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 September 30, 1994 Commission file number:
014140
F I R S T A L B A N Y C O M P A N I E S I N C .
(Exact name of registrant as specified in its charter)
New York 22-2655804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 State Street, Albany, New York 12207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 447-8500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class: none which registered: none
Securities registered pursuant to Section 12(g) of the Act:
Common stock par value $.01 per share
(Title of class)
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 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]
As of December 14, 1994, 4,027,004 shares, par value $.01 per share, were
outstanding. The aggregate market value of the shares of common stock of the
Registrant held by non-affiliates (based upon the closing price of
Registrant's shares as reported on the NASDAQ system on December 14, 1994,
which was $7.25) was approximately $29,195,779.
DOCUMENTS INCORPORATED BY REFERENCE
The Exhibit index is included on pages 36 through 38.
Portions of the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission are incorporated by reference into Part III.
Total number of pages in this document - 41.
Part I
Item 1. Business
First Albany Companies Inc. (the "Company"), through its wholly owned
subsidiary First Albany Corporation ("First Albany"), conducts an investment
banking business with brokerage activity centered in New York and New England.
The primary business includes securities brokerage for individual and
institutional customers, and market-making and trading of corporate,
government, and municipal securities. In addition, First Albany underwrites
and distributes municipal and corporate securities, provides securities
clearance activities for other brokerage firms, and offers financial advisory
services to its customers. Another of the Company's subsidiaries is First
Albany Asset Management Corporation ("Asset Management"). Under management
agreements, Asset Management serves as investment manager to individual and
institutional customers. Asset Management also serves as a sub-advisor under
contract to the Victory Fund for Income, a mutual fund separated under the
Investment Company Act of 1940. Asset Management directs the investment of
the customer and mutual fund assets by making investment decisions, placing
purchase and sales orders, and providing research, statistical analysis, and
continuous supervision of the portfolios.
Brokerage services to retail and institutional customers are provided through
First Albany's salesforce of Investment Executives and institutional
salespeople. First Albany believes that Investment Executives are a key
factor to the success of its business. Over the last five years, the number
of full-time Investment Executives and Institutional Salespeople has grown
from approximately 212 to 265, many of whom joined First Albany after previous
associations with national brokerage firms.
First Albany has organized its business to focus on and serve the needs and
financial/capital requirements of institutions, individuals, corporations, and
municipalities. As investment bankers, First Albany is positioned to advise,
manage, and conduct a variety of activities as requested including
underwritings, initial and secondary offerings, advisement services, mergers
and acquisitions, and private placements. As a brokerage firm, First Albany
offers customers a full array of investment opportunities.
First Albany operates a total of 25 Retail, Institutional, and Investment
Banking offices in 8 states. First Albany's executive office and largest
sales office are both located in Albany, New York.
First Albany is a member of the New York Stock Exchange, Inc. ("NYSE"), the
American Stock Exchange, Inc. ("ASE"), and the Boston Stock Exchange, Inc.
("BSE") and is registered as a broker-dealer with the Securities and Exchange
Commission ("SEC"). First Albany is also a member of the National Association
of Securities Dealers, Inc. ("NASD") and the Securities Investor Protection
Corporation ("SIPC"), which insures customer funds and securities deposited
with a broker-dealer up to $500,000 per customer, with a limitation of
$100,000 on claims for cash balances. A second level of coverage is provided
by a $10,000,000 per account policy which our firm has purchased from AIG
subsidiary National Union Fire Insurance Company that further protects
securities lost which might not be returned in a SIPC liquidation proceeding
as governed by federal law.
Sources of Revenues
A breakdown of the amount and percentage of revenues from each principal source
for the periods indicated follows:
<TABLE>
<CAPTION>
Years Ended
-----------
September 30, 1994 September 24, 1993 September 25, 1992
------------------ ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Securities commissions:
Listed $ 14,201 13.2% $ 14,219 13.9% $12,790 14.9%
Over-the-counter 3,588 3.3 3,290 3.2 2,723 3.2
Options 911 0.8 851 0.8 778 0.9
Mutual funds 10,586 9.8 10,334 10.1 8,089 9.4
Other 267 0.3 190 0.2 189 0.2
Sub-total 29,553 27.4 28,884 28.2 24,569 28.6
Principal transactions 36,167 33.6 34,857 34.0 31,405 36.6
Investment banking 19,164 17.8 23,265 22.7 16,065 18.7
Clearing revenues 1,151 1.1 1,102 1.1 944 1.1
Tax shelters 243 0.2 380 0.4 405 0.5
Fees and other 5,184 4.8 4,419 4.3 3,433 4.0
Total operating
revenues 91,462 84.9 92,907 90.7 76,821 89.5
Interest income 16,222 15.1 9,483 9.3 8,999 10.5
Total revenues $107,684 100.0% $102,390 100.0% $85,820 100.0%
</TABLE>
Securities Commissions
In executing customers' orders to buy or sell listed securities and securities
in which it does not make a market, First Albany generally acts as an agent
and charges a commission.
Principal Transactions
First Albany buys and maintains inventories of municipal debt, corporate debt,
and equity securities as a "market maker" for sale of those securities to
other dealers and to customers. A staff of 38 traders, underwriters, and
assistants manages First Albany's inventory of securities. First Albany
Investment Executives work directly with these traders. As of September 30,
1994, First Albany made a market in 287 common stocks quoted on National
Association of Securities Dealers Automated Quotation ("NASDAQ") in addition
to other less actively traded securities. First Albany also trades municipal
bonds and taxable debt obligations, including U.S. Treasury bills, notes, and
bonds, U.S. Government agency notes and bonds, bank certificates of deposit,
mortgage-backed securities, and corporate obligations. Principal transactions
have been a significant source of revenue and should continue to be so in the
future. Continuation of these activities depends on the availability of
sufficient capital and the services of highly skilled traders, Investment
Executives, and institutional salespeople.
The majority of revenues derived from principal transactions are on a
"riskless" basis, and most of the inventory positions are carried for the
purpose of generating sales by the retail and institutional salesforce.
First Albany's trading activities require the commitment of capital and may
place First Albany's capital at risk. Profits and losses are dependent upon
the skill of traders, price movement, trading activity, and the size of
inventories.
In executing customers' orders to buy or sell in the over-the-counter market
in a security in which it makes a market, First Albany may sell to or purchase
from its customers at a price which is substantially equal to the current
inter-dealer market price, plus or minus a markup or markdown. Alternatively,
First Albany may act as an agent, executing a customer's purchase or sale order
with another broker-dealer, who acts as a market maker, at the best inter-dealer
market price available and charging a commission.
The following table sets forth: the highest, lowest, and average month-end
inventories (including the net of securities owned and securities sold, but
not yet purchased) for fiscal 1994 by securities category where First Albany
acted as principal.
Highest Lowest Average
Inventory Inventory Inventory
--------- --------- ---------
(In thousands of dollars)
State and municipal bonds $ 28,973 $ 9,068 $ 16,557
Corporate obligations 6,525 (474) 3,178
Corporate stocks 2,178 (677) 919
U.S. Government and federal
agencies obligations 5,581 1,582 3,048
Underwriting and Investment Banking
First Albany manages, co-manages, and participates in tax-exempt and corporate
securities distributions. For the periods indicated, the table below
highlights the number and dollar amount of corporate and tax-exempt securities
offerings managed or co-managed by First Albany and the number and amount of
First Albany's underwriting participations in syndicates, including those
managed or co-managed by First Albany:
Corporate Stock and Bond Offerings
----------------------------------
Managed or Co-Managed Syndicate Participations
--------------------- ------------------------
Fiscal Number of Dollar Number of Dollar
Year Issues Amount Participations Amount
- - ----- --------- ------ -------------- ------
(In thousands of dollars)
1994 13 $483,814 334 $ 98,900
1993 3 158,300 344 167,152
1992 4 212,451 322 130,938
1991 1 7,650 159 51,677
Tax-Exempt Bond Offerings
-------------------------
Managed or Co-Managed Syndicate Participations
---------------------- ------------------------
Fiscal Number of Dollar Number of Dollar
Year Issues Amount Participations Amount
- - ------ -------- ------ -------------- ------
(In thousands of dollars)
1994 123 $14,744,502 332 $1,598,182
1993 171 18,379,821 349 1,741,206
1992 179 14,482,448 328 1,137,423
1991 89 14,933,761 332 886,069
Participation in an underwriting syndicate or selling group involves both
economic and regulatory risks. An underwriter or selling group member may
incur losses if it is forced to resell the securities it is committed to
purchase at less than the agreed-upon purchase price. In addition, under the
federal securities laws, other statutes, and court decisions with respect to
underwriters' liabilities and limitations on indemnification of underwriters
by issuers, an underwriter is subject to substantial potential liability for
material misstatements or omissions in prospectuses and other communications
with respect to underwritten offerings. Further, underwriting or selling
commitments constitute a charge against net capital, and First Albany's
underwriting or selling commitments may be limited by the requirements that it
must at all times be in compliance with the net capital rule. See "Net
Capital Requirements."
Interest
First Albany derives interest income primarily from the financing of customer
margin loans, securities lending activities, and securities owned.
Customers' securities transactions are effected on either a cash or margin
basis. In margin transactions, First Albany extends credit, which is
collateralized by securities and cash in the customer's account, to the
customer. In accordance with Federal Reserve Bank regulations, NYSE
regulations, and internal firm policy, First Albany earns interest income as a
result of charging customers at a rate of up to 2% over the brokers' call
rate.
During the past several years, cash balances in customers' accounts have
provided the primary source of funds to finance customers' margin account
debit balances. SEC regulations restrict the use of customers' funds by
broker-dealers by providing generally that free credit balances and funds
derived from pledging and lending customers' securities are to be used only to
finance customers' margin account debit balances, and, to the extent not so
used, the funds must be deposited in a special reserve bank account for the
exclusive benefit of customers. The regulations also require broker-dealers,
within designated periods of time, to obtain physical possession or control of
and to segregate customers' fully paid and excess margin securities.
In connection with both its trading and brokerage activities, First Albany
borrows securities to cover short sales and to complete transactions in which
customers or other brokers have failed to deliver securities by the required
settlement date. First Albany also lends securities to other brokers and
dealers for similar purposes. This is a common occurrence for broker-dealers.
When borrowing securities, First Albany is required to deposit cash or other
collateral, or to post a letter of credit with the lender and receive a rebate
(based on the amount of cash deposited) calculated to yield a negotiated rate
of return. When lending securities, First Albany receives cash and generally
pays a rebate (based on the amount of cash received) to the other party to the
transaction. Securities borrow and loan transactions are executed pursuant to
written agreements with counter-parties which provide that the securities
borrowed or loaned be marked to market on a daily basis and that excess
collateral be refunded or that additional collateral be furnished in the event
of changes in the market value of the securities. Collateral adjustments are
usually made on a daily basis through the facilities of various
clearinghouses.
Operations, Clearing, and Systems
First Albany's operations include: execution of orders; processing of
transactions; receipt, identification, and delivery of funds and securities;
custody of customers' securities; internal financial control; and compliance
with regulatory and legal requirements.
The volume of transactions handled by the operations staff fluctuates
substantially. The monthly number of purchase and sale transactions processed
for the periods indicated were as follows:
Number of Monthly
Transactions
-----------------
Fiscal Year High Low Average
- - ----------- ---- --- -------
1994 58,245 40,537 47,257
1993 51,745 37,276 43,409
1992 43,068 30,907 36,346
1991 38,744 20,800 31,434
First Albany has established internal controls and safeguards against
securities theft, including use of depositories and periodic securities
counts. As required by the NYSE and certain other authorities, First Albany
carries fidelity bonds covering loss or theft of securities as well as
embezzlement and forgery.
First Albany clears its own securities transactions and posts its books and
records daily. Periodic reviews of controls are conducted, and
administrative and operations personnel meet frequently with management to
review operating conditions. Operations personnel monitor compliance with
applicable laws, rules, and regulations.
In addition to processing its own customer transactions, First Albany
processes, for a fee, the transactions of other brokerage firms whose customer
accounts are carried on a fully disclosed basis with all security positions,
margin account receivables, and credit balances reflected on the books and
records of First Albany.
Financial Services
Customized financial services are available to customers at First Albany.
The Financial Planning Department advises customers on a variety of
interrelated financial matters, including investment portfolio review, tax
management, insurance analysis, education and retirement planning, and estate
analysis. For a fee, financial planners will prepare a detailed analysis with
specific recommendations aimed at accumulating wealth and attaining financial
goals.
First Albany also offers a range of retirement plans, including IRAs, SEP
Plans, profit sharing, 401K, and pension programs. Fixed and variable
annuities are available as well as life, disability, and nursing home
insurance programs, limited partnership interests in real estate, oil and gas
drilling, and similar ventures.
Research
First Albany maintains a professional staff of equity analysts.
Research is focused on six industry sectors: technology, health care,
financial services, energy, utilities, and basic industry. First
Albany employs 9 analysts and 8 research assistants who support the Company's
institutional and retail brokerage and corporate finance activities.
Research services include review and analysis of the economy; general market
conditions; industries and specific companies via both fundamental and
technical analyses; recommendations of specific action with regard to
industries and specific companies; review of customer portfolios; preparation
of research reports which are provided to retail and institutional customers;
and responses to inquiries from customers and Investment Executives. In
addition, First Albany purchases outside research services including economic
reports, charts, data bases, company analyses, and technical analyses.
Retail Business
Revenues from First Albany's retail brokerage activities are a substantial
portion of First Albany's business and are generated through customer
purchases and sales of stocks, bonds, mutual funds, and other investment
products. For the fiscal years 1994, 1993, and 1992, these revenues accounted
for approximately 54%, 49%, and 55% of net revenues, respectively.
Institutional Business
Revenues generated from securities transactions with major institutions in
fiscal 1994, 1993, and 1992 accounted for approximately 29%, 30%, and 29% of
net revenues, respectively. Institutional revenues are derived from sales of
tax-exempt securities, taxable debt obligations, and equities, and are
serviced primarily in Albany, Boston, Wellesley, and New York City. First
Albany Investment Executives cover most of the regional institutions.
Municipal Bond Business
First Albany considers its expertise in municipal bonds to be one of its major
strengths. The tax-exempt department consists of 43 professionals and
offers a broad range of services, including primary market underwriting,
secondary market trading, institutional sales, sales liaison with branches,
portfolio analysis, credit analysis, investment banking services, and financial
advisory services.
Sales revenues from all secondary market tax-exempt products were $8.95
million in fiscal 1994, $7.5 million in fiscal 1993, $7.2 million in fiscal
1992.
Employees
At fiscal year-end, the Company had 619 full-time employees, of which 190 were
Investment Executives and 75 were institutional salespeople (primarily on
commission), 120 were in branch sales support, 25 were in home office sales
support, 51 were in other revenue producing positions, 68 were in operations,
and 90 were in other support and administrative functions.
New Investment Executives are required to take examinations given by the NASD
and approved by the NYSE and all principal exchanges as well as state
securities authorities in order to be registered. There is intense
competition among securities firms for Investment Executives with proven sales
production records.
The Company considers its employee relations to be good and believes that its
compensation and employee benefits are competitive with those offered by other
securities firms. None of the Company's employees are covered by a collective
bargaining agreement.
Competition
First Albany is engaged in a highly competitive business. Its competition
includes, with respect to one or more aspects of its business, all of the
member organizations of the NYSE and other registered securities exchanges,
all members of the NASD, members of the various commodity exchanges, and
commercial banks and thrift institutions. Many of these organizations are
national firms and have substantially greater financial and human resources
than First Albany. Discount brokerage firms seeking to expand their share of
the retail market, including firms affiliated with commercial banks and thrift
institutions, are devoting substantial funds to advertising and direct
solicitation of customers. In many instances, First Albany is competing
directly with such organizations. In addition, there is competition for
investment funds from the real estate, insurance, banking, and savings and
loan industries. The Company believes that the principal factors affecting
competition for the securities industry are the quality and ability of
professional personnel and relative prices of services and products
offered.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations, principally the NASD and the national securities exchanges.
These self-regulatory organizations adopt rules (subject to approval by the
SEC) which govern the industry and conduct periodic examinations of member
broker-dealers. Securities firms are also subject to regulation by state
securities commissions in the states in which they are registered. First
Albany is currently registered as a broker-dealer in 49 states and the
District of Columbia.
The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales methods, trade practices among broker-
dealers, capital structure of securities firms, recordkeeping, and conduct of
directors, officers, and employees. Additional legislation, changes in rules
promulgated by the SEC and by self-regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules often directly affect
the method of operation and profitability of broker-dealers. The SEC, self-
regulatory organizations, and state security regulators may conduct
administrative proceedings which can result in censure, fine, suspension, or
expulsion of a broker-dealer, its officers, or employees. The principal
purpose of regulation and discipline of broker-dealers is the protection of
customers and the securities markets rather than protection of creditors and
stockholders of broker-dealers.
Net Capital Requirements
As a broker-dealer and member of the NYSE, First Albany is subject to the
Uniform Net Capital Rule promulgated by the SEC. The rule is designed to
measure the general financial condition and liquidity of a broker-dealer;
therefore, it imposes a minimum net capital requirement deemed necessary to
meet the broker-dealer's continuing commitments to its customers.
A broker-dealer may be required to reduce its business and to restrict
withdrawal of subordinated capital if its net capital is less than 4% of
aggregate debit balances; it may be prohibited from expanding its business and
declaring cash dividends if its net capital is less than 5% of aggregate debit
balances; and it will be subject to closer supervision by the NYSE if its net
capital is less than 6% of aggregate debit balances. Compliance with the Net
Capital Rule may limit those operations of a firm such as First Albany which
require the use of its capital for purposes such as maintaining the inventory
required for a firm trading in securities, underwriting securities, and
financing customer margin account balances. Net capital and aggregate debit
balances change from day to day and, at September 30, 1994, First Albany's net
capital was $18,636,000 which was 19.9% of its aggregate debit balances (2%
minimum requirement) and $16,771,000 in excess of required minimum net
capital.
Item 2. Properties
The Company has a total of 25 Retail, Institutional, and Investment Banking
offices in 8 states, all of which are leased or rented. The Company's
executive offices are located at 41 State Street, Albany, New York. The order
entry, trading, investment banking, research, data processing, operations, and
accounting activities are centralized in the Albany office. The office is
operated under a lease with renewal options extending until 1999. All other
offices are subject to lease or rental agreements which, in the opinion of
management, are sufficient to meet the needs of the Company.
Item 3. Legal Proceedings
In the normal course of business, the Company has been named a defendant, or
otherwise has possible exposure, in several claims. Certain of these are
class actions which seek unspecified damages that could be substantial.
Although there can be no assurance as to the eventual outcome of litigation in
which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions most likely to result in
adverse dispositions. Although further losses are possible, the opinion of
management, based upon the advice of its attorneys and general counsel, is
that such litigation will not, in the aggregate, have a material adverse
effect on the Company's liquidity or financial position, although it could
have a material effect on quarterly or annual operating results in the period
in which it is resolved.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock has traded on the Nasdaq Stock Market under the
symbol "FACT." As of December 16, 1994, there were approximately 620 holders
of record of the Company's common stock. The following table sets forth the
high and low bid quotations for the common stock along with cash dividends
during each quarter for the fiscal years ended:
September 30, 1994 Quarters Ended
- - ------------------ --------------
Stock Price Range Dec. 31 Mar. 25 June 24 Sept. 30
----------------- ------- ------- ------- --------
High $9 1/8 $9 1/4 $8 3/4 $8
Low $7 5/8 $8 1/4 $7 1/2 $6 3/4
Cash Dividend
per Share $ .05 $ .05 $ .05 $ .05
September 24, 1993 Quarters Ended
- - ------------------ --------------
Stock Price Range Dec. 31 Mar. 26 June 25 Sept. 24
----------------- ------- ------- ------- --------
High $8 $9 1/2 $9 3/4 $9 1/4
Low $6 1/2 $7 $8 1/2 $6 3/4
Cash Dividend
per Share $ .05 $ .05 $ .05 $ .05
The Board of Directors has from time to time authorized the Company to
repurchase shares of its common stock either in the open market or otherwise.
In fiscal year 1994, the Company repurchased 130,000 shares at an average
price of $8.25, bringing the total number of shares repurchased to 408,450,
after the 5% common stock dividend declared on October 27, 1994.
When appropriate, the Company will consider making additional purchases.
During fiscal 1994, the Company declared and paid four quarterly cash
dividends totaling $.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends. During fiscal 1993, the Company also
declared and paid four quarterly cash dividends totaling $.20 per share of
common stock, along with declaring and issuing two 5% common stock dividends.
On October 27, 1994, subsequent to the period reflected in this report, the
Board of Directors declared the regular quarterly cash dividend of $0.05 per
share along with a 5% common stock dividend, both payable on November 23,
1994, to shareholders of record on November 9, 1994.
Item 6. Selected Financial Data
The following selected financial data have been derived from the Consolidated
Financial Statements of the Company.
First Albany Companies Inc.
FIVE YEAR FINANCIAL SUMMARY
---------------------------
(In thousands of dollars except per share amounts)
For the years ended Sept. 30, Sept. 24, Sept. 25, Sept. 27, Sept. 30,
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
Operating Results
Revenues:
Commissions $ 29,553 $ 28,884 $ 24,569 $ 19,445 $ 18,311
Principal
transactions 36,167 34,857 31,405 28,443 18,923
Investment banking 19,164 23,265 16,065 8,051 7,808
Fees and other 6,578 5,901 4,782 4,593 4,005
Operating revenues 91,462 92,907 76,821 60,532 49,047
Interest income 16,222 9,483 8,999 12,047 17,997
Total revenues 107,684 102,390 85,820 72,579 67,044
Interest expense 10,467 5,257 5,078 8,697 13,997
Net revenues 97,217 97,133 80,742 63,882 53,047
Expenses Excluding Interest:
Compensation and
benefits 65,513 64,388 51,558 40,881 36,260
Clearing, settlement
and brokerage costs 1,894 1,981 1,978 2,120 2,110
Communications
and data processing 7,198 6,209 5,213 4,770 4,384
Occupancy and
depreciation 5,710 5,395 5,130 5,130 5,061
Selling 4,779 4,152 3,410 2,565 4,238
Other 4,755 6,242 4,534 4,831 3,476
Total expenses
excluding interest 89,849 88,367 71,823 60,297 55,529
Income (loss) before
income taxes 7,368 8,766 8,919 3,585 (2,482)
Income tax expense
(benefit) 2,876 3,375 3,352 1,302 (925)
Net income
(loss) $ 4,492 $ 5,391 $ 5,567 $ 2,283 $ (1,557)
Per Common Share: *
Earnings-primary $ 1.06 $ 1.26 $ 1.34 $ .57 $ (.39)
Cash dividend 0.20 0.20 0.20
Book value 8.25 7.37 6.22 5.03 4.45
Financial Condition:
Total assets $482,749 $514,794 $203,877 $164,679 $233,448
Long-term
note payable 94 456 1,334 1,900 2,700
Subordinated debt 2,250 2,750 3,250 3,750
Stockholders'
equity 33,230 30,088 25,272 19,989 17,706
* All per share figures have been restated for common stock dividends
declared through October 1994.
<TABLE>
<CAPTION>
First Albany Companies Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON
1994 VS. 1993 AND 1993 VS. 1992
(In thousands of dollars)
1994 1993
Fiscal Years Ended vs. 1993 vs. 1992
Sept. 30, Sept. 24, Sept. 25, Increase Increase
1994 1993 1992 (Decrease) (Decrease)
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Revenues:
Commissions $ 29,553 $ 28,884 $ 24,569 $ 669 2% $ 4,315 18%
Principal
transactions 36,167 34,857 31,405 1,310 4% 3,452 11%
Investment banking 19,164 23,265 16,065 (4,101) (18%) 7,200 45%
Fees and other 6,578 5,901 4,782 677 11% 1,119 23%
Operating revenues 91,462 92,907 76,821 (1,445) (2%) 16,086 21%
Interest income 16,222 9,483 8,999 6,739 71% 484 5%
Total revenues 107,684 102,390 85,820 5,294 5% 16,570 19%
Interest expense 10,467 5,257 5,078 5,210 99% 179 4%
Net revenues 97,217 97,133 80,742 84 0% 16,391 20%
Expenses Excluding Interest:
Compensation
and benefits 65,513 64,388 51,558 1,125 2% 12,830 25%
Clearing, settlement
and brokerage costs 1,894 1,981 1,978 (87) (4%) 3 0%
Communications and
data processing 7,198 6,209 5,213 989 16% 996 19%
Occupancy and
depreciation 5,710 5,395 5,130 315 6% 265 5%
Selling 4,779 4,152 3,410 627 15% 742 22%
Other 4,755 6,242 4,534 (1,487) (24%) 1,708 38%
Total expenses
excluding interest 89,849 88,367 71,823 1,482 2% 16,544 23%
Income before
income taxes 7,368 8,766 8,919 (1,398) (16%) (153) (2%)
Income tax expense 2,876 3,375 3,352 (499) (15%) 23 1%
Net income $ 4,492 $ 5,391 $ 5,567 $ (899) (17%) $ (176) (3%)
Net interest income:
Interest income $ 16,222 $ 9,483 $ 8,999 $ 6,739 71% $ 484 5%
Interest expense 10,467 5,257 5,078 5,210 99% 179 4%
Net interest income $ 5,755 $ 4,226 $ 3,921 $ 1,529 36% $ 305 8%
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
BUSINESS ENVIRONMENT
First Albany Corporation, a wholly owned subsidiary of First Albany
Companies Inc. (the Company), is a full service investment banking and
brokerage firm. Its primary business includes the underwriting,
distribution, and trading of fixed income and equity securities. The
investment banking and brokerage business earns revenues in direct
correlation with the general level of trading activity in the stock
and bond markets. This level of activity cannot be controlled by
the Company; however, many of the Company's costs are
fixed. Therefore, the Company's earnings, like those of others in the
industry, reflect the activity in the markets and can fluctuate accordingly.
This is a highly competitive business. The competition includes not only
full service national firms and discount houses, but also mutual funds that
sell directly to the customer as well as banks that offer a variety of
investment products.
In February 1994, the Federal Reserve Board raised short-term interest
rates for the first time since March 1989. This was the first of six
increases in short-term interest rates in 1994. Long-term interest rates rose
sharply as the Fed raised short-term rates and fears among bond buyers of
higher inflation intensified. The decline in bond prices and the subsequent
returns from long-term bond investments was the lowest since 1980. This had a
substantial impact on our business. First, the refinancing of debt by
corporations and municipalities which had been the surge in our financial
business in 1993 declined dramatically. Second, we saw less business in
secondary issues in the fixed income markets as inventory supplies were
greatly reduced. This was partially offset by the stock market s performance.
On balance, the stock market was flat with two strong rallies and two sharp
corrections. In light of this, or in spite of this, investors remained
optimistic and invested in a difficult environment. First Albany showed solid
gains in equity investment banking and in our equity institutional business.
Overall, it was a difficult year in the financial markets and, in spite of
that, our revenues came in slightly above 1993's.
RESULTS OF OPERATIONS
Fiscal Year 1994 Compared with Fiscal Year 1993
Net Income
Net income for the 1994 fiscal year was $4.5 million or $1.06 per share
compared to $5.4 million or $1.26 per share earned in fiscal 1993. Revenues
increased due to a solid contribution made by our retail brokerage business
along with significant contributions by our institutional equity and corporate
finance areas. However, net income decreased due to the effect of falling
bond prices on fixed income sales, trading and underwritings, and because
municipal bond refinancings declined significantly from last year.
Principal Transactions
Principal transactions increased $1.3 million or 4% in fiscal 1994. This
increase was comprised of an increase in equities of $3.2 million, a decrease
in taxable fixed income securities of $4.1 million, an increase in municipal
bonds of $0.8 million and an unrealized gain of $1.4 million due to the
Company's investment in a firm which completed an initial public offering in
February 1994.
Investment Banking
Investment banking revenues decreased $4.1 million or 18% in fiscal 1994.
Revenues from selling concessions decreased $0.2 million (equities increased
$1.7 million, while municipal bonds decreased $1.8 million and taxable fixed
income decreased $0.1 million), underwriting fees decreased $1.1 million
(primarily municipal bonds), and investment banking fees decreased $2.8
million (corporate finance fees increased $1.6 million, while municipal
finance fees decreased $4.4 million). The result in investment banking
revenues was largely dependent upon declining municipal bond activity due to
increasing interest rates and a significant decrease in municipal bond
refinancings; however, these were partially offset by increasing revenues in
equity corporate finance activities.
Net Interest Income
Net interest income increased $1.5 million or 36% in fiscal 1994 due
primarily to increased revenues from customer margin balances, and increased
stock borrowed and stock loaned activities.
Compensation and Benefits
Compensation and benefits increased $1.1 million or 2% in fiscal 1994.
Sales-related compensation decreased $1.3 million, salaries increased $1.8
million which impacted benefits (up $0.6 million).
Communications and Data Processing
Communications and data processing expense increased $1 million or 16% in
fiscal 1994. Communication expense increased $0.8 million mainly as a result
of the expansion of the institutional and research divisions. Data processing
expense increased $0.2 million due primarily to an increased number of
transactions.
Other Expense
Other expense decreased $1.5 million or 24% in fiscal 1994 due primarily
to a decrease in litigation and consulting costs.
Fiscal Year 1993 Compared with Fiscal Year 1992
Net Income
Net income for the 1993 fiscal year was $5.4 million or $1.26 per share,
as restated, compared to $5.6 million or $1.34 per share, as restated,
earned in fiscal 1992. For fiscal 1993, total revenues increased 19% to
$102.4 million from $85.8 million in fiscal 1992. These strong revenues are a
result of higher levels of brokerage volume and investment banking activity.
Net income continued to reflect the impact of expenses associated with
strategic investments in core businesses-investment banking, institutional
sales, and research-aimed at future growth.
Commissions
Commission revenues increased $4.3 million or 18% in fiscal 1993,
reflecting higher volume of trading activity on the New York Stock Exchange
and other major financial markets. The increase in commission revenues was
comprised primarily of mutual fund commission revenues which increased $2.2
million or 28% and of listed and over-the-counter agency stock commissions
which increased $2 million or 13%.
Principal Transactions
Principal transactions revenues increased $3.5 million or 11% in fiscal
1993, led by equity securities which increased $2.1 million or 53%. A strong
stock market and First Albany's focused emphasis on equities primarily
enhanced these revenues. Taxable fixed income securities, including
corporate bonds, United States government bonds, and mortgage-backed
securities, demonstrated a revenue increase of $1.7 million or 6% in fiscal
1993.
Investment Banking
Favorable market conditions, low interest rates, and continued growth in
our banking activities combined to increase our revenues $7.2 million or 45%.
Municipal financings or refinancings played a large role as investment banking
fees increased $5 million, sales credits in institutional accounts increased
$1.5 million, and underwriting fees increased $0.6 million.
Fees and Other
Fees and other revenues increased $1.1 million or 23% in fiscal 1993,
reflecting increased service charge income and financial services revenues.
Compensation and Benefits
On the expense side, compensation and benefits increased $12.8 million or
25%, primarily due to the increase in revenues. Sales related compensation
increased $9.5 million; retail recruiting incentives decreased $0.1 million;
salaries increased $2.6 million (due partly to the expansion of our investment
banking, research, and institutional divisions); and benefits increased $0.8
million.
Communications and Data Processing
Communications and data processing expenses increased $996,000 or 19%.
Market data services expenses increased $424,000 mainly as a result of the
expansion of the institutional division and greater quotation costs in the
trading departments. Because of the higher volume of brokerage transactions,
variable data processing expenses increased $274,000.
Selling Expense
Selling expense increased $742,000 or 22%, reflecting higher expenses in
media and promotional related activities and additional costs relating to the
expansion of our investment banking, research, and institutional divisions.
Other Expense
Other expense increased $1.7 million, or 38%, primarily due to increased
litigation costs and the aforementioned expansion in the investment banking
and research divisions.
LIQUIDITY AND CAPITAL RESOURCES
A substantial portion of the Company's assets, similar to other brokerage
and investment banking firms, is liquid, consisting of cash and assets readily
convertible into cash. These assets are financed primarily by the Company's
interest-bearing and non-interest-bearing payables to customers, payables
to brokers and dealers secured by loaned securities and bank lines-of-credit.
Securities borrowed and securities loaned will fluctuate due primarily to the
current level of business activity in this area. Receivable from others
increased due primarily to securities owned activities related to transactions
which were sold for an October settlement date. Net receivables from customers
increased as a result of larger customer margin balances. Short-term bank
loans increased because of an increase in receivable from others and net
receivable from customers.
At fiscal year-end 1994, both First Albany Corporation and Northeast
Brokerage Services Corporation, subsidiaries of First Albany Companies
Inc., were in compliance with the net capital requirements of the Securities
and Exchange Commission and had capital in excess of the minimum required.
Management believes that funds provided by operations and a variety of
committed and uncommitted bank lines-of-credit--totaling $85,000,000 of which
approximately $49,499,000 were unused as of September 30, 1994--will provide
sufficient resources to meet present and reasonably foreseeable short-term
financial needs.
During fiscal 1994, the Company declared and paid four quarterly cash
dividends totaling $ 0.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends.
On October 27, 1994, subsequent to the period reflected in this report,
the Board of Directors declared the regular quarterly cash dividend of $ 0.05
per share along with a 5% common stock dividend, both payable on November 23,
1994, to stockholders of record on November 9, 1994.
The Company believes that funds provided by operations will be sufficient
to fund the acquisition of office equipment and leasehold improvements,
and other long-term requirements.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS 17
FINANCIAL STATEMENTS:
Consolidated Statements of Income, For the Years
Ended September 30, 1994, September 24, 1993,
and September 25, 1992 18
Consolidated Statements of Financial Condition,
as of September 30, 1994, and September 24, 1993 19
Consolidated Statements of Changes in
Stockholders' Equity, For the Years Ended
September 30, 1994, September 24, 1993,
and September 25, 1992 20
Consolidated Statements of Cash Flows,
For the Years Ended September 30, 1994,
September 24, 1993, and September 25, 1992 21
Notes to Consolidated Financial Statements 22-33
SUPPLEMENTARY DATA:
Selected Quarterly Financial Data (Unaudited) 34
Report of Independent Accountants
Board of Directors and Stockholders
First Albany Companies Inc.
We have audited the consolidated financial statements and the financial
statement schedules of First Albany Companies Inc. listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Albany
Companies Inc. as of September 30, 1994, and September 24, 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1994, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND, L.L.P.
Albany, New York
November 4, 1994
First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars)
----------------------------------
For the years ended
September 30, September 24, September 25,
1994 1993 1992
------------- ------------- -------------
Revenues
Commissions $ 29,553 $ 28,884 $ 24,569
Principal transactions 36,167 34,857 31,405
Investment banking 19,164 23,265 16,065
Interest 16,222 9,483 8,999
Fees and other 6,578 5,901 4,782
Total revenues 107,684 102,390 85,820
Interest expense 10,467 5,257 5,078
Net revenues 97,217 97,133 80,742
Expenses excluding interest
Compensation and benefits 65,513 64,388 51,558
Clearing, settlement and
brokerage costs 1,894 1,981 1,978
Communications and data
processing 7,198 6,209 5,213
Occupancy and depreciation 5,710 5,395 5,130
Selling 4,779 4,152 3,410
Other 4,755 6,242 4,534
Total expenses excluding interest 89,849 88,367 71,823
Income before income taxes 7,368 8,766 8,919
Income tax expense 2,876 3,375 3,352
Net income $ 4,492 $ 5,391 $ 5,567
Net income per common and
common equivalent share
Primary $ 1.06 $ 1.26 $ 1.34
Fully diluted $ 1.06 $ 1.25 $ 1.34
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
<CAPTION>
First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands of dollars)
September 30, September 24,
1994 1993
------------- -------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,165 $ 6,971
Cash segregated under federal regulations 250
Securities purchased under agreements
to resell 2,806
Securities borrowed 331,209 374,319
Receivables from
Brokers, dealers and
clearing agencies 1,511 902
Customers 96,830 96,718
Others 18,358 1,863
Securities owned 20,988 21,445
Office equipment and leasehold
improvements, net 5,151 3,619
Other assets 5,537 5,901
Total Assets $482,749 $514,794
Liabilities and Stockholders' Equity
Liabilities
Short-term bank loans $ 38,921 $ 9,931
Securities sold under
agreements to repurchase 2,825
Securities loaned 329,478 374,229
Payables to
Brokers, dealers and clearing agencies 5,077 6,465
Customers 56,949 69,201
Others 1,663 1,752
Securities sold but not yet purchased 3,724 1,826
Accounts payable 1,411 1,580
Accrued compensation 9,149 10,263
Accrued expenses 3,053 3,928
Notes payable 94 456
Subordinated debt 2,250
Total Liabilities 449,519 484,706
Commitments and Contingencies
Stockholders' Equity
Preferred stock; $1.00 par value; authorized
500,000 shares; none issued
Common stock; $.01 par value; authorized
10,000,000 shares; issued 4,435,454
shares 1994 and 4,023,421 shares 1993 44 40
Additional paid-in capital 16,489 13,142
Retained earnings 19,099 18,719
Less treasury stock at cost (2,402) (1,813)
Total Stockholders' Equity 33,230 30,088
Total Liabilities and
Stockholders' Equity $482,749 $514,794
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
<CAPTION>
First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1994, September 24, 1993,
and September 25, 1992
(In thousands of dollars except for number of shares)
Common Stock Additional
Issued Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance,
September 27, 1991 3,475,915 $ 35 $ 8,554 $ 13,759 (360,630) $(2,359)
Sale of treasury
stock (80) 66,085 432
Cash dividends paid (636)
Net income 5,567
Balance
September 25, 1992 3,475,915 35 8,554 18,610 (294,545) (1,927)
Issuance of
restricted stock 14 (13) 2,050 13
Stock dividends
declared 547,506 5 4,574 (4,580) (44,448)
Cash dividends
paid (671)
Options exercised (18) 16,157 101
Net income 5,391
Balance
September 24, 1993 4,023,421 40 13,142 18,719 (320,786) (1,813)
Issuance of re-
stricted stock 132 (104) 16,028 104
Stock dividends
declared 412,033 4 3,215 (3,219) (37,973)
Cash dividends
paid (742)
Options exercised (47) 64,281 379
Treasury stock purchase (130,000) (1,072)
Net income 4,492
Balance
September 30, 1994 4,435,454 $ 44 $16,489 $ 19,099 (408,450) $(2,402)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
<CAPTION>
First Albany Companies Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
September 30, September 24, September 25,
For the years ended 1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,492 $ 5,391 $ 5,567
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,511 1,326 1,378
Deferred income taxes 466 (165) (701)
(Increase) decrease in operating assets:
Cash and securities segregated under federal
regulations 250 36 6,322
Securities purchased under agreement
to resell 2,806 (2,806)
Securities borrowed, net (1,641) 883 311
Net receivable from customers (12,364) (13,086) (5,345)
Net receivable from others (16,584) 3,013 (3,278)
Securities owned, net 2,355 (569) (3,089)
Other assets (102) (1,072) (1,285)
Increase (decrease) in operating liabilities:
Securities sold under agreement to
repurchase (2,825) 2,825
Net payable to brokers and dealers (1,997) 7,457 (1,114)
Net payable to others
Accounts payable and accrued expenses (2,158) 3,401 4,291
Net cash (used in) provided
by operating activities (25,791) 6,634 3,057
Cash flows from investing activities:
Purchase of furniture, equipment, and
leaseholds (3,043) (1,460) (730)
Net cash used in investing activities (3,043) (1,460) (730)
Cash flows from financing activities:
Proceeds (payments) of short-term bank
loans, net 28,990 1,100 (1,280)
Payments of subordinated debt (2,250) (500) (500)
Payments of notes payable (362) (878) (566)
Payments for purchases of common stock
for treasury (1,072)
Proceeds from issuance of common stock
from treasury 332 83 352
Proceeds from issuance of restricted stock 132 13
Dividends paid (742) (671) (636)
Net cash provided by (used in)
financing activities 25,028 (853) (2,630)
(Decrease) increase in cash (3,806) 4,321 (303)
Cash at beginning of the year 6,971 2,650 2,953
Cash at the end of the period $ 3,165 $ 6,971 $ 2,650
Supplemental cash flow disclosures:
Income tax payments $ 2,660 $ 3,322 $ 4,369
Interest payments $10,108 $ 4,999 $ 5,227
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
Significant Accounting Policies
The consolidated financial statements include the accounts of First Albany
Companies Inc. and its wholly owned subsidiaries (the Company). First
Albany Corporation (the "Corporation") is the Company's principal
subsidiary and a registered broker-dealer. All significant intercompany
balances and transactions have been eliminated. The Company's year-end is
the last Friday in September. Therefore, the Company's fiscal year will
contain 52 or 53 week periods. The years ended September 30, 1994,
September 24, 1993, and September 25, 1992, contained 53 weeks, 52 weeks, and
52 weeks, respectively.
For purposes of the statements of cash flows, the Company considers
amounts in demand deposit accounts at various financial institutions, other
than those segregated under federal regulations, to be cash equivalents.
Customers' securities transactions are recorded on a settlement date basis
with related commission income and expenses recorded on a trade date basis.
Securities transactions of the Company are recorded on a trade date
basis. Investment banking revenue is recorded as follows: management fees on
offering date, selling concessions on trade date, and underwriting fees upon
completion of the underwriting.
Marketable securities and securities sold, but not yet purchased, are
valued based upon market quotations, and securities not readily marketable are
valued at fair value as determined by management. Municipal Bond Index
Futures, that are not specific hedges, are used to reduce the exposure to
changes in securities valuation. The resulting unrealized gains and losses
are included in revenue from principal transactions.
Securities purchased under agreement to resell and securities sold under
agreement to repurchase are treated as financing transactions and are carried
at the amounts at which the securities will be subsequently reacquired or
resold as specified in the respective agreements.
Office equipment and leasehold improvements are stated at cost less
accumulated depreciation of $7,570,000 in 1994 and $8,283,000 in 1993,
respectively. Depreciation is provided on a straight-line basis over the
estimated useful life of the asset or the remaining life of the lease.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between financial statement and tax basis of
existing assets and liabilities.
Net income per common and common equivalent share have been computed
based upon the weighted average number of common shares and dilutive common
equivalent shares (stock options) outstanding. The weighted average number
of common shares and dilutive common equivalent shares were:
Fiscal Year 1994 Fiscal Year 1993 Fiscal Year 1992
---------------- ---------------- ----------------
Primary 4,242,863 4,286,648 4,152,257
Fully diluted 4,242,863 4,300,639 4,161,468
All per share figures, as well as the weighted average number of common and
dilutive common equivalent shares, have been restated for stock dividends
declared through October 1994.
Certain 1993 and 1992 amounts have been reclassified to conform with 1994
presentation.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 2.
Cash and Securities Segregated Under Federal Regulations
Cash (1994, $0; 1993, $250,000) has been segregated in special reserve
bank accounts for the exclusive benefit of customers under Rule 15c3-3 of the
Securities and Exchange Commission.
NOTE 3.
Receivables From and Payables To Brokers, Dealers, and Clearing Agencies
Amounts receivable from and payable to brokers, dealers and clearing
agencies other than correspondents as of:
(In thousands of dollars) September 30, September 24,
1994 1993
------------- -------------
Securities failed to deliver $ 1,511 $ 901
Receivable from clearing agencies 1
Total receivables $ 1,511 $ 902
Securities failed to receive $ 2,453 $ 4,746
Payable to clearing agencies 2,624 1,719
Total payables $ 5,077 $ 6,465
NOTE 4.
Receivables From and Payables To Customers
Receivables from and payables to customers arise from cash and margin
transactions. Securities owned by customers are held as collateral for
receivables. Such collateral is not reflected in the financial statements.
Total unsecured and partly secured customer receivables were $204,000 and
$173,000 for the fiscal years ended 1994 and 1993, respectively. An allowance
for doubtful accounts, based upon an aging of accounts receivable and specific
identification, has been recorded for $106,000 and $125,000 for the fiscal
years ended 1994 and 1993, respectively.
NOTE 5.
Receivables From Others
Amounts receivable from others as of:
(In thousands of dollars) September 30, September 24,
1994 1993
------------- -------------
Adjustment to record securities
on a trade date basis, net $15,040 $
Others 3,318 1,863
Total $18,358 $1,863
Amounts receivable and payable for securities transactions that have not
reached their contractual date are recorded net on the statement of financial
condition.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 6.
Securities Owned And Sold, But Not Yet Purchased
Securities owned and sold, but not yet purchased consisted of the
following as of:
(In thousands of dollars) September 30, September 24,
1994 1993
------------- -------------
Sold, but Sold, but
not yet not yet
Owned Purchased Owned Purchased
----- --------- ----- ---------
Marketable
U.S. government and federal
agencies obligations $ 2,943 $ 1,220 $ 2,974 $ 152
State and municipal bonds 10,943 436 12,656 622
Corporate obligations 2,698 348 3,292 53
Corporate stocks 3,768 1,720 2,328 999
Not readily marketable
securities 636 195
------- ------- -------- -------
$20,988 $ 3,724 $ 21,445 $ 1,826
Securities not readily marketable include investment securities (a) for
which there is no market on a securities exchange or no independent publicly
quoted market, (b) that cannot be publicly offered or sold unless registration
has been effected under the Securities Act of 1933, or (c) that cannot be
offered or sold because of other arrangements, restrictions, or conditions
applicable to the securities or to the Company.
NOTE 7.
Debt
For the purpose of short-term bank loans the Company maintains a variety
of committed and uncommitted bank lines of credit totaling $85,000,000
which are limited to financing securities eligible for collateralization
under these arrangements. This includes Company securities owned and
certain customer owned securities purchased on margin, subject to certain
regulatory formulae.
Short-term bank loans and unused lines of credit were collateralized by
Company securities owned of $26,010,000 and customers' margin account
securities of $45,732,000 at September 30, 1994.
During October 1993, the Company repaid the subordinated debt that was
outstanding at September 24, 1993.
NOTE 8.
Stockholders' Equity
During fiscal 1994, the Company declared and paid four quarterly cash
dividends totaling $0.20 per share of common stock, along with declaring and
issuing two 5% common stock dividends.
On October 27, 1994, subsequent to the period reflected in this report,
the Board of Directors declared the regular quarterly cash dividend of $0.05
per share along with a 5% common stock dividend, both payable on November 23,
1994, to shareholders of record on November 9, 1994. Stockholders Equity and
all per share figures have been adjusted to reflect the common stock dividend.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 9.
Income Taxes
The Financial Accounting Standards Board issued Financial Accounting
Standard (FAS) No. 109, "Accounting for Income Taxes," in February 1992. The
Standard requires a change from the deferred method to the asset and liability
method of accounting for income taxes. Under the asset and liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable for future
years to differences between financial statement and tax basis of existing
assets and liabilities. Under FAS No. 109, the effect of tax rate changes on
deferred taxes is recognized in the income tax provision in the period that
includes the enactment date. Under the previous method, deferred taxes were
recognized using the tax rate applicable to the year of the calculation and
were not adjusted for subsequent changes in tax rates.
The Company adopted FAS No. 109 beginning in fiscal 1994. In accordance
with the provisions of the Standard, prior years financial statements have
not been restated. The Company has determined that the cumulative effect of
change in accounting principle was not material.
The components of income taxes are:
(In thousands of dollars) September 30, September 24, September 25,
1994 1993 1992
------------- ------------- -------------
Federal
Current $ 1,463 $ 2,475 $ 3,096
Deferred 466 (165) (701)
State and local 947 1,065 957
Total income taxes $ 2,876 $ 3,375 $ 3,352
The reasons for the difference between the expected income tax expense
using the federal statutory rate and the income tax expense are as follows:
(In thousands of dollars) September 30, September 24, September 25,
1994 1993 1992
------------- ------------- -------------
Income taxes
at federal statutory rate $2,505 $2,984 $3,032
State income taxes, net of
federal income taxes 625 703 599
Tax-exempt interest income (348) (357) (290)
Other, net 94 45 11
Total income taxes $2,876 $3,375 $3,352
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the years ended September 24, 1993, and September 25, 1992, the
sources of timing differences and the related deferred tax effect of each are
as follows:
(In thousands of dollars) September 24, September 25,
1993 1992
------------- -------------
Bad debts $ 22 $ (24)
Unrealized gains and losses 243 (71)
Accelerated tax depreciation (134) (129)
Deferred compensation 200 (477)
Provision for losses (646)
Other 150
Deferred income taxes $ (165) $ (701)
The temporary differences that give rise to significant portions of
deferred tax assets at September 30, 1994, are as follows:
(In thousands of dollars)
Receivables $ 45
Securities held for investment (606)
Fixed assets 340
Deferred compensation 824
Other 323
Total deferred tax asset $ 926
The Company has not recorded a valuation allowance for deferred tax
assets because income in the carryback period is sufficient to realize the
benefit of future deductions.
NOTE 10.
Employee Benefit Plans
The Company maintains a deferred profit sharing plan (Internal Revenue
Code Section 401(k) Plan) which permits eligible employees to defer a
percentage of their compensation. Company contributions to eligible
participants may be made at the discretion of the Board of Directors. The
Company contributed $56,000 in 1994, $46,000 in 1993, and $ 47,000 in 1992.
The Company also participates in an Employee Stock Bonus Plan (Internal
Revenue Code Section 401(a)) which permits eligible employees to contribute up
to 8% of their compensation on an after-tax basis. The Company makes matching
contributions equal to a percentage of each employee's contributions. Company
contributions vest in accordance with the Plan and are tax-deferred until
withdrawal. Employee and Company contributions are invested solely in the
common stock of First Albany Companies Inc. The Company contributed $357,000
in 1994, $244,000 in 1993, and $175,000 in 1992.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 11.
Incentive Plans
In 1982, the Company established a Stock Incentive Plan (the "1982 Plan")
which, as amended by stockholders in 1987, authorized issuance of options to
officers and key employees to purchase up to 800,000 shares of common stock.
On February 27, 1989, stockholders approved adoption of the First Albany
Companies Inc. 1989 Stock Incentive Plan (the "1989 Plan"). Coincident with
the adoption of the 1989 Plan, the 1982 Plan was terminated. Options
previously granted under the 1982 Plan remain valid in accordance with the
terms of the grant of such options; however, the grant of new options under
the 1982 Plan was ended. Both the 1982 Plan and 1989 Plan provide for
incentive stock options (ISOs) which meet the requirements of Section 422A
of the Internal Revenue Code of 1954, as amended, and nonqualified stock
options (NSOs) which may be granted. ISOs are granted at prices not less
than fair value at the date of the grant; NSOs may be issued at prices less
than fair market value.
In addition, under the 1989 Plan, stock appreciation rights (SARs) may be
granted in tandem with ISOs or NSOs. SARs may be exercised only if the related
options (or portions thereof) are surrendered and at such time as the fair
market value of the shares underlying the option exceeds the option price for
such shares. Upon exercise of an SAR and surrender of the related option, an
employee will be entitled to receive an amount equal to the excess of the fair
market value of one share at the time of such surrender over the option price
per share specified in such option times the number of such shares called for
by the option, or portion thereof, which is so surrendered. Payment may be
made in cash, shares of common stock, or a combination thereof. SARs
may not be exercised before six months from date of grant.
Both ISOs and NSOs may not have a term of more than ten years. Under certain
conditions, the Company is required to purchase shares issued under this Plan
at prices ranging from the original exercise or award a price to the greater
of the then book or market value. If NSOs are exercised, the difference
between the option price and the selling price will be recognized as an
expense in the income statement.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Option transactions for the 3-year period ended
September 30, 1994, under the 1982 Plan were as follows: (all are ISOs unless
otherwise noted)
Exercised Issued
Or And Options Total
Terminated Exercisable Issuable Authorized
---------- ----------- -------- ----------
September 27, 1991 758,132 41,868 0 800,000
Options exercised at $5.00
to $6.375 31,835 (31,835)
Options forfeited (2,500) 2,500
Options expired (4,533) 4,533
Options terminated 7,033 (7,033)
September 25, 1992 797,000 3,000 0 800,000
Additional options authorized 3,950 3,950
Options expired adjustment (38,000) 38,000
Options exercised at $4.76 5,000 (5,000)
September 24, 1993 764,000 39,950 0 803,950
Additional options authorized 3,280 3,280
Options exercised at $4.31
to $5.96 7,220 (7,220)
Options forfeited (4,410) 4,410
Options terminated 4,410 (4,410)
September 30, 1994 775,630 31,600 0 807,230
Issued and exercisable options are outstanding at $4.31 - $5.96 per share.
During fiscal year 1994, the Company declared two 5% common stock
dividends. These dividends resulted in an additional 3,280 options
authorized.
<TABLE>
<CAPTION>
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Option transactions during the 3-year period ended September 30, 1994,
under the 1989 Plan were as follows:
Issued Issued
And But Not Options Options Total
Exercisable Exercisable Issuable Exercised Authorized
----------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
September 27, 1991 168,750 128,750 202,500 0 500,000
Additional options authorized 200,000 200,000
Options issued and exercis-
able: $5.75 to $6.325 161,000 (161,000)
Options exercisable:
$5.125 to $6.25 36,875 (36,875)
Options issued but not exer-
cisable: $5.125 to $9.00 70,000 (70,000)
Options exercised
$5.44 to $6.25 (34,250) 34,250
Options terminated (23,500) 23,500
September 25, 1992 332,375 138,375 195,000 34,250 700,000
Additional options authorized 51,891 11,257 4,519 67,667
Options issued and
exercisable: $6.12 - $7.50 340,000 (340,000)
Options exercisable:
$5.125 to $6.25 45,249 (45,249)
Options issued but
not exercisable: $6.12 15,000 (15,000)
Options exercised:
$4.93 - $5.22 (11,157) 11,157
Options terminated (376,733) (41,663) 418,396
September 24, 1993 381,625 77,720 262,915 45,407 767,667
Additional options authorized 43,914 6,057 283,687 333,658
Options issued and
exercisable: $4.48 - $9.43 126,891 (126,891)
Options exercisable:
$4.48 to $6.59 37,026 (37,026)
Options exercised:
$5.65 - $6.48 (57,061) 57,061
Options terminated (8,770) (2,893) 11,663
September 30, 1994 523,625 43,858 431,374 102,468 1,101,325
</TABLE>
Issued and exercisable options are outstanding at $4.48 - $9.43 per share
During fiscal year 1994, the Company declared two 5% common stock
dividends. These dividends resulted in an additional 83,658 options
authorized.
On February 14, 1994, the Company's stockholders approved an amendment
to the 1989 Plan, adopted by the Board of Directors on December 22, 1993.
This amendment increased the number of shares available for issuance under the
1989 Plan by 250, 000.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 1992, the Company established the First Albany Companies Inc.
Restricted Stock Plan which authorized the issuance of up to 250,000 shares of
common stock to certain key employees of the Company. Awards under this plan
expire over a four-year period after the award date and are subject to
certain restrictions including continued employment. As of September 30,
1994, 18,180 shares have been awarded under this plan. The fair market value
of the awards will be amortized over the period in which the restrictions are
outstanding.
The Company has various other incentive programs which are offered to
eligible employees. These programs consist of cash incentives and deferred
bonuses. Amounts awarded vest over periods ranging from three to five years.
Costs are amortized over the vesting period and aggregated $1,828,000 in 1994,
$369,000 in 1993, and $553,000 in 1992.
NOTE 12.
Commitments and Contingencies
The Company's headquarters, sales offices, and certain data processing and
communication equipment are leased under noncancellable operating leases.
These expire at various times through 2003.
Future minimum annual rentals payable are as follows: (In thousands of
dollars)
1995 $ 3,154
1996 2,228
1997 1,737
1998 1,414
1999 1,195
Thereafter 2,114
Total $ 11,842
Annual rental expense including utilities for 1994, 1993, and 1992
approximated $3,955,000, $3,932,000, and $3,713,000, respectively.
In the normal course of business, the Company has been named a defendant,
or otherwise has possible exposure, in several claims. Certain of these are
class actions which seek unspecified damages that could be substantial.
Although there can be no assurance as to the eventual outcome of litigation in
which the Company has been named as a defendant or otherwise has possible
exposure, the Company has provided for those actions most likely to result in
adverse dispositions. Although further losses are possible, the opinion of
management, based upon the advice of its attorneys and general counsel, is
that such litigation will not, in the aggregate, have a material adverse
effect on the Company's liquidity or financial position, although it could
have a material effect on quarterly or annual operating results in the period
in which it is resolved.
The Company is contingently liable under bank stand-by letter of credit
agreements, executed in connection with security clearing activities, totaling
$3,460,000 at September 30, 1994.
NOTE 13.
Net Capital Requirements
The Corporation is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of
minimum net capital as calculated and defined by the Rule. The Corporation
has elected to use the alternative method, permitted by the Rule, which
requires a minimum net capital equal to 2 percent of aggregate debit balances
arising from customer transactions.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
At September 30, 1994, the Corporation had net capital of $18,636,000 which
was 19.9% of aggregate debit balances and $16,771,000 in excess of required
minimum net capital.
NOTE 14.
Off-Balance-Sheet Credit Risk and Concentrations of Credit Risk
In the normal course of business, the Company's customer and correspondent
clearance activities involve the execution, settlement, and financing of
various customer securities transactions. These activities may expose the
Company to off-balance-sheet risk in the event the customer or other party is
unable to fulfill its contractual obligations.
The Company's customer securities activities are transacted on either a
cash or margin basis. In margin transactions, the Company extends credit to
its customers, subject to various regulatory and internal margin requirements,
collateralized by cash and securities in the customers accounts. In
connection with these activities, the Company executes and clears customer
transactions involving the sale of securities not yet purchased, substantially
all of which are transacted on a margin basis subject to individual exchange
regulations and Regulation T of the Federal Reserve. Such transactions may
expose the Company to significant off-balance-sheet risk in the event margin
requirements are not sufficient to fully cover losses that customers may
incur. In the event the customer fails to satisfy its obligations, the
Company may be required to purchase or sell financial instruments at
prevailing market prices to fulfill the customer's obligations.
The Company seeks to control the risks associated with its customer
activities by requiring customers to maintain margin collateral in compliance
with various regulatory and internal guidelines. The Company monitors
required margin levels daily and, pursuant to such guidelines, requires the
customer to deposit additional collateral, or to reduce positions, when
necessary.
The Company's customer financing and securities settlement activities
require the Company to pledge customer securities as collateral in support of
various secured financing sources such as bank loans and securities loaned.
In the event the counterparty is unable to meet its contractual obligation to
return customer securities pledged as collateral, the Company will be
exposed to the risk of acquiring the securities at prevailing market prices in
order to satisfy its customer obligations. The Company controls this risk by
monitoring the market value of securities pledged on a daily basis and by
requiring adjustments of collateral levels in the event of excess market
exposure. In addition, the Company establishes credit limits for such
activities and monitors compliance on a daily basis.
During the year, in order to meet the reserve requirements under Rule
15c3-3 of the Securities and Exchange Commission, the Company entered into
resale agreements with financial institutions. At September 30, 1994 and
September 24, 1993, the Company had not entered into any resale agreements to
meet the reserve requirements under Rule 15c3-3 of the Securities and Exchange
Commission. The Company also enters into resale agreements with other
parties. Should the other party to any resale agreement be unable to return
the cash, the Company could be required to sell the securities pledged as
collateral at prevailing market prices. The market values of the securities
are monitored and additional collateral is requested where appropriate. At
September 30, 1994, the Company had not entered into any resale agreements
with other parties. At September 24, 1993, the market value of securities
pledged was $76,500 greater than the resale price of the securities.
The Company enters into repurchase agreements with other parties. Should
the other party to these transactions be unable to return the securities, the
Company would be required to buy the securities pledged as collateral at
prevailing market prices. The market value of the securities is monitored
and additional collateral is requested where appropriate.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
At September 30, 1994, the Company had not entered into any repurchase
agreements with other parties. At September 24, 1993, the market value of
securities pledged was $57,900 greater than the repurchase price of the
securities.
The Company loans securities to and borrows securities from other brokers
and dealers. In accordance with industry practice, security lending and
borrowing agreements are generally collateralized by cash or securities with a
market value in excess of the Company's obligation under the agreement. In
the event the other party to these transactions is unable to return the
collateral, the Company will be exposed to the risk of replacing or
disposing of the securities at prevailing market prices. The Company controls
this risk by monitoring the collateral held on a daily basis and by requesting
additional collateral when necessary. At September 30, 1994, and September
24, 1993, the market value of securities loaned in excess of cash received was
$52,000 and $10,000.
The Company, as a part of its normal brokerage activities, assumes short
positions in its inventory. The establishment of short positions exposes the
Company to risk in the event prices increase, as the Company may be obligated
to acquire the securities at prevailing market prices. The Company does not
engage in proprietary trading of derivative securities with the exception of
options. At September 30, 1994, and September 24, 1993, securities sold, but
not yet purchased amounted to $3,724,000 and $1,826,000, respectively.
The Company pledges unpaid customer securities as collateral for bank
loans and to satisfy margin deposits of clearing organizations under contracts
with these organizations. In the event such parties are unable to return
customer securities pledged as collateral, the Company will be exposed to
the risk of acquiring the securities at prevailing market prices. The Company
seeks to reduce this risk by having the securities held by an independent
securities custodian. At September 30, 1994, and September 24, 1993, customer
securities pledged to collateralize bank loans and unused lines of credit were
$45,732,000 and $36,819,000, respectively.
In accordance with industry practice, the Company records customer
transactions on a settlement date basis, which is generally five business days
after trade date. The Company is therefore exposed to risk of loss on these
transactions in the event of the customer's or broker's inability to meet the
terms of contract, in which case the Company may have to purchase or sell
securities at prevailing market prices. Settlement of these transactions is
not expected to have a significant effect upon the Company's financial
position.
Securities that the Company has not received or delivered at the
settlement date result in fails (Note 3). Should the other party to these
transactions be unable to fulfill its obligations, the Company may be required
to purchase or sell these securities at prevailing market prices.
The Company is a market maker in a number of securities and in this
capacity may have significant positions in its inventory or be required to
purchase significant positions in a volatile market. In order to control this
risk, security positions are monitored on at least a daily basis, and there
are regulatory guidelines that limit the obligation of the market maker to
purchase the securities in a volatile market. Should the Company find it
necessary to sell such a security, it may not be able to realize the full
carrying value of the security due to the significance of the position sold.
The Company reduces its exposure to changes in securities valuation with the
use of municipal bond index futures contracts. The contract amounts reflect
the extent of involvement the Company has in these transactions and do not
reflect exposure to credit risk. The Company controls the credit risk through
credit approvals, limits, and monitoring procedures. As of September 30,
1994, the Company had sold contracts covering a total amount of $1 million,
which required a cash deposit in the amount of $18,000.
First Albany Companies Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The criterion for determining whether an individual security position
represents a significant portion of the security issue is defined by SEC rule
15c3-1 and is referred to as "market blockage." At September 30, 1994, and
September 25, 1993, the Company held no securities in inventory which met this
criterion. Similarly, if a single security position held in inventory
represents a significant portion of net capital, referred to as "undue
concentration" as defined by SEC Rule 15c3-1, the Company may not be able to
realize the full carrying value of the security if the entire position was
required to be sold. At September 30, 1994, the Company had no securities in
inventory which met this criterion. The total value of securities held in
inventory at September 24, 1993, which met this criterion was $4,792,000. The
Company mitigated the risk of loss by hedging the position with a municipal
bond index futures contract with a contract value of $2,500,000.
The Company acts as a manager and co-manager in underwriting security
transactions. In this capacity, there is risk if the potential customer does
not fulfill the obligation to purchase the securities. The Company controls
this risk by dealing primarily with institutional investors. In most cases,
no one institutional customer subscribes to the majority of the securities
being sold, thereby spreading the risk for this type of loss among many
established customers. The Company also maintains credit limits for these
activities and monitors compliance with applicable limits and industry
regulations on a daily basis.
FIRST ALBANY COMPANIES INC.
<TABLE>
<CAPTION>
SUPPLEMENTARY DATA
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands of dollars, except per share data)
Quarters Ended
1994 Dec. 31 Mar. 25 June 24 Sept. 30
- - ---- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Total revenues $29,749 $27,154 $24,590 $26,191
Interest expense (2,428) (2,133) (2,842) (3,064)
Net revenues 27,321 25,021 21,748 23,127
Total expenses excluding interest (24,343) (22,993) (20,912) (21,601)
Income before income taxes 2,978 2,028 836 1,526
Income tax expense (1,216) (820) (298) (542)
Net income $1,762 $ 1,208 $538 $984
Net income per common
and common equivalent share:
Primary $.41 $.28 $.13 $.24
Fully diluted $.41 $.28 $.13 $.24
Quarters Ended
1993 Dec. 31 Mar. 26 June 25 Sept. 24
- - ---- ------- ------- ------- --------
Total revenues $22,337 $25,066 $27,999 $26,988
Interest expense (1,060) (1,115) (1,408) (1,674)
Net revenues 21,277 23,951 26,591 25,314
Total expenses excluding interest (19,391) (21,318) (23,803) (23,855)
Income before income taxes 1,886 2,633 2,788 1,459
Income tax expense (671) (1,043) (1,093) (568)
Net income $1,215 $1,590 $1,695 $891
Net income per common
and common equivalent share:
Primary $.29 $.37 $.39 $.21
Fully diluted $.29 $.37 $.39 $.21
</TABLE>
All per share figures have been restated for common stock dividends declared
through October 1994. The sum of the quarters' earnings per share amount does
not always equal the full fiscal year's amount due to the effect of averaging
the number of shares of common stock and common stock equivalents throughout
the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There has been no Form 8-K filed within 24 months prior to the date of the
most recent consolidated financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting
principle or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Except as set forth below, the information required by this item will be
contained under the caption "Election of Directors" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held
on or about March 7, 1995. Such information is incorporated herein by
reference to the proxy statement.
Information (not included in the Company's definitive proxy statement for the
1994 Annual Meeting of Stockholders) regarding certain executive officers of
the Company is as follows:
Edwin T. Brondo, age 47, Senior Vice President and Chief Administrative
Officer, joined First Albany Corporation in 1993 and was elected Vice
President of First Albany Companies Inc. in 1994. He previously held senior
management positions at Bankers Trust Company, Goldman Sachs, and Morgan
Stanley.
David J. Cunningham, age 48, Senior Vice President and Chief Financial
Officer, joined First Albany Corporation in 1975 and has served as Chief
Financial Officer of First Albany Corporation since 1980 and First Albany
Companies Inc. since fiscal 1986.
Michael R. Lindburg, age 45, Senior Vice President, Secretary and General
Counsel, joined First Albany Companies Inc. in 1986 after previously serving
as Vice President and General Counsel of the Boston Stock Exchange.
Item 11. Executive Compensation.
The information required by this item will be contained under the caption
"Compensation of Executive Officers and Directors" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on or about
March 7, 1995. Such information is incorporated herein by reference to the
proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item will be contained under the caption
"Stock Ownership of Principal Owners and Management" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held
on or about March 7, 1995. Such information is incorporated herein by
reference to the proxy statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item will be contained under the caption
"Certain Transactions" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on or about March 7, 1995. Such
information is incorporated herein by reference to the proxy statement.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) The following financial statements are included in Part II, Item 8:
Report of Independent Accountants
Financial Statements:
Consolidated Statements of Income, For the Years
Ended September 30, 1994, September 24, 1993, and
September 25, 1992.
Consolidated Statements of Financial Condition,
as of September 30, 1994, and September 24, 1993.
Consolidated Statements of Changes in
Stockholders' Equity, For the Years Ended
September 30, 1994, September 24, 1993, and
September 25, 1992.
Consolidated Statements of Cash Flows,
For the Years Ended September 30, 1994,
September 24, 1993, and September 25, 1992.
Notes to Consolidated Financial Statements
(2) The following financial schedules for the years 1994, 1993, and 1992
are submitted herewith:
Schedule I-Marketable Securities
Schedule VIII-Valuation and Qualifying Accounts
Schedule IX-Short-Term Borrowings
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
(3) Exhibits included herein:
Exhibit
Number Description
3.1 Certificate of Incorporation of First Albany Companies Inc. (filed as
Exhibit No. 3.1 to Registration Statement No. 33-1353).
3.2 By-laws of First Albany Companies Inc. (filed as Exhibit No. 3.2 to
Registration Statement No.33-1353).
3.2a By-laws of First Albany Companies Inc., as amended. (filed as Exhibit
No. 3.2a to Form 10-k for the Fiscal Year Ended 9/24/93).
4 Specimen Certificate of Common Stock, par value $.01 per share
(filed as Exhibit No. 4 to Registration Statement No. 33-1353).
10.2 Lease dated February 9, 1978, between MacFarland Construction
Company Inc. and First Albany Corporation for office facilities
at 41 State Street, Albany, New York (filed as Exhibit No.
10.2 to Registration Statement No. 33-1353).
10.6 Deferred Profit Sharing Plan of First Albany Corporation
effective October 1, 1982, as amended by shareholder vote dated
January 19, 1987 (filed as Exhibit 10.6 to Form 10-K for the
fiscal year ended September 30, 1986).
10.7 Incentive Stock Option Plan of First Albany Corporation
effective October 1, 1982, as amended by shareholder vote
dated January 19, 1987 (filed as Exhibit 10.7 to Form 10-K
for the fiscal year ended September 30, 1987).
10.10 First Albany Companies Inc. Stock Bonus Plan effective July 8, 1987
(filed as Registration Statement No. 33-15220 (Form B) dated July 8,
1987).
10.10a First Albany Companies Inc. Stock Bonus Plan, as amended, effective
June 25, 1990 (filed as Registration Statement No. 33-35166 (Form S-
8) dated June 25, 1990).
10.10b First Albany Companies Inc. Stock Bonus Plan, as amended, effective
February 4, 1994 (filed as Registration Statement 33-521353 (Form S-
8) dated February 4, 1994).
10.12 First Albany Companies Inc. 1989 Stock Incentive Plan effective
February 27, 1989, as approved by shareholder vote dated February 27,
1989 (filed as Exhibit 10.12 to Form 10-K for the fiscal year ended
September 30, 1989).
10.13 Term Loan Agreement dated December 28, 1989, between First Albany
Companies Inc. and Norstar Bank of Upstate NY (filed as Exhibit 10.13
to Form 10-K for the fiscal year ended September 30, 1990).
10.14 Senior Subordinated Loan Agreement dated July 16, 1990, between
First Albany Corporation and Norstar Bank of Upstate NY, as
corrected December 2, 1991 (filed as Exhibit 10.14 to Form 10-K for
the fiscal year ended September 27, 1991).
10.15 Lease dated June 12, 1992, between First Albany Companies Inc. and
Olympia and York Limited Partnership for office space at 53 State
Street, Boston, Massachusetts (filed as Exhibit 10.15 to Form 10-K
for the fiscal year ended September 25, 1992).
10.16 The First Albany Companies Inc. Restricted Stock Plan as adopted by
the Company on April 27,1992 (filed as Exhibit 10.16 to Form 10-K
for the fiscal year ended September 25, 1992).
11 Computation of per share earnings
22 List of Subsidiaries of First Albany Companies Inc.
24 Consent of experts
27 Financial Data Schedule BD
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed by the Registrant during the
last quarter of the period covered by this report.
<TABLE>
<CAPTION>
FIRST ALBANY COMPANIES INC.
SCHEDULE I -- MARKETABLE SECURITIES--OTHER INVESTMENTS
SEPTEMBER 30, 1994
COL. A COL. B COL. C COL. D COL. E
Amount at Which
Each Portfolio of
Number of Equity Security
Shares or Units Market Value Issues and Each
Name of Issuer Principal of Each Issue Other Security Issue
and Title of Amount of Cost of at Balance Carried in the
Each Issue Bonds & Notes Each Issue Sheet Date Balance Sheet
- - ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
U.S. Government
obligations 51 Issues $ 2,949,000 $ 2,943,000 $ 2,943,000
State and Municipal
Bonds 167 Issues 11,003,000 10,943,000 10,943,000
Corporate
obligations 106 Issues 2,888,000 2,698,000 2,698,000
Corporate stocks 173 Issues 2,821,000 4,404,000 4,404,000
$ 19,661,000 $ 20,988,000 $ 20,988,000
</TABLE>
<TABLE>
<CAPTION>
FIRST ALBANY COMPANIES INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1994,
SEPTEMBER 24, 1993, AND SEPTEMBER 25, 1992
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged to Balance
Beginning Costs and at End of
Description of Period Expenses Deductions Period
- - ----------- --------- -------- ---------- ------
Allowance for doubtful
accounts -- deducted
from receivables from
customers:
<C> <C> <C> <C> <C>
1994 $ 125,000 $ 120,000 $ 139,000 $ 106,000
1993 $ 189,000 $ 120,000 $ 184,000 $ 125,000
1992 $ 118,000 $ 71,000 $ 0 $ 189,000
</TABLE>
<TABLE>
<CAPTION>
FIRST ALBANY COMPANIES INC.
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEARS ENDED SEPTEMBER 30, 1994,
SEPTEMBER 24, 1993, AND SEPTEMBER 25, 1992
COL. A COL. B COL. C COL. D COL. E COL. F
Weighted Weighted
Average Maximum Average Average
Interest Amount Amount Interest
Category of Aggre- Balance at Rate at Outstanding Outstanding Rate
gate Short-Term End of End of During the During the During the
Borrowings Period Period Period (1) Period (2) Period (3)
- - ---------- ------ ------ ----------- ---------- ----------
Short-term bank loans:
<S> <C> <C> <C> <C> <C>
1994 $ 38,921,000 5.82% $ 69,631,000 $ 30,685,000 5.93%
1993 $ 9,931,000 3.63% $106,831,000 $ 28,508,000 3.70%
1992 $ 8,831,000 5.50% $ 54,661,000 $ 19,329,330 6.18%
</TABLE>
Short-term bank loans are made under a variety of committed and
uncommitted lines of credit totaling $85,000,000 which are limited to
financing securities eligible for collateralization under these arrangements
including Company securities owned and certain customer owned securities
purchased on margin, subject to certain regulatory formulae.
(1) The maximum amount outstanding during the period was the maximum amount
outstanding at any month-end.
(2) The average amount outstanding during the period was computed by dividing
the total month-end outstanding principal balances by the number of
months in the period.
(3) The average interest rate during the period was computed by dividing the
actual interest expense by the daily average amount outstanding during
the period.
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.
FIRST ALBANY COMPANIES INC.
By: /s/ George C. McNamee
-------------------------
George C. McNamee,
Chairman of the Board
Date: December 16, 1994.
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 in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/ George C. McNamee Chairman of the Board December 16, 1994
/s/ Alan P. Goldberg President and Director December 16, 1994
/s/ J. Anthony Boeckh Director December 16, 1994
/s/ Hugh L. Carey Director December 16, 1994
/s/ Edwin T. Brondo Vice President December 16, 1994
/s/ David J. Cunningham Vice President and December 16, 1994
Chief Financial Officer
(Principal Accounting Officer)
/s/ Hugh A. Johnson, Jr. Senior Vice President December 16, 1994
and Director
/s/ Michael R. Lindburg Vice President December 16, 1994
General Counsel
/s/ Daniel V. McNamee Director December 16, 1994
/s/ Robert F. Vagt Director December 16, 1994
/s/ Benaree P. Wiley Director December 16, 1994
EXHIBIT 11
<TABLE>
<CAPTION>
FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES
Computation of Per Share Earnings *
(In thousands, except per share amounts)
(unaudited)
Primary:
September 30, September 24, September 25,
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Primary:
Net income $4,492 $5,391 $5,567
Weighted average number of shares
outstanding during the period 4,049 4,078 4,032
Incremental shares under stock options
computed under the treasury stock method
using the average market price of the
issuer's stock during the period 194 209 120
Weighted average shares and common
equivalent shares outstanding 4,243 4,287 4,152
Net income per share $ 1.06 $ 1.26 $ 1.34
Fully diluted:
Net income $4,492 $5,391 $5,567
Weighted average number of shares
outstanding during the period 4,049 4,078 4,032
Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of the issuer's stock at
the end of the period 194 223 129
Weighted average shares and common
equivalent shares outstanding 4,243 4,301 4,161
Net income per share $ 1.06 $ 1.25 $ 1.34
</TABLE>
* All per share figures have been restated for common stock
dividends declared through October 1994.
EXHIBIT 22
SUBSIDIARIES OF FIRST ALBANY COMPANIES INC.
COMPANY NAME STATE OF INCORPORATION
- - ------------ ----------------------
FIRST ALBANY CORPORATION NEW YORK
FIRST ALBANY ASSET MANAGEMENT CORPORATION NEW YORK
NORTHEAST BROKERAGE SERVICES CORPORATION NEW YORK
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
First Albany Companies Inc. on Form S-8 related to the First Albany Companies
Inc. Stock Bonus Plan (Registration No. 33-15220, Registration No. 33-35166,
and Registration No. 33-52153) of our report dated November 4, 1994, on our
audits of the consolidated financial statements and financial statement
schedules of First Albany Companies Inc. as of September 30, 1994 and
September 24, 1993, and for the years ended September 30, 1994, September 24,
1993 and September 25, 1992, which report is included in this Annual Report on
Form 10-K. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND, L. L. P.
Albany, New York
December 12, 1994.
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
EXHIBIT 27
Selected Financial Data Schedule BD -- Exhibit 27
(in thousands of dollars except per share amounts)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 3,165
<RECEIVABLES> 116,699
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 331,209
<INSTRUMENTS-OWNED> 20,988
<PP&E> 5,151
<TOTAL-ASSETS> 482,749
<SHORT-TERM> 38,921
<PAYABLES> 63,689
<REPOS-SOLD> 0
<SECURITIES-LOANED> 329,478
<INSTRUMENTS-SOLD> 3,724
<LONG-TERM> 94
<COMMON> 44
0
0
<OTHER-SE> 33,186
<TOTAL-LIABILITY-AND-EQUITY> 482,749
<TRADING-REVENUE> 36,167
<INTEREST-DIVIDENDS> 16,222
<COMMISSIONS> 29,553
<INVESTMENT-BANKING-REVENUES> 19,164
<FEE-REVENUE> 6,578
<INTEREST-EXPENSE> 10,467
<COMPENSATION> 65,513
<INCOME-PRETAX> 7,368
<INCOME-PRE-EXTRAORDINARY> 4,492
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,492
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
