<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<CIK> 0000080255
<NAME> T. ROWE PRICE ASSOCIATES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 121,502,000
<SECURITIES> 137,511,000
<RECEIVABLES> 68,103,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 83,190,000<F2>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 457,955,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 11,457,000
<OTHER-SE> 310,124,000
<TOTAL-LIABILITY-AND-EQUITY> 457,955,000
<SALES> 0
<TOTAL-REVENUES> 426,250,000
<CGS> 0
<TOTAL-COSTS> 290,514,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 135,736,000
<INCOME-TAX> 52,793,000
<INCOME-CONTINUING> 70,817,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,817,000
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 0
<FN>
<F1>Not contained in registrant's unclassified balance sheet.
<F2>Represents net amount reported at interim.
<F3>Not reported at interim.
</FN>
</TABLE>
