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8-K - 8-K - PRICE T ROWE GROUP INC | w81369e8vk.htm |
Exhibit 99.1
T. ROWE PRICE GROUP REPORTS FOURTH QUARTER AND ANNUAL 2010 RESULTS
Assets Under Management up $90.7 Billion During Year to a Record $482.0 Billion
BALTIMORE (January 28, 2011) T. Rowe Price Group, Inc. (NASDAQ-GS: TROW) today reported its
fourth quarter 2010 results, including net revenues of $647.5 million, net income of $191.6
million, and diluted earnings per common share of $.72, an increase of 26% from the $.57 per share
in the comparable 2009 quarter. Net revenues were $542.6 million in the fourth quarter of 2009, and
net income was $152.5 million.
Assets under management increased $42.3 billion from $439.7 billion at September 30, 2010, to a
record $482.0 billion at December 31, 2010, including $282.6 billion in the T. Rowe Price mutual
funds distributed in the United States and $199.4 billion in other managed investment portfolios.
Net cash inflows in the fourth quarter 2010 totaled $6.9 billion, and market appreciation and
income added $35.4 billion to assets under management. As a result, investment advisory revenues
increased 21%, or nearly $99 million, from the comparable 2009 quarter.
Year-end assets under management increased nearly $91 billion, or 23%, from $391.3 billion at the
end of 2009. Net cash inflows from investors totaled $30.3 billion for 2010, and market
appreciation and income added $60.4 billion during the year. Year-end assets under management
increased nearly 21% from the previous year-end high of $400.0 billion at December 31, 2007.
Annual results for 2010 include net revenues of nearly $2.4 billion, net income of
$672.2 million, and diluted earnings per common share of $2.53, an increase of 53% from the $1.65
earned in 2009. In 2010, the firm recognized a $16.4 million pre-tax fourth-quarter charge related
to its contribution to certain sponsored money market funds to offset the cumulative losses
realized by those funds in past years. The firm also voluntarily waived $25.1 million of money
market advisory fees in 2010 to maintain a positive yield for fund investors and expects such fee
waivers to continue into 2011.
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Financial Highlights
Relative to the 2009 fourth quarter, investment advisory revenues earned from the T. Rowe Price
mutual funds distributed in the U.S. increased 20%, or $63.5 million, to $381.9 million in the
fourth quarter of 2010. Average mutual fund assets under management were $272.4 billion in the 2010
quarter, an increase of 21% from the average for the comparable 2009 quarter. Mutual fund assets at
December 31, 2010 were $282.6 billion, an increase of $23.9 billion from the end of September 2010,
and $49.9 billion from the end of 2009.
Net inflows to the sponsored mutual funds were $3.2 billion during the fourth quarter of 2010,
including $1.7 billion added to the stock and blended asset funds, $1.4 billion to the bond funds,
and $.1 billion to the money market funds. The New Income, Equity Income, International Bond, and
Dividend Growth Funds together added $1.9 billion in net inflows. Market appreciation and income
increased mutual fund assets under management by $20.7 billion during the fourth quarter of 2010.
Investment advisory revenues earned on the other investment portfolios that the firm manages
increased $35.3 million, or 25%, from the fourth quarter of 2009, to $178.6 million. Average assets
in these portfolios were $191.3 billion during the fourth quarter of 2010, an increase of
$39.4 billion, or 26%, from the 2009 quarter. Ending assets at December 31, 2010 were
$199.4 billion, an increase of $18.4 billion from the end of September 2010. Net inflows of
$3.7 billion, in the 2010 quarter were sourced primarily from institutional investors. Market
appreciation and income increased assets under management in these portfolios by $14.7 billion.
Investors domiciled outside the United States accounted for 12.5% of the firms assets under
management at December 31, 2010.
The target-date retirement investment portfolios continue to be a steady source of assets under
management. During the fourth quarter of 2010, net inflows of $1.3 billion originated in these
portfolios bringing the total net inflows to $7.5 billion for the year. Assets in the target-date
retirement portfolios were $59.4 billion at December 31, 2010, accounting for 12% of the firms
assets under management and nearly 20% of its mutual fund assets.
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Operating expenses were $364.7 million in the fourth quarter of 2010, up $51.9 million from the
2009 quarter. Compensation and related costs increased $21.4 million, or nearly 11%, from the
comparable 2009 quarter, due primarily to an increase in salaries, temporary employment costs and
the accrual for the firms annual variable compensation program. Salaries rose in the fourth
quarter of 2010 compared to the 2009 period, due to an increase of nearly 5.0% in the average
number of staff. At December 31, 2010, we employed 5,052 associates, up 5.2% from the 4,802
associates employed at the end of 2009.
Advertising and promotion expenditures were up $.9 million compared to the fourth quarter of 2009.
The firm currently expects that its advertising and promotion expenditures in 2011 could increase
about 15% from 2010 levels. The firm varies its level of spending based on market conditions and
investor demand as well as its efforts to expand its investor base in the United States and abroad.
Other operating expenses increased $26.6 million, or 59.2%, from the fourth quarter of 2009,
including the $16.4 million charge related to the one-time contribution made to certain money
market funds. As previously disclosed, the firm decided to make such a contribution to allay any
fund shareholder concerns that might arise as a result of new SEC disclosure rules. Consulting
fees, travel costs, other professional fees and other operating costs all rose from the fourth
quarter of 2009 to meet increasing business demands.
The 2010 annual provision for income taxes as a percentage of pretax income is 37.2%, down from the
previous full-year estimate of 38.0%. The difference is primarily due to nonrecurring benefits
recognized in the fourth quarter of 2010, related to the settlement of state tax positions and the
firms reorganization of its international entities to help realize additional operational
efficiencies. The firm currently estimates its effective rate for 2011 will be about 37.8%.
Management Commentary
James A.C. Kennedy, the companys chief executive officer and president, commented: Although it
was a volatile year, the dramatic and broad-based market recovery that started in 2009 continued
through 2010. Additionally, our strong investment performance continues to attract assets from
existing and new clients. As a result, our year-end assets under management
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hit a record level. Quarterly and annual average assets under management also hit new highs for a
reported period. Accordingly, our annual net revenues, net income, and earnings have recovered from
the recent financial crisis, surpassing their 2007 peaks.
Given our strong balance sheet and operating cash flow, our investment and service professionals
have not had to worry about the health of our firm during periods of market volatility, thus
remaining completely focused on our clients. Further, given our financial strength, we are able to
continue to invest in our capabilities through volatile market cycles.
The firms long-term investment advisory results relative to our peers remain very strong, with
86% of the T. Rowe Price funds across their share classes surpassing their comparable Lipper
averages on a total return basis for the three-year period ended December 31, 2010, 88%
outperforming for the five-year period, 84% outperforming for the 10-year period, and 74%
outperforming for the one-year period. In addition, T. Rowe Price stock, bond and blended asset
funds that ended the quarter with an overall rating of four or five stars from Morningstar account
for more than 70% of our rated funds assets under management.
In 2010 we increased our total number of investment professionals, including continuing to add to
our team of global research analysts, and broadened our fixed income capabilities. We expanded our
investment offerings for individual and institutional clients with the launch of several new equity
and fixed-income products. We also completed the purchase of a 26% stake in Indias UTI Asset
Management Company, and began collaborating and sharing best practices with their investment and
corporate management teams.
Reflecting our commitment to the controlled expansion of our distribution and related service
capabilities, we added to our sales and client service teams across our North American distribution
channels, as well as in our Europe and Asia-Pacific regions. We expanded our Hong Kong location to
serve as a future hub for our Asian regional and Greater China business, and opened an office in
Dubai.
Strengthening our ability to meet the needs of our clients, we rolled out a variety of new
services and products for individual investors, financial intermediaries, and plan sponsors,
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including an enhanced investor website and new mobile capabilities for account access. We also saw
further increases in the number of retirement plans and financial intermediaries offering the
Retirement Date Funds, as well as greater adoption of our growing suite of automated services
designed to improve retirement outcomes for plan participants. Supporting our long history of
educating investors, The Great Piggy Bank Adventure our family financial education collaboration
with Walt Disney Imagineering and Walt Disney Parks and Resorts Online continued to gain
traction in bringing core financial principles to life for children and adults.
We remain debt-free with substantial liquidity, including cash and mutual fund investment holdings
of more than $1.5 billion, Mr. Kennedy added. During 2010 we increased our dividend by 8%,
expended $240 million to repurchase nearly five million of our common shares, and invested $118
million in facilities and technology. These cash expenditures, as well as the $142 million
investment in UTI, were funded from our available liquid resources. The company is planning 2011
capital expenditures of about $120 million for property and equipment additions, which we expect to
fund internally.
Market Commentary
While 2010 was a volatile year in the worlds markets, the global economic recovery is well under
way with emerging economies continuing to have a positive impact on global growth. Although
earnings growth in the U.S. is expected to slow, and market volatility and the residual effects of
the financial crisis are likely to be with us for some time, the trends remain positive and equity
valuations seem reasonably attractive. Corporate fundamentals are generally strong, as is the
outlook for business capital spending. While returns in much of the bond market are likely to be
more subdued after back-to-back stellar years, equity market gains should extend into 2011.
Closing Comment
In closing, Mr. Kennedy said: Given the depth and breadth of our 5,000 associates, together with
the strength of our balance sheet, T. Rowe Price is very well positioned to continue to perform for
our clients and take advantage of attractive opportunities into the foreseeable future.
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Other Matters
The financial results presented in this release are unaudited. KPMG LLP is currently completing its
audits of the firms 2010 financial statements and internal controls over financial reporting at
December 31, 2010. The firm expects that KPMG will complete its work in early February and that it
will then file its Form 10-K Annual Report for 2010 with the U.S. Securities and Exchange
Commission. The Form 10-K will include additional information, including the firms audited
financial statements, managements report on internal controls over financial reporting at December
31, 2010, and the reports of KPMG.
Certain statements in this press release may represent forward-looking information, including
information relating to anticipated changes in revenues, net income and earnings per common share,
anticipated changes in the amount and composition of assets under management, anticipated expense
levels, estimated tax rates, and expectations regarding financial results, future transactions,
investments, capital expenditures, and other market conditions. For a discussion concerning risks
and other factors that could affect future results, see the firms 2010 Form 10-K report.
Founded in 1937, Baltimore-based T. Rowe Price (troweprice.com) 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 Prices disciplined, risk-aware investment approach focuses on
diversification, style consistency, and fundamental research.
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per-share amounts)
(in millions, except per-share amounts)
Three months ended | Year ended | |||||||||||||||
12/31/2009 | 12/31/2010 | 12/31/2009 | 12/31/2010 | |||||||||||||
Revenues |
||||||||||||||||
Investment advisory fees |
$ | 461.7 | $ | 560.5 | $ | 1,546.1 | $ | 2,026.8 | ||||||||
Administrative fees |
80.1 | 86.3 | 318.8 | 337.5 | ||||||||||||
Investment income of savings bank subsidiary |
1.8 | 1.5 | 7.0 | 6.4 | ||||||||||||
Total revenues |
543.6 | 648.3 | 1,871.9 | 2,370.7 | ||||||||||||
Interest expense on savings bank deposits |
1.0 | 0.8 | 4.5 | 3.5 | ||||||||||||
Net revenues |
542.6 | 647.5 | 1,867.4 | 2,367.2 | ||||||||||||
Operating expenses |
||||||||||||||||
Compensation and related costs |
202.0 | 223.4 | 773.4 | 860.4 | ||||||||||||
Advertising and promotion |
23.8 | 24.7 | 73.2 | 86.9 | ||||||||||||
Depreciation and amortization of property and equipment |
15.5 | 15.8 | 65.2 | 62.6 | ||||||||||||
Occupancy and facility costs |
26.6 | 29.3 | 102.4 | 109.1 | ||||||||||||
Other operating expenses |
44.9 | 71.5 | 151.6 | 211.7 | ||||||||||||
Total |
312.8 | 364.7 | 1,165.8 | 1,330.7 | ||||||||||||
Net operating income |
229.8 | 282.8 | 701.6 | 1,036.5 | ||||||||||||
Non-operating investment income (loss) |
10.2 | 15.4 | (12.7 | ) | 33.5 | |||||||||||
Income before income taxes |
240.0 | 298.2 | 688.9 | 1,070.0 | ||||||||||||
Provision for income taxes |
87.5 | 106.6 | 255.3 | 397.8 | ||||||||||||
Net income |
$ | 152.5 | $ | 191.6 | $ | 433.6 | $ | 672.2 | ||||||||
Earnings per share on common stock |
||||||||||||||||
Basic |
$ | 0.59 | $ | 0.74 | $ | 1.69 | $ | 2.60 | ||||||||
Diluted |
$ | 0.57 | $ | 0.72 | $ | 1.65 | $ | 2.53 | ||||||||
Net income allocated to common stockholders |
||||||||||||||||
Net income |
$ | 152.5 | $ | 191.6 | $ | 433.6 | $ | 672.2 | ||||||||
Net income allocated to outstanding restricted
stock and stock unit holders |
$ | (0.5 | ) | $ | (0.8 | ) | $ | (1.5 | ) | $ | (2.8 | ) | ||||
Net income allocated to common stockholders |
$ | 152.0 | $ | 190.8 | $ | 432.1 | $ | 669.4 | ||||||||
Weighted average common shares |
||||||||||||||||
Outstanding |
257.1 | 256.7 | 255.9 | 257.2 | ||||||||||||
Outstanding assuming dilution |
265.3 | 265.4 | 262.3 | 265.1 | ||||||||||||
Dividends declared per share |
$ | 0.25 | $ | 0.27 | $ | 1.00 | $ | 1.08 | ||||||||
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Three months ended | Year ended | |||||||||||||||
12/31/2009 | 12/31/2010 | 12/31/2009 | 12/31/2010 | |||||||||||||
Investment Advisory Revenues (in millions) |
||||||||||||||||
Sponsored mutual funds in the U.S. |
||||||||||||||||
Stock and blended asset |
$ | 255.8 | $ | 307.1 | $ | 843.7 | $ | 1,116.3 | ||||||||
Bond and money market |
62.6 | 74.8 | 224.6 | 278.0 | ||||||||||||
Total |
318.4 | 381.9 | 1,068.3 | 1,394.3 | ||||||||||||
Other portfolios |
143.3 | 178.6 | 477.8 | 632.5 | ||||||||||||
Total |
$ | 461.7 | $ | 560.5 | $ | 1,546.1 | $ | 2,026.8 | ||||||||
Average Assets Under Management (in billions) |
||||||||||||||||
Sponsored mutual funds in the U.S. |
||||||||||||||||
Stock and blended asset |
$ | 166.7 | $ | 202.0 | $ | 139.5 | $ | 184.7 | ||||||||
Bond and money market |
58.5 | 70.4 | 52.3 | 66.1 | ||||||||||||
Total |
225.2 | 272.4 | 191.8 | 250.8 | ||||||||||||
Other portfolios |
151.9 | 191.3 | 129.5 | 171.8 | ||||||||||||
Total |
$ | 377.1 | $ | 463.7 | $ | 321.3 | $ | 422.6 | ||||||||
12/31/2009 | 12/31/2010 | |||||||
Assets Under Management (in billions) |
||||||||
Sponsored mutual funds in the U.S. |
||||||||
Stock and blended asset |
$ | 172.7 | $ | 212.4 | ||||
Bond and money market |
60.0 | 70.2 | ||||||
Total |
232.7 | 282.6 | ||||||
Other portfolios |
158.6 | 199.4 | ||||||
Total |
$ | 391.3 | $ | 482.0 | ||||
Stock and blended asset portfolios |
$ | 290.4 | $ | 360.6 | ||||
Fixed income portfolios |
100.9 | 121.4 | ||||||
Total |
$ | 391.3 | $ | 482.0 | ||||
Year ended | ||||||||
12/31/2009 | 12/31/2010 | |||||||
Condensed Consolidated Cash Flows Information (in millions) |
||||||||
Cash provided by operating activities, including $89.5 of non-cash stock-based compensation
in 2010 |
$ | 535.6 | $ | 732.8 | ||||
Cash used in investing activities, including $(118.0) for additions to property and equipment
and $(142.4) for investment in UTI Asset Management Company Limited in 2010 |
(166.7 | ) | (276.9 | ) | ||||
Cash used in financing activities, including common stock repurchases of $(240.0)
and dividends paid of $(278.9) in 2010 |
(244.7 | ) | (386.1 | ) | ||||
Net change in cash during the period |
$ | 124.2 | $ | 69.8 | ||||
12/31/2009 | 12/31/2010 | |||||||
Condensed Consolidated Balance Sheet Information (in millions) |
||||||||
Cash and cash equivalents |
$ | 743.3 | $ | 813.1 | ||||
Investments in sponsored mutual funds |
677.5 | 747.9 | ||||||
Other investments |
45.7 | 209.7 | ||||||
Property and equipment |
512.8 | 560.3 | ||||||
Goodwill |
665.7 | 665.7 | ||||||
Accounts receivable, debt securities held by savings bank subsidiary and other assets |
565.3 | 645.3 | ||||||
Total assets |
3,210.3 | 3,642.0 | ||||||
Total liabilities |
328.1 | 345.5 | ||||||
Stockholders equity, 258.8 common shares outstanding in 2010, including net
unrealized holding gains of $135.5 in 2010 |
$ | 2,882.2 | $ | 3,296.5 | ||||
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