Price posts 34% slide in profit

1st-quarter plunge blamed on slump in stock market

`Doing well in April'

Company will cut expenses and jobs, top executive says

April 24, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Group Inc. reported yesterday that its profit slipped 34 percent in the first quarter, hurt by a slumping stock market, and a top executive said the company will tighten expenses and cut jobs.

James S. Riepe, vice chairman of the Baltimore-based mutual fund company, said Price is looking at across-the-board expense cuts that will "include certainly some personnel."

"Some of our shareholder service area volumes are down ... and we will have to make some adjustments to our capacity to reflect those lower volumes," Riepe said.

He declined to comment further.

Price has about 4,000 employees worldwide, with the bulk - 3,200 - in Baltimore and Owings Mills.

As are many other mutual fund companies, Price is feeling the impact of a more volatile and less robust stock market that has prompted nervous investors to pull money out.

Lipper Inc., a mutual fund tracking company, reported yesterday that investors pulled a record $15.4 billion out of stock mutual funds in March, making it the first time since 1990 that investors withdrew more money than they deposited.

Price's profit in the three months that ended March 31 was $49.3 million, or 38 cents per diluted share, down from $75 million, or 58 cents per diluted share, in the corresponding period a year earlier. This year's results include a charge of $7 million, or 5 cents per share, from an acquisition in August.

The results fell short of Wall Street's consensus estimates by 2 cents. Analysts expected the company to make 40 cents per diluted share, according to Zacks Investment Research, which surveyed nine analysts.

"It was a weak quarter," said Amy Butte, an analyst at Bear Stearns & Co. in New York. "It came in a little less than expected."

Revenue slipped 11.3 percent in the quarter, to $280.5 million from $316.3 million in the corresponding period a year earlier.

Price's shares fell $1.59 yesterday to close at $34.76.

"Lower interest rates and better valuations make us optimistic that the worst of the market decline is behind us," George A. Roche, Price's chairman and president, said in a statement. "As a result, while the equity market may continue to be volatile, we believe that our broad diversification by investment approach continues to position us well for long-term growth."

The decline in profit is a reflection of a drastically weakened stock market, which has fallen sharply since early last year. The Dow Jones industrial average peaked at 11,722.98 points in January, and the Nasdaq composite index reached a high of 5,048.62 two months later. Some stocks have only recently begun to recover.

Total assets Price manages for individuals and institutions slipped to $148.7 billion in the first quarter, down 19.7 percent from $185.2 billion a year earlier.

Assets in Price's more than 80 mutual funds fell 20.6 percent in the quarter, to $94.8 billion from $119.4 billion in the first quarter of last year.

Investors continued to pump money into Price mutual funds during the quarter, however, adding $395 million to mutual fund accounts, $523 million to money market and bond funds, and $306 million to domestic stock funds.

"We are doing well in April. We have net inflows in April," Riepe said. "We are looking toward the end of the year, and I think we are going to be in good shape unless the markets give us another surprise."

Price expects expenses to be lower than they were last year. Expenses rose 6.7 percent in the first quarter, to $198 million, but were nearly $1.2 million lower than in the fourth quarter of last year.

Advertising and promotion expenses fell 14.3 percent, to $21.5 million from $25.1 million a year earlier.

Despite Price's problems, Butte said she likes the company because it continues to invest in its business, expand overseas and has a strong name. She has given the company's stock an "attractive" rating and expects Price to make 39 cents a share in the second quarter.

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