BALTIMORE, Jan. 28 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported 2004 fourth quarter net revenues of more than
$345 million, net income of $97 million, and diluted earnings per share of
$.71, an increase of 34% from the $.53 per share reported in the fourth
quarter of 2003. Comparable net revenues in the fourth quarter of 2003 were
$281 million and net income was nearly $69 million.
Assets under management increased to a record $235.2 billion at December
31, 2004, up 10.9% from the previous high of $212.0 billion at the end of the
third quarter 2004, and up 24% from $190.0 billion at year-end 2003.
Financial Highlights
For the year 2004, the firm's net revenues were up 28% from $996 million
in 2003 to almost $1.3 billion. Net income was $337 million versus $227
million in 2003 and diluted earnings per share was $2.51 versus $1.77 in 2003.
Operating expenses for the year were up $121 million or 19% to $752 million in
2004. Net operating income was $525 million in 2004, up $160 million or 44%
compared to 2003. Net non-operating income also increased to $8.5 million
from $.5 million in 2003.
Investment advisory revenues were up 25% or $56 million in the fourth
quarter of 2004 versus the 2003 quarter. Increased assets under management
was the primary cause of the change as average mutual fund assets under
management were $138 billion, more than $26 billion higher than the $112
billion average of the fourth quarter of 2003. Average assets in other
managed portfolios were $85.7 billion in the fourth quarter of 2004, up $17.6
billion versus the average of $68.1 billion in the 2003 quarter.
Total assets under management were up $45 billion during 2004 and ended
the year at the record of $235.2 billion, including $175.9 billion in equity
securities and $59.3 billion in bond and money market holdings. These
investment assets include $145.5 billion in the T. Rowe Price mutual funds
distributed in the United States and $89.7 billion in other managed investment
portfolios consisting of institutional separate accounts, sub-advised funds,
sponsored mutual funds which are offered to non-U.S. investors, and variable
insurance portfolios. Improving financial market valuations and income added
almost $24.5 billion during 2004, while net investor inflows added $20.7
billion. This all-time record included flows into the mutual funds of $12.7
billion - almost 50% greater than the record flows the funds experienced in
1996 - and $8.0 billion to our other managed investment portfolios. Net
mutual fund inflows of $9.5 billion for 2004 were made into five funds - the
Mid-Cap Value, Equity Income, Growth Stock, Capital Appreciation, and Mid-Cap
Growth funds. In addition, our series of target date Retirement Funds, which
are designed to provide shareholders with single, diversified portfolios that
invest in underlying T. Rowe Price funds and automatically shift asset
allocations between funds as the investor ages, have continued to see very
strong asset growth, and now total $3.6 billion.
During the fourth quarter 2004, nearly all of the $3.3 billion net inflows
to the mutual funds were concentrated in the U.S. stock funds with more than
$2.6 billion going to the Mid-Cap Value, Equity Income, Growth Stock, and
Capital Appreciation funds. U.S. stock funds had almost $10 billion in net
market appreciation while international stock funds added almost $1.5 billion
of appreciation during the final quarter of 2004.
Mutual fund net inflows in 2004 were supported broadly by the financial
intermediary, individual direct, and defined contribution retirement plans
channels, and were concentrated in the U.S. domestic stock mutual funds.
Strong net cash inflows into other managed portfolios resulted from increased
investment activity through financial intermediaries in the United States,
Japan and Europe, and from institutional investors, including new assignments
from Europe and Australia.
Operating expenses for the fourth quarter of 2004 increased nearly $31
million from the previous year's quarter to $202 million. Increases in
compensation and related employment costs, in advertising and promotion costs,
and in other operating expenses were the primary reasons for the change. At
December 31, 2004, the firm employed 4,139 associates, up more than 9% since
the beginning of the year to accommodate increased volume-related activities
across the firm. Strong financial markets and growing investor interest,
coupled with the fourth quarter seasonal aspect of targeted advertising
spending, led the firm to increase its promotional spending in the final
quarter of 2004 to the highest level in four years. The firm expects its
advertising and promotion expenditures in the first quarter of 2005 will be at
about the same level as the fourth quarter of 2004, while spending for the
year could be up 10-15% versus 2004. The firm continues to monitor financial
market conditions and will adjust its future advertising and promotion
spending accordingly. The sequential increase in other operating expenses
from the third quarter to the fourth quarter of 2004 results largely from a
$4.8 million charitable contribution to the T. Rowe Price corporate
foundation.
In the fourth quarter of 2004, the company lowered its expected effective
income tax rate for the year from 37.5% to 36.8% to reflect lower than
previously estimated prior year tax return liabilities and to revise the
estimated liability for 2004. The estimate of the effective tax rate for 2005
is presently 37.1%.
Chairman Commentary
George A. Roche, the company's chairman and president, commented: "We are
pleased to report outstanding results for our company in 2004. While the
financial markets were trendless for much of the year before staging a fourth-
quarter post-election rally, T. Rowe Price Group registered steady growth
throughout 2004. Improved cash inflows from all business channels combined
with the end-of-the year market upturn to generate record revenues, earnings,
and assets under management.
"The firm's investment advisory results relative to our peers remain
exemplary, with more than 81% of the T. Rowe Price funds across their share
classes surpassing their Lipper averages on a total return basis for the one-
and three-year periods ended December 31, 2004, and 75% outperforming the
average for the five- and 10-year periods. In addition, 64% of our rated
retail funds ended the year with an overall rating of four or five stars from
Morningstar, compared with 32.5% for the overall industry. It was also an
award-winning year, as Global Pensions magazine named T. Rowe Price 'Active
Equity Manager of the Year' and Morningstar named Brian Berghuis, manager of
the Mid-Cap Growth portfolios, its 'Domestic-Stock Manager of the Year.' Our
world-class client service was also recognized, as Plan Sponsor magazine,
based on surveys of nearly 4,000 defined-contribution plan sponsors, honored
T. Rowe Price with 30 'Best in Class' awards.
"Concurrent with our strong earnings and growing investor interest in the
markets, the firm implemented a variety of positive initiatives across
business channels during 2004. We have continued to invest in our
distribution efforts through financial intermediaries. We also expanded our
offerings of investment education materials and guidance capabilities to
assist individual investors and retirement plan participants. In our
Retirement Plan Services area, we enhanced our online tools for plan sponsors
and introduced our FuturePath line of automated services, including automatic
enrollment, automatic investment, and automatic increase. In our
institutional business, we combined our U.S. and non-U.S. sales and client
services groups into one department, and added staff to support this group.
In addition, the opening of new offices in Sweden and Australia signals our
continued global expansion, with investors outside the United States now
accounting for more than 5% of our assets under management.
"Our corporate earnings and cash flow remain very strong and give us
substantial financial flexibility," Mr. Roche added. "As a result we have
been able to invest in our business, increase our dividend more than 20% to
$.23 per quarter, and repurchase 400,000 shares of our common stock. We also
remain debt free and have cash and net liquid investments of nearly $600
million at the beginning of 2005.
"The strong finish to 2004 provides considerable momentum to the economy
and the markets in 2005," Mr. Roche said. "It will not be entirely smooth
sailing, however. The nation's trade and budget deficits are a growing
concern and high commodity prices suggest that inflation, which has been
contained for some time, is likely to pick up at some point. We believe that
the Fed will continue to hike interest rates toward a more neutral level that
neither stimulates nor stifles economic growth."
In closing, Mr. Roche said: "Our long-term strategy is not dependent on
the strength of the financial markets, however. We continue to take steps to
strengthen our competitive position and believe our combination of investment
management excellence, world-class service and guidance, and our heritage of
integrity provide a firm foundation for growth in the year ahead."
The financial results presented in this release are unaudited as of this
date. The company's independent auditors are currently completing their
audits of the company's 2004 financial statements and its internal controls
over financial reporting at December 31, 2004. The company expects that their
work will be completed in early February. T. Rowe Price Group's Form 10-K
Annual Report for 2004 will be filed in early March with the U.S. Securities
and Exchange Commission. The Form 10-K will include more complete audited
information on the company's financial results, management's report on
internal controls over financial reporting at December 31, 2004, and the
reports of our independent auditors.
Certain statements in this press release may represent "forward-looking
information," including information relating to anticipated growth in
revenues, net income and earnings per share, anticipated changes in the amount
and composition of assets under management, anticipated expense levels, and
expectations regarding financial and other market conditions. For a
discussion concerning risks and other factors that could affect future
results, see "Forward-Looking Information" in Item 2 of the company's Form 10-
Q Report for the period ended September 30, 2004.
Founded in 1937, Baltimore-based T. Rowe Price is a global investment
management organization that provides a broad array of mutual funds,
subadvisory services, and separate account management for individual and
institutional investors, retirement plans, and financial intermediaries. The
organization also offers a variety of sophisticated investment planning and
guidance tools. T. Rowe Price's disciplined, risk-aware investment approach
focuses on diversification, style consistency, and fundamental research. More
information is available at http://www.troweprice.com.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
Quarter ended Year ended
Revenues 12/31/2003 12/31/2004 12/31/2003 12/31/2004
Investment advisory
fees $224,001 $280,131 $777,462 $1,028,831
Administrative fees
and other income 56,958 65,329 217,483 247,743
Investment income of
savings bank
subsidiary 1,002 905 3,910 3,775
Total revenues 281,961 346,365 998,855 1,280,349
Interest expense on
savings bank deposits 842 867 3,288 3,300
Net revenues 281,119 345,498 995,567 1,277,049
Operating expenses
Compensation and
related costs 99,025 117,086 382,956 457,905
Advertising and
promotion 20,383 24,140 59,005 74,268
Depreciation and
amortization of
property and
equipment 10,446 9,964 45,289 40,018
Occupancy and facility
costs 15,747 17,269 62,538 66,420
Other operating
expenses 25,268 33,549 80,739 113,159
170,869 202,008 630,527 751,770
Net operating income 110,250 143,490 365,040 525,279
Other investment income 1,384 5,885 2,175 9,496
Other interest and
credit facility expenses 387 99 1,699 992
Net non-operating income 997 5,786 476 8,504
Income before income
taxes 111,247 149,276 365,516 533,783
Provision for income
taxes 42,600 52,144 138,029 196,523
Net income $68,647 $97,132 $227,487 $337,260
Earnings per share
Basic $0.55 $0.75 $1.84 $2.65
Diluted $0.53 $0.71 $1.77 $2.51
Dividends declared
per share $0.19 $0.23 $0.70 $0.80
Weighted average shares
Outstanding 124,697 129,155 123,423 127,419
Assuming dilution 130,645 135,935 128,289 134,135
Investment Advisory Revenues (in thousands)
Three months ended Year ended December 31,
12/31/2003 12/31/2004 2003 2004
Sponsored mutual funds
in the U.S.
Stock $128,168 $165,230 $434,423 $602,220
Bond and money market 32,116 34,623 123,879 133,953
160,284 199,853 558,302 736,173
Other portfolios 63,717 80,278 219,160 292,658
$224,001 $280,131 $777,462 $1,028,831
Assets Under Management (in billions)
Average during Average during
the fourth quarter the year
2003 2004 2003 2004
Sponsored mutual funds
in the U.S.
Stock $82.8 $107.1 $71.2 $98.1
Bond and money market 28.9 30.9 28.2 30.0
111.7 138.0 99.4 128.1
Other portfolios 68.1 85.7 60.5 78.8
$179.8 $223.7 $159.9 $206.9
12/31/2003 12/31/2004
Sponsored mutual funds in the U.S.
Stock $88.4 $114.3
Bond and money market 29.1 31.2
117.5 145.5
Other portfolios 72.5 89.7
$190.0 $235.2
Equity securities $135.5 $175.9
Debt securities 54.5 59.3
$190.0 $235.2
Condensed Consolidated Cash Flows Information
(in thousands) Year ended
12/31/2003 12/31/2004
Cash provided by operating activities $296,955 $374,280
Cash used in investing activities, including
($43,069) for additions to property and equipment
in 2004 (53,659) (75,865)
Cash used in financing activities, including
stock options exercised of $75,149 and common
shares repurchased of ($18,334) in 2004 (118,181) (35,198)
Net increase in cash during the period $125,115 $263,217
Condensed Consolidated Balance Sheet Information
(in thousands) 12/31/2003 12/31/2004
Cash and cash equivalents $236,533 $499,750
Accounts receivable 121,295 158,342
Investments in sponsored mutual funds 162,283 215,159
Debt securities held by savings bank subsidiary 110,962 114,075
Property and equipment 201,094 203,807
Goodwill 665,692 665,692
Other assets 48,718 72,000
Total assets 1,546,577 1,928,825
Total liabilities, including savings
bank deposits of $100,427 in 2004 217,497 231,525
Stockholders' equity, 129,607,697 common shares
outstanding in 2004, including net unrealized
holding gains of $41,666 in 2004 $1,329,080 $1,697,300
SOURCE T. Rowe Price Group, Inc.
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Related links:
http://www.troweprice.com
CONTACT:
Brian Lewbart, +1-410-345-2242, Steve
Norwitz, +1-410-345-2124, or Rajiv Vyas, +1-410-345-6559, all of
T. Rowe Price Group
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