Price's profit rises 29%

Mutual funds giant earns 54 cents

a share, beats forecasts by 1 cent

Earnings

July 26, 2000|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc. said yesterday that profit increased 29 percent in the second quarter, despite sharp swings in the stock market that prompted some investors to withdraw money from the company's mutual funds.

Price made $69.3 million in the quarter that ended June 30, or 54 cents per share, compared with $53.7 million, or 41 cents per share, in the corresponding quarter a year earlier. Net income was boosted by a $4.1 million gain on the sale of $56.8 million in mutual fund holdings.

The Baltimore mutual fund company's results beat Wall Street estimates by a penny a share, according to Zacks Investment Research, which surveyed eight analysts. Revenue was up 22 percent in the quarter to $300.7 million, compared with $245.8 million in the 1999 period.

"You would have to say this was a very good quarter for us," said George A. Roche, Price's president and chairman. Nevertheless, shares of Price fell $1.125 and closed at $44.125.

In the first half of the year, Price made $144.4 million, up 34.8 percent from the corresponding period a year earlier. Price made $1.12 per diluted share, up 36.6 percent, compared with 82 cents a year earlier. Revenue rose 25.5 percent to $617 million in the six-month period.

William R. Katz, an analyst at Merrill Lynch & Co. in New York, called Price's results "mixed."

He said that the company kept expenses under control and that money is flowing into its domestic equity mutual funds, but overall flows into its funds fell from the first quarter to the second.

"That continues to be an issue for them," Katz said.

Assets that Price manages rose 12.6 percent to $179 billion in the quarter, compared with $159 billion a year earlier. But quarter-end assets slipped from $185 billion in the first quarter this year.

Assets declined by $692 million in the second quarter because stocks held in some of Price's mutual funds depreciated in value and a modest amount of money flowed out.

Price's domestic mutual funds, however, had net cash inflows of $321 million, while $1 billion flowed out of international stock and fixed-income funds.

"It is a function of the balance of our business," Roche said. "If you have the international market pick up, I think you will see a reversal in those flows. Since the end of the quarter you have had a lift in the market. You have seen some reversal in that asset depreciation already."

Roche said the company has taken steps to expand its assets base, including arranging with Salomon Smith Barney to distribute Price's new Advisor Class of shares of its mutual funds to their clients. In addition, the T. Rowe Price Savings Bank began accepting customer deposits last month.

Roche believes that a more balanced stock market is better for Price, which offers a broad array of mutual funds that are more conservatively managed than those at other companies. "As you ... burn off some of the excess speculation [in the market], on balance it is probably favorable to us," he said.

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