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, 1995 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 1, 1996, there were 63,377,364 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
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<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
November 30, February 28,
1995 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 35,311 $ 41,464
Cash and government securities,
at market, segregated under federal
and other regulations 47,279 43,808
Securities purchased under agreements
to resell 91,993 42,819
Receivable from brokers and dealers 410,308 309,417
Receivable from customers, less allowance
for doubtful accounts of $3,440
and $3,450 1,503,548 1,359,172
Securities inventory, at market:
State and municipal 85,710 77,834
Government and agencies 37,944 30,239
Corporate 36,626 44,489
Property and equipment, at cost, net of
accumulated depreciation and
amortization of $165,809 and $145,072 179,874 167,570
Other assets 120,632 107,470
$2,549,225 $2,224,282
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks payable $ 137,643 $ 106,973
Payable to brokers and dealers 490,238 462,693
Payable to customers 545,665 415,741
Securities sold but not yet purchased,
at market 22,917 39,478
Employee compensation and related taxes 274,933 246,120
Income taxes 3,408 2,370
Other liabilities 37,478 31,626
Total Liabilities 1,512,282 1,305,001
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 63,669,624 and 62,294,211
shares 63,670 62,294
Additional paid-in capital 219,129 194,863
Retained earnings 760,005 665,992
1,042,804 923,149
Less: Unamortized expense of
restricted stock awards 823 3,868
Treasury Stock, at cost (198,118 shares) 5,038
Total Stockholders' Equity 1,036,943 919,281
$2,549,225 $2,224,282
<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 Nine Months
Ended November 30, Ended November 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Commissions $219,197 $150,981 $ 618,333 $481,344
Principal transactions 46,832 60,298 159,793 175,141
Investment banking 28,817 24,423 76,281 76,934
Interest 33,464 27,506 98,841 74,573
Other 33,577 25,926 95,988 78,236
361,887 289,134 1,049,236 886,228
EXPENSES:
Compensation and benefits 231,557 183,965 672,431 572,217
Communications 20,071 18,713 59,392 55,223
Occupancy and equipment 19,921 18,793 58,098 54,432
Floor brokerage and clearance 3,940 3,660 12,106 10,824
Interest 524 1,948 2,428 5,109
Other operating expenses 16,025 13,829 47,684 39,567
292,038 240,908 852,139 737,372
EARNINGS BEFORE INCOME TAXES 69,849 48,226 197,097 148,856
INCOME TAXES 26,850 18,369 75,460 56,850
NET EARNINGS $ 42,999 $ 29,857 $ 121,637 $ 92,006
Earnings per share $.67 $.48 $1.90 $1.49
Dividends per share $.16 $.14 $.44 $.42
Average common and common
equivalent shares outstanding 64,909 62,617 64,172 61,853
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 1994 AND 1995
(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, 1994 $60,446 $165,124 $576,073 $(11,276) $ 0
Net earnings 92,006
Cash dividends -
$.42 per share (25,541)
Treasury stock acquired (2,766)
Stock issued:
Employee stock
purchase/option plans 1,211 16,848 3,370
Restricted stock (3) 806 381 (604)
Amortization of restricted
stock awards 5,315
BALANCES, November 30, 1994 $61,654 $182,778 $642,538 $ (5,580) $ 0
BALANCES, March 1, 1995 $62,294 $194,863 $665,992 $ (3,868) $ 0
Net earnings 121,637
Cash dividends -
$.44 per share (27,624)
Treasury stock acquired (5,129)
Stock issued:
Employee stock
purchase/option plans 1,376 23,994 530
Restricted stock 272 135 (439)
Amortization of restricted
stock awards 2,910
BALANCES, November 30, 1995 $63,670 $219,129 $760,005 $ (823) $(5,038)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended November 30,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $121,637 $ 92,006
Noncash items included in earnings 31,935 30,658
(Increase) decrease in segregated cash
and government securities (3,471) 151,190
Increase in net receivable from brokers
and dealers (73,346) (245,044)
Increase in net receivable
from customers (14,452) (203,649)
(Increase) decrease in net securities inventory (24,279) 46,725
Net change in other assets and liabilities 47,790 (67,176)
Net cash provided by (used in) operating activities 85,814 (195,290)
Cash Flows from (payments for) Investing Activities:
Securities purchased under agreements to resell (49,174) 96,185
Capital expenditures and other investments (35,908) (52,812)
Net cash (used in) provided by investing activities (85,082) 43,373
Cash Flows from (payments for) Financing Activities:
Bank loans 131,900
Securities sold under agreements to repurchase 20,547
Employee stock transactions 25,868 22,009
Cash dividends (27,624) (25,541)
Treasury stock (5,129) (2,766)
(6,885) 146,149
Net Decrease in Cash and Cash Equivalents (6,153) (5,768)
Cash and Cash Equivalents at March 1 41,464 40,341
Cash and Cash Equivalents at November 30 $ 35,311 $ 34,573
<FN>
Income tax payments totaled $79,257 and $67,858 during the nine month periods ended November 30, 1995, and 1994,
respectively.
Interest payments totaled $2,691 and $4,484 during the nine month periods ended November 30, 1995, and 1994,
respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 30, 1995
(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, 1995. 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, 1995, are not necessarily indicative of the results for the year
ending February 29, 1996.
COMMON STOCK:
Options to purchase 1,250,000 shares of common stock granted under the Employee
Stock Purchase Plan are exercisable October 1, 1996 at 85% of market price based
on dates specified in the plan. Employees purchased 1,247,073 shares at $18.09
per share in October 1995.
NET CAPITAL REQUIREMENTS:
Edwards is subject to the uniform net capital rule administered by 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, 1995, Edwards'
net capital of $677,165,000 was $650,146,000 in excess of the minimum required.
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
NINE MONTHS ENDED NOVEMBER 30, 1995 COMPARED WITH
NINE MONTHS ENDED NOVEMBER 30, 1994
Results of Operations
The nine months ended November 30, 1995, saw an upturn of retail investor
activity compared with the level experienced during our last fiscal year. The
NYSE and Nasdaq overall trading volumes increased 23% and 41%, respectively,
over the prior year, which is reflected in a 21% increase in total company
customer trades. The number and size of customer trades and the product mix
generally affect the level of revenues. The number of branches and brokers
increased to 534 and 5,668, which represent increases of 6% and 5%,
respectively, compared with the same period last year.
Total revenue increased $l63 million (18%) over last year, from $886 million to
$1,049 million. Expenses were $852 million, an increase of $115 million (16%),
resulting in a rise in net profit margins from 10.4% last year to 11.6% this
year.
Total commission revenues increased $137 million (28%) primarily due to
increases in listed, OTC and mutual fund revenues. The combined listed and OTC
revenue increased $108 million reflecting the recent rise in volume in the
equity markets, contrasted with the uncertainty in the equity markets last year
caused by rising interest rates. Revenue from mutual fund sales and
distribution fees increased $19 million (12%) primarily due to the strong
performances of growth funds following the rise in the equity markets.
Revenue from principal transactions declined $15 million (9%) with lower revenue
from all debt products partially offset by higher corporate equity revenue.
Customer demand for debt securities declined primarily due to the strong equity
market and relatively flat interest rates this year, compared with a sluggish
equity market and a rising interest rate environment last year. As a result,
revenue from bond sales has fallen $32 million. As a partial offset, bond
inventory gains rose $3 million due to lower gains last year from rising
interest rates. Corporate equity revenue rose $13 million (47%) reflecting a
41% increase in overall Nasdaq volume caused by the rising equity market.
Investment banking revenues were flat primarily due to decreases in corporate
equity and management fee revenues offset by increases in corporate debt
revenue. Revenues from corporate equity issues and management fees declined a
combined $4 million due to the participation in several large deals last fiscal
year. Although activity in the initial public offering market has increased
recently, it was slow early this year due to the poor performance of the equity
markets last year. Revenue from corporate debt issues rose $4 million due to
increased activity in the new issue market for corporate debt securities and a
rise in sales of certificates of deposit.
Interest revenue increased $24 million (33%) primarily due to higher interest
rates earned on customer receivables, debt inventory and short-term investments.
Higher levels of debt inventory and short-term investments also contributed to
this increase.
Other revenue increased $18 million (23%) resulting from an increase in customer
investments under professional management. Revenue from service fees also
increased due to a rise in custodial and administrative transaction fees.
Compensation and benefits expenses increased $100 million (18%) due to increases
in most categories. Commission expense increased due to the rise in
commissionable revenue. General and administrative salaries and related
benefits increased due primarily to general increases and expansion. Incentive
related compensation rose as a result of higher earnings.
Liquidity and Capital Resources
No material changes have taken place since February 28, 1995 regarding the
Company's liquidity, capital resources and overall financial condition.
THREE MONTHS ENDED NOVEMBER 30, 1995 COMPARED WITH
THREE MONTHS ENDED NOVEMBER 30, 1994
Net earnings for the quarter ended November 30, 1995 were $43 million on
revenues of $362 million compared with net earnings of $30 million on revenues
of $289 million for the same period one year ago. The explanation of revenue
and expense fluctuations presented for the nine month period are generally
applicable to the three months of operations with the exception of investment
banking revenue. Investment banking revenue increased $4 million (18%) due to
the rise in activity in the initial public offering market for equities during
the third quarter this year, which follows the continued strength of the equity
markets.
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, 1995.
Item 6: Exhibits and Reports on 8-K
Exhibit 27 Financial Data Schedule. (This financial data schedule is
only required to be submitted with the Company's Quarterly
Report in Form 10-Q as filed electronically to the SEC's EDGAR
database.)
Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended November
30, 1995.
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 12, 1996 /s/ Benjamin F. Edwards III
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: January 12, 1996 /s/ David W. Mesker
DAVID W. MESKER
Principal Financial Officer
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<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE
NINE MONTH PERIOD ENDED NOVEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 35,311
<RECEIVABLES> 1,530,197
<SECURITIES-RESALE> 91,993
<SECURITIES-BORROWED> 383,659
<INSTRUMENTS-OWNED> 160,280
<PP&E> 179,874
<TOTAL-ASSETS> 2,549,225
<SHORT-TERM> 0
<PAYABLES> 1,002,868
<REPOS-SOLD> 0
<SECURITIES-LOANED> 445,611
<INSTRUMENTS-SOLD> 22,917
<LONG-TERM> 0
0
0
<COMMON> 63,670
<OTHER-SE> 973,273
<TOTAL-LIABILITY-AND-EQUITY> 2,549,225
<TRADING-REVENUE> 159,793
<INTEREST-DIVIDENDS> 98,841
<COMMISSIONS> 567,126
<INVESTMENT-BANKING-REVENUES> 76,281
<FEE-REVENUE> 108,977
<INTEREST-EXPENSE> 2,428
<COMPENSATION> 672,431
<INCOME-PRETAX> 197,097
<INCOME-PRE-EXTRAORDINARY> 197,097
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,637
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
