<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 September 30, 1995
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 15,517,197
- --------------------------------------------------------------------------------
(Class) (Outstanding at October 30, 1995)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Consolidated Statements of Earnings (Unaudited) for the
three month and nine month periods ended
September 30, 1995 and September 30, 1994 1
Consolidated Statements of Financial Condition as of
September 30, 1995 (Unaudited) and December 31, 1994 2-3
Consolidated Statements of Stockholders' Equity
(Unaudited) for the nine month periods ended
September 30, 1995 and September 30, 1994 4
Consolidated Statements of Cash Flows (Unaudited)
for the nine month periods ended September 30, 1995 and
September 30, 1994 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
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 45,127 $ 33,737 $128,862 $105,631
Investment banking 76,423 45,537 191,195 149,299
Principal transactions 34,744 29,852 100,250 92,935
Interest and dividends 28,023 18,597 73,256 49,039
Advisory and other 25,961 17,728 69,166 54,834
-------- -------- -------- --------
Total revenues 210,278 145,451 562,729 451,738
-------- -------- -------- --------
Operating expenses:
Compensation and benefits 117,993 82,451 309,731 253,269
Communications 8,250 7,128 24,092 20,423
Occupancy and equipment 9,800 7,805 29,520 21,701
Interest 9,483 6,114 24,530 16,165
Floor brokerage, exchange
and clearing fees 4,812 4,125 13,840 11,826
Other operating expenses 21,703 15,513 57,126 42,997
-------- -------- -------- --------
Total operating expenses 172,041 123,136 458,839 366,381
-------- -------- -------- --------
Earnings before income taxes 38,237 22,315 103,890 85,357
Income taxes 15,295 9,037 41,556 34,569
-------- -------- -------- --------
Net earnings $ 22,942 $ 13,278 $ 62,334 $ 50,788
======== ======== ======== ========
Earnings per share:
Primary $ 1.45 $ 0.87 $ 4.06 $ 3.27
======== ======== ======== ========
Fully diluted $ 1.28 $ 0.78 $ 3.54 $ 2.90
======== ======== ======== ========
Weighted average number of
shares outstanding:
Primary 15,858 15,340 15,364 15,549
======== ======== ======== ========
Fully diluted 18,325 17,834 18,077 18,076
======== ======== ======== ========
Cash dividends declared
per share $ 0.20 $ 0.175 $ 0.575 $ 0.50
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
(1)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(in thousands)
ASSETS
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 29,627 $ 24,024
Receivables:
Customers 1,081,816 800,017
Brokers, dealers and clearing organizations 407,188 237,479
Current federal and state income taxes 10,960 581
Other 53,531 40,308
Firm trading securities (Note 2) 97,568 93,352
Securities purchased under agreements to resell 6,990 -
Deferred income taxes 21,609 17,675
Memberships in exchanges, at cost
(market $2,678 and $2,259) 323 323
Office equipment and leasehold improvements,
at cost less accumulated depreciation and
amortization of $42,673 and $37,177 41,032 29,405
Investment securities (Note 5) 45,475 32,835
Loans to employees to purchase convertible
subordinated debentures (Note 4) 48,532 33,412
Other assets 70,315 37,022
---------- ----------
$1,914,966 $1,346,433
========== ==========
</TABLE>
(continued)
(2)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition (continued)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Bank loans $ 73,346 $ 72,943
Payables:
Cash management facility 59,829 62,296
Customers, including free credit balances 381,171 307,245
Brokers, dealers and clearing organizations 519,284 279,637
Current federal income taxes - 2,145
Other 222,304 163,537
Securities sold, not yet purchased (Note 2) 27,588 25,842
7 5/8% Senior notes (Note 4) 109,392 -
5 3/4% Convertible subordinated debentures (Note 4) 11,961 24,690
Employee convertible subordinated debentures (Note 4) 51,819 34,670
Commitments and contingencies (Note 6)
Stockholders' equity (Note 4):
Common stock of $.10 par value
Authorized 50,000,000 shares
Issued and outstanding 15,505,735 shares in 1995
and 14,290,012 shares in 1994 1,551 1,429
Additional paid-in capital 113,286 81,042
Loans to employees to purchase common stock (12,640) (11,011)
Retained earnings 356,075 301,968
---------- ----------
Total stockholders' equity 458,272 373,428
---------- ----------
$1,914,966 $1,346,433
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
</PAGE>
<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
------ --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1995
Balance at December 31, 1994 $1,429 $ 81,042 ($11,011) $301,968 $373,428
Net earnings - - - 62,334 62,334
Issuance of 1,090,790 shares of
common stock 109 28,175 (2,465) - 25,819
Payments on employee loans - - 800 - 800
Repurchase and retirement of
9,301 shares of common stock (1) (296) - - (297)
Compensation payable in
common stock 14 4,365 - - 4,379
Loan forgiveness - - 36 - 36
Dividends paid - - - (8,227) (8,227)
------ -------- -------- -------- --------
Balance at September 30, 1995 $1,551 $113,286 ($12,640) $356,075 $458,272
====== ======== ======== ======== ========
Nine months ended September 30, 1994
Balance at December 31, 1993 $1,536 $114,014 ($10,902) $241,017 $345,665
Net earnings - - - 50,788 50,788
Issuance of 415,813 shares of
common stock 42 6,645 (218) - 6,469
Payments on employee loans - - 375 - 375
Repurchase and retirement of
887,225 shares of common stock (89) (23,424) - - (23,513)
Compensation payable in
common stock 20 5,244 - - 5,264
Dividends paid - - - (7,303) (7,303)
------ -------- -------- -------- --------
Balance at September 30, 1994 $1,509 $102,479 ($10,745) $284,502 $377,745
====== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 62,334 $ 50,788
Reconciliation of net earnings to net cash
used for operating activities:
Depreciation and amortization 9,091 5,972
Non-cash compensation expense 6,998 5,264
Gain on investment securities (13,561) (7,550)
Other 280 (4)
(Increase) decrease in assets:
Receivables (475,110) 16,967
Firm trading securities (4,216) (18,943)
Securities purchased under agreements to resell (6,990) (6,948)
Deferred income taxes (3,934) (8,260)
Other assets (33,181) (15,112)
Increase (decrease) in liabilities:
Payables 370,195 (109,862)
Securities sold, not yet purchased 1,746 (5,921)
-------- --------
Net cash used for operating activities (86,348) (93,609)
-------- --------
Cash flows from financing activities:
Net proceeds (payments):
Short-term loans 6,321 81,489
Cash management facility (2,467) (14,225)
Proceeds from term loan - 15,000
Payments on term loans (5,918) (7,095)
Proceeds from senior notes 108,677 -
Issuance of common stock 13,056 5,921
Repurchase of common stock (297) (23,513)
Dividends paid to stockholders (8,227) (7,303)
-------- --------
Net cash provided by financing activities 111,145 50,274
-------- --------
Cash flows from investing activities:
Purchase of office equipment and leasehold
improvements (20,115) (10,119)
Purchase of investment securities (11,118) (13,121)
Sale of investment securities 12,039 28,024
-------- --------
Net cash provided by (used for) investing activities (19,194) 4,784
-------- --------
Net increase (decrease) in cash and cash equivalents 5,603 (38,551)
Cash and cash equivalents at beginning of period 24,024 57,005
-------- --------
Cash and cash equivalents at end of period $ 29,627 $ 18,454
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(5)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1995
(Unaudited)
(1) The accompanying consolidated 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 revenue and expense items in 1994 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
09/30/95 12/31/94 09/30/95 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
United States government
and agencies $ 3,263 $ 4,946 $ 8,066 $ 4,750
Mortgage-backed 1,664 648 - -
States and municipalities 44,067 39,978 61 329
Corporate debt 19,583 25,631 888 3,286
Equities and convertible debt 28,991 22,149 18,573 17,477
------- ------- ------- -------
$97,568 $93,352 $27,588 $25,842
======= ======= ======= =======
</TABLE>
(3) In October 1995, the Company declared a $.20 quarterly cash dividend payable
November 9, 1995 to stockholders of record on October 30, 1995.
(4) On August 21, 1995, the Company issued $110,000,000 senior notes due
August 15, 2005, which bear interest at 7 5/8%. The notes were sold at a
discount to yield 7.705%.
During 1995, the Company issued $18,341,551 convertible subordinated
debentures to certain employees pursuant to the 1991 Equity Incentive Plan.
The debentures are convertible in installments into the Company's common
stock three to six years after the date issued. The Company made loans to
employees to fund the purchases of the debentures. During the first nine
months of 1995, employees converted $643,909 convertible subordinated
debentures, which were issued in prior years, into 51,620 shares of the
Company's common stock.
During 1995, $12,920,000 par value of the 5 3/4% convertible subordinated
debentures was converted into 496,343 shares of the Company's common stock.
(5) Investment securities at September 30, 1995 and December 31, 1994 included
$21.0 million and $13.6 million, respectively, of merchant banking
investments.
(6)
</PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
September 30, 1995
(Unaudited)
(6) COMMITMENTS AND CONTINGENCIES
Letters of Credit
At September 30, 1995, the Company's principal subsidiary, Alex. Brown & Sons
Incorporated, was contingently liable for up to $49,883,000 under unsecured
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)
</PAGE>
<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
Third Quarter 1995 Compared to Third Quarter 1994
Revenues totalled $210.3 million, a 45% increase as compared to $145.5 million
in the third quarter of 1994. Commission revenues increased 34% to $45.1
million for the quarter, primarily as a result of increased private client and
institutional listed commissions. Investment banking revenues increased 68% to
$76.4 million, primarily due to an increase in revenues from underwriting
activities. Partially offsetting this increase was a 14% decrease in merger
and advisory revenues to $12.9 million for the quarter. Principal transaction
revenues increased 16% to $34.7 million, primarily due to increases in revenues
from OTC trading. This increase was partially offset by a decline in fixed
income trading revenues. Interest and dividend revenues increased 51% to
$28.0 million as a result of higher margin loan balances and higher interest
rates. Advisory and other revenues increased 46% to $26.0 million, primarily
due to increases in investment revenues, advisory and other fees and an
increase in correspondent services revenues. Investment revenues of $5.5
million for the quarter consisted of both realized gains and increases in
the carrying value of investments.
Operating expenses totalled $172.0 million, a 40% increase as compared to $123.1
million in the third quarter of 1994. Compensation and benefits increased
43% from $82.5 million to $118.0 million as a result of increased incentive and
commission expense. Communications expense increased 16% to $8.3 million,
reflecting expenses required to support increased levels of business activity.
Occupancy and equipment expense increased 26% to $9.8 million, primarily as
a result of expansion in several offices, increased technology expenditures
and an expense provision related to vacating certain office space prior to
expiration of the lease of one of the Company's offices. Interest expense
increased 55% to $9.5 million from $6.1 million, primarily due to the cost of
financing increased margin loans and interest rate increases. Floor brokerage,
exchange and clearing fees increased 17% to $4.8 million, reflecting an
increased volume of listed trades. Other operating expenses increased 40% to
$21.7 million, primarily reflecting increases in expenses associated with the
higher level of business activity.
The Company's effective tax rate for the quarter was 40.0%, compared to 40.5%
for the third quarter of 1994.
(8)
</PAGE>
<PAGE>
As a result of the above, net earnings increased by 73% to $22.9 million from
$13.3 million in the third quarter of 1994. Primary and fully diluted earnings
per share were $1.45 and $1.28, respectively, as compared to $0.87 and $0.78
for the same period in the prior year.
Nine Months 1995 Compared to Nine Months 1994
Revenues for the nine months totalled $562.7 million, a 25% increase as
compared to $451.7 million in the first nine months of 1994. Commission
revenues increased 22% to $128.9 million during the first nine months of 1995,
primarily as a result of increased institutional and private client listed
commissions over the same period in the prior year. Investment banking
revenues increased 28% to $191.2 million, primarily as a result of increases
from underwriting activities. Principal transaction revenues increased 8% to
$100.3 million, primarily due to increases in OTC trading revenues. Partially
offsetting this increase was a decrease in fixed income trading revenues,
primarily in the areas of mortgage-backed and government securities trading.
Interest and dividend revenues increased 49% to $73.3 million from $49.0
million, primarily resulting from higher interest rates and an increase
in margin loan balances. Advisory and other revenues increased 26% to $69.2
million, reflecting increases in advisory and other fees, investment
revenues and an increase in correspondent services revenues.
Operating expenses totalled $458.8 million, a 25% increase as compared to $366.4
million in the first nine months of 1994. Compensation and benefits increased
22% to $309.7 million, primarily as a result of increased incentive, commission
and salary expense. Communications expense increased 18% to $24.1 million,
reflecting increased levels of business activity and increased technology
expenditures. Occupancy and equipment expense increased 36% to $29.5 million,
primarily as a result of expansion in several offices, increased technology
expenditures and an expense provision related to vacating certain office space
prior to expiration of the lease of one of the Company's offices. Interest
expense increased 52% to $24.5 million from $16.2 million, primarily as a
result of interest rate increases and the need to finance increased margin
loans. Floor brokerage, exchange and clearing fees increased 17% to $13.8
million, reflecting an increased volume of listed trades. Other operating
expenses increased 33% to $57.1 million, primarily reflecting increases in
expenses associated with the higher level of business activity, which were
partially offset by a decline in affiliate expenses.
The Company's effective tax rate for the nine months was 40.0%, compared to
40.5% for the first nine months of 1994.
As a result of the above, net earnings increased by 23% to $62.3 million from
$50.8 million in the first nine months of 1994. Primary and fully diluted
earnings per share were $4.06 and $3.54, respectively, as compared to $3.27
and $2.90 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.
(9)
</PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated statement of financial condition reflects a liquid
financial position. The majority of the long and short securities positions in
Alex. Brown's trading accounts are readily marketable and actively traded.
Customer receivables include margin balances and amounts due on uncompleted
transactions. 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 non-investment
grade debt securities which are rated by Standard & Poor's as lower than BBB-
and by Moody's Investors Service as lower than Baa3. The market for high yield
securities can be extremely volatile and many high yield securities experienced
significant price declines in the past several years. At September 30, 1995,
in its high yield operations, Alex. Brown had $13.8 million of long inventory
and $0.7 million of short inventory as compared to $21.3 million of long
inventory and $1.0 million of short inventory at year-end 1994.
As of September 30, 1995, the carrying value of the Company's merchant banking
investments was $21.0 million, compared to $13.6 million at year-end 1994.
Gains related to merchant banking investments were $4.3 million for the first
nine months of 1995, primarily reflecting increases in the carrying value of
investments. It is anticipated that merchant banking investments will generally
have a holding period of three years or more and 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 September 30, 1995,
$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, as well as through the issuance of debt
and equity securities.
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 $150.0 million of unsecured and secured financing from banks
available under committed, revolving lines of credit which expire in August
1996. There were no amounts outstanding under the Credit Facilities as of
September 30, 1995. The Credit Facilities and certain term loans contain
various restrictive covenants, the most significant of which require the
maintenance of minimum levels of net worth by both the Company and Alex. Brown
and minimum levels of net capital by Alex. Brown.
(10)
</PAGE>
<PAGE>
On July 10, 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission to register the offer and sale of up to
$150,000,000 of senior debt and convertible debt securities. On August 16,
1995, the Company issued $110.0 million of 7 5/8% Senior Notes due 2005. The
notes were issued at a discount to yield 7.705%.
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 September 30, 1995, Alex. Brown had
aggregate net capital of $254.5 million, which exceeded its minimum net capital
requirement by $231.1 million.
During the first nine months of 1995, the Company repurchased a total of 9,301
shares of its Common Stock at a cost of $0.3 million. As of October 1995, the
Company had a remaining repurchase authorization of approximately 1.4 million
shares. The Company anticipates that, subject to market conditions, it will
make additional repurchases in the future.
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,
generally the third business day following the transaction. The risk of loss on
unsettled transactions relates to customers' or brokers' inability or refusal
to meet the terms of their contracts. The Company monitors its exposure to
market and counterparty risk through a variety of financial, position and
credit exposure reporting and control procedures. The Risk Management, Credit
and Investment Committees, each of which meets on a regular basis, include
members of senior management. 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.
INFLATION
Because the Company's assets are, to a large extent, liquid in nature, they
are not significantly affected by inflation. However, the rate of inflation
affects the Company's expenses such as employee compensation, office space
leasing costs and communication charges, and increases therein may not be
readily recoverable in the price of services offered by the Company. To the
extent inflation results in rising interest rates and has other adverse effects
upon the securities markets and on the value of securities owned by the
Company, it may adversely affect the Company's financial position and results
of operations.
(11)
</PAGE>
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re: Calculation of Earnings Per Share
(b) A Form 8-K was filed on August 11, 1995 to report on matters submitted to
the vote of stockholders at the annual meetings of stockholders on
April 25, 1995, April 25, 1994 and May 13, 1993.
(12)
</PAGE>
<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: November 9, 1995 A. B. KRONGARD
------------------------------------
A. B. Krongard
Chairman and Chief Executive Officer
Date: November 9, 1995 BEVERLY L. WRIGHT
------------------------------------
Beverly L. Wright
Principal Financial Officer
</TABLE>
(13)
</PAGE>
<PAGE>
Exhibit 11
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
September 30, 1995 September 30, 1994
------------------ -------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding:
Common stock 15,338 15,338 15,088 15,088
Stock options 520 568 252 252
Convertible subordinated
debentures - 2,419 - 2,494
------- ------- ------- -------
15,858 18,325 15,340 17,834
======= ======= ======= =======
Net earnings for calculating
earnings per share:
Net earnings $22,942 $22,942 $13,278 $13,278
Interest expense on
convertible subordinated
debentures, net of tax - 593 - 554
------- ------- ------- -------
$22,942 $23,535 $13,278 $13,832
======= ======= ======= =======
Earnings per share $ 1.45 $ 1.28 $ 0.87 $ 0.78
======= ======= ======= =======
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
------------------- ---------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Weighted average shares
outstanding:
Common stock 14,958 14,958 15,291 15,291
Stock options 406 594 258 270
Convertible subordinated
debentures - 2,525 - 2,515
------- ------- ------- -------
15,364 18,077 15,549 18,076
======= ======= ======= =======
Net earnings for calculating
earnings per share:
Net earnings $62,334 $62,334 $50,788 $50,788
Interest expense on
convertible subordinated
debentures, net of tax - 1,738 - 1,543
------- ------- ------- -------
$62,334 $64,072 $50,788 $52,331
======= ======= ======= =======
Earnings per share $ 4.06 $ 3.54 $ 3.27 $ 2.90
======= ======= ======= =======
</TABLE>
(14)
</PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> $29,627
<RECEIVABLES> $1,553,495
<SECURITIES-RESALE> $6,990
<SECURITIES-BORROWED> $0<F1>
<INSTRUMENTS-OWNED> $143,043
<PP&E> $41,032
<TOTAL-ASSETS> $1,914,966
<SHORT-TERM> $56,813
<PAYABLES> $1,182,588
<REPOS-SOLD> $0
<SECURITIES-LOANED> $0<F2>
<INSTRUMENTS-SOLD> $27,588
<LONG-TERM> $189,705
<COMMON> $1,551
$0
$0
<OTHER-SE> $456,721
<TOTAL-LIABILITY-AND-EQUITY> $1,914,966
<TRADING-REVENUE> $100,250
<INTEREST-DIVIDENDS> $73,256
<COMMISSIONS> $128,862
<INVESTMENT-BANKING-REVENUES> $191,195
<FEE-REVENUE> $69,166
<INTEREST-EXPENSE> $24,530
<COMPENSATION> $309,731
<INCOME-PRETAX> $103,890
<INCOME-PRE-EXTRAORDINARY> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $62,334
<EPS-PRIMARY> $4.06
<EPS-DILUTED> $3.54
<FN>
<F1>Included as part of receivables.
<F2>Included as part of payables.
</FN>
