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Price T Rowe Group Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 6, 2003
Period End
December 31, 2002
Security
TROW
In the record · 2016–202610-K1110-Q338-K83

TROW filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 83 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Leadership change8-K · Jun ’19Jun ’19
  3. Deal closed8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed March 6, 2003. Cited figures are marked; the original filing is the authoritative source.

T.

Rowe Price Group, Inc. (Nasdaq: TROW) is a financial services holding company whose revenues and net income come primarily from investment advisory services to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios. Assets under management fell $15.7 billiona during 2002 to end the year at $140.6 billion, the lowest year-end figure of the past five years, as equity markets declined for a third straight year.

Net cash inflows to the Price funds totaled $3.1 billionb, the most since 1998, but lower market valuations reduced mutual fund assets by $13.8 billion. Financially, net revenues declined 7% to $923.5 million and net income was essentially flat at $194.3 million, with diluted earnings per share unchanged at $1.52. Results were supported by a $81.2 million reduction in operating expenses, including the elimination of $28.9 million of goodwill amortization under the new accounting standard, and the company stated its operating cash flow and financial condition remained strong.

Net non-operating results swung to a loss of $10.9 millionc, driven by investment losses, and stockholders' equity rose to $1.13 billion. The company repaid $49 million of debt and repurchased 2.8 million shares for $96 million during 2002, and it declared a quarterly dividend increase to $.17 per share in December 2002. The filing also flags sensitivity to market conditions and fund flows.

Management states that the potential loss on sponsored mutual fund holdings from a hypothetical decline was $16.2 milliond, and that the company's revenues depend substantially on fees under contracts with the Price funds. Management also notes that under FASB Interpretation No. 46 it may need to consolidate two $300 million high-yield collateralized bond obligations beginning July 1, 2003, with maximum exposure limited to a $10 million carrying amount.

02—Key points

Key Highlights

  1. Assets under management declined $15.7 billion in 2002 to $140.6 billion, including $92.9 billion in equity securities and $47.7 billion in debt securities; the company reported $88.7 billion held in retirement accounts and variable annuity portfolios.
  2. Net revenues fell 7% to $923.5 million, while net income declined about $1.6 million, or 1%, to $194.3 million; diluted EPS held at $1.52.
  3. Net cash inflows to T. Rowe Price mutual funds totaled $3.1 billion, the most since 1998, but market declines reduced fund assets by $13.8 billion.
  4. Operating expenses fell $81.2 million versus 2001, including $28.9 million from the elimination of goodwill amortization.
  5. Net non-operating loss of $10.9 million in 2002 versus net non-operating income of $19.4 million in 2001, driven by investment losses.
  6. Repaid $49 million of debt and repurchased 2.8 million shares for $96 million; stockholders' equity increased to $1.13 billion.
  7. Quarterly dividend raised to $.17 per share in December 2002, the seventeenth consecutive annual increase since the 1986 public offering; more than 80% of mutual funds outperformed their Lipper peer group averages over one, three, and five years.

03—Questions

Frequently Asked Questions

  1. How much did T. Rowe Price's assets under management change in 2002?

    Total assets under management decreased $15.7 billion, or 10%, over 2002 to end the year at $140.6 billion. Lower financial market valuations more than offset net investor inflows during the year.

  2. Did net income and earnings per share change in 2002?

    Net income decreased about $1.6 million, or 1%, to $194.3 million, and diluted earnings per share was unchanged at $1.52. Lower weighted average shares outstanding from share repurchases offset the decline in net income.

  3. Why did mutual fund advisory revenues decline?

    Investment advisory revenues from the U.S.-distributed T. Rowe Price mutual funds decreased $43.5 million because average fund assets were $92.1 billion in 2002, $6.6 billion less than in 2001. Weak equity market valuations, which fell to levels last seen in the first half of 1997, reduced fund assets despite $3.1 billion of net cash inflows.

  4. How did the company respond to the weak market environment?

    Management meaningfully reduced operating expenses in each of the last two years, with 2002 operating expenses $81.2 million lower than in 2001. The company also reduced its average number of associates by 6% and curtailed advertising and promotion spending, which was down $5.6 million in 2002.

  5. What risks does the filing identify for future results?

    The filing notes that revenues depend on the total value and composition of assets under management and on fees under contracts with the Price funds, which could be adversely affected if independent fund directors terminate or significantly alter those agreements. It also cites possible further goodwill impairment, since the carrying amount of goodwill was $666 million at December 31, 2002, and potential consolidation of two high-yield collateralized bond obligations beginning July 1, 2003.

04—Continue

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