SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For Quarter Ended November 24, 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 November 24, 1995
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition - November 24, 1995
(Unaudited) and February 28, 1995 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
November 24, 1995 and November 25, 1994 2
Consolidated Statements of Income
(Unaudited) - Nine Months Ended
November 24, 1995 and November 25, 1994 3
Consolidated Statements of Cash
Flows (Unaudited) - Nine Months Ended
November 24, 1995 and and November 25, 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>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
November 24, February 28,
(In thousands except share amounts) 1995 1995
-------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $56,500 $40,863
Receivable from Brokers, Dealers
and Clearing Organizations 2,024,108 1,606,210
Receivable From Customers 983,531 800,884
Securities Owned at Market Value -
U.S. Government 45,717 8,382
Municipal 76,034 83,120
Equities and Other 35,629 14,914
Exchange Memberships- At Cost
(Market Value $11,877 and $10,362) 3,908 3,908
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of $8,966
and $7,155 15,147 6,340
Other Assets 70,724 17,259
------------------------------------------
TOTAL ASSETS $3,311,298 $2,581,880
==========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $1,000 $7,797
Drafts Payable 33,190 34,522
Payable to Brokers, Dealers
and Clearing Organizations 2,364,062 1,821,151
Payable to Customers 502,328 409,560
Securities Sold, But Not Yet
Purchased - At Market Value 19,302 12,918
Income Taxes Payable 4,055 3,643
Accrued Expenses and Other Liabilities 108,358 55,421
-----------------------------------------
Total Liabilities 3,032,295 2,345,012
-----------------------------------------
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 25,283,860 shares 2,528 2,528
Paid-In Capital 74,333 72,775
Retained Earnings 204,804 165,837
-----------------------------------------
Less: Common Stock in Treasury,
at Cost - 281,665 241,140
227,676 shares on November 24, 1995
and 365,400 on February 28, 1995 (2,662) (4,272)
-----------------------------------------
TOTAL SHAREHOLDERS' EQUITY 279,003 236,868
-----------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,311,298 $2,581,880
=========================================
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statments of Income
(Unaudited)
(In thousands, except per share amounts) Three Months Ended
------------------------------------
November 24, November 25,
1995 1994
------------------------------------
<S> <C> <C>
REVENUES
Commisssions and Clearance Income $51,619 $36,336
Interest 47,517 35,013
Trading 11,455 7,530
Other 3,148 1,124
------------------------------------
Total Revenues 113,739 80,003
Interest Expense 34,652 22,806
------------------------------------
Net Revenues 79,087 57,197
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 25,739 20,951
Brokerage, Exchange and Clearance Fees 4,728 3,211
Data Processing and Equipment Rental 6,805 4,115
Communication 943 709
Printing, Postage, Stationery
and Office Supplies 2,067 1,414
Advertising 1,353 1,167
Rent and Other Occupancy 2,061 1,575
Professional Services 717 748
Amortization of Intangibles 1,017 509
Other 5,199 3,085
------------------------------------
Total Non-Interest Expenses 50,629 37,484
------------------------------------
Income Before Provision for
Income Taxes 28,458 19,713
Provision for Income Taxes 13,326 9,572
------------------------------------
NET INCOME $15,132 $10,141
====================================
Earnings Per Share $0.605 $0.406
Weighted Average Number Of Shares
Outstanding During the Period 25,009 24,982
Cash Dividends Declared Per Share $0.07 $0.053
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statments of Income
(Unaudited)
(In thousands, except per share amounts) Nine Months Ended
------------------------------------
November 24, November 25,
1995 1994
------------------------------------
<S> <C> <C>
REVENUES
Commisssions and Clearance Income $143,517 $107,956
Interest 139,798 90,989
Trading 31,848 24,007
Other 9,030 5,552
------------------------------------
Total Revenues 324,193 228,504
Interest Expense 101,199 58,621
------------------------------------
Net Revenues 222,994 169,883
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 73,955 63,023
Brokerage, Exchange and Clearance Fees 13,623 9,892
Data Processing and Equipment Rental 17,891 12,531
Communication 2,980 2,211
Printing, Postage, Stationery
and Office Supplies 5,997 4,381
Advertising 3,848 4,001
Rent and Other Occupancy 5,551 4,729
Professional Services 2,006 1,853
Amortization of Intangibles 2,006 1,577
Other 12,960 8,965
------------------------------------
Total Non-Interest Expenses 140,817 113,163
------------------------------------
Income Before Provision for
Income Taxes 82,177 56,720
Provision for Income Taxes 38,131 27,739
------------------------------------
NET INCOME $44,046 $28,981
====================================
Earnings Per Share $1.765 $1.159
Weighted Average Number Of Shares
Outstanding During the Period 24,950 25,013
Cash Dividends Declared Per Share $0.204 $0.159
<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)
Nine Months Ended
-------------------------
(In Thousands) November 24, November 25,
1995 1994
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $44,046 $28,981
Adjustments to Reconcile Net Income to
Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 3,937 3,053
Decreases (Increases) in Operating Assets:
Receivable from Brokers, Dealers,
and Clearing Organization (417,898) (347,457)
Receivable from Customers (182,647) 9,816
Securities Owned (50,964) (36,724)
Other Assets (55,475) 952
Increases (Decreases) in Operating Liabilities:
Money Borrowed From Banks (6,797) (37,003)
Drafts Payable (1,332) (21,409)
Payable to Brokers, Dealers, and
Clearing Organizations 542,911 330,922
Payable to Customers 92,768 80,225
Securities Sold, But Not Yet Purchased 6,384 (5,457)
Income Taxes Payable 412 1,236
Accrued Expenses and Other Liabilities 52,937 5,490
-------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 28,282 12,625
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid on Common Stock (5,090) (3,997)
Proceeds From Sale of Treasury Stock 3,179 -
Purchase of Treasury Stock - (2,342)
-------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,911) (6,339)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Funiture, Equipment
and Leasehold Improvements (10,734) (924)
-------------------------
NET CASH USED IN INVESTING ACTIVITIES (10,734) (924)
-------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 15,637 5,362
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 40,863 41,824
-------------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $56,500 $47,186
=========================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Paid During the Period For:
Interest $98,248 $55,673
Income Taxes 33,094 24,589
<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. Consistent with accounting presentation in
previous years, the Company has presented stock borrow and stock loan
transactions on a gross basis. In the first and second quarters of
this fiscal year, stock borrow and stock loan transactions with the
same counterparties were netted. 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 $56,022,000 with a clearing
corporation at November 24, 1995 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 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. 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.
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 these
transactions. 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 November 24, 1995 and November 25,
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 November 24, 1995, the subsidiaries had net
capital, in the aggregate, of $183,870,000 which exceeded aggregate
minimum net capital requirements by $133,265,000.
6. Dividends Declared
On September 13, 1995, the Board of Directors declared a cash
dividend of $0.07 per share payable on October 2, 1995 to holders of
record on September 1, 1995.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Total Assets of the Quick & Reilly Group, Inc.
increased $729,418,000 or 28% for November 24, 1995 versus
February 28, 1995. Receivable From Brokers, Dealers and Clearing
Organizations increased $417,898,000 or 26% primarily due to increases
in stock borrowed activity. Receivable From Customers increased
$182,647,000 or 23% due to an increase in debits on November 24, 1995.
Investments in U.S. Government and Municipal Bonds increased
$30,249,000 or 33%, primarily to take advantage of relatively higher
short-term interest rates. Furniture, Equipment and Leasehold
Improvements increased $8,807,000 or 139% primarily due to the
purchase of new equipment in various subsidiaries. Other Assets
increased $53,465,000 or 310% primarily due to the increase in
intangible assets associated with acquisitions in the current fiscal
year.
Total Liabilities of the Quick & Reilly Group, Inc. increased
$687,283,000 or 29% for November 24, 1995 versus February 28, 1995.
Money Borrowed From Banks decreased $6,797,000 or 87% due to the
increase in stock loan activities. Drafts Payable decreased
$1,332,000 or 4% primarily due to the increase in stock loan
activities. Payable to Brokers, Dealers and Clearing Organizations
increased $542,911,000 or 30% primarily due to the increase in stock
loan activities. Payable to Customers increased $92,768,000 or 23%
due to increased trading volume. Accrued Expenses and Other
Liabilities increased $52,937,000 or 96% primarily due to increased
dividends payable, increased incentive compensation payable and
liabilities incurred in connection with acquistions in the current
fiscal year.
Total Revenues increased $33,736,000 or 42% for the quarter ended
November 24, 1995 versus quarter ended November 25, 1994. Total
Revenues increased $95,689,000 or 42% for the nine month period ended
November 24, 1995 versus the nine month period ended November 25,
1994. Net Revenues increased $21,890,000 or 38% for the quarter ended
November 24, 1995 versus November 25, 1994. Net Revenues increased
$53,111,000 or 31% for the nine month period ended November 24, 1995
versus the nine month period ended November 25, 1994. Commission and
Clearance Income increased $15,283,000 or 42% for the quarterly
comparison and $35,522,000 or 33% for the nine month comparison due to
increased trading volume in the securities markets. Interest Income
increased $12,504,000 or 36% for the quarterly comparison and
$48,809,000 or 54% for the nine month comparison due to increased
margin debits and stock borrowed activities. Interest Expense
increased $11,846,000 or 52% for the quarterly comparison and
$42,578,000 or 73% for the nine month comparison primarily due to
increased stock loan activities. Trading increased $3,925,000 or 52%
for the quarterly comparison and $7,841,000 or 33% for the nine month
comparison due to favorable market conditions and the acquisition of
MMS&N & Co. by the JJC Specialist unit in October, 1995. Other
Revenues increased $2,024,000 or 180% for the quarterly comparison and
$3,477,000 or 63% for the nine month comparison primarily due to
increased unrealized gains on investments, increased fee income and
gain on the sale of assets.
Total Non-Interest Expenses for the quarter ended November 24, 1995
versus the quarter ended November 25, 1994 increased $13,144,000 or
35%. The nine month comparison shows Non-Interest Expenses increasing
$27,654,000, or 24%. Employee Compensation and Benefits increased
$4,788,000 or 23% for the quarterly comparison and $10,932,000 or 17%
for the nine month comparison primarily due to an increase in the
number of employees and increases in incentive compensation.
Brokerage, Exchange, and Clearance Fees increased $1,517,000 or 47%
for the quarterly comparison and $3,732,000 or 38% for the nine month
comparison primarily due to the increased number of trades processed
by U.S. Clearing Corp. Data Processing and Equipment Rental increased
$2,690,000 or 65% for the quarterly comparison and $5,360,000 or 43%
for the nine 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 $234,000 or 33% for the three month comparison and
$769,000 or 35% for the nine month comparison primarily 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 $653,000 or 46% for
the quarterly comparison and $1,616,000 or 37% for the nine month
comparison primarily due to the increase in trading volume.
Advertising expenditures increased $187,000 or 16% for the three month
comparison due to increased advertising expenditures in Quick &
Reilly, Inc. Rent and Other Occupancy increased $487,000 or 31% for
the quarterly comparison and $821,000 or 17% for the nine month
comparison primarily due to the expansion of the branch network in
Quick & Reilly, Inc. Other Expenses increased $2,113,000 or 69% for
the quarterly comparison and $3,995,000 or 45% for the nine 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
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-24-1995
<CASH> 56,500
<RECEIVABLES> 1,037,824
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 1,969,815
<INSTRUMENTS-OWNED> 157,380
<PP&E> 15,147
<TOTAL-ASSETS> 3,311,298
<SHORT-TERM> 0
<PAYABLES> 673,422
<REPOS-SOLD> 0
<SECURITIES-LOANED> 2,339,571
<INSTRUMENTS-SOLD> 19,302
<LONG-TERM> 0
<COMMON> 2,528
0
0
<OTHER-SE> 276,475
<TOTAL-LIABILITY-AND-EQUITY> 3,311,298
<TRADING-REVENUE> 11,455
<INTEREST-DIVIDENDS> 47,517
<COMMISSIONS> 51,619
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 2,579
<INTEREST-EXPENSE> 34,652
<COMPENSATION> 25,739
<INCOME-PRETAX> 28,458
<INCOME-PRE-EXTRAORDINARY> 28,458
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,132
<EPS-PRIMARY> .605
<EPS-DILUTED> .605
</TABLE>
