<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 June 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 16,042,805
_____________________________________________________________________________
(Class) (Outstanding at August 2, 1996)
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
INDEX
Page
Part I - Financial Information
Consolidated Statements of Earnings (Unaudited) for the
three months and six months ended June 30, 1996 and 1995 1
Consolidated Statements of Financial Condition as of
June 30, 1996 (Unaudited) and December 31, 1995 2-3
Consolidated Statements of Stockholders' Equity
(Unaudited) for the six months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 54,352 $ 44,116 $106,357 $ 83,735
Investment banking 133,662 74,918 235,501 114,772
Principal transactions 49,100 36,589 101,465 65,506
Interest and dividends 36,371 23,535 69,423 44,090
Advisory and other 36,750 21,957 68,330 44,348
-------- -------- -------- --------
Total revenues 310,235 201,115 581,076 352,451
-------- -------- -------- --------
Operating expenses:
Compensation and benefits 162,754 109,493 308,328 191,738
Communications 9,810 8,591 18,452 15,841
Occupancy and equipment 9,263 11,118 18,026 19,622
Interest 13,075 8,268 25,261 15,047
Floor brokerage, exchange
and clearing fees 5,460 4,831 10,403 9,028
Other operating expenses 26,491 20,498 49,958 35,522
-------- -------- -------- --------
Total operating expenses 226,853 162,799 430,428 286,798
-------- -------- -------- --------
Earnings before income taxes 83,382 38,316 150,648 65,653
Income taxes 33,541 15,326 60,111 26,261
-------- -------- -------- --------
Net earnings $ 49,841 $ 22,990 $ 90,537 $ 39,392
======== ======== ======== ========
Earnings per share:
Primary $ 3.02 $ 1.50 $ 5.53 $ 2.61
======== ======== ======== ========
Fully diluted $ 2.66 $ 1.32 $ 4.87 $ 2.28
======== ======== ======== ========
Weighted average number
of shares outstanding:
Primary 16,522 15,285 16,366 15,113
======== ======== ======== ========
Fully diluted 18,989 17,894 18,857 17,774
======== ======== ======== ========
Cash dividends declared per share $ 0.25 $ 0.20 $ 0.45 $ 0.375
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(in thousands)
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 26,970 $ 62,103
Receivables:
Customers 1,418,243 1,277,869
Brokers, dealers and clearing organizations 566,180 416,449
Current state income taxes 6,304 -
Other 71,520 62,056
Firm trading securities (Note 2) 210,094 110,564
Securities purchased under agreements to resell 29,172 34,865
Deferred income taxes 31,020 27,813
Memberships in exchanges, at cost
(market $3,867 and $2,864) 323 323
Office equipment and leasehold improvements,
at cost less accumulated depreciation and
amortization of $45,501 and $40,483 35,634 41,189
Investment securities (Note 5) 54,470 50,294
Loans to employees to purchase convertible
subordinated debentures (Note 4) 54,917 48,320
Other assets 93,313 64,662
---------- ----------
$2,598,160 $2,196,507
========== ==========
</TABLE>
(continued)
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Financial Condition (continued)
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Bank loans $ 206,366 $ 120,008
Payables:
Cash management facility 80,811 70,338
Customers, including free credit balances 548,334 506,993
Brokers, dealers and clearing organizations 558,500 480,621
Current federal and state income taxes 10,037 5,032
Other 348,228 294,643
Securities sold, not yet purchased (Note 2) 66,089 54,276
Securities sold under repurchase agreements - 2,460
7 5/8% Senior notes 109,444 109,414
5 3/4% Convertible subordinated debentures 11,861 11,851
Employee convertible subordinated debentures (Note 4) 62,591 51,584
Commitments and contingencies (Note 6)
Stockholders' equity (Note 4):
Common stock of $.10 par value
Authorized 50,000,000 shares
Issued and outstanding 16,193,552 shares in 1996
and 15,532,696 shares in 1995 1,619 1,553
Additional paid-in capital 134,490 114,011
Loans to employees to purchase common stock (10,539) (12,470)
Retained earnings 470,329 386,193
---------- ----------
Total stockholders' equity 595,899 489,287
---------- ----------
$2,598,160 $2,196,507
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
</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> <S> <C> <C>
Six months ended June 30, 1996
Balance at December 31, 1995 $1,553 $114,011 $(12,470) $386,193 $489,287
Net earnings - - - 90,537 90,537
Issuance of 498,787 shares of
common stock 50 13,928 - - 13,978
Payments on employee loans - - 1,879 - 1,879
Repurchase and retirement of
15,253 shares of common stock (2) (715) - - (717)
Compensation payable
in common stock 18 7,266 - - 7,284
Loan forgiveness - - 52 - 52
Dividends paid - - - (6,401) (6,401)
------ -------- ---------- -------- --------
Balance at June 30, 1996 $1,619 $134,490 $(10,539) $470,329 $595,899
====== ======== ========= ======== ========
Six months ended June 30, 1995
Balance at December 31, 1994 $1,429 $81,042 $(11,011) $301,968 $373,428
Net earnings - - - 39,392 39,392
Issuance of 676,840 shares of
common stock 68 16,419 (1,319) - 15,168
Payments on employee loans - - 747 - 747
Repurchase and retirement of
7,344 shares of common stock (1) (221) - - (222)
Compensation payable
in common stock 13 4,328 - - 4,341
Loan forgiveness - - 36 - 36
Dividends paid - - - (5,161) (5,161)
------ -------- -------- -------- --------
Balance at June 30, 1995 $1,509 $101,568 $(11,547) $336,199 $427,729
====== ======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 90,537 $ 39,392
Reconciliation of net earnings to net cash
used for operating activities:
Depreciation and amortization 6,257 5,984
Non-cash compensation expense 10,343 6,961
Gain on investment securities (13,877) (8,087)
Other (83) 50
(Increase) decrease in assets:
Receivables (299,448) (192,924)
Firm trading securities (99,530) (30,091)
Deferred income taxes (3,207) (2,598)
Securities purchased under agreements to resell 5,693 (7,859)
Other assets (29,017) (24,063)
Increase in liabilities:
Payables 177,810 174,400
Securities sold, not yet purchased 11,813 3,296
--------- ---------
Net cash used for operating activities (142,709) (35,539)
--------- ---------
Cash flows from financing activities:
Net proceeds (payments):
Short-term loans 89,000 36,246
Securities sold under repurchase agreements (2,460) -
Cash management facility 10,473 13,336
Payments on term loans (2,642) (3,798)
Issuance of common stock 13,846 11,488
Repurchase of common stock (717) (222)
Dividends paid to stockholders (6,401) (5,161)
--------- ---------
Net cash provided by financing activities 101,099 51,889
--------- ---------
Cash flows from investing activities:
Purchase of office equipment and leasehold improvements (3,224) (13,627)
Purchase of investment securities (10,614) (9,004)
Sale of investment securities 20,315 6,039
--------- ---------
Net cash provided by (used for) investing activities 6,477 (16,592)
--------- ---------
Net decrease in cash and cash equivalents (35,133) (242)
Cash and cash equivalents at beginning of period 62,103 24,024
--------- ---------
Cash and cash equivalents at end of period $ 26,970 $ 23,782
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</PAGE>
</TABLE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 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
06/30/96 12/31/95 06/30/96 12/31/95
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
United States government
and agencies $ 7,990 $ 9,315 $31,389 $34,958
Mortgage-backed 17,732 1 - -
States and municipalities 71,938 36,607 51 67
Corporate debt 15,543 42,945 311 5,593
Equities and convertible debt 96,891 21,696 34,338 13,658
-------- -------- ------- -------
$210,094 $110,564 $66,089 $54,276
======== ======== ======= =======
</TABLE>
(3) In July, 1996, the Company increased its quarterly cash dividend to
$.25 per share. The Company declared a $.25 quarterly cash dividend
payable August 13, 1996 to stockholders of record on August 2, 1996.
(4) 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 six 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.
(5) Investment securities at June 30, 1996 and December 31, 1995 included
$22.4 million and $23.5 million, respectively, of merchant banking
investments.
</PAGE>
<PAGE>
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
June 30, 1996
(Unaudited)
(6) COMMITMENTS AND CONTINGENCIES
Letters of Credit
At June 30, 1996, the Company's principal subsidiary, Alex. Brown &
Sons Incorporated, was contingently liable for up to $47.0 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.
</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
Second Quarter 1996 Compared to Second Quarter 1995
Revenues totalled $310.2 million, a 54% increase as compared to $201.1 million
in the second quarter of 1995. Commission revenues increased 23% to $54.4
million for the second quarter, 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 78%
to $133.7 million, primarily due to significant increases in revenues from
underwriting activities and a 40% increase in merger and advisory revenues to
$23.3 million. Principal transaction revenues increased 34% to $49.1 million,
primarily due to increases in revenues from OTC trading. Interest and dividend
revenues increased 55% to $36.4 million, primarily as a result of interest
earned on higher margin loan balances. Advisory and other revenues increased
67% to $36.8 million, primarily due to increases in advisory fees, net
investment gains and fees from correspondent services. Net investment gains
totalled $8.5 million for the quarter as compared to $2.8 million in the
corresponding period of the prior year.
Operating expenses totalled $226.9 million, a 39% increase as compared to
$162.8 million in the second quarter of 1995. Compensation and benefits
increased 49% to $162.8 million from $109.5 million, primarily as a result of
increased incentive and commission expenses. Communications expense increased
14% to $9.8 million, due to expenses required to support increased levels of
business activity. Occupancy and equipment expenses decreased 17% to $9.3
million, primarily due to an expense provision related to vacating certain
office space prior to expiration of the lease of one of the Company's offices
which was recorded in the second quarter of 1995. Interest expense increased
58% to $13.1 million from $8.3 million, primarily due to the cost of financing
increased margin loan balances. Floor brokerage, exchange and clearing fees
increased 13% to $5.5 million, attributable to an increased volume of listed
trades. Other operating expenses increased 29% to $26.5 million, primarily due
to increased expenses associated with the higher level of business activity.
The Company's effective tax rate for the quarter was 40.2%, compared to 40.0%
for the second quarter of 1995.
As a result of the above, net earnings increased by 117% to $49.8 million from
$23.0 million in the second quarter of 1995. Primary and fully diluted
earnings per share were $3.02 and $2.66, respectively, as compared to $1.50 and
$1.32 for the same period in the prior year.
</PAGE>
<PAGE>
Six Months 1996 Compared to Six Months 1995
Revenues totalled $581.1 million, a 65% increase as compared to $352.5 million
in the first six months of 1995. Commission revenues increased 27% to $106.4
million during the first half 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 105%
to $235.5 million, primarily due to significant increases in revenues from
underwriting activities and a 67% increased in merger and advisory revenues to
$53.5 million. Principal transaction revenues increased 55% to $101.5 million,
primarily due to increases in revenues from OTC trading. Interest and dividend
revenues increased 57% to $69.4 million as a result of interest earned on
higher margin loan balances. Advisory and other revenues increased 54% to
$68.3 million, primarily due to increases in advisory fees, net investment
gains and fees from correspondent services. Net investment gains totalled
$13.9 million for the first six months of 1996 as compared to $8.1 million in
the corresponding period of the prior year.
Operating expenses totalled $430.4 million, a 50% increase as compared to
$286.8 million in the first six months of 1995. Compensation and benefits
increased 61% to $308.3 million from $191.7 million, primarily as a result of
increased incentive and commission expenses. Communications expense increased
16% to $18.5 million, due to expenses required to support increased levels of
business activity. Occupancy and equipment expenses decreased 8% to $18.0
million, due to an expense provision related to vacating certain office space
prior to expiration of the lease of one of the Company's offices which was
recorded during the second quarter of 1995. Interest expense increased 68% to
$25.3 million from $15.0 million, primarily due to the cost of financing
increased margin loan balances. Floor brokerage, exchange and clearing fees
increased 15% to $10.4 million due to an increased volume of listed trades.
Other operating expenses increased 41% to $50.0 million, primarily due to
increased expenses associated with the higher level of business activity.
The Company's effective tax rate for the six months was 39.9%, compared to
40.0% for the first six months of 1995.
As a result of the above, net earnings increased by 130% to $90.5 million from
$39.4 million in the first six months of 1995. Primary and fully diluted
earnings per share were $5.53 and $4.87, respectively, as compared to $2.61 and
$2.28 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 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.
</PAGE>
<PAGE>
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 June 30, 1996, in its high yield operations,
Alex. Brown had $17.7 million of long inventory and $.1 million of short
inventory as compared to $12.9 million of long inventory and $.6 million of
short inventory at year-end 1995.
As of June 30, 1996, the carrying value of the Company's merchant banking
investments was $22.4 million, compared to $23.5 million at year-end 1995.
Gains related to merchant banking investments were $8.4 million for the first
six 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 June 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 August 1996 and March 1999, with
$50 million expiring in August 1996. 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 June 30, 1996. At June
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 June 30, 1996, Alex. Brown
had aggregate net capital of $303.7 million, which exceeded its minimum net
capital requirement by $271.2 million.
During the first six months of 1996, the Company repurchased a total of 15,253
shares of its Common Stock at a cost of $716,095. As of June 30, 1996, the
</PAGE>
<PAGE>
Company had a remaining repurchase authorization of approximately 1.3 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.
</PAGE>
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
NASDAQ Market-Maker Anti-Trust Litigation and Related Investigations.
On July 16, 1996, twenty-four NASDAQ market-makers, including Alex. Brown,
entered into a Stipulation and Order resolving a civil complaint filed by the
United States Department of Justice alleging that the defendants and other
NASDAQ market-makers violated Section 1 of the Sherman Act in connection with
certain market-making practices. In entering into the Stipulation and Order,
the parties agreed that the defendants would not engage in certain types of
activities, and the defendants undertook specified steps to assure compliance
with their agreement. The Stipulation and Order are subject to approval by the
United States District Court for the Southern District of New York following
a public hearing, and, if that Court approves the Stipulation and Order, the
complaint will be dismissed with prejudice. The Stipulation and Order does not
affect the private class action proceedings which remain pending.
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of Alex. Brown Incorporated on April
23, 1996, the following persons were elected as directors of the Company to
hold office until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified:
<TABLE>
<CAPTION>
Name Votes For Withheld*
<S> <C> <S> <C> <C>
Lee A. Ault III 13,062,927 8,129
Neil R. Austrian 13,062,672 8,429
Thomas C. Barry 13,062,972 8,129
Benjamin H. Griswold IV 12,995,372 75,729
A. B. Krongard 12,992,472 78,629
Steven Muller, Ph.D. 13,051,537 19,564
Frank E. Richardson 13,051,737 19,364
Mayo A. Shattuck III 12,981,479 89,622
John J. F. Sherrerd 13,056,316 14,785
<FN>
* Including abstentions and broker non-votes
</TABLE>
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 30,
1996
</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: August 9, 1996 A. B. KRONGARD
A. B. Krongard
Chairman and Chief Executive Officer
Date: August 9, 1996 BEVERLY L. WRIGHT
Beverly L. Wright
Principal Financial Officer
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
ALEX. BROWN INCORPORATED AND SUBSIDIARIES
Calculation of Earnings Per Share
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Three Months Ended
June 30, 1996 June 30, 1995
------------------- ----------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Common stock 16,146 16,146 14,911 14,911
Stock options 376 417 374 401
Convertible subordinated debentures - 2,426 - 2,582
------- ------- ------- -------
16,522 18,989 15,285 17,894
======= ======= ======= =======
Net earnings for calculating earnings per share:
Net earnings $49,841 $49,841 $22,990 $22,990
Interest expense on convertible
subordinated debentures, net of tax - 658 - 582
------- ------- ------- -------
$49,841 $50,499 $22,990 $23,572
======= ======= ======= =======
Earnings per share $ 3.02 $ 2.66 $ 1.50 $ 1.32
======= ======= ======= =======
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
------------------ ----------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Weighted average shares outstanding:
Common stock 15,993 15,993 14,765 14,765
Stock options 373 448 348 430
Convertible subordinated debentures - 2,416 - 2,579
------- ------- ------- -------
16,366 18,857 15,113 17,774
======= ======= ======= =======
Net earnings for calculating earnings per share:
Net earnings $90,537 $90,537 $39,392 $39,392
Interest expense on convertible
subordinated debentures, net of tax - 1,284 - 1,145
------- ------- ------- -------
$90,537 $91,821 $39,392 $40,537
======= ======= ======= =======
Earnings per share $ 5.53 $ 4.87 $ 2.61 $ 2.28
======= ======= ======= =======
</TABLE>
</PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> $26,970
<RECEIVABLES> $2,062,247
<SECURITIES-RESALE> $29,172
<SECURITIES-BORROWED> $0<F1>
<INSTRUMENTS-OWNED> $264,564
<PP&E> $35,634
<TOTAL-ASSETS> $2,598,160
<SHORT-TERM> $192,266
<PAYABLES> $1,545,910
<REPOS-SOLD> $0
<SECURITIES-LOANED> $0<F2>
<INSTRUMENTS-SOLD> $66,089
<LONG-TERM> $197,996
<COMMON> $1,619
$0
$0
<OTHER-SE> $594,280
<TOTAL-LIABILITY-AND-EQUITY> $2,598,160
<TRADING-REVENUE> $115,343<F3>
<INTEREST-DIVIDENDS> $69,423
<COMMISSIONS> $106,357
<INVESTMENT-BANKING-REVENUES> $235,501
<FEE-REVENUE> $54,452
<INTEREST-EXPENSE> $25,261
<COMPENSATION> $308,328
<INCOME-PRETAX> $150,648
<INCOME-PRE-EXTRAORDINARY> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> $90,537
<EPS-PRIMARY> $5.53
<EPS-DILUTED> $4.87
<FN>
<F1>Included as part of receivables.
<F2>Included as part of payables.
<F3>Includes net investment gains.
</FN>
