BALTIMORE, April 24 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported its first quarter 2008 results, including net
revenues of $559 million, net income of $151.5 million, and diluted
earnings per share of $.55, an increase of 8% from $.51 per share in the
comparable 2007 quarter. Net revenues in the first quarter of 2007 were
$508 million, and net income was $143 million.
Investment advisory revenues were up almost 11%, or $45 million, from
the comparable 2007 quarter. Assets under management declined 5.4% from
$400 billion at December 31, 2007, to $378.6 billion at March 31, 2008.
Record quarterly net cash inflows from investors totaled $9.7 billion
during the first quarter of 2008. Lower market valuations, net of income,
reduced assets under management by $31.1 billion.
Financial Highlights
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased 9%, or $27.8 million, to $333.6
million in the first quarter of 2008. Average mutual fund assets were
$231.2 billion in the 2008 quarter, an increase of 8% from the average for
the 2007 first quarter. Mutual fund assets at March 31, 2008 were $230.5
billion, down $15.5 billion or 6% from the end of 2007.
Net inflows to the mutual funds were $3.7 billion during the first
quarter of 2008. International and global stock funds had net inflows of
$1.7 billion, bond funds added $1.2 billion, and the money funds added $.8
billion. While U.S. domestic stock funds were flat overall, the Growth
Stock fund attracted $.8 billion of net inflows during the first quarter of
2008. Lower market valuations, net of the funds' income, decreased mutual
fund assets under management by $19.2 billion during the first quarter of
2008.
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 assets
and, at March 31, 2008, total $30.7 billion or 13% of mutual fund assets
under management. During the 2008 quarter, net fund inflows of $2.8 billion
originated in the target-date Retirement Funds.
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 $136.5 million in the
2008 quarter, an increase of $17.3 million from the comparable period last
year. Ending assets in these portfolios were $148.1 billion, down $5.9
billion since the beginning of the year. Strong net cash inflows during the
first quarter of $6.0 billion were more than offset by lower market
valuations that reduced assets $11.9 billion during the quarter. Investors
outside the United States now account for nearly 10% of assets under
management.
Operating expenses were $329 million in the first quarter of 2008, up
$39.5 million from the 2007 first quarter, but down $6.2 million from last
year's fourth quarter. The largest expense, compensation and related costs,
increased $23.2 million, or 13%, over the comparable 2007 quarter,
primarily due to increased staff size, higher salaries, and the accrual for
annual bonus expense. The firm has increased its staff to handle increased
volume-related activities and other business opportunities, and at March
31, 2008, employed 5,203 associates.
Advertising and promotion expenditures vary period-to-period in
response to investor interest and in the first quarter were up $4.7 million
from the 2007 quarter. Market conditions have caused the firm to reduce its
planned spending on advertising and promotion over the balance of 2008 such
that spending is now expected to be up about 5% in the second quarter from
the comparable 2007 quarter, and about 7% for the full year versus 2007.
The firm varies its level of spending based on market conditions and
investor demand as well as its efforts to expand the investor base in the
United States and abroad.
Other operating expenses in the first quarter were up $6.6 million over
the 2007 quarter. Consulting and professional fees, travel, information
services, and other costs have risen this year to meet increased business
demands.
The first quarter 2008 provision for income taxes as a percentage of
pretax income has been recognized at a rate of 38.0%, up from 37.7% for the
year 2007. The estimated effective tax rate will be about 38.2% for the
year 2008 reflecting changes in state income tax rates and regulations.
Management Commentary
James A.C. Kennedy, the company's Chief Executive Officer and
President, commented: "The firm's investment advisory results relative to
our peers remain strong, with 80% of the T. Rowe Price funds across their
share classes surpassing their comparable Lipper averages on a total return
basis for the three- and five-year periods ended March 31, 2008, 76%
surpassing their comparable Lipper averages for the 10-year period, and 68%
outperforming the average for the one-year period. In addition, 80 of the
T. Rowe Price stock and bond funds across their share classes, which
account for 72% of stock and bond fund assets under management, ended the
first quarter with an overall rating of four or five stars from
Morningstar. These four- and five-star rated investments represent 57.6% of
our rated funds and share classes, compared with 32.5% for the overall
industry.
"In spite of a very difficult market environment so far this year, we
continue to be encouraged by our solid investment management results and
the strong pace of net cash inflows across our multiple distribution
channels. While we have been tapping on the brakes of expenses, our strong
capital position enables us to continue to invest in our business for the
future and gives us substantial financial flexibility to weather the
inevitable ups and downs in the market and to fund appropriate business
opportunities.
"We expect to fund about $180 million of capital expenditures this year
and have already expended $294 million in 2008 to repurchase 5.9 million of
our common shares. These outlays, together with last year's capital
expenditures of $146 million and share repurchases of $320 million, were
all made from our available cash positions. We remain debt-free with
substantial liquidity, including cash and investment holdings of $1.4
billion.
"The start to 2008 in the financial markets has been anything but
upbeat," Mr. Kennedy said. "Global GDP has slowed, liquidity is scarce as
the financial system deleverages, most market participants throughout the
world are risk averse, and weak economic data suggest that the U.S. will be
hard-pressed to avoid a recession. Even with significant monetary and
fiscal stimulus in the U.S., domestic economic growth will likely remain
weak for some time as problems in the financial system are resolved and
consumer confidence is restored.
"Nevertheless, while the duration and magnitude of the global economic
slowdown is difficult to predict, and there are likely bumps left in the
road ahead, valuations among many high-quality companies have become more
attractive. Our portfolio managers and analysts are finding buying
opportunities for our clients' investment portfolios. By the end of the
year, many of the investment issues we worry about now on a daily basis are
likely to recede and investor sentiment should improve."
In closing, Mr. Kennedy said: "Despite the short-term market
uncertainties, the road ahead for T. Rowe Price continues to be promising.
We have outstanding associates who are focused on our clients, a very
healthy balance sheet, and globally diversified investment and distribution
expertise. We remain committed to investing in our business in both the
U.S. and overseas - to service and expand our diverse base of customers and
investment offerings - and are optimistic that these efforts and an
eventual market turnaround will positively affect our future revenues and
earnings."
Other Matters
The financial results presented in this release are unaudited. The
company expects that it will file its Form 10-Q Quarterly Report for the
first quarter of 2008 with the U.S. Securities and Exchange Commission
later today. The Form 10-Q will include more information on the company's
unaudited financial results.
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 March 31,
Revenues 2007 2008
Investment advisory fees $425.0 $470.1
Administrative fees 83.1 88.8
Investment income of savings bank subsidiary 1.5 1.5
Total revenues 509.6 560.4
Interest expense on savings bank deposits 1.2 1.3
Net revenues 508.4 559.1
Operating expenses
Compensation and related costs 184.2 207.4
Advertising and promotion 31.8 36.5
Depreciation and amortization of
property and equipment 13.7 15.0
Occupancy and facility costs 21.4 25.1
Other operating expenses 38.4 45.0
289.5 329.0
Net operating income 218.9 230.1
Non-operating investment income 11.8 14.3
Income before income taxes 230.7 244.4
Provision for income taxes 87.8 92.9
Net income $142.9 $151.5
Earnings per share
Basic $0.54 $0.58
Diluted $0.51 $0.55
Dividends declared per share $0.17 $0.24
Weighted average shares
Outstanding 265.4 261.7
Outstanding assuming dilution 279.8 273.5
Investment Advisory Revenues (in millions)
Three months ended
3/31/2007 3/31/2008
Sponsored mutual funds in the U.S.
Stock and blended asset $263.2 $282.4
Bond and money market 42.6 51.2
305.8 333.6
Other portfolios 119.2 136.5
Total investment advisory fees $425.0 $470.1
Assets Under Management (in billions)
Average during
the first quarter
2007 2008 12/31/ 3/31/
2007 2008
Sponsored mutual funds in the U.S.
Stock and blended asset $174.6 $184.7 $200.6 $182.8
Bond and money market 39.0 46.5 45.4 47.7
213.6 231.2 246.0 230.5
Other portfolios 130.0 147.7 154.0 148.1
$343.6 $378.9 $400.0 $378.6
Equity securities $321.6 $297.3
Debt securities 78.4 81.3
$400.0 $378.6
Condensed Consolidated Cash Flows Information (in millions)
Three months ended
3/31/2007 3/31/2008
Cash provided by operating activities $241.7 $258.6
Cash used in investing activities,
including ($29.9) for additions to
property and equipment in 2008 (60.8) (34.1)
Cash used in financing activities,
including common stock repurchases
of ($294.9) and dividends paid of
($126.1) in 2008 (42.8) (399.4)
Net change in cash during the period $138.1 $(174.9)
Condensed Consolidated Balance Sheet Information (in millions)
12/31/2007 3/31/2008
Cash and cash equivalents $785.1 $610.2
Investments in sponsored mutual
funds 773.0 725.1
Property and equipment 358.3 371.2
Goodwill and other intangible assets 668.8 668.6
Accounts receivable and other assets 592.1 574.3
Total assets 3,177.3 2,949.4
Total liabilities 400.2 371.1
Stockholders' equity, 259.6 common
shares outstanding in 2008,
including net unrealized holding
gains of $64.0 in 2008 $2,777.1 $2,578.3
SOURCE T. Rowe Price Group, Inc.
 back to top
Related links:
http://www.troweprice.com
CONTACT:
Brian Lewbart, +1-410-345-2242, Steve
Norwitz, +1-410-345-2124 and Robert Benjamin, +1-410-345-2205,
all of T. Rowe Price Group, Inc.
|
