<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 March 31, 1995
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 8,550,017 shares
Class Outstanding at April 28, 1995
Total of sequentially numbered pages 18.
Exhibit index sequential page number page 17.
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THE ADVEST GROUP, INC.
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1995 and September 30, 1994 3
Consolidated Statements of Operations
Three and Six Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1995 and 1994 5
Consolidated Statement of Changes in Shareholders' Equity
Six Months Ended March 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
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<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE ADVEST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
(In thousands, except share and per share amounts) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Assets (unaudited)
Cash and short-term investments
Cash and cash equivalents $ 3,688 $ 7,278
Cash and securities segregated under
federal and other regulations 43,289 49,305
Interest-earning deposits and investments -- 3,000
----------------------------
46,976 59,583
----------------------------
Receivables
Brokerage customers, net 294,351 321,776
Loans and mortgages, net 276,782 279,730
Securities borrowed 90,003 65,751
Brokers and dealers 1,679 3,539
Other 12,952 11,560
----------------------------
675,767 682,356
----------------------------
Securities
Inventory, at market value 34,403 34,810
Held to maturity (market values
of $30,367 and $53,102) 30,981 53,850
Available for sale (market values
of $1,483 and $4,902) 1,483 4,902
----------------------------
66,867 93,562
----------------------------
Other assets
Other real estate owned, net 11,737 13,414
Equipment and leasehold improvements, net 12,629 11,537
Other 24,286 24,403
----------------------------
48,652 49,354
----------------------------
Total Assets $ 838,262 $ 884,855
============================
Liabilities & Shareholders' Equity
Brokerage customers $ 296,738 $ 310,537
Deposits 276,015 291,885
Securities loaned 105,259 79,459
Short-term borrowings 3,151 32,652
Compensation and benefits 12,123 14,053
Checks payable 7,134 6,800
Brokers and dealers 1,042 6,023
Securities sold, not yet purchased, at market value 2,804 2,187
Other 13,738 15,894
----------------------------
718,004 759,490
Long-term borrowings 24,796 30,388
Subordinated borrowings 20,621 20,997
----------------------------
763,421 810,875
----------------------------
Shareholders' Equity
Preferred stock, par value $.01, authorized
2,000,000 shares, none issued -- --
Common stock, par value $.01,
authorized 25,000,000 shares, issued
10,571,888 shares and 10,570,222 shares 113 106
Paid-in capital 67,405 67,405
Retained earnings 17,626 16,605
Net unrealized losses on securities available for sale (20) --
Treasury stock, at cost, 2,018,268 shares
and 1,987,357 shares (10,283) (10,136)
----------------------------
74,841 73,980
----------------------------
Total Liabilities and Shareholders' Equity $ 838,262 $ 884,855
============================
See Notes to Consolidated Financial Statements.
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------------------------
(In thousands, except per share amount) 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Commissions $ 19,138 $ 23,112 $ 37,151 $ 44,936
Interest 14,025 10,822 27,756 21,768
Principal transactions 10,750 7,797 20,495 16,879
Asset management and administration 4,191 4,114 8,439 8,083
Investment banking 3,176 5,265 6,940 14,622
Gain on sale of investment
advisory business 843 -- 843 --
Other 1,440 878 2,932 2,048
----------------------------------------------
Total revenues 53,563 51,988 104,556 108,336
----------------------------------------------
Expenses
Compensation and benefits 28,058 30,402 56,119 61,725
Interest 7,810 5,312 15,112 10,704
Communications 4,504 4,846 8,781 9,485
Occupancy and equipment 4,300 3,854 8,388 7,664
Business development 1,020 1,109 2,202 2,341
Professional 1,235 1,348 2,229 2,882
Brokerage, clearing and exchange 1,008 992 1,879 1,955
Provision for credit losses and
asset devaluation 3,097 1,768 3,573 3,076
Other 2,245 1,902 4,482 4,215
----------------------------------------------
Total expenses 53,277 51,533 102,765 104,047
----------------------------------------------
Income before taxes 286 455 1,791 4,289
Provision for income taxes 123 196 770 1,844
----------------------------------------------
NET INCOME $ 163 $ 259 $ 1,021 $ 2,445
==============================================
Net income per common share:
Primary $ 0.02 $ 0.03 $ 0.12 $ 0.27
==============================================
Assuming full dilution $ 0.02 $ 0.03 $ 0.12 $ 0.27
==============================================
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
March 31,
--------------------
(In thousands) 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,021 $ 2,445
Adjustments to reconcile net income to net cash
provided by operating activites:
Amortization 2,793 2,420
Depreciation 1,452 1,023
Provision for credit losses and asset devaluation 3,573 3,076
Gain on sale of investment advisory business (843) -
Other 1,242 1,120
(Increase) decrease in operating assets:
Receivables from brokerage customers 27,395 (33,634)
Securities borrowed (24,252) (16,229)
Receivables from brokers and dealers 1,860 (1,162)
Securities inventory 407 (6,289)
Cash and securities segregated under federal and other regulations 6,016 5,538
Other (1,020) 243
Increase (decrease) in operating liabilities:
Brokerage customers (13,799) 25,255
Securities loaned 25,800 16,169
Brokers and dealers (4,981) -
Checks payable 334 1,012
Other (3,889) (6,245)
--------------------
Net cash provided by (used for) operating activities 23,109 (5,258)
--------------------
FINANCING ACTIVITIES
Net decrease in deposits (15,870) (21,087)
Proceeds of short-term borrowings (341) -
Repayment of short-term borrowings (9,842) (1,325)
Short-term brokerage borrowings, net (22,501) 8,200
Proceeds from long-term borrowings 7,250 -
Repayment of long-term borrowings (10,000) -
Other (140) (2,244)
--------------------
Net cash used for financing activities (51,444) (16,456)
--------------------
INVESTING ACTIVITIES
Proceeds from sales of investments 24,002 10,914
Proceeds from maturities of investments 13,403 90,199
Purchase of investment securities and short-term investments (8,198) (69,211)
Principal collections on loans 21,308 21,325
Proceeds from loan sale 8,808 -
Proceeds from other real estate owned, net 2,582 2,936
Loans originated (32,498) (37,111)
Other (4,662) (6,762)
--------------------
Net cash provided by investing activities 24,745 12,290
--------------------
Decrease in cash and cash equivalents (3,590) (9,424)
Cash and cash equivalents at beginning of period 7,278 19,232
--------------------
Cash and cash equivalents at period end $ 3,688 $ 9,808
====================
Interest paid $ 14,899 $ 10,762
Income taxes paid $ 934 $ 578
Non-cash transfers:
Loans to OREO $ 2,790 $ 865
Securities available for sale to (from) investment securities $(15,079) $ 27,910
Change in SFAS 115 valuation reserve, net $ (20) $ -
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</TABLE>
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<TABLE>
THE ADVEST GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Net Unrealized
Losses on
Common Stock Treasury Stock Securities Total
-------------- Paid-in Retained ----------------- Available Shareholders'
(In thousands) Shares Amount Capital Earnings Shares Amount for Sale 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 1,021 1,021
Exercise of stock
options 2 7 7
Repurchase of
common stock (86) (459) (459)
Sale of treasury stock
to 1995 equity plan 55 312 312
Change in unrealized
gains (losses),
net of taxes 37 37
-----------------------------------------------------------------------------------
Balance, as of
March 31, 1995 10,572 $113 $67,405 $17,626 (2,018) $(10,283) $(20) $74,841
===================================================================================
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
fair value and unrealized holding gains or losses are credited or charged
directly to 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 adoption did not have a material effect on the
Company's results of operations or financial condition.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 ("SFAS 121"), "Accounting for the Impairment Of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of". SFAS 121 establishes accounting
standards for the impairment of long-lived assets and certain identifiable
intangibles to be held and used by an entity or disposed of. SFAS 121 is
effective for fiscal years beginning after December 15, 1995, although earlier
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<PAGE>
implementation is encouraged. The Company has not determined when it will
adopt SFAS 121 but does not expect its implementation to have a material effect
on results of operations or financial condition.
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 March 31, 1995, Advest's regulatory net capital of $37.6 million was
12% of aggregate debit balances and exceeded required net capital by $31.5
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
adversely classified assets to not more than 40% of total capital and reserves
and to provide periodic progress reports to regulatory agencies.
At March 31, 1995, the Bank's leverage capital ratio was 6.08% 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 March 31, 1995,
the Bank's total risk-based capital ratio was 9.87% and the Tier 1 ratio was
8.62%, 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 For the six months
ended March 31, ended March 31,
1995 1994 1995 1994
---------------- ------------------
Primary 8,721 9,054 8,718 9,163
===== ===== ===== =====
Assuming full dilution 8,721 9,054 8,718 9,163
===== ===== ===== =====
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<PAGE>
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"). 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 each month-end using the closing price of the stock
and will be restricted until the January 1, 1999 vesting date. Options will be
granted on January 1, 1996 and will become exercisable on the January 1, 2001
vesting date. 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 and may not be
offered in future years.
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. ("Advest"), 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.
Net income for the quarter declined 37% to $.2 million ($.02 per share)
compared with $.3 million ($.03 per share) a year ago. Current quarter results
include a $2.8 million pre-tax loss on the sale of a pool of Bank assets and a
$.8 million pre-tax gain on the sale of the Company's investment advisory
business related to the Scottish Widows International Fund.
Advest, Inc.
During the quarter, signs of a slowing economy, declining interest rates
and strong corporate earnings lifted the DOW over the 4000 mark for the first
time in history, establishing a new high at 4172. At the close, the DOW stood
at 4157, up 8% from the preceding quarter and 14% versus the year ago quarter.
In the underwriting arena, domestic sales of new stocks and bonds declined 51%
from the year earlier quarter. In the bond market, the outlook for a sustained
bond market rally remains favorable, despite the continued decline of the
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<PAGE>
dollar and uncertainty about the near-term direction of interest rates. At
quarter end, the yield on 30-year Treasury bonds was 7.43%.
Advest's pre-tax earnings were $2.6 million, a 7% improvement.
Significant revenue gains were posted for principal trading and net interest
income but were offset by declines in investment banking and commission
revenues.
Advest Bank
The Bank posted a $3.2 million loss compared with a $1.1 million loss in
the prior year. Current quarter results include a $2.8 million loss, net of
reserves, on the sale of a pool of assets with an aggregate book value of $7.4
million. The assets sold included non-performing loans, OREO and certain
performing assets. The Bank continues to evaluate other potential asset sales.
Non-performing assets were $16.0 million, a 49% decline from the prior
year. Non-performing assets comprised 5% percent of total assets, down from 9%
a year ago.
Other
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. On January 27, 1995, the settlement was finalized.
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 will be required to make
supplementary cash payments to the partnership via capital contributions. The
settlement did not have a material impact on the Company's results of
operations or financial condition. Billings posted a quarterly pre-tax profit
of $27,000 compared with a loss of $301,000 a year ago.
Results of Operations
Three Months Ended March 31, 1995 Versus
Three Months ended March 31, 1994
Net revenues, total revenues less interest expense, were $45.8 million, a
decline of 2% from the prior year. Substantial declines in commission and
investment banking revenues offset advances in all other revenue categories.
Net expenses, total expenses excluding interest, declined 2% to $45.5 million.
Excluding the loss on the Bank's asset sale, net expenses declined 8%. The tax
rate for both years was 43%.
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Commission revenue decreased $4.0 million (17%) to $19.1 million.
Declines were posted in most categories including mutual funds, down $1.6
million (24%); listed securities, down $1.0 million (9%); over-the-counter
issues, down $.6 million (19%); commodities down $.5 million (69%) and
insurance products, down $.4 million (24%).
Revenue from principal activities increased $3.0 million (38%) to $10.7
million. Trading profits advanced from primarily trading losses a year ago to
profits across the board in the current quarter. Municipal and government bond
trading profits improved $1.0 million and $.3 million, respectively, while
sales credits on debt issues increased $.3 million. NASDAQ trading profits and
related sales credits posted a combined $1.0 million increase.
Investment banking revenues declined $2.1 million (40%) to $3.2 million,
reflecting an industry wide decline in new offerings as well as increased
competition and lower fees. Sales credits and syndicate fees decreased $1.0
million and $.9 million, respectively, accounting for most of the decrease.
Asset management revenue increased 2% to $4.2 million due to a 4%
increase in Advest's revenues. Other income increased $.6 million (64%) due
primarily to higher fee income at Advest.
Net interest income was $6.2 million, a $.7 million (13%) increase from
the prior year. Advest's net interest advanced $.8 million (22%) primarily due
to higher interest rates on margin accounts, although average margin debits
declined on a year to year basis.
Compensation costs decreased $2.3 million (8%) primarily due to lower
sales compensation and related incentives. General firm payroll declined year
to year due to cost cutting measures, including personnel reductions and salary
freezes implemented in 1994's fourth quarter. The provision for credit losses
and asset devaluation increased $1.3 million (75%) due to the inclusion of the
$2.8 million loss on the sale of Bank assets discussed previously. Occupancy
and equipment costs increased $.4 million (12%) primarily due to the costs
associated with the Advantage 2000 rollout, a technology upgrade for the sales
force.
Six Months Ended March 31, 1995 Versus
Six Months Ended March 31, 1994
Net revenues decreased $8.2 million (8%) to $89.4 million due to
significant declines in commission and investment banking revenues. Net income
was $1.0 million compared with $2.4 million in the prior year, a 58% decline.
Year to year comparisons primarily reflect the adverse impact of rising
interest rates, as the Fed has raised rates seven times since February 1994.
Commissions declined $7.8 million (17%). Revenue from listed securities
and mutual funds were down $2.1 million (10%) and $3.0 million (24%),
respectively. Other revenue declines included over-the-counter issues, down
$1.2 million (19%); insurance products, down $.9 million (29%) and
commodities, down $.7 million (59%).
Investment banking revenues decreased $7.7 million (53%) to $6.9 million.
Reflecting a significant decline in the number of new offerings, sales credits
decreased $4.2 million (62%) and syndicate revenues fell $1.7 million (81%).
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Revenue from principal transactions increased $3.6 million (21%) to $20.5
million. Trading profits on municipal and government issues advanced $1.3
million (654%) and $.3 million (210%), respectively, and sales credits on debt
securities gained $1.3 million (12%). Trading profits on NASDAQ issues
increased $.3 million (195%).
Other income increased $.9 million (43%) to $2.9 million due primarily to
the sale of an exchange seat in the first quarter and higher fee income at
Advest.
Net interest income was $12.6 million, a $1.6 million (14%) increase from
fiscal 1994. Advest's net interest increased $1.9 million (28%) primarily due
to higher interest rates on margin debits. The Bank's net interest declined
$.2 million (5%) largely reflecting a smaller asset base.
Expenses, excluding interest, declined $5.7 million (6%) to $87.7 million
primarily due to a $5.6 million decrease in sales compensation and related
incentives.
Liquidity and Capital Resources
Six Months Ended March 31, 1995
During the current quarter, Advest borrowed $6.25 million under a non-
recourse note, collateralized exclusively by Advest's furniture and computer
equipment. Under the terms of the note, the principal is due October 1, 1998,
unless extended at Advest's option, with interest payments due monthly
beginning May 1, 1995. The purpose of the loan was to increase the broker-
dealer's net capital. As required by the non-recourse note, AGI signed a
letter of credit with a third party bank guaranteeing 20% of Advest's debt.
Certain securities of the Bank have been reclassified as required by the
adoption of SFAS 115, as discussed in Note 2.
There have been no other material changes to the Company's liquidity or
capital resources since September 30, 1994.
Subsequent Events
On May 1, the Company completed the sale of its advisory business related
to the Advantage Municipal Funds. The three municipal funds were acquired by
three municipal funds managed by Massachusetts Financial Services Company for
total consideration paid of $1.2 million. Net of expenses, which include
unamortized organization costs of the funds and Advest's deferred sales
charges, the Company expects to realize a pre-tax gain of approximately $.2
million.
Under a separate agreement, the Company is selling the advisory business
related to its six taxable Advantage Funds to Northstar Investment Management
Corp. ("Northstar"), a subsidiary of ReliaStar Financial Corp. (formerly the
NWNL Companies). Northstar will become investment advisor to the funds and
NWNL Northstar Distributors, Inc., an affiliate, will serve as principal
underwriter. Northstar will pay consideration of up to $10 million, together
with additional payments contingent upon net assets and future fund sales. The
deal is expected to be finalized in the June quarter.
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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 adverse effect on the
financial condition or future operating results of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company commenced solicitation of proxies on December 20, 1994 in
connection with its Annual Meeting held on January 26, 1995. The solicitation
was performed in accordance with Section 14 of the Securities and Exchange Act
of 1934 and the rules thereunder. There was no solicitation in opposition to
management's solicitation. A total of 7,100,806 shares were represented at the
meeting out of the total of 8,507,415 issued and outstanding as of the December
12, 1994 record date for the meeting.
(a) Election of Directors. At the Annual Meeting, the reelection as
directors of Messrs. Boujoukos and LaCroix and Ms. Norgaard to serve for three
year terms expiring in 1998 was considered. Also considered was the election
of Mr. Sanford Cloud, Jr. to serve for a two year term expiring in 1997. All
such nominees were reelected or elected to the Board of Directors. The
nominees received the following votes:
In Favor
-----------------------------------
Nominee In Person By Proxy Total Withheld
George A. Boujoukos 0 6,761,350 6,761,350 339,456
Anthony A. LaCroix 0 6,734,171 6,734,171 366,635
Corine T. Norgaard 0 6,772,171 6,772,171 328,635
Sanford Cloud, Jr. 0 6,752,089 6,752,089 348,717
The terms of office of the following continuing directors expire in 1996:
Richard G. Dooley, John A. Powers and Robert L. Thomas. The terms of office of
the following continuing directors expire in 1997: Grant W. Kurtz and Allen
Weintraub. At a meeting of the Board of Directors held following the Annual
Meeting, Robert W. Fiondella was elected as director for a term expiring in
1996.
(b) 1994 Non-Employee Director Stock Option Plan. Also presented at the
meeting was a proposal to approve The Advest Group, Inc. 1994 Non-Employee
Director Stock Option Plan (the "Plan"). The purpose of the Plan is to attract
and retain the continued services of non-employee directors of The Advest
Group, Inc. with the requisite qualifications and to encourage such directors
to secure or increase on reasonable terms their stock ownership in the Company.
The Plan authorizes the issuance of an aggregate of up to 50,000 shares,
- 13 -
<PAGE>
subject to adjustment under certain events. The Plan was approved by the
stockholders, receiving the following vote:
For Against Abstaining Total
6,449,575 597,898 53,333 7,100,806
(c) Stockholder Proposal. Also presented at the meeting was a proposal
by a stockholder requesting that the Directors submit to shareholders an
appropriate amendment to the Articles of Incorporation to provide that at
future elections Directors whose terms of office have expired be elected
annually and not by classes as is now provided. The proposal was rejected by
the stockholders, receiving the following vote:
For Against Abstaining No Vote Total
1,783,232 3,318,668 108,686 1,890,220 7,100,806
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10(a) -- Registrant's 1994 Non-Employee Director Stock Option
Plan *
Exhibit 11 -- Computation of Net Earnings Per Share
Coopers & Lybrand report on limited review performed on financial
information contained herein (see page 15)
____________
* Incorporated by reference to Exhibit A to Registrant's Proxy
Statement dated December 20, 1994.
(b) Reports on Form 8-K
None
- 14 -
<PAGE>
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 March 31, 1995, and the related consolidated
statements of operations and cash flows for the three and six-month periods
ended March 31, 1995 and 1994, and changes in shareholders' equity for the six-
month period ended March 31, 1995. These financial statements are the
responsibilities 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 inquiries 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 and 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
April 20, 1995
- 15 -
<PAGE>
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 April 28, 1995 /s/Allen Weintraub
Allen Weintraub,
Chairman of the Board and
Chief Executive Officer
Date April 28, 1995 /s/Martin M. Lilienthal
Martin M. Lilienthal,
Senior Vice President and
Chief Financial Officer
- 16 -
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
11 Computation of Net Income Per Share 18
- 17 -
<PAGE>
Exhibit 11
THE ADVEST GROUP, INC. AND SUBSIDIARIES
Computation of Net Income Per Common Share
For the quarters For the six months
ended March 31, ended March 31,
(In thousands, except Primary* Primary*
per share amounts) 1995 1994 1995 1994
- --------------------------------------------------------------------------
Net income applicable to
common stock and other
dilutive securities $ 163 $ 259 $1,021 $2,445
=========================================
Average number of common
shares outstanding
during the period 8,537 8,797 8,542 8,899
Additional shares assuming:
Exercise of stock options 184 257 176 264
-----------------------------------------
Average number of common
and common equivalent
shares used to calculate
net income per common
share 8,721 9,054 8,718 9,163
=========================================
Income per common and
common equivalent share:
Net income $ .02 $ .03 $ .12 $ .27
=========================================
* For the quarter and six months ended March 31, 1995 and 1994, the
primary and fully diluted net income per common share were equal.
- 18 -
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