01—Abstract
Summary
Summary of the 10-K filed November 21, 2012. Cited figures are marked; the original filing is the authoritative source.
Raymond James Financial, Inc. (RJF) reported record fiscal 2012 results for the year ended September 30, 2012, with net revenues of $3.8 billiona, a 14% increase over the prior year, and net income attributable to RJF of $295.9 million compared with $278.4 million in fiscal 2011.
The results include six months of Morgan Keegan, which RJF acquired from Regions Financial on April 2, 2012 for approximately $1.2 billionb in cash. Excluding the estimated contribution from Morgan Keegan, net revenues increased 2%. Client assets under administration rose to $390 billion, a 52% increase, and total assets reached $21.2 billion at year-end.
Shareholders' equity increased to $3.27 billionc, and diluted EPS was $2.20 versus $2.19 a year earlier. RJ Bank was a standout performer, with pre-tax income up 39% to a record $240 million, driven by higher corporate loan balances and a lower loan loss provision. The Private Client Group's net revenues rose 13% to $2.5 billion, but its pre-tax income fell 4% to $210 million because of higher technology costs and Morgan Keegan integration.
Acquisition and integration costs totaled $59 milliond in fiscal 2012, with about $40 million more expected in fiscal 2013. Management expects the integration of Morgan Keegan's platform onto RJ&A during the second quarter of fiscal 2013. Investors should weigh the Morgan Keegan integration risk, the indemnification from Regions for pre-closing litigation (with a range of potential liability of $30 million to $400 million disclosed), and the outstanding SEC litigation involving MK & Co.'s auction rate securities, which is scheduled for trial beginning November 26, 2012.
Senior long-term debt ratings are BBB (S&P, negative outlook) and Baa2 (Moody's, stable). The company declared a quarterly dividend of $0.13 per share.
02—Key points
Key Highlights
- Net revenues of $3.81 billion, up 14% year over year; excluding estimated Morgan Keegan contribution, net revenues rose 2%.
- Net income attributable to RJF of $295.9 million ($2.20 diluted EPS) versus $278.4 million ($2.19) in fiscal 2011.
- Acquired Morgan Keegan from Regions Financial on April 2, 2012 for about $1.2 billion in cash; acquisition and integration costs were $59 million, with approximately $40 million more expected in fiscal 2013.
- RJ Bank pre-tax income rose 39% to a record $240 million, reflecting higher net interest revenue and a lower loan loss provision.
- Client assets under administration increased 52% to $390 billion; Private Client Group pre-tax income fell 4% to $210 million.
- Total assets of $21.2 billion and shareholders' equity of $3.27 billion at September 30, 2012, with book value per share of $24.02.
- Credit ratings are BBB (S&P, negative outlook) and Baa2 (Moody's, stable); the Regions credit facility was repaid and replaced by a revolving line on November 14, 2012.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed November 21, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $3.90B$3.40B | +14.6% |
| Interest Expense | $91.37M— | — |
| Net Income | $295.87M$278.35M | +6.3% |
| EPS (Basic) | $2.22$2.20 | +0.9% |
| EPS (Diluted) | $2.20$2.19 | +0.5% |
| Shares Outstanding (Basic) | 130.81M122.45M | +6.8% |
| Shares Outstanding (Diluted) | 131.79M122.84M | +7.3% |
05—Questions
Frequently Asked Questions
How did the Morgan Keegan acquisition affect RJF's results in fiscal 2012?
The acquisition closed April 2, 2012, so results include only six months of Morgan Keegan. Net revenues rose 14% overall but only 2% excluding the estimated Morgan Keegan contribution. Client assets under administration increased by $66 billion from the acquisition, and the Private Client Group added more than 900 financial advisors, of whom 892 had been retained as of September 30, 2012.
What litigation risks are associated with Morgan Keegan?
Pre-closing Morgan Keegan matters are subject to indemnification by Regions. These include the Fairfax RICO lawsuit, which was dismissed before trial and is under appeal, class actions related to the Regions Morgan Keegan Funds, and an SEC auction rate securities case scheduled for trial beginning November 26, 2012. Management estimates the range of potential liability for indemnified matters at $30 million to $400 million, and RJF recorded an indemnification asset of about $198 million.
How is RJ Bank performing?
RJ Bank's pre-tax income rose $67 million, or 39%, to a record $240 million. Net interest income increased 19%, net charge-offs fell 31% to $24 million, and nonperforming loans fell 20%. The net interest margin was 3.50%, and the bank was categorized as well capitalized as of September 30, 2012.
What dividend and share activity did RJF report?
Cash dividends declared were $0.52 per share for fiscal 2012, the same as fiscal 2011. A quarterly dividend of $0.13 was declared on August 23, 2012 and paid October 15, 2012. In February 2012 the company sold 11,075,000 shares, generating net proceeds of about $363 million. As of September 30, 2012, $40.8 million remained on the Board's share repurchase authorization.
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