01—Abstract
Summary
Summary of the 10-K filed February 8, 2011. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. (NASDAQ: TROW) reported a strong 2010 in its 10-K filed February 8, 2011. The firm is a financial services holding company whose revenues and net income come primarily from investment advisory services to individual and institutional investors in the T. Rowe Price mutual funds and other investment portfolios.
Total assets under management rose $90.7 billiona during 2010 to a record $482.0 billion, recovering from $276.3 billion at the end of 2008, on net inflows of $30.3 billion and market appreciation and income of $60.4 billion. Net revenues were $2,367.2 million, net operating income was $1,036.5 million, and net income rose to $672.2 million from $433.6 million in 2009, with diluted earnings per share of $2.53 versus $1.65. The filing highlights strong long-term relative performance, with 86% of the T.
Rowe Price funds (across share classes) beating their comparable Lipper averages on a total return basis over three years, 88% over five years, and 84% over ten years. Target-date retirement portfolios grew to $59.4 billionb, or 12% of managed assets.
Management also disclosed the 2010 purchase of a 26% equity interest in UTI Asset Management Company for $142.4 millionc, $240.0 million of share repurchases, and a dividend of $1.08 per share, with the company planning to exceed that amount in 2011. Risk factors center on dependence on asset levels and market values, a large share of revenue from the Price funds under terminable contracts, fee waivers on money market funds driven by low rates, and competition.
02—Key points
Key Highlights
- Record year-end assets under management of $482.0 billion, up $90.7 billion in 2010 from $391.3 billion, after net inflows of $30.3 billion.
- Net income rose $238.6 million, or 55%, to $672.2 million; diluted EPS was $2.53 versus $1.65 in 2009.
- Net operating income increased $334.9 million, or 47.7%, to more than $1.0 billion, lifting the operating margin to 43.8% from 37.6%.
- 86% of T. Rowe Price funds beat comparable Lipper averages on total return over three years, 88% over five years, and 84% over ten years.
- Target-date retirement portfolios reached $59.4 billion, or 12% of managed assets, after growing nearly 36% in 2010.
- Acquired a 26% equity interest in UTI Asset Management Company for $142.4 million and repurchased 5.0 million shares for $240.0 million in 2010.
- Money market fee waivers of $25.1 million were made to keep fund yields at or above zero, and the filing anticipates these waivers will continue into 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Price T Rowe Group kept $0.28.
- Revenue$2.37B100.0%
- Cost of revenue−$3.5M0.1%
- Gross profit$2.37B99.9%
- Operating costs−$1.33B56.1%
- Operating income$1.04B43.7%
- Interest, other & tax−$364.3M15.4%
- Net income$672.2M28.4%
Where FY2010 revenue went
$2.37B- Operating costs: $1.33B, 56% of revenue
- Net income: $672.2M, 28% of revenue
- Interest, other & tax: $364.3M, 15% of revenue
- Cost of revenue: $3.5M, 0.1% of revenue
Kept 28% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 8, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.37B$1.87B | +26.6% |
| Gross Profit | $2.37B$1.87B | +26.8% |
| Operating Expenses | $1.33B$1.17B | +14.1% |
| Operating Income | $1.04B$701.60M | +47.7% |
| Net Income | $672.20M$433.60M | +55.0% |
| EPS (Basic) | $2.60$1.69 | +53.8% |
| EPS (Diluted) | $2.53$1.65 | +53.3% |
| Shares Outstanding (Basic) | 257.20M255.90M | +0.5% |
| Shares Outstanding (Diluted) | 265.10M262.30M | +1.1% |
05—Questions
Frequently Asked Questions
How much did T. Rowe Price's assets under management grow in 2010?
Total assets under management increased $90.7 billion during 2010 to a record $482.0 billion, compared with $276.3 billion at the end of 2008 and the prior record of $400.0 billion at the end of 2007. Net inflows were $30.3 billion and market appreciation and income added $60.4 billion.
How did the company's profitability change in 2010?
Net revenues rose to $2,367.2 million from $1,867.4 million, and net operating income reached $1,036.5 million from $701.6 million. Net income was $672.2 million, up from $433.6 million, and diluted EPS was $2.53 compared with $1.65 in 2009.
How dependent is the company on the T. Rowe Price mutual funds?
The filing states that a significant majority of revenues are based on contracts with the Price funds, which can be terminated without cause on short notice, typically on 60 days' notice. Six Price funds accounted for 25% of investment advisory revenues in 2010. More than 30% of assets under management come from third-party financial intermediaries, which have no contractual obligation to recommend the firm's funds.
What did the company do with its cash in 2010?
The company bought a 26% equity interest in UTI Asset Management Company for 6.5 billion Indian rupees, or $142.4 million, plus $3.2 million in transaction costs. It repurchased 5.0 million shares for $240.0 million and paid dividends of $1.08 per share for the year. It also made a one-time $16.4 million contribution to certain money market funds.
What are the main risks to the company's earnings?
The filing identifies declines in market values, weak relative investment performance, investor redemptions, intense competition, and reliance on key personnel as primary risks. It also notes money market fee waivers caused by low interest rates, regulatory changes that could cut fund fees, and the possibility of future impairments of the UTI investment or goodwill of $665.7 million.
06—Continue