FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9109
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida No. 59-1517485
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
(813) 573-3800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
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
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the close of the latest practicable
date.
1,249,014 shares of Common Stock as of May 3, 1995
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended March 31, 1995
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Statement of Financial Condition as of
March 31,1995 (unaudited), and September 30,1994 2
Consolidated Statement of Operations (unaudited) for the
three and six month periods ended March 31, 1995
and March 25,1994 3
Consolidated Statement of Cash Flows (unaudited) for the
six months ended March 31,1995 and March 25,1994 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11: Computation of Earnings Per Share 10
(b) Reports on Form 8-K: Dated February 28, 1995,
reporting the finalization of a $50 million revolving
line of credit, the hiring of Kenneth W. Corba as the
chief investment officer and growth equity portfolio
manager of Eagle Asset Management and the appointment
of Bert Boksen as the small cap equities portfolio
manager of Eagle Asset Management.
All other items required in Part II have been previously filed or
are not applicable for the quarter ended March 31, 1995.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
March 31, September 30,
1995 1994
(Unaudited)
ASSETS
Cash and cash equivalents $ 71,865 $ 54,021
Assets segregated pursuant to Federal regulations:
Cash and cash equivalents 186,000 145,398
Short-term investments 63,502 14,964
Other investments 9,925 33,872
Other short-term investments 34,868 47,332
Receivables:
Brokerage customers 373,897 348,077
Stock borrowed 1,036,910 747,272
Brokers and dealers 22,397 14,410
Other 36,516 14,643
Trading and investment account securities 200,689 169,381
Investment in leveraged lease 10,325 9,940
Property and equipment, net 42,109 42,080
Deferred income taxes 21,182 20,584
Prepaid expenses and other assets 41,363 36,288
---------- ----------
$2,151,548 $1,698,262
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage note payable $ 13,165 $ 13,243
Payables:
Brokerage customers 675,326 516,794
Stock loaned 1,030,628 771,666
Brokers and dealers 24,780 23,837
Trade and other 80,762 46,811
Trading account securities sold but not yet
purchased 39,695 33,032
Accrued employee compensation 43,635 59,514
Income taxes payable 3,163 5,913
---------- ---------
1,911,154 1,470,810
---------- ---------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock; $.10 par value; authorized
10,000,000 shares; outstanding -0- shares - -
Common stock; $.01 par value; authorized
50,000,000 shares; issued 20,520,615 and 21,777,271
shares 217 217
Additional paid-in capital 50,720 52,375
Unrealized gain on securities available for sale 32 -
Retained earnings 206,582 192,280
257,551 244,872
----------- ----------
Less: 1,256,656 and 1,282,929 common shares
in treasury, at cost (17,157) (17,420)
----------- ----------
240,394 227,452
----------- -----------
$2,151,548 $1,698,262
=========== ===========
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 25, March 31, March 25,
1995 1994 1995 1994
Revenues:
Securities commissions $ 75,114 $ 77,006 $146,709 $160,786
Investment banking 7,062 18,929 12,488 35,836
Investment advisory fees 9,133 12,973 21,037 24,467
Interest 21,790 12,389 41,470 25,587
Principal trading profits 5,211 2,194 5,807 4,661
Financial service fees 2,922 2,117 8,339 6,656
Other 4,446 4,461 5,541 6,489
-------- -------- -------- --------
125,678 130,069 241,391 264,482
-------- -------- -------- --------
Expenses:
Employee compensation 73,785 82,936 143,760 169,205
Data communications 6,322 6,521 12,578 12,012
Occupancy and equipment costs 5,374 3,688 10,398 7,221
Clearance and floor brokerage 1,819 1,912 3,783 3,826
Interest 14,386 7,663 26,733 15,414
Business development 3,498 3,337 7,200 6,904
Other 4,198 4,305 8,130 8,992
-------- -------- -------- --------
109,382 110,362 212,582 223,574
-------- -------- -------- --------
Income before income taxes
and minority interests 16,296 19,707 28,809 40,908
Provision for income taxes 6,195 7,368 10,828 15,298
Minority interests in income (losses)
of consolidated subsidiaries 1 (9) (10) (16)
--------- --------- --------- ---------
Net income $ 10,100 $ 12,348 $ 17,991 $ 25,626
========= ========= ========= =========
Net income per share $ .49 $ .57 $ .87 $ 1.18
========= ========= ========== =========
Cash dividends declared per
common share $ .09 $ .08 $ .18 $ .16
========= ========= ========== =========
Average common equivalent
shares outstanding 20,699 21,747 20,639 21,747
========= ========= ========== =========
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(UNAUDITED)
(in thousands)
Six Months Ended
March 31, March 25,
1995 1994
Cash flows from operating activities:
Net income $ 17,991 $ 25,626
-------- ---------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,056 2,881
(Increase) decrease in assets:
Short-term investments (36,074) (24,025)
Deposits with clearing organizations (3,585) (11,472)
Receivable from:
Brokerage customers (25,820) (52,728)
Stock borrowed (289,638) (386,337)
Brokers and dealers (7,987) 18,025
Other (21,873) 5,719
Trading account securities (698) (32,188)
Deferred income taxes (598) (1,863)
Prepaid expenses and other assets (1,875) 7,062
Increase (decrease) in liabilities:
Payable to:
Brokerage customers 158,532 2,295
Stock loaned 258,962 404,838
Brokers and dealers 943 10,809
Trade and other 18,951 (1,758)
Accrued employee compensation and other expenses(15,879) (9,227)
Income taxes payable (2,750) (4,645)
--------- ---------
Total adjustments 35,667 (72,614)
--------- ---------
Net cash provided by (used in) operating activities 53,658 (46,988)
--------- ---------
Cash flows from investing activities:
Additions to property and equipment, net (5,085) (4,260)
--------- ---------
Cash flows from financing activities:
Borrowings from banks and financial institutions 15,000 -
Payments on borrowings from banks & financial
institutions (78) (70)
Issuance of common stock 1,904 1,582
Purchase of treasury stock (3,296) (6,359)
Cash dividends on common stock (3,689) (3,436)
Unrealized gain on securities available for sale 32 -
--------- --------
Net cash provided by (used in) financing activities 9,873 (8,283)
--------- --------
Net increase (decrease) in cash and cash equivalents 58,446 (59,531)
Cash and cash equivalents at beginning of period 199,419 153,557
-------- ---------
Cash and cash equivalents at end of period $257,865 $ 94,026
======== =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 25,639 $ 13,668
Cash paid for taxes $ 13,880 $ 21,806
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
Basis of Consolidation
The consolidated financial statements include the accounts of
Raymond James Financial, Inc. and its consolidated subsidiaries (the
"Company"). All material intercompany balances and transactions have
been eliminated in consolidation. These statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods presented.
All such adjustments made are of a normal recurring nature. The
nature of the Company's business is such that the results of any
interim period are not necessarily indicative of results for a full
year.
Commitments and Contingencies
In connection with certain limited partnerships syndicated by
Raymond James & Associates, Inc., the Company is contingently liable
as guarantor of certain loans totalling $385,000 at March 31, 1995.
In connection with the early payoff of its $5.8 million loan to
Cumberland Healthcare Fund, L.P. I-A, the Company has a commitment
through October 1, 1996, to relend up to $5 million upon request. No
use of this facility is currently anticipated.
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations in these cases and believes that there are meritorious
defenses in each of these lawsuits. In view of the number and
diversity of claims against the Company, the number of jurisdictions
in which litigation is pending and the inherent difficulty of
predicting the outcome of litigation and other claims, the Company
cannot state with certainty what the eventual outcome of pending
litigation or other claims will be. In the opinion of management,
based on discussions with counsel, the outcome of these matters will
not result in a material adverse effect on the financial position or
results of operations.
Capital Transactions
The Company's Board of Directors has, from time to time, adopted
resolutions authorizing the Company to repurchase its common stock for
the funding of its incentive stock option and stock purchase plans and
other corporate purposes. On February 17, 1995, the Board of
Directors authorized the repurchase of an additional 385,525 shares of
common stock, bringing the cummulative total authorized to 3,125,416.
Of these 2,126,558 shares had been purchased as of March 31, 1995.
In December 1994, the Board of Directors of the Company increased
the quarterly cash dividend to $.09 per share.
Net Capital Requirements
The broker-dealer subsidiaries of the Company are subject to the
requirements of Rule 15c3-1 under the Securities Exchange Act of 1934.
This rule requires that aggregate indebtedness, as defined, not exceed
fifteen times net capital, as defined. Rule 15c3-1 also provides for
an "alternative net capital requirement" which, if elected, requires
that net capital be equal to the greater of $250,000 or two percent of
aggregate debit items computed in applying the formula for
determination of reserve requirements. The New York Stock Exchange
may require a member organization to reduce its business if its net
capital is less than four percent of aggregate debit items and may
prohibit a member firm from expanding its business and declaring cash
dividends if its net capital is less than five percent of aggregate
debit items. The net capital positions of the Company's broker-dealer
subsidiaries at March 31, 1995 were as follows:
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate debit items 16.00%
Net capital $71,587,000
Required net capital $ 8,779,000
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital 1.62
Net capital $ 3,127,000
Required net capital $ 339,000
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital 5.28
Net capital $ 695,000
Required net capital $ 250,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
General
While the current quarter's results compare unfavorably to the prior
year, it is encouraging to note the improvement over the immediately
preceding quarter. Business activity has strengthened, propelling equity
indices to record levels and retracing part of 1994's dramatic rise in long-
term interest rates. Although volatility has been high, the trends recently
have been positive and investor confidence appears to be building.
Results of Operations - Three months ended March 31, 1995 compared with
three months ended March 25, 1994.
Total revenues declined 3%, from $130,069,000 to $125,678,000, while net
income fell 18%, from $12,348,000 to $10,100,000.
Securities commission revenues decreased only slightly, despite a
significant drop in mutual fund and annuity sales. Production per Account
Executive is well below the prior year, and the recruiting pace is below the
Company's historic average.
Investment banking revenues remain well below the prior year's level,
which reflected the tail end of a record period for underwriting volume.
Investment advisory fees declined 30% as a result of institutional
growth equity accounts transferring to Liberty Investment Management (as
shown below), a joint venture between the Company and a former employee,
effective January 1, 1995. Pursuant to the agreement, the Company will
receive 50% of the revenue from these accounts for the next 5 years, while
bearing none of the expenses.
March 31, March 25, % Increase
1995 1994 (Decrease)
Financial Assets Under Management (000's):
Eagle Asset Management, Inc. $1,659,000 $5,639,000 (71%)
Heritage Family of Mutual Funds 1,615,000 1,537,000 5%
Investment Advisory Services 723,000 706,000 2%
Awad and Associates 240,000 197,000 22%
Focus Investment Advisors 47,000 53,000 (11%)
Carillon Asset Management 81,000 81,000 0%
Subtotal 4,365,000 8,213,000 (47%)
------------ ----------
Liberty Investment Management 4,409,000 - (100%)
----------- ----------
Total financial assets $8,774,000 $8,213,000 7%
=========== ===========
Principal trading profits were up significantly, reflecting the improved
market conditions discussed above.
Net interest income achieved a quarterly record of $7.4 million. Higher
interest rates have led to increased earnings on the Company's capital,
largely invested in fixed income securities either as inventories or short-
term investments. Additionally, both customer margin loan and credit
interest balances reached all-time highs. Raymond James Bank, FSB is also
becoming a meaningful contributor to interest earnings.
The decrease in employee compensation expense reflects the declines in
commission expense and in the numerous incentive compensation arrangements
which are a function of departmental, subsidiary and overall firm
profitability.
The significant increase in occupancy and equipment costs was due to
increased retail branch office space and the purchase of additional satellite
and computer workstation equipment, the latter being depreciated over very
short periods for financial reporting purposes.
Results of Operations - Six months ended March 31, 1995 compared with six
months ended March 25, 1994.
Total revenues for the six months ended March 31, 1995 declined 9% from
$264,482,000 to 241,391,000. Net income of $17,991,000 was 30% below the
prior year figure of $25,626,000.
(The underlying reasons for most of the variances to the prior year
period are substantially the same as the comparative quarterly discussion
above and the statements contained in such foregoing discussion also apply to
the six month comparison. Therefore, this section is limited to the
discussion of additional factors influencing the comparative six months
results.)
The increase in principal trading profits is attributable to improved
fixed income trading results.
Financial Condition
The Company's balance sheet has increased since fiscal year end,
primarily the result of increased stock loan/borrow activity. In addition,
increased customer credit interest balances led to a rise in assets
segregated for the benefit of customers.
Liquidity and Capital Resources
Net cash provided by operating activities for the 6 months was
$53,658,000. Net income plus the net increase in customer credit balances
were the primary sources of cash.
Investing and financing activities provided $4,788,000 of cash during
the 6 months, primarily due to $15 million in short-term bank borrowings,
which more than offset fixed asset purchases and cash dividends paid.
The Company has long-term debt in the amount of $13,165,000 in the form
of a mortgage on the first of its two current headquarters buildings. The
second building was constructed using internally generated funds.
During the quarter, the Company obtained a $50 million unsecured
corporate line of credit. This facility has no immediate use identified, but
is intended to enable the Company to take advantage of emergent
opportunities.
The Company's broker-dealer subsidiaries are subject to requirements of
the Securities and Exchange Commission relating to liquidity and capital
standards (see Notes to Consolidated Financial Statements).
Effects of Inflation
The Company's assets are primarily liquid in nature, and are not
significantly affected by inflation. Management believes that the changes in
replacement cost of property and equipment would not materially affect
operating results. However, the rate of inflation affects the Company's
expenses, including employee compensation, data communications and occupancy,
which may not be readily recoverable through charges for services provided by
the Company.
EXHIBIT 11
RAYMOND JAMES FINANCIAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 25, March 31, March 25,
1995 1994 1995 1994
Net income $10,100 $12,348 $17,991 $25,626
======= ======= ======= =======
Average number of common
shares and equivalents
outstanding during the
period 20,486 21,389 20,479 21,368
Additional shares assuming
exercise of stock
options (1) 213 358 160 379
------- ------- ------- -------
Average number of
common shares used
to calculate earnings
per share 20,699 21,747 20,639 21,747
======== ======= ======= =======
Net income per share $ .49 $ .57 $ .87 $ 1.18
======== ======= ======= =======
(1) Represents the number of shares of common stock issuable on the
exercise of dilutive employee stock options less the number of shares
of common stock which could have been purchased with the proceeds from
the exercise of such options. These purchases were assumed to have
been made at the average market price of the common stock during the
period, or that part of the period for which the option was
outstanding.
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.
RAYMOND JAMES FINANCIAL, INC.
(Registrant)
Date: May 12, 1995 /s/ THOMAS A. JAMES
Thomas A. James
Chairman and Chief
Executive Officer
/s/ JEFFREY P. JULIEN
Jeffrey P. Julien
Vice President - Finance
and Chief Financial
Officer