Exhibit 99.1
Contact: | Brett S. Perryman | |
|
| Peter W. MacEwen |
|
| Affiliated Managers Group, Inc. |
|
| (617) 747-3300 |
|
| ir@amg.com |
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, MA, January 25, 2006 – Affiliated Managers Group, Inc. (NYSE: AMG) today reported its financial and operating results for the fourth quarter and full year 2005.
Cash earnings per share (“Cash EPS”) for the fourth quarter of 2005 were $1.42, compared to $1.08 for the fourth quarter of 2004, while diluted earnings per share 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 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 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 $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 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 grew by 42% during 2005, and were $184 billion at December 31, 2005.
(more)
“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, 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 and the continued growth of First Quadrant, two of the most highly regarded quantitative 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 mid-sized asset management firms. We also had excellent results among our domestic equity products, which contribute approximately 45% to our EBITDA. In addition to outstanding value oriented Affiliates such as Tweedy, Browne and Third Avenue, our growth oriented Affiliates have superior near- and long-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 firms, AMG is widely recognized as the succession planning 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.”
2
“Through our Affiliate growth and development initiatives, AMG offers an array of opportunities for Affiliates to meaningfully strengthen and enhance their businesses,” stated William 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. In addition, AMG provides centralized assistance to its Affiliates in strategic matters, marketing, distribution, product development and operations.
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including changes in the securities or financial markets or in general economic conditions, the availability of equity and debt financing, competition for acquisitions of interests in investment management firms, the ability to close pending investments, the investment performance of our Affiliates and their ability to effectively market their investment strategies, and other risks detailed from time to time in AMG’s filings with the Securities and Exchange Commission. Reference is hereby made to the “Cautionary Statements” set forth in the Company’s Form 10-K for the year ended December 31, 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.
3
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)* |
| $ | 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 |
|
*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.
4
|
| 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)* |
| $ | 2.02 |
| $ | 2.81 |
|
|
|
|
|
|
| ||
Average shares outstanding - adjusted diluted (D) |
| 31,998,750 |
| 38,404,868 |
| ||
|
|
|
|
|
| ||
Cash earnings per share - diluted (D) |
| $ | 3.95 |
| $ | 4.85 |
|
*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.
5
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 |
|
6
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 |
|
7
Affiliated Managers Group, Inc.
Operating Results
(in millions)
Assets under Management (E)
Statement of Changes - Quarter to Date
|
| Mutual |
| Institutional |
| High Net |
| 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 |
| Institutional |
| High Net |
| 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 |
|
8
Affiliated Managers Group, Inc.
Operating Results
(in thousands)
Financial Results (E)
|
| Three |
|
|
| Three |
|
|
| ||
|
| 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% |
|
9
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 |
|
10
Affiliated Managers Group, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)
|
| Three Months Ended December 31, |
| Year Ended December 31, |
| ||||||||
|
| 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 |
|
11
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 |
|
12
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
|
| Three Months Ended December 31, |
| Year Ended 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 |
|
|
|
|
|
|
|
|
| ||||
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 |
| (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 |
|
13
Affiliated Managers Group, Inc.
Notes
(A) | Cash Net Income is defined as Net Income plus amortization and deferred taxes related to intangible assets plus Affiliate depreciation. This supplemental non-GAAP performance measure is provided in addition to, but not as a substitute for, Net Income. The Company considers Cash Net Income an important measure of its financial performance, as management believes it best represents operating performance before non-cash expenses relating to the acquisition of interests in its affiliated investment management firms. Since acquired assets do not generally depreciate or require replacement, and since they generate deferred tax expenses that are unlikely to reverse, the Company adds back these non-cash expenses. Cash Net Income is used by the Company’s management and Board of Directors as a principal performance benchmark. |
|
|
| The Company adds back amortization attributable to acquired client relationships because this expense does not correspond to the changes in value of these assets, which do not diminish predictably over time. The Company adds back the portion of deferred taxes generally attributable to intangible assets (including goodwill) that it no longer amortizes but which continues to generate tax deductions. These deferred tax expense accruals would be used in the event of a future sale of an Affiliate or an impairment charge, which the Company considers unlikely. The Company adds back the portion of consolidated depreciation expense incurred by Affiliates because under its Affiliate operating agreements, the Company is generally not required to replenish these depreciating assets. |
|
|
(B) | EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. This supplemental non-GAAP liquidity measure is provided in addition to, but not as a substitute for, cash flow from operations. As a measure of liquidity, the Company believes EBITDA is useful as an indicator of its ability to service debt, make new investments and meet working capital requirements. EBITDA, as calculated by the Company, may not be consistent with computations of EBITDA by other companies. In reporting EBITDA by segment, Affiliate expenses are allocated to a particular segment on a pro rata basis with respect to the revenue generated by that Affiliate in such segment. |
|
|
(C) | 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 on page 6). |
|
|
(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 |
14
| 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. |
15