UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number: 1-9143
--------
RODMAN & RENSHAW CAPITAL GROUP, INC.
- - -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3111956
- - ----------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
233 S. Wacker Drive, Suite 4500, Chicago, IL 60606
- - -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312)526-2000
--------------
- - -------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
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 (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. YES No X *
------- ------
* - Registrant's Form 10-K for 1996 was filed on April 16, 1997, one day
later than the extended due date.
Shares of common stock, par value $.09 per share, outstanding at August 1,
1997: 6,645,802.
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition
as of June 30, 1997 (unaudited) and December 31, 1996.
Condensed Consolidated Statements of Operations (unaudited)
for the three and six months ended June 30, 1997 and
June 30, 1996.
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 30, 1997 and
June 30, 1996.
Notes to Condensed Consolidated Financial Statements
(unaudited) - June 30, 1997.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands)
<TABLE>
JUNE 30, DECEMBER 31,
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 303 $ 2,243
Securities purchased under agreements
to resell 6,601 5,301
Cash and short-term investments required to
be segregated under federal regulations - 7,467
Receivables:
Customers - 25
Brokers, dealers, and clearing
organizations 1,361 1,610
Securities owned - at market 5,768 8,279
Memberships in securities and commodities
exchanges at cost(market value 06/30/97 -
$387; 12/31/96 - $246) 122 122
Furniture, fixtures and leasehold improvements,
at cost, less accumulated depreciation and
amortization (06/30/97 - $6,150; 12/31/96 -
$5,484) 6,809 7,431
Prepaid expenses and other assets 8,005 11,305
__________ ___________
$ 28,969 $ 43,783
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term notes payable to affiliate $ 38,875 $ 23,500
Payables:
Customers - 8,290
Brokers, dealers, and clearing
organizations - 1,294
Securities sold but not yet purchased,
at market 897 782
Accrued commissions 1,061 1,995
Accounts payable and accrued expenses 9,658 15,770
_________ ___________
50,491 51,631<PAGE>
Stockholders' equity:
Convertible non-voting preferred stock,
$.01 par value, 5,000,000 shares authorized;
175 shares issued at 06/30/97 and
at 12/31/96 - -
Common stock, $.09 par value: 20,000,000
shares authorized; 6,645,802 issued at
06/30/97 and 12/31/96 598 598
Additional paid-in capital 48,249 48,249
Accumulated deficit (70,369) (56,695)
__________ ___________
(21,522) (7,848)
__________ ___________
$ 28,969 $ 43,783
========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Commissions $ 3,572 $ 5,307 $ 8,007 $ 10,547
Principal 2,037 9,728 7,164 16,390
Interest 282 721 563 1,361
Fee income 661 3,218 2,224 5,035
Other 109 800 284 1,414
_________ ________ ________ ________
TOTAL REVENUES 6,661 19,774 18,242 34,747
EXPENSES:
Employee compensation
and benefits 6,213 13,578 15,229 26,394
Commissions, floor brokerage
and clearance 1,404 1,041 2,521 2,153
Interest 1,086 885 2,003 2,386
Communications 910 1,498 2,061 2,979
Occupancy and equipment 1,714 1,758 3,261 3,169
Professional fees (*) 2,086 806 2,760 1,249
Other operating expense 2,891 1,898 4,081 3,358
_________ ________ ________ ________
TOTAL EXPENSES 16,304 21,464 31,916 41,688
NET LOSS $ (9,643) $ (1,690) $(13,674) $ (6,941)
========= ======== ========= =========
Earnings per share data:
NET LOSS PER COMMON SHARE $ (1.45) $ (0.25) $ (2.06) $ (1.04)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,646 6,646 6,646 6,646
</TABLE>
(*) Professional fees include accounting fees & expenses, consulting fees &
expenses, outside legal counsel fees & expenses and litigation awards &
settlements.
See Notes to Condensed Consolidated Financial Statements
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (13,674) $ (6,941)
Adjustments to reconcile net loss to
net cash flows provided by (used in)
operating activities:
Depreciation and amortization 666 473
Net changes in operating assets
and liabilities:
Cash and short-term investments
required to be segregated under
federal regulations 7,467 (447)
Receivables from and payables
to customers, brokers, dealers
and clearing organizations (9,309) 10,476
Securities owned 2,511 7,082
Prepaid expenses and other assets 2,015 (502)
Securities sold but not yet purchased 115 19,888
Accrued commissions (934) 305
Accounts payable and accrued expenses (6,113) (4,982)
NET CASH FLOWS PROVIDED BY (USED IN) ___________ __________
OPERATING ACTIVITIES (17,256) 25,352
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase)/Sale of furniture, fixtures and
leasehold improvements (net) (44) (106)
Securities purchased under agreements to resell (1,300) 2,204
Sale of exchange memberships 1,285 -
NET CASH FLOWS PROVIDED BY (USED IN) ___________ __________
INVESTING ACTIVITIES (59) 2,098
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in short-term
borrowings from banks - (30,672)
Proceeds from short-term notes payable
to affiliate 15,375 -
Proceeds from issuance of convertible
non-voting preferred stock - 9,500
NET CASH FLOWS PROVIDED BY (USED IN) ___________ __________
FINANCING ACTIVITIES 15,375 (21,172)
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS (1,940) 6,278
Cash and cash equivalents at beginning
of period 2,243 9,001
___________ ___________
Cash and cash equivalents at end of period $ 303 $ 15,279
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
RODMAN & RENSHAW CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
- - ------------------------------
The unaudited condensed consolidated financial statements of Rodman & Renshaw
Capital Group, Inc. and subsidiaries (collectively, the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management
of the Company, all adjustments considered necessary for a fair presentation
of the financial condition and results of operations of the Company for the
periods presented have been included. Although the Company has stock options
outstanding, such stock options do not have a dilutive effect on earnings per
share; accordingly, the primary and fully diluted loss per share calculations
are not different. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Report
on Form 10-K for the year ended December 31, 1996.
NOTE B - ASSETS SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS
- - --------------------------------------------------------------
The Company was holding in safekeeping $0.0 million and $1.0 million of
securities owned by customers as of June 30, 1997 and December 31, 1996,
respectively. In accordance with applicable regulations, these securities
are not included in the Condensed Consolidated Financial Statements.
NOTE C - NET CAPITAL REQUIREMENT AND DIVIDEND RESTRICTIONS
- - ----------------------------------------------------------
The Company's primary subsidiary, Rodman & Renshaw, Inc.("Rodman"), a
registered broker-dealer and futures commission merchant, is subject to the
minimum net capital rules of the Securities and Exchange Commission (the
"SEC") and the Commodity Futures Trading Commission (the "CFTC"), and the
capital rules of the New York Stock Exchange, Inc. (the "NYSE"), of which
Rodman is a member. Rodman has elected to use the alternative net capital
method permitted by SEC rules. In January 1996, Rodman changed its business
operation from a clearing securities broker to a non-clearing securities
broker whereby Rodman's customer accounts are introduced and cleared by a
contracted clearing broker on a fully disclosed basis. As a result of this
conversion, Rodman is required to maintain minimum net capital, as defined in
such rules, equal to the greater of $250,000 or 4% of the funds required to
be segregated for commodities customers. At June 30, 1997 and December 31,
1996, Rodman had net capital, as defined, of $5.0 million and $2.5 million,
respectively, or $4.7 million and $2.2 million, respectively, in excess of
the minimum net capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The results of operations should be read in conjunction with the Company's
condensed consolidated statements of income. Like other securities brokerage
and investment banking firms, the Company conducts its businesses in highly
volatile markets. Consequently, the Company's results of operations are
affected by many factors, including general market conditions, the liquidity
of secondary markets, the level and volatility of interest rates, currency
and security valuations, competitive conditions and the size, number and
timing of transactions. In periods of unfavorable market activity,
profitability can be adversely affected because certain expenses remain
relatively fixed. As a result, revenues and net earnings can vary
significantly from quarter to quarter. In addition, results of operations for
any particular interim period may not be indicative of results to be expected
for the year ending December 31, 1997.
Revenues for the quarter ended June 30, 1997 totaled $6.7 million, a 66.2%
decrease from $19.8 million for the previous year's comparative quarter,
reflecting changes in business mix, a decrease in producers and capital
constraints. For the second quarter of 1997, the Company recorded a net loss
of $9.6 million, or $1.45 per common share, versus a net loss of $1.7
million, or $0.25 per common share, for the comparative quarter last year.
REVENUES
Revenues for the quarter and six months ended June 30, 1997 were $6.7 million
and $18.2 million, respectively, or $13.1 million and $16.5 million,
respectively, lower than the same periods last year. Downsizing of the
Futures and Fixed Income businesses accounted for $2.3 million and $5.4
million of these decreases during the three and six months ended June 30,
1997 versus the same periods last year. The Company's core business lines
(Retail, Institutional Equity, and Investment Banking) were, on a combined
basis, 61.1% and 40.7% below 1996 levels, reflecting capital constraints, a
net reduction in producers and generally lower levels of production by
producers.
Commission revenue is derived from the execution of customer orders to buy
and sell securities. Commission revenue decreased 32.1% from $5.3 million for
the quarter ended June 30, 1996 to $3.6 million for the quarter ended June
30, 1997 and 23.8% from $10.5 million for the six months ended June 30, 1996
to $8.0 million in the first six months of 1997, mainly reflecting lower
Retail and Institutional Equity sales. The number of Retail producers
declined from 57 at June 30, 1996 to 41 at June 30, 1997 and the number of
Institutional Equity producers declined from 52 to 45 as of such dates. The
average annualized production of Institutional Equity sales producers fell
21.5% from June 30, 1996 to June 30, 1997 and the average annualized
production of Retail sales producers fell 17.8% as of such dates. Partly
offsetting the decline in overall Institutional Equity commissions was
increased revenue from the Direct Access segment of that group, where
revenues increased from $1.1 million for the three months ended June 30, 1996
to $1.5 million for the three months ended June 30, 1997, a 36.4% increase.
For the six months ended June 30, 1997, Direct Access revenues totaled $3.0
million versus $2.2 million for the same period in 1996, a 36.4% increase.
Revenue from principal transactions includes mark-ups and realized and
unrealized gains and losses on securities held for resale. Principal
transaction revenue decreased $7.7 million from $9.7 million for the quarter
ended June 30, 1996 to $2.0 million for the quarter ended June 30, 1997 and
decreased $9.2 million from $16.4 million for the six months ended June 30,
1996 to $7.2 million for the six months ended June 30, 1997. This decline was
partially due to a downsizing of the Company's Fixed Income business, which
occurred at the end of 1996, both in its New York and Chicago offices. Also
contributing to the weaker 1997 performance levels in principal transactions
was lower revenue from the Institutional Equity business line, which
reflected the departure of certain New York based sales personnel. Partially
offsetting the decline were gains in the corporate securities portfolio.
Interest income for the three and six months ended June 30, 1997 declined by
$0.4 million and $0.8 million, respectively, compared to the comparable
periods of 1996, as the Company continued to reduce its securities inventory
positions.
Fee income, which reflects mainly the activities of Rodman's Investment
Banking department, decreased 79.4% for the quarter ended June 30, 1997 as
compared to the second quarter of 1996 and decreased 56.0% for the six months
ended June 30, 1997 compared to the same period in 1996. In each of the three
and six months ended June 30, 1997, the Company completed only one public
offering versus three and five, respectively, in the same 1996 periods. Also
contributing to the revenue decline were significantly lower Investment
Banking advisory fees in the three and six months ended June 30, 1997.
EXPENSES
Expenses decreased $5.2 million, or 24.2%, from $21.5 million for the three
months ended June 30, 1996 to $16.3 million for the three months ended June
30, 1997 and decreased $9.8 million, or 23.5%, from $41.7 million for the six
months ended June 30, 1996 to $31.9 million for the six months ended June 30,
1997. Employee compensation decreased by $7.4 million, a decrease of 54.4%,
and $11.2 million, a decrease of 42.4%, respectively, for the quarter and six
months ended June 30, 1997 versus the same periods last year. Total headcount
at June 30, 1997 was 36.0% lower than at June 30, 1996. This change is mainly
attributable to the ongoing expense reduction program. This program includes
the downsizing of the Futures and Fixed Income business lines, which were
unprofitable, reductions in administrative staffing, pruning of weak
producers and other cost containment measures.
Communications and occupancy and equipment expenses also declined in the
three and six months ended June 30, 1997 as compared to the same periods last
year, primarily as a result of savings from downsizing. Other operating
expenses increased in the three and six months ended June 30, 1997 as
compared to the prior year periods as a result of certain asset write-offs.
Professional fees also increased in the three and six months ended June 30,
1997 primarily because of higher litigation and settlement expenses
(especially the $1.5 million NASD arbitration award to Michael Delaney in
June - see "LEGAL PROCEEDINGS"). Interest expense increased $0.2 million, or
22.7%, during the three months ended June 30, 1997 compared to the same
period last year due to the increase in borrowings from Confia, S.A.,
Institucion de Banca Multiple, Abaco Grupo Financiero ("Confia"), an
affiliated company of the Company's majority stockholder, Abaco Casa de
Bolsa, S.A. de C.V., Abaco Grupo Financiero ("Abaco"), but decreased by $0.4
million, or 16.7%, for the first six months of 1997 compared to the first six
months of 1996. This decrease was primarily a result of downsizing the
Futures business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's assets are substantially comprised of cash and cash
equivalents, receivables and securities inventory, all of which are highly
liquid. The principal sources of financing are notes payable from affiliate
and other payables.
As a registered broker-dealer and futures commission merchant, Rodman is
required by the SEC and CFTC to maintain specific amounts of net capital to
meet its customers' obligations. As of June 30, 1997, Rodman's net capital,
as defined, exceeds the minimum net capital requirements.
During 1994 and 1995, the Company borrowed a total of $26.5 million from
Confia (the "Loan"). The Company needed the Loan in order to continue to
conduct its business because losses were eroding its net capital. In the
fourth quarter of 1996, $3.0 million of the Loan was repaid. On December 3,
1996, the remaining balance of the Loan was extended for an additional six
month period ending June 3, 1997, at an annual interest rate of 12%. On June
3, 1997, the Loan, plus the accrued interest thereon, was further extended
for an additional six month period ending December 1, 1997. From January 1,
1997 through June 30, 1997, Confia made new loans totaling $13.95 million
(the "1997 Loans" and together with the Loan hereinafter referred to
collectively as the "Loans"). The 1997 Loans were as follows: $3.0 million on
March 26, 1997 due June 24, 1997 extended to September 22, 1997, $2.5 million
on April 30, 1997 due July 29, 1997 (of which $2.475 has been extended to
October 29, 1997), $1.5 million on May 23, 1997 due August 21, 1997, $1.5
million on June 9, 1997 due September 8, 1997 and $5.45 million on June 27,
1997 due September 29, 1997. Based upon the letter of support discussed
below, management believes that it is the intention of Confia to renew the
Loans when they become due or convert all or a portion of the Loans to equity
pursuant to the Note Conversion Agreement discussed below, subject to receipt
of necessary approvals from Mexican governmental authorities. Any renewal may
be on different terms than the then existing Loans, depending upon market
conditions and Confia's internal lending policies at the time of renewal.
On February 9, 1996, the Company received a letter from Abaco Grupo
Financiero, S.A. de C.V. ("Parent"), whereby Parent agreed to continue to
unconditionally support the Company and Rodman for the next year, up to and
including March 31, 1997. The support referred to in the February 9, 1996
letter could have included, with previous receipt of requisite approvals from
Mexican governmental authorities, infusions of capital, conversion of
short-term debt to long-term debt or conversion of short or long-term debt to
equity, if required, to continue to sustain Rodman's operations and allow it
to maintain the required net capital pursuant to the SEC's Uniform Net
Capital Rule 15c3-1. In February 1997, the Company received a new support
letter from Parent and Abaco covering the period up to and including March
31, 1999. Such letter states that it is the intention of Parent and Abaco to
continue to unconditionally support the Company and Rodman for losses
incurred in the ordinary course of business during such period and that such
support may include, with prior receipt of requisite approvals from Mexican
governmental authorities, infusions of capital, conversion of short term debt
to long term debt or conversion of short or long term debt to equity. The
Company is dependent on Parent to cover its operating cash requirements.
Parent has announced that there will likely be a change in control of the
Parent later in 1997.
At June 30, 1997, the Company had subordinated loans outstanding to Rodman,
its broker-dealer subsidiary, in an aggregate amount of $23.0 million. The
subordinated loans have been funded by the Company's borrowings from Confia
discussed above. To the extent that such subordinated borrowings are required
for Rodman's continued compliance with minimum net capital requirements, they
may not be repaid. In the event that any of the Loans are not renewed or
converted, Rodman would be required to curtail its business activities
substantially in order to reduce its minimum net capital requirements, and
then it would seek regulatory approval to repay its subordinated debt to the
Company.
The Uniform Net Capital Rule also provides that the total outstanding
principal amounts of a broker-dealer's indebtedness under certain
subordination agreements, the proceeds of which are includible in its net
capital, may not exceed (for a period in excess of 90 days) 70% of the sum of
the total outstanding principal amounts of all subordinated indebtedness
included in net capital plus stockholder's equity (the "debt/equity ratio").
As of March 31, 1997, the debt/equity ratio was 60.8%. In April 1997, the
Company borrowed an additional $2.5 million from Confia. $1.5 million of this
in turn was loaned by the Company to Rodman under the revolving subordinated
credit facility with the Company. As a result, the debt-equity ratio at April
30, 1997 was 69.9%. During the months of May and June 1997, the Company
borrowed from Confia a total of $11.45 million of which the entire amount was
contributed into Rodman as capital. As a result, the debt-equity ratio as of
May 31, 1997 and June 30, 1997 was 68.1% and 58.1%, respectively.
In the six months ended June 30, 1997, the Company used cash and cash
equivalents of $17.3 million from operating activities primarily related to
the payments of accounts payable. In the six months ended June 30, 1996, the
Company's operations provided $25.4 million of cash, primarily related to the
decrease in receivables from and payables to customers, brokers, dealers and
clearing organizations and the sale of securities not yet purchased.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not currently applicable to the Company.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On April 4, 1997, an action entitled Feivel Gottlieb and Kenneth
Steiner, Plaintiffs v. Rodman & Renshaw Capital Group, Inc., Ernesto
Arechavala, Alexander C. Anderson, Peter Boneparth, Eduardo Camarena
Legaspi, William C. Dennis, Jorge Lankenau Rocha, Rodrigo Padilla, Federico
Richardson Lamas, Joseph P. Shanahan, Abaco Casa de Bolsa, S.A. de C.V.,
Abaco Grupo Financiero, R&R Capital Holdings, Inc. and R&R Capital
Acquisition Corp. was commenced in the Court of Chancery of the State of
Delaware in and for New Castle County. The action is a purported class
action brought on behalf of all holders of the common stock other than the
defendants and persons affiliated with the defendants. The action relates to
the proposed series of transactions (the "Transactions") announced by Abaco
on February 4, 1997 which would have the result of Abaco owning 100% of the
outstanding common stock of the Company. The plaintiffs allege that the
Transactions and the price to be paid for their shares of common stock in
connection therewith are unfair and entail breach of fiduciary duties owed to
the plaintiffs and the purported class. Plaintiffs seek to preliminarily and
permanently enjoin the Transactions and to obtain a monetary recovery for any
damages sustained. Defendants, including the Company, have retained counsel
and believe they have good and meritorious defenses, which they intend to
vigorously assert. In light of the early stage of this action, the Company
cannot assess at this time whether it will have any material adverse effect
on the Company.
On July 8, 1996, Michael Delaney, then an employee of Rodman, initiated
an NASD arbitration proceeding by means of a Statement of Claim alleging
breach of certain terms and conditions of his employment agreement with
Rodman, especially with respect to certain override provisions as to
institutional equity sales commissions. The Statement of Claim alleged
damages in excess of $2.0 million arising from such breach. On September 6,
1996, Rodman filed its Answer to Mr. Delaney's Statement of Claim denying Mr.
Delaney's claim and asserting various defenses. On October 11, 1996, Mr.
Delaney amended his Statement of Claim, primarily to include claims relating
to the termination of his employment with Rodman on July 29, 1996. The
Amended Statement of Claim alleged damages in excess of $2.0 million and
requested punitive damages. On November 12, 1996, Rodman submitted its Answer
to the Amended Statement of Claim again denying Mr. Delaney's claims and
asserting various defenses. An arbitration hearing on this matter was held in
May 1997. During the hearing, Mr. Delaney requested $2.8 million in
compensatory damages plus punitive damages. By notice dated June 18, 1997,
the NASD advised that the arbitration panel had awarded Mr. Delaney
$1,519,638. Such amount was paid to Mr. Delaney in July 1997.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION.
As a result of the proposed Transactions announced by Abaco on February
4, 1997, which Transactions currently remain pending subject to certain
regulatory authorizations, and the impact thereof on the need for and
functioning of a large board of directors, certain directors of the Company
resigned in April and during the first part of May 1997. See the Company's
Form 10-Q for the Fiscal Quarter ended March 31, 1997.
Eduardo Camarena Legaspi and Jorge Antonio Garcia Garza resigned as
directors of the Company as of May 27, 1997. The present directors of the
Company are Alexander C. Anderson, Ernesto Arechavala and Jorge Lankenau
Rocha.
Ms. Joan J. Tannen resigned from her position as Chief Financial
Officer on June 18, 1997 and Thomas G. Pinou became Chief Financial Officer
as of that date.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - The following exhibits are included
herein or are incorporated by reference.
27.1 Financial Data Schedule.
10.30 Abaco Support Letter.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the
quarter ended June 30, 1997.
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RODMAN & RENSHAW CAPITAL GROUP, INC.
(Registrant)
Date: August 12, 1997 By: /s/Thomas G. Pinou
---------------------------------
Thomas G. Pinou
Chief Financial Officer
Date: August 12, 1997 By: /s/Joseph P. Shanahan
---------------------------------
Joseph P. Shanahan
President and Chief Executive
Officer
EXHIBIT INDEX
ITEM NO. DESCRIPTION SEQUENTIALLY NO. PAGE
27.1 FINANCIAL DATA SCHEDULE
10.30 ABACO SUPPORT LETTER
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,904,000
<RECEIVABLES> 1,361,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 5,768,000
<PP&E> 6,809,000
<TOTAL-ASSETS> 28,969,000
<SHORT-TERM> 38,875,000
<PAYABLES> 10,719,000
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 897,000
<LONG-TERM> 0
<COMMON> 598,000
0
0
<OTHER-SE> (21,522,000)
<TOTAL-LIABILITY-AND-EQUITY> 28,969,000
<TRADING-REVENUE> 2,037,000
<INTEREST-DIVIDENDS> 282,000
<COMMISSIONS> 3,572,000
<INVESTMENT-BANKING-REVENUES> 661,000
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 1,086,000
<COMPENSATION> 6,213,000
<INCOME-PRETAX> (9,643,000)
<INCOME-PRE-EXTRAORDINARY> (9,643,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,643,000)
<EPS-PRIMARY> (1.45)
<EPS-DILUTED> (1.45)
</TABLE>
EXHIBIT 10.30
ABACO GRUPO FINANCIERO
February 28, 1997
Joseph P. Shanahan
President & Chief Executive Officer
Rodman & Renshaw Capital Group, Inc.
2 World Financial Center
Tower B, 30th Floor
New York, NY 10281
Dear Mr. Shanahan:
This is to confirm to you that with respect to Rodman & Renshaw Capital
Group, Inc. (the "Company"), a subsidiary of Abaco Casa de Bolsa, S.A. de
C.V., Abaco Grupo Financiero, ("Casa de Bolsa"), a subsidiary of Abaco Grupo
Financiero, S.A. de C.V. ("Abaco"), it is the intention of Casa de Bolsa and
Abaco to continue to unconditionally support the Company and its majority
subsidiary, Rodman & Renshaw, Inc. ("Rodman"), for losses incurred in the
ordinary course of business for the next two years, up to March 31, 1999.
Such support may include, with prior receipt of requisite approvals from
Mexican Government Authorities, infusions of capital, conversion of short
term debt to long term debt or conversion of short or long term debt to
equity.
/s/ Jorge Lankenau Rocha
- - -------------------------
Jorge Lankenau Rocha
Chairman of the Board of Directors
Abaco Grupo Financiero, S.A. de C.V.
cc: Coopers & Lybrand L.L.P.
<PAGE>
