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 November 30, 1993 Commission file number 1-8527
A.G. EDWARDS, INC.
DELAWARE 43-1288229
State of Incorporation: I.R.S. Employer Identification No.
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 January 3, 1994, there were 59,596,287 shares of A.G. Edwards, Inc.
common stock, par value $1, issued and outstanding.
<PAGE>
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
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<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
November 30, February 28,
1993 1993
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 32,417 $ 27,963
Cash and government securities, at market, segregated under
federal and other regulations 45,760 286,239
Receivable from brokers and dealers 278,330 475,468
Receivable from customers, less allowance for doubtful accounts
of $3,350 and $3,250 1,160,500 950,937
Securities inventory, at market:
State and municipal 85,523 87,418
Government and agencies 34,010 34,827
Corporate 38,725 27,503
Property and equipment, at cost, net of accumulated depreciation
and amortization of $121,414 and $106,760 140,988 140,790
Other assets 98,239 80,047
---------- ----------
$1,914,492 $2,111,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans $ 22,300 $ -
Checks payable 117,853 113,665
Payable to brokers and dealers 335,477 503,379
Payable to customers 392,331 575,283
Securities sold but not yet purchased, at market 11,222 10,576
Employee compensation and related taxes 249,830 244,226
Income taxes 8,388 18,242
Other liabilities 36,940 30,581
---------- ----------
Total Liabilities 1,174,341 1,495,952
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 59,595,979 and 46,158,664 shares 59,596 46,159
Additional paid-in capital 149,566 125,328
Retained earnings 544,512 452,045
---------- ----------
753,674 623,532
Less - Unamortized expense of restricted stock awards 13,523 8,292
---------- ----------
Total Stockholders' Equity 740,151 615,240
---------- ----------
$1,914,492 $2,111,192
<FN>
See Notes to Consolidated Financial Statements.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
November 30 November 30
1993 1992 1993 1992
<S> <C> <C> <C> <C>
REVENUES:
Commissions $193,612 $141,934 $563,720 $424,159
Principal transactions 43,337 53,564 144,226 154,905
Investment banking 46,656 26,921 121,929 79,377
Interest 18,903 15,498 54,837 48,139
Other 24,764 20,979 71,837 62,156
-------- -------- -------- --------
327,272 258,896 956,549 768,736
EXPENSES:
Compensation and benefits 210,392 165,754 617,945 494,321
Communications 18,335 16,196 54,764 49,650
Occupancy and equipment 17,145 15,528 49,973 45,801
Floor brokerage and clearance 3,606 3,334 11,441 10,816
Interest 249 405 971 1,685
Other operating expenses 12,663 12,209 40,408 34,584
-------- -------- -------- --------
262,390 213,426 775,502 636,857
EARNINGS BEFORE INCOME TAXES 64,882 45,470 181,047 131,879
INCOME TAXES 23,770 16,790 66,240 48,860
-------- -------- -------- --------
NET EARNINGS $ 41,112 $ 28,680 $114,807 $ 83,019
Earnings per share $.67 $.49 $1.91 $1.44
Dividends per share $.14 $.10 $.38 $.31
Average common and common
equivalent shares outstanding 60,785 58,095 59,992 57,533
<FN>
See Notes to Consolidated Financial Statements.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 1993 AND 1992
(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, 1992 $44,466 $ 95,033 $357,244 $ (4,733) $ 0
Net earnings 83,019
Cash dividends -
$.31 per share (17,693)
Treasury stock acquired (21)
Stock issued:
Employee stock purchase/options 1,186 16,660 122
Restricted stock 388 9,798 (10,054) (101)
Amortization of restricted
stock awards 4,907
------- -------- -------- -------- -----
BALANCES, November 30, 1992 $46,040 $121,491 $422,570 $ (9,880) $ 0
BALANCES, March 1, 1993 $46,159 $125,328 $452,045 $ (8,292) $ 0
Net earnings 114,807
Cash dividends -
$.38 per share (22,340)
Treasury stock acquired (9)
Stock issued:
Employee stock purchase/options 1,134 22,780 427
Restricted stock 384 13,377 (11,953) (418)
Amortization of restricted
stock awards 6,722
Stock split -- 5-for-4 11,919 (11,919)
------- -------- -------- -------- -----
BALANCES, November 30, 1993 $59,596 $149,566 $544,512 $(13,523) $ 0
<FN>
See Notes to Consolidated Financial Statements.
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended November 30,
1993 1992
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 114,807 $ 83,019
Noncash items included in earnings 28,899 23,330
Decrease in segregated cash and government securities 240,479 176,724
Increase in net payable from brokers and dealers 29,236 216,052
Increase in net receivable from customers (392,515) (434,223)
(Increase) decrease in net securities inventory (7,864) 9,950
Net change in other assets and liabilities (16,854) (14,780)
-------- --------
Net cash (used in) provided by operating activities (3,812) 60,072
Cash Flows from Investing Activities:
Securities purchased under agreements to resell (51,209)
Capital expenditures and other investments (17,416) (19,930)
-------- -------
Net cash used in investing activities (17,416) (71,139)
Cash Flows from Financing Activities:
Net proceeds of bank loans 22,300
Employee stock transactions 25,731 17,968
Cash dividends (22,340) (17,693)
Other financing uses (9) (21)
-------- --------
Net cash provided by financing activities 25,682 254
Net Increase (Decrease) in Cash and Cash Equivalents 4,454 (10,813)
Cash and Cash Equivalents at March 1 27,963 41,534
-------- --------
Cash and Cash Equivalents at November 30 $ 32,417 $ 30,721
<FN>
Income tax payments totaled $80,172 and $54,442 during the nine month period ended November 30, 1993 and 1992,
respectively.
<FN>
Interest payments totaled $948 and $1,659 during the nine month period ended November 30, 1993 and 1992,
respectively.
<FN>
Supplemental disclosure of noncash financing activities - restricted stock awarded, net of forfeitures, totaled
$11,953 and $10,054 during the nine month period ended November 30, 1993 and 1992, respectively.
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 30, 1993
(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, 1993. 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
nine months ended November 30, 1993, are not necessarily indicative of the
results for the year ending February 28, 1994.
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 on
November 19, 1993 and payable on January 3, 1994 to holders of record
December 10, 1993.
Options to purchase 1,231,250 shares of common stock granted to employees
under the Employee Stock Purchase Plan are exercisable October 1, 1994, at
85% of market price based on dates specified in the plan. Employees
purchased 1,227,908 shares at $17.17 per share in October 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 November 30, 1993,
Edwards' net capital of $460,094,000 was $437,300,000 in excess of the
minimum required.
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A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
NINE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO
NINE MONTHS ENDED NOVEMBER 30, 1992
Results of Operations
The nine months ended November 30, 1993 saw a continuation of the high
level of retail investor activity experienced during our last two fiscal
years. The Dow Jones Industrial Average reached a new record high in
November, while increasing 9% during the period to 3,684 from 3,371 at
February 28, 1993. Trading volumes also increased with NYSE average daily
volume rising 34% and Nasdaq volume increasing 47% over the same period
last year. The number of branches and brokers increased to 486 and 5,095,
which represent increases of 4% and 7%, respectively, compared with the
same period last year.
Total revenues increased $188 million (24%) over last year, from $769
million to $957 million. Expenses were $776 million, an increase of $139
million (22%), resulting in profit margins of 12.0% in 1993 versus 10.8% in
1992.
Total commission revenue increased $140 million (33%) reflecting increased
trading volume and, to a lesser extent, expansion of the Company's
distribution system. Equity related commissions rose $63 million while
mutual fund and insurance sales increased $53 million and $20 million,
respectively. Stocks and mutual funds continue to offer clients potentially
higher returns than those available from bank time deposits.
Insurance revenue rose due to increased demand for variable annuities
caused by declining interest rates and higher tax rates.
Revenues from principal transactions decreased $11 million (7%). Debt
sales, primarily government bonds, were down $19 million (14%) due to lower
interest rates and a shift to mutual funds, variable annuities and other
equity products which offer higher effective yields. This was partially
offset by over-the-counter equity sales increasing $8 million (40%) as
activity continues to be strong due to rising prices coupled with higher
volume in the Nasdaq Market.
Investment banking revenue rose $43 million (54%) principally due to the
increase in corporate equity and management fee revenues. Revenues from
corporate equity issues increased $24 million (64%) due to the continued
vigorous activity in initial public offerings. Management fees have also
increased $14 million (87%) due to participation as manager or co-manager
in a larger number of offerings this year.
Interest revenues increased $7 million (14%) due to higher customer
receivables, partially offset by lower interest rates.
Other revenues increased $10 million (16%) due to an increase in fees
received in connection with customer investments under professional
management. Service fees have also increased due to a rise in the number
of accounts and trades.
Compensation and benefits increased $124 million (25%) primarily from
higher commission expense due to increased commissionable revenue and
higher incentive related compensation caused by increased earnings.
Salaries and related benefits also rose as a result of branch and home
office expansion. Deferred compensation increased $14 million primarily
due to an amendment to the Incentive Stock Plan for restricted stock
awards. Beginning in fiscal 1994, the amount of the award is expensed in
the current period and no longer amortized over the restriction period.
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A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
(Continued)
Communication expense increased $5 million (10%) and occupancy and
equipment expense increased $4 million (9%). Communication expense
increased primarily due to higher postage and quote service costs caused by
expansion, increased trade activity and rising quote service rates.
Occupancy and equipment increased as a result of higher rental costs, real
estate taxes and maintenance costs associated with computer equipment.
Interest expense decreased $.7 million (42%) due to the decrease in average
bank loans coupled with lower interest rates.
Other expense rose $6 million (17%) primarily due to increased costs
associated with litigation and higher publications and subscription
expenses.
Liquidity and Capital Resources
No material changes have taken place since February 28, 1993 regarding the
Company's liquidity, capital resources and overall financial condition.
THREE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO
THREE MONTHS ENDED NOVEMBER 30, 1992
Net earnings for the quarter ended November 30, 1993 were $41 million on
revenues of $327 million compared to net earnings of $29 million on
revenues of $259 million for the same period a year ago. Except for other
expenses which were basically flat, the explanations of revenue and expense
fluctuations presented in the results for the nine month period are
generally applicable to the three months of operations.
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, 1993.
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
November 30, 1993.
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<PAGE>
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)
Date: January 13, 1994 /s/ Benjamin F. Edwards, III
----------------------------
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: January 13, 1994 /s/ David W. Mesker
----------------------------
DAVID W. MESKER
Principal Financial Officer
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