<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, 1997.
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. 58,457,825 SHARES AT OCTOBER
16, 1997.
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.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
12/31/96 09/30/97
________ ________
ASSETS
Cash and cash equivalents $114,551 $180,727
Accounts receivable 73,239 87,888
Investments in sponsored mutual funds held as
available-for-sale securities 143,410 176,149
Partnership and other investments 25,161 24,275
Property and equipment 101,207 132,744
Goodwill and other assets 21,266 16,323
________ ________
$478,834 $618,106
________ ________
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 31,529 $ 31,737
Accrued compensation and retirement costs 41,523 66,454
Income taxes payable 14,464 17,760
Dividends payable 7,484 7,586
Minority interests in consolidated subsidiaries 38,168 46,196
________ ________
Total liabilities 133,168 169,733
________ ________
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
200,000,000 shares; issued 57,572,791 shares
in 1996 and 58,366,912 shares in 1997 11,514 11,673
Capital in excess of par value 7,823 18,249
Retained earnings 306,566 384,588
Unrealized security holding gains 19,763 33,863
________ ________
Total stockholders' equity 345,666 448,373
________ ________
$478,834 $618,106
________ ________
________ ________
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,
__________________________________
1996 1997 1996 1997
________ ________________ ________
Revenues
Investment advisory fees $118,765 $158,233 $328,473 $429,079
Administrative fees 28,654 37,533 86,748 107,362
Investment and other income 2,731 4,003 11,029 11,375
________ ________ ________ ________
150,150 199,769 426,250 547,816
________ ________ ________ ________
Expenses
Compensation and related costs 46,691 59,944 131,842 169,810
Advertising and promotion 11,347 13,419 41,770 44,618
Depreciation, amortization and
operating rentals of property
and equipment 10,809 14,126 27,937 35,374
International investment
research fees 9,900 13,145 28,614 35,884
Administrative and general 21,837 24,516 60,351 70,088
________ ________ ________ ________
100,584 125,150 290,514 355,774
________ ________ ________ ________
Income before income taxes and
minority interests 49,566 74,619 135,736 192,042
Provision for income taxes 19,220 27,968 52,793 73,254
________ ________ ________ ________
Income from consolidated companies 30,346 46,651 82,943 118,788
Minority interests in consolidated
subsidiaries 4,398 5,314 12,126 15,122
________ ________ ________ ________
Net income $ 25,948 $ 41,337 $ 70,817 $103,666
________ ________ ________ ________
________ ________ ________ ________
Earnings per share $ .42 $ .64 $ 1.15 $ 1.63
________ ________ ________ ________
________ ________ ________ ________
Dividends declared per share $ .105 $ .13 $ .315 $ .39
________ ________ ________ ________
________ ________ ________ ________
Weighted average shares outstanding,
including share equivalents arising
from unexercised stock options 61,776 64,254 61,680 63,772
________ ________ ________ ________
________ ________ ________ ________
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
__________________
09/30/96 09/30/97
________ ________
Cash flows from operating activities
Net income $ 70,817 $103,666
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 13,133 19,371
Minority interests in consolidated subsidiaries 12,126 15,122
Increase in accounts receivable (12,262) (14,649)
Increase in accounts payable and accrued liabilities 38,601 34,888
Other changes in assets and liabilities 3,375 (2,333)
________ ________
Net cash provided by operating activities 125,790 156,065
________ ________
Cash flows from investing activities
Investments in sponsored mutual funds (8,948) (10,453)
Proceeds from dispositions of sponsored mutual funds 2,626 --
Partnership and other investments (8,940) (1,789)
Distributions from partnership investments 1,666 6,348
Additions to property and equipment (37,370) (53,070)
________ ________
Net cash used in investing activities (50,966) (58,964)
________ ________
Cash flows from financing activities
Purchases of stock (19,668) (9,655)
Receipts relating to stock issuances 3,003 8,645
Dividends paid to stockholders (18,043) (22,545)
Distributions to minority interests (45) (7,370)
________ ________
Net cash used in financing activities (34,753) (30,925)
________ ________
Cash and cash equivalents
Net increase during period 40,071 66,176
At beginning of year 81,431 114,551
________ ________
At end of period $121,502 $180,727
________ ________
________ ________
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
portfolios 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, 1997, the Company's
assets under management totaled $124.7 billion, including $81.7 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 1996 Annual Report to
Stockholders.
<PAGE> 6
NOTE 2 - STOCKHOLDERS' EQUITY.
The following table details the changes in stockholders' equity (dollars in
thousands) during the first nine months of 1997.
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,
1996 57,572,791 $11,514 $ 7,823 $306,566 $19,763 $345,666
Common stock
issued under
stock-based
compensation
plans 1,024,121 205 17,038 17,243
Purchases of
common stock (230,000) (46) (6,612) (2,997) (9,655)
Net income 103,666 103,666
Dividends
declared (22,647) (22,647)
Increase in
unrealized
security
holding gains 14,100 14,100
__________ _______ _______ ________ _______ ________
Balance at
September 30,
1997 58,366,912 $11,673 $18,249 $384,588 $33,863 $448,373
__________ _______ _______ ________ _______ ________
__________ _______ _______ ________ _______ ________
<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, 1997, and the
related condensed consolidated statements of income and of cash flows for the
three- and nine-month periods ended September 30, 1996 and 1997. 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, 1996, and the
related consolidated statements of income, of cash flows, and of stock-
holders' equity for the year then ended (not presented herein), and in our
report dated January 24, 1997 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,
1996, 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 17, 1997
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 portfolios, 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 portfolios which meet the varied needs and objectives of its
individual and institutional investors. During 1996 and 1997, there have
been significant net cash inflows to the stock mutual funds, particularly the
domestic funds. At September 30, 1997, total assets under management were
$124.7 billion, including $81.7 billion in the Funds. Equity investments
comprise approximately 72% of total assets under management.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS 1996.
Net income increased $15.4 million or 59% to $41.3 million or $.64 per share
from $25.9 million or $.42 per share. Total revenues increased 33% from
$150.2 million to a record quarterly total of $199.8 million, led by an
increase of $39.5 million in investment advisory fees.
Investment advisory revenues from the Funds increased $31.5 million as
average fund assets under management were up $21.4 billion to $79.1 billion.
Fund assets totaled $81.7 billion at September 30, 1997, up $2.6 billion over
the quarterly average and up $6.3 billion from June 30, 1997, with stock
funds accounting for most of the increase. Net cash inflows to the Funds
during the third quarter totaled $2.4 billion. Advisory fees from private
accounts and other sponsored investment portfolios contributed the balance of
the investment advisory revenue gains. These assets under management rose to
$43.0 billion at September 30, 1997, up $1.5 billion from June 30, 1997 and
$8.0 billion from December 31, 1996. Total assets under management closed
the quarter at $124.7 billion, up from $116.9 billion at June 30, 1997 and
$99.4 billion at December 31, 1996.
Administrative fees, primarily from services to the Funds and their
shareholders, grew $8.9 million to $37.5 million; however, increases in
related operating expenses more than offset these revenue gains. Investment
income rose nearly $1.3 million due primarily to the return on larger cash
investments.
Operating expenses increased 24% or $24.6 million to $125.2 million. Greater
compensation and related costs of almost $13.3 million were attributable to
an 18% increase in the number of employees during the past twelve months,
<PAGE> 9
primarily to support the Company's growing administrative services and data
processing operations, and to higher rates of pay including performance-
related compensation accruals. Advertising and promotion expenditures
increased $2.1 million as the Company sought to capitalize on the strong
investor demand for stock mutual funds. These expenditures will vary over
time as market conditions and cash flows to the Funds warrant. Depreciation,
amortization and operating rentals of property and equipment was up 31% or
$3.3 million due to expansion of facilities and recent equipment
acquisitions, primarily investments in technology assets. International
investment research fees increased $3.2 million as international assets under
management by Rowe Price-Fleming International (RPFI) rose to $33.0 billion
at September 30, 1997. Administrative and general expenses increased $2.7
million due mainly to greater costs associated with the Company's growing
administrative operations including data processing and communications
capabilities.
Increased earnings by RPFI on greater assets under management was responsible
for the increase in minority interests in consolidated subsidiaries.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS 1996.
Net income increased $32.8 million or 46% to $103.7 million or $1.63 per
share from $70.8 million or $1.15 per share. Total revenues increased 29%
from $426.3 million to a record nine month total of almost $548 million, led
by an increase of almost $101 million in investment advisory fees.
Investment advisory revenues from the Funds increased almost $74.4 million as
average fund assets under management rose $17.3 billion to $72.4 billion.
Net cash inflows to the Funds during the first nine months of 1997 totaled
$7.7 billion. Advisory fees from private accounts and other sponsored
investment portfolios contributed the balance of the investment advisory
revenue gains.
Administrative fees, primarily from services to the Funds and their
shareholders, grew $20.6 million to $107.4 million; however, increases in
related operating expenses more than offset these revenue gains.
Operating expenses increased 23% or $65.3 million to $355.8 million. Greater
compensation and related costs were attributable to increases in the number
of employees and to higher rates of pay including performance-related
compensation accruals. Advertising and promotion expenditures were up 7% or
$2.8 million. Depreciation, amortization and operating rentals of property
and equipment was up $7.4 million due to expansion of facilities and recent
equipment acquisitions, primarily investments in technology assets.
International investment research fees increased $7.3 million based on the
higher international assets under management by RPFI. Administrative and
general expenses increased $9.7 million due mainly to greater costs of the
Company's growing administrative operations including data processing and
communications capabilities.
Increased earnings by RPFI on greater assets under management was responsible
<PAGE> 10
for the increase in minority interests in consolidated subsidiaries.
FORWARD-LOOKING INFORMATION.
Information or statements provided by or on behalf of the Company from time
to time, including those within this Form 10-Q Quarterly Report, 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 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 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 cash
inflows or outflows in mutual funds and private accounts; fluctuations in the
financial markets resulting in appreciation or depreciation of assets under
management; the relative investment performance of the Company's sponsored
investment portfolios and private accounts as compared to competing offerings
and market indices; the extent to which performance-based investment advisory
fees are earned from private accounts; the expense ratios of the Company's
sponsored investment portfolios; 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 introduction of new mutual funds and investment portfolios; the ability
of the Company to contract with the Price Funds for payment for
administrative services offered to the Price Funds and Price Fund
shareholders; the continuation of trends in the retirement plan marketplace
favoring defined contribution plans and participant-directed investments; and
the amount and timing of income from 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, including performance-based compensation
based on the Company's financial results, as well as changes in response to
the size of 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.
<PAGE> 11
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.
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 October 20, 1997.
T. Rowe Price Associates, Inc.
/s/ Alvin M. Younger, Jr., Chief Financial & Accounting Officer
EXHIBIT 15
October 20, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that our report dated October 17, 1997 (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. 033-07012, No. 033-08672, No.
033-37573, No. 033-72568, No. 033-58749 and No. 333-20333). 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, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 180,727,000
<SECURITIES> 176,149,000
<RECEIVABLES> 87,888,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 132,744,000<F2>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 618,106,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 11,673,000
<OTHER-SE> 436,700,000
<TOTAL-LIABILITY-AND-EQUITY> 618,106,000
<SALES> 0
<TOTAL-REVENUES> 547,816,000
<CGS> 0
<TOTAL-COSTS> 355,774,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 192,042,000
<INCOME-TAX> 73,254,000
<INCOME-CONTINUING> 103,666,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,666,000
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 0
<FN>
<F1>Item is not contained in registrant's unclassified balance sheet.
<F2>Item is reported net of accumulated depreciation at interim.
<F3>Not reported at interim.
</FN>
</TABLE>
