SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended Commission file
February 28, 1994 number 1-8517
THE QUICK & REILLY GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3082841
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
230 South County Road, Palm Beach, Florida 33480
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code
(407) 655-8000
Securities registered pursuant to Section 12(b) of the
Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the
Act: None
(Title of class)
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. (X)
The aggregate market value of voting stock held by non-
affiliates of the registrant is $185,957,205 at May
11, 1994.
11,121,075
(Number of shares of common stock outstanding
at May 11, 1994)
Documents Incorporated by Reference Form 10-K
Annual Report to Shareholders for Parts II, IV
year ended February 28, 1994
Proxy Statement for Annual Meeting Part III
of Shareholders - June 28, 1994
PART I
Item 1. Business
(a) General Development of Business
The Quick & Reilly Group, Inc. (the
"Company") was originally incorporated in New York on
June 25, 1981. The Company was reincorporated in
Delaware in 1987. It is a holding company owning all
of the capital stock of its primary subsidiaries:
Quick & Reilly, Inc., U.S. Clearing Corp., and JJC
Specialist Corp.
Quick & Reilly, Inc. ("Q&R") was incorporated
in New York on March 1, 1974. Q&R became a member
organization of The New York Stock Exchange, Inc.
("NYSE") on May 2, 1974, and became the first member
organization to offer substantially discounted
commission rates to individual investors following the
elimination of fixed commission rates by the
Securities and Exchange Commission (the "SEC") on May
1, 1975.
U.S. Clearing Corp. ("U.S. Clearing") was
incorporated in New York on December 22, 1978 as a
subsidiary of Q&R and began clearing customer
securities transactions in March 1979.
JJC Specialist Corp. ("JJC Specialist") was
incorporated in New York as a subsidiary of the
Company on September 10, 1982, and conducts specialist
operations on the floor of the NYSE, along with JJC
Specialist Partners, the partnership acquired as a
result of the merger of the Stokes, Hoyt & Co.
specialist operations with JJC Specialist in December
1992.
Q&R, U.S. Clearing, and JJC Specialist (the
"primary subsidiaries") as well as JJC Specialist
Partners, are member organizations of the NYSE and are
registered as broker-dealers with the SEC. Q&R and
U.S. Clearing are members of the National Association
of Securities Dealers (the "NASD"). U.S. Clearing is
also a member of the American Stock Exchange (the
"AMEX"), Boston Stock Exchange, Philadelphia Stock
Exchange, Pacific Stock Exchange, Midwest Stock
Exchange and Chicago Board Options Exchange. Q&R,
U.S. Clearing, JJC Specialist and JJC Specialist
Partners are members of the Securities Investor
Protection Corporation, which provides protection for
customer accounts up to $500,000 per customer, with a
limitation of $100,000 on claims for cash balances.
U.S. Clearing has also arranged for an additional $24.5
million worth of protection per customer on securities
through the Aetna Casualty & Surety Co.
(b) Financial Information about Industry
Segments
The Company operates in a single industry
segment and has no foreign operations. No material
part of the Company's consolidated revenues is received
from a single customer or group of customers.
(c) Narrative Description of Business
The following table sets forth consolidated
revenues of the Company, and the number of branch
offices of Q&R in operation at year-end, on a
comparative basis for its last three fiscal years:
<TABLE>
Fiscal Year Ended the Last Day of February,
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
AMOUNT % AMOUNT % AMOUNT %
Commissions (Net
of clearance
fees) (1) $116,127,964 43.8 $95,033,443 48.5 $75,493,098 49.0
Clearance
Income (1) 38,039,653 14.3 28,915,075 14.8 26,277,226 17.1
Interest 68,336,767 25.8 47,334,287 24.2 35,558,585 23.1
Specialist Trading
and Commissions 37,869,617 14.3 19,083,325 9.7 13,243,651 8.6
Other 4,821,607 1.8 5,567,901 2.8 3,446,396 2.2
TOTAL REVENUES $265,195,608 100% $195,934,031 100% $154,018,956 100%
Number of Q&R
Offices 97 82 74
<F1>
(1) Amounts for the fiscal years ended on the last day
of February 1993 and 1992 have been restated to conform
with the current year's presentation.
</TABLE>
Discount Brokerage Services
On May 1, 1975, the SEC eliminated all fixed
commission rates on securities transactions. Although
this resulted in an immediate and substantial reduction
in commission rates charged to institutional customers,
rates charged to individual retail customers by the
full-service national brokerage firms were not reduced.
In mid-1975, Q&R's management perceived that an
opportunity existed for firms willing to offer
brokerage services at commission rates substantially
below the pre-1975 fixed rates, and Q&R began offering
such services.
The discount brokerage service offered by Q&R
is based on the principle that there are many investors
who wish to conduct their own research and make their
own investment decisions, and do not wish to pay for
education or assistance. Q&R's management perceives
that these investors basically wish to have their
orders executed at the best possible price, and to
have their transactions cleared and their accounts
maintained - all at the lowest commission rate
consistent with a professional level of service. Q&R,
together with the clearing operation U.S. Clearing, is
able to provide all of these services.
Q&R reaches the self-directed investor
through a combination of customer referrals and
national and regional advertising (generally
in financially oriented publications, radio and
television). When an individual responds to a referral
or advertising, he or she receives a booklet describing
Q&R's services and its commission schedule, as well as
a new account form for opening a cash or margin
account. An account is established when the
application is returned and the initial transaction
takes place.
An extensive branch office system has been
established by Q&R for the many investors who prefer to
be close to their broker. The branch office provides
Q&R with a presence in the community and provides the
client with the opportunity to visit the office. The
investor may also contact the branch office by calling
a toll-free phone number. A client is assigned his own
Account Executive.
From a single office in New York in 1974, Q&R
has grown to a total of 97 offices nationwide. Fifteen
new offices were opened during the fiscal year ended
February 28, 1994. These offices are located in
Syracuse, White Plains, and Forest Hills, New York;
Salt Lake City, Utah; Glendale, Fresno, Rancho
Bernardo, and downtown San Diego, California; King of
Prussia, Pennsylvania; Bethesda, Maryland; Dayton,
Ohio; Greenville and Columbia, South Carolina; San
Antonio, Texas; and Port Richey, Florida.
Q&R's Account Executives have access to the
latest electronic display equipment and to direct lines
to the floors of various exchanges to obtain current
price quotations. Q&R has a policy against Account
Executives giving investment advice or opinions. Q&R
executes orders for its customers in listed and
unlisted common and preferred stocks, debt securities
and options.
Q&R also has available various money market
and mutual funds that are provided by outside vendors,
representing 77 mutual fund families, of which there
are in excess of 1,500 individual funds, including 135
no-load funds.
After price information is given, the
customer's order is taken by the Account Executive and
executed, confirmed (both verbally and in writing) and
the transaction is cleared by U.S. Clearing. At the
end of each month in which the customer effects a
trade, he or she is sent a statement that contains, in
addition to standard information, market value,
estimated annual yield and dollar income for each
security as well as for the portfolio, and the amount
of margin interest charged and dividends or interest
earned.
Q&R offers a service that allows customers with
personal computers to monitor and manage their
portfolios twenty-four hours a day without talking to
an Account Executive. The "Quick Way" system enables
customers to receive quotes, to have access to timely
market and research information, and to enter orders
that are electronically routed through a Q&R office to
the proper market for execution.
The ability to obtain the best execution of
an order is of the utmost importance to a customer, and
to ensure that this is accomplished, Q&R and U.S.
Clearing, through their exchange memberships, have
direct wire access to the trading floors of all major
exchanges and also interface electronically with the
latest automated execution and order routing
facilities.
The Company believes that Q&R's advertising
has played a role in expanding the firm's customer
base. Advertising expenses for the fiscal years ended
in 1994, 1993 and 1992 were $6,226,000, $6,010,000, and
$4,972,000, respectively.
Clearing Services
U.S. Clearing, which became operational in
1979, maintains accounts and clears securities
transactions for (1) customers of Q&R and (2) customers
introduced by other brokerage firms and by banks
(theintroducing party being commonly known as a
"correspondent" broker). When a customer of Q&R or of
a correspondent broker opens an account, the account is
physically maintained by U.S. Clearing, as agent for
Q&R or the correspondent broker.
U.S. Clearing clears all securities
transactions for Q&R's customer accounts and presently
carries accounts and clears transactions for 179
correspondent brokers. The competition to obtain
clearing agreements with correspondent brokers is
intense, and U.S. Clearing competes in this respect
with a number of highly visible, large, well-financed
clearing firms. Contacts between U.S. Clearing and
potential correspondent brokers are made by
advertising, referrals and solicited calls. Price,
services, diversity of data processing programs and
applications, and reputation are the main bases of
competition. Although U.S. Clearing's prices are not
the lowest in the industry, management believes that
U.S. Clearing's service and systems are competitive.
The following table sets forth clearance income,
number of securities transactions processed and number
of correspondents for U.S. Clearing for the periods
shown:
<TABLE>
Fiscal Year Ended the Last Day of February
1994 1993 1992
<CAPTION>
<S> <C> <C> <C>
Clearance Income
Q&R and JJC Specialist(1)(2) $22,099,510 $17,404,922 $15,095,085
Correspondents 33,410,169 25,883,324 23,187,910
Total $55,509,679 $43,288,246 $38,282,995
Transactions
Q&R, JJC Specialist
and Correspondents (1)(2) 4,446,155 2,954,122 2,720,712
Correspondents - Number
at Year End 179 165 120
<F1>
(1) JJC Specialist started clearing through U.S.
Clearing in September 1991.
<F2>
(2) Includes JJC Specialist Partners transactions for
the fiscal year ended February 28, 1994, and for the
two months ended February 28, 1993.
</TABLE>
Electronic data processing is an integral
part of the Company's entire brokerage operations,
particularly of U.S. Clearing's operations. Although
the Company owns or leases all of the data processing
hardware necessary to input trading and back-office
data, it relies on a data processing service bureau for
programming and main frame computer capabilities.
Management thus far has been satisfied with the service
bureau's performance, but there can be no assurance of
satisfactory performance in the future.
The Company believes that U.S. Clearing's
internal controls and safeguards against risk of
securities theft are adequate. U.S. Clearing relies
upon certificate counts, microfilming procedures, and
video cameras recording movements in high security
areas as deterrents to securities theft. In addition,
as required by the NYSE and certain other regulatory
authorities, U.S. Clearing carries a fidelity bond
covering loss or theft. The total coverage of
$20,000,000 (with a $250,000 deductible provision per
incident) is believed to be adequate.
Customer Financing
Customers of Q&R and of U.S. Clearing's
correspondent brokers may effect transactions either on
a cash or margin basis. In an account authorized for
margin trading, Q&R and U.S. Clearing may lend its
customers an amount up to that permitted by the Federal
Reserve Board, currently 50% of the market value of
securities purchased (Regulation T). The amount of the
loan is also subject to NYSE margin requirements and
the firm's internal policies, which in some instances
are more stringent than Regulation T and NYSE
requirements.
"Short" sales of securities represent sales
of borrowed securities and obligate the client to
purchase the securities at a later date. Clients may
sell securities short in a margin account subject to
minimum equity, applicable margin requirements, and the
availability of such securities to be borrowed and
delivered.
Interest is charged on the amount borrowed by
customers to finance their margin transactions.
Interest charged on customer accounts represented a
major component of the Company's gross revenues for the
fiscal year ended February 28, 1994.
Secured borrowings, subordinated loans and
equity capital are the primary sources of funds to
finance customer margin account borrowings. U.S.
Clearing also uses cash balances in customer accounts,
known as free credit balances, to finance customer
margin account balances. As of February 28, 1994,
customer free credit balances available to U.S.
Clearing aggregated more than $248,000,000. U.S.
Clearing pays interest on approximately $152,000,000 of
these funds.
The amount of the Company's net interest
revenues from financing margin transactions and from
free credit balances is affected not only by the volume
of business but also by fluctuations in prevailing
interest rates.
Specialist Business
JJC Specialist Corp. is a wholly-owned
subsidiary of the Company. The unit consists of 23
specialists who are members of the NYSE that make
markets in 132 common stocks and 27 preferred stocks.
Each specialist unit is obligated by NYSE rules to
maintain a fair and orderly market in those stocks in
which it is registered. It does so by purchasing and
selling stocks at times of demand and supply. The
specialist, therefore, becomes the central figure in
the auction market.
The business provides an opportunity for
profits but also involves a high degree of risk during
market volatility. At present, there are 40 specialist
units that compete in the allocation process for new
stocks.
On December 24, 1992, JJC Specialist Corp.
acquired through merger the partnership of Stokes, Hoyt
& Co., a specialist on the floor of the NYSE. This
unit became JJC Specialist Partners and was merged into
JJC Specialist Corp. on March 1, 1994.
The following table sets forth the
highest,lowest and average month-end long and short
positions of the Company's specialist business ending
February 28, 1994:
Average Month-End
Highest Position Lowest Position Position
Long Short Long Short Long Short
$14,523,969 $15,682,223 $8,620,452 $4,829,969 $11,519,470 $7,307,867
Competition
All aspects of the Company's business are
highly competitive. Competition within the securities
industry is principally based on the price and quality
of the products and services offered, financial
resources, and the Company's reputation within the
investing community. There is also competition to
attract and retain personnel within the securities
industry. Competition for clients has increased from
other sources, such as commercial banks, savings
institutions, mutual fund management companies and
investment advisory companies. It is likely that
competition from these institutions will intensify as
they expand their brokerage, clearance and specialist
services.
Regulation
The Company's primary subsidiaries are
subject to various federal and state laws which
specifically regulate their activities. The primary
purpose of these requirements is to enhance the
protection of customer assets rather than the Company's
stockholders. Under certain circumstances, these rules
may limit the ability of the Company to make
withdrawals of capital from the primary subsidiaries.
These laws and regulatory requirements generally
subject the primary subsidiaries to standards of
solvency with respect to capital requirements,
financial reporting requirements, approval of
qualifications of personnel engaged in various aspects
of its business, recordkeeping and business practices,
the handling of customer funds resulting from
securities transactions and the extension of credit to
customers on margin transactions. Infractions of these
rules and regulations may result in suspension of
individual employees and/or their supervisors,
termination of employees, limitations on
certain aspects of the primary subsidiaries'
businesses, as well as censures and fines, or even
proceedings of a civil or criminal nature which
could result in a temporary or permanent suspension
of a part or all of the primary subsidiaries'
activities. Additional information regarding
regulation is set forth in Note 12 of the
Notes to Consolidated Financial Statements under the
caption "Capital Requirements". Such information is
incorporated by reference.
Employees
As of February 28, 1994, the Company and its
subsidiaries had 926 employees, including full-time
and part-time employees. Of these, 362 acted as
Account Executives for Q&R. The Company's executive
management group consists of six executive officers.
The Company believes its relations with its employees
are good.
(d) Financial Information about Foreign and
Domestic Operations and Export Sales
Not applicable.
Item 2. Properties
The headquarters of the Company is located at
230 South County Road, Palm Beach, Florida 33480. The
offices of its primary subsidiaries are located at 26
Broadway, New York, New York 10004, under a lease
expiring in 2002. Q&R's 97 branch offices are located
in 33 states and the District of Columbia. Those
offices are located in premises covered by leases that
expire on various dates through 2003.
Item 3. Legal Proceedings
In the ordinary course of their securities
business, certain of the Company's subsidiaries have
been named as defendants in a number of lawsuits and
arbitration proceedings. In the opinion of management,
based on discussions with counsel, the resolution of
such lawsuits and arbitration proceedings will not in
the aggregate have a material adverse effect on the
financial condition or the results of operations of the
Company or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security
Holders
No matters were submitted to a vote of the
Company's security holders during the last quarter of
its fiscal year ended February 28, 1994.
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
The information required herein is reported on
page 24 of the Company's Annual Report to Stockholders
for the year ended February 28, 1994, and is
incorporated herein by reference.
Item 6. Selected Financial Data
The information required herein is reported on
page 1 of the Company's Annual Report to Stockholders
for the year ended February 28, 1994, and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information required herein is reported on
pages 11 and 12 of the Company's Annual Report to
Stockholders for the year ended February 28, 1994, and
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The information required herein is reported on
pages 13 through 23 of the Company's Annual Report to
Stockholders for the year ended February 28, 1994, and
is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of
the Registrant
The information required herein will be
reported in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held June
28, 1994, which will be filed on or before June 28,
1994, and is incorporated herein by reference.
The Company's executive officers hold office
until their respective successors are duly elected and
qualified, or until their earlier resignation or
removal. The executive officers devote substantially
all of their business efforts to the affairs of the
Company. The following table sets forth the name, age
and position with the Company of the executive
officers.
Name Age Position
Leslie C. Quick, Jr. 68 Chairman of the
Board of Directors,
Chief Executive
Officer, Chief
Financial Officer
and Director
Peter Quick 38 Director and
President
Leslie C. Quick III 41 Director, Vice
President and
Treasurer
Christopher C. Quick 37 Director and Vice
President
Thomas C. Quick 39 Director, Assistant
Treasurer and Vice
President
Pascal J. Mercurio 55 Director and Vice
President
Leslie C. Quick, Jr. is the founder of the
Company and served as President, Chief Executive
Officer and a director from its organization in 1981
until June 1986. In April 1983, he was elected
Chairman of the Board of Directors of the Company. He
has served as President and Chief Executive Officer of
Q&R from its organization in 1974 until June 1986 and
as a director from 1974 until March 1993. He has
served as President and Chief Executive Officer of U.S.
Clearing from January 1979 to May 1981, and as a
director from January 1979 to May 1993. Mr. Quick has
also served as Treasurer and a director of JJC
Specialist from September 1982 until March 1990, and as
President and Chief Executive Officer from March 1983
until June 1986. Mr. Quick has also served as
President and as a director of Q&R Charter, Inc. since
December 1982.
Peter Quick, a son of Leslie C. Quick, Jr.,
became a director of the Company in November 1982 and
was elected President in March 1994. Mr. Quick has
served as a Vice President from June 1985 until his
election as President in March 1994. He was named Vice
President of U.S. Clearing in May 1987. He served in
that capacity until May 1990 when he became President
of U.S. Clearing, which position he held until March
1994 when he was elected President of the Company and
Vice President of U.S. Clearing.
Leslie C. Quick III, a son of Leslie C.
Quick, Jr., has served as Vice President since March
1994, Treasurer since February 1985 and as Assistant
Secretary and a director since July 1981. Mr. Quick
served as President of the Company from June 1986 to
March 1994, at which time he was elected President of
U.S. Clearing and became a Vice President of the
Company. He also serves as Vice President, Treasurer,
Secretary and a director of Q&R. He has served as
Secretary and Assistant Treasurer of JJC Specialist.
Christopher C. Quick, son of Leslie C. Quick,
Jr., has served as a Vice President of the Company
since 1988 and as a director since November 1982. Mr.
Quick has served as President of JJC Specialist
since June 1986 and as a director since its
organization in September 1982. From September 1982
until June 1986, Mr. Quick served as Vice President -
Trading of JJC Specialist. He is a member of the
NYSE and serves as a registered specialist in the
specialist book managed by JJC Specialist.
Thomas C. Quick, a son of Leslie C. Quick,
Jr., has served as Vice President and a director of the
Company since July 1981. In addition, Mr. Quick has
served as Vice President and director of U.S. Clearing
since May 1982 and as Assistant Treasurer of that
corporation since May 1985. Mr. Quick joined Q&R in
1977, became Vice President and a director in May 1981
and was elected President of that corporation in June
1986.
Pascal J. Mercurio has been a director of the
Company since July 1981 and a director of Q&R since
March 1980. He joined U.S. Clearing as a
director and Executive Vice President upon its
organization in January 1979. Since that time he
has served in various capacities and in May 1990, he
became U.S. Clearing's Chairman of the Board and
Chief Executive Officer.
Item 11. Executive Compensation
The information required herein will be
reported in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held June
28, 1994, which will be filed on or before June 28,
1994, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The information required herein will be
reported in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held
June 28, 1994, which will be filed on or before June
28, 1994, and is incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions
The information required herein will be
reported in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held June
28, 1994, which will be filed on or before June 28,
1994, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
(a)(1) The following report and consolidated
financial statements are incorporated by
reference from the Registrant's 1994 Annual
Report to Stockholders and filed as part of
this Report:
Report of Independent Public Accountants
Consolidated Financial Statements:
Consolidated Statements of Financial
Condition - February 28, 1994 and
February 28, 1993
Consolidated Statements of Income for
the Years Ended the last day of February
1994, 1993 and 1992
Consolidated Statements of Changes in
Shareholders' Equity for the Years Ended
the last day of February 1994, 1993 and
1992
Consolidated Statements of Cash Flows
for the Years Ended the last day of
February 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a)(2) The following is a list of financial
statement schedules filed as part of this
report beginning on page 27:
Schedule I - Marketable Securities - Other
Investments
Schedule III - Condensed Financial
Information of Registrant
Schedule IX - Short-Term Borrowings
Report of Independent Public Accountants on
Schedules
(a)(3) See accompanying Index to Exhibits
(b) No reports on Form 8-K were filed by the
Registrant during the last fiscal quarter of
the fiscal year covered by this Report.
(c) The following is a list of all Exhibits filed
as part of this Report:
Exhibit No. Description Page
3.1 Amended By-Laws previously filed
and herein incorporated by reference.
3.2 The Company's restated certificate of
incorporation was filed as exhibit 4.1
to the Company's Registration Statement
on Form S-8, Registration No. 33-28345,
and is hereby incorporated by reference.
4.1 Instruments defining the rights of
security holders were filed as
exhibits 4.1 and 4.2 to the Company's
Registration Statement on Form S-1,
Registration No. 2-83667, and Exhibit
4.3 to the Company's Registration
Statement on Form S-8, Registration No.
33-28345,and are hereby incorporated by
reference.
10.1 Material contracts were filed as
exhibits 10.4 and 10.5 to the Company's
Registration Statement on Form S-1,
Registration No. 2-83667, and are hereby
incorporated by reference.
10.2 Agreement and Plan of Merger
(Reincorporation Merger Agreement) was
filed as Exhibit A to the Company's
Notice of Annual Meeting of Stockholders
and Proxy Statement for the June 23,
1987 Annual Meeting of Stockholders.
Restated Certificate of Incorporation of
The Quick & Reilly (Delaware) Group,
Inc. was filed as Exhibit B to the
Company's Notice of Annual Meeting of
Stockholders and Proxy Statement for the
June 23, 1987 Annual Meeting of
Stockholders. By-Laws of The Quick &
Reilly (Delaware) Group, Inc. was filed
as Exhibit C to the Company's Notice of
Annual Meeting of Stockholders and Proxy
Statement for the June 23, 1987 Annual
Meeting of Stockholders.
10.3 Quick & Reilly Stock Option Plan was
filed as Appendix A to the Company's
Notice of Annual Meeting of Stockholders
for the fiscal year ended February 28,
1991.
13.1 Annual Report to Stockholders for 36
the year ended February 28, 1994.
With the exception of the information
incorporated By reference into Items, 5,
6, 7, and 8 of this Form 10-K, the
Annual Report to Stockholders for the
year ended February 28, 1994 is not
deemed filed as part of this report for
the purposes of Section 18 of the
Securities Exchange Act of 1934, as
amended.
22.1 A list of the Company's subsidiaries. 63
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
THE QUICK & REILLY GROUP, INC.
BY PETER QUICK Dated: May 19, 1994
Peter Quick, President
Pursuant to the requirement of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
LESLIE C. QUICK, JR. Dated: May 19, 1994
Leslie C. Quick, Jr.
Chairman of the Board of Directors,
Chief Executive Officer,
Chief Financial Officer
and Director
PETER QUICK Dated: May 19, 1994
Peter Quick
President and Dirctor
THOMAS C. QUICK Dated: May 19, 1994
Thomas C. Quick
Director, Vice President
and Assistant Treasurer
CHRISTOPHER C. QUICK Dated: May 19, 1994
Christopher C. Quick
Vice President and Director
LESLIE C. QUICK III Dated: May 19, 1994
Leslie C. Quick III
Vice President, Treasurer and Director
ALEXANDER BENISATTO Dated: May 19, 1994
Alexander Benisatto
Director
RICHARD G. BRODRICK Dated: May 19, 1994
Richard G. Brodrick
Director
THOMAS E. CHRISTMAN Dated: May 19, 1994
Thomas E. Christman
Director
ARLENE B. FRYER Dated: May 19, 1994
Arlene B. Fryer
Secretary and Director
HENRY P. KILROY Dated: May 19, 1994
Henry P. Kilroy
Director
CLIFFORD W. MAYS Dated: May 19, 1994
Clifford W. Mays
Director
PASCAL J. MERCURIO Dated: May 19, 1994
Pascal J. Mercurio
Vice President and Director
ROBERT J. RABINOFF Dated: May 19, 1994
Robert J. Rabinoff
Controller and Principal Accounting
Officer
THE QUICK & REILLY GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Reference
Annual
Report to
Stock-
Form holders
10-K (page)
Financial Statements
Consolidated Statements of Financial
Condition at February 28, 1994
and February 28, 1993 13
For each of the three fiscal years in
the period ended February 28, 1994:
Consolidated Statements of Income 14
Consolidated Statements of Changes
in Shareholders' Equity 15
Consolidated Statements of Cash Flows 16
Notes to Consolidated Financial Statements 17 - 21
Report of Independent Public Accountants 22
Supplementary Information:
Quarterly Financial Data (unaudited) 23
Common Stock Data 24
Schedules
Report of Independent Public
Accountants on Schedules 35
I - Marketable Securities -
Other Investments 27-28
III - Condensed Financial
Information of Registrant 29-33
IX - Short-Term Borrowings 34
THE QUICK AND REILLY GROUP, INC.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
(Item 14(a))
Information presented in the schedules pertains
only to continuing operations unless otherwise stated.
All other schedules are omitted because the
required information is not present in amounts
sufficient to require submission of the schedule, or
because the information required is included in the
consolidated financial statements and notes thereto.
The consolidated financial statements and
supplementary information listed in the above index,
which are included in the Annual Report to Stockholders
of The Quick & Reilly Group, Inc. for the year ended
February 28, 1994, are hereby incorporated by
reference.
<PAGE>
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES -- OTHER INVESTMENTS
<CAPTION>
THE QUICK & REILLY GROUP, INC.
February 28, 1994
Number of
Shares or Market
Units- Value of Each
Principal Issue at
Amount of Cost Statement
Bonds of Each Financial
And Notes Issue (1) Condition Date
<S> <C> <C> <C>
Category
Securities Owned at
February 28, 1994
were as follows:
United States
Government Obligations 8,740,000 $8,990,705 $8,990,705
Municipal Obligations:
Illinois Educational
Facility 7,205,000 $7,205,000 $7,205,000
State Obligations 400,000 427,992 427,992
Obligations of
Political
Commonwealths
and Subdivisions
of States 35,045,000 36,163,374 36,163,374
TOTALS $43,796,366 $43,796,366
Other Marketable
Securities:
Corporate Stocks 100 Issues $11,977,085 $11,977,085
Mutual Funds 1 Issue 20,782 20,782
TOTALS $11,997,867 $11,997,867
Securities Sold, But
Not Yet Purchased at
February 28, 1994
were as follows:
Other Marketable
Securities:
Corporate Stocks 62 Issues $8,059,125 $8,059,125
<F1>
(1) The Company records its marketable securities at market.
</TABLE>
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES -- OTHER INVESTMENTS
THE QUICK & REILLY GROUP, INC.
February 28, 1993
<CAPTION>
Number of
Shares or Market
Units - Value of Each
Principal Issue at
Amount of Cost Statement of
Bonds of Each Financial
And Notes Issue (1) Condition Date
<S> <C> <C> <C>
Category
Securities Owned at
February 28, 1993
were as follows:
United States
Government
Obligations 4,725,000 $4,879,596 $4,879,596
Municipal
Obligations:
Illinois Educational
Facility 7,340,000 $7,340,000 $7,340,000
State Obligations 400,000 435,480 435,480
Obligations of
Political
Commonwealths and
Subdivisions
of States 27,285,000 27,895,650 27,895,650
TOTALS $35,671,130 $35,671,130
Other Marketable
Securities:
Corporate Stocks 112 Issues $14,485,168 $14,485,168
Mutual Funds 1 Issue 19,687 19,687
Options 28 Issues 777,000 777,000
TOTALS $15,281,855 $15,281,855
Securities Sold,
But Not Yet
Purchased at
February 28, 1993
were as follows:
Other Marketable
Securities:
Corporate Stocks 60 Issues $10,890,920 $10,890,920
Options 55 Issues 1,009,488 1,009,488
TOTALS $11,900,408 $11,900,408
<F1>
(1) The Company records its marketable securities at market.
</TABLE>
<TABLE>
Schedule III
(page 1)
Condensed Financial Information of Registrant
The Quick & Reilly Group, Inc.
(Parent Company Only)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
February February
1994 1993
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $1,479,038 $10,998,399
Securities Owned - At Market Value:
Municipal 23,585,782 19,759,178
Other 20,782 19,687
Receivable From Subsidiaries 1,296,850 2,387,826
Investments in Subsidiaries, at Equity 181,679,430 140,783,479
Other Assets 4,250,603 2,867,692
TOTAL ASSETS $212,312,485 $176,816,261
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to Subsidiaries $3,274,549 $4,046,533
Accrued Expenses and Other Liabilities 4,080,399 3,444,198
TOTAL LIABILITIES 7,354,948 7,490,731
Shareholders' Equity
Preferred Stock, $.01 Par Value;
Authorized 1,000,000 Shares,
None Issued and Outstanding - -
Common Stock, $.10 Par Value;
Authorized 20,000,000 Shares,
Issued 11,237,475 shares in
1994 and 10,176,937 Shares
in 1993 1,123,748 1,017,693
Paid-in Capital 74,179,352 41,576,880
Retained Earnings 131,584,887 127,898,457
206,887,987 170,493,030
Less: Common Stock in Treasury
at Cost - 69,400 shares in
1994 and 60,000 shares in
1993 (1,930,450) (1,167,500)
TOTAL SHAREHOLDERS' EQUITY 204,957,537 169,325,530
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $212,312,485 $176,816,261
See notes to Condensed Financial Information.
</TABLE>
<PAGE>
<TABLE>
Schedule III
(Page 2)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE QUICK & REILLY GROUP, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Fiscal Year Ended the Last Day of February
1994 1993 1992
<S> <C> <C> <C>
REVENUES
Management fees from
Subsidiaries $1,942,003 $1,664,500 $1,390,000
Interest from
Subsidiaries 1,560,000 1,560,000 1,560,000
Other 1,203,652 1,901,829 1,931,089
TOTAL REVENUES 4,705,655 5,126,329 4,881,089
EXPENSES
Employee Compensation
and Benefits 1,678,306 1,953,424 1,187,324
Interest 0 10,562 321,740
Rent and Other
Occupancy 62,973 21,239 39,449
Professional Services 240,742 119,453 192,936
Other 696,910 438,615 352,343
TOTAL EXPENSES 2,678,931 2,543,293 2,093,792
INCOME BEFORE PROVISION
FOR INCOME TAXES AND
EQUITY IN EARNINGS OF
SUBSIDIARIES 2,026,724 2,583,036 2,787,297
Provision for Income Taxes 434,663 514,546 871,216
INCOME BEFORE EQUITY IN
EARNINGS OF SUBSIDIARIES 1,592,061 2,068,490 1,916,081
Equity in Earnings of
Subsidiaries 40,898,951 26,626,339 20,767,579
NET INCOME $42,491,012 $28,694,829 $22,683,660
See Notes to Condensed Financial Information.
</TABLE>
<TABLE>
<PAGE>
SCHEDULE III
(Page 3)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE QUICK & REILLY GROUP, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Fiscal Year Ended the Last Day of February
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $42,491,012 $28,694,829 $22,683,660
Adjustments to
Reconcile Net Income to
Net Cash Provided By
(Used in) Operating
Activities:
Equity in Earnings
of Subsidiaries (40,898,951) (26,626,339) (20,767,579)
(Increases) Decreases in
Operating Assets:
Securities Owned (3,827,698) (3,642,127) 3,936,128
Receivable From
Subsidiaries 1,090,976 11,464,272 (12,500,780)
Other Assets (1,382,912) (432,173) (1,246,942)
Increases (Decreases) in
Operating Liabilities:
Payable to Subsidiaries (771,984) 4,046,533 -
Income Taxes Payable - (2,975) (280,684)
Accrued Expenses and
Other Liabilities 636,201 (358,253) 1,709,172
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES (2,663,356) 13,143,767 (6,467,025)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Redemption of Debenture
Payable - - (2,681,170)
Dividends Paid on Common
Stock (6,195,508) (4,588,255) (3,717,809)
Purchase of Treasury
Stock (1,784,600) (1,167,500) -
Proceeds From Sale of
Treasury Stock Under Stock
Option Plan 1,121,185 - 4,707,637
Proceeds from Issuance of
Common Stock Under Stock
Option Plan - 229,532 10,037,578
Purchase of Shares Held
in Escrow (82) - -
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES (6,859,005) (5,526,223) 8,346,236
CASH FLOWS FROM INVESTING
ACTIVITIES:
Increase in Investment
in Subsidiary (1,997,000) (3,655,783) (6,318,975)
Cash Dividends Received
From Subsidiaries 2,000,000 2,000,000 5,716,000
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES 3,000 (1,655,783) (602,975)
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (9,519,361) 5,961,761 1,276,236
CASH AND CASH EQUIVALENTS AT
THE BEGINNING OF THE YEAR 10,998,399 5,036,638 3,760,402
CASH AND CASH EQUIVALENTS AT
THE END OF THE YEAR $1,479,038 $10,998,399 $5,036,638
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Paid During the Year for:
Interest $ - $10,562 $321,740
Income Taxes 609,750 526,682 816,863
Noncash Financing and Investing
Activities:
Issuance of Common Stock
Pursuant to Acquisition $ - $7,735,340 $ -
Five Percent Stock
Dividends Paid 32,609,074 - -
Issuance of Common Stock
Pursuant to Acquisition 1,947 - -
See Notes to Condensed Financial Information
</TABLE>
<PAGE>
Schedule III
(Page 4)
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT
THE QUICK & REILLY GROUP, INC.
(Parent Company Only)
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE 1 - DIVIDENDS RECEIVED FROM SUBSIDIARIES
The Quick & Reilly Group, Inc. received
from its consolidated subsidiaries cash dividends of
$2,000,000 for each of the fiscal years ended
February 28, 1994 and 1993, respectively.
NOTE 2 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The condensed financial information of The
Quick & Reilly Group, Inc. (Parent Company Only)
should be read in conjunction with the consolidated
financial statements of The Quick & Reilly Group,
Inc. and subsidiaries and the notes thereto
incorporated by reference in this report.
<TABLE>
SCHEDULE IX
THE QUICK & REILLY GROUP, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
<CAPTION>
Fiscal Years Ended the Last Day of February 1994 and 1993
Category of Weighted
Aggregate Average
Short-Term Balance Interest Rate
Borrowings at End of Year at End of Year
<S> <C> <C> <C>
Fiscal Year Ended
the Last Day of
February,
1994 Banks $38,003,000 4.1%
1993 Banks $28,050,000 3.7%
Maximum Average Weighted
Amount Amount Average
Outstanding Outstanding Interest Rate
During the Year During the During the
(at Month-End) Year (1) Year (1)
Fiscal Year Ended
the Last Day of
February,
1994 $38,003,000 $8,540,000 3.60%
1993 $57,050,000 $7,550,000 3.96%
<F1>
(1) Average amounts outstanding are based on daily averages. Weighted
average interest rates during the year are calculated by dividing
interest expense by the daily average amounts outstanding.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Quick & Reilly Group, Inc.:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in The Quick & Reilly Group, Inc. and subsidiaries'
annual report to stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated
April 15, 1994. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The
schedules listed in the index on page 25 are the
responsibility of the Company's management and are presented
for the purpose of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken
as a whole.
Arthur Andersen & Co.
New York, New York
April 15, 1994
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS
<CAPTION>
Fiscal Year Ended the Last Day of February
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
(In Thousands, Except Per Share Amounts)
Revenues $265,196 $195,934 $154,019 $110,946 $108,086
Income Before Income Taxes 79,897 52,196 42,036 20,915 18,432
Net Income 42,491 28,695 22,684 11,755 11,436
Net Income Per Share (1) 3.79 2.63 2.22 1.14 1.10
Cash Dividends Per Share (1) 0.57 0.42 0.35 0.25 0.28
Total Assets 2,476,855 1,376,965 1,029,611 435,143 525,280
Total Liabilities 2,271,897 1,207,639 891,190 330,433 427,145
Total Shareholders' Equity 204,958 169,326 138,422 104,711 98,135
Book Value Per Share (1) 18.35 15.18 12.72 10.31 9.41
<F1>
(1) All per share data have been restated to reflect two five percent
stock dividends declared during the fiscal year ended
February 28, 1994.
</TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Description of Business
The Quick & Reilly Group, Inc. (the "Company") was
originally incorporated in New York on June 25,
1981. At the Annual Meeting of Shareholders held
on June 23, 1987, the shareholders approved a
proposal changing the Company's state of
incorporation to Delaware by merging the Company
into a Delaware corporation which the Company
caused to be incorporated in Delaware on April 24,
1987, for this purpose. The Company is a holding
company owning all the capital stock of its primary
operating subsidiaries: Quick & Reilly, Inc., U.S.
Clearing Corp., and JJC Specialist Corp.
Quick & Reilly, Inc. ("Q&R") was incorporated in
New York on March 1, 1974. Q&R became a member
organization of the New York Stock Exchange
("NYSE") on May 2, 1974, and became the first
member organization to offer substantially
discounted commission rates to individual
investors following the elimination of fixed
commission rates by the Securities and Exchange
Commission ("SEC") on May 1, 1975.
U.S. Clearing Corp. ("U.S. Clearing") was
incorporated in New York on December 22, 1978, as a
subsidiary of Q&R and began clearing customer
trades in March 1979. On June 15, 1992, U.S.
Clearing established its institutional sales and
research operations.
JJC Specialist Corp. ("JJC Specialist") was
incorporated in New York as a subsidiary of the
Company on September 10, 1982, and conducts the
specialist operations on the floor of the NYSE.
JJC Specialist Partners was a wholly owned
subsidiary of JJC Specialist and was liquidated on
March 1, 1994; its net assets merged into the
assets and liabilities of JJC Specialist.
Q&R, U.S. Clearing and JJC Specialist are member
organizations of the NYSE and are registered as
broker-dealers with the SEC. Q&R and U.S. Clearing
are members of the National Association of
Securities Dealers. U.S. Clearing is also a
member of the American Stock Exchange, Boston
Stock Exchange, Pacific Stock Exchange,
Philadelphia Stock Exchange, Midwest Stock
Exchange and Chicago Board Options Exchange. Q&R,
U.S. Clearing and JJC Specialist are members of
the Securities Investors Protection Corporation,
which provides protection for customer accounts up
to $500,000 per customer, with a limitation of
$100,000 on claims for cash balances. U.S.
Clearing has also arranged for an additional $24.5
million protection per customer on securities
through the Aetna Casualty & Surety Co.
Results of Operations
Comparison of 1994 and 1993 Results
Fiscal 1994 Revenues of the Company increased 35%
compared with fiscal 1993. Commission and
Clearance Income increased 24% compared with 1993
due to increased volume in the securities markets.
Interest Income increased 44% primarily due to
increased customer margin debits and stock
borrowing activities. Interest Expense increased
60% primarily due to increased stock lending
activities. Specialist Trading and Commissions
increased 98% primarily due to the acquisition of
Stokes, Hoyt & Co. in December 1992. Other
Revenues decreased 13% primarily due to decreased
fee income.
Total Expenses increased 29% for fiscal 1994
compared with fiscal 1993. Employee Compensation
and Benefits increased 31% for 1994 compared with
1993 primarily due to the acquisition of Stokes,
Hoyt & Co. and their related personnel, as well as
increases in incentive compensation. Brokerage,
Exchange and Clearance Fees increased 11%
primarily due to increased trading volume. Data
Processing and Equipment Rental increased 23%
primarily due to the increased trading volume as
did Printing, Postage, Stationery and Office
Supplies, rising 45% for 1994 versus 1993. Rent
and Other Occupancy increased 17% primarily due to
the opening of new branch offices in Quick &
Reilly, Inc. Amortization of Intangible Assets
decreased 42% primarily due to the expiration of
certain covenants and contracts relating to the
acquisition of Conklin, Cahill & Co. Other
expenses increased 31% primarily due to the
increased volume, expansion of the Q&R branch
network and the increase in institutional
operations at U.S. Clearing.
Comparison of 1993 and 1992 Results
Fiscal 1993 Revenues of the Company increased 27%
compared with fiscal 1992. Commission and
Clearance Income increased 22% compared with 1992
due to increased volume in the securities markets.
Interest Income increased 33% primarily due to
increased customer margin debits and stock
borrowing activities. Interest Expense increased
76% primarily due to increased stock lending
activities. Specialist Trading and Commissions
increased 44% due to increased market volume.
Other Revenues increased 62% due to increased fee
income and increased trading activities.
Total Expenses increased 28% for fiscal 1993
compared with fiscal 1992. Employee Compensation
and Benefits increased 29% for 1993 over 1992
primarily due to increases in incentive
compensation. Brokerage, Exchange and Clearance
Fees increased 19% for 1993 versus 1992 primarily
due to the increased trading volume. Data
Processing and Equipment Rental increased 29%
primarily due to increased trading volume as did
Printing, Postage, Stationery and Office Supplies,
rising 6% for 1993 versus 1992. Advertising
increased 21% due to increased expenditures
for the current national advertising campaign.
Amortization of Intangible Assets decreased 25%
due to the expiration of certain covenants and
contracts relating to the acquisition of Conklin,
Cahill & Co. Other expenses increased 17%
primarily due to the increased volume, expansion
of the Q&R branch network and the relocation
of headquarters for the Company's primary
subsidiaries.
Liquidity and Capital Resources
Management of the Company believes that funds
generated from operations will provide it with
sufficient resources to meet all present and
reasonably foreseeable future capital needs.
The Company's assets are highly liquid and
consist mainly of cash or assets readily
convertible into cash. The Company utilizes bank
borrowings, securities lending activities,
customers' free credit balances and other
payables, as well as the Company's equity capital
to finance receivables from customers. The
secured financings are collateralized primarily by
customer securities pledged. Customer receivables
are secured by customer securities held as
collateral. The Company can demand payment of
outstanding balances at any time. Receivables and
payables with other broker-dealers represent
either current open transactions which usually
settle within a few days or securities lending and
borrowing activities which are collateralized and
normally can be closed out within a few days.
The Company's primary subsidiaries are
subject to regulatory net capital requirements
which are designed to measure the general
financial integrity and liquidity of broker-
dealers. Under the SEC's net capital
requirements, neither Q&R nor U.S. Clearing may
(a) pay or permit the payment or withdrawal of any
subordinated debt, (b) permit equity capital to be
removed if, after giving effect to such payment,
withdrawal or removal, either aggregate
indebtedness of Q&R would exceed 10 times its net
capital or net capital of Q&R would fail to equal
1.2 times its minimum required net capital or for
U.S. Clearing would be less than 5% of its
aggregate debit balances arising from customer
transactions or net capital of U.S. Clearing would
fail to equal 1.2 times its minimum required net
capital, or (c) permit equity withdrawals,
unsecured loans or advances, to certain related
parties without prior approval of the SEC or its
designated examining authority if the withdrawal
would cause net capital to fall below certain
specified levels. Additionally, JJC Specialist
and JJC Specialist Partners must comply with the
net liquid asset requirements of the NYSE. These
restrictions have not had, and are not expected to
have, any impact on the ability of the Company to
meet its obligations. As of the last day of
February 1994 and 1993, the Company's principal
subsidiaries had aggregate net capital of
$138,376,000 and $115,878,000, respectively, which
exceeded their aggregate minimum net capital
requirements by $108,425,000 and $90,806,000.
Effects of Inflation
The Company's assets are not significantly
affected by inflation because they are primarily
monetary and liquid. In addition, large
investments in fixed assets are not required
because the nature of the Company's business is to
provide services. Management believes that the
replacement costs of furniture, equipment and
leasehold improvements in the Company's principal
and branch offices would not materially affect
operations. However, the rate of inflation
affects the Company's expenses, such as employee
compensation, rent, communications and other
expenses which may not be readily recoverable in
the prices of services offered by the Company. To
the extent inflation results in rising interest
rates and has other adverse effects upon the
securities markets, it may adversely affect the
Company's financial position and results of
operations.
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
<CAPTION>
February 28, February 28,
1994 1993
<S> <C> <C>
----------------------------------
ASSETS
Cash and Cash Equivalents $ 41,824,406 $46,230,544
Receivable From Brokers, Dealers
and Clearing Organizations 1,610,695,323 703,370,780
Receivable From Customers- Net of
Allowance for Doubtful Accounts
of $4,568,774 in 1994 and
$4,591,665 in 1993 731,352,887 541,821,008
Securities Owned- At Market Value
U.S. Government 8,990,705 4,879,596
Municipal 43,796,366 35,671,130
Equities and Other 11,997,867 15,281,855
Exchange Memberships- At Cost
(Market Value $9,000,000 in 1994
and $6,255,000 in 1993) 3,908,060 3,333,060
Furniture, Equipment and Leasehold
Improvements- At Cost Less
Accumulated Depreciation and
Amortization of $7,837,481 in
1994 and $4,557,801 in 1993 5,922,909 5,966,353
Other Assets 18,366,137 20,410,321
----------------------------------
TOTAL ASSETS $2,476,854,660 $1,376,964,647
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $38,003,000 $28,050,000
Drafts Payable 46,552,251 46,297,851
Payable to Brokers, Dealers and
Clearing Organizations 1,758,737,385 806,167,005
Payable to Customers 376,569,142 278,943,565
Securities Sold, But Not Yet
Purchased- At Market Value 8,059,125 11,900,408
Income Taxes Payable 1,702,141 6,989,147
Accrued Expenses and Other
Liabilities 42,274,079 29,291,141
----------------------------------
TOTAL LIABILITIES 2,271,897,123 1,207,639,117
----------------------------------
Commitments and Contingencies
Shareholders' Equity:
Preferred Stock, $.01 par value;
authorized 1,000,000 shares, none
issued and outstanding - -
Common Stock, $.10 par value;
authorized 20,000,000 shares,
issued 11,237,475 in 1994 and
10,176,937 shares in 1993 1,123,748 1,017,693
Paid-in Capital 74,179,352 41,576,880
Retained Earnings 131,584,887 127,898,457
----------------------------------
206,887,987 170,493,030
Less: Common Stock in Treasury, at
Cost - 69,400 shares in 1994 and
60,000 shares in 1993 (1,930,450) (1,167,500)
----------------------------------
TOTAL SHAREHOLDERS' EQUITY 204,957,537 169,325,530
----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,476,854,660 $1,376,964,647
<F1>
The accompaning notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Income
Fiscal Year Ended the Last Day of February
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
REVENUES
Commission and
Clearance Income $154,167,617 $123,948,518 $101,770,324
Interest 68,336,767 47,334,287 35,558,585
Specialist Trading
and Commission 37,869,617 19,083,325 13,243,651
Other 4,821,607 5,567,901 3,446,396
Total Revenues 265,195,608 195,934,031 154,018,956
EXPENSES
Employee Compensation
and Benefits 79,546,481 60,676,302 46,956,890
Interest 38,790,449 24,237,734 13,781,267
Brokerage, Exchange and
Clearance Fees 12,792,669 11,507,450 9,663,983
Data Processing and
Equipment Rental 16,466,720 13,436,619 10,410,595
Communication 2,825,794 3,139,746 2,315,139
Printing, Postage,
Stationery and
Office Supplies 6,685,747 4,619,238 4,367,554
Advertising 6,226,229 6,010,351 4,971,664
Rent and Other Occupancy 5,381,157 4,614,326 4,327,756
Professional Services 2,220,044 2,097,986 1,611,428
Amortization of
Intangibles 2,545,397 4,397,857 5,880,456
Other 11,818,233 9,000,298 7,696,678
Total Expenses 185,298,920 143,737,907 111,983,410
Income Before
Provision
for Income Taxes 79,896,688 52,196,124 42,035,546
Provision for Income
Taxes 37,405,676 23,501,295 19,351,886
NET INCOME $42,491,012 $28,694,829 $22,683,660
Earnings Per Share $3.79 $2.63 $2.22
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
<CAPTION>
Common
Stock Paid-in Retained Treasury
Total Shares Amount Capital Earnings Stock
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDERS'
EQUITY-
FEBRUARY 28,
1991 $104,710,518 9,476,968 $947,697 $21,779,689 $84,826,032 ($2,842,900)
Cash
Dividends
on Common
Stock (3,717,809) - - - (3,717,809) -
Sale of
Treasury
Stock Under
Stock Option
Plan 4,707,637 - - 1,864,737 - 2,842,900
Issuance of
Common Stock
Under Stock
Option Plan
and Related
Tax Benefits 10,037,578 396,900 39,690 9,997,888 - -
Net Income 22,683,660 - - - 22,683,660 -
SHAREHOLDERS'
EQUITY-
FEBRUARY 29,
1992 138,421,584 9,873,868 987,387 33,642,314 103,791,883 -
Cash
Dividends
on Common
Stock (4,588,255) - - - (4,588,255) -
Purchase of
Treasury
Stock (1,167,500) - - - - (1,167,500)
Issuance of
Common Stock
Under Stock
Option Plan
and Related
Tax Benefits 229,532 10,000 1,000 228,532 - -
Issuance of
Common Stock
Pursuant to
Stokes, Hoyt
& Co.
Acquisition 7,735,340 293,069 29,306 7,706,034 - -
Net Income 28,694,829 - - - 28,694,829 -
SHAREHOLDERS'
EQUITY-
FEBRUARY 28,
1993 169,325,530 10,176,937 1,017,693 41,576,880 127,898,457 (1,167,500)
Five Percent
Common Stock
Dividends
Declared in
April and
December
1993 - 1,041,071 104,108 32,504,966 (32,609,074) -
Reclassifi-
cation of
Common
Stock
Issued
Pursuant to
Stokes,
Hoyt & Co.
Acquisition (82) 19,467 1,947 (2,029) - -
Cash Dividends
on Common
Stock (6,195,508) - - - (6,195,508) -
Purchase of
Treasury
Stock (1,784,600) - - - - (1,784,600)
Sale of
Treasury
Stock
Under
Stock
Option
Plan and
Related
Tax
Benefits 1,121,185 - - 99,535 - 1,021,650
Net
Income 42,491,012 - - - 42,491,012 -
SHAREHOLDERS'
EQUITY-
FEBRUARY
28,
1994 $204,957,537 11,237,475 $1,123,748 $74,179,352 $131,584,887 ($1,930,450)
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Fiscal Year Ended the Last Day of February
------------------------------------------------
1994 1993 1992
------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income $ 42,491,012 $ 28,694,829 $ 22,683,660
Adjustments to Reconcile
Net Income to Net Cash
Provided By Operating
Activities:
Depreciation and
Amortizaton 3,971,412 5,435,096 6,772,423
Decreases (Increases)
in Operating Assets:
Receivable From Brokers,
Dealers and Clearing
Organizations (907,324,543) (228,900,074) (441,917,798)
Receivable From
Customers (189,531,879) (89,463,761) (125,131,671)
Securities Purchased
Under Agreement to
Resell - - 2,600,000
Securities Owned (8,952,357) (1,749,381) (5,714,911)
Other Assets 2,866,766 330,123 (7,778,874)
Increases (Decreases)
in Operating Liabilities:
Money Borrowed From Banks 9,953,000 25,500,000 1,485,000
Drafts Payable 254,400 15,493,193 21,081,353
Payable to Brokers,
Dealers and Clearing
Organizations 952,570,380 235,494,673 519,714,292
Payable to Customers 97,625,577 30,218,001 4,980,545
Securities Sold, But
Not Yet Purchased (3,841,283) 4,649,727 2,264,010
Income Taxes Payable (5,287,006) 1,410,130 4,311,356
Accrued Expenses and
Other Liabilities 12,982,938 698,081 9,601,466
------------------------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,778,417 27,810,637 14,950,851
------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Redemption of Debentures
Payable - - (2,681,170)
Cash Dividends Paid on
Common Stock (6,195,508) (4,588,255) (3,717,809)
Purchase of Treasury Stock (1,784,600) (1,167,500) -
Proceeds From Issuance of
Common Stock
Under Stock Option Plan - 229,532 10,037,578
Proceeds From Sale of
Treasury Stock Under
Stock Option Plan 1,121,185 - 4,707,637
Cash Acquired Related to
Issuance of Common
Stock for Stokes,
Hoyt & Co. Acquisition - 1,754,493 -
Reclassification of Common
Stock Issued Pursuant to
Stokes, Hoyt & Co.
Acquisition (82) - -
------------------------------------------------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES (6,859,005) (3,771,730) 8,346,236
------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payment for Purchase of
Exchange Membership (575,000) (500,000) (440,000)
Payments for Purchase
of Furniture, Equipment
and Leasehold
Improvements (1,250,550) (5,123,328) (645,917)
Payments for Acquisitions (3,500,000) - (3,476,759)
Payment for Intangible
Assets Acquired Related
to Stokes, Hoyt & Co.
Acquisition - (1,500,000) -
------------------------------------------------
NET CASH USED IN
INVESTING
ACTIVITIES (5,325,550) (7,123,328) (4,562,676)
------------------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (4,406,138) 16,915,579 18,734,411
------------------------------------------------
CASH AND CASH EQUIVALENTS
AT THE BEGINNING
OF THE YEAR 46,230,544 29,314,965 10,580,554
------------------------------------------------
CASH AND CASH EQUIVALENTS
AT THE END OF THE YEAR $41,824,406 $46,230,544 $29,314,965
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash Paid During the Year
for-
Interest $38,272,771 $26,221,917 $14,438,506
Income Taxes 34,180,587 22,460,892 14,435,592
Noncash Financing and
Investing Activities-
Issuance of Common Stock
for Noncash Net Assets
and Intangible Assets
Pursuant to Stokes,
Hoyt & Co. Acquisition - 5,980,847 -
Five Percent Stock
Dividends Paid 32,609,074 - -
Issuance of Common
Stock Pursuant to
Stokes, Hoyt & Co.
Acquisition 1,947 - -
The accompanying notes are an integral part of these statements.
</TABLE>
THE QUICK & REILLY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
The consolidated financial statements include the
accounts of The Quick & Reilly Group, Inc. (the
"Company") and its wholly owned subsidiaries
which primarily include Quick & Reilly, Inc., a
broker-dealer providing discount brokerage
services; U.S. Clearing Corp., a broker-dealer
providing securities clearance for Quick &
Reilly, Inc. as well as for other correspondent
broker-dealers; and JJC Specialist Corp., a
broker-dealer that is a specialist on the floor
of the New York Stock Exchange, Inc. (the "primary
subsidiaries"). All material intercompany
transactions have been eliminated.
Securities transactions are recorded on a
settlement date basis, except for proprietary
transactions, commission and clearance revenues
and the related expenses which are recorded on a
trade date basis.
Securities owned and securities sold, but not yet
purchased, are valued at market and the resulting
unrealized gains and losses are reflected in the
consolidated statements of income.
Intangible assets are being amortized on a
straight-line basis over three to fifteen years.
Office furniture and equipment are depreciated on a
straight-line basis over three to eight years.
Leasehold improvements are amortized over the lives
of the related leases.
The Company considers short-term, highly
liquid investments to be cash equivalents.
Securities purchased under agreements to
resell are collateralized investing activities
and are carried at the amounts at which the
securities will be subsequently resold.
Certain amounts have been restated for fiscal
years ended February 28, 1993, and February 29,
1992, to conform with the February 28, 1994,
presentation.
The number of Common Stock shares outstanding,
and related dollar amounts of Common Stock, Paid-in
Capital and Retained Earnings, as shown on the
Consolidated Statement of Financial Condition at
February 28, 1993, and the Consolidated Statements
of Changes in Shareholders' Equity for the fiscal
years ended on the last day of February 1993, 1992
and 1991, have not been retroactively restated to
reflect the two five percent stock dividends paid
during the fiscal year ended February 28, 1994.
NOTE 2- ACQUISTIONS
During the fiscal year ended February 28, 1994,
Quick & Reilly, Inc., a wholly owned subsidiary of
the Company, acquired the assets of a broker-dealer
for cash. The major portion of the purchase price
has been allocated to customer lists, goodwill, and
covenants not to compete ("Intangible Assets") which
are reflected in Other Assets at $3,229,000, net of
accumulated amortization of $171,000, at February
28, 1994.
During the fiscal year ended February 28, 1993,
JJC Specialist Corp., a wholly owned subsidiary of
the Company, acquired through merger the specialist
firm of Stokes, Hoyt & Co., and renamed it JJC
Specialist Partners. The Company issued shares of
its common stock to the sellers valued as of the
closing date of the transaction in December 1992.
The major portion of the purchase price has been
allocated to goodwill and covenants not to compete.
Goodwill and covenants not to compete are reflected
in Other Assets in the amounts of $4,585,000 and
$917,000, net of accumulated amortization of
$1,390,000 and $583,000, respectively, at February
28, 1994, and $5,776,000 and $1,417,000, net of
accumulated amortization of $199,000 and $83,000,
respectively, at February 28, 1993.
During the period March 1, 1988, through February
28, 1992, the Company acquired the retail businesses
of several broker-dealers and the operations of two
specialist firms. Included in Other Assets at
February 28, 1994, and 1993, are amounts of
approximately $163,000 and $850,000, net of
accumulated amortization of approximately
$25,144,000 and $24,467,000, respectively, from such
activity.
The acquisitions were accounted for under the
purchase method of accounting and the consolidated
financial statements include the results of
operations of the businesses acquired from the date
of acquisition.
<TABLE>
NOTE 3-RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND
CLEARING ORGANIZATIONS
<CAPTION>
Amounts receivable from and payable to brokers, dealers and clearing
organizations include:
February 28, February 28,
1994 1993
------------------------------
<S> <C> <C>
Receivable:
Securities Borrowed $1,546,291,049 $659,427,419
Securities Failed to Deliver 13,262,232 16,289,633
Clearing Organizations and Other 51,142,042 27,653,728
------------------------------
$1,610,695,323 $703,370,780
===============================
Payable:
Securities Loaned $1,716,024,465 $773,093,194
Securities Failed to Receive 11,240,919 15,094,166
Clearing Organizations and Other 31,472,001 17,979,645
------------------------------
$1,758,737,385 $806,167,005
===============================
As these receivables and payables are short-term in nature, their
carrying amounts are reasonable estimates of fair market value.
</TABLE>
NOTE 4- RECEIVABLE FROM AND PAYABLE TO CUSTOMERS
The amounts shown represent the dollar
balances receivable from and payable to
customers in connection with securities, cash
and margin transactions. Customer receivables
are collateralized by securities, the
value of which is not reflected in the consolidated
financial statements. As these amounts are
short-term in nature, their carrying amounts are
reasonable estimates of fair market value.
NOTE 5- MONEY BORROWED FROM BANKS
Money borrowed from banks includes $38,003,000
and $28,050,000, at February 28, 1994, and 1993,
respectively, which is fully collateralized by securities
owned by customers and noncustomers. These loans
are payable on demand and generally bear interest at
the brokers' call rate. The weighted average borrowings
during fiscal 1994 and 1993 were $8,540,000
and $7,550,000, respectively. The weighted
average interest rates during fiscal 1994 and
1993 were 3.60% and 3.96%, respectively.
As these borrowings are short-term in nature and
bear market rates of interest, their carrying amounts are
reasonable estimates of fair market value.
NOTE 6- COMMITMENTS AND CONTINGENCIES
The Company and its primary subsidiaries occupy
office premises under noncancellable leases
expiring at various dates through November
2003. Future minimum aggregate rentals,
excluding escalations, under the leases are
$2,970,000, $2,916,000, $2,802,000,
$2,400,000 and $1,689,000, for each of the
fiscal years ending the last day of
February 1995 through 1999 and $4,893,000,
thereafter. The leases contain provisions
for rent escalations based on increases in
costs incurred by the lessor. Rental
expense under the leases was $3,412,000,
$2,902,000 and $2,945,000, during the fiscal
years ended the last day of February 1994,
1993 and 1992, respectively.
Margin requirements of $30,831,000 with
a clearing corporation at February 28, 1994,
have been satisfied by obtaining letters of
credit with face amounts totaling
$38,000,000. These letters of credit are
secured by customers' margin securities.
In the ordinary course of their
securities business, certain of the
Company's primary subsidiaries have been named as
defendants in a number of lawsuits. In the
opinion of management, based on discussions
with counsel, the resolution of such
lawsuits will not have a material adverse
effect on the consolidated financial condition
of the Company or on its results of operations.
NOTE 7- SECURED DEMAND NOTES
The notes, which have a face value of $410,000
and are included in Other Assets, have been
contributed pursuant to secured demand note collateral
agreements and are subordinated to the claims
of general creditors of U.S. Clearing Corp.
The loans bear interest at rates of 7% to
8% per annum, and mature on March 31, 1995.
The loans are fully collateralized by
marketable securities of approximately
$600,000, which are available to the Company
to utilize in its securities finanacing
activities. The loans have automatic
renewal options unless written notice is
given by either party prior to seven months
preceding the stated maturity dates.
The loans are available to U.S. Clearing
Corp. in computing its net capital pursuant
to Rule 15c3-1 of the Securities and
Exchange Commission ("SEC"). The notes can
be repaid only if, after giving effect to
such repayment, U.S. Clearing Corp. meets
the SEC's net capital regulations governing
the withdrawal of subordinated debt.
NOTE 8- EARNINGS PER SHARE
Earnings per share have been calculated by dividing
net income by the weighted average number of shares
outstanding for the fiscal year. Stock options
issued pursuant to The Quick & Reilly Stock Option
Plan are common stock equivalents. For the fiscal
years ended on the last day of February 1994, 1993
and 1992, earnings per share have not been adjusted
for the effect of any outstanding stock options as
the impact is immaterial; however, they have been
retroactively adjusted to reflect the two five
percent stock dividends declared during the fiscal
year ended February 28, 1994. The weighted average
shares outstanding was 11,207,713, 10,911,146 and
10,239,196, for the fiscal years ended the last day
of February 1994, 1993 and 1992, respectively.
<TABLE>
NOTE 9- INTEREST
Interest Income is comprised of the following:
<CAPTION>
Fiscal Year Ended February
-------------------------------------
1994 1993 1992
-------------------------------------
<S> <C> <C> <C>
Interest on Customer Margin Balances $35,548,168 $28,249,144 $26,212,487
Interest on Securities Borrowed 30,096,816 16,973,556 6,760,547
Other Interest Income 2,691,783 2,111,587 2,585,551
--------------------------------------
$68,336,767 $47,334,287 $35,558,585
=======================================
</TABLE>
<TABLE>
Interest Expense is comprised of the following:
<CAPTION>
Fiscal Year Ended February
-------------------------------------
1994 1993 1992
-------------------------------------
<S> <C> <C> <C>
Interest on Securities Loaned $33,716,361 $20,577,640 $ 9,560,553
Interest on Customer Credit Balances 4,562,393 3,198,744 2,499,027
Interest on Bank Loans 398,141 395,869 1,223,059
Interest on Debentures - - 321,740
Other Interest Expense 113,554 65,481 176,888
-------------------------------------
$38,790,449 $24,237,734 $13,781,267
=======================================
</TABLE>
NOTE 10- PENSION AND PROFIT SHARING PLANS
The Company and its primary subsidiaries have
adopted defined contribution pension and profit
sharing plans covering all full-time employees who
have completed one year of service. The pension
plans provide for the employer to contribute an
amount based on a percentage of compensation as
defined in the plan agreements. The profit
sharing plans provide for the employer to
contribute an amount out of its current
profits, as defined in the plan agreements, or
accumulated earned surplus as determined by its
Board of Directors. Voluntary contributions
from the participants may not exceed ten
percent of compensation paid to them during the
plan year. For fiscal years ended on the last day of
February 1994, 1993 and 1992, the Company and
its primary subsidiaries contributed, in the aggregate
$2,982,000, $2,633,000 and $2,400,000,
respectively, to the plans. The Company and
its primary subsidiaries also have a
noncontributory 401(k) plan covering all full-time
employees.
The Company and its primary subsidiaries
participate in The Quick & Reilly Group, Inc.
Employee Benefit Plan (the "Benefit Plan"). The
Benefit Plan, established on September 1, 1992,
provides health benefits to eligible employees and
their families. The Benefit Plan is subject to
the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"). For the
fiscal years ended February 28, 1994, and 1993,
the Company and its primary subsidiaries
contributed, in the aggregate, $1,825,000 and
$575,000, respectively, to the plan.
NOTE 11 - INCOME TAXES
The Company and its subsidiaries file a consolidated federal
tax return. Each subsidiary is charged or credited with an amount
equal to its separate tax liability or benefit as if it were filing
on an individual company basis.
In 1994, the Company adopted the provisions of the Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS No. 109"), which requires that an asset and liability approach
be applied in accounting for income taxes and that deferred tax
assets and liabilities be adjusted currently using tax rates expected
to be in effect when taxes are estimated to be paid or recovered. The
implementation of SFAS No. 109 did not have a material impact on the
financial condition of the Company or on its results of operations.
The effective tax rates differ from the federal statutory rate
applied to income before income taxes for the following reasons:
<TABLE>
<CAPTION>
Fiscal Year Ended February
-------------------------------
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Federal Statutory Income Tax Rate 35% 34% 34%
State & Local Taxes, Net of
Federal Tax Benefits 14% 10% 10%
Other ( 2%) 1% 2%
-------------------------------
Effective Income Tax Rate 47% 45% 46%
===============================
</TABLE>
<TABLE>
Income taxes consist of the following:
<S> <C> <C> <C>
Federal $24,095,858 $15,670,381 $12,861,406
State & Local 13,309,818 7,830,914 6,490,480
-------------------------------------
$37,405,676 $23,501,295 $19,351,886
====================================
</TABLE>
Included in income taxes for 1994, 1993 and 1992 is deferred income
tax provision (benefit) of ($1,106,000), $350,000 and ($56,000),
respectively.
The deferred income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended February
----------------------------
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Valuation of Securities Owned $ (150,000) $164,000 $ 161,000
Reserves Not Currently Deductible (956,000) 186,000 (217,000)
-----------------------------------
$(1,106,000) $350,000 $( 56,000)
=====================================
</TABLE>
The following temporary differences which created
deferred tax assets are reflected in Other Assets:
<TABLE>
At
February 28,
1994
------------
<S> <C>
Deferred Tax Assets:
Valuation of Securities Owned $ 116,000
Reserves Not Currently Deductible 1,279,000
------------
Total Deferred Assets $1,395,000
============
NOTE 12- CAPITAL REQUIREMENTS
As registered broker-dealers and member firms of the New York
Stock Exchange, Inc. (the"NYSE"), the primary subsidiaries
are subject to certain capital rules of both the SEC and the
NYSE. These rules require registrants to maintain minimum
levels of net capital, as defined, and may require a member
to reduce its business or prohibit a member from expanding
its business and declaring dividends as its net capital
approaches specified levels. As of February 28, 1994 and
1993, the primary subsidiaries had net capital, in the
aggregate, of $138,376,000 and $115,878,000, respectively,
which exceeded aggregate minimum net capital requirements by
$108,425,000 and $90,806,000, respectively. While the
primary subsidiaries' aggregate equity capital is includable
in net capital, $61,306,000 is not available for payment of
cash dividends and advances to the Company. As of February
28, 1994, this limitation does not restrict the Company from
declaring its regular dividends to its shareholders.
NOTE 13- STOCK OPTION PLAN
On June 25, 1991, the Company amended The JJC Stock Option
Plan to (a) change its name to The Quick & Reilly Stock
Option Plan("the Plan"), (b) expand the Plan participants to cover
directors, officers and employees of the Company and each of
its wholly owned subsidiaries, and (c) increase the number
of shares of common stock to 1,500,000. Pursuant to the Plan,
all options are granted at not less than fair market value on
the date of grant and for not more than a five-year time
period. All options outstanding on the last day of February
1994, 1993 and 1992 are exercisable. An officer of a
subsidiary will be granted on August 15, 1994 options
to purchase 55,125 shares of the Company's common stock.
</TABLE>
<TABLE>
<CAPTION>
STOCK OPTION Market Price
Number of -------------------------
Shares Per Share Total
--------------- -------------------------
<S> <C> <C> <C>
Outstanding at February 28, 1991* 726,500 $16.19 $11,765,000
Granted at $20.60 per share* 55,125 $18.02 993,500
Less:
Exercised at $17.63 and $17.75
per share (664,000) $19.63-$31.75 17,884,000
---------------
Outstanding at February 29, 1992 117,625 $27.24 3,204,300
Granted at $20.99 per share* 55,125 $18.25 1,006,000
Granted at $31.05 per share 10,000 $22.38 223,800
Granted at $31.77 per share 10,000 $27.63 276,300
Less:
Exercised at $17.63 per share (10,000) $28.50 285,000
---------------
Outstanding at February 28, 1993 182,750 $24.19 4,420,000
Cancelled at $31.05 per share (10,000) $25.75 257,500
Cancelled at $31.77 per share (10,000) $25.75 257,500
Granted at $33.38 per share* 55,125 $30.48 1,680,000
Less:
Exercised at $13.79 per share (35,000) $27.13 949,550
Exercised at $13.79 per share (17,500) $33.00 577,500
---------------
Outstanding at February 28, 1994 165,375 $28.38 $4,693,343
===============
Available for Grant at
February 28, 1994 588,125
===============
</TABLE>
* The quantity of stock options granted as well as the
related exercise prices have been appropriately adjusted
to reflect the stock dividends declared during the fiscal
year ended February 28, 1994.
NOTE 14- SEGMENT REPORTING
The Company, through its primary subsidiaries,
operates predominantly in the securities industry.
Operations in such securities industry include
agency and principal transactions, and other
securities-related financial services.
NOTE 15- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET
RISK AND CONCENTRATIONS OF CREDIT RISK
In the normal course of business, the primary subsidiaries'
securities activities involve execution, settlement and financing
of various securities transactions for a nationwide customer
and noncustomer client base, as well as specialist trading
activities with counterparties. These activities may expose the
primary subsidiaries to risk in the event customers, other
broker-dealers, banks, depositories or clearing organizations are
unable to fulfill contractual obligations.
The primary subsidiaries conduct business with broker-
dealers, clearing organizations and depositories. Banking
activities are conducted mainly with commercial banks throughout
the country primarily to support customer securities activities.
For transactions in which the primary subsidiaries extend
credit to customers and noncustomers, the primary subsidiaries
seek to control the risks associated with these activities by
requiring the maintenance of margin collateral in compliance
with various regulatory and internal guidelines. The primary
subsidiaries monitor required margin levels daily and, pursuant
to such guidelines, request the deposit of additional collateral,
or reduce securities positions when necessary. In addition, the
primary subsidiaries' correspondent broker-dealers may be
required to maintain deposits relating to security clearance
activities.
The primary subsidiaries record clearance of securities
transactions on a settlement date basis, which is generally five
business days after trade date. They are therefore exposed to
off-balance-sheet risk of loss on unsettled transactions in the
event customers and other counterparties are unable to fulfill
contractual obligations.
The Company's financing and securities lending activities
require the Company to pledge securities as collateral for
various secured financing sources such as bank loans, securities
loaned and letters of credit. In the event the counterparty is
unable to meet its contractual obligations, the Company may be
exposed to off-balance-sheet risk of acquiring securities
at prevailing market prices. The Company monitors the credit
standing of counterparties with whom it conducts business. Risk
is further controlled by monitoring the market value of
securities pledged on a daily basis and by requiring adjustments
of collateral level in the event of excess market exposure or by
instituting securities buy-in procedures when required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Shareholders of
The Quick & Reilly Group, Inc.:
We have audited the accompanying consolidated statements of
financial condition of The Quick & Reilly Group, Inc. (a
Delaware Corporation) and subsidiaries as of February 28,
1994 and February 28, 1993, and the related consolidated
statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended
February 28, 1994. 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 statments 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 financial
position of The Quick & Reilly Group, Inc. and subsidiaries
as of February 28, 1994 and February 28, 1993, and the
results of their operations and their cash flows for each
of the three years in the period ended February 28, 1994,
in conformity with generally accepted accounting principles.
Arthur Andersen & Co.
New York, New York
April 15, 1994
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
QUARTERLY FINANCIAL DATA
<CAPTION>
For the Fiscal Year Ended February 28, 1994
(Unaudited)
--------------------------------------------
Quarter
--------------------------------------------
First Second Third Fourth
--------------------------------------------
(In thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Total Revenues $60,135 $61,329 $68,699 $75,033
Interest Expense 7,522 8,153 11,139 11,977
--------------------------------------------
Net Revenues 52,613 53,176 57,560 63,056
Total Expenses Excluding
Interest 34,070 35,341 37,457 39,641
Income Before Income Taxes 18,544 17,836 20,103 23,414
Net Income 10,224 9,947 10,184 12,136
Net Income Per Share (1) 0.91 0.89 0.90 1.09
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended February 28, 1993
(Unaudited)
--------------------------------------------
Quarter
--------------------------------------------
First Second Third Fourth
--------------------------------------------
(In thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Total Revenues $46,517 $42,903 $44,619 $61,895
Interest Expense 6,114 6,022 5,604 6,498
--------------------------------------------
Net Revenues 40,403 36,881 39,015 55,397
Total Expenses Excluding
Interest 28,245 27,502 28,788 34,965
Income Before Income Taxes 12,158 9,379 10,227 20,432
Net Income 6,780 5,211 5,595 11,109
Net Income Per Share (1) 0.63 0.48 0.52 1.00
<F1>
(1) See Note 8 to Consolidated Financial Statements for the method of
calulating per share data.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
COMMON STOCK DATA
<CAPTION>
The Company's shares trade on the NYSE under the
symbol "BQR."
Market (1)
------------------
High Low Dividend (2)
------------------------------
<S> <C> <C> <C>
First Quarter Ended 5/29/92 28 1/2 18 1/4 $.07
Second Quarter Ended 8/28/92 19 3/4 17 1/8 $.07
Third Quarter Ended 11/27/92 23 1/2 17 1/2 $.07
Fourth Quarter Ended 2/28/93 25 1/2 22 3/8 $.20
First Quarter Ended 5/28/93 25 1/8 22 3/8 $.10
Second Quarter Ended 8/27/93 33 3/4 24 $.10
Third Quarter Ended 11/26/93 37 7/8 29 3/4 $.10
Fourth Quarter Ended 2/28/94 37 3/8 27 3/8 $.27
</TABLE>
The Company expects to pay a quarterly dividend of $.12 per share
on April 1, July 1, October 1 and January 1.
As of May 12, 1994, there were 878 holders of record of the Company's
common stock. Included in one holder of record is U.S. Clearing
Corp., which holds securities beneficially owned by approximately
1,258 accounts.
(1) Represents NYSE high and low range of common stock price per share,
as restated for the two five percent stock dividends declared
during the fiscal year ended February 28, 1994.
(2) Dividends per share have been restated to reflect the two five
percent stock dividends declared during the fiscal year ended
February 28, 1994.
<PAGE>
Exhibit No. 22.1
The Subsidiaries of The Quick & Reilly Group, Inc.
Quick & Reilly, Inc.
U.S. Clearing Corp.
JJC Specialist Corp.
JJC Specialist Partners
Q&R Charter, Inc.
