Record Assets Under Management Reach Nearly $236 Billion;
Reelection of Directors Expected at Annual Meeting Today
BALTIMORE, April 26 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported record first quarter 2005 net revenues of more
than $357 million, net income of $94 million, and diluted earnings per share
of $.69, an increase of 19% from the $.58 per share reported for the first
quarter of 2004. Comparable net revenues in the first quarter of 2004 were
nearly $306 million and net income was more than $77 million.
Operating expenses for the 2005 quarter were up $27 million or 15% to
nearly $210 million. Net operating income was $147 million, up more than $24
million or 20% compared to the 2004 period. Net non-operating income also
increased to about $2 million from $.8 million.
Assets under management increased to a record $235.9 billion at March 31,
2005, up $670 million from the previous high of $235.2 billion at the end of
2004, and up 17% from $201.0 billion at March 31, 2004.
Financial Highlights
Investment advisory revenues were up 18%, or $44 million versus the 2004
quarter. Record average assets under management were $234.7 billion, more
than $37 billion higher than the average of the 2004 quarter.
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased nearly $33 million. Mutual fund
assets ended March 2005 at $148.3 billion, up $2.8 billion from the beginning
of 2005. Net investor inflows added $5.5 billion to mutual fund assets during
the quarter, more than offsetting the effect of market value declines that
reduced mutual fund assets $2.7 billion during this past quarter. Net cash
inflows were concentrated in the U.S. stock funds, but were also positive in
the international stock, bond, and money market funds. The Growth Stock,
Capital Appreciation, Equity Income, and Mid-Cap Value funds each added more
than $500 million of net investor inflows and, together, accounted for nearly
$3.1 billion of the funds' net inflows. 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. These funds had net subscriptions
of nearly $1 billion during the first quarter and now total about $4.5
billion.
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 increased $11 million to nearly $81 million. Ending
assets in these portfolios were $87.6 billion, down $2.1 billion from the
beginning of 2005. Market value declines lowered these assets under
management $1.8 billion and investors made net withdrawals of $.3 billion from
these portfolios.
Operating expenses in the 2005 quarter were $27 million more than in the
2004 quarter. Our largest expense, compensation and related costs, increased
more than $17 million from the first quarter of 2004. The number of our
associates, their total compensation costs, and the costs of their employee
benefits have all increased. The firm has added about 400 associates since
the beginning of 2004, primarily to handle volume-related activities and
business growth. At March 31, 2005, we employed 4,185 associates across the
globe.
Advertising and promotion expenditures were up $2.4 million versus the
2004 period. These costs in the second quarter of 2005 will decline about 15%
to 20% from the first quarter of this year, while our expenditures for the
full year 2005 will be 10% to 15% higher than 2004. The firm varies its level
of spending based on market conditions and investor demand.
Other operating expenses increased nearly $5 million, including more than
$1 million that results from the decision to pay for all third party
investment research and related services directly and more that $1.3 million
for distribution costs of our Advisor and R classes of mutual fund shares that
are based on greater assets under management and are offset by administrative
revenues of the same amount.
Overall, net operating income for 2005 increased 20% to more than $147
million.
Chairman Commentary
George A. Roche, the company's chairman and president, commented: "The
firm's investment advisory results relative to our peers remain very strong,
with more than 82% 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 March 31, 2005 and more than 72% outperforming the
average for the five- and 10-year periods. In addition, 60% of our rated
retail funds ended the quarter with an overall rating of four or five stars
from Morningstar, compared with 32.5% for the overall industry.
"Although the year so far has been lackluster at best for the financial
markets, we continue to be encouraged by business across our distribution
channels and strong investment management results. Our corporate earnings and
cash flow remain very strong and give us substantial financial flexibility.
As a result we have been able to invest in our business and our people, and
repurchase 600,000 shares of our common stock. We also remain debt free and
have cash and net liquid investments of $650 million at March 31, 2005.
"Although the Federal Reserve is likely to continue raising short-term
interest rates, and investors remain concerned about high oil prices and
continued geopolitical risks, we believe the outlook for equities is modestly
positive for the remainder of 2005. The market has declined this year, stock
valuations are reasonable in many sectors, corporate earnings remain strong,
and there are substantial liquid assets held by individuals and institutions
that could be reallocated to equities."
In closing, Mr. Roche said: "We believe the outlook for our company
remains very strong. Our diversified business model and broad product lineup
is designed to compete well in a dynamic and ever-changing marketplace, and
our sound financial position gives us the flexibility to take advantage of
industry or market opportunities. The T. Rowe Price brand is increasingly
visible and respected in the marketplace, and we are well positioned for
growth in the months and years ahead."
Annual Meeting
During the Company's annual meeting, which is scheduled for 10 a.m. today
in Baltimore, stockholders are expected to reelect all 11 nominees to the
Board of Directors. Stockholders are also expected to ratify the reappointment
of KPMG LLP as the Company's independent accountant.
Other Matters
The financial results presented in this release are unaudited. The
company expects that it will file its Form 10-Q Report for the first quarter
of 2005 later today. The Form 10-Q will include more complete information on
the company's 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 "Forward-Looking Information" in Item 7 of the company's Form 10-
K Report for 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)
Three months ended March 31,
Revenues 2005 2004
Investment advisory fees $289,003 $245,009
Administrative fees and other
income 67,955 60,465
Investment income of savings bank
subsidiary 1,003 1,002
Total revenues 357,961 306,476
Interest expense on savings bank
deposits 890 825
Net revenues 357,071 305,651
Operating expenses
Compensation and related costs 127,142 109,780
Advertising and promotion 23,471 21,059
Depreciation and amortization of
property and equipment 9,772 10,128
Occupancy and facility costs 18,319 15,658
Other operating expenses 31,086 26,165
209,790 182,790
Net operating income 147,281 122,861
Other investment income 2,055 1,153
Credit facility expenses 95 332
Net non-operating income 1,960 821
Income before income taxes 149,241 123,682
Provision for income taxes 54,944 46,343
Net income $94,297 $77,339
Earnings per share
Basic $0.72 $0.61
Diluted $0.69 $0.58
Dividends declared per share $0.23 $0.19
Weighted average shares outstanding 130,266 126,096
Weighted average shares outstanding
assuming dilution 136,742 133,777
Investment Advisory Revenues (in thousands)
Three months ended
3/31/2004 3/31/2005
Sponsored mutual funds in the U.S.
Stock $142,481 $173,499
Bond and money market 33,027 34,693
175,508 208,192
Other portfolios 69,501 80,811
$245,009 $289,003
Assets Under Management (in billions)
Average during
the first quarter
2004 2005 12/31/2004 3/31/2005
Sponsored mutual funds in the U.S.
Stock $93.2 $115.2 $114.3 $116.7
Bond and money market 29.6 31.5 31.2 31.6
122.8 146.7 145.5 148.3
Other portfolios 74.7 88.0 89.7 87.6
$197.5 $234.7 $235.2 $235.9
Equity securities $176.0 $176.6
Debt securities 59.2 59.3
$235.2 $235.9
Condensed Consolidated Cash Flows
Information (in thousands) Three months ended
3/31/2004 3/31/2005
Cash provided by operating
activities $90,723 $149,481
Cash used in investing activities,
including ($13,738) for
additions to property and
equipment in 2005 (6,768) (20,673)
Cash used in financing activities,
including stock options exercised
of $18,200 and common shares
repurchased of ($36,704) in 2005 (13,569) (46,067)
Net increase in cash during the
period $70,386 $82,741
Condensed Consolidated Balance Sheet
Information (in thousands) 12/31/2004 3/31/2005
Cash and cash equivalents $499,750 $582,491
Accounts receivable 158,342 165,278
Investments in sponsored mutual funds 215,159 215,534
Debt securities held by savings bank
subsidiary 114,075 115,284
Property and equipment 203,807 207,677
Goodwill 665,692 665,692
Other assets 72,000 51,750
Total assets 1,928,825 2,003,706
Total liabilities, including savings
bank customer deposits of $102,664
in 2005 231,525 249,381
Stockholders' equity, 130,055,524
common shares outstanding in 2005,
including net unrealized holding
gains of $38,268 in 2005 $1,697,300 $1,754,325
SOURCE T. Rowe Price Group, Inc.
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Related links:
http://www.troweprice.com
CONTACT:
Steve Norwitz, +1-410-345-2124, or Brian
Lewbart, +1-410-345-2242, both of T. Rowe Price Group
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