10-QPeriod: Q3 FY2001

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 14, 2001For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported its financial results for the nine months ended September 30, 2001. The company's net income for the period was $37.4 million, a decrease from $41.9 million in the prior year. This decline was primarily driven by a reduction in revenues, which fell to $297.7 million from $343.9 million in the comparable period, largely due to market declines affecting asset-based fees. Despite the revenue dip, AMG managed operating expenses effectively, leading to a decrease in total operating expenses from $214.1 million to $186.8 million, mainly due to lower compensation and related expenses. AMG has been actively pursuing strategic acquisitions, notably completing the acquisition of a majority stake in Friess Associates for approximately $241 million in October 2001 and entering into an agreement to acquire a majority interest in Welch & Forbes. The company also strengthened its balance sheet by issuing $251 million in principal amount of zero-coupon senior convertible notes in May 2001, using a portion of the proceeds to repay existing debt. As of September 30, 2001, AMG held $205.1 million in cash and cash equivalents, indicating a healthy liquidity position to support ongoing operations and future growth initiatives.

Key Highlights

  • 1Net income for the nine months ended September 30, 2001, decreased to $37.4 million from $41.9 million in the prior year, primarily due to a decline in revenues.
  • 2Total revenues for the nine-month period decreased by $46.2 million to $297.7 million, mainly attributed to reduced asset-based fees stemming from equity market declines.
  • 3Total operating expenses decreased by $27.3 million to $186.8 million, largely driven by a reduction in compensation and related expenses.
  • 4The company completed the acquisition of a majority equity interest in Friess Associates for approximately $241 million on October 31, 2001, and has an agreement to acquire a majority stake in Welch & Forbes.
  • 5In May 2001, AMG issued $251 million in principal amount of zero-coupon senior convertible notes, using a portion of the proceeds to repay $101 million in debt.
  • 6Cash and cash equivalents increased significantly to $205.1 million as of September 30, 2001, from $31.6 million at the end of 2000, indicating strong liquidity.
  • 7The company adopted new accounting standards FAS 141 and FAS 142, which are expected to positively impact reported net income and EPS by eliminating amortization of goodwill and certain other intangible assets starting in 2002.

Frequently Asked Questions

The primary driver for the decrease in net income was a reduction in total revenues, which fell to $297.7 million from $343.9 million in the prior year. This decline was largely due to lower asset-based fees resulting from a broad equity market decline impacting the value of assets under management.

AMG's liquidity position has significantly improved. Cash and cash equivalents increased to $205.1 million as of September 30, 2001, from $31.6 million at December 31, 2000. This increase is largely due to proceeds from the issuance of convertible notes and effective management of cash flows.

The adoption of FAS 141 and FAS 142 is expected to have a positive impact on AMG's reported net income and earnings per share starting in 2002. This is because goodwill and certain other intangible assets will no longer be amortized, but instead tested for impairment annually. The company anticipates a reduction of at least $4.0 million in intangible amortization expense per quarter.

AMG completed the acquisition of a majority equity interest in Friess Associates on October 31, 2001, for approximately $241 million. Additionally, the company has entered into a definitive agreement to acquire a majority equity interest in Welch & Forbes, Inc.