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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
AMENDMENT NO. 1
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: SEPTEMBER 30, 1999
Commission file number: 1-14933
U.S. TRUST CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3818952
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
114 West 47th Street, New York, New York 10036-1532
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(Address of principal executive offices) (Zip Code)
(212) 852-1000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report)
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.
18,665,033 shares, Common Stock, $1 par value, as of October 29, 1999
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The following is an amendment to Part I - Item 1 of U.S. Trust
Corporation's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999, as filed November 12, 1999. This amendment is made to
correct the column heading on page 4 to state "For the nine months ended
September 30, 1999 and 1998". Previously, the column heading stated "For the
three months ended September 30, 1999 and 1998".
2
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U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
INCREASE (DECREASE)
-------------------
1999 1998 $ %
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Fee Revenue $103,478 $ 88,892 $14,586 16.4 %
Net Interest Revenue * 28,557 24,690 3,867 15.7
-------- -------- ------- --------
TOTAL REVENUE 132,035 113,582 18,453 16.2
-------- -------- ------- --------
OPERATING EXPENSES
Salaries 36,175 30,402 5,773 19.0
Performance Compensation 12,448 11,121 1,327 11.9
Sales Commissions and Incentives 7,585 4,807 2,778 57.8
Other Employee Benefits 9,241 7,830 1,411 18.0
-------- -------- ------- --------
Total Salaries, Performance
Compensation and Other Benefits 65,449 54,160 11,289 20.8
Net Occupancy 9,992 9,536 456 4.8
Other 24,580 23,849 731 3.1
-------- -------- ------- --------
TOTAL OPERATING EXPENSES 100,021 87,545 12,476 14.3
-------- -------- ------- --------
Income Before Income Tax Expense 32,014 26,037 5,977 23.0
Income Tax Expense 12,485 10,155 2,330 22.9
-------- -------- ------- --------
NET INCOME $ 19,529 $ 15,882 $ 3,647 23.0 %
======== ======== ======= ========
BASIC EARNINGS PER SHARE $ 1.05 $ 0.85 $ 0.20 23.5 %
======== ======== ======= ========
DILUTED EARNINGS PER SHARE $ 0.93 $ 0.76 $ 0.17 22.4 %
======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Net Interest Revenue consists of interest income, net securities gains
(losses) less interest expense and the provision for credit losses. There
was no provision for credit losses for the three month period ended
September 30, 1999. The provision for credit losses was $150,000 for the
three month period ended September 30, 1998
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U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------
INCREASE (DECREASE)
-------------------
1999 1998 $ %
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fee Revenue $308,543 $250,805 $ 57,738 23.0 %
Net Interest Revenue * 86,486 74,748 11,738 15.7
-------- -------- -------- --------
TOTAL REVENUE 395,029 325,553 69,476 21.3
-------- -------- -------- --------
OPERATING EXPENSES
Salaries 103,529 86,184 17,345 20.1
Performance Compensation 43,628 33,208 10,420 31.4
Sales Commissions and Incentives 20,968 13,823 7,145 51.7
Other Employee Benefits 25,838 22,599 3,239 14.3
-------- -------- -------- --------
Total Salaries, Performance
Compensation and Other Benefits 193,963 155,814 38,149 24.5
Net Occupancy 29,131 27,425 1,706 6.2
Other 77,297 67,117 10,180 15.2
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 300,391 250,356 50,035 20.0
-------- -------- -------- --------
Income Before Income Tax Expense 94,638 75,197 19,441 25.9
Income Tax Expense 37,221 29,327 7,894 26.9
-------- -------- -------- --------
NET INCOME $ 57,417 $ 45,870 $ 11,547 25.2 %
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 3.10 $ 2.44 $ 0.66 27.0 %
======== ======== ======== ========
DILUTED EARNINGS PER SHARE $ 2.75 $ 2.19 $ 0.56 25.6 %
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Net Interest Revenue consists of interest income, net securities gains
(losses) less interest expense and the provision for credit losses. There
was no provision for credit losses for the nine month period ended
September 30, 1999. The provision for credit losses was $450,000 for the
nine month period ended September 30, 1998.
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U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CONDITION
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
-------------- --------------
<S> <C> <C>
Cash and Due from Banks $ 209,739 $ 108,346
Interest Earning Securities 1,183,662 1,517,351
Loans, Net of Allowance for Credit Losses
($20,014 in 1999 and $19,414 in 1998) 2,569,282 2,171,393
Other Assets 413,995 345,772
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Total Assets $ 4,376,678 $ 4,142,862
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total Deposits $ 3,646,105 $ 3,414,791
Short and Long-Term Credit Facilities 144,469 208,698
Other Liabilities 284,652 274,738
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Total Liabilities 4,075,226 3,898,227
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Stockholders' Equity 301,452 244,635
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Total Liabilities and Stockholders' Equity $ 4,376,678 $ 4,142,862
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Capital Retained Treasury Loan to Comprehensive Stockholders'
Stock Surplus Earnings Stock ESOP Income/(Loss) Equity
--------- ---------- ----------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ 19,971 $ 18,902 $ 293,289 $ (87,768) $ (3,773) $ 4,014 $ 244,635
Net Income 57,417 57,417
Net Unrealized (Loss) on Securities
Available for Sale (11,375) (11,375)
----------- ------------- ------------
Total Comprehensive Income 57,417 (11,375) 46,042
Purchases of Treasury Stock (35,397) (35,397)
Principal Payment by ESOP 3,773 3,773
Cash Dividends Declared ($0.66 Per Share) (12,179) (12,179)
Issuance of Shares for Acquisitions 12,564 32,181 44,745
Capital Effect of Employee Benefit Plans 89 3,260 18 6,466 9,833
--------- ---------- ----------- ----------- ---------- ------------- ------------
Balance, September 30, 1999 $ 20,060 $ 34,726 $ 338,545 $ (84,518) $ - $ (7,361) $ 301,452
========= ========== =========== =========== ========== ============= ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Capital Retained Treasury Loan to Comprehensive Stockholders'
Stock Surplus Earnings Stock ESOP Income Equity
--------- ---------- ----------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $ 19,895 $ 12,325 $ 244,980 $ (42,627) $ (7,254) $ 3,827 $ 231,146
Net Income 45,870 45,870
Net Unrealized Gain on Securities
Available for Sale 2,164 2,164
----------- ------------- ------------
Total Comprehensive Income 45,870 2,164 48,034
Purchases of Treasury Stock (42,648) (42,648)
Principal Payment by ESOP 3,481 3,481
Cash Dividends Declared ($0.54 Per Share) (10,114) (10,114)
Issuance of Shares for Acquisitions 2,453 6,503 8,956
Capital Effect of Employee Benefit Plans 52 2,321 75 3,644 6,092
--------- ---------- ----------- ----------- ---------- ------------- ------------
Balance, September 30, 1998 $ 19,947 $ 17,099 $ 280,811 $ (75,128) $ (3,773) $ 5,991 $ 244,947
========= ========== =========== =========== ========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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U.S. TRUST CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 80,307 $ 61,152
------------ ------------
Cash Flows From Investing Activities:
Interest Earning Securities:
Purchases (337,684) (237,865)
Sales 10,019 1,315
Maturities, Calls and Mandatory Redemptions 638,281 629,488
Net Increase in Loans (398,526) (147,822)
Other, Net (13,657) (29,632)
------------ ------------
Net Cash Provided by (Used in) Investing Activities (101,567) 215,484
------------ ------------
Cash Flows From Financing Activities:
Net Change in Non-Interest Bearing Deposits 19,746 (53,813)
Net Change in Interest Bearing Deposits 211,568 144,872
Net Change in Short and Long -Term Credit Facilities (64,229) (48,030)
Purchases of Treasury Stock (35,397) (42,648)
Other, Net (9,035) (8,219)
------------ ------------
Net Cash Provided by (Used in) Financing Activities 122,653 (7,838)
------------ ------------
Net Change in Cash and Cash Equivalents 101,393 268,798
Cash and Cash Equivalents at January 1 108,346 74,887
------------ ------------
Cash and Cash Equivalents at September 30 $ 209,739 $ 343,685
============ ============
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Income Taxes Paid $ 32,257 $ 32,478
Interest Expense Paid 93,588 91,358
Noncash Items:
Issuance of stock for acquisitions $ 44,745 $ 8,955
Issuance of stock for employee benefit plans $ 9,147 $ 5,183
</TABLE>
The accompanying notes are an integral part of these financial statements.
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U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
U.S. Trust Corporation (individually, the "Parent") and its wholly owned
subsidiaries (collectively, with the Parent, the "Corporation"). All material
intercompany accounts and transactions have been eliminated in consolidation.
The accounting and reporting policies of the Corporation conform with
generally accepted accounting principles and general practice within the
investment management and banking industries. The preparation of financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities (including, but not limited to the allowance for credit losses,
retirement and postretirement benefits and deferred income taxes) as of the
financial statement dates and the reported amounts of revenues and expenses
during the reporting periods. Since management's judgment involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results.
In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position and results of operations
for the interim periods have been made. Such adjustments, unless otherwise noted
in these Notes to the Condensed Consolidated Financial Statements and/or
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Part I - Item 2 of this report), are of a normal recurring nature.
These financial statements should be read in conjunction with the audited
financial statements included in the Corporation's annual report on Form 10-K
for the year ended December 31, 1998 as well as the Form 10-Q for the first two
quarters of 1999.
2. ACCOUNTING CHANGES AND DEVELOPMENTS
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," ("FAS 131") was issued in
June 1997, effective for interim and annual periods beginning with consolidated
financial statements for December 31, 1998. Comparative prior period information
is required. FAS 131 requires disclosure of financial and descriptive
information about the Corporation's reportable operating segments. The
Corporation has presented the financial disclosures and commentary prescribed by
FAS 131 in the "Businesses of U.S. Trust" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations (Part I - Item 2 of
this report).
In March 1998, Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," ("SOP 98-1") was
issued effective for financial statements issued in 1999. SOP 98-1 requires the
capitalization of eligible costs of specified activities related to computer
software developed or obtained for internal use. SOP 98-1 was adopted by the
Company on January 1, 1999. The adoption of SOP 98-1 has not had a material
effect on the Corporation's financial condition or results of operations.
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U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING CHANGES AND DEVELOPMENTS (CONTINUED)
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("FAS 133") was
issued. FAS 133 establishes accounting and reporting standards for derivatives.
FAS 133 requires recognition of all derivatives as either assets or liabilities
in the statement of financial condition and measurement of those instruments at
fair value. Fair market valuation adjustments for derivatives meeting hedge
criteria will be recorded in either comprehensive income or earnings depending
on their classification. The Corporation's use of derivatives to date has been
limited to utilizing interest rate swaps as hedges to mitigate interest rate
exposure associated with short-term floating interest-rate deposits. As such
this use of interest rate swaps would be categorized as a cash flow hedge under
FAS 133 and the effective portion of the gain or loss on the interest rate swaps
would be recorded in comprehensive income. In June 1999, Statement of Financial
Accounting Standards No 137, "Accounting for Derivative Instruments and Hedging
Activities- Deferral of the Effective Date of FASB Statement No 133" ("FAS 137")
was issued. FAS 137 delayed the effective date of FAS 133 one year to fiscal
years beginning after June 15, 2000. Management is evaluating the impact of
adopting FAS 133 and does not believe that it will have a material impact on its
financial condition or its results from operations.
3. ACQUISITIONS
On August 31, 1999, the Corporation acquired NCT Holdings, Inc. the parent
of North Carolina Trust Company, a non-deposit banking corporation headquartered
in Greensboro, North Carolina. North Carolina Trust Company primarily engages in
the business of investment management and fiduciary services and has
approximately $2.1 billion in assets under management. Under the terms of the
acquisition, the Corporation made a $41.5 million initial payment comprised of
both cash and common stock of the Corporation (411,773 shares) and may make
additional payments based upon business retention and other considerations.
On January 29, 1999, the Corporation acquired Radnor Capital Management,
Inc., an investment management company located in Wayne, Pennsylvania with
approximately $727 million in assets under management. Under the terms of the
acquisition, the Corporation made a $7.8 million initial payment in the form of
the Corporation's common shares (101,604 shares) and may make additional
payments in its own common shares based upon business retention and other
conditions.
These acquisitions were accounted for using the purchase method of
accounting and did not have a material effect on the Corporation's financial
statements.
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U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EARNINGS PER SHARE
The calculations of basic earnings per share and diluted earnings per share
for the three-month and nine-month periods ended September 30, 1999 and
September 30, 1998 are reflected in the following table.
<TABLE>
<CAPTION>
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
- -------------------------------------------------------------------------------------------------------------------------
(In Thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income for basic earnings per share $19,529 $15,882 $57,417 $45,870
Dividend equivalents on stock based benefit plans (after-tax) 220 179 614 502
--------- --------- --------- ---------
Net income for diluted earnings per share $19,749 $16,061 $58,031 $46,372
Weighted average shares outstanding for basic earnings per share 18,527 18,707 18,540 18,823
Dilutive effect of stock based benefit plans 2,685 2,432 2,597 2,320
--------- --------- --------- ---------
Total dilutive shares outstanding 21,212 21,139 21,137 21,143
========= ========= ========= =========
Basic earnings per share $ 1.05 $ 0.85 $ 3.10 $ 2.44
========= ========= ========= =========
Diluted earnings per share $ 0.93 $ 0.76 $ 2.75 $ 2.19
========= ========= ========= =========
</TABLE>
5. NET INTEREST REVENUE
The following is an analysis of the composition of net interest revenue:
<TABLE>
<CAPTION>
Three Month Periods Nine Month Periods
Ended September 30, Ended September 30,
-------------------------------- ---------------------------------
Increase Increase
(In Thousands) 1999 1998 (Decrease) 1999 1998 (Decrease)
- ---------------------------------------- -------- -------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest revenue:
Loans $ 45,338 $ 38,052 19.1% 126,213 110,088 14.6%
Securities:
Taxable 13,346 14,498 (7.9) 41,524 45,284 (8.3)
Tax-exempt 1,204 1,037 16.1 3,472 2,875 20.8
Short-term investments and deposits
with banks 1,706 2,051 (16.8) 8,004 8,202 (2.4)
-------- -------- ----------- --------- -------- -----------
Total interest revenue 61,594 55,638 10.7 179,213 166,449 7.7
-------- -------- ----------- --------- -------- -----------
Interest expense:
Deposits 30,087 27,259 10.4 83,818 80,123 4.6
Short and long-term credit facilities 2,950 3,540 (16.7) 8,926 11,132 (19.8)
-------- -------- ----------- --------- -------- -----------
Total interest expense 33,037 30,799 7.3 92,744 91,255 1.6
-------- -------- ----------- --------- -------- -----------
Net interest income 28,557 24,839 15.0 86,469 75,194 15.0
Provision for credit losses - (150) N/M - (450) N/M
Securities gains, net - 1 N/M 17 4 N/M
-------- -------- ----------- --------- -------- -----------
Net interest revenue $ 28,557 $ 24,690 15.7% $ 86,486 $ 74,748 15.7%
======== ======== =========== ========= ======== ===========
</TABLE>
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U.S. TRUST CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PLEDGED ASSETS
Financial instruments carried at $203.1 million on September 30, 1999 and
$230.3 million on December 31, 1998 were pledged to secure public deposits as
collateral for borrowings, to qualify for fiduciary powers and for other
permitted purposes.
7. CONTINGENCIES
There are various pending and threatened actions and claims against the
Corporation in which the Corporation has denied liability and which it will
vigorously contest. Although there can be no assurance as to the ultimate
outcome, management, after consultation with counsel and based on current
available information, is of the opinion that the ultimate resolution of such
matters, taken in the aggregate, is unlikely to have a material adverse effect
on the Corporation's financial position, results of operations or cash flows.
8. RECLASSIFICATIONS
Certain amounts presented in the prior period have been reclassified to
conform with the current period's presentation.
9. OPERATING SEGMENTS
The Corporation has presented the financial disclosures on its operating
segments in the "Businesses of U.S. Trust" section of Management's Discussion
and Analysis of Financial Condition and Results of Operations (Part I - Item 2
of this report).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused Amendment No. 1 to be signed on its behalf by the
undersigned thereunto duly authorized.
U. S. Trust Corporation
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(Registrant)
Date: December 1, 1999 By: /s/ Richard E. Brinkmann
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Richard E. Brinkmann
Managing Director and
Comptroller
(Principal Accounting Officer)
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