AMG Reports Financial and Operating Results for Fourth Quarter and Full Year 2005; Company Reports EPS of $0.90, Cash EPS of $1.42 for Fourth Quarter, EPS of $2.81, Cash EPS of $4.85 for Full Year 2005.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 fourth quarter and full year 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 fourth quarter of 2005 were $1.42, compared to $1.08 for the fourth 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 fourth quarter of 2005 were $0.90, compared to $0.58 for the same period of 2004. Cash Net Income was $56.2 million for the fourth quarter of 2005, compared to $37.5 million for the fourth quarter of 2004. Net Income for the fourth quarter of 2005 was $38.8 million, compared to $23.3 million for the fourth quarter of 2004. (Cash EPS and Cash Net Income are defined in the attached tables.) For the fourth quarter of 2005, revenue was $272.5 million, compared to $184.0 million for the fourth 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 fourth quarter of 2005 was $83.4 million, compared to $53.8 million for the same period of 2004. For the year ended December December: see month. 31, 2005, Cash Net Income was $186.1 million, while EBITDA was $267.5 million. For the same period, Net Income was $119.1 million, on revenue of $916.5 million. 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. Net client cash flows for the fourth quarter of 2005 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4.8 billion, with net inflows in the institutional, mutual fund, and high net worth channels of $4.4 billion, $201 million, and $155 million, respectively. These aggregate net client cash flows resulted in an increase of approximately $8 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. Net client cash flows for the full year 2005 were $10.9 billion, resulting in an increase of approximately $15 million to AMG's annualized EBITDA. 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. grew by 42% during 2005, and were $184 billion at December 31, 2005. "AMG had an outstanding 2005, as we achieved broad success across all elements of our growth strategy. We generated record organic growth as a result of the excellent investment performance and net client cash flows of our Affiliates, and continued to expand our product offerings through the successful addition of new Affiliates," 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. "For the quarter, Cash earnings per share increased by over 30% as compared to the same period of 2004. For the full year, organic growth by our Affiliates increased our assets under management by $30 billion, including $11 billion in net client cash flows, which added approximately $15 million to our annualized EBITDA." Mr. Healey continued, "Our Affiliates produced exceptional investment performance and net client cash flows during the quarter and for the full year, with especially strong results across our larger Affiliates by EBITDA contribution. AMG's Affiliates are among the industry's leading investment management firms, with broad participation in the fastest growing segments of the asset management business. Within these segments, our Affiliates are exceptionally well positioned, with highly rated, strong performing investment products across every major product category. Demand for alternative investment products was particularly strong during the year, and, through our investment in AQR AQR Association for Qualitative Research (UK) AQR Airline Quality Rating AQR Anàlisi Quantitativa Regional AQR Assured Quality Routing (iBasis) AQR Applied Quantitative Research and the continued growth of 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. , two of the most highly regarded quantitative quantitative /quan·ti·ta·tive/ (kwahn´ti-ta?tiv) 1. denoting or expressing a quantity. 2. relating to the proportionate quantities or to the amount of the constituents of a compound. managers in the industry, we have meaningfully expanded our participation in this area, with alternative products now generating approximately 15% of our EBITDA. Our increased participation in alternative investments resulted in a substantial contribution to our earnings from performance fees this year, and with the strength of our Affiliates' investment performance and net client cash flows in this area, we are confident in our prospects for continued growth from these products. "We also have a significant participation in another of the fastest growing industry segments, international equities, which contribute approximately 35% of our EBITDA. We further increased our participation in this segment in 2005, with our acquisition of First Asset Management and its interests in six leading Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. mid-sized asset management firms This is a list of corporations that provide financial asset management.
n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. Affiliates such as Tweedy, Browne and Third Avenue, our growth oriented Affiliates have superior near- and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. performance records, and we are well positioned for strong growth in this area should the markets continue to favor growth equities, as they did in the fourth quarter." Mr. Healey concluded, "In addition to the organic growth of our Affiliates, our unique platform provides a further source of earnings growth through accretive investments in new Affiliates. With an established reputation as an innovative and helpful partner to our Affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. firms, AMG is widely recognized as the succession planning Management Succession Planning In organizational development, succession planning is the process of identifying and preparing suitable employees through mentoring, training and job rotation, to replace key players — such as the chief executive officer (CEO) — partner of choice among growing, mid-sized investment management firms, and we are confident that we will continue to add materially to AMG's growth and diversity through investments in attractive new Affiliates." "Through our Affiliate growth and development initiatives, AMG offers an array of opportunities for Affiliates to meaningfully strengthen and enhance their businesses," 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. "During the year, we broadened these opportunities with the launch of our broker-sold distribution platform, which significantly expanded the product development and distribution capacity of our Affiliates. In addition, our Affiliate Legal and Compliance Program continues to offer Affiliates access to the highest quality legal and compliance resources on a cost efficient basis. We remain focused on identifying and creating opportunities to leverage the benefits of scale on behalf of our Affiliates." 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, 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 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 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 1-800-366-3908 (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 11051583. 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
12/31/04 12/31/05
-------------- --------------
Revenue $ 183,955 $ 272,497
Net Income $ 23,258 $ 38,764
Cash Net Income (A) $ 37,489 $ 56,216
EBITDA (B) $ 53,827 $ 83,422
Average shares outstanding - diluted (C) 41,846,140 45,303,516
Earnings per share - diluted (C)(1) $ 0.58 $ 0.90
Average shares outstanding - adjusted
diluted (D) 34,790,006 39,707,676
Cash earnings per share - diluted (D) $ 1.08 $ 1.42
December 31, December 31,
2004 2005
-------------- --------------
Cash and cash equivalents $ 140,277 $ 140,423
Senior debt $ 126,750 $ 241,250
Senior convertible debt $ 423,958 $ 424,232
Mandatory convertible securities $ 300,000 $ 300,000
Stockholders' equity $ 707,692 $ 817,381
(1) 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
$1,015 and $2,055 for the three months ended December 31, 2004 and
2005, respectively.
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
Year Year
Ended Ended
12/31/04 12/31/05
-------------- --------------
Revenue $ 659,997 $ 916,492
Net Income $ 77,147 $ 119,069
Cash Net Income (A) $ 126,475 $ 186,103
EBITDA (B) $ 186,434 $ 267,463
Average shares outstanding - diluted (C) 39,644,676 44,689,655
Earnings per share - diluted (C)(2) $ 2.02 $ 2.81
Average shares outstanding - adjusted
diluted (D) 31,998,750 38,404,868
Cash earnings per share - diluted (D) $ 3.95 $ 4.85
(2) 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
$3,016 and $6,693 for the years ended December 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
12/31/04 12/31/05
-------------- --------------
Net Income $ 23,258 $ 38,764
Contingent convertible securities
interest expense, net 1,015 2,055
-------------- --------------
Net Income, as adjusted $ 24,273 $ 40,819
Average shares outstanding - diluted (C) 41,846,140 45,303,516
Earnings per share - diluted (C) $ 0.58 $ 0.90
Year Year
Ended Ended
12/31/04 12/31/05
-------------- --------------
Net Income $ 77,147 $ 119,069
Contingent convertible securities
interest expense, net 3,016 6,693
-------------- --------------
Net Income, as adjusted $ 80,163 $ 125,762
Average shares outstanding - diluted (C) 39,644,676 44,689,655
Earnings per share - diluted (C) $ 2.02 $ 2.81
Affiliated Managers Group, Inc.
Reconciliations of Average Shares Outstanding
Three Months Three Months
Ended Ended
12/31/04 12/31/05
------------- --------------
Average shares outstanding - diluted (C) 41,846,140 45,303,516
Assumed issuance of COBRA shares (6,066,716) (6,752,305)
Assumed issuance of LYONS shares (2,344,234) (2,337,698)
Dilutive impact of COBRA shares 1,073,673 2,757,892
Dilutive impact of LYONS shares 281,143 736,271
------------- --------------
Average shares outstanding - adjusted
diluted (D) 34,790,006 39,707,676
============= ==============
Year Year
Ended Ended
12/31/04 12/31/05
------------- --------------
Average shares outstanding - diluted (C) 39,644,676 44,689,655
Assumed issuance of COBRA shares (5,711,719) (6,346,063)
Assumed issuance of LYONS shares (2,344,234) (2,342,522)
Dilutive impact of COBRA shares 317,509 1,865,097
Dilutive impact of LYONS shares 92,518 538,701
------------- --------------
Average shares outstanding - adjusted
diluted (D) 31,998,750 38,404,868
============= ==============
Affiliated Managers Group, Inc.
Operating Results
(in millions)
Assets Under Management (E)
Statement of Changes - Quarter to Date
Mutual High Net
Fund Institutional Worth Total
---------- ------------- --------- ----------
Assets under management,
September 30, 2005 $ 49,081 $ 99,976 $ 26,254 $ 175,311
Net client cash flows 201 4,442 155 4,798
Investment performance 374 3,384 443 4,201
---------- ---------- ---------- ----------
Assets under management,
December 31, 2005 $ 49,656 $ 107,802 $ 26,852 $ 184,310
========== ========== ========== ==========
Statement of Changes - Year to Date
Mutual High Net
Fund Institutional Worth Total
---------- ------------- ---------- ---------
Assets under management,
December 31, 2004 $ 33,919 $ 76,127 $ 19,756 $ 129,802
Net client cash flows 4,117 8,735 (1,961) 10,891
New investments (F) 6,462 13,868 7,611 27,941
First Quadrant Ltd.
operations (G) - (3,647) - (3,647)
Investment performance 5,158 12,719 1,446 19,323
---------- ---------- ---------- ----------
Assets under management,
December 31, 2005 $ 49,656 $ 107,802 $ 26,852 $ 184,310
========== ========== ========== ==========
Affiliated Managers Group, Inc.
Operating Results
(in thousands)
Financial Results (E)
Three Three
Months Months
Ended Percent Ended Percent
12/31/04 of Total 12/31/05 of Total
---------- ------------- ---------- ---------
Revenue
Mutual Fund $ 72,639 39% $ 113,388 42%
Institutional 78,744 43% 121,300 44%
High Net Worth 32,572 18% 37,809 14%
---------- --------- ---------- --------
$ 183,955 100% $ 272,497 100%
========== ========= ========== ========
EBITDA (B)
Mutual Fund $ 22,648 42% $ 29,936 36%
Institutional 22,147 41% 44,756 54%
High Net Worth 9,032 17% 8,730 10%
---------- --------- ---------- --------
$ 53,827 100% $ 83,422 100%
========== ========= ========== ========
Year Year
Ended Percent Ended Percent
12/31/04 of Total 12/31/05 of Total
---------- ------------- ---------- ---------
Revenue
Mutual Fund $ 261,858 40% $ 400,344 44%
Institutional 262,356 39% 384,440 42%
High Net Worth 135,783 21% 131,708 14%
---------- --------- ---------- --------
$ 659,997 100% $ 916,492 100%
========== ========= ========== ========
EBITDA (B)
Mutual Fund $ 78,679 42% $ 110,211 41%
Institutional 71,554 39% 124,934 47%
High Net Worth 36,201 19% 32,318 12%
---------- --------- ---------- --------
$ 186,434 100% $ 267,463 100%
========== ========= ========== ========
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in thousands)
Three Months Three Months
Ended Ended
12/31/04 12/31/05
------------ ------------
Net Income $ 23,258 $ 38,764
Intangible amortization 5,125 6,875
Intangible amortization - equity method
investments (H) 908 2,296
Intangible-related deferred taxes 7,107 6,873
Affiliate depreciation 1,091 1,408
------------ ------------
Cash Net Income (A) $ 37,489 $ 56,216
============ ============
Cash flow from operations $ 45,563 $ 67,496
Interest expense, net of non-cash items 6,288 9,527
Current tax provision 6,917 14,995
Income from equity method investments,
net of distributions (H) 2,173 12,929
Changes in assets and liabilities and
other adjustments (7,114) (21,525)
------------ ------------
EBITDA (B) $ 53,827 $ 83,422
------------ ------------
Holding company expenses 7,866 17,123
------------ ------------
EBITDA Contribution $ 61,693 $ 100,545
============ ============
Year Year
Ended Ended
12/31/04 12/31/05
------------ ------------
Net Income $ 77,147 $ 119,069
Intangible amortization 18,339 24,873
Intangible amortization - equity method
investments (H) 908 8,483
Intangible-related deferred taxes 25,791 28,791
Affiliate depreciation 4,290 4,887
------------ ------------
Cash Net Income (A) $ 126,475 $ 186,103
============ ============
Cash flow from operations $ 177,886 $ 204,078
Interest expense, net of non-cash items 26,929 32,512
Current tax provision 20,330 38,895
Income from equity method investments,
net of distributions (H) 2,173 18,889
Changes in assets and liabilities and
other adjustments (40,884) (26,911)
------------ ------------
EBITDA (B) $ 186,434 $ 267,463
------------ ------------
Holding company expenses 28,831 46,401
------------ ------------
EBITDA Contribution $ 215,265 $ 313,864
============ ============
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenue $ 183,955 $ 272,497 $ 659,997 $ 916,492
Operating expenses:
Compensation and
related expenses 65,455 106,415 241,633 365,960
Selling, general
and administrative 31,980 46,793 109,066 162,078
Amortization of
intangible assets 5,125 6,875 18,339 24,873
Depreciation and
other amortization 1,623 1,977 6,369 7,029
Other operating
expenses 4,359 6,426 16,708 21,497
------------ ------------ ------------ ------------
108,542 168,486 392,115 581,437
------------ ------------ ------------ ------------
Operating income 75,413 104,011 267,882 335,055
------------ ------------ ------------ ------------
Non-operating
(income) and
expenses:
Investment and
other income (6,265) (20,087) (8,460) (36,286)
Interest expense 7,407 10,744 31,725 37,426
------------ ------------ ------------ ------------
1,142 (9,343) 23,265 1,140
------------ ------------ ------------ ------------
Income before
minority interest
and taxes 74,271 113,354 244,617 333,915
Minority interest (I) (35,507) (51,824) (115,524) (144,263)
------------ ------------ ------------ ------------
Income before
income taxes 38,764 61,530 129,093 189,652
Income taxes -
current 6,917 14,995 20,330 38,895
Income taxes -
intangible-related
deferred 7,107 6,873 25,791 28,791
Income taxes -
other deferred 1,482 898 5,825 2,897
------------ ------------ ------------ ------------
Net Income $ 23,258 $ 38,764 $ 77,147 $ 119,069
============ ============ ============ ============
Average shares
outstanding -
basic 31,314,436 33,832,572 29,994,560 33,667,542
Average shares
outstanding -
diluted (C) 41,846,140 45,303,516 39,644,676 44,689,655
Earnings per share
- basic $ 0.74 $ 1.15 $ 2.57 $ 3.54
Earnings per share
- diluted (C) $ 0.58 $ 0.90 $ 2.02 $ 2.81
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2004 2005
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 140,277 $ 140,423
Short-term investments 21,173 -
Investment advisory fees receivable 91,487 148,850
Prepaid expenses and other current
assets 24,795 48,529
------------- -------------
Total current assets 277,732 337,802
Fixed assets, net 40,953 50,592
Equity investments in Affiliates 252,597 301,476
Acquired client relationships, net 440,409 483,692
Goodwill 888,567 1,093,249
Other assets 33,163 54,825
------------- -------------
Total assets $ 1,933,421 $ 2,321,636
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 114,350 $ 176,711
Senior debt - 65,750
Payables to related party 17,728 14,127
------------- -------------
Total current liabilities 132,078 256,588
Senior debt 126,750 175,500
Senior convertible debt 423,958 424,232
Mandatory convertible securities 300,000 300,000
Deferred income taxes 124,168 182,623
Other long-term liabilities 31,397 20,149
------------- -------------
Total liabilities 1,138,351 1,359,092
Minority interest (I) 87,378 145,163
Stockholders' equity:
Common stock 387 390
Additional paid-in capital 566,776 593,090
Accumulated other comprehensive income 1,537 16,756
Retained earnings 384,119 503,188
------------- -------------
952,819 1,113,424
Less treasury stock, at cost (245,127) (296,043)
------------- -------------
Total stockholders' equity 707,692 817,381
------------- -------------
Total liabilities and stockholders'
equity $ 1,933,421 $ 2,321,636
============= =============
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2004 2005 2004 2005
---------- --------- ---------- ----------
Cash flow from operating
activities:
Net Income $ 23,258 $ 38,764 $ 77,147 $ 119,069
Adjustments to reconcile
Net Income to net cash
flow from operating
activities:
Amortization of
intangible assets 5,125 6,875 18,339 24,873
Amortization of debt
issuance costs 789 743 3,641 3,018
Depreciation and other
amortization 1,623 1,977 6,369 7,029
Deferred income tax
provision 8,589 7,771 31,616 31,688
Accretion of interest 330 474 1,155 1,896
Income from equity method
investments, net of
amortization (1,265) (16,722) (1,265) (26,971)
Distributions received
from equity method
investments - 6,089 - 16,565
Tax benefit from exercise
of stock options 2,502 2,839 8,027 13,942
Other adjustments - 22 2,493 (2,231)
Changes in assets and
liabilities:
Increase in investment
advisory fees receivable (2,483) (21,874) (26,199) (53,846)
(Increase) decrease in
other current assets (5,020) (12,316) 1,827 (8,258)
(Increase) decrease in
non-current other
receivables (9,393) 1,771 (9,992) (126)
Increase (decrease) in
accounts payable,
accrued expenses
and other liabilities (5,335) 6,518 16,386 32,217
Increase in minority
interest 26,843 44,565 48,342 45,213
---------- --------- ---------- ----------
Cash flow from
operating
activities 45,563 67,496 177,886 204,078
---------- --------- ---------- ----------
Cash flow used in investing
activities:
Costs of investments in
Affiliates, net of cash
acquired (391,926) (4,409) (474,104) (85,175)
Purchase of fixed assets (492) (5,422) (6,977) (14,523)
Purchase of investment
securities (24,630) - (37,080) (6,393)
Sale of investment
securities 37,297 - 39,955 24,062
Increase in other assets (3) - (60) -
---------- --------- ---------- ----------
Cash flow used in
investing
activities (379,754) (9,831) (478,266) (82,029)
---------- --------- ---------- ----------
Cash flow from (used in)
financing activities:
Borrowings of senior bank
debt 83,000 49,500 134,000 224,500
Repayments of senior bank
debt (83,000) (65,000) (83,000) (100,000)
Repayment of debt assumed
in new investment - - - (150,811)
Issuance of convertible
securities - - 300,000 -
Repurchase of convertible
securities - - (124,525) -
Repurchase of senior debt
securities - - - (10,000)
Issuance of common stock 198,673 4,635 210,232 28,892
Repurchase of common
stock - (42,796) (194,420) (82,317)
Settlement of forward
equity sale agreement - - - (14,008)
Issuance costs (435) (2,009) (12,800) (2,660)
Repayments of notes
payable and other
liabilities (3,415) (377) (14,244) (15,863)
---------- --------- ---------- ----------
Cash flow from
(used in)
financing
activities 194,823 (56,047) 215,243 (122,267)
---------- --------- ---------- ----------
Effect of foreign exchange
rate changes on cash flow 1,030 (430) 1,132 364
Net increase (decrease) in
cash and cash equivalents (138,338) 1,188 (84,005) 146
Cash and cash equivalents at
beginning of period 278,615 139,235 224,282 140,277
---------- --------- ---------- ----------
Cash and cash equivalents at
end of period $ 140,277 $140,423 $ 140,277 $ 140,423
========== ========= ========== ==========
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 three months and years ended
December 31, 2004 and 2005. 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) In connection with the Company's July 2005 acquisition of First
Asset Management Inc., and the resulting increase in registered
products based outside the United States, the Company amended its
Mutual Fund distribution channel definition to include non-
institutional collective investment vehicle products registered
abroad. As a result, in the third quarter of 2005 approximately
$3.2 billion and $0.7 billion of existing assets under management
in the Institutional and High Net Worth distribution channels,
respectively, were reclassified to the Mutual Fund distribution
channel, and accordingly, financial information for corresponding
periods in 2004 and 2005 were revised to conform to this
presentation.
(F) The Company completed its acquisition of the mutual fund business
of Fremont Investment Advisors through Managers Investment Group
LLC in January 2005. In July 2005, the Company completed its
acquisition of equity investments in six Canadian asset management
firms: Foyston, Gordon & Payne, Inc.; Beutel, Goodman & Company
Ltd.; Montrusco Bolton Investment Inc.; Deans Knight Capital
Management Ltd.; Triax Capital Corporation; and Covington Capital
Corporation. The Company acquired these interests and certain
other assets through the acquisition of First Asset Management
Inc.
(G) In 2005, the Company sold its interest in First Quadrant Ltd.
(H) The Company is required to use the equity method of accounting for
its investments in AQR Capital Management, LLC, Beutel,Goodman &
Company Ltd. and Deans Knight Capital Management Ltd. (together,
"equity method investments"). Consistent with this method, the
Company has not consolidated the operating results (including the
revenue) of its equity method investments in its income statement.
The Company's share of its equity method investments' profits, net
of intangible amortization, is reported in "Investment and other
income." Income tax attributable to these profits is reported
within the Company's consolidated income tax provision. The assets
under management of equity method investments are included in the
Company's reported assets under management.
(I) 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.
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