<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 May 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 June 30, 1996, there were 63,402,791 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
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
May 31, February 29,
1996 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 62,713 $ 52,587
Cash and government securities, segregated under
federal and other regulations 154,077 402,785
Securities purchased under agreements to resell 121,954 92,013
Securities borrowed 628,622 613,266
Receivables:
Customers, less allowance for doubtful accounts
of $3,500 and $3,470 1,582,268 1,428,063
Brokers, dealers and clearing organizations 16,636 13,921
Securities inventory, at fair value:
State and municipal 86,743 117,602
Government and agencies 38,086 36,112
Corporate 41,554 42,078
Property and equipment, at cost, net of accumulated depreciation
and amortization of $173,995 and $167,139 178,611 178,556
Other assets 133,158 125,102
$3,044,422 $3,102,085
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks payable $ 148,168 $ 148,970
Securities loaned 687,741 660,489
Payables:
Customers 688,114 719,989
Brokers, dealers and clearing organizations 42,884 78,647
Securities sold but not yet purchased, at fair value 29,944 21,871
Employee compensation and related taxes 249,106 331,098
Income taxes 32,795 12,630
Other liabilities 37,075 39,707
Total Liabilities 1,915,827 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 62,312,658 shares 64,313 64,313
Additional paid-in capital 233,102 232,058
Retained earnings 845,049 798,805
1,142,464 1,095,176
Less:Treasury stock, at cost (569,235 and 267,650 shares) 13,869 6,492
Total Stockholders' Equity 1,128,595 1,088,684
<FN> $3,044,422 $3,102,085
See Notes to Consolidated Financial Statements.
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended May 31,
1996 1995
<S> <C> <C>
REVENUES:
Commissions $246,762 $166,336
Principal transactions 53,486 56,875
Investment banking 34,121 25,326
Asset management and service fees 56,713 42,639
Interest 35,026 32,566
Other 2,376 1,560
428,484 325,302
EXPENSES:
Compensation and benefits 275,476 207,395
Communications 21,164 19,841
Occupancy and equipment 19,891 18,521
Floor brokerage and clearance 4,702 3,770
Interest 718 1,409
Other operating expenses 14,571 17,153
336,522 268,089
EARNINGS BEFORE INCOME TAXES 91,962 57,213
INCOME TAXES 35,520 21,840
NET EARNINGS $ 56,442 $ 35,373
Earnings per share $ .87 $ .56
Dividends per share $ .16 $ .14
Average common and common
equivalent shares outstanding 65,045 63,644
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MAY 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 35,373
Cash dividends -
$.14 per share (8,731)
Stock issued:
Employee stock
purchase/option plans 70 1,372 73
Restricted stock 238 18 (73)
Amortization of restricted
stock awards
996
BALANCES, May 31, 1995 $62,364 $196,473 $692,634 $(2,854) $ 0
BALANCES, March 1, 1996 $64,313 $232,058 $798,805 $ 0 $ (6,492)
Net earnings 56,442
Cash dividends -
$.16 per share (10,198)
Treasury stock acquired (9,000)
Stock issued:
Employee stock
purchase/option plans 482 1,648
Restricted stock 562 (25)
BALANCES, May 31, 1996 $64,313 $233,102 $845,049 $ 0 $(13,869)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended May 31,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 56,442 $ 35,373
Noncash items included in earnings 15,938 10,163
Decrease (increase) in segregated cash and government securities 248,708 (8,746)
Net change in securities borrowed and loaned 11,896 (25,870)
Decrease in net payable to brokers and dealers (38,478) (27,127)
(Increase) decrease in net receivable from customers (186,080) 38,635
Decrease (increase) in net securities inventory 37,482 (41,815)
Net change in other assets and liabilities (78,426) (32,158)
Net cash provided by (used in) operating activities 67,482 (51,545)
Cash Flows from (payments for) Investing Activities:
Securities purchased under agreements to resell (29,941) 18,058
Capital expenditures and other investments (10,937) (6,447)
Net cash (used in) provided by investing activities (40,878) 11,611
Cash Flows from (payments for) Financing Activities:
Bank loans 54,900
Employee stock transactions 2,720 1,698
Cash dividends (10,198) (8,731)
Treasury stock (9,000)
Net cash (used in) provided by financing activities (16,478) 47,867
Net Increase in Cash and Cash Equivalents 10,126 7,933
Cash and Cash Equivalents at March 1 52,587 41,464
Cash and Cash Equivalents at May 31 $ 62,713 $ 49,397
<FN>
Income tax payments totaled $11,760 and $2,673 during the three month periods
ended May 31, 1996, and 1995, respectively.
Interest payments totaled $586 and $1,104 during the three month periods ended
May 31, 1996, and 1995, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
-4-
<PAGE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 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 the Company, 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 three months ended May
31, 1996, are not necessarily indicative of the results for the year ending
February 28, 1997.
NET CAPITAL REQUIREMENTS:
Edwards is subject to the uniform net capital rule administered by the
Securities and Exchange Commission ("SEC"). This rule requires Edwards to
maintain a minimum net capital, as defined, and to notify, and sometimes obtain
approval of, the SEC and other regulatory organizations for substantial
withdrawals of capital and loans to affiliates. At May 31, 1996, Edwards' net
capital of $765,021 was $735,413 in excess of the minimum required.
-5-
<PAGE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
THREE MONTHS ENDED MAY 31, 1996 COMPARED TO
THREE MONTHS ENDED MAY 31, 1995
Results of Operations
The three months ended May 31, 1996 saw a continuation of the high level of
retail investor activity that existed during last fiscal year. The NYSE and
Nasdaq overall trading volumes increased 22% and 66%, respectively, over the
prior year which resulted in a 32% 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 538 and
5,800, which represent increases of 3% and 4%, respectively, compared with the
same period last year.
Total revenues increased $103 million (32%) over last year, from $325 million to
$428 million. Expenses were $337 million, an increase of $68 million (26%),
resulting in a rise in net profit margins from 10.9% last year to 13.2% this
year.
Total commission revenue increased $80 million (48%) reflecting increased
trading volume and, to a lesser extent, expansion of the Company's distribution
system. Equity related commissions rose $45 million (42%) while mutual fund and
insurance sales increased $25 million (66%) and $10 million (55%), 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 this year.
Revenues from principal transactions declined slightly. An increase in
corporate equity revenue of $3 million (21%) was more than offset by a decline
in revenue generated from sales of corporate and government bonds, which were
down a combined $7 million (25%). Market conditions for equity securities
improved this year compared to the first quarter last year when rising interest
rates caused uncertainties in the market. Client demand for bonds has
declined primarily due to lower yields combined with the strong performance of
the equity markets.
Investment banking revenue increased $9 million (35%) due to increases in every
category. Underwriting fees and concessions rose $7 million (36%) resulting
primarily from improved market conditions for corporate securities issues.
Management fees also increased $2 million (30%) due to participation as manager
or co-manager in a larger number of offerings coupled with increased activity in
mergers and acquisitions, this year.
Asset management and service fees increased $14 million (33%). Service fees
from third party management, including mutual funds, increased $12 million (38%)
as a result of more assets under management. Transaction-related revenue and
other administrative fees increased $2 million (18%), reflecting record activity
levels.
Compensation and benefits increased $68 million (33%) due to increases in every
category. Commission expense increased due to the rise in commissionable
revenue. General and administrative salaries and related benefits increased due
primarily to general increases and expansion. Incentive related compensation
rose as a result of higher earnings.
-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 common 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. The Company anticipates that this
repurchase will be financed from operations and does not expect it to have a
material effect on the Company's liquidity or capital resources.
No material changes have taken place since February 29, 1996 regarding the
Company's liquidity, capital resources and overall financial condition.
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
At the Company's Annual Meeting of Stockholders on June 20, 1996,
stockholders approved a number of nominations and proposals. Results of
these nominations and proposals were:
Votes Votes
Votes For Against Withheld*
Nominations for director:
Benjamin F. Edwards III 51,334,040 831,354
Robert C. Dissett 51,269,345 896,049
Samuel C. Hutchinson Jr. 51,676,397 488,997
Ratification of auditors 51,845,617 198,098 121,679
A total of 52,165,394 shares were present in person or by proxy at the
Annual Meeting.
*Includes abstentions and broker non-votes.
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 May 31,
1996.
-7-
<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: July 12, 1996 /s/ Benjamin F. Edwards III
BENJAMIN F. EDWARDS, III
Principal Executive Officer
Date: July 12, 1996 /s/ David W. Mesker
DAVID W. MESKER
Principal Financial Officer
-8-
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 62,713
<RECEIVABLES> 1,598,904
<SECURITIES-RESALE> 121,954
<SECURITIES-BORROWED> 628,622
<INSTRUMENTS-OWNED> 166,383
<PP&E> 178,611
<TOTAL-ASSETS> 3,044,422
<SHORT-TERM> 0
<PAYABLES> 1,128,272
<REPOS-SOLD> 0
<SECURITIES-LOANED> 687,741
<INSTRUMENTS-SOLD> 29,944
<LONG-TERM> 0
0
0
<COMMON> 64,313
<OTHER-SE> 1,064,282
<TOTAL-LIABILITY-AND-EQUITY> 3,044,422
<TRADING-REVENUE> 53,486
<INTEREST-DIVIDENDS> 35,026
<COMMISSIONS> 246,762
<INVESTMENT-BANKING-REVENUES> 34,121
<FEE-REVENUE> 44,430
<INTEREST-EXPENSE> 718
<COMPENSATION> 275,476
<INCOME-PRETAX> 91,962
<INCOME-PRE-EXTRAORDINARY> 91,962
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,442
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
