01—Abstract
Summary
Summary of the 10-K filed February 5, 2013. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. reported record results for 2012, with assets under management rising $87.3 billiona to a record $576.8 billion. The increase came from $70.1 billion of market appreciation and income, net of mutual fund distributions not reinvested, plus net inflows of $17.2 billion, primarily from third-party financial intermediaries. Net revenues grew 10.0% to $3.0 billion, net operating income rose 11.2% to nearly $1.4 billion, and net income increased $110.4 million, or 14.3%, to $883.6 million, with diluted earnings per share of $3.36.
The filing states the company remains debt-free, and stockholders' equity rose from $3.4 billion to $3.8 billionb. The filing highlights concentration and fee-related risks. Six Price funds accounted for 25% of investment advisory revenues in 2012, and the Price funds' contracts are terminable on 60 days' notice.
Money market fee waivers totaled $35.0 millionc in 2012, and management expects them to continue in 2013. The company also reports a 26% equity stake in UTI Asset Management Company Ltd., carried at $139.8 million. Capital returns were significant.
Dividends declared in 2012 totaled $2.36d per share, including a $1.00 special dividend paid on December 28, 2012, and the company repurchased 2.3 million shares for $135.2 million. Management plans quarterly dividends in 2013 that will, taken together, exceed the $1.36 in regular annual dividends declared in 2012.
02—Key points
Key Highlights
- Assets under management reached a record $576.8 billion at December 31, 2012, up $87.3 billion, including $17.2 billion of net inflows, primarily from third-party financial intermediaries.
- Net revenues rose 10.0% to $3.0 billion, and net operating income increased 11.2% to nearly $1.4 billion; the operating margin reached 45.1%, up from 44.7% in 2011.
- Net income increased 14.3% to $883.6 million, and diluted EPS rose 15.1% to $3.36, helped by $32.6 million in gains from sales of sponsored fund investments.
- Target-date retirement portfolios held $88.9 billion, or 15.4% of managed assets, and generated $10.1 billion of the 2012 net inflows.
- Long-term relative performance remained strong, with 78% of Price funds outperforming their Lipper averages on a three-year total return basis and 84% on a five-year basis.
- Shareholder returns included a $1.00 special dividend paid December 28, 2012, bringing 2012 dividends declared to $2.36 per share; the company repurchased 2.3 million shares for $135.2 million.
- The company remains debt-free, with stockholders' equity of $3.8 billion at year-end and cash and fund investments totaling $2.0 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 5, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $3.02B$2.75B | +10.0% |
| Operating Expenses | $1.66B$1.52B | +9.1% |
| Operating Income | $1.36B$1.23B | +11.2% |
| Net Income | $883.60M$773.20M | +14.3% |
| EPS (Basic) | $3.47$3.01 | +15.3% |
| EPS (Diluted) | $3.36$2.92 | +15.1% |
| Shares Outstanding (Basic) | 253.40M255.60M | −0.9% |
| Shares Outstanding (Diluted) | 261.00M263.30M | −0.9% |
05—Questions
Frequently Asked Questions
What drove the growth in assets under management in 2012?
Assets under management increased $87.3 billion to $576.8 billion. Market appreciation and income, net of mutual fund distributions not reinvested, contributed $70.1 billion, and net inflows contributed $17.2 billion, primarily from third-party financial intermediaries.
How concentrated is the company's revenue?
Six Price funds (Growth Stock, Equity Income, Mid-Cap Growth, Blue-Chip Growth, Value and New Income) accounted for 25% of investment advisory revenues in 2012. The filing also states that the Price fund advisory agreements can be terminated by the funds on 60 days' notice, which could materially affect revenues if that happened.
Are money market funds generating meaningful fee income?
The company voluntarily waived $35.0 million of money market advisory fees in 2012 to keep fund yields at zero or above, compared with $36.4 million in 2011. Management expects these waivers to continue in 2013.
What is the company's dividend outlook?
Dividends declared in 2012 were $2.36 per share, including the $1.00 special dividend. The company plans to declare quarterly dividends in 2013 that, taken together, will exceed the $1.36 in regular annual dividends declared in 2012, although it notes no assurance that dividends will continue to increase.
What is the company's exposure to its UTI investment?
The company holds a 26% interest in UTI Asset Management Company Limited, carried at $139.8 million at December 31, 2012. The filing notes the company is at risk for loss up to this carrying amount if conditions deteriorate in UTI's markets, and that it does not use derivatives to hedge the related Indian rupee currency risk.
06—Continue