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Jun. 30, 2013
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Variable Interest Entities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities Sponsored Investment Funds The Company's Affiliates act as the investment manager for certain investment funds that are considered variable interest entities ("VIEs"). In addition to an Affiliate's involvement as the investment manager, Affiliates may also hold investments in these products. Affiliates are not the primary beneficiary of these VIEs as their involvement is limited to that of a service provider and their investment, if any, represents an insignificant interest in the fund's assets under management. As a result, the Company's variable interests will not absorb the majority of the variability of the entity's net assets and therefore the Company has not consolidated these entities. Trust Preferred Vehicles The Company established wholly-owned trusts in connection with the 2006 and 2007 issuances of junior convertible trust preferred securities. These entities are considered VIEs and the Company is not the primary beneficiary, therefore these entities are not consolidated in the Company's financial statements. The net assets and liabilities of these unconsolidated VIEs and the Company's maximum risk of loss related thereto are as follows:
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Derivative Financial Instruments (Tables)
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amount of derivative instrument gains and (losses) before taxes | The following summarizes the amount of derivative instrument gains and losses reported in the Consolidated Statements of Comprehensive Income:
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Schedule of location and fair values of derivative instruments on the Consolidated Balance Sheet | The following summarizes the location and fair values of derivative instruments on the Consolidated Balance Sheets:
___________________________________________________________
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Income Taxes
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to non-controlling interests as follows:
___________________________________________________________
The components of deferred tax assets and liabilities are as follows:
Deferred tax liabilities are primarily the result of tax deductions for the Company's intangible assets and convertible securities. The Company amortizes most of its intangible assets for tax purposes only, reducing its tax basis below its carrying value for financial statement purposes and generating deferred taxes each reporting period. The Company's 2008 senior convertible notes and junior convertible trust preferred securities also generate deferred taxes because the Company's tax deductions are higher than the interest expense recorded for financial statement purposes. In the three months ended June 30, 2013, $5.7 million of deferred tax liabilities were reclassified to stockholders' equity related to the repurchase of the 2008 senior convertible notes. At June 30, 2013, the Company has state net operating loss carryforwards that expire over a 15-year period beginning in 2013. The Company also has foreign tax credit carryforwards that expire over a 10-year period beginning in 2013. The valuation allowances at December 31, 2012 and June 30, 2013 were principally related to the Company's projections of taxable income prior to the expiration of these state and federal carryforwards. As of June 30, 2013, the Company carried a liability for uncertain tax positions of $21.1 million, including $2.1 million for interest and related charges. At June 30, 2013 this liability also included $17.8 million for tax positions that, if recognized, would affect the Company's effective tax rate. The Company periodically has tax examinations in the United States and foreign jurisdictions. Examination outcomes, and any related settlements, are subject to significant uncertainty. The completion of examinations may result in the payment of additional taxes and/or the recognition of tax benefits. |
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
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Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
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Income tax provision | ||||||||||
Deferred taxes | $ 16.1 | $ (15.5) | $ 28.8 | $ (2.0) | ||||||
Provision for income taxes | 38.2 | 2.0 | 75.7 | 26.6 | ||||||
Controlling Interests [Member]
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Income tax provision | ||||||||||
Current tax | 19.8 | 14.3 | 41.0 | 22.3 | ||||||
Intangible-related deferred taxes | 12.3 | (21.5) | 24.3 | (11.6) | ||||||
Other deferred taxes | 4.0 | 3.3 | 4.8 | 6.2 | ||||||
Provision for income taxes | 36.1 | (3.9) | 70.1 | 16.9 | ||||||
Income before income taxes (controlling interest) | 100.8 | 2.7 | 197.2 | 60.9 | ||||||
Effective tax rate attributable to controlling interests (as a percent) | 35.80% | [1] | (144.40%) | [1] | 35.50% | [1] | 27.80% | [1] | ||
Non-controlling interests [Member]
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||||||||||
Income tax provision | ||||||||||
Current tax | 2.3 | 3.2 | 5.9 | 6.3 | ||||||
Deferred taxes | (0.2) | 2.7 | (0.3) | 3.4 | ||||||
Provision for income taxes | $ 2.1 | $ 5.9 | $ 5.6 | $ 9.7 | ||||||
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Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
Pantheon's prior owner [Member]
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Dec. 31, 2013
Scenario, Forecast [Member]
|
|
Commitments and Contingencies | |||
Co-investment commitments in partnership | $ 71.3 | ||
Reimbursable amount of investment commitments | 32.7 | ||
Acquisition agreements contingency liability | 465.0 | ||
Expected payments to settle contingent obligations | 217.0 | 0 | |
Expected payments related to equity method investments | 142.0 | ||
Net present value of expected payments to settle contingent obligations | $ 44.3 |
Affiliate Equity (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Affiliate Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the changes in redeemable non-controlling interests | The following table presents the changes in Redeemable non-controlling interests during the period:
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Schedule of the effect of changes in the entity's ownership interest in its affiliates on the controlling interest's equity | The following schedule discloses the effect of changes in the Company's ownership interest in its Affiliates on the controlling interest's equity:
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Share-Based Compensation (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of transactions of the Company's stock options | The following table summarizes the transactions of the Company's stock options:
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Summary of transactions of the Company's restricted stock | The following table summarizes the transactions of the Company's restricted stock:
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Share-Based Compensation (Details 2) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
|
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Long-Term Equity Interests Plan [Member]
|
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Weighted Average Grant Date Value | ||
Awards repurchased (in shares) | 3.2 | 3.2 |
Restricted stock [Member]
|
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Restricted Stock | ||
Unvested units at the beginning of the period (in shares) | 0.4 | |
Units issued (in shares) | (0.1) | |
Unvested units at the end of the period (in shares) | 0.3 | 0.3 |
Weighted Average Grant Date Value | ||
Unvested units at the beginning of the period (in dollars per share) | $ 84.53 | |
Units issued (in dollars per share) | $ 85.63 | |
Unvested units at the end of the period (in dollars per share) | $ 84.49 | $ 84.49 |
Variable Interest Entities (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Sponsored investment funds [Member]
|
||
Variable Interest Entities | ||
Unconsolidated VIE Net Assets | $ 7,511.8 | $ 7,186.9 |
Carrying Value and Maximum Exposure to Loss | 1.6 | 0.8 |
Trust preferred vehicles [Member]
|
||
Variable Interest Entities | ||
Unconsolidated VIE Net Assets | 9.0 | 9.0 |
Carrying Value and Maximum Exposure to Loss | $ 9.0 | $ 9.0 |
Segment Information (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information | Statements of Income
|
Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Intangible assets | ||||
Amortization and impairment expenses of intangible assets | $ 32.6 | $ 114.7 | $ 65.5 | $ 145.1 |
Additional investments in new or existing Affiliates | 0 | 0 | ||
Acquired client relationships
|
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Intangible assets | ||||
Weighted average life | 11 years | |||
Amortization and impairment expenses of intangible assets | 32.6 | 114.7 | 65.5 | 145.1 |
Annual amortization expense for each of the next five years | 100.0 | |||
Additional investments in new or existing Affiliates | $ 0 | $ 0 |
Fair Value Measurements (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of financial assets and financial liabilities measured on a recurring basis | The following table summarizes the Company's financial assets and financial liabilities that are measured at fair value on a recurring basis:
___________________________________________________________
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Schedule of presents certain quantitative information about the significant unobservable inputs used in valuing our Level 3 financial liabilities: | The following table presents certain quantitative information about the significant unobservable inputs used in valuing our Level 3 financial liabilities:
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Schedule of changes in Level 3 financial assets and financial liabilities | The following table presents the changes in Level 3 financial assets and financial liabilities for the three and six months ended June 30, 2012 and 2013:
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Schedule of investments | The following table summarizes, as of December 31, 2012 and June 30, 2013, the nature of these investments and any related liquidation restrictions or other factors which may impact the ultimate value realized:
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Recent Accounting Developments
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6 Months Ended |
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Jun. 30, 2013
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Recent Accounting Developments | |
Recent Accounting Developments | Recent Accounting Developments In February 2013, the Financial Accounting Standards Board issued an update to the guidance for reporting reclassifications out of accumulated other comprehensive income. The new guidance requires companies to present the impact of significant amounts reclassified from accumulated other comprehensive income and the income statement line items affected by the reclassification. The new guidance is effective for interim and fiscal periods beginning after December 15, 2012. The Company adopted this guidance in the first quarter of 2013. Adoption of this new guidance did not have a significant impact on the Company's Consolidated Financial Statements. In June 2013, the Financial Accounting Standards Board issued an update to the guidance for determining whether a public or private company is an investment company. The new guidance clarifies the characteristics of an investment company and amends certain disclosure and measurement requirements. The new guidance is effective for interim and fiscal periods beginning after December 15, 2013 (early application is prohibited). The Company is evaluating the impact of this guidance and does not expect it to have a significant impact on the Company's Consolidated Financial Statements. |
Long-Term Debt
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6 Months Ended |
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Jun. 30, 2013
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Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Senior Bank Debt The Company entered into a $1.25 billion senior unsecured revolving credit facility in April 2013 (the "credit facility") which matures in April 2018. As of June 30, 2013, the current outstanding balance under the credit facility is $100.0 million. The credit facility is unsecured and contains financial covenants with respect to leverage and interest coverage, as well as customary affirmative and negative covenants, including limitations on indebtedness, liens, cash dividends, asset dispositions and fundamental corporate changes. Convertible Securities In the second quarter of 2013, the Company repurchased an aggregate of $53.4 million principal amount outstanding of its 3.95% senior convertible notes due 2038 ("2008 senior convertible notes"). In July 2013, the Company repurchased an additional $26.1 million principal amount outstanding and subsequently called the outstanding 2008 senior convertible notes for redemption on August 15, 2013. In lieu of redemption, holders of the 2008 senior convertible notes may convert their securities at any time before the close of business on August 14, 2013. The conversion rate is 7.9586 shares of Company common stock per $1,000 principal amount of 2008 senior convertible notes. The Company may elect to settle such conversions in cash or common stock (or a combination thereof). Pursuant to its call and prior repurchases, all of the Company's 2008 senior convertible notes will be canceled and retired. |
Investments in Marketable Securities
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Jun. 30, 2013
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Marketable Securities | Investments in Marketable Securities Investments in marketable securities at December 31, 2012 and June 30, 2013 were $128.9 million and $120.1 million, respectively. These investments are comprised of the Company's investments in Value Partners Group Limited ("Value Partners"), a publicly-traded asset management firm based in Hong Kong, and investments held by Affiliates. The following is a summary of the cost, gross unrealized gains and losses and fair value of investments classified as available-for-sale and trading at December 31, 2012 and June 30, 2013:
During the second quarter of 2013, the Company's investment in Value Partners declined, resulting in an unrealized loss at June 30, 2013. The Company intends to hold this investment for a reasonable period of time sufficient for a forecasted recovery. The following is a summary of the Company's realized gains and losses on investments classified as available-for-sale and trading:
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Fair Value Measurements (Details 3) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Changes in level 3 assets and liabilities | ||||||||||||||
Transfers of financial assets from level 1 to level 2 | $ 2.0 | $ 2.0 | ||||||||||||
Other investments [Member]
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Changes in level 3 assets and liabilities | ||||||||||||||
Balance at the beginning of the period | 121.9 | 107.5 | 118.9 | 103.4 | ||||||||||
Net realized gains/losses | (0.9) | [1] | (0.9) | [1] | (1.4) | [1] | (1.7) | [1] | ||||||
Net unrealized gains/losses relating to instruments still held at the reporting date | 3.9 | [1] | 3.6 | [1] | 6.4 | [1] | 6.1 | [1] | ||||||
Purchases and issuances | 2.8 | 5.2 | 7.7 | 10.0 | ||||||||||
Settlements and reductions | (3.3) | (2.4) | (7.2) | (4.8) | ||||||||||
Net transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 | ||||||||||
Balance at the end of period | 124.4 | 113.0 | 124.4 | 113.0 | ||||||||||
Contingent payment arrangements [Member]
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Changes in level 3 assets and liabilities | ||||||||||||||
Balance at the beginning of the period | 40.5 | 83.1 | 31.0 | 87.1 | ||||||||||
Net realized gains/losses | 0 | 0 | 0 | 0 | ||||||||||
Net unrealized gains/losses relating to instruments still held at the reporting date | 3.8 | [2] | (45.4) | [2] | 13.3 | [2] | (49.4) | [2] | ||||||
Purchases and issuances | 0 | 24.8 | 0 | 24.8 | ||||||||||
Settlements and reductions | 0 | 0 | 0 | 0 | ||||||||||
Net transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 | ||||||||||
Balance at the end of period | 44.3 | 62.5 | 44.3 | 62.5 | ||||||||||
Obligations to related parties [Member]
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Changes in level 3 assets and liabilities | ||||||||||||||
Balance at the beginning of the period | 90.7 | 77.6 | 77.8 | 92.0 | ||||||||||
Net realized gains/losses | 0.6 | [3] | 0.7 | [3] | 2.0 | [3] | 0.5 | [3] | ||||||
Net unrealized gains/losses relating to instruments still held at the reporting date | 0.6 | [3] | (0.2) | [3] | 0.2 | [3] | 0.8 | [3] | ||||||
Purchases and issuances | 16.9 | 6.0 | 32.0 | 20.3 | ||||||||||
Settlements and reductions | (12.2) | (4.6) | (15.4) | (34.1) | ||||||||||
Net transfers in and/or out of Level 3 | 0 | 0 | 0 | 0 | ||||||||||
Balance at the end of period | $ 96.6 | $ 79.5 | $ 96.6 | $ 79.5 | ||||||||||
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Income Taxes (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income tax provision attributable to controlling Interests and to non-controlling interests | The consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to non-controlling interests as follows:
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Schedule of components of deferred tax assets and liabilities | The components of deferred tax assets and liabilities are as follows:
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Investments in Marketable Securities (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Cost of investments in marketable securities, gross unrealized gains and losses | ||
Total investments | $ 120.1 | $ 128.9 |
Derivative Financial Instruments (Details 2) (Interest rate swaps [Member], USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Interest rate swaps [Member]
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Fair values of derivative instruments | ||||||
Cash Flow Hedges, Fair value of derivative assets | $ (2.7) | [1] | $ (4.0) | [1] | ||
Fair value of collateral posted | $ 4.0 | |||||
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