SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999
Commission file number 0-14140
First Albany Companies Inc.
------------------------------------------------------
(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.)
30 South Pearl St., Albany, NY 12207
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(518) 447-8500
-------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 (1) No
----- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
6,612,870 Shares of Common Stock were outstanding as of the close of
--------------------------------------------------------------------
business on April 29, 1999
- --------------------------
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of
Financial Condition at March 31, 1999
and December 31,1998................. 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
March 31, 1999 and March 27, 1998........ 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended
March 31, 1999 and March 27, 1998......... 5-6
Notes to Condensed Consolidated Financial
Statements................................ 7-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 16-22
Item 3. Quantitative and Qualitative
Disclosures about Market Risk........... 23-24
Part II - Other Information
Item 1. Legal Proceedings......................... 25
Item 6. Exhibits and Reports on Form 8-K........ 26-27
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
March 31,
1999 December 31,
(In thousands of dollars) (Unaudited) 1998
<S> <C> <C>
- -------------------------------------------------------------
Assets
Cash $ 1,470 $ 1,424
Securities purchased under
agreement to resell 1,754 1,631
Securities borrowed 572,528 470,693
Receivables from:
Brokers, dealers and
clearing agencies 10,058 6,434
Customers 209,021 194,401
Others 8,314 12,228
Securities owned 117,669 118,370
Investments 7,140 10,719
Office equipment and leasehold
improvements, net 10,603 11,390
Other assets 17,063 15,608
- ------------------------------------------------------------
Total assets $955,620 $842,898
============================================================
Liabilities and Stockholders' Equity
Liabilities
Short-term bank loans $62,144 $104,679
Securities loaned 692,907 565,571
Payables to:
Brokers, dealers and
clearing agencies 6,011 4,862
Customers 75,422 48,467
Others 28,067 17,742
Securities sold but not
yet purchased 5,660 2,814
Accounts payable 2,593 4,970
Accrued compensation 10,128 23,584
Accrued expenses 7,006 5,863
Notes payable 7,004 4,750
Obligations under capitalized
leases 3,624 3,688
- ------------------------------------------------------------
Total liabilities 900,566 786,990
- ------------------------------------------------------------
Commitments and Contingencies
Subordinated debt 7,500 7,500
- ------------------------------------------------------------
Stockholders' Equity
Common stock 66 66
Additional paid-in-capital 40,616 40,354
Retained earnings 6,874 8,001
Less treasury stock at cost (2) (13)
- ------------------------------------------------------------
Total stockholders' equity 47,554 48,408
- ------------------------------------------------------------
Total liabilities and
stockholders' equity $ 955,620 $ 842,898
============================================================
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended
(In thousands of dollars except
for per share and outstanding March 31, March 27,
share amounts) 1999 1998
<S> <C> <C>
- ------------------------------------------------------------------------
Revenues
Commissions $ 18,658 $ 14,707
Principal transactions 17,075 20,996
Investment banking 7,206 6,124
Investment (losses) gains (3,555) 1,049
Interest 11,741 11,213
Fees and other 3,933 3,009
- ------------------------------------------------------------------------
Total revenues 55,058 57,098
Interest expense 9,335 9,105
- ------------------------------------------------------------------------
Net revenues 45,723 47,993
- ------------------------------------------------------------------------
Compensation and benefits 34,313 34,504
Clearing, settlement and brokerage
costs 1,295 868
Communications and data processing 3,660 3,224
Occupancy and depreciation 3,190 3,225
Selling 2,108 1,827
Other 2,482 2,079
- ------------------------------------------------------------------------
Total expenses (excluding interest) 47,048 45,727
- ------------------------------------------------------------------------
(Loss) income before income taxes (1,325) 2,266
Income tax (benefit) expense (528) 859
- ------------------------------------------------------------------------
Net (loss) income $ (797) $ 1,407
========================================================================
Net (loss) income Per Common and Common
Equivalents Per Share:
Basic $ (0.12) $ 0.21
Dilutive $ (0.12) $ 0.19
========================================================================
Weighted average common
and common equivalent
shares outstanding:
Basic 6,925,209 6,809,580
Dilutive 6,925,209 7,541,637
=========================================================================
Dividend per common share
outstanding $ 0.05 $ 0.05
=========================================================================
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
March 31, March 27,
(In thousands of dollars) 1999 1998
<S> <C> <C>
- ----------------------------------------------------------------------
Cash flows from operating activities:
Net (loss)/income $ (797) $ 1,407
Adjustments to reconcile net (loss)
income to net cash
Provided by (used in) operating
activities:
Depreciation and amortization 1,134 1,130
Deferred income taxes (1,791) 42
Undistributed loss of affiliate 544 579
Unrealized investment loss (gain) 3,011 (1,574)
Realized gain on sale of investments (54)
Loss on disposal of fixed assets 120
Services provided in exchange for
common stock 162 129
(Increase) decrease in operating assets:
Cash and securities segregated under
federal regulations (260)
Securities purchased under agreement
to resell (123) 4,300
Securities sold under agreement to
repurchase (891)
Net receivables from customers 12,335 (24,971)
Net receivables from brokers and
dealers (2,475) 1,295
Net receivables from others (46,888)
Securities owned, net 3,547 (5,381)
Other assets 336 2,633
Increase (decrease) in operating liabilities:
Securities loaned, net 25,501 9,312
Net payables to others 15,917
Accounts payable and accrued
expenses (14,690) (1,390)
- -----------------------------------------------------------------------
Net cash provided by (used in)
operating activities 42,731 (60,582)
- -----------------------------------------------------------------------
Cash flows from investing activities:
Purchase of furniture, equipment,
and leaseholds (196) (34)
Proceeds from sale of investments 66
- -----------------------------------------------------------------------
Net cash (used in) provided by investing
activities (196) 32
- -----------------------------------------------------------------------
Cash flows from financing activities:
(Payments) proceeds of short-term
bank loans (42,535) 59,500
Proceeds of notes payable 4,400
Payments on notes payable (2,146) (656)
Payments of obligations under
capitalized leases (311) (237)
Proceeds from issuance of common stock 111 544
Net (decrease)/increase from borrowing
under line-of-credit agreements (1,678) 2,499
Dividends paid (330) (295)
- ------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (42,489) 61,355
========================================================================
</TABLE>
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<TABLE>
Three Months Ended
March 31, March 27,
(In thousands of dollars) 1999 1998
<S> <C> <C>
- -------------------------------------------------------------------
Increase in cash 46 805
Cash at beginning of the year 1,424 951
- -------------------------------------------------------------------
Cash at end of period $ 1,470 $ 1,756
===================================================================
</TABLE>
In 1999, the Company entered into capital leases for office and computer
equipment totaling approximately $247 thousand.
See notes to the condensed consolidated financial statements.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all normal, recurring adjustments necessary
for a fair presentation of results for such periods. The results for any
interim period are not necessarily indicative of those for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
notes for the year ended December 31, 1998.
Certain amounts in the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
In 1999, the Company changed its quarter end from a last Friday of the
quarter to a calendar quarter end. This change was made to be consistent
with the year end, which is on a calendar basis. Below is a proforma
condensed consolidated statement of income approximating the effect of this
change in the three months ended March 31, 1999:
<TABLE>
Three Month Three Month
Ended March 27 Ended
March 26, 1999 To March 31 March 31, 1999
<S> <C> <C> <C>
=============================================================================
Net Revenues $ 44,530 1,193 45,723
Expenses Excluding Interest 45,830 1,218 47,048
- -----------------------------------------------------------------------------
Income Before Income Taxe s (1,300) (25) 1,325
Income Tax (Benefit) (518) (10) (528)
- -----------------------------------------------------------------------------
Net Income (782) (15) (797)
=============================================================================
</TABLE>
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Earnings Per Common Share
-------------------------
Basic earnings per share has been computed based upon the weighted average
number of common shares outstanding. Dilutive earnings per share has been
computed based upon the weighted average common shares outstanding for all
potentially dilutive common stock outstanding during the reporting period.
The weighted average number of common shares and dilutive common equivalent
shares were:
<TABLE>
Three Months Ended
March 31, March 27,
(In thousands of dollars, 1998 1998
except per share amounts)
<S> <C> <C>
- --------------------------------------------------------------------
Net (loss) income $ (797) $ 1,407
- --------------------------------------------------------------------
Weighted average shares
for basic earnings per share 6,925 6,810
Effect of dilutive common
equivalent shares 731
- --------------------------------------------------------------------
Weighted average shares and
dilutive common equivalent shares
for dilutive earnings per share 6,925 7,541
====================================================================
Basic earnings per share $ (0.12) $ 0.21
Dilutive earnings per share $ (0.12) $ 0.19
</TABLE>
Per share figures and shares outstanding have been restated for all
dividends declared, including the May 1999 5% stock dividends.
For the quarter ended March 31, 1999 the Company excluded approximately
627,000 common equivalent shares in its computation of dilutive earnings
per share because to do so would have been anti-dilutive.
3. Investments
-----------
At March 31, 1999 the Company owned approximately 2,444,000 common shares
(34% of the shares outstanding) of Mechanical Technology Incorporated
(MTI). The Company's investment in MTI is recorded under the equity method
and approximated $3.9 million, which included goodwill of approximately
$0.7 million which is being amortized over 10 years. The Company's equity
in MTI's net loss, recorded on a one-quarter delay basis, was $0.5 million
for the three months ended December 31, 1998.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
The following presents unaudited summarized financial information of MTI
for the three months ended December 31, 1998:
<TABLE>
(in thousands of dollars)
<S> <C>
========================================
Assets $ 21,332
Liabilities 11,804
----------------------------------------
Shareholder's equity $ 9,528
========================================
========================================
Revenues $ 2,710
----------------------------------------
Operating loss (349)
Equity in Joint Venture losses (1,221)
Other (27)
-----------------------------------------
Loss from continuing operations,
net of taxes (1,597)
Net loss $(1,597)
==========================================
</TABLE>
At March 31, 1999 the aggregate market value of the Company's shares of
MTI stock was $45.8 million. Under the equity method, the market value of
MTI's stock is not included in the Company's financial results. Equity in
joint venture losses for the three months ended December 31, 1998 are
attributed to MTI's investments in Plug Power, L.L.C. The Company's equity
in MTI's net loss, recorded on a one-quarter delay basis, was $0.9 million
for the three months ended March 31, 1999, which will be recorded by the
Company in the quarter ending June 30, 1999.
At March 31, 1999, the Company owned 209,500 shares of META Group, Inc.
The fair market value of this investment was $3.2 million. During the
quarter ended March 31, 1999, the Company has recorded unrealized losses
of $3.0 million with respect to this investment.
4. Receivables from Others
-----------------------
Amounts receivable from others as of:
<TABLE>
March 31, December 31,
(In thousands of dollars) 1999 1998
<S> <C> <C>
=======================================================================
Adjustment to record securities
owned on a trade date basis, net $ 3,773
Others $ 8,314 8,455
- -----------------------------------------------------------------------
Total $ 8,314 $ 12,228
=======================================================================
</TABLE>
Proprietary securities transactions are recorded on trade date, as if
they had settled. The related amounts receivable and payable for unsettled
securities transactions are recorded net in Receivables or Payables to
Others on the Statement of Financial Condition.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
5. Payables to Others
------------------
Amounts payable to others as of:
<TABLE>
March 31, December 31,
(In thousands of dollars) 1999 1998
<S> <C> <C>
========================================================================
Adjustment to record securities
owned on a trade date basis, net $ 11,946
Borrowing under line-of-credit
agreements 13,057 $ 14,735
Others 3,064 3,007
- ------------------------------------------------------------------------
Total $ 28,067 $ 17,742
========================================================================
</TABLE>
Proprietary securities transactions are recorded on trade date, as if
they had settled. The related amounts receivable and payable for unsettled
securities transactions are recorded net in Receivables or Payables to
Others on the Statement of Financial Condition.
6. Notes Payable
-------------
Notes payable consists of a note for $2,604,167 which is collateralized by
assets and is payable in monthly principal payments of $104,167 plus
interest. The interest rate is 2% over the 30-day
London InterBank Offered Rate ("LIBOR") (4.937% plus 2% on March 31, 1999).
This note matures on March 27, 2001.
Notes payable also consists of a note dated March 31, 1999 for $4,400,000
payable in monthly principal payments of $73,333 plus interest. The
interest rate is 1.5% over the 30-day London Interbank Offered Rate
("LIBOR"). A portion of the proceeds from this note were used to pay off a
previous note for $1,489,583. This note matures on April 1, 2004.
One of the more significant covenants of both notes requires First Albany
Corporation to maintain a minimum net capital (as defined by Rule 15c 3-1
of the Securities and Exchange Commission) equal to three times the
required minimum net capital. The required minimum net capital as of March
31, 1999 was $4.6 million. The amount of net capital as of March 31, 1999
was $20.9 million.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
7. Obligations under Capitalized Leases
------------------------------------
The following is a schedule of future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as
of March 31, 1999:
<TABLE>
(In thousands of dollars)
<S> <C>
------------------------------------
1999 $ 1,353
2000 1,769
2001 1,420
2002 446
2003 49
------------------------------------
Total Minimum Lease Payments 5,037
Less: Amount Representing
Interest 1,413
------------------------------------
Present Value of Minimum
Lease Payments $ 3,624
====================================
</TABLE>
8. Subordinated Debt
-----------------
The Company has a subordinated debt of $2,500,000. This debt bears
interest at 8.75%. Interest is paid monthly with the principal amount due
at maturity on December 31, 2002. The lender has the right to exercise
stock options on 31,130 shares of the Company's stock at $16.06 per share.
This right expires December 31, 2002.
The Company also has an additional subordinated debt of $5,000,000 which
bears interest at 9.25%. Interest is paid monthly with the principal
amount due at maturity on December 31, 2002. The lender has the right to
exercise stock options on 102,103 shares of the Company's stock at $9.80
per share. This right expires December 31, 2002.
Both loan agreements include restrictive financial covenants. One of the
more significant covenants requires the Company to maintain a minimum net
capital (as defined by Rule 15c3-1 of the Securities and Exchange
Commission) equal to three times the required net capital. The amount of
required net capital as of March 31, 1999 was $4.6 million. The amount of
net capital as of March 31, 1999 was $20.9 million.
9. Commitments and Contingencies
-----------------------------
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 which 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
it believes are 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.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
10. Stockholders' Equity
---------------------
In January 1999, the Board of Directors declared the regular quarterly
cash dividend of $0.05 per share payable on February 24, 1999, to
shareholders of record on February 10, 1999.
In April 1999, the Board of Directors declared the regular quarterly
dividend of $0.05 per share for the first quarter, ended March 31, 1999,
along with a 5% stock dividend. Both are payable on May 25, 1999 to
shareholders of record on May 11, 1999.
11. Net Capital Requirements
-------------------------
The Company's broker-dealer subsidiary, First Albany Corporation, is
subject to the Securities and Exchange Commission's Uniform Net Capital
Rule which requires the maintenance of a minimum net capital as calculated
and defined by the Rule. As of March 31, 1999, the broker-dealer
subsidiary had aggregate net capital, as defined, of $20.9 million -
exceeding the required net capital by $16.3 million.
12. Derivative Financial Instruments
--------------------------------
The Company does not engage in the proprietary trading of derivative
securities with the exception of highly liquid index futures contracts and
options. These index futures contracts and options are used to hedge
certain securities positions in the Company's inventory. Gains and losses
are included as revenues from principal transactions.
The contractual or notional amounts reflected to these financial
instruments reflect the volume and activity and do not reflect the amounts
at risk. The amounts at risk are generally limited to the unrealized
market valuation gains or losses on the instruments and will vary based on
changes in market value. Futures contracts are executed on an exchange,
and cash settlement is made on a daily basis for market movements. Open
equity in the futures contracts are recorded as receivables from clearing
organizations. The settlement of these transactions is not expected to
have a material adverse effect on the financial condition of the Company.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
13. Segment Analysis
----------------
The Company's reportable operating segments are: Private Client Group,
Institutional Sales and Trading ("Institutional"), and Other. The financial
policies of the Company's segments are the same as those described in the
"Summary of Significant Accounting Policies." The Private Client Group
provides securities brokerage services to individual investors. Revenues
are generated through customer purchase and sale of equity securities,
taxable and non-taxable fixed income securities, along with mutual funds and
various other investment products and services. The Institutional segment
generates revenues from securities transactions (equities and fixed-income
securities) with major institutions along with investment banking
activities, which includes the managing, co-managing and participating in
tax-exempt and corporate securities underwritings. This segment also
includes trading activity in which the Company buys and maintains inventories
of fixed-income products and equities securities (as a "market maker") for
sale to other dealers and to customers. The Other segment revenues are
derived from a variety of sources which include investment income, net
interest revenues relating to securities lending transactions and revenues
from correspondent services.
The Company's Other segment also includes revenue relating to the
Company's investment in Mechanical Technology Incorporated (MTI) which is
recorded under the equity method (see Note 3 - "Investments"). Pre-tax net
(loss)income relating to MTI was $(544,000) and $(579,000) for the quarters
ended March 1999 and 1998 respectively. The Company records its other
investments at fair market value, which is also included in the Other segment.
Intersegment revenues and expenses are eliminated between segments.
Interest revenues and interest expenses are reviewed primarily on a net
basis (Net Interest Revenues) and are shown as such. The Company evaluates
the performance of its segments and allocates resources to them based upon
long term operating margin opportunities which are consistent with the growth
strategy of the Company. Included in the Other segment are operations,
administrative functions and other support costs along with an accrual for
general discretionary variable compensation which are not allocated to the
various segments. Asset information by reportable segments is not reported
since the Company does not produce such information internally for the
reportable segments. All assets are located in the United States.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Information concerning operations in these segments is as follows:
<TABLE>
- ----------------------------------------------------------------------
For three months ended March 31, March 27,
(in thousands of dollars) 1999 1998
<S> <C> <C>
======================================================================
Revenues (excluding interest):
Private Client Group $ 23,363 $ 20,829
Institutional 22,000 22,875
Other (2,046) 2,181
- ----------------------------------------------------------------------
Total $ 43,317 $ 45,885
======================================================================
Net Interest Revenues:
Private Client Group $ 929 $ 763
Institutional (118) (370)
Other 1,595 1,715
- -----------------------------------------------------------------------
Total $ 2,406 $ 2,108
=======================================================================
Net Revenues:
Private Client Group $ 24,292 $ 21,592
Institutional 21,882 22,505
Other (451) 3,896
- -----------------------------------------------------------------------
Total $ 45,723 $ 47,993
=======================================================================
Pre-Tax Income:
Private Client Group $ 5,051 $ 3,379
Institutional 810 1,153
Other (7,186) (2,266)
- ------------------------------------------------------------------------
Total $ (1,325) $ 2,266
========================================================================
</TABLE>
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
14. New Accounting Standards
------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
The Company will adopt SFAS 133 in its 2000 fiscal year, as required, and
has not determined whether its implementation will have a material impact
on the Company's financial condition, results of operations or cash flows.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
1999 vs.
Three Months Ended 1998 Percentage
March 31, March 27, Increase Increase
(In thousands of dollars) 1999 1998 (Decrease) (Decrease)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenues
Commissions $ 18,658 $ 14,707 $ 3,951 27%
Principal transactions 17,075 20,996 (3,921) (19)%
Investment banking 7,206 6,124 1,082 18%
Investment (losses) gains (3,555) 1,049 (4,604) (439)%
Interest income 11,741 11,213 528 5%
Fees and others 3,933 3,009 924 31%
- -----------------------------------------------------------------------------
Total revenues 55,058 57,098 (2,040) (4)%
Interest expense 9,335 9,105 230 3%
- -----------------------------------------------------------------------------
Net revenues 45,723 47,993 (2,270) (5)%
- -----------------------------------------------------------------------------
Expenses (excluding interest)
Compensation and benefits 34,313 34,504 (191) (1)%
Clearing, settlement and
brokerage costs 1,295 868 427 49%
Communications and
data processing 3,660 3,224 436 14%
Occupancy and depreciation 3,190 3,225 (35) (1)%
Selling 2,108 1,827 281 15%
Other 2,482 2,079 403 19%
- -----------------------------------------------------------------------------
Total expenses
(excluding interest) 47,048 45,727 1,321 3%
- -----------------------------------------------------------------------------
(Loss) income before
income taxes (1,325) 2,266 (3,591) (158)%
Income tax (benefit) expense (528) 859 (1,387 (161)%
- -----------------------------------------------------------------------------
Net (loss) income $ (797) $ 1,407 $ (2,204) (157)%
=============================================================================
Net interest income
Interest income $ 11,741 $ 11,213 $ 528 5%
Interest expense 9,335 9,105 230 3%
- -----------------------------------------------------------------------------
Net Interest Income $ 2,406 $ 2,108 $ 298 14%
=============================================================================
</TABLE>
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position
and results of operations during the periods included in the accompanying
condensed consolidated financial statements.
Business Environment
- --------------------
First Albany Corporation (First Albany), 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 businesses earn 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.
Results of Operations
- ---------------------
Three Month Periods Ended March 31, 1999 and March 27, 1998
- ------------------------------------------------------------
Net Income
- ----------
Net (loss) income for the quarter ended March 31, 1999 was ($0.8) million
or ($0.12) basic earnings per share ($0.12 dilutive earnings per share),
compared to $1.4 million or $0.21 basic earnings per share ($0.19 dilutive
earnings per share) in the comparable 1998 period. First Albany
Corporation, the brokerage operations, had pre-tax profit of $2.5 million
on record net revenues of $49.1 million for the quarter ending March
31,1999, compared to pre-tax profit of $1.7 million on net revenues of
$46.9 million for the same period in 1998. The earnings at First Albany
Corporation were offset by a pre-tax loss at the holding company of $3.8
million, resulting primarily from a decline in the book value of First
Albany Companies Inc.'s investment portfolio, which compares to a pre-tax
profit of $599 thousand for the same period of 1998.
Commissions
- -----------
Commission revenues for this year's first quarter increased $4.0 million
or 27% compared to the comparable 1998 period reflecting active trading in
all major markets. Revenues from listed and over-the-counter commissions
increased $4.1 million, revenues from options increased $0.3, while
revenues from mutual fund commission decreased $0.4.
Principal Transactions
- ----------------------
Principal transactions for this year's first quarter decreased $3.9
million or 19% compared to the comparable 1998 period. This amount was
comprised of an increase in equity securities of $0.2 million, a decrease
in taxable fixed income of $4.6 million (due mainly to a decrease in
international market activity) and an increase in municipal bonds of $0.5
million.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Investment Banking
- ------------------
Investment banking revenues for this year's first quarter increased $1.1
million or 18% compared to the comparable 1998 period. Revenues from
selling concessions increased $1.1 million (equities increased
$1.2 million, municipals decreased $0.7 million and fixed income increased
$0.6 million), while investment banking fees and underwriting fees remained
stable.
Investment gains/(losses)
- -------------------------
Investment gains (losses) for this year's first quarter decreased $4.6
million compared to the comparable 1998 period. The decrease was due
primarily to a decline in the book value of the investment portfolio held
at First Albany Companies Inc, the holding company.
Fees and Others
- ---------------
Fees and other revenues for this year's first quarter increased $0.9
million or 31% compared to the comparable 1998 period resulting from the
firm's focus to increase fee-based revenues and from increased service
charges.
Clearance, Settlement and Brokerage Costs
- -----------------------------------------
Clearance, settlement and brokerage costs for this year's first quarter
increased $0.4 million or 49% compared to the comparable 1998 period due
primarily to increases in listed agency transactions.
Communications and Data Processing
- ----------------------------------
Communication and data processing for this year's first quarter increased
$0.4 million or 14% compared to the comparable 1998 period due in most part
to a greater number of transactions.
Income Taxes
- ------------
Income taxes decreased $1.4 million compared to the comparable 1998 period
due to an decrease in pre-tax earnings.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
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 along with
receivables from customers and payable to customers will fluctuate
primarily due to the current level of business activity in these areas.
Securities owned will fluctuate as a result of the changes in the level of
positions held to facilitate customer transactions and changes in market
conditions. Short-term bank loans and securities loaned, net, are a source
of financing for the Company and will fluctuate accordingly. Receivables
from others and payables to others will fluctuate primarily due to the
change in the adjustment to record securities owned on a trade date basis.
At March 31, 1999, First Albany Corporation, a registered broker-dealer
subsidiary of First Albany Companies Inc., was 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 $250,000,000 of
which approximately $187,856,000 were unused as of March 31, 1999-will
provide sufficient resources to meet present and reasonably foreseeable
short-term financing needs.
In January 1999, the Board of Directors declared the regular quarterly
cash dividend of $0.05 per share payable on February 24, 1999, to
shareholders of record on February 10, 1999.
In April 1999 the Board of Directors declared the regular quarterly
dividend of $0.05 per share for the first quarter, ended March 31, 1999,
along with a 5% stock dividend. Both are payable on May 25, 1999 to
shareholders of record on May 11, 1999.
The Company believes that funds provided by operations will also provide
sufficient resources for the acquisition of office equipment and leasehold
improvements, current long-term loan repayment requirements, and other long-
term requirements.
Year 2000
- ---------
The Year 2000 Issue (Y2K) concerns the potential impact of historic
computer software code that only utilizes two digits to represent the
calendar year (e.g., "98" for "1998"). Software so developed and not
corrected, could produce inaccurate or unpredictable results commencing
January 1, 2000, when current and future dates present a lower two-digit
year number than dates in the prior century. The Company, similar to most
securities institutions, is significantly subject to the potential impact
of the Y2K due to the nature of the industry. Potential impacts to the
Company may arise from software, computer hardware, and other equipment
both within the Company's direct control and outside the Company's
ownership, yet with which the Company interfaces either electronically or
operationally. Securities industry regulators have intensively focused upon
Y2K exposures issuing guidance concerning the responsibilities of senior
management and directors. Y2K testing and certification is being addressed
as a key safety and soundness issue in conjunction with regulatory
examinations of securities firms.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
In August 1998, the Company filed form BD-Y2K, a mandatory filing with the
Securities & Exchange Commission, New York Stock Exchange and National
Association of Securities Dealers describing its Y2K compliance efforts and
its Y2K readiness status. The Company filed the second of these mandatory
filings in April 1999. The SEC has highly prioritized Y2K compliance in
order to avoid major disruptions to the operations of securities
institutions. Institutions failing to file this mandatory disclosure may be
and in some cases already have been subject to formal enforcement action,
supervisory agreements, cease and desist orders or civil money penalties.
The Project
- -----------
The Company has initiated a comprehensive project to prepare its
internally and externally dependent computer and peripheral systems for the
year 2000, and has completed changes to critical systems. The Company has
taken part in numerous testing opportunities with other security industry
parties, including testing with Exchanges and Utilities. The Company began
extensive Industry Wide Testing in the first quarter of 1999 that will end
during the second quarter of 1999. In addition, the Company will take part
in other industry testing including Market Data Testing and Securities
Lending Testing. The approach is multiphase, as follows:
Phase I - Inventory & Assessment: A comprehensive inventory of all
hardware, software, vendor interfaces and service providers has been
completed and is stored in a database that allows for easy access and
updating.
Phase II - Planning, Analysis & Design: The detailed Project Plan has
been completed, to allow for easy tracking and updating.
Phase III - Remediation: In some cases, remediation was undertaken either
by the Company or by an outsourced third party in the form of upgrades,
replacements or code fixes. In other cases, the Company monitored its
vendors' progress in making its systems Y2K compliant.
Phase IV - Testing: As programs and hardware were fixed, replaced or
upgraded, they were extensively tested before being placed into production.
The Company will continue to participate in all available securities
industry testing.
Phase V - Implementation: All production-ready systems (hardware,
software, and programming) were placed into production and carefully
monitored.
Phase VI - Post Implementation: The Company will keep a careful eye out
for any new products put into production after the Y2K plan has been fully
executed.
The Company is currently participating in external testing with its
service providers and is participating in industry-wide testing. In
addition to our own testing, securities industry service providers, such as
the New York Stock Exchange, the Depository Trust Company and the National
Securities Clearance Corporation, are conducting tests of the critical
clearance and execution systems that drive the industry as a whole. This is
being done with the oversight of the Securities and Exchange Commission.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
State of Readiness
- ------------------
The Company had defined "mission-critical" applications as those
necessary for the Company to continue with business as usual. Beta Systems,
which represents 90% of the Company's mission-critical applications,
provides the Company with its official books and records, order entry and
clearing capabilities related to securities transaction processing. Beta
Systems has certified to the Company that they are Y2K compliant. Full
testing with Beta Systems, for mission-critical applications, began in the
third quarter of 1998 and was completed in the fourth quarter of 1998.
Testing of non mission-critical applications began during the fourth
quarter 1998 and was successfully completed in the first quarter of 1999.
The Company is utilizing BETA Systems for participation in Industry Wide
Testing and it is not until this testing is final that the Company will
have independent verification of BETA System's compliance.
The Company has included facilities management concerns in its overall
Y2K plan. This includes issues with power, HVAC, elevators, fire alarm
systems, and security systems, among others. The Company is confident that
these systems will work normally after January 1, 2000. The Company has
delayed several Information Technology projects so thatY2K issues could be
timely and efficiently dealt with. The delay of these projects has not
affected the Company's financial condition and the results of operations.
The Costs to Address the Company's Y2K Issues
- ---------------------------------------------
The Company has allocated a budget of $1.2 million for the Y2K project.
The Company has spent $800,000 on its Y2K project through the first quarter
of 1999. This amount was spent on upgrades to its Novell and NT operating
systems, upgrading three voice/data applications, replacing non-compliant
systems and building a Y2K compliant environment. The Company expects to
spend an additional $400,000 in the remaining three quarters of 1999. Most
upgrades to date have been capitalized, however, independent-verification
testing of its internal applications will be expensed as incurred. These
costs are being funded through operating cash flow. All internal
remediation has been accomplished by utilizing existing Company personnel.
The Company's Y2K budget does not reflect the costs of the extensive
resource allocation and management from internal sources. The Novell, NT,
voice/data applications and the rollout of new desktop computer projects
were all accelerated to meet the Company's Y2K project deadlines.
The Risks of the Company's Y2K Issues
- -------------------------------------
The failure to correct a material Y2K problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition. Due to
the general uncertainty inherent in the Y2K problem, resulting in part from
the uncertainty of the Y2K readiness of third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of Y2K failures will have a material impact on the Company's
results of operations, liquidity or financial condition.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Although all of Company's internal critical systems are now believed to
be compliant, the Company cannot give any assurances that this result was
actually achieved. Specific factors that give rise to this uncertainty
include: failure to identify all susceptible systems, non compliance by
third parties whose systems and operations impact the Company, and other
similar uncertainties. A reasonably possible worst case scenario might
include one or more of the Company's significant systems being non
compliant. Such an event could result in a material disruption to the
Company's operations. Specifically, the Company could experience an
interruption in its ability to process trades, safeguard and manage its
invested assets and operating cash accounts, accurately maintain client
information, accurately maintain accounting records, and/or perform adequate
customer service. Should the worst-case scenario occur it could, depending
on its duration, have a material impact on the Company's results of
operations and financial position.
The Company believes that, with implementation and completion of its Y2K
project, the possibility of significant interruptions of normal business
operations should be reduced.
The Company's Contingency Plans
- -------------------------------
There are certain industry-service centers that are so fundamental to the
securities business that they cannot be replaced. The Company acknowledges
that while a close watch must be kept on these, they have not been factored
into the Company's contingency strategy. These service centers include, but
are not limited to the following:
National Exchanges (NYSE, AMEX, NASDAQ, CBOT, etc.)
DTC Trading systems
Local and long-distance telephone carriers
Utility companies, including gas and electric
The Company has determined that if it cannot independently confirm
through extensive third party testing that Beta Systems is Y2K compliant,
it will be necessary to convert to a service bureau that is compliant.
While the Company believes that Beta Systems will be able to prove their
compliance within an acceptable time frame, the Company has contracted
with an established service bureau to convert the Company in the event that
Beta Systems is determined to be non compliant. The Company will make this
decision early in the third quarter 1999 to allow enough time for the
conversion. The Company has established a written contingency plan for all
major systems. The Company will continue to reassess the need for
additional contingency planning based on progress of Y2K testing by the
Company and efforts of third parties.
New Accounting Standards
- ------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
The Company will adopt SFAS 133 in its 2000 fiscal year, as required, and
has not determined whether its implementation will have a material impact
on the Company's financial condition, results of operations or cash flows.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
MARKET RISK
- -----------
Market risk generally represents the risk of loss that may result from
the potential change in the value of a financial instrument as a result of
fluctuations in interest rates and equity prices, changes in the implied
volatility of interest rate and equity prices and also changes in the
credit ratings of either the issuer or its related country of origin.
Market risk is inherent to both derivative and non-derivative financial
instruments, and accordingly, the scope of the Company's market risk
management procedures extends beyond derivatives to include all market risk
sensitive financial instruments. The Company's exposure to market risk is
directly related to its role as a financial intermediary in customer-
related transactions and to its proprietary trading.
The Company 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. The Company is also an active market-maker in
over-the-counter equity markets. In connection with these activities, the
Company may be required to maintain inventories in order to ensure
availability and to facilitate customer transactions. In connection with
some of these activities, the Company attempts to mitigate its exposure to
such market risk by entering into hedging transactions, which may include
highly liquid future contracts, options and U.S. Government securities.
Following is a discussion of the Company's primary market risk exposures
as of March 31, 1999, including a discussion of how those exposures are
currently managed.
Interest Rate Risk
- ------------------
Interest rate risk is a consequence of maintaining inventory positions
and trading in interest-rate-sensitive financial instruments. In
connection with trading activities, the Company exposes itself to interest
rate risk, arising from changes in the level or volatility of interest
rates or the shape and slope of the yield curve. The Company's fixed income
activities also expose it to the risk of loss related to changes in credit
spreads. The Company attempts to hedge its exposure to interest rate risk
primarily through the use of U.S. government securities, highly liquid
futures and options designed to reduce the Company's risk profile.
A sensitivity analysis has been prepared to estimate the Company's
exposure to interest rate risk of its inventory position. The fair market
value of these securities included in the Company's inventory at March 31,
1999 was $105.8 million. Interest rate risk is estimated as the potential
loss in fair value resulting from a hypothetical one-half percent decrease
in interest rates. At year end, the potential change in fair value,
assuming this hypothetical decrease, was $5.2 million. The actual risks
and results of such adverse effects may differ substantially.
Equity Price Risk
- -----------------
The Company is exposed to equity price risk as a consequence of making
markets in equity securities. Equity price risk results from changes in
the level or volatility of equity prices, which affect the value of equity
securities or instruments that derive their value from a particular stock.
The Company attempts to reduce the risk of loss inherent in its inventory
of equity securities by monitoring those security positions daily.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Marketable equity securities included in the Company's inventory at March
31, 1999, which were recorded at a fair value of $ 5.6 million, have
exposure to equity price risk. This risk is estimated as the potential
loss in fair value resulting from a hypothetical 10% adverse change in
prices quoted by stock exchanges and amounts to $ 0.6 million. The actual
risks and results of such adverse effects may differ substantially. The
Company's investment portfolio, excluding its investment in MTI, at March
31, 1999 had a fair market value of $3.2 million. (See Note 3). This
equity price risk is also estimated as the potential loss in fair value
resulting from a hypothetical 10% adverse change in prices quoted by stock
exchanges and amounts to $0.3 million. Actual results may differ.
CREDIT RISK
- -----------
The Company is engaged in various trading and brokerage activities whose
counterparties primarily include broker-dealers, banks, and other financial
institutions. In the event counterparties do not fulfill their
obligations, the Company may be exposed to risk. The risk of default
depends on the credit worthiness of the counterparty or issuer of the
instrument. The Company seeks to control credit risk by following an
established credit approval process, monitoring credit limits, and
requiring collateral where appropriate.
The Company purchases debt securities and may have significant positions
in its inventory subject to market and credit risk. In order to control
these risks, security positions are monitored on at least a daily basis.
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 attempts to reduce its
exposure to changes in securities valuation with the use of highly liquid
municipal bond index futures contracts.
OPERATING RISK
- --------------
Operating risk is the potential for loss arising from limitations in the
Company's financial systems and controls, deficiencies in legal
documentation and the execution of legal and fiduciary responsibilities,
deficiencies in technology and the risk of loss attributable to operational
problems. These risks are less direct than credit and market risk, but
managing them is critical, particularly in a rapidly changing environment
with increasing transaction volumes. In order to reduce or mitigate these
risks, the Company has established and maintains an effective internal
control environment which incorporates various control mechanisms at
different levels throughout the organization and within such departments as
Financial and Accounting, Operations, Legal, Compliance and Internal Audit.
These control mechanisms attempt to ensure that operational policies and
procedures are being followed and that the Company's various businesses are
operating with established corporate policies and limits.
OTHER RISKS
- -----------
Other risks encountered by the Company include political, regulatory and
tax risks. These risks reflect the potential impact that changes in local
laws, regulatory requirements or tax statutes have on the economics and
viability of current or future transactions. In an effort to mitigate
these risks, the Company seeks to continuously review new and pending
regulations and legislation and their potential impact on its business.
</PAGE>
<PAGE>
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Part II-Other Information
-------------------------
Item 1. 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 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
(11) Statement Re: Computation of Per Share Earnings.
(27) Selected Financial Data Schedule BD
(b) Reports on Form 8-K
-------------------
No Form 8K Was Filed During the Quarter Ended March 31, 1999.
</PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
First Albany Companies Inc.
--------------------------------
(Registrant)
/s/ ALAN P. GOLDBERG
Date: May 11, 1999 -----------------------------
Alan P. Goldberg
President/Director
/s/ TIMOTHY R. WELLES
Date: May 10, 1999 -----------------------------
Timothy R. Welles
Chief Financial Officer
(Principal Accounting Officer)
</PAGE>
FIRST ALBANY COMPANIES INC. (Exhibit 11)
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
Three Months Ended
March 31, March 27,
(In thousands of dollars, 1999 1998
except per share amounts)
<S> <C> <C>
- -----------------------------------------------------------------------------
Basic:
Net (loss) income $ (797) $ 1,407
- -----------------------------------------------------------------------------
Weighted average number of shares
outstanding during the period 6,925 6,810
- -----------------------------------------------------------------------------
Net (loss) income per share $ (0.12) $ 0.21
=============================================================================
Dilutive:
Net (loss) income $ (797) $ 1,407
=============================================================================
Weighted average number of shares
outstanding during the period 6,925 6,810
Effective of dilutive common
equivalent shares 731
- -----------------------------------------------------------------------------
Weighted average shares and
dilutive common equivalent shares
for dilutive earnings per share 6,925 7,541
- -----------------------------------------------------------------------------
Net (loss) income per share $ (0.12) $ 0.19
=============================================================================
</TABLE>
*Per share figures and shares outstanding have been restated for all
dividends declared, including the May 1999 5% stock dividends.
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,470
<RECEIVABLES> 227,393
<SECURITIES-RESALE> 1,754
<SECURITIES-BORROWED> 572,528
<INSTRUMENTS-OWNED> 117,669
<PP&E> 10,603
<TOTAL-ASSETS> 955,620
<SHORT-TERM> 62,144
<PAYABLES> 109,500
<REPOS-SOLD> 0
<SECURITIES-LOANED> 692,907
<INSTRUMENTS-SOLD> 5,660
<LONG-TERM> 7,004
0
0
<COMMON> 66
<OTHER-SE> 47,488
<TOTAL-LIABILITY-AND-EQUITY> 955,620
<TRADING-REVENUE> 13,520
<INTEREST-DIVIDENDS> 11,741
<COMMISSIONS> 18,658
<INVESTMENT-BANKING-REVENUES> 7,206
<FEE-REVENUE> 3,933
<INTEREST-EXPENSE> 9,335
<COMPENSATION> 34,313
<INCOME-PRETAX> (1,325)
<INCOME-PRE-EXTRAORDINARY> (797)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> $(0.12)
<EPS-DILUTED> $(0.12)
</TABLE>
