Exhibit 99.1
| | Contact: | | Brett S. Perryman |
| | | | Laura Nicoll |
| | | | Affiliated Managers Group, Inc. |
| | | | (617) 747-3300 |
| | | | ir@amg.com |
AMG Reports Financial and Operating Results
for Fourth Quarter and Full Year 2006
Company Reports EPS of $1.21, Cash EPS of $1.79 for Fourth Quarter,
EPS of $3.74, Cash EPS of $5.68 for Full Year 2006
Boston, MA, January 24, 2007— Affiliated Managers Group, Inc. (NYSE: AMG) today reported its financial and operating results for the fourth quarter and full year 2006.
Cash earnings per share (“Cash EPS”) for the fourth quarter of 2006 were $1.79, compared to $1.42 for the fourth quarter of 2005, while diluted earnings per share for the fourth quarter of 2006 were $1.21, compared to $0.90 for the same period of 2005. Cash Net Income was $68.6 million for the fourth quarter of 2006, compared to $56.2 million for the fourth quarter of 2005. Net Income for the fourth quarter of 2006 was $49.0 million, compared to $38.8 million for the fourth quarter of 2005. (Cash EPS and Cash Net Income are defined in the attached tables.)
For the fourth quarter of 2006, revenue was $328.8 million, compared to $272.5 million for the fourth quarter of 2005. EBITDA for the fourth quarter of 2006 was $105.2 million, compared to $83.4 million for the same period of 2005.
For the year ended December 31, 2006, Cash Net Income was $222.5 million, while EBITDA was $342.1 million. For the same period, Net Income was $151.3 million, on revenue of $1,170.4 million. 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.
Net client cash flows for the fourth quarter of 2006 were approximately $6.6 billion, with flows in the institutional, mutual fund, and high net worth channels of $6.7 billion, $91 million, and $(240) million, respectively. Net client cash flows for the full year 2006 were $19.4 billion. Aggregate assets under management grew by $57 billion, or 31%, during 2006 to $241.1 billion at December 31, 2006.
“AMG’s fourth quarter capped an exceptional year with strong results across our business,” stated Sean M. Healey, President and Chief Executive Officer. “Cash earnings per share for the fourth quarter were $1.79, a 26% increase over the same period of 2005. Assets under management increased in 2006 to over $241 billion, principally driven by outstanding organic growth of $46 billion, or 25%, including a record $19.4 billion in net client cash flows. These net flows added $25.9 million to AMG’s annualized EBITDA.”
Mr. Healey continued, “Our Affiliates generated excellent investment performance and net client cash flows during both the quarter and the full year. We saw this across all investment product categories, with Affiliates performing well in growth and value equities, domestic and global equities, as well as alternative products. In a year of strong growth in most equity market indices, AMG was well positioned for outstanding results, particularly through our participation in fast-growing areas including alternative and international investments. With high quality alternative products managed by Affiliates including First Quadrant, AQR and Third Avenue, and strong-performing international products offered by Affiliates such as Tweedy, Browne, AQR, and Genesis, AMG is well positioned within these segments.”
Mr. Healey concluded, “In addition to the strong results of our existing Affiliates, we continue to generate earnings growth through accretive investments in new Affiliates. In the fourth quarter, we were pleased to welcome a new Affiliate, Chicago Equity Partners, a leading manager of quantitative equity and fixed income products with over $12 billion in assets under management. Looking ahead, with an established reputation as the premier succession planning partner of choice among growing, mid-sized asset management firms, our prospects for new investments remain strong. We are making excellent progress in cultivating relationships with a wide range of high quality asset management firms, and are confident that we will continue to add materially to AMG’s growth and diversity through investments in attractive new 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, 2005.
2
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 1-866-249-5225 (domestic calls) or 1-303-262-2005 (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 11082463. 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 | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Revenue | | $ | 272,497 | | $ | 328,764 | |
| | | | | |
Net Income | | $ | 38,764 | | $ | 48,954 | |
| | | | | |
Cash Net Income (A) | | $ | 56,216 | | $ | 68,588 | |
| | | | | |
EBITDA (B) | | $ | 83,422 | | $ | 105,220 | |
| | | | | |
| | | | | |
Average shares outstanding - diluted | | 45,303,516 | | 44,599,646 | |
| | | | | |
Earnings per share - diluted | | $ | 0.90 | | $ | 1.21 | |
| | | | | |
Average shares outstanding - adjusted diluted (C) | | 39,707,676 | | 38,382,648 | |
| | | | | |
Cash earnings per share - diluted (C) | | $ | 1.42 | | $ | 1.79 | |
| | | | | |
| | December 31,
2005 | | December 31,
2006 | |
| | | | | |
Cash and cash equivalents | | $ | 140,423 | | $ | 201,729 | |
| | | | | |
Senior debt | | $ | 241,250 | | $ | 365,500 | |
| | | | | |
Senior convertible securities | | $ | 424,232 | | $ | 413,358 | |
| | | | | |
Mandatory convertible securities | | $ | 300,000 | | $ | 300,000 | |
| | | | | |
Junior convertible trust preferred securities (D) | | $ | — | | $ | 300,000 | |
| | | | | |
Stockholders’ equity | | $ | 817,381 | | $ | 499,222 | |
4
Affiliated Managers Group, Inc.
Financial Highlights
(dollars in thousands, except per share data)
| | Year | | Year | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Revenue | | $ | 916,492 | | $ | 1,170,353 | |
| | | | | |
Net Income | | $ | 119,069 | | $ | 151,277 | |
| | | | | |
Cash Net Income (A) | | $ | 186,103 | | $ | 222,454 | |
| | | | | |
EBITDA (B) | | $ | 267,463 | | $ | 342,118 | |
| | | | | |
Average shares outstanding - diluted | | 44,689,655 | | 45,159,002 | |
| | | | | |
Earnings per share - diluted | | $ | 2.81 | | $ | 3.74 | |
| | | | | |
Average shares outstanding - adjusted diluted (C) | | 38,404,868 | | 39,184,738 | |
| | | | | |
Cash earnings per share - diluted (C) | | $ | 4.85 | | $ | 5.68 | |
| | | | | |
5
Affiliated Managers Group, Inc.
Reconciliations of Earnings Per Share Calculation
(dollars in thousands, except per share data)
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Net Income | | $ | 38,764 | | $ | 48,954 | |
Convertible securities interest expense, net (E) | | 2,055 | | 5,117 | |
Net Income, as adjusted | | $ | 40,819 | | $ | 54,071 | |
| | | | | |
Average shares outstanding - diluted | | 45,303,516 | | 44,599,646 | |
| | | | | |
Earnings per share - diluted | | $ | 0.90 | | $ | 1.21 | |
| | Year | | Year | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Net Income | | $ | 119,069 | | $ | 151,277 | |
Convertible securities interest expense, net (E) | | 6,693 | | 17,618 | |
Net Income, as adjusted | | $ | 125,762 | | $ | 168,895 | |
| | | | | |
Average shares outstanding - diluted | | 44,689,655 | | 45,159,002 | |
| | | | | |
Earnings per share - diluted | | $ | 2.81 | | $ | 3.74 | |
| | | | | |
6
Affiliated Managers Group, Inc.
Reconciliations of Average Shares Outstanding
| | Three Months | | Three Months | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Average shares outstanding - diluted | | 45,303,516 | | 44,599,646 | |
Assumed issuance of COBRA shares | | (6,752,305 | ) | (7,188,461 | ) |
Assumed issuance of LYONS shares | | (2,337,698 | ) | (2,122,932 | ) |
Assumed issuance of Trust Preferred shares (D) | | — | | (2,000,000 | ) |
Dilutive impact of COBRA shares | | 2,757,892 | | 4,090,419 | |
Dilutive impact of LYONS shares | | 736,271 | | 1,003,976 | |
Dilutive impact of Trust Preferred shares (D) | | — | | — | |
Average shares outstanding - adjusted diluted (C) | | 39,707,676 | | 38,382,648 | |
| | Year | | Year | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Average shares outstanding - diluted | | 44,689,655 | | 45,159,002 | |
Assumed issuance of COBRA shares | | (6,346,063 | ) | (7,066,493 | ) |
Assumed issuance of LYONS shares | | (2,342,522 | ) | (2,171,762 | ) |
Assumed issuance of Trust Preferred shares (D) | | — | | (1,489,011 | ) |
Dilutive impact of COBRA shares | | 1,865,097 | | 3,794,935 | |
Dilutive impact of LYONS shares | | 538,701 | | 958,067 | |
Dilutive impact of Trust Preferred shares (D) | | — | | — | |
Average shares outstanding - adjusted diluted (C) | | 38,404,868 | | 39,184,738 | |
7
Affiliated Managers Group, Inc.
Operating Results
(in millions)
Assets Under Management (F)
Statement of Changes - Quarter to Date
| | Mutual
Fund | | Institutional | | High Net
Worth | | Total | |
| | | | | | | | | |
Assets under management, September 30, 2006 | | $ | 54,359 | | $ | 128,929 | | $ | 27,411 | | $ | 210,699 | |
Net client cash flows | | 91 | | 6,721 | | (240 | ) | 6,572 | |
New investment (G) | | 612 | | 11,138 | | 143 | | 11,893 | |
Other Affiliate transactions (H) | | — | | (345 | ) | (562 | ) | (907 | ) |
Investment performance | | 3,179 | | 8,282 | | 1,422 | | 12,883 | |
Assets under management, December 31, 2006 | | $ | 58,241 | | $ | 154,725 | | $ | 28,174 | | $ | 241,140 | |
Statement of Changes - Year to Date
| | Mutual
Fund | | Institutional | | High Net
Worth | | Total | |
| | | | | | | | | |
Assets under management, December 31, 2005 | | $ | 50,268 | | $ | 109,299 | | $ | 24,743 | | $ | 184,310 | |
Net client cash flows | | 458 | | 18,472 | | 489 | | 19,419 | |
New investment (G) | | 612 | | 11,138 | | 143 | | 11,893 | |
Other Affiliate transactions (H) | | — | | (345 | ) | (562 | ) | (907 | ) |
Investment performance | | 6,903 | | 16,161 | | 3,361 | | 26,425 | |
Assets under management, December 31, 2006 | | $ | 58,241 | | $ | 154,725 | | $ | 28,174 | | $ | 241,140 | |
8
Affiliated Managers Group, Inc.
Operating Results
(in thousands)
Financial Results (F)
| | Three | | | | Three | | | |
| | Months | | | | Months | | | |
| | Ended | | Percent | | Ended | | Percent | |
| | 12/31/05 | | of Total | | 12/31/06 | | of Total | |
Revenue | | | | | | | | | |
Mutual Fund | | $ | 113,738 | | 42% | | $ | 131,024 | | 40% | |
Institutional | | 122,028 | | 45% | | 158,490 | | 48% | |
High Net Worth | | 36,731 | | 13% | | 39,250 | | 12% | |
| | $ | 272,497 | | 100% | | $ | 328,764 | | 100% | |
| | | | | | | | | |
EBITDA (B) | | | | | | | | | |
Mutual Fund | | $ | 30,006 | | 36% | | $ | 38,110 | | 36% | |
Institutional | | 44,901 | | 54% | | 55,908 | | 53% | |
High Net Worth | | 8,515 | | 10% | | 11,202 | | 11% | |
| | $ | 83,422 | | 100% | | $ | 105,220 | | 100% | |
| | Year | | | | Year | | | |
| | Ended | | Percent | | Ended | | Percent | |
| | 12/31/05 | | of Total | | 12/31/06 | | of Total | |
Revenue | | | | | | | | | |
Mutual Fund | | $ | 400,859 | | 44% | | $ | 501,739 | | 43% | |
Institutional | | 385,681 | | 42% | | 514,761 | | 44% | |
High Net Worth | | 129,952 | | 14% | | 153,853 | | 13% | |
| | $ | 916,492 | | 100% | | $ | 1,170,353 | | 100% | |
| | | | | | | | | |
EBITDA (B) | | | | | | | | | |
Mutual Fund | | $ | 110,303 | | 41% | | $ | 138,246 | | 40% | |
Institutional | | 125,152 | | 47% | | 162,251 | | 48% | |
High Net Worth | | 32,008 | | 12% | | 41,621 | | 12% | |
| | $ | 267,463 | | 100% | | $ | 342,118 | | 100% | |
9
Affiliated Managers Group, Inc.
Reconciliations of Performance and Liquidity Measures
(in thousands)
| | Three
Months | | Three
Months | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Net Income | | $ | 38,764 | | $ | 48,954 | |
Intangible amortization | | 6,875 | | 6,845 | |
Intangible amortization - equity method investments (I) | | 2,296 | | 2,327 | |
Intangible-related deferred taxes | | 6,873 | | 8,986 | |
Affiliate depreciation | | 1,408 | | 1,476 | |
Cash Net Income (A) | | $ | 56,216 | | $ | 68,588 | |
| | | | | |
Cash flow from operations | | $ | 67,496 | | $ | 69,883 | |
Interest expense, net of non-cash items | | 9,527 | | 14,638 | |
Current tax provision | | 14,995 | | 17,856 | |
Income from equity method investments, net of distributions (I) | | 12,929 | | 12,298 | |
Changes in assets and liabilities and other adjustments | | (21,525 | ) | (9,455 | ) |
EBITDA (B) | | $ | 83,422 | | $ | 105,220 | |
Holding company expenses | | 17,123 | | 5,434 | |
EBITDA Contribution | | $ | 100,545 | | $ | 110,654 | |
| | Year | | Year | |
| | Ended | | Ended | |
| | 12/31/05 | | 12/31/06 | |
| | | | | |
Net Income | | $ | 119,069 | | $ | 151,277 | |
Intangible amortization | | 24,873 | | 27,378 | |
Intangible amortization - equity method investments (I) | | 8,483 | | 9,290 | |
Intangible-related deferred taxes | | 28,791 | | 28,779 | |
Affiliate depreciation | | 4,887 | | 5,730 | |
Cash Net Income (A) | | 186,103 | | 222,454 | |
| | | | | |
Cash flow from operations | | $ | 204,078 | | $ | 301,003 | |
Interest expense, net of non-cash items | | 32,512 | | 53,578 | |
Current tax provision | | 38,895 | | 55,267 | |
Income from equity method investments, net of distributions (I) | | 18,889 | | 1,575 | |
Changes in assets and liabilities and other adjustments | | (26,911 | ) | (69,305 | ) |
EBITDA (B) | | $ | 267,463 | | $ | 342,118 | |
Holding company expenses | | 46,401 | | 42,220 | |
EBITDA Contribution | | $ | 313,864 | | $ | 384,338 | |
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, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | | | | | | | | |
Revenue | | $ | 272,497 | | $ | 328,764 | | $ | 916,492 | | $ | 1,170,353 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Compensation and related expenses | | 106,415 | | 114,372 | | 365,960 | | 472,400 | |
Selling, general and administrative | | 46,793 | | 54,314 | | 162,078 | | 184,019 | |
Amortization of intangible assets | | 6,875 | | 6,845 | | 24,873 | | 27,378 | |
Depreciation and other amortization | | 1,977 | | 2,377 | | 7,029 | | 8,763 | |
Other operating expenses | | 6,426 | | 7,182 | | 21,497 | | 23,880 | |
| | 168,486 | | 185,090 | | 581,437 | | 716,440 | |
Operating income | | 104,011 | | 143,674 | | 335,055 | | 453,913 | |
| | | | | | | | | |
Non-operating (income) and expenses: | | | | | | | | | |
Investment and other income | | (3,087 | ) | (7,949 | ) | (8,871 | ) | (16,943 | ) |
Income from equity method investments | | (16,722 | ) | (18,788 | ) | (26,970 | ) | (38,318 | ) |
Investment income from Affiliate investments in partnerships (K) | | (278 | ) | (6,852 | ) | (445 | ) | (3,400 | ) |
Interest expense | | 10,744 | | 15,966 | | 37,426 | | 58,800 | |
| | (9,343 | ) | (17,623 | ) | 1,140 | | 139 | |
| | | | | | | | | |
Income before minority interest and taxes | | 113,354 | | 161,297 | | 333,915 | | 453,774 | |
Minority interest (J) | | (51,824 | ) | (76,898 | ) | (144,263 | ) | (212,523 | ) |
Minority interest in Affiliate investments in partnerships (K) | | — | | (6,694 | ) | — | | (3,364 | ) |
Income before income taxes | | 61,530 | | 77,705 | | 189,652 | | 237,887 | |
| | | | | | | | | |
Income taxes - current | | 14,995 | | 17,856 | | 38,895 | | 55,267 | |
Income taxes - intangible-related deferred | | 6,873 | | 8,986 | | 28,791 | | 28,779 | |
Income taxes - other deferred | | 898 | | 1,909 | | 2,897 | | 2,564 | |
Net Income | | $ | 38,764 | | $ | 48,954 | | $ | 119,069 | | $ | 151,277 | |
| | | | | | | | | |
Average shares outstanding - basic | | 33,832,572 | | 29,930,399 | | 33,667,542 | | 31,289,005 | |
Average shares outstanding - diluted | | 45,303,516 | | 44,599,646 | | 44,689,655 | | 45,159,002 | |
| | | | | | | | | |
Earnings per share - basic | | $ | 1.15 | | $ | 1.64 | | $ | 3.54 | | $ | 4.83 | |
Earnings per share - diluted | | $ | 0.90 | | $ | 1.21 | | $ | 2.81 | | $ | 3.74 | |
| | | | | | | | | |
11
Affiliated Managers Group, Inc.
Consolidated Balance Sheets
(in thousands)
| | December 31, | | December 31, | |
| | 2005 | | 2006 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 140,423 | | $ | 201,729 | |
Investment advisory fees receivable | | 148,850 | | 201,385 | |
Affiliate investments in partnerships (K) | | 5,079 | | 108,350 | |
Prepaid expenses and other current assets | | 48,529 | | 57,017 | |
Total current assets | | 342,881 | | 568,481 | |
| | | | | |
Fixed assets, net | | 50,592 | | 63,984 | |
Equity investments in Affiliates | | 301,476 | | 293,440 | |
Acquired client relationships, net | | 483,692 | | 502,066 | |
Goodwill | | 1,093,249 | | 1,177,227 | |
Other assets | | 49,746 | | 60,722 | |
Total assets | | $ | 2,321,636 | | $ | 2,665,920 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable and accrued liabilities | | $ | 176,711 | | $ | 246,727 | |
Senior debt | | 65,750 | | — | |
Payables to related party | | 14,127 | | 41,086 | |
Total current liabilities | | 256,588 | | 287,813 | |
| | | | | |
Senior debt | | 175,500 | | 365,500 | |
Senior convertible securities | | 424,232 | | 413,358 | |
Mandatory convertible securities | | 300,000 | | 300,000 | |
Junior convertible trust preferred securities (D) | | — | | 300,000 | |
Deferred income taxes | | 182,623 | | 218,584 | |
Other long-term liabilities | | 20,149 | | 11,209 | |
Total liabilities | | 1,359,092 | | 1,896,464 | |
| | | | | |
Minority interest (J) | | 145,163 | | 166,138 | |
Minority interest in Affiliate investments in partnerships (K) | | — | | 104,096 | |
| | | | | |
Stockholders’ equity: | | | | | |
Common stock | | 390 | | 390 | |
Additional paid-in capital | | 593,090 | | 609,369 | |
Accumulated other comprehensive income | | 16,756 | | 14,666 | |
Retained earnings | | 503,188 | | 654,465 | |
| | 1,113,424 | | 1,278,890 | |
Less treasury stock, at cost | | (296,043 | ) | (779,668 | ) |
Total stockholders’ equity | | 817,381 | | 499,222 | |
Total liabilities and stockholders’ equity | | $ | 2,321,636 | | $ | 2,665,920 | |
12
Affiliated Managers Group, Inc.
Consolidated Statements of Cash Flow
(in thousands)
| | Three Months Ended December 31, | | Year Ended December 31, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | | | | | | | | |
Cash flow from operating activities: | | | | | | | | | |
Net Income | | $ | 38,764 | | $ | 48,954 | | $ | 119,069 | | $ | 151,277 | |
Adjustments to reconcile Net Income to net cash flow from operating activities: | | | | | | | | | |
Amortization of intangible assets | | 6,875 | | 6,845 | | 24,873 | | 27,378 | |
Amortization of issuance costs | | 743 | | 740 | | 3,018 | | 2,862 | |
Depreciation and other amortization | | 1,977 | | 2,377 | | 7,029 | | 8,763 | |
Deferred income tax provision | | 7,771 | | 10,895 | | 31,688 | | 31,343 | |
Accretion of interest | | 474 | | 588 | | 1,896 | | 2,360 | |
Income from equity method investments, net of amortization | | (16,722 | ) | (18,788 | ) | (26,971 | ) | (38,318 | ) |
Distributions received from equity method investments | | 6,089 | | 8,817 | | 16,565 | | 46,033 | |
Tax benefit from exercise of stock options | | 2,839 | | 601 | | 13,942 | | 5,482 | |
Other adjustments | | 22 | | 6,879 | | (2,231 | ) | 10,182 | |
Changes in assets and liabilities: | | | | | | | | | |
Increase in investment advisory fees receivable | | (21,874 | ) | (38,907 | ) | (53,846 | ) | (52,281 | ) |
Decrease in Affiliate investments in partnerships | | — | | 4,842 | | — | | 7,707 | |
(Increase) decrease in prepaids and other current assets | | (12,316 | ) | (7,691 | ) | (8,258 | ) | 150 | |
(Increase) decrease in other assets | | 1,771 | | 1,858 | | (126 | ) | 3,159 | |
Increase in accounts payable, accrued liabilities and other long-term liabilities | | 6,518 | | 2,962 | | 32,217 | | 65,814 | |
Increase in minority interest | | 44,565 | | 38,911 | | 45,213 | | 29,092 | |
Cash flow from operating activities | | 67,496 | | 69,883 | | 204,078 | | 301,003 | |
| | | | | | | | | |
Cash flow used in investing activities: | | | | | | | | | |
Cost of investments in Affiliates, net of cash acquired | | (4,409 | ) | (102,712 | ) | (85,175 | ) | (123,262 | ) |
Purchase of fixed assets | | (5,422 | ) | (6,548 | ) | (14,523 | ) | (21,510 | ) |
Purchase of investment securities | | — | | (6,421 | ) | (6,393 | ) | (29,522 | ) |
Sale of investment securities | | — | | 9,215 | | 24,062 | | 9,215 | |
Cash flow used in investing activities | | (9,831 | ) | (106,466 | ) | (82,029 | ) | (165,079 | ) |
| | | | | | | | | |
Cash flow from (used in) financing activities: | | | | | | | | | |
Borrowings of senior bank debt | | 49,500 | | 207,000 | | 224,500 | | 602,000 | |
Repayments of senior bank debt | | (65,000 | ) | (57,500 | ) | (100,000 | ) | (412,000 | ) |
Issuance of junior convertible trust preferred securities (D) | | — | | — | | — | | 300,000 | |
Repayment of debt assumed in new investment | | — | | — | | (150,811 | ) | — | |
Repayment of senior debt | | — | | (65,750 | ) | — | | (65,750 | ) |
Repurchase of senior debt | | — | | — | | (10,000 | ) | — | |
Issuance of common stock | | 4,635 | | 5,941 | | 28,892 | | 52,765 | |
Repurchase of common stock | | (42,796 | ) | (73,553 | ) | (82,317 | ) | (536,478 | ) |
Issuance costs | | (2,009 | ) | (576 | ) | (2,660 | ) | (9,982 | ) |
Settlement of forward equity sale agreement | | — | | — | | (14,008 | ) | — | |
Excess tax benefit from exercise of stock options | | — | | 5,696 | | — | | 23,047 | |
Cost of call spread option agreements | | — | | — | | — | | (13,290 | ) |
Repayment of notes payable and other liabilities | | (377 | ) | — | | (15,863 | ) | (7,687 | ) |
Redemptions of Minority interest - Affiliate investments in partnerships | | — | | (4,842 | ) | — | | (7,707 | ) |
Cash flow from (used in) financing activities | | (56,047 | ) | 16,416 | | (122,267 | ) | (75,082 | ) |
| | | | | | | | | |
Effect of foreign exchange rate changes on cash and cash equivalents | | (430 | ) | (166 | ) | 364 | | 464 | |
Net increase (decrease) in cash and cash equivalents | | 1,188 | | (20,333 | ) | 146 | | 61,306 | |
Cash and cash equivalents at beginning of period | | 139,235 | | 222,062 | | 140,277 | | 140,423 | |
| | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 140,423 | | $ | 201,729 | | $ | 140,423 | | $ | 201,729 | |
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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) Cash earnings per share represents Cash Net Income divided by the adjusted diluted average shares
outstanding. In this calculation, the potential share issuance in connection with the Company’s convertible
securities is measured 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 and the junior convertible trust
preferred 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.
(D) In the second quarter of 2006, the Company completed the private placement of convertible trust preferred securities. The convertible trust preferred securities were issued to investors by a wholly-owned trust, simultaneous with the issuance of $300 million of junior subordinated convertible debentures (the “junior convertible trust preferred” or “Trust Preferred” securities) by the Company to the trust.
(E) Convertible securities interest expense, net, includes the interest expense, net of tax, associated with the
Company’s contingently convertible securities and Trust Preferred securities (but excludes the interest expense
associated with the Company’s mandatory convertible securities).
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(F) During the first quarter of 2006, approximately $1.5 billion and $0.6 billion of existing assets under
management were reclassified to the Institutional and Mutual Fund distribution channels, respectively, from
the High Net Worth distribution channel, to conform to the current period’s presentation. As such, financial
information for prior periods has been revised to conform to this presentation.
(G) The Company completed its investment in Chicago Equity Partners, LLC during the quarter ended December 31,
2006.
(H) The Company transferred its interests in two Affiliates during the fourth quarter of 2006. The financial effect
of these transactions was not material to the Company’s results.
(I) 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 “Income from equity
method investments.” 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.
(J) 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.
(K) EITF Issue No. 04-05, “Determining Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights,” (“EITF 04-05”),
became effective January 1, 2006. EITF 04-05 requires the Company to consolidate certain Affiliate
investment partnerships (including interests in the partnerships in which the Company does not have ownership
rights) in its consolidated financial statements. For the twelve months ending December 31, 2006, the total non-
operating income associated with those partnerships was $3.4 million, while the portion attributable to the
underlying investors unrelated to the Company (the “outside owners”) was $3.3 million; as of December 31, 2006,
the total assets attributable to these investment partnerships was $108.4 million, while the portion owned by
the outside owners was $104.1 million.
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