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 December 27, 1996
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.
21,043,332 shares of Common Stock as of February 5, 1997
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended December 27, 1996
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
---------------------
Item 1. Financial Statements
Consolidated Statement of Financial Condition as of
December 27, 1996 (unaudited) and September 27, 1996 2
Consolidated Statement of Operations (unaudited) for the
three month period ended December 27, 1996 and
December 29, 1995 3
Consolidated Statement of Cash Flows (unaudited) for the
three months ended December 27, 1996 and
December 29, 1995 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Financial Discussion and Analysis 7
PART II. OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11: Computation of Earnings Per Share 10
(b) Exhibit 21: List of Subsidiaries 11
(c) Reports on Form 8-K: None
All other items required in Part II have been previously filed or
are not applicable for the quarter ended December 27, 1996.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
December 27, September 27,
1996 1996
(Unaudited)
--------------------------
ASSETS
Cash and cash equivalents $ 190,815 $ 258,206
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 10 119
Securities purchased under agreements to resell 578,233 476,945
Securities owned:
Trading and investment account securities 105,500 124,253
Available for sale securities 228,223 208,897
Receivables:
Customers 480,226 459,180
Stock borrowed 1,073,489 864,140
Brokers, dealers and clearing organizations 44,842 24,306
Other 26,196 28,980
Investment in leveraged leases 20,848 20,318
Property and equipment, net 43,576 39,585
Deferred income taxes 20,094 21,189
Deposits with clearing organizations 22,060 22,044
Prepaid expenses and other assets 20,170 18,219
-------------------------
$2,854,282 $2,566,381
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 22,405 $ 24,898
Payables:
Customers 1,217,294 1,086,406
Stock loaned 1,045,431 848,595
Brokers, dealers and clearing organizations 29,340 56,928
Trade and other 58,661 54,007
Trading account securities sold but not yet purchased 41,301 57,210
Accrued compensation 82,569 101,300
Income taxes payable 13,750 10,405
-------------------------
2,510,751 2,239,749
-------------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock; $.10 par value; authorized 10,000,000
shares; issued and outstanding -0- shares - -
Common stock; $.01 par value; authorized 50,000,000
shares; issued 21,777,271 shares 217 217
Additional paid-in capital 50,514 50,271
Unrealized gain (loss) on securities available for sale,
net of deferred taxes (309) (791)
Retained earnings 303,959 289,096
-------------------------
354,381 338,793
Less: 787,705 and 882,811 common shares in treasury,
at cost (10,850) (12,161)
-------------------------
343,531 326,632
-------------------------
$2,854,282 $2,566,381
=========================
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
December 27, December 29,
1996 1995
---------------------------
Revenues:
Securities commissions $111,495 $ 91,769
Investment banking 17,910 11,085
Investment advisory fees 14,224 11,572
Interest 35,878 26,565
Correspondent clearing 1,034 876
Net trading profits 4,689 2,779
Financial service fees 5,334 3,779
Other 4,255 3,601
--------------------------
194,819 152,026
==========================
Expenses:
Employee compensation 115,316 89,413
Data processing and communications 7,861 6,798
Occupancy and equipment 6,184 6,072
Clearing and floor brokerage 2,403 2,380
Interest 23,479 16,635
Business development 4,715 4,005
Other 6,863 6,435
-------------------------
166,821 131,738
-------------------------
Income before provision for
income taxes 27,998 20,288
Provision for income taxes 10,830 7,747
-------------------------
Net income $ 17,168 $ 12,541
=========================
Net income per share $ .81 $ .60
=========================
Cash dividends declared per
share $ 0.11 $ 0.095
=========================
Average common equivalent
shares outstanding 21,265 20,979
=========================
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended
December 27, December 29,
1996 1995
--------------------------
Cash flows from operating activities:
Net income $ 17,168 $ 12,541
Adjustments to reconcile net income to net cash --------------------------
provided by operating activities:
Depreciation and amortization 2,903 2,864
(Increase) decrease in assets:
Investments (19,326) (9,575)
Receivables:
Customers (21,046) (24,177)
Stock borrowed (209,349) (371,961)
Brokers, dealers and clearing organizations (20,536) (20,895)
Other 2,784 1,096
Trading and investment account securities 2,844 45,630
Deferred income taxes 1,095 761
Prepaid expenses and other assets (2,497) (1,666)
Increase (decrease) in liabilities:
Payables:
Customers 130,888 259,815
Stock loaned 196,836 359,407
Brokers, dealers and clearing organizations (27,588) 994
Trade and other 4,654 10,671
Accrued compensation (18,731) (16,055)
Income taxes payable 3,345 4,708
--------------------------
Total adjustments 26,276 241,617
--------------------------
Net cash provided by operating activities 43,444 254,158
--------------------------
Cash flows from investing activities:
Additions to property and equipment, net (6,894) (1,374)
Cash flows from financing activities:
Repayments on bank notes (2,493) (42)
Exercise of stock options & employee stock purchases1,554 876
Cash dividends on common stock (2,305) (1,960)
Unrealized gain (loss) on securities
available for sale, net 482 494
-------------------------
Net cash provided by (used in) financing activities (2,762) (632)
-------------------------
Net increase in cash and cash equivalents 33,788 252,152
Cash and cash equivalents at beginning of period 735,270 420,379
-------------------------
Cash and cash equivalents at end of period $769,058 $672,531
=========================
Supplemental disclosures of cash flow information:
Cash paid for interest $ 19,592 $ 19,699
=========================
Cash paid for taxes $ 6,390 $ 2,279
=========================
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 27, 1996
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
The Company has committed to lend to, or guarantee other debt for,
Raymond James Tax Credit Funds, Inc. ("RJTCF") up to $10 million upon
request. RJTCF, a wholly-owned subsidiary of the Company, is a sponsor of
limited partnerships qualifying for low income housing tax credits. The
borrowings would be secured by properties under development. The
commitment expires on November 30, 1997, at which time any outstanding
balances would be due and payable. There were no amounts outstanding or
guaranteed at December 27, 1996.
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. As of December 27, 1996, management has Board
authorization to purchase up to 981,000 shares at its discretion.
At their meeting on November 21, 1996, the Board of Directors of the
Company increased the quarterly cash dividend from $.095 to $.11 per share
for fiscal 1997.
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 December 27, 1996 were as
follows (dollar amounts in thousands):
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate debit items 23%
Net capital $123,867
Required net capital $10,550
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital 1.22
Net capital $5,732
Required net capital $467
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital 3.78
Net capital $1,600
Required net capital $403
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
(Any statements containing forward looking information should be read in
conjunction with Management's Discussion and Analysis of Results of
Operations and Financial Condition in the Company's 10-K for the year ended
September 27, 1996.)
General
Overall market activity remained robust during the most recent
quarter, as a favorable balance in economic conditions led to continuing
favorable investor sentiment. As in the previous several quarters,
virtually all of the Company's business lines turned in strong results for
the quarter.
Results of Operations - Three months ended December 27, 1996 compared with
three months ended December 29, 1995.
Quarterly revenues of $194,819,000 were the Company's second highest
ever, representing a 28% increase over last year's $152,026,000.
Reflecting a healthy after-tax margin of just under 9%, net income
increased 37% to $17,168,000 from $12,541,000 in the prior year period.
Securities commission revenues increased 21% as the Company's
transaction volume narrowly missed setting a quarterly record. Consistent
with the past several quarters, equities and equity-based products (mutual
funds and variable annuities) accounted for most of the increase.
Augmenting an increase in Account Executive productivity, the Company's
sales force grew by approximately 11% during the year.
Investment banking revenues increased 62% as the Company managed or co-
managed more (21 versus 11) and larger ($124 million average versus $58
million average) public offerings than in the prior year.
Investment advisory fees continued their steady growth as assets under
management continued to increase across the board, as shown below:
December 27, December 29, % Increase
1996 1995 (Decrease)
------------------------------------------
Assets Under Management (000's):
Eagle Asset Management, Inc. $2,547,000 $1,973,000 29%
Heritage Family of Mutual Funds 2,554,000 1,932,000 32%
Investment Advisory Services 1,058,000 869,000 22%
Awad & Associates Asset Mgmt. 514,000 358,000 44%
Carillon Asset Management 45,000 64,000 (30%)
Total Financial Assets -----------------------------------------
Under Management $6,718,000 $5,196,000 29%
=========================================
Tangible Assets Under Management $1,818,000 $1,523,000 19%
=========================================
For calendar 1995 and 1996, investment advisory fees have included
approximately $2.4 million per quarter from the Company's interest in the
revenues of Liberty Investment Management, Inc. ("Liberty"). As previously
announced, the sale of Liberty to Goldman Sachs closed in early January
1997. The Company's remaining interest in Liberty's future revenues, as
well as its option to acquire 20% of Liberty at a future date, was settled
for approximately $30.6 million. These proceeds have been received by the
Company and will be reflected as a non-recurring gain in its results of
operations for the quarter ending March 1997.
Net trading profits rose significantly due primarily to improved
results in over-the-counter equity market-making.
Net interest income of $12,399,000 established a tenth consecutive
quarterly record. Growth of Credit Interest Program deposit balances in
brokerage accounts and increased stock loan matched-book positions were
primarily responsible for this increase.
The largest portion of the increase in employee compensation was the
increase in registered representative compensation, a direct result of
increased securities commissions and investment banking revenues. In
addition, departmental and Company-wide profit-based incentive compensation
accruals increased, while administrative and clerical compensation
continued to rise as additional staff were hired in order to support the
Company's growth.
Comparative data processing and communications and business
development costs reflect overall business growth.
Financial Condition
The Company's statement of financial condition has increased since
fiscal year end, the combined result of increased matched-book stock loan
program balances and increased customer cash balances, particularly in the
Credit Interest Program and bank deposits. The increase in customer cash
balances is reflected as an increased customer payable and results in a
corresponding increase in assets segregated pursuant to Federal Regulations
and available for sale securities.
Liquidity and Capital Resources
Net cash provided by operating activities for the quarter was
$43,444,000. The primary source of this increase was the aforementioned
increased customer cash balances.
Investing and financing activities used $9,656,000 during the quarter,
the primary uses being purchases of property and equipment, the payment of
cash dividends and repayment on bank notes.
The Company has debt in the amount of $12,861,000 in the form of a
mortgage on the first of its two current headquarters buildings. This note
matures on December 1, 1997. The second building was constructed using
internally generated funds. The Company has commenced the development and
construction of the third tower in its headquarters complex. It is
projected that approximately $27 million will be required and completion is
scheduled for early calendar 1998. At this time, the Company has no
external financing plans for this building. Upon completion, the Company
will realize a significant increase in occupancy expense.
The Company has two committed lines of credit. During 1995, the
parent company obtained an unsecured $50 million line for general corporate
purposes. In addition, a $50 million line was established to finance
Raymond James Credit Corporation, a Regulation G subsidiary organized to
provide loans collateralized by restricted or control shares of public
companies. The balance of $9,544,000 outstanding on this line is included
in bank notes payable. In addition, Raymond James & Associates, Inc. has
uncommitted lines of credit aggregating $255 million.
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, 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
December 27, December 29,
1995 1996
--------------------------
Net income $ 17,168 $ 12,541
==========================
Average number of common shares and equivalents
outstanding during the period 20,931 20,639
Additional shares assuming
exercise of stock options (1) 334 340
--------------------------
Average number of common shares used
to calculate earnings per share 21,265 20,979
==========================
Net income per share $ .81 $ .60
==========================
(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.
EXHIBIT 21
RAYMOND JAMES FINANCIAL, INC.
LIST OF SUBSIDIARIES
The following listing includes the registrant's subsidiaries all of which are
included in the consolidated financial statements as of December 27, 1996:
State of
Name of Company Incorporation Subsidiary of
- ---------------------------------------------------------------------------
Raymond James &
Associates, Inc.("RJA") Florida Raymond James
Financial,
Inc. ("RJF")
Eagle Asset Management, Inc. Florida RJF
Heritage Asset Management, Inc. Florida RJF
Investment Management & Research, Inc. Florida RJF
Planning Corporation of America ("PCA") Florida RJA
PCAF, Inc. Florida PCA
Raymond James Bank, FSB Florida RJF
Raymond James Credit Corporation, Inc. Delaware RJF
Raymond James Int'l Holdings, Inc. ("RJIH") Delaware RJF
Raymond James Mortgage Capital, Inc. Delaware RJF
Raymond James Partners, Inc. Florida RJF
Raymond James Realty Advisors, Inc. Florida RJP
Raymond James Trust Company Florida RJF
RJ Communication, Inc. Florida RJF
Raymond James Tax Credit Funds, Inc. Florida RJF
RJ Equities, Inc. Florida RJF
RJ Equities-2, Inc. Florida RJF
RJ Government Securities, Inc. Florida RJF
RJ Health Properties, Inc. Florida RJF
RJ Leasing, Inc. Florida RJF
RJ Leasing-2, Inc. Florida RJF
RJ Medical Investors, Inc. Florida RJF
RJ Mortgage Acceptance Corporation Delaware RJF
RJ Partners, Inc. Florida RJF
RJ Properties, Inc. ("RJP") Florida RJF
RJ Realty, Inc. Florida RJF
RJ Specialist, Inc. Florida RJF
RJ Washington Square Georgia RJF
RJA Municipal ABS, Inc. Delaware RJF
Robert Thomas Securities, Inc. Florida RJF
Sound Trust Company Washington RJF
Value Partners, Inc. Florida RJF
Heritage International, Ltd. Mauritius RJIH
Raymond James & Associates, Ltd. Bermuda RJIH
Raymond James Financial International, Ltd. United Kingdom RJIH
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: February 10, 1997
Thomas A. James
Chairman and Chief
Executive Officer
Jeffrey P. Julien
Vice President - Finance
and Chief Financial
Officer