<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1997
Commission file number 0-16633
THE JONES FINANCIAL COMPANIES, L.P., LLP
______________________________________________________________________
(Exact name of registrant as specified in its charter)
MISSOURI 43-1450818
______________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
__________________
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
____ ____
As of the filing date, there are no voting
securities held by non-affiliates of the Registrant.
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THE JONES FINANCIAL COMPANIES, L.P., LLP
INDEX
Page
Number
Part I.FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Statement of Financial Condition ...........3
Consolidated Statement of Income .......................5
Consolidated Statement of Cash Flows ....................6
Consolidated Statement of Changes in Partnership Capital 7
Notes to Consolidated Financial Statements ..............8
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations .....................9
Part II.OTHER INFORMATION
Item 1.Legal Proceedings.......................................13
Signatures.....................................................14
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THE JONES FINANCIAL COMPANIES, L.P., LLP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
(Unaudited)
March 28, December 31,
(Amounts in thousands) 1997 1996
Cash and cash equivalents $ 64,309 $ 64,858
Securities purchased under
agreements to resell 70,000 145,000
Receivable from:
Customers 648,370 615,399
Brokers or dealers and clearing
organizations 16,542 14,978
Mortgages and loans 67,883 66,116
Securities owned, at market value:
Inventory securities 51,381 58,373
Investment securities 171,444 171,177
Equipment, property and improvements 175,562 173,719
Other assets 69,780 70,796
__________ __________
$1,335,271 $1,380,416
The accompanying notes are an integral part of these financial
statements.
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THE JONES FINANCIAL COMPANIES, L.P., LLP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
(Unaudited)
March 28, December 31,
(Amounts in thousands) 1997 1996
Bank loans $ 3,800 $ 2,750
Payable to:
Customers 535,583 591,931
Brokers or dealers and clearing
organizations 17,238 12,999
Depositors 63,373 63,125
Securities sold but not yet purchased,
at market value 18,932 13,215
Accounts payable and accrued expenses 47,684 54,115
Accrued compensation and employee benefits 88,795 88,474
Long-term debt 65,025 67,190
__________ __________
840,430 893,799
Liabilities subordinated to claims
of general creditors 216,500 216,500
Partnership capital 259,997 248,157
Partner's capital reserved for
anticipated withdrawals 18,344 21,960
__________ __________
278,341 270,117
__________ __________
$ 1,335,271 $ 1,380,416
The accompanying notes are an integral part of these financial
statements.
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THE JONES FINANCIAL COMPANIES, L.P., LLP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
(Amounts in thousands, March 28, March 29,
except per unit information) 1997 1996
Revenues:
Commissions $170,477 $160,196
Principal transactions 48,579 33,714
Investment banking 3,337 2,983
Interest and dividends 18,735 15,154
Other 20,726 15,214
_________ _________
261,854 227,261
_________ _________
Expenses:
Employee and partner compensation and benefits 149,751 130,927
Occupancy and equipment 30,603 23,374
Communications and data processing 17,100 15,712
Interest 10,273 7,875
Payroll and other taxes 10,741 9,420
Floor brokerage and clearance fees 1,916 1,666
Other operating expenses 17,724 15,064
_________ _________
238,108 204,038
_________ _________
Net income $ 23,746 $ 23,223
========= =========
Net income allocated to:
Limited partners $ 3,488 $ 4,169
Subordinated limited partners 2,632 2,470
General partners 17,626 16,584
________ ________
$ 23,746 $ 23,223
======== ========
Net income per weighted average $1,000
equivalent partnership unit outstanding:
Limited partners $ 36.65 $ 42.63
======= ========
Subordinated limited partners $ 70.67 $ 79.00
======= ========
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners 95,161 97,806
======= ========
Subordinated limited partners 37,239 31,269
======= ========
The accompanying notes are an integral part of these financial
statements.
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THE JONES FINANCIAL COMPANIES, L.P., LLP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 28, March 29,
(Amounts in thousands) 1997 1996
Cash Flows Provided by Operating Activities:
Net income $ 23,746 $ 23,223
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,077 6,212
Decrease in securities held for
repurchase 75,000 -
(Increase) decrease in net receivable from
customers (89,319) 36,271
Increase (decrease) in net payable to/
receivable from brokers or dealers and
clearing organizations 2,675 (2,548)
Increase in receivable from mortgages
and loans (1,767) (561)
Decrease in securities owned, net 12,442 36,713
Decrease (increase) in payable to
depositors 247 (595)
(Decrease) increase in accounts payable
and accrued expenses (6,109) 1,439
Other assets 1,016 10,679
__________ __________
Net cash provided by operating
activities 27,008 110,833
__________ __________
Cash Flows Used by Investing Activities:
Purchase of equipment, property and
improvements (10,920) (5,955)
__________ __________
Cash Flows Used by Financing Activities:
Issuance (repayment) of bank loans 1,050 (31,002)
Repayment of long-term debt (2,165) (2,126)
Issuance of partnership interests 8,082 3,365
Redemption of partnership interests (1,106) (1,960)
Withdrawals and distributions from
partnership capital (22,498) (16,423)
__________ __________
Net cash used by financing activities (16,637) (48,146)
__________ __________
Net (decrease) increase in cash and
cash equivalents (549) 56,732
Cash and Cash Equivalents,
beginning of period 64,858 44,112
__________ __________
Cash and Cash Equivalents,
end of period $ 64,309 $ 100,844
Interest payments for the periods were $9,579 and $5,452.
The accompanying notes are an integral part of these financial
statements.
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THE JONES FINANCIAL COMPANIES, L.P., LLP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
THREE MONTHS ENDED MARCH 28, 1997, AND MARCH 29, 1996
(Unaudited)
Subordinated
Limited limited General
ptnrshp ptnrshp ptnrshp
(Amounts in thousands) capital capital capital Total
Balance, December 31, 1995 $ 98,410 $ 28,943 $103,465 $ 230,818
Issuance of partnership
interests - 3,365 - 3,365
Redemption of partnership
interests (852) (1,108) - (1,960)
Net income 4,169 2,471 16,583 23,223
Withdrawals and distributions (7) (4) - (11)
Reserved for anticipated
withdrawals (4,162) (2,467) (12,006) (18,635)
________ ________ ________ ________
Balance, March 29, 1996 $97,558 $31,200 $108,042 $ 236,800
Balance, December 31, 1996 $ 95,807 $ 29,178 $123,172 $ 248,157
Issuance of partnership
interests - 8,082 - 8,082
Redemption of partnership
interests (1,042) (64) - (1,106)
Net income 3,488 2,632 17,626 23,746
Withdrawals and distributions (19) (56) (463) (538)
Reserved for anticipated
withdrawals (3,469) (2,576) (12,299) (18,344)
________ ________ ________ _______
Balance, March 28, 1997 $ 94,765 $ 37,196 $128,036 $ 259,997
The accompanying notes are an integral part of these financial
statements.
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THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of The Jones Financial Companies, L.P., LLP and all wholly
owned subsidiaries (The "Partnership"), including the Partnership's
principal subsidiary, Edward D. Jones & Co., L.P., ("EDJ"), a
registered broker/dealer. All material intercompany balances and
transactions have been eliminated. Investments in nonconsolidated
companies which are at least 20% owned are accounted for under the
equity method.
The financial statements have been prepared under the accrual basis
of accounting which requires the use of certain estimates by
management in determining the Partnership's assets, liabilities,
revenues and expenses.
The financial information included herein is unaudited. However,
in the opinion of management, such information includes all
adjustments, consisting solely of normal recurring accruals, which are
necessary for a fair presentation of the results of interim
operations.
The results of operations for the three months ended March 28,
1997, are not necessarily indicative of the results to be expected for
the full year.
NET CAPITAL REQUIREMENTS
As a result of its activities as a registered broker/dealer, EDJ is
subject to the Net Capital requirements of the Securities and Exchange
Commission and the New York Stock Exchange. Under the alternative
method permitted by the rules, EDJ is required to maintain minimum Net
Capital of 2% of aggregate debit items arising from customer
transactions. The Net Capital rules also provide that EDJ may not
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expand its business nor may partnership capital be withdrawn if
resulting Net Capital would be less than 5% of aggregate debit items.
At March 28, 1997, EDJ's Net Capital of $268.3 million was 42% of
aggregate debit items and its Net Capital in excess of the minimum
required was $255.6 million.
THE JONES FINANCIAL COMPANIES, L.P., LLP
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER ENDED MARCH 28, 1997, VERSUS
QUARTER ENDED MARCH 29, 1996
During the first quarter of 1997, the Partnership experienced a
significant increase in customer dollars invested, and an increase in
the number of its Investment Representatives. As a result, revenues
increased 15% ($34.6 million). Additionally, the Partnership made
significant progress in its implementation of client server
technology. The combination of increased Investment Representatives
and client server conversion costs resulted in a 17% ($34.1 million)
increase in expenses. The resulting net income increased $.5 million,
or 2% over the same period last year.
Total revenues increased 15% ($34.7 million) to $261.8 million
compared to the quarter ended March 29, 1996. The Partnership
segments its revenues between securities transaction revenues
(revenues resulting from customers' trades) and non-transaction or
other revenues. Growth of the salesforce contributed to increases in
both revenue segments, as the Partnership increased its salesforce 11%
compared to the first quarter of 1996. These added investment
representatives (IRs) and a strong market increased the customer
dollars handled, which drive securities transaction revenue. During
the first quarter, $7.5 billion customer dollars were handled, an
increase of 19% over 1996. These increases were offset by a lower
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gross margin percentage, as the Firm's product mix shifted away from
higher margin mutual funds and insurance products to equity and fixed
income products. The gross margin percentage decreased from 2.8% in
the first quarter of 1996 to 2.6% in the first quarter of 1997. The
net effect was a 10% ($17.3 million) increase in securities
transaction revenue, which totaled $193.5 million for the quarter
ending March 28, 1997.
Non-transaction revenue includes service fees from mutual fund and
insurance companies, interest income, IRA custodial fees earned on IRA
accounts, and management fees received from mutual fund and money
market products. Assets under control increased 20% compared to the
first quarter of 1996, and serves as the basis for service fees and
management fee revenue received from mutual fund, insurance and money
market products. Also, IRA fees are based upon the number of IRA
accounts, which increased significantly from a year ago. Non-
transaction revenues increased 34% ($17.4 million) to $68.3 million
for the quarter ending March 28, 1997.
The firm's operating expenses reflect both the higher number of IRs
this year and the number of offices which have been converted to
client server. Expenses have increased by 17% ($34.1 million)
compared to the first quarter of 1996. The client server conversion
is nearing completion, as approximately 3,000 branch client servers
are installed compared with only 300 in March, 1996.
Focusing on changes in major revenue and expense categories,
Commission revenues increased 6% ($10.3 million) due to the
significant increase in customer dollars invested. Significant
increases include Listed and over-the-counter (O-T-C) agency equity
commissions, which increased 14% ($5.4 million) and mutual fund
commissions which increased 8% ($6.5 million). These increases were
offset by a 4% ($1.6 million) decrease in Insurance and Annuity
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revenues.
Principal transaction revenue increased 44% ($14.9 million). This
increase was primarily reflected in municipal bond principal revenues
(29% or $3.5 million), certificate of deposit revenues (47% or $3.0
million), OTC principal transactions (156% or $2.8 million), and
Mortgage backed product revenues (35% or $2.0 million).
Interest and dividend income increased 23% ($3.4 million). This
was due to a $161.5 million (33%) increase in loans to customers since
March 29, 1996, and resulted in $2.5 in increased interest income.
Also, interest on firm investments increased (156% or $1.2 million).
Other revenue increased 36% ($5.5 million), as a result of
increased management fees from mutual fund, insurance and money market
products that the firm distributes ($4.8 million) and from increased
IRA custodial fees ($.7 million).
Compensation costs increased 14% ($18.8 million) compared to the
prior year. Commissions, estimated sales bonuses, and profit sharing
provisions earned by Investment Representatives increased due to
increased revenues, as the Partnership has a compensation structure
which expands and contracts with increases and decreases in revenues,
profit margins, and net income. Salaries of branch and heaquarters
non-sales associates were also higher as headcount grew to support a
larger salesforce.
Occupancy and equipment and Communications as data processing costs
increased 22% ($8.6 million) due to increased expenses related to the
implementation of client server technology.
Interest expense increased 30% ($2.4 million). This is primarily a
result of the $94.5 million subordinated debt offering issued in
September, 1996.
Of the Partnership's remaining expenses, the most significant
changes were related to support the Partnership's strategy of
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expanding its salesforce and implementing new technology.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at March 28, 1997, after reserves
for anticipated withdrawals, was $260.0 million compared to $236.8
million as of March 29, 1996. Equity capital increased primarily due
to retention of earnings and contributions of subordinated limited
partnership capital, net of redemptions of subordinated limited
partnership and limited partnership capital.
At March 28, 1997, the Partnership had $64.3 million in cash and
cash equivalents. Lines of credit are in place at ten banks
aggregating $575 million ($500 million of which are through
uncommitted lines of credit). Actual borrowing availability is
primarily based on securities owned and customers' margin securities
which serve as collateral for the loans.
A substantial portion of the Partnership's assets are primarily
liquid, consisting mainly of cash and assets readily convertible into
cash. These assets are financed primarily by customer credit
balances, equity capital, bank lines of credit and other payables.
The Partnership believes that the liquidity provided by existing cash
balances and borrowing arrangements will be sufficient to meet the
Partnership capital and liquidity requirements.
CASH FLOWS
For the Quarter ended March 28, 1997, cash and cash equivalents
decreased $.5 million. Cash flows from operating activities provided
$27 million, primarily attributable to net income adjusted for
depreciation and amortization, decreases in securities held for
repurchase, decreased in securities owned, offset by increases in net
receivables from customers and decreases in accounts payable and
accrued expenses. Investing activities used $10.9 million for the
purchase of fixed assets. Cash flows from financing activities used
<PAGE>
$16.6 million primarily for withdrawals and distributions from
partnership capital, net of issuance of partnership interests.
There were no material changes in the partnership's overall
financial condition during the three months ended March 28, 1997,
compared with the three months ended March 29, 1996. The
Partnership's balance sheet is comprised primarily of cash and assets
readily convertible into cash. Securities inventories are carried at
market values and are readily marketable. Customer margin accounts
are collateralized by marketable securities. Other customer
receivables and receivables and payables with other broker/dealers
normally settle on a current basis. Liabilities, including certain
amounts payable to customers, checks, accounts payable and accrued
expenses are sources of funds to the Partnership. These liabilities,
to the extent not utilized to finance assets, are available to meet
liquidity needs and provide funds for short term investments, which
favorably impacts profitability.
The Partnership's growth in recent years has been financed through
sales of limited partnership interests to its employees, retention of
earnings, and private placements of long-term and subordinated debt.
The Partnership's principal subsidiary, Edward D. Jones & Co.,
L.P., ("EDJ") as a securities broker/dealer, is subject to the
Securities and Exchange Commission regulations requiring EDJ to
maintain certain liquidity and capital standards. EDJ has been in
compliance with these regulations.
The Partnership's subsidiary, Boone National Savings and Loan
Association, F.A. (Boone), a Federally-chartered stock savings and
loan association, is required under federal regulations to maintain
specified levels of liquidity and capital standards. Boone has been
in compliance with these regulations.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings
previously reported.
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index contained hereinafter.
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended March 28,
1997.
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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.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: May 12, 1997 /s/ John W. Bachmann
_____________________
John W. Bachmann
Managing Partner
Dated: May 12, 1997 /s/ Steven Novik
_____________________
Steven Novik
Chief Financial Officer
<PAGE>
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.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: May 12, 1997
_____________________
John W. Bachmann
Managing Partner
Dated: May 12, 1997
_____________________
Steven Novik
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
For the quarter ended March 28, 1997
Exhibit No. Description Page
27.0 Financial Data Schedule (provided for the
Securities and Exchange Commission only)
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<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for The Jones Financial Companies for the 3 months ended
March 28, 1997 and is qualified in its entirety to such financial statements.
</LEGEND>
<CIK> 0000815917
<NAME> THE JONES FINANCIAL COMPANIES, L.P., LLP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-28-1997
<EXCHANGE-RATE> 1
<CASH> 64,309
<RECEIVABLES> 723,314
<SECURITIES-RESALE> 70,000
<SECURITIES-BORROWED> 9,481
<INSTRUMENTS-OWNED> 222,825
<PP&E> 175,562
<TOTAL-ASSETS> 1,335,271
<SHORT-TERM> 0
<PAYABLES> 608,001
<REPOS-SOLD> 0
<SECURITIES-LOANED> 8,193
<INSTRUMENTS-SOLD> 18,932
<LONG-TERM> 281,525
0
0
<COMMON> 0
<OTHER-SE> 259,997
<TOTAL-LIABILITY-AND-EQUITY> 1,335,271
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 18,735
<COMMISSIONS> 219,056
<INVESTMENT-BANKING-REVENUES> 3,337
<FEE-REVENUE> 20,726
<INTEREST-EXPENSE> 10,273
<COMPENSATION> 149,751
<INCOME-PRETAX> 23,746
<INCOME-PRE-EXTRAORDINARY> 23,746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,746
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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