<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-8408
THE ADVEST GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0950444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Commercial Plaza - 280 Trumbull Street
Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 525-1421
NONE
Former name, former address and former fiscal year, if changed since last
report.
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 8,536,277 shares
Class Outstanding at January 31, 1995
Total of sequentially numbered pages 21.
Exhibit index sequential page number page 13.
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THE ADVEST GROUP, INC.
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1994 and September 30, 1994 1
Consolidated Statements of Operations
Three Months Ended December 31, 1994 and 1993 2
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1994 and 1993 3
Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended December 31, 1994 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 12
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
(In thousands, except share and per share amounts) 1994 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Assets (unaudited)
Cash and short-term investments
Cash and cash equivalents $ 11,023 $ 7,278
Cash and securities segregated under
federal and other regulations 54,270 49,305
Interest-earning deposits and investments 3,000 3,000
------------ ------------
68,293 59,583
------------ ------------
Receivables
Brokerage customers, net 305,131 321,776
Loans and mortgages, net 279,139 279,730
Securities borrowed 61,537 65,751
Brokers and dealers 6,015 3,539
Other 12,257 11,560
------------ ------------
664,079 682,356
------------ ------------
Securities
Inventory, at market value 57,567 34,810
Held to maturity (market values
of $29,938 and $53,102) 31,064 53,850
Available for sale (market values
of $24,670 and $4,902) 24,670 4,902
------------ ------------
113,301 93,562
------------ ------------
Other assets
Other real estate owned, net 12,421 13,414
Equipment and leasehold improvements, net 12,306 11,537
Other 23,562 24,403
------------ ------------
48,289 49,354
------------ ------------
Total Assets $ 893,962 $ 884,855
============ ============
Liabilities & Shareholders' Equity
Brokerage customers $ 314,666 $ 310,537
Deposits 290,392 291,885
Securities loaned 71,542 79,459
Short-term borrowings 44,201 32,652
Compensation and benefits 12,694 14,053
Checks payable 11,777 6,800
Brokers and dealers 3,767 6,023
Securities sold, not yet purchased, at market value 2,428 2,187
Other 16,980 15,894
------------ ------------
768,447 759,490
Long-term borrowings 30,225 30,388
Subordinated borrowings 20,997 20,997
------------ ------------
819,669 810,875
------------ ------------
Shareholders' Equity
Common stock, par value $.01,
authorized 25,000,000 shares,
issued 10,570,222 shares 106 106
Paid-in capital 67,405 67,405
Retained earnings 17,463 16,605
Unrealized losses on securities available for sale, net (153) --
Treasury stock, at cost, 2,061,807 shares
and 1,987,357 shares (10,528) (10,136)
------------ ------------
74,293 73,980
------------ ------------
Total Liabilities and Shareholders' Equity $ 893,962 $ 884,855
============ ============
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
December 31,
(In thousands, except per share amount) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Commissions $ 18,013 $ 21,824
Interest 13,731 10,946
Principal transactions 9,745 9,082
Asset management and administration 4,248 3,969
Investment banking 3,764 9,357
Other 1,492 1,170
---------- ----------
Total revenues 50,993 56,348
---------- ----------
Expenses
Compensation and benefits 28,062 31,323
Interest 7,301 5,392
Communications 4,278 4,639
Occupancy and equipment 4,088 3,809
Business development 1,182 1,233
Professional 993 1,534
Brokerage, clearing and exchange 871 963
Provision for credit losses and asset devaluation 401 1,308
Other 2,312 2,313
---------- ----------
Total expenses 49,488 52,514
---------- ----------
Income before taxes 1,505 3,834
Provision for income taxes 647 1,649
---------- ----------
NET INCOME $ 858 $ 2,185
========== ==========
- -------------------------------------------------------------------------------------
Net income per common and common equivalent share:
Primary $ 0.10 $ 0.24
========== ==========
Assuming full dilution $ 0.10 $ 0.23
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
December 31,
(In thousands) 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 858 $ 2,185
Adjustments to reconcile net income to net cash
provided by operating activites:
Amortization 1,371 1,168
Depreciation 702 494
Provision for credit losses and asset devaluation 401 1,308
Other 25 880
(Increase) decrease in operating assets:
Receivables from brokerage customers 16,609 (21,106)
Securities borrowed 4,214 1,965
Receivables from brokers and dealers (2,476) (9,485)
Securities inventory (22,796) (5,701)
Cash and securities segregated under federal and other regulations (4,965) (13,792)
Other 124 (939)
Increase (decrease) in operating liabilities:
Brokerage customers 4,129 41,550
Securities loaned (7,917) (6,794)
Brokers and dealers (2,256) 793
Checks payable 4,977 (4,951)
Other (397) (1,950)
--------- --------
Net cash used for operating activities (7,397) (14,375)
--------- --------
FINANCING ACTIVITIES
Net decrease in deposits (1,493) (1,035)
Proceeds of short-term borrowings 5,000 -
Repayment of short-term borrowings (5,163) (663)
Short-term brokerage borrowings, net 11,549 13,600
Other (391) (909)
--------- --------
Net cash provided by financing activities 9,502 10,993
--------- --------
INVESTING ACTIVITIES
Proceeds from sales of investments 151 10,910
Proceeds from maturities of investments 6,479 64,379
Purchase of investment securities and short-term investments (3,897) (50,788)
Principal collections on loans 11,410 10,938
Proceeds from loan sale 6,889 -
Proceeds from other real estate owned, net 745 903
Loans originated (17,107) (19,457)
Other (3,030) (3,703)
--------- --------
Net cash provided by investing activities 1,640 13,182
--------- --------
Increase in cash and cash equivalents 3,745 9,800
Cash and cash equivalents at beginning of period 7,278 19,232
--------- --------
Cash and cash equivalents at period end $ 11,023 $ 29,032
========= ========
Interest paid $ 6,679 $ 5,175
Income taxes paid $ 630 $ 308
Non-cash transfers:
Loans to OREO $ - $ 737
Securities available for sale to (from) investment securities $(15,079) $ 27,910
Change in SFAS 115 valuation reserve, net $ (153) $ -
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Unrealized
Losses on
Common Stock Treasury Stock Securities Total
-------------- Paid-in Retained ----------------- Available Shareholders'
(In thousands) Shares Amount Capital Earnings Shares Amount for Sale, Net Equity
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, as of
September 30, 1994 10,570 $106 $67,405 $16,605 (1,987) $(10,136) $ -- $73,980
Adjustment to beginning
balance for change in
accounting principle (57) (57)
Net income 858 858
Purchase of
treasury stock (74) (392) (392)
Change in unrealized
gains (losses), net of taxes (96) (96)
- ----------------------------------------------------------------------------------------------------------
Balance, as of
December 31, 1994 10,570 $106 $67,405 $17,463 (2,061) $(10,528) $(153) $74,293
=================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements:
The consolidated financial statements have been prepared in accordance with
the instructions to Form 10-Q and do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. The consolidated financial statements include the
accounts of The Advest Group, Inc. ("AGI") and all subsidiaries (the
"Company"). All significant intercompany transactions and accounts have been
eliminated in consolidation. All normal recurring adjustments which, in the
opinion of management, are necessary for a fair presentation of the
consolidated financial condition and results of operations for the interim
periods presented have been made. Certain fiscal 1993 amounts have been
reclassified in the accompanying consolidated financial statements to provide
comparability with the current year presentation. The results of operations
for the interim periods are not necessarily indicative of the results for a
full year.
The statements should be read in conjunction with the Notes to Consolidated
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's Annual Report for
the year ended September 30, 1994, as filed with the Securities and Exchange
Commission on Form 10-K.
2. Summary of Significant Accounting Policies:
Effective October 1, 1994, the Company prospectively adopted Statement of
Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115") and revised its securities accounting
policy. SFAS 115 requires the Company to classify its investments in debt and
certain equity securities into three categories: "trading (inventory)",
"available for sale" or "held to maturity". Bonds, notes and mortgage-backed
securities held by the Bank and designated as available for sale are carried at
aggregate fair value. Unrealized holding gains or losses, net of applicable
income taxes, are reported as a separate component of shareholders' equity.
Other bonds, notes and mortgage-backed securities, which Bank management
intends to hold until maturity, are carried at amortized cost and classified as
held to maturity investments. Available for sale or held to maturity
securities will be reduced to fair value, through charges to income, for
declines in value that are considered to be other than temporary. The
accounting treatment for securities classified as "trading" will not change
with the adoption of SFAS 115.
Upon adoption of SFAS 115, management allocated the securities held in the
previous classifications to the classifications specified in SFAS 115.
Consequently, the balances of the category identified as available for sale
prior to the adoption of SFAS 115 increased by $15,079,000 from the prior
year's presentation. The cumulative effect as of October 1, 1994 of adopting
SFAS 115 was an increase in net income of $17,000 (net of $8,000 in deferred
income taxes). The cumulative effect reflects the reversal of previous write-
downs on securities available for sale and the recording of such write-downs in
shareholders' equity. The opening balance of shareholders' equity decreased by
$57,000 (net of $29,000 in deferred income taxes) to reflect the net unrealized
losses on securities classified as available for sale that were previously
classified as held for investment and available for sale, and carried at
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amortized cost and lower of cost or market, respectively.
3. Capital and Regulatory Requirements:
Advest is subject to the net capital rule adopted and administered by the
New York Stock Exchange, Inc. ("NYSE") and the Securities and Exchange
Commission. Advest has elected to compute its net capital under the
alternative method of the rule which requires the maintenance of minimum net
capital equal to 2% of aggregate debit balances arising from customer
transactions, as defined. The NYSE also may require a member firm to reduce
its business if net capital is less than 4% of aggregate debit balances and may
prohibit a member firm from expanding its business and declaring cash dividends
if net capital is less than 5% of aggregate debit balances. At December 31,
1994, Advest's regulatory net capital of $29.0 million was 9% of aggregate
debit balances and exceeded required net capital by $22.7 million.
The Federal Deposit Insurance Corporation ("FDIC") requires most banks to
establish and maintain leverage capital of 4% to 5%. Pursuant to a Memorandum
of Understanding (the "MOU") with the Regional Director of the FDIC and the
Banking Commissioner of the State of Connecticut, the Bank is required to
exercise all reasonable good faith efforts to achieve (generally within
unspecified time periods) certain goals, including among others: to achieve and
maintain a leverage capital ratio of at least 6% and comply with existing risk-
based capital requirements, to ensure that there are adequate loan loss
reserves and quarterly evaluations of such reserves, to reduce the level of
overdue and non-accrual loans to not more than 5% of total loans, to reduce the
level of adversely classified assets to not more than 40% of total capital and
reserves, to develop a written policy addressing concentrations of credit and
to provide periodic progress reports to regulatory agencies.
At December 31, 1994 the Bank's leverage capital ratio was 6.35% which met
the regulatory requirements. In addition, the Bank must maintain risk-based
capital of 8.0%, including at least 4.0% Tier 1 capital. At December 31, 1994,
the Bank's total risk-based capital ratio was 10.66% and the Tier 1 ratio was
9.41%, which exceeded the regulatory requirements.
4. Income per share calculations:
Primary income per common share is computed by dividing net income by the
weighted average number of common stock and common stock equivalents
outstanding during the period. Fully diluted income per common share assumes
conversion of outstanding convertible debentures as well.
The weighted average number of common stock and common stock equivalents
included in the primary and fully diluted per share calculations are as follows
(in thousands):
For the quarters ended December 31, 1994 1993
Primary 8,704 9,286
Assuming full dilution 8,704 10,872
5. Employee Benefit Plans:
Equity Plans
In January 1995, the Company implemented two 1995 equity plans which cover
executive officers (the "Executive Plan"), eligible top performing account
executives and designated key employees of the Company (the "Equity Plan").
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<PAGE>
Under the Equity Plan, participants may elect to invest part of their 1995
compensation, within established minimum and maximum amounts, on a pre-tax
basis in units consisting of one share of the AGI's common stock and one option
to purchase a single share of AGI common stock. The stock will be purchased
from AGI's treasury stock on a monthly basis and will be restricted until the
January 1, 1999 vesting date. Options will be granted on January 1, 1996 and
will become exercisable for two years beginning on the January 1, 2001 vesting
date. The vesting periods may be accelerated under certain circumstances if
the participant's employment terminates. Employees may forfeit both unvested
stock and options under circumstances outlined in the Equity Plan's prospectus.
The terms of the Executive Plan are similar in most respects to the Equity
Plan. The principal differences are that shares of AGI stock will be purchased
on the open market on a quarterly basis and the options will be granted under
the 1993 Stock Option Plan. Both plans are effective for calendar year 1995
only.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Business Environment
The Advest Group, Inc. is a financial services holding company engaged with
its operating subsidiaries (the "Company") in securities brokerage, trading,
investment banking, consumer lending, asset management and related financial
services. All aspects of the business of the Company are highly competitive
and impacted by a variety of factors outside of its control including economic
conditions, the political climate and investor sentiment. Consequently,
revenues and operating results can vary significantly from one reporting period
to the next. Principal operating subsidiaries are Advest, Inc., a broker-
dealer; Advest Bank (the "Bank"), a state-chartered savings bank, Boston
Security Counsellors ("BSC"), an investment advisor and Billings & Co., Inc.
("Billings"), a company specializing in private placement offerings primarily
in real estate.
The Company reported its tenth consecutive quarterly profit posting net
income of $.9 million ($.10 per share) for the quarter ending December 31,
1994. The results represent a 61% decline from net income of $2.2 million
($.24 per share) in the 1993 quarter. Quarterly comparisons reflect the
adverse impact of rising interest rates and uncertain financial markets.
Advest, Inc.
The Fed raised rates six times for an overall 2.5% increase in the fed fund
rate and a 1.75% increase in the discount rate during calendar year 1994. The
DOW, after achieving a record high 3978 to close January 1994, was negatively
impacted by rising interest rates for much of the year but gained momentum in
the second half, on the strength of corporate profits and a robust economy, and
ended the year up 2% at 3834. The S&P 500 and the NASDAQ Composite both
declined during 1994 to close at 459 (down 2%) and 752 (down 3%), respectively.
The 1994 bond market was, by almost any measure, a catastrophe as prices
plummeted virtually across the board, particularly for long-term treasuries.
IPO's were hard hit in 1994, as new issuances fell to the lowest level since
1991 and declined on a year to year basis for the first time in six years.
Advest's pre-tax income declined 60% to $2.0 million for the quarter ending
December 31, 1994 compared with $5.1 million in the previous year. The 1993
period had benefitted from the final momentum of a three year market rally that
ended abruptly in the following quarter. Current quarter gains in principal
trading, asset management and net interest revenues were more than offset by a
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collective $8.7 million decrease in commission and investment banking revenues.
Total revenues were $43.4 million and total expenses were $41.4 million,
reflecting declines of 10% and 4%, respectively.
Advest Bank
The Bank posted pre-tax income of $25,000 for the current quarter compared
with a $68,000 loss in 1993. Net interest income declined $.2 million
primarily due to greater increases in the rates paid on deposits compared with
increases in lending rates which reduced interest spreads. Expenses, excluding
interest, declined $.4 million (14%), more than offsetting the revenue decline.
The decrease was primarily due to lower loss provisions and reduced operating
and professional costs associated with other real estate owned.
Nonperforming assets declined 3% during the quarter ended December 31, 1994,
from $21.7 million to $21.1 million. OREO declined 7% to $12.4 million. The
Bank's level of delinquent loans was 7.02% at December 31, 1994 compared with
3.84% at September 30, 1994 and nonperforming loans increased $.3 million (4%),
to $8.6 million.
Other
BSC's pre-tax income was $.5 million, a 20% increase over 1993. The
advance was a result of a 6% increase in total revenues to $1.1 million
together with a 2% decrease in expenses. Total assets under management,
including the Company's proprietary Advantage Funds, were substantially
unchanged from 1993.
Billings Management Company ("BMC"), a subsidiary of Billings, has served as
a managing general partner of a real estate limited partnership since 1990 when
the original general partner filed for bankruptcy protection. As a result
Billings has made advances through charges to income to the partnership to
cover cash flow deficiencies. Over the past two years, the deficiencies have
declined substantially resulting in a favorable impact on Billings' pre-tax
results. The partnership property is currently fully occupied with a waiting
list and generates sufficient cash flow from operations to meet its needs. In
January 1993, a class action lawsuit on behalf of the limited partners was
certified. On December 24, 1994, the U.S. District Court for the district of
Connecticut signed an order approving a stipulation of settlement whereby the
Plaintiffs retained their equity interests in the partnership in exchange for
annual cash distributions through 2004 and a substantial reduction in
partnership debt. Management expects that the partnership will produce
sufficient cash flow to meet the annual cash distribution payments through
2004. However, should funds from operations be insufficient, the company may
be required to make supplementary cash payments to the partnership via capital
contributions. Management does not believe that the proposed settlement will
have a material impact on the Company's results of operations or financial
condition. Billings posted a pre-tax loss of $.1 million for the current
quarter, an improvement of 54% from 1993.
Results of Operations
Three Months Ended December 31, 1994 Versus
Three Months Ended December 31, 1993
Net revenues, total revenues less interest expense, were $43.7 million, a
decline of $7.3 million (14%), due to significant declines in commission and
investment banking revenues which offset gains in all other revenue categories.
Expenses, excluding interest, declined $4.9 million (10%) to $42.2 million,
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primarily related to a decrease in sales-related compensation and lower loss
provisions. The tax rate for both the 1994 and 1993 quarters was 43%.
Reflective of the volatility in the securities markets, commission revenues
decreased $3.8 million (17%) to $18.0 million, with declines posted in all
major categories. Mutual fund revenues, which achieved record highs in the
prior year, declined $1.4 million (23%) and listed sales were off $1.1 million
(11%). Commissions on over-the-counter issues and insurance products declined
$.6 million (19%) and $.5 million (34%), respectively.
Investment banking revenues declined $5.6 million (60%) to $3.8 million due
to a substantial decrease in initial public offerings combined with lower fees
related to the competitive environment for new deals.
Revenue from principal transactions increased $.7 million (7%) to $9.7
million. A significant increase in the revenues from municipal issues is due
to the strengthening of the Company's institutional desk in the fourth quarter
of fiscal 1994 and higher interest rates in the current year. Additionally,
revenue increases were posted for government zero coupons and money market
instruments but the gains were virtually halved by declines primarily in sales
of CMOs and high yield corporates.
Asset management revenues increased $.3 million (7%) to $4.2 million.
Advest's income increased $.2 million (7%) as a result of increased assets
under management. BSC's revenue increased $.1 million (9%) as a result of its
waiving advisory fees during the start up months of the three Advantage
Municipal funds which were introduced in July 1993; no revenue was recognized
on these funds in the December 1993 quarter.
Other income increased $.3 million (28%) to $1.5 million due primarily to a
$.5 million gain on the sale of an exchange seat which was partly offset by
declines in various service fees.
Net interest income was $6.4 million, an increase of $.9 million (16%) from
1993. Advest's net interest rose $1.1 million (33%) due to higher average
margin debits and related interest rate spreads. The Bank's net interest
declined $.2 million (7%) primarily due to reduced interest spreads as the Bank
raised the rates paid on deposits to a relatively higher level compared with
increases in lending rates.
Compensation costs declined $3.2 million (10%) primarily due to lower sales
related compensation and incentives and lower general payroll costs associated
with the Company's efforts to keep costs in line with the downturn in the
securities markets. Professional fees declined $.5 million (35%) due primarily
to lower legal fees at Advest and the Bank. Communications expenses decreased
$.4 million (8%) and occupancy and equipment costs increased $.3 million (7%)
primarily due to the replacement of Quotron leased terminals with new Advantage
2000 workstations for its sales force. The new equipment is owned by Advest.
The provision for credit losses and asset devaluation declined $.9 million
(69%) due to lower current year provisions required by AGI, Billings and the
Bank.
Liquidity and Capital Resources
Three Months Ended December 31, 1994
With the exception of reclasses of certain securities required by the
implementation of SFAS 115 in the current quarter, as discussed in Note 2,
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there have been no material changes to the Company's liquidity or capital
resources since September 30, 1994.
Subsequent Events
The Company announced in January 1995 that it had reached agreements in
principle with two unrelated third parties to transfer its mutual fund advisory
business related to the Advantage Family of Mutual Funds. Northstar Investment
Management Corp., a subsidiary of The NWNL Companies, would acquire the
business related to the six taxable funds and serve as their investment
advisor. An affiliate, NWNL Northstar Distributors, Inc., would become the
principal underwriter of the six funds. Northstar would pay up to $10 million,
together with additional payments contingent on net assets and future fund
sales. Under a separate arrangement, three municipal bond funds managed by
Massachusetts Financial Services Company will acquire the assets of the three
Advantage municipal bond funds. In connection with this transaction, the
Company would receive consideration of $1.2 million. The agreements, which are
subject to the approval of shareholders, trustees and boards of directors and
negotiation of definitive agreements, are expected to be completed in the
quarter ending June 30, 1995.
On November 3, 1994, the Company entered into an Asset Acquisition Agreement
whereby it would sell its investment advisory business related to the Scottish
Widows International Fund to Penn Square Management Corporation. On January
19, 1995, the sale was finalized and the Company received payment of $522,000.
A minimum of $322,000 in additional consideration related to net assets and
future fund sales will be paid over the next two anniversary dates.
In January 1995, the Company also announced that it is exploring a bulk sale
of the non-performing assets of the Bank. If a sale is consummated, it would
result in losses which will substantially offset the non-recurring gains
realized from the transfers of the mutual fund business related to the
Advantage Funds, discussed above.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named as defendant in various legal actions. These
actions have arisen principally from the securities and investment banking
business. In the opinion of management, based on discussion with counsel, the
outcome of these matters will not result in a material effect on the financial
condition or future operating results of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 -- Form of Executive Officer Restricted Stock and Stock
Option Agreement
Exhibit 11 -- Computation of Net Income Per Share
The interim financial information contained herein has been subjected
to a review by Coopers & Lybrand L.L.P., the registrant's
Independent Accountants, whose report is included on page 11 of
this filing.
(b) Reports on Form 8-K
None
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Advest Group, Inc.:
We have reviewed the accompanying consolidated balance sheet of The Advest
Group, Inc. and subsidiaries as of December 31, 1994, and the related
consolidated statements of operations and cash flows for the three-month period
ended December 31, 1994 and 1993, and changes in shareholders' equity for the
three-month period ended December 31, 1994. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquires of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the aforementioned consolidated financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of September 30, 1994, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the year then ended (not presented herein), and in our
report dated October 27, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of September 30, 1994, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
January 19, 1995
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the thereunto
duly authorized.
The Advest Group, Inc.
Registrant
Date February 13, 1995 Allen Weintraub
(Allen Weintraub),
President and Chief
Executive Officer
Date February 13, 1995 Martin M. Lilienthal
(Martin M. Lilienthal),
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit Description Page
10 Form of Executive Officer Restricted Stock and Stock 14
Option Agreement
11 Computation of Net Income Per Share 21
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EXECUTIVE OFFICER
RESTRICTED STOCK AND
STOCK OPTION AGREEMENT
Percentage of All Income
(minimum of 2.5% of Compensation,
maximum of 7.5% of Compensation): _________
Percentage of Bonus: _________
Effective Date: January 1, 1995
This Executive Officer Restricted Stock and Stock Option Agreement (the
"Agreement") is entered into as of the above date, by the undersigned executive
officer ("Executive Officer") and The Advest Group, Inc. (the "Company").
ARTICLE I. Election to Participate and Amount Deferred. Executive
Officer hereby elects to receive the percentage set forth above of his or her
Compensation and/or Bonus (the "Deferred Amount") in the form of Units. A
Unit consists of one share of common stock of the Company subject to the
restrictions set forth below (the "Restricted Stock") and one non-qualified
stock option to purchase shares of common stock of the Company which is not an
incentive stock option under Section 422 of the Internal Revenue Code of 1986
(an "Option"). For purposes of this Agreement, Compensation shall mean the
amount of earnings due to Executive Officer for the Deferral Period, and shall
include amounts contributed to the Company's 401(k) plan or Deferred
Compensation Savings and Investment Plan, or any successor plan(s). Deferral
Period shall mean the period beginning on January 1, 1995 and ending on the
earliest of: (a) the termination of Executive Officer's employment with the
Company or an affiliate of the Company (an "Affiliate"), (b) the termination of
this Agreement in accordance with Article IV(D), or (c) December 31, 1995.
Executive Officer hereby authorizes the Company to withhold from his or
her paycheck, draw, bonus and/or commission the Deferred Amount. Amounts
Deferred hereunder (other than amounts deferred out of bonus) shall be withheld
from Executive Officer's paycheck in periodic installments. The Company may,
but shall not be obligated to, invest any Amount Deferred in insured bank
deposit accounts or other money-market investments pending investment under
this Agreement. During the period beginning on the third business day after
the date of release by the Company of quarterly or annual summary statements of
financial date and ending on the twelfth business day following such date, the
total of Executive Officer's Deferred Amounts, together with any earnings
thereon, shall be applied by the Company to acquire shares of the Company's
common stock (the "Stock") on the open market to be held as Restricted Stock
for Executive Officer. Fractional units may be acquired by Executive Officer,
provided that the Company may establish procedures to eliminate any fractional
holdings of Units held on behalf of Executive Officer as of December 31, 1995.
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ARTICLE II. Restricted Stock Agreement. Executive Officer hereby
authorizes Company to hold in the Company's name as escrow agent for Executive
Officer, all shares of Restricted Stock to which Executive Officer is entitled.
A. Restrictions. Shares of Restricted Stock which are placed into
escrow for the benefit of Executive Officer will be subject to the following
restrictions and conditions:
(1) During the period commencing on the date of the acquisition
of any shares of Restricted Stock hereunder and terminating on January 1,
1999 (together with any extensions of such period approved as provided
herein) (the "Restriction Period"), Executive Officer shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
acquired hereunder. One year extensions of the Restriction Period for
Restricted Stock purchased hereunder will be made at Executive Officer's
election, which election must be in writing on a form provided by the
Company and must be made no later than one year before the Restriction
Period would otherwise terminate; provided, however, that the Company may
at any time determine that no additional extensions of Restricted Periods
will be effective;
(2) Executive Officer shall have the right to direct the vote of
his or her shares of Restricted Stock during the Restriction Period.
Executive Officer shall have the right to receive any regular dividends
on such shares of Restricted Stock. The Company shall in its sole
discretion determine Executive Officer's rights with respect to
extraordinary dividends on the shares of Restricted Stock; and
(3) Shares of Restricted Stock shall be transferred to Executive
Officer's brokerage account with Advest, Inc. within a reasonable time
after, and only after, the Restriction Period shall expire (or such
earlier time as the restrictions may lapse in accordance with this
Article) without forfeiture in respect of such shares of Restricted
Stock.
B. Termination of Employment. Subject to the provisions of
subparagraph (A) above, the following provisions shall apply to Executive
Officer's shares of Restricted Stock prior to the end of the Restriction Period
(including extensions):
(1) Upon Executive Officer's death, Permanent Disability,
Retirement with the written consent of the President or the Chief
Executive Officer of the Company or an Affiliate by which Executive
Officer is employed, voluntary termination of employment more than nine
months after a Change of Control, or involuntary termination of
employment (other than a termination for Cause), the restrictions on
Executive Officer's Restricted Stock shall immediately lapse, and such
shares shall be delivered to Executive Officer or Executive Officer's
designated Beneficiary, as the case may be, within a reasonable time
after the occurrence of any such event.
For purposes of this Agreement, the following terms shall have the stated
definitions:
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(i) "Permanent Disability" means a mental or physical
condition which renders Executive Officer permanently unable or
incompetent to engage in any substantial gainful activity.
(ii) "Retirement" means the date Executive Officer retires
after attaining the age of fifty-five.
(iii) "Change of Control" means a transfer or sale of
substantially all of the assets of the Company or merger or
consolidation of the Company into or with any other corporation or
entity that occurs after the effective date of this Agreement,
provided either (a) the other corporation or entity is engaged in
the retail securities brokerage business at the date of the
transaction and such transaction results in the Company not
surviving such merger or consolidation or (b) a substantial change
in the senior management of the Company occurs within six months as
a result of the transaction.
(iv) "Cause" shall be deemed to include any act of
dishonesty or fraud, gross negligence, gross insubordination or
willful or reckless conduct detrimental to the business of the
Company or an Affiliate.
(v) "Beneficiary" means any person (including, but not
limited to, Executive Officer's estate) designated by Executive
Officer on a form provided or approved by the Company to receive
any Stock or Options to which Executive Officer shall be entitled
upon Executive Officer's death in accordance with the terms of this
Agreement. If more than one Beneficiary shall be designated, the
Beneficiaries shall share equally in any rights or interests of
Executive Officer under this Agreement. If Executive Officer shall
fail to file a valid designation form, or if all persons designated
on the designation form shall have predeceased Executive Officer,
the Company shall distribute all of Executive Officer's Stock and
Options to which he or she shall have been entitled upon his or her
death to the Executive Officer's estate.
(2) Upon Executive Officer's Retirement without the written
consent of the President or the Chief Executive Officer of the Company or
the Affiliate by which Executive Officer is employed or voluntary
termination of employment within nine months of a Change of Control,
Executive Officer shall forfeit all of Executive Officer's shares of
Restricted Stock and receive in return, without interest, a cash payment
equal to (a) the lesser of: (i) the aggregate purchase price for such
Restricted Stock, and (ii) the closing price per share of Stock on the
Composite Tape of the New York Stock Exchange on Executive Officer's date
of termination or Retirement, multiplied by (b) the number of shares of
Restricted Stock owned by Executive Officer.
(3) If Executive Officer voluntarily terminates employment (other
than as set forth in subparagraphs (1) or (2) of this Article), is
involuntarily terminated for Cause, or retires prior to attaining the age
of fifty-five, Executive Officer shall forfeit Executive Officer's
Restricted Stock.
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ARTICLE III. Stock Option Agreement. Executive Officer will be entitled
to an Option to purchase one share of stock for each share of Restricted Stock
acquired for Executive Officer pursuant to Article I. The Options to which
Executive Officer is entitled will be issued under The Advest Group, Inc. 1993
Stock Option Plan on the last date on which Stock is acquired for the Executive
Officer pursuant to Article I at an exercise price per share equal to the
closing price per share on the Composite Tape of the New York Stock Exchange on
the date of the issuance of the Options. The Options are not transferable by
Executive Officer other than by will or the laws of descent and distribution,
and during the lifetime of Executive Officer the Options may be exercised only
by Executive Officer.
A. Exercise of Options. Options acquired hereunder will vest and become
exercisable on January 1, 2001 (unless earlier forfeited or terminated) and
will remain exercisable for a period of twenty-four months, until December 31,
2002. An Option shall not be exercisable unless payment in full is made for
the shares being acquired thereunder at the time of exercise; such payment
shall be made (a) in United States dollars by cash or check, or (b) in lieu
thereof, unless the Company shall in its sole discretion determine otherwise,
by tendering to the Company Stock owned by the person exercising the Option (or
owned by the person exercising the Option and his or her spouse, jointly) and
acquired more than six months prior to such tender, and having a fair market
value equal to the cash exercise price applicable to such Option, such fair
market value to be determined in such reasonable manner as may be provided for
from time to time by the Company or as may be required in order to comply with
or to conform to the requirements of any applicable or relevant laws or
regulations, or (c) by a combination of United States dollars and Stock as
aforesaid.
B. Termination Of Employment. An Option shall not be exercisable unless
the person exercising the Option has been, at all times during the period
beginning with the date of purchase of the Option and ending on the date of
such exercise, an employee of the Company or an Affiliate, except that:
(1) Upon Executive Officer's death, Permanent Disability, or
Retirement with the written consent of the President or the Chief
Executive Officer of the Company or the Affiliate by which Executive
Officer is employed, the Options shall immediately vest and shall be
exercisable by Executive Officer or Executive Officer's designated
Beneficiary, as the case may be, for a period of three months after
Executive Officer's termination of employment.
(2) If Executive Officer's employment is involuntarily terminated
(other than a termination for Cause), the Company shall give Executive
Officer at least one day's advance notice prior to the date of
termination, and the Options shall immediately vest and shall be
exercisable by Executive Officer upon receipt of such notice, and shall
expire on the date of termination. If Executive Officer voluntarily
terminates employment more than nine months after a Change of Control,
then the Options shall immediately vest and shall be exercisable by
Executive Officer upon the later of a receipt by the Company of
notification by Executive Officer of the termination or the tenth day
prior to the termination, and shall expire upon the date of termination.
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(3) Upon Executive Officer's termination of employment (other
than as set forth in subparagraphs (1) or (2) of this Article III(B)),
Executive Officer shall forfeit Executive Officer's unvested Options.
(4) If Executive Officer shall have terminated employment for any
reason after the acquisition of Units hereunder but prior to the issuance
of the Option portion of such Units, any Option acquired as part of the
Unit shall be forfeited as provided in subparagraph (3) of this Article
III(B).
ARTICLE IV. Miscellaneous.
A. Change of Election. Following an election by Executive Officer to
have an Amount Deferred, he or she at any time during the Deferral Period may
choose to discontinue all (but not less than all) Amounts Deferred with respect
to Compensation due to him or her during subsequent calendar quarters of the
Deferral Period. Such election shall be made on such form as the Company may
prescribe and shall become effective as of the first day of the calendar
quarter following receipt of such form by the Company.
B.Adjustments Upon a Change in Common Stock. In the event of any change
in the outstanding Stock of the Company by reason of any stock split, stock
dividend, recapitalization, merger, consolidation, reorganization, combination
or exchange of shares or other similar event, if such change equitably requires
an adjustment in the number or kind of shares that may be issued hereunder, or
in the number or kind of shares subject to, or the option price per share
under, any outstanding Option which has been purchased by Executive Officer,
such adjustment shall be made by the Company and shall be conclusive and
binding for all purposes hereunder. In no event shall the excess of the
aggregate fair market value of the Stock subject to the Options immediately
after any substitution, exchange or adjustment over the aggregate option price
for such Stock be more than the excess of the aggregate fair market value of
all of the Stock subject to the Option immediately before any such
substitution, exchange or adjustment over the aggregate option price of such
Stock nor shall the adjusted Option give the holder thereof any additional
benefits he did not have under the old Option.
C. Withholding. In the event that the Company determines that it or an
Affiliate is required by law to withhold taxes at any time, including, but not
limited to, upon the exercise of an Option or upon the vesting of shares of
Restricted Stock, the Company shall have the right to require Executive Officer
to pay to the Company the amount of taxes that the Company or Affiliate is
required to withhold, or, in lieu thereof: (1) retain, or sell without notice,
a sufficient number of shares of Restricted Stock held by it for Executive
Officer to cover the amount to be withheld, or (2) withhold the amount of such
taxes from any other sums due or to become due from the Company or an Affiliate
to Executive Officer upon such terms and conditions as the Company shall
prescribe.
D. Amendment and Termination. The Board of Directors of the Company may
amend, modify, change, or revise this Agreement by amendment at any time;
provided, however, that (a) no amendment shall increase the duties or
liabilities of the Board of
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Directors or the Company without written consent of each member and (b) no
amendment shall be made without the written consent of Executive Officer if the
effect of such amendment would reduce the rights of Executive Officer with
respect to Units acquired prior to the date of the amendment.
The continuation of this Agreement is not assumed as a contractual
obligation of the Company and the right is reserved by the Company at any time
to discontinue this Agreement. This Agreement may be terminated by the Board
of Directors at any time, when in its judgment, business, financial or other
good causes make such termination necessary or appropriate; such termination to
become effective upon the delivery of notice by the Board of Directors or the
Company to Executive Officer.
E. Merger. Any successor corporation to the Company, by merger,
consolidation, purchase or otherwise, shall be substituted hereunder for the
Company. This Agreement shall be binding on all successors to and assigns of
the Company; provided that such successors or assigns may terminate this
Agreement in accordance with the provisions hereof.
F. Securities Laws. Regarding the purchasing of shares pursuant to an
Option or shares of Restricted Stock the Company may require Executive Officer
to represent and agree with the Company in writing that he or she is acquiring
the shares without a view to distribution thereof. The certificates for such
shares may include any legend which the Company deems appropriate to reflect
any restriction on transfer. Furthermore, all certificates for shares of Stock
delivered under this Agreement shall be subject to such stock-transfer orders
and other restrictions as the Company may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Stock is then listed, and as any applicable
Federal or state securities law, and the Company may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
G. Contract of Employment. Nothing contained herein shall be construed
to constitute a contract of employment between the Company or an Affiliate and
Executive Officer. Nothing contained herein will confer upon Executive Officer
the right to be retained in the service of the Company or an Affiliate or limit
the right of the Company or an Affiliate to discharge or otherwise deal with
Executive Officer without regard to the existence of this Agreement.
H. Headings. The headings of Articles are included solely for
convenience of reference, and if there is any conflict between such headings
and the text of this Agreement, the text shall control.
I. Invalidity of Certain Provisions. If any provision of this Agreement
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Agreement shall be
construed and enforced as if such provisions, to the extent invalid or
unenforceable, had not been included.
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J. Law Governing. This Agreement shall be construed and enforced
according to the laws of the State of Connecticut (other than its laws
respecting choice of law).
K. Limitation on Liability. Neither the Company nor any agent or
representative of the Company who is an employee, officer, or director of the
Company in any manner guarantees the payments to be made under this Agreement
against loss or depreciation, and to the extent not prohibited by federal law,
none of them shall be liable (except for his own gross negligence or willful
misconduct), for any act or failure to act, done or omitted in good faith, with
respect to this Agreement. The Company shall not be responsible for any act or
failure to act of any agent appointed to administer this Agreement.
L. Gender. Except when otherwise indicated by the context, any
masculine terminology herein shall also include the feminine, and the
definition of any term herein in the singular shall also include the plural.
EXECUTIVE OFFICER
____________________________________
(Signature)
____________________________________
(Print Executive Officer's Name)
THE ADVEST GROUP, INC.
By: _____________________________
Allen Weintraub
Chief Executive Officer
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EXHIBIT 11
THE ADVEST GROUP, INC. AND SUBSIDIARIES
Computation of Net Income Per Common Share
(In thousands, except per share amounts)
For the quarters ended December 31,
-----------------------------------
Assuming
Primary Full Dilution
-------------- -------------
1994* 1993 1993
----- ---- -----
Income before extraordinary credit $ 858 $2,185 $2,185
Interest on convertible debentures
outstanding during the period,
net of tax and other related
expenses -- -- 274
----- ------ ------
Net income applicable to
common stock and other
dilutive securities $ 858 $ 2,185 $ 2,459
===== ====== ======
Average number of common shares
outstanding during the period 8,540 9,010 9,010
Additional shares assuming:
Exercise of stock options 164 276 286
Conversion of debentures -- -- 1,576
----- ------ ------
Average number of common and
common equivalent shares used
to calculate net income per
common share 8,704 9,286 10,872
===== ====== ======
Income per common and common
equivalent share:
Net income $ .10 $ .24 $ .23
===== ====== ======
* For the quarter ending December 31, 1994, primary and fully diluted net
income per common share are equal.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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