5
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one) FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 26, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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)
Registrant's telephone number, including area code (813) 573-3800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 17, 1997: $687,731,024
Number of common shares outstanding (December 17, 1997): 31,878,062
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Shareholders to be held on February 12,
1998. (The Company intends to file with the Commission a definitive proxy
statement pursuant to Regulation 14A prior to January 23, 1998.)
PART I
ITEM 1. BUSINESS
(a) General Description of Business
Raymond James Financial, Inc. ("RJF") is a Florida-based holding company
that was incorporated in 1974 as a successor to its predecessor corporation
founded in 1962. Its principal subsidiaries include Raymond James &
Associates, Inc. ("RJA"), Investment Management & Research, Inc. ("IM&R"),
Robert Thomas Securities, Inc. ("RTS"), Eagle Asset Management, Inc.
("Eagle"), Heritage Asset Management, Inc. ("Heritage") and Raymond James
Bank, FSB. All of these subsidiaries are wholly-owned by RJF. RJF and its
subsidiaries are hereinafter collectively referred to as the "Company".
RJF's principal subsidiary, RJA, was organized in Florida in 1962. RJA
is a regional securities brokerage firm engaged in most aspects of the
securities business. All but 15 of RJA's 47 retail branch offices are located
in Florida, and the Company is the largest brokerage and investment firm
headquartered in that state. RJA also has 21 institutional sales offices, 6
of which are located in Europe. RJA is a member of the New York Stock
Exchange ("NYSE") and other principal stock and option exchanges.
IM&R was formed in 1973 as an independent contractor financial planning
organization and participates in the distribution of all products and services
offered by RJA to its retail clients through its 499 offices and 82 satellite
offices in all 50 states. IM&R is a member of the National Association of
Securities Dealers ("NASD") and Securities Investor Protection Corporation
("SIPC"), but not of any exchange, as it clears its trades on a fully-
disclosed basis through RJA.
RTS was organized in 1981. It serves independent contractor brokers who
do a majority of their business in individual securities and currently
operates 405 branch offices and 136 satellite offices in all 50 states. RTS,
like IM&R, is a member of the NASD and SIPC, but not of any exchange, as it
also clears all of its business on a fully-disclosed basis through RJA.
Eagle was formed in 1984 as a registered investment advisor and at
September 26, 1997 had approximately $3.7 billion of client assets under
management. Prior to the inception of Eagle, the asset management operation
had been a division of RJA.
Heritage was organized in 1985 to act as the manager of the Company's
internally sponsored Heritage family of mutual funds. At September 26, 1997
the 11 funds managed by Heritage had a total of nearly $3.2 billion in assets.
Raymond James Bank was formed in 1994 in conjunction with the purchase
from the RTC of certain branches of a failed thrift. Its primary purpose is
to provide traditional banking products and services to the clients of the
Company's broker-dealer subsidiaries. At September 26, 1997, Raymond James
Bank had $329 million in assets.
(b) Financial Information about Industry Segments
The Company's operations consist of various financial services provided
to its clients. The following table shows revenues by source for the last
three years:
Year Ended
-------------------------------------------------
Sept. 26, Sept. 27, Sept. 29,
1997 % 1996 % 1995 %
-------------------------------------------------
(dollar amounts in thousands)
Securities commissions:
Listed products $ 115,818 12.9 $ 90,536 12.5 $ 82,738 14.9
Over-the-counter 148,791 16.6 133,543 18.5 110,062 19.9
Mutual funds 117,748 13.1 96,099 13.3 68,994 12.4
Asset management 61,444 6.8 45,005 6.2 31,159 5.6
Annuities and other
insurance products 70,944 7.9 56,964 7.9 34,238 6.2
Other 219 .1 340 0.1 356 .1
--------------------------------------------------
Total $ 514,964 57.4 $ 422,487 58.5 $ 327,547 59.1
---------------------------------------------------
Investment banking:
Underwriting management
fees $ 43,434 4.8 $21,887 3.0 $ 12,184 2.2
Merger and acquisition
fees 7,929 .9 12,009 1.7 4,854 .9
New issue sales credits 47,639 5.3 31,189 4.3 18,744 3.4
Limited partnerships and
other 10,086 1.2 7,511 1.1 7,222 1.3
--------------------------------------------------
Total $ 109,088 12.2 72,596 10.1 43,004 7.8
--------------------------------------------------
Investment advisory fees 55,194 6.2 50,715 7.0 42,922 7.7
Interest 155,746 17.4 126,453 17.5 97,211 17.5
Correspondent clearing 4,502 .5 3,985 0.6 3,721 .7
Net trading and investment
profits 12,797 1.4 12,243 1.7 12,637 2.3
Financial service fees 24,610 2.7 18,191 2.5 14,740 2.7
Other 20,060 2.2 15,082 2.1 12,288 2.2
--------------------------------------------------
896,961 100.0 721,752 100.0 554,070 100.0
Gain on sale of Liberty
Investment Management, Inc.* 30,646 - - - - -
--------------------------------------------------
Total revenues $ 927,607 - $ 721,752 100.0 $ 554,070 100.0
==================================================
Securities commissions by
broker-dealer:
Raymond James & Associates,
Inc. $ 222,771 43.3 $ 190,042 45.0 $ 146,004 44.6
Investment Management &
Research, Inc. 185,384 36.0 149,181 35.3 118,738 36.3
Robert Thomas Securities,
Inc. 106,809 20.7 83,264 19.7 62,805 19.1
---------------------------------------------------
Total $ 514,964 100.0 $ 422,487 100.0 $ 327,547 100.0
===================================================
* See Note 15 of the Notes to Consolidated Financial Statements for
details.
(c) Narrative Description of Business
At September 26, 1997 the Company employed 3,244 individuals. RJA
employed 2,666 of these individuals, 510 of whom were full-time retail
financial advisors. In addition, 2,315 full-time financial advisors were
affiliated with the Company as independent contractors. Through its broker-
dealer subsidiaries, the Company provides securities services to approximately
600,000 client accounts. No single client accounts for a material percentage
of the Company's total business.
Raymond James & Associates, Inc.
RJA's activities in the securities business include retail and
institutional securities brokerage, origination and distribution of limited
partnership interests, management of and participation in underwritings of
equity and fixed income securities, market making in corporate and municipal
securities, origination, distribution of mutual funds and unit
trusts, and research and investment advisory services. RJA also offers
financial planning services for individuals and provides clearing services for
IM&R, RTS and other unaffiliated broker-dealers. For the year ended September
26, 1997 the revenues of RJA accounted for 62% of the consolidated revenues of
the Company.
RJA is a member of the NYSE, American Stock Exchange, Philadelphia Stock
Exchange, Chicago Board Options Exchange, New York Futures Exchange, Pacific
Exchange and Chicago Stock Exchange. It is also a member of the Securities
Industry Association, NASD and SIPC. SIPC provides insurance protection for
clients' accounts of up to $500,000 each (limited to $100,000 for claims for
cash) in the event of the Company's liquidation. In addition, RJA carries
$49,500,000 per account of excess client insurance.
Brokerage Transactions. RJA provides securities brokerage services to
both retail and institutional clients. In most cases, RJA charges commissions
to its retail clients, on both exchange and over-the-counter transactions, in
accordance with its established commission schedule. In certain instances,
varying discounts from the schedule are given, generally based upon the
client's level of business, the trade size and other relevant factors. RJA
discounts its commissions substantially on institutional transactions based on
trade size and the amount of business conducted annually with each
institution. For certain fee-based accounts, a fee is charged in lieu of
standard commissions.
Clients' transactions in securities are effected on either a cash or
margin basis. In margin transactions, the client pays a portion of the
purchase price, and RJA makes a loan to the client for the balance,
collateralized by the securities purchased or by other securities owned by the
client. Interest is charged to clients on the amount borrowed to finance
margin transactions. The financing of margin purchases is an important source
of revenue to RJA, since the interest rate paid by the client on funds loaned
by RJA exceeds RJA's cost of short-term funds. The interest rate charged to a
client on a margin loan depends on the average loan balance in the client's
account and ranges from prime plus 1% to prime minus .75%.
Typically, broker-dealers utilize secured bank borrowings and equity
capital as the primary
sources of funds to finance clients' margin account borrowings. Since the
inception of the Client Interest Program in 1981, however, the Company's
primary source of funds to finance clients' margin account balances has been
cash balances in clients' accounts which are awaiting investment. In
addition, pursuant to written agreements with clients, broker-dealers are
permitted by Securities and Exchange Commission ("SEC") and NYSE rules to lend
client securities in margin accounts to other brokers. SEC regulations,
however, restrict the use of clients' funds derived from pledging and lending
clients' securities, as well as funds awaiting investments, to the financing
of margin account balances, and to the extent not so used, such funds are
required to be deposited in a special account for the benefit of clients. The
regulations also require broker-dealers, within designated periods of time, to
obtain possession or control of, and to segregate, clients' fully paid and
excess margin securities.
Stock Borrow/Stock Loan Program. RJA commenced this program in July
1987, involving the borrowing and lending of securities from and to other
broker-dealers. RJA generally acts as an intermediary between broker-dealers
and other financial institutions, where it borrows from one party and lends to
another. The borrower of the securities puts up a cash deposit, commonly 102%
of the market value of the securities. This deposit, which is adjusted daily
to reflect changes in current market value, earns interest at a negotiated
rate, typically .2% to .5% below what the lender of the securities can earn on
the funds.
Mutual Funds. RJA sells a number of professionally managed, load mutual
funds and offers, in addition, a selection of no-load funds. RJA maintains
dealer-sales agreements with most major distributors of mutual fund shares
sold through broker-dealers. Commissions on such sales generally range from
1% to 5% of the dollar value of the transaction. Alternative sales
compensation structures typically include front-end charges, "back-end" or
contingent deferred sales charges, and an annual charge in the form of a fund
expense.
At September 26, 1997, the Company had 11 internally sponsored mutual
funds for which RJA acts as distributor. (See Heritage Asset Management, Inc.
description on page 9.) As the distributor of these funds, RJA has the right
to enter into dealer agreements with other broker-dealers for the sale of
Heritage funds to their clients.
Asset Management Services ("AMS"). This department manages programs
which offer investment advisory services to clients as well as certain non-
advisory programs which offer fee based alternatives to traditional commission
charges for transactions. Advisory programs include: Investment Advisory
Services ("IAS"), the Passport Program ("Passport"), the Managed Investment
Program ("MIP") and the Preferred Portfolio Account ("PPA"). IAS maintains
an approved list of investment managers, most of which are unaffiliated with
the Company, establishes custodial facilities, monitors performance of client
accounts, provides clients with accounting and other administrative services
and assists investment managers with certain trading management activities.
IAS earns fees generally ranging from .5%-1.0% of asset balances per annum, a
portion of which is paid to investment managers who direct the investment of
the clients' accounts. At September 26, 1997, this program had approximately
$1.4 billion in assets under management through agreements with 22 independent
investment advisors. Two proprietary asset managers, Awad and Associates
("Awad") and Carillon Asset Management ("Carillon"), are also offered through
this program.
Passport and a similar program offered by IM&R, known as IMPAC, offer
both a discretionary and non-discretionary advisory fee alternative that
allows clients to pay a quarterly fee plus low transaction charges in lieu of
commissions. Fees are based on the individual account size and are also
dependent on the type of securities in the accounts. In addition, AMS
collects an administrative fee of up to .2% of asset balances annually, for
which clients receive a quarterly performance report and other services. As
of September 26, 1997, Passport and IMPAC had approximately $2.7 billion and
$493 million in assets, respectively, serviced by financial advisors.
MIP is a program that allows selected financial advisors to manage client
portfolios on a discretionary, wrap fee basis. The financial advisors must
satisfy certain criteria and complete educational courses to be selected for
this program. Fees are dependent on the size of the account and the type of
securities in the account. AMS establishes custodial facilities, monitors
performance of client portfolios, provides clients with accounting and other
administrative services and assists the financial advisors with certain
trading management activities. AMS collects an administrative fee of up to
.2% of asset balances. As of September 26, 1997, MIP had approximately $68
million in assets.
PPA is a non-discretionary wrap fee pricing alternative that allows
clients to pay a quarterly fee in lieu of commissions. Unlike Passport, no
transaction charge is imposed. The fee structure and services provided by AMS
are similar to Passport and MIP. As of September 26, 1997, PPA had
approximately $61 million in assets.
Awad is primarily a small and mid-cap equity portfolio management
division of RJA which was formed in March of 1992. Clients pay fees and/or
commissions for management of their accounts. Present fees range from .5% to
1.0% of asset balances annually. In addition to private accounts, Awad also
manages a portion of the Heritage Small Cap Stock Fund Portfolio and other non-
affiliated fund portfolios. Exclusive of the Heritage Small Cap Fund, Awad had
approximately $814 million under management at September 26, 1997.
Carillon, another division of RJA offered through IAS, commenced
operations in 1993. Carillon manages approximately $54 million for private
accounts investing exclusively in closed-end mutual funds. Fees are currently
approximately .4% of assets annually.
In addition to the foregoing programs, AMS also offers fee based programs
to clients who have contracted for portfolio management services from outside
money managers that are not a part of the IAS program.
Equity Capital Markets Group. This division consists of the five
following departments, which were brought together under common management
pursuant to a 1997 reorganization:
1) Investment Banking Group. The 51 professionals of RJA's Investment
Banking Group, located primarily in St. Petersburg with satellite offices in
Atlanta, Boston, Dallas, and Houston, are involved in a variety of activities
including public and private debt and equity financing for corporate clients,
merger and acquisition advisory services, fairness opinions and evaluations.
The Company focuses on specific industry groups or strategic business units
("SBUs") including consumer products, financial services, healthcare,
information technology and telecom, environmental and industrial, and real
estate.
2) Research Department. The 33 analysts in this department publish
research on over 290 companies, primarily focused on emerging growth and mid-
cap companies in SBU industries. Proprietary research reports are provided to
both retail and institutional clients, and are supplemented by research
purchased from outside services to accomodate retail clients. This department
has distinguished itself through its extremely successful short and long-term
comparative results as reported by Zacks Investment Research each quarter in
the Wall Street Journal.
3) The Domestic Institutional Equity Sales Department. The 32
salespersons of the Domestic Institutional Equity Sales Department maintain
relationships with over 840 institutional clients. A large percentage of their
trades involve managed/co-managed underwritings and stocks followed by the
Research Department.
4) Over-the-Counter Equity Trading. Trading securities in the over-the-
counter ("OTC") market involves the purchase of securities from, and the sale
of securities to, clients of the Company or other dealers who may be
purchasing or selling securities for their own account or acting as agent for
their clients. Profits and losses are derived from the spreads between bid
and asked prices, as well as market trends for the individual securities
during the holding period. At September 26, 1997, RJA made markets in 210
common stocks in the OTC market. RJA frequently acts as agent in the execution
of OTC orders for its clients and as such transacts these trades with other
dealers. When RJA receives a client order in a security in which it makes a
market, it may act as principal as long as it matches or improves upon the
best price in the dealer market, plus or minus a mark-up or mark-down not
exceeding the equivalent agency commission charge. Recently adopted
regulations require that client limit orders be satisfied prior to the
brokerage firm buying securities into or selling securities from their
own inventory at the same price.
5) Syndicate Department. The Syndicate Department coordinates the
marketing, distribution, pricing and stabilization of Raymond James' lead-
managed equity underwritings. In addition to Raymond James' managed and co-
managed offerings, this department coordinates the firm's syndicate and
selling group activities in transactions managed by other investment banking
firms. Marketing and distribution activities are focused on the firm's
institutional and retail clients. Brokered certificate of deposit offerings
are also handled in this department.
Fixed Income Department. Through the Fixed Income Department, RJA
distributes both taxable and tax-exempt fixed income products to its
institutional and retail clients. These products include municipal,
corporate, government agency and mortgage-backed bonds, preferred stock, and
unit investment trusts. RJA carries inventory positions of taxable and
municipal securities in both the primary and secondary market. The
department's Public Finance division, operating out of 6 offices (5 located
throughout the State of Florida and one in Birmingham, Alabama), acts as
financial advisor or underwriter to various municipal agencies or political
subdivisions. RJA also acts as an underwriter or selling group member for
corporate bonds, agency bonds, preferred stock and unit investment trusts.
When underwriting new issue securities, RJA agrees to purchase the issue
through a negotiated sale or submits a competitive bid. In addition to St.
Petersburg, the Fixed Income Department maintains institutional sales and
trading offices in New York, Chicago, Houston, Boston, and Dublin, Ohio. To
assist our institutional clients, the department's Fixed Income Research Group
provides value-added analytical services and publishes research reports
containing both specific product information and information on topics of
interest such as market and regulatory developments.
Operations and Administration. RJA's operations/administrative personnel
are responsible for the execution of orders, processing of securities
transactions, custody of client securities, receipt, identification and
delivery of funds and securities, compliance with regulatory and legal
requirements, internal financial accounting and controls and general office
administration for most of the Company's operations.
Investment Management & Research, Inc.
IM&R participates in the distribution of all the products and services
offered by RJA to its retail clients through 1,205 independent contractor
registered representatives in 581 offices and satellite offices throughout all
50 states. The number of registered representatives in these offices ranges
from 1 to 20. Such representatives devote all or substantially all of their
time to the sale of securities and, while these independent contractors must
conduct all securities business through IM&R, their contracts permit them to
conduct insurance, real estate brokerage, accounting services or other
business for others or for their own account. Many IM&R registered
representatives are better characterized as financial planners than as stock
brokers, although they are not required to conduct their business as financial
planners. Independent contractors are responsible for all of their direct
costs and are paid higher than normal commission rates to compensate them for
their added expenses.
Robert Thomas Securities, Inc.
RTS has 1,110 full-time independent contractor registered representatives
in 48 states who offer securities and investment advice to individuals and
institutions through a network of 508 branch offices and satellite offices.
Of these offices, 147 are located within depository institutions (banks,
savings and loans and credit unions). RTS representatives offer the full
range of securities products and services of RJA. RTS branches have the
independence to set their own commissions on agency business within regulatory
guidelines. Like IM&R, RTS branches and their registered personnel may offer
non-securities products or services to clients outside of their relationship
with RTS.
Eagle Asset Management, Inc.
Eagle is a registered investment advisor with approximately $3.7 billion
under management at September 26, 1997. Eagle's clients include pension and
profit sharing plans, retirement funds, foundations, endowments, trusts and
individuals. Accounts are managed on a discretionary basis in accordance with
the investment objective(s) specified by the client. Eagle manages
approximately $700 million for institutional clients and $3.0 billion for
retail accounts.
Eagle's investment management fee generally ranges from .25%-1.0% of
asset balances per year depending upon the size and investment objective of
the account. In addition to the management fees, clients are required to pay
brokerage commissions (or a fee in lieu thereof) for transactions in their
account.
Heritage Asset Management, Inc.
Heritage is the manager of the internally sponsored Heritage family of
mutual funds, currently consisting of eleven separate portfolios. Heritage
serves as the transfer agent for all Heritage open-end funds and as fund
accountant for all Heritage open-end funds except for the Eagle International
Equity Portfolio. Portfolio management for the Growth Equity Fund and the
Income-Growth Trust is subcontracted to Eagle. Portfolio management for the
Small Cap Stock Fund is subcontracted to Awad and Eagle. Effective October 1,
1997, portfolio management for the Value Equity Fund was also subcontracted to
Eagle. Unaffiliated advisors are used for the Eagle Internationl Equity
Portfolio and the Capital Appreciation Trust. Net assets at September 26,
1997 were as follows (in thousands):
Heritage Cash Trust:
Money Market Fund $2,058,980
Municipal Money Market Fund 424,693
Heritage Capital Appreciation Trust 88,248
Heritage Income-Growth Trust 85,043
Heritage Income Trust:
High Yield Bond Fund 54,585
Intermediate Government Fund 14,875
Heritage Series Trust:
Small Cap Stock Fund 306,743
Value Equity Fund 37,835
Eagle International Equity Portfolio 10,850
Growth Equity Fund 41,674
Heritage U.S. Government Income Fund
(closed-end) 37,384
----------
$3,160,910
==========
Planning Corporation of America
Planning Corporation of America ("PCA"), a wholly-owned subsidiary of
RJA, is a general insurance agency and represents a number of insurance
companies. Through the financial advisors of the Company's broker-dealer
subsidiaries, PCA provides product and marketing support for a broad range of
insurance products, principally fixed and variable annuities, numerous forms
of life insurance, disability insurance and long-term care coverage.
RJ Properties, Inc.
RJ Properties, Inc. ("RJP"), headquartered in Atlanta, Georgia, acts as a
general or co-general partner for private and public limited partnerships
currently owning 23 apartment properties and 4 shopping centers. RJP acquires
properties for syndications for which it serves as a general partner and
receives acquisition fees and residual interests in profits and proceeds from
future sales of the projects. Through its subsidiary, Raymond James Realty
Advisors, RJP acts as the advisor for real estate portfolios of institutional
clients. At September 26, 1997, RJP acted as advisor for approximately $1.15
billion of such assets. In addition, RJP performs the property management
function for certain properties owned either by partnerships in which RJP is a
general partner or properties in portfolios of institutional clients. At
September 26, 1997, RJP had 35 properties with a total of 8,500 apartment
units under management. The Company owns 85% of the outstanding shares of
RJP. Mr. Francis S. Godbold, President and a Director of the Company, owns
7.5%, and Mr. J. Robert Love, President of RJP, owns the remaining 7.5%.
Raymond James Trust Company
Sound Trust Company
Raymond James Trust Company was chartered in 1992 and opened for business in
September 1992. This wholly-owned subsidiary of RJF was formed primarily to
provide personal trust services to existing clients of the broker-dealer
subsidiaries. Portfolio management of trust assets is generally subcontracted
to the asset management operations of the Company. In October 1993 the
Company acquired a second trust company, Sound Trust Company, in Tacoma,
Washington. This subsidiary provides personal trust services primarily to
broker-dealer clients outside the State of Florida. These two subsidiaries
had a combined total of $417 million in client assets at September 26, 1997.
Raymond James Bank, FSB
Raymond James Bank, FSB, ("RJBank") received its federal savings bank
charter on May 6, 1994. RJBank provides residential lending products and FDIC-
insured deposit products to clients of RJF's broker-dealer subsidiaries and to
the general public.
Access to RJBank's products and services is available nationwide through
the offices of its affiliate investment firms as well as through convenient
telephonic and electronic banking services, including ATM, point-of-sale, 24-
hour TeleDirect automated telephone banking, checkwriting, direct deposit and
ACH payments. As of September 30, 1997, RJBank had total assets of
approximately $329 million.
Raymond James Credit Corporation
Raymond James Credit Corporation ("RJCC") was formed in 1996 as a finance
company pursuant to Federal Reserve Regulation G. To date, this subsidiary has
primarily provided loans collateralized by control or restricted securities.
RJCC is funded with internal capital and by a $50 million line of credit with
a commercial bank. At September 26, 1997, RJCC had $42 million in outstanding
loans.
Raymond James International Holdings, Inc.
Raymond James International Holdings, Inc. is a Delaware corporation
formed in 1994 to house the Company's foreign operations. To date, such
operations consist of brokerage and asset management joint venture investments
in India, South Africa, and France.
Other Subsidiaries
Over time, the Company has formed several subsidiaries to act as general
or co-general partner for various public and private limited partnerships
syndicated by RJA. These subsidiaries include:
Subsidiary Type of Partnership(s)
----------------------------------------------------------
RJ Leasing, Inc. Equipment leasing
RJ Leasing - 2, Inc. Equipment leasing
RJ Equities, Inc. Real estate
RJ Health Properties, Inc. Nursing homes
RJ Credit Partners, Inc. Government subsidized apartments
Raymond James Partners, Inc. Various
RJ Medical Investors, Inc. Nursing homes
RJ Partners, Inc. Various
The Company has several other subsidiaries, but their activities are not
material to the Company's operations.
Competition
The Company's subsidiaries compete with many larger, better capitalized
providers of financial services, including other securities firms, some of
which are affiliated with major financial services companies, insurance
companies, banking institutions and other organizations. They also compete
with a number of firms offering discount brokerage services, usually with
lower levels of service, to individual clients. The Company's subsidiaries
compete principally on the basis of service, product selection, location and
reputation in local markets.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations, principally the NASD and the NYSE. These self-regulatory
organizations adopt rules (which are subject to approval by the SEC) for
governing the industry and conduct periodic examinations of member broker-
dealers. Securities firms are also subject to regulation by state securities
commissions in the states in which they are registered. RJA, IM&R and RTS are
currently registered in all 50 states.
The regulations to which broker-dealers are subject cover all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, capital structure of securities firms, record keeping and the
conduct of directors, officers and employees. Additional legislation, changes
in rules promulgated by the SEC and by self-regulatory organizations or
changes in the interpretation or enforcement of existing laws and rules often
directly affect the method of operation and profitability of broker-dealers.
The SEC and the self-regulatory organizations may conduct administrative
proceedings which can result in censure, fine, suspension or expulsion of a
broker-dealer, its officers or employees. The principal purpose of regulation
and discipline of broker-dealers is the protection of clients and the
securities markets rather than protection of creditors and shareholders of
broker-dealers.
See Notes 12 and 13 of the Notes to Consolidated Financial Statements for
further description of certain SEC regulations.
ITEM 2. PROPERTIES
The Company owns a 310,000 square foot headquarters complex (two
buildings) located in St. Petersburg, Florida. The Company also owns 29
adjacent acres for future growth, where a third headquarters building (276,000
square feet) and a bank and trust company building (24,000 square feet) are
presently under construction. In addition, the Company leases 84,000 square
feet in nearby office buildings. With the exception of the Company-owned RJA
branch office building in Crystal River, Florida, RJA branches are leased with
various expiration dates through 2002. The IM&R and RJP headquarters offices
in Atlanta, Georgia are also under leases. See Notes 4 and 9 of the Notes to
Consolidated Financial Statements for further information regarding the
Company's leases.
Leases for branch offices of IM&R and RTS are the responsibility of the
respective independent contractor registered representatives.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant or co-defendant in various lawsuits incidental
to its securities business. The Company is contesting the allegations of the
complaints 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 of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded on the NYSE under the symbol "RJF".
The following table sets forth for the periods indicated the high and low
trades for the common stock.
1997 1996
-------------------------------------
High Low High Low
-------------------------------------
First Quarter $20-1/2 $15-13/16 $25-1/4 $20-1/8
Second Quarter 25-9/16 18-2/3 23-3/8 19
Third Quarter 29-1/4 19-9/16 23-1/2 20-1/2
Fourth Quarter 37-1/8 25-3/4 24-3/8 19-3/4
Since the Company initiated payment of a cash dividend in 1985, there
have been 15 increases in the dividend rate, 6 of which were in the form of
stock splits and stock dividends. The dividend rate following the April 3,
1997 stock split was $.08 per quarter.
The payment of dividends on the Company's common stock is subject to the
availability of funds from the Company's subsidiaries, including the broker-
dealer subsidiaries which may be subject to restrictions under the net capital
rules of the SEC and the NYSE. Such restrictions have never become applicable
with respect to the Company's dividend payments. (See Note 12 of the Notes to
Consolidated Financial Statements.)
At December 17, 1997 there were approximately 10,000 holders of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
Year Ended
--------------------------------------------------------
Sept. 26, Sept. 27, Sept. 29, Sept. 30, Sept. 24,
1997** 1996 1995 1994 1993
--------------------------------------------------------
Operating Results:
Revenues $ 927,607 $ 721,752 $ 554,070 $ 507,136 $ 451,747
Net income $ 98,915 $ 65,978 $ 46,141 $ 42,069 $ 49,347
Net income per share:*$ 3.06 $ 2.09 $ 1.49 $ 1.31 $ 1.52
Weighted average shares
outstanding:* 32,258 31,538 31,058 32,039 32,435
Cash dividends declared
per share* $ .31 $ .25 $ .24 $ .21 $ .14
Financial Condition:
Total assets $3,278,645 $2,566,381 $2,012,715 $1,698,262 $1,447,570
Long-term debt $ 12,715 $ 12,909 $ 13,084 $ 13,243 $ 13,387
Shareholders' equity $ 423,276 $ 326,632 $ 266,193 $ 227,452 $ 205,565
Shares outstanding* 31,797 31,341 30,921 30,741 31,974
Equity per share
at end of period* $ 13.31 $ 10.42 $ 8.61 $ 7.39 $ 6.43
* Gives effect to the common stock splits paid on April 3, 1997 and
November 15, 1993.
** Amounts include the $30.6 million gain from the sale of Liberty
Investment Management, Inc. Excluding this gain, revenues were
$896,961,000 and net income was $80,126,000. See Note 15 of the
Notes to Consolidated Financial Statements for details.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations - Three Years Ended September 26, 1997
Fiscal 1997 was the Company's thirteenth consecutive year of record
revenues, even exclusive of the gain on the sale of the Company's interest
in Liberty Investment Management, Inc. ("Liberty") as described in Note 15
of the Consolidated Financial Statements. For the past two years, the
equity markets have experienced an unprecedented rise, spurring record
levels of transaction volume and capital markets activity. These conditions
have led to record results in many sectors of the financial services
industry, including most of the Company's primary lines of business.
Accordingly, the last two fiscal years have each established earnings
records for the Company by a wide margin.
Fiscal 1995 was a mixed year, with the first six months a continuation
of 1994's subdued market conditions in a period of rising interest
rates. The second half of fiscal 1995 was a dramatic contrast, with a
return to declining interest rates and a rising stock market.
Year Ended
---------------------------------------------------
Sept. 26, Sept. 27, % Incr. Sept. 29,
1997 % Incr. 1996 (Decr.) 1995
----------------------------------------------------
Revenues: (000's) (000's) (000's)
Securities commissions
and fees $514,964 22% $422,487 29% $327,547
Investment banking 109,088 50% 72,596 69% 43,004
Investment advisory fees 55,194 9% 50,715 18% 42,922
Interest 155,746 23% 126,453 30% 97,211
Correspondent clearing 4,502 13% 3,985 7% 3,721
Net trading profits 12,797 5% 12,243 (3%) 12,637
Financial service fees 24,610 35% 18,191 23% 14,740
Other 20,060 33% 15,082 23% 12,288
---------------------------------------------------
896,961 24% 721,752 30% 554,070
Gain from sale of Liberty30,646
---------------------------------------------------
Total revenues $927,607 29% $721,752 30% $554,070
===================================================
Over time, the Company's emphasis on non-transaction dependent
revenues has created a consistently growing revenue stream. For the past
three years, revenues which are of a recurring fee or time-based nature
have represented nearly one third of total revenues.
Continued strength of the securities markets and record transaction
volume in fiscal 1997 and 1996 resulted in increased securities commissions
for the sales of all product lines, with the largest absolute increases in
mutual funds, over-the-counter stocks and annuities during the period.
While the retail sales force has experienced double-digit annual growth
since fiscal 1995, as illustrated below, the increased productivity of
existing Financial Advisors has been an even greater factor in the growth
of commission revenues.
Year Ended
------------------------------------------------
Sept. 26,% Incr. Sept. 27, Sept. 29,
1997 (Decr.) 1996 % Incr. 1995
------------------------------------------------
Number of retail Financial
Advisors at yearend 2,825 13% 2,503 9% 2,288
Retail commission
revenues (000's) $ 422,316 26% $ 334,871 27% $ 264,211
Retail new issue
sales credits (000's) $ 24,472 49% $ 16,462 40% $ 11,736
Number of institutional
salesmen at yearend 123 (5%) 129 10% 117
Institutional commission
revenues (000's) $ 92,648 6% $ 87,616 38% $ 63,336
Institutional new issue
sales credits (000's) $ 23,167 57% $ 14,727 110% $ 7,008
Number of trades processed 2,803,000 11% 2,526,000 20% 2,104,000
Investment banking revenues, including new issue sales credits,
increased 50% in 1997 to a record $109.1 million following a 69% surge in
the prior year. Fiscal years 1997 and 1996 were record years for equity
underwriting activity, both in number of new issues and average offering
size. In contrast, fiscal 1995 revenues reflected a partial year of much
slower activity. The number of managed or co-managed underwritings and the
dollar volume of these transactions were as follows: 1997 - 65 new issues
for $7.8 billion; 1996 - 38 new issues for $2.7 billion; and 1995 - 24 new
issues for $1.4 billion. Merger and acquisition fees, although a less
significant component, have been a consistent revenue source during the
past few years.
Investment advisory fees have risen with the generally strong growth
in assets under management as shown in the table below. Asset management
growth has benefitted both from asset appreciation and from positive net
sales during this period. For 1997, investment advisory fees included only
three months of fees from Liberty, which was sold in January 1997. Since
1995, real estate assets under management have increased significantly as
the Company's Raymond James Realty Advisors subsidiary has become a
recognized manager of institutional real estate portfolios.
Sept. 26, %Incr. Sept. 27,% Incr. Sept. 29,
1997 (Decr.) 1996 (Decr.) 1995
-----------------------------------------------
(000's) (000's) (000's)
Eagle Asset
Management, Inc. $ 3,714,407 55% $ 2,388,922 29% $ 1,856,284
Heritage Family
of Mutual Funds 3,160,910 33% 2,382,670 24% 1,921,377
Investment Advisory Services 1,433,018 46% 980,415 17% 836,065
Awad and Associates
Asset Management 814,315 66% 490,477 48% 331,236
Carillon Asset Management 53,448 5% 50,795 (28%) 70,217
------------------------------------------------
Subtotal 9,176,098 46% 6,293,279 25% 5,015,179
Liberty Investment
Management, Inc.* - 5,468,913 14% 4,806,210
------------------------------------------------
Total Financial Assets Under
Management $ 9,176,098 (22%) $11,762,192 20% $ 9,821,389
================================================
Real estate and equipment
assets under management $ 2,087,766 34% $ 1,557,931 16% $ 1,341,442
================================================
* See Note 15 of the Notes to Consolidated Financial Statements.
Net interest income continues to be a stable, growing source of
earnings. A large portion of the increase has been a result of the dramatic
growth in retail brokerage account balances, including resultant segregated
account assets. The components of interest earnings are as follows:
Sept. 26, Sept. 27, Sept. 29,
1997 1996 1995
---------------------------------------------------
(balances in 000's)
Margin balances:
Average balance $480,203 $386,422 $337,969
Average rate 8.1% 8.2% 8.3%
-------- -------- --------
$ 39,087 $ 31,529 $ 27,974
Assets segregated pursuant to
Federal Regulations:
Average balance 601,902 452,710 294,664
Average rate 5.3% 5.4% 5.7%
------- -------- --------
32,148 24,538 16,813
Stock borrowed:
Average balance 1,004,735 947,412 761,204
Average rate 4.8% 4.7% 4.8%
-------- ------- -------
48,606 44,361 36,228
Raymond James Bank, FSB 17,739 11,980 7,197
Other interest revenue 18,166 14,045 8,999
-------- -------- -------
Total interest revenue 155,746 126,453 97,211
-------- -------- -------
Credit interest program:
Average balance 880,026 678,910 482,985
Average rate 4.7% 4.8% 5.1%
-------- ------- --------
41,693 32,374 24,625
Stock loaned:
Average balance 980,000 941,937 765,799
Average rate 4.5% 4.4% 4.4%
-------- ------- --------
44,238 41,165 33,867
Raymond James Bank, FSB 12,997 7,782 4,268
Other interest expense 2,413 2,150 1,998
-------- ------- --------
Total interest expense 101,341 83,471 64,758
-------- -------- ---------
Net interest income $ 54,405 $ 42,982 $ 32,453
======== ======== =========
Net trading profits have remained consistent in total from fiscal 1995
through 1997. These profits are primarily from over-the-counter equity and
fixed income inventory activity. Despite a significant increase in the
number of stocks for which the Company acts as a market maker, various
industry changes (order execution rules, introduction of sixteenths, etc.)
have limited the ability to realize a proportionate increase in trading
profits.
The increase in financial service fees in fiscal 1997 and 1996 is a
combined result of the general growth of the Company's retail client base
and recent dramatic growth in transaction fees arising from our retail wrap
fee account programs, which have become increasingly popular as an
alternative to the traditional commission-based pricing structure.
Other income in fiscal 1997 includes a gain of $2.5 million from the Compan
y's sale of its former headquarters building. Recurring factors include the
continuing growth in floor brokerage revenues during this active market
period and a rise in property management fees as the Company's RJ
Properties subsidiary has increased substantially the number of apartment
units which it manages.
Year Ended
-------------------------------------------------
Sept. 26, % Incr.Sept. 27, Sept. 29,
1997 1996 % Incr. 1995
------------------------------------------------
Expenses: (000's) (000's) (000's)
Employee compensation:
Sales commissions $346,770 24% $279,670 32% $211,082
Administrative and benefit
costs 96,549 21% 80,092 12% 71,364
Incentive compensation 94,091 47% 64,142 46% 43,980
Total employee -------------------------------------------------
compensation 537,410 27% 423,904 30% 326,426
Communications and information
processing 37,491 23% 30,585 19% 25,619
Occupancy and equipment 27,175 14% 23,927 11% 21,653
Clearance & floor brokerage 11,708 16% 10,098 22% 8,257
Interest 101,341 21% 83,471 29% 64,758
Business development 20,755 29% 16,053 13% 14,210
Other 31,212 24% 25,189 35% 18,688
--------------------------------------------------
$767,092 25% $613,227 28% $479,611
==================================================
Since several of the expense line items are explained by the
fluctuation in corresponding revenues and others were relatively constant
or experienced a general corporate growth rate during this period, the
following discussion will focus on the expense items not falling into
either of these two categories.
Incentive compensation expenses are based on departmental, subsidiary
and firm-wide profitability and reflect the record earnings in fiscal 1997
and 1996. Record underwriting activity has resulted in a dramatic increase
in investment banking departmental profits, having a significant impact on
incentive compensation.
The increases in communications and information processing expense in
fiscal 1997 and 1996 reflect the costs of further enhancement and expansion
of the Company's systems of internal communication and information
dissemination, as well as higher general business volume which gave rise to
increased costs for telephone, printing and supplies.
The increase in occupancy and equipment expense between fiscal 1996
and 1997 is predominantly the increased depreciation on additional
information processing equipment. The increase also includes expenses
associated with upgraded retail office space and account executive
workstations, which have been a primary factor in the past two years'
increases.
The rise in other expenses is primarily the result of higher legal
expenses and settlements, and increased subadvisory fees paid to
unaffiliated portfolio managers in our Investment Advisory Services
program.
The widespread use of computer programs that rely on two-digit date
programs to perform computations and decision-making functions may cause
computer systems to malfunction in the year 2000 and lead to significant
business delays and disruptions in the U. S. and internationally. The
Company has begun the process of identifying internal computer code which
will require modification to become Year 2000 compliant, as well as
identifying software provided by third party vendors which will require
modification. The Company is also monitoring the progress of the supplier
of its securities processing software and other industry suppliers in
addressing this issue.
While management has not finalized an estimate of the cost of internal
system modifications, it does not believe that these costs will have a
material impact on the Company's operations in fiscal 1998.
The impact of this problem on the securities industry will be
material, however, since virtually every aspect of the sale of securities
and processing of transactions will be affected. Due to the enormous task
facing the securities industry, and the interdependent nature of securities
transactions, the Company may be adversely affected by this problem in the
Year 2000 depending on whether it and the entities with whom it does
business address this issue successfully.
Liquidity and Capital Resources
Net cash from operating activities during the current year was
$300,011,000. Cash was generated by increased client balances in the
credit interest program and by fluctuations in various asset and liability
accounts.
Investing activities required $132,415,000 during the year. Additions
to fixed assets consumed $25,456,000, of which $7.2 million was toward the
construction of a third headquarters building, the remainder was for the
purchase of computers, office furniture and equipment. Net purchases,
sales and maturations of investments consumed $106,959,000. These
investments were primarily mortgage-backed securities purchased by Raymond
James Bank, FSB.
Financing activities required $14,086,000, the result of dividends
paid on the Company's common stock and repayments on a subsidiary's credit
line.
The Company has notes payable consisting of debt in the amount of
$12.7 million in the form of a mortgage on its headquarters office building
with a balloon payment due on December 1, 1997. The Company has refinanced
the existing mortgage, as well as added additional financing for a total of
$20 million. The Company has also committed to an additional borrowing of
$20 million to be executed on or before July 31, 1998, upon completion of a
third office building currently under construction.
The Company has two committed lines of credit. During 1995, the
parent company obtained an unsecured $50 million line for general corporate
purposes. In 1996, 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 $285,000,000.
The Company's broker-dealer subsidiaries are subject to requirements
of the SEC relating to liquidity and capital standards (see Notes to
Consolidated Financial Statements).
Effects of Recently Issued Accounting Standards
During fiscal 1996, the Financial Accounting Standards Board ("FASB")
issued Statement No. 125 "Accounting for Transfers and Security of Financial
Assets and Extingushment of Liabilites" (FAS 125). During fiscal 1997, the
FASB issued statement No. 127, which defers certain provisions of FAS 125
until January 1, 1998. The impact of adopting FAS 125 is not anticipated to
have a material effect on the Company's financial position or results of
operations.
Also during fiscal 1997 the FASB issued statements No. 128 "Earnings
per Share" (FAS 128), No. 130 "Reporting Comprehensive Income" (FAS 130) and
No. 131 "Disclosures about Segments of an Enterprise and Related
Information" (FAS 131). These statements are not anticipated to have a
material effect on the Company's financial position or results of
operations. However, FAS 128 requires a change in the earnings per share
disclosures and FAS 130 requires additional disclosures of the items
included in comprehensive income. FAS 131 requires extensive additional
disclosures regarding the Company's reportable operating segments used by
management to evaluate segment performance and decide how to allocate
resources. The Company plans to adopt all three of these statements in
fiscal 1998.
During fiscal 1997 the Securities and Exchange Commission issued market
risk disclosure requirements to enhance disclosures of accounting policies
for derivatives and other financial instruments and to provide quantitative
and qualitative disclosures about market risk inherent in derivatives and
other financial instruments. The Company performed an entity-wide analysis
of the Company's financial instruments and assessed the related risk and
materiality in accordance with the rules. Based on this analysis, in the
opinion of management, the market risk associated with the Company's
financial instruments at September 26, 1997 will not have a material adverse
effect on the consolidated financial position or results of operations of
the Company.
Effects of Inflation
The Company's assets are primarily liquid in nature and are not
significantly affected by inflation. Management believes that the
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.
Factors Affecting "Forward-Looking Statements"
From time to time, the Company may publish "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as amended, or
make oral statements that constitute forward-looking statements. These
forward-looking statements may relate to such matters as anticipated
financial performance, future revenues or earnings, business prospects,
projected ventures, new products, anticipated market performance, and
similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company cautions readers that a
variety of factors could cause the Company's actual results to differ
materially from the anticipated results or other expectations expressed in
the Company's forward-looking statements. These risks and uncertainties,
many of which are beyond the Company's control, include, but are not limited
to: (i) transaction volume in the securities markets, (ii) the volatility
of the securities markets, (iii) fluctuations in interest rates, (iv)
changes in regulatory requirements which could affect the cost of doing
business, (v) fluctuations in currency rates, (vi) general economic
conditions, both domestic and international, (vii) changes in the rate of
inflation and related impact on securities markets, (viii) competition from
existing financial institutions and other new participants in the securities
markets, (ix) legal developments affecting the litigation experience of the
securities industry, and (x) changes in federal and state tax laws which
could affect the popularity of products sold by the Company. The Company
does not undertake any obligation to publicly update or revise any forward-
looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial statements, schedules and exhibits filed under this item
are listed in the index appearing on page F-1 of this report.
(b) QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share data)
1997 1st Qtr. 2nd Qtr.** 3rd Qtr. 4th Qtr.
- --------------------------------------------------------------------------
Revenues $194,819 $249,995 $210,118 $272,675
Income before income taxes 27,998 62,128 27,945 42,444
Net income 17,168 38,130 17,140 26,477
Net income per share* .54 1.18 .53 .81
1996 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ---------------------------------------------------------------------------
Revenues $152,026 $178,719 $198,194 $192,813
Income before income taxes 20,288 24,665 30,522 33,050
Net income 12,541 15,313 18,582 19,542
Net income per share* .40 .49 .59 .62
* Gives effect to the 3-for-2 common stock split paid on April 3, 1997
** Amounts include the $30.6 million gain from the sale of Liberty
Investment Management, Inc. Excluding this gain, revenues were
$219,349,000 and net income was $80,126,000. See Note 15 of the Notes
to Consolidated Financial Statements for details.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the registrant (including its significant
subsidiaries) who are not Directors of the registrant are as follows:
Jeffrey P. Julien 41 Vice President - Finance and Chief
Financial Officer, Director and/or
officer of certain RJF subsidiaries.
Barry S. Augenbraun 58 Senior Vice President and
Corporate Secretary.
Jennifer Ackart 33 Controller.
The information required by Item 10 relating to Directors of the registrant is
incorporated herein by reference to the registrant's definitive proxy
statement for the 1998 Annual Meeting of Shareholders. Such proxy statement
will be filed with the SEC prior to January 23, 1998.
ITEMS 11,12 AND 13.
The information required by Items 11, 12 and 13 is incorporated herein by
reference to the registrant's definitive proxy statement for the 1998 Annual
Meeting of Shareholders. Such proxy statement will be filed with the SEC
prior to January 23, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Exhibits required by this Item are either listed in the index
appearing on page F-1 of this report or have been previously filed
with the SEC.
(b) Financial statement schedules required by this Item are listed in
the index appearing on page F-1 of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
St. Petersburg, State of Florida, on the 19th day of December, 1997.
RAYMOND JAMES FINANCIAL, INC.
By /s/ THOMAS A. JAMES
Thomas A. James, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ THOMAS A. JAMES Chairman and Chief December 19, 1997
Thomas A. James Executive Officer
/s/ FRANCIS S. GODBOLD President and Director December 19, 1997
Francis S. Godbold
/s/ M. ANTHONY GREENE Executive Vice President December 19, 1997
M. Anthony Greene and Director
/s/ J. STEPHEN PUTNAM Executive Vice President December 19, 1997
J. Stephen Putnam and Director
/s/ ROBERT F. SHUCK Vice Chairman and Director December 19, 1997
Robert F. Shuck
/s/ JEFFREY P. JULIEN Vice President - Finance December 19, 1997
Jeffrey P. Julien (Chief Financial Officer)
/s/ JENNIFER C. ACKART Controller (Chief December 19, 1997
Jennifer C. Ackart Accounting Officer)
/s/ JONATHAN A. BULKLEY Director December 19, 1997
Jonathan A. Bulkley
/s/ ANGELA BIEVER Director December 19, 1997
Angela Biever
/s/ THOMAS S. FRANKE Director December 19, 1997
Thomas S. Franke
/s/ HARVARD H. HILL, JR. Director December 19, 1997
Harvard H. Hill, Jr.
/s/ HUNTINGTON A. JAMES Director December 19, 1997
Huntington A. James
/s/ PAUL W. MARSHALL Director December 19, 1997
Paul W. Marshall
/s/ DENNIS W. ZANK Director December 19, 1997
Dennis W. Zank
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS PAGE(S)
Report and Consent of Independent Certified Public
Accountants F-3
Consolidated Statement of Financial Condition
as of September 26, 1997 and September 27, 1996 F-4
Consolidated Statement of Income for the Three Years
Ended September 26, 1997 F-5
Consolidated Statement of Changes in Shareholders' Equity
for the Three Years Ended September 26, 1997 F-6
Consolidated Statement of Cash Flows
for the Three Years Ended September 26, 1997 F-7-8
Summary of Significant Accounting Policies F-9-11
Notes to Consolidated Financial Statements F-12-25
EXHIBITS
3.1 Amended and restated Articles of Incorporation of Raymond James
Financial, Inc.as filed with the Secretary of State Florida on March 3,
1997, incorporated by reference to Exhibit 3 of Form 10Q filed on
May 9, 1997.
3.2 Amended and restated By-Laws of the Company, as of May 15, 1997.
(filed electronically)
10.1 Raymond James Financial, Inc. Amended Stock Option
Plan for Outside Directors, dated December 12, 1986,
incorporated by reference to Exhibit 4.1 (b) to
Registration Statement on Form S-8, No. 33-38350
10.2 Raymond James Financial, Inc. 1992 Incentive Stock
Option Plan effective August 20, 1992, incorporated by
reference to Exhibit 4.1 to Registration Statement on
Form S-8, No. 33-60608.
10.3 Raymond James Financial, Inc. Deferred Managment Bonus
Plan, effective as of October 1, 1989*
10.4 Employment contract with Corporate Secretaty effective as of October
21, 1996.*
10.5 Termination and Release Agreement between Liberty Asset Management,
Inc. and Raymond James Financial, Inc.*
10.6 Raymond James Financial, Inc. 1996 Stock Option Plan for
Key Management Personnel, dated Novemer 21, 1996.
(filed electronically)
11 Computation of Earnings per Share X-1
21 List of Subsidiaries X-2
23 Independent Auditor's Consent F-3
27 Financial Data Schedule - EDGAR version only
* Incorporated by reference as filed with the Company's Form 10-K on
December 23, 1996
SCHEDULES AND EXHIBITS EXCLUDED
All schedules and exhibits not included are not applicable, not
required or would contain information which is included in the Consolidated
Financial Statements, Summary of Significant Accounting Policies, or the
Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Raymond James Financial, Inc.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the
financial position of Raymond James Financial, Inc. and its subsidiaries at
September 26, 1997 and September 27, 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended September 26, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Raymond James Bank, FSB, a wholly-owned subsidiary, which
statements reflect total assets of $328,519,000 and $227,176,000 at
September 26, 1997 and September 27, 1996, respectively, and total revenues
of $17,712,000, $12,121,000 and $7,304,000 for each of the three years in
the period ended September 26, 1997. Those statements were audited by
other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Raymond James Bank, FSB, is based solely on the report of the other
auditors. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the
report of other auditors provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Tampa, Florida
November 14, 1997
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-54071, 33-60608 and 33-38390) of Raymond
James Financial, Inc. of our report dated November 14, 1997 appearing on
page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Tampa, Florida
December 19, 1997
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
September 26, September 27,
1997 1996
------------------------------
ASSETS
Cash and cash equivalents $ 196,351 $ 258,206
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 375 119
Securities purchased under
agreements to resell 692,054 476,945
Securities owned:
Trading and investment account securities 98,004 124,253
Available for sale securities 313,286 208,897
Receivables:
Customers, net 686,339 459,180
Stock borrowed 1,070,944 864,140
Brokers, dealers and clearing organizations 39,644 24,306
Other 38,118 28,980
Investment in leveraged leases 22,161 20,318
Property and equipment, net 51,674 39,585
Deferred income taxes, net 24,356 21,189
Deposits with clearing organizations 22,200 22,044
Prepaid expenses and other assets 23,139 18,219
---------------------------
$3,278,645 $2,566,381
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 14,215 $ 24,898
Payables:
Customers 1,487,158 1,086,406
Stock loaned 1,035,035 848,595
Brokers, dealers and clearing organizations 24,954 56,928
Trade and other 81,217 54,007
Trading account securities sold but not yet
purchased 52,596 57,210
Accrued compensation and commissions 141,781 101,300
Income taxes payable 18,413 10,405
----------------------------
2,855,369 2,239,749
----------------------------
Commitments and contingencies (Note 9)
Shareholders' equity:
Preferred stock; $.10 par value; authorized
10,000,000 shares; issued and outstanding -0- share - -
Common stock; $.01 par value; authorized
50,000,000 shares; issued 32,665,720 shares 326 217
Additional paid-in capital 52,599 50,271
Unrealized gain (loss) on securities available
for sale, net of deferred taxes 341 (791)
Retained earnings 377,981 289,096
----------------------------
431,247 338,793
Less: 868,784 and 1,324,217 common shares
in treasury, at cost (7,971) (12,161)
----------------------------
423,276 326,632
----------------------------
$3,278,645 $2,566,381
============================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of
these financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
Year Ended
--------------------------------------------
September 26, September 27, September 29,
1997 1996 1995
--------------------------------------------
Revenues:
Securities commissions and fees$ 514,964 $ 422,487 $ 327,547
Investment banking 109,088 72,596 43,004
Investment advisory fees 55,194 50,715 42,922
Interest 155,746 126,453 97,211
Correspondent clearing 4,502 3,985 3,721
Net trading profits 12,797 12,243 12,637
Financial service fees 24,610 18,191 14,740
Other 20,060 15,082 12,288
Gain on sale of Liberty
Investment Management,
Inc.(Note 15) 30,646 - -
--------------------------------------------
927,607 721,752 554,070
--------------------------------------------
Expenses:
Employee compensation 537,410 423,904 326,426
Communications and information
processing 37,491 30,585 25,619
Occupancy and equipment 27,175 23,927 21,653
Clearance and floor brokerage 11,708 10,098 8,257
Interest 101,341 83,471 64,758
Business development 20,755 16,053 14,210
Other 31,212 25,189 18,688
--------------------------------------------
767,092 613,227 479,611
--------------------------------------------
Income before provision for
income taxes 160,515 108,525 74,459
Provision for income taxes 61,600 42,547 28,318
--------------------------------------------
Net income $ 98,915 $ 65,978 $ 46,141
============================================
Net income per share $ 3.06 $ 2.09 $ 1.49
============================================
Average common and common
equivalent shares outstanding 32,258 31,538 31,058
============================================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of
these financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share amounts)
Unrealized Total
Add. Ret. Gain/(Loss) Share-
Pref. Stock Common Stock Pd. in Earnings on AFS Treasury holders'
Capital Securities Stock Equity
Shares Amt. Shares Amt. Shares Amt.
-----------------------------------------------------------------------
Balance
at Sept.
30, 1994 21,777 $217 $52,375 $192,280 (1,283)$(17,420)$227,452
Net Income 46,141 46,141
Cash Divds.
($.24/share) (7,392) (7,392)
Purchase of
Treasury
Shares (234) (3,296) (3,296)
Employee
Stock Purchase 139 107 1,455 1,594
Exercise of
Stock Options (1,974) 247 3,377 1,403
Tax benefit-
NQOs 145 145
Net unrealized
gain on AFS $146 146
----------------------------------------------------------------------
Balance at
Sept. 29,
1995 21,777 217 50,685 231,029 146 (1,163) (15,884) 266,193
_____________________________________________________________________
Net Income 65,978 65,978
Cash Divds.
($.25/share) (7,911) (7,911)
Purchase of
Treasury
Shares (18) (367) (367)
Employee
Stock Purchases 585 106 1,455 2,040
Exercise of
Stock Options (1,250) 192 2,635 1,385
Tax benefit-
NQOs 251 251
Net unrealized
loss on AFS (937) (937)
------------------------------------------------------------------------
Balance
at Sept.27,
1996 21,777 217 50,271 289,096 (791) (883) (12,161) 326,632
-----------------------------------------------------------------------
Net Income 98,915 98,915
Cash Divds.
($.31/share) (9,916) (9,916)
Employee
Stock Purchases 2,031 145 1,649 3,680
Exercise of
Stock Options (11) 211 2,541 2,530
Tax benefits-
NQOs 308 308
3-for-2 stock
split 10,888 109 (109) (342) -
Cash paid
for fractional
shares (5) (5)
Net unrealized
gain on AFS 1,132 1,132
----------------------------------------------------------------------
Balance at
Sept. 26,
1997 32,665 $326 $52,599 $377,981 $341 (869) $(7,791)$423,276
====================================================================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts these
financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(continued on next page)
Year Ended
----------------------------------------
September 26, September 27, September 29,
1997 1996 1995
----------------------------------------
Cash flows from operating activities:
Net income $ 98,915 $ 65,978 $ 46,141
----------------------------------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,312 11,299 9,673
Unrealized loss (gain) and premium
amortization on securities 2,009 152 (1,033)
Gain on sale of securities 55 (199) (489)
Gain on sale of property and
equipment 55 155 117
Provision for bad debts (380) 27 234
Provision for other accruals (6,881) (1,690) 2,890
Decrease (increase) in assets:
Short-term investments - 34,017 500
Securities and investments - - (12,963)
Receivables:
Customers (226,779) (62,006) (49,358)
Stock borrowed (206,804) (88,852) (28,016)
Brokers, dealers and clearing
organizations (15,338) 24,829 (34,725)
Other (9,138) (4,094) (10,243)
Trading and investment
account securities, net 23,273 (18,992) 50,260
Deferred income taxes (3,167) (209) (396)
Prepaid expenses and other assets (6,919) (11,664) (2,689)
Increase (decrease) in liabilities:
Payables:
Customers 400,752 311,930 257,682
Stock loaned 186,440 62,811 14,118
Brokers, dealers and clearing
organizations (31,974) 39,386 (6,295)
Trade and other 34,091 (514) 6,510
Accrued compensation 40,481 27,933 13,853
Income taxes payable 8,008 4,234 258
-----------------------------------------
Total adjustments 201,096 328,553 209,888
----------------------------------------
Net cash provided by
operating activities 300,011 394,531 256,029
----------------------------------------
Cash flows from investing activities:
Additions to property and equipment (25,456) (10,093) (9,646)
Sales of property and equipment - - 990
Sales of securities 23,655 51,050 28,805
Purchases of securities (178,767) (167,512) (92,926)
Purchases of held to maturity
securities - - (8,033)
Security maturations and repayments 48,153 42,213 23,157
----------------------------------------
Net cash used in investing activities (132,415) (84,342) (57,653)
----------------------------------------
Cash flows from financing activities:
Repayments on mortgage note (193) (176) (159)
Borrowings from banks 11,990
Repayments to banks (10,490) (2,510) 2,510
Exercise of stock options and
employee stock purchases 6,518 3,676 3,142
Purchase of treasury stock - (367) (3,296)
Cash dividends on common stock (9,916) (7,911) (7,392)
Cash paid for fractional shares (5) - -
----------------------------------------
Net cash provided by (used in)
financing activities (14,086) 4,702 (5,195)
----------------------------------------
Net increase in cash and
cash equivalents 153,510 314,891 193,181
Cash and cash equivalents at
beginning of year 735,270 420,379 227,198
----------------------------------------
Cash and cash equivalents at end of
year $ 888,780 $ 735,270 $ 420,379
========================================
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 100,546 $ 88,599 $ 57,834
========================================
Cash paid for taxes $ 55,382 $ 41,371 $ 29,216
========================================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of these financial statem
ents.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Raymond James Financial, Inc. is a holding company which, through its
subsidiaries, is engaged principally in the securities brokerage business,
including the underwriting, distribution, trading and brokerage of equity
and debt securities and the sale of mutual funds and other investment
products. In addition, it provides investment management services for
retail and institutional customers and banking and trust services for
retail customers. The accounting and reporting policies of Raymond James
Financial, Inc. and its subsidiaries (the "Company") conform to generally
accepted accounting principles, the more significant of which are
summarized below:
Basis of consolidation
The consolidated financial statements include the accounts of Raymond
James Financial, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
All consolidated subsidiaries are 100% owned by the Company except for
RJ Properties, Inc., which is 85% owned.
Reporting period
The Company's fiscal year ends on the last Friday in September of each
year.
Recognition of revenues
Securities transactions and related commission revenues and expenses
are recorded on a trade date basis.
Revenues from investment banking are recorded at the time the
transaction is completed and the related income is reasonably determinable.
Investment banking revenues include sales credits earned in connection with
the distribution of the underwritten securities. Any warrants received in
connection with investment banking transactions are carried at a nominal
value until such time as the warrants are exercisable and the underlying
shares are salable.
The Company earns an advisory fee based on a client's portfolio
value on portfolios managed by its investment advisor subsidiaries. These
fees are recorded under the accrual method.
Management estimates and assumptions
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents for purposes of the
consolidated statement of cash flows. These consist primarily of shares of
money market funds and of U.S. Treasury Securities purchased under
agreements to resell, some of which are held in special reserve accounts,
and are stated at cost, which approximates market at fiscal yearend.
It is the Company's policy to obtain possession and control of
securities purchased under resale agreements. The net fair value of
securities purchased under resale agreements approximates their carrying
value, as such financial instruments are predominantly short-term in
nature. The Company monitors the risk of loss by assessing the market value
of the underlying securities as compared to the related receivable or
payable, including accrued interest, and requests additional collateral
where deemed appropriate. At September 26, 1997, and September 27, 1996,
there were no agreements with any individual counterparties where the risk
of loss exceeded 10% of shareholders' equity.
Securities owned
The Company accounts for securities owned in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("FAS 115"). FAS 115 requires
investments in debt and equity securities to be classified as either "held
to maturity," "trading," or "available for sale." The accounting
treatment for unrealized gains and losses on those securities is then
determined by the classification chosen. The trading and investment account
securities held by the brokerage subsidiaries are classified as trading.
Investment account securities not readily marketable are carried at
estimated fair value as determined by management with unrealized gains and
losses included in earnings. Trading securities are carried at market
value with realized and unrealized gains and losses included in earnings.
Securities available for sale are carried at estimated market value, with
unrealized gains and losses reported as a separate component of
shareholders' equity, net of deferred taxes, and realized gains and losses,
determined on a specific identification basis, included in earnings.
Property and equipment
Property, equipment and leasehold improvements are stated at cost less
accumulated depreciation. Depreciation of assets is provided principally
using the straight-line method for financial reporting purposes over the
estimated useful lives of the assets, which range from two to seven years
for furniture and equipment and fifteen to thirty-one years for buildings
and land improvements. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the estimated
useful lives of the assets. For income tax purposes, assets are
depreciated using accelerated methods.
Additions, improvements and expenditures for repairs and maintenance
that significantly extend the useful life of an asset are capitalized.
Other expenditures for repairs and maintenance are charged to operations in
the period incurred. Gains and losses on disposals of fixed assets are
reflected in income in the period realized.
Goodwill
Goodwill is stated at cost less accumulated amortization.
Amortization of goodwill is provided using the straight-line method for
financial reporting purposes over three years. Goodwill is reflected in
prepaid expenses and other assets.
Correspondent clearing
Under clearing agreements, the Company clears trades for unaffiliated
correspondent brokers and retains a portion of commissions as a fee for its
services. The Company records clearing charges net of commissions
remitted. Total commissions generated by correspondents were $21,334,000,
$18,742,000 and $16,155,000, and commissions remitted totaled $16,832,000,
$14,757,000 and $12,434,000 for the years ended September 26, 1997,
September 27, 1996 and September 29, 1995, respectively.
Income taxes
The Company utilizes the asset and liability approach defined in
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). FAS 109 requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement amounts and the tax
bases of assets and liabilities.
Net income per share
Net income per share is computed using weighted average common stock
and common stock equivalents outstanding. Common stock equivalents include
shares issuable under stock options and are determined under the treasury
stock method. All per share amounts have been restated to give retroactive
effect to the common stock dividend paid on April 3, 1997.
Reclassifications
Certain amounts from prior years have been reclassified for
consistency with current year presentation. These reclassifications were
not material to the consolidated financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - RECEIVABLES FROM AND PAYABLES TO CUSTOMERS:
Receivables from and payables to customers include amounts arising
from normal cash and margin transactions. Securities owned by brokerage
customers are held as collateral for receivables. Such collateral is not
reflected in the accompanying consolidated financial statements. The
amount receivable from customers is shown net of an allowance for doubtful
accounts of approximately $824,000 and $1,204,000 as of September 26, 1997
and September 27, 1996, respectively. The Company pays interest at varying
rates for qualifying customer funds on deposit awaiting reinvestment. Such
funds on deposit totaled $961,857,000 and $755,281,000 at September 26,
1997 and September 27, 1996, respectively. Other funds on deposit on which
the Company does not pay interest totaled $224,814,000 and $130,547,000 at
September 26, 1997 and September 27, 1996, respectively. Unsecured
receivables, other than affiliated company amounts which are eliminated in
consolidation, are not significant.
NOTE 2 - TRADING AND INVESTMENT ACCOUNT SECURITIES (in thousands):
September 26, 1997 September 27, 1996
-----------------------------------------------------
Securities Securities
sold but sold but
Securities not yet Securities not yet
owned purchased owned purchased
Marketable:
Stocks and warrants $ 15,212 $ 23,653 $ 12,341 $ 11,177
Municipal obligations 48,716 1,689 72,881 454
Corporate obligations 7,681 2,504 7,894 1,536
Government obligations 22,988 24,717 26,086 44,031
Other 2,644 33 4,904 12
Non-marketable 763 - 147 -
-----------------------------------------------------
$ 98,004 $ 52,596 $ 124,253 $ 57,210
=====================================================
NOTE 3 - AVAILABLE FOR SALE SECURITIES (in thousands):
The amortized cost and estimated market values of securities available
for sale at September 26, 1997 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------------------------------------------
Mortgage-backed securities:
FNMA $142,966 $ 307 $ (99) $143,174
FHLMC 137,557 446 (5) 137,998
GNMA 14,457 - (137) 14,320
U.S. Treasury Securities 7,995 30 - 8,025
U.S. Govt. Obligations 4,992 - (8) 4,984
Corporate Investments 4,003 4 (2) 4,005
Municipal Bonds 758 4 - 762
Other 6 12 - 18
--------------------------------------------------
$312,734 $ 803 $ (251) $313,286
==================================================
The amortized cost and estimated market values of securities available
for sale at September 27, 1996 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------------------------------------------
Mortgage-backed securities:
FNMA $ 75,014 $ 194 $ (433) $ 74,775
FHLMC 95,076 206 (246) 95,036
GNMA 29,053 - (949) 28,104
U.S. Treasury Securities 11,047 24 (98) 10,973
Other 5 4 - 9
-------------------------------------------------
$210,195 $ 428 $(1,726) $208,897
=================================================
The U.S. Treasury Securities and U.S. Government Agency Obligations
mature after one year and within five years.
NOTE 4 - LEVERAGED LEASES (in thousands):
On September 24, 1993, the Company became the lessor in their first
leveraged commercial aircraft transaction with a major domestic airline.
On June 27, 1996, the Company entered into their second such transaction.
The Company's combined equity investments represented 21% of the aggregate
purchase prices; the remaining 79% was funded by public debt issues in the
form of equipment trust certificates. The residual values of the aircrafts
at the end of an average lease term of 20 years are projected to be an
average of 10% of the original cost.
September 26, September 27,
1997 1996
------------------------------------
Rents receivable (net of principal and
interest on the non-recourse debt) $21,056 $21,056
Unguaranteed residual values 10,719 10,719
Unearned income (9,614) (11,457)
------------------------------------
Investment in leveraged leases 22,161 20,318
Deferred taxes arising from leveraged leases(19,259) (13,414)
------------------------------------
Net investment in leveraged leases $ 2,902 $ 6,904
====================================
NOTE 5 - PROPERTY AND EQUIPMENT (in thousands):
September 26, September 27,
1997 1996
-----------------------------------
Land $ 9,612 $ 6,287
Buildings and improvements 30,460 26,626
Furniture, fixtures, equipment
and leasehold improvements 75,374 63,280
-----------------------------------
115,446 96,193
Less: accumulated depreciation
and amortization (63,772) (56,608)
-----------------------------------
$51,674 $39,585
==================================
NOTE 6 - BORROWINGS:
The mortgage note payable requires monthly principal and interest
payments of approximately $120,000 with a balloon payment due December 1,
1997. The mortgage bears interest at 9.75% and is secured by land,
buildings and improvements with a net book value of $9,585,000 at September
26, 1997. In December 1997, the Company refinanced the existing mortgage
note, as well as added additional financing for a total of $20 million.
Principal maturities under this mortgage note payable for the succeeding
five years are as follows: $190,275 in 1998, $303,474 in 1999, $326,610 in
2000, $351,511 in 2001, and $378,311 in 2002. The Company has also
committed to an additional borrowing of $20 million to be executed on or
before July 31, 1998, upon the completion of a third office building
currently under construction. The total cost of the new building is
estimated to be $30 million, of which $7.2 million had been incurred at
fiscal yearend. Both mortgages will bear interest at 7.37% for a term of 10
years from the date of funding the first $20 million, with a balloon
payment due on December 1, 2007. The mortgages will be secured by land,
three office buildings, and improvements.
The Company has two $50 million committed lines of credit with
commercial banks. Borrowings under the lines of credit bear interest at
various rates (the lesser of prime rate or Fed Funds plus .5%, or LIBOR
plus .75%). The lines of credit require that the Company, or one of its
subsidiaries, maintain certain net worth levels, limit other leases and
debt and require the Company to follow certain other sound business
practices. The Company paid $63,000, $64,000 and $42,000 in loan
commitment fees on these lines during fiscal years 1997, 1996 and 1995,
respectively. There were borrowings of $1,500,000 and $11,989,000 at
September 26, 1997 and September 27, 1996, collateralized by customer
securities with a maximum loan to value of fifty percent. The interest rate
on these borrowings was the one-month LIBOR rate plus .75% and ranged from
6.1% to 6.4% in 1997 and from 6.1% to 6.8% during 1996.
The Company also maintains uncommitted lines of credit aggregating
$285,000,000 with commercial banks ($200,000,000 secured and $85,000,000
unsecured). Borrowings under the lines of credit bear interest, at the
Company's option, at the bank's prime rate, Fed Funds rate plus 1.25%, or
LIBOR plus .75%. There were no short-term borrowings outstanding under
these lines at September 26, 1997 or September 27, 1996. The interest rate
on these borrowings ranged from 5.87% to 7.25% in 1997 and 5.64% to 6.50%
in 1996. Loans on the secured, uncommitted lines of credit are
collateralized by firm or customer margin securities.
NOTE 7 - BANK OPERATIONS AND DEPOSITS:
On May 6, 1994, the Company chartered Raymond James Bank, FSB, ("RJ
Bank") in conjunction with the purchase of the deposits of certain branches
of a federal savings bank from the Resolution Trust Corporation ("RTC") for
a nominal purchase price. The Company contributed $25 million in capital
to fund RJ Bank's start-up.
A summary of customer deposit accounts (in thousands) and weighted
average interest rates follows:
September 26, 1997 September 27, 1996
--------------------------------------------------
Weighted Weighted
Balance Average Rate Balance Average Rate
Demand deposits:
Non-interest bearing $ 610 - $ 161 -
Interest bearing 1,665 2.33% 1,056 2.33%
Money markets 5,383 3.94% 1,256 3.58%
Savings accounts 204,496 4.70% 155,131 4.63%
Certificates of deposit 87,731 5.68% 42,892 5.43%
(3.00% - 9.00%) ---------------------------------------------------
$299,885 4.95% $200,496 4.78%
===================================================
The certificates of deposit mature as follows: $55,331,000 in 1998,
$16,932,000 in 1999, $5,478,000 in 2000, $3,372,000 in 2001, $6,318,000 in
2002, $68,000 in 2003 and $233,000 thereafter. Certificates of deposit and
savings accounts in amounts of $100,000 or more at September 26, 1997 and
September 27, 1996 were approximately $80,942,000 and $43,834,000,
respectively
A summary of loan distribution (in thousands) at September 26, 1997
and September 27, 1996 is as follows:
1997 1996
---------------------------
Residential mortgage loans $18,190 $6,358
Consumer loans 115 20
---------------------------
18,305 6,378
Allowance for loan losses (191) (64)
Purchase premium 308 40
Deferred origination fees
and costs 25 7
--------------------------
$18,447 $6,361
==========================
Activity in the allowance for loan losses for 1997 and 1996 consists
solely of the provision for loan losses. There were no actual loan losses
in 1997 or 1996.
There was no recorded investment or interest income recognized on
impaired loans during 1997 and 1996, as there were no impaired loans during
these periods.
Generally, mortgage loans are secured by either first or second
mortgages on residential property, and consumer loans are secured by time
deposit accounts. As of September 26, 1997 and September 27, 1996, all of
RJ Bank's loan portfolio was secured.
RJ Bank is subject to various regulatory and capital requirements and
was in compliance with all requirements throughout the fiscal year.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), RJ Bank is subject to rules limiting brokered deposits
and related interest rates. Under these rules, banks that are deemed "well-
capitalized" may accept brokered deposits without restriction, and banks
deemed "adequately capitalized" may do so with a waiver from the FDIC. An
"undercapitalized" bank is not eligible for a waiver and may not accept
brokered deposits. At September 26, 1997 and September 27, 1996,
management believes RJ Bank met the definition of the well-capitalized
category.
At September 26, 1997 and September 27, 1996, RJ Bank exceeded the
tangible capital, core capital, core/leverage capital, Tier I/risk-based
capital and total risk-based capital levels mandated by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 and FDICIA. At
September 26, 1997 and September 27, 1996, RJ Bank's Tier I capital to
average assets ratio was 9.3% and 13.8%, respectively.
NOTE 8 - FEDERAL AND STATE INCOME TAXES (in thousands):
The provision (benefit) for income taxes consists of:
Year Ended
---------------------------------------------
September 26, September 27, September 29,
1997 1996 1995
---------------------------------------------
Current provision:
Federal $55,864 $35,473 $24,790
State 9,655 6,730 4,000
---------------------------------------------
65,519 42,203 28,790
---------------------------------------------
Deferred provision (benefit):
Federal (3,306) 383 (425)
State (613) (39) (47)
---------------------------------------------
(3,919) 344 (472)
---------------------------------------------
$61,600 $42,547 $28,318
=============================================
The Company's effective tax rate on pre-tax income differs from the
statutory federal income tax rate due to the following:
Year Ended
---------------------------------------------
September 26, September 27, September 29,
1997 1996 1995
---------------------------------------------
Provision calculated at
statutory rates $56,230 $38,034 $26,061
State income taxes, net
of federal benefit 5,877 4,349 2,570
Other (507) 164 (313)
---------------------------------------------
$61,600 $42,547 $28,318
=============================================
The major deferred tax asset (liability) items, as computed under FAS
109, are as follows:
September 26, September 27,
1997 1996
---------------------------------------------
Deferred tax assets:
Deferred compensation $26,653 $18,658
Accrued expenses 14,833 13,259
Other 7,489 5,625
---------------------------------------------
Total deferred tax assets 48,975 37,542
---------------------------------------------
Deferred tax liabilities:
Aircraft leases (19,259) (13,416)
Other, net (5,360) (2,937)
---------------------------------------------
Total deferred tax liabilities (24,619) (16,353)
---------------------------------------------
Net deferred tax assets $24,356 $21,189
=============================================
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
Long-term lease agreements expire at various times from 1998 through
2002. Minimum annual rentals under such agreements for the succeeding five
fiscal years are approximately: $7,640,000 in 1998, $6,520,000 in 1999,
$5,793,000 in 2000, $5,039,000 in 2001, and $3,877,000 in 2002. Rental
expense incurred under all leases, including equipment under short-term
agreements, aggregated $8,802,000, $7,589,000, and $5,481,000 in 1997, 1996
and 1995, respectively.
The Company has committed to lend to, or guarantee other debt for,
Raymond James Tax Credit Funds VI Ltd. ("RJ Tax Credit") up to $10 million
upon request. Any borrowings bear interest at broker call plus 1% per
annum. RJ Tax Credit is charged 1% for amounts guaranteed. The borrowings
are secured by properties under development. At September 26, 1997,
balances of $4,530,000 were loaned to RJ Tax Credit. At September 27, 1996
balances of $1,892,000 were guaranteed. The commitment expired in November
1997 at which time any outstanding balances were due and payable. On
November 18, 1997, the Board of Directors renewed the commitment and
increased the amount to $15 million expiring in November 1998.
In the normal course of business, the Company enters into underwriting
commitments. Transactions relating to such commitments that were open at
September 26, 1997 and were subsequently settled had no material effect on
the consolidated financial statements as of that date.
The Company utilizes a letter of credit and deposits with clearing
organizations to satisfy margin deposit requirements. At September 26,
1997, and September 27, 1996 the Company had a letter of credit outstanding
of $100,000 and customer margin securities valued at $54,448,000 and
$20,599,000, respectively, on deposit with a clearing organization.
In the normal course of business, the Company, as general partner, is
contingently liable for the obligations of various limited partnerships
engaged primarily in securities investments and real estate activities. In
the opinion of the Company, such liabilities, if any, for the obligations
of the partnerships will not in the aggregate have a material adverse
effect on the Company's consolidated financial position.
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations of the complaints 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 the matters will not result in a material adverse effect on
the consolidated financial position or results of operations of the
Company.
NOTE 10 - 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. Through September 26, 1997, the Board of Directors has
authorized the repurchase of a cumulative total of 8,617,500 shares of
common stock, of which 7,120,000 shares have been purchased through that
date.
In February 1997, the Company's Board of Directors declared a 3-for-2
stock split in the form of a dividend. The additional shares were
distributed on April 3, 1997 to shareholders of record on March 7, 1997.
All references (unless otherwise noted) in the consolidated financial
statements and accompanying notes to amounts per share and to the number of
common shares have been restated to give retroactive effect to the stock
dividend.
NOTE 11 - EMPLOYEE BENEFIT PLANS:
The Company's profit sharing plan and employee stock ownership plan
provide certain death, disability or retirement benefits for all employees
who meet certain service requirements. Such benefits become fully vested
after seven years of qualified service. The Company also offers a plan
pursuant to section 401(k) of the Internal Revenue Code, which provides for
the Company to match 100% of the first $500 and 50% of the next $500 of
compensation deferred by each participant annually. The Company's deferred
management bonus plan is a non-qualified plan that provides retirement
benefits for employees who meet certain length of service and compensation
requirements. Contributions to these plans are made in amounts approved
annually by the Board of Directors. Compensation expense includes
aggregate contributions to these plans of $15,462,000, $12,527,000, and
$8,530,000 for 1997, 1996 and 1995, respectively.
Stock Compensation Plans
At September 26, 1997 the Company has six stock-based compensation
plans, which are described below. In accordance with the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("FAS 123"),the Company applies APB Opinion 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for these plans. If the Company had elected to recognize
compensation expense based on the fair value at the grant dates for awards
under these plans consistent with the methodology prescribed by
FAS 123, the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated below:
1997 1996 1995
-----------------------------
Net income (in thousands) As reported $98,915 $65,978 $46,141
Pro forma $95,936 $64,902 $45,755
Net income per share As reported $ 3.06 $ 2.09 $ 1.49
Pro forma $ 2.97 $ 2.06 $ 1.47
These proforma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense
over the vesting period and additional options may be granted in future
years. For disclosure purposes, the fair value of each fixed option grant
is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for stock option
grants in 1997, 1996, and 1995, respectively: dividend yields of 1.1% for
all 3 years; expected volatility of 32.2%, 31.5% and 33.0%, risk-free
interest rates of 6.28%, 5.89%, and 7.17% and expected lives of 5.99, 4.89
and 4.91 years.
Fixed Stock Option Plans
The Company has five fixed stock option plans. Under the 1982
Incentive Stock Option Plan, the Company may grant options to its employees
for up to 2,850,188 shares of common stock. Under the 1992 Incentive Stock
Option Plan, the Company may grant options to its management personnel for
up to 1,575,000 shares of common stock. The 1992 Plan was established to
replace, on substantially the same terms and conditions, the 1982 Plan. On
November 18, 1997 the Board of Directors approved, subject to shareholders'
approval, an amendment to add 1,500,000 shares of common stock to the
number of shares authorized for option grants under the 1992 Plan. Options
are granted to key administrative employees and registered representatives
of Raymond James & Associates, Inc. who achieve certain gross commission
levels. Options are exercisable in the 36th to 72nd months following the
date of grant and only in the event that the grantee is an employee of the
Company at that time.
Under one of the Company's non-qualified stock option plans, the
Company may grant up to 1,519,500 shares of common stock to independent
contractor registered representatives. Options are exercisable five years
after grant date provided that the representative is still associated with
the Company. Under the Company's second non-qualified stock option plan,
the Company may grant up to 99,840 shares of common stock to the Company's
outside directors. Options vest over a five year period from grant date
provided that the director is still serving on the Board of the Company.
Under the Company's third non-qualified stock option plan, the Company may
grant up to 750,000 shares of common stock to key management personnel.
Option terms are specified in individual agreements and expire on a date no
later than the tenth anniversary of the grant date. Under all plans, the
exercise price of each option equals the market price of the Company's
stock on the date of grant and an option's maximum term is 10 years.
A summary of the status of the Company's five fixed stock option plans as
of September 26, 1997, September 27, 1996 and September 29, 1995 and
changes during the years ending on those dates is presented below:
1997 1996 1995
Shares Weighted- Shares Weighted- Shares Weighted-
Average Average Average
(000) Exercise (000) Exercise (000) Exercise
Price Price Price
Outstanding at
beginning of year 1,577,396 $11.49 1,390,262 $8.90 1,696,577 $8.06
Granted 519,917 18.82 511,050 14.70 164,438 9.89
Cancelled (127,538) 10.76 (35,142) 9.84 (100,157) 9.27
Exercised (277,080) 6.61 (288,774) 4.79 (370,596) 3.79
____________________________________________________________
Outstanding at
end of year
1,692,695 $15.06 1,577,396 $11.49 1,390,262 $8.90
============================================================
Options
exercisable at 240,990 476,541 191,160
year end
Weighted-average
fair value of
options granted
during the year $ 6.41 $ 5.91 $ 3.71
The following table summarizes information about fixed stock options
outstanding at September 26, 1997:
Options Outstanding Options
Exercisable
----------------------------------------------------------
Range of Number Weighted Weighted Number Weighted
Exercise Outstanding Average Average Exercisable Average
Prices at Remaining Exercise at Exercise
9/26/97 Contractual Price 9/26/97 Price
Life
------------------------------------------------------------------------
$ 7.01- 406,751 2.57 $ 9.57 184,197 $9.59
10.00
$10.01- 218,101 2.37 10.84 56,793
12.00 10.99
$12.01- 525,426 3.40 14.30 -
15.00 0.00
$15.01- 116,399 4.75 15.84 -
18.00 0.00
$18.01- 348,918 5.53 18.92 - 0.00
20.00
$20.01- 64,500 5.26 20.08 -
25.00 0.00
$25.01- 7.02
50.00 12,600 25.98 - - 0.00
----------------------------------------------------------------------
1,692,695 4.10 $15.06 240,990 $ 9.96
======================================================================
Employee Stock Purchase Plan
Under the 1994 Employee Stock Purchase Plan, the Company is
authorized to issue up to 750,000 shares of common stock to its full-time
employees, nearly all of whom are eligible to participate. Under the
terms of the Plan, employees can choose each year to have up to 20
percent of their annual compensation specified to purchase the Company's
common stock. Share purchases in any calendar year are limited to the
lesser of 1,000 shares or shares with a market value of $25,000. The
purchase price of the stock is 85 percent of the market price on the day
prior to the purchase date. Under the Plan, the Company sold 179,071
shares, 159,296 shares and 159,228 shares to employees in fiscal years
1997, 1996, and 1995, respectively. The compensation cost which would
have been recognized for the fair value of the employees' purchase rights
was calculated as the value of the 15% discount from market value.
NOTE 12 - NET CAPITAL REQUIREMENTS:
The broker-dealer subsidiaries of the Company are subject to the
requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the
Securities Exchange Act of 1934 and the rules of the securities exchanges
of which Raymond James & Associates, Inc. is a member whose requirements
are substantially the same. 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 (see Note
13). The New York Stock Exchange, Inc. 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. Net capital positions of the
Company's broker-dealer subsidiaries were as follows:
September 26, September 27,
1997 1996
-----------------------------
Raymond James & Associates, Inc.: (dollar amounts in thousands)
(alternative method elected)
Net capital as a percent of aggregate
debit items 18% 26%
Net capital $130,466 $127,302
Required net capital 14,665 9,703
----------------------------
Excess net capital $115,801 $117,599
============================
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net
capital 1.04 1.28
Net capital $ 7,907 $ 5,261
Required net capital 548 449
----------------------------
Excess net capital $ 7,359 $ 4,812
============================
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net
capital 4.10 5.99
Net capital $ 2,693 $ 1,213
Required net capital 737 484
----------------------------
Excess net capital $ 1,956 $ 729
============================
NOTE 13 - RESERVE REQUIREMENTS:
Rule 15c3-3 of the Securities Exchange Act of 1934 specifies certain
conditions under which brokers and dealers carrying customer accounts are
required to maintain cash or qualified securities in a special reserve
account for the exclusive benefit of customers. Amounts to be
maintained, if required, are computed in accordance with a formula
defined in the Rule. At September 26, 1997, Raymond James & Associates,
Inc. had $692,429,000 in special reserve accounts which consisted of
$692,054,000 of U.S. Treasury Securities purchased under agreements to
resell and $375,000 in cash, as compared to a reserve requirement of
$608,298,000 at that date. At September 27, 1996, this subsidiary had
$477,064,000 in special reserve accounts which consisted of $476,945,000
of U.S. Treasury Securities purchased under agreements to resell and
$119,000 in cash, as compared to a reserve requirement of $474,430,000 at
that date. At September 26, 1997, such repurchase agreements were on an
overnight basis with Deutsche Bank, BT Securities Corporation, First
Union Capital Markets Corp., and Morgan Stanley and Company, Inc. At
September 27, 1996, such repurchase agreements were on an overnight basis
with Cantor Fitzgerald Partners and Eastbridge Capital, Inc. The Company
monitors the market value of the underlying securities as compared to the
related receivable, including accrued interest, and requires additional
collateral where deemed appropriate.
Investment Management & Research, Inc. and Robert Thomas Securities,
Inc. are exempt from the provisions of Rule 15c3-3, since they clear all
transactions with and for customers on a fully disclosed basis with
Raymond James & Associates, Inc.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
In the normal course of business, the Company purchases and sells
securities as either principal or agent on behalf of its customers. If
either the customer or a counterparty fails to perform, the Company may
be required to discharge the obligations of the nonperforming party. In
such circumstances, the Company may sustain a loss if the market value of
the security or futures contract is different from the contract value of
the transaction.
The Company also acts as an intermediary between broker-dealers and
other financial institutions whereby the Company borrows securities from
one broker-dealer and then lends them to another. Securities borrowed
and securities loaned are carried at the amounts of cash collateral
advanced and received in connection with the transactions. The Company
measures the market value of the securities borrowed and loaned against
the cash collateral on a daily basis. The market value of securities
borrowed and securities loaned was $1,034,408,000 and $998,698,000,
respectively, at September 26, 1997 and $816,362,000 and $798,968,000,
respectively, at September 27, 1996. Additional cash is obtained as
necessary to ensure such transactions are adequately collateralized. If
another party to the transaction fails to perform as agreed (such as
failure to deliver a security or failure to pay for a security), the
Company may incur a loss if the market value of the security is different
from the contract amount of the transaction.
The Company has also loaned, to brokers and dealers, securities
owned by customers and others for which it has received cash or other
collateral. If a borrowing institution or broker-dealer does not return
a security, the Company may be obligated to purchase the security in
order to return it to the owner. In such circumstances, the Company may
incur a loss equal to the amount by which the market value of the
security on the date of nonperformance exceeds the value of the loan from
the institution or the collateral from the broker or dealer.
The Company has sold securities that it does not currently own and
will, therefore, be obligated to purchase such securities at a future
date. The Company has recorded $52,596,000 and $57,210,000 at September
26, 1997 and September 27, 1996, respectively, which represents the
market value of the related securities at such dates. The Company is
subject to loss if the market price of those securities not covered by a
hedged position increases subsequent to fiscal year end. The Company
utilizes short government obligations and equity securities to hedge long
proprietary inventory positions. At September 26, 1997, the Company had
$21,123,000 in short government obligations and $1,925,000 in short
equity securities which represented hedge positions. At September 27,
1996, the Company had $31,203,000 in short government obligations and
$512,000 in short equity securities which represented hedge positions.
The Company enters into security transactions involving forward
settlement. The Company has recorded transactions with a contract value
of $196,156,000 and $18,258,000 and a market value of $195,063,000 and
$18,033,000 as of September 26, 1997 and September 27, 1996,
respectively. Transactions involving future settlement give rise to
market risk, which represents the potential loss that can be caused by a
change in the market value of a particular financial instrument. The
Company's exposure to market risk is determined by a number of factors,
including the size, composition and diversification of positions held,
the absolute and relative levels of interest rates, and market
volatility.
The majority of the Company's transactions and, consequently, the
concentration of its credit exposure is with customers, broker-dealers
and other financial institutions in the United States. These activities
primarily involve collateralized arrangements and may result in credit
exposure in the event that the counterparty fails to meet its contractual
obligations. The Company's exposure to credit risk can be directly
impacted by volatile securities markets which may impair the ability of
counterparties to satisfy their contractual obligations. The Company
seeks to control its credit risk through a variety of reporting and
control procedures, including establishing credit limits based upon a
review of the counterparties' financial condition and credit ratings.
The Company monitors collateral levels on a daily basis for compliance
with regulatory and internal guidelines and requests changes in
collateral levels as appropriate.
NOTE 15 - RELATED PARTIES:
On October 27, 1994, the Company and the then President and Chief
Investment Officer of its Eagle Asset Management, Inc. ("Eagle")
subsidiary, Herbert E. Ehlers ("Ehlers"), entered into a Separation
Agreement by which Ehlers (a director of the Company) and certain other
Eagle personnel became employees of a new firm, Liberty Investment
Management, Inc. ("Liberty"), effective December 31, 1994. Ehlers began
operating Liberty as of January 1, 1995, and he remained a dual employee of
Eagle and Liberty through June 1995, continuing as investment manager on
certain retail accounts until they were assigned to other portfolio
managers. As of January 1, 1995, Liberty assumed the responsibility for
providing investment management services to institutional growth equity
accounts totaling $4.3 billion formerly managed by Eagle.
In accordance with Ehlers' employment agreement, Eagle was to receive
50% of the revenues from these accounts through December 31, 1999, while
bearing none of the expenses. In addition, the Company was granted an
option to purchase 20% of Liberty in the year 2000 at a predetermined
price. For the years ended September 26, 1997, September 27, 1996 and
September 29, 1995, Eagle recognized $2,569,000, $9,813,000 and $7,233,000,
respectively, in fees from Liberty, which are included in investment
advisory fees in the consolidated statement of income. At September 29,
1996, $5,004,000 due from Liberty is included in other receivables on the
consolidated statement of financial condition.
On January 2, 1997, Liberty sold substantially all of its assets to
Goldman Sachs Asset Management, Inc. Accordingly, the Company received a
lump sum settlement of $30.6 million for its remaining three years'
interest in Liberty's revenue stream and the Company's option to purchase
20% of Liberty at a future date.
EXHIBIT 11
RAYMOND JAMES FINANCIAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Year Ended
-----------------------------------------------
September 26, September 27, September 29,
1997 1996 1995
-----------------------------------------------
Net income $ 98,915 (3) $ 65,978 $ 46,141
================================================
Average number of common
shares and equivalents
outstanding during the
period (1) 31,589 31,187 30,780
Additional shares assuming
exercise of stock options
and warrants (1)(2) 669 351 278
-----------------------------------------------
Average number of common
shares used to calculate
earnings per share (1) 32,258 31,538 31,058
===============================================
Net income per share $ 3.06 $ 2.09 $ 1.49
===============================================
(1) Gives effect to the 3-for-2 common stock split paid on April 3, 1997.
(2) 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.
(3) Amount includes the gain from the sale of Liberty Investment
Management, Inc. Excluding this gain net income was $80,126,000. See
Note 15 of the Notes to Consolidated Financial Statements for details.
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:
State of
Name of Company Incorporation Subsidiary of
- -----------------------------------------------------------------------------
Raymond James & Associates, Inc. Florida Raymond James
Financial,
Inc. ("RJF")
Eagle Asset Management, Inc. Florida RJF
Gateway Assignor Corp., Inc. Florida RJF
Geovest Florida RJF
Heritage Asset Management, Inc. Florida RJF
Investment Management & Research, Inc. Florida RJF
Planning Corporation of America ("PCA") Florida Raymond James &
Associates, Inc.
("RJA")
PCAF, Inc. Florida PCA
Raymond James Bank, FSB Florida RJF
Raymond James Credit Corporation Delaware RJF
Raymond James International Holdings, 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
RJ 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 Acquisition Corp. Georgia RJP
RJ Properties, Inc. ("RJP") Florida RJF
RJ Realty, Inc. Florida RJF
RJRD, Inc. Georgia RJP
RJ Specialist, Inc. Florida 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 Raymond James
International
Holdings, Inc.
("RJIH")
Raymond James & Associates, Ltd. Bermuda RJIH
Raymond James Dublin, Ltd. Ireland RJIH
Raymond James Financial International, Ltd. United Kingdom RJIH
Exhibit 3.2
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
RAYMOND JAMES FINANCIAL, INC.
ARTICLE I
Name
The name of this corporation shall be: RAYMOND JAMES FINANCIAL, INC.
ARTICLE II
Term of Existence
The duration of this corporation is to be perpetual.
ARTICLE III
Purposes
The principal purposes of the corporation shall be:
To engage in and carry on a general securities brokerage and financial
business.
To underwrite, subscribe for, buy, sell, pledge, mortgage, hold and
otherwise deal in stocks, bonds, obligations or securities of any private
or public corporation, government or municipality, trusts, syndicates,
partnerships or individuals and to do any other act or thing permitted by
law for the preservation, protection, improvement or enhancement of the
value of such shares of stock, bonds, securities or other obligations
including the right to vote thereon.
To undertake and carry on any business transaction or operation
commonly carried on or undertaken by capitalists, promoters, financiers,
contractors, merchants, commission men or agents.
To promote or assist financially or otherwise, corporations,
syndicates, partnerships, individuals or associations of all kinds and to
give any guarantee in connection therewith for the payment of money or for
the performance of any obligation or undertaking.
To deal in shares, stocks, bonds, notes, debentures, or other evidence
of indebtedness or securities of any domestic or foreign corporations, or
mutual investment companies, either as principal, or as agent or broker, or
otherwise. To acquire by lease, purchase, gift, devise, contract,
concession, or otherwise, and to hold, own, develop, explore, exploit,
improve, operate, lease, enjoy, control, manage, or otherwise turn to
account, mortgage, grant, sell, exchange, convey, or otherwise dispose of,
wherever situated, within or without the State of Florida, any and all real
estate, lands, options, concessions, grants, land patents, franchises,
rights, privileges, easements, tenements, estates, hereditaments,
interests, and properties of every kind, nature and description whatsoever.
To acquire, and to make payment therefor in cash or the stock or bonds
of the corporation, or by undertaking or assuming the obligations and
liabilities of the transferor, or in any other way, the good will, rights
and property, the whole or any part of the assets, tangible or intangible,
and to undertake or assume the liabilities of, any person, firm,
association or corporation, to hold or in any manner dispose of the whole
or any part of the property so purchased, to conduct in any lawful manner
the whole or any part of the business so acquired and to exercise all of
the powers necessary or convenient for the conduct and management thereof.
To adopt, apply for, obtain, register, produce, take, purchase,
exchange, lease, hire, acquire, secure, own, hold, use, operate, contract,
or negotiate for, take licenses or other rights in respect of, sell,
transfer, grant licenses and rights in respect of, manufacture under,
introduce, sell, assign, collect the royalties on, mortgage, pledge, create
liens upon, or otherwise dispose of, deal in, and turn to account, letters
patent, patents, patent rights, patents applied for or to be applied for,
trade-marks, trade names and symbols, distinction marks and indications of
origin or ownership, copyrights, syndicate rights, inventions, discoveries,
devices, machines, improvements, licenses, processes, data, and formulae of
any and all kinds granted by, or recognized under or pursuant to laws of
the United States of America, or of any other country or countries
whatsoever, and with a view to the working and development of the same, to
carry on any business, whether manufacturing or otherwise, which the
corporation may think calculated, directly or indirectly, to effectuate
these objects.
To manufacture, purchase, or otherwise acquire, hold, own, sell,
assign, transfer, lease, exchange, invest in, mortgage, pledge, or
otherwise encumber or dispose of and generally deal and trade in and with,
both within and without the State of Florida, and in any part of the world,
goods, wares, merchandise, and property of every kind, nature and
description.
To enter into, make and perform contracts of every kind and
description with any person, firm, association or corporation,
municipality, body politic, country, territory, state, government or colony
or dependency thereof.
To borrow or raise money for any of the purposes of the corporation,
without limit as to amount, and in connection therewith to grant collateral
or other security either alone or jointly with any other person, firm or
corporation, and to make, execute, draw, accept, endorse, discount, pledge,
issue, sell or otherwise dispose of promissory notes, drafts, bills of
exchange, warrants, bonds, debentures and other evidences of indebtedness,
negotiable or non-negotiable, transferable or non-transferable, and to
confer upon the holders of any of its obligations such powers, rights and
privileges as from time to time may be deemed advisable by the Board of
Directors, to the extent permitted under the General Corporation Law of the
State of Florida; to lend and advance money, extend credit, take notes,
open accounts and every kind and nature of evidence of indebtedness and
collateral security in connection therewith.
To purchase or otherwise acquire, hold, sell, pledge, transfer or
otherwise dispose of shares of its own capital stock, provided that the
funds or property of the corporation shall not be used for the purchase of
its own shares of capital stock when such use would cause any impairment of
the capital of the corporation and provided further, that shares of its own
capital stock belonging to the corporation shall not be voted upon directly
or indirectly.
To have one or more offices, conduct and carry on its business and
operations and promote its objects within and without the State of Florida,
in other states, the District of Columbia, the territories, colonies and
dependencies of the United States, and in foreign countries, without
restriction as to place or amount, but subject to the laws of such state,
district, territory, colony, dependency or country.
To engage in any other business or businesses, whether related thereto
or not, as may be approved by the Board of Directors and which businesses
are permitted by law.
In general to do any or all of the things herein set forth to the same
extent as natural persons might or could do and in any part of the world,
as principals, agents, contractors, trustees, or otherwise, within or
without the State of Florida, either alone or in company with others, and
to carry on any other business in connection therewith, whether
manufacturing or otherwise, and to do all things not forbidden, and with
all the powers conferred upon corporations by the laws of the State of
Florida.
It is the intention that each of the objects, purposes and powers
specified in each of the paragraphs of this third article of this
Certificate of Incorporation shall, except where otherwise specified, be
nowise limited or restricted by reference to or inference from the terms of
any other paragraph or of any other article in this Certificate of
Incorporation, but that the objects, purposes and powers specified in this
article and in each of the articles or paragraphs of this Certificate shall
be regarded as independent objects, purposes and powers, and the
enumeration of specific purposes and powers shall not be construed to
restrict in any manner the general terms and powers of this corporation,
nor shall the expression of one thing be deemed to exclude another,
although it be of like nature. The enumeration of objects or purposes
herein shall not be deemed to exclude or in any way limit by inference any
powers, objects, or purposes which this corporation is empowered to
exercise, whether expressly by force of the laws of the State of Florida,
now or hereafter in effect, or impliedly by any reasonable construction of
said law.
ARTICLE IV
Stock Clause
Shares Authorized. The aggregate number of shares of stock which this
corporation shall have authority to issue shall be fifty million
(50,000,000) shares of common stock, each with a par value of one cent
($.01) and ten million (10,000,000) shares of preferred stock, each with a
par value of ten cents ($.10).
ARTICLE V
Vote to Effect Business Combination
The affirmative vote of two-thirds (2/3) of all the shares outstanding
and entitled to vote shall be required to approve any of the following:
(a). any merger or consolidation of the corporation with or into
any other corporation;
(b). any share exchange in which a corporation, person, or entity
acquires the issued or outstanding shares of stock of this corporation
pursuant to a vote of stockholders;
(c). any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of this corporation to any other
corporation, person or entity;
(d). any transaction similar to, or having a similar effect as,
any of the foregoing transactions.
Such affirmative vote shall be in lieu of the vote of stockholders
otherwise required by law.
ARTICLE VI
Pre-Emptive Rights
No holder of any shares of stock of the corporation shall have any pre-
emptive rights whatsoever to subscribe for or acquire additional shares of
the corporation of any class, whether such shares shall be hereby or
hereafter authorized; and no holder of shares shall have any right to
subscribe to or acquire any shares which may be held in the treasury of the
corporation; nor shall any holder have a right to subscribe to or acquire
any bonds, certificates of indebtedness, debentures or other securities
convertible into stock, or carrying any right to purchase stock. All such
additional or treasury shares or securities convertible into stock or
carrying any right to purchase stock may be sold for such consideration, at
such time, on such terms and to such person or persons, firms, corporations
or associations as the Board of Directors may from time to time determine.
ARTICLE VII
Directors
A. Number
The business of the corporation shall be managed initially by a
board of not less than three (3) directors. The number of directors may,
as provided in the by-laws, be from time to time increased or decreased,
but shall never be less than three (3) nor more than thirteen (13).
B. Interested Directors
No contract or other transaction between this corporation and any
other corporation, whether or not a majority of the shares of the capital
stock of such other corporation is owned by this corporation, and no act of
this corporation, shall in any way be affected or invalidated by the fact
that any of the directors of this corporation are pecuniarily or otherwise
interested in, or are directors or officers of, such other corporation.
Any director individually, or any firm of which such director may be a
member, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the corporation, provided that the fact
that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors, or a majority thereof. Any director of
this corporation who is also a director or officer of such other
corporation, or who is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of this
corporation that shall authorize such contract or transaction, and may vote
thereat to authorize such contract or transaction, with like force and
effect as if he were not such director or officer of such other corporation
or not so interested.
C. Authority to Make Long-Term Employment Contracts
The Board of Directors may authorize the corporation to enter
into employment contracts with any executive officer for periods longer
than one year, and any charter or by-law provision for annual election
shall be without prejudice to the contract rights, if any, of any executive
officer under such contract.
D. Reliance on Corporation Books
Each officer, director, or member of any committee designated by
the Board of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or reports
made to the company by any of its officials or by an independent public
accountant or by an appraiser selected with reasonable care by the Board of
Directors or by any such committee or in relying in good faith upon other
records of the company.
ARTICLE VIII
Amendment
These Articles of Incorporation may be amended in the manner provided
by law. Every amendment shall be approved by the Board of Directors,
proposed by them to the stockholders, and approved at a stockholders'
meeting by a majority of the stock entitled to vote thereon; provided,
however, that the provisions set forth in Article V may not be altered,
amended or repealed unless such alteration, amendment or repeal is approved
by the affirmative vote of two-thirds (2/3) of all of the shares
outstanding and entitled to vote.
Exhibit 10.6
RAYMOND JAMES FINANCIAL, INC.
1996 STOCK OPTION PLAN
FOR KEY MANAGEMENT PERSONNEL
SECTION 1. PURPOSE
This 1996 Stock Option Plan for Key Management Personnel (the "Plan")
is intended as a performance incentive for key management personnel of
RAYMOND JAMES FINANCIAL, INC., a Florida corporation (the "Company") or its
Subsidiaries (as hereinafter defined) to enable the persons to whom options
are granted (an "Optionee" or "Optionees") to acquire or increase a
proprietary interest in the success of the Company. The Company intends
that this purpose will be effected by the granting of non-qualified stock
options ("Options"). These Options are not intended to qualify as Incentive
Stock Options as described in Section 422 of the Internal Revenue Code. The
term "Subsidiaries" means any corporations in which stock possessing 50% or
more of the total combined voting power of all classes of stock is owned
directly or indirectly by the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 Options to be Granted. Options granted under the Plan will be
non-qualified Options.
2.2 Administrative by the Board. This Plan shall be administered
by the Board of Directors of the Company (the "Board"). The Board shall
have full and final authority to operate, manage and administer the Plan on
behalf of the Company. This authority includes, but is not limited to (i)
the power to grant options conditionally or unconditionally; (ii) the power
to prescribe the form or forms of the instruments evidencing options
granted under this Plan; (iii) the power to interpret the Plan; (iv) the
power to provide regulations for the operation of the features of the Plan,
and otherwise to prescribe regulations for interpretation, management and
administration of the Plan; (v) the power to delegate responsibility for
Plan operation, management and administration on such terms, consistent
with the Plan, as the Board may establish; (vi) the power to delegate to
other persons the responsibility for performing ministerial acts in
furtherance of the Plan's purpose and (vii) the power to engage the
services of persons or organizations in furtherance of the Plan's purpose,
including but not limited to, banks, insurance companies, brokerage firms
and consultants.
In addition, as to each option, the Board shall have full and final
authority in its discretion; (i) to determine the number of shares subject
to each option; (ii) to determine the time or times at which options will
be granted; (iii) to determine the option price for the shares subject to
each option, which price shall be subject to the applicable requirements,
if any, of Section 5.1(c) hereof; and (iv) to determine the time or times
when each option shall become exercisable and the duration of the exercise
period, which shall not exceed the limitations specified in Section 5.1(a).
2.3 Appointment and Proceedings of Committee. The Board may
appoint a Stock Option Committee (the "Committee") which shall consist of
the members of the Compensation Committee of the Board. The Board may from
time to time appoint members of the Committee in substitution for, or in
addition to, members previously appointed, remove members (with or without
cause) and fill vacancies, however caused, in the Committee. The Committee
shall select one of its members as its chairman and shall hold its meetings
at such times and places as it shall deem advisable. A majority of its
members shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of its members. Any action may be taken by a written
instrument signed by all of the members, and any action so taken shall be
as fully effective as it had been taken by a vote of a majority of the
members at a meeting duly called and held.
2.4 Powers of Committee. Subject to the provisions of this Plan
and the approval of the Board, the Committee shall have the power to make
recommendations to the Board as to whom options should be granted, the
number of shares to be covered by each option, the time or times of option
grants, and the terms and condition of each option. In addition, the
Committee shall have authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, and to exercise the
administrative and ministerial powers of the Board with regard to aspects
of the Plan other than the granting of options. The interpretation and
construction by the Committee of any provisions of the Plan, or of any
option granted hereunder, and the exercise of any power delegated to it
hereunder shall be final, unless otherwise determined by the Board. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option
granted hereunder.
SECTION 3. STOCK
3.1 Shares Subject to Plans. The stock subject to the options
granted under the Plan shall be shares of the Company's authorized but
unissued common stock, par value $.01 per share or treasury shares held by
the Company ("Common Stock"). The total number of shares that may be issued
pursuant to options granted under the Plan shall not exceed an aggregate of
500,000 shares of Common Stock.
3.2 Lapsed or Unexercised Options. Whenever any outstanding
option under the Plan expires, is canceled or is otherwise terminated
(other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option shall be restored to the Plan and be
available for the grant of other options under the Plan.
SECTION 4. ELIGIBILITY
4.1 Eligible Optionees. Options may be granted only to officers
and other employees of the Company or its Subsidiaries, including members
of the Board who are also employees of the Company or a Subsidiary.
SECTION 5. TERMS OF THE OPTION AGREEMENTS
5.1 Mandatory Terms. Each option agreement shall contain such
provisions as the Board or the Committee shall from time to time deem
appropriate, and shall include provisions relating to the method of
exercise, payment of exercise price, adjustments or changes in the
Company's capitalization and the effect of a merger, consolidation,
liquidation, sale or other disposition of or involving the Company. Option
agreements need not be identical, but each option agreement by appropriate
language shall include the substance of all of the following provisions:
(a) Expiration. Notwithstanding any other provision of the
Plan or of any option agreement, each option shall expire on the date
specified in the option agreement, which date shall not be later than the
tenth anniversary of the date on which the option was granted.
(b) Exercise. Each option shall be deemed exercised when
(i) the Company has received written notice of such exercise in accordance
with the terms of the option, (ii) full payment of the aggregate option
price of the shares of Common Stock as to which the option is exercised has
been made, and (iii) arrangements that are satisfactory to the Board or the
Committee in its sole discretion have been made for the optionee's payment
to the Company of the amount, if any, that is necessary for the Company or
Subsidiary employing the optionee to withhold in accordance with applicable
Federal or state tax withholding requirements. Unless further limited by
the Board or the Committee in any option, the option price of any shares
of Common Stock purchased shall be paid in cash, by certified or official
bank check, by money order, with shares of Common Stock of the Company or
by a combination of the above; provided further, however, that the Board or
the Committee in its sole discretion may accept a personal check in full or
partial payment of any shares of Common Stock. If the exercise price is
paid in whole or in part with shares, the value of the shares surrendered
shall be their fair market value on the date the option is exercised as
determined in accordance with Section 5.1 (c) hereof. The Company in its
sole discretion may, on an individual basis or pursuant to a general
program established in connection with this Plan, lend money to an
optionee, guarantee an loan to an optionee, or otherwise assist an optionee
to obtain the cash necessary to exercise all or a portion of an option
granted hereunder. No optionee shall be deemed to be a holder of any shares
of Common Stock subject to an option unless and until a stock certificate
or certificates for such shares of Common Stock are issued to such
person(s) under the terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as expressly
provided in Section 6 hereof. Unless otherwise provided in the terms of an
option, an option must be exercised by the Optionee while he is an Employee
and has maintained since the date of the grant of the option the continuous
status as an Employee.
Except, as may be otherwise expressly provided in the terms and
conditions of the option granted to an Optionee, options granted hereunder
shall terminate on the earlier to occur of the date of expiration thereof
or:
(i) Exercise Upon Disability. Unless otherwise provided in
the terms of an option, if an Optionee's employment terminates by reason of
a permanent disability, all unexpired options held by the Optionee shall
immediately vest and become fully exercisable. The Optionee shall then be
entitled to exercise the option in whole or in part; provided, however,
such option must be exercised within 12 months following the date that the
Optionee became permanently disabled or by the expiration date of such
option, whichever first occurs. An Optionee is permanently disabled if the
Board determines he is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted, or can be expected
to last, for a continuous period of not less than 12 months.
(ii) Exercise Upon Death. Except as may otherwise be
expressly provided in the terms and conditions of the option granted to an
Optionee, in the event of the death of an Optionee while in the employment
of the Company and before the date of expiration of such option, all
options held by the Optionee shall immediately vest and become fully
exercisable. Such option shall terminate on the earlier of such date of
expiration or 90 days following the date of such death. After the death of
the Optionee, his executors, administrators or any person or persons to
whom his option may be transferred by will or by laws of descent and
distribution, shall have the right, at any time prior to such termination,
to exercise the option.
(iii) Exercise Upon Termination of Employment After Age 60.
Unless otherwise provided in the terms of an option, if an Optionee's
Employment terminates after attainment of age 60, all options held by the
Optionee shall immediately vest and become fully exercisable if: (a)
termination occurs on or after the optionee has attained age 65, the
optionee shall have the right to exercise any or all outstanding options,
in whole or in part, at any time from the date of termination through 90
days thereafter or the expiration date of such option, whichever first
occurs: or, (b)termination occurs prior to the Optionee's attainment of age
65 but after the Optionees attainment of age 60, the Optionee shall have
the right to exercise any or all outstanding Options, in whole or in
part, at any time from the date of termination through 90 days thereafter
or the expiration date of such option, whichever first occurs, provided
that the sum of his years of service with the Company plus his
age at termination from the Company equals at least 75.
(c) Purchase Price. The purchase price per share of the
Common Stock under each option shall be established by the committee on the
date the option is granted.
For the purpose of the Plan, the "fair market value" per share of
Common Stock on any date of reference shall be the closing Price of the
Common Stock of the Company which is referred to in either clause (i), (ii)
or (iii) below, on such date, or if not referred to in either clause (i),
(ii) or (iii) below, "fair market value" per share of Common Stock shall be
such value as shall be determined by the Board or the Committee. For this
purpose, the Closing Price of the Common Stock on any business day shall be
(i) if the Common Stock is listed or admitted for trading on any United
States national securities exchange, or if actual transactions are
otherwise reported on a consolidated transaction reporting system, the last
reported sale price of Common Stock on such exchange or reporting system,
as reported in any newspaper of general circulation, (ii) if the Common
Stock is quoted on the National Association of Securities Dealers Automated
Quotations Systems ("NASDAQ"), or any similar system of automated
dissemination of quotations of security prices in common use, the mean
between the closing high bid and low asked quotations of Common Stock for
such day on such system, or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
common Stock as reported by the National Quotation Bureau, Incorporated if
at least two securities dealers have inserted both bid and asked quotations
for Common Stock on at least five of ten preceding days.
(d) Transferability of Options. Unless otherwise specified in the
Option Agreement, options granted under the Plan and the rights and
privileges conferred thereby may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by applicable laws of descent and distribution, and shall
not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
any option under the Plan or any right or privilege conferred hereby,
contrary to the provisions of the Plan, or upon the sale or levy or any
attachment or similar process upon the rights and privileges conferred
hereby, such option shall thereupon terminate and become null and void.
(e) Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any share of Common Stock subject to any option
unless and until (i) the option shall have been exercised pursuant to the
terms thereof, (ii) the Company shall have issued and delivered
certificates evidencing the shares of the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common
Stock.
SECTION 6. ADJUSTMENT OF SHARES OF COMMON STOCK
6.1 Stock Dividend or Recapitalization. If at any time while the
Plan is in effect or unexercised options are outstanding, there shall be an
increase or decrease in the number of issued and outstanding shares of
Common Stock through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
shares of Common Stock, then and in such event (i) appropriate adjustment
shall be made in the maximum number of shares of Common Stock available for
grant under the Plan, so that the same percentage of the Company's issued
and outstanding shares of Common Stock shall continue to be subject to
being so optioned, and (ii) appropriate adjustment shall be made in the
number of shares and the exercise price per share of Common Stock hereof
then subject to any outstanding option, so that the same percentage of the
Company's issued and outstanding shares of Common Stock shall remain
subject to purchase at the same aggregate exercise price.
6.2 Sale or Conversion of Shares. Except as otherwise expressly
provided herein, the issuance by the Company of shares of its capital stock
of any class, or securities convertible into shares of capital stock of any
class, either in connection with direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect and no adjustment by reason thereof shall be
made with respect to the number of or exercise price of shares of Common
Stock then subject to outstanding options granted under the Plan.
6.3 General. Without limiting the generality of the foregoing, the
existence of outstanding options granted under the Plan shall not affect in
any manner the right or power of the Company to make, authorize or
consummate (i) any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business; (ii)
any merger or consolidation of the Company; (iii) any issue by the Company
of debt securities, or preferred or preference stock that would rank above
the shares subject to outstanding option; (iv) the dissolution or
liquidation of the Company; (v) any sale, transfer or assignment of all or
any part of the assets or business of the Company; or (vi) any other
corporate act or proceeding , whether of a similar character or otherwise.
SECTION 7. AMENDMENT OF THE PLAN
The Board may amend the Plan at any time, and from time to time.
Rights and obligations under any option granted before any amendment of the
Plan shall not be altered or impaired by such amendment, except with the
consent of the Optionee.
SECTION 8. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the approval of
the Plan by the stockholders of the Company shall be construed as creating
any limitations on the power of the Board to adopt such other arrangements
as it may deem desirable, including without limitation the granting of
stock options otherwise than under the Plan, and such arrangements may be
either applicable generally or only in specific cases.
SECTION 9. CONDITIONS UPON ISSUANCE
9.1 Conditions Upon Issuance. The obligation of the Company to sell
and deliver shares of Common Stock with respect to options granted under
the Plan shall be subject to all applicable laws, rules and regulations,
including all applicable federal and state securities laws, and the
obtaining of all such approvals by government agencies as may be deemed
necessary or appropriate by the Board or the Committee.
9.2 Representation Required. As a condition to the exercise of an
option, the Company may require the person exercising such option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares, if, in the option of counsel for the
Company, such a representation is required by any of the aforementioned
relevant provisions of law.
9.3 Reservations of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available the number of shares as
such be sufficient to satisfy the requirements of the Plan.
9.4 Liability of Company. The Company or any subsidiary which is
in existence or thereafter comes into existence shall not be liable to any
Optionee or other person as to:
(a) Non-Issuance of Shares. The non-issuance or sale of shares
as to which the Company has been unable to obtain from any regulatory body
having jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares hereunder; and
(b) Tax Consequences. Any tax consequences expected, but not
realized, by any Optionee or other person due to the exercise of any option
granted hereunder.
9.5 Governing Law. This Plan shall be interpreted and construed in
accordance with the laws of the State of Florida.
SECTION 10. EFFECTIVE DATE OF PLAN
The effective date of the Plan is November 21, 1996, the date on
which it was approved by the Board.
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