10-KPeriod: FY2003

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2003

Filed March 15, 2004For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) delivered a strong financial performance in 2003, reflecting the robust growth in the asset management industry driven by favorable market conditions. The company's assets under management grew to $91.5 billion, a significant increase from $70.8 billion in 2002, primarily fueled by the investment in Third Avenue and positive net client cash flows. Revenue saw a modest increase of 3% to $495.0 million, while Net Income grew by 8% to $60.5 million, demonstrating effective management of operating expenses and strategic growth initiatives. AMG continues to execute its growth strategy by investing in mid-sized investment management firms and enhancing its existing businesses across its three distribution channels: Mutual Fund, Institutional, and High Net Worth. The company is well-positioned to capitalize on industry trends, including demographic shifts and wealth creation, and is actively pursuing strategic transactions to further expand its capabilities. The company's financial position remains solid, supported by growing EBITDA, though it also faces leverage considerations related to its convertible debt and credit facilities.

Key Highlights

  • 1Assets under management increased significantly to $91.5 billion in 2003, up from $70.8 billion in 2002, driven by market growth and strategic investments.
  • 2Revenue grew by 3% to $495.0 million in 2003, with the Mutual Fund segment showing notable growth.
  • 3Net Income increased by 8% to $60.5 million in 2003, indicating improved profitability.
  • 4EBITDA also saw an increase of 6% to $147.2 million in 2003, reflecting strong operational performance.
  • 5AMG made new investments and expanded its relationships with existing affiliates, including Third Avenue and planning for acquisitions like Genesis Holdings International.
  • 6The company maintains a strong liquidity position, with cash and cash equivalents of $253.3 million at the end of 2003, though it also manages substantial convertible debt.
  • 7AMG continues to prioritize growth and value creation, with a strategy focused on internal growth and strategic acquisitions in the mid-sized investment management sector.

Frequently Asked Questions

AMG's revenue growth in 2003 was primarily driven by an increase in average assets under management, fueled by positive market conditions and strategic investments in affiliates like Third Avenue. While the Mutual Fund segment showed strong revenue growth, the Institutional and High Net Worth segments saw slight decreases due to factors like lower performance fees and market declines impacting average assets under management.

AMG's balance sheet shows a significant increase in intangible assets (goodwill and acquired client relationships) to $1.116 billion in 2003, reflecting its acquisition strategy. Long-term obligations also increased substantially to $863.6 million, mainly due to the issuance of convertible securities in 2003, including $300 million in floating rate senior convertible securities. The company maintained a $250 million revolving credit facility with no outstanding debt as of December 31, 2003.

AMG's growth strategy focuses on internal growth of existing businesses and strategic investments in mid-sized investment management firms. The company plans to use its cash flow from operations and potential capital raises to fund new and existing affiliate investments, repurchase debt, and manage working capital. They are also actively seeking new investment opportunities as founders of firms approach retirement.

AMG adopted Financial Accounting Standard No. 142 (FAS 142) for goodwill and other intangible assets in 2002, which eliminated the amortization of goodwill and certain other indefinite-lived intangibles. This change impacted comparability with prior periods. In 2003, they also adopted FAS 150 regarding financial instruments, which did not have a material impact. These changes affect how intangible assets are valued and tested for impairment.