SEC Filing | T. Rowe Price Group, Inc.

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trow-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-32191

______________________________________

T. ROWE PRICE GROUP, INC.

(Exact name of registrant as specified in its charter)


Maryland						52-2264646
(State of incorporation)						(I.R.S. Employer Identification No.)

100 East Pratt Street, Baltimore, Maryland 21202

(Address, including Zip Code, of principal executive offices)

(410) 345-2000

(Registrant’s telephone number, including area code)

________________


Common stock, $.20 par value per share	TROW	The NASDAQ Stock Market LLC
(title of security)	(ticker symbol)	(Name of exchange on which registered)

______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer (do not check if smaller reporting company)	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date,

April 27, 2021, is 226,855,575.

The exhibit index is at Item 6 on page 34.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	3/31/2021		12/31/2020
ASSETS
Cash and cash equivalents	$	2,830.1	$	2,151.7
Accounts receivable and accrued revenue	885.9		863.1
Investments	3,403.6		3,250.8
Assets of consolidated T. Rowe Price investment products ($1,782.9 million at March 31, 2021 and $2,497.4 million at December 31, 2020, related to variable interest entities)	1,946.8		2,695.5
Operating lease assets	110.2		117.6
Property and equipment, net	703.9		695.4
Goodwill	665.7		665.7
Other assets	218.2		219.2
Total assets	$	10,764.4	$	10,659.0

LIABILITIES
Accounts payable and accrued expenses	$	228.9	$	187.7
Liabilities of consolidated T. Rowe Price investment products ($49.0 million at March 31, 2021 and $47.7 million at December 31, 2020, related to variable interest entities)	53.7		57.7
Operating lease liabilities	146.0		154.1
Accrued compensation and related costs	260.8		133.6
Supplemental savings plan liability	769.9		772.2
Income taxes payable	284.0		85.0
Total liabilities	1,743.3		1,390.3

Commitments and contingent liabilities

Redeemable non-controlling interests	1,012.9		1,561.7

STOCKHOLDERS’ EQUITY
Preferred stock, undesignated, $.20 par value – authorized and unissued 20,000,000 shares	—		—
Common stock, $.20 par value—authorized 750,000,000; issued 226,948,000 shares at March 31, 2021 and 227,965,000 at December 31, 2020	45.4		45.6
Additional capital in excess of par value	654.6		654.6
Retained earnings	7,338.7		7,029.8
Accumulated other comprehensive loss	(30.5)		(23.0)
Total permanent stockholders’ equity	8,008.2		7,707.0
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity	$	10,764.4	$	10,659.0

The accompanying notes are an integral part of these statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)


	Three months ended
	3/31/2021		3/31/2020
Revenues
Investment advisory fees	$	1,687.8	$	1,327.8
Administrative, distribution, and servicing fees	139.0		134.8
Net revenues	1,826.8		1,462.6

Operating expenses
Compensation and related costs	583.5		440.7
Distribution and servicing	85.6		65.7
Advertising and promotion	18.9		24.9
Product-related costs	41.0		41.6
Technology, occupancy, and facility costs	117.3		105.4
General, administrative, and other	87.3		77.1

Total operating expenses	933.6		755.4

Net operating income	893.2		707.2

Non-operating income (loss)
Net gains (losses) on investments	68.6		(154.6)
Net gains (losses) on consolidated investment products	37.2		(330.3)
Other income (loss)	(3.7)		(15.4)
Total non-operating income (loss)	102.1		(500.3)

Income before income taxes	995.3		206.9
Provision for income taxes	230.5		40.3
Net income	764.8		166.6
Less: net income (loss) attributable to redeemable non-controlling interests	15.4		(176.5)
Net income attributable to T. Rowe Price Group	$	749.4	$	343.1

Earnings per share on common stock of T. Rowe Price Group
Basic	$	3.20	$	1.43
Diluted	$	3.17	$	1.41

The accompanying notes are an integral part of these statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three months ended
	3/31/2021		3/31/2020
Net income	$	764.8	$	166.6
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities	(18.9)		(25.1)
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products	(2.6)		(.1)
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities	(21.5)		(25.2)
Equity method investments	(.8)		(.1)


Other comprehensive loss before income taxes	(22.3)		(25.3)
Net deferred tax benefits	3.0		2.0
Total other comprehensive loss	(19.3)		(23.3)

Total comprehensive income	745.5		143.3
Less: comprehensive income (loss) attributable to redeemable non-controlling interests	3.6		(193.7)
Total comprehensive income attributable to T. Rowe Price Group	$	741.9	$	337.0

The accompanying notes are an integral part of these statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Three months ended
	3/31/2021		3/31/2020
Cash flows from operating activities
Net income	$	764.8	$	166.6
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	49.0		46.1
Stock-based compensation expense	57.5		58.3
Net (gains) losses recognized on investments	(59.5)		167.3
Net change in T. Rowe Price investment products used to economically hedge supplemental savings plan liability	22.0		(8.9)
Net change in securities held by consolidated T. Rowe Price investment products	(120.9)		234.6
Other changes in assets and liabilities	281.8		123.7
Net cash provided by operating activities	994.7		787.7

Cash flows from investing activities
Purchases of T. Rowe Price investment products	(12.5)		(225.1)
Dispositions of T. Rowe Price investment products	60.3		299.1
Net cash of T. Rowe Price investment products on deconsolidation	(27.3)		(.8)
Additions to property and equipment	(58.8)		(46.0)
Other investing activity	7.5		.4
Net cash (used in) provided by investing activities	(30.8)		27.6

Cash flows from financing activities
Repurchases of common stock	(259.2)		(891.3)
Common share issuances under stock-based compensation plans	20.9		38.1
Dividends paid to common stockholders of T. Rowe Price Group	(252.3)		(215.2)
Net subscriptions received from redeemable non-controlling interest holders	183.1		76.1
Net cash used in financing activities	(307.5)		(992.3)

Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	.9		(1.2)

Net change in cash and cash equivalents during period	657.3		(178.2)
Cash and cash equivalents at beginning of period, including $104.8 million at December 31, 2020, and $76.5 million at December 31, 2019, held by consolidated T. Rowe Price investment products	2,256.5		1,858.3
Cash and cash equivalents at end of period, including $83.7 million at March 31, 2021, and $117.7 million at March 31, 2020, held by consolidated T. Rowe Price investment products	$	2,913.8	$	1,680.1

The accompanying notes are an integral part of these statements.

Page 5

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(shares in thousands; dollars in millions)


	Three months ended 3/31/2021
	Common shares outstanding	Common stock		Additional capital in excess of par value		Retained earnings		AOCI(1)		Total stockholders’ equity		Redeemable non-controlling interests
Balances at December 31, 2020	227,965	$	45.6	$	654.6	$	7,029.8	$	(23.0)	$	7,707.0	$	1,561.7
Net income	—	—		—		749.4		—		749.4		15.4
Other comprehensive income (loss), net of tax	—	—		—		—		(7.5)		(7.5)		(11.8)
Dividends declared ($1.08 per share)	—	—		—		(252.3)		—		(252.3)		—

Shares issued upon option exercises	572	.1		25.3		—		—		25.4		—

Net shares issued upon vesting of restricted stock units	41	—		(3.7)		—		—		(3.7)		—

Stock-based compensation expense	—	—		57.5		—		—		57.5		—
Restricted stock units issued as dividend equivalents	—	—		.1		(.1)		—		—		—
Common shares repurchased	(1,630)	(.3)		(79.2)		(188.1)		—		(267.6)		—
Net subscriptions into T. Rowe Price investment products	—	—		—		—		—		—		187.5
Net deconsolidations of T. Rowe Price investment products	—	—		—		—		—		—		(739.9)
Balances at March 31, 2021	226,948	$	45.4	$	654.6	$	7,338.7	$	(30.5)	$	8,008.2	$	1,012.9

	Three months ended 3/31/2020
	Common shares outstanding	Common stock		Additional capital in excess of par value		Retained earnings		AOCI(1)		Total stockholders’ equity		Redeemable non-controlling interests
Balances at December 31, 2019	235,214	$	47.0	$	654.6	$	6,443.5	$	(43.0)	$	7,102.1	$	1,121.0



Net income	—	—		—		343.1		—		343.1		(176.5)
Other comprehensive income (loss), net of tax	—	—		—		—		(6.1)		(6.1)		(17.2)
Dividends declared ($0.90 per share)	—	—		—		(214.7)		—		(214.7)		—

Shares issued upon option exercises	1,068	.2		41.1		—		—		41.3		—

Net shares issued upon vesting of restricted stock units	37	—		(3.0)		—		—		(3.0)		—

Stock-based compensation expense	—	—		58.3		—		—		58.3		—
Restricted stock units issued as dividend equivalents	—	—		.1		(.1)		—		—		—
Common shares repurchased	(8,334)	(1.6)		(96.5)		(788.9)		—		(887.0)		—
Net subscriptions into T. Rowe Price investment products	—	—		—		—		—		—		63.8
Net deconsolidations of T. Rowe Price investment products	—	—		—		—		—		—		(20.1)
Balances at March 31, 2020	227,985	$	45.6	$	654.6	$	5,782.9	$	(49.1)	$	6,434.0	$	971.0

(1) Accumulated other comprehensive income.

The accompanying notes are an integral part of these statements.

Page 6

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”), subadvised funds, separately managed accounts, collective investment trusts, and other

T. Rowe Price products. The other T. Rowe Price products include 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; trust services; and non-discretionary advisory services through model delivery.

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. Certain prior year amounts have been reclassified to conform to the 2021 presentation.

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 2020 Annual Report.

NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE

We have considered all 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.

NOTE 2 – INFORMATION ABOUT RECEIVABLES, REVENUES, AND SERVICES.

Revenues earned under agreements with clients include:


	Three months ended 3/31/2021								Three months ended 3/31/2020
			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	$	1,050.2	$	78.7	$	29.1	$	1,158.0	$	876.2	$	77.2	$	27.9	$	981.3
Subadvised funds, separate accounts, collective investment trusts, and other investment products	637.6		—		—		637.6		451.6		—		—		451.6
Other clients(1)	—		31.2		—		31.2		—		29.7		—		29.7
	$	1,687.8	$	109.9	$	29.1	$	1,826.8	$	1,327.8	$	106.9	$	27.9	$	1,462.6

(1) Other clients primarily include individuals, defined contribution plans, college savings plans, and institutions related to model delivery.

Total net revenues earned from our related parties, specifically T. Rowe Price investment products, aggregate $1,482.3 million and $1,207.7 million for the three months ended March 31, 2021 and 2020, respectively. Accounts

Page 7

receivable from these products aggregate to $540.0 million at March 31, 2021, and $523.4 million at December 31, 2020.

In the second quarter of 2020, we changed our fee structure of the target date retirement funds such that our investment advisory fee revenue is now earned at the target date retirement fund level rather than at the underlying mutual fund level. As a result, we have modified our investment advisory fee and assets under management presentation below to separately breakout the fees earned and assets under management of our multi-asset portfolios. All prior periods have been recast to conform to this new presentation and to provide comparability.

The following table details the investment advisory fees earned from clients by their underlying asset class.


	Three months ended
(in millions)	3/31/2021		3/31/2020
U.S. mutual funds
Equity	$	729.8	$	568.4
Fixed income, including money market	59.0		71.7
Multi-asset	261.4		236.1
	1,050.2		876.2
Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity	429.8		279.5
Fixed income, including money market	31.7		38.0
Multi-asset	176.1		134.1
	637.6		451.6
Total	$	1,687.8	$	1,327.8

The following table summarizes the assets under management on which we earn investment advisory fees.


	Average during
	Three months ended				As of
(in billions)	3/31/2021		3/31/2020			3/31/2021		12/31/2020
U.S. mutual funds
Equity	$	509.6	$	388.3		$	511.7	$	498.6
Fixed income, including money market	82.3		75.7			82.6		79.4
Multi-asset	222.6		190.3			222.1		216.6
	814.5		654.3			816.4		794.6
Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity	418.9		277.5			405.5		397.2
Fixed income, including money market	80.2		81.3			90.2		89.3
Multi-asset	195.2		149.6			205.9		189.4
	694.3		508.4			701.6		675.9
Total	$	1,508.8	$	1,162.7		$	1,518.0	$	1,470.5

Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for 8.8% and 9.3% of our assets under management at March 31, 2021, and December 31, 2020, respectively.

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NOTE 3 – INVESTMENTS.

The carrying values of our investments that are not part of the consolidated T. Rowe Price investment products are as follows:


(in millions)	3/31/2021		12/31/2020

Investments held at fair value
T. Rowe Price investment products
Discretionary investments	$	1,664.3	$	1,647.7
Seed capital	269.5		169.5
Supplemental savings plan liability economic hedges	766.9		768.1
Investment partnerships and other investments	100.6		95.1
Equity method investments
T. Rowe Price investment products
Discretionary investments	245.8		242.9
Seed capital	203.7		178.6

23% investment in UTI Asset Management Company Limited (India)	149.1		145.5
Investment partnerships and other investments	2.7		2.4
U.S. Treasury note	1.0		1.0
Total	$	3,403.6	$	3,250.8

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 transferability restrictions. 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, 2021, net gains on investments included $38.8 million of net unrealized gains related to investments held at fair value that were still held at March 31, 2021. For the same period of 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.

During the three months ended March 31, 2021 and 2020, 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, 2020, 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.


	Three months ended
(in millions)	3/31/2021		3/31/2020
Net decrease in assets of consolidated T. Rowe Price investment products	$	(928.1)	$	(46.2)
Net decrease in liabilities of consolidated T. Rowe Price investment products	$	(15.3)	$	(2.4)
Net decrease in redeemable non-controlling interests	$	(739.9)	$	(20.1)

Gains recognized upon deconsolidation	$	2.6	$	.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.

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VARIABLE INTEREST ENTITIES.

Our investments at March 31, 2021 and December 31, 2020, 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:


(in millions)	3/31/2021		12/31/2020
Investment carrying values	$	289.6	$	144.7
Unfunded capital commitments	11.3		12.3
Accounts receivable	60.7		13.8
	$	361.6	$	170.8

The unfunded capital commitments totaling $11.3 million at March 31, 2021 and $12.3 million at December 31, 2020 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 investments held at fair value 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.


	3/31/2021				12/31/2020
(in millions)	Level 1		Level 2		Level 1		Level 2
T. Rowe Price investment products
Cash equivalents held in money market funds	2,487.5		$	—	$	1,931.1	$	—
Discretionary investments	1,664.3		—		1,647.7		—
Seed capital	254.6		14.9		156.6		12.9
Supplemental savings plan liability economic hedges	766.9				768.1		—
Other investments	.2		.7		.5		.6
Total	$	5,173.5	$	15.6	$	4,504.0	$	13.5

The fair value hierarchy level 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 $99.7 million at March 31, 2021, and $94.0 million at December 31, 2020.

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.

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The following table details the net assets of the consolidated T. Rowe Price investment products:


	3/31/2021						12/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Cash and cash equivalents(1)	$	3.0	$	80.7	$	83.7	$	7.1	$	97.7	$	104.8
Investments(2)	157.5		1,664.5		1,822.0		188.2		2,372.7		2,560.9
Other assets	3.4		37.7		41.1		2.8		27.0		29.8
Total assets	163.9		1,782.9		1,946.8		198.1		2,497.4		2,695.5
Liabilities	4.7		49.0		53.7		10.0		47.7		57.7
Net assets	$	159.2	$	1,733.9	$	1,893.1	$	188.1	$	2,449.7	$	2,637.8

Attributable to T. Rowe Price Group	$	96.4	$	783.8	$	880.2	$	130.7	$	945.4	$	1,076.1
Attributable to redeemable non-controlling interests	62.8		950.1		1,012.9		57.4		1,504.3		1,561.7
	$	159.2	$	1,733.9	$	1,893.1	$	188.1	$	2,449.7	$	2,637.8

(1) Cash and cash equivalents includes $2.8 million at March 31, 2021, and $7.0 million at December 31, 2020, of T. Rowe Price money market mutual funds.

(2) Investments include $24.4 million at March 31, 2021, and $26.9 million at December 31, 2020 of other 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, 2021 and 2020, are reflected in our unaudited condensed consolidated statements of income as follows:


	Three months ended
	3/31/2021						3/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Operating expenses reflected in net operating income	$	(.2)	$	(3.3)	$	(3.5)	$	(.2)	$	(3.5)	$	(3.7)
Net investment income (loss) reflected in non-operating income (loss)	6.1		31.1		37.2		(35.2)		(295.1)		(330.3)
Impact on income before taxes	$	5.9	$	27.8	$	33.7	$	(35.4)	$	(298.6)	$	(334.0)

Net income (loss) attributable to T. Rowe Price Group	$	4.0	$	14.3	$	18.3	$	(22.6)	$	(134.9)	$	(157.5)
Net income (loss) attributable to redeemable non-controlling interests	1.9		13.5		15.4		(12.8)		(163.7)		(176.5)
	$	5.9	$	27.8	$	33.7	$	(35.4)	$	(298.6)	$	(334.0)

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 $1.3 million and $2.5 million for the three months ended March 31, 2021 and 2020, respectively, against the investment advisory and administrative fees earned from these products. The net investment income (loss) reflected in non-

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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, 2021 and 2020.


	Three months ended
	3/31/2021						3/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Net cash provided by (used in) operating activities	$	(31.7)	$	(112.0)	$	(143.7)	$	11.3	$	(87.0)	$	(75.7)
Net cash used in investing activities	(9.1)		(18.2)		(27.3)		(.8)		—		(.8)
Net cash provided by financing activities	36.7		112.3		149.0		2.7		116.2		118.9
Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	—		.9		.9		—		(1.2)		(1.2)
Net change in cash and cash equivalents during period	(4.1)		(17.0)		(21.1)		13.2		28.0		41.2
Cash and cash equivalents at beginning of year	7.1		97.7		104.8		9.9		66.6		76.5
Cash and cash equivalents at end of period	$	3.0	$	80.7	$	83.7	$	23.1	$	94.6	$	117.7

The net cash provided by financing activities during the three months ended March 31, 2021 and 2020 includes $34.1 million and $42.8 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.


	3/31/2021				12/31/2020
(in millions)	Level 1		Level 2		Level 1		Level 2
Assets
Cash equivalents	$	2.8	$	—	$	7.0	$	—
Equity securities	225.7		449.9		308.0		708.0
Fixed income securities	—		1,107.2		—		1,411.3
Other investments	4.0		35.2		2.6		131.0
	$	232.5	$	1,592.3	$	317.6	$	2,250.3

Liabilities	$	(.4)	$	(9.9)	$	(.4)	$	(18.8)

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NOTE 6 – STOCKHOLDERS’ EQUITY.

Accounts payable and accrued expenses includes liabilities of $10.9 million at March 31, 2021, and $2.5 million at December 31, 2020, for common stock repurchases that settled during the first week of April 2021 and January 2021, 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, 2021.


	Options	Weighted- average exercise price
Outstanding at December 31, 2020	4,329,056	$	72.52



Exercised	(748,203)	$	72.28


Outstanding at March 31, 2021	3,580,853	$	72.57
Exercisable at March 31, 2021	3,580,853	$	72.57

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, 2021.


	Restricted shares	Restricted stock units	Weighted-average fair value
Nonvested at December 31, 2020	7,412	6,367,059	$	116.51
Time-based grants	—	3,397	$	154.03

Dividend equivalents granted to non-employee directors	—	550	$	172.22
Vested	—	(64,942)	$	97.37
Forfeited	—	(19,489)	$	114.66
Nonvested at March 31, 2021	7,412	6,286,575	$	116.73

Nonvested at March 31, 2021, includes performance-based restricted stock units of 361,609. These nonvested performance-based restricted stock units include 198,205 units for which the performance period has lapsed, 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, 2021. 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 2021	$	56.9
Third quarter 2021	56.7
Fourth quarter 2021	50.2
2022	117.4
2023 through 2026	97.2
Total	$	378.4

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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 outstanding stock options had an anti-dilutive impact on the diluted earnings per common share calculation in the periods presented.