SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For Quarter Ended August 30, 1996
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 30, 1996
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition -August 30, 1996
(Unaudited) and February 29, 1996 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
August 30, 1996 and August 25, 1995 2
Consolidated Statements of Income
(Unaudited) - Six Months Ended
August 30, 1996 and August 25, 1995 3
Consolidated Statements of Cash
Flows (Unaudited) - Six Months Ended
August 30, 1996 and August 25, 1995 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 30, February 29,
(In thousands except share amounts) 1996 1996
-------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $106,696 $133,287
Receivable from Brokers, Dealers
and Clearing Organizations 1,874,707 1,926,583
Receivable From Customers 1,014,203 1,223,184
Securities Owned at Market Value -
U.S. Government 15,098 1,995
Municipal 93,433 93,841
Equities and Other 45,756 59,637
Exchange Memberships- At Cost
(Market Value $17,008 and $14,692) 3,908 3,908
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of
$11,266 and $9,462 16,167 15,307
Other Assets 65,467 65,161
-------------------------------------
TOTAL ASSETS $3,235,435 $3,522,903
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $1,000 $1,000
Drafts Payable 27,171 81,331
Payable to Brokers, Dealers
and Clearing Organizations 2,350,577 2,340,739
Payable to Customers 408,468 680,790
Securities Sold, But Not Yet
Purchased - At Market Value 17,244 14,847
Income Taxes Payable 3,308 6,608
Accrued Expenses and Other Liabilities 88,575 94,954
-------------------------------------
Total Liabilities 2,896,343 3,220,269
-------------------------------------
Commitments and Contingencies
Put Options Issued on Company Stock 250 470
Shareholders' Equity
Preferred Stock, $.01 par value;
authorized 1,000,000 shares,
none issued and outstanding - -
Common Stock, $.10 par value;
authorized 60,000,000 shares,
issued 25,283,860 shares 2,528 2,528
Paid-In Capital 74,694 74,462
Retained Earnings 263,018 226,425
-------------------------------------
340,240 303,415
Less: Common Stock in Treasury,
at Cost - 111,145 shares at
August 30, 1996 and 106,145 shares
at February 29, 1996 (1,398) (1,251)
-------------------------------------
TOTAL SHAREHOLDERS' EQUITY 338,842 302,164
_____________________________________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,235,435 $3,522,903
=====================================
<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 30, August 25,
1996 1995
------------------------------------
<S> <C> <C>
REVENUES
Commissions and Clearance Income $56,390 $50,061
Interest 44,963 41,984
Trading 12,234 10,132
Other 3,455 3,154
------------------------------------
Total Revenues 117,042 105,331
Interest Expense 30,810 28,889
------------------------------------
Net Revenues 86,232 76,442
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 29,673 25,148
Brokerage, Exchange and Clearance Fees 4,205 4,748
Data Processing and Equipment Rental 7,490 5,985
Communication 1,180 1,225
Printing, Postage, Stationery
and Office Supplies 1,913 2,084
Advertising 1,424 1,348
Rent and Other Occupancy 2,199 1,816
Professional Services 979 617
Amortization of Intangibles 1,139 495
Other 5,546 4,231
------------------------------------
Total Non-Interest Expenses 55,748 47,697
------------------------------------
Income Before Provision for
Income Taxes 30,484 28,745
Provision for Income Taxes 11,836 13,398
------------------------------------
NET INCOME $18,648 $15,347
====================================
Earnings Per Share $0.741 $0.616
Weighted Average Number Of Shares
Outstanding During the Period 25,177 24,922
Cash Dividends Declared Per Share $0.080 $0.066
<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 30, August 25,
1996 1995
------------------------------------
<S> <C> <C>
REVENUES
Commissions and Clearance Income $122,369 $91,899
Interest 88,820 87,008
Trading 30,869 20,392
Other 7,267 5,882
------------------------------------
Total Revenues 249,325 205,181
Interest Expense 60,464 61,274
------------------------------------
Net Revenues 188,861 143,907
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 63,451 48,216
Brokerage, Exchange and Clearance Fees 9,226 8,895
Data Processing and Equipment Rental 17,256 11,086
Communication 2,543 2,037
Printing, Postage, Stationery
and Office Supplies 4,027 3,930
Advertising 2,887 2,495
Rent and Other Occupancy 4,344 3,489
Professional Services 2,555 1,289
Amortization of Intangibles 2,280 988
Other 10,854 7,762
------------------------------------
Total Non-Interest Expenses 119,423 90,187
------------------------------------
Income Before Provision for
Income Taxes 69,438 53,720
Provision for Income Taxes 29,069 24,806
------------------------------------
NET INCOME $40,369 $28,914
====================================
Earnings Per Share $1.603 $1.160
Weighted Average Number Of Shares
Outstanding During the Period 25,177 24,920
Cash Dividends Declared Per Share $0.150 $0.132
<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 30, August 25,
1996 1995
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $40,369 $28,914
Adjustments to Reconcile Net Income to
Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 4,089 2,170
Decreases (Increases) in Operating Assets:
Receivable from Brokers, Dealers,
and Clearing Organizations 51,876 4,289
Receivable from Customers 208,981 (86,533)
Securities Owned 1,186 (34,168)
Other Assets (2,600) (10,725)
Increases (Decreases) in Operating Liabilities:
Money Borrowed From Banks - (5,797)
Drafts Payable (54,160) 2,019
Payable to Brokers, Dealers,
and Clearing Organizations 9,838 70,850
Payable to Customers (272,322) 39,248
Securities Sold, But Not Yet Purchased 2,397 4,874
Income Taxes Payable (3,300) 37
Accrued Expenses and Other Liabilities (6,379) 6,965
-------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (20,025) 22,143
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid on Common Stock (3,776) (3,330)
Proceeds From Sale of Treasury Stock
Under Stock Option Plan - 665
Purchase of Treasury Stock (147) -
Proceeds From Put Options Written 12 -
-------------------------
NET CASH USED IN FINANCING ACTIVITIES (3,911) (2,665)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Funiture, Equipment
and Leasehold Improvements (2,655) (9,596)
-------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,655) (9,596)
-------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (26,591) 9,882
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 133,287 40,863
-------------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $106,696 $50,745
=========================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Paid During the Period For:
Interest $60,510 $65,652
Income Taxes 33,303 22,222
<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. Certain intra-company interest transactions
for the three months and six months ended August 25, 1995 were
presented on a gross basis; they have been restated to a net basis to
conform with the current year's presentation. For the six months ended
August 25, 1995, stock borrow and stock loan transactions with the
same counterparties were netted. To conform with the current year's
presentation, these transactions have been restated to a gross basis.
It is recommended that these financial statements be read in
conjunction with the Company's Financial Statements and Notes thereto
included in the 1996 Annual Report which is incorporated by reference
on Form 10-K.
2. Commitments and Contingencies
Margin requirements of approximately $60,839,000 with a clearing
corporation at August 30, 1996 have been satisfied by obtaining
letters of credit of $63,300,000 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 September 13, 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
October 18, 1995, for shareholders of record as of September 27, 1995.
Earnings per share and dividends per share prior to September 15,
1995 have been retroactively adjusted to give effect to these
transactions. Earnings per share have been calculated by dividing net
income by the weighted average number of shares outstanding as
adjusted for the fiscal quarters.
4. Income Taxes
For the three months ended August 30, 1996 and August 25, 1995
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 30, 1996, the subsidiaries had net
capital, in the aggregate, of $211,624,000 which exceeded aggregate
minimum net capital requirements by $158,815,000.
6. Dividends Declared
On June 25, 1996, the Board of Directors declared a cash dividend
of $0.08 per share payable on October 1, 1996 to holders of record
on September 2, 1996.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Total Assets of the Quick & Reilly Group, Inc. decreased
$287,468,000 or 8% for August 30, 1996 versus February 29, 1996.
Receivable From Brokers, Dealers and Clearing Organizations decreased
$51,876,000 or 3% primarily due to decreases in fails to deliver.
Receivable From Customers decreased $208,981,000 or 17% primarily due
to a decrease in delivery versus payment accounts.
Total Liabilities of the Quick & Reilly Group, Inc. decreased
$323,926,000 or 10% for August 30, 1996 versus February 29, 1996.
Drafts Payable decreased $54,160,000 or 67% primarily due to
exceptionally large drafts at February 29, 1996 which were paid down
during the quarter ended May 31, 1996. Payable to Customers decreased
$272,322,000 or 40% primarily due to decreases in customer short
positions and free credit balances. Income Taxes Payable decreased
$3,300,000 or 50% primarily due to the payment of second quarter
income tax liabilities in August, 1996. Accrued Expenses and Other
Liabilities decreased $6,379,000 or 7% primarily due to payments made
in the current fiscal year for February 1996 year-end employee benefit
payables.
Total Revenues increased $11,711,000 or 11% for the quarter ended
August 30, 1996 versus the quarter ended August 25, 1995. Total
Revenues increased $44,144,000 or 22% for the six month period ended
August 30, 1996 versus the six month period ended August 25, 1995. Net
Revenues increased $9,790,000 or 13% for the quarter ended August 30,
1996 versus August 25, 1995. Net Revenues increased $44,954,000 or 31%
for the six month period ended August 30, 1996 versus the six month
period ended August 25, 1995. Commission and Clearance Income
increased $6,329,000 or 13% for the quarterly comparison and
$30,470,000 or 33% for the six month comparison primarily due to
increased trading volume in the securities markets and the acquisition
of MMS&N & Co. by the JJC Specialist unit in October, 1995 resulting
in increased floor brokerage income. Interest Income increased
$2,979,000 or 7% for the quarterly comparison and $1,812,000 for the
six month comparison primarily due to increased margin debits.
Interest Expense increased $1,921,000 or 7% for the quarterly
comparison due to increased stock loan activities. Trading increased
$2,102,000 or 21% for the quarterly comparison and $10,477,000 or 51%
for the six month comparison due to favorable market conditions and
the acquisition of MMS&N & Co. by JJC. Other Revenues increased
$301,000 or 10% for the quarterly comparison and $1,385,000 or 24% for
the six month comparison primarily due to increased fee income.
Total Non-Interest Expenses for the quarter ended August 30, 1996
versus the quarter ended August 25, 1995 increased $8,051,000 or 17%.
The six month comparison shows total Non-Interest Expenses increasing
$29,236,000, or 32%. Employee Compensation and Benefits increased
$4,525,000 or 18% for the quarterly comparison and $15,235,000 or 32%
for the six month comparison primarily due to an increase in the
number of employees. Brokerage, Exchange, and Clearance Fees decreased
$543,000 or 11% for the quarterly comparison due to decreased
execution costs in the quarter ended August 30, 1996 and increased
$331,000 or 4% 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 $1,505,000 or 25% for the
quarterly comparison and $6,170,000 or 56% for the six month
comparison primarily due to the increased costs associated with
improving and expanding various information systems and the increased
volume. Communication expense decreased $45,000 or 4% for the three
month comparison due to increases in communication credits received
and increased $506,000 or 25% 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 and Easy Trade brokerage
services. Printing, Postage, Stationery and Office Supplies decreased
$171,000 or 8% for the quarterly comparison primarily due to decreases
in the costs of stationery and printing. Advertising expenditures
increased $76,000 or 6% for the three month comparison and $392,000 or
16% for the six month comparison due to increased advertising
expenditures for Quick & Reilly, Inc. Rent and Other Occupancy
increased $383,000 or 21% for the quarterly comparison and $855,000 or
25% for the six month comparison primarily due to the expansion of the
branch network in Quick & Reilly, Inc. and the expansion of JJC
Specialist Corp.'s office and operational space. Amortization of
Intangible Assets increased $644,000 or 130% for the quarterly
comparison and $1,292,000 or 131% due to the acquisition of broker
dealers in the last fiscal year whose acquisition costs are currently
being amortized. Other Expenses increased $1,315,000 or 31% for the
quarterly comparison and $3,092,000 or 40% 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: -------------------
Thomas C. Quick
President
BY: -------------------
Robert J. Rabinoff
Controller
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-30-1996
<CASH> 106,696
<RECEIVABLES> 1,061,777
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 1,827,133
<INSTRUMENTS-OWNED> 154,287
<PP&E> 16,167
<TOTAL-ASSETS> 3,235,435
<SHORT-TERM> 0
<PAYABLES> 660,829
<REPOS-SOLD> 0
<SECURITIES-LOANED> 2,218,270
<INSTRUMENTS-SOLD> 17,244
<LONG-TERM> 0
0
0
<COMMON> 2,528
<OTHER-SE> 336,314
<TOTAL-LIABILITY-AND-EQUITY> 3,235,435
<TRADING-REVENUE> 12,234
<INTEREST-DIVIDENDS> 44,963
<COMMISSIONS> 56,390
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 3,183
<INTEREST-EXPENSE> 30,810
<COMPENSATION> 29,673
<INCOME-PRETAX> 30,484
<INCOME-PRE-EXTRAORDINARY> 30,484
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,648
<EPS-PRIMARY> .741
<EPS-DILUTED> .741
</TABLE>
