01—Abstract
Summary
Summary of the 10-K filed February 4, 2014. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. (NASDAQ: TROW) reported record assets under management of $692.4 billiona at December 31, 2013, up $115.6 billion from year-end 2012, driven by $127.6 billion in market gains and income, partly offset by net cash outflows of $12.0 billion. Net revenues rose 15.3% to $3,484.2 million, net operating income increased 20.0% to $1,637.4 million, and net income grew 18.6% to $1,047.7 million, with diluted earnings per share of $3.90 versus $3.36 in 2012. Operating margin improved to 47.0% from 45.1%.
Within net flows, the Price funds took in $10.2 billionb, while other investment portfolios had net outflows of $22.2 billion, concentrated among several large institutional clients outside the U.S. and intermediary clients. Target-date retirement portfolios, with $121.2 billion in assets, contributed $11.5 billion of net cash inflows in 2013. The company remains debt-free, held cash and fund investments of $3.0 billion at year-end, and sold its savings bank subsidiary on December 5, 2013 for $23.6 million in proceeds.
Management expects 2014 quarterly dividends to exceed the $1.52c per share regular dividend paid in 2013, though it notes no assurance of continued increases. Capital expenditures for 2014 are expected to be approximately $145 million, and advertising spend is estimated to fall about 5%. The filing's risk factors emphasize that revenues depend on asset values and composition, and that most fund advisory contracts can be terminated on 60 days' notice.
02—Key points
Key Highlights
- Assets under management reached a record $692.4 billion at December 31, 2013, up $115.6 billion, with $435.3 billion in sponsored U.S. mutual funds and $257.1 billion in other investment portfolios.
- Net revenues were $3,484.2 million, up 15.3%, and net income was $1,047.7 million, up 18.6%, with diluted EPS of $3.90 versus $3.36 in 2012.
- Net cash inflows of $10.2 billion into Price funds were more than offset by net outflows of $22.2 billion from other investment portfolios, for total net outflows of $12.0 billion.
- Target-date retirement portfolios contributed $11.5 billion of 2013 net cash flows and held $121.2 billion in assets, 17.5% of managed assets.
- Operating margin rose to 47.0% from 45.1%, and 76% of T. Rowe Price U.S. mutual funds outperformed their Lipper averages on a three-year total return basis.
- The company is debt-free with $3.0 billion in cash and fund investment holdings, and stockholders' equity increased to $4.8 billion.
- Advisory fees waived on money market funds totaled $51.2 million in 2013, up from $35.0 million in 2012, and are expected to continue in 2014.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 4, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $3.48B$3.02B | +15.3% |
| Operating Expenses | $1.85B$1.66B | +11.4% |
| Operating Income | $1.64B$1.36B | +20.0% |
| Net Income | $1.05B$883.60M | +18.6% |
| EPS (Basic) | $4.02$3.47 | +15.9% |
| EPS (Diluted) | $3.90$3.36 | +16.1% |
| Shares Outstanding (Basic) | 258.30M253.40M | +1.9% |
| Shares Outstanding (Diluted) | 266.30M261.00M | +2.0% |
05—Questions
Frequently Asked Questions
How did T. Rowe Price's assets under management and earnings change in 2013?
Assets under management rose to a record $692.4 billion, up $115.6 billion, mainly from $127.6 billion in market gains and income, offset by $12.0 billion in net cash outflows. Net income increased 18.6% to $1,047.7 million, and diluted EPS rose to $3.90 from $3.36.
Why were there net outflows from other investment portfolios in 2013?
The filing states that the vast majority of the $22.2 billion in outflows from other investment portfolios were concentrated among several large institutional clients outside the U.S. and intermediary clients that changed their investment objectives, repositioned strategy allocations, or experienced investment performance challenges. A large portion came from one international institutional client.
What does the company plan for dividends and capital spending in 2014?
T. Rowe Price presently plans to declare and pay quarterly cash dividends in 2014 that, taken together, will exceed the $1.52 per share paid in 2013, though it gives no assurance of continued increases. Capital expenditures for property and equipment are expected to be approximately $145 million.
What are the main risks to revenues according to the filing?
Revenues depend on the value and composition of assets under management, which are affected by investor withdrawals, market declines, investment performance, investing trends, interest rates, and tax changes. Most Price fund advisory agreements can be terminated on 60 days' notice, and money market fee waivers reduce advisory income.
06—Continue