BALTIMORE, July 23, 2015
/PRNewswire/ -- T. Rowe Price Group, Inc. (NASDAQ-GS: TROW)
today reported its second quarter of 2015 results, including net
revenues of $1.1 billion, net income
of $333.2 million, and diluted
earnings per common share of $1.24.
On a comparable basis, net revenues were $984.3 million, net income was $305.8 million, and diluted earnings per common
share was $1.13 in the second quarter
of 2014.
Financial
Highlights
|
|
|
Three months
ended
|
|
|
|
Six months
ended
|
|
Percentage
Change
|
(in millions,
exception per-share data)
|
6/30/2014
|
|
6/30/2015
|
|
Percentage
Change
|
|
6/30/2014
|
|
6/30/2015
|
|
Investment advisory
fees
|
$
|
855.3
|
|
|
$
|
942.2
|
|
|
10
|
%
|
|
$
|
1,681.7
|
|
|
$
|
1,838.7
|
|
|
9
|
%
|
Net
revenues
|
$
|
984.3
|
|
|
$
|
1,072.4
|
|
|
9
|
%
|
|
$
|
1,938.9
|
|
|
$
|
2,099.4
|
|
|
8
|
%
|
Operating
expenses
|
$
|
511.2
|
|
|
$
|
564.6
|
|
|
10
|
%
|
|
$
|
1,016.7
|
|
|
$
|
1,113.8
|
|
|
10
|
%
|
Net operating
income
|
$
|
473.1
|
|
|
$
|
507.8
|
|
|
7
|
%
|
|
$
|
922.2
|
|
|
$
|
985.6
|
|
|
7
|
%
|
Net non-operating
investment income
|
$
|
26.1
|
|
|
$
|
33.0
|
|
|
26
|
%
|
|
$
|
68.2
|
|
|
$
|
59.8
|
|
|
(12)
|
%
|
Net income
|
$
|
305.8
|
|
|
$
|
333.2
|
|
|
9
|
%
|
|
$
|
610.1
|
|
|
$
|
642.7
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
1.13
|
|
|
$
|
1.24
|
|
|
10
|
%
|
|
$
|
2.25
|
|
|
$
|
2.39
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under
management (in billions)
|
$
|
717.2
|
|
|
$
|
783.6
|
|
|
9
|
%
|
|
$
|
709.2
|
|
|
$
|
771.4
|
|
|
9
|
%
|
Assets under management at June 30,
2015 were $773.0 billion, an
increase of $.3 billion from
March 31, 2015 and $26.2 billion from the end of 2014.
|
Three months ended
6/30/2015
|
|
Six months ended
6/30/2015
|
(in
billions)
|
Sponsored U.S. mutual
funds
|
|
Other investment
portfolios
|
|
Total
|
|
Sponsored U.S. mutual
funds
|
|
Other investment
portfolios
|
|
Total
|
Assets under
management
at beginning of
period
|
$
|
497.2
|
|
|
$
|
275.5
|
|
|
$
|
772.7
|
|
|
$
|
477.6
|
|
|
$
|
269.2
|
|
|
$
|
746.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows before
client transfers
|
2.5
|
|
|
(4.6)
|
|
|
(2.1)
|
|
|
8.7
|
|
|
(8.9)
|
|
|
(.2)
|
|
Client transfers from
mutual funds to other portfolios
|
(1.1)
|
|
|
1.1
|
|
|
—
|
|
|
(3.9)
|
|
|
3.9
|
|
|
—
|
|
Net cash flows after
client transfers
|
1.4
|
|
|
(3.5)
|
|
|
(2.1)
|
|
|
4.8
|
|
|
(5.0)
|
|
|
(.2)
|
|
Net market
appreciation and income
|
1.5
|
|
|
.9
|
|
|
2.4
|
|
|
17.7
|
|
|
8.7
|
|
|
26.4
|
|
Change during the
period
|
2.9
|
|
|
(2.6)
|
|
|
.3
|
|
|
22.5
|
|
|
3.7
|
|
|
26.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under
management
at June 30,
2015
|
$
|
500.1
|
|
|
$
|
272.9
|
|
|
$
|
773.0
|
|
|
$
|
500.1
|
|
|
$
|
272.9
|
|
|
$
|
773.0
|
|
For the three-month period ended June 30, 2015, the net
cash inflows after client transfers into the mutual funds of
$1.4 billion include net inflows of
$1.5 billion into the fixed income
funds and $.4 billion into the stock
and blended asset funds. These net inflows were offset by net
outflows from money market funds of $.5
billion. The net cash outflows during the second quarter of
2015 from the other investment portfolios were largely concentrated
among a small number of institutional and subadvised clients who
redeemed primarily from large-cap U.S. equity strategies. The
firm's overall net cash flows for the second quarter of 2015
include $5.2 billion that originated
in the firm's target-date retirement strategies, which totaled
$166.5 billion in assets under
management at June 30, 2015. These target-date assets
contribute to the nearly $213 billion
of assets under management in the firm's asset allocation
portfolios.
T. Rowe Price remains debt-free with ample liquidity, including
cash and sponsored portfolio investment holdings of nearly
$3.1 billion at June 30, 2015.
During the second quarter of 2015, the firm expended $271 million to repurchase 3.4 million shares.
For the first half of 2015, the firm has expended $385 million to repurchase 4.8 million shares, or
nearly 2%, of its outstanding common stock, and invested
$80 million in capitalized technology
and facilities. Capital expenditures for the full year 2015 are
expected to be approximately $175
million.
Investment Performance
For the three-year period ended
June 30, 2015, 76% of the T. Rowe Price mutual funds across
their share classes outperformed their comparable Lipper averages
on a total return basis, 80% outperformed for the five-year period,
86% outperformed for the 10-year period, and 78% outperformed 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 82% of the
assets under management in the firm's rated funds. The performance
of the firm's institutional strategies against their benchmarks was
substantially similar. The firm's target-date retirement funds
continue to deliver very attractive long-term performance, with
100% of these funds outperforming their comparable Lipper averages
on a total return basis for the three- and five-year periods ended
June 30, 2015.
Financial Results
Investment advisory revenues earned
in the second quarter of 2015 from the T. Rowe Price mutual funds
distributed in the U.S. were $683.0
million, an increase of $69.6
million, or 11%, from the comparable 2014 quarter. Average
mutual fund assets under management in the second quarter of 2015
were $506.2 billion, an increase of
11% from the average in the second quarter of 2014.
Investment advisory revenues earned in the second quarter of
2015 from the other investment portfolios were $259.2 million, an increase of $17.3 million, or 7%, from the comparable 2014
quarter. Average assets under management in the second quarter of
2015 were $277.4 billion, an increase
of 6% from the average in the second quarter of 2014. Investors
domiciled outside the United
States accounted for about 5% of the firm's assets under
management at June 30, 2015.
Money market advisory fees and other fund expenses voluntarily
waived by the firm to maintain positive yields for investors in the
second quarter of 2015 were $12.5
million, compared with $15.0
million in the 2014 quarter. The firm expects that it will
continue to waive such fees for the remainder of the year.
Operating expenses were $564.6
million in the second quarter of 2015, up $53.4 million from the comparable 2014 quarter.
Compensation and related costs have increased $34.5 million from the second quarter of 2014,
due primarily to higher salaries, benefits, and related employee
costs from modest base salary increases at the beginning of the
year and added headcount; an increase in the interim accrual for
year-end bonus compensation; and higher stock-based compensation.
The firm has increased its average staff size by 4.0% from the
second quarter of 2014. At June 30, 2015, the firm employed
5,991 associates.
Advertising and promotion costs were $14.2 million in the second quarter of 2015,
compared with $14.6 million in the
comparable 2014 period. The firm currently expects advertising and
promotion costs for the full-year 2015 to increase about 5% from
2014 levels.
Occupancy and facility costs, together with depreciation and
amortization expense, were $72.1
million in the second quarter of 2015, up $8.1 million compared to the second quarter of
2014. The increase is primarily attributable to the added costs to
update and enhance technology capabilities, including related
maintenance programs.
Other operating expenses in the second quarter of 2015 were up
$8.0 million from the comparable 2014
quarter, as increased business demands and the firm's continued
investment in its operating capabilities have increased costs.
These higher costs in the second quarter of 2015 include costs
related to the firm's defined contribution recordkeeping business,
information and other third-party service costs, travel costs, and
other general and administrative costs.
Net non-operating investment income in the second quarter of
2015 increased $6.9 million from the
2014 quarter. The firm realized gains of $22.7 million from the sale of certain of its
sponsored fund investments in the second quarter of 2015 compared
with $11.7 million of realized gains
in the 2014 quarter. The proceeds from the sale of the fund
investments in 2015 were used to provide new or additional seed
capital to other sponsored funds in support of the firm's global
distribution efforts. The increase in realized gains in the 2015
quarter was offset in part by smaller net investment gains
recognized on the firm's other investment portfolios and lower
dividends earned on its sponsored investment portfolios.
The firm's effective tax rate for the second quarter of 2015 is
38.4%, which reflects certain adjustments made in the quarter to
the 2014 tax accruals. The firm currently estimates that its
effective rate for the full-year 2015 will be about 38.7%.
Management Commentary
James A.
C. Kennedy, the company's chief executive officer and
president, commented: "U.S. economic growth picked up in the second
quarter, as evidenced by increased consumer spending and exports,
solid jobs improvement, and income growth. While oil prices ticked
up from their first-quarter lows, they remain subdued and should
continue to provide a tailwind for consumers and global economies.
Corporate earnings also rose modestly. The Fed once again deferred
its first rate hike since 2006, though improving economic data
suggest the central bank could begin raising short-term interest
rates later this year. We believe the pace of those rate hikes will
be gradual.
"The overseas economic picture was mixed. Europe's growth outlook improved and deflation
fears abated, but fallout from the Greek debt crisis and the
political turmoil it has created on the Continent could hinder the
broad recovery. Japanese growth likewise improved, although
structural reforms have been slow to materialize. Weakening Chinese
economic growth and the sharp downturn in Chinese asset prices
since mid-June clearly bear close watching, as they could have
broader economic and political ramifications.
"Against this backdrop, major U.S. stock indexes reached new
highs during the quarter, before retreating by the end of June.
U.S. bond returns were mostly negative, but high yield issues had a
modestly positive return. The broad MSCI indexes measuring equities
in developed non-U.S. markets and emerging markets rose less than
1% in U.S. dollar terms. Global government bonds fell slightly, and
bond returns in emerging markets varied as U.S. currency strength
moderated and countries pursued divergent monetary policies.
"Global market volatility has increased and is likely to remain
higher for the near term. Given the significant appreciation of
many asset classes over the last six years, we believe investors
should continue to temper their performance expectations. U.S.
equity valuations are mostly full and earnings growth could be
harder to achieve as the economic expansion matures. With global
bond yields at or near historically low levels, we expect modest
fixed income returns going forward.
"Our investment performance for our clients generally remains
very strong, especially in our asset allocation portfolios. Our
financial strength allows us to continue to invest in developing
our talent, broadening our capabilities, and gaining efficiencies.
We are confident that these investments will enable us to maintain
competitive investment performance, further broaden our
distribution reach, and meet changing client needs."
Other Matters
The financial results presented in this
release are unaudited. The firm expects that it will file its Form
10-Q Quarterly Report for the second quarter of 2015 with the U.S.
Securities and Exchange Commission later today. The Form 10-Q will
include additional information on the firm's unaudited financial
results at June 30, 2015.
Certain statements in this earnings 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, dividends, stock repurchases,
and other market conditions. For a discussion concerning risks and
other factors that could affect future results, see the firm's 2014
Form 10-K.
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
Price's disciplined, risk-aware investment approach focuses on
diversification, style consistency, and fundamental research.
Unaudited
Condensed Consolidated Statements of Income
|
|
|
|
|
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
Revenues
|
|
6/30/2014
|
|
6/30/2015
|
|
6/30/2014
|
|
6/30/2015
|
|
Investment advisory
fees
|
|
$
|
855.3
|
|
|
$
|
942.2
|
|
|
$
|
1,681.7
|
|
|
$
|
1,838.7
|
|
|
Administrative
fees
|
|
93.6
|
|
|
91.6
|
|
|
188.1
|
|
|
184.6
|
|
|
Distribution and
servicing fees
|
|
35.4
|
|
|
38.6
|
|
|
69.1
|
|
|
76.1
|
|
|
Net
revenues
|
|
984.3
|
|
|
1,072.4
|
|
|
1,938.9
|
|
|
2,099.4
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Compensation and
related costs
|
|
326.4
|
|
|
360.9
|
|
|
645.3
|
|
|
707.4
|
|
|
Advertising and
promotion
|
|
14.6
|
|
|
14.2
|
|
|
37.2
|
|
|
39.5
|
|
|
Distribution and
servicing costs
|
|
35.4
|
|
|
38.6
|
|
|
69.1
|
|
|
76.1
|
|
|
Depreciation and
amortization of property and equipment
|
|
28.0
|
|
|
32.2
|
|
|
55.1
|
|
|
61.3
|
|
|
Occupancy and
facility costs
|
|
36.0
|
|
|
39.9
|
|
|
71.4
|
|
|
78.2
|
|
|
Other operating
expenses
|
|
70.8
|
|
|
78.8
|
|
|
138.6
|
|
|
151.3
|
|
|
Total operating
expenses
|
|
511.2
|
|
|
564.6
|
|
|
1,016.7
|
|
|
1,113.8
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
income
|
|
473.1
|
|
|
507.8
|
|
|
922.2
|
|
|
985.6
|
|
Non-operating
investment income
|
|
26.1
|
|
|
33.0
|
|
|
68.2
|
|
|
59.8
|
|
Income before income
taxes
|
|
499.2
|
|
|
540.8
|
|
|
990.4
|
|
|
1,045.4
|
|
Provision for income
taxes
|
|
193.4
|
|
|
207.6
|
|
|
380.3
|
|
|
402.7
|
|
Net income
|
|
$
|
305.8
|
|
|
$
|
333.2
|
|
|
$
|
610.1
|
|
|
$
|
642.7
|
|
|
|
|
|
|
|
|
|
|
|
Net income
allocated to common stockholders
|
|
Three months
ended
|
|
Six months
ended
|
|
|
6/30/2014
|
|
6/30/2015
|
|
6/30/2014
|
|
6/30/2015
|
|
Net income
|
|
$
|
305.8
|
|
|
$
|
333.2
|
|
|
$
|
610.1
|
|
|
$
|
642.7
|
|
|
Less: net income
allocated to outstanding restricted stock and stock unit
holders
|
|
(3.4)
|
|
|
(4.1)
|
|
|
(6.7)
|
|
|
(9.8)
|
|
|
Net income allocated
to common stockholders
|
|
$
|
302.4
|
|
|
$
|
329.1
|
|
|
$
|
603.4
|
|
|
$
|
632.9
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
on common stock
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.16
|
|
|
$
|
1.28
|
|
|
$
|
2.32
|
|
|
$
|
2.45
|
|
|
Diluted
|
|
$
|
1.13
|
|
|
$
|
1.24
|
|
|
$
|
2.25
|
|
|
$
|
2.39
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
260.7
|
|
|
257.7
|
|
|
260.5
|
|
|
258.2
|
|
|
Outstanding assuming
dilution
|
|
268.7
|
|
|
264.6
|
|
|
268.7
|
|
|
265.1
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share, including a $2.00 per share special cash
dividend declared and paid in first half of 2015
|
|
$
|
.44
|
|
|
$
|
.52
|
|
|
$
|
.88
|
|
|
$
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
Investment
Advisory Revenues (in millions)
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2014
|
|
6/30/2015
|
|
6/30/2014
|
|
6/30/2015
|
Sponsored U.S. mutual
funds
|
|
|
|
|
|
|
|
Stock and blended
asset
|
$
|
514.7
|
|
|
$
|
575.5
|
|
|
$
|
1,012.0
|
|
|
$
|
1,118.7
|
|
Bond and money
market
|
98.7
|
|
|
107.5
|
|
|
192.2
|
|
|
210.2
|
|
|
613.4
|
|
|
683.0
|
|
|
1,204.2
|
|
|
1,328.9
|
|
Other investment
portfolios
|
|
|
|
|
|
|
|
Stock and blended
asset
|
202.4
|
|
|
220.0
|
|
|
399.3
|
|
|
433.0
|
|
Bond, money market,
and stable value
|
39.5
|
|
|
39.2
|
|
|
78.2
|
|
|
76.8
|
|
|
241.9
|
|
|
259.2
|
|
|
477.5
|
|
|
509.8
|
|
Total
|
$
|
855.3
|
|
|
$
|
942.2
|
|
|
$
|
1,681.7
|
|
|
$
|
1,838.7
|
|
|
|
|
|
|
|
|
|
Average Assets
Under Management (in billions)
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2014
|
|
6/30/2015
|
|
6/30/2014
|
|
6/30/2015
|
Sponsored U.S. mutual
funds
|
|
|
|
|
|
|
|
Stock and blended
asset
|
$
|
355.0
|
|
|
$
|
398.9
|
|
|
$
|
350.6
|
|
|
$
|
390.2
|
|
Bond and money
market
|
100.9
|
|
|
107.3
|
|
|
98.7
|
|
|
106.5
|
|
|
455.9
|
|
|
506.2
|
|
|
449.3
|
|
|
496.7
|
|
Other investment
portfolios
|
|
|
|
|
|
|
|
Stock and blended
asset
|
198.6
|
|
|
214.2
|
|
|
197.5
|
|
|
211.9
|
|
Bond, money market,
and stable value
|
62.7
|
|
|
63.2
|
|
|
62.4
|
|
|
62.8
|
|
|
261.3
|
|
|
277.4
|
|
|
259.9
|
|
|
274.7
|
|
Total
|
$
|
717.2
|
|
|
$
|
783.6
|
|
|
$
|
709.2
|
|
|
$
|
771.4
|
|
|
|
|
|
|
|
|
|
Ending Assets
Under Management (in billions)
|
|
|
|
|
As of
|
|
|
|
|
|
12/31/2014
|
|
6/30/2015
|
Sponsored U.S. mutual
funds
|
|
|
|
|
|
|
|
Stock and blended
asset
|
|
|
|
|
$
|
373.0
|
|
|
$
|
392.9
|
|
Bond and money
market
|
|
|
|
|
104.6
|
|
|
107.2
|
|
|
|
|
|
|
477.6
|
|
|
500.1
|
|
Other investment
portfolios
|
|
|
|
|
|
|
|
Stock and blended
asset
|
|
|
|
|
206.9
|
|
|
210.0
|
|
Bond, money market,
and stable value
|
|
|
|
|
62.3
|
|
|
62.9
|
|
|
|
|
|
|
269.2
|
|
|
272.9
|
|
Total
|
|
|
|
|
$
|
746.8
|
|
|
$
|
773.0
|
|
|
|
|
|
|
|
|
|
Stock and blended
asset portfolios
|
|
|
|
|
$
|
579.9
|
|
|
$
|
602.9
|
|
Fixed income
portfolios
|
|
|
|
|
166.9
|
|
|
170.1
|
|
Total
|
|
|
|
|
$
|
746.8
|
|
|
$
|
773.0
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Cash Flows Information (in millions)
|
|
Six months
ended
|
|
|
6/30/2014
|
|
6/30/2015
|
Cash provided by
operating activities, including $66.6 of stock-based compensation
expense in 2015
|
|
$
|
725.6
|
|
|
$
|
886.7
|
|
Cash used in
investing activities, including ($79.9) for additions to property
and equipment and $49.2 in net proceeds from sponsored fund
dispositions in 2015
|
|
(187.8)
|
|
|
(33.9)
|
|
Cash used in
financing activities, including common stock repurchases of
($353.8) and dividends paid of ($794.5) in 2015
|
|
(231.5)
|
|
|
(1,089.7)
|
|
Net change in cash
during the period
|
|
$
|
306.3
|
|
|
$
|
(236.9)
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheet Information (in millions)
|
|
As of
|
|
|
12/31/2014
|
|
6/30/2015
|
Cash and cash
equivalents
|
|
$
|
1,506.1
|
|
|
$
|
1,269.2
|
|
Accounts receivable
and accrued revenue
|
|
442.8
|
|
|
449.4
|
|
Investments in
sponsored funds
|
|
1,884.0
|
|
|
1,856.7
|
|
Other
investments
|
|
408.3
|
|
|
414.4
|
|
Property and
equipment, net
|
|
586.4
|
|
|
607.3
|
|
Goodwill
|
|
665.7
|
|
|
665.7
|
|
Other
assets
|
151.1
|
|
|
152.8
|
|
Total
assets
|
|
5,644.4
|
|
|
5,415.5
|
|
Total
liabilities
|
|
249.2
|
|
|
448.4
|
|
Stockholders' equity,
257.4 common shares outstanding at June 30, 2015, includes net
unrealized holding gains of $157.5 at June 30, 2015
|
|
$
|
5,395.2
|
|
|
$
|
4,967.1
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/t-rowe-price-group-reports-second-quarter-2015-results-300117711.html
SOURCE T. Rowe Price Group, Inc.