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: MARCH 31, 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. 57,155,624 SHARES AT MAY 3,
1996.
Exhibit index is at Item 6(a) on page 10.
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
T. ROWE PRICE ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
03/31/96
12/31/95 Unaudited
________ _________
ASSETS
Cash and cash equivalents $ 81,431 $ 88,233
Accounts receivable 55,841 63,607
Investments in sponsored mutual funds held as
available-for-sale securities 121,606 126,510
Partnership and other investments 28,049 30,722
Property and equipment 60,222 63,035
Goodwill and other assets 18,194 15,686
________ ________
$365,343 $387,793
________ ________
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 27,287 $ 29,501
Accrued compensation and retirement costs 28,803 25,435
Income taxes payable 7,376 19,208
Dividends payable 6,036 5,995
Minority interests in consolidated subsidiaries 21,609 24,999
________ ________
Total liabilities 91,111 105,138
________ ________
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, including 100,000,000 shares authorized
on April 12, 1996; issued 28,665,472 shares
in 1995 and 57,105,176 shares in 1996, including
28,552,588 shares issued as part of a stock split
on April 30, 1996 (Note 3) 5,733 11,421
Capital in excess of par value 2,912 2,899
Retained earnings 252,934 253,477
Unrealized security holding gains 12,653 14,858
________ ________
Total stockholders' equity 274,232 282,655
________ ________
$365,343 $387,793
________ ________
________ ________
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 ended
___________________
03/31/95 03/31/96
________ ________
Revenues
Investment advisory fees $ 73,133 $100,006
Administrative fees 22,613 28,126
Investment and other income 2,100 4,280
________ ________
97,846 132,412
________ ________
Expenses
Compensation and related costs 33,090 41,986
Advertising and promotion 7,901 16,070
Depreciation, amortization and operating
rentals of property and equipment 7,357 8,092
International investment research fees 6,782 9,034
Administrative and general 13,595 18,292
________ ________
68,725 93,474
________ ________
Income before income taxes and minority interests 29,121 38,938
Provision for income taxes 11,302 15,157
________ ________
Income from consolidated companies 17,819 23,781
Minority interests in consolidated subsidiaries 2,828 3,362
________ ________
Net income $ 14,991 $ 20,419
________ ________
________ ________
Earnings per share (Note 3) $ .25 $ .33
________ ________
________ ________
Dividends declared per share (Note 3) $ .08 $ .105
________ ________
________ ________
Weighted average shares outstanding, including
share equivalents arising from unexercised
stock options (Note 3) 60,026 61,493
________ ________
________ ________
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)
Three months ended
__________________
03/31/95 03/31/96
________ ________
Cash flows from operating activities
Net income $ 14,991 $ 20,419
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 3,090 3,513
Minority interests in consolidated subsidiaries 2,828 3,362
Increase in accounts receivable (316) (7,766)
Change in accounts payable and accrued liabilities (6,218) 3,884
Increase in accrued income taxes payable 8,936 13,386
Other changes in assets and liabilities 2,442 (1,620)
________ ________
Net cash provided by operating activities 25,753 35,178
________ ________
Cash flows from investing activities
Investments in sponsored mutual funds (2,474) (1,365)
Partnership and other investments (1,063) (1,200)
Return of partnership investments 1,010 151
Additions to property and equipment (3,456) (7,499)
________ ________
Net cash used in investing activities (5,983) (9,913)
________ ________
Cash flows from financing activities
Purchases of stock (7,637) (13,116)
Receipts relating to stock issuances 858 734
Dividends paid to stockholders (4,575) (6,036)
Distributions to minority interests (7,594) (45)
________ ________
Net cash used in financing activities (18,948) (18,463)
________ ________
Cash and cash equivalents
Net increase during period 822 6,802
At beginning of period 60,016 81,431
________ ________
At end of period $ 60,838 $ 88,233
________ ________
________ ________
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 March 31, 1996, the Company's assets
under management totaled $82.0 billion, including $53.5 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
will be 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.
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NOTE 3 - STOCKHOLDERS' EQUITY.
The following table details the changes in stockholders' equity (dollars in
thousands) during the first three 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 82,116 17 984 (1) 1,000
Purchases of
common stock (195,000) (39) (450) (8,717) (9,206)
Net income 20,419 20,419
Dividends
declared (5,995) (5,995)
Increase in
unrealized
security
holding gains 2,205 2,205
2-for-1 split
of common stock
issued at
March 31, 1996 28,552,588 5,710 (547) (5,163) --
__________ _______ _______ ________ _______ ________
Balance at
March 31,
1996 57,105,176 $11,421 $ 2,899 $253,477 $14,858 $282,655
__________ _______ _______ ________ _______ ________
__________ _______ _______ ________ _______ ________
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. Per-share and share data in the accompanying unaudited condensed
consolidated financial statements have been adjusted to give retroactive
effect to the stock split.
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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 March 31, 1996, and the related
condensed consolidated statements of income and cash flows for the three-
month periods ended March 31, 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
May 1, 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.
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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
in the first quarter of 1996 as the stock funds had net inflows of $2.9
billion, including $2.0 billion into the domestic funds. 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 MARCH 31, 1996 VERSUS 1995.
Net income increased $5.4 million or 36% to $20.4 million or $.33 per share
from $15.0 million or $.25 per share. Earnings per share have been
retroactively adjusted for the two-for-one stock split effected on April 30,
1996. Total revenues increased 35% from $97.8 million to a record quarterly
total of $132.4 million, led by an increase of $26.9 million in investment
advisory fees.
Investment advisory revenues from the Funds increased $20.9 million as
average assets under management rose $13.5 billion to $51.4 billion. Fund
assets totaled $53.5 billion at March 31, 1996, up almost $5.0 billion from
December 31, 1995, with stock funds accounting for $4.8 billion of the
increase. Net cash inflows to the Funds during the first quarter totaled
nearly $3.2 billion, more than four times that of the comparable period last
year and 81% of the record net inflows of $3.9 billion achieved in the year
1993. Private accounts and other sponsored products contributed the balance
of the investment advisory revenue gains as these assets under management
rose to $28.5 billion at March 31, 1996, up $1.6 billion from December 31,
1995 and $6.3 billion from March 31, 1995. Total assets under management at
quarter end increased to $82.0 billion from $75.4 billion at December 31,
1995 and $61.6 billion at March 31, 1995.
Administrative fees from services to the Funds and their shareholders grew
$5.5 million to $28.1 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 positive performance of the partnerships in which the
Company has invested.
Operating expenses increased 36% or more than $24.7 million to almost $93.5
million from $68.7 million. Greater compensation and related costs, which
were up $8.9 million, were attributable to increases in overall compensation
rates, including higher bonuses, and an 8% increase in the average number of
employees primarily to support the Company's growing administrative
operations. Advertising and promotion expenditures more than doubled to
almost $16.1 million and were up 17% from the record fourth quarter 1995
level. 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. Advertising and promotion expenditures
in the next six months are expected to remain high relative to 1995
expenditures as long as market conditions and cash inflows warrant.
International investment research fees increased 33% or $2.3 million as
international assets under management rose to $24.7 billion at March 31,
1996, including $14.2 billion in the mutual funds. Administrative and
general expenses increased $4.7 million due to greater costs associated with
the Company's growing operations including its data processing and
communications capabilities.
PART II. OTHER INFORMATION.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1996 annual meeting of the Company's stockholders was held on April 12,
1996. The Company's proxy statement and solicitation pertaining to this
meeting were previously filed with the Commission. Shares eligible to vote
were 28,519,079 as of the record date of February 12, 1996.
Management's 14 nominees for the Board of Directors were elected to hold
office until the next annual meeting of stockholders and until their respec-
tive successors are elected and have qualified. The tabulation of votes was:
Nominee For Withheld
________________ __________ _________
G.J. Collins 24,635,458 599,033
J.E. Halbkat, Jr. 24,638,998 595,493
H.H. Hopkins 24,637,134 597,357
J.A.C. Kennedy 24,635,371 599,120
J.H. Laporte 24,639,175 595,316
R.L. Menschel 24,386,998 847,493
W.T. Reynolds 24,639,125 595,366
J.S. Riepe 24,638,574 595,917
G.A. Roche 24,638,975 595,516
J.W. Rosenblum 24,638,721 595,770
R.L. Strickland 24,636,881 597,610
M.D. Testa 24,053,658 1,180,833
P.C. Walsh 24,636,223 598,268
A.M. Whittemore 24,632,847 601,644
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The charter amendment to effect a two-for-one stock split and to increase the
authorized common stock of the Company from 100,000,000 to 200,000,000 shares
was approved by a vote of: 24,096,424 for; 740,923 against; and 300,104
abstentions. Broker non-votes were 97,040.
The 1996 Stock Incentive Plan was approved by a vote of: 16,334,881 for;
6,705,161 against; and 544,973 abstentions. Broker non-votes were 1,649,476.
ITEM 5. OTHER INFORMATION.
On April 12, 1996, George J. Collins, President and Chief Executive Officer
(CEO), announced his intention to step aside as the Company's CEO by April
1997. The Board of Directors has designated George A. Roche, currently the
Chief Financial Officer, to succeed Mr. Collins as CEO.
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:
3.(i) - Composite Restated Charter as of April 12, 1996.
10 P - Agreement between TRP Suburban Second, Inc. and Riparius
Construction, Inc. as Construction Manager and Constructor
(Incorporated by reference from Form SE which was filed in
paper pursuant to a continuing hardship exemption.)
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 May 6, 1996.
T. Rowe Price Associates, Inc.
/s/ George A. Roche, Chief Financial Officer
/s/ Alvin M. Younger, Jr., Principal Accounting Officer