Profit off 14.3% at T. Rowe Price

Shaky stock market, weak economy hurt

Company still optimistic

October 26, 2002|By Bill Atkinson | Bill Atkinson,SUN STAFF

A turbulent stock market and a weak economy drove T. Rowe Price Group Inc.'s profit down 14.3 percent in the third quarter, and assets that it manages sank more than 6 percent as stock prices fell.

Price made $43.2 million in the third quarter, which ended Sept. 30, compared with $50.4 million in the year-earlier quarter, the company said yesterday. Diluted earnings per share were 34 cents in the quarter, compared with 39 cents in the corresponding period last year.

Revenue sank 9.6 percent to $220.3 million in the quarter, compared with $243.6 million a year ago.

The results were 4 cents shy of Wall Street expectations, according to Zacks Investment Research, which surveyed 17 analysts.

Ken Worthington, an analyst at CIBC World Markets in New York, said the results were not disappointing.

"The quarter was fine," he said. "It represents continued deterioration in the markets, which is not unexpected."

Shares of the Baltimore-based mutual fund company rose $1.12 to close at $27.96 on a strong day for the market.

In the first nine months of the year, Price's profit fell 1.9 percent to $148 million, or $1.15 per diluted share, compared with $150.9 million, or $1.17 per diluted share, a year earlier.

Revenue was down 11.1 percent, to $698.6 million in the nine-month period from $786.2 million last year.

The stock market's slump, which began in March 2000, has ravaged many brokerage and mutual fund companies. They have reacted by slashing thousands of workers from their payrolls.

"This down market ... has gone on longer than the siege of Leningrad," said George A. Roche, Price's chairman and president, referring to the Russian city that was paralyzed by a 900-day blockade during World War II. "Since about April, it has been very rough. Everybody began suffering in April. It didn't matter whether you were large or small; it didn't matter if you were value or growth."

The depressed stock market pushed Price's assets under management down 6.3 percent, to $131.6 billion in the quarter from $140.4 billion a year ago.

Average mutual fund assets dropped 9.7 percent, to $86.6 billion, from $95.9 billion.

Price has responded by cutting expenses, which declined 5.3 percent in the quarter to about $150 million from $158.4 million a year earlier.

Compensation costs were down 2.9 percent in the period, to $88.6 million. Expenses fell 13.6 percent, to $459.4 million in the first nine months of the year, while compensation costs dipped 6.3 percent, to $273.7 million.

Last year, Price eliminated about 200 employees, but Roche said he doesn't expect further staff cuts. "I am anticipating things will get better," he said.

Despite the gloomy quarter, the performance of Price's mutual funds has been strong.

In the 12 months that ended Sept. 30, 87 percent of Price's domestic equity mutual funds have had higher returns than the average of their peer groups, according to Lipper Inc., a New York-based mutual fund research firm.

"We think our investment results are good," Roche said. "We think we will come out of this in good shape."

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