EX-99.1 2 a05-2208_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Contact:

 

Darrell W. Crate

 

 

Affiliated Managers Group, Inc.

 

 

(617) 747-3300

 

AMG Reports Financial and Operating Results

for Fourth Quarter and Full Year 2004

 

Company Reports EPS of $0.58, Cash EPS of $1.08 for Fourth Quarter,

EPS of $2.02, Cash EPS of $3.95 for Full Year 2004

 

Boston, MA, January 26, 2005 – Affiliated Managers Group, Inc. (NYSE: AMG) today reported its financial and operating results for the fourth quarter and full year 2004.

 

Cash earnings per share (“Cash EPS”) for the fourth quarter of 2004 were $1.08, compared to $0.86 for the fourth quarter of 2003, while diluted earnings per share for the fourth quarter of 2004 were $0.58, compared to $0.44 for the same period of 2003.  Cash Net Income was $37.5 million for the fourth quarter of 2004, compared to $28.5 million for the fourth quarter of 2003.  Net Income for the fourth quarter of 2004 was $23.3 million, compared to $17.3 million for the fourth quarter of 2003.  (Cash EPS and Cash Net Income are defined in the attached tables.)

 

For the fourth quarter of 2004, revenue was $184.0 million, compared to $139.6 million for the fourth quarter of 2003.  EBITDA for the fourth quarter of 2004 was $53.8 million, compared to $40.6 million for the same period of 2003.

 

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.  For the year ended December 31, 2003, Cash Net Income was $104.9 million, while EBITDA was $147.2 million.  For the same period, Net Income was $60.5 million, on revenue of $495.0 million.

 

Net client cash flows were $182 million, with net inflows of $101 million from directly managed assets, and $81 million from overlay assets.  Net inflows in the mutual fund and institutional channels were $823 million and $683 million, respectively, while outflows in the high net worth channel were $1.4 billion.  These aggregate net client cash flows for the quarter resulted in an increase of approximately $600,000 to AMG’s annualized EBITDA.  Pro forma for the Company’s recent acquisition of the Fremont Funds, the aggregate assets under management of AMG’s affiliated investment management firms at December 31, 2004 were approximately $133 billion.

 

(more)

 


 

“A strong fourth quarter capped an outstanding 2004, as excellent investment performance, net client cash flows, and the completion of several new investments generated an increase in Cash earnings per share of 26% year-over-year,” stated Sean M. Healey, President and Chief Executive Officer.  “We experienced especially strong growth in our annualized EBITDA from the investment performance and positive net client cash flows of our larger Affiliates, including First Quadrant, Friess Associates, Genesis, Third Avenue, and Tweedy, Browne.”

 

Mr. Healey continued, “While our existing Affiliates performed well during 2004, AMG also had an excellent year in our new investments area, as we completed investments in three new Affiliates:  Genesis Asset Managers, AQR Capital Management, and TimesSquare Capital Management.  In addition to being excellent investment management firms, these Affiliates add materially to the diversity of our Affiliate group and our product offerings.  Genesis, AMG’s first internationally-based Affiliate, is also our first Affiliate concentrating in emerging markets equity securities, and AQR, our first Affiliate specializing in alternative investment products, significantly expands our participation in investment strategies designed to have a low correlation to the equity markets.  We were also pleased to invest in the growth equity business of TimesSquare, which provides AMG with additional capacity in growth equities in the small, “smid” and mid-cap areas.  Finally, we expanded our Managers Funds mutual fund family through the acquisitions of the mutual fund families of Conseco Capital Management, Inc. and Fremont Investment Advisors, Inc.”  Mr. Healey concluded, “As we look to 2005, we are very optimistic about our prospects for continued strong growth by our existing Affiliates, as well as earnings accretion from additional investments in high quality, mid-sized asset management firms.”

 

“In addition to the strong performance of our Affiliates and the successful execution of investments in new Affiliates in 2004, we made significant progress in expanding the resources we provide our Affiliates with the launch of Managers Investment Group at the end of the year,” stated William J. Nutt, Chairman.  “This initiative leverages the breadth and diversity of AMG’s Affliates’ products through a single high-quality sales force.  Managers now distributes more than 75 of AMG’s institutional-quality investment products managed by 10 AMG Affiliates through banks, brokerage firms, and other sponsored platforms.”

 

“More broadly,” Mr. Nutt concluded, “we further enhanced the depth and experience of our holding company management team in each area of our business.  In Affiliate Development, we added senior attorneys and compliance professionals to our centralized legal and compliance program.  We also added valuable new members to our Finance and New Investment teams.  Finally, as we announced earlier, we formally recognized the increasing role in the overall management of AMG that Sean has taken in recent years, as he assumed the title of Chief Executive Officer on January 1, 2005.”

 

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

 

2


 

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, 2003.

 

Financial Tables Follow

 

A teleconference will be held with AMG’s management at 11:00 a.m. Eastern time today.  Parties interested in listening to the teleconference should dial 1-800-240-5318 (domestic calls) or 1-303-262-2190 (international calls) starting at 10:45 a.m. Eastern time.  Those wishing to listen to the teleconference should dial the appropriate number at least ten minutes before the call begins.  The teleconference will be available for replay approximately one hour after the conclusion of the call.  To access the replay, please dial 1-800-405-2236 (domestic calls) or 1-303-590-3000 (international calls), pass code 11020828.  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
Ended
12/31/03

 

Three Months
Ended
12/31/04

 

 

 

 

 

 

 

Revenue

 

$

139,616

 

$

183,955

 

 

 

 

 

 

 

Net Income

 

$

17,313

 

$

23,258

 

 

 

 

 

 

 

Cash Net Income (A)

 

$

28,455

 

$

37,489

 

 

 

 

 

 

 

EBITDA (B)

 

$

40,607

 

$

53,827

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

41,023,759

 

41,846,140

 

 

 

 

 

 

 

Earnings per share - diluted (C) (D)*

 

$

0.44

 

$

0.58

 

 

 

 

 

 

 

Average shares outstanding - diluted, as adjusted (C) (E)

 

33,141,060

 

34,790,006

 

 

 

 

 

 

 

Cash earnings per share - diluted (C) (E)

 

$

0.86

 

$

1.08

 

 

 

 

December 31,
2003

 

December 31,
2004

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

253,334

 

$

161,450

 

 

 

 

 

 

 

Senior debt

 

$

—

 

$

126,750

 

 

 

 

 

 

 

Senior convertible debt

 

$

423,340

 

$

423,958

 

 

 

 

 

 

 

Mandatory convertible securities

 

$

230,000

 

$

300,000

 

 

 

 

 

 

 

Stockholders’ equity

 

$

614,769

 

$

707,692

 

 

*As required by EITF 04-08 (discussed in Note D in greater detail) the calculation of Earnings per share - diluted includes the addition to Net Income of interest expense related to the Company’s contingently convertible securities, net of tax, of $602 and $1,015 for the three months ended December 31, 2003 and December 31, 2004, respectively.

 

4


 

Affiliated Managers Group, Inc.

Financial Highlights

(dollars in thousands, except per share data)

 

 

 

Year
Ended
12/31/03

 

Year
Ended
12/31/04

 

 

 

 

 

 

 

Revenue

 

$

495,029

 

$

659,997

 

 

 

 

 

 

 

Net Income

 

$

60,528

 

$

77,147

 

 

 

 

 

 

 

Cash Net Income (A)

 

$

104,944

 

$

126,475

 

 

 

 

 

 

 

EBITDA (B)

 

$

147,215

 

$

186,434

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

40,113,040

 

39,644,676

 

 

 

 

 

 

 

Earnings per share - diluted (C) (D) **

 

$

1.57

 

$

2.02

 

 

 

 

 

 

 

Average shares outstanding - diluted, as adjusted (C) (E)

 

32,706,777

 

31,998,750

 

 

 

 

 

 

 

Cash earnings per share - diluted (C) (E)

 

$

3.21

 

$

3.95

 

 

**As required by EITF 04-08 (discussed in Note D in greater detail) the calculation of Earnings per share - diluted includes the addition to Net Income of interest expense related to the Company’s contingently convertible securities, net of tax, of $2,293 and $3,016 for the years ended December 31, 2003 and December 31, 2004, respectively.

 

5


 

Affiliated Managers Group, Inc.

Reconciliations of Earnings Per Share Calculation

(dollars in thousands, except per share data)

 

 

 

Three Months
Ended
12/31/03

 

Three Months
Ended
12/31/04

 

 

 

 

 

 

 

Net Income

 

$

17,313

 

$

23,258

 

Contingent convertible securities interest expense, net

 

602

 

1,015

 

Net Income, as adjusted

 

$

17,915

 

$

24,273

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

41,023,759

 

41,846,140

 

 

 

 

 

 

 

Earnings per share - diluted (C) (D)

 

$

0.44

 

$

0.58

 

 

 

 

Year
Ended
12/31/03

 

Year
Ended
12/31/04

 

 

 

 

 

 

 

Net Income

 

$

60,528

 

$

77,147

 

Contingent convertible securities interest expense, net

 

2,293

 

3,016

 

Net Income, as adjusted

 

$

62,821

 

$

80,163

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

40,113,040

 

39,644,676

 

 

 

 

 

 

 

Earnings per share - diluted (C) (D)

 

$

1.57

 

$

2.02

 

 

6


 

Affiliated Managers Group, Inc.

Reconciliations of Average Shares Outstanding

 

 

 

Three Months
Ended
12/31/03

 

Three Months
Ended
12/31/04

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

41,023,759

 

41,846,140

 

Assumed issuance of COBRA shares

 

(5,538,465

)

(6,066,716

)

Assumed issuance of LYONS shares

 

(2,344,234

)

(2,344,234

)

Dilutive impact of COBRA shares

 

—

 

1,073,673

 

Dilutive impact of LYONS shares

 

—

 

281,143

 

Average shares outstanding - diluted, as adjusted (C) (E)

 

33,141,060

 

34,790,006

 

 

 

 

Year
Ended
12/31/03

 

Year
Ended
12/31/04

 

 

 

 

 

 

 

Average shares outstanding - diluted (C) (D)

 

40,113,040

 

39,644,676

 

Assumed issuance of COBRA shares

 

(4,692,311

)

(5,711,719

)

Assumed issuance of LYONS shares

 

(2,713,952

)

(2,344,234

)

Dilutive impact of COBRA shares

 

—

 

317,509

 

Dilutive impact of LYONS shares

 

—

 

92,518

 

Average shares outstanding - diluted, as adjusted (C) (E)

 

32,706,777

 

31,998,750

 

 

7


 

Affiliated Managers Group, Inc.

Operating Results

(in millions)

 

Assets Under Management

 

Statement of Changes - Quarter to Date

 

 

 

Mutual
Fund

 

Institutional

 

High Net
Worth

 

Total

 

 

 

 

 

 

 

 

 

 

 

Assets under management, September 30, 2004

 

$

26,181

 

$

54,456

 

$

20,374

 

$

101,011

 

Net client cash flows - directly managed assets

 

823

 

683

 

(1,405

)

101

 

Net client cash flows - overlay assets

 

—

 

81

 

—

 

81

 

New investments (G)

 

—

 

17,532

 

—

 

17,532

 

Investment performance

 

2,877

 

6,678

 

1,522

 

11,077

 

Assets under management, December 31, 2004

 

$

29,881

 

$

79,430

 

$

20,491

 

$

129,802

 

 

Statement of Changes - Year to Date

 

 

 

Mutual
Fund

 

Institutional

 

High Net
Worth

 

Total

 

 

 

 

 

 

 

 

 

 

 

Assets under management, December 31, 2003

 

$

23,339

 

$

44,686

 

$

23,499

 

$

91,524

 

Net client cash flows - directly managed assets

 

1,942

 

1,521

 

(4,334

)

(871

)

Net client cash flows - overlay assets

 

—

 

114

 

—

 

114

 

New investments (G)

 

361

 

24,789

 

—

 

25,150

 

Investment performance

 

4,239

 

8,320

 

1,326

 

13,885

 

Assets under management, December 31, 2004

 

$

29,881

 

$

79,430

 

$

20,491

 

$

129,802

 

 

8


 

Affiliated Managers Group, Inc.

Operating Results

(in thousands)

 

Financial Results

 

 

 

Three
Months
Ended
12/31/03

 

Percent of
Total

 

Three
Months
Ended
12/31/04

 

Percent of
Total

 

Revenue

 

 

 

 

 

 

 

 

 

Mutual Fund

 

$

55,454

 

40%

 

$

69,443

 

38%

 

Institutional

 

49,578

 

35%

 

80,349

 

44%

 

High Net Worth

 

34,584

 

25%

 

34,163

 

18%

 

 

 

$

139,616

 

100%

 

$

183,955

 

100%

 

 

 

 

 

 

 

 

 

 

 

EBITDA (B)

 

 

 

 

 

 

 

 

 

Mutual Fund

 

$

17,053

 

42%

 

$

21,540

 

40%

 

Institutional

 

13,542

 

33%

 

22,585

 

42%

 

High Net Worth

 

10,012

 

25%

 

9,702

 

18%

 

 

 

$

40,607

 

100%

 

$

53,827

 

100%

 

 

 

 

Year
Ended
12/31/03

 

Percent of
Total

 

Year
Ended
12/31/04

 

Percent of
Total

 

Revenue

 

 

 

 

 

 

 

 

 

Mutual Fund

 

$

191,740

 

39%

 

$

255,153

 

39%

 

Institutional

 

171,798

 

35%

 

265,770

 

40%

 

High Net Worth

 

131,491

 

26%

 

139,074

 

21%

 

 

 

$

495,029

 

100%

 

$

659,997

 

100%

 

 

 

 

 

 

 

 

 

 

 

EBITDA (B)

 

 

 

 

 

 

 

 

 

Mutual Fund

 

$

59,053

 

40%

 

$

75,446

 

40%

 

Institutional

 

48,075

 

33%

 

72,648

 

39%

 

High Net Worth

 

40,087

 

27%

 

38,340

 

21%

 

 

 

$

147,215

 

100%

 

$

186,434

 

100%

 

 

9


 

Affiliated Managers Group, Inc.

Reconciliations of Performance and Liquidity Measures

(in thousands)

 

 

 

Three Months
Ended
12/31/03

 

Three Months
Ended
12/31/04

 

 

 

 

 

 

 

Net Income

 

$

17,313

 

$

23,258

 

Intangible amortization

 

4,064

 

5,125

 

Intangible amortization - equity method investments (H)

 

—

 

908

 

Intangible-related deferred taxes

 

6,050

 

7,107

 

Affiliate depreciation

 

1,028

 

1,091

 

Cash Net Income (A)

 

$

28,455

 

$

37,489

 

 

 

 

 

 

 

Cash flow from operations

 

$

33,481

 

$

45,563

 

Interest expense, net of non-cash items

 

4,627

 

6,288

 

Current tax provision

 

3,141

 

6,917

 

Intangible amortization - equity method investments (H)

 

—

 

908

 

Changes in assets and liabilities and other adjustments

 

(642

)

(5,849

)

EBITDA (B)

 

$

40,607

 

$

53,827

 

Holding company expenses

 

7,283

 

7,866

 

EBITDA Contribution

 

$

47,890

 

$

61,693

 

 

 

 

Year
Ended
12/31/03

 

Year
Ended
12/31/04

 

 

 

 

 

 

 

Net Income

 

$

60,528

 

$

77,147

 

Intangible amortization

 

16,176

 

18,339

 

Intangible amortization - equity method investments (H)

 

—

 

908

 

Intangible-related deferred taxes

 

23,899

 

25,791

 

Affiliate depreciation

 

4,341

 

4,290

 

Cash Net Income (A)

 

$

104,944

 

$

126,475

 

 

 

 

 

 

 

Cash flow from operations

 

$

116,515

 

$

177,886

 

Interest expense, net of non-cash items

 

18,977

 

26,929

 

Current tax provision

 

10,255

 

20,330

 

Intangible amortization - equity method investments (H)

 

—

 

908

 

Changes in assets and liabilities and other adjustments

 

1,468

 

(39,619

)

EBITDA (B)

 

$

147,215

 

$

186,434

 

Holding company expenses

 

22,265

 

28,831

 

EBITDA Contribution

 

$

169,480

 

$

215,265

 

 

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,

 

 

 

2003

 

2004

 

2003

 

2004

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

139,616

 

$

183,955

 

$

495,029

 

$

659,997

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Compensation and related expenses

 

48,414

 

65,455

 

174,992

 

241,633

 

Selling, general and administrative

 

22,216

 

31,980

 

84,059

 

109,066

 

Amortization of intangible assets

 

4,064

 

5,125

 

16,176

 

18,339

 

Depreciation and other amortization

 

1,547

 

1,623

 

6,231

 

6,369

 

Other operating expenses

 

4,537

 

4,359

 

16,056

 

16,708

 

 

 

80,778

 

108,542

 

297,514

 

392,115

 

Operating income

 

58,838

 

75,413

 

197,515

 

267,882

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) and expenses:

 

 

 

 

 

 

 

 

 

Investment and other (income) loss

 

(1,952

)

(6,265

)

(8,245

)

(8,460

)

Interest expense

 

5,653

 

7,407

 

22,976

 

31,725

 

 

 

3,701

 

1,142

 

14,731

 

23,265

 

 

 

 

 

 

 

 

 

 

 

Income before minority interest and taxes

 

55,137

 

74,271

 

182,784

 

244,617

 

Minority interest (F)

 

(25,794

)

(35,507

)

(80,952

)

(115,524

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

29,343

 

38,764

 

101,832

 

129,093

 

 

 

 

 

 

 

 

 

 

 

Income taxes - current

 

3,141

 

6,917

 

10,255

 

20,330

 

Income taxes - intangible-related deferred

 

6,050

 

7,107

 

23,899

 

25,791

 

Income taxes - other deferred

 

2,839

 

1,482

 

7,150

 

5,825

 

Net Income

 

$

17,313

 

$

23,258

 

$

60,528

 

$

77,147

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding - basic (C)

 

31,974,918

 

31,314,436

 

31,867,989

 

29,994,560

 

Average shares outstanding - diluted (C) (D)

 

41,023,759

 

41,846,140

 

40,113,040

 

39,644,676

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic (C)

 

$

0.54

 

$

0.74

 

$

1.90

 

$

2.57

 

Earnings per share - diluted (C) (D)

 

$

0.44

 

$

0.58

 

$

1.57

 

$

2.02

 

 

11


 

Affiliated Managers Group, Inc.

Consolidated Balance Sheets

(in thousands)

 

 

 

December 31,
2003

 

December 31,
2004

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

253,334

 

$

161,450

 

Investment advisory fees receivable

 

65,288

 

91,487

 

Prepaid expenses and other current assets

 

20,861

 

24,795

 

Total current assets

 

339,483

 

277,732

 

 

 

 

 

 

 

Fixed assets, net

 

36,886

 

40,953

 

Equity investment in Affiliate

 

—

 

252,597

 

Acquired client relationships, net

 

364,429

 

440,409

 

Goodwill

 

751,607

 

888,567

 

Other assets

 

26,800

 

33,163

 

Total assets

 

$

1,519,205

 

$

1,933,421

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

89,707

 

$

114,350

 

Notes payable to related party

 

11,744

 

17,728

 

Total current liabilities

 

101,451

 

132,078

 

 

 

 

 

 

 

Senior debt

 

—

 

126,750

 

Senior convertible debt

 

423,340

 

423,958

 

Mandatory convertible securities

 

230,000

 

300,000

 

Deferred income taxes

 

92,707

 

124,168

 

Other long-term liabilities

 

16,144

 

31,397

 

Total liabilities

 

863,642

 

1,138,351

 

 

 

 

 

 

 

Minority interest (F)

 

40,794

 

87,378

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

235

 

387

 

Additional paid-in capital

 

408,449

 

566,776

 

Accumulated other comprehensive income

 

944

 

1,537

 

Retained earnings

 

306,972

 

384,119

 

 

 

716,600

 

952,819

 

Less treasury stock, at cost

 

(101,831

)

(245,127

)

Total stockholders’ equity

 

614,769

 

707,692

 

Total liabilities and stockholders’ equity

 

$

1,519,205

 

$

1,933,421

 

 

12


 

Affiliated Managers Group, Inc.

Consolidated Statements of Cash Flow

(in thousands)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2003

 

2004

 

2003

 

2004

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Net Income

 

$

17,313

 

$

23,258

 

$

60,528

 

$

77,147

 

Adjustments to reconcile Net Income to net cash flow from operating activities:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

4,064

 

5,125

 

16,176

 

18,339

 

Amortization of debt issuance costs

 

872

 

789

 

3,286

 

3,641

 

Depreciation and amortization of fixed assets

 

1,547

 

1,623

 

6,231

 

6,369

 

Deferred income tax provision

 

8,889

 

8,589

 

31,049

 

31,616

 

Accretion of interest

 

154

 

330

 

713

 

1,155

 

Tax benefit from exercise of stock options

 

619

 

2,502

 

3,039

 

8,027

 

Other adjustments

 

—

 

(1,265

)

(555

)

1,228

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Increase in investment advisory fees receivable

 

(9,073

)

(2,483

)

(14,490

)

(26,199

)

Decrease (increase) in other current assets

 

(3,968

)

(5,020

)

(7,033

)

1,827

 

Decrease (increase) in non-current other receivables

 

(2,001

)

(9,393

)

663

 

(9,992

)

Increase (decrease) in accounts payable, accrued expenses and other liabilities

 

7,382

 

(5,335

)

6,612

 

16,386

 

Increase in minority interest

 

7,683

 

26,843

 

10,296

 

48,342

 

Cash flow from operating activities

 

33,481

 

45,563

 

116,515

 

177,886

 

 

 

 

 

 

 

 

 

 

 

Cash flow used in investing activities:

 

 

 

 

 

 

 

 

 

Cost of investments, net of cash acquired

 

(11,184

)

(391,926

)

(19,052

)

(474,104

)

Purchase of fixed assets

 

(678

)

(492

)

(23,889

)

(6,977

)

Investment in marketable securities

 

(23

)

(2,412

)

(1,875

)

(5,004

)

Increase in other assets

 

(2

)

(3

)

(14

)

(60

)

Cash flow used in investing activities

 

(11,887

)

(394,833

)

(44,830

)

(486,145

)

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

Borrowings of senior bank debt

 

—

 

83,000

 

85,000

 

134,000

 

Repayments of senior bank debt

 

—

 

(83,000

)

(85,000

)

(83,000

)

Issuances of convertible securities

 

—

 

—

 

300,000

 

300,000

 

Repurchase of convertible securities

 

—

 

—

 

(105,841

)

(124,525

)

Issuance of equity securities

 

2,403

 

198,673

 

11,375

 

210,232

 

Repurchases of common stock

 

—

 

—

 

(33,688

)

(194,420

)

Issuance costs

 

(31

)

(435

)

(7,850

)

(12,800

)

Repayments of notes and other liabilities

 

(1,725

)

(3,415

)

(10,299

)

(14,244

)

Cash flow from financing activities

 

647

 

194,823

 

153,697

 

215,243

 

 

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash flow

 

—

 

1,030

 

244

 

1,132

 

Net increase (decrease) in cash and cash equivalents

 

22,241

 

(153,417

)

225,626

 

(91,884

)

Cash and cash equivalents at beginning of period

 

231,093

 

314,867

 

27,708

 

253,334

 

Cash and cash equivalents at end of period

 

$

253,334

 

$

161,450

 

$

253,334

 

$

161,450

 

 

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)                                In January 2004, the Company’s Board of Directors authorized a three-for-two stock split.  The additional shares of common stock were distributed on March 29, 2004.  The weighted average shares outstanding and per share figures reflect the stock split.

 

(D)                               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.  Under EITF 04-08, the aggregate number of shares of common stock that could be issued in the future to settle contingently convertible securities are deemed to be outstanding for purposes of the calculation of diluted earnings per share.  This approach, commonly referred to as the “if-converted” method, requires that such shares be deemed outstanding regardless of whether the issuance of those shares could actually be triggered.  Under this method, the Company has included the shares of common stock that may be issued to settle its zero coupon senior convertible notes and floating rate senior convertible securities in the calculation of its diluted earnings per share for the fourth quarter and year ended December 31, 2004 and has restated earnings per share information for prior periods.  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).

 

14


 

(E)                                 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 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.

 

(F)                                 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.

 

(G)                                The Company completed new investments in TimesSquare Capital Management, LLC and AQR Capital Management, LLC (“AQR”) in the quarter ended December 31, 2004.

 

(H)                               The Company is required to use the equity method of accounting for its investment in AQR.  Consistent with this method, the Company has not consolidated AQR’s operating results (including its revenue) in its income statement.  The Company’s share of AQR’s profits is reported in “investment and other income”.

 

15