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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended: JUNE 30, 2002.
Commission file number: 000-32191.
Exact name of registrant as specified in its charter:
T. ROWE PRICE GROUP, INC.
State of incorporation: MARYLAND.
I.R.S. Employer Identification No.: 52-2264646.
Address and Zip Code of principal executive offices: 100 EAST PRATT
STREET, BALTIMORE, MARYLAND 21202.
Registrant's telephone number, including area code: (410) 345-2000.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
Indicate the number of shares outstanding of the issuer's common stock ($.20 par
value), as of the latest practicable date. 122,451,997 SHARES AT JULY 19, 2002.
Exhibit index is at Item 6(a) on page 13.
1
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
12/31/01 06/30/02
------------ ------------
ASSETS
Cash and cash equivalents $ 79,741 $ 97,576
Accounts receivable (Note 5) 104,001 106,027
Investments in sponsored mutual funds 123,247 128,306
Debt securities held by savings bank subsidiary 30,961 75,873
Property and equipment 241,825 226,936
Goodwill (Note 4) 665,692 665,692
Other assets 67,648 55,991
------------ ------------
$ 1,313,115 $ 1,356,401
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 37,440 $ 46,688
Accrued compensation and related costs 43,498 64,149
Income taxes payable 5,342 7,619
Dividends payable 19,699 19,611
Customer deposits at savings bank subsidiary 25,422 65,878
Debt and accrued interest (Note 2) 103,889 58,780
------------ ------------
Total liabilities 235,290 262,725
------------ ------------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, undesignated, $.20 par value -
authorized and unissued 20,000,000 shares -- --
Common stock, $.20 par value - authorized
500,000,000 shares; issued 123,088,795 shares in
2001 and 122,467,824 shares in 2002 (Note 3) 24,618 24,494
Additional capital in excess of par value 67,965 75,543
Retained earnings 973,472 984,482
Accumulated other comprehensive income 11,770 9,157
------------ ------------
Total stockholders' equity 1,077,825 1,093,676
------------ ------------
$ 1,313,115 $ 1,356,401
============ ============
See the accompanying notes to the condensed consolidated financial statements.
2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
Three months Six months
ended ended
------------------------ -----------------------
06/30/01 06/30/02 06/30/01 06/30/02
----------- ----------- ----------- -----------
Revenues (Note 5)
Investment advisory fees $ 198,149 $ 189,731 $ 398,976 $ 378,251
Administrative fees 53,575 50,441 115,838 103,712
Investment income (loss) 10,406 (4,049) 27,798 (3,691)
----------- ----------- ----------- -----------
262,130 236,123 542,612 478,272
----------- ----------- ----------- -----------
Expenses
Compensation and related costs 96,214 90,713 200,857 185,079
Advertising and promotion 15,595 14,436 37,122 31,347
Occupancy and equipment 30,709 27,947 61,467 56,459
Goodwill amortization (Note 4) 7,230 - 14,460 -
Interest expense (Note 2) 3,896 1,185 8,818 2,270
Other operating expenses 21,648 18,250 50,602 34,319
----------- ----------- ----------- -----------
175,292 152,531 373,326 309,474
----------- ----------- ----------- -----------
Income before income taxes and
minority interests 86,838 83,592 169,286 168,798
Provision for income taxes 35,682 31,738 69,179 63,920
----------- ----------- ----------- -----------
Income from consolidated companies 51,156 51,854 100,107 104,878
Minority interests in consolidated
subsidiaries - - (357) -
----------- ----------- ----------- -----------
Net income (Note 4) $ 51,156 $ 51,854 $ 100,464 $ 104,878
=========== =========== =========== ============
Basic earnings per share (Note 4) $ .42 $ .42 $ .82 $ .85
=========== =========== =========== ============
Diluted earnings per share (Note 4) $ .40 $ .40 $ .78 $ .81
=========== =========== =========== ============
Dividends declared per share $ .15 $ .16 $ .30 $ .32
=========== =========== =========== ============
Weighted average shares -
Outstanding 123,082 123,136 122,918 123,332
=========== =========== =========== ============
Assuming dilution 129,058 128,680 129,266 129,429
=========== =========== =========== ============
See the accompanying notes to the condensed consolidated financial statements.
3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six months ended
-------------------------------------
06/30/01 06/30/02
----------- -----------
Cash flows from operating activities
Net income $ 100,464 $ 104,878
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 25,450 25,742
Amortization of goodwill 14,460 -
Other changes in assets and liabilities 38,417 55,873
----------- -----------
Net cash provided by operating activities 178,791 186,493
----------- -----------
Cash flows from investing activities
Investments in sponsored mutual funds (12,597) (10,258)
Dispositions of sponsored mutual funds 52,585 -
Increase in debt securities held by savings
bank subsidiary (8,252) (44,602)
Additions to property and equipment (32,558) (12,511)
Other investment activity (9,987) 1,462
----------- -----------
Net cash used in investing activities (10,809) (65,909)
----------- -----------
Cash flows from financing activities
Repurchases of common shares (6,221) (77,069)
Stock options exercised 6,542 19,763
Debt principal repaid (95,000) (46,366)
Dividends paid to stockholders (36,818) (39,533)
Savings bank subsidiary deposits 8,526 40,456
----------- -----------
Net cash used in financing activities (122,971) (102,749)
----------- -----------
Cash and cash equivalents
Net increase during period 45,011 17,835
At beginning of year 80,526 79,741
----------- -----------
At end of period $ 125,537 $ 97,576
=========== ===========
See the accompanying notes to the condensed consolidated financial statements.
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Addi-
tional Accumu-
capital lated
in other Total
excess compre- stock-
Common of par Retained hensive holders'
stock value earnings income equity
---------- --------- ------------- ---------- ------------
(in thousands)
Balance at
December 31, 2001,
123,088,795 common
shares $ 24,618 $ 67,965 $ 973,472 $ 11,770 $ 1,077,825
Comprehensive income
Net income 104,878
Change in unrealized
security holding
gains, including
($3,590) for the
second quarter (2,613)
Total comprehensive
income 102,265
1,479,029 common shares
issued under stock-based
compensation plans 296 28,701 28,997
2,100,000 common shares
repurchased (420) (21,123) (54,423) (75,966)
Dividends declared (39,445) (39,445)
---------- --------- ------------- ---------- ------------
Balance at June 30,
2002, 122,467,824
common shares $ 24,494 $ 75,543 $ 984,482 $ 9,157 $ 1,093,676
========== ========= ============= ========== ============
See the accompanying notes to the condensed consolidated financial statements.
5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND BASIS OF PREPARATION.
T. Rowe Price Group derives its consolidated revenues and net income primarily
from investment advisory services that its subsidiaries provide to individual
and institutional investors in the sponsored T. Rowe Price mutual funds and
other investment portfolios. We also provide our investment advisory clients
with related administrative services, including mutual fund transfer agent,
accounting and shareholder services; participant recordkeeping and transfer
agent services for defined contribution retirement plans; discount brokerage;
and trust services. The investors that we serve are primarily domiciled in the
United States of America.
Investment advisory revenues depend largely on the total value and composition
of assets under our management. Accordingly, fluctuations in financial markets
and in the composition of assets under management impact our revenues and
results of operations.
These unaudited condensed consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of our results for the interim periods presented. All such adjustments
are of a normal recurring nature.
The unaudited interim financial information contained in these condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements contained in our 2001 Annual Report.
NOTE 2 - DEBT.
On April 2, 2002, the interest rate on the balance owed on our yen-denominated
debt of 1,628,550,000 yen ($13,620,000) was reset to 1.06% for the next twelve
months.
On July 15, 2002, we reduced our dollar-denominated debt by $2 million to
$43 million. The debt bears interest at an annual rate of approximately 2.25%
for the next three months.
NOTE 3 - COMMON STOCK.
During the first five days of July 2002, we repurchased an additional 100,000
common shares at an aggregate price of $3,170,000.
NOTE 4 - CHANGE IN ACCOUNTING PRINCIPLES.
On January 1, 2002, we adopted the provisions of a new financial accounting
standard and ceased the amortization of goodwill. We have completed our testing
of goodwill balances at the time of implementation and no impairment of goodwill
exists at that date. In future periods, we will evaluate goodwill for possible
impairment on at least an annual basis. We operate in one reportable business
segment - that of the investment advisory business - and all goodwill is
attributed to that segment.
The following information reconciles reported net income and earnings per share
to adjusted net income and earnings per share, excluding the goodwill
amortization previously recognized.
6
Three months Six months
ended ended
------------------------------ ----------------------
06/30/01 06/30/02 06/30/01 06/30/02
------------ ------------ ------------ ------------
Reported net income (in thousands) $ 51,156 $ 51,854 $ 100,464 $ 104,878
Add back goodwill amortization (in
thousands) 7,230 - 14,460 -
------------ ------------ ------------ ------------
Adjusted net income $ 58,386 $ 51,854 $ 114,924 $ 104,878
============ ============ ============ ============
Basic earnings per share
Reported net income $ .42 $ .42 $ .82 $ .85
Goodwill amortization .05 - .11 -
------------ ------------ ------------ ------------
Adjusted net income $ .47 $ .42 $ .93 $ .85
============ ============ ============ ============
Diluted earnings per share
Reported net income $ .40 $ .40 $ .78 $ .81
Goodwill amortization .05 - .11 -
------------ ------------ ------------ ------------
Adjusted net income $ .45 $ .40 $ .89 $ .81
============ ============ ============ ============
NOTE 5 - INFORMATION ABOUT REVENUES AND SERVICES.
Revenues (in thousands) from advisory services provided under agreements with
sponsored U.S. mutual funds and other investment clients for the six months
ended June 30 include:
2001 2002
------------- -------------
Sponsored U.S. mutual funds
Stock and blended
Domestic $ 189,588 $ 185,965
International 52,948 37,956
Bond and money market 47,586 51,066
------------- -------------
290,122 274,987
Other portfolios 108,854 103,264
------------- -------------
Total investment advisory fees $ 398,976 $ 378,251
============= =============
The following table summarizes the various investment portfolios and assets
under management (in billions) on which advisory fees are earned.
Average during
first 6 months
---------------------------
2001 2002 12/31/01 06/30/02
---------- ---------- ------------ ------------
Sponsored U.S. mutual funds
Stock and blended
Domestic $ 65.0 $ 63.0 $ 63.5 $ 58.5
International 14.8 10.6 11.0 10.0
Bond and money market 22.5 24.1 23.5 24.6
---------- ---------- ------------ ------------
102.3 97.7 98.0 93.1
Other portfolios 57.3 58.3 58.3 55.7
---------- ---------- ------------ ------------
$ 159.6 $ 156.0 $ 156.3 $ 148.8
========== ========== ============ ============
Fees for advisory-related administrative services provided to our sponsored
mutual funds were $ 91,032,000 and $77,491,000 for the first six months of 2001
and 2002, respectively. Accounts receivable from the mutual funds aggregate
$57,972,000 at December 31, 2001 and $55,686,000 at June 30, 2002.
7
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders of
T. Rowe Price Group, Inc.:
We have reviewed the condensed consolidated balance sheet of T. Rowe Price
Group, Inc. and subsidiaries as of June 30, 2002, the related condensed
consolidated statements of income for the three- and six-month periods ended
June 30, 2002, and the related condensed consolidated statements of cash flows
and stockholders' equity for the six-month period ended June 30, 2002. These
condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2001, and the related consolidated statements of income, cash
flows, and stockholders' equity for the year then ended (not presented herein);
and in our report dated January 24, 2002, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of December
31, 2001, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ KPMG LLP
Baltimore, Maryland
July 18, 2002
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL.
Our revenues and net income are derived primarily from investment advisory
services provided to U.S. individual and institutional investors in our
sponsored mutual funds and other investment portfolios.
We manage a broad range of U.S. domestic and international stock, bond, and
money market mutual funds and other investment portfolios which meet the varied
needs and objectives of individual and institutional investors. Investment
advisory revenues depend largely on the total value and composition of assets
under management. Accordingly, fluctuations in financial markets and in the
composition of assets under management impact our revenues and results of
operations. Total assets under our management were $148.8 billion at June 30,
2002, including $104.9 billion in equity securities and $43.9 billion in bond
and money market investments. This reflects a $7.5 billion, or 4.8%, decrease
from the $156.3 billion that we managed at the end of 2001.
Investors outside the United States now account for almost 2% of our assets
under management. Our expenditures to attract new assets under management and
broaden our investor base may be significant and will precede revenues from any
new investment advisory clients that we may obtain.
RESULTS OF OPERATIONS.
THREE MONTHS ENDED JUNE 30, 2002 VERSUS 2001. Net income increased $.7 million,
or 1.4%, to $51.9 million, and diluted earnings per share was unchanged at $.40.
With the adoption of a new accounting standard on January 1, 2002, we have
ceased amortizing the goodwill that is recognized in our consolidated balance
sheet. After excluding the 2001 amortization of goodwill, adjusted net income
for the comparable 2001 period was $58.4 million and adjusted diluted earnings
per share was $.45. Total revenues declined 10% from $262 million to $236
million.
Investment advisory revenues earned from the T. Rowe Price mutual funds
decreased $5.8 million as average fund assets under management were $97.4
billion during the 2002 quarter, $3.8 billion less than in the 2001 period.
Weakness in financial market valuations that began in early 2000 have continued
now for more than two years. Mutual fund assets ended June 2002 at $93.1
billion, down $6.9 billion from March 31, 2002 and $4.3 billion from the second
quarter 2002 average. The Price funds had nearly $1.3 billion of net cash
inflows during the second quarter of 2002; however, market depreciation, net of
income and dividends paid but not reinvested, more than offset the inflows and
reduced fund assets more than $8.1 billion in the 2002 quarter. Domestic stock
funds had net investor subscriptions of $1.3 billion with investors in the
Small-Cap Stock, Small-Cap Value, Mid-Cap Value and Equity Income funds each
adding more than $300 million of net inflows. Money market and bond fund
investors added $386 million while international stock funds had net outflows of
$361 million.
Investment advisory revenues earned from other investment portfolios that we
manage were down more than $2.6 million, one-half of which is attributable to
lower performance-based fees. These portfolios had net cash outflows of $250
million during the 2002 quarter, and lower market valuations further decreased
assets $3.8 billion. Though recurring, performance-based fees vary
significantly as market conditions and investment portfolios change.
9
Administrative revenues were down $3.1 million versus the 2001 quarter but were
primarily offset by reduced costs of the services that we provide to the mutual
funds and defined contribution retirement plans.
Net investment losses of more than $4 million in the 2002 quarter compare with
investment income of $10.4 million during the second quarter last year when we
recognized $7.4 million of gain on the disposition of available-for-sale mutual
fund investments. The proceeds of those transactions were used to reduce our
debt. We have not sold any of our available-for-sale fund investments in 2002.
Investment losses during this year's second quarter more than offset investment
income, and include a $1.4 million loss from exchange rate fluctuations on our
yen debt, valuation decreases of $1.8 million on private equity investments, and
a $2.1 million loss on an investment in a sponsored collateralized bond
obligation. At June 30, 2002, our aggregate holdings of private equity and
high-yield collateralized bond obligation investments were less than $20
million. We expect that investment income in the third quarter and balance of
2002 will be lower than that of the comparable 2001 periods.
Operating expenses have been reduced almost $23 million, or 13%, from $175.3
million to $152.5 million in 2002. Our largest expense, compensation and related
costs, decreased 6%, or $5.5 million, from the 2001 quarter. Over the last
fifteen months, we have significantly reduced our use of temporary personnel in
the technology group. Additionally, attrition and reductions have reduced our
staff nearly 10% from almost 4,000 as of March 31, 2001 to about 3,600
associates at June 30, 2002. We reduced our advertising and promotion
expenditures $1.2 million to $14.4 million in the 2002 quarter in light of the
weak financial market conditions that have made investors more cautious and less
active. We vary our spending based on market conditions and investor demand as
well as the level of our efforts to expand our investor base globally. We expect
our advertising and promotion expenditures in the third quarter of 2002 to be
similar to or less than that of the 2002 second quarter.
The elimination of the amortization of goodwill and lower interest expense on
our remaining acquisition indebtedness account for $7.2 million and $2.9
million, respectively, of our lower 2002 operating expenses. Occupancy and
equipment costs and other operating expenses for the quarter decreased $2.8
million and $3.4 million, respectively, versus the second quarter of last year.
These reductions primarily reflect the completion of several technology
initiatives and the completion of the infrastructure transition to independent
international operations in seven countries in the first half of 2001.
The 2002 provision for income taxes as a percentage of pretax income is lower
than that of 2001 due primarily to stopping the amortization of nondeductible
goodwill in 2002.
SIX MONTHS ENDED JUNE 30, 2002 VERSUS 2001. Net income increased $4.4 million,
or 4.4%, to $104.9 million, and diluted earnings per share rose from $.78 to
$.81. After excluding the 2001 amortization of goodwill, adjusted net income for
the comparable 2001 period was $114.9 million and adjusted diluted earnings per
share was $.89. Total revenues declined 12% from $543 million to $478 million.
10
Investment advisory revenues earned from the T. Rowe Price mutual funds
decreased $15.1 million as average fund assets under management were $97.7
billion during the 2002 period, $4.6 billion less than in the 2001 period. The
Price funds had $2.4 billion of net cash inflows during the 2002 period;
however, market depreciation, net of income and dividends paid but not
reinvested, more than offset the inflows and reduced fund assets $7.3 billion in
the first half of 2002. Domestic stock funds had net investor subscriptions of
$2.5 billion. Fixed income fund investors added $650 million, offsetting net
outflows of $700 million from the international stock funds.
Investment advisory revenues earned from other investment portfolios that we
manage were down more than $5.6 million, including $1.6 million which is
attributable to lower performance-based fees. These portfolios had net cash
inflows of $1 billion in the first half of 2002, while lower market valuations
decreased these assets $3.6 billion.
Net investment losses of $3.7 million in the 2002 period compare with investment
income of $27.8 million during the comparable 2001 period when we recognized
$14.3 million of gain on the disposition of available-for-sale mutual fund
investments. The 2001 results also include a $4.6 million gain on investment
partnerships that held distressed debt securities and a $1.3 million gain on
exchange rate fluctuations on our yen debt. We have neither sold any of our
available-for-sale fund investments in 2002 nor have we recognized similar
foreign currency gains. Instead, our investment losses thus far in 2002 have
more than offset investment income, and include a $1.3 million loss from
exchange rate fluctuations on our yen debt, valuation decreases of $2.1 million
on private equity investments, and a $2.1 million loss on an investment in a
sponsored collateralized bond obligation.
Operating expenses have been reduced almost $64 million, or 17%, from $373.3
million to $309.5 million in 2002. Our largest expense, compensation and related
costs, decreased 8%, or $15.8 million, from the 2001 period. We reduced our
advertising and promotion expenditures $5.8 in the first half of 2002 in light
of the weak financial market conditions. The elimination of the amortization of
goodwill and lower interest expense on our remaining acquisition indebtedness
account for $14.5 million and $6.8 million, respectively, of our lower 2002
operating expenses. Occupancy and equipment costs and other operating expenses
decreased $5.0 million and $16.3 million, respectively, versus the first half of
last year. These reductions primarily reflect the completion of several
technology initiatives and the completion of the international infrastructure
transition.
CAPITAL RESOURCES AND LIQUIDITY.
During the first half of 2002, we repaid $46.4 million of our debt and expended
$77 million in the repurchase of our common shares. In July 2002, we repaid an
additional $2 million of debt and repurchased $3.2 million of our common stock.
These cash outflows, as well as similar payments that we expect to make later
this year, are funded by existing cash balances and cash provided by operating
activities.
11
FORWARD-LOOKING INFORMATION.
From time to time, information or statements provided by or on behalf of T. Rowe
Price, including those within this Quarterly Report on Form 10-Q, may contain
certain forward-looking information, including information or anticipated
information relating to changes in our revenues and net income, changes in the
amount and composition of our assets under management, our expense levels, and
our expectations regarding financial markets and other conditions. Readers are
cautioned that any forward-looking information provided by or on behalf of
T. Rowe Price is not a guarantee of future performance. Actual results may
differ materially from those in forward-looking information as a result of
various factors, including but not limited to those discussed below. Further,
forward-looking statements speak only as of the date on which they are made, and
we undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which it is made or to reflect the
occurrence of unanticipated events.
Our future revenues will fluctuate due to many factors, including: the total
value and composition of assets under our management; cash inflows and outflows
in the T. Rowe Price mutual funds and other managed investment portfolios;
fluctuations in the financial markets around the world that result in
appreciation or depreciation of the assets under our management; the relative
investment performance of the Price mutual funds and other managed investment
portfolios as compared to competing offerings and market indices; the extent to
which we earn performance-based investment advisory fees; the expense ratios of
the Price mutual funds; investor sentiment and investor confidence; the ability
to maintain our investment management and administrative fees at appropriate
levels; competitive conditions in the mutual fund, asset management, and broader
financial services sectors; our introduction of new mutual funds and investment
portfolios; our ability to contract with the Price mutual funds for payment for
investment advisory-related administrative services provided to the funds and
their shareholders; changes in retirement savings trends favoring participant-
directed investments and defined contribution plans; the amount and timing of
income or loss from our private equity, high yield, and other investments; and
our level of success in implementing our strategy to expand our business
internationally. Our revenues are substantially dependent on fees earned under
contracts with the Price funds and could be adversely affected if the
independent directors of one or more of the Price funds determined to terminate
or significantly alter the terms of the investment management or related
administrative services agreements.
Our future operating results are also dependent upon the level of our operating
expenses, which are subject to fluctuation for the following or other reasons:
changes in the level of our advertising expenses in response to market
conditions, expansion of marketing efforts within the U.S. and internationally,
including our efforts to expand our investment advisory business to investors
outside the United States, and other factors; variations in the level of
compensation expense due to, among other things, performance-based bonuses,
changes in our employee count and mix, and competitive factors; any goodwill
impairment that may arise in the future; fluctuation in foreign currency
exchange rates applicable to the costs of our international operations and our
yen-denominated debt; expenses and capital costs, such as technology assets,
depreciation, amortization, and research and development, incurred to maintain
and enhance our administrative and operating services infrastructure;
unanticipated costs that may be incurred to protect investor accounts and the
goodwill of our clients; and disruptions of services, including those provided
by third parties such as facilities, communications, power, and the mutual fund
transfer agent system.
12
Our business is also subject to substantial governmental regulation, and changes
in legal, regulatory, accounting, tax, and compliance requirements may have a
substantial effect on our operations and results, including but not limited to
effects on costs that we incur and effects on investor interest in mutual funds
and investing in general, or in particular classes of mutual funds or other
investments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Except that equity and currency market fluctuations have resulted in losses as
discussed in Item 2 of this Form 10-Q, there has been no material change since
December 31, 2001 in the information provided in Item 7A of the 2001 Form 10-K
Annual Report.
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits required to be filed by Item 601 of Regulation
S-K are filed herewith and incorporated by reference herein.
3(i) Amended and Restated Charter of T. Rowe Price Group, Inc. as
of March 9, 2001. (Incorporated by reference from Form 10-K
for 2000; Accession No. 0001113169-01-000003.)
3(ii) By-Laws of T. Rowe Price Group, Inc. as of July 1, 2002.
4 $500,000,000 Five-Year Credit Agreement among T. Rowe Price
Associates, Inc., the several lenders, and JPMorgan Chase
Bank, as administrative agent. (Incorporated by reference
from Form 10-Q Report for the quarterly period ended June 30,
2000; Accession No. 0000080255-00-000425.)
15 Letter from KPMG LLP, independent accountants, re unaudited
interim financial information.
(b) Reports on Form 8-K: None during the second quarter of 2002.
SIGNATURES.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on July 23, 2002.
T. Rowe Price Group, Inc.
/s/ Cristina Wasiak, Chief Financial Officer
/s/ Joseph P. Croteau, Treasurer (Principal Accounting Officer)
13