T. Rowe Price's earnings slide 27%

3rd quarter comes in at 39 cents a share

revenue falls 19.8%

Weak market is blamed

October 20, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Group Inc. reported yesterday that third-quarter profit fell 27 percent as assets under management slid, and the company said it will look to cut more costs, including laying off employees.

"We will basically look at everything," said George A. Roche, chairman and president of the Baltimore-based mutual fund company. "You look across the board to control your expenses. You look at all of your personnel costs."

Price's problems, like those at most mutual fund companies, stem from a weakened stock market that was sorely jolted by the Sept. 11 terrorist attacks.

Price made $50 million in the quarter that ended Sept. 30, compared with $69.2 million in the corresponding period a year earlier.

Diluted earnings per share fell 26.4 percent to 39 cents, compared with 53 cents per diluted share in last year's third quarter.

Price also wrote off $7.2 million of good will in the quarter, almost all of it associated with the acquisition of T. Rowe Price International in August 2000.

Revenue slipped 19.8 percent to $243.6 million in the quarter, from $303.7 million.

"Clearly, our revenues were adversely impacted by the market," Roche said.

"The stock market's sharp decline this autumn will adversely affect our fourth-quarter revenues and earnings."

Shares of Price gained 23 cents to $28.36 on the Nasdaq stock market.

Robert A. Lee, director of equity research at UBS Warburg LLC in New York, said Price's performance was solid, despite the lower earnings.

"Considering the environment, it was about as [good] as you could expect," Lee said.

Price has reduced profit erosion by cutting costs. Expenses fell 16.3 percent in the third quarter to $158.4 million, compared with $189.2 million a year earlier.

Compensation costs fell nearly 8 percent to $91.2 million in the quarter; advertising expenses were down 33.5 percent to $10.3 million; and occupancy and equipment expenses were flat at $28 million. The company also reduced debt by $75 million to $140 million.

"I think we have made very reasonable progress," Roche said.

The company has been trimming costs much of the year. It eliminated 55 employees in April, most of them telephone representatives at its Owings Mills call center.

Price, which employs about 3,900, said its total head count is down about 150 this year from layoffs and attrition.

During the quarter, frightened investors and poor stock market performance pushed Price's assets under management down 21.8 percent to $140.4 billion, compared with $179.6 billion a year earlier.

Investors pulled $725 million out of T. Rowe Price funds in the quarter - $640 million from Price's international funds and $85 million from domestic funds. But they pumped $468 million into Price's money market and bond funds.

In the first nine months of the year, Price made $150.9 million, or $1.17 per diluted share, down 29.4 percent from $213.6 million, or $1.65 per diluted share, in 2000.

Revenue totaled $786.2 million in the period, down 14.6 percent from revenue of $920.7 million in 2000. Expenses fell 4.2 percent to $531.7 million from $554.9 million.

Roche said he expects business to improve next year if the economy and market recovers.

"We have been in a very severe bear market, and it has run now a very long period of time," Roche said. "Bear markets don't go forever, thank goodness."

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