SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported
October 14, 1997
Interra Financial Incorporated
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation of organization)
1-8186 41-1228350
(Commission File Number) (IRS Employer
Identification Number)
Dain Bosworth Plaza, 60 South Sixth Street,
Minneapolis, Minnesota 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-7750
<PAGE>
Item 5. OTHER EVENTS
Reference is made to Exhibit 99 filed herewith.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99 Press release which includes announcement
of: (1) registrant's intent to combine Dain
Bosworth and Rauscher Pierce Refsnes;
(2) registrant's intent to change its name;
(3) restructuring of the registrant's
management team; and (4) 1997 third quarter
$9.6 million after-tax restructuring charge.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
INTERRA FINANCIAL INCORPORATED
Registrant
Date: October 14, 1997 By: Daniel J. Reuss
------------------ -------------------------
Daniel J. Reuss
Senior Vice President,
Corporate Controller &
Treasurer
<PAGE>
INTERRA FINANCIAL INCORPORATED AND SUBSIDIARIES
INDEX OF EXHIBITS
Exhibit No.
99 Press release which includes announcement of: (1)
registrant's intent to combine Dain Bosworth and
Rauscher Pierce Refsnes; (2) registrant's intent to
change its name; (3) restructuring of the registrant's
management team; and (4) 1997 third quarter $9.6
million after-tax restructuring charge.
Exhibit 99
NEW RELEASE
INTERRA TO COMBINE DAIN BOSWORTH AND RAUSCHER PIERCE REFSNES;
HOLDING COMPANY TO CHANGE NAME TO DAIN RAUSCHER
Third-Quarter Earnings, Excluding One-Time Restructuring Charge,
Set New Record
MINNEAPOLIS (Oct. 14, 1997) -- Interra Financial (NYSE: IFI),
parent company of full-service securities firms Dain Bosworth of
Minneapolis and Rauscher Pierce Refsnes of Dallas, announced
today it will combine the two broker-dealers and its operations
subsidiary into a new firm, Dain Rauscher Incorporated, effective
on Jan. 1, 1998. Pending regulatory approval, Interra will
change its name to Dain Rauscher Corporation on Jan. 2, 1998, and
the company's trading symbol on the New York Stock Exchange will
change to DRC on that date.
The combination of Dain and Rauscher creates the largest
regional brokerage firm in the west and the tenth-largest full-
service securities firm in the nation, with more than 1,200
private client and institutional investment executives in 26
predominantly western states and annualized 1997 net revenues of
almost $700 million.
"We are changing our strategy and structure because the
competitive environment in which we operate has changed
dramatically in recent months, and we are committed to taking
steps that will allow our company to build shareholder value well
into the next century," stated Irving Weiser, chairman, president
and chief executive officer. "Combining our two regional firms
into a single, powerful brand will secure an even brighter future
for shareholders, clients and employees. It enables us to
simplify our structure, become more responsive and less
bureaucratic, and preserve the entrepreneurial culture that we
believe is essential in our industry."
The company, which employs 3,600 people, expects to eliminate
approximately 100 management, business-line and staff positions
over the next several months. The reorganization is expected to
reduce non-interest expense levels by approximately $10 million
before taxes, which should improve pretax operating margins by
approximately 1.5 percentage points beginning in 1998.
Interra took a one-time after-tax charge of $9.6 million ($15
million before taxes), or 72 cents per share, against third-
quarter 1997 earnings to cover severance and other restructuring
costs. Excluding the restructuring charge, third-quarter
earnings were a new record for the company.
MANAGEMENT TEAM. Effective immediately, the company's
executive committee is comprised of Weiser, 49, as chairman,
president and CEO; and John C. Appel, 48, presently CEO of Dain,
and William A. Johnstone, 53, presently CEO of Rauscher, who have
been named vice chairmen of Dain Rauscher. Appel was named to
the additional post of chief financial officer of Dain Rauscher,
with management responsibility for finance, legal, compliance and
the firm's St. Louis-based Correspondent Services business.
Johnstone was named president of the company's equity capitalmarkets
group, which includes corporate finance, research,
institutional sales, trading and syndicate. Appel and Johnstone
will continue to serve as CEOs of their respective firms until
the consolidation and both remain on the board of directors.
Completing the executive committee are Ronald A. Tschetter,
Nelson D. Civello and J. Scott Spiker. Tschetter, 56, has been
promoted to president of the newly combined private client group,
the company's largest business unit. Civello, 51, has been
promoted to president of the newly combined fixed income capital
markets group, which includes public finance; and taxable and
tax-exempt institutional sales, trading and underwriting.
Spiker, 42, was promoted to president of the advisory and
clearing services group, which provides operations, technology,
packaged products, marketing, communications and other services
to the company's business lines, including money market funds and
fixed income institutional accounts managed by Insight Investment
Management. Currently, advisory and clearing services operate as
separate subsidiaries of Interra, but will become part of the
broker-dealer when the consolidation is completed.
Three Rauscher executive vice presidents will remain EVPs in
the newly combined company: Robert H. Brown Jr., as director of
corporate finance; Robert A. Vanosky, as director of public
finance; and Dan N. Wilhite, as director of the southwest region
for the private client group, all in Dallas. John C. O'Malley, a
Dain executive vice president, has been named EVP and director of
equity sales, trading and syndicate in Minneapolis.
As part of the reorganization, Louis C. Fornetti, 47, who was
an executive vice president and Interra's CFO, has resigned from
the firm. Before joining Interra in 1995, Fornetti was CFO of
American Express Financial Advisors.
"Lou has been a valuable member of our executive team," Weiser
said. "He's been great to work with, and we wish him all the
best."
CORPORATE STRATEGY CHANGE. Under the new strategy, Dain
Rauscher's merged broker-dealer will focus on: individual
investors predominantly in the western half of the United States;
and capital markets and correspondent services clients in select
markets throughout the country. This represents a significant
shift in the company's strategy from a family of separately
managed investment services and investment banking firms that
shared only administrative services, such as operations,
technology, human resources, communications and other corporate
services.
Weiser said the company is changing its structure and strategy
because of the rapid consolidation of the securities industry,
sparked in February by Federal Reserve Board rulings that
effectively permitted bank holding companies to acquire
investment banks.
"As part of this dramatic change in the competitive landscape,
bank acquisitions and mergers have driven up the price of
securities firms to the point where acquisitions of major
additional firms planned by Interra no longer appear to be cost-
effective," Weiser said.
Dain Rauscher may continue to acquire smaller securities firms
in or near its current markets, and will continue to expand its
Correspondent Services business, which provides clearing and
trade-settlement services to 180 non-affiliated brokerages across
the United States and in several foreign countries. The company
also expects to explore new business opportunities in other
securities-related businesses.
Weiser said the company's name change (to Interra) last
February made this decision more difficult, but that was not
sufficient reason to hold back. "The new strategy, built around
one flagship brokerage, provides a better platform for growth in
a rapidly changing industry and better brand-name recognition in
the investment community."
THIRD-QUARTER EARNINGS. For the third quarter, the company
reported net earnings of $7.1 million, or 53 cents per share.
Excluding the one-time charge, Interra would have reported record
quarterly net earnings of $16.7 million, or $1.25 per share. Net
revenues (revenues less interest expenses) rose 20 percent from
prior-year levels to $181.4 million. For the first nine months
of 1997, Interra's net earnings were $33.9 million, or $2.54 per
share, on net revenues that rose 9 percent to $503.5 million.
Without the third-quarter charge, Interra would have posted
record earnings for the first nine months of 1997.
During the third quarter, Dain Bosworth's net revenues rose 18
percent to $117.9 million and 9 percent during the first nine
months to $329.0 million compared with 1996. Dain's pretax
earnings rose 17 percent to $17.8 million during the third
quarter and were flat at $45.7 million for the first nine months.
Rauscher's net revenues rose 21 percent to $53.5 million in the
third quarter and 6 percent to $147.1 million during the first
nine months of 1997. Rauscher's pretax earnings rose 51 percent
to a record $7.5 million in the third quarter and 6 percent to
$17.5 million year-to-date.
Strong third-quarter operating results reflect double-digit
revenue increases at the firms' private client groups, which were
fueled by strong equity markets. Fixed income businesses were
also strong during the quarter, particularly public finance and
taxable sales, trading and underwriting.
Interra's annualized return on average equity was 16.3 percent
during the first three quarters; excluding the restructuring
charge, it was 19.2 percent. Book value per share increased to
$24.97 on Sept. 30 from $22.66 on Dec. 31, 1996. The stock price
rose 43 percent in the third quarter to close at $60.06 per
share.
<PAGE>
<TABLE>
INTERRA FINANCIAL INCORPORATED
CONSOLIDATED SUMMARY OF OPERATIONS
(in thousands, except per-share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, Ended September 30,
------------------- --------------------
1997 1996 1997 1996
------------------- --------------------
<S> <C> <C> <C> <C>
Revenues............. $196,605 $165,505 $545,181 $503,860
Interest expense..... (15,237) (14,470) (41,720) (42,948)
------- ------- ------- -------
Net revenues......... 181,368 151,035 503,461 460,912
Expenses excluding
interest (1)........ 170,377 131,051 450,582 397,685
------- ------- ------- -------
Earnings before
income taxes........ 10,991 19,984 52,879 63,227
Income tax expense... (3,935) (6,994) (18,931) (22,129)
------- ------- ------- -------
Net earnings......... $7,056 $12,990 $33,948 $41,098
======= ======= ======= =======
Net earnings per share:
Primary.............. $.53 $1.02 $2.58 $3.24
Fully diluted........ $.53 $1.01 $2.54 $3.19
Shares used for
per-share calculation:
Primary.............. 13,226 12,777 13,166 12,666
Fully diluted........ 13,400 12,920 13,380 12,889
Selected financial data:
Net revenues:
Dain Bosworth
Incorporated........ $117,922 $99,705 $328,952 $301,210
Rauscher Pierce
Refsnes, Inc. (2)... 53,526 44,419 147,128 138,729
Corporate, other and
eliminations (2).... 9,920 6,911 27,381 20,973
------- ------- ------- -------
$181,368 $151,035 $503,461 $460,912
======= ======= ======= =======
Pretax earnings (loss):
Dain Bosworth
Incorporated........ $17,761 $15,242 $45,719 $45,651
Rauscher Pierce
Refsnes, Inc. (2)... 7,511 4,967 17,483 16,436
Corporate, other and
eliminations (2).... (14,281) (225) (10,323) 1,140
------- ------- ------- -------
$10,991 $19,984 $52,879 $63,227
======= ======= ======= =======
<FN>
(1) Expenses excluding interest for the 1997 periods contain a
$15 million restructuring charge.
(2) Rauscher's results exclude those of St. Louis-based
Correspondent Services, which are now included in
Corporate, other and eliminations. Prior-year amounts have
been restated to reflect this change.
</TABLE>
Interra Financial, which becomes Dain Rauscher Corporation on
Jan. 1, is the nation's tenth largest full-service securities
firm with 3,600 employees. Founded in 1909, the Minneapolis-based
company provides advice and services to individual investors in
21 western states, and investment banking services to
corporations and municipalities nationwide. Through its St.
Louis-based Correspondent Services unit, the company markets
clearing and trade settlement services to 180 other broker-
dealers in the U.S. and abroad. The company's broker-dealers are
members of the New York Stock Exchange and other major stock and
option exchanges as well as the Securities Investor Protection
Corp. The company's common stock currently trades on the New York
Stock Exchange under the symbol IFI. Its headquarters are
located at Dain Bosworth Plaza, 60 S. Sixth Street.
CONTACTS: Media-Jennifer Driscoll (612) 373-1647; Investors-Neal
St. Anthony (612) 371-2934
