T. Rowe Price Associates Second Quarter Report
June 30, 1996
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
410-547-2000
T. Rowe Price Associates
Financial Highlights ($000)
Three months ended June 30, Six months ended June 30,
________________________________________________________
1995 1996 Change 1995 1996 Change
Revenues $104,789 $143,688 37.1% $202,635 $276,100 36.3%
Net Income $18,222 $24,450 34.2% $33,213 $44,869 35.1%
Earnings
Per Share $0.30 $0.40 33.3% $0.55 $0.73 32.7%
Average
Shares
Outstanding 60,736 61,774 1.7% 60,383 61,633 2.1%
Assets Under Management at
End of Period (Billions) $66.6 $87.3 31.1%
Dear Stockholder:
Second quarter financial market performance was, generally speaking, similar
to that in the first quarter of 1996: U.S. stock prices continued to climb,
domestic bond prices faltered, and international markets trailed the U.S.
There were some anxious moments along the way depending on the outlook for
corporate profits, economic growth, and interest rates. With over $52 billion
in stock assets under management at the beginning of April, T. Rowe Price
benefited from appreciation and cash flows in both its mutual funds and
private accounts.
Total assets under management reached a record $87.3 billion on June 30,
up $20.7 billion from a year ago, $11.9 billion from December, and $5.3
billion from the end of the 1996 first quarter. Mutual funds accounted for
over 70% of the increase for each period, ending the quarter at $57.3 billion.
The leaders in terms of appreciation and cash flows for the quarter were the
New Horizons, International Stock, and Science & Technology Funds. The
International Stock Fund also led the new sales category, followed by New
Horizons and Equity Income. At quarter-end, stocks represented two-thirds of
total assets under the firm's management. International assets under Rowe
Price-Fleming International's management rose to $26.5 billion by quarter-end,
with over $15 billion in mutual funds.
The strong growth in assets led to a 36% increase in investment advisory
fees over last year's second quarter. The momentum behind the $29 million rise
was attributable to domestic and international stock funds and private
portfolios, which carry higher fee schedules than most of the fixed income
products. Retail transfer agent operations - both higher transaction volumes
and fees - contributed the majority of the 33% increase in administrative
revenues, with greater retirement plan contract and service fees a close
second.
Investment and other income more than doubled over the 1995 second
quarter, as partnership income grew by over $1.0 million. While the lion's
share of the firm's liquid capital is in shares of sponsored mutual funds,
including money market funds, some $30 million currently resides in
partnerships such as venture capital investments which have benefited from the
record initial public offering market.
For the reasons enumerated in past reports - more employees, higher
wages and bonuses - compensation expense was up 21% from June 1995. Other
expense categories, such as rents for space and equipment as well as
depreciation, rose in line with the growth in staff. In addition, data
processing costs continued to mount as we spent heavily for ongoing
improvements in our ability to respond to customer service needs.
Our advertising and promotion expenditures rose dramatically over the
prior-year level, as investor interest in capturing the heady returns from
stocks remained strong. However, the $14 plus million spent in the June
quarter was down 11% from the first quarter level. Media spending in the most
recent three months was geared toward the domestic equity funds and the
International Stock Fund.
The net income and earnings per share shown above represented new
quarterly highs. Six-month records were also established, with net income of
almost $45 million and earnings per share of $0.73, up 35% and 33%,
respectively. The balance sheet also reflects record net worth, as total
stockholders' equity is almost $300 million. The two-for-one stock split on
April 30 of this year is reflected in the comparisons.
Outlook
We said in our March 31 report to you that we could experience a stock market
correction but that we did not foresee a prolonged downturn. It appears that
the correction started in July, and it would be presumptuous of us to
speculate on its depth or duration.
There are a number of favorable underpinnings which support our prior
feeling that the downturn will not be prolonged. Among them are the economic
momentum, low inflation, good corporate profit reports, and a steady hand at
the Federal Reserve. On the other hand, the election creates an uncertain
atmosphere, as does the potential for the Fed to become aggressive if the
economy's vigor puts upward pressure on inflation. While we remain cautious,
we continue to expect a good year for T. Rowe Price, its clients, and its
stockholders.
Sincerely,
George J. Collins
President and Chief Executive Officer
August 5, 1996
T. Rowe Price Associates, Inc.
Unaudited Condensed Consolidated Statements of Income
Three months ended Six months ended
June 30, June 30,
___________________ ___________________
1995 1996 1995 1996
________ ________ ________ ________
(in thousands, except per share amounts)
Revenues
Investment
advisory fees . . . . . . . . . .$ 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
________ ________ ________ ________
________ ________ ________ ________
T. Rowe Price Associates, Inc.
Condensed Consolidated Balance Sheets
06/30/96
12/31/95 Unaudited
________ __________
(in thousands, except share data)
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
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
________ ________
________ ________
