-----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, L185RWDlHyFyC5OlGMU0tGIVCuOq0Wq2XvHXlRRN0OiJAnXrV/WhtoABgYa+EslB JjBRRmnLWGS271nOFwSo2g== 0000718482-96-000006.txt : 19960715 0000718482-96-000006.hdr.sgml : 19960715 ACCESSION NUMBER: 0000718482-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 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: 1934 Act SEC FILE NUMBER: 001-08527 FILM NUMBER: 96594113 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 May 31, 1996 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 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 June 30, 1996, there were 63,402,791 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) May 31, February 29, 1996 1996 ASSETS Cash and cash equivalents $ 62,713 $ 52,587 Cash and government securities, segregated under federal and other regulations 154,077 402,785 Securities purchased under agreements to resell 121,954 92,013 Securities borrowed 628,622 613,266 Receivables: Customers, less allowance for doubtful accounts of $3,500 and $3,470 1,582,268 1,428,063 Brokers, dealers and clearing organizations 16,636 13,921 Securities inventory, at fair value: State and municipal 86,743 117,602 Government and agencies 38,086 36,112 Corporate 41,554 42,078 Property and equipment, at cost, net of accumulated depreciation and amortization of $173,995 and $167,139 178,611 178,556 Other assets 133,158 125,102 $3,044,422 $3,102,085 LIABILITIES AND STOCKHOLDERS' EQUITY Checks payable $ 148,168 $ 148,970 Securities loaned 687,741 660,489 Payables: Customers 688,114 719,989 Brokers, dealers and clearing organizations 42,884 78,647 Securities sold but not yet purchased, at fair value 29,944 21,871 Employee compensation and related taxes 249,106 331,098 Income taxes 32,795 12,630 Other liabilities 37,075 39,707 Total Liabilities 1,915,827 2,013,401 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 62,312,658 shares 64,313 64,313 Additional paid-in capital 233,102 232,058 Retained earnings 845,049 798,805 1,142,464 1,095,176 Less:Treasury stock, at cost (569,235 and 267,650 shares) 13,869 6,492 Total Stockholders' Equity 1,128,595 1,088,684 $3,044,422 $3,102,085 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 May 31, 1996 1995 REVENUES: Commissions $246,762 $166,336 Principal transactions 53,486 56,875 Investment banking 34,121 25,326 Asset management and service fees 56,713 42,639 Interest 35,026 32,566 Other 2,376 1,560 428,484 325,302 EXPENSES: Compensation and benefits 275,476 207,395 Communications 21,164 19,841 Occupancy and equipment 19,891 18,521 Floor brokerage and clearance 4,702 3,770 Interest 718 1,409 Other operating expenses 14,571 17,153 336,522 268,089 EARNINGS BEFORE INCOME TAXES 91,962 57,213 INCOME TAXES 35,520 21,840 NET EARNINGS $ 56,442 $ 35,373 Earnings per share $ .87 $ .56 Dividends per share $ .16 $ .14 Average common and common equivalent shares outstanding 65,045 63,644 See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MAY 31, 1995 AND 1996 (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, 1995 $62,294 $194,863 $665,992 $(3,868) $ 0 Net earnings 35,373 Cash dividends - $.14 per share (8,731) Stock issued: Employee stock purchase/option plans 70 1,372 73 Restricted stock 238 18 (73) Amortization of restricted stock awards 996 BALANCES, May 31, 1995 $62,364 $196,473 $692,634 $(2,854) $ 0 BALANCES, March 1, 1996 $64,313 $232,058 $798,805 $ 0 $ (6,492) Net earnings 56,442 Cash dividends - $.16 per share (10,198) Treasury stock acquired (9,000) Stock issued: Employee stock purchase/option plans 482 1,648 Restricted stock 562 (25) BALANCES, May 31, 1996 $64,313 $233,102 $845,049 $ 0 $(13,869) See Notes to Consolidated Financial Statements.
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A.G. EDWARDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended May 31, 1996 1995 Cash Flows from Operating Activities: Net earnings $ 56,442 $ 35,373 Noncash items included in earnings 15,938 10,163 Decrease (increase) in segregated cash and government securities 248,708 (8,746) Net change in securities borrowed and loaned 11,896 (25,870) Decrease in net payable to brokers and dealers (38,478) (27,127) (Increase) decrease in net receivable from customers (186,080) 38,635 Decrease (increase) in net securities inventory 37,482 (41,815) Net change in other assets and liabilities (78,426) (32,158) Net cash provided by (used in) operating activities 67,482 (51,545) Cash Flows from (payments for) Investing Activities: Securities purchased under agreements to resell (29,941) 18,058 Capital expenditures and other investments (10,937) (6,447) Net cash (used in) provided by investing activities (40,878) 11,611 Cash Flows from (payments for) Financing Activities: Bank loans 54,900 Employee stock transactions 2,720 1,698 Cash dividends (10,198) (8,731) Treasury stock (9,000) Net cash (used in) provided by financing activities (16,478) 47,867 Net Increase in Cash and Cash Equivalents 10,126 7,933 Cash and Cash Equivalents at March 1 52,587 41,464 Cash and Cash Equivalents at May 31 $ 62,713 $ 49,397 Income tax payments totaled $11,760 and $2,673 during the three month periods ended May 31, 1996, and 1995, respectively. Interest payments totaled $586 and $1,104 during the three month periods ended May 31, 1996, and 1995, respectively. See Notes to Consolidated Financial Statements.
-4- A.G. EDWARDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MAY 31, 1996 (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 29, 1996. All adjustments that, in the opinion of the Company, 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 three months ended May 31, 1996, are not necessarily indicative of the results for the year ending February 28, 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 approval of, the SEC and other regulatory organizations for substantial withdrawals of capital and loans to affiliates. At May 31, 1996, Edwards' net capital of $765,021 was $735,413 in excess of the minimum required. -5- A.G. EDWARDS, INC. AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION THREE MONTHS ENDED MAY 31, 1996 COMPARED TO THREE MONTHS ENDED MAY 31, 1995 Results of Operations The three months ended May 31, 1996 saw a continuation of the high level of retail investor activity that existed during last fiscal year. The NYSE and Nasdaq overall trading volumes increased 22% and 66%, respectively, over the prior year which resulted in a 32% increase in total client trades. The number and size of client trades and the product mix generally affect the level of revenues. The number of branches and brokers increased to 538 and 5,800, which represent increases of 3% and 4%, respectively, compared with the same period last year. Total revenues increased $103 million (32%) over last year, from $325 million to $428 million. Expenses were $337 million, an increase of $68 million (26%), resulting in a rise in net profit margins from 10.9% last year to 13.2% this year. Total commission revenue increased $80 million (48%) reflecting increased trading volume and, to a lesser extent, expansion of the Company's distribution system. Equity related commissions rose $45 million (42%) while mutual fund and insurance sales increased $25 million (66%) and $10 million (55%), respectively. Client demand for stocks, mutual funds and variable annuities continued to rise due to the continuation of the strong equity market conditions and slightly lower interest rates this year. Revenues from principal transactions declined slightly. An increase in corporate equity revenue of $3 million (21%) was more than offset by a decline in revenue generated from sales of corporate and government bonds, which were down a combined $7 million (25%). Market conditions for equity securities improved this year compared to the first quarter last year when rising interest rates caused uncertainties in the market. Client demand for bonds has declined primarily due to lower yields combined with the strong performance of the equity markets. Investment banking revenue increased $9 million (35%) due to increases in every category. Underwriting fees and concessions rose $7 million (36%) resulting primarily from improved market conditions for corporate securities issues. Management fees also increased $2 million (30%) due to participation as manager or co-manager in a larger number of offerings coupled with increased activity in mergers and acquisitions, this year. Asset management and service fees increased $14 million (33%). Service fees from third party management, including mutual funds, increased $12 million (38%) as a result of more assets under management. Transaction-related revenue and other administrative fees increased $2 million (18%), reflecting record activity levels. Compensation and benefits increased $68 million (33%) due to increases in every category. Commission expense increased due to the rise in commissionable revenue. General and administrative salaries and related benefits increased due primarily to general increases and expansion. Incentive related compensation rose as a result of higher earnings. -6- Liquidity and Capital Resources On May 23, 1996, the Board of Directors authorized the repurchase of up to 22 million of its outstanding common shares during the next 5 1/2 year period. The acquired shares will be used for its employee stock plans and to partially offset the past effect of these plans. The Company anticipates that this repurchase will be financed from operations and does not expect it to have a material effect on the Company's liquidity or capital resources. No material changes have taken place since February 29, 1996 regarding the Company's liquidity, capital resources and overall financial condition. 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 29, 1996. Item 4: Submission of Matters to a Vote of Security Holders At the Company's Annual Meeting of Stockholders on June 20, 1996, stockholders approved a number of nominations and proposals. Results of these nominations and proposals were: Votes Votes Votes For Against Withheld* Nominations for director: Benjamin F. Edwards III 51,334,040 831,354 Robert C. Dissett 51,269,345 896,049 Samuel C. Hutchinson Jr. 51,676,397 488,997 Ratification of auditors 51,845,617 198,098 121,679 A total of 52,165,394 shares were present in person or by proxy at the Annual Meeting. *Includes abstentions and broker non-votes. 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 in 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 May 31, 1996. -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: July 12, 1996 /s/ Benjamin F. Edwards III BENJAMIN F. EDWARDS, III Principal Executive Officer Date: July 12, 1996 /s/ David W. Mesker DAVID W. MESKER Principal Financial Officer -8- EX-27 2
BD 1000 3-MOS FEB-28-1997 MAY-31-1996 62,713 1,598,904 121,954 628,622 166,383 178,611 3,044,422 0 1,128,272 0 687,741 29,944 0 0 0 64,313 1,064,282 3,044,422 53,486 35,026 246,762 34,121 44,430 718 275,476 91,962 91,962 0 0 56,442 .87 .87
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