-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FopvYy/dM1BpE8TxJST1CkZp/FUaXaiQZFL5206qokJAUCBA52j1L42tczwhhkt9 x0ZyvQRQ2dRXzdprdVs8gA== 0000718482-97-000011.txt : 19971016 0000718482-97-000011.hdr.sgml : 19971016 ACCESSION NUMBER: 0000718482-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971015 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDWARDS A G INC CENTRAL INDEX KEY: 0000718482 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 431288229 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08527 FILM NUMBER: 97696087 BUSINESS ADDRESS: STREET 1: ONE N JEFFERSON AVE CITY: ST LOUIS STATE: MO ZIP: 63103 BUSINESS PHONE: 3142893000 10-Q 1 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 August 31, 1997 Commission file number 1-8527 A.G. EDWARDS, INC. State of Incorporation: DELAWARE I.R.S. Employer Identification No: 43-1288229 ONE NORTH JEFFERSON AVENUE ST. LOUIS, MISSOURI 63103 Registrant's telephone number, including area code: (314) 955-3000 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 for 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 September 30, 1997, there were 94,662,129 shares of A.G. Edwards, Inc. common stock, par value $1, issued and outstanding. The shares were adjusted for the October 1, 1997 stock split. 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) August 31, February 28, 1997 1997 ASSETS Cash and cash equivalents $ 58,577 $ 62,799 Cash and government securities, segregated under federal and other regulations 157,753 400,991 Securities purchased under agreements to resell 224,362 200,000 Securities borrowed 910,066 1,392,864 Receivables: Customers, less allowance for doubtful accounts of $3,600 and $3,550 1,899,111 1,677,354 Brokers, dealers and clearing organizations 27,964 14,635 Securities inventory, at fair value: State and municipal 90,706 98,516 Government and agencies 41,397 39,666 Corporate 33,431 25,785 Property and equipment, at cost, net of accumulated depreciation and amortization of $214,269 and $196,414 202,789 189,795 Deferred income taxes 58,304 56,558 Other assets 97,886 85,377 $ 3,802,346 $ 4,244,340 LIABILITIES AND STOCKHOLDERS' EQUITY Checks payable $ 160,058 $ 174,736 Securities sold under agreements to repurchase 9,363 Securities loaned 944,032 1,458,426 Payables: Customers 822,245 816,668 Brokers, dealers and clearing organizations 48,621 47,842 Securities sold but not yet purchased, at fair value 32,221 17,670 Employee compensation and related taxes 379,152 414,177 Income taxes 23,755 13,536 Other liabilities 49,500 39,982 Total Liabilities 2,468,947 2,983,037 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 96,468,990 and 64,312,658 shares 96,469 64,313 Additional paid-in capital 199,665 229,235 Retained earnings 1,075,981 976,011 1,372,115 1,269,559 Less - Treasury stock, at cost (1,535,306 and 234,921 shares) 38,716 8,256 Total Stockholders' Equity 1,333,399 1,261,303 $ 3,802,346 $ 4,244,340 See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended August 31, August 31, 1997 1996 1997 1996 REVENUES: Commissions $ 293,005 $ 207,626 $ 530,638 $ 454,388 Principal transactions 52,836 53,890 107,438 107,376 Investment banking 42,252 47,688 78,880 81,809 Asset management and service fees 75,477 59,469 143,126 116,182 Interest 43,514 35,865 84,357 70,891 Other 2,748 2,517 4,741 4,893 509,832 407,055 949,180 835,539 EXPENSES: Compensation and benefits 326,412 258,411 609,868 533,887 Communications 24,529 20,781 47,992 41,945 Occupancy and equipment 23,487 20,914 46,116 40,805 Floor brokerage and clearance 5,309 4,510 9,845 9,212 Other operating expenses 17,350 17,469 33,743 32,758 397,087 322,085 747,564 658,607 EARNINGS BEFORE INCOME TAXES 112,745 84,970 201,616 176,932 INCOME TAXES 43,500 32,750 77,830 68,270 NET EARNINGS $ 69,245 $ 52,220 $ 123,786 $ 108,662 Earnings per share $ 0.71 $ 0.54 $ 1.26 $ 1.12 Dividends per share $ 0.13 $ 0.11 $ 0.25 $ 0.21 Average common and common equivalent shares outstanding 98,408 97,199 98,488 97,383 See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED AUGUST 31, 1996 AND 1997 (In thousands, except per share amounts) (Unaudited) Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total BALANCES, March 1, 1996 $ 64,313 $ 232,058 $ 798,805 $ (6,492) $ 1,088,684 Net earnings 108,662 108,662 Cash dividends - $0.21 per share (20,245) (20,245) Treasury stock acquired (36,918) (36,918) Stock issued: Employee stock purchase/option plans 800 3,683 4,483 Restricted stock 595 (110) 485 BALANCES, August 31, 1996 $ 64,313 $ 233,453 $ 887,222 $ (39,837) $ 1,145,151 BALANCES, March 1, 1997 $ 64,313 $ 229,235 $ 976,011 $ (8,256) $ 1,261,303 Net earnings 123,786 123,786 Cash dividends - $0.25 per share (23,816) (23,816) Treasury stock acquired (41,471) (41,471) Stock issued: Employee stock purchase/option plans (1,783) 11,841 10,058 Restricted stock 4,369 (830) 3,539 Stock Split - 3 for 2 32,156 (32,156) BALANCES, August 31, 1997 $ 96,469 $ 199,665 $ 1,075,981 $ (38,716) $ 1,333,399 See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended August 31, 1997 1996 Cash Flows from Operating Activities: Net earnings $ 123,786 $ 108,662 Noncash items included in earnings 30,049 27,321 Decrease in segregated cash and government securities 243,238 250,998 Net change in securities borrowed and loaned (31,596) 12,992 Decrease in net payable to brokers, dealers and clearing organizations (12,550) (41,178) Increase in net receivable from customers (216,180) (339,890) Decrease in net securities inventory 12,984 52,279 Net change in other assets and liabilities (55,530) (48,632) Net cash provided by operating activities 94,201 22,552 Cash Flows from Investing Activities: Securities purchased under agreements to resell (15,000) 47,013 Capital expenditures and other investments (32,953) (18,814) Net cash (used in) provided by investing activities (47,953) 28,199 Cash Flows from Financing Activities: Employee stock transactions 14,817 5,075 Cash dividends (23,816) (20,245) Purchase of treasury stock (41,471) (36,918) Net cash used in financing activities (50,470) (52,088) Net Decrease in Cash and Cash Equivalents (4,222) (1,337) Cash and Cash Equivalents at March 1 62,799 52,587 Cash and Cash Equivalents at August 31 $ 58,577 $ 51,250 Income tax payments totaled $60,336 and $78,387 during the six month periods ended August 31, 1997, and 1996, respectively. Interest payments totaled $1,353 and $1,198 during the six month periods ended August 31, 1997, and 1996, respectively. See Notes to Consolidated Financial Statements.
-4- A.G. EDWARDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED AUGUST 31, 1997 (Dollars in thousands) (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, 1997. 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 six months ended August 31, 1997, are not necessarily indicative of the results for the year ending February 28, 1998. Where appropriate, prior year's financial information has been reclassified to conform with the current year presentation. COMMON STOCK: All share amounts and share data have been restated to reflect a three-for-two stock split, effected in the form of a stock dividend, declared on August 22, 1997 and payable on October 1, 1997 to holders of record September 5, 1997. NET CAPITAL REQUIREMENTS: Edwards is subject to the uniform net capital rule administered by the Securities and Exchange Commission ("SEC"). This rule requires Edwards to maintain a minimum net capital, as defined, and to notify, and sometimes obtain the approval of, the SEC and other regulatory organizations for substantial withdrawals of capital and loans to affiliates. As of August 31, 1997, Edwards' net capital of $975,670 was $937,935 in excess of the minimum required. -5- A.G. EDWARDS, INC. AND SUBSIDIARIES MANAGEMENT FINANCIAL DISCUSSION SIX MONTHS ENDED AUGUST 31, 1997 COMPARED TO SIX MONTHS ENDED AUGUST 31, 1996 Results of Operations The six months ended August 31, 1997 saw a continuation of the high level of retail investor activity of the last two fiscal years coupled with increased volatility in the equity and debt markets this year. The NYSE and Nasdaq overall trading volumes increased 25% and 11%, respectively, over the prior year reflected by a 20% increase in the Company's total customer trades. The number and size of customer trades and the product mix generally affect the level of revenues. The number of branches and brokers increased to 581 and 6,131, which represent increases of 6% and 5%, respectively, compared with the same period last year. Total revenues increased $113 million (14%) to $949 million from $836 million last year. Operating expenses were $748 million, an increase of $89 million (14%). Net earnings were $124 million, an increase of $15 million (14%), resulting in a 13% profit margin for both years. Total commission revenue increased $76 million (17%) reflecting increased trading volume and, to a lesser extent, expansion of the Company's distribution system. Equity related commissions rose $58 million (21%) while mutual fund and insurance sales increased $10 million (9%) and $9 million (16%), respectively. Client demand for stocks, mutual funds and variable annuities continues to rise due to the continuation of the strong equity market conditions reflecting the higher trading volumes and the 11% rise in the Dow Jones Industrial Average during the first six months of this fiscal year. Investment banking revenue decreased $3 million (4%). Management fees declined $10 million (39%) primarily due to the participation in two large transactions last year; this decline was partially offset by increased underwriting fees and concessions of $7 million (13%) as a result of increased customer demand for unit trusts primarily caused by slightly higher interest rates coupled with favorable market conditions for debt security instruments. Asset management and service fees increased $27 million (23%). Fees from third- party mutual funds rose $16 million (23%) reflecting strong mutual fund sales as well as higher market valuations of existing assets. Fees for administration of client assets under third-party management, as well as the Company's management services, increased $10 million (46%) as a result of a 60% rise in the average number of accounts while average assets in these programs grew 49%. Interest revenue increased $13 million (19%). Interest revenue from margin accounts rose $10 million (17%) due to a 14% rise in average margin debits coupled with slightly higher interest rates. Interest revenue from short-term investments increased $3 million (48%) caused by a 41% rise in average short- term investments as well as higher interest rates. - 6 - Compensation and benefits increased $76 million (14%) due to increases in every category. Commission expense increased due to the rise in commissionable revenue. General and administrative salaries and related benefits increased primarily because of general increases and higher employment. Incentive related compensation rose primarily as a result of higher earnings. Communication expense increased $6 million (14%) and occupancy and equipment expenses increased $5 million (13%) primarily due to branch and home office expansion. Liquidity and Capital Resources No material changes have taken place since February 28, 1997 regarding the Company's liquidity, capital resources and overall financial condition. THREE MONTHS ENDED AUGUST 31, 1997 COMPARED TO THREE MONTHS ENDED AUGUST 31, 1996 Net earnings for the quarter ended August 31, 1997 were $69 million on revenues of $510 million compared to net earnings of $52 million on revenues of $407 million for the same period a year ago. The explanation of revenue and expense fluctuations presented for the six 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, 1997. Item 4: Submission of Matters to a Vote of Security Holders (c) The results of the annual meeting of stockholders, held on June 19, 1997, were previously reported on Form 10-Q filed for the quarter ended May 31, 1997. Item 6: Exhibits and Reports on 8-K Exhibit 27 Financial Data Schedule. (This financial data schedule is only required to be submitted with the registrant's Quarterly Report on Form 10-Q as filed electronically to the SEC's EDGAR database.) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended August 31, 1997. -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: October 14, 1997 /s/ Benjamin F. Edwards III BENJAMIN F. EDWARDS, III Principal Executive Officer Date: October 14, 1997 /s/ Robert L. Proost ROBERT L. PROOST Principal Financial Officer -8- EX-27 2
BD 1000 6-MOS FEB-28-1998 AUG-31-1997 58,577 1,927,075 224,362 910,066 165,534 202,789 3,802,346 0 1,410,076 9,363 944,032 32,221 0 0 0 96,469 1,236,930 3,802,346 107,438 84,357 530,638 78,880 117,312 0 609,868 201,616 201,616 0 0 123,786 1.26 1.26
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