Assets Under Management Up 5% During the Quarter to Nearly $258 Billion
BALTIMORE, Oct. 26 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc.
(Nasdaq: TROW) today reported record quarterly results for its third quarter
2005 that include net revenues of $388.7 million, net income of
$116.3 million, and diluted earnings per share of $.85, an increase of 37%
from the $.62 per share reported for the third quarter of 2004, and a 12%
increase over the prior record of $.76 per share achieved in the second
quarter of this year. Comparable net revenues in the third quarter of 2004
were $316.2 million, and net income was $82.5 million.
Investment advisory revenues were up nearly 26%, or about $65 million more
than the 2004 quarter. Assets under management increased to a record
$257.6 billion at September 30, 2005, up $22.4 billion from the end of 2004,
and $12.8 billion from June 30, 2005. Record average assets under management
were $254.1 billion for the quarter, more than $49 billion higher than the
average of the 2004 quarter.
Operating expenses for the 2005 quarter were up $24 million or 13% to
$209 million. Net operating income was $180 million, up $49 million or 37%
compared to the 2004 period. Net non-operating income increased $3 million in
the 2005 quarter.
For the first nine months of 2005, results include net revenues of
$1.1 billion, net income of $313 million and diluted earnings per share of
$2.30, an increase of 28% from the $1.80 per share reported for the comparable
2004 period.
Financial Highlights
Investment advisory revenues earned from the T. Rowe Price mutual funds
distributed in the United States increased almost $53 million. Mutual fund
assets ended September 2005 at $165.3 billion, up $10.8 billion during the
2005 quarter. Investors added net inflows of $3.5 billion to the mutual funds
during the quarter while market appreciation and income added $7.3 billion.
Net cash inflows were spread among the funds, with the U.S. stock funds adding
$2.3 billion, the international stock funds adding $.7 billion and the bond
and money market funds adding $.5 billion. The Growth Stock and Capital
Appreciation funds together added nearly $1.1 billion of the net inflows,
while the New Income, Value, and Equity Income funds each added more than
$250 million. Cash inflows during the third quarter of 2005 also included
nearly $400 million resulting from the merger of the TD Waterhouse Index Funds
into four of the T. Rowe Price index funds. 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,
continue to be responsible for a significant part of our asset growth with net
inflows of more than $800 million during the third quarter. Total assets in
the Retirement Funds reached $6.4 billion at September 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 nearly $13 million to more than $85 million.
Ending assets in these portfolios were $92.3 billion, up $2.0 billion from
June 30, 2005. Market value appreciation added more than $3.3 billion to
these portfolios during the quarter while investors made net withdrawals of
$1.3 billion.
Operating expenses in the 2005 quarter were nearly $24 million more than
in the 2004 quarter. Our largest expense, compensation and related costs,
increased $14 million from the third 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
7% since July 1, 2004 and, at September 30, 2005, employed 4,278 associates
across the globe.
Advertising and promotion expenditures were up $2.4 million versus the
2004 period. The firm varies its level of spending based on market conditions
and investor demand. For the fourth quarter of 2005, the firm expects that
these costs will increase about $13 million from the third quarter of this
year.
Net non-operating income in the 2005 quarter increased nearly $3 million
over the 2004 period as a result of larger cash balances and higher interest
rates.
The third quarter 2005 provision for income taxes as a percentage of
pretax income was 36.9%, basically unchanged from the 36.8% rate for the year
2004. The firm estimates that its effective tax rate for the full year 2005
will decrease to 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
at least 78% of the T. Rowe Price funds across their share classes surpassing
their respective Lipper averages on a total return basis for the three- and
five-year periods ended September 30, 2005, and more than 67% outperforming
the average for the one- and 10-year periods. In addition, 58.5% 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.
"We continue to be encouraged by the 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. In addition, our corporate earnings and cash
flows remain very strong and give us substantial financial flexibility.
"Solid performance over the quarter was achieved against a backdrop of two
devastating hurricanes, sharp increases in energy prices, and higher
short-term interest rates. The risk of higher inflation and a further
tightening of monetary policy by the Federal Reserve could make the market
environment more challenging in the months ahead. We are encouraged, however,
that corporations are generally in good financial shape and profitability is
robust. Longer-term prospects for the economy, corporate earnings, and the
stock market remain favorable, and we believe investors will continue to be
well-served by our investment approach. The outlook for our company remains
strong and we believe the combination of investment management excellence,
world-class service and guidance, and a diversified business model has us
well-positioned for the future."
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 third 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.
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 Nine months ended
Revenues 9/30/2005 9/30/2004 9/30/2005 9/30/2004
Investment advisory fees $319,967 $254,689 $904,501 $748,700
Administrative fees and other
income 68,561 61,403 204,397 182,414
Investment income of savings
bank subsidiary 1,077 944 3,126 2,870
Total revenues 389,605 317,036 1,112,024 933,984
Interest expense on savings
bank deposits 902 808 2,704 2,433
Net revenues 388,703 316,228 1,109,320 931,551
Operating expenses
Compensation and related costs 132,011 117,955 389,276 340,819
Advertising and promotion 15,394 12,952 57,688 50,128
Depreciation and amortization
of property and equipment 10,795 10,083 31,069 30,054
Occupancy and facility costs 18,646 16,968 55,131 49,151
Other operating expenses 32,005 27,356 93,502 79,610
208,851 185,314 626,666 549,762
Net operating income 179,852 130,914 482,654 381,789
Other investment income 4,464 1,519 12,041 3,611
Credit facility expenses 95 93 286 893
Net non-operating income 4,369 1,426 11,755 2,718
Income before income taxes 184,221 132,340 494,409 384,507
Provision for income taxes 67,886 49,815 181,028 144,379
Net income $116,335 $82,525 $313,381 $240,128
Earnings per share
Basic $0.89 $0.65 $2.41 $1.89
Diluted $0.85 $0.62 $2.30 $1.80
Dividends declared per share $0.23 $0.19 $0.69 $0.57
Weighted average shares
Outstanding 130,006 127,429 130,028 126,836
Assuming dilution 136,432 133,305 136,295 133,531
Three months ended Nine months ended
9/30/2005 9/30/2004 9/30/2005 9/30/2004
Investment Advisory Revenues
(in thousands)
Sponsored mutual funds in the
U.S.
Stock $198,379 $148,295 $551,026 $436,990
Bond and money market 36,246 33,609 105,926 99,330
234,625 181,904 656,952 536,320
Other portfolios 85,342 72,785 247,549 212,380
$319,967 $254,689 $904,501 $748,700
Average Assets Under Management
(in billions)
Sponsored mutual funds
Stock $129.0 $96.1 $120.9 $95.0
Bond and money market 32.6 30.0 32.0 29.7
Total 161.6 126.1 152.9 124.7
Other portfolios 92.5 78.4 89.7 76.6
$254.1 $204.5 $242.6 $201.3
9/30/2005 12/30/2004
Assets Under Management (in
billions)
Sponsored mutual funds
Stock $132.5 $114.3
Bond and money market 32.8 31.2
Total 165.3 145.5
Other portfolios 92.3 89.7
$257.6 $235.2
Equity securities $197.0 $176.0
Debt securities 60.6 59.2
$257.6 $235.2
Condensed Consolidated Balance
Sheet Information (in thousands)
Cash and cash equivalents $772,374 $499,750
Accounts receivable 167,481 158,342
Investments in sponsored mutual funds 255,041 215,159
Debt securities held by savings
bank subsidiary 113,117 114,075
Property and equipment 210,791 203,807
Goodwill 665,692 665,692
Other assets 53,104 72,000
Total assets 2,237,600 1,928,825
Total liabilities, including savings bank
deposits of $100,447 in 2005 326,944 231,525
Stockholders' equity, 130,303,494 common shares
outstanding in 2005, including net unrealized
holding gains of $48,252 in 2005 $1,910,656 $1,697,300
Nine months ended
9/30/2005 9/30/2004
Condensed Consolidated Cash
Flows Information (in thousands)
Cash provided by operating activities $475,960 $343,598
Cash used in investing activities, including
$38,383 for additions to property and equipment
and $28,586 for mutual fund and other
investments in 2005 (66,764) (45,632)
Cash used in financing activities, including
repurchases of common stock for $75,853,
dividends paid of $89,577, and stock option
exercise receipts of $28,838 in 2005 (136,572) (44,438)
Net increase in cash during the period $272,624 $253,528
SOURCE T. Rowe Price Group, Inc.
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Related links:
http://www.troweprice.com
CONTACT:
Brian Lewbart, +1-410-345-2242, or Steve
Norwitz, +1-410-345-2124, or Rajiv Vyas, +1-410-345-6559, all of
T. Rowe Price Group
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