Assets Under Management Reach Nearly $245 Billion
BALTIMORE, July 27 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported record quarterly results for its second quarter
2005 that include net revenues of $363.5 million, net income of $102.7
million, and diluted earnings per share of $.76, an increase of almost 27%
from the $.60 per share reported for the second quarter of 2004 and a 7%
increase over the prior record of $.71 per share achieved in the fourth
quarter of 2004. Comparable net revenues in the second quarter of 2004 were
$309.7 million, and net income was $80.3 million.
Operating expenses for the 2005 quarter were up $26 million or 15% to $208
million. Net operating income was $155.5 million, up $27.5 million or 21.5%
compared to the 2004 period. Net non-operating income also increased to $5.4
million from $.5 million in the prior year's quarter.
Assets under management increased to a record $244.8 billion at June 30,
2005, up $9.6 billion from the end of 2004, and $8.9 billion from March 31,
2005.
For the first half of 2005, year-to-date results include net revenues of
$721 million, net income of $197 million and diluted earnings per share of
$1.45, an increase of 23% from the $1.18 per share reported for the first half
of 2004.
Financial Highlights
Investment advisory revenues were up nearly 19%, or $46.5 million versus
the 2004 quarter. Record average assets under management were $238.7 billion,
more than $36 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 $35 million. Mutual fund assets
ended June 2005 at $154.5 billion, up $6.2 billion during the 2005 quarter.
Investors added net inflows of $2.8 billion to the mutual funds during the
quarter while market appreciation and income added another $3.4 billion. Net
cash inflows were concentrated in the U.S. stock funds which accounted for 95%
of the net inflows. The Growth Stock, Capital Appreciation, and Equity Income
funds each added more than $500 million of net investor inflows and, together,
accounted for $1.9 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 strong asset growth with net inflows of more than
$750 million during the second quarter. Total assets in the Retirement Funds
reached $5.4 billion at June 30, 2005.
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 more than $81 million. Ending
assets in these portfolios were $90.3 billion, up $2.7 billion from March 31,
2005. Market value appreciation added nearly $2 billion to these portfolios
during the quarter and investors, primarily in US equities, made net
investments of $750 million.
Operating expenses in the 2005 quarter were $26 million more than in the
2004 quarter. Our largest expense, compensation and related costs, increased
$17 million from the second 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 increased its staff size by about 3% since the
beginning of 2005 and, at June 30, employed 4,261 associates across the globe.
Advertising and promotion expenditures were up $2.7 million versus the
2004 period. The firm varies its level of spending based on market conditions
and investor demand. For the third quarter of 2005, the firm expects that
these costs will decline about 15% from the second quarter of this year, while
expenditures for the full year 2005 will be about 15% higher than in 2004.
Net non-operating income in the 2005 quarter increased nearly $5 million
over the 2004 period. Larger cash and investment balances and higher interest
rates contributed $2.7 million of the increase with the remaining gain
primarily resulting from the disposition of a cost-basis equity investment.
The second quarter 2005 provision for income taxes as a percentage of
pretax income decreased from 36.8% in the first quarter to 36.2%. This lower
rate reflects the reversal of a valuation allowance for tax benefits arising
from a 2002 foreign net operating loss carryforward. The effective rate for
the year-to-date period was 36.5%, and the firm estimates that its effective
tax rate for the full year 2005 will rise to about 36.7%.
Chairman Commentary
George A. Roche, the company's chairman and president, commented: "The
firm's investment advisory results relative to our peers remain strong, with
81% of the T. Rowe Price funds across their share classes surpassing their
respective Lipper averages on a total return basis for the three-year period
ended June 30, 2005, and more than 72% outperforming the average for the one-,
five-, and 10-year periods. In addition, 60% of the firm's funds and their
share classes that are rated by Morningstar ended the quarter with an overall
rating of four or five stars. This compares with 32.5% for the overall
industry.
"While the financial markets overall had lackluster performance in the
first half of the year, we remain encouraged by continued strong net cash
inflows into our funds and the relative performance of our managed investment
portfolios. The broad diversification of our assets under management and our
distribution channels, along with strong investment management results,
underpins the company's solid performance.
"Our corporate earnings and cash flows remain very strong and give us
substantial financial flexibility," Mr. Roche added. "We have been able to
invest in our business and our people, and have repurchased 1.3 million shares
of our common stock this year. We remain debt free and have cash and net
liquid investments of $700 million at June 30, 2005.
"While we share the concerns of many investors about higher energy costs
and the potential for further increases in interest rates, our outlook for the
financial markets remains positive since we believe that equity valuations in
general are reasonable relative to the current level of interest rates and
inflation. We expect corporate earnings to slow from the rapid growth rate
experienced in recent years, but results should still be very favorable this
year. In addition, the economy remains on solid footing and inflation does
not appear to be threatening at this time. Overall, we feel the economic
environment should be supportive for investors. While we expect the Federal
Reserve to continue to raise the federal funds rate, we do not anticipate
substantial increases in longer term rates that would seriously undermine
stock and bond prices."
In closing, Mr. Roche said: "We believe the outlook for our company
remains strong as we continue to take steps to strengthen our competitive
position. We believe the combination of investment management excellence,
world-class service and guidance, and a diversified business model has
positioned us for good growth in the months and years ahead."
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 second quarter
of 2005 with the SEC later today. The Form 10-Q will include more complete
information on the company's recent 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 2 of the company's Form 10-
Q Report for the quarterly period ended March 31, 2005.
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 Six months ended
Revenues 6/30/2005 6/30/2004 6/30/2005 6/30/2004
Investment advisory fees $295,531 $249,002 $584,534 $494,011
Administrative fees and other
income 67,881 60,546 135,836 121,011
Investment income of savings
bank subsidiary 1,046 924 2,049 1,926
Total revenues 364,458 310,472 722,419 616,948
Interest expense on savings
bank deposits 912 800 1,802 1,625
Net revenues 363,546 309,672 720,617 615,323
Operating expenses
Compensation and related costs 130,123 113,084 257,265 222,864
Advertising and promotion 18,823 16,117 42,294 37,176
Depreciation and amortization
of property
and equipment 10,502 9,843 20,274 19,971
Occupancy and facility costs 18,166 16,525 36,485 32,183
Other operating expenses 30,411 26,089 61,497 52,254
208,025 181,658 417,815 364,448
Net operating income 155,521 128,014 302,802 250,875
Other investment income 5,522 939 7,577 2,092
Credit facility expenses 96 468 191 800
Net non-operating income 5,426 471 7,386 1,292
Income before income taxes 160,947 128,485 310,188 252,167
Provision for income taxes 58,198 48,221 113,142 94,564
Net income $102,749 $80,264 $197,046 $157,603
Earnings per share
Basic $0.79 $0.63 $1.52 $1.25
Diluted $0.76 $0.60 $1.45 $1.18
Dividends declared per share $0.23 $0.19 $0.46 $0.38
Weighted average shares
Outstanding 129,815 126,976 130,039 126,536
Assuming dilution 135,715 133,513 136,226 133,645
Three months ended Six months ended
6/30/2005 6/30/2004 6/30/2005 6/30/2004
Investment Advisory Revenues (in
thousands)
Sponsored mutual funds in the U.S.
Stock $179,148 $146,214 $352,647 $288,695
Bond and money market 34,987 32,694 69,680 65,721
214,135 178,908 422,327 354,416
Other portfolios 81,396 70,094 162,207 139,595
$295,531 $249,002 $584,534 $494,011
Average Assets Under Management
(in billions)
Sponsored mutual funds
Stock $118.2 $96.0 $116.7 $94.6
Bond and money market 31.9 29.4 31.7 29.5
Total 150.1 125.4 148.4 124.1
Other portfolios 88.6 76.6 88.3 75.7
$238.7 $202.0 $236.7 $199.8
6/30/2005 12/31/2004
Assets Under Management (in billions)
Sponsored mutual funds
Stock $122.3 $114.3
Bond and money market 32.2 31.2
Total 154.5 145.5
Other portfolios 90.3 89.7
$244.8 $235.2
Equity securities $184.6 $175.9
Debt securities 60.2 59.3
$244.8 $235.2
Condensed Consolidated Balance Sheet
Information (in thousands)
Cash and cash equivalents $624,034 $499,750
Accounts receivable 164,594 158,342
Investments in sponsored mutual funds 244,581 215,159
Debt securities held by savings bank
subsidiary 112,552 114,075
Property and equipment 208,283 203,807
Goodwill 665,692 665,692
Other assets 48,540 72,000
Total assets 2,068,276 1,928,825
Total liabilities, including savings
bank deposits of $99,142 in 2005 267,146 231,525
Stockholders' equity, 129,707,258
common shares outstanding in 2005,
including net unrealized holding
gains of $41,361 in 2005 $1,801,130 $1,697,300
Six months ended
6/30/2005 6/30/2004
Condensed Consolidated Cash Flows
Information (in thousands)
Cash provided by operating
activities $290,753 $210,852
Cash used in investing activities,
including $24,694 for
additions to property and
equipment in 2005 (52,966) (27,668)
Cash used in financing activities,
including $75,853 for repurchases
of common stock, dividends paid of
$59,752 and receipts of $23,387
from stock option exercises in 2005 (113,503) (24,475)
Net increase in cash during the
period $124,284 $158,709
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 Rajiv Vyas, +1-410-345-6559, all of
T. Rowe Price Group
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