Assets Under Management Reach $400 Billion
BALTIMORE, Jan. 29 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported its fourth quarter 2007 results, including
net revenues of $598 million, net income of nearly $191 million, and
diluted earnings per share of $.68, an increase of 28% from $.53 per share
in the comparable 2006 quarter. Net revenues in the final quarter of 2006
were $489 million, and net income was $149 million.
Investment advisory revenues were up 24%, or $97 million, from the
comparable 2006 quarter. Assets under management of $400 billion at
December 31 are up $3.2 billion, or nearly 1%, during the fourth quarter.
Net cash inflows from investors totaled $9.1 billion during the fourth
quarter, more than offsetting the quarter's decline in assets from lower
market valuations.
Results for 2007 include net revenues of more than $2.2 billion, net
income of more than $670 million, and diluted earnings per share of $2.40 -
an increase of 26% from $1.90 per share in 2006. Assets under management
increased 19.5% or $65.3 billion during 2007. Net cash inflows from
investors totaled $33.8 billion, and net market appreciation and income
added $31.5 billion to assets under management during the year.
Financial Highlights
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased to $363.3 million for the fourth
quarter of 2007, up $70.3 million from the comparable 2006 quarter. Mutual
fund assets of $246.0 billion at year-end 2007 were off $.3 billion from
September 30, 2007, as market value reductions of nearly $4.0 billion were
mostly offset by net cash inflows of $3.7 billion. Net cash inflows were
spread among the funds, with the international and global stock funds
adding $1.6 billion, the bond and money market funds adding $1.5 billion,
and the U.S. stock and blended asset funds adding nearly $.6 billion. The
Growth Stock, Equity Index 500, Blue Chip Growth, and New Income funds
together added more than $2.5 billion during the quarter.
The series of target-date Retirement Funds, which provide fund
shareholders with single, diversified portfolios that invest in underlying
T. Rowe Price funds and automatically adjust fund asset allocations as
investors age, continues to be a significant source of mutual fund asset
growth, increasing nearly 11% or $2.9 billion during the fourth quarter to
total $30 billion at year-end 2007. Mutual fund net inflows of $3.4 billion
originated in the Retirement Funds during the fourth quarter of 2007. For
the year, these funds grew $12.7 billion from $17.3 billion, and now
represent 12% of our mutual fund assets under management.
For the year, net inflows to the mutual funds were $20.2 billion,
including $10.7 billion that originated in the target-date Retirement
Funds. The U.S. stock and blended asset funds had net inflows of $9.9
billion, while bond and money market funds added $5.6 billion, and
international and global stock funds added $4.7 billion. The Growth Stock
Fund added more than $4.8 billion of net investments this year while the
New Income Fund added $2.5 billion. Higher market valuations and income
increased mutual fund assets by $19.3 billion in 2007.
Investment advisory revenues earned from other managed investment
portfolios, consisting of institutional separate accounts, sub-advised
funds, sponsored investment funds which are offered to investors outside
the U.S., and variable insurance portfolios, were $143 million in the 2007
quarter, an increase of nearly $27 million from the comparable 2006
quarter. Ending assets in these portfolios were $154.0 billion, up $3.5
billion since September 30. Strong net cash inflows during the fourth
quarter of $5.4 billion were partially offset by lower market valuations
that reduced assets nearly $1.9 billion during the quarter. Investors
outside the United States now account for 9% of assets under management.
Operating expenses were $335 million in the fourth quarter of 2007, up
$61 million from the 2006 fourth quarter. The largest expense, compensation
and related costs, increased $43 million, or 26%, over the comparable 2006
quarter, primarily due to higher salaries, bonus compensation and
stock-based compensation expense. The firm has increased its staff by 10.3%
since the beginning of 2007, primarily to handle increased volume-related
activities and other growth. At December 31, the firm employed 5,081
associates.
Advertising and promotion expenditures vary period-to-period in
response to investor interest and in the fourth quarter were up $5.0
million from the 2006 quarter. Advertising and promotion expenditures in
2008 are expected to be up about 15% versus 2007, and spending in the first
quarter of 2008 is expected to be up about $2 million from the fourth
quarter of 2007.
Other operating expenses in the fourth quarter were up $11.0 million,
including $2.7 million of higher distribution expenses recognized on
greater fund assets under management that are sourced from financial
intermediaries. These costs offset the same increase in administrative
revenues from 12b-1 fees. Additionally, consulting and professional fees,
travel, information services, and other costs have risen this year to meet
increased business demands.
Net non-operating income, which includes interest income as well as the
recognition of investment gains and losses, increased nearly $16 million in
the 2007 quarter versus the prior year's fourth quarter. Larger year-end
dividends, including capital gains distributions, from mutual fund
investments were responsible for $14 million of the increase.
The fourth quarter 2007 provision for income taxes as a percentage of
pretax income has been recognized in order that the provision for the full
year 2007 reflects an estimated annualized rate of 37.7%. We currently
estimate that our 2008 effective tax rate will be up to .5% higher than in
2007 due primarily to changes in state income tax rates and regulations.
Management Commentary
James A.C. Kennedy, the company's Chief Executive Officer and
President, commented: "We are pleased to report that 2007 was a successful
year for T. Rowe Price Group with strong financial results across the
board. Although it was a year marked by high market volatility, and stocks
declined sharply in the fourth quarter amid concerns that rising energy and
materials prices as well as the credit market turmoil would lead to a
significant economic slowdown, most major stock and bond indexes had
positive returns for the year, and helped the firm achieve record assets
under management, revenues, earnings, and stockholders' equity.
Importantly, thanks to our fixed-income analytical team, our clients fared
relatively well in the treacherous credit market environment when many
financial institutions struggled with problems caused by investments in
low-quality fixed-income instruments.
"The firm's investment advisory results relative to our peers remain
strong, with at least 72% of the T. Rowe Price funds across their share
classes surpassing their comparable Lipper averages on a total return basis
for the three-, five-, and 10-year periods ended December 31, 2007, and 61%
outperforming for the one-year period. In addition, 71 of the T. Rowe Price
stock, bond and blended asset funds across their share classes, which
account for more than 72% of our rated funds' assets under management,
ended the year with an overall rating of four or five stars from
Morningstar. These four- and five-star-rated investments represent 58.2% of
our rated funds and share classes, compared with 32.5% for the overall
industry.
"Our clients have access to our investment strategies through several
distribution channels, and investor demand reflects strong results from
each of them. Our retail direct and retirement planning services channels
continued their longstanding success, while even more significant
contributions to asset flows came from intermediary and global
institutional channels. Highlights of the year included the significant
growth in our global equity and large-cap growth stock franchises, as well
as the growing use of our target-date Retirement Funds.
"On the investment side, we introduced several new funds and
institutional strategies, and launched new initiatives to manage assets for
investors in China and India, markets which could well represent solid
growth opportunities over the long term. We also augmented the range of
services and products we offer financial intermediaries and plan sponsors.
Further, to better meet the savings and retirement needs of individual
investors and plan participants, we enhanced our advisory planning
services, opened an additional investor center, and increased the number of
retirement plans offering the Retirement Funds and participant
auto-enrollment.
"We continue to grow our global presence and invest heavily in our
organization to prepare for the future. We now have clients in more than 30
countries, and with the opening of an office in Toronto have facilities in
12 countries. In order to better serve our clients, we also recently
completed a new building in Colorado Springs and a business continuity site
in Maryland, upgraded our Baltimore and London offices, and announced
expansion plans for our Owings Mills, Maryland, campus to build two new
environmentally friendly buildings over the next two years.
"Our strong capital position gives us the financial flexibility both to
weather storms as they periodically arise and to fund growth and investment
initiatives that make sense for us to pursue," Mr. Kennedy added. "In
December, we increased our quarterly dividend 41% to $.24 per share. In
addition, we made capital expenditures of $145 million, and spent $320
million to repurchase more than 2% of our outstanding common shares during
2007. We have maintained a debt-free balance sheet with substantial
liquidity, including cash and investment holdings of more than $1.6 billion
at the beginning of 2008."
"After five years of strong global growth, it appears that global
economies will grow more moderately in 2008," Mr. Kennedy said. "Although
the full impact of the global credit squeeze continues to play out and the
current financial unrest may linger and even deepen, prospects for earnings
growth at many companies are favorable and valuations seem reasonable and
have become more supportive due to the recent market decline. Monetary
authorities have acted to calm the credit markets and should continue to be
accommodative in the event economic growth continues to decelerate. While
the first several weeks of the year have been challenging, we know how
difficult it is to forecast short-term market returns with any precision.
As always, we would caution investors to be patient as the market goes
through a period of transition and adjustment, and to have modest market
return expectations and an awareness of risk and uncertainty."
In closing, Mr. Kennedy said: "While the performance of financial
markets has a significant impact on the performance of the company,
especially in the short term, we will build on our success over the long
term by creating durable value for our growing number of clients around the
world and taking advantage of attractive growth opportunities. Although
there are always bumps in the road, the future for T. Rowe Price continues
to look promising as our strong investment performance, diversified
business model, and talented and dedicated associates have us well
positioned for long-term growth."
Other Matters
The financial results presented in this release are unaudited. KPMG LLP
is currently completing its audits of the company's 2007 financial
statements and internal controls over financial reporting at December 31,
2007. The company expects that KPMG will complete its work in early
February and that it will then file its Form 10-K Annual Report for 2007
with the U.S. Securities and Exchange Commission. The Form 10-K will
include more complete information on the company's audited financial
results, management's report on internal controls over financial reporting
at December 31, 2007, and the reports of KPMG.
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, estimated tax rates, and expectations regarding financial and other
market conditions. For a discussion concerning risks and other factors that
could affect future results, see the company's Form 10-K and Form 10-Q
reports.
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 millions, except per-share amounts)
Three months ended Year ended
12/31/2006 12/31/2007 12/31/2006 12/31/2007
Revenues
Investment advisory fees $409.7 $506.6 $1,508.5 $1,879.1
Administrative fees 79.1 90.9 305.4 348.1
Investment income of savings
bank subsidiary 1.5 1.5 5.4 5.9
Total revenues 490.3 599.0 1,819.3 2,233.1
Interest expense on savings
bank deposits 1.2 1.2 4.3 4.8
Net revenues 489.1 597.8 1,815.0 2,228.3
Operating expenses
Compensation and related costs 163.9 207.2 658.4 797.2
Advertising and promotion 30.8 35.8 97.3 107.9
Depreciation and amortization of
property and equipment 13.4 13.7 46.5 53.4
Occupancy and facility costs 21.8 23.2 82.5 92.1
Other operating expenses 44.3 55.3 143.4 181.3
274.2 335.2 1,028.1 1,231.9
Net operating income 214.9 262.6 786.9 996.4
Other investment income 23.3 39.0 71.7 80.4
Credit facility expenses - - 0.3 -
Net non-operating income 23.3 39.0 71.4 80.4
Income before income taxes 238.2 301.6 858.3 1,076.8
Provision for income taxes 89.3 110.9 328.7 406.2
Net income $148.9 $190.7 $529.6 $670.6
Earnings per share
Basic $0.56 $0.72 $2.01 $2.53
Diluted $0.53 $0.68 $1.90 $2.40
Dividends declared per share $0.17 $0.24 $0.59 $0.75
Weighted average shares
Outstanding 264.1 264.0 263.8 264.8
Assuming dilution 279.5 278.7 278.7 279.2
Three months ended Year ended
12/31/2006 12/31/2007 12/31/2006 12/31/2007
Investment Advisory Revenues
(in millions)
Sponsored mutual funds in the U.S.
Stock and blended asset $251.5 $313.9 $937.5 $1,168.7
Bond and money market 41.5 49.4 155.6 184.6
293.0 363.3 1,093.1 1,353.3
Other portfolios 116.7 143.3 415.4 525.8
$409.7 $506.6 $1,508.5 $1,879.1
Average Assets Under Management
(in billions)
Sponsored mutual funds in the U.S.
Stock and blended asset $162.9 $202.8 $152.2 $191.1
Bond and money market 38.6 44.4 35.4 41.7
201.5 247.2 187.6 232.8
Other portfolios 123.1 152.9 112.1 141.4
$324.6 $400.1 $299.7 $374.2
12/31/2006 12/31/2007
Assets Under Management (in billions)
Sponsored mutual funds in the U.S.
Stock and blended asset $168.5 $200.6
Bond and money market 38.0 45.4
206.5 246.0
Other portfolios 128.2 154.0
$334.7 $400.0
Stock and blended asset portfolios $267.0 $321.6
Fixed income portfolios 67.7 78.4
$334.7 $400.0
Year ended
12/31/2006 12/31/2007
Condensed Consolidated Cash Flows
Information (in millions)
Cash provided by operating activities,
including $79.8 of non-cash stock-based
compensation $593.2 $758.0
Cash used in investing activities,
including ($145.6) for additions to
property and equipment and ($190.8) for
investments in sponsored mutual funds in 2007 (421.2) (344.7)
Cash used in financing activities,
including common stock repurchases
of ($312.1) and dividends paid of
($180.3) in 2007 (202.6) (401.2)
Net change in cash during the period $(30.6) $12.1
Condensed Consolidated Balance Sheet
Information (in millions) 12/31/2006 12/31/2007
Cash and cash equivalents $773.0 $785.1
Investments in sponsored mutual funds 554.4 773.0
Property and equipment 264.9 358.3
Goodwill and other intangible assets 669.4 668.8
Accounts receivable and other assets 503.6 592.1
Total assets 2,765.3 3,177.3
Total liabilities 338.4 400.2
Stockholders' equity, 264.6 common
shares outstanding in 2007, including net
unrealized holding gains of $95.0 in 2007 $2,426.9 $2,777.1
SOURCE T. Rowe Price Group, Inc.
 back to top
Related links:
http://www.troweprice.com
CONTACT:
Brian Lewbart, +1-410-345-2242, or Robert
Benjamin, +1-410-345-2205, or Steve Norwitz, +1-410-345-2124, all
of T. Rowe Price Group, Inc.
|
