Assets Under Management at March 31 Reach Record $349.9 Billion
BALTIMORE, April 25 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported its quarterly results for the first quarter
of 2007 that include net revenues of $508 million, net income of nearly
$143 million, and diluted earnings per share of $.51, an increase of 21%
from $.42 per share in the comparable 2006 quarter. Net revenues in the
first quarter of 2006 were $429 million, and net income was nearly $117
million.
Investment advisory revenues were up $71 million or 20% from the 2006
first quarter. Assets under management increased to a record $349.9 billion
at March 31, 2007, up 4.5% or $15.2 billion since the end of 2006. Net cash
inflows from investors were $9.6 billion during the first quarter of 2007.
Net market appreciation and income added $5.6 billion.
The company split its common shares two-for-one in June 2006, and data
for the first quarter of 2006 has been adjusted to reflect this split.
Financial Highlights
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased to $306 million for the first
quarter of 2007, up $47 million from the 2006 first quarter. Mutual fund
assets increased $12.3 billion across all distribution channels during the
first quarter of 2007 and ended the quarter at $218.8 billion. Investors
added net inflows of $8.4 billion to the mutual funds during the quarter
while market appreciation and income added $3.9 billion. Net cash inflows
were spread among the funds, with the U.S. stock and blended asset funds
adding nearly $5.7 billion, the bond and money market funds adding $1.7
billion and the international stock funds adding $1.0 billion. The Growth
Stock Fund added $2.3 billion of net investments 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, continue to be a significant source of mutual fund asset
growth. Net inflows of $2.8 billion originated in the Retirement Funds
during the first quarter of 2007, the largest quarterly amount since this
series of funds was launched in September 2002. Total fund assets in the
Retirement Funds were $20.5 billion at March 31, 2007.
Investment advisory revenues earned from 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, were $119 million in the 2007 quarter, an
increase of $24 million from the 2006 first quarter. Ending assets in these
portfolios were $131.1 billion, up $2.9 billion since the beginning of the
year. Market value appreciation added $1.7 billion and net cash inflows,
primarily from institutional investors in the U.S. and other countries,
were $1.2 billion during the first quarter. Investors outside the United
States now account for more than 7% of our assets under management.
Operating expenses were $289.5 million in the first quarter of 2007, up
$38.7 million from the 2006 first quarter. The largest expense,
compensation and related costs, increased $24.2 million or 15% over the
comparable 2006 quarter, primarily due to higher salary and bonus
compensation expense. The firm has increased its average staff size by
nearly 7% since the first quarter of 2006. At March 31, 2007, the firm
employed 4,765 associates, up 3.5% from the beginning of 2007, primarily to
handle increased volume-related activities and other growth.
Advertising and promotion expenditures increased $3.8 million in
response to investor interest. Advertising and promotion expenditures for
the second quarter and full year 2007 are expected to each be up about 10%
versus comparable 2006 spending.
Other operating expenses were up $6.3 million, including $1.9 million
of higher distribution expenses recognized on greater assets under
management sourced from financial intermediaries that distribute the
Advisor and R classes of mutual fund shares. These distribution costs are
offset by an equal increase in administrative revenues recognized from the
12b-1 fees.
Net non-operating income, which includes interest income as well as the
recognition of investment gains and losses, increased $4.2 million to $11.8
million, due primarily to larger money market mutual fund balances at
higher interest rates.
The first quarter 2007 provision for income taxes as a percentage of
pretax income has been recognized using an estimated 38.1% rate, down
slightly from 38.3% for the year 2006 when the provision included
additional amounts for the anticipated settlement of prior years' taxes. A
higher anticipated effective state income tax rate has pushed the current
estimate for the full year 2007 to 38.0%, up from the prior estimate of
37.7%.
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 at least 77% of the T. Rowe Price funds
across their share classes surpassing their comparable Lipper averages on a
total return basis for the one-, three-, and five-year periods ended March
31, 2007, and 71% outperforming the average for the 10-year period. In
addition, 77 of the T. Rowe Price stock and bond funds across their share
classes, which account for more than 73% 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 63% of our rated funds and share classes, compared with 32.5% for
the overall industry.
"Our strong first quarter performance was achieved during a period in
which fixed-income markets performed reasonably well while global equity
markets on an overall basis produced modest returns. A major mid-quarter
Asian market sell-off and subprime mortgage concerns in the U.S. led to
steep market declines from February highs. As they did last year, though,
global markets showed resilience, with the S&P 500, for example, reaching a
six-and-a-half-year high in April. Looking ahead, our outlook for the
financial markets remains positive; however, market volatility has
increased and corporate earnings growth in the U.S. will likely moderate as
we proceed through the year. We believe the global economy will continue to
expand, albeit at a slower pace from the rapid growth of recent years.
Prospects for relatively stable interest rates are favorable, and we
continue to be encouraged by strong corporate balance sheets and investor
liquidity. While valuations are not as supportive as they once were, they
still seem reasonable.
"T. Rowe Price's strong capital position gives us substantial financial
flexibility," Mr. Kennedy added. "As a result, we continue to invest in our
business and to position our firm for growth opportunities. Along with a
modest increase in the size of our staff, we are planning $145 million of
capital expenditures this year. Our directors increased our quarterly
corporate dividend by 21% to $.17 per share versus $.14 per share at this
time last year. We have also repurchased more than 683,000 common shares
for $32.3 million thus far in 2007. T. Rowe Price Group remains debt free
and we have cash and corporate investment holdings of $1.6 billion at March
31, 2007."
In closing, Mr. Kennedy said: "The outlook for our company remains
strong. We have an outstanding pool of employees who are focused on our
clients, a healthy balance sheet, a brand that is increasingly respected
around the globe, and a business model that is diversified across
distribution channels and investment portfolios. Despite the ebbs and flows
of the markets, we believe investors will continue to be well served over
the long term by our disciplined investment approach and culture."
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 2007 with the U.S. Securities and Exchange Commission
later today. The Form 10-Q will include more complete 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, 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 2006 2007
Investment advisory fees $353.9 $425.0
Administrative fees 75.2 83.1
Investment income of savings bank
subsidiary 1.2 1.5
Total revenues 430.3 509.6
Interest expense on savings bank
deposits 1.0 1.2
Net revenues 429.3 508.4
Operating expenses
Compensation and related costs 160.0 184.2
Advertising and promotion 28.0 31.8
Depreciation and amortization of
property and equipment 11.1 13.7
Occupancy and facility costs 19.6 21.4
Other operating expenses 32.1 38.4
250.8 289.5
Net operating income 178.5 218.9
Other investment income 7.7 11.8
Credit facility expenses 0.1 -
Net non-operating income 7.6 11.8
Income before income taxes 186.1 230.7
Provision for income taxes 69.4 87.8
Net income $116.7 $142.9
Earnings per share
Basic $0.44 $0.54
Diluted $0.42 $0.51
Dividends declared per share $0.14 $0.17
Weighted average shares outstanding 264.0 265.4
Weighted average shares outstanding
assuming dilution 277.9 279.8
Investment Advisory Revenues (in millions) Three months ended
03/31/2006 03/31/2007
Sponsored mutual funds in the U.S.
Stock and blended asset $222.9 $263.2
Bond and money market 36.2 42.6
259.1 305.8
Other portfolios 94.8 119.2
$353.9 $425.0
Assets Under Management Average during
(in billions) the first quarter
2006 2007 12/31/2006 03/31/2007
Sponsored mutual funds in the U.S.
Stock and blended asset $146.4 $174.6 $168.5 $178.6
Bond and money market 33.1 39.0 38.0 40.2
179.5 213.6 206.5 218.8
Other portfolios 102.5 130.0 128.2 131.1
$282.0 $343.6 $334.7 $349.9
Equity securities $267.0 $279.8
Debt securities 67.7 70.1
$334.7 $349.9
Condensed Consolidated Cash Flows Three months ended
Information (in millions) 03/31/2006 03/31/2007
Cash provided by operating activities $181.2 $241.7
Cash used in investing activities, including
($26.9) for additions to property and equipment
and ($29.5) for investments in sponsored mutual
funds in 2007 (49.8) (60.8)
Cash used in financing activities, including
common stock repurchases of ($23.2) and
dividends paid of ($45.1) in 2007 (1.7) (42.8)
Net increase in cash during the period $129.7 $138.1
Condensed Consolidated Balance Sheet
Information (in millions) 12/31/2006 03/31/2007
Cash and cash equivalents $773.0 $911.1
Investments in sponsored mutual funds 554.4 593.2
Property and equipment 264.9 278.6
Goodwill and other intangible assets 669.4 669.3
Receivables and other assets 503.6 505.2
Total assets 2,765.3 2,957.4
Total liabilities 338.4 408.6
Stockholders' equity, 265.6 common shares
outstanding in 2007, including net unrealized
holding gains of $75.5 in 2007 $2,426.9 $2,548.8
SOURCE T. Rowe Price Group, Inc.
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Related links:
http://www.troweprice.com/
CONTACT:
Steven Norwitz, +1-410-345-2124; or Brian
Lewbart, +1-410-345-2242; or Robert Benjamin, +1-410-345-2205,
all of T. Rowe Price Group, Inc.
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