<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 September 30, 1997 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 1-9215
---------------------------------------
UNITED ASSET MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2714625
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(617) 330-8900
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. X Yes No
----- -----
The number of shares of common stock outstanding as of November 3, 1997
was 69,449,376.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. (Pages F-1 to F-5)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Pages F-5 to F-7)
Item 3. Quantitative and Qualitative Disclosures About Market
Risk. Not Applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of the Company's subsidiaries are
subject to legal proceedings arising in the ordinary course
of business. On the basis of information presently
available and advice received from legal counsel, it is the
opinion of management that the disposition or ultimate
determination of such legal proceedings will not have a
material adverse effect on the Company's consolidated
financial position, its consolidated results of operations
or its consolidated cash flows.
Item 2. Changes in Securities. Not Applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 2 - Not Applicable
Exhibit 3 - Not Applicable
Exhibit 4 - Not Applicable
(1) Exhibit 10 - First Amendment to United Asset
Management Corporation
Deferred Compensation Plan
(Effective July 1, 1997)
Exhibit 11 - Calculation of Earnings Per Share (Page F-8)
Exhibit 15 - Not Applicable
Exhibit 18 - Not Applicable
Exhibit 19 - Not Applicable
Exhibit 22 - Not Applicable
Exhibit 23 - Not Applicable
Exhibit 24 - Not Applicable
Exhibit 27 - Financial Data Schedule
(b) There have been no reports on Form 8-K filed by the
Company for the quarter ended September 30, 1997.
Notes to Exhibit Listing
(1) United Asset Management Corporation Deferred
Compensation Plan (Effective January 1, 1994) filed
as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.
<PAGE>
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.
UNITED ASSET MANAGEMENT CORPORATION
November 6, 1997 /s/ William H. Park
- ------------------------------ ------------------------------
(Date) William H. Park
Executive Vice President and
Chief Financial Officer
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED ASSET MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ---------------------------------
1997 1996 1997 1996
-------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Revenues.................................... $ 241,710,000 $ 219,618,000 $ 676,804,000 $ 634,805,000
Operating expenses:
Compensation and related expenses....... 119,183,000 111,050,000 331,296,000 313,740,000
Amortization of cost assigned to
contracts acquired.................... 27,775,000 24,292,000 78,349,000 77,654,000
Other operating expenses................ 43,677,000 34,473,000 114,605,000 101,644,000
-------------- -------------- ------------------ --------------
190,635,000 169,815,000 524,250,000 493,038,000
-------------- -------------- ------------------ --------------
Operating income............................ 51,075,000 49,803,000 152,554,000 141,767,000
-------------- -------------- ------------------ --------------
Non-operating expenses:
Interest expense, net..................... 9,839,000 9,048,000 26,201,000 29,284,000
Other amortization........................ 543,000 540,000 1,595,000 1,470,000
-------------- -------------- ------------------ --------------
10,382,000 9,588,000 27,796,000 30,754,000
-------------- -------------- ------------------ --------------
Income before income tax expense............ 40,693,000 40,215,000 124,758,000 111,013,000
Income tax expense.......................... 17,467,000 17,210,000 53,447,000 47,644,000
-------------- -------------- ------------------ --------------
Net income.................................. $ 23,226,000 $ 23,005,000 $ 71,311,000 $ 63,369,000
-------------- -------------- ------------------ --------------
-------------- -------------- ------------------ --------------
Primary earnings per share (1).............. $ .32 $ .32 $ .97 $ .88
Fully diluted earnings per share (1)........ $ .32 $ .32 $ .96 $ .88
Dividends declared per share................ $ .20 $ .17 $ .57 $ .49
-------------- -------------- ------------------ --------------
-------------- -------------- ------------------ --------------
</TABLE>
- ------------------------
(1) See Note 5 for pro forma earnings per share calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share,
which will be effective for financial statements for both interim and annual
periods ending after December 15, 1997.
See Notes to Condensed Consolidated Financial Statements.
F-1
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------- ----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................................................. $ 164,304,000 $ 248,399,000
Investment advisory fees receivable........................................ 160,560,000 149,843,000
Other current assets....................................................... 10,371,000 11,713,000
---------------- ----------------
Total current assets......................................................... 335,235,000 409,955,000
Fixed assets, net............................................................ 34,978,000 30,297,000
Cost assigned to contracts acquired, net..................................... 1,127,668,000 941,490,000
Other assets................................................................. 47,299,000 48,911,000
---------------- ----------------
Total assets................................................................. $ 1,545,180,000 $ 1,430,653,000
---------------- ----------------
---------------- ----------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses...................................... $ 105,745,000 $ 113,718,000
Accrued compensation....................................................... 116,994,000 116,005,000
Current portion of notes payable........................................... 556,000 3,481,000
---------------- ----------------
Total current liabilities.................................................... 223,295,000 233,204,000
Senior notes payable......................................................... 175,500,000 150,000,000
Subordinated notes payable................................................... 547,442,000 457,486,000
Deferred income taxes........................................................ 38,054,000 37,719,000
---------------- ----------------
Total liabilities............................................................ 984,291,000 878,409,000
---------------- ----------------
---------------- ----------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share..................................... 703,000 692,000
Capital in excess of par value............................................. 356,381,000 346,017,000
Retained earnings.......................................................... 225,677,000 217,703,000
---------------- ----------------
582,761,000 564,412,000
Less treasury shares at cost............................................... (21,872,000) (12,168,000)
---------------- ----------------
Total stockholders' equity................................................... 560,889,000 552,244,000
---------------- ----------------
Total liabilities and stockholders' equity................................... $ 1,545,180,000 $ 1,430,653,000
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
-------------- -------------- -------------- --------------
Cash flow from operating activities:
Net income.................................... $ 23,226,000 $ 23,005,000 $ 71,311,000 $ 63,369,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Amortization of cost assigned to contracts
acquired.................................. 27,775,000 24,292,000 78,349,000 77,654,000
Depreciation.............................. 2,670,000 2,638,000 7,505,000 6,749,000
Other amortization........................ 543,000 540,000 1,595,000 1,470,000
-------------- -------------- -------------- --------------
Net income plus amortization and
depreciation................................ 54,214,000 50,475,000 158,760,000 149,242,000
Changes in assets and liabilities:
Increase in investment advisory fees
receivable................................ (14,708,000) (16,120,000) (10,517,000) (16,660,000)
Decrease (increase) in other current assets. (198,000) 1,534,000 714,000 2,845,000
Increase (decrease) in accounts payable and
accrued expenses.......................... (2,161,000) (6,048,000) (6,361,000) 10,703,000
Increase in accrued compensation............ 27,251,000 23,437,000 1,187,000 13,788,000
Increase (decrease) in deferred income taxes 2,179,000 (1,968,000) 335,000 (6,809,000)
-------------- -------------- -------------- --------------
Net cash flow from operating activities......... 66,577,000 51,310,000 144,118,000 153,109,000
-------------- -------------- -------------- --------------
Cash flow used in investing activities:
Cash additions to cost assigned to contracts
acquired.................................... (47,395,000) (20,000) (158,277,000) (123,000)
Change in other assets........................ (1,962,000) (6,976,000) (13,382,000) (13,690,000)
-------------- -------------- -------------- --------------
Net cash flow used in investing activities...... (49,357,000) (6,996,000) (171,659,000) (13,813,000)
-------------- -------------- -------------- --------------
Cash flow from (used in) financing activities:
Purchase of treasury shares................... (19,935,000) (10,358,000) (54,764,000) (40,021,000)
Additions to (reductions in) notes payable, net.. 25,098,000 (8,241,000) 14,583,000 (18,839,000)
Issuance or reissuance of equity securities... 4,370,000 2,844,000 23,074,000 20,024,000
Dividends paid................................ (12,959,000) (9,792,000) (37,650,000) (28,538,000)
-------------- -------------- -------------- --------------
Net cash flow used in financing activities...... (3,426,000) (25,547,000) (54,757,000) (67,374,000)
-------------- -------------- -------------- --------------
Effect of foreign exchange rate changes on cash
flow.......................................... (1,115,000) 182,000 (1,797,000) 104,000
-------------- -------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents................................... 12,679,000 18,949,000 (84,095,000) 72,026,000
Cash and cash equivalents at beginning of
period........................................ 151,625,000 178,525,000 248,399,000 125,448,000
-------------- -------------- -------------- --------------
Cash and cash equivalents at end of period...... $ 164,304,000 $ 197,474,000 $ 164,304,000 $ 197,474,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-3
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
In the opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial position
of the Company and its subsidiaries at September 30, 1997 and their results
of operations and cash flows for the three- and nine-month periods ended
September 30, 1997 and 1996. These Financial Statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
Note 2
Accumulated depreciation of fixed assets was $47,545,000 and $40,040,000
at September 30, 1997 and December 31, 1996, respectively. The accumulated
amortization of cost assigned to contracts acquired was $545,920,000 and
$467,571,000 at September 30, 1997 and December 31, 1996, respectively.
Note 3
The Company has a systematic program to repurchase shares of its common
stock to meet the requirements for future issuance of shares upon the
exercise of stock options and warrants. During the three-month period ended
September 30, 1997, the Company repurchased 723,900 shares of its common
stock at a cost of $19,935,000. For the nine months ended September 30,
1997, common stock repurchases totaled 2,038,200 shares at a cost of
$54,764,000. During the three- and nine-month periods ended September 30,
1997, exercises of warrants and stock options resulted in the Company
extinguishing subordinated notes, receiving cash proceeds and issuing stock
as follows:
Three Months Nine Months
Ended Ended
September 30, 1997 September 30, 1997
------------------ ------------------
Subordinated notes extinguished...... -- $ 6,848,000
Cash proceeds received............... $ 4,431,000 $23,161,000
Shares issued........................ -- 1,129,151
Treasury shares reissued............. 262,115 1,750,908
As of September 30, 1997, the Company held 793,338 treasury shares. In
addition, 9,342,000 warrants and 6,980,000 stock options were outstanding at
weighted average exercise prices of $23.00 and $20.99, respectively.
Note 4
During September 1997, the Company acquired a minority interest in
Lincluden Management Limited. This transaction is not material to the
Company's Condensed Consolidated Financial Statements.
F-4
<PAGE>
Note 5
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share (FAS 128), which replaces
Accounting Principles Board Opinion No. 15. FAS 128 requires dual
presentation of basic and diluted earnings per share. This standard is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. Although earlier adoption is prohibited, disclosing
pro forma earnings per share data in the notes to the financial statements is
permitted.
Based on the provisions of FAS 128, pro forma earnings per share are set
forth below:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
Basic earnings per share $.33 $.34 $1.02 $.93
Diluted earnings per share $.32 $.32 $ .97 $.88
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The revenues of UAM's affiliated firms are derived primarily from fees
for investment advisory services provided to institutional and other clients.
Investment advisory fees are generally a function of the overall fee rate
charged to each account and the level of assets under management by the
affiliated firms. A minor portion of revenues is generated when firms
consummate transactions for client portfolios. Assets under management can
be affected by the addition of new client accounts or client contributions to
existing accounts, withdrawals of assets from or terminations of client
accounts and investment performance, which may depend on general market
conditions.
UAM's assets under management were $206.9 billion as of September 30,
1997, $14.1 billion higher than the $192.8 billion under management on June
30, 1997. The net $14.1 billion increase in assets under management during
the quarter resulted from market performance of $12.9 billion and acquired
assets under management of $4.7 billion, partially offset by $3.5 billion in
negative net client cash flow.
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED AND OPERATING CASH FLOW
(NET INCOME PLUS AMORTIZATION AND DEPRECIATION)
Cost assigned to contracts acquired, net of accumulated amortization,
represented approximately 73% of the Company's total assets as of September
30, 1997. Amortization of cost assigned to contracts acquired, which is a
non-cash charge, represented 15% of the Company's operating expenses for both
the three- and nine-month periods ended September 30, 1997. Recording the
cost assigned to contracts acquired as an asset, with the resulting
amortization as an operating expense, reflects the application of generally
accepted accounting principles to acquisitions by UAM of investment
management firms in transactions accounted for as purchases. The principal
assets acquired are the investment advisory contracts which evidence the
firms' ongoing relationships with their clients.
Although the contracts acquired are typically terminable on 30-days
notice, analyses conducted by independent consultants retained by UAM to
assist the Company in allocating the purchase price among the assets acquired
and the experience of UAM's firms to date have indicated that: 1) contracts
are relatively long-lived; 2) the duration of contracts can be reasonably
estimated; and 3) the value of the cost assigned to contracts acquired can be
estimated based on the present value of its projected income stream.
F-5
<PAGE>
The cost assigned to contracts acquired is amortized on a straight-line
basis over the estimated weighted average useful life of the contracts of
individual firms acquired. These lives are estimated through statistical
analysis of historical patterns of terminations and the size and age of the
contracts acquired as of the acquisition date.
When actual terminations differ from the statistical patterns developed,
or upon the occurrence of certain other events, the Company updates the
lifing analyses discussed above. If the update indicates that any of the
estimates of the average remaining lives should be shortened, the remaining
cost assigned to contracts acquired will be amortized over the shorter life
commencing in the year in which the new estimate is determined. There has
been no material effect on the Company's financial position or results of
operations as a result of these updates.
Cost assigned to contracts acquired is amortized as an operating
expense. It does not, however, require the use of cash and therefore,
management believes that it is important to distinguish this expense from
other operating expenses in order to evaluate the performance of the Company.
Amortization of cost assigned to contracts acquired per share referred to
below has been calculated by dividing total amortization by the same number
of shares used in the fully diluted earnings-per-share calculation.
For purposes of this discussion, Operating Cash Flow is defined as net
income plus amortization and depreciation, as reflected in the Company's
Condensed Consolidated Statement of Cash Flows. Management uses Operating
Cash Flow not to the exclusion of net income, but rather as an additional
important measure of the Company's performance.
OPERATING RESULTS
Three Months Ended September 30, 1997
compared to
Three Months Ended September 30, 1996
Revenues increased 10% to $241,710,000 for the three months ended
September 30, 1997, from $219,618,000 for the third quarter of 1996. This
increase is the result of favorable portfolio performance achieved by UAM's
affiliated firms as well as the impact of acquisitions, partially offset by
the effect of negative net client cash flow. The revenues of J.R. Senecal &
Associates Investment Counsel Corp., Pacific Financial Research, Inc.,
Thomson Horstmann and Bryant, Inc. and Lincluden Management Limited acquired
January 7, 1997, May 29, 1997, June 6, 1997 and September 4, 1997,
respectively, have been included since their acquisition dates.
Compensation and related expenses together with other operating expenses
increased 12% to $162,860,000 from $145,523,000, primarily reflecting the
acquisitions described above and higher operating expenses and compensation
earned by employees of existing affiliated firms in accordance with revenue
sharing plans. Amortization of cost assigned to contracts acquired increased
14% to $27,775,000 from $24,292,000 as a result of the acquisitions discussed
above.
Interest expense increased to $11,389,000 from $10,941,000 primarily due
to the increase in the Company's average debt levels, partially offset by a
decrease in the Company's average borrowing rates.
Income before income tax expense increased to $40,693,000 from
$40,215,000, reflecting the circumstances described above. The Company's
estimated annual effective tax rate approximated 43% for both of the
three-month periods ended September 30, 1997 and 1996.
Net income increased to $23,226,000 from $23,005,000, reflecting the
factors described above. Fully diluted earnings per share were $.32 for both
of the three-month periods ended September 30, 1997 and 1996. Amortization
of cost assigned to contracts acquired on a per-share basis was $.38 compared
to $.34 in the third quarter of 1996 primarily due to the circumstances
discussed above.
F-6
<PAGE>
Nine Months Ended September 30, 1997
compared to
Nine Months Ended September 30, 1996
Revenues increased 7% to $676,804,000 for the nine months ended
September 30, 1997, from $634,805,000 for the first nine months of 1996.
This increase is the result of favorable portfolio performance achieved by
UAM's affiliated firms as well as the impact of acquisitions, partially
offset by the effect of negative net client cash flow. The revenues of OSV
Partners, J.R. Senecal & Associates Investment Counsel Corp., Pacific
Financial Research, Inc., Thomson Horstmann and Bryant, Inc., and Lincluden
Management Limited, acquired April 22, 1996, January 7, 1997, May 29, 1997,
June 6, 1997 and September 4, 1997, respectively, have been included since
their acquisition dates.
Compensation and related expenses together with other operating expenses
increased 7% to $445,901,000 from $415,384,000, primarily reflecting the
acquisitions described in the preceding paragraph and higher operating
expenses and compensation earned at existing affiliates. Amortization of cost
assigned to contracts acquired increased to $78,349,000 from $77,654,000 as a
result of the acquisitions discussed above, partially offset by an adjustment
made during the first quarter of 1996 to the carrying value of a contract
with an executive at a UAM affiliate who died in March 1996.
Interest expense decreased from $32,736,000 to $31,530,000 primarily due
to the decrease in both the Company's average debt levels and interest rates
charged on borrowings.
Income before income tax expense increased 12% to $124,758,000 from
$111,013,000, reflecting the net result of the circumstances discussed above.
The Company's estimated annual effective tax rate approximated 43% for both
of the nine-month periods ended September 30, 1997 and 1996.
Net income increased 13% to $71,311,000 from $63,369,000, reflecting the
factors described above. Fully diluted earnings per share increased 9% to
$.96 from $.88, reflecting higher net income and the effect of the Company's
common stock repurchased, partially offset by the impact of the issuance of
shares of common stock, the Company's higher common stock price and the
hypothetical exercise of warrants and stock options on the calculation of
earnings per share under the modified treasury stock method. Amortization of
cost assigned to contracts acquired on a per-share basis was $1.06 compared
to $1.07 for the first nine months of 1996, primarily as a result of the
acquisitions described above.
CHANGES IN FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
The Company generated $54,214,000 and $158,760,000 in Operating Cash
Flow (net income plus amortization and depreciation) for the three- and
nine-month periods ended September 30, 1997. The primary use of this
Operating Cash Flow was to fund the costs of acquisitions, to repurchase
shares of the Company's common stock and to pay dividends to shareholders.
The Company invests its excess cash in deposits with major banks, money
market funds or in securities, principally commercial paper of companies with
strong credit ratings in diversified industries. As of September 30, 1997,
the Company had $25,500,000 of borrowings outstanding under its $500,000,000
Reducing Revolving Credit Agreement.
Management believes that the Company's existing capital, together with
Operating Cash Flow and borrowings available under its revolving line of
credit, will provide the Company with sufficient resources to meet its
present and reasonably foreseeable future cash needs. Management expects
that the principal need for financial resources will be to acquire additional
investment management firms, to fund commitments due or potentially due to
former owners of affiliated firms, to pay shareholder dividends, and to
repurchase shares of the Company's common stock.
F-7
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
Exhibit 11
CALCULATION OF EARNINGS PER SHARE (1)
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Common and common equivalent
shares:
Net income....................... $23,226 $ 23,005 $ 71,311 $ 63,369
Adjustments thereto (2).......... -- 32 -- 635
-------- ---------- -------- ---------
Adjusted net income.............. $ 23,226 $ 23,037 $ 71,311 $ 64,004
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Average shares outstanding....... 69,794 68,918 69,988 68,631
Adjustments thereto (2).......... 2,936 3,243 3,352 3,889
-------- ---------- -------- ---------
Shares used in computation....... 72,730 72,161 73,340 72,520
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Per share.......................... $ .32 $ .32 $ .97 $ .88
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Common shares-assuming full dilution:
Net income....................... $ 23,226 $ 23,005 $ 71,311 $ 63,369
Adjustments thereto (2).......... -- 5 -- 98
-------- ---------- -------- ---------
Adjusted net income.............. $ 23,226 $ 23,010 $ 71,311 $ 63,467
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Average shares outstanding....... 69,794 68,918 69,988 68,631
Adjustments thereto (2).......... 3,446 3,243 4,034 3,889
-------- ---------- -------- ---------
Shares used in computation....... 73,240 72,161 74,022 72,520
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Per share.......................... $ .32 $ .32 $ .96 $ .88
-------- ---------- -------- ---------
-------- ---------- -------- ---------
</TABLE>
- ------------------------
(1) See Note 5 for pro forma earnings per share calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share,
which will be effective for financial statements for both interim and annual
periods ending after December 15, 1997.
(2) Adjustments relate to application of modified treasury stock method.
F-8
<PAGE>
Exhibit 10
UNITED ASSET MANAGEMENT CORPORATION
DEFERRED COMPENSATION PLAN
FIRST AMENDMENT
WHEREAS, United Asset Management Corporation (hereinafter referred to as
the "Company") adopted the United Asset Management Corporation Deferred
Compensation Plan (hereinafter referred to as the "Plan") effective as of
January 1, 1994 to provide retirement benefits for certain employees of the
Company; and
WHEREAS, in accordance with Section 10 of the Plan, the Company wishes to
amend the Plan;
NOW, THEREFORE, the Plan is hereby amended effective as of July 1, 1997, as
follows:
1. In Subsection 8.5 of Section 8, Subparagraph (i) of Paragraph (b) is
amended to read and provide as follows:
(b) Notional Shares Election.
(i) The Election. Each Participant may elect to have all or any portion
of his or her Allocations under the Plan (including all or any portion of his or
her existing Account that was previously invested under the Mutual Fund
Election) be deemed to be invested in Notional Shares. All such elections shall
be made on a form prescribed by the Retirement Committee and shall be subject to
the following requirements and restrictions:
(1) The election with respect to any Allocations made for a Plan Year
shall be received by the Retirement Committee on or before the second-to-last
day of such Plan Year (or on such earlier business day as the Retirement
Committee may set for any Plan Year if such second-to-last day is not a business
day) for a deemed investment in Notional Shares as of the last business day on
or after the last day of such Plan Year;
(2) The election with respect to any portion of an existing Account
previously invested (or deemed to be invested) under the Mutual Fund Election
shall be effective on the next business day after it is received by the
Retirement Committee;
<PAGE>
(3) No investment or reinvestment in Notional Shares will be made to the
extent that the Retirement Committee determines that such action would likely
result in more Notional Shares being credited to Accounts under the Plan than
could be paid out as shares of Stock pursuant to paragraph (b) of Subsection
7.2;
(4) To the extent that a Notional Shares Election cannot be carried out
because of clause (3) above or because it is received by the Retirement
Committee after the deadline in clause (1) above, it will be deemed to be a
Mutual Fund Election and the mutual fund or funds chosen for investment of the
Allocation or Account shall be as selected by the Retirement Committee until
such time as the Participant gives effective investment instructions pursuant to
Paragraph (a) of this Subsection 8.5 or clause (2) of this Paragraph (b), as
applicable; and
(5) Once made, investment of an Allocation or reinvestment of any portion
of an existing Account in Notional Shares is irrevocable.
2. In Subsection 8.5 of Section 8, Subparagraph (ii) of Paragraph (b) is
amended to read and provide as follows:
(ii) The Investment. As of the date that any deemed investment in Notional
Shares takes place, the number of Notional Shares credited to the Participant's
Account shall be determined by dividing the amount of the Allocation to be
invested and/or the value of the Account to be reinvested by the closing price
of the Stock on its principal trading exchange as of such date (or on the last
previous day on which a trade occurred if no trade of the Stock occurred on the
relevant date), with any resulting fractional Notional Share rounded up to the
next whole Share.
*******************************
Except as specifically amended hereby, the Plan is hereby reaffirmed in all
respects.
Signed as a sealed Massachusetts instrument effective as of the date stated
above.
UNITED ASSET MANAGEMENT CORPORATION
By: /s/ William H. Park
-----------------------------------------
William H. Park, Executive Vice President
July 22, 1997
- -------------
Date
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
Exhibit 11
CALCULATION OF EARNINGS PER SHARE (1)
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Common and common equivalent
shares:
Net income....................... $23,226 $ 23,005 $ 71,311 $ 63,369
Adjustments thereto (2).......... -- 32 -- 635
-------- ---------- -------- ---------
Adjusted net income.............. $23,226 $ 23,037 $ 71,311 $ 64,004
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Average shares outstanding....... 69,794 68,918 69,988 68,631
Adjustments thereto (2).......... 2,936 3,243 3,352 3,889
-------- ---------- -------- ---------
Shares used in computation....... 72,730 72,161 73,340 72,520
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Per share.......................... $ .32 $ .32 $ .97 $ .88
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Common shares-assuming full dilution:
Net income....................... $23,226 $ 23,005 $ 71,311 $ 63,369
Adjustments thereto (2).......... -- 5 -- 98
-------- ---------- -------- ---------
Adjusted net income.............. $23,226 $ 23,010 $ 71,311 $ 63,467
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Average shares outstanding....... 69,794 68,918 69,988 68,631
Adjustments thereto (2).......... 3,446 3,243 4,034 3,889
-------- ---------- -------- ---------
Shares used in computation....... 73,240 72,161 74,022 72,520
-------- ---------- -------- ---------
-------- ---------- -------- ---------
Per share.......................... $ .32 $ .32 $ .96 $ .88
-------- ---------- -------- ---------
-------- ---------- -------- ---------
</TABLE>
- ------------------------
(1) See Note 5 for pro forma earnings per share calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings per Share,
which will be effective for financial statements for both interim and annual
periods ending after December 15, 1997.
(2) Adjustments relate to application of modified treasury stock method.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information
extracted from the Company's nine months ended September 30, 1997
Consolidated Statement of Income and the Condensed Consolidated
Balance Sheet. This information is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000796370
<NAME> UNITED ASSET MANAGEMENT CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 164,304
<SECURITIES> 0
<RECEIVABLES> 160,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,371
<PP&E> 82,588
<DEPRECIATION> (47,545)
<TOTAL-ASSETS> 1,545,180<F1>
<CURRENT-LIABILITIES> 223,295
<BONDS> 722,942<F2>
0
0
<COMMON> 703
<OTHER-SE> 560,186
<TOTAL-LIABILITY-AND-EQUITY> 1,545,180
<SALES> 0
<TOTAL-REVENUES> 676,804
<CGS> 0
<TOTAL-COSTS> 445,901
<OTHER-EXPENSES> 78,349<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,796
<INCOME-PRETAX> 0
<INCOME-TAX> 53,447
<INCOME-CONTINUING> 71,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,311
<EPS-PRIMARY> .97
<EPS-DILUTED> .96
<FN>
<F1>Includes 1,127,668,000 of cost assigned to contracts acquired, net of
accumulated amortization.
<F2>Includes $175,500,000 in senior notes payable and 547,442,000 in subordinated
notes payable.
<F3>Represents amortization of costs assigned to contracts acquired.
</FN>
</TABLE>
