10-QPeriod: Q2 FY2003

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2003

Filed August 14, 2003For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported its financial results for the quarter ended June 30, 2003. The company saw a decline in revenue and net income compared to the same period in the prior year, largely due to challenging market conditions impacting asset values. Despite the revenue dip, AMG managed its operating expenses effectively, with total operating expenses decreasing slightly. The company's assets under management saw a notable increase sequentially, driven by market performance and acquisitions, reaching $77.3 billion. Financially, AMG maintained a strong liquidity position, with a significant increase in cash and cash equivalents. The company's debt structure includes substantial convertible securities. AMG repurchased a portion of its zero coupon convertible notes and continued its share repurchase program. Investors should note the ongoing market sensitivity of AMG's revenue and the company's continued strategy of investing in and growing its affiliated investment management firms.

Key Highlights

  • 1Total revenue for the three months ended June 30, 2003, decreased by 10% to $116.7 million compared to the prior year's period.
  • 2Net income for the three months ended June 30, 2003, decreased by 10% to $13.8 million, or $0.64 per diluted share, compared to $15.4 million, or $0.67 per diluted share, in the prior year.
  • 3Assets under management grew 13% sequentially to $77.3 billion as of June 30, 2003, driven by market appreciation and new investments.
  • 4Cash and cash equivalents significantly increased to $200.5 million as of June 30, 2003, from $27.7 million at December 31, 2002.
  • 5The company repurchased $116.5 million principal amount at maturity of zero coupon senior convertible notes during the first six months of 2003.
  • 6Operating expenses decreased by 5% to $70.5 million for the three months ended June 30, 2003, compared to $74.1 million in the prior year.
  • 7Shareholders' equity remained relatively stable at $571.7 million as of June 30, 2003.

Frequently Asked Questions

The decrease in revenue and net income is primarily attributed to challenging financial market conditions, particularly a net decline in the equity markets since the beginning of 2002, which negatively impacted the value of assets under management and, consequently, advisory fees.

The company's cash and cash equivalents have significantly increased from $27.7 million at the end of 2002 to $200.5 million at June 30, 2003. This substantial increase is a result of strong financing activities, including the issuance of floating rate senior convertible securities.

AMG's growth strategy focuses on the internal growth of its existing businesses across its High Net Worth, Mutual Fund, and Institutional distribution channels. It also involves strategic investments in mid-sized investment management firms and other transactions designed to enhance its Affiliates' businesses and growth prospects.

The company's long-term debt includes significant amounts of convertible securities. Notably, as of June 30, 2003, it had $123.0 million in zero coupon senior convertible notes, $300.0 million in floating rate senior convertible securities, and $230.0 million in mandatory convertible debt securities. The company also has a $250 million senior revolving credit facility, though no amounts were borrowed under it at the reporting date.