SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 199431, 1995
Commission file number 0-16633
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
______________________________________________________________________
(Exact name of registrant as specified in its charter)
MISSOURI 43-1450818
______________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 851-2000
_______________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports,
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
____ ____
As of the filing date, there are no voting
securities held by non-affiliates of the Registrant.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Financial Condition 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Consolidated Statement of Changes in Partnership Capital 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHERII.OTHER INFORMATION
Item 1. Legal Proceedings 12
Signatures 13
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
March 25,31, December 31,
(Amounts in thousands) 1995 1994 1993
Cash and cash equivalents $ 31,78033,420 $ 28,79836,682
Receivable from:
Customers 472,977 464,760459,236 497,961
Brokers or dealers and clearing
organization deposits 26,604 32,55023,045 16,604
Securities owned, at market value:
Trading securities 55,612 60,37174,685 91,308
Investment securities 66,590 73,575130,058 137,066
Office equipment, property and improvements,
at cost, net of accumulated depreciation
and amortization of $99,574 in 1995 and
$81,895 in 1994 and
$73,920 in 1993 114,227 102,434130,378 125,764
Other assets 36,411 37,990
__________ __________44,655 47,974
_________ _________
$ 804,201 $ 800,478895,477 $953,359
======== ========
The accompanying notes are an integral part of these financial
statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
March 25,31, December 31,
(Amounts in thousands) 1995 1994 1993
Bank loans $ 195,814 $ 139,261160,800 $165,000
Payable to:
Customers 212,039 242,584254,234 293,324
Brokers or dealers and clearing
organizations 11,690 8,0928,457 13,225
Securities sold but not yet purchased,
at market value 16,974 17,76621,028 16,037
Accounts payable and accrued expenses 37,768 37,41944,759 39,425
Accrued compensation and employee benefits 53,906 69,26445,793 58,046
Long-term debt 36,659 33,317
__________ __________
564,850 547,70341,674 41,779
_________ _________
576,745 626,836
Liabilities subordinated to claims
of general creditors 59,000 73,000129,000 136,000
Partnership capital 180,351 179,775
__________ __________189,732 190,523
_________ _________
$ 804,201 $ 800,478895,477 $953,359
======== ========
The accompanying notes are an integral part of these financial
statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
(Amounts in thousands, March 25,31, March 26,25
except per unit information) 1995 1994 1993
Revenues:
Commissions $ 112,718 $ 98,11387,655 $112,718
Principal transactions 23,103 24,89640,713 24,406
Investment banking 8,432 10,5309,822 7,129
Interest and dividends 13,521 9,065
7,838
Other 8,728 8,095
5,447
__________ ___________________ _________
160,439 161,413
146,824
__________ ___________________ _________
Expenses:
Employee and partner compensation
and benefits 90,254 96,607 88,649
Occupancy and equipment 19,326 17,028 14,029
Communications and data processing 13,063 10,122
7,636
Interest 7,928 5,335 4,287
Payroll and other taxes 7,186 6,519 5,727
Floor brokerage and clearance fees 1,407 1,385 1,595
Other operating expenses 12,335 10,682
8,734
__________ ___________________ _________
151,499 147,678
130,657
__________ ___________________ _________
Net income $ 13,7358,940 $ 16,16713,735
========= =========
Net income allocated to:
Limited partners $ 2,0771,311 $ 1,9192,077
Subordinated limited partners 967 1,360 1,602
General partners 6,662 10,298
12,646
__________ ___________________ _________
$ 8,940 $ 13,735 $ 16,167
========= =========
Net income per weighted average $1,000
equivalent partnership unit outstanding:
Limited partners $ 32.5221.13 $ 47.3532.66
========= =========
Subordinated limited partners $ 63.3636.32 $ 95.6162.82
========= =========
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners $ 63,58462,024 $ 40,52963,854
========= =========
Subordinated limited partners $ 21,46926,625 $ 16,75821,469
========= =========
The accompanying notes are an integral part of these financial
statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
March 25,31, March 26,25,
(Amounts in thousands) 1995 1994 1993
Cash Flows Provided (Used) Provided by Operating
Activities:
Net income $ 13,7358,940 $ 16,16713,735
Adjustments to reconcile net income to
net cash provided (used) provided by operating
activities:
Depreciation and amortization 5,000 4,862 4,076
Increase in net receivable from/payable to
customers (365) (38,762)
(2,351)
Decrease (increase)(Increase) decrease in net receivable from/
payable to brokers or dealers and dealersclearing
organizations (11,209) 9,544 (366)
Decrease in securities owned, net 28,622 10,952 10,856
Decrease in accounts payable, and other
accrued expenses and accrued compensation(6,919) (15,009)
(11,799)
Other, netDecrease in other assets 3,319 1,579
2,227
__________ ___________________ _________
Net cash provided (used) provided by operating
activities 27,388 (13,099)
18,810
__________ ___________________ _________
Cash Flows (Used)Used by Investing Activities:
Purchase of equipment, property and
improvements (9,614) (16,655)
(5,529)
__________ ___________________ _________
Cash Flows (Used) Provided (Used) by Financing
Activities:
Issuance (repayment) of(Decrease) increase in bank loans (4,200) 56,553 (16,466)
Issuance of long-term debt - 3,569 11,700
Repayment of long-term debt (105) (227) (611)
Repayment of subordinated debt (7,000) (14,000) -
Issuance of partnership interests 4,651 4,436 3,900
Redemption of partnership interests (621) (813) (235)
Withdrawals and distributions from
partnership capital (13,761) (16,782)
(17,702)
__________ ___________________ _________
Net cash (used) provided (used) by financing
activities (21,036) 32,736
(19,414)
__________ ___________________ _________
Net (decrease) increase (decrease) in cash and cash
equivalents (3,262) 2,982 (6,133)
Cash and Cash Equivalents, beginning of period 36,682 28,798
37,730
__________ ___________________ _________
Cash and Cash Equivalents, end of period $ 33,420 $ 31,780
$ 31,597======== =========
Interest payments for the periods were $2,877$4,907 and $3,923.$2,877.
The accompanying notes are an integral part of these financial
statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
THREE MONTHS ENDED MARCH 25, 1994,31, 1995, AND MARCH 26, 199325, 1994
(Unaudited)
Subordinated
Limited limited General
partnership partnership partnership
(Amounts in thousands) capital capital capital Total
Balance, December 31, 1992 $ 47,328 $ 14,716 $ 75,252 $137,296
Issuance of partnership
interests - 3,900 - 3,900
Redemption of partnership
interests (235) - - (235)
Net income 1,919 1,602 12,646 16,167
Withdrawals and distributions (6,618) (1,758) (9,326) (17,702)
________ ________ ________ ________
Balance, March 26, 1993 $ 42,394 $ 18,460 $ 78,572 $139,426
Balance, December 31, 1993 $ 71,222 $ 19,163 $ 89,390 $179,775
Issuance of partnership
interests - 4,349 - 4,349
Redemption of partnership
interests (526) (200) - (726)
Net income 2,077 1,360 10,298 13,735
Withdrawals and
distributions (6,941) (1,812) (8,029) (16,782)
________ ________ ________ _______________
Balance, March 25, 1994 $ 65,832 $ 22,860 $ 91,659 $180,351
Balance, December 31, 1994 $ 67,461 $ 23,722 $ 99,340 $190,523
Issuance of partnership
interests - 4,651 - 4,651
Redemption of partnership
interests (621) - - (621)
Net income 1,311 967 6,662 8,940
Withdrawals and
distributions (5,083) (1,688) (6,990) (13,761)
________ ________ ________ _______
Balance, March 31, 1995 $ 63,068 $ 27,652 $ 99,012 $189,732
The accompanying notes are an integral part of these financial
statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of The Jones Financial Companies, A Limited Partnership and
all wholly owned subsidiaries (The "Partnership"), including the
Partnership's principal subsidiary, Edward D. Jones & Co., L.P.,
("EDJ"), a registered broker/dealer.
The financial information included herein is unaudited. However,
in the opinion of management, such information includes all
adjustments, consisting solely of normal recurring accruals, which are
necessary for a fair presentation of the results of interim
operations.
Certain 19931994 amounts have been reclassified to conform to 19941995
financial statement presentation.
The results of operations for the three months ended March 25,
1994,31,
1995, are not necessarily indicative of the results to be expected for
the full year.
NET CAPITAL REQUIREMENTS
As a result of its activities as a registered broker/dealer, EDJ
is subject to the Net Capital requirements of the Securities and
Exchange Commission and the New York Stock Exchange. Under the
alternative method permitted by the rules, EDJ is required to maintain
minimum Net Capital of 2% of aggregate debit items arising from
customer transactions. The Net Capital rules also provide that EDJ
may not expand its business nor may partnership capital be withdrawn
if resulting Net Capital would be less than 5% of aggregate debit
items. At March 25, 1994,31, 1995, EDJ's Net Capital of $100.8$157.8 million was 22%34%
of aggregate debit items and its Net Capital in excess of the minimum
required was $91.6$148.7 million.
EDJ received permission from the New York Stock Exchange to
prepay in advance of its scheduled maturity $17,000,000 of
subordinated debt. During March 1994, $7,000,000 was prepaid.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER ENDED MARCH 25, 1994,31, 1995, VERSUS
QUARTER ENDED MARCH 26, 199325, 1994
The Partnership has experienced significant growth in its
salesforce in recent years, averaging 23% over the last three years.
The Partnership anticipates limited or no change in the salesforce
growth in 1995. The number of investment representatives increased
14% to 3,252 as of March 31, 1995, from 2,856 as of March 25, 1994.
With the flattening of the yield curve during the past year, the
product mix has shifted away from mutual funds and to shorter term
fixed income products including corporate bonds, government bonds,
municipal bonds, and certificates of deposit which carry lower margins
compared with longer term investments and equities. Lower margins
have not been offset by the growth in the salesforce. Overall
revenues decreased slightly from the level attained in the first
quarter of 1994.
Total revenues increased 10%decreased 1% ($14.61.0 million) to $161.4$160.4 million
compared to the quarter ended March 26, 1993.25, 1994. Expenses increased 13%3%
($17.03.8 million) to $147.7$151 million. As a result, net income decreased by
$2.4$4.8 million to $13.7$8.9 million. These results were significantly
influenced by the Partnership's strategy of expanding its investment
representatives. The number of investment representatives increased
24% (551) to 2,856, and the number of branches increased to 2,784, a
26% increase over last year. The majority of new investment
representatives hired by the Partnership are beginners in the
industry. Successful investment representatives generally achieve
profitability after about 30 months. In the interim, the Partnership
incurs significant training, salary and support costs. Additionally,
the Partnership made significant increases in home office overhead to
support the increased salesforce.
Commission revenues increased 15%decreased 22% ($14.625.1 million). Mutual fund
commissions rose 10%declined 36% ($5.924.2 million) and were athe major
contributor to the increase. Insurance commission revenue increased 76%, with
variable annuitydecrease. Annuity revenues increasing 104%decreased 9% ($7.31.6
million) and fixed
annuity revenues increased 5%. Listed and over-the-counter (O-T-C) agency equity
commission revenues decreased 6%increased 4% ($1.4.9 million). With
interest rates rising slightly from their lowest levels in more than
20 years,As the yield curve
flattened, investors continuedwere attracted to favor equity mutual funds for their
professional selection and diversification and variable annuities
seeking greater returns than those offered by bank time deposits andshorter term fixed income
investments.products rather than to mutual funds.
Principal transaction revenues decreased 7%increased 67% ($1.816.3 million) to
$23.1$40.7 million for the period. This decrease was a result of
governmentGovernment bond principal revenues decreasing 28%revenue
increased 330% ($.76.1 million) and municipal bond principal revenue
increased 27% ($2.9 million). Corporate bond principal revenues
increased 25%54% ($1.82.2 million). O-T-C
principal stock sales decreased 46% ($.9 million). Overall, municipal
bond principal revenue levels were comparable in 1994 and 1993.
Investment banking revenues decreased 20%increased 38% ($2.12.7 million) to $8.4$9.8
million for the period. MunicipalCertificate of deposit revenues increased
substantially 185% ($3.9 million). With uncertainty as to the
direction of interest rates, investors were attracted to certificates
of deposit. Higher interest rates throughout the quarter reduced debt
and equity unit investment trustsorigination revenues declined 58%42% ($1.61.5 million). The composition of EDJ unit
trust securities is largely utility company stocks. The utility index
has significantly declined from 1993 levels, causing investors to
favor securities other than utilities. Syndicate CMO revenues
decreased by $3.3 million (98%). With interest rates at 20 year lows,
the supply of new CMO offerings declined substantially while the
secondary market has continued growing.
Interest and dividend income increased 16%49% ($4.5 million) to
$13.5 million due to a 41% ($2.9 million) increase in interest income
earned on margin balances as a result of higher interest rates. U.S.
Government and agency interest income increased 85% ($1.2 million)
to $9.1
million primarily due to a 31% ($1.7 million) increase in margin
interest. Lower interest rate levels, marketingfrom larger investment security positions purchased by the Partnership
with subordinated debt proceeds from the second quarter of a personal line of
credit service and increased equity margin sales caused customer
margin borrowing to increase $91.3 million to $467.3 million. Due to
lower interest rates, lower inventory and levels of securities owned,
interest income decreased approximately $.3 million.1994.
Compensation costs increased 9%decreased 7% ($8.06.4 million) compared to the
same period last year. Commissions increaseddecreased due to increasedlower revenues.
However, salesSales bonuses, sales incentives and profit sharing provisions were
lower due to lower profit margins.margins and net income. Salaries and wages
earned by non-sales personnel were also higher during the period due to
increases in personnel necessary to support thean increased sales force.
Of the Partnership's remaining expenses, the most significant
changes were seen in occupancy, equipment, communications and data
processing expenses in order to support an expanding number of offices
and branch network.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at March 25, 1994,31, 1995, was $180.4$189.7
million compared to $139.4$180.4 million as of March 26, 1993. Limited partnership
capital increased $23.4 million primarily due to a $24.8 million
limited partnership offering made in August 1993 and to the retention
of earnings, net of withdrawals and distributions. Subordinated
limited partnership capital increased $4.4 million due to capital
contributions.25, 1994. General
partnership capital increased $13.1$7.4 million due to retention of
earnings and to an increase in distributable profits. Subordinated
limited partnership capital increased $5.5 million due to capital
contributions. Limited partnership capital decreased $2.8 million
primarily due to withdrawals and distributions of earnings.
At March 25, 1994,31, 1995, the Partnership had a $31.8$33.4 million balance ofin cash and
cash equivalents. Lines of credit are in place at nineten banks
aggregating $475$615 million ($455570 million of which are through
uncommitted lines of credit),. Actual borrowing availability is
primarily based on securities owned and customers' margin securities.
Subordinated debt has decreased by $7 million due to the maturity
of which $283.7 million was available at
March 25, 1994.one of the Partnership's issues. The Partnership believes that the
liquidity provided by existing cash balances and borrowing
arrangements will be sufficient to meet the Partnership capital and
liquidity requirements.
CASH FLOWS
Cash and cash equivalents increased $3decreased $3.3 million from December
31, 19931994 to March 25, 1994.1995. Cash flows provided were primarily from
net income, depreciation, decreases in securities owned, increasedecrease in
other assets and the issuance of partnership interests. Cash was
primarily used to fund increased receivables from brokers and dealers,
and issuance of long-term debt,
bank loans and partnership interests. Cash flows used were primarily
used to fund loans to customers, paydownreduce accounts payable, purchase fixed assets, to repay bank loans,
long-term debt, and subordinated debt, and to fund withdrawals and
distributions.
There were no material changes in the partnership's overall
financial condition during the three months ended March 25, 1994,31, 1995,
compared with the three months ended March 26, 1993.25, 1994. The
Partnership's balance sheet is comprised primarily of cash and assets
readily convertible into cash. Securities inventories are carried at
market values and are readily marketable. Customer margin accounts
are collateralized by marketable securities. Other customer
receivables and receivables and payables with other broker/dealers
normally settle on a current basis. Liabilities, including amounts
payable to customers, checks and accounts payable and accrued expenses
are non-interest bearing sources of funds to the Partnership. These
liabilities, to the extent not utilized to finance assets, are
available to meet liquidity needs and provide funds for short term
investments, which favorably impacts profitability.
The Partnership's growth in recent years has been financed
through sales of limited partnership interests to its employees,
retention of earnings, and private placements of long-term and
subordinated debt.
The Partnership's principal subsidiary, Edward D. Jones & Co.,
L.P., ("EDJ") as a securities broker/dealer, is subject to the
Securities and Exchange Commission regulations requiring EDJ to
maintain certain liquidity and capital standards. EDJ has been in
compliance with these regulations at all times.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings
previously reported.
Item 5: Other Information
For purposes of complying with the amendments to the rules
governing Form S-8 under the Securities Act of 1933, the registrant
hereby undertakes as follows, which undertaking shall be incorporated
by reference into it, Registration Statement of Form S-8 (File No. 33-
35247):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefor, unenforceable. In the event that claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index contained hereinafter..
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended March 25,
1994.
31,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: May 6, 199412, 1995 /s/ John W. Bachmann
_____________________
John W. Bachmann
Managing Partner
Dated: May 6,12, 1994 /s/ Edward SouleSteven Novik
_____________________
Edward SouleSteven Novik
Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: May 12, 1995 _____________________
John W. Bachmann
Managing Partner
Dated: May 12, 1994 _____________________
Steven Novik
Chief Financial Officer
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
For the quarter ended March 25, 19941995
Exhibit No. Description Page
10.1 Mortgage Note; Dead of Trust and Security 15
Agreement; Assignment of Leases, Rents
and Profits; and Subordination and AttornmentLoan Agreement between EDJ LeasingEdward D. Jones
& Co., L.P. and Nationwide Insurance CompanyBoatmen's Bank dated
April 6, 199428, 1995.