<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 31, 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or of such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At September 30, 1996, there were 62,630,896 shares of A.G. Edwards, Inc. common
stock, par value $1, issued and outstanding.
<PAGE>
A.G. EDWARDS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Consolidated balance sheets 1
Consolidated statements of earnings 2
Consolidated statements of
stockholders' equity 3
Consolidated statements of cash flows 4
Notes to consolidated financial statements 5
Management's financial discussion 6 - 7
PART II. OTHER INFORMATION 7
SIGNATURES 8
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<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
August 31, February 29,
1996 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 51,250 $ 52,587
Cash and government securities, segregated under
federal and other regulations 151,787 402,785
Securities purchased under agreements to resell 45,000 92,013
Securities borrowed 510,878 613,266
Receivables:
Customers, less allowance for doubtful accounts
of $3,510 and $3,470 1,599,414 1,428,063
Brokers, dealers and clearing organizations 8,984 13,921
Securities inventory, at fair value:
State and municipal 85,176 117,602
Government and agencies 31,742 36,112
Corporate 38,312 42,078
Property and equipment, at cost, net of accumulated depreciation
and amortization of $180,492 and $167,139 178,984 178,556
Other assets 136,444 125,102
$ 2,837,971 $ 3,102,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks payable $ 144,578 $ 148,970
Securities loaned 571,093 660,489
Payables:
Customers 551,450 719,989
Brokers, dealers and clearing organizations 32,532 78,647
Securities sold but not yet purchased, at fair value 33,588 21,871
Employee compensation and related taxes 315,864 331,098
Income taxes 1,323 12,630
Other liabilities 42,392 39,707
Total Liabilities 1,692,820 2,013,401
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 shares 64,313 64,313
Additional paid-in capital 233,453 232,058
Retained earnings 887,222 798,805
1,184,988 1,095,176
Less:Treasury stock, at cost (1,517,307 and 267,650 shares) 39,837 6,492
Total Stockholders' Equity 1,145,151 1,088,684
$ 2,837,971 $ 3,102,085
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Commissions $ 207,626 $ 200,565 $ 454,388 $ 366,901
Principal transactions 53,890 56,086 107,376 112,961
Investment banking 47,688 22,138 81,809 47,464
Asset management and service fees 59,469 48,360 116,182 90,999
Interest 35,865 32,811 70,891 65,377
Other 2,517 2,087 4,893 3,647
407,055 362,047 835,539 687,349
EXPENSES:
Compensation and benefits 258,411 233,479 533,887 440,874
Communications 20,781 19,480 41,945 39,321
Occupancy and equipment 20,914 19,656 40,805 38,177
Floor brokerage and clearance 4,510 4,396 9,212 8,166
Interest 487 495 1,205 1,904
Other operating expenses 16,982 14,506 31,553 31,659
322,085 292,012 658,607 560,101
EARNINGS BEFORE INCOME TAXES 84,970 70,035 176,932 127,248
INCOME TAXES 32,750 26,770 68,270 48,610
NET EARNINGS $ 52,220 $ 43,265 $108,662 $ 78,638
Earnings per share $.80 $.67 $1.67 $1.23
Dividends per share $.16 $.14 $.32 $.28
Average common and common
equivalent shares outstanding 64,799 63,962 64,922 63,803
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1995 AND 1996
(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, 1995 $ 62,294 $ 194,863 $ 665,992 $ (3,868) $ 0
Net earnings 78,638
Cash dividends -
$.28 per share (17,468)
Stock issued:
Employee stock
purchase/option plans 108 1,861 221
Restricted stock 269 64 (221)
Amortization of restricted
stock awards 1,982
BALANCES, August 31, 1995 $ 62,402 $ 196,993 $ 727,162 $ (1,822) $ 0
BALANCES, March 1, 1996 $ 64,313 $ 232,058 $ 798,805 $ 0 $ (6,492)
Net earnings 108,662
Cash dividends -
$.32 per share (20,245)
Treasury stock acquired (36,918)
Stock issued:
Employee stock
purchase/option plans 800 3,683
Restricted stock 595 (110)
BALANCES, August 31, 1996 $ 64,313 $ 233,453 $ 887,222 $ 0 $(39,837)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended August 31,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 108,662 $ 78,638
Noncash items included in earnings 27,321 21,541
Decrease (increase) in segregated cash and government securities 250,998 (6,575)
Net change in securities borrowed and loaned 12,992 (57,530)
Decrease in net payable to brokers and dealers (41,178) (6,785)
(Increase) decrease in net receivable from customers (339,890) 93,108
Decrease (increase) in net securities inventory 52,279 (16,393)
Net change in other assets and liabilities (48,632) 8,140
Net cash provided by operating activities 22,552 114,144
Cash Flows from (payments for) Investing Activities:
Securities purchased under agreements to resell 47,013 (70,826)
Capital expenditures and other investments (18,814) (30,144)
Net cash provided by (used in) investing activities 28,199 (100,970)
Cash Flows from (payments for) Financing Activities:
Employee stock transactions 5,075 2,302
Cash dividends (20,245) (17,468)
Treasury stock (36,918)
Net cash used in financing activities (52,088) (15,166)
Net Decrease in Cash and Cash Equivalents (1,337) (1,992)
Cash and Cash Equivalents at March 1 52,587 41,464
Cash and Cash Equivalents at August 31 $ 51,250 $ 39,472
<FN>
Income tax payments totaled $78,387 and $42,227 during the six month periods
ended August 31, 1996, and 1995, respectively.
Interest payments totaled $1,198 and $1,773 during the six month periods ended
August 31, 1996, and 1995, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1996
(Dollars in thousands)
(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 29, 1996. All adjustments that, in
the opinion of management, are necessary for a fair presentation of the results
of operations for the interim periods have been reflected. All such adjustments
consist of normal recurring accruals unless otherwise disclosed in these interim
financial statements. The results of operations for the six months ended August
31, 1996, are not necessarily indicative of the results for the year ending
February 28, 1997. Where appropriate, prior year's financial information has
been reclassified to conform with the current year presentation.
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. As of August 31, 1996, Edwards'
net capital of $811,127 was $780,458 in excess of the minimum required.
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<PAGE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
SIX MONTHS ENDED AUGUST 31, 1996 COMPARED TO
SIX MONTHS ENDED AUGUST 31, 1995
Results of Operations
The six months ended August 31, 1996 saw a continuation of the high level of
retail investor activity experienced in the second half of the last fiscal year.
The NYSE and Nasdaq overall trading volumes increased 14% and 40%, respectively,
over the prior year, resulting in an 18% increase in total client trades. The
number and size of client trades and the product mix generally affect the level
of revenues. The number of branches and brokers increased to 546 and 5,847,
respectively, which represent increases of 4% compared with the same period last
year.
Total revenues increased $148 million (22%) over last year, from $687 million to
$835 million. Expenses were $659 million, an increase of $99 million (18%),
resulting in a rise in net profit margins from 11.4% last year to 13% this year.
Total commission revenue increased $87 million (24%) reflecting increased
trading volume and, to a lesser extent, expansion of the Company's distribution
system. Equity related commissions rose $43 million (18%) while mutual fund and
insurance sales increased $30 million (36%) and $14 million (34%), respectively.
Client demand for stocks, mutual funds and variable annuities continued to rise
due to the continuation of the strong equity market conditions and slightly
lower interest rates during the current six month period.
Revenues from principal transactions declined $6 million (5%). Corporate equity
revenue declined $3 million (9%) primarily due to a decrease in market making
activities. Revenue from debt products fell $3 million (3%) primarily due to
rising interest rates in the beginning of this year compared to declining rates
last year. As a result, inventory profits declined $4 million (49%).
Investment banking revenue increased $34 million (72%). Underwriting fees and
concessions from corporate equity and debt issues rose $9 million (45%) and $7
million (83%), respectively, as a result of improved market conditions for
corporate securities issues. Management fees increased $15 million (132%) due
to participation as manager or co-manager in a larger number of public and
corporate offerings coupled with increased activity in mergers and acquisitions
this year. The largest transactions included the debt restructuring for Orange
County, California and assisting in the sale of Minneapolis-based West
Publishing Company.
Asset management and service fees increased $25 million (28%). Service fees
from third-party management, including mutual funds, increased $22 million (33%)
as a result of more assets under management. Transaction-related revenue and
other administrative fees increased $3 million (13%), reflecting record activity
levels.
Compensation and benefits increased $93 million (21%). Commission expense
increased due to the rise in commissionable revenue. General and administrative
salaries and related benefits increased primarily due to general increases and
expansion. Incentive related compensation rose as a result of higher earnings.
-6-
<PAGE>
Liquidity and Capital Resources
On May 23, 1996, the Board of Directors authorized the repurchase of up to 22
million of its outstanding shares during the next 5 1/2 year period. The
acquired shares will be used for its employee stock plans and to partially
offset the past effect of these plans.
No material changes have taken place since February 29, 1996 regarding the
Company's liquidity, capital resources and overall financial condition.
THREE MONTHS ENDED AUGUST 31, 1996 COMPARED
THREE MONTHS ENDED AUGUST 31, 1995
Net earnings for the quarter ended August 31, 1996 were $52 million on revenues
of $407 million compared to net earnings of $43 million on revenues of $362
million for the same period a year ago. The explanation of revenue and expense
fluctuations presented for the six month period are generally applicable to the
three months of operations with the exception of commission revenue. The NYSE
and Nasdaq trading volumes increased 7% and 19%, respectively, over the same
period last year resulting in slightly higher, $7 million (4%), commission
revenues.
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 29, 1996.
Item 4: Submission of Matters to a Vote of Security Holders
(c) The results of the annual meeting of stockholders, held on June 20,
1996, were previously reported on Form 10-Q filed for the quarter
ended May 31, 1996.
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 registrant'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 August 31, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
A.G. EDWARDS, INC.
(Registrant)
Date: October 14, 1996 /s/ Benjamin F. Edwards III
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: October 14, 1996 /s/ David W. Mesker
DAVID W. MESKER
Principal Financial Officer
-8-
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 51,250
<RECEIVABLES> 1,608,398
<SECURITIES-RESALE> 45,000
<SECURITIES-BORROWED> 510,878
<INSTRUMENTS-OWNED> 155,230
<PP&E> 178,984
<TOTAL-ASSETS> 2,837,971
<SHORT-TERM> 0
<PAYABLES> 1,044,424
<REPOS-SOLD> 0
<SECURITIES-LOANED> 571,093
<INSTRUMENTS-SOLD> 33,588
<LONG-TERM> 0
0
0
<COMMON> 64,313
<OTHER-SE> 1,080,838
<TOTAL-LIABILITY-AND-EQUITY> 2,837,971
<TRADING-REVENUE> 107,376
<INTEREST-DIVIDENDS> 70,891
<COMMISSIONS> 454,388
<INVESTMENT-BANKING-REVENUES> 81,809
<FEE-REVENUE> 91,276
<INTEREST-EXPENSE> 1,205
<COMPENSATION> 533,887
<INCOME-PRETAX> 176,932
<INCOME-PRE-EXTRAORDINARY> 176,932
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,662
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
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