BALTIMORE, July 27 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported 2004 second quarter net revenues of nearly $310
million, net income of $80.3 million, and diluted earnings per share of $.60,
surpassing the record diluted earnings per share of $.58 reported in the first
quarters of 2004 and 2000. Comparatively, the reported results versus the
second quarter of 2003 represent a 30% increase in net revenues from $237
million, a 49% increase in net income from nearly $54 million, and a 43%
increase in diluted earnings per share from $.42. Assets under management
increased to a record of $206.8 billion at June 30, 2004, up nearly 9% from
$190 billion at the end of 2003 and up more than 28% from $161 billion at
June 30, 2003.
For the first half of 2004, cumulative results include net revenues of
$615 million, net income of $157.6 million, and diluted earnings per share of
$1.18, all records for the first half of a year.
Financial Highlights
Investment advisory revenues were up 35% or $65.1 million in the second
quarter of 2004 versus the 2003 quarter. Increased assets under management
drove the change as average mutual fund assets under management exceeded $125
billion, $30 billion higher than the $95 billion average of the second quarter
of 2003. Average assets in other managed portfolios were $76.6 billion in the
second quarter of 2004, up nearly $19 billion versus the average of $57.7
billion in the 2003 quarter.
The $206.8 billion of assets under management at June 30, 2004 include
$128.3 billion in the T. Rowe Price mutual funds distributed in the United
States and $78.5 billion in other managed portfolios consisting of separately
managed accounts, sub-advised funds, sponsored mutual funds which are offered
to non-U.S. investors, and variable annuity portfolios. The $5.8 billion
increase in assets under management from $201 billion at March 31, 2004
included $4.2 billion of net investor inflows, with almost $1.9 billion added
to the mutual funds and $2.3 billion to other managed portfolios. Net market
appreciation and income added the remaining $1.6 billion to assets under
management during the quarter. When added to first quarter 2004, net cash
flows for the first half total $10.6 billion, with $6.6 billion into the
mutual funds and $4.0 billion into the other managed investment portfolios.
Mutual fund net inflows in the 2004 second quarter were concentrated in
the U.S. domestic stock mutual funds with 75% of the total going to the Mid-
Cap Value, Equity Income and Growth Stock funds, each rated either four or
five stars by Morningstar. Other managed U.S. portfolios benefited from cash
flows from new and existing institutional investors both in the U.S. and
overseas and from third-party distribution efforts in the U.S.
Operating expenses increased $29 million from the previous year's quarter
to more than $181.7 million. Increases in compensation and related employment
costs, in advertising and promotion costs, and in other operating expenses
were the primary reasons for the change. On a sequential basis, operating
expenses were down $1 million from the first quarter of 2004 as a $5 million
decrease in advertising and promotion was mostly offset by smaller increases
in compensation and occupancy costs. At June 30, 2004, the firm employed
4,000 associates, up almost 6% since the beginning of the year to accommodate
increased volumes across the firm. The firm expects its advertising and
promotion expenditures in the third quarter of 2004 will be up more than $3
million versus the comparable 2003 quarter while spending for all of 2004
could be up nearly 25% versus 2003. The firm continues to monitor financial
market conditions and will adjust its future advertising and promotion
spending accordingly.
Chairman Commentary
George A. Roche, the company's chairman and president, commented: "The
firm's investment results continue to be strong relative to our peers, with
more than 70% of the T. Rowe Price funds and their share classes surpassing
their Lipper averages on a total return basis for the one-, three-, five-, and
ten-year periods ended June 30, 2004. In addition, two-thirds of our rated
retail funds ended the quarter with an overall rating of four or five stars
from Morningstar.
"We continue to be encouraged by net cash inflows into our mutual funds
and managed accounts during the second quarter, which included steady inflows
from across our multiple distribution channels. In particular, our
institutional advisory efforts saw substantial growth, particularly outside
the U.S. where net inflows exceeded $1 billion. In the U.S., activity in our
institutional separate account business was buoyed by renewed interest in
large-cap investments, as well as growing interest in our structured research
strategy. In addition, our target-date Retirement Funds continue to grow and
are particularly popular among defined contribution plan participants."
In closing, Mr. Roche said: "The economy continues to show signs of
improvement, companies are reporting strong second quarter earnings, and
traditional valuation measures for equities are reasonable. Although concerns
about inflation, rising interest rates, global political risks, and higher oil
prices may be injecting more caution by investors currently, we believe the
outlook for the markets and our company remains favorable for the long term."
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.
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 2 of the company's Form 10-
Q Report for the period ended March 31, 2004. The Form 10-Q report for the
second quarter of 2004 will be filed this week with the U.S. Securities and
Exchange Commission and will include more complete information on the
company's interim financial results.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
Three months ended Six months ended
Revenues 6/30/2003 6/30/2004 6/30/2003 6/30/2004
Investment advisory fees $183,896 $249,002 $348,285 $494,011
Administrative fees and
other income 53,433 60,546 107,578 121,011
Investment income of
savings bank subsidiary 951 924 1,931 1,926
Total revenues 238,280 310,472 457,794 616,948
Interest expense on savings
bank deposits 818 800 1,614 1,625
Net revenues 237,462 309,672 456,180 615,323
Operating expenses
Compensation and related
costs 94,343 113,084 186,490 222,864
Advertising and promotion 12,392 16,117 28,737 37,176
Depreciation and
amortization of property
and equipment 11,705 9,843 23,556 19,971
Occupancy and facility
costs 14,985 16,525 31,506 32,183
Other operating expenses 19,221 26,089 36,631 52,254
152,646 181,658 306,920 364,448
Net operating income 84,816 128,014 149,260 250,875
Other investment income 1,848 939 203 2,092
Other interest and credit
facility expenses 480 468 980 800
Net non-operating income
(expense) 1,368 471 (777) 1,292
Income before income taxes 86,184 128,485 148,483 252,167
Provision for income taxes 32,409 48,221 55,934 94,564
Net income $53,775 $80,264 $92,549 $157,603
Earnings per share
Basic $0.44 $0.63 $0.76 $1.25
Diluted $0.42 $0.60 $0.73 $1.18
Dividends declared per share $0.17 $0.19 $0.34 $0.38
Weighted average shares
Outstanding 122,507 126,976 122,475 126,536
Assuming dilution 126,844 133,513 126,185 133,645
YTD 2004 Avg YTD 2003 Avg 6/30/2004 12/31/2003
Assets Under Management
(in billions)
Sponsored mutual funds
Stock $94.6 $63.3 $98.8 $88.4
Bond and money market 29.5 27.8 29.5 29.1
Total 124.1 91.1 128.3 117.5
Other portfolios 75.7 55.4 78.5 72.5
$199.8 $146.5 $206.8 $190.0
Equity securities $150.5 $135.5
Debt securities 56.3 54.5
$206.8 $190.0
Six months ended
6/30/2004 6/30/2003
Condensed Consolidated Cash Flows Information
(in thousands)
Cash provided by operating activities $210,852 $130,215
Cash used in investing activities, including
($21,589) for additions to property and equipment
in 2004 (27,668) (13,821)
Cash used in financing activities, including stock
options exercised of $28,362 and dividends paid
of ($47,721) in 2004 (24,475) (83,669)
Net increase in cash during the period $158,709 $32,725
6/30/2004 12/31/2003
Condensed Consolidated Balance Sheet Information
(in thousands)
Cash and cash equivalents $395,242 $236,533
Accounts receivable 135,960 121,295
Investments in sponsored mutual funds 179,213 162,283
Debt securities held by savings bank subsidiary 104,317 110,962
Property and equipment 202,475 201,094
Goodwill 665,692 665,692
Other assets 45,237 48,718
Total assets 1,728,136 1,546,577
Total liabilities, including savings bank
deposits of $91,160 in 2004 230,074 217,497
Stockholders' equity, 127,233,274 common shares
outstanding in 2004, including net unrealized
holding gains of $30,381 in 2004 $1,498,062 $1,329,080
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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