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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

     
July 27, 2004
Date of Report
(Date of earliest event reported)

T. Rowe Price Group, Inc.

(Exact name of registrant as specified in its 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 and Exhibits.

  (c)   Exhibits. The following exhibit is furnished in accordance with the provisions of Item 601 of Regulation S-K.
 
  99   Press Release issued July 27, 2004

Item 12. Results of Operations and Financial Condition.

On July 27, 2004, T. Rowe Price Group, Inc. issued a press release reporting its second quarter and first half 2004 results. A copy of the press release is attached hereto as Exhibit 99 to this Current Report on Form 8-K.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

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 27, 2004.

T. Rowe Price Group, Inc.

     
By: /s/
  Kenneth V. Moreland
  Vice President and Chief Financial Officer

 

exv99
 

Exhibit 99

(T ROWE PRICE NEWS RELEASE GRAPHIC)

T. ROWE PRICE GROUP REPORTS RECORD QUARTERLY RESULTS

Assets Under Management Exceed $206 Billion; Diluted Earnings Per Share up 43%

BALTIMORE (July 27, 2004) — T. Rowe Price Group, Inc. (Nasdaq: TROW) today reported 2004 second quarter net revenues of nearly $310 million, net income of $80.3 million, and diluted earnings per share of $.60, surpassing the record diluted earnings per share of $.58 reported in the first quarters of 2004 and 2000. Comparatively, the reported results versus the second quarter of 2003 represent a 30% increase in net revenues from $237 million, a 49% increase in net income from nearly $54 million, and a 43% increase in diluted earnings per share from $.42. Assets under management increased to a record of $206.8 billion at June 30, 2004, up nearly 9% from $190 billion at the end of 2003 and up more than 28% from $161 billion at June 30, 2003.

For the first half of 2004, cumulative results include net revenues of $615 million, net income of $157.6 million, and diluted earnings per share of $1.18, all records for the first half of a year.

Financial Highlights

Investment advisory revenues were up 35% or $65.1 million in the second quarter of 2004 versus the 2003 quarter. Increased assets under management drove the change as average mutual fund assets under management exceeded $125 billion, $30 billion higher than the $95 billion average of the second quarter of 2003. Average assets in other managed portfolios were $76.6 billion in the second quarter of 2004, up nearly $19 billion versus the average of $57.7 billion in the 2003 quarter.

The $206.8 billion of assets under management at June 30, 2004 include $128.3 billion in the T. Rowe Price mutual funds distributed in the United States and $78.5 billion in other managed portfolios consisting of separately managed accounts, sub-advised funds, sponsored mutual funds which are offered to non-U.S. investors, and variable annuity portfolios. The $5.8 billion increase in assets under management from $201 billion at March 31, 2004 included $4.2 billion of net investor inflows, with almost $1.9 billion added to the mutual funds and $2.3 billion to

 


 

other managed portfolios. Net market appreciation and income added the remaining $1.6 billion to assets under management during the quarter. When added to first quarter 2004, net cash flows for the first half total $10.6 billion, with $6.6 billion into the mutual funds and $4.0 billion into the other managed investment portfolios.

Mutual fund net inflows in the 2004 second quarter were concentrated in the U.S. domestic stock mutual funds with 75% of the total going to the Mid-Cap Value, Equity Income and Growth Stock funds, each rated either four or five stars by Morningstar. Other managed U.S. portfolios benefited from cash flows from new and existing institutional investors both in the U.S. and overseas and from third party distribution efforts in the U.S.

Operating expenses increased $29 million from the previous year’s quarter to more than $181.7 million. Increases in compensation and related employment costs, in advertising and promotion costs, and in other operating expenses were the primary reasons for the change. On a sequential basis, operating expenses were down $1 million from the first quarter of 2004 as a $5 million decrease in advertising and promotion was mostly offset by smaller increases in compensation and occupancy costs. At June 30, 2004, the firm employed 4,000 associates, up almost 6% since the beginning of the year to accommodate increased volumes across the firm. The firm expects its advertising and promotion expenditures in the third quarter of 2004 will be up more than $3 million versus the comparable 2003 quarter while spending for all of 2004 could be up nearly 25% versus 2003. The firm continues to monitor financial market conditions and will adjust its future advertising and promotion spending accordingly.

Chairman Commentary

George A. Roche, the company’s chairman and president, commented: “The firm’s investment results continue to be strong relative to our peers, with more than 70% of the T. Rowe Price funds and their share classes surpassing their Lipper averages on a total return basis for the one-, three-, five-, and ten-year periods ended June 30, 2004. In addition, two-thirds of our rated retail funds ended the quarter with an overall rating of four or five stars from Morningstar.

 


 

“We continue to be encouraged by net cash inflows into our mutual funds and managed accounts during the second quarter, which included steady inflows from across our multiple distribution channels. In particular, our institutional advisory efforts saw substantial growth, particularly outside the U.S. where net inflows exceeded $1 billion. In the U.S., activity in our institutional separate account business was buoyed by renewed interest in large-cap investments, as well as growing interest in our structured research strategy. In addition, our target-date Retirement Funds continue to grow and are particularly popular among defined contribution plan participants.”

In closing, Mr. Roche said: “The economy continues to show signs of improvement, companies are reporting strong second quarter earnings, and traditional valuation measures for equities are reasonable. Although concerns about inflation, rising interest rates, global political risks, and higher oil prices may be injecting more caution by investors currently, we believe the outlook for the markets and our company remains favorable for the long term.”

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 Report for the period ended March 31, 2004. The Form 10-Q report for the second quarter of 2004 will be filed this week 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
Revenues   6/30/2003
  6/30/2004
  6/30/2003
  6/30/2004
Investment advisory fees
  $ 183,896     $ 249,002     $ 348,285     $ 494,011  
Administrative fees and other income
    53,433       60,546       107,578       121,011  
Investment income of savings bank subsidiary
    951       924       1,931       1,926  
 
   
 
     
 
     
 
     
 
 
Total revenues
    238,280       310,472       457,794       616,948  
Interest expense on savings bank deposits
    818       800       1,614       1,625  
 
   
 
     
 
     
 
     
 
 
Net revenues
    237,462       309,672       456,180       615,323  
 
   
 
     
 
     
 
     
 
 
Operating expenses
                               
Compensation and related costs
    94,343       113,084       186,490       222,864  
Advertising and promotion
    12,392       16,117       28,737       37,176  
Depreciation and amortization of property and equipment
    11,705       9,843       23,556       19,971  
Occupancy and facility costs
    14,985       16,525       31,506       32,183  
Other operating expenses
    19,221       26,089       36,631       52,254  
 
   
 
     
 
     
 
     
 
 
 
    152,646       181,658       306,920       364,448  
 
   
 
     
 
     
 
     
 
 
Net operating income
    84,816       128,014       149,260       250,875  
 
   
 
     
 
     
 
     
 
 
Other investment income
    1,848       939       203       2,092  
Other interest and credit facility expenses
    480       468       980       800  
 
   
 
     
 
     
 
     
 
 
Net non-operating income (expense)
    1,368       471       (777 )     1,292  
 
   
 
     
 
     
 
     
 
 
Income before income taxes
    86,184       128,485       148,483       252,167  
Provision for income taxes
    32,409       48,221       55,934       94,564  
 
   
 
     
 
     
 
     
 
 
Net income
  $ 53,775     $ 80,264     $ 92,549     $ 157,603  
 
   
 
     
 
     
 
     
 
 
Earnings per share
                               
Basic
  $ 0.44     $ 0.63     $ 0.76     $ 1.25  
 
   
 
     
 
     
 
     
 
 
Diluted
  $ 0.42     $ 0.60     $ 0.73     $ 1.18  
 
   
 
     
 
     
 
     
 
 
Dividends declared per share
  $ 0.17     $ 0.19     $ 0.34     $ 0.38  
 
   
 
     
 
     
 
     
 
 
Weighted average shares
                               
Outstanding
    122,507       126,976       122,475       126,536  
 
   
 
     
 
     
 
     
 
 
Assuming dilution
    126,844       133,513       126,185       133,645  
 
   
 
     
 
     
 
     
 
 

 


 

                                 
    YTD 2004 Avg
  YTD 2003 Avg
  6/30/2004
  12/31/2003
Assets Under Management (in billions) Sponsored mutual funds Stock
  $ 94.6     $ 63.3     $ 98.8     $ 88.4  
Bond and money market
    29.5       27.8       29.5       29.1  
 
   
 
     
 
     
 
     
 
 
Total
    124.1       91.1       128.3       117.5  
Other portfolios
    75.7       55.4       78.5       72.5  
 
   
 
     
 
     
 
     
 
 
 
  $ 199.8     $ 146.5     $ 206.8     $ 190.0  
 
   
 
     
 
     
 
     
 
 
Equity securities
                  $ 150.5     $ 135.5  
Debt securities
                    56.3       54.5  
 
                   
 
     
 
 
 
                  $ 206.8     $ 190.0  
 
                   
 
     
 
 
                 
    Six months ended
    6/30/2004
  6/30/2003
Condensed Consolidated Cash Flows Information (in thousands)
               
Cash provided by operating activities
  $ 210,852     $ 130,215  
Cash used in investing activities, including ($21,589) for additions to property and equipment in 2004
    (27,668 )     (13,821 )
Cash used in financing activities, including stock options exercised of $28,362 and dividends paid of ($47,721) in 2004
    (24,475 )     (83,669 )
 
   
 
     
 
 
Net increase in cash during the period
  $ 158,709     $ 32,725  
 
   
 
     
 
 
                 
    6/30/2004
  12/31/2003
Condensed Consolidated Balance Sheet Information (in thousands)
               
Cash and cash equivalents
  $ 395,242     $ 236,533  
Accounts receivable
    135,960       121,295  
Investments in sponsored mutual funds
    179,213       162,283  
Debt securities held by savings bank subsidiary
    104,317       110,962  
Property and equipment
    202,475       201,094  
Goodwill
    665,692       665,692  
Other assets
    45,237       48,718  
 
   
 
     
 
 
Total assets
    1,728,136       1,546,577  
Total liabilities, including savings bank deposits of $91,160 in 2004
    230,074       217,497  
 
   
 
     
 
 
Stockholders’ equity, 127,233,274 common shares outstanding in 2004, including net unrealized holding gains of $30,381 in 2004
  $ 1,498,062     $ 1,329,080