Back to GetFilings.com
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 24, 1999
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------- ------------
Commission file number 1-9109
------
RAYMOND JAMES FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida No. 59-1517485
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
- --------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (727) 573-3800
-------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ---------------------------- -----------------------------------------
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
---------------
(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 14, 1999: $847,330,199
Number of common shares outstanding (December 14, 1999): 46,588,602
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement for Annual Meeting of Shareholders to be held on February 10,
2000. (The Company intends to file with the Commission a definitive proxy
statement pursuant to Regulation 14A prior to January 10, 2000.)
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 the original corporation
founded in 1962. Its principal subsidiaries include Raymond James &
Associates, Inc. ("RJA"), Raymond James Financial Services, Inc. ("RJFS"),
Eagle Asset Management, Inc. ("Eagle"), Heritage Asset Management, Inc.
("Heritage") and Raymond James Bank, FSB ("RJBank"). All of these
subsidiaries are wholly-owned by RJF. RJF and its subsidiaries are
hereinafter collectively referred to as the "Company".
RJF's principal subsidiary, RJA, was organized in Florida in 1962. RJA
is a full service broker-dealer engaged in most aspects of securities
distribution and investment banking. RJA also offers financial planning
services for individuals and provides clearing services for RJFS and several
unaffiliated broker-dealers. The Company is the largest brokerage and
investment firm headquartered in the state of Florida. RJA is a member of
the New York Stock Exchange ("NYSE"), American Stock Exchange, Philadelphia
Stock Exchange, Boston Stock Exchange, Chicago Board Options Exchange, New
York Futures Exchange, Pacific Exchange and Chicago Stock Exchange. It is
also a member of the Securities Industry Association, National Association of
Securities Dealers ("NASD"), and Securities Investors Protection Corporation
("SIPC"). SIPC provides insurance protection for clients' accounts of up to
$500,000 each (limited to $100,000 for claims for cash) in the event of RJA's
liquidation. In addition, RJA carries $49,500,000 per account of excess
client insurance. For the year ended September 24, 1999 the revenues of RJA
accounted for 54% of the consolidated revenues of the Company.
On May 28, 1999 the Company purchased Roney & Co. ("Roney"), a broker-
dealer headquartered in Detroit, Michigan. Immediately subsequent to
fiscal year Roney was contributed and merged into RJA. Roney added 320
Financial Advisors and 28 offices to RJA.
RJFS was formed in January 1999, when the Company merged its two
independent contractor broker-dealer subsidiaries, Investment Management &
Research, Inc. ("IM&R") and Robert Thomas Securities, Inc. ("RTS"). IM&R
was formed in 1973 as an independent contractor financial planning
organization and participates in the distribution of all products and
services offered by RJA to its retail clients. RTS was organized in 1981,
and serves independent contractor brokers who do a majority of their
business in individual securities. RJFS is a member of the NASD and SIPC,
but not of any exchange, as it clears all of its business on a fully-
disclosed basis through RJA.
Eagle was formed in 1984 as a registered investment advisor to serve as
the discretionary manager for individual equity portfolios.
Heritage was organized in 1985 to act as the manager of the Company's
internally sponsored Heritage family of mutual funds.
Raymond James Bank was formed in 1994 in conjunction with the purchase
from the Resolution Trust Corporation of certain branches of a failed thrift.
Its primary purpose is to provide traditional banking products and services
to the
clients of the Company's broker-dealer subsidiaries.
(b) Financial Information - Revenues by Source
The Company's operations consist of various financial services provided
to its clients. The following table shows revenues by source for the last
three years:
Year Ended
------------------------------------------------------
Sept. 24, Sept. 25, Sept. 26,
1999 % 1998 % 1997 %
---------- ----- ---------- ----- ---------- -----
(dollar amounts in thousands)
Securities commissions:
- -----------------------
Listed products $ 161,240 13.1 $ 132,211 12.2 $115,818 12.9
Over-the-counter 186,258 15.1 163,410 15.1 148,791 16.6
Mutual funds 169,377 13.7 150,536 13.9 117,748 13.1
Asset-based fees 130,359 10.6 100,055 9.2 61,444 6.8
Annuities and other
insurance products 110,899 9.0 85,322 7.9 70,944 7.9
Other 3 .0 127 .0 219 .1
---------- ----- ---------- ----- -------- -----
Total 758,136 61.5 631,661 58.3 514,964 57.4
---------- ----- ---------- ----- -------- -----
Investment banking:
- -------------------
Underwriting management
fees 11,852 1.0 27,569 2.5 43,434 4.8
Merger and acquisition
fees 16,304 1.3 20,153 1.9 7,929 .9
New issue sales credits 37,400 3.0 51,446 4.8 47,639 5.3
Limited partnerships and
other 9,192 .8 10,537 1.0 10,086 1.2
---------- ----- ---------- ----- -------- -----
Total 74,748 6.1 109,705 10.2 109,088 12.2
---------- ----- ---------- ----- -------- -----
Investment advisory fees 91,920 7.5 79,485 7.3 55,194 6.2
Interest 229,806 18.6 202,255 18.7 155,746 17.4
Correspondent clearing 4,655 .4 4,429 .4 4,502 .5
Net trading and investment
profits 17,034 1.4 6,300 .6 12,797 1.4
Financial service fees 36,101 2.9 24,797 2.3 20,786 2.3
Other 19,806 1.6 24,275 2.2 23,884 2.6
---------- ----- ---------- ----- -------- -----
1,232,206 100.0 1,082,907 100.0 896,961 100.0
===== ===== =====
Gain on sale of Liberty
Investment Mgmt., Inc.* - - 30,646
---------- ---------- --------
Total revenues $1,232,206 $1,082,907 $927,607
========== ========== ========
Securities commissions by
- -------------------------
broker-dealer:
- ---------------
Raymond James & Associates,
Inc. 284,139 37.5 $ 262,966 41.6 $222,771 43.3
Roney & Co. 23,825 3.1 - - - -
Raymond James Financial
Services, Inc. 448,864 59.2 368,695 58.4 292,193 56.7
Raymond James Financial
International, Ltd. 1,308 .2 - - - -
--------- ----- ---------- ----- -------- -----
Total $ 758,136 100.0 $ 631,661 100.0 $514,964 100.0
========= ===== ========== ===== ======== =====
* See Note 16 of the Notes to Consolidated Financial Statements for details.
(c) Narrative Description of Business
---------------------------------
At September 24, 1999 the Company employed 4,480 individuals. RJA
employed 4,018 of these individuals, 915 of whom were full-time retail
Financial Advisors. In addition, 2,949 full-time Financial Advisors were
affiliated with the Company as independent contractors. Through its broker-
dealer subsidiaries, the Company provides securities services to more than
one million client accounts. No single client accounts for a material
percentage of the Company's total business.
The Company currently divides its business into five segments based on
the products and services offered. These segments are retail distribution,
institutional distribution, investment banking, asset management, and other.
RETAIL DISTRIBUTION
-------------------
The Company provides securities transaction and financial planning
services to its retail clients through the RJA retail branch system, its
independent contractor firm (RJFS), and a general insurance agency.
RJA - Retail Sales
RJA's 79 retail branches and 8 satellites are located primarily in the
southeastern U.S., with a concentration in Florida, and the Midwest, as a
result of the acquisition of Roney. The Roney transaction added 320
Financial Advisors and 28 offices in Indiana, Michigan and Ohio. RJA's 915
retail Financial Advisors provide a broad range of financial products and
services to their clients. In most cases, RJA charges commissions to its
retail clients, on both exchange and over-the-counter equity transactions,
in accordance with its established commission schedule. In certain
instances, varying discounts from the schedule are given, generally based
upon the client's level of business, the trade size and other relevant
factors. RJA also distributes both taxable and tax-exempt fixed income
products to its retail clients, including municipal, corporate, government
agency and mortgage-backed bonds, preferred stock and unit investment
trusts. In addition, a growing number of clients are electing asset-based
fee alternatives to the traditional commission structure.
The retail Financial Advisors sell a number of professionally managed,
load mutual funds and offer, in addition, a selection of no-load funds. RJA
maintains dealer-sales agreements with most major distributors of mutual
fund shares sold through broker-dealers. Commissions on such sales
generally range from 1% to 5% of the dollar value of the transaction.
Alternative sales compensation structures typically include front-end
charges, "back-end" or contingent deferred sales charges, and an annual
charge in the form of a fund expense.
At September 24, 1999, the Company had 14 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.
RJFS
RJFS participates in the distribution of all the products and services
offered by RJA to its retail clients through 2,949 independent contractor
Financial Advisors in 1,193 offices and 323 satellite offices in all 50
states.
The Company operates with three separate divisions. The Investment
Management division has 687 offices and 1,597 Financial Advisors and are
better characterized as financial planners than as stock brokers although
they are not required to conduct their business as financial planners. The
Securities Division primarily offers individual securities and investment
advice to individual investors and institutions through 919 Financial
Advisors in 322 branch offices. The Financial Institutions Division offers
securities on a third party basis to customers of financial institutions
such as banks, thrifts and credit unions and has 433 Financial Advisors in
184 locations.
The number of Financial Advisors in all offices ranges from 1 to 26.
Such Financial Advisors devote all or substantially all of their time to the
sale of securities and, while these independent contractors must conduct all
securities business through RJFS, their contracts permit them to conduct
insurance, real estate brokerage, accounting services or other business for
others or for their own account. Independent contractors are responsible
for all of their direct costs and are paid a larger percentage of
commissions and fees to compensate them for their added expenses.
Planning Corporation of America
Planning Corporation of America ("PCA"), a wholly-owned subsidiary of
RJA, is a general insurance agency and represents a number of insurance
companies. Through the Financial Advisors of the Company's broker-dealer
subsidiaries, PCA provides product and marketing support for a broad range
of insurance products, principally fixed and variable annuities, numerous
forms of life insurance, disability insurance and long-term care coverage.
Clients' transactions in securities are effected on either a cash or
margin basis. In margin transactions, the client pays a portion of the
purchase price, and RJA makes a loan to the client for the balance,
collateralized by the securities purchased or by other securities owned by
the client. Interest is charged to clients on the amount borrowed to
finance margin transactions. The financing of margin purchases is an
important source of revenue to RJA, since the interest rate paid by the
client on funds loaned by RJA exceeds RJA's cost of short-term funds. The
interest rate charged to a client on a margin loan depends on the average
loan balance in the client's account and ranges from prime plus 1% to prime
minus .75%.
Typically, broker-dealers utilize secured bank borrowings and equity
capital as the primary sources of funds to finance clients' margin account
borrowings. Since the inception of the Client Interest Program in 1981,
however, the Company's primary source of funds to finance clients' margin
account balances has been cash balances in clients' accounts which are
awaiting investment. In addition, pursuant to written agreements with
clients, broker-dealers are permitted by Securities and Exchange Commission
("SEC") and NYSE rules to lend client securities in margin accounts to other
brokers. SEC regulations, however, restrict the use of clients' funds
derived from pledging and lending clients' securities, as well as funds
awaiting investment, to the financing of margin account balances, and to the
extent not so used, such funds are required to be deposited in a special
account for the benefit of clients. The regulations also require
broker-dealers, within designated periods of time, to obtain possession or
control of, and to segregate, clients' fully paid and excess margin
securities.
INSTITUTIONAL DISTRIBUTION
--------------------------
The Company's institutional clients are serviced by RJA's
Institutional Equity and Fixed Income Departments.
The 53 domestic professionals in the Institutional Equity Sales and
Sales Trading Departments maintain relationships with 776 institutional clients.
In addition to the Company's headquarters in St. Petersburg, FL, institutional
equity offices are located in New York, Houston, Dallas, Princeton, San Diego,
Toronto, Calgary, Brussels, Brugte, Dusseldorf, Geneva, London (Raymond James
Financial International, Ltd., a UK broker-dealer), Luxembourg,
Milan and Paris.
In addition, RJA distributes to its institutional clients both taxable
and tax-exempt fixed income products, primarily municipal, corporate,
government agency and mortgage-backed bonds. RJA carries inventory
positions of taxable and municipal securities in both the primary and
secondary market. In addition to St. Petersburg, the Fixed Income
Department maintains institutional sales and trading offices in New York,
Chicago, Houston, Boston, Atlanta, Boca Raton, and Dublin, Ohio. To assist
our institutional clients, the department's Fixed Income Research Group
provides value-added analytical services and publishes research reports
containing both specific product information and information on topics of
interest such as market and regulatory developments.
In providing these securities brokerage services to its institutional
clients, RJA discounts its commissions substantially on transactions based
on trade size and the amount of business conducted annually with each
institution.
The revenues and costs of RJA's back office operations are attributable
primarily to the two distribution segments above. RJA's operations
personnel are responsible for the execution of orders, processing of
securities transactions, custody of client securities, receipt,
identification and delivery of funds and securities, compliance with
regulatory and legal requirements, internal financial accounting and
controls and general office administration for most of the Company's
securities brokerage operations.
INVESTMENT BANKING/CAPITAL MARKETS
----------------------------------
Investment Banking activities include both equity and fixed income
products. This segment consists of the departments described below:
Investment Banking Group. The 47 professionals of RJA's Investment
Banking Group, located primarily in St. Petersburg with satellite offices in
New York, Dallas, Houston, Calgary, and Chicago are involved in a variety of
activities including public and private equity financing for corporate
clients, merger and acquisition advisory services, fairness opinions and
evaluations. The Company focuses on specific industry groups or strategic
business units ("SBUs") including Consumer, Financial and Business Services,
Healthcare, Information Technology, Environmental, Real Estate, and Energy.
In addition, RJA acts as an underwriter or selling group member for
corporate bonds, agency bonds, preferred stock and unit investment trusts.
When underwriting new issue securities, RJA agrees to purchase the issue
through a negotiated sale or submits a competitive bid.
Research Department. The 45 analysts in this department publish
research on over 340 companies, primarily focused on emerging growth and mid-
cap companies in a broad range of industries. Approximately 28% of the
companies covered are investment banking clients. Proprietary research
reports are provided to both retail and institutional clients, and are
supplemented by research purchased from outside services to accommodate
retail clients. This department has distinguished itself through its
extremely successful long-term comparative results as reported by Zacks
Investment Research each quarter in the Wall Street Journal.
Over-the-Counter Equity Trading. Trading securities in the over-the-
counter ("OTC") market involves the purchase of securities from, and the
sale of securities to, clients of the Company or other dealers who may be
purchasing or selling securities for their own account or acting as agent
for their clients. Profits and losses are derived from the spreads between
bid and asked prices, as well as market trends for the individual securities
during the holding period. At September 24, 1999, RJA made markets in over
250 common stocks in the OTC market. RJA frequently acts as agent in the
execution of OTC orders for its clients and as such transacts these trades
with other dealers. When RJA receives a client order in a security in which
it makes a market, it may act as principal as long as it matches or improves
upon the best price in the dealer market, plus or minus a mark-up or
mark-down not exceeding the equivalent agency commission charge. Recently
adopted regulations require that client limit orders be satisfied prior to
the brokerage firm buying securities into or selling securities from their
own inventory at the same price.
Syndicate Department. The Syndicate Department coordinates the
marketing, distribution, pricing and stabilization of Raymond James' lead-
and co-managed equity underwritings. In addition to Raymond James' managed
and co-managed offerings, this department coordinates the firm's syndicate
and selling group activities in transactions managed by other investment
banking firms. Marketing and distribution activities are focused on the
firm's institutional and retail clients. The Syndicate Department is also
responsible for the Corporate Client Services group which serves the firm's
Investment Banking and Research clients by providing specialized brokerage
services for corporations and their executives.
Public Finance. The 21 professionals in the Public Finance division
operate out of 7 offices (2 located in the State of Florida, one in
Birmingham, AL, one in New York, NY, one in Pittsburgh, PA, one in Detroit,
MI, and one in San Antonio, TX), acting as Financial Advisor or underwriter
to various municipal agencies or political subdivisions.
Partnership Investment Banking. The Company acts as the general
partner in equipment leasing and real estate limited partnerships. Most
significantly, Raymond James Tax Credit Funds, Inc. is the general partner
in funds that have invested nationwide in properties that qualify for low
income housing tax credits.
ASSET MANAGEMENT
- ----------------
The Company's asset management segment includes proprietary asset
management operations, internally sponsored mutual funds, outside money
management
alternatives, and other asset-based fee programs.
Eagle Asset Management, Inc.
Eagle is a registered investment advisor with approximately $5.1
billion under management at September 24, 1999. Eagle's clients include
pension and profit sharing plans, retirement funds, foundations, endowments,
trusts, life insurance and mutual fund portfolios and individuals. Accounts
are managed on a discretionary basis in accordance with the investment
objective(s) specified by the client. Eagle manages approximately $1.2
billion for institutional clients and $3.9 billion for retail accounts.
Eagle's investment management fee generally ranges from .30% to 1.0% of
asset balances per year depending upon the size and investment objective of
the account. In addition to the management fees, clients are required to pay
brokerage commissions (or more commonly, a fee in lieu thereof) for
transactions in their accounts.
Heritage Asset Management, Inc.
Heritage Asset Management, Inc. ("Heritage") serves as investment
advisor to the Heritage Family of Mutual Funds. Heritage also serves as
transfer agent or sub-transfer agent for all of the open-end funds and as
fund accountant or sub-fund accountant for all Heritage funds except the
Eagle International Equity Portfolio. Portfolio management for the Income-
Growth Trust, Aggressive Growth Fund, Growth Equity Fund, Mid Cap Growth
Fund, Value Equity Fund, and the First Puerto Rico Growth and Income Fund
are subcontracted. Portfolio management for the Small Cap Stock Fund is
subcontracted to Eagle and the Company's Awad Asset Management subsidiary.
Unaffiliated advisors are employed for the Municipal Money Market Fund,
Capital Appreciation Trust, High Yield Bond Fund and the Eagle International
Equity Portfolio.
Heritage also serves as an advisor to Raymond James Bank to make
recommendations and monitor the Bank's investment portfolio of mortgage-
backed securities.
Net assets at September 24, 1999 were as follows (in thousands):
Heritage Cash Trust:
Money Market Fund $3,197,446
Municipal Money Market Fund 644,679
Heritage Capital Appreciation Trust 228,855
Heritage Income-Growth Trust 93,419
Heritage Income Trust:
High Yield Bond Fund 50,845
Intermediate Government Fund 13,369
Heritage Series Trust:
Small Cap Stock Fund 201,312
Growth Equity Fund 139,028
Eagle International Equity Portfolio 15,127
Value Equity Fund 27,179
Mid Cap Stock Fund 26,535
Aggressive Growth Fund 47,975
Heritage U.S. Govt Income Fund
(closed-end) 35,643
First Puerto Rico Growth & Income Fund
(available to Puerto Rico Residents only) 59,335
----------
$4,780,747
==========
Awad Asset Management, Inc.
Awad Asset Management, Inc. ("Awad") is primarily a small and mid-cap
equity portfolio management subsidiary. Clients pay fees and/or commissions
for management of their accounts. Present fees range from .50% to 1.0% of
asset balances annually. In addition to private accounts, Awad also manages
a portion of the Heritage Small Cap Stock Fund Portfolio and other non-
affiliated mutual fund portfolios. Exclusive of the Heritage Small Cap Fund,
Awad had approximately $569 million under management at September 24, 1999.
RJA - Asset Management Services
RJA's Asset Management Services ("AMS") Department manages programs
which offer investment advisory services to clients, as well as certain non-
advisory programs which offer fee-based alternatives to traditional
commission charges for transactions. The primary advisory service offered
by AMS is the Investment Advisory Services ("IAS") program. IAS maintains
an approved list of investment managers, most of which are unaffiliated with
the Company, establishes custodial facilities, monitors performance of
client accounts, provides clients with accounting and other administrative
services and assists investment managers with certain trading management
activities. IAS earns fees generally ranging from .50% to 1.0% of asset
balances per annum, a portion of which is paid to investment managers who
direct the investment of the clients' accounts. At September 24, 1999, this
program had approximately $3.1 billion in assets under management through
agreements with 29 independent investment advisors and Awad.
Passport and a similar program offered by RJFS, known as IMPAC, offer
both a discretionary and non-discretionary advisory fee alternative that
allows clients to pay a quarterly fee plus low transaction charges in lieu
of commissions. Fees are based on the individual account size and are also
dependent on the type of securities in the accounts. In addition, AMS
collects an administrative fee of up to .175% of asset balances annually,
for which clients receive quarterly performance reporting and other
services. As of September 24, 1999, Passport and IMPAC had approximately
$5.23 billion and $1.43 billion in assets, respectively, serviced by
Financial Advisors.
In addition to the foregoing programs, AMS also offers fee based
programs to clients who have contracted for portfolio management services
from outside money managers that are not a part of the IAS program.
Further, AMS administers other less significant asset-based fee programs.
OTHER
-----
Aside from the retail and institutional distribution, investment
banking and asset management businesses, the Company operates a stock
borrow/stock loan program, offers bank and trust services, and has several
international joint ventures. These operations are grouped in the "other"
segment.
RJA - Stock Borrow/Stock Loan
RJA commenced this program in 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.
Raymond James Bank, FSB
Raymond James Bank, FSB, ("RJBank") received its federal savings bank
charter on May 6, 1994. RJBank provides residential, consumer and commercial
loans as well as FDIC-insured deposit accounts to clients of RJF's broker-
dealer subsidiaries and to the general public nationwide.
Access to RJBank's products and services is available nationwide
through the offices of its affiliated investment firms as well as through
convenient telephonic and electronic banking services, including debit
cards, ATM/point-of-sale, 24-hour TeleDirect automated telephone banking,
Internet Banking with Electronic Bill-Paying, checkwriting, direct deposit
and ACH payments. As of September 24, 1999, RJBank had total assets in
excess of $635 million.
Raymond James Trust Company
Sound Trust Company
Raymond James Trust Company was chartered and opened for business in
1992. This wholly-owned subsidiary of RJF was formed primarily to provide
personal trust services to existing clients of the broker-dealer
subsidiaries. Portfolio management of trust assets is often subcontracted
to the asset management operations of the Company. In October 1993, the
Company acquired a second trust company, Sound Trust Company, in Tacoma,
Washington. This subsidiary provides personal trust services primarily to
broker-dealer clients outside the State of Florida. These two subsidiaries
had a combined total of $548 million in client assets at September 24, 1999.
Raymond James Credit Corporation
Raymond James Credit Corporation ("RJCC") was formed in 1996 as a
regulated finance company. To date, this subsidiary has primarily provided
loans collateralized by control or restricted securities. RJCC is funded
with internal capital and by a $50 million line of credit with a commercial
bank. At September 24, 1999, RJCC had $66 million in outstanding loans to
customers.
Raymond James International Holdings, Inc.
Raymond James International Holdings, Inc. ("RJIH") is a Delaware
corporation formed in 1994 to house the Company's foreign operations. RJIH
now has ownership in unconsolidated joint ventures in Argentina, India,
Turkey and France. These joint ventures operate in securities brokerage,
investment banking and asset management.
COMPETITION
The Company's subsidiaries compete with many larger, better capitalized
providers of financial services, including other securities firms, some of
which are affiliated with major financial services companies, insurance
companies, banking institutions and other organizations. They also compete
with a number of firms offering discount brokerage services, usually with
lower levels of service, to individual clients. The Company's subsidiaries
compete principally on the basis of service, product selection, location and
reputation in local markets.
REGULATION
Most of the Company's operations are subject to regulatory oversight by
governmental agencies and/or self regulatory organizations.
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations, principally the NASD and the NYSE. These self-regulatory
organizations adopt rules (which are subject to approval by the SEC) for
governing the industry and conduct periodic examinations of member broker-
dealers. Securities firms are also subject to regulation by state
securities commissions in the states in which they are registered. RJA and
RJFS are currently registered in all 50 states.
See Note 13 of the Notes to Consolidated Financial Statements for
further description of certain SEC regulations pertaining to broker-dealer
Net Capital Requirements.
The Company's investment advisory operations, including the Company-
sponsored mutual funds, are also subject to extensive regulation by the SEC.
Raymond James Bank, FSB, is subject to regulation by various federal
banking agencies, including the Office of Thrift Supervision and the Federal
Deposit Insurance Corporation.
The Company's two trust companies are subject to regulation by the
states in which they are chartered.
ITEM 2. PROPERTIES
----------
The Company owns a 610,000 square foot headquarters complex in St.
Petersburg, FL (three home office buildings, a bank and trust headquarters
building, and a five deck parking garage). The complex covers approximately
forty-five acres, and the Company has the ability to build up to another
460,000 square feet on this site. The Company also leases 70,000 square feet
in a nearby office building, and has committed to lease an additional 30,000
sq. feet as of April 2000. In addition the Company acquired a 45,000 square
foot, eight story building in Detroit, Michigan as part of the Roney
transaction. With the exception of a Company-owned RJA branch office
building in Crystal River, FL, RJA branches are leased with various
expiration dates through 2008. The RJFS Investment Management division
headquarters office in Atlanta and Sound Trust Company facility in Seattle
are also under lease. See Note 9 to Consolidated Financial Statements for
further information regarding the Company's leases.
Leases for branch offices of RJFS are the responsibility of the
respective independent contractor registered representatives.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations of the complaints in these cases and believes that there are
meritorious defenses in each of these lawsuits. In view of the number and
diversity of claims against the Company, the number of jurisdictions in which
litigation is pending and the inherent difficulty of predicting the outcome
of litigation and other claims, the Company cannot state with certainty what
the eventual outcome of pending litigation or other claims will be.
As a result of the extensive regulation of the securities industry, the
Company's broker-dealer subsidiaries are subject to regular reviews and
inspections by regulatory authorities and self regulatory organizations which
can result in imposition of sanctions for regulatory violations, ranging from
non-monetary censure to fines and, in serious cases, temporary or permanent
suspension from business. In addition, from time to time regulatory agencies
and self regulatory organizations institute investigations into industry
practices which can result in the imposition of such sanctions. During the
course of the past fiscal year, the Company's primary broker-dealer
subsidiary resolved a number of regulatory and self regulatory investigations
by payment of fines that were immaterial in amount.
The Securities and Exchange Commission has initiated an investigation of
certain trading practices in the over-the-counter securities market during
1994 and 1995. Along with many other market makers, the Company has
submitted documents and cooperated with the S.E.C. in this investigation. The
Company does not anticipate that the resolution of this proceeding will have
a material effect on its business or operations. The Securities and Exchange
Commission, the Internal Revenue Service, and the National Association of
Securities Dealers, Inc., have been conducting reviews of investment banking
practices in connection with advance refunding transactions for
municipalities. The investigation has focused on the mark-ups charged by
investment banking firms for securities purchased by municipalities in
connection with these refundings. Along with other participants in the
municipal bond market, the Company has been providing documents and
furnishing information to regulators in connection with this investigation,
which is ongoing.
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.
1999 1998
----------------- -----------------
High Low High Low
------ ------ ------ ------
First Quarter $26.25 $16.75 $26.63 $18.00
Second Quarter 22.63 18.00 29.13 21.63
Third Quarter 24.19 18.88 36.50 28.50
Fourth Quarter 25.19 18.81 32.63 17.07
Since the Company initiated payment of a cash dividend in 1985,
there have been 17 increases in the dividend rate, 7 of which were in the
form of stock splits and stock dividends.
The payment of dividends on the Company's common stock is subject to the
availability of funds from the Company's subsidiaries, including the broker-
dealer subsidiaries which may be subject to restrictions under the net
capital rules of the SEC and the NYSE. Such restrictions have never become
applicable with respect to the Company's dividend payments. (See Note 13 of
the Notes to Consolidated Financial Statements.)
At December 14, 1999 there were approximately 11,000 holders of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
(in thousands, except per share data)
Year Ended
-----------------------------------------------------------
Sept. 24, Sept. 25, Sept. 26, Sept. 27, Sept. 29,
1999 1998 1997** 1996 1995
Operating Results: ---------- ---------- ----------- ----------- ----------
- ------------------
Revenues $1,232,206 $1,082,907 $ 927,607 $ 721,752 $ 554,070
Net income $ 85,090 $ 92,704 $ 98,915 $ 65,978 $ 46,141
Net income per
share - basic:* $ 1.79 $ 1.92 $ 2.09 $ 1.41 $ .99
Net income per
share - diluted:* $ 1.76 $ 1.86 $ 2.04 $ 1.39 $ .98
Weighted average
common shares
outstanding - basic:* 47,606 48,160 47,383 46,781 46,607
Weighted average common
and common equivalent
shares outstanding -
diluted:* 48,449 49,951 48,387 47,307 47,083
Cash dividends declared
per share* $ .28 $ .24 $ .21 $ .17 $ .16
Financial Condition:
- --------------------
Total assets $5,030,715 $3,852,737 $3,278,645 $2,566,381 $2,012,715
Long-term debt $ 44,183 $ 44,767 $ 12,715 $ 12,909 $ 13,084
Shareholders' equity$ 558,486 $ 509,898 $ 423,276 $ 326,632 $ 266,193
Shares outstanding* 47,242 48,268 47,695 47,012 46,382
Equity per share
at end of period* $ 11.82 $ 10.56 $ 8.87 $ 6.95 $ 5.74
* Gives effect to the common stock splits paid on April 2, 1998
and April 3, 1997.
** Amounts include the $30.6 million gain on the sale of Liberty
Investment Management, Inc. Excluding this gain, revenues were
$896,961,000, net income was $80,126,000, and basic and diluted
net income per share were $1.69 and $1.66, respectively. See Note
16 of the Notes to Consolidated Financial Statements for details.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
Results of Operations - Three Years Ended September 24, 1999
- ------------------------------------------------------------
Fiscal 1999 was the Company's fifteenth consecutive year of record
revenues, with total revenues of $1,232,206,000 representing an increase of
14% over the prior year. In contrast, net income of $85,090,000 represented a
decline of 8% from the prior year. Earnings were negatively impacted by
costs associated with a corporate branding campaign, the creation of Raymond
James Financial Services, Inc. ("RJFS"), the expansion of the corporate
headquarters, Y2K preparation, and the acquisition of Roney & Co. ("Roney").
Not only did the Company incur the aforementioned expenses, certain of
which will be non-recurring, but operational expenses grew at a rate
exceeding revenue growth and investment banking results were down sharply.
The Company's retail business, the independent contractor portion in
particular, continued its steady growth with exceptionally strong recruiting
results. The Company has also been successful in its focus on non-
transaction dependent fee revenues, such as investment advisory fees,
interest and asset-based commission alternatives. For fiscal 1999, such fee-
based revenues represented approximately 44% of total revenues, up from 31%
five years ago.
Year Ended
------------------------------------------------
Sept. 24, % Incr. Sept. 25, % Incr. Sept. 26,
1999* (Decr.) 1998 (Decr.) 1997
---------- ------- --------- ------- ---------
Revenues: (000's) (000's) (000's)
Securities commissions
and fees $ 758,136 20% $ 631,661 23% $ 514,964
Investment banking 74,748 (32%) 109,705 1% 109,088
Investment advisory fees 91,920 16% 79,485 44% 55,194
Interest 229,806 14% 202,255 30% 155,746
Correspondent clearing 4,655 5% 4,429 (2%) 4,502
Net trading profits 17,034 170% 6,300 (51%) 12,797
Financial service fees 36,101 46% 24,797 19% 20,786
Other 19,806 (18%) 24,275 2% 23,884
---------- ---------- ----------
1,232,206 14% 1,082,907 21% 896,961
Gain on sale of Liberty - - 30,646
---------- ---------- ----------
Total revenues $1,232,206 14% $1,082,907 17% $ 927,607
========== ========== ==========
* Includes $36,177 from Roney.
The record transaction volumes in fiscal years 1999, 1998 and 1997
resulted in increased securities commissions from the sales of all product
lines during the period, with the largest increases occurring in equities and
annuities.
YEAR ENDED
-------------------------------------------------
Sept. 24, %Incr. Sept. 25, Sept. 26,
1999 (Decr.) 1998 %Incr. 1997
----------- ------- --------- ------ ---------
Number of retail Financial
Advisors at yearend* 3,864 24% 3,117 10% 2,825
Retail commission revenues
(000's) $ 631,572 21% $ 523,890 24% $ 422,316
Retail new issue sales credits
(000's) $ 16,345 (35%) $ 24,976 2% $ 24,472
Number of institutional
salesmen at yearend 150 12% 134 9% 123
Institutional commission
revenues (000's) $ 126,564 17% $ 107,771 16% $ 92,648
Institutional new issue sales
credits (000's) $ 21,055 (20%) $ 26,470 14% $ 23,167
Number of trades processed 4,107,000 23% 3,328,000 19% 2,803,000
* Includes Roney. Excluding Roney: 3,548 Financial Advisors, a 14%
increase.
Investment banking revenues, including new issue sales credits,
decreased considerably to $75 million in 1999 from the record $110 million in
the prior year. Fiscal 1997 was a record year for equity underwriting
activity, both in number of new issues and average offering size. This pace
continued only through the first half of fiscal 1998, at which time small and
mid-cap stocks began to weaken, particularly in certain industry sectors,
which severely slowed the new issue deal flow. Investment banking revenues
in fiscal 1999 were well below recent prior years as a result of several of
the Company's major sectors of emphasis (energy, real estate and health care)
being out of favor for most of the year and the Company being behind schedule
in developing a significant technology investment banking and research
effort. The number of managed and co-managed underwritings, the vast
majority of which were equity-related offerings, and the dollar volume of
these transactions were as follows: 1999 - 23 new issues for $3.0 billion;
1998 - 57 new issues for $6.0 billion; and 1997 - 65 new issues for $7.8
billion. Merger and acquisition fees, which have been a consistent revenue
source during the past few years, also declined in fiscal 1999 to $16 million
after reaching a record $20 million in 1998.
Investment advisory fees have risen commensurate with the generally
strong growth in assets under management, which has shown an annual 21%
increase for the period. Asset management growth has benefited from both
overall asset appreciation and net sales during the past two years. For
fiscal 1997, investment advisory fees included $2.6 million in fees from
Liberty, which was sold in January 1997. During 1998, the Company's real
estate portfolio management operation was sold, and its employees were
transferred to the new owner. This transaction generated $3.7 million of
performance fees, which are included in investment advisory fees.
Sept. 24, %Incr. Sept. 25, %Incr. Sept. 26,
1999 (Decr.) 1998 (Decr.) 1997
----------- ------- ----------- ------- ----------
(000's) (000's) (000's)
Eagle Asset Mgmt., Inc.* $ 5,138,064 7% $ 4,804,967 29% $3,714,407
Heritage Family of Mutual
Funds 4,780,747 21% 3,947,394 25% 3,160,910
Investment Advisory Services 3,110,000 73% 1,798,260 25% 1,433,018
Awad Asset Management* 569,000 (13%) 656,336 (19%) 814,315
Carillon Asset Management - - 53,448
----------- ----------- ----------
Total Financial Assets
Under Management $13,597,811 21% $11,206,957 22% $9,176,098
=========== =========== ==========
* Excludes balances included in the Heritage Family of Mutual Funds.
Net interest income continues to be a growing source of recurring
earnings. The components of interest earnings are as follows:
Sept. 24, Sept. 25, Sept. 26,
1999 1998 1997
--------- --------- ---------
(balances in 000's)
Margin balances:
Average balance $ 908,671 $ 701,742 $ 480,203
Average rate 7.6% 8.2% 8.1%
---------- ---------- ----------
$ 69,059 $ 57,697 $39,087
Assets segregated
pursuant to Federal
Regulations:
Average balance 1,063,350 776,768 601,902
Average rate 4.9% 5.6% 5.3%
---------- ---------- ----------
51,630 43,163 32,148
Stock borrowed:
Average balance 1,270,112 1,154,703 1,004,735
Average rate 4.6% 4.9% 4.8%
---------- ---------- ----------
58,209 57,049 48,606
Raymond James Bank, FSB 28,756 22,937 17,739
Other interest revenue 22,152 21,409 18,166
------- ------- -------
Total interest revenue 229,806 202,255 155,746
------- ------- -------
Client interest program:
Average balance 1,540,966 1,201,398 880,026
Average rate 4.3% 4.8% 4.7%
--------- --------- --------
66,260 57,627 41,693
Stock loaned:
Average balance 1,292,791 1,119,287 980,000
Average rate 4.3% 4.7% 4.5%
--------- --------- ---------
55,590 53,200 44,238
Raymond James Bank, FSB 20,270 17,249 12,997
Other interest expense 9,374 2,933 2,413
-------- -------- --------
Total interest expense 151,494 131,009 101,341
-------- -------- --------
Net interest income $ 78,312* +10% $ 71,246 +31% $ 54,405
======== ======== ========
* Includes $2,383 from Roney.
Net trading profits increased dramatically over fiscal 1998, reflecting
improved corporate and government bond trading results in addition to
somewhat improved over-the-counter equity trading results. However, due to
the changes in the over-the-counter equity trading regulations and practices
in fiscal 1998, the Company expects that flat or negative over-the-counter
equity trading results will be the norm, not the exception. Through fiscal
1997, the Company's trading profits had remained relatively consistent,
derived primarily from client order flow in both over-the-counter equity and
fixed income securities.
The growth in the Company's retail client base during the past two
fiscal years has led to increased financial service fees. In the past two
years there has been a 54% increase in the number of IRA accounts, a 61%
increase in money market processing fees, and a 151% increase in transaction
fees arising from retail asset-based fee account programs, an increasingly
popular alternative to the traditional commission-based pricing structure.
Other income is composed predominantly of postage and handling fees and
floor brokerage income. Fiscal 1998's other income also included $1.7
million related to the sale of the real estate portfolio and property
management operations and $2.4 million from the sale of the Company's
specialist operations on the Chicago Exchange. For the first half of 1998
and in previous years, other income included property management fees from
the operations which were sold by the Company in March 1998. These fees had
been increasing substantially through the years as the number of apartment
units under management increased. Other income in fiscal 1997 included a
gain of $2.5 million from the Company's sale of its former headquarters
building.
Year Ended
-----------------------------------------------
Sept. 24, % Incr. Sept. 25, % Incr. Sept. 26,
1999* (Decr.) 1998 (Decr.) 1997
----------- ------- --------- ------- ---------
Expenses: (000's) (000's) (000's)
Employee compensation:
Sales commissions $ 517,280 20% $430,556 24% $346,770
Administrative and
benefit costs 146,254 21% 120,935 25% 96,549
Incentive compensation 91,213 (6%) 96,723 3% 94,091
----------- -------- --------
Total employee compensation 754,747 16% 648,214 21% 537,410
Communications and information
processing 53,071 22% 43,485 16% 37,491
Occupancy and equipment 40,059 21% 33,029 22% 27,175
Clearance and floor brokerage 13,456 16% 11,607 (1%) 11,708
Interest 151,494 16% 131,009 29% 101,341
Business development 38,395 22% 31,514 52% 20,755
Other 43,465 29% 33,813 8% 31,212
---------- -------- --------
$1,094,687 17% $932,671 22% $767,092
========== ======== ========
* Includes $34,625 from Roney.
Sales commission expense again increased at a rate approximately
proportionate to the related revenues. The slightly higher increase in
Financial Advisor compensation in fiscal 1998 over the related revenue
reflects the increase in the proportion of independent contractor versus
employee Financial Advisors.
Administrative and benefit compensation costs had been increasing at a
rate consistent with the growth in total revenues. However, the fiscal 1999
increase exceeded the growth in revenues as a result of continued hiring to
support transaction volume, including the personnel acquired in the Roney
transaction, and the recruiting of investment bankers and research analysts
during a period of decreased investment banking revenues.
Incentive compensation expenses, including contributions to qualified
retirement plans, are based on departmental, subsidiary and firm-wide
profitability. Lower investment banking results in fiscal 1999 resulted in
significantly lower incentive compensation accruals for this area.
Simultaneously, improved results in other segments partially offset this
decline, holding the decrease in total incentive compensation expense to a
rate below the decrease in net income. In contrast, strong underwriting
activity in 1998 and 1997 resulted in record investment banking departmental
profits, having a dramatic impact on incentive compensation.
While the costs associated with overall growth continued to affect
communications and information processing, fiscal 1999 also included costs
associated with the integration of Roney, preparation for Y2K, and the merger
creating RJFS. The increases in communications and information processing
expense in fiscal 1998 and 1997 reflected the costs of further enhancement
and expansion of the Company's systems of internal communication and
information dissemination, as well as higher general business volume, which
gave rise to increased costs for telephone, printing and supplies.
The completion and occupancy of the third headquarters building in the
spring of 1998 gave rise to much of the increased occupancy and equipment
expenses for that year. Fiscal 1999 includes the first full annual effect of
this expansion.
For the first time in several years, clearing and floor brokerage
increased, a result of increased transaction volume and higher international
clearing costs. As in the past, clearing and floor brokerage expense
increased at a rate lower than the growth in related revenues due to the
increased productivity of floor brokers and other cost saving measures
implemented.
Several of the Company's branding initiatives impacted business
development in fiscal 1999, such as the first full year of the stadium naming
rights, general image advertising costs (primarily television), and
recruiting-related programs capitalizing on the creation of RJFS. In
addition, certain costs related to the Roney acquisition and subsequent
communication and training are included in this expense. Business
development expenses rose dramatically in 1998 due to increased advertising,
both to recruit Financial Advisors and increase brand name recognition;
increased travel and related expenses, particularly by the larger staff of
investment bankers and research analysts; the inception of the stadium naming
rights contract; and costs associated with larger conferences throughout the
Company's operations.
While the Company was able to hold other expenses relatively constant in
1998, these expenses increased from 1998 to 1999 at a pace exceeding the
growth in revenues. These expenses include fees paid to outside managers in
the Company's investment advisory services program, bank service charges,
legal expenses and provisions, and amortization of goodwill arising from the
Roney acquisition.
Year 2000
- ---------
The widespread use of computer programs that rely on two-digit date
programs to perform computations and decision-making functions may cause
computer systems to malfunction in the Year 2000 and lead to significant
business delays and disruptions in the U.S. and internationally.
The Company has revised all critical information technology (IT)
internal computer code that it has identified as requiring modification for
Year 2000 compliance, and has successfully tested the revised code for the
transition between December 29, 1999 and January 3, 2000; testing will
continue throughout 1999 and may be continued into January 2000 with respect
to other dates that could be affected by this problem. The company will be
limiting the introduction of new computer code during this period to protect
the integrity of the changes made during this year.
All of the Company's securities transactions are processed on software
provided by Securities Industry Software (SIS), a subsidiary of Automatic
Data Processing, Inc., and the Company has closely monitored the progress of
SIS in revising its software. Based on information received to date, the
Company believes that SIS completed revision and testing of its software on a
timely basis. The Company is also monitoring information received from third-
party vendors regarding their progress in modification of other software used
by the Company, as well as the progress of other industry suppliers, in
addressing this issue.
With respect to non-IT systems, primarily those located at its
headquarters campus and those provided by its telecommunications and
satellite service providers, the Company has completed the inventory of all
systems and confirmed the compliance status of its vendors. Most of these
vendors are major national or international companies which have been
addressing the Year 2000 issue for some time.
With the exception of those discussed below, all of the Company's
subsidiaries are substantially dependent upon the Company's Year 2000
compliance program. Raymond James Bank, FSB, Raymond James Trust Company and
Heritage Asset Management, Inc. have received revised computer software from
the third-party vendors on whom they are dependent and have completed testing
of these systems. Eagle Asset Management, Inc. has installed a new portfolio
management system which has been designed to be Year 2000 compliant and
completed testing of its mission critical systems in September 1999.
The Company has developed a contingency plan for mission critical
business functions. In accordance with industry requirements, the company
has established a command center which will operate 24 hours a day between
December 29, 1999 and January 3, 2000 to monitor the functioning of its
systems and processes.
The securities industry conducted a series of industry-wide tests for
Year 2000 compliance between April and July 1999; the Company participated in
all tests and did not experience any material problems relating to its Year
2000 code and data revisions. In general, representatives of the securities
industry were satisfied that the tests confirmed substantial success in
dealing with the Year 2000 issue. The testing process did identify a number
of minor communications problems, most of them unrelated to Year 2000 issues;
these problems were identified and successfully resolved during the course of
the testing.
The Company estimates that its costs for these efforts during this
fiscal year were approximately $2,500,000, an additional $800,000 will be
spent during fiscal 2000. Because many of the Company's basic operating
systems are provided by third party vendors, as indicated above, the
Company's costs for Year 2000 remediation have been substantially less than
the costs incurred by companies which have developed and maintain all their
own operating systems.
The impact of this problem on the securities industry will be material,
however, since virtually every aspect of the sale of securities and the
processing of transactions will be affected. Due to the enormous task facing
the securities industry, the interdependent nature of securities
transactions, and reliance on third parties such as utilities and
telecommunications providers, the Company may be adversely affected by this
problem in the Year 2000 depending on whether it and the entities with whom
it does business address this issue successfully.
Liquidity and Capital Resources
- -------------------------------
Net cash from operating activities during the current year was $250
million. Cash was generated by increased stock loan balances exceeding the
increased stock borrowed balances, increased balances in the client interest
program net of increased customer margin balances, decreased broker-dealer
receivables net of increased trading account securities, and the fluctuations
in various other asset and liability accounts.
Investing activities required $107 million during the year. The cash
used for the purchase of Roney included the $71 million purchase price net of
the $3 million in cash received as part of Roney. Additions to fixed assets
consumed $21 million, predominantly for the purchase of computers, office
furniture and equipment. Net purchases, sales and maturations of investments
required $18 million. These investments were primarily mortgage-backed
securities purchased by Raymond James Bank, FSB ("RJBank").
Financing activities used $33 million, the result of the purchase of
treasury stock and the payment of cash dividends net of the exercise of stock
options and employee stock purchases.
The Company has loans payable consisting of debt in the amount of $39
million in the form of a mortgage on its headquarters office complex, a $5
million Federal Home Loan Bank advance at RJBank, $60 million at Raymond
James Credit Corporation, $65 million in short-term financing of customer
settlements and $33 million at the parent company to fund the Roney
acquisition. Subsequent to yearend the Company secured a $50 million term
loan to repay the $33 million advance on its line of credit.
The parent company has a commitment from a group of commercial banks for
an unsecured $100 million line of credit for general corporate purposes. In
addition, Raymond James & Associates, Inc. has uncommitted bank lines of
credit aggregating $480 million.
The Company's broker-dealer subsidiaries are subject to requirements of
the SEC relating to liquidity and capital standards (see Notes to
Consolidated Financial Statements).
Effects of Recently Issued Accounting Standards
- -----------------------------------------------
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use", effective for fiscal years beginning
after December 15, 1998. SOP 98-1 requires that certain costs of computer
software developed or obtained for internal use be capitalized and amortized
over the useful life of the related software. The Company currently expenses
the costs of all software development in the period in which it is incurred.
The Company intends to adopt this statement beginning in fiscal 2000 and does
not anticipate that it will have a material impact on the financial position,
results of operations, earnings per share or cash flows.
Market Risk
- -----------
During fiscal 1997 the Securities and Exchange Commission issued market
risk disclosure requirements to enhance disclosures of accounting policies
for derivatives and other financial instruments and to provide quantitative
and qualitative disclosures about market risk inherent in derivatives and
other financial instruments. The Company manages risk exposure involving
various levels of management. Position limits in trading and inventory
accounts are established and monitored on an ongoing basis. Current and
proposed underwriting, corporate development, merchant banking and other
commitments are subject to due diligence reviews by senior management, as
well as professionals in the appropriate business and support units involved.
Credit risk related to various financing activities is reduced by the
industry practice of obtaining and maintaining collateral. The Company
monitors its exposure to counterparty risk through the use of credit exposure
information, the monitoring of collateral values and the establishment of
credit limits.
The Company maintains inventories as detailed in Note 2 to the
Consolidated Financial Statements. The fair value of these securities at
September 24, 1999, was $181 million in long positions and $33 million in
short positions. The Company performed an entity-wide analysis of the
Company's financial instruments and assessed the related risk and materiality
in accordance with the rules. Based on this analysis, in the opinion of
management, the market risk associated with the Company's financial
instruments at September 24, 1999 will not have a material adverse effect on
the consolidated financial position or results of operations of the Company.
Effects of Inflation
- --------------------
The Company's assets are primarily liquid in nature and are not
significantly affected by inflation. Management believes that the
replacement cost of property and equipment would not materially affect
operating results. However, the rate of inflation affects the Company's
expenses, including employee compensation and benefits, communications and
occupancy, which may not be readily recoverable through charges for services
provided by the Company.
Factors Affecting "Forward-Looking Statements"
- ----------------------------------------------
From time to time, the Company may publish "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as amended, or
make oral statements that constitute forward-looking statements. These
forward-looking statements may relate to such matters as anticipated
financial performance future revenues or earnings, business prospects,
projected ventures, new products, anticipated market performance, and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements. In order to comply with the
terms of the safe harbor, the Company cautions readers that a variety of
factors could cause the Company's actual results to differ materially from
the anticipated results or other expectations expressed in the Company's
forward-looking statements. These risks and uncertainties, many of which are
beyond the Company's control, include, but are not limited to: (i)
transaction volume in the securities markets, (ii) the volatility of the
securities markets, (iii) fluctuations in interest rates, (iv) changes in
regulatory requirements which could affect the cost of doing business, (v)
fluctuations in currency rates, (vi) general economic conditions, both
domestic and international, (vii) changes in the rate of inflation and
related impact on securities markets, (viii) competition from existing
financial institutions and other new participants in the securities markets,
(ix) legal developments affecting the litigation experience of the securities
industry, (x) changes in federal and state tax laws which could affect the
popularity of products sold by the Company, and (xi) disruptions in the
Company's business or general economic conditions caused by computer
malfunctions in 2000. The Company does not undertake any obligation to
publicly update or revise any forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
(a) Financial statements, schedules and exhibits filed under this item are
listed in the index appearing on page F-1 of this report.
(b) QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share data)
1999 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
Revenues $264,507 $299,191 $324,390 $344,118
Income before income taxes 28,337 35,319 37,989 35,874
Net income 17,479 21,869 23,490 22,252
Net income per share - basic .36 .46 .50 .47
Net income per share - diluted .36 .45 .49 .46
1998 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
Revenues $252,304 $267,538 $275,791 $287,274
Income before income taxes 36,886 40,534 36,341 36,475
Net income 22,745 24,700 22,791 22,468
Net income per share - basic* .48 .51 .47 .46
Net income per share - diluted* .45 .50 .46 .45
* Gives effect to the 3-for-2 common stock split paid on April 2,
1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Executive officers of the registrant (including its significant
subsidiaries) who are not Directors of the registrant are as follows:
Richard K. Riess 50 Executive Vice President - RJF,
President and CEO of Eagle, and
Managing Director - Asset Management.
Jeffrey P. Julien 43 Vice President - Finance and Chief
Financial Officer, Director and/or
officer of certain RJF subsidiaries.
Barry S. Augenbraun 60 Senior Vice President and
Corporate Secretary.
Jennifer C. Ackart 35 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 1999 Annual Meeting of Shareholders. Such proxy statement
will be filed with the SEC prior to January 10, 2000.
ITEMS 11,12 AND 13.
The information required by Items 11, 12 and 13 is incorporated herein
by reference to the registrant's definitive proxy statement for the 2000
Annual Meeting of Shareholders. Such proxy statement will be filed with the
SEC prior to January 10, 2000.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
-------------------------------------------
REPORTS ON FORM 8-K
-------------------
(a) Exhibits required by this Item are either listed in the index appearing
on
page F-1 of this report or have been previously filed with the SEC.
(b) Financial statement schedules required by this Item are listed in the
index
appearing on page F-1 of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
St. Petersburg, State of Florida, on the 17th day of December, 1999.
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 17, 1999
- --------------------------
Thomas A. James Executive Officer
/s/ FRANCIS S. GODBOLD President and Director December 17, 1999
- --------------------------
Francis S. Godbold
/s/ M. ANTHONY GREENE Executive Vice President December 17, 1999
- --------------------------
M. Anthony Greene and Director
/s/ J. STEPHEN PUTNAM Executive Vice President December 17, 1999
- --------------------------
J. Stephen Putnam and Director
/s/ ROBERT F. SHUCK Vice Chairman and Director December 17, 1999
- --------------------------
Robert F. Shuck
/s/ JEFFREY P. JULIEN Vice President - Finance December 17, 1999
- --------------------------
Jeffrey P. Julien (Chief Financial Officer)
/s/ JENNIFER C. ACKART Controller (Chief December 17, 1999
- --------------------------
Jennifer C. Ackart Accounting Officer)
/s/ ANGELA M. BIEVER Director December 17, 1999
- --------------------------
Angela M. Biever
/s/ JONATHAN A. BULKLEY Director December 17, 1999
- --------------------------
Jonathan A. Bulkley
/s/ ELAINE L. CHAO Director December 17, 1999
- --------------------------
Elaine L. Chao
/s/ THOMAS S. FRANKE Director December 17, 1999
- --------------------------
Thomas S. Franke
/s/ HARVARD H. HILL, JR. Director December 17, 1999
- --------------------------
Harvard H. Hill, Jr.
/s/ HUNTINGTON A. JAMES Director December 17, 1999
- --------------------------
Huntington A. James
/s/ PAUL W. MARSHALL Director December 17, 1999
- --------------------------
Paul W. Marshall
/s/ DENNIS W. ZANK Director December 17, 1999
- --------------------------
Dennis W. Zank
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
- ----------------------------------------------
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
- -----------------------------------------------------
FINANCIAL STATEMENTS PAGE(S)
- --------------------
Reports and Consents of Independent Accountants F-2-3
Consolidated Statement of Financial Condition
as of September 24, 1999 and September 25, 1998 F-4
Consolidated Statement of Income for the Three Years
Ended September 24, 1999 F-5
Consolidated Statement of Changes in Shareholders' Equity
for the Three Years Ended September 24, 1999 F-6
Consolidated Statement of Cash Flows
for the Three Years Ended September 24, 1999 F-7-8
Summary of Significant Accounting Policies F-9-12
EXHIBITS
- --------
Notes to Consolidated Financial Statements F-13-26
3.1 Amended and restated Articles of Incorporation of Raymond James Financial,
Inc. as filed with the Secretary of State Florida on March 9, 1998, and
as Exhibit 3 of Form 10Q filed on May 11, 1998
3.2 Amended and restated By-Laws of the Company, filed as Exhibit 3
of Form 10Q filed February 9, 1998
10.1 Raymond James Financial, Inc. Amended Stock Option Plan for Outside
Directors, dated December 12, 1986, incorporated by reference to
Exhibit 4.1 (b) to Registration Statement on Form S-8, No. 33-38350
10.2 Raymond James Financial, Inc. 1992 Incentive Stock Option Plan effective
August 20, 1992, incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-8, No. 33-60608; and amended on Form S-8, No. 333-
59449 filed July 20, 1998
10.3 Raymond James Financial, Inc. Deferred Management Bonus
Plan, effective as of October 1, 1989
10.4 Raymond James Financial, Inc. 1996 Stock Option Plan for
Key Management Personnel, dated November 21, 1996 and Incorporated by
reference as filed with the Company's Form 10-K on December 24, 1998
10.5 Termination and Release Agreement between Liberty
Asset Management, Inc. and Raymond James Financial, Inc. and Incorporated
by reference as filed with the Company's Form 10-K on December 24, 1997
10.6 Raymond James Financial, Inc.'s 1999 Employee Stock
Purchase Plan S-8, No. 333-68821, filed December 14, 1998
10.7 Purchase agreement between BANK ONE CORPORATION as seller, and RAYMOND
JAMES FINANCIAL, INC., filed as Exhibit 10 of Form 10Q filed May 7, 1999
10.8 Term Credit Agreement for $50 million dated as of October 26, 1999
10.9 Revolving Credit Agreement for $100 million dated as of October 26, 1999
11 Computation of Earnings per Share X-1
21 List of Subsidiaries X-2
23 Consent of Independent Accountants F-2-3
27 Financial Data Schedule - EDGAR version only
* Incorporated by reference as filed with the Company's Form 10-K on December
24, 1997.
** Incorporated by reference as filed with the Company's Form 10-K on December
24, 1998.
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 ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Raymond James Financial, Inc.
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated financial statements listed in the index
appearing on page F-1 present fairly, in all material respects, the
financial position of Raymond James Financial, Inc. and its subsidiaries at
September 24, 1999 and September 25, 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended September 24, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
did not audit the financial statements of Raymond James Bank, FSB, a wholly-
owned subsidiary, which statements reflect total assets of $638,970,000 and
$510,580,000 at September 24, 1999 and September 25, 1998, respectively,
and total revenues of $29,200,000, $23,199,000 and $17,712,000 for each of
the three years in the period ended September 24, 1999. Those statements
were audited by other auditors whose report thereon has been furnished to
us, and our opinion expressed herein, insofar as it relates to the amounts
included for Raymond James Bank, FSB, is based solely on the report of the
other auditors. We conducted our audits of the consolidated financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
October 19, 1999
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-68821, 333-59449 and 33-38390) of Raymond
James Financial, Inc. of our report dated October 19, 1999 appearing on
page F-2 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
December 10, 1999
Independent Auditors' Report
The Board of Directors
Raymond James Bank, FSB (A wholly-owned
subsidiary of Raymond James Financial, Inc.):
We have audited the balance sheets of Raymond James Bank, FSB (A
wholly-owned subsidiary of Raymond James Financial, Inc.) as of September
30, 1999 and 1998, and the related statements of income, stockholder's
equity and comprehensive income, and cash flows for the years then ended.
These financial statements are the responsibility of the Bank's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Raymond James Bank, FSB
(A wholly-owned subsidiary of Raymond James Financial, Inc.) at September
30, 1999 and 1998, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Tampa, Florida
October 29, 1999
The Board of Directors
Raymond James Bank, FSB:
We consent to the inclusion of our report dated October 29, 1999, with
respect to the balance sheets of Raymond James Bank, FSB as of September 30,
1999 and 1998, and the related statements of income, stockholder's equity
and comprehensive income, and cash flows for each of the years then ended,
which report appears in the Form 10-K of Raymond James Financial, Inc. dated
September 30, 1999.
/s/ KPMG LLP
Tampa, Florida
December 21, 1999
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
---------------------------------------------
(in thousands, except share amounts)
September 24, September 25,
1999 1998
------------- -------------
ASSETS
Cash and cash equivalents $ 250,855 $ 296,817
Assets segregated pursuant to Federal Regulations:
Cash and cash equivalents 9 1
Securities purchased under agreements to resell 1,102,979 946,723
Securities owned:
Trading and investment account securities 180,967 105,892
Available for sale securities 400,143 385,676
Receivables:
Clients, net 1,447,618 893,839
Stock borrowed 1,277,692 852,744
Brokers, dealers and clearing organizations 34,670 112,838
Other 69,339 62,722
Investment in leveraged leases 23,950 23,297
Property and equipment, net 91,335 81,372
Deferred income taxes, net 39,631 32,841
Deposits with clearing organizations 24,634 21,206
Intangible assets 34,866 817
Prepaid expenses and other assets 52,027 35,952
----------- -----------
$5,030,715 $3,852,737
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $ 201,504 $ 44,767
Payables:
Clients 2,524,352 2,126,699
Stock loaned 1,378,821 828,102
Brokers, dealers and clearing organizations 55,722 43,227
Trade and other 101,772 99,690
Trading account securities sold but not yet
purchased 33,400 30,841
Accrued compensation and commissions 172,066 158,539
Income taxes payable 4,592 10,974
----------- -----------
4,472,229 3,342,839
----------- -----------
Commitments and contingencies (Note 10) - -
Shareholders' equity:
Preferred stock; $.10 par value; authorized
10,000,000 shares; issued and outstanding -0- shares - -
Common stock; $.01 par value; authorized
100,000,000 shares; issued 48,997,995 shares 490 490
Additional paid-in capital 58,023 57,777
Other Comprehensive Income (1,076) 114
Retained earnings 530,885 459,099
----------- -----------
588,322 517,480
Less: 1,755,585 and 730,118 common shares
in treasury, at cost (29,836) (7,582)
----------- -----------
558,486 509,898
----------- -----------
$5,030,715 $3,852,737
=========== ===========
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 24, September 25, September 26,
1999 1998 1997
------------- ------------- -------------
Revenues:
Securities commissions and fees $ 758,136 $ 631,661 $ 514,964
Investment banking 74,748 109,705 109,088
Investment advisory fees 91,920 79,485 55,194
Interest 229,806 202,255 155,746
Correspondent clearing 4,655 4,429 4,502
Net trading profits 17,034 6,300 12,797
Financial service fees 36,101 24,797 20,786
Other 19,806 24,275 23,884
Gain on sale of Liberty
Investment Management, Inc.
(Note 16) - - 30,646
---------- ---------- ---------
1,232,206 1,082,907 927,607
---------- ---------- ---------
Expenses:
Employee compensation and benefits 754,747 648,214 537,410
Communications and information
processing 53,071 43,485 37,491
Occupancy and equipment 40,059 33,029 27,175
Clearance and floor brokerage 13,456 11,607 11,708
Interest 151,494 131,009 101,341
Business development 38,395 31,514 20,755
Other 43,465 33,813 31,212
---------- ---------- ---------
1,094,687 932,671 767,092
---------- ---------- ---------
Income before provision for
income taxes 137,519 150,236 160,515
Provision for income taxes 52,429 57,532 61,600
---------- ---------- ---------
Net income $ 85,090 $ 92,704 $ 98,915
========== ========== =========
Net income per share - basic $ 1.79 $ 1.92 $ 2.09
========== ========== =========
Net income per share - diluted $ 1.76 $ 1.86 $ 2.04
========== ========== =========
Weighted average common shares
outstanding - basic 47,606 48,160 47,383
========== ========== =========
Weighted average common and
common equivalent shares
outstanding - diluted 48,449 49,951 48,387
========== ========== =========
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)
Add- Other Treasury Total Total
Common itional Compre- Stock Share- Compre-
Stock Paid-in Retained hensive Common holders' hensive
Shares Amount Capital Earnings Income Shares Amount Equity Income
- --------------------------------------------------------------------------------
Balances at
September
27, 1996 21,777 $217 $50,271 $289,096 $ (791) (883)$(12,161)$326,632
Net income
fiscal
1997 98,915 98,915 $98,915
Cash divi-
dends -
common
stock
($.21
per share) (9,921) (9,921)
Employee
stock
purchases 2,031 145 1,649 3,680
Exercise
of stock
options (11) 211 2,541 2,530
Tax benefit
related to
non-qualified
option
exercises 308 308
3-for-2
stock
split 10,888 109 (109) (342) -
Net
unrealized
gain on
securities
available
for sale 1,132 1,132 1,132
---------------------------------------------------------------------
Balances at
September
26, 1997 32,665 326 52,599 377,981 341 (869) (7,971) 423,276
=====================================================================
Total
Compre-
hensive
Income
fiscal
1997 100,047
========
Net income
fiscal 1998 92,704 92,704 92,704
Cash divi-
dends -
common
stock
($.24
per share) (11,586) (11,586)
Purchase
of trea-
sury shares (292) (5,346) (5,346)
Employee
stock
purchases 4,271 261 2,274 6,545
Exercise
of stock
options 197 403 3,461 3,658
Tax benefit
related to
non-qualified
option exercises 539 539
3-for-2
stock
split 16,333 164 (164) (233) -
Corporate
sale of
RJF put
options 335 335
Net
unrealized
loss on
securities
available
for sale (227) (227) (227)
---------------------------------------------------------------------
Balances at
September
25, 1998 48,998 490 57,777 459,099 114 (730) (7,582) 509,898
=====================================================================
Total
Compre-
hensive
Income
fiscal
1998 92,477
========
Net income
fiscal 1999 85,090 85,090 85,090
Cash divi-
dends -
common
stock
($.28
per share) (13,304) (13,304)
Purchase
of trea-
sury shares (1,652) (31,564) (31,564)
Employee
stock
purchases 385 302 4,826 5,211
Exercise
of stock
options (1,860) 324 4,484 2,624
Tax benefit
related to
non-qualified
option exercises 407 407
Corporate
sale of
RJF put
options 1,314 1,314
Net
unrealized
loss on
securities
available
for sale (1,190) (1,190)(1,190)
---------------------------------------------------------------------
Balances at
September
24, 1999 48,998 $490 $58,023 $530,885$(1,076)(1,756)$(29,836)$558,486
=====================================================================
Total
Compre-
hensive
Income
fiscal
1999 $83,900
=======
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of these financial
statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(in thousands)
(continued on next page)
Year Ended
-----------------------------------------
September 24, September 25, September 26,
1999 1998 1997
------------- ------------- -------------
Cash flows from operating activities:
Net income $ 85,090 $ 92,704 $ 98,915
--------- ---------- ----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 19,129 16,321 13,312
Amortization of goodwill 930 487 1,799
Unrealized loss on investment
account securities 2,749 773 2,075
Unrealized loss (gain) and premium
amortization on available for sale
securities 642 1,395 (66)
(Gain)loss on sale of securities (2,227) (1,130) 55
(Gain)loss on sale of property and
equipment 277 (204) 55
Provision for bad debts (2,332) (342) (380)
Provision for other accruals (3,493) (1,825) (6,881)
Decrease (increase) in assets:
Receivables:
Clients (335,975) (207,158) (226,779)
Stock borrowed (424,648) 218,200 (206,804)
Brokers, dealers and clearing
organizations 82,395 (73,194) (15,338)
Other (3,669) (24,604) (9,138)
Trading account securities, net (70,814) (33,549) 25,975
Deferred income taxes (6,790) (8,485) (3,167)
Prepaid expenses and other assets (13,663) (14,259) (8,718)
Increase (decrease) in liabilities:
Payables:
Clients 370,758 639,541 400,752
Stock loaned 543,934 (206,933) 186,440
Brokers, dealers and clearing
organizations 7,055 20,975 (34,676)
Trade and other 4,230 20,298 34,091
Accrued compensation and commissions 3,147 16,758 40,481
Income taxes payable (6,742) (7,439) 8,008
--------- --------- ---------
Total adjustments 164,893 355,626 201,096
--------- --------- ---------
Net cash provided by operating activities 249,983 448,330 300,011
--------- --------- ---------
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of these financial
statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(in thousands)
(continued from preceding page)
Year Ended
-----------------------------------------
September 24, September 25, September 26,
1999 1999 1999
------------- ------------- -------------
Cash flows from investing activities:
Additions to property and equipment (20,543) (45,815) (25,456)
Sales of investment account securities 6,545 4,563 4,923
Sales of available for sale securities - - 18,732
Purchases of investment account
securities (8,769) (3,007) (8,636)
Purchases of available for sale
securities (207,907) (187,213) (170,131)
Security maturations and repayments 191,608 113,206 48,153
Acquisition of Roney & Co. (67,597) - -
----------- ----------- -----------
Net cash used in investing activities (106,663) (118,266) (132,415)
----------- ----------- -----------
Cash flows from financing activities:
Repayments on mortgage note (584) (12,948) (193)
Proceeds from mortgage financing - 40,000 -
Other borrowed funds 123,614 5,000 -
Repayments on borrowings (120,736) (1,500) (10,490)
Exercise of stock options and
employee stock purchases 8,242 10,742 6,518
Purchase of treasury stock (31,564) (5,346) -
Sale of stock options 1,314 335 -
Cash dividends on common stock (13,304) (11,586) (9,921)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (33,018) 24,697 (14,086)
----------- ----------- -----------
Net increase in cash and
cash equivalents 110,302 354,761 153,510
Cash and cash equivalents at
beginning of year 1,243,541 888,780 735,270
----------- ----------- -----------
Cash and cash equivalents at end of
year $1,353,843 $1,243,541 $ 888,780
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 151,295 $ 129,367 $ 100,546
=========== =========== ===========
Cash paid for taxes $ 65,601 $ 73,456 $ 55,382
=========== =========== ===========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are integral parts of these financial
statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Raymond James Financial, Inc. is a holding company which, through its
subsidiaries, is engaged principally in the securities brokerage business,
including the underwriting, distribution, trading and brokerage of equity and
debt securities and the sale of mutual funds and other investment products.
In addition, it provides investment management services for retail and
institutional clients and banking and trust services for retail clients. The
accounting and reporting policies of Raymond James Financial, Inc. and its
subsidiaries (the "Company") conform to generally accepted accounting
principles, the more significant of which are summarized below:
Basis of consolidation
- ----------------------
The consolidated financial statements include the accounts of Raymond
James Financial, Inc. and its subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.
All consolidated subsidiaries are 100% owned by the Company, except for
RJ Properties, Inc., which was 85% owned until August 1999 (see Note 16).
Reporting period
- ----------------
The Company's fiscal year ends on the last Friday in September of each
year.
Recognition of revenues
- -----------------------
Securities transactions and related commission revenues and expenses are
recorded on a trade date basis.
Revenues from investment banking are recorded at the time the
transaction is completed and the related income is reasonably determinable.
Investment banking revenues include sales credits earned in connection with
the distribution of the underwritten securities. Any warrants received in
connection with investment banking transactions are carried at a nominal
value until such time as the warrants are exercisable and the underlying
shares are salable.
The Company earns an advisory fee based on a client's portfolio value on
portfolios managed by its investment advisor subsidiaries. These fees are
recorded under the accrual method.
Management estimates and assumptions
- ------------------------------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Segment reporting
- -----------------
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of Enterprise and Related
Information" ("FAS 131"). FAS 131 supersedes FAS 14, "Financial Reporting
for Segments of a Business Enterprise", replacing the "industry segment"
approach with the "management" approach. The management approach designates
the internal organization that is used by management for making operating
decisions and assessing performance as the source of the Company's reportable
segments. FAS 131 also requires disclosures about products and services,
geographic areas, and major customers. The adoption of FAS 131 did not
affect the Company's financial position or results of operations, but did
affect the disclosure of segment information (see Note 15).
Cash and cash equivalents
- -------------------------
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents for purposes of the
consolidated statement of cash flows. These consist primarily of shares of
money market funds and of U.S. Treasury Securities purchased under agreements
to resell, some of which are held in special reserve accounts, and are stated
at cost, which approximates market at fiscal yearend.
In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934
the Company, as a broker-dealer carrying client accounts, is subject to
requirements related to maintaining cash or qualified securities in a
segregated reserve account for the exclusive benefit of its clients.
It is the Company's policy to obtain possession and control of
securities purchased under resale agreements. The net fair value of
securities purchased under resale agreements approximates their carrying
value, as such financial instruments are 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 24, 1999 and September 25, 1998, there were no
agreements with any individual counterparties where the risk of loss exceeded
10% of shareholders' equity.
Customer receivables
- --------------------
Customer receivables are reported at their outstanding principal,
adjusted for any allowance for doubtful accounts, write-offs, any deferred
fees or costs on originated bank loans and unamortized premiums or discounts
on purchased loans. Client loans are considered to be impaired when it is
probable that the Company will be unable to collect all amounts due.
Impaired loans are written down or reserved to the extent that the principal
is judged to be uncollectible. In the case of collateral-dependent loans
where repayment is expected to be provided solely by the underlying
collateral value, the loans are written down to the lower of cost or
collateral value. Impairment losses are included in the allowance for
doubtful accounts or reserves through an income statement charge.
Securities owned
- ----------------
The trading and investment account securities held by the brokerage
subsidiaries are classified as trading. Investment account securities not
readily marketable are carried at estimated fair value as determined by
management with unrealized gains and losses included in earnings. Trading
securities are carried at market value with realized and unrealized gains and
losses included in earnings. The Company accounts for other securities owned
in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt
and Equity Securities" ("FAS 115"). FAS 115 requires investments in debt and
equity securities to be classified as either "held to maturity," "trading,"
or "available for sale." The accounting treatment for unrealized gains and
losses on those securities is then determined by the classification chosen.
Securities available for sale are carried at estimated market value, with
unrealized gains and losses reported as a separate component of shareholders'
equity, net of deferred taxes, and realized gains and losses, determined on a
specific identification basis, included in earnings.
Property and equipment
- ----------------------
Property, equipment and leasehold improvements are stated at cost less
accumulated depreciation. Depreciation of assets is provided principally
using the straight-line method for financial reporting purposes over the
estimated useful lives of the assets, which range from two to seven years for
furniture and equipment and fifteen to thirty-one years for buildings and
land improvements. Leasehold improvements are amortized using the straight-
line method over the shorter of the lease term or the estimated useful lives
of the assets. For income tax purposes,
assets are depreciated using accelerated methods.
Additions, improvements and expenditures for repairs and maintenance
that significantly extend the useful life of an asset are capitalized. Other
expenditures for repairs and maintenance are charged to operations in the
period incurred. Gains and losses on disposals of fixed assets are
reflected in income in the period realized.
Intangible Assets
- -----------------
Goodwill is stated at cost less accumulated amortization and reflected
as an intangible asset. Amortization of goodwill is provided using the
straight-line method for financial reporting purposes over a period ranging
from three to fifteen years.
Correspondent clearing
- ----------------------
Under clearing agreements, the Company clears trades for unaffiliated
correspondent brokers and retains a portion of commissions as a fee for its
services. The Company records clearing charges net of commissions remitted.
Total commissions generated by correspondents were $22,126,000, $22,244,000
and $21,334,000, and commissions remitted totaled $17,471,000, $17,815,000
and $16,832,000 for the years ended September 24, 1999, September 25, 1998
and September 26, 1997, respectively.
Comprehensive Income
- --------------------
The Company adopted SFAS No. 130, Reporting Comprehensive Income in
fiscal 1999. This statement establishes standards for the reporting and
display of comprehensive income and its components. This statement requires
that an enterprise classify items of other comprehensive income by nature in
a financial statement, and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a balance sheet. The Company's other
comprehensive income represents the unrealized gain (loss) on securities
available for sale in addition to net income.
Derivative Financial Instruments
- --------------------------------
To manage interest rate exposures at Raymond James Bank, FSB ("RJBank"),
this subsidiary uses interest rate swaps. Interest rate swaps are agreements
to exchange interest rate payment streams based on a notional principal
amount. RJBank specifically designates interest rate swaps as hedges of the
fixed rate period of certain purchased loans and recognizes interest
differentials as adjustments to interest income in the period they occur.
Income taxes
- ------------
The Company utilizes the asset and liability approach defined in
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). FAS 109 requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the financial statement amounts and the tax bases of
assets and liabilities.
Net income per share
- --------------------
Net income per share is computed using weighted average common stock and
common stock equivalents outstanding. Common stock equivalents include
shares issuable under stock options and are determined under the treasury
stock method. All per share amounts have been restated to give retroactive
effect to the common stock dividends paid on April 2, 1998 and April 3, 1997
(see Note 11), as well as the implementation of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS 128") in fiscal
1998.
Reclassifications
- -----------------
Certain amounts from prior years have been reclassified for consistency
with current year presentation. These reclassifications were not material to
the
consolidated financial statements.
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - RECEIVABLES FROM AND PAYABLES TO CLIENTS:
- --------------------------------------------------
Receivables from clients include amounts arising from normal cash and
margin transactions, bank loans receivable (see Note 7), and fees receivable.
Securities owned by brokerage clients are held as collateral for margin
receivables. Such collateral is not reflected in the accompanying
consolidated financial statements. The amount receivable from clients is
shown net of an allowance for doubtful accounts of approximately $3,603,000
and $1,166,000 as of September 24, 1999 and September 25, 1998, respectively.
Unsecured receivables are not significant.
Payables to clients include brokerage client funds on deposit awaiting
reinvestment and bank savings accounts and certificates of deposit. The
Company pays interest at varying rates on qualifying brokerage client funds
on deposit. These funds totaled $1,627,629,000 and $1,447,665,000 at
September 24, 1999 and September 25, 1998, respectively. In addition, the
Company pays interest at varying rates on client bank deposits as described
in Note 7.
NOTE 2 - TRADING AND INVESTMENT ACCOUNT SECURITIES (in thousands):
- ------------------------------------------------------------------
September 24, 1999 September 25, 1998
---------------------- ----------------------
Securities Securities
sold but sold but
Securities not yet Securities not yet
owned purchased owned purchased
---------- ---------- ---------- ----------
Marketable:
Stocks and warrants $ 9,891 $ 3,731 $ 9,715 $ 5,000
Municipal obligations 144,597 285 77,697 55
Corporate obligations 9,743 3,488 1,913 1,197
Government obligations 7,894 24,842 10,547 24,589
Other 8,183 1,054 5,530 -
Non-marketable 659 - 490 -
-------- ------- --------- -------
$180,967 $33,400 $105,892 $30,841
======== ======= ======== =======
NOTE 3 - AVAILABLE FOR SALE SECURITIES (in thousands):
- ------------------------------------------------------
The amortized cost and estimated market values of securities available
for sale at September 24, 1999 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
Mortgage-backed securities:
FNMA $126,115 $ 236 $ (460) $125,891
FHLMC 196,917 362 (244) 197,035
GNMA 33,367 - (387) 32,980
Corporate investments 20,521 - (76) 20,445
Other 24,701 14 (923) 23,792
-------- ------- -------- --------
$401,621 $ 612 $(2,090) $400,143
======== ======= ======== ========
The amortized cost and estimated market values of securities available
for sale at September 25, 1998 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
Mortgage-backed securities:
FNMA $178,651 $124 $ (79) $178,696
FHLMC 152,510 212 (1) 152,721
GNMA 13,093 265 - 13,358
Corporate investments 20,527 - (71) 20,456
Other 20,717 96 (368) 20,445
-------- ---- ------ --------
$385,498 $697 $(519) $385,676
======== ==== ====== ========
The U.S. Treasury Securities and U.S. Government Obligations mature
after one year and within ten years.
NOTE 4 - LEVERAGED LEASES (in thousands):
- -----------------------------------------
The Company is the lessor in two leveraged commercial aircraft
transactions with major domestic airlines. The Company's combined equity
investments represented 21% of the aggregate purchase prices; the remaining
79% was funded by public debt issues in the form of equipment trust
certificates. The residual values of the aircrafts at the end of an average
lease term of 20 years are projected to be an average of 10% of the original
cost. The leases expire in September 2013 and June 2016, respectively.
September 24, September 25,
1999 1998
------------- -------------
Rents receivable (net of principal and
interest on the non-recourse debt $ 21,056 $ 21,056
Unguaranteed residual values 10,719 10,719
Unearned income (7,825) (8,478)
---------- ---------
Investment in leveraged leases 23,950 23,297
Deferred taxes arising from leveraged leases (25,777) (23,049)
---------- ---------
Net investment in leveraged leases $ (1,827) $ 248
========== =========
NOTE 5 - PROPERTY AND EQUIPMENT (in thousands):
- -----------------------------------------------
September 24, September 25,
1999 1998
------------- -------------
Land $ 12,612 $ 9,612
Buildings and improvements 66,062 60,059
Furniture, fixtures, equipment
and leasehold improvements 100,134 83,904
--------- ---------
178,808 153,575
Less: accumulated depreciation
and amortization $(87,473) (72,203)
--------- ---------
$ 91,335 $ 81,372
========= =========
NOTE 6 - BORROWINGS:
- --------------------
The Company has a mortgage note payable of $39.2 million related to the
refinancing of two existing buildings at the headquarters complex and
additional financing for a third building and adjacent parking garage
completed during fiscal year 1998. The mortgage requires monthly principal
and interest payments of approximately $291,000 with a balloon payment due
January 1, 2008. The mortgage bears interest at 7.37% and is secured by
land, buildings and improvements with a net book value of $48.75 million at
September 24, 1999. Principal maturities under this mortgage note payable
for the succeeding five years are as follows: $624,000 in 2000, $671,000 in
2001, $722,000 in 2002, $777,000 in 2003, $837,000 in 2004 and $35,601,000
thereafter.
The Company had a $50 million committed, unsecured line of credit with a
commercial bank. Borrowings under the line bore interest at the lesser of
prime rate, Fed Funds plus .5%, or LIBOR plus .375%. The line of credit
required that the Company maintain certain net worth levels, limited other
leases and debt, and required the Company to follow certain other sound
business practices. The Company paid $26,000, $63,000 and $63,000 in loan
commitment fees on this line during fiscal years 1999, 1998 and 1997,
respectively. During fiscal 1999, the Company renewed this line on an
uncommitted basis with the same terms and the same bank. Subsequent to
yearend, the Company replaced this line with a three year term loan for $50
million and a $100 million committed line of credit through a group of
commercial banks. The term loan bears interest at LIBOR plus .75%, while any
draws on the line of credit would bear interest at the Company's option, at
LIBOR plus .5%, or the higher of prime or Fed Funds plus .5%. There is a
.125% loan commitment fee on the $100 million line of credit.
The Company's Raymond James Credit Corp. subsidiary has a $50 million
line of credit, under which borrowings are collateralized by customer
securities, which bears interest at a rate of one month LIBOR plus .75%.
There were borrowings of $60 million under this facility at September 24,
1999. The interest rate on these borrowings ranged from 4.8% to 6.3%.
The Company's broker-dealer subsidiaries also maintain uncommitted lines
of credit aggregating $480 million with commercial banks ($235 million
secured and $245 million unsecured). Borrowings under the lines of credit
bear interest, at the Company's option, at the bank's prime rate, Fed Funds
rate plus .25% to .5%, or LIBOR plus .75%. Unsecured short-term borrowings
at September 24, 1999, totaled $65 million with an average interest rate of
5.66%. The interest rate on these borrowings ranged from 4.50% to 8.50% in
1999, and 5.58% to 6.84% in 1998. Loans on the secured, uncommitted lines of
credit are collateralized by firm or client margin securities.
RJBank has a $5 million FHLB advance outstanding which bears interest at
a fixed rate of 5.67% and matures May 27, 2008. Securities with a carrying
value of $19,917,000 are pledged as collateral for this and future borrowing.
The Bank's borrowing availability related to FHLB advances is 10% of RJBank's
total assets.
NOTE 7 - BANK OPERATIONS AND DEPOSITS:
On May 6, 1994, the Company chartered RJBank in conjunction with the
purchase of the deposits of certain branches of a federal savings bank from
the Resolution Trust Corporation for a nominal purchase price.
A summary of client deposit accounts and weighted average interest rates
follows:
September 24, 1999 September 25, 1998
------------------------ ------------------------
(dollar amounts in thousands)(dollar amounts in thousands)
Weighted Weighted
Balance Average Rate Balance Average Rate
-------- ------------ -------- ------------
Demand deposits:
Non-interest bearing $ 936 - $ 646 -
Interest bearing 2,963 1.66% 2,229 2.19%
Money market accounts 15,784 3.70% 12,211 3.85%
Savings accounts 469,097 4.24% 382,767 4.53%
Certificates of deposit
(3.85% - 7.25%) 106,848 5.73% 52,705 5.67%
-------- ----- -------- -----
$595,628 4.47% $450,558 4.62%
======== ===== ======== =====
The certificates of deposit mature as follows: $34,824,000 in 2000,
$35,407,000 in 2001, $11,692,000 in 2002, $2,523,000 in 2003 and $22,402,000
in 2004 and thereafter. Certificates of deposit in amounts of $100,000 or
more at September 24, 1999 and September 25, 1998 were approximately
$21,567,000 and $6,089,000, respectively.
A summary of RJBank's loan distribution is as follows:
September 24, September 25,
1999 1998
------------- -------------
(000's) (000's)
Residential mortgage loans $138,840 $60,173
Consumer and commercial loans 30,665 2,111
--------- --------
169,505 62,284
Allowance for loan losses (1,799) (642)
Purchase premium 455 362
Purchase discount (303) -
Deferred origination fees
and costs, net (75) 22
--------- --------
$167,783 $62,026
========= ========
Activity in the allowance for loan losses for 1999 and 1998 consists
solely of the provision for loan losses. There were no actual loan losses in
1999, 1998 or 1997. There was no recorded investment or interest income
recognized on impaired loans during 1999, 1998 and 1997, as there were no
impaired loans during these periods.
Generally, mortgage loans are secured by either first or second
mortgages on residential property, consumer loans are secured by securities
and time deposit accounts, and commercial loans are generally secured by real
property or the general assets of the borrower. As of September 24, 1999 and
September 25, 1998, 97% and 100%, respectively, of RJBank's loan portfolio
was secured.
RJBank is subject to various regulatory and capital requirements and was
in compliance with all requirements throughout the fiscal years.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), RJBank is subject to rules limiting brokered deposits and
related interest rates. Under these rules, banks that are deemed "well-
capitalized" may accept brokered deposits without restriction, and banks
deemed "adequately capitalized" may do so with a waiver from the FDIC. An
"undercapitalized" bank is not eligible for a waiver and may not accept
brokered deposits. As of September 24, 1999, the most recent notification
from the Office of Thrift Supervision categorized RJBank as "well
capitalized" under the regulatory framework for prompt corrective action.
At September 24, 1999 and September 25, 1998, RJBank exceeded the
tangible capital, core capital, core/leverage capital, Tier I/risk-based
capital and total risk-based capital levels mandated by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 and FDICIA. At
September 24, 1999 and September 25, 1998, RJBank's Tier I capital to average
assets ratio was 5.8% and 8.2%, respectively.
NOTE 8 - Derivative Financial Instruments
- -----------------------------------------
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The derivative
financial instruments are used to manage well-defined interest rate risk at
RJBank.
RJBank uses interest rate swap agreements to hedge against the potential
impact of increases in interest rates during the fixed rate period of certain
purchased loan pools. Under the interest rate swap agreements, RJBank
receives or makes payments, on a monthly basis, based on the differential
between a specified interest rate and one month LIBOR. At September 24,
1999, RJBank was party to two interest rate swap agreements, one of $20
million and one of $32 million, expiring on July 17, 2004 and August 17,
2004, respectively. There were no swap agreements outstanding at September
24, 1998. RJBank recognized a reduction of interest income of approximately
$71,000 for the year ended September 24, 1999 as a result of these swap
agreements.
The fair aggregate value of the Company's interest rate swap agreements
approximated $159,000 at September 24, 1999. This positive fair value
represents the estimated amount the other party would have to pay the Company
at each date to cancel the contracts or transfer them to other parties.
The Company is exposed to credit losses in the event of nonperformance
by the counterparties to its interest rate swap agreements. The Company
anticipates, however, that the counterparties will be able to fully satisfy
its obligation under the agreements. The Company does not obtain collateral
to support their financial instruments but monitors the credit standing of
the counterparties.
NOTE 9 - FEDERAL AND STATE INCOME TAXES (in thousands):
- -------------------------------------------------------
The provision (benefit) for income taxes consists of:
Year Ended
-----------------------------------------
September 24, September 25, September 26,
1999 1998 1997
------------- ------------- -------------
Current provision:
Federal $ 49,841 $ 56,151 $ 55,864
State 8,588 9,774 9,655
--------- --------- ---------
58,429 65,925 65,519
Deferred benefit: --------- --------- ---------
Federal (5,110) (7,120) (3,306)
State (890) (1,273) (613)
--------- --------- ---------
(6,000) (8,393) (3,919)
--------- --------- ---------
$ 52,429 $57,532 $61,600
========= ========= =========
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 24, September 25, September 26,
1999 1998 1997
------------- ------------- -------------
Provision calculated at
statutory rates $ 48,145 $ 52,637 $ 56,230
State income taxes, net
of federal benefit 5,003 5,526 5,877
Other (719) (631) (507)
--------- --------- ---------
$ 52,429 $ 57,532 $ 61,600
========= ========= =========
The major deferred tax asset (liability) items, as computed under FAS
109, are as follows:
September 24, September 25,
1999 1998
------------- -------------
Deferred tax assets:
Deferred compensation $ 38,156 $ 35,216
Accrued expenses 20,843 17,376
Other 17,021 13,063
--------- ---------
Total deferred tax assets 76,020 65,655
--------- ---------
Deferred tax liabilities:
Aircraft leases (25,779) (23,049)
Other (10,610) (9,765)
--------- ---------
Total deferred tax liabilities (36,389) (32,814)
--------- ---------
Net deferred tax assets $ 39,631 $ 32,841
========= =========
NOTE 10 - COMMITMENTS AND CONTINGENCIES:
- ----------------------------------------
Long-term lease agreements expire at various times through 2004.
Minimum annual rentals under such agreements for the succeeding five fiscal
years are approximately: $14,545,000 in 2000, $13,196,000 in 2001,
$11,024,000 in 2002, $7,600,000 in 2003, $4,817,000 in 2004 and $3,558,000
thereafter. Rental expense incurred under all leases, including equipment
under short-term agreements, aggregated $13,154,000, $11,085,000, and
$8,802,000 in 1999, 1998 and 1997, respectively.
The Company has committed to lend to, or guarantee other debt for,
Raymond James Tax Credit Funds, Inc. ("RJ Tax Credit") up to $45 million upon
request. Any borrowings bear interest at broker call plus 1% per annum. RJ
Tax Credit is charged 1% for amounts guaranteed. The borrowings are secured
by properties under development. At September 24, 1999, balances of
$8,553,000 were loaned to RJ Tax Credit and $440,000 were guaranteed. At
September 25, 1998, balances of $5,267,000 were loaned to RJ Tax Credit and
$2,420,000 were guaranteed. The commitment expired in November 1999 at which
time any outstanding balances were due and payable. On November 18, 1999, the
Board of Directors renewed the commitment until November 2000.
At September 24, 1999, RJBank had letters of credit of $1,182,000
outstanding. In addition, RJBank had commitments to fund loans at fixed and
variable rates of $1,039,000 and $2,992,000, respectively, at September 24,
1999.
As part of an effort to increase brand awareness, the Company entered
into a stadium naming rights contract in July 1998. The contract has a
thirteen-year term with a five-year renewal option and a 4% annual escalator.
Expense of $2,719,000 and $921,000 was recognized in fiscal 1999 and 1998,
respectively.
In the normal course of business, the Company enters into underwriting
commitments. Transactions relating to such commitments that were open at
September 24, 1999 and were subsequently settled had no material effect on
the consolidated financial statements as of that date.
The Company utilizes a letter of credit and deposits with clearing
organizations to satisfy margin deposit requirements. At September 24, 1999
and September 25, 1998, the Company had a letter of credit outstanding of
$100,000 and client margin securities valued at $86,277,000 and $62,912,000,
respectively, on deposit with a clearing organization.
The Company has guaranteed lines of credit for its various foreign joint
ventures as follows: two letters of guaranty totaling $6 million in Turkey,
two letters of guaranty not to exceed $8 million in Argentina and a $5
million letter of guaranty and $325,000 letter of credit in India.
In the normal course of business, certain subsidiaries of the Company,
as general partner, are contingently liable for the obligations of various
limited partnerships engaged primarily in securities investments and real
estate activities. In the opinion of the Company, such liabilities, if any,
for the obligations of the partnerships will not in the aggregate have a
material adverse effect on the Company's consolidated financial position.
As a result of the extensive regulation of the securities industry, the
Company's broker-dealer subsidiaries are subject to regular reviews and
inspections by regulatory authorities and self-regulatory organizations,
which can result in imposition of sanctions for regulatory violations,
ranging from non-monetary censure to fines and, in serious cases, temporary
or permanent suspension from business. In addition, from time to time
regulatory agencies and self-regulatory organizations institute
investigations into industry practices, which can result in the imposition of
such sanctions. Current proceedings in which the Company is one of the named
defendants include the combined SEC, Internal Revenue Service and National
Association of Securities Dealers, Inc. review of investment banking
practices in connection with advance refunding transactions for
municipalities.
The Company is also a defendant or co-defendant in various lawsuits
incidental to its securities business. The Company is contesting the
allegations of the complaints in these cases and believes that there are
meritorious defenses in each of these lawsuits. In view of the number and
diversity of claims against the Company, the number of jurisdictions in which
litigation is pending and the inherent difficulty of predicting the outcome
of litigation and other claims, the Company cannot state with certainty what
the eventual outcome of pending litigation or other claims will be. In the
opinion of management, based on discussions with counsel, the outcome of
these matters will not result in a material adverse effect on the
consolidated financial position or results of operations of the Company.
NOTE 11 - CAPITAL TRANSACTIONS:
- -------------------------------
The Company's Board of Directors has, from time to time, adopted
resolutions authorizing the Company to repurchase its common stock for
general corporate purposes. At September 24, 1999, pursuant to prior
authorizations from the Board of Directors, 2,275,000 shares were available
to be repurchased.
In February 1998 and 1997, the Company's Board of Directors declared a 3-
for-2 stock split in the form of a dividend. The additional shares were
distributed on April 2, 1998 and April 3, 1997, respectively, to shareholders
of record on March 10, 1998 and March 7, 1997, respectively. All references
(unless otherwise noted) in the consolidated financial statements and
accompanying notes to amounts per share and to the number of common shares
have been restated to give retroactive effect to the stock dividends.
The Company sold equity put options in October 1998 and August 1999 that
entitle the holder, at the expiration date, to sell 239,000 and 400,000
shares of common stock to the Company at exercise prices of $18.31 and $20.24
per share, respectively. The $1,314,000 in premiums has been accounted for
as additional paid-in capital. At September 24, 1999, put options covering
400,000 shares were outstanding, with an aggregate exercise price of
$8,096,000 and an expiration date of February 9, 2000. In the event the
options are exercised, the Company may elect to pay the holder in cash for
the difference between the exercise price and the market price of the
Company's shares, in lieu of repurchasing the stock.
NOTE 12 - EMPLOYEE BENEFIT PLANS:
- ---------------------------------
The Company's profit sharing plan and employee stock ownership plan
provide certain death, disability or retirement benefits for all employees
who meet certain service requirements. Such benefits become fully vested
after seven years of qualified service. The Company also offers a plan
pursuant to section 401(k) of the Internal Revenue Code, which provides for
the Company to match 100% of the first $500 and 50% of the next $500 of
compensation deferred by each participant annually. Roney also offers a plan
pursuant to section 401(k) of the Internal Revenue Code. This plan will be
merged into the Company's plan on January 1, 2000. 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 $16,240,000, $17,299,000 and $15,462,000, for
1999, 1998 and 1997, respectively.
Stock Compensation Plans
At September 24, 1999, the Company has six stock-based compensation
plans, which are described below. In accordance with the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("FAS 123"),the Company applies APB Opinion 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for these plans.
If the Company had elected to recognize compensation expense based on
the fair value at the grant dates for awards under these plans consistent
with the methodology prescribed by FAS 123, the Company's net income and net
income per share would have been reduced to the pro forma amounts indicated
below:
Year Ended
-----------------------------
Sept. 24, Sept. 25, Sept. 26,
1999 1998 1997
--------- --------- ---------
Net income (in thousands) As reported $85,090 $92,704 $98,915
Pro forma $80,372 $88,278 $95,936
Net income per share - basic As reported $ 1.79 $ 1.92 $ 2.09
Pro forma $ 1.69 $ 1.83 $ 2.02
Net income per share - diluted As reported $ 1.76 $ 1.86 $ 2.04
Pro forma $ 1.66 $ 1.77 $ 1.98
These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over
the vesting period and additional options may be granted in future years.
For disclosure purposes, the fair value of each fixed option grant is
estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions used for stock option grants
in 1999, 1998 and 1997, respectively: dividend yields of 1.3%, 1.1% and 1.1%;
expected volatility of 42.6%, 44.1% and 32.2%, risk-free interest rates of
4.96%, 5.85% and 6.28%, and expected lives of 5.61, 5.32 and 5.99 years.
Fixed Stock Option Plans
The Company has one qualified and three non-qualified fixed stock option
plans. Under the 1992 Incentive Stock Option Plan, the Company may grant
options to its management personnel for up to 4,612,500 shares of common
stock. The 1992 Plan was established to replace, on substantially the same
terms and conditions, the 1982 Plan. Options are granted to key
administrative employees and registered representatives of Raymond James &
Associates, Inc. who achieve certain gross commission levels. Options are
exercisable in the 36th to 72nd months following the date of grant and only
in the event that the grantee is an employee of the Company at that time.
Under one of the Company's non-qualified stock option plans, the Company
may grant up to 2,278,125 shares of common stock to independent contractor
registered representatives. Options are exercisable five years after grant
date provided that the representative is still associated with the Company.
Under the Company's second non-qualified stock option plan, the Company may
grant up to 379,688 shares of common stock to the Company's outside
directors. Options vest over a five-year period from grant date provided
that the director is still serving on the Board of the Company. Under the
Company's third non-qualified stock option plan, the Company may grant up to
1,125,000 shares of common stock to key management personnel. Option terms
are specified in individual agreements and expire on a date no later than the
tenth anniversary of the grant date. Under all plans, the exercise price of
each option equals the market price of the Company's stock on the date of
grant and an option's maximum term is 10 years.
A summary of the status of the Company's four fixed stock option plans
as of September 24, 1999, September 25, 1998 and September 26, 1997, and
changes during the years ending on those dates is presented below:
1999 1998 1997
------------------ ------------------ ------------------
Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
------------------ ------------------ ------------------
Outstanding at
beginning of year 2,738,045 $14.00 2,539,220 $ 9.37 2,366,094 $ 7.66
Granted 258,785 21.24 831,340 23.15 779,876 12.55
Canceled (190,902) 14.33 (84,516) 12.32 (191,130) 7.17
Exercised (324,240) 8.09 (547,999) 6.66 (415,620) 4.41
---------- ------ ---------- ------ ---------- ------
Outstanding at
yearend 2,481,688 $15.52 2,738,045 $14.00 2,539,220 $ 9.37
========== ====== ========== ====== ========== ======
Options exercisable
at yearend 299,350 215,878 360,691
Weighted average
fair value of
options granted
during the year $ 8.89 $10.26 $ 9.62
The following table summarizes information about fixed stock options
outstanding at September 24, 1999:
Options Outstanding Options Exercisable
---------------------------------------------------------------
Range of Number Weighted- Weighted- Number Weighted-
Exercise Outstanding Average Average Exercisable Average
Prices at 9/24/99 Remaining Exercise at 9/24/99 Exercise
Contractual Price Price
Life
- --------------------------------------------------------------------------------
$ 3.16 - 6.33 107,982 .9 $ 6.15 42,501 $ 6.11
$ 6.33 - 9.49 174,788 1.3 7.73 39,714 6.86
$ 9.49 - 12.65 1,077,244 2.2 11.10 217,135 9.86
$12.65 - 15.81 90,000 3.3 13.39 - -
$15.81 - 18.98 30,000 4.8 17.94 - -
$18.98 - 22.14 196,500 5.5 20.57 - -
$22.14 - 25.30 683,774 3.5 22.56 - -
$25.30 - 28.46 97,350 4.1 26.36 - -
$28.46 - 31.63 24,050 3.9 31.49 - -
--------- --- ------ ------- ------
2,481,688 2.9 $15.52 299,350 $ 8.93
========= === ====== ======= ======
Employee Stock Purchase Plan
Under the 1994 and 1998 Employee Stock Purchase Plans, the Company is
authorized to issue up to 1,125,000 and 1,500,000 shares of common stock,
respectively, to its full-time employees, nearly all of whom are eligible to
participate. Under the terms of the Plans, employees can choose each year to
have up to 20% of their annual compensation specified to purchase the
Company's common stock. Share purchases in any calendar year are limited to
the lesser of 1,000 shares or shares with a market value of $25,000. The
purchase price of the stock is 85% of the market price on the day prior to
the purchase date. Under the Plans, the Company sold 301,837, 314,114 and
268,607 shares to employees in fiscal years 1999, 1998 and 1997,
respectively. The compensation cost which would have been recognized for the
fair value of the employees' purchase rights was calculated as the value of
the 15% discount from market value.
Employee Investment Fund
Certain key employees of the Company participate in a limited
partnership arrangement in which the Company makes a non-recourse loan to
these employees for two thirds of the purchase price per unit of the Raymond
James Employee Investment Fund I, L.P. The loan plus interest is intended to
be paid back from the earnings of the fund. The fund is invested in the
merchant banking activities of the Company and other venture capital limited
partnerships.
NOTE 13- NET CAPITAL REQUIREMENTS:
- ----------------------------------
The broker-dealer subsidiaries of the Company are subject to the
requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the
Securities Exchange Act of 1934 and the rules of the securities exchanges of
which Raymond James & Associates, Inc. ("RJA") is a member, whose
requirements are substantially the same. This Rule requires that aggregate
indebtedness, as defined, not exceed fifteen times net capital, as defined.
Rule 15c3-1 also provides for an "alternative net capital requirement" which,
if elected, requires that net capital be equal to the greater of $250,000 or
two percent of aggregate debit items computed in applying the formula for
determination of reserve requirements. The New York Stock Exchange, Inc. may
require a member organization to reduce its business if its net capital is
less than four percent of aggregate debit items and may prohibit a member
firm from expanding its business and declaring cash dividends if its net
capital is less than five percent of aggregate debit items. As of January 1,
1999 the Company merged its independent contractor broker-dealers, Investment
Management & Research, Inc. and Robert Thomas Securities, Inc. into Raymond
James Financial Services, Inc. In addition, on May 28, 1999, the Company
purchased Roney & Co., a broker-dealer. The net capital position of the
Company's clearing broker-dealer subsidiary was as follows:
September 24, September 25,
1999 1998
------------- -------------
Raymond James & Associates, Inc.: (dollar amounts in thousands)
- ---------------------------------
(alternative method elected)
Net capital as a percent of aggregate
debit items 19% 17%
Net capital $218,456 $149,284
Required net capital 22,848 17,862
--------- ---------
Excess net capital $195,608 $131,422
========= =========
All other broker-dealer subsidiaries were in compliance during all years
presented.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
- ------------------------------------------------------------
In the normal course of business, the Company purchases and sells
securities as either principal or agent on behalf of its clients. If either
the client or a counterparty fails to perform, the Company may be required to
discharge the obligations of the nonperforming party. In such circumstances,
the Company may sustain a loss if the market value of the security or futures
contract is different from the contract value of the transaction.
The Company also acts as an intermediary between broker-dealers and
other financial institutions whereby the Company borrows securities from one
broker-dealer and then lends them to another. Securities borrowed and
securities loaned are carried at the amounts of cash collateral advanced and
received in connection with the transactions. The Company measures the
market value of the securities borrowed and loaned against the cash
collateral on a daily basis. The market value of securities borrowed and
securities loaned was $1,242,224,000 and $1,344,366,000, respectively, at
September 24, 1999 and $824,726,000 and $796,504,000, respectively, at
September 25, 1998. 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
clients and others for which it has received cash or other collateral. If a
borrowing institution or broker-dealer does not return a security, the
Company may be obligated to purchase the security in order to return it to
the owner. In such circumstances, the Company may incur a loss equal to the
amount by which the market value of the security on the date of
nonperformance exceeds the value of the loan from the institution or the
collateral from the broker or dealer.
The Company has sold securities that it does not currently own and will,
therefore, be obligated to purchase such securities at a future date. The
Company has recorded $33.4 million and $30.8 million, at September 24, 1999
and September 25, 1998, respectively, which represents the market value of
the related securities at such dates. The Company is subject to loss if the
market price of those securities not covered by a hedged position increases
subsequent to fiscal yearend. The Company utilizes short government
obligations and equity securities to hedge long proprietary inventory
positions. At September 24, 1999, the Company had $24,670,000 in short
government obligations and $1,275,000 in short equity securities which
represented hedge positions. At September 25, 1998, the Company had
$24,245,000 in short government obligations and $571,000 in short equity
securities, which represented hedge positions.
The Company enters into security transactions involving forward
settlement. The Company has recorded transactions with a contract value of
$61,353,000 and $311,252,000 and a market value of $62,257,000 and
$315,104,000 as of September 24, 1999 and September 25, 1998, respectively.
Transactions involving future settlement give rise to market risk, which
represents the potential loss that can be caused by a change in the market
value of a particular financial instrument. The Company's exposure to market
risk is determined by a number of factors, including the size, composition
and diversification of positions held, the absolute and relative levels of
interest rates, and market volatility.
The majority of the Company's transactions and, consequently, the
concentration of its credit exposure is with clients, broker-dealers and
other financial institutions in the United States. These activities
primarily involve collateralized arrangements and may result in credit
exposure in the event that the counterparty fails to meet its contractual
obligations. The Company's exposure to credit risk can be directly impacted
by volatile securities markets, which may impair the ability of
counterparties to satisfy their contractual obligations. The Company seeks
to control its credit risk through a variety of reporting and control
procedures, including establishing credit limits based upon a review of the
counterparties' financial condition and credit ratings. The Company monitors
collateral levels on a daily basis for compliance with regulatory and
internal guidelines and requests changes in collateral levels as appropriate.
NOTE 15 - SEGMENT ANALYSIS:
- ---------------------------
The Company's reportable segments are: retail distribution, institutional
distribution, investment banking, asset management and other. The retail
distribution segment includes the retail branches of the Company's broker-
dealer subsidiaries located throughout the U.S. These branches provide
securities brokerage services including the sale of equities, mutual funds,
fixed income products and insurance to their retail clients. The
institutional distribution segment includes institutional sales offices in
the U.S. and Europe providing securities brokerage services emphasizing the
sale of U.S. equities and fixed income products to institutions. The
investment banking segment includes management and participation in
underwritings (exclusive of sales credits, which are included in the
distribution segments), mergers and acquisitions, public finance, trading,
research and market making. The asset management segment includes investment
portfolio management services of Eagle Asset Management, Inc., Awad Asset
Management and RJA's Asset Management Services division and mutual fund
management by Heritage Asset Management, Inc. In the various programs
offered by these entities, clients' funds are professionally managed either
in individual accounts or in mutual funds. RJBank and the trust companies,
the results of operations of international joint ventures, stock loan/stock
borrow and earnings on firm capital are included in the segment entitled
"other."
The financial results of the Company's segments are the same as those
described in the "Summary of Significant Accounting Policies". Segment data
includes charges allocating corporate overhead to each segment. Intersegment
revenues and charges are eliminated between segments. The Company evaluates
the performance of its segments and allocates resources to them based on
return on investment.
The Company has not disclosed asset information by segment as the
information is not produced internally. All long-lived assets are located in
the U.S.
The Company's business is predominantly in the U.S., with only 3% of
revenues and 4% of net income coming from international operations.
Information concerning operations in these segments of business is as
follows:
1999 1998 1997
---------- ---------- ----------
Revenue: (amounts in thousands)
Retail distribution $ 847,783 $ 704,598 $ 572,807
Institutional distribution 158,596 146,590 121,411
Investment banking 36,155 57,180 64,192
Asset management 95,055 86,221 61,602
Other 94,617 88,318 76,949
---------- ---------- ----------
$1,232,206 $1,082,907 $ 896,961
Gain on sale of Liberty * - - 30,646
---------- ---------- ----------
Total $1,232,206 $1,082,907 $ 927,607
========== ========== ==========
Pre-tax income:
Retail distribution $ 90,564 $ 79,062 $ 71,088
Institutional distribution 12,782 15,747 13,892
Investment banking 3,636 25,405 28,217
Asset management 21,603 22,002 14,935
Other 8,934 8,020 1,737
---------- ---------- ----------
137,519 150,236 129,869
Gain on sale of Liberty * - - 30,646
---------- ---------- ----------
Total $ 137,519 $ 150,236 $ 160,515
========== ========== ==========
* see Note 16
NOTE 16 - RELATED PARTIES:
- --------------------------
Pursuant to a separation agreement between the Company and the former
President and Chief Investment Officer of its Eagle Asset Management, Inc.
("Eagle") subsidiary, Liberty Investment Management, Inc. ("Liberty") assumed
responsibility for providing portfolio management services to institutional
growth equity accounts
formerly managed by Eagle. Eagle was to receive 50% of the revenues from
these accounts through December 31, 1999, while bearing none of the expenses.
In addition, the Company was granted an option to purchase 20% of Liberty in
the Year 2000 at a predetermined price. For the year ended September 26,
1997, Eagle recognized $2,569,000 in fees from Liberty, which are included in
investment advisory fees in the consolidated statement of income.
On January 2, 1997, Liberty sold substantially all of its assets to
Goldman Sachs Asset Management, Inc. Accordingly, the Company received a lump
sum settlement of $30.6 million for its remaining three years' interest in
Liberty's revenue stream and the Company's option to purchase 20% of Liberty
at a future date.
A Director and a former employee of the Company, each owned 7.5% of the
outstanding shares of common stock of RJ Properties, Inc. ("RJP"), a
subsidiary of the Company, until August 1999 when the shares were purchased
by RJP for an adjusted book value totaling $517,000 and notes payable of
$200,000. They will receive payments on the notes as RJP collects on certain
receivables, which were excluded from the adjusted book value calculation.
Such shares were acquired for nominal consideration in connection with the
organization of RJP in 1980.
NOTE 17- ACQUISITION OF RONEY & CO.:
- ------------------------------------
On May 28, 1999, the Company purchased Roney from Bank One Corporation
for $71.3 million and the assumption of approximately $10 million in deferred
compensation liabilities. For consolidated financial statement purposes the
acquisition was accounted for as a purchase and, accordingly, Roney's results
are included in the consolidated financial statements since the date of
acquisition. The aggregate purchase price, which was financed through
available cash resources and the Company's line of credit (subsequently
replaced by a 3 year term note), has been allocated to the assets of Roney
based on their respective fair market values. The excess of the purchase
price over assets acquired (goodwill) approximated $35 million and is being
amortized over 15 years.
The pro forma unaudited consolidated results of operations as though
Roney had been acquired as of the beginning of fiscal 1999 and 1998 are as
follows:
1999 1998
---------- ----------
Revenues (000's) $1,349,130 $1,195,153
Net Income (000's) $ 85,831 $ 94,257
Net Income per share:
Basic $1.80 $1.96
Diluted $1.77 $1.89
EXHIBIT 11
- ----------
RAYMOND JAMES FINANCIAL, INC.
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(in thousands, except per share amounts)
Year Ended
-------------------------------------------
September 24, September 25, September 26,
1999 1998 1997
------------- ------------- -------------
Net income $85,090 $92,704 $98,915(3)
Weighted average common
shares outstanding during the
period (1) 47,606 48,160 47,383
Additional shares assuming
exercise of stock options
and warrants (1)(2) 843 1,791 1,004
------- ------- -------
Weighted average diluted common
shares (1) 48,449 49,951 48,387
======= ======= =======
Net income per share - basic (1) $ 1.79 $ 1.92 $ 2.09
======= ======= =======
Net income per share - diluted (1) $ 1.76 $ 1.86 $ 2.04
======= ======= =======
(1) Gives effect to the 3-for-2 common stock splits paid on April 2, 1998
and April 3, 1997.
(2) Represents the number of shares of common stock issuable on the exercise
of dilutive employee stock options less the number of shares of common
stock which could have been purchased with the proceeds from the
exercise of such options. These purchases were assumed to have been
made at the average market price of the common stock during the period,
or that part of the period for which the option was outstanding.
(3) Amount includes the gain on the sale of Liberty Investment Management,
Inc. Excluding this gain net income was $80,126,000 and basic and diluted
net income per share were $1.69 and $1.66, respectively. See Note 16 of
the Notes to Consolidated Financial Statements for details.
EXHIBIT 21
- ----------
RAYMOND JAMES FINANCIAL, INC.
-----------------------------
LIST OF SUBSIDIARIES
--------------------
The following listing includes the registrant's subsidiaries, all of
which are included in the consolidated financial statements:
State of
Name of Company Incorporation Subsidiary of
Raymond James & Associates, Inc. ("RJA") Florida Raymond James
Financial, Inc.
("RJF")
Awad Asset Management, Inc. Florida RJF
Eagle Asset Management, Inc. Florida RJF
Gateway Assignor Corporation, Inc. Florida RJF
Geovest Energy, Inc. Florida RJF
Heritage Asset Management, Inc. Florida RJF
Investment Management & Research, Inc. Florida RJF
Planning Corporation of America ("PCA") Florida RJA
PCAF, Inc. Florida PCA
Raymond James Bank, FSB Florida RJF
Raymond James Capital, Inc. Delaware RJF
Raymond James Credit Corporation Delaware RJF
RJEIF, Inc. Delaware RJF
Raymond James Financial Services, Inc. Florida RJF
Raymond James International Holdings, Inc.("RJIH")Delaware RJF
Raymond James Partners, Inc. Florida RJF
Raymond James Trust Company Florida RJF
RJC Partners, Inc. Delaware RJF
RJ Communication, Inc. Florida RJF
Raymond James Tax Credit Funds, Inc. Florida RJF
RJ Equities, Inc. Florida RJF
RJ Equities-2, Inc. Florida RJF
RJ Government Securities, Inc. Florida RJF
RJ Health Properties, Inc. Florida RJF
RJ Leasing, Inc. Florida RJF
RJ Leasing-2, Inc. Florida RJF
RJ Medical Investors, Inc. Florida RJF
RJ Mortgage Acceptance Corporation Delaware RJF
RJ Partners, Inc. Florida RJF
RJ Properties, Inc. ("RJP") Florida RJF
RJ Properties Acquisition Corp. Florida RJP
RJ Realty, Inc. Florida RJF
RJ Specialist Corp. Florida RJF
RJA Structured Finance, Inc. Delaware RJF
Robert Thomas Securities, Inc. Florida RJF
Roney & Co. Delaware RJF
Sound Trust Company Washington RJF
Value Partners, Inc. Florida RJF
Heritage International, Ltd. Mauritius RJIH
Raymond James & Associates, Ltd. Bermuda RJIH
Raymond James Dublin, Ltd. Ireland RJIH
Raymond James Financial International, Ltd. United KingdomRJIH
Raymond James European Holdings, Inc. Florida RJIH
Raymond James South American Holdings, Inc. Florida RJIH