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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one) FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 29, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-9109
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RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida No. 59-1517485
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (813) 573-3800
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------- -----------------------------------------
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 11, 1995: $261,832,708.
Number of common shares outstanding (December 11, 1995): 20,668,798
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement for Annual Meeting of Shareholders to be held on February 15,
1996. (The Company intends to file with the Commission a definitive proxy
statement pursuant to Regulation 14A prior to January 25, 1996.)
PART I
ITEM 1. BUSINESS
(a) General Description of Business
Raymond James Financial, Inc. ("RJF") is a Florida-based holding
company that was incorporated in 1974 as a successor to its predecessor
corporation founded in 1962. Its principal subsidiaries include Raymond
James & Associates, Inc. ("RJA"), Investment Management & Research, Inc.
("IM&R"), Robert Thomas Securities, Inc. ("RTS"), Eagle Asset Management,
Inc. ("Eagle"), Heritage Asset Management, Inc. ("Heritage") and Raymond
James Bank, FSB. All of these subsidiaries are wholly-owned by RJF. RJF
and its subsidiaries are hereinafter collectively referred to as the
"Company".
RJF's principal subsidiary, RJA, was organized in Florida in 1962.
RJA is a regional securities brokerage firm engaged in most aspects of the
securities business. All but 11 of RJA's 40 retail branch offices are
located in Florida, and the Company is the largest brokerage and investment
firm headquartered in that state. RJA also has 13 institutional sales
offices, 6 of which are located in Europe. RJA is a member of the New York
Stock Exchange ("NYSE") and other principal stock and option exchanges.
IM&R was formed in 1973 as an independent contractor financial
planning organization and participates in the distribution of all products
and services offered by RJA to its retail customers through its 417 offices
and 74 satellite offices in all 50 states. IM&R is a member of the
National Association of Securities Dealers ("NASD") and Securities Investor
Protection Corporation ("SIPC"), but not of any exchange, as it clears its
trades on a fully-disclosed basis through RJA.
RTS was organized in 1981. It serves independent contractor brokers
who do a majority of their business in individual securities and currently
operates 272 branch offices and 81 satellite offices in 47 states. RTS,
like IM&R, is a member of the NASD and SIPC, but not of any exchange, as it
also clears all of its business on a fully-disclosed basis through RJA.
Eagle was formed in 1984 as a registered investment advisor and at
September 29, 1995 had approximately $1.9 billion of client assets under
management. Prior to the inception of Eagle, the asset management
operation had been a division of RJA.
Heritage was organized in 1985 to act as the manager of the Company's
internally sponsored Heritage family of mutual funds. At September 29,
1995 the six funds managed by Heritage had a total of over $1.9 billion in
assets.
Raymond James Bank was formed in 1994 in conjunction with the purchase
from the RTC of the deposits of a failed thrift. Its primary purpose is to
provide traditional banking products and services to the clients of the
Company's broker-dealer subsidiaries. At September 29, 1995, Raymond James
Bank had $128 million in assets.
(b) Financial Information about Industry Segments
The Company's operations consist of various financial services provided to
its clients. The following table shows revenues by source for the last three
years:
Year Ended
Sept. 29, Sept. 30, Sept. 24,
1995 % 1994 % 1993 %
-------------------------------------------------
(dollar amounts in thousands)
Securities commissions:
Listed products $ 82,738 14.9 $ 68,938 13.6 $ 60,973 13.5
Over-the-counter 110,062 19.9 92,609 18.3 84,630 18.7
Mutual funds 68,994 12.4 76,115 15.0 72,978 16.2
Asset management 31,159 5.6 27,202 5.4 22,331 4.9
Insurance and annuities 34,238 6.2 36,199 7.1 31,762 7.1
Other 356 .1 2,130 .4 3,615 .8
--------------------------------------------------
Total 327,547 59.1 303,193 59.8 276,289 61.2
--------------------------------------------------
Investment banking:
Corporate finance (includ-
ing underwriting sales
credits) 38,262 6.9 54,238 10.7 53,905 11.9
Limited partnerships 4,742 .9 5,981 1.2 6,096 1.4
--------------------------------------------------
Total 43,004 7.8 60,219 11.9 60,001 13.3
--------------------------------------------------
Investment advisory fees 42,922 7.7 51,153 10.1 46,507 10.3
Interest 97,211 17.5 58,542 11.5 33,616 7.4
Correspondent clearing 3,721 .7 3,866 .8 4,164 .9
Net trading and investment
profits 12,637 2.3 6,843 1.3 14,846 3.3
Financial service fees 17,154 3.1 13,446 2.7 11,907 2.6
Other 9,874 1.8 9,874 1.9 4,417 1.0
--------------------------------------------------
Total revenues $554,070 100.0 $507,136 100.0 $451,747 100.0
==================================================
Securities commissions by
broker-dealer:
Raymond James & Associates,
Inc. $146,004 44.6 $130,565 43.1 $127,178 46.0
Investment Management &
Research, Inc. 118,738 36.3 114,506 37.8 99,192 35.9
Robert Thomas Securities,
Inc. 62,805 19.1 58,122 19.1 49,919 18.1
--------------------------------------------------
Total $327,547 100.0 $303,193 100.0 $276,289 100.0
==================================================
(c) Narrative Description of Business
At September 29, 1995 the Company employed 2,639 individuals. RJA
employed 2,166 of these individuals, 485 of whom were full-time account
executives. In addition, 1,803 full-time account executives were affiliated
with the Company as independent contractors. Through its broker-dealer
subsidiaries, the Company provides securities services to approximately 470,000
client accounts. No single client accounts for a material percentage of the
Company's total business.
Raymond James & Associates, Inc.
RJA's activities in the securities business include retail and
institutional securities brokerage, origination and distribution of limited
partnership interests, management of and participation in underwritings of
equity and fixed income securities, market making in corporate and
municipal securities, origination, distribution and management of mutual
funds and unit trusts and research and investment advisory services. RJA
also offers financial planning services for individuals and provides
clearing services for IM&R, RTS and other unaffiliated broker-dealers. For
the year ended September 29, 1995 the revenues of RJA accounted for 62% of
the consolidated revenues of the Company.
RJA is a member of the NYSE, American Stock Exchange, Philadelphia
Stock Exchange, Chicago Board Options Exchange, the New York Futures
Exchange, Pacific Exchange and Chicago Exchange. It is also a member of
the Securities Industry Association, NASD and SIPC. SIPC provides
insurance protection for customers' accounts of up to $500,000 each
(limited to $100,000 for claims for cash). In addition, RJA carries up to
$24,500,000 per account of excess customer insurance.
Brokerage Transactions. RJA provides securities brokerage services to
both retail and institutional customers. RJA charges commissions to its
retail customers, on both exchange and over-the-counter transactions, in
accordance with its established commission schedule. In certain instances,
varying discounts from the schedule are given, generally based upon the
customer's level of business, the trade size and other relevant factors.
RJA discounts its commissions substantially on institutional transactions
based on trade size and the amount of business conducted annually with each
institution.
Customers' transactions in securities are effected on either a cash or
margin basis. In margin transactions, the customer pays a portion of the
purchase price, and RJA makes a loan to the customer for the balance,
collateralized by the securities purchased or by other securities owned by
the customer. Interest is charged to customers on the amount borrowed to
finance margin transactions. The financing of margin purchases is an
important source of revenue to RJA, since the interest rate paid by the
customer on funds loaned by RJA exceeds RJA's cost of short-term funds. The
interest rates charged to customers on such loans depend on the average
margin loan balance in the customer's account and range from prime plus 1%
to prime minus .75%.
Typically, secured bank borrowings and equity capital are the primary
sources of funds to finance customers' margin account borrowings. Since
the inception of the Credit Interest Program in 1981, however, the
Company's primary source of funds to finance customers' margin account
balances has been cash balances in customers' accounts which are not
required to be segregated. In addition, pursuant to written agreements
with customers, broker-dealers are permitted by Securities and Exchange
Commission ("SEC") and NYSE rules to lend customer securities in margin
accounts to other brokers. SEC regulations, however, restrict the use of
customers' funds derived from pledging and lending customers' securities to
the financing of margin account balances, and to the extent not so used,
such funds are required to be deposited in a special account for the
benefit of customers. The regulations also require broker-dealers, within
designated periods of time, to obtain possession or control of, and to
segregate, customers' fully paid and excess margin securities.
Over-the-Counter and Other Trading. Trading securities in the over-
the-counter ("OTC") market involves the purchase of securities from, and
the sale of securities to, clients of the Company or other dealers who may
be purchasing or selling securities for their own account or acting as
agent for their clients. Profits and losses are derived from the spreads
between bid and asked prices, as well as market trends for the individual
securities during the holding period. RJA makes markets in corporate
stocks and bonds, municipal bonds and various government securities. At
September 29, 1995 RJA made markets in 204 common stocks traded in the OTC
market.
RJA frequently acts as agent in the execution of OTC orders for its
customers and as such transacts these trades with other dealers. When RJA
receives a customer order in a security in which it makes a market, it may
act as principal as long as it matches or improves upon the best price in
the dealer market, plus or minus a mark-up or mark-down not exceeding the
equivalent agency commission charge. Recently adopted regulations require
that customer limit orders be satisfied prior to the brokerage firm buying
securities into their own inventory at the same price.
Stock Borrow/Stock Loan Program. RJA commenced this program in July
1987, involving the borrowing and lending of securities from and to other
broker-dealers. RJA generally acts as an intermediary between broker-
dealers and other financial institutions, where it borrows from one party
and lends to another. The borrower of the securities puts up a cash
deposit, commonly 102% of the market value of the securities. This
deposit, which is adjusted daily to reflect changes in current market
value, earns interest at a negotiated rate, typically .2% to .5% below what
the lender of the securities can earn on the funds.
Mutual Funds. RJA sells a number of professionally managed, load
mutual funds and offers, in addition, a selection of no-load funds. RJA
maintains dealer-sales agreements with most major distributors of mutual
fund shares sold through broker-dealers. Commissions on such sales
generally range from 1% to 5% of the dollar value of the transaction.
Alternative sales compensation structures typically include front-end
charges, "back-end" or deferral charges, and an annual charge in the form
of a higher annual fund expense.
At September 29, 1995, the Company had 6 internally sponsored mutual
funds for which RJA acts as distributor. (See Heritage Asset Management,
Inc. description on page 7.) As the distributor of these funds, RJA has
the right to enter into dealer agreements with other broker-dealers for the
sale of Heritage funds to their clients.
Asset Management Services ("AMS"). RJA formed this department in
April 1990 to encompass several programs involving portfolio management,
primarily Investment Advisory Services ("IAS"), the Passport Program
("Passport"), the Managed Investment Program ("MIP") and the Preferred
Portfolio Account ("PPA"). IAS, which commenced operations in August 1987,
assists clients in selecting portfolio managers, establishes custodial
facilities, monitors performance of client accounts, provides clients with
accounting and other administrative services and assists portfolio managers
with certain trading management activities. IAS earns fees generally
ranging from .5%-1.0% of asset balances per annum, a substantial portion of
which is paid to portfolio managers who direct the investment of the
client's account. At September 29, 1995, this program had approximately
$960 million in assets under management through agreements with 20
independent investment advisors. In addition, two proprietary asset
managers, Awad and Associates Asset Management ("AWAD") and Carillon Asset
Management ("Carillon"), are offered through this program.
Passport is a non-discretionary advisory fee alternative that allows
clients to pay a quarterly fee plus low transaction charges in lieu of
commissions. Fees are based on the individual accounts and are dependent
on the type of securities in the accounts. In addition, AMS collects an
administrative fee of up to .2% of asset balances annually, for which
clients receive a quarterly performance report and other services. As of
September 29, 1995, Passport had approximately $420 million in assets
serviced by account executives.
MIP is a program that allows selected account executives to manage
customer portfolios on a discretionary, wrap fee basis. The account execu
tives must satisfy certain criteria and complete educational courses to be
selected for this program. Fees are based on the individual accounts and
are dependent on the size of the account and the type of securities in the
account. AMS establishes custodial facilities, monitors performance of
client portfolios, provides clients with accounting and other
administrative services and assists the account executives with certain
trading management activities. AMS collects a fixed fee plus a percentage
of the assets. As of September 29, 1995, MIP had approximately $90 million
in assets serviced by fourteen account executives.
PPA is another non-discretionary wrap fee pricing alternative that
allows clients to pay a quarterly fee in lieu of commissions. Unlike
Pasport, no transaction charge is imposed. Fees are based on the
individual accounts and are dependent on the type of securities in the
accounts. In addition, AMS collects an annual administrative fee of .2% of
asset balances, for which clients are provided with a quarterly performance
report and other services. As of September 29, 1995, PPA had approximately
$53 million in assets.
AWAD is primarily an equity portfolio management division of RJA which
was formed in March of 1992. Clients pay fees and/or commissions for
management of their accounts. Present fees range from .5% to 1.0% of asset
balances annually. In addition to private accounts, AWAD also manages a
portion of the Heritage Small Cap Stock Fund Portfolio. AWAD, which is
offered through the IAS program, had approximately $360 million under
management at September 29, 1995.
Carillon, a division of RJA offered through IAS, commenced operations
in 1993. Carillon manages approximately $72 million for private accounts
investing in closed-end funds. Fees are currently .375% of assets
annually.
In addition to the foregoing programs, AMS also monitors various
outside money managers that are not a part of the IAS program.
Institutional Sales, Trading and Research. RJA has a domestic staff
of 134 professionals who provide research, sales and execution services to
RJA's institutional clients. In addition, RJA has 36 account executives in
6 institutional sales offices located in Europe. RJA's research is focused
on the identification of industries and companies which its staff believe
are undervalued. These professionals also attempt to provide general
coverage on public companies located in Florida and throughout the
southeastern United States. Proprietary research reports, supplemented by
research purchased from outside services, are also provided to retail
customers.
Investment Banking Group. The 55 professionals of RJA's Investment
Banking Group located primarily in St. Petersburg, Florida, with satellite
offices in Atlanta, Boston and Dallas, operate in two distinct areas. The
Corporate Finance Department is involved in a variety of activities
including public and private debt and equity financing for corporate
clients, merger and acquisition consulting services, fairness opinions and
evaluations. The Real Estate Investment Banking Department originates,
syndicates, markets and monitors the performance of public and private
limited partnerships, primarily in the real estate and equipment leasing
industries. An active secondary trading market is also maintained for the
purchase and resale of public limited partnership units.
RJA's affiliates frequently act as a general or co-general partner for
the limited partnerships the Company syndicates and/or manages. See the
description of the Company's other subsidiaries on page 9.
Syndicate Department. The Syndicate Department coordinates the
distribution of newly issued securities to institutional and retail
investors. They handle public offerings that are managed or co-managed by
RJA as well as selling group and syndicate participations managed by other
firms. This department primarily deals with equity and closed-end mutual
fund underwritings and brokered certificate of deposit offerings.
Fixed Income Department. Through its Fixed Income Department, RJA
distributes both taxable and tax-exempt fixed income products (such as
corporate, government and mortgage-backed bonds as well as municipal bonds
and unit investment trusts) to its customers. RJA positions taxable fixed
income securities and municipal securities in both the primary and
secondary markets as principal. The department's Public Finance Division
acts as financial advisor or underwriter to various municipal agencies or
political subdivisions. When underwriting municipal bonds, RJA agrees to
purchase bonds either through a negotiated sale or based upon a competitive
bid. RJA also acts as an underwriter, dealer and selling group member for
both taxable and non-taxable unit trusts. The Institutional Fixed Income
Research Group provides institutional clients with value-added services and
research bulletins on topics ranging from specific product information to
regulatory developments.
Administration and Operations. RJA's operations personnel are
responsible for the execution of orders, processing of securities
transactions, custody of customer securities, receipt, identification and
delivery of funds and securities, compliance with regulatory and legal
requirements, internal financial accounting and controls and general office
administration for all of the financial services group.
Investment Management & Research, Inc.
IM&R participates in the distribution of all the products and services
offered by RJA to its retail customers through 1,041 independent contractor
registered representatives in 491 offices and satellite offices throughout
all 50 states. The number of registered representatives in these offices
ranges from 1 to 21. Such representatives devote all or substantially all
of their time to the sale of securities and, while these independent
contractors must conduct all securities business through IM&R, their
contracts permit them to conduct insurance, real estate brokerage,
accounting services or other business for others or for their own account.
Many IM&R registered representatives are better characterized as financial
planners than as stock brokers, although they are not required to conduct
their business as financial planners. Independent contractors are
responsible for all of their direct costs and are paid higher than normal
commission rates to compensate them for their added expenses.
Robert Thomas Securities, Inc.
RTS has 762 full-time independent contractor registered
representatives in 47 states who offer securities and investment advice to
individuals and institutions through a network of 353 branch offices and
satellite offices. Of these, 111 are located within depository
institutions (banks, savings and loans and credit unions). RTS
representatives offer the full range of securities products and services of
RJA. RTS branches have the independence to set their own commissions on
agency business within regulatory guidelines. RTS branches and their
registered personnel may offer non-securities financial products (i.e.,
life insurance) to customers outside of their relationship with RTS.
Eagle Asset Management, Inc.
Eagle is a registered investment advisor with approximately $1.9
billion under management at September 29, 1995. Eagle's clients include
pension and profit sharing plans, retirement funds, foundations,
endowments, trusts and individuals. Accounts are managed on a
discretionary basis in accordance with the investment objective(s)
specified by the client. Eagle manages approximately $300 million for 92
institutional clients and $1.6 billion for 6,450 retail accounts.
Eagle's investment management fee generally ranges from .25%-1.0% of
asset balances per year depending upon the size and investment objective of
the account. In addition to the management fees, clients are required to
pay brokerage commissions (or a fee in lieu thereof) for transactions in
their account.
Eagle's former president and chief investment officer entered into a
Separation Agreement with the Company effective December 31, 1994. Under
this agreement the institutional growth equity accounts previously managed
by Eagle were transferred to a new firm, Liberty Investment Management,
Inc. ("Liberty"), headed by the former president and chief investment
officer. For the five years ending December 31, 1999, the Company will
receive 50% of the management fees earned by the new firm on the assets in
these transferred accounts, while bearing none of the expenses. Further,
the Company has the option of purchasing 20% of Liberty at December 31,
1999 at a predetermined price.
Heritage Asset Management, Inc.
Heritage is the manager of the internally sponsored Heritage family of
mutual funds, currently consisting of Heritage Cash Trust (a money market
fund with taxable and tax-exempt portfolios), Heritage Capital Appreciation
Trust (a mutual fund seeking long-term appreciation), Heritage
Income-Growth Trust (a mutual fund seeking long-term total return with
approximately equal emphasis on current income and capital appreciation),
Heritage Income Trust (a trust consisting of the Diversified Portfolio and
the Limited Maturity Government Portfolio, each seeking high current income
consistent with the preservation of capital), Heritage Series Trust (a
trust consisting of the Small Cap Stock Fund, the Value Equity Fund, and
the Eagle International Equity Fund, each seeking long-term capital
appreciation through investments in small capitalization stocks and
undervalued stocks, respectively) and Heritage U.S. Government Income Fund
(a closed-end fund seeking high current income with the potential for
capital appreciation). Heritage also serves as the administrator for the
Heritage Series Trust-Eagle International Equity Portfolio, which seeks
long-term capital appreciation through investments in international stocks.
Heritage serves as the transfer agent for all Heritage open-end funds and
as fund accountant for all Heritage open-end funds except for the Eagle
International Equity Portfolio. Net assets at September 29, 1995 were as
follows (in thousands):
Heritage Cash Trust:
Money Market Fund $1,359,852
Municipal Money Market Fund 278,988
Heritage Capital Appreciation Trust 74,174
Heritage Income-Growth Trust 34,622
Heritage Income Trust:
Diversified Portfolio 30,648
Limited Maturity Government Portfolio 24,552
Heritage Series Trust:
Small Cap Stock Fund 64,247
Value Equity Fund 15,321
Eagle International Equity Portfolio 9,059
Heritage U.S. Government Income Fund 38,973
-----------
$1,930,436
===========
Portfolio management for the Value Equity Fund, Income-Growth Trust
and a portion of the Diversified Portfolio is subcontracted to Eagle.
Portfolio management for the Small Cap Stock Fund is subcontracted to AWAD
and Eagle. Portfolio management for the Capital Appreciation Trust is
subcontracted to Liberty Investment Management, Inc.
Planning Corporation of America
Planning Corporation of America ("PCA"), a wholly-owned subsidiary of
RJA, is a general insurance agency and represents a number of insurance
companies. Through the account executives of the Company's broker-dealer
subsidiaries, PCA provides products and marketing support for a broad range
of insurance products, principally fixed and variable annuities, all forms
of life insurance, disability insurance and long-term care coverage.
RJ Properties, Inc.
RJ Properties, Inc. ("RJP"), headquartered in Atlanta, Georgia, was
incorporated in April, 1980 and acts as a general or co-general partner for
private and public limited partnerships currently owning 33 apartment
properties and 5 shopping centers. RJP acquires properties for
syndications for which it serves as a general partner and receives
acquisition fees and residual interests in profits and proceeds from future
sales of the projects. Through an affiliate, Raymond James Realty
Advisors, RJP acts as the advisor for real estate portfolios of
institutional clients. At September 29, 1995, RJP acted as advisor for
approximately $370 million of such assets. In addition, RJP performs the
property management function for certain properties owned either by
partnerships in which RJP is a general partner or properties in portfolios
of institutional clients. At September 29, 1995, RJP had 31 properties
with a total of 6,298 apartment units under management. The Company owns
85% of the outstanding shares of RJP. Mr. Francis S. Godbold, President
and a Director of the Company, owns 7.5%, and Mr. J. Robert Love, President
of RJP, owns the remaining 7.5%.
Raymond James Trust Company
Sound Trust Company
Raymond James Trust Company was chartered in 1992 and opened for
business in September 1992. This wholly-owned subsidiary of RJF was formed
primarily to provide personal trust services to existing clients of the
broker-dealer subsidiaries. Portfolio management of trust assets is
generally subcontracted to the existing asset management operations of the
Company. In October 1993 the Company acquired a second trust company,
Sound Trust Company, in Tacoma, Washington. This subsidiary provides
personal trust services primarily to broker-dealer clients outside the
State of Florida. These two subsidiaries had a combined total of $250
million in client assets at September 29, 1995.
Raymond James Bank, FSB
Raymond James Bank, FSB, ("RJBK") was chartered as a federal savings
bank on May 6, 1994, in conjunction with the acquisition of deposits of
certain branches of a failed thrift from the Resolution Trust Corporation.
As a member of the Federal Deposit Insurance Corporation ("FDIC"), RJBK
offers FDIC-insured deposit products to clients of the broker-dealer
subsidiaries and its delineated market. As a well-capitalized institution,
RJBK continues to exceed all required capital ratios. At September 29,
1995, RJBK had total assets of approximately $128 million.
Raymond James Mortgage Companies
Raymond James Mortgage Capital, Inc. ("RJMC") and several related
subsidiaries were formed during 1994 to conduct various mortgage
securitization activities. As a result of economic losses and the loss of
its president, RJMC and the related mortgage subsidiaries will be sold
during fiscal 1996.
Raymond James International Holdings, Inc.
Raymond James International Holdings, Inc. is a Delaware corporation
formed in 1994 to house the Company's foreign operations. To date,
operations consist of asset management joint ventures in India and France.
Other Subsidiaries
Several of the Company's subsidiaries were formed to act as general or
co-general partner for various public and private limited partnerships
syndicated by RJA. A summary of these subsidiaries is as follows:
Subsidiary Type of Partnership(s)
---------- ----------------------
RJ Leasing, Inc. Equipment leasing
RJ Leasing - 2, Inc. Equipment leasing
RJ Equities, Inc. Real estate
RJ Health Properties, Inc. Nursing homes
RJ Telecommunications, Inc. Media properties
RJ Credit Partners, Inc. Government subsidized apartments
Raymond James Partners, Inc. Various
RJ Medical Investors, Inc. Nursing homes
RJ Partners, Inc. Various
The Company has several other subsidiaries, but their activities are
not material to the Company's operations.
Competition
The Company's subsidiaries compete with many larger, better
capitalized providers of financial services, including other securities
firms, some of which are affiliated with major financial services
companies, insurance companies, banking institutions and other
organizations. They also compete with a number of firms offering discount
brokerage services, usually with lower levels of service, to individual
customers. The Company's subsidiaries compete principally on the basis of
service, product selection, location and reputation in local markets.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-
regulatory organizations, principally the NASD and the NYSE. These self-
regulatory organizations adopt rules (which are subject to approval by the
SEC) for governing the industry and conduct periodic examinations of member
broker-dealers. Securities firms are also subject to regulation by state
securities commissions in the states in which they are registered. RJA,
IM&R and RTS are currently registered in all 50 states.
The regulations to which broker-dealers are subject cover all aspects
of the securities business, including sales methods, trade practices among
broker-dealers, capital structure of securities firms, record keeping and
the conduct of directors, officers and employees. Additional legislation,
changes in rules promulgated by the SEC and by self-regulatory
organizations or changes in the interpretation or enforcement of existing
laws and rules often directly affect the method of operation and
profitability of broker-dealers. The SEC and the self-regulatory
organizations may conduct administrative proceedings which can result in
censure, fine, suspension or expulsion of a broker-dealer, its officers or
employees. The principal purpose of regulation and discipline of broker-
dealers is the protection of customers and the securities markets rather
than protection of creditors and shareholders of broker-dealers.
See Notes 12 and 13 of the Notes to Consolidated Financial Statements
for further description of certain SEC regulations.
ITEM 2. PROPERTIES
Properties owned by the Company at September 29, 1995 include a
310,000 square foot headquarters complex (two buildings) and the 86,000
square foot former headquarters building, both located in St. Petersburg,
Florida. The former headquarters building is presently unoccupied and
available for sale or lease. In addition, the Company leases 60,000 square
feet in a nearby office building. The Company owns 13.87 acres near the
current headquarters for long-term growth purposes and owns the RJA branch
office building in Crystal River, Florida. The remaining RJA branch
offices are leased with various expiration dates through 2002. The IM&R,
RJMC and RJP headquarters offices in Atlanta, Georgia are also under
leases. See Notes 4 and 9 of the Notes to Consolidated Financial
Statements for further information regarding the Company's leases.
Leases for branch offices of IM&R and RTS are the responsibility of
the respective independent contractor registered representatives.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations of the complaints in these cases and believes that there are
meritorious defenses in each of these lawsuits. In view of the number and
diversity of claims against the Company, the number of jurisdictions in
which litigation is pending and the inherent difficulty of predicting the
outcome of litigation and other claims, the Company cannot state with
certainty what the eventual outcome of pending litigation or other claims
will be. In the opinion of management, based on discussions with counsel,
the outcome of these matters will not result in a material adverse effect
on the financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded on the NYSE under the symbol
"RJF". The following table sets forth for the periods indicated the high
and low trades for the common stock (restated to reflect the 3-for-2 stock
split paid on November 15, 1993).
1995 1994
-----------------------------------
High Low High Low
-----------------------------------
First Quarter $15-1/2 $13-1/4 $20-1/4 $15-7/8
Second Quarter 18 13-3/4 18-3/4 15
Third Quarter 20-1/2 16-1/4 16-1/4 14-1/2
Fourth Quarter 22-5/8 18-1/2 16-1/8 13-1/8
Since the Company initiated payment of a cash dividend in 1985, there
have been thirteen increases in the dividend rate, five of which were in
the form of stock splits and stock dividends. The dividend rate in fiscal
1995 was $.09 per quarter.
The payment of dividends on the Company's common stock is subject to
the availability of funds from the Company's subsidiaries, including the
broker-dealer subsidiaries which may be subject to restrictions under the
net capital rules of the SEC and the NYSE. Such restrictions have never
become applicable with respect to the Company's dividend payments. (See
Note 12 of the Notes to Consolidated Financial Statements.)
At December 11, 1995 there were approximately 7,500 holders of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
Year Ended
Sept. 29, Sept. 30, Sept. 24, Sept. 25, Sept. 27,
1995 1994 1993 1992 1991
--------------------------------------------------------
Operating Results:
Revenues $ 554,070 $ 507,136 $ 451,747 $ 361,134 $ 286,048
Net income $ 46,141 $ 42,069 $ 49,347 $ 41,022 $ 26,735
Net income per share:*
Primary $ 2.23 $ 1.97 $ 2.28 $ 1.89 $ 1.26
Fully diluted $ 2.21 $ 1.97 $ 2.27 $ 1.89 $ 1.25
Weighted average shares
outstanding:*
Primary 20,705 21,359 21,623 21,737 21,248
Fully diluted 20,877 21,359 21,713 21,737 21,464
Cash dividends declared
per share* $ .36 $ .32 $ .21 $ .16 $ .10
Financial Condition:
Total assets $2,012,715 $1,698,262 $1,447,570 $ 806,230 $1,059,717
Long-term debt $ 13,084 $ 13,243 $ 13,387 $ 13,518 $ 13,637
Shareholders' equity $ 266,193 $ 227,452 $ 205,565 $ 160,935 $ 122,115
Shares outstanding* 20,614 20,494 21,316 21,225 20,849
Equity per share
at end of period* $ 12.91 $ 11.09 $ 9.64 $ 7.58 $ 5.86
* Gives effect to the common stock splits paid on April 19, 1991,
February 3, 1992 and November 15, 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations - Three Years Ended September 29, 1995
Fiscal 1995 represented the Company's eleventh consecutive year of
record revenues. Net income for 1995 was the second highest in the
Company's history, trailing only 1993's results. Fiscal 1995 began as a
continuation of 1994, with a subdued market in a period of rising interest
rates. The second half of the year saw a dramatic turnaround, with a
return to declining interest rates and a vibrant, rapidly rising stock
market.
Fiscal 1994 was also a schizophrenic year. The first half was a
continuation of the record-setting pace experienced in 1993, while the
second half was much weaker as the Federal Reserve commenced a rapid
series of interest rate increases.
Year Ended
Sept. 29, % Incr. Sept. 30, % Incr. Sept. 24,
1995 (Decr.) 1994 (Decr.) 1993
Revenues: (000's) (000's) (000's)
-----------------------------------------------
Securities commissions $327,547 8% $303,193 10% $276,289
Investment banking 43,004 (29%) 60,219 - 60,001
Investment advisory fees 42,922 (16%) 51,153 10% 46,507
Interest 97,211 66% 58,542 74% 33,616
Correspondent clearing 3,721 (4%) 3,866 (7%) 4,164
Net trading and investment
profits 12,637 85% 6,843 (54%) 14,846
Financial service fees 17,154 28% 13,446 13% 11,907
Other 9,874 - 9,874 124% 4,417
-----------------------------------------------
$554,070 9% $507,136 12% $451,747
===============================================
Despite the volatility of the markets, the Company managed to realize
a relatively consistent, albeit below target, rate of increase in
securities commission revenues. From a product line perspective, the
largest volume increase, by a wide margin, has been in equities.
Year Ended
Sept. 29,% Incr.Sept. 30, % Incr. Sept. 24,
1995 (Decr.) 1994 (Decr.) 1993
--------------------------------------------
Number of retail offices at yearend
(excluding satellite locations) 729 13% 644 13% 568
Number of retail account executives
at yearend 2,288 4% 2,207 7% 2,057
Number of institutional salesmen
at yearend 117 13% 104 25% 83
Retail commission revenue(000's)$264,211 12% $236,548 10% $214,682
Institutional commission revenue
(000's) $ 63,336 (5%) $ 66,645 8% $ 61,607
Number of trades processed 2,104,000 12% 1,878,000 18% 1,590,000
Investment banking activity has been on a roller coaster ride during
this three year period. Fiscal 1993 and the first half of 1994 were
exceptionally strong. Mid-1994 to mid-1995 was a relatively slow period,
and then 1995 closed with a flurry. The number of managed or co-managed
underwritings and the dollar volume of these transactions were as follows:
1995 - 24 deals for $1.4 billion; 1994 - 35 deals for $2.2 billion; and
1993 - 35 deals for $1.4 billion. In addition, merger and acquisition
fees have increased each year during this period.
Assets under management, including those assets transferred to
Liberty Investment Management ("Liberty"), increased as a result of net
new account sales and/or appreciation of existing accounts. The decline
in investment advisory fees from 1994 to 1995 reflects the transfer of
$4.3 billion to Liberty on January 1, 1995. As described in Note 15 of
the Notes to Consolidated Financial Statements, the Company receives 50%
of the fees from these accounts through December 31, 1999, while bearing
none of the expenses. As shown in the table below, the Company's various
asset management operations have had disparate growth rates:
Sept. 29,% Incr. Sept. 30,% Incr. Sept. 24,
1995 (Decr.) 1994 (Decr.) 1993
(000's) (000's) (000's)
--------------------------------------------
Eagle Asset Management, Inc.$1,856,284(70%) $6,129,827 7% $5,729,622
Heritage Family of Mutual 1,921,377 30% 1,479,711 2% 1,451,270
Funds
Investment Advisory Services 836,065 10% 763,313 28% 596,308
Awad and Associates Asset 331,236 64% 202,301 14% 176,812
Management
Focus Investment Advisors -(100%) 50,775 (29%) 71,414
Carillon Asset Management 70,217 (25%) 93,636 202% 31,031
Subtotal 5,015,179 (42%) 8,719,563 8% 8,056,457
Liberty Investment 4,806,210 100% - - -
Management, Inc.
---------------------------------------------
Total Financial Assets Under
Management $9,821,389 13% $8,719,563 8% $8,056,457
=============================================
During 1995, real estate assets under management increased
significantly as the Company's RJ Properties subsidiary has become a
recognized manager of institutional portfolios. Including partnerships
for which the Company's various subsidiaries act as general or co-general
partner, total tangible assets under management at yearend for 1995, 1994
and 1993 were $937 million, $650 million, and $550 million, respectively.
Net interest income is a stable, growing source of earnings. Most of
the increase has been a result of the dramatic growth in retail brokerage
account balances. Going forward, it is anticipated that interest earnings
will be enhanced by the growth of the Company's Raymond James Bank, FSB
subsidiary. The major components of interest earnings are as follows:
Sept. 29, Sept. 30, Sept. 24,
1995 1994 1993
-----------------------------------------
Margin balances: (balances in 000's)
Average balance $337,969 $298,674 $209,792
Average rate 8.3% 6.3% 5.6%
-------- --------- ---------
$27,974 $18,875 $11,715
Stock borrowed:
Average balance 761,204 955,597 466,571
Average rate 4.8% 2.8% 2.5%
------- ------- --------
36,228 26,625 11,748
Assets segregated pursuant to
Federal Regulations:
Average balance 294,664 132,169 120,349
Average rate 5.7% 3.9% 3.8%
------- ------- --------
16,813 5,184 4,603
Other interest revenue 16,196 7,858 5,550
------- ------- -------
Total interest revenue 97,211 58,542 33,616
------- ------- -------
Credit interest program:
Average balance 482,985 303,123 222,112
Average rate 5.1% 3.3% 2.6%
------- ------- -------
24,625 9,908 5,880
Stock loaned:
Average balance 765,799 955,328 460,536
Average rate 4.4% 2.6% 2.2%
------- ------- -------
33,867 24,584 10,076
Other interest expense 6,266 1,662 1,237
-------- -------- --------
Total interest expense 64,758 36,154 17,193
-------- -------- --------
Net interest $ 32,453 $ 22,388 $ 16,423
======== ======== ========
Net trading and investment profits have risen and fallen generally as
a result of the prevailing interest rate environment, as the great
majority of the firm's holdings are fixed income securities. Trading
profits from over-the-counter equity market making activities have been
relatively consistent during the period. In fiscal 1993 and the latter
half of 1995, both periods of declining interest rates, positive fixed
income trading results were realized, while the rising rate environment
present during most of fiscal 1994 was an extremely difficult period for
fixed income securities.
The increase in financial service fees is a result of the growth of
the Company's retail client base. Examples of items in this category are
IRA account fees, transfer and postage charges, and money market
distribution and processing fees.
The jump in other income from 1993 to 1994 was primarily due to
increased floor brokerage revenues as the Company increased its number of
floor traders during the active market period through mid-1994. In the
latter half of 1994, the Company's internal order flow slowed somewhat,
allowing more time to execute trades on behalf of other firms.
Year Ended
Sept. 29, % Incr.Sept. 30, % Incr. Sept. 24,
1995 (Decr.) 1994 (Decr.) 1993
Expenses: (000's) (000's) (000's)
-----------------------------------------------
Employee compensation:
Sales commissions $221,629 1% $219,291 11% $197,559
Administrative and benefit
costs 71,364 8% 65,895 28% 51,283
Incentive compensation 33,433 2% 32,893 (3%) 34,023
----------------------------------------------
Total employee compensation 326,426 3% 318,079 12% 282,865
----------------------------------------------
Communications 25,619 (3%) 26,420 32% 19,955
Occupancy and equipment 21,653 37% 15,758 29% 12,197
Clearance and floor brokerage 8,257 8% 7,644 12% 6,812
Interest 64,758 79% 36,154 110% 17,193
Business development 14,210 - 14,220 4% 13,646
Other 18,688 (14%) 21,644 15% 18,791
----------------------------------------------
$479,611 9% $439,919 18% $371,459
==============================================
Since several of the expense line items are explained by the
fluctuation in related revenues and others were relatively constant or
experienced a general corporate growth rate during this three year period,
the following discussion will focus on the expense items not falling into
either of these two categories.
The significant increase in administrative compensation and benefits
from 1993 to 1994 represents the impact of a full year of expenses
relating to the increased number of support personnel added during the
very active market period through 1993. Incentive compensation expenses
are based on departmental, subsidiary and firm-wide profitability.
The sharp rise in communications expense from 1993 to 1994 primarily
reflects the costs associated with the introduction of a satellite-based
communication system.
Occupancy and equipment has risen at a rate which has outpaced
general firm growth. The increase from 1993 to 1994 was due primarily to
the mid-1993 completion of the Company's second headquarters building,
generating a full year of associated costs in 1994. Throughout the three
year period, numerous retail branch office spaces were increased and/or
upgraded and many account executive workstations, which are depreciated
over very short periods for financial reporting purposes, were added.
Liquidity and Capital Resources
Net cash from operating activities during the current year was
$258,539,000. Cash was generated by increased customer balances in the
credit interest program and by fluctuations in various asset and liability
accounts.
Investing activities required $57,653,000 during the year. Net
additions to fixed assets consumed $8,656,000, the majority of which was
for the purchase of computers and office furniture and equipment. Net
purchases, sales and maturations of investments consumed $48,997,000.
These investments were primarily mortgage-backed securities purchased by
Raymond James Bank, FSB.
Financing activities required $7,705,000, primarily the result of
dividends paid on the Company's common stock and treasury stock purchases.
The Company has long-term debt in the amount of $13,084,000 in the
form of a mortgage on its headquarters office building. The Company
completed construction of a second building, occupied in the spring of
1993, adjacent to its existing headquarters building. The Company has not
obtained long-term financing for the second building.
The Company has three committed lines of credit. During 1995, the
parent company obtained an unsecured $50 million line for general
corporate purposes. In conjunction with the residential mortgage
securitization effort, a $50 million warehousing line was established.
Finally, a $50 million line was established to finance Raymond James
Credit Corporation, a Regulation G subsidiary organized to provide loans
collateralized by restricted or control shares of public companies.
Subsequent to yearend, the Company has terminated its mortgage
securitization efforts and will, therefore, be terminating the related
line of credit. In addition, Raymond James & Associates, Inc. has
uncommitted lines of credit aggregating $255,000,000.
The Company's broker-dealer subsidiaries are subject to requirements
of the SEC relating to liquidity and capital standards (see Notes to
Consolidated Financial Statements).
Effects of Recently Issued Accounting Standards
During the year, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" ("FAS 115") and Statement of Financial Accounting
Standards No. 119 "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments" ("FAS 119").
FAS 115 requires that certain securities, held by other than the
broker-dealer subsidiaries, formerly classified as short-term investments
or trading and investment account securities, be classified as available
for sale. The unrealized gains/losses, net of tax, on these securities
are reported as a separate component of shareholders' equity. FAS 119 did
not have a material impact on the Company's financial position, results of
operations or financial disclosures as the Company trades derivative
financial instruments primarily for customers and held no firm derivative
positions at yearend.
The Company will adopt Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" ("FAS 123") in fiscal
year 1997. FAS 123 is not expected to have a material impact on the
Company's financial position or results of operations but will require
extensive disclosures regarding the Company's stock option and employee
stock purchase plans.
Effects of Inflation
The Company's assets are primarily liquid in nature and are not
significantly affected by inflation. Management believes that the
replacement cost of property and equipment would not materially affect
operating results. However, the rate of inflation affects the Company's
expenses, including employee compensation, communications and occupancy,
which may not be readily recoverable through charges for services provided
by the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial statements, schedules and exhibits filed under
this item are listed in the index appearing on page F-1 of this
report.
(b) QUARTERLY FINANCIAL INFORMATION
(In thousands, except share amounts)
1995 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
----------------------------------------------
Revenues $115,712 $125,678 $148,943 $163,737
Income before income taxes 12,524 16,295 21,670 23,970
Net income 7,891 10,100 13,838 14,312
Net income per share .38 .49 .67 .69
1994 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
----------------------------------------------
Revenues $134,413 $130,069 $117,737 $124,917
Income before income taxes 21,208 19,715 11,879 14,415
Net income 13,278 12,348 7,448 8,995
Net income per share .62 .57 .35 .43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the registrant (including its significant
subsidiaries) who are not Directors of the registrant are as follows:
Lynn Pippenger 57 Secretary and Treasurer; Senior
Vice President-Finance of RJA, Secretary
and/or Treasurer and Director of
certain RJF subsidiaries.
Jeffrey P. Julien 39 Vice President - Finance and Chief
Financial Officer, Director and/or
officer of certain RJF subsidiaries.
Mary Jean Kissner 38 Vice President and Tax Manager.
Jennifer Ackart 31 Controller.
The information required by Item 10 relating to Directors of the
registrant is incorporated herein by reference to the registrant's
definitive proxy statement for the 1996 Annual Meeting of Shareholders.
Such proxy statement will be filed with the SEC prior to January 25, 1996.
ITEMS 11,12 AND 13.
The information required by Items 11, 12 and 13 is incorporated
herein by reference to the registrant's definitive proxy statement for the
1996 Annual Meeting of Shareholders. Such proxy statement will be filed
with the SEC prior to January 25, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Exhibits required by this Item are either listed in the index
appearing on page F-1 of this report or have been previously
filed with the SEC.
(b) Financial statement schedules required by this Item are listed
in the index appearing on page F-1 of this report.
(c) The Company filed a report on Form 8-K on February 28, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of St. Petersburg, State of Florida, on the 15th day of December,
1995.
RAYMOND JAMES FINANCIAL, INC.
By /s/ THOMAS A. JAMES
Thomas A. James, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ THOMAS A. JAMES Chairman and Chief December 15, 1995
Thomas A. James Executive Officer
/s/ FRANCIS S. GODBOLD President and Director December 15, 1995
Francis S. Godbold
/s/ M. ANTHONY GREENE Executive Vice President December 15, 1995
M. Anthony Greene and Director
/s/ ROBERT F. SHUCK Vice Chairman and Director December 15, 1995
Robert F. Shuck
/s/ JEFFREY P. JULIEN Vice President - Finance December 15, 1995
Jeffrey P. Julien (Chief Financial Officer)
/s/ JENNIFER C. ACKART Controller (Chief December 15, 1995
Jennifer C. Ackart Accounting Officer)
/s/ JONATHAN A. BULKLEY Director December 15, 1995
Jonathan A. Bulkley
/s/ HERBERT E. EHLERS Director December 15, 1995
Herbert E. Ehlers
/s/ THOMAS S. FRANKE Director December 15, 1995
Thomas S. Franke
/s/ HARVARD H. HILL, JR. Director December 15, 1995
Harvard H. Hill, Jr.
/s/ CHRISTOPHER W. JAMES Director December 15, 1995
Christopher W. James
/s/ PAUL W. MARSHALL Director December 15, 1995
Paul W. Marshall
/s/ J. STEPHEN PUTNAM Executive Vice President December 15, 1995
J. Stephen Putnam and Director
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS PAGE(S)
Report and Consent of Independent Certified Public
Accountants F-2
Consolidated Statement of Financial Condition
as of September 29, 1995 and September 30, 1994 F-3
Consolidated Statement of Income for the Three Years
Ended September 29, 1995 F-4
Consolidated Statement of Changes in Shareholders' Equity
for the Three Years Ended September 29, 1995 F-5
Consolidated Statement of Cash Flows
for the Three Years Ended September 29, 1995 F-6-7
Summary of Significant Accounting Policies F-8-11
Notes to Consolidated Financial Statements F-12-22
EXHIBITS
11 Computation of Earnings per Share F-23
SCHEDULES AND EXHIBITS EXCLUDED
All schedules and exhibits not included are not applicable, not
required or would contain information which is included in the
Consolidated Financial Statements, Summary of Significant Accounting
Policies, or the Notes to Consolidated Financial Statements.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Raymond James Financial, Inc.
In our opinion, the consolidated financial statements listed in the
index appearing on page F-1 present fairly, in all material respects,
the financial position of Raymond James Financial, Inc. and its
subsidiaries at September 29, 1995 and September 30, 1994, and the
results of their operations and their cash flows for each of the three
years in the period ended September 29, 1995, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Tampa, Florida
November 16, 1995
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-54071, 33-60608 and 33-38390) of
Raymond James Financial, Inc. of our report dated November 16, 1995
appearing on page F-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Tampa, Florida
December 15, 1995
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in thousands, except share amounts)
September 29, September 30,
1995 1994
------------------------------
ASSETS
Cash and cash equivalents $ 86,417 $ 81,800
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 3,158 5,398
Securities purchased under agreements to resell 330,804 140,000
Short-term and other investments 34,017 48,836
Other short-term investments - 19,553
Trading and investment account securities 74,815 169,381
Available for sale securities 114,941 -
Held to maturity securities 11,210 -
Receivables:
Brokerage customers 397,201 348,077
Stock borrowed 775,288 747,272
Brokers, dealers and clearing organizations 49,135 14,410
Other 24,886 14,643
Investment in leveraged lease 10,581 9,940
Property and equipment, net 40,946 42,080
Deferred income taxes 20,980 20,584
Prepaid expenses and other assets 38,336 36,288
--------------------------
$2,012,715 $1,698,262
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage note payable $ 13,084 $ 13,243
Payables:
Brokerage customers 774,476 516,794
Stock loaned 785,784 771,666
Brokers, dealers and clearing organizations 17,542 23,837
Trade and other 58,721 46,811
Trading account securities sold but not yet
purchased 17,377 33,032
Accrued compensation 73,367 59,514
Income taxes payable 6,171 5,913
-------------------------
1,746,522 1,470,810
-------------------------
Commitments and contingencies (Note 9)
Shareholders' equity:
Preferred stock; $.10 par value; authorized
10,000,000 shares; issued and outstanding -0- shares - -
Common stock; $.01 par value; authorized
50,000,000 shares; issued 21,777,271 shares 217 217
Additional paid-in capital 50,685 52,375
Unrealized gain on securities available
for sale, net of deferred taxes 146 -
Retained earnings 231,029 192,280
--------------------------
282,077 244,872
Less: 1,163,573 and 1,282,929 common shares
in treasury, at cost (15,884) (17,420)
--------------------------
266,193 227,452
--------------------------
$2,012,715 $1,698,262
==========================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of
these financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
Year Ended
September 29, September 30, September 24,
1995 1994 1993
--------------------------------------------
Revenues:
Securities commissions $327,547 $303,193 $276,289
Investment banking 43,004 60,219 60,001
Investment advisory fees 42,922 51,153 46,507
Interest 97,211 58,542 33,616
Correspondent clearing 3,721 3,866 4,164
Net trading and investment
profits 12,637 6,843 14,846
Financial service fees 17,154 13,446 11,907
Other 9,874 9,874 4,417
----------------------------------------
554,070 507,136 451,747
----------------------------------------
Expenses:
Employee compensation 326,426 318,079 282,865
Communications 25,619 26,420 19,955
Occupancy and equipment 21,653 15,758 12,197
Clearance and floor brokerage 8,257 7,644 6,812
Interest 64,758 36,154 17,193
Business development 14,210 14,220 13,646
Other 18,688 21,644 18,791
----------------------------------------
479,611 439,919 371,459
----------------------------------------
Income before provision for
income taxes 74,459 67,217 80,288
Provision for income taxes 28,318 25,148 30,941
----------------------------------------
Net income $ 46,141 $ 42,069 $ 49,347
========================================
Net income per share $ 2.23 $ 1.97 $ 2.28
========================================
Average common and common
equivalent shares outstanding 20,705 21,359 21,623
========================================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of
these financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except per share amounts)
Preferred Common Additional Treasury Stock Total
Stock Stock Paid-in Retained Common Share-
Shares Amount Shares Amount Earnings Shares Amount holder's
Equity
--------------------------------------------------------------------
Balance at - - 14,518 $145 $52,028$112,214 (369) $(3,452) $160,935
Sept.25,1992
Net income 49,347 49,347
Cash dividends
-common stock
($.21 per share) (4,540) (4,540)
Purchase of
treasury shares (160) (2,772) (2,772)
Employee stock
purchases 530 62 698 1,228
Exercise of
stock options (943) 159 1,784 841
3-for-2 stock
dividend 7,259 72 (72)(154) -
Non-qualified
option exercises 526 526
-------------------------------------------------------------------
Balances at
Sept.24,1993 - - 21,777 217 52,141 156,949 (462) (3,742) 205,565
-------------------------------------------------------------------
Net income 42,069 42,069
Cash dividends
-common stock
($.32 per share) (6,733) (6,733)
Purchase of
treasury shares (1,113) (16,604)(16,604)
Employee stock
purchases 442 165 1,789 2,231
Exercise of stock
options (632) 127 1,137 505
Sale of stock
options 202 202
Non-qualified
option exercises 222 222
Cash paid for
fractional shares (5) (5)
-------------------------------------------------------------------
Balances at
Sept.30,1994 - - 21,777 217 52,375 192,280(1,283) (17,420)227,452
-------------------------------------------------------------------
Net income 46,141 46,141
Cash dividends
-common stock
($.36 per share) (7,392) (7,392)
Purchase of
treasury shares (234) (3,296) (3,296)
Employee stock
purchases 139 107 1,455 1,594
Exercise of
stock options (1,974) 247 3,377 1,403
Non-qualified
option exercises 145 145
Net unrealized
gain on securities
available for sale 146 146
--------------------------------------------------------------------
Balances at
Sept.29,1995 - - 21,777 $217 $50,685$231,175(1,163)$(15,884)$266,193
====================================================================
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(continued on next page)
Year Ended
September 29, September 30, September 24,
1995 1994 1993
------------------------------------------
Cash flows from operating activities:
Net income $ 46,141 $ 42,069 $ 49,347
------------------------------------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 9,673 7,011 4,989
Unrealized gain on investment
account securities (659) (716) (338)
Unrealized gain and premium
amortization on securities (374) - -
Gain on sale of securities (489) - -
Gain on sale of property and
equipment 117 128 128
Provision for bad debts 234 (25) (185)
Provision for other accruals 2,890 5,041 6,635
Decrease (increase) in assets:
Short-term investments 500 20,490 (28,384)
Securities and investments (12,963) (13,905) (7,392)
Receivables:
Brokerage customers (49,358) (80,712) (75,917)
Stock borrowed (28,016) 16,106 (503,610)
Brokers, dealers and clearing
organizations (34,725) 17,588 (22,271)
Other (10,243) 10,579 (4,565)
Trading account securities, net 50,260 (64,202) (15,394)
Deferred income taxes (396) (2,690) (1,964)
Prepaid expenses and other assets (2,689) 2,683 (8,431)
Increase (decrease) in liabilities:
Payables:
Brokerage customers 257,682 183,835 55,774
Stock loaned 14,118 20,226 504,702
Brokers, dealers and clearing
organizations (6,295) 7,870 (1,732)
Trade and other 9,020 359 3,232
Accrued compensation 13,853 (2,706) 14,212
Income taxes payable 258 (2,384) 691
------------------------------------------
Total adjustments 212,398 124,576 (79,820)
------------------------------------------
Net cash provided by (used in)
operating activities 258,539 166,645 (30,473)
-------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (9,646) (14,677) (15,151)
Sales of property and equipment 990 627 93
Sales of investment account
securities 11,371 5,076 2,753
Sales of available for sale
securities 17,434 - -
Purchases of investment account
securities (1,863) (63,303) (3,561)
Purchases of available for sale
securities (91,063) - -
Purchases of held to maturity
securities (8,033) - -
Security maturations 23,157 - -
------------------------------------------
Net cash used in investing activities (57,653) (72,277) (15,866)
-----------------------------------------
Cash flows from financing activities:
Repayments on mortgage note (159) (144) (131)
Exercise of stock options and
employee stock purchases 3,142 2,958 2,378
Purchase of treasury stock (3,296) (16,604) (2,772)
Cash dividends on common stock (7,392) (6,733) (4,540)
Sale of stock options - 202 -
Cash paid for fractional shares - (5) -
----------------------------------------
Net cash used in financing activities (7,705) (20,326) (5,065)
-----------------------------------------
Net increase (decrease) in cash and
cash equivalents 193,181 74,042 (51,404)
Cash and cash equivalents at begin-
ning of year 227,198 153,156 204,560
----------------------------------------
Cash and cash equivalents at end of
year $420,379 $227,198 $153,156
========================================
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 57,834 $ 36,663 $ 15,634
Cash paid for taxes $ 29,216 $ 30,033 $ 32,214
========================================
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of
these financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Raymond James Financial, Inc. is a holding company which, through its
subsidiaries, is engaged principally in the securities brokerage business,
including the underwriting, distribution, trading and brokerage of equity
and debt securities and the sale of mutual funds and other investment
products. In addition, it provides investment management services for
retail and institutional customers and banking services for retail
customers. The accounting and reporting policies of Raymond James
Financial, Inc. and its subsidiaries (the "Company") conform to generally
accepted accounting principles, the more significant of which are
summarized below:
Basis of consolidation
The consolidated financial statements include the accounts of Raymond
James Financial, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation. The
consolidated subsidiaries at September 29, 1995 are as follows:
Raymond James & Associates, Inc. RJ Health Properties, Inc.
Investment Management & Research, Inc. RJ Leasing, Inc.
Robert Thomas Securities, Inc. RJ Leasing - 2, Inc.
Eagle Asset Management, Inc. RJ Medical Investors, Inc.
Heritage Asset Management, Inc. RJ Mortgage Acceptance Corporation
Raymond James Trust Company RJ Oil and Gas, Inc.
Raymond James Bank, FSB RJ Partners, Inc.
Sound Trust Company RJ Realty, Inc.
Planning Corporation of America RJ Residential Funding Corp.
RJ Properties, Inc. RJ Specialist, Inc.
Gateway Assignor Corporation, Inc. RJ Telecommunications, Inc.
Heritage International, Ltd. RJ Washington Square
MorCap, Inc. Raymond James Credit Corporation,
PCAF, Inc. Inc.
RJA Municipal ABS, Inc. Raymond James International
RJ Communication, Inc. Holdings, Inc.
RJ Credit Partners, Inc. Raymond James Mortgage Capital,Inc.
RJ Equities, Inc. Raymond James Partners, Inc.
RJ Equities - 2, Inc. Raymond James Realty Advisors,Inc.
RJ Government Securities, Inc. Raymond James Structured Mortgage
Corporation
Value Partners, Inc.
All consolidated subsidiaries are 100% owned by the Company except for
RJ Properties, Inc., which is 85% owned.
Reporting period
The Company's fiscal year ends on the last Friday in September of each
year.
Recognition of revenues
Securities transactions and related commission revenues and expenses
are recorded on a trade date basis for fiscal year 1995 and on a settlement
date basis for fiscal years 1994 and 1993, which is not materially
different from trade date.
Revenues from limited partnerships and investment banking are recorded
at the time the transaction is completed and the related income is
reasonably determinable. Investment banking revenues include sales credits
earned in connection with the distribution of the underwritten securities.
The Company earns an advisory fee based on a client's portfolio value
on portfolios managed by its investment advisor subsidiaries. These fees
are recorded under the accrual method. In addition, on certain portfolios,
the Company earns performance fees which are recorded when earned.
Cash and cash equivalents
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents for purposes of the
consolidated statement of cash flows. These consist primarily of U.S.
Treasury Securities and are stated at cost, which approximates market at
fiscal yearend.
It is the Company's policy to obtain possession and control of
securities purchased under resale agreements. The net fair value of
securities purchased under resale agreements approximates their carrying
value, as such financial instruments are predominantly short-term in
nature. The Company monitors the risk of loss by assessing the market value
of the underlying securities as compared to the related receivable or
payable, including accrued interest, and requests additional collateral
where deemed appropriate. At September 29, 1995, there were no agreements
with any individual counterparties where the risk of loss exceeded 10% of
shareholders' equity.
Short-term and other investments
Short-term and other investments segregated pursuant to Federal
Regulations are stated at market. Other short-term investments are stated
at amortized cost, which approximates market value at fiscal yearend.
Securities owned
The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
("FAS 115"), as of October 1, 1994. FAS 115 requires investments in debt
and equity securities to be classified as either "held to maturity,"
"trading," or "available for sale." The accounting treatment for
unrealized gains and losses on those securities is then determined by the
classification chosen. The trading and investment account securities held
by the brokerage subsidiaries are classified as trading. Investment
account securities not readily marketable are carried at estimated fair
value as determined by management. Trading securities are carried at
market value with realized and unrealized gains and losses included in
earnings. Securities available for sale are carried at fair value, with
unrealized gains and losses reported as a separate component of
shareholders' equity, net of deferred taxes, and realized gains and losses,
determined on a specific identification basis, included in earnings.
Securities classified as held to maturity are carried at amortized
cost and are adjusted for premium amortization or discount accretion with
realized gains and losses included in earnings. At September 29, 1995,
Raymond James Bank, FSB, holds one FHLMC mortgage-backed security in its
held to maturity portfolio with an amortized cost of $2,800,000 and an
estimated market value of $2,865,000, and the parent company holds U.S.
Treasury Notes and municipal bonds with an amortized cost of $8,410,000 and
an estimated market value of $8,475,000. U.S. Treasury Notes with an
amortized cost of $3,003,000 mature within one year. The remainder of the
securities mature in one to five years.
For fiscal years 1994 and 1993, trading and investment account
securities are recorded at market value with unrealized appreciation or
depreciation reflected in income currently. Other short-term investments
are stated at amortized cost, which approximates market value at fiscal
year end.
Property and equipment
Property, equipment and leasehold improvements are stated at cost less
accumulated depreciation. Depreciation of assets is provided principally
using the straight-line method for financial reporting purposes over the
estimated useful lives of the assets, which range from two to seven years
for furniture and equipment and fifteen to thirty-one years for buildings
and land improvements. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the estimated
useful lives of the assets. For income tax purposes, assets are
depreciated using accelerated methods.
Additions, improvements and expenditures for repairs and maintenance
that significantly extend the useful life of an asset are capitalized.
Other expenditures for repairs and maintenance are charged to operations in
the period incurred. Gains and losses on disposals of fixed assets are
reflected in income in the period incurred.
Clearing charges to correspondents
Under clearing agreements, the Company clears trades for unaffiliated
correspondent brokers and retains a portion of commissions as a fee for its
services. The Company records clearing charges net of commissions
remitted. Total commissions generated by correspondents were $16,155,000,
$17,232,000 and $23,044,000, and commissions remitted totaled $12,434,000,
$13,366,000 and $18,880,000 for the years ended September 29, 1995,
September 30, 1994 and September 24, 1993, respectively.
Income taxes
The Company utilizes the asset and liability approach defined in
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). FAS 109 requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement amounts and the tax
bases of assets and liabilities.
Net income per share
Earnings per share are computed using weighted average common stock
and common stock equivalents outstanding. Common stock equivalents include
shares issuable under stock options and are determined under the treasury
stock method. All per share amounts have been restated to give retroactive
effect to the common stock dividend on November 15, 1993.
Reclassifications
Certain amounts from prior years have been reclassified for
consistency with current year presentation. These reclassifications were
not material to the consolidated financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - RECEIVABLES FROM AND PAYABLES TO BROKERAGE CUSTOMERS:
Receivables from and payables to brokerage customers include amounts
arising from normal cash and margin transactions. Securities owned by
brokerage customers are held as collateral for receivables. Such
collateral is not reflected in the accompanying consolidated financial
statements. The amount receivable from customers is shown net of an
allowance for doubtful accounts of approximately $1,177,000 and $1,411,000
as of September 29, 1995 and September 30, 1994, respectively. The Company
pays interest at varying rates for qualifying customer funds on deposit
awaiting reinvestment. Such funds on deposit totaled $571,628,000 and
$378,130,000 at September 29, 1995 and September 30, 1994, respectively.
Other funds on deposit on which the Company does not pay interest totaled
$101,160,000 and $90,386,000 at September 29, 1995 and September 30, 1994,
respectively. Unsecured receivables, other than affiliated company amounts
which are eliminated in consolidation, are not significant.
NOTE 2 - TRADING AND INVESTMENT ACCOUNT SECURITIES (in thousands):
September 29, 1995 September 30, 1994
-----------------------------------------------------
Securities Securities
sold but sold but
Securities not yet Securities not yet
owned purchased owned purchased
_____________________________________________________
Marketable:
Stocks and warrants $ 14,348 $ 10,897 $ 12,136 $ 3,120
Municipal obligations 20,366 979 74,118 66
Corporate obligations 11,346 434 12,425 885
Government obligations 15,611 5,067 67,308 28,836
Other 11,229 - 1,055 125
Non-marketable 1,915 - 2,339 -
---------------------------------------------------
$ 74,815 $ 17,377 $169,381 $ 33,032
===================================================
NOTE 3 - AVAILABLE FOR SALE SECURITIES (in thousands):
The amortized cost and estimated market values of securities available
for sale at September 29, 1995 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------------------------------------------
Mortgage-backed securities:
FNMA $ 38,912 $182 $ (10) $ 39,084
FHLMC 44,837 157 (85) 44,909
GNMA 15,183 42 (31) 15,194
CMO 771 - (2) 769
U.S. Treasury Securities 10,013 57 (5) 10,065
U.S. Government Agency
Obligations 4,988 - (68) 4,920
------------------------------------------------
$114,704 $438 $(201) $114,941
================================================
The U.S. Treasury Securities and U.S. Government Agency Obligations
mature after one year and within 5 years. The remainder of the available
for sale securities are mortgage-backed securities.
NOTE 4 - LEVERAGED LEASE (in thousands):
On September 24, 1993, the Company became the lessor in a leveraged
commercial aircraft transaction with a major domestic airline. The
Company's equity investment of $8.6 million represented 21% of the purchase
price; the remaining 79% was funded by two public debt issues in the form
of equipment trust certificates. The residual value of the aircraft at the
end of the 22.5 year lease term is projected to be 5% of the original cost.
September 29, September 30,
1995 1994
---------------------------------
Rents receivable (net of principal and
interest on the non-recourse debt) $ 9,793 $ 9,793
Unguaranteed residual value 2,026 2,026
Unearned income (1,238) (1,879)
---------------------------------
Investment in leveraged lease 10,581 9,940
Deferred taxes arising from
leveraged lease (8,617) (5,352)
---------------------------------
Net investment in leveraged lease $ 1,964 $ 4,588
=================================
NOTE 5 - PROPERTY AND EQUIPMENT (in thousands):
September 29, September 30,
1995 1994
--------------------------------
Land $ 6,287 $ 6,287
Buildings and improvements 26,643 26,158
Furniture, fixtures, equipment
and leasehold improvements 53,946 45,893
--------------------------------
86,876 78,338
Less: accumulated depreciation
and amortization (45,930) (36,258)
-------------------------------
$40,946 $42,080
===============================
NOTE 6 - BORROWINGS:
The mortgage note payable requires monthly principal and interest
payments of approximately $120,000 with a balloon payment due December 1,
1997. The mortgage bears interest at 9.75% and is secured by land,
buildings and improvements with a net book value of $10,783,000 at
September 29, 1995. Principal maturities under this mortgage note payable
for the succeeding five fiscal years are as follows: 1996 - $175,000; 1997
- - $193,000; 1998 - $12,716,000; 1999 and beyond - $0.
During fiscal year 1995, the Company established three $50 million
committed lines of credit with commercial banks. Borrowings under the
lines of credit bear interest at various rates (Fed Funds plus 2%, the
lesser of prime rate or Fed Funds plus 1/2%, or LIBOR plus 3/4%). The
lines of credit require that the Company, or one of its subsidiaries,
maintain certain net worth levels, limit other leases and debt and require
the Company to follow certain other sound business practices. The Company
paid $100,000 in loan commitment fees during fiscal year 1995. There were
borrowings of $2,510,000 at 8.2%, collateralized by mortgage loans with a
fair value of $7,376,000, outstanding at September 29, 1995. The interest
rate on these borrowings was Fed Funds plus 2%, and ranged from 7.5% to
8.2% during the year.
The Company also maintains uncommitted lines of credit aggregating
$255,000,000 with commercial banks ($200,000,000 secured and $55,000,000
unsecured). Borrowings under the lines of credit bear interest, at the
Company's option, at the bank's prime rate, Fed Funds rate plus 1 1/4%, or
LIBOR plus 3/4%. There were no short-term borrowings outstanding at
September 29, 1995 or September 30, 1994. The interest rate on these
borrowings ranged from 5.08% to 7.00% in 1995 and 4.88% to 5.46% in 1994.
Loans on the secured, uncommitted lines of credit are collateralized by
firm or customer margin securities.
NOTE 7 - BANK OPERATIONS AND DEPOSITS:
On May 6, 1994, the Company organized Raymond James Bank, FSB, ("RJ
Bank") in conjunction with the purchase of the deposits of certain branches
of a federal savings bank from the Resolution Trust Corporation ("RTC") for
a nominal purchase price. The Company contributed $25 million in capital
to fund the bank's start-up and investments.
A summary of customer deposit accounts (in thousands) and weighted
average interest rates follows:
September 29, 1995 September 30, 1994
--------------------------------------------------
Weighted Weighted
Balance Average Rate Balance Average Rate
Demand deposits:
Non-interest bearing $ 56 - $ 46 -
Interest bearing 760 2.95% 853 2.54%
Savings accounts 89,998 4.95% 42,744 3.82%
Certificates of deposit 10,874 5.59% 4,635 4.33%
-------------------------------------------------
$101,688 5.00% $48,278 3.84%
=================================================
The certificates of deposit mature as follows: $8,059,000 in 1996,
$1,890,000 in 1997, $45,000 in 1998, $231,000 in 1999 and $649,000 in 2000.
Certificates of deposit and savings accounts in amounts of $100,000 or more
at September 29, 1995 and September 30, 1994 were approximately $22,558,000
and $4,738,000, respectively.
RJ Bank has not yet begun making loans to customers, thus its assets
consist primarily of investments in mortgage-backed securities.
Certificates of deposit and savings accounts in amounts of $100,000 or
more at September 29, 1995 and September 30, 1994 were approximately
$22,558,000 and $4,738,000, respectively.
RJ Bank is subject to various regulatory and capital requirements and
was in compliance with all requirements throughout the fiscal year.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), RJ Bank is subject to rules limiting brokered deposits
and related interest rates. Under these rules, banks that are deemed "well-
capitalized" may accept brokered deposits without restriction, and banks
deemed "adequately capitalized" may do so with a waiver from the FDIC. An
"undercapitalized" bank is not eligible for a waiver and may not accept
brokered deposits. At September 29, 1995, management believes RJ Bank met
the definition of the well-capitalized category.
At September 29, 1995, RJ Bank exceeded the tangible capital, core
capital, core/leverage capital, tier/risk-based capital and total risk-
based capital levels mandated by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 and FDICIA. As part of the purchase
of deposits from the RTC, RJ Bank is required to maintain a total risk-
based capital ratio of at least 10% for its first three years of
operations. At September 29, 1995, RJ Bank's total risk-based capital
ratio was 113.9%.
NOTE 8 - FEDERAL AND STATE INCOME TAXES (in thousands):
The provision (benefit) for income taxes consists of:
Year Ended
September 29, September 30, September 24,
1995 1994 1993
-------------------------------------------
Current provision:
Federal $24,790 $23,975 $28,511
State 4,000 3,762 4,384
-------------------------------------------
28,790 27,737 32,895
-------------------------------------------
Deferred benefit:
Federal (425) (2,277) (1,693)
State (47) (312) (261)
-------------------------------------------
(472) (2,589) (1,954)
-------------------------------------------
$28,318 $25,148 $30,941
===========================================
The Company's effective tax rate on pre-tax income differs from the
statutory federal income tax rate due to the following:
Year Ended
September 29, September 30, September 24,
1995 1994 1993
-------------------------------------------
Provision calculated at
statutory rates $26,061 $23,526 $27,900
State income taxes, net
of federal benefit 2,570 2,243 2,690
Other (313) (621) 351
-------------------------------------------
$28,318 $25,148 $30,941
===========================================
The tax effects of the principal temporary differences resulting in
deferred tax benefits are as follows:
Year Ended
September 29, September 30, September 24,
1995 1994 1993
-------------------------------------------
Deferred compensation $ (3,548) $(4,143) $(1,338)
Accrued expenses (320) (2,697) (1,670)
Accelerated depreciation (374) 700 303
Unrealized gains on securities 234 98 166
Equity in partnerships (5) 185 (143)
Capital loss carryover 625 (797) 360
Aircraft lease 3,266 4,776 576
Other, net (350) (711) (208)
-----------------------------------------
$ (472) $(2,589) $(1,954)
=========================================
The major deferred tax asset (liability) items, as computed under FAS
109, are as follows:
September 29, September 30,
1995 1994
------------------------------------------
Deferred tax assets:
Deferred compensation $ 15,728 $ 12,099
Accrued expenses 13,501 12,672
Capital loss carryover 335 960
Depreciation 837 135
Unrealized losses on securities 13 206
Equity in partnerships 501 602
Other 1,872 1,240
-----------------------------------------
Total deferred tax assets 32,787 27,914
-----------------------------------------
Deferred tax liabilities:
Accelerated depreciation (839) (510)
Equity in partnerships (1,018) (1,125)
Aircraft lease (8,617) (5,352)
Unrealized gains on securities (221) -
Accrued income (590) -
Other, net (522) (343)
-----------------------------------------
Total deferred tax liabilities (11,807) (7,330)
-----------------------------------------
Net deferred tax assets $ 20,980 $ 20,584
=========================================
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
Long-term lease agreements expire at various times from 1996 through
2002. Minimum annual rentals under such agreements for the succeeding five
fiscal years are approximately: $5,988,000 in 1996, $5,487,000 in 1997,
$4,153,000 in 1998, $3,047,000 in 1999 and $2,879,000 in 2000. Rental
expense incurred under all leases, including equipment under short-term
agreements, aggregated $5,481,000, $5,435,000 and $4,482,000 in 1995, 1994
and 1993, respectively.
In connection with a real estate limited partnership syndicated by
Raymond James & Associates, Inc., the Company was contingently liable for
$385,000 at September 29, 1995 in the form of a loan guarantee. The
Company has no reserves on its books attributable to this guarantee since,
in the opinion of management, the likelihood of payment under this
guarantee is remote.
In connection with the early payoff of its $5.8 million loan to
Cumberland Healthcare Fund, L.P. I-A, the Company has a commitment to
relend up to $5 million upon request. Although no use of this facility is
currently anticipated, any borrowings under this agreement would bear
interest at 15.5% per annum and would be secured by approximately $10
million of nursing home properties. The commitment expires on October 1,
1996, at which time any outstanding balances would be due and payable.
The Company has committed to lend to, or guarantee other debt for,
Gateway Tax Credit Funds ("Gateway") up to $6 million upon request. It is
anticipated that Gateway will begin requesting funds or guarantees in
December, 1995. Any borrowings will bear interest at broker call plus 1%
per annum. Gateway will be charged 1% for amounts guaranteed. The
borrowings would be secured by properties under development. The
commitment expires in November 1997 at which time any outstanding balances
would be due and payable.
In the normal course of business, the Company enters into underwriting
commitments. Transactions relating to such commitments that were open at
September 29, 1995 and were subsequently settled had no material effect on
the consolidated financial statements as of that date.
At September 29, 1995, the Company had a letter of credit outstanding
of $200,000 and excess customer margin securities valued at $13,211,000 on
deposit with a clearing organization, which are used to satisfy margin
deposit requirements.
In the normal course of business, the Company, as general partner, is
contingently liable for the obligations of various limited partnerships
engaged primarily in securities investments and real estate activities. In
the opinion of the Company, such liabilities, if any, for the obligations
of the partnerships will not in the aggregate have a material adverse
effect on the Company's consolidated financial position.
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations of the complaints in these cases and believes that there are
meritorious defenses in each of these lawsuits. In view of the number and
diversity of claims against the Company, the number of jurisdictions in
which litigation is pending and the inherent difficulty of predicting the
outcome of litigation and other claims, the Company cannot state with
certainty what the eventual outcome of pending litigation or other claims
will be. In the opinion of management, based on discussions with counsel,
the outcome of the matters will not result in a material adverse effect on
the financial position or results of operations of the Company.
NOTE 10 - CAPITAL TRANSACTIONS:
The Company's Board of Directors has, from time to time, adopted
resolutions authorizing the Company to repurchase its common stock for the
funding of its incentive stock option and stock purchase plans and other
corporate purposes. On May 12, 1994, the Board of Directors authorized the
repurchase of an additional 1,000,000 shares of common stock, and on
February 17, 1995, the Board of Directors authorized the purchase of an
additional 386,000 shares of common stock, bringing the total authorized to
3,125,000. Of these, 2,127,000 shares have been purchased through September
29, 1995.
On September 23, 1993, the Company's Board of Directors declared a 3-
for-2 stock split in the form of a dividend payable on November 15, 1993 to
shareholders of record on October 25, 1993. The Company's capital accounts
at September 24, 1993 were adjusted retroactively to give effect to the
dividend in the same manner as would have been done if the dividend were
paid before September 24, 1993.
NOTE 11 - EMPLOYEE BENEFIT PLANS:
The Company's profit sharing plan and employee stock ownership plan
provide certain death, disability or retirement benefits for all employees
who meet certain service requirements. Such benefits become fully vested
after seven years of qualified service. The Company also offers a plan
pursuant to section 401(k) of the Internal Revenue Code which, effective
January 1, 1994, provides for the Company to match 100% of the first $500
and 50% of the next $500 of compensation deferred by each participant
annually. The Company's deferred management bonus plan is a non-qualified
plan that provides retirement benefits for employees who meet certain
length of service and compensation requirements. Contributions to these
plans are made in amounts approved annually by the Board of Directors.
Compensation expense includes aggregate contributions to these plans of
$8,530,000, $7,257,000 and $8,696,000 for 1995, 1994 and 1993,
respectively. The employee stock purchase plan allows employees to
purchase shares of the Company's common stock on four specified dates
throughout the year at a 15% discount from market value, subject to certain
limitations.
On September 30, 1982, the Board of Directors of the Company adopted
an Incentive Stock Option Plan ("1982 Plan"), which covered an aggregate of
1,900,125 shares of common stock. Options were granted to registered
representatives of Raymond James & Associates, Inc. who achieved certain
gross commission levels and to key administrative employees of the Company.
The options were granted at fair market value. No compensation expense was
recognized with respect to these options. Options are exercisable in the
36th to 72nd months following the date of grant and only in the event that
the grantee is an employee of the Company at that time.
On August 20, 1992, the Board of Directors adopted the 1992 Incentive
Stock Option Plan which covers an aggregate of 1,050,000 shares of common
stock. The Plan was established to replace, on substantially the same
terms and conditions, the 1982 Plan.
On December 13, 1985, the Company's Board of Directors adopted a non-
qualified stock option plan which currently covers 1,013,000 shares of
common stock for the benefit of independent contractor registered
representatives of the Company. Options are exercisable five years after
grant date provided that the representative is still associated with the
Company.
The directors who are also employees of the Company adopted a non-
qualified stock option plan on December 13, 1990 under which the Company's
outside directors have been granted options covering 66,560 shares of the
Company's common stock. Options vest over a five year period from grant
date provided that the director is still associated with the Company.
The following table summarizes the option activity under these
programs for the three years ended September 29, 1995:
Shares Under Option Price
Option Range
Outstanding at September 25, 1992 1,036,979 $ 2.74 to $18.75
Granted 362,994 14.83 to 18.08
Canceled (79,800) 2.80 to 16.49
Exercised (238,859) 2.80 to 5.40
-----------------------------------
Outstanding at September 24, 1993 1,081,314 2.74 to 18.75
Granted 208,999 16.36 to 16.63
Canceled (31,787) 4.21 to 14.83
Exercised (127,475) 2.74 to 5.00
------------------------------------
Outstanding at September 30, 1994 1,131,051 3.00 to 16.63
Granted 109,625 13.75 to 21.75
Canceled (66,771) 4.74 to 18.08
Exercised (247,064) 3.25 to 14.67
-----------------------------------
Outstanding at September 29, 1995 926,841 $3.00 to 21.75
====================================
NOTE 12 - NET CAPITAL REQUIREMENTS:
The broker-dealer subsidiaries of the Company are subject to the
requirements of Rule 15c3-1 under the Securities Exchange Act of 1934. This
rule requires that aggregate indebtedness, as defined, not exceed fifteen
times net capital, as defined. Rule 15c3-1 also provides for an
"alternative net capital requirement" which, if elected, requires that net
capital be equal to the greater of $250,000 or two percent of aggregate
debit items computed in applying the formula for determination of reserve
requirements (see Note 13). The New York Stock Exchange may require a member
organization to reduce its business if its net capital is less than four
percent of aggregate debit items and may prohibit a member firm from
expanding its business and declaring cash dividends if its net capital is
less than five percent of aggregate debit items. Net capital positions of
the Company's broker-dealer subsidiaries were as follows:
September 29, September 30,
1995 1994
(dollar amounts in thousands) ----------------------------------
Raymond James & Associates, Inc.:
(alternative method elected)
Net capital as a percent of aggregate
debit items 23.00% 18.00%
Net capital $97,955 $65,208
Required net capital $ 8,594 $ 7,426
Excess net capital $89,361 $57,782
Investment Management & Research, Inc.:
Ratio of aggregate indebtedness to net
capital 2.14 1.29
Net capital $ 2,877 $ 4,432
Required net capital $ 410 $ 295
Excess net capital $ 2,467 $ 4,137
Robert Thomas Securities, Inc.:
Ratio of aggregate indebtedness to net
capital 4.95 3.16
Net capital $ 1,217 $ 1,190
Required net capital $ 402 $ 251
Excess net capital $ 815 $ 939
NOTE 13 - RESERVE REQUIREMENTS:
Rule 15c3-3 of the Securities Exchange Act of 1934 and the requirements
of the Commodity Exchange Act specify certain conditions under which brokers
and dealers carrying customer accounts are required to maintain cash or
qualified securities in a special reserve account for the exclusive benefit
of customers. Amounts to be maintained, if required, are computed in
accordance with a formula defined in the rule. At September 29, 1995,
Raymond James & Associates, Inc. had $367,979,000 (consisting of
$330,804,000 of securities purchased under agreements to resell, $34,017,000
in U.S. Treasury Notes and $3,158,000 in cash) in special reserve accounts
as compared to a reserve requirement of $321,377,000 at that date. At
September 30, 1994, this subsidiary had $194,234,000 (consisting of
$140,000,000 of securities purchased under agreements to resell, $48,836,000
in U.S. Treasury Notes and $5,398,000 in cash) in special reserve accounts
as compared to a reserve requirement of $176,969,000 at that date. At
September 29, 1995, all such repurchase agreements were on an overnight
basis with Cantor Fitzgerald Partners and Eastbridge Capital, Inc. The
Company monitors the market value of the underlying securities as compared
to the related receivable, including accrued interest, and requires
additional collateral where deemed appropriate.
Investment Management & Research, Inc. and Robert Thomas Securities,
Inc. are exempt from the provisions of Rule 15c3-3, since they clear all
transactions with and for customers on a fully-disclosed basis with Raymond
James & Associates, Inc.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
In the normal course of business, the Company purchases and sells
securities and commodities as either principal or agent on behalf of its
customers. If either the customer or a counterparty fails to perform, the
Company may be required to discharge the obligations of the nonperforming
party. In such circumstances, the Company may sustain a loss if the market
value of the security or futures contract is different from the contract
value of the transaction.
The Company also acts as an intermediary between broker-dealers and
other financial institutions whereby the Company borrows securities from one
broker-dealer and then lends them to another. Securities borrowed and
securities loaned are carried at the amount of cash collateral advanced and
received in connection with the transactions. The Company measures the
market value of the securities borrowed and loaned against the cash
collateral on a daily basis. The market value of securities borrowed and
securities loaned was $772,101,000 and $784,767,000, respectively, at
September 29, 1995 and $687,658,000 and $705,042,000, respectively, at
September 30, 1994. Additional cash is obtained as necessary to ensure such
transactions are adequately collateralized. If another party to the
transaction fails to perform as agreed (such as failure to deliver a
security or failure to pay for a security), the Company may incur a loss if
the market value of the security is different from the contract amount of
the transaction.
The Company has also loaned, to brokers and dealers, securities owned
by customers and others for which it has received cash or other collateral.
If a borrowing institution or broker-dealer does not return a security, the
Company may be obligated to purchase the security in order to return it to
the owner. In such circumstances, the Company may incur a loss equal to the
amount by which the market value of the security on the date of
nonperformance exceeds the value of the loan from the institution or the
collateral from the broker or dealer.
The Company has sold securities that it does not currently own and will
therefore be obligated to purchase such securities at a future date. The
Company has recorded $17,377,000 and $33,032,000 at September 29, 1995 and
September 30, 1994, respectively, which represents the market value of the
related securities at such dates. The Company is subject to loss if the
market price of those securities not covered by a hedged position increases
subsequent to September 29, 1995. The Company utilizes short government
obligations and equity securities to hedge long proprietary inventory
positions. At September 29, 1995, the Company had $7,712,000 in short
government obligations and $3,844,000 in short equity securities which
represented hedge positions. At September 30, 1994, the Company had
$26,046,000 in short government obligations and $2,412,000 in short equity
securities which represented hedge positions.
The Company enters into security transactions involving forward
settlement. Transactions involving future settlement give rise to market
risk, which represents the potential loss that can be caused by a change in
the market value of a particular financial instrument. The Company's
exposure to market risk is determined by a number of factors, including the
size, composition and diversification of positions held, the absolute and
relative levels of interest rates, and market volatility.
The majority of the Company's transactions and, consequently, the
concentration of its credit exposure is with customers, broker-dealers and
other financial institutions in the United States. These activities
primarily involve collateralized arrangements and may result in credit
exposure in the event that the counterparty fails to meet its contractual
obligations. The Company's exposure to credit risk can be directly impacted
by volatile securities markets which may impair the ability of
counterparties to satisfy their contractual obligations. The Company seeks
to control its credit risk through a variety of reporting and control
procedures, including establishing credit limits based upon a review of the
counterparties' financial condition and credit ratings. The Company
monitors collateral levels on a daily basis for compliance with regulatory
and internal guidelines and requests changes in collateral levels as
appropriate.
NOTE 15 - RELATED PARTIES:
On October 27, 1994, the Company and the then President and Chief
Investment Officer of its Eagle Asset Management, Inc. ("Eagle") subsidiary,
Herbert E. Ehlers ("Ehlers"), entered into a Separation Agreement by which
Ehlers (a director of the Company) and certain other Eagle personnel became
employees of a new firm, Liberty Investment Management, Inc. ("Liberty"),
effective December 31, 1994. Ehlers began operating Liberty as of January
1, 1995, and he remained a dual employee of Eagle and Liberty through June
1995, continuing as investment manager on certain retail accounts until they
were transferred to other portfolio managers. As of January 1, 1995,
Liberty assumed the responsibility for providing investment management
services to institutional growth equity accounts totaling $4.3 billion
formerly managed by Eagle. In accordance with Ehlers' employment agreement,
Eagle receives 50% of the revenues from these accounts through December 31,
1999, while bearing none of the expenses. At the end of this period, the
Company has the option to purchase 20% of Liberty at a predetermined price.
For the year ended September 29, 1995, Eagle recognized $7,233,000 in fees
from Liberty, which are included in investment advisory fees on the
consolidated statement of income. At September 29, 1995, $4,921,000 due
from Liberty is included in other receivable on the consolidated statement
of financial condition.
EXHIBIT 11
RAYMOND JAMES FINANCIAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
Year Ended
September 29, September 30, September 24,
1995 1994 1993
--------------------------------------------
Net income applicable to common
stock and other dilutive
securities $46,141 $42,069 $49,347
==========================================
Average number of common
shares and equivalents
outstanding during the
period (1) 20,520 21,038 21,224
Additional shares assuming
exercise of stock options
and warrants (1)(2) 185 321 399
-----------------------------------------
Average number of common
shares used to calculate
earnings per share (1) 20,705 21,359 21,623
=========================================
Income per share $ 2.23 $ 1.97 $ 2.28
=========================================
(1) Restated to give retroactive effect to all common stock dividends.
(2) Represents the number of shares of common stock issuable on the
exercise of dilutive employee stock options less the number of shares
of common stock which could have been purchased with the proceeds from
the exercise of such options. These purchases were assumed to have
been made at the average market price of the common stock during the
period, or that part of the period for which the option was
outstanding.