T. Rowe Price Group Reports First Quarter 2001 Results

Apr 23, 2001, 01:00 ET from T. Rowe Price Group, Inc.

    BALTIMORE, April 23 /PRNewswire Interactive News Release/ --
 T. Rowe Price Group, Inc. (Nasdaq:   TROW) today reported first quarter revenues
 of $280.5 million, net income of $49.3 million, and diluted earnings per share
 of $.38, down $.20 from $.58 per share in the first quarter of 2000 when
 revenues were $316.3 million.  The results this year include a charge of
 $7 million, or $.05 per share, for the amortization of goodwill from the
 T. Rowe Price International acquisition of August 2000.  Changes to accounting
 principles that have been proposed would end this recurring quarterly charge
 after the second quarter of 2001.
     George A. Roche, Chairman and President, noted that the first quarter
 results reflect the decline in the company's assets under management.  Lower
 equity security valuations experienced across the financial markets have
 caused total assets under management to decline to $148.7 billion at March 31,
 compared with $166.7 billion at the end of 2000 and the quarter-end record of
 $185.2 billion reached on March 31, 2000.  Average T. Rowe Price mutual fund
 assets under management during the 2001 first quarter were $103.4 billion.
 Fund assets declined to $94.8 billion at the end of the quarter while other
 managed portfolios dipped to $53.9 billion.
     The financial markets had the most impact on mutual fund assets, resulting
 in $11.9 billion of net depreciation during the first quarter of 2001.  In
 this climate, however, investors added net inflows of $395 million to their
 T. Rowe Price mutual fund accounts, more than in any of the quarterly periods
 last year.  Money market and bond fund investors added $523 million while
 domestic stock funds had net investor subscriptions of $306 million.
 International stock funds had net outflows of $434 million.  Total advisory
 revenues from mutual fund assets under management declined $20.4 million
 versus the first quarter of last year.
     Declining market valuations also pushed other managed portfolios down
 $6.5 billion during the first quarter of 2001.  Lower performance fees earned
 from these portfolios, including the disposition service for venture capital
 investors, account for a decline of $5.4 million in advisory fees.
 Performance fees vary significantly period-to-period as market conditions and
 the composition of portfolios change.  Lower assets under management in the
 other managed portfolios pushed advisory fees down $7.5 million.
     Administrative revenues increased only $1.4 million due to lower
 commissions from discount brokerage of $4.6 million.  Commission rates have
 been lowered and trading volume is down.  The $6 million increase in other
 administrative revenues, largely for mutual fund services, is offset by a
 similar increase in operating expenses.  Investment income comparisons are
 less favorable due to the significant venture capital returns and interest
 income from larger cash positions in 2000 prior to the T. Rowe Price
 International acquisition.  This loss of revenue was partially offset by gains
 from the firm's partnership investment in distressed debt positions and by
 income of $6.9 million, or $.03 per share, realized upon the disposition of
 $23.5 million of the company's mutual fund investments this quarter.
     Operating expenses rose nearly 7% from last year's first quarter to
 $198 million, though expenses are down almost $1.2 million from the fourth
 quarter of 2000.  Compensation and related costs increased $11.7 million from
 the 2000 period.  "We remain committed to maintaining the highest quality
 investment professionals and services staff to meet our investors' needs," Mr.
 Roche said.  Advertising and promotion expenses decreased 14% from the 2000
 first quarter and nearly $5 million from the fourth quarter of 2000 to
 $21.5 million.  Advertising and promotion costs are typically at a seasonal
 high in the first quarter; however, financial market declines have made
 investors more cautious and, as a result, Mr. Roche noted that "we have
 reduced our spending in this environment.  Further, our ad expenditures for
 the balance of the year are expected to be lower than last year."
     Occupancy and equipment expenses rose 19% from $25.9 million for the first
 quarter of 2000 to $30.8 million this quarter.  These costs reflect the firm's
 movement to new and larger facilities internationally and to a new campus in
 Colorado Springs.  "The build out of an international infrastructure to
 support our operations in seven foreign countries is nearing completion," Mr.
 Roche commented.  "Our independent offices have been established and our
 staffs are now fully relocated.  The last major step in the transition phase
 is to complete the technology core and implementation of the T. Rowe Price
 investment portfolio system around the world."  The T. Rowe Price
 International acquisition resulted in the realignment of operating costs to
 include greater compensation and facility costs and added interest expense on
 the acquisition indebtedness.  However, international research fees to former
 affiliates were eliminated.  Other operating expenses increased $3.7 million
 from the 2000 period due largely to professional fees incurred in technology
 and services development activities.  "We have continued to invest in the
 business, though as the international expansion and several technology
 projects are brought to a close, we expect to reduce total operating expenses
 for 2001 below the spending level of 2000," Mr. Roche said.
     In closing, the chairman said:  "The first quarter was a very difficult
 one for the equity markets.  The uncertain economic environment and weak
 technology demand have brought many stock valuations down to more attractive
 levels.  The surprise cut in interest rates by one-half percent on April 18th
 by the Federal Reserve Board resulted in a very strong market rally.  The
 Federal Reserve has also indicated it will continue to cut interest rates in
 order to stimulate the economy.  Lower interest rates and better valuations
 make us optimistic that the worst of the market decline is behind us.  As a
 result, while the equity market may continue to be volatile, we believe that
 our broad diversification by investment approach continues to position us well
 for long-term growth."
     T. Rowe Price serves as investment adviser to more than eight million
 institutional and individual accounts in the T. Rowe Price family of no-load
 mutual funds and other investment portfolios.
 
     Certain statements in this press release may represent "forward-looking
 information," including information relating to anticipated growth in revenues
 or earnings, anticipated changes in the amount and composition of assets under
 management, anticipated expense levels, and expectations regarding financial
 and other market conditions.  For a discussion concerning risks and other
 factors that could affect future results, see "Forward-looking information" in
 Item 2 of the company's Form 10-Q report for the period ended March 30, 2001.
 The Form 10-Q report is expected to be filed tomorrow with the U.S. Securities
 and Exchange Commission and will include more complete information on the
 company's financial results.
 
      Unaudited Condensed Consolidated Statements of Income
      (in thousands, except per-share amounts)
 
                                                  Three months   Three months
                                                       2001          2000
     Revenues
       Investment advisory fees                      $200,827       $234,161
       Administrative fees                             62,263         60,847
       Investment and other income                     17,392         21,323
                                                      280,482        316,331
 
     Expenses
       Compensation and related costs                 104,643         92,967
       Advertising and promotion                       21,527         25,110
       Occupancy and equipment                         30,758         25,906
       International investment research fees              --         16,014
       Goodwill amortization                            7,230            186
       Interest expense                                 4,922             61
       Other operating expenses                        28,954         25,296
                                                      198,034        185,540
 
     Income before income taxes and
      minority interests                               82,448        130,791
     Provision for income taxes                        33,497         49,204
     Income from consolidated companies                48,951         81,587
     Minority interests in consolidated
      subsidiaries                                       (357)         6,553
     Net income                                       $49,308        $75,034
 
     Basic earnings per share                            $.40           $.62
     Diluted earnings per share                          $.38           $.58
 
     Dividends declared per share                        $.15           $.13
 
     Weighted average shares outstanding              122,751        120,419
     Weighted average shares outstanding
      assuming dilution                               129,476        128,399
 
 
     Investment Advisory Fees
     Sponsored mutual funds
       Stock and blended
        Domestic                                      $95,131       $104,373
        International                                  27,726         38,999
       Bond and money market                           23,526         23,425
       Total                                          146,383        166,797
     Other portfolios                                  54,444         67,364
                                                     $200,827       $234,161
 
 
     Assets under management (in billions)           03/31/2001    03/31/2000
     Sponsored mutual funds
       Stock and blended
        Domestic                                        $58.3          $75.3
        International                                    13.6           22.1
       Bond and money market                             22.9           22.0
       Total                                             94.8          119.4
     Other portfolios                                    53.9           65.8
       Total                                           $148.7         $185.2
 
     Domestic equities                                  $81.3         $103.0
     International equities                              27.2           41.8
     Debt securities                                     40.2           40.4
                                                       $148.7         $185.2
 
      Condensed Consolidated Balance Sheet
       Information (in thousands)                   03/31/2001     12/31/2000
     Cash and cash equivalents                       $150,278        $80,526
     Accounts receivable                              127,121        131,041
     Investments in mutual funds                      144,724        190,406
     Other investments                                 63,474         59,801
     Property and equipment                           262,044        255,660
     Goodwill                                         687,755        694,985
     Other assets                                      23,049         57,040
       Total assets                                 1,458,445      1,469,459
     Total liabilities, including debt of
       $290,419 in 2001                               453,512        478,394
     Stockholders' equity, 123,019 common shares
      outstanding in 2001, including unrealized
      holding gains, net of taxes, of $13,936
      in 2001                                      $1,004,933       $991,065
 
 
                                                  Three months   Three months
                                                      2001           2000
 
     Condensed Consolidated Cash Flows Information
     Cash provided by operating activities, including
      depreciation of property and equipment
      of $12,156 in 2001                             $108,851       $104,695
     Cash used in investing activities, including
      capital expenditures of $23,093 in 2001          (3,480)       (13,146)
     Cash used in financing activities, including
      share repurchases of $6,000 and debt repayments
      of $20,000 in 2001                              (35,619)       (11,586)
     Net increase during the quarter                  $69,752        $79,963
 
 
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SOURCE T. Rowe Price Group, Inc.
    BALTIMORE, April 23 /PRNewswire Interactive News Release/ --
 T. Rowe Price Group, Inc. (Nasdaq:   TROW) today reported first quarter revenues
 of $280.5 million, net income of $49.3 million, and diluted earnings per share
 of $.38, down $.20 from $.58 per share in the first quarter of 2000 when
 revenues were $316.3 million.  The results this year include a charge of
 $7 million, or $.05 per share, for the amortization of goodwill from the
 T. Rowe Price International acquisition of August 2000.  Changes to accounting
 principles that have been proposed would end this recurring quarterly charge
 after the second quarter of 2001.
     George A. Roche, Chairman and President, noted that the first quarter
 results reflect the decline in the company's assets under management.  Lower
 equity security valuations experienced across the financial markets have
 caused total assets under management to decline to $148.7 billion at March 31,
 compared with $166.7 billion at the end of 2000 and the quarter-end record of
 $185.2 billion reached on March 31, 2000.  Average T. Rowe Price mutual fund
 assets under management during the 2001 first quarter were $103.4 billion.
 Fund assets declined to $94.8 billion at the end of the quarter while other
 managed portfolios dipped to $53.9 billion.
     The financial markets had the most impact on mutual fund assets, resulting
 in $11.9 billion of net depreciation during the first quarter of 2001.  In
 this climate, however, investors added net inflows of $395 million to their
 T. Rowe Price mutual fund accounts, more than in any of the quarterly periods
 last year.  Money market and bond fund investors added $523 million while
 domestic stock funds had net investor subscriptions of $306 million.
 International stock funds had net outflows of $434 million.  Total advisory
 revenues from mutual fund assets under management declined $20.4 million
 versus the first quarter of last year.
     Declining market valuations also pushed other managed portfolios down
 $6.5 billion during the first quarter of 2001.  Lower performance fees earned
 from these portfolios, including the disposition service for venture capital
 investors, account for a decline of $5.4 million in advisory fees.
 Performance fees vary significantly period-to-period as market conditions and
 the composition of portfolios change.  Lower assets under management in the
 other managed portfolios pushed advisory fees down $7.5 million.
     Administrative revenues increased only $1.4 million due to lower
 commissions from discount brokerage of $4.6 million.  Commission rates have
 been lowered and trading volume is down.  The $6 million increase in other
 administrative revenues, largely for mutual fund services, is offset by a
 similar increase in operating expenses.  Investment income comparisons are
 less favorable due to the significant venture capital returns and interest
 income from larger cash positions in 2000 prior to the T. Rowe Price
 International acquisition.  This loss of revenue was partially offset by gains
 from the firm's partnership investment in distressed debt positions and by
 income of $6.9 million, or $.03 per share, realized upon the disposition of
 $23.5 million of the company's mutual fund investments this quarter.
     Operating expenses rose nearly 7% from last year's first quarter to
 $198 million, though expenses are down almost $1.2 million from the fourth
 quarter of 2000.  Compensation and related costs increased $11.7 million from
 the 2000 period.  "We remain committed to maintaining the highest quality
 investment professionals and services staff to meet our investors' needs," Mr.
 Roche said.  Advertising and promotion expenses decreased 14% from the 2000
 first quarter and nearly $5 million from the fourth quarter of 2000 to
 $21.5 million.  Advertising and promotion costs are typically at a seasonal
 high in the first quarter; however, financial market declines have made
 investors more cautious and, as a result, Mr. Roche noted that "we have
 reduced our spending in this environment.  Further, our ad expenditures for
 the balance of the year are expected to be lower than last year."
     Occupancy and equipment expenses rose 19% from $25.9 million for the first
 quarter of 2000 to $30.8 million this quarter.  These costs reflect the firm's
 movement to new and larger facilities internationally and to a new campus in
 Colorado Springs.  "The build out of an international infrastructure to
 support our operations in seven foreign countries is nearing completion," Mr.
 Roche commented.  "Our independent offices have been established and our
 staffs are now fully relocated.  The last major step in the transition phase
 is to complete the technology core and implementation of the T. Rowe Price
 investment portfolio system around the world."  The T. Rowe Price
 International acquisition resulted in the realignment of operating costs to
 include greater compensation and facility costs and added interest expense on
 the acquisition indebtedness.  However, international research fees to former
 affiliates were eliminated.  Other operating expenses increased $3.7 million
 from the 2000 period due largely to professional fees incurred in technology
 and services development activities.  "We have continued to invest in the
 business, though as the international expansion and several technology
 projects are brought to a close, we expect to reduce total operating expenses
 for 2001 below the spending level of 2000," Mr. Roche said.
     In closing, the chairman said:  "The first quarter was a very difficult
 one for the equity markets.  The uncertain economic environment and weak
 technology demand have brought many stock valuations down to more attractive
 levels.  The surprise cut in interest rates by one-half percent on April 18th
 by the Federal Reserve Board resulted in a very strong market rally.  The
 Federal Reserve has also indicated it will continue to cut interest rates in
 order to stimulate the economy.  Lower interest rates and better valuations
 make us optimistic that the worst of the market decline is behind us.  As a
 result, while the equity market may continue to be volatile, we believe that
 our broad diversification by investment approach continues to position us well
 for long-term growth."
     T. Rowe Price serves as investment adviser to more than eight million
 institutional and individual accounts in the T. Rowe Price family of no-load
 mutual funds and other investment portfolios.
 
     Certain statements in this press release may represent "forward-looking
 information," including information relating to anticipated growth in revenues
 or earnings, anticipated changes in the amount and composition of assets under
 management, anticipated expense levels, and expectations regarding financial
 and other market conditions.  For a discussion concerning risks and other
 factors that could affect future results, see "Forward-looking information" in
 Item 2 of the company's Form 10-Q report for the period ended March 30, 2001.
 The Form 10-Q report is expected to be filed tomorrow with the U.S. Securities
 and Exchange Commission and will include more complete information on the
 company's financial results.
 
      Unaudited Condensed Consolidated Statements of Income
      (in thousands, except per-share amounts)
 
                                                  Three months   Three months
                                                       2001          2000
     Revenues
       Investment advisory fees                      $200,827       $234,161
       Administrative fees                             62,263         60,847
       Investment and other income                     17,392         21,323
                                                      280,482        316,331
 
     Expenses
       Compensation and related costs                 104,643         92,967
       Advertising and promotion                       21,527         25,110
       Occupancy and equipment                         30,758         25,906
       International investment research fees              --         16,014
       Goodwill amortization                            7,230            186
       Interest expense                                 4,922             61
       Other operating expenses                        28,954         25,296
                                                      198,034        185,540
 
     Income before income taxes and
      minority interests                               82,448        130,791
     Provision for income taxes                        33,497         49,204
     Income from consolidated companies                48,951         81,587
     Minority interests in consolidated
      subsidiaries                                       (357)         6,553
     Net income                                       $49,308        $75,034
 
     Basic earnings per share                            $.40           $.62
     Diluted earnings per share                          $.38           $.58
 
     Dividends declared per share                        $.15           $.13
 
     Weighted average shares outstanding              122,751        120,419
     Weighted average shares outstanding
      assuming dilution                               129,476        128,399
 
 
     Investment Advisory Fees
     Sponsored mutual funds
       Stock and blended
        Domestic                                      $95,131       $104,373
        International                                  27,726         38,999
       Bond and money market                           23,526         23,425
       Total                                          146,383        166,797
     Other portfolios                                  54,444         67,364
                                                     $200,827       $234,161
 
 
     Assets under management (in billions)           03/31/2001    03/31/2000
     Sponsored mutual funds
       Stock and blended
        Domestic                                        $58.3          $75.3
        International                                    13.6           22.1
       Bond and money market                             22.9           22.0
       Total                                             94.8          119.4
     Other portfolios                                    53.9           65.8
       Total                                           $148.7         $185.2
 
     Domestic equities                                  $81.3         $103.0
     International equities                              27.2           41.8
     Debt securities                                     40.2           40.4
                                                       $148.7         $185.2
 
      Condensed Consolidated Balance Sheet
       Information (in thousands)                   03/31/2001     12/31/2000
     Cash and cash equivalents                       $150,278        $80,526
     Accounts receivable                              127,121        131,041
     Investments in mutual funds                      144,724        190,406
     Other investments                                 63,474         59,801
     Property and equipment                           262,044        255,660
     Goodwill                                         687,755        694,985
     Other assets                                      23,049         57,040
       Total assets                                 1,458,445      1,469,459
     Total liabilities, including debt of
       $290,419 in 2001                               453,512        478,394
     Stockholders' equity, 123,019 common shares
      outstanding in 2001, including unrealized
      holding gains, net of taxes, of $13,936
      in 2001                                      $1,004,933       $991,065
 
 
                                                  Three months   Three months
                                                      2001           2000
 
     Condensed Consolidated Cash Flows Information
     Cash provided by operating activities, including
      depreciation of property and equipment
      of $12,156 in 2001                             $108,851       $104,695
     Cash used in investing activities, including
      capital expenditures of $23,093 in 2001          (3,480)       (13,146)
     Cash used in financing activities, including
      share repurchases of $6,000 and debt repayments
      of $20,000 in 2001                              (35,619)       (11,586)
     Net increase during the quarter                  $69,752        $79,963
 
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X96234653
 
 SOURCE  T. Rowe Price Group, Inc.