SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For The Quarter Ended May 31, 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 May 31, 1996
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition - May 31, 1996
(Unaudited) and February 29, 1996 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
May 31, 1996 and May 26, 1995 2
Consolidated Statements of Cash
Flows (Unaudited) - Three Months Ended
May 31, 1996 and May 26, 1995 3
Notes to Consolidated Financial
Statements ( Unaudited) 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
SIGNATURE PAGE
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
May 31, February 29,
(In thousands except share amounts) 1996 1996
-------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $138,402 $133,287
Receivable from Brokers, Dealers
and Clearing Organizations 1,867,202 1,926,583
Receivable From Customers 1,103,999 1,223,184
Securities Owned at Market Value -
U.S. Government 14,540 1,995
Municipal 96,639 93,841
Equities and Other 40,669 59,637
Exchange Memberships- At Cost
(Market Value $16,956 and $14,692) 3,908 3,908
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of $10,321
and $9,462 15,503 15,307
Other Assets 66,440 65,161
-------------------------------------
TOTAL ASSETS $3,347,302 $3,522,903
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $1,000 $1,000
Drafts Payable 43,748 81,331
Payable to Brokers, Dealers
and Clearing Organizations 2,414,900 2,340,739
Payable to Customers 435,755 680,790
Securities Sold, But Not Yet
Purchased - At Market Value 19,713 14,847
Income Taxes Payable 17,160 6,608
Accrued Expenses and Other Liabilities 92,429 94,954
-------------------------------------
Total Liabilities 3,024,705 3,220,269
-------------------------------------
Commitments and Contingencies
Put Options Issued on Company Stock 350 470
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 and outstanding 25,283,860 shares 2,528 2,528
Paid-In Capital 74,585 74,462
Retained Earnings 246,385 226,425
-------------------------------------
323,498 303,415
Less: Common Stock in Treasury,
at Cost - 106,145 shares (1,251) (1,251)
-------------------------------------
TOTAL SHAREHOLDERS' EQUITY 322,247 302,164
-------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,347,302 $3,522,903
=====================================
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
<CAPTION>
(In thousands, except per share amounts) Three Months Ended
------------------------------------
May 31, May 26,
1996 1995
------------------------------------
<S> <C> <C>
REVENUES
Commisssions and Clearance Income $65,979 $41,838
Interest 43,857 45,025
Trading 18,635 10,260
Other 3,812 2,728
------------------------------------
Total Revenues 132,283 99,851
Interest Expense 29,653 32,386
------------------------------------
Net Revenues 102,630 67,465
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 33,778 23,068
Brokerage, Exchange and Clearance Fees 5,021 4,147
Data Processing and Equipment Rental 9,767 5,101
Communication 1,363 812
Printing, Postage, Stationery
and Office Supplies 2,114 1,846
Advertising 1,463 1,147
Rent and Other Occupancy 2,145 1,673
Professional Services 1,576 672
Amortization of Intangibles 1,141 493
Other 5,308 3,531
------------------------------------
Total Non-Interest Expenses 63,676 42,490
------------------------------------
Income Before Provision for
Income Taxes 38,954 24,975
Provision for Income Taxes 17,232 11,408
------------------------------------
NET INCOME $21,722 $13,567
====================================
Earnings Per Share $0.863 $0.544
Weighted Average Number Of Shares
Outstanding During the Period 25,177,715 24,918,459
Cash Dividends Declared Per Share $0.07 $0.066
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
(In thousands) Three Months Ended
-----------------------------
May 31, May 26,
1996 1995
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $21,722 $13,567
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation and Amortization 2,002 998
Decrease (Increase) in Operating Assets:
Receivable From Brokers, Dealers and
Clearing Organizations 59,381 (257,556)
Receivable From Customers 119,185 41,907
Securities Owned 3,625 (35,757)
Other Assets (2,428) (1,311)
Increase (Decrease) in Operating Liabilities:
Money Borrowed From Banks - 24,191
Drafts Payable (37,583) 5,223
Payable to Brokers, Dealers
and Clearing Organizations 74,161 212,714
Payable to Customers (245,035) 8,037
Securities Sold, But Not Yet Purchased 4,866 (4,634)
Income Taxes Payable 10,552 4,858
Accrued Expenses and Other Liabilities (2,525) 858
--------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,923 13,095
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid on Common Stock (1,762) (1,661)
Proceeds from Put Options Written 3 -
--------------------------------
(1,759) (1,661)
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Furniture,
Equipment and Leasehold Improvements (1,049) (1,979)
--------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,049) (1,979)
--------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,115 9,455
--------------------------------
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 133,287 40,863
--------------------------------
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR $138,402 $50,318
================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash Paid During the Year for-
Interest $28,571 $32,316
Income Taxes 5,238 6,511
<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 ended May 26, 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 three months ended May 26, 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 $80,079,000 with a clearing
corporation at May 31, 1996 have been satisfied by obtaining letters
of credit of $79,300,000 secured by customers' margin account
securities. On June 3, 1996, a letter of credit was increased by
$5,000,000.
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 13,
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 May 31, 1996 and May 26, 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 May 31, 1996, the subsidiaries had net capital,
in the aggregate, of $201,130,000 which exceeded aggregate minimum net
capital requirements by $146,056,000.
6. Dividends Declared
On March 15, 1996, the Board of Directors declared a cash
dividend of $0.07 per share payable on July 1, 1996 to holders of
record on June 3, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Total Assets of the Quick & Reilly Group, Inc.
decreased $175,601,000 or 5% for May 31, 1996 versus
February 29, 1996. Receivable From Brokers, Dealers and
Clearing Organizations decreased $59,381,000 or 3% primarily
due to decreases in stock borrowed activity. Receivable
From Customers decreased $119,185,000 or 10% primarily due to a
decrease in delivery versus payment accounts.
Total Liabilities of the Quick & Reilly Group, Inc.
decreased $195,564,000 or 6% for May 31, 1996 versus February
29, 1996. Drafts Payable decreased $37,583,000 or 46% due to
exceptionally large drafts at February 29, 1996 which were paid
down during the quarter ended May 31, 1996. Payable to Brokers,
Dealers and Clearing Organizations increased $74,161,000 or 3%
primarily due to increases in stock lending activity.
Payable to Customers decreased $245,035,000 or 36% primarily
due to decreases in customer short positions and free credit
balances. Income Taxes Payable increased $10,552,000 or 160%
primarily due to an increased first quarter tax liability
paid in June, 1996.
Total Revenues increased $32,432,000 or 32% for the
quarter ended May 31, 1996 versus the quarter ended May
26, 1995. Net Revenues increased $35,165,000 or 52%.
Commission and Clearance Income increased $24,141,000 or
58% reflecting an increase in trading volume. Interest
Income decreased $1,168,000 or 3%, due to decreased stock
borrowing activities and a decrease in interest rates. Interest
Expense decreased $2,733,000 or 8% primarily due to a decrease in
interest rates. Trading increased $8,375,000 or 82% due to
favorable market conditions and the acquisition of MMS&N
& Co. by the JJC Specialist unit in October, 1995. Other
Revenues increased $1,084,000 or 40% primarily due to
increased fee income.
Total Non-Interest Expenses for the quarter ended
May 31, 1996 increased $21,186,000 or 50% versus the
quarter ended May 26, 1995. Employee Compensation and
Benefits increased $10,710,000 or 46% primarily due to an
increase in the number of employees and increases in
incentive compensation. Brokerage, Exchange and Clearance
Fees increased $874,000 or 21% primarily due to the
increased number of trades processed by U.S. Clearing
Corp. Data Processing and Equipment Rental increased
$4,666,000 or 91% due to costs associated with improving and
expanding various information systems and the increased volume.
Communications increased $551,000 or 68% primarily due to the
establishment of the Easy Trade and Twenty four hour brokerage
operations at Quick & Reilly, Inc. and the increased volume.
Printing, Postage, Stationery and Office Supplies increased
$268,000 or 15% primarily due to the increase in trading volume
and the increase in postal rates. Rent and Other Occupancy
increased $472,000 or 28% 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.
Professional Services increased $904,000 or 136% primarily due to
the consulting costs associated with improving and expanding the
accounting systems, data bases and information systems of the
three primary subsidiaries. Amortization of Intangible Assets
increased $648,000 or 131% due the acquisitions of broker-dealers
after the first quarter ended May 26, 1995. Other Expenses
increased $1,777,000 or 50% primarily due to the increased volume,
expansion of the Quick & Reilly branch network 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> MAY-31-1996
<CASH> 138,402
<RECEIVABLES> 1,182,592
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 1,790,609
<INSTRUMENTS-OWNED> 151,848
<PP&E> 15,503
<TOTAL-ASSETS> 3,347,302
<SHORT-TERM> 0
<PAYABLES> 698,979
<REPOS-SOLD> 0
<SECURITIES-LOANED> 2,305,993
<INSTRUMENTS-SOLD> 19,713
<LONG-TERM> 0
0
0
<COMMON> 2,528
<OTHER-SE> 319,719
<TOTAL-LIABILITY-AND-EQUITY> 3,347,302
<TRADING-REVENUE> 18,635
<INTEREST-DIVIDENDS> 43,857
<COMMISSIONS> 65,979
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 3,829
<INTEREST-EXPENSE> 29,653
<COMPENSATION> 33,778
<INCOME-PRETAX> 38,954
<INCOME-PRE-EXTRAORDINARY> 38,954
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,722
<EPS-PRIMARY> .863
<EPS-DILUTED> .863
</TABLE>
