-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QBHeWvwfsaXUitzfkLiJG+MboKOJjP8/+cl5jLgKpxtX4XTNyxcmx2cDkE5VyP55 1ov5SSVcOp/GzsIQbjtz0A== 0000718482-94-000002.txt : 19940114 0000718482-94-000002.hdr.sgml : 19940114 ACCESSION NUMBER: 0000718482-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDWARDS A G INC CENTRAL INDEX KEY: 0000718482 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 431288229 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-08527 FILM NUMBER: 94501373 BUSINESS ADDRESS: STREET 1: ONE N JEFFERSON AVE CITY: ST LOUIS STATE: MO ZIP: 63103 BUSINESS PHONE: 3142893000 10-Q 1 3RD QUARTER 10-Q FY'94 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended November 30, 1993 Commission file number 1-8527 A.G. EDWARDS, INC. DELAWARE 43-1288229 State of Incorporation: I.R.S. Employer Identification No. One North Jefferson Avenue St. Louis, Missouri 63103 Registrant's telephone number, including area code: (314) 289-3000 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 (or of such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At January 3, 1994, there were 59,596,287 shares of A.G. Edwards, Inc. common stock, par value $1, issued and outstanding. A.G. EDWARDS, INC. INDEX Page PART I. FINANCIAL INFORMATION Consolidated balance sheets 1 Consolidated statements of earnings 2 Consolidated statements of stockholders' equity 3 Consolidated statements of cash flows 4 Notes to consolidated financial statements 5 Management's financial discussion 6 - 7 PART II. OTHER INFORMATION 7 SIGNATURES 8
A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited) November 30, February 28, 1993 1993 ASSETS Cash and cash equivalents $ 32,417 $ 27,963 Cash and government securities, at market, segregated under federal and other regulations 45,760 286,239 Receivable from brokers and dealers 278,330 475,468 Receivable from customers, less allowance for doubtful accounts of $3,350 and $3,250 1,160,500 950,937 Securities inventory, at market: State and municipal 85,523 87,418 Government and agencies 34,010 34,827 Corporate 38,725 27,503 Property and equipment, at cost, net of accumulated depreciation and amortization of $121,414 and $106,760 140,988 140,790 Other assets 98,239 80,047 ---------- ---------- $1,914,492 $2,111,192 LIABILITIES AND STOCKHOLDERS' EQUITY Bank loans $ 22,300 $ - Checks payable 117,853 113,665 Payable to brokers and dealers 335,477 503,379 Payable to customers 392,331 575,283 Securities sold but not yet purchased, at market 11,222 10,576 Employee compensation and related taxes 249,830 244,226 Income taxes 8,388 18,242 Other liabilities 36,940 30,581 ---------- ---------- Total Liabilities 1,174,341 1,495,952 Stockholders' Equity: Preferred stock, $25 par value: Authorized 4,000,000 shares, none issued Common stock, $1 par value: Authorized 250,000,000 shares Issued 59,595,979 and 46,158,664 shares 59,596 46,159 Additional paid-in capital 149,566 125,328 Retained earnings 544,512 452,045 ---------- ---------- 753,674 623,532 Less - Unamortized expense of restricted stock awards 13,523 8,292 ---------- ---------- Total Stockholders' Equity 740,151 615,240 ---------- ---------- $1,914,492 $2,111,192 See Notes to Consolidated Financial Statements. -1-
A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended November 30 November 30 1993 1992 1993 1992 REVENUES: Commissions $193,612 $141,934 $563,720 $424,159 Principal transactions 43,337 53,564 144,226 154,905 Investment banking 46,656 26,921 121,929 79,377 Interest 18,903 15,498 54,837 48,139 Other 24,764 20,979 71,837 62,156 -------- -------- -------- -------- 327,272 258,896 956,549 768,736 EXPENSES: Compensation and benefits 210,392 165,754 617,945 494,321 Communications 18,335 16,196 54,764 49,650 Occupancy and equipment 17,145 15,528 49,973 45,801 Floor brokerage and clearance 3,606 3,334 11,441 10,816 Interest 249 405 971 1,685 Other operating expenses 12,663 12,209 40,408 34,584 -------- -------- -------- -------- 262,390 213,426 775,502 636,857 EARNINGS BEFORE INCOME TAXES 64,882 45,470 181,047 131,879 INCOME TAXES 23,770 16,790 66,240 48,860 -------- -------- -------- -------- NET EARNINGS $ 41,112 $ 28,680 $114,807 $ 83,019 Earnings per share $.67 $.49 $1.91 $1.44 Dividends per share $.14 $.10 $.38 $.31 Average common and common equivalent shares outstanding 60,785 58,095 59,992 57,533 See Notes to Consolidated Financial Statements. -2-
A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED NOVEMBER 30, 1993 AND 1992 (In thousands, except per share amounts) (Unaudited) Unamortized Additional Expense of Common Paid-in Retained Restricted Treasury Stock Capital Earnings Stock Awards Stock BALANCES, March 1, 1992 $44,466 $ 95,033 $357,244 $ (4,733) $ 0 Net earnings 83,019 Cash dividends - $.31 per share (17,693) Treasury stock acquired (21) Stock issued: Employee stock purchase/options 1,186 16,660 122 Restricted stock 388 9,798 (10,054) (101) Amortization of restricted stock awards 4,907 ------- -------- -------- -------- ----- BALANCES, November 30, 1992 $46,040 $121,491 $422,570 $ (9,880) $ 0 BALANCES, March 1, 1993 $46,159 $125,328 $452,045 $ (8,292) $ 0 Net earnings 114,807 Cash dividends - $.38 per share (22,340) Treasury stock acquired (9) Stock issued: Employee stock purchase/options 1,134 22,780 427 Restricted stock 384 13,377 (11,953) (418) Amortization of restricted stock awards 6,722 Stock split -- 5-for-4 11,919 (11,919) ------- -------- -------- -------- ----- BALANCES, November 30, 1993 $59,596 $149,566 $544,512 $(13,523) $ 0 See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended November 30, 1993 1992 Cash Flows from Operating Activities: Net earnings $ 114,807 $ 83,019 Noncash items included in earnings 28,899 23,330 Decrease in segregated cash and government securities 240,479 176,724 Increase in net payable from brokers and dealers 29,236 216,052 Increase in net receivable from customers (392,515) (434,223) (Increase) decrease in net securities inventory (7,864) 9,950 Net change in other assets and liabilities (16,854) (14,780) -------- -------- Net cash (used in) provided by operating activities (3,812) 60,072 Cash Flows from Investing Activities: Securities purchased under agreements to resell (51,209) Capital expenditures and other investments (17,416) (19,930) -------- ------- Net cash used in investing activities (17,416) (71,139) Cash Flows from Financing Activities: Net proceeds of bank loans 22,300 Employee stock transactions 25,731 17,968 Cash dividends (22,340) (17,693) Other financing uses (9) (21) -------- -------- Net cash provided by financing activities 25,682 254 Net Increase (Decrease) in Cash and Cash Equivalents 4,454 (10,813) Cash and Cash Equivalents at March 1 27,963 41,534 -------- -------- Cash and Cash Equivalents at November 30 $ 32,417 $ 30,721 Income tax payments totaled $80,172 and $54,442 during the nine month period ended November 30, 1993 and 1992, respectively. Interest payments totaled $948 and $1,659 during the nine month period ended November 30, 1993 and 1992, respectively. Supplemental disclosure of noncash financing activities - restricted stock awarded, net of forfeitures, totaled $11,953 and $10,054 during the nine month period ended November 30, 1993 and 1992, respectively. See Notes to Consolidated Financial Statements.
-4- A.G. EDWARDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED NOVEMBER 30, 1993 (Unaudited) FINANCIAL STATEMENTS: The consolidated financial statements include the accounts of A.G. Edwards,Inc. and its wholly owned subsidiaries (collectively referred to as the "Company"), including its principal subsidiary, A.G. Edwards & Sons, Inc. ("Edwards"), and have been prepared in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with the Company's annual report for the year ended February 28, 1993. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been reflected. All such adjustments consist of normal recurring accruals unless otherwise disclosed in these interim financial statements. The results of operations for the nine months ended November 30, 1993, are not necessarily indicative of the results for the year ending February 28, 1994. COMMON STOCK: All share amounts and share data have been restated to reflect a five for four stock split, effected in the form of a stock dividend, declared on November 19, 1993 and payable on January 3, 1994 to holders of record December 10, 1993. Options to purchase 1,231,250 shares of common stock granted to employees under the Employee Stock Purchase Plan are exercisable October 1, 1994, at 85% of market price based on dates specified in the plan. Employees purchased 1,227,908 shares at $17.17 per share in October 1993. NET CAPITAL REQUIREMENTS: Edwards is subject to the uniform net capital rule of the Securities and Exchange Commission ("SEC"). This rule requires Edwards to maintain a minimum net capital, as defined, and to notify, and sometimes obtain approval of, the SEC and other regulatory organizations for substantial withdrawals of capital and loans to affiliates. At November 30, 1993, Edwards' net capital of $460,094,000 was $437,300,000 in excess of the minimum required. -5- A.G. EDWARDS, INC. AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION NINE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO NINE MONTHS ENDED NOVEMBER 30, 1992 Results of Operations The nine months ended November 30, 1993 saw a continuation of the high level of retail investor activity experienced during our last two fiscal years. The Dow Jones Industrial Average reached a new record high in November, while increasing 9% during the period to 3,684 from 3,371 at February 28, 1993. Trading volumes also increased with NYSE average daily volume rising 34% and Nasdaq volume increasing 47% over the same period last year. The number of branches and brokers increased to 486 and 5,095, which represent increases of 4% and 7%, respectively, compared with the same period last year. Total revenues increased $188 million (24%) over last year, from $769 million to $957 million. Expenses were $776 million, an increase of $139 million (22%), resulting in profit margins of 12.0% in 1993 versus 10.8% in 1992. Total commission revenue increased $140 million (33%) reflecting increased trading volume and, to a lesser extent, expansion of the Company's distribution system. Equity related commissions rose $63 million while mutual fund and insurance sales increased $53 million and $20 million, respectively. Stocks and mutual funds continue to offer clients potentially higher returns than those available from bank time deposits. Insurance revenue rose due to increased demand for variable annuities caused by declining interest rates and higher tax rates. Revenues from principal transactions decreased $11 million (7%). Debt sales, primarily government bonds, were down $19 million (14%) due to lower interest rates and a shift to mutual funds, variable annuities and other equity products which offer higher effective yields. This was partially offset by over-the-counter equity sales increasing $8 million (40%) as activity continues to be strong due to rising prices coupled with higher volume in the Nasdaq Market. Investment banking revenue rose $43 million (54%) principally due to the increase in corporate equity and management fee revenues. Revenues from corporate equity issues increased $24 million (64%) due to the continued vigorous activity in initial public offerings. Management fees have also increased $14 million (87%) due to participation as manager or co-manager in a larger number of offerings this year. Interest revenues increased $7 million (14%) due to higher customer receivables, partially offset by lower interest rates. Other revenues increased $10 million (16%) due to an increase in fees received in connection with customer investments under professional management. Service fees have also increased due to a rise in the number of accounts and trades. Compensation and benefits increased $124 million (25%) primarily from higher commission expense due to increased commissionable revenue and higher incentive related compensation caused by increased earnings. Salaries and related benefits also rose as a result of branch and home office expansion. Deferred compensation increased $14 million primarily due to an amendment to the Incentive Stock Plan for restricted stock awards. Beginning in fiscal 1994, the amount of the award is expensed in the current period and no longer amortized over the restriction period. -6- A.G. EDWARDS, INC. AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION (Continued) Communication expense increased $5 million (10%) and occupancy and equipment expense increased $4 million (9%). Communication expense increased primarily due to higher postage and quote service costs caused by expansion, increased trade activity and rising quote service rates. Occupancy and equipment increased as a result of higher rental costs, real estate taxes and maintenance costs associated with computer equipment. Interest expense decreased $.7 million (42%) due to the decrease in average bank loans coupled with lower interest rates. Other expense rose $6 million (17%) primarily due to increased costs associated with litigation and higher publications and subscription expenses. Liquidity and Capital Resources No material changes have taken place since February 28, 1993 regarding the Company's liquidity, capital resources and overall financial condition. THREE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 1992 Net earnings for the quarter ended November 30, 1993 were $41 million on revenues of $327 million compared to net earnings of $29 million on revenues of $259 million for the same period a year ago. Except for other expenses which were basically flat, the explanations of revenue and expense fluctuations presented in the results for the nine month period are generally applicable to the three months of operations. PART II. OTHER INFORMATION Item 1: Legal Proceedings There have been no material changes in the legal proceedings previously reported in the Company's Annual Report on Form 10-K for the year ended February 28, 1993. Item 6: Exhibits and Reports on 8-K Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended November 30, 1993. -7- 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. A.G. EDWARDS, INC. (Registrant) Date: January 13, 1994 /s/ Benjamin F. Edwards, III ---------------------------- BENJAMIN F. EDWARDS, III Principal Executive Officer Date: January 13, 1994 /s/ David W. Mesker ---------------------------- DAVID W. MESKER Principal Financial Officer -8- -----END PRIVACY-ENHANCED MESSAGE-----