SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
For Quarter Ended May 30, 1997
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 30, 1997
INDEX
Page Number
Part I.
Item 1. Financial Statements
Consolidated Statements of
Financial Condition - May 30, 1997
(Unaudited) and February 28, 1997 1
Consolidated Statements of Income
(Unaudited) - Three Months Ended
May 30, 1997 and May 31, 1996 2
Consolidated Statements of Cash
Flows (Unaudited) - Three Months Ended
May 30, 1997 and May 31, 1996 3
Notes to Consolidated Financial
Statements ( Unaudited) 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 6
SIGNATURE PAGE
<TABLE>
<CAPTION>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
<S> <C> <C>
May 30, February 28,
(In thousands except share amounts) 1997 1997
-------------------------------------
(Unaudited)
ASSETS
Cash & Cash Equivalents $105,531 $89,389
Receivable from Brokers, Dealers
and Clearing Organizations 2,628,013 2,618,325
Receivable From Customers 1,164,372 1,181,677
Securities Owned at Market Value -
U.S. Government 21,029 20,722
Municipal 113,897 103,057
Equities and Other 30,481 36,934
Exchange Memberships- At Cost
(Market Value $16,137and $16,732) 5,033 5,033
Furniture, Equipment and Leasehold
Improvements- At Cost Less Accumulated
Depreciation and Amortization of
$14,219 and $13,042 18,897 17,047
Other Assets 85,340 59,858
-------------------------------------
TOTAL ASSETS $4,172,593 $4,132,042
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Money Borrowed From Banks $1,000 $8,600
Drafts Payable 48,403 50,342
Payable to Brokers, Dealers and
Clearing Organizations 3,026,294 3,079,657
Payable to Customers 557,514 507,884
Securities Sold, But Not Yet Purchased -
At Market Value 35,565 22,378
Income Taxes Payable 7,835 2,552
Accrued Expenses and Other Liabilities 88,390 86,077
-------------------------------------
Total Liabilities 3,765,001 3,757,490
-------------------------------------
Commitments and Contingencies
Put Options Issued on Company Stock 100 150
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
38,664,015 shares at May 30, 1997 and
37,925,555 shares at February 28, 1997 3,866 3,792
Paid-In Capital 89,763 73,825
Retained Earning 314,507 297,863
-------------------------------------
408,136 375,480
Less: Common Stock in Treasury, at Cost -
48,235 shares at May 30, 1997 and
100,057 shares at February 28, 1997 (644) (1,078)
-------------------------------------
TOTAL SHAREHOLDERS' EQUITY 407,492 374,402
-------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $4,172,593 $4,132,042
=====================================
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
The Quick & Reilly Group, Inc. and Subsidiaries
Consolidated Statments of Income
(Unaudited)
<CAPTION>
<S> <C> <C>
(In thousands, except per share amounts) Three Months Ended
------------------------------------
May 30, May 31,
1997 1996
------------------------------------
REVENUES
Commisssions and Clearance Income $61,036 $65,979
Interest 55,832 43,857
Trading 23,545 18,635
Other 866 3,812
------------------------------------
Total Revenues 141,279 132,283
Interest Expense 39,093 29,653
------------------------------------
Net Revenues 102,186 102,630
------------------------------------
NON-INTEREST EXPENSES
Employee Compensation and Benefits 36,933 33,778
Brokerage, Exchange and Clearance Fees 5,861 5,021
Data Processing and Equipment Rental 9,791 9,767
Communication 1,318 1,363
Printing, Postage, Stationery and
Office Supplies 2,160 1,882
Advertising 1,866 1,946
Rent and Other Occupancy 2,855 2,145
Professional Services 1,166 1,576
Amortization of Intangibles 1,532 1,141
Other 8,088 5,057
------------------------------------
Total Non-Interest Expenses 71,570 63,676
------------------------------------
Income Before Provision for
Income Taxes 30,616 38,954
Provision for Income Taxes 11,656 17,232
------------------------------------
NET INCOME $18,960 $21,722
====================================
Earnings Per Share $0.492 $0.575
Weighted Average Number Of Shares
Outstanding During the Period 38,547,117 37,766,572
Cash Dividends Declared Per Share $0.060 $0.047
<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 Flows
(Unaudited)
(In thousands) Three Months Ended
--------------------------------
May 30, May 31,
1997 1996
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $18,960 $21,722
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation and Amortization 2,712 2,002
Decrease (Increase) in Operating Assets:
Receivable From Brokers, Dealers and
Clearing Organizations (9,688) 59,381
Receivable From Customers 17,305 119,185
Securities Owned (4,694) 3,625
Other Assets (11,022) (2,428)
Increase (Decrease) in Operating Liabilities:
Money Borrowed From Banks (7,600) -
Drafts Payable (1,939) (37,583)
Payable to Brokers, Dealers and Clearing
Organizations (53,363) 74,161
Payable to Customers 49,630 (245,035)
Securities Sold, But Not Yet Purchased 13,187 4,866
Income Taxes Payable 5,283 10,552
Accrued Expenses and Other Liabilities 2,313 (2,525)
--------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 21,084 7,923
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Dividends Paid on Common Stock (2,321) (1,762)
Payments for Purchase of Treasury Stock (447) -
Proceeds from Sale of Treasury Stock 842 -
Proceeds from Put Options Written 6 3
--------------------------------
NET CASH USED IN FINANCING ACTIVITIES (1,920) (1,759)
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Purchase of Furniture,
Equipment and Leasehold Improvements (3,022) (1,049)
--------------------------------
NET CASH USED IN INVESTING ACTIVITIES (3,022) (1,049)
--------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 16,142 5,115
--------------------------------
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 89,389 133,287
--------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR $105,531 $138,402
================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash Paid During the Year for-
Interest $37,699 $28,571
Income Taxes 6,202 5,238
Noncash Financing and Investing Activities-
Issuance of Common Stock for
Intangible Assets $16,000 -
<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. It is
recommended that these financial statements be read in conjunction with the
Company's Financial Statements and Notes thereto included in the 1997
Annual Report which is incorporated by reference on Form 10-K.
2. Commitments and Contingencies
Margin requirements of approximately $116,803,000 with a clearing
corporation at May 30, 1997 have been satisfied by obtaining letters of
credit of $126,000,000 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 May 30, 1997 and May 31, 1996 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"), four 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 30, 1997,
the subsidiaries had net capital, in the aggregate, of $209,972,000 which
exceeded aggregate minimum net capital requirements by $180,845,000.
5. Dividends Declared
On May 7, 1997, the Board of Directors declared a cash dividend of $0.06
per share payable on July 1, 1997 to holders of record on June 2, 1997.
Item 2. Management's Financial Discussion
Results of Operations:
First Quarter Ended May 30, 1997 Compared to First Quarter Ended May 31, 1996.
Revenues:
Total revenues increased 7% to $141,279,000 while net revenues
(revenues net of interest expense) were virtually even at $102,186,000 versus
$102,630,000. Expenses, not including interest, increased 12% to $71,570,000.
Pretax margin on net revenues decreased from 38% to 30%. Net margin on net
revenues decreased from 21% to 19%, while net margin on gross revenues
decreased from 16% to 13%. The Company's effective tax rate for the current
quarter was 38% versus 44% for the first quarter last year.
Commissions and Clearance Income decreased 7.5% to $61,036,000 reflecting
decreased trading volume for the current quarter. Interest income increased
27% to $55,832,000 primarily due to increases in stock borrowing activities.
Trading increased 26% to $23,545,000 primarily due to the over-the-counter
trading of the Nash, Weiss & Co. subsidiary, acquired in March, 1997. Other
income decreased 77% because brokerage fees previously received from
unrelated parties are eliminated in the Company's consolidated results
since the March, 1997 acquisition of Nash, Weiss & Co.
Expenses:
Employee Compensation and Benefits increased 9% to $36,933,000 primarily due
to the increase in employees due to the acquisition of Nash, Weiss & Co. in
March, 1997. Brokerage, Exchange and Clearance Fees increased 17% to
$5,861,000 due to the brokerage fees paid by the newly-acquired Nash, Weiss
& Co. subsidiary in March, 1997. Rent and Occupancy increased 33% to
$2,855,000 due to increased occupancy costs in Quick & Reilly Inc.'s branch
network, increased depreciation charges and the additional occupancy costs
associated with the Nash, Weiss & Co. acquisition. Professional Services
decreased 26% to $1,166,000 primarily due to a decrease in the amounts paid or
due to outside consultants. Amortization of Intangibles increased 34% to
$1,532,000 due to the amortization of intangible assets associated with the
Nash, Weiss & Co. acquisition. Other expenses increased 60% to $8,088,000
primarily due to increases in research expenditures, registration fees and
additional miscellaneous expenses attributable to Nash, Weiss & Co.
---------
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-28-1998
<PERIOD-END> MAY-30-1997
<CASH> 105,531
<RECEIVABLES> 1,249,086
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 2,543,299
<INSTRUMENTS-OWNED> 165,407
<PP&E> 18,897
<TOTAL-ASSETS> 4,172,593
<SHORT-TERM> 0
<PAYABLES> 794,361
<REPOS-SOLD> 0
<SECURITIES-LOANED> 2,838,850
<INSTRUMENTS-SOLD> 35,565
<LONG-TERM> 0
0
0
<COMMON> 3,866
<OTHER-SE> 403,626
<TOTAL-LIABILITY-AND-EQUITY> 4,172,593
<TRADING-REVENUE> 23,545
<INTEREST-DIVIDENDS> 55,832
<COMMISSIONS> 61,036
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 2,661
<INTEREST-EXPENSE> 39,093
<COMPENSATION> 36,933
<INCOME-PRETAX> 30,616
<INCOME-PRE-EXTRAORDINARY> 30,616
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,960
<EPS-PRIMARY> 0.492
<EPS-DILUTED> 0.492
</TABLE>
