BALTIMORE, July 25 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported its second quarter 2008 results, including
net revenues of nearly $587 million, net income of $162 million, and
diluted earnings per share of $.60, an increase of 3% from $.58 per share
in the comparable 2007 quarter. Net revenues were $551 million in the
second quarter of 2007 when net income was also $162 million. Weighted
average shares outstanding have decreased from the 2007 period due to the
ongoing common share repurchase program. Over the twelve month period ended
June 30, 2008, the firm has repurchased more than 4%, or 11.2 million, of
its outstanding common shares.
Investment advisory revenues were up almost 7%, or $31.2 million, from
the comparable 2007 quarter. Assets under management increased 2.4% from
March 31, 2008, to $387.7 billion at June 30, including $233.3 billion in
the T. Rowe Price mutual funds distributed in the United States and $154.4
billion in other managed investment portfolios. Net cash inflows from
investors in the second quarter of 2008 totaled $8.1 billion. Changes in
market valuations and portfolio income in the 2008 quarter added $1.0
billion to assets under management.
Results for the first half of 2008 include net revenues of more than
$1.1 billion, net income of nearly $314 million, and diluted earnings per
share of $1.15 - an increase of 5.5% from $1.09 per share in the 2007
period. Assets under management are down 3.1% from the beginning of 2008 as
cash inflows from investors of $17.8 billion have been more than offset by
market valuation declines of $30.1 billion during the period.
Financial Highlights
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased 4.0%, or $13.6 million, to
$349.5 million in the second quarter of 2008. Average mutual fund assets
were $242.6 billion in the 2008 quarter, an increase of 4.6% from the
average for the comparable 2007 quarter. Mutual fund assets at June 30,
2008 were up $2.8 billion or 1.2% from the end of March 2008, but down 5.2%
from the beginning of the year. Net inflows to the mutual funds were $2.4
billion during the second quarter of 2008. International and global stock
funds had net inflows of $1.2 billion, the U.S. stock funds added $.7
billion, and the bond and money funds added $.5 billion. The Emerging
Markets Stock Fund attracted $.6 billion of net inflows during the second
quarter of 2008. Income and changes in market valuations in the mutual
funds increased fund assets under management by $.4 billion during the 2008
quarter.
The target-date retirement investment portfolios, which provide
investors with single, diversified portfolios that invest in specific
underlying investment portfolios and automatically adjust asset allocations
as investors age, continue to be a significant source of assets under
management. During the 2008 quarter, net inflows of $2.3 billion originated
in target-date retirement portfolios, including net inflows of $1.1 billion
into the target- date funds after taking into account that $1.2 billion was
moved in June from the funds to target-date investments included in other
managed portfolios. Assets in target-date investment portfolios have grown
from $30.7 billion at March 31, 2008, to $32.9 billion at the end of June,
and now account for 8.5% of the firm's assets under management and 13.6% of
its mutual fund assets.
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 annuity insurance portfolios, were $145.8 million in
the 2008 quarter, an increase of $17.6 million from the comparable period
last year. These portfolio assets were up $6.3 billion or 4.3% from the end
of March 2008. Net inflows for the 2008 quarter were $5.7 billion from U.S.
and international institutional investors and third-party financial
intermediaries, including the $1.2 billion from the target-date Retirement
Funds. Income earned in these portfolios and changes in market valuations
increased assets under management by $.6 billion during the 2008 quarter.
Investors outside the United States now account for more than 10% of assets
under management.
Operating expenses were $328 million in the second quarter of 2008, up
$28 million from the 2007 quarter. The largest expense, compensation and
related costs, increased $21 million, or nearly 11%, 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 June 30, 2008, employed 5,308 associates.
Advertising and promotion expenditures vary period-to-period in
response to investor interest and in the second quarter were down $1.7
million from the 2007 quarter. Investor sentiment in this uncertain market
environment has caused the firm to reduce its planned spending on
advertising and promotion over the balance of 2008. Spending in the third
and fourth quarters of 2008 is now expected to be comparable to the second
and first quarters of 2008, respectively. 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.
The provision for income taxes as a percentage of pretax income for the
first six months of 2008 is 38.6%. The second quarter and six-month
provisions include $2.5 million for prior years' estimated interest and
taxes. The firm's estimated effective tax rate for the full-year 2008 has
been increased from 38.2% to 38.5% to reflect these charges.
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 76% 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 June
30, 2008, and 57% outperforming for the one-year period. In addition, 81 of
the T. Rowe Price stock, bond and blended asset funds across their share
classes, which account for more than 62% of our rated funds' assets under
management, ended the quarter with an overall rating of four or five stars
from Morningstar. These four- and five-star-rated investments represent
57.0% of our rated funds and share classes, compared with 32.5% for the
overall industry.
"Our second quarter performance was achieved during a tough market
environment in which major U.S. stock indexes experienced marked
volatility. Investor sentiment deteriorated amid sluggish economic growth,
rising food and commodity prices, and the continuing fallout from the
housing downturn and credit crunch. While the start of the third quarter
saw further financial market declines, by mid-July lower oil prices and
improving investor sentiment had produced some rebound in equity
valuations.
"Looking ahead, the credit crisis, deleveraging financial institutions,
and inflationary pressures continue to be a brake on the economic recovery.
However, for the long-term, market turbulence such as we've seen this year
often creates attractive buying opportunities.
"In spite of a very unsettled financial environment, we remain
encouraged by our solid investment management results and the pace of net
cash inflows across our distribution channels. Our strong capital position
gives us the financial flexibility to weather turbulent markets and the
ability to continue to invest for the future.
"Our expected capital expenditures for 2008 will be comparable to 2007
spending at approximately $150 million. We have expended $425 million so
far this year to repurchase 8.2 million of our common shares, compared to
share repurchases totaling $320 million for all of 2007. These expenditures
are being funded from our available cash positions. We remain debt-free
with substantial liquidity, including cash and investment holdings of $1.5
billion."
In closing, Mr. Kennedy said: "We are proud of our associates for
staying focused on our clients during these turbulent times. We believe our
globally diversified investment and distribution expertise, and our
long-term investment perspective serve our clients and fund shareholders
quite well. The outlook for T. Rowe Price remains very strong."
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
second 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 Six months ended
Revenues 6/30/2007 6/30/2008 6/30/2007 6/30/2008
Investment advisory fees $464.1 $495.3 $889.1 $965.4
Administrative fees 86.7 90.9 169.8 179.7
Investment income of savings bank
subsidiary 1.5 1.5 3.0 3.0
Total revenues 552.3 587.7 1,061.9 1,148.1
Interest expense on savings bank
deposits 1.2 1.2 2.4 2.5
Net revenues 551.1 586.5 1,059.5 1,145.6
Operating expenses
Compensation and related costs 197.0 218.0 381.2 425.4
Advertising and promotion 21.9 20.2 53.7 56.7
Depreciation and amortization of
property and equipment 14.0 15.6 27.7 30.6
Occupancy and facility costs 22.7 24.9 44.1 50.0
Other operating expenses 44.4 49.2 82.8 94.2
300.0 327.9 589.5 656.9
Net operating income 251.1 258.6 470.0 488.7
Net non-operating investment income 11.7 7.8 23.5 22.1
Income before income taxes 262.8 266.4 493.5 510.8
Provision for income taxes 100.6 104.2 188.4 197.1
Net income 162.2 162.2 305.1 313.7
Earnings per share
Basic $.61 $.62 $1.15 $1.20
Diluted $.58 $.60 $1.09 $1.15
Dividends declared per share $.17 $.24 $.34 $.48
Weighted average shares
Outstanding 265.4 259.6 265.5 260.7
Outstanding assuming dilution 280.0 272.4 280.0 273.0
Three months ended Six months ended
6/30/2007 6/30/2008 6/30/2007 6/30/2008
Investment Advisory Revenues
(in millions)
Sponsored mutual funds in the U.S.
Stock and blended asset $290.6 $296.8 $553.7 $579.2
Bond and money market 45.3 52.7 88.0 103.9
335.9 349.5 641.7 683.1
Other portfolios 128.2 145.8 247.4 282.3
Total investment advisory fees $464.1 $495.3 $889.1 $965.4
Average Assets Under Management
(in billions)
Sponsored mutual funds in the U.S.
Stock and blended asset $191.1 $194.4 $182.9 $189.5
Bond and money market 40.9 48.2 40.0 47.4
232.0 242.6 222.9 236.9
Other portfolios 138.9 157.4 134.4 152.6
$370.9 $400.0 $357.3 $389.5
12/31/2007 6/30/2008
Assets Under Management (in billions)
Sponsored mutual funds in the U.S.
Stock and blended asset $200.6 $185.0
Bond and money market 45.4 48.3
246.0 233.3
Other portfolios 154.0 154.4
$400.0 $387.7
Equity securities $321.6 $305.6
Debt securities 78.4 82.1
$400.0 $387.7
Six months ended
6/30/2007 6/30/2008
Condensed Consolidated Cash Flows
Information (in millions)
Cash provided by operating activities $421.8 $453.2
Cash used in investing activities,
including ($53.5) for additions to
property and equipment in 2008 (142.0) (43.2)
Cash used in financing activities,
including common stock repurchases
of ($369.7) and dividends paid of
($188.4) in 2008 (157.6) (513.9)
Net change in cash during the period $122.2 $(103.9)
Condensed Consolidated Balance Sheet
Information (in millions) 12/31/2007 6/30/2008
Cash and cash equivalents $785.1 $681.2
Investments in sponsored mutual funds 773.0 730.5
Property and equipment 358.3 382.7
Goodwill and other intangible assets 668.8 668.5
Accounts receivable and other assets 592.1 586.9
Total assets 3,177.3 3,049.8
Total liabilities 400.2 397.6
Stockholders' equity, 259.7 common
shares outstanding in 2008,
including net unrealized holding
gains of $64.5 in 2008 $2,777.1 $2,652.2
SOURCE T. Rowe Price Group, Inc.
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Related links:
http://www.troweprice.com
CONTACT:
Brian Lewbart, +1-410-345-2242, Edward
Giltenan, +1-410-345-3437, or Robert Benjamin, +1-410-345-2205
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