SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X]/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ]/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 001-13459
Affiliated Managers Group, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3218510
-------- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Identification Number)
Two International Place, Boston, MassachusettsTWO INTERNATIONAL PLACE, BOSTON, MASSACHUSETTS 02110
----------------------------------------------------
(Address of principal executive offices)
(617) 747-3300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]/X/ No [ ]/ /
Number of shares of the registrant'sRegistrant's Common Stock outstanding at November
13, 1998: 17,531,617,May 14,
1999: 23,282,559 including 1,886,8001,492,079 shares of Class B Non-Voting Common Stock.
Unless otherwise specified, the term Common Stock includes both Common Stock and
Class B Non-Voting Common Stock.
In addition, unless otherwise
specified, the term Common Stock excludes the 1,750,942 outstanding shares of
the registrant's Series C Convertible Non-Voting Stock.
PART I - FINANCIAL INFORMATION
ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)(IN THOUSANDS)
September 30, December 31, March 31,
1998 19971999
------------ -----------------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $ 29,87723,735 $ 22,76640,838
Investment advisory fees receivable ............. 35,384 27,061....................... 66,939 38,892
Other current assets ............................ 3,532 2,231...................................... 5,137 4,920
--------- ---------
Total current assets ........................... 68,793 52,058................................ 95,811 84,650
Fixed assets, net .................................. 6,829 4,724............................................ 8,001 10,035
Equity investment in Affiliate ..................... 1,277 1,237............................... 1,340 1,486
Acquired client relationships, net of accumulated amortization
of $11,888$7,923 in 1998 and $6,14210,192 in 1997 163,225 142,8751999 ...................... 169,065 186,851
Goodwill, net of accumulated amortization of $20,633$15,550 in 1998
and $13,50218,536 in 1997 ...................... 310,430 249,6981999 ........................................ 321,409 360,419
Notes receivable from employeees ............................. 1,700 2,898
Other assets ....................................... 7,226 6,398................................................. 8,008 9.009
--------- ---------
Total assets ............................................................................ $ 557,780605,334 $ 456,990
========= =========655,348
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities ................................ $ 20,37942,617 $ 18,81538,043
Notes payable to related parties ............................. 22,000 --
--------- ---------
Total current liabilities ...................... 20,379 18,815............................ 64,617 38,043
Senior bank debt ................................... 200,300 159,500............................................. 190,500 158,000
Other long-term liabilities ........................ 9,614 1,656.................................. 11,614 13,283
Subordinated debt .............................................................................. 800 800
--------- ---------
Total liabilities .............................. 231,093 180,771.................................... 267,531 210,126
Minority interest .................................. 21,264 16,479............................................ 24,148 22,447
Stockholders' equity:
Convertible stock .............................................................................. 30,992 --
Common stock ........................................................................................ 177 177234
Additional paid-in capital on common stock ......... 273,414 273,475................... 273,413 405,989
Accumulated other comprehensive income ............. 15 (30)
Retained....................... 16 (49)
Accumulated earnings (deficit) ........................ 2,359 (13,882)......................................... 11,669 19,213
--------- ---------
306,957 259,740316,267 425,387
Less treasury shares ............................... (1,534) --
--------- ---------......................................... (2,612) (2,612)
Total stockholders' equity ..................... 305,423 259,740.............................. 313,655 422,775
--------- ---------
Total liabilities and stockholders' equity ................... $ 557,780605,334 $ 456,990
========= =========655,348
--------- ---------
--------- ---------
The accompanying notes are an integral part of the consolidated
financial statements.
2
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
(unaudited)(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------
1998 1997 1998 19971999
------------ ----------- ------------ -----------
Revenues .................................................................... $ 55,89245,723 $ 20,410 $ 158,201 $ 53,28068,127
Operating expenses:
Compensation and related expenses . 19,281 9,947 55,359 25,610........... 16,615 24,422
Amortization of intangible assets . 4,530 1,078 12,877 3,121........... 3,829 5,255
Depreciation and other amortization 736 388 1,849 1,059......... 513 747
Selling, general and administrative 8,190 4,412 22,830 11,057......... 6,783 9,857
Other operating expenses .......... 1,806 1,315 5,011 3,461.................... 1,290 1,999
------------ ----------- ------------
-----------
34,543 17,140 97,926 44,30829,030 42,280
------------ ----------- ------------ -----------
Operating income ........... 21,349 3,270 60,275 8,972..................... 16,693 25,847
Non-operating (income) and expenses:
Investment and other income ....... (500) (376) (1,341) (814)................. (311) (912)
Interest expense .................. 3,564 1,000 10,567 2,707............................ 3,074 3,445
------------ ----------- ------------
-----------
3,064 624 9,226 1,8932,763 2,533
------------ ----------- ------------ -----------
Income before minority interest and income taxes ...................... 18,285 2,646 51,049 7,07913,930 23,314
Minority interest .................... (8,512) (2,393) (23,981) (6,025).............................. (6,493) (10,528)
------------ ----------- ------------ -----------
Income before income taxes ........... 9,773 253 27,068 1,054..................... 7,437 12,786
Income taxes ......................... 3,909 126 10,827 221................................... 2,975 5,242
------------ ----------- ------------ -----------
Net income ................................................................ $ 5,8644,462 $ 127 $ 16,241 $ 833
============ =========== ============ ===========7,544
------------ ------------
------------ ------------
Net income per share - basic ............................ $ 0.330.25 $ 0.21 $ 0.92 $ 1.480.40
Net income per share - diluted ........................ $ 0.300.25 $ 0.02 $ 0.85 $ 0.120.36
Average shares outstanding - basic ... 17,627,839 602,038 17,613,291 564,082............. 17,594,555 19,023,027
Average shares outstanding - diluted . 19,546,983 6,862,428 19,146,658 6,850,761........... 18,176,428 20,726,355
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)(IN THOUSANDS)
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------- --------------------------FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------1999
------- -------
Net income ..................................................................... $ 5,8644,462 $ 127 $ 16,241 $ 8337,544
Foreign currency translation adjustment, net of taxes .......... 7 (92) 45 (99)
------------ ----------- ------------ -----------36 (65)
------- -------
------- -------
Comprehensive income ................................................. $ 5,8714,498 $ 35 $ 16,286 $ 734
============ =========== ============ ===========7,479
------- -------
------- -------
The accompanying notes are an integral part of the consolidated
financial statements.
3
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)(IN THOUSANDS)
(UNAUDITED)
For the Nine Months
Ended September 30,
--------------------FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
1998 1997
-------- --------1999
--------- ---------
Cash flow from operating activities:
Net income .......................................................................................................................... $ 16,2414,462 $ 8337,544
Adjustments to reconcile net income to net cash flow from operating activities:
Amortization of intangible assets .................................. 12,877 3,121.......................................... 3,829 5,255
Depreciation and other amortization ................................ 1,849 1,059........................................ 513 747
Deferred income tax provision .............................................. 2,423 2,287
Changes in assets and liabilities:
Increase(Increase) decrease in investment advisory fees receivable .................... (8,323) (212)
Increase................. (5,056) 35,628
(Increase) decrease in other current assets ................................... (1,301) (2,304)
Increase................................ (170) 450
Decrease in accounts payable, accrued expenses and other liabilities 9,522 3,476....... (1,601) (13,276)
Minority interest .................................................. 4,785 776
-------- --------.......................................................... 4,613 (1,700)
--------- ---------
Cash flow from operating activities ......................... 35,650 6,749
-------- --------................................. 9,013 36,935
--------- ---------
Cash flow used in investing activities:
Purchase of fixed assets ........................................... (2,658) (1,545)................................................... (824) (1,045)
Costs of investments, net of cash acquired ......................... (65,389) (25,315)................................. (64,173) (63,769)
Distribution received from Affiliate equity investment ............. 495 135
Increase..................... 107 --
Decrease in other assets ........................................... (293) (282)
-------- --------................................................... (181) (723)
Loans to employees ......................................................... -- (1,198)
--------- ---------
Cash flow used in investing activities ....................... (67,845) (27,007)
-------- --------............................... (65,071) (66,735)
--------- ---------
Cash flow from financing activities:
Borrowings of senior bank debt ..................................... 74,300 31,900............................................. 72,300 91,300
Repayments of senior bank debt ..................................... (33,500) (2,000)............................................. (9,500) (123,800)
Repayments of notes payable ........................................................................................ -- (5,878)
Issuance (repurchase)(22,000)
Issuances of equity securities ......................... (1,539) 10
-------- --------............................................. -- 101,643
Debt issuance costs ........................................................ (40) (175)
--------- ---------
Cash flow from (used in) financing activities .......................... 39,261 24,032........................ 62,760 46,968
Effect of foreign exchange rate changes on cash flow .................. 45 (99).......................... 36 (65)
Net increase in cash and cash equivalents ............................. 7,111 3,675..................................... 6,738 17,103
Cash and cash equivalents at beginning of period .................................................. 22,766 6,767
-------- --------23,735
--------- ---------
Cash and cash equivalents at end of period ................................................................ $ 29,87729,504 $ 10,442
======== ========40,838
--------- ---------
--------- ---------
Supplemental disclosure of non-cash financing activities:
Stock issued in acquisitions ...................................................................................... $ 30,992 $ 11,101--
The accompanying notes are an integral part of the consolidated
financial statements.
4
1. Basis of PresentationBASIS OF PRESENTATION
The consolidated financial statements of Affiliated Managers Group,
Inc. (the "Company" or "AMG") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The year
end condensed balance sheet data was derived from audited financial
statements, but does not include all of the disclosures required by generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain prior year amounts have been
reclassified to conform withto the current year'syear presentation. Operating results
for interim periods are not necessarily indicative of the results that may be
expected for the full year. The Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 19971998 includes additional information about
AMG, its operations, and its financial position, and should be read in
conjunction with this quarterly report on Form 10-Q.
2. Income TaxesACQUISITIONS
On January 6, 1999 the Company completed its investment in Rorer
Asset Management. The total purchase price associated with this investment
was approximately $65 million. On April 1, 1999, the Company completed an
investment in substantially all of the partnership interests in The Managers
Funds, L.P., which serves as the adviser to a family of ten equity and fixed
income no-load mutual funds. These transactions will be accounted for under
the purchase method of accounting.
3. OFFERING
On March 3, 1999, the Company completed its second public offering
of Common Stock. In the offering 5,529,954 shares of Common Stock were sold,
of which 4,000,000 shares were sold by the Company and 1,529,954 shares were
sold by selling stockholders. AMG used the net proceeds from the offering to
reduce indebtedness and did not receive any proceeds from the sale of Common
Stock by the selling stockholders.
4. INCOME TAXES
A summary of the provision for income taxes is as follows (in
thousands):
Three Months Ended September 30,
--------------------March 31,
-------------------------------------
1998 1997
------ ----1999
---------------- ----------------
Federal: Current .........................Current............................. $ ----- $ --
Deferred ........................ 3,103 692,535
Deferred............................ 2,120 2,002
State: Current ......................... 367 57
Deferred ........................ 439 --
------ ----Current............................. 552 420
Deferred............................ 303 285
----------------- ----------------
Provision for income taxes ............... $3,909 $126
====== ====taxes......................... $ 2,975 $ 5,242
----------------- ----------------
----------------- ----------------
The Company has determined that because it is more likely than not that
a majority of its tax net operating loss carryforwards will be utilized
during 1998, the deferred tax valuation allowance which existed at December
31, 1997 was no longer necessary. Accordingly, the Company expects that the
benefit of the reversal of the allowance will be realized ratably over the
year.
3. Earnings Per Share5. EARNINGS PER SHARE
The calculation for the basic earnings per share is based on the
weighted average of common shares outstanding during the period. The calculation
for the diluted earnings per share is based on the weighted average of common
and common equivalent shares outstanding during the period. The following is a
reconciliation of the numerators and denominators of the basic and diluted EPS
computations.
5
Three Months Ended September 30,
-----------------------March 31,
------------------------------------
1998 1997
----------- ----------1999
---------------- ----------------
Numerator:
Net income ....................................income................................................. $ 5,864,0004,462,000 $ 127,0007,544,000
Denominator:
Average shares outstanding - basic ............ 17,627,839 602,038basic......................... 17,594,555 19,023,027
Convertible stock ............................. 1,750,942 5,768,247stock.......................................... 233,459 1,517,483
Stock options and unvested restricted stock ... 168,202 492,143
----------- ----------stock................ 348,414 185,845
---------------- ----------------
Average shares outstanding - diluted .......... 19,546,983 6,862,428
=========== ==========diluted....................... 18,176,428 20,726,355
---------------- ----------------
---------------- ----------------
Net income per share:
Basic .........................................Basic...................................................... $ 0.330.25 $ 0.21
Diluted .......................................0.40
Diluted.................................................... $ 0.300.25 $ 0.020.36
Item5
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
This report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, which are
based on management's current views and assumptions regarding future events
and financial performance. Words or phrases such as "will likely result,"
"are expected to," "will continue," "is anticipated," "believes,"
"estimates," "projects" and other similar expressions are intended to
identify such forward-looking statements. Such statements are subject to
certain risks and uncertainties, including those discussed herein and in the
"BusinessMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
WHEN USED IN THIS FORM 10-Q AND IN OUR FUTURE FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, IN OUR PRESS RELEASES AND IN ORAL
STATEMENTS MADE WITH THE APPROVAL OF AN AUTHORIZED EXECUTIVE OFFICER, THE
WORDS OR PHRASES "WILL LIKELY RESULT", "ARE EXPECTED TO", "WILL CONTINUE",
"IS ANTICIPATED", "BELIEVES", "ESTIMATE", "PROJECT" OR SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED UNDER
THE CAPTION "BUSINESS-CAUTIONARY STATEMENTS" IN OUR ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1998, THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR
PROJECTED. WE WISH TO CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE. WE WISH TO
ADVISE READERS THAT THE FACTORS UNDER THE ABOVE DESCRIBED CAPTION "BUSINESS
- Cautionary Statements" section of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, that could cause
actual results to differ materially from those discussed in the
forward-looking statements. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only
as of the date made, and the Company will not undertake to release publicly
the result of any revisions which may be made to any forward-looking
statements to reflect the occurrence of events or changes in circumstances
after the date of such statements. In addition, the discussion and analysis
below with respect to the Year-CAUTIONARY STATEMENTS" COULD AFFECT OUR FINANCIAL PERFORMANCE AND COULD
CAUSE OUR ACTUAL RESULTS FOR FUTURE PERIODS TO DIFFER MATERIALLY FROM ANY
OPINIONS OR STATEMENTS EXPRESSED WITH RESPECT TO FUTURE PERIODS IN ANY
CURRENT STATEMENTS.
IN ADDITION, THE DISCUSSION AND ANALYSIS WITH RESPECT TO THE YEAR 2000
Issue including i) our expectations of
when YearISSUE, INCLUDING (I) OUR EXPECTATIONS OF WHEN YEAR 2000 compliance will actually be achieved, ii) estimates of the
costs involved in achieving YearCOMPLIANCE WILL ACTUALLY
BE ACHIEVED, (II) ESTIMATES OF THE COSTS INVOLVED IN ACHIEVING YEAR 2000
readiness and iii) our belief that the
costs will not be material to operating results, are based on management's
estimates which, in turn, are based upon a number of assumptions regarding
future events, including third party modification plans and the availability
of certain resources. There can be no guarantee that these estimates will be
achieved, and actual results may differ materially from management's
estimates. Specific factors which might cause such material differences with
respect to the YearREADINESS AND (III) OUR BELIEF THAT THE COSTS WILL NOT BE MATERIAL TO OPERATING
RESULTS, ARE BASED ON MANAGEMENT'S ESTIMATES WHICH, IN TURN, ARE BASED UPON A
NUMBER OF ASSUMPTIONS REGARDING FUTURE EVENTS, INCLUDING THIRD PARTY
MODIFICATION PLANS AND THE AVAILABILITY OF CERTAIN RESOURCES. THERE CAN BE NO
GUARANTEE THAT THESE ESTIMATES WILL BE ACHIEVED, AND ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM MANAGEMENT'S ESTIMATES. SPECIFIC FACTORS WHICH MIGHT CAUSE SUCH
MATERIAL DIFFERENCES WITH RESPECT TO THE YEAR 2000 Issue include, but are not limited to, the failure
of third party providers to achieve represented or stated levels of YearISSUE INCLUDE, BUT ARE NOT
LIMITED TO, THE FAILURE OF THIRD PARTY PROVIDERS TO ACHIEVE REPRESENTED OR
STATED LEVELS OF YEAR 2000 compliance, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
Overview
The Company acquiresCOMPLIANCE, AVAILABILITY AND COST OF PERSONNEL
TRAINED IN THIS AREA, THE ABILITY TO LOCATE AND CORRECT ALL RELEVANT COMPUTER
CODES, AND SIMILAR UNCERTAINTIES.
WE WILL NOT UNDERTAKE AND WE SPECIFICALLY DISCLAIM ANY OBLIGATION TO
RELEASE PUBLICLY THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF
SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF EVENTS, WHETHER OR NOT
ANTICIPATED.
OVERVIEW
We acquire equity positionsinterests in mid-sized investment management firms
and derives itscurrently derive all of our revenues from suchthose firms. AMG hasWe refer to firms in
which we have purchased less than 100% (typically less than 80%) as our
"affiliates". We hold investments in 13 affiliates that managed $64.2 billion in
assets at March 31, 1999. Our most recent affiliate investments were in Davis
Hamilton Jackson & Associates, L.P. ("DHJA") in December 1998 and Rorer Asset
Management LLC ("Rorer") in January 1999. On April 1, 1999, we completed an
acquisition of substantially all of the partnership interests in the Managers
Funds, L.P. ("Managers"), which serves as the adviser to a family of ten equity
and fixed income no-load mutual funds.
We have a revenue sharing arrangement with each investment management firm inof our affiliates which it has an
investment (each, an "Affiliate") which is contained in the organizational
document of that Affiliate. Each such arrangement
allocates a specified percentage of revenues (typically 50-70%) for use by
management of that Affiliateaffiliate in paying operating expenses, of the Affiliate, including salaries
and bonuses (the "Operating Allocation"). The remaining portion of revenues of
the Affiliate,affiliate, typically 30-50% (the "Owners' Allocation"), is allocated to the
owners of that Affiliateaffiliate (including AMG), generally in proportion to their
ownership of the Affiliate. Sinceaffiliate. One of the purposes of our revenue sharing
arrangements is to provide ongoing incentives for the managers of the affiliates
by allowing them:
o to participate in their firm's growth through their compensation from the
Operating Allocation,
o to receive a portion of the Owners' Allocation based on their ownership
interest in the affiliate, and
o to control operating expenses, thereby increasing the portion of the
Operating Allocation which is available for growth initiatives and bonuses
for management of the affiliate.
6
The managers of each affiliate, therefore, have an incentive to both
increase revenues (thereby increasing the Operating Allocation and their Owners'
Allocation) and to control expenses (thereby increasing the excess Operating
Allocation).
The revenue sharing arrangements allow us to participate in the revenue
growth of each affiliate because we receive a portion of the additional revenue
as our share of the Owners' Allocation. However, we participate in that growth
to a lesser extent than the managers of the affiliate, because we do not share
in the growth of the Operating Allocation.
Under the organizational documents of the affiliates, the allocations
and distributions of cash to us generally take priority over the allocations and
distributions to the management owners of the affiliates. This further protects
us if there are any expenses in excess of the Operating Allocation of an
affiliate. Thus, if an affiliate's expenses exceed its foundingOperating Allocation, the
excess expenses first reduce the portion of the Owners' Allocation allocated to
the affiliate's management owners, until that portion is eliminated, and then
reduce the portion allocated to us.
The portion of each affiliate's revenues which is included in December 1993,its
Operating Allocation and retained by it to pay salaries, bonuses and other
operating expenses, as well as the Company has completed 11 investmentsportion of each affiliate's revenues which is
included in Affiliatesits Owners' Allocation and has announceddistributed to us and the signingother owners of
definitive agreements for investmentsthe affiliate, are both included as "revenues" on our Consolidated Statements of
Operations. The expenses of each affiliate which are paid out of the Operating
Allocation, as well as our holding company expenses which we pay out of the
amounts of the Owners' Allocation which we receive from the affiliates, are both
included in two additional
Affiliates, Davis Hamilton Jackson & Associates, L.P."operating expenses" on our Consolidated Statements of Operations.
The portion of each affiliate's Owners' Allocation which is allocated to owners
of the affiliates other than us is included in "minority interest" on our
Consolidated Statements of Operations.
The EBITDA Contribution of an affiliate represents the Owners'
Allocation of that affiliate allocated to AMG before interest, taxes,
depreciation and Rorer Asset
Management, LLC.amortization of that affiliate. EBITDA Contribution does not
include our holding company expenses.
The Affiliates'affiliates' revenues are derived from the provision of investment
management services for fees. Investment management fees are usually determined
as a percentage fee charged on periodic values of a client's assets under
management. Certain of the affiliates bill advisory fees for all or a portion of
their clients based upon assets under management valued at the beginning of a
billing period ("in advance"). Other affiliates bill advisory fees for all or a
portion of their clients based upon assets under management valued at the end of
the billing period ("in arrears"). Advisory fees billed in advance will not
reflect subsequent changes in the market value of assets under management for
that period. Conversely, advisory fees billed in arrears will reflect changes in
the market value of assets under management for that period. In addition,
several of the Affiliatesaffiliates charge performance-based fees to certain of their
clients; these performance-based fees result in payments to the applicable
Affiliateaffiliate if specified levels of investment performance are achieved. All
references in this report to "assets under management" include assets directly managed as well
as assets underlying overlay strategies which employ futures, options or other
derivative securities to achieve a particular investment objective.
Our level of profitability will depend on a variety of factors
including principally: (i) the level of affiliate revenues, which is dependent
on the ability of our existing affiliates and future affiliates to maintain or
increase assets under management by maintaining their existing investment
advisory relationships and fee structures, marketing their services successfully
to new clients, and obtaining favorable investment results; (ii) the receipt of
Owners' Allocation, which is dependent on the ability of the affiliates and
future affiliates to maintain certain levels of operating profit margins; (iii)
the availability and cost of the capital with which we finance our investments;
(iv) our success in attracting new investments and the terms upon which such
transactions are completed; (v) the level of intangible assets and the
associated amortization expense resulting from our investments; (vi) the level
of expenses incurred for holding company operations, including compensation for
its employees; and (vii) the level of taxation to which we are subject, all of
which are, to some extent, dependent on factors which are not in our control,
such as general securities market conditions.
Assets under management were $50.1$64.2 billion at September 30, 1998March 31, 1999 versus
$54.9 billion at June 30, 1998 and $45.7$57.7 billion at December 31, 1997.1998. The declineincrease in assets under management was
partially related to the closing of our investment in the third quarter resulted from adverse conditions in the
equity markets during the quarter, partially offset by positiveRorer ($4.4
7
billion). Aggregate net client cash flows of $445flow for directly managed assets contributed
$381.0 million to the increase, while overlay assets (which generally carry
lower fees than directly managed assets) declined $1.1 billion. Positive
investment performance accounted for the 6
quarter. Year to date growth was driven by the addition of an Affiliate and
positive net client cash flows of $1.6 billion, offsetting negative investment
performance due primarily to the adverse conditionsremaining change in the equity markets during
the third quarter.
Each of the Company'sassets under
management.
Our investments ishave been accounted for under the purchase method of
accounting under which goodwill is recorded for the excess of the purchase price
for the acquisition of interests in Affiliatesaffiliates over the fair value of the net
assets acquired, including acquired client relationships.
As a result of the series of our investments, made by the Company, intangible assets,
(collectively,consisting of acquired client relationships and goodwill, are referred to as
"intangible assets") constitute a
substantial percentage of theour consolidated assets and our results of the
Company. At September 30, 1998, the Company'soperations
have included increased charges for amortization of those intangible assets. As
of March 31, 1999, our total assets were $557.8approximately $655.3 million, of which
$163.2approximately $186.9 million consisted of acquired client relationships and
$310.4$360.4 million consisted of goodwill.
The amortization period for intangible assets for each investment is
assessed individually, with amortization periods for the Company'sour investments to date
ranging from nine to 28 years in the case of acquired client relationships and
15 to 35 years in the case of goodwill. In determining the amortization period
for intangible assets acquired, the Company considerswe consider a number of factors including: the
firm's historical and potential future operating performance; the firm's historicalperformance and potential future ratesrate of
attrition among clients; the stability and longevity of existing client
relationships; the firm's recent, as well as long-term, investment performance;
the characteristics of the firm's products and investment styles; the stability
and depth of the firm's management team and the firm's history and perceived
franchise or brand value. The Company performsWe perform a quarterly evaluation of intangible assets
on an Affiliate-by-Affiliateaffiliate-by-affiliate basis to determine whether there has been any
impairment in their carrying value or their useful lives. If impairment is
indicated, then the carrying amount of intangible assets, including goodwill,
will be reduced to their fair values.
While amortization of intangible assets has been charged to the results
of operations and is expected to be a continuing material component of the
Company'sour
operating expenses, management believes that it is important to distinguish this
expense from other operating expenses since such amortization does not require
the use of cash. Also,Because of this, and because the Company'sour distributions from its Affiliatesour
affiliates are based on its share oftheir Owners' Allocation, management has provided
additional supplemental information in this report for "cash" related earnings,
as an addition to, but not as a substitute for, measures related to net income.
Such measures are (i) EBITDA, (earnings before interest expense, income taxes,
depreciation and amortization), which the Company believeswe believe is useful to investors as an
indicator of the Company'sour ability to service debt, to make new investments and meet
working capital requirements, and (ii) EBITDA as adjusted, (earnings after interest expense and income taxes but before depreciation and
amortization), which the Company believeswe believe is
useful to investors as another indicator of funds available to the Companywhich may be used to
make new investments, to repay debt obligations, to repurchase shares of our
Common Stock or repay debt obligations.
Three Months Ended September 30,pay dividends on our Common Stock.
THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
1998 as Compared to Three Months Ended
September 30, 1997
The Company had net income of $5.9$7.5 million for the quarter ended
September
30, 1998March 31, 1999 compared to net income of $127,000$4.5 million for the quarter ended
September 30,
1997.March 31, 1998. The increase in net income resulted primarily from net income
from new
investments.investments made during and subsequent to the first quarter of 1998. The
Company invested in GeoCapital, LLC ("GeoCapital") in September
1997, Tweedy, Browne Company LLC ("Tweedy, Browne") in October 1997, and Essex Investment Management, Company, LLC ("Essex") inon March 20, 1998 and
included their
results from their respective dates of investment.
RevenuesDHJA and Rorer on December 31, 1998 and January 6, 1999, respectively.
Total revenues for the quarter ended September 30, 1998March 31, 1999 were $55.9$68.0 million,
an increase of $35.5$22.3 million over the quarter ended September 30, 1997,March 31, 1998, primarily as
a result of the addition of the new Affiliates as described above.
OperatingAffiliate investments.
Total operating expenses increased by $17.4$13.2 million to $34.5$42.0 million
for the quarter ended September 30, 1998 overMarch 31, 1999 from $29.0 million for the quarter ended
September 30, 1997.March 31, 1998. Compensation and related expenses increased by $9.3$7.8 million,
amortization of intangible assets increased by $3.5$1.4 million, and selling, general
and administrative expenses increased by $3.8 million.$3.0 million, and other operating
expenses increased by $709,000. The increases in operating expenses wereare
primarily due to the inclusion of the new Affiliates described above.
Minority interest increased by $4.0 million to $10.5 million for the
quarter ended March 31, 1999 from $6.5 million for the quarter ended March 31,
1998. This increase is a result of the addition of the new Affiliates.
Minority interestAffiliates as
8
described above.
Interest expense increased by $6.1 million$371,000 to $8.5approximately $3.5 million
for the quarter ended September 30, 1998 over the quarter ended September 30, 1997,
primarily as a result of the increase in revenuesMarch 31, 1999 from the addition of the new
Affiliates.
7
Interest expense increased by $2.6 million to $3.6$3.1 million for the quarter ended
September 30,March 31, 1998 over the quarter ended September 30, 1997 as a result of the increased indebtedness incurred in connection
with the investments in the
new Affiliates.described above.
Income tax expense was $3.9$5.2 million for the quarter ended September 30,
1998March 31,
1999 compared to $126,000$3.0 million for the quarter ended September 30, 1997.March 31, 1998. The change
in income tax expense iswas mostly related to an increase in income before taxes in the
quarter ended September 30, 1998.taxes.
EBITDA increased by $15.9$7.4 million to $18.6$22.2 million for the quarter ended
September 30, 1998 overMarch 31, 1999 from $14.9 million for the quarter ended September 30, 1997,March 31, 1998,
primarily as a result of the inclusion of the new Affiliates.Affiliates as described above.
EBITDA as adjusted increased by $9.5$4.7 million to $11.1$13.5 million for the
quarter ended September 30, 1998 overMarch 31, 1999 from $8.8 million for the quarter ended September 30, 1997March 31,
1998 as a result of the factors affecting net income as described above, before
non-cash expenses such as amortization of intangible assets and depreciation of
$5.3$6.0 million for the quarter ended September 30, 1998.
Nine Months Ended September 30, 1998 as Compared to Nine Months Ended
September 30, 1997
The Company had net income of $16.2March 31, 1999 and $4.3 million for the
nine monthsquarter ended September 30, 1998 comparedMarch 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have met our cash requirements primarily through cash generated by
operating activities, bank borrowings, and the issuance of equity and debt
securities in public and private placement transactions. We anticipate that we
will use cash flow from our operating activities to net incomerepay debt and to finance
our working capital needs and will use bank borrowings and issue equity and debt
securities to finance future affiliate investments. Our principal uses of $833,000cash
have been to make investments in affiliates, to retire indebtedness, repurchase
shares and to support our and our affiliates' operating activities. We expect
that our principal use of funds for the nine months
ended September 30, 1997. The increaseforeseeable future will be for
investments in net income resulted primarily from
net income from new investments. The Company invested in Gofen and Glossberg,
L.L.C. ("Gofen and Glossberg") in May 1997, GeoCapital in September 1997,
Tweedy, Browne in October 1997, and Essex in March 1998 (collectively, the
"New Affiliates") and included their results from their respective datesadditional affiliates, repayments of investment.
Revenues for the nine months ended September 30, 1998 were $158.2 million,
an increase of $104.9 million over the nine months ended September 30, 1997,
primarily as a resultdebt, including interest
payments on outstanding debt, distributions of the additionOwners' Allocation to owners
of affiliates other than us, additional investments in existing affiliates,
including upon management owners' sales of their retained equity to us, and for
working capital purposes. We do not expect to make commitments for material
capital expenditures.
At March 31, 1999, we had outstanding borrowings of senior debt
under our credit facility of $158.0 million. On January 29, 1999 we exercised
our option to expand the New Affiliates.
Operating expenses increasedcredit facility from $300 to $330 million and added
another major commercial bank to our group of lenders. We have the option,
with the consent of our lenders, to increase the facility by $53.6another $70
million to $97.9 million for the
nine months ended September 30, 1998 over the nine months ended September 30,
1997. Compensation and related expenses increased by $29.7 million, amortizationa total of intangible assets increased by $9.8 million, selling, general and
administrative expenses increased by $11.8 million, and other operating expenses
increased by $1.6$400 million. The growth in operating expenses was primarily a
result of the addition of the New Affiliates.
Minority interest increased by $18.0 million to $24.0 million for the nine
months ended September 30, 1998 over the nine months ended September 30, 1997,
primarily as a result of the addition of New Affiliates.
Interest expense increased by $7.9 million to $10.6 million for the
nine months ended September 30, 1998 over the nine months ended September 30,
1997, as a result of the increased indebtedness incurred in connection with
the investments in the New Affiliates.
Income tax expense was $10.8 million for the nine months ended
September 30, 1998 compared to $221,000 for the nine months ended September
30, 1997. The change in income tax expense is related to an increase in
income before taxes in the nine months ended September 30, 1998 and the
recognition of the benefit of the reversal of the Company's tax valuation
allowance at December 31, 1996 in the nine months ended September 30, 1997.
EBITDA increased by $44.4 million to $52.4 million for the nine months
ended September 30, 1998 over the nine months ended September 30, 1997,
primarily as a result of the inclusion of the New Affiliates.
EBITDA as adjusted increased by $26.0 million to $31.0 million for the
nine months ended September 30, 1998 over the nine months ended September 30,
1997 as a result of the factors affecting net income as described above, before
non-cash expenses such as amortization of intangible assets and depreciation of
$14.7 million for the nine months ended September 30, 1998.
8
Liquidity and Capital Resources
At September 30, 1998, the Company had cash and cash equivalents of $29.9
million and outstanding borrowings under its revolvingOur credit facility ("Credit
Facility") of $200.3 million. The Credit Facility allows for borrowings up to
$300 million (which may be increased to $400 million upon the approval of the
lenders) and matures in December 2002. The Company paysbears interest at
either LIBOR plus a margin ranging from .50% to 2.25% or the Prime Rate plus
a margin as well asranging up to 1.25% and matures during December 2002. In order to
offset our exposure to changing interest rates we enter into interest rate
hedging contracts. We pay a commitment fee of up to 1/2 of 1% on the daily
unused portion of the facility.
On September 11, 1998,Our borrowings under the Company's Boardcredit facility are collateralized by pledges
of Directors authorized a share
repurchase program pursuant toall of our interests in affiliates (including all interests in affiliates
which AMG could repurchase up to five percent of
AMG's issued and outstanding shares of Common Stock. During the quarter ended
September 30, 1998, the Company repurchased 84,400 shares for $1.5 million.
Subsequent to September 30, 1998 the Company has repurchased an additional
62,600 shares for $1.1 million.
On October 22, 1998, AMG announced an agreement to acquire a 65%
interestare directly held by us, as well as all interests in Davis Hamilton Jackson & Associates, L.P.affiliates which are
indirectly held by us through wholly-owned subsidiaries), which will holdinterests
represent substantially all of our assets. Our credit facility contains a number
of negative covenants, including those which generally prevent us and our
affiliates from: (i) incurring additional indebtedness (other than subordinated
indebtedness) (ii) creating any liens or encumbrances on material assets (with
certain enumerated exceptions), (iii) selling assets outside the ordinary course
of business presently operated by Davis Hamilton Jackson & Associates, Inc.
("DHJA"). DHJA isor making certain fundamental changes with respect to our
businesses, including a Houston based asset management firm with approximately
$3.0 billionrestriction on our ability to transfer interests in any
majority owned affiliate if, as a result of assets under management at September 30, 1998. On November 9,
1998, the Company announced an agreement to acquire an approximately 65%
interest in Rorer Asset Management, LLC, which will hold the business
presently operated by Edward C. Rorer & Co., Inc. ("Rorer"). Rorer is a
Philadelphia based investment advisor with approximately $3.6 billionsuch transfer, we would own less
than 51% of assets under management at September 30, 1998. AMG will pay approximately $65
million in cash for its investment in Rorer. AMG will finance these two
investments with borrowings under its Credit Facility.such affiliate, and (iv) declaring or paying dividends on our Common
Stock.
In order to provide the funds necessary for the Companyus to continue to acquire
interests in investment management firms, including additional
investments inour existing Affiliates,affiliates upon
the management owners' sales of their retained equity to us, it will be
necessary for the Companyus to incur, from time to time, additional long-term bank debt
and/or issue equity or debt securities, depending on market and other
conditions. There can be no assurance that such additional financing will be
available or become available on terms acceptable to us.
9
On December 31, 1998, we acquired a 65% interest in DHJA. DHJA is a
Houston based asset management firm with approximately $3.5 billion of assets
under management at December 31, 1998. On January 6, 1999, we acquired an
approximately 65% interest in Rorer. Rorer is a Philadelphia based investment
adviser with approximately $4.4 billion of assets under management at December
31, 1998. We paid $65 million in cash for our investment in Rorer. We financed
these two investments with borrowings under our credit facility.
On March 3, 1999, we completed a public offering of 5,529,954 shares of
Common Stock, of which 4,000,000 shares were sold by us and 1,529,954 shares
were sold by selling stockholders. We used the Company.
Recent Accounting Developments
In June 1997,net proceeds from the Financial Accounting Standards Board (the "FASB") issued
Statement4,000,000
shares sold by us to reduce indebtedness and did not receive any proceeds from
the sale of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("FAS 131"). FAS 131 requires
disclosure of financial and descriptive information about an entity's reportable
operating segments. This standard is effective for financial statements for
periods beginning after December 15, 1997, with restatement of comparative
information for prior periods. The standard is not required to be applied to
interim financial statements inCommon Stock by the initial year of its application.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS
133"). FAS 133 standardizes the accounting for derivative instruments by
requiring thatselling stockholders.
On April 1, 1999, we acquired substantially all derivatives be recognized as assets and liabilities and
measured at fair value. FAS 133 is effective for financial statements for fiscal
years beginning after June 15, 1999.
The Company does not believe that the implementation of FAS 131 or FAS 133
will have a material impact on the Company's financial statements.
Impact of the Yearpartnership
interests in The Managers Funds, L.P., which serves as the adviser to a family
of ten equity and fixed income no-load mutual funds. We financed the investment
with a borrowing under our credit facility.
YEAR 2000
Issue
The Year 2000 Issue is the"Year 2000" poses a concern to our business as a result of the fact
that computer programs being written usingapplications have historically used the last two digits, rather
than all four digits, to definestore year data. If left unmodified, these applications
would misinterpret the applicable year. AnyYear 2000 for the Year 1900 and would in many cases be
unable to function properly in the Year 2000 and beyond.
We have based our evaluation of the Company's
or its Affiliates' computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Such disruptions could affect the Company's Affiliates'our ability to provide
advisory services.
The Company hasprepare for the Year
2000 upon a number of assumptions regarding future events, including third party
modification plans and the availability of needed resources. We cannot guarantee
that these estimates will be achieved, and actual results may differ materially
from our estimates. Specific factors which might cause such material differences
with respect to the Year 2000 issue include, but are not limited to, the failure
of our affiliates to achieve represented or stated levels of Year 2000
compliance, the availability and cost of personnel trained in this area and the
ability to locate and correct all relevant computer codes and similar
uncertainties.
AMG'S READINESS
In anticipation of this problem, we have identified all of the
significant computers, software applications and related equipment used at theour
holding company that need to be modified, upgraded or replaced to minimize the
possibility of a material disruption to its business.
9
In addition,our business based on the Company hasadvent of the
Year 2000. We anticipate completing our Year 2000 preparations at the holding
company by the end of the second quarter of 1999. We estimate our total cost
will be less than $800,000 for the four year period ending on December 31, 1999.
We cannot be certain that we will not encounter unforeseen delays or costs in
completing our preparations.
OUR AFFILIATES' READINESS
We have also established a time line with each Affiliate a timeline
for complianceof our affiliates to
complete their Year 2000 preparations and hashave received estimates from each
of compliance costs.them of the costs required to complete their preparations. As part of theour
general compliancepreparedness program, each of the Affiliatesour affiliates has assigned
responsibility for preparing for the Year 2000 Issue to a member of its senior
management in order to ensure that both proprietary and third party vendor
systems will be ready for the Year 2000
compliant.
All Affiliates have2000. Each of our affiliates has completed
theirits assessment and plans are in place for the renovation or replacement of
non-compliantall non-compatible systems. The completionWe anticipate that most of the affiliates will
complete the renovation or replacement of all non-compatible systems and the
subsequent testing and implementation are
scheduledof all systems by the end of the second quarter of 1999
with the remainder completing those activities during the third quarter of
1999. Most of our affiliates pay for the fourth quartercosts of 1998 and early 1999, while industry wide
testing will take place in 1999. If the Affiliates fail to resolve their Year 2000
issues,preparations out of their Operating Allocation, which is the Affiliates'portion of their
revenues that is allocated to pay their operating expenses. As a result,
these costs will only reduce an affiliate's distributions to us based on our
ownership interest in the affiliate if the affiliate's operating expenses
exceed its Operating Allocation and accordingly, the Company's business would
be materially disrupted.portion of revenues allocated to the
management owners.
10
OUTSIDE SERVICE PROVIDERS
Outside service providers perform certainseveral processes which are critical
for the Company's Affiliates,to our affiliates' business operations, including transfer agency and custody
functions. The progress ofOur affiliates have surveyed these parties is being monitored by the Company's
Affiliates.and are monitoring their
progress. However, the Affiliatesour affiliates have limited or no control, if any, over the actions
of these outside parties and in certain casessome instances have no alternative vendors
are available.vendors. If
these parties fail to resolve Year 2000 issues, the
Affiliates and, accordingly, the Company's business would be materially
disrupted.
The Company and its Affiliates estimate that its compliance activities
will be completed no later than the second quarter of 1999. Because most of
the Year 2000 costs are being covered by the Affiliates' Operating
Allocation, the total costs of this effort to the Company (as opposed to the
affiliates) are estimated to be less than $800,000 for the four year period
ending December 31, 1999.
European Monetary Unit
On January 1, 1999, a single currency for the European Economic and
Monetary Union (the "Euro") is scheduled to replace the national currency for
participating member countries which include countries in which several of
the Company's Affiliates do business. The managed funds and financial
products of these Affiliates have investments in countries whose currencies
will be replaced by the Euro. Many aspects of these Affiliates' investment
process, including trading, foreign exchange, payments, settlements, cash
accounts, custodial accounts and accounting will be affected by the
implementation of the Euro (the "Euro Issue").
The Affiliates impacted have created teams to determine changes that will
be required in connection with the Euro Issue in order to process
transactions accurately with minimal disruption to business activities. These
Affiliates are also communicating with its external partners and vendors to
assess their readiness to manage the Euro Issue without disruption to their
business or operations. If these Affiliatesoutside service providers fail to resolve their Euro Issue,Year 2000 issues, we anticipate
that our affiliates' operations will experience material disruptions caused by
the Affiliatesinability to process trades and access client and investment research data
files and, accordingly, the Company's businessour and our affiliates' businesses would be materially
disrupted.adversely
affected.
Quantitative and Qualitative Disclosures About Market Risk
We use interest-rate swaps to manage market exposures associated
with our variable rate debt by creating offsetting market exposures. These
instruments are not held for trading purposes. In the normal course of
operations, we also face risks that are either nonfinancial or
nonquantifiable. Such risks principally include country risk, credit risk,
and legal risk, and are not represented in the analysis that follows.
This analysis presents the hypothetical loss in earnings of the
derivative instruments we held at March 31, 1999 that are sensitive to
changes in interest rates. Interest rate swaps allow us to achieve a level of
variable-rate and fixed-rate debt that is acceptable to us, and to reduce
interest rate exposure. In each of our interest rate swaps, we have agreed
with another party to exchange the difference between fixed-rate and floating
rate interest amounts calculated by reference to an agreed notional principal
amount. Under each of our interest rate swaps, interest rates on the notional
amounts are capped at rates ranging between 6.67% and 6.78% upon quarterly
reset dates. In addition, if LIBOR falls below 5% at a quarterly reset date,
we are required to make a payment to our counterparty equal to the difference
between the interest rate on our floating rate LIBOR debt on an annualized
rate of between 6.67% and 6.78%, multiplied by the notional principal amount.
At March 31, 1999, a total of $185 million was subject to interest rate swaps
(the "Original Swaps"), and our exposure was to changes in three-month LIBOR
rates. Beginning in January 1999, we also became a party to additional
contracts with a $75 million notional amount (the "Subsequent Swaps"). These
contracts are designed to limit interest rate increases to 5.99% on this
notional amount if three-month LIBOR rates fall below 5%.
The hypothetical loss in earnings on all derivative instruments that
would have resulted from a hypothetical change of 10 percent in three-month
LIBOR rates, sustained for three months, is estimated to be $390,000. Because
our net-earnings exposure under the combined debt and interest-rate swap was
to three-month LIBOR rates, the hypothetical loss was calculated as follows:
multiplying the notional amount of the swap by the effect of a 10% reduction
in LIBOR under the Original Swaps, partially offset by the Subsequent Swaps
and interest savings on the underlying debt.
PART II - OTHER INFORMATION
ItemITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and its Affiliates may be parties to
various claims, suits and complaints. Currently, there are no such claims, suits
or complaints that, in the opinion of management, would have a material adverse
effect on the Company's financial position, liquidity or results of operations.
ITEM 2. CHANGES IN SECURITIES
On March 3, 1999, we completed a public offering of 5,529,954 shares of
Common Stock, of which 4,000,000 shares were sold by us and 1,529,954 shares
were sold by selling stockholders. In connection with the offering 555,555
shares of Class B Common Stock were converted into common stock.
In March 1998, the Company issued 1,750,942 shares of Series C
Convertible Stock in completing its investment in Essex Investment Management
Company, LLC. Each share converted into one share of Common Stock on March 20,
1999.
ITEM 6. Exhibits and Reports on FormEXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.9 Stock Purchase Agreement dated November 9, 1998, by and among the
Company, Edward C. Rorer & Co., Inc. and the stockholders of
Edward C. Rorer & Co., Inc. (excluding schedules and exhibits,
which the Registrant agrees to furnish supplementally to the
Commission upon request)
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
There have been no reportsThe following Current Reports on Form 8-K were filed by the CompanyAMG during the quarter
ended March 31, 1999:
1. Current Report on Form 8-K dated January 6, 1999 (filed January 21,
1999), reporting the consummation of the investment in Rorer.
2. Current Report on Form 8-K dated February 1, 1999 (filed February 1,
1999), containing the following financial statements for indicated
affiliates:
GEOCAPITAL CORPORATION
Report of Independent Accountants
Statement of Financial Condition as of September 30, 1998.1997
Statement of Operations for the Year Ended September 30, 1997
Statement of Changes in Stockholders' Equity for the Year Ended
September 30, 1997
Statement of Cash Flows for the Year Ended September 30, 1997
Notes to Financial Statements
TWEEDY, BROWNE COMPANY L.P.
Report of Independent Accountants
Statement of Financial Condition as of October 8, 1997
Statement of Operations for the Period January 1, 1997 through
October 8, 1997
Statement of Changes in Partners' Capital for the Period
January 1, 1997 through October 8, 1997
Statement of Cash Flows for the Period January 1, 1997 through
October 8, 1997
Notes to Financial Statements
GOFEN AND GLOSSBERG, INC.
Report of Independent Accountants
Statement of Financial Condition as of May 6, 1997
Statement of Operations for the Period January 1, 1997 to May 6, 1997
Statement of Changes in Shareholders' Equity for the Period January 1,
1997 to May 6, 1997
Statement of Cash Flows for the Period January 1, 1997 to May 6, 1997
Notes to Financial Statements
3. Current Report on Form 8-K dated February 1, 1999 (filed February 1,
1999) containing the press release disclosing the Company's operating
results for the year ended December 31, 1998
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFILIATED MANAGERS GROUP, INC.
-------------------------------
(Registrant)
/s/ Darrell/S/ DARRELL W. CrateCRATE on behalf of the Registrant as November 16, 1998Senior May 14, 1999
- - ---------------------- Senior-------------------- Vice President, Chief Financial Officer
(Darrell W. Crate) Chief Financial Officer and Treasurer (and also as Principal Financial
and Principal Accounting Officer)
1011