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 31, 199529, 1996
______________
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. FINANCIALI.FINANCIAL INFORMATION
Item 1. Financial1.Financial Statements
Consolidated Statement of Financial Condition 3...........3
Consolidated Statement of Income 5.......................5
Consolidated Statement of Cash Flows 6....................6
Consolidated Statement of Changes in Partnership Capital 7
Notes to Consolidated Financial Statements 8..............8
Item 2. Management's2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 9....................9
Part II.OTHER INFORMATION
Item 1. Legal Proceedings 12Proceedings......................................13
Signatures 13............................................14
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
(Unaudited)
March 31,29, December 31,
(Amounts in thousands) 1996 1995 1994
Cash and cash equivalents $ 33,420100,844 $ 36,68244,112
Receivable from:
Customers 459,236 497,961486,868 489,041
Brokers or dealers and clearing
organization deposits 23,045 16,604organizations 22,405 22,094
Mortgages and loans 59,397 58,836
Securities owned, at market value:
TradingInventory securities 74,685 91,30849,331 88,295
Investment securities 130,058 137,066
Office equipment,123,663 123,060
Equipment, property and improvements at cost, net of accumulated depreciation
and amortization of $99,574 in 1995 and
$81,895 in 1994 130,378 125,764144,838 145,095
Other assets 44,655 47,974
_________ _________64,289 74,968
__________ __________
$ 895,477 $953,359
======== ========1,051,635 $1,045,501
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
(Unaudited)
March 31,29, December 31,
(Amounts in thousands) 1996 1995 1994
Bank loans $ 160,800 $165,0001,501 $ 32,503
Payable to:
Customers 254,234 293,324394,852 360,754
Brokers or dealers and clearing
organizations 8,457 13,22510,788 13,025
Depositors 60,594 61,189
Securities sold but not yet purchased,
at market value 21,028 16,03716,780 18,428
Accounts payable and accrued expenses 44,759 39,42547,091 49,097
Accrued compensation and employee
benefits 45,793 58,04673,529 70,084
Long-term debt 41,674 41,779
_________ _________
576,745 626,83668,001 70,127
__________ __________
673,136 675,207
Liabilities subordinated to claims
of general creditors 129,000 136,000122,000 122,000
Partnership capital 189,732 190,523
_________ _________256,499 248,294
__________ __________
$1,051,635 $ 895,477 $953,359
======== ========1,045,501
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 31,29, March 2531,
except per unit information) 1996 1995 1994
Revenues:
Commissions $ 87,655 $112,718$160,196 $87,655
Principal transactions 27,419 40,713 24,406
Investment banking 9,278 9,822 7,129
Interest and dividends 15,002 13,521
9,065
Other 8,728 8,09515,214 9,377
_________ _________
160,439 161,413227,109 161,088
_________ _________
Expenses:
Employee and partner compensation and benefits 90,254 96,607130,927 90,284
Occupancy and equipment 23,374 19,326 17,028
Communications and data processing 13,063 10,12215,712 13,68
Interest 7,723 7,928 5,335
Payroll and other taxes 9,420 7,186 6,519
Floor brokerage and clearance fees 1,666 1,407 1,385
Other operating expenses 15,064 12,335 10,682
_________ _________
151,499 147,678203,886 152,148
_________ _________
Net income $ 8,94023,223 $ 13,7358,940
========= =========
Net income allocated to:
Limited partners $ 1,3114,169 $ 2,0771,311
Subordinated limited partners 2,470 967 1,360
General partners 16,584 6,662
10,298
_________ ________________ _______
$ 23,223 $ 8,940
$ 13,735
========= ================ =======
Net income per weighted average $1,000
equivalent partnership unit outstanding:
Limited partners $ 42.63 $ 21.13
$ 32.66
========= ================ =======
Subordinated limited partners $ 79.00 $ 36.32
$ 62.82
========= ================ =======
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners $97,806 62,024
$ 63,854
========= ================ =======
Subordinated limited partners $31,269 26,625
$ 21,469
========= ================ =======
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 31,29, March 25,31,
(Amounts in thousands) 1996 1995 1994
Cash Flows Provided (Used) by Operating Activities:
Net income $ 8,94023,223 $ 13,7358,940
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 6,212 5,000
4,862
IncreaseDecrease (increase) in net receivable
from/payable to customers 36,271 (365)
(38,762)
(Increase) decreaseIncrease in net receivable from/
payable to brokers or dealers and
clearing organizations (2,548) (11,209)
9,544Increase in receivable from mortgages
and loans (561) -
Decrease in securities owned, net 36,713 28,622
10,952
Decrease in payable to depositors (595) -
Increase (decrease) in accounts payable
and other
accrued expenses 1,439 (6,919)
(15,009)
Decrease in otherOther assets 10,679 3,319
1,579
_________ ___________________ __________
Net cash provided (used) by operating
activities 110,833 27,388
(13,099)
_________ ___________________ __________
Cash Flows Used by Investing Activities:
Purchase of equipment, property and
improvements (5,955) (9,614)
(16,655)
_________ ___________________ __________
Cash Flows (Used) ProvidedUsed by Financing Activities:
(Decrease) increase inRepayment of bank loans (31,002) (4,200) 56,553
Issuance of long-term debt - 3,569
Repayment of long-term debt (2,126) (105) (227)
Repayment of subordinated debt - (7,000) (14,000)
Issuance of partnership interests 3,365 4,651 4,436
Redemption of partnership interests (1,960) (621) (813)
Withdrawals and distributions from
partnership capital (16,423) (13,761)
(16,782)
_________ ___________________ __________
Net cash (used) providedused by financing activities (48,146) (21,036)
32,736
_________ ___________________ __________
Net increase (decrease) increase in cash and
cash equivalents 56,732 (3,262) 2,982
Cash and Cash Equivalents,
beginning of period 44,112 36,682
28,798
_________ ___________________ __________
Cash and Cash Equivalents,
end of period $ 33,420100,844 $ 31,780
======== =========33,420
Interest payments for the periods were $4,907$5,300 and $2,877.$6,164.
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 31, 1995,29, 1996, AND MARCH 25, 199431, 1995
(Unaudited)
Subordinated
Limited limited General
partnership partnership partnership
(Amounts in thousands) capital capital capital Total
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 $190,523$ 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)distributions(5,083) (1,688) (6,990) (13,761)
________ ________ ________ _______
Balance, March 31, 1995 $ 63,068 $ 27,652 $ 99,012 $189,732$ 189,732
Balance, December 31, 1995 $103,972 $ 31,524 $112,798 $ 248,294
Issuance of partnership
interests - 3,365 - 3,365
Redemption of partnership
interests (852) (1,108) - (1,960)
Net income 4,169 2,471 16,583 23,223
Withdrawals and distributions(5,569) (2,521) (8,333) (16,423)
________ ________ ________ ________
Balance, March 29, 1996 $101,720 $33,731 $121,048 $256,499
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. All material intercompany
balances and transactions have been eliminated. Investments in
nonconsolidated companies which are at least 20% owned are accounted
for under the equity method.
The financial statements have been prepared under the accrual basis
of accounting which requires the use of certain estimates by
management in determining the Partnership's assets, liabilities,
revenues and expenses.
The financial information included herein is unaudited. However,
in the opinion of management, such information includes all
adjustments, consisting solely of normal recurring accruals, which are
necessary for a fair presentation of the results of interim
operations.
Certain 1994 amounts have been reclassified to conform to 1995
financial statement presentation.
The results of operations for the three months ended March 31,
1995,29,
1996, 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 31, 1995,29, 1996, EDJ's Net Capital of $157.8$200.7 million was 34%42% of
aggregate debit items and its Net Capital in excess of the minimum
required was $148.7$191.2 million.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER ENDED MARCH 31, 1995,29, 1996, VERSUS
QUARTER ENDED MARCH 25, 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 decreased 1%increased 41% ($1.066 million) to $160.4$227.1 million
compared to the quarter ended March 25, 1994. Expenses31, 1995. During the first
quarter of 1996, customers have invested more in equity products
versus fixed income products a year ago. At the same time, customer
dollars invested with the firm increased 3%
($3.8 million)13% from $4.9 billion to $151 million.$6.3
billion. These two factors combined resulted in improved gross
commission percentages. As a result, productivity, measured on a per
IR basis, is approximately 49% higher than during the first quarter of
1995.
Expenses have increased 34% ($51.7 million) to $203.8 million, and
net income decreasedhas increased by $4.8$14.3 million to $8.9$23.2 million. Expense
increases have been the result of two major decisions implemented by
the firm during 1995. The first was to slow the growth of the
salesforce to enable a thorough revision of the new IR training
program. As a result, the number of Investment Representatives, 3,254
as of March 29, 1996, remained relatively unchanged when compared with
the first quarter of 1995.
Also during 1995, the firm began the migration from mainframe
technology to client server technology. The client server technology
will be rolled out over the course of the next few years. Until the
installation is complete, costs will be incurred to support both the
existing and the new technology.
As a result of these decisions, the cost to support an individual
Investment Representative has increased. During 1996, the long term
strategy of growing the salesforce has resumed. Ultimately, resuming
salesforce growth will begin to positively influence the cost of
supporting an Investment Representative.
Commission revenues decreased 22%increased 83% ($25.172.5 million). Mutual fund
commissions declined 36%increased 94% ($24.2 million) and were the major
contributor to the decrease. Annuity revenues decreased 9% ($1.640.4 million). Listed and over-the-counterover-the-
counter (O-T-C) agency equity commission revenues increased 4%65% ($.915.2
million). As the yield curve
flattened, investors were attracted to shorter term fixed income
products rather than to mutual funds.Annuity revenues, primarily variable, increased 81% ($16.9
million).
Principal transaction revenues increased 67%decreased 33% ($16.313.3 million) to
$40.7$27.4 million for the period. GovernmentMunicipal bond principal revenues
decreased 11% ($1.6 million), corporate bond principal revenues
decreased 32% ($2.0 million) and government bond principal revenue
increased 330%decreased 76% ($6.1 million) and municipal bond principal revenue
increased 27%. Collateralized Mortgage Obligations
(CMO) revenues decreased 39% ($2.9 million). Corporate bond principal revenues
increased 54% ($2.23.5 million).
Investment banking revenues increased 38%decreased 6% ($2.7.5 million) to $9.8$9.3
million for the period. CertificateDemand for underwritings of deposit revenues increased
substantially 185% ($3.9 million). With uncertainty as tofixed income
products was lower during the direction of interest rates, investors were attracted to certificates
of deposit. Higher interest rates throughout the quarter reduced debt
and equity origination revenues 42% ($1.5 million).period.
Interest and dividend income increased 49%11% ($4.51.5 million) to $13.5$15.0
million due primarily to a 41% ($2.9 million) increase in interest income earned on margin balancesloans at Boone
National Savings and Loan Association, F.A., (Boone) which was
acquired in July, 1995.
Other revenue increased $5.8 million or 62%, as a result of
higher interest rates. U.S.
Governmentincreased management fees from money market and agency interest incomemutual fund products
that the firm distributes, and from increased 85% ($1.2 million)
from larger investment security positions purchased by the Partnership
with subordinated debt proceeds from the second quarter of 1994.IRA custodial fees.
Compensation costs decreased 7%increased 45% ($6.440.6 million) compared to the
same period last year. Commissions, decreased due to lower revenues.
Salessales bonuses, sales incentives
and profit sharing provisions earned by Investment Representatives
were lowerhigher due to lower profit marginsincreased revenues and net income. Salaries and
wages earned by non-sales personnel were higher during the period due
to increases in personnel necessary to support an increased sales
force.
Interest expense declined as the Partnership's borrowings were
lower during the first quarter of 1996. Interest expense includes
interest paid on deposit instruments by Boone.
Of the Partnership's remaining expenses, the most significant
changes were seen in occupancy, equipment, communications and data
processing expenses in order to support anthe Partnership's strategy of
implementing new technology and expanding number of offices
and branch network.its locations.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at March 31, 1995,29, 1996, was $189.7$56.5
million compared to $180.4$248.3 million as of March 25, 1994.31, 1995. General
partnership capital increased $7.4$22 million due to retention of earnings
and to an increase in distributable profits. Subordinated limited
partnership capital increased $5.5$6.1 million due to capital
contributions.contributions and an increase in distributable profits. Limited
partnership capital decreased $2.8increased $38.7 million primarily due to withdrawalsfrom a $39.7
million Limited Partnership offering in October, 1995, an increase in
distributable profits, and distributionsoffset by $2 million of earnings.partnership
redemptions.
At March 31, 1995,29, 1996, the Partnership had $33.4$100.8 million in cash and
cash equivalents. Lines of credit are in place at ten banks
aggregating $615$570 million ($570545 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 tosecurities
which serve as collateral for the maturity
of oneloans.
A substantial portion of the Partnership's issues.assets are primarily
liquid, consisting mainly of cash and assets readily convertible into
cash. These assets are financed primarily by customer credit
balances, equity capital, bank lines of credit and other payables.
The Partnership believes that the liquidity provided by existing cash
balances and borrowing arrangements will be sufficient to meet the
Partnership capital and liquidity requirements.
CASH FLOWS
CashFor the Quarter ended March 29, 1996, cash and cash equivalents
decreased $3.3 million from December
31, 1994 to March 25, 1995.increased $56.7 million. Cash flows from operating activities
provided were$111 million, primarily fromattributable to net income depreciation,and
decreases in securities owned, decrease innet receivables from customers, and
other assets, adjusted for depreciation and amortization. Investing
activities used $6 million for the issuancepurchase of partnership interests.fixed assets. Cash
wasflows from financing activities used $48 million primarily used to fund increased receivables from brokers and dealers,
reduce accounts payable, purchase fixed assets, repaydecrease
bank loans, repay long-term debt and subordinated debt, and to fund withdrawals and
distributions.distributions from partnership capital.
There were no material changes in the partnership's overall
financial condition during the three months ended March 31, 1995,29, 1996,
compared with the three months ended March 25, 1994.31, 1995. The
Partnership's balance sheet is comprised primarily of cash and assets
readily convertible into cash. Securities inventories are carried at
market values and are readily marketable. Customer margin accounts
are collateralized by marketable securities. Other customer
receivables and receivables and payables with other broker/dealers
normally settle on a current basis. Liabilities, including certain
amounts payable to customers, checks, 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.
The Partnership's subsidiary, Boone National Savings and Loan
Association, F.A. (Boone), a Federally-chartered stock savings and
loan association, is required under federal regulations at all times.to maintain
specified levels of liquidity and capital standards. Boone has been
in compliance with these regulations.
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.None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index contained hereinafter..hereinafter.
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended March 31,
1995.29, 1996.
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, 199510, 1996 /s/ John W. Bachmann
_____________________
John W. Bachmann
Managing Partner
Dated: May 12, 199410, 1996 /s/ Steven Novik
_____________________
Steven 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, 199510, 1996
_____________________
John W. Bachmann
Managing Partner
Dated: May 12, 199410, 1996
_____________________
Steven Novik
Chief Financial Officer
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
For the quarter ended March 25, 199529, 1996
Exhibit No. Description Page
10.1 Loan Agreement between Edward D. Jones
& Co., L.P.27.0 Financial Data Schedule (provided
for the Securities and Boatmen's Bank dated
April 28, 1995.Exchange
Commission only)