Release Details

Nine months ended

(in millions, except per-share data)

Q3 2017⁽¹⁾

Q3 2018

%
change

Q2 2018

Q3 2018
vs.
Q2 2018

9/30/2017⁽¹⁾

9/30/2018

%
change

U.S. GAAP basis

Investment advisory fees

$

1,098.9

$

1,263.3

15.0

%

$

1,214.4

4.0

%

$

3,137.6

$

3,666.9

16.9

%

Net revenues

$

1,238.7

$

1,394.6

12.6

%

$

1,345.0

3.7

%

$

3,557.3

$

4,067.6

14.3

%

Operating expenses

$

690.2

$

754.0

9.2

%

$

750.3

0.5

%

$

1,979.5

$

2,248.5

13.6

%

Net operating income

$

548.5

$

640.6

16.8

%

$

594.7

7.7

%

$

1,577.8

$

1,819.1

15.3

%

Non-operating income⁽²⁾

$

67.3

$

124.9

n/m

$

34.1

n/m

$

294.3

$

175.1

n/m

Net income attributable to T. Rowe
Price Group

$

390.9

$

583.0

49.1

%

$

448.9

29.9

%

$

1,150.7

$

1,485.6

29.1

%

Diluted earnings per common share

$

1.56

$

2.30

47.4

%

$

1.77

29.9

%

$

4.60

$

5.85

27.2

%

Weighted average common shares
outstanding assuming dilution

244.4

247.5

1.3

%

247.4

—

%

244.3

248.2

1.6

%

Adjusted-non-GAAP basis⁽³⁾

Operating expenses

$

682.7

$

744.5

9.1

%

$

745.3

(.1)%

$

2,018.5

$

2,230.8

10.5

%

Net income attributable to T. Rowe
Price Group

$

362.1

$

505.0

39.5

%

$

472.8

6.8

%

$

977.2

$

1,423.4

45.7

%

Diluted earnings per common share

$

1.45

$

1.99

37.2

%

$

1.87

6.4

%

$

3.91

$

5.60

43.2

%

Assets under Management (in billions)

Average AUM

$

927.4

$

1,072.4

15.6

%

$

1,036.5

3.5

%

$

886.3

$

1,045.0

17.9

%

Ending AUM

$

947.9

$

1,083.8

14.3

%

$

1,044.1

3.8

%

$

947.9

$

1,083.8

14.3

%

⁽¹⁾

Results for 2017 were recast to reflect the adoption of the new revenue recognition accounting guidance on January 1, 2018. For further information, refer to the Form 10-Q for the period-ended September 30, 2018, filed with the SEC on October 25, 2018.

⁽²⁾

The percentage change in non-operating income is not meaningful (n/m).

⁽³⁾

See the reconciliation to the comparable U.S. GAAP measures at the end of this earnings release.

Quarter ended 9/30/2018

Nine months ended 9/30/2018

(in billions)

U.S.
mutual
funds

Subadvised
and separate
accounts

Other
investment
products

Total

U.S.
mutual
funds

Subadvised
and separate
accounts

Other
investment
products

Total

Assets under management
at beginning of period

$

626.1

$

268.8

$

149.2

$

1,044.1

$

606.3

$

255.2

$

129.6

$

991.1

Net cash flows before client
transfers

(.5)

1.5

1.7

2.7

11.6

2.0

8.0

21.6

Client transfers

(3.2)

—

3.2

—

(16.8)

2.6

14.2

—

Net cash flows after client
transfers

(3.7)

1.5

4.9

2.7

(5.2)

4.6

22.2

21.6

Net market appreciation
and income

22.5

11.0

3.6

37.1

44.5

21.5

5.9

71.9

Distributions not reinvested

(.1)

—

—

(.1)

(.8)

—

—

(.8)

Change during the period

18.7

12.5

8.5

39.7

38.5

26.1

28.1

92.7

Assets under management
at September 30, 2018

$

644.8

$

281.3

$

157.7

$

1,083.8

$

644.8

$

281.3

$

157.7

$

1,083.8

Quarter ended 9/30/2018

Nine months ended 9/30/2018

(in billions)

Equity

Fixed
income,
including
money
market

Multi-
asset⁽¹⁾

Total

Equity

Fixed
income,
including
money
market

Multi-
asset⁽¹⁾

Total

Assets under management
at beginning of period

$

603.6

$

136.4

$

304.1

$

1,044.1

$

564.1

$

134.4

$

292.6

$

991.1

Net cash flows

(.7)

1.0

2.4

2.7

5.9

4.3

11.4

21.6

Net market
appreciation/(depreciation)
and income⁽²⁾

28.8

.5

7.7

37.0

61.7

(.8)

10.2

71.1

Change during the period

28.1

1.5

10.1

39.7

67.6

3.5

21.6

92.7

Assets under management
at September 30, 2018

$

631.7

$

137.9

$

314.2

$

1,083.8

$

631.7

$

137.9

$

314.2

$

1,083.8

⁽¹⁾ 

The underlying assets under management of the multi-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.

⁽²⁾ 

Reported net of distributions not reinvested.

Statutory U.S. federal income tax rate

21.0

%

Impact of nonrecurring charge related to U.S. tax reform recognized in the second quarter

1.0

%

Impact of nonrecurring charge related to new Maryland state tax legislation recognized in the second quarter

.4

%

State income taxes for current year, net of federal income tax benefits⁽¹⁾

4.6

%

Net income attributable to redeemable non-controlling interests

(.2)

%

Net excess tax benefits from stock-based compensation plans activity

(1.8)

%

Other items

(.1)

%

Effective income tax rate

24.9

%

⁽¹⁾

State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.

(in millions)

12/31/2017

9/30/2018

Cash and cash equivalents

$

1,902.7

$

2,090.6

Discretionary investments

780.3

1,636.4

Total cash and discretionary investments

2,683.0

3,727.0

Redeemable seed capital investments

1,188.9

1,204.5

Investments used to hedge the supplemental savings plan liability

268.2

294.6

Total cash and investments in T. Rowe Price products

$

4,140.1

$

5,226.1

1 year

3 years

5 years

10 years

Outperformed Morningstar median

    All funds

47%

70%

81%

79%

    Multi-asset funds

42%

81%

88%

89%

Top Morningstar quartile

    All funds

22%

39%

45%

53%

    Multi-asset funds

15%

53%

53%

84%

⁽¹⁾

Source: © 2018 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Historically, the firm has disclosed the percentage of U.S. mutual funds (across all share classes) that outperformed their comparable Lipper averages on a total return basis and that are in the top Lipper quartile for the same periods. Investment performance results using the new measures are similar to the Lipper results.

Unaudited Consolidated Statements of Income

(in millions, except per-share amounts)

Three months ended

Three months ended

Nine months ended

Revenues

9/30/2017⁽¹⁾

9/30/2018

Q3 2018
vs. 
Q3 2017⁽²⁾

6/30/2018

Q3 2018
vs. 
Q2 2018⁽²⁾

9/30/2017⁽¹⁾

9/30/2018

% change⁽²⁾

Investment advisory fees

$

1,098.9

$

1,263.3

15.0

%

$

1,214.4

4.0

%

$

3,137.6

$

3,666.9

16.9

%

Administrative, distribution, and
servicing fees

139.8

131.3

(6.1)%

130.6

0.5

%

419.7

400.7

(4.5)

%

Net revenues

1,238.7

1,394.6

12.6

%

1,345.0

3.7

%

3,557.3

4,067.6

14.3

%

Operating expenses⁽³⁾

Compensation and related costs

417.4

454.3

8.8

%

456.0

(0.4)%

1,218.6

1,351.7

10.9

%

Distribution and servicing

67.4

71.4

5.9

%

71.6

(0.3)%

192.0

213.3

11.1

%

Advertising and promotion

14.0

20.2

44.3

%

19.0

6.3

%

58.4

63.8

9.2

%

Product-related costs

37.9

37.9

—

%

37.1

2.2

%

110.9

117.1

5.6

%

Technology, occupancy, and
facility costs

86.3

96.5

11.8

%

93.2

3.5

%

254.7

283.8

11.4

%

General, administrative, and
other

67.2

73.7

9.7

%

73.4

0.4

%

194.9

218.8

12.3

%

Nonrecurring insurance
recoveries related to Dell
appraisal rights matter

—

—

—

—

—

(50.0)

—

n/m

Total operating expenses

690.2

754.0

9.2

%

750.3

.5

%

1,979.5

2,248.5

13.6

%

Net operating income

548.5

640.6

16.8

%

594.7

7.7

%

1,577.8

1,819.1

15.3

%

Non-operating income

Net gains on investments

28.9

116.1

n/m

17.4

n/m

165.1

147.9

n/m

Net gains on consolidated
investment products

37.5

8.7

n/m

19.1

n/m

125.8

28.6

n/m

Other income (loss)

.9

.1

n/m

(2.4)

n/m

3.4

(1.4)

n/m

   Total non-operating income

67.3

124.9

n/m

34.1

n/m

294.3

175.1

n/m

Income before income taxes

615.8

765.5

24.3

%

628.8

21.7

%

1,872.1

1,994.2

6.5

%

Provision for income taxes

211.6

183.9

(13.1)%

169.2

8.7

%

677.5

497.5

(26.6)

%

Net income

404.2

581.6

43.9

%

459.6

26.5

%

1,194.6

1,496.7

25.3

%

Less: net income attributable to
redeemable non-controlling
interests

13.3

(1.4)

(110.5)%

10.7

(113.1)%

43.9

11.1

(74.7)

%

Net income attributable to
T. Rowe Price Group

390.9

583.0

49.1

%

448.9

29.9

%

1,150.7

1,485.6

29.1

%

Less: net income allocated to
outstanding restricted stock and
stock unit holders

8.8

13.7

55.7

%

10.5

30.5

%

26.0

34.8

33.8

%

Net income allocated to T.
Rowe Price Group common
stockholders

$

382.1

$

569.3

49.0

%

$

438.4

29.9

%

$

1,124.7

$

1,450.8

29.0

%

Earnings per share

Basic

$

1.59

$

2.34

47.2

%

$

1.81

29.3

%

$

4.67

$

5.97

27.8

%

Diluted

$

1.56

$

2.30

47.4

%

$

1.77

29.9

%

$

4.60

$

5.85

27.2

%

Weighted-average common
shares

Outstanding

240.3

242.8

1.0

%

242.2

.2

%

240.7

243.1

1.0

%

Outstanding assuming dilution

244.4

247.5

1.3

%

247.4

—

%

244.3

248.2

1.6

%

Dividends declared per share

$

.57

$

.70

22.8

%

$

.70

—

%

$

1.71

$

2.10

22.8

%

⁽¹⁾

Results for 2017 were recast to reflect the adoption of the new revenue recognition accounting guidance on January 1, 2018. For further information, refer to the Form 10-Q for the period ended September 30, 2018 filed with the SEC on October 25, 2018.

⁽²⁾

The percentage change in non-operating income and nonrecurring insurance recoveries is not meaningful (n/m).

⁽³⁾

Certain 2017 amounts have been reclassified to conform to the firm's new income statement presentation. For a recast of 2017 quarterly financial results, refer to the Form 10-Q for the period ended September 30, 2018, filed with the SEC on October 25, 2018.

Investment Advisory Revenues (in millions)

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

U.S. mutual funds

Equity and blended assets

$

657.0

$

745.5

$

1,880.1

$

2,169.0

Fixed income, including money market

129.1

131.8

379.8

388.1

786.1

877.3

2,259.9

2,557.1

Subadvised and separate accounts and other investment products

Equity and blended assets

259.6

326.0

727.8

931.0

Fixed income, including money market

53.2

60.0

149.9

178.8

312.8

386.0

877.7

1,109.8

Total

$

1,098.9

$

1,263.3

$

3,137.6

$

3,666.9

Assets Under Management (in billions)

Average during

Three months ended

Nine months ended

As of

9/30/2017

9/30/2018

9/30/2017

9/30/2018

12/31/2017

9/30/2018

U.S. mutual funds

Equity and blended assets

$

452.9

$

511.6

$

438.2

$

500.8

$

480.5

$

515.1

Fixed income, including money market

123.2

129.9

119.6

128.6

125.8

129.7

576.1

641.5

557.8

629.4

606.3

644.8

Subadvised and separate accounts and other
investment products

Equity and blended assets

264.6

331.8

247.0

318.4

291.9

338.8

Fixed income, including money market

86.7

99.1

81.5

97.2

92.9

100.2

351.3

430.9

328.5

415.6

384.8

439.0

Total

$

927.4

$

1,072.4

$

886.3

$

1,045.0

$

991.1

$

1,083.8

Net Cash Flows After Client Transfers (by investment vehicle and underlying asset class)⁽¹⁾⁽²⁾

Three
months
ended

Nine months
ended

(in billions)

9/30/2018

9/30/2018

U.S. mutual funds

Equity and blended assets

$

(4.6)

$

(10.2)

Fixed income, including money market

.9

5.0

(3.7)

(5.2)

Subadvised and separate accounts and other investment products

Equity and blended assets

4.0

18.6

Fixed income, including money market

2.4

8.2

6.4

26.8

Total net cash flows after client transfers

$

2.7

$

21.6

⁽¹⁾

The asset class net cash flows above include, in addition to net client flows, rebalancing within the target date portfolios in order to maintain their targeted asset allocations.

⁽²⁾ 

The underlying assets of the multi-asset portfolios that invest in T. Rowe Price products have been broken out and included in their respective vehicle and asset class amounts.

Non-Operating Income (in millions)

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Net gains from non-consolidated T. Rowe Price investment products

Net realized gains on dispositions of available-for-sale investments

$

.1

$

—

$

78.0

$

—

Ordinary and capital gain dividend distributions

5.3

14.4

11.2

33.7

Market gains (losses) on equity method and other investments at fair value

(16.3)

7.1

26.0

(6.5)

Gains reclassified from accumulated other comprehensive income upon
transfer of an available-for-sale sponsored investment portfolio to sponsored
investment portfolios held as trading

23.6

—

23.6

—

Net gain recognized upon deconsolidation

.1

—

.1

3.6

Dividends and market gains on investment products used to hedge the
supplemental savings plan liability

6.1

6.3

6.1

14.2

Total net gains from non-consolidated T. Rowe Price investment products

18.9

27.8

145.0

45.0

Other investment income

10.0

88.3

20.1

102.9

Net gains on investments

28.9

116.1

165.1

147.9

Net gains (losses) on consolidated sponsored investment portfolios

37.5

8.7

125.8

28.6

Other income, including foreign currency gains and losses

.9

.1

3.4

(1.4)

Non-operating income

$

67.3

$

124.9

$

294.3

$

175.1

Unaudited Condensed Consolidated Cash Flows Information (in millions)

Nine months ended

9/30/2017

9/30/2018

Cash flow
attributable
to T. Rowe
Price Group

Cash flow
attributable to
consolidated
T. Rowe Price
investment
products, net
of eliminations

As
reported
on
statement
of cash
flows

Cash flow
attributable
to T. Rowe
Price Group

Cash flow
attributable to
consolidated
T. Rowe Price
investment
products, net
of eliminations

As
reported
on
statement
of cash
flows

Cash provided by (used in) operating
activities, including $135.3 of stock-based
compensation expense and $114.9 of
depreciation expense in 2018

$

1,462.4

$

(1,109.6)

$

352.8

$

2,060.9

$

(574.5)

$

1,486.4

Cash provided by (used in) investing activities
attributable to T. Rowe Price Group in 2018,
including ($121.5) for additions to property
and equipment and ($1,118.7) of additions to
T. Rowe Price investment products

(63.2)

138.6

75.4

(923.7)

93.3

(830.4)

Cash provided by (used in) financing activities,
including T. Rowe Price Group common stock
repurchases of ($543.0) and dividends paid of
($522.3) in 2018

(734.7)

1,005.3

270.6

(949.3)

486.2

(463.1)

Effect of exchange rate changes on cash and
cash equivalents

—

6.9

6.9

—

(2.4)

(2.4)

Net change in cash and cash equivalents
during period

$

664.5

$

41.2

$

705.7

$

187.9

$

2.6

$

190.5

Unaudited Condensed Consolidated Balance Sheet Information (in millions)

As of

12/31/2017

9/30/2018

Cash and cash equivalents

$

1,902.7

$

2,090.6

Accounts receivable and accrued revenue

565.3

583.1

Investments

1,477.3

2,414.4

Assets of consolidated T. Rowe Price investment products

2,048.4

1,917.8

Property and equipment, net

652.0

657.0

Goodwill

665.7

665.7

Other assets

224.0

202.0

Total assets

7,535.4

8,530.6

Total liabilities, includes $55.9 at December 31, 2017, and $74.7 at September 30, 2018, from consolidated 
T. Rowe Price investment products

718.2

1,209.5

Redeemable non-controlling interests

992.8

860.6

Stockholders' equity, 242.6 common shares outstanding at September 30, 2018

$

5,824.4

$

6,460.5

Cash, Cash Equivalents, and Investments Information (in millions)

Cash and cash
equivalents

Investments

Net assets of
consolidated T.
Rowe Price
investment
products

9/30/2018

Cash and discretionary investments

$

2,090.6

$

1,607.7

$

28.7

$

3,727.0

Seed capital investments

—

250.7

953.8

1,204.5

Investment products used to hedge supplemental savings plan

—

294.6

—

294.6

Total cash and investments in T. Rowe Price products attributable
to T. Rowe Price Group

2,090.6

2,153.0

982.5

5,226.1

 Investment in UTI and other investments

—

261.4

—

261.4

Total cash and investments attributable to T. Rowe Price Group

2,090.6

2,414.4

982.5

5,487.5

Redeemable non-controlling interests

—

—

860.6

860.6

As reported on unaudited condensed consolidated balance sheet
at September 30, 2018

$

2,090.6

$

2,414.4

$

1,843.1

$

6,348.1

Three months ended

Nine months ended

(in millions, except for per-share amounts)

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Operating expenses, GAAP basis

$

690.2

$

754.0

$

1,979.5

$

2,248.5

Non-GAAP adjustments:

Expenses of consolidated T. Rowe Price investment products, net of
elimination of its related management and administrative fees⁽¹⁾

(1.8)

(2.1)

(5.3)

(4.6)

Compensation expense related to market valuation changes in the
supplemental savings plan liability⁽²⁾

(5.7)

(7.4)

(5.7)

(13.1)

Insurance recoveries related to Dell appraisal rights matter⁽⁴⁾

—

—

50.0

—

Adjusted operating expenses

$

682.7

$

744.5

$

2,018.5

$

2,230.8

Net income attributable to T. Rowe Price Group, GAAP basis

$

390.9

$

583.0

$

1,150.7

$

1,485.6

Non-GAAP adjustments:

Net income of consolidated T. Rowe Price investment products, net of
redeemable non-controlling interests⁽¹⁾

(21.0)

(6.5)

(73.4)

(8.3)

Non-operating income of investments designated as an economic hedge of
the supplemental savings plan liability less related compensation expense⁽²⁾

(.4)

1.1

(.4)

(1.1)

Other non-operating income⁽³⁾

(23.7)

(92.2)

(162.4)

(106.6)

Insurance recoveries related to Dell appraisal rights matter⁽⁴⁾

—

—

(50.0)

—

Income tax impacts of non-GAAP adjustments⁽⁵⁾

16.3

19.6

112.7

25.1

Nonrecurring charge related to enactment of U.S. tax reform⁽⁶⁾

—

—

—

20.8

Nonrecurring charge related to enactment of Maryland state tax legislation⁽⁷⁾

—

—

—

7.9

Adjusted net income attributable to T. Rowe Price Group

$

362.1

$

505.0

$

977.2

$

1,423.4

Diluted earnings per common share, GAAP basis

$

1.56

$

2.30

$

4.60

$

5.85

Non-GAAP adjustments:

Consolidated T. Rowe Price investment products⁽¹⁾

(.05)

(.02)

(.18)

(.03)

Other non-operating income⁽³⁾

(.06)

(.29)

(.39)

(.33)

Insurance recoveries related to Dell appraisal rights matter⁽⁴⁾

—

—

(.12)

—

Nonrecurring charge related to enactment of U.S. tax reform⁽⁶⁾

—

—

—

.08

Nonrecurring charge related to enactment of Maryland state tax legislation⁽⁷⁾

$

—

$

—

$

—

$

.03

Adjusted diluted earnings per common share⁽⁸⁾

$

1.45

$

1.99

$

3.91

$

5.60

⁽¹⁾

The non-GAAP adjustments add back the management and administrative fees that the firm earns from the consolidated T. Rowe Price investment products and subtract the investment income and operating expenses of these products that have been included in the firm's U.S. GAAP consolidated statements of income. Management believes the consolidated T. Rowe Price investment products may impact the reader's ability to understand the firm's core operating results. The following table details the calculation of operating expenses of consolidated T. Rowe Price investment products, net of elimination of its related management and administrative fees.

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Operating expenses before eliminations

$

3.2

$

3.6

$

8.5

$

9.2

Operating expenses eliminated in consolidation

(1.4)

(1.5)

(3.2)

(4.6)

Total operating expenses, net of eliminations

$

1.8

$

2.1

$

5.3

$

4.6

The following table details the calculation of net income of consolidated T. Rowe Price investment products, net of redeemable non-controlling interests:

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Net investment gains

$

37.5

$

8.7

$

125.8

$

28.6

Operating expenses

(3.2)

(3.6)

(8.5)

(9.2)

Net income

34.3

5.1

117.3

19.4

Less: net income attributable to redeemable non-controlling interests

13.3

(1.4)

43.9

11.1

T. Rowe Price Group's portion of net income

$

21.0

$

6.5

$

73.4

$

8.3

⁽²⁾

This non-GAAP adjustment removes the impact of market movements on the supplemental savings plan liability and related economic hedges of the liability beginning July 1, 2017. Amounts deferred under the supplemental savings plan are adjusted for appreciation (depreciation) of hypothetical investments chosen by the employees. Since the firm economically hedges the exposure to these market movements, management believes it is useful to offset the non-operating investment income earned on the hedges against the related compensation expense to increase comparability period to period. The following table details the supplemental savings plan related items:

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Non-operating income of investments designated as an economic hedge of
supplemental savings plan liability

$

6.1

$

6.3

$

6.1

$

14.2

Compensation expense from market valuation changes in supplemental
savings plan liability

(5.7)

(7.4)

(5.7)

(13.1)

Non-operating income of investments designated as an economic hedge of
supplemental savings plan liability less compensation expense

$

.4

$

(1.1)

$

.4

$

1.1

⁽³⁾

This non-GAAP adjustment removes the non-operating income that remains after backing out the portion related to the consolidated T. Rowe Price investment products and the investments designated as an economic hedge of our supplemental savings plan liability. Beginning in the second quarter of 2018, management modified the non-GAAP adjustment to no longer adjust for the investment gains recognized on its cash and discretionary investments, as the income earned on these assets are considered part of the firm's core operations. The impact on previously reported non-GAAP measures is immaterial. Management believes adjusting for the remaining non-operating income helps the reader's ability to understand the firm's core operating results and increases comparability to prior years. Additionally, management does not emphasize the impact of the portion of non-operating income removed when managing and evaluating the firm's performance.

Three months ended

Nine months ended

9/30/2017

9/30/2018

9/30/2017

9/30/2018

Total non-operating income

$

67.3

$

124.9

$

294.3

$

175.1

Less: net investment gains of consolidated T. Rowe Price investment products

37.5

8.7

125.8

28.6

Less: non-operating income from investments designated as an economic
hedge of supplemental savings plan liability

6.1

6.3

6.1

14.2

Less: investment gains earned on cash and discretionary investments

—

17.7

—

25.7

Total other non-operating income

$

23.7

$

92.2

$

162.4

$

106.6

⁽⁴⁾

In the first quarter of 2017, the firm recognized insurance recoveries of $50.0 million related to the Dell appraisal rights matter as a reduction in operating expenses. Management believes it is useful to readers of the firm's condensed consolidated statements of income to adjust for these insurance recoveries given the nonrecurring nature of the initial charge and related insurance recoveries.

⁽⁵⁾

The income tax impacts were calculated in order to achieve an overall year-to-date non-GAAP effective tax rate of 36.6% for 2017 and 23.8% for 2018. As such, the non-GAAP effective tax rate for the third quarter was 35.0% for 2017 and 24.5% for 2018. The firm estimates its effective tax rate for the full-year 2018 on a non-GAAP basis will be in the range of 23% to 25%.

⁽⁶⁾

During the second quarter of 2018, the firm recognized a nonrecurring charge of $20.8 million for an adjustment made to the charge taken in 2017 related to the enactment of U.S. tax reform. Management believes it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to T. Rowe Price Group and diluted earnings per share.

⁽⁷⁾

During the second quarter of 2018 the firm recognized a nonrecurring charge of $7.9 million for the remeasurement of the firm's deferred tax assets and liabilities to reflect the effect of Maryland state tax legislation enacted on April 24, 2018. Management believes it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to T. Rowe Price Group and diluted earnings per share.

⁽⁸⁾

This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price Group divided by the weighted-average common shares outstanding assuming dilution.