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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended February 29, 1996 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) 955-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
RIGHTS TO PURCHASE COMMON STOCK NEW YORK STOCK EXCHANGE
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of voting stock held by non-affiliates was
approximately $1.5 billion at May 1, 1996.
At May 1, 1996, there were 63,906,972 shares of A.G. Edwards, Inc. Common Stock,
$1 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended February
29, 1996 (the "1996 Annual Report to Stockholders") are incorporated by
reference into Parts I, II and IV hereof. Portions of the Company's Proxy
Statement filed with the SEC in connection with the Company's Annual Meeting of
Stockholders to be held June 20, 1996 (the "Company's 1996 Proxy Statement") are
incorporated by reference into Part III hereof. Other documents incorporated by
reference in this report are listed in the Exhibit Index beginning on page 14 of
this Form 10-K.
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PART I
ITEM 1. BUSINESS.
(a) General Development of Business
A.G. Edwards, Inc., a Delaware corporation, is a holding company incorporated in
1983 whose principal subsidiary, A.G. Edwards & Sons, Inc. (Edwards), is
successor to a partnership founded in 1887. A.G. Edwards, Inc. and its directly
owned and indirectly owned subsidiaries (collectively referred to as the
Company) provide securities and commodities brokerage, asset management,
insurance, trust, investment banking and other related financial services to
individual, corporate, governmental and institutional clients.
Edwards' business, primarily with individual clients, is conducted through one
of the largest retail branch office networks (based upon number of offices) in
the United States. At February 29, 1996, Edwards had 536 offices (up from 516
at the end of the prior fiscal year) in 48 states and the District of Columbia,
and 11,279 full-time employees (up from 10,741), including 5,757 investment
brokers (up from 5,483) providing services for approximately 1,720,000 clients
(up from 1,580,000). No single client accounts for a significant portion of
Edwards' business. Edwards is a member of all major securities exchanges in the
United States, the National Association of Securities Dealers, Inc. (NASD) and
the Securities Investor Protection Corporation (SIPC). Additionally, Edwards
has memberships on several commodity exchanges and is registered with the
Commodity Futures Trading Commission (CFTC) as a futures commission merchant.
AGE Commodity Clearing Corp. (Clearing), a commodity clearing subsidiary, is
registered with the CFTC as a futures commission merchant (FCM) and operates
exclusively as a commodity clearing company for Edwards. Clearing is a member
of all major U.S. commodities exchanges and the National Futures Association
(NFA). The four A.G. Edwards Trust companies provide investment advisory,
portfolio management and trust services. Gull-AGE Capital Group, Inc. serves as
general partner of 64 real estate partnerships in connection with 24 limited
partnerships sold by Edwards from 1982 through 1985. Edwards Development
Corporation is the sole general partner in Indianapolis Historic Partners (IHP),
a partnership, in which Edwards owns the entire limited partnership interest.
IHP purchased, renovated and now operates residential rental property in the
Indianapolis, Indiana area.
(b) Financial Information About Industry Segments
The Company operates in one principal line of business, that of providing
investment services. Because the Company's services use the same distribution
personnel and facilities, and the same support services, it is impractical to
identify the assets, expenses and profitability of any one class of service.
The principal sources of revenue for the last three fiscal years are set forth
on pages 26 and 27 of the 1996 Annual Report to Stockholders under the caption
"Ten-Year Financial Summary". Such information is hereby incorporated by
reference.
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(c) Narrative Description of Business
Commissions, asset management and service fees, principal transactions and
investment banking each accounted for 10% or more of the Company's consolidated
revenues for one or more of the past three fiscal years. The amounts of the
total revenue contributed by such services during the last three fiscal years
are set forth on pages 26 and 27 of the 1996 Annual Report to Stockholders under
the caption "Ten-Year Financial Summary," which information is hereby
incorporated by reference.
The Company markets and distributes its products and services to its clients in
the 48 contiguous states and the District of Columbia through its branch office
network, 5,757 investment brokers and 5,522 support employees.
COMMISSIONS
Commission revenue represents the most significant source of revenue for the
Company, accounting for approximately 50% of total revenue in each of the last
five years. The following briefly describes the Company's sources of commission
revenue.
Listed and Over-the-Counter Securities. A significant portion of the Company's
revenue is derived from commissions generated on securities transactions
executed by Edwards, as a broker, in common and preferred stocks and debt
instruments on exchanges or in the over-the-counter markets. Edwards' brokerage
clients are primarily individual investors; however, resources continue to be
directed to further the development of its institutional business. Edwards'
commission rates for brokerage transactions vary with the size and complexity of
the transactions, among other factors.
Options. Edwards acts as broker in the purchase and sale of option contracts to
buy or sell securities, primarily common stocks and stock indexes. Edwards
holds memberships for trading on principal option exchanges.
Mutual Funds. Edwards distributes mutual fund shares in continuous offerings of
open-end funds as well as new underwritings of closed-end funds. Income from
the sale of mutual funds is derived primarily from the standard dealer's
discount which varies as a percentage of the client's purchase price depending
upon the size of the transaction and terms of the selling agreement. Revenues
derived from mutual fund sales continue to be a significant portion of overall
revenues. Edwards does not sponsor its own mutual fund products.
Commodities and Financial Futures. Edwards acts as broker in the purchase and
sale of commodity futures contracts, financial futures contracts and options on
commodity and financial futures contracts. These contracts cover agricultural
products, precious metals, currency, interest rate and stock index futures.
Substantially all of Edwards clients' futures transactions are executed and
cleared through Clearing. Nearly all transactions in futures contracts are
executed with a relatively low margin deposit, usually 3% to 12% of the total
contract amount. Consequently, the risk to the client and resulting credit risk
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assumed by Edwards is substantial, generally greater than on securities
transactions. To limit its exposure, Edwards requires its clients to meet
minimum net worth requirements and other established credit standards, in
addition to the margin deposits. Regulations of some commodity exchanges limit
the allowable upward or downward price fluctuations for each commodity on a
given day. These restrictions on price fluctuations may preclude purchases or
sales necessary to limit losses or realize gains.
As a member of the clearing associations of the principal commodity exchanges,
Clearing has potentially significant financial exposure in the event other
members default on their obligations to the clearing houses of such exchanges.
Insurance. As agent for several life insurance companies, Edwards distributes
life insurance and tax-deferred annuities. Edwards also provides financial
planning services to assist individuals in structuring financial portfolios to
achieve their financial goals. In addition, A.G. Edwards Life Insurance Company
is licensed to issue life insurance policies under the laws of Missouri, but has
not issued any to date.
PRINCIPAL TRANSACTIONS
Client transactions in the equity and fixed income over-the-counter markets may
be effected by Edwards acting as principal as well as agent. Principal
transactions, including market making, require maintaining inventories of
securities to satisfy customer order flow. These securities are valued on the
Company's financial statements at fair value and unrealized gains or losses are
included in the results of operations. Securities fluctuations may be sudden
and sharp as a result of changes in market conditions. To the extent Edwards
can correctly anticipate such changes, risks may be reduced by varying inventory
levels or by use of hedging strategies.
INVESTMENT BANKING
Edwards is an underwriter of corporate and municipal securities, certificates of
deposit, as well as corporate and municipal unit investment trusts. Activities
in municipal underwriting include areas of specialization in financing of
municipal projects such as infrastructure improvements, education, housing and
health facilities. As an underwriter, usually in conjunction with other broker-
dealers and financial institutions, Edwards purchases securities for resale to
its clients. Edwards acts as a consultant to corporations and municipal
entities in planning their capital needs and determining the most advantageous
means for raising capital. It also advises clients in merger and acquisition
activities and acts as agent in private placements.
Underwriting involves risk. As an underwriter, Edwards may incur losses if it
is unable to resell the securities it is committed to purchase or if it is
forced to liquidate all or a part of its commitment at less than the purchase
price. Under federal and state securities laws, an underwriter is exposed to
substantial potential liability for material misstatements or omissions of fact
in the prospectus used to describe the securities being offered. Generally,
issuers agree to indemnify underwriters against such liabilities, but otherwise,
underwriters are not specifically insured. In addition, the commitment of
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capital to underwriting may reduce Edwards' regulatory
net capital position and, consequently, its underwriting participation may be
limited by the requirement that it must at all times be in compliance with the
net capital rules administered by the Securities and Exchange Commission (SEC).
Although it is generally more profitable to manage or co-manage an underwriting,
as opposed to being a participant, managers generally commit to underwriting a
greater portion of the offering than the other members of the underwriting group
and consequently, managers assume a greater risk.
ASSET MANAGEMENT AND SERVICE FEES
Asset management and service fees consist primarily of revenues earned for
providing support and services in connection with assets under third-party
management, including mutual funds. These revenues include fees based on the
amount of client assets under management and transaction-related fees, as well
as fees related to the administration of custodial and other specialty accounts.
Edwards, through the A.G. Edwards Trust companies, provides its clients with a
full range of personal, ERISA and custodial trust services. Through four
separate state charters, the A.G. Edwards Trust companies are able to provide
trust services to clients in most states.
Clients desiring professional money management are offered two separate account
portfolio services. Edwards, acting as investment manager, offers portfolio
management strategies based on the client's investment objectives. In addition,
through Asset Performance Monitor(R), Edwards provides its clients access to
third-party investment management, performance measurement, management search
and related consulting services.
Edwards offers UltraAsset, Total Asset and the Cash Convenience accounts, which
combine a full-service brokerage account with a money market fund. These
programs provide for the automatic investment of customer free credit balances
in one of several money market funds. Interest is not paid on free credit
balances held in client accounts. In addition, the UltraAsset and Total Asset
accounts allow clients access to their margin securities and money market shares
through the use of debit cards and checking account services provided by a major
bank. The UltraAsset account offers additional advanced features and special
investment portfolio reports.
Edwards provides custodial services for clients' self-directed Individual
Retirement Accounts and Keogh plans.
MARGIN FINANCING
Securities transactions are executed on a cash or margin basis. In margin
transactions, Edwards extends credit to its clients for a portion of the
purchase price, with the client's securities held as collateral. The amount of
credit is limited by the initial margin regulations of the Federal Reserve
Board. The current prescribed minimum initial margin for equity securities is
equal to 50% of the value of equity securities purchased. The regulations of
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the various exchanges require minimum maintenance margins, which are below the
initial margin. Edwards' maintenance requirements generally exceed the
exchanges' requirements. Such requirements are intended to reduce the risk that
a market decline will reduce the value of the collateral below that of the
client's indebtedness before the collateral can be liquidated.
A substantial portion of the Company's assets and obligations result from
transactions with clients who have provided financial instruments as collateral.
The Company manages its risk associated with these transactions through position
and credit limits, and the continuous monitoring of collateral. Additional
information regarding risks associated with client transactions is set forth in
Note 9 of the Notes to Consolidated Financial Statements under the caption "Off-
Balance Sheet Risk and Concentration of Credit Risk" appearing on page 35 of the
1996 Annual Report to Stockholders. Such information is hereby incorporated by
reference.
A client, borrowing in a margin account, is charged an interest rate based on
the broker call loan rate plus an amount up to 2 1/2% depending on the amount of
the client's borrowings during each interest period. Interest earned on these
balances represents an important source of revenue for Edwards.
Although borrowings from banks, either unsecured or secured by the clients'
collateral securities, are an available source of funds to carry client margin
accounts, the Company's stockholders' equity, cash received from loans of the
clients' collateral securities to other brokers and, to the extent permitted by
regulations, customer free credit balances provide most of the funds required.
RESEARCH
Edwards provides both technical market analysis and fundamental analysis of
numerous industries and individual securities for use by its investment brokers
and clients. In addition, reviews and analysis of general economic conditions,
along with asset allocation recommendations, are also available. These services
are provided by Edwards' research analysts, economists and market strategists.
Revenues from research activities are derived principally through resulting
transactions on an agency or principal basis.
COMPETITION
All aspects of the Company's business are highly competitive. Edwards competes
with numerous broker-dealers, some of whom possess greater financial resources
than the Company. Edwards competes for clients on the basis of price, the
quality of its services, financial resources and reputation within the clients'
communities. There is constant competition to attract and retain personnel
within the securities industry. Competition for the investment dollar and for
clients has increased from other sources, such as commercial banks, savings
institutions, mutual fund management companies, investment advisory companies as
well as from other companies offering insurance, real estate and other
investment opportunities. If enacted, certain legislative proposals, calling
for reduced restrictions on brokerage service and underwriting activities, may
lead to increased competition from commercial banks and their affiliates.
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REGULATION
Edwards, as a broker-dealer and FCM, is subject to various federal and state
laws which specifically regulate its activities as a broker-dealer in securities
and commodities, as an investment advisor and as an insurance agent. Clearing,
as a FCM, is regulated as a broker in commodities. Edwards and Clearing are
also subject to various regulatory requirements imposed by the securities and
commodities exchanges and the NASD. The primary purpose of these requirements
is to enhance the protection of customer assets. Under certain circumstances,
these rules may limit the ability of A.G. Edwards, Inc. to make withdrawals of
capital from Edwards and Clearing. These laws and regulatory requirements
generally subject Edwards and Clearing to standards of solvency with respect to
capital requirements, financial reporting requirements, approval of
qualifications of personnel engaged in various aspects of its business, record
keeping and business practices, the handling of their clients' funds resulting
from securities and commodities transactions and the extension of credit to
clients on margin transactions. Infractions of these rules and regulations may
include suspension of individual employees, their supervisors, termination of
employees, limitations on certain aspects of Edwards' and Clearing's regulated
businesses, as well as censures and fines, or even proceedings of a civil or
criminal nature which could result in a temporary or permanent suspension of a
part or all of Edwards' and Clearing's activities. Additional information
regarding regulation is set forth in Note 5 of the Notes to Consolidated
Financial Statements under the caption "Net Capital Requirements" appearing on
page 34 of the 1996 Annual Report to Stockholders. Such information is hereby
incorporated by reference.
Under the Market Reform Act of 1990 and the Futures Trading Practices Act of
1992, the SEC and CFTC, respectively, adopted regulations requiring certain
registered broker-dealers and FCMs to maintain, preserve and periodically
describe and report their risk management policies and certain other information
concerning affiliates whose activities are reasonably likely to have a material
impact on the financial or operating condition of the broker-dealer or FCM.
Edwards and Clearing are each subject to one or both of these laws and related
regulations.
Additionally, the four state-chartered trust companies are separately regulated
by banking or trust laws of the states in which they are incorporated or do
business. A.G. Edwards Life Insurance Company is regulated by the insurance
laws of the State of Missouri. The Ceres Investment Company, a commodity pool
operator and general partner of four commodity pools sponsored by Edwards, is
regulated by the CFTC and the NFA.
ITEM 2. PROPERTIES.
The Company's headquarters, consisting of several buildings located at One North
Jefferson Avenue, St. Louis, Missouri, contains approximately 1,100,000 square
feet of general office space, as well as underground and surface parking and a
five story parking garage. The buildings are located on approximately 590,000
square feet of land owned by the Company. The Company also owns approximately
495,000 square feet of land adjacent to its headquarters and is using this
property principally for additional employee parking areas. The Company began
construction of an additional headquarters building in November 1995, and its
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cost is expected to be approximately $40 million. Also, the Company owns two
of its branch office buildings and two additional office buildings which serve
as a data processing and contingency planning facility.
The remainder of the Company's branch offices occupy leased premises. Aggregate
annual rental for branch office premises for the year ended February 29, 1996,
was $32,860,000.
ITEM 3. LEGAL PROCEEDINGS.
(a) Litigation
The Company is a defendant in numerous lawsuits and arbitrations, in some
of which plaintiffs claim substantial amounts, relating primarily to its
securities and commodities business. While results of litigation cannot
be predicted with certainty, management, based on consultation with
counsel, believes that resolution of all such litigation will have no
material adverse effect on the consolidated financial statements of the
Company.
(b) Proceedings Terminated during the Fourth Quarter of the Fiscal Year
Covered by This Report.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 29, 1996.
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EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the executive officers of the Company as of
May 1, 1996. Executive officers are appointed by the Board of Directors to hold
office until their successors are appointed and qualified.
<TABLE>
<CAPTION>
Year First
Appointed Executive
Officer of the
Name Age Office & Title Company
<S> <C> <C> <C>
Benjamin F. Edwards III 64 Chairman of the Board, 1983
President and Chief Executive
Officer of the Company.
Chairman of the Board,
President and Chief Executive
Officer of Edwards. Employee
of Edwards for 39 years.
Director of Edwards since 1967.
Robert G. Avis 64 Vice Chairman of the Board of 1984
the Company. Vice Chairman of
the Board, Executive Vice President,
Director of the Investment Banking Division
and Director of the Sales and
Marketing Division of Edwards.
Employee of Edwards for 30 years.
Director of Edwards since 1970.
Robert L. Bagby 52 Vice Chairman of the Board of 1991
the Company and Vice Chairman of
the Board of Edwards since March 1996.
Corporate Vice President, Director of the
Branch Division of Edwards since March 1995.
Assistant Director of the Branch Division of
Edwards until February 1995. Employee of
Edwards for 21 years. Director of Edwards
since 1979.
Donnis L. Casey 48 Vice President of Edwards. Director 1996
of the Staff Division of Edwards since
March 1996. Assistant Director of the Staff
Division of Edwards from March 1993 to
February 1996. Assistant Training Director
prior to March 1993. Employee of Edwards
for 29 years. Director of Edwards since 1993.
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Year First
Appointed Executive
Officer of the
Name Age Office & Title Company
Robert C. Dissett 58 Corporate Vice President, 1990
Assistant Treasurer and
Director of Operations of Edwards.
Employee of Edwards for 34 years.
Director of Edwards since 1973.
Benjamin F. Edwards IV 40 Vice President of Edwards. Central Region 1996
Officer of Edwards since March 1995.
Assistant branch manager until February 1995.
Employee of Edwards for 18 years. Director
of Edwards since 1994.
Alfred E. Goldman 62 Senior Vice President, Technical 1991
Market Analysis of Edwards.
Employee of Edwards for 36 years.
Director of Edwards since 1967.
Douglas L. Kelly 47 Secretary of the Company. 1994
Vice President, Secretary and Director
of Law and Compliance of Edwards.
Employee of Edwards for 2 years.
Director of Edwards since 1994.
Ronald J. Kessler 48 Corporate Vice President and Assistant 1996
Director of Operations of Edwards.
Employee of Edwards for 28 years.
Director of Edwards since 1989.
Eugene J. King 64 Vice President, Controller and 1983
Assistant Treasurer of the Company.
Senior Vice President, Assistant
Treasurer and Controller of Edwards.
Employee of Edwards for 25 years.
Director of Edwards since 1988.
David W. Mesker 64 Treasurer of the Company. Treasurer and 1983
Senior Vice President of Edwards. Director of
the Staff Division of Edwards until February 1996.
Employee of Edwards for 34 years.
Director of Edwards since 1967.
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Year First
Appointed Executive
Officer of the
Name Age Office & Title Company
Robert L. Proost 58 Vice President of the Company. Corporate 1990
Vice President, Assistant Secretary and
Director of Administration of Edwards.
Employee of Edwards for 8 years.
Director of Edwards since 1989.
</TABLE>
All of the above officers, except Mr. Kelly, have served as officers of Edwards
during the past five years. Mr. Kelly was a partner at the law firm of Peper,
Martin, Jensen, Maichel and Hetlage practicing law in the corporate, commercial
and securities areas for 20 years prior to his employment with the Company.
Peper, Martin, Jensen, Maichel and Hetlage serves as one of the Company's legal
counsel.
Benjamin F. Edwards III and Robert G. Avis are stepbrothers.
Benjamin F. Edwards III is the father of Benjamin F. Edwards IV.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information required by this item is contained in the 1996 Annual Report to
Stockholders on page 28 under the caption "Quarterly Financial Information" and
on page 44 under the caption "Stockholder Information". Such information is
hereby incorporated by reference. The approximate number of equity security
holders of record includes customers who hold the Company's stock in their
accounts on the books of Edwards.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is contained on pages 26 and 27 of the
1996 Annual Report to Stockholders under the caption "Ten-Year Financial
Summary". Such information is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is contained on pages 23 through 25 of the
1996 Annual Report to Stockholders under the caption "Management's Financial
Discussion". Such information is hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in the Consolidated Financial
Statements and Notes thereto, together with the Independent Auditors' Report
thereon of Deloitte & Touche llp dated April 18, 1996, and under the caption
"Quarterly Financial Information" on pages 28 through 35 of the 1996 Annual
Report to Stockholders. Such information is hereby incorporated by reference.
Additional Information - Edwards maintains a Stockbrokers Blanket Bond insuring
various loss contingencies. Under the terms of the current policy, Edwards is
responsible for the first $1,000,000 of each such occurrence.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is included under the caption "Election of
Directors - Nominees for Directors" on pages 4 through 6 of the Company's 1996
Proxy Statement and in Part I of this Form 10-K on pages 9 through 11 under the
caption "Executive Officers of the Company". Such information is hereby
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under the captions "Director
Compensation" and "Executive Compensation" on page 6 and pages 8 through 16 of
the Company's 1996 Proxy Statement. Such information is hereby incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is contained on pages 7 and 8 of the
Company's 1996 Proxy Statement under the caption "Ownership of the Company's
Common Stock". Such information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is contained on page 17 of the Company's
1996 Proxy Statement under the caption "Certain Transactions". Such information
is hereby incorporated by reference.
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PART IV
ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES,
EXHIBITS AND REPORTS ON FORM 8-K.
PAGE
INDEX NUMBER
(a) 1. Financial Statements
Independent Auditors' Report (X)
Consolidated balance sheets (X)
Consolidated statements of earnings (X)
Consolidated statements of stockholders' equity (X)
Consolidated statements of cash flows (X)
Notes to consolidated financial statements (X)
(X) The consolidated financial statements, together with the Independent
Auditors' Report thereon of Deloitte & Touche LLP, included on pages 28
through 35 of the Company's 1996 Annual Report to Stockholders, are hereby
incorporated by reference.
2. Financial Statement Schedules
All schedules are omitted due to the absence of conditions under which
they are required or because the required information is provided in the
consolidated financial statements or notes thereto.
3. Exhibits*
Some of the following exhibits were previously filed as exhibits to other
reports or registration statements filed by the Registrant and are incorporated
by reference as indicated below.
2 Not applicable.
3(i) Certificate of Incorporation filed as Exhibit 3(i) to the
Registrant's Form 10-K for the fiscal year ended February 28,
1993.
3(ii) By-laws filed as Exhibit 3(ii) to the Registrant's Form 10-K
for the fiscal year ended February 28, 1994.
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4(i) Reference is made to Articles IV, V, X, XII, XIII and XV of
the Certificate of Incorporation filed as Exhibit 3(i) to this
Form 10-K.
4(ii) Reference is made to Article II, Article III Sections 1 and
15, Article IV Sections 1 and 3, Article VI and Article VII
Sections 1-3 of the By-laws filed as Exhibit 3(ii) to this
Form 10-K.
4(iii) Rights Agreement dated as of December 30, 1988 between A.G.
Edwards, Inc. and Boatmen's Trust Company as Rights Agent filed
as Exhibit 4 to the Registrant's Form 8-K Report dated December
30, 1988.
4(iv) Amendment No. 1 to the Rights Agreement dated December 30,
1988, between A.G. Edwards Inc. and Boatmen's Trust Company as
Rights Agent, dated May 24, 1991 filed as Exhibit 4.4 to
Registrant's Form 10-K for the fiscal year ended February 29,
1992.
4(v) Amendment No. 2 to the Rights Agreement dated December 30,
1988, between A.G. Edwards, Inc. and Boatmen's Trust Company as
Rights Agent, dated June 22, 1995 filed with the Registrant's
Form 8-A/A on August 17, 1995.
9 Not applicable.
10(i) A.G. Edwards, Inc. 1988 Incentive Stock Plan (as amended and
restated) filed as Exhibit 10.2 to Registrant's Form 10-K for the
fiscal year ended February 29, 1992.
10(ii) Certificate of Amendment dated April 27, 1993 to A.G.
Edwards, Inc. 1988 Incentive Stock Plan (Exhibit 10(i)) filed as
Exhibit 10(iii) to Registrant's Form 10-K for the fiscal year
ended February 28, 1994.
11 Computation of per share earnings may be clearly determined from
the consolidated financial statements and notes thereto contained
on pages 29 through 35 in the Company's Annual Report to
Stockholders for the fiscal year ended February 29, 1996 and
incorporated herein by reference.
12 Not applicable.
13 Annual Report to Stockholders for the fiscal year ended
February 29, 1996. Except for those portions of pages expressly
incorporated by reference, the 1996 Annual Report to Stockholders
is not deemed filed as part of this Annual Report on Form 10-K.
16 Not applicable.
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18 Not applicable.
21 Subsidiaries of the Registrant.
22 Not applicable.
23 Independent Auditors' Consent.
24 Power of Attorney.
27 Financial Data Schedule. This Financial Data Schedule is only
required to be submitted with the Registrant's Annual Report on
Form 10-K as filed electronically to the SEC's EDGAR database.
28 Not applicable.
*Numbers correspond to document numbers in Exhibit Table of Item 601 of
Regulation S-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year ended
February 29, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: May 23, 1996 By /s/ Benjamin F. Edwards III
Benjamin F. Edwards III,
Chairman of the Board
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POWER OF ATTORNEY EXHIBIT 24
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Benjamin F. Edwards III, and David W. Mesker and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign this Report, any and all amendments to this
Report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Benjamin F. Edwards III Chairman of the Board, May 23, 1996
Benjamin F. Edwards III President and Director
(Chief Executive Officer)
/s/ David W. Mesker Treasurer and Director May 23, 1996
David W. Mesker (Principal Financial Officer)
/s/ Eugene J. King Vice President May 23, 1996
Eugene J. King (Principal Accounting Officer)
/s/ Robert G. Avis Vice Chairman of the Board May 23, 1996
Robert G. Avis and Director
/s/ Robert L. Bagby Vice Chairman of the Board May 23, 1996
Robert L. Bagby and Director
/s/ Dr. E. Eugene Carter Director May 23, 1996
Dr. E. Eugene Carter
/s/ Robert C. Dissett Director May 23, 1996
Robert C. Dissett
Director
Dr. Louis Fernandez
/s/ Samuel C. Hutchinson Jr. Director May 23, 1996
Samuel C. Hutchinson, Jr.
/s/ Donna C. E. Williamson Director May 23, 1996
Donna C.E. Williamson
</TABLE>
18
<PAGE>
Exhibit Index
Exhibit Description
13 1996 Annual Report to Stockholders.
21 Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
24 Power of Attorney. Included on Signature Page 18.
19
<PAGE>
EXHIBIT 13
A.G. EDWARDS, INC.
1996 Annual Report / Fiscal year ended February 29, 1996
Note: Only those pages of the 1996 Annual Report to Stockholders
expressly incorporated by reference are included in this
Exhibit 13 to this Annual Report on Form 10-K.
<PAGE>
MANAGEMENT'S FINANCIAL DISCUSSION
(Year references are to fiscal years unless otherwise specified.)
General Business Environment
A.G. Edwards, Inc. is a holding company which, through its operating
subsidiaries (collectively the Company), provides securities and commodities
brokerage, investment banking, trust, asset management and insurance services
through one of the industry's major retail branch distribution systems. Its
principal subsidiary, A.G. Edwards & Sons, Inc., is a St. Louis-based financial
services firm with more than 530 locations across the 48 contiguous states and
approximately 12,000 employees. The Company's primary business is providing
individual investors a full range of financial products and services. The
Company also provides products and services to institutional investors and
investment banking services to corporate, governmental and municipal clients.
Many factors affect investors and therefore the Company's revenues and
profitability, including changes in economic conditions, investor sentiment, the
level and volatility of interest rates, inflation, political events, and
competition from other financial institutions. Because these factors are
unpredictable and beyond the Company's control, earnings may fluctuate
significantly from period to period.
Calendar 1995 and the Company's fiscal 1996 were highly profitable for the
securities industry and for many individual investors as well. Declining
interest rates, together with profit growth for corporations, led to increased
investor activity, propelling stock prices to record highs. The Dow Jones
Industrial Average climbed 37% to 5,486 at year end. The Nasdaq average added a
39% gain, primarily as a result of the strong performance of technology stocks.
Industry-wide corporate debt and equity underwritings rose 23% ($134 billion)
over 1995, and mergers and acquisitions were the second highest on record.
Mutual funds continued to attract strong inflows of cash, directed primarily at
domestic equity funds. Owning bonds in the declining interest rate environment
provided some of the highest total returns on record to fixed-income investors;
however, interest rates began to increase in February 1996.
Results of Operations
Revenues, net earnings and earnings per share reached record levels in 1996 for
the Company as the entire securities industry experienced one of its most
profitable years on record. Revenues for the Company rose 23% to $1.5 billion
from $1.2 billion in 1995 and $1.3 billion in 1994. Net earnings of $171 million
were up 37% from the previous year's $124 million and up 10% from 1994's net
earnings of $155 million. Earnings per share were $2.65 in the current year
versus $2.00 and $2.57 in 1995 and 1994, respectively. Profit margins were 11.7%
in 1996, compared with 10.5% in 1995 and 12.1% in 1994.
The number of A.G. Edwards investment brokers reached 5,757 at year end, an
increase of 5% from the prior year end. This growth rate compared with an
average 6% annual growth during the last five years. The number of locations at
the end of 1996 was 536, up from 516 at year end 1995. It is the Company's
intent to continue expanding its distribution system as opportunities present
themselves.
The following table and discussion summarize the changes in the major categories
of revenues and expenses for the past two years (dollars in thousands):
1996 vs. 1995 1995 vs. 1994
Increase (Decrease)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Revenues:
Commissions $227,259 39% $(149,530) (21)%
Principal transactions (34,658) (14) 54,060 29
Investment banking 12,269 13 (54,243) (37)
Asset management and service fees 42,297 28 17,640 13
Interest 28,823 27 30,954 42
Other 135 2 820 12
$276,125 23% $(100,299) (8)%
Expenses:
Compensation and benefits $173,019 23% $ (71,673) (9)%
Communications 5,656 8 1,660 2
Occupancy and equipment 5,969 8 5,850 9
Floor brokerage and clearance 1,920 13 (707) (5)
Interest (3,665) (54) 5,705 513
Other operating expenses 16,273 31 3,108 6
$199,172 20% $ (56,057) (5)%
</TABLE>
Commissions
Commissions remain the most significant source of revenue for the Company,
accounting for 55% of total revenue in 1996 and 49% in 1995. Commission revenue
jumped 39%, from $579 million to $806 million, in 1996 and accounted for more
than 80% of the Company's overall revenue increase for the year. As commissions
are transaction-based revenues, they are directly influenced by changes in
trading volume and may vary considerably from period to period.
Listed equity securities commissions increased 43% ($102 million) and over-the-
counter equity commission revenue rose 77% ($62 million), tracking record
trading volumes and higher stock prices on the New York Stock Exchange and the
Nasdaq. For the industry, average daily trading volume was up 24% on the New
York Stock Exchange and 47% on the Nasdaq. The number of agency transactions for
the Company increased 37% over 1995, while the average ticket size increased
11%.
23
<PAGE>
Company revenues from mutual fund sales rose 28% ($41 million), reflecting an
industry-wide trend. Increased sales by the Company of variable annuities was
the primary reason for a 17% ($13 million) increase in commissions from
insurance products.
The prior year's 21% ($150 million) decline in total commissions, 1995 compared
with 1994, reflected a decrease in retail investor activity, primarily mutual
fund sales, due to uncertainties in the financial markets caused in part by a
rising interest rate environment.
Principal Transactions
The Company effects certain transactions with its clients by acting as principal
and, therefore, seeks to maintain inventories of debt and equity securities to
satisfy investor demand. Realized and unrealized gains and losses may result
from holding securities positions for resale to investors and are included in
principal transaction revenue.
Principal transaction revenues declined 14% ($35 million) in 1996, partially
offsetting the Company's overall revenue increase, after rising 29% ($54
million) in 1995. Revenue from principal sales of debt securities, primarily
municipal and governmental, in 1996 dropped 26% ($52million), because of lower
interest rates and concerns over possible tax law changes. Lower interest rates
made alternative investments more attractive, and the proposed tax law changes
might have eliminated the tax advantages of municipal securities, thereby making
them less attractive to investors.
In contrast, 1995's increases in revenues from the principal sales of municipal
and governmental debt securities resulted from investor demand for longer-term,
more conservative investments in a rising interest rate environment.
Revenue from principal transactions in equity securities increased 47% ($18
million) in 1996, reflecting the strong performance of the over-the-counter
market. These revenues were down slightly in 1995 primarily because of lower
inventory gains.
Investment Banking
The Company derives investment banking revenue by underwriting public offerings
of securities for corporations and governmental entities and by providing
advisory services for such clients.
Underwriting fees and concessions from corporate equity and debt issues rose 15%
($6 million) and 41% ($5 million), respectively, in 1996 because of improved
market conditions for corporate securities issues. Fees from serving as managing
underwriter increased slightly because of participation in a greater number of
corporate debt offerings and increased financial advisory service fees.
Underwriting fees and concessions fell 37% ($41 million) in 1995, principally
because of fewer closed-end mutual fund underwritings. A significant reduction
in municipal debt refundings also contributed to the overall underwriting
decrease in 1995.
Asset Management and Service Fees
Asset management and service fees consist primarily of revenues earned for
providing support and services in connection with assets under third-party
management, including mutual funds. These revenues include fees based on the
amount of client assets under management and transaction-related fees, as well
as fees related to the administration of custodial and other specialty accounts.
Asset management and service fees increased 28% ($42million) in 1996 and 13%
($18 million) in 1995. The 1996 increase was primarily due to $29 million in
additional service fees from third-party mutual funds as a result of more assets
under management. Transaction-related revenue and other administrative fees
contributed $9 million to this category's overall increase in 1996, reflecting
record activity levels.
The 1995 increase was primarily due to service fees from third-party mutual
funds as a result of an increase in assets under management from the previous
year.
Interest
The Company earns interest revenue principally from financing its clients'
margin accounts, from debt securities carried for resale and from short-term
investments.
Interest revenue rose in 1996 primarily because of a 19% ($17 million) increase
in interest earned on margin accounts. Average rates were higher in 1996,
despite a change from rising rates in 1995 to declining rates in 1996. Interest
earned on substantially greater short-term investments added $10 million to the
increase in 1996.
The 1995 versus 1994 increase was principally due to 22% higher average client
borrowings and higher interest rates charged on such receivables.
Expenses
Compensation and benefits, the major components of the Company's overall
expense, rose 23% in 1996 after declining 9% in 1995. A significant portion of
these expenses is variable in nature and directly relates to commissionable
sales and to the Company's profitability. Thus the year-to-year comparison
generally reflects the 1996 increase in revenue and profitability and the 1995
decrease in revenue and profitability over the respective prior years. General
24
<PAGE>
and administrative salary expense increased 9% ($13 million) in 1996 and 12%
($16 million) in 1995 because of general salary increases and an increased
number of employees.
In 1994, an amendment to the Company's Incentive Stock Plan defined the service
period in connection with restricted stock awards to coincide with the period
for which the amount of the award is determined. Beginning in 1994, the amount
of the award is expensed in the year granted instead of being amortized over the
subsequent three-year restricted period. As a result of this transition, 1996,
1995 and 1994 include expenses for the current year awards and amortization of
awards granted prior to 1994. The amount charged to expense was $22 million
(including $4 million of amortization) in 1996, $19 million (including $7
million of amortization) in 1995 and $25 million (including $9million of
amortization) in 1994.
All other operating expenses showed slight increases in both years primarily due
to expansion.
Income Taxes
For information concerning the provision for income taxes as well as information
regarding the difference between effective tax rates and statutory rates, see
Note 6 of the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Average assets increased during the last three years primarily from expansion,
increased customer margin activities and growth of earnings. Assets fluctuate in
the normal course of business principally because of the timing of certain
transactions, which may result in corresponding fluctuations in related
liabilities. Customer and broker-dealer related receivables and securities
inventory, which are highly liquid, represent a substantial percentage of
assets.
The principal sources for financing the Company's assets are stockholders'
equity, proceeds from securities lending, bank loans, customer free credit
balances and other payables. The Company has no long-term debt. Cash generated
from operations and proceeds from employee stock plans have kept bank borrowings
at low levels in the past three years. Average daily borrowings were $5 million
in 1996, $64 million in 1995 and $14 million in 1994.
Capital expenditures for the past three years have been financed from
operations. The Company completed construction of an employee parking garage in
calendar 1995 at a cost of $11 million. Construction of an additional
headquarters building began in November 1995, and its cost is expected to be
about $40 million.
The Company is authorized to purchase treasury shares for its employee stock
plans. During the past year, 500,000 shares were purchased for use with these
plans. Additional treasury share purchases, as well as dividend payments and the
cost of expansion, are expected to be financed from operations.
Because of the Company's size, earnings history and strong financial condition,
management believes adequate sources of credit would be available, if needed, to
finance higher trading volumes, branch expansion, stock repurchases and major
capital expenditures.
The Company's principal subsidiary, A.G. Edwards & Sons, Inc., is required by
the Securities and Exchange Commission (SEC) to maintain specified amounts of
liquid net capital to meet its obligations to clients (see Note 5 of the Notes
to Consolidated Financial Statements). The net capital of A.G. Edwards & Sons,
Inc., in excess of that required by the SEC, was approximately $689 million on
February 29, 1996, up from $562 million the previous year.
Other Matters
The Company does not act as dealer, trader or end-user of complex derivatives
such as swaps, collars, caps and the like. The Company provides advice and
guidance on complex derivative products to selected clients; however, this
activity does not involve the Company's acquiring a position or commitment in
these products. The Company will occasionally hedge a portion of its debt
inventory through the use of financial futures contracts. These transactions are
not mater-ial to the Company's financial condition or results of operations.
Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting For Stock Based Compensation," for
years beginning after December 15, 1995, and will require additional disclosures
regarding the Company's stock option and employee stock purchase plans. The
Company has not yet determined if it will elect to change to the fair value
method nor determined the effect this standard will have on net earnings or
earnings per share should it elect such a change.
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," in 1996. The adoption of this pronouncement did not have a
material impact on the Company's financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL SUMMARY
(In thousands, except per share amounts)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions:
Listed Securities $ 338,241 $ 236,629 $ 273,363 $ 231,312 $ 203,936
Options 29,432 21,576 21,135 19,167 21,745
Over-the-Counter Securities 142,696 80,525 94,075 69,199 69,415
Mutual Funds 189,109 147,709 248,146 193,820 146,377
Commodities 16,448 15,261 16,766 13,016 13,941
Insurance 90,150 77,117 74,862 46,757 47,343
Total 806,076 578,817 728,347 573,271 502,757
Principal Transactions:
Equities 55,334 37,565 40,260 31,266 23,157
Debt Securities 151,033 203,460 146,705 184,040 165,284
Total 206,367 241,025 186,965 215,306 188,441
Investment Banking:
Underwriting Fees and
Selling Concessions 80,572 70,156 111,379 87,061 77,464
Management Fees 24,427 22,574 35,594 21,251 13,389
Total 104,999 92,730 146,973 108,312 90,853
Asset Management and
Service Fees 195,100 152,803 135,163 107,306 87,461
Interest:
Margin Account Balances 107,192 89,971 60,491 50,098 47,026
Securities Owned and Deposits 27,150 15,548 14,074 14,631 16,915
Total 134,342 105,519 74,565 64,729 63,941
Other 7,583 7,448 6,628 5,464 5,206
Total Revenues 1,454,467 1,178,342 1,278,641 1,074,388 938,659
Expenses:
Compensation and Benefits 929,755 756,736 828,409 692,127 594,404
Communications 80,364 74,708 73,048 66,899 62,468
Occupancy and Equipment 79,077 73,108 67,258 61,701 56,035
Floor Brokerage and Clearance 16,275 14,355 15,062 15,016 13,741
Interest 3,153 6,818 1,113 1,886 1,186
Other Operating Expenses 69,561 53,288 50,180 46,774 42,793
Total Expenses 1,178,185 979,013 1,035,070 884,403 770,627
Earnings Before Income Taxes 276,282 199,329 243,571 189,985 168,032
Income Taxes 105,700 75,210 88,700 70,560 62,500
Net Earnings $ 170,582 $ 124,119 $ 154,871 $ 119,425 $ 105,532
Per Share Data:
Earnings $ 2.65 $ 2.00 $ 2.57 $ 2.07 $ 1.88
Cash Dividends $ .60 $ .56 $ .52 $ .43 $ .37
Book Value $ 17.00 $ 14.76 $ 13.08 $ 10.66 $ 8.84
Other Data:
Total Assets $ 3,102,085 $ 2,224,282 $ 2,236,590 $ 2,111,192 $ 1,577,143
Stockholders' Equity $ 1,088,684 $ 919,281 $ 790,367 $ 615,240 $ 492,010
Cash Dividends $ 37,769 $ 34,200 $ 30,843 $ 24,624 $ 20,622
Return on Average Equity 17.0% 14.5% 22.0% 21.6% 24.0%
Pretax Return on Average Equity 27.5% 23.3% 34.7% 34.3% 38.3%
Net Earnings as a
Percent of Revenues 11.7% 10.5% 12.1% 11.1% 11.2%
Average Common and Common
Equivalent Shares Outstanding 64,429 62,178 60,354 57,827 56,101
<FN>
Per share data have been restated for stock splits and stock dividends.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR FINANCIAL SUMMARY (continued)
(In thousands, except per share amounts)
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions:
Listed Securities $ 140,096 $ 129,288 $ 95,276 $ 114,906 $ 109,511
Options 20,002 18,141 14,201 26,668 23,073
Over-the-Counter Securities 38,842 38,236 30,608 41,687 40,900
Mutual Funds 80,529 70,299 46,675 87,096 145,604
Commodities 12,322 11,941 12,413 12,087 10,991
Insurance 39,514 40,424 39,082 36,120 15,728
Total 331,305 308,329 238,255 318,564 345,807
Principal Transactions:
Equities 10,922 11,741 9,166 7,680 10,951
Debt Securities 145,732 116,624 97,247 60,406 45,693
Total 156,654 128,365 106,413 68,086 56,644
Investment Banking:
Underwriting Fees and
Selling Concessions 44,167 42,395 54,308 35,847 47,502
Management Fees 11,161 11,542 12,071 7,472 14,506
Total 55,328 53,937 66,379 43,319 62,008
Asset Management and
Service Fees 61,084 47,020 30,654 23,083 19,159
Interest:
Margin Account Balances 51,209 50,489 44,260 39,722 32,539
Securities Owned and Deposits 15,025 14,817 11,321 8,279 8,642
Total 66,234 65,306 55,581 48,001 41,181
Other 4,302 4,066 3,430 3,477 1,603
Total Revenues 674,907 607,023 500,712 504,530 526,402
Expenses:
Compensation and Benefits 422,524 374,119 301,421 309,753 323,524
Communications 58,323 52,527 47,601 42,738 37,521
Occupancy and Equipment 49,783 42,560 36,097 32,459 27,788
Floor Brokerage and Clearance 11,461 10,031 9,400 10,648 9,464
Interest 4,229 6,314 8,604 7,126 4,089
Other Operating Expenses 36,925 29,948 45,292 45,303 25,661
Total Expenses 583,245 515,499 448,415 448,027 428,047
Earnings Before Income Taxes 91,662 91,524 52,297 56,503 98,355
Income Taxes 32,500 32,700 17,348 20,490 44,625
Net Earnings $59,162 $ 58,824 $ 34,949 $ 36,013 $ 53,730
Per Share Data:
Earnings $ 1.10 $ 1.09 $ .66 $ .67 $ 1.00
Cash Dividends $ .29 $ .28 $ .26 $ .26 $ .24
Book Value $ 7.19 $ 6.45 $ 5.64 $ 5.20 $ 4.82
Other Data:
Total Assets $ 1,402,627 $ 1,126,004 $ 1,062,640 $ 869,940 $ 982,300
Stockholders' Equity $ 385,869 $ 343,539 $ 300,585 $ 274,100 $ 256,833
Cash Dividends $15,480 $ 15,185 $ 13,904 $ 13,990 $ 12,734
Return on Average Equity 16.2% 18.3% 12.2% 13.6% 22.8%
Pretax Return on Average Equity 25.1% 28.4% 18.2% 21.3% 41.7%
Net Earnings as a
Percent of Revenues 8.8% 9.7% 7.0% 7.1% 10.2%
Average Common and Common
Equivalent Shares Outstanding 54,016 53,922 53,119 53,561 53,584
<FN>
Per share data have been restated for stock splits and stock dividends.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Quarterly Financial Information (Unaudited)
Cash Stock Price Earnings Net
Dividends Trading Range Revenues Before Tax Earnings Earnings
Per Share High -- Low (In millions) (In millions) (In millions) Per Share
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1995 by Quarter
First $.14 22 1/2 -- 16 7/8 $301.6 $49.4 $30.6 $.50
Second .14 20 1/4 -- 16 5/8 295.5 51.2 31.6 .51
Third .14 20 3/8 -- 16 1/2 289.1 48.2 29.9 .48
Fourth .14 22 1/2 -- 16 1/2 292.1 50.5 32.0 .51
Fiscal 1996 by Quarter
First $.14 23 5/8 -- 20 3/8 $325.3 $57.2 $35.4 $.56
Second .14 25 1/2 -- 22 362.0 70.0 43.3 .67
Third .16 27 -- 23 1/2 361.9 69.8 43.0 .67
Fourth .16 26 15/16- 22 5/8 405.3 79.3 48.9 .75
</TABLE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
A.G. Edwards, Inc.:
We have audited the accompanying consolidated balance sheets of A.G.
Edwards, Inc. and subsidiaries as of February 29, 1996 and February 28,
1995, and the related consolidated statements of earnings,stockholders'
equity and cash flows for each of the three years in the period ended
February 29, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements 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 are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. 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, such consolidated financial statements present
fairly, in all material respects, the financial position of A.G.
Edwards, Inc. and subsidiaries as of February 29, 1996 and February
28, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended February 29, 1996, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
April 18, 1996
St. Louis, Missouri
28
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(In thousands, except share amounts)
February 29, February 28,
1996 1995
<S> <C> <C>
Assets
Cash and cash equivalents $ 52,587 $ 41,464
Cash and government securities,
segregated under federal and other
regulations 402,785 43,808
Securities purchased under agreements
to resell 92,013 42,819
Securities borrowed 613,266 279,671
Receivables:
Customers, less allowance for doubtful
accounts of $3,470 and $3,450 1,428,063 1,359,172
Brokers, dealers and clearing organizations 13,921 29,746
Securities inventory, at fair value:
State and municipal 117,602 77,834
Government and agencies 36,112 30,239
Corporate 42,078 44,489
Property and equipment, at cost, net of
accumulated depreciation and
amortization of $167,139 and $145,072 178,556 167,570
Other assets 125,102 107,470
$ 3,102,085 $ 2,224,282
Liabilities and Stockholders' Equity
Checks payable $ 148,970 $ 106,973
Securities loaned 660,489 379,727
Payables:
Customers 719,989 415,741
Brokers, dealers and clearing organizations 78,647 82,966
Securities sold but not yet purchased,
at fair value 21,871 39,478
Employee compensation and related taxes 331,098 246,120
Income taxes 12,630 2,370
Other liabilities 39,707 31,626
Total Liabilities 2,013,401 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, 64,312,658 and 62,294,211 shares 64,313 62,294
Additional paid-in capital 232,058 194,863
Retained earnings 798,805 665,992
1,095,176 923,149
Less:
Unamortized expense of restricted stock
awards 3,868
Treasury stock, at cost (267,650 shares) 6,492
Total Stockholders' Equity 1,088,684 919,281
$ 3,102,085 $ 2,224,282
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Year Ended
February 29, February 28, February 28,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Commissions $ 806,076 $ 578,817 $ 728,347
Principal transactions 206,367 241,025 186,965
Investment banking 104,999 92,730 146,973
Asset management and service fees 195,100 152,803 135,163
Interest 134,342 105,519 74,565
Other 7,583 7,448 6,628
1,454,467 1,178,342 1,278,641
Expenses:
Compensation and benefits 929,755 756,736 828,409
Communications 80,364 74,708 73,048
Occupancy and equipment 79,077 73,108 67,258
Floor brokerage and clearance 16,275 14,355 15,062
Interest 3,153 6,818 1,113
Other operating expenses 69,561 53,288 50,180
1,178,185 979,013 1,035,070
Earnings Before Income Taxes 276,282 199,329 243,571
Income Taxes 105,700 75,210 88,700
Net Earnings $ 170,582 $ 124,119 $ 154,871
Earnings per share $ 2.65 $ 2.00 $ 2.57
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Three years ended February 29, 1996 Unamortized
(In thousands, except per share amounts) Additional Expense
Common Paid-in Retained of 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 154,871
Cash dividends -- $.52 per share (30,843)
Treasury stock acquired (26)
Stock issued:
Employee stock purchase/option plans 1,154 23,087 575
Restricted stock 1,219 28,623 (11,893) (549)
Amortization of restricted stock awards 8,909
Stock split -- 5 for 4 11,914 (11,914)
Balances, February 28, 1994 60,446 165,124 576,073 (11,276) 0
Net earnings 124,119
Cash dividends -- $.56 per share (34,200)
Treasury stock acquired (2,766)
Stock issued:
Employee stock purchase/option plans 1,293 17,538 3,500
Restricted stock 555 12,201 439 (734)
Amortization of restricted stock awards 6,969
Balances, February 28, 1995 62,294 194,863 665,992 (3,868) 0
Net earnings 170,582
Cash dividends -- $.60 per share (37,769)
Treasury stock acquired (12,511)
Stock issued:
Employee stock purchase/option plans 1,376 22,282 3,280
Restricted stock 643 14,913 189 2,739
Amortization of restricted stock awards 3,679
Balances, February 29, 1996 $ 64,313 $232,058 $798,805 $ 0 $ (6,492)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
(In thousands) Year Ended
February 29, February 28, February 28,
1996 1995 1994
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 170,582 $ 124,119 $ 154,871
Noncash items included in earnings:
Depreciation and amortization 31,141 28,722 22,895
Amortization/expense of restricted stock awards 21,697 18,778 24,598
Deferred items (13,096) (6,095) (11,486)
(Increase) decrease in operating assets:
Segregated cash and government securities (358,977) 151,918 90,513
Securities borrowed (333,595) (36,250) 203,282
Receivable from brokers, dealers and
clearing organizations 15,825 (12,309) 11,328
Receivable from customers (68,891) (141,027) (267,208)
Securities inventory (43,230) 15,197 (18,011)
Other assets (10,274) 927 (1,975)
Increase (decrease) in operating liabilities:
Checks payable 41,997 (4,974) (1,718)
Securities loaned 280,762 104,432 (184,811)
Payable to brokers, dealers and
clearing organizations (4,319) (264,773) 304,466
Payable to customers 304,248 60,517 (220,059)
Securities sold but not yet purchased (17,607) 15,369 13,533
Employee compensation and related taxes 84,978 (39,093) 40,987
Income taxes 10,260 (7,589) (8,283)
Other liabilities 8,081 (5,111) 6,156
Net cash provided by operating activities 119,582 2,758 159,078
Cash Flows From Investing Activities:
Securities purchased under agreements to resell (49,194) 71,734 (114,553)
Purchase of property and equipment (42,127) (50,851) (27,546)
Long-term investments included in other assets 5,738 (8,535) (259)
Net cash (used in) provided by investing activities (85,583) 12,348 (142,358)
Cash Flows From Financing Activities:
Employee stock transactions 27,404 22,983 26,527
Purchase of treasury stock (12,511) (2,766) (26)
Cash dividends paid (37,769) (34,200) (30,843)
Net cash used in financing activities (22,876) (13,983) (4,342)
Net Increase in Cash and Cash Equivalents 11,123 1,123 12,378
Cash and Cash Equivalents, at Beginning of Year 41,464 40,341 27,963
Cash and Cash Equivalents, at End of Year $ 52,587 $ 41,464 $ 40,341
<FN>
Income tax payments totaled $106,740 in 1996, $87,269 in 1995 and
$105,604 in 1994.
Interest payments totaled $3,806 in 1996, $6,425 in 1995 and $1,059 in
1994.
Supplemental disclosures of noncash financing activities: Restricted
stock awards, net of forfeitures, totaled $18,291 in 1996, $11,561 in
1995 and $27,582 in 1994.
See Notes to Consolidated Financial Statements.
</TABLE>
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Three years ended February 29, 1996)
(Dollars in thousands, except per share amounts)
1. Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of A.G. Edwards,
Inc. and its wholly owned subsidiaries (collectively referred to as the Company)
and are prepared in conformity with generally accepted accounting principles. In
accordance with accounting principles and industry practice, management has made
use of estimates concerning certain assets and liabilities, and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates. All material intercompany balances and transactions have been
eliminated in consolidation. Where appropriate, prior years' financial
information has been reclassified to conform with the current year presentation.
The Company is in one principal line of business, that of providing investment
services, including securities and commodities brokerage, asset management,
insurance, trust, investment banking, and other related financial services to
individual retail, corporate, governmental and institutional clients. These
services are provided through its principal subsidiary, A.G. Edwards & Sons,
Inc., and other wholly owned subsidiaries.
Cash equivalents consist of interest-earning investments purchased with
maturities of 90 days or less at the date of acquisition.
Securities purchased under agreements to resell (Resale Agreements) are
recorded at amounts at which the purchased securities will be resold, including
accrued interest. Cash and government securities segregated under federal and
other regulations included Resale Agreements of $350,000 in 1996. The Company's
policy is to obtain possession or control of securities purchased under Resale
Agreements.
Securities borrowed and securities loaned are recorded at the amount of the
cash collateral provided for securities borrowed transactions and received for
securities loaned transactions, respectively. The adequacy of the collateral is
continuously monitored and adjusted when deemed necessary to minimize the risk
associated with this activity. Substantially all of these transactions are
executed under master netting agreements, which give the Company right of offset
in the event of counterparty default.
Customer securities transactions are recorded on settlement date. Revenues and
related expenses for transactions executed but unsettled are accrued on a trade-
date basis.
Securities inventory and securities segregated under federal and other
regulations are recorded on a trade-date basis and are carried at fair value.
Fair value is based on quoted market or dealer prices, pricing models, or
management's estimates. Unrealized gains and losses are reflected in revenue.
Depreciation of buildings is provided using both straight line and accelerated
methods over estimated useful lives of 15 to 45 years. Leasehold improvements
are amortized over the lesser of the life of the lease or estimated useful life
of the improvement. Depreciation of equipment is provided over estimated useful
lives of five to 10 years using both straight line and accelerated methods.
Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding of 64,429,000 in 1996, 62,178,000 in
1995 and 60,354,000 in 1994. Common share equivalents represent the effect of
shares issuable under the Company's employee stock plans. Primary and fully
diluted earnings per share are substantially the same.
2. Bank Loans
Bank loans are short-term borrowings with interest generally based on the
federal funds rate. Such loans are payable on demand and may be unsecured or
collateralized by customer-owned securities held in margin accounts. The average
of such borrowings was $4,878 in 1996, $63,803 in 1995 and $14,140 in 1994, at
effective interest rates of 6.5%, 5.0% and 3.6%, respectively. Substantially all
such borrowings were secured by customer-owned securities. There were no
borrowings outstanding at February 29, 1996, and February 28, 1995.
3. Employee Stock Plans
Options to purchase 1,250,000 shares of common stock granted to employees under
the Company's 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 1996, 1,228,565 shares at $15.30 per share in 1995
and 1,227,908 shares at $17.17 per share in 1994. Of the shares exercised,
treasury shares were utilized for 132,559 shares in 1995.
Under the Company's stock option plan, three types of benefits may be granted to
officers and key employees: restricted stock, stock options and stock
appreciation rights. Such awards are subject to forfeiture upon termination of
employment during a restricted period. Through February29, 1996, no stock
appreciation rights have been granted.
Restricted stock awards are made, and shares issued, without cash payment by
the employee. The shares are restricted for a vesting period, generally three
years, from the award date. In 1994, the Company amended its Incentive Stock
Plan to define the service period in connection with restricted stock awards to
coincide with the period for which the amount of the award is determined.
33
<PAGE>
Therefore, beginning in 1994, awards are expensed in the year granted. For
awards prior to 1994, this amount was amortized over the vesting period.
Eligible employees as of February 29, 1996, were awarded 742,755 shares with a
market value of $18,480. As of February28, 1995 and 1994, the awards were
546,590 and 883,860 shares, respectively, with corresponding market values of
$11,888 and $15,689. As of February29, 1996, restricted stock awards covering
2,575,508 shares were outstanding, with the restrictions expiring at various
dates through 1999.
Stock options are granted to purchase common stock at 100% of market value at
date of grant. Such options are exercisable beginning three years from date of
grant and expire eight years from date of grant, or earlier upon termination of
employment. During the year ended February 29, 1996, options to purchase 563,396
shares were granted and options to purchase 270,223 shares were exercised.
During the years 1995 and 1994, respectively, options to purchase 472,872 and
789,347 shares were granted, and options for 264,747 and 241,657 shares were
exercised. Treasury shares of 132,552 in 1996, 66,958 in 1995 and 30,560 in 1994
were utilized for options exercised. Options to acquire 3,240,711 shares of
common stock at prices ranging from $7.93 to $24.88 per share were outstanding
at February 29, 1996, and expire at various dates through 2004.
4. Employee Profit Sharing Plan
The Company has an employee profit sharing plan covering substantially all
employees, whereby it is obligated to match, in specified amounts as defined
therein, portions of contributions made by eligible employees. Additional
contributions may be made at the discretion of the Company. Required and
discretionary contributions totaled $56,107 in 1996, $41,788 in 1995 and $52,164
in 1994.
5. Net Capital Requirements
A.G. Edwards & Sons, Inc. is subject to net capital rules administered by the
Securities and Exchange Commission (SEC) and the New York Stock Exchange. Under
such rules, this subsidiary must maintain net capital of not less than 2% of
aggregate debit items, as defined, arising from customer transactions and would
be restricted from expanding its business or paying cash dividends and loans to
affiliates if its net capital was less than 5% of such items. These rules also
require A.G. Edwards & Sons, Inc. to notify and sometimes obtain approval of the
SEC and other regulatory organizations for substantial withdrawals of capital
and loans to affiliates. At February 29, 1996, the subsidiary's net capital of
$716,878 was 52% of aggregate debit items and $689,448 in excess of the minimum
required.
Certain other subsidiaries are also subject to minimum capital requirements
that may restrict the payment of cash dividends and advances to A.G. Edwards,
Inc. The only restriction with regard to the payment of cash dividends by A.G.
Edwards, Inc. is its ability to obtain cash dividends and advances from its
subsidiaries, if needed.
6. Income Taxes
The provisions for income taxes consist of:
1996 1995 1994
Current:
Federal $ 99,934 $67,821 $ 85,940
State and local 18,862 13,484 14,246
Total 118,796 81,305 100,186
Deferred (13,096) (6,095) (11,486)
$105,700 $75,210 $ 88,700
Deferred income taxes reflect temporary differences in the basis of the
Company's assets and liabilities for income tax purposes and for financial
reporting purposes, using current tax rates. These temporary differences result
in taxable or deductible amounts in future years.
Deferred tax assets totaled $60,826 at February 29, 1996, and $45,545 at
February 28, 1995, and consisted primarily of employee benefits that are not
currently deductible. The Company expects to fully realize these deferred tax
assets given its historical levels of earnings and related taxes paid;
accordingly, no valuation allowance has been established. Deferred tax
liabilities totaled $18,212 at February 29, 1996, and $16,027 at February 28,
1995, and consisted primarily of accelerated depreciation deductions.
The Company's effective tax rate was 38% in 1996 and 1995 and 36% in 1994,
which differed from the federal statutory rate of 35%. State and local taxes,
net of federal benefit, increased the effective rate by 4% in 1996 and 1995 and
3% in 1994. No other single item had a material impact on the difference in the
rates.
7. Common Stock Rights
On December 30, 1988, the Board of Directors adopted
a Stockholders' Rights Plan by declaring a distribution of one Common Stock
Purchase Right for each outstanding share of the Company's common stock. This
plan was amended in June 1995. The rights cannot be exercised or traded apart
from the common stock until, without the prior consent of the Company, a third
party either acquires 20% or more of the Company's outstanding common stock or
commences a tender or exchange offer that would result in it acquiring 20% or
34
<PAGE>
more of the outstanding common stock. Each right, upon becoming exercisable,
entitles the registered holder to purchase one share of common stock for $90
from the Company. If a person actually acquires 20% or more of the Company's
common stock without the Board of Directors' consent, then each right will
entitle its holder, other than the acquiring company, to purchase for $90 the
number of shares of the Company's common stock (or in the event of a merger or
other business combination, the number of shares of the acquirer's stock), which
has a market value of $180. The rights, which are redeemable by the Company at a
price of $0.00384 each prior to a person's acquiring 20% or more of the
Company's common stock, are subject to adjustment to prevent dilution and expire
June 22, 2005.
8. Commitments and Contingent Liabilities
The Company has long-term operating leases for office
space and communications equipment. Minimum rental commitments under all such
noncancelable leases, some of which contain escalation clauses and renewal
options, at February29, 1996, are as follows:
Year ending February 28 (29),
1997 $ 36,500
1998 30,200
1999 24,900
2000 19,100
2001 14,800
Later years 29,400
$154,900
Rental expense under all operating leases and equipment maintenance contracts
was $36,381 in 1996, $34,203 in 1995 and $37,829 in 1994.
In the normal course of business, the Company enters into when-issued and
underwriting commitments. Transactions relating to open commitments at February
29, 1996, and subsequently settled, had no material effect on the consolidated
financial statements as of that date.
At February 29, 1996, and February 28, 1995, the Company had $94,938 and
$56,938, respectively, of outstanding letters of credit, principally to satisfy
margin deposit requirements with a clearing corporation. Of this amount, $8,000
and $5,000, respectively, were collateralized by customer-owned securities.
The Company is a defendant in a number of lawsuits, in some of which plaintiffs
claim substantial amounts, relating primarily to its securities and commodities
business. While results of litigation cannot be predicted with certainty,
management, after consultation with counsel, believes that resolution of all
such litigation will have no material adverse effect on the consolidated
financial statements of the Company.
9. Financial Instruments
Off-Balance Sheet Risk and Concentration of Credit Risk
The Company records customer transactions on a settlement date basis, generally
three business days after trade date. The risk of loss on unsettled transactions
is identical to settled transactions and relates to customers' and other
counterparties' inability to fulfill their contracted obligations.
In the normal course of business, the Company also executes customer
transactions involving the sale of securities not yet purchased, the purchase
and sale of futures contracts, and the writing of option contracts on both
securities and futures. In the event customers or other counterparties such as
broker-dealers or clearing organizations fail to satisfy their obligations, the
Company may be required to purchase or sell financial instruments in order to
fulfill its obligations at prices that may differ from amounts recorded in the
balance sheet.
Customer financing and securities settlement activities generally require the
Company to pledge customer securities as collateral in support of various
financing sources. Additionally, customer securities may be pledged as
collateral to satisfy margin deposits at various clearing organizations. To the
extent these counterparties are unable to fulfill their contracted obligation to
return securities pledged, the Company is exposed to the risk of obtaining
securities at prevailing market prices to meet its customer obligations.
Securities sold but not yet purchased represent obligations of the Company to
deliver specified securities at contracted prices. Settlement of such
obligations may be at amounts greater than those recorded in the balance sheet.
A substantial portion of the Company's assets and obligations results from
transactions with customers and other counterparties who have provided financial
instruments as collateral. Volatile trading markets could impair the value of
such collateral and impact customers' and other counterparties' ability to
satisfy their obligations to the Company.
The Company manages its risk associated with the aforementioned transactions
through position and credit limits, and the continuous monitoring of collateral.
Additional collateral is requested from customers and other counterparties when
appropriate.
Fair Value Considerations
Substantially all the Company's financial instruments are carried at fair value
or amounts that approximate fair value. Customer receivables, primarily
consisting of floating rate loans collateralized by margin securities, are
charged interest at rates similar to other such loans made throughout the
industry. The Company's remaining financial instruments are generally short-term
in nature and liquidate at their carrying values.
35
<PAGE>
STOCKHOLDER INFORMATION
Annual Meeting
The 1996 Annual Meeting of Stockholders will be held at the Company's
headquarters, One North Jefferson, St. Louis, Missouri, on Thursday, June 20,
1996, at 10:00 a.m.
Notice of Annual Meeting, Proxy Statement and Proxy Voting Card are mailed in
May to each stockholder. The Proxy Statement describes the items of business to
be voted on at the Annual Meeting and provides information on the Board's
nominees for director and their principal affiliations with other organizations,
as well as other information about the Company.
Quarterly Reports
Mailed in June, September and December, the quarterly reports contain a
Chairman's letter, balance sheet and a summary of earnings.
Dividend Payment Dates
The next four anticipated dividend payment dates are July 1 and October 1,
1996, and January 2 and April 1, 1997.
Form 10-K
The Form 10-k Annual Report filed with the Securities
and Exchange Commission, which provides further details on A.G.Edwards'
business, is available at no charge from the Secretary, A.G. Edwards,
Inc., One North Jefferson, St.Louis, Missouri 63103.
Stock Exchange Listing
A.G. Edwards, Inc. stock is traded on the New York Stock Exchange. (The stock
symbol is age.) The approximate number of stockholders on February 29, 1996, was
21,500.
Registrar/Transfer Agent
Boatmen's Trust Company, St. Louis, Missouri.
Account Protection Package
The securities held by A.G. Edwards & Sons, Inc. for the accounts of clients
are protected up to $500,000, including up to $100,000 for cash claims, by the
Securities Investor Protection Corporation (sipc). In addition to the sipc
coverage, securities held in client accounts are provided $49.5 million in
protection by an independent commercial insurance company.
Exchange Memberships
A.G. Edwards companies are members of all major stock and commodity
exchanges, including the American, Boston, Chicago, New York, Pacific and
Philadelphia stock exchanges; the Chicago Board Options Exchange;the Chicago
Board of Trade; the Chicago Mercantile Exchange; the New York Futures
Exchange and other commodity exchanges; as well as the National Futures
Association and the National Association of Securities Dealers.
44
EXHIBIT 21
A.G. EDWARDS, INC.
REGISTRANT'S SUBSIDIARIES
The following listing includes the registrant's directly-owned subsidiaries
and indirectly-owned subsidiaries (certain subsidiaries which are not
significant are omitted from the listing), all of which are included in the
consolidated financial statements:
<TABLE>
<CAPTION> State of
Incorporation/
Name of Company Organization Subsidary of
/s/ <C> <C>
A.G. Edwards & Sons, Inc. (Edwards) Delaware Registrant
The Ceres Investment Company Missouri Edwards
Indianapolis Historic Partners Indiana Edwards
AGE Commodity Clearing Corp. Delaware Registrant
A.G. Edwards Life Insurance Company Missouri Registrant
Edwards Development Corporation Missouri Registrant
A.G. Edwards Trust Company (Missouri Trust) Missouri Registrant
A.G. Edwards Asset Performance Monitor, Inc. Missouri Missouri Trust
A.G. Edwards Trust Company New Jersey Registrant
A.G. Edwards Trust Company Texas Registrant
A.G. Edwards Trust Company Florida Registrant
A.G.E. Properties, Inc. (Properties) Missouri Registrant
A.G.E. Realty Corp. Missouri Properties
A.G.E. Redevelopment Corporation Missouri Properties
GULL-AGE Capital Group, Inc. Delaware Registrant
AGE Investments, Inc. Delaware Registrant
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
(File Nos. 33-61949, 33-52786, 33-36609 and 33-23837), the A.G. Edwards,
Inc. 1988 Incentive Stock Plan on Form S-8, of our report dated April 18,
1996, appearing in and/or incorporated by reference in the Annual Report on
Form 10-K of A.G. Edwards, Inc. for the year ended February 29, 1996.
/s/DELOITTE & TOUCHE LLP
May 28, 1996
St. Louis, MO
<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
FISCAL YEAR ENDED FEBRUARY 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 52,587
<RECEIVABLES> 1,441,984
<SECURITIES-RESALE> 92,013
<SECURITIES-BORROWED> 613,266
<INSTRUMENTS-OWNED> 195,792
<PP&E> 178,556
<TOTAL-ASSETS> 3,102,085
<SHORT-TERM> 0
<PAYABLES> 1,278,704
<REPOS-SOLD> 0
<SECURITIES-LOANED> 660,489
<INSTRUMENTS-SOLD> 21,871
<LONG-TERM> 0
0
0
<COMMON> 64,313
<OTHER-SE> 1,024,371
<TOTAL-LIABILITY-AND-EQUITY> 3,102,085
<TRADING-REVENUE> 206,367
<INTEREST-DIVIDENDS> 134,342
<COMMISSIONS> 806,076
<INVESTMENT-BANKING-REVENUES> 104,999
<FEE-REVENUE> 151,088
<INTEREST-EXPENSE> 3,153
<COMPENSATION> 929,755
<INCOME-PRETAX> 276,282
<INCOME-PRE-EXTRAORDINARY> 276,282
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 170,582
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 2.65
</TABLE>
