<PAGE> 1
Total # of Pages 17
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 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 1-13940
----------------------------------------------------------
EVEREN CAPITAL CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-4019175
- - ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive
Chicago, Illinois 60601
- - ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 574-6000
--------------------
Indicate by checkmark 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 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. Shares outstanding as of
May 9, 1996:
$.01 par value common stock - 11,496,537
$.01 par value non-voting common stock - 107,400
<PAGE> 2
INDEX
-----
Page
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Financial Condition -
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations - Three
months ended March 31, 1996 and 1995 4
Consolidated Statement of Changes in Stockholders' Equity -
Three months ended March 31, 1996 5
Consolidated Statements of Cash Flows -Three months
ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis -
Results of Operations
Liquidity and Capital Resources 9
PART II. OTHER INFORMATION
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
</TABLE>
2
<PAGE> 3
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1996 DECEMBER 31,
(UNAUDITED) 1995
----------- ------------
<S> <C> <C>
Cash and Cash Equivalents $ 19,556 $ 14,585
Cash and Securities Segregated Under
Federal and Other Regulations 17,005 15,556
Receivables from:
Customers 696,964 648,659
Brokers and Dealers 140,530 145,762
Others 47,106 51,496
Securities Owned, at Market 155,576 141,256
Securities Purchased Under Agreements to Resell 527,866 1,308,495
Investment in Mortgage-Backed Certificates
available-for-sale, at fair value 146,616 156,457
Fixed Assets, At Cost, Net 45,200 49,403
Other Assets 22,505 18,958
---------- ----------
$1,818,924 $2,550,627
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank Loans Payable $ 340,600 $ 297,800
Payables to:
Customers 195,136 223,757
Brokers and Dealers 54,417 78,410
Collateralized Mortgage Obligations 139,548 143,878
Securities Sold, Not Yet Purchased, at Market 67,672 91,632
Securities Sold Under Agreements to Repurchase 515,588 1,282,788
Deferred Income Taxes 22,645 26,118
Accounts Payable, Accrued Expenses and
Other Liabilities 311,861 246,328
---------- ----------
1,647,467 2,390,711
---------- ----------
Commitments and Contingencies
Exchangeable Preferred Stock, $.01 par value per share;
10,000,000 shares authorized; 1,286,158 and 1,244,168 shares
issued and outstanding at March 31, 1996 and December 31, 1995, 31,615 28,343
respectively
Stockholders' Equity:
Common Stock, $.01 par value per share; 40,000,000
shares authorized, 11,496,537 and 11,496,970 shares issued
and outstanding at March 31, 1996 and
December 31, 1995, respectively 115 115
Nonvoting Common Stock, $.01 par value per share;
400,000 shares authorized, 107,400 shares issued
and outstanding 1 1
Additional Paid-in Capital 152,892 449,396
Unrealized gain (loss) on available-for-sale securities, net of
income taxes (3,576) 11,497
Unearned KSOP Shares (15,219) (22,875)
Treasury Stock, at cost, 5,333 shares and 3,239 shares, respectively (45) (22)
Accumulated Deficit - (306,539)
Retained Earnings (since January 1, 1996) 5,674 -
---------- ----------
139,842 131,573
---------- ----------
$1,818,924 $2,550,627
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Revenue:
Commissions $ 98,009 $ 77,601
Interest and dividends 18,191 20,768
Securities gains, net 6,699 8,410
Investment banking fees 3,421 3,281
Investment management income 15,804 14,908
Other 1,018 833
-------- --------
Total revenue 143,142 125,801
-------- --------
Expenses:
Commissions, clearing,
and exchange fees 58,873 48,103
Employee compensation and benefits 30,801 28,472
Occupancy 10,224 11,154
Communications and data processing 10,321 10,666
Interest 9,254 13,651
Other 13,031 18,901
-------- --------
Total expenses 132,504 130,947
-------- --------
Income (loss) before income taxes 10,638 (5,146)
Income tax benefit (expense) (3,832) 1,930
-------- --------
Net income (loss) $ 6,806 $ (3,216)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Unrealized
gain Retained
Common Stock Additional (loss) on Unearned Earnings Total
--------------- Paid-In available for ESOP Treasury Accumulated (Since Stockholders'
Voting Non-voting Capital sale securities Shares Stock Deficit (1/1/96) Equity
------ ---------- ------- ----------------- ------- ------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $115 $ 1 $ 449,396 $ 11,497 $ (22,875) $ (22) $(306,539) $ - $131,573
Quasi-reorganization adjustments
at January 1, 1996:
Restatement of assets and
liabilities to estimated fair
value (3,675) (3,675)
Transfer of deficit and unrealized
gain at January 1, 1996 to
additional paid in capital (295,042) (11,497) 306,539 -
Amount received from former
parent under indemnification
agreement 1,406 1,406
Release of KSOP shares 807 7,656 8,463
Dividends on exchangeable
preferred stock (1,132) (1,132)
Unrealized gain (loss) for
the period (3,576) (3,576)
Purchase of treasury stock (23) (23)
Net income 6,806 6,806
---- --------- -------- --------- ----- --------- ------- --------
Balances at March 31, 1996 $115 $ 1 $ 152,892 (3,576) $ (15,219) $ (45) $ - $ 5,674 $139,842
==== === ========= ======== ========= ===== ========= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,806 $ (3,216)
Adjustments to reconcile net loss to net cash flows
from operating activities: -
Depreciation and amortization 3,727 4,185
Deferred income taxes (720) -
Change in assets and liabilities:
Cash and securities segregated under federal
and other regulations (1,449) (1,700)
Receivables from/payables to:
Customers (76,926) 21,752
Brokers and dealers (18,761) 30,343
Affiliates - (3,402)
Others 4,390 (359)
Securities owned (14,320) (7,688)
Securities purchased under agreements to resell 780,629 (101,523)
Other assets 434 2,280
Securities sold, not yet purchased (23,960) 36,683
Securities sold under agreements to repurchase (767,200) 98,333
Accounts payable, accrued expenses,
and other liabilities 59,953 (27,945)
-------- --------
Net cash flows from operating activities (47,397) 47,743
-------- --------
Cash flows from investing activities:
Collections of principal on investments in mortgage-
backed securities 4,339 3,888
Purchase of investments in mortgage-backed securities - (20,532)
Proceeds from sale of fixed assets 2,120 -
Acquisition of fixed assets, net (1,644) (1,818)
-------- --------
Net cash flows from investing activities 4,815 (18,462)
-------- --------
Cash flows from financing activities:
Amount collected under indemnification agreement 1,406 -
Proceeds from the issuance of collateralized mortgage obligations - 20,155
Repayment of collateralized mortgage obligations (4,330) (3,532)
Increase (decrease) in bank loans payable 50,500 (50,053)
Purchase of treasury stock (23) -
-------- --------
Net cash flows from financing activities 47,553 (33,430)
--------- --------
Increase (decrease) in cash and cash equivalents 4,971 (4,149)
Cash and cash equivalents at beginning of the period 14,585 10,522
--------- --------
Cash and cash equivalents at end of the period $ 19,556 $ 6,373
========= ========
Supplemental disclosure of cash flow information-interest
paid $ 8,718 $ 11,927
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
- - --------------------------------------------------------------------------------
(1) GENERAL INFORMATION
The consolidated financial statements, prepared in accordance with
generally accepted accounting principles, include the accounts of EVEREN
Capital Corporation and its subsidiaries (the "Company"). The
consolidated financial statements are unaudited. However, in the opinion
of management, all adjustments, consisting of normal recurring accruals,
necessary for the fair presentation of the interim financial statements
have been made. Certain information and footnotes normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to Securities and
Exchange Commission rules and regulations. Management believes the
disclosures made are adequate to make the information not misleading and
suggests that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
1995 Annual Report on Form 10-K. All material intercompany balances and
transactions have been eliminated. The results of operations for interim
periods are not necessarily indicative of results for the entire year.
Certain reclassifications have been made in the prior period financial
statements to conform to the current year presentation.
(2) NET CAPITAL RULE
EVEREN Securities, Inc. ("ESI") and EVEREN Clearing Corporation ("ECC"),
the Company's broker-dealer subsidiaries, are subject to the Uniform Net
Capital Rule of the Securities and Exchange Commission ("SEC"). Both ESI
and ECC operate under the alternative method, as defined, of computing
minimum net capital. At March 31, 1996, ESI had net capital of
approximately $79.4 million which was approximately $78.4 million in
excess of its required minimum net capital. At March 31, 1996, ECC had
net capital of approximately $55.3 million which was approximately $41.1
million in excess of its required minimum net capital. Such net capital
requirements could restrict the ability of these subsidiaries to make
dividend distributions to their parent.
The Company is restricted in its ability to pay dividends to its common
stockholders by certain covenants of the KSOP loan and the Series A
Exchangeable Preferred Stock ("Exchangeable Preferred Stock"). The
Company does not currently intend to pay cash dividends on its common
stock in the foreseeable future. In addition, the ability of the Company
to pay cash dividends is dependent on the receipt of dividends or other
payments from its subsidiaries. Any dividends on the Exchangeable
Preferred Stock are required to be paid in shares of Exchangeable
Preferred Stock in lieu of cash until the KSOP loan is repaid in full.
(3) COMMITMENTS AND CONTINGENCIES
The Company has been named as a defendant in various legal actions in
connection with its securities and commodities business. Some of these
lawsuits involve claims for substantial amounts. Although the ultimate
outcome of these suits cannot be ascertained at this time, it is the
opinion of management, after consultation with outside counsel, that the
resolution of such suits will not have a material adverse effect on the
consolidated financial position of the Company, but may be material to the
Company's operating results for any particular period, depending upon the
level of the Company's income for such period.
7
<PAGE> 8
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
- - --------------------------------------------------------------------------------
In the normal course of business, the Company enters into various
contractual commitments involving future settlement. These include
futures, forwards, options and securities sold, not yet purchased. These
transactions are executed either over-the-counter or are exchange-traded,
and are used primarily to hedge the Company's securities inventory. Many
of these products have maturities that do not extend beyond one year.
Transactions relating to such commitments which were open at March 31,
1996, and subsequently settled, had no material effect on the consolidated
financial position of the Company.
(4) QUASI - REORGANIZATION
The Company, with approval from its Board of Directors, implemented a
quasi-reorganization effective January 1, 1996 and revalued certain assets
and liabilities to fair value as of that date. This revaluation resulted
in a reduction of net assets of $3.7 million. The quasi-reorganization
also resulted in the transfer of the accumulated deficit as of January 1,
1996 of $306.5 million to additional paid-in capital. The balance in
retained earnings at March 31, 1996 represents the accumulated net
earnings available to common stockholders arising subsequent to the date
of the quasi-reorganization.
(5) SUBSEQUENT EVENTS
On April 30, 1996 the Company completed the sale of BETA Systems Inc., a
wholly-owned data processing and quote service subsidiary, for $63.5
million. The sale, which resulted in an after-tax gain of approximately
$30 million, will be reflected in the Company's second quarter results.
On May 1, 1996 the Company repaid the remaining balance on the KSOP loan.
On May 8, 1996 the Board of Directors approved the exchange of all of
the Company's outstanding shares of Exchangeable Preferred Stock for 13.5
percent Junior Subordinated Debentures due 2007 on June 17, 1996; and
declared a cash dividend of $.84375 per share, to all holders of record at
the close of business on May 23, 1996, of Exchangeable Preferred Stock,
payable on June 17,1996.
8
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The Company's business activities, primarily retail securities brokerage, as
well as its securities trading, investment banking and other operations are
highly competitive and subject to various risks, particularly volatile trading
markets and fluctuations in the volume of market activity. As a result, the
Company's revenue and earnings have been, and may continue to be, subject to
wide fluctuations, reflecting the impact of many factors including: economic
and securities market conditions, changes in interest rates, competitive
conditions within the industry, and regulatory developments. Consequently, the
results of operations for a particular interim period may not be indicative of
results to be expected for an entire fiscal year.
The first quarter of 1996 was characterized by continued strong conditions in
the equity markets, reflecting continued investor optimism concerning inflation
and interest rate stability. For the three months ended March 31, 1996, the
Company generated net income of $6.8 million, which represents an improvement
of $10.0 million, when compared to the net loss of $3.2 million reported in the
first quarter of 1995.
Revenue totaled $143.1 million and $125.8 million for the three months ended
March 31, 1996 and 1995, respectively. The $17.3 million (14%) increase in
total revenue in the current period is the result of a $20.4 million (26%)
increase in commission revenue, to $98.0 million for the three months ended
March 31, 1996, up from $77.6 million in the corresponding period in 1995. The
strong market conditions coupled with increased investment consultant
productivity in the first quarter of 1996 contributed to the increased
commission revenues reported in the current period. In 1995, the uncertainty
that surrounded the Company's ownership negatively effected production per
investment consultant and underwriting activities in the comparative quarter.
Interest and dividend income decreased $2.6 million (12%) to $18.2 million for
the three months ended March 31, 1996, when compared to the same period in
1995, due to lower average inventory balances, reduced average margin debit
balances and a lower average rate of interest earnings on margin accounts. The
decline in interest and dividend income was more than offset by a decrease in
interest expense of $4.4 million as discussed in detail below.
Securities gains revenue (trading profits) decreased $1.7 million to $6.7
million for the three months ended March 31, 1996, compared with $8.4 million
for the corresponding period in 1995, due to decreased levels of securities
inventory in the current quarter. Investment banking fees, investment
management income and other income remained relatively constant in the first
quarter of 1996 when compared to the same period in 1995.
Total expenses increased $1.6 million (1%) for the three months ended March 31,
1996, to $132.5 million from $130.9 million for the period ended March 31,
1995. This slight increase is the net result of an increase in
production-related compensation directly attributable to improved revenue which
was offset by reduced operating expenses from the continued focus on cost
containment. Expenses for brokerage commissions, clearing and exchange fees
increased $10.8 million (22%) to $58.9 million for the three months ended March
31, 1996 from $48.1 million for the corresponding period in 1995 due to higher
commission expense (a direct result of increased commission revenue) and
increased production-based compensation accruals.
All other operating expenses, excluding interest, decreased $4.8 million (7%)
to $64.4 million from $69.2 million, as the benefits of cost containment
programs continue to be realized. Specifically, when comparing the
9
<PAGE> 10
periods ended March 31, 1996 and 1995, occupancy decreased $.9 million (8%);
communications and data processing decreased $.3 million (3%) and all other
expenses, which include promotional, litigation-related and general
administrative expenses decreased $5.9 million, $2.2 million (12%) after
excluding a $3.7 million pretax charge from first quarter 1995 expenses
related to the failure of a correspondent firm of the Company's clearing
subsidiary in March 1995. Employee compensation and benefits costs increased
$2.3 million (8%) for the three months ended March 31, 1996 when compared to
the corresponding period in 1995 primarily due to increased performance-based
compensation accruals. Interest expense decreased for the three months ended
March 31, 1996 to $9.3 million, down $4.4 million (32%) from the corresponding
period in 1995, the combined result of reduced costs of financing lower levels
of securities inventory and customer margin accounts, and reduced levels of
long-term debt due to the Company's separation from Kemper Corporation which
occurred in the third quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Holding Company
EVEREN Capital Corporation ("EVEREN") is the parent holding company for
EVEREN Securities Holdings, Inc. ("ESHI"), the holding company for the
Company's operating subsidiaries. EVEREN's majority shareholder is the EVEREN
Capital Corporation 401(K) and Employee Stock Ownership Trust which is part of
the EVEREN Capital Corporation 401(K) and Employee Stock Ownership Plan (the
"KSOP"). In connection with, and as part of the KSOP's purchase of the
Company's common stock, $55 million of bank debt was incurred by the Company to
provide financing (the "KSOP loan"). As the parent, EVEREN expects to receive
from its subsidiaries dividends, interest on any loans and payments for federal
income tax. Dividends and other distributions, as well as certain interest
payments, to EVEREN from its registered broker-dealer subsidiaries, which are
expected to be the holding company's primary sources of liquidity, are
restricted as to amounts which may be paid by applicable law and regulations
and the KSOP loan covenants. The "net capital" rules are the primary
regulatory restrictions. EVEREN's rights (and the rights of its stockholders
and creditors) to participate in the assets of any subsidiary are also subject
to prior claims of the subsidiaries' creditors, including customers of the
broker-dealer subsidiaries (except to the extent EVEREN itself may be a
creditor with recognized claims).
The KSOP has agreed to repay the KSOP loan, and the KSOP's main source of funds
for this and other purposes is anticipated to be contributions by the Company
and proceeds from the KSOP's offering to KSOP Participants of common stock as
an investment option in the KSOP (the "Founders' Offering"). In addition,
Kemper Financial Companies, Inc. has agreed to indemnify the Company for the
first $20 million of employer contributions (other than 401(k) contributions.
As a result of the cash provided by the Founders' Offering and the related
Company contributions, the KSOP loan balance was reduced to approximately $15.1
million at March 31, 1996. Additionally, as discussed in Note 5 to the
financial statements included in Item 1 of this report, the remaining loan
balance was repaid by the Company on May 1, 1996.
Any dividends on the Exchangeable Preferred Stock are required to be paid in
shares of Exchangeable Preferred Stock in lieu of cash until the KSOP loan is
repaid in full. The Company is restricted in its ability to pay dividends to
its stockholders by certain covenants attached to the KSOP loan and the
Exchangeable Preferred Stock. The Company does not intend to pay dividends on
the common stock in the foreseeable future. During the quarter ended March 31,
1996, the Company accrued approximately $1.1 million of payment in kind
Exchangeable Preferred stock dividends.
10
<PAGE> 11
On May 8, 1996 the Board of Directors approved the exchange of all of the
Company's outstanding shares of Exchangeable Preferred Stock for 13.5 percent
Junior Subordinated Debentures due 2007 on June 17, 1996; and declared a cash
dividend of $.84375 per share, to all holders of record at the close of
business on May 23, 1996, of Exchangeable Preferred Stock, payable on June
17,1996.
As previously discussed in Note 5 to the financial statements included in Item
1 of this report, on April 30, 1996 the Company completed the sale of BETA
Systems Inc., its wholly-owned data processing and quote service subsidiary,
for $63.5 million. The sale resulted in an approximate $30 million after-tax
gain, which will be included in the Company's second quarter results.
The Company, with approval from its Board of Directors, implemented a
quasi-reorganization effective January 1, 1996 and revalued certain assets and
liabilities to fair value as of that date. This revaluation resulted in a
reduction of net assets of $3.7 million. The quasi-reorganization also
resulted in the transfer of the accumulated deficit as of January 1, 1996 of
$306.5 million to additional paid-in capital. The balance in retained earnings
at March 31, 1996 represents the accumulated net earnings available to common
stockholders arising subsequent to the date of the quasi-reorganization.
Operating Subsidiaries
The Company's operating subsidiaries monitor cash and short-term assets to
maintain adequate balances for timely payment of payables to customers and
broker-dealers, and for performance under repurchase agreements. Subsidiaries
historically have relied upon operating funds and collateralized bank loans to
satisfy their liquidity and capital needs, and the capital structure of the
Company anticipates no affiliate or other material long-term debt.
Principal sources of the operations' cash and liquidity are expected to be
commissions, other operating revenues, repurchase agreements and collateralized
bank loans. The amount of commissions varies with the business environment,
primarily driven by market conditions discussed under "Results of Operations"
above. Current levels of commission revenue are expected to be sufficient to
satisfy the Company's on-going cash and liquidity needs. Furthermore, any
future declines in commission revenue would be offset in significant part by
decreases in variable production-related expenses. However, material long-term
declines in commission revenue could require further modification to the
Company's cost structure. Repurchase agreements are used primarily for
customer accommodation purposes and to support the Company's inventory
positions in U.S. government and agency securities. These securities
inventories provide products and liquidity for customers and are not maintained
for the Company's investment or market speculation. At March 31, 1996 the
Company had entered into $58.9 million of repurchase agreements for customer
accommodation purposes with a corresponding $43.4 million of reverse repurchase
agreements; resulting in decreases of $737.8 million and $753.3 million,
respectively, when compared to year end 1995 balances.
Collateralized bank loans totaling $305.5 million and unsecured credit
arrangements totaling $20 million at March 31, 1996 are drawn from
approximately $500 million in lines of credit extended by seven banks to the
Company's clearing subsidiary. The level of these borrowings fluctuates daily,
at times significantly, depending on market activity and customer margin
activity levels. These borrowings are secured by customers' excess margin
securities and the Company's securities inventory. Margin loans to customers
totaled approximately $679 million at March 31, 1996.
11
<PAGE> 12
The Company seeks to manage the off-balance sheet risks associated with its
customers and its correspondent brokerage firms by requiring them to maintain
margin collateral in excess of regulatory requirements. The Company's
repurchase obligations also result in off-balance sheet risk.
Management believes that existing capital, funds from operations and current
credit facilities will be sufficient to finance the Company's ongoing business,
including its current recruitment programs. There are no known trends or
uncertainties which would cause a material change in the Company's capital
structure. The majority of the Company's assets are funded with liabilities
that reprice on a matched basis, generally producing a positive spread. As a
result, the Company's operations have modest exposure to fluctuations in
interest rates (other than the effect of interest rate volatility on market
conditions and prices of fixed income securities).
The Company's assets are to a large extent liquid in nature and, as such, are
not significantly affected by inflation. The rate of inflation does, however,
affect the Company's operating expenses, such as employee compensation and
benefits, facilities leasing costs and communication charges, which, depending
in large part on competitive conditions, may not be readily recovered in the
price of services offered by the Company.
Derivative Financial Instruments
The Company has entered into certain futures and options contracts on a limited
basis in the ordinary course of its business to hedge or modify exposures to
interest rate fluctuations related to its unit investment trust products
origination and interest-sensitive securities in its inventory. Given the
limited use of such derivatives, the Company does not expect any losses
relating to its derivative investments that would not be materially offset with
corresponding gains on the securities hedged. Both the securities hedged and
the derivative instruments are carried on the balance sheet at their market
values. Gains and losses, both realized and unrealized, from both the hedged
securities and the derivative instruments are included in income currently.
12
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PART II - OTHER INFORMATION
Item 5. OTHER INFORMATION
On April 30, 1996, the Company completed its previously announced sale
of all of the issued and outstanding shares of stock of BETA Systems Inc. to
Thomson Holdings Inc., a subsidiary of The Thomson Corporation, for a cash
purchase price of $63.5 million. BETA Systems Inc. will continue to provide
its services to the Company under long-term service contracts.
On May 8, 1996 the Board of Directors approved the exchange of all the
company's outstanding shares of Exchangeable Preferred Stock for 13.5 percent
Junior Subordinated Debentures due 2007 on June 17, 1996, and declared a cash
dividend of $.84375 per share, to all holders of record at the close of business
on May 23, 1996, of Exchangeable Preferred Stock, payable on June 17, 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
On February 7, 1996, EVEREN filed a Report on Form 8-K, and reported under
Item 5, Other Events, as follows:
For the quarter ended December 31, 1995, its first as an independent,
employee-owned company, EVEREN Capital Corporation reported after-tax
net earnings of $6.2 million, on net revenues of $131.1 million. For
the full year the company reported an after-tax net loss of $15.9
million, on net revenues of $490.6 million. Copies of announcements
distributed to employees and to holders of the Company's Series A
Exchangeable Preferred Stock are included as Exhibits 99.1 and 99.2,
respectively.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
EVEREN has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EVEREN CAPITAL CORPORATION
Date: May 14, 1996 By: /s/Daniel D. Williams
---------------------
Daniel D. Williams
Senior Executive Vice President
Treasurer and Chief Financial Officer
(Principal Financial Officer)
By: /s/Thomas M. Mansheim
---------------------
Thomas M. Mansheim
Senior Vice President
Controller and Chief Accounting Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
----------- ----------------------------------------------------- --------
<S> <C> <C>
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
</TABLE>
15
<PAGE> 1
EXHIBIT 11
EVEREN CAPITAL CORPORATION
PRO FORMA COMUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended March 31
1996 1995
---- ----
<S> <C> <C>
Net income (loss) reported $ 6,806 (3,215)
Less:
Pro Forma Preferred Dividends
(13.5% of liquidation value) (1,132) (1,132)
----------- ----------
Pro Forma Net income (loss) applicable to
Common Shares $ 5,674 (4,347)
----------- ----------
Pro Forma Net income (loss) per Common Share $ .62 (.48)
----------- ----------
Pro Forma Weighted Average Common Shares
Outstanding
Common Shares Outstanding 11,603,937 11,603,937
Unearned KSOP Shares (2,521,005) (2,521,005)
----------- ----------
9,082,932 9,082,932
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000945770
<NAME> EVEREN CAPITAL CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 19,556,000
<SECURITIES> 155,576,000
<RECEIVABLES> 47,106,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 45,200,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,818,924,000
<CURRENT-LIABILITIES> 0
<BONDS> 139,548,000
31,615,000
0
<COMMON> 115,000
<OTHER-SE> 139,727,000
<TOTAL-LIABILITY-AND-EQUITY> 1,818,924,000
<SALES> 98,009,000
<TOTAL-REVENUES> 143,142,000
<CGS> 58,873,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,254,000
<INCOME-PRETAX> 10,638,000
<INCOME-TAX> 3,832,000
<INCOME-CONTINUING> 6,806,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,806,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
