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 September 27, 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) 515-2000
__________________
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.OTHER INFORMATION
Item 1.Legal Proceedings.......................................13
Signatures ..............................................14
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
(Unaudited)
September 27, December 31,
(Amounts in thousands) 1996 1995
Cash and cash equivalents $114,591 $44,112
Receivable from:
Customers 570,918 489,041
Brokers or dealers and clearing
organizations 9,689 22,094
Mortgages and loans 63,300 58,836
Securities owned, at market value:
Inventory securities 43,932 88,295
Investment securities 171,243 123,060
Equipment, property and improvements 166,285 145,095
Other assets 69,976 74,968
__________ __________
$1,209,934 $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)
September 27, December 31,
(Amounts in thousands) 1996 1995
Bank loans $1,450 $32,503
Payable to:
Customers 434,038 360,754
Brokers or dealers and clearing
organizations 14,893 13,025
Depositors 60,728 61,189
Securities sold but not yet purchased,
at market value 8,868 18,428
Accounts payable and accrued
expenses 52,934 49,097
Accrued compensation and employee
benefits 95,076 70,084
Long-term debt 70,191 70,127
__________ __________
738,178 675,207
Liabilities subordinated to claims
of general creditors 216,500 122,000
Partnership capital 255,256 248,294
__________ __________
$1,209,934 $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)
(Amounts in thousands Three Months Ended Nine Months Ended
except per unit Sept. 27, Sept. 29, Sept. 27, Sept. 29,
information) 1996 1995 1996 1995
Revenues:
Commissions $ 139,176 $ 121,802 $ 459,307 $318,292
Principal transactions 46,766 32,915 133,473 114,081
Investment banking 4,227 4,726 11,105 14,621
Interest and dividends 18,233 15,420 50,257 44,150
Other 19,552 11,321 52,246 32,280
______________________________________________
227,954 186,184 706,388 523,424
______________________________________________
Expenses:
Employee and partner compensation
and benefits 129,469 105,927 408,391 293,812
Occupancy and equipment 27,585 22,258 76,079 62,325
Communications and
data processing 17,301 13,771 51,644 40,288
Interest 9,206 7,883 25,111 23,719
Payroll and other taxes 5,606 4,960 22,275 17,623
Floor brokerage and
clearance fees 1,841 1,403 5,372 4,319
Other operating expenses 16,467 14,571 47,914 41,542
______________________________________________
207,475 170,773 636,786 483,628
______________________________________________
Net income $ 20,479 $ 15,411 $ 69,602 $39,796
========= ========= ========= =======
Net income allocated to:
Limited partners $ 3,637 $ 1,925 $ 12,428 $ 5,045
Subordinated limited
partners 1,999 1,781 7,120 4,355
General partners 14,843 11,705 50,054 30,396
______________________________________________
$ 20,479 $ 15,411 $ 69,602 $39,796
========= ========= ========= =======
Net income per weighted average
$1,000 equivalent partnership
units outstanding:
Limited partners $ 37.63 $ 32.01 $ 127.85 $82.44
========= ========= ========= ======
Subordinated limited
partners $ 65.49 $ 59.94 $229.67 $159.45
========= ========= ========= =======
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners 96,647 60,138 97,210 61,200
========= ========= ========= =========
Subordinated limited
partners 30,526 29,714 30,998 27,313
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
Sept. 27, 1996 Sept. 29, 1995
(Amounts in thousands) 1996 1995
Cash Flows Provided by Operating Activities:
Net income $69,602 $39,796
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 21,536 16,302
(Increase) decrease in net receivable
from/payable to customers (8,593) 4,078
Decrease (increase) in net receivable
from/payable to brokers or dealers and
clearing organizations 14,273 (6,939)
Increase in receivable from mortgages
and loans (4,464) (934)
Decrease in inventory securities, net34,803 23,026
(Decrease) increase in payable to
depositors (461) 2,152
Increase in accounts payable and
accrued expenses 28,829 14,368
Other assets 4,992 3,366
__________ __________
Net cash provided by operating
activities 160,517 95,215
__________ __________
Cash Flows Used by Investing Activities:
Purchase of equipment, property and
improvements (42,726) (31,445)
(Increase) decrease in investment
securities (48,183) 7,000
Purchase of Boone National Savings and
Loan Association, F.A., net of cash
acquired - (2,103)
__________ __________
Net cash used by investing
activities (90,909) (26,548)
__________ __________
Cash Flows Provided (Used) by
Financing Activities:
Repayment of bank loans (31,053) (45,502)
Issuance of long-term debt 7,993 28,912
Repayment of long-term debt (7,929) (3,888)
Issuance of subordinated debt 94,500 -
Repayment of subordinated debt - (14,000)
Issuance of partnership interests 3,365 10,842
Redemption of partnership interests (5,160) (5,480)
Withdrawals and distributions from
partnership capital (60,845) (38,809)
__________ __________
Net cash provided (used) by financing
activities 871 (67,925)
__________ __________
Net increase in cash and cash
equivalents 70,479 742
Cash and Cash Equivalents, beginning
of period 44,112 36,682
__________ __________
Cash and Cash Equivalents,
end of period $114,591 $37,424
Interest payments for the periods were $22,152 and $22,080.
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
NINE MONTHS ENDED SEPTEMBER 27, 1996, AND SEPTEMBER 29, 1995
(Unaudited)
Subordinated
Limited limited General
ptnrshp ptnrshp ptnrshp
(Amounts in thousands) capital capital capital Total
Balance, December 31, 1994 $ 67,461 $ 23,722 $ 99,340 $190,523
Issuance of partnership
interests - 10,842 - 10,842
Redemption of partnership
interests (2,400) (3,080) - (5,480)
Net income 5,045 4,355 30,396 39,796
Withdrawals and distributions(7,895) (5,338) (25,576) (38,809)
________ ________ ________ _______
Balance, September 29, 1995$ 62,211 $ 30,501 $104,160 $196,872
Balance, December 31, 1995 $103,972 $ 31,524 $112,798 $248,294
Issuance of partnership
interests - 3,365 - 3,365
Redemption of partnership
interests (2,029) (3,131) - (5,160)
Net income 12,428 7,120 50,054 69,602
Withdrawals and distributions(10,853) (9,102) (40,890) (60,845)
________ ________ ________ ________
Balance, September 27, 1996$103,518 $29,776 $121,962 $255,256
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. Where appropriate, prior years' financial statements have
been reclassified to conform with the 1996 presentation.
The results of operations for the three and nine months ended
September 27, 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 September 27, 1996, EDJ's Net Capital of $278.8 million was 50% of
aggregate debit items and its Net Capital in excess of the minimum
required was $267.6 million.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1996
VERSUS QUARTER AND NINE MONTHS ENDED SEPTEMBER 29, 1995
During the first nine months of 1996, the Partnership benefited
from favorable conditions in the U.S. securities markets. Revenues
increased 35% ($183 million) to $706.4 million compared to the nine
months ended September 29, 1995. Expenses have increased 32% ($153.2
million) to $636.8 million. As a result, net income during the nine
month period ended September 27, 1996 increased 75% ($29.8 million) to
$69.6 million. Similarly, earnings for the third quarter of 1996 were
significantly higher than for the third quarter of 1995. Revenues
increased 22% ($41.7 million), expenses increased 21% ($36.7 million),
and net income increased 33% ($5.0 million).
The Partnership has experienced favorable trends in product mix and
transaction volume in 1996 compared with 1995. These trends continued
during the third quarter as investors have heavily favored equity
products. Through September, 67% of the Partnership's securities
revenues were derived from the sale of equity products with the
majority of these sales through mutual funds and variable annuities.
At the same time, the volume of customer business transacted by the
Partnership has increased 34%, from $15.3 billion to $20.5 billion
through September, 1996. The shift in product mix from shorter term
fixed income products in early 1995 to mutual funds and annuities in
1996 increased gross commission percentages.
Non-securities transaction revenues have also increased
significantly in 1996 and 1995. These revenues are derived from
service fees earned from mutual funds and annuities, IRA custodian
fees and revenue sharing arrangements with mutual funds distributed by
the Partnership. Service fees increased $4.3 million (22%), and $15.5
million (30%), for the three and nine months ended September 29, 1996,
over the same periods in the prior year. Additionally, revenues from
IRA custodian fees and revenue sharing arrangements increased $10.9
million (83%) and $20.6 million (66%), for the three and nine months
ended September 29, 1996. These revenue sources are impacted by
customer assets under control of the Partnership, and to some extent
by market conditions. As of September 29, 1996, assets under control
exceeded $105 billion.
Interest and dividend revenues increased $2.7 million, and $5.9
million for the quarter and nine months ended September, 1996. These
increases are due to increased levels of short term investments and to
interest earned on loans of Boone National Savings and Loan
Association, F.A., which was acquired in July, 1995.
Expenses for the three and nine months increased $36.7 million
(21%) and $153.2 million (32%). Expense increases are related to the
Partnership's strategic decision to move from its existing technology
to a client server platform. Additionally, during 1996, the
Partnership resumed its long term strategy of growing the salesforce,
which also contributes to increased costs. As of September 27, 1996,
the number of investment representatives has increased 6% to 3,370
from 3,187 as of September 29, 1995.
Compensation costs have increased $23.5 million (22%) and $114.6
million (39%) for the three and nine months. Sales and variable
compensation, including sales bonuses, sales incentives and profit
sharing have increased due to increased revenues and net income.
Compensation costs related to non-sales personnel increased due to the
growth in the number of support personnel in the firm's branch offices
and to growth in personnel required to support the conversion to
client server technology.
Expense increases in occupancy and communication systems costs
result from the implementation of client server technology and
increases in the number of support personnel. Until the installation
of the new system in the branch locations and St. Louis headquarters
is completed which is planned for 1997, costs will be incurred to
support both the existing technology and the new client server
technology.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at September 27, 1996, was $255.3
million compared to $196.9 million as of September 29, 1995. General
partnership capital increased $17.8 million due to retention of
earnings and to increased distributable profits. Subordinated limited
partnership capital decreased $0.7 million due to redemptions of
Partnership interests and decreased undistributed profits. Limited
partnership capital increased $41.3 million primarily from a $39.7
million Limited Partnership offering in October, 1995, and increased
distributable profits.
Edward D. Jones & Co., L.P. privately placed $94.5 million of
subordinated debt during the period. The proceeds will be used for
general purposes including the expansion of the sales force and fixed
asset improvements primarily related to enhancements in technology.
At September 27, 1996, the Partnership had $114.6 million in cash
and cash equivalents. Lines of credit are in place at ten banks
aggregating $575 million ($500 million of which are through
uncommitted lines of credit). Actual borrowing availability is
primarily based on market values of securities owned and customers'
margin securities which serve as collateral for the loans.
A substantial portion of the Partnership's 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, subordinated debt, 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
For the nine months ended September 27, 1996, cash and cash
equivalents increased $70.5 million. Cash flows from operating
activities provided $160.5 million primarily attributable to net
income, adjusted for depreciation and amortization, decreased net
receivables from/payable to broker or dealers and clearing
organizations, increased accounts payable and accrued expenses,
decreased levels of inventory securities and other assets. Investing
activities used $91 million for the purchase of fixed assets and
investment securities. Cash flows from financing activities provided
$0.9 million primarily from the issuance of subordinated debt,
decreased bank loans and redemptions, withdrawals and distributions
from partnership capital.
During the third quarter of 1995, the Partnership purchased Boone
National Savings and Loan Association, F.A. in a stock purchase
transaction for approximately $8.6 million. The acquisition was
funded with $5 million of long-term debt and a $3.6 million note held
by the sellers.
There were no material changes in the Partnership's overall
financial condition during the nine months ended September 27, 1996,
compared with the nine months ended September 29, 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, accounts payable and accrued
expenses are 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.
REGULATORY REQUIREMENTS
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 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
None
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 September
27, 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: November 12, 1996 /s/ John W. Bachmann
_________________________
John W. Bachmann
Managing Partner
Dated: November 12, 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: November 12, 1996
_____________________
John W. Bachmann
Managing Partner
Dated: November 12, 1996
_____________________
Steven Novik
Chief Financial Officer
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
For the quarter ended September 27, 1996
Exhibit No. Description Page
10.1 Note Purchase Agreement by Edward D. Jones
& Co., L.P., for $94,500,000 aggregate
principal amount of 8.18% subordinated
capital notes due September 1, 2008.
10.2 Seventh Amended and Restated Limited
Partnership Agreement of Edward D.
Jones & Co., L.P., dated August 31, 1996.
27.0 Financial Data Schedule (provided for the
Securities and Exchange Commission only)