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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934

July 25, 2003

Date of Report
(Date of earliest event reported)

T. Rowe Price Group, Inc.

(Exact Name of Registrant as Specified in Charter)

         
Maryland   000-32191   52-2264646
(State of Incorporation)   (Commission File Number)   (IRS Employer Identification No.)

100 East Pratt Street, Baltimore, Maryland 21202
(Address including Zip Code of Principal Executive Offices)

Registrant’s telephone number, including area code: (410)-345-2000

 


 

     
Item 7.   Financial Statements, Pro Forma Financial Information and Exhibits

(c)   Exhibits. The following exhibit is furnished herewith.

99   Press Release issued July 25, 2003
     
Item 9.   Regulation FD Disclosure – Information furnished under Item 12:
    Results of Operations and Financial Condition

     On July 25, 2003, T. Rowe Price Group, Inc. issued a press release reporting its financial results for the three- and six-month periods ended June 30, 2003. The press release is attached hereto as Exhibit 99.

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 hereunto duly authorized on July 25, 2003.

T. Rowe Price Group, Inc.

By: /s/ Cristina Wasiak
Vice President and Chief Financial Officer

 

exv99
 

(LOGO)

Contact:
Steven E. Norwitz
410-345-2124
Fax 410 345-4661

T. ROWE PRICE GROUP REPORTS SECOND QUARTER 2003 RESULTS

BALTIMORE (July 25, 2003) – T. Rowe Price Group, Inc. (Nasdaq: TROW) today reported 2003 second quarter net revenues of $237 million, net income of $54 million, and diluted earnings per share of $.42. For the comparable 2002 quarter, the firm previously reported net revenues of $240 million, net income of $52 million, and diluted earnings per share of $.40. Assets under management reached $161.2 billion at June 30, 2003, up from $139.9 billion at the beginning of the second quarter this year and the highest level since December 31, 2000 when assets under management were $166.7 billion.

For the first six months of 2003, the firm’s net revenues were down $26 million to $456 million from $482 million in the same period last year. Net income was $93 million versus $105 million for the first half of 2002 and diluted earnings per share were $.73 versus $.81 in the 2002 period. Operating expenses were unchanged at $307 million for the first six months of 2003 and also 2002.

Rebounding financial market valuations in the second quarter of 2003 resulted in appreciation of assets under management of $17.3 billion. Net cash inflows were also quite strong during the quarter, totaling nearly $4.0 billion. The T. Rowe Price mutual funds had $2.0 billion of net cash inflows, the highest quarterly net inflow since the third quarter of 1997. Stock funds had net investor subscriptions of $1.5 billion and bond and money market funds added an additional $.5 billion of net inflows. Investors were largely attracted to three funds, adding an aggregate of more than $1.1 billion to the Mid-Cap Growth, Equity Income and High Yield funds.

George A. Roche, the company’s chairman and president, commented: “As the market has shown signs of recovery, we continue to be encouraged by the performance of our managed investment portfolios and the company’s positioning for both individual and institutional investors. The T. Rowe Price funds have continued to perform well relative to their peers, with 61% of our rated retail funds garnering an overall rating of four or five stars from Morningstar as

 


 

of June 30, 2003. In addition, at least 77% of our funds and their share classes surpassed their Lipper averages on a total return basis for the one-, three-, five-, and ten-year periods ended June 30, 2003. The strong cash inflows for the quarter were buoyed by steady inflows from our defined contribution plan clients, additions made through our third-party distributors, successful global sales efforts, and additions to our college savings plans – which recently topped $1 billion in assets. Lastly, we are encouraged by signs that individual investors are returning to the equity markets.”

Advisory revenues are down $5.8 million versus the 2002 quarter. Lower assets under management account for a $6.6 million decrease but were partially offset by increased fees of $.8 million from our managed disposition service for venture capital distributions. Average mutual fund assets under management were $95.3 billion this quarter compared to $97.4 billion in the second quarter last year. Market appreciation increased mutual fund assets nearly $11.2 billion during the quarter and net investor inflows added another $2.0 billion to increase fund assets from $86.9 billion at the beginning of the quarter to $100.1 billion at June 30, 2003. Additionally, market appreciation of $6.1 billion and net investor inflows of nearly $2.0 billion increased other managed portfolios from $53.0 billion at the beginning of the quarter to $61.1 billion at June 30, 2003.

Administrative revenues increased $3.0 million from the second quarter 2002 to $53.4 million for this year’s period due primarily to increases in mutual fund transfer agency revenues and distribution fees from our Advisor class of mutual fund shares. These revenues are offset by corresponding increases in the related operating expenses. Discount brokerage trading activity was up during this year’s quarter and also contributed to the revenue increase.

Operating expenses increased only .9% or $1.3 million from the previous year’s quarter to $152.6 million. Increases in compensation and related costs and in other operating expenses were nearly offset by decreases in advertising and promotion and in depreciation and amortization expenses. “We expect that our advertising and promotion expense in the third quarter of 2003 will be about the same as that of the second quarter of 2003. Market conditions later this year will dictate our fourth quarter spending then,” Mr. Roche commented.

 


 

Net operating income was down $4.1 million to $84.8 million for the second quarter of 2003. However, net non-operating results from investment income net of debt expenses increased $6.7 million from a loss of $5.3 million in the second quarter 2002 to a gain of $1.4 million in the second quarter 2003. In the 2003 quarter, the firm recognized $.8 million of gains on dispositions of its mutual fund investments. The 2002 quarter included losses on our investments and from foreign currency exchange rate fluctuations.

“Our corporate earnings and cash flow remain very strong and give us substantial financial flexibility,” Mr. Roche added. During the second quarter, the firm continued to reduce its debt and on July 17, 2003 made the final repayment of $5 million on its $300 million acquisition indebtedness obtained in August 2000 when it acquired the other half of T. Rowe Price International from its former venture partner.

In closing, Mr. Roche said: “The relatively quick end to the U.S.-led war against Iraq; falling interest rates; and reductions in income, stock dividend, and capital gains taxes contributed to a resurgent stock market in the second quarter. Provided there are no severe external shocks to the system, we believe the remainder of the year should continue to be an improving environment for the financial markets and the company. Despite some economists’ deflation fears, the economy is cyclically poised for recovery and should continue on a slow growth path. We are finding that current valuations are attractive on stocks across many sectors, and while it may take a while to recover from the stock market excesses of the late 1990s, prudent long-term investors should continue to find a more welcoming environment moving forward. The rebuilding of investor confidence and the continued strong relative performance of our mutual funds, combined with the investments we are making in our business, positions us well moving forward.”

Founded in 1937, Baltimore-based T. Rowe Price is a global investment management organization that provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries. The organization also offers a variety of sophisticated investment planning and guidance tools. T. Rowe Price’s disciplined, risk-aware investment approach focuses on diversification, style consistency, and fundamental research. More information is available at www.troweprice.com.

 


 

Certain statements in this press release may represent “forward-looking information,” including information relating to anticipated growth in revenues, net income, and earnings per share, 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 Quarterly Report for the period ended March 31, 2003. The Form 10-Q report for the period ended June 30, 2003 is expected to be filed by July 29, 2003 with the U.S. Securities and Exchange Commission and will include more complete information on the company’s interim financial results.

 


 

Unaudited Condensed Consolidated Statements of Income
(in thousands, except per-share amounts)

                                   
      Three months ended   Six months ended
      June 30,   June 30,
     
 
Revenues   2003   2002   2003   2002
   
 
 
 
 
Investment advisory fees
  $ 183,896     $ 189,731     $ 348,285     $ 378,251  
 
Administrative fees and other income
    53,433       50,434       107,578       103,756  
 
Investment income of savings bank subsidiary
    951       598       1,931       1,053  
 
   
     
     
     
 
 
Total revenues
    238,280       240,763       457,794       483,060  
 
Interest expense on savings bank deposits
    818       483       1,614       772  
 
   
     
     
     
 
 
Net revenues
    237,462       240,280       456,180       482,288  
 
   
     
     
     
 
Operating expenses
                               
 
Compensation and related costs
    94,343       90,707       186,490       185,080  
 
Advertising and promotion
    12,392       14,436       28,737       31,347  
 
Depreciation and amortization of property and equipment
    11,705       12,991       23,556       25,742  
 
Occupancy and facility costs
    14,985       15,039       31,506       30,846  
 
Other operating expenses
    19,221       18,173       36,631       34,189  
 
   
     
     
     
 
 
    152,646       151,346       306,920       307,204  
 
   
     
     
     
 
Net operating income
    84,816       88,934       149,260       175,084  
 
   
     
     
     
 
Other investment income (loss)
    1,848       (4,640 )     203       (4,788 )
Other interest expense
    480       702       980       1,498  
 
   
     
     
     
 
Net non-operating income (loss)
    1,368       (5,342 )     (777 )     (6,286 )
 
   
     
     
     
 
Income before income taxes and minority interests
    86,184       83,592       148,483       168,798  
Provision for income taxes
    32,408       31,738       55,933       63,920  
 
   
     
     
     
 
Net income
  $ 53,776     $ 51,854     $ 92,550     $ 104,878  
 
   
     
     
     
 
Earnings per share
                               
 
Basic
  $ 0.44     $ 0.42     $ 0.76     $ 0.85  
 
   
     
     
     
 
 
Diluted
  $ 0.42     $ 0.40     $ 0.73     $ 0.81  
 
   
     
     
     
 
Dividends declared per share
  $ 0.17     $ 0.16     $ 0.34     $ 0.32  
 
   
     
     
     
 
Weighted average shares outstanding
    122,507       123,136       122,475       123,332  
 
   
     
     
     
 
Weighted average shares outstanding assuming dilution
    126,844       128,680       126,185       129,429  
 
   
     
     
     
 
Investment Advisory Fees (in thousands)
                               
Sponsored U.S. mutual funds
                               
 
Stock
                  $ 190,384     $ 223,921  
 
Bond and money market
                    60,333       51,066  
 
                   
     
 
 
                    250,717       274,987  
Other portfolios
                    97,568       103,264  
 
                   
     
 
Total investment advisory fees
                  $ 348,285     $ 378,251  
 
                   
     
 
Condensed Consolidated Cash Flows Information (in thousands)
                    6/30/03       6/30/02  
 
                   
     
 
Cash provided by operating activities, including changes in receivables and payables
                  $ 130,215     $ 186,493  
Cash used in investing activities, including $13,544 for additions to property and equipment in 2003
                    (13,821 )     (65,909 )
Cash used in financing activities, including debt repayments of $38,531 and share repurchases of $19,962 in 2003
                    (83,669 )     (102,749 )
 
                   
     
 
Net increase in cash during the period
                  $ 32,725     $ 17,835  
 
                   
     
 

 


 

                                   
Assets under management (in billions)   Q2 2002 Avg   Q2 2003 Avg   6/30/03   6/30/02
   
 
 
 
Sponsored U.S. mutual funds
                               
 
Stock
  $ 73.1     $ 66.9     $ 71.3     $ 68.4  
 
Bond and money market
    24.3       28.4       28.8       24.7  
 
   
     
     
     
 
 
Total
    97.4       95.3       100.1       93.1  
Other portfolios
    58.2       57.7       61.1       55.7  
 
   
     
     
     
 
 
  $ 155.6     $ 153.0     $ 161.2     $ 148.8  
 
   
     
     
     
 
Equity securities
                  $ 108.9     $ 104.9  
Debt securities
                    52.3       43.9  
 
                   
     
 
 
                  $ 161.2     $ 148.8  
 
                   
     
 
                   
Condensed Consolidated Balance Sheet Information (in thousands)   6/30/03   12/31/02
   
 
Cash and cash equivalents
  $ 144,143     $ 111,418  
Accounts receivable
    106,818       96,787  
Investments in sponsored mutual funds
    133,224       123,172  
Debt securities held by savings bank subsidiary
    99,128       92,908  
Property and equipment
    205,294       215,590  
Goodwill
    665,692       665,692  
Other assets
    58,091       64,866  
 
   
     
 
 
Total assets
    1,412,390       1,370,433  
Total liabilities, including debt of $17,119 in 2003
    221,106       236,593  
 
   
     
 
Stockholders’ equity, 123,022,816 common shares outstanding in 2003, including net unrealized holding gains of $18,104 in 2003
  $ 1,191,284     $ 1,133,840