BALTIMORE, July 25, 2017
/PRNewswire/ -- T. Rowe Price Group, Inc. (NASDAQ-GS: TROW)
today reported its second quarter of 2017 results, including net
revenues of $1.2 billion, net income
of $373.9 million, and diluted
earnings per common share of $1.50.
On a comparable basis, net revenues were $1.0 billion, net income was $203.3 million, and diluted earnings per common
share was $.79 in the second quarter
of 2016. The 2016 results included the nonrecurring operating
charge of $166.2 million related to
the Dell appraisal rights matter, which reduced net income by
$100.7 million, or $.39 in diluted earnings per common share. A
summary of the impact the matter has had on the firm's periodic
financial results is summarized in a table at the back of this
release. Adjusted diluted earnings per share for the second quarter
of 2017 is up 15.3% compared to the 2016 quarter.
Financial Highlights
The table below presents financial results on a U.S. GAAP basis
as well as a non-GAAP basis that adjusts for the impact of the Dell
appraisal rights matter, the firm's consolidated sponsored
investment portfolios, and other non-operating income. The firm
believes the non-GAAP financial measures below provide relevant and
meaningful information to investors about its core operating
results.
|
Three months
ended
|
|
Six months
ended
|
(in millions, except
per-share data)
|
6/30/2016
|
(1)
|
6/30/2017
|
|
%
change
|
|
6/30/2016
|
(1)
|
6/30/2017
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
Basis
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory
fees
|
$
|
920.6
|
|
|
$
|
1,043.9
|
|
|
13.4
|
%
|
|
$
|
1,791.4
|
|
|
$
|
2,035.0
|
|
|
13.6
|
%
|
Net
revenues
|
$
|
1,044.7
|
|
|
$
|
1,171.6
|
|
|
12.1
|
%
|
|
$
|
2,038.8
|
|
|
$
|
2,285.2
|
|
|
12.1
|
%
|
Operating
expenses
|
$
|
761.2
|
|
|
$
|
664.0
|
|
|
(12.8)%
|
|
|
$
|
1,344.4
|
|
|
$
|
1,255.9
|
|
|
(6.6)%
|
|
Net operating
income
|
$
|
283.5
|
|
|
$
|
507.6
|
|
|
79.0
|
%
|
|
$
|
694.4
|
|
|
$
|
1,029.3
|
|
|
48.2
|
%
|
Non-operating
income
|
$
|
41.5
|
|
|
$
|
112.0
|
|
|
169.9
|
%
|
|
$
|
126.6
|
|
|
$
|
227.0
|
|
|
79.3
|
%
|
Net income
attributable to T. Rowe Price Group
|
$
|
203.3
|
|
|
$
|
373.9
|
|
|
83.9
|
%
|
|
$
|
507.4
|
|
|
$
|
759.8
|
|
|
49.7
|
%
|
Diluted earnings per
common share
|
$
|
.79
|
|
|
$
|
1.50
|
|
|
89.9
|
%
|
|
$
|
1.97
|
|
|
$
|
3.04
|
|
|
54.3
|
%
|
Weighted average
common shares outstanding
assuming dilution
|
252.6
|
|
|
243.0
|
|
|
(3.8)%
|
|
|
252.2
|
|
|
244.2
|
|
|
(3.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted(2)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
$
|
593.3
|
|
(3)
|
$
|
662.3
|
|
(3)
|
11.6
|
%
|
|
$
|
1,175.2
|
|
(5)
|
$
|
1,302.4
|
|
(5)
|
10.8
|
%
|
Net income
attributable to T. Rowe Price Group
|
$
|
285.6
|
|
(4)
|
$
|
317.9
|
|
(4)
|
11.3
|
%
|
|
$
|
545.7
|
|
(6)
|
$
|
615.1
|
|
(6)
|
12.7
|
%
|
Diluted earnings per
common share
|
$
|
1.11
|
|
|
$
|
1.28
|
|
|
15.3
|
%
|
|
$
|
2.12
|
|
|
$
|
2.46
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under
Management (in billions)
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under
management
|
$
|
772.7
|
|
|
$
|
885.9
|
|
|
14.6
|
%
|
|
$
|
750.4
|
|
|
$
|
865.6
|
|
|
15.4
|
%
|
Ending assets under
management
|
$
|
776.6
|
|
|
$
|
903.6
|
|
|
16.4
|
%
|
|
$
|
776.6
|
|
|
$
|
903.6
|
|
|
16.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Prior year amounts have been
adjusted to reflect the impact of implementing new stock-based
compensation accounting guidance in the third quarter of
2016.
|
(2) See
the reconciliation to the comparable U.S. GAAP measures at the end
of this earnings release.
|
Assets Under Management
Assets under management increased $42.0
billion in the second quarter of 2017 to $903.6 billion at June 30, 2017. The firm's
net cash inflows were $3.7 billion in
the second quarter of 2017. There were $7.6
billion of client transfers from the mutual funds to other
portfolios. The components of the change in assets under management
are shown in the table below.
|
Three months ended
6/30/2017
|
|
Six months ended
6/30/2017
|
(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
|
$
|
548.3
|
|
|
$
|
313.3
|
|
|
$
|
861.6
|
|
|
$
|
514.2
|
|
|
$
|
296.6
|
|
|
$
|
810.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows before
client transfers
|
1.9
|
|
|
1.8
|
|
|
3.7
|
|
|
4.4
|
|
|
—
|
|
|
4.4
|
|
Client transfers from
mutual funds
to other portfolios
|
(7.6)
|
|
|
7.6
|
|
|
—
|
|
|
(7.9)
|
|
|
7.9
|
|
|
—
|
|
Net cash flows after
client transfers
|
(5.7)
|
|
|
9.4
|
|
|
3.7
|
|
|
(3.5)
|
|
|
7.9
|
|
|
4.4
|
|
Net market
appreciation and
income, net of distributions not
reinvested
|
23.9
|
|
|
14.4
|
|
|
38.3
|
|
|
55.8
|
|
|
32.6
|
|
|
88.4
|
|
Change during the
period
|
18.2
|
|
|
23.8
|
|
|
42.0
|
|
|
52.3
|
|
|
40.5
|
|
|
92.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under
management at June 30, 2017
|
$
|
566.5
|
|
|
$
|
337.1
|
|
|
$
|
903.6
|
|
|
$
|
566.5
|
|
|
$
|
337.1
|
|
|
$
|
903.6
|
|
The firm's net cash flows were in the following asset
classes:
|
|
|
|
(in
billions)
|
Three months
ended 6/30/2017
|
|
Six months
ended 6/30/2017
|
|
|
|
|
Stock and
blended asset
|
$
|
(1.4)
|
|
$
|
(5.3)
|
Bond, money
market, and stable value
|
5.1
|
|
9.7
|
Total net cash
flows
|
3.7
|
|
4.4
|
Net cash flows into the firm's target date retirement portfolios
were $3.1 billion in the second
quarter of 2017 and $5.4 billion in
the first half of 2017.
The firm's assets under management by asset class and in the
firm's retirement date portfolios are as follows:
|
|
As of
|
(in
billions)
|
|
12/31/2016
|
|
3/31/2017
|
|
6/30/2017
|
Equity
|
|
$
|
450.6
|
|
|
$
|
482.9
|
|
|
$
|
508.9
|
|
Fixed
income
|
|
121.2
|
|
|
123.5
|
|
|
125.4
|
|
Asset
allocation
|
|
239.0
|
|
|
255.2
|
|
|
269.3
|
|
Total assets under
management
|
|
$
|
810.8
|
|
|
$
|
861.6
|
|
|
$
|
903.6
|
|
|
|
|
|
|
|
|
Target date
retirement portfolios
|
|
$
|
189.2
|
|
|
$
|
202.6
|
|
|
$
|
213.8
|
|
Investors domiciled outside the United
States accounted for about 5% of the firm's assets under
management at December 31, 2016, and June 30, 2017.
Capital Management
T. Rowe Price remains debt-free with ample liquidity, including
cash and sponsored portfolio investment holdings as follows:
(in
millions)
|
|
12/31/2016
|
|
6/30/2017
|
Cash and cash
equivalents
|
|
$
|
1,204.9
|
|
|
$
|
1,542.2
|
|
Discretionary
investments in sponsored investment portfolios
|
|
700.6
|
|
|
678.7
|
|
Total discretionary
investments
|
|
1,905.5
|
|
|
2,220.9
|
|
Redeemable seed
capital investments in sponsored investment portfolios
|
|
1,263.8
|
|
|
1,169.1
|
|
Investments in
sponsored investment portfolios to hedge supplemental savings plan
liability
|
|
—
|
|
|
172.3
|
|
Total cash and
sponsored investment holdings
|
|
$
|
3,169.3
|
|
|
$
|
3,562.3
|
|
The firm's common shares outstanding decreased since the end of
2016 as it expended $447.0 million
during the first half of 2017 to repurchase 6.5 million shares, or
2.6%, of its outstanding common shares, including $130.7 million to repurchase 1.9 million shares
during the second quarter of 2017. The firm invested $82.6 million during the first half of 2017 in
capitalized facilities and technology and expects capital
expenditures for 2017 to be up to $200
million, of which about two-thirds is planned for technology
initiatives. These expenditures are expected to continue to be
funded from operating resources.
Investment Performance
The percentage of T. Rowe Price mutual funds (across share
classes) that outperformed their comparable Lipper averages on a
total return basis and that are in the top Lipper quartile for the
one-, three-, five-, and 10-years ended June 30, 2017,
were:
|
|
1 year
|
|
3 years
|
|
5 years
|
|
10 years
|
Outperformed Lipper
averages
|
|
|
|
|
|
|
|
|
All funds
|
|
68%
|
|
81%
|
|
83%
|
|
85%
|
Asset allocation funds
|
|
90%
|
|
96%
|
|
95%
|
|
93%
|
|
|
|
|
|
|
|
|
|
Top Lipper
quartile
|
|
|
|
|
|
|
|
|
All funds
|
|
44%
|
|
56%
|
|
58%
|
|
61%
|
Asset allocation funds
|
|
66%
|
|
67%
|
|
84%
|
|
79%
|
In addition, 88% of the rated Price Funds' assets under
management ended the quarter with an overall rating of four or five
stars from Morningstar. The performance of the firm's institutional
strategies against their benchmarks remains very competitive
especially over longer time periods.
Financial Results
Investment advisory revenues earned in the current quarter from
the T. Rowe Price mutual funds distributed in the U.S. were
$754.3 million, an increase of 12.7%
from the comparable 2016 quarter. Average U.S. mutual fund assets
under management increased 13.8% to $560.2
billion.
Investment advisory revenues earned in the current quarter from
other investment portfolios were $289.6
million, an increase of 15.1% from the comparable 2016
quarter. Average assets under management for these portfolios
increased 16.1% to $325.7
billion.
The firm has reduced the management fees of certain of its
mutual funds and other investment portfolios since mid-2016. These
reductions were a factor in why investment advisory revenue grew
slower than average assets under management during 2017. The firm
regularly assesses the competitiveness of its fees and will
continue to make adjustments as deemed appropriate.
Operating expenses were $664.0
million in the current quarter. Excluding the $166.2 million charge related to the Dell matter
recognized in the second quarter of 2016, operating expenses have
increased 11.6% from the 2016 quarter. The firm currently expects
that its operating expenses, excluding the impact of the Dell
matter, will grow about 10% in 2017 versus 2016. The firm could
elect to modify the pace of spending on its planned initiatives
should markets rise or decline significantly.
Compensation and related costs were $403.8 million in the current quarter, an
increase of 8.8% over the second quarter of 2016, due primarily to
additional headcount, an increase in the interim accrual of the
annual bonus, and higher benefits. Benefits expenses rose primarily
due to increased market valuations on its supplemental savings plan
liability, which resulted in additional compensation expense. These
increases were offset in part by higher labor capitalization
related to internally developed software as the firm continues to
invest in its technology capabilities. Average staff size increased
by 6.8% from the second quarter of 2016, and the firm employed
6,651 associates at June 30, 2017.
Advertising and promotion costs were $18.6 million in the current quarter, compared
with $14.9 million in the 2016
quarter. The firm currently expects advertising and promotion costs
for 2017 to grow up to 10% over 2016 as the firm executes on a
number of strategic initiatives.
Occupancy and facility costs, together with depreciation
expense, were $83.1 million in the
current quarter, an increase of 11.4% compared to the second
quarter of 2016. The increase is due primarily to higher facility
costs as well as the added costs to update and enhance technology
capabilities, including related maintenance programs.
Other operating expenses were $122.1
million in the current quarter, an increase of 23.5% from
the comparable 2016 quarter, as operational and regulatory business
demands continue to grow.
Net non-operating income was $112.0
million in the current quarter, an increase of $70.5 million from the second quarter of 2016.
The components and variances are included in the table below:
|
|
Three months
ended
|
|
|
|
|
6/30/2016
|
|
6/30/2017
|
|
$ change
|
|
|
|
|
|
|
|
Net realized gains on
dispositions of sponsored fund investments
|
|
$
|
—
|
|
|
$
|
30.3
|
|
|
$
|
30.3
|
|
Ordinary dividend
distributions from sponsored fund investments
|
|
1.8
|
|
|
3.5
|
|
|
1.7
|
|
Unrealized gains on
sponsored fund investments
|
|
7.5
|
|
|
32.0
|
|
|
24.5
|
|
Net investment income
on consolidated sponsored investment
portfolios(1)
|
|
26.4
|
|
|
39.4
|
|
|
13.0
|
|
Other investment
income
|
|
6.0
|
|
|
5.6
|
|
|
(.4)
|
|
Other non-operating
expenses, including foreign currency gains and losses
|
|
(.2)
|
|
|
1.2
|
|
|
1.4
|
|
Net non-operating
income
|
|
$
|
41.5
|
|
|
$
|
112.0
|
|
|
$
|
70.5
|
|
|
(1) A
table detailing the impact the consolidated sponsored investment
portfolios have had on the firm's consolidated statements of income
is included at the end of this earnings release.
|
Nearly all of the $30.3 million in
net realized gains and $23.6 million
of the $32.0 million in unrealized
gains on sponsored funds recognized during the second quarter of
2017 resulted from the firm's decision to economically hedge the
market exposure associated with its supplemental savings plan
liability.
The firm's effective tax rate for the second quarter of 2017 was
37.1%. The firm currently estimates its effective tax rate for 2017
will be about 37.4%.
Management Commentary
William J. Stromberg, the
company's president and chief executive officer, commented: "U.S.
stocks rose broadly in the second quarter of 2017 with many major
indexes reaching all-time highs. International stocks outperformed
U.S. shares, aided by strengthening currencies relative to the U.S.
dollar. Fixed income returns were also positive with healthy credit
conditions in the U.S. and abroad.
"Our assets under management grew by five percent in the second
quarter of 2017, boosted by strong market returns, healthy alpha
generation, and solid net inflows. Positive net flows continued
into our international equity, fixed income, and asset allocation
strategies, partially offset by modest outflows from U.S.
equity.
"Overall we are encouraged by increasing levels of client
activity and by execution of our strategy. Our relative investment
performance remains strong, investor interest continues to grow
globally, and we are making good progress with our investments in
product, distribution, and technology. Some highlights of activity
that reflect ways we are meeting the needs of our clients and
distribution partners include:
- New Investment Products—Recently launched portfolios include
the Retirement Income 2020 Fund (a new managed-payout fund) and the
U.S. High Yield Fund (stemming from the acquisition of the
Henderson High Yield Opportunities Fund). We have also filed
preliminary registration statements for the Multi-Strategy Total
Return Fund and Capital Appreciation & Income Fund, both of
which we expect to launch later this year.
- Recent Vehicle Launches Gaining Traction—The T. Rowe Price
ActivePlus Portfolios, retail separately managed accounts, and
model portfolios are each attracting clients and assets.
- Expanding Distribution Reach—Our mutual funds are now available
on Fidelity Investments' FundsNetwork® and their Institutional No
Transaction Fee (iNTF) Program, further expanding their
availability to retail investors and advisors with no transaction
fees. This agreement follows the recent addition of our mutual
funds to Charles Schwab's Mutual
Fund OneSource® service with no transaction fee.
- Client Experience Enhancements—A new relationship management
team servicing high-value individual investors in our direct
channel is bolstering client engagement, and helping attract and
retain assets. Likewise, our agile approach to innovating and
developing improved client digital experiences is also seeing
initial success.
"With the progress we are making on our strategic priorities and
the outstanding work of our associates, we are confident we are on
the right track to enhance our competitiveness and grow and
diversify our business. In this our 80th year, we remain committed
to our guiding principle of always doing what is right for our
clients. Over time, we believe that this approach will enable us to
remain a premier asset manager and create attractive long-term
value for our stockholders."
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 2017 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, 2017.
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,
new products and services, 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 2016 Form 10-K and June 30,
2017 Form 10-Q filed later today.
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
Consolidated Statements of Income
|
|
|
|
|
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
Revenues
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
|
Investment advisory
fees
|
$
|
920.6
|
|
|
$
|
1,043.9
|
|
|
$
|
1,791.4
|
|
|
$
|
2,035.0
|
|
|
Administrative
fees
|
88.5
|
|
|
91.3
|
|
|
177.9
|
|
|
178.6
|
|
|
Distribution and
servicing fees
|
35.6
|
|
|
36.4
|
|
|
69.5
|
|
|
71.6
|
|
|
Net
revenues
|
1,044.7
|
|
|
1,171.6
|
|
|
2,038.8
|
|
|
2,285.2
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Compensation and
related costs
|
371.0
|
|
|
403.8
|
|
|
726.2
|
|
|
801.2
|
|
|
Advertising and
promotion
|
14.9
|
|
|
18.6
|
|
|
38.0
|
|
|
44.2
|
|
|
Distribution and
servicing costs
|
35.6
|
|
|
36.4
|
|
|
69.5
|
|
|
71.6
|
|
|
Depreciation and
amortization of property and equipment
|
33.8
|
|
|
36.3
|
|
|
66.0
|
|
|
71.9
|
|
|
Occupancy and
facility costs
|
40.8
|
|
|
46.8
|
|
|
82.2
|
|
|
92.2
|
|
|
Other operating
expenses
|
98.9
|
|
|
122.1
|
|
|
196.3
|
|
|
224.8
|
|
|
Nonrecurring charge
(insurance recoveries) related to Dell appraisal rights
matter
|
166.2
|
|
|
—
|
|
|
166.2
|
|
|
(50.0)
|
|
|
Total operating
expenses
|
761.2
|
|
|
664.0
|
|
|
1,344.4
|
|
|
1,255.9
|
|
|
|
|
|
|
|
|
|
|
Net operating
income
|
283.5
|
|
|
507.6
|
|
|
694.4
|
|
|
1,029.3
|
|
|
|
|
|
|
|
|
|
Non-operating
income
|
|
|
|
|
|
|
|
Net investment income
on investments
|
15.3
|
|
|
71.4
|
|
|
76.6
|
|
|
136.2
|
|
Net investment income
on consolidated sponsored investment portfolios
|
26.4
|
|
|
39.4
|
|
|
50.2
|
|
|
88.3
|
|
Other
income
|
(.2)
|
|
|
1.2
|
|
|
(.2)
|
|
|
2.5
|
|
Total
non-operating income
|
41.5
|
|
|
112.0
|
|
|
126.6
|
|
|
227.0
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
325.0
|
|
|
619.6
|
|
|
821.0
|
|
|
1,256.3
|
|
Provision for income
taxes
|
113.8
|
|
|
229.6
|
|
|
296.5
|
|
|
465.9
|
|
Net income
|
211.2
|
|
|
390.0
|
|
|
524.5
|
|
|
790.4
|
|
|
Less: net income
attributable to redeemable non-controlling interests
|
7.9
|
|
|
16.1
|
|
|
17.1
|
|
|
30.6
|
|
Net income
attributable to T. Rowe Price Group
|
203.3
|
|
|
373.9
|
|
|
507.4
|
|
|
759.8
|
|
|
Less: net income
allocated to outstanding restricted stock and stock unit
holders
|
4.0
|
|
|
8.5
|
|
|
9.8
|
|
|
17.2
|
|
Net income
allocated to T. Rowe Price Group common stockholders
|
$
|
199.3
|
|
|
$
|
365.4
|
|
|
$
|
497.6
|
|
|
$
|
742.6
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
on common stock of T. Rowe Price Group
|
|
|
|
|
|
|
|
|
Basic
|
$
|
.81
|
|
|
$
|
1.52
|
|
|
$
|
2.02
|
|
|
$
|
3.08
|
|
|
Diluted
|
$
|
.79
|
|
|
$
|
1.50
|
|
|
$
|
1.97
|
|
|
$
|
3.04
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares
|
|
|
|
|
|
|
|
|
Outstanding
|
246.9
|
|
|
239.8
|
|
|
246.8
|
|
|
240.9
|
|
|
Outstanding assuming
dilution
|
252.6
|
|
|
243.0
|
|
|
252.2
|
|
|
244.2
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per share
|
$
|
.54
|
|
|
$
|
.57
|
|
|
$
|
1.08
|
|
|
$
|
1.14
|
|
Impact of
consolidated sponsored investment portfolios on consolidated
statements of income (in millions)
|
Three months
ended
|
|
Six months
ended
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
|
|
|
|
|
|
|
|
Operating expenses
reflected in net operating income
|
$
|
(3.5)
|
|
|
$
|
(2.7)
|
|
|
$
|
(6.1)
|
|
|
$
|
(5.3)
|
|
Net investment income
reflected in non-operating income
|
26.4
|
|
|
39.4
|
|
|
50.2
|
|
|
88.3
|
|
Impact on income
before taxes
|
$
|
22.9
|
|
|
$
|
36.7
|
|
|
$
|
44.1
|
|
|
$
|
83.0
|
|
|
|
|
|
|
|
|
|
Income attributable
to T. Rowe Price Group's interest
|
$
|
15.0
|
|
|
$
|
20.6
|
|
|
$
|
17.1
|
|
|
$
|
52.4
|
|
Income attributable
to redeemable non-controlling interests
|
7.9
|
|
|
16.1
|
|
|
27.0
|
|
|
30.6
|
|
|
$
|
22.9
|
|
|
$
|
36.7
|
|
|
$
|
44.1
|
|
|
$
|
83.0
|
|
Investment
Advisory Revenues (in millions)
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
Sponsored U.S. mutual
funds
|
|
|
|
|
|
|
|
Stock and blended
asset
|
$
|
551.1
|
|
|
$
|
628.6
|
|
|
$
|
1,070.6
|
|
|
$
|
1,222.7
|
|
Bond and money
market
|
118.0
|
|
|
125.7
|
|
|
230.6
|
|
|
247.4
|
|
|
669.1
|
|
|
754.3
|
|
|
1,301.2
|
|
|
1,470.1
|
|
Other investment
portfolios
|
|
|
|
|
|
|
|
Stock and blended
asset
|
210.3
|
|
|
240.3
|
|
|
408.2
|
|
|
468.2
|
|
Bond, money market,
and stable value
|
41.2
|
|
|
49.3
|
|
|
82.0
|
|
|
96.7
|
|
|
251.5
|
|
|
289.6
|
|
|
490.2
|
|
|
564.9
|
|
Total
|
$
|
920.6
|
|
|
$
|
1,043.9
|
|
|
$
|
1,791.4
|
|
|
$
|
2,035.0
|
|
Assets Under
Management (in billions)
|
Average
during
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
As of
|
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
|
12/31/2016
|
|
6/30/2017
|
Sponsored U.S. mutual
funds
|
|
|
|
|
|
|
|
|
|
|
|
Stock and blended
asset
|
$
|
383.6
|
|
|
$
|
440.1
|
|
|
$
|
372.4
|
|
|
$
|
430.6
|
|
|
$
|
401.3
|
|
|
$
|
445.5
|
|
Bond and money
market
|
108.5
|
|
|
120.1
|
|
|
106.4
|
|
|
117.8
|
|
|
112.9
|
|
|
121.0
|
|
|
492.1
|
|
|
560.2
|
|
|
478.8
|
|
|
548.4
|
|
|
514.2
|
|
|
566.5
|
|
Other investment
portfolios
|
|
|
|
|
|
|
|
|
|
|
|
Stock and blended
asset
|
209.9
|
|
|
244.7
|
|
|
203.2
|
|
|
238.0
|
|
|
220.8
|
|
|
254.0
|
|
Bond, money market,
and stable value
|
70.7
|
|
|
81.0
|
|
|
68.4
|
|
|
79.2
|
|
|
75.8
|
|
|
83.1
|
|
|
280.6
|
|
|
325.7
|
|
|
271.6
|
|
|
317.2
|
|
|
296.6
|
|
|
337.1
|
|
Total
|
$
|
772.7
|
|
|
$
|
885.9
|
|
|
$
|
750.4
|
|
|
$
|
865.6
|
|
|
$
|
810.8
|
|
|
$
|
903.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated
Cash Flows Information
(in
millions)
|
Six months
ended
|
|
6/30/2016
|
|
6/30/2017
|
|
Cash flow
attributable to T. Rowe Price Group
|
|
Cash flow
attributable to consolidated sponsored investment portfolios, net
of eliminations
|
|
As reported on
statement of cash flows
|
|
Cash flow
attributable to T. Rowe Price Group
|
|
Cash flow
attributable to consolidated sponsored investment portfolios, net
of eliminations
|
|
As reported on
statement of cash flows
|
Cash provided by
(used in) operating activities, including ($74) of stock-based
compensation expense and $150 related to the Dell appraisal rights
matter attributable to T. Rowe Price Group in 2017
|
$
|
662.2
|
|
|
$
|
(676.4)
|
|
|
$
|
(14.2)
|
|
|
$
|
876.1
|
|
|
$
|
(736.9)
|
|
|
$
|
139.2
|
|
Cash provided by
(used in) investing activities, including ($83) for additions to
property and equipment and $294 of proceeds from the sale of
available-for-sale investments attributable to T. Rowe Price Group
in 2017
|
(103.1)
|
|
|
265.1
|
|
|
162.0
|
|
|
114.1
|
|
|
23.5
|
|
|
137.6
|
|
Cash provided by
(used in) financing activities, including T. Rowe Price Group
common stock repurchases of $(447) and dividends paid of $(280) in
2017
|
(456.2)
|
|
|
540.0
|
|
|
83.8
|
|
|
(652.9)
|
|
|
717.7
|
|
|
64.8
|
|
Effect of exchange
rate changes on cash
and cash equivalents
|
—
|
|
|
(21.3)
|
|
|
(21.3)
|
|
|
—
|
|
|
3.8
|
|
|
3.8
|
|
Net change in cash
and cash
equivalents during period
|
$
|
102.9
|
|
|
$
|
107.4
|
|
|
$
|
210.3
|
|
|
$
|
337.3
|
|
|
$
|
8.1
|
|
|
$
|
345.4
|
|
Unaudited
Condensed Consolidated Balance Sheet Information (in
millions)
|
|
As of
|
|
|
12/31/2016
|
|
6/30/2017
|
Cash and cash
equivalents
|
|
$
|
1,204.9
|
|
|
$
|
1,542.2
|
|
Accounts receivable
and accrued revenue
|
|
455.1
|
|
|
488.7
|
|
Investments
|
|
1,257.5
|
|
|
1,333.7
|
|
Assets of
consolidated sponsored investment portfolios
|
|
1,680.5
|
|
|
1,604.0
|
|
Property and
equipment, net
|
|
615.1
|
|
|
624.3
|
|
Goodwill
|
|
665.7
|
|
|
665.7
|
|
Other
assets
|
346.2
|
|
|
274.0
|
|
Total
assets
|
|
6,225.0
|
|
|
6,532.6
|
|
Total liabilities,
includes $65.6 at December 31, 2016, and $55.4 at June 30, 2017,
from consolidated sponsored investment portfolios
|
|
529.2
|
|
|
736.4
|
|
Redeemable
non-controlling interests
|
|
687.2
|
|
|
627.6
|
|
Stockholders' equity,
240.3 common shares outstanding at June 30, 2017, includes net
unrealized holding gains of $10.1 at June 30, 2017
|
|
$
|
5,008.6
|
|
|
$
|
5,168.6
|
|
Cash, Cash
Equivalents, and Investments Information (in
millions)
|
|
|
|
|
|
Interest Held by T.
Rowe Price Group
|
|
|
|
|
|
Cash and
discretionary investments in sponsored portfolios
|
|
Investments in
sponsored portfolios to hedge supplemental savings plan
|
|
Seed capital
investments in sponsored portfolios
|
|
Investment in
UTI and other investments
|
|
Total
|
|
Redeemable
non-controlling interests
|
|
As reported on
consolidated balance sheet 6/30/2017
|
Cash and cash
equivalents
|
$
|
1,542.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,542.2
|
|
|
$
|
—
|
|
|
$
|
1,542.2
|
|
Investments
|
675.6
|
|
|
172.3
|
|
|
251.2
|
|
|
234.6
|
|
|
1,333.7
|
|
|
—
|
|
|
1,333.7
|
|
Net assets of
consolidated sponsored
investment portfolios
|
3.1
|
|
|
—
|
|
|
917.9
|
|
|
—
|
|
|
921.0
|
|
|
627.6
|
|
|
1,548.6
|
|
|
$
|
2,220.9
|
|
|
$
|
172.3
|
|
|
$
|
1,169.1
|
|
|
$
|
234.6
|
|
|
$
|
3,796.9
|
|
|
$
|
627.6
|
|
|
$
|
4,424.5
|
|
Quarterly
Financial Impact of Dell Appraisal Rights Matter (in
millions)
|
|
|
|
|
Three months
ended
|
|
Pre-tax operating
expense
|
|
Pre-tax operating
cash flow
|
June 30,
2016
|
|
$
|
166.2
|
|
|
$
|
(164.0)
|
|
September 30,
2016
|
|
—
|
|
|
(.9)
|
|
December 31,
2016
|
|
(100.0)
|
|
|
(1.3)
|
|
Total -
2016
|
|
66.2
|
|
|
(166.2)
|
|
March 31,
2017
|
|
(50.0)
|
|
|
140.0
|
|
June 30,
2017
|
|
—
|
|
|
10.0
|
|
Total impact of
Dell appraisal rights matter
|
|
$
|
16.2
|
|
|
$
|
(16.2)
|
|
Non-GAAP Information and Reconciliation
The firm believes the non-GAAP financial measures below provide
relevant and meaningful information to investors about its core
operating results. These measures have been established in order to
increase transparency for the purpose of evaluating the firm's core
business, for comparing current results with prior period results,
and to enable more appropriate comparison with industry peers.
However, non-GAAP financial measures should not be considered as a
substitute for financial measures calculated in accordance with
U.S. GAAP and may be calculated differently by other companies. The
following schedule (in millions, except for per-share amounts)
reconciles U.S. GAAP financial measures to non-GAAP measures for
the three- and six-month period ended June 30, 2016 and
2017.
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
Operating
expenses, GAAP basis
|
$
|
761.2
|
|
|
$
|
664.0
|
|
|
$
|
1,344.4
|
|
|
$
|
1,255.9
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Expenses of
consolidated sponsored investment portfolios, net of elimination of
its related management fee(1)
|
(1.7)
|
|
|
(1.7)
|
|
|
(3.0)
|
|
|
(3.5)
|
|
Insurance recoveries
(nonrecurring charge) related to Dell appraisal rights matter
(3)
|
(166.2)
|
|
|
—
|
|
|
(166.2)
|
|
|
50.0
|
|
Adjusted operating
expenses
|
$
|
593.3
|
|
|
$
|
662.3
|
|
|
$
|
1,175.2
|
|
|
$
|
1,302.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to T. Rowe Price Group, GAAP basis
|
$
|
203.3
|
|
|
$
|
373.9
|
|
|
$
|
507.4
|
|
|
$
|
759.8
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Net income of
consolidated sponsored investment portfolios, net of redeemable
non-controlling interests(1)
|
(15.0)
|
|
|
(20.6)
|
|
|
(27.0)
|
|
|
(52.4)
|
|
Non-operating income,
excluding impact of consolidated sponsored investment
portfolios(2)
|
(15.1)
|
|
|
(72.6)
|
|
|
(76.4)
|
|
|
(138.7)
|
|
Nonrecurring charge
(insurance recoveries) related to Dell appraisal
rights matter (3)
|
166.2
|
|
|
—
|
|
|
166.2
|
|
|
(50.0)
|
|
Income tax impacts of
non-GAAP adjustments (4)
|
(53.8)
|
|
|
37.2
|
|
|
(24.5)
|
|
|
96.4
|
|
Adjusted net
income attributable to T. Rowe Price Group
|
$
|
285.6
|
|
|
$
|
317.9
|
|
|
$
|
545.7
|
|
|
$
|
615.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per common share, GAAP basis
|
$
|
.79
|
|
|
$
|
1.50
|
|
|
$
|
1.97
|
|
|
$
|
3.04
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
Consolidated sponsored
investment portfolios (1)
|
(.04)
|
|
|
(.05)
|
|
|
(.07)
|
|
|
(.13)
|
|
Non-operating income,
excluding impact of consolidated sponsored investment
portfolios(2)
|
(.03)
|
|
|
(.17)
|
|
|
(.17)
|
|
|
(.33)
|
|
Nonrecurring charge
(insurance recoveries) related to Dell appraisal rights matter
(3)
|
.39
|
|
|
—
|
|
|
.39
|
|
|
(.12)
|
|
Adjusted diluted
earnings per common share(5)
|
$
|
1.11
|
|
|
$
|
1.28
|
|
|
$
|
2.12
|
|
|
$
|
2.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The non-GAAP
adjustments add back the management fees that the firm earns from
the consolidated sponsored investment portfolios and subtract the
investment income and operating expenses of these portfolios that
have been included in the firm's U.S. GAAP consolidated statements
of income. Management believes the consolidated sponsored
investment portfolios may impact the reader's ability to understand
the firm's core operating results. The following table details the
calculation of net income of consolidated sponsored investment
portfolios, net of redeemable non-controlling interests, for the
three- and six-month period ended June 30,
2016 and 2017:
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
Net investment income
of consolidated sponsored portfolios
|
$
|
26.4
|
|
|
$
|
39.4
|
|
|
$
|
50.2
|
|
|
$
|
88.3
|
|
Operating expenses of
consolidated sponsored portfolios
|
(3.5)
|
|
|
(2.7)
|
|
|
(6.1)
|
|
|
(5.3)
|
|
Net income of
consolidated sponsored portfolios
|
22.9
|
|
|
36.7
|
|
|
44.1
|
|
|
83.0
|
|
Less: net income
attributable to redeemable non-controlling interests
|
7.9
|
|
|
16.1
|
|
|
17.1
|
|
|
30.6
|
|
T. Rowe Price's
portion of net income
|
$
|
15.0
|
|
|
$
|
20.6
|
|
|
$
|
27.0
|
|
|
$
|
52.4
|
|
(2) This non-GAAP
adjustment removes the non-operating income that remains after
backing out the portion related to the consolidated sponsored
investment portfolios. Management believes excluding non-operating
income helps the reader's ability to understand the firm's core
operating results and increases comparability to prior years.
Additionally, management does not emphasize the impact of
non-operating income when managing the firm and evaluating its
performance. The following table details the calculation of other
non-operating income for the three- and six-month period ended
June 30, 2016 and 2017:
|
Three months
ended
|
|
Six months
ended
|
|
6/30/2016
|
|
6/30/2017
|
|
6/30/2016
|
|
6/30/2017
|
Total non-operating
income
|
$
|
41.5
|
|
|
$
|
112.0
|
|
|
$
|
126.6
|
|
|
$
|
227.0
|
|
Less: net investment
income of consolidated sponsored portfolios
|
26.4
|
|
|
39.4
|
|
|
50.2
|
|
|
88.3
|
|
Total other
non-operating income
|
$
|
15.1
|
|
|
$
|
72.6
|
|
|
$
|
76.4
|
|
|
$
|
138.7
|
|
(3) In the second
quarter of 2016, the firm recognized a nonrecurring charge of
$166.2 million related to the firm's
decision to compensate certain clients in regard to the Dell
appraisal rights matter. In the first quarter of 2017, the firm
recognized insurance recoveries of $50
million as a reduction in operating expenses from claims
that were filed in relation to the matter. Management believes it
is useful to readers of the firm's consolidated statements of
income to adjust for these non-recurring insurance recoveries in
arriving at adjusted operating expenses and net income attributable
to T. Rowe Price Group, Inc. and diluted earnings per share, as
this will aid with comparability to prior periods and analyzing the
firm's core business results.
(4) These were
calculated using the effective tax rate applicable to the related
items.
(5) This non-GAAP
measure was calculated by applying the two-class method to adjusted
net income attributable to T. Rowe Price Group, Inc. divided by the
weighted-average common shares outstanding assuming dilution.
View original
content:http://www.prnewswire.com/news-releases/t-rowe-price-group-reports-second-quarter-2017-results-300493523.html
SOURCE T. Rowe Price Group, Inc.