10-QPeriod: Q1 FY2003

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 15, 2003For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported its first quarter 2003 financial results, showing a year-over-year decrease in both revenue and net income. Revenue declined by 8% to $110.2 million, impacted by a 14% decrease in average assets under management, largely due to market conditions. Net income fell by 10% to $13.0 million, or $0.60 per diluted share, compared to $0.63 per diluted share in the prior year quarter. The company's balance sheet saw a significant increase in cash and cash equivalents, rising from $27.7 million at the end of 2002 to $171.4 million by March 31, 2003. This was primarily driven by financing activities, including the issuance of $300 million in floating rate senior convertible securities. Total assets grew to $1.39 billion from $1.24 billion. Long-term debt also increased substantially due to the new convertible securities and senior convertible debt. Financially, AMG managed $68.4 billion in assets under management as of March 31, 2003, a slight decrease from $70.8 billion at year-end 2002, mainly attributed to equity market declines. The company continues to execute its strategy of growth through internal expansion and strategic investments in other investment management firms.

Key Highlights

  • 1Revenue decreased by 8% to $110.2 million for the first quarter of 2003 compared to $119.3 million in the prior year period, driven by a decline in average assets under management.
  • 2Net income for the quarter was $13.0 million, a decrease of 10% from $14.5 million in Q1 2002. Diluted EPS was $0.60, down from $0.63.
  • 3Assets under management decreased by 3% to $68.4 billion as of March 31, 2003, from $70.8 billion at December 31, 2002, primarily due to equity market declines.
  • 4Cash and cash equivalents significantly increased to $171.4 million from $27.7 million, largely due to proceeds from financing activities.
  • 5The company issued $300 million of floating rate senior convertible securities in February 2003, impacting the debt structure.
  • 6Operating expenses decreased by 2% to $68.3 million, with compensation and SG&A expenses seeing slight declines, while amortization of intangible assets increased by 21%.
  • 7The company repurchased $111.5 million principal amount of zero coupon senior convertible notes during the quarter.

Frequently Asked Questions

The primary driver of the revenue decline was a decrease in average assets under management, which fell by 14% year-over-year. This was largely due to declines in the equity markets. The decrease in revenue was partially offset by the inclusion of revenue from the recent acquisition of Third Avenue and an increase in transaction-based brokerage fees.

AMG issued $300 million in floating rate senior convertible securities in February 2003, significantly increasing its long-term debt. This issuance was used in part to repurchase $111.5 million of zero coupon senior convertible notes. The company also saw an increase in senior convertible debt outstanding.

The company's assets under management are directly affected by financial market conditions, particularly equity markets. While assets under management decreased in Q1 2003 due to market declines, AMG continues its strategy of growth through internal expansion and strategic acquisitions of investment management firms.

The company's liquidity was significantly bolstered by the issuance of $300 million in convertible securities, which resulted in a substantial increase in cash and cash equivalents. While operating cash flow was negative for the quarter, financing activities provided strong cash inflows. The company expects future cash needs for investments, debt repayment, and potential acquisitions.