^L<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 24, 1994
Commission file number 0-14199
ALEX. BROWN INCORPORATED
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1434118
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
135 E. Baltimore St., Baltimore, MD
21202
- - -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip code)
410-727-1700
- - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - -------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.10 par value 15,121,378
- - -------------------------------------------------------------------------------
(Class) (Outstanding at July 29, 1994)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Consolidated Statements of Earnings (Unaudited)
for the three month and six month periods ended
June 24, 1994 and June 25, 1993 1
Consolidated Statements of Financial Condition
as of June 24, 1994 (Unaudited) and
December 31, 1993 2-3
Consolidated Statements of Stockholders' Equity
(Unaudited) for the six month periods ended
June 24, 1994 and June 25, 1993 4
Consolidated Statements of Cash Flows (Unaudited)
for the six month periods ended June 24, 1994
and June 25, 1993 5
Notes to Consolidated Financial Statements
(Unaudited) 6-7
Management's Discussion and Analysis of Results of
Operations and Financial Condition 8-11
Part II - Other Information 12
Signatures 13
Exhibit -
(11) Calculation of Earnings Per Share (Unaudited) 14
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 24, June 25, June 24, June 25,
1994 1993 1994 1993
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 33,850 $ 30,380 $ 71,894 $ 63,854
Investment banking 53,371 43,511 104,634 97,016
Principal transactions 26,839 29,496 62,211 55,985
Interest and dividends 15,163 11,709 30,442 21,392
Advisory and other 14,652 14,920 37,106 31,508
-------- -------- -------- --------
Total 143,875 130,016 306,287 269,755
-------- -------- -------- --------
Operating expenses:
Compensation and benefits 83,330 70,863 170,812 149,393
Communications 6,869 5,961 13,300 11,411
Occupancy and equipment 7,264 6,494 13,889 12,134
Interest 4,490 3,805 10,051 6,596
Floor brokerage, exchange
and clearing fees 3,893 3,605 7,701 6,609
Other operating expenses 13,680 14,076 27,492 25,477
-------- -------- -------- --------
Total 119,526 104,804 243,245 211,620
-------- -------- -------- --------
Earnings before income taxes 24,349 25,212 63,042 58,135
Income taxes 9,861 10,211 25,532 23,051
-------- -------- -------- --------
Net earnings $ 14,488 $ 15,001 $ 37,510 $ 35,084
======== ======== ======== ========
Earnings per share:
Primary $ 0.93 $ 0.95 $ 2.39 $ 2.23
======== ======== ======== ========
Fully diluted $ 0.83 $ 0.89 $ 2.11 $ 2.08
======== ======== ======== ========
Weighted average number of
shares outstanding:
Primary 15,586 15,746 15,666 15,725
======== ======== ======== ========
Fully diluted 18,131 17,143 18,223 17,118
======== ======== ======== ========
Cash dividends declared
per share $ 0.175 $ 0.15 $ 0.325 $ 0.275
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(1)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(in thousands)
ASSETS
<TABLE>
<CAPTION>
June 24, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 20,529 $ 57,005
Receivables:
Customers 761,354 731,404
Brokers, dealers and clearing organizations 183,348 228,258
Current state income taxes 5,983 73
Other 39,460 55,282
Firm trading securities (Note 2) 114,796 79,007
Securities purchased under agreements
to resell 9,975 -
Deferred income taxes 10,279 6,979
Memberships in exchanges, at cost
(market $2,394 and $2,083) 323 323
Office equipment and leasehold improvements,
at cost less accumulated depreciation and
amortization of $31,453 and $26,311 25,903 24,216
Investment securities (Note 5) 56,904 52,903
Loans to employees to purchase convertible
subordinated debentures (Note 4) 33,253 29,284
Other assets 33,118 18,689
---------- ----------
$1,295,225 $1,283,423
========== ==========
</TABLE>
(continued)
(2)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition (continued)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 24, December 31,
1994 1993
---------- ----------
(Unaudited)
<S> <C> <C> <C>
Bank loans $ 148,276 $ 65,973
Payables:
Cash management facility 45,389 68,837
Customers, including free credit balances 244,084 345,283
Brokers, dealers and clearing organizations 257,014 175,369
Current federal and state income taxes 5,275 14,716
Other 132,257 184,030
Securities sold, not yet purchased (Note 2) 30,239 27,402
5.75% Convertible subordinated debentures 24,666 24,642
Employee convertible subordinated debentures
(Note 4) 35,206 31,506
Stockholders' equity (Note 4):
Common stock of $.10 par value.
Authorized 50,000,000 shares.
Issued 15,261,191 shares in 1994
and 15,356,431 shares in 1993 1,526 1,536
Additional paid-in capital 108,337 114,014
Loans to employees to purchase common stock (10,915) (10,902)
Retained earnings 273,871 241,017
----------- -----------
Total stockholders' equity 372,819 345,665
----------- -----------
$1,295,225 $1,283,423
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Loans to
Employees
Additional To Purchase Total
Common Paid-in Common Retained Stockholders'
Stock Capital Stock Earnings Equity
--------- --------- ---------- --------- -------------
Six months ended June 24, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ 1,536 $114,014 $(10,902) $241,017 $345,665
Net earnings 37,510 37,510
Issuance of 299,001 shares of
common stock 30 5,162 (218) - 4,974
Payments on employee loans 205 - 205
Repurchase and retirement of
599,395 shares of common stock (60) (16,058) - - (16,118)
Compensation payable in
common stock 20 5,219 - - 5,239
Dividends paid (4,656) (4,656)
------- -------- --------- --------- ---------
Balance at June 24, 1994 $ 1,526 $108,337 $(10,915) $273,871 $372,819
======= ======== ========= ========= =========
Six months ended June 25, 1993
Balance at December 31, 1992 $ 1,519 $112,534 $ - $160,342 $274,395
Net earnings 35,084 35,084
Issuance of 261,561 shares of
common stock 26 3,988 - - 4,014
Repurchase and retirement of
81,400 shares of common stock (8) (1,631) - - (1,639)
Compensation payable in
common stock 6 1,155 - - 1,161
Dividends paid (3,848) (3,848)
------- -------- --------- --------- ---------
Balance at June 25, 1993 $ 1,543 $116,046 $ - $191,578 $309,167
======= ======== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
^<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 24, June 25,
1994 1993
--------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 37,510 $ 35,084
Reconciliation of net earnings to net cash
used for operating activities:
Depreciation and amortization 3,868 3,081
Non-cash compensation expense 5,239 1,161
Gain on investment securities (5,565) (4,774)
Other 24 24
(Increase) decrease in assets:
Receivables 24,872 12,715
Firm trading securities (35,789) (56,928)
Securities purchased under agreements to resell (9,975) -
Deferred income taxes (3,300) (11,293)
Other assets (14,429) (1,547)
Increase (decrease) in liabilities:
Payables (80,791) (71,670)
Securities sold, not yet purchased 2,837 (4,417)
--------- ---------
Net cash used for operating activities (75,499) (98,564)
--------- ---------
Cash flows from financing activities:
Net proceeds (payments):
Short-term loans 86,678 62,100
Cash management facility (23,448) (12,536)
Proceeds from term loan - 7,500
Payments on term loans (4,375) (2,024)
Issuance of common stock 4,933 4,014
Repurchase of common stock (16,118) (1,639)
Dividends paid to stockholders (4,656) (3,848)
--------- ---------
Net cash provided by financing activities 43,014 53,567
--------- ---------
Cash flows from investing activities:
Purchase of office equipment and leasehold
improvements (5,555) (4,826)
Purchase of investment securities (12,769) (2,611)
Sale of investment securities 14,333 1,143
--------- ---------
Net cash used for investing activities (3,991) (6,294)
--------- ---------
Net decrease in cash and cash equivalents (36,476) (51,291)
Cash and cash equivalents at beginning of period 57,005 87,064
--------- ---------
Cash and cash equivalents at end of period $ 20,529 $ 35,773
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 24, 1994
(Unaudited)
Notes:
(1) The accompanying financial statements do not include all of the
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments considered
necessary to fairly reflect the Company's financial position and results
of operations, consisting of normal recurring adjustments, have been
included. Certain expense items in 1993 have been reclassified to conform
to the current year presentation.
(2) Firm trading securities and securities sold, not yet purchased consisted
of the following (in thousands):
<TABLE>
<CAPTION>
Long Short
6/24/94 12/31/93 6/24/94 12/31/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
United States government
and agencies $ 9,032 $ 4,738 $ 11,579 $ 1,989
Mortgage-backed 10,315 167 1,894 6
States and municipalities 44,223 40,290 876 189
Corporate debt 30,470 11,959 2,006 3,975
Corporate equity 20,756 21,853 13,884 21,243
-------- ------- ------- -------
$114,796 $79,007 $30,239 $27,402
======== ======= ======= =======
</TABLE>
(3) In July 1994, the Company declared a $.175 quarterly cash dividend payable
August 10, 1994 to stockholders of record on July 29, 1994.
(4) During 1994, the Company issued $4,417,000 convertible subordinated
debentures to certain employees pursuant to the 1991 Equity Incentive
Plan. The debentures are convertible into the Company's Common Stock
three and four years after the date issued. The Company made loans to
employees to fund the purchases of the debentures. During the first
quarter of 1994, employees converted $246,000 convertible subordinated
debentures, which were issued in January 1991, into 29,009 shares of the
Company's Common Stock.
(5) Investment securities at June 24, 1994 included $21.3 million of merchant
banking investments and $12.5 million managed by an affiliate, which
included marketable securities with a long market value of $9.3 million
and a short market value of $7.6 million.
(6)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 24, 1994
(Unaudited)
Notes (Continued):
(6) COMMITMENTS AND CONTINGENCIES
Letters of Credit
At June 24, 1994, the Company's principal subsidiary, Alex. Brown &
Sons Incorporated, was contingently liable for up to $24,279,000
under unsecured letters of credit and $22,320 under secured letters
of credit used to satisfy required margin deposits at four
securities clearing corporations.
Litigation
In the course of its investment banking and securities brokerage
business, Alex. Brown & Sons Incorporated has been named a defendant
in a number of lawsuits and may be required to contribute to final
settlements in actions, in which it has not been named a defendant,
arising out of its participation in the underwritings of certain
issues. A substantial settlement or judgment in any of these cases
could have a material adverse effect on the Company. Although the
ultimate outcome of such litigation is not subject to determination
at present, in the opinion of management, after consultation with
counsel, the resolution of these matters will not have a material
adverse effect on the Company's consolidated financial statements.
(7)
^L<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Alex. Brown Incorporated (the "Company") is a holding company whose primary
subsidiary is Alex. Brown & Sons Incorporated ("Alex. Brown"), a major
investment banking and securities brokerage firm. The Company, like other
securities firms, is directly affected by general economic and market
conditions, including fluctuations in volume and price levels of securities,
changes in interest rates and demand for investment banking and securities
brokerage services, all of which have an impact on the Company's revenues as
well as its liquidity. Substantial fluctuations can occur in the Company's
revenues and net earnings due to these and other factors.
In periods of reduced market activity, profitability is likely to be adversely
affected because certain expenses, consisting primarily of salaries and
benefits, communications and occupancy expenses, remain relatively fixed.
Accordingly, net earnings for any period should not be considered
representative of any other period.
RESULTS OF OPERATIONS
Second Quarter 1994 Compared to Second Quarter 1993
Revenues totaled $143.9 million, an 11% increase as compared to $130.0 million
in the second quarter of 1993. Commission revenues increased 11% to $33.8
million for the quarter, primarily as a result of increased institutional
listed commissions. Investment banking revenues increased 23% to $53.4
million, primarily as a result of significant increases from merger and
advisory work, which more than offset a decline in underwriting revenues.
Principal transaction revenues decreased 9% to $26.8 million, primarily
reflecting declines in equity trading revenues, which offset an increase in
fixed income trading revenues, including increases in mortgage-backed and
municipal trading revenues. Interest and dividend revenues increased 30% to
$15.2 million from $11.7 million, resulting primarily from higher margin loan
balances and interest rate increases. Advisory and other revenues decreased
2% to $14.7 million, principally reflecting a $2.0 million reduction in the
valuation of a merchant banking investment; partially offsetting this decline
were increases in revenues from Asset Management, Correspondent Services
operations and gains from investments. During the second quarter of 1993,
advisory and other revenues included a $2.1 million gain in the value of
merchant banking investments.
Operating expenses totaled $119.5 million, a 14% increase from $104.8 million
in the second quarter of the 1993. Compensation and benefits increased 18%
from $70.9 million to $83.3 million, primarily as a result of increased
incentive and salary expense. Communications expense increased 15% to $6.9
million, reflecting increased levels of business activity. Occupancy and
equipment expense increased 12% to $7.3 million, primarily as a result of
planned growth and increased technology expenditures. Interest expense
increased 18% to $4.5 million from $3.8 million, primarily as a result of the
need to finance increased margin loans and inventories, and as a result of
rate increases in overnight borrowings. Floor brokerage, exchange and
clearing fees increased 8% to $3.9 million, reflecting an increased volume of
listed trades. Other operating expenses decreased 3% to $13.7 million,
primarily reflecting declines in professional and affiliate expenses, which
offset increases in expenses associated with the level of business activity.
The Company's effective tax rate for the quarter was 40.5%., which was
unchanged versus the prior year.
As a result of the above, net earnings decreased by 3% to $14.5 million from
$15.0 million in the second quarter of 1993. Primary and fully diluted
earnings per share were $.93 and $.83, respectively, as compared to $.95 and
$.89 per share for the same period in the prior year.
(8)
^L<PAGE>
Six Months 1994 Compared to Six Months 1993
Revenues for the six months totaled $306.3 million, a 14% increase as compared
to $269.8 million in the first six months of 1993. Commission revenues
increased 13% to $71.9 million during the first half of 1994, primarily as a
result of increased institutional listed commissions over the same period in
the prior year. Investment banking revenues increased 8% to $104.6 million,
primarily as a result of increases from merger and advisory work, which more
than offset a decline in underwriting revenues. Principal transaction
revenues increased 11% to $62.2 million from $56.0 million, due primarily to
increases in fixed income trading revenues, particularly in the area of
mortgage-backed and government trading. Interest and dividend revenues
increased 42% to $30.4 million from $21.4 million, resulting primarily from
higher margin loan balances and increased interest-bearing securities
positions. Advisory and other revenues increased 18% to $37.1 million,
reflecting increases in Asset Management, Correspondent Services operations
and increases in investment revenues. These increases more than offset a
revenue decline relating to the valuation of publicly-traded merchant banking
investments.
Operating expenses totaled $243.2 million, a 15% increase from $211.6 million
in the first six months of 1993. Compensation and benefits increased 14% from
$149.4 million to $170.8 million, primarily as a result of increased
incentive, salary and commission expense. Communications expense increased 17%
to $13.3 million, reflecting increased levels of business activity.
Occupancy and equipment expense increased 14% to $13.9 million from $12.1
million, primarily as a result of planned growth and increased technology
expenditures. Interest expense increased 52% to $10.1 million from $6.6
million, primarily as a result of the need to finance increased margin loans,
government securities and reverse repurchase agreements. Floor brokerage,
exchange and clearing fees increased 17% to $7.7 million, reflecting higher
volumes of listed trades. Other operating expenses increased 8% to $27.5
million from $25.5 million, reflecting the increased level of business
activity.
The Company's effective tax rate for the six months was 40.5%, compared to
39.7% for the first six months of 1993.
As a result of the above, net earnings increased by 7% to $37.5 million from
$35.1 million in the first six months of 1993. Primary and fully diluted
earnings per share were $2.39 and $2.11, respectively, as compared to $2.23
and $2.08 per share for the same period in the prior year.
The weighted average number of shares outstanding for purposes of calculating
earnings per share includes shares related to outstanding dilutive stock
options and is affected by the market price of the Company's Common Stock.
Additionally, the calculation of fully diluted earnings per share assumes the
conversion into Common Stock of the Company's outstanding convertible
subordinated debt, if dilutive. The combination of these factors can result
in lower rates of increase or higher rates of decrease in earnings per share
as compared to the rates of increase or decrease in net earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated statement of financial condition reflects a liquid
financial position. The majority of the securities positions in Alex. Brown's
trading accounts (both long and short) are readily marketable and actively
traded. Customer receivables include margin balances and amounts due on
uncompleted transactions.
(9)
^L<PAGE>
Receivables from other brokers and dealers generally represent either current
open transactions, which usually settle within a few days, or securities
borrowed transactions which normally can be closed out within a few days.
Most of the Company's receivables are secured by marketable securities. The
Company also has investments in fixed assets and illiquid securities but such
investments are not a significant portion of the Company's total assets.
High yield securities, also referred to as "junk" bonds, are debt securities
and non-investment grade debt securities which are rated by Standard & Poor's
as lower than BBB. The market for high yield securities can be extremely
volatile and many experienced significant declines in the past several years.
At June 24, 1994, in its high yield operations, Alex. Brown had $22.3 million
and $1.0 million of long and short inventory, respectively, as compared to
$5.2 million and $.9 million at year-end 1993.
As of June 24, 1994, the carrying value of the Company's merchant banking
investments was $21.3 million, compared to $16.6 million at year-end 1993.
Losses related to merchant banking investments were $2.0 million for the
second quarter of 1994, reflecting a reduction in the valuation of a merchant
banking investment. It is anticipated that merchant banking investments will
generally have a holding period of three years or more. It is also
anticipated that these activities will be funded with existing sources of
working capital. The Company has no outstanding bridge loans.
From time to time the Company makes subordinated loans to correspondents as
part of its Correspondent Services business. These loans may be secured or
unsecured and are funded through general working capital sources. At
June 24, 1994, $3.0 million of such loans were outstanding.
The Company finances its business through a number of sources, consisting
primarily of paid-in capital, funds generated from operations, free credit
balances in customers' accounts, deposits received on securities loaned,
repurchase agreements and bank loans.
The Company borrows from banks on a short-term basis under arrangements
pursuant to which the amount of funds available to the Company is based on the
value of the securities owned by the Company and customers' margin securities
pledged as collateral. In addition, the Company borrows on a long-term basis
from banks on both an unsecured basis and with fixed assets pledged as
collateral. The Company has historically been able to obtain necessary
bank borrowings and believes that it will continue to be able to do so in
the future. The Company also has a total of $125 million of unsecured and
secured financing from banks available under committed, revolving lines of
credit, of which $25 million expires in August 1994 and $100 million expires
in August 1996.
During the first six months of 1994, the Company repurchased a total of
599,395 shares of its Common Stock at a cost of $16.1 million. As of
July 18, 1994, the Company had a remaining repurchase authorization of
approximately 2.3 million shares. The Company anticipates that, subject to
market conditions, it will make additional repurchases in the future.
Alex. Brown is required to comply with the net capital rule of the Securities
and Exchange Commission. The rule may limit the Company's ability to
withdraw capital from Alex. Brown. Alex. Brown has consistently exceeded
minimum net capital requirements under the rule. At June 24, 1994,
Alex. Brown had aggregate net capital of $237.8 million, which exceeded
the minimum net capital requirements by $221.4 million.
(10)
^L<PAGE>
Management of the Company believes that existing capital and credit
facilities, when combined with funds generated from operations, will provide
the Company with sufficient resources to meet its present and reasonably
foreseeable cash and capital needs.
RISK MANAGEMENT
The Company records securities transactions on a settlement date basis. The
risk of loss on unsettled transactions and on settled transactions that have
not cleared relates to customers' or brokers' inability or refusal to meet
the terms of their contracts. The Company continually monitors its exposure
to market and counterparty risk through a variety of financial, inventory
position and credit exposure reporting and control procedures. Members of
senior management serve on the Risk Management, Credit and Investment
Committees, each of which meets on a regular basis. Each trading department
is subject to internal position limits established by the Risk Management
Committee which also reviews positions and results of the trading departments.
Alex. Brown's Credit Committee establishes and reviews appropriate credit
limits for customers and brokers seeking margin, repurchase and reverse
repurchase agreement facilities and securities borrowed and securities loaned
arrangements. The Investment Committee approves investment purchases and
sales and reviews holdings.
(11)
^L<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
The Company has been named as a defendant in five purported class action
proceedings that allege violations of a Federal anti-trust statute. The
actions were instituted during July, 1994 in the United States District Court
for the District of Columbia, and are entitled: Hennessey v. Alex. Brown &
Sons Incorporated, et al.; Krum v. Alex. Brown & Sons Incorporated, et al.;
Sachs v. Alex. Brown & Sons Incorporated, et al.; Silverman v. Alex. Brown &
Sons Incorporated, et al.; and Tolchin v. Alex. Brown & Sons Incorporated,
et al. The plaintiffs allege that the Company, along with twenty-three
other defendants that act as dealers on the NASDAQ computerized quotations
system, conspired to raise and fix the spreads between the bid and ask prices
of securities traded over NASDAQ. Plaintiffs further allege that as a result
of such conspiracy, NASDAQ spreads are larger than spreads for stocks traded
on the New York Stock Exchange and the American Stock Exchange. The purported
class consists of all persons in the United States who are current customers
and who bought or sold securities through NASDAQ within four years prior to
the filing of the complaints. Plaintiffs seek treble damages of an
unspecified amount.
On April 25, 1994, the Supreme Court of the State of Delaware reversed a
decision of the Delaware Chancery Court dismissing the Company from a
previously reported suit entitled Branson v. Exide Electronics Corporation,
et al. The suit, originally filed on May 3, 1990, remains pending in
Delaware Chancery Court, New Castle County and pertains to the December,
1989 public offering (the "Offering") of 1.2 million shares of the Common
Stock of Exide Electronics Group, Inc. ("Exide") at $12.50 per share. The
Company was lead manager of the Offering and directly underwrote 224,000
shares. Plaintiff purports to represent a class consisting of all persons
who purchased shares of Exide in the Offering. The complaint alleges
violations of the Securities Act of 1933 and of Delaware common law in
connection with alleged untrue statements and omissions of material facts in
the registration statement and prospectus prepared in connection with the
Offering. In particular, the complaint alleges that the prospectus failed to
properly disclose Exide's exposure with respect to litigation that had been
pending against Exide in a California court and in which a jury returned a
verdict against Exide, in April, 1990, in the amount of $14.9 million.
Immediately following the verdict, Exide shares traded in the range of
$7-8 per share. Plaintiff seeks unspecified compensatory damages, costs and
fees.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re: Calculation of Earnings Per Share
(b) No reports on Form 8-K were filed during the quarter ended
June 24, 1994
(12)
^L<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEX. BROWN INCORPORATED
(Registrant)
<TABLE>
<CAPTION>
<S> <C> <S> <C> <S> <C>
Date: August 4, 1994 A. B. KRONGARD
------------------------------------
Chairman and Chief Executive Officer
Date: August 4, 1994 BEVERLY L. WRIGHT
------------------------------------
Principal Financial Officer
</TABLE>
(13)
^L<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Calculation of Earnings Per Share
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 24, 1994 June 25, 1993
------------------ --------------------
Fully Fully
Primary Diluted Primary Diluted
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Common stock 15,347 15,347 15,426 15,426
Stock options 239 239 320 331
Convertible subordinated
debentures - 2,545 - 1,386
------- ------- ------- -------
15,586 18,131 15,746 17,143
======= ======= ======= =======
Net earnings for calculating
earnings per share:
Net earnings $14,488 $14,488 $15,001 $15,001
Interest expense on
convertible subordinated
debentures, net of tax - 519 - 296
------- ------- ------- -------
$14,488 $15,007 $15,001 $15,297
======= ======= ======= =======
Earnings per share $ 0.93 $ 0.83 $ 0.95 $ 0.89
======= ======= ======= =======
Six Months Ended Six Months Ended
June 24, 1994 June 25, 1993
------------------ ------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- -------- -------
Weighted average shares outstanding:
Common stock 15,404 15,404 15,383 15,383
Stock options 262 279 342 349
Convertible subordinated
debentures - 2,540 - 1,386
------- ------- ------- -------
15,666 18,223 15,725 17,118
======= ======= ======= =======
Net earnings for calculating
earnings per share:
Net earnings $37,510 $37,510 $35,084 $35,084
Interest expense on
convertible subordinated
debentures, net of tax - 995 - 571
------- ------- ------- -------
$37,510 $38,505 $35,084 $35,655
======= ======= ======= =======
Earnings per share $ 2.39 $ 2.11 $ 2.23 $ 2.08
======= ======= ======= =======
</TABLE>
(14)
ALEX. BROWN INCORPORATED
135 E. Baltimore Street
Baltimore, MD 21202
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10-Q.
