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 June 30, 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.
20,569,686 shares of Common Stock as of August 3, 1995
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended June 30, 1995
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statement of Financial Condition as of
June 30, 1995 (unaudited) and September 30, 1994 2
Consolidated Statement of Operations (unaudited) for the
three and nine month periods ended June 30, 1995
and June 24, 1994 3
Consolidated Statement of Cash Flows (unaudited) for the
nine months ended June 30, 1995 and June 24, 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: None
All other items required in Part II have been previously filed
or are not applicable for the quarter ended June 30, 1995.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
June 30, September 30,
1995 1994
----------- -------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 64,759 $ 54,021
Assets segregated pursuant to Federal regulations:
Cash and cash equivalents 302,364 145,398
Short-term investments 44,016 14,964
Other investments - 33,872
Other short-term investments 13,440 47,332
Receivables:
Brokerage customers 385,103 348,077
Stock borrowed 1,052,066 747,272
Brokers and dealers 42,899 14,410
Other 24,758 14,643
Trading and investment account securities 205,977 169,381
Investment in leveraged lease 10,468 9,940
Property and equipment, net 41,727 42,080
Deferred income taxes 21,179 20,584
Prepaid expenses and other assets 36,680 36,288
---------- ----------
$2,245,436 $1,698,262
LIABILITIES AND STOCKHOLDERS' EQUITY ========== ==========
Mortgage note payable $ 13,125 $ 13,243
Payables:
Brokerage customers 726,801 516,794
Stock loaned 1,045,814 771,666
Brokers and dealers 35,648 23,837
Trade and other 73,750 46,811
Trading account securities sold but not yet
purchased 34,674 33,032
Accrued employee compensation 54,906 59,514
Income taxes payable 7,452 5,913
---------- ---------
1,992,170 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 21,777,271
shares 217 217
Additional paid-in capital 50,722 52,375
Unrealized gain (loss) on securities available
for sale 277 (79)
Retained earnings 218,570 192,359
---------- ---------
269,786 244,872
Less: 1,210,040 and 1,282,929 common shares
in treasury, at cost (16,520) (17,420)
---------- ---------
253,266 227,452
---------- ----------
$2,245,436 $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 Nine Months Ended
June 30, June 24, June 30, June 24,
1995 1994 1995 1994
-------- --------- -------- --------
Revenues:
Securities commissions $ 85,569 $ 70,878 $232,279 $231,664
Investment banking 13,267 13,849 25,754 49,685
Investment advisory fees 9,642 11,632 30,680 36,098
Interest 28,080 14,660 69,549 40,247
Principal trading profits 4,857 62 10,664 4,723
Financial service fees 5,170 3,802 13,509 10,445
Other 2,358 2,854 7,899 9,357
-------- -------- -------- --------
148,943 117,737 390,334 382,219
Expenses:
Employee compensation 85,198 74,556 228,958 243,762
Data communications 6,071 6,936 18,649 18,947
Occupancy and equipment costs 5,373 4,058 15,771 11,279
Clearance and floor brokerage 2,116 2,080 5,899 5,906
Interest 19,576 9,538 46,308 24,952
Business development 3,929 3,669 11,130 10,573
Other 5,008 5,014 13,138 14,006
-------- -------- --------- --------
127,271 105,851 339,853 329,425
Income before income taxes
and minority interests 21,672 11,886 50,481 52,794
Provision for income taxes 7,832 4,431 18,660 19,728
Minority interests in income (losses)
of consolidated subsidiaries 2 7 (8) (8)
-------- -------- -------- --------
Net income $ 13,838 $ 7,448 $ 31,829 $ 33,074
======== ======== ======== ========
Net income per share $ .67 $ .35 $ 1.54 $ 1.54
======== ======== ======== ========
Cash dividends declared per
common share $ .09 $ .08 $ .27 $ .24
======== ======== ======== ========
Average common equivalent
shares outstanding 20,775 21,123 20,670 21,533
======== ======== ======== ========
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)
Nine Months Ended
June 30, June 24,
1995 1994
-------- ---------
Cash flows from operating activities:
Net income $ 31,829 $ 33,074
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,739 4,742
(Increase) decrease in assets:
Short-term investments 4,840 (30,327)
Deposits with clearing organizations 1,272 (11,533)
Receivable from:
Brokerage customers (37,026) (69,535)
Stock borrowed (304,794) (120,597)
Brokers and dealers (28,489) 17,652
Other (10,115) 12,546
Trading and investment account securities (1,082) (95,535)
Deferred income taxes (595) (1,641)
Prepaid expenses and other assets (2,192) 1,072
Increase (decrease) in liabilities:
Payable to:
Brokerage customers 210,007 90,666
Stock loaned 274,148 149,413
Brokers and dealers 11,811 17,134
Trade and other 26,939 5,826
Accrued employee compensation (4,608) (6,285)
Income taxes payable 1,539 (4,904)
-------- ---------
Total adjustments 149,394 (41,306)
-------- ---------
Net cash provided by (used in) operating activities 181,223 (8,232)
-------- ---------
Cash flows from investing activities:
Additions to property and equipment, net (7,386) (7,293)
-------- ---------
Cash flows from financing activities:
Borrowings from banks and financial institutions - 15,000
Payments on borrowings from banks & financial
institutions (118) (107)
Issuance of common stock 2,462 2,650
Purchase of treasury stock (3,296) (12,449)
Cash dividends on common stock (5,539) (5,093)
Nonqualified options exercised 81 -
Unrealized gain on securities available for sale 277 -
-------- --------
Net cash provided by (used in) financing activities (6,133) 1
-------- --------
Net increase (decrease) in cash and cash equivalents 167,704 (15,524)
Cash and cash equivalents at beginning of period 199,419 153,557
-------- --------
Cash and cash equivalents at end of period $367,123 $138,033
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 44,135 $ 24,094
======== ========
Cash paid for taxes $ 13,880 $ 26,273
======== ========
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 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 totaling $385,000 at June 30, 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 incident
al 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 June 30, 1995, management has Board authorization
to purchase up to 1 million additional shares.
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 June 30, 1995 were as follows:
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate debit items 22%
Net capital $93,264,000
Required net capital $8,376,000
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital 1.76
Net capital $3,164,000
Required net capital $371,000
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital 4.37
Net capital $1,075,000
Required net capital $313,000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
General
In a quarter reminiscent of 1992 or 1993, the Company generated record
revenues during the three months ended June 30. Profit margins returned to
historically high levels, yielding the second most profitable quarter in the
Company's history. A confluence of interrelated factors, including all-time
highs in the equity markets, surging transaction volume, a resurgence of
investment banking activity and a favorably trending bond market, led to the
strong results.
Results of Operations - Three months ended June 30, 1995 compared with three
months ended June 24, 1994.
Total revenues increased to a record $148,943,000, a 27% increase over
last year's $117,737,000, while net income rose 86% to $13,838,000 from
$7,448,000.
Securities commission revenues increased significantly, driven by a 38%
jump in equity commission revenues. Transaction volume for the quarter of
nearly 600,000 was the Company's heaviest ever. The number of account
executives increased 11% from the prior year, totaling 2,390 at June 30,
1995.
While investment banking revenues were relatively flat with the prior
year, they compare favorably to the previous three quarters. This is the
result of a restimulation of investment banking activity as the combination
of higher stock prices and generally favorable economic conditions induced
corporations to raise capital.
Investment advisory fees declined 17% 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. Exclusive of this factor, investment advisory
fees did not quite keep pace with the increase in assets under management due
to a moderate shift to fixed income assets, which carry a lower management
fee.
June 30, June 24, % Increase
1995 1994 (Decrease)
---------- ------------ ----------
Financial Assets Under Management (000's):
Eagle Asset Management, Inc. $1,776,000 $1,759,000 1%
Eagle Accounts Transferred
to Liberty Investment Management - 4,101,000 (100%)
Heritage Family of Mutual Funds 1,783,000 1,502,000 19%
Investment Advisory Services 786,000 725,000 8%
Awad and Associates 292,000 198,000 47%
Focus Investment Advisors - 51,000 (100%)
Carillon Asset Management 81,000 90,000 (10%)
---------- ----------
Subtotal 4,718,000 8,426,000 (44%)
Liberty Investment Management 4,409,000 - -
---------- ----------
Total $9,127,000 $8,426,000 8%
========== ==========
Net interest income of $8.5 million established a fourth consecutive
quarterly record. 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. While still
relatively small, Raymond James Bank, FSB, continues to grow as a meaningful
contributor to interest earnings.
Principal trading profits reflect the improved market conditions and
compare particularly favorably to the prior year's third quarter, during
which the Company experienced losses in fixed income inventory accounts.
Increased financial service fees reflect the increased number of clients
electing wrap fee accounts over traditional commissions.
The increase in employee compensation expense reflects the increased
commission expense, an 8% increase in administrative and clerical salaries
(reflecting overall firm growth and normal salary increases), and an increase
in incentive compensation accruals related to 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 - Nine months ended June 30, 1995 compared with nine
months ended June 24, 1994.
Total revenues for the nine months ended June 30, 1995 increased 2% from
$382,219,000 to $390,334,000. Net income of $31,829,000 was 4% below the
prior year figure of $33,074,000.
(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 nine month comparison. Therefore, this section is limited to the
discussion of additional factors influencing the comparative nine months
results.)
Securities commissions have reached figures comparable to the prior year
period due to improved equity volume in the most recent quarter.
Investment banking revenues, although improved over the prior several
quarters, were well below prior year figures which reflected an extremely
robust period for underwriting volume.
Decreased employee compensation expense reflects a slight decline in
commission expense and decreases in certain incentive compensation
arrangements, which are a function of departmental and subsidiary
profitability.
Financial Condition
The Company's statement of financial condition has increased
significantly since fiscal year end, primarily the result of increased stock
loan/borrow activity and increased customer credit interest balances, the
latter leading to a rise in assets segregated for the benefit of customers.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months was
$181,223,000. Net income plus the net increase in customer credit balances
were the primary sources of cash.
Investing and financing activities used $13,519,000 of cash during the
nine months, primarily due to fixed asset purchases, cash dividends paid and
repurchases of the Company's common stock.
The Company has long-term debt in the amount of $13,125,000 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 year, the Company obtained a $50 million unsecured 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 Nine Months Ended
June 30, June 24, June 30, June 24,
1995 1994 1995 1994
------- ------- ------- -------
Net income $13,838 $ 7,448 $31,829 $33,074
======= ======= ======= =======
Average number of common
shares and equivalents
outstanding during the
period 20,541 20,828 20,500 21,188
Additional shares assuming
exercise of stock
options (1) 234 295 170 345
------- ------- ------- -------
Average number of
common shares used
to calculate earnings
per share 20,775 21,123 20,670 21,533
======= ======= ======= =======
Net income per share $ .67 $ .35 $ 1.54 $ 1.54
======= ======= ======= =======
(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: August 7, 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
<TABLE> <S> <C>
<ARTICLE> BD
<CIK> 0000720005
<NAME> JUN95FDS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-29-1995 SEP-29-1995
<PERIOD-START> APR-01-1995 SEP-30-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 346627000 346627000
<RECEIVABLES> 452760000 452760000
<SECURITIES-RESALE> 20496000 20496000
<SECURITIES-BORROWED> 1052066000 1052066000
<INSTRUMENTS-OWNED> 205977000 205977000
<PP&E> 41727000 41727000
<TOTAL-ASSETS> 2245436000 2245436000
<SHORT-TERM> 0 0
<PAYABLES> 898557000 898557000
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 1045814000 1045814000
<INSTRUMENTS-SOLD> 34674000 34674000
<LONG-TERM> 13125000 13125000
<COMMON> 217000 217000
0 0
0 0
<OTHER-SE> 253049000 253049000
<TOTAL-LIABILITY-AND-EQUITY> 2245436000 2245436000
<TRADING-REVENUE> 4857000 10664000
<INTEREST-DIVIDENDS> 28080000 69549000
<COMMISSIONS> 85569000 232279000
<INVESTMENT-BANKING-REVENUES> 13267000 25754000
<FEE-REVENUE> 14812000 44189000
<INTEREST-EXPENSE> 19576000 46308000
<COMPENSATION> 85198000 228958000
<INCOME-PRETAX> 21672000 50489000
<INCOME-PRE-EXTRAORDINARY> 21672000 50489000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13838000 31829000
<EPS-PRIMARY> .67 1.54
<EPS-DILUTED> .66 1.53
</TABLE>
