AMG Reports Financial and Operating Results for Third Quarter and Nine Months Ended September 30, 2004.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. -- Company Reports 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. of $0.55; Cash EPS of $0.96 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 and nine months ended September September: see month. 30, 2004. Cash earnings per share ("Cash EPS") for the third quarter of 2004 were $0.96, compared to $0.84 for the third quarter of 2003, 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 third quarter of 2004 were $0.55, compared to $0.50 for the same period of 2003. Cash Net Income was $29.3 million for the third quarter of 2004, compared to $27.5 million for the third quarter of 2003. Net Income for the third quarter of 2004 was $16.8 million, compared to $16.4 million for the third quarter of 2003. (Cash EPS and Cash Net Income are defined in the attached tables.) For the third quarter of 2004, revenue was $165.8 million, compared to $128.5 million for the third quarter of 2003. 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 third quarter of 2004 was $42.7 million, compared to $39.3 million for the same period of 2003. For the nine months ended September 30, 2004, Cash Net Income was $89.0 million, while EBITDA was $132.6 million. For the same period, Net Income was $53.9 million, on revenue of $476.0 million. For the nine months ended September 30, 2003, Cash Net Income was $76.5 million, while EBITDA was $106.6 million. For the same period, Net Income was $43.2 million, on revenue of $355.4 million. Net client cash flows were $(1.1) billion, with outflows of $1.0 billion from directly managed assets, and $99 million from 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. Net inflows in the mutual fund channel were $475 million, while outflows in the institutional and high net worth channels were $308 million and $1.2 billion, respectively. These aggregate net client cash flows for the quarter resulted in a decrease of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.0 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. 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 September 30, 2004 were $101.0 billion, and 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 investment in TimesSquare Capital Management and 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, AMG's assets under management at September 30, 2004 were approximately $109.0 billion. "AMG's Affiliates posted solid results during a challenging quarter in the equity market environment, generating growth in Cash earnings per share of 15% year-over-year," 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 and Chief Executive Officer. "While our net flows in the high net worth and institutional channels reflect continued challenges to the large-cap Large-cap A stock with a high level of capitalization, usually at least $5 billion market value. large-cap 1. Of or relating to the common stock of a big corporation that has considerable retained earnings and a large amount of product at Rorer Asset Management, client cash flows remained strong across the remainder of 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. group, particularly in the mutual fund channel, where our international and value equity funds have generated strong results for both the quarter and the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. ." "We were very pleased this quarter to announce our pending investment in the equity business of TimesSquare Capital Management, a highly regarded investment manager specializing in small- and mid-cap Mid-cap Short for "Middle Cap," mid cap refers to stocks with a market capitalization of between $2 billion to $10 billion. Notes: As the name implies, a mid-cap is in the middle of the pack. A mid-cap isn't too big, but at the same time has a relatively decent market cap. growth equity investing with approximately $5.0 billion in assets under management. We expect to complete our investment in TimesSquare and our acquisition of the Fremont Funds during the fourth quarter," 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 Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "In addition to these pending transactions, we continue to make excellent progress in executing additional investments in new Affiliates." "AMG significantly expanded the scope of our growth and development initiatives during the third quarter," stated Nate Dalton Dalton, city (1990 pop. 21,761), seat of Whitfield co., extreme NW Ga., in the Appalachian valley; inc. 1847. It is a highly industrialized city in a farm area. , Executive Vice President in charge of Affiliate Development. "With the launch of Managers Investment Group, we have combined several successful distribution and service teams with an industry-leading operational infrastructure to distribute and service more than 75 institutional-quality investment products offered by AMG Affiliates to separate account and mutual fund investors through banks, brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. firms, and other sponsored platforms. Managers Investment Group brings together the strengths of several complementary businesses to expand our product offerings across segments of the retail marketplace." 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 December: see month. 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 1-800-366-7449 (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 11009627. 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
9/30/03 9/30/04
Revenue $ 128,465 $ 165,846
Net Income $ 16,395 $ 16,799
Cash Net Income (A) $ 27,527 $ 29,253
EBITDA (B) $ 39,314 $ 42,728
Average shares outstanding - diluted (C) 32,951,832 30,570,211
Earnings per share - diluted (C) $ 0.50 $ 0.55
Cash earnings per share - diluted (C) (D) $ 0.84 $ 0.96
December 31, September 30,
2003 2004
Cash and cash equivalents $ 253,334 $ 314,867
Senior bank debt $ - $ 51,000
Senior convertible debt $ 423,340 $ 423,803
Mandatory convertible securities $ 230,000 $ 375,750
Stockholders' equity $ 614,769 $ 491,105
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
Nine Months Nine Months
Ended Ended
9/30/03 9/30/04
Revenue $ 355,413 $ 476,042
Net Income $ 43,215 $ 53,889
Cash Net Income (A) $ 76,489 $ 88,986
EBITDA (B) $ 106,608 $ 132,607
Average shares outstanding - diluted (C) 32,572,684 30,991,442
Earnings per share - diluted (C) $ 1.33 $ 1.74
Cash earnings per share - diluted (C) (D) $ 2.35 $ 2.87
Affiliated Managers Group, Inc.
Operating Results
(in millions)
Assets Under Management
Statement of Changes - Quarter to Date
Mutual High Net
Fund Institutional Worth Total
Assets under management,
June 30, 2004 $ 25,805 $ 54,335 $ 22,079 $ 102,219
Net client cash flows
- directly managed
assets 475 (308) (1,178) (1,011)
Net client cash flows
- overlay assets - (99) - (99)
Investment performance (99) 528 (527) (98)
Assets under management,
September 30, 2004 $ 26,181 $ 54,456 $ 20,374 $ 101,011
Statement of Changes - Year to Date
Mutual High Net
Fund Institutional Worth Total
Assets under management,
December 31, 2003 $ 23,339 $ 44,686 $ 23,499 $ 91,524
Net client cash flows
- directly managed
assets 1,118 837 (2,928) (973)
Net client cash flows
- overlay assets - 33 - 33
New investments 361 7,257 - 7,618
Investment performance 1,363 1,643 (197) 2,809
Assets under management,
September 30, 2004 $ 26,181 $ 54,456 $ 20,374 $ 101,011
Affiliated Managers Group, Inc.
Operating Results
(in thousands)
Financial Results
Three Three
Months Months
Ended Percent Ended Percent
9/30/03 of Total 9/30/04 of Total
Revenue
Mutual Fund $ 50,094 39% $ 63,857 38%
Institutional 44,956 35% 67,808 41%
High Net Worth 33,415 26% 34,181 21%
$ 128,465 100% $ 165,846 100%
EBITDA (B)
Mutual Fund $ 15,975 41% $ 17,537 41%
Institutional 12,632 32% 16,744 39%
High Net Worth 10,707 27% 8,447 20%
$ 39,314 100% $ 42,728 100%
Nine Months Nine Months
Ended Percent Ended Percent
9/30/03 of Total 9/30/04 of Total
Revenue
Mutual Fund $ 136,286 38% $ 185,710 39%
Institutional 122,220 35% 185,421 39%
High Net Worth 96,907 27% 104,911 22%
$ 355,413 100% $ 476,042 100%
EBITDA (B)
Mutual Fund $ 42,000 40% $ 53,906 41%
Institutional 34,533 32% 50,063 38%
High Net Worth 30,075 28% 28,638 21%
$ 106,608 100% $ 132,607 100%
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in thousands)
Three Months Three Months
Ended Ended
9/30/03 9/30/04
Net Income $ 16,395 $ 16,799
Intangible amortization 4,065 4,950
Intangible-related deferred taxes 5,950 6,441
Affiliate depreciation 1,117 1,063
Cash Net Income (A) $ 27,527 $ 29,253
Cash flow from operations $ 49,348 $ 51,133
Interest expense, net of non-cash items 4,789 6,829
Current tax provision 3,372 3,240
Changes in assets and liabilities and other
adjustments (18,195) (18,474)
EBITDA (B) $ 39,314 $ 42,728
Holding company expenses 5,000 7,036
EBITDA Contribution $ 44,314 $ 49,764
Nine Months Nine Months
Ended Ended
9/30/03 9/30/04
Net Income $ 43,215 $ 53,889
Intangible amortization 12,112 13,214
Intangible-related deferred taxes 17,849 18,684
Affiliate depreciation 3,313 3,199
Cash Net Income (A) $ 76,489 $ 88,986
Cash flow from operations $ 83,034 $ 128,535
Interest expense, net of non-cash items 14,350 20,641
Current tax provision 7,114 13,413
Changes in assets and liabilities and other
adjustments 2,110 (29,982)
EBITDA (B) $ 106,608 $ 132,607
Holding company expenses 14,982 20,965
EBITDA Contribution $ 121,590 $ 153,572
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2004 2003 2004
Revenue $ 128,465 $ 165,846 $ 355,413 $ 476,042
Operating expenses:
Compensation and
related expenses 47,054 61,296 126,578 176,178
Selling, general and
administrative 21,447 28,440 61,843 77,086
Amortization of
intangible assets 4,065 4,950 12,112 13,214
Depreciation and
other amortization 1,560 1,587 4,684 4,746
Other operating
expenses 3,741 5,176 11,519 12,349
77,867 101,449 216,736 283,573
Operating income 50,598 64,397 138,677 192,469
Non-operating (income)
and expenses:
Investment and other
(income) loss (3,334) 1,387 (6,293) (2,195)
Interest expense 5,901 8,193 17,323 24,318
2,567 9,580 11,030 22,123
Income before minority
interest and taxes 48,031 54,817 127,647 170,346
Minority interest (E) (20,243) (26,819) (55,158) (80,017)
Income before income
taxes 27,788 27,998 72,489 90,329
Income taxes - current 3,372 3,240 7,114 13,413
Income taxes -
intangible-related
deferred 5,950 6,441 17,849 18,684
Income taxes - other
deferred 2,071 1,518 4,311 4,343
Net Income $ 16,395 $ 16,799 $ 43,215 $ 53,889
Average shares out-
standing - basic (C) 31,843,368 29,353,068 31,831,957 29,551,383
Average shares out-
standing - diluted
(C) 32,951,832 30,570,211 32,572,684 30,991,442
Earnings per share -
basic (C) $ 0.51 $ 0.57 $ 1.36 $ 1.82
Earnings per share -
diluted (C) $ 0.50 $ 0.55 $ 1.33 $ 1.74
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in thousands)
December 31, September 30,
2003 2004
Assets
Current assets:
Cash and cash equivalents $ 253,334 $ 314,867
Investment advisory fees receivable 65,288 89,004
Prepaid expenses and other current assets 20,861 18,951
Total current assets 339,483 422,822
Fixed assets, net 36,886 40,884
Acquired client relationships, net 364,429 373,893
Goodwill 751,607 814,379
Other assets 26,800 33,950
Total assets $ 1,519,205 $ 1,685,928
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 89,707 $ 128,037
Notes payable to related party 11,744 9,305
Total current liabilities 101,451 137,342
Senior bank debt - 51,000
Senior convertible debt 423,340 423,803
Mandatory convertible securities 230,000 375,750
Deferred income taxes 92,707 115,308
Other long-term liabilities 16,144 24,952
Total liabilities 863,642 1,128,155
Minority interest (E) 40,794 66,668
Stockholders' equity:
Common stock 235 353
Additional paid-in capital 408,449 381,252
Accumulated other comprehensive income 944 1,689
Retained earnings 306,972 360,861
716,600 744,155
Less treasury stock, at cost (101,831) (253,050)
Total stockholders' equity 614,769 491,105
Total liabilities and stockholders'
equity $ 1,519,205 $ 1,685,928
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2004 2003 2004
Cash flow from operating
activities:
Net Income $ 16,395 $ 16,799 $ 43,215 $ 53,889
Adjustments to reconcile
Net Income to net cash
flow from
operating activities:
Amortization of
intangible assets 4,065 4,950 12,112 13,214
Amortization of debt
issuance costs 958 1,020 2,414 2,852
Depreciation and
amortization of fixed
assets 1,560 1,587 4,684 4,746
Deferred income tax
provision 8,021 7,959 22,160 23,027
Accretion of interest 154 344 559 825
Tax benefit from exercise
of stock options 1,506 16 2,420 5,525
Other adjustments - 2,493 (555) 2,493
Changes in assets and
liabilities:
Increase in investment
advisory fees receivable (4,825) (9,109) (5,417) (23,716)
Decrease (increase) in
other current assets (2,360) (18) (3,065) 6,847
Decrease (increase) in
non-current other
receivables 3,364 (4,127) 2,664 (599)
Increase (decrease) in
accounts payable,
accrued expenses
and other liabilities 13,996 15,121 (770) 17,933
Increase in minority
interest 6,514 14,098 2,613 21,499
Cash flow from
operating
activities 49,348 51,133 83,034 128,535
Cash flow used in investing
activities:
Cost of investments, net
of cash acquired (1,750) (2,112) (7,868) (82,178)
Purchase of fixed assets (20,352) (2,966) (23,211) (6,485)
Investment in marketable
securities - - (1,852) (2,592)
Increase in other assets - - (12) (57)
Cash flow used in
investing
activities (22,102) (5,078) (32,943) (91,312)
Cash flow from (used in)
financing activities:
Borrowings of senior bank
debt - 51,000 85,000 51,000
Repayments of senior bank
debt - - (85,000) -
Issuances of convertible
securities - - 300,000 300,000
Repurchase of convertible
securities - (124,525) (105,841) (124,525)
Issuance of equity
securities 4,199 145 8,972 11,559
Repurchases of common
stock - - (33,688) (194,420)
Issuance costs (358) (2,521) (7,819) (12,365)
Repayments of notes
payable (506) - (8,574) (7,041)
Cash flow from (used
in) financing
activities 3,335 (75,901) 153,050 24,208
Effect of foreign exchange
rate changes on cash flow - 41 244 102
Net increase (decrease) in
cash and cash equivalents 30,581 (29,805) 203,385 61,533
Cash and cash equivalents at
beginning of period 200,512 344,672 27,708 253,334
Cash and cash equivalents at
end of period $ 231,093 $ 314,867 $ 231,093 $ 314,867
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) Cash earnings per share represents Cash Net Income divided by
average shares outstanding.
(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.
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