ITEM 2. PROPERTIES
The Company's headquarters are located in Charlotte, and it serves retail and institutional clients through sales offices located in North Carolina, South Carolina, Virginia, Georgia, and New York.
The Company leases substantially all of its office facilities. See Note 7, "Commitments and Contingencies," of the Notes to Consolidated Financial Statements for the fiscal year ended September 30, 1996, which is incorporated herein by reference. Capital assets include two office buildings (one of which is unoccupied) in Savannah, Georgia, and an investment property in Orlando, Florida; all were acquired as a result of the Johnson Lane transaction. The balance of the capital assets consist primarily of office furniture and equipment, computer hardware and software and leasehold improvements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain litigation arising in the ordinary course of business. While some actions seek substantial damages, management believes, based upon discussion with counsel, that the outcome of this litigation will not have a material effect on the Company's financial position. The materiality of these legal matters to the Company's future operating results depends on the level of future results of operations as well as the timing and ultimate resolution of such legal matters.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange.
The table on page 34 of the 1996 Annual Report to Shareholders shows the high and low market prices of the Company's common stock, information from which is incorporated herein by reference. In January 1994, the Company's Board of Directors declared a $.03 per share quarterly dividend on the Company's common stock and declared quarterly dividends of the same amount through July 1996. In October 1996, the Company's Board of Directors declared a $.04 per share quarterly dividend. Continued payment of dividends in the future will depend upon the Board's evaluation of earnings, financial condition and working capital needs of the Company.
As of November 29, 1996, the Company had approximately 980 shareholders of record.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The "Five Year Financial Summary" on page 19 of the 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information on pages 20 through 22 of the 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes to the consolidated financial statements for Interstate/Johnson Lane, Inc., as appearing on pages 24 through 32 of the 1996 Annual Report to Shareholders, are incorporated herein by reference.
Quarterly "Supplementary Financial Data" is presented on page 19 of the 1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning those directors who are executive officers of the Registrant is presented under the caption "Election of Directors" on pages 4 through 6 of the Proxy Statement, dated December 17, 1996, to be used in connection with the Company's Annual Shareholders' Meeting to be held January 21, 1997, is incorporated herein by reference.
In addition to the individuals referred to in the preceding paragraph, the following individuals currently serve as executive officers of the Registrant.
Edwin A. Dalrymple, Jr., 46, is a Senior Managing Director of IJL and the head of its Private Client Group. Mr. Dalrymple joined IJL in 1981, and previously served as branch manager of the Pinehurst and Charlotte branch offices and as Associate Director of the Private Client Group. He was elected a Senior Vice President in 1989 and a Director of IJL in 1991. He was elected a Senior Managing Director in 1996.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Harvey D. Harrelson, 47, has been with IJL since 1981, when he joined the firm as a bond trader, and currently serves as the head of the Fixed Income Capital Markets Group, which includes a staff of 90 professionals. He was elected a Senior Vice President and a Director of IJL in 1989. He was elected a Senior Managing Director in 1996.
John H. Haynie, 48, is a Senior Managing Director of IJL and Director of Operations. He joined the firm in 1973 as a Margin manager, became Assistant Director of Operations in 1979 and assumed his current role in 1992. He was elected a Senior Vice President in 1992 and a Director of IJL in 1995. He was elected a Senior Managing Director in 1996.
Michael D. Hearn, 44, joined IJL in 1976 and has served as Secretary and General Counsel of the Company since 1985. He was elected a Senior Vice President of IJL in 1978 and a Director in 1986. He was elected a Senior Managing Director in 1996.
Lewis F. Semones, Jr., 38, joined IJL in 1985 as Controller. From May 1988 to November 1989 he was chief financial officer of another regional securities firm, after which he rejoined IJL as head of internal audit. He was elected a Senior Vice President of IJL in 1992 and a Director of IJL in 1994, and presently has executive responsibility for information technology, strategic planning, and several other administrative support functions. He was elected a Senior Managing Director in 1996.
Executive officers of the Company serve at the pleasure of the Board of Directors.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" on pages 16 through 19 of the Proxy Statement, dated December 17, 1996, to be used in connection with the Company's Annual Shareholders' Meeting to be held January 21, 1997, is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain Beneficial Owners and Management" on pages 13 through 15 of the Proxy Statement, dated December 17, 1996, to be used in connection with the Company's Annual Shareholders' Meeting to be held January 21, 1997, is incorporated herein by reference.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Related Transactions" on page 18 of the Proxy Statement, dated December 17, 1996, to be used in connection with the Company's Annual Shareholders' Meeting to be held January 21, 1997, is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
All other schedules are omitted because they are not required, are not applicable, or because the required information is given in the consolidated financial statements or notes thereto.
With the exception of the specific pages referenced, (19 through 22, 24 through 32, and page 34), the 1996 Annual Report to Shareholders is not deemed filed as part of this report.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
Exhibits: (i) The following exhibits are filed as part of this report:
Exhibit 11 Statement Regarding Computation of Per Share Earnings 13 1996 Annual Report to Shareholders 21 Subsidiaries 23 Consent of Independent Accountants 27 Financial Data Schedule
(ii) The following exhibits have been previously filed:
3(a) Certificate of Incorporation of the Company, as Amended, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(b) By-Laws of the Company, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(c) Amendment of the Certificate of Incorporation, incorporated herein by reference to Form 10-Q filed May 14, 1987.
(d) Restated Certificate of Incorporation of Interstate Securities, Inc., incorporated herein by reference to the Company's Form S-4 Registration Statement, filed September 26, 1988.
(e) Certificate of Amendment of Restated Certificate of Incorporation of Interstate Securities, Inc., incorporated herein by reference to Form 10-Q filed February 13, 1989.
4(a) Specimen Certificate of Common Stock, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
Material Contracts:
10(a) 1985 Incentive Stock Option Plan, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(b) Interstate Securities Corporation Profit-Sharing and Capital Accumulation Plan and Trust, Amended and Restated as of October 1, 1984, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
(ii) Exhibits previously filed, continued:
10(c) Interstate Securities Corporation Employee Stock Ownership and PAYSOP Plan and Trust, Amended and Restated as of October 1, 1984, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(d) Lease Agreement dated January 27, 1981, between Interstate and JACMABRUTER, a North Carolina partnership, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(e) Lease Agreement dated October 21, 1983, between Interstate and NCNB National Bank of North Carolina, co-trustee (u/w of Walter H. Hook, Sr. and u/a Walter W. Hook, Jr.), incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(f) Ominbus Account Agreement dated May 1, 1984, between Interstate and Pershing Futures, a Division of Donaldson, Lufkin & Jenrette Securities Corporation, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(g) Financial Information Service Agreement dated March 5, 1981, between Interstate and Quotron Systems, Inc., incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(h) Financial Data Base Services Agreement dated December 3, 1984, between Interstate and Quotron Systems, Inc., incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(i) Form of Indemnity Agreement entered into between Interstate Securities, Inc. and each of its Directors and Officers, incorporated herein by reference to Form 10-K filed December 23, 1986.
(j) Interstate/Johnson Lane, Inc. 1985 Nonqualified Stock Option Plan, incorporated herein by reference to Form 10-Q filed February 12, 1986.
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
(k) Lease agreement dated October 9, 1987, between Interstate Securities, Inc., and Office On The Square Limited Partnership, a North Carolina limited partnership, incorporated herein by reference to Form 10-K filed December 2, 1988.
(l) Lease agreement dated January 25, 1990, between Interstate/Johnson Lane Corporation and RESURGENS PLAZA SOUTH ASSOCIATES, a Georgia general partnership, incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(m) Lease agreement dated December 30, 1991, between Interstate/Johnson Lane Corporation and ADP Financial Information Services, Inc., incorporated herein by reference to the Company's Form S-1 Registration Statement (Reg. No. 2-98424), which became effective on July 31, 1985.
(n) Lease agreement dated June 8, 1993, between Interstate/Johnson Lane Corporation and Vanguard/IJL Limited Partnership incorporated herein by reference to Form 10-K filed December 23, 1993.
(b) Reports on Form 8-K
There were no 8-K reports filed during the fourth quarter of fiscal year 1996.
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 as follows:
Interstate/Johnson Lane, Inc. Amended and Restated Stock Award Plan, 10/21/96 Filed 12/16/96
Interstate/Johnson Lane, Inc. Amended and Restated 1987 Stock Award Plan Filed 10/26/94
Interstate/Johnson Lane, Inc. Amended and Restated 1987 Stock Award Plan Filed 09/13/91
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
Interstate/Johnson Lane, Inc. Amended and Restated 1985 Incentive Stock Option Plan Filed 11/06/89
Interstate/Johnson Lane, Inc. 1985 Non-Qualified Stock Option Plan Filed 11/06/89
Interstate/Johnson Lane, Inc. Filed 11/07/88
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim arises for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person in connection with the securities being registered), the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Interstate/Johnson Lane, Inc.:
We have audited the consolidated financial statements of Interstate/Johnson Lane, Inc. and Subsidiaries as of September 30, 1996 and 1995, and for each of the three years in the period ended September 30, 1996 which financial statements are included on pages 24 through 32 of the 1996 Annual Report to Shareholders of Interstate/Johnson Lane, Inc. and are incorporated herein by reference. We have also audited the financial statement schedule listed in the index on page 12 of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule 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 consolidated financial condition of Interstate/Johnson Lane, Inc. and Subsidiaries as of September 30, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
As discussed in Note 12 to the Consolidated Financial Statements, on October 1, 1993, the Company adopted Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes."
/s/ Coopers and Lybrand L.L.P.
Charlotte, North Carolina October 21, 1996
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS INTERSTATE/JOHNSON LANE, INC. AND SUBSIDIARIES
A - Payments charged to reserve B - Reassessment of reserve C - Specific account charge-offs
INTERSTATE/JOHNSON LANE, INC. AND CONSOLIDATED SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15d 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 on December 20, 1996.
INTERSTATE/JOHNSON LANE, INC.
BY:/s/ James H. Morgan ------------------------------- James H. Morgan, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
Exhibit Number Description of Exhibit
11 Statement Regarding Computation of Per Share Earnings
13 1996 Annual Report to Shareholders
21 Subsidiaries
23 Consent of Independent Accountants
27 Financial Data Schedule