<PAGE>
Total # of Pages 29
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, 1997 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________
TO ___________
Commission File Number 1-13940
--------------------------------------------------------
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
2, 1997:
$.01 par value common stock - 17,122,078
<PAGE>
INDEX
-----
Page
PART I. Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Statements of Financial Condition -
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations - Three
months ended March 31, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders' Equity -
Three months ended March 31, 1997 5
Consolidated Statements of Cash Flows - Three months
ended March 31, 1997 and 1996 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 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
EXHIBIT INDEX 26
2
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
Assets ----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 51,622 $ 46,592
Cash and securities segregated under
federal and other regulations 15,611 15,778
Receivables from:
Customers 783,742 764,405
Brokers and dealers 25,623 50,807
Others 50,365 52,804
Securities borrowed 47,715 50,687
Securities owned, at market 225,981 160,940
Securities purchased under agreements to resell 378,901 479,313
Investment in mortgage-backed certificates
available-for-sale, at fair value 139,028 144,962
Fixed assets, at cost, net 36,188 36,136
Other assets 20,753 21,921
---------- ----------
$1,775,529 $1,824,345
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Bank loans payable $ 151,000 $ 140,000
Payables to:
Customers 222,974 259,607
Brokers and dealers 91,937 24,632
Securities loaned 226,652 189,303
Collateralized mortgage obligations 134,688 137,699
Securities sold, not yet purchased, at market 129,021 89,709
Securities sold under agreements to repurchase 271,485 466,266
Deferred income taxes 8,240 13,491
Accounts payable, accrued expenses and
other liabilities 237,799 214,603
---------- ----------
1,473,796 1,535,310
---------- ----------
Stockholders' Equity:
Common stock, $.01 par value per share; 40,000,000
shares authorized, 17,133,635 and 16,611,889 outstanding at
March 31, 1997 and December 31, 1996, respectively 175 170
Additional paid-in capital 266,605 255,040
Unrealized loss on available-for-sale securities, net of
income taxes (6,310) (4,381)
Unearned cost of restricted stock (7,031) (1,576)
Treasury stock, at cost, 361,721 and 354,473 shares at March 31, 1997
and December 31, 1996, respectively (5,281) (5,230)
Retained earnings (since January 1, 1996) 53,575 45,012
---------- ----------
301,733 289,035
---------- ----------
$1,775,529 $1,824,395
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Revenue:
Commissions $ 61,811 $ 57,431
Principal transactions 23,273 30,875
Investment banking 9,990 10,442
Asset management 16,098 14,480
Other 8,856 11,722
Interest 18,023 18,191
----------- --------
Total revenue 138,051 143,141
Interest expense 6,740 9,254
----------- --------
Net revenue 131,311 133,887
Non-interest expenses:
Compensation and benefits 78,545 86,725
Brokerage and clearance 4,206 2,949
Communications 9,609 10,321
Occupancy and equipment 9,935 10,224
Promotional 4,589 3,982
Other 8,206 9,049
----------- --------
Total non-interest expenses 115,090 123,250
----------- --------
Income before income taxes 16,221 10,637
Income tax expense 6,119 3,831
----------- --------
Net income $ 10,102 $ 6,806
=========== ========
Net earnings applicable to common stock $ 10,102
===========
Weighted average common shares outstanding 17,449,174
===========
Net earnings per share $ .58
===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Unearned
Additional cost of Unrealized Retained Total
Common Paid-In Restricted loss on available Treasury Earnings Stockholders'
Stock Capital Stock for sale securities Stock (Since 1/1/96) Equity
------ ------- ------- ------------------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 $ 170 $255,040 $(1,576) $(4,381) $(5,230) $45,012 $289,035
Issuance of additional common
stock under equity plans 5 11,553 (5,455) 6,103
Dividend on common stock (1,539) (1,539)
Dividend reinvestment 12 12
Unrealized loss for the period (1,929) (1,929)
Purchase of treasury stock (51) (51)
Net income 10,102 10,102
------ -------- ------- ------- ------- ------- --------
Balances at March 31, 1997 $ 175 $255,040 $(7,031) $(6,310) $(5,281) $53,575 $301,733
====== ======== ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,102 $ 6,806
Adjustments to reconcile net income to net cash flows
from operating activities: --
Depreciation and amortization 3,583 3,727
Deferred income taxes (4,215) (720)
Change in assets and liabilities:
Cash and securities segregated under federal
and other regulations 167 (1,449)
Receivables from/payables to:
Customers (55,970) (76,926)
Brokers and dealers 92,489 (43,887)
Others 2,439 4,390
Securities borrowed 2,972 (15,894)
Securities owned (65,041) (14,320)
Securities purchased under agreements to resell 100,412 780,629
Other assets 1,112 434
Securities loaned 37,349 41,020
Securities sold, not yet purchased 39,312 (23,960)
Securities sold under agreements to repurchase (194,781) (767,200)
Accounts payable, accrued expenses,
and other liabilities 23,196 59,953
--------- ---------
Net cash flows from operating activities (6,874) (47,397)
--------- ---------
Cash flows from investing activities:
Collections of principal on investments in mortgage-
backed securities 3,152 4,339
Proceeds from sale of fixed assets - 2,120
Acquisition of fixed assets, net (3,335) (1,644)
--------- ---------
Net cash flows from investing activities (183) 4,815
--------- ---------
Cash flows from financing activities:
Dividends paid (1,539) -
Proceeds from common stock issuance 5,808 -
Proceeds from dividend reinvestment 12 -
Amount collected under indemnification agreement - 1,406
Repayment of collateralized mortgage obligations (3,143) (4,330)
Increase in bank loans payable 11,000 50,500
Purchase of treasury stock (51) (23)
--------- ---------
Net cash flows from financing activities 12,087 47,553
--------- ---------
Increase in cash and cash equivalents 5,030 4,971
Cash and cash equivalents at beginning of the period 46,592 14,585
--------- ---------
Cash and cash equivalents at end of the period $ 51,622 $ 19,556
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 7,419 $ 8,718
========= =========
Income taxes paid $ 409 $ 6,536
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Three months ended March 31, 1997
- --------------------------------------------------------------------------------
(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,
such financial statements include all adjustments, consisting of normal
recurring accruals, necessary for the fair presentation of the accompanying
consolidated financial statements.
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 ("SEC") rules
and regulations. Accordingly, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1996 Annual Report on Form 10-K.
All material intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts. Actual results could differ
from those estimates. 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 period presentation.
(2) Net Capital Rule
----------------
EVEREN Securities, Inc. ("EVEREN Securities") and EVEREN Clearing Corp.
("EVEREN Clearing"), the Company's broker-dealer subsidiaries, are subject
to the Uniform Net Capital Rule of the SEC. Both EVEREN Securities and
EVEREN Clearing operate under the alternative method, as defined, of
computing minimum net capital. At March 31, 1997, EVEREN Securities had
net capital of approximately $134.8 million which was approximately $133.8
million in excess of its required minimum net capital. At March 31, 1997,
EVEREN Clearing had net capital of approximately $67.5 million which was
approximately $51.4 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.
7
<PAGE>
EVEREN CAPITAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Three months ended March 31, 1997
- --------------------------------------------------------------------------------
(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.
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,
1997, and subsequently settled, had no material effect on the consolidated
financial position of the Company.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto contained in Item
1 of this report. In addition to historical information, the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements. Such forward looking statements
are within the meaning of that term in Section 27A of the Securities Act of
1933, as amended, and Section 21F of the Securities Exchange Act of 1934, as
amended. Such statements may include, but are not limited to, projections of
revenues, income or loss, capital expenditures, plans for future operations,
financing needs or plans, and plans relating to products or services of the
Company, as well as assumptions relating to the foregoing.
Forward looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward looking statements. Statements in this quarterly
report, including the notes to the consolidated financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," describe factors, among others, that could contribute to or cause
such differences. Additional factors that could cause actual results to differ
materially from those expressed in such forward looking statements include those
discussed below in "Business Environment."
Business Environment
The Company's principal business, securities brokerage, is directly
affected by many factors, including economic and political conditions, broad
trends in business and finance, legislation and regulation affecting the
national and international business and financial communities, currency values,
inflation, market conditions, the availability and cost of short-term or long-
term funding and capital, the credit capacity or perceived creditworthiness of
the securities industry in the marketplace and the level and volatility of
interest rates. Such factors can lead to volatility in the price levels for
securities and illiquid markets.
Volatile price levels of securities may, among other things result in
(a) reduced volume of securities, options and futures transactions, with a
consequent reduction in commission revenues, (b) losses from declines in the
market value of securities held in trading, investment and underwriting
positions and (c) reduced management fees calculated as a percentage of assets
managed. In periods of low volume, levels of profitability are further adversely
affected because certain expenses remain relatively fixed. Illiquid markets may
result in the Company having difficulty selling securities, hedging its
securities positions and investing funds under its management. The Company
believes its trading strategy and risk management procedures reduce its exposure
to losses resulting from such risks, although there can be no assurance that
such losses will not occur or if they do, that they will not be material.
Consequently, the results of operations for a particular period may not be
indicative of results to be expected for other periods.
Industry market conditions remained generally favorable during the first
quarter of 1997. The Company's strong performance in January and February of
1997 subsided in March of 1997 due to a rise in short-term interest rates and
investor uncertainty, which prompted a slowdown in the equity markets and the
slowing of investment banking transactions.
9
<PAGE>
Equity Participation of Employees
As of March 31, 1997, the Company's current employees and directors,
through the Company's 401(k) and Employee Stock Ownership Plan ("the KSOP") and
otherwise, own approximately 75% of the outstanding Common Stock. Management
believes that significant employee ownership fosters a culture that encourages
strong performance and provides employees the opportunity to participate in the
future performance of the Company.
In the second quarter of 1996, the Company instituted three new employee
benefit plans to provide current and future employees the opportunity to acquire
Common Stock outside of the KSOP. In connection with these plans, the Company
recognizes additional compensation expense over the respective vesting period
equal to the difference between the fair value of the Common Stock issued under
each respective plan and cash paid (if any). During the first quarter of 1997,
the Company issued approximately 510,000 shares under these equity plans to
employees.
Components of Revenue and Expenses
Revenue. Commissions include revenue generated by executing listed and
over-the-counter transactions as agent, as well as commissions earned on the
sales of mutual funds, insurance, annuities and certain other products.
Principal transactions consist of gains and losses from the trading of
securities by the Company as principal, including principal sales credits.
Investment banking revenue includes merger and acquisition fees, other advisory
fees and underwriting revenue, which is comprised of underwriting selling
concessions, management fees and underwriting fees. Asset management revenue
primarily includes managed account fees and 12b-1 distribution fees. Other
revenue includes transaction and account fees, correspondent clearing and
execution income and miscellaneous income. Interest income primarily represents
interest earned on customer margin accounts and interest income on securities
owned and investments in mortgage-backed certificates. Net revenues equal total
revenues less interest expense. Interest expense includes interest paid on bank
borrowings, collateralized securities transactions with brokers and dealers and
collateralized mortgage obligations.
Expenses. Compensation and benefits expense includes sales, trading and
incentive compensation, which are primarily variable based on revenue
production, and salaries, payroll taxes and employee benefits, which are
relatively fixed in nature. Brokerage and clearance expense includes the cost
of securities clearance, floor brokerage and exchange fees. Communications
expense includes charges for telecommunications, news and market data services,
customer statements and depreciation on data processing and telecommunications
equipment. Occupancy and equipment expense includes rent and operating expenses
for the Company's facilities, expenditures for repairs and maintenance, and
depreciation of furniture, fixtures and leasehold improvements. Promotional
expense includes travel, entertainment and advertising. Other expense includes
professional services, litigation expenses, office expenses, dues and
assessments, and other miscellaneous expenses.
10
<PAGE>
Results of Operations
The following table sets forth certain financial data as a percentage of net
revenues:
Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
---- ----
<S> <C> <C>
Revenue:
Commissions 47.1% 42.9%
Principal transactions 17.7 23.1
Investment banking 7.6 7.8
Asset management 12.3 10.8
Other 6.7 8.8
Interest 13.7 13.6
----- -----
Total revenue 105.1 107.0
Interest expense 5.1 7.0
----- -----
Net revenue 100.0 100.0
----- -----
Non-interest expenses:
Compensation and benefits 59.8 64.8
Brokerage and clearance 3.2 2.2
Communications 7.3 7.7
Occupancy and equipment 7.6 7.6
Promotional 3.5 3.0
Other 6.2 6.8
----- ----
Total non-interest expenses 87.6 92.1
Income before income taxes 12.4 7.9
Income tax provision 4.7 2.9
----- -----
Net income 7.7% 5.0%
===== =====
- ------------------
</TABLE>
11
<PAGE>
Three months ended March 31, 1997 compared to the three months ended March 31,
1996
The Company experienced strong operating results for the quarter ended
March 31, 1997 when compared to the first quarter of 1996. One of the Company's
strategic initiatives is to focus on its core businesses. This focus resulted in
the sale of the Company's data-processing and quote service subsidiary, Beta
Systems, Inc. ("BETA"), in the second quarter of 1996; and the departure from
both the unit investment trust origination business and portions of the
municipal institutional sales and trading business in the fourth quarter of
1996. As a result, while revenues are slightly lower in the first quarter of
1997 than in the comparable period of 1996, revenues from the Company's ongoing
core businesses increased. Non-interest expenses have declined in most areas, as
well as overall, as a percentage of net revenues. Net income has improved
significantly in the first quarter of 1997 when compared to the first quarter of
1996. Management attributes these results to several factors. First, favorable
conditions prevailed in the equity markets for most of the first quarter of
1997, reflecting continued investor optimism concerning inflation and interest
rate stability. Second, this period reflects the continued benefits of ownership
resolution, which, in management's opinion, has enhanced employee morale, focus
and productivity, and has allowed management to concentrate on achieving its key
strategic initiatives. Finally, the continued emphasis on cost containment has
contributed to the strong operating results.
Total revenue decreased $5.0 million or 4% to $138.1 million for the three
months ended March 31, 1997 from $143.1 million for the three months ended March
31, 1996. Net revenues decreased $2.6 million or 2% to $131.3 million for the
three months ended March 31, 1997 from $133.9 million for the three months ended
March 31, 1996. As previously noted, the Company sold or exited certain non-
strategic businesses in 1996. Excluding the revenues from these businesses,
total revenues for the first quarter of 1997 increased $5.0 million to $138.1
million from $133.1 million in 1996, and net revenues for the first quarter of
1997 increased by approximately $6.7 million or 5% over the same period of 1996.
Commission revenue increased $4.4 million or 8% to $61.8 million for the
three months ended March 31, 1997 from $57.4 million for the three months ended
March 31, 1996 due to increased business in both the retail and institutional
areas, consistent with the continued growth in listed share volume on most major
domestic equity exchanges in the first quarter of 1997.
Principal transactions revenue decreased $7.6 million or 25% to $23.3
million for the three months ended March 31, 1997 from $30.9 million for the
three months ended March 31, 1996. Excluding principal transactions revenue
attributable to the municipal sales and trading area in the first quarter of
1996, principal transactions revenue decreased $5.4 million or 19% in the first
quarter of 1997. Increased volatility in the equity markets in the latter part
of the first quarter of 1997 depressed trading profits and transaction volume.
Investment banking revenue decreased $.5 million or 4% to $10.0 million for
the three months ended March 31, 1997 from $10.5 million for the three months
ended March 31, 1996. Excluding investment banking revenue of $2.3 million
generated from the aforementioned exited businesses in the first quarter of
1996, investment banking revenues increased $1.8 million or 22% for the first
quarter of 1997. This increase is the result of the Company's focus on
developing corporate finance transactions in several targeted industry sectors.
12
<PAGE>
Asset management revenue increased $1.6 million or 11% to $16.1 million for
the three months ended March 31, 1997 from $14.5 million for the three months
ended March 31, 1996 due primarily to increased managed account fees and
increased 12b-1 distribution fees.
Other income decreased $2.9 million or 24% to $8.8 million for the three
months ended March 31, 1997 from $11.7 million for the three months ended March
31, 1996. This resulted primarily from the sale of BETA in the second quarter of
1996. Excluding revenues attributable to BETA, other income increased $1.5
million or 19% for the first quarter of 1997 when compared to the first quarter
of 1996. This increase is due in part to earnings from its joint venture with
Mentor Investment Group, Inc. ("Mentor") in the first quarter of 1997.
Interest and dividend income remained constant for the three months ended
March 31, 1997 when compared to the corresponding period in 1996. Net interest
increased $2.3 million or 26% to $11.3 million for the three months ended March
31, 1997 from $9.0 million for the three months ended March 31, 1996. The
decline in interest expense of $2.5 million or 27% to $6.7 million for the three
months ended March 31, 1997 from $9.2 million for the three months ended March
31, 1996 was the result of the elimination of the long-term debt incurred in
connection with the Company's separation from Kemper ("the Buy-Out") in
September, 1995 and reduced bank borrowings in the current period.
Total non-interest expenses decreased $8.2 million or 7% to $115.1 million
for the three months ended March 31, 1997 from $123.3 million for the three
months ended March 31, 1996. When analyzing non-interest expenses for the
quarters ended March 31, 1997 and 1996, the sale of BETA has had the effect of
decreasing most expense categories. Concurrent with the sale of BETA, the
Company entered into new service agreements with BETA, whereby BETA operating
costs previously included in the various consolidated operating expense
categories are now limited to amounts due under such agreements and included in
brokerage and clearance expense.
Compensation and benefits expense decreased $8.2 million or 9% to $78.5
million for the three months ended March 31, 1997 from $86.7 million for the
three months ended March 31, 1996. This decrease is the result of several
factors, including the sale of BETA as mentioned above, the elimination of
certain compensation costs related to the release of unearned KSOP shares and
the payoff of the related loans, and the continued management focus on
controlling overall compensation expense as a percentage of net revenues.
Brokerage and clearance expense increased $1.3 million or 43% to $4.2
million for the three months ended March 31, 1997 from $2.9 million for the
three months ended March 31, 1996. The increase is due in part to the sale of
BETA and the new service agreements described above. This increase was also
related to the increased transaction volume in the current period and was
consistent with the increase in transactional revenue in 1997 over 1996.
Communications expense decreased $.7 million or 7% to $9.6 million for the
three months ended March 31, 1997 from $10.3 million for the three months ended
March 31, 1996, primarily due to decreased electronic data processing costs in
1997 resulting from the sale of BETA.
13
<PAGE>
All other operating expenses decreased $.5 million or 2% to $22.7 million
for the three months ended March 31, 1997 from $23.2 million for the three
months ended March 31, 1996, primarily due to the continued focus on cost
containment within the Company. All other operating expenses as a percentage of
net revenues remained constant for the three months ended March 31, 1997 when
compared to the three months ended March 31, 1996. Specifically, when comparing
the three months ended March 31, 1997 and 1996, occupancy and equipment expense
decreased $.3 million or 3%; promotional expense increased $.6 million or 15%;
and other expenses decreased $.8 million or 9%. The increase in promotional
expense was due primarily to a new advertising campaign initiated in 1997 and
the promotion of the Mentor products.
The Company's income tax expense for the three months ended March 31, 1997
was $6.1 million, which represented an effective tax rate on income before taxes
of 37.7%, compared to a $3.8 million or a 36% effective tax rate for the three
months ended March 31, 1996.
Net income increased $3.3 million to $10.1 million for the three months
ended March 31, 1997 from $6.8 million for the three months ended March 31,
1996.
14
<PAGE>
QUARTERLY RESULTS
The information set forth below is derived from unaudited quarterly
financial statements of the Company. Such financial statements have been
prepared by the Company on a basis consistent with the consolidated financial
statements included elsewhere in this report and include all adjustments,
consisting principally of normal recurring accruals, that the Company considers
necessary for a fair presentation thereof. These operating results are not
necessarily indicative of the Company's future performance.
<TABLE>
<CAPTION>
Three months ended
------------------
3/31/97 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95 6/30/95
-------- -------- ------- ------- -------- --------- -------- -------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Commissions $ 61,811 $ 57,348 $ 50,741 $ 60,277 $ 57,431 $ 49,591 $ 51,188 $ 47,189
Principal transactions 23,273 23,557 26,389 34,469 30,875 30,863 33,670 30,180
Investment banking 9,990 17,229 11,677 16,540 10,442 15,520 8,220 11,807
Asset management 16,098 14,804 14,776 13,231 14,480 13,907 13,636 13,031
Other 8,856 9,775 7,234 13,486 11,722 14,552 11,493 12,112
Interest 18,023 18,328 18,270 19,278 18,191 19,452 20,497 20,460
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue 138,051 141,041 129,087 157,281 143,141 143,885 138,704 134,779
Interest expense 6,740 6,850 8,613 9,203 9,254 12,567 12,942 13,368
-------- -------- -------- -------- -------- -------- -------- --------
Net revenue 131,311 134,191 120,474 148,078 133,887 131,318 125,762 121,411
Non-interest expenses:
Compensation and
benefits 78,545 80,170 75,601 88,893 86,725 83,101 98,378 (3) 80,193
Brokerage and clearance 4,206 3,937 3,773 3,899 2,949 2,590 3,329 2,729
Communications 9,609 9,495 8,883 9,567 10,321 10,305 10,085 10,703
Occupancy and equipment 9,935 9,200 9,676 10,052 10,224 10,714 21,687 (3) 10,929
Promotional 4,589 5,167 4,326 4,375 3,982 3,453 3,568 3,269
Other 8,206 11,194 6,640 10,881 9,049 10,504 17,219 (3) 12,568
-------- -------- -------- -------- -------- -------- -------- --------
Total non-interest
expenses 115,090 119,163 108,899 127,667 123,250 120,667 154,266 120,391
Gain on sale of subsidiary - - - 50,181 (2) - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes
and extraordinary charge 16,221 15,028 11,575 70,592 10,637 10,651 (28,504) 1,020
Income tax provision (benefit) 6,119 5,266 5,165 28,173 3,831 4,413 (9,125) 517
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary charge 10,102 9,762 6,410 42,419 6,806 6,238 (19,379) 503
Extraordinary charge, net
of income taxes of $1,561 - - (2,900) (1) - - - - -
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 10,102 $ 9,762 $ 3,510 (1) $ 42,419 (2) $ 6,806 $ 6,238 $(19,379) (3) $ 503
======== ========= ======= ======== ======= ======== ======== ========
</TABLE>
(1) Includes a $2.9 million after-tax charge related to the early retirement of
the Company's Debentures.
(2) Includes a $50.2 million pre-tax ($30.2 million after-tax) gain on the sale
of BETA.
(3) Includes $33.3 million pre-tax ($22.0 million after-tax) of non-recurring
charges incurred in connection with the Buy-Out as discussed under "Results
of Operations." On a pre-tax basis, excluding these charges, compensation
and benefits expense would decrease $16.7 million to $81.7 million from
$98.4 million; occupancy and equipment expense would decrease $10.6 million
to $11.1 million from $21.7 million; and other expenses would decrease $6.0
million to $11.2 million from $17.2 million.
15
<PAGE>
The following table sets forth certain financial data as a percentage of net
revenues.
<TABLE>
<CAPTION>
Three months ended
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/31/97 12/31/96 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95 6/30/95
------- -------- ------- ------- ------- -------- ------- -------
Revenue:
Commissions 47.1% 42.7% 42.1% 40.7% 42.9% 37.8% 40.7% 38.9%
Principal transactions 17.7 17.6 21.9 23.3 23.1 23.5 26.8 24.9
Investment banking 7.6 12.8 9.7 11.2 7.8 11.8 6.5 9.7
Asset management 12.3 11.0 12.3 8.9 10.8 10.6 10.8 10.7
Other 6.7 7.3 6.0 9.1 8.8 11.1 9.1 10.0
Interest 13.7 13.7 15.2 13.0 13.6 14.8 16.3 16.9
----- ----- ----- ----- ----- ----- ----- -----
Total revenue 105.1 105.1 107.2 106.2 107.0 109.6 110.2 111.1
Interest expense 5.1 5.1 7.2 6.2 7.0 9.6 10.2 11.1
----- ----- ----- ----- ----- ----- ----- -----
Net revenue 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Non-interest expenses:
Compensation and benefits 59.8 59.7 62.8 60.0 64.8 63.3 78.2(3) 66.1
Brokerage and clearance 3.2 2.9 3.1 2.6 2.2 2.0 2.6 2.2
Communications 7.3 7.1 7.4 6.5 7.7 7.8 8.0 8.8
Occupancy and equipment 7.6 6.9 8.0 6.8 7.6 8.2 17.2(3) 9.0
Promotional 3.5 3.9 3.6 3.0 3.0 2.6 2.8 2.7
Other 6.2 8.3 5.5 7.3 6.8 8.0 13.7(3) 10.4
----- ----- ----- ----- ----- ----- ----- -----
Total non-interest expenses 87.6 88.8 90.4 86.2 92.1 91.9 122.5 99.2
Gain on sale of subsidiary - - - 33.9(2) - - - -
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before income
taxes and extraordinary charge 12.4 11.2 9.6 47.7 7.9 8.1 (22.5) 0.8
Income tax provision (benefit) 4.7 3.9 4.3 19.0 2.9 3.4 (7.3) 0.4
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
extraordinary charge 7.7 7.3 5.3 28.7 5.0 4.7 (15.2) 0.4
----- ----- ----- ----- ----- ----- ----- -----
Extraordinary charge, net of
income taxes - - (2.4)(1) - - - - -
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss) 7.7% 7.3% 2.9%(1) 28.7%(2) 5.0% 4.7% (15.2)%(3) 0.4%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ------------
(1) Includes a $2.9 million or 2.4% after-tax charge related to the early
retirement of the Company's junior subordinated debentures.
(2) Includes a $50.2 million pre-tax or 33.9% ($30.2 million after-tax or
20.4%) gain on the sale of BETA.
(3) Includes $33.3 million pre-tax or 26.5% ($22.0 million after-tax or 17.4%)
of net revenues for non-recurring charges incurred in connection with the
Buy-Out discussed under "Results of Operations." On a pre-tax basis,
excluding these charges, compensation and benefits expense would decrease
13.3% to 64.9% from 78.2%; occupancy and equipment expense would decrease
8.4% to 8.8% from 17.2%; and other expenses would decrease 4.8% to 8.9%
from 13.7%.
16
<PAGE>
The generally upward trend in the Company's net revenues for the eight
quarterly periods ended March 31, 1997 reflects generally favorable retail
brokerage industry market conditions and relative stability in the fixed income
markets, combined with ownership certainty. Revenues in the third quarter of
1996 were adversely effected by the market volatility and decreased
transactional volume seen throughout the industry.
Net revenues during this eight-quarter period follow the same positive
trend, with the Company realizing the benefit of declining non-customer/dealer
related interest expense as a result of the elimination of certain long-term
debt owed to Kemper and the accelerated repayment of the KSOP loans.
While in absolute dollar amounts, non-interest expenses have remained
constant during the eight periods (excluding the third quarter 1995 non-
recurring charges of $33.3 million pre-tax discussed previously), such absolute
dollar increases are generally attributable to compensation and benefits expense
and brokerage and clearance expense, which are significantly correlated to
revenue growth. As a percentage of net revenues, non-interest expenses have
trended downward during such periods, which management believes to be a result
of the Company's focus on cost containment.
Net income (both in absolute dollar amounts and as a percentage of net
revenues) also reflects a positive trend during this eight-quarter period, with
the exception of the third quarter of 1995 which includes the $22.0 million
(after-tax) of non-recurring charges discussed previously.
LIQUIDITY AND CAPITAL RESOURCES
Holding Company
EVEREN Capital Corporation ("EVEREN Capital") is the parent holding company
for EVEREN Securities Holdings, Inc. ("EVEREN Holdings"), the holding company
for the Company's operating subsidiaries. As the parent, EVEREN Capital expects
to receive dividends, interest on any loans and payments for federal income tax
from its subsidiaries. Dividends and other distributions, as well as certain
interest payments, to EVEREN Capital from its registered broker-dealer
subsidiaries, which are EVEREN Capital's primary sources of liquidity, are
restricted as to amounts which may be paid by applicable laws or regulations.
The "net capital" rules are the primary regulatory restrictions. EVEREN
Capital'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 subsidiary's creditors, including customers of the broker-dealer
subsidiaries (except to the extent the Company itself may be a creditor with
recognized claims). See Note 2 of Notes to Consolidated Financial Statements
contained in Item 1 of this report.
Since becoming a publicly-traded company in the fourth quarter of 1996, the
Company, with approval from its Board of Directors, has paid a quarterly
dividend of $.09 per share on the outstanding shares of Common Stock.
The Company believes that its current level of equity capital, combined
with funds generated from operations, will be adequate to fund its capital needs
for the foreseeable future.
17
<PAGE>
Operating Subsidiaries
The assets of EVEREN Securities, Inc. and EVEREN Clearing Corp., the
Company's primary operating subsidiaries (the "Subsidiaries"), are highly
liquid. The majority of their assets consist of securities inventories and
collateralized receivables, both of which fluctuate depending on the levels of
customer business. Collateralized receivables consist primarily of securities
purchased under agreements to resell ("resale agreements") and securities
borrowed, both of which are secured by U.S. government and agency securities and
highly marketable corporate debt and equity securities. In addition, the
Subsidiaries have significant receivables from customers, brokers and dealers
which turn over rapidly. The Subsidiaries' total assets and the individual
components of total assets vary significantly from period to period because of
changes relating to customer needs and economic and market conditions. A
relatively small percentage of total assets is fixed or held for a period of
longer than one year. The Company's total assets at both March 31, 1997 and
December 31, 1996, were approximately $1.8 billion.
The majority of the Subsidiaries' assets are financed through daily
operations by securities sold under agreements to repurchase, securities sold
not yet purchased, bank loans, through payables to customers, brokers and
dealers, and through securities loaned. Short-term funding is generally obtained
at rates based on the federal funds, LIBOR and money market rates. Other
borrowing costs are negotiated depending upon prevailing market conditions. The
Company monitors overall liquidity by tracking the extent to which unencumbered
marketable assets exceed short-term unsecured borrowings. The Company maintains
borrowing relationships with a broad range of banks, financial institutions,
counterparties and others. At March 31, 1997, the Subsidiaries had approximately
$600 million in uncommitted credit lines with several banks.
Repurchase agreements are used primarily for customer accommodation
purposes and to finance the Company's inventory positions in U.S. government and
agency securities. These positions provide products and liquidity for customers
and are not maintained for the Company's investment or market speculation. The
level of activity fluctuates significantly depending on customer needs; however,
these fluctuations have no material effect on cash flows, liquidity or capital
resources. The Company monitors the collateral position and counterparty risk on
these transactions daily. See "Risk Management."
The Subsidiaries are capital intensive. In addition to normal operating
requirements, capital is required to cover financing and regulatory charges on
securities inventories, investment banking commitments and investments in fixed
assets. The Company's overall capital needs are continually reviewed to ensure
that its capital base can appropriately support the anticipated needs of the
Subsidiaries. Management believes that existing capital, funds from operations
and current credit facilities will be sufficient to finance the operating
subsidiaries' ongoing businesses. The majority of the Subsidiaries' assets are
funded with liabilities that reprice on a matched basis, generally producing a
positive spread. As a result, the Company has modest exposure to fluctuations in
interest rates (other than the effect of interest rate volatility on market
conditions and prices of fixed income securities, and the impact on the
Company's revenues).
18
<PAGE>
CASH FLOWS
The Company's statements of consolidated cash flows classify cash flows
into three broad categories: net cash flows from operating activities, investing
activities and financing activities. The Company's net cash flows are
principally associated with operating and financing activities, which support
the Company's trading, customer and banking activities.
Three months ended March 31, 1997 and 1996
Cash and cash equivalents at March 31, 1997 and 1996 totaled $51.6 million
and $19.6 million, respectively, reflecting increases of $5.0 million and $5.0
million, respectively.
For the three months ended March 31, 1997 and 1996, cash used by operating
activities was generated primarily in financing activities through an increase
in bank loans payable.
Net cash used by operating activities totaled $6.9 million and $47.4
million in 1997 and 1996, respectively. In 1997, changes in securities owned and
securities sold not yet purchased of $25.7 million and securities purchased
under agreements to resell and repurchase of $94.4 million used cash. These uses
were partially offset by a $38.9 million use of funds related to the net change
in receivables from and payables to customers, broker-dealers and others and
changes in securities borrowed and loaned of $40.3 million. In 1996, there were
changes in securities borrowed and loaned of $25.1 million and changes in other
assets and other liabilities of $60.4 million which generated cash. These
sources were partially offset by a $38.3 million increase in securities owned
and securities sold not yet purchased and a $116.4 million use of funds related
to the net change in receivables from and payables to customers, broker-dealers,
affiliates and others.
In 1997, net cash used in investing activities of $.2 million is the result
of collections of principal on investments in mortgage-backed securities of $3.1
million offset by a net increase of $3.3 million of fixed assets. In 1996 cash
provided from investing activities of $4.8 million resulted primarily from the
$2.1 million of net cash flows from the sale of fixed assets and principal
collections on investments in mortgage-backed securities of $4.3 million, which
were offset by $1.6 million of fixed asset purchases.
In 1997, net cash flows from financing activities amounted to $12.1
million, the net result of an $11 million increase in bank loans, $5.8 million
of proceeds from the issuance of common stock, payment of dividends of $1.5
million and the repayment of collateralized mortgage obligations of $3.1
million. In 1996 the Company's financing activities provided $47.6 million of
net cash flows, the net result of a $50.5 million increase in bank loans and
$4.3 million of repayments of collateralized mortgage obligations.
19
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives are financial instruments, the payments on which are linked to
the prices, or relationships between prices, of securities or commodities,
interest rates, currency exchange rates or other financial measures
(collectively referred to as "cash market instruments"). Derivatives enable the
Company and its clients to manage their exposure to interest rates and currency
exchange rates, and security and other price risks. Derivatives include
structured notes, swaps, futures or forward contracts and options. Certain types
of derivatives, including forwards and certain options, are traded in the OTC
markets. Other types of derivatives, including futures contracts and listed
options, are traded on regulated exchanges.
Based on relative notional amounts, management believes that the Company's
derivative activities are not as extensive as those of many of its competitors.
The Company does not engage in the speculative trading of derivatives. Instead,
the Company has focused its derivative activities on trading in forward and
futures contracts in U.S. government and agency issued or guaranteed securities
as hedges against the Company's securities inventory positions. The Company also
executes transactions in exchange-traded futures contracts and listed options on
behalf of its customers.
The Company enters 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 interest-sensitive securities in its
inventory. Given the limited use of such derivatives, the Company has not
incurred and does not expect to incur any material losses relating to its
derivative investments that would not be substantially offset with corresponding
gains on the securities positions hedged. Both the securities hedged and the
derivative instruments are carried on the statement of financial condition at
their market values. Gains and losses, both realized and unrealized, from both
the hedged securities and the derivative instruments are included in current
operating results.
RISK MANAGEMENT
The Company monitors its market and counterparty risk on a daily basis
through a number of control procedures designed to identify and evaluate the
various risks to which the Company is exposed.
The Company often acts as a principal in customer-related transactions in
financial instruments which expose the Company to market risks. The Company
makes dealer markets in certain equity securities, investment-grade corporate
debt, high-yield securities, U.S. government and agency securities, mortgages
and mortgage-backed securities, and municipal fixed-income securities. As such,
the Company maintains securities inventories to facilitate customer
transactions. The Company covers its exposure to market risk by limiting its net
long or short positions, both overall and by individual product area, by
limiting the number of days inventory is held, by selling or buying similar
instruments and by utilizing various derivative financial instruments such as
futures and forward and option contracts. Management believes the Company's
philosophy, risk management and hedging practices result in carefully managed
market exposure and reduced earnings volatility.
20
<PAGE>
At March 31, 1997 and December 31, 1996, the Company's securities owned and
securities sold, not yet purchased consisted of the following (in thousands):
<TABLE>
<CAPTION>
OWNED 3/31/97 12/31/96
- ----- -------- --------
<S> <C> <C>
Obligations of the U.S. Government
or its agencies $108,894 $ 83,083
State and municipal obligations 26,553 10,354
Corporate debt obligations 75,693 58,115
Corporate stocks and warrants 13,028 8,459
Other 1,813 929
-------- --------
$225,981 $160,940
======== ========
SOLD, NOT YET PURCHASED
- -----------------------
Obligations of the U.S. Government
or its agencies $109,118 $ 68,713
State and municipal obligations 470 657
Corporate debt obligations 12,394 8,461
Corporate stocks and warrants 6,388 11,372
Other 651 506
-------- --------
$129,021 $ 89,709
======== ========
</TABLE>
The Company manages risk exposure utilizing mechanisms involving various
levels of management. The Company's risk management committee assists senior
management in managing risk associated with trading and inventory accounts. The
primary function of this committee is to establish and monitor position limits
for these accounts on an ongoing basis. Current and proposed underwriting and
other commitments are subject to due diligence reviews by senior management as
well as professionals in the appropriate business and support units involved.
The Company's trading activities result in the creation of inventory
positions. Position and exposure reports are prepared daily by operations staff.
Such reports are distributed to and reviewed independently on a daily basis by
the Company's risk management committee as well as members of senior management.
In addition, the corporate accounting group prepares a daily consolidated
summarized position report indicating both long and short exposure. These
reports, which are distributed to various levels of management throughout the
Company, enable senior management to better control inventory levels and monitor
results of the trading areas. The Company also reviews and monitors, at various
levels of management, inventory aging, pricing, concentration and securities
ratings.
In addition to position and exposure reports, the Company produces a daily
revenue report which summarizes the trading, interest, commissions, fees,
underwriting and other revenue items for each of the trading departments. Daily
revenue is reviewed for various risk factors and is independently verified by
members of the risk management committee. The daily revenue report is summarized
by the corporate accounting group and distributed to various levels of
management throughout the Company, together with position and exposure reports.
These
21
<PAGE>
reports enable senior management to monitor and better control the overall
activity of the trading areas.
Credit risk related to various financing activities is reduced by the
industry practice of obtaining and maintaining possession and control of
collateral. The Company monitors its exposure to counterparty risk on a daily
basis through the use of credit exposure information and the monitoring of
collateral values. The Company's credit department is responsible for reviewing
counterparties to establish appropriate exposure limits for a variety of
transactions. In addition, the Company actively manages the credit exposure
relating to its trading activities by monitoring the creditworthiness of
counterparties and their related trading limits on an ongoing basis, requesting
additional collateral when deemed necessary and limiting the amount and duration
of exposure to individual counterparties.
The Company seeks to control the risks associated with its investment
banking activities through a process that results in a thorough review by
various committees of the risks associated with all significant transactions
prior to acceptance of any engagement. The Company currently has various
commitment and other review committees. Each such committee is chaired by a
member of senior management and has at least one additional senior management
member. Other committee members include employees who provide expertise in the
evaluation and analysis of proposed transactions brought before the particular
committee.
The Company's risk management effort also includes an emphasis on
compliance. Retail branch managers and other supervisors are required to engage
in specific review and other tasks, and complete various reports, as part of
their supervisory responsibilities. The Company's compliance department
professionals monitor the Company's retail and capital markets activities,
conduct periodic and other examinations, respond to any customer complaints that
arise and interface with the various regulatory agencies that have jurisdiction
over the Company and its business.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Many aspects of the Company's business involve substantial risks of
liability. In recent years there has been an increasing incidence of litigation
involving the securities brokerage industry, including class action suits that
generally seek substantial damages and other suits seeking punitive damages.
Underwriters are subject to substantial potential liability for material
misstatements and omissions in prospectuses and other communications with
respect to securities offerings. Like other securities brokerage firms, the
Company has been named as a defendant in class action and other suits and has in
the past been subject to substantial settlements and judgments.
Following are descriptions of certain changes in the status of the lawsuits
previously disclosed in the Company's annual report on Form 10-K.
22
<PAGE>
Estate of Braunstein, et al. v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., et al. EVEREN Securities was named as a defendant, together with ten other
broker-dealers, in a purported class action lawsuit filed in the Supreme Court
of the State of New York, County of New York, in May 1994. Plaintiffs purported
to state claims individually and on behalf of a class of all individuals or
entities who had accounts with one or more of the defendants in which they had
free credit balances from which the defendants derived economic benefit for
which they had not accounted to the plaintiffs. The complaint purported to
assert causes of action for breach of fiduciary duty and unjust enrichment.
Plaintiffs sought compensatory damages, the imposition of a constructive trust,
an injunction to require the payment of interest on free credit balances, costs
and attorneys' fees. In September 1996, the court denied without prejudice
plaintiffs' motion for class certification. On April 22, 1997, the denial of
defendants' motion to dismiss plaintiffs' amended complaint was reversed by the
appellate court, and the amended complaint was dismissed in its entirety.
EVEREN Clearing v. A.T. Brod & Company, Inc. ("Brod"), et al. EVEREN
Clearing initiated this New York Stock Exchange arbitration proceeding seeking
to recover from Brod, a failed correspondent clearing firm, and two of its
principals approximately $5.3 million in losses primarily resulting from
unsatisfied margin calls and other losses incurred as a result of Brod's
failure. Brod and its principals asserted various defenses to EVEREN Clearing's
claims, and Brod and one of the principals filed counterclaims in which they
sought to recover approximately $25.7 million in alleged damages as the result
of EVEREN Clearing's termination of its clearing agreement with Brod. On March
24, 1997, an arbitration panel rendered a decision in favor of EVEREN Clearing
finding the respondents jointly and severally liable to EVEREN Clearing in the
amount of $3.8 million.
In addition to the matters described above, the Company is currently a
defendant in various civil actions and arbitrations arising out of its
activities as a broker-dealer in securities. Some of such actions involve
allegations of misconduct by Company employees, and other actions involve claims
against the Company by current or former employees. 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.
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
No reports on Form 8-K have been filed by the Registrant during the
period covered by this report.
23
<PAGE>
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, 1997 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
Executive Vice President
Controller and Chief Accounting
24
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
25
<PAGE>
EXHIBIT 11
EVEREN CAPITAL CORPORATION
PRO FORMA COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
1996
-----------
<S> <C>
Net income reported $ 6,806
===========
Net income applicable to common shares $ 6,806
===========
Pro Forma Weighted Average Common Shares
Outstanding: 16,561,298
===========
Pro Forma net income per share of common stock $ .41
===========
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000945770
<NAME> EVEREN Capital Corporation
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 51,622,000
<SECURITIES> 225,981,000
<RECEIVABLES> 50,365,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 36,188,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,775,529,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 175,000
<OTHER-SE> 301,558,000
<TOTAL-LIABILITY-AND-EQUITY> 1,775,529,000
<SALES> 61,811,000
<TOTAL-REVENUES> 138,051,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 115,090,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,740,000
<INCOME-PRETAX> 16,221,000
<INCOME-TAX> 6,119,000
<INCOME-CONTINUING> 10,102,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,102,000
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
</TABLE>
