ITEM 1. BUSINESS
The Jones Financial Companies, a Limited Partnership (the "Registrant" and also referred to herein as the "Partnership") is organized under the Revised Uniform Limited Partnership Act of the State of Missouri. The terms "Registrant" and "Partnership" used throughout, refer to The Jones Financial Companies, a Limited Partnership and any or all of its consolidated subsidiaries. The Partnership is the successor to Whitaker & Co., which was established in 1871 and dissolved on October 1, 1943, said date representing the organization date of Edward D. Jones & Co., L.P. ("EDJ"), the Partnership's principal subsidiary. EDJ was reorganized on August 28, 1987, which date represents the organization date of The Jones Financial Companies, a Limited Partnership.
The Partnership is engaged in business as a broker/dealer in listed and unlisted securities, including governmental issues, acts as an investment banker, and is a distributor of mutual fund shares. In addition, the Partnership engages in sales of various insurance products and renders investment advisory services. The Partnership is heavily oriented towards serving individual retail customers.
The Partnership is a member firm of the New York, American and Midwest exchanges, and is a registered broker/dealer with the National Association of Securities Dealers, Inc.
As of February 24, 1995, the Partnership was comprised of 115 general partners, 1,918 limited partners and 59 subordinated limited partners. The Partnership employed 9,670 persons, including 2,252 part-time employees. As of said date, the Partnership employed 3,309 full-time investment representatives actively engaged in sales in 3,261 offices in 50 states and Canada.
The Partnership owns 100 percent of the outstanding common stock of EDJ Holding Company, Inc., a Missouri corporation and 100 percent of the outstanding common stock of LHC, Inc., a Missouri corporation. The Partnership also holds all of the partnership equity of Edward D. Jones & Co., L.P., a Missouri limited partnership and EDJ Leasing Co., L.P. a Missouri limited partnership. EDJ Holding Company, Inc. and LHC, Inc. are the general partners of Edward D. Jones & Co., L.P. and EDJ Leasing Co., L.P., respectively. In addition, the Partnership owns 100 percent of the outstanding common stock of Conestoga
Securities, Inc., a Missouri corporation and also owns, as a limited partner, 49.5 percent of Passport Research Ltd., a Pennsylvania limited partnership, which acts as an investment advisor to a money market mutual fund. The Partnership owns 100% of the equity of Edward D. Jones & Co., an Ontario limited partnership and the general partner is Edward D. Jones & Co. Canada Holding Co. Inc., which is wholly owned by the Partnership. The Partnership has an equity position in several entities formed to act as general partners of various direct participation programs sponsored by the Nooney Corporation as follows: Nooney Capital Corp. (a Missouri corporation), 66-2/3% of outstanding Class B non-voting stock; Nooney-Five Capital Corp. (a Missouri Corporation), 100% of outstanding Class B non-voting stock; Nooney-Six Capital Corp. (a Missouri corporation), 100% of outstanding Class B non-voting stock; Nooney-Seven Capital Corp. (a Missouri corporation), 100% of outstanding Class B non-voting stock; Nooney Income Investments, Inc. (a Missouri corporation), 100% of outstanding Class B non-voting stock; Nooney Income Investments Two, Inc. (a Missouri corporation), 100% of outstanding Class B non-voting stock; Nooney Income Investment Three, Inc., (a Missouri corporation), 100% of outstanding Class B non-voting stock. The Partnership holds all of the partnership equity in a Missouri limited partnership, EDJ Ventures, Ltd. Conestoga Securities, Inc. is the general partner of EDJ Ventures, Ltd. The Partnership is the sole shareholder of Tempus Corporation, a Missouri corporation, which was formed strictly to facilitate the issuance of certain debt securities of the Partnership in a private transaction.
The Partnership is a limited partner of EDJ Insurance Agency of New Jersey, L.P., a New Jersey limited partnership; EDJ Insurance Agency of Arkansas, an Arkansas limited partnership; EDJ Insurance Agency of Montana, a Montana limited partnership; EDJ Insurance Agency of New Mexico, a New Mexico limited partnership; EDJ Insurance Agency of Utah, a Utah limited partnership; and is a general partner in EDJ Insurance Agency of California, a California general partnership; each of which engage in general insurance brokerage activities. The Partnership owns all of the outstanding stock of EDJ Insurance Agency of Ohio, Inc., which is also engaged in insurance brokerage activities. Affiliates of the Partnership include EDJ Insurance Agency of Nevada, EDJ Insurance Agency of Texas, EDJ Insurance Agency of Alabama, EDJ Insurance Agency of Florida, EDJ Insurance Agency of Wyoming, EDJ Insurance Agency of Arizona and EDJ Insurance Agency of Massachusetts. The Partnership holds all of the Partnership equity of Unison Investment Trusts, L.P., d/b/a Unison Investment Trusts, Ltd., a Missouri limited partnership, which sponsors unit investment trust programs. The general partner of Unison Investment Trusts, L.P. is Unison Capital Corp., Inc., a Missouri corporation wholly owned by the Partnership. The Partnership owns 100% of the outstanding common stock of Edward D. Jones Homeowners, Inc., a Missouri corporation which, in turn, serves as the general partner of EDJ Residential Mortgage Services, a Missouri limited partnership wholly owned by the Partnership, which formerly provided mortgage brokerage and ancillary services. The Partnership owns 100% of the outstanding common stock of Cornerstone Mortgage Investment Group, Inc., a Delaware limited purpose corporation which has issued and sold collateralized mortgage obligation bonds, and Cornerstone Mortgage Investment Group II, Inc., a Delaware limited purpose corporation which has structured and sold secured mortgage bonds. The Partnership owns 100% of the outstanding stock of CIP Management, Inc., which is the managing general partner of CIP Management, L.P. CIP Management, L.P. is the managing general
partner of Community Investment Partners, L.P. and Community Investment Partners II, L.P., business development companies.
Other affiliates of the Partnership include Patronus, Inc. and EDJ Investment Advisory Services. Neither has conducted an active business.
The Partnership owns as a general partner, 1/3 of Commonwealth Pacific Limited Partnership, a Washington limited partnership, which formerly operated as a syndicator of various real estate limited partnership programs, for which the Partnership had served as an underwriter and distributor.
Revenues by Source. The following table sets forth, for the past three years the sources of the Partnership's revenues by dollar amounts, (all amounts in thousands): 1994 1993 1992 Commissions Listed $ 63,903 $ 72,536 $ 59,256 Mutual Funds 202,698 269,818 187,411 O-T-C 18,985 20,786 14,424 Insurance 85,759 70,334 46,509 Other 580 596 274 Principal Transactions 163,050 92,471 131,366 Investment Banking 36,359 45,001 60,635 Interest & Dividends 52,143 38,084 30,520 Money-Market Fees 10,110 10,048 10,751 IRA Custodial Service Fees 5,614 4,387 3,310 Other Revenues 18,844 15,203 9,514 _________ _________ _________ Total Revenues $ 658,045 $ 639,564 $553,970
Because of the interdependence of the activities and departments of the Partnership's investment business and the arbitrary assumptions involved in allocating overhead, it is impractical to identify and specify expenses applicable to each aspect of the Partnership's operations. Furthermore, the net income of firms principally engaged in the securities business, including the Partnership's, is effected by interest savings as a result of customer and other credit balances and interest earned on customer margin accounts.
Listed Brokerage Transactions. A large portion of the Partnership's revenue is derived from customers' transactions in which the Partnership acts as agent in the purchase and sale of listed corporate securities. These securities include common and preferred stocks and corporate debt securities traded on and off the securities exchanges. Revenue from brokerage transactions is highly influenced by the volume of business and securities prices.
Customers' transactions in securities are effected on either a cash or a margin basis. In a margin account, the Partnership lends the customer a portion of the purchase price up to the limits imposed by the margin regulations of the Federal Reserve Board (Regulation T), New York Stock Exchange (NYSE) margin requirements, or the Partnership's internal policies, which may be more stringent than the regulatory minimum requirements. Such loans are secured by the securities held in customers' margin accounts. These loans provide a source of income to the Partnership since it is able to lend to customers at rates which are higher than the rates at which it is able to borrow on a secured basis. The Partnership is permitted to use as
collateral for the borrowings, securities owned by margin customers having an aggregate market value generally up to 140 percent of the debit balance in margin accounts. The Partnership may also use the interest-free funds provided by free credit balances in customers' accounts to finance customers' margin account borrowings.
In permitting customers to purchase securities on margin, the Partnership assumes the risk of a market decline which could reduce the value of its collateral below a customer's indebtedness before the collateral is sold. Under the NYSE rules, the Partnership is required in the event of a decline in the market value of the securities in a margin account to require the customer to deposit additional securities or cash so that at all times the loan to the customer is no greater than 75 percent of the value of the securities in the account ( or to sell a sufficient amount of securities in order to maintain this percentage). The Partnership, however, imposes a more stringent maintenance requirement.
Variations in revenues from listed brokerage commissions between periods is largely a function of market conditions; however, some portion of the overall increases in recent years is due to the growth in the number of registered representatives over these periods.
Mutual Funds. The Partnership distributes mutual fund shares in continuous offerings and new underwritings. As a dealer in mutual fund shares, the Partnership receives a dealers' discount which generally ranges from 1 percent to 5 3/4 percent of the purchase price of the shares, depending on the terms of the dealer agreement and the amount of the purchase. The Partnership also earns service fees which are generally based on 15 to 25 basis points of its customers' assets which are held by the mutual funds. The Partnership does not manage any mutual fund, although it is a limited partner of Passport Research, Ltd., an advisor to a money market mutual fund.
Over-the-Counter and Principal Transactions. Partnership activities in unlisted (over-the-counter) transactions are essentially similar to its activities as a broker in listed securities. In connection with customers' orders to buy or sell securities on an agency basis, the Partnership charges a commission. In dealing on a principal basis, the Partnership charges its customers a net price approximately equal to the current inter-dealer market price plus or minus a mark-up or mark-down from such market price. The National Association of Securities Dealers (NASD) Rules of Fair Practice require that such mark-up (or mark-down) be fair and reasonable.
Insurance. The Partnership has executed several agency agreements with various national insurance companies. Through its approximately 2,608 investment representatives who hold insurance sales licenses, EDJ is able to offer term life insurance, health insurance, and fixed and variable annuities to its customers. Revenues from the sale of insurance products, primarily annuities, approximated 13% of total revenues in 1994, and the overall Insurance area has experienced growth in recent years largely as a result of the growth in the number of representatives licensed to engage in insurance sales.
The Partnership makes a market in over-the-counter corporate securities, municipal obligations, including general obligations and revenue bonds, unit investment trusts and mortgage-backed securities. The Partnership's market-making activities are conducted with other dealers in the "wholesale" market and "retail" market wherein the
Partnership acts as a dealer buying from and selling to its customers. In making markets in over-the-counter securities, the Partnership exposes its capital to the risk of fluctuation in the market value of its security positions. It is the Partnership's policy not to trade for its own account.
As in the case of listed brokerage transactions, revenue from over- the-counter and principal transactions is highly influenced by the volume of business and securities prices, as well as by the varying number of registered representatives employed by the Partnership over the periods indicated.
Investment Banking. The Partnership's investment banking activities are carried on through its Syndicate and Underwriting Departments. The principal service which the Partnership renders as an investment banker is the underwriting and distribution of securities either in a primary distribution on behalf of the issuer of such securities or in a secondary distribution on behalf of a holder of such securities. The distributions of corporate and municipal securities are, in most cases, underwritten by a group or syndicate of underwriters. Each underwriter has a participation in the offering.
Unlike many larger firms against which the Partnership competes, the Partnership does not presently engage in other investment banking activities such as assisting in mergers and acquisitions, arranging private placement of securities issues with institutions or providing consulting and financial advisory services to corporations.
The Syndicate and Underwriting Departments are responsible for the largest portion of the Partnership's investment banking business. In the case of an underwritten offering managed by the Partnership, these departments may form underwriting syndicates and work closely with the branch office system for sales of the Partnership's own participation and with other members of the syndicate in the pricing and negotiation of other terms. In offerings managed by others in which the Partnership participates as a syndicate member, these departments serve as active coordinators between the managing underwriter and the Partnership's branch office system.
The underwriting activity of the Partnership involves substantial risks. An underwriter may incur losses if it is unable to resell the securities it is committed to purchase or if it is forced to liquidate all or part of its commitment at less than the agreed purchase price. Furthermore, the commitment of capital to underwriting may adversely affect the Partnership's capital position and, as such, its participation in an underwriting may be limited by the requirement that it must at all times be in compliance with the net capital rule.
The Securities Act of 1933 and other applicable laws and regulations impose substantial potential liabilities on underwriters for material misstatements or omissions in the prospectus used to describe the offered securities. In addition, there exists a potential for possible conflict of interest between an underwriter's desire to sell its securities and its obligation to its customers not to recommend unsuitable securities. In recent years there has been an increasing incidence of litigation in these areas. These lawsuits are frequently brought for the benefit of large classes of purchasers of underwritten securities. Such lawsuits often name underwriters as defendants and typically seek substantial amounts in damages.
Interest and Dividends. Interest and dividend income is earned on securities held and margin account balances.
Money Market Fees, IRA Custodial Service Fees and Other Revenues. Other revenue sources include money market management fees and IRA custodial services fees, accommodation transfer fees, gains from sales of certain assets, and other product and service fees. The Partnership has an interest in the investment advisor to its money market fund, Daily Passport Cash Trust. Revenue from this source has increased over the periods due to growth in the fund, both in dollars invested and number of accounts. In 1991 EDJ became the custodian for its IRA accounts. Each account is charged an annual service fee for services rendered to it by the Partnership.
The Partnership has registered an investment advisory program with the SEC under the Investment Advisors Act of 1940. This service is offered firmwide and involves income and estate tax planning and analysis for clients. Revenues from this source are insignificant and included under "Other Revenues."
Also included in the category "Other Revenues" are accommodation transfer fees, gains from sales of certain assets, other non-recurring gains and revenue from management fees charged by mutual funds.
Research Department. The Partnership maintains a Research Department to provide specific investment recommendations and market information for retail customers. The Department supplements its own research with the services of various independent research services. The Partnership competes with many other securities firms with substantially larger research staffs in its research activities.
Customer Account Administration and Operations. Operations employees are responsible for activities relating to customers' securities and the processing of transactions with other broker/dealers. These activities include receipt, identification, and delivery of funds and securities, internal financial controls, accounting and personnel functions, office services, storage of customer securities and the handling of margin accounts. The Partnership processes substantially all of its own transactions. It is important that the Partnership maintains current and accurate books and records from both a profit viewpoint as well as for regulatory compliance.
To expedite the processing of orders, the Partnership's branch office system is linked to the St. Louis headquarters office through an extensive communications network. Orders for all securities are centralized and executed in St. Louis. The Partnership's processing of paperwork following the execution of a security transaction is automated, and operations are generally on a current basis.
There is considerable fluctuation during any one year and from year to year in the volume of transactions the Partnership processes. The Partnership records transactions and posts its books on a daily basis. Operations' personnel monitor day-to-day operations to determine compliance with applicable laws, rules and regulations. Failure to keep current and accurate books and records can render the Partnership liable to disciplinary action by governmental and self-regulatory organizations.
The Partnership has a computerized branch office communication system which is principally utilized for entry of security orders, quotations, messages between offices and cash receipts functions.
The Partnership clears and settles virtually all of its listed transactions through the National Securities Clearing Corporation ("NSCC"), New York, New York. NSCC effects clearing of securities on the New York, American and Midwest Stock Exchanges.
In conjunction with clearing and settling transactions with NSCC the Partnership holds customers' securities on deposit with Depository Trust Company ("DTC") in lieu of maintaining physical custody of the certificates.
The Partnership is substantially dependent upon the operational capacity and ability of NSCC/DTC. Any serious delays in the processing of securities transactions encountered by NSCC/DTC may result in delays of delivery of cash or securities to the Partnership's customers. These services are performed for the Partnership under contracts which may be changed or terminated at will by either party.
Automated Data Processing, Inc., ("ADP") provides automated data processing services for customer account activity and records.
The Partnership does not employ its own floor broker for transactions on exchanges. The Partnership has arrangements with other brokers to execute the Partnership's transactions in return for a commission based on the size and type of trade. If for any reason any of the Partnership's clearing, settling or executing agents were to fail, the Partnership and its customers would be subject to possible loss. While the coverages provided by the Securities Investors Protection Corporation (SIPC) and protection in excess of SIPC limits would be available to customers of the Partnership, to the extent that the Partnership would not be able to meet the obligations of the customers, such customers might experience delays in obtaining the protections afforded them by the SIPC and the Partnership's insurance carrier.
The Partnership believes that its internal controls and safeguards concerning the risks of securities thefts are adequate. Although the possibility of securities thefts is a risk of the industry, the Partnership has not had, to date, a significant problem with such thefts. The Partnership maintains fidelity bonding insurance which, in the opinion of management, provides adequate coverage.
Employees. Including its general partners, the Partnership has approximately 9,670 full and part-time employees, including 3,309 who are registered salespeople as of February 24, 1995. The Partnership's salespersons are compensated on a commission basis and may, in addition, be entitled to bonus compensation based on their respective branch office profitability and the profitability of the Partnership. The Partnership has no formal bonus plan for its non-registered employees. The Partnership has, however, in the past paid bonuses to its non-registered employees on an informal basis, but there can be no assurance that such bonuses will be paid for any given period or will be within any specific range of amounts.
Employees of the Partnership are bonded under a blanket policy as required by NYSE rules. The annual aggregate amount of coverage is
$40,000,000 subject to a $2,000,000 deductible provision, per occurrence.
The Partnership maintains a training program for prospective salespeople which includes eight weeks of concentrated instruction and on-the-job training in a branch office. The first phase of training is spent reviewing Series 7 examination materials and preparing for and taking the examination. The first week of the training after passing the examination is spent in a comprehensive training program in St. Louis. The next five weeks include on-the-job training in branch locations reviewing products, office procedures and sales techniques. The broker is then sent to a designated location to establish the EDJ office, conduct market research and prepare for opening the office. After the salesperson has opened a branch office, one final week is spent in a central location to complete the initial training program. Three and six months later, the investment representative attends additional training classes in St. Louis, and subsequently, EDJ offers periodic continuing training mechanisms to its seasoned sales force. Although the Partnership pays the broker during the transition period, the broker must fulfill special tasks before being awarded full branch status. EDJ's basic brokerage payout is similar to its competitors. A bonus may also be paid based on the profitability of the branch and the profitability of the Partnership.
The Partnership considers its employee relations to be good and believes that its compensation and employee benefits which include medical, life, and disability insurance plans and profit sharing and deferred compensation retirement plans, are competitive with those offered by other firms principally engaged in the securities business.
Competition. The Partnership is subject to intensive competition in all phases of its business from other securities firms, many of which are substantially larger than the Partnership in terms of capital, brokerage volume and underwriting activities. In addition, the Partnership encounters competition from other financially oriented organizations such as banks, insurance companies, and others offering financial services and advice. In recent periods, many regulatory requirements prohibiting non-securities firms from engaging in certain aspects of brokerage firms' business have been eliminated and further removal of such prohibitions is anticipated. With minor exceptions, customers are free to transfer their business to competing organizations at any time.
There is intense competition among securities firms for salespeople with good sales production records. In recent periods, the Partnership has experienced increasing efforts by competing firms to hire away its registered representatives although the Partnership believes that its rate of turnover of investment representatives is not higher than that of other firms comparable to the Partnership.
Regulation. The securities industry in the United States is subject to extensive regulation under both federal and state laws. The SEC is the federal agency responsible for the administration of the federal securities laws. The Partnership's principal subsidiary is registered as a broker-dealer and investment advisor with the SEC. Much of the regulation of broker-dealers has been delegated to self-regulatory organizations, principally the NASD and national securities exchanges such as the NYSE, which has been designated by the SEC as the Partnership's primary regulator. These self-regulatory organizations adopt rules (which are subject to approval by the SEC) that govern the
industry and conduct periodic examinations of the Partnership's operations. Securities firms are also subject to regulation by state securities administrators in those states in which they conduct business. EDJ or an affiliate is registered as a broker-dealer in 50 states, Puerto Rico and Canada.
Broker-dealers are subject to regulations which cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and safekeeping of customers' funds and securities, capital structure of securities firms, record-keeping and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and self- regulatory organizations, or changes in the interpretation or enforcement of existing laws and rules, may directly affect the mode of operation and profitability of broker-dealers. The SEC, self- regulatory organizations and state securities commissions may conduct administrative proceedings which can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets, rather than protection of the creditors and stockholders of broker-dealers.
Uniform Net Capital Rule. As a broker-dealer and a member firm of the NYSE, the Partnership is subject to the Uniform Net Capital Rule (Rule) promulgated by the SEC. The Rule is designed to measure the general financial integrity and liquidity of a broker-dealer and the minimum net capital deemed necessary to meet the broker-dealer's continuing commitments to its customers. The Rule provides for two methods of computing net capital and the Partnership has adopted what is generally referred to as the alternative method. Minimum required net capital under the alternative method is equal to 2% of the customer debit balances, as defined. The Rule prohibits withdrawal of equity capital whether by payment of dividends, repurchase of stock or other means, if net capital would thereafter be less than 5% of customer debit balances. Additionally, certain withdrawals require the consent of the SEC to the extent they exceed defined levels even though such withdrawals would not cause net capital to be less than 5% of aggregate debit items. In computing net capital, various adjustments are made to exclude assets which are not readily convertible into cash and to provide a conservative statement of other assets such as a company's inventories. Failure to maintain the required net capital may subject a firm to suspension or expulsion by the NYSE, the SEC and other regulatory bodies and may ultimately require its liquidation. The Partnership has, at all times, been in compliance with the net capital rules.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership conducts its headquarters operations from 19 separate buildings in St. Louis County, Missouri. The headquarters facilities are comprised of 18 separate buildings containing approximately 761,700 usable square feet which it owns and one building which it leases. In addition, the Partnership leases approximately 5,000 square feet of office space for its Canadian headquarters operations in Mississauga, Ontario. The Partnership also maintains facilities in 3,356 branch locations which (as of December 31, 1994) are predominantly rented under cancellable leases.
Furniture, fixtures, computer and communication equipment are rented under various operating leases. Additionally, branch offices are
leased on a three to five year basis and are cancellable at the option of the Partnership. The Partnership's lease commitments are summarized in the Notes to the Consolidated Financial Statements appearing elsewhere herein.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In recent years there has been an increasing incidence of litigation involving the securities industry. Such suits often seek to benefit large classes of industry customers; many name securities dealers as defendants along with exchanges in which they hold membership and seek large sums as damages under federal and state securities laws, anti- trust laws, and common law.
Various legal actions, primarily relating to the distribution of securities, are pending against the Partnership. Certain cases are class actions (or purported class actions) claiming substantial damages. These actions are in various stages and the results of such actions cannot be predicted with certainty. In the opinion of management, after consultation with legal counsel, the ultimate resolution of these actions will not have a material adverse impact on the Partnership's financial condition.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no market for the Limited or Subordinated Limited Partnership interests and their assignment is prohibited.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following information sets forth, for the past five years, selected financial data. (All amounts in thousands, except per unit information.)
Summary Income Statement Data:
1994 1993 1992 1991 1990
Revenues $658,045 $639,564 $553,970 $411,588 $316,503 Net income 53,857 66,211 62,282 40,875 22,553
Net income per weighted average $1,000 equivalent limited partnership unit outstanding $127.59 $194.62 $238.41 $185.92 $130.52
Weighted average $1,000 equivalent limited partnership units outstanding 63,165 50,381 41,160 42,616 25,874
Net income per weighted average
$1,000 equivalent subordinated limited partnership unit outstanding $237.83 $350.32 $418.21 $322.38 $212.86
Weighted average $1,000 equivalent subordinated limited partnership units outstanding 21,789 16,936 12,941 10,624 10,190
Summary Balance Sheet Data:
1994 1993 1992 1991 1990
Total assets $953,359 $800,478 $653,253 $513,730 $422,257 ======= ======= ======= ======= =======
Long-term debt $ 41,779 $ 33,317 $ 23,847 $ 24,769 $ 19,977
Other liabilities, exclusive of subordinated liabilities 585,057 514,386 414,110 326,229 250,772
Subordinated liabilities136,000 73,000 78,000 48,000 50,400
Total partnership capital 190,523 179,775 137,296 114,732 101,108 ________ ________ ________ ________ ________ Total liabilities and partnership capital $953,359 $800,478 $653,253 $513,730 $422,257 ======== ======== ======== ======== ========
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table summarizes the changes in major categories of revenues and expenses for the last two years (Dollar amounts in thousands.) 1994 vs. 1993 1993 vs. 1992 Increase - (Decrease) Amount Percentage Amount Percentage
Revenues Commissions $(62,445) (14)% $126,496 41% Principal transactions 70,579 76 (38,895) (30) Investment banking (8,642) (19) (15,634) (26) Interest and dividends 14,059 37 7,564 25 Other 4,930 17 6,063 26 _________ ___ ________ ___
18,481 3 85,594 15 _________ ___ ________ ___ Expenses Employee and partner compensation and benefits (6,997) (2) 57,613 17 Occupancy and equipment 9,916 17 10,069 20 Communications and data processing 13,724 40 4,898 17 Interest 9,616 50 3,632 23 Payroll and other taxes 3,108 17 1,767 11 Floor brokerage and clearance fees (371) (6) 781 15 Other operating expenses 1,839 4 2,905 7 _________ ___ _________ ___
30,835 5 81,665 17 _________ ___ _________ ___
Net income $(12,354) (19)% $ 3,929 6%
RESULTS OF OPERATIONS (1994 VERSUS 1993)
Revenues increased 3% ($18.5 million) over 1993 to $658 million. Expenses increased by 5% ($31 million) resulting in net income of $54 million, a decrease of 19% ($12 million) over 1993.
In 1994, the Partnership increased its salesforce by 23% to 3,378 investment representatives compared with 2,745 at the end of 1993. The growth in the salesforce contributed to a 7% increase in dollars invested by EDJ customers which grew from $17.8 billion in 1993 to $19.1 billion in 1994. Productivity measured on an individual investment representative basis, however, has decreased as EDJ has increased its investment representatives. Many of the new investment representatives are beginners in the industry who generally achieve profitability after about 30 months. In addition, the product mix of the firm has shifted away from mutual funds and into Certificates of Deposit, Corporate, Government and Municipal bonds, which has reduced the margin on customer dollars invested compared with 1993. As the yield curve has flattened, customers were inclined to purchase shorter term investments, which carry lower margins compared with longer term investments and equities. These factors combined caused an overall increase in revenues of 3% ($18.5 million) over 1993 to $658 million.
Commission revenues decreased $62 million primarily from a $79 million (35%) decrease in mutual fund commissions offset by a $10 million increase in mutual fund service fees. Listed and over-the-counter agency commissions decreased $8.5 million or 10% over 1993. Insurance commissions increased 18%, with variable and fixed annuities increasing by $12.8 million. With rising interest rates over the year, customers increased their investments in short and intermediate term fixed income securities.
Principal transaction revenues increased 76% ($71 million) with government and municipal bond revenues increasing $46 million. Revenues from collateralized mortgage obligations (CMOs) increased 123% ($15.5 million) and corporate bonds increased 38% ($6.3 million). At the same time, O-T-C principal stock sales decreased by $1 million.
Investment banking revenues declined 19% ($8.6 million) from substantial decreases in equity originations and syndicate equity
participations ($7.2 million). Syndicate CMOs decreased 89% ($5.5 million) with the decrease partially offset by certificate of deposit revenue increasing 110% ($9.1 million).
Interest and dividend revenues increased 37% or $14 million. Customers' margin loan balances increased 4% in 1994 ($17 million) ending the year at $468 million. Customer margin loan revenue increased 38% ($11.1 million) primarily due to the increase in interest rates during the year. U.S. Government and agency interest income increased 42% ($2.8 million) from $6.5 million as the Partnership increased Investment Securities by approximately $60 million during the year.
Other revenues increased $5 million (17%) over 1993. Revenues from non-bank custodian IRA accounts resulted in an increase of $1.2 million in 1994.
Overall expenses increased 5% ($31 million) as the Partnership continued to incur significant costs related to the growth of its salesforce, which has increased approximately 23% for each of the last three years. The Partnership incurred approximately $28 million of training, salary and other costs in order to support the growth in the salesforce compared with $21 million in 1993.
The Partnership's compensation structure for its investment representatives and non-sales personnel is designed to expand or contract substantially as a result of changes in revenues, net income and profit margins. As a result of decreased revenues and net income in 1994, variable compensation, including bonuses and profit sharing contributions, declined by $35 million or 44% from 1993 levels. This was offset by increases in headquarter, branch and trainee compensation which increased to support the 23% growth in the salesforce. Overall, compensation decreased by $7 million.
Other operating expenses are less influenced by decreasing revenues and net income. In total, these expenses increased by $38 million, or 21%, and were primarily related to the headquarters and increased branch expenses necessary to support a rapidly growing salesforce.
RESULTS OF OPERATIONS (1993 VERSUS 1992)
Revenues increased 15% ($86 million) over 1992 to $640 million. Expenses increased by 17% ($82 million) resulting in net income of $66 million, an increase of 6% ($4 million) over 1992. These results were significantly influenced by the Partnership's activities in connection with the expansion of its salesforce. The number of investment representatives increased 24% in 1993 to 2,745. By comparison, 1992's growth in investment representatives was 22%. The Partnership incurred significant training, salary and other costs in support of new investment representatives. The net impact of these direct expenses amounted to nearly $21 million during 1993 ($14 million in 1992). Additionally, the Partnership made significant increases in home office overhead to support the increased salesforce.
Commission revenues increased $126 million fueled by a $82 million (44%) increase in mutual fund commissions and service fees. Listed and over-the-counter agency commissions increased $18 million or 24% over 1992. Insurance commissions increased 56%, with variable and fixed annuity commissions increasing $26 million. The increasing
level of securities prices along with lower interest rates turned individual investors to equity markets and equity based investments in search of more attractive returns. The continued strength of the securities markets led to solid increases in commission generated from the sales of securities products.
Principal transaction revenues decreased 30% ($39 million). CMO revenues decreased $11.3 million, government and municipal bond revenues decreased by $9.7 million and $3.7 million, respectively. Prior to 1993, municipal bond syndicate revenues were included in principal transaction revenues. In 1993, these revenues, totalling $10.3 million, were included in investment banking revenues. The majority of the principal transaction revenue decreases largely resulted from historically low interest rates and the resulting popularity of equity based investments.
Investment banking revenues declined $15.6 million resulting from decreases in certificate of deposit revenues ($8 million), CMO revenues ($11 million), and equity and debt originations.
Interest and dividend revenues increased 25% or $7.6 million. Customers' margin loan balances increased 36% in 1993 ($120 million) ending the year at $451 million. The increase in customers' loan balances was attributable to higher securities prices, continuation of marketing efforts targeting individuals to view their securities as access to a personal line of credit and lower interest rates. The increase in loan balances more than offset the decline in short term interest rates during the year resulting in increased interest earnings.
Other revenues increased $6 million (26%) over 1992. Revenues from non-bank custodian IRA accounts resulted in an increase of $1 million in 1993.
Overall expenses increased 17% ($82 million). The Partnership's compensation structure for its investment representatives is designed to expand or contract substantially as a result of changes in revenues, net income and profit margins. Similarly, non-sales personnel compensation from bonuses and profit sharing contributions expands and contracts in relation to net income. The Partnership's non-compensation related expenses are less responsive to changes in revenues and net income. Rather, these expenses are influenced by the number of salespeople, growth of the salesforce, the number of customer accounts and, to a lesser extent, the volume of transactions. As a result of its expense structure, the Partnership's compensation expense increased 17% . The Partnership's expenses other than compensation increased 15%. Increased expense levels related to supporting a larger number of investment representatives and branch offices were primarily responsible for the increase in operating expenses.
The Effects of Inflation
The Partnership's net assets are primarily monetary, consisting of cash, securities inventories and receivables less liabilities. Monetary net assets are primarily liquid in nature and would not be significantly affected by inflation. Inflation and future expectations of inflation influence securities prices, as well as activity levels in the securities markets. As a result, profitability
and capital may be impacted by inflation and inflationary expectations. Additionally, inflation's impact on the Partnership's operating expenses may affect profitability to the extent that additional costs are not recoverable through increased prices of services offered by the Partnership.
Liquidity and Capital Adequacy
The Partnership's equity capital at December 31, 1994, was $190.5 million compared to $179.8 million at December 31, 1993. Overall, equity capital increased 6%, primarily due to the retention of earnings and issuance of partnership interests. The Partnership issued additional limited partnership interests in August 1993 of $24.8 million and additional subordinated limited partnership interest of $4.4 and $5.2 million in 1993 and 1994, respectively.
At December 31, 1994, the Partnership had a $36.7 million balance of cash and cash equivalents. Lines of credit are in place at ten banks aggregating $615 million ($570 million were through uncommitted facilities). Actual borrowing availability is primarily based on securities owned and customers' margin securities.
In addition, the Partnership increased its subordinated liabilities by approximately $63 million during the year, the net proceeds of which were primarily invested in U.S. Government Obligations.
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.
As a result of its activities as a broker/dealer, EDJ, the Partnership's principal subsidiary, is subject to the Net Capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934 and the capital rules of the New York Stock Exchange. Under the alternative method permitted by the rules, EDJ must maintain minimum Net Capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. The Net Capital rule also provides the partnership capital may not be withdrawn if resulting Net Capital would be less than 5% of aggregate debit items. Additionally, certain withdrawals require the consent of the SEC to the extent they exceed defined levels even though such withdrawals would not cause Net Capital to be less than 5% of aggregate debit items. At December 31, 1994, EDJ's Net Capital of $153,163,000 was 31% of aggregate debit items and its net capital in excess of the minimum required was $143,423,000. Net Capital and the related capital percentage may fluctuate on a daily basis.
Cash Flows
Cash and cash equivalents increased $7,884,000 from December 31, 1993, to December 31, 1994. Cash flows were primarily provided from net income, a decrease in net receivables from customers, brokers, dealers or clearing organizations and increases in short term bank loans, issuance of subordinated debt and the issuance of long term debt. Cash flows were primarily used to decrease accounts payable and accrued expenses, increase securities owned, purchase equipment, property and improvements, repay long-term debt, repay subordinated liabilities and fund capital withdrawals and distributions.
Cash and cash equivalents decreased $8,932,000 from December 31, 1992, to December 31, 1993. Cash flows were primarily provided from net income, a decrease in securities owned, an increase in short and long term bank loans and the issuance of partnership interests. Cash flows were primarily used to increase net receivables from customers and brokers, purchase equipment, property and improvements, and fund withdrawals and distributions.
Cash and cash equivalents increased $5,308,000 from December 31, 1991, to December 31, 1992. Cash flows were primarily provided from net income, an increase in short term bank loans and the issuance of subordinated debt. Cash flows were primarily used to increase net receivables from customers, increase securities owned, purchase equipment, property and improvements, and fund capital withdrawals and distributions.
There were no material changes in the Partnership's overall financial condition during the year ended December 31, 1994, compared with the year ended December 31, 1993. The Partnership's consolidated statement of financial condition is comprised primarily of cash and assets readily convertible into cash. Securities inventories are carried at market value and are readily marketable. The firm carried higher trading inventory levels in 1994 as compared to 1993. 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 interest to its employees, retention of earnings and private placements of long-term and subordinated debt.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements Included in this Item
Page No.
Report of Independent Public Accountants 19
Consolidated Statements of Financial Condition as of December 31, 1994 and 1993 20
Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992 22
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 23
Consolidated Statements of Changes in Partnership Capital for the years ended December 31, 1994, 1993 and 1992 24
Notes to Consolidated Financial Statements 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Jones Financial Companies, a Limited Partnership:
We have audited the accompanying consolidated statements of financial condition of The Jones Financial Companies, a Limited Partnership (a Missouri limited partnership) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, cash flows and changes in partnership capital for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Jones Financial Companies, a Limited Partnership and subsidiaries as of December 31, 1994 and 1993, and the results of their operations, their cash flows and the changes in their partnership capital for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri, February 21, 1995
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31, December 31, (Amounts in thousands) 1994 1993
Cash and cash equivalents $ 36,682 $ 28,798
Receivable from: Customers (Note 2) 497,961 464,760 Brokers or dealers and clearing organizations (Note 3) 16,604 32,550
Securities owned, at market value (Note 4): Inventory securities 91,308 60,371 Investment securities 137,066 73,575
Office equipment, property and improvements, net (Note 5) 125,764 102,434
Other assets 47,974 37,990 __________ __________
$ 953,359 $ 800,478
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
December 31, December 31, (Amounts in thousands) 1994 1993
Bank loans (Note 6) $ 165,000 $ 139,261
Payable to: Customers (Note 2) 293,324 242,584 Brokers or dealers and clearing organizations (Note 3) 13,225 8,092
Securities sold but not yet purchased, at market value (Note 4) 16,037 17,766
Accounts payable and accrued expenses 39,425 37,419
Accrued compensation and employee benefits 58,046 69,264
Long-term debt (Note 7) 41,779 33,317 ____________ __________ 626,836 547,703 Liabilities subordinated to claims of general creditors (Note 8) 136,000 73,000
Partnership capital (Notes 9 and 10): Limited partners 67,461 71,222 Subordinated limited partners 23,722 19,163 General partners 99,340 89,390
____________ __________ 190,523 179,775 ____________ __________
$ 953,359 $ 800,478
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
(Amounts in thousands, December 31 December 31 December 31 except per unit information) 1994 1993 1992
Revenues: Commissions $ 371,925 $ 434,370 $307,874 Principal transactions 163,050 92,471 131,366 Investment banking 36,359 45,001 60,635 Interest and dividends 52,143 38,084 30,520 Other 34,568 29,638 23,575 _________ _________ _________ 658,045 639,564 553,970 __________ _________ _________ Expenses: Employee and partner compensation and benefits (Note 11) 382,920 389,917 332,304 Occupancy and equipment (Notes 5 & 12) 69,465 59,549 49,480 Communications and data processing 47,891 34,167 29,269 Interest (Notes 6, 7 and 8) 28,744 19,128 15,496 Payroll and other taxes 21,288 18,180 16,413 Floor brokerage and clearance fees 5,770 6,141 5,360 Other operating expenses 48,110 46,271 43,366 _________ _________ _________ 604,188 573,353 491,688 _________ _________ _________
Net income $ 53,857 $ 66,211 $ 62,282 ======== ======== ======== Net income allocated to: Limited partners $ 8,059 $ 9,805 $ 9,813 Subordinated limited partners 5,182 5,933 5,412 General partners 40,616 50,473 47,057 _________ _________ _________ $ 53,857 $ 66,211 $ 62,282 ======== ======== ======== Net income per weighted average $1,000 equivalent partnership units outstanding: Limited partners $ 127.59 $ 194.62 $ 238.41 ======== ======== ========= Subordinated limited partners $ 237.83 $ 350.32 $ 418.21 ======== ======== ======== Weighted average $1,000 equivalent partnership units outstanding: Limited partners 63,165 50,381 41,160 ======== ======== ======== Subordinated limited partners 21,789 16,936 12,941 ======== ======== ========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 December 31 December 31 (Amounts in thousands) 1994 1993 1992 CASH FLOWS (USED) PROVIDED BY OPERATING ACTIVITIES: Net income $ 53,857 $ 66,211 $ 62,282 Adjustments to reconcile net income to net cash (used) provided by operating activities: Depreciation and amortization 19,236 16,800 14,728 Decrease (increase) in net receiv- able from/payable to customers 17,539 (37,374) (90,526) Decrease (increase) in net receivable from/payable to brokers or dealers and clearing organizations 21,079 (24,493) 13,401 (Increase) decrease in securities owned, net (96,157) 20,902 2,573 (Decrease) increase in accounts payable and other accrued expenses (9,212) 6,960 106 Increase in other assets (9,984) (7,828) (7,744) Net cash (used) provided by operating activities (3,642) 41,178 (5,180)
CASH FLOWS USED BY INVESTING ACTIVITIES: Purchase of office equipment, property and improvements, net (42,566) (47,109) (28,872)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES: Increase in bank loans 25,739 16,261 50,000 Issuance of long-term debt 44,859 11,700 - Repayment of long-term debt (36,397) (2,230) (922) Issuance of subordinated liabilities 92,000 - 30,000 Repayment of subordinated liabilities (29,000) (5,000) - Issuance of partnership interests 5,167 29,195 2,396 Redemption of partnership interests (2,343) (1,193) (1,326) Withdrawals and distributions from partnership capital (45,933) (51,734) (40,788) Net cash provided (used) by financing activities 54,092 (3,001) 39,360 Net increase (decrease) in cash and cash equivalents 7,884 (8,932) 5,308
CASH AND CASH EQUIVALENTS, beginning of year 28,798 37,730 32,422
end of year $ 36,682 $ 28,798 $ 37,730
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL
YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
Subordinated Limited Limited General Partnership Partnership Partnership Capital Capital Capital Total
Balance, December 31, 1991 $ 46,687 $ 11,788 $ 56,257 $114,732 Issuance of partnership interests - 2,396 - 2,396 Redemption of partnership interests (1,175) (151) - (1,326) Net income 9,813 5,412 47,057 62,282 Withdrawals and distributions (7,997) (4,729) (28,062) (40,788) _________ _________ _________ ________
Balance, December 31, 1992 $ 47,328 $ 14,716 $ 75,252 $137,296 Issuance of partnership interests 24,763 4,432 - 29,195 Redemption of partnership interests (1,193) - - (1,193) Net income 9,805 5,933 50,473 66,211 Withdrawals and distributions (9,481) (5,918) (36,335) (51,734) _________ _________ _________ _________
Balance, December 31, 1993 $ 71,222 $ 19,163 $ 89,390 $179,775 Issuance of partnership interests - 5,167 - 5,167 Redemption of partnership interests (1,905) (438) - (2,343) Net income 8,059 5,182 40,616 53,857 Withdrawals and distributions (9,915) (5,352) (30,666) (45,933) _________ _________ _________ _________
Balance, December 31, 1994 $ 67,461 $ 23,722 $ 99,340 $190,523
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The Partnership's Business and Basis of Accounting. The accompanying consolidated financial statements include the accounts of The Jones Financial Companies, a Limited Partnership, and all wholly owned subsidiaries (the "Partnership"). All material intercompany balances and transactions have been eliminated.
The Partnership conducts business throughout the United States and in Canada with its customers, various brokers and dealers, clearing organizations, depositories and banks. The Partnership's principal operating subsidiary is Edward D. Jones & Co., L.P. ("EDJ"), a registered broker/dealer.
Cash and Cash Equivalents. The Partnership considers all short-term investments with original maturities of three months or less, that are not held for sale to customers, to be cash equivalents.
Securities Transactions. The Partnership's securities activities involve execution, settlement and financing of various securities transactions for customers. These transactions (and related revenue and expense) are recorded on a settlement date basis, generally representing the fifth business day following the transaction date,
which is not materially different than a trade date basis. The Partnership may be exposed to risk of loss in the event customers, other brokers and dealers, banks, depositories or clearing organizations are unable to fulfill contractual obligations. For transactions in which it extends credit to customers, the Partnership seeks to control the risks associated with these activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines.
Securities Owned. Securities owned are valued at current market prices. Unrealized gains or losses are reflected in principal transactions revenue.
Office Equipment, Property and Improvements. Office equipment is depreciated using straight-line and accelerated methods over estimated useful lives of five to ten years. Buildings are depreciated using the straight-line method over estimated useful lives approximating thirty years. Amortization of property improvements is computed based on the remaining life of the property or economic useful life of the improvement, whichever is less. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged against income as incurred, whereas significant renewals and betterments are capitalized.
Segregated Cash Equivalents and Securities Owned. Rule 15c3-3 of the Securities and Exchange Commission requires deposits of cash or securities to a special reserve bank account for the benefit of customers if total customer related credits exceed total customer related debits, as defined. No deposits of cash or securities were required as of December 31, 1994 or 1993.
Income Taxes. Income taxes have not been provided for in the consolidated financial statements since The Jones Financial Companies, a Limited Partnership, is organized as a partnership, and each partner is liable for its own tax payments.
Reclassifications. Certain 1993 and 1992 amounts have been reclassified to conform to the 1994 financial statement presentation.
NOTE 2 - RECEIVABLE FROM AND PAYABLE TO CUSTOMERS
Accounts receivable from and payable to customers include margin balances and amounts due on uncompleted transactions. Values of securities owned by customers and held as collateral for these receivables are not reflected in the financial statements. Substantially all amounts payable to customers are subject to withdrawal upon customer request.
NOTE 3 - RECEIVABLE FROM AND PAYABLE TO BROKERS OR DEALERS AND CLEARING ORGANIZATIONS
The components of receivable from and payable to brokers or dealers and clearing organizations are as follows:
(Amounts in thousands) 1994 1993
Securities failed to deliver $ 3,864 $ 7,030 Deposits paid for securities borrowed 8,604 22,048
Deposits with clearing organizations 2,448 2,446 Other 1,688 1,026 __________ __________ Total receivable from brokers or dealers and clearing organizations $ 16,604 $ 32,550 ========== ==========
Securities failed to receive $ 10,064 $ 6,580 Deposits received for securities loaned 2,735 1,239 Other 426 273 __________ __________ Total payable to brokers or dealers and clearing organizations $ 13,225 $ 8,092
"Fails" represent the contract value of securities that have not been received or delivered by settlement date.
NOTE 4 - SECURITIES OWNED
Securities owned are summarized as follows (at market value):
1994 1993 _____________________________________ Securities Securities Sold but Sold but Securities not yet Securities not yet (Amounts in thousands) Owned Purchased Owned Purchased
Inventory Securities: Certificates of deposit $ 3,113 $ 246 $ 3,691 $ 49 U.S. and Canadian government and agency obligations 18,501 11,201 4,123 15,070 State and municipal obligations 42,860 726 34,306 839 Corporate bonds and notes 16,342 3,145 10,045 818 Corporate stocks 10,492 719 8,206 990 _________ _________ _________ _________ $ 91,308 $ 16,037 $ 60,371 $ 17,766 ======== ======== ======== ========
Investment Securities: U.S. government and agency obligations $137,066 $ 73,575 ======== ========
The Partnership attempts to reduce its exposure to market price fluctuations of its inventory securities through the sale of futures contracts and U.S. government securities. The amount of the securities purchased or sold will fluctuate on a daily basis due to changes in interest rates and market conditions. Any gain or loss on the hedging activities is recognized in principal transactions revenue.
NOTE 5 - OFFICE EQUIPMENT, PROPERTY AND IMPROVEMENTS
Office equipment, property and improvements are summarized as follows:
(Amounts in thousands) 1994 1993
Land $ 13,705 $ 13,705 Buildings and improvements 76,142 62,035 Office equipment 78,902 70,213 Furniture and fixtures 51,557 36,383 __________ __________ Total office equipment, property and improvements 220,306 182,336
Accumulated depreciation and amortization (94,542) (79,902) __________ __________ Office equipment, property and improvements, net $ 125,764 $ 102,434 ========== ==========
NOTE 6 - BANK LOANS
The Partnership borrows from banks on a short-term basis primarily to finance customer margin balances and inventory securities. As of December 31, 1994, the Partnership had bank lines of credit aggregating $615,000,000 of which $570,000,000 were through uncommitted facilities. Actual borrowing availability is primarily based on securities owned and customers' margin securities. Short- term bank loans outstanding at December 31, 1994 and 1993, are collateralized by securities owned by the Partnership and customers' margin securities with a market value of $475,594,000 and $363,740,000, respectively. Bank loans outstanding approximate their fair value.
Interest is at a fluctuating rate (weighted average rate of 6.98% and 4.17% at December 31, 1994, and 1993, respectively) based on short- term lending rates. The average of the aggregate short-term bank loans outstanding was $159,600,000, $99,100,000 and $57,794,000 and the average interest rate (computed on the basis of the average aggregate loans outstanding) was 5.22%, 4.04% and 4.40% for the years ended December 31, 1994, 1993 and 1992, respectively.
Cash paid for interest on bank loans, long-term debt, capital notes and other liabilities was $22,550,000, $14,059,000 and $10,956,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
NOTE 7 - LONG-TERM DEBT
Long-term debt is comprised of the following:
(Amounts in thousands) 1994 1993
Note payable, 9%, retired during 1994. $ - $ 9,600
Note payable, 9.875%, retired during 1994. - 12,282
Note payable, 8.5%, retired during 1994. - 11,435
Note payable, secured by equipment, interest at the prime rate, due in variable monthly installments of $194,444 plus interest with the final payment of $1,200,000 due on May 1, 1997. 6,450 -
Note payable, secured by property, interest at 8.72% per annum, principal and interest due in monthly installments of $289,700 with the final installment due on June 5, 2003. 20,818 -
Note payable, secured by property, interest at 8.23% per annum, principal and interest due in monthly installments of $149,659 due on April 5, 2008. 14,511 - __________ __________
$ 41,779 $ 33,317
Required annual principal payments, as of December 31, 1994, are as follows:
Principal Payment Year (Amounts in thousands)
1995 $ 4,687 1996 4,898 1997 4,577 1998 3,043 1999 3,315 Thereafter 21,259 _______ $ 41,779 ======
The Partnership has land, buildings and equipment with a carrying value of $51,457,000 at December 31, 1994, which are subject to security agreements that collateralize various notes payable. The Partnership has estimated the fair value of the long-term debt to be approximately $38,199,000 and $36,493,000 as of December 31, 1994 and 1993, respectively.
NOTE 8 - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
Liabilities subordinated to the claims of general creditors consist of:
(Amounts in thousands) 1994 1993
Capital notes, 9.375%, retired during 1994. $ - $ 15,000
Capital notes, 10.6%, due in installments of $7,000,000 on March 15, 1995 and 1996. 14,000 28,000
Capital notes, 8.96%, due in annual installments of $6,000,000 commencing on May 1, 1998, with a final installment on May 1, 2002 30,000 30,000
Capital notes, 7.95%, due in annual installments of $10,225,000 commencing on April 15, 1998, with a final installment of $10,200,000 due on April 15, 2006. 92,000 - __________ __________
$ 136,000 $ 73,000
The capital note agreements contain restrictions that among other things, require maintenance of certain financial ratios, restrict encumbrance of assets and creation of indebtedness and limit the withdrawal of partnership capital. As of December 31, 1994, the Partnership was required, under the note agreements, to maintain minimum partnership capital of $110,000,000 and Net Capital as computed in accordance with the uniform Net Capital rule of 7.5% of aggregate debit items (See Note 10).
The subordinated liabilities are subject to cash subordination agreements approved by the New York Stock Exchange and, therefore, are included in the Partnership's computation of Net Capital under the Securities and Exchange Commission's uniform Net Capital rule. The Partnership has estimated the fair value of the subordinated capital notes to be approximately $130,520,000 and $76,726,000 as of December 31, 1994 and 1993, respectively.
NOTE 9 - PARTNERSHIP CAPITAL
The limited partnership capital, consisting of 62,375 and 64,280 $1,000 units at December 31, 1994 and 1993, respectively, is held by current and former employees and general partners of the Partnership. Each limited partner receives interest at seven and one-half percent on the principal amount of capital contributed and a varying percentage of the net income of the Partnership. Interest expense includes $4,741,000, $3,781,000, and $3,090,000 for the years ended December 31, 1994, 1993 and 1992, respectively, paid to limited partners on capital contributed.
The subordinated limited partnership capital, consisting of 22,020 and 17,290 $1,000 units at December 31, 1994 and 1993, respectively, is held by current and former general partners of the Partnership. Each subordinated limited partner receives a varying percentage of the net
income of the Partnership. The subordinated limited partner capital is subordinated to the limited partnership capital.
Included in partnership capital at December 31, 1994 and 1993, are undistributed profits of $14,679,000 and $17,964,000, respectively, that will be withdrawn by the partners.
NOTE 10 - NET CAPITAL REQUIREMENTS
As a result of its activities as a broker/dealer, EDJ, is subject to the Net Capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934 and the capital rules of the New York Stock Exchange. Under the alternative method permitted by the rules, EDJ must maintain minimum Net Capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. The Net Capital rule also provides that partnership capital may not be withdrawn if resulting Net Capital would be less than 5% of aggregate debit items. Additionally, certain withdrawals require the consent of the SEC to the extent they exceed defined levels even though such withdrawals would not cause Net Capital to be less than 5% of aggregate debit items. At December 31, 1994, EDJ's Net Capital of $153,163,000 was 31% of aggregate debit items and its Net Capital in excess of the minimum required was $143,423,000. Net Capital as a percentage of aggregate debits after anticipated capital withdrawals was 30%. Net Capital and the related capital percentage may fluctuate on a daily basis. EDJ's Net Capital excludes $15,130,000 of undistributed profits that will be withdrawn by the partners.
NOTE 11 - EMPLOYEE BENEFIT PLAN
The Partnership maintains a profit sharing plan covering all eligible employees. Contributions to the plan are at the discretion of the Partnership. However, participants may contribute on a voluntary basis. Approximately $13,835,000, $16,716,000, and $15,625,000 were provided by the Partnership for its contributions to the plan for the years ended December 31, 1994, 1993 and 1992, respectively. No post retirement benefits are provided.
NOTE 12 - COMMITMENTS
Furniture, fixtures, computer and communication equipment are rented under various operating leases. Additionally, branch offices are leased on a three to five year basis and are cancellable at the option of the Partnership. The Partnership's lease commitments are:
(Amounts in thousands)
1995 $ 13,155 1996 11,289 1997 11,586 1998 6,076 1999 2,122
Rent expense was $35,558,000, $28,385,000, and $24,837,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
On October 25, 1994, the Partnership entered into an Agreement and Plan of Acquisition with Boone National Savings and Loan Association, F.A. to acquire the Association for a purchase price of approximately $8.6 million. The Partnership is in the process of obtaining regulatory approval for this transaction.
NOTE 13 - CONTINGENCIES
Various legal actions, primarily relating to the distribution of securities, are pending against the Partnership. Certain cases are class actions (or purported class actions) claiming substantial damages. These actions are in various stages and the results of such actions cannot be predicted with certainty. In the opinion of management, after consultation with legal counsel, the ultimate resolution of these actions will not have a material adverse impact on the Partnership's financial condition.
ITEM 9.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Jones Financial Companies, a Limited Partnership, being organized as a partnership, does not have individuals associated with it designated as officers or directors. As of February 24, 1995, the Partnership is comprised of 115 general partners, 1,918 limited partners and 59 subordinated limited partners. Under the terms of the Partnership Agreement, John W. Bachmann is designated Managing Partner and in said capacity has primary responsibility for administering the Partnership's business, determining its policies, controlling the management and conduct of the Partnership's business and has the power to appoint and dismiss general partners of the Partnership and to fix the proportion of their respective interests in the Partnership. Subject to the foregoing, the Partnership is managed by its 115 general partners.
The Management Committee of the Partnership is comprised of John W. Bachmann, Douglas E. Hill, Charles R. Larimore, Richie L. Malone, Steven Novik, Darryl L. Pope, Gary D. Reamey, Connie M. Silverstein, Edward Soule, Robert Virgil, Jr., and James D. Weddle. The purpose of the Management Committee is to provide counsel and advice to the Managing Partner in discharging his functions. Furthermore, in the event the position of Managing Partner is vacant, the Management Committee shall succeed to all of the powers and duties of the managing partner.
None of the general partners are appointed for any specific term nor are there any special arrangements or understandings pursuant to their appointment other than as contained in the Partnership Agreement.
No general partner is or has been individually, nor in association with any prior business, the subject of any action under any insolvency law or criminal proceeding or has ever been enjoined temporarily or permanently from engaging in any business or business practice.
A listing of the names, ages, dates of becoming a general partner and area of responsibility for each general partner follows at February 24, 1995:
Became General Name Age Partner Area of Responsibility
Warren K. Akerson 52 1974 Sales Allan J. Anderson 52 1992 Sales Management John W. Bachmann 56 1970 Managing Partner Thomas M. Bartow 45 1989 Sales Training James D. Bashor 40 1990 Regional Sales Leader Robert J. Beck 40 1983 Municipal Trading Roger W. Bennett 39 1995 Regional Sales Leader John D. Beuerlein 41 1979 Sales Management John S. Borota 54 1978 Sales Hiring William H. Broderick, III 42 1986 Syndicate Morton L. Brown 48 1978 Managed Investments Spencer B. Burke 46 1987 Investment Banking Daniel A. Burkhardt 47 1979 Investment Banking Jack L. Cahill 45 1980 Sales Management Brett A. Campbell 36 1993 Marketing Donald H. Carter 51 1994 Regional Sales Leader John J. Caruso 48 1988 Information Systems Guy R. Cascella 37 1992 Sales Management Pamela K. Cavness 32 1995 Compliance Craig E. Christell 38 1994 Regional Sales Leader Richard A. Christensen, Jr.47 1978 Mutual Funds Processing Robert J. Ciapciak 39 1988 Market Research David W. Clapp 45 1978 Sales Management Stephen P. Clement 45 1990 Video Communications Cheryl J. Cook-Schneider 36 1995 Compliance Loyola A. Cronin 37 1987 Branch Staff Training Stanley A. Cunningham 51 1995 Regional Sales Leader Harry J. Daily, Jr. 48 1985 Regional Sales Leader Cynthia A. Doria 39 1995 Legal Terry A. Doyle 45 1992 Regional Sales Leader William T. Dwyer, Jr. 39 1994 Regional Sales Leader Abe W. Dye 50 1984 Sales Management Allen R. Eaker 48 1989 Regional Sales Leader Norman L. Eaker 38 1984 Securities Processing Kevin Eberle 44 1993 Regional Sales Leader Michael J. Esser 46 1983 Advanced Sales Training Kevin N. Flatt 46 1989 Fixed Income/Equity Trading John A. Fowler 47 1979 Customer Tax Support Steve Fraser 39 1993 Securities Processing Colleen A. Geraty 33 1995 Advertising Chris A. Gilkison 41 1994 Branch Locations Barbara G. Gilman 56 1988 Trust Marketing Steven L. Goldberg 36 1987 Central Services Ronald Gorgen 45 1993 Field Services Robert L. Gregory 52 1974 Sales Hiring Kevin C. Haarberg 40 1995 Regional Sales Leader Patricia F. Hannum 34 1988 Financial Services Stephen P. Harrison 46 1990 Regional Sales Leader James W. Harrod 59 1974 Sales Training David L. Hayes 39 1994 Regional Sales Leader Randy K. Haynes 39 1994 Operations
John M. Hess 47 1992 Regional Sales Leader Mary Beth Heying 37 1994 Communications Douglas E. Hill 50 1974 Product Management Don R. Howard 43 1995 Regional Sales Leader Stephen M. Hull 50 1994 Regional Sales Leader Earl H. Hull, Jr. 49 1990 Regional Sales Leader Glennon D. Hunn 52 1984 Information Systems Gary R. Hunziker 54 1994 Regional Sales Leader Paul C. Husted 41 1990 Regional Sales Leader Thomas G. Iorio 34 1994 Regional Sales Leader Mellany F. Isom 41 1984 Sales Hiring Myles P. Kelly 41 1989 Accounting Timothy J. Kirley 41 1994 Customer Segments James A. Krekeler 30 1995 Investment Banking Charles R. Larimore 54 1981 Branch Administration Ronald E. Lemonds 58 1972 Equity Marketing Mark Leverenz 39 1995 Securities Processing Michele Liebman 38 1994 Information Systems Richie L. Malone 46 1979 Information Systems Richard G. McCarty 55 1990 Regional Sales Leader James A. McKenzie 50 1977 Regional Sales Leader Thomas Migneron 34 1993 Internal Audit Richard G. Miller, Jr. 39 1991 Regional Sales Leader Thomas W. Miltenberger 47 1985 Mutual Funds Marketing Merry L. Mosbacher 36 1986 Investment Banking Joseph M. Mott, III 37 1989 Insurance/Annuities Marketing Matt B. Myre 38 1988 Regional Sales Leader Rodger W. Naugle 53 1992 Regional Sales Leader Steven Novik 45 1983 Accounting Cynthia Paquette 34 1993 Information Systems Robert K. Pearce 45 1989 Human Resources Darryl L. Pope 55 1971 Operations Gary D. Reamey 39 1984 Canada Division James L. Regnier 37 1994 Sales Training Ray L. Robbins, Jr. 50 1975 Research Stephen T. Roberts 42 1981 Compliance Wann V. Robinson 44 1992 Regional Sales Leader Douglas Rosen 34 1993 Regional Sales Leader Harry John Sauer, III 37 1988 Dividend Processing Philip R. Schwab 46 1978 Syndicate Robert D. Seibel 60 1974 Regional Sales Leader Festus W. Shaughnessy, III 39 1988 Sales Training Connie M. Silverstein 39 1988 Sales Hiring Alan F. Skrainka 33 1989 Research John S. Sloop 46 1990 Sales Management Ronald H. Smith 55 1984 Regional Sales Leader Lawrence R. Sobol 44 1977 General Counsel Edward Soule 42 1986 Accounting Lawrence E. Thomas 39 1983 Government Bond Trading Terry R. Tucker 40 1988 Information Systems Richard G. Unnerstall 39 1989 Information Systems Robert Virgil, Jr. 60 1994 Headquarters Administration JoAnn Von Bergen 45 1986 Cash Processing Donald E. Walter 49 1983 Compliance Director Bradley T. Wastler 42 1989 Sales Management James D. Weddle 41 1984 Sales Management Vicki Westall 35 1993 Product Review Thomas J. Westphal 36 1989 Customer Statements Heidi Whitfield 34 1993 Product Review Robert D. Williams 33 1994 Regional Sales Leader
A. Thomas Woodward 48 1985 Sales Management Price P. Woodward 32 1993 Regional Sales Leader Alan T. Wright 48 1994 Investment Banking Bradley A. Ytterberg 40 1994 Customer Segments
Except as indicated below, each of the General Partners has been a general partner of the Partnership for more than the preceding five years.
Allan J. Anderson, joined the Partnership in 1984 as a registered representative and became a general partner in 1992.
Roger W. Bennett, joined the Partnership in 1982 as a registered representative and became a general partner in 1995.
Brett A. Campbell, joined the Partnership in 1984 as a registered representative and became a general partner in January 1993.
Donald H. Carter, joined the Partnership in 1982 as a registered representative and became a general partner in January 1994.
Guy Cascella, joined the Partnership in 1983 as a registered representative and became a general partner in 1992.
Pamela K. Cavness, joined the Partnership in 1987 in the Compliance Department and became a general partner in 1995. Prior to this, she worked as an investment representative for a NYSE registered broker/dealer, earned a MBA in finance and currently serves as an arbitrator for the National Association of Securities Dealers.
Craig E. Christell, joined the Partnership in 1982 as a registered representative and became a general partner in January 1994.
Cheryl Cook-Schneider, joined the Partnership in 1987 in the Compliance Department and became a general partner in January 1995. Prior to this, she passed the Missouri Bar Exam and worked as an attorney in private practice.
Stanley A. Cunningham, joined the Partnership in 1981 as a registered representative and became a general partner in January 1995.
Cynthia A. Doria, joined the Partnership in 1984 as an attorney in the Legal Department and became a general partner in January 1995. Prior to this, she handled litigation defense for three years in a St. Louis law firm.
Terry Doyle, joined the Partnership in 1981 as a registered representative and became a general partner in 1992.
William T. Dwyer, joined the Partnership in 1982 as a registered representative and became a general partner in January 1994.
Kevin Eberle, joined the Partnership in 1985 as a registered representative and became a general partner in 1993.
Steve Fraser, joined the Partnership in 1985 in the Operations Department and became a general partner in January, 1993. Prior to this, he was employed by Automated Data Processing Inc.
Colleen A. Geraty, joined the Partnership in 1987 in the Advertising Department and became a general partner in January 1995.
Chris A. Gilkison, joined the Partnership in 1987 as a registered representative and became a general partner in January 1994.
Ronald Gorgen, joined the Partnership in 1980 as a registered representative and became a general partner in January 1993.
Kevin C. Haarberg, joined the Partnership in 1984 as a registered representative and became a general partner in January 1995.
David L. Hayes, joined the Partnership in 1977 active in hiring and training and became a general partner in January 1994.
Randy K. Haynes, joined the Partnership in 1984 as a registered representative and became a general partner in January 1994.
John M. Hess, joined the Partnership in 1982 as a registered representative and became a general partner in 1992.
Mary Beth Heying, joined the Partnership in 1984 in the Communications Department and became a general partner in January 1994.
Don R. Howard, joined the Partnership in 1984 as a registered representative and became a general partner in January 1995.
Steven M. Hull, joined the Partnership in 1973 as a registered representative and became a general partner in 1994.
Gary R. Hunziker, joined the Partnership in 1986 as a registered representative and became a general partner in January 1994.
Thomas G. Iorio, joined the Partnership in 1982 as a registered representative and became a general partner in January 1994.
Timothy J. Kirley, joined the Partnership in 1983 as a registered representative and became a general partner in 1994.
James A. Krekeler, joined the Partnership in 1988 in the Research Department and became a general partner in January 1995. Prior to this, he received his MBA from Washington University and is a Chartered Financial Analyst.
Mark Leverenz, joined the Partnership in 1988 in the Operations Department and became a general partner in January 1995. Prior to this, he served as Vice President and Corporate Controller at a NYSE registered broker/dealer and was a CPA with Arthur Andersen & Co.
Michele M. Liebman, joined the Partnership in 1985 in the Data Processing Department and became a general partner in January 1994.
Thomas Migneron, joined the Partnership in 1985 as an internal auditor and became a general partner in January, 1993.
Richard G. Miller, Jr., joined the Partnership in 1981 as a registered representative and became a general partner in 1991.
Rodger Naugle, joined the Partnership in 1981 as a registered representative and became a general partner in 1992.
Cynthia Paquette, joined the Partnership in 1985 in the Data Processing Department and became a general partner in January 1993.
James L. Regnier, joined the Partnership in 1983 as a registered representative and became a general partner in January 1994.
Wann V. Robinson, joined the Partnership in 1985 as a registered representative and became a general partner in 1992.
Douglas Rosen, joined the Partnership in 1982 as a registered representative and became a general partner in January 1993.
Robert Virgil, Jr., joined the Partnership in 1993 as a general partner. Prior to this, he served as dean of the John M. Olin School of Business at Washington University.
Vicki Westall, joined the Partnership in 1984 in the Product Review Department and became a general partner in January, 1993. Prior to this, she was an accountant with Peat, Marwick, Mitchell & Co.
Heidi Whitfield, joined the Partnership in 1982 as an equity analyst and became a general partner in January 1993.
Robert D. Williams, joined the Partnership in 1986 as a registered representative and became a general partner in 1994.
Price P. Woodward, joined the Partnership in 1984 as a registered representative and became a general partner in January 1993.
Alan T. Wright, joined the Partnership in 1985 in Investment Banking Department and became a general partner in January 1994.
Bradley A. Ytterberg, joined the Partnership in 1984 as a registered representative and became a general partner in 1994.
Daniel A. Burkhardt is a director of Essex County Gas Company, Amsebury, Massachusetts; Galaxy Cablevision Management, Inc., Sikeston, Missouri; Mid-American Reality Investments, Inc., Omaha, Nebraska; Southeastern MI Gas Enterprises Inc., Port Huron, Michigan; and Community Investment Partners, L.P. John C. Heisler, Philip R. Schwab and John D. Beuerlein are directors of Cornerstone Mortgage Investment Group, Inc. and Cornerstone Mortgage Investment Group II, Inc. Ray L. Robbins, Jr. is a director of Community Investment Partners, L.P. Robert Virgil, Jr. is a director of CPI Corp., St. Louis, Missouri.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Partnership during the three most recent years to the five general partners receiving the greatest compensation (including respective shares of profit participation). Returns to General Partner Capital ___________________ (1) (2) (3) & (4) Net income General Ptr Deferred allocated invested Total Compen- to General Capital at (1)(2) Year Salaries sation Partners 12/31 (3)
John W. Bachmann 1994 120,000 5,553 1,681,517 4,115,163 1,807,070 1993 120,000 10,707 2,350,562 3,971,779 2,481,269 1992 120,000 11,306 2,298,834 3,408,360 2,430,140
Douglas E. Hill 1994 118,000 5,553 1,513,365 3,703,647 1,636,918 1993 118,000 10,707 1,994,416 3,369,994 2,123,123 1992 118,000 11,306 1,948,536 2,888,991 2,077,842
Ron Larimore 1994 118,000 5,553 1,513,365 3,703,647 1,636,918 1993 118,000 10,707 1,994,416 3,369,994 2,123,123 1992 118,000 11,306 1,992,323 2,953,912 2,121,629
Richie L. Malone 1994 118,000 5,553 1,513,365 3,703,647 1,636,918 1993 118,000 10,707 1,899,444 3,209,518 2,028,151 1992 118,000 11,306 1,810,493 2,596,846 1,939,799
Darryl W. Pope 1994 118,000 5,553 1,513,365 3,703,647 1,636,918 1993 118,000 10,707 1,994,416 3,369,994 2,123,123 1992 118,000 11,306 1,926,642 2,856,530 2,055,948
(1) Each non-selling general partner receives a salary generally ranging from $90,000 - $120,000 annually. Selling general partners do not receive a specified salary, rather, they receive the net sales commissions earned by them (none of the five individuals listed above earned any such commissions). Additionally, general partners who are principally engaged in sales are entitled to office bonuses based on the profitability of their respective branch office, on the same basis as the office bonus program established for all investment representative employees.
(2) Each general partner is a participant in the Partnership's profit sharing plan which covers all eligible employees. Contributions to the plan, which are within the discretion of the Partnership, are made annually and have historically been determined based on approximately twenty-four percent of the Partnership's net income. Allocation of the Partnership's contribution among participants is determined by each participant's relative level of eligible earnings, including in the case of general partners, their profit participation.
(3) Each general partner is entitled to participate in the annual net income of the Partnership based upon the respective percentage interest in the Partnership of each partner. These interests in the Partnership held by each general partner currently range from 1/10 of 1% to 4.50% in 1994. (1/10 of 1% to 4.95% in 1993 and 1/10 of 1% to 5.25% in 1992). At the discretion of the Managing Partner, the partnership agreement provides that, generally, the first eight percent of net income allocable to general partners be distributed on the basis of individual merit or otherwise as determined by the Managing Partner. Thereafter, the remaining net income allocable to general partners is distributed based upon each individual's percentage interest in the Partnership.
(4) Net income allocable to general partners is the amount remaining after payment of interest and earnings on capital invested to limited partners and subordinated limited partners.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Being organized as a limited partnership, management is vested in the general partners thereof and there are no other outstanding "voting" or "equity" securities. It is the opinion of the Partnership that the general partnership interests are not securities within the meaning of federal and state securities laws primarily because each of the general partners participates in the management and conduct of the business.
In connection with outstanding limited and subordinated limited partnership interests (non-voting securities), 85 of the general partners also own limited partnership interests and 34 of the general partners also own subordinated limited partnership interests, as noted in the table below.
As of February 24, 1995: Name of Amount of Beneficial Beneficial Percent of Title of Class Owner Ownership Class
Limited Partnership All General Interests Partners as a Group $5,466,000 9%
Subordinated All General Limited Partnership Partners as Interests a Group 17,121,000 64%
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its business the Partnership has extended credit to certain of its partners and employees in connection with their purchase of securities. Such extensions of credit have been made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-affiliated persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. The Partnership also, from time to time and in the ordinary course of business, enters into transactions involving the purchase or sale of securities from or to partners or employees and members of their immediate families, as principal. Such purchases and sales of securities on a principal basis are effected on substantially the same terms as similar transactions with unaffiliated third parties.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
INDEX
(a) (1) The following financial statements are included in Part II, Item 8:
Page No.
Report of Independent Public Accountants 19
Consolidated Statements of Financial Condition as of December 31, 1994 and 1993 20
Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992 22
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 23
Consolidated Statements of Changes in Partnership Capital for the years ended December 31, 1994, 1993 and 1992 24
Notes to Consolidated Financial Statements 25
All schedules are omitted because they are not required, inapplicable, or the information is otherwise shown in the financial statements or notes thereto.
(b) Report on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1994.
(c) Exhibits
Reference is made to the Exhibit Index hereinafter contained.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994
Exhibit Number Page Description
3.1 * Fifth Amended and Restated Limited Partnership Agreement of Edward D, Jones & Co., L.P., dated April 28, 1994, incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
3.2 * Form of Limited Partnership Agreement of Edward D. Jones & Co., L.P.,
10.1 * Form of Cash Subordination Agreement between the Registrant and Edward D. Jones & Co., incorporated herein by reference to Exhibit 10.1 to the Company's registration statement of Form S-1 (Reg. No. 33-14955).
10.2 * Note Purchase Agreement between Tempus Corporation and Edward D. Jones & Co., L.P. dated as of March 15, 1988, incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1988.
10.3 * Complaint for Permanent Injunction and Other Equitable Relief and Final Judgment of Permanent Injunction in re: SEC v. Edward D. Jones & Co. (U.S. Dist. Ct. for Dist. of Columbia; Civil Action No. 85-3078), incorporated herein by reference to Exhibit 10(i) to the Company's current report on Form 8-K dated September 24, 1985.
10.4 * Volume Discount Agreement dated May 27, 1987, between Digital Equipment Corporation and Edward D. Jones & Co., incorporated herein by reference to Exhibit 10.13(c) to the Company's registration statement on Form S-1 (Reg. No.33-14955).
10.5 * Master Lease Agreement dated as of May 29, 1987, between Digital Equipment Corporation and Edward D. Jones & Co., incorporated herein by reference to Exhibit 10.13(b) to the Company's registration statement on Form S-1 (Reg. No. 33-14955).
10.6 * Master Lease Agreement dated as of October 17, 1988, between Edward D. Jones & Co., L.P., and BancBoston Leasing, incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1988.
10.16 * Satellite Communications Agreement dated as of September 12, 1988, between Hughes Network Systems and Edward D. Jones & Co., L.P., incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended September 30, 1988.
10.18 * Agreements of Lease between EDJ Leasing Company and Edward D. Jones & Co., L.P., dated August 1, 1991, incorporated herein by reference to Exhibit 10.18 to the Company's Annual Report or Form 10-K for the year ended September 27, 1991.
10.20 * Edward D. Jones & Co., L.P. Note Purchase Agreement dated as of May 8, 1992, incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 26, 1992.
10.21 * Purchase and Sale Agreement by and between EDJ Leasing Co., L.P. and the Resolution Trust Corporation incorporated herein by reference to Exhibit 10.21 to the Company's Annual Report or Form 10-K for the year ended December 31, 1992.
10.22 Master Lease Agreement between EDJ Leasing Company and Edward D. Jones & Co., L.P., dated March 9, 1993, and First Amendment to Lease dated March 9, 1994.
10.23 Purchase Agreement by and between Edward D. Jones & Co., L.P. and Genicom Corporation dated November 25, 1992.
10.24 Mortgage Note and Deed of Trust and Security Agreement between EDJ Leasing Co., L.P. and Nationwide Insurance Company dated March 9, 1993.
10.25 Mortgage Note and Amendment to Deed of Trust between EDJ Leasing Co., L.P. and Nationwide Insurance Company dated March 9, 1994.
10.26 Mortgage Note; Dead of Trust and Security Agreement; Assignment of Leases, Rents and Profits; and Subordination and Attornment Agreement between EDJ Leasing Co., L.P. and Nationwide Insurance Company dated April 6, 1994, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1994.
10.27 Note Purchase Agreement by Edward D. Jones & Co., L.P., for $92,000,000 aggregate principal amount of 7.95% subordinated capital notes due April 15, 2006, incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
10.28 Equipment Lease Agreement between IFA Incorporated and Edward D. Jones & Company, L.P., dated June 8, 1994, incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
10.29 Master Lease Agreement and Addendum by and
between Edward D. Jones & Co., L.P. and General Electric Capital Corporation dated April 21, 1994, incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
10.30 Equipment Lease by and between Edward D. Jones & Co., L.P., and EDJ Leasing Co., L.P. dated April 1, 1994, incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
10.31 $8,200,000 Promissory Note to Commerce Bank National Association by EDJ Leasing Co., L.P., dated April 5, 1994, incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 24, 1994.
10.32 Agreement and Plan of Acquisition between The Jones Financial Companies and Boone National Savings and Loan Association, F.A., incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
10.33 Credit Agreement between EDJ Leasing Co., L.P. and Southtrust Bank of Alabama, N.A. dated October 26, 1994.
10.34 Master Lease Agreement between EDJ Leasing Company and Edward D. Jones & Co., L.P. dated October 26, 1994.
10.35 Lease Financing Line of Credit Agreement and Term Note Agreement between EDJ Leasing Co., L.P. and Enterprise Bank dated December 6, 1994.
10.36 Master Lease Agreement between EDJ Leasing Co. and Edward D. Jones & Co. L.P., dated December 6, 1994.
10.37 Purchase Agreement by and between Edward D. Jones & Co., L.P. and Tektronix Inc. dated February 28, 1995.
24.1 45 Consent of Independent Public Accountants
25 * Delegation of Power of Attorney to Managing Partner contained within Exhibit 3.1.
______________________________________________________________
* - Incorporated by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:
(Registrant) THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP ____________________________________________________
By (Signature and Title) /s/ John W. Bachmann
__________________________________ John W. Bachmann, Managing Partner
Date March 24, 1995 ____________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
(Registrant) THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP ____________________________________________________
By (Signature and Title) /s/ John W. Bachmann __________________________________ John W. Bachmann, Managing Partner
Date March 24, 1995 ____________________________________________________
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
There have been no annual reports sent to security holders covering the registrant's last fiscal year nor have there been any proxy statements, form of proxy or other proxy soliciting material sent to any of registrant's security holders.