<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
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 15,956,189
_______________________________________________________________________________
(Class) (Outstanding at November 1, 1996)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Consolidated Statements of Earnings (Unaudited) for the three
months and nine months ended September 30, 1996 and 1995 1
Consolidated Statements of Financial Condition as of
September 30, 1996 (Unaudited) and December 31, 1995 2-3
Consolidated Statements of Stockholders' Equity (Unaudited)
for the nine months ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 1996 and 1995 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>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 42,981 $ 45,127 $149,338 $128,862
Investment banking 73,981 76,423 309,482 191,195
Principal transactions 32,468 34,744 133,933 100,250
Interest and dividends 35,681 27,488 105,104 71,578
Advisory and other 28,862 26,496 97,192 70,844
-------- -------- -------- --------
Total revenues 213,973 210,278 795,049 562,729
-------- -------- -------- --------
Operating expenses:
Compensation and benefits 110,874 117,993 419,202 309,731
Communications 9,372 8,250 27,824 24,090
Occupancy and equipment 9,456 9,804 27,482 29,426
Interest 13,333 9,483 38,594 24,530
Floor brokerage, exchange
and clearing fees 5,055 4,812 15,458 13,840
Other operating expenses 20,912 21,699 70,870 57,222
-------- -------- -------- --------
Total operating expenses 169,002 172,041 599,430 458,839
-------- -------- -------- --------
Earnings before income taxes 44,971 38,237 195,619 103,890
Income taxes 18,664 15,295 78,775 41,556
-------- -------- -------- --------
Net earnings $ 26,307 $ 22,942 $116,844 $ 62,334
======== ======== ======== ========
Earnings per share:
Primary $ 1.61 $ 1.45 $ 7.14 $ 4.06
======== ======== ======== ========
Fully diluted $ 1.43 $ 1.28 $ 6.30 $ 3.54
======== ======== ======== ========
Weighted average number
of shares outstanding:
Primary 16,341 15,858 16,358 15,364
======== ======== ======== ========
Fully diluted 18,871 18,325 18,868 18,077
======== ======== ======== ========
Cash dividends
declared per share $ 0.25 $ 0.20 $ 0.70 $ 0.575
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
(1)
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(in thousands)
ASSETS
<CAPTION>
September 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 41,616 $ 62,103
Receivables:
Customers 1,463,931 1,277,869
Brokers, dealers and clearing organizations 530,985 416,449
Current state and federal income taxes 27,050 -
Other 45,150 62,056
Firm trading securities (Note 2) 207,168 110,564
Securities purchased under agreements to resell 37,026 34,865
Deferred income taxes 34,070 27,813
Memberships in exchanges, at cost
(market $3,301 and $2,864) 323 323
Office equipment and leasehold improvements,
at cost less accumulated depreciation and
amortization of $48,422 and $40,483 40,652 41,189
Investment securities (Note 4) 55,116 50,294
Loans to employees to purchase convertible
subordinated debentures (Note 5) 54,454 48,320
Other assets 96,615 64,662
---------- ----------
$2,634,156 $2,196,507
========== ==========
</TABLE>
(continued)
(2)
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition (continued)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1996 1995
----------- ----------
(Unaudited)
<S> <C> <C>
Bank loans $ 241,529 $ 120,008
Payables:
Cash management facility 75,695 70,338
Customers, including free credit balances 482,751 506,993
Brokers, dealers and clearing organizations 650,961 480,621
Current federal and state income taxes - 5,032
Other 325,652 294,643
Securities sold, not yet purchased (Note 2) 68,403 54,276
Securities sold under repurchase agreements - 2,460
7 5/8% Senior notes 109,459 109,414
5 3/4% Convertible subordinated debentures 11,792 11,851
Employee convertible subordinated debentures (Note 5) 62,043 51,584
Commitments and contingencies (Note 6)
Stockholders' equity (Note 5):
Common stock of $.10 par value
Authorized 50,000,000 shares
Issued and outstanding 15,927,521 shares in 1996
and 15,532,696 shares in 1995 1,593 1,553
Additional paid-in capital 122,021 114,011
Loans to employees to purchase common stock (10,369) (12,470)
Retained earnings 492,626 386,193
---------- ----------
Total stockholders' equity 605,871 489,287
---------- ----------
$2,634,156 $2,196,507
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
(3)
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(in thousands)
(Unaudited)
<CAPTION>
Loans To
Employees Total
Additional To Purchase Stock-
Common Paid-in Common Retained holders'
Stock Capital Stock Earnings Equity
----- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine months ended September 30, 1996
Balance at December 31, 1995 $1,553 $114,011 $(12,470) $386,193 $489,287
Net earnings - - - 116,844 116,844
Issuance of 541,284 shares of
common stock 54 15,691 - - 15,745
Payments on employee loans - - 2,049 - 2,049
Repurchase and retirement of
342,396 shares of common stock (34) (15,937) - - (15,971)
Compensation payable
in common stock 20 8,256 - - 8,276
Loan forgiveness - - 52 - 52
Dividends paid - - - (10,411) (10,411)
------ -------- --------- -------- --------
Balance at September 30, 1996 $1,593 $122,021 $(10,369) $492,626 $605,871
====== ======== ========= ======== ========
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
====== ======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
(4)
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
--------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 116,844 $ 62,334
Reconciliation of net earnings to net cash
used for operating activities:
Depreciation and amortization 10,004 9,091
Non-cash compensation expense 11,225 6,998
Gain on investment securities (14,239) (13,561)
Other (222) 280
(Increase) decrease in assets:
Receivables (307,205) (475,110)
Firm trading securities (96,604) (4,216)
Deferred income taxes (6,257) (3,934)
Securities purchased under agreements to resell (2,161) (6,990)
Other assets (32,634) (33,181)
Increase in liabilities:
Payables 172,075 370,195
Securities sold, not yet purchased 14,127 1,746
--------- --------
Net cash used for operating activities (135,047) (86,348)
--------- --------
Cash flows from financing activities:
Net proceeds (payments):
Short-term loans 125,000 6,321
Securities sold under repurchase agreements (2,460) -
Cash management facility 5,357 (2,467)
Payments on term loans (3,479) (5,918)
Proceeds from senior notes - 108,677
Issuance of common stock 15,893 13,056
Repurchase of common stock (15,971) (297)
Dividends paid to stockholders (10,411) (8,227)
-------- --------
Net cash provided by financing activities 113,929 111,145
-------- --------
Cash flows from investing activities:
Purchase of office equipment and leasehold improvements (8,786) (20,115)
Purchase of investment securities (16,853) (11,118)
Sale of investment securities 26,270 12,039
--------- ---------
Net cash provided by (used for) investing activities 631 (19,194)
--------- ---------
Net increase (decrease) in cash and cash equivalents (20,487) 5,603
Cash and cash equivalents at beginning of period 62,103 24,024
--------- ---------
Cash and cash equivalents at end of period $ 41,616 $ 29,627
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
(5)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996
(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 Alex. Brown Incorporated's (the "Company")
financial position and results of operations, consisting of normal
recurring adjustments, have been included. Certain revenue and expense
items in 1995 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
09/30/96 12/31/95 09/30/96 12/31/95
-------- -------- ------- -------
<S> <C> <C> <C> <C>
United States government
and agencies $ 7,269 $ 9,315 $40,914 $34,958
Mortgage-backed 49,527 1 - -
States and municipalities 72,987 36,607 43 67
Corporate debt 30,389 42,945 3,873 5,593
Equities and convertible debt 46,996 21,696 23,573 13,658
-------- -------- ------- -------
$207,168 $110,564 $68,402 $54,276
======== ======== ======= =======
</TABLE>
(3) In October, 1996, the Company declared a $.25 per share quarterly cash
dividend payable November 12, 1996 to stockholders of record on
November 1, 1996.
(4) Investment securities at September 30, 1996 and December 31, 1995 included
$24.2 million and $23.5 million, respectively, of merchant banking
investments.
(5) Convertible subordinated debentures issued to certain employees pursuant to
the 1991 Equity Incentive Plan are convertible into the Company's Common
Stock. The Company made loans to employees to fund the purchases of the
debentures. During the first nine months of 1996, employees converted \
$1,901,641 convertible subordinated debentures, which were issued in prior
years, into 113,474 shares of the Company's common stock.
(6)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
September 30, 1996
(Unaudited)
(6) COMMITMENTS AND CONTINGENCIES
Letters of Credit
At September 30, 1996, the Company's principal subsidiary, Alex. Brown &
Sons Incorporated, was contingently liable for up to $47.2 million under
unsecured letters of credit used to satisfy required margin deposits at five
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 1996 Compared to Third Quarter 1995
Revenues totalled $214.0 million, a 2% increase as compared to $210.3 million in
the third quarter of 1995. Commission revenues decreased 5% to $43.0 million
for the third quarter, primarily as a result of a decline in private client
listed commissions, which was partially offset by an increase in mutual fund
commissions. Investment banking revenues decreased 3% to $74.0 million,
primarily due to a decline in corporate selling concessions and management fees
related to a slowdown in public equity underwritings, while underwriting fees
more than doubled to $10.5 million. Merger and advisory revenues increased 46%
to $18.9 million. Principal transaction revenues decreased 7% to $32.5 million,
due to decreases in most of the Firm's trading areas. Interest and dividend
revenues increased 30% to $35.7 million, primarily as a result of interest
earned on higher margin loan balances. Advisory and other revenues increased
9% to $28.9 million, primarily due to increases in advisory fees and fees
from correspondent services. Partially offsetting this increase was a
reduction in revenues from investment gains which totalled $0.4 million, as
compared to $5.5 million in the corresponding period of the prior year.
Operating expenses totalled $169.0 million, a 2% decrease as compared to $172.0
million in the third quarter of 1995. Compensation and benefits decreased 6% to
$110.9 million from $118.0 million, primarily as a result of decreased
incentive and commission expenses. Communications expense increased 14% to
$9.4 million due to additional services and equipment. Occupancy and
equipment expenses decreased 4% to $9.5 million primarily due to the
elimination of an expense provision related to vacating certain office space
prior to expiration of the lease of one of the Company's offices which had
been recorded in 1995. Interest expense increased 41% to $13.3 million from
$9.5 million primarily due to the cost of financing increased margin loan
balances. Floor brokerage, exchange and clearing fees increased 5% to $5.1
million due to increased brokerage services. Other operating expenses
decreased 4% to $20.9 million primarily due to a reduction in expenses
associated with the current level of business activity.
The Company's effective tax rate for the quarter was 41.5%, compared to 40.0%
for the third quarter of 1995.
As a result of the above, net earnings increased by 15% to $26.3 million from
$22.9 million in the third quarter of 1995. Primary and fully diluted
earnings per share were $1.61 and $1.43, respectively, as compared to $1.45 and
$1.28 for the same period in the prior year.
(8)
</PAGE>
<PAGE>
Nine Months 1996 Compared to Nine Months 1995
Revenues totalled $795.0 million, a 41% increase as compared to $562.7 million
in the first nine months of 1995. Commission revenues increased 16% to
$149.3 million during the first nine months of 1996, primarily as a result of
increased institutional and private client listed commissions, as well as an
increase in private client OTC agency business. Investment banking revenues
increased 62% to $309.5 million, primarily due to significant increases in
revenues from underwriting activities and a 61% increase in merger and
advisory revenues to $72.4 million. Principal transaction revenues increased
34% to $133.9 million, primarily due to increases in revenues from OTC trading.
Interest and dividend revenues increased 47% to $105.1 million as a result
of interest earned on higher margin loan balances. Advisory and other
revenues increased 37% to $97.2 million, primarily due to increases in
advisory fees and fees from correspondent services. Net investment gains
totalled $14.2 million for the first nine months of 1996 as compared to $13.6
million in the corresponding period of the prior year.
Operating expenses totalled $599.4 million, a 31% increase as compared to
$458.8 million in the first nine months of 1995. Compensation and benefits
increased 35% to $419.2 million from $309.7 million, primarily as a result of
increased incentive and commission expenses. Communications expense increased
16% to $27.8 million, due to expenses required to support increased levels of
business activity. Occupancy and equipment expenses decreased 7% to $27.5
million, due to the elimination of an expense provision related to vacating
certain office space prior to expiration of the lease of one of the Company's
offices which had been recorded during the first nine months of 1995. Interest
expense increased 57% to $38.6 million from $24.5 million, primarily due to the
cost of financing increased margin loan balances. Floor brokerage, exchange and
clearing fees increased 12% to $15.5 million due to an increased volume of
listed trades and brokerage services. Other operating expenses increased
24% to $70.9 million, primarily due to increased expenses associated with
the higher level of business activity.
The Company's effective tax rate for the first nine months was 40.3%, compared
to 40.0% for the first nine months of 1995.
As a result of the above, net earnings increased by 87% to $116.8 million from
$62.3 million in the first nine months of 1995. Primary and fully diluted
earnings per share were $7.14 and $6.30, respectively, as compared to $4.06 and
$3.54 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 (both long and short) 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
(9)
</PAGE>
<PAGE>
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 experienced significant declines
in the past several years. At September 30, 1996, in its high yield operations,
Alex. Brown had $14.2 million of long inventory and $0.4 million of short
inventory as compared to $12.9 million of long inventory and $0.6 million of
short inventory at year-end 1995.
As of September 30, 1996, the carrying value of the Company's merchant banking
investments was $24.2 million, compared to $23.5 million at year-end 1995.
Gains related to merchant banking investments were $8.7 million for the first
nine months of 1996, due to net increases in the carrying value of
investments and realized gains. 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, 1996, $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 both on an unsecured basis
and under arrangements pursuant to which the amount of funds available 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 ("term loans"). The Company historically has been able
to obtain necessary bank borrowings and believes that it will continue
to be able to do so in the future. The Company has $350 million of unused
committed lines of credit under revolving credit agreements (the "Credit
Facilities") with various banks. The Credit Facilities expire between
March 1997 and March 1999. The Credit Facilities and term loans contain
various restrictive financial 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. There were no
outstanding borrowings under the Credit Facilities at September 30, 1996. At
September 30, 1996, the Company and Alex. Brown were in compliance with all
restrictive covenants contained in the Credit Facilities and term loans.
Alex. Brown is required to comply with the net capital rule of the Securities
and Exchange Commission. The Company's ability to withdraw capital from
Alex. Brown may be limited by the rule. Alex. Brown has consistently exceeded
minimum net capital requirements under the rule. At September 30, 1996,
Alex. Brown had aggregate net capital of $360.9 million, which exceeded its
minimum net capital requirement by $328.2 million.
(10)
</PAGE>
<PAGE>
During the first nine months of 1996, the Company repurchased a total of
342,396 shares of its Common Stock at a cost of $16.0 million. As of
September 30, 1996, the Company had a remaining repurchase authorization of
approximately 1.0 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 trade execution. 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) No reports on Form 8-K were filed during the quarter ended
September 30, 1996
(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)
Date: November 12, 1996 A. B. KRONGARD
------------------------------------
A. B. Krongard
Chairman and Chief Executive Officer
Date: November 12, 1996 BEVERLY L. WRIGHT
-------------------------------------
Beverly L. Wright
Principal Financial Officer
(13)
</PAGE>
<PAGE>
<TABLE>
Exhibit 11
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Calculation of Earnings Per Share
(in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
------------------- -------------------
Fully Fully
Primary Diluted Primary Diluted
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Common stock 16,011 16,011 15,338 15,338
Stock options 330 420 520 568
Convertible subordinated debentures - 2,440 - 2,419
-------- -------- ------- -------
16,341 18,871 15,858 18,325
======== ======== ======= =======
Net earnings for calculating earnings per share:
Net earnings $26,307 $26,307 $22,942 $22,942
Interest expense on convertible
subordinated debentures, net of tax - 683 - 593
-------- -------- -------- -------
$26,307 $26,990 $22,942 $23,535
======== ======== ======= =======
Earnings per share $ 1.61 $ 1.43 $ 1.45 $ 1.28
======== ======== ======= =======
Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Weighted average shares outstanding:
Common stock 15,999 15,999 14,958 14,958
Stock options 359 445 406 594
Convertible subordinated debentures - 2,424 - 2,525
-------- -------- ------- -------
16,358 18,868 15,364 18,077
======== ======== ======= =======
Net earnings for calculating earnings per share:
Net earnings $116,844 $116,844 $62,334 $62,334
Interest expense on convertible
subordinated debentures, net of tax - 1,968 - 1,738
-------- -------- ------- -------
$116,844 $118,812 $62,334 $64,072
======== ======== ======= =======
Earnings per share $ 7.14 $ 6.30 $ 4.06 $ 3.54
======== ======== ======= =======
</TABLE>
(14)
</PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> $41,616
<RECEIVABLES> $2,067,116
<SECURITIES-RESALE> $37,026
<SECURITIES-BORROWED> $0<F1>
<INSTRUMENTS-OWNED> $262,284
<PP&E> $40,652
<TOTAL-ASSETS> $2,634,156
<SHORT-TERM> $228,629
<PAYABLES> $1,535,059
<REPOS-SOLD> $0
<SECURITIES-LOANED> $0<F2>
<INSTRUMENTS-SOLD> $68,403
<LONG-TERM> $196,194
<COMMON> $1,593
$0
$0
<OTHER-SE> $604,278
<TOTAL-LIABILITY-AND-EQUITY> $2,634,156
<TRADING-REVENUE> $133,933
<INTEREST-DIVIDENDS> $105,104
<COMMISSIONS> $149,338
<INVESTMENT-BANKING-REVENUES> $309,482
<FEE-REVENUE> $97,192
<INTEREST-EXPENSE> $38,594
<COMPENSATION> $419,202
<INCOME-PRETAX> $195,619
<INCOME-PRE-EXTRAORDINARY> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $116,844
<EPS-PRIMARY> $7.14
<EPS-DILUTED> $6.30
<FN>
<F1>Included as part of receivables.
<F2>Included as part of payables.
</FN>
