-----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, OWjWHHQb1/f859p645Mi+xeYkKaIDWWdVdLR+kREcQCb85hCeQjDfEsBPqUUXhuJ BNsJVPIm//XytZdNPo1JcA== 0000080255-96-000244.txt : 19960806 0000080255-96-000244.hdr.sgml : 19960806 ACCESSION NUMBER: 0000080255-96-000244 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960805 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: 96603686 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: JUNE 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) 547-2000. 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. 57,244,841 SHARES AT AUGUST 2, 1996. Exhibit index is at Item 6(a) on page 11. 2 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. T. ROWE PRICE ASSOCIATES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) 06/30/96 12/31/95 Unaudited ________ _________ ASSETS Cash and cash equivalents $ 81,431 $ 94,945 Accounts receivable 55,841 65,265 Investments in sponsored mutual funds held as available-for-sale securities 121,606 132,549 Partnership and other investments 28,049 30,562 Property and equipment 60,222 72,622 Goodwill and other assets 18,194 16,731 ________ ________ $365,343 $412,674 ________ ________ ________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 27,287 $ 29,350 Accrued compensation and retirement costs 28,803 38,723 Income taxes payable 7,376 9,445 Dividends payable 6,036 6,012 Minority interests in consolidated subsidiaries 21,609 29,449 ________ ________ Total liabilities 91,111 112,979 ________ ________ 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 57,173,141 shares in 1996 5,733 11,435 Capital in excess of par value 2,912 3,745 Retained earnings 252,934 267,899 Unrealized security holding gains 12,653 16,616 ________ ________ Total stockholders' equity 274,232 299,695 ________ ________ $365,343 $412,674 ________ ________ ________ ________ 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 Six months ended ended June 30, June 30, __________________________________ 1995 1996 1995 1996 ________ ________________ ________ Revenues Investment advisory fees $ 80,467 $109,702 $153,600 $209,708 Administrative fees 22,506 29,968 45,119 58,094 Investment and other income 1,816 4,018 3,916 8,298 ________ ________ ________ ________ 104,789 143,688 202,635 276,100 ________ ________ ________ ________ Expenses Compensation and related costs 35,697 43,165 68,787 85,151 Advertising and promotion 6,069 14,353 13,970 30,423 Depreciation, amortization and operating rentals of property and equipment 7,265 9,036 14,622 17,128 International investment research fees 7,332 9,680 14,114 18,714 Administrative and general 12,976 20,222 26,571 38,514 ________ ________ ________ ________ 69,339 96,456 138,064 189,930 ________ ________ ________ ________ Income before income taxes and minority interests 35,450 47,232 64,571 86,170 Provision for income taxes 13,786 18,416 25,088 33,573 ________ ________ ________ ________ Income from consolidated companies 21,664 28,816 39,483 52,597 Minority interests in consolidated subsidiaries 3,442 4,366 6,270 7,728 ________ ________ ________ ________ Net income $ 18,222 $ 24,450 $ 33,213 $ 44,869 ________ ________ ________ ________ ________ ________ ________ ________ Earnings per share $ .30 $ .40 $ .55 $ .73 ________ ________ ________ ________ ________ ________ ________ ________ Dividends declared per share $ .08 $ .105 $ .16 $ .21 ________ ________ ________ ________ ________ ________ ________ ________ Weighted average shares outstanding, including share equivalents arising from unexercised stock options 60,736 61,774 60,383 61,633 ________ ________ ________ ________ ________ ________ ________ ________ 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) Six months ended __________________ 06/30/95 06/30/96 ________ ________ Cash flows from operating activities Net income $ 33,213 $ 44,869 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 6,300 7,575 Minority interests in consolidated subsidiaries 6,270 7,728 Increase in accounts receivable (4,178) (9,424) Increase in accrued liabilities 1,612 19,396 Other changes in assets and liabilities 2,565 (1,526) ________ ________ Net cash provided by operating activities 45,782 68,618 ________ ________ Cash flows from investing activities Investments in sponsored mutual funds (2,804) (4,520) Proceeds from dispositions of sponsored mutual funds 3,075 -- Partnership and other investments (1,552) (2,808) Return of partnership investments 1,173 1,141 Additions to property and equipment (6,376) (20,770) ________ ________ Net cash used in investing activities (6,484) (26,957) ________ ________ Cash flows from financing activities Purchases of stock (7,489) (17,774) Receipts relating to stock issuances 1,637 1,703 Dividends paid to stockholders (9,128) (12,031) Distributions to minority interests (7,594) (45) ________ ________ Net cash used in financing activities (22,574) (28,147) ________ ________ Cash and cash equivalents Net increase during period 16,724 13,514 At beginning of period 60,016 81,431 ________ ________ At end of period $ 76,740 $ 94,945 ________ ________ ________ ________ 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 June 30, 1996, the Company's assets under management totaled $87.3 billion, including $57.3 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 six 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 307,657 62 2,442 (2) 2,502 Purchases of common stock (370,000) (74) (1,062) (12,728) (13,864) Net income 44,869 44,869 Dividends declared (12,007) (12,007) Increase in unrealized security holding gains 3,963 3,963 2-for-1 split of common stock28,570,012 5,714 (547) (5,167) -- __________ _______ _______ ________ _______ ________ Balance at June 30, 1996 57,173,141 $11,435 $ 3,745 $267,899 $16,616 $299,695 __________ _______ _______ ________ _______ ________ __________ _______ _______ ________ _______ ________ 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 June 30, 1996, and the related condensed consolidated statements of income and cash flows for the three- and six-month periods ended June 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 July 25, 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 half of 1996 as the stock funds had net inflows of $5.3 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 JUNE 30, 1996 VERSUS 1995. Net income increased almost $6.3 million or 34% to $24.5 million or $.40 per share from $18.2 million or $.30 per share. Earnings per share for 1995 has been adjusted to reflect the two-for-one stock split on April 30, 1996. Total revenues increased 37% from $104.8 million to a record quarterly total of $143.7 million, led by an increase of $29.2 million in investment advisory fees. Investment advisory revenues from the Funds increased $21.8 million as average assets under management rose $14.8 billion to $56.0 billion. Fund assets totaled $57.3 billion at June 30, 1996, up almost $3.8 billion from March 31, 1996, with stock funds accounting for substantially all of the increase. Net cash inflows to the Funds during the second quarter totaled $2.3 billion. Private accounts and other sponsored products contributed the balance of the investment advisory revenue gains as these assets under management rose to $30.0 billion at June 30, 1996, up $1.6 billion from March 31, 1996 and $6.0 billion from June 30, 1995. Total assets under management at quarter end increased to $87.3 billion from $82.0 billion at March 31, 1996 and $66.6 billion at June 30, 1995. Administrative fees from services to the Funds and their shareholders grew $7.5 million to $30.0 million; however, increases in related operating expenses more than offset these revenue gains. 9 Investment and other income more than doubled from the 1995 quarter primarily as a result of the performance of the partnerships in which the Company has invested. Operating expenses increased 39% or $27.1 million to more than $96.4 million from $69.3 million. Greater compensation and related costs, which were up $7.5 million, were attributable to increases in overall compensation rates, including higher bonuses, and a 16% increase in the average number of employees primarily to support the Company's growing administrative and data processing operations. Advertising and promotion expenditures were 136% higher than in the comparable 1995 quarter but were down 11% from record first quarter 1996 spending. Spending has been boosted significantly in response to investor demand for stock mutual funds and in order to increase the national image and investor awareness of T. Rowe Price. Third quarter advertising and promotion expenditures are expected to remain high relative to the comparable 1995 quarter. International investment research fees increased 32% or $2.3 million as international assets under management rose to $26.5 billion at June 30, 1996. Administrative and general expenses increased $7.3 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 reason for the increase in minority interests in consolidated subsidiaries. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 VERSUS 1995. Net income increased $11.7 million or 35% to $44.9 million or $.73 per share from $33.2 million or $.55 per share. Total revenues increased 36% from $202.6 million to a record six month total of $276.1 million, led by an increase of $56.1 million in investment advisory fees. Investment advisory revenues from the Funds increased $42.7 million as average assets under management rose $14.1 billion to $53.7 billion. Fund assets totaled $57.3 billion at June 30, 1996, up almost $8.7 billion from December 31, 1995, with stock funds accounting for most of the increase. Net cash inflows to the Funds during the first half of 1996 totaled nearly $5.5 billion, more than three times that of the comparable period last year and substantially higher than the record annual net inflows of $3.9 billion achieved in 1993. Private accounts and other sponsored products contributed the balance of the investment advisory revenue gains. Administrative fees from services to the Funds and their shareholders grew $13.0 million to $58.1 million; however, increases in related operating expenses more than offset these revenue gains. Operating expenses increased 37% or more than $51.8 million to almost $189.9 million from $138.1 million. Greater compensation and related costs, which were up $16.4 million, were attributable to increases in overall compensation rates, including higher bonuses, and a 13% increase in the average number of employees primarily to support the Company's growing administrative and data processing operations. Advertising and promotion expenditures more than 10 doubled to $30.4 million. International investment research fees increased 33% or $4.6 million as international assets under management rose to $26.5 billion at June 30, 1996. Administrative and general expenses increased $11.9 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 approximately $58 million, including $20 million for development 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 5. OTHER INFORMATION. Information or statements provided by or on behalf of the Company from time to time 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 cautionary statements provided below are being made pursuant to the Private Securities Litigation Reform Act of 1995 and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act for any such forward-looking information. Many of the following important factors discussed below as well as other factors have also been discussed in the Company's prior public filings. 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 the 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 fund inflows or outflows; fluctuations in the financial markets; the relative investment performance of the Company's sponsored investment products as compared to other managed products and market indices; the expense ratios of the Company's sponsored investment products; 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 ability of the Company to contract with the Price Funds for payment for administrative services offered to the Price Funds and Price Fund 11 shareholders; the continuation of trends in the retirement plan market favoring defined contribution plans and participant-directed plans; and the amount and timing of recognition of income on 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, in response to changes in 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. 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. 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. 12 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 August 5, 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 August 2, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that our report dated July 25, 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 June 30, 1996 and is qualified in its entirety by reference to such financial statements. 0000080255 T. ROWE PRICE ASSOCIATES, INC. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 94,945,000 132,549,000 65,265,000 0 0 0 72,622,000 0 412,674,000 0 0 0 0 11,435,000 288,260,000 412,674,000 0 276,100,000 0 189,930,000 0 0 0 86,170,000 33,573,000 44,869,000 0 0 0 44,869,000 .73 0 Not contained in registrant's unclassified balance sheet. Represents net amount reported at interim. Not reported at interim.
-----END PRIVACY-ENHANCED MESSAGE-----