Price has 1.4% rise in 2Q profit

Stock market woes cut revenue by 9.9 percent

July 20, 2002|By William Patalon III | William Patalon III,SUN STAFF

T. Rowe Price Group Inc. eked out a 1.4 percent profit increase in the second quarter, despite a 9.9 percent drop in revenue brought about by the volatile stock market.

Price said yesterday that its net income for the quarter that ended June 30 was $51.9 million, a 1.4 percent increase over the $51.2 million earned during the second quarter of last year. Net income was flat at 40 cents a share.

Analysts had expected Price to earn 42 cents a share, according to Thomson Financial/First Call.

Price's second-quarter revenue was $236.12 million, a 9.9 percent decline from the $262.13 million Price took in during the corresponding quarter a year ago.

"They missed their number," said Bruce R. Brewington, an analyst who follows asset-management firms for Putnam Lovell NBF in San Francisco. "And that was due to the loss to losses in their investment portfolio."

Price was hurt in several ways by a continuing bear market.

The firm depends heavily on the advisory fees it receives on the assets under its care. Advisory revenue was down $8.4 million from a year ago to $189.73 million. That's largely because total assets under management dropped $11 billion, falling from $158.6 billion last year to $148.8 million at the end of this year's second quarter. Price said "subsequent financial declines have further reduced assets under management in early July."

Average mutual fund assets declined by $8.1 billion, to $93.1 billion, because of losses in the stock market, offsetting - by far - the $1.3 billion in new money investors put into T. Rowe Price mutual funds. Price's other managed-money portfolios dropped $3.8 billion to $59.8 billion. Together, that represented the $11.9 billion in losses in the company's investment portfolio referred to by Brewington, the analyst.

Price has cut about 400 jobs since March of last year, the equivalent of 10 percent of its work force. That helped trim expenses by about 13 percent to $152.5 million in the second quarter, the company said.

Brewington said some long-term bright spots exist for the company. The cost-cuts should really help earnings going forward, he said, and the firm has shown it's still able to sell mutual funds during the worst market for stocks in decades.

"Earnings were [relatively] in line with expectations," Brewington said. "We're pleased the company has made cuts in expenses" and has done a good job branching out internationally, too.

George A. Roche, Price's chairman and president, said the terrible environment for stocks will likely continue in the near future, and that will hurt the company's financial results.

"The firm expects that investment income in the third quarter and the balance of 2002 will be lower than that of comparable 2001 periods," Roche said.

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