<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: 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<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 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.
<PAGE> 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.
<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 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.
<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 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
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
<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 June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 94,945,000
<SECURITIES> 132,549,000
<RECEIVABLES> 65,265,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 72,622,000<F2>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 412,674,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 11,435,000
<OTHER-SE> 288,260,000
<TOTAL-LIABILITY-AND-EQUITY> 412,674,000
<SALES> 0
<TOTAL-REVENUES> 276,100,000
<CGS> 0
<TOTAL-COSTS> 189,930,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 86,170,000
<INCOME-TAX> 33,573,000
<INCOME-CONTINUING> 44,869,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,869,000
<EPS-PRIMARY> .73
<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>
