SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For Quarter Ended November 29, 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 November 29, 1996
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition -November 29, 1996
(Unaudited) and February 29, 1996 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
November 29, 1996 and November 24, 1995 2
Consolidated Statements of Income
(Unaudited) - Nine Months Ended
November 29, 1996 and November 24, 1995 3
Consolidated Statements of Cash
Flows (Unaudited) - Nine Months Ended
November 29, 1996 and November 24, 1995 4
Notes to Consolidated Financial
Statements ( Unaudited) 6
Item 2. Management's Financial Discussion 7
SIGNATURE PAGE
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
<CAPTION>
November 29, February 29,
(In thousands except share amounts) 1996 1996
--------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash & Cash Equivalents $71,694 $133,287
Receivable from Brokers, Dealers and
Clearing Organizations 2,349,000 1,926,583
Receivable From Customers 1,045,211 1,223,184
Securities Owned at Market Value -
U.S. Government 15,361 1,995
Municipal 96,279 93,841
Equities and Other 71,839 59,637
Exchange Memberships- At Cost
(Market Value $15,112 and $14,692) 5,033 3,908
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of $12,254 and $9,462 16,552 15,307
Other Assets 61,325 65,161
--------------------------
TOTAL ASSETS $3,732,294 $3,522,903
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $1,000 $1,000
Drafts Payable 52,782 81,331
Payable to Brokers, Dealers
and Clearing Organizations 2,730,778 2,340,739
Payable to Customers 485,988 680,790
Securities Sold, But Not Yet Purchased -
At Market Value 28,415 14,847
Income Taxes Payable 5,407 6,608
Accrued Expenses and Other Liabilities 72,409 94,954
--------------------------
Total Liabilities 3,376,779 3,220,269
--------------------------
Commitments and Contingencies
Put Options Issued on Company Stock 125 470
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 74,819 74,462
Retained Earnings 279,441 226,425
--------------------------
356,788 303,415
Less: Common Stock in Treasury,
at Cost - 111,145 shares
at November 29, 1996 and 106,145
shares at February 29, 1996 (1,398) (1,251)
--------------------------
TOTAL SHAREHOLDERS' EQUITY 355,390 302,164
__________________________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,732,294 $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
------------------------------------
November 29, November 24,
1996 1995
------------------------------------
<S> <C> <C>
REVENUES
Commissions and Clearance Income $57,463 $51,619
Interest 45,525 42,788
Trading 11,780 11,455
Other 3,291 3,148
------------------------------------
Total Revenues 118,059 109,010
Interest Expense 31,070 29,923
------------------------------------
Net Revenues 86,989 79,087
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 29,908 25,739
Brokerage, Exchange and Clearance Fees 3,935 4,728
Data Processing and Equipment Rental 7,469 6,805
Communication 1,069 943
Printing, Postage, Stationery and
Office Supplies 1,821 2,067
Advertising 1,639 1,353
Rent and Other Occupancy 2,386 2,061
Professional Services 1,012 717
Amortization of Intangibles 1,139 1,017
Other 5,898 5,199
------------------------------------
Total Non-Interest Expenses 56,276 50,629
------------------------------------
Income Before Provision for Income Taxes 30,713 28,458
Provision for Income Taxes 12,276 13,326
------------------------------------
NET INCOME $18,437 $15,132
====================================
Earnings Per Share $0.732 $0.605
Weighted Average Number Of Shares
Outstanding During the Period 25,173 25,009
Cash Dividends Declared Per Share $0.080 $0.070
<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) Nine Months Ended
------------------------------------
November 29, November 24,
1996 1995
------------------------------------
<S> <C> <C>
REVENUES
Commissions and Clearance Income $179,833 $143,517
Interest 134,345 129,796
Trading 42,649 31,848
Other 10,557 9,030
------------------------------------
Total Revenues 367,384 314,191
Interest Expense 91,533 91,197
------------------------------------
Net Revenues 275,851 222,994
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 93,359 73,955
Brokerage, Exchange and Clearance Fees 13,161 13,623
Data Processing and Equipment Rental 24,725 17,891
Communication 3,612 2,980
Printing, Postage, Stationery and
Office Supplies 5,848 5,997
Advertising 4,526 3,848
Rent and Other Occupancy 6,730 5,551
Professional Services 3,567 2,006
Amortization of Intangibles 3,419 2,006
Other 16,753 12,960
------------------------------------
Total Non-Interest Expenses 175,700 140,817
------------------------------------
Income Before Provision for
Income Taxes 100,151 82,177
Provision for Income Taxes 41,344 38,131
------------------------------------
NET INCOME $58,807 $44,046
====================================
Earnings Per Share $2.336 $1.765
Weighted Average Number Of Shares
Outstanding During the Period 25,176 24,950
Cash Dividends Declared Per Share $0.230 $0.204
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
--------------------------
(In Thousands) November 29, November 24,
1996 1995
--------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $58,807 $44,046
Adjustments to Reconcile Net Income to
Net Cash Provided By (Used In)
Operating Activities:
Depreciation and Amortization 6,209 3,937
Decreases (Increases) in Operating Assets:
Receivable from Brokers, Dealers,
and Clearing Organizations (422,417) (417,898)
Receivable from Customers 177,973 (182,647)
Securities Owned (28,006) (50,964)
Other Assets 401 (55,475)
Increases (Decreases) in Operating Liabilities:
Money Borrowed From Banks - (6,797)
Drafts Payable (28,549) (1,332)
Payable to Brokers, Dealers,
and Clearing Organizations 390,039 542,911
Payable to Customers (194,802) 92,768
Securities Sold, But Not Yet Purchased 13,568 6,384
Income Taxes Payable (1,201) 412
Accrued Expenses and Other Liabilities (22,545) 52,937
--------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (50,523) 28,282
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid on Common Stock (5,791) (5,090)
Proceeds From Sale of Treasury Stock
Under Stock Option Plan - 3,179
Purchase of Treasury Stock (147) -
Proceeds From Put Options Written 12 -
--------------------------
NET CASH USED IN FINANCING ACTIVITIES (5,926) (1,911)
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Funiture, Equipment
and Leasehold Improvements (4,019) (10,734)
Payment for Purchase of Exchange Membership (1,125) -
--------------------------
NET CASH USED IN INVESTING ACTIVITIES (5,144) (10,734)
--------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (61,593) 15,637
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 133,287 40,863
--------------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $71,694 $56,500
==========================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash Paid During the Period For:
Interest $91,202 $88,426
Income Taxes 42,937 33,094
<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 nine months ended November 24, 1995 were
presented on a gross basis; they have been restated to a net basis to
conform with the current year's presentation. 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 $107,000,000 with a clearing
corporation at November 29, 1996 have been satisfied by obtaining
letters of credit of $109,000,000 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. Income Taxes
For the three months ended November 29, 1996 and November 24, 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.
4. 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 29, 1996, the subsidiaries had net
capital, in the aggregate, of $222,023,000 which exceeded aggregate
minimum net capital requirements by $167,031,000.
5. Dividends Declared
On September 21, 1996, the Board of Directors declared a cash dividend
of $0.08 per share payable on January 2, 1997 to holders of record on
December 2, 1996.
Item 2. Management's Financial Discussion
Results of Operations:
Third Quarter Ended November 29, 1996 Compared to
Third Quarter Ended November 24, 1995.
Total revenues increased 8% to $118,059,000
while net revenues (revenues net of interest expense)
increased 10% to $86,989,000. Expenses, not including
interest, increased 11% to $56,276,000. Pretax margin on net
revenues decreased from 36% to 35%, while the pretax
margin on gross revenues remained constant at 26%.
Net margin on net revenues increased from 19% to 21%,
while net margin on gross revenues increased from 14%
to 16%. The Company's effective tax rate was 40% for
the current quarter versus 47% for the same quarter
last year.
Commissions and Clearance Income increased 11% to $57,463,000
reflecting increased trading volume. Interest income increased 6% to
$45,525,000 primarily due to an increase in customer margin debits.
Other income increased 5% to $3,291,000 primarily due to increased
unrealized gains in investment positions.
Employee Compensation and Benefits increased 16% to $29,908,000
primarily due to increases in incentive bonuses. Brokerage, Exchange
and Clearance Fees decreased 17% to $3,935,000 due to a decrease in
execution costs in the third quarter of the current year. Printing,
Postage, Stationery and Office Supplies decreased 12% to $1,821,000
due to improved purchasing procedures. Professional Services increased
41% to $1,012,000 due to increased consulting fees. The increase in
other expense categories was due primarily to the increased volume.
Nine Months Ended November 29, 1996 Compared to
Nine Months Ended November 24, 1995.
Total revenues increased 17% to $367,384,000
while net revenues (revenues net of interest
expense) increased 24% to $275,851,000. Expenses,
not including interest, increased 25% to
$175,700,000. Pretax margin on net revenues decreased
from 37% to 36%, while the pretax margin on gross
revenues increased from 26% to 27%. Net margin on
net revenues increased from 20% to 21%, while net
margin on gross revenues increased from 14% to 16%.
The Company's effective tax rate was 41% for the
current nine month period versus 46% for the same
period last year.
Commissions and Clearance Income increased 25% to $179,833,000
reflecting increased trading volume. Interest income increased 4% to
$134,345,000 primarily due to an increase in customer margin
debits. Trading increased 34% to $42,649,000 due to a subsidiary
acquisition and favorable market conditions. Other income increased
17% to $10,557,000 primarily due to increased unrealized gains in
investment positions and increased fee income.
Employee Compensation and Benefits increased 26% to $93,359,000
primarily due to increases in incentive bonuses and an increase in the
total number of employees. Brokerage, Exchange and Clearance Fees
decreased 3% to $13,161,000 due to a decrease in execution costs.
Printing, Postage, Stationery and Office Supplies decreased 3% to
$5,848,000 due to improved purchasing procedures. Professional
Services increased 78% to $3,567,000 due to increased consulting fees.
The increase in other expense categories was due primarily to the
increased volume.
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> NOV-29-1996
<CASH> 71,694
<RECEIVABLES> 1,183,222
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 2,272,314
<INSTRUMENTS-OWNED> 183,479
<PP&E> 16,552
<TOTAL-ASSETS> 3,732,294
<SHORT-TERM> 0
<PAYABLES> 759,713
<REPOS-SOLD> 0
<SECURITIES-LOANED> 2,588,651
<INSTRUMENTS-SOLD> 28,415
<LONG-TERM> 0
0
0
<COMMON> 2,528
<OTHER-SE> 352,862
<TOTAL-LIABILITY-AND-EQUITY> 3,732,294
<TRADING-REVENUE> 11,780
<INTEREST-DIVIDENDS> 45,525
<COMMISSIONS> 57,463
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 2,663
<INTEREST-EXPENSE> 31,070
<COMPENSATION> 29,908
<INCOME-PRETAX> 30,713
<INCOME-PRE-EXTRAORDINARY> 30,713
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,437
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.73
</TABLE>
