SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8989
The Bear Stearns Companies Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3286161
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
245 Park Avenue, New York, New York 10167
(Address of principal executive offices) (Zip Code)
(212) 272-2000
(Registrant's telephone number, including area code)
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 [ ]
As of May 4, 1994, the latest practicable date, there were 109,563,220
shares outstanding of Common Stock, $1 par value.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 25, 1994
(Unaudited) and June 30, 1993.
Consolidated Statements of Income (Unaudited) for the three-month
and nine-month periods ended March 25, 1994 and March 26, 1993
Consolidated Statements of Cash Flows (Unaudited) for the nine-month
periods ended March 25, 1994 and March 26, 1993.
Notes to Consolidated Financial Statements (Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K.
Signatures.
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Assets
<CAPTION>
March 25, June 30,
1994 1993
(Unaudited)
(In thousands, except share data)
<S> <C> <C>
Cash and cash equivalents $ 213,022 $ 317,886
Cash and securities deposited with
clearing organizations or
segregated in compliance with
Federal regulations 2,238,649 2,291,992
Securities purchased under agreements
to resell 23,626,127 16,038,657
Securities borrowed 20,737,384 16,721,404
Receivables
Customers 8,081,339 4,954,404
Brokers, dealers and others 3,032,027 1,016,068
Interest and dividends 175,988 109,217
Financial instruments owned-at
market value 18,874,260 15,214,510
Property, equipment and leasehold
improvements, net of accumulated
depreciation and amortization 257,419 238,936
Other assets 397,746 536,431
Total Assets $77,633,961 $57,439,505
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Liabilities and Stockholders' Equity
<CAPTION>
March 25, June 30,
1994 1993
(Unaudited)
(In thousands, except share data)
<S> <C> <C>
Short-term borrowings $ 8,782,308 $ 6,118,894
Securities sold under agreements
to repurchase 34,073,911 22,058,354
Securities loaned 767,484 565,584
Payables
Customers 16,086,224 13,038,380
Broker, dealers and others 1,171,585 1,595,098
Interest and dividends 246,492 177,948
Financial instruments sold, but not
yet purchased - at market value 9,809,407 8,973,839
Accrued employee compensation and benefits 637,650 469,376
Other liabilities and accrued expenses 617,856 782,379
72,192,917 53,779,852
Commitments and contingencies
Long-term borrowings 3,208,025 1,883,123
Preferred Stock issued by subsidiary 150,000
Stockholders' Equity
Preferred Stock, $1.00 par value;
10,000,000 shares authorized:
Adjustable Rate Cumulative Preferred
Stock, Series A - $50 liquidation
preference; 3,000,000 shares issued 150,000 150,000
Cumulative Preferred Stock, Series B-$200
liquidation preference; 937,500 shares
issued and outstanding 187,500 187,500
Cumulative Preferred Stock, Series C-$200
liquidation preference; 500,000 shares 100,000
issued and outstanding
Common Stock, $1.00 par value;
200,000,000 shares authorized;
138,072,022 and 131,507,178 shares issued
at March 25, 1994 and June 30, 1993,
respectively 138,072 131,507
Paid-in capital 1,346,513 1,225,557
Retained earnings 485,971 328,414
Capital Accumulation Plan 138,331 138,331
Treasury stock, at cost -
Adjustable Rate Cumulative Preferred
Stock, Series A - 2,118,550 shares (85,507) (85,507)
Common Stock - 26,867,458 and 22,203,018
shares at March 25, 1994 and June 30, 1993,
respectively (347,185) (263,755)
Note receivable from ESOP Trust (30,676) (35,517)
Total Stockholders' Equity 2,083,019 1,776,530
Total Liabilities and Stockholders' Equity $ 77,633,961 $ 57,439,505
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
March 25, March 26, March 25, March 26,
1994 1993 1994 1993
(In thousands, except share data)
<S> <C> <C> <C> <C>
Revenues
Commissions $ 121,541 $ 112,750 $ 358,657 $ 303,089
Principal transactions 353,999 318,543 1,004,212 796,752
Investment banking 103,571 87,939 399,694 213,496
Interest and dividends 315,269 209,501 888,729 645,708
Other income 4,581 5,162 19,587 10,648
Total revenues 898,961 733,895 2,670,879 1,969,693
Interest expense 245,324 163,428 679,782 506,486
Revenues, net of
interest expense 653,637 570,467 1,991,097 1,463,207
Non-interest expenses
Employee compensation
and benefits 321,042 276,148 989,842 725,211
Floor brokerage, exchange
and clearance fees 22,868 21,702 70,329 60,378
Communications 19,345 14,845 54,317 43,967
Occupancy 19,227 17,994 56,325 52,457
Depreciation and
amortization 12,243 9,815 34,921 30,639
Advertising and market
development 10,997 10,520 34,869 29,888
Data processing and
equipment 7,100 5,963 20,721 20,331
Other expenses 44,317 30,053 123,369 97,512
Total non-interest
expenses 457,139 387,040 1,384,693 1,060,383
Income before provision
for income taxes 196,498 183,427 606,404 402,824
Provision for income taxes 81,048 73,011 251,838 165,158
Net income $ 115,450 $ 110,416 $ 354,566 $ 237,666
Net income applicable to
common shares $ 113,144 $ 109,677 $ 343,366 $ 239,834
Earnings per share $ .88 $ .88 $ 2.65 $ 1.89
Weighted average common
and common equivalent
shares outstanding 128,039,443 124,981,273 129,402,173 126,784,549
Cash dividends declared
per common share $ .15 $ .15 $ .45 $ .45
</TABLE>
<TABLE>
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
March 25, March 26,
1994 1993
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 354,566 $ 237,666
Adjustments to reconcile net income to
cash used for operating activities:
Depreciation and amortization 34,921 30,639
Deferred income taxes (56,862) 13,275
Other 15,996 28,606
(Increases) decreases in operating receivables:
Securities borrowed (4,015,980) (4,421,160)
Customers (3,126,935) 139,404
Brokers, dealers and others (2,015,959) (2,990,759)
Other (87,180) 112,481
Increases (decreases) in operating payables:
Securities loaned 201,900 (470,595)
Customers 3,047,844 3,236,820
Brokers, dealers and others (421,928) (683,328)
Other 68,544 (44,937)
(Increases) decreases in:
Cash and securities deposited with clearing
organizations or segregated in compliance
with Federal regulations 53,343 (684,497)
Securities purchased under agreements to resell (7,587,470) 996,966
Financial instruments owned (3,659,750) (3,955,234)
Other assets 157,907 (58,155)
Increases (decreases) in:
Securities sold under agreements to repurchase 12,015,557 3,959,123
Financial instruments sold, but not
yet purchased 835,568 3,257,391
Accrued employee compensation and benefits 152,674 (22,573)
Other liabilities and accrued expenses (107,979) 103,144
Cash used in operating activities (4,141,223) (1,215,723)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings 2,663,414 851,900
Issuance of long-term borrowings 1,507,043 524,575
Net proceeds from issuance of Cumulative
Preferred Stock, Series C 96,788
Net proceeds from issuance of Cumulative
Preferred Stock, Series B 181,438
Net proceeds from issuance of Preferred Stock
by Subsidiary 145,000
Other common stock transactions 3,722 1,545
Note repayment from ESOP trust 4,841 4,483
Payments for:
Retirement of Senior Notes (183,000)
Retirement of Subordinated Notes (1,000) (1,000)
Treasury stock purchases (83,960) (82,934)
Cash dividends paid (69,181) (49,153)
Cash provided by financing activities 4,083,667 1,430,854
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements, net (53,404) (36,948)
Purchases of investment securities and other assets (3,300) (575)
Proceeds from sale of investment securities and
other assets 3,096 108,601
Proceeds from distributions on investment securities 6,300
Cash (used in) provided by investing activities (47,308) 71,078
Net (decrease)increase in cash and cash equivalents (104,864) 286,209
Cash and cash equivalents, beginning of period 317,886 124,088
Cash and cash equivalents, end of period $ 213,022 $ 410,297
See Notes to Consolidated Financial Statements.
</TABLE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of The Bear Stearns Companies Inc. and
its subsidiaries (the "Company") and have been prepared
pursuant to the Securities and Exchange Commission's rules
and regulations. The consolidated financial statements
reflect all adjustments which, in the opinion of management,
are normal and recurring and are necessary for a fair
statement of the results for the interim periods presented.
All material intercompany balances and transactions have
been eliminated. The nature of the Company's business is
such that the results of any interim period may not be
indicative of the results to be expected for a full fiscal
year. Certain prior period amounts have been reclassified
to conform with the current period's presentation.
2. FINANCIAL INSTRUMENTS - AT FAIR VALUE
Financial instruments owned and financial instruments sold,
but not yet purchased, consist of the Company's proprietary
trading and investment accounts, at fair value, as follows
(in thousands):
March 25, June 30,
1994 1993
Financial instruments owned:
United States government and agency $ 6,942,333 $ 7,644,206
Non-U.S. government 663,071 432,008
State and municipal 192,428 234,503
Corporate equity 2,610,293 1,602,077
Corporate debt 4,791,766 3,365,013
Mortgages and mortgage-backed 3,083,945 1,663,842
Other 590,424 272,861
$18,874,260 $15,214,510
Financial instruments sold, but not
yet purchased:
United States government and agency $ 5,446,356 $ 5,879,085
Non-U.S. government 388,108 82,281
Corporate equity 2,808,669 2,091,996
Corporate debt 692,244 490,563
Other 474,030 429,914
$ 9,809,407 $ 8,973,839
3. COMMITMENTS AND CONTINGENCIES
At March 25, 1994, the Company is contingently liable for
unsecured letters of credit of approximately $535,400,000
and letters of credit of approximately $72,300,000 secured
by financial instruments owned by the Company, which are
principally used as deposits for securities borrowed and to
satisfy margin deposits at option and commodity exchanges.
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES - (continued)
In the normal course of its business, the Company enters into
transactions in a variety of financial instruments in order
to meet the financing and hedging needs of its customers, to
reduce its own exposure to market, currency and interest rate
risks and in connection with its proprietary market-making
and trading activities. These financial instruments include
forward and futures contracts, interest rate swaps and the
writing of options, including interest rate caps and floors.
The settlement of these transactions is not expected to have
a material effect on the consolidated financial condition of
the Company.
In the normal course of business, the Company has been named
as a defendant in several lawsuits which involve claims for
substantial amounts. Although the ultimate outcome of these
suits cannot be ascertained at this time, it is the opinion
of management, after consultation with counsel, that the
resolution of such suits will not have a material adverse
effect on the results of operations or the financial
condition of the Company.
4. NET CAPITAL REQUIREMENTS
The Company's principal operating subsidiary, Bear, Stearns
& Co. Inc. ("Bear Stearns") and Bear Stearns' wholly-owned
subsidiary, Bear, Stearns Securities Corp. ("BSSC"), are
registered broker-dealers and, accordingly, are subject to
Securities and Exchange Commission Rule 15c3-1 (the "Net
Capital Rule") and the capital rules of the New York Stock
Exchange, Inc. ("NYSE") and other principal exchanges of
which Bear Stearns and BSSC are members. Bear Stearns and
BSSC have consistently operated in excess of the minimum net
capital requirements imposed by the capital rules. Included
in the computation of net capital of Bear Stearns, is net
capital of BSSC in excess of 5% of aggregate debit items
arising from customer transactions, as defined. At March 25,
1994, Bear Stearns' net capital of $842,663,016, exceeded the
minimum requirement by $820,293,094.
Bear, Stearns International Limited ("BSIL"), and Bear
Stearns International Trading Limited ("BSIT") wholly-owned
London-based subsidiaries, are subject to regulatory capital
requirements of the Securities and Futures Authority. BSIL
and BSIT have consistently operated in excess of these
requirements.
<PAGE>
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. EARNINGS PER SHARE
Earnings per share is computed by dividing net income
applicable to common shares by the weighted average number of
shares of Common Stock and common stock equivalents
outstanding during each period presented. Common stock
equivalents include the assumed distribution of shares of
Common Stock issuable under certain of the Company's deferred
compensation arrangements with appropriate adjustments made
to net income for earnings accruals related thereto.
Additionally, shares of Common Stock issued or issuable under
various employee benefit plans are included as common stock
equivalents.
6. CASH FLOW INFORMATION
Cash payments for interest approximated interest expense for
the nine months ended March 25, 1994 and March 26, 1993,
respectively. Income taxes paid totaled $255,073,831 and
$126,736,000 for the nine months ended March 25, 1994 and
March 26, 1993, respectively. Noncash financing activities
Resolved, that Section 6.5 of The Bear Stearns Companies
Inc. Management Compensation Plan (as amended and restated as of
July 1, 1993) be, and hereby, is amended in its entirety to read as
follows:
The aggregate Bonuses awarded for any year
shall not exceed the Annual Bonus Pool for
such year, including amounts awarded to
participants who were not voting members of
the Executive Committee for the entire fiscal
year. In any fiscal year, any balance in the
Annual Bonus Pool attributable to a forfeiture
of Bonus under Section 6.2 as a result of a
Participant ceasing to be a voting member of
the Executive Committee during such year shall
not be distributed to other Participants and
shall not be carried forwarded or be
available for distribution as Bonuses under
the Plan in a future year or years.
<TABLE>
Exhibit 11
THE BEAR STEARNS COMPANIES INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
March 25, March 26, March 25, March 26,
1994 1993 1994 1993
(In thousands, except share data)
<S> <C> <C> <C> <C>
Weighted average common
and common equivalent
shares outstanding:
Average Common Stock
outstanding 118,370 124,088 119,663 119,149
Average Common Stock
equivalents:
Common Stock issuable
under employee
benefit plans 1,033 893 1,103 1,026
Common Stock issuable
assuming conversion
of CAP Units 8,636 8,636 6,610
Total weighted average
common and common
equivalent shares
outstanding 128,039 124,981 129,402 126,785
Net income $115,450 $110,416 $354,566 $237,666
Preferred Stock dividend
requirements (6,200) (835) (18,157) (2,244)
Income adjustment
(net of tax) applicable
to deferred compensation
arrangements 3,894 96 6,957 4,412
Adjusted net income $113,144 $109,677 $343,366 $239,834
Earnings per share $ .88 $ .88 $ 2.65 $ 1.89
</TABLE>
<TABLE>
Exhibit 12
THE BEAR STEARNS COMPANIES INC.
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except for ratio)
<CAPTION>
Nine Months Nine Months Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended Ended Ended
March 25, March 26, June 30, 1993 June 30, 1992 June 30, 1991 June 30, 1990 June 30, 1989
1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes
on income $ 606,404 $402,824 $ 614,398 $ 507,625 $ 229,501 $ 192,532 $ 287,383
Add: Fixed Charges
Interest 679,782 506,486 710,086 834,859 1,141,029 1,217,212 1,089,879
Interest factor
in rents 16,165 15,287 20,084 20,874 18,715 18,999 18,798
Total fixed charges 695,947 521,773 730,170 855,733 1,159,744 1,236,211 1,108,677
Earnings before
fixed charges and
taxes on income $1,302,351 $924,597 $1,344,568 $1,363,358 $1,389,245 $1,428,743 $1,396,060
Ratio of earnings to
fixed charges 1.9 1.8 1.8 1.6 1.2 1.2 1.3
</TABLE>
