UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 2000
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 0-21105
RESEARCH PARTNERS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3414302
----------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One State Street Plaza, New York, NY 10004
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(212) 208-6500
-----------------------------------------------------
(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 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 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 June 14, 2000
----- ----------------------------
Common Stock, $.0001 par value 9,337,817 shares
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Index
<TABLE>
Page
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<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
April 30, 2000 (Unaudited) and January 31, 2000 3
Consolidated Statements of Operations for the three
months ended April 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the year ended January 31, 2000 and the three months
ended April 30, 2000 (Unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended April 30, 2000 and 1999 (Unaudited) 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II - Other Information
Item 2. Sales of Unregistered Securities during the three months ended
April 30, 2000
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
April 30, January 31,
2000 2000
-------------- ----------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 24,679,000 $ 7,747,000
Receivable from brokers and dealers 5,902,000 12,216,000
Securities owned, at market value 2,063,000 2,918,000
Securities owned, not readily marketable, at fair value 2,257,000 2,355,000
Investment in affiliate 8,482,000 5,248,000
Investment fees receivable --- 3,253,000
Loans receivable --- 987,000
Office furniture, equipment and leasehold improvements, net 2,428,000 2,529,000
Goodwill, net 1,533,000 1,592,000
Income taxes receivable 814,000 576,000
Other assets 7,476,000 2,779,000
-------------- --------------
Total assets $ 55,634,000 $ 42,200,000
============== ==============
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, not yet purchased, at market value $ 699,000 $ 1,677,000
Commissions payable 1,501,000 3,045,000
Deferred tax liability 3,163,000 3,145,000
Income taxes payable 147,000 1,028,000
Accrued expenses and other liabilities 6,221,000 6,040,000
Minority Interest 8,372,000
--------- ----------------
20,103,000 14,935,000
Liability subordinated to the claims for general creditors 314,000 314,000
----------- -----------
Total liabilities 20,417,000 15,249,000
------------ -------------
Stockholders' equity:
Common stock, $.0001 par value; 35,000,000 shares
authorized; 9,927,973 shares issued; 9,337,817 and
8,629,213 shares outstanding, respectively 1,000 1,000
Additional paid-in capital 29,984,000 20,342,000
Retained earnings 7,895,000 9,206,000
Accumulated other comprehensive loss (115,000) (51,000)
--------------- --------------
37,765,000 29,498,000
Less treasury stock, at cost; 590,156 and 580,662 shares (2,548,000) (2,547,000)
-------------- --------------
Total stockholders' equity 35,217,000 26,951,000
-------------- --------------
Total liabilities and stockholders' equity $ 55,634,000 $42,200,000
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
Three Months
Ended April 30,
2000 1999
---------------- -----------------
<S> <C> <C>
Revenues:
Commissions $ 18,907,000 $ 11,508,000
Investment banking 2,451,000 597,000
Principal transactions (779,000) 276,000
Interest 569,000 353,000
Other 230,000 15,000
---------------- ---------------
Total revenues 21,378,000 12,749,000
---------------- ---------------
Expenses:
Compensation and benefits 14,844,000 8,196,000
Occupancy and equipment 967,000 1,176,000
Brokerage, clearing and exchange fees 752,000 741,000
Communications 873,000 707,000
Professional fees 717,000 477,000
Business development 1,950,000 201,000
Other 3,461,000 114,000
---------------- ---------------
Total expenses 23,564,000 11,612,000
---------------- ---------------
Income before income taxes (2,186,000) 1,137,000
Income taxes benefit 875,000 -
---------------- ---------------
Net income / loss from continuing operations $ (1,311,000) $ 1,137,000
----------------- ---------------
Discontinued operations:
Loss from operations of the discontinued
Institutional and Research segment (326,000)
Loss from operations of the discontinued
On-site Day Trading segment --- (194,000)
--------------- ----------------
Net income / loss $(1,311,000) $617,000
Weighted average common shares
outstanding - basic and diluted 8,983,515 8,724,612
================ ===============
Basic and diluted EPS from continuing operations $ (0.15) $ 0.13
Basic and diluted EPS from discontinued operations --- $ (0.06)
----- ------
Basic and diluted EPS $ (0.15) $ 0.07
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Year Ended January 31, 2000 and the Three Months Ended April 30, 2000 (Unaudited)
(Accumulated Accumulated
Common Stock Additional Deficit) Other Treasury Stock
--------------------- Paid-in Retained Comprehensive ---------------------
Shares Amt. Capital Earnings (Loss) Income Shares Amount Total
----------- ------- -------------- ------------- -------------- ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 31, 1999 9,209,875 $ 1,000 $ 21,022,000 $ 4,351,000 $ (18,000) (798,976) $(3,516,000) $ 21,954,000
Net income - - - 4,855,000 - - - 4,855,000
Starting
bonuses awarded - - (147,000) - - 79,746 351,000 204,000
Stock options
exercised - - (109,000) - - 66,631 294,000 185,000
Forfeiture
of stock issued
compensation plan - - 112,000 - - (27,046) (112,000) -
Stock issued -
deferred
compensation plan - - (93,000) - - 34,676 153,000 60,000
Stock issued -
401(k) plan - - (131,000) - - 48,179 212,000 81,000
Preferred
stock
conversion - - (61,000) - - 16,128 71,000 -
Cancellation of
preferred stock - - (894,000) - - - - (998,000)
Note receivable
paid - - 121,000 - - - - 121,000
Amortization of
unearned
compensation - - 522,000 - - - - 522,000
Translation
adjustment - - - - (33,000) - - (33,000)
----------- ---------- ----------- ------- -------------- ------------- ------------- ------ ---------
Balance at
January 31, 2000 9,209,875 1,000 20,342,000 9,206,000 (51,000) (580,662) (2,547,000) 26,951,000
=========== ======= ============== ============= ============ =========== ============= =============
Net income - - - (1,311,000) - - - (1,311,000)
Net proceeds
of stock sale
by EarlyBirdCapital.com - - 10,173,000 - - - - 10,173,000
Minority Interest
- EarlyBirdCapital
.com (3,339,000) - - - - (3,339,000)
Net proceeds of
stock sale
By Shochet Holdings - - 7,612,000 - - - - 7,612,000
Minority Interest
- Shochet Holdings - - (5,033,000) - - - - (5,033,000)
Stock options exercised - 27,053 103,216 - - - - 103,216
Forfeiture of
stock issued -
compensation plan (3,916) - - - - - -
Stock issued -
deferred
compensation plan - - - - - - -
Stock issued
- 401(k) plan - - - - - - -
Amortization of
unearned
compensation - - 125,000 - - - 125,000
Translation
adjustment - - - - (64,000) - (64,000)
----------------------------------------------------------------------------------------------------
Balance at
April 30, 2000 9,233,012 1,000 29,983,216 7,895,000 (115,000) (580,662) (2,547,000) 35,217,216
=========== ======= ============== ============= ============ =========== ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
Three Months Ended April 30,
2000 1999
---------------- ----------
<S> <C> <C>
Operating activities:
Net loss $ (1,311,000) $ 617,000
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 91,000 203,000
Translation adjustment (65,000) (9,000)
Other 357,000 166,000
---------------- ----------------
(928,000) 977,000
(Increase) decrease in operating assets:
Receivable from brokers and dealers 6,314,000 5,000
Securities owned, at market value 855,000 (250,000)
Securities owned, not readily marketable 98,000 (576,000)
Investment fees receivable 3,253,000 ---
Income taxes receivable (238,000) (183,000)
Loans receivable 987,000 96,000
Other assets (4,697,000) (311,000)
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased (978,000) 202,000
Commissions payable (1,544,000) 1,170,000
Income taxes payable (881,000) ---
Deferred tax liability 18,000 ---
Accrued expenses and other liabilities 181,000 (332,000)
---------------- -----------------
Net cash used in operating activities 3,368,000 798,000
---------------- ----------------
Investing activities:
Investment in affiliate (3,234,000)
---
Purchase of office furniture, equipment
and leasehold improvements --- (99,000)
Liquidation of investment in limited partnerships --- 433,000
Goodwill (59,000) ---
----------------- ---
Net cash provided by (used in) investing activities (3,293,000) 334,000
----------------- ----------------
Financing activities:
Stock sale by EarlyBirdCapital.com 10,173,000 ---
Stock sale by Shochet Holdings 7,612,000
Satisfaction of subscription receivable --- 121,000
Issuance of treasury stock --- 140,000
Repayment of note payable --- (94,000)
--- --------
Net cash provided by financing activities 17,785,000 167,000
---------------- ----------------
Net change in cash and cash equivalents 16,932,000 1,299,000
Cash and cash equivalents at beginning of year 7,747,000 10,553,000
---------------- ----------------
Cash and cash equivalents at end of period $ 24,679,000 $ 11,852,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include the activities of Research
Partners International, Inc. and its subsidiaries (the "Company"). The Company
is primarily engaged in the following segments: full service retail, discounted
retail, online investment banking and asset management. These segments provide
securities brokerage, investment banking, online investing, merchant banking and
asset management and trading services for individuals and corporations through
the Company's subsidiaries.
All significant intercompany accounts and transactions are eliminated in
consolidation. In the opinion of management, the consolidated financial
statements reflect all adjustments, which are all of a normal recurring nature,
necessary for a fair statement of the Company's financial position and results
of operations for the interim periods presented. These consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto for the year ended January 31, 2000, in
its annual report on Form 10-K. Certain reclassifications have been made to the
prior year amounts to conform to the current presentation.
The financial statements conform with generally accepted accounting principles
("GAAP"). The preparation of financial statements in conformity with GAAP
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could vary from these estimates.
The Company's principal business activities are affected by many factors,
including general economic and market conditions, which can result in
substantial fluctuations in the Company's revenues and net income. Therefore,
the results of operations for the three months ended April 30, 2000, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
2. Segment and Geographic Area Data
The Company currently operates in four principal segments: Full Service Retail
and Discounted Retail Brokerage. Each segment is managed separately based on
types of products and services offered and the related client bases. The Company
evaluates the performance of its segments based primarily on income before
income taxes.
o Full Service Retail - provides full service securities brokerage and
trading services, through GKN Securities Corp. ("GKN"), to a clientele
which primarily consists of individuals who invest in OTC equity
securities.
o Discounted Retail - provides full service discount brokerage services,
through Shochet Securities Inc. ("Shochet Securities") to a clientele
consisting primarily of retired individuals who invest in
exchange-listed equity securities, fixed income securities and mutual
funds.
o Online investment bank - through EarlyBirdCapital, Inc. ("EarlyBird")
<PAGE>
o Asset Management - provides asset management services to investors
through Dalewood Associates, Inc., the general partner of Dalewood
Associates, L.P. Dalewood Associates, L.P. is a private partnership
which invests primarily in venture stage, pre-IPO companies.
The Company allocates to segments certain overhead expenses based upon specified
agreed-upon amounts. Certain of the segments incur interest expense on
subordinated debt payable to the Company at contract rates. All such amounts are
eliminated in consolidation.
<TABLE>
Online Eliminations
Full Service Discounted Investment and
Retail Retail Bank all other Total
Three months ended:
April 30, 2000: "in thousands"
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external sources $16,963 $ 3,328 $ 914 $ 173 $21,378
Intersegment revenues $57 $ - $ - $ (57) $ -
Loss before income taxes $(609) $ (360) $(558) $ (660) $(2,187)
April 30, 1999:
--------------
Revenues from external sources $10,561 $ 2,298 $ - $3,355 $16,214
Intersegment revenues $ 132 $ - $ - $ (132) $ -
Income (Loss) before income taxes $ 571 $ (10) $ - $ 56 $ 617
Balance Sheet data:
April 30, 2000:
Segment assets $15,927 $ 12,722 $10,746 $16,239 $55,634
January 31, 2000
Segment assets $21,274 $ 4,321 $ - $16,605 $42,200
</TABLE>
Financial information for the Asset Management segment are not calculated for
the quarter ended April 30, 2000 or April 30, 1999, as this segments
contribution in each quarter was immaterial to the company total.
The Company's principal operations are located in the United States. The Company
maintains an office
The Company's principal operations are located in the United States. The Company
maintains an office in Europe. Gross revenues from operations in Europe
represent less than 4% of the Company's overall revenues.
3. Net Capital Requirements
GKN, EarlyBird and Shochet Securities, are registered broker-dealers with the
Securities and Exchange Commission ("SEC") and member firms of the National
Association of Securities Dealers, Inc. ("NASD"). As such, GKN, EarlyBird and
Shochet Securities are subject to the SEC's net capital rule, which requires the
maintenance of minimum net capital.
9
<PAGE>
GKN has elected to compute net capital using the alternative method permitted by
the net capital rule, which requires that it maintain minimum net capital, as
defined, to be greater than or equal to $250,000. At April 30, 2000, GKN had net
capital of $5,100,000.
EarlyBird has elected to compute net capital under the standard aggregate
indebtedness method permitted by the net capital rule, which requires that the
ratio of aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. At April 30, 2000, EarlyBird had net capital of $2,200,000 and a
net capital requirement of $100,000.
Shochet Securities has also elected to compute net capital under the standard
aggregate indebtedness method permitted by the net capital rule. At April 30,
2000, Shochet Securities had net capital of $3,200,000 and a net capital
requirement of $100,000.
<PAGE>
4. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share ("EPS"):
<TABLE>
Three months ended
April 30,
2000 1999
------------- ---------------
<S> <C> <C>
Numerator for basic and diluted EPS:
Income / Loss from continuing operations $ (1,311,000) $ 1,137,000
Loss from discontinued operations - (520,000)
------------- -------------
Net Income / Loss $ (1,311,000) $ 617,000
============= =============
Denominator for basic and diluted EPS 8,983,515 8,724,612
------------- -------------
Basic and diluted EPS from:
Income / Loss from continuing operations $ (0.15) $ 0.13
Loss from discontinued operations - (0.06)
------------- -------------
Net loss $ (0.15) $ 0.07
============= ============
</TABLE>
5. Supplemental Cash Flow Information
<TABLE>
Three Months Ended
April 30,
2000 1999
------------- --------
<S> <C> <C>
Cash paid for:
Income taxes $ 371,000 $ 183,000
</TABLE>
6. Commitments and Contingencies
The Company's broker-dealer subsidiaries are involved in various legal
proceedings arising from its securities activities. Management believes that
resolution of these proceedings will have no material adverse effect on the
Company's consolidated financial position or results of operations.
<PAGE>
7. Comprehensive Income
The Company has adopted SFAS No. 130, Reporting Comprehensive Income, which
establishes standards for the reporting and display of comprehensive income and
its components. Total comprehensive income measures all changes in stockholders'
equity resulting from transactions of the period, other than transactions with
stockholders.
The components of comprehensive loss for the three months ended April 30, 2000
and 1999 are as follows:
<TABLE>
Three months ended April 30,
2000 1999
--------------------------
<S> <C> <C>
Net income (1,311,000) 617,000
Other comprehensive income (loss):
Foreign currency translation
adjustments (64,000) (9,000)
----------- ---------------
Total comprehensive income (loss) $ (1,375,000) $ 608,000
============ ==============
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following analysis of the consolidated results of operations and financial
condition of Research Partners International, Inc. and Subsidiaries should be
read in conjunction with the Consolidated Financial Statements included in Item
1 of this document and with the Management's Discussion and Analysis of the
Financial Condition and Results of Operations included in our company's Fiscal
2000 Annual Report on Form 10-K.
Business Environment
Our primary business activities, investment banking, online investing, merchant
banking and asset management, securities brokerage and securities trading, with
an emphasis on small- and mid-capitalization companies and early-stage growth
companies, are subject to general economic and market conditions and the
volatility of trading markets, specifically the small- and mid-capitalization
market. The quarter ended April 30, 2000, witnessed an extension of the
favorable market conditions, which have existed through much of fiscal year
2000, for approximately half of the quarter ended April 30, 2000. But in the
final half of the quarter, equity prices fell dramatically, while volume
retreated from the record levels. Thus, while commission income comparisons were
still very favorable, trading results were negatively impacted
During the first quarter of 2001, the Company's strategic plans for
EarlyBirdCapital.com and Shochet Holding, reached key milestones as both
entities raised capital. EarlyBird raised $11 million of gross proceeds through
a private placement; the Company retains a 65% equity interest in EarlyBird.
Shochet Holding, the direct parent of Shochet Securities, raised $9,405,000 of
gross proceeds; the Company retains a 53.5% equity interest in Shochet Holding.
EarlyBird had a successful launch of its online investment bank, closing two
deals. Shochet intends to offer brokerage and insurance services over the
Internet, as it builds a portal directed toward the retirement community..
The results of operations for the three months ended April 30, 2000 are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
Results of Operations
Three Months Ended April 30, 2000 vs. Three Months Ended April 30, 1999
Net loss for the three months ended April 30, 2000 was $1,311,000 as compared
with net income of $617,000 for the three months ended April 30, 1999. Net
income from continuing operations for the year-earlier quarter was $1,137,000.
Basic and diluted loss per share of common stock was $0.15 for the first quarter
of fiscal 2001 as compared to earnings of $0.07 for the fiscal 2000 quarter.
Basic and diluted earnings from continuing operations per share of common stock
was $0.16 for the first quarter of fiscal 2000, which ended on April 30, 1999.
Revenues
Total revenues increased by 68% to $21,378,000 for the first quarter of fiscal
2001, versus the year-earlier period, mainly as a result of an increase of
commission revenues and investment banking fees; however. losses from principal
transactions moderated some of the gains.
<PAGE>
Commission revenues increased 64% to $18.9 million in the first quarter of
fiscal 2001. Trading volume increased 56% and was augmented by a modest increase
in average commissions per ticket.
Investment banking revenues increased to $2,451,000 from $597,000 in the first
quarter of fiscal 2000. The sharp advance reflected the initial contributions
from the Company's online investment bank, EarlyBirdCapital, which closed two
deals, and a significant addition from Shochet Securities which was part of the
underwriting syndicate. Shochet Holding Corp's initial public offering.
Losses from principal transactions were $779,000 in the first quarter of fiscal
2001, versus a profit of $276,000 in the year-earlier period. The slump in
equity prices in the latter part of the fiscal 2001 quarter was particularly
acute for the small- and mid- capitalization stocks in which GKN makes a market.
Interest income increased 61% to $406,000 in fiscal 2001 as a result of
increased interest on customer balances held at our clearing firm, as well as
higher interest rates.
Other revenues were $230,000 in fiscal 2001, versus $15,000, as a result of
management fees and partnership income derived from our asset management
division.
Expenses
Total expenses for the first quarter of fiscal 2001 were $23,564,000, a 103%
increase from the same quarter in fiscal 2000. The increase is attributable to
increases in compensation and benefits and business development and other
expenses. Part of the increase represented planned marketing and promotion
initiatives at EarlyBirdCapital and Shochet Securities, as those entities seek
to expand their brand name recognition.
Compensation and benefits expense increased 81% to $14, 844,000. These expenses
are primarily variable as commissions to brokers are paid as a percentage of
commission revenues generated.
Occupancy and equipment expense in the fiscal 2001 quarter declined 18% to
$967,000, reflecting the sublet of part of the company's home office space.
Communications expenses increased 23% to $873,000, primarily as a result of
increased brokerage activity.
Professional fees increased by 50% to $717,000, mainly as a result of increased
consulting and legal fees at GKN Securities.
Business development expenses were $1,950,000 in the fiscal 2001 quarter, versus
$201,000 in the year-earlier period. EarlyBirdCapital accounted for over half
the total, as it established its electronic investment bank. Shochet also had
sharply higher advertising expenditures.
Other expenses increased sharply to $3,461,000 from $114,000, with the largest
factors in the higher totals increased charges for errors and unsecured debits.
13
<PAGE>
Income taxes
For the quarter ended April 30, 2000, our company booked an income tax recovery,
against its consolidated pretax loss. Additionally, our company takes a full
valuation on deferred tax assets primarily resulting from net operating loss
carryforwards.
Discontinued Operations
During the second quarter of fiscal 2000, management discontinued the operations
of the On-site Day Trading ,and Institutional and Research segments of our
business. After-tax losses for the first quarter of 2000 ended April 30, 1999
from these discontinued operations were $194,000 and $326,000, respectively.
Weighted average common shares outstanding
The weighted average number of common shares outstanding used in the computation
of basic and diluted loss per common share was 8,773,314 for the first quarter
of fiscal 2001, compared with 8,724,612 in the prior year's period.
Liquidity and Capital Resources
Approximately 59% of our company's assets at April 30, 2000 are highly liquid,
consisting primarily of cash and cash equivalents, securities inventories, and
receivables from other broker-dealers, all of which fluctuate depending upon the
levels of customer business and trading activity. Receivables from
broker-dealers, which are primarily from our clearing broker, turn over rapidly.
As a securities dealer, we may carry significant levels of securities
inventories to meet customer needs. Our inventory of market-making securities is
readily marketable; however, holding large blocks of the same security may limit
liquidity and prevent realization of full market value for the securities.
Securities owned, but not readily marketable, represent underwriter warrants and
the securities underlying such warrants. The liquidity of these securities is
limited. A relatively small percentage of our total assets are fixed. The total
assets or the individual components of total assets may vary significantly from
period to period because of changes relating to customer demand, economic and
market conditions, and proprietary trading strategies.
Our domestic operating brokerage subsidiaries, GKN, Shochet Securities and
EarlyBird are subject to the net capital rules of the NASD and the SEC. They and
our company, therefore, are subject to certain restrictions on the use of
capital and its related liquidity. GKN's, Shochet Securities' and EarlyBird's
respective net capital positions as of April 30, 2000 were $5,100,000,
$3,200,000 and $2,200,000, which were $4,850,000, $3,100,000 and $2,100,000,
respectively, in excess of their respective net capital requirements.
In conjunction with our corporate headquarters relocation in New York we have
significantly upgraded our technological infrastructure. The combined costs of
the move and the technological investment were financed through a series of
operating leases. These leases total $4.8 million. As security for these leases,
we arranged for a standby letter of credit. As collateral for the standby letter
of credit, we have placed $2.5 million in a restricted cash escrow account with
the provider.
Our overall capital and funding needs are continually reviewed to ensure that
our capital base can support the estimated needs of its business units. These
reviews take into account business needs as well as regulatory capital
requirements of the subsidiaries. Based upon these reviews, management believes
that our capital structure is adequate for current operations and reasonably
foreseeable future needs.
<PAGE>
Item 3.
Quantitative and qualitative disclosures about market risk
Our market making, investing and underwriting activities often involve the
purchase, sale or short sale of securities as principal. Such activities subject
our capital to significant risks from markets that may be characterized by
relative illiquidity or may be particularly susceptible to rapid fluctuations in
liquidity. Such market conditions could limit our ability to resell securities
purchased or to purchase securities sold short. These activities subject our
capital to significant risks, including market, credit counterparty and
liquidity risks. Market risk relates to the risk of fluctuating values based on
market prices without action on our part. Our primary credit risk is settlement
or counterparty risk, which relates to whether a counterparty will fulfill its
contractual obligations, such as delivery of securities or payment of funds.
Liquidity risk relates to our inability to liquidate assets or redirect the
deployment of assets contained in illiquid investments. In addition, our market
and liquidity risks associated with asset revaluation are increased because
these risks associated with asset revaluation are increases because these risks
for us are concentrated and thus subject us to increased risks if market
conditions deteriorate.
OTHER MATTERS
Safe Harbor Cautionary Statement
We occasionally make forward-looking statements such as forecasts and
projections of expected future performance or statements of our plans and
objectives. When used in this quarterly report and in future filings with the
SEC, in our press releases and in oral statements made with the approval an
authorized executive officer, the words or phrases "will likely result," "the
Company expects," "we intend or expect," "will continue," "is anticipated,"
"estimated," "project," or "outlook" or similar expressions, including
confirmations by one of our authorized executive officers of any such
expressions made by a third party regarding us with respect to the company are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. We want to caution you not to
place undue reliance on these forward-looking statements, each of which speaks
only as of the date made. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Factors that
could affect our results of operations and cause its results to differ from
these statements include:
o the volatility and price level of the securities markets
o the volume, size and timing of securities transactions
o the demand for investment banking services
o the level and volatility of interest rates
o the availability of credit
o legislation affecting the business and financial communities, and
o the economy in general.
For a more complete discussion of these and other factors, see Exhibit 99 to our
Annual Report on Form 10K, for the fiscal year ended January 31, 2000. We have
no obligation to publicly release the result of any revisions that may be made
to any forward-looking statements to reflect anticipated or unanticipated events
or circumstances occurring after the date of these statements.
15
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Part II - OTHER INFORMATION
Item 2. Sales of Unregistered Securities during the three months ended
------------------------------------------------------------------------
April 30, 2000
--------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule BD
(b) Reports on Form 8-K:
None
16
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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.
RESEARCH PARTNERS INTERNATIONAL, INC.
Date: June 19, 2000 /s/ John Margaritis
---------------------------
John P. Margaritis
Chief Executive Officer
/s/ Robert Rosenberg
-----------------------------
Robert M. Rosenberg
Chief Financial Officer
<PAGE>
RESEARCH PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
Exhibit Index
Number Description
27 Financial Data Schedule BD (10/31/99)
