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 August 31, 1994 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 September 30, 1994, there were 60,411,680 shares of A.G. Edwards, Inc. common
stock, par value $1, issued and outstanding.
A.G. EDWARDS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Consolidated balance sheets
Consolidated statements of earnings
Consolidated statements of stockholders' equity
Consolidated statements of cash flows
Notes to consolidated financial statements
Management's financial discussion
PART II. OTHER INFORMATION
SIGNATURES
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
August 31, February 28,
ASSETS 1994 1994
<S> <C> <C>
Cash and cash equivalents $ 35,434 $ 40,341
Cash and government securities,
at market, segregated under federal
and other regulations 47,605 195,726
Securities purchased under .
agreements to resell 13,113 114,553
Receivable from brokers and dealers 213,362 260,858
Receivable from customers, less
allowance for doubtful accounts
of $3,415 and $3,400 1,383,711 1,218,145
Securities inventory, at market
State and municipal 73,176 97,991
Government and agencies 21,505 28,864
Corporate 38,314 40,904
Property and equipment, at cost,
net of accumulated depreciation and
amortization of $135,078 and $124,423 165,842 145,441
Other assets 110,611 93,767
$2,102,673 $2,236,590
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans $ 123,800 $ --
Checks payable 116,195 111,947
Payable to brokers and dealers 367,909 623,034
Payable to customers 380,668 355,224
Securities sold but not yet
purchased, at market 24,011 24,109
Employee compensation and related taxes 212,622 285,213
Income taxes 2,428 9,959
Other liabilities 35,827 36,737
Total Liabilities 1,263,460 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 167,182 165,124
Retained earnings 621,310 576,073
849,036 801,643
Less: Unamortized expense of
restricted stock awards 7,431 11,276
Treasury stock, at cost
(137,660 shares) 2,392
Total Stockholders' Equity 839,213 790,367
$2,102,673 $2,236,590
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES:
Commissions $155,225 $185,969 $ 330,363 $ 370,108
Principal transactions 57,937 49,831 114,843 100,889
Investment banking 31,252 36,620 52,511 75,273
Interest 25,328 18,335 47,067 35,934
Other 25,776 23,617 52,310 47,073
295,518 314,372 597,094 629,277
EXPENSES:
Compensation and benefits 190,035 202,632 388,252 407,553
Communications 17,798 18,268 36,510 36,429
Occupancy and equipment 18,416 16,324 35,639 32,828
Floor brokerage and clearance 3,323 3,965 7,164 7,835
Interest 2,185 518 3,161 722
Other operating expenses 12,565 15,871 25,738 27,745
244,322 257,578 496,464 513,112
EARNINGS BEFORE INCOME TAXES 51,196 56,794 100,630 116,165
INCOME TAXES 19,601 21,188 38,481 42,470
NET EARNINGS $ 31,595 $ 35,606 $ 62,149 $ 73,695
Earnings per share $ .51 $ .60 $ 1.01 $ 1.24
Dividends per share $ .14 $ .12 $ .28 $ .24
Average common and common
equivalent shares outstanding 61,484 59,667 61,471 59,595
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 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 73,695
Cash dividends -
$.24 per share (13,997)
Treasury stock acquired (9)
Stock issued:
Employee stock
purchase/option plans 128 1,925 269
Restricted stock 384 13,371 (12,178) (260)
Amortization of restricted
stock awards 4,537
BALANCES, August 31, 1993 $ 46,671 $ 140,624 $ 511,743 $(15,933) $ 0
BALANCES, March 1, 1994 $ 60,446 $ 165,124 $ 576,073 $(11,276) $ 0
Net earnings 62,149
Cash dividends -
$.28 per share (16,912)
Treasury stock acquired (2,766)
Stock issued:
Employee stock
purchase/option plans 101 1,285 815
Restricted stock (3) 773 305 (441)
Amortization of restricted
stock awards 3,540
BALANCES, August 31, 1994 $ 60,544 $ 167,182 $ 621,310 $ (7,431) $(2,392)
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended August 31,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 62,149 $ 73,695
Noncash items included in earnings 22,161 19,932
Decrease in segregated cash and
government securities 148,121 238,981
Decrease in net payable to brokers
and dealers (207,629) (30,061)
Increase in securities sold under
agreements to repurchase 30,240
Increase in net receivable from customers (140,122) (392,743)
Decrease (increase) in net securities
inventory 34,666 (25,512)
Net change in other assets
and liabilities (95,967) (42,304)
Net cash used in operating activities (176,621) (127,772)
Cash Flows from Investing Activities
Proceeds from (payments for):
Securities purchased under
agreements to resell 101,440
Capital expenditures and
other investments (36,683) (10,942)
Net cash provided by (used in)
investing activities 64,757 (10,942)
Cash Flows from Financing Activities
Proceeds from (payments for):
Bank loans 123,800 151,700
Employee stock transactions 2,835 3,639
Cash dividends (16,912) (13,997)
Treasury stock (2,766) (9)
Net cash provided by financing activities 106,957 141,333
Net (Decrease) Increase in Cash
and Cash Equivalents (4,907) 2,619
Cash and Cash Equivalents at March 1 40,341 27,963
Cash and Cash Equivalents at August 31 $ 35,434 $ 30,582
<FN>
Income tax payments totaled $45,750 and $54,566 during the six month periods
ended August 31, 1994 and 1993, respectively.
Interest payments totaled $2,420 and $605 during the six month periods ended
August 31, 1994 and 1993, respectively.
Supplemental disclosure of noncash financing activities - restricted stock
awarded, net of forfeitures, totaled $12,178 during the six month period ended
August 31, 1993.
See Notes to Consolidated Financial Statements.
</TABLE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 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 six months ended August 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 August 31, 1994, Edwards' net capital of
$525,904,000 was $499,848,000 in excess of the minimum required.
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
SIX MONTHS ENDED AUGUST 31, 1994 COMPARED TO
SIX MONTHS ENDED AUGUST 31, 1993
Results of Operations
The six months ended August 31, 1994 saw a downturn from the high level of
retail investor activity experienced during our last three fiscal years.
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 504 and 5,314, which represent increases of 4% and 5%,
respectively, compared to the same period last year.
Total revenues declined $32 million (5%) versus last year, from $629 million to
$597 million. Expenses were $496 million, a decrease of $17 million (3%),
resulting in profit margins of 10.4% in 1994 versus 11.7% in 1993.
Total commission revenue decreased $40 million (11%) primarily due to decreases
in listed, OTC and mutual fund revenue, partially offset by an increase in
insurance revenue. Listed and OTC revenue decreased a combined $21 million and
mutual fund revenue declined $27 million reflecting the uncertainty in the
equity markets and rising interest rates. Despite NYSE total volume increasing
10%, the Company's listed trades were down 8% reflecting a slowdown in retail
investor activity. Insurance revenue rose $8 million (23%) primarily due to
increased customer demand for annuities caused by higher interest and tax rates
this year.
Revenues from principal transactions increased $14 million (14%). This increase
was a result of rising interest rates which was followed by increased revenue
from sales of debt securities, primarily municipal and government bonds, which
increased $17 million while inventory gains decreased $4 million.
Investment banking revenue decreased $23 million (30%) principally due to a
decline in corporate equity, municipal bond and management fee revenues.
Revenues from corporate equity issues dropped $13 million (36%) due to a drastic
slow down in initial public offerings caused by the uncertainty in the equity
markets. Municipal bond revenue decreased $7 million (43%) 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 $3 million (16%)
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 $11 million (31%) due to higher customer
receivables, which are up 26%, coupled with higher interest rates.
Other revenues increased $5 million (11%) 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 $19 million (5%) 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 increased due to higher state income taxes.
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.
THREE MONTHS ENDED AUGUST 31, 1994 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 1993
Net earnings for the quarter ended August 31, 1994 were $32 million on revenues
of $296 million compared to net earnings of $36 million on revenues of $314
million for the same period a year ago. The explanations of revenue and expense
fluctuations presented in the results for the six 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, 1994.
Item 4: Submission of Matters to a Vote of Security Holders
(C) The results of the annual meeting of stockholders, held on June 23,
1994, were previously reported on Form 10-Q filed for the quarter
ended May 31, 1994.
Item 6: Exhibits and Reports on 8-K
Exhibits:
Exhibit 27 - Financial Data Schedule, Article BD for the six month period
ended August 31, 1994
Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended August
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)
Date: October 14, 1994 /s/ Benjamin F. Edwards, III
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: October 14, 1994 /s/ David W. Mesker
DAVID W. MESKER
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE
SIX MONTH PERIOD ENDED AUGUST 31, 1991, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> MAR-01-1994
<PERIOD-END> AUG-31-1994
<CASH> 35,434
<RECEIVABLES> 1,397,683
<SECURITIES-RESALE> 13,113
<SECURITIES-BORROWED> 199,390
<INSTRUMENTS-OWNED> 132,995
<PP&E> 165,842
<TOTAL-ASSETS> 2,102,673
<SHORT-TERM> 123,800
<PAYABLES> 762,105
<REPOS-SOLD> 0
<SECURITIES-LOANED> 302,530
<INSTRUMENTS-SOLD> 24,011
<LONG-TERM> 0
<COMMON> 60,544
0
0
<OTHER-SE> 778,669
<TOTAL-LIABILITY-AND-EQUITY> 2,102,673
<TRADING-REVENUE> 114,843
<INTEREST-DIVIDENDS> 47,067
<COMMISSIONS> 303,489
<INVESTMENT-BANKING-REVENUES> 52,511
<FEE-REVENUE> 57,755
<INTEREST-EXPENSE> 3,161
<COMPENSATION> 388,252
<INCOME-PRETAX> 100,630
<INCOME-PRE-EXTRAORDINARY> 100,630
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,149
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
