<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 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 (IRS Employer
incorporation or organization) Identification Number)
90 State House Square
Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 509-1000
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 8,409,015 Shares
Class Outstanding at January 31, 1996
Total of sequentially numbered pages 18.
Exhibit index sequential page number page 16.
<PAGE>
THE ADVEST GROUP, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1995 and September 30, 1995 3
Consolidated Statements of Earnings
Three Months Ended December 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1995 and 1994 5
Consolidated Statement of Changes in Shareholders' Equity
Three Months Ended December 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
2
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Advest Group, Inc.
Consolidated Balance Sheets
<CAPTION>
In thousands, except share and per share amounts December 31, 1995 September 30, 1995
- -------------------------------------------- ---------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and short-term investments
Cash and cash equivalents $ 7,883 $ 7,294
Cash and securities segregated under federal and other regulations 36,724 31,259
---------- ----------
44,607 38,553
---------- ----------
Receivables
Brokerage customers, net 316,329 308,714
Loans, net 228,975 242,575
Securities borrowed 89,914 110,681
Brokers and dealers 2,261 2,391
Other 9,140 11,179
---------- ----------
646,619 675,540
---------- ----------
Securities
Trading, at market value 60,155 41,500
Held to maturity (market values of $23,577 and $31,473) 23,371 31,469
Available for sale, at market value 15,343 3,360
---------- ----------
98,869 76,329
---------- ----------
Other assets
Other real estate owned, net 3,486 5,799
Equipment and leasehold improvements, net 13,648 12,115
Other 21,145 22,479
---------- ----------
38,279 40,393
---------- ----------
$828,374 $830,815
========== ==========
Liabilities & Shareholders' Equity
Liabilities
Brokerage customers $324,463 $300,011
Deposits 222,435 235,656
Securities loaned 95,579 113,632
Compensation and benefits 15,404 16,529
Checks payable 11,673 6,751
Short-term borrowings 11,251 10,251
Brokers and dealers 6,395 9,744
Securities sold, not yet purchased, at market value 2,881 4,847
Other 18,454 16,670
---------- ----------
708,535 714,091
Long-term borrowings 17,267 17,240
Subordinated borrowings 20,552 20,552
---------- ----------
746,354 751,883
---------- ----------
Shareholders' Equity
Common stock, par value $.01, authorized 25,000,000 shares,
issued 10,590,238 and 10,584,488 shares 106 106
Paid-in capital 67,490 67,467
Retained earnings 26,088 22,956
Treasury stock, at cost, 2,209,909 and 2,202,519 shares (11,665) (11,599)
Net unrealized gain on securities available for sale, net of taxes 1 2
---------- ----------
82,020 78,932
---------- ----------
$828,374 $830,815
========== ==========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
3
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The Advest Group, Inc.
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
December 31,
In thousands, except share and per share amounts 1995 1994
- ------------------------------------------------------------------------
Revenues
Commissions $24,939 $18,013
Interest 14,174 13,731
Principal transactions 10,598 9,745
Investment banking 7,936 3,764
Asset management and administration 4,675 4,248
Other 2,726 1,492
--------------------
Total revenues 65,048 50,993
--------------------
Expenses
Compensation and benefits 35,358 28,062
Interest 7,614 7,301
Communications 4,752 4,278
Occupancy and equipment 4,531 4,088
Professional 1,229 993
Business development 1,146 1,182
Brokerage, clearing and exchange 983 871
Provision for credit losses and asset devaluation 163 475
Other 3,472 2,238
--------------------
Total Expenses 59,248 49,488
--------------------
Income before taxes 5,800 1,505
Provision for income taxes 2,668 647
--------------------
Net Income $ 3,132 $ 858
====================
Net income per common and common equivalent shares:
Primary $ 0.36 $ 0.10
Assuming full dilution $ 0.33 $ 0.10
Average common and common equivalent shares outstanding:
Primary 8,773 8,704
Assuming full dilution 10,301 8,704
See Notes to Consolidated Financial Statements
4
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<TABLE>
The Advest Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended December 31,
In thousands 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,132 $ 858
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,933 2,073
Provision for credit losses and asset devaluation 163 401
Other 842 25
(Increase) decrease in operating assets:
Receivables from brokerage customers (7,642) 16,609
Securities borrowed 20,767 4,214
Receivables from brokers and dealers 130 (2,476)
Trading securities (18,655) (22,796)
Cash and securities segregated under federal and other regulations (5,465) (4,965)
Other 2,719 124
Increase (decrease) in operating liabilities:
Brokerage customers 24,452 4,129
Securities loaned (18,053) (7,917)
Brokers and dealers (3,349) (2,256)
Checks payable 4,922 4,977
Other (2,138) (397)
----------- -----------
Net cash provided by (used for) operating activities 3,758 (7,397)
----------- -----------
FINANCING ACTIVITIES
Net decrease in deposits (13,221) (1,493)
Proceeds from short-term borrowings - 5,000
Repayment of short-term borrowings (223) (5,163)
Short-term brokerage borrowings, net - 11,549
Proceeds from long-term borrowings 1,250 -
Repayment of long-term borrowings - -
Other (43) (391)
----------- -----------
Net cash (used for) provided by financing activities (12,237) 9,502
----------- -----------
INVESTING ACTIVITIES
Proceeds from (payments for):
Sales of available for sale secuities 4,133 -
Maturities of available for sale secuities 230 -
Maturities of held to maturity securities 5,923 -
Purchase of available for sale secuities (26) -
Purchase of held to maturity securities (7,841) -
Purchase of investment securities and short-term investments - (3,897)
Maturities of investments - 6,479
Sales of investments - 151
Loans sold 9,337 6,889
Sales of OREO, net 2,237 745
Principal collections on loans 22,072 11,410
Loans originated (24,475) (17,107)
Other (2,522) (3,030)
----------- -----------
Net cash provided by investing activities 9,068 1,640
----------- -----------
Increase in cash and cash equivalents 589 3,745
Cash and cash equivalents at beginning of period 7,294 7,278
----------- -----------
Cash and cash equivalents at period end $ 7,883 $11,023
=========== ===========
Interest paid $ 6,919 $ 6,679
Income taxes paid $ 502 $ 630
Non-cash activities:
Securities available for sale from investment securities - $(20,891)
Securities available for sale from held to maturity $(9,962) -
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
5
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<TABLE>
The Advest Group, Inc.
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
<CAPTION>
Net unrealized gain
$.01 par value (loss) on securities Total
In thousands, except Common stock Paid-in Retained Treasury stock available for sale, Shareholders'
share and per share amounts Shares Amount capital earnings Shares Amount net of taxes Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
September 30, 1995 10,584,488 $106 $67,467 $22,956 (2,202,519) $(11,599) $2 $78,932
Net Income 3,132 3,132
Exercise of Stock Options 5,750 -- 23 23
Repurchase of common stock (49,100) (441) (441)
Sale of treasury stock
to 1995 equity plan 41,716 375 375
Change in unrealized gains,
(losses), net of taxes (1) (1)
Balance as of --------------------------------------------------------------------------------------------
December 31, 1995 10,590,238 $106 $67,490 $26,088 (2,209,903) $(11,665) $1 $82,020
============================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
6
<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"), a financial services holding company,
and all subsidiaries (collectively the "Company"). 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. 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 1995 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, 1995, as filed with the Securities and Exchange
Commission on Form 10-K.
2. Summary of Significant Accounting Policies:
The Company adopted Statement of Financial Accounting
Standards ("SFAS") 114, "Accounting by Creditors for Impairment
of a Loan," effective October 1, 1995. Under SFAS 114, a loan is
considered impaired if it is probable that the Company will be
unable to collect scheduled payments according to the terms of
the loan agreement. The measurement of impaired loans is
generally based on the present value of expected cash flows
discounted at the loan's historical effective interest rate,
except that collateral dependent loans are measured for
impairment based on the observable market value or fair value of
the collateral less estimated selling costs. The Company
considers residential mortgage loans and consumer loans to be
small balance, homogenous loan portfolios, which under SFAS 114
are excluded from individual impairment measurement, and are
evaluated collectively for impairment. Such loans are
collectively evaluated for impairment using historical chargeoff
data, industry data and other trend analyses. An insignificant
delay (less than ninety days) in amounts due, or a shortfall (10%
or less) in the amount of scheduled payments due would not be
events that, when considered in isolation, would automatically
cause a loan to be considered impaired. Loans remain classified
as impaired until they are current as to scheduled payments and
the timely collection of future required payments is considered
probable. Income on impaired loans generally is recognized under
the cash method. Under the cash method, the amount of interest
recognized in any one period is limited to the lesser of the cash
amount received or an amount that is not more than that which
would have been earned at the contractual effective interest
rate. Loans that are deemed collateral dependent will recognize
income after the principal amount of the loan is recovered. All
loans more than ninety days delinquent will generally be placed
into non-accrual status. Loans less than ninety days delinquent
7
<PAGE>
may be placed on non-accrual status if management's analysis
indicates probable non-payment of the total amounts due under the
terms of the loan.
Nonperforming loans were $12.8 million and $11.7 million at
December 31, 1995 and September 30, 1995, respectively. Included
in the nonperforming loans at December 31, 1995 were $.2 million
of impaired loans, of which $.1 million were measured based upon
the fair value of the underlying collateral and $.1 million were
measured based upon the present value of expected future cash
flows. No allowance was necessary for the impaired loans and no
interest income was recorded on these loans for the quarter ended
December 31, 1995. The adoption of SFAS 114 resulted in no
additional provisions for loan losses. Accordingly, there was no
impact to the Company's financial condition or results of
operations.
As of October 1, 1995, the Company prospectively adopted
SFAS 122 "Accounting for Mortgage Servicing Rights." The
statement requires that a separate asset be recognized that
represents Originated Mortgage Servicing Rights ("OMSRs"), the
right to service mortgage loans for others. Under SFAS 122, the
Bank allocates the total cost of mortgage loans sold in the
secondary market to the OMSRs and the loans, based upon their
relative fair values. OMSRs generally are evaluated for
impairment in the aggregate based on quoted prices in active
markets. When such quotations are not available, OMSRs are
evaluated on the estimated discounted present value of the
expected cash flows using industry consensus assumptions. At each
reporting period OMSRs carrying values are adjusted to the lower
of their book value or the current valuation. Any impairment is
recognized through a charge to earnings and the establishment of
an impairment allowance. Amortization schedules are also
adjusted periodically, if necessary, to reflect current consensus
prepayment assumptions. Retroactive capitalization of OMSRs for
loans sold prior to adoption of SFAS 122 is prohibited.
In November 1995, the FASB issued a special report which
allowed a one time election to transfer securities from the held
to maturity classification, provided such transfers were effected
on or before December 31, 1995. Pursuant to the FASB's action,
on December 22, 1995 the Company transferred $9.9 million of
securities to the available for sale category from held to
maturity. The assets were transferred at fair value with a net
unrealized loss of $61,000.
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, 1995, Advest's
regulatory net capital of $42.6 million was 13% of aggregate
debit balances and exceeded required net capital by $36.0
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
8
<PAGE>
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, 1995, the Bank's leverage capital ratio was
5.43% which met the regulatory requirements but was below the 6%
required by the MOU. The Bank's regulators recently approved a
capital and risk management plan which provides an estimated time
frame for attaining 6% leverage capital. The Bank is also
required to maintain risk-based capital of 8.0%, including at
least 4.0% Tier 1 capital. At December 31, 1995, the Bank's
total risk-based capital ratio was 9.22% and the Tier 1 ratio was
7.96%, which met both the regulatory and MOU requirements.
4. Employee Benefit Plans:
Equity Plans
In January 1996, the Company implemented equity investment
plans which cover executive officers (the "Executive Plan") and
eligible top performing account executives and designated key
employees of the Company (the "1996 Equity Plan"). The plans are
similar to plans offered by the Company during calendar 1995.
Under the 1996 Equity Plan, participants may elect to invest part
of their 1996 compensation, within established minimum and
maximum amounts, on a pre-tax basis in units consisting of one
share of AGI common stock and one option to purchase a single
share of AGI common stock. The stock will be purchased from AGI
treasury stock on a monthly basis and will be restricted until
the January 1, 2000 vesting date. Options will be granted on
June 30, 1996 and January 1, 1997 and will become exercisable for
two years beginning on the January 1, 2002 vesting date. Vesting
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.
5. Loans
Loans at December 31, 1995 and September 30, 1995 consist of
the following:
December 31, September 30,
In thousands 1995 1995
- -------------------------------------------------------------------
Mortgages:
Commercial $ 49,730 $ 52,945
Multi-family 12,227 12,257
1-4 family residential 160,959 170,414
Commercial 3,093 3,956
Consumer 1,134 972
Installment note and lease loan financing 1,716 1,811
Other 1,436 1,444
--------- ---------
Total loans 230,295 243,799
Net deferred loan costs 1,298 1,110
--------- ---------
Total loans, net of unearned income 231,593 244,909
Allowance for credit losses (2,618) (2,334)
--------- ---------
Net loans $228,975 $242,575
========= =========
9
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An analysis of the allowance for credit losses at December
31, 1995 and 1994 is as follows:
December 31, December 31,
In thousands 1995 1994
- ------------------------------------------------------------
Balance at beginning of period $2,334 $4,900
Provision charged to operating expense 95 --
Recoveries on loans 207 42
Loans charged off (18) (198)
------- -------
Balance at end of period $2,618 $4,744
======= =======
At December 31, 1995, and December 31, 1994 the Bank had
nonaccrual loans of $320,000 and, $6,778,000, respectively. Had
these loans performed in accordance with their original terms,
interest income of $7,000 and $206,000 would have been recorded
in the quarter ended December 31, 1995 and December 31, 1994,
respectively.
6. Capitalized Mortgage Servicing Rights
At December 31, 1995, the Bank's Capitalized Mortgage
Servicing Rights were:
December 31,
In thousands 1995
----------------------------------------
Balance at beginning of period $ --
Additions 72
Less: Amortization (1)
-----
Balance at end of period $ 71
=====
The Bank had no valuation allowance at any time during the
quarter ended December 31, 1995.
10
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Item 2. Management's Discussion and Analysis of Financial
Condition
and Results of Operations
Overview
The Company is engaged in securities brokerage, trading,
investment banking, consumer lending, asset management, trust and
related financial services. All aspects of the Company's
business are highly competitive and regulated and impacted by a
variety of factors outside of its control including the economy,
interest rates, the political climate and investor sentiment.
Consequently, revenues and operating results can vary
significantly from one reporting period to the next.
The Company reported net income of $3.1 million ($.36 per
share) for the quarter ending December 31, 1995 compared with $.9
million ($.10 per share) in the prior year, an increase of 265%
and its fourteenth consecutive quarterly profit. Current quarter
results were favorably impacted by modest, but steady economic
growth coupled with nominal inflation and lower interest rates.
In January 1996, the Company relocated its corporate
offices, including Advest and its Hartford-based retail sales
office and the Bank and its one branch office. The new address
is 90 State House Square, Hartford, CT 06103. Advest's new
telephone number is (860) 509-1000. The Bank's new telephone
number is (860) 509-3000.
Advest, Inc.
The DOW surpassed the 5000 mark during the current quarter
fueled by strong corporate profits and low interest rates and
closed at 5177 on December 31, 1995, reflecting 7% and 33% gains,
respectively, for the quarter and calendar year. The S&P 500 and
NASDAQ Composite both advanced, gaining 5% and 1%, respectively,
for the quarter, and 34% and 40%, respectively, for the year.
Merger and acquisition activity was robust most of the calendar
year and underwriting activity, led by equity issues, surpassed
1994 levels with a strong second half.
Advest achieved its best quarterly results since March 1992,
posting pre-tax income of $6.6 million, a 224% increase from $2.0
million in 1994. Current quarter revenues increased across the
board, led by commissions (up 38%), asset management income (up
37%) and investment banking revenue (up 111%). Total revenues
were $59.3 million and total expenses were $52.7 million,
reflecting increases of 36% and 26%, respectively.
Advest Bank
The Bank posted pre-tax income of $300,000 for the current
quarter compared with $25,000 in the year earlier quarter.
Interest spreads improved in the 1995 quarter, however, a planned
decline in the Bank's asset base contributed to a $.2 million
(10%) decrease in net interest income. The provision for credit
losses and asset devaluation was $.1 million, reflecting a 56%
year-to-year decline, and other expenses, largely carrying costs
of foreclosed properties, declined 20% to $.7 million. The
declines were primarily a result of the accelerated asset
disposition program implemented by the Bank during fiscal 1995
which resulted in the sale or transfer of substantial levels of
the Bank's nonperforming assets (NPAs"). At December 31, 1995,
the Bank's NPAs were $1.6 million (.7% of total Bank assets)
compared with $21.1 million (6% of total Bank assets) a year ago.
At December 31, 1995, the Bank's leverage capital ratio was
5.43% which met the regulatory requirements but was below the 6%
required by the MOU. The Bank's regulators recently approved a
capital and risk management plan which provides an estimated time
frame for attaining 6% leverage capital. The Bank is also
required to maintain risk-based capital of 8.0%,
11
<PAGE>
including at least 4.0% Tier 1 capital. At December 31, 1995,
the Bank's total risk-based capital ratio was 9.22% and the Tier
1 ratio was 7.96%, which met both the regulatory and MOU
requirements.
Results of Operations
Three Months Ended December 31, 1995 Versus
Three Months Ended December 31, 1994
Net revenues, total revenues less interest expense, were
$57.4 million, an increase of $13.7 million (31%), reflecting
across the board revenue gains. Expenses, excluding interest,
increased $9.4 million (22%) to $51.6 million, primarily related
to higher sales-related compensation at Advest. The tax rate was
46% in the current quarter compared with 43% in 1994. The higher
current year rate is primarily due to state taxes.
Commission revenue increased $6.9 million (38 %) to $24.9
million, led by mutual fund sales, including distribution fees,
which advanced $2.8 million (62%). Listed securities rose $2.2
million (23%), over-the-counter issues gained $1.8 million (72%)
and insurance products, primarily annuities, rose $.4 million
(41%).
Investment banking revenues more than doubled to $7.9
million, reflecting high levels of underwriting and merger and
acquisition activities. Equity underwriting and private
placement fees increased $2.4 million and related commissions
increased $1.3 million. Merger and acquisition revenues
increased $.9 million.
Revenue from principal transactions increased $.9 million
(9%) to $10.6 million. Equity commissions increased $1.6 million
(68%). Commissions on debt securities declined $1.2 million
(18%), with sales of municipal issues off $1.0 million primarily
due to investor concerns about proposed tax reforms. Municipal
bond trading profits increased $.5 million.
Asset management revenues increased $.4 million (10%) to
$4.7 million. Advest's income increased $1.1 million (37%) as a
result of a 46% year-to-year increase in its managed account
base. BSC's revenue declined $.8 million (72%) due to the sale
of the advisory business related to the Company's proprietary
mutual funds in the prior year. The business was sold subsequent
to the December 1994 quarter.
Other income increased $1.2 million (83%) to $2.7 million
due primarily to a $.9 million gain on the sale of an equity
investment held by Advest and increased fee income.
Net interest income was $6.6 million, an increase of $.1
million (2%) from 1994. Advest's net interest rose $.4 million
(10%) primarily due to higher income from margin accounts. The
Bank's net interest declined $.2 million (10%) primarily due to a
planned reduction in its asset base.
Compensation costs increased $7.3 million (26%) primarily
due to higher sales-related compensation and incentives and
higher general payroll and retirement plan costs. Compensation
at BSC decreased $.3 million (66%) due to the fiscal 1995 sale of
the Company's advisory business related to its proprietary mutual
funds. Other expenses increased $1.2 million (55%) due primarily
to settlement and computer software costs at Advest and expenses
related to the relocation of the Company's headquarters to new
corporate offices.
Liquidity and Capital Resources
Three Months Ended December 31, 1995
There have been no material changes to the Company's
liquidity or capital resources since September 30, 1995.
12
<PAGE>
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 11 -- Computation of Net Income Per Share
Exhibit 27 -- Financial Data Schedule (Selected financial
data - for EDGAR electronic filing only to SEC)
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 14 of this filing.
(b) Reports on Form 8-K
None
13
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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, 1995,
and the related consolidated statements of earnings and cash
flows for the three-month period ended December 31, 1995 and
1994, and changes in shareholders' equity for the three-month
period ended December 31, 1995. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with Statements on
Standards of Accounting and Review Services issued 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, 1995, and the related consolidated statements of
earnings, changes in shareholders' equity and cash flows for the
year then ended (not presented herein), and in our report dated
October 26, 1995, 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, 1995, 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 18, 1996
14
<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 February 8, 1996 /s/Allen Weintraub
Allen Weintraub,
Chairman of the Board and
Chief Executive Officer
Date February 8, 1996 /s/Martin M. Lilienthal
Martin M. Lilienthal,
Senior Vice President and
Chief Financial Officer
15
<PAGE>
Exhibit Index
Exhibit Description Page
11 Computation of Net Income Per Share 17
27 Financial Data Schedule (Selected financial data
- for EDGAR electronic transmission only for SEC.) 18
16
<PAGE>
EXHIBIT 11
The Advest Group, Inc. and Subsidiaries
Computation of Net Income Per Common Share
For the quarters ended December 31,
Assuming
Primary Full Dilution
------------------- -------------
In thousands, except per share amounts 1995 1994* 1995
- ----------------------------------------------------------------------------
Income before extraordinary credit $3,132 $858 $3,132
Interest on convertible debentures
outstanding during the period,
net of tax and other related expenses -- -- 250
------ ----- ------
Net income applicable to
common stock and other
dilutive securities $3,132 $858 $3,382
====== ===== ======
Average number of common shares
outstanding during the period 8,385 8,540 8,385
Additional shares assuming:
Exercise of stock options 388 164 401
Conversion of debentures -- -- 1,515
----- ----- ------
Average number of common and
common equivalent shares used
to calculate net income per
common share 8,773 8,704 10,300
===== ===== ======
Income per common and common
equivalent share:
Net income $ .36 $ .10 $ .33
===== ===== =====
* For the quarter ending December 31, 1994, primary and fully
diluted net income per common share are equal.
17
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<ARTICLE> BD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 8132
<RECEIVABLES> 556705
<SECURITIES-RESALE> 36475
<SECURITIES-BORROWED> 89914
<INSTRUMENTS-OWNED> 98869
<PP&E> 13648
<TOTAL-ASSETS> 828374
<SHORT-TERM> 11251
<PAYABLES> 258957
<REPOS-SOLD> 0
<SECURITIES-LOANED> 95579
<INSTRUMENTS-SOLD> 2881
<LONG-TERM> 37819
<COMMON> 106
0
0
<OTHER-SE> 81914
<TOTAL-LIABILITY-AND-EQUITY> 828374
<TRADING-REVENUE> 10598
<INTEREST-DIVIDENDS> 14174
<COMMISSIONS> 24939
<INVESTMENT-BANKING-REVENUES> 7936
<FEE-REVENUE> 4675
<INTEREST-EXPENSE> 7614
<COMPENSATION> 35358
<INCOME-PRETAX> 5800
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3132
<EPS-PRIMARY> .36
<EPS-DILUTED> .33
</TABLE>
