-----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, AAFlnhRnZhCA/qPx4N1MJNc58q15jIooiuhzphn0BjUqReTGGj/aMDHVEgKGI1hn VaRRfKFd2SGgwqpV8POD1g== 0000812712-95-000013.txt : 19950718 0000812712-95-000013.hdr.sgml : 19950718 ACCESSION NUMBER: 0000812712-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950711 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATERHOUSE INVESTOR SERVICES INC CENTRAL INDEX KEY: 0000812712 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 133400568 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10983 FILM NUMBER: 95553132 BUSINESS ADDRESS: STREET 1: 100 WALL STREET CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128063500 MAIL ADDRESS: STREET 1: 100 WALL ST CITY: NEW YORK STATE: NY ZIP: 10005 10-Q 1 QUARTERLY REPORT - QUARTER ENDED MAY 31, 1995 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended May 31, 1995 Commission file number 0-15948 WATERHOUSE INVESTOR SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware 13-3400568 (State or other jurisdiction of (I.R.S. Employer I.D. Number) incorporation or organization) 100 Wall Street, New York, NY 10005 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (212) 806-3500 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. X Yes No ------ ------ The number of shares outstanding of Common Stock (par value $.01 per share) as of May 31, 1995 was 9,153,678. 2 WATERHOUSE INVESTOR SERVICES, INC. Quarterly Report on Form 10-Q For the Quarter Ended May 31, 1995 Index
Part I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements: Consolidated Statements of Financial Condition as of May 31, 1995 and August 31, 1994 3 Consolidated Statements of Income for the Three and Nine Months Ended May 31, 1995 and May 31, 1994 4 Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 1995 and May 31, 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11 EXHIBIT A 12 EXHIBIT B 13 2
3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements WATERHOUSE INVESTOR SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited) May 31, August 31, 1995 1994 ----------- ----------- ASSETS: Cash and due from banks $ 11,188,911 $ 7,728,832 Interest bearing deposits with other banks 17,000,000 --- Fed funds sold 24,400,000 --- Investment securities 27,346,290 7,532,305 Receivable from brokers and dealers 6,863,312 10,260,515 Receivable from customers, net 294,662,130 275,821,544 Deposits with clearing organizations 3,732,604 3,527,517 Notes Receivable 5,000,000 --- Furniture, equipment and leasehold improvements, net 6,483,106 7,382,326 Memberships in exchanges 698,000 698,000 Other assets 4,038,984 2,829,401 ------------ ------------ Total assets $401,413,337 $315,780,440 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities: Broker loans and overdrafts $ 73,365,339 $ 76,283,181 Deposits 49,058,230 --- Payable to brokers and dealers 18,315,240 17,502,736 Payable to customers 127,359,686 106,028,013 Dividends payable --- 1,830,736 6% convertible subordinated notes 48,500,000 48,500,000 Accounts payable, taxes payable, accrued expenses and other liabilities 22,350,739 16,032,541 ------------ ------------ Total liabilities 338,949,234 266,177,207 ============ ============ Stockholders' Equity: Common stock, $.01 par value, 20,000,000 shares authorized and 9,403,680 shares issued 94,038 94,038 Additional paid in capital 9,167,551 9,167,551 Retained earnings 54,210,884 41,350,014 Less: Treasury Stock, 250,002 shares, at cost (1,008,370) (1,008,370) ----------- ----------- Total stockholders' equity 62,464,103 49,603,233 ----------- ----------- Total liabilities and stockholders' equity $401,413,337 $315,780,440 ============ ============
The accompanying notes are an integral part of these financial statements. 3 4 WATERHOUSE INVESTOR SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended
May 31, May 31, May 31, May 31, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- INTEREST INCOME: Margin loans $ 6,110,191 $ 3,915,118 $17,014,821 $10,707,633 Short-term investments 702,880 --- 1,279,610 15,038 Other interest income 171,238 63,377 414,265 166,885 ---------- ---------- ---------- ---------- Total interest income 6,984,309 3,978,495 18,708,696 10,889,556 ========== ========== ========== ========== INTEREST EXPENSE: Broker loans and overdrafts 1,381,295 817,787 4,028,220 2,319,429 6% convertible subordinated notes 727,500 742,500 2,182,500 1,334,167 Other 603,775 72,473 1,105,765 160,236 ---------- ---------- ---------- ---------- Total interest expense 2,712,570 1,632,760 7,316,485 3,813,832 ---------- ---------- ---------- ---------- Net interest income 4,271,739 2,345,735 11,392,211 7,075,724 ---------- ---------- ---------- ---------- NONINTEREST INCOME: Commissions and clearing fees 23,876,115 18,884,024 61,903,719 59,729,619 Mutual fund revenues 2,558,246 1,815,355 6,757,172 5,129,868 Other 3,195,195 2,315,076 8,645,697 7,180,821 ---------- ---------- ---------- ---------- Total noninterest income 29,629,556 23,014,455 77,306,588 72,040,308 ---------- ---------- ---------- ---------- Total income 33,901,295 25,360,190 88,698,799 79,116,032 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Employee compensation and benefits 10,563,021 8,639,795 28,608,207 25,285,185 Communications and data processing 4,810,340 3,947,919 13,265,821 11,434,146 Advertising and promotion 1,962,495 975,442 5,256,022 2,899,315 Stationery and postage 1,708,350 1,393,019 3,578,203 3,509,023 Clearing fees 1,148,568 1,100,125 3,242,130 3,190,802 Occupancy 1,115,604 917,997 3,140,547 2,704,065 Professional fees 814,951 493,540 2,316,566 1,146,337 Depreciation and amortization 592,867 515,792 1,691,792 1,202,567 Other 2,375,471 1,237,023 5,520,783 3,809,468 ---------- ---------- ---------- ---------- Total operating expenses 25,091,667 19,220,652 66,620,071 55,180,908 ---------- ---------- ---------- ---------- Income before income taxes 8,809,628 6,139,538 22,078,728 23,935,124 Income tax provision 3,652,663 2,717,378 9,217,858 10,524,554 ---------- ---------- ---------- ---------- Net income $ 5,156,965 $ 3,422,160 $12,860,870 $13,410,570 =========== =========== =========== =========== Weighted average shares outstanding 9,190,592 9,166,132 9,174,120 9,167,620 Primary earnings per share $ .56 $ .37 $1.40 $1.46 Fully diluted earnings per share $ .51 $ .35 $1.30 $1.42
The accompanying notes are an integral part of these financial statements. 4 5 WATERHOUSE INVESTOR SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended May 31, May 31, 1995 1994
----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $12,860,870 $13,410,570 Non cash items included in net income: Amortization of debt issuance costs 105,354 114,465 Depreciation and amortization 1,691,792 1,202,567 (Increases) decreases in operating assets: Receivable from brokers and dealers 3,397,203 (3,440,487) Receivable from customers, net (18,840,586) (56,248,740) Deposits with clearing organizations (205,087) (915,970) Other assets (1,314,937) (743,293) Increases (decreases) in operating liabilities: Broker loans and overdrafts (2,917,842) (10,893,948) Payable to brokers and dealers 812,504 1,361,055 Payable to customers 21,331,673 20,814,180 Accounts payable, taxes payable, accrued expenses, and other liabilities 6,318,198 (343,332) ----------- ----------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 23,239,142 (35,682,933) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: 6% convertible subordinated notes --- 48,500,000 Deposits 49,058,230 --- Debt issuance costs, net --- (1,449,000) Dividends paid (1,830,736) (1,521,494) Proceeds from exercise of stock options --- 90,544 ----------- ----------- CASH PROVIDED BY FINANCING ACTIVITIES 47,227,494 45,620,050 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest bearing deposits with other banks (17,000,000) --- Fed funds sold (24,400,000) --- Investment securities purchased (39,194,985) --- Proceeds from maturities of investment securities 19,381,000 --- Notes Receivable issued (5,000,000) --- Purchase of furniture, equipment and leasehold improvements (792,572) (4,112,538) ----------- ----------- CASH (USED IN) INVESTING ACTIVITIES (67,006,557) (4,112,538) ----------- ----------- INCREASE IN CASH AND DUE FROM BANKS 3,460,079 5,824,579 CASH AND DUE FROM BANKS, beginning of period 7,728,832 5,806,314 ----------- ----------- CASH AND DUE FROM BANKS, end of period $11,188,911 $11,630,893 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 5,585,758 $ 2,225,764 =========== =========== Cash paid for income taxes $ 7,227,797 $12,607,206 =========== ===========
The accompanying notes are an integral part of these financial statements. 5 6 WATERHOUSE INVESTOR SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF ACCOUNTING PRINCIPLES The accompanying consolidated financial statements include the accounts of Waterhouse Investor Services, Inc. (the "Company") and its wholly- owned subsidiaries, the most significant of which is Waterhouse Securities, Inc. ("Waterhouse Securities"), a securities brokerage firm which is registered with the Securities and Exchange Commission (the "SEC"). Effective October 13, 1994, the Company became registered as a bank holding company. Such statements have been prepared by the Company, without audit, pursuant to the Rules and Regulations of the SEC and reflect all adjustments (which include only normal recurring adjustments) which are necessary to present a fair statement of the results for the interim periods reported. Certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended August 31, 1994. 2. CAPITAL ADEQUACY Since being approved as a bank holding company, the Company closely monitors its capital levels to provide for normal business needs and to comply with regulatory requirements. As summarized below the Company's capital ratios were in excess of the regulatory requirements to be deemed "Well Capitalized" for the period ended May 31, 1995.
Regulatory Waterhouse Minimum to be Company's National Bank's "Well Capitalized" Capital Ratio Capital Ratios ------------------ ------------- --------------- Total Risk Based Capital Ratio 10.0% 18.73% 62.19% Tier 1 Risk Capital Ratio 6.0% 18.73% 62.19% Tier 1 Leverage Ratio 5.0% 15.56% 11.07%
As a broker-dealer, Waterhouse Securities is subject to the SEC's Uniform Net Capital Rule. Waterhouse Securities has elected the alternative method allowed by the Rule under which net capital, as defined, shall not be less than 2% of aggregate debit items, as defined. At May 31, 1995, Waterhouse Securities had net capital of $29,599,000 in excess of its required net capital of $6,267,000. 3. RECLASSIFICATION The consolidated statements of income and cash flows for the three and nine months ended May 31, 1994 have been reclassified to conform with the presentation adopted for the three and nine months ended May 31, 1995 because of the Company's registration as a bank holding company. Certain prior period amounts have been reclassified to conform to the current period presentation. 4. INVESTMENT SECURITIES The Investment Securities are held by Waterhouse National Bank and carried at amortized cost since the bank has the intent and the ability to hold these instruments to maturity. The maturity of these instruments range from 6/1/95 to 4/26/96. The following is a comparison of the carrying amount and approximate market values:
May 31, 1995 August 31, 1994 Carrying Approximate Carrying Approximate Amount Market Value Amount Market Value ---------- ------------ ---------- ------------ U.S. Government $25,896,290 $25,947,000 $7,082,305 $7,075,863 and Agency Securities Other securities 1,450,000 1,450,000 450,000 450,000 ----------- ----------- ---------- ---------- Total $27,346,290 $27,397,000 $7,532,305 $7,525,863
=========== =========== ========== ==== 6 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL Waterhouse Investor Services, Inc. was formed in 1987 as a holding company and became registered as a bank holding company in 1994. The principal operating subsidiary of the Company is Waterhouse Securities which was established in 1978. Waterhouse Securities, a member firm of the NYSE and other principal exchanges, conducts business as a discount broker offering reduced commission rates to individual investors. Waterhouse National Bank was established in 1994 as a wholly-owned subsidiary of the Company and will provide the Company with the ability to offer expanded financial services and products to the customer base of Waterhouse Securities. The securities industry has always been subject to volatility and sizable market swings. In the past, this volatility has had little effect on the financial condition of Waterhouse Securities. In addition, management feels that the effect of this volatility on the results of the Company's operations for any specific period of time may not be representative of the general trend in the securities industry or operations of Waterhouse Securities. RESULTS OF OPERATIONS The Company has experienced rapid growth in customer accounts, trade processing activity and revenues during the past several years. The Company believes that favorable market conditions and increasing participation of individual investors have contributed substantially to this growth. However, the Company also believes that its historical growth is attributable in large measure to the expansion of its branch office network, the introduction of new products and services, increased advertising and marketing expenditures, and growth in the number of individuals comprising the Company's target market. Waterhouse has historically derived nearly all its revenue from commissions charged on securities transactions and from interest earned on customer margin balances. As a result, the revenues and earnings of the Company are directly and materially affected by changes in the volume and price level of securities transactions, the amount of customer margin loans and the Company's cost of funds used to finance such loans. Accordingly, the Company's revenues and earnings have fluctuated materially from quarter to quarter. 7 8 The following table sets forth selected consolidated financial data as percentages of total revenues and the percentage increase in each item over the amount for the previous period: Increase % Third Quarter FY 1995 Percentage of Total Revenues compared to
Third Quarter Third Quarter Third Quarter FY 1995 FY 1994 FY 1994 ------------- ------------- ------------- Income: Net interest income 12.6% 9.2% 82.1% Commissions and clearing fees 70.4% 74.5% 26.4% Mutual fund revenues 7.5% 7.2% 40.9% Other noninterest income 9.5% 9.1% 38.0% ------ ------ 100.0% 100.0% 33.7 ------ ------ Operating Expenses: Employee compensation 31.2% 34.1% 22.3% Communications, clearing and stationery 22.6% 25.4% 19.0% Advertising 5.8% 3.8% 101.2% Occupancy 3.3% 3.6% 21.5% Other operating expenses 11.1% 8.9% 68.4% ------ ------ 74.0% 75.8% 30.5% Income before income taxes 26.0% 24.2% 43.5% Income tax provision 10.8% 10.6% 34.4% ------ ------ Net income 15.2% 13.6% 50.7% ====== ======
INCOME NET INTEREST INCOME. Currently, Waterhouse Securities' primary source of interest income is margin loans to customers. These loans are financed primarily through bank loans, credit balances in customer accounts (known as free credit balances) and subordinated debt. Net interest income (interest income less interest expense) is directly affected by the level of such loans, the interest rate charged on those loans, which is based on the then-applicable broker call rate, and the cost of financing. Net interest income increased for both the third quarter and first nine months of fiscal year 1995 by 82% and 61%,respectively, from that of the same periods in the prior year. Such increase in net interest income is primarily a result of a 8% increase in average customer margin loans, and an increase in the broker call rate from 5.25% to 7.75% during the period. As Waterhouse National Bank becomes fully operational, net interest income is expected to further increase and become a greater percentage of total income. COMMISSIONS AND CLEARING FEES. Waterhouse Securities acts primarily as an agent for customer trading activity, and therefore, the commissions earned by Waterhouse Securities are directly affected by the number of trades executed and cleared, as well as the average commission rate per trade. During the third quarter and first nine months of fiscal year 1995, the number of trades executed and cleared by Waterhouse Securities was up 30% and 10%, respectively, while the average commission rate per trade was down 3% and 6%, as compared with the same periods of fiscal 1994. MUTUAL FUND REVENUES. Included in mutual fund revenues are commission fees on mutual fund and money market transfers. Such revenues increased 41% for the third quarter of fiscal year 1995, and 32% for the first nine months over the same periods in the prior year, primarily due to a corresponding increase in money market balances. 8 9 OTHER NONINTEREST INCOME. Included in other noninterest income are payments received for order flow and other miscellaneous revenues. The increase of 38% for the third quarter and 20% for the first nine months of fiscal year 1995 were a result of increased participation by the Company in the order flow rebate market. The SEC has issued new regulations requiring additional disclosure of fees received by brokers for order flow. No assurance can be given that any such additional disclosure will not have an adverse effect on the Company's revenues. EXPENSES EMPLOYEE COMPENSATION. Employee compensation represented approximately 42% of total pre-tax operating expenses in the third quarter and first nine months of fiscal 1995, the Company's largest expense. This expense primarily includes salaries, bonuses, profit sharing plan contributions and other related benefits and taxes. Employee compensation expense is directly impacted by the number of employees, and partially impacted by the profits of the Company, as the bonuses and contributions to the profit sharing plan are dependent on income before taxes. Employee compensation increased 22% in the third quarter and 13% for the first nine months, respectively, of fiscal 1995 over the same periods of fiscal 1994, primarily as a result of an increase in the number of employees from 775 in May 1994 to 815 in May 1995. These increases were necessary to support the rapid branch expansion from 60 as of May 31, 1994 to 68 as of May 31, 1995, as well as the staffing of Waterhouse National Bank. COMMUNICATIONS AND DATA PROCESSING, CLEARING FEES AND STATIONERY AND POSTAGE. These categories are primarily composed of variable charges related to executing and clearing customer transactions, telephone, computer service, quotation, clearance, floor brokerage, envelopes and postage charges. These charges increased 19% for the third quarter and 11% for the first nine months, respectively, of fiscal year 1995 due to increased customer transactions and the continuous upgrading of the company's technology, which includes Trade Direct. ADVERTISING. As the branch network expanded at its rapid rate over the past several years, Waterhouse Securities increased its advertising campaign with larger and more frequent advertising. The Company's advertisements appear on a regular basis in national publications, such as The Wall Street Journal, Barron's and Investor's Daily, and run regularly on CNBC and other cable television networks. In addition, the Company introduced a host of new services during fiscal 1995. As a result, advertising and promotion expense increased 101% and 81% for the third quarter and first nine months of fiscal year 1995 over the same periods of the prior year. OCCUPANCY. Occupancy expense increased 22% in the third quarter and 16% for the first nine months, respectively, of fiscal 1995 vs. the same periods in fiscal 1994. This increase was primarily attributable to an increase in rental expense resulting from the expansion of the Company's branch office network and corporate headquarters. OTHER OPERATING EXPENSES. Included in other operating expenses are depreciation and amortization, insurance, professional fees and other miscellaneous expenses. Other operating expenses amounted to $3.8 million in the third quarter and $9.5 million for the first nine months of fiscal year 1995, resulting in increases of 68% and 55% as compared to the third quarter and first nine months of fiscal 1994, respectively. This increase is primarily attributable to equipment purchased used in the general expansion of the Company's business during the period. 9 10 FINANCIAL CONDITION As of May 31, 1995, the Company's financial position remained strong with over 97% of total assets consisting of cash, interest bearing deposits with other banks, fed funds sold, investment securities and receivables. The Company's assets primarily consist of receiveables from other broker-dealers and customers. Customer receivables of $295 million at May 31, 1995 are secured by readily marketable securities, some of which are used to collateralize bank loans of $73 million. The Company's other assets consist principally of office and operating equipment. Stockholders' equity as of May 31, 1995 was over $62 million, an increase of almost $13 million since August 31, 1994. Such increase was due to earnings during the first nine months of fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES With the establishment of the Waterhouse National Bank on October 13, 1994, the Company became subject to regulation as a registered bank holding company under the Bank Holding Company Act. As such, the Company is subject to examination by the FRB, regulatory reporting requirements, minimum capital requirements and ratios, certain restrictions on non-banking activities, transactions with affiliates, tie-in arrangements, changes in control, dividend payments, redemptions and other payments to security holders, and other restrictions. Under FRB policy, the Company, as a bank holding company, will be expected to act as a source of financial strength to Waterhouse National Bank and to commit resources to support the Bank. Currently, both the Company and the Bank have adequate capital, in excess of minimum requirements. Waterhouse Securities is subject to rules adopted by the SEC, the NASD, the NYSE and various state securities law administrators which are designed to measure the general financial integrity and liquidity of broker-dealers by determining the amount of their net capital. Waterhouse Securities may not pay dividends, distribute capital, prepay subordinated indebtedness or redeem or repurchase shares of its capital stock if, thereafter, it would be in violation of any such rules. In the past, Waterhouse Securities has at all times maintained net capital in excess of the minimum amount of net capital required to be maintained by such rules, and, as of May 31, 1995, Waterhouse Securities had net capital in excess of the minimum amount of net capital required to be so maintained. The Company had available formal and informal lines of credit of approximately $255 million (of which $73 million was utilized) at May 31, 1995, which require collateralization upon utilization. These lines of credit, payables to customers, and the convertible subordinated notes are the primary sources of liquidity for the Company. Management believes that these primary sources of liquidity, along with the equity of the Company, are sufficient to meet the working capital needs of its subsidiaries including expansion of the securities, clearing and banking operations, as well as any possible future acquisitions. EFFECTS OF INFLATION For the nine month period ended May 31, 1995, there was no material effect on the Company due to inflation. 10 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings In the ordinary course of its business the Company is involved in certain routine legal matters in which, in the opinion of management, based on its discussions with counsel, are not expected to have a material adverse effect on the Company's consolidated financial condition. Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K Exhibit A - Computation of Earnings Per Common and Common Equivalent Shares Exhibit B - Computation of Ratio of Earnings to Fixed Charges SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WATERHOUSE INVESTOR SERVICES, INC. Date: July 12, 1995 By: /s/ Lawrence M. Waterhouse Jr. ------------------------------ Lawrence M. Waterhouse, Jr. Chairman & Chief Executive Officer Date: July 12, 1995 By: /s/ Bernard Siegel ------------------------------ M. Bernard Siegel Chief Financial Officer ?? 11 EX-11.A 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT A WATERHOUSE INVESTOR SERVICES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
Nine Months Ended Nine Months Ended May 31, 1995 May 31, 1994 Primary Fully Diluted Primary Fully Diluted ------- ------------- ------- ------------- Number of common shares outstanding at beginning of period 9,401,438 9,401,438 9,397,952 9,397,952 Weighted average number of common shares issued pursuant to the exercise of stock options -- -- 1,296 1,301 Weighted average number of common shares issuable assuming full conversion of 6% convertible subordinated notes -- 1,658,120 -- 568,455 Weighted average number of common shares held in treasury (250,002) (250,002) (250,002) (250,002) Common shares issuable assuming stock options outstanding were exercised at the beginning of the period with applicable proceeds used to purchase treasury stock at the average market price during the period 22,684 52,324 18,369 18,369 ------- ------- ------- ------- Weighted average number of common and common equivalent shares outstanding at end of period 9,174,120 10,861,880 9,167,615 9,736,075 ========== ========== ========== ========== Earnings applicable for common shares $12,860,870 $14,126,719 $13,410,570 $13,829,578 Earnings per common and common equivalent shares $1.40 $1.30 $1.46 $1.42
12 EX-12.B 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT B WATERHOUSE INVESTOR SERVICES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Years Ended August 31, Nine Months Ended --------------------------------------------------------------- May 31, 1990 1991 1992 1993 1994 1995 ---------- ---------- ----------- ----------- ---------- ----------- Earnings Before Taxes On Income $2,506,460 $5,689,134 $15,163,052 $25,791,806 $28,009,177 $22,078,728 ---------- ---------- ----------- ----------- ----------- ----------- Fixed Charges: Interest 2,190,386 1,388,577 1,958,817 3,043,570 5,791,799 7,316,485 Interest Factor in Rent 418,695 418,685 618,012 899,371 1,206,530 1,046,849 --------- --------- --------- --------- --------- --------- Total Fixed Charges 2,609,081 1,807,262 2,576,829 3,942,941 6,998,329 8,363,334 --------- --------- --------- --------- --------- --------- Earnings Before Taxes On Income and Fixed Charges $5,115,541 $7,496,396 $17,739,881 $29,734,747 $35,007,506 $30,442,062 ========== ========== =========== =========== =========== =========== Ratio Of Earnings to Fixed Charges 1.96 4.15 6.88 7.54 5.00 3.64
13 EX-27 4 FINANCIAL DATA SCHEDULE
BD 3-MOS AUG-31-1995 MAY-1-1995 11188911 307442731 0 3005700 0 6483106 401413337 733653396 168025665 0 0 0 48500000 94038 0 0 62370065 401413337 0 6984309 23876115 0 0 2712570 10563021 8809628 0 0 0 5156965 .56 .51
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