UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT #1 TO 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 March 31, 1996
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 1-8952
INTERSTATE/JOHNSON LANE, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
56-1470946
(I.R.S. Employer Identification No.)
Interstate Tower, P.O. Box 1012, Charlotte, North Carolina 28201-1012
(Address of principal executive offices, zip code)
(704) 379-9000
(Registrant's telephone number, including area code)
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 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 X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
----- ------------------------------
(Common stock, $.20 par value) 6,009,941
PAGE 1 OF 14
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
Index
Page Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of
Financial Condition--March 31, 1996 and
September 30, 1995 3
Condensed Consolidated Statements of
Operations--Six Months Ended
March 31, 1996 and 1995 4
Condensed Consolidated Statements of
Cash Flows--Six Months Ended
March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Page 2
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
(All dollars in thousands)
March 31, September 30,
1996 1995
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 13,709 $ 26,537
Cash and securities segregated for
regulatory purposes 132,984 117,616
Loans under matched securities resale agreements 7,007 129,623
Receivables:
Financing resale agreements 56,149 23,848
Customers 195,802 175,328
Brokers, dealers and clearing agencies 10,980 18,048
Other 4,139 4,722
Trading securities owned 98,803 75,749
Land, buildings, and improvements, net 6,179 7,285
Office facilities and equipment, net 9,637 8,865
Goodwill and intangible assets 13,377 13,678
Other assets 19,818 15,213
------------- ------------
$ 568,584 $ 616,512
============= ============
Liabilities and Shareholders' Equity
Short-term borrowings:
Checks payable $ 21,346 $ 11,872
Financing repurchase agreements 47,758 38,561
Borrowings under matched securities repurchase agreements 7,075 130,453
Payables:
Customers 290,424 267,714
Brokers and dealers 2,629 6,619
Other 6,627 7,322
Accrued compensation and benefits 16,727 14,460
Securities sold but not yet purchased 57,744 25,305
Notes payable 6,664 7,772
Other liabilities and accrued expenses 16,179 15,864
------------- ------------
473,173 525,942
------------- ------------
Minority interests 200 200
------------- ------------
Long-term subordinated debt 20,999 20,999
------------- ------------
Shareholders' equity:
Common stock 1,377 1,377
Additional paid-in-capital 31,067 31,510
Retained earnings 49,551 45,043
------------- ------------
81,995 77,930
Less: treasury stock, at cost (7,783) (8,559)
------------- ------------
Total shareholders' equity 74,212 69,371
------------- ------------
$ 568,584 $ 616,512
============= ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 3
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended March 31, Ended March 31,
(All dollars in thousands) (All dollars in thousands)
1996 1995 1996 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Commissions and sales credits $ 74,043 $ 51,681 $ 39,726 $ 27,434
Trading gains, net 3,910 3,477 1,871 2,366
Investment banking and underwriting 2,936 1,824 1,197 869
Asset management and advisory 4,390 3,517 2,245 1,795
Interest 16,808 21,428 8,346 11,219
Other 3,909 3,319 2,077 1,895
-------------- ------------- ------------- -------------
Total revenues 105,996 85,246 55,462 45,578
Interest expense 10,761 16,360 5,204 8,585
-------------- ------------- ------------- -------------
Net revenues 95,235 68,886 50,258 36,993
-------------- ------------- ------------- -------------
Expenses:
Compensation and benefits 61,898 43,698 33,365 23,370
Technology and telephone 8,642 6,926 4,493 3,581
Occupancy 4,249 4,176 2,156 2,085
Execution, clearance and depository 2,111 1,886 1,031 1,011
Promotion and development 2,919 2,780 1,431 1,581
Professional services 1,513 1,528 717 717
Printing, postage and supplies 1,790 1,620 934 908
Other operating expenses 3,849 2,129 1,375 1,150
-------------- ------------- ------------- -------------
Total expenses 86,971 64,743 45,502 34,403
-------------- ------------- ------------- -------------
Income before income taxes 8,264 4,143 4,756 2,590
Income tax expense 3,387 1,609 1,949 988
-------------- ------------- ------------- -------------
Net Income $ 4,877 $ 2,534 $ 2,807 $ 1,602
============== ============= ============= =============
Earnings per share:
Primary $ 0.80 $ 0.40 $ 0.46 $ 0.25
============== ============= ============= =============
Fully diluted $ 0.70 $ 0.40 $ 0.40 $ 0.24
============== ============= ============= =============
Weighted average shares:
Primary 6,112,079 6,369,903 6,113,568 6,349,441
============== ============= ============= =============
Fully diluted 7,679,665 7,648,482 7,681,154 7,628,020
============== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Page 4
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
(All dollars in thousands)
1996 1995
------------- ------------
Cash flows from operating activities:
- - -----------------------------------------
<S> <C> <C>
Net income $ 4,877 $ 2,534
------------- ------------
Adjustments to reconcile net income to cash provided (used) by operating
activities:
Depreciation and amortization 2,349 1,581
Deferred income taxes (950) -
Provision for real estate charges 850 500
Other non-cash items 904 (42)
------------- ------------
3,153 2,039
------------- ------------
Changes in operating assets and liabilities:
Cash and securities segregated for
regulatory purposes (15,368) (24,147)
Loans under matched securities resale and repurchase agreements, net (762) 3,166
Net payables to customers 2,237 19,015
Net receivables from brokers, dealers and clearing agencies 3,077 2,019
Other receivables 583 4,073
Trading securities owned, net 9,386 (431)
Other assets (3,705) (4,448)
Accrued compensation and benefits 2,267 (3,243)
Other liabilities and accrued expenses 471 (1,436)
------------- ------------
(1,814) (5,432)
------------- ------------
Cash provided (used) by operating activities 6,216 (859)
------------- ------------
Cash flows from financing activities:
- - -----------------------------------------
Proceeds from (repayment of ):
Short-term bank borrowings 9,474 (11,189)
Borrowings under financing repurchase and resale agreements, net (23,104) (3,056)
Notes payable (1,108) (680)
Proceeds from stock options exercised 126 146
Purchase of stock for treasury (1,714) (1,260)
Dividends paid (369) (383)
------------- ------------
Cash used by financing activities (16,695) (16,422)
------------- ------------
Cash flows from investing activities:
- - -----------------------------------------
Capital expenditures (2,349) (1,549)
------------- ------------
Cash used by investing activities (2,349) (1,549)
------------- ------------
Net decrease in cash and cash equivalents (12,828) (18,830)
Cash and cash equivalents at beginning of period 26,537 30,193
------------- ------------
Cash and cash equivalents at end of period $ 13,709 $ 11,363
============= ============
Cash paid during the quarter for:
Interest $ 11,098 $ 8,710
Income taxes $ 4,128 $ 1,073
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
Page 5
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The interim financial statements are unaudited; however, such information
reflects all normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the
period. The nature of the Company's business is such that the results of
any interim period are not necessarily indicative of results for a full
fiscal year.
2. NET CAPITAL REQUIREMENTS:
As a registered broker-dealer and member of the New York Stock Exchange,
Interstate/Johnson Lane Corporation ("IJL"), the principal operating
subsidiary of the Company, is subject to the Securities and Exchange
Commission's uniform net capital rule. IJL has elected to operate under the
alternative method of the rule, which prohibits a broker-dealer from
engaging in any transactions when its "net capital" is less than 2% of its
"aggregate debit balances" arising from customer transactions, as these
terms are defined in the rule. The Exchange may also impose business
restrictions on a member firm if its net capital falls below 5% of its
aggregate debit balances. IJL is also subject to the Commodity Futures
Trading Commission minimum net capital requirement.
At March 31, 1996, IJL's net capital was 21% of its aggregate debit
balances and approximately $38.8 million in excess of its minimum
regulatory requirements.
3. COMMITMENTS AND CONTINGENCIES:
Leases for office space and equipment are accounted for as operating
leases. Approximate minimum rental commitments under noncancelable leases,
some of which contain escalation clauses and renewal options, are as
follows:
Millions
For the six months ended September 30, 1996 $5.4
For the fiscal year ended September 30,
1997 7.5
1998 5.3
1999 3.4
2000 1.4
Thereafter 4.9
--------
$ 27.9
Page 6
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES, CONTINUED:
In connection with its involvement as a general partner and/or placement
agent of various real estate limited partnerships, the Company has
guaranteed certain obligations of limited partners and, with others, has
jointly or severally guaranteed mortgage loan obligations of some of the
partnerships. At March 31, 1996, contingent liabilities under these
obligations amounted to approximately $2.1 million in the aggregate.
Of a $20 million irrevocable letter of credit available, the amount
outstanding at March 31, 1996 under this facility was $3.0 million.
4. LEGAL PROCEEDINGS:
The Company is involved in certain litigation arising in the ordinary
course of business. Management believes, based upon discussion with
counsel, that the outcome of this litigation will not have a material
effect on the Company's financial position. The materiality of legal
matters on the Company's future operating results depends on the level of
future results of operations as well as the timing and ultimate outcome of
such legal matters.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
IJL's business activities involve the execution, settlement and financing
of securities transactions generating accounts receivable, and thus may
expose IJL to financial risk in the event a customer or other counterparty
is unable to fulfill its contractual obligations. IJL controls the risk
associated with collateralized loans by revaluing collateral at current
prices, monitoring compliance with applicable credit limits and industry
regulations, and requiring the posting of additional collateral when
appropriate.
Obligations arising from financial instruments sold short in connection
with its normal trading activities expose IJL to risk in the event market
prices increase, since it may be obligated to repurchase those positions at
a greater price. IJL's short selling primarily involves debt securities,
which are typically less volatile than equities or options.
Page 7
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK, CONTINUED:
Forward and futures contracts provide for the seller agreeing to make
delivery of securities or other instruments at a specified future date and
price. Risk arises from the potential inability of counterparties to honor
contract terms, and from changes in values of the underlying instruments.
At March 31, 1996, IJL's commitments included forward purchase and sale
contracts involving mortgage-backed securities with long market values of
approximately $28.6 million and short market values of approximately $30.1
million and futures sale contracts with short market values of $14.2
million used primarily to hedge municipal bonds. While IJL may from time to
time participate in the trading of some derivative securities for its
customers, this is not a significant portion of IJL's business.
IJL enters into resale agreements, whereby it lends money by purchasing
U.S. government/agency or mortgage-backed securities from customers or
dealers with an agreement to resell them to the same customers or dealers
at a later date. Such loans are collateralized by the underlying
securities, which are held in custody by IJL and may be converted into cash
at IJL's option. In addition, IJL monitors the market value of the
collateral, and issues margin calls as necessary according to the
creditworthiness of the borrower. Approximately 89% of all loans under
securities resale agreements at March 31, 1996 were made to three
counterparties.
IJL incurs risk in underwriting public securities offerings to the extent
that prospective buyers fail to purchase the securities. The Company
attempts to mitigate this risk through due diligence carried out prior to
undertaking the contractual obligation.
6. LONG-TERM INCENTIVE COMPENSATION PLAN:
The Company's Board of Directors approved a three-year incentive
compensation plan ("the Plan") for selected executive officers at its July
1996 meeting. The Plan was approved retroactively to the beginning of the
Company's 1996 fiscal year; accordingly, quarterly financial information
has been restated to reflect adoption of the Plan. Compensation expense
recognized under the Plan totaled $487,000 and $664,000, respectively,
for the quarter and six months ended March 31, 1996 and is reflected in
the accompanying restated financial statements. Maximum imputed shares
issuable under the Plan as of March 31, 1996 totaled 350,000, and are
included as common stock equivalents in the computation of fully diluted
earnings per share.
Page 8
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General Business Environment
The Company's principal activities -- securities brokerage for individual
(retail) and institutional investors, market-making in equity and fixed-income
securities, investment banking and underwriting, and investment management and
advisory services -- are highly competitive. Strategic alliances between
investment firms and commercial banks, insurance companies, and other financial
services entities have intensified this competition. Many of the Company's
revenue sources are sensitive to marketplace trading volumes and to interest
rate conditions which can be volatile. As a result, revenues and earnings may
vary significantly from quarter to quarter.
In recent years, the Company's retail sales force has grown in large part due to
the recruitment and training of individuals without securities industry
experience. At March 31, 1996, approximately 24% of the Company's retail
financial consultants had fewer than three years' industry experience. While
this strategy may be rewarding in the future, near-term slowdowns in individual
investor activity could negatively impact the revenue production of a less
seasoned sales force. Implementation of prospective Securities and Exchange
Commission disclosure requirements for broker-dealers regarding payment for
order flow, and for money managers regarding "soft dollar" arrangements with
broker-dealers, could also indirectly stifle certain revenue streams in the
future.
Liquidity and Capital Resources
The Company's net cash position decreased $12.8 million for the six months ended
March 31, 1996. Operating activities consumed $1.8 million of cash, offset by
$8.0 million of net income adjusted for depreciation and other non-cash charges.
Financing activities used an additional $16.7 million of cash while capital
expenditures totaled $2.3 million.
The Company's asset base consists primarily of cash, cash equivalents, and other
assets which can be converted to cash within one year; at March 31, 1996, these
assets comprised approximately 91% of the balance sheet. Day-to-day financing
requirements generally are influenced by the level of securities inventories,
net receivables from customers and broker-dealers, and net receivables under
resale agreements. Significant incremental cash requirements also may occur from
time to time in connection with payments under deferred compensation plans,
repurchase of the Company's common stock and/or convertible debentures, payment
of dividends, and litigation settlements arising from normal business
operations. In addition, the Company anticipates capital spending of up to $3
million over the next several years in conjunction with a planned program of
technology improvements.
Page 9
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Capital Resources, continued
At March 31, 1996, the Company had $155 million of unused call loan financing
available. In addition, the Company maintains credit lines of several hundred
million dollars for collateralized repurchase agreements with other financial
institutions, and has financed its customer receivables with customer payables
for many years. Management believes that these resources, funds provided by
operations, and permanent capital of shareholders' equity and long-term
subordinated debt, will satisfy normal financing needs for the foreseeable
future.
The Company's broker-dealer subsidiary, Interstate/Johnson Lane Corporation
("IJL"), is subject to liquidity and capital requirements of the Securities and
Exchange Commission, Commodity Futures Trading Commission, and The New York
Stock Exchange, and consistently has operated well in excess of the minimum
requirements. At March 31, 1996, IJL had net capital of $42.8 million, "excess
net capital" of approximately $38.8 million, and a net capital ratio of 21%.
Results of Operations
For the six months ended March 31, 1996, net revenues increased $26.3 million,
or 38%, from the previous year, while expenses, other than interest, increased
$22.2 million, or 34%. Net income of $4.9 million was up $2.3 million from the
results of the period of a year ago. Net revenues increased $13.3 million, or
36%, for the three months ended March 31, 1996, while expenses, other than
interest, increased $11.0 million, or 32%. Net income for the period was $2.8
million or $.46 per share, compared with $1.6 million or $.25 per share for the
same quarter of a year ago.
Overall, commissions and sales credits increased by about $22.4 million, or 43%,
from the same six-month period of a year ago, representing gains of 40% in the
retail sector and 49% in the institutional sector. For the three-month period
ended March 31, 1996, commissions and sales credits increased about $12.3
million from the same period of a year ago. Increases in secondary market
transactions in both exchange listed and OTC equities, and increased equity
underwritings contributed to the increase in both the retail and institutional
sectors for the six and three month periods. Increased sales of mutual fund
shares and annuity products also contributed to the increase in the retail
sector, while improving new issues markets and increased activity in
mortgage-backed securities had a positive impact on the institutional sector for
both periods presented.
Increased profits of $800,000 in OTC trading were offset by a $350,000 decrease
in fixed income trading to produce an overall increase in trading gains of
$450,000, or 12% for the six months ended March 31, 1996. However, an increase
of $400,000 in OTC trading for the quarter was insufficient to overcome a
decrease of $900,000 in fixed income trading, thus producing a net decrease of
$500,000 or 21% in trading gains.
Page 10
<PAGE>
INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Results of Operations, continued
Investment banking fees and underwriting profits increased $1.1 million, or 61%,
and $300,000, or 38%, from the same six and three month periods of a year ago
due to an improved capital-raising environment, coupled with an increased level
of managed underwritings. Asset management and advisory fees were up $900,000
and $450,000 for the six and three month periods, respectively, due to the
continued growth of asset-based fees charged retail clients in lieu of
transaction-based commissions. Other income was up $600,000 and $200,000 for the
six and three month periods, respectively, largely attributable to an increase
in money fund service fees.
Interest revenues were down about $4.6 million for the six months ($2.9 million
for the quarter) ended March 31, 1996 while expenses decreased $5.6 million and
$3.4 million for the corresponding periods. The resultant increases of $1.0
million and $500,000 in net interest income for the six and three month periods,
respectively, is due primarily to increased segregated customer funds, and to
increased inventories of mortgage-backed and corporate securities, offset
slightly by increased levels of net unmatched repurchase agreements and interest
paid on higher levels of net customer credits. The majority of the decrease in
both revenues and expenses is attributable to significantly lower levels of
matched resale and repurchase agreements.
Compensation and benefits costs increased $18.2 million, or 42% ($10.0 million
for the quarter), due primarily to an increase in transaction-based commissions
and other profit-driven incentives including the new management LTIP described
in Note 6 to the Condensed Consolidated Financial Statements. Technology and
telephone expense increased $1.7 million, or 25%, for the six month period and
$900,000 for the quarter primarily due to expenses related to the Company's
ongoing program of technology improvements. Other operating expenses increased
$1.7 million, or 81% ($200,000 for the quarter) largely as a result of increased
provisions for legal and related matters, and of adjustments to the carrying
value of certain assets.
Page 11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in certain litigation arising in the ordinary
course of business. Management believes, based upon discussion with
counsel, that the outcome of this litigation will not have a material
effect on the Company's financial position. The materiality of legal
matters on the Company's future operating results depends on the level of
future results of operations as well as the timing and ultimate outcome of
such legal matters.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Designation of Exhibit Sequential
in this Report Description Page Number
11 Statement Regarding
Computation of Per
Share Earnings 14
27 Financial Data
Schedule 15
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended March 31, 1996.
Page 12
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
AND CONSOLIDATED SUBSIDIARIES
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.
INTERSTATE/JOHNSON LANE, INC.
Registrant
Signature Title Date
_________________________ President and Chief
James H. Morgan Executive Officer October 21, 1996
_________________________ Vice President - Finance
Edward C. Ruff and Treasurer (Principal
Financial Officer) October 21, 1996
_________________________ Assistant Vice President
C. Fred Wagstaff, III (Principal Accounting
Officer) October 21, 1996
Page 13
<PAGE>
Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
--------------------------------- --------------------------------
Net income per share was computed as follows: 1996 1995 1996 1995
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Primary:
Net income $ 4,877,197 $ 2,533,760 $ 2,806,998 $ 1,602,197
============== ============== ============== =============
1) Weighted average shares outstanding 6,112,079 6,369,903 6,113,568 6,349,441
2) Incremental shares under stock options
computed under the treasury stock method
using the average market price of
issuer's stock during the periods 30,667 73,296 34,338 80,008
-------------- -------------- -------------- -------------
3) Weighted average shares and common
equivalent shares outstanding 6,142,746 6,443,199 6,147,906 6,429,449
============== ============== ============== =============
4) Weighted average shares outstanding
which were used for calculation (A) 6,112,079 (A) 6,369,903 (A) 6,113,568 (A) 6,349,441
============== ============== ============== =============
Net income per share $ 0.80 $ 0.40 $ 0.46 $ 0.25
============== ============== ============== =============
Fully Diluted:
1) Unadjusted income $ 4,877,197 $ 2,533,760 $ 2,806,998 $ 1,602,197
2) Interest on convertible subordinated 480,089 492,285 240,045 246,148
-------------- -------------- -------------- -------------
Adjusted net income $ 5,357,286 $ 3,026,045 $ 3,047,043 $ 1,848,345
============== ============== ============== =============
3) Weighted average shares outstanding 6,112,079 6,369,903 6,113,568 6,349,441
4) Incremental shares under stock options
computed under the treasury stock method
using the higher of the average or ending
market price of issuer's stock at the end
of the periods 34,544 95,537 34,544 95,537
5) Incremental shares relating to
convertible subordinated debentures 1,183,042 1,183,042 1,183,042 1,183,042
6) Incremental shares related to long-term
incentive compensation plan. (See Note 6) 350,000 350,000
-------------- -------------- -------------- -------------
7) Weighted average shares and common
equivalent shares outstanding 7,679,665 7,648,482 7,681,154 7,628,020
============== ============== ============== =============
Net income per share $ 0.70 $ 0.40 $ 0.40 $ 0.24
============== ============== ============== =============
</TABLE>
(A) Dilutive effect of common equivalent shares not included since dilution is
less than 3%.
Page 14
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1996
<PERIOD-START> JAN-01-1996 OCT-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 13,709 13,709
<RECEIVABLES> 202,463 202,463
<SECURITIES-RESALE> 63,156 63,156
<SECURITIES-BORROWED> 8,458 8,458
<INSTRUMENTS-OWNED> 98,803 98,803
<PP&E> 15,816 15,816
<TOTAL-ASSETS> 568,584 568,584
<SHORT-TERM> 21,346 21,346
<PAYABLES> 299,680 299,680
<REPOS-SOLD> 54,833 54,833
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 57,744 57,744
<LONG-TERM> 27,663 27,663
1,377 1,377
0 0
<COMMON> 0 0
<OTHER-SE> 72,835 72,835
<TOTAL-LIABILITY-AND-EQUITY> 568,584 568,584
<TRADING-REVENUE> 1,871 3,910
<INTEREST-DIVIDENDS> 8,346 16,808
<COMMISSIONS> 39,726 74,043
<INVESTMENT-BANKING-REVENUES> 1,197 2,936
<FEE-REVENUE> 2,245 4,390
<INTEREST-EXPENSE> 5,204 10,761
<COMPENSATION> 33,365 61,234
<INCOME-PRETAX> 4,756 8,928
<INCOME-PRE-EXTRAORDINARY> 4,756 5,268
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,807 4,877
<EPS-PRIMARY> 0.46 0.80
<EPS-DILUTED> 0.40 0.70
</TABLE>
