10-QPeriod: Q1 FY2004

AFFILIATED MANAGERS GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 10, 2004For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported strong financial performance for the quarter ended March 31, 2004, demonstrating significant growth compared to the prior year. Revenue surged by 38% to $151.6 million, driven by a substantial 34% increase in average assets under management across all distribution channels, primarily due to positive investment performance and net client cash inflows. This top-line growth translated into a robust 40% increase in Net Income, which reached $18.2 million, or $0.60 per diluted share (adjusted for a recent stock split). The company's balance sheet showed a healthy increase in cash and cash equivalents, rising to $359.7 million. However, total liabilities also saw a significant increase, largely due to the issuance of $300 million in new mandatory convertible securities in February 2004, bringing the total of such securities to $530 million. Despite increased leverage, the company maintained a manageable leverage ratio of 0.4:1, indicating a strong ability to service its debt. The company's strategic acquisitions and growth initiatives appear to be yielding positive results, positioning AMG for continued expansion in the asset management sector.

Key Highlights

  • 1Revenue increased by 38% to $151.6 million for the quarter ended March 31, 2004, compared to the same period in 2003.
  • 2Average assets under management grew by 34% to $93.4 billion, reflecting strong market performance and client inflows.
  • 3Net Income saw a substantial increase of 40% to $18.2 million, with diluted Earnings Per Share rising to $0.60 (post-stock split).
  • 4Cash and cash equivalents increased significantly to $359.7 million, providing ample liquidity.
  • 5The company issued $300 million in new mandatory convertible securities in February 2004, increasing total mandatory convertible securities to $530 million.
  • 6Despite increased liabilities, the leverage ratio remained strong at 0.4:1.
  • 7The company repurchased approximately 3.5 million shares of common stock during the quarter, totaling $194.3 million.

Frequently Asked Questions

AMG's revenue growth of 38% was primarily driven by a significant increase in average assets under management (up 34% to $93.4 billion). This growth in assets was largely due to positive investment performance in the preceding twelve months and, to a lesser extent, positive net client cash flows. Higher performance fees also contributed to the revenue increase.

In February 2004, AMG issued $300 million of new mandatory convertible securities ('2004 PRIDES'), increasing its total mandatory convertible securities to $530 million. This issuance boosted the company's cash position but also increased its total liabilities. Despite this, the company maintained a healthy leverage ratio of 0.4:1, indicating its ability to manage its increased debt obligations.

The filing notes that a three-for-two stock split occurred in March 2004. This means that for every two shares of common stock held, shareholders received an additional share. Consequently, the number of outstanding shares increased, and earnings per share calculations were adjusted to reflect this split, making historical and current per-share data comparable on a split-adjusted basis.

AMG's growth strategy focuses on internal growth of existing businesses and strategic investments in mid-sized investment management firms. The strong increase in revenue and net income, driven by growth in assets under management across its Mutual Fund, Institutional, and High Net Worth distribution channels, demonstrates the effectiveness of this strategy. The continued acquisition of interests in Affiliates and the expansion of its product offerings are key components of this growth.