<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 29, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM ______________
COMMISSION FILE NUMBER 1-7467
FIRST OF MICHIGAN CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2780197
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
100 Renaissance Center, 26th Floor
Detroit, Michigan 48243
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (313) 259-2600
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
- ------------------- -----------------------------------------
Common Stock, $.10 par value Chicago Stock Exchange, Incorporated
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the shares of Common Stock owned by
persons other than directors, executive officers, and persons or groups known
to the Registrant to own over 10% of its outstanding Common Stock (none of
which persons or groups are hereby acknowledged to be affiliates) was
$9,986,471 on December 14, 1995 and represented 1,174,879 shares.
2,675,733 shares of Common Stock, par value $.10 per share, were
outstanding as of December 19, 1995.
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE> 2
PART I
ITEM 1. BUSINESS.
General. Registrant was incorporated on May 13, 1974 and is a
holding company, the principal subsidiary of which is First of Michigan
Corporation ("FoM"), founded in 1933.
FoM is a securities broker-dealer and investment banker, and engages
in brokerage of listed securities and principal and agency transactions in
unlisted securities and the underwriting and distribution of securities.
Securities dealt in include equity and debt securities of industrial and
financial companies and institutions, mutual funds, and securities of states,
municipalities, and other governmental entities, including hospital, industrial
development, and pollution control bonds. FoM is a member of the New York
Stock Exchange, Inc. (the "NYSE"), other stock, commodity, and option
exchanges, and the National Association of Securities Dealers, Inc. (the
"NASD").
Under the direction of its Corporate Finance Department, FoM is
responsible for underwritings, mergers and acquisitions, private placements,
valuations, financial advisory work, and other investment banking matters and
manages the underwriting of corporate and certain municipal securities. FoM
also participates as an underwriter in underwriting syndicates managed by other
firms. Through its Public Finance Department, FoM also acts as an underwriter
and dealer in tax-exempt bonds issued by states, cities, and other political
subdivisions and may act as manager or participant in offerings of such
securities managed by other firms.
The management of and participation in public offerings involves
significant risks. An underwriter may incur losses if it is unable to resell
at a profit the securities it has purchased. Under the Securities Act of 1933,
other statutes, and court decisions, an underwriter is subject to substantial
liability for misstatements or omissions that are judged to be material in
prospectuses and other communications related to underwritings. Underwriting
commitments cause a charge against net capital, as defined in Rule 15c3-1 of
the Securities and Exchange Commission (the "Commission") -- see "Regulation"
below; consequently, the aggregate amount of underwriting commitments at any
one time may be limited by the amount of available net capital. Such
limitation has not to date caused FoM to be unable to accept underwriting
commitments it desired to accept.
In its business as a broker-dealer, FoM purchases securities for
customers on either a cash or margin basis. When securities are purchased on a
margin basis, the customer deposits less than the full cost of the security,
and FoM makes a loan for the balance of the purchase price. Such loans are
collateralized by the securities purchased. The amount which may be loaned is
subject to the margin requirements of Regulation T of the Board of Governors of
the Federal Reserve System, NYSE margin requirements, and FoM's internal
policies, which in most instances are more restrictive than Regulation T or
NYSE requirements. In permitting customers to purchase securities on margin,
FoM is subject to the risk of a market decline which could reduce the value of
its collateral below the amount of the customers' indebtedness.
FoM trades as principal in the over-the-counter market and it acts as
both principal and agent to facilitate the execution of customers' orders. FoM
"makes a market" in various securities of interest to its customers through
buying, selling, and maintaining an inventory of these securities. FoM also
buys corporate and municipal bonds for its own account in the secondary market,
maintains an inventory, and resells from that inventory to other dealers and to
institutional and retail customers.
At September 29, 1995, FoM maintained current accounts for
approximately 160,000 customers -- that is, customers for whom at least one
transaction had been effected or for whom securities or money were being held
during the previous 24 months. Also, as of September 29, 1995,
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money or securities were being held, or a transaction had been effected since
August 28, 1995, for approximately 78,000 customers.
FoM is registered as a broker-dealer in all of the fifty states,
except Nebraska, and maintains offices in 33 locations in two states.
Thirty-two of its 33 offices are in Michigan.
Cranbrook Capital Management, Inc. ("Cranbrook Capital"), a subsidiary
of Registrant organized in 1994, is registered as an investment adviser under
the Investment Advisers Act of 1940. Cranbrook Capital provides investment
management services covering stocks, bonds, and cash investments to high
net-worth individuals and institutional accounts such as pension plans, trusts,
foundations, and 401(k) plans and also acts as investment adviser to Cranbrook
Money Market Fund and Cranbrook Treasury Fund, both series of Cranbrook Funds,
a registered investment company. At September 29, 1995, $447 million in
Cranbrook Funds assets were under management by Cranbrook Capital, and other
assets under management totaled $38.7 million. First of Michigan Insurance
Agency, Inc., another subsidiary of Registrant, is licensed to act as a general
life insurance agent and thus to sell life insurance. Registrant's other
subsidiaries, FoM Advisers, Inc., First of Michigan Properties, Inc., First of
Michigan Leasing, Inc., First of Michigan Commodities, Inc., and First of
Michigan Venture Capital Associates, Inc. have not engaged in significant
activity in recent years.
Each business area of Registrant uses, for the most part, the same
facilities on an integrated basis, with the result that it is not possible to
identify or make meaningful estimates of the cost and expenses applicable to
and relative profitability of each business area. In fiscal 1995, consolidated
revenues were $62,864,914. (See below for information concerning the
contribution to revenues of various areas of business.) No material part of
Registrant's business is dependent on a single customer or a very few
customers. Currently customers are served by 290 investment executives, and
there are an aggregate of 265 other full-time employees.
Competition. All aspects of the securities business are intensely
competitive. Competition exists directly with other broker-dealers and
investment banking firms, banks, insurance companies, investment
advisers, mutual fund management companies, and other providers of financial
services. In addition, investment vehicles other than those offered by the
securities industry compete for customers' investment dollars. Many
competitors have substantially greater resources than Registrant and its
subsidiaries, and Registrant and its subsidiaries are not a major factor in the
securities or financial service businesses.
In addition to competing more directly for customers in the range and
quality of its products and services and in rates charged to customers, FoM
competes with other broker-dealers and investment banking firms for investment
executives -- both to retain its current sales force and in the hiring of
investment executives from other firms. The financial incentives, including
upfront "bonus" payments, offered by other firms in an effort to hire
investment executives of FoM can be substantial, and FoM's efforts to retain
the services of such personnel may not always succeed. The loss of a
significant number of high-producing FoM investment executives to competitors
could have a material adverse effect on Registrant's gross revenues and
profitability, at least over the short term.
Regulation. FoM is subject to stringent government regulation and
regulation by securities exchanges, principally the NYSE, in the day-to-day
conduct of its business. Such regulation is primarily intended to benefit
FoM's customers rather than Registrant's stockholders. See Note H of Notes to
the Consolidated Financial Statements under Item 8 below with respect to the
net capital requirements of the NYSE and the Commission.
As a member of the NASD and the NYSE, FoM is subject to various rules,
the purpose of which is the self-regulation of the securities industry as
contemplated by Federal laws, including rules
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requiring just and equitable principles of trade. The NASD and the NYSE are
subject to regulation and supervision by the Commission under the Securities
Exchange Act of 1934. Included among NASD and NYSE rules are rules with
respect to the amounts of markup or "spread" which a dealer or underwriter may
charge on sales as a principal, the manner in which securities may be
underwritten, sold, and distributed, and the manner of administering customers'
margin accounts.
Certain of FoM's officers and employees, including all of its
investment executives, must individually qualify for registration with the
NYSE, other exchanges, the NASD, and certain state regulatory authorities. FoM
may be subject to penalties for violations of applicable regulations by its
officers, investment executives, and other employees, whether or not FoM has
knowledge of or participates in such violations.
Violations of the provisions of the Securities Act of 1933, the
Securities Exchange Act of 1934 or the regulatory provisions of the agencies or
authorities having jurisdiction over FoM could subject it to disciplinary
proceedings, including temporary or permanent suspension from the conduct of
its business or civil or criminal liability. Any such proceedings could have
serious adverse effects upon all phases of its business. Violations of the
NASD rules of fair practice or other rules including those of exchanges may
result in disciplinary proceedings, fines, or expulsion from membership.
As an investment adviser, Cranbrook Capital and its employees also are
subject to extensive regulation under the securities laws, including the
Investment Advisers Act and certain provisions of the Investment Company Act of
1940. Activities and employees of other subsidiaries of the Registrant also
are subject to varying degrees of government regulation.
Revenues. Registrant and its subsidiaries provide several classes of
service, which utilize the same facilities, distribution, accounting, and
service personnel. The following table sets forth, for the five years ended
September 29, 1995, the sources of the Registrant's revenues by dollars and
percentage amounts:
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REVENUES BY SOURCE (1)
FIRST OF MICHIGAN CAPITAL CORPORATION
Fiscal Year Ended
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
Amount % Amount % Amount %
--------- ----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Commissions:
Listed Securities $16,682,979 26.5 $16,871,142 27.6 $17,230,266 27.4
Over the Counter 7,723,565 12.3 9,123,817 14.9 8,018,282 12.7
Mutual Funds 9,810,436 15.6 11,510,489 18.8 11,684,055 18.5
---------- ---- ----------- ---- ----------- ----
34,216,980 54.4 37,505,448 61.3 36,932,603 58.6
---------- ---- ----------- ---- ----------- ----
Principal Transactions (2):
Municipal Securities 1,637,277 2.6 919,278 1.5 1,123,465 1.8
Corporate Securities 3,161,722 5.0 2,830,881 4.6 3,198,075 5.1
---------- ---- ----------- ---- ----------- ----
4,798,999 7.6 3,750,159 6.1 4,321,540 6.9
---------- ---- ----------- ---- ----------- ----
Investment Banking (3):
Municipal Securities 2,067,402 3.3 1,878,932 3.1 2,637,377 4.2
Corporate Securities 6,353,141 10.1 6,344,106 10.4 8,069,965 12.8
Miscellaneous Fees 1,664,322 2.6 643,409 1.0 1,353,736 2.1
---------- ---- ----------- ---- ----------- ----
10,084,865 16.0 8,866,447 14.5 12,061,078 19.1
---------- ---- ----------- ---- ----------- ----
Interest:
Securities Owned and
Other 604,345 1.0 431,109 .7 481,556 .8
Margin Balances 5,665,573 9.0 4,094,432 6.7 2,606,866 4.1
---------- ---- ----------- ---- ----------- ----
6,269,918 10.0 4,525,541 7.4 3,088,422 4.9
---------- ---- ----------- ---- ----------- ----
Insurance Commissions 2,758,840 4.4 3,338,579 5.5 3,090,235 4.9
Other Revenues (4) 4,735,312 7.6 3,210,344 5.2 3,535,704 5.6
---------- ---- ----------- ---- ----------- ----
Total Revenues $62,864,914 100.0 $61,196,518 100.0 $63,029,582 100.0
========== ===== =========== ===== =========== =====
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
September 25, 1992 September 27, 1991
Amount % Amount %
------ ------ ------ -------
<S> <C> <C> <C> <C>
Commissions:
Listed Securities $16,144,393 27.0 $13,232,702 27.5
Over the Counter 6,973,320 11.6 4,945,655 10.3
----------- ---- ----------- ----
33,570,252 56.1 26,137,375 54.3
----------- ---- ----------- ----
Principal Transactions (2):
Municipal Securities 1,171,574 2.0 1,376,492 2.9
Corporate Securities 3,047,583 5.1 2,969,748 6.2
----------- ---- ----------- ----
4,219,157 7.1 4,346,240 9.1
----------- ---- ----------- ----
Investment Banking (3):
Municipal Securities 1,971,343 3.3 2,023,135 4.2
Corporate Securities 9,721,757 16.2 4,621,572 9.6
Miscellaneous Fees 1,239,175 2.1 1,705,288 3.5
----------- ---- ----------- ----
12,932,275 21.6 8,349,995 17.3
----------- ---- ------------ ----
Interest:
Securities Owned and
Other 549,362 .9 872,478 1.8
Margin Balances 2,357,050 3.9 2,439,414 5.1
----------- ---- ----------- ----
2,906,412 4.8 3,311,892 6.9
----------- ---- ----------- ----
Insurance Commissions 2,411,316 4.0 2,646,655 5.5
Other Revenues (4) 3,839,591 6.4 3,344,073 6.9
----------- ---- ----------- ----
Total Revenues $59,879,003 100.0 $48,136,230 100.0
=========== ===== =========== =====
</TABLE>
(1) It is impractical to show a dollar and percentage breakdown of
the Registrant's net income from these sources after allocation of all
appropriate expenses, since substantially the same sales personnel and branch
office facilities are engaged in the production of the above revenues at any
time, and it is not practical to allocate to each revenue source its share of
such joint expenses as personnel costs, occupancy and equipment costs, interest
and communications costs.
(2) Principal transaction revenues include realized gains and
losses from sales of trading investment account securities and unrealized gains
and losses from adjusting security positions to market at the end of each
period.
(3) Investment banking revenues result from the Registrant's
management and participation as an underwriter or member of the selling group
for the sale of securities and certain other activities. Revenue is the
difference between the sales price of the security and the cost of the security
and directly related underwriting expenses. Unrealized gains and losses from
adjusting security positions to market at the end of each period are also
reflected in such revenues. Such revenues include corporate and municipal
underwriting management fees. Miscellaneous includes financial consulting fees
and private placement fees.
(4) Other Revenues includes fees for cash management accounts,
proxy solicitations, appraisals, etc.
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ITEM 2. PROPERTIES.
All offices of Registrant and its subsidiaries are located in leased
premises. Aggregate space leased for all offices totals 143,000 square feet at
an annual rental of $1,987,000 at November 24, 1995. The longest lease expires
on October 31, 2005.
FoM leases office, communication, and other equipment at an annual
rent of approximately $409,000 at November 24, 1995. All present equipment
leases have remaining terms of five years or less.
See Note E of Notes to the Consolidated Financial Statements included
herein under Item 8 with respect to rental commitments for such properties.
ITEM 3. LEGAL PROCEEDINGS.
FoM is from time to time a party defendant (frequently one of many
defendants) in litigation arising out of its activities as an underwriter of
securities. Also, the terms of underwriting arrangements into which FoM enters
may require that FoM bear a portion of expenses and certain liabilities, if
any, which arise as a result of the underwriting, whether or not FoM is a named
or class defendant in litigation which may be instituted. FoM is also from
time to time involved in litigation in which claims are asserted against it
arising out of its business as a broker-dealer.
At the date hereof FoM is subject to litigation of the nature
described in which substantial amounts are sought. Where it is a defendant FoM
is vigorously contesting such suits by asserting denials and defenses which it
believes to be meritorious and, in the opinion of management, based in part
upon advice of legal counsel, resolution of the litigation by which it may be
affected should have no material adverse effect on the financial position of
the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The only outstanding class of equity security of Registrant is its
Common Stock, $0.10 par value (the "Common Stock"). Shares of Common Stock are
listed for trading on the Chicago Stock Exchange (the "CSE") and at November
28, 1995 were held of record by 327 persons. The information required by this
item concerning dividends paid on the Common Stock and trading prices for such
stock on the CSE is provided in Note K to the Consolidated Financial Statements
included herein under Item 8.
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS 1995 1994 1993 1992 1991
------------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 62,864,914 $ 61,196,518 $63,029,582 $59,879,003 $48,136,230
Net Income . . . . . . . . . . . . . . . . . 108,067 1,042,893 3,400,467 4,704,952 2,775,169
Net Income Per Common and
Common Equivalent Share* . . . . . . . . . . $ .04 $ .35 $ 1.16 $ 1.64 $ .98
Cash Dividends Per Common Share * . . . . . . .18 .16 .36 1.05 .36
Average Number of Common and
Common Equivalent Shares Outstanding* . . . . 2,855,460 2,952,969 2,936,217 2,864,901 2,843,423
AT YEAR END
Total Assets . . . . . . . . . . . . . . . . $110,457,474 $ 103,767,953 $86,506,328 $67,958,688 $56,161,514
Stockholders' Equity Per Common Share* . . . $10.59 $ 10.80 $ 10.63 $ 9.80 $ 9.20
</TABLE>
*Amounts adjusted to reflect the 10% stock dividend declared in December 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
1995 Compared to 1994
For fiscal 1995, total revenues rose 3% and net income declined 90%.
This was due somewhat to slight changes in the revenue mix but was primarily
due to higher expenses, resulting mainly from Registrant's investments in
technology, office facilities, and new investment executives and support
personnel, all of which are needed to help Registrant grow its business and
compete effectively in the Great Lakes region.
Total revenues for the year increased by $1,668,396 or 3%. Revenues
from commissions were down $3,288,468 or 9% with the first two quarters of
fiscal 1995 showing a decrease of over $5.2 million or 26%, and the last two
quarters increasing by almost $2.0 million, a gain of 12%. Agency stock
commissions were down $1.5 million or 6% for the year, and commissions from
mutual fund transactions decreased $1.7 million or 15%. Registrant's results
from retail commissions were typical of what happened in the securities
industry for the period October 1994 to September 1995 -- to be specific,
revenues declined into Registrant's third quarter, with growth then beginning.
Revenues from principal transactions increased $1,048,840 or 28%, with trading
revenues in the fixed income area, both taxable and non-taxable, accounting for
84% ($880,000) of the increase as a result of increased emphasis in this area.
In addition, profits earned during the formation of the highly successful First
of Michigan Financial Institution's Trust, Series I and II, contributed to the
increase. Offsetting those increases was a decline in over-the-counter trading
revenues.
Investment banking revenues increased $1,218,418 or 14%. As previously
mentioned, FoM originated and sold $30.5 million of the First of Michigan
Financial Institution's Trust, Series I and Series II. These two Series
contributed $1.5 million in revenues during fiscal 1995. The fixed income area
recorded a $617,000 increase over the prior year. In addition, fee-based
revenues from corporate finance activities increased $1 million over fiscal
1994. Offsetting all of these increases in the investment banking area was a
$1.9 million decline in revenues from equity underwritings as a result of a
decline in syndicate underwriting participations. Higher interest rates during
the first nine months of fiscal 1995 contributed to the overall reduction of
underwriting activity during that period. With rates starting to decrease
during the last quarter of fiscal 1995, an increase in underwriting activity
did occur.
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Interest income grew to $6.2 million in fiscal 1995 from $4.5 million
in fiscal 1994, an increase of 38%. Average margin account borrowings, which
are Registrant's principal source of interest revenues, increased by
approximately $7.5 million or 12%. Due to increases in short term rates,
higher rates charged to clients with margin accounts also contributed to the
increase. Insurance commission revenues decreased $580,000 or 17% due to
commission reductions in the areas of life insurance and variable rate
annuities. Other income increased $1.5 million or 48%, with Registrant's new
investment advisory subsidiary, Cranbrook Capital, contributing $665,000.
Income contributed by Cranbrook Capital consisted of $570,000 attributable to
advisory fees received from the Cranbrook Money Market and Treasury Funds,
which Cranbrook Capital began advising in March 1995, and $95,000 related to
fees received from other investment advisory services. The remaining increase
in other income was due to increased money market distribution fees, increased
solicitation fees received by FoM, and gains on the sale of certain investment
account securities.
Expenses increased $2,743,222 or 5%. Employee compensation and
benefits increased $4,049,659 or 13% with salary increases accounting for $2.2
million (54%) of the increase. Salary expense increased because of planned
additions in support areas such as information systems, compliance, human
resources, fixed income, and branch sales management, as well as first year
salary guarantees to certain new administrative and sales support executives.
Those guarantees do not continue past fiscal 1995. Payouts to investment
executives increased $650,000 or 4% because of slightly higher bonus incentive
programs for higher producing investment executives and increased payouts due
to the hiring of additional investment executives. In addition, with the
settlement of the lawsuit with Comerica Incorporated in August 1994 (see Note F
to the Consolidated Financial Statements), the amortization of certain employee
retention agreements, amounting to $1.3 million, has been included in employee
compensation and benefits for fiscal 1995. In prior years, the merger
termination expenses included legal costs as well as the amortization of
certain employee retention agreements and were shown as a separate line item on
Registrant's income statement. Also contributing to the increase in employee
compensation and benefits were increased salaries at Cranbrook Capital, which
began operation at the beginning of fiscal 1995. Offsetting these increases
was a decline of $473,000 in certain discretionary bonus programs associated
with the level of pre-tax earnings.
Floor brokerage, exchange, clearance, and other fees declined
$1,104,052 or 19% as a result of reduced payouts ($792,000) to fully disclosed
brokers because of a decrease in revenues generated by those brokers. Also
contributing to the decrease was a reduction in fees paid clearing brokers
($314,000) because of reduced agency business and a redirection of certain
agency equity business to other more cost efficient executing brokers.
Interest expense increased $1,282,126 or 75%. An increase in the
average (month-end) borrowing rate accounted for approximately $1 million of
that increase; the remainder was due to an increase in bank borrowings to
support the increase in average margin debits discussed above. Taxes, other
than income taxes, were up $254,428 or 10% as a result of an increase in
payroll taxes associated with the previously described increase in employee
compensation. Communications expense increased $197,158 or 20% due to
increased telephone usage particularly in the home office because of additional
personnel, an increase in conference call usage, and a refund from a provider
recorded in fiscal 1994. Occupancy and equipment rental increased $963,196 or
20% with 71% of the increase ($684,000) attributable to FoM's conversion, which
began in October 1994, to a new quotation and information system, as well as
increases in the number of quotation machines and in the service features
provided for the use of investment executives. Rental increases, due to
additional space leased in the headquarters office and branch office lease
renewals, accounted for approximately $255,000 (25%) of the increase. Office
supplies and expense increased $790,786 or 28% due to a combination of factors,
including higher paper prices, significant revisions and additions to FoM's
standard communication items, major improvements to the client statement, an
increase in the number of statements mailed, and the 10% postage rate increase
which took effect in January 1995. Also contributing to the increase were
higher charges from the service bureau providing back-office processing and
accounting to FoM because of higher trade count and increased services provided
to
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FoM clients such as mutual fund networking, dividend reinvestment, and more
detailed year-end reporting information. Increased usage of employment
agencies also contributed to the increase.
Other expenses decreased $304,489 or 4% because of lower consulting,
legal, and insurance costs. Partially offsetting those decreases were
increases in sales promotion costs. Included in the provision for income taxes
is approximately $325,000 related to the surrender of certain whole life
insurance policies insuring the lives of certain officers and naming Registrant
as the beneficiary. The proceeds to Registrant from this surrender amounted to
approximately $5.7 million.
1994 Compared to 1993
Total revenues decreased $1,833,064 (3%) versus the previous year. The
entire decrease occurred in the last quarter of the fiscal year, which showed a
decrease of $2,526,360 (15%) compared to the last quarter of fiscal 1993.
Overall volume was down at First of Michigan Corporation as it was throughout
the securities industry.
Revenues from principal transactions were down $571,381 (13%), with
revenues from secondary corporate bonds and unit trusts largely contributing to
the decline. Partially offsetting that decline were slight increases in
secondary municipal trading and over-the-counter stock trading. Investment
banking revenues were down $3,194,631 (26%), with revenues from stock
underwritings down 31%, accounting for 69% of the total decline in this
category. Revenues from municipal bond and unit trust underwriting were also
down. Interest income was up $1,437,119 (47%) reflecting an increase in average
customer margin debit balances from $47.2 million in fiscal 1993 to $63.2
million in fiscal 1994. Insurance commissions increased $248,344 (8%) because
of an increase in sales of fixed rate annuities. Other income decreased
$325,360 (9%) due to reduced fees received from money market accounts, because
of lower balances, as well as a decrease in other service fees received.
Total expenses increased $1,919,510 (3%). Excluding those costs
incurred in the now-settled lawsuit against Comerica Incorporated arising out
of its termination of a merger agreement with Registrant, as well as other
legal and hiring costs, all other expenses were generally in line with the
related revenues.
Employee compensation and benefits declined $2,344,291 (7%) in
conjunction with the decrease in revenues and also due to a decrease in
certain discretionary bonus programs associated with the level of pre-tax
earnings. Offsetting these declines was an increase in salaries associated with
staff additions. Communications expense increased $53,727 (6%) because of
increased usage and additional data line costs. Interest expense was up
$893,330 (108%) because of increased borrowings required to support the
increase in customer margin debit balances. Occupancy and equipment rental was
up $275,302 (8%) due to additional space leased at the corporate offices as
well as rent increases associated with lease renewals. Office supplies and
expenses increased $301,250 (12%) due to increased costs associated with the
newly formatted customer statement as well as increased usage of employment
agencies. Expenses associated with the Comerica Incorporated merger termination
and lawsuit were $3,385,590, representing 6% of total expenses, of which
$1,383,000 are attributable to the amortization of the notes receivable from
employees. Other operating expenses increased $2,814,784 (59%) as a result of
increased legal costs, which accounted for 28% of the increase, increased fees
paid to consultants, and higher sales promotion costs.
Effects of Inflation
Registrant's business is affected by general trends in business and
finance and by the overall state of the economy. Additionally, revenues and
certain expenses are influenced by the volume of securities transactions, level
of interest rates, and overall securities prices. Sustained periods of reduced
volume, or loss of clients, could have adverse effects upon profitability.
Since the majority of Registrant's assets are highly liquid, they are not
significantly affected by inflation. Securities owned
-9-
<PAGE> 10
are carried at market value, with all adjustments to market value included in
earnings, thus the effects of inflation are generally reflected in historical
earnings.
Liquidity and Capital Funds
Registrant maintains a highly liquid position at all times with most
of its assets consisting of receivables from customers (collateralized by
readily marketable securities) and brokers (essentially collectable on demand
against delivery of securities). A significant amount of leverage is inherent
in carrying these assets.
Registrant's assets are principally financed by capital funds,
short-term bank loans, and payables to customers and brokers. At September 29,
1995, FoM had available lines of credit on a secured basis with five banks
aggregating $112,000,000. FoM had borrowed $29,500,000 against these lines of
credit at September 29, 1995.
Under separate agreements, Registrant had available short-term lines
of credit with two banks on an unsecured basis, aggregating to $8,000,000.
There were no borrowings against these lines of credit at September 29, 1995.
Certain minimum amounts of capital must be maintained to satisfy
regulatory requirements applicable to FoM. These requirements include the
uniform net capital rule, designed to assure a measure of financial integrity
and liquidity of registered broker-dealers and provide minimum acceptable
levels of net capital to satisfy commitments to customers. Unless the defined
minimum capital is maintained, FoM would be prohibited from paying dividends to
the parent company. At September 29, 1995, FoM was in compliance with the
uniform net capital rule and had net capital of more than nine times the
minimum required.
Management believes that funds provided by net cash earnings combined
with the liquidity of its assets, its existing capital base, and its available
lines of credit, are fully adequate to meet Registrant's financing needs for
the foreseeable future.
Registrant does not engage in any derivative trading that would result
in any additional off-balance sheet risk.
Contingent Matters
FoM is the subject of claims made in several civil actions arising out
of its business as a broker-dealer and as an investment banker. Registrant
provides for costs related to contingencies when a loss is probable and the
amount is reasonably determinable. While these actions in the aggregate seek
substantial amounts, management believes that their disposition will not have a
material adverse effect on the financial position of Registrant. However,
depending on the amount and timing of a potential unfavorable resolution to a
contingency, it is possible that Registrant's future results of operations or
cash flows could be materially adversely affected for the relevant reporting
period.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
-10-
<PAGE> 11
[LETTERHEAD OF ERNST & YOUNG LLP]
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
First of Michigan Capital Corporation
We have audited the accompanying consolidated balance sheets of First
of Michigan Capital Corporation and subsidiaries as of September 29, 1995 and
September 30, 1994, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three fiscal years in the
period ended September 29, 1995. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and related schedules. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of First of Michigan Capital Corporation and subsidiaries at September 29, 1995
and September 30, 1994, and the consolidated results of their operations and
their cash flows for each of the three fiscal years in the period ended
September 29, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
November 10, 1995
-11-
<PAGE> 12
FIRST OF MICHIGAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------
SEPT. 29, SEPT. 30, SEPT. 24,
1995 1994 1993
-------------- --------------- --------------
<S> <C> <C> <C>
REVENUES
Commissions . . . . . . . . . . . . . . . . . . . . . . . $34,216,980 $37,505,448 $36,932,603
Principal transactions . . . . . . . . . . . . . . . . . . 4,798,999 3,750,159 4,321,540
Investment banking . . . . . . . . . . . . . . . . . . . . 10,084,865 8,866,447 12,061,078
Interest . . . . . . . . . . . . . . . . . . . . . . . . 6,269,918 4,525,541 3,088,422
Insurance commissions . . . . . . . . . . . . . . . . . . 2,758,840 3,338,579 3,090,235
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 4,735,312 3,210,344 3,535,704
-------------------------------------------------------------
62,864,914 61,196,518 63,029,582
EXPENSES
Employee compensation and benefits . . . . . . . . . . . . 35,255,683 31,206,024 33,550,315
Floor brokerage, exchange, clearance and other fees . . . 4,834,407 5,938,459 5,799,617
Communications . . . . . . . . . . . . . . . . . . . . . 1,180,344 983,186 929,459
Interest . . . . . . . . . . . . . . . . . . . . . . . . 3,001,553 1,719,427 826,097
Occupancy and equipment rental . . . . . . . . . . . . . 4,552,852 3,589,656 3,314,354
Taxes, other than income taxes . . . . . . . . . . . . . 2,776,992 2,522,564 2,575,605
Office supplies and expenses . . . . . . . . . . . . . . 3,620,573 2,829,787 2,528,537
Merger related expenses . . . . . . . . . . . . . . . . . -- 3,385,590 3,545,983
Other operating expenses . . . . . . . . . . . . . . . . 7,249,443 7,553,932 4,739,148
-------------------------------------------------------------
62,471,847 59,728,625 57,809,115
-------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . 393,067 1,467,893 5,220,467
Provision for income taxes . . . . . . . . . . . . . . . . 285,000 425,000 1,820,000
-------------------------------------------------------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 108,067 $ 1,042,893 $ 3,400,467
=============================================================
Net income per share . . . . . . . . . . . . . . . . . . $.04 $.35 $1.16
===============================================================
Cash dividends per share . . . . . . . . . . . . . . . . . $.18 $.16 $.36
===============================================================
Average number of common and common equivalent
shares outstanding for income per share . . . . . . . 2,855,460 2,952,969 2,936,217
</TABLE>
See notes to consolidated financial statements.
-12-
<PAGE> 13
FIRST OF MICHIGAN CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------
SEPT. 29, SEPT. 30,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,995,513 $ 2,612,487
Receivable from brokers and dealers . . . . . . . . . . . . . . . . . . . . . 4,527,882 2,673,582
Receivable from customers . . . . . . . . . . . . . . . . . . . . . . . . . . 79,368,761 73,536,305
Notes receivable from employees . . . . . . . . . . . . . . . . . . . . . . . 2,126,096 2,278,673
Other accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,879,608 1,756,211
Securities owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,387,294 4,656,986
Memberships in exchanges, at cost
(market value - $856,000 in 1995 and $ 918,000 in 1994) . . . . . . . . . . 430,503 430,503
Equipment and leasehold improvements, at depreciated cost . . . . . . . . . . 2,828,932 2,597,239
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711,609 1,134,887
Net cash surrender value of life insurance . . . . . . . . . . . . . . . . . 1,816,471 6,874,924
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,892,000 2,541,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,492,805 2,675,156
-------------------------------------
$ 110,457,474 $ 103,767,953
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,500,000 $ 26,250,000
Payable to brokers and dealers . . . . . . . . . . . . . . . . . . . . . . . . 18,165,571 16,368,327
Payable to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,070,912 12,685,476
Securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . 530,748 318,255
Employee compensation payable . . . . . . . . . . . . . . . . . . . . . . . . 12,964,140 12,335,278
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 172,913
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452,587 126,178
Other accounts payable and accrued liabilities . . . . . . . . . . . . . . . 3,762,123 2,884,546
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226,623 1,500,000
-------------------------------------
80,672,704 72,640,973
Commitments and contingencies - See notes E & F.
STOCKHOLDERS' EQUITY:
Serial preferred stock, $.10 par value, 5,000,000
shares authorized and unissued
Common stock, $ .10 par value, 10,000,000 shares authorized, 2,891,558
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,156 289,156
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . 3,687,348 3,767,157
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,803,153 27,202,524
-------------------------------------
30,779,657 31,258,837
Less treasury stock, at cost (80,116 shares in 1995 and 9,674 in 1994) (994,887) (131,857)
-------------------------------------
Total Stockholders' Equity 29,784,770 31,126,980
-------------------------------------
$110,457,474 $ 103,767,953
=====================================
</TABLE>
See notes to consolidated financial statements.
-13-
<PAGE> 14
FIRST OF MICHIGAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
SEPT. 29, SEPT. 30, SEPT. 24,
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,067 $ 1,042,893 $ 3,400,467
Noncash items included in net income:
Depreciation and amortization . . . . . . . . . . . . . . . . . 666,889 314,638 330,793
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . (351,000) (281,000) 341,000
Gain on sale of fixed assets . . . . . . . . . . . . . . . . . . (2,963) (499) (27,454)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (332,375) (38,880) (57,135)
-----------------------------------------
88,618 1,037,152 3,987,671
(Increase) decrease in operating receivables:
Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . (1,854,300) 193,760 131,666
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,832,456) (16,709,935) (16,419,334)
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,577 1,360,145 (3,162,715)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (123,397) 12,521 (843,662)
Increase (decrease) in operating payables:
Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . 1,797,244 6,559,493 4,690,507
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,385,436 (4,205,493) 2,980,341
Employee compensation . . . . . . . . . . . . . . . . . . . . . 628,862 (1,090,171) 408,995
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 326,409 (20,962) (394,603)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877,577 794,166 (87,712)
(Increase) decrease in:
Securities inventory . . . . . . . . . . . . . . . . . . . . . . (3,730,308) 1,196,797 2,080,180
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5,240,804 (1,659,999) 80,106
Increase (decrease) in:
Securities sold, not yet purchased . . . . . . . . . . . . . . . 212,493 (231,664) 316,872
-----------------------------------------
(919,059) (13,801,342) (10,219,359)
-----------------------------------------
CASH USED FOR OPERATING ACTIVITIES . . . . . . . . . . . . . . . . (830,441) (12,764,190) (6,231,688)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings . . . . . . . . . . . . . . . . . 3,250,000 14,250,000 9,500,000
Proceeds from employee stock transactions . . . . . . . . . . . . . 306,533 419,167 534,076
Payments for repurchases of common stock . . . . . . . . . . . . . (1,249,372) (625,475) (1,312)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (680,351) (1,130,329) (2,799,991)
-----------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . 1,626,810 12,913,363 7,232,773
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment account securities . . . . . . -- 712,319 429,090
Purchase of investment account securities . . . . . . . . . . . -- -- (61,000)
Net payments for equipment and leasehold improvements . . . . . (1,168,996) (514,423) (257,775)
Purchases, advances and other activity in
other investments-net . . . . . . . . . . . . . . . . . . . . . 755,653 (11,510) (503,870)
-----------------------------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES . . . . . . . . . . (413,343) 186,386 (393,555)
-----------------------------------------
Increase in cash and cash equivalents . . . . . . . . . . . . . . . 383,026 335,559 607,530
-----------------------------------------
Cash and cash equivalents at beginning of year . . . . . . . . . . 2,612,487 2,276,928 1,669,398
-----------------------------------------
Cash and cash equivalents at end of year . . . . . . . . . . . . . $2,995,513 $ 2,612,487 $ 2,276,928
=========================================
</TABLE>
See notes to consolidated financial statements.
-14-
<PAGE> 15
FIRST OF MICHIGAN CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ISSUED TREASURY STOCK
--------------------- CAPITAL --------------------- TOTAL
NUMBER AGGREGATE IN EXCESS RETAINED NUMBER OF STOCKHOLDERS'
OF SHARES PAR VALUE OF PAR VALUE EARNINGS SHARES COST EQUITY
----------- ----------- -------------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at September 26, 1992 . . . . 2,584,988 $258,499 $3,339,501 $24,272,709 -- $ -- $27,870,709
Net income . . . . . . . . . . . . . -- -- -- 3,400,467 -- -- 3,400,467
Cash dividends declared . . . . . . . -- -- -- (1,051,516) -- -- (1,051,516)
Purchase of treasury shares . . . . . -- -- -- -- (100) (1,312) (1,312)
Shares issued under stock option
plans . . . . . . . . . . . . . . . 43,802 4,380 528,384 -- 100 1,312 534,076
----------------------------------------------------------------------------------------
Balances at September 24, 1993 . . . . 2,628,790 262,879 3,867,885 26,621,660 -- -- 30,752,424
Net income . . . . . . . . . . . . . -- -- -- 1,042,893 -- -- 1,042,893
Cash dividends declared . . . . . . . -- -- -- (462,029) -- -- (462,029)
Purchase of treasury shares . . . . . -- -- -- -- (46,579) (625,475) (625,475)
Shares issued under stock option
plans . . . . . . . . . . . . . . . -- -- (74,451) -- 36,905 493,618 419,167
Stock dividend . . . . . . . . . . . 262,768 26,277 (26,277) -- -- -- --
----------------------------------------------------------------------------------------
Balances at September 30, 1994 . . . . 2,891,558 289,156 3,767,157 27,202,524 (9,674) (131,857) 31,126,980
Net income . . . . . . . . . . . . . -- -- -- 108,067 -- -- 108,067
Cash dividends declared . . . . . . . -- -- -- (507,438) -- -- (507,438)
Purchase of treasury shares . . . . . -- -- -- -- (98,222) (1,249,372) (1,249,372)
Shares issued under stock options
plans . . . . . . . . . . . . . . . -- -- (79,809) -- 27,780 386,342 306,533
----------------------------------------------------------------------------------------
Balances at September 29, 1995 . . . . 2,891,558 $289,156 $3,687,348 $26,803,153 (80,116) $(994,887) $29,784,770
========================================================================================
</TABLE>
See notes to consolidated financial statements.
-15-
<PAGE> 16
FIRST OF MICHIGAN CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The consolidated financial statements include the accounts and
operations of First of Michigan Capital Corporation and its subsidiary
companies (the Company) including First of Michigan Corporation, (the
Corporation), a registered securities broker-dealer and a member organization
of the New York Stock Exchange, Inc., after elimination of all significant
intercompany accounts and transactions.
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Accounts of officers and employees are included in receivable from and
payable to customers, as they are subject to the normal terms and regulations
as to payment and, in the aggregate, are not significant.
Securities owned and securities sold, not yet purchased, consist of
the Company's trading accounts carried at market value. Unrealized gains and
losses are reflected in operations. Sales of securities, not yet purchased,
represent an obligation of the Company to deliver specified equity securities
at a predetermined date and price. The Company will be obligated to acquire the
required securities at prevailing market prices in the future to satisfy this
obligation.
Securities transactions and related revenues and expenses are recorded
on a settlement date basis which does not differ materially from a trade date
basis. The risk of loss on unsettled transactions is the same as settled
transactions and relates to the customer's or broker's inability to meet the
terms of their contracts. Credit risk is reduced by the industry policy of
obtaining and maintaining adequate collateral until the commitment is
completed.
Depreciation of equipment is provided using the straight-line basis
over the estimated useful lives of the assets. Leasehold improvements are
amortized using the straight-line method over the term of the lease or the
useful life of the improvement, whichever is less. Amortization of assets
recorded under capital leases is included in depreciation expense.
Investment account securities are carried at the lower of cost or
market. Certain other investments are accounted for on the equity method. The
Company's equity in such operations is not material.
Net income per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding, assuming dilutive
stock options were exercised at the beginning of each quarter or at the date of
issuance, if later, with applicable proceeds used to acquire additional
treasury shares at the average market price.
The Company is a party to financial instruments with off-balance-sheet
risk in its normal course of business. The Company is required, in the event of
the non-delivery of customers' securities owed the Company by other
broker-dealers, or by its customers, to purchase identical securities in the
open market. Such purchases might result in losses not reflected in the
accompanying financial statements. The market values of securities owed the
Company approximates the amounts payable.
Certain amounts in the prior years have been re-classified to be to be
consistent with the 1995 presentation.
-16-
<PAGE> 17
NOTE B
BROKERS, DEALERS AND CUSTOMERS
The components of the receivable from and payable to brokers and
dealers are as shown.
Receivables from brokers generally are collected within thirty days
and are collateralized by securities in physical possession, on deposit, or
receivable from customers or other brokers. The Company does business with
brokers that for the most part are members of the major securities exchanges.
The Company monitors the credit standing of each broker-dealer and
customer that it conducts business with. In addition, the Company monitors the
market value of collateral held and the market value of securities receivable
from others. It is the Company's policy to request and obtain additional
collateral when exposure to loss exists. The value of securities owned by
customers and held as collateral for these receivables is not included in the
balance sheet. Payable to customers includes free credit balances of $7,557,132
at September 29, 1995 and $8,344,946 at September 30, 1994. Interest paid on
stock loan transactions approximated $862,000, $455,000 and $127,000 for the
years ended September 29, 1995, September 30, 1994 and September 24, 1993,
respectively.
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
SEPT. 29, SEPT. 30,
1995 1994
------------ ------------
<S> <C> <C>
Receivable from brokers and dealers:
Securities failed-to-deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 233,145 $ 348,399
Deposits on securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,280,000 2,302,500
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,737 22,683
-----------------------------
$ 4,527,882 $ 2,673,582
=============================
Payable to brokers and dealers:
Securities failed-to-receive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 364,409 $ 239,569
Deposits received for securities loaned . . . . . . . . . . . . . . . . . . . . . . . . 16,737,100 15,358,150
Clearing organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890,934 770,608
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,128 --
-----------------------------
$ 18,165,571 $ 16,368,327
=============================
</TABLE>
NOTE C
SECURITIES OWNED
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
SEPT. 29, SEPT. 30,
Securities owned are as shown. 1995 1994
------------ -----------
<S> <C> <C>
Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,743,784 $ 2,020,058
Corporate stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,761,686 2,002,429
Corporate obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,124,399 634,499
U.S. Government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757,425 --
-----------------------------
$ 8,387,294 $ 4,656,986
=============================
</TABLE>
NOTE D
BANK CREDIT ARRANGEMENTS
First of Michigan Corporation has available lines of credit on a
secured basis with five banks aggregating $112,000,000. The Corporation had
borrowed $29,500,000 against these lines of credit at September 29, 1995. There
were $26,250,000 in borrowings outstanding against these lines of credit at
September 30, 1994. Interest is at the banks' broker call loan interest rate.
The lines of credit may be withdrawn at the sole discretion of the banks.
-17-
<PAGE> 18
Under separate agreements, First of Michigan Capital Corporation has
available short-term lines of credit on an unsecured basis, aggregating
$8,000,000 with two banks. Interest is at the banks' broker call loan interest
rate. First of Michigan Capital Corporation had no borrowings against these
lines of credit at September 29, 1995 or at September 30, 1994.
Interest paid for the years ended September 29, 1995, September 30,
1994 and September 24, 1993, exclusive of amounts for stock loaned referred to
in Note B, was $1,996,000, $1,201,000 and $684,000, respectively. The weighted
average interest rate paid for the fiscal year ended September 29, 1995 was
6.09% and for the fiscal year ended September 30, 1994 was 5.39%.
NOTE E
COMMITMENTS AND CONTINGENCIES
As of September 29, 1995, First of Michigan Corporation pledged to a
clearing corporation customer securities valued at approximately $2,400,000
which satisfied margin deposit requirements of $1,673,153 at that date.
At September 29, 1995, the aggregate minimum rental commitments under
noncancellable leases and contracts for office space and equipment, expiring
1996 through 2005, are as shown.
Certain of the office leases contain renewal options ranging from one
to five years. The office leases generally provide for rent escalations
resulting from increased assessments for real estate taxes and other charges.
Annual rental expense for office space and equipment was approximately
$3,081,000 in 1995, $2,400,000 in 1994 and $2,170,000 in 1993.
<TABLE>
<CAPTION>
RENTAL COMMITMENTS: CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 336,000 $ 2,396,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,000 2,098,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,000 1,195,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,000 1,043,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 402,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585,000
----------- -----------
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344,000 $ 7,719,000
----------- ===========
Amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,000
-----------
Present value of net minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200,000
===========
</TABLE>
In the normal course of business, First of Michigan Corporation enters
into underwriting commitments. Transactions relating to such underwriting
commitments which were open at September 29, 1995 and subsequently settled, had
no material effect on the financial statements as of that date.
First of Michigan Corporation is the subject of claims made in
several civil actions arising out of its business as a broker-dealer and as an
investment banker. While these actions in the aggregate seek substantial
amounts, management believes that their disposition will not have a material
adverse effect on the financial position of the Company.
NOTE F
TERMINATION OF MERGER AND RELATED EXPENSES
On January 10, 1993, the Company and Comerica Incorporated (Comerica)
entered into an Agreement and Plan of Merger (Merger Agreement). The Company
was notified on March 31, 1993 by Comerica that it was terminating the Merger
Agreement.
As a result of the termination of the Merger Agreement, First of
Michigan Corporation entered into additional retention agreements with certain
investment executives, covering a three year period. The amortization of these
agreements resulted in compensation expenses of approximately $1,311,000 in
1995. Approximately $1,383,000 in 1994 and $699,000 in 1993 of amortization
was included in merger-related expenses. At September 29, 1995, approximately
$673,000 of the notes receivable from employees represents the unamortized
portion of these agreements, which will be amortized ratably over the next six
months.
-18-
<PAGE> 19
NOTE G
STOCK OPTIONS
The Company has a Stock Option Plan for its employees under which the
Company may grant options for up to 550,000 shares of common stock at a price
not less than 85% of the market value of the common stock on the date of grant.
All options granted through September 29, 1995 have prices equal to at least
95% of the market value at date of grant. Options become exercisable after 3
years but not later than 5 years from date of grant except options for 16,225
shares at $7.16 per share granted December 12, 1990 and options for 9,900
shares at $9.55 per share granted December 27, 1991, which become exercisable
after 5 years but not later than 7 years from date of grant, and options for
90,000 shares and 30,000 shares at $13.38 and $16.72, respectively, granted
March 29, 1994, which become exercisable at a rate of 20% after each year until
the end of year 5, when all options are vested, and which expire March 29, 2001
and April 8, 1999, respectively. Options for 9,000 shares, 11,500 shares,
8,000 shares and 8,000 shares were granted on March 16, 1995 at prices of
$12.88, $13.38, $13.50 and $14.25, respectively, which became exercisable upon
the attainment of specific performance and objectives and which expire March
16, 2005. Additional option information is shown.
Options outstanding at September 29, 1995, of which 71,181 were
exercisable, carried exercise prices ranging from $8.41 to $16.72 per share
(weighted average of $11.09 per share) and 271,668 shares were available for
future grants.
The Company has a separate Stock Option Plan for its non-employee
Directors under which the Company may grant options for up to 55,000 shares of
common stock at a price not less than the market value of the common stock on
the date of grant. Options become exercisable after 5 years but no later than 7
years from date of grant. Additional option information is shown.
Options outstanding at September 29, 1995, of which none were
exercisable, carried exercise prices ranging from $7.16 to $9.55 per share
(weighted average of $8.05 per share) and 48,400 shares were available for
future grants.
<TABLE>
<CAPTION>
EMPLOYEE STOCK OPTION PLAN 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Outstanding at beginning of fiscal year . . . . . . . . . . 384,040 265,012 252,300
Granted (a) . . . . . . . . . . . . . . . . . . . . . . 36,500 210,204 79,959
Exercised (b) . . . . . . . . . . . . . . . . . . . . . (27,780) (38,598) (48,292)
Cancelled or expired . . . . . . . . . . . . . . . . . (8,731) (52,578) (18,955)
---------------------------------------------------------
Outstanding at end of fiscal year (c) . . . . . . . . . 384,029 384,040 265,012
=========================================================
<CAPTION>
DIRECTORS STOCK OPTION PLAN 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Outstanding at beginning of fiscal year . . . . . . . . . . . 6,600 8,800 8,800
Granted . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Exercised . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Cancelled or expired . . . . . . . . . . . . . . . . . -- (2,200) --
---------------------------------------------------------
Outstanding at end of fiscal year . . . . . . . . . . . 6,600 6,600 8,800
=========================================================
</TABLE>
(a) Grant prices per share were $12.88, $13.38, $13.50 and $14.25 in 1995,
$12.61, $13.38 and $16.72 in 1994 and $10.00 in 1993.
(b) Weighted average price per share of $9.81 in 1995, $10.04 in 1994 and
$10.55 in 1993.
(c) Includes 73,306 in 1995, 103,078 shares in 1994 and 176,437 shares in 1993
granted under a previous Stock Option Plan.
NOTE H
CAPITAL REQUIREMENTS
The Corporation is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule (rule 15c3-1), which requires the maintenance of
minimum net capital. The Corporation has elected to use the alternative method,
permitted by the rule, which requires that the Corporation maintain minimum net
capital, as defined, equal to the greater of $263,000 or 2 percent of aggregate
debit balances arising from customer transactions, as defined. The net capital
rule of the New York Stock Exchange, Inc.,
-19-
<PAGE> 20
also provides that equity capital may not be withdrawn or cash dividends paid
if resulting net capital would be less than 5 percent of aggregate debits.
At September 29, 1995, the Corporation had net capital of $17,054,548
which was 20 percent of aggregate debit balances and $15,416,134 in excess of
required net capital.
NOTE I
INCOME TAXES
<TABLE>
<CAPTION>
The provision for income taxes consists of the following: YEAR ENDED
--------------------------------------------------------------
SEPT. 29, SEPT. 30, SEPT. 24,
1995 1994 1993
------------- ------------- ------------
<S> <C> <C> <C>
Federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . $ 611,000 $ 681,000 $ 1,419,000
Deferred (credit) . . . . . . . . . . . . . . . . . . . . . (351,000) (281,000) 341,000
--------------------------------------------------------------
260,000 400,000 1,760,000
State and local . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 60,000
--------------------------------------------------------------
$ 285,000 $425,000 $ 1,820,000
==============================================================
</TABLE>
<TABLE>
<CAPTION>
A reconciliation of the total income tax provision and the
amount computed by applying the statutory federal income
tax rate of 34% to earnings before income taxes is as follows: YEAR ENDED
-------------------------------------------------------------
SEPT. 29, SEPT. 30, SEPT. 24,
1995 1994 1993
------------- -------------- ------------
<S> <C> <C> <C>
Computed amounts . . . . . . . . . . . . . . . . . . . . . . $ 135,000 $ 499,000 $ 1,775,000
Municipal interest income . . . . . . . . . . . . . . . . . . (61,000) (72,000) (90,000)
Redemption of life insurances policies . . . . . . . . . . . 312,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (126,000) (27,000) 75,000
-------------------------------------------------------------
Federal Income Tax Provision . . . . . . . . . . . . . . . . $ 260,000 $ 400,000 $ 1,760,000
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of September 29, 1995 and September 30, 1994 are as follows:
SEPT. 29, SEPT. 30,
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,000 $ 170,000
Lease payment accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,000 53,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000 26,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 45,000
------------------------------------
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 255,000 294,000
Deferred tax assets:
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954,000 1,754,000
Retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743,000 777,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 304,000
------------------------------------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,147,000 2,835,000
------------------------------------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,892,000 $ 2,541,000
====================================
</TABLE>
-20-
<PAGE> 21
Federal, state and local income taxes paid during the year
approximated $176,000 in 1995, $861,000 in 1994 and $1,874,000 in 1993.
NOTE J - RETIREMENT PLANS
The Company has various defined contribution retirement plans covering
substantially all full-time employees. Contributions to the plans are made at
the discretion of the Company's Board of Directors. The Company also sponsors
an unfunded Supplemental Executive Retirement Program (SERP), which is a
non-qualified plan that provides certain current and former officers additional
retirement benefits.
The unfunded status for this plan was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
SEPT. 29, SEPT. 30,
1995 1994
------------ ------------
<S> <C> <C>
Projected Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,169,569 $ 3,572,199
Accumulated Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 3,101,747 2,816,328
Minimum Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,101,747 2,816,328
Unrecognized Net Transition Obligation . . . . . . . . . . . . . . . . . . . . . 702,883 927,129
Net Recorded Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,466,686 2,645,070
</TABLE>
The cost of the retirement plans, including the SERP plan expense of
$355,187, $556,748, and $386,654, for the fiscal years ended in 1995, 1994 and
1993, respectively, consisted of the following components:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------
SEPT. 29, SEPT. 30, SEPT. 24,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Service Cost . . . . . . . . . . . . . . . . . . . . . . . . $ 63,934 $ 139,187 $ 81,197
Interest Cost . . . . . . . . . . . . . . . . . . . . . . . . 202,457 289,509 201,060
Amortization . . . . . . . . . . . . . . . . . . . . . . . . 88,796 128,052 104,397
Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . . . . 184,370 245,456 275,000
------------ ------------ ------------
Total Costs . . . . . . . . . . . . . . . . . . . . . . . . . $ 539,557 $ 802,204 $ 661,654
============ ============ ============
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation was 8% and 5% at September 29, 1995, September 30,
1994 and at September 24, 1993.
-21-
<PAGE> 22
NOTE K
QUARTERLY INFORMATION (UNAUDITED)
The table shown below sets forth the unaudited results of operations
of the Company by quarter for 1995 and 1994. The information was prepared in
conformity with generally accepted accounting principles. As such, it reflects
all adjustments which were, in the opinion of management, necessary for a fair
presentation of the results of operations for the periods presented. The nature
of the Company's business is such that the results of any interim period are
not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
DEC. 30, MARCH 31, JUNE 30, SEPT. 29,
1994 1995 1995 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 14,048,655 $ 14,643,998 $ 15,648,355 $ 18,523,906
Expenses . . . . . . . . . . . . . . . . . . . . . . . . 13,551,982 14,787,718 16,117,731 18,014,416
---------------------------------------------------------------
Income (loss) before income taxes . . . . . . . . . . . . 496,673 (143,720) (469,376) 509,490
Provision (credit) for income taxes . . . . . . . . . . . 130,000 (105,000) (240,000) 500,000
---------------------------------------------------------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 366,673 $ (38,720) $ (229,376) $ 9,490
Net income (loss) per share . . . . . . . . . . . . . . . $ .13 $ (.02) $ (.08) $ .01
=================================================================
Dividends per share . . . . . . . . . . . . . . . . . . . $ .06 $ .06 $ .06 $ .00
================================================================
Stock price range:
High . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.25 $ 12.50 $ 11.125 $ 10.125
Low . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13.00 $ 10.50 $ 9.25 $ 8.875
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------
DEC. 31, MARCH 25, JUNE 24, SEPT. 30,
1993 1994 1994 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 16,474,646 $ 15,353,056 $ 14,925,020 $ 14,443,796
Expenses . . . . . . . . . . . . . . . . . . . . . . . . 14,871,413 15,219,224 14,788,002 14,849,986(a)
--------------------------------------------------------------------
Income (loss) before income taxes . . . . . . . . . . . . 1,603,233 133,832 137,018 (406,190)
Provision (credit) for income taxes . . . . . . . . . . . 545,000 20,000 10,000 (150,000)
--------------------------------------------------------------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 1,058,233 $ 113,832 $ 127,018 $ (256,190)
====================================================================
Net income (loss) per share . . . . . . . . . . . . . . . $ .36 $ .04 $ .04 $ (.09)
====================================================================
Dividends per share . . . . . . . . . . . . . . . . . . . $ .00 $ .05 $ .05 $ .06
====================================================================
Stock price range:
High . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.61 $ 13.50 $ 13.50 $ 14.38
Low . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.93 $ 12.38 $ 13.00 $ 12.88
</TABLE>
(a) Expenses include an accrual of $600,000 for legal costs.
-22-
<PAGE> 23
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
FIRST OF MICHIGAN CAPITAL CORPORATION
(PARENT COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 29, 1995 September 30, 1994
------ ------------------ ------------------
<S> <C> <C>
Cash $ 1,332 $ 300,868
Dividend receivable from subsidiary (a) -- 172,913
Receivable from affiliates (a) 644,600 714,531
Prepaid expenses 37,500 60,940
Investments in subsidiaries, at equity (a) 36,096,071 35,212,063
Other Investments 128,251 500,001
Fixed Assets 1,200,000 1,526,026
----------- -----------
$38,107,754 $38,487,342
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to subsidiaries (a) $ 6,847,454 $ 5,687,449
Other Accounts Payable 248,907 --
Dividend payable -- 172,913
Capital lease obligation 1,226,623 1,500,000
----------- -----------
8,322,984 7,360,362
----------- -----------
Stockholders' equity:
Serial preferred stock--none
issued
Common stock 289,156 289,156
Capital in excess of par value 3,687,348 3,767,157
Retained earnings 26,803,153 27,202,524
----------- -----------
30,779,657 31,258,837
Less treasury stock, at cost (994,887) (131,857)
----------- -----------
Total Stockholders' equity 29,784,770 31,126,980
----------- -----------
$38,107,754 $38,487,342
=========== ===========
</TABLE>
- -----------------------
(a) Eliminated upon consolidation
Notes to Consolidated Financial Statements are incorporated herein by
reference.
-23-
<PAGE> 24
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
FIRST OF MICHIGAN CAPITAL CORPORATION
(PARENT COMPANY)
CONDENSED INCOME STATEMENTS
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
Income:
Interest $ 1,814 $ 5,063 $ 6,721
Dividends -- 23,036 28,741
Income from
investments 332,386 34,977 54,699
Other (a) 336,000 -- --
--------- ---------- ---------
670,200 63,076 90,161
Expenses:
Interest expense (b) 461,837 274,087 232,066
General and
administrative expenses 1,176,743* 521,137 430,121
--------- ---------- ----------
1,638,580 795,224 662,187
Income (loss) before
income tax credits and
equity in net income of
subsidiaries (968,380) (732,148) (572,026)
Federal and state
income tax (credits)
(c) (365,000) (263,000) (233,000)
-------- ----------- -----------
(603,380) (469,148) (339,026)
Equity in net income of
subsidiaries (a) 711,447 1,512,041 3,739,493
--------- ---------- ----------
Net Income $ 108,067 $1,042,893 $3,400,467
========= ========== ==========
</TABLE>
- ----------------------
(a) Eliminated upon consolidation.
(b) Includes $399,214, $274,087, and $232,066 eliminated upon
consolidation for the years ended September 29, 1995, September 30, 1994, and
September 24, 1993, respectively.
(c) Calculated on a separate-return basis; the tax credit results
from the utilization of the loss in the consolidated return.
*Includes $300,000 depreciation expense related to a capital lease, as
well as $346,230 in expenses associated with a tender offer made and withdrawn
by Registrant during fiscal 1995.
Notes to Consolidated Financial Statements are incorporated herein by
reference.
-24-
<PAGE> 25
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
FIRST OF MICHIGAN CAPITAL CORPORATION
(PARENT COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 108,067 $ 1,042,893 $ 3,400,467
Noncash items included
in net income:
Equity in net income
of subsidiaries (884,008) (1,202,277) (3,117,070)
Depreciation and
amortization 300,000 -- --
Gain on sale of investment
account securities -- (38,880) (57,135)
Other (332,375) -- --
---------------------------------------------------------------------------------------------------------
(808,316) (198,264) 226,262
Decrease in operating
receivables:
Subsidiaries 69,931 14,303 76,285
Increase in operating
payables:
Subsidiaries 1,160,005 573,807 221,648
Other 248,907 -- --
(Increase) decrease in
other assets: 23,440 (10,940) (4,167)
---------------------------------------------------------------------------------------------------------
1,502,283 577,170 293,766
---------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING
ACTIVITIES $ 693,967 $ 378,906 $ 520,028
</TABLE>
-25-
<PAGE> 26
SCHEDULE III--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
FIRST OF MICHIGAN CAPITAL CORPORATION
(PARENT COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
------------------ ------------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from:
Employee stock transactions $ 306,533 $ 419,167 $ 534,076
Net payments for:
Repurchases of common stock (1,249,372) (625,475) (1,312)
Dividends paid (680,351) (1,130,329) (2,799,991)
------------------------------------------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (1,623,190) (1,336,637) (2,267,227)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of
investment account securities -- 712,319 429,090
Purchase of
investment account
securities -- -- (61,000)
Payments for
equipment - net (247,351) (26,026) --
Purchase, advances
and other activity
in other
investments - net 877,038 99,239 1,827,872
------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY
INVESTING ACTIVITIES 629,687 785,532 2,195,962
------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (299,536) (172,199) 448,763
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 300,868 473,067 24,304
------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 1,332 $ 300,868 $ 473,067
============================================================================================================
Interest payments $ 62,623 $ -- $ --
</TABLE>
Notes to Consolidated Financial Statements are incorporated herein by
reference.
-26-
<PAGE> 27
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FIRST OF MICHIGAN CAPITAL CORPORATION
(PARENT COMPANY)
<TABLE>
<CAPTION>
Bal. at Beginning Additions Charged Deductions- Balance at
Description of Period to Costs and Expenses Describe End of Period
----------- ----------------- --------------------- ----------- -------------
<S> <C> <C> <C> <C>
Year ended September 29, 1995:
Reserves and allowances
Deducted from Asset Accounts:
Allowances for doubtful
accounts $10,267 $73,000 $73,325(1) $ 9,942
Year ended September 30, 1994:
Reserves and allowances
Deducted from Asset Accounts:
Allowances for doubtful
accounts $35,867 $30,000 $55,600(1) $10,267
Investment account
valuation reserve 32,604 -- 32,604(2) --
Year ended September 24, 1993:
Reserves and allowance
Deducted from Asset Accounts:
Allowance for doubtful
accounts $49,012 $10,000 $23,145(1) $35,867
Investment account
valuation reserve 16,325 16,279 -- 32,604
</TABLE>
________________________
(1) Uncollectible accounts written off, net of recoveries.
(2) Loss realized on disposition of investment security.
-27-
<PAGE> 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table identifies each Director of the Registrant and
provides information as of December 19, 1995 concerning each Director's age,
business background, period of service and current term of office as a
Director, and ownership of Common Stock, based in each case on data furnished
by him. It also sets forth the Common Stock ownership as of that date of each
Executive Officer of the Registrant named in the Summary Compensation Table
under Item 11 below who is not also a Director of the Registrant, and of all
Directors and Executive Officers as a group, based on information so furnished.
Except as indicated by footnote, each person exercises sole voting and
dispositive power with respect to shares shown.
-28-
<PAGE> 29
<TABLE>
<CAPTION>
SHARES OF COMMON
NAME AND PRINCIPAL OCCUPATION OR SERVED AS A STOCK OWNED PERCENT
EMPLOYMENT AT PRESENT AND FOR DIRECTOR OF THE BENEFICIALLY AT OF
PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS AGE REGISTRANT SINCE DECEMBER 19, 1995(1) CLASS(1)
----------------------------------------- --- ---------------- -------------------- --------
DIRECTORS WHOSE TERMS EXPIRE IN 1996
<S> <C> <C> <C> <C>
Steve Gasper, Jr., President and Chief 48 April 4, 1994 176,854(2) 6.6%
Executive Officer of the Company and of
its principal subsidiary, First of
Michigan Corporation ("FoM"), since April
4, 1994. Executive Vice President,
Fidelity Brokerage Services, Inc., from
September 1989 to January 1994. Prior
thereto, Senior Vice President and
Director of Corporate Marketing, Thomson
McKinnon Financial Group. Member of
Board of Governors, Chicago Stock
Exchange.
Gerard M. Lavin, President, Chief Executive 53 March 16, 1995 0 *
Officer, and a director, Berger
Associates, Inc., a mutual fund management
company. Also Vice President of DST
Systems, Inc. (information processing and
computer software services and products).
From February 1992 to March 1995,
President and Chairman of the Board,
Investors Fiduciary Trust Company. From
February 1989 to April 1992, Chief
Operating Officer, Sunamerica Asset
Management Corporation.
<CAPTION>
DIRECTORS WHOSE TERMS EXPIRE IN 1997
<S> <C> <C> <C> <C>
Geoffrey B. Baker, Investor. (3) 45 April 25, 1985 76,607(3) 2.7%
Joseph M. Mengden, Chairman and Chief 71 June 27, 1968 123,836 4.6%
Executive Officer of Saginaw Bay
Broadcasting Corporation, Saginaw,
Michigan (AM radio station operator),
since March 1992, and President of
Mengden & Associates Ltd., Grosse Pointe,
Michigan, since February 1992. Chairman
of the Board of Registrant and of FoM,
April 1994-95, and Senior Consultant to
Registrant, September 29, 1989 to
March 31, 1992. Prior thereto, Executive
Vice President of Registrant and of FoM.
William H. Cuddy, Partner in the law firm of 60 March 12, 1994 700 *
Day, Berry & Howard. Chairman of the
Board of Registrant since April 25, 1995.
</TABLE>
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<PAGE> 30
DIRECTORS WHOSE TERMS EXPIRE IN 1998
<TABLE>
<S> <C> <C> <C> <C>
Craig P. Baker, Investor. (3) 43 January 27, 1994 679,344(3)(4) 25.4%
Thomas A. McDonnell, President and Chief 50 May 3, 1994 0(5) *
Executive Officer, DST Systems, Inc.
Also a director of DST Systems, Inc.,
Informix Software, Inc., BHA Group, Inc.
(manufacture and supply of after-market
air pollution control equipment), The
Continuum Company (software
development and data processing
services to the insurance industry), and
Nellcor-Puritan Bennett Corporation
(design, manufacture, and distribution of
specialized equipment for emergency,
therapeutic, and surgical pulmonary care).
</TABLE>
NON-DIRECTOR NAMED EXECUTIVES AND GROUP
<TABLE>
<S> <C> <C>
John S. Albright 1,947 *
Conrad W. Koski 57,993 2.2%
Urban A. MacDonald 100(6) *
Charles R. Roberts 151,167(2) 5.6%
All Directors and Executive Officers as a group 1,118,733 41.8%
(12 persons)(1)(2)(3)(4)(5)(6)(7)
</TABLE>
* Less than 0.1%
(1) Where applicable, shares reported as owned include shares
subject to options that are or will become exercisable within
60 days of the date of this Report on Form 10-K. For purposes
of reporting the percentage owned as a group, all such
optioned shares are treated as outstanding, but for purposes
of reporting the percentage owned by an individual only such
of those optioned shares as are held by the individual are
treated as outstanding.
(2) Includes 150,854 shares held by Registrant's Employee Stock
Ownership Plan ("ESOP") as of October 31, 1995. See note (3)
to table under Item 12 below.
(3) Messrs. Geoffrey and Craig Baker are brothers. Shares
reported for each include 21,780 shares as to which voting and
investment power is shared as a co-trustee. See note (2) to
table under Item 12.
(4) Includes 657,564 shares owned by 1888 Limited Partnership of
which Mr. Craig Baker is a general and limited partner. See
note (2) to table under Item 12. Mr. Baker disclaims
beneficial ownership of these shares.
(5) Mr. McDonnell disclaims beneficial ownership of shares owned
by DST. See note (1) to table under Item 12.
(6) Includes 50 shares held by Mr. MacDonald's wife, as to which
he disclaims beneficial ownership.
(7) Shares as to which there is shared voting or investment power
by Directors or Executive Officers are included only once.
See notes to table under Item 12.
The following table provides information as of December 19, 1995
concerning the age and office(s) with the Registrant and its principal
subsidiary, FoM, of each Executive Officer of the Registrant, other than
Mr. Gasper for whom information is provided in the preceding table.
Information concerning the business background of each Executive Officer
listed is provided after the table, in each
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<PAGE> 31
case based on data furnished by such Executive Officer. All Executive
Officers' terms of office as such extend until the next Annual Meeting of
Stockholders of the Registrant and until their successors shall be elected and
qualified. There are no family relationships among the Executive Officers nor
any such relationship of any Executive Officer to any Director.
<TABLE>
<CAPTION>
Position
Name Age Office Held Since
---- --- ------ ----------
<S> <C> <C> <C>
John S. Albright 57 Senior Vice- 1994
President of
Registrant, FoM
Director of Fixed
Income
Conrad W. Koski 50 Executive Vice- 1983
President and
Treasurer of
Registrant and
FoM
Urban A. MacDonald 48 Senior Vice- 1994
President of
Registrant, FoM
Director of
Corporate Finance
Charles R. Roberts 43 Senior Vice- 1994
President of
Registrant, FoM
Director of Sales
and Branches
Lenore P. Denys 45 Senior Vice- 1984
President
and Secretary of
Registrant and FoM
</TABLE>
Before joining FoM as Director of Fixed Income in August 1994, Mr.
Albright served as President of Reflections La Canada, Inc. (restaurant
management), from December 1988 to May 1994. He also has been a Senior
Managing Director of World Data Delivery Systems, Inc. (financial data base
access by fax), from November 1991 to March 1993, and Co-Director of Fixed
Income for Bateman Eichler, Hill Richards (now Kemper Securities, Inc.), from
August 1986 to December 1988. The foundation of Mr. Albright's career in the
fixed income area was as a group vice-president with Michigan-based MBM Group,
Inc.- Manley Bennett, McDonald & Co. prior that firm's acquisition by Thomson
McKinnon Securities.
Mr. MacDonald was engaged by FoM as Director of Corporate Finance in
October 1994, after terminating a 12-year association with another
broker-dealer, Roney & Co. Before leaving Roney, Mr. MacDonald was its
Director of Mergers & Acquisitions for two years. Prior to that period, he was
Director of Investment Banking for Roney, beginning in June 1982. After
leaving Roney in February 1994, Mr. MacDonald established his own company, The
Chesapeake Group, Inc., a merger and acquisition intermediary firm.
Mr. Roberts joined FoM as Director of Sales and Branches in July 1994.
From September 1993 until leaving to join FoM, he held a comparable position
with Roney. Mr. Roberts also has served as
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<PAGE> 32
a regional director for the brokerage firm Stifel, Nicolaus & Company, Inc.,
from December 1992 to September 1993, and in various capacities with
PaineWebber, Inc., including as an investment executive, a regional insurance
coordinator, and (most recently) a branch manager, beginning in August 1979.
Each of the other Executive Officers, Mr. Koski and Ms. Denys, has
served Registrant and FoM in the capacities reported above for over five years.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Information
The table which follows sets forth summary information for
Registrant's 1995 fiscal year and, as applicable, the preceding two fiscal
years with respect to the compensation of Steve Gasper, Jr., Registrant's Chief
Executive Officer, and of each Executive Officer of Registrant who served as
such during fiscal 1995 and whose total salary and bonus compensation for such
fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation(1) Compensation
---------------------- ------------
Awards
------------
Other
Annual Securities
Compen- Underlying All Other
Salary Bonus sation Options/SARs Compensation
Name and Principal Position Year ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steve Gasper, Jr. 1995 $100,000 $500,000 -0- -0- $ 811
President and Chief Executive 1994 50,000 236,667 $178,818 120,000 N/A
Officer (since April 4, 1994) 1993 N/A N/A N/A N/A N/A
John S. Albright 1995 $ 92,584 $110,000 -0- 8,000 $ 246
Senior Vice-President 1994 N/A N/A N/A N/A N/A
(since August 1, 1994)(6) 1993 N/A N/A N/A N/A N/A
Conrad W. Koski 1995 $ 88,731 $ 20,000 -0- -0- $1,364
Executive Vice-President 1994 88,703 98,980 -0- -0- 2,989
and Treasurer 1993 85,291 331,650 -0- -0- 3,846
Urban A. MacDonald 1995 $115,000 $180,930 -0- 8,000 -0-
Senior Vice-President 1994 N/A N/A N/A N/A N/A
(since October 17, 1994)(6) 1993 N/A N/A N/A N/A N/A
Charles R. Roberts 1994 $95,000 $180,000 -0- 8,000 $ 243
Senior Vice-President 1993 N/A N/A N/A N/A N/A
(since July 26, 1994)(6) N/A N/A N/A N/A N/A
</TABLE>
(1) This compensation was received primarily in their capacities with FoM.
In addition to salary paid in respect of services performed during the
pertinent fiscal year, amounts reported in this column include, where
applicable, salary payable for such year but deferred under
Registrant's Deferred Compensation Plan and salary so payable but
contributed on behalf of the named executive to Registrant's Capital
Accumulation Plan, a so-called "401(k) plan." For Mr. Koski, the
amount reported also includes for each fiscal year an amount equal to
the interest paid by him for such year on a then-outstanding loan to
purchase Common Stock, pursuant to the terms of Registrant's Loan
Guaranty Plan.
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<PAGE> 33
(2) This compensation was received primarily in their capacities with FoM.
In addition to bonuses paid in respect of the pertinent fiscal year,
the amounts reported in this column include, where applicable, bonuses
payable for such year but deferred under the Deferred Compensation
Plan or contributed to the Capital Accumulation Plan. For Mr.
MacDonald, the amount reported consists primarily of the share of the
earnings of FoM's Corporate Finance Department payable to him as head
of that department.
(3) The fiscal 1994 amount reported in this column for Mr. Gasper includes
relocation expense reimbursements and an adjustment for the tax effect
of such reimbursements aggregating to $154,026. In accordance with
Commission rules, the other amounts shown in this column do not
include any perquisites or other personal benefits provided to named
executives, which in each case and for each fiscal year did not exceed
the lesser of (a) $50,000 and (b) 10% of the aggregate salary and
bonus reported for the named executive.
(4) All shares reported in this column relate to option grants. The
Registrant has never maintained any plans for the grant of so-called
"freestanding" stock appreciation rights ("SARs").
(5) Amounts reported in this column represent the amounts of Registrant's
contributions for the pertinent fiscal year allocated to the accounts
of then-eligible named executives under its Profit Sharing Retirement
Plan (the "Retirement Plan") and/or its ESOP, both of which are
so-called "defined contribution" plans, and the amounts of "matching"
contributions for the pertinent fiscal year allocated to the accounts
of such named executives under the Capital Accumulation Plan. For
fiscal 1995, the amounts so contributed and allocated under the
Retirement Plan for the accounts of the eligible executives were as
follows: Mr. Gasper, $586; Mr. Koski, $239; and the amounts so
contributed and allocated under the Capital Accumulation Plan were as
follows: Mr. Gasper, $225; Mr. Albright, $246; Mr. Koski, $1,125; Mr.
Roberts, $243. No contributions were made for fiscal 1995 to the
ESOP, which is being discontinued.
(6) Date shown is date of engagement as an officer of FoM. Messrs.
Albright, MacDonald, and Roberts were first appointed Executive
Officers in December 1994. As permitted by rules of the Commission,
fiscal 1994 compensation information is not presented for Messrs.
Albright and Roberts since neither served as an Executive Officer
during that year.
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<PAGE> 34
Stock Options
The table which follows provides information concerning all grants of
options to purchase Common Stock made by the Registrant in respect of fiscal
1995 to the executives named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants (1) Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (2)
------------------------------------------------------------------------------------ -------------------------------
Percent of
Number of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 0%($) 5%($) 10%($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Steve Gasper, Jr. -0-
John S. Albright 8,000 21.9% $13.50 3/16/05 $0 $68,000 $172,000
Conrad W. Koski -0-
Urban A. MacDonald 8,000 21.9% 14.25 3/16/05 $0 $72,000 $182,000
Charles R. Roberts 8,000 21.9% 13.375 3/16/05 $0 $67,000 $171,000
</TABLE>
(1) The grants reported in this table are grants of so-called
"nonqualified" stock options under Registrant's Employee Stock Option
Plan of 1992 (the "1992 Option Plan"). All reported options were
granted on March 16, 1995 at exercise prices equal to the market value
for the Common Stock as of the grant date of hire by FoM, which
exceeded the market value at date of grant, and first become
exercisable on the second anniversary of the grantee's hire date.
Like all options previously granted under the 1992 Option Plan, the
options reported are nontransferable, except by will or the laws of
descent and distribution in the event of death, and, to the extent not
theretofore exercised, will expire automatically if the grantee ceases
to be employed by the Registrant or a subsidiary for any reason other
than death or military or sick leave. Subject to disallowance by the
Compensation/Stock Option Committee of Registrant's Board of Directors
and compliance with other pertinent Plan requirements, each grantee
may elect for the Registrant to withhold a portion of the shares with
respect to which the option is exercised in order to satisfy tax
withholding obligations relating to such exercise.
(2) For purposes of the columns under this heading, it is assumed that the
grant date market value of the number of shares of Common Stock
underlying each reported option will appreciate at the rates of 0%,
5%, and 10% per year, compounded annually, over the full term of the
option. "Potential realizable values" are then calculated by
subtracting from such assumed appreciated amounts the aggregate
exercise price for the number of shares subject to the options at
fiscal year-end. The assumed rates of appreciation used for this
table are used pursuant to Commission rules and are not intended as
predictions of the extent, if any, to which the value of the Common
Stock actually may appreciate over the pertinent period or any other
period. The actual value, if any, which a grantee may realize in
respect of options will depend on the future performance of Registrant
and overall market conditions.
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<PAGE> 35
During fiscal 1995, none of the executives named in the Summary
Compensation Table exercised any options to purchase Common Stock. The
following table provides information concerning unexercised options held by
such named executives at fiscal year-end.
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of
Unexercised Options/SARs Unexercised In-the-Money Options/
at Fiscal SARs at Fiscal
Year-End (#)(1) Year-End ($)(2)
------------------------------- ---------------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Steve Gasper, Jr. 24,000/96,000 $0/$0
John S. Albright 0/8,000 $0/$0
Conrad W. Koski 0/10,725 $0/$14,596
Urban A. MacDonald 0/8,000 $0/$0
Charles R. Roberts 0/8,000 $0/$0
</TABLE>
(1) Where appropriate, adjusted for a 10% stock dividend on the Common
Stock paid January 18, 1994 to holders of record as of December 31,
1993.
(2) For purposes of this column, "value" is determined by subtracting the
aggregate exercise price for the optioned shares from the product of
that number of shares and the closing price for the Common Stock on
the Chicago Stock Exchange as of fiscal year-end.
Certain Contracts
Gasper Employment and Option Contracts. In connection with his
engagement as President and Chief Executive Officer, Steve Gasper, Jr. has an
agreement with Registrant and FoM with respect to his employment thereunder
through March 31, 1997 (the "anticipated term"). Under this employment
agreement, as amended, Mr. Gasper is to receive (a) salary at the annual rate
of $100,000 and (b) through March 31, 1997, a quarterly cash bonus of $125,000.
The agreement also contemplated payment to Mr. Gasper, commencing with the 1995
fiscal year, of an additional annual cash incentive bonus (if earned) measured
in accordance with a performance formula to be developed by Registrant, reduced
by the aggregate quarterly bonuses paid to him for fiscal 1995. The amount of
any incentive bonus earned by Mr. Gasper for Registrant's 1996 or 1997 fiscal
year pursuant to the agreement also is to be reduced by the aggregate quarterly
bonuses paid to him under the agreement for the pertinent fiscal year. The
agreement also provides that if, in light of the provisions of Section 162(m)
of the Internal Revenue Code (which establishes certain limits on deductibility
of compensation paid to the CEO and certain other executives of Registrant),
its Board of Directors hereafter determines it to be advisable to seek
stockholder approval of the incentive bonus performance formula that is
developed, then the formula is to be submitted to the stockholders by the time
of the 1996 annual meeting, and no incentive bonus compensation will be payable
under the agreement unless stockholder approval of the formula is obtained.
Mr. Gasper also was entitled under the agreement to certain relocation expense
reimbursements (which were paid in fiscal 1994) and is entitled to certain
fringe benefits and to participate in Registrant's employee benefit plans.
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<PAGE> 36
Either Mr. Gasper or Registrant may terminate his employment under the
agreement prior to the end of the anticipated term, upon 30 days prior notice
to the other. However, except in certain situations involving disability or
incapacity of Mr. Gasper, if termination is by Registrant other than for Good
Reason (as defined in the agreement), he will be entitled to receive his salary
and quarterly bonuses under the agreement through the end of the anticipated
term. Regardless of the time of or reason for employment termination, Mr.
Gasper would continue for two years thereafter to be prohibited by the
agreement from making any attempt to induce or encourage any employee of
Registrant or an affiliate to leave for employment with a competitor. The
agreement also imposes confidentiality obligations upon Mr. Gasper, which
continue indefinitely.
The options shown for Mr. Gasper in the immediately preceding table
also were granted to him in connection with his engagement as CEO. Under the
terms of the option agreement governing those options, the options ordinarily
become exercisable at the rate of 20% per year on the first through the fifth
anniversaries of grant, but they are subject to acceleration of exercisability
upon the occurrence of a change in control (as therein defined) or the giving
of notice to Mr. Gasper of termination of his employment by Registrant other
than for Good Reason (as defined in his employment agreement).
Roberts and Albright Employment Contracts. In connection with their
respective engagements by FoM in July and August of 1994, Charles R. Roberts
and John S. Albright also entered into employment agreements with FoM.
Mr. Roberts' employment agreement provides for salary at the annual
rate of $95,000. For fiscal 1995, the agreement also provided for a minimum
cash bonus at the annual rate of $180,000 through the end of that fiscal year,
and a potential future grant of options to purchase 8,000 shares of Common
Stock, if Mr. Roberts achieved certain investment executive recruitment goals
specified in the agreement, which occurred during that year. Currently, only
the salary payment continues to be covered by the agreement. Under the
currently operative terms of the agreement, Mr. Roberts may be terminated by
FoM at will, but if he is terminated other than for "cause" (as therein
defined) prior to the end of fiscal 1997 he will be entitled to receive his
salary through the end of that period. In connection with Mr. Robert's
employment, FoM also made him a $25,000 cash advance, $5,000 of which was
forgiven on the first anniversary of his employment by FoM and the remainder of
which is to be forgiven in $5,000 increments on the second through fifth
anniversaries of his employment provided he is then still employed by FoM.
Mr. Albright's employment agreement has an initial term of eighteen
months and provides for salary at the annual rate of $90,000 and, for the first
twelve months, a total minimum cash bonus of $110,000. It also contemplated a
potential future grant to Mr. Albright of options to purchase 8,000 shares of
Common Stock, depending on the achievement of a specified revenue goal by FoM's
Fixed Income Department, which occurred during the last fiscal year. During
the initial term of the agreement, Mr. Albright may be terminated by FoM only
for "cause" (as therein defined) or if for any reason he is unable to perform
the duties of his position. If he is terminated at any time for inability to
perform, he is entitled to salary earned to the date of termination but not to
any pro-rata portion of any bonus.
Each of the above-described agreements also imposes certain
indemnification obligations upon the covered executive and entitles the
executive to receive certain fringe benefits and to participate in employee
benefit plans and in any bonus pool for executives at his level. Mr.
Albright's agreement also provided for payment or reimbursement to him of
certain relocation expenses, which were paid in fiscal 1995.
Koski Loan Guaranty and Retirement Arrangements. At Registrant's 1986
annual meeting, its stockholders approved its Key Employee Stock Purchase Loan
Guaranty Plan (the "Loan Guaranty Plan"), under which, through December 31,
1990, certain Executive Officers could be granted rights to require Registrant
to guarantee repayment of third-party loans made to such officers for the
purpose of purchasing Common Stock. Such loan guaranty rights were granted to
and exercised by Conrad
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<PAGE> 37
W. Koski during fiscal 1987, and Registrant accordingly guaranteed a $300,000
loan to Mr. Koski for the purpose of purchasing 25,000 shares. At the end of
fiscal 1995, the outstanding principal balance of the loan was $60,000; the
loan was repaid in full during the current fiscal year.
Under the terms of the Loan Guaranty Plan, while Mr. Koski's
guaranteed loan was outstanding, Registrant was obligated to pay him additional
compensation equal to the amount of interest on the loan paid by him. The
additional compensation so paid to Mr. Koski for fiscal years 1993, 1994, and
1995 is included under "Salary" in the Summary Compensation Table above.
Registrant also has an agreement with Mr. Koski to provide
supplemental retirement benefits following his retirement or following
termination of his employment under certain circumstances in the event of a
change in control of Registrant, but in any event not before age 65, of 25% of
average compensation in the fiscal years 1987 through 1991 for each year until
age 75 and to designated beneficiaries in the event of his death before age 75.
In the event of death before retirement, an amount equal to such compensation
is payable to his designated beneficiaries in the year following death and 50%
of such amount is payable in each year thereafter until Mr. Koski would have
reached age 65 or for nine years, whichever is later.
Compensation Committee Interlocks and Insider Participation
Certain decisions concerning the compensation of Executive Officers
are made by the Compensation/Stock Option Committee of Registrant's Board of
Directors; others are made by the full Board. Messrs. Geoffrey Baker, Cuddy,
and Mengden served on the Compensation/Stock Option Committee throughout the
last fiscal year, and Mr. Lavin joined the committee during the second half of
the fiscal year. The only other person who served on the committee during
fiscal 1995 is Mr. Richard J. Lewis, who served until his retirement from
Registrant's Board of Directors at its 1995 annual meeting of stockholders.
Other than incumbent Directors and Mr. Lewis, the only other persons who served
on the Board of Directors at any time during the last fiscal year are Messrs.
John G. Martin and Richard B. Gushee, each of whom also retired from Board
service at the 1995 annual meeting.
Messrs. Martin and Mengden are the only current or former Directors
who took part in any decisions concerning the fiscal 1995 compensation of any
Executive Officer and who also have ever been employed by or an officer of
Registrant or any of its subsidiaries. Mr. Martin formerly was the Chief
Executive Officer of Registrant and FoM. Mr. Mengden also is a former
Executive Officer of Registrant and FoM and served as Chairman of both
companies for portions of fiscal 1994 and fiscal 1995.
During his employment with Registrant, Mr. Mengden entered into an
agreement with Registrant for the provision of supplemental retirement benefits
similar to the agreement with Conrad Koski discussed under "Certain Contracts"
above. Benefits became payable to Mr. Mengden under his agreement in April
1992, at the rate of $49,500 per year for 10 years. Mr. Martin also has such
an agreement with the Registrant under which, beginning in May 1994, he began
receiving benefits at the rate of $99,996 per year for 10 years.
Mr. Mengden's consulting firm, Mengden & Associates, Ltd., was paid
$24,000 for consulting services rendered to FoM during fiscal 1995.
Mr. Gushee is a former principal of and currently is Of Counsel to the
law firm of Miller, Canfield, Paddock and Stone, P.L.C., which rendered legal
services to Registrant and its subsidiaries during fiscal 1995.
Directors' Compensation
Retainer, Fees and Other Benefits. Directors who are not also
employees of Registrant or an affiliate receive an annual retainer of $8,000,
fees of $1,500 for each Board meeting attended in
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<PAGE> 38
person, $500 for each such meeting attended by phone, and $750 for each Board
committee meeting attended, and are reimbursed reasonable traveling expenses.
For his services as Chairman of Registrant's Board of Directors and as Chairman
of the Board's Audit Committee, Mr. Cuddy receives additional annual retainers
of $22,000 and $6,000, respectively. Directors may defer receipt of retainer
and fees. Deferred amounts are payable with interest at FoM's base customer
margin rate (which also is the rate paid under the Deferred Compensation Plan
for employees). No Director has thus far deferred any amounts. Registrant
also permits Directors who are not employees to elect to participate in its
health insurance plans on the same terms as are available to its employees
generally. The only Director currently participating in such plans is Mr.
Geoffrey Baker.
Stock Options. At their meeting in 1989, Registrant's stockholders
approved its Directors Stock Option Plan of 1989 (the "Directors Plan"), which
is intended to extend the policy of providing management with an equity
interest in Registrant to Directors who are not employees and therefore not
eligible for stock options under any of Registrant's other stock option plans,
and to provide an incentive to qualified individuals to serve or continue to
serve as Directors. The only Directors eligible to participate in this plan
are those who are not and have never been employees of Registrant or any of its
subsidiaries. Currently, the eligible Directors are Craig P. Baker, Geoffrey
B. Baker, William H. Cuddy, Gerard M. Lavin, and Thomas A. McDonnell.
Under the terms of the Directors Plan, for any year in which
Registrant meets the performance goals stated in either Column A or Column B
below, each eligible Director receives an option to purchase the quotient of
the number of shares listed in Column C divided by the number of eligible
Directors:
<TABLE>
<CAPTION>
A. B. C.
-- -- --
INCREASE IN PROFITS
PRE-TAX PROFIT PERCENTAGE OVER OVER PREVIOUS
REGIONAL AVERAGE THREE-YEAR AVERAGE NUMBER OF SHARES
---------------- ------------------ ----------------
<S> <C> <C>
.25 5% 1,000
.50 10% 1,000
.75 15% 2,000
1.00 20% 2,000
1.25 25% 3,000
1.50 30% 3,000
1.75 35% 4,000
2.00 40% 4,000
2.25 45% 5,000
2.50 or more 50% or more 5,000
</TABLE>
For fiscal 1995, no options were granted under this plan.
The exercise price for any option granted under the Directors Plan
during a given year is the market value for the Common Stock on the Chicago
Stock Exchange as of the date of the regular December meeting of the Board of
Directors (or if there is no such meeting, December 31) of that year. Options
granted under the Directors Plan ordinarily may be exercised at any time during
the period which begins five years from the date of grant and ends seven years
after that date. However, exercisability would be accelerated in the event of
a change in control of Registrant (as defined in the plan). No option may be
exercised after the holder thereof voluntarily resigns from service as a
Director, unless such resignation is due to disability or retirement from the
Board with the consent of all other Board members or after age 65. Options
granted under the Directors Plan are non-transferable, except by will or the
laws of descent and distribution in the event of death. No options may be
granted under the plan after December 31, 1999.
-38-
<PAGE> 39
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Executive Officers and Directors of Registrant, beneficial owners of
more than 10% of its outstanding Common Stock, and certain related trusts
("Section 16 Reporting Persons") are required to file initial statements of
beneficial ownership and (except in certain cases pertaining to trusts) reports
of changes in ownership of Common Stock and related derivative securities,
pursuant to Section 16(a) of the Securities Exchange Act of 1934. Registrant
has reviewed such reports as it has received from persons known to it to be (or
during fiscal 1995 to have been) Section 16 Reporting Persons and written
representations of certain such persons to the effect that other reports are
not required. Based solely on such review, the Registrant believes that in
respect of fiscal 1995 all Section 16(a) filing requirements were met, except
that Mr. MacDonald did not file a Form 4 and was late in filing a Form 5 to
report acquisitions of 50 shares each made during the fiscal year by him and his
wife.
-39-
<PAGE> 40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information required by this item concerning security ownership of
Registrant's Directors and Executive Officers is provided under Item 10 above.
So far as is known to Registrant, no person or group of persons owned
beneficially as of December 19, 1995 more than 5% of the Common Stock, the only
outstanding voting security of Registrant, other than the persons shown in the
following table. Except as indicated below, each party named in this table has
an address at 100 Renaissance Center, Detroit, Michigan 48234.
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
---------------- --------- --------
<S> <C> <C>
DST Systems, Inc.(1) . . . . . . . . . . . . . . . . . . . 609,956(1) 22.8%
1888 Limited Partnership . . . . . . . . . . . . . . . . . 657,564(2) 24.6
Steve Gasper, Jr. . . . . . . . . . . . . . . . . . . . . . 176,854(3) 6.6
Charles R. Roberts . . . . . . . . . . . . . . . . . . . . 151,167(3) 5.6
Bruce M. Rockwell . . . . . . . . . . . . . . . . . . . . . 175,666(3)(4) 6.6
Hal H. Smith III . . . . . . . . . . . . . . . . . . . . . 173,356 6.5
</TABLE>
(1) Based upon disclosures contained in a Schedule 13D dated April 23,
1982, as amended, filed with the Securities and Exchange Commission
(the "Commission") by DST Systems, Inc. ("DST"). Such amended filing
indicates that the address of DST, a Delaware corporation, is 1055
Broadway, Kansas City, Missouri 64105, and that DST has sole voting
and dispositive power over all of the reported shares.
(2) Based upon disclosures contained in a Schedule 13D filed October 6,
1995 with the Commission by 1888 Limited Partnership, a Connecticut
limited partnership (the "Partnership") and in Schedule 13D amendments
filed October 10, 1995 by Louis C. Baker, who is the father of
Registrant's Directors Craig P. and Geoffrey B. Baker, and by Mr.
Louis Baker's brother, Paxton Mendelssohn II. The address for the
Partnership listed in such filing is c/o Day, Berry & Howard, One
Canterbury Green, Stamford, Connecticut 06091. Such filings report
that Messrs. Craig and Louis Baker and Mr. Mendelssohn constitute the
sole general partners of the Partnership, each having a one-third
general partnership interest as well as limited partnership interests,
and that action by the Partnership requires the approval of the
general partners holding at least two-thirds in interest of the
general partners. In light of that approval requirement, each general
partner has disclaimed beneficial ownership of any shares of Common
Stock held by the Partnership, and the Partnership has reported having
sole voting and dispositive power over such shares. The shares
reported for the Partnership do not include 21,780 shares held by a
trust of which Messrs. Craig and Louis Baker and one other person are
co-trustees, 21,780 shares held by a trust of which Messrs. Geoffrey
and Louis Baker and another person are co-trustees, and 21,780 shares
held by a trust of which Mr. Mendelssohn and two other persons are
co-trustees.
(3) Includes 150,854 shares (5.6%) held by Registrant's ESOP as of October
31, 1995, which are voted by a committee consisting of Mr. Gasper,
Mr. Roberts, and Mr. Rockwell, an officer and employee of FoM.
(4) Includes 24,812 shares held by a trust of which Mr. Rockwell is
trustee.
-40-
<PAGE> 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is provided under Item 11 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) (1) The following consolidated financial statements of
the Registrant are included in this Report under
Item 8:
Report of independent auditors
Consolidated balance sheets - September 29, 1995 and
September 30, 1994
Consolidated statements of income - Fiscal Years
ended September 29, 1995, September 30, 1994, and
September 24, 1993
Consolidated statements of stockholders' equity -
Fiscal Years ended September 29, 1995, September 30,
1994, and September 24, 1993
Consolidated statements of cash flows - Fiscal Years
ended September 29, 1995, September 30, 1994, and
September 24, 1993
Notes to consolidated financial statements -
September 29, 1995
(2) The following consolidated financial statement
schedules are included in this Report under Item 8:
Schedule III - Condensed Financial
Information of Registrant
Schedule VIII - Valuation and Qualifying
Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(3) Exhibits.
(i) Exhibits Filed Herewith
(11) Computation of Per Share Earnings.
(21) Subsidiaries of Registrant.
(23) Consent of Independent Auditors - The consent of
Ernst & Young LLP with respect to incorporation by
reference of its report on the financial statements
and schedules of Registrant included herein into
Registration Statements (Form S-8 No. 2-95535 and
Form S-8 No. 33-16204) relating to Registrant's
Amended and Restated Employee Stock Option Plan of
1981, as amended, and in the related Prospectus,
Registration Statement (Form S-8 No. 33-51640)
relating to Registrant's Employee Stock Option Plan
of 1992 and in the related
-41-
<PAGE> 42
Prospectus, and Registration Statement (Form S-8 No.
33-51638) relating to Registrant's Director Stock
Option Plan of 1989 and in the related Prospectus.
(27) Financial Data Schedule (EDGAR filing only)
(ii) Exhibits Incorporated herein by Reference
(3) Restated Certificate of Incorporation of Registrant
dated March 15, 1988. (Exhibit (3) to Form 10-K for
the year ended September 30, 1988. File No. 1-7467)
(3)(a) Bylaws of Registrant as currently in effect.
(Exhibit (3)(a) to Form 10-Q for the quarter ended
March 31, 1989 and Exhibit 2 to Form 8-K dated
January 11, 1993. File No.1-7467 for each)
(4) Articles Fourth, Tenth, and Eleventh of the Restated
Certificate of Incorporation of Registrant dated
March 15, 1988 (Exhibit (4) to Form 10-K for the year
ended September 30, 1988. File No. 1-7467)
(10)-(i)* Restated Agreement dated December 1, 1983 between
Registrant and Joseph M. Mengden with respect to
supplemental retirement benefit. (Exhibit (10)-(vii)
to Form 10-K for year ended September 30, 1983. File
No. 1-7467)
(10)-(i)(a)* Amendment dated April 27, 1989 to Restated Agreement
dated December 1, 1983 between Registrant and Joseph
M. Mengden. (Exhibit (10)-(2) to Form 10-K for the
year ended September 29, 1989. File No. 1-7467)
(10)-(i)(b)* Amendment dated September 26, 1990 to Restated
Agreement dated December 1, 1983 between Registrant
and Joseph M. Mengden. (Exhibit (10)-(1) to Form
10-K for the year ended September 28, 1990. File No.
1-7467)
(10)-(i)(c)* Amendment dated September 26, 1992 to Restated
Agreement dated December 1, 1983, as amended, between
Registrant and Joseph M. Mengden. (Exhibit (10)-(1)
to Form 10-K for the year ended September 27, 1991.
File No. 1-7467)
(10)-(ii)* Restated Agreement dated December 1, 1983 between
Registrant and Conrad W. Koski with respect to
supplemental retirement benefit. (Exhibit
(10)-(viii) to Form 10-K for year ended September 30,
1983. File No. 1-7467)
(10)-(ii)(a)* Form of Amendment dated April 22, 1989 to Restated
Agreement dated December 1, 1983 between Registrant
and Conrad W. Koski. (Exhibit (10)-(1) to Form 10-K
for year ended September 29, 1989. File No. 1-7467)
(10)-(iii)* First of Michigan Corporation Supplemental Retirement
and Survivor Income Plan (Junior Management).
(Exhibit (10)- (xv) to Form 10-K for year ended
September 26, 1986. File No. 1-7467)
(10)-(iv)* Form of Indemnification Agreement which Registrant
has entered into with each of its Directors, its
Executive Vice-President Conrad W. Koski, its
Secretary Lenore P. Denys, and certain other officers
of FoM. (Exhibit (11)-(1) to Form 10-K for the year
ended September 30, 1988. File No. 1-7467)
(10)-(v)* Deferred Compensation Plan for Directors Fees.
(Exhibit (10)-(2) to Form 10-K for the year ended
September 30, 1988. File No. 17467)
-42-
<PAGE> 43
(10)-(vi)* Amended and Restated Employee Stock Option Plan of
1981. (Exhibit (10)-(3) to Form 10-K for year ended
September 29, 1989. File No. 1-7467)
(10)-(vii)* First of Michigan Capital Corporation Directors Stock
Option Plan of 1989. (Exhibit (10)-(4) to Form 10-K
for year ended September 29, 1989. File No. 1-7467)
(10)-(vii)(a)* Paragraph 8 as amended of the Directors Stock Option
Plan of 1989. (Exhibit (10)-(2) to Form 10-K for
year ended September 25, 1992. File No. 1-7467)
(10)-(viii)* First of Michigan Capital Corporation Amended and
Restated Deferred Compensation Plan. (Exhibit
(10)-(2) to Form 10-K for year ended September 28,
1990. File No. 1-7467)
(10)-(viii)(a)* Amendment dated January 1, 1992 to First of Michigan
Capital Corporation Amended and Restated Deferred
Compensation Plan. (Exhibit (10)-(1) to Form 10-K
for the year ended September 25, 1992. File No.
1-7467)
(10)-(ix)* First of Michigan Capital Corporation Employee Stock
Option Plan of 1992. (Appendix A to the definitive
proxy statement of Registrant dated January 24, 1992.
File No. 1-7467)
(10)-(x)* Employment Agreement dated April 1, 1994 among
Registrant, FoM, and Steve Gasper, Jr. (Exhibit
(10)-(xx) to Form 10-K for year ended September 30,
1994. File No. 1-7467)
(10)-(x)(a)* First Amendment, dated January 24, 1995, to
Employment Agreement, dated April 1, 1994, between
Registrant and Steve Gasper, Jr. (Exhibit 19 to Form
10-Q for quarter ended March 31, 1995. File No.
1-7467)
(10)-(xi)* Stock Option Agreement dated March 29, 1994 between
Registrant and Steve Gasper, Jr.
(10)-(xii)* Employment Agreement dated July 26, 1994 between FoM
and Charles R. Roberts and related Promissory Note
from Charles R. Roberts to FoM.
(10)-(xiii)* Employment Agreement dated August 1, 1994 between FoM
and John S. Albright.
(10)-(xiv)* Key Employee Stock Purchase Loan Guaranty Plan.
(Exhibit (10)-(xiii) to Form 10-K for year ended
September 26, 1986. File No. 1-7467)
(10)-(xv) Form of agreement with investment executives entered
into following termination of Agreement and Plan of
Merger with Comerica Incorporated. (Exhibit
(10)-(xx) to Form 10-K for the year ended September
24, 1993. File No. 1-7467) (See Note F to the
Consolidated Financial Statements included herein for
additional information concerning these agreements.)
- --------------------
* Designates a management contract or a compensatory plan or arrangement
to which one or more Directors or Executive Officers of Registrant is
a party or in which one or more Directors or Executive Officers
participates or may participate.
-43-
<PAGE> 44
(b) Reports on Form 8-K
No report on Form 8-K was filed by Registrant in the quarter ended
September 29, 1995.
-44-
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FIRST OF MICHIGAN CAPITAL CORPORATION
By /s/ Steve Gasper, Jr.
Steve Gasper, Jr.
President and Chief Executive Officer
Dated: December 19, 1995
S-1
<PAGE> 46
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signature Office Date of Signing
--------- ------ ---------------
<S> <C> <C>
/s/ William H. Cuddy Chairman of the December 19, 1995
- ------------------------------ Board of Directors
William H. Cuddy
/s/ Steve Gasper, Jr. President, Chief December 19, 1995
- ------------------------------ Executive Officer
Steve Gasper, Jr. (principal exe-
cutive officer) and
Director
/s/ Craig P. Baker Director December 19, 1995
- ------------------------------
Craig P. Baker
- ------------------------------ Director December __, 1995
Geoffrey B. Baker
/s/ Gerard M. Lavin Director December 19, 1995
- ------------------------------
Gerard M. Lavin
- ------------------------------ Director December __, 1995
Thomas A. McDonnell
/s/ Joseph M. Mengden Director December 19, 1995
- ------------------------------
Joseph M. Mengden
/s/ Conrad W. Koski Executive Vice-President December 19, 1995
- ------------------------------ and Treasurer (principal
Conrad W. Koski financial and accounting
officer)
</TABLE>
S-2
<PAGE> 47
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
<TABLE>
<S> <C>
For the fiscal year ended Commission File
September 29, 1995 Number 1-7467
</TABLE>
FIRST OF MICHIGAN CAPITAL CORPORATION
E-1
<PAGE> 48
EXHIBIT INDEX
Exhibit
Number Title
(i) Exhibits Filed Herewith
(11) Computation of Per Share Earnings.
(21) Subsidiaries of Registrant.
(23) Consent of Independent Auditors - The consent of
Ernst & Young LLP with respect to incorporation by
reference of its report on the financial statements
and schedules of Registrant included herein into
Registration Statements (Form S-8 No. 2-95535 and
Form S-8 No. 33-16204) relating to Registrant's
Amended and Restated Employee Stock Option Plan of
1981, as amended, and in the related Prospectus,
Registration Statement (Form S-8 No. 33-51640)
relating to Registrant's Employee Stock Option Plan
of 1992 and in the related Prospectus, and
Registration Statement (Form S-8 No. 33-51638)
relating to Registrant's Director Stock Option Plan
of 1989 and in the related Prospectus.
(27) Financial Data Schedule (EDGAR filing only)
(ii) Exhibits Incorporated herein by Reference
(3) Restated Certificate of Incorporation of Registrant
dated March 15, 1988. (Exhibit (3) to Form 10-K for
the year ended September 30, 1988. File No. 1-7467)
(3)(a) Bylaws of Registrant as currently in effect.
(Exhibit (3)(a) to Form 10-Q for the quarter ended
March 31, 1989 and Exhibit 2 to Form 8-K dated
January 11, 1993. File No.1-7467 for each)
(4) Articles Fourth, Tenth, and Eleventh of the Restated
Certificate of Incorporation of Registrant dated
March 15, 1988 (Exhibit (4) to Form 10-K for the year
ended September 30, 1988. File No. 1-7467)
(10)-(i)* Restated Agreement dated December 1, 1983 between
Registrant and Joseph M. Mengden with respect to
supplemental retirement benefit. (Exhibit (10)-(vii)
to Form 10-K for year ended September 30, 1983. File
No. 1-7467)
(10)-(i)(a)* Amendment dated April 27, 1989 to Restated Agreement
dated December 1, 1983 between Registrant and Joseph
M. Mengden. (Exhibit (10)-(2) to Form 10-K for the
year ended September 29, 1989. File No. 1-7467)
(10)-(i)(b)* Amendment dated September 26, 1990 to Restated
Agreement dated December 1, 1983 between Registrant
and Joseph M. Mengden. (Exhibit (10)-(1) to Form
10-K for the year ended September 28, 1990. File No.
1-7467)
(10)-(i)(c)* Amendment dated September 26, 1992 to Restated
Agreement dated December 1, 1983, as amended, between
Registrant and Joseph M. Mengden. (Exhibit (10)-(1)
to Form 10-K for the year ended September 27, 1991.
File No. 1-7467)
E-2
<PAGE> 49
(10)-(ii)* Restated Agreement dated December 1, 1983 between
Registrant and Conrad W. Koski with respect to
supplemental retirement benefit. (Exhibit
(10)-(viii) to Form 10-K for year ended September 30,
1983. File No. 1-7467)
(10)-(ii)(a)* Form of Amendment dated April 22, 1989 to Restated
Agreement dated December 1, 1983 between Registrant
and Conrad W. Koski. (Exhibit (10)-(1) to Form 10-K
for year ended September 29, 1989. File No. 1-7467)
(10)-(iii)* First of Michigan Corporation Supplemental Retirement
and Survivor Income Plan (Junior Management).
(Exhibit (10)- (xv) to Form 10-K for year ended
September 26, 1986. File No. 1-7467)
(10)-(iv)* Form of Indemnification Agreement which Registrant
has entered into with each of its Directors, its
Executive Vice-President Conrad W. Koski, its
Secretary Lenore P. Denys, and certain other officers
of FoM. (Exhibit (11)-(1) to Form 10-K for the year
ended September 30, 1988. File No. 1-7467)
(10)-(v)* Deferred Compensation Plan for Directors Fees.
(Exhibit (10)-(2) to Form 10-K for the year ended
September 30, 1988. File No. 17467)
(10)-(vi)* Amended and Restated Employee Stock Option Plan of
1981. (Exhibit (10)-(3) to Form 10-K for year ended
September 29, 1989. File No. 1-7467)
(10)-(vii)* First of Michigan Capital Corporation Directors Stock
Option Plan of 1989. (Exhibit (10)-(4) to Form 10-K
for year ended September 29, 1989. File No. 1-7467)
(10)-(vii)(a)* Paragraph 8 as amended of the Directors Stock Option
Plan of 1989. (Exhibit (10)-(2) to Form 10-K for
year ended September 25, 1992. File No. 1-7467)
(10)-(viii)* First of Michigan Capital Corporation Amended and
Restated Deferred Compensation Plan. (Exhibit
(10)-(2) to Form 10-K for year ended September 28,
1990. File No. 1-7467)
(10)-(viii)(a)* Amendment dated January 1, 1992 to First of Michigan
Capital Corporation Amended and Restated Deferred
Compensation Plan. (Exhibit (10)-(1) to Form 10-K
for the year ended September 25, 1992. File No.
1-7467)
(10)-(ix)* First of Michigan Capital Corporation Employee Stock
Option Plan of 1992. (Appendix A to the definitive
proxy statement of Registrant dated January 24, 1992.
File No. 1-7467)
(10)-(x)* Employment Agreement dated April 1, 1994 among
Registrant, FoM, and Steve Gasper, Jr. (Exhibit
(10)-(xx) to Form 10-K for year ended September 30,
1994. File No. 1-7467)
(10)-(x)(a)* First Amendment, dated January 24, 1995, to
Employment Agreement, dated April 1, 1994, between
Registrant and Steve Gasper, Jr. (Exhibit 19 to Form
10-Q for quarter ended March 31, 1995. File No.
1-7467)
(10)-(xi)* Stock Option Agreement dated March 29, 1994 between
Registrant and Steve Gasper, Jr.
(10)-(xii)* Employment Agreement dated July 26, 1994 between FoM
and Charles R. Roberts and related Promissory Note
from Charles R. Roberts to FoM.
E-3
<PAGE> 50
(10)-(xiii)* Employment Agreement dated August 1, 1994 between FoM
and John S. Albright.
(10)-(xiv)* Key Employee Stock Purchase Loan Guaranty Plan.
(Exhibit (10)-(xiii) to Form 10-K for year ended
September 26, 1986. File No. 1-7467)
(10)-(xv) Form of agreement with investment executives entered
into following termination of Agreement and Plan of
Merger with Comerica Incorporated. (Exhibit
(10)-(xx) to Form 10-K for the year ended September
24, 1993. File No. 1-7467) (See Note F to the
Consolidated Financial Statements included herein for
additional information concerning these agreements.)
- --------------------
* Designates a management contract or a compensatory plan or arrangement
to which one or more Directors or Executive Officers of Registrant is
a party or in which one or more Directors or Executive Officers
participates or may participate.
E-4
<PAGE> 1
EXHIBIT (11) - COMPUTATION OF PER SHARE EARNINGS
FIRST OF MICHIGAN CAPITAL CORPORATION
REPORT ON FORM 10-K FOR THE PERIOD
ENDED SEPTEMBER 29, 1995
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------------
September 29, 1995 September 30, 1994 September 24, 1993
------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 2,830,263 2,890,513 2,879,062
Net effect of dilutive
stock options--based on
the treasury stock method
using average market price 25,197 62,456 57,155
----------- ---------- ----------
TOTAL 2,855,460 2,952,969 2,936,217
========= ========== ==========
Net income $ 108,067 $1,042,893 $3,400,467
========= ========== ==========
Per share amount $.04 $ .35 $1.16
==== ====== =====
FULLY DILUTED
Average shares outstanding N/A N/A N/A
Note A Note A Note A
</TABLE>
____________________________
Note A: The fully-diluted computations for the years ended September 29, 1995,
September 30, 1994, and September 24, 1993 are not reported as the
calculation did not exceed 3% of the primary calculation.
<PAGE> 1
EXHIBIT (21) - SUBSIDIARIES OF REGISTRANT
The following is a listing of all active subsidiaries of the
Registrant as of December 20, 1995 together with a listing of the states or
jurisdictions in which they are organized. In each case, 100% of the voting
securities (except for directors' qualifying shares, if required) are owned by
the subsidiary's immediate parent as indicated by indentation. All of these
subsidiaries are included in the consolidated financial statements.
<TABLE>
<CAPTION>
State or Other
Jurisdiction Where
Incorporated Or
Name Organized
---- ------------------
<S> <C>
First of Michigan Capital Corporation
(the Registrant) Delaware
First of Michigan Corporation Delaware
First of Michigan Insurance Agency, Inc. Michigan
Cranbrook Capital Management, Inc. Michigan
FoM Advisers, Inc. Michigan
First of Michigan Properties, Inc. Michigan
First of Michigan Real Estate, Inc. Michigan
First of Michigan Leasing, Inc. Michigan
First of Michigan Commodities, Inc. Michigan
First of Michigan Venture Capital
Associates, Inc. Michigan
</TABLE>
<PAGE> 1
EXHIBIT (23) - [LETTERHEAD OF ERNST & YOUNG LLP]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
2-95535 on Form S-8 dated January 28, 1985, Registration Statement No. 33-16204
on Form S-8 dated July 31, 1987, Registration Statement No. 33-51638 on Form
S-8 dated September 3, 1992, and Registration Statement No. 33-51640 on Form
S-8 dated September 3, 1992, of our report dated November 10, 1995 with respect
to the consolidated financial statements and schedules of First of Michigan
Capital Corporation included in the Annual Report (Form 10-K) for the fiscal
year ended September 29, 1995.
/s/ Ernst & Young LLP
December 19, 1995
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-29-1995
<EXCHANGE-RATE> 1
<CASH> 2,995,513
<RECEIVABLES> 83,622,347
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 4,280,000
<INSTRUMENTS-OWNED> 8,387,294
<PP&E> 2,828,932
<TOTAL-ASSETS> 110,457,474
<SHORT-TERM> 29,500,000
<PAYABLES> 19,261,506
<REPOS-SOLD> 0
<SECURITIES-LOANED> 16,737,100
<INSTRUMENTS-SOLD> 530,748
<LONG-TERM> 0
0
0
<COMMON> 289,156
<OTHER-SE> 29,495,614
<TOTAL-LIABILITY-AND-EQUITY> 110,457,474
<TRADING-REVENUE> 4,798,999
<INTEREST-DIVIDENDS> 6,269,918
<COMMISSIONS> 34,216,980
<INVESTMENT-BANKING-REVENUES> 10,084,865
<FEE-REVENUE> 4,735,312
<INTEREST-EXPENSE> 3,001,553
<COMPENSATION> 35,255,683
<INCOME-PRETAX> 393,067
<INCOME-PRE-EXTRAORDINARY> 108,067
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,067
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
