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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 29, 2000
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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
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Commission file number 1-9109
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida No. 59-1517485
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (727) 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
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(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 13, 2000: $1,461,919,589
Number of common shares outstanding (December 13, 2000): 46,886,453
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement for Annual Meeting of Shareholders to be held on February 8,
2001. (The Company intends to file with the Commission a definitive proxy
statement pursuant to Regulation 14A prior to January 10, 2001.)
PART I
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ITEM 1. BUSINESS
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(a) General Description of Business
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Raymond James Financial, Inc. ("RJF") is a Florida-based holding company
that was incorporated in 1974 as a successor to the original corporation
founded in 1962. Its principal subsidiaries include Raymond James &
Associates, Inc. ("RJA"), Raymond James Financial Services, Inc. ("RJFS"),
Eagle Asset Management, Inc. ("Eagle"), Heritage Asset Management, Inc.
("Heritage") and Raymond James Bank, FSB ("RJBank"). 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 full service broker-dealer engaged in most aspects of securities
distribution and investment banking. RJA also offers financial planning
services for individuals and provides clearing services for RJFS and several
unaffiliated broker-dealers. The Company is the largest brokerage and
investment firm headquartered in the state of Florida. RJA is a member of
the New York Stock Exchange ("NYSE"), American Stock Exchange, Philadelphia
Stock Exchange, Boston 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, National Association of
Securities Dealers ("NASD"), and Securities Investors Protection Corporation
("SIPC"). Securities in accounts custodied at Raymond James & Associates are
protected by the Securities Investor Protection Corporation up to $500,000,
including up to $100,000 in cash, in the event of the firm's liquidation. An
additional $49.5 million of protection, including another $900,000 for cash
awaiting investment, is provided by Asset Guaranty Insurance Company. On July
21, 2000 an additional $50 million of protection was purchased from Travelers
Casualty and Surety Company of America, providing total coverage of $100
million per account. This does not protect against market fluctuations. For
the year ended September 29, 2000 the revenues of RJA accounted for 57% of
the consolidated revenues of the Company.
On May 28, 1999 the Company purchased Roney & Co. ("Roney"), a broker-
dealer headquartered in Detroit, Michigan. At the beginning of fiscal 2000
Roney was contributed and merged into RJA. Roney added 320 Financial
Advisors and 28 offices to RJA.
RJFS was formed in January 1999, when the Company merged its two
independent contractor broker-dealer subsidiaries, Investment Management &
Research, Inc. ("IM&R") and Robert Thomas Securities, Inc. ("RTS"). 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. RTS was organized in 1981,
and has two divisions one which serves independent contractor brokers who
do a majority of their business in individual securities, the other which
offers securities on a third party basis to customers of banks. RJFS is a
member of the NASD and SIPC, but not of any exchange, as it clears all of
its business on a fully-disclosed basis through RJA.
Eagle was formed in 1984 as a registered investment advisor to serve as
the discretionary manager for individual equity portfolios.
Heritage was organized in 1985 to act as the manager of the Company's
internally sponsored Heritage family of mutual funds.
Raymond James Bank was formed in 1994 in conjunction with the purchase
from the Resolution Trust Corporation 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.
(b) Financial Information - Revenues by Source
------------------------------------------
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
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Sept. 29, Sept. 24, Sept. 25,
2000 % 1999 % 1998 %
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(dollar amounts in thousands)
Securities commissions:
Listed products $ 177,882 10.5 $ 161,240 13.1 $ 132,211 12.2
Over-the-counter 251,724 14.8 186,258 15.1 163,410 15.1
Mutual funds 249,755 14.7 169,377 13.7 150,536 13.9
Asset-based fees 189,757 11.2 130,359 10.6 100,055 9.2
Annuities and other
insurance products 159,850 9.4 110,899 9.0 85,322 7.9
Other, including
international exchanges 8,778 .5 3 .0 127 .0
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Total 1,037,746 61.1 758,136 61.5 631,661 58.3
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Investment banking:
Underwriting management
fees 16,593 1.0 11,852 1.0 27,569 2.5
Merger and acquisition
fees 19,744 1.2 16,304 1.3 20,153 1.9
New issue sales credits 33,739 2.0 37,400 3.0 51,446 4.8
Other 11,932 .6 9,192 .8 10,537 1.0
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Total 82,008 4.8 74,748 6.1 109,705 10.2
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Investment advisory fees 122,901 7.2 91,920 7.5 79,485 7.3
Interest 345,689 20.4 229,806 18.6 202,255 18.7
Correspondent clearing 5,370 .3 4,655 .4 4,429 .4
Net trading and investment
profits 27,277 1.6 17,034 1.4 6,300 .6
Financial service fees 45,115 2.7 36,101 2.9 24,797 2.3
Other 32,488 1.9 19,806 1.6 24,275 2.2
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578,840 34.1 399,322 32.4 341,541 31.5
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Total revenues $1,698,594 100.0 $1,232,206 100.0 $1,082,907 100.0
========== ===== ========== ===== ========== =====
(c) Narrative Description of Business
---------------------------------
At September 29, 2000 the Company employed 4,818 individuals. RJA
employed 4,307 of these individuals, 944 of whom were full-time retail
Financial Advisors. In addition, 3,350 full-time Financial Advisors were
affiliated with the Company as independent contractors. Through its broker-
dealer subsidiaries, the Company provides securities services to more than
one million client accounts. No single client accounts for a material
percentage of the Company's total business.
The Company currently divides its business into five segments based on
the products and services offered. These segments are retail distribution,
institutional distribution, investment banking, asset management, and other.
RETAIL DISTRIBUTION
-------------------
The Company provides securities transaction and financial planning
services to its retail clients through the RJA retail branch system, its
independent contractor firm (RJFS), and a general insurance agency.
RJA - Retail Sales
RJA's 79 retail branches and 13 satellites are located primarily in the
southeastern U.S., with a concentration in Florida and the Midwest, the
latter as a result of the acquisition of Roney. The Roney transaction added
320 Financial Advisors and 28 offices in Indiana, Michigan and Ohio. RJA's
944 retail Financial Advisors provide a broad range of financial products
and services to their clients. In most cases, RJA charges commissions to its
retail clients, on both exchange and over-the-counter equity 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 also distributes both taxable and tax-exempt fixed income
products to its retail clients, including municipal, corporate, government
agency and mortgage-backed bonds, preferred stock and unit investment
trusts. In addition, a growing number of clients are electing asset-based
fee alternatives to the traditional commission structure.
The retail Financial Advisors sell a number of professionally managed,
load mutual funds and offer, 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 29, 2000, the Company had 13 internally sponsored mutual
fund portfolios for which RJA acts as distributor. (See Heritage Asset
Management, Inc. description on page 7.) 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.
RAYMOND JAMES FINANCIAL SERVICES
RJFS participates in the distribution of all the products and services
offered by RJA to its retail clients through 3,301 independent contractor
financial advisors in 1,375 offices and 401 satellite offices in all 50
states.
The Company operates with three separate Divisions. The Investment
Management Division has 790 offices and 1,808 Financial Advisors and are
better characterized as financial planners than as stock brokers although
they are not required to conduct their business as financial planners. The
Securities Division primarily offers individual securities and investment
advice to individual investors and institutions through 1,010 Financial
Advisors in 348 branch offices. The Financial Institutions Division offers
securities on a third party basis to customers of financial institutions
such as banks, thrifts and credit unions and has 483 Financial Advisors in
237 locations.
The number of Financial Advisors in all offices ranges from 1 to 26.
Such Financial Advisors devote all or substantially all of their time to the
sale of securities and, while these independent contractors must conduct all
securities business through RJFS, their contracts permit them to conduct
insurance, real estate brokerage, accounting services or other business for
others or for their own account. Independent contractors are responsible
for all of their direct costs and are paid a larger percentage of
commissions and fees to compensate them for their added expenses.
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.
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. However, since the inception of the Client Interest Program in
1981, 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 investment, 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.
INSTITUTIONAL DISTRIBUTION
--------------------------
The Company's institutional clients are serviced by RJA's Institutional
Equity and Fixed Income Departments.
The 90 domestic and overseas professionals in the Institutional Equity
Sales and Sales Trading Departments maintain relationships with over 1000
institutional clients, principally in North America and Europe. In addition
to the Company's headquarters in St. Petersburg, FL, institutional equity
offices are located in New York, Chicago, Los Angeles, Dallas, Calgary,
Princeton, San Diego, Brussels, Dusseldorf, Geneva, London (Raymond James
Financial International, Ltd., a UK broker-dealer), Luxembourg and Paris. In
providing these securities brokerage services to its institutional clients,
RJA discounts its commissions substantially on transactions based on trade
size and the amount of business conducted annually with each institution.
In addition, RJA distributes to its institutional clients both taxable
and tax-exempt fixed income products, primarily municipal, corporate,
government agency and mortgage-backed bonds. RJA carries inventory
positions of taxable and municipal securities in both the primary and
secondary market. In addition to St. Petersburg, the Fixed Income
Department maintains institutional sales and trading offices in New York,
Chicago, Houston, Boston, Atlanta, Boca Raton, Seattle and Dublin, Ohio. To
assist our institutional clients, the 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.
The revenues and costs of RJA's back office operations are attributable
primarily to the two distribution segments above. RJA's operations
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
securities brokerage operations.
INVESTMENT BANKING/CAPITAL MARKETS
----------------------------------
Capital Markets activities include both equity and fixed income
products and services. This segment consists of the departments described
below:
Investment Banking. The 47 professionals of RJA's Investment Banking
Group, located primarily in St. Petersburg with offices in Atlanta, Chicago,
Dallas, Houston, Calgary, and Detroit, are involved in a variety of
activities including public and private equity financing for corporate
clients, and merger and acquisition advisory services. The firm's investment
banking activities are focused in the same industries as those followed by
the Equity Research Department.
In addition, RJA 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.
Equity Research Department. The 44 senior analysts in this department
publish research on over 400 companies, primarily focused on emerging
growth, mid-cap and large-cap companies in specific industries including
Technology, Telecommunications, Consumer, Financial Services, Healthcare,
Real Estate, Energy and Industrial Growth. Proprietary industry studies and
company-specific research reports are provided to both institutional and
retail clients. This department has distinguished itself through its record
of extremely successful comparative stock recommendation results as reported
each quarter in the Wall Street Journal.
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 29, 2000, RJA made markets in
approximately 250 common stocks in the OTC market.
Syndicate Department. The Syndicate Department coordinates the
marketing, distribution, pricing and stabilization of Raymond James' lead-
and co-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. The Syndicate Department is also
responsible for the Private Client Group, which serves the firm's Investment
Banking and Research clients by providing specialized brokerage services for
corporations and their executives.
Public Finance. The 21 professionals in the Public Finance division
operate out of 7 offices (Delray and St. Petersburg, FL, Birmingham, AL, New
York, Pittsburgh, Detroit, and San Antonio), acting as financial advisor or
underwriter to various municipal agencies and political subdivisions.
Partnership Investment Banking. The Company acts as the general
partner in equipment leasing and real estate limited partnerships. Most
significantly, Raymond James Tax Credit Funds, Inc. is the general partner
in funds that have invested nationwide in properties that qualify for low
income housing tax credits.
ASSET MANAGEMENT
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The Company's asset management segment includes proprietary asset
management operations, internally sponsored mutual funds, outside money
management alternatives, and other asset-based fee programs.
Eagle Asset Management, Inc.
Eagle is a registered investment advisor with approximately $5.9
billion under management at September 29, 2000. Eagle's clients include
pension and profit sharing plans, retirement funds, foundations, endowments,
trusts, life insurance and mutual fund portfolios and individuals. Accounts
are managed on a discretionary basis in accordance with the investment
objective(s) specified by the client. Eagle manages approximately $1.9
billion for institutional clients and $4.0 billion for retail accounts.
Eagle's investment management fee generally ranges from .20% to 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 more commonly, a fee in lieu thereof) for
transactions in their accounts.
Heritage Asset Management, Inc.
Heritage Asset Management, Inc. ("Heritage") serves as investment
advisor to the Heritage Family of Mutual Funds. Heritage also serves as
transfer agent or sub-transfer agent for all of the open-end funds and as
fund accountant or sub-fund accountant for all Heritage funds except the
Eagle International Equity Portfolio. Portfolio management for the Income-
Growth Trust, Aggressive Growth Fund, Growth Equity Fund, Technology Fund
and the Mid Cap Stock Fund are subcontracted to Eagle Asset Management, Inc.
Portfolio management for the Small Cap Stock Fund is subcontracted to both
Eagle and the Company's Awad Asset Management subsidiary. Unaffiliated
advisors are employed for the Municipal Money Market Fund, Capital
Appreciation Trust, High Yield Bond Fund, Value Equity Fund and the Eagle
International Equity Portfolio.
Heritage also serves as an advisor to Raymond James Bank to make
recommendations and monitor the Bank's investment portfolio of mortgage-
backed securities.
Net assets under management at September 29, 2000 were as follows (in
thousands):
Heritage Cash Trust:
Money Market Fund $ 3,916,207
Municipal Money Market Fund 775,040
Heritage Capital Appreciation Trust 356,556
Heritage Income-Growth Trust 65,627
Heritage Income Trust:
High Yield Bond Fund 36,640
Intermediate Government Fund 25,208
Heritage Series Trust:
Small Cap Stock Fund 173,834
Growth Equity Fund 336,683
Eagle International Equity Portfolio 17,849
Value Equity Fund 24,353
Mid Cap Stock Fund 37,671
Aggressive Growth Fund 110,870
Technology Fund 142,586
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$ 6,019,124
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Awad Asset Management, Inc.
Awad Asset Management, Inc. ("Awad") is primarily a small and mid-cap
equity portfolio management subsidiary. Clients pay fees and/or commissions
for management of their accounts. Present fees generally range from .50% 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 mutual fund portfolios. Exclusive of the Heritage Small Cap
Fund, Awad had approximately $575 million under management at September 29,
2000.
RJA - Asset Management Services
RJA's Asset Management Services ("AMS") 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. The primary advisory service offered
by AMS is the Investment Advisory Services ("IAS") program. IAS maintains
an approved list of investment managers, of which all but one 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 .50% to 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
29, 2000, this program had approximately $5 billion in assets under
management through agreements with 32 independent investment advisors and
Awad.
Passport and a similar program offered by RJFS, 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 .175% of asset balances annually,
for which clients receive quarterly performance reporting and other
services. As of September 29, 2000, Passport and IMPAC had approximately
$7.8 billion and $2.5 billion in assets, respectively, serviced by Financial
Advisors.
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.
Further, AMS administers other less significant asset-based fee programs.
OTHER
Aside from the retail and institutional distribution, investment
banking and asset management businesses, the Company operates a stock
borrow/stock loan program, offers bank and trust services, and has several
international joint ventures. These operations are grouped in the "other"
segment.
RJA - Stock Borrow/Stock Loan
RJA commenced this program in 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.
Raymond James Bank, FSB
Raymond James Bank, FSB ("RJBank") received its federal savings bank
charter in 1994. RJBank provides residential, consumer and commercial loans
as well as FDIC-insured deposit accounts to clients of Raymond James
Financial's broker-dealer subsidiaries and to the general public.
Access to RJBank's products and services is available nationwide
through the offices of its affiliated broker-dealer firms as well as through
convenient telephonic and electronic banking services, including Internet
Banking with online Bill Pay through www.rjbank.com, debit cards, ATM/point-
of-sale, 24-hour TeleDirectTM automated telephone banking, checkwriting,
direct deposit and ACH payments and deposits. As of September 29, 2000,
RJBank had total assets in excess of $700 million.
Raymond James Trust Company
Raymond James Trust Company West
Raymond James Trust Company was chartered and opened for business in
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 often 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. The name of Sound Trust Company was changed to Raymond James
Trust Company West effective October 1, 2000. This subsidiary provides
personal trust services primarily to broker-dealer clients outside the State
of Florida. These two subsidiaries had a combined total of $723 million in
client assets at September 29, 2000.
Raymond James Credit Corporation
Raymond James Credit Corporation ("RJCC") was formed in 1996 as a
regulated finance company. 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 29, 2000, RJCC had $33 million in outstanding loans to
clients.
Raymond James International Holdings, Inc.
Raymond James International Holdings, Inc. ("RJIH") is a Delaware
corporation formed in 1994 to house the Company's foreign operations. RJIH
now has ownership in consolidated joint ventures in Argentina, India,
Turkey and France. These joint ventures operate in securities brokerage,
investment banking and asset management.
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
Most of the Company's operations are subject to regulatory oversight by
governmental agencies and/or self regulatory organizations.
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 and
RJFS are currently registered in all 50 states.
See Note 13 of the Notes to Consolidated Financial Statements for
further description of certain SEC regulations pertaining to broker-dealer
Net Capital Requirements.
The Company's investment advisory operations, including the Company-
sponsored mutual funds, are also subject to extensive regulation by the SEC.
Raymond James Bank, FSB, is subject to regulation by various federal
banking agencies, including the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation.
The Company's two trust companies are subject to regulation by the
states in which they are chartered.
The Company's various overseas operations and joint ventures are
subject to regulation by the authorities in the countries in which they
operate.
ITEM 2. PROPERTIES
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The Company owns a 610,000 square foot headquarters complex in St.
Petersburg, FL (three mid rise office buildings, a bank and trust
headquarters building, and a five deck parking garage). The complex covers
approximately forty-five acres, and the Company has the ability to build up
to another 460,000 square feet on this site. The Company also leases 80,000
square feet in a nearby office building, and an additional 30,000 square feet
in another nearby facility as of April 2000. In addition, the Company
acquired a 45,000 square foot, eight story building in Detroit, Michigan as
part of the Roney transaction. The Company also leases 20,000 square feet in
a building adjacent to the Detroit building. With the exception of a Company-
owned RJA branch office building in Crystal River, FL, RJA branches are
leased with various expiration dates through 2008. The RJFS Investment
Management division headquarters office in Atlanta and Raymond James Trust
Company West facility in Tacoma are also under lease. See Note 10 to
Consolidated Financial Statements for further information regarding the
Company's leases.
Leases for branch offices of RJFS 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.
On June 19, 2000 a judgment in the amount of $40,675,537 was entered in
the United States District Court for the Eastern District of Kentucky,
Covington Division, against two of the Company's subsidiaries: Raymond James
& Associates, Inc (RJA) and RJ Mortgage Acceptance Corp., a subsidiary which
has been inactive since 1995. The judgment was based on a jury verdict that
found that both companies had breached a contractual obligation made in 1994
to provide financing in the amount of $18 million to Corporex Realty and
Investment Corporation and a related entity. The jury also found that both
defendants had defrauded the plaintiffs in failing to provide this financing;
the jury awarded the plaintiffs compensatory damages of approximately $10
million (including $7.6 million for "lost investment opportunity") and $30
million in punitive damages. The Company intends to appeal the judgment to
the U.S. Court of Appeals for the Sixth Circuit. The Company has provided
for this judgment in the accompanying consolidated financial statements.
As a result of the extensive regulation of the securities industry, the
Company's broker-dealer subsidiaries are subject to regular reviews and
inspections by regulatory authorities and self regulatory organizations which
can result in imposition of sanctions for regulatory violations, ranging from
non-monetary censure to fines and, in serious cases, temporary or permanent
suspension from business. In addition, from time to time regulatory agencies
and self regulatory organizations institute investigations into industry
practices which can result in the imposition of such sanctions. During the
course of the past fiscal year, the Company's primary broker-dealer
subsidiary resolved a number of regulatory and self regulatory investigations
by payment of fines that were immaterial in amount.
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.
2000 1999
------------------ ------------------
High Low High Low
-------- ------- -------- -------
First Quarter $21.44 $16.69 $26.25 $16.75
Second Quarter 21.81 16.37 22.63 18.00
Third Quarter 23.94 16.00 24.19 18.88
Fourth Quarter 33.06 22.12 25.19 18.81
Since the Company initiated payment of a cash dividend in 1985,
there have been 18 increases in the cash dividend rate and 7 in the form of
stock splits and stock dividends.
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 13 of
the Notes to Consolidated Financial Statements.)
At December 13, 2000 there were approximately 11,000 holders of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------------
(in thousands, except per share data)
Year Ended
---------------------------------------------------------
Sept. 29, Sept. 24, Sept. 25, Sept. 26, Sept. 27,
2000*** 1999 1998 1997** 1996
----------- ----------- ----------- ----------- -----------
Operating Results:
- ------------------
Revenues $1,698,594 $1,232,206 $1,082,907 $ 927,607 $ 721,752
Net income $ 125,195 $ 85,090 $ 92,704 $ 98,915 $ 65,978
Net income per
share - basic:* $ 2.70 $ 1.79 $ 1.92 $ 2.09 $ 1.41
Net income per
share - diluted:* $ 2.67 $ 1.76 $ 1.86 $ 2.04 $ 1.39
Weighted average
common shares
outstanding - basic:* 46,291 47,606 48,160 47,383 46,781
Weighted average common
and common equivalent
shares outstanding -
diluted:* 46,867 48,449 49,951 48,387 47,307
Cash dividends declared
per share* $ .30 $ .28 $ .24 $ .21 $ .17
Financial Condition:
- --------------------
Total assets $6,308,816 $5,030,715 $3,852,737 $3,278,645 $2,566,381
Long-term debt $ 98,555 $ 44,183 $ 44,767 $ 12,715 $ 12,909
Shareholders' equity $ 650,518 $ 558,486 $ 509,898 $ 423,276 $ 326,632
Shares outstanding* 46,287 47,242 48,268 47,695 47,012
Equity per share
at end of period* $ 14.05 $ 11.82 $ 10.56 $ 8.87 $ 6.95
* Gives effect to the common stock splits paid on April 2, 1998
and April 3, 1997.
** Amounts include the $30.6 million gain on the sale of Liberty
Investment Management, Inc. Excluding this gain, revenues were
$896,961,000, net income was $80,126,000, and basic and diluted
net income per share were $1.69 and $1.66, respectively.
*** Amounts include a $20 million charge to increase legal reserves
related to the Corporex case. Excluding this charge, net income
was $136,354,000 and basic and diluted net income per share were
$2.94 and $2.91, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
Results of Operations - Three Years Ended September 29, 2000
- ------------------------------------------------------------
Fiscal 2000 was the Company's sixteenth consecutive year of record
revenues, with total revenues of $1,698,594,000 representing an increase of
38% over the prior year. The record net income of $125,195,000 represented
an increase of 47% from the prior year. Earnings were positively impacted by
increased commission revenues associated with an increased number of
Financial Advisors and sometimes explosive market volume, increased net
interest associated with increased client balances, growth in assets under
management and improved trading profits. Due to the ongoing investment in
back office capabilities and technology, the Company was in a position to
handle these increases and the resultant leverage led to improved margins.
The Company has also been successful in its focus on non-transaction
dependent fee revenues, such as investment advisory fees, interest and asset-
based commission alternatives. For fiscal 2000, such fee-based revenues
represented approximately 46% of total revenues, up from 36% five years ago.
Year Ended
-------------------------------------------------------
Sept. 29, % Incr. Sept. 24, % Incr. Sept. 25,
2000 (Decr.) 1999* (Decr.) 1998
---------- ------- ---------- ------- ----------
Revenues: (000's) (000's) (000's)
Securities commissions
and fees $1,037,746 37% $ 758,136 20% $ 631,661
Investment banking 82,008 10% 74,748 (32%) 109,705
Investment advisory fees 122,901 34% 91,920 16% 79,485
Interest 345,689 50% 229,806 14% 202,255
Correspondent clearing 5,370 15% 4,655 5% 4,429
Net trading profits 27,277 60% 17,034 170% 6,300
Financial service fees 45,115 25% 36,101 46% 24,797
Other 32,488 64% 19,806 (18%) 24,275
---------- ------- ---------- -------- ----------
Total revenues $1,698,594 38% $1,232,206 14% $1,082,907
---------- ------- ---------- -------- ----------
* Includes $36,177 from Roney, which was acquired on May 28, 1999.
Not only did the market conditions provide for increased volume during
portions of the year, but the Company's retail business, including the
addition of Roney's 320 Financial Advisors in the later portion of fiscal
1999 and the independent contractor operation in particular, continued to
have steady growth from strong recruiting results. The consecutive record
transaction volumes in fiscal years 2000, 1999 and 1998 resulted in increased
securities commissions from the sales of all product lines during the period,
with the largest dollar increases occurring in mutual funds and over-the-
counter equities during fiscal 2000 and in equities and annuities in fiscal
1999.
YEAR ENDED
--------------------------------------------------
Sept. 29, %Incr. Sept. 24, %Incr. Sept. 25,
2000 (Decr.) 1999 (Decr.) 1998
---------- ------- ---------- ------- ---------
Number of retail Financial
Advisors at yearend 4,245 10% 3,864 24% 3,117
Retail commission revenues
(000's) $ 903,448 43% $ 631,572 21% $ 523,890
Retail new issue sales credits
(000's) $ 15,819 (3%) $ 16,345 (35%) $ 24,976
Number of institutional
salesmen at yearend 149 (1%) 150 12% 134
Institutional commission
revenues (000's) $ 134,298 6% $ 126,564 17% $ 107,771
Institutional new issue sales
credits (000's) $ 17,920 (15%) $ 21,055 (20%) $ 26,470
Number of trades processed 5,826,000 42% 4,107,000 23% 3,328,000
Number of client accounts 991,871 36% 729,903 19% 614,578
* Includes Roney. Excluding Roney: 3,548 Financial Advisors, a 14% increase.
Investment banking revenues, including new issue sales credits, improved
10% to $82 million in 2000 from $75 million in the prior year. The first
half of fiscal 1998 brought the end to a record setting period in the
Company's investment banking business as small and mid-cap stocks began to
weaken, particularly in certain industry sectors, which severely slowed the
new issue deal flow. Investment banking revenues in fiscal 1999 remained
slow as a result of several of the Company's major sectors of emphasis
(energy, real estate and health care) being out of favor for most of the year
and the Company being behind schedule in developing a significant technology
investment banking and research effort. The improved results in fiscal 2000
reflect the increase in the Company's capacity in the technology sector,
particularly telecommunications, and improved market conditions in other
sectors such as energy. The number of managed and co-managed underwritings,
the vast majority of which were equity-related offerings, and the dollar
volume of these transactions were as follows: 2000 - 23 new issues for $3.6
billion; 1999 - 23 new issues for $3.0 billion and 1998 - 57 new issues for
$6.0 billion. Merger and acquisition fees, which have been a consistent
revenue source during the past few years, increased to $19.7 million in
fiscal 2000, after a decline in fiscal 1999 to $16.3 million from a record
$20.2 million in 1998.
Investment advisory fees have continued to rise commensurate with the
generally strong growth in assets under management; these assets increased
29% to $17.6 billion at the end of fiscal 2000. Asset management growth has
benefited from both overall asset appreciation and net sales during the past
two years. The largest increase has occurred in Investment Advisory Services
as a result of the strong performance of several managers in the program and
the addition of client assets from the Roney acquisition. During 1998, the
Company's real estate portfolio management operation was sold, and its
employees were transferred to the new owner. This transaction generated $3.7
million of performance fees, which are included in investment advisory fees.
Sept. 29, Sept. 24, %Incr. Sept. 25,
2000 %Incr. 1999 (Decr.) 1998
----------- ------ ----------- ------- -----------
(000's) (000's) (000's)
Eagle Asset Mgmt., Inc.* $ 5,966,233 16% $ 5,138,064 7% $ 4,804,967
Heritage Family of Mutual
Funds 6,019,124 26% 4,780,747 21% 3,947,394
Investment Advisory Services 4,989,000 60% 3,110,000 73% 1,798,260
Awad Asset Management* 575,000 1% 569,000 (13%) 656,336
----------- ----------- -----------
Total Financial Assets
Under Management $17,549,357 29% $13,597,811 21% $11,206,957
=========== =========== ===========
* Excludes balances included in the Heritage Family of Mutual Funds.
Net interest income continues to be a growing source of recurring
earnings. The components of interest earnings are as follows:
Sept. 29, Sept. 24, Sept. 25,
2000 1999 1998
---------- ---------- ----------
(balances in 000's)
Margin balances:
Average balance $1,526,273 $ 908,671 $ 701,742
Average rate 8.5% 7.6% 8.2%
---------- ---------- ----------
$129,589 $ 69,059 $57,697
Assets segregated
pursuant to Federal
Regulations:
Average balance 996,969 1,063,350 776,768
Average rate 5.8% 4.9% 5.6%
---------- ---------- ----------
58,025 51,630 43,163
Stock borrowed:
Average balance 1,458,007 1,270,112 1,154,703
Average rate 5.6% 4.6% 4.9%
---------- ---------- ----------
82,334 58,209 57,049
Raymond James Bank, FSB 44,842 28,756 22,937
Other interest revenue 30,899 22,152 21,409
-------- -------- --------
Total interest revenue 345,689 229,806 202,255
-------- -------- --------
Client interest program:
Average balance 1,985,003 1,540,966 1,201,398
Average rate 5.3% 4.3% 4.8%
---------- ---------- ----------
105,631 66,260 57,627
Stock loaned:
Average balance 1,448,007 1,292,791 1,119,287
Average rate 5.3% 4.3% 4.7%
---------- ---------- ----------
77,721 55,590 53,200
Raymond James Bank, FSB 31,904 20,270 17,249
Other interest expense 13,396 9,374 2,933
-------- -------- --------
Total interest expense 228,652 151,494 131,009
-------- -------- --------
Net interest income $117,037 +49% $ 78,312* +10% $ 71,246
======== ======== ========
* Includes $2,383 from Roney.
Net trading profits have increased $10 million in each of the past two
years. Fiscal 2000 trading results reflect significantly improved municipal
bond and over-the-counter equity trading results, with the industry having
adapted to the changes in the over-the-counter regulations made in fiscal
1998. Trading results in fiscal 1999 reflected particularly strong corporate
and government bond trading results. After several years of relatively
consistent trading profits, derived primarily from client order flow in both
over-the-counter equity and fixed income securities, changes in the over-the-
counter equity trading regulations and practices in fiscal 1998 resulted in
lower trading profits on those securities.
Financial service fees increased 25% in fiscal 2000 - a result of the
Company's increased client base. The Roney acquisition in May 1999 brought
clients that contributed to fee income for an entire year in fiscal 2000. In
addition, the strong recruiting of independent contractors in both fiscal
2000 and 1999 contributed to the increased client base. In the past two
years there has been a 67% increase in the number of IRA accounts, a 74%
increase in money market processing fees, and a 206% increase in transaction
fees arising from retail asset-based fee account programs, an increasingly
popular alternative to the traditional commission-based pricing structure.
Other income is comprised predominantly of postage and handling fees
and floor brokerage income, both of which are related to volume and the size
of the Company's client base. In addition to increases in both of these
factors during the prior two years, the Company also increased its postage
and handling fee in February 2000. Fiscal 1998's other income also included
$1.7 million related to the sale of the real estate portfolio and property
management operations and $2.4 million from the sale of the Company's
specialist operations on the Chicago Exchange.
Year Ended
-------------------------------------------------
Sept. 29, Sept. 24, % Incr. Sept. 25,
2000 % Incr. 1999* (Decr.) 1998
---------- ------- ---------- ------- ----------
Expenses: (000's) (000's) (000's)
Compensation and benefits:
Sales commissions $ 692,866 34% $ 517,280 20% $430,556
Administrative and
benefit costs 185,192 27% 146,254 21% 120,935
Incentive compensation 131,077 44% 91,213 (6%) 96,723
---------- ---------- --------
Total compensation
and benefits 1,009,135 34% 754,747 16% 648,214
Communications and information
processing 61,812 16% 53,071 22% 43,485
Occupancy and equipment 51,168 28% 40,059 21% 33,029
Clearance and floor brokerage 14,814 10% 13,456 16% 11,607
Interest 228,652 51% 151,494 16% 131,009
Business development 39,830 4% 38,395 22% 31,514
Other 88,503 104% 43,465 29% 33,813
---------- ---------- --------
$1,493,914 36% $1,094,687 17% $932,671
========== ========== ========
* Includes $34,625 in total expenses from Roney.
Sales commission expense increased each period at a rate approximately
proportionate to the related revenues.
Administrative and benefit compensation costs have typically increased
at a rate consistent with the growth in total revenues. However, the fiscal
1999 increase exceeded the growth in revenues as a result of continued hiring
to support transaction volume, including the personnel acquired in the Roney
transaction, and the recruiting of investment bankers and research analysts
during a period of decreased investment banking revenues. This was reversed
in fiscal 2000 as revenues grew 38% and administrative and clerical personnel
costs increased only 27%, providing part of the Company's leverage which
resulted in improved margins.
Incentive compensation expenses, including contributions to qualified
retirement plans, are based on departmental, subsidiary and firm-wide
profitability. This expense increased ratably with the Company's net income
in fiscal 2000. Despite lower investment banking results in fiscal 1999,
improved results in other segments held the decrease in total incentive
compensation expense to a rate below the decrease in net income. In
contrast, strong underwriting activity in fiscal 1998 resulted in record
investment banking departmental profits, having a significant upward impact
on incentive compensation.
While costs associated with overall growth continue to affect
communications and information processing expense, there were also some
significant individual items such as Y2K testing and the development of the
former Roney headquarters in Detroit as a disaster recovery processing center
during fiscal 2000. Fiscal 1999 included costs associated with the
integration of Roney, preparation for Y2K and the merger creating RJFS. The
increases in communications and information processing expense in all three
fiscal years include 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.
Increased occupancy in fiscal 2000 includes expanded RJA retail and
institutional offices and additional space in Detroit. Both fiscal 2000 and
1999 include the full annual effect of the completion and occupancy of the
third headquarters building in the spring of 1998.
Clearing and floor brokerage increased a modest 10%, a result of
increased transaction volume and higher international clearing costs. As in
the past, clearing and floor brokerage expense increased at a rate lower than
the growth in related revenues due to volume efficiencies and cost saving
measures implemented.
The Company held business development expenses close to even with the
prior year. However, they are expected to increase in fiscal 2001 as the
Company initiates increased television advertising and some additional
branding efforts on a trial basis under the guidance of an advertising
agency. Several of the Company's branding initiatives impacted business
development expense in fiscal 2000 and 1999, including the stadium naming
rights, general image advertising costs (primarily television), and
recruiting-related programs capitalizing on the creation of RJFS.
Fiscal 2000's other expense includes the increase in legal reserves
related to the Corporex judgment discussed in Note 10. In addition, this
expense category includes fees paid to outside managers in the Company's
growing investment advisory services program, bank service charges, legal
expenses and provisions, and amortization of goodwill arising from the Roney
acquisition.
Liquidity and Capital Resources
- -------------------------------
Net cash used in operating activities during the current year was $111
million. Cash was required for increased stock borrow balances exceeding the
increased stock loan balances, increased balances in the client margin
accounts net of increased client interest balances, increased broker-dealer
receivables, and the fluctuations in various other asset and liability
accounts.
Investing activities required $20 million during the year. Additions to
fixed assets consumed $20 million, predominantly for the purchase of
computers, office furniture and equipment. Net purchases, sales and
maturations of investments were static for the year.
Financing activities used $102 million, the result of net repayments of
loans, purchase of treasury stock and the payment of cash dividends net of
the exercise of stock options and employee stock purchases.
The Company has loans payable consisting of debt in the amount of $38.6
million in the form of a mortgage on its headquarters office complex, $10
million in Federal Home Loan Bank advances at RJBank, $33 million at Raymond
James Credit Corporation and a $50 million three year term loan at the parent
company. Subsequent to yearend the parent company renewed its line of
credit, increasing it from $100 million to $125 million. In addition,
Raymond James & Associates, Inc. has uncommitted bank lines of credit
aggregating $430 million.
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
- -----------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement, as amended in June 2000
by FAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," requires the fair value of derivatives to be recorded as
assets or liabilities. Gains or losses resulting from changes in the fair
values of derivatives would be accounted for depending on the purpose of the
derivatives and whether they qualify for hedge accounting treatment. This
statement, as deferred by FAS No. 137, "Accounting for Derivatives and
Hedging Activities - Deferral of the Effective Date of FAS Statement No.
133," issued in June 1999, is effective for fiscal years beginning after
June 15, 2000. The adoption of FAS 133 and FAS 138 is only anticipated to
affect the accounting for the gains or losses related to the use of interest
rate swaps by RJBank. To the extent that RJBank's interest rate swaps may no
longer qualify for hedge accounting treatment under FAS 133 and FAS 138 the
gains and/or losses will be included in net income.
In September 2000, the Financial Accounting Standards Board issued FAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", which replaces FAS 125. FAS 140 revises the
standards for accounting for securitizations and other transfers of financial
assets and collateral. The statement is effective for the Company in fiscal
2001 and will require some changes in disclosure but is not anticipated to
have a material impact on the financial position, results of operations, net
income per share or cash flows.
Market Risk
- -----------
Certain of the Company's business activities expose it to market risk.
This market risk represents the potential for loss that may result from a
change in value of a financial instrument as a result of fluctuations in
interest rates, equity prices or changes in credit ratings of issuers of debt
securities. This risk relates to financial instruments held by the company
as investment, in client accounts and for trading. The Company manages its
trading businesses by product and has established trading divisions that have
responsibility for each product. The trading portfolios are managed with a
view toward client service, as well as the risk and profitability of each
portfolio.
The Company is exposed to interest rate risk primarily from changes in
the interest rates on its interest-earning assets (including client margin
loans, stock borrow activities, investments, and inventories) and its funding
sources (including client cash balances, stock lending activities, and bank
borrowings), which finance these assets. The collateral underlying these
financial instruments is repriced daily, thus there are no unrecorded gains
or losses in value. Interest rates on client balances and stock borrow and
lending produce a positive spread to the Company, with the rates generally
fluctuating in parallel.
The Company manages its inventory exposure to interest rate risk by
setting and monitoring limits and, where feasible, hedging with offsetting
positions in securities with similar interest rate risk characteristics. At
September 29, 2000 and September 24, 1999, the Company's fixed income
securities, predominantly municipal obligations, were approximately $87
million and $162 million, respectively. Fixed income securities sold but not
yet purchased, predominantly government obligations, aggregating $17 million
and $29 million at September 29, 2000 and September 24, 1999, respectively.
The Company has performed an evaluation of its potential interest rate risk,
including interest rate sensitivity analysis on the RJBank portfolio and an
exposure analysis on the municipal bond inventories. Management is of the
opinion that the exposure to interest rate risk would not be material to its
financial position.
The Company's equity securities inventories are exposed to risk of loss
in the event of unfavorable price movements. The Company's equity securities
inventories are repriced on a daily basis and there are no unrecorded gains
or losses. The Company's activities as a dealer are client-driven, with the
objective of meeting clients' needs while earning a positive spread. At
September 29, 2000 and September 24,1999, the balances of the Company's
equity securities positions owned and sold but not yet purchased were
approximately $19 million and $13 million and $10 million and $4 million,
respectively. In addition the Company has investments in Company-sponsored
mutual funds, certificates of deposit, mortgaged-backed securities and
managed funds with a carrying value of $15 million. In the opinion of
management, the potential exposure to equity price risk would not be material
to the Company's financial position.
The Company is also subject to credit risk arising from non-performance
by trading counterparties, clients and issuers of debt securities owned. The
Company manages this risk by imposing and monitoring position limits,
monitoring trading counterparties, reviewing security concentrations, holding
and marking to market collateral and conducting business through clearing
organizations which guarantee performance. The Company does not trade or
have positions in complex derivative financial instruments.
The Company is subject to concentration risk if it holds large positions
or has large commitments with a single counterparty or group of similar
counterparties (i.e. in the same industry). Securities purchased under
agreement to resell represent approximately 13% of the Company's total assets
and consist of securities issued by the U.S. government. Receivables from
and payables to clients and stock borrow and lending activities are both with
a large number of clients and counterparties and any potential concentration
is carefully monitored. Inventory and investment positions taken and
commitments made, including underwritings, may involve exposure to individual
issuers and businesses. The Company seeks to limit this risk through careful
review of counterparties and the use of limits established by senior
management, taking into consideration factors including the financial
strength of the counterparty, the size of the position or commitment, the
expected duration of the position or commitment and other positions or
commitments outstanding.
The Company's client activities involve the execution, settlement, and
financing of various transactions on behalf of its clients. Client
activities are transacted on either a cash or margin basis. The Company's
client activities may expose it to off-balance sheet credit risk. The
Company may have to purchase or sell financial instruments at the prevailing
market price in the event of the failure of a client to settle a trade on its
original terms or in the event that cash and securities in the client margin
accounts are not sufficient to fully cover the client losses. The Company
seeks to control the risks associated with client activities by requiring
clients to maintain collateral in compliance with various regulations and
Company policies. The Company has established a separate subsidiary which
makes loans to clients who hold control positions or large restricted
positions in equity securities.
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 and benefits, 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 or the
profitability of certain segments of the Company's 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, (x) changes
in federal and state tax laws which could affect the popularity of products
sold by the Company, and (xi) natural disasters which could disrupt the
Company's communications and securities processing capabilities. 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)
2000 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
--------- -------- -------- --------
Revenues $383,926 $456,187 $426,424 $432,057
Income before income taxes 43,227 62,175 38,428 60,850
Net income 26,816 38,236 23,163 36,980
Net income per share - basic .57 .83 .50 .80
Net income per share - diluted .56 .82 .50 .79
1999 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
--------- -------- -------- --------
Revenues $264,507 $299,191 $324,390 $344,118
Income before income taxes 28,337 35,319 37,989 35,874
Net income 17,479 21,869 23,490 22,252
Net income per share - basic .36 .46 .50 .47
Net income per share - diluted .36 .45 .49 .46
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:
Richard K. Riess 51 Executive Vice President - RJF,
President and CEO of Eagle, and
Managing Director - Asset Management.
Jeffrey P. Julien 44 Senior Vice President - Finance
and Chief Financial Officer,
Director and/or officer of
several RJF subsidiaries.
Barry S. Augenbraun 61 Senior Vice President and
Corporate Secretary.
Jennifer C. Ackart 36 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 2000 Annual Meeting of Shareholders. Such proxy statement
will be filed with the SEC prior to January 10, 2001.
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 2000
Annual Meeting of Shareholders. Such proxy statement will be filed with the
SEC prior to January 10, 2001.
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 15th day of December, 2000.
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 15, 2000
- ------------------------ Executive Officer
Thomas A. James
/s/ FRANCIS S. GODBOLD President and Director December 15, 2000
- ------------------------
Francis S. Godbold
/s/ M. ANTHONY GREENE Executive Vice President December 15, 2000
- ------------------------ and Director
M. Anthony Greene
/s/ J. STEPHEN PUTNAM Executive Vice President December 15, 2000
- ------------------------ and Director
J. Stephen Putnam
/s/ ROBERT F. SHUCK Vice Chairman and Director December 15, 2000
- ------------------------
Robert F. Shuck
/s/ JEFFREY P. JULIEN Senior Vice President-Finance December 15, 2000
- ------------------------ (Chief Financial Officer)
Jeffrey P. Julien
/s/ JENNIFER C. ACKART Controller (Chief December 15, 2000
- ------------------------ Accounting Officer)
Jennifer C. Ackart
/s/ ANGELA M. BIEVER Director December 15, 2000
- ------------------------
Angela M. Biever
/s/ JONATHAN A. BULKLEY Director December 15, 2000
- ------------------------
Jonathan A. Bulkley
/s/ ELAINE L. CHAO Director December 15, 2000
- ------------------------
Elaine L. Chao
/s/ THOMAS S. FRANKE Director December 15, 2000
- ------------------------
Thomas S. Franke
/s/ HARVARD H. HILL, JR. Director December 15, 2000
- ------------------------
Harvard H. Hill, Jr.
/s/ HUNTINGTON A. JAMES Director December 15, 2000
- ------------------------
Huntington A. James
/s/ PAUL W. MARSHALL Director December 15, 2000
- ------------------------
Paul W. Marshall
/s/ DENNIS W. ZANK Director December 15, 2000
- ------------------------
Dennis W. Zank
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
- ----------------------------------------------
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
- -----------------------------------------------------
FINANCIAL STATEMENTS PAGE(S)
- --------------------
Reports and Consents of Independent Certified Public Accountants
and Independent Auditors F-3-4
Consolidated Statement of Financial Condition
as of September 29, 2000 and September 24, 1999 F-5
Consolidated Statement of Income for the Three Years
Ended September 29, 2000 F-6
Consolidated Statement of Changes in Shareholders' Equity
for the Three Years Ended September 29, 2000 F-7
Consolidated Statement of Cash Flows
for the Three Years Ended September 29, 2000 F-8-9
Summary of Significant Accounting Policies F-10-13
EXHIBITS
- --------
Notes to Consolidated Financial Statements F-14-27
3.1 Amended and restated Articles of Incorporation of Raymond James
Financial, Inc. as filed with the Secretary of State Florida on
March 9, 1998,incorporated by reference to Exhibit 3 as filed with
Form 10Q on May 11, 1998
3.2 Amended and restated By-Laws of the Company, incorporated by reference
to Exhibit 3 as filed with Form 10Q February 9, 1998
3.2.1 Amended Article IV Section 8 of the By-Laws approved on November 29,
2000
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; and
amended on Form S-8, No. 333-59449 filed July 20, 1998
10.3 Raymond James Financial, Inc. Deferred Management Bonus
Plan, incorporated by reference to Exhibit 10 as filed with the
Company's Form 10K on December 23, 1996
10.4 Raymond James Financial, Inc. 1996 Stock Option Plan for
Key Management Personnel, dated November 21, 1996 and incorporated by
reference as filed with the Company's Form 10-K on December 24, 1998
10.5 Termination and Release Agreement between Liberty
Asset Management, Inc. and Raymond James Financial, Inc. and
incorporated by reference as filed with the Company's Form 10-K on
December 24, 1997
10.6 Raymond James Financial, Inc.'s 1999 Employee Stock
Purchase Plan S-8, No. 333-68821, filed December 14, 1998
10.7 Purchase agreement between BANK ONE CORPORATION as seller, and RAYMOND
JAMES FINANCIAL, INC., incorporated by reference to Exhibit 10 as
filed with the Company's Form 10Q on May 7, 1999
10.8 Term Credit Agreement for $50 million dated as of October 26, 1999 and
incorporated by reference as filed with the Company's Form 10K on
December 22, 1999
10.9 Revolving Credit Agreement for $100 million dated as of October 26,
1999 and incorporated by reference as filed with the Company's
Form 10K on December 22, 1999
10.10 Arrangement Agreement between Goepel McDermid Inc. as seller, and
Raymond James Holdings (Canada), Inc. as filed with the
Company's S-3 on December 14, 2000
10.11 Amendments to the Term Credit Agreement for $50 million (dated October
26, 1999) and Revolving Credit Aggreement for $100 million (dated
October 26, 1999), dated October 13, 2000 and October 24, 2000
11 Computation of Earnings per Share X-1
21 List of Subsidiaries X-2
23 Consent of Independent Certified Public Accountants F-2-3
27 Financial Data Schedule - EDGAR version only
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 on our audits and the report of other auditors,
the accompanying consolidated statements of financial condition and the
related statements of income, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position
of Raymond James Financial, Inc. and its subsidiaries at September 29,
2000 and September 24, 1999, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended
September 29, 2000, in conformity with accounting principles generally
accepted in the United States of America. 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 $712,332,000 and $638,970,000 as of September 29, 2000 and
September 24, 1999, respectively, and total revenues of $45,150,000,
$29,200,000 and $23,199,000 for each of the three fiscal years in the
period ended September 29, 2000. 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 auditing standards generally accepted in the United States of
America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
November 17, 2000
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. 333-68821, 333-59449 and 33-38390) of
Raymond James Financial, Inc. of our report dated November 17, 2000
relating to the financial statements and financial statement schedules,
which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
December 19, 2000
Independent Auditors' Report
The Board of Directors
Raymond James Bank, FSB (a wholly owned
subsidiary of Raymond James Financial, Inc.):
We have audited the balance sheets of Raymond James Bank, FSB (a wholly owned
subsidiary of Raymond James Financial, Inc.) as of September 30, 2000 and
1999, and the related statements of income, stockholder's equity and
comprehensive income, and cash flows for the years then ended. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Raymond James Bank, FSB (a
wholly owned subsidiary of Raymond James Financial, Inc.) at September 30,
2000 and 1999, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted
in the United States of America.
/s/ KPMG LLP
Tampa, Florida
November 8, 2000
The Board of Directors
Raymond James Bank, FSB:
We consent to the incorporation by reference in the registration statements
(No. 333-68821, 333-59449 and 33-38390) on Form S-8 of Raymond James
Financial, Inc, of our report dated November 8, 2000, with respect to the
balance sheets of Raymond James Bank, FSB as of September 30, 2000 and 1999,
and the related statements of income, stockholder's equity and comprehensive
income, and cash flows for the years then ended, which report appears in the
Form 10-K of Raymond James Financial, Inc dated September 29, 2000.
Tampa, Florida
December 15, 2000
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
---------------------------------------------
(in thousands, except share amounts)
September 29, September 24,
2000 1999
------------- -------------
ASSETS
Cash and cash equivalents $ 305,284 $ 250,855
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 183 9
Securities purchased under agreements to resell 814,050 1,102,979
Securities owned:
Trading and investment account securities 121,584 180,967
Available for sale securities 398,537 400,143
Receivables:
Clients, net 2,037,049 1,447,618
Stock borrowed 2,143,452 1,277,692
Brokers, dealers and clearing organizations 123,874 34,670
Other 97,415 69,339
Investment in leveraged leases 24,407 23,950
Property and equipment, net 91,064 91,335
Deferred income taxes, net 44,228 39,631
Deposits with clearing organizations 24,621 24,634
Intangible assets 32,448 34,866
Prepaid expenses and other assets 50,620 52,027
----------- -----------
$6,308,816 $5,030,715
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $ 132,470 $ 201,504
Payables:
Clients 2,962,786 2,524,352
Stock loaned 2,109,506 1,378,821
Brokers, dealers and clearing organizations 69,190 55,722
Trade and other 152,937 101,772
Trading account securities sold but not yet
purchased 29,740 33,400
Accrued compensation and commissions 199,678 172,066
Income taxes payable 1,991 4,592
----------- -----------
5,658,298 4,472,229
----------- -----------
Commitments and contingencies (Note 10) - -
Shareholders' equity:
Preferred stock; $.10 par value; authorized
10,000,000 shares; issued and outstanding -0- shares - -
Common stock; $.01 par value; authorized
100,000,000 shares; issued 48,997,995 shares 490 490
Additional paid-in capital 56,380 58,023
Accumulated other comprehensive income (1,618) (1,076)
Retained earnings 642,202 530,885
----------- -----------
697,454 588,322
Less: 2,710,636 and 1,755,585 common shares
in treasury, at cost (46,936) (29,836)
----------- -----------
650,518 558,486
----------- -----------
$6,308,816 $5,030,715
=========== ===========
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 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Revenues:
Securities commissions and fees $1,037,746 $ 758,136 $ 631,661
Investment banking 82,008 74,748 109,705
Investment advisory fees 122,901 91,920 79,485
Interest 345,689 229,806 202,255
Correspondent clearing 5,370 4,655 4,429
Net trading profits 27,277 17,034 6,300
Financial service fees 45,115 36,101 24,797
Other 32,488 19,806 24,275
---------- ---------- ----------
1,698,594 1,232,206 1,082,907
---------- ---------- ----------
Expenses:
Compensation and benefits 1,009,135 754,747 648,214
Communications and information
processing 61,812 53,071 43,485
Occupancy and equipment 51,168 40,059 33,029
Clearance and floor brokerage 14,814 13,456 11,607
Interest 228,652 151,494 131,009
Business development 39,830 38,395 31,514
Other 88,503 43,465 33,813
---------- ---------- ----------
1,493,914 1,094,687 932,671
---------- ---------- ----------
Income before provision for
income taxes 204,680 137,519 150,236
Provision for income taxes 79,485 52,429 57,532
========== ========== ==========
Net income $ 125,195 $ 85,090 $ 92,704
========== ========== ==========
Net income per share - basic $ 2.70 $ 1.79 $ 1.92
========== ========== ==========
Net income per share - diluted $ 2.67 $ 1.76 $ 1.86
========== ========== ==========
Cash dividends declared per
common share $ .30 $ .28 $ .24
========== ========== ==========
Weighted average common shares
outstanding - basic 46,291 47,606 48,160
========== ========== ==========
Weighted average common and
common equivalent shares
outstanding - diluted 46,867 48,449 49,951
========== ========== ===========
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)
Other Treasury Total Total
Common Additional Compre- Stock Share- Compre-
Stock Paid-in Retained hensive common holders hensive
Shares Amount Capital Earnings Income Shares Amount Equity Income
- ------------------------------------------------------------------------------
Balances
at Sept-
ember 26,
1997 32,665 $326 $52,599 $377,981 $341 (869) $(7,971) $423,276
Net income
fiscal
1998 92,704 92,704 92,704
Cash div-
idends
- - common
stock
($.24 per share) (11,586) (11,586)
Purchase
of treasury
shares (292) (5,346) (5,346)
Employee
stock
purchases 4,271 261 2,274 6,545
Exercise
of stock
options 197 403 3,461 3,658
Tax benefit
related to
non-qualified
option exercises 539 539
3-for-2
stock
split 16,333 164 (164) (233) -
Corporate
sale of
RJF put
options 335 335
Net un-
realized
loss on
securities
available
for sale,
net of tax (227) (227) (227)
- --------------------------------------------------------------------------------
Balances
at Sept-
ember 25,
1998 48,998 $490 $57,777 $459,099 $114 (730) $(7,582) $509,898
================================================================================
Total Comprehensive Income
fiscal 1998 $ 92,477
========
Net income
fiscal
1999 85,090 85,090 85,090
Cash divi-
dends - common
stock
($.28 per share) (13,304) (13,304)
Purchase
of treasury
shares (1,652) (31,564) (31,564)
Employee
stock
purchases 385 302 4,826 5,211
Exercise
of stock
options (1,860) 324 4,484 2,624
Tax benefit
related to
non-qualified
option exercises 407 407
Corporate
sale of
RJF put
options 1,314 1,314
Net un-
realized
loss on
securities
available
for sale,
net of tax (1,190) (1,190) (1,190)
- --------------------------------------------------------------------------------
Balances at
Sept-
ember 24,
1999 48,998 $490 $58,023 $530,885 $(1,076) (1,756)$(29,836) $558,486
================================================================================
Total Comprehensive Income
fiscal 1999 $ 83,900
=========
Net income
fiscal
2000 125,195 125,195 125,195
Cash divi-
dends - common
stock
($.30 per share) (13,878) (13,878)
Purchase
of treasury
shares (1,512) (26,768) (26,768)
Employee
stock
purchases 176 210 3,636 3,812
Exercise
of stock
options (2,943) 316 5,503 2,560
Grant of
restricted
shares 208 31 529 737
Tax benefit
related to
non-qualified
option exercises 360 360
Extension on
RJF put options 556 556
Net un-
realized
gain on
securities
available
for sale,
net of tax 269 269 269
Net change
in currency
translations (811) (811) (811)
- --------------------------------------------------------------------------------
Balances at
Sept-
ember 29,
2000 48,998 $490 $56,380 $642,202 $(1,618) (2,711) (46,936) $650,518
================================================================================
Total Comprehensive Income
fiscal 2000 $124,653
========
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 CASH FLOWS
------------------------------------
(in thousands)
(continued on next page)
Year Ended
-----------------------------------------
September 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Cash flows from operating activities:
Net income $125,195 $ 85,090 $ 92,704
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 21,436 19,129 16,321
Amortization of goodwill 2,418 930 487
Unrealized loss on investment
account securities 645 2,749 773
Unrealized loss and premium
amortization on available for sale
securities 1,470 642 1,395
Gain on sale of securities (1,274) (2,227) (1,130)
(Gain) loss on sale of property and
equipment (903) 277 (204)
Provision for bad debts and
other accruals (26,064) (5,825) (2,167)
Tax benefit related to non-qualified
option exercises 360 407 539
Decrease (increase) in assets:
Receivables:
Clients (580,318) (335,975) (207,158)
Stock borrowed (865,760) (424,648) 218,200
Brokers, dealers and clearing
organizations (89,204) 82,395 (73,194)
Other (28,076) (3,669) (24,604)
Trading account securities, net 56,932 (70,814) (33,549)
Deferred income taxes (4,597) (6,790) (8,485)
Prepaid expenses and other assets 963 (13,663) (14,259)
Increase (decrease) in liabilities:
Payables:
Clients 438,434 370,758 639,541
Stock loaned 730,685 543,934 (206,933)
Brokers, dealers and clearing
organizations 13,468 7,055 20,975
Trade and other 68,116 4,230 20,298
Accrued compensation and commissions 27,612 3,147 16,758
Income taxes payable (2,601) (6,742) (7,439)
--------- --------- ---------
Total adjustments (236,258) 165,300 356,165
--------- --------- ---------
Net cash provided by (used in)
operating activities (111,063) 250,390 448,869
--------- --------- ---------
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 CASH FLOWS
------------------------------------
(in thousands)
(continued from preceding page)
Year Ended
-----------------------------------------
September 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Cash flows from investing activities:
Additions to property and equipment (20,262) (20,543) (45,815)
Sales of investment account securities 11,407 6,545 4,563
Purchases of investment account
securities (11,987) (8,769) (3,007)
Purchases of available for sale
securities (129,770) (207,907) (187,213)
Security maturations and repayments 130,175 191,608 113,206
Acquisition of Roney & Co. - (67,597) -
----------- ----------- -----------
Net cash used in investing activities (20,437) (106,663) (118,266)
----------- ----------- -----------
Cash flows from financing activities:
Repayments on mortgage note (627) (584) (12,948)
Proceeds from mortgage financing - - 40,000
Proceeds from borrowed funds 140,933 123,614 5,000
Repayments on borrowings (209,340) (120,736) (1,500)
Exercise of stock options, stock
grants and employee stock purchases 7,109 7,835 10,203
Purchase of treasury stock (26,768) (31,564) (5,346)
Sale of RJF put options 556 1,314 335
Cash dividends on common stock (13,878) (13,304) (11,586)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (102,015) (33,425) 24,158
----------- ----------- -----------
Currency adjustments:
Effect of Exchange rate
changes on cash (811) - -
Net (decrease) increase in cash and
cash equivalents (234,326) 110,302 354,761
Cash and cash equivalents at
beginning of year 1,353,843 1,243,541 888,780
----------- ----------- -----------
Cash and cash equivalents at end of
year $1,119,517 $1,353,843 $1,243,541
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 221,509 $ 151,295 $ 129,367
=========== =========== ===========
Cash paid for taxes $ 99,325 $ 65,601 $ 73,456
=========== =========== ===========
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
----------------------------------------------
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 clients and banking and trust services for retail clients. 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
Awad & Associates, Inc., which is 75% owned; Raymond James Killik, LTD, which
is 60% owned; various foreign joint ventures owned 51% and RJ Properties,
Inc., which was 85% owned until August 1999 (see Note 16).
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.
Investment banking fees 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 estimated fair
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, 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.
Segment reporting
- -----------------
The Company uses the "management approach" as defined by Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of
Enterprise and Related Information" ("FAS 131") for its segment reporting.
The management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. FAS 131 also requires
disclosures about products and services, geographic areas, and major
customers. The adoption of FAS 131 did not affect the Company's financial
position or results of operations, but did affect the disclosure of segment
information (see Note 15).
Cash, cash equivalents and securities purchased under agreements to resell
- --------------------------------------------------------------------------
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 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.
In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934,
the Company, as a broker-dealer carrying client accounts, is subject to
requirements related to maintaining cash or qualified securities in a
segregated reserve account for the exclusive benefit of its clients.
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 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 29, 2000 and September 24, 1999, there were no
agreements with any individual counterparties where the risk of loss exceeded
10% of shareholders' equity.
Client receivables
- ------------------
Client receivables are reported at their outstanding principal, adjusted
for any allowance for doubtful accounts, write-offs, any deferred fees or
costs on originated bank loans and unamortized premiums or discounts on
purchased loans. Client loans are considered to be impaired when it is
probable that the Company will be unable to collect all amounts due.
Impaired loans are written down or reserved to the extent that the principal
is judged to be uncollectible. In the case of collateral-dependent loans
where repayment is expected to be provided solely by the underlying
collateral value, the loans are written down to the lower of cost or
collateral value. The accrual of interest on impaired RJBank loans is
discontinued when, in management's opinion, the borrower may be unable to
meet payments as they become due. Interest is subsequently recognized to the
extent cash payments are received. Impairment losses are included in the
allowance for doubtful accounts or reserves through an income statement
charge.
Mortgage loans originated and intended for sale in the secondary market
are carried at the lower of cost or estimated market value in the aggregate.
Net unrealized losses are recognized through a valuation allowance by charges
to income. Loans available for sale were $975,000 and $127,000 at September
29, 2000 and September 24, 1999, respectively, and are included in client
receivables.
Securities owned
- ----------------
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 estimated fair value with realized and unrealized
gains and losses included in earnings. The Company accounts for other
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.
Securities available for sale are carried at estimated fair value, with
unrealized gains and losses net of deferred taxes, reported as a separate
component of shareholders' equity, 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 using the
straight-line method for financial reporting purposes over the estimated
useful lives of the assets, which range from two to five years for software,
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 property and equipment are
reflected in income in the period realized.
Exchange memberships
- --------------------
Exchange memberships are carried at cost. The domestic memberships
which are included in prepaid expenses and other assets at a cost of
$3,339,000 and $1,116,000 at September 29, 2000, and September 24, 1999,
respectively, had an aggregate market value of $7,633,000 and $5,794,000 at
September 29, 2000, and September 24, 1999, respectively.
Intangible assets
- -----------------
Intangible assets are stated at cost less accumulated amortization.
Amortization of intangible assets is provided using the straight-line method
for financial reporting purposes over periods ranging from three to fifteen
years.
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 $28,247,000, $22,126,000
and $22,244,000, and commissions remitted totaled $22,877,000, $17,471,000,
and $17,815,000 for the years ended September 29, 2000, September 24, 1999
and September 25, 1998, respectively.
Stock compensation
- ------------------
The Company has various incentive stock option and restricted stock
plans which provide for the issuance of RJF common stock. The Company
accounts for restricted stock and stock options under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
In accordance with APB 25, compensation expense is not recognized for stock
options that have no intrinsic value on the date of the grant. Compensation
expense is recognized immediately for restricted stock units for which future
service is not required as a condition to the delivery of the underlying
shares of common stock. For restricted stock units with future service
requirements, compensation expense is recognized over the relevant vesting
period.
Comprehensive income
- --------------------
The Company adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income" ("FAS 130") in fiscal 1999. This statement
establishes standards for the reporting and display of comprehensive income
and its components. This statement requires that an enterprise classify
items of other comprehensive income by nature in a financial statement, and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
balance sheet. The Company's other comprehensive income represents the
unrealized gain (loss) on securities available for sale and translation gains
on foreign operations in addition to net income.
Derivative financial instruments
- --------------------------------
To manage interest rate exposures at Raymond James Bank, FSB ("RJBank"),
this subsidiary uses interest rate swaps. Interest rate swaps are agreements
to exchange interest rate payment streams based on a notional principal
amount. RJBank specifically designates interest rate swaps as hedges during
the initial fixed rate period of certain purchased adjustable rate loan pools
and recognizes interest differentials as adjustments to interest income in
the period they occur.
Foreign currency translation
- ----------------------------
The Company consolidates its foreign joint ventures. The joint
ventures' statements of financial condition are translated at the rate as of
the period end. The statements of operations are translated at an average
rate for the period. Any gain or loss on foreign currency transaction is
included in comprehensive income.
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 dividends paid on April 2, 1998 (see Note 11), as
well as the implementation of Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("FAS 128") in fiscal 1998.
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 CLIENTS:
- --------------------------------------------------
Receivables from clients include amounts arising from normal cash and
margin transactions, bank loans receivable (see Note 7), and fees receivable.
Securities owned by brokerage clients are held as collateral for margin
receivables. Such collateral is not reflected in the accompanying
consolidated financial statements. The amount receivable from clients is
shown net of an allowance for doubtful accounts of approximately $12,611,000
and $3,603,000 as of September 29, 2000 and September 24, 1999, respectively.
Unsecured receivables are not significant.
Payables to clients include brokerage client funds on deposit awaiting
reinvestment and bank savings accounts and certificates of deposit. The
Company pays interest at varying rates on qualifying brokerage client funds
on deposit. Such funds on deposit totaled $1,985,330,000 and $1,627,629,000
at September 29, 2000 and September 24, 1999, respectively. Other brokerage
client funds on deposit on which the Company does not pay interest totaled
$335,792,000 and $282,267,000 at September 29, 2000 and September 24, 1999,
respectively. In addition, the Company pays interest at varying rates on
client bank deposits as described in Note 7.
NOTE 2 - TRADING AND INVESTMENT ACCOUNT SECURITIES (in thousands):
- ------------------------------------------------------------------
September 29, 2000 September 24, 1999
---------------------- ----------------------
Securities Securities
sold but sold but
Securities not yet Securities not yet
owned purchased owned purchased
---------- ---------- ---------- ----------
Marketable:
Stocks and warrants $ 18,964 $12,867 $ 9,891 $ 3,731
Municipal obligations 61,502 20 144,597 285
Corporate obligations 12,370 868 9,743 3,488
Government obligations 13,361 15,985 7,894 24,842
Other 15,055 - 8,183 1,054
Non-marketable 332 - 659 -
-------- ------- -------- -------
$121,584 $29,740 $180,967 $33,400
======== ======= ======== =======
NOTE 3 - AVAILABLE FOR SALE SECURITIES (in thousands):
- ------------------------------------------------------
The amortized cost and estimated market values of securities available
for sale at September 29, 2000 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
Mortgage-backed securities:
FNMA $120,398 $ 186 $ (414) $120,170
FHLMC 191,554 333 (232) 191,655
GNMA 47,132 8 (354) 46,786
Corporate investments 20,511 1 (15) 20,497
Other 20,265 27 (863) 19,429
-------- ----- -------- --------
$399,860 $ 555 $(1,878) $398,537
======== ===== ======== ========
The amortized cost and estimated market values of securities available
for sale at September 24, 1999 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Mortgage-backed securities:
FNMA $126,115 $ 236 $ (460) $125,891
FHLMC 196,917 362 (244) 197,035
GNMA 33,367 - (387) 32,980
Corporate investments 20,521 - (76) 20,445
Other 24,701 14 (923) 23,792
-------- ----- -------- --------
$401,621 $ 612 $(2,090) $400,143
======== ===== ======== ========
The U.S. Treasury Securities and U.S. Government Obligations mature
after one year and within ten years.
NOTE 4 - LEVERAGED LEASES (in thousands):
- -----------------------------------------
The Company is the lessor in two leveraged commercial aircraft
transactions with major domestic airlines. 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. The leases expire in September 2013 and June 2016, respectively.
September 29, September 24,
2000 1999
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 (7,368) (7,825)
--------- ---------
Investment in leveraged leases 24,407 23,950
Deferred taxes arising from leveraged leases (26,786) (25,777)
--------- ---------
Net investment in leveraged leases $ (2,379) $ (1,827)
========= =========
NOTE 5 - PROPERTY AND EQUIPMENT (in thousands):
- -----------------------------------------------
September 29, September 24,
2000 1999
------------- -------------
Land $ 12,612 $ 12,612
Buildings and improvements 68,234 66,062
Furniture, fixtures, and equipment 105,116 100,134
--------- ---------
185,962 178,808
Less: accumulated depreciation
and amortization $(94,898) $(87,473)
--------- ---------
$ 91,064 $ 91,335
========= =========
NOTE 6 - BORROWINGS:
- --------------------
The Company has a mortgage note payable of $38.6 million related to the
financing of its home office complex. The mortgage requires monthly
principal and interest payments of approximately $291,000 with a balloon
payment of $32,615,000 due on January 1, 2008. The mortgage bears interest
at 7.37% and is secured by land, buildings and improvements with a net book
value of $47.16 million at September 29, 2000. Principal maturities under
this mortgage note payable for the succeeding five years are as follows:
fiscal 2001 - $671,000, fiscal 2002 - $722,000, fiscal 2003 - $777,000,
fiscal 2004 - $837,000, fiscal 2005 - $900,000, and $34,701,000 thereafter.
The Company has a three year term loan for $50 million and a $100
million committed line of credit through a group of commercial banks. The
term loan bears interest at LIBOR plus 3/4%, while any draws on the line of
credit would bear interest at the Company's option, at LIBOR plus 1/2%, or
the higher of prime or Fed Funds plus 1/2%. There is a 1/8% loan commitment
fee on the $100 million line of credit. The Company paid $118,000 in
commitment fees on the line during fiscal 2000. In fiscal 1999 and 1998 the
Company paid $26,000 and $63,000 in loan commitment fees on their previous
line of credit. The interest rate on borrowings ranged from 6.16% to 7.55% in
2000, and 4.95% to 7.75% in 1999. The term loan and line of credit require
that the Company maintain a certain net worth and requires that the Company
follow certain other sound business practices. At September 29, 2000 and
September 24, 1999, there were outstanding balances of $50 million and $33
million on the term loan and previous line of credit, respectively.
Subsequent to yearend, the Company renewed its line of credit, increasing it
to $125 million.
The Company's Raymond James Credit Corp. subsidiary has a $50 million
line of credit, under which borrowings are collateralized by client
securities, which bears interest at a rate of Fed Funds plus 3/4%. There
were borrowings of $33 million under this facility at September 29, 2000.
The interest rate on these borrowings ranged from 5.94% to 8% during fiscal
2000 and 5.5% to 6.25% in 1999.
Raymond James & Associates, Inc., one of the Company's broker-dealer
subsidiaries, also maintains uncommitted lines of credit aggregating $430
million with commercial banks ($265 million secured and $165 million
unsecured). Borrowings under the lines of credit bear interest, at the
Company's option, at the banks' prime rate, Fed Funds rate plus 1/2%, or
LIBOR plus 3/4%. There were no unsecured short-term borrowings outstanding
at September 29, 2000. The interest rate on borrowings ranged from 5.45% to
7 1/4% in 2000, and 4 1/2% to 8 1/2% in 1999. Loans on the secured,
uncommitted lines of credit are collateralized by firm or client margin
securities.
RJBank has two $5 million FHLB advances outstanding which bear interest
at fixed rates of 5.67% and 5.65% and mature May 2008 and September 2010,
respectively. Securities with a carrying value of approximately $63 million
are pledged as collateral for these and future borrowings. The Bank's pre-
approved borrowing availability related to FHLB advances is 10% of RJBank's
total assets.
NOTE 7 - BANK OPERATIONS AND DEPOSITS:
- --------------------------------------
On May 6, 1994, the Company chartered RJBank in conjunction with the
purchase of the deposits of certain branches of a federal savings bank from
the Resolution Trust Corporation for a nominal purchase price.
A summary of client deposit accounts (included in client payables) and
weighted average interest rates follows:
September 29, 2000 September 24, 1999
----------------------------- -----------------------------
(dollar amounts in thousands) (dollar amounts in thousands)
Weighted Weighted
Balance Average Rate Balance Average Rate
--------------- ------------ ------------- -------------
Demand deposits:
Non-interest bearing $ 1,728 - $ 936 -
Interest bearing 2,760 1.86% 2,963 1.66%
Money market accounts 14,606 5.00% 15,784 3.70%
Savings accounts 507,126 5.58% 469,097 4.24%
Certificates of deposit
(3.85% - 7.25%) 113,829 6.09% 106,848 5.73%
-------- ----- -------- -----
$640,049 5.63% $595,628 4.47%
======== ===== ======== =====
The certificates of deposit mature as follows: $52,566,000 in 2001,
$19,258,000 in 2002, $5,451,000 in 2003, $21,896,000 in 2004, and $14,659,000
in 2005 and thereafter. Certificates of deposit in amounts of $100,000 or
more at September 29, 2000 and September 24, 1999 were approximately
$25,316,000 and $21,567,000, respectively.
A summary of RJBank's loans receivable (included in client receivables)
is as follows:
September 29, September 24,
2000 1999
------------- -------------
(000's) (000's)
Residential mortgage loans $204,433 $138,840
Consumer and commercial loans 87,926 30,665
--------- ---------
292,359 169,505
Allowance for loan losses (2,936) (1,799)
Purchase premium 376 455
Purchase discount (328) (303)
Deferred origination fees
and costs, net 246 (75)
--------- ---------
$289,717 $167,783
========= =========
Activity in the allowance for loan losses for 2000 and 1999 consists
solely of the provision for loan losses. There were no actual loan losses in
2000, 1999 or 1998. The average balance of impaired loans at September 30,
2000 and 1999 along with related interest income recognized on these loans,
was immaterial to the financial statements.
Generally, mortgage loans are secured by either first or second
mortgages on residential property, consumer loans are secured by securities
and time deposit accounts, and commercial loans are generally secured by real
property or the general assets of the borrower. As of September 29, 2000 and
September 24, 1999, 98% and 97%, respectively, of RJBank's loan portfolio was
secured.
RJBank is subject to various regulatory and capital requirements and was
in compliance with all requirements at September 29, 2000 and September 24,
1999.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), RJBank 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. As of September 29, 2000, the most recent notification
from the Office of Thrift Supervision categorized RJBank as "well
capitalized" under the regulatory framework for prompt corrective action.
At September 29, 2000 and September 24, 1999, RJBank 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 29, 2000 and September 24, 1999, RJBank's Tier I capital to average
assets ratio was 7.2% and 5.8%, respectively.
NOTE 8 - DERIVATIVE FINANCIAL INSTRUMENTS:
- ------------------------------------------
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The derivative
financial instruments are used to manage well-defined interest rate risk at
RJBank.
RJBank uses interest rate swap agreements to hedge against the potential
impact of increases in market interest rates during the initial fixed rate
period of certain purchased adjusted rate loan pools. Under the interest
rate swap agreements, RJBank receives or makes payments, on a monthly basis,
based on the differential between a specified interest rate and one month
LIBOR. At September 29, 2000 and September 24, 1999, RJBank was party to
four and two interest rate swap agreements, respectively. The original terms
on the contracts are five years. For the years ended September 30, 2000 and
1999, the Bank recognized a net cost, which was amortized to income, of
approximately $70,000. The amount paid is based on the differential between
the specified rate of the swap agreement and the variable interest rate of
one-month LIBOR. There were no swap agreements outstanding at September 24,
1998.
The net fair aggregate value of the Company's interest rate swap
agreements approximated $212,000 and $159,000 at September 29, 2000 and
September 24, 1999, respectively. This positive fair value represents the
estimated amount the other party would have to pay the Company at each date
to cancel the contracts or transfer them to other parties. Conversely, any
negative fair value represents the estimated amount the Bank would have to
pay the counter-party at that date to cancel the contracts of transfer to
other parties. The Bank has pledged as collateral a mortgage back security
with an approximate carrying value of $1,213,000 and cash in the amount of
$320,000 on the swaps.
The Company is exposed to credit losses in the event of nonperformance
by the counterparties to its interest rate swap agreements. The Company
anticipates, however, that the counterparties will be able to fully satisfy
their obligations under the agreements. The Company does not obtain
collateral to support their financial instruments but monitors the credit
standing of the counterparties.
NOTE 9 - FEDERAL AND STATE INCOME TAXES (in thousands):
- -------------------------------------------------------
The provision (benefit) for income taxes consists of:
Year Ended
-----------------------------------------
September 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Current provision:
Federal $ 71,029 $ 49,841 $ 56,151
State 12,290 8,588 9,774
--------- --------- ---------
83,319 58,429 65,925
--------- --------- ---------
Deferred benefit:
Federal (3,356) (5,110) (7,120)
State (478) (890) (1,273)
--------- --------- ---------
(3,834) (6,000) (8,393)
--------- --------- ---------
$ 79,485 $ 52,429 $ 57,532
========= ========= =========
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 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Provision calculated at
statutory rates $ 72,251 $ 48,145 $ 52,637
State income taxes, net
of federal benefit 7,678 5,003 5,526
Other (444) (719) (631)
--------- --------- ---------
$ 79,485 $ 52,429 $ 57,532
========= ========= =========
The major deferred tax asset (liability) items, as computed under FAS
109, are as follows:
September 29, September 24,
2000 1999
------------- -------------
Deferred tax assets:
Deferred compensation $ 33,543 $ 38,156
Accrued expenses 26,254 20,843
Other 21,961 17,021
--------- ---------
Total deferred tax assets 81,758 76,020
--------- ---------
Deferred tax liabilities:
Aircraft leases (26,786) (25,777)
Other (10,744) (10,612)
--------- ---------
Total deferred tax liabilities (37,530) (36,389)
--------- ---------
Net deferred tax assets $ 44,228 $ 39,631
========= =========
NOTE 10 - COMMITMENTS AND CONTINGENCIES:
- ----------------------------------------
Long-term lease agreements expire at various times through 2004.
Minimum annual rentals under such agreements for the succeeding five fiscal
years are approximately: $15,384,000 in 2001, $13,587,000 in 2002, $9,717,000
in 2003, $7,050,000 in 2004, $5,105,000 in 2005 and $6,132,000 thereafter.
Rental expense incurred under all leases, including equipment under short-
term agreements, aggregated $16,338,000, $13,154,000, and $11,085,000 in
2000, 1999 and 1998, respectively.
The Company has committed to lend to, or guarantee other debt for,
Raymond James Tax Credit Funds, Inc. ("RJ Tax Credit") up to $60 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 29, 2000, balances of
$15,636,000 were loaned to RJ Tax Credit and $2,740,000 were guaranteed. At
September 24, 1999, balances of $8,553,000 were loaned to RJ Tax Credit and
$440,000 were guaranteed. The commitment expired in November 2000 at which
time any outstanding balances were due and payable. On November 29, 2000, the
Board of Directors renewed the commitment until November 2001.
At September 29, 2000, RJBank had letters of credit of $1,524,000
outstanding. In addition, RJBank had commitments to fund loans at fixed and
variable rates of $3,662,000 and $3,719,000, respectively, at September 29,
2000.
Securities with carrying values of $69,789,000 and $21,349,000 are
pledged as collateral with the Federal Home Loan Bank for advances at
September 29, 2000 and September 24, 1999, respectively.
As part of an effort to increase brand awareness, the Company entered
into a stadium naming rights contract in July 1998. The contract has a
thirteen-year term with a five-year renewal option and a 4% annual escalator.
Expenses of $2,295,000 and $2,719,000 were recognized in fiscal 2000 and
1999, respectively.
In the normal course of business, the Company enters into underwriting
commitments. Transactions relating to such commitments that were open at
September 29, 2000 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 29, 2000
and September 24, 1999, the Company had a letter of credit outstanding of
$100,000 and client margin securities valued at $107,778,000 and $86,277,000,
respectively, on deposit with a clearing organization.
The Company also has guaranteed lines of credit and comfort letters for
their various foreign joint ventures as follows: two lines of credit totaling
$6 million in Turkey, two lines of credit not to exceed $11 million in
Argentina, a $5 million line of credit and a $325,000 letter of credit in
India, twenty one comfort letters totaling $55,000,000 in Turkey, four
comfort letters totaling $8,000,000 in Argentina and two comfort letters for
$2,325,000 in India. In addition, the Company has guaranteed trades with
counterparties in Turkey, Argentina and India.
The Company has committed $25.6 million and $20 million to 28 and 21
independent venture capital limited partnerships of which $17 million and $12
million had been paid as of September 29, 2000 and September 24, 1999,
respectively.
In the normal course of business, certain subsidiaries of the Company,
as general partner, are 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.
As a result of the extensive regulation of the securities industry, the
Company's broker-dealer subsidiaries are subject to regular reviews and
inspections by regulatory authorities and self-regulatory organizations,
which can result in imposition of sanctions for regulatory violations,
ranging from non-monetary censure to fines and, in serious cases, temporary
or permanent suspension from business. In addition, from time to time
regulatory agencies and self-regulatory organizations institute
investigations into industry practices, which can result in the imposition of
such sanctions. Current proceedings in which the Company is one of the named
defendants include the combined SEC, Internal Revenue Service and National
Association of Securities Dealers, Inc. review of investment banking
practices in connection with advance refunding transactions for
municipalities.
On June 19, 2000 a judgment in the amount of $40.7 million was entered
in the United States District Court for the Eastern District of Kentucky,
Covington Division, against two of the Company's subsidiaries: Raymond James
& Associates, Inc (RJA) and RJ Mortgage Acceptance Corp., a subsidiary which
has been inactive since 1995. The judgment was based on a jury verdict that
found that both companies had breached a contractual obligation made in 1994
to provide financing in the amount of $18 million to Corporex Realty and
Investment Corporation and a related entity. The jury also found that both
defendants had defrauded the plaintiffs in failing to provide this financing;
the jury awarded the plaintiffs compensatory damages of approximately $10
million (including $7.6 million for "lost investment opportunity") and $30
million in punitive damages. The Company intends to appeal the judgment to
the U.S. Court of Appeals for the Sixth Circuit. The Company has provided
for this judgment in the accompanying consolidated financial statements.
The Company is also 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
consolidated financial position or results of operations of the Company.
NOTE 11 - CAPITAL TRANSACTIONS:
- -------------------------------
The Company's Board of Directors has, from time to time, adopted
resolutions authorizing the Company to repurchase its common stock for
general corporate purposes. At September 29, 2000, pursuant to prior
authorizations from the Board of Directors, 1,768,875 shares were available
to be repurchased.
In February 1998, 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 2, 1998, to shareholders of record on March 10, 1998. 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 dividends.
The Company sold equity put options in October 1998 and August 1999 that
entitled the holder, at the expiration date, to sell 239,000 and 400,000
shares of common stock to the Company at exercise prices of $18.31 and $20.24
per share, respectively. In February 2000, the Company extended their
contract for additional consideration of $1.39 per share. The $556,000 and
$1,314,000 in premiums have been accounted for as additional paid-in capital
in fiscal 2000 and fiscal 1999, respectively. There were no put options
outstanding at September 29, 2000.
NOTE 12 - 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. Roney offered a similar
plan which was merged into the Company's plan on January 1, 2000. The
Company's Long Term Incentive Plan ("LTIP") is a non-qualified deferred
compensation plan that provides benefits to employees who meet certain length
of service and compensation requirements. Contributions to the qualified
plans and the LTIP contribution for management are made in amounts approved
annually by the Board of Directors. Compensation expense includes aggregate
contributions to these plans of $24,196,000, $16,240,000 and $17,299,000, for
fiscal 2000, 1999 and 1998, respectively.
Stock Compensation Plans
At September 29, 2000, the Company has eight 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 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:
Year Ended
-------------------------------
Sept. 29, Sept. 24, Sept. 25,
2000 1999 1998
--------- --------- ---------
Net income (in thousands) As reported $125,195 $85,090 $92,704
Pro forma $122,437 $82,735 $90,569
Net income per share - basic As reported $ 2.70 $ 1.79 $ 1.92
Pro forma $ 2.64 $ 1.74 $ 1.88
Net income per share - diluted As reported $ 2.67 $ 1.76 $ 1.86
Pro forma $ 2.61 $ 1.71 $ 1.81
These pro forma 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 fiscal 2000, 1999 and 1998, respectively: dividend yields of 1.4%, 1.3%
and 1.1%; expected volatility of 45.7%, 42.6% and 44.1%, risk-free interest
rates of 6.25%, 4.96% and 5.85%, and expected lives of 5.16, 5.61 and 5.32
years.
Fixed Stock Option Plans
The Company has one qualified and three non-qualified fixed stock option
plans. Under the 1992 Incentive Stock Option Plan, the Company may grant
options to its management personnel for up to 4,612,500 shares of common
stock. The 1992 Plan was established to replace, on substantially the same
terms and conditions, the 1982 Plan. Options are granted to key
administrative employees and Financial Advisors 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 2,278,125 shares of common stock to independent contractor
Financial Advisors. Options are exercisable five years after grant date
provided that the Financial Advisors are still associated with the Company.
Under the Company's second non-qualified stock option plan, the Company may
grant up to 379,688 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
1,125,000 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 four fixed stock option plans
as of September 29, 2000, September 24, 1999 and September 25, 1998 and
changes during the years ending on those dates is presented below:
2000 1999 1998
------------------ ------------------ ------------------
Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
----------------------------------------------------------
Outstanding at
beginning of year 2,481,688 $15.52 2,738,045 $14.00 2,539,220 $ 9.37
Granted 881,075 20.25 258,785 21.24 831,340 23.15
Canceled (246,127) 18.60 (190,902) 14.33 (84,516) 12.32
Exercised (315,809) 8.22 (324,240) 8.09 (547,999) 6.66
---------- ------ ---------- ------ ---------- ------
Outstanding at
Yearend 2,800,827 $17.56 2,481,688 $15.52 2,738,045 $14.00
========== ====== ========== ====== ========== ======
Options exercisable
at yearend 506,802 299,350 215,878
Weighted average
fair value of
options granted
during the year $ 8.89 $ 8.89 $10.26
The following table summarizes information about fixed stock options
outstanding at September 29, 2000:
Options Outstanding Options Exercisable
--------------------------------------------------------------
Range of Number Weighted- Weighted- Number Weighted-
Exercise Outstanding Average Average Exercisable Average
Prices at 9/29/00 Remaining Exercise at 9/29/00 Exercise
Contractual Price Price
Life
- ------------------------------------------------------------------------------
$ 3.16 - 6.33 17,776 0.2 $ 6.17 17,776 $ 6.17
$ 6.33 - 9.49 58,500 1.2 9.29 6,750 8.08
$ 9.49 - 12.65 901,970 1.3 11.16 480,401 10.83
$12.65 - 15.81 86,625 2.3 13.39 - -
$15.81 - 18.98 220,750 4.9 18.53 1,125 18.33
$18.98 - 22.14 755,325 4.5 20.37 - -
$22.14 - 25.30 605,481 2.5 22.57 - -
$25.30 - 28.46 134,150 4.0 26.40 750 26.46
$28.46 - 31.63 20,250 2.9 31.47 - -
--------- --- ------ ------- ------
2,800,827 2.9 $17.56 506,802 $10.67
========= === ====== ======= ======
Restricted Stock Plan
Under the 1999 Restricted Stock Plan the Company is authorized to issue
up to 1,000,000 restricted shares of common stock to employees and
independent contractors. Awards under this plan may be granted by various
departments of the Company in connection with initial employment or under
various retention plans for individuals who are responsible for a
contribution to the management growth, and/or profitability of the Company.
These shares are forfeitable in the event of voluntary termination. The
compensation cost is recognized over the vesting period of the shares and is
calculated as the market value of the shares on the date of grant. As of
September 29, 2000, 30,500 shares were granted with a future service period
of 5 years.
Employee Stock Purchase Plan
Under the 1998 Employee Stock Purchase Plan, the Company is authorized
to issue up to 1,125,000 shares of common stock to its full-time employees,
nearly all of whom are eligible to participate. Under the terms of the
Plans, employees can choose each year to have up to 20% 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% of the market price on the day prior to the purchase date. Under the
Plans, the Company sold 209,883, 301,837 and 314,114 shares to employees in
fiscal years 2000, 1999 and 1998, 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.
Stock Bonus Plan
The Company's 1999 Stock Bonus Plan authorizes the Company to issue up
to 1,000,000 restricted shares to officers and certain other employees in
lieu of cash for 10% to 20% of annual bonus amounts in excess of $250,000.
Under the plan the restricted stock is granted at a twenty percent discount
in determining the number of shares to be granted and the shares are
generally restricted for a three year period, during which time the shares
are forfeitable in the event of voluntary termination. The compensation cost
is recognized over the three year vesting period based on the market value of
the shares on the date of grant. No shares had been granted under this plan
as of September 29, 2000.
Employee Investment Fund
Certain key employees of the Company participate in the Raymond James
Employee Investment Fund I, a limited partnership which invests in the
merchant banking activities of the Company and other venture capital limited
partnerships. The Company makes a non-recourse loan to these employees for
two thirds of the purchase price per unit. The loan plus interest is
intended to be paid back from the earnings of the fund.
NOTE 13- 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. Raymond James & Associates, Inc. ("RJA"), a
member firm of the New York Stock Exchange, Inc. ("NYSE"), is also subject to
the rules of the NYSE, whose requirements are substantially the same. Rule
15c3-1 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 RJA has elected. It requires that minimum
net capital, as defined, be equal to the greater of $250,000 or two percent
of Aggregate Debit Items arising form client transactions. The NYSE may
require a member firm 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. In addition, on May 28,
1999, the Company purchased Roney & Co., a broker-dealer. The net capital
position of the Company's clearing broker-dealer subsidiary was as follows:
September 29, September 24,
2000 1999
------------- -------------
Raymond James & Associates, Inc.: (dollar amounts in thousands)
(alternative method elected)
Net capital as a percent of Aggregate
Debit Items 16% 19%
Net capital $311,917 $218,456
Less: required net capital 37,940 22,848
-------- --------
Excess net capital $273,977 $195,608
======== ========
All other broker-dealer subsidiaries were in compliance at September 29, 2000
and September 24, 1999.
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 clients. If either
the client 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 $2,045,325,000 and $2,015,589,000, respectively, at
September 29, 2000 and $1,242,224,000 and $1,344,366,000, respectively, at
September 24, 1999. Additional cash is obtained as necessary to ensure such
transactions are adequately collateralized. If another party to the
transaction fails to perform as agreed (for example 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
clients 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 $29.7 million and $33.4 million, at September 29, 2000
and September 24, 1999, 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 yearend. The Company utilizes short government
obligations and equity securities to hedge long proprietary inventory
positions. At September 29, 2000, the Company had $7,968,000 in short
government obligations and $784,000 in short equity securities which
represented hedge positions. At September 24, 1999, the Company had
$24,670,000 in short government obligations and $1,275,000 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
$38,099,000 and $61,353,000 and a market value of $38,783,000 and $62,257,000
as of September 29, 2000 and September 24, 1999, 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 clients, 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 - SEGMENT ANALYSIS:
- ---------------------------
The Company's reportable segments are: retail distribution, institutional
distribution, investment banking, asset management and other. The retail
distribution segment includes the retail branches of the Company's broker-
dealer subsidiaries located throughout the U.S. These branches provide
securities brokerage services including the sale of equities, mutual funds,
fixed income products and insurance to their retail clients. The
institutional distribution segment includes institutional sales offices in
the U.S. and Europe providing securities brokerage services emphasizing the
sale of U.S. equities and fixed income products to institutions. The
investment banking segment includes management and participation in
underwritings (exclusive of sales credits, which are included in the
distribution segments), mergers and acquisitions, public finance, trading,
research and market making. The asset management segment includes investment
portfolio management services of Eagle Asset Management, Inc., Awad Asset
Management and RJA's Asset Management Services division and mutual fund
management by Heritage Asset Management, Inc. In the various programs
offered by these entities, clients' funds are professionally managed either
in individual accounts or in mutual funds. RJBank and the trust companies,
the results of operations of international joint ventures, stock loan/stock
borrow and earnings on firm capital are included in the segment entitled
"other".
The financial results of the Company's segments are the same as those
described in the "Summary of Significant Accounting Policies". Segment data
includes charges allocating corporate overhead to each segment. Intersegment
revenues and charges are eliminated between segments. The Company evaluates
the performance of its segments and allocates resources to them based on
return on investment.
The Company has not disclosed asset information by segment as the
information is not produced internally. All long-lived assets are located in
the U.S.
The Company's business is predominantly in the U.S., with only 4% of
revenues and 2% of net income coming from international operations.
Information concerning operations in these segments of business is as
follows:
2000 1999 1998
----------- ---------- ----------
Revenue: (amounts in thousands)
Retail distribution $1,206,775 $ 847,783 $ 704,598
Institutional distribution 172,130 158,596 146,590
Investment banking 42,848 36,155 57,180
Asset management 124,005 95,055 86,221
Other 152,836 94,617 88,318
----------- ---------- ----------
Total $1,698,594 $1,232,206 $1,082,907
=========== ========== ==========
Pre-tax income:
Retail distribution $ 162,619 $ 90,564 $ 79,062
Institutional distribution 13,688 12,782 15,747
Investment banking 3,658 3,636 25,405
Asset management 29,141 21,603 22,002
Other (4,426) 8,934 8,020
----------- ---------- ----------
Total $ 204,680 $ 137,519 $ 150,236
=========== ========== ==========
NOTE 16 - RELATED PARTIES:
- --------------------------
A director and a former employee of the Company each owned 7.5% of the
outstanding shares of common stock of RJ Properties, Inc. ("RJP"), a
subsidiary of the Company, until August 1999 when the shares were purchased
by RJP for an adjusted book value totaling $517,000 and notes payable of
$200,000. They will receive payments on the notes as RJP collects on certain
receivables, which were excluded from the adjusted book value calculation.
Such shares were acquired for nominal consideration in connection with the
organization of RJP in 1980.
NOTE 17- ACQUISITION OF RONEY & CO.:
- ------------------------------------
On May 28, 1999, the Company purchased Roney from Bank One Corporation
for $71.3 million and the assumption of approximately $10 million in deferred
compensation liabilities. For consolidated financial statement purposes the
acquisition was accounted for as a purchase and, accordingly, Roney's results
are included in the consolidated financial statements since the date of
acquisition. The aggregate purchase price, which was originally financed
through available cash resources and the Company's line of credit
(subsequently replaced by a three year term note), has been allocated to the
assets of Roney based on their respective fair market values. The excess of
the purchase price over assets acquired (goodwill) approximated $35 million
and is being amortized over 15 years.
The pro forma unaudited consolidated results of operations as though
Roney had been acquired as of the beginning of fiscal 1999 and 1998 are as
follows:
1999 1998
---------- ----------
Revenues (000's) $1,349,130 $1,195,153
Net income (000's) $ 85,831 $ 94,257
Net income per share:
Basic $1.80 $1.96
Diluted $1.77 $1.89
NOTE 18 - SUBSEQUENT EVENT:
- ---------------------------
The Company has entered into an agreement to acquire 100% of the
outstanding shares of Goepel McDermid Inc., a Canadian broker-dealer, for CDN
$112.5 million plus the establishment of CDN $17.5 million in deferred
compensation. The CDN $112.5 million purchase price will consist of 1,000,000
shares of RJF common stock (to be valued at $25.75 per share) and cash, for
an estimated total purchase price of $75 to $80 million.
The transaction, which is anticipated to close at the beginning of
January 2001, will be accounted for as a purchase. Accordingly, the Company
will record the assets at estimated fair value and record the remainder of
the purchase price as goodwill. The transaction will initially be financed
by available cash and the Company's line of credit.
EXHIBIT 11
- ----------
RAYMOND JAMES FINANCIAL, INC.
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(in thousands, except per share amounts)
Year Ended
-------------------------------------------
September 29, September 24, September 25,
2000 1999 1998
------------- ------------- -------------
Net income $125,195 $85,090 $92,704
======== ======= =======
Weighted average common
shares outstanding during the
period (1) 46,291 47,606 48,160
Additional shares assuming
exercise of stock options (1)(2) 576 843 1,791
-------- ------- -------
Weighted average diluted common
shares (1) 46,867 48,449 49,951
======== ======= =======
Net income per share - basic (1) $ 2.70 $ 1.79 $ 1.92
======== ======= =======
Net income per share - diluted (1) $ 2.67 $ 1.76 $ 1.86
======== ======= =======
(1) Gives effect to the 3-for-2 common stock split paid on April 2, 1998.
(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.
EXHIBIT 21
- ----------
RAYMOND JAMES FINANCIAL, INC.
-----------------------------
LIST OF SUBSIDIARIES
--------------------
The following listing includes the registrant's subsidiaries, which are
included in the consolidated financial statements:
Place of Subsidiary or
Name of Company Incorporation Joint Venture of
- --------------- ------------- ----------------
Raymond James & Associates, Inc. ("RJA") Florida Raymond James
Financial,
Inc. ("RJF")
Awad & Associates, Inc. Florida RJF
Awad Asset Management, Inc. Florida RJF
Eagle Asset Management, Inc. Florida RJF
Gateway Assignor Corporation, Inc. Florida RJF
Geovest Energy, Inc. Florida RJF
Heritage Asset Management, Inc. Florida RJF
Investment Management & Research, Inc. Florida RJF
Planning Corporation of America ("PCA") Florida RJA
PCAF, Inc. Florida PCA
Raymond James Bank, FSB Florida RJF
Raymond James Capital, Inc. Delaware RJF
Raymond James Credit Corporation Delaware RJF
RJEIF, Inc. Delaware RJF
Raymond James Financial Services, Inc. Florida RJF
Raymond James International Holdings, Inc.("RJIH") Delaware RJF
Raymond James Partners, Inc. Florida RJF
Raymond James Trust Company Florida RJF
Raymond James Trust Company West Washington RJF
RJC Partners, Inc. Florida RJF
RJ Communication, Inc. Florida RJF
Raymond James Tax Credit Funds, Inc. Florida RJF
RJ Equities, Inc. Florida RJF
RJ Equities-2, Inc. Florida RJF
RJ Government Securities, Inc. Florida RJF
RJ Health Properties, Inc. Florida RJF
RJ Leasing, Inc. Florida RJF
RJ Leasing-2, Inc. Florida RJF
RJ Medical Investors, Inc. Florida RJF
RJ Mortgage Acceptance Corporation Delaware RJF
RJ Partners, Inc. Florida RJF
RJ Properties, Inc. ("RJP") Florida RJF
RJ Properties Acquisition Corp. Florida RJP
RJ Realty, Inc. Florida RJF
RJ Specialist Corp. Florida RJF
RJA Structured Finance, Inc. Delaware RJF
Robert Thomas Securities, Inc. Florida RJF
Value Partners, Inc. Florida RJF
Raymond James Killik, Ltd. United Kingdom RJF
Heritage International, Ltd. ("HIL") Mauritius RJIH
Raymond James & Associates, Ltd. Bermuda RJIH
Raymond James Dublin, Ltd. Ireland RJIH
Raymond James Financial International, Ltd. United Kingdom RJIH
Raymond James European Holdings, Inc.("RJEH") Florida RJIH
Raymond James South American Holdings,Inc.
("RJSAH") Florida RJIH
Raymond James & Associates Ltd., Bermuda RJIH
Raymond James Asset Management Int'l., S.A.
("RJAMI") France RJIH
Raymond James Financial International, Ltd. London RJIH
ASK-Raymond James Securities India Ltd. India HIL
IT Finance France RJAMI
Park-Raymond James Securities Turkey RJEH
Raymond James Argentina Sociedad De Bolsa, S.A. Argentina RJSAH
EXHIBIT 3.2.1
- -------------
AMENDED ARTICLE IV SECTION 8 OF THE BY-LAWS
-------------------------------------------
XII RESOLVED, that the Board of Directors hereby approves the amendment of
Article IV, Section 8 of the By-laws so that it shall read, in its entirety,
as follows:
"Section 8. Notice of all special meetings of the Board of Directors
shall be given to each director by two (2) days' service of the same by
telecopier transmission, mail, electronic mail or personally."