SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 1994 Commission file number 1-8527
A.G. EDWARDS, INC.
State of Incorporation: DELAWARE
I.R.S. Employer Identification No. 43-1288229
ONE NORTH JEFFERSON AVENUE
ST. LOUIS, MISSOURI 63103
Registrant's telephone number, including area code: (314) 289-3000
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 of 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
At June 30, 1994, there were 60,400,781 shares of A.G. Edwards, Inc. common
stock, par value $1, issued and outstanding.
A.G. EDWARDS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Consolidated balance sheets 1
Consolidated statements of earnings 2
Consolidated statements of
stockholders' equity 3
Consolidated statements of cash flows 4
Notes to consolidated financial statements 5
Management's financial discussion 6 - 7
PART II. OTHER INFORMATION 7
SIGNATURES 8
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
May 31, February 28,
1994 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 37,203 $ 40,341
Cash and government securities, at market,
segregated under federal and other regulations 47,935 195,726
Securities purchased under agreements to resell 114,553
Receivable from brokers and dealers 366,797 260,858
Receivable from customers, less allowance for
doubtful accounts of $3,400 1,308,681 1,218,145
Securities inventory, at market
State and municipal 91,617 97,991
Government and agencies 18,841 28,864
Corporate 38,889 40,904
Property and equipment, at cost, net of
accumulated depreciation and amortization
of $128,532 and $124,423 157,697 145,441
Other assets 100,537 93,767
$2,168,197 $2,236,590
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks payable $ 103,944 $ 111,947
Payable to brokers and dealers 692,680 623,034
Payable to customers 307,524 355,224
Securities sold but not yet purchased, at market 32,927 24,109
Employee compensation and related taxes 163,674 285,213
Income taxes 17,048 9,959
Other liabilities 36,362 36,737
Total Liabilities 1,354,159 1,446,223
Stockholders' Equity:
Preferred stock, $25 par value:
Authorized 4,000,000 shares, none issued
Common stock, $1 par value:
Authorized 250,000,000 shares
Issued 60,544,239 and 60,446,336 shares 60,544 60,446
Additional paid-in capital 167,275 165,124
Retained earnings 598,172 576,073
825,991 801,643
Less: Treasury stock 2,565
Unamortized expense of
restricted stock award 9,388 11,276
Total Stockholders' Equity 814,038 790,367
$2,168,197 $2,236,590
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended May 31,
1994 1993
<S> <C> <C>
REVENUES:
Commissions $175,138 $184,139
Principal transactions 56,906 51,058
Investment banking 21,259 38,653
Interest 21,739 17,599
Other 26,534 23,456
301,576 314,905
EXPENSES:
Compensation and benefits 198,217 204,921
Communications 18,712 18,161
Occupancy and equipment 17,223 16,504
Floor brokerage and clearance 3,841 3,870
Interest 976 204
Other operating expenses 13,173 11,874
252,142 255,534
EARNINGS BEFORE INCOME TAXES 49,434 59,371
INCOME TAXES 18,880 21,282
NET EARNINGS $30,554 $38,089
Earnings per share $.50 $.64
Dividends per share $.14 $.12
Average common and common
equivalent shares outstanding 61,459 59,523
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MAY 31, 1994 AND 1993
(In thousands, except per share amounts)
(Unaudited)
Unamortized
Additional Expense of
Common Paid-in Retained Restricted Treasury
Stock Capital Earnings Stock Awards Stock
<S> <C> <C> <C> <C> <C>
BALANCES, March 1, 1993 $ 46,159 $125,328 $ 452,045 $ (8,292) $ 0
Net earnings 38,089
Cash dividends -
$.12 per share (6,996)
Treasury stock acquired (9)
Stock issued:
Employee stock purchase/option
plans 98 1,638 163
Restricted stock 383 13,203 (12,294) (154)
Amortization of restricted
stock awards 2,264
BALANCES, May 31, 1993 $ 46,640 $140,169 $ 483,138 $ (18,322) $ 0
BALANCES, March 1, 1994 $ 60,446 $165,124 $ 576,073 $ (11,276) $ 0
Net earnings 30,554
Cash dividends -
$.14 per share (8,455)
Treasury stock acquired (2,765)
Stock issued:
Employee stock purchase/option
plans 101 1,382 244
Restricted stock (3) 769 65 (44)
Amortization of restricted
stock awards 1,823
BALANCES, May 31, 1994 $ 60,544 $167,275 $ 598,172 $ (9,388) $ (2,565)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended May 31,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 30,554 $ 38,089
Noncash items included in earnings 12,231 9,338
Decrease in segregated cash and government securities 147,791 242,091
(Decrease) increase in net payable to brokers and dealers (36,293) 31,137
Increase in net receivable from customers (138,236) (140,680)
Decrease (increase) in net securities inventory 27,230 (20,719)
Net change in other assets and liabilities (130,620) (74,829)
Net cash (used in) provided by operating activities (87,343) 84,427
Cash Flows from Investing Activities
Proceeds from (payments for):
Securities purchased under agreements to resell 114,553 (72,564)
Capital expenditures and other investments (21,642) (4,574)
Net cash provided by (used in) investing activities 92,911 (77,138)
Cash Flows from Financing Activities
Proceeds from (payments for):
Employee stock transactions 2,514 3,027
Cash dividends (8,455) (6,996)
Treasury stock (2,765) (9)
Net cash used in financing activities (8,706) (3,978)
Net (Decrease) Increase in Cash and Cash Equivalents (3,138) 3,311
Cash and Cash Equivalents at March 1 40,341 27,963
Cash and Cash Equivalents at May 31 $ 37,203 $ 31,274
<FN>
Income tax payments totaled $9,290 and $17,016 during the three month period
ended May 31, 1994 and 1993, respectively.
Interest payments totaled $401 and $114 during the three month period ended May
31, 1994 and 1993, respectively.
Supplemental disclosure of noncash financing activities - restricted stock
awarded, net of forfeitures, totaled $12,294 during the three month period ended
May 31, 1993.
See Notes to Consolidated Financial Statements.
</TABLE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 31, 1994
(Unaudited)
FINANCIAL STATEMENTS:
The consolidated financial statements include the accounts of A.G. Edwards, Inc.
and its wholly owned subsidiaries (collectively referred to as the "Company"),
including its principal subsidiary, A.G. Edwards & Sons, Inc. ("Edwards"), and
have been prepared in conformity with generally accepted accounting principles.
These financial statements should be read in conjunction with the Company's
annual report for the year ended February 28, 1994. Where appropriate, prior
years' financial information has been reclassified to conform with the current
year presentation. All adjustments that, in the opinion of management, are
necessary for a fair presentation of the results of operations for the interim
periods have been reflected. All such adjustments consist of normal recurring
accruals unless otherwise disclosed in these interim financial statements. The
results of operations for the three months ended May 31, 1994, are not
necessarily indicative of the results for the year ending February 28, 1995.
COMMON STOCK:
All share amounts and share data have been restated to reflect a five for four
stock split, effected in the form of a stock dividend, declared in November
1993.
NET CAPITAL REQUIREMENTS:
Edwards is subject to the uniform net capital rule of the Securities and
Exchange Commission ("SEC"). This rule requires Edwards to maintain a minimum
net capital, as defined, and to notify, and sometimes obtain approval of, the
SEC and other regulatory organizations for substantial withdrawals of capital
and loans to affiliates. At May 31, 1994, Edwards' net capital of $517,503,000
was $492,211,000 in excess of the minimum required.
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
THREE MONTHS ENDED MAY 31, 1994 COMPARED TO
THREE MONTHS ENDED MAY 31, 1993
Results of Operations
The first quarter of fiscal year 1995 saw a slight downturn from the high level
of retail investor activity experienced during our last three fiscal years. The
Dow Jones Industrial Average dropped 2% in the first quarter to 3,758 from 3,832
at February 28, 1994. Despite NYSE and NASDAQ overall trading volumes
increasing, the retail investor volume has slowed versus the same period last
year. The number of branches and brokers increased to 493 and 5,256, which
represent increases of 3% and 5%, respectively, compared to the same period last
year.
Total revenues declined $13 million (4%) versus last year, from $315 million to
$302 million. Expenses were $252 million, a decrease of $3 million (1%),
resulting in profit margins of 10.1% in 1994 versus 12.1% in 1993.
Total commission revenue decreased $9 million (5%) primarily due to decreases in
listed and mutual fund revenue, partially offset by increases in insurance and
commodity revenue. Listed revenue decreased $10 million and mutual fund revenue
declined $6 million reflecting the uncertainty in the equity markets and rising
interest rates. Despite NYSE total volume increasing 11%, the Company's listed
trades were down 8%. Insurance revenue rose $6 million (40%) primarily due to
increased customer demand for annuities caused by higher interest and tax rates
this year. Commodity revenue increased $1 million (28%) primarily due to higher
exchange volume caused by increased volatility in interest rate sensitive
commodities.
Revenues from principal transactions increased $6 million (12%). This increase
was a result of rising interest rates which was followed by increased revenue
from sales of debt securities, primarily municipal bonds, which increased $9
million while trading gains decreased $3 million.
Investment banking revenue decreased $17 million (45%) principally due to a
decline in corporate equity, municipal bond and management fee revenues.
Revenues from corporate equity issues dropped $9 million (47%) due to a drastic
slow down in initial public offerings caused by the uncertainty in the equity
markets. Municipal bond revenue decreased $3 million (39%) primarily due to a
reduction in refundings as well as a decrease in the supply of new issues caused
by higher interest rates this year. Management fees decreased $4 million (49%)
due to participation as manager or co-manager in a smaller number of offerings,
in both corporate equity and municipal bond issues, this year.
Interest revenues increased $4 million (24%) due to higher customer receivables
coupled with higher interest rates.
Other revenues increased $3 million (13%) due to an increase in fees received in
connection with customer investments under professional management. Service
fees have also increased primarily due to a rise in administrative transaction
fees.
Compensation and benefits decreased $7 million (3%) primarily from lower
commission expense due to decreased commissionable revenue and a decline in
incentive related compensation caused by reduced earnings. These were partially
offset by increased salaries and related benefits as a result of branch and home
office expansion.
The effective income tax rate has risen due to increases in federal and state
statutory income tax rates.
Liquidity and Capital Resources
No material changes have taken place since February 28, 1994 regarding the
Company's liquidity, capital resources and overall financial condition.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings previously
reported in the Company's Annual Report on Form 10-K for the year ended
February 28, 1994.
Item 4: Submission of Matters to a Vote of Security Holders
<TABLE>
<CAPTION>
At the Company's Annual Meeting of Stockholders on June 23, 1994,
stockholders approved a number of nominations and proposals. Results of
these nominations and proposals were:
Votes Votes
Votes For Against Withheld*
<S> <C> <C> <C>
Nominations for director:
Dr. Louis Fernandez 51,620,535 570,766
David W. Mesker 51,627,969 563,332
Donna C.E. Williamson 51,422,970 768,331
Approval of A.G. Edwards, Inc.
Performance Plan for Executives 47,868,592 3,767,373 555,336
Ratification of auditors 51,808,448 140,767 242,086
</TABLE>
A total of 52,191,301 shares were present in person or by proxy at the
Annual Meeting.
*Includes abstentions and broker non-votes.
Item 6: Exhibits and Reports on 8-K
Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended May 31,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
A.G. EDWARDS, INC.
(Registrant)
/s/ Benjamin F. Edwards, III
Date: July 14, 1994 ----------------------------
BENJAMIN F. EDWARDS, III
Principal Executive Officer
/s/ David W. Mesker
Date: July 14, 1994 ---------------------------
DAVID W. MESKER
Principal Financial Officer
