FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9109
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida No. 59-1517485
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
(813) 573-3800_______
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No___
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the close of the latest practicable date.
31,706,391 shares of Common Stock as of August 4, 1997
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended June 27, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statement of Financial Condition as of
June 27, 1997 (unaudited) and September 27, 1996 2
Consolidated Statement of Operations (unaudited) for the
three and nine month periods ended June 27, 1997 and
June 28, 1996 3
Consolidated Statement of Cash Flows (unaudited) for the
nine months ended June 27, 1997 and June 28, 1996 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Financial Discussion and Analysis 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3: Amendments to the Bylaws
(filed electronically)
Exhibit 11: Computation of Earnings Per Share 11
Exhibit 27: Financial Data Schedule - EDGAR version only
(filed electronically)
(b) Reports on Form 8-K: None
All other items required in Part II have been previously filed or
are not applicable for the quarter ended June 27, 1997.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
June 27, September 27,
1997 1996
(Unaudited)
---------------------------
ASSETS
Cash and cash equivalents $ 178,991 $ 258,206
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents - 119
Securities purchased under agreements to resell 600,789 476,945
Securities owned:
Trading and investment account securities 150,727 124,253
Available for sale securities 272,572 208,897
Receivables:
Customers 582,460 459,180
Stock borrowed 909,637 864,140
Brokers, dealers and clearing organizations 35,451 24,306
Other 24,845 28,980
Investment in leveraged leases 21,780 20,318
Property and equipment, net 47,538 39,585
Deferred income taxes 21,557 21,189
Deposits with clearing organizations 21,044 22,044
Prepaid expenses and other assets 21,012 18,219
--------------------------
$2,888,403 $2,566,381
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $ 32,265 $ 24,898
Payables:
Customers 1,313,327 1,086,406
Stock loaned 878,597 848,595
Brokers, dealers and clearing organizations 25,917 56,928
Trade and other 65,314 54,007
Trading account securities sold but not yet purchased 61,202 57,210
Accrued compensation 102,434 101,300
Income taxes payable 11,997 10,405
--------------------------
2,491,053 2,239,749
Commitments and contingencies
Shareholders' equity:
Preferred stock; $.10 par value; authorized 10,000,000
shares; issued and outstanding -0- shares - -
Common stock; $.01 par value; authorized 50,000,000
shares; issued 32,665,720 shares 326 217
Additional paid-in capital 51,872 50,271
Unrealized gain (loss) on securities available for sale,
net of deferred taxes (59) (791)
Retained earnings 354,046 289,096
--------------------------
406,185 338,793
Less: 962,624 and 1,324,216 common shares in treasury,
at cost (8,835) (12,161)
--------------------------
397,350 326,632
--------------------------
$2,888,403 $2,566,381
==========================
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
------------------------------------------
Revenues:
Securities commissions $127,044 $118,219 $368,880 $320,561
Investment banking 16,400 20,941 58,429 42,619
Investment advisory fees 13,346 12,902 39,709 35,932
Interest 38,912 33,303 112,476 93,051
Correspondent clearing 1,022 1,199 3,258 3,045
Net trading and investment profits 3,243 3,498 11,955 9,236
Financial service fees 6,126 5,040 17,145 13,319
Gain on sale of interest in Liberty
Investment Management, Inc. - - 30,646 -
Other 4,025 3,562 12,434 11,176
-----------------------------------------
Total revenues 210,118 198,664 654,932 528,939
-----------------------------------------
Expenses:
Compensation and benefits 125,781 119,006 373,562 314,478
Communications 9,137 7,468 26,206 22,257
Occupancy and equipment 6,836 5,772 19,652 17,971
Clearance and floor brokerage 2,811 2,455 8,316 7,292
Interest 24,850 22,293 73,397 61,206
Business development 6,124 4,562 15,551 12,426
Other 6,634 6,586 20,178 17,833
------------------------------------------
Total expenses 182,173 168,142 536,862 453,463
------------------------------------------
Income before provision for
income taxes 27,945 30,522 118,070 75,476
Provision for income taxes 10,805 11,940 45,632 29,040
------------------------------------------
Net income $ 17,140 $ 18,582 $ 72,438 $ 46,436
==========================================
Net income per share * $ .53 $ .59 $ 2.25 $ 1.47
==========================================
Cash dividends declared per
share * $ .08 $ .063 $ .233 $ .189
==========================================
Average common equivalent
shares outstanding * 32,485 31,654 32,205 31,508
==========================================
* Gives effect to the 3-for-2 stock split paid April 3, 1997.
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended
June 27, June 28,
1997 1996
-------------------------
Cash flows from operating activities:
Net income $ 72,438 $ 46,436
-------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,356 8,347
(Increase) decrease in assets:
Short-term investments - 34,017
Deposits with clearing organizations 1,000 (1,688)
Available for sale securities (63,675) (76,437)
Receivables:
Customers (123,280) (56,567)
Stock borrowed (45,497) (303,379)
Brokers, dealers and clearing organizations (11,145) (13,036)
Other 4,135 (1,441)
Trading and investment account securities, net (22,482) 4,198
Deferred income taxes (368) 628
Prepaid expenses and other assets (4,255) (12,419)
Increase (decrease) in liabilities:
Payables:
Customers 226,921 256,668
Stock loaned 30,002 280,552
Brokers, dealers and clearing organizations (31,011) 10,238
Trade and other 11,307 (2,738)
Accrued compensation 1,134 8,343
Income taxes payable 1,592 (555)
--------------------------
Total adjustments (16,266) 134,731
--------------------------
Net cash provided by operating activities 56,172 181,167
--------------------------
Cash flows from investing activities:
Additions to property and equipment, net (17,309) (5,099)
--------------------------
Cash flows from financing activities:
Borrowings from banks and financial institutions 7,510 17,529
Repayments on notes (143) (130)
Issuance of common stock 4,927 3,070
Cash dividends on common stock (7,374) (5,926)
Cash paid for fractional shares (5) -
Unrealized gain (loss) on
securities available for sale, net 732 (1,228)
-------------------------
Net cash provided by financing activities 5,647 13,315
-------------------------
Net increase in cash and cash equivalents 44,510 189,383
Cash and cash equivalents at beginning of period 735,270 420,379
-------------------------
Cash and cash equivalents at end of period $779,780 $609,762
=========================
Supplemental disclosures of cash flow information:
Cash paid for interest $ 72,931 $ 61,384
=========================
Cash paid for taxes $ 44,408 $ 27,864
=========================
See Notes to Consolidated Financial Statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 27, 1997
Basis of Consolidation
The consolidated financial statements include the accounts of Raymond
James Financial, Inc. and its consolidated subsidiaries (the "Company").
All material intercompany balances and transactions have been eliminated in
consolidation. These statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for
the interim periods presented. All such adjustments made are of a normal,
recurring nature. The nature of the Company's business is such that the
results of any interim period are not necessarily indicative of results for
a full year. Certain amounts from prior years have been reclassified for
consistency with current year presentation. These reclassifications were
not material to the consolidated financial statements.
Commitments and Contingencies
The Company has committed to lend to, or guarantee other debt for,
Raymond James Tax Credit Funds, Inc. ("RJTCF") up to $10 million upon
request. RJTCF, a wholly-owned subsidiary of the Company, is a sponsor of
limited partnerships qualifying for low income housing tax credits. The
borrowings are secured by properties under development. The commitment
expires on November 30, 1997, at which time any outstanding balances will
be due and payable. At June 27, 1997, there were loans of $1,600,000
outstanding.
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations in these cases and believes that there are meritorious defenses
in each of these lawsuits. In view of the number and diversity of claims
against the Company, the number of jurisdictions in which litigation is
pending and the inherent difficulty of predicting the outcome of litigation
and other claims, the Company cannot state with certainty what the eventual
outcome of pending litigation or other claims will be. In the opinion of
management, based on discussions with counsel, the outcome of these matters
will not result in a material adverse effect on the financial position or
results of operations.
Capital Transactions
The Company's Board of Directors has, from time to time, adopted
resolutions authorizing the Company to repurchase its common stock for the
funding of its incentive stock option and stock purchase plans and other
corporate purposes. As of June 27, 1997, management has Board
authorization to purchase up to 1,500,000 shares.
At their meeting on February 14, 1997, the Company's Board of
Directors declared a 3-for-2 stock split. The additional shares were
distributed on April 3, 1997, to shareholders of record on March 7, 1997.
All references in the consolidated financial statements to amounts per
share and to the average number of shares outstanding have been restated to
give retroactive effect to the stock split. Also at their meeting on May
15, 1997, the Company's Board of Directors declared the quarterly cash
dividend of $.08 per share, payable July 3 to shareholders of record June
13.
Net Capital Requirements
The broker-dealer subsidiaries of the Company are subject to the
requirements of Rule 15c3-1 under the Securities Exchange Act of 1934.
This rule requires that aggregate indebtedness, as defined, not exceed
fifteen times net capital, as defined. Rule 15c3-1 also provides for an
"alternative net capital requirement" which, if elected, requires that net
capital be equal to the greater of $250,000 or two percent of aggregate
debit items computed in applying the formula for determination of reserve
requirements. The New York Stock Exchange may require a member
organization to reduce its business if its net capital is less than four
percent of aggregate debit items and may prohibit a member firm from
expanding its business and declaring cash dividends if its net capital is
less than five percent of aggregate debit items. The net capital positions
of the Company's broker-dealer subsidiaries at June 27, 1997 were as
follows (dollar amounts in thousands):
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate debit items 22%
Net capital $139,108
Required net capital $12,691
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net capital .91
Net capital $7,744
Required net capital $470
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net capital 2.74
Net capital $2,834
Required net capital $517
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
(Any statements containing forward looking information should be read in
conjunction with Management's Discussion and Analysis of Results of
Operations and Financial Condition in the Company's Annual Report on Form
10-K for the year ended September 27, 1996.)
Results of Operations - Three months ended June 27, 1997 compared with
three months ended June 28, 1996.
Total revenues increased 6% to $210,118,000, the Company's second best
quarter. However, due to a decline in investment banking revenues and
increases in certain expenses, net income declined 8% to $17,140,000 from
last year's $18,582,000.
Record transaction volume was a primary factor in the 7% rise in
commission revenues. Successful recruiting efforts, particularly during
the past six months, have led to a 10% increase in the number of Financial
Advisors as compared to a year ago.
The brief market decline early in the quarter contributed to a slow-
down in underwriting activity and a 22% decline in investment banking
revenues from the strong prior year quarter.
Despite the loss of $2.4 million in quarterly fee income from Liberty
Investment Management, Inc. due to its sale in January 1997, investment
advisory fees showed a 3% increase. Record retail managed account sales
combined with appreciation from strong investment performance fueled the
significant growth in assets under management as follows:
June 27, June 28, % Increase
1997 1996 (Decrease)
------------------------------------------
Assets Under Management (000's):
Eagle Asset Mgmt., Inc. $3,292,726 $2,235,341 47%
Heritage Family of Mutual Funds 2,847,939 2,280,217 25%
Investment Advisory Services 1,152,049 941,889 22%
Awad and Assoc. Asset Mgmt. 607,824 455,541 33%
Carillon Asset Mgmt. 42,866 57,260 (25%)
------------------------------------------
Total Financial Assets Under
Management $7,943,404 $5,970,248 33%
==========================================
Tangible Assets Under Management$1,931,050 $1,530,031 26%
==========================================
Net interest income of over $14 million was the twelfth consecutive
quarterly record. Customer cash deposits and margin loan balances
continued their seemingly relentless climbs, and the Company continued to
generate free cash from operations.
Support costs, including administrative and clerical compensation,
occupancy and equipment, data communications and business development, have
continued to increase as general business volume has increased and the
Company builds the infrastructure to support future growth. Increased
communications expense is related to increased transaction volume and a
greater number of financial advisors, branch offices and customer accounts,
all of which result in increases in telephone, postage, printing and quote
services. Occupancy and equipment increases are largely attributable to
purchases of new computer workstation equipment and upgrades of existing
equipment. In addition, with the opening of two new Raymond James &
Associates offices and expansion of other locations, including certain home
office departments, rent expense has increased. To accommodate future
growth, the Company has commenced construction of its third headquarters
building, which is scheduled for occupancy in April 1998. Business
development costs include increased travel, lodging and sales meetings
expenses.
Results of Operations - Nine months ended June 27, 1997 compared with nine
months ended June 28, 1996.
(The underlying reasons for most of the variances to the prior year
period are substantially the same as the comparative quarterly discussion
above and the statements contained in such foregoing discussion also apply
to the nine month comparison. Therefore, this section is limited to the
discussion of additional factors influencing the comparative nine month
results.)
As previously disclosed, the Company completed the sale of its
interest in Liberty Investment Management, Inc. ("Liberty") during the
second fiscal quarter. Pursuant to an agreement executed in 1994, the
Company was to receive, for the five years ending December 31, 1999, 50% of
the revenues derived from institutional growth equity accounts previously
managed by its Eagle Asset Management, Inc. subsidiary. Liberty assumed
management of approximately $4.3 billion of such accounts effective January
1, 1995, and this arrangement generated an average of approximately $2.4
million per quarter for the Company during calendar years 1995 and 1996.
Liberty was sold to Goldman Sachs Asset Management in early January 1997,
and the Company received $30.6 million, shown as a separate line item on
the consolidated statement of operations, for its remaining three years'
interest in account revenues and its option to purchase a 20% interest in
Liberty at a future date. This transaction generated net income of $18.8
million, or $.58 per share.
Excluding the sale of Liberty, revenues of $624,286,000 represent an
18% increase in revenues over the prior year's nine month revenues of
$528,939,000. Net income of $53,649,000 for the nine months ended June 27,
1997, which also excludes the sale of Liberty, exceeds the prior year's
results by 16%.
Investment banking revenues are higher in the current year as a result
of a strong first half. Through nine months, the Company has managed or co-
managed 43 offerings for a total of $5.3 billion raised versus 38 offerings
with $2.7 billion raised in all of fiscal 1996.
Due to the growth of assets under management, investment advisory fees
exceeded the prior year figure in spite of the fact the prior year includes
three quarters of fees from Liberty, nearly $5 million more than the
current year, which includes only one quarter of these fees.
Financial Condition
The Company's total assets have increased since fiscal year end, the
combined result of increased matched-book stock loan program balances and
increased customer cash balances, particularly in the client interest
program, margin loans and bank deposits. The increase in customer cash
balances is reflected as an increased customer payable and increased margin
loans are reflected as increased customer receivables, the net of which
generally results in a corresponding increase in assets segregated pursuant
to Federal Regulations. Increased bank deposits also contribute to
increased customer payables and are generally invested in available for
sale securities.
Liquidity and Capital Resources
Net cash provided by operating activities for the nine months was
$56,172,000. The primary source of this increase was net income, including
proceeds received from the sale of Liberty.
Investing and financing activities used $11,662,000 during the nine
months, with the primary uses being purchases of property and equipment,
and the payment of cash dividends.
The Company has debt in the amount of $12,765,000 in the form of a
mortgage on the first of its two current headquarters buildings. During
the second quarter of fiscal 1997, the Company commenced construction of a
third building at its headquarters complex. The 270,000 square foot tower,
including an adjacent parking garage, is scheduled for completion in the
spring of 1998. Construction is being financed with internal funds.
The Company has two committed lines of credit. During 1995, the
parent company obtained an unsecured $50 million line for general corporate
purposes. In addition, a $50 million line was established to finance
Raymond James Credit Corporation, a Regulation G subsidiary organized to
provide loans collateralized by restricted or control shares of public
companies. The balance of $1,500,000 outstanding on the latter line is
included in notes and loans payable. In addition, Raymond James &
Associates, Inc. has uncommitted lines of credit aggregating $255 million.
The balance of $18 million outstanding on one of these lines is also
included in notes and loans payable.
The Company's broker-dealer subsidiaries are subject to requirements
of the Securities and Exchange Commission relating to liquidity and capital
standards (see Notes to Consolidated Financial Statements).
Effects of Inflation
The Company's assets are primarily liquid in nature and are not
significantly affected by inflation. Management believes that the changes
in replacement cost of property and equipment would not materially affect
operating results. However, the rate of inflation affects the Company's
expenses, including employee compensation, communications and occupancy,
which may not be readily recoverable through charges for services provided
by the Company.
EXHIBIT 11
RAYMOND JAMES FINANCIAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
-------------------------------------------------
Net income $17,140 $18,582 $72,438 $46,436
=================================================
Average number of common
shares and equivalents
outstanding during the
period 31,663 31,277 31,545 31,146
Additional shares assuming
exercise of stock
options (1) 822 377 660 362
-------------------------------------------------
Average number of
common shares used
to calculate earnings
per share 32,485 31,654 32,205 31,508
==================================================
Net income per share $ .53 $ .59 $ 2.25 $ 1.47
==================================================
(1) Represents the number of shares of common stock issuable on the
exercise of dilutive employee stock options less the number of shares
of common stock which could have been purchased with the proceeds from
the exercise of such options. These purchases were assumed to have
been made at the average market price of the common stock during the
period, or that part of the period for which the option was
outstanding.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RAYMOND JAMES FINANCIAL, INC.
(Registrant)
Date: August 6, 1997 ____/s/_ Thomas A. James ______
Thomas A. James
Chairman and Chief
Executive Officer
____/s/_ Jeffrey P. Julien ____
Jeffrey P. Julien
Vice President - Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-26-1997 SEP-26-1997
<PERIOD-END> JUN-27-1997 JUN-27-1997
<CASH> 117576 117576
<RECEIVABLES> 642756 642756
<SECURITIES-RESALE> 662204 662204
<SECURITIES-BORROWED> 909637 909637
<INSTRUMENTS-OWNED> 423299 423299
<PP&E> 47538 47538
<TOTAL-ASSETS> 2888403 2888403
<SHORT-TERM> 32265 32265
<PAYABLES> 1404558 1404558
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 878597 878597
<INSTRUMENTS-SOLD> 61202 61202
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 326 326
<OTHER-SE> 397350 397350
<TOTAL-LIABILITY-AND-EQUITY> 2888403 2888403
<TRADING-REVENUE> 3243 11955
<INTEREST-DIVIDENDS> 38912 112476
<COMMISSIONS> 127044 368880
<INVESTMENT-BANKING-REVENUES> 16400 58429
<FEE-REVENUE> 19472 56854
<INTEREST-EXPENSE> 24850 73397
<COMPENSATION> 125781 373562
<INCOME-PRETAX> 27945 118070
<INCOME-PRE-EXTRAORDINARY> 27945 118070
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 17140 72438
<EPS-PRIMARY> .53 2.25
<EPS-DILUTED> .53 2.25
</TABLE>
EXHIBIT "B"
[Article IV, Section 12]
(d) In any instance where more than one person is
entitled to reimbursement of attorneys' fees pursuant to this
Section 12, the Company shall select one attorney to serve as
attorney for all such persons, unless, in the opinion of the
attorney selected by the Company, a conflict of interest exists
which would prevent representation by that attorney of one or
more persons. Notwithstanding the foregoing provision, any
person may at any time decide to be represented by an attorney of
his choosing, at his own expense.
[Article VII, Section 12]
Section 12. In addition to such bank accounts and
brokerage accounts as may be authorized in the usual manner by
resolution of the Board of Directors, the Treasurer or the
Controller of the Company, with the approval of any one of the
Chairman, the President, or the Chief Financial Officer, may
authorize such bank accounts or brokerage accounts to be opened
or maintained in the name and on behalf of the Company as he or
she may deem necessary or appropriate. Payments from such bank
accounts shall be made upon and according to a check or draft
which may be signed jointly or singly by either the manual or
facsimile signature or signatures of such officers or bonded
employees of the Company as shall be specified in the written
instruction of the Chief Financial Officer, the Treasurer, or the
Controller of the Company. With respect to any brokerage account
established pursuant to this Section 12, any of the Chairman, the
Chief Financial Officer, the Treasurer, the Controller or any
other employee of the Company specified in written instructions
by the Chief Financial Officer or Treasurer of the Company shall
be fully authorized and empowered to purchase, sell, assign,
transfer and deliver any and all shares of stock, bonds,
debentures, notes, evidences of indebtedness or other securities
owned by the Company or registered in the name of the Company,
and such persons shall be authorized to make, execute and deliver
any and all written instruments of assignment and transfer
necessary or proper to give effect to any transaction in such
brokerage account.
e:\misc-045.doc
