UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 26, 2005
Affiliated Managers Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
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001-13459 |
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04-3218510 |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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600 Hale Street |
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01965 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(617) 747-3300 |
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(Registrant’s Telephone Number, Including Area Code) |
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N/A |
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(Former Name or Former Address, if Changed Since Last Report) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition
On January 26, 2005, Affiliated Managers Group, Inc. (the “Company”) issued a press release setting forth its financial and operating results for the quarter and year ended December 31, 2004. A copy of this press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference herein.
ITEM 9.01 Financial Statements and Exhibits
(c) Exhibits.
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Exhibit No. |
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Description |
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99.1* |
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Press Release issued by the Company on January 26, 2005. |
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
2
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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AFFILIATED MANAGERS GROUP, INC. |
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Date: January 26, 2005 |
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By: |
/s/ John Kingston, III |
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Name: |
John Kingston, III |
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Title: |
Senior Vice President and |
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3
EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1* |
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Press Release issued by the Company on January 26, 2005. |
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
4
Exhibit 99.1
Contact: |
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Darrell W. Crate |
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Affiliated Managers Group, Inc. |
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(617) 747-3300 |
AMG Reports Financial and Operating Results
for Fourth Quarter and Full Year 2004
Company Reports EPS of $0.58, Cash EPS of $1.08 for Fourth Quarter,
EPS of $2.02, Cash EPS of $3.95 for Full Year 2004
Boston, MA, January 26, 2005 – Affiliated Managers Group, Inc. (NYSE: AMG) today reported its financial and operating results for the fourth quarter and full year 2004.
Cash earnings per share (“Cash EPS”) for the fourth quarter of 2004 were $1.08, compared to $0.86 for the fourth quarter of 2003, while diluted earnings per share for the fourth quarter of 2004 were $0.58, compared to $0.44 for the same period of 2003. Cash Net Income was $37.5 million for the fourth quarter of 2004, compared to $28.5 million for the fourth quarter of 2003. Net Income for the fourth quarter of 2004 was $23.3 million, compared to $17.3 million for the fourth quarter of 2003. (Cash EPS and Cash Net Income are defined in the attached tables.)
For the fourth quarter of 2004, revenue was $184.0 million, compared to $139.6 million for the fourth quarter of 2003. EBITDA for the fourth quarter of 2004 was $53.8 million, compared to $40.6 million for the same period of 2003.
For the year ended December 31, 2004, Cash Net Income was $126.5 million, while EBITDA was $186.4 million. For the same period, Net Income was $77.1 million, on revenue of $660.0 million. For the year ended December 31, 2003, Cash Net Income was $104.9 million, while EBITDA was $147.2 million. For the same period, Net Income was $60.5 million, on revenue of $495.0 million.
Net client cash flows were $182 million, with net inflows of $101 million from directly managed assets, and $81 million from overlay assets. Net inflows in the mutual fund and institutional channels were $823 million and $683 million, respectively, while outflows in the high net worth channel were $1.4 billion. These aggregate net client cash flows for the quarter resulted in an increase of approximately $600,000 to AMG’s annualized EBITDA. Pro forma for the Company’s recent acquisition of the Fremont Funds, the aggregate assets under management of AMG’s affiliated investment management firms at December 31, 2004 were approximately $133 billion.
(more)
“A strong fourth quarter capped an outstanding 2004, as excellent investment performance, net client cash flows, and the completion of several new investments generated an increase in Cash earnings per share of 26% year-over-year,” stated Sean M. Healey, President and Chief Executive Officer. “We experienced especially strong growth in our annualized EBITDA from the investment performance and positive net client cash flows of our larger Affiliates, including First Quadrant, Friess Associates, Genesis, Third Avenue, and Tweedy, Browne.”
Mr. Healey continued, “While our existing Affiliates performed well during 2004, AMG also had an excellent year in our new investments area, as we completed investments in three new Affiliates: Genesis Asset Managers, AQR Capital Management, and TimesSquare Capital Management. In addition to being excellent investment management firms, these Affiliates add materially to the diversity of our Affiliate group and our product offerings. Genesis, AMG’s first internationally-based Affiliate, is also our first Affiliate concentrating in emerging markets equity securities, and AQR, our first Affiliate specializing in alternative investment products, significantly expands our participation in investment strategies designed to have a low correlation to the equity markets. We were also pleased to invest in the growth equity business of TimesSquare, which provides AMG with additional capacity in growth equities in the small, “smid” and mid-cap areas. Finally, we expanded our Managers Funds mutual fund family through the acquisitions of the mutual fund families of Conseco Capital Management, Inc. and Fremont Investment Advisors, Inc.” Mr. Healey concluded, “As we look to 2005, we are very optimistic about our prospects for continued strong growth by our existing Affiliates, as well as earnings accretion from additional investments in high quality, mid-sized asset management firms.”
“In addition to the strong performance of our Affiliates and the successful execution of investments in new Affiliates in 2004, we made significant progress in expanding the resources we provide our Affiliates with the launch of Managers Investment Group at the end of the year,” stated William J. Nutt, Chairman. “This initiative leverages the breadth and diversity of AMG’s Affliates’ products through a single high-quality sales force. Managers now distributes more than 75 of AMG’s institutional-quality investment products managed by 10 AMG Affiliates through banks, brokerage firms, and other sponsored platforms.”
“More broadly,” Mr. Nutt concluded, “we further enhanced the depth and experience of our holding company management team in each area of our business. In Affiliate Development, we added senior attorneys and compliance professionals to our centralized legal and compliance program. We also added valuable new members to our Finance and New Investment teams. Finally, as we announced earlier, we formally recognized the increasing role in the overall management of AMG that Sean has taken in recent years, as he assumed the title of Chief Executive Officer on January 1, 2005.”
AMG is an asset management company with equity investments in a diverse group of mid-sized investment management firms. AMG’s strategy is to generate growth through the internal growth of its existing Affiliates, as well as through investments in new Affiliates. AMG’s innovative transaction structure allows individual members of each Affiliate’s management team to retain or
2
receive significant direct equity ownership in their firm while maintaining operating autonomy. In addition, AMG provides centralized assistance to its Affiliates in strategic matters, marketing, distribution, product development and operations.
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including changes in the securities or financial markets or in general economic conditions, the availability of equity and debt financing, competition for acquisitions of interests in investment management firms, the ability to close pending investments, the investment performance of our Affiliates and their ability to effectively market their investment strategies, and other risks detailed from time to time in AMG’s filings with the Securities and Exchange Commission. Reference is hereby made to the “Cautionary Statements” set forth in the Company’s Form 10-K for the year ended December 31, 2003.
Financial Tables Follow
A teleconference will be held with AMG’s management at 11:00 a.m. Eastern time today. Parties interested in listening to the teleconference should dial 1-800-240-5318 (domestic calls) or 1-303-262-2190 (international calls) starting at 10:45 a.m. Eastern time. Those wishing to listen to the teleconference should dial the appropriate number at least ten minutes before the call begins. The teleconference will be available for replay approximately one hour after the conclusion of the call. To access the replay, please dial 1-800-405-2236 (domestic calls) or 1-303-590-3000 (international calls), pass code 11020828. The live call and the replay of the session, and the additional financial information referenced during the teleconference, may also be accessed via the Web at www.amg.com.
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For more information on Affiliated Managers
Group, Inc.,
please visit AMG’s Web site at www.amg.com.
3
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
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Three Months |
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Three Months |
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Revenue |
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$ |
139,616 |
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$ |
183,955 |
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Net Income |
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$ |
17,313 |
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$ |
23,258 |
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Cash Net Income (A) |
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$ |
28,455 |
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$ |
37,489 |
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EBITDA (B) |
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$ |
40,607 |
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$ |
53,827 |
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Average shares outstanding - diluted (C) (D) |
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41,023,759 |
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41,846,140 |
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Earnings per share - diluted (C) (D)* |
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$ |
0.44 |
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$ |
0.58 |
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Average shares outstanding - diluted, as adjusted (C) (E) |
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33,141,060 |
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34,790,006 |
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Cash earnings per share - diluted (C) (E) |
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$ |
0.86 |
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$ |
1.08 |
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December 31, |
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December 31, |
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Cash and cash equivalents |
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$ |
253,334 |
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$ |
161,450 |
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Senior debt |
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$ |
— |
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$ |
126,750 |
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Senior convertible debt |
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$ |
423,340 |
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$ |
423,958 |
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Mandatory convertible securities |
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$ |
230,000 |
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$ |
300,000 |
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Stockholders’ equity |
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$ |
614,769 |
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$ |
707,692 |
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*As required by EITF 04-08 (discussed in Note D in greater detail) the calculation of Earnings per share - diluted includes the addition to Net Income of interest expense related to the Company’s contingently convertible securities, net of tax, of $602 and $1,015 for the three months ended December 31, 2003 and December 31, 2004, respectively.
4
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
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Year |
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Year |
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Revenue |
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$ |
495,029 |
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$ |
659,997 |
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Net Income |
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$ |
60,528 |
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$ |
77,147 |
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Cash Net Income (A) |
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$ |
104,944 |
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$ |
126,475 |
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EBITDA (B) |
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$ |
147,215 |
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$ |
186,434 |
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Average shares outstanding - diluted (C) (D) |
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40,113,040 |
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39,644,676 |
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Earnings per share - diluted (C) (D) ** |
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$ |
1.57 |
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$ |
2.02 |
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Average shares outstanding - diluted, as adjusted (C) (E) |
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32,706,777 |
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31,998,750 |
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Cash earnings per share - diluted (C) (E) |
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$ |
3.21 |
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$ |
3.95 |
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**As required by EITF 04-08 (discussed in Note D in greater detail) the calculation of Earnings per share - diluted includes the addition to Net Income of interest expense related to the Company’s contingently convertible securities, net of tax, of $2,293 and $3,016 for the years ended December 31, 2003 and December 31, 2004, respectively.
5
Affiliated Managers Group, Inc.
Reconciliations of Earnings Per Share Calculation
(dollars in thousands, except per share data)
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Three Months |
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Three Months |
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Net Income |
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$ |
17,313 |
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$ |
23,258 |
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Contingent convertible securities interest expense, net |
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602 |
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1,015 |
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Net Income, as adjusted |
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$ |
17,915 |
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$ |
24,273 |
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Average shares outstanding - diluted (C) (D) |
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41,023,759 |
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41,846,140 |
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Earnings per share - diluted (C) (D) |
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$ |
0.44 |
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$ |
0.58 |
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Year |
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Year |
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Net Income |
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$ |
60,528 |
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$ |
77,147 |
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Contingent convertible securities interest expense, net |
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2,293 |
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3,016 |
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Net Income, as adjusted |
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$ |
62,821 |
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$ |
80,163 |
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Average shares outstanding - diluted (C) (D) |
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40,113,040 |
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39,644,676 |
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Earnings per share - diluted (C) (D) |
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$ |
1.57 |
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$ |
2.02 |
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6
Affiliated Managers Group, Inc.
Reconciliations of Average Shares Outstanding
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Three Months |
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Three Months |
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Average shares outstanding - diluted (C) (D) |
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41,023,759 |
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41,846,140 |
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Assumed issuance of COBRA shares |
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(5,538,465 |
) |
(6,066,716 |
) |
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Assumed issuance of LYONS shares |
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(2,344,234 |
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(2,344,234 |
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Dilutive impact of COBRA shares |
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— |
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1,073,673 |
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Dilutive impact of LYONS shares |
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— |
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281,143 |
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Average shares outstanding - diluted, as adjusted (C) (E) |
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33,141,060 |
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34,790,006 |
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Year |
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Year |
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Average shares outstanding - diluted (C) (D) |
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40,113,040 |
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39,644,676 |
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Assumed issuance of COBRA shares |
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(4,692,311 |
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(5,711,719 |
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Assumed issuance of LYONS shares |
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(2,713,952 |
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(2,344,234 |
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Dilutive impact of COBRA shares |
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— |
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317,509 |
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Dilutive impact of LYONS shares |
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— |
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92,518 |
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Average shares outstanding - diluted, as adjusted (C) (E) |
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32,706,777 |
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31,998,750 |
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7
Affiliated Managers Group, Inc.
Operating Results
(in millions)
Assets Under Management
Statement of Changes - Quarter to Date
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Mutual |
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Institutional |
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High Net |
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Total |
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Assets under management, September 30, 2004 |
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$ |
26,181 |
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$ |
54,456 |
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$ |
20,374 |
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$ |
101,011 |
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Net client cash flows - directly managed assets |
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823 |
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683 |
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(1,405 |
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101 |
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Net client cash flows - overlay assets |
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— |
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81 |
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— |
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81 |
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New investments (G) |
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— |
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17,532 |
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— |
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17,532 |
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Investment performance |
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2,877 |
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6,678 |
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1,522 |
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11,077 |
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Assets under management, December 31, 2004 |
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$ |
29,881 |
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$ |
79,430 |
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$ |
20,491 |
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$ |
129,802 |
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Statement of Changes - Year to Date
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Mutual |
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Institutional |
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High Net |
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Total |
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Assets under management, December 31, 2003 |
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$ |
23,339 |
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$ |
44,686 |
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$ |
23,499 |
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$ |
91,524 |
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Net client cash flows - directly managed assets |
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1,942 |
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1,521 |
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(4,334 |
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(871 |
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Net client cash flows - overlay assets |
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— |
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114 |
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— |
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114 |
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New investments (G) |
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361 |
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24,789 |
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— |
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25,150 |
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Investment performance |
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4,239 |
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8,320 |
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1,326 |
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13,885 |
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Assets under management, December 31, 2004 |
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$ |
29,881 |
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$ |
79,430 |
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$ |
20,491 |
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$ |
129,802 |
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8
Affiliated Managers Group, Inc.
Operating Results
(in thousands)
Financial Results
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Three |
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Percent of |
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Three |
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Percent of |
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Revenue |
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Mutual Fund |
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$ |
55,454 |
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40% |
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$ |
69,443 |
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38% |
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Institutional |
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49,578 |
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35% |
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80,349 |
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44% |
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High Net Worth |
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34,584 |
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25% |
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34,163 |
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18% |
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$ |
139,616 |
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100% |
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$ |
183,955 |
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100% |
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EBITDA (B) |
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Mutual Fund |
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$ |
17,053 |
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42% |
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$ |
21,540 |
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40% |
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Institutional |
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13,542 |
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33% |
|
22,585 |
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42% |
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High Net Worth |
|
10,012 |
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25% |
|
9,702 |
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18% |
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$ |
40,607 |
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100% |
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$ |
53,827 |
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100% |
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Year |
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Percent of |
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Year |
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Percent of |
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Revenue |
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Mutual Fund |
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$ |
191,740 |
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39% |
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$ |
255,153 |
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39% |
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Institutional |
|
171,798 |
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35% |
|
265,770 |
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40% |
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||
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High Net Worth |
|
131,491 |
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26% |
|
139,074 |
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21% |
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|
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$ |
495,029 |
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100% |
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$ |
659,997 |
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100% |
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EBITDA (B) |
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Mutual Fund |
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$ |
59,053 |
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40% |
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$ |
75,446 |
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40% |
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Institutional |
|
48,075 |
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33% |
|
72,648 |
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39% |
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High Net Worth |
|
40,087 |
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27% |
|
38,340 |
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21% |
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||
|
|
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$ |
147,215 |
|
100% |
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$ |
186,434 |
|
100% |
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9
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in thousands)
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Three Months |
|
Three Months |
|
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|
|
|
|
|
|
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Net Income |
|
$ |
17,313 |
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$ |
23,258 |
|
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Intangible amortization |
|
4,064 |
|
5,125 |
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Intangible amortization - equity method investments (H) |
|
— |
|
908 |
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Intangible-related deferred taxes |
|
6,050 |
|
7,107 |
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Affiliate depreciation |
|
1,028 |
|
1,091 |
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Cash Net Income (A) |
|
$ |
28,455 |
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$ |
37,489 |
|
|
|
|
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|
|
|
||
|
Cash flow from operations |
|
$ |
33,481 |
|
$ |
45,563 |
|
|
Interest expense, net of non-cash items |
|
4,627 |
|
6,288 |
|
||
|
Current tax provision |
|
3,141 |
|
6,917 |
|
||
|
Intangible amortization - equity method investments (H) |
|
— |
|
908 |
|
||
|
Changes in assets and liabilities and other adjustments |
|
(642 |
) |
(5,849 |
) |
||
|
EBITDA (B) |
|
$ |
40,607 |
|
$ |
53,827 |
|
|
Holding company expenses |
|
7,283 |
|
7,866 |
|
||
|
EBITDA Contribution |
|
$ |
47,890 |
|
$ |
61,693 |
|
|
|
|
Year |
|
Year |
|
||
|
|
|
|
|
|
|
||
|
Net Income |
|
$ |
60,528 |
|
$ |
77,147 |
|
|
Intangible amortization |
|
16,176 |
|
18,339 |
|
||
|
Intangible amortization - equity method investments (H) |
|
— |
|
908 |
|
||
|
Intangible-related deferred taxes |
|
23,899 |
|
25,791 |
|
||
|
Affiliate depreciation |
|
4,341 |
|
4,290 |
|
||
|
Cash Net Income (A) |
|
$ |
104,944 |
|
$ |
126,475 |
|
|
|
|
|
|
|
|
||
|
Cash flow from operations |
|
$ |
116,515 |
|
$ |
177,886 |
|
|
Interest expense, net of non-cash items |
|
18,977 |
|
26,929 |
|
||
|
Current tax provision |
|
10,255 |
|
20,330 |
|
||
|
Intangible amortization - equity method investments (H) |
|
— |
|
908 |
|
||
|
Changes in assets and liabilities and other adjustments |
|
1,468 |
|
(39,619 |
) |
||
|
EBITDA (B) |
|
$ |
147,215 |
|
$ |
186,434 |
|
|
Holding company expenses |
|
22,265 |
|
28,831 |
|
||
|
EBITDA Contribution |
|
$ |
169,480 |
|
$ |
215,265 |
|
10
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenue |
|
$ |
139,616 |
|
$ |
183,955 |
|
$ |
495,029 |
|
$ |
659,997 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Compensation and related expenses |
|
48,414 |
|
65,455 |
|
174,992 |
|
241,633 |
|
||||
|
Selling, general and administrative |
|
22,216 |
|
31,980 |
|
84,059 |
|
109,066 |
|
||||
|
Amortization of intangible assets |
|
4,064 |
|
5,125 |
|
16,176 |
|
18,339 |
|
||||
|
Depreciation and other amortization |
|
1,547 |
|
1,623 |
|
6,231 |
|
6,369 |
|
||||
|
Other operating expenses |
|
4,537 |
|
4,359 |
|
16,056 |
|
16,708 |
|
||||
|
|
|
80,778 |
|
108,542 |
|
297,514 |
|
392,115 |
|
||||
|
Operating income |
|
58,838 |
|
75,413 |
|
197,515 |
|
267,882 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Non-operating (income) and expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Investment and other (income) loss |
|
(1,952 |
) |
(6,265 |
) |
(8,245 |
) |
(8,460 |
) |
||||
|
Interest expense |
|
5,653 |
|
7,407 |
|
22,976 |
|
31,725 |
|
||||
|
|
|
3,701 |
|
1,142 |
|
14,731 |
|
23,265 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income before minority interest and taxes |
|
55,137 |
|
74,271 |
|
182,784 |
|
244,617 |
|
||||
|
Minority interest (F) |
|
(25,794 |
) |
(35,507 |
) |
(80,952 |
) |
(115,524 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income before income taxes |
|
29,343 |
|
38,764 |
|
101,832 |
|
129,093 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income taxes - current |
|
3,141 |
|
6,917 |
|
10,255 |
|
20,330 |
|
||||
|
Income taxes - intangible-related deferred |
|
6,050 |
|
7,107 |
|
23,899 |
|
25,791 |
|
||||
|
Income taxes - other deferred |
|
2,839 |
|
1,482 |
|
7,150 |
|
5,825 |
|
||||
|
Net Income |
|
$ |
17,313 |
|
$ |
23,258 |
|
$ |
60,528 |
|
$ |
77,147 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Average shares outstanding - basic (C) |
|
31,974,918 |
|
31,314,436 |
|
31,867,989 |
|
29,994,560 |
|
||||
|
Average shares outstanding - diluted (C) (D) |
|
41,023,759 |
|
41,846,140 |
|
40,113,040 |
|
39,644,676 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings per share - basic (C) |
|
$ |
0.54 |
|
$ |
0.74 |
|
$ |
1.90 |
|
$ |
2.57 |
|
|
Earnings per share - diluted (C) (D) |
|
$ |
0.44 |
|
$ |
0.58 |
|
$ |
1.57 |
|
$ |
2.02 |
|
11
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in thousands)
|
|
|
December 31, |
|
December 31, |
|
||
|
Assets |
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
253,334 |
|
$ |
161,450 |
|
|
Investment advisory fees receivable |
|
65,288 |
|
91,487 |
|
||
|
Prepaid expenses and other current assets |
|
20,861 |
|
24,795 |
|
||
|
Total current assets |
|
339,483 |
|
277,732 |
|
||
|
|
|
|
|
|
|
||
|
Fixed assets, net |
|
36,886 |
|
40,953 |
|
||
|
Equity investment in Affiliate |
|
— |
|
252,597 |
|
||
|
Acquired client relationships, net |
|
364,429 |
|
440,409 |
|
||
|
Goodwill |
|
751,607 |
|
888,567 |
|
||
|
Other assets |
|
26,800 |
|
33,163 |
|
||
|
Total assets |
|
$ |
1,519,205 |
|
$ |
1,933,421 |
|
|
|
|
|
|
|
|
||
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Accounts payable and accrued liabilities |
|
$ |
89,707 |
|
$ |
114,350 |
|
|
Notes payable to related party |
|
11,744 |
|
17,728 |
|
||
|
Total current liabilities |
|
101,451 |
|
132,078 |
|
||
|
|
|
|
|
|
|
||
|
Senior debt |
|
— |
|
126,750 |
|
||
|
Senior convertible debt |
|
423,340 |
|
423,958 |
|
||
|
Mandatory convertible securities |
|
230,000 |
|
300,000 |
|
||
|
Deferred income taxes |
|
92,707 |
|
124,168 |
|
||
|
Other long-term liabilities |
|
16,144 |
|
31,397 |
|
||
|
Total liabilities |
|
863,642 |
|
1,138,351 |
|
||
|
|
|
|
|
|
|
||
|
Minority interest (F) |
|
40,794 |
|
87,378 |
|
||
|
|
|
|
|
|
|
||
|
Stockholders’ equity: |
|
|
|
|
|
||
|
Common stock |
|
235 |
|
387 |
|
||
|
Additional paid-in capital |
|
408,449 |
|
566,776 |
|
||
|
Accumulated other comprehensive income |
|
944 |
|
1,537 |
|
||
|
Retained earnings |
|
306,972 |
|
384,119 |
|
||
|
|
|
716,600 |
|
952,819 |
|
||
|
Less treasury stock, at cost |
|
(101,831 |
) |
(245,127 |
) |
||
|
Total stockholders’ equity |
|
614,769 |
|
707,692 |
|
||
|
Total liabilities and stockholders’ equity |
|
$ |
1,519,205 |
|
$ |
1,933,421 |
|
12
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
||||||||
|
|
|
2003 |
|
2004 |
|
2003 |
|
2004 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
||||
|
Net Income |
|
$ |
17,313 |
|
$ |
23,258 |
|
$ |
60,528 |
|
$ |
77,147 |
|
|
Adjustments to reconcile Net Income to net cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
||||
|
Amortization of intangible assets |
|
4,064 |
|
5,125 |
|
16,176 |
|
18,339 |
|
||||
|
Amortization of debt issuance costs |
|
872 |
|
789 |
|
3,286 |
|
3,641 |
|
||||
|
Depreciation and amortization of fixed assets |
|
1,547 |
|
1,623 |
|
6,231 |
|
6,369 |
|
||||
|
Deferred income tax provision |
|
8,889 |
|
8,589 |
|
31,049 |
|
31,616 |
|
||||
|
Accretion of interest |
|
154 |
|
330 |
|
713 |
|
1,155 |
|
||||
|
Tax benefit from exercise of stock options |
|
619 |
|
2,502 |
|
3,039 |
|
8,027 |
|
||||
|
Other adjustments |
|
— |
|
(1,265 |
) |
(555 |
) |
1,228 |
|
||||
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
||||
|
Increase in investment advisory fees receivable |
|
(9,073 |
) |
(2,483 |
) |
(14,490 |
) |
(26,199 |
) |
||||
|
Decrease (increase) in other current assets |
|
(3,968 |
) |
(5,020 |
) |
(7,033 |
) |
1,827 |
|
||||
|
Decrease (increase) in non-current other receivables |
|
(2,001 |
) |
(9,393 |
) |
663 |
|
(9,992 |
) |
||||
|
Increase (decrease) in accounts payable, accrued expenses and other liabilities |
|
7,382 |
|
(5,335 |
) |
6,612 |
|
16,386 |
|
||||
|
Increase in minority interest |
|
7,683 |
|
26,843 |
|
10,296 |
|
48,342 |
|
||||
|
Cash flow from operating activities |
|
33,481 |
|
45,563 |
|
116,515 |
|
177,886 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash flow used in investing activities: |
|
|
|
|
|
|
|
|
|
||||
|
Cost of investments, net of cash acquired |
|
(11,184 |
) |
(391,926 |
) |
(19,052 |
) |
(474,104 |
) |
||||
|
Purchase of fixed assets |
|
(678 |
) |
(492 |
) |
(23,889 |
) |
(6,977 |
) |
||||
|
Investment in marketable securities |
|
(23 |
) |
(2,412 |
) |
(1,875 |
) |
(5,004 |
) |
||||
|
Increase in other assets |
|
(2 |
) |
(3 |
) |
(14 |
) |
(60 |
) |
||||
|
Cash flow used in investing activities |
|
(11,887 |
) |
(394,833 |
) |
(44,830 |
) |
(486,145 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
||||
|
Borrowings of senior bank debt |
|
— |
|
83,000 |
|
85,000 |
|
134,000 |
|
||||
|
Repayments of senior bank debt |
|
— |
|
(83,000 |
) |
(85,000 |
) |
(83,000 |
) |
||||
|
Issuances of convertible securities |
|
— |
|
— |
|
300,000 |
|
300,000 |
|
||||
|
Repurchase of convertible securities |
|
— |
|
— |
|
(105,841 |
) |
(124,525 |
) |
||||
|
Issuance of equity securities |
|
2,403 |
|
198,673 |
|
11,375 |
|
210,232 |
|
||||
|
Repurchases of common stock |
|
— |
|
— |
|
(33,688 |
) |
(194,420 |
) |
||||
|
Issuance costs |
|
(31 |
) |
(435 |
) |
(7,850 |
) |
(12,800 |
) |
||||
|
Repayments of notes and other liabilities |
|
(1,725 |
) |
(3,415 |
) |
(10,299 |
) |
(14,244 |
) |
||||
|
Cash flow from financing activities |
|
647 |
|
194,823 |
|
153,697 |
|
215,243 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Effect of foreign exchange rate changes on cash flow |
|
— |
|
1,030 |
|
244 |
|
1,132 |
|
||||
|
Net increase (decrease) in cash and cash equivalents |
|
22,241 |
|
(153,417 |
) |
225,626 |
|
(91,884 |
) |
||||
|
Cash and cash equivalents at beginning of period |
|
231,093 |
|
314,867 |
|
27,708 |
|
253,334 |
|
||||
|
Cash and cash equivalents at end of period |
|
$ |
253,334 |
|
$ |
161,450 |
|
$ |
253,334 |
|
$ |
161,450 |
|
13
Affiliated Managers Group, Inc.
Notes
(A) Cash Net Income is defined as Net Income plus amortization and deferred taxes related to intangible assets plus Affiliate depreciation. This supplemental non-GAAP performance measure is provided in addition to, but not as a substitute for, Net Income. The Company considers Cash Net Income an important measure of its financial performance, as management believes it best represents operating performance before non-cash expenses relating to the acquisition of interests in its affiliated investment management firms. Since acquired assets do not generally depreciate or require replacement, and since they generate deferred tax expenses that are unlikely to reverse, the Company adds back these non-cash expenses. Cash Net Income is used by the Company’s management and Board of Directors as a principal performance benchmark.
The Company adds back amortization attributable to acquired client relationships because this expense does not correspond to the changes in value of these assets, which do not diminish predictably over time. The Company adds back the portion of deferred taxes generally attributable to intangible assets (including goodwill) that it no longer amortizes but which continues to generate tax deductions. These deferred tax expense accruals would be used in the event of a future sale of an Affiliate or an impairment charge, which the Company considers unlikely. The Company adds back the portion of consolidated depreciation expense incurred by Affiliates because under its Affiliate operating agreements, the Company is generally not required to replenish these depreciating assets.
(B) EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. This supplemental non-GAAP liquidity measure is provided in addition to, but not as a substitute for, cash flow from operations. As a measure of liquidity, the Company believes EBITDA is useful as an indicator of its ability to service debt, make new investments and meet working capital requirements. EBITDA, as calculated by the Company, may not be consistent with computations of EBITDA by other companies. In reporting EBITDA by segment, Affiliate expenses are allocated to a particular segment on a pro rata basis with respect to the revenue generated by that Affiliate in such segment.
(C) In January 2004, the Company’s Board of Directors authorized a three-for-two stock split. The additional shares of common stock were distributed on March 29, 2004. The weighted average shares outstanding and per share figures reflect the stock split.
(D) EITF Issue No. 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share” (“EITF 04-08”), became effective in the fourth quarter of 2004. Under EITF 04-08, the aggregate number of shares of common stock that could be issued in the future to settle contingently convertible securities are deemed to be outstanding for purposes of the calculation of diluted earnings per share. This approach, commonly referred to as the “if-converted” method, requires that such shares be deemed outstanding regardless of whether the issuance of those shares could actually be triggered. Under this method, the Company has included the shares of common stock that may be issued to settle its zero coupon senior convertible notes and floating rate senior convertible securities in the calculation of its diluted earnings per share for the fourth quarter and year ended December 31, 2004 and has restated earnings per share information for prior periods. In this if-converted calculation, while the contingently convertible securities continue to be reflected as liabilities on the Company’s balance sheet, the associated interest expense (net of taxes) has been added back to Net Income (as further illustrated on page 6).
14
(E) Cash earnings per share represents Cash Net Income divided by the adjusted diluted average shares outstanding. In this calculation, the potential share issuance in connection with the Company’s contingently convertible securities measures net shares using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the value of the contingently convertible securities in excess of par, if any, are deemed to be outstanding. The Company believes the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and the Company is relieved of its debt obligation. This method does not take into account any increase or decrease in the Company’s cost of capital in an assumed conversion.
(F) Minority interest on the Company’s income statement represents the profits allocated to Affiliate management owners for that period. Minority interest on the Company’s balance sheet represents the undistributed profits and capital owned by Affiliate management, who retain a conditional right to sell their interests to the Company.
(G) The Company completed new investments in TimesSquare Capital Management, LLC and AQR Capital Management, LLC (“AQR”) in the quarter ended December 31, 2004.
(H) The Company is required to use the equity method of accounting for its investment in AQR. Consistent with this method, the Company has not consolidated AQR’s operating results (including its revenue) in its income statement. The Company’s share of AQR’s profits is reported in “investment and other income”.
15