SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED OCTOBER 31, 2000 COMMISSION FILE NO. 1-9015 MORGAN KEEGAN, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-1153850 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Fifty Front Street Memphis, Tennessee 38103 (Address of principal (Zip Code) executive offices) 901-524-4100 (Registrant's telephone number, including area code) N/A (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 at least the past 90 days. Yes X No . APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practical date. Class Outstanding at October 31, 2000 Common Stock $.625 par value 28,562,566 Page 1 of 15 INDEX MORGAN KEEGAN, INC. and Subsidiaries Part I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). Consolidated Statements of Financial Condition. . . . . . October 31, 2000 and July 31, 2000 Consolidated Statements of Income . . . . . . . . . . . . Three months ended October 31, 2000 and 1999 Consolidated Statements of Cash Flows . . . . . . . . . . Three months ended October 31, 2000 and 1999 Notes to Consolidated Financial Statements. . . . . . . October 31, 2000 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Part II. Other Information Item 1. Legal proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures Page 2 of 15 Part I. FINANCIAL INFORMATION Item 1. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION MORGAN KEEGAN, INC. and Subsidiaries

~~April~~October 3031 July 31 2000 ~~1999~~2000 (unaudited) (in thousands) ASSETS Cash $ 2319,~~459~~496 $ 1619,~~102~~716 Securities segregated for regulatory purposes, at market ~~186~~329,~~200~~500 ~~246~~170,~~000~~600 Deposits with clearing organizations and others 89,~~585~~878 911,~~792~~846 Receivable from brokers and dealers and clearing organizations 1938,~~446~~086 1214,~~781~~062 Receivable from customers ~~731~~745,~~396~~202 ~~557~~713,~~678~~485 Securities purchased under agreements to resell ~~256~~324,~~312~~482 ~~184~~310,~~852~~935 Securities owned, at market ~~434~~477,~~952~~112 ~~480~~390,~~662~~656 Memberships in exchanges, at cost (market value-$56,~~615~~188,000 at 410-3031-00; $65,~~456~~780,000 at 7-31-9900) 2,~~428~~411 2,428 Furniture, equipment and leasehold improvements, at cost (less allowances for depreciation and amortization $2826,~~003~~810,000 at 410-3031-00; $2730,~~402~~524,000 at 7-31-9900) 2527,~~908~~009 26,~~167~~498 Other assets 7084,~~546~~356 6172,~~903~~050 $12,~~759~~057,~~232~~532 $1,~~598~~732,~~365~~276 LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ ~~197~~156,~~300~~384 $ ~~115,~~100,290 Commercial paper 41110,~~666~~407 6570,~~111~~741 Payable to brokers and dealers and clearing organizations 2115,~~114~~419 718,~~959~~768 Payable to customers ~~847~~1,~~865~~003,721 ~~733~~829,~~725~~517 Customer drafts payable 2016,~~860~~251 1617,~~076~~752 Securities sold under agreements to repurchase ~~191~~305,~~247~~079 ~~239~~207,~~019~~488 Securities sold, not yet purchased, at market ~~105~~93,~~349~~528 58130,~~755~~851 Other liabilities 8389,~~543~~349 8398,~~558~~240 1,~~508~~790,~~944~~138 1,~~319~~473,~~303~~647 Stockholders' equity Common Stock, par value $.625 per share: authorized 100,000,000 shares; shares issued and outstanding 28,562,566 at 410-3031-00; 3128,~~859~~549,~~258~~066 at 7-31-9900 17,851 1917,~~911~~842 Retained earnings ~~232~~249,~~437~~543 ~~259~~240,~~151~~787 ~~250~~267,~~288~~394 ~~279~~258,~~062~~629 $12,~~759~~057,~~232~~532 $1,~~598~~732,~~365~~276

[FN] See accompanying notes. Page 3 of 15 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries

Three Months Ended ~~Nine~~October ~~Months~~31 ~~Ended~~2000 ~~April~~1999 ~~30 April 30~~ (in thousands, except per share amounts) ~~2000 1999 2000 1999~~ REVENUES Commissions $ 4535,~~715~~024 $ 3227,~~739~~279 ~~$112,848 $ 89,699~~ Principal transactions 3938,~~184~~942 4130,~~007~~623 ~~107,490 112,376~~ Investment banking 1612,~~912~~425 911,~~276~~884 ~~40,962 30,305~~ Interest 2628,~~484~~976 2022,~~812~~345 ~~73,124 57,910~~ Investment management fees 10,~~086~~587 7,~~356~~903 ~~26,679 18,833~~ Other 35,~~427~~546 3,~~338~~001 ~~10,109 8,987~~ TOTAL ~~141~~131,~~808~~500 ~~114~~103,~~528~~035 ~~371,212 318,110~~ EXPENSES Compensation 7365,~~216~~983 6053,~~122~~125 ~~190,264 165,052~~ Floor brokerage and clearance 1,~~887~~879 1,~~814~~770 ~~5,283 4,923~~ Communications 67,~~970~~233 6,~~208~~559 ~~19,442 16,996~~ Travel and promotional 3,~~123~~691 23,~~802~~950 ~~10,689 9,062~~ Occupancy and equipment costs 56,~~882~~372 5,~~327~~862 ~~18,026 15,811~~ Interest 1921,~~157~~042 1315,~~896~~204 ~~51,650 36,179~~ Taxes, other than income taxes 32,~~544~~746 2,~~774~~267 ~~9,933 8,527~~ Other operating ~~expense~~expenses ~~3,938 1,885 9,472~~ 6,~~576~~881 ~~117~~2,~~717~~433 94115,~~828~~827 ~~314~~91,~~759~~170 ~~263,126~~ INCOME BEFORE INCOME TAXES 2415,~~091~~673 1911,~~700~~865 ~~56,453 54,984~~ INCOME TAX EXPENSE 95,~~200~~800 74,~~500~~400 ~~21,300 21,300~~ NET INCOME $ 149,~~891~~873 $ 127,~~200~~465 ~~$ 35,153 $ 33,684~~ NET INCOME PER SHARE: Basic $ 0.5235 $ 0.3825 ~~$ 1.19 $ 1.04~~ Diluted $ 0.5234 $ 0.3724 ~~$ 1.19 $ 1.03~~ DIVIDENDS PER SHARE $ 0.0809 $ 0.0708 ~~$ 0.24 $ 0.21~~ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 28,~~760~~557 3230,~~497~~402 ~~29,454 32,484~~ Diluted 28,~~803~~644 3230,~~585 29,~~505 ~~32,585~~

[FN] See accompanying notes. Page 4 of 15 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries

~~Nine~~Three Months Ended ~~April~~October 3031 2000 1999 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 359,~~153~~873 $ 337,~~684~~465 Adjustments to reconcile net income to cash used for operating activities: Depreciation and amortization 72,~~638~~720 72,~~220~~699 Deferred income taxes (~~900~~300) ~~850~~(400) Amortization of gain on sale of building and related assets (~~1,035~~345) (~~1,035~~345) Amortization of restricted stock 51,~~749~~350 61,~~800~~200 4613,~~605~~298 4710,~~519~~619 (Increase) decrease in operating assets: Receivable from brokers and dealers and clearing organizations (624,~~665~~024) (2711,~~176~~158) Deposits with clearing organizations and others 1,~~207~~968 ~~1,207~~ Receivable from customers (~~173~~31,~~718~~717) (6664,~~481~~291) Securities segregated for regulatory purposes 59(158,~~800~~900) 1443,~~600~~300 Securities owned ~~45,710~~ (~~240~~86,~~253~~456) 63,099 Other assets (712,~~743~~006) (61,~~086)~~843 Increase (decrease) in operating liabilities: Payable to brokers and dealers and clearing organizations 13(3,~~155~~349) 2935,~~880~~455 Payable to customers ~~114~~174,~~140~~204 50(10,~~199~~532) Customer drafts payable 4(1,~~784~~501) ~~4,758~~(302) Securities sold, not yet purchased ~~46,594~~ (1837,~~734~~323) 30,238 Other liabilities 1(8,~~020~~546) (1715,~~975~~092) ~~98,284~~ (~~276~~187,~~061~~650) 72,560 Cash ~~provided by~~ (used for) provided by operating activities ~~144,889~~ (~~228~~174,~~542~~352) 83,179 CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper 39,666 (239,~~445~~833) ~~20,386~~ Issuance of Common Stock ~~5,529~~109 ~~4,942~~82 Retirement of Common Stock ~~(68,220)~~- (2442,~~181~~751) Dividends paid (62,~~985~~567) (62,~~798~~399) Short-term borrowings 8256,~~200~~094 ~~230~~55,~~000~~200 Securities purchased under agreements to resell (7113,~~460~~547) 2(30,~~309~~998) Securities sold under agreements to repurchase 97,591 (4746,~~772~~683) ~~7,916~~ Cash provided by (used for) ~~provided by~~ financing activities 177,346 (~~130~~77,~~153~~382) ~~234,574~~ CASH FLOWS FROM INVESTING ACTIVITIES Payments for furniture, equipment and leasehold improvements (73,~~379~~231) (72,~~710~~903) Other 17 - Cash used for investing activities (73,~~379~~214) (72,~~710~~903) ~~Increase~~ (~~decrease~~Decrease) increase in Cash ~~7,357~~ (~~1,678~~220) 2,894 Cash at Beginning of Period 19,716 16,102 ~~22,172~~ Cash at End of Period $ 2319,~~459~~496 $ 2018,~~494~~996

[FN] Income tax payments were approximately $713,000 and $562,000 for the three month periods ending October 31, 2000, and 1999, respectively. Interest payments were approximately $18,211,000 and $14,953,000 for the same periods, respectively. See accompanying notes. Page 5 of 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries October 31, 2000 NOTE A - BASIS OF PRESENTATION The consolidated financial statements include the accounts of Morgan Keegan, Inc. and its subsidiaries (collectively referred to as the Registrant). The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended October 31, 2000, are not necessarily indicative of the results that may be expected for the year ending July 31, 2001. For further information, refer to the financial statements and notes thereto included in the Registrant's annual report on Form 10-K for the year ended July 31, 2000. NOTE B - NET CAPITAL REQUIREMENT As a registered broker/dealer and member of the New York Stock Exchange, the registrant's brokerage subsidiary, Morgan Keegan & Company, Inc. (M.K. & Co.) is subject to the Securities and Exchange Commission's (SEC) uniform net capital rule. The broker/dealer subsidiary has elected to operate under the alternative method of the rule, which prohibits a broker/dealer from engaging in any securities transactions when its net capital is less than 2% of its aggregate debit balances, as defined, arising from customer transactions. The SEC may also require a member firm to reduce its business and restrict withdrawal of subordinated capital if its net capital is less than 4% of aggregate debit balances, and may prohibit a member firm from expanding its business and declaring cash dividends if its net capital is less than 5% of aggregate debit balances. At October 31, 2000, M.K. & Co. had net capital of $145,543,997 which was 19% of its aggregate debit balances and $130,345,054 in excess of the 2% net capital requirement. NOTE C - INCOME TAXES The principal reason for the difference between the Registrant's effective tax rate and the federal statutory rate is the non-taxable interest earned on municipal bonds. Page 6 of 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries NOTE D - NET INCOME PER SHARE The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended ~~Nine~~October ~~Months~~31 ~~Ended April 30 April 30~~ 2000 1999 ~~2000 1999~~ (in thousands, except per share amounts) Numerator Net Income $~~14,891~~ ~~$12~~9,~~200~~873 $~~35,153~~ ~~$33~~7,~~684~~465 Denominator Denominator for basic earnings per share - weighted average shares 28,~~760~~557 3230,~~497~~402 ~~29,454 32,484~~ Effect of dilutive securities - stock options 4387 88103 ~~51 101~~ Denominator for diluted earnings per share - adjusted weighted average shares and assumed ~~conversations~~conversions 28,~~803~~644 3230,~~585 29,~~505 ~~32,585~~ Basic earnings per share $ 0.5235 $ 0.3825 ~~$ 1.19 $ 1.04~~ Diluted earnings per share $ 0.5234 $ 0.~~37 $ 1.19 $ 1.03~~24

NOTE E - OTHER ACCOUNTING PRONOUNCEMENTS Effective August 1, 2000, the Registrant adopted Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative and Hedging Activities", as amended by Statement Nos. 137 and 138 (collectively, the Statements). The Statements require derivatives to be recorded on the statement of financial condition at fair value, with changes in fair value recognized in income, stockholders' equity, or as adjustments to the carrying value of assets and liabilities, depending on the use of the derivative. The adoption of the Statements had no material effect on the Registrant's financial statements. The Registrant's broker/dealer subsidiary does trade in certain derivative securities on behalf of its customers, but generally does not act as principal in such trades. Page 7 of 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries NOTE F - Business Segment Information The Registrant provides financial services through five business segments: Investment Advisory; Private Client; Equity Capital Markets; Fixed Income Capital Markets; and Other. Segment results include all direct revenues and expenses of the operating units in each segment and allocations of indirect expenses based on specific methodologies. Investment Advisory provides investment advisory services to Company-sponsored mutual funds and asset management for institutional and individual clients. Private Client distributes a wide range of financial products through its branch distribution network, including equity and fixed income securities, proprietary and non-affiliated mutual funds and annuities. Net interest income for customers' margin loan and credit account balances is included in this segment. Equity Capital Markets consists of the Registrant's equity institutional sales and trading, syndicate, and corporate finance activities. Sales credits associated with underwritten offerings are reported in the Private Client segment when sold through retail distribution channels and in the Equity Capital Markets segment when sold through institutional distribution channels. Fixed Income Capital markets consists of the Registrant's fixed income institutional sales and trading, syndicate, and public finance activities. Other businesses are principally the Registrant's Athletic Resource Management business and unallocated corporate revenues and expenses. Page 8 of 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MORGAN KEEGAN, INC. and Subsidiaries NOTE F - Business Segment Information (continued) Business segment financial results for the three month periods ending October 31, 2000 and 1999 are as follows:

~~Three~~October ~~Months~~31 ~~Ended~~October ~~Nine~~31 ~~Months Ended April 30 April 30~~ 2000 1999 ~~2000 1999~~ Revenues: Private Client $ 6758,~~010~~628 $ 5647,~~428~~420 ~~$178,632 $146,458~~ Fixed Income Capital Markets 3741,~~119~~298 3933,~~982~~891 ~~110,083 116,524~~ Equity Capital Markets 2117,~~993~~450 912,~~263~~572 ~~47,191 29,842~~ Investment Advisory 910,~~430~~887 7,~~372~~917 ~~25,408 19,090~~ Other 63,~~256~~237 1,~~483~~235 ~~9,898 6,196~~ Total $~~141~~131,~~808~~500 $~~114~~103,~~528~~035 ~~$371,212 $318,110~~ Income before income taxes: Private Client $ 126,~~834~~449 $ 115,~~178~~154 ~~$ 28,889 $ 29,551~~ Fixed Income Capital Markets ~~4,591~~ 5,~~312~~369 134,~~170~~649 ~~16,753~~ Equity Capital Markets 42,~~438~~712 1,~~975~~263 ~~9,322 5,284~~ Investment Advisory ~~1,821~~722 ~~1,070~~612 ~~3,964 2,678~~ Other ~~407~~421 ~~165~~187 ~~1,108 718~~ Total $ 2415,~~091~~673 $ 1911,~~700 $ 56,453 $ 54,984~~865

Segment data includes charges allocated to each segment. Intersegment revenues and charges are eliminated between segments. The Registrant evaluates the performance of its segments and allocates resources to them based on return on investment. The Registrant has not disclosed asset information by segment as the information is not produced internally. All long-lived assets are located in the U.S. The Registrant's business is predominantly in the U.S., with less than 1% of revenues and net income from international operations. Page 9 of 15 Part I. FINANCIAL INFORMATION Item 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MORGAN KEEGAN, INC. and Subsidiaries Morgan Keegan, Inc. (The Registrant) operates a full service regional brokerage business through its principal subsidiary, Morgan Keegan & Company, Inc. (M.K. & Co.). M.K. & Co. is involved in the highly competitive business of origination, underwriting, distribution, trading and brokerage of fixed income and equity securities and also provides investment advisory services. While M.K. & Co. regularly participates in the trading of some derivative securities for its customers, this trading is not a major portion of M.K. & Co.'s business. Many highly volatile factors affect revenues, including general market conditions, interest rates, investor sentiment and world affairs, all of which are outside the Registrant's control. However, certain expenses are relatively fixed. As a result, net earnings can vary significantly from quarter to quarter, regardless of management's efforts to enhance revenues and control costs. Results of Operations The Registrant's revenues increased 28% to $131,500,000 for the quarter ended October 31, 2000 versus revenues of $103,035,000 for the same period in the prior year. The major components of this increase included a 34% increase in investment management fees, a 28% increase in commissions, a 27% increase in principal transactions and a 30% increase in interest income. The increases represent solid business throughout the firm with strong revenue increases in both the equity and fixed income capital markets groups. Business was slightly better among institutional clients than individual investors. Operating expenses were $115,827,000 for the quarter ended October 31, 2000 versus $91,170,000 for the same quarter of the previous year. Employee compensation increased 24% and is relative to the increase in revenues. Interest expense increased 38% due to increased level of inventory carried during the quarter, but was only slightly ahead of the 30% increase in interest income. Other operating expenses increased $4,448,000, or 183% over the same period in the previous year due primarily to legal expenses including the $1,900,000 charge from legal settlements previously reported in the Registrant's Form 10-K. Net income for the quarter ended October 31, 2000 was $9,873,000, or $0.35 per basic share, and was 32% higher than the same period of the previous year when net income was $7,465,000, or $0.25 per basic share. Page 10 of 15 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MORGAN KEEGAN, INC. and Subsidiaries Liquidity and Capital Resources High liquidity is reflected in the Registrant's statement of financial condition with approximately 95% of its assets consisting of cash or assets readily convertible into cash. Financing resources include the Registrant's equity capital, commercial paper, short-term borrowings, repurchase agreements and other payables. For the three months ended October 31, 2000 cash flows used for operating activities were $174,352,000 primarily due to a $158,900,000 increase in securities segregated for regulatory purposes and an $86,456,000 increase in securities owned. Cash flows from financing activities were $177,346,000 for the three months ended October 31, 2000 compared to cash flows used for financing activities of $77,382,000 for the same period of the previous year. The largest components of this change include a $97,591,000 increase in securities sold under agreements to repurchase and a $56,094,000 increase in short-term borrowings. Cash flows from investing activities during the three months ended October 31, 2000 were $3,214,000. This investing activity is a continuation of the Registrant's efforts to upgrade and maintain the broker/dealer subsidiary's branch network. The Board of Directors increased the quarterly dividend from $0.08 per share to $0.09 per share. Total dividends paid during the quarter were $2,567,000. Page 11 of 15 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MORGAN KEEGAN, INC. and Subsidiaries Forward Looking Statements This Form 10-Q may contain or incorporate by reference statements which may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Page 12 of 15 Part I. FINANCIAL INFORMATION Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MORGAN KEEGAN, INC. and Subsidiaries Interest Rate Sensitivity No significant changes have occurred since July 31, 2000 in the Registrant's exposure to market risk. See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Page 13 of 15 PART II. OTHER INFORMATION MORGAN KEEGAN, INC. and Subsidiaries Item 1. Legal proceedings Morgan Keegan & Company, Inc. is subject to various Claims incidental to its securities business. While the ultimate resolution of pending litigation and claims cannot be predicted with certainty, based upon the information currently known, management is of the opinion that it has meritorious defenses and has instructed its counsel to vigorously defend such lawsuits and claims, and that liability, if any, resulting from all litigation will have no material adverse effect on the Registrant's consolidated financial condition or results of operations. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27 - Financial Data Schedule b. Reports on Form 8-K No reports were filed during the quarter on Form 8-K Page 14 of 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Keegan, Inc. Registrant BY /s/Joseph C. Weller Joseph C. Weller EVP, CFO, Sec.-Treas. Date: December 13, 2000 Page 15 of 15 ??

Filing Compare · MORGAN KEEGAN INC