SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- - --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- - --- OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8186
Inter-Regional Financial Group, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1228350
(State or other jurisdiction (IRS Employer
of incorporation of organization) Identification
Number)
Dain Bosworth Plaza, 60 South Sixth Street
Minneapolis, Minnesota 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-7750
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 April 30, 1994, the Company had 8,192,608 shares of common
stock outstanding.
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1994
INDEX
Page
I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets............................ 1
Consolidated Statements of Operations.................. 2
Consolidated Statements of Cash Flows.................. 3
Notes to Consolidated Financial Statements............. 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 5
II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K ...................... 7
Signature.............................................. 8
Index of Exhibits...................................... 9
Exhibits...............................................10
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1994 1993
_____________________
(Unaudited)
Assets:
Cash and cash equivalents.............. $20,895 $14,047
Cash and short-term investments
segregated for regulatory purposes... 526,005 581,005
Receivable from customers.............. 598,579 531,636
Receivable from brokers and dealers.... 202,175 178,448
Securities purchased under agreements
to resell............................ 163,544 111,887
Trading securities owned, at market.... 398,618 271,378
Equipment, leasehold improvements and
buildings, net....................... 26,616 24,720
Other receivables...................... 46,204 40,744
Deferred income taxes.................. 18,995 18,995
Other assets........................... 13,045 13,162
--------- ---------
$2,014,676 $1,786,022
========= =========
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings.................. $127,037 $ 123,973
Drafts payable......................... 40,983 32,041
Payable to customers................... 924,438 866,144
Payable to brokers and dealers......... 211,281 250,594
Securities sold under repurchase
agreements........................... 144,027 83,978
Trading securities sold, but not yet
purchased, at market................. 234,643 72,218
Accrued compensation................... 44,861 83,458
Other accrued expenses and accounts
payable.............................. 64,817 63,776
Accrued income taxes................... 13,266 9,991
Subordinated and other debt............ 21,829 22,166
--------- ---------
1,827,182 1,608,339
--------- ---------
Shareholders' equity:
Common stock........................... 1,023 1,016
Additional paid-in capital............. 73,759 73,475
Retained earnings...................... 112,712 103,192
-------- --------
187,494 177,683
--------- ---------
$2,014,676 $1,786,022
========= =========
<FN>
See accompanying notes to consolidated financial statements.
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share amounts)
Three Months Ended March 31,
1994 1993
_________________________
Revenues:
Commissions.......................... $39,128 $ 35,446
Principal transactions............... 35,789 36,785
Investment banking and underwriting.. 27,878 24,547
Interest............................. 15,255 12,413
Asset management..................... 4,077 2,905
Correspondent clearing............... 3,181 2,785
Other................................ 5,763 3,890
------- -------
Total revenues.......................... 131,071 118,771
Interest expense........................ (7,392) (6,427)
------- -------
Net revenues............................ 123,679 112,344
------- -------
Expenses excluding interest:
Compensation and benefits............ 78,724 70,797
Communications....................... 8,550 6,940
Occupancy and equipment rental....... 6,698 5,957
Travel and promotional............... 4,226 3,028
Floor brokerage and clearing fees.... 2,245 2,075
Other................................ 7,176 7,200
------- -------
Total expenses excluding interest....... 107,619 95,997
------- -------
Earnings:
Earnings before income taxes......... 16,060 16,347
Income tax expense................... (5,889) (6,212)
------- -------
Net earnings............................ $10,171 $ 10,135
======= ========
Earnings per common and common equivalent share:
Primary and fully diluted............... $ 1.20 $ 1.22
======= =======
<FN>
See accompanying notes to consolidated financial statements.
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended March 31,
1994 1993
____________________________
Cash flows from operating activities:
Net earnings......................... $10,171 $10,135
Adjustments to reconcile earnings
to cash provided (used) by
operating activities:
Depreciation and amortization...... 1,778 1,191
Deferred income taxes.............. (1,222) (899)
Other non-cash items............... 2,434 2,941
Cash and short-term investments
segregated for regulatory
purposes.......................... 55,000 17,910
Net receivable from/payable to
brokers and dealers............... (63,040) (42,386)
Securities purchased under
agreements to resell (51,657) (109,855)
Net trading securities owned and
trading securities sold, but
not yet purchased................. 35,185 (217,565)
Short-term borrowings and drafts
payable of securities companies... 12,006 79,486
Net payable to customers........... (8,649) (26,616)
Securities sold under repurchase
agreements........................ 60,049 301,926
Accrued compensation............... (38,597) (22,739)
Other.............................. (3,123) (968)
------- -------
Cash provided (used) by operating
activities........................ 10,335 (7,439)
------- -------
Cash flows from financing activities:
Proceeds from:
Issuance of common stock........... 291 164
Subordinated and other debt........ 237 3,000
Payments for:
Dividends on common stock.......... (651) (324)
Subordinated and other debt........ (574) (311)
Revolving credit agreement, net.... __ (5,450)
------- -------
Cash (used) by financing
activities......................... (697) (2,921)
------- -------
Cash flows from investing activities:
Proceeds from investment dividends
and sales........................... 481 1,147
Payments for equipment, leasehold
improvements and other.............. (3,271) (2,354)
------- -------
Cash (used) for investing
activities.......................... (2,790) (1,207)
------- -------
Increase/(decrease) in cash and cash
equivalents........................... 6,848 (11,567)
Cash and cash equivalents:
At beginning of period............... 14,047 34,461
------- -------
At end of period..................... $20,895 $22,894
======= =======
Income tax payments totaled $2,615,000 and $716,000 and interest
payments totaled $7,664,000 and $5,693,000 during the three
months ended March 31, 1994 and 1993, respectively.
<FN>
See accompanying notes to consolidated financial statements.
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Condensed Consolidated Financial Statements
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the
instructions for Form 10-Q and do not include all the
information and footnotes required by generally accepted
accounting principles for complete financial statements and
should be read in conjunction with the consolidated financial
statements and related notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993. In
the opinion of management, all adjustments necessary for a
fair presentation of such interim consolidated financial
statements have been included. All such adjustments are of a
normal recurring nature. The results of operations for the
three-month period ended March 31, 1994 are not necessarily
indicative of results expected for subsequent periods.
Certain prior year amounts in the financial statements have
been reclassified to conform to the 1994 presentation.
B. Lease Commitment
During the first quarter of 1994, Rauscher Pierce Refsnes
entered into an operating lease for new headquarters space in
Dallas, Texas. The lease commences during the fourth quarter
of 1995 and the minimum rental commitments are as follows:
1995 - $0; 1996 - $1,294,000; 1997 - $1,340,000; 1998 -
$1,340,000; 1999 - $1,340,000; thereafter $9,892,000.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with Item 7
(Management's Discussion and Analysis) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
Summary
Consolidated net revenues (revenues less interest expense)
increased $11.3 million over first quarter of 1993. The
Company's commission, principal transaction and investment
banking and underwriting businesses benefited early in the
quarter, along with the rest of the securities industry, from
relatively strong financial markets, low interest rates, high
securities prices and increased levels of municipal and corporate
underwritings. In the latter part of the quarter, however,
rising interest rates led to falling bond prices and as a result,
lower trading revenues and sales of fixed income products.
Results of Operations:
Three Months Ended March 31,
(Unaudited, in thousands) 1994 1993
__________________________
Net revenues:
Dain Bosworth Incorporated......... $80,641 $70,312
Rauscher Pierce Refsnes, Inc....... 42,378 41,825
Corporate, other and eliminations.. 660 207
------- -------
$123,679 $112,344
======= =======
Earnings (Loss) before income taxes:
Dain Bosworth Incorporated......... $11,412 $10,603
Rauscher Pierce Refsnes, Inc....... 5,058 7,031
Corporate, other and eliminations.. (410) (1,287)
------- -------
$16,060 $16,347
======= =======
Commission revenues rose $3.7 million in the first quarter
of 1994 over the first quarter of 1993 due principally to
increased sales of mutual fund and exchange listed securities to
individual and institutional investors made through a sales force
that was 9 percent larger than in the prior year period.
The $1.0 million decline in principal transaction revenues
from the 1993 first quarter primarily resulted from lower fixed
income trading revenues at Dain Bosworth and Rauscher Pierce
Refsnes due to volatile bond market conditions late in the 1994
first quarter and decreased demand for fixed income products. If
the volatility in the bond markets continues, principal
transaction revenues will likely continue to decline from 1993
levels.
Investment banking and underwriting revenues increased $3.3
million during the quarter over prior year levels as corporate
clients of Dain Bosworth and Rauscher Pierce Refsnes issued
greater quantities of corporate equity and debt securities.
First quarter 1994 investment banking and underwriting revenues
that were generated from municipal clients approximated those
generated in the first quarter of 1993. While revenues
recognized as a result of municipal refunding transactions
declined significantly from levels experienced in the third and
fourth quarters of 1993, such revenues increased slightly during
the 1994 first quarter over the 1993 first quarter. The Company
anticipates that revenues derived from municipal refundings will
decline over the remainder of 1994.
Net interest income increased $1.9 million during the first
quarter over prior year levels chiefly as a result of increased
margin debit and credit balances with net interest spreads
remaining basically the same, larger volumes of stock borrow and
stock loan transactions and increased fixed income inventories.
Asset management revenue increased $1.2 million from the
1993 first quarter due primarily to increased assets in managed
account programs at Dain Bosworth and Rauscher Pierce Refsnes as
well as increased money market fund balances managed by Insight
Investment Management.
During first quarter 1994, compensation and benefits expense
increased $7.9 million due largely to increased commissions,
incentive compensation and related benefits that rose in
conjunction with increased operating revenues. Also, the 1994
increase was partially the result of a 10 percent increase in the
average number of employees.
Expenses other than compensation and benefits increased $3.7
million for the quarter due primarily to increased usage of
communications and market data and clearing services which are
partially volume driven, increased travel costs associated with
the generation of new business, increased operating costs at the
Company's Minneapolis headquarters due to expansion and the
addition of four operating office locations from first quarter
1993 levels.
LIQUIDITY AND CAPITAL RESOURCES
As described in Note K to the Consolidated Financial
Statements of the Company's 1993 Annual Report on Form 10-K,
Regional Operations Group, Dain Bosworth and Rauscher Pierce
Refsnes must comply with certain regulations of the Securities
and Exchange Commission and The New York Stock Exchange, Inc.,
measuring capitalization and liquidity. All three broker-
dealers continue to operate above minimum net capital standards.
At March 31, 1994, net capital was $43.9 million at Regional
Operations Group, which was 6.7 percent of aggregate debit
balances and $30.8 million in excess of the 5 percent
requirement. At March 31, 1994, Dain Bosworth and Rauscher
Pierce Refsnes had net capital of $27.2 million and $11.5
million, respectively, in excess of the $1 million requirement.
On April 27, 1994, the Company's Board of Directors
announced that it would double the regular quarterly cash
dividend paid on the Company's common stock from $.08 per share
to $.16 per share beginning with the dividend paid during the
1994 second quarter. The determination of future cash dividends,
if any, to be declared and paid will depend on the Company's
future financial condition, earnings and available funds. On the
same date, the Company's Board of Directors authorized a plan to
repurchase up to 400,000 shares of the Company's common stock.
Purchases of the common stock will be made from time to time at
prevailing prices in the open market, by block purchases, or in
privately negotiated transactions. The repurchased shares will
be used for the Company's employee stock option and other benefit
plans, or for corporate purposes.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Computation of Net Earnings Per Share
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended
March 31, 1994:
Items Reported
Item 5 - Other Events (Election of two additional outside
directors and election of John C. Appel as President
and Chief Operating Officer of Dain Bosworth Incorporated)
Item 7 - Financial Statements & Exhibits
Exhibit 4(a) - First Amendment to Credit Agreement dated
November 30, 1993.
Exhibit 4(b) - Third Amendment to Term Loan Agreement
dated November 30, 1993.
Exhibit 28 - Press release regarding the election of John
C. Appel as President and Chief Operating Officer of Dain
Bosworth Incorporated.
Date of Report - February 1, 1994.
Financial Statements Filed - None.
SIGNATURE
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.
INTER-REGIONAL FINANCIAL GROUP, INC.
Registrant
Date: May 6, 1994 By Daniel J. Reuss
__________________________
Daniel J. Reuss
Senior Vice President, Controller
and Treasurer (Principal
Financial and Accounting Officer)
INTER-REGIONAL FINANCIAL GROUP, INC. AND SUBSIDIARIES
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1994
Exhibit 11 - Computation of Net Earnings Per Share
Filed herewith.
EXHIBIT 11
INTER-REGIONAL FINANCIAL GROUP, INC.
COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited, amounts in thousands, except per-share data)
Three Months Ended March 31,
1994 1993
___________________________
PRIMARY EARNINGS PER SHARE:
Net earnings........................ $10,171 $10,135
======= =======
Average number of common and
common equivalent shares
outstanding:
Average common shares outstanding. 8,149 8,099
Incentive stock options........... 356 235
------- -------
8,505 8,334
======= =======
Primary earnings per share........... . $ 1.20 $ 1.22
======= =======
EARNINGS PER SHARE ASSUMING FULL DILUTION:
Net earnings.......................... $10,171 $10,135
======= =======
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding... 8,149 8,099
Incentive stock options............. 356 241
------- -------
8,505 8,340
======= =======
Fully diluted earnings per share:..... $ 1.20 $ 1.22
======= =======