UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
10-Q
(Mark
one)
x |
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
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|
|
THE
SECURITIES EXCHANGE ACT OF 1934. |
|
For
the quarterly period ended March
24, 2005
OR
o |
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
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|
|
THE
SECURITIES EXCHANGE ACT OF 1934 |
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For
the transition period from |
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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 |
(State
or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
|
|
|
880
Carillon Parkway, St. Petersburg, Florida 33716
(Address
of principal executive offices) (Zip Code)
(727)
567-1000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X
No___
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).
Yes
X
No
___
Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the close of the latest practicable date.
74,924,785
shares of Common Stock as of April 28, 2005.
|
|
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES |
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Form
10-Q for the Quarter Ended March
24, 2005 |
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INDEX |
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PART
I. |
|
FINANCIAL
STATEMENTS (unaudited) |
PAGE |
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|
Item
1. |
|
Condensed
Consolidated
Statement
of Financial
Condition as
of March 24, 2005 and September 24, 2004
|
3 |
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|
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|
Condensed
Consolidated Statement of Operations for the three and six months ended
March 24, 2005 and March 26, 2004 |
4 |
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|
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Condensed
Consolidated Statement of Cash Flows for the six months ended March 24,
2005 and March 26, 2004 |
5 |
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Notes
to Condensed Consolidated Financial Statements |
7 |
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|
|
|
Item
2. |
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations |
17 |
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|
|
|
Item
3. |
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Quantitative
and Qualitative Disclosures About Market Risk |
26 |
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|
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|
Item
4. |
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Controls
and Procedures |
29 |
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PART
II. |
|
OTHER
INFORMATION |
|
|
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|
|
Item
1. |
|
Legal
Proceedings |
29 |
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|
|
|
Item
2. |
|
Unregistered
Sales of Equity Securities and Use of Proceeds |
30 |
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|
|
|
Item
4. |
|
Submission
of Matters to a Vote of Security Holders |
30 |
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Item
6. |
|
Exhibits
|
32 |
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Signatures |
33 |
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Certifications |
34 |
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION |
(Unaudited) |
(In
thousands, except share data) |
|
March
24, |
|
September
24, |
|
2005 |
|
2004 |
|
|
|
|
ASSETS |
|
|
|
Cash
and cash equivalents |
$
667,614 |
|
$
528,823 |
Cash
and cash equivalents, segregated pursuant to federal
regulations |
2,463,385
|
|
2,322,402 |
Securities
owned: |
|
|
|
Trading
account securities, at fair value |
512,069 |
|
329,861 |
Available
for sale securities, at fair value |
177,647 |
|
208,022 |
Receivables: |
|
|
|
Clients |
2,138,210
|
|
1,961,553 |
Stock
borrowed |
1,156,450
|
|
1,536,879 |
Brokers,
dealers and clearing organizations |
105,389 |
|
125,544 |
Other |
172,965
|
|
169,577 |
Property
and equipment, net |
128,722
|
|
122,750 |
Deferred
income taxes, net |
81,421
|
|
73,559 |
Deposits
with clearing organizations |
31,468 |
|
28,466 |
Goodwill |
62,575
|
|
62,575 |
Investment
in leveraged leases |
19,905
|
|
20,160 |
Prepaid
expenses and other assets |
173,334 |
|
131,675 |
|
|
|
|
|
$
7,891,154 |
|
$7,621,846 |
LIABILITIES
AND SHAREHOLDERS' EQUITY |
|
|
|
Loans
payable |
$
153,821 |
|
$
136,393 |
Payables: |
|
|
|
Clients |
4,658,047
|
|
4,121,713 |
Stock
loaned |
1,165,229 |
|
1,597,117 |
Brokers,
dealers and clearing organizations |
93,558 |
|
74,258 |
Trade
and other |
204,978
|
|
195,291 |
Trading
account securities sold but not yet purchased, at fair
value |
206,042 |
|
122,281 |
Accrued
compensation, commissions and benefits |
210,017 |
|
256,062 |
Income
taxes payable |
13,666 |
|
32,145 |
|
|
|
|
|
6,705,358 |
|
6,535,260 |
|
|
|
|
Minority
Interests |
25,414 |
|
21,373 |
|
|
|
|
Shareholders'
equity |
|
|
|
Preferred
stock; $.10 par value; authorized |
|
|
|
10,000,000
shares; issued and outstanding -0- shares |
- |
|
- |
Common
Stock; $.01 par value; authorized |
|
|
|
180,000,000
shares; issued 76,208,099 at |
|
|
|
March
24, 2005 and 75,321,926 at Sept. 24, 2004 |
762 |
|
753 |
Shares
exchangeable into common stock: 285,325 |
5,493 |
|
5,493 |
Additional
paid-in capital |
151,670 |
|
127,405 |
Accumulated
other comprehensive income |
6,095 |
|
3,875 |
Retained
earnings |
1,019,192 |
|
957,317 |
|
1,183,212 |
|
1,094,843 |
Less:1,353,172
and 1,761,322 common shares |
|
|
|
in
treasury, at cost |
22,830 |
|
29,630 |
|
1,160,382 |
|
1,065,213 |
|
|
|
|
|
$
7,891,154 |
|
$7,621,846 |
|
See
accompanying Notes to Condensed Consolidated Financial
Statements. |
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS |
(Unaudited) |
(In
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Securities
commissions and fees |
$
341,373 |
|
$
352,039 |
|
$
698,842 |
|
$
655,330 |
Investment
banking |
28,387 |
|
32,065 |
|
56,892 |
|
51,791 |
Investment
advisory fees |
39,106 |
|
34,460 |
|
76,558 |
|
66,418 |
Interest |
57,392 |
|
31,575 |
|
111,808 |
|
62,731 |
Net
trading profits |
7,445 |
|
4,512 |
|
17,197 |
|
11,291 |
Financial
service fees |
21,748 |
|
21,571 |
|
44,158 |
|
40,273 |
Other |
16,876 |
|
15,151 |
|
31,249 |
|
28,199 |
Total
Revenues |
512,327 |
|
491,373 |
|
1,036,704 |
|
916,033 |
|
|
|
|
|
|
|
|
Interest
expense |
29,209 |
|
10,925 |
|
54,601 |
|
21,598 |
Net
Revenues |
483,118 |
|
480,448 |
|
982,103 |
|
894,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest
Expenses: |
|
|
|
|
|
|
|
Compensation,
commissions and benefits |
342,492 |
|
341,370 |
|
691,401 |
|
642,030 |
Communications
and information processing |
22,059 |
|
21,354 |
|
43,258 |
|
40,550 |
Occupancy
and equipment costs |
15,822 |
|
15,229 |
|
31,875 |
|
30,522 |
Clearance
and floor brokerage |
5,779 |
|
5,320 |
|
11,245 |
|
10,372 |
Business
development |
15,501 |
|
13,854 |
|
30,245 |
|
26,797 |
Other |
26,956 |
|
15,368 |
|
53,176 |
|
37,118 |
Total
Non-Interest Expenses |
428,609 |
|
412,495 |
|
861,200 |
|
787,389 |
Income
before provision for income taxes and minority interests |
54,509 |
|
67,953 |
|
120,903 |
|
107,046 |
|
|
|
|
|
|
|
|
Provision
for income taxes |
23,432 |
|
23,839 |
|
48,994 |
|
38,564 |
Minority
interest |
(3,620) |
|
1,046 |
|
(2,031) |
|
1,184 |
|
|
|
|
|
|
|
|
Net
Income |
$
34,697 |
|
$
43,068 |
|
$
73,940 |
|
$
67,298 |
|
|
|
|
|
|
|
|
Net
Income per share-basic |
$
0.47 |
|
$
0.59 |
|
$
1.00 |
|
$
0.92 |
Net
Income per share-diluted |
$
0.46 |
|
$
0.58 |
|
$
0.98 |
|
$
0.91 |
Weighted
average common shares |
|
|
|
|
|
|
|
outstanding-basic |
74,874 |
|
73,352 |
|
74,239 |
|
73,117 |
Weighted
average common and common |
|
|
|
|
|
|
|
equivalent
shares outstanding-diluted |
76,305 |
|
74,395 |
|
75,622 |
|
74,254 |
|
|
|
|
|
|
|
|
See
accompanying Notes to Condensed Consolidated Financial Statements.
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS |
(Unaudited) |
(In
thousands) |
continued
on next page |
|
|
|
|
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
Cash
Flows from operating activities: |
|
|
|
Net
Income |
$
73,940 |
|
$
67,298 |
Adjustments
to reconcile net income to net |
|
|
|
cash
provided by (used in) operating activities: |
|
|
|
Depreciation
and amortization |
8,424 |
|
8,294 |
Deferred
income taxes |
(7,863) |
|
(3,985) |
Unrealized
gain and premium amortization |
|
|
|
on
available for sale securities |
(660) |
|
(824) |
Ineffectiveness
of interest rate swaps accounted for |
|
|
|
as
cash flow hedges |
(4) |
|
(187) |
Loss
on sale of property and equipment |
801 |
|
81 |
Provision
for bad debts and other accruals |
18,636 |
|
13,020 |
Stock
and option compensation expense |
7,878 |
|
11,062 |
Minority
Interest |
4,042 |
|
7,855 |
(Increase)
decrease in operating assets: |
|
|
|
Assets
segregated pursuant to federal regulations |
(140,983) |
|
(212,630) |
Receivables: |
|
|
|
Clients,
net |
(176,922) |
|
(155,561) |
Stock
borrowed |
380,429 |
|
(252,756) |
Brokers-dealers
and clearing organizations |
20,155 |
|
23,718 |
Other |
(3,390) |
|
(8,790) |
Trading
securities, net |
(98,447) |
|
(44,617) |
Prepaid
expenses and other assets |
(37,358) |
|
(33,766) |
|
|
|
|
Increase
(decrease) in operating liabilities: |
|
|
|
Payables: |
|
|
|
Clients |
536,334 |
|
84,667 |
Stock
loaned |
(431,888) |
|
367,527 |
Brokers-dealers
and clearing organizations |
19,300 |
|
(95,045) |
Trade
and other |
(8,685) |
|
(11,430) |
Accrued
compensation, commissions and benefits |
(46,045) |
|
(3,889) |
Income
taxes payable |
(18,479) |
|
(10,372) |
Total
adjustments |
25,275 |
|
(317,628) |
Net
cash provided by (used in) operating activities |
99,215 |
|
(250,330) |
|
See
accompanying Notes to Condensed Consolidated Financial
Statements |
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS |
(Unaudited) |
(in
thousands) |
continued
from previous page |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
|
|
|
Cash
Flows from investing activities: |
|
|
|
Additions
to property and equipment, net |
(12,607) |
|
(13,869) |
Sales
of available for sale securities |
9,251 |
|
476 |
Purchases
of available for sale securities |
(14,860) |
|
(2,022) |
Security
maturations and repayments |
36,048 |
|
56,433 |
|
|
|
|
Net
cash provided by investing activities |
17,832 |
|
41,018 |
|
|
|
|
Cash
Flows from financing activities: |
|
|
|
Proceeds
from loans payable |
21,400 |
|
67,955 |
Repayments
on loans payable |
(3,973) |
|
(46,020) |
Exercise
of stock options and employee stock purchases |
15,365 |
|
8,917 |
Purchase
of treasury stock |
(96) |
|
(134) |
Cash
dividends on common stock |
(12,065) |
|
(9,571) |
|
|
|
|
Net
cash provided by financing activities |
20,631 |
|
21,147 |
|
|
|
|
Currency
adjustments: |
|
|
|
Effect
of exchange rate changes on cash |
1,113 |
|
1,766 |
Net
increase (decrease) in cash and cash equivalents |
138,791 |
|
(186,399) |
Cash
and cash equivalents at beginning of period |
528,823 |
|
734,631 |
|
|
|
|
Cash
and cash equivalents at end of period |
$
667,614 |
|
$
548,232 |
|
|
|
|
Supplemental
disclosures of cash flow information |
|
|
|
Cash
paid for interest |
$
54,397 |
|
$
21,426 |
Cash
paid for taxes |
$
75,335 |
|
$
52,921 |
|
|
|
|
See
accompanying Notes to Condensed Consolidated Financial Statements
|
RAYMOND
JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March
24, 2005
Note
1 - Basis of Presentation
The
condensed consolidated
financial statements include the accounts of Raymond James Financial, Inc.
(“RJF”) and its consolidated subsidiaries. RJF is a Florida-based holding
company whose subsidiaries are engaged in various financial service businesses;
as used herein, the term “the Company” refers to RJF or one or more of its
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation. Certain financial information that is normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") but not
required for interim reporting purposes has been condensed or omitted. Pursuant
to GAAP, these unaudited condensed consolidated financial statements reflect, in
the opinion of management, all adjustments necessary for a fair presentation of
the consolidated financial position and results of operations for the interim
periods presented. The nature of the Company's business is such that the results
of any interim period are not necessarily indicative of results for a full year.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 24, 2004. To
prepare consolidated financial statements in conformity with GAAP, management
must estimate certain amounts that affect the reported assets and liabilities,
disclosure of contingent assets and liabilities, and reported revenues and
expenses. Actual results could differ from those estimates. Certain
reclassifications have been made to the condensed consolidated financial
statements of the prior period to conform to the current period
presentation.
The
Company's quarters end on the last Friday (unless Friday is a holiday in which
case it is the preceding business day) of December, March, June and September.
Three of the Company's wholly-owned subsidiaries, Raymond James Bank (“RJBank”),
Raymond James Limited (“RJ Ltd.”) and Raymond James Tax Credit Funds, Inc. (“RJ
Tax Credit”) have quarters that end on the last day of each calendar quarter.
Note
2 - Effects of recently issued accounting standards
In
December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No.
123R (revised 2004), "Share-Based Payment" ("SFAS No. 123R"). This statement
requires the recognition of the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value of the
award in its financial statements. It also requires the cost to be recognized
over the period during which an employee is required to provide service in
exchange for the award (usually the vesting period). SFAS No. 123R replaces SFAS
No. 123 and supersedes APB Opinion No. 25, and its related interpretations. SFAS
No. 123R is effective at the beginning of the first annual reporting period
beginning on or after June 15, 2005 and applies to all awards granted, modified,
repurchased, or cancelled after that date. The adoption of this statement is not
expected to have a material impact on its financial statements given that the
Company adopted the fair value recognition provisions of SFAS No. 123 effective
September 28, 2002.
In
October 2004, the
Financial Accounting Standards Board (“FASB”) ratified the consensus reached by
the Emerging Issues Task Force (“EITF”) on EITF issue 04-10, “Determining
Whether to Aggregate Operating Segments that do not meet the Quantitative
Thresholds.” The task force concluded that operating segments that do not meet
the quantitative thresholds established by Statement of Financial Accounting
Standard (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and
Related Information,” can be aggregated only if aggregation is consistent with
the objective and basic principles of SFAS No. 131, the segments have similar
economic characteristics, and the segments share a majority of the aggregation
criteria listed in SFAS No. 131. This EITF becomes applicable for fiscal years
ending after October 13, 2004. The adoption of this EITF is not expected to have
a material effect on the Company's disclosure.
In March
2004, the FASB ratified the consensus reached by the EITF in issue 03-1, “The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” on the guidance to be used in determining when an investment is
considered impaired, whether that impairment is other than temporary, and the
measurement of an impairment loss. This consensus ratified by the FASB in March
2004 was effective for other-than-temporary impairment evaluations made in
reporting periods beginning after June 15, 2004. However, the guidance contained
in paragraphs 10 - 20 of EITF 03-1, related to determining whether an impairment
is other-than-temporary and measuring the related impairment loss, has been
delayed by FASB Staff Position (“FSP”) EITF Issue 03-1-1, "Effective Date of
Paragraphs 10 - 20 of EITF Issue No. 03-1.” The delay of the effective date for
paragraphs 10-20 will be superseded concurrent with the final issuance of
proposed FSP EITF Issue 03-1-a, "Implication Guidance for the Application of
Paragraph 16 of EITF Issue No. 03-1, 'The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.'" The Company does not
believe that the impact of adopting the provisions of this EITF will be material
to its consolidated financial statements.
Note
3 - Trading Account Securities Owned And Trading Account Securities Sold But Not
Yet Purchased, at Fair Value:
|
March
24, 2005 |
|
September
24, 2004 |
|
|
|
Trading
Account |
|
|
|
Trading
Account |
|
|
|
Securities
Owned |
|
|
|
Securities
Owned |
|
|
|
Sold
but |
|
|
|
Sold
but |
|
Trading
Account |
|
Not
yet |
|
Trading
Account |
|
Not
yet |
|
Securities
Owned |
|
Purchased, |
|
Securities
Owned |
|
Purchased, |
|
At
Fair Value |
|
at
Fair Value |
|
at
Fair Value |
|
at
Fair Value |
|
|
|
|
|
|
|
|
|
(in
000's) |
Marketable: |
|
|
|
|
|
|
|
Equities
|
$
26,262 |
|
$
34,587 |
|
$
33,910 |
|
$
32,950 |
Municipal
obligations |
171,679 |
|
- |
|
192,099 |
|
- |
Corporate
obligations |
131,782 |
|
425 |
|
26,216 |
|
3,522 |
Government
obligations |
72,435 |
|
61,887 |
|
43,518 |
|
55,082 |
Agency
obligations |
83,138 |
|
64,410 |
|
8,817 |
|
10,991 |
Other |
26,772 |
|
44,733 |
|
17,886 |
|
19,736 |
Non-marketable |
1 |
|
- |
|
7,415 |
|
- |
|
$512,069 |
|
$206,042 |
|
$329,861 |
|
$122,281 |
Note
4 - Variable Interest Entities (“VIE’s”)
Under the
provisions of FASB Interpretation 46R ("FIN 46R") the Company determined that
Raymond James Employee Investment Funds I and II (the “Funds”) and Comprehensive
Software Systems, Inc. (“CSS”) are VIE’s. The Funds are limited partnerships,
for which the Company is the general partner, that invest in the merchant
banking and private equity activities of the Company and other unaffiliated
venture capital limited partnerships. Both Funds were established as
compensation and retention measures for certain qualified key employees of the
Company. The Company makes non-recourse loans to these employees for two thirds
of the purchase price per unit. The loans and applicable interest are to be
repaid based solely on the earnings of the Funds. The Company is deemed to be
the primary beneficiary, and accordingly, consolidates the Funds, which have
combined assets of approximately $10.2 million at March 24, 2005. None of those
assets act as collateral for any obligations of the Funds. The Company's
exposure to loss is limited to its contributions and the loans it funded to the
employee investors. At March 24, 2005, that exposure is approximately $9.3
million.
CSS was
formed by a group of broker-dealer firms, including the Company, to develop a
back-office software system. CSS is currently funded by capital contributions
and loans from its owners. CSS had assets of $10.7 million at March 24, 2005.
The Company's exposure to loss is limited to its capital contributions. The
Company is not the primary beneficiary of CSS and accounts for its investment
using the equity method of accounting. The carrying value of the Company's
investment in CSS was approximately $2.6 million at March 24, 2005.
Note
5 - Stock-based Compensation
At March
24, 2005, the Company had eight stock-based compensation plans, which are
described more fully in Note 14 of the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended September 24, 2004. The Company accounts for stock-based compensation in
accordance with the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." For the three months ended March 24,
2005 and March 26, 2004, the Company recognized expense of $4.0 million and $4.0
million, respectively, related to its stock-based compensation plans. For the
six months ended March 24, 2005 and March 26, 2004, the Company recognized
expense of $7.9 million and $7.9 million, respectively, related to its
stock-based compensation plans.
Note
6 - Commitments and Contingencies
RJBank
has outstanding at any time a significant number of commitments to extend
credit. These arrangements are subject to strict credit control assessments and
each client's credit worthiness is evaluated on a case-by-case basis. A summary
of commitments to extend credit and letters of credit outstanding are as
follows:
|
|
March
31, 2005 |
|
September
24, 2004 |
|
|
(in
000's) |
|
|
|
|
|
Standby
letters of credit |
|
$
9,204 |
|
$
7,917 |
Consumer
lines of credit |
|
17,794 |
|
31,708 |
Commercial
lines of credit |
|
39,418 |
|
62,085 |
Unfunded
loan commitments - variable rate |
|
144,213 |
|
119,669 |
Unfunded
loan commitments - fixed rate |
|
11,262 |
|
3,755 |
Because
many commitments expire without being funded in whole or part, the contract
amounts are not estimates of future cash flows. The majority of loan commitments
have terms of up to one year.
In the
normal course of business, RJBank issues, or participates in the issuance of,
financial standby letters of credit whereby it provides an irrevocable guarantee
of payment in the event the letter of credit is drawn down by the beneficiary.
As of March 31, 2005, $9.2 million of such letters of credit were outstanding.
Of the letters of credit outstanding, $7.8 million are underwritten as part of a
larger corporate credit relationship, and the remaining $1.4 million are fully
secured by cash or securities. In the event that a letter of credit is drawn
down, RJBank would pursue repayment from the account party under the existing
borrowing relationship, or would liquidate collateral, or both. The proceeds
from repayment or liquidation of collateral are expected to cover the maximum
potential amount of any future payments of amounts drawn down under the existing
letters of credit.
At March
31, 2005 and September 24, 2004, no securities were pledged by RJBank as
collateral with the Federal Home Loan Bank of Atlanta ("FHLB") for advances. In
lieu of pledging securities as collateral for advances, RJBank provided the FHLB
with a lien against RJBank's portfolio of residential mortgages.
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 $707,313 and
$680,109 were recognized in the three months ended March 24, 2005 and March 26,
2004, respectively.
In the
normal course of business, the Company enters into underwriting commitments.
Transactions relating to such commitments that were open at March 24, 2005 and
were subsequently settled had no material effect on the consolidated financial
statements as of that date.
The
Company utilizes client marginable securities to satisfy deposits with clearing
organizations. At March 24, 2005 and September 24, 2004, the Company had client
margin securities valued at $66.4 million and $90.2 million, respectively, on
deposit with a clearing organization.
The
Company has guaranteed lines of credit for various foreign joint ventures as
follows: three lines of credit totaling $12.5 million in Turkey and one line of
credit totaling $1.3 million in Argentina. At March 24, 2005, there were no
outstanding balances on these lines of credit. The Company has also from time to
time authorized guarantees for the completion of trades with counterparties in
Argentina and Turkey: at March 24, 2005 there were outstanding guarantees for a
maximum of $4 million in Argentina and no guarantees were outstanding for
Turkey.
The
Company has committed a total of $30.9 million, in amounts ranging from $200,000
to $1.5 million, to 33 different independent venture capital or private equity
partnerships. As of March 24, 2005, the Company had invested $25.8 million of
that amount. Additionally,
the Company is the general partner in two internally sponsored private equity
limited partnerships to which it has committed $14 million. Of that amount, the
Company has invested $8.8 million as of March 24, 2005.
In the
normal course of business, certain subsidiaries of the Company act as general
partner and may be contingently liable for activities of various limited
partnerships. These partnerships engaged primarily in real estate activities. In
the opinion of the Company, such liabilities, if any, for the obligations of the
partnerships will not in the aggregate have a material adverse effect on the
Company's consolidated financial position.
The
Company guarantees the existing mortgage debt of Raymond James & Associates,
Inc. ("RJA") of $71.1 million. The
Company may guarantee interest rate swap obligations of RJ Capital Services,
Inc. The Company has also committed to lend to or guarantee obligations of RJ
Tax Credit of up to $90 million upon request, subject to certain limitations as
well as annual review and renewal. The borrowings are secured by real estate
properties. RJ Tax Credit borrows in order to invest in partnerships which
purchase and develop properties qualifying for tax credits. These investments in
project partnerships are then sold to third parties, typically within a 90-day
period. The proceeds of which are used to repay RJ Tax Credit's borrowings. At
March 24, 2005 there were no guarantees outstanding to third parties and cash
funded to invest in project partnerships was $48 million. In addition, at March
24, 2005 RJ Tax Credit is committed to additional future fundings of $ 96.9
million, of which $76 million relates to project partnerships that have already
been sold to third parties.
The
Company is a defendant or co-defendant in various lawsuits and arbitrations
incidental to its securities business. Consistent with retail securities
industry trends, the number of claims seeking recovery due to portfolio losses
experienced in the early 2000's has begun to decline.
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
the 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 also
result in the imposition of such sanctions.
As
previously reported, on September 30, 2004 the SEC instituted an administrative
proceeding against Raymond James Financial Services, Inc. (“RJFS”) alleging
fraud and failure to supervise a former financial advisor in the RJFS Cranston,
Rhode Island office. Following three weeks of hearings before an SEC
Administrative Law Judge, the Division of Enforcement and RJFS have filed
proposed findings and post trial briefs. In its brief, the Division has
requested the Administrative Law Judge to order disgorgement by RJFS of up to
$16 million and $1.9 million in margin interest and other fees, prejudgment
interest, a penalty of up to $14,850,000 for alleged supervisory violations and
a penalty of up to $950,000 for failure to have an effective e-mail system in
place during this period. The Division has also asked the Administrative Law
Judge to enter a cease and desist order against RJFS, to appoint an independent
consultant to review its compliance policies and procedures, and to suspend RJFS
from hiring new financial advisors and opening new offices until the
recommendations of the independent consultant has been implemented.
The
Company believes that the testimony and documentary exhibits introduced at the
hearing do not support the sanctions requested by the Division. The Company has
made provision in its financial statements for its estimate of the reasonable
exposure it may face in the event of an adverse ruling, in an amount
substantially less than the amount sought by the Division. The Administrative
Law Judge is scheduled to issue an initial decision by the end of July 2005;
both RJFS and the Division of Enforcement have a right to appeal the initial
decision to the full Commission for review.
As
previously reported, the Company and RJFS are defendants in a series of lawsuits
and arbitrations relating to an alleged mortgage lending program known as the
"Premiere 72" program, that was administered by a company owned in part by two
individuals who were registered as Financial Advisors with RJFS in Houston. The
lawsuits are pending in various courts, and several of the arbitration claims
relating to this matter have been settled by RJFS for amounts consistent with
its evaluation of those claims. Several cases that had been removed to federal
court were remanded to state court, and the plaintiffs are seeking
reconsideration of that decision.
In the
first arbitration to reach a hearing, claimants sought approximately $1.8
million dollars in damages plus punitive damages. The panel entered a
preliminary order requiring RJFS to pay its clients their losses through a
formula, which included the assignment to RJFS of their interests in the real
estate transactions, awarded claimants attorneys' fees and directed the parties
to calculate the actual amount to be paid. In the order the panel denied any
recovery to non-clients. The amounts due under the formula were substantially
less than the claimants sought and the parties settled on terms consistent with
the order. The Company does not believe that this order represents a precedent
that would govern future decisions. Arbitration proceedings for other
claimants are currently scheduled through November 2006.
The
Company is contesting the allegations in these and other matters and believes
that there are meritorious defenses in each of these matters. 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 the Company's management, based on current
available information, review with outside legal counsel, and consideration of
amounts provided for in the accompanying consolidated financial statements with
respect to these matters, ultimate resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operations. However, resolution of one or more of these matters may have a
material effect on the results of operations in any future period, depending
upon the ultimate resolution of those matters and upon the level of income for
such period.
Note
7 - Capital Transactions
The
following table presents information on a monthly basis for purchases of the
Company’s stock for the quarter ended March 24, 2005 (in 000’s, except share
amounts):
|
Number
of |
|
Average |
|
Shares
Purchases (1) |
|
Price
Per Share |
|
|
|
|
January |
2,000 |
|
$30.94 |
February |
- |
|
- |
March |
397 |
|
31.05 |
Total |
2,397 |
|
30.96 |
(1) |
The
Company does not have a formal stock repurchase plan. Shares are
repurchased at the discretion of management pursuant to prior
authorization from the board of directors. On May 20, 2004, the board of
directors authorized purchases of up to $75 million. Since that date,
80,101 shares have been purchased for a total of $1.8 million, leaving
$73.2 million available to repurchase shares. Historically the Company has
considered such purchases when the price of its stock reaches or
approaches 1.5 times book value or when employees surrender shares as
payment for option exercises. The decision to repurchase shares is subject
to cash availability and other factors. During the quarter ended March 24,
2005, the Company only purchased shares that were surrendered by employees
as payment for option exercises. |
Note
8 - Regulation and 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 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 both RJA and RJFS have elected. It
requires that minimum net capital, as defined, be equal to the greater of
$250,000 or two percent of Aggregate Debit Items arising from client
transactions. The NYSE may require a member firm to reduce its business if its
net capital is less than four percent of Aggregate Debit Items and may prohibit
a member firm from expanding its business and declaring cash dividends if its
net capital is less than five percent of Aggregate Debit Items. The net capital
positions of the Company's broker-dealer subsidiaries were as
follows:
|
March
24, |
|
September
24, |
|
2005 |
|
2004 |
Raymond
James & Associates, Inc.: |
($
in 000's) |
(alternative
method elected) |
|
|
|
Net
capital as a percent of Aggregate |
|
|
|
Debit
Items |
27% |
|
28% |
Net
capital |
$
345,118 |
|
$
363,049 |
Less:
required net capital |
(25,838) |
|
(25,840) |
Excess
net capital |
$
319,280 |
|
$
337,209 |
At March
24, 2005 and September 24, 2004, RJFS had no Aggregate Debit Items and therefore
the minimum net capital of $250,000 was applicable. The net capital position of
RJFS at March 24, 2005 and September 24, 2004 was as follows:
|
March
24, |
|
September
24, |
|
2005 |
|
2004 |
Raymond
James Financial Services, Inc.: |
(in
000's) |
(alternative
method elected) |
|
|
|
Net
capital |
$
37,840 |
|
$
39,663 |
Less:
required net capital |
(250) |
|
(250) |
Excess
net capital |
$
37,590 |
|
$
39,413 |
Raymond
James Ltd. is subject to the Minimum Capital Rule (By-Law No. 17 of the
Investment Dealers Association ("IDA")) and the Early Warning System (By-Law No.
30 of the IDA). The Minimum Capital Rule requires that every member shall have
and maintain at all times Risk Adjusted Capital greater than zero calculated in
accordance with Form 1 (Joint Regulatory Financial Questionnaire and Report) and
with such requirements as the Board of Directors of the IDA may from time to
time prescribe. Insufficient Risk Adjusted Capital my result in suspension from
membership in the stock exchanges or the IDA.
The Early
Warning System is designed to provide advance warning that a member firm is
encountering financial difficulties. This system imposes certain sanctions on
members who are designated in Early Warning level 1 or level 2 according to its
capital, profitability, liquidity position, frequency of designation or at the
discretion of the IDA. Restrictions on business activities and capital
transactions, early filing requirements, and mandated corrective measures are
sanctions that may be imposed as part of the Early Warning System. The Company
was not in Early Warning level 1 or level 2 at March 31, 2005 or September 30,
2004.
The Risk
Adjusted Capital of RJ Ltd. was CDN $20,479,000 and CDN $20,422,000 at March 31,
2005 and September 30, 2004, respectively.
RJBank is
subject to various regulatory and capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, RJBank must meet specific capital guidelines that
involve quantitative measures of RJBank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices.
RJBank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative
measures established by regulation to ensure capital adequacy require RJBank to
maintain minimum amounts and ratios (set forth in the table below) of total and
Tier I Capital (as defined in the regulations) to risk-weighted assets (as
defined). Management believes that, as of March 31, 2005 and September 30, 2004,
the Bank meets all capital adequacy requirements to which it is
subject.
As of
March 31, 2005, the most recent notification from the Office of Thrift
Supervision categorized RJBank as “well capitalized” under the regulatory
framework for prompt corrective action. To be categorized as “well capitalized”,
RJBank must maintain minimum total risk-based, Tier I risk-based, and Tier
I leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the
institution's category.
|
|
Requirement
for capital |
Requirement |
|
|
Adequacy |
to
be categorized as |
|
Actual |
Purposes |
"well
capitalized" |
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|
($
in 000's) |
As
of March 31, 2005: |
|
|
|
|
|
|
Total
capital (to |
|
|
|
|
|
|
risk-weighted
assets) |
$
87,632 |
16.7% |
$
42,080 |
8.0% |
$
52,600 |
10.0% |
Tier I
capital (to |
|
|
|
|
|
|
risk-weighted
assets) |
81,032 |
15.4% |
21,040 |
4.0% |
31,560 |
6.0% |
Tier I
capital (to |
|
|
|
|
|
|
adjusted
assets) |
81,032 |
7.8% |
41,537 |
4.0% |
51,928 |
5.0% |
|
|
|
|
|
|
|
|
|
Requirement
for capital |
Requirement |
|
|
Adequacy |
to
be categorized as |
|
Actual |
Purposes |
"well
capitalized" |
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|
($
in 000's) |
As
of September 30, 2004: |
|
|
|
|
|
|
Total
capital (to |
|
|
|
|
|
|
risk-weighted
assets) |
$
84,278 |
15.1% |
$
44,666 |
8.0% |
$
55,832 |
10.0% |
Tier I
capital (to |
|
|
|
|
|
|
risk-weighted
assets) |
77,299 |
13.8% |
22,333 |
4.0% |
33,499 |
6.0% |
Tier I
capital (to |
|
|
|
|
|
|
adjusted
assets) |
77,299 |
8.0% |
38,468 |
4.0% |
48,084 |
5.0% |
Note
9 - Earnings Per Share
The
following table presents the computation of basic and diluted earnings per share
(in 000's, except per share amounts):
|
Three
Months Ended |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
|
|
|
|
|
|
|
|
Net
income |
$34,697
|
|
$43,068
|
|
$73,940
|
|
$67,298
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
|
|
|
|
|
|
outstanding
during the period |
74,874
|
|
73,352
|
|
74,239
|
|
73,117
|
|
|
|
|
|
|
|
|
Additional
shares assuming |
|
|
|
|
|
|
|
exercise
of stock options (1) |
1,431
|
|
1,043
|
|
1,383
|
|
1,137
|
|
|
|
|
|
|
|
|
Weighted
average diluted common shares (1) |
76,305
|
|
74,395
|
|
75,622
|
|
74,254
|
|
|
|
|
|
|
|
|
Net
income per share - basic |
$
0.47 |
|
$
0.59 |
|
$
1.00 |
|
$
0.92 |
|
|
|
|
|
|
|
|
Net
income per share - diluted (1) |
$
0.46 |
|
$
0.58 |
|
$
0.98 |
|
$
0.91 |
|
|
|
|
|
|
|
|
Securities
excluded from weighted average |
|
|
|
|
|
|
|
common
shares diluted because their effect |
|
|
|
|
|
|
|
would
be antidilutive |
- |
|
1,291 |
|
41 |
|
60 |
(1) Represents
the number of shares of common stock issuable on the exercise of dilutive
employee stock options less the number of shares of common stock which
could have been purchased with the proceeds from the exercise of such
options. These purchases were assumed to have been made at the average
market price of the common stock during the period, or that part of the
period for which the option was
outstanding. |
Note
10 - Comprehensive Income
Total
comprehensive income for the three and six months ended March 24, 2005 and March
26, 2004 is as follows (in 000's):
|
Three
Months Ended |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Net
income |
$
34,697 |
|
$
43,068 |
|
$
73,940 |
|
$
67,298 |
Other
comprehensive income: |
|
|
|
|
|
|
|
Unrealized
(loss) gain on securities available for sale, net of tax |
(32) |
|
120 |
|
111 |
|
37 |
Unrealized
gain on interest rate swaps accounted for as cash flow hedges, net of
tax |
232 |
|
422 |
|
589 |
|
1,066 |
Foreign
currency translation adjustment |
(671) |
|
(407) |
|
1,520 |
|
(501) |
|
|
|
|
|
|
|
|
Total
comprehensive income |
$
34,226 |
|
$
43,203 |
|
$
76,160 |
|
$
67,900 |
Note
11 - Derivative Financial Instruments and Hedging
Activities
The
Company makes limited use of derivative financial instruments in certain of its
businesses. Certain derivative financial instruments are used to manage
well-defined interest rate risk at RJBank, while others are designed to offset
risk within fixed income inventories. In addition, the Company acts as a
dealer/agent in matched book swap transactions. The Company accounts for
derivative financial instruments and hedging activities in accordance with SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
subsequently amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statements No. 133",
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities", and SFAS No. 149, "Amendments of Statement 133 on Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivatives and hedging activities. These statements establish
standards for designating a derivative as a hedge. Derivatives in a
broker-dealer or those that do not meet the criteria for designation as a hedge
are accounted for as trading account assets, and recorded at fair value in the
statement of financial condition with the gain or loss recorded in the statement
of operations for the period.
RJBank
uses variable-rate deposits to finance the purchase of certain loan pools that
are fixed for the first five years of their life. The funding sources expose
RJBank to variability in interest payments due to changes in interest rates.
Management believes it is prudent to limit the variability of its interest
payments. To meet this objective, management enters into interest rate swap
agreements to manage fluctuations in cash flows resulting from interest rate
risk. These swaps change the variable-rate cash flow exposure on the funding
sources to fixed cash flows. Under the terms of the interest rate swaps, RJBank
receives variable interest rate payments and makes fixed interest rate payments,
thereby creating the equivalent of fixed-rate funding. At March 31, 2005 and
September 24, 2004, RJBank was party to $20.1 million and
$48.9 million, respectively, in notional
amount of interest rate swap agreements, and had securities and cash totaling
$1.1 million and $1.9 million, respectively, pledged or held as interest-bearing
collateral for such agreements.
Changes
in the fair value of a derivative that is highly effective, as defined by SFAS
133, and that is designated and qualifies as a cash flow hedge are recorded in
other comprehensive income until earnings are affected by the variability in
cash flows of the designated hedged item. Any ineffectiveness resulting from the
cash flow hedge is recorded in income or expense at the end of each reporting
period. When hedge accounting is discontinued, RJBank continues to carry the
derivative at its fair value in the statement of financial condition, and
recognizes any changes in its fair value in earnings. For the three months ended
March 31, 2005 and 2004, RJBank recorded $1,266 and $55,317, respectively, in
income from ineffective cash flow hedges and transition adjustments.
The
Company uses interest rate swaps as well as futures contracts to offset market
risk in certain fixed income inventory positions. In addition, the Company
enters into interest rate swaps with counterparties which are economically
hedged. These positions are marked to market with the gain or loss recorded in
the statement of operations for the period. At March 24, 2005 and September 24,
2004, the Company had outstanding derivative contracts with notional amounts of
$1.25 billion and $626 million, respectively, in interest rate swaps. The
notional amount of a derivative contract does not change hands; it is simply
used as a reference to calculate payments. Accordingly, the notional amount of
the Company’s derivative contracts outstanding at March 24, 2005 significantly
exceeds the possible losses that could arise from such transactions. The net
market value of all open swap positions at March 24, 2005 and September 24, 2004
was an asset of $11 million and $5 million, respectively.
The
Company is exposed to credit losses in the event of nonperformance by the
counterparties to its interest rate swap agreements. The Company performs a
credit evaluation of counterparties prior to entering into swap transactions.
Currently, the Company anticipates that all counterparties will be able to fully
satisfy their obligations under those agreements. The Company may require
collateral from counterparties to support these obligations as established by
the credit threshold specified by the agreement and/or as a result of monitoring
the credit standing of the counterparties. However, state laws may prohibit
municipalities and other governmental entities from posting collateral in these
transactions.
Note
12 - Segment Information
The
Company currently operates through the following five business segments: Private
Client Group, Capital Markets, Asset Management, RJBank, and Other. The business
segments are based upon factors such as the services provided and the
distribution channels served and are consistent with how the Company assesses
performance and determines how to allocate resources throughout the Company and
its subsidiaries. The financial results of the Company's segments are presented
using the same policies as those described in Note 1 of the Notes to the
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K. Segment data includes charges allocating corporate overhead and
benefits to each segment. Intersegment revenues, charges, receivables and
payables are eliminated between segments upon consolidation.
The
Private Client Group segment includes the retail branches of the Company's
broker-dealer subsidiaries located throughout the United States, Canada and the
United Kingdom. These branches provide securities brokerage services including
the sale of equities, mutual funds, fixed income products and insurance products
to their individual clients. The segment includes net interest earnings on
client margin loans and cash balances. Additionally, this segment includes the
correspondent clearing services that the Company provides to other broker-dealer
firms.
The
Capital Markets segment includes institutional sales and trading in the United
States, Canada and Europe. It provides securities brokerage services, as well as
trading and research services to institutions with an emphasis on the sale of
U.S. and Canadian equities and fixed income products. This segment also includes
the Company's management of and participation in underwritings, merger and
acquisition services, public finance activities, and the operations of Raymond
James Tax Credit Funds.
The Asset
Management segment includes investment portfolio management services of Eagle
Asset Management, Inc., Awad Asset Management, Inc., and the Raymond James &
Associates asset management services division, mutual fund management by
Heritage Asset Management, Inc., private equity management by Raymond James
Capital, Inc., and trust services of Raymond James Trust Company and Raymond
James Trust Company West. In addition to the asset management services noted
above, this segment also offers fee-based programs to clients who have
contracted for portfolio management services from outside money
managers.
Raymond
James Bank is a separate segment, which provides consumer, residential, and
commercial loans, as well as FDIC-insured deposit accounts to clients of the
Company's broker-dealer subsidiaries and to the general public.
The Other
segment includes the Company's securities lending business and the activities of
the consolidated foreign joint ventures in emerging market countries.
Information
concerning operations in these segments of business is as follows (in 000's):
|
Three
Months Ended |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Revenues: |
|
|
|
|
|
|
|
Private
Client Group |
$337,477 |
|
$327,416 |
|
$
677,919 |
|
$614,219 |
Capital
Markets |
103,664 |
|
113,246 |
|
220,683 |
|
204,853 |
Asset
Management |
42,701 |
|
38,270 |
|
82,522 |
|
72,181 |
RJBank |
9,820 |
|
6,897 |
|
18,803 |
|
13,455 |
Other |
18,665 |
|
5,544 |
|
36,777 |
|
11,325 |
Total |
$512,327 |
|
$491,373 |
|
$1,036,704 |
|
$916,033 |
|
|
|
|
|
|
|
|
Pre-tax
Income: |
|
|
|
|
|
|
|
Private
Client Group |
$
30,768 |
|
$
35,028 |
|
$
63,755 |
|
$
62,287 |
Capital
Markets |
12,923 |
|
21,610 |
|
30,253 |
|
27,625 |
Asset
Management |
10,432 |
|
8,978 |
|
18,815 |
|
13,900 |
RJBank |
2,826 |
|
2,366 |
|
6,078 |
|
4,263 |
Other |
1,180 |
|
(1,075) |
|
4,033 |
|
(2,213) |
Total |
$
58,129 |
|
$
66,907 |
|
$
122,934 |
|
$105,862 |
The
following table presents the Company's total assets
on a segment basis (in 000's):
|
March
24, |
|
September
24, |
|
2005 |
|
2004 |
|
(000's) |
Total
Assets: |
|
|
|
Private
Client Group |
$
4,465,394 |
|
$
3,945,968 |
Capital
Markets |
815,244 |
|
740,210 |
Asset
Management |
56,794 |
|
81,559 |
RJBank |
1,046,735 |
|
924,747 |
Other* |
1,506,987 |
|
1,929,362 |
Total |
$
7,891,154 |
|
$
7,621,846 |
*
Includes Stock Borrowed balance
of $1,156,450 and $1,536,879 at March 24, 2005 and September 24, 2004,
respectively.
The
Company has operations in the United States, Canada, Europe and joint ventures
in India, France, Turkey, and Argentina.
Substantially all long-lived assets are located in the United States. The
following table represents revenue by country for the three and six months ended
March 24, 2005 and March 26, 2004 (in 000’s).
|
Three
Months Ended |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2005 |
|
2004 |
Revenues: |
|
|
|
|
|
|
|
United
States |
$453,086 |
|
$444,031 |
|
$924,380 |
|
$823,646 |
Canada |
43,613 |
|
31,968 |
|
80,491 |
|
61,906 |
Europe |
6,954 |
|
7,030 |
|
15,594 |
|
12,933 |
Other |
8,674 |
|
8,344 |
|
16,239 |
|
17,548 |
Total |
$512,327 |
|
$491,373 |
|
$1,036,704 |
|
$916,033 |
While the
dollar amount invested in emerging market joint ventures is only $4.5 million,
these investments carry greater risk than amounts invested in developed
markets.
ITEM
2. |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
Business
and Total Company Overview
The March
quarter results reflected the combined effects of a more difficult market
environment and a shorter time period. The Company’s results continue to be
highly correlated to the U.S. equity markets, and the market volatility combined
with the rising interest rates and high oil prices, had a negative impact on
investor confidence during the quarter ended March 24, 2005. Comparisons to
prior quarters are also impacted by the Company's policy of ending each fiscal
period on the last Friday of the period, which caused the March 2005 quarter to
consist of only twelve weeks. The immediately preceding quarter was a fourteen
week quarter and last year’s quarter was a thirteen week quarter. The length of
the quarter primarily impacts interest earnings and commission revenues. While
declines in most financial statement line items in comparison to the immediately
preceding quarter can be attributed to the shorter duration of the quarter, the
comparison to the prior year quarter is affected by additional factors as
discussed below.
Results
of Operations - Three Months Ended March 24, 2005 Compared with the Three Months
Ended March 26, 2004
Total
Company
For the
second quarter of fiscal 2005, the Company’s net revenues were $483 million, an
increase of less than 1% from $480 million in the same quarter of the prior
year. The decline in commission revenue and investment banking revenues were
offset by increased net interest income, investment advisory fees and principal
trading profits. The prior year quarter had unusually strong investment banking
results with 26 lead and co-managed transactions (vs. 20 in the current year
quarter) combined with $7.6 million in mergers and acquisition fees, an amount
that had been between $ 4 and $5 million per quarter for the past year. The
decline in this high margin business had a greater impact on the bottom line
than the decline in commissions. Increased interest rates and assets under
management led to increases in the related revenues.
Net
income of $34.7 million was lower by 19%, or $8.3 million, than the same quarter
in the prior year, $3 million of which was the recognition of a state tax refund
upon the receipt of a favorable ruling from the State of Florida. Expense
increases, notably administrative compensation, business development and other,
although reasonably well controlled, resulted in a decline in pre-tax income.
Moderate increases are likely to continue in the compensation area as the
Company is beginning to experience increased payroll pressure in the current
economic conditions. In addition, both the compensation and communications and
information processing expense lines will continue to be impacted as the Company
is undergoing a comprehensive upgrade to its information technology platform
(see Liquidity and Capital Resources of this item for further details). These
expense line items and depreciation expense will also be impacted as the Company
establishes a regional processing center in a new site located in Southfield,
Michigan. This site will also serve as a live business continuity site. The
Company plans to employ approximately 200 operations and IT personnel at this
site. Approximately 120 of these jobs will result from the transfer of functions
from St. Petersburg to Southfield. The total capital expenditure is anticipated
to be approximately $13 million, which will be depreciated over periods ranging
from 2 to 30 years.
Segments
The
company operates
through the following five segments: Private Client Group, Capital Markets,
Asset Management, RJBank, and Other.
The
following tables present the revenues and pre-tax income of the Company on a
segment basis (in 000’s):
|
Three
Months Ended |
|
March
24, |
|
March
26, |
|
Dollar |
|
Percentage |
|
2005 |
|
2004 |
|
Change |
|
Change |
Revenues: |
|
|
|
|
|
|
|
Private
Client Group |
$
337,477 |
|
$
327,416 |
|
$10,061
|
|
3% |
Capital
Markets |
103,664 |
|
113,246 |
|
(9,582) |
|
(8%) |
Asset
Management |
42,701 |
|
38,270 |
|
4,431
|
|
12% |
RJBank |
9,820 |
|
6,897 |
|
2,923
|
|
42% |
Other |
18,665 |
|
5,544 |
|
13,121
|
|
237% |
Total |
$
512,327 |
|
$
491,373 |
|
$20,954
|
|
4% |
|
Three
Months Ended |
|
March
24, |
|
March
26, |
|
Dollar |
|
Percentage |
|
2005 |
|
2004 |
|
Change |
|
Change |
Pre-tax
Income: |
|
|
|
|
|
|
|
Private
Client Group |
$
30,768 |
|
$
35,028 |
|
($4,260) |
|
(12%) |
Capital
Markets |
12,923 |
|
21,610 |
|
(8,687) |
|
(40%) |
Asset
Management |
10,432 |
|
8,978 |
|
1,454 |
|
16% |
RJBank |
2,826 |
|
2,366 |
|
460
|
|
19% |
Other |
1,180 |
|
(1,075) |
|
2,255 |
|
210% |
Total |
$
58,129 |
|
$
66,907 |
|
($8,778) |
|
(13%) |
Private
Client Group
The
Private Client Group segment includes the retail branches of the Company's
broker-dealer subsidiaries located throughout the United States, Canada, and the
United Kingdom. The Private Client Group Financial Advisors provide securities
brokerage services including the sale of equity securities, mutual funds, fixed
income instruments and insurance products. This segment accounts for the
majority of the Company's revenues (66% of total company revenues for the three
months ended March 24, 2005). It generates revenues principally through
commissions charged on securities transactions, fees from wrap fee investment
accounts and the interest revenue generated from client margin loans and cash
balances. The Company charges commissions to its Private Client Group clients
based on commission schedules or through asset-based fee alternatives that
clients can elect as an alternative to traditional commissions.
The
success of the Private Client Group is dependent upon the quality and integrity
of its Financial Advisors and other associates and the Company's ability to
attract, retain, and motivate a sufficient number of these associates. The
Company faces competition for qualified associates from major financial services
companies, including other brokerage firms, insurance companies, banking
institutions, and discount brokerage firms. The Company currently offers several
alternatives for Financial Advisors including the traditional branch setting,
under which the Financial Advisors are employees of the Company and the costs
associated with running the branch are incurred by the Company, to the
independent contractor model, under which the Financial Advisors are responsible
for all of their own direct costs. Accordingly, the independent contractor
Financial Advisors are paid a larger percentage of commissions and fees. By
offering alternative models to potential and existing Financial Advisors, the
Company is able to effectively compete with other brokerage firms for qualified
Financial Advisors, as Financial Advisors are able to choose the model that best
suits their practice and profile. As of March 24, 2005 the Company had 4,956
Private Client Group Financial Advisors. Although this number is relatively flat
when compared to the same time period in the prior year, it reflects the nearly
completed effort to create a more productive sales force by adjusting and
enforcing the minimum production standards for Financial Advisors to remain with
the Company. The following table presents a summary of Private Client Group
Financial Advisors as of the periods indicated.
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
Private
Client Group - Financial Advisors: |
|
|
|
Traditional
Branch |
1,057 |
|
1,003 |
Independent
Contractor |
3,899 |
|
3,870 |
Total
Financial Advisors |
4,956 |
|
4,873 |
For the
quarter ended March 24, 2005, Private Client Group segment revenues increased a
modest $10 million, or 3%, when compared to the same quarter in the prior year,
the result of increased interest on customer balances net of slightly lower
commission revenues. Both of these factors were affected by the shorter (by one
week) quarter in the current year.
There was
a decrease in transaction based commissions, but an increase in equity values
due to market appreciation, combined with additional new customer assets,
resulted in increased wrap account fees.
This
segment includes the interest earned on client margin account balances and on
the assets segregated pursuant to Federal Regulations, as well as the interest
expense paid on client cash balances. The combination of an increase of $137
million in average client margin balances and an average rate exceeding the
prior year’s rate by approximately 150 basis points resulted in an increase in
related interest revenue of over $26 million. Offsetting this was an $18 million
increase in interest paid to clients on cash balances awaiting investment due to
the combination of an increase of $122 million in these balances and the
increase in interest rates.
|
Three
Months Ended |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
($
in millions) |
Client
Margin Accounts: |
|
|
|
Average
Balance |
$
1,109 |
|
$
972 |
Average
Rate |
5.32% |
|
3.82% |
|
|
|
|
Assets
Segregated: |
|
|
|
Average
Balance |
$
2,193 |
|
$
2,360 |
Average
Rate |
2.49% |
|
1.00% |
|
|
|
|
Client
Interest Program: |
|
|
|
Average
Balance |
$
2,868 |
|
$2,746 |
Average
Rate |
1.71% |
|
0.37% |
Despite
the modest increase in revenues, pretax income for the segment declined $4.2
million, or 12%, due to increased expenses, including higher legal expense and
modest increases in various other expenses.
Capital
Markets
The
Capital Markets segment includes institutional sales and trading in the United
States, Canada, and Europe; management of and participation in underwritings;
merger and acquisition services; public finance activities; and the syndication
of investment partnerships designed to yield returns in the form of low-income
housing tax credits. The Company provides securities brokerage services to
institutions with an emphasis on the sale of U.S. and Canadian equities and
fixed income products. Institutional sales commissions account for the majority
of the segment's revenue and are driven primarily through trade volume, which is
fueled by a combination of general market activity and by the Financial
Advisors' ability to find attractive investment opportunities and promote those
opportunities to potential and existing clients. Revenues from investment
banking activities are driven principally by the number and the dollar value of
the transactions with which the company is involved. This segment includes
trading of taxable and tax-exempt and high yield fixed income products, as well
as equity securities in the OTC and Canadian markets. This trading 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 related to
this trading activity are primarily derived from the spreads between bid and
asked prices.
Capital
Markets segment revenues decreased by $10 million, or 8%, during the quarter.
The decrease is primarily attributable to a decrease in sales commissions of
approximately $14 million and a decrease in investment banking revenue of $4
million. This decrease was offset by an increase in trading profits of $2.9
million and an increase in interest income of $1.4 million on fixed income
inventory. The decrease in securities commissions was split approximately
two-thirds equity and one-third fixed income products. Although institutional
commissions have declined since the prior year, they do include the positive
impact of the Company's strength in coverage of the natural resources stocks in
both Canada and the U.S. The decrease in investment banking revenue and related
commissions are attributable to a decrease in the number and dollar value of
lead and co-managed equity underwritings as shown in the following tables:
|
Three
Months Ended |
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
Number
of managed/co-managed public equity offerings: |
|
|
|
US |
20 |
|
26 |
Canada |
4 |
|
7 |
|
|
|
|
Total
dollars raised (in 000's): |
|
|
|
US |
$5,851,000 |
|
$5,723,000 |
Canada
(in U.S. dollars) |
137,000 |
|
205,000 |
The
underwriting volume for the second quarter of fiscal 2005, although not equal to
the record levels that were experienced in the prior year, were still strong.
The Company currently has a number of potential underwritings under review and
significant merger and acquisition engagements in progress.
As a
result of the aforementioned revenue decreases, pre-tax income decreased $8.7
million, or 40%, during the quarter.
Asset
Management
The Asset
Management segment includes investment portfolio management services, mutual
fund management, private equity management, and trust services. Investment
portfolio management services include both proprietary and selected outside
money managers. The majority of the revenue for this segment is generated by the
investment advisory fees related to asset management services for individual
investment portfolios and mutual funds. These accounts are billed a fee based on
a percentage of assets. Investment advisory fees are charged based on either a
single point in time within the quarter, typically the beginning or end of a
quarter, or the “average daily” balances of assets under management. The balance
of assets under management is affected by both the performance of the underlying
investments and the new sales and redemptions of client accounts/funds.
Improving equity markets provide the Asset Management segment with the potential
to improve revenues from investment advisory fees as existing accounts
appreciate in value, in addition to individuals and institutions being more
likely to commit new funds to the equity markets. The following table presents
the assets under management as of the dates indicated:
|
March
24, |
|
Dec.
31, |
|
Sept.
24, |
|
March
26, |
|
2005 |
|
2004 |
|
2004 |
|
2004 |
Assets
Under Management
(in 000's): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eagle
Asset Management, Inc. |
$10,722,299 |
|
$10,393,956 |
|
$
8,842,611 |
|
$
8,535,369 |
Heritage
Family of Mutual Funds |
8,517,701 |
|
8,533,528 |
|
8,055,112 |
|
8,211,302 |
Raymond
James Consulting Services |
5,794,133 |
|
5,632,472 |
|
4,810,935 |
|
4,417,214 |
Awad
Asset Management |
1,423,757 |
|
1,560,230 |
|
1,349,040 |
|
1,329,970 |
Freedom
Accounts |
1,523,684 |
|
1,264,874 |
|
988,010 |
|
778,000 |
Total
Assets Under Management |
$27,981,574 |
|
$27,385,060 |
|
$24,045,708 |
|
$23,271,855 |
|
|
|
|
|
|
|
|
Less:
Assets Managed for Related Parties |
2,536,049 |
|
2,313,716 |
|
1,728,788 |
|
1,452,875 |
|
|
|
|
|
|
|
|
Total
Third Party Assets Under Management |
$25,445,525 |
|
$25,071,344 |
|
$22,316,920 |
|
$21,818,980 |
|
|
|
|
|
|
|
|
Trust
Company Assets Under Administration |
$
1,032,794 |
|
$
1,055,572 |
|
$
949,773 |
|
$
920,023 |
The
increase in revenues for the Asset Management segment of $4
million, or 12%, for the quarter ended March 24, 2005, is due entirely to the
increase in investment advisory fees. Approximately one third of the increase
over the prior year quarter was a result of market appreciation. Pre-tax income
increased by approximately $1.5 million, or 16%. Heritage Asset Management
recently registered a mutual fund to be managed by the Company's premier core
growth manager, which will be marketed internally and through other
broker-dealers.
RJ
Bank
RJBank
provides residential, consumer, and commercial loans, as well as FDIC-insured
deposit accounts, to clients of the Company's broker-dealer subsidiaries and to
the general public. RJBank
also purchases residential whole loan packages, and participates with other
banks in corporate loan syndications. RJBank generates revenue principally
through the interest income earned on the loans noted above offset by the
interest expense it incurs on client deposits and borrowings. RJBank’s policy is
to maintain a substantially duration-matched portfolio of assets and
liabilities. As the largest portion of liabilities are floating rate demand
deposits, certain asset purchases are hedged with similar term deposits or FHLB
advances, or by entering into interest rate swap contracts.
RJBank's
net revenues (net interest income plus non-interest income) increased 16% over
the prior year quarter to $5.3 million, generating a 19% increase in pre-tax
income. The improvement in net interest income is the result of rising interest
rates, which have resulted in improved spreads.
Other
expense was higher than the prior year quarter, primarily due to a larger
addition to loan loss reserves within the quarter. During the periods of growth,
as new loans are originated or purchased, a general allowance for loan losses is
established for potential losses inherent in those new loans. Accordingly, a
robust period of net loan growth paradoxically results in depressed earnings in
that period, while the benefit of the higher interest earnings is realized in
later periods.
Over 75%
of RJBank's assets at March 31, 2005, consist of loans, which is its highest
yielding asset class. RJBank's current capital base allows for continued loan
growth, even to the point of utilizing modest leverage. Further, the Company has
demonstrated a willingness to infuse capital as necessary to grow this
subsidiary. In addition, the Company is considering the possibility of
redirecting deposits from other parts of the firm to RJ Bank. The objective of
this strategy is to produce a higher return to the Company without negatively
impacting clients, but would also require significant investment on the part of
the Company in RJ Bank.
Other
The Other
segment principally represents securities lending activity and investments in
international joint ventures. Revenue for the segment is primarily interest
generated by the securities lending activity, which involves the borrowing and
lending of securities from and to other broker-dealers and other financial
institutions, generally as an intermediary. The borrower of the securities puts
up a cash deposit, commonly in excess of the market value of the securities, on
which interest is earned. Conversely, the lender receives the cash deposit and
incurs interest expense accordingly. As the Company generally acts as an
intermediary between two firms that enter into a securities lending transaction,
the Company earns a spread between the interest rates on the cash
deposits.
Although
average
total stock lending balances were relatively flat, the rising rate environment
has allowed interest spreads to improve, contributing to the increase in
revenues and pre-tax income in this segment.
|
March
24, |
|
March
26, |
|
2005 |
|
2004 |
|
(in
000's) |
|
|
|
|
Stock
Borrowed - average |
$
1,290,854 |
|
$
1,192,851 |
Stock
Loaned - average |
1,598,011 |
|
1,294,495 |
Average
Spread on finder business |
.23% |
|
.01% |
The Other
segment has also been positively impacted by the increase in revenue from the
foreign joint ventures in Latin
America and Turkey, which have improved based on the same fundamentals as the
U.S. and Canadian businesses - a strengthening economy and improving equity
markets.
Results
of Operations - Six Months Ended March 24, 2005 Compared with the Six Months
Ended March 26, 2005
Except as
discussed below, the underlying reasons for the variances to the prior year
period are substantially the same as the comparative quarterly
discussion above and the statements contained in such foregoing discussion also
apply for the six month comparison.
Total
Company
For the
first six months of fiscal 2005, the Company's net revenues increased $88
million, or 10%, over the same period in the prior year. Of this increase, $43
million, $10 million, and $16 million is attributable to an increase in
securities commissions, investment advisory fees, and net interest,
respectively. As a result, net income increased $6.6 million, or 10%, to $74
million, or $0.98 per diluted share, from $67 million, or $0.91 per diluted
share.
Segments
The
following tables present the revenues and pre-tax income of the Company on a
segment basis (in 000’s):
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
Dollar |
|
Percentage |
|
2005 |
|
2004 |
|
Change |
|
Change |
Revenues: |
|
|
|
|
|
|
|
Private
Client Group |
$
677,919 |
|
$
614,219 |
|
$
63,700 |
|
10% |
Capital
Markets |
220,683 |
|
204,853 |
|
15,830 |
|
8% |
Asset
Management |
82,522 |
|
72,181 |
|
10,341 |
|
14% |
RJBank |
18,803 |
|
13,455 |
|
5,348 |
|
40% |
Other |
36,777 |
|
11,325 |
|
25,452 |
|
225% |
Total |
$1,036,704 |
|
$
916,033 |
|
$120,671 |
|
13% |
|
Six
Months Ended |
|
March
24, |
|
March
26, |
|
Dollar |
|
Percentage |
|
2005 |
|
2004 |
|
Change |
|
Change |
Pre-tax
Income: |
|
|
|
|
|
|
|
Private
Client Group |
$
63,755 |
|
$
62,287 |
|
$
1,468 |
|
2% |
Capital
Markets |
30,253 |
|
27,625 |
|
2,628 |
|
10% |
Asset
Management |
18,815 |
|
13,900 |
|
4,915 |
|
35% |
RJBank |
6,078 |
|
4,263 |
|
1,815 |
|
43% |
Other |
4,033 |
|
(2,213) |
|
6,246 |
|
282% |
Total |
$
122,934 |
|
$
105,862 |
|
$
17,072 |
|
16% |
On a
year-to-date basis the segments have experienced results similar to the
quarter-to-date results. For the Private Client Group, revenues increased
predominantly due to the improving equity markets, which resulted in an increase
in commission revenues of approximately $30 million. Pre-tax income in the
Private Client Group increased year-to-year in contrast to the decline between
comparative quarters. The increase in year-to-date results was a modest 2%
despite the 10% increase in revenues due to increased expenses, particularly
legal expenses.
The
Capital Markets segment’s results were driven by both commissions, which were up
year over year, although not quarter vs. quarter due to the general performance
of the equity markets, and investment banking revenues, which were up year over
year, although not vs. the prior year quarter. The year-to-date results are
attributable to the increase in the number and dollar value of lead and
co-managed underwritings.
Revenues
and pre-tax income for the Asset Management segment increased $10 million and $5
million, respectively, due to the increase in assets under management.
Interest
rates had a significant impact on both RJBank and the Other segment. Revenues
and pre-tax income for RJBank increased $5 million and $2 million, respectively.
The Other segment revenues increased $25 million, yielding a $6 million increase
in pre-tax income.
Liquidity
and Capital Resources
Cash
provided by operating activities during the six months ended March 24, 2005 was
approximately $99 million. Cash was provided by earnings and increased client
payable balances. This was offset by an increase in receivables due from
clients, an increase in securities inventory levels, and a decrease in accrued
compensation, commissions, and benefits.
Investing
activities provided $18 million in cash, which is primarily due to the
maturation and repayments of mortgage-backed securities and the sales of
available for sale securities, net of reinvestment and capital expenditures. In
conjunction with the Company's decision to expand its Detroit operations,
Raymond James & Associates purchased an 84,000 square foot building on March
10, 2005 in Southfield, Michigan for $5.8 Million. Additionally, the Company
expects to incur approximately $5 million in capital improvements over the next
two years, including build-out and equipment (primarily additional computer
hardware). The Company also plans on expending approximately $2.2 million to
upgrade its existing information technology platform in the next six months.
Financing
activities provided $21 million, the result of the payment of cash dividends,
the net proceeds from borrowings, and net cash provided from the exercise of
stock options and employee stock purchases.
At March
24, 2005 and September 24, 2004 the Company had loans payable of approximately
$154 million and $136 million, respectively. The balance at March 24, 2005 is
comprised primarily of a $71 million mortgage on its home-office complex, $70
million in Federal Home Loan Bank advances (used to fund operations at RJBank),
and various short-term borrowings totaling $13 million. The increase from
year-end is attributable primarily to the increase in the Federal Home Loan Bank
advances.
As of
March 24,
2005, consistent with year-end, the Company's liabilities are comprised
primarily of client payables of $4.7 billion at the
broker-dealer subsidiaries and RJBank, as well as deposits held on stock loaned
transactions of $1.2 billion. The Company primarily acts as an intermediary in
stock borrowed/loan transactions. As a result, the liability associated with the
stock loaned transactions is offset by the $1.2 billion receivable related to
the Company's cash deposits for stock borrowed transactions. To meet its
obligations to clients, the Company has approximately $2.5 billion in cash and
cash equivalents segregated pursuant to federal regulations. The Company also
has client receivables of $2.1 billion.
The
Company believes its existing assets, which are highly liquid in nature,
together with funds generated from operations should provide adequate funds for
continuing operations.
As of
March 24, 2005 both of the Company's domestic broker-dealer subsidiaries well
exceeded the net capital requirements of the Uniform Net Capital Rule under the
Securities Exchange Act of 1934, RJ Ltd exceeded the Risk Adjusted Capital
required under the Minimum Capital Rule of the IDA, and RJBank was “well
capitalized” under the regulatory framework for prompt corrective action. There
have been no significant changes in circumstances since year-end that have
affected the capital of either the broker-dealer subsidiaries or RJBank with
respect to their respective regulatory capital requirements.
In its
Annual Report on Form 10-K for the year-ended September 24, 2004, the Company
reported that it had contractual obligations of $611 million, with $102 million
coming due in 2005 and another $225 million related to RJBank's commitments to
extend credit, which represented potential obligations of 2005. Since year-end,
there have been no significant changes to the Company's contractual obligations.
In
addition to the mortgage loan and advances from the Federal Home Loan Bank, the
Company and its subsidiaries have several lines of credit denominated in U.S.
dollars and one line of credit denominated in Canadian dollars, with aggregate
available balances of $560
million and CDN$40 million (US$33 million), respectively. At March 24, 2005, the
Company was in compliance with all covenants of the lines of credit and its
mortgage loan, with $11 million drawn against these lines of
credit.
Effects
of Inflation
The
Company's assets are primarily liquid in nature and are not significantly
affected by inflation. Management believes that the changes in replacement
cost of
property and equipment are adequately insured and therefore would not materially
affect operating results. However, the rate of inflation affects the Company's
expenses, including employee compensation, communications and occupancy, which
may not be readily recoverable through charges for services provided by the
Company.
Factors
Affecting “Forward-Looking Statements”
From time
to time, the Company may publish “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended, or make verbal 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 Company or the securities industry
generally; (x) changes in federal and state tax laws which could affect the
popularity of products sold by the Company; (xi) natural disasters; (xii)
political and military events which would affect the United States of America or
world markets, or which could disrupt the Company's communications and
securities processing capabilities
or other operations; and (xiii) changes in investor confidence which could
adversely affect the sale of the Company's products and services. The Company
does not undertake any obligation to publicly update or revise any
forward-looking statements.
Critical
Accounting Policies
The
condensed consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. For a
full description of these and other accounting policies, see Note 1 of the Notes
to the Consolidated Financial Statements included in the Company's Annual Report
on Form 10-K. The Company believes that of its significant accounting policies,
those described below involve a high degree of judgment and complexity. These
critical accounting policies require estimates and assumptions that affect the
amounts of assets, liabilities, revenues and expenses reported in the condensed
consolidated financial statements. Due to their nature, estimates involve
judgment based upon available information. Actual results or amounts could
differ from estimates and the difference could have a material impact on the
condensed consolidated financial statements. Therefore, understanding these
policies is important in understanding the reported results of operations and
the financial position of the Company.
Valuation
of Securities
“Trading
account securities” and “Available for sale securities” are reflected in the
condensed consolidated statement of financial condition at fair value or amounts
that approximate fair value. In accordance with SFAS 115, “Accounting for
Certain Investments in Debt and Equity Securities”, unrealized gains and losses
related to these financial instruments are reflected in net earnings or other
comprehensive income, depending on the underlying purpose of the instrument. The
following table presents our trading and available for sale securities
segregated into cash (i.e., non-derivative) trading instruments, derivative
contracts, and available for sale securities:
|
March
24,
2005 |
|
Financial
Instruments
Owned
at
Fair Value |
|
Financial
Instruments
Sold
but
not yet Purchased
at
Fair Value |
|
(in
000’s) |
|
|
|
|
Cash
trading instruments |
$
488,657 |
|
$
195,520 |
Derivative
contracts |
23,412 |
|
10,522 |
Available
for sale securities |
177,647 |
|
- |
Total |
$
689,716 |
|
$
206,042 |
Cash
Trading Instruments and Available for Sale Securities
When
available, the Company uses prices from independent sources such as listed
market prices, or broker or dealer price quotations to derive the fair value of
the instruments. For investments in illiquid, privately held or other securities
that do not have readily determinable fair values, the Company uses estimated
fair values as determined by management. The following table presents the
carrying value of cash trading and available for sale securities for which fair
value is measured based on quoted prices or other independent sources versus
those for which fair value is determined by management:
|
March
24,
2005 |
|
Financial
Instruments
Owned at Fair Value |
|
Financial
Instruments
Sold
but
not yet Purchased at
Fair
Value |
|
(in
000’s) |
Fair
value based on quoted prices and independent sources |
$
524,246 |
|
$
206,042 |
Fair
value determined by Management |
165,470 |
|
- |
Total |
$
689,716 |
|
$
206,042 |
Derivative
Contracts
Fair
value for derivative contracts are
obtained from pricing models that consider current market and contractual prices
for the underlying financial instruments or commodities, as well as time value
and yield curve or volatility factors underlying the positions.
Goodwill
Intangible
assets consist predominantly of goodwill related to the acquisitions of Roney
& Co. (now part of RJA) and Goepel McDermid, Inc. (now called Raymond James
Ltd). This goodwill, totaling $63 million, was allocated to the reporting units
within the Private Client Group and
Capital Markets segments pursuant to SFAS No. 142, “Goodwill and Other
Intangible Assets”. Goodwill represents the excess cost of a business
acquisition over the fair value of the net assets acquired. In accordance with
SFAS No. 142, indefinite-life intangible assets and goodwill are not
amortized.
The
Company reviews its goodwill in order to determine whether its value is impaired
on at least an annual basis. Goodwill is impaired when the carrying amount of
the reporting unit exceeds the implied fair value of the reporting unit. When
available, the Company uses recent, comparable transactions to estimate the fair
value of the respective reporting units. The company calculates an estimated
fair value based on multiples of revenues, earnings, and book value of
comparable transactions. However, when such comparable transactions are not
available or have become outdated, the Company uses discounted cash flow
scenarios to estimate the fair value of the reporting units. As of March 24,
2005, goodwill had been allocated to the Private Client Group of RJA, and both
the Private Client Group and Capital Markets segments of RJ Ltd. As of the most
recent impairment test, the Company determined that the carrying value of the
goodwill for each reporting unit had not been impaired. However, changes in
current circumstances or business conditions could result in an impairment of
goodwill. As required, the Company will continue to perform impairment testing
on an annual basis or when an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its
carrying amount.
Reserves
The
Company records reserves related to legal proceedings in "other payables". Such
reserves are established and maintained in accordance with SFAS No. 5,
"Accounting for Contingencies", and Financial Interpretation No. 14. The
determination of these reserve amounts requires significant judgment on the part
of management. Management considers many factors including, but not limited to:
the amount of the claim; the amount of the loss in the client's account; the
basis and validity of the claim; the possibility of wrongdoing on the part of an
associate of the Company; likely insurance coverage; previous results in similar
cases; and legal precedents and case law. Each legal proceeding is reviewed with
counsel in each accounting period and the reserve is adjusted as deemed
appropriate by management. Any change in the reserve amount is recorded in the
consolidated financial statements and is recognized as a charge/credit to
earnings in that period. The assumptions of management in determining the
estimates of reserves may prove to be incorrect, which could materially affect
results in the period the expenses are ultimately determined.
The
Company also records reserves or allowances for doubtful accounts related to
client receivables and loans. Client receivables at the broker-dealers are
generally collateralized by securities owned by the brokerage clients.
Therefore, when a receivable is considered to be impaired, the amount of the
impairment is generally measured based on the fair value of the securities
acting as collateral, which is measured based on current prices from independent
sources such as listed market prices or broker-dealer price quotations.
Client
loans at RJBank are generally collateralized by real estate or other property.
RJBank provides for both an allowance for losses in accordance with
SFAS No. 5, “Accounting for Contingencies”, and a reserve for individually
impaired loans in accordance with SFAS No. 114, “Accounting by a Creditor for
Impairment of a Loan”. The calculation of the SFAS No. 5 allowance is subjective
as management segregates the loan portfolio into different classes and assigns
each class an allowance percentage based on the perceived risk associated with
that class of loans. The factors taken into consideration when assigning the
reserve percentage to each class include trends in delinquencies; volume and
terms; changes in geographic distribution, lending policies, local, regional,
and national economic conditions; and past loss history. For individual loans
identified as impaired, RJBank measures impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate, the
loan's observable market price, or the fair value of the collateral if the loan
is collateral dependent. Management changed the methodology used in evaluating
the adequacy of the allowance for loan loss in the March 2005 quarter, although
the process is still based on the same factors above. At March 31, 2005, the
amortized cost of all RJBank loans was $807 million and an allowance for loan
losses of $8.6 million was recorded against that balance. The allowance for loan
losses was 1.07% of the amortized cost of the loan portfolio and has not changed
significantly since September 24, 2004.
The
Company also makes loans or pays advances to Financial Advisors, primarily for
recruiting and retention purposes. The Company provides for a general allowance
for loan losses on such receivables based on historical collection experience.
Additionally, the Company provides for a specific reserve on these receivables
if a Financial Advisor is no longer associated with the Company and it is
determined that it is probable the amount will not be collected. At March 24,
2005 the receivable from Financial Advisors was $52 million, which is net of an
allowance of $7.9 million for estimated uncollectibility.
Item
3. Quantitative
and Qualitative Disclosure of Market Risk
Market
risk is the risk of loss to the Company resulting from changes in interest rates
and equity prices. The Company has exposure to market risk primarily through its
broker-dealer and banking operations. The Company's broker-dealer subsidiaries
trade tax exempt and taxable debt obligations and act as an active market maker
in approximately 268 over-the-counter equity securities. In connection with
these activities, the Company maintains inventories in order to ensure
availability of securities and to facilitate client transactions. Additionally,
the Company, primarily within its Canadian broker-dealer subsidiary, invests for
its own proprietary equity investment account.
The
following table represents the carrying value of trading inventories associated
with the Company's broker-dealer client facilitation, market-making activities
and proprietary trading activities.
|
March
24, 2005 |
|
September
24, 2004 |
|
|
|
Securities |
|
|
|
Securities |
|
|
|
Sold
but |
|
|
|
Sold
but |
|
Trading |
|
Not
yet |
|
Trading |
|
Not
yet |
|
Securities |
|
Purchased |
|
Securities |
|
Purchased |
|
|
|
|
|
|
|
|
|
(in
000's) |
Marketable: |
|
|
|
|
|
|
|
Municipal
|
$
171,679 |
|
$
- |
|
$
192,099 |
|
$
- |
Corporate
|
131,782 |
|
425 |
|
26,216 |
|
3,522 |
Government
|
72,435 |
|
61,887 |
|
43,518 |
|
55,082 |
Agency |
83,138 |
|
64,410 |
|
8,817 |
|
10,991 |
Total
debt securities |
459,034 |
|
126,722 |
|
270,650 |
|
69,595 |
|
|
|
|
|
|
|
|
Equity
& other securities |
53,035 |
|
79,320 |
|
59,211 |
|
52,686 |
Total |
$512,069 |
|
$206,042 |
|
$329,861 |
|
$122,281 |
Changes
in value of the Company's trading inventory may result from fluctuations in
interest rates, credit ratings of the issuer, equity prices and the correlation
among these factors. The Company manages its trading inventory by product type
and has established trading divisions that have responsibility for each product
type. The Company's primary method of controlling risk in its trading inventory
is through the use of limits. As of March 24, 2005, the absolute fixed income
and equity inventory limits were $1,382,000,000 and $76,600,000, respectively.
The Company's trading activities were well within these limits at March 24,
2005. Additionally, for its derivative activities, primarily interest rate
swaps, the company has established a limit structure that is based on factors
such as interest rate risk and spread exposure. Position limits in trading
inventory accounts are monitored on a daily basis. Consolidated position and
exposure reports are prepared and distributed to senior management. Limit
violations are carefully monitored. Management monitors inventory levels and
trading results, as well as inventory aging, pricing, concentration and
securities ratings. For derivative instruments, mark-to-market prices are
obtained from an external vendor and are compared to internal valuations.
Summarized results are reviewed and a valuation adjustment is determined by
management to record the instrument at estimated fair value.
RJBank
maintains an investment portfolio that is comprised of mortgage-backed
securities, as well as mortgage, consumer and commercial loans. Those
investments are funded in part by its client obligations, including demand
deposits, money market accounts, savings accounts, and certificates of deposit.
Based on the banking industry and the current investment portfolio of RJBank,
market risk for RJBank is limited primarily to interest rate risk. RJBank
reviews interest rate risk based on the economic value of equity, and on net
interest income, which is the net amount of interest received and interest paid.
The following table represents the carrying value of RJBank's assets and
liabilities that are subject to market risk. This table does not include
financial instruments with limited market risk exposure due to offsetting asset
and liability positions or short holding periods.
RJBank
Financial Instruments with Market Risk (as described above, in
000's): |
|
|
|
|
|
|
March
31, 2005 |
|
September
24, 2004 |
|
|
|
|
|
Mortgage-backed
securities |
|
$
7,869 |
|
$
9,121 |
Municipal
obligations |
|
21 |
|
41 |
Loans
receivable |
|
502,397 |
|
420,744 |
Total
assets with market risk |
|
$
510,287 |
|
$
429,906 |
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit |
|
$
202,405 |
|
$
140,980 |
Federal
Home Loan Bank advances |
|
70,000 |
|
60,000 |
Interest
rate swaps |
|
336 |
|
1,299 |
Total
liabilities with market risk |
|
$
272,741 |
|
$
202,279 |
Interest
Rate Risk
RJA is
exposed to interest rate risk as a result of maintaining trading inventories of
fixed income instruments, which are sensitive to changes in interest rates.
The
Company monitors, on a daily basis, the Value-at-Risk (“VaR”) in its
institutional Fixed Income trading portfolios (cash instruments and interest
rate derivatives held either as economic hedges or as customer-related
positions). Using a
variance/covariance methodology, VaR is a
technique for estimating the potential loss in the Company's fixed income
portfolio due to adverse market movements over a defined time horizon with a
specified confidence level.
A
standard regulatory-type data set is used (one year historical observation
period, 0% exponential decay) and the results are compared daily against those
obtained using corresponding data with a 6% exponential decay factor. VaR is
reported at a 99% confidence level, based on a 1-day holding period; this is
consistent with the Company's high-turnover trading activity, which is based on
supporting client sales activity. This means that there is a one in 100 chance
that daily trading net revenues will fall below the expected daily trading net
revenues by an amount at least as large as the reported VaR. However, shortfalls
on a single day can exceed reported VaR by significant amounts. Shortfalls can
also accumulate over a longer time horizon, such as a number of consecutive
trading days.
The
following table sets forth the high, low and average
VaR for the Company's overall portfolio during the quarter ended March 24, 2005,
with the corresponding dollar value of the Company's portfolio:
|
|
Highest
Daily VaR |
|
Lowest
Daily VaR |
|
Daily
Averages |
VaR |
|
$
1,369,000 |
|
$
674,000 |
|
$
1,019,000 |
Portfolio
value (net) |
|
$265,609,000 |
|
$210,960,000 |
|
$
206,295,000 |
VaR
as a percent of portfolio value |
|
0.52% |
|
0.32% |
|
0.50% |
The
modeling of the risk characteristics of trading positions involves a number of
assumptions and approximations. While management believes that its assumptions
and approximations are reasonable, there is no uniform industry methodology for
estimating VaR, and different assumptions and/or approximations could produce
materially different VaR estimates. Given its reliance on historical data, VaR
is most effective in estimating risk exposures in markets in which there are no
sudden fundamental changes or shifts in market conditions. An inherent
limitation of VaR is that the distribution of past changes in market risk
factors may not produce accurate predictions of future market risk. Moreover,
VaR calculated for a one-day time horizon does not fully capture the market risk
of positions that cannot be liquidated or offset with hedges within one day.
Accordingly, management also monitors the risk in its trading activities by
establishing position limits and daily review of trading results, inventory
aging, pricing, concentration and securities ratings.
Additional
information is discussed under Derivative Financial Instruments in Note 11 of
the Notes to the Condensed Consolidated Financial Statements of this Form
10-Q.
As noted
above, RJBank reviews interest rate risk based on net interest income and equity
valuation. One of the core objectives of RJBank's Asset/Liability Management
Committee is to manage the sensitivity of net interest income to changes in
market interest rates. The Asset/Liability Management Committee uses several
measures to monitor and limit RJBank's interest rate risk including scenario
analysis, interest repricing gap analysis and limits, and net portfolio value
limits. Model-based scenario analysis is used to monitor and report the interest
rate risk positions, and analyze alternative strategies.
Net
interest income is the net amount of interest received less interest paid. This
involves large volumes of contracts and transactions, and numerous different
products. Simulation models and estimation techniques are used to assess the
sensitivity of the net interest income stream to movements in interest rates.
Assumptions about consumer behavior play an important role in these
calculations; this is particularly relevant for loans such as mortgages where
the client has the right, but not the obligation, to repay before the scheduled
maturity. On the liability side, the re-pricing characteristics of deposits are
based on estimates since the rates are not coupled to a specified market
rate.
The
sensitivity of net interest income to interest rate conditions is estimated for
a variety of scenarios. Assuming an immediate and lasting shift of 100 basis
points in the term structure of interest rates, RJBank's sensitivity analysis
indicates that an upward movement would decrease RJBank's net interest income by
8.3% in the first year after the rate jump, whereas a downward shift of the same
magnitude would decrease RJBank's net interest income by 4.5%. These sensitivity
figures are based on positions as of March 31, 2005, and are subject to certain
simplifying assumptions, including that management takes no corrective action.
This outcome is largely due to sharply higher pre-payment expectations if rates
fall.
Equity
Price Risk
The
Company is exposed to equity price risk as a consequence of making markets in
equity securities and the investment activities of RJA and RJ Ltd. The U.S.
broker-dealer activities are client-driven, with the objective of meeting
clients' needs while earning a trading profit to compensate for the risk
associated with carrying inventory. The Company attempts to reduce the risk of
loss inherent in its inventory of equity securities by monitoring those security
positions constantly throughout each day and establishing position limits. The
Company's Canadian broker-dealer has a proprietary trading business with 24
traders. The average aggregate inventory held for proprietary trading during the
quarter-ended March 31, 2005 was CDN$7,623,283. The Company's equity securities
inventories are priced on a regular basis and there are no material unrecorded
gains or losses.
Item
4. CONTROLS
AND PROCEDURES
Disclosure
Controls are procedures designed to ensure that information required to be
disclosed in the Company's reports filed under the Exchange Act, such as this
report, is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms. Disclosure controls are also designed to
ensure that such information is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Within
the 90-day period prior to the filing of this report, an evaluation was carried
out under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. No significant changes were made in the
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
PART
II OTHER INFORMATION
Item
1. LEGAL
PROCEEDINGS
The
Company is a defendant or co-defendant in various lawsuits and arbitrations
incidental to its securities business. Consistent with retail securities
industry trends, the number of claims seeking recovery due to portfolio losses
experienced in the early 2000's has begun to decline.
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
the 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 also
result in the imposition of such sanctions.
As
previously reported, on September 30, 2004 the SEC instituted an administrative
proceeding against RJFS alleging fraud and failure to supervise a former
financial advisor in the RJFS Cranston, Rhode Island office. Following three
weeks of hearings before an SEC Administrative Law Judge, the Division of
Enforcement and RJFS have filed proposed findings and post trial briefs. In its
brief, the Division has requested the Administrative Law Judge to order
disgorgement by RJFS of up to $16 million and $1.9 million in margin interest
and other fees, prejudgment interest, a penalty of up to $14,850,000 for alleged
supervisory violations and a penalty of up to $950,000 for failure to have an
effective e-mail system in place during this period. The Division has also asked
the Administrative Law Judge to enter a cease and desist order against RJFS, to
appoint an independent consultant to review its compliance policies and
procedures, and to suspend RJFS from hiring new financial advisors and opening
new offices until the recommendations of the independent consultant has been
implemented.
The
Company believes that the testimony and documentary exhibits introduced at the
hearing do not support the sanctions requested by the Division. The Company has
made provision in its financial statements for its estimate of the reasonable
exposure it may face in the event of an adverse ruling, in an amount
substantially less than the amount sought by the Division. The Administrative
Law Judge is scheduled to issue an initial decision by the end of July 2005;
both RJFS and the Division of Enforcement have a right to appeal the initial
decision to the full Commission for review.
The
Company is contesting the allegations in these and other matters and believes
that there are meritorious defenses in each of these matters. 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 the Company's management, based on current
available information, review with outside legal counsel, and consideration of
amounts provided for in the accompanying consolidated financial statements with
respect to these matters, ultimate resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operations. However, resolution of one or more of these matters may have a
material effect on the results of operations in any future period, depending
upon the ultimate resolution of those matters and upon the level of income for
such period.
Item
2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Reference
is made to information contained under “Capital Transactions” in Note 7 of the
Notes to Condensed Consolidated Financial Statements for the information
required by Part II, Item 2(c).
The
Company expects to continue paying cash dividends. However, the payment and rate
of dividends on the Company's common stock is subject to several factors
including operating results, financial requirements of the Company, compliance
with the net worth covenant in the Company's line of credit agreement, and 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, NYSE and the IDA; and RJBank, which may be subject to
restrictions by federal banking agencies. Such restrictions have never become
applicable with respect to the Company's dividend payments. (See Note 8 of the
Notes to Consolidated Financial Statements for more information on the capital
restrictions placed on RJBank and the Company's broker-dealer subsidiaries).
Item
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxies
for the Annual meeting of Shareholders held on February 17, 2005 were solicited
by the Company pursuant to Regulation 14A of the Securities Act of 1934, as
amended. Matters voted upon at the Annual Meeting of Shareholders were as
follows:
1. The
election of ten directors to the Board of Directors to hold office for a term of
one year. There was no solicitation in opposition of the nominees and all such
nominees were elected.
|
For
Individual
Director |
|
Against
Individual
Director |
Biever,
Angela M. |
69,436,123 |
|
113,246 |
Bulkley,
Jonathan A. |
66,454,834 |
|
3,094,535 |
Godbold,
Francis S. |
66,433,897 |
|
3,115,472 |
Habermeyer,
H. William |
68,694,305 |
|
855,064 |
Helck,
Chester B. |
66,499,099 |
|
3,050,270 |
James,
Thomas A. |
66,445,798 |
|
3,103,571 |
Marshall,
Paul W. |
65,353,245 |
|
4,196,124 |
Shields,
Kenneth A. |
63,806,840 |
|
5,742,529 |
Simmons,
Hardwick |
68,279,096 |
|
1,270,273 |
Sink,
Adelaide |
68,352,674 |
|
1,196,695 |
2. To
approve the Senior Management Incentive Plan for the Company's Executive
Officers.
For |
|
Against |
|
Abstain |
64,581,853 |
|
4,539,172 |
|
428,344 |
3. To
ratify the appointment of KPMG LLP by the Audit Committee of the Board of
Directors as the
Company’s independent auditors.
For |
|
Against |
|
Abstain |
69,422,093 |
|
94,244 |
|
33,032 |
4. To
approve amendment of the Company's Articles of Incorporation to increase the
authorized shares of common stock to 180 million shares, $.01 par
value.
For |
|
Against |
|
Abstain |
63,729,148 |
|
5,753,545 |
|
66,676 |
5. To
approve the 2005 Restricted Stock Plan.
For |
|
Against |
|
Abstain |
44,358,924 |
|
10,026,283 |
|
438,495 |
Item
6. EXHIBITS
|
|
|
3.1.1 |
|
Articles
of Amendment to Articles of Incorporation of Raymond James Financial, Inc.
(filed herewith). |
|
|
|
11 |
|
Statement
Re: Computation of per Share Earnings (The calculation of per share
earnings is included in Part I, Item 1 in the Notes to Condensed
Consolidated Financial Statements (Earnings Per Share) and is omitted here
in accordance with Section (b)(11) of Item 601 of Regulation
S-K.). |
|
|
|
31.1 |
|
Principal
Executive Officer Certification as required by Rule 13a-14(a)/15d-14(a),
filed herewith. |
|
|
|
31.2 |
|
Principal
Financial Officer Certification as required by Rule 13a-14(a)/15d-14(a),
filed herewith. |
|
|
|
32 |
|
Certification
furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith. |
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
RAYMOND
JAMES FINANCIAL, INC. |
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
|
Date:
May 4, 2005 |
|
/s/
Thomas A. James |
|
|
Thomas
A. James |
|
|
Chairman
and Chief |
|
|
Executive
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Jeffrey P. Julien |
|
|
Jeffrey
P. Julien |
|
|
Senior
Vice President - Finance |
|
|
and
Chief Financial |
|
|
Officer |