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
|
|
%
chan ge
|
|
|
|
|
|
|
|
|
|
|
|
|
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.