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 29, 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.
20,803,167 shares of Common Stock as of__February 5, 1996
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended December 29, 1995
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statement of Financial Condition as of
December 29, 1995 (unaudited) and September 29, 1995 2
Consolidated Statement of Operations (unaudited) for the
three month period ended December 29, 1995 and
December 30, 1994 3
Consolidated Statement of Cash Flows (unaudited) for the
three months ended December 29, 1995 and
December 30,1994 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Financial Discussion and Analysis 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 December 29, 1995.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
December 29, September 29,
1995 1995
----------------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 101,739 $ 83,453
Securities purchased under agreements to resell 124,155 2,964
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 728 3,158
Securities purchased under agreements to resell 445,909 330,804
Short-term and other investments 19,038 34,017
Trading and investment account securities 64,176 74,815
Available for sale securities 150,705 114,941
Held to maturity securities - 11,210
Receivables:
Brokerage customers 421,378 397,201
Stock borrowed 1,147,249 775,288
Brokers, dealers and clearing organizations 70,030 49,135
Other 23,790 24,886
Investment in leveraged lease 10,666 10,581
Property and equipment, net 39,456 40,946
Deferred income taxes 20,219 20,980
Prepaid expenses and other assets 39,917 38,336
--------------------------
$2,679,155 $2,012,715
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage note payable $ 13,042 $ 13,084
Payables:
Brokerage customers 1,034,291 774,476
Stock loaned 1,145,191 785,784
Brokers, dealers and clearing organizations 18,536 17,542
Trade and other 69,392 58,721
Trading account securities sold but not yet purchased 52,368 17,377
Accrued compensation 57,312 73,367
Income taxes payable 10,879 6,171
--------------------------
2,401,011 1,746,522
--------------------------
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 50,524 50,685
Unrealized gain on securities available for sale,
net of deferred taxes 640 146
Retained earnings 241,610 231,029
--------------------------
292,991 282,077
Less: 1,087,735 and 1,163,573 common shares in
treasury, at cost (14,847) (15,884)
--------------------------
278,144 266,193
--------------------------
$2,679,155 $2,012,715
==========================
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 29, December 30,
1995 1994
---------------------------
Revenues:
Securities commissions $ 91,769 $ 71,596
Investment banking 11,085 5,426
Investment advisory fees 11,572 11,904
Interest 26,565 19,680
Correspondent clearing 876 944
Net trading and investment profits 2,779 596
Financial services fees 3,779 3,475
Other 3,601 2,091
-------------------------
152,026 115,712
-------------------------
Expenses:
Employee compensation 89,413 69,975
Communications 6,798 6,256
Occupancy and equipment 6,072 5,023
Clearing and floor brokerage 2,380 1,964
Interest 16,635 12,347
Business development 4,005 3,702
Other 6,398 3,932
-------------------------
131,701 103,199
-------------------------
Income before provision for income taxes 20,325 12,513
Provision for income taxes 7,747 4,633
Minority interests in income (loss)
of consolidated subsidiaries 37 (11)
-------------------------
Net income $ 12,541 $ 7,891
=========================
Net income per share $ .60 $ .38
=========================
Cash dividends declared per share $ .095 $ .09
=========================
Average common and common equivalent shares
outstanding 20,979 20,713
=========================
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three Months Ended
--------------------------
December 29, December 30,
1995 1994
---------------------------
Cash flows from operating activities:
Net income $ 12,541 $ 7,891
-------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,864 2,432
Increase (decrease) in assets:
Short-term and other investments 14,979 (38,244)
Securities available for sale & held to maturity (24,554) (99,456)
Receivables:
Brokerage customers (24,177) (27,598)
Stock borrowed (371,961) 151,073
Brokers, dealers and clearing organizations (20,895) (7,858)
Other 1,096 426
Trading and investment account securities, net 45,630 103,127
Deferred income taxes 761 (2,113)
Prepaid expenses and other assets (1,666) (5,652)
Increase (decrease) in liabilities:
Payables:
Brokerage customers 259,815 153,577
Stock loaned 359,407 (160,952)
Brokers, dealers and clearing organizations 994 (1,264)
Trade and other 10,671 2,190
Accrued compensation (16,055) (16,117)
Income taxes payable 4,708 3,302
-------------------------
Total adjustments 241,617 56,873
-------------------------
Net cash provided by operating activities 254,158 64,764
-------------------------
Cash flows from investing activities:
Additions to property and equipment, net (1,374) (3,547)
-------------------------
Cash flows from financing activities:
Repayments on mortgage note (42) (38)
Issuance of common stock 876 720
Purchase of treasury stock - (3,280)
Cash dividends on common stock (1,960) (1,841)
Unrealized gain (loss) on securities
available for sale, net 494 (456)
-------------------------
Net cash used in financing activities (632) (4,895)
-------------------------
Net increase in cash and cash equivalents 252,152 56,322
Cash and cash equivalents at beginning of period 420,379 227,198
------------------------
Cash and cash equivalents at end of period $672,531 $283,520
========================
Supplemental disclosures of cash flow information:
Cash paid for interest $ 19,699 $ 11,875
Cash paid for taxes $ 2,279 $ 3,148
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 29, 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
At December 29, 1995 Raymond James & Associates, Inc. had $5,384,000
of government securities held as deposits by the Options Clearing
Corporation, an amount sufficient to cover unsettled options at that date.
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 December 29, 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 to relend up to $5 million upon request
through October 1, 1996. No use of this facility is currently anticipated.
The Company has committed to lend up to, or guarantee other debt for,
Gateway Tax Credit funds ("Gateway") up to $6 million upon request. 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.
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 29, 1995, management has Board
authorization to purchase up to 999,000 shares.
At their meeting on November 14, 1995, the Board of Directors of the
Company increased the quarterly cash dividend from $.09 to $.095 per share
for fiscal 1996.
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 29, 1995 were as
follows (dollar amounts in thousands):
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate debit items 21.00%
Net capital $96,048
Required net capital $ 9,150
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital 1.15
Net capital $ 4,944
Required net capital $ 379
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital 2.30
Net capital $ 2,153
Required net capital $ 330
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
General
Overall market activity remained vibrant during the latest quarter as
both equity and fixed income markets continued their ascent, albeit at a
somewhat slower rate than in the previous two quarters. Substantially all
of the Company's business lines turned in strong results for the period,
particularly when compared to the relatively mediocre market conditions in
the same quarter of the prior year.
Results of Operations - Three months ended December 29, 1995 compared with
three months ended December 30, 1994.
Total revenues of $152,026,000 were the Company's second highest ever,
trailing only the immediately preceding quarter, representing a 31%
increase over last year's $115,712,000. Reflecting a relatively healthy
after-tax margin of 8.25%, net income increased 59% to $12,541,000 from
last year's $7,891,000.
The 28% growth in securities commissions was primarily attributable to
the heightened client activity associated with a rapidly rising stock
market. Further, the Company's sales force grew by approximately 6% during
the year.
Investment banking revenues more than doubled as the Company managed
or co-managed more deals (11 versus 8) and larger deals ($58 million versus
$31 million average) than in the prior year.
Investment advisory fees declined slightly due to the prior year's
inclusion of fees related to $4.3 billion of institutional growth equity
accounts which were transferred to Liberty Investment Management, Inc.
("Liberty") as of January 1, 1995. Subsequent to the transfer, the Company
receives 50% of the fee revenues received by Liberty from these accounts
for the five year period ending December 31, 1999. Net of the impact of
this transfer, investment advisory fees grew by 16%, reflecting the net
growth of the various asset management programs as shown below:
December 29, December 30, % Increase
1995 1994 (Decrease)
------------------------------------------
Assets Under Management (000's):
Eagle Asset Management, Inc. $ 1,973,000 $ 6,035,000 (67%)
Heritage Family of Mutual Funds 1,932,000 1,399,000 38%
Investment Advisory Services 869,000 750,000 16%
Awad & Associates Asset Management358,000 204,000 75%
Focus Investment Advisors - 48,000 (100%)
Carillon Asset Management 64,000 88,000 (27%)
------------------------------------------
Subtotal $ 5,196,000 $ 8,524,000 (39%)
Liberty Investment
Management, Inc. 4,806,000 - 100%
------------------------------------------
Total Financial Assets
Under Management $ 10,002,000 $ 8,524,000 17%
==========================================
Real Estate Assets
Under Management $ 1,185,000 $ 652,000 82%
==========================================
Principal trading profits returned to a more normal level as
contrasted to the prior year figure which was depressed by negative fixed
income results. The current quarter was also augmented by trading profits
generated by the Company's recently acquired specialist operations on three
regional exchanges.
Net interest income of $9,930,000 established a sixth consecutive
quarterly record. Growth of customer deposit balances, in both brokerage
and banking subsidiaries, has significantly exceeded budgeted amounts.
The jump in other revenues primarily represents an increase in floor
brokerage revenues as a result of much higher trading volumes on the
exchanges.
The increase in employee compensation was due to a proportionate
increase in commission expense as a function of commission revenues and an
increase in incentive compensation accruals which are related to
departmental and firm-wide profitability. Administrative compensation
increased only 7% over the prior year quarter.
Comparative communications, occupancy and business development costs
reflect overall business growth.
The rise in other expenses encompasses higher legal and bad debt
accruals, as well as normal corporate growth in numerous categories.
Financial Condition
The Company's balance sheet has increased significantly 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. The increase in customer cash balances is reflected as
an increased brokerage customer payable and results in a corresponding
increase in cash segregated pursuant to Federal Regulations.
Liquidity and Capital Resources
Net cash provided by operating activities for the quarter was
$254,158,000. The primary source of this increase was the aforementioned
increased customer cash balances.
Investing and financing activities used $2,006,000 during the quarter,
the primary uses being the payment of cash dividends and purchases of
property and equipment.
The Company has long-term debt in the amount of $13,042,000 in the
form of a mortgage on the first of its two current headquarters buildings.
The second building was constructed using internally generated funds.
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. In addition, Raymond James & Associates, Inc. has uncommitted
lines of credit aggregating $255,000,000.
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 29, December 30,
1995 1994
---------------------------
Net income $ 12,541 $ 7,891
===========================
Average number of common shares and equivalents
outstanding during the period 20,639 20,472
Additional shares assuming
exercise of stock options (1) 340 241
---------------------------
Average number of common shares used
to calculate earnings per share 20,979 20,713
===========================
Net income per share $ .60 $ .38
===========================
(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: February 9, 1996 /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
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