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COVER
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 1-8529
LEGG MASON, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-1200960
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 South Calvert Street 21202
Baltimore, Maryland (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 539-0000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of May 18, 1995, the aggregate market value of the registrant's common
stock held by non-affiliates was $268,734,674.
As of May 18, 1995, the number of shares outstanding of the registrant's
common stock was 12,298,865.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement dated June 15,
1995 are incorporated by reference into Part III.
1
PART I
Item 1. Business.
General
Legg Mason, Inc. (the "Company") is a holding company which,
through its subsidiaries, is engaged in securities brokerage and
trading, investment management of Company-sponsored mutual funds and
individual and institutional accounts, investment banking for
corporations and municipalities, sale of insurance and annuity
products, commercial mortgage banking and provision of other financial
services.
The Company's principal broker-dealer subsidiary is Legg
Mason Wood Walker, Incorporated ("Legg Mason Wood Walker"), a full
service regional broker-dealer and investment banking firm operating
primarily in the Eastern and Mid-South regions of the United
States. Another broker-dealer subsidiary, Howard, Weil, Labouisse,
Friedrichs Incorporated ("Howard Weil"), engages in public finance
in the Mid-South region as well as energy-related investment
banking and institutional brokerage.
Investment advisory subsidiaries of the Company, and their
respective assets under management as of March 31, 1995, include Legg
Mason Fund Adviser, Inc., which serves as investment adviser to or
manager of Company-sponsored mutual funds, with assets of
approximately $4.1 billion; Western Asset Management Company, which
manages fixed-income assets for institutional accounts, with
approximately $12.5 billion under management; Batterymarch Financial
Management, Inc., which manages emerging markets, international and
U.S. equity portfolios for institutional clients, with approximately
$4.9 billion under management; Legg Mason Capital Management, Inc.,
which serves as investment adviser to individual and institutional
accounts, with approximately $740 million under management; Gray,
Seifert & Co., Inc., which serves as investment adviser to wealthy
individual, family group, endowment and foundation accounts, with
approximately $680 million under management; The Fairfield Group,
Inc., which serves as investment adviser to mutual funds (with assets
of approximately $310 million) structured to meet the investment needs
of banks and bank trust departments.
The Company's principal real estate finance subsidiaries are
Legg Mason Real Estate Services, Inc. (formerly named Latimer & Buck,
Inc.) and Dorman & Wilson, Inc. which are primarily engaged in
commercial mortgage banking and commercial loan servicing.
In the fiscal year ended March 31, 1995, the Company's total
revenues were derived approximately 51% from individual investor
brokerage accounts, including interest on margin accounts, 6% from
institutional investor brokerage accounts, 24% from investment
advisory services, and the balance from transactions as principal with
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other dealers, investment banking, mortgage banking and other
activities.
The Company was incorporated in Maryland in 1981 to serve as
a holding company for Legg Mason Wood Walker and other subsidiaries.
The predecessor company to Legg Mason Wood Walker was formed in 1970
under the name Legg Mason & Co., Inc. to combine the operations of
Legg & Co., a Maryland-based broker-dealer formed in 1899, and Mason &
Company, Inc., a Virginia-based broker-dealer formed in 1962. The
Company's subsequent growth has occurred through internal expansion as
well as through its acquisitions of Wood Walker & Co., a New York
broker-dealer, in 1973; Mason & Lee, Incorporated, a Virginia
broker-dealer, in 1981; C. C. Collings and Company, Inc. and A. E.
Masten & Co., Incorporated, two Pennsylvania broker-dealers, in 1984;
Hill & Co., an Ohio broker-dealer, in 1985; Western Asset Management
Company and Warren W. York & Co., a Pennsylvania broker-dealer, in
1986; Howard Weil in 1987; Latimer & Buck, Inc. in 1990; Dorman &
Wilson, Inc. in 1991; The Fairfield Group, Inc. in April 1993; Gray,
Seifert & Co., Inc. in April 1994; and Batterymarch Financial
Management in January 1995.
Unless the context otherwise requires, all references in
this Report to the Company include Legg Mason, Inc. and its
predecessors and subsidiaries.
Registrations and Exchange Memberships
Legg Mason Wood Walker and Howard Weil are registered as
broker-dealers with the Securities and Exchange Commission ("SEC"), are
members of the New York Stock Exchange, Inc. ("NYSE"), the New York
Futures Exchange, Inc., the National Association of Securities
Dealers, Inc. ("NASD") and the Securities Investors Protection
Corporation ("SIPC"), and are registered as futures commission
merchants with the Commodity Futures Trading Commission. In addition,
Legg Mason Wood Walker is a member of the Philadelphia Stock Exchange,
Inc.
3
Brokerage Offices
The following table reflects, as of March 31, 1995, certain
information with respect to the Company's securities brokerage
offices.
Number of
Investment Number of
Location Executives Offices
United States:
Maryland.................. 227 16
Pennsylvania.............. 165 18
Louisiana................. 93 9
Virginia.................. 83 9
North Carolina............ 60 7
Texas..................... 45 4
Massachusetts............. 40 1
District of Columbia...... 30 1
Ohio...................... 24 3
New York.................. 22 2
Alabama................... 21 3
New Jersey................ 21 4
Florida................... 19 5
Mississippi............... 19 3
Connecticut............... 15 3
West Virginia............. 15 2
Delaware.................. 11 2
Maine..................... 11 1
Tennessee................. 8 1
South Carolina............ 6 1
Georgia................... 3 1
Illinois.................. 2 1
France:
Paris..................... 5 1
TOTAL.............. 945 98
4
Revenues by Source
The following table sets forth certain information regarding
the revenues of the Company by source.
LEGG MASON, INC. AND SUBSIDIARIES
Years Ended March 31,
1993 1994 1995
(Dollars in thousands)
Amount Percent Amount Percent Amount Percent
Commissions
Listed.................. $ 58,048 17.3% $ 67,034 16.9% $ 59,057 15.9%
Over-the-Counter........ 26,644 7.9 29,920 7.5 24,519 6.6
Mutual Funds............ 23,927 7.1 31,364 7.9 23,314 6.3
Insurance & Annuities... 5,972 1.8 10,660 2.7 11,621 3.1
Options & Commodities... 2,714 0.8 2,397 0.6 2,224 0.6
Total............... 117,305 34.9 141,375 35.6 120,735 32.5
Principal Transactions(1)
Customer Related:
Government & Agency... 22,258 6.6 16,235 4.1 12,986 3.5
Municipal............. 12,907 3.9 13,173 3.3 17,901 4.8
Corporate Debt........ 2,939 0.9 2,855 0.7 5,989 1.6
Equities.............. 12,120 3.6 17,969 4.6 18,467 5.0
50,224 15.0 50,232 12.7 55,343 14.9
Dealer Related:
Government & Agency... (1,043) (0.3) 714 0.1 903 0.2
Municipal............. 241 0.1 (585) (0.1) (75) -
Corporate Debt........ 72 - 45 - 515 0.1
Equities.............. 5,506 1.6 3,543 0.9 2,784 0.8
4,776 1.4 3,717 0.9 4,127 1.1
Total............... 55,000 16.4 53,949 13.6 59,470 16.0
Investment Advisory &
Related Fees............ 50,915 15.1 65,583 16.5 88,345 23.8
Investment Banking(2)
Corporate............... 45,432 13.5 60,838 15.3 27,078 7.3
Municipal............... 21,143 6.3 18,445 4.6 7,575 2.0
Total............... 66,575 19.8 79,283 19.9 34,653 9.3
Interest Income........... 23,973 7.1 29,990 7.5 39,265 10.6
Other(3).................. 22,579 6.7 27,354 6.9 29,123 7.8
Total Revenues...... $336,347 100.0% $397,534 100.0% $371,591 100.0%
(1) Principal transactions (securities transactions in which the Company buys
for or sells from its own inventory) are classified as "Customer Related"
when such transactions are effected with a customer of the Company
(whether an individual or institutional investor) and as "Dealer Related"
when such transactions are effected with another dealer.
(2) Principally selling concessions from underwriting participations and fees
from managed offerings.
(3) Includes revenues from mortgage servicing and loan originations (1993:
$12,198; 1994: $14,908; 1995: $14,603) and real estate appraisal and
consulting fees (1993: $3,776; 1994: $3,094; 1995: $2,805); and
retirement account fees (1993: $2,205; 1994: $1,922; 1995: $2,391).
5
Retail Securities Business
For the fiscal years ended March 31, 1993, 1994 and 1995,
revenues derived from securities transactions for individual investors
(excluding interest on margin accounts) constituted approximately 82%,
84% and 88%, respectively, of total revenues from securities
transactions and 50%, 50% and 45%, respectively, of the Company's
total revenues. Management believes that such services will continue
to be the Company's primary source of revenues in the foreseeable
future, although the percentage of total revenues may decrease
primarily as a result of increases in investment advisory revenues.
Retail commissions are charged on both exchange and over-the-counter
("OTC") transactions in accordance with a schedule which the Company
has formulated and may change from time to time. Discounts from the
schedule are granted in certain cases. The Company also offers
certain account arrangements under which a single fee is charged based
on a percentage of the assets held in a customer's account and no
commissions are charged on a transaction by transaction basis. When
OTC transactions are executed by the Company as a dealer, the Company
receives, in lieu of commissions, mark-ups or mark-downs that are
included in "Revenues by Source" as customer-related principal
transactions. The Company has dealer-sales agreements with several
major distributors that offer mutual fund shares through
broker-dealers. In addition, the Company sells shares of
Company-sponsored mutual funds. See "Company-Sponsored Mutual Funds."
Margin Accounts, Interest Income and Free Credit Balances
Customers' securities transactions are effected on either a
cash or a margin basis. In a margin account, the customer pays less
than the full cost of the securities purchased and the broker-dealer
makes a loan for the balance of the purchase price secured by the
securities purchased or other securities owned by the investor. The
amount of the loan is subject to the margin regulations (Regulation T)
of the Board of Governors of the Federal Reserve System, NYSE margin
requirements, and the Company's internal policies, which in some
instances are more stringent than Regulation T or NYSE requirements.
In permitting a customer to purchase securities on margin, the Company
is subject to the risk that a market decline could reduce the value of
its collateral below the amount of the customer's indebtedness and
that the customer might be unable otherwise to repay the indebtedness.
Interest is charged on amounts borrowed by customers (debit
balances) to finance their margin transactions. The rate of interest
charged to customers is the brokers' call money rate (the interest
rate on bank loans to brokers collateralized by securities) plus an
additional amount that varies depending upon the size of the
customer's debit balance and level of account activity. For the
fiscal years ended March 31, 1993, 1994 and 1995, interest income
derived from these sources constituted approximately 3%, 3% and 5%,
respectively, of the Company's total revenues. Interest is also
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earned on securities owned by the Company and on operating and
segregated cash balances.
Free credit balances (excess funds kept by customers in their
brokerage accounts), equity capital and bank lines of credit are the
primary sources of funds to finance customers' margin account
borrowings. Legg Mason Wood Walker pays interest on certain free
credit balances in customers' accounts when the customer has indicated
that the funds will be used for reinvestment at a future date. The
rate of interest on these customer balances has generally been below
money market fund rates. In fiscal 1995, Legg Mason Wood Walker paid
interest on approximately 76% of customer free credit balances.
Institutional Business
The Company is engaged in executing securities transactions
for institutional investors such as banks, mutual funds, insurance
companies and pension and profit-sharing plans. Such investors
normally purchase and sell securities in large quantities which
require special marketing and trading expertise. The Company believes
that a significant portion of its institutional brokerage commissions
is received as a consequence of provision to institutions of research
opinions and services regarding specific corporations and industries
and other matters affecting the securities markets. See "Research."
Transactions are executed by the Company acting as broker or
as principal. The Company permits discounts from its commission
schedule to its institutional customers. The size of such discounts
varies with the size of particular transactions and other factors.
For the fiscal years ended March 31, 1993, 1994 and 1995, revenues
derived from securities transactions for institutional investors
constituted approximately 18%, 16% and 12%, respectively, of total
revenues from securities transactions and 11%, 10% and 6%,
respectively, of the Company's total revenues.
Principal Transactions
The Company is an active market maker and distributor of
municipal bonds, particularly bonds issued by municipalities located
in the Mid-Atlantic and Mid-South regions. The Company also makes
primary markets in equity securities that are traded OTC, particularly
securities of companies located in the Mid-Atlantic and Mid-South
regions.
As of March 31, 1995, the Company made markets in equity
securities of approximately 460 corporations, including corporations
for which the Company has acted as a managing or co-managing
underwriter. The Company has 23 traders involved in trading corporate
equity and debt securities, 14 in trading municipal securities, and 9
in trading government securities.
7
The Company's market-making activities are also conducted
with other dealers through a network of direct wires, and with
institutional and individual customers of its branch office system.
In making markets in equity and debt securities, the Company maintains
positions in such securities to service its customers and accordingly
exposes its own capital to the risk of fluctuations in market value.
While the Company seeks to avoid substantial market risk, and may
engage in hedging transactions to minimize risk, it does, nonetheless,
realize profits and losses from market fluctuations. Trading profits
(or losses) depend upon the skills of the employees engaged in market
making, the amount of capital allocated to positions in securities and
the general level of activity and trend of prices in the securities
markets.
Investment Banking
Corporate and Municipal Finance
The Company participates as an underwriter in public
offerings of corporate debt and equity issues as well as municipal
securities, generally as a member of underwriting syndicates managed
by others. The Company also serves as manager or co-manager of
corporate equity and municipal offerings, generally involving issuers
located in the Mid-Atlantic and Mid-South regions.
The following tables set forth, for the periods indicated,
(i) the total number and dollar amount of corporate stock and bond and
municipal bond offerings managed or co-managed by the Company, and
(ii) the total number and dollar amount of its underwriting
participations in those offerings and in offerings managed by others.
Managed or Co-Managed Offerings
Calendar Year Number of Issues Amount of Offering
Corporate Municipal Corporate Municipal
1990 18 125 $2,006,152,000 $ 2,327,652,000
1991 23 215 3,792,939,000 4,813,803,000
1992 62 314 7,361,066,000 10,091,755,000
1993 81 340 9,949,500,000 15,715,724,000
1994 24 227 3,764,956,000 5,779,156,000
Underwriting Participations
Calendar Year Number of Issues Amount of Participation
Corporate Municipal Corporate Municipal
1990 237 191 $ 246,831,000 $ 547,234,000
1991 380 313 595,406,000 1,654,210,000
1992 500 362 1,139,104,000 1,845,151,000
1993 598 458 1,396,410,000 6,017,729,000
1994 411 309 776,258,000 1,187,236,000
8
As the above tables indicate, the number and size of
corporate and municipal offerings managed or underwritten by the
Company increased sharply in 1991, 1992 and 1993, largely because of
favorable conditions in the equity and debt markets, and refinancings
resulting from substantial declines in interest rates. The 1992 and
1993 increases included a substantial volume of closed-end fund
offerings and the 1993 increase included a substantial volume of real
estate investment trust offerings. In 1994, higher interest rate
levels resulted in industry-wide declines in the volume and size of
corporate and municipal securities offerings.
Underwriting involves both economic and regulatory risks. An
underwriter may incur losses if it is unable to resell the securities
it is committed to purchase, or if it is forced to liquidate its
commitments at less than the agreed purchase price. In addition, an
underwriter is subject to substantial potential liability for material
misstatements or omissions in prospectuses and other communications
with respect to underwritten offerings. See "Item 3. Legal
Proceedings." Furthermore, because underwriting commitments require
a charge against net capital, the Company's broker-dealer subsidiaries
could find it necessary to limit their underwriting participations to
remain in compliance with regulatory net capital requirements. See
"Net Capital Requirements."
Other Investment Banking Activities
The Company's investment banking activities also include
private debt and equity placements and initiation and advice with
respect to merger and acquisition transactions, as well as provision
of financial advisory services to corporate and municipal clients.
The Company sells interests in both private and public
limited partnership investments and in the past has originated real
estate securities partnership offerings, although activities in this
area have not been significant for several years. In self-originated
offerings, subsidiaries of the Company serve as general partners of
limited partnerships sponsored by the Company, which may subject the
Company to the potential liabilities that can arise as a result of
such service.
At March 31, 1995, the Company had 72 professionals engaged
in investment banking activities, including 34 in municipal finance,
37 in corporate finance and 3 in limited partnership investment
activities.
Company-Sponsored Mutual Funds
The Company sponsors and serves as distributor for fifteen
Legg Mason mutual funds, including five equity funds, seven taxable
and tax-exempt fixed-income funds and three taxable and tax-exempt
money market funds. Legg Mason Fund Adviser, Inc., Western Asset
Management Company, Batterymarch Financial Management, Inc. and Legg
9
Mason Capital Management, Inc., wholly-owned subsidiaries of the
Company, serve as investment adviser to or manager of these funds.
The Company anticipates that it will sponsor additional funds in the
future and that such funds will be advised by investment advisory
subsidiaries of the Company.
As of March 31, 1994 and 1995, the aggregate net assets of
all Company-sponsored mutual funds were approximately $3.7 billion and
$4.1 billion, respectively.
For the fiscal years ended March 31, 1993, 1994 and 1995, the
Company received approximately $12.3 million, $16.8 million and $21.0
million, respectively, in asset-based sales charges from its sponsored
mutual funds.
Investment Advisory Services
Legg Mason Fund Adviser, Inc. serves as investment adviser to
or manager of the Company-sponsored mutual funds as described above.
Western Asset Management Company specializes in the
management of fixed-income assets for institutional clients. At March
31, 1994 and 1995, Western had approximately $10.5 billion and $12.5
billion, respectively, under management (not including assets in
Company-sponsored mutual funds for which it serves as investment
adviser).
Batterymarch Financial Management, Inc., acquired in January
1995, manages emerging markets, international, and U.S. equity
portfolios for institutional clients. At March 31, 1995,
Batterymarch managed assets with a value of approximately
$4.9 billion.
Gray, Seifert & Co., Inc., acquired in April 1994, manages
securities portfolios for wealthy individuals and family groups,
endowments, and foundations. At March 31, 1994 and 1995, Gray Seifert
managed assets with a value of approximately $670 million and $680
million, respectively.
The Company has revenue sharing agreements with Western,
Batterymarch, and Gray Seifert and certain of their key officers
pursuant to which a specified percentage of the subsidiary's revenues
is distributed to Legg Mason, Inc., and the balance of the revenues is
retained by the subsidiary to pay its operating expenses, including
salaries and bonuses, with specific expense and compensation
allocations being determined by the subsidiary's management.
Legg Mason Capital Management, Inc. manages securities
portfolios of individual and institutional clients. At March 31, 1994
and 1995, this subsidiary managed assets with values of approximately
$615 million and $740 million, respectively, including approximately
$75 million and $55 million, respectively, of the Company's funds
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invested in short-term securities (not including assets in Company-sponsored
mutual funds for which it serves as investment adviser).
The Fairfield Group, Inc., acquired in April 1993, offers
several investment vehicles structured to meet the specialized
investment needs of banks and bank trust departments. These include
the Navigator taxable and tax-free money market funds, with combined
assets of approximately $560 million and $310 million at March 31,
1994 and 1995, respectively, and Navigator REPO/LINE, a service which
invested approximately $1.6 billion and $1.3 billion at March 31, 1994
and 1995, respectively, of short-term cash in repurchase agreements
collateralized by U.S. government and government agency securities.
The Company's advisory activities also include wrap-fee
programs in which the Company's customer pays a single asset-based fee
that covers all execution and advisory services, including advisory
services provided by the Company's investment advisory affiliates and
selected independent advisory firms. In addition, the Company
provides asset allocation and advisor performance and selection
consultation services.
Mortgage Banking and Real Estate Services
Legg Mason Real Estate Services, Inc. ("LMRES"), formerly
named Latimer & Buck, Inc., is engaged in the commercial mortgage
banking, loan servicing and pension fund advisory businesses. In its
mortgage banking business, LMRES originates, structures, places and
services commercial mortgages on income-producing properties for
insurance companies, pension funds and other investors. In its
pension fund advisory business, LMRES manages mortgage portfolios on
behalf of two state pension funds. LMRES' headquarters are located in
Philadelphia, Pennsylvania, and it has offices located in the
Mid-Atlantic and Southeastern regions of the United States.
Dorman & Wilson, Inc. is a mortgage banking firm engaged in
commercial mortgage banking and loan servicing. Headquartered in
White Plains, New York, Dorman & Wilson has offices in New York and
New Jersey.
As of March 31, 1994 and 1995, the combined commercial
mortgage servicing portfolios of LMRES and Dorman & Wilson totaled
approximately $12.0 and $10.8 billion, respectively.
Legg Mason Realty Group, Inc., with offices in Baltimore,
Washington, D.C. and Philadelphia, provides market feasibility,
consulting and appraisal services regarding residential, retail,
commercial and industrial real estate to a diverse clientele.
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Insurance and Financial Planning
Approximately 725 of the Company's investment executives are
licensed to sell insurance. Legg Mason Financial Services, Inc., a
wholly-owned subsidiary of the Company, acts as general agent for
several life insurance companies and sells fixed and variable
annuities and insurance. The Company also offers comprehensive
financial planning services to individuals.
Other Services
At March 31, 1995, the Company served as a non-bank custodian
for approximately 96,000 IRA's, 2,600 Keogh Plans, and 8,200
Simplified Employee Pension Plans.
The Company effects the purchase and sale of options and
commodities contracts on behalf of clients.
In March 1993, the Company established the Legg Mason Trust
Company, a state chartered, non-depository bank, to provide services
as a trustee for trusts established by the Company's individual and
employee benefit plan clients. The Company provides brokerage and
advisory services for a significant portion of the assets held in the
Trust Company's accounts.
Research
The Company employs 26 analysts who develop investment
recommendations and market information with respect to companies and
industries. Legg Mason Wood Walker's research emphasizes the
identification of securities of financially sound, well managed
companies that appear to be undervalued in relation to their
long-term earning power or the value of underlying assets. Legg Mason
refers to this investment strategy as the "Value Approach" to
investing. Howard Weil's analysts concentrate on the oil and gas
exploration, pipeline and service industries. The Company's research
services are supplemented by research services purchased from outside
consultants.
The Company's clients do not pay for research services
directly, although the Company is often compensated for its research
services by institutional clients through the direction of brokerage
transactions to the Company for execution. The Company believes that
its research activities are extremely important in attracting and
retaining individual and institutional brokerage and investment
advisory clients.
Operations
Administrative and operations personnel are responsible for
the processing of securities transactions; receipt, identification
and delivery of funds and securities; internal financial controls;
office services; custody of customers' securities and the handling of
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margin accounts. At March 31, 1995, the Company had approximately 250
full-time employees performing such functions.
There is considerable fluctuation during any year and from
year to year in the volume of transactions the Company must process.
During the fiscal years ended March 31, 1993, 1994 and 1995, the
Company processed approximately 1,721,000, 2,146,000 and 2,056,000
securities transactions, respectively. The Company records
transactions and posts its books on a daily basis. Operations
personnel monitor day-to-day operations to determine compliance with
applicable laws, rules and regulations. Failure to keep current and
accurate books and records can render the Company liable to
disciplinary action by governmental and self-regulatory authorities.
Legg Mason Wood Walker clears all of its own securities
transactions as a participant in various depositories. It executes
transactions in listed securities on the NYSE and other exchanges
through the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corporation. Pershing also processes orders and floor
reports, matches trades and transmits execution reports and records
data pertinent to trades in listed securities. All over-the-counter
and foreign securities transactions are compared by Legg Mason Wood
Walker through its participation in various clearing corporations.
The Company believes that its internal controls and
safeguards are adequate, although fraud and misconduct by customers
and employees and the possibility of theft of securities are risks
inherent in the securities industry. As required by the NYSE and
certain other authorities, the Company carries a fidelity bond
covering loss or theft of securities as well as forgery of checks and
drafts and embezzlement and misplacement of securities. The bond
provides total coverage of $30,000,000 (subject to a $1,000,000
deductible per claim).
Employees
At March 31, 1995, the Company had approximately 2,900
employees. None of the Company's employees is covered by a collective
bargaining agreement. The Company considers its relations with its
employees to be satisfactory. However, competition for experienced
financial services personnel, especially investment executives and
investment management professionals, is keen and from time to time the
Company may experience a loss of valuable personnel.
The Company recognizes the importance of hiring and training
investment executives. The Company trains new investment executives
who are required to take examinations given by the NYSE, the NASD and
various states in order to be registered and qualified. The Company
also requires ongoing training for investment executives.
13
Competition
The Company is engaged in an extremely competitive business.
Its competition includes, with respect to one or more aspects of its
business, numerous national, regional and local broker-dealer and
investment advisory firms, and commercial banks and thrift
institutions. Many of these organizations have substantially greater
personnel and financial resources than the Company. Discount
brokerage firms oriented to the retail market, including firms
affiliated with commercial banks and thrift institutions, are devoting
substantial funds to advertising and direct solicitation of customers
in order to increase their share of commission dollars and other
securities-related income. In many instances, the Company is
competing directly with such organizations. The Company also competes
for investment funds with banks, insurance companies and investment
companies. The principal competitive factors relating to the
Company's business are the quality of advice and services provided to
investors and the price of those services.
Competition in the Company's business periodically has been
affected by significant developments in the securities industry. See
"Factors Affecting the Company and the Securities Industry -- Industry
Changes and Competitive Factors."
Regulation
The securities industry in the United States is subject to
extensive regulation under both Federal and state laws. The SEC is
the Federal agency charged with administration of the Federal
securities laws. Much of the regulation of broker-dealers has been
delegated to self-regulatory authorities, principally the NASD and the
securities exchanges. These self-regulatory organizations conduct
periodic examinations of member broker-dealers in accordance with
rules they have adopted and amended from time to time, subject to
approval by the SEC. Securities firms are also subject to regulation
by state securities commissions in those states in which they do
business.
Broker-dealers are subject to regulations that cover all
aspects of the securities business, including sales methods, trading
practices among broker-dealers, uses and safekeeping of customers'
funds and securities, capital structure and financial soundness of
securities firms, recordkeeping and the conduct of directors, officers
and employees. Additional legislation, changes in rules promulgated
by the SEC and self-regulatory authorities, or changes in the
interpretation or enforcement of existing laws and rules, may directly
affect the mode of operation and profitability of broker-dealers. The
SEC, self-regulatory authorities and state securities commissions may
conduct administrative proceedings that can result in censure, fine,
suspension or expulsion of a broker-dealer, its officers or employees.
Such administrative proceedings, whether or not resulting in adverse
findings, can require substantial expenditures and can have an adverse
14
impact on the reputation of a broker-dealer. The principal purpose of
regulation and discipline of broker-dealers is the protection of
customers and the securities markets, rather than protection of
creditors and stockholders of the regulated entity.
The Company's investment advisory subsidiaries and the
Company-sponsored mutual funds are also subject to extensive Federal
and state regulation by the SEC and state securities commissions.
The Company's broker-dealer subsidiaries are required by
Federal law to belong to the SIPC. When the SIPC fund falls below a
certain amount, members are required to pay annual assessments. The
Company's broker-dealer subsidiaries are currently contributing
.00073% of their adjusted gross revenues to the fund. The SIPC fund
provides protection for securities held in customer accounts up to
$500,000 per customer, with a limitation of $100,000 on claims for
cash balances. The Company purchases insurance that provides
additional protection for securities of up to $24,500,000 per
customer.
Net Capital Requirements
Every registered broker-dealer doing business with the public
is subject to the Uniform Net Capital Rule (Rule 15c3-1) promulgated
by the SEC. The Rule, which is designed to measure the financial
soundness and liquidity of broker-dealers, specifies minimum net
capital requirements. Since the Company is not itself a registered
broker-dealer, it is not directly subject to the Uniform Net Capital
Rule. However, its broker-dealer subsidiaries are subject to the
Rule, and a provision of the Rule requires that a broker-dealer notify
the SEC prior to the withdrawal of equity capital by a parent company
if the withdrawal would exceed the greater of $500,000 or 30 percent
of the broker-dealer's excess net capital.
Rule 15c3-1 provides that a broker-dealer doing business with
the public shall not permit its aggregate indebtedness to exceed 15
times its net capital (the "primary method") or, alternatively, that
it not permit its net capital to be less than 2% of its aggregate
debit items (primarily receivables from customers and broker-dealers)
computed in accordance with such Rule (the "alternative method"). Legg
Mason Wood Walker and Howard Weil use the alternative method of
calculation. As of March 31, 1995, these broker-dealer subsidiaries
had aggregate net capital of $89.6 million, which exceeded the minimum
net capital requirements by $82.1 million.
In computing net capital under the Rule, various adjustments
are made to net worth with a view to excluding assets not readily
convertible into cash and to provide a conservative statement of other
assets, such as a firm's position in securities. To that end, a
deduction is made against the market value of securities to reflect
the possibility of a market decline prior to their disposition. For
every dollar that net capital is reduced, by means of such deductions
15
or otherwise (for example, through operating losses or capital
distributions), the maximum aggregate debit items which a firm may
carry is reduced. Thus, net capital rules, which are unique to the
securities industry, impose financial restrictions upon the Company's
business that are more severe than those imposed on other types of
businesses.
Under NYSE Rule 326, Legg Mason Wood Walker as a member
organization that carries customer accounts, would be required to
reduce its business activities if its net capital, as defined, was
less than 4% of aggregate debit items, as defined, and would be
precluded from expanding its business if its net capital was less than
5% of aggregate debit items.
Compliance with applicable net capital rules could limit
operations of the Company's broker-dealer subsidiaries, particularly
operations such as underwriting and trading activities that require
use of significant amounts of capital. A significant operating loss
or an extraordinary charge against net capital could adversely affect
the ability of the broker-dealers to expand or even maintain their
present levels of business.
Outstanding Subordinated Liabilities
Legg Mason Wood Walker has incurred subordinated liabilities
("Subordinated Liabilities") which it is permitted to treat as capital
for the purposes of the Uniform Net Capital Rule and NYSE Rules 325
and 326. The Subordinated Liabilities instruments issued by Legg
Mason Wood Walker provide that such liabilities shall be subordinated
in right of payment to the prior payment in full, or provision for
such payment, of all obligations to all other present and future
creditors of Legg Mason Wood Walker (except for other Subordinated
Liabilities similarly subordinated). At March 31, 1995, Legg Mason
Wood Walker had a $5.0 million Subordinated Liability outstanding, due
to Legg Mason, Inc. The Subordinated Liability may, with the prior
written consent of the NYSE, be prepaid in whole or in part at any
time after such Subordinated Liability has been outstanding for more
than one year. Legg Mason Wood Walker may not pay or permit the
payment or withdrawal of any Subordinated Liability if, after giving
effect to such payment or withdrawal, its net capital would be less
than 5% (6% in the case of the Subordinated Liability due to Legg
Mason, Inc.) of aggregate debit items. See Note 14 of Notes to
Consolidated Financial Statements in Item 8 of this Report.
Factors Affecting the Company and the Securities Industry
The securities industry is characterized by frequent change,
the effects of which have been difficult to predict. In addition to
an evolving regulatory environment, the industry has been subject to
radical changes in pricing structure, alternating periods of
contraction and expansion and intense competition from within and
outside the industry.
16
Fluctuating Securities Volume and Prices
The securities industry is subject to substantial
fluctuations in volume and price levels of securities transactions.
These fluctuations can occur on a daily basis as well as over longer
periods as a result of national and international economic and
political events, and broad trends in business and finance. Reduced
volume and prices generally result in lower brokerage and investment
banking revenues, as well as losses from trading as principal and from
underwriting. Profitability is adversely affected in periods of
reduced volume because fixed costs remain relatively unchanged. To
the extent that purchases of securities are permitted to be made on
margin, securities firms also are subject to risks inherent in
extending credit, especially during periods of rapidly declining
markets, in that a market decline could reduce collateral value below
the amount of a customer's indebtedness. In the past, heavy trading
volume has caused clearance and processing problems for many
securities firms, and this could occur in the future. In addition,
there is risk of loss from errors that can occur in the execution and
settlement process. See "Operations."
Industry Changes and Competitive Factors
Considerable consolidation has occurred in the securities
industry as numerous securities firms have either ceased operations or
been acquired by other securities firms, in many cases resulting in
firms with greater financial resources than firms such as the Company.
In addition, a number of substantial companies not previously engaged
in the securities business have made investments in and acquired
securities firms. Increasing competitive pressures in the securities
industry require regional securities firms to offer to their customers
many of the financial services that are provided by much larger
securities firms that have substantially greater resources than the
Company. A sizeable number of new investment advisory firms and
mutual funds have been established in recent years, increasing
competition in that area of the Company's activities.
Fixed minimum commissions for securities transactions were
eliminated in 1975, resulting in substantial discounts of commissions
earned from institutional customers and in the establishment of an
increasing number of firms, including affiliates of banks and thrift
institutions, that offer discount brokerage services to retail
customers. These firms generally effect transactions at lower
commission rates on an "execution only" basis, without offering other
services such as investment advice and research that are provided by
"full-service" brokerage firms such as the Company. In addition, some
discount brokerage firms have increased the range of services that
they offer. Continued increases in the number of discount brokerage
firms and services provided by such firms may adversely affect the
Company.
17
Certain institutions, notably commercial banks and thrift
institutions, have become a competitive factor in the securities
industry by offering certain investment banking and corporate and
individual financial services traditionally provided only by
securities firms. The Federal Reserve Board has approved applications
of major commercial banks to underwrite and deal in certain types of
securities that such banks had not been permitted to underwrite and
deal in previously, subject to limitations on the resulting
underwriting volume and market share. Commercial banks, generally,
are expanding their securities activities, as well as their activities
relating to the provision of financial services. Also, major
corporations have acquired large securities firms. While it presently
is not possible to predict the type and extent of competitive services
that banks and other institutions ultimately may offer or the extent
to which administrative or legislative barriers will be repealed or
modified, to the extent that such services are offered on a large
scale, securities firms such as the Company that are heavily oriented
to individual retail customers may be adversely affected.
Regulation
The business of the Company and its subsidiaries in the
securities industry is subject to regulation by various regulatory
authorities that are charged with protecting the interests of
broker-dealers' customers. See "Regulation."
Effect of Net Capital Requirements
The SEC and the NYSE have stringent rules with respect to the
net capital requirements of securities firms. A significant operating
loss or extraordinary charge against net capital may adversely affect
the ability of the Company's broker-dealer subsidiaries to expand or
even maintain their present levels of business. See "Net Capital
Requirements."
Litigation
Many aspects of the Company's business involve substantial
risks of liability. In the normal course of business, the Company's
subsidiaries have been named as defendants or co-defendants in
lawsuits seeking substantial damages. There has been an increased
incidence of litigation in the securities industry in recent years,
including customer claims as well as class action suits seeking
substantial damages. See "Item 3. Legal Proceedings."
Item 2. Properties.
The Company leases a substantial portion of its office space.
The Company's headquarters are located in an office building in which
the Company is the major tenant. The Company currently occupies
approximately 101,000 square feet in that building for a term expiring
18
in February 1998. Annual base rent for the current leased space is
approximately $2.4 million.
The Company's administrative and operations personnel are
located in an office building owned by the Company. The building,
located in Baltimore, consists of a total of 162,000 square feet, of
which approximately 103,000 square feet is occupied by the Company and
48,000 square feet is leased to unrelated tenants.
Information concerning location of the Company's sales
offices is contained in Item 1 of this Report. See Note 8 of Notes to
Consolidated Financial Statements in Item 8 of this Report.
Item 3. Legal Proceedings.
Taxable Municipal Bond Litigation
From April 1990 through January 1991, a number of purported
class actions were filed in various federal courts naming Howard,
Weil, Labouisse, Friedrichs Incorporated as one of the defendants in
connection with seven different public offerings involving a total of
$1.55 billion in taxable municipal bonds issued by six state financing
authorities. The seven offerings were made in the period from July
through November 1986. Howard Weil was one of the co-managing
underwriters in the offerings, each of which had Drexel Burnham
Lambert Incorporated as the senior managing underwriter. All of these
actions, which generally are based on similar factual and legal
allegations, as discussed below, were transferred by the Judicial
Panel on Multidistrict Litigation to the United States District Court
for the Eastern District of Louisiana (the "MDL Court") for coordinated
and consolidated pre-trial proceedings under the caption In Re Taxable
Municipal Bond Securities Litigation. Pursuant to a pre-trial order
of the MDL Court, the various actions have been consolidated and a
single complaint has been filed to cover all actions relating to each
of the public offerings. In addition, a single complaint has been
filed to cover the allegations made under RICO with respect to all of
the offerings. The following schedule sets forth with respect to each
offering the identification and amount of the offering, including the
percentage underwritten by Howard Weil, and the title of the
consolidated action in the MDL Court.
Bond Offering Title of Action
$150 Million Louisiana First National Bank v.
Housing Finance Agency Louisiana Housing
8.61% Securitized Multifamily Finance Agency, et al.
Housing Revenue Bonds,
Series 1986A
Howard Weil Underwriting
Percentage: 11.0%
19
$300 Million Southeast Texas Texas State Bank, et
Housing Finance Corporation al. v. Southeast Texas
8.6% Securitized Multifamily Housing Finance
Housing Revenue Bond Series 1986A Corporation, et al.
Howard Weil Underwriting
Percentage: 13.3%
$150 Million Louisiana Agricultural Bloomfield State Bank,
Finance Authority 8.25% Agricultural et al. v. Louisiana
Revenue Bonds Series 1986A Agricultural Finance
Howard Weil Underwriting Authority, et al.
Percentage: 23.0%
$150 Million Louisiana Agricultural Associated Kellogg Bank,
Finance Authority 8.80% Securitized et al. v. Louisiana
Agricultural Revenue Bonds Series 1986A Agricultural Finance
Howard Weil Underwriting Authority, et al.
Percentage: 17.8%
$400 Million Health, Educational Janet Virgin, et al. v.
and Housing Facility Board of the City Health, Educational and
of Memphis, Tennessee 8.68% Securitized Housing Facility Board of
Multifamily Housing Revenue Bonds, the City of Memphis,
Series 1986 Tennessee, et al.
Howard Weil Underwriting
Percentage: 11.1%
$200 Million El Paso Housing Finance Farm Bureau Town & Country
Corporation 8.8% Securitized Multifamily Insurance Company of
Housing Revenue Bonds, Series 1986A Missouri, et al. v.
Howard Weil Underwriting El Paso Housing Finance
Percentage: 19.7% Corporation, et al.
$200 Million Nebraska Investment Finance Washington National Life
Authority Agricultural Revenue Bonds, Insurance Company of New
Series 1986A and Series 1986B York, et al. v. Morgan
Howard Weil Underwriting Stanley & Co.
Percentage: 19.3% Incorporated, et al.
Generally, each action alleges, among other things, that the
official statement by which the public offering was made contained
misrepresentations and omissions in violation of federal and state
securities laws, common law fraud, negligent misrepresentation and
RICO. The complaints generally allege misstatements and omissions
regarding, among other things, (i) the likelihood that the proceeds of
each offering that were placed in a guaranteed investment contract
("GIC") issued by Executive Life Insurance Company would remain
invested in the GIC rather than being used to purchase, and
collateralize the bonds with, agricultural or multifamily housing
loans; (ii) an alleged scheme between Drexel Burnham Lambert
Incorporated, the senior managing underwriter of the offering, and
Executive Life relating to retention of the proceeds in the GIC;
(iii) Executive Life's substantial investment of its funds in junk
bonds; and (iv) the possibility that the GICs would not be treated as
20
insurance products entitled to pro rata treatment with other Executive
Life insurance products in the event of an Executive Life insolvency.
In each action, the plaintiff class purportedly consists of all
persons who purchased the bonds either in the initial offering or in
the open market through April 1990. Following the deterioration of
the junk bond market in early 1990, the ratings of both Executive Life
and the bonds that had been issued in the seven offerings were
downgraded and the bonds experienced substantial market price
declines. In addition, the bonds have defaulted in interest payments
as a result of Executive Life having been placed in conservatorship in
April 1991 and ceasing payments on the GICs, and the amount of future
payments of principal and interest is dependent upon successful
resolution of the pending conservatorship. The various complaints
seek actual and punitive damages in unspecified amounts, pre and post
judgment interest, as well as costs and attorneys' fees. If any of
these actions were determined adversely to Howard Weil, substantial
liabilities could result, with a significant adverse effect on Howard
Weil's financial condition and operations.
During 1992, the MDL Court issued orders denying the motions
to dismiss of Howard Weil and the other principal defendants with
respect to virtually all counts of the complaint. In September 1993,
all class plaintiffs except Washington National Life Insurance Company
of New York, a putative class representative in the case relating to
the Nebraska Investment Finance Authority bonds, voluntarily dismissed
the plaintiffs' joint complaint covering allegations made under RICO.
Howard Weil and other defendants filed a motion for summary judgment
with respect to Washington National's RICO claim. This motion was
granted. In August 1993, Howard Weil and other defendants filed
motions for summary judgment with respect to the issue of whether
plaintiffs' claims under Rule 10b-5 should be dismissed in any case in
which plaintiffs did not actually rely on the official statements that
are alleged to have been false and misleading. These motions are
pending.
In February 1995, the MDL Court preliminarily approved the
principal terms of a proposed settlement of the class actions as set
forth in a settlement agreement among the defendants and the
representatives of the putative plaintiff class. The settlement
agreement will require Howard Weil, as one of the underwriter
defendants, to contribute approximately $3.6 million toward a total
settlement amount of $25.6 million. A settlement notice has been sent
to putative class members and a settlement hearing before the MDL
Court is scheduled for July 31, 1995.
In January 1991, an action captioned Magnolia Life Insurance
Company v. Howard, Weil, Labouisse, Friedrichs Incorporated was
commenced in the 14th Judicial District Court, Parish of Calcasieu,
State of Louisiana, alleging misrepresentation by Howard Weil in the
sale to Magnolia in April 1988 of approximately $830,000 of taxable
municipal bonds issued by the Louisiana Agricultural Finance Authority
21
("LAFA"). These bonds had been part of the bonds issued in the 1986
LAFA public offering described above. The plaintiff alleges that
Howard Weil misrepresented to it that the bonds were secured by
government guaranteed loans. In September 1991, the plaintiff filed
a motion for summary judgment. This motion is pending. A stay of
this proceeding by the MDL Court was lifted in December 1994
permitting the case to proceed to discovery and ultimate resolution.
Nasdaq Market-Makers Antitrust Litigation
Legg Mason Wood Walker and approximately thirty other broker-dealer
firms have been named as defendants in a number of purported class actions
filed in various federal courts alleging violation of federal antitrust laws.
The first of these actions was filed in May 1994, and in October 1994 the
actions were consolidated in the United States District Court for the
Southern District of New York under the caption In re Nasdaq Market-Makers
Antitrust Litigation. The consolidated complaint alleges that the defendants
violated the antitrust laws by conspiring to raise, fix and maintain the
"spreads" on certain securities traded on Nasdaq by refusing to quote bids and
asks in so-called "odd-eighths." The actions purport to be brought on
behalf of all persons who purchased or sold these securities on Nasdaq
during the approximately five year period preceding commencement of
the litigation. The plaintiffs seek treble damages in an unspecified
amount, injunctive relief, and attorneys' fees and costs. In February
1995, the defendants filed a motion to dismiss the actions. The
decision on the motion is pending.
Following the commencement of the antitrust litigation, the
Antitrust Division of the United States Department of Justice and the
Securities and Exchange Commission commenced investigations relating
to the allegations in the litigation. Legg Mason Wood Walker,
together with other broker-dealer firms, has received requests for
information from both government agencies.
In addition to the matters described above, the Company's
subsidiaries have been named as defendants or co-defendants in various
other lawsuits alleging substantial damages. Some of these
proceedings relate to public offerings of securities in which one or
more subsidiaries of the Company participated as a member of the
underwriting syndicate. The Company is also aware of litigation
against certain underwriters of offerings in which one or more
subsidiaries of the Company was a participant, but where the
subsidiary is not now a defendant. In these latter cases, it is
possible that a subsidiary may be called upon to contribute to
settlements or judgments. While the ultimate resolution of pending
litigation cannot be predicted with certainty, in the opinion of
management, after consultation with legal counsel, pending litigation
will not have a material adverse effect on the consolidated financial
statements of the Company.
22
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 4A. Executive Officers of the Company.
Information (not included in the Company's definitive proxy
statement for the 1995 Annual Meeting of Stockholders) regarding
certain executive officers of the Company is as follows:
F. Barry Bilson, age 42, was elected Vice President-Finance
of the Company in June 1984. He served as Controller of the Company
from October 1983 until September 1988, and as Controller of Legg
Mason Wood Walker from April 1981 to September 1988. From December
1978 to March 1981, he was Assistant Controller of the Coatings
Division of Dutch Boy, Inc. Mr. Bilson is a certified public
accountant.
Theodore S. Kaplan, age 52, became Senior Vice President and
General Counsel of the Company in April 1993. From 1970 until he
joined the Company, he was engaged in the private practice of law with
the firm of Weinberg and Green. Prior to 1970, Mr. Kaplan served as
an attorney in the Office of the General Counsel and Division of
Corporation Finance of the Securities and Exchange Commission.
Eileen M. O'Rourke, age 37, became Controller of the Company
and of Legg Mason Wood Walker in September 1988 and was elected Vice
President-Finance of the Company in March 1989, having served as
Assistant Controller since December 1984. Mrs. O'Rourke is a
certified public accountant and was an audit manager with Peat Marwick
Main & Co. prior to joining the Company in 1984.
Timothy C. Scheve, age 37, has been Treasurer of the Company
and of Legg Mason Wood Walker since January 1992. He became a Vice
President of the Company in August 1993 and a Senior Vice President
of Legg Mason Wood Walker in August 1994. Mr. Scheve has served
in various financial and administrative capacities since joining the
Company in 1984. Mr. Scheve was a management consultant with Price
Waterhouse & Co. prior to joining the Company.
Elisabeth N. Spector, age 47, became a Senior Vice President
of the Company and Legg Mason Wood Walker in January 1994. She has
general responsibilities in business and financial strategy. From
November 1989 until she joined the Company, Ms. Spector was employed
by the Resolution Trust Corporation, where, among other things, she
served as the initial Director of the RTC's Capital Markets Division.
From 1975 to November 1989 she was an investment banker with Merrill
Lynch & Co., Inc.
Edward A. Taber III, age 51, became an Executive Vice
President of the Company in September 1992. He is responsible for
supervising the Company's investment management activities. From 1973
until he joined the Company, Mr. Taber held various positions with T.
Rowe Price Associates, Inc., an investment management firm, last
23
serving as Director of that firm's taxable fixed income division.
Prior to 1973, Mr. Taber served as the Treasurer and Chief Financial
Officer of the Federal Home Loan Bank of Boston. Mr. Taber is a
Director of the Legg Mason Value Trust, Inc., the Legg Mason Total
Return Trust, Inc., the Legg Mason Special Investment Trust, Inc., a
trustee of the Legg Mason Tax-Free Income Fund, President and a
director of the Legg Mason Income Trust, Inc., the Legg Mason Global
Trust, Inc., and the Legg Mason Investors Trust, Inc., and Vice
President of the Worldwide Value Fund, Inc.
24
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Shares of Legg Mason, Inc. common stock are listed and traded
on the New York Stock Exchange (symbol LM). As of March 31, 1995,
there were 1,385 shareholders of record of the Company's common stock.
Information with respect to the Company's dividends and stock prices
is as follows:
Quarter ended*
Mar. 31 Dec. 31 Sept. 30 June 30
1995
Cash dividend per share $ .11 $ .11 $ .11 $ .10
Stock price range:
High 23.750 22.000 22.875 22.000
Low 20.625 19.750 18.500 18.125
1994
Cash dividend per share $ .10 $ .10 $ .10 $ .08
Stock price range:
High 25.250 25.250 24.125 22.625
Low 20.375 22.125 21.750 19.375
*Adjusted to reflect the 5-for-4 stock split paid September 1993.
25
Item 6. Selected Financial Data.
(Dollars in thousands except per share amounts)
Years ended March 31,
1995 1994 1993 1992 1991
OPERATING RESULTS
Revenues $371,591 $397,534 $336,347 $292,356 $251,021
Expenses 343,902 338,320 287,364 257,341 228,795
Earnings before income taxes 27,689 59,214 48,983 35,015 22,226
Income taxes 11,431 23,166 18,780 13,898 8,702
Net earnings $ 16,258 $ 36,048 $ 30,203 $ 21,117 $ 13,524
PER COMMON SHARE*
Primary earnings $ 1.30 $ 2.98 $ 2.61 $ 1.85 $ 1.21
Fully diluted earnings $ 1.13 $ 2.41 $ 2.37 $ 1.70 $ 1.14
Dividends declared $ .43 $ .38 $ .312 $ .28 $ .248
Book value $ 18.49 $ 18.04 $ 15.73 $ 13.38 $ 11.96
Average shares outstanding:
Primary 12,529,239 12,109,820 11,574,018 11,386,148 11,142,970
Fully diluted 16,853,846 16,138,100 13,276,250 13,089,271 12,873,789
FINANCIAL CONDITION
Total assets $816,658 $811,488 $640,454 $579,883 $502,678
Subordinated liabilities $102,487 $102,487 $ 34,597 $ 35,020 $ 35,120
Total stockholders' equity $226,453 $211,686 $176,928 $147,957 $130,264
*Adjusted to reflect the 5-for-4 stock split paid September 1993.
26
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
Legg Mason, Inc. and its subsidiaries ("the Company") are
principally engaged in providing securities brokerage, investment
advisory, investment banking and mortgage banking services to
individuals, institutions, corporations and municipalities. The
Company's profitability is sensitive to a variety of factors
including the volume of trading in securities, the volatility and
general level of market prices, and the demand for investment
banking and mortgage banking services.
During the fiscal year ended March 31, 1995, interest rate
levels rose sharply, adversely impacting the Company's investment
banking and securities brokerage revenues. In contrast, the prior
year's results were the most successful in the Company's history
and were achieved in a very favorable corporate and municipal
finance environment.
The Company's investment advisory activities and their
contribution to operating results have grown significantly, through
both internal growth and acquisition, over the past ten years.
During fiscal 1995, the Company acquired Batterymarch Financial
Management, Inc. ("Batterymarch") and Gray, Seifert & Co. ("Gray
Seifert"), as described in Note 2 of Notes to Consolidated
Financial Statements. Batterymarch, acquired in January 1995,
manages approximately $5 billion in emerging markets, international
and U.S. equity portfolios for institutional clients. Gray Seifert,
acquired in April 1994, manages $680 million in equity and balanced
accounts for individuals and family groups, endowments and
foundations. With these two additions, assets under management for
institutions, Company-sponsored mutual funds and private accounts
managed by the Company's subsidiaries were $24.6 billion at March
31, 1995, up 47% from $16.7 billion a year earlier and from $526
million ten years ago. Earnings from investment advisory services
tend to be more stable than those from securities brokerage and
investment banking activities because they are less affected by
changes in securities market conditions.
Results of any individual period should not be considered
representative of future profitability. Many of the Company's
activities have fixed operating costs which do not decline with
reduced levels of volume. While the Company attempts to reduce
costs, particularly during periods of low volume, it does not, as
a general rule, attempt to do so through personnel reduction.
Accordingly, sustained periods of unfavorable market conditions may
adversely affect profitability.
27
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
items in the Consolidated Statements of Earnings as percentages of
total revenues and the increase (decrease) by item as a
percentage of the amount for the previous period:
Percentage of Total Revenues Period to Period Change
1995 1994
Years Ended March 31, Compared Compared
1995 1994 1993 to 1994 to 1993
REVENUES
Commissions...................... 32.5% 35.6% 34.9% (14.6)% 20.5%
Principal transactions........... 16.0 13.6 16.4 10.2 (1.9)
Investment advisory and
related fees................... 23.8 16.5 15.1 34.7 28.8
Investment banking............... 9.3 19.9 19.8 (56.3) 19.1
Interest......................... 10.6 7.5 7.1 30.9 25.1
Other............................ 7.8 6.9 6.7 6.5 21.1
100.0 100.0 100.0 (6.5) 18.2
EXPENSES
Compensation and benefits........ 58.4 57.6 57.6 (5.2) 18.1
Occupancy and equipment rental... 8.0 6.8 7.0 10.7 14.8
Communications................... 7.0 5.8 6.0 13.0 13.7
Floor brokerage and clearing fees 1.3 1.4 1.7 (13.2) 4.3
Interest......................... 4.6 3.9 3.4 11.3 32.4
Other............................ 13.2 9.6 9.7 28.0 17.1
92.5 85.1 85.4 1.6 17.7
EARNINGS BEFORE INCOME TAXES...... 7.5 14.9 14.6 (53.2) 20.9
Income taxes..................... 3.1 5.8 5.6 (50.7) 23.4
NET EARNINGS...................... 4.4% 9.1% 9.0% (54.9)% 19.4%
In fiscal 1995, revenues, net earnings and earnings per
share declined from record levels reached in the prior fiscal year.
Revenues were $371.6 million, a 7% decrease from revenues of $397.5
million in fiscal 1994. Net earnings were $16.3 million, down 55%
from net earnings of $36.0 million in the prior fiscal year.
Primary earnings per share declined 56% to $1.30 from $2.98.
Revenues derived from securities transactions for
individual investors constituted approximately 50% of the Company's
total revenues in fiscal 1995, and the Company believes this will
continue to be the largest single source of its revenues in the
foreseeable future.
28
Revenues
Commissions
Commissions fell 15% to $120.7 million in fiscal 1995,
principally as a result of lower sales of non-affiliated mutual
funds and listed and over-the-counter securities. Commission
revenues were adversely affected by rising interest rates and
investor caution, particularly on the part of individual investors.
In fiscal 1994, commissions rose 21% to $141.4 million
from levels in fiscal 1993, principally because of increases in
sales of listed securities, non-affiliated mutual funds, variable
annuities and over-the-counter securities. During most of fiscal
1994, commission revenues benefited from an active and rising stock
market, attributable in part to investors seeking higher investment
returns than those available on money market accounts and other
short-term investments.
Principal Transactions
Revenues from principal transactions rose 10% to $59.5
million in fiscal 1995, principally as a result of increased sales
of municipal and corporate debt securities, offset in part by lower
sales of mortgage-backed securities. Higher sales of municipal
securities in the secondary markets substantially offset sharp
declines in municipal new issue volume. Sales of corporate debt
securities benefited from the Company's expansion of its taxable
fixed-income marketing capabilities.
In fiscal 1994, principal transactions fell 2% to $53.9
million because of lower sales of taxable fixed-income securities
and a decline in profits on firm-owned securities positions,
substantially offset by increased sales of over-the-counter
securities.
Investment Advisory and Related Fees
Investment advisory and related fees rose 35% in fiscal
1995 to $88.3 million, principally as a result of the addition of
fees earned by Batterymarch and Gray Seifert and growth in assets
under management in Company-sponsored mutual funds and the
Company's fixed-income advisory subsidiary. Excluding fees earned
by Batterymarch and Gray Seifert, investment advisory and related
fees rose 19% in fiscal 1995. Fees from assets under management and
from fee-based brokerage accounts accounted for 24% of total
revenues in fiscal 1995, up from 16% in the prior year.
In fiscal 1994, investment advisory and related fees rose
29% because of growth in assets under management in
Company-sponsored mutual funds and the Company's fixed-income
advisory subsidiary, as well as growth in various types of
fee-based brokerage accounts.
29
The graph here depicts the growth in Investment Advisory and
Related Fees Revenue and Assets Under Management for the five
fiscal periods ended March 31, 1995.
1991 1992 1993 1994 1995
Assets Under Management
(in millions) $11,021 $10,873 $13,069 $16,653 $24,561
Investment Advisory
and Related Fees
(in thousands) $38,259 $42,887 $50,915 $65,583 $88,345
Investment Banking
Investment banking revenues declined 56% to $34.7 million
in fiscal 1995 from record levels achieved in the prior fiscal year
as significantly higher interest rates led to industry-wide
declines in corporate and municipal securities offerings.
In fiscal 1994, investment banking revenues rose 19% to
$79.3 million as a result of selling concessions and management
fees earned on a substantially higher level of corporate
underwritings, particularly co-managed offerings of real estate
investment trusts and closed-end fund issuances. Low interest rates
and higher securities valuations were important factors in the
growth of investment banking revenues during fiscal 1994.
Other Revenues
Other revenues rose 6% to $29.1 million, primarily because
of increased account maintenance fees and rental income from an
office building purchased in fiscal 1995.
In fiscal 1994, other revenues rose 21%, primarily because
of increased mortgage banking loan origination fees and the
addition of certain fees earned by The Fairfield Group subsequent
to its acquisition in April 1993.
Expenses
Compensation and Benefits
Compensation and benefits fell 5% to $217.0 million in
fiscal 1995, as lower commission and profitability-based
compensation was partially offset by personnel additions in certain
30
product and support areas and in twelve new branch office
locations.
In fiscal 1994, compensation and benefits rose 18% to
$229.0 million, reflecting higher sales compensation on increased
commission-based revenues, personnel additions, and higher
profitability-based compensation.
A substantial part of compensation expense fluctuates in
proportion to the level of business activity. Other compensation
costs, primarily salaries and benefits, are fixed and may not
decline with reduced levels of volume. Therefore, profitability may
be adversely affected by sustained periods of unfavorable market
conditions or slow revenue growth in acquired businesses or new
product areas.
Occupancy and Equipment Rental
Occupancy and equipment rental rose 11% to $29.8 million
because of the inclusion of expenses of Batterymarch and Gray
Seifert and higher depreciation and data processing expenses
related to branch office and product area expansion.
In fiscal 1994, occupancy and equipment rental rose 15% to
$26.9 million, principally because of increased transaction-related
data processing costs and higher rental payments at corporate
headquarters and certain branch office locations.
Communications
Communications costs rose 13% to $25.9 million in fiscal
1995, principally reflecting increased quote services for branch
offices and product areas, and higher printing and paper expenses.
In fiscal 1994, communications costs rose 14%, reflecting
increases in telephone and transaction-related variable expenses
attributable to increased business activity.
Floor Brokerage and Clearing Fees
Floor brokerage and clearing fees fell 13% to $5.0 million
in fiscal 1995, following a 4% increase in fiscal 1994, reflecting
changes in securities transaction volume.
Other Expense
Other expense rose 28% and 17% in fiscal 1995 and 1994,
respectively, because of increased litigation-related expenses
(including a $2.0 million current year charge for the proposed
settlement of a class action lawsuit discussed in Note 8 of Notes
to Consolidated Financial Statements) and higher promotional and
programming expense. In addition, fiscal 1995 includes the expenses
of Batterymarch and Gray Seifert subsequent to their acquisitions.
31
Interest Revenue and Expense
Interest revenue increased 31% to $39.3 million in fiscal
1995, primarily as a result of higher interest rates earned on
substantially larger customer margin account balances and stock
loan conduit activity, offset in part by a reduction in interest
earned on proprietary securities positions. Interest expense
increased 11% to $17.1 million because of higher interest rates
paid on customer credit and conduit stock loan balances, offset in
part by a decline in interest paid on short-term borrowings.
In fiscal 1994, interest revenue increased 25% to $30.0
million, as a result of increased stock loan conduit activity,
larger customer margin account balances and investment of proceeds
of the Company's $68.0 million convertible subordinated debenture
offering completed in April 1993. These increases were partially
offset by lower interest earnings on proprietary fixed-income
securities positions. Interest expense increased 32% to $15.4
million, primarily because of debt service on the convertible
subordinated debentures and increased stock loan conduit activity.
As a result of substantially larger customer margin
account balances and higher interest rates, the Company's net
interest margin increased to 56.4% in fiscal 1995 from 48.7% in
fiscal 1994.
The graph here depicts Interest Revenue and Interest Expense for
the five fiscal periods ended March 31, 1995.
1991 1992 1993 1994 1995
Interest Revenue
(in thousands) $28,267 $25,629 $23,973 $29,990 $39,265
Interest Expense
(in thousands) $14,394 $13,433 $11,629 $15,396 $17,135
32
Income Taxes
Income taxes fell 51% to $11.4 million in fiscal 1995
because of lower pre-tax earnings. The Company's effective tax rate
increased to 41.3% from 39.1% as a result of federal tax law
changes and higher effective state income tax rates.
In fiscal 1994, income taxes increased 23% because of
higher pre-tax earnings. The Company's effective tax rate increased
to 39.1% from 38.3% as a result of higher corporate income tax
rates following the enactment of the 1993 Omnibus Budget
Reconciliation Act.
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are primarily liquid, consisting
mainly of cash and assets readily convertible into cash. These
assets are financed primarily by free credit balances, equity
capital, convertible debentures, bank lines of credit and other
payables.
During the year ended March 31, 1995, cash and cash
equivalents increased $17.1 million. Cash flows from operating
activities provided $62.3 million, primarily attributable to a
reduction in regulatory deposits and to fiscal 1995 net earnings,
adjusted for depreciation and amortization, offset in part by
increased customer receivables. The Company invested cash of $26.7
million, principally related to the acquisition of Batterymarch,
offset in part by a net decrease in resale agreements and
investment securities. Cash flows from financing activities used
$18.5 million primarily to repay short-term borrowings.
During fiscal 1995, the Company acquired Batterymarch
utilizing $54.1 million in cash. See Note 2 of Notes to
Consolidated Financial Statements regarding future payments that
may be required in the business combination.
The Company's broker-dealer subsidiaries are subject to
the requirements of the SEC's net capital rule which is designed
to measure the general financial soundness and liquidity of
broker-dealers. At March 31, 1995, the brokerage subsidiaries had
aggregate net capital of $90.7 million, which exceeded minimum net
capital requirements by $82.9 million.
The principal sources of the Company's funds are its
investment advisory and broker-dealer subsidiaries. The amount of
the broker-dealers' net assets that may be distributed is subject
to restrictions under applicable net capital rules. In addition,
the Company has a revolving bank line of credit in the amount of
$50.0 million, none of which is currently outstanding, and the
Company's subsidiaries have lines of credit, aggregating $96.0
million, pursuant to which they may borrow on a short-term demand
33
basis generally at prevailing broker call rates. Management
believes that funds available from operations and its lines of
credit are sufficient to meet its present and reasonably
foreseeable capital needs, although the Company may augment its
capital funds for continued expansion by internal growth and
acquisition.
The Company borrows and lends securities in the normal
course of business to facilitate the settlement of its customer and
proprietary transactions. In addition, the Company engages in
conduit securities borrowing and lending activities in which it
acts as an agent to facilitate settlement for other institutions.
In both firm and conduit transactions, the Company deposits or
receives cash, generally equal to 102% of the market value of
securities exchanged, and monitors the adequacy of collateral
levels on a daily basis.
EFFECTS OF INFLATION
The Company's assets are not significantly affected by
inflation because they are primarily monetary, consisting of cash,
resale agreements, securities and receivables. However, the rate
of inflation affects various expenses, including employee
compensation, occupancy, and communications, which may not be
readily recoverable in charges for services provided by the
Company.
RECENT ACCOUNTING DEVELOPMENT
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," was issued by the Financial
Accounting Standards Board in March 1995. The Company expects to
adopt the provisions of Statement No. 121 beginning in fiscal 1996.
Based on the Company's current evaluation, the impact of adoption
will not be material to the Company's financial position or results
of operations.
34
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders, Legg Mason, Inc.
We have audited the accompanying consolidated statements
of financial condition of Legg Mason, Inc. and Subsidiaries as of
March 31, 1995 and 1994, and the related consolidated statements
of earnings, changes in stockholders' equity and cash flows for
each of the three years in the period ended March 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Legg Mason, Inc. and Subsidiaries as of March
31, 1995 and 1994, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended March 31, 1995, in conformity with generally accepted
accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
May 2, 1995
35
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except per share amounts)
Years ended March 31,
1995 1994 1993
Revenues
Commissions $120,735 $141,375 $117,305
Principal transactions 59,470 53,949 55,000
Investment advisory and related fees 88,345 65,583 50,915
Investment banking 34,653 79,283 66,575
Interest 39,265 29,990 23,973
Other 29,123 27,354 22,579
371,591 397,534 336,347
Expenses
Compensation and benefits 217,028 228,998 193,857
Occupancy and equipment rental 29,775 26,902 23,437
Communications 25,933 22,943 20,186
Floor brokerage and clearing fees 5,047 5,816 5,575
Interest 17,135 15,396 11,629
Other 48,984 38,265 32,680
343,902 338,320 287,364
Earnings Before Income Taxes 27,689 59,214 48,983
Income taxes 11,431 23,166 18,780
Net Earnings $ 16,258 $ 36,048 $ 30,203
Earnings per Common Share
Primary $ 1.30 $ 2.98 $ 2.61
Fully diluted $ 1.13 $ 2.41 $ 2.37
See notes to consolidated financial statements.
36
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
March 31,
1995 1994
ASSETS
Cash and cash equivalents $ 57,300 $ 40,208
Cash and securities segregated
for regulatory purposes 30,528 127,003
Resale agreements 63,960 97,950
Receivable from customers 306,004 250,237
Receivable from brokers and dealers 902 5,074
Securities borrowed 120,402 96,030
Securities owned, at market value 51,890 57,617
Investment securities, at market value 22,112 29,754
Property and equipment, net 25,871 15,679
Intangible assets 72,463 23,727
Other 65,226 68,209
$816,658 $811,488
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Payable to customers $320,830 $298,943
Payable to brokers and dealers 3,929 10,629
Securities loaned 104,304 108,065
Short-term borrowings - 15,546
Securities sold, but not yet purchased,
at market value 6,362 8,513
Accrued compensation 15,866 15,651
Other 36,427 39,968
487,718 497,315
COMMITMENTS AND CONTINGENCIES
SUBORDINATED LIABILITIES 102,487 102,487
STOCKHOLDERS' EQUITY
Common stock, par value $.10; authorized
20,000,000 shares; issued 12,250,047
shares in 1995 and 11,734,573 in 1994 1,225 1,173
Additional paid-in capital 79,591 76,249
Retained earnings 145,279 134,264
Net unrealized appreciation on
investment securities 358 -
226,453 211,686
$816,658 $811,488
See notes to consolidated financial statements.
37
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands except share amounts)
Net Unrealized
Appreciation
Additional on Total
Common Stock Paid-in Retained Investment Stockholders'
Shares Amount Capital Earnings Securities Equity
BALANCE MARCH 31, 1992 8,849,353 $ 885 $71,263 $ 75,809 $147,957
Issuance of common stock 157,391 16 1,952 1,968
Repurchase of common stock (8,189) (1) (153) (154)
Dividends declared
($.312 per share)* (3,482) (3,482)
Tax benefit of pooled 436 436
entity
Net earnings 30,203 30,203
BALANCE MARCH 31, 1993 8,998,555 $ 900 $73,498 $102,530 $176,928
Issuance of common stock 410,828 41 2,312 104 2,457
5-for-4 stock split 2,325,190 232 (239) (7)
Dividends declared
($.38 per share)* (4,418) (4,418)
Tax benefit of pooled 678 678
entity
Net earnings 36,048 36,048
BALANCE MARCH 31, 1994 11,734,573 $1,173 $76,249 $134,264 $211,686
Issuance of common stock 522,974 53 3,482 3,535
Repurchase of common stock (7,500) (1) (140) (141)
Dividends declared
($.43 per share) (5,243) (5,243)
Net unrealized appreciation
on investment securities $358 358
Net earnings 16,258 16,258
BALANCE MARCH 31, 1995 12,250,047 $1,225 $79,591 $145,279 $358 $226,453
* Adjusted to reflect the 5-for-4 stock split paid September 1993.
See notes to consolidated financial statements.
38
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years ended March 31,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $16,258 $ 36,048 $30,203
Noncash items included in earnings:
Depreciation and amortization 10,461 8,328 8,404
(Gain) loss on sales of investment securities 124 (48) (49)
Tax benefit of pooled entity 275 352 436
Gain on sale of mortgage servicing portfolio (345)
27,118 44,680 38,649
(Increase) decrease in assets excluding
acquisitions:
Cash and securities segregated for
regulatory purposes 96,475 (20,938) 19,755
Receivable from customers (55,096) (41,884) (43,313)
Receivable from brokers and dealers 4,172 3,222 (2,763)
Securities borrowed (24,372) (81,874) (2,436)
Securities owned 5,727 51,480 (18,342)
Other 4,183 (13,405) (11,810)
Increase (decrease) in liabilities excluding
acquisitions:
Payable to customers 21,887 31,627 30,337
Payable to brokers and dealers (6,700) (4,069) 8,626
Securities loaned (3,761) 97,225 306
Securities sold, but not yet purchased (2,151) 1,875 3,197
Accrued compensation 215 137 (1,406)
Other (5,428) 5,201 5,126
CASH PROVIDED BY OPERATING ACTIVITIES 62,269 73,277 25,926
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for:
Property and equipment (13,451) (8,365) (4,313)
Intangible assets (554) (2,539) (2,537)
Acquisition, net of cash acquired (53,808)
Net (increase) decrease in resale agreements 33,990 (24,149) 3,285
Purchases of investment securities (29,294) (118,083) (563)
Proceeds from sales of investment securities 36,467 92,934 49
Proceeds from sale of mortgage servicing portfolio 474
CASH USED FOR INVESTING ACTIVITIES (26,650) (60,202) (3,605)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings (15,546) (43,533) (30,864)
Net increase (decrease) in repurchase agreements (20,416) 16,701
Issuance (repayment) of subordinated liabilities 67,900 (423)
Issuance of common stock 2,228 2,329 1,968
Repurchase of common stock (141) (154)
Dividends paid (5,068) (4,145) (3,482)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (18,527) 2,135 (16,254)
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,092 15,210 6,067
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 40,208 24,998 18,931
CASH AND CASH EQUIVALENTS AT END OF YEAR $57,300 $ 40,208 $24,998
See notes to consolidated financial statements.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousand except per share amounts)
1. Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts
of Legg Mason, Inc. ("Parent") and its wholly-owned subsidiaries.
All material intercompany balances and transactions have been
eliminated. Where appropriate, prior years' financial statements
have been reclassified to conform with the 1995 presentation.
Cash and Cash Equivalents
Cash equivalents are highly liquid investments with
original maturities of less than 90 days, other than those held for
sale in the ordinary course of business.
Resale Agreements
The Company invests in short-term resale agreements
collateralized by U.S. government and agency securities. The market
value of the underlying collateral as determined daily, plus
accrued interest thereon, must exceed the face amount of the
transaction. It is the Company's policy to have such underlying
collateral deposited in the Company's accounts at its custodian
banks. Resale agreements are carried at the amounts at which the
securities will be subsequently resold as specified in the
agreements, plus accrued interest.
Securities
Securities transactions are recorded on a settlement date
basis which does not differ materially from a trade date basis.
Commission revenues and related expenses for unsettled transactions
are recorded on a trade date basis. Securities owned by the
Company's broker-dealer subsidiaries, both for trading and
investing, are valued at market and resulting unrealized gains and
losses are reflected in earnings.
The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," in fiscal 1995.
Accordingly, investment securities of the Parent and its
non-broker-dealer subsidiaries held as available-for-sale are
valued at market and resulting unrealized gains and losses are
reflected in stockholders' equity.
40
Depreciation and Amortization
Property and equipment are reported at cost, net of
accumulated depreciation and amortization of $32,193 and $28,025 at
March 31, 1995 and 1994, respectively.
Depreciation and amortization are determined by use of the
straight line method over the estimated useful life of the asset or
the remaining life of the lease. Maintenance and repair costs are
expensed as incurred.
Intangible Assets
Intangible assets consist principally of goodwill, asset
management and mortgage servicing contracts, attributable to
business combinations. Intangibles are amortized using straight
line and accelerated methods over periods ranging from three to
forty years. Accumulated amortization at March 31, 1995 and 1994
was $41,794 and $36,714, respectively.
The Company periodically reviews its accounting for
goodwill and other intangible assets, considering such factors as
historical profitability and projected operating cash flows, to
determine that the assets are realizable and the amortization
periods are appropriate.
Investment Advisory and Related Fees
The Company earns investment advisory fees on assets in
accounts managed by its subsidiaries, distribution fees on assets
in Company-sponsored equity and bond mutual funds, and asset based
fees on various types of single-fee brokerage accounts.
Earnings Per Share
Primary earnings per share are computed by dividing net
earnings by the weighted average number of shares outstanding and
dilutive common stock equivalents. The Company's common stock
equivalents are shares of common stock issuable under various stock
option plans.
Fully diluted earnings per share assumes both the exercise
of dilutive common stock equivalents and conversion of subordinated
debentures.
The weighted average number of shares is as follows:
Years ended March 31,
1995 1994 1993
Primary...................... 12,529,239 12,109,820 11,574,018
Fully diluted................ 16,853,846 16,138,100 13,276,250
41
2. BUSINESS COMBINATIONS
On January 5, 1995, the Company acquired the assets of
Batterymarch Financial Management ("Batterymarch"), an investment
advisory firm that manages equity portfolios for institutional
clients. The Company paid $54,141 cash at closing. A supplemental
closing payment of $5,859 is due on or before January 1996 if
Batterymarch reaches a specified annualized revenue level in any
month during calendar 1995. An additional payment, due in early 1998
and based on Batterymarch's achievement of specified revenue levels
for calendar 1997, could increase the total consideration up to
$120,000. If the amount of the 1998 payment exceeds $40,000, the
Company may pay all or any portion of the excess in the form of
shares of the Company's common stock.
The acquisition was accounted for under the purchase
method of accounting; accordingly, the total purchase price was
allocated to the net assets acquired, principally goodwill and
asset management contracts, based on estimated fair market values.
The results of operations have been included in the consolidated
financial statements from the date of acquisition.
The Company acquired Gray Seifert and Co. ("Gray Seifert")
and The Fairfield Group ("Fairfield"), in April 1994 and 1993,
respectively, through the issuance of common stock. Gray Seifert
provides investment advisory services to individuals, endowments
and foundations. Fairfield is a provider of mutual fund advisory
and other services to banks and bank trust departments. The
acquisitions were accounted for as poolings of interests, but were
not material to the Company's results of operations and financial
position. Accordingly, the results of operations of Gray Seifert
and Fairfield have been included from the dates of acquisition.
3. RECEIVABLE FROM AND PAYABLE TO CUSTOMERS
Receivable from and payable to customers represent
balances arising from cash and margin transactions. Securities
owned by customers are held as collateral for the receivable
balances. Included in payable to customers are free credit balances
of approximately $269,825 as of March 31, 1995, and $261,803 as of
March 31, 1994. The Company pays interest on certain customer free
credit balances held for reinvestment purposes.
42
4. SECURITIES, AT MARKET
Securities positions consist of the following at March 31:
Securities owned
1995 1994
U.S. government and federal agencies............. $11,779 $12,347
State and municipal bonds........................ 27,205 34,153
Corporate debt and equity........................ 12,906 11,117
$51,890 $57,617
Securities sold,
but not yet purchased
1995 1994
U.S. government and federal agencies............. $1,122 $1,048
State and municipal bonds........................ 251 383
Corporate debt and equity........................ 4,989 7,082
$6,362 $8,513
5. INVESTMENT SECURITIES
The Company's investment securities, including the type
and maturity range for available-for-sale securities, are as
follows:
Cost/ Gross Gross Fair
amortized unrealized unrealized market
cost gains losses value
Non-broker-dealer:
Corporate debt:
within one year...... $ 2,006 $ (18) $ 1,988
one to five years.... 7,107 (193) 6,914
U.S. governments:
within one year...... 4,003 (54) 3,949
one to five years.... 2,502 (91) 2,411
Other securities:
one to five years.... 1,359 $ 17 (38) 1,338
money-markets........ 1,649 1,649
equities............. 110 990 (16) 1,084
$18,736 $1,007 $(410) $19,333
Broker-dealer............ 2,779
$22,112
The proceeds of debt securities held as available-for-sale
which matured or were sold during fiscal 1995 were $35,882, with a
gross realized loss of $124.
43
At March 31,1994, prior to adoption of SFAS 115,
investment securities were carried at unamortized cost of $29,754
and had a market value of $30,368.
6. SHORT-TERM BORROWINGS
The Company has a revolving credit agreement which permits
it to borrow up to $50,000, repayable generally over five years, at
floating rates. Under the terms of the agreement, the Company is
required, among other things, to maintain consolidated net worth
plus subordinated liabilities of not less than $252,011 plus 50% of
consolidated annual net earnings subsequent to March 31, 1995.
Together with certain subsidiaries, the Company has jointly entered
into revolving credit agreements which permit it to borrow up to
$40,000, repayable within 30 days. In addition, subsidiaries of the
Company have bank lines of credit of $96,000, which are generally
subject to termination at either party's discretion. No borrowings
were outstanding under these agreements at March 31, 1995.
Short-term borrowings at March 31, 1994, primarily loans
from banks, totalled $15,546.
Interest payments were $17,190 in 1995, $12,704 in 1994
and $10,941 in 1993.
7. SUBORDINATED LIABILITIES
The Company's subordinated liabilities at March 31, 1995
and 1994 are as follows:
5.25% Convertible subordinated debentures due May 1, 2003........ $ 68,000
7% Convertible subordinated debentures due June 15, 2011........ 34,487
$102,487
The 5.25% and 7% debentures are convertible at any time
prior to maturity into common stock of the Company at per share
conversion prices of $25.80 and $21.76, respectively. The
conversion prices are subject to adjustment in certain events.
The Company may redeem the debentures prior to maturity,
in whole or in part, subject to certain conditions. The 5.25%
debentures are redeemable at 103.28% of the principal on May 1,
1996, and thereafter at prices declining annually to 100% on or
after May 1, 2001. At March 31, 1995, the 7% debentures are
redeemable at 101.4%, declining to 100% on or after June 15, 1996.
The 7% debentures require annual sinking fund payments of
$1,500 beginning June 15, 1997 calculated to retire 61% of the
debentures prior to maturity.
44
8. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities and equipment under
non-cancellable operating leases which expire on varying dates
through 2005. Certain leases provide for renewal options and
contain escalation clauses providing for increased rentals. As of
March 31, 1995, the minimum annual aggregate rentals are as
follows:
1996............................................................... $13,764
1997............................................................... 12,162
1998............................................................... 10,939
1999............................................................... 7,104
2000............................................................... 4,574
Thereafter......................................................... 9,943
$58,486
Total rental expense, including cancellable equipment
leases, was $23,510, $27,761 and $24,768 for 1995, 1994 and 1993,
respectively.
The Company leased office space from a partnership in
which the Company and some of its officers, stockholders and
directors had a combined controlling interest through July 1994, at
which time the Company acquired the property for $5,000. Rent
expense includes payments of $240 in 1995, $811 in 1994, and $690
in 1993 to the aforementioned partnership.
The Company enters into when-issued and underwriting
commitments. Had the open transactions relating to these
commitments as of March 31, 1995 been closed, the effect on the
consolidated financial statements of the Company would not have
been material.
The Company and its subsidiaries have been named as
defendants in various legal actions arising primarily from
securities and investment banking activities, including certain
class actions which primarily allege violations of securities laws
and seek unspecified damages which could be substantial. While the
ultimate resolution of these actions cannot be currently
determined, in the opinion of management, after consultation with
legal counsel, the actions will be resolved with no material
adverse effect on the consolidated financial statements of the
Company.
Fiscal 1995 earnings include a charge of $2,000 ($950
after tax) relating to the proposed settlement of class action
litigation arising from taxable municipal bond offerings
underwritten in 1986 by one of the Company's subsidiaries. The
settlement is subject to final court approval, to be considered at
45
a hearing scheduled for July 1995. "Item 3. Legal Proceedings" of
this Report contains additional information concerning this matter.
9. EMPLOYEE BENEFITS
The Company, through its subsidiaries, maintains various
defined contribution plans covering substantially all employees.
Discretionary contributions charged to operations amounted to
$3,417, $7,241 and $6,181 in 1995, 1994 and 1993, respectively. In
addition, employees can make voluntary contributions under certain
plans.
10. INCOME TAXES
The Company and its subsidiaries file a consolidated
federal income tax return. The provision for income taxes consists
of:
1995 1994 1993
Federal.......................... $ 8,822 $19,005 $15,569
State and local.................. 2,609 4,161 3,211
$11,431 $23,166 $18,780
Current.......................... 12,344 23,390 19,861
Deferred......................... (913) (224) (1,081)
$11,431 $23,166 $18,780
A reconciliation of the difference between the effective
income tax rate and the statutory federal income tax rate follows:
1995 1994 1993
Taxes at statutory rates......... 35.0% 35.0% 34.0%
State income taxes, net of
federal income tax benefit..... 6.1 4.6 4.3
Tax-exempt interest
income, net.................... (1.9) (0.8) (0.9)
Other, net....................... 2.1 0.3 0.9
Effective income tax rates....... 41.3% 39.1% 38.3%
46
Components of the Company's deferred tax assets and liabilities
are as follows:
1995 1994
Deferred tax assets:
Accrued compensation
and benefits................. $ 4,759 $3,419
Accrued expenses............... 2,845 1,837
Operating loss carryforwards... 1,369 1,250
Amortization of leasehold
improvements................. 998 884
Other.......................... 1,769 2,285
Valuation allowance............ (1,501) (1,288)
$10,239 $8,387
Deferred tax liabilities:
Depreciation................... $ 1,309 $ 883
Deferred income................ 841 639
Other.......................... 488 177
$ 2,638 $1,699
At March 31, 1995 and 1994, the deferred tax valuation
allowance was primarily for benefits related to net operating
losses which expire from 2000 to 2010.
Income tax payments were $12,047 in 1995, $26,114 in 1994,
and $19,529 in 1993.
11. CAPITAL STOCK
At March 31, 1995, the authorized numbers of common and
preferred shares were 20,000,000 and 4,000,000, respectively, of
which 4,220,540 common shares were reserved for issuance upon
conversion of the Company's convertible subordinated debentures. In
addition, at March 31, 1995 and 1994, there were 2,157,456 and
2,239,870 shares of common stock reserved for issuance under the
Company's stock option plans.
On September 24, 1993, the Company paid a 5-for-4 stock
split to shareholders of record on September 8, 1993. All
references in the consolidated financial statements to the number
of common shares and per share amounts have been adjusted
retroactively to reflect the 5-for-4 stock split, except for the
number of issued common shares presented in the consolidated
financial statements.
12. STOCK PLANS
Options under the Company's employee stock option plans
have been granted at prices not less than 100% of the fair market
47
value of the shares on the date of grant. Options granted are
generally exercisable in cumulative 20% increments over five years
and have a term of not more than ten years from the date of grant.
Transactions under the plans during the three years ending
March 31, 1995 are summarized below:
Number of Shares
Options outstanding at
March 31, 1992 (683,448 exercisable).................... 1,111,185
Granted................................................. 185,883
Exercised............................................... (138,815)
Per share option price: $2.33-$15.12
Cancelled............................................... (18,929)
Options outstanding at
March 31, 1993 (679,888 exercisable).................... 1,139,324
Granted................................................. 214,025
Exercised............................................... (117,683)
Per share option price: $5.82-$18.28
Cancelled............................................... (16,405)
Options outstanding at
March 31, 1994 (691,499 exercisable).................... 1,219,261
Granted................................................. 407,307
Exercised............................................... (73,269)
Per share option price: $6.11-$17.40
Cancelled............................................... (22,905)
Options outstanding at
March 31, 1995 (763,163 exercisable).................... 1,530,394
Per share option price: $8.22-$24.75
The Company has also adopted the "Legg Mason 1988
Non-Employee Director Option Plan." Options granted under the plan
are immediately exercisable at a price equal to the fair market
value of the shares on the date of grant. Options issuable under
the plan, limited to 175,000 shares in aggregate, have a term of
not more than ten years from the date of grant. At March 31, 1995,
options on 69,000 shares have been granted, of which 64,000 are
currently outstanding. The Company makes no charge to income with
respect to its stock option plans.
The Company has an Employee Stock Purchase Plan covering
substantially all employees. Shares of common stock are purchased
in the open market on behalf of participating employees, subject to
a 625,000 total share limit under the plan. Purchases are made
through payroll deductions with the Company matching 5% of the
employees' contributions. Charges to earnings were not significant
with respect to this plan.
48
13. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT
In the normal course of business, the Company executes,
settles and finances customer and proprietary securities
transactions. These activities expose the Company to off-balance
sheet risk in the event that customers or other parties fail to
satisfy their obligations.
In accordance with industry practice, securities
transactions are recorded on settlement date, generally five
business days after trade date. Should a customer or broker fail to
deliver cash or securities as agreed, the Company may be required
to purchase or sell securities at unfavorable market prices.
The Company extends credit to customers, collateralized by
cash and securities, and subject to regulatory and internal
requirements. Customer margin transactions include sales of
securities not yet purchased, option contracts and commodity
futures contracts. The Company continually monitors margin
requirements and requests customers to deposit additional
collateral or reduce positions when necessary. Such transactions
expose the Company to risk in the event that margin requirements
are insufficient to fully cover customer losses.
The Company borrows and lends securities to finance
transactions and facilitate the settlement process, utilizing both
firm proprietary positions and customer margin securities held as
collateral. The Company deposits or receives cash generally equal
to 102% of the market value of securities exchanged and monitors
the adequacy of collateral levels on a daily basis. The Company
periodically borrows from banks on a collateralized basis utilizing
firm and customer margin securities in compliance with Securities
and Exchange Commission rules. Should the counterparty fail to
return customer securities pledged, the Company is subject to the
risk of acquiring the securities at prevailing market prices in
order to satisfy its customer obligations. The Company sells
securities it does not currently own, and is obligated to
subsequently purchase such securities at prevailing market prices.
The Company is exposed to risk of loss if securities prices
increase prior to closing the transactions.
14. REGULATORY REQUIREMENTS
The Company's broker-dealer subsidiaries are subject to the
Securities and Exchange Commission's Uniform Net Capital Rule. The
rule provides that equity capital may not be withdrawn or cash
dividends paid if resulting net capital would fall below specified
levels. As of March 31, 1995, the broker-dealer subsidiaries had
aggregate net capital, as defined, of $90,711 which exceeded
required net capital by $82,949.
49
The Company's principal broker-dealer subsidiary must
maintain a separate account for the exclusive benefit of customers
in accordance with Securities and Exchange Commission Rule 15c3-3,
as determined by periodic computations. The rule allows the
broker-dealer to maintain the required amounts in cash or qualified
securities.
15. BUSINESS SEGMENT INFORMATION
The Company, through its subsidiaries, operates
predominantly in a single business segment-the securities industry.
Within this segment, the Company is primarily engaged in securities
brokerage, investment advisory and investment banking activities.
QUARTERLY FINANCIAL DATA*
(Dollars in thousands except per share amounts)
(Unaudited)
Quarter ended
1995 Mar. 31 Dec. 31 Sept. 30 June 30
Revenues $100,417 $ 92,887 $ 88,452 $89,835
Expenses 93,407 85,899 83,100 81,496
Earnings before income taxes 7,010 6,988 5,352 8,339
Income taxes 2,989 2,855 2,251 3,336
Net earnings $ 4,021 $ 4,133 $ 3,101 $ 5,003
Earnings per share:
Primary $ .32 $ .33 $ .25 $ .40
Fully diluted $ .28 $ .29 $ .23 $ .35
1994 Mar. 31 Dec. 31 Sept. 30 June 30
Revenues $ 96,294 $103,125 $106,767 $91,348
Expenses 85,347 86,803 88,025 78,145
Earnings before income taxes 10,947 16,322 18,742 13,203
Income taxes 4,280 6,433 7,382 5,071
Net earnings $ 6,667 $ 9,889 $ 11,360 $ 8,132
Earnings per share:
Primary $ .55 $ .81 $ .94 $ .68
Fully diluted $ .45 $ .65 $ .74 $ .57
* Adjusted to reflect the 5-for-4 stock split paid September 1993.
50
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item is contained under
the caption "Election of Directors" on pages 1 through 4 of the
Company's definitive proxy statement for the 1995 Annual Meeting of
Stockholders and the caption "Compliance With Section 16(a) of the
Securities Exchange Act of 1934" on page 13 of such proxy
statement. Such information is incorporated herein by reference to
the proxy statement. See Part I, Item 4A of this Report for
information regarding certain executive officers of the Company.
Item 11. Executive Compensation.
The information required by this item is contained under
the caption "Executive Compensation" on pages 6 and 7 of the
Company's definitive proxy statement for the 1995 Annual Meeting of
Stockholders. Such information is incorporated herein by reference
to the proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this item is contained under
the caption "Security Ownership of Management and Principal
Stockholders" on page 5 of the Company's definitive proxy statement
for the 1995 Annual Meeting of Stockholders. Such information is
incorporated herein by reference to the proxy statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is contained under
the caption "Certain Transactions" on page 10 of the Company's
definitive proxy statement for the 1995 Annual Meeting of
Stockholders. Such information is incorporated herein by reference
to the proxy statement.
51
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) Documents filed as a part of the report:
1. The following consolidated financial statements are
included in Item 8 of this Report:
Page Number in
this Report
Report of Independent
Accountants 34
Consolidated Statements
of Earnings 35
Consolidated Statements
of Financial Condition 36
Consolidated Statements of
Changes in Stockholders'
Equity 37
Consolidated Statements
of Cash Flows 38
Notes to Consolidated
Financial Statements 39-49
2. Financial Statement Schedules (included on pages S-1
to S-5 of this Report):
Report of Independent Accountants on Financial Statement
Schedules
Schedule I - Condensed Financial Statement of Registrant
All other schedules to the consolidated financial
statements for which provision is made in the accounting
regulations of the Securities and Exchange Commission are
not applicable or are not required and therefore have been
omitted.
3. Exhibits
3.1 - Articles of Incorporation of the
Company, as amended (incorporated by
reference to Form 10-Q for the quarter
ended June 30, 1988)
3.2 - By-laws of the Company as amended and
restated April 25, 1988 (incorporated
by reference to the Company's Annual
52
Report on Form 10-K for the year ended
March 31, 1988)
4 - The Company hereby agrees, pursuant to
Item 601(b)(4)(iii)(A) of Regulation
S-K, to furnish to the Commission upon
request a copy of each instrument with
respect to the rights of holders of
long-term debt of the Company or its
subsidiaries.
10.1.1 - Lease dated September 11, 1987 between
Baltimore Center Associates Limited
Partnership and Legg Mason Tower, Inc.
with respect to the Company's premises
at 111 South Calvert Street,
Baltimore, Maryland (incorporated by
reference to Form 10-Q for the quarter
ended September 30, 1987)
10.1.2 - First Amendment of Agreement of Lease
dated August 1, 1988 with respect to
lease dated September 11, 1987
(incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1989)
10.1.3 - Second Amendment of Agreement of Lease
dated December 19, 1988 with respect
to lease dated September 11, 1987
(incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1989)
10.1.4 - Third Amendment of Agreement of Lease
dated as of October 1, 1990 with
respect to lease dated September 11,
1987 (incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1991)
10.1.5 - Fourth Amendment of Agreement of Lease
dated August 3, 1992 with respect to
lease dated September 11, 1987
(incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1993)
10.2 - Legg Mason, Inc. 1981 Stock Option
Plan, as amended through January 26,
1988 (incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1988)*
10.3 - Legg Mason, Inc. 1981 Incentive Stock
Option Plan, as amended through
June 2, 1988 (incorporated by
reference to the Company's Annual
53
Report on Form 10-K for the year ended
March 31, 1988)*
10.4 - Legg Mason, Inc. 1988 Non-Employee
Director Stock Option Plan
(incorporated by reference to the
Company's Annual Report on Form 10-K
for the year ended March 31, 1993)*
10.5 - Legg Mason Wood Walker, Incorporated
Deferred Compensation/Phantom Stock
Plan (incorporated by reference to
Registration No. 33-28609 on
Form S-8)*
10.6.1 - Legg Mason, Inc. 1991 Omnibus
Long-Term Compensation Plan
(incorporated by reference to Exhibit
A to the definitive proxy statement
for the Company's 1991 Annual Meeting
of Stockholders)*
10.6.2 - Form of Option Agreement under Legg
Mason, Inc. 1991 Omnibus Long-Term
Compensation Plan (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year ended
March 31, 1993)*
10.7 - Legg Mason, Inc. Executive Incentive
Compensation Plan (incorporated by
reference to Appendix A to the
definitive proxy statement for the
Company's 1995 Annual Meeting of
Stockholders)*
11 - Statement regarding computation of per
share earnings, filed herewith
21 - Subsidiaries of the Company, filed
herewith
23 - Consent of independent accountants,
filed herewith
27 - Financial Data Schedule
*These exhibits are management contracts or compensatory plans
or arrangements.
(b) No reports on Form 8-K were filed during the quarter
ended March 31, 1995.
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LEGG MASON, INC.
By: /s/ Raymond A. Mason
Raymond A. Mason, Chairman
of the Board, President and
Chief Executive Officer
Date: June 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.
Signature Title Date
/s/ Raymond A. Mason Chairman of the Board, June 28, 1995
Raymond A. Mason President and Chief
Executive Officer
(Principal Executive
Officer)
/s/ F. Barry Bilson Vice President-Finance June 28, 1995
F. Barry Bilson (Principal Financial
Officer)
/S/ Eileen M. O'Rourke Controller (Principal June 28, 1995
Eileen M. O'Rourke Accounting Officer)
/s/ John F. Curley, Jr. Director June 28, 1995
John F. Curley, Jr.
55
Director
James W. Brinkley
Director
Edmund J. Cashman, Jr.
/s/ Charles A. Bacigalupo Director June 28, 1995
Charles A. Bacigalupo
/s/ Harry M. Ford, Jr. Director June 28, 1995
Harry M. Ford, Jr.
/s/ Kenneth S. Battye Director June 28, 1995
Kenneth S. Battye
/s/ Nicholas J. St. George Director June 28, 1995
Nicholas J. St. George
/s/ Richard J. Himelfarb Director June 28, 1995
Richard J. Himelfarb
/s/ James E. Ukrop Director June 28, 1995
James E. Ukrop
/s/ John E. Levert, Jr. Director June 28, 1995
John B. Levert, Jr.
/s/ Harold L. Adams Director June 28, 1995
Harold L. Adams
56
/s/ John E. Koerner, III Director June 28, 1995
John E. Koerner, III
/s/ Roger W. Schipke Director June 28, 1995
Roger W. Schipke
/s/ W. Curtis Livingston Director June 28, 1995
W. Curtis Livingston
/s/ Edward I. O'Brien Director June 28, 1995
Edward I. O'Brien
/s/ Peter F. O'Malley Director June 28, 1995
Peter F. O'Malley