NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – THE COMPANY AND BASIS OF PREPARATION.
T. Rowe Price Group Inc. derives its consolidated revenues and net income primarily from investment advisory services that its subsidiaries provide to individual and institutional investors in the T. Rowe Price U.S. mutual funds (“U.S. mutual funds”), separately managed accounts, subadvised funds, and other T. Rowe Price products. The other T. Rowe Price products include: collective investment trusts, open-ended investment products offered to investors outside the U.S., and products offered through variable annuity life insurance plans in the U.S. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; and trust services.
Investment advisory revenues depend largely on the total value and composition of assets under our management. Accordingly, fluctuations in financial markets and in the composition of assets under management impact our revenues and results of operations.
BASIS OF PRESENTATION.
These unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These principles require the use of estimates and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature. Actual results may vary from our estimates.
The unaudited interim financial information contained in these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in our 2019 Annual Report.
NEW ACCOUNTING GUIDANCE.
We adopted Accounting Standards Update No. 2018-15 — Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract on January 1, 2020 using the prospective method of adoption. This update required implementation costs incurred in cloud computing arrangements to be deferred and recognized over the term of the hosting arrangement. A hosting arrangement is an agreement that allows customers, like us, to access and use software on an as-needed basis without having possession of the software. Beginning on January 1, 2020, we are required to defer such qualifying implementation costs. As of March 31, 2020, we capitalized an immaterial amount of implementation costs incurred in a cloud computing arrangement. Accordingly, the adoption of this guidance did not have a material impact on our consolidated balance sheets or our consolidated statements of income.
NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE
We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our unaudited condensed consolidated statements, including those we have not yet adopted. We do not believe that any such guidance has or will have a material effect on our financial position or results of operations.
U.S. ECONOMIC RELIEF LEGISLATION
On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The CARES Act provides economic relief to eligible businesses and individuals impacted by the novel coronavirus pandemic. We are currently assessing what impact, if any, the CARES Act’s provisions will have on our financial position and results of operations, but we do not believe the impact will be material.
NOTE 2 – INFORMATION ABOUT RECEIVABLES, REVENUES, AND SERVICES.
Revenues earned during the first quarter of 2020 and 2019 under agreements with clients include:
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|
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|
|
|
|
|
|
|
|
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Three months ended 3/31/2020
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|
Three months ended 3/31/2019
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|
|
|
Administrative, distribution, and servicing fees
|
|
|
|
|
|
Administrative, distribution, and servicing fees
|
|
|
(in millions)
|
Investment advisory fees
|
|
Administrative fees
|
|
Distribution and servicing fees
|
|
Net revenues
|
|
Investment advisory fees
|
|
Administrative fees
|
|
Distribution and servicing fees
|
|
Net revenues
|
U.S. mutual funds
|
$
|
876.2
|
|
|
$
|
77.2
|
|
|
$
|
27.9
|
|
|
$
|
981.3
|
|
|
$
|
815.9
|
|
|
$
|
76.6
|
|
|
$
|
30.2
|
|
|
$
|
922.7
|
|
Subadvised and separate accounts and other investment products
|
451.6
|
|
|
—
|
|
|
—
|
|
|
451.6
|
|
|
378.3
|
|
|
—
|
|
|
—
|
|
|
378.3
|
|
Other clients
|
—
|
|
|
29.7
|
|
|
—
|
|
|
29.7
|
|
|
—
|
|
|
26.3
|
|
|
—
|
|
|
26.3
|
|
|
$
|
1,327.8
|
|
|
$
|
106.9
|
|
|
$
|
27.9
|
|
|
$
|
1,462.6
|
|
|
$
|
1,194.2
|
|
|
$
|
102.9
|
|
|
$
|
30.2
|
|
|
$
|
1,327.3
|
|
Total net revenues earned from our related parties, specifically T. Rowe Price investment products, aggregate $1,207.7 million and $1,093.4 million for the three months ended March 31, 2020 and 2019, respectively. Accounts receivable from these products aggregate to $374.3 million at March 31, 2020, and $424.8 million at December 31, 2019.
The following table details the investment advisory fees earned from clients by their underlying asset class.
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Three months ended
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(in millions)
|
3/31/2020
|
|
3/31/2019
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U.S. mutual funds
|
|
|
|
Equity and blended assets
|
$
|
749.8
|
|
|
$
|
694.5
|
|
Fixed income, including money market
|
126.4
|
|
|
121.4
|
|
|
876.2
|
|
|
815.9
|
|
Subadvised and separate accounts and other investment products
|
|
|
|
Equity and blended assets
|
385.2
|
|
|
318.8
|
|
Fixed income, including money market
|
66.4
|
|
|
59.5
|
|
|
451.6
|
|
|
378.3
|
|
Total
|
$
|
1,327.8
|
|
|
$
|
1,194.2
|
|
The following table summarizes the assets under management on which we earn investment advisory fees.
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Average during
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|
three months ended
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As of
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(in billions)
|
3/31/2020
|
|
3/31/2019
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|
3/31/2020
|
|
12/31/2019
|
U.S. mutual funds
|
|
|
|
|
|
|
|
Equity and blended assets
|
$
|
525.0
|
|
|
$
|
487.6
|
|
|
$
|
443.6
|
|
|
$
|
552.4
|
|
Fixed income, including money market
|
129.3
|
|
|
122.5
|
|
|
118.7
|
|
|
130.3
|
|
|
654.3
|
|
|
610.1
|
|
|
562.3
|
|
|
682.7
|
|
Subadvised and separate accounts and other investment products
|
|
|
|
|
|
|
|
Equity and blended assets
|
396.3
|
|
|
332.9
|
|
|
340.9
|
|
|
412.1
|
|
Fixed income, including money market
|
112.1
|
|
|
100.5
|
|
|
105.6
|
|
|
112.0
|
|
|
508.4
|
|
|
433.4
|
|
|
446.5
|
|
|
524.1
|
|
Total
|
$
|
1,162.7
|
|
|
$
|
1,043.5
|
|
|
$
|
1,008.8
|
|
|
$
|
1,206.8
|
|
Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for 7.4% and 6.9% of our assets under management at March 31, 2020, and December 31, 2019, respectively.
NOTE 3 – INVESTMENTS.
The carrying values of our investments that are not part of the consolidated T. Rowe Price investment products are as follows:
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(in millions)
|
3/31/2020
|
|
12/31/2019
|
Investments held at fair value
|
|
|
|
T. Rowe Price investment products
|
$
|
1,088.1
|
|
|
$
|
1,402.9
|
|
T. Rowe Price investment products designated as an economic hedge of supplemental savings plan liability
|
500.0
|
|
|
561.1
|
|
Investment partnerships and other investments
|
105.5
|
|
|
99.7
|
|
Equity method investments
|
|
|
|
T. Rowe Price investment products
|
864.5
|
|
|
705.6
|
|
26% interest in UTI Asset Management Company Limited (India)
|
166.8
|
|
|
164.5
|
|
Investment partnerships and other investments
|
5.4
|
|
|
5.0
|
|
U.S. Treasury note
|
1.0
|
|
|
1.0
|
|
Total
|
$
|
2,731.3
|
|
|
$
|
2,939.8
|
|
The investment partnerships are carried at fair value using net asset value (“NAV”) per share as a practical expedient. Our interests in these partnerships are generally not redeemable and are subject to significant restrictions on transferability. The underlying investments of these partnerships have contractual terms through 2029, though we may receive distributions of liquidating assets over a longer term. The investment strategies of these partnerships include growth equity, buyout, venture capital, and real estate.
During the three months ended March 31, 2020, net losses on investments included $103.6 million of net unrealized losses related to investments held at fair value that were still held at March 31, 2020. For the same period of 2019, the net gains on investments included $50.6 million of net unrealized gains on investments held at fair value that were still held at March 31, 2019.
During the three months ended March 31, 2020 and 2019, certain T. Rowe Price investment products in which we provided initial seed capital at the time of formation were deconsolidated, as we no longer had a controlling interest. Depending on our ownership interest, we are now reporting our residual interests in these T. Rowe Price investment products as either an equity method investment or an investment held at fair value. Additionally, during the three months ended March 31, 2019, certain T. Rowe Price investment products that were being accounted for as equity method investments were consolidated, as we regained a controlling interest. The net impact of these changes on our unaudited condensed consolidated balance sheets and statements of income as of the dates the portfolios were deconsolidated or reconsolidated is detailed below.
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Three months ended
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(in millions)
|
3/31/2020
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|
3/31/2019
|
Net increase (decrease) in assets of consolidated T. Rowe Price investment products
|
$
|
(46.2
|
)
|
|
$
|
12.3
|
|
Net decrease in liabilities of consolidated T. Rowe Price investment products
|
$
|
(2.4
|
)
|
|
$
|
(.9
|
)
|
Net increase (decrease) in redeemable non-controlling interests
|
$
|
(20.1
|
)
|
|
$
|
20.4
|
|
|
|
|
|
Gains recognized upon deconsolidation
|
$
|
.1
|
|
|
$
|
.1
|
|
The gains or losses recognized upon deconsolidation were the result of reclassifying currency translation adjustments accumulated on certain T. Rowe Price investment products with non-USD functional currencies from accumulated other comprehensive income to non-operating income (loss).
VARIABLE INTEREST ENTITIES.
Our investments at March 31, 2020 and December 31, 2019, include interests in variable interest entities that we do not consolidate as we are not deemed the primary beneficiary. Our maximum risk of loss related to our involvement with these entities is as follows:
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|
|
|
|
|
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(in millions)
|
3/31/2020
|
|
12/31/2019
|
Investment carrying values
|
$
|
129.4
|
|
|
$
|
156.0
|
|
Unfunded capital commitments
|
15.6
|
|
|
18.1
|
|
Uncollected investment advisory and administrative fees
|
7.1
|
|
|
10.5
|
|
|
$
|
152.1
|
|
|
$
|
184.6
|
|
The unfunded capital commitments totaling $15.6 million and $18.1 million at March 31, 2020 and December 31, 2019, respectively, relate primarily to the investment partnerships in which we have an existing investment. In addition to such amounts, a percentage of prior distributions may be called under certain circumstances.
NOTE 4 – FAIR VALUE MEASUREMENTS.
We determine the fair value of our cash equivalents and certain investments using the following broad levels of inputs as defined by related accounting standards:
Level 1 – quoted prices in active markets for identical securities.
Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar
|
|
|
securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data
|
obtained from independent sources.
Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. We do not
value any investments using Level 3 inputs.
These levels are not necessarily an indication of the risk or liquidity associated with our investments. The following table summarizes our investments that are recognized in our unaudited condensed consolidated balance sheets using fair value measurements determined based on the differing levels of inputs. This table excludes investments held by the consolidated T. Rowe Price investment products which are presented separately on our unaudited condensed consolidated balance sheets and are detailed in Note 5.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2020
|
|
12/31/2019
|
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 1
|
|
Level 2
|
Cash equivalents held in T. Rowe Price money market funds
|
$
|
1,164.9
|
|
|
$
|
—
|
|
|
$
|
1,355.6
|
|
|
$
|
—
|
|
T. Rowe Price investment products
|
1,075.7
|
|
|
12.4
|
|
|
1,393.0
|
|
|
9.9
|
|
T. Rowe Price investment products designated as an economic hedge of supplemental savings plan liability
|
500.0
|
|
|
—
|
|
|
561.1
|
|
|
—
|
|
Total
|
$
|
2,740.6
|
|
|
$
|
12.4
|
|
|
$
|
3,309.7
|
|
|
$
|
9.9
|
|
As required by the accounting guidance, the fair value hierarchy levels table above does not include the investment partnerships and other investments for which fair value is estimated using their NAV per share as a practical expedient. The carrying value of these investments as disclosed in Note 3 were $105.5 million at March 31, 2020 and $99.7 million at December 31, 2019.
NOTE 5 – CONSOLIDATED T. ROWE PRICE INVESTMENT PRODUCTS.
The T. Rowe Price investment products that we consolidate in our unaudited condensed consolidated financial statements are generally those products we provided initial seed capital at the time of their formation and have a controlling interest. Our U.S. mutual funds are considered voting interest entities, while those regulated outside the U.S. are considered variable interest entities.
The following table details the net assets of the consolidated T. Rowe Price investment products:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2020
|
|
12/31/2019
|
(in millions)
|
Voting
interest entities
|
|
Variable interest entities
|
|
Total
|
|
Voting
interest entities
|
|
Variable interest entities
|
|
Total
|
Cash and cash equivalents(1)
|
$
|
23.1
|
|
|
$
|
94.6
|
|
|
$
|
117.7
|
|
|
$
|
9.9
|
|
|
$
|
66.6
|
|
|
$
|
76.5
|
|
Investments(2)
|
197.3
|
|
|
1,641.3
|
|
|
1,838.6
|
|
|
281.1
|
|
|
1,891.3
|
|
|
2,172.4
|
|
Other assets
|
8.1
|
|
|
59.9
|
|
|
68.0
|
|
|
10.6
|
|
|
17.4
|
|
|
28.0
|
|
Total assets
|
228.5
|
|
|
1,795.8
|
|
|
2,024.3
|
|
|
301.6
|
|
|
1,975.3
|
|
|
2,276.9
|
|
Liabilities
|
10.9
|
|
|
72.0
|
|
|
82.9
|
|
|
12.2
|
|
|
27.0
|
|
|
39.2
|
|
Net assets
|
$
|
217.6
|
|
|
$
|
1,723.8
|
|
|
$
|
1,941.4
|
|
|
$
|
289.4
|
|
|
$
|
1,948.3
|
|
|
$
|
2,237.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to T. Rowe Price Group
|
$
|
155.0
|
|
|
$
|
815.4
|
|
|
$
|
970.4
|
|
|
$
|
199.6
|
|
|
$
|
917.1
|
|
|
$
|
1,116.7
|
|
Attributable to redeemable non-controlling interests
|
62.6
|
|
|
908.4
|
|
|
971.0
|
|
|
89.8
|
|
|
1,031.2
|
|
|
1,121.0
|
|
|
$
|
217.6
|
|
|
$
|
1,723.8
|
|
|
$
|
1,941.4
|
|
|
$
|
289.4
|
|
|
$
|
1,948.3
|
|
|
$
|
2,237.7
|
|
(1) Cash and cash equivalents includes $22.5 million and $9.1 million at March 31, 2020, and December 31, 2019, respectively, of T. Rowe Price money market mutual funds.
(2) Investments includes $35.3 million and $40.2 million at March 31, 2020, and December 31, 2019, respectively, of T. Rowe Price investment products.
Although we can redeem our net interest in these consolidated T. Rowe Price investment products at any time, we cannot directly access or sell the assets held by these products to obtain cash for general operations. Additionally, the assets of these investment products are not available to our general creditors.
Since third party investors in these investment products have no recourse to our credit, our overall risk related to the net assets of consolidated T. Rowe Price investment products is limited to valuation changes associated with our net interest. We, however, are required to recognize the valuation changes associated with all underlying investments held by these products in our unaudited condensed consolidated statements of income and disclose the portion attributable to third party investors as net income attributable to redeemable non-controlling interests.
The operating results of the consolidated T. Rowe Price investment products for the three months ended March 31, 2020 and 2019, are reflected in our unaudited condensed consolidated statements of income as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
3/31/2020
|
|
3/31/2019
|
(in millions)
|
Voting interest entities
|
|
Variable interest entities
|
|
Total
|
|
Voting interest entities
|
|
Variable interest entities
|
|
Total
|
Operating expenses reflected in net operating income
|
$
|
(.2
|
)
|
|
$
|
(3.5
|
)
|
|
$
|
(3.7
|
)
|
|
$
|
(.3
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
(3.1
|
)
|
Net investment income (loss) reflected in non-operating income (loss)
|
(35.2
|
)
|
|
(295.1
|
)
|
|
(330.3
|
)
|
|
8.0
|
|
|
93.9
|
|
|
101.9
|
|
Impact on income before taxes
|
$
|
(35.4
|
)
|
|
$
|
(298.6
|
)
|
|
$
|
(334.0
|
)
|
|
$
|
7.7
|
|
|
$
|
91.1
|
|
|
$
|
98.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to T. Rowe Price Group
|
$
|
(22.6
|
)
|
|
$
|
(134.9
|
)
|
|
$
|
(157.5
|
)
|
|
$
|
8.7
|
|
|
$
|
48.7
|
|
|
$
|
57.4
|
|
Net income (loss) attributable to redeemable non-controlling interests
|
(12.8
|
)
|
|
(163.7
|
)
|
|
(176.5
|
)
|
|
(1.0
|
)
|
|
42.4
|
|
|
41.4
|
|
|
$
|
(35.4
|
)
|
|
$
|
(298.6
|
)
|
|
$
|
(334.0
|
)
|
|
$
|
7.7
|
|
|
$
|
91.1
|
|
|
$
|
98.8
|
|
The operating expenses of the consolidated investment products are reflected in other operating expenses. In preparing our unaudited condensed consolidated financial statements, we eliminated operating expenses of $2.5 million and $1.5 million for the three months ended March 31, 2020 and 2019, respectively, against the investment advisory and administrative fees earned from these products. The net investment income (loss) reflected in non-
operating income (loss) includes dividend and interest income and realized and unrealized gains and losses on the underlying securities held by the consolidated T. Rowe Price investment products.
The table below details the impact of these consolidated investment products on the individual lines of our unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
3/31/2020
|
|
3/31/2019
|
(in millions)
|
Voting
interest entities
|
|
Variable interest entities
|
|
Total
|
|
Voting
interest entities
|
|
Variable interest entities
|
|
Total
|
Net cash provided by operating activities
|
$
|
11.3
|
|
|
$
|
(87.0
|
)
|
|
$
|
(75.7
|
)
|
|
$
|
(28.7
|
)
|
|
$
|
(65.0
|
)
|
|
$
|
(93.7
|
)
|
Net cash provided by (used in) investing activities
|
(.8
|
)
|
|
—
|
|
|
(.8
|
)
|
|
(5.1
|
)
|
|
1.7
|
|
|
(3.4
|
)
|
Net cash used in financing activities
|
2.7
|
|
|
116.2
|
|
|
118.9
|
|
|
31.6
|
|
|
72.2
|
|
|
103.8
|
|
Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products
|
—
|
|
|
(1.2
|
)
|
|
(1.2
|
)
|
|
—
|
|
|
(.7
|
)
|
|
(.7
|
)
|
Net change in cash and cash equivalents during period
|
13.2
|
|
|
28.0
|
|
|
41.2
|
|
|
(2.2
|
)
|
|
8.2
|
|
|
6.0
|
|
Cash and cash equivalents at beginning of year
|
9.9
|
|
|
66.6
|
|
|
76.5
|
|
|
18.5
|
|
|
51.6
|
|
|
70.1
|
|
Cash and cash equivalents at end of period
|
$
|
23.1
|
|
|
$
|
94.6
|
|
|
$
|
117.7
|
|
|
$
|
16.3
|
|
|
$
|
59.8
|
|
|
$
|
76.1
|
|
The net cash provided by financing activities during the three months ended March 31, 2020 and 2019 includes $42.8 million and $37.8 million, respectively, of net subscriptions we made into the consolidated T. Rowe Price investment products, net of dividends received. These cash flows were eliminated in consolidation.
FAIR VALUE MEASUREMENTS.
We determine the fair value of investments held by consolidated T. Rowe Price investment products using the following broad levels of inputs as defined by related accounting standards:
Level 1 – quoted prices in active markets for identical securities.
Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data obtained from independent sources.
Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. The value of investments using Level 3 inputs is insignificant.
These levels are not necessarily an indication of the risk or liquidity associated with these investment holdings. The following table summarizes the investment holdings held by our consolidated T. Rowe Price investment products using fair value measurements determined based on the differing levels of inputs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2020
|
|
12/31/2019
|
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 1
|
|
Level 2
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
22.5
|
|
|
$
|
—
|
|
|
$
|
9.1
|
|
|
$
|
1.1
|
|
Equity securities
|
149.9
|
|
|
548.3
|
|
|
162.8
|
|
|
724.5
|
|
Fixed income securities
|
—
|
|
|
1,097.9
|
|
|
—
|
|
|
1,248.6
|
|
Other investments
|
3.3
|
|
|
39.2
|
|
|
2.7
|
|
|
33.8
|
|
|
$
|
175.7
|
|
|
$
|
1,685.4
|
|
|
$
|
174.6
|
|
|
$
|
2,008.0
|
|
|
|
|
|
|
|
|
|
Liabilities
|
$
|
(2.3
|
)
|
|
$
|
(31.9
|
)
|
|
$
|
(.4
|
)
|
|
$
|
(11.2
|
)
|
NOTE 6 – STOCKHOLDERS’ EQUITY.
Accounts payable and accrued expenses includes liabilities of $7.9 million at March 31, 2020, and $12.2 million at December 31, 2019, for common stock repurchases that settled during the first week of April 2020 and January 2020, respectively.
NOTE 7 – STOCK-BASED COMPENSATION.
STOCK OPTIONS.
The following table summarizes the status of, and changes in, our stock options during the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted-
average
exercise
price
|
Outstanding at December 31, 2019
|
7,388,068
|
|
|
$
|
71.06
|
|
Exercised
|
(1,540,694
|
)
|
|
$
|
67.50
|
|
Forfeited
|
(1,428
|
)
|
|
$
|
76.00
|
|
Outstanding at March 31, 2020
|
5,845,946
|
|
|
$
|
72.00
|
|
Exercisable at March 31, 2020
|
5,176,419
|
|
|
$
|
71.50
|
|
RESTRICTED SHARES AND STOCK UNITS.
The following table summarizes the status of, and changes in, our nonvested restricted shares and restricted stock units during the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
shares
|
|
Restricted
stock
units
|
|
Weighted-average
fair value
|
Nonvested at December 31, 2019
|
7,404
|
|
|
6,718,261
|
|
|
$
|
98.75
|
|
Time-based grants
|
—
|
|
|
15,184
|
|
|
$
|
126.33
|
|
Dividend equivalents granted to non-employee directors
|
—
|
|
|
643
|
|
|
$
|
98.80
|
|
Vested
|
—
|
|
|
(62,499
|
)
|
|
$
|
95.26
|
|
Forfeited
|
—
|
|
|
(34,004
|
)
|
|
$
|
97.30
|
|
Nonvested at March 31, 2020
|
7,404
|
|
|
6,637,585
|
|
|
$
|
98.85
|
|
Nonvested at March 31, 2020, includes 403,008 performance-based restricted stock units, including 318,768 restricted stock units for which the performance period has expired, and the performance threshold has been met.
FUTURE STOCK-BASED COMPENSATION EXPENSE.
The following table presents the compensation expense to be recognized over the remaining vesting periods of the stock-based awards outstanding at March 31, 2020. Estimated future compensation expense will change to reflect future grants of restricted stock awards and units, future option grants, changes in the probability of performance thresholds being met, and adjustments for actual forfeitures.
|
|
|
|
|
(in millions)
|
|
Second quarter 2020
|
$
|
54.5
|
|
Third quarter 2020
|
53.2
|
|
Fourth quarter 2020
|
46.2
|
|
2021
|
108.1
|
|
2022 through 2026
|
90.0
|
|
Total
|
$
|
352.0
|
|
NOTE 8 – EARNINGS PER SHARE CALCULATIONS.
The following table presents the reconciliation of net income attributable to T. Rowe Price Group to net income allocated to our common stockholders and the weighted-average shares that are used in calculating the basic and diluted earnings per share on our common stock. Weighted-average common shares outstanding assuming dilution reflects the potential dilution, determined using the treasury stock method, that could occur if outstanding stock options were exercised and non-participating stock awards vested. No stock options had an anti-dilutive impact on the diluted earnings per common share calculation in the periods presented.
|
|
|
|
|
|
|
|
|
|
Three months ended
|
(in millions)
|
3/31/2020
|
|
3/31/2019
|
Net income attributable to T. Rowe Price Group
|
$
|
343.1
|
|
|
$
|
512.6
|
|
Less: net income allocated to outstanding restricted stock and stock unit holders
|
9.4
|
|
|
13.0
|
|
Net income allocated to common stockholders
|
$
|
333.7
|
|
|
$
|
499.6
|
|
|
|
|
|
Weighted-average common shares
|
|
|
|
Outstanding
|
234.1
|
|
|
236.6
|
|
Outstanding assuming dilution
|
236.8
|
|
|
239.6
|
|
NOTE 9 – OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS.
The changes in each component of accumulated other comprehensive loss, including reclassification adjustments for the three months ended March 31, 2020 and 2019 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended 3/31/2020
|
|
Three months ended 3/31/2019
|
|
|
Currency translation adjustments
|
|
Currency translation adjustments
|
(in millions)
|
|
Equity method investments
|
|
Consolidated T. Rowe Price investment products - variable interest entities
|
|
Total currency translation adjustments
|
|
Equity method investments
|
|
Consolidated T. Rowe Price investment products - variable interest entities
|
|
Total currency translation adjustments
|
Balances at beginning of period
|
|
$
|
(46.9
|
)
|
|
$
|
3.9
|
|
|
$
|
(43.0
|
)
|
|
$
|
(48.8
|
)
|
|
$
|
6.8
|
|
|
$
|
(42.0
|
)
|
Other comprehensive income (loss) before reclassifications and income taxes
|
|
(.1
|
)
|
|
(7.9
|
)
|
|
(8.0
|
)
|
|
4.9
|
|
|
(4.5
|
)
|
|
.4
|
|
Reclassification adjustments recognized in non-operating income
|
|
—
|
|
|
(.1
|
)
|
|
(.1
|
)
|
|
—
|
|
|
(.1
|
)
|
|
(.1
|
)
|
|
|
(.1
|
)
|
|
(8.0
|
)
|
|
(8.1
|
)
|
|
4.9
|
|
|
(4.6
|
)
|
|
.3
|
|
Net deferred tax benefits (income taxes)
|
|
—
|
|
|
2.0
|
|
|
2.0
|
|
|
(1.1
|
)
|
|
1.2
|
|
|
.1
|
|
Other comprehensive income (loss)
|
|
(.1
|
)
|
|
(6.0
|
)
|
|
(6.1
|
)
|
|
3.8
|
|
|
(3.4
|
)
|
|
.4
|
|
Balances at end of period
|
|
$
|
(47.0
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(49.1
|
)
|
|
$
|
(45.0
|
)
|
|
$
|
3.4
|
|
|
$
|
(41.6
|
)
|
The other comprehensive income (loss) in the table above excludes $17.2 million and $1.3 million of other comprehensive loss related to redeemable non-controlling interests held in our consolidated products for the three months ended March 31, 2020 and 2019, respectively.
NOTE 10 – COMMITMENTS AND CONTINGENCIES.
On February 14, 2017, T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price Trust Company, current and former members of the management committee, and trustees of the T. Rowe Price U.S. Retirement Program were named as defendants in a lawsuit filed in the United States District Court for the District of Maryland. The lawsuit alleges breaches of ERISA’s fiduciary duty and prohibited transaction provisions on behalf of a class of all participants and beneficiaries of the T. Rowe Price 401(k) Plan from February 14, 2011, to the time of judgment. The matter has been certified as a class action. T. Rowe Price believes the claims are without merit and is vigorously defending the action. This matter is in the expert discovery phase of litigation and we cannot predict the eventual outcome, or whether it will have a material negative impact on our financial results, or estimate the possible loss or range of loss that may arise from any negative outcome.
On April 27, 2016, certain shareholders in the T. Rowe Price Blue Chip Growth Fund, T. Rowe Price Capital Appreciation Fund, T. Rowe Price Equity Income Fund, T. Rowe Price Growth Stock Fund, T. Rowe Price International Stock Fund, T. Rowe Price High Yield Fund, T. Rowe Price New Income Fund and T. Rowe Price Small Cap Stock Fund (the “Funds”) filed a Section 36(b) complaint under the caption Zoidis v. T. Rowe Price Assoc., Inc., against T. Rowe Price Associates, Inc. (“T. Rowe Price”) in the United States District Court for the Northern District of California. The complaint alleges that the management fees for the identified funds are excessive because
T. Rowe Price charges lower advisory fees to subadvised clients with funds in the same strategy. The complaint seeks to recover the allegedly excessive advisory fees received by T. Rowe Price in the year preceding the start of the lawsuit, along with investments’ returns and profits. In the alternative, the complaint seeks the rescission of each fund’s investment management agreement and restitution of any allegedly excessive management fees.
T. Rowe Price believes the claims are without merit and is vigorously defending the action. This matter is in the discovery phase of litigation and we cannot predict the eventual outcome, or whether it will have a material negative impact on our financial results, or estimate the possible loss or range of loss that may arise from any negative outcome.
In addition to the matters discussed above, various claims against us arise in the ordinary course of business, including employment-related claims. In the opinion of management, after consultation with counsel, the likelihood of an adverse determination in one or more of these pending ordinary course of business claims that would have a material adverse effect on our financial position or results of operations is remote.