How did Raymond James perform financially in fiscal 2004?

Total revenues increased 22% to a record $1.83 billion and net income rose 48% to a record $127.6 million, or $1.72 per diluted share, compared with $86.3 million, or $1.17 per diluted share, in fiscal 2003. The company said growth came from each of its three largest segments.

Which business segments drove the growth?

The Private Client Group generated $1.22 billion in revenues and $109.7 million in pre-tax earnings, up 49%. Capital Markets generated $400.8 million in revenues and $57.9 million in pre-tax earnings, up 54%, supported by record equity underwriting activity. Asset Management had $148.2 million in revenues and $27.9 million in pre-tax earnings, up 49%. RJBank's pre-tax earnings declined 13%.

How significant is the company's exposure to market conditions?

The filing states that results are highly and directly correlated to the direction of the equity markets, and that each of the three largest segments has significant operating leverage that is generally evident when equity markets rise. It also notes that rising interest-rate expectations dampened demand for fixed income products in the second half of fiscal 2004.

What legal and regulatory matters could affect the company?

The company faces lawsuits and arbitrations over the Premiere 72 mortgage lending program, in which participants funded more than $150 million, though actual claimant losses are not yet determinable. An SEC administrative proceeding against RJFS, its former President and a former branch manager is scheduled for a hearing in February 2005, and a provision has been made for that matter. Management believes the ultimate resolution will not have a material adverse effect on financial position or results of operations, but a resolution could affect results in a future period.

What did the company do with its capital and shares?

The company paid cash dividends of $.28 per share declared in fiscal 2004 (adjusted for the three-for-two stock split in March 2004), repaid its $50 million parent-company term loan in August 2004, and repurchased 86,057 shares during fiscal 2004 at an average price of $23.17. The board authorized up to $75 million in repurchases in May 2004, leaving $73.3 million unused.

RJF 10-K FY2004 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed December 8, 2004. Cited figures are marked; the original filing is the authoritative source.

Raymond James Financial, Inc. (RJF) reported record results for the fiscal year ended September 24, 2004.

Total revenues rose 22% to a record $1.83 billion^a, net revenues rose 23%, and net income rose 48% to a record $127.6 million, or $1.72 per diluted share. The filing attributes the growth to each of the three largest segments (Private Client Group, Capital Markets, and Asset Management) and notes that net interest income grew 5% on rising margin loan balances as individual investors returned to the market. Management also notes that the company's results remain highly correlated with equity market direction, and that investor activity was depressed in the second half of fiscal 2004 by expectations of rising interest rates and a demanding regulatory environment.

Balance sheet and capital metrics were solid. Total assets were $7.62 billion^b and shareholders' equity was $1.07 billion, up from $924.7 million a year earlier. Private Client Group pre-tax earnings rose 49% to $109.7 million, Capital Markets pre-tax earnings rose 54% to $57.9 million on record equity underwriting activity (120 public offerings led or co-managed), and Asset Management pre-tax earnings rose 49% to $27.9 million.

RJBank pre-tax earnings fell 13%^c. The filing also discloses material legal and regulatory exposure.

The Premiere 72 mortgage lending program litigation involves claimants who funded more than $150 million^d, with the actual loss not yet determinable, and a pending SEC administrative proceeding against RJFS has a hearing scheduled for February 2005 with a provision made in the financial statements. Management states that the ultimate resolution of these matters is not expected to have a material adverse effect on financial position or results of operations, though a resolution could affect results in a future period.

02—Key points

Key Highlights

Record total revenues of $1.83 billion, up 22%, and net income of $127.6 million, up 48% from the prior year; diluted EPS of $1.72 versus $1.17.
Private Client Group commission revenues rose 25% to $1.02 billion, with 4,929 Financial Advisors at year end and pre-tax earnings up 49% to $109.7 million.
Capital Markets reported record revenues of $400.8 million and pre-tax earnings of $57.9 million (up 54%), with equity commissions up 59% to $174.5 million and 120 public offerings led or co-managed.
Asset Management segment total assets under management reached $24.0 billion, up 18%; third-party assets under management were $22.3 billion.
Total assets were $7.62 billion and shareholders' equity was $1.07 billion; the company repaid its $50 million parent-company term loan in August 2004, more than a year ahead of maturity.
The company announced a May 2004 board authorization to repurchase up to $75 million of common stock, with $73.3 million unused at fiscal year end.
Ongoing litigation over the Premiere 72 mortgage lending program (funded by more than $150 million from participants) and a pending SEC proceeding against RJFS remain key risk items.

03—Questions

Frequently Asked Questions

How did Raymond James perform financially in fiscal 2004?
Total revenues increased 22% to a record $1.83 billion and net income rose 48% to a record $127.6 million, or $1.72 per diluted share, compared with $86.3 million, or $1.17 per diluted share, in fiscal 2003. The company said growth came from each of its three largest segments.
Which business segments drove the growth?
The Private Client Group generated $1.22 billion in revenues and $109.7 million in pre-tax earnings, up 49%. Capital Markets generated $400.8 million in revenues and $57.9 million in pre-tax earnings, up 54%, supported by record equity underwriting activity. Asset Management had $148.2 million in revenues and $27.9 million in pre-tax earnings, up 49%. RJBank's pre-tax earnings declined 13%.
How significant is the company's exposure to market conditions?
The filing states that results are highly and directly correlated to the direction of the equity markets, and that each of the three largest segments has significant operating leverage that is generally evident when equity markets rise. It also notes that rising interest-rate expectations dampened demand for fixed income products in the second half of fiscal 2004.
What legal and regulatory matters could affect the company?
The company faces lawsuits and arbitrations over the Premiere 72 mortgage lending program, in which participants funded more than $150 million, though actual claimant losses are not yet determinable. An SEC administrative proceeding against RJFS, its former President and a former branch manager is scheduled for a hearing in February 2005, and a provision has been made for that matter. Management believes the ultimate resolution will not have a material adverse effect on financial position or results of operations, but a resolution could affect results in a future period.
What did the company do with its capital and shares?
The company paid cash dividends of $.28 per share declared in fiscal 2004 (adjusted for the three-for-two stock split in March 2004), repaid its $50 million parent-company term loan in August 2004, and repurchased 86,057 shares during fiscal 2004 at an average price of $23.17. The board authorized up to $75 million in repurchases in May 2004, leaving $73.3 million unused.

04—Continue

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