10-Q 1 ck0000815917-10q_20190329.htm 10-Q ck0000815917-10q_20190329.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 0-16633

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

(Exact name of registrant as specified in its Charter)

 

 

MISSOURI

43-1450818

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

12555 Manchester Road

Des Peres, Missouri 63131

(Address of principal executive office)

(Zip Code)

(314) 515-2000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

As of April 26, 2019, 1,260,268 units of limited partnership interest (“Interests”) are outstanding, each representing $1,000 of limited partner capital.  There is no public or private market for such Interests.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

None

N/A

N/A

 

 

 

 


 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

3

 

 

Consolidated Statements of Income

 

4

 

 

Consolidated Statements of Changes in Partnership Capital

 

5

 

 

Consolidated Statements of Cash Flows

 

6

 

 

Notes to Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

31

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

31

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

32

 

 

 

 

 

Item 1A.

 

Risk Factors

 

32

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

 

 

 

 

 

Item 6.

 

Exhibits

 

33

 

 

 

 

 

 

 

Signatures

 

34

 

 

 

2


PART I. FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

 

March 29,

 

 

December 31,

 

(Dollars in millions)

 

2019

 

 

2018

 

ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,370

 

 

$

1,498

 

Cash and investments segregated under federal regulations

 

 

7,052

 

 

 

8,241

 

Securities purchased under agreements to resell

 

 

1,232

 

 

 

911

 

Receivables from:

 

 

 

 

 

 

 

 

Clients

 

 

3,317

 

 

 

3,359

 

Mutual funds, insurance companies and other

 

 

620

 

 

 

555

 

Brokers, dealers and clearing organizations

 

 

300

 

 

 

261

 

Securities owned, at fair value:

 

 

 

 

 

 

 

 

Investment securities

 

 

270

 

 

 

250

 

Inventory securities

 

 

57

 

 

 

43

 

Lease right-of-use asset

 

 

795

 

 

 

 

Equipment, property and improvements, at cost, net of accumulated

   depreciation and amortization

 

 

566

 

 

 

555

 

Other assets

 

 

116

 

 

 

142

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

15,695

 

 

$

15,815

 

 

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

Payables to:

 

 

 

 

 

 

 

 

Clients

 

$

10,223

 

 

$

11,117

 

Brokers, dealers and clearing organizations

 

 

95

 

 

 

90

 

Lease liability

 

 

809

 

 

 

-

 

Accrued compensation and employee benefits

 

 

1,182

 

 

 

1,465

 

Accounts payable, accrued expenses and other

 

 

212

 

 

 

288

 

 

 

 

12,521

 

 

 

12,960

 

Contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Partnership capital subject to mandatory redemption, net of reserve for

   anticipated withdrawals and partnership loans:

 

 

 

 

 

 

 

 

Limited partners

 

 

1,261

 

 

 

884

 

Subordinated limited partners

 

 

523

 

 

 

504

 

General partners

 

 

1,179

 

 

 

1,119

 

Total

 

 

2,963

 

 

 

2,507

 

Reserve for anticipated withdrawals

 

 

211

 

 

 

348

 

Total partnership capital subject to mandatory redemption

 

 

3,174

 

 

 

2,855

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

$

15,695

 

 

$

15,815

 

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

3


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

 

 

(Dollars in millions, except per unit information and units outstanding)

 

March 29,

2019

 

 

March 30,

2018

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Fee revenue

 

 

 

 

 

 

 

 

 

Asset-based

 

$

1,559

 

 

$

1,453

 

 

Account and activity

 

 

172

 

 

 

172

 

 

Total fee revenue

 

 

1,731

 

 

 

1,625

 

 

Trade revenue

 

 

368

 

 

 

364

 

 

Interest and dividends

 

 

103

 

 

 

79

 

 

Other revenue

 

 

28

 

 

 

6

 

 

Total revenue

 

 

2,230

 

 

 

2,074

 

 

Interest expense

 

 

40

 

 

 

32

 

 

Net revenue

 

 

2,190

 

 

 

2,042

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

1,536

 

 

 

1,454

 

 

Occupancy and equipment

 

 

119

 

 

 

109

 

 

Communications and data processing

 

 

86

 

 

 

80

 

 

Fund sub-adviser fees

 

 

36

 

 

 

30

 

 

Advertising

 

 

24

 

 

 

25

 

 

Professional and consulting fees

 

 

23

 

 

 

18

 

 

Postage and shipping

 

 

15

 

 

 

14

 

 

Other operating expenses

 

 

110

 

 

 

79

 

 

Total operating expenses

 

 

1,949

 

 

 

1,809

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners

 

 

241

 

 

 

233

 

 

 

 

 

 

 

 

 

 

 

 

Allocations to partners:

 

 

 

 

 

 

 

 

 

Limited partners

 

 

37

 

 

 

27

 

 

Subordinated limited partners

 

 

29

 

 

 

30

 

 

General partners

 

 

175

 

 

 

176

 

 

Net Income

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

Income allocated to limited partners per weighted average

   $1,000 equivalent limited partnership unit outstanding

 

$

29.20

 

 

$

30.16

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average $1,000 equivalent limited partnership

   units outstanding

 

 

1,262,740

 

 

 

893,700

 

 

 

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

4


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL

SUBJECT TO MANDATORY REDEMPTION

FOR THE THREE MONTHS ENDED MARCH 29, 2019 and MARCH 30, 2018

(Unaudited)

 

 

(Dollars in millions)

 

Limited

Partnership

Capital

 

 

Subordinated

Limited

Partnership

Capital

 

 

General

Partnership

Capital

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY

   REDEMPTION, DECEMBER 31, 2017

 

$

956

 

 

$

499

 

 

$

1,340

 

 

$

2,795

 

Reserve for anticipated withdrawals

 

 

(66

)

 

 

(36

)

 

 

(188

)

 

 

(290

)

Partnership capital subject to mandatory redemption, net of

   reserve for anticipated withdrawals, December 31, 2017

 

$

890

 

 

$

463

 

 

$

1,152

 

 

$

2,505

 

Partnership loans outstanding, December 31, 2017

 

 

 

 

 

3

 

 

 

294

 

 

 

297

 

Total partnership capital, including capital financed with partnership loans,

   net of reserve for anticipated withdrawals, December 31, 2017

 

 

890

 

 

 

466

 

 

 

1,446

 

 

 

2,802

 

Issuance of partnership interests

 

 

4

 

 

 

51

 

 

 

170

 

 

 

225

 

Redemption of partnership interests

 

 

(2

)

 

 

(6

)

 

 

(151

)

 

 

(159

)

Income allocated to partners

 

 

27

 

 

 

30

 

 

 

176

 

 

 

233

 

Distributions

 

 

 

 

 

(1

)

 

 

(11

)

 

 

(12

)

Total partnership capital, including capital financed with partnership loans

 

 

919

 

 

 

540

 

 

 

1,630

 

 

 

3,089

 

Partnership loans outstanding, March 30, 2018

 

 

 

 

 

(2

)

 

 

(379

)

 

 

(381

)

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY

   REDEMPTION, MARCH 30, 2018

 

$

919

 

 

$

538

 

 

$

1,251

 

 

$

2,708

 

Reserve for anticipated withdrawals

 

 

(27

)

 

 

(29

)

 

 

(140

)

 

 

(196

)

Partnership capital subject to mandatory redemption, net of

   reserve for anticipated withdrawals, March 30, 2018

 

$

892

 

 

$

509

 

 

$

1,111

 

 

$

2,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY

   REDEMPTION, DECEMBER 31, 2018

 

$

956

 

 

$

545

 

 

$

1,354

 

 

$

2,855

 

Reserve for anticipated withdrawals

 

 

(72

)

 

 

(41

)

 

 

(235

)

 

 

(348

)

Partnership capital subject to mandatory redemption, net of

   reserve for anticipated withdrawals, December 31, 2018

 

$

884

 

 

$

504

 

 

$

1,119

 

 

$

2,507

 

Partnership loans outstanding, December 31, 2018

 

 

 

 

 

4

 

 

 

328

 

 

 

332

 

Total partnership capital, including capital financed with partnership loans,

   net of reserve for anticipated withdrawals, December 31, 2018

 

 

884

 

 

 

508

 

 

 

1,447

 

 

 

2,839

 

Issuance of partnership interests

 

 

380

 

 

 

51

 

 

 

162

 

 

 

593

 

Redemption of partnership interests

 

 

(3

)

 

 

(31

)

 

 

(37

)

 

 

(71

)

Income allocated to partners

 

 

37

 

 

 

29

 

 

 

175

 

 

 

241

 

Distributions

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Total partnership capital, including capital financed with partnership loans

 

 

1,298

 

 

 

557

 

 

 

1,741

 

 

 

3,596

 

Partnership loans outstanding, March 29, 2019

 

 

 

 

 

(5

)

 

 

(417

)

 

 

(422

)

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY

   REDEMPTION, MARCH 29, 2019

 

$

1,298

 

 

$

552

 

 

$

1,324

 

 

$

3,174

 

Reserve for anticipated withdrawals

 

 

(37

)

 

 

(29

)

 

 

(145

)

 

 

(211

)

Partnership capital subject to mandatory redemption, net of

   reserve for anticipated withdrawals, March 29, 2019

 

$

1,261

 

 

$

523

 

 

$

1,179

 

 

$

2,963

 

 

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

5


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

 

 

Three Months Ended

 

(Dollars in millions)

 

March 29,

2019

 

 

March 30,

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

 

 

$

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Income before allocations to partners

 

 

241

 

 

 

233

 

Depreciation and amortization

 

 

25

 

 

 

22

 

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Investments segregated under federal regulations

 

 

(491

)

 

 

402

 

Securities purchased under agreements to resell

 

 

(321

)

 

 

340

 

Net payable to clients

 

 

(852

)

 

 

(821

)

Net receivable from brokers, dealers and clearing organizations

 

 

(34

)

 

 

45

 

Receivable from mutual funds, insurance companies and other

 

 

(65

)

 

 

(60

)

Securities owned

 

 

(34

)

 

 

(40

)

Lease right-of-use asset

 

 

10

 

 

 

 

Other assets

 

 

26

 

 

 

6

 

Lease liability

 

 

4

 

 

 

 

Accrued compensation and employee benefits

 

 

(283

)

 

 

(263

)

Accounts payable, accrued expenses and other

 

 

(76

)

 

 

24

 

Net cash used in operating activities

 

 

(1,850

)

 

 

(112

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of equipment, property and improvements

 

 

(36

)

 

 

(25

)

Cash used in investing activities

 

 

(36

)

 

 

(25

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of partnership interests

 

 

430

 

 

 

57

 

Redemption of partnership interests

 

 

(71

)

 

 

(159

)

Distributions from partnership capital

 

 

(281

)

 

 

(218

)

Net cash provided by (used in) financing activities

 

 

78

 

 

 

(320

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(1,808

)

 

 

(457

)

 

 

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

 

 

 

 

 

 

 

 

Beginning of period

 

 

8,737

 

 

 

8,537

 

End of period

 

$

6,929

 

 

$

8,080

 

 

See Note 11 for additional cash flow information.

 

 


 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

6


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

 

 

NOTE 1 – INTRODUCTION AND BASIS OF PRESENTATION

 

The accompanying Consolidated Financial Statements include the accounts of The Jones Financial Companies, L.L.L.P. and all wholly-owned subsidiaries (collectively, the “Partnership” or "JFC").  All material intercompany balances and transactions have been eliminated in consolidation.  The financial position of the Partnership’s subsidiaries in Canada as of February 28, 2019 and November 30, 2018 are included in the Partnership’s Consolidated Statements of Financial Condition and the results for the three month periods ended February 28, 2019 and 2018 are included in the Partnership’s Consolidated Statements of Income, Consolidated Statements of Changes in Partnership Capital Subject to Mandatory Redemption,  and Consolidated Statements of Cash Flows because of the timing of the Partnership’s financial reporting process.

The Partnership’s principal operating subsidiary, Edward D. Jones & Co., L.P. (“Edward Jones”), is a registered broker-dealer and investment adviser in the United States (“U.S.”), and one of Edward Jones’ subsidiaries is a registered broker-dealer in Canada.  Through these entities, the Partnership primarily serves individual investors in the U.S. and Canada. Edward Jones is a retail brokerage business and primarily derives revenues from fees for providing investment advisory and other account services to its clients, fees for assets held by clients, the distribution of mutual fund shares, and commissions for the purchase or sale of securities and the purchase of insurance products.  The Partnership conducts business throughout the U.S. and Canada with its clients, various brokers, dealers, clearing organizations, depositories and banks. Trust services are offered to Edward Jones’ U.S. clients through Edward Jones Trust Company (“Trust Co.”), a wholly-owned subsidiary of the Partnership.  Olive Street Investment Advisers, LLC, a wholly-owned subsidiary of the Partnership, provides investment advisory services to the sub-advised mutual funds in the Bridge Builder® Trust ("BB Trust").  Passport Research, Ltd., a wholly-owned subsidiary of the Partnership, provides investment advisory services to the Edward Jones Money Market Fund (the "Fund").    

The Consolidated Financial Statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”), which require the use of certain estimates by management in determining the Partnership’s assets, liabilities, revenues and expenses.  Actual results could differ from these estimates.  The Partnership has evaluated subsequent events through the date these Consolidated Financial Statements were issued and identified no matters requiring disclosure.

The interim financial information included herein is unaudited.  However, in the opinion of management, such information includes all adjustments, consisting primarily of normal recurring accruals, which are necessary for a fair statement of the results of interim operations.

There have been no material changes to the Partnership’s significant accounting policies or disclosures of recently issued accounting standards as described in Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 of the Partnership's Annual Report on Form 10-K for the year ended December 31, 2018 (the "Annual Report"), except as disclosed in Note 2 herein.  The results of operations for the three month period ended March 29, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.  These unaudited Consolidated Financial Statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes thereto included in the Annual Report.

 

 


 

7


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

NOTE 2 – RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

 

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) (“ASC 842”), which requires lessees to recognize leases with terms greater than 12 months on the balance sheet as lease right-of-use assets and lease liabilities. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), which allows an entity to recognize a cumulative-effect adjustment to the opening balance of Partnership capital in the period of adoption and prior periods do not have to be restated.  Effective January 1, 2019, the Partnership adopted ASC 842 and recorded a lease right-of-use asset of $785 and lease liability of $805 related to the Partnership's branch office network and home offices. The lease right-of-use asset was reduced by $20 for deferred rent on existing leases at adoption. The cumulative-effect adjustment to the opening balance of Partnership capital was zero and prior periods were not restated. The Partnership elected the package of practical expedients for leases that commenced prior to January 1, 2019, which allowed the Partnership to not reassess whether any contracts are or contain leases, lease classification for expired or existing leases, and initial direct costs for existing leases.  There was no material impact on the Consolidated Statements of Income, Consolidated Statements of Cash Flows or net capital requirements of Edward Jones. See Note 3 for additional information.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  ASU 2016-13 removes the "probable" threshold for credit loss recognition, requiring companies to capture all expected credit losses and to consider a broader range of reasonable and supportable information to inform credit loss estimates.  The Partnership is in the process of evaluating the update and expects to adopt ASU 2016-13 as of January 1, 2020 with no material impact to the Consolidated Financial Statements from adoption.

 

NOTE 3 – LEASES

The Partnership leases branch office space under numerous operating leases from non-affiliates and financial advisors.  Branch offices are generally leased for terms of five years and generally contain a renewal option.  Renewal options are not included in the lease term because it is not reasonably certain the Partnership will exercise the renewal option. The Partnership also leases a few of its home office spaces from non-affiliates with terms ranging from 12 to 30 years.

The Partnership recognizes lease liabilities for future lease payments and lease right-of-use assets for the right of use of an underlying asset within a contract.  Current leases are all classified as operating leases. Lease right-of-use assets and lease liabilities are recognized on the Consolidated Statements of Financial Condition at commencement date and calculated as the present value of the sum of the remaining fixed lease payments over the lease term. The lease right-of-use asset includes the impact from the timing of lease payments and straight-line rent expense. The Partnership used its incremental borrowing rate based on information available at lease commencement as leases do not contain a readily determinable implicit rate.  A single lease cost, or rent expense, is recognized on a straight-line basis over the lease term. The Partnership does not separate lease components (i.e. fixed payments including rent, real estate taxes and insurance costs) from non-lease components (i.e. common-area maintenance) and recognizes them as a single lease component. Variable lease payments not included within lease contracts are expensed as incurred.  

For the three months ended March 29, 2019, cash paid for amounts included in the measurement of operating lease liabilities was $67 and lease right-of-use assets obtained in exchange for new operating lease liabilities was $67.  As of March 29, 2019, the weighted-average remaining lease term was four years, and the weighted-average discount rate was 3.5%.

 

 

 

 

 

 

8


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

For the first quarter of 2019, operating lease cost was $66 and variable lease costs not included in the lease liability were $14, resulting in a total lease cost of $80. The Partnership's future undiscounted cash outflows for operating leases as of March 29, 2019 are summarized below:

2019

$

202

 

2020

 

232

 

2021

 

184

 

2022

 

128

 

2023

 

74

 

Thereafter

 

60

 

Total lease payments

 

880

 

Less: Interest

 

71

 

Total present value of lease liabilities

$

809

 

 

While the rights and obligations for leases that have not yet commenced are not significant, the Partnership does continually enter into new branch office leases.    

NOTE 4 – REVENUE

As of March 29, 2019 and December 31, 2018, $421 and $377, respectively, of the receivable from clients balance and $295 and $278, respectively, of the receivable from mutual funds, insurance companies and other balance related to revenue contracts with customers.  

The Partnership derived 14% and 15% of its total revenue for the three month periods ended March 29, 2019 and March 30, 2018, respectively, from one mutual fund complex.  

 

The following table shows the Partnership's disaggregated revenue information. See Note 9 for segment information.

 

 

 

Three Months Ended March 29, 2019

 

 

Three Months Ended March 30, 2018

 

 

 

U.S.

 

 

Canada

 

 

Total

 

 

U.S.

 

 

Canada

 

 

Total

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory programs fees

 

$

1,081

 

 

$

15

 

 

$

1,096

 

 

$

982

 

 

$

13

 

 

$

995

 

Service fees

 

 

292

 

 

 

21

 

 

 

313

 

 

 

305

 

 

 

22

 

 

 

327

 

Other asset-based fees

 

 

150

 

 

 

 

 

 

150

 

 

 

131

 

 

 

 

 

 

131

 

Total asset-based fee revenue

 

 

1,523

 

 

 

36

 

 

 

1,559

 

 

 

1,418

 

 

 

35

 

 

 

1,453

 

Account and activity fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder accounting services

   fees

 

 

107

 

 

 

 

 

 

107

 

 

 

109

 

 

 

 

 

 

109

 

Other account and activity fee

   revenue

 

 

62

 

 

 

3

 

 

 

65

 

 

 

59

 

 

 

4

 

 

 

63

 

Total account and activity fee

   revenue

 

 

169

 

 

 

3

 

 

 

172

 

 

 

168

 

 

 

4

 

 

 

172

 

   Total fee revenue

 

 

1,692

 

 

 

39

 

 

 

1,731

 

 

 

1,586

 

 

 

39

 

 

 

1,625

 

Trade revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

 

322

 

 

 

11

 

 

 

333

 

 

 

318

 

 

 

14

 

 

 

332

 

Principal transactions

 

 

34

 

 

 

1

 

 

 

35

 

 

 

31

 

 

 

1

 

 

 

32

 

Total trade revenue

 

 

356

 

 

 

12

 

 

 

368

 

 

 

349

 

 

 

15

 

 

 

364

 

Total revenue from customers

 

 

2,048

 

 

 

51

 

 

 

2,099

 

 

 

1,935

 

 

 

54

 

 

 

1,989

 

Net interest and dividends and other

  revenue

 

 

87

 

 

 

4

 

 

 

91

 

 

 

49

 

 

 

4

 

 

 

53

 

Net revenue

 

$

2,135

 

 

$

55

 

 

$

2,190

 

 

$

1,984

 

 

$

58

 

 

$

2,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements, continued

 

NOTE 5 – FAIR VALUE

The Partnership's valuation methodologies for financial assets and financial liabilities measured at fair value and the fair value hierarchy are described in Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 of the Partnership's Annual Report.  There have been no material changes to the Partnership's valuation methodologies since December 31, 2018.

The Partnership did not have any assets or liabilities categorized as Level III during the three and twelve month periods ended March 29, 2019 and December 31, 2018, respectively.

The following tables show the Partnership’s financial assets measured at fair value:

 

 

 

Financial Assets at Fair Value as of

 

 

 

March 29, 2019

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

$

 

 

$

298

 

 

$

 

 

$

298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments segregated under federal regulations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

1,493

 

 

$

 

 

$

 

 

$

1,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities owned:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds(1)

 

$

264

 

 

$

 

 

$

 

 

$

264

 

Government and agency obligations

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Equities

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Corporate bonds and notes

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total investment securities

 

$

269

 

 

$

1

 

 

$

 

 

$

270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and municipal obligations

 

$

 

 

$

27

 

 

$