-----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, JRzorG4Cns0vO3oRoezCi7EBNQOvRlchhmXxnF0b9OYmuq2+Ojsvac5kirSYQLHv G/esGdyNr+cKA7Eg/61n7A== 0000080255-96-000278.txt : 19961118 0000080255-96-000278.hdr.sgml : 19961118 ACCESSION NUMBER: 0000080255-96-000278 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 1934 Act SEC FILE NUMBER: 000-14282 FILM NUMBER: 96663160 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 MAIL ADDRESS: STREET 1: 100 EAST PRATT STREET CITY: BALTIMORE STATE: MD ZIP: 21202 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 1996. 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. 57,348,130 SHARES AT NOVEMBER 7, 1996. Exhibit index is at Item 6(a) on page 10. 2 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. T. ROWE PRICE ASSOCIATES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) 09/30/96 12/31/95 Unaudited ________ _________ ASSETS Cash and cash equivalents $ 81,431 $121,502 Accounts receivable 55,841 68,103 Investments in sponsored mutual funds held as available-for-sale securities 121,606 137,511 Partnership and other investments 28,049 32,801 Property and equipment 60,222 83,190 Goodwill and other assets 18,194 14,848 ________ ________ $365,343 $457,955 ________ ________ ________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 27,287 $ 29,752 Accrued compensation and retirement costs 28,803 54,505 Income taxes payable 7,376 12,239 Dividends payable 6,036 6,015 Minority interests in consolidated subsidiaries 21,609 33,863 ________ ________ Total liabilities 91,111 136,374 ________ ________ Commitments and contingent liabilities (Note 2) Stockholders' equity Preferred stock, undesignated, $.20 par value - authorized and unissued 20,000,000 shares -- -- Common stock, $.20 par value - authorized 100,000,000 shares in 1995 and 200,000,000 shares in 1996; issued 28,665,472 shares in 1995 and 57,285,558 shares in 1996 5,733 11,457 Capital in excess of par value 2,912 5,060 Retained earnings 252,934 286,414 Unrealized security holding gains 12,653 18,650 ________ ________ Total stockholders' equity 274,232 321,581 ________ ________ $365,343 $457,955 ________ ________ ________ ________ 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, __________________________________ 1995 1996 1995 1996 ________ ________________ ________ Revenues Investment advisory fees $ 87,019 $118,765 $240,619 $328,473 Administrative fees 24,448 28,654 69,567 86,748 Investment and other income 1,759 2,731 5,675 11,029 ________ ________ ________ ________ 113,226 150,150 315,861 426,250 ________ ________ ________ ________ Expenses Compensation and related costs 35,973 46,691 104,760 131,842 Advertising and promotion 7,126 11,347 21,096 41,770 Depreciation, amortization and operating rentals of property and equipment 7,306 10,809 21,928 27,937 International investment research fees 7,793 9,900 21,907 28,614 Administrative and general 14,783 21,837 41,354 60,351 ________ ________ ________ ________ 72,981 100,584 211,045 290,514 ________ ________ ________ ________ Income before income taxes and minority interests 40,245 49,566 104,816 135,736 Provision for income taxes 14,914 19,220 40,002 52,793 ________ ________ ________ ________ Income from consolidated companies 25,331 30,346 64,814 82,943 Minority interests in consolidated subsidiaries 3,780 4,398 10,050 12,126 ________ ________ ________ ________ Income before extraordinary charge 21,551 25,948 54,764 70,817 Extraordinary charge from early extinguishment of debt, net of income tax benefit 1,049 -- 1,049 -- ________ ________ ________ ________ Net income $ 20,502 $ 25,948 $ 53,715 $ 70,817 ________ ________ ________ ________ ________ ________ ________ ________ Earnings per share, including an extraordinary charge of $.02 per share in 1995 $ .33 $ .42 $ .88 $ 1.15 ________ ________ ________ ________ ________ ________ ________ ________ Dividends declared per share $ .08 $ .105 $ .24 $ .315 ________ ________ ________ ________ ________ ________ ________ ________ Weighted average shares outstanding, including share equivalents arising from unexercised stock options 61,412 61,776 60,730 61,680 ________ ________ ________ ________ ________ ________ ________ ________ 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 __________________ 09/30/95 09/30/96 ________ ________ Cash flows from operating activities Net income $ 53,715 $ 70,817 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 9,670 13,133 Minority interests in consolidated subsidiaries 10,050 12,126 Increase in accounts receivable (7,546) (12,262) Increase in accrued liabilities 16,831 38,601 Other changes in assets and liabilities 5,154 3,375 ________ ________ Net cash provided by operating activities 87,874 125,790 ________ ________ Cash flows from investing activities Investments in sponsored mutual funds (3,035) (8,948) Proceeds from dispositions of sponsored mutual funds 3,076 2,626 Partnership and other investments (1,888) (8,940) Return of partnership investments 2,065 1,666 Additions to property and equipment (10,846) (37,370) ________ ________ Net cash used in investing activities (10,628) (50,966) ________ ________ Cash flows from financing activities Purchases of stock (7,489) (19,668) Receipts relating to stock issuances 2,808 3,003 Dividends paid to stockholders (13,686) (18,043) Distributions to minority interests (7,594) (45) Debt payments (12,613) -- ________ ________ Net cash used in financing activities (38,574) (34,753) ________ ________ Cash and cash equivalents Net increase during period 38,672 40,071 At beginning of year 60,016 81,431 ________ ________ At end of period $ 98,688 $121,502 ________ ________ ________ ________ 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 products 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, 1996, the Company's assets under management totaled $92.9 billion, including $60.3 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 1995 Annual Report to Stockholders. NOTE 2 - COMMITMENTS AND CONTINGENT LIABILITIES. On March 8, 1996, the Company entered into an agreement to construct two, 100,000 square foot, four-story office buildings and two, three-deck parking garages for an aggregate price not to exceed $36 million. The facilities are being erected on a portion of the 32.5 acres of land in suburban Owings Mills, Maryland which were acquired in December 1995. Construction is scheduled to be completed in September 1997. 6 NOTE 3 - STOCKHOLDERS' EQUITY. The following table details the changes in stockholders' equity (dollars in thousands) during the first nine months of 1996. 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, 1995 28,665,472 $ 5,733 $ 2,912 $252,934 $12,653 $274,232 Common stock issued under stock-based compensation plans 495,074 99 4,216 (1) 4,314 Purchases of common stock (445,000) (89) (1,521) (14,147) (15,757) Net income 70,817 70,817 Dividends declared (18,022) (18,022) Increase in unrealized security holding gains 5,997 5,997 2-for-1 split of common stock 28,570,012 5,714 (547) (5,167) -- __________ _______ _______ ________ _______ ________ Balance at September 30, 1996 57,285,558 $11,457 $ 5,060 $286,414 $18,650 $321,581 __________ _______ _______ ________ _______ ________ __________ _______ _______ ________ _______ ________ On April 12, 1996, the Company's stockholders approved an amendment of the Company's charter which increased the Company's authorized common shares from 100,000,000 to 200,000,000 and split the outstanding common shares two-for- one. The stock split was effected at the close of business on April 30, 1996. The unaudited condensed consolidated statements of income have been adjusted to give retroactive effect to the stock split. 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, 1996, and the related condensed consolidated statements of income and cash flows for the three- and nine-month periods ended September 30, 1995 and 1996. 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, 1995, and the related consolidated statements of income, cash flows, and stockholders' equity for the year then ended (not presented herein), and in our report dated January 25, 1996 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, 1995, 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 24, 1996 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 products, 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 products which meet the varied needs and objectives of its individual and institutional investors. In recent years, there have been significant net cash inflows to the stock mutual funds. This trend continued during the first nine months of 1996 as the stock funds had net inflows of $6.7 billion. Company revenues are largely dependent on the total value and composition of assets under management; accordingly, fluctuations in financial markets and in the composition of assets under management impact revenues and results of operations. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS 1995. Net income increased more than $5.4 million or 27% to $25.9 million or $.42 per share from $20.5 million or $.33 per share. Results for 1995 include a $1.0 million, or $.02 per share extraordinary charge from the early extinguishment of the Company's long-term debt. Earnings per share for 1995 has been adjusted to reflect the two-for-one stock split on April 30, 1996. Total revenues increased 33% from $113.2 million to a record quarterly total of $150.2 million, led by an increase of $31.7 million in investment advisory fees. Investment advisory revenues from the Funds increased $19.2 million as average fund assets under management rose $13.1 billion to $57.7 billion. Fund assets totaled $60.3 billion at September 30, 1996, up almost $3.0 billion from June 30, 1996, with stock funds accounting for $2.6 billion of the increase. Net cash inflows to the Funds during the third quarter totaled $1.5 billion. Advisory fees from private accounts and other sponsored products and performance management fees earned from sponsored partnerships contributed the balance of the investment advisory revenue gains. These assets under management rose to $32.6 billion at September 30, 1996, up $2.5 billion from June 30, 1996 and $7.0 billion from September 30, 1995. Total assets under management at quarter end increased to $92.9 billion from $87.3 billion at June 30, 1996 and $71.5 billion at September 30, 1995. Administrative fees from services to the Funds and their shareholders grew $4.2 million to $28.7 million; however, increases in related operating expenses more than offset these revenue gains. 9 Operating expenses increased 38% or $27.6 million to almost $100.6 million from $73.0 million. Greater compensation and related costs, which were up $10.7 million, were attributable to increases in overall compensation rates, including higher bonuses, and a 27% increase in the average number of employees primarily to support the Company's growing administrative and data processing operations. Advertising and promotion expenditures were 59% higher than in the comparable 1995 quarter but were down 21% from the second quarter of 1996. Fourth quarter spending is expected to increase significantly and likely will exceed first quarter 1996 levels. International investment research fees increased 27% or $2.1 million as international assets under management rose to $27.1 billion at September 30, 1996. Depreciation, amortization and operating rentals of property and equipment was up $3.5 million due to expansion of facilities and investments in technology. Administrative and general expenses increased $7.1 million due to greater costs associated with the Company's growing operations including its data processing capabilities. Increased earnings by RPFI on greater assets under management was the primary reason for the increase in minority interests in consolidated subsidiaries. RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS 1995. Net income increased $17.1 million or 32% to $70.8 million or $1.15 per share from $53.7 million or $.88 per share. Results for 1995 include a $1.0 million, or $.02 per share extraordinary charge from the early extinguishment of the Company's long-term debt. Earnings per share for 1995 has been adjusted to reflect the two-for-one stock split on April 30, 1996. Total revenues increased 35% from $315.9 million to a record nine month total of almost $426.3 million, led by an increase of almost $87.9 million in investment advisory fees. Investment advisory revenues from the Funds increased $61.9 million as average fund assets under management rose $13.8 billion to $55.1 billion. Fund assets totaled $60.3 billion at September 30, 1996, up $11.7 billion from December 31, 1995, with stock funds accounting for most of the increase. Net cash inflows to the Funds during the first nine months of 1996 totaled nearly $7.0 billion, more than double that of the comparable period last year and significantly more than the record annual net inflows of $3.9 billion achieved in 1993. Private accounts and other sponsored products and performance management fees earned from sponsored partnerships contributed the balance of the investment advisory revenue gains. Administrative fees from services to the Funds and their shareholders grew $17.1 million to $86.7 million; however, increases in related operating expenses more than offset these revenue gains. Operating expenses increased 38% to $290.5 million. Greater compensation and related costs, which were up $27.1 million, were attributable to increases in overall rates of compensation, including higher bonuses, and an 18% increase in the average number of employees primarily to support the Company's growing administrative and data processing operations. Advertising and promotion 10 expenditures almost doubled to $41.8 million as the Company sought to capitalize on the strong investor demand for stock mutual funds. International investment research fees increased 31% or $6.7 million as international assets under management rose to $27.1 billion at September 30, 1996. Depreciation, amortization and operating rentals of property and equipment was up due to expansion of facilities and investments in technology. Administrative and general expenses increased $19.0 million due to greater costs associated with the Company's growing operations including its data processing and communications capabilities. CAPITAL RESOURCES AND LIQUIDITY. The Company anticipates 1996 property and equipment acquisitions of up to $58 million, including $20 million for construction of two office buildings on the land acquired in 1995. Additional construction and furnishing costs of approximately $30 million for these new facilities are expected in 1997 before occupancy occurs in the latter half of the year. These capital expenditures are expected to be funded from liquid assets currently available and from operating cash inflows. 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 November 14, 1996. T. Rowe Price Associates, Inc. /s/ George A. Roche, Chief Financial Officer /s/ Alvin M. Younger, Jr., Principal Accounting Officer EX-15 2 EXHIBIT 15 November 13, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that our report dated October 24, 1996 (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. 33-7012, No. 33-8672, No. 33- 37573, No. 33-72568 and No. 33-58749). 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, 1996 and is qualified in its entirety by reference to such financial statements. 0000080255 T. ROWE PRICE ASSOCIATES, INC. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 121,502,000 137,511,000 68,103,000 0 0 0 83,190,000 0 457,955,000 0 0 0 0 11,457,000 310,124,000 457,955,000 0 426,250,000 0 290,514,000 0 0 0 135,736,000 52,793,000 70,817,000 0 0 0 70,817,000 1.15 0 Not contained in registrant's unclassified balance sheet. Represents net amount reported at interim. Not reported at interim.
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