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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2002
Commission file number 1-11123
THE JOHN NUVEEN COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3817266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 917-7700
NO CHANGES
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At August 8, 2002, there were 93,089,900 shares of the Company's Common
Stock outstanding, consisting of 19,764,686 shares of Class A Common Stock, $.01
par value, and 73,325,214 shares of Class B Common Stock, $.01 par value.
THE JOHN NUVEEN COMPANY
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited),
June 30, 2002 and December 31, 2001 3
Consolidated Statements of Income (Unaudited),
Three Months Ended June 30, 2002 and 2001
Six Months Ended June 30, 2002 and 2001 4
Consolidated Statement of Changes in Common Stockholders'
Equity (Unaudited), Six Months Ended June 30, 2002 5
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 2002 and 2001 6
Notes to Consolidated Financial Statements
(Unaudited) 7
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
Item 1 through Item 6 21-23
Signatures 24
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE JOHN NUVEEN COMPANY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31,
2002 2001
----------- ----------
ASSETS
- ------
Cash and cash equivalents $ 116,765 $ 83,659
Management and distribution fees receivable 37,522 53,803
Other receivables 7,138 12,537
Securities owned (trading account),
at market value:
Nuveen defined portfolios 3 15,901
Bonds and notes - 1,445
Deferred income tax asset, net - 164
Furniture, equipment, and leasehold
improvements, at cost less accumulated
depreciation and amortization of
$35,243 and $31,823, respectively 27,544 28,372
Other investments 60,602 59,651
Goodwill 360,925 353,598
Other intangible assets, net of accumulated
amortization of $3,035 and $1,623,
respectively 43,216 51,876
Prepaid expenses and other assets 39,819 35,605
----------- ----------
$ 693,534 $ 696,611
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Notes payable $ 183,000 $ 183,000
Accrued compensation and other expenses 30,817 44,973
Deferred compensation 28,253 28,398
Security purchase obligations - 739
Deferred income tax liability, net 3,858 -
Other liabilities 19,816 27,611
----------- ----------
Total liabilities 265,744 284,721
----------- ----------
Redeemable preferred stock, at redemption
value; 5,000,000 shares authorized,
225,000 shares issued and outstanding 5,625 5,625
Minority interest 40,930 -
Common stockholders' equity:
Class A Common stock, $.01 par value;
160,000,000 shares authorized at
June 30, 2002; 470 470
46,967,682 shares issued
and outstanding
Class B Common stock, $.01 par value;
80,000,000 shares authorized at
June 30, 2002; 733 733
73,325,214 shares issued and
outstanding
Additional paid-in capital 148,356 131,996
Retained earnings 647,525 620,274
Unamortized cost of restricted
stock awards (1,142) (1,537)
Accumulated other comprehensive loss (4,072) (3,713)
----------- ----------
791,870 748,223
Less common stock held in treasury,
at cost (26,451,796 and
25,150,668 shares, respectively) (410,635) (341,958)
----------- ----------
Total common stockholders' equity 381,235 406,265
----------- ----------
$ 693,534 $ 696,611
=========== ==========
See accompanying notes to consolidated financial statements.
3
THE JOHN NUVEEN COMPANY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ------------------------
2002 2001 2002 2001
---------- ---------- ---------- -----------
Operating revenues:
Investment advisory fees from assets
under management $ 86,056 $ 79,029 $ 171,211 $ 158,555
Underwriting and distribution of
investment products 1,667 5,004 6,538 9,262
Positioning profits/(losses), net (13) 278 (127) 178
Other operating revenue 2,638 1,914 5,335 3,931
---------- ---------- ---------- -----------
Total operating revenues 90,348 86,225 182,957 171,926
Operating expenses:
Compensation and benefits 21,718 21,436 44,570 42,906
Advertising and promotional costs 3,500 4,025 6,967 8,467
Occupancy and equipment costs 4,153 3,510 8,172 6,679
Amortization of goodwill and
intangible assets 698 2,041 1,411 4,083
Travel and entertainment 2,132 2,264 4,113 4,420
Other operating expenses 8,353 7,579 18,353 15,303
---------- ---------- ---------- -----------
Total operating expenses 40,554 40,855 83,586 81,858
Operating income 49,794 45,370 99,371 90,068
Non-operating income 243 1,016 71 2,091
---------- ---------- ---------- -----------
Income before taxes 50,037 46,386 99,442 92,159
Income taxes 19,585 18,371 39,001 36,185
---------- ---------- ---------- -----------
Net income $ 30,452 $ 28,015 $ 60,441 $ 55,974
========== ========== ========== ===========
Average common and common equivalent
shares outstanding:
Basic 94,398 93,820 94,659 93,752
========== ========== ========== ===========
Diluted 99,141 101,752 99,362 102,186
========== ========== ========== ===========
Earnings per common share:
Basic $ 0.32 $ 0.30 $ 0.64 $ 0.59
========== ========== ========== ===========
Diluted $ 0.31 $ 0.28 $ 0.61 $ 0.55
========== ========== ========== ===========
See accompanying notes to consolidated financial statements.
4
THE JOHN NUVEEN COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS)
Unamortized Accumulated
Class A Class B Additional Cost of Other
Common Common Paid-In Retained Restricted Comprehensive Treasury
Stock Stock Capital Earnings Stock Awards Loss Stock Total
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 2001 $ 470 $ 733 $ 131,996 $ 620,274 $ (1,537) $ (3,713) $ (341,958) $ 406,265
Net income - - - 60,441 - - - 60,441
Cash dividends paid - - - (22,856) - - - (22,856)
Amortization of
restricted stock
awards - - - - 395 - - 395
Purchase of treasury
stock - - - - - - (105,232) (105,232)
Exercise of stock
options - - - (10,300) - - 36,467 26,167
Issuance of
restricted stock - - - (34) - - 88 54
Tax benefit of
options exercised - - 16,360 - - - - 16,360
Other - - - - - (359) - (359)
---------- ---------- ---------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2002 $ 470 $ 733 $ 148,356 $ 647,525 $ (1,142) $ (4,072) $ (410,635) $ 381,235
========== ========== ========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
5
THE JOHN NUVEEN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
------------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 60,441 $ 55,974
Adjustments to reconcile net income
to net cash provided from operating
activities:
Deferred income taxes 4,259 (1,741)
Depreciation of office property
and equipment 3,432 2,321
Amortization of goodwill and
intangible assets 1,411 4,083
Net (increase) decrease in assets:
Management and distribution
fees receivable 16,281 32,683
Other receivables 5,399 8,407
Nuveen defined portfolios 15,898 (3,463)
Bonds and notes 1,445 739
Prepaid expenses and other assets (4,214) (1,471)
Net increase (decrease) in liabilities:
Accrued compensation and other expenses (14,156) (23,870)
Deferred compensation (145) 303
Security purchase obligations (739) 10,149
Other liabilities (7,795) (6,522)
Other 17,055 8,189
----------- ----------
Net cash provided from
operating activities 98,572 85,781
----------- ----------
Cash flows from financing activities:
Dividends paid (22,856) (22,264)
Proceeds from stock options exercised 26,167 18,701
Proceeds from Rittenhouse stock options
exercised 40,504 -
Acquisition of treasury stock (105,232) (60,284)
----------- ----------
Net cash used for
financing activities (61,417) (63,847)
----------- ----------
Cash flows from investing activities:
Net purchase of office property
and equipment (2,592) (3,378)
Proceeds from sales of investment securities 526 13,288
Purchases of investment securities (902) (3,203)
Other (1,081) (7,756)
----------- ----------
Net cash used for
investing activities (4,049) (1,049)
----------- ----------
Increase in cash and cash equivalents 33,106 20,885
Cash and cash equivalents:
Beginning of year 83,659 72,351
----------- ----------
End of period $ 116,765 $ 93,236
----------- ----------
Supplemental Information:
Taxes paid $ 21,294 $ 28,759
Interest paid $ 2,577 $ 1,053
See accompanying notes to consolidated financial statements.
6
THE JOHN NUVEEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
NOTE 1 BASIS OF PRESENTATION
The consolidated financial statements include the accounts of The John Nuveen
Company and its wholly owned subsidiaries ("the Company" or "Nuveen") and have
been prepared in conformity with accounting principles generally accepted in the
United States of America. These financial statements have also been prepared in
accordance with the instructions to Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures have been omitted pursuant to such rules
and regulations. As a result, these financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
included in the Company's latest annual report on Form 10-K.
These financial statements rely, in part, on estimates. In the opinion of
management, all necessary adjustments (consisting of normal recurring accruals)
have been reflected for a fair presentation of the results of operations,
financial position and cash flows in the accompanying unaudited consolidated
financial statements. The results for the period are not necessarily indicative
of the results to be expected for the entire year.
NOTE 2 EARNINGS PER COMMON SHARE
On August 9, 2001, the Company's Board of Directors authorized a 3-for-2 stock
split of its common stock to shareholders of record on September 20, 2001. On
May 9, 2002, the Company's Board of Directors declared another stock split - a
2-for-1 stock split to be effected as a dividend to shareholders of record as of
June 3, 2002. All references in the consolidated financial statements and notes
as to number of shares, per share amounts and market prices of the Company's
common stock have been restated to reflect the increased number of shares
outstanding.
The following table sets forth a reconciliation of net income and the weighted
average common shares used in the basic and diluted earnings per share
computations for the three-month and six-month periods ended June 30, 2002 and
June 30, 2001.
- -------------------------------------------------------------------------------------------------
In thousands, For the three months ended
except per share data June 30, 2002 June 30, 2001
Net Per-share Net Per-share
income Shares amount income Shares amount
-------------------------------------------------------------
Net income $30,452 $28,015
Less: Preferred stock dividends (70) (281)
------- -------
Basic EPS 30,382 94,398 $0.32 27,734 93,820 $0.30
Dilutive effect of:
Restricted stock - 463 - 272
Employee stock options - 3,662 - 3,536
Assumed conversion of
preferred stock 70 618 281 4,124
------- ------- ------- -------
Diluted EPS $30,452 99,141 $0.31 $28,015 101,752 $0.28
- -------------------------------------------------------------------------------------------------
7
- --------------------------------------- ---------------------------------------------------------
In thousands, For the six months ended
except per share data June 30, 2002 June 30, 2001
Net Per-share Net Per-share
income Shares amount income Shares amount
-------------------------------------------------------------
Net income $60,441 $55,974
Less: Preferred stock dividends (141) (844)
------- -------
Basic EPS 60,300 94,659 $0.64 55,130 93,752 $0.59
Dilutive effect of:
Restricted stock - 369 - 272
Employee stock options - 3,716 - 3,626
Assumed conversion of
preferred stock 141 618 844 4,536
------- ------- -------
Diluted EPS $60,441 99,362 $0.61 $55,974 102,186 $0.55
- -------------------------------------------------------------------------------------------------
Options to purchase 2,170,000 and 150,000 shares of the Company's common stock
were outstanding at June 30, 2002 and 2001, respectively, but were not included
in the computation of diluted earnings per share because the options' respective
weighted average exercise prices of $29.45 and $18.91 per share were greater
than the average market price of the Company's common shares during the
applicable period.
NOTE 3 NET CAPITAL REQUIREMENT
Nuveen Investments, the Company's wholly owned broker/dealer subsidiary, is
subject to the Securities and Exchange Commission Rule 15c3-1, the "Uniform Net
Capital Rule," which requires the maintenance of minimum net capital and
requires that the ratio of aggregate indebtedness to net capital, as these terms
are defined, shall not exceed 15 to 1. At June 30 2002, Nuveen Investments' net
capital ratio was 1.37 to 1 and its net capital was $23,952,000, which is
$21,760,000 in excess of the required net capital of $2,192,000.
NOTE 4 ACQUISITION OF SYMPHONY ASSET MANAGEMENT
On July 16, 2001, Nuveen acquired Symphony Asset Management, LLC ("Symphony").
Symphony is an institutional investment manager based in San Francisco. The
aggregate purchase price was $208.3 million, of which approximately $4.5 million
was allocated to the net book value of assets acquired. Net book value consisted
primarily of cash, fee receivables and payables. The remaining purchase price
has been allocated to identifiable intangible assets and goodwill. Of the $45.8
million of acquired intangible assets, $43.8 million was assigned to existing
contractual customer relationships (19.7-year estimated useful life), $1.6
million to internally developed software (5-year estimated useful life), and the
remaining $0.4 million to a favorable lease (38-month useful life). For the
three months and six months ended June 30, 2002, the aggregate amortization
expense relating to amortizable intangible assets acquired in the Symphony
acquisition was approximately $0.7 million and $1.3 million, respectively. As
Symphony was not acquired until July 16, 2001, there was no amortization expense
relating to Symphony amortizable intangible assets for the three months and six
months ended June 30, 2001. The following table sets forth the gross carrying
amounts of the acquired amortizable intangible assets and their corresponding
accumulated amortization amounts as of June 30, 2002 and December 31, 2001:
8
------------------------------------------------------------------------
Acquired Amortizable Intangible Assets
(in thousands)
------------------------------------------------------------------------
Gross
Carrying Accumulated Amortization As Of:
Amount 6/30/02 12/31/01
-------------------------------------------
Customer relationships $43,800 $ 2,111 $ 1,000
Internally developed software 1,622 296 134
Favorable lease 369 168 110
------- ------- --------
Total $45,791 $ 2,575 $ 1,244
------------------------------------------------------------------------
The estimated aggregate annual amortization expense for each of the next five
years is approximately $2.7 million.
The transaction price will have potential additional future payments up to a
maximum of $180 million based on Symphony's reaching specified performance and
growth targets for its business. Any future payments will be recorded as
additional goodwill. There were no such payments for the year ended December 31,
2001 or during the six months ended June 30, 2002.
The following unaudited actual information for the three-month and six-month
periods ended June 30, 2002 and unaudited pro-forma information for the
three-month and six-month periods ended June 30, 2001 reflect a summary of the
consolidated results of operations of Nuveen and Symphony as if the acquisition
had occurred on January 1, 2001. (In thousands, except per share data).
- -------------------------------------------------------------------------------------------------------
As Reported
Three Months Pro-Forma As Reported Pro-forma
Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
----------------------------------------------------------------------------
Revenues $90,348 $93,552 $182,957 $187,050
Net Income $30,452 $28,055 $ 60,441 $ 56,269
Earnings per common share
(diluted) $ 0.31 $ 0.28 $ 0.61 $ 0.55
- -------------------------------------------------------------------------------------------------------
NOTE 5 GOODWILL - ADOPTION OF SFAS NO. 142
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires that goodwill
and intangible assets with indefinite useful lives no longer be amortized, but
instead that they be tested for impairment at least annually using a two-step
process. Prior to the adoption of SFAS No. 142, goodwill was amortized on a
straight-line basis over the estimated future periods to be benefited. Effective
January 1, 2002 (adoption date of SFAS No. 142), goodwill is no longer being
amortized, but is subject to the impairment rules of SFAS No. 142.
The first step of the SFAS No. 142 goodwill impairment test is to identify
potential impairment and, in the year of adoption, this step must be measured as
of the beginning of the fiscal year. A company has six months from the date of
adoption to complete the first step (in the case of Nuveen, June 30, 2002). The
second step of the goodwill impairment test (which only has to be performed if
the results from the first step of the goodwill impairment test indicate that
there is potential impairment) measures the amount of the impairment loss
(measured as of the beginning of the year of adoption), if any, and must be
completed by the end of a company's fiscal year.
9
We have completed the first step of the SFAS No. 142 goodwill impairment test
and our results indicate that, as of January 1, 2002, there is no indication of
potential impairment of goodwill.
In 2001 (prior to the adoption of SFAS No. 142), we incurred annual goodwill
amortization expense of approximately $8 million ($2.0 million and $4.0 million
before taxes, for the three months and six months ended June 30, 2001,
respectively). The following table presents what net income would have been for
the three months and six months ended June 30, 2001 as if the new accounting
rules effective January 1, 2002 (goodwill is no longer being amortized) were in
effect as of January 1, 2001. Adjusted per-share amounts are also presented.
- ---------------------------------------------------------------------------------------------------------
(in thousands, except for earnings FOR THE THREE MONTHS FOR THE SIX MONTHS
per share amounts) ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
----------------------------------------------------------
Net income, as reported $ 30,452 $ 28,015 $ 60,441 $ 55,974
Addback: goodwill amortization, net of tax - 1,211 - 2,422
----------------------------------------------------------
Adjusted net income $ 30,452 $ 29,226 $ 60,441 $ 58,396
BASIC EARNINGS PER SHARE:
Net income, as reported $ 0.32 $ 0.30 $ 0.64 $ 0.59
Goodwill amortization, net of tax - 0.01 - 0.03
----------------------------------------------------------
Adjusted net income $ 0.32 $ 0.31 $ 0.64 $ 0.62
DILUTED EARNINGS PER SHARE:
Net income, as reported $ 0.31 $ 0.28 $ 0.61 $ 0.55
Goodwill amortization, net of tax - 0.01 - 0.02
----------------------------------------------------------
Adjusted net income $ 0.31 $ 0.29 $ 0.61 $ 0.57
- ---------------------------------------------------------------------------------------------------------
NOTE 6 NOTES PAYABLE
On August 10, 2000, the Company entered into a $250 million revolving line of
credit with a group of banks that extends through August 2003. The committed
line is divided into two equal facilities, one of which has a three-year term,
the other is renewable in 364 days. Proceeds from borrowings under the facility
are used for fulfilling day to day cash requirements and general corporate
purchases including acquisitions, share repurchases and asset purchases. The
rate of interest payable under the agreement is, at the Company's option, a
function of one of various floating rate indices. The agreement requires the
Company to pay a facility fee at an annual rate of .095% of the committed amount
for the three-year facility and .08% of the committed amount for the 364-day
facility. The Company has the option to provide collateral to secure borrowings
under this line of credit. At June 30, 2002, there were two borrowings under
this committed line. The Company borrowed $125 million under the three-year
facility, and $58 million under the 364-day facility. For the six months ended
June 30, 2002, the weighted average interest rate on these two borrowings was
2.1% for both the 364-day facility and the three-year facility. Subsequent to
quarter-end, all of the outstanding debt on this revolving line of credit was
paid down and new borrowings were made under a new loan facility (see Note 8).
10
NOTE 7 RELATED PARTY TRANSACTIONS
Included in Other Assets is a note receivable of approximately $2 million
relating to a loan made to one of Symphony's prior owners, Maestro LLC. The
members of Maestro LLC are also employees of Symphony. This uncollateralized,
interest-bearing loan is payable on or before December 31, 2006 and carries an
interest rate equal to the Applicable Federal Rate published by the Secretary of
the Treasury (as of July 2002, the applicable interest rate is 4.60% per annum).
Any contingent consideration payment from the Symphony acquisition (see Note 4)
may be used to satisfy this loan obligation.
NOTE 8 SUBSEQUENT EVENTS
On July 31, 2002, Nuveen entered into and drew down fully on a $250 million
revolving loan agreement with its majority shareholder, The St. Paul Companies,
Inc. ("St. Paul"). This loan facility expires on July 15, 2003 and carries a
floating interest rate of LIBOR plus a margin of up to 0.25%. A portion of the
proceeds from this $250 million loan was used to repay the existing outstanding
debt of $183 million.
On August 1, 2002, Nuveen completed the acquisition of NWQ Investment Management
("NWQ"). NWQ is an asset management firm based in Los Angeles, California with
approximately $7 billion of assets under management. NWQ specializes in
value-oriented equity investments with significant relationships among
institutions and financial advisors serving high net worth investors. As a
result of the acquisition, Nuveen expects to broaden and diversify its asset
base even further by adding a value-manager into its managed accounts business.
With the acquisition of NWQ, Nuveen will be able to offer a single source for
managed accounts that employ growth, value, and fixed-income strategies. Nuveen
will pay NWQ's current owner, Old Mutual (U.S.) Holdings, Inc. ("Old Mutual"),
cash in the amount of $140 million, which will include up to $20 million over 5
years that can be offset by fees paid to Old Mutual affiliates under a strategic
alliance agreement. A combination of existing available cash as well as a
portion of the proceeds from the new loan agreement with St. Paul was used to
fund the payment made at closing. Nuveen has engaged external valuation experts
to determine the appropriate purchase price allocation.
On August 8, 2002, Nuveen renewed its 364-day credit facility. The terms of the
facility fee and interest rate payable remain unchanged from that disclosed in
Note 6.
11
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
JUNE 30, 2002
DESCRIPTION OF THE BUSINESS
- ---------------------------
Our principal businesses are asset management and related research as well as
the development, marketing, and distribution of investment products and services
for the affluent, high-net-worth and the institutional market segments. We
distribute our investment products and services, including mutual funds,
exchange-traded funds, and individually managed accounts, to the affluent and
high-net-worth market segments through unaffiliated intermediary firms including
broker/dealers, commercial banks, affiliates of insurance providers, financial
planners, accountants, consultants and investment advisors. We also provide
investment products to institutional markets.
The financial advisors we support serve affluent and high-net-worth investors.
We provide consultative services to these financial advisors with a primary
focus on managed assets for fee-based customers and structured investment
services for transaction-based advisors.
Our primary business activities generate three principal sources of revenue: (1)
ongoing advisory fees earned on assets under management, including mutual funds,
exchange-traded funds, and separately managed accounts, (2) distribution
revenues earned upon the sale of certain investment products and (3) incentive
fees earned on certain institutional accounts based on the performance of such
accounts.
Sales of our products, and their profitability, are directly affected by many
variables, including investor preferences for equity, fixed-income or other
investments, the availability and attractiveness of competing products, market
performance, continued access to distribution channels, changes in interest
rates, inflation, and income tax rates and laws.
RECENT EVENTS
- -------------
The following events are relevant to the understanding of our second quarter
2002 results:
On July 16, 2001, we completed the acquisition of Symphony Asset Management LLC
("Symphony") for $208 million in cash. These funds were provided through a
combination of cash on hand and borrowings under our committed credit
facilities. Symphony, an institutional investment manager based in San
Francisco, manages portfolios designed to reduce risk through market-neutral and
other alternative-investment strategies in several equity and fixed-income asset
classes. Symphony's business generates two principal sources of revenue: (1)
ongoing advisory fees based on assets under management, and (2) incentive fees
earned on certain institutional accounts based on performance of the accounts.
On August 9, 2001, we announced a 3-for-2 stock split of our common stock. The
stock split was effected as a dividend to shareholders of record as of September
20, 2001. Shareholders received one additional share of Nuveen common stock for
every two shares that they owned as of the record date. On May 9, 2002, we
announced a 2-for-1 split of our commons stock. The stock split was effected as
a dividend to shareholders of record as of June 3, 2002. For comparability,
prior period share information has been restated for both stock splits.
12
The Board of Directors for each of the Nuveen Money Market Funds decided to
close all of the Funds effective August 24, 2001. Due to shrinking demand from
investors who increasingly use brokerage sweep accounts for their cash
management needs, the Funds did not maintain a self-sustaining level of assets.
In early 2002, we announced our intention to stop depositing continuously
offered equity and fixed-income defined portfolio products. As anticipated, this
scale-back plan was completed by the end of the first quarter of 2002.
SUBSEQUENT EVENTS
- -----------------
On August 1, 2002 we finalized the acquisition of NWQ Investment Management
("NWQ"), an asset management firm based in Los Angeles with approximately $7
billion of assets under management. NWQ specializes in value-oriented equity
investments with significant relationships among institutions and financial
advisors serving high net worth investors. Cash payments of $140 million will be
paid to Old Mutual (U.S.) Holdings, Inc., which includes up to $20 million to be
paid over the next five years under the terms of a strategic alliance agreement.
Retention programs have been put in place, including an equity-based program
designed to enable key management to participate in NWQ's future earnings
growth.
SUMMARY OF OPERATING RESULTS
- ----------------------------
The table below presents the highlights of our operations for the three-month
and six-month periods ended June 30, 2002 and 2001:
FINANCIAL RESULTS SUMMARY
COMPANY OPERATING STATISTICS
($ in millions except per share amounts)
- ----------------------------------------------------------------------------------------------------
FOR THE SECOND QUARTER OF FOR THE FIRST SIX MONTHS OF
2002 2001 % CHANGE 2002 2001 % CHANGE
---- ---- -------- ---- ---- --------
- ----------------------------------------------------------------------------------------------------
Gross sales of investment products $ 3,321 $ 3,256 2% $ 6,710 $ 7,067 (5%)
- ----------------------------------------------------------------------------------------------------
Assets under management (1)(2) 68,496 62,990 9 68,496 62,990 9
- ----------------------------------------------------------------------------------------------------
Operating revenues 90.3 86.2 5 183.0 171.9 6
- ----------------------------------------------------------------------------------------------------
Operating expenses 40.6 40.9 (1) 83.6 81.9 2
- ----------------------------------------------------------------------------------------------------
Pretax income 50.0 46.4 8 99.4 92.2 8
- ----------------------------------------------------------------------------------------------------
Net income 30.5 28.0 9 60.4 56.0 8
- ----------------------------------------------------------------------------------------------------
Basic earnings per share (3) 0.32 0.30 7 0.64 0.59 8
- ----------------------------------------------------------------------------------------------------
Diluted earnings per share (3) 0.31 0.28 11 0.61 0.55 11
- ----------------------------------------------------------------------------------------------------
Dividends per share (3) 0.12 0.12 - 0.24 0.23 4
- ----------------------------------------------------------------------------------------------------
(1) At period end.
(2) Excludes defined portfolio assets under surveillance.
(3) The prior period has been adjusted to reflect the 3-for-2 stock split
that occurred in September of 2001 and the 2-for-1 split that occurred
in June of 2002.
Gross sales for the quarter were $3.3 billion, up 2% versus the prior year. Our
fixed-income sales continued to be strong across all product lines. Overall,
fixed income sales were $2.4 billion, up 86%
13
versus the prior year. This increase was driven by our exchange-traded funds as
we raised more than $1.4 billion in new closed-end funds assets. This included
approximately $500 million from leveraging several new closed-end funds we
introduced in the first quarter of 2002 and approximately $900 million through
the initial offering of the Nuveen Quality Preferred Income Fund. Strong
interest in fixed-income products also helped drive the increase in mutual fund
sales and fixed income managed account sales, which were $371 million and $625
million for the quarter, respectively, up 28% and 79% versus the prior year.
These strong fixed-income sales were offset by a decline in equity sales as a
result of the downturn in the equity markets. Defined portfolio product sales
declined as a result of our decision in the first quarter of 2002 to discontinue
this product line.
Net flows (equal to the sum of sales, reinvestments and exchanges less
redemptions) totaled $0.6 billion for the quarter ended June 30, 2002 with
positive flows from fixed-income products accounting for $2.0 billion.
Offsetting these strong flows, our equity mutual funds and managed accounts
experienced net outflows of $0.8 billion for the quarter as a result of weakened
equity market conditions. Additionally, our alternative investment products also
experienced net outflows for the second quarter as we exited certain non-hedge
fund advisory mandates.
Total assets under management at the end of the second quarter of 2002 were
$68.5 billion. This is an increase in of $5.5 billion or 9% versus the $63.0
billion in assets at the end of the second quarter 2001. This increase in assets
under management was driven by the inclusion of Symphony assets ($4 billion) and
as a result of net flows into funds and accounts.
Operating revenues for the quarter totaled $90.3 million, an increase of 5% over
the $86.2 million in operating revenues recorded in the second quarter of 2001.
This increase was driven by a 9% increase in advisory fees as a result of an
increase in average assets under management, mainly in our fixed income
businesses, and the inclusion of Symphony advisory fees.
Operating expenses for the quarter declined 1% when compared with the prior
year. Excluding the impact of Symphony, operating expenses declined 8%, mainly
as a result of decreased goodwill amortization expense (due to new accounting
rules effective 2002). However, even after considering the impact of both
Symphony and the new accounting rules effective in 2002, total operating
expenses for the quarter were down 3% compared with the prior year.
RESULTS OF OPERATIONS
- ---------------------
The following discussion and analysis contains important information that should
be helpful in evaluating our results of operations and financial condition, and
should be read in conjunction with the consolidated financial statements and
related notes.
Total advisory fee income earned during any period is directly related to the
market value of the assets we manage. Advisory fee income will increase with a
rise in the level of assets under management. Assets under management rise with
the sale of fund shares, the addition of new managed accounts or deposits into
existing managed accounts, the acquisition of assets under management from other
advisory companies, or through increases in the value of portfolio investments.
Assets under management may also increase as a result of reinvestment of
distributions from funds and accounts, and from reinvestment of distributions
from defined portfolio products we sponsor into shares of mutual funds. Fee
income will decline when managed assets decline, as would occur when the values
of fund portfolio investments decrease or when mutual fund redemptions or
managed account withdrawals exceed sales and reinvestments.
14
Distribution revenue is earned as defined portfolio and mutual fund products are
sold to the public through financial advisors. Correspondingly, distribution
revenue will rise and fall with the level of our sales of these products, and
has been impacted by our decision to discontinue the defined portfolio product
line in 2002.
Gross sales of investment products for three-month and six-month periods ended
June 30, 2002 and 2001 are shown below:
- ---------------------------------------------------------------------------------------
GROSS INVESTMENT PRODUCT SALES
(in millions)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
---- ---- ---- ----
Managed Assets:
Exchange-Traded Funds $ 1,462 $ 579 $ 2,570 $ 1,740
Mutual Funds 371 290 657 595
Managed Accounts - Retail 1,322 1,892 2,983 3,693
Managed Accounts - Institutional 166 108 306 242
------- ------- ------- -------
Total Managed Assets 3,321 2,869 6,516 6,270
Defined Portfolios - 387 194 797
------- ------- ------- -------
Total $ 3,321 $ 3,256 $ 6,710 $ 7,067
======= ======= ======= =======
- ---------------------------------------------------------------------------------------
Gross sales of investment products decreased 5% for the six-month period ended
June 30, 2002 when compared with the same period in 2001, due to our exit of the
defined portfolio business. Excluding the impact of our exit of the defined
portfolio business, we grew our sales 4%. Sales of our 2002 ETF offerings
combined with the leveraging of the November 2001 offerings totaled $2.6
billion, up 48% versus the prior year. Retail managed account sales were down
19% from a year ago, reflecting volatility and general weakened equity market
conditions. Defined portfolio sales declined 76% as a result of our decision at
the beginning of 2002 to discontinue our defined portfolio product line.
The following table summarizes net assets under management:
- ----------------------------------------------------------------------------
NET ASSETS UNDER MANAGEMENT (1)
(in millions)
JUNE 30, DECEMBER 31, JUNE 30,
2002 2001 2001
------- ------- -------
Mutual Funds $11,641 $11,814 $11,491
Exchange-Traded Funds 35,051 32,000 30,012
Managed Accounts 21,804 24,671 21,058
Money Market Funds - - 429
------- ------- -------
Total $68,496 $68,485 $62,990
======= ======= =======
(1) Excludes defined portfolio product assets under surveillance
- ----------------------------------------------------------------------------
Assets under management grew 9% to $68.5 billion, an increase of $5.5 billion
from the end of June 2001. Symphony assets accounted for approximately $4.0
billion of the increase, while strong net flows, mainly on our fixed-income
products more than offset equity market declines and a reduction in assets due
to the closing of the money market funds. Assets under management were flat
versus
15
December 31, 2001 as net flows into funds and accounts of $2.3 billion
and appreciation on our fixed income assets were offset by equity market
depreciation or $3.0 billion.
Investment advisory fee income, net of sub-advisory fees and expense
reimbursements, is shown in the following table:
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY FEES
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
------- ------- -------- --------
Mutual Funds $14,390 $14,283 $ 28,609 $ 28,160
Exchange-Traded Products 46,444 42,973 91,312 84,674
Managed Accounts 25,222 21,339 51,290 44,917
Money Market Funds - 434 - 804
------- ------- -------- --------
Total $86,056 $79,029 $171,211 $158,555
======= ======= ======== ========
- ------------------------------------------------------------------------------
Advisory fees for the six-month period ended June 30, 2002, increased 8% over
the same period in 2001. Symphony accounted for 5% of the increase, while
exchange-traded funds and other fixed-income products drove the remainder. These
increases were partially offset by a decline in fees as a result of the closing
of the money market funds in the third quarter of 2001.
Underwriting and distribution revenue for the three-month and six-month periods
ended June 30, 2002 and 2001 is shown in the following table:
- ------------------------------------------------------------------------------
UNDERWRITING AND DISTRIBUTION REVENUE
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
------- ------- -------- --------
Mutual Funds $ 521 $ 819 $ 1,334 $ 1,862
Defined Portfolios 51 3,784 2,607 5,817
Exchange-Traded Products 1,095 401 2,597 1,583
------- ------- -------- --------
Total $ 1,667 $ 5,004 $ 6,538 $ 9,262
======= ======= ======== ========
- ------------------------------------------------------------------------------
Total underwriting and distribution revenue for the first half of 2002 declined
$2.7 million when compared with the first half in 2001 due to a decline in
distribution revenue on defined portfolios as a result of the discontinuation of
this business. Additionally, mutual fund distribution revenue declined as a
result of a decline in equity product sales. Partially offsetting these declines
is an increase in underwriting fees on our exchange-traded fund offerings.
16
OTHER OPERATING REVENUE
Other operating revenue consists of various fees earned in connection with
services provided on behalf of our defined portfolio assets under surveillance
and incentive fees earned on institutional assets managed by Symphony. The
increase in other operating revenue for the six-month period ended June 30, 2002
is due to the inclusion of Symphony incentive fees.
POSITIONING PROFITS/(LOSSES)
We record positioning profits or losses from changes in the market value of the
inventory of unsold investment products and other securities held by our
broker/dealer subsidiary, Nuveen Investments. We recorded net positioning losses
of $0.1 million in the first half of 2002, compared to gains of $0.2 million in
the first half of 2001.
OPERATING EXPENSES
The following table summarizes operating expenses for the three-month and
six-month periods ended June 30, 2002 and 2001:
- ------------------------------------------------------------------------------
OPERATING EXPENSES
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
------- ------- -------- --------
Compensation and Benefits $21,718 $21,436 $ 44,570 $ 42,906
Advertising and Promotion 3,500 4,025 6,967 8,467
Occupancy and Equipment 4,153 3,510 8,172 6,679
Amortization of
Intangibles 698 2,041 1,411 4,083
Travel and Entertainment 2,132 2,264 4,113 4,420
Other Operating Expenses 8,353 7,579 18,353 15,303
------- ------- -------- --------
Total $40,554 $40,855 $ 83,586 $ 81,858
======= ======= ======== ========
- ------------------------------------------------------------------------------
Operating expenses increased $1.7 million during the first half of 2002 compared
to the first half of 2001. This increase is primarily due to the inclusion of
Symphony operating expenses. Excluding Symphony, operating expenses declined
$4.4 million (5%), driven mainly by a $4.0 million reduction in goodwill
amortization expense as a result of new accounting rules effective January 1,
2002.
Compensation and related benefits for the first half of 2002 increased $1.7
million compared to the first half in the prior year, primarily as a result of
the inclusion of Symphony. Excluding the impact of Symphony, compensation
expense was down slightly to the prior year as salary increases were more than
offset by headcount reductions. The reduction in headcount is related to the
discontinuation of the defined portfolio business.
17
Advertising and promotional expenditures decreased $1.5 million for the first
half of 2002 compared to the first half of 2001. This decrease is due to a
reduction in spending behind our defined portfolio business.
All other operating expenses, including occupancy and equipment costs, travel
and entertainment and other, increased $4.2 million during the first half of
2002 compared to the first quarter of 2001. The inclusion of Symphony expenses
drove $2.6 million of the increase with the remainder mainly driven by increased
severance due to the exit of our defined portfolio business and fund
organization costs related to our exchange-traded fund offerings.
NON-OPERATING INCOME/(EXPENSE)
Non-operating income/(expense) is comprised primarily of net interest
income/(expense) and other miscellaneous non-operating revenue/(expense).
Net interest income was down $3.1 million in the first half of 2002 compared to
the first half of 2001. This decline was partially caused by a decrease in
interest income resulting from the use of cash on hand for the Symphony
acquisition, and partially because of an increase in interest expense as a
result of the debt incurred in connection with the Symphony acquisition. This
decline in net interest income was partially offset by a decrease in interest
expense on deferred compensation, and partially because of non-recurring
miscellaneous income recorded as a result of our exit from the defined portfolio
business.
CAPITAL RESOURCES, LIQUIDITY
AND FINANCIAL CONDITION
- -----------------------
Our principal businesses are not capital intensive and, historically, we have
met our liquidity requirements through cash flow generated by operations. In
addition, our broker/dealer subsidiary occasionally utilizes available,
uncommitted lines of credit, which approximate $200 million, to satisfy
periodic, short-term liquidity needs. As of June 30, 2002, no borrowings were
outstanding on these uncommitted lines of credit. In August 2000, we entered
into a $250 million committed line of credit with a group of banks to ensure an
ongoing liquidity source for general corporate purposes including acquisitions.
The new committed line is divided into two equal facilities, one of which has a
three-year term, the other is renewable in 364 days. As of June 30, 2002, the
outstanding balance under this committed credit line was $183 million. The
proceeds from these facilities were used in part to fund the Symphony
acquisition. On August 8, 2002, Nuveen renewed its 364-day credit facility. The
terms of the facility fee and interest rate payable remain unchanged from the
previous agreement.
Subsequent to quarter-end, Nuveen entered into and drew down fully on a $250
million revolving loan agreement with its majority shareholder, The St. Paul
Companies, Inc. ("St. Paul"). This loan facility expires on July 15, 2003 and
carries a floating interest rate of LIBOR plus a margin of up to 0.25%. A
portion of the proceeds from this $250 million loan was used to repay the
existing outstanding debt of $183 million, with the remainder used to fund the
NWQ acquisition.
Options to purchase 395,142 shares of Rittenhouse non-voting Class B common
stock were exercised on March 28, 2002 under the Rittenhouse Financial Services,
Inc. 1997 Equity Incentive Award Plan. Rittenhouse accounted for these options
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." As a result of this exercise, the Company has recorded $40.5 million
of minority interest on its consolidated balance sheet. The minority interest
will remain in place as long as the stock is outstanding. In the event that the
stock is repurchased, any purchase price in excess of the exercise price will be
added to goodwill associated with the Company's acquisition of Rittenhouse.
18
At June 30, 2002, we held in treasury 26,451,796 shares of Class A common stock
acquired in open market transactions. As part of an ongoing repurchase program,
we are authorized to purchase approximately 1.0 million additional shares.
During the second quarter of 2002, the Company repurchased 1,692,100 Class A
common stock shares in open market transactions.
During the first half of 2002, we paid out dividends on common shares totaling
$22.7 million and on preferred shares totaling $0.1 million.
Our broker/dealer subsidiary is subject to requirements of the Securities and
Exchange Commission relating to liquidity and capital standards. (See Notes to
Consolidated Financial Statements.)
Management believes that cash provided from operations and borrowings available
under its uncommitted and committed credit facilities will provide us with
sufficient liquidity to meet our operating needs for the foreseeable future.
INFLATION
Our assets are, to a large extent, liquid in nature and therefore not
significantly affected by inflation. However, inflation may result in increases
in our expenses, such as employee compensation, advertising and promotional
costs, and office occupancy costs. To the extent inflation, or the expectation
thereof, results in rising interest rates or has other adverse effects upon the
securities markets and on the value of financial instruments, it may adversely
affect our financial condition and results of operations. A substantial decline
in the value of fixed-income or equity investments could adversely affect the
net asset value of funds we manage, which in turn would result in a decline in
investment advisory fee revenue.
FORWARD-LOOKING INFORMATION
From time to time, information we provide or information included in our filings
with the SEC (including this report on Form 10-Q) may contain statements that
are not historical facts but are forward-looking statements reflecting
management's expectations and opinions. Our actual future results may differ
significantly from those anticipated in any forward-looking statements due to
numerous factors. These include, but are not limited to, the effects of the
substantial competition that we, like all market participants, face in the
investment management business, including competition for continued access to
the brokerage firms' retail distribution systems, our reliance on revenues from
investment management contracts which are renewed annually according to their
terms, reductions in assets under management because of market declines and
redemptions, burdensome regulatory developments, recent accounting
pronouncements, and unforeseen developments in litigation. We undertake no
responsibility to update publicly or revise any forward-looking statements.
19
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
JUNE 30, 2002
In addition to the various risks previously discussed in this report, we are
exposed to market risk from changes in interest rates, which may adversely
affect our results of operations and financial condition. In the past, we were
exposed to this risk primarily in our fixed-income defined portfolio inventory
and, at times, sought to minimize the risks from these interest rate
fluctuations through the use of derivative financial instruments. As a result of
our decision to discontinue our defined portfolio product line, we no longer
regularly purchase and hold for resale municipal securities and defined
portfolio units. Therefore, it is no longer necessary to utilize futures
contracts to minimize risk. Correspondingly, there were no open derivative
financial instruments at June 30, 2002.
We invest in short-term debt instruments, classified as "Cash and cash
equivalents" on our consolidated balance sheet. The investments are treated as
collateralized financing transactions and are carried at the amounts at which
they will be subsequently resold, including accrued interest. We also invest in
certain Company-sponsored equity, senior-loan and fixed-income mutual funds.
We do not believe that the effect of any reasonably likely near-term changes in
interest rates would be material to our financial position, results of
operations or cash flows.
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported most recently in the Form 10-K for December 31,
2001, a lawsuit (Civil Action No. 97 C 5255) brought in June, 1996 by
certain shareholders is currently pending in federal district court
for the Northern District of Illinois against Nuveen Advisory. The
suit was originally brought against John Nuveen & Co. Incorporated,
Nuveen Advisory, six Nuveen investment companies (the "Funds") managed
by Nuveen Advisory and two of the Funds' former directors seeking
unspecified damages, an injunction and other relief. The suit also
sought certification of a defendant class consisting of all
Nuveen-managed leveraged funds.
The complaint was filed on behalf of a purported class of present and
former shareholders of all Nuveen leveraged investment companies,
including the Funds, which allegedly engaged in certain practices that
Plaintiffs allege violated provisions of the Investment Company Act of
1940 and common law. Plaintiffs alleged, among other things, breaches
of fiduciary duty and various misrepresentations and omissions in
disclosures in connection with the use and maintenance of leverage
through the issuance and periodic auctioning of preferred stock and
the payment of management and brokerage fees to Nuveen Advisory and
John Nuveen & Co. A similar complaint was filed by the Plaintiffs at
the same time against another major leveraged-fund sponsor and
adviser. The Plaintiffs filed a motion to certify a plaintiff class
(which would include current and former shareholders of all Nuveen
leveraged closed-end funds).
On March 30, 1999, the court entered a memorandum opinion and order
(1) granting the Defendants' motion to dismiss all of Plaintiffs'
counts against the defendants other than Nuveen Advisory, (2) granting
Nuveen Advisory's motion to dismiss all of Plaintiffs' counts against
it other than breach of fiduciary duty under Section 36(b) of the
Investment Company Act of 1940, and (3) denying the Plaintiffs' motion
to certify a plaintiff class and a defendant class. No appeal was made
by Plaintiffs of this decision, and the remaining Section 36(b) count
against Nuveen Advisory has proceeded through the discovery phase.
As to alleged damages, Plaintiffs claimed as damages the portion of
all advisory compensation received by Nuveen Advisory from the Funds
during the period from June 21, 1995 to the present that is equal to
the proportion of each Fund's preferred stock to its total assets. The
preferred stock constitutes approximately one third of the Funds'
assets so the amount claimed would equal approximately one third of
management fees received by Nuveen Advisory for managing the Funds
during this period, or more than $60 million. Nuveen Advisory believes
that it has no liability and that Plaintiffs have suffered no damages
and filed a motion for summary judgement as to both liability and
damages. Plaintiffs filed a motion for partial summary judgement as to
liability only. In a memorandum opinion dated September 6, 2001, the
court granted Nuveen Advisory's motion for summary judgement, thereby
terminating the litigation before the court. Plaintiffs appealed this
decision on October 8, 2001.
In an opinion dated July 8, 2002, the United States Court of Appeals
for the Seventh Circuit affirmed the opinion of the district court
dismissing Plaintiffs' lawsuit. Any petition by Plaintiff, for a writ
of certiori to the United States Supreme Court seeking to appeal the
7th Circuit opinion would need to be filed within 90 days of the
issuance of such opinion.
21
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 9, 2002, the eight
directors nominated in the Proxy Statement were elected for a one-year
term expiring at the annual meeting to be held in 2003. The following
individuals were elected directors by the vote of holders of the
following number of shares of Class A and Class B Common Stock
represented at the meeting, voting together as a single class:
DIRECTOR FOR WITHHELD BROKER NON-VOTE
-------- --- -------- ---------------
Timothy R. Schwertfeger 44,953,293 1,559,303 0
John P. Amboian 46,427,593 85,003 0
Willard L. Boyd 46,319,989 193,238 0
Duane R. Kullberg 46,231,293 190,607 0
The following individuals were elected as Class B directors by the
vote of holders of the following number of shares of Class B Common
Stock represented at the meeting, voting as a separate class:
CLASS B DIRECTOR FOR WITHHELD BROKER NON-VOTE
---------------- --- -------- ---------------
Jay S. Fishman 36,662,607 0 0
W. John Driscoll 36,662,607 0 0
Thomas A. Bradley 36,662,607 0 0
John A. MacColl 36,662,607 0 0
A vote to amend the Restated Certificate of Incorporation of the
Company to increase the authorized number of shares of capital stock
from 195,000,000 shares to 245,000,000, of which 160,000,000 shares
shall be designated as Class A Common Stock, par value $0.01 per
share, and 80,000,000 shares shall be designated as Class B Common
Stock, par value $0.01 per share and 5,000,000 shares shall be
designated as Preferred Stock, par value, $0.01 per share, was
approved by the following votes:
--------------------------------------------------------------------
FOR OPPOSED WITHHELD
--- ------- --------
--------------------------------------------------------------------
Class A Common Stock 9,271,857 28,281 549,851
--------------------------------------------------------------------
Class B Common Stock 36,662,607 0 0
--------------------------------------------------------------------
Class A & B Common Stock (Total) 45,934,464 28,281 549,851
--------------------------------------------------------------------
The proposal to approve the Second Amendment and Restatement of the
Company's 1996 Equity Incentive Award Plan was approved by a vote of
43,127,749 shares in favor, 162,113 shares opposed, 1,107,361 shares
abstaining, and 2,115,373 Broker Non-Votes.
22
The proposal to approve the Company's 2002 Executive Officer
Performance Plan was approved by a vote of 45,748,762 shares in favor,
139,971 shares opposed, and 623,863 shares abstaining.
The proposal to ratify the selection of KPMG LLP as independent
auditors for the Company was approved by a vote of 45,940,671 shares
in favor, 565,441 shares opposed and 6,484 shares abstaining.
ITEM 5. OTHER INFORMATION
The next annual shareholder meeting for The John Nuveen Company has
been set for Thursday, May 8, 2003 in Chicago, Illinois.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
10.18 (a) First Amendment to Three Year Revolving
Credit Agreement
10.19 (a) First Amendment to 364 Day-Revolving
Credit Agreement
10.19 (b) Second Amendment to 364-Day-Revolving
Credit Agreement
10.21 Revolving Loan Agreement
99.1 Certification of C.E.O. and C.F.O.
b) Reports on Form 8-K.
None.
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE JOHN NUVEEN COMPANY
(Registrant)
DATE: August 14, 2002 /s/ John P. Amboian
------------------------------------
John P. Amboian
President
DATE: August 14, 2002 /s/ Margaret E. Wilson
------------------------------------
Margaret E. Wilson
Senior Vice President of Finance
(Principal Accounting Officer)
24