01—Abstract
Summary
Summary of the 10-K filed February 5, 2010. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. reported in its 10-K for fiscal 2009 a sharp rebound in assets under management, which ended the year at $391.3 billiona, up from $276.3 billion at the end of 2008 and approaching the historical period-end high of $400.0 billion at December 31, 2007. Net inflows were $22.7 billion for the year, including $14.7 billion in the second half, and market gains and income added $92.3 billion. Despite the asset recovery, results declined as average assets under management of $321.3 billion were $36.9 billion lower than in 2008.
Investment advisory revenues fell 12% to more than $1.5 billion, net revenues fell to $1.87 billionb, net operating income declined to $702 million, and net income fell to $434 million, with diluted earnings per share of $1.65 versus $1.81 in 2008. The company reported operating expenses $102 million lower than in 2008 following cost reduction efforts, including a 5.5% workforce reduction in April 2009. The filing describes a company that remains debt-free, with stockholders' equity of $2.88 billion at year end and cash and cash equivalents of $743.3 million.
Management stated that the firm does not maintain an available external source of liquidity given its financial resources. Dividends declared rose to $1.00c per share for 2009 from $.96 in 2008, and the company repurchased about 2.3 million shares for $67 million during 2009. Subsequent to year end, on January 20, 2010, the company completed the acquisition of a 26% equity interest in UTI Asset Management Company and an affiliate for $142.4 million plus transaction costs of about $3.5 million.
Key risks highlighted include dependence on fees from the T. Rowe Price mutual funds, which are generally terminable on 60-day notice; revenue sensitivity to market declines and investor withdrawals; and reliance on third-party financial intermediaries, which the filing says source more than 30%d of assets under management. Fee reductions on money market funds, made to keep yields at or above 0%, continued into 2010.
02—Key points
Key Highlights
- Total assets under management ended 2009 at $391.3 billion, up from $276.3 billion at year-end 2008, approaching the $400.0 billion record at December 31, 2007.
- Net inflows of $22.7 billion in 2009, including $14.7 billion in the second half, with market gains and income adding $92.3 billion.
- Net revenues fell 12% to $1.87 billion; net operating income declined to $702 million from $849 million and net income fell to $434 million.
- Diluted earnings per share were $1.65 in 2009, down from $1.81 in 2008; the dividend rose to $1.00 per share from $.96.
- Operating expenses were $102 million lower than 2008, aided by a 5.5% workforce reduction in April 2009 and lower advertising and promotion spending.
- The company remains debt-free with stockholders' equity of $2.88 billion and cash and cash equivalents of $743.3 million at December 31, 2009.
- On January 20, 2010, the company acquired a 26% equity interest in UTI Asset Management Company for $142.4 million, accounted for under the equity method.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Price T Rowe Group kept $0.23.
- Revenue$1.87B100.0%
- Cost of revenue−$4.5M0.2%
- Gross profit$1.87B99.8%
- Operating costs−$1.17B62.3%
- Operating income$701.6M37.5%
- Interest, other & tax−$268.0M14.3%
- Net income$433.6M23.2%
Where FY2009 revenue went
$1.87B- Operating costs: $1.17B, 62% of revenue
- Net income: $433.6M, 23% of revenue
- Interest, other & tax: $268.0M, 14% of revenue
- Cost of revenue: $4.5M, 0.2% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 5, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $1.87B$2.12B | −11.8% |
| Gross Profit | $1.87B$2.12B | −11.8% |
| Operating Expenses | $1.17B$1.27B | −8.0% |
| Operating Income | $701.60M$848.50M | −17.3% |
| Net Income | $433.60M$490.80M | −11.7% |
| EPS (Basic) | $1.69$1.89 | −10.6% |
| EPS (Diluted) | $1.65$1.81 | −8.8% |
| Shares Outstanding (Basic) | 255.90M259.30M | −1.3% |
| Shares Outstanding (Diluted) | 262.30M269.90M | −2.8% |
05—Questions
Frequently Asked Questions
How much did T. Rowe Price's assets under management change in 2009?
Assets under management rose to $391.3 billion at December 31, 2009, from $276.3 billion at the end of 2008. The increase reflected $22.7 billion in net inflows and $92.7 billion in net market gains and income, partly offset by $0.4 billion in mutual fund distributions not reinvested.
Why did net income decline in 2009 even though assets under management recovered?
Average assets under management were $321.3 billion in 2009, $36.9 billion lower than in 2008, and the average annualized fee rate fell to 48.1 basis points from 49.2 basis points. Investment advisory revenues therefore declined 12%, and net income fell to $433.6 million from $490.8 million.
How dependent is the company on the T. Rowe Price mutual funds?
The company derives its revenues primarily from investment advisory services to the Price funds and other portfolios. The filing states that a significant majority of revenues are based on contracts with the Price funds that can be terminated without cause on 60 days' notice, and that the funds' boards must approve these agreements annually.
What is the company's financial position and capital return policy?
The company reported total assets of $3.21 billion and stockholders' equity of $2.88 billion at December 31, 2009, and stated that it remains debt-free. It repurchased about 2.3 million common shares for $67 million in 2009 and declared dividends of $1.00 per share, with management planning 2010 quarterly dividends that together will exceed that amount.
What was the significance of the UTI Asset Management acquisition?
On January 20, 2010, the company bought a 26% equity interest in UTI Asset Management Company and an affiliate from existing stockholders for 6.5 billion Indian rupees, or $142.4 million, plus about $3.5 million in transaction costs. UTI is an unlisted Indian company with approximately $17.8 billion in average assets under management in December 2009.
06—Continue