<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 001-13459
AFFILIATED MANAGERS GROUP, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3218510
-------- ----------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
Two International Place, Boston, Massachusetts 02110
-----------------------------------------------------
(Address of principal executive offices)
(617) 747-3300
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of the registrant's Common Stock outstanding at May 14,
1998: 17,703,617 including 2,636,800 shares of Class B Non-Voting Common
Stock. Unless otherwise specified, the term Common Stock includes both Common
Stock and Class B Non-Voting Common Stock.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,504 $ 22,766
Investment advisory fees receivable . . . . . . . . . . . . . . . . . . . . . . . . . 32,117 27,061
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,401 2,231
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,022 52,058
Fixed assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,194 4,724
Equity investment in Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,279 1,237
Acquired client relationships, net of accumulated amortization
of $7,923 in 1998 and $6,142 in 1997 . . . . . . . . . . . . . . . . . . . . . . . . 166,852 142,875
Goodwill, net of accumulated amortization of $15,550 in 1998
and $13,502 in 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314,635 249,698
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,733 6,398
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 560,715 $ 456,990
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . $ 17,427 $ 18,815
Senior bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,300 159,500
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,866 1,656
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 800
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,393 180,771
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,092 16,479
Stockholders' equity:
Convertible stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,992 --
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 177
Additional paid-in capital on common stock . . . . . . . . . . . . . . . . . 273,475 273,475
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . 6 (30)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,420) (13,882)
---------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 295,230 259,740
---------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $ 560,715 $ 456,990
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,723 $ 16,568
Operating expenses:
Compensation and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,615 7,906
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,829 988
Depreciation and other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 513 234
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . 6,783 2,947
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,290 932
------------ ------------
29,030 13,007
------------ ------------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,693 3,561
Non-operating (income) and expenses:
Investment and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) (185)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,074 786
------------ ------------
2,763 601
------------ ------------
Income before minority interest and income taxes . . . . . . . . . . . . . . . . . . . . . 13,930 2,960
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,493) (1,740)
------------ ------------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,437 1,220
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,975 546
------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,462 $ 674
------------ ------------
------------ ------------
Net income per share -- basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 1.31
Net income per share -- diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.10
Average shares outstanding -- basic . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,594,555 514,619
Average shares outstanding -- diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 18,176,428 6,832,900
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,462 $ 674
Foreign currency translation adjustment, net of taxes . . . . . . . . . . . . . . . . . . 36 (35)
------------ ------------
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,498 $ 639
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,462 $ 674
Adjustments to reconcile net income to net cash flow from operating activities:
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,829 988
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,613 2,403
Depreciation and other amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 513 234
Increase in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,423 --
Changes in assets and liabilities:
(Increase) decrease in investment advisory fees receivable . . . . . . . . . . . . . . (5,056) 141
(Increase) decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . (170) 12
Decrease in accounts payable, accrued expenses and other liabilities . . . . . . . . . (1,601) (2,460)
------------ ------------
Cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . 9,013 1,992
------------ ------------
Cash flow used in investing activities:
Purchase of fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (824) (437)
Costs of investments, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . (64,173) --
Distribution received from Affiliate equity investment. . . . . . . . . . . . . . . . . 107 --
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (181) (490)
------------ ------------
Cash flow used in investing activities . . . . . . . . . . . . . . . . . . . . . (65,071) (927)
------------ ------------
Cash flow from financing activities:
Borrowings of senior bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,300 6,500
Repayments of senior bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,500) (1,000)
Repayments of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (5,878)
Issuances of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 10
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) --
------------ ------------
Cash flow from (used in) financing activities . . . . . . . . . . . . . . . . . . 62,760 (368)
Effect of foreign exchange rate changes on cash flow . . . . . . . . . . . . . . . . . . . 36 (36)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 6,738 661
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . 22,766 6,767
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 29,504 $ 7,428
------------ ------------
------------ ------------
Supplemental disclosure of non-cash financing activities:
Stock issued in acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,992 $ 1,501
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
1. BASIS OF PRESENTATION
The consolidated financial statements of Affiliated Managers Group,
Inc. (the "Company" or "AMG") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
The year end condensed balance sheet data was derived from audited financial
statements, but does not include all of the disclosures required by generally
accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Certain prior year amounts have
been reclassified to conform with the current year's presentation. Operating
results for interim periods are not necessarily indicative of the results
that may be expected for the full year. The Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 includes additional
information about AMG, its operations, and its financial position, and should
be read in conjunction with this quarterly report on Form 10-Q.
Effective January 1, 1998, AMG adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard requires that comprehensive income and its components be reported
and displayed in a financial statement with the same prominence as other
financial statements.
2. ACQUISITIONS
On March 20, 1998, AMG acquired a 68% interest in Essex Investment
Management Company, LLC ("Essex"). AMG paid $69.7 million, including
transaction costs, in a combination of cash and the assumption of certain
liabilities, and issued 1,750,942 shares of Series C Non-Voting Convertible
Stock (the "Series C Stock"). Each share of Series C Stock will convert into
one share of AMG's Common Stock, $.01 par value per share, on March 20, 1999,
or upon certain extraordinary events, as defined. This transaction will be
accounted for under the purchase method of accounting. The Company elected
the automatic 60 day extension for filing financial statements in the Form
8-K filed in relation to its investment in Essex. The required financial
statements and pro forma financial information will be filed by amendment to
the Form 8-K on or before June 3, 1998.
3. INCOME TAXES
A summary of the provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Federal: Current . . . . . . . . . . . . . $ -- $ --
Deferred . . . . . . . . . . . . 2,120 311
State: Current . . . . . . . . . . . . . 552 141
Deferred . . . . . . . . . . . . 303 94
------------ ------------
Provision for income taxes . . . . . . . . . . . . . $ 2,975 $ 546
------------ ------------
------------ ------------
</TABLE>
In the first quarter of 1998, the Company has determined that because
it is more likely than not that all of its tax net operating loss
carryforwards will be utilized during 1998, its deferred tax valuation
allowance is no longer necessary. Accordingly, the Company expects that the
benefit of the reversal of the allowance will be realized ratably over the
year.
4. EARNINGS PER SHARE
The calculation for the basic earnings per share is based on the
weighted average of common shares outstanding during the period. The
calculation for the diluted earnings per share is based on the weighted
average of common and common equivalent shares outstanding during the period.
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations.
5
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 4,462,000 $ 674,000
Denominator:
Average shares outstanding -- basic . . . . . . . . . . . 17,594,555 514,619
Convertible stock . . . . . . . . . . . . . . . . . . . . 233,459 5,761,497
Stock options and unvested restricted stock . . . . . . . 348,414 556,784
------------ ------------
Average shares outstanding -- diluted . . . . . . . . . . 18,176,428 6,832,900
------------ ------------
------------ ------------
Net income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 1.31
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.10
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 which are
based on management's current views and assumptions regarding future events
and financial performance. Words or phrases such as "will likely result,"
"are expected to," "will continue," "is anticipated," "believes,"
"estimates," "projects" and other similar expressions are intended to
identify such forward-looking statements. Such statements are subject to
certain risks and uncertainties, including those discussed herein and in the
"Business - Cautionary Statements" section of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, that could cause
actual results to differ materially from those discussed in the
forward-looking statements. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only
as of the date made, and the Company will not undertake to release publicly
the result of any revisions which may be made to any forward-looking
statements to reflect the occurrence of events or changes in circumstances
after the date of such statements.
OVERVIEW
The Company acquires equity positions in mid-sized investment
management firms, and derives its revenues from such firms. AMG has a revenue
sharing arrangement with each investment management firm in which it has an
investment (each, an "Affiliate") which is contained in the organizational
document of that Affiliate. Each such arrangement allocates a specified
percentage of revenues (typically 50-70%) for use by management of that
Affiliate in paying operating expenses of the Affiliate, including salaries
and bonuses (the "Operating Allocation"). The remaining portion of revenues
of the Affiliate, typically 30-50% (the "Owners' Allocation"), is allocated
to the owners of that Affiliate (including AMG), generally in proportion to
their ownership of the Affiliate.
The Affiliates' revenues are derived from the provision of investment
management services for fees. Investment management fees are usually
determined as a percentage fee charged on periodic values of a client's
assets under management. In addition, several of the Affiliates charge
performance-based fees to certain of their clients; these performance-based
fees result in payments to the applicable Affiliate if specified levels of
investment performance are achieved. All references in this report to "assets
under management" include assets directly managed as well as assets
underlying overlay strategies which employ futures, options or other
derivative securities to achieve a particular investment objective.
Since its founding in December 1993, the Company has completed 11
investments in such firms. The most recent investment, in Essex Investment
Management Company, LLC ("Essex"), was completed in March 1998. The Company
completed investments in Gofen and Glossberg, L.L.C. ("Gofen and Glossberg"),
GeoCapital, LLC ("GeoCapital") and Tweedy, Browne Company LLC ("Tweedy,
Browne"), in May, September and October 1997, respectively.
6
<PAGE>
Assets under management increased by $8.6 billion to $54.3 billion at
March 31, 1998 from $45.7 billion at December 31, 1997, in part due to the
investment made in Essex. Excluding the initial assets under management of
Essex at the Company's date of investment, assets under management increased
by $4.0 billion as a result of $3.8 billion in market appreciation and $237
million from positive net client cash flows for the three months ended March
31, 1998.
The Company's investments have been accounted for under the purchase
method of accounting, under which goodwill is recorded for the excess of the
purchase price for the acquisition of interests in Affiliates over the fair
value of the net assets acquired, including acquired client relationships.
As a result of the series of investments made by the Company, intangible
assets (collectively, acquired client relationships and goodwill are referred
to as "intangible assets") constitute a substantial percentage of the assets
of the Company. At March 31, 1998, the Company's total assets were $560.7
million, of which $166.9 million consisted of acquired client relationships
and $314.6 million consisted of goodwill.
The amortization period for intangible assets for each investment is
assessed individually, with amortization periods for the Company's
investments to date ranging from nine to 28 years in the case of acquired
client relationships and 15 to 35 years in the case of goodwill. In
determining the amortization period for intangible assets acquired, the
Company considers a number of factors including: the firm's historical and
potential future operating performance; the firm's historical and potential
future rates of attrition among clients; the stability and longevity of
existing client relationships; the firm's recent, as well as long-term,
investment performance; the characteristics of the firm's products and
investment styles; the stability and depth of the firm's management team and
the firm's history and perceived franchise or brand value. The Company
performs a quarterly evaluation of intangible assets on an
Affiliate-by-Affiliate basis to determine whether there has been any
impairment in their carrying value or their useful lives. If impairment is
indicated, then the carrying amount of intangible assets, including goodwill,
will be reduced to their fair values.
While amortization of intangible assets has been charged to the
results of operations and is expected to be a continuing material component
of the Company's operating expenses, management believes that it is important
to distinguish this expense from other operating expenses since such
amortization does not require the use of cash. Also, because the Company's
distributions from its Affiliates are based on its share of Owners'
Allocation, management has provided additional supplemental information for
"cash" related earnings, as an addition to, but not as a substitute for,
measures related to net income. Such measures are (i) EBITDA (earnings before
interest expense, income taxes, depreciation and amortization), which the
Company believes is useful to investors as an indicator of the Company's
ability to service debt, make new investments and meet working capital
requirements, and (ii) EBITDA as adjusted (earnings after interest expense
and income taxes but before depreciation and amortization), which the Company
believes is useful to investors as another indicator of funds available to
the Company to make new investments or repay debt obligations.
QUARTER ENDED MARCH 31, 1998 AS COMPARED TO QUARTER ENDED MARCH 31, 1997
The Company had net income of $4.5 million for the quarter ended March
31, 1998 compared to net income of $674,000 for the quarter ended March 31,
1997. The increase in net income resulted primarily from income from
investments made subsequent to March 31, 1997. The Company invested in Gofen
and Glossberg in May 1997, GeoCapital in September 1997 and Tweedy, Browne in
October 1997, and included their results from their respective dates of
investment. In addition, the Company invested in Essex on March 20, 1998 and
its results were included in the results for the quarter ended March 31, 1998
for 11 days.
Total revenues for the quarter ended March 31, 1998 were $45.7
million, an increase of $29.2 million over the quarter ended March 31, 1997,
primarily as a result of the new investments subsequent to March 31, 1997.
Total operating expenses increased by $16.0 million to $29.0 million
for the quarter ended March 31, 1998 from $13.0 million for the quarter ended
March 31, 1997. Compensation and related expenses increased by $8.7 million,
amortization of intangible assets increased by $2.8 million, selling, general
and administrative expenses increased by $3.9 million, and other operating
expenses increased by $358,000. The increases in operating expenses are
primarily due to the inclusion of the new Affiliates described above.
7
<PAGE>
Minority interest increased by $4.8 million to $6.5 million for the
quarter ended March 31, 1998 from $1.7 million for the quarter ended March
31, 1997. This increase is a result of the addition of new Affiliates as
described above and the Owners' Allocation growth at the Company's existing
Affiliates.
Interest expense increased by $2.3 million to $3.1 million for the
quarter ended March 31, 1998 from $786,000 for the quarter ended March 31,
1997 as a result of the increased indebtedness incurred in connection with
the investments described above.
Income tax expense was $3.0 million for the quarter ended March 31,
1998 compared to $546,000 for the quarter ended March 31, 1997. The
effective tax rate for the quarter ended March 31, 1998 was 40% compared to
45% for the quarter ended March 31, 1997. The change in effective tax rates
from 1997 to 1998 is partially related to the reversal of the deferred tax
asset valuation allowance in 1998.
EBITDA increased by $11.7 million to $14.9 million for the quarter
ended March 31, 1998 from $3.2 million for the quarter ended March 31, 1997,
primarily as a result of the inclusion of new Affiliates as described above.
EBITDA as adjusted increased by $6.9 million to $8.8 million for the
quarter ended March 31, 1998 from $1.9 million for the quarter ended March
31, 1997 as a result of the factors affecting net income as described above,
before non-cash expenses such as amortization of intangible assets and
depreciation of $4.3 million for the quarter ended March 31, 1998 and $1.2
million for the quarter ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of $29.5
million and outstanding borrowings under its revolving credit facility
("Credit Facility") of $222.3 million. The Credit Facility allows for
borrowings up to $300 million (which may be increased to $400 million upon
the approval of the lenders), bears interest at either LIBOR plus a margin or
the Prime Rate plus a margin and matures during December 2002. In addition,
the Company pays a commitment fee on the daily unused portion of the facility.
On March 20, 1998, AMG acquired a 68% interest in Essex. AMG paid
$69.7 million, including transaction costs, in a combination of cash and the
assumption of certain liabilities, and issued 1,750,942 shares of AMG's newly
designated Series C Non-Voting Convertible Stock (the "Series C Stock").
Each share of Series C Stock will convert into one share of AMG's Common
Stock, $.01 par value per share, on March 20, 1999, or upon certain
extraordinary events, as defined. AMG financed the cash portion of the
purchase price with borrowings under its Credit Facility.
In order to provide the funds necessary for the Company to continue to
acquire interests in investment management firms, including additional
investments in existing Affiliates, it will be necessary for the Company to
incur, from time to time, additional long-term debt and/or issue equity or
debt securities, depending on market and other conditions. There can be no
assurance that such additional financing will be available or become
available on terms acceptable to the Company.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and its Affiliates may be parties to
various claims, suits and complaints. Currently, there are no such claims,
suits or complaints that, in the opinion of management, would have a material
adverse effect on the Company's financial position, liquidity or results of
operations.
ITEM 2. CHANGES IN SECURITIES
On March 20, 1998, the Company issued 1,750,942 shares of AMG's newly
designated Series C Non-Voting Convertible Stock (the "Series C Stock") to
former stockholders of Essex Investment Management
8
<PAGE>
Company, Inc. as partial consideration for its investment in Essex. Each
share of Series C Stock will convert into one share of AMG's Common Stock,
$.01 par value per share, on March 20, 1999, or upon certain extraordinary
events, as defined. The Company believes that the issuance of the Series C
Stock was exempt from the registration requirements of the Securities Act of
1933, as amended, by reason of Section 4(2) thereof, based on the private
nature of the transaction and the financial sophistication of the purchasers,
each of whom had access to complete information concerning the Company and
acquired the securities for investment and not with a view to the
distribution thereof.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report under this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report under this item.
ITEM 5. OTHER INFORMATION
Nothing to report under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
1 Current Report on Form 8-K dated March 20, 1998, reporting
the Company's investment in Essex. The required financial
statements and pro forma financial information will be
filed by amendment to the Form 8-K on or before June 3,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AFFILIATED MANAGERS GROUP, INC.
-------------------------------
(Registrant)
<TABLE>
<S> <C> <C>
/s/ Darrell W. Crate on behalf of the Registrant as Senior Vice President May 14, 1998
- --------------------- and Chief Financial Officer
(Darrell W. Crate) (and also as Principal Financial and
Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,504
<SECURITIES> 0
<RECEIVABLES> 32,117
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 64,022
<PP&E> 6,194
<DEPRECIATION> 0
<TOTAL-ASSETS> 560,715
<CURRENT-LIABILITIES> 17,427
<BONDS> 222,300
0
0
<COMMON> 273,652
<OTHER-SE> 21,578
<TOTAL-LIABILITY-AND-EQUITY> 560,715
<SALES> 0
<TOTAL-REVENUES> 45,723
<CGS> 0
<TOTAL-COSTS> 29,030
<OTHER-EXPENSES> 6,493
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,074
<INCOME-PRETAX> 7,437
<INCOME-TAX> 2,975
<INCOME-CONTINUING> 4,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,462
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
