SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For Quarter Ended August 25, 1995
Commissions File #2-83667
THE QUICK & REILLY GROUP, INC.
State of Incorporation - Delaware
IRS Employer ID# - 13-3082841
230 South County Road
Palm Beach, FL 33480
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,
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
THE QUICK & REILLY GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED AUGUST 25, 1995
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition - August 25, 1995
(Unaudited) and February 28, 1995 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
August 25, 1995 and August 26, 1994 2
Consolidated Statements of Income
(Unaudited) - Six Months Ended
August 25, 1995 and August 26, 1994 3
Consolidated Statements of Cash
Flows (Unaudited) - Six Months Ended
August 25, 1995 and and August 26, 1994 4
Notes to Consolidated Financial
Statements ( Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
SIGNATURE PAGE
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
<CAPTION>
August 25, February 28,
(In thousands except share amounts) 1995 1995
------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $50,745 $40,863
Receivable from Brokers, Dealers
and Clearing Organizations 805,271 783,777
Receivable From Customers 887,417 800,884
Securities Owned at Market Value -
U.S. Government 25,397 8,382
Municipal 91,284 83,120
Equities and Other 23,903 14,914
Exchange Memberships- At Cost
(Market Value $11,249 and $10,362) 3,908 3,908
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of $8,221
and $7,155 14,758 6,340
Other Assets 26,992 17,259
------------------------------
TOTAL ASSETS $1,929,675 $1,759,447
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $2,000 $7,797
Drafts Payable 36,541 34,522
Payable to Brokers, Dealers and
Clearing Organizations 1,095,351 998,718
Payable to Customers 448,808 409,560
Securities Sold, But Not Yet
Purchased - At Market Value 17,792 12,918
Income Taxes Payable 3,680 3,643
Accrued Expenses and Other Liabilities 62,386 55,421
------------------------------
Total Liabilities 1,666,558 1,522,579
------------------------------
Commitments and Contingencies
Shareholders' Equity
Preferred Stock, $.01 par value; authorized
1,000,000 shares, non issued and outstanding
Common Stock, $.10 par value; authorized
20,000,000, issued 16,856,047 shares 1,686 1,686
Paid-In Capital 73,883 73,617
Retained Earnings 191,426 165,837
------------------------------
Less: Common Stock in Treasury,
at Cost - 266,995 241,140
221,100 shares on August 25, 1995
and 243,600 on February 28, 1995 (3,878) (4,272)
------------------------------
TOTAL SHAREHOLDERS' EQUITY 263,117 236,868
------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,929,675 $1,759,447
==============================
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts) Three Months Ended
------------------------------------
August 25, August 26,
1995 1994
------------------------------------
<S> <C> <C>
REVENUES
Commisssions and Clearance Income $50,061 $32,334
Interest 44,399 30,582
Trading 10,132 7,529
Other 3,154 2,618
------------------------------------
Total Revenues 107,746 73,063
Interest Expense 31,304 19,784
------------------------------------
Net Revenues 76,442 53,279
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 25,148 20,114
Brokerage, Exchange and Clearance Fees 4,748 3,259
Data Processing and Equipment Rental 5,985 3,829
Communication 1,225 678
Printing, Postage, Stationery and
Office Supplies 2,084 1,409
Advertising 1,348 1,386
Rent and Other Occupancy 1,816 1,597
Professional Services 617 469
Amortization of Intangibles 495 545
Other 4,231 2,914
------------------------------------
Total Non-Interest Expenses 47,697 36,200
------------------------------------
Income Before Provision for
Income Taxes 28,745 17,079
Provision for Income Taxes 13,398 8,560
------------------------------------
NET INCOME $15,347 $8,519
====================================
Earnings Per Share (Note 7) $0.924 $0.511
Weighted Average Number Of Shares
Outstanding During the Period 16,615 16,673
Cash Dividends Declared Per Share $0.10 $0.08
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
The Quick & Reilly Group Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts) Six Months Ended
------------------------------------
August 25, August 26,
1995 1994
------------------------------------
<S> <C> <C>
REVENUES
Commisssions and Clearance Income $91,899 $71,619
Interest 92,281 55,976
Trading 20,392 16,477
Other 5,882 4,429
------------------------------------
Total Revenues 210,454 148,501
Interest Expense 66,547 35,815
------------------------------------
Net Revenues 143,907 112,686
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 48,216 42,072
Brokerage, Exchange and Clearance Fees 8,895 6,680
Data Processing and Equipment Rental 11,086 8,415
Communication 2,037 1,503
Printing, Postage, Stationery and
Office Supplies 3,930 2,966
Advertising 2,495 2,834
Rent and Other Occupancy 3,489 3,155
Professional Services 1,289 1,105
Amortization of Intangibles 988 1,067
Other 7,762 5,881
------------------------------------
Total Non-Interest Expenses 90,187 75,678
------------------------------------
Income Before Provision for
Income Taxes 53,720 37,008
Provision for Income Taxes 24,806 18,169
------------------------------------
NET INCOME $28,914 $18,839
====================================
Earnings Per Share (Note 7) $1.740 $1.129
Weighted Average Number Of Shares
Outstanding During the Period 16,614 16,686
Cash Dividends Declared Per Share $0.20 $0.16
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(Unaudited)
Six Months Ended
------------------------
(In Thousands) August 25, August 26,
1995 1994
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $28,914 $18,839
Adjustments to Reconcile Net Income to
Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 2,170 2,065
Decreases (Increases) in Operating Assets:
Receivable from Brokers, Dealers, and
Clearing Organizations (21,494) (128,723)
Receivable from Customers (86,533) 37,407
Securities Owned (34,168) (15,317)
Other Assets (10,725) (1,133)
Increases (Decreases) in Operating Liabilities:
Money Borrowed From Banks (5,797) (37,003)
Drafts Payable 2,019 (24,135)
Payable to Brokers, Dealers, and
Clearing Organizations 96,633 161,875
Payable to Customers 39,248 40,501
Securities Sold, But Not Yet Purchased 4,874 (1,031)
Income Taxes Payable 37 416
Accrued Expenses and Other Liabilities 6,965 421
------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 22,143 54,182
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid on Common Stock (3,330) (2,668)
Proceeds From Sale of Treasury Stock Under
Stock Option Plan 665 -
Purchase of Treasury Stock - (1,486)
------------------------
NET CASH USED IN FINANCING ACTIVITIES (2,665) (4,154)
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Funiture, Equipment
and Leasehold Improvements (9,596) (657)
------------------------
NET CASH USED IN INVESTING ACTIVITIES (9,596) (657)
------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 9,882 49,371
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 40,863 41,824
------------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $50,745 $91,195
========================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Paid During the Period For:
Interest $65,652 $34,546
Income Taxes 22,222 14,254
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying interim financial statements reflect all
adjustments which are, of a normal recurring nature, and, in the
opinion of management, necessary for a fair presentation of the
interim periods presented. Stock borrow and loan transactions with the
same counterparty are netted where a right of setoff exists. It is
recommended that these financial statements be read in conjunction
with the Company's Financial Statements and Notes thereto included in
the 1995 Annual Report which is incorporated by reference on
Form 10-K.
2. Commitments and Contingencies
Margin requirements of approximately $56,900,000 with a clearing
corporation at August 25, 1995 have been satisfied by obtaining
letters of credit of $60,500,000 secured by customers' margin account
securities.
In the ordinary course of their securities business, certain of
the Company's subsidiaries have been named defendants in a number of
lawsuits. In the opinion of management, based upon discussion with
counsel, the resolutions of such lawsuits will not in the aggregate
have a material adverse effect on the consolidated financial
condition of the Company or on its results of operations.
3. Shareholders' Equity and Earnings Per Share
On March 1, 1995, the Company's Board of Directors approved a
three-for-two stock split, effected in the form of a 50% stock
dividend, on the Company's Common Stock. The split became effective
on June 7, 1995, for shareholders of record as of May 15, 1995.
All amounts for shares issued and held in treasury along with the
related total par value for common stock issued and paid-in capital,
as well as earnings per share and dividends per share prior to March
1, 1995 have been retroactively adjusted to give effect to this
transaction. Earnings per share have been calculated by dividing net
income by the weighted average number of shares outstanding for the
fiscal quarter.
4. Income Taxes
For the three months ended August 25, 1995 and August 26, 1994,
respectively, the effective income tax rate differs from the expected
federal statutory rate applied to income before income taxes primarily
due to state and local taxes.
5. Net Capital Requirements
As registered broker-dealers and member firms of the New York
Stock Exchange, Inc. (the "NYSE"), three subsidiaries are subject to
certain rules of both the Securities and Exchange Commission and the
NYSE. These rules require registrants to maintain minimum levels of
net capital, as defined, and may restrict a member from expanding its
business and declaring dividends as its net capital approaches
specified levels. At August 25, 1995, the subsidiaries had net
capital, in the aggregate, of $194,179,000 which exceeded aggregate
minimum net capital requirements by $160,919,000.
6. Dividends Declared
On June 27, 1995, the Board of Directors declared a cash dividend
of $0.10 per share payable on October 2, 1995 to holders of record
on September 1, 1995.
7. Subsequent Events
On September 13, 1995, the Company's Board of Directors approved
a three-for-two stock split, to be effected in the form of a 50% stock
dividend, on the Company's Common Stock. The split will become
effective on October 18, 1995, for shareholders of record as of
September 27, 1995. A total of 8,428,023 shares of common stock are
anticipated to be issued in connection with the split, including
110,550 shares of common stock held in treasury.
Retroactive application of the split will have several effects on
the financial statements. The number of shares issued will increase to
25,284,070 as of August 25, 1995 and February 28, 1995. Net Income per
share will decrease to $0.62 and $0.34 for the three months ended
August 25, 1995 and August 26, 1994, respectively; and will decrease
to $1.16 and $0.75 for the six months ended August 25, 1995 and August
26, 1994, respectively. Book value per share will decrease to $10.55
from $15.82 at August 25, 1995 and will decrease to $9.51 from $14.26
at February 28, 1995.
Pursuant to an asset purchase agreement, JJC Specialist Corp., a
wholly-owned subsidiary of the Quick & Reilly Group, Inc., acquired
certain tangible and intangible assets of MMS&N, LLC, a New York Stock
Exchange specialist firm, on October 6, 1995.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Total Assets of the Quick & Reilly Group, Inc.
increased $170,228,000 or 10% for August 25, 1995 versus
February 28, 1995. Receivable From Brokers, Dealers and Clearing
Organizations increased $21,494,000 or 3% primarily due to increases
in stock borrowed activity. Receivable From Customers increased
$86,533,000 or 11% due to an increase in debits on August 25, 1995.
Investments in U.S. Government and Municipal Bonds increased
$25,179,000 or 28%, primarily to take advantage of relatively higher
short-term interest rates. Furniture, Equipment and Leasehold
Improvements increased $8,418,000 or 132% primarily due to the
purchase of new equipment in various subsidiaries. Other Assets
increased $9,733,000 or 56% primarily due to increases in dividends
receivable.
Total Liabilities of the Quick & Reilly Group, Inc. increased
$143,979,000 or 9% for August 25, 1995 versus February 28, 1995.
Money Borrowed From Banks decreased $5,797,000 or 74% due to the
increase in stock loan activities. Drafts Payable increased
$2,019,000 or 6% primarily due to the increase in customer debits.
Payable to Brokers, Dealers and Clearing Organizations increased
$96,634,000 or 10% primarily due to the increase in stock loan
activities. Payable to Customers increased $39,248,000 or 10% due to
increased trading volume. Accrued Expenses and Other Liabilities
increased $6,965,000 or 13% primarily due to increased dividends
payable and increased incentive compensation payable.
Total Revenues increased $34,683,000 or 47% for the quarter ended
August 25, 1995 versus the quarter ended August 26, 1994. Total
Revenues increased $61,953,000 or 42% for the six month period ended
August 25, 1995 versus the six month period ended August 26, 1994. Net
Revenues increased $23,163,000 or 43% for the quarter ended August 25,
1995 versus August 26, 1994. Net Revenues increased $31,221,000 or 28%
for the six month period ended August 25, 1995 versus the six month
period ended August 26, 1994. Commission and Clearance Income
increased $17,727,000 or 55% for the quarterly comparison and
$20,280,000 or 28% for the six month comparison due to increased
trading volume in the securities markets. Interest Income increased
$13,817,000 or 45% for the quarterly comparison and $36,305,000 or 65%
for the six month comparison due to increased margin debits and stock
borrowed activities. Interest Expense increased $11,520,000 or 58%
for the quarterly comparison and $30,732,000 or 86% for the six month
comparison primarily due to increased stock loan activities. Trading
increased $2,603,000 or 35% for the quarterly comparison and
$3,915,000 or 24% for the six month comparison due to favorable market
conditions. Other Revenues increased $536,000 or 20% for the quarterly
comparison and $1,453,000 or 33% for the six month comparison
primarily due to increased unrealized gains on investments and
increased fee income.
Total Non-Interest Expenses for the quarter ended August 25, 1995
versus the quarter ended August 26, 1994 increased $11,497,000 or 32%.
The six month comparison shows Non-Interest Expenses increasing
$14,509,000, or 19%. Employee Compensation and Benefits increased
$5,034,000 or 25% for the quarterly comparison and $6,144,000 or 15%
for the six month comparison primarily due to an increase in the
number of employees and increases in incentive compensation.
Brokerage, Exchange, and Clearance Fees increased $1,489,000 or 46%
for the quarterly comparison and $2,215,000 or 33% for the six month
comparison primarily due to the increased number of trades processed
by U.S. Clearing Corp. Data Processing and Equipment Rental increased
$2,156,000 or 56% for the quarterly comparison and $2,671,000 for the
six month comparison primarily due to the increased volume and
the increased costs of maintaining and expanding the capabilities of
the computer systems of the various subsidiaries. Communication
expense increased $547,000 or 80% for the three month comparison and
$534,000 or 36% for the six month comparison due to the expansion of
the Quick & Reilly Inc.'s branch network and the implementation of its
twenty-four hour brokerage service. Printing, Postage, Stationery and
Office Supplies increased $675,000 or 48% for the quarterly comparison
and $964,000 or 33% for the six month comparison primarily due to the
increase in trading volume. Advertising expenditures decreased
$38,000 or 3% for the three month comparison and $339,000 or 12% for
the six month comparison due to reduced advertising expenditures for
Quick & Reilly, Inc. Rent and Other Occupancy increased $219,000 or
14% for the quarterly comparison and $334,000 or 11% for the six month
comparison primarily due to the expansion of the branch network in
Quick & Reilly, Inc. Other Expenses increased $1,317,000 or 45% for
the quarterly comparison and $1,881,000 or 32% for the six month
comparison primarily due to the increase in volume and normal
increases in operating costs.
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.
---------------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
THE QUICK & REILLY GROUP, INC.
BY:--------------------------
Leslie C. Quick, Jr.
Chairman of the Board
Chief Executive Officer
BY:--------------------------
Peter Quick
President
BY:--------------------------
Robert J. Rabinoff
Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-25-1995
<CASH> 50,745
<RECEIVABLES> 921,568
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 771,120
<INSTRUMENTS-OWNED> 140,584
<PP&E> 14,758
<TOTAL-ASSETS> 1,929,675
<SHORT-TERM> 38,541
<PAYABLES> 524,682
<REPOS-SOLD> 0
<SECURITIES-LOANED> 1,085,543
<INSTRUMENTS-SOLD> 17,792
<LONG-TERM> 0
<COMMON> 1,686
0
0
<OTHER-SE> 261,431
<TOTAL-LIABILITY-AND-EQUITY> 1,929,675
<TRADING-REVENUE> 10,132
<INTEREST-DIVIDENDS> 44,399
<COMMISSIONS> 50,061
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 2,581
<INTEREST-EXPENSE> 31,304
<COMPENSATION> 25,148
<INCOME-PRETAX> 28,745
<INCOME-PRE-EXTRAORDINARY> 28,745
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,347
<EPS-PRIMARY> .924
<EPS-DILUTED> .924
</TABLE>
