AMG Reports Financial and Operating Results for First Quarter of 2005; Company Reports EPS of $0.61; Cash EPS of $1.12.BOSTON Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. -- Affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: Managers Group, Inc. (NYSE NYSE See: New York Stock Exchange : AMG AMG All Music Guide (music website) AMG All Media Guide (group of media websites) AMG All Movie Guide (Movie website) AMG Arzneimittelgesetz (German Law) ) today reported its financial and operating results for the quarter ended March 31, 2005. Cash earnings per share ("Cash EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ") for the first quarter of 2005 were $1.12, compared to $0.91 for the first quarter of 2004, while diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the first quarter of 2005 were $0.61, compared to $0.47 for the same period of 2004. Cash Net Income was $41.7 million for the first quarter of 2005, compared to $29.4 million for the first quarter of 2004. Net Income for the first quarter of 2005 was $25.6 million, compared to $18.2 million for the first quarter of 2004. (Cash EPS and Cash Net Income are defined in the attached tables.) For the first quarter of 2005, revenue was $201.6 million, compared to $151.6 million for the first quarter of 2004. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the first quarter of 2005 was $58.6 million, compared to $43.8 million for the same period of 2004. Net client cash flows from directly managed assets for the first quarter of 2005 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.4 billion, while outflows of overlay (1) A preprinted, precut form placed over a screen, key or tablet for identification purposes. See keyboard template. (2) A program segment called into memory when required. assets were approximately $1.6 billion. Net inflows in directly managed assets in the mutual fund and institutional channels were $1.2 billion and $2.1 billion, respectively, while outflows in the high net worth channel were $1.9 billion. These aggregate net client cash flows for the quarter resulted in an increase of approximately $2.2 million to AMG's annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. EBITDA. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma for its pending acquisition of First Asset Management Inc., the aggregate assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. of AMG's affiliated investment management firms at March 31, 2005 were approximately $155 billion. "AMG had an excellent start to 2005, delivering year-over-year growth in Cash earnings per share of more than 23 percent," stated Sean M. Healey Healey is a surname originally from the Sligo area of the Republic of Ireland and the Gaelic word O hEalaighthe which derives from the word 'ealadhach' meaning indigenous. Other versions of this surname include Haly, Haley, Haily, Hely, Healy, O'Healey, O'Haly and many more. , President and Chief Executive Officer of AMG. "Our results reflect the continued excellent investment performance and positive net client cash flows of our largest Affiliates, including Tweedy, Browne, Friess Associates, Third Avenue and First Quadrant quadrant, in analytic geometry quadrant. 1 In analytic geometry, one of the four regions of the plane determined by two lines, the x-axis and the y-axis. , as well as our expanded participation in high-growth, higher-margin areas such as international equities and alternative investments through outstanding firms such as Genesis and AQR AQR Association for Qualitative Research (UK) AQR Airline Quality Rating AQR Anàlisi Quantitativa Regional AQR Assured Quality Routing (iBasis) AQR Applied Quantitative Research ." "Our results are especially impressive given the overall declines in the equity markets during the quarter," stated William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack J. Nutt, Chairman of AMG. "The quality and diversity of AMG's broad product offerings continue to provide a source of growth and stability to our earnings. We will further enhance our position with our recently-announced investment in six of Canada's leading mid-sized investment management firms through the acquisition of First Asset Management. With this investment, we will meaningfully enhance the diversity of our international product offerings." "We are also pleased with our prospects for future growth through the Managers Investment Group distribution platform," said Mr. Healey. "During the quarter, we completed the acquisition of the Fremont Fremont (frē`mŏnt). 1 City (1990 pop. 173,339), Alameda co., W Calif., on San Francisco Bay; inc. 1956. Long an agricultural center, with champagne vineyards founded (1870) by Leland Stanford, it still ships fruits and vegetables. Funds, through which we added approximately $3 billion in assets under management to The Managers Funds family of sub-advised mutual funds, which are distributed by Managers Investment Group. While we continue to develop the capabilities and infrastructure of the Managers platform, early signs are very promising in terms of market acceptance and the addition of products to significant platforms." 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 receive significant direct equity ownership in their firm while maintaining operating autonomy autonomy (ôtŏn`əmē) [Gr.,=self-rule], in a political sense, limited self-government, short of independence, of a political state or, more frequently, of a subdivision. . In addition, AMG provides centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay , competition for acquisitions of interests in investment management firms, our ability to complete 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2004. 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 1-800-257-2101 (domestic calls) or 1-303-262-2050 (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 11028408. 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. For more information on Affiliated Managers Group, Inc., please visit AMG's Web site at www.amg.com.
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
Three Months Three Months
Ended Ended
3/31/04 3/31/05
------------ -------------
Revenue $ 151,634 $ 201,612
Net Income $ 18,170 $ 25,553
Cash Net Income (A) $ 29,379 $ 41,730
EBITDA (B) $ 43,752 $ 58,553
Average shares outstanding - diluted (C) 39,974,682 44,075,669
Earnings per share - diluted (C)(a) $ 0.47 $ 0.61
Average shares outstanding -
adjusted diluted (D) 32,240,644 37,315,053
Cash earnings per share - diluted (D) $ 0.91 $ 1.12
December 31, March 31,
2004 2005
------------ -------------
Cash and cash equivalents $ 140,277 $ 122,653
Senior debt $ 126,750 $ 126,750
Senior convertible debt $ 423,958 $ 424,107
Mandatory convertible securities $ 300,000 $ 300,000
Stockholders' equity $ 707,692 $ 736,591
(a)As required by EITF 04-08 (discussed in Note C in greater detail),
the calculation of diluted earnings per share includes the addition
to Net Income of interest expense related to the Company's
contingently convertible securities, net of tax, of $607 and $1,294
for the three months ended March 31, 2004 and 2005, respectively.
Affiliated Managers Group, Inc.
Reconciliations of Earnings Per Share Calculation
(dollars in thousands, except per share data)
Three Months Three Months
Ended Ended
3/31/04 3/31/05
----------- -------------
Net Income $ 18,170 $ 25,553
Contingent convertible securities
interest expense, net 607 1,294
----------- -------------
Net Income, as adjusted $ 18,777 $ 26,847
Average shares outstanding - diluted (C) 39,974,682 44,075,669
Earnings per share - diluted (C) $ 0.47 $ 0.61
Affiliated Managers Group, Inc.
Reconciliations of Average Shares Outstanding
Three Months Three Months
Ended Ended
3/31/04 3/31/05
------------ ------------
Average shares outstanding - diluted (C) 39,974,682 44,075,669
Assumed issuance of COBRA shares (5,675,095) (5,944,283)
Assumed issuance of LYONS shares (2,344,234) (2,344,130)
Dilutive impact of COBRA shares 196,363 1,127,305
Dilutive impact of LYONS shares 88,928 400,492
----------- -----------
Average shares outstanding -
adjusted diluted (D) 32,240,644 37,315,053
=========== ===========
Affiliated Managers Group, Inc.
Operating Results
Assets Under Management
(in millions)
Statement of Changes - Quarter to Date
Mutual High Net
Fund Institutional Worth Total
--------- ------------- ---------- --------
Assets under management,
December 31, 2004 $29,881 $79,430 $20,491 $129,802
Net client cash flows -
directly managed assets 1,241 2,053 (1,942) 1,352
Net client cash flows -
overlay assets - (1,568) - (1,568)
New investments (F) 2,825 72 88 2,985
Investment performance 335 (316) (529) (510)
--------- ------------- --------- --------
Assets under management,
March 31, 2005 $34,282 $79,671 $18,108 $132,061
========= ============= ========= ========
Financial Results
(in thousands)
Three Three
Months Months
Ended Percent Ended Percent
3/31/04 of Total 3/31/05 of Total
--------- ------------- --------- ---------
Revenue
Mutual Fund $ 60,303 40% $ 80,941 40%
Institutional 55,241 36% 88,048 44%
High Net Worth 36,090 24% 32,623 16%
--------- ------------- --------- ---------
$151,634 100% $201,612 100%
========= ============= ========= =========
EBITDA (B)
Mutual Fund $ 18,111 41% $ 23,042 39%
Institutional 15,240 35% 27,220 47%
High Net Worth 10,401 24% 8,291 14%
--------- ------------- --------- ---------
$ 43,752 100% $ 58,553 100%
========= ============= ========= =========
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in thousands)
Three Months Three Months
Ended Ended
3/31/04 3/31/05
------------ ------------
Net Income $ 18,170 $25,553
Intangible amortization 4,101 5,736
Intangible amortization - equity method
investment (G) - 1,998
Intangible-related deferred taxes 6,083 7,430
Affiliate depreciation 1,025 1,013
------------ ------------
Cash Net Income (A) $ 29,379 $41,730
============ ============
Cash flow from operations $ 11,806 $ (8,394)
Interest expense, net of non-cash items 6,257 6,851
Current tax provision 4,549 8,000
Income from equity method investment (G) - 5,000
Changes in assets and liabilities and
other adjustments 21,140 47,096
------------ ------------
EBITDA (B) $ 43,752 $ 58,553
------------ ------------
Holding company expenses 6,891 9,768
------------ ------------
EBITDA Contribution $ 50,643 $ 68,321
============ ============
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
Three Months Ended
March 31,
2004 2005
----------- -----------
Revenue $ 151,634 $ 201,612
Operating expenses:
Compensation and related expenses 57,291 81,212
Selling, general and administrative 23,321 33,799
Amortization of intangible assets 4,101 5,736
Depreciation and other amortization 1,539 1,534
Other operating expenses 3,722 4,839
----------- -----------
89,974 127,120
----------- -----------
Operating income 61,660 74,492
----------- -----------
Non-operating (income) and expenses:
Investment and other income (1,884) (4,178)
Interest expense 7,315 8,070
----------- -----------
5,431 3,892
----------- -----------
Income before minority interest and taxes 56,229 70,600
Minority interest (E) (25,432) (29,385)
----------- -----------
Income before income taxes 30,797 41,215
Income taxes - current 4,549 8,000
Income taxes - intangible-related deferred 6,083 7,430
Income taxes - other deferred 1,995 232
----------- -----------
Net Income $ 18,170 $ 25,553
=========== ===========
Average shares outstanding - basic 30,310,432 33,311,259
Average shares outstanding - diluted (C) 39,974,682 44,075,669
Earnings per share - basic $ 0.60 $ 0.77
Earnings per share - diluted (C) $ 0.47 $ 0.61
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in thousands)
December 31, March 31,
2004 2005
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 140,277 $ 122,653
Short-term investments 21,173 -
Investment advisory fees receivable 91,487 109,542
Prepaid expenses and other current assets 24,795 28,554
----------- -----------
Total current assets 277,732 260,749
Fixed assets, net 40,953 42,051
Equity investment in Affiliate 252,597 253,239
Acquired client relationships, net 440,409 445,441
Goodwill 888,567 887,328
Other assets 33,163 34,283
----------- -----------
Total assets $1,933,421 $1,923,091
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 114,350 $ 105,251
Payables to related party 17,728 8,080
----------- -----------
Total current liabilities 132,078 113,331
Senior debt 126,750 126,750
Senior convertible debt 423,958 424,107
Mandatory convertible securities 300,000 300,000
Deferred income taxes 124,168 129,070
Other long-term liabilities 31,397 26,580
----------- -----------
Total liabilities 1,138,351 1,119,838
Minority interest (E) 87,378 66,662
Stockholders' equity:
Common stock 387 387
Additional paid-in capital 566,776 567,158
Accumulated other comprehensive income 1,537 2,754
Retained earnings 384,119 409,672
----------- -----------
952,819 979,971
Less treasury stock, at cost (245,127) (243,380)
----------- ----------
Total stockholders' equity 707,692 736,591
----------- -----------
Total liabilities and stockholders'
equity $1,933,421 $1,923,091
=========== ===========
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
Three Months Ended
March 31,
2004 2005
----------------------
Cash flow from (used in) operating activities:
Net Income $ 18,170 $ 25,553
Adjustments to reconcile Net Income to net cash
flow from (used in) operating activities:
Amortization of intangible assets 4,101 5,736
Amortization of debt issuance costs 904 745
Depreciation and amortization of fixed assets 1,539 1,534
Deferred income tax provision 8,078 7,662
Accretion of interest 154 474
Income from equity method investment, net - (3,002)
Tax benefit from exercise of stock options 5,509 395
Other investment income - (657)
Changes in assets and liabilities:
Increase in investment advisory fees
receivable (8,832) (18,055)
Decrease in other current assets 1,549 857
Decrease in non-current other receivables 711 331
Decrease in accounts payable, accrued expenses
and other liabilities (20,084) (10,480)
Increase (decrease) in minority interest 7 (19,487)
---------- ----------
Cash flow from (used in) operating
activities 11,806 (8,394)
---------- ----------
Cash flow from (used in) investing activities:
Costs of investments in Affiliates, net of
cash acquired (4,114) (15,498)
Purchase of fixed assets (1,295) (2,633)
Purchase of investment securities (3,675) (5,930)
Sale of investment securities 658 24,062
Distributions received from equity method
investment - 2,361
Increase in other assets (106) -
---------- ----------
Cash flow from (used in) investing
activities (8,532) 2,362
---------- ----------
Cash flow from (used in) financing activities:
Borrowings of senior bank debt - 5,000
Repayments of senior bank debt - (5,000)
Issuance of convertible securities 300,000 -
Issuance of common stock 11,414 1,741
Repurchase of common stock (194,420) -
Issuance costs (9,715) (243)
Repayments of notes and other liabilities (4,584) (12,805)
---------- ----------
Cash flow from (used in) financing
activities 102,695 (11,307)
---------- ----------
Effect of foreign exchange rate changes on cash
flow - (285)
Net increase (decrease) in cash and cash
equivalents 105,969 (17,624)
Cash and cash equivalents at beginning of period 224,282 140,277
---------- ----------
Cash and cash equivalents at end of period $330,251 $122,653
========== ==========
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) 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. EITF 04-08 states that any shares of
common stock that may be issued to settle contingently convertible
securities (such as the shares that underlie the Company's zero
coupon senior convertible notes and floating rate senior
convertible securities) must be considered issued in the
calculation of diluted earnings per share, regardless of whether
the market price trigger (or other contingent feature) in these
securities has been met. This is commonly referred to as the
"if-converted" method. Under this method, the Company has included
the shares of common stock that may be issued to settle its
contingently convertible securities in the calculation of its
diluted earnings per share for the quarter ended March 31, 2005
and has retroactively adjusted earnings per share information for
the quarter ended March 31, 2004. 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 in
"Reconciliations of Earnings Per Share Calculation").
(D) Cash earnings per share represents Cash Net Income divided by
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.
(E) 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.
(F) The Company completed its acquisition of the mutual fund business
of Fremont Investment Advisors through Managers Investment Group
LLC in the quarter ended March 31, 2005.
(G) The Company is required to use the equity method of accounting for
its investment in AQR Capital Management, LLC ("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, net of intangible amortization,
is reported in "Investment and other income." AQR's assets under
management are included in the Company's reported assets under
management.
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