10-QPeriod: Q3 FY2002

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 14, 2002For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported its third-quarter and nine-month results for the period ending September 30, 2002. The company experienced robust revenue growth, driven by strategic acquisitions and increased assets under management across its High Net Worth, Mutual Fund, and Institutional segments. Total revenue rose by 19% for the quarter and 22% for the nine months compared to the prior year, reflecting strong performance in the Mutual Fund segment. Financially, AMG saw a modest increase in net income for the quarter to $12.8 million from $12.4 million in the prior year, and a more significant 14% increase for the nine months to $42.7 million. The adoption of FAS 142, which ceased the amortization of goodwill and certain other intangible assets, positively impacted reported net income. The company also strengthened its balance sheet by increasing its revolving credit facility and issuing mandatory convertible debt, while managing a substantial increase in interest expense due to these financing activities. Cash flow from operations also showed a healthy increase, underscoring the company's ongoing financial strength.

Key Highlights

  • 1Total revenue increased by 19% year-over-year for the third quarter and 22% for the first nine months, driven by new affiliate acquisitions and market growth.
  • 2Net income for the nine months ended September 30, 2002, rose by 14% to $42.7 million compared to $37.4 million in the prior year.
  • 3The adoption of FAS 142, eliminating goodwill amortization, positively impacted reported earnings, though the adjusted earnings present a different perspective on performance comparisons.
  • 4Assets under management decreased to $68.5 billion by September 30, 2002, from $81.0 billion at the end of 2001, primarily due to broad declines in equity markets.
  • 5The company secured a new revolving credit facility of up to $250 million, maturing in August 2005, to support its growth strategy.
  • 6Interest expense significantly increased by 100% for the quarter and 106% for the nine months, largely due to the issuance of mandatory convertible debt securities in late 2001 and early 2002.

Frequently Asked Questions

AMG reported strong revenue growth driven by acquisitions and increased assets under management, with total revenue up 19% for the quarter and 22% for the nine months year-over-year. Net income for the nine months increased by 14% to $42.7 million. However, assets under management saw a decline to $68.5 billion due to market conditions.

AMG adopted FAS 142 in January 2002, which stopped the amortization of goodwill and other intangible assets. This change resulted in a reported increase in net income compared to prior periods where such amortization was expensed. The company provides adjusted earnings to allow for a more direct comparison of operating performance before the impact of this accounting change.

AMG's growth strategy involves internal growth of existing affiliates and investments in new mid-sized investment management firms. The company financed its recent acquisition of Third Avenue Management and other investments through working capital, borrowings under its credit facility, and the issuance of debt securities. The company also has a new revolving credit facility and has recently issued mandatory convertible debt to support its capital needs.

AMG's performance is sensitive to financial market conditions, particularly equity markets, which can impact advisory fees. The company also faces risks related to its ability to find and successfully invest in new firms, secure capital on favorable terms, and manage its debt obligations. Additionally, market risk related to interest rate fluctuations on its debt is managed through derivative contracts.