SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1993
Commission file number 0-14140
First Albany Companies Inc.
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(Exact name of registrant as specified in its charter)
New York 22-2655804
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 State Street, Albany, NY 12207
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(Address of principal executive offices) (Zip Code)
(518) 447-8500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
3,734,635 Shares of Common Stock were outstanding as of the close
of business on January 21, 1994.
FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Financial
Condition at December 31, 1993 and
September 24, 1993
Condensed Consolidated Statements of Operations
for the Three Months Ended
December 31, 1993 and 1992
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended
December 31, 1993 and 1992
Notes to Condensed Consolidated Financial
Statements
Item 2. Management s Discussion and Analysis of
Financial Condition and Results of
Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, September 24,
1993 1993
(In thousands of dollars) (Unaudited)
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Assets
Cash and cash equivalents $ 2,521 $ 6,971
Cash and securities segregated
under federal regs. 7,554 250
Securities purchased under
agreements to resell 2,806
Securities borrowed 276,386 374,319
Receivables from
Brokers, dealers and
clearing agencies 3,359 902
Customers 91,678 96,718
Others (See note 3) 50,809 1,863
Securities owned 29,286 21,445
Office equipment and leasehold
improvements, net 3,715 3,619
Other assets 5,068 5,901
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Total assets $470,376 $514,794
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Liabilities and Stockholders' Equity
Liabilities
Short-term bank loans $ 31,088 $ 9,931
Securities sold under agreements
to repurchase 33,102 2,825
Securities loaned 265,346 374,229
Payables to
Brokers, dealers and
clearing agencies 4,064 6,465
Customers 85,143 69,201
Others 5,406 1,752
Securities sold but not yet
purchased 2,306 1,826
Accounts payable 2,165 1,580
Accrued compensation 5,920 10,263
Accrued expenses 3,858 3,928
Notes payable 141 456
Subordinated debt 2,250
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Total liabilities 438,539 484,706
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Commitments and Contingencies
Stockholders' Equity
Common stock 40 40
Additional paid-in-capital 13,142 13,142
Retained earnings 20,287 18,719
Less treasury stock at cost (1,632) (1,813)
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Total stockholders' equity 31,837 30,088
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Total liabilities and
stockholders' equity $470,376 $514,794
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See notes to the condensed consolidated financial statements.
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
(In thousands of dollars
except for per share December 31, December 31,
and outstanding share amounts) 1993 1992
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Revenues
Commissions $ 8,860 $ 6,314
Principal transactions 9,830 8,336
Investment banking 5,709 3,985
Interest 3,780 2,063
Fees and other 1,570 1,639
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Total revenues 29,749 22,337
Interest expense 2,428 1,060
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Net revenues 27,321 21,277
Expenses excluding interest
Compensation and benefits 18,451 14,000
Clearing, settlement and brokerage
costs 530 477
Communications and data processing 1,706 1,447
Occupancy and depreciation 1,333 1,459
Selling 1,134 978
Other 1,189 1,030
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Total expenses excluding interest 24,343 19,391
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Income before income taxes 2,978 1,886
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Income tax expense 1,216 671
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Net Income $ 1,762 $ 1,215
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Net income per common and
common equivalent share:
Primary $ 0.45 $ 0.32
Fully diluted 0.45 0.32
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Weighted average common and
common equivalent shares
outstanding:
Primary 3,910,972 3,834,961
Fully diluted 3,910,972 3,834,961
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Dividend per common share
outstanding $ 0.05 $ 0.05
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See notes to the condensed consolidated financial statements.
FIRST ALBANY COMPANIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
December 31, December 31,
(In thousands of dollars) 1993 1992
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Cash flows from operating activities:
Net income $ 1,762 $ 1,215
Noncash items included in
earnings:
Depreciation and amortization 335 339
(Increase) decrease in operating
receivables:
Brokers, dealers and clearing
agencies (2,457) (628)
Customers 5,040 (1,160)
Others (48,946) 1,093
(Decrease) increase in operating
payables:
Brokers, dealers and clearing
agencies (2,401) 2,281
Customers 15,942 4,098
Others 3,654 928
Decrease (increase) in:
Securities borrowed 97,933 (17,567)
Cash and securities segregated
under federal regulations (7,304) (1,934)
Securities purchased under
agreement to resell 2,806
Securities owned (7,841) (22,375)
Other assets 833 2
(Decrease) increase in:
Securities loaned (108,883) 17,414
Securities sold under agreement
to repurchase 30,277
Securities sold but not yet
purchased 480 2,152
Accounts payable and accrued
expenses (3,828) (5,947)
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Cash flows used by operating
activities (22,598) (20,089)
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Cash flows from financing activities:
Net proceeds from short-term
bank loans 21,157 20,200
Net payments of notes payable (315) (381)
Net payments of subordinated loan (2,250) (125)
Sale of treasury stock 163
Dividends paid (176) (160)
Proceeds from issuance of
restricted stock 14
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Cash flows provided by financing
activities 18,579 19,548
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Cash flows used for investing
activities:
Net acquisition of office equipment
and leasehold improvements (431) (64)
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Cash flows used for investing
activities (431) (64)
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Decrease in cash and cash
equivalents (4,450) (605)
Cash and cash equivalents at
beginning of period 6,971 2,650
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Cash and cash equivalents at end
of period $ 2,521 $ 2,045
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Supplemental disclosures of cash flow information: Income tax payments
totaled $576 in 1993 and $322 in 1992. Interest payments totaled $2,320 in
1993 and $948 in 1992.
See notes to the condensed consolidated financial statements.
FIRST ALBANY COMPANIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of results for such
periods. The results for any interim period are not necessarily indicative
of results for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted. These
consolidated financial statements should be read in conjunction with
financial statements and notes for the year ended September 24, 1993.
2. Cash and Securities Under Federal Regulations
Cash and resale agreements collateralized by U.S. Government securities
have been segregated in special reserve bank accounts for the exclusive
benefit of customers under Rule 15c3-3 of the Securities and Exchange
Commission.
3. Receivables from Others
Amounts receivable from others as of:
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December 31, December 31,
(In thousands of dollars) 1993 1992
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Adjustment to record securities
owned on a trade date basis,
net $ 46,122
Others 4,687 $ 1,863
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Total $ 50,809 $ 1,863
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Adjustment to record securities owned on a trade date basis, net
increased primarily from municipal finance activities related to refunding
transactions which were sold for a January settlement.
4. Notes Payable
Notes payable consist of:
An unsecured note for $141,000 is payable in quarterly installments of
$15,625 plus interest at the prime rate (6% at December 31, 1993) plus 1/2%.
The note matures March 25, 1996.
5. Contingencies
In the normal course of business, the Company has been named a
defendant, or otherwise has possible exposure, in several claims arising in
the ordinary course of its business. Certain of these actions are class
actions which seek unspecified damages which could be substantial. Although
there can be no assurance as to the eventual outcome of litigation in which
the Company has been named as a defendant or otherwise has possible exposure,
the Company has provided for those actions most likely of adverse
dispositions. Although further liabilities of undeterminable amounts are
possible, in the opinion of management, based upon the advice of its general
counsel and outside counsel, such litigation will not, in the aggregate, have
a material adverse effect on the Company s financial position.
6. Stockholders' Equity
On October 21, 1993, the Board of Directors declared the regular
quarterly dividend of $0.05 per share for the fourth quarter along with a 5%
stock dividend. Both were payable on November 15, 1993 to shareholders of
record on November 1, 1993.
On January 18, 1994, the Board of Directors declared the regular
quarterly dividend of $0.05 per share for the first quarter, ended December
31, 1993, payable on February 18, 1994 to shareholders of record on February
4, 1994.
7. Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share for both the primary
and fully diluted computation have been based upon the weighted average
number of common shares and the dilutive common stock equivalents
outstanding. The dilutive effect of the common stock equivalents was
determined using the treasury stock method.
Net income per common and common equivalent share, along with both the
primary and fully dilutive weighted average common and common equivalent
shares outstanding, have been adjusted to reflect all of the 5% stock
dividends declared.
8. Net Capital Requirements
The Company's broker-dealer subsidiary, First Albany Corporation, is
subject to the Securities and Exchange Commission's Uniform Net Capital Rule
which requires the maintenance of a minimum net capital as calculated and
defined in the Rule. As of December 31, 1993, the broker-dealer subsidiary
had aggregate net capital, as defined, of $17,873,000-exceeding the required
net capital by $15,841,000.
9. Subsequent Events
On January 4, 1994, one of the Company's subsidiaries, First Albany
Asset Management, entered into an agreement for the sale of certain assets
relating to the management of Investors Preference Fund For Income, Inc. and
Investors Preference New York Tax Free Fund Inc. The sales price is
contingent upon the asset value of the funds on the closing date and the
first anniversary of the closing date. Accordingly, the ultimate sales price
to be realized is not yet determinable.
On February 1, 1994, the Company completed a purchase of 130,000 shares
of its common stock, representing 3.5% of the shares then outstanding for
$1,072,500. The purchase was internally financed.
In February 1994, a firm, in which the Company had invested, completed
an initial public offering. As a result, the Company's investment
appreciated in value and as of February 4, 1994, it recorded an unrealized
pretax gain of approximately $900,000.
FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS COMPARISON
OF 1993 VS. 1992
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1993 vs.
Three Months Ended 1992 Percentage
December 31, December 31, Increase Increase
(In thousands of dollars) 1993 1992 (Decrease) (Decrease)
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Revenues
Commissions $ 8,860 $ 6,314 $ 2,546 40%
Principal transactions 9,830 8,336 1,494 18%
Investment banking 5,709 3,985 1,724 43%
Interest income 3,780 2,063 1,717 83%
Fees and others 1,570 1,639 (69) (4)%
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Total revenues 29,749 22,337 7,412 33%
Interest expense 2,428 1,060 1,368 129%
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Net revenues 27,321 21,277 6,044 28%
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Expenses excluding interest
Compensation and
benefits 18,451 14,000 4,451 32%
Clearing, settlement and
brokerage cost 530 477 53 11%
Communications and
data processing 1,706 1,447 259 18%
Occupancy and
depreciation 1,333 1,459 (126) (9)%
Selling 1,134 978 156 16%
Other 1,189 1,030 159 15%
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Total expenses excluding
interest 24,343 19,391 4,952 26%
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Income before income
taxes 2,978 1,886 1,092 58%
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Income tax expense 1,216 671 545 81%
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Net income $ 1,762 $ 1,215 $ 547 45%
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Net interest income
Interest income $ 3,780 $ 2,063 $ 1,717 83%
Interest expense 2,428 1,060 1,368 129%
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Net interest income $ 1,352 $ 1,003 $ 349 35%
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FIRST ALBANY COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management s discussion and analysis of certain
significant factors which have affected the Company s financial position and
results of operations during the periods included in the accompanying
condensed consolidated financial statements.
Business Environment
First Albany Corporation, a wholly owned subsidiary of First Albany
Companies Inc. (the Company), is a full service investment banking and
brokerage firm. Its primary business includes the underwriting,
distribution, and trading of fixed income and equity securities. The
investment banking and brokerage business earns revenues in direct
correlation with the general level of trading activity in the stock and bond
markets. This level of activity cannot be controlled by the Company;
however, many of the Company s costs are fixed. Therefore, the Company's
earnings, like those of others in the industry, reflect the activity in the
markets and can fluctuate accordingly.
Results of Operations
Three Months Periods Ended December 31, 1993 and December 31, 1992
Net Income
Net income for the quarter ended December 31, 1993 was $1.8 million or
$0.45 per share compared to $1.2 million or $0.32 per share a year ago.
Revenues continue to benefit from strong levels of brokerage volume as well
as increased investment banking activity.
Commissions
Commission revenues increased $2.5 million or 40% in this year s first
quarter. This increase was comprised primarily of increases in listed and
over-the-counter agency stock commissions of $1.2 million or 29% and from
mutual funds commission revenues of $1.2 million or 61%.
Principal Transactions
Principal transactions increased $1.5 million or 18% in this year s
first quarter resulting from an increase in institutional transactions of
$1.2 million.
Investment Banking
Investment banking revenues were up $1.7 million or 43% in this year s
first quarter. Revenues from retail accounts increased $0.4 million
(primarily equity new issues), institutional accounts increased $0.7 million
(primarily equity new issues), underwriting fees remained constant, and
investment banking fees increased $0.6 million.
Net Interest Income
Net interest income increased $0.3 million due primarily to increased
revenues from customer margin balances.
Compensation and Benefits
Compensation and benefits increased $4.5 million due primarily to the
increase in revenues. Sales-related compensation increased $3.5 million,
salaries increased $0.7 million, and benefits increased $0.3 million.
Liquidity and Capital Resources
A substantial portion of the company s assets, similar to other
brokerage and investment banking firms, is liquid, consisting of cash and
assets readily convertible into cash. These assets are financed primarily by
the Company's interest-bearing and non-interest-bearing payables to customers
and payables to brokers and dealers secured by loaned securities and bank
lines-of-credits. Securities borrowed and securities loaned will fluctuate
due primarily to the current level of business activity in this area.
Receivables from others increased due primarily from municipal activities
relating to refunding activities (See note 3). The increase in receivables
from others was financed primarily by repurchase agreements and short-term
borrowings. The Company s broker-dealer subsidiaries-First Albany
Corporation and Northeast Brokerage Services Corp.-at December 31, 1993, were
in compliance with the net capital requirements of the Securities and
Exchange Commission (SEC) and had capital in excess of the minimum required.
Management believes that funds provided by operations and a variety of
committed and uncommitted bank lines-of-credit-totaling $80,000,000-of which
approximately $49,670,000 were unused as of December 31, 1993-will provide
sufficient resources to meet present and reasonably foreseeable short-term
financial needs.
On October 21, 1993, the Board of Directors declared the regular
quarterly dividend of $0.05 per share for the fourth quarter along with a 5%
stock dividend, both payable on November 15, 1993 to shareholders of record
on November 1, 1993.
On January 18, 1994, the Board of Directors declared the regular
quarterly dividend of $0.05 per share for the first quarter, ended December
31, 1993, payable on February 18, 1994 to shareholders of record on February
4, 1994.
The Company believes that funds provided by operations will also provide
sufficient resources to fund the acquisition of office equipment and
leasehold improvements, current long-term loan repayment requirements, and
other long-term requirements.
Item 1. Legal Proceedings
In the normal course of business, the Company has been named a
defendant, or otherwise has possible exposure, in several claims arising in
the ordinary course of its business. Certain of these actions are class
actions which seek unspecified damages which could be substantial. Although
there can be no assurance as to the eventual outcome of litigation in which
the Company has been named as a defendant or otherwise has possible exposure,
the Company has provided for those actions most likely of adverse
dispositions. Although further liabilities of undeterminable amounts are
possible, in the opinion of management, based upon the advice of its general
counsel and outside counsel, such litigation will not, in the aggregate, have
a material adverse effect on the Company s financial position.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(11) Statement Re: Computations of per share earnings.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter ended
December 31, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
First Albany Companies Inc.
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(Registrant)
Date: 2/10/94 /s/ Alan P. Goldberg
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Alan P. Goldberg
President - Director
Date: 2/10/94 /s/ David J. Cunningham
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David J. Cunningham
Vice President and Chief Financial Officer
(Principal Accounting Officer)