10-QPeriod: Q2 FY2002

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 14, 2002For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported solid financial results for the six months ended June 30, 2002, demonstrating growth in revenue and net income compared to the same period in the prior year. The company experienced a significant increase in total revenue, rising by 24% year-over-year, driven by growth in assets under management and a notable increase in performance fees. This top-line growth, combined with the adoption of FAS 142 which eliminated goodwill amortization, contributed to an 18% increase in net income for the quarter and a 20% increase for the six-month period. The company's strategic focus on acquiring and growing mid-sized investment management firms continues to yield positive results, with significant revenue increases noted across all three distribution channels: High Net Worth, Mutual Fund, and Institutional. While market declines impacted asset values, AMG's ability to attract net client cash flows and benefit from performance fees, particularly within the Mutual Fund and Institutional segments, mitigated some of these pressures. The company also shows a strong commitment to capital management, indicated by increased cash on hand and a new revolving credit facility, positioning it for future growth and acquisitions.

Key Highlights

  • 1Total revenue increased by 24% for the six months ended June 30, 2002, compared to the prior year, reaching $248.9 million.
  • 2Net income grew by 20% for the six months ended June 30, 2002, to $29.9 million, benefiting from revenue growth and the impact of FAS 142 adoption.
  • 3Assets under management stood at $74.1 billion as of June 30, 2002, a decrease from December 31, 2001, primarily due to market declines.
  • 4The company adopted FAS 142, ceasing amortization of goodwill and other indefinite-lived intangible assets, which reduced amortization expense significantly.
  • 5Interest expense more than doubled for the six-month period due to increased debt levels from recent financings.
  • 6Cash and cash equivalents increased to $127.9 million as of June 30, 2002, up from $73.4 million at the end of 2001.
  • 7A new revolving credit facility of $235 million was secured in August 2002 to support future growth and acquisitions.

Frequently Asked Questions

The primary drivers of AMG's revenue growth were an increase in average assets under management and a rise in performance fees earned by its affiliates. Additionally, a larger proportion of assets billed in advance in the second quarter of 2002 compared to the prior year also contributed.

The adoption of FAS 142, effective January 1, 2002, eliminated the amortization of goodwill and other indefinite-lived intangible assets. This led to a significant decrease in amortization expenses, positively impacting reported net income and 'adjusted' net income figures.

AMG's liquidity position strengthened, with cash and cash equivalents increasing to $127.9 million as of June 30, 2002. The company replaced its existing credit facility with a new $235 million revolving credit facility in August 2002, providing ample capacity for ongoing operations, potential acquisitions, and other strategic initiatives. Debt levels have increased due to recent financings, leading to higher interest expenses.

The broad declines in equity markets during the period negatively impacted the value of assets under management, leading to a decrease from $81.0 billion at the beginning of the year to $74.1 billion by June 30, 2002. The company anticipates that ongoing market performance will continue to influence asset levels.