01—Abstract
Summary
Summary of the 10-K filed February 5, 2015. Cited figures are marked; the original filing is the authoritative source.
T.
Rowe Price Group, Inc. is a financial services holding company that provides global investment management services through its subsidiaries to individual and institutional investors, primarily in the sponsored T. Rowe Price mutual funds and other investment portfolios. At December 31, 2014, it had $746.8 billiona in assets under management, including $477.6 billion in the Price funds and $269.2 billion in other investment portfolios.
Assets under management rose $54.4 billionb during 2014, driven by $50.7 billion of market appreciation and income and $3.7 billion of net cash inflows. Net revenues were $3,982.1 million, net operating income $1,890.9 million, and net income $1,229.6 million, or diluted earnings per share of $4.55, compared with $3.90 in 2013. The company remained debt-free at year-end 2014, with cash and fund investment holdings of $3.4 billion.
It repurchased 5,312,663 shares for $415.5 millionc during 2014 and paid $1.76 per share in regular dividends. It expects quarterly dividends in 2015 to exceed that $1.76 total, and expects 2015 capital expenditures of up to $175 million.
The filing notes that a significant share of revenue depends on Price fund contracts that can be terminated on 60 days' notice, and that money market fee waivers totaled $58.4 milliond in 2014 and are expected to continue in 2015. Key risks highlighted include market declines, investment performance relative to peers, investor mobility, low interest rates affecting money market funds, regulatory changes (including MiFID II and SEC money market reforms), and reliance on third-party intermediaries, which account for about 45% of assets under management.
02—Key points
Key Highlights
- Record assets under management of $746.8 billion at December 31, 2014, up $54.4 billion from 2013.
- Net revenues of $3,982.1 million, up 14.3%, and net income of $1,229.6 million, up 17.4%.
- Diluted earnings per share of $4.55, up 16.7% from $3.90 in 2013.
- Net cash inflows of $3.7 billion for 2014; Price funds had $11.8 billion of inflows offset by $8.1 billion of outflows from other portfolios.
- Target-date portfolios held $148.5 billion in assets under management, or 19.9% of managed assets.
- Debt-free balance sheet with $3.4 billion in cash and fund investment holdings; $415.5 million spent on share repurchases in 2014.
- Regular dividends of $1.76 per share declared in 2014, with 2015 quarterly dividends planned to exceed that amount.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 5, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $3.98B$3.48B | +14.3% |
| Operating Expenses | $2.09B$1.85B | +13.2% |
| Operating Income | $1.89B$1.64B | +15.5% |
| Net Income | $1.23B$1.05B | +17.4% |
| EPS (Basic) | $4.68$4.02 | +16.4% |
| EPS (Diluted) | $4.55$3.90 | +16.7% |
| Shares Outstanding (Basic) | 259.60M258.30M | +0.5% |
| Shares Outstanding (Diluted) | 267.40M266.30M | +0.4% |
05—Questions
Frequently Asked Questions
How much did T. Rowe Price's assets under management grow in 2014?
Assets under management ended 2014 at a record $746.8 billion, an increase of $54.4 billion from the end of 2013. Market appreciation and income added $50.7 billion, and net cash inflows added $3.7 billion.
What drove the increase in net income?
Net income rose to $1,229.6 million from $1,047.7 million, driven by net revenues of $3,982.1 million, up from $3,484.2 million. Investment advisory fees rose to $3,464.5 million, and average assets under management increased $90.9 billion to $724.7 billion. Non-operating investment income also rose to $112.2 million, including $49.3 million in realized gains on sponsored fund holdings.
What is the company's capital return policy and outlook?
In 2014 the company paid $1.76 per share in regular dividends and spent $415.5 million repurchasing 5,312,663 shares. It plans to declare quarterly cash dividends in 2015 that, taken together, will exceed $1.76 per share, though it gives no assurance it will continue increasing dividends. The Board increased the repurchase authorization by 15 million shares on December 11, 2014.
What are the main risks to the business?
Revenue depends on asset values and composition, so market declines, weaker investment performance, and investor withdrawals reduce fees. Most revenue from the Price funds comes from contracts terminable on 60 days' notice. The company also faces intense competition, low interest rates that force fee waivers on money market funds, and regulatory changes including MiFID II and SEC money market reforms.
How concentrated is the client base?
Third-party financial intermediaries source nearly forty-five percent of assets under management. The six largest Price funds accounted for 27% of investment advisory revenues in 2014, and one third-party intermediary accounted for about 4% of investment advisory revenues.
06—Continue