-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VGMO+jePX8V8hdBATjj9+EB9khjTZX/noAj4suGS/4nz7rPwlVb72VavXJ2aNDgI MNszYsIU5XC55XYvcJwfTQ== 0000080255-97-000385.txt : 19971021 0000080255-97-000385.hdr.sgml : 19971021 ACCESSION NUMBER: 0000080255-97-000385 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971020 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE ASSOCIATES INC /MD/ CENTRAL INDEX KEY: 0000080255 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 520556948 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14282 FILM NUMBER: 97697920 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: (410) 345-2000 MAIL ADDRESS: STREET 1: P.O. BOX 89000 CITY: BALTIMORE STATE: MD ZIP: 21289 10-Q 1 1 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: SEPTEMBER 30, 1997. Commission file number: 0-14282. Exact name of registrant as specified in its charter: T. ROWE PRICE ASSOCIATES, INC. State of incorporation: MARYLAND. I.R.S. Employer Identification No.: 52-0556948. Address and Zip Code of principal executive offices: 100 EAST PRATT STREET, BALTIMORE, MARYLAND 21202. Registrant's telephone number, including area code: (410) 345-2000. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) 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 [X]. No [ ]. Indicate the number of shares outstanding of the issuer's common stock ($.20 par value), as of the latest practicable date. 58,457,825 SHARES AT OCTOBER 16, 1997. Exhibit index is at Item 6(a) on page 11. 2 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) 12/31/96 09/30/97 ________ ________ ASSETS Cash and cash equivalents $114,551 $180,727 Accounts receivable 73,239 87,888 Investments in sponsored mutual funds held as available-for-sale securities 143,410 176,149 Partnership and other investments 25,161 24,275 Property and equipment 101,207 132,744 Goodwill and other assets 21,266 16,323 ________ ________ $478,834 $618,106 ________ ________ ________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 31,529 $ 31,737 Accrued compensation and retirement costs 41,523 66,454 Income taxes payable 14,464 17,760 Dividends payable 7,484 7,586 Minority interests in consolidated subsidiaries 38,168 46,196 ________ ________ Total liabilities 133,168 169,733 ________ ________ Commitments and contingent liabilities Stockholders' equity Preferred stock, undesignated, $.20 par value - authorized and unissued 20,000,000 shares -- -- Common stock, $.20 par value - authorized 200,000,000 shares; issued 57,572,791 shares in 1996 and 58,366,912 shares in 1997 11,514 11,673 Capital in excess of par value 7,823 18,249 Retained earnings 306,566 384,588 Unrealized security holding gains 19,763 33,863 ________ ________ Total stockholders' equity 345,666 448,373 ________ ________ $478,834 $618,106 ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 3 T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per-share amounts) Three months Nine months ended ended September 30, September 30, __________________________________ 1996 1997 1996 1997 ________ ________________ ________ Revenues Investment advisory fees $118,765 $158,233 $328,473 $429,079 Administrative fees 28,654 37,533 86,748 107,362 Investment and other income 2,731 4,003 11,029 11,375 ________ ________ ________ ________ 150,150 199,769 426,250 547,816 ________ ________ ________ ________ Expenses Compensation and related costs 46,691 59,944 131,842 169,810 Advertising and promotion 11,347 13,419 41,770 44,618 Depreciation, amortization and operating rentals of property and equipment 10,809 14,126 27,937 35,374 International investment research fees 9,900 13,145 28,614 35,884 Administrative and general 21,837 24,516 60,351 70,088 ________ ________ ________ ________ 100,584 125,150 290,514 355,774 ________ ________ ________ ________ Income before income taxes and minority interests 49,566 74,619 135,736 192,042 Provision for income taxes 19,220 27,968 52,793 73,254 ________ ________ ________ ________ Income from consolidated companies 30,346 46,651 82,943 118,788 Minority interests in consolidated subsidiaries 4,398 5,314 12,126 15,122 ________ ________ ________ ________ Net income $ 25,948 $ 41,337 $ 70,817 $103,666 ________ ________ ________ ________ ________ ________ ________ ________ Earnings per share $ .42 $ .64 $ 1.15 $ 1.63 ________ ________ ________ ________ ________ ________ ________ ________ Dividends declared per share $ .105 $ .13 $ .315 $ .39 ________ ________ ________ ________ ________ ________ ________ ________ Weighted average shares outstanding, including share equivalents arising from unexercised stock options 61,776 64,254 61,680 63,772 ________ ________ ________ ________ ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 4 T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Nine months ended __________________ 09/30/96 09/30/97 ________ ________ Cash flows from operating activities Net income $ 70,817 $103,666 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 13,133 19,371 Minority interests in consolidated subsidiaries 12,126 15,122 Increase in accounts receivable (12,262) (14,649) Increase in accounts payable and accrued liabilities 38,601 34,888 Other changes in assets and liabilities 3,375 (2,333) ________ ________ Net cash provided by operating activities 125,790 156,065 ________ ________ Cash flows from investing activities Investments in sponsored mutual funds (8,948) (10,453) Proceeds from dispositions of sponsored mutual funds 2,626 -- Partnership and other investments (8,940) (1,789) Distributions from partnership investments 1,666 6,348 Additions to property and equipment (37,370) (53,070) ________ ________ Net cash used in investing activities (50,966) (58,964) ________ ________ Cash flows from financing activities Purchases of stock (19,668) (9,655) Receipts relating to stock issuances 3,003 8,645 Dividends paid to stockholders (18,043) (22,545) Distributions to minority interests (45) (7,370) ________ ________ Net cash used in financing activities (34,753) (30,925) ________ ________ Cash and cash equivalents Net increase during period 40,071 66,176 At beginning of year 81,431 114,551 ________ ________ At end of period $121,502 $180,727 ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 5 T. ROWE PRICE ASSOCIATES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY AND BASIS OF PREPARATION. T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the Company) derives its revenue primarily from investment advisory and administrative services provided to sponsored mutual funds and investment portfolios and to private accounts of other institutional and individual investors. Company revenues are largely dependent on the total value and composition of assets under management, which include domestic and international equity and debt securities; accordingly, fluctuations in financial markets and in the composition of assets under management impact revenues and results of operations. At September 30, 1997, the Company's assets under management totaled $124.7 billion, including $81.7 billion in the Price funds. The unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The unaudited interim financial information contained in the condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the 1996 Annual Report to Stockholders. 6 NOTE 2 - STOCKHOLDERS' EQUITY. The following table details the changes in stockholders' equity (dollars in thousands) during the first nine months of 1997. Capital Unreal- Common in ized Total Common stock excess security stock- stock - par of par Retained holding holders' - shares value value earnings gains equity __________ _______ _______ ________ ________ ________ Balance at December 31, 1996 57,572,791 $11,514 $ 7,823 $306,566 $19,763 $345,666 Common stock issued under stock-based compensation plans 1,024,121 205 17,038 17,243 Purchases of common stock (230,000) (46) (6,612) (2,997) (9,655) Net income 103,666 103,666 Dividends declared (22,647) (22,647) Increase in unrealized security holding gains 14,100 14,100 __________ _______ _______ ________ _______ ________ Balance at September 30, 1997 58,366,912 $11,673 $18,249 $384,588 $33,863 $448,373 __________ _______ _______ ________ _______ ________ __________ _______ _______ ________ _______ ________ 7 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of T. Rowe Price Associates, Inc. We have reviewed the condensed consolidated balance sheet of T. Rowe Price Associates, Inc. and its subsidiaries as of September 30, 1997, and the related condensed consolidated statements of income and of cash flows for the three- and nine-month periods ended September 30, 1996 and 1997. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1996, and the related consolidated statements of income, of cash flows, and of stock- holders' equity for the year then ended (not presented herein), and in our report dated January 24, 1997 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ PRICE WATERHOUSE LLP Baltimore, Maryland October 17, 1997 THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS' LIABILITY PROVISIONS OF SECTION 11 OF THE ACT DO NOT APPLY. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL. T. Rowe Price Associates, Inc. (the Company) derives its revenue primarily from investment advisory and administrative services provided to the Price Mutual Funds (the Funds), other sponsored investment portfolios, and private accounts of other institutional and individual investors. Investment advisory fees are generally based on the net assets of the portfolios managed. The majority of administrative revenues are derived from services provided to the Funds. The Company's base of assets under management consists of a broad range of domestic and international stock, bond and money market mutual funds and other investment portfolios which meet the varied needs and objectives of its individual and institutional investors. During 1996 and 1997, there have been significant net cash inflows to the stock mutual funds, particularly the domestic funds. At September 30, 1997, total assets under management were $124.7 billion, including $81.7 billion in the Funds. Equity investments comprise approximately 72% of total assets under management. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS 1996. Net income increased $15.4 million or 59% to $41.3 million or $.64 per share from $25.9 million or $.42 per share. Total revenues increased 33% from $150.2 million to a record quarterly total of $199.8 million, led by an increase of $39.5 million in investment advisory fees. Investment advisory revenues from the Funds increased $31.5 million as average fund assets under management were up $21.4 billion to $79.1 billion. Fund assets totaled $81.7 billion at September 30, 1997, up $2.6 billion over the quarterly average and up $6.3 billion from June 30, 1997, with stock funds accounting for most of the increase. Net cash inflows to the Funds during the third quarter totaled $2.4 billion. Advisory fees from private accounts and other sponsored investment portfolios contributed the balance of the investment advisory revenue gains. These assets under management rose to $43.0 billion at September 30, 1997, up $1.5 billion from June 30, 1997 and $8.0 billion from December 31, 1996. Total assets under management closed the quarter at $124.7 billion, up from $116.9 billion at June 30, 1997 and $99.4 billion at December 31, 1996. Administrative fees, primarily from services to the Funds and their shareholders, grew $8.9 million to $37.5 million; however, increases in related operating expenses more than offset these revenue gains. Investment income rose nearly $1.3 million due primarily to the return on larger cash investments. Operating expenses increased 24% or $24.6 million to $125.2 million. Greater compensation and related costs of almost $13.3 million were attributable to an 18% increase in the number of employees during the past twelve months, 9 primarily to support the Company's growing administrative services and data processing operations, and to higher rates of pay including performance- related compensation accruals. Advertising and promotion expenditures increased $2.1 million as the Company sought to capitalize on the strong investor demand for stock mutual funds. These expenditures will vary over time as market conditions and cash flows to the Funds warrant. Depreciation, amortization and operating rentals of property and equipment was up 31% or $3.3 million due to expansion of facilities and recent equipment acquisitions, primarily investments in technology assets. International investment research fees increased $3.2 million as international assets under management by Rowe Price-Fleming International (RPFI) rose to $33.0 billion at September 30, 1997. Administrative and general expenses increased $2.7 million due mainly to greater costs associated with the Company's growing administrative operations including data processing and communications capabilities. Increased earnings by RPFI on greater assets under management was responsible for the increase in minority interests in consolidated subsidiaries. RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS 1996. Net income increased $32.8 million or 46% to $103.7 million or $1.63 per share from $70.8 million or $1.15 per share. Total revenues increased 29% from $426.3 million to a record nine month total of almost $548 million, led by an increase of almost $101 million in investment advisory fees. Investment advisory revenues from the Funds increased almost $74.4 million as average fund assets under management rose $17.3 billion to $72.4 billion. Net cash inflows to the Funds during the first nine months of 1997 totaled $7.7 billion. Advisory fees from private accounts and other sponsored investment portfolios contributed the balance of the investment advisory revenue gains. Administrative fees, primarily from services to the Funds and their shareholders, grew $20.6 million to $107.4 million; however, increases in related operating expenses more than offset these revenue gains. Operating expenses increased 23% or $65.3 million to $355.8 million. Greater compensation and related costs were attributable to increases in the number of employees and to higher rates of pay including performance-related compensation accruals. Advertising and promotion expenditures were up 7% or $2.8 million. Depreciation, amortization and operating rentals of property and equipment was up $7.4 million due to expansion of facilities and recent equipment acquisitions, primarily investments in technology assets. International investment research fees increased $7.3 million based on the higher international assets under management by RPFI. Administrative and general expenses increased $9.7 million due mainly to greater costs of the Company's growing administrative operations including data processing and communications capabilities. Increased earnings by RPFI on greater assets under management was responsible 10 for the increase in minority interests in consolidated subsidiaries. FORWARD-LOOKING INFORMATION. Information or statements provided by or on behalf of the Company from time to time, including those within this Form 10-Q Quarterly Report, may contain certain "forward-looking information", including information relating to anticipated growth in revenues or earnings per share, anticipated changes in the amount and composition of assets under management, anticipated expense levels, and expectations regarding financial market conditions. The Company cautions readers that any forward-looking information provided by or on behalf of the Company is not a guarantee of future performance and that actual results may differ materially from those in forward-looking information as a result of various factors, including but not limited to those discussed below. Further, such forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. The Company's future revenues may fluctuate due to factors such as: the total value and composition of assets under management and related cash inflows or outflows in mutual funds and private accounts; fluctuations in the financial markets resulting in appreciation or depreciation of assets under management; the relative investment performance of the Company's sponsored investment portfolios and private accounts as compared to competing offerings and market indices; the extent to which performance-based investment advisory fees are earned from private accounts; the expense ratios of the Company's sponsored investment portfolios; investor sentiment and investor confidence in mutual funds; the ability of the Company to maintain investment management fees at current levels; competitive conditions in the mutual funds industry; the introduction of new mutual funds and investment portfolios; the ability of the Company to contract with the Price Funds for payment for administrative services offered to the Price Funds and Price Fund shareholders; the continuation of trends in the retirement plan marketplace favoring defined contribution plans and participant-directed investments; and the amount and timing of income from the Company's investment portfolio. The Company's future operating results are also dependent upon the level of operating expenses, which are subject to fluctuation for the following or other reasons: changes in the level of advertising expenses in response to market conditions or other factors; variations in the level of compensation expense incurred by the Company, including performance-based compensation based on the Company's financial results, as well as changes in response to the size of the total employee population, competitive factors, or other reasons; changes in the manner in which the Company provides international investment services; expenses and capital costs, including depreciation, amortization and other non-cash charges, incurred by the Company to maintain its administrative and service infrastructure; and unanticipated costs that may be incurred by the Company from time to time to protect investor accounts and client goodwill. 11 The Company's revenues are substantially dependent on revenues from the Price Funds, which could be adversely affected if the independent directors of one or more of the Price Funds determined to terminate or renegotiate the terms of one or more investment management agreements. The Company's business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on the Company's business and results of operations, including but not limited to effects on the level of costs incurred by the Company and effects on investor interest in mutual funds in general or in particular classes of mutual funds. PART II. OTHER INFORMATION. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits required to be filed by Item 601 of Regulation S-K are filed herewith and incorporated by reference herein: 15 - Letter from Price Waterhouse LLP, independent accountants, re unaudited interim financial information. 27 - Financial Data Schedule. All other items are omitted because they are not applicable or the answers are none. SIGNATURES. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on October 20, 1997. T. Rowe Price Associates, Inc. /s/ Alvin M. Younger, Jr., Chief Financial & Accounting Officer EX-15 2 EXHIBIT 15 October 20, 1997 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that our report dated October 17, 1997 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) is incorporated by reference in the Prospectuses constituting parts of T. Rowe Price Associates, Inc.'s Registration Statements on Form S-8 (No. 033-07012, No. 033-08672, No. 033-37573, No. 033-72568, No. 033-58749 and No. 333-20333). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /s/ Price Waterhouse LLP EX-27 3
5 This schedule contains summary financial information extracted from the unaudited condensed consolidated financial statements of T. Rowe Price Associates, Inc. included in Part I., Item 1. of the accompanying Form 10-Q Quarterly Report for the period ended September 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000080255 T. ROWE PRICE ASSOCIATES, INC. 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 180,727,000 176,149,000 87,888,000 0 0 0 132,744,000 0 618,106,000 0 0 0 0 11,673,000 436,700,000 618,106,000 0 547,816,000 0 355,774,000 0 0 0 192,042,000 73,254,000 103,666,000 0 0 0 103,666,000 1.63 0 Item is not contained in registrant's unclassified balance sheet. Item is reported net of accumulated depreciation at interim. Not reported at interim.
-----END PRIVACY-ENHANCED MESSAGE-----