10-K
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/x/Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
/ /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 1-9305
STIFEL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1273600
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 N. Broadway
St. Louis, Missouri 63102-2188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-342-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock, Par Value $.15 per share New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 for such shorter period that the
registrant was required to file such report) 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 voting stock held by non-affiliates of the
registrant at March 15, 1995 was $23,760,907.
Shares of Common Stock outstanding at March 15, 1995: 4,198,780 shares,
par value $.15 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December
31, 1994 are incorporated by reference to Part II hereof. Portions of the
Company's Proxy Statement filed with the SEC in connection with the
Company's Annual Meeting of Stockholders to be held April 25, 1995 are
incorporated by reference to Part III hereof. Exhibit Index located on
pages 23 - 25.
PART I
ITEM 1. BUSINESS
Stifel Financial Corp. ("Financial") was organized in fiscal year 1983
pursuant to a plan of reorganization whereby Stifel, Nicolaus & Company,
Incorporated ("Stifel, Nicolaus") became a wholly-owned subsidiary of
Financial. Stifel, Nicolaus is the successor to a partnership founded in
1890. The term "Company" as used herein means Financial and its
subsidiaries.
The Company offers securities-related financial services through its wholly
owned operating subsidiaries, Stifel, Nicolaus, Century Securities
Associates, Inc., Todd Investment Advisors, Inc. and Pin Oak Capital, Ltd.
These subsidiaries provide brokerage, trading, investment banking,
investment advisory, and related financial services primarily to customers
throughout the United States from 72 locations. The Company's customers
include individuals, corporations, municipalities and institutions.
Although the Company has customers throughout the United States, its major
geographic area of concentration is in the Midwest. On February 6, 1995
the Company entered into an agreement whereby, subject to certain
conditions, it has agreed to sell all of the assets related to its
operations in Oklahoma, which consists of 23 retail securities offices and
a municipal underwriting, trading, and institutional sales operation, and
three retail offices in Texas. During 1994 these operations comprised 14%
of the Company's total revenue.
Principal Sources of Revenue
The amounts of each of the principal sources of revenue of the Company for
the calendar year, the five-month transition period and each of the two
prior fiscal years is contained on page 18 of the Company's 1994 Annual
Report to Stockholders. Such information is hereby incorporated by
reference.
Commissions
During recent years, most of the Company's securities commissions resulted
from transactions with retail (individual) investor accounts. Retail
commissions are charged on both stock exchange and over-the-counter
transactions in accordance with the Company's commission schedule. In
certain cases, discounts from that schedule are granted, usually on large
trades or to active customers.
The percentage of total commission revenue from institutional customers is
not accounted for separately. Institutional accounts, which are primarily
fixed income, are serviced primarily by the Company's offices in St. Louis
and Oklahoma City. Retail investment executives also receive orders from
institutional customers from time to time.
Principal Transactions
The Company trades as principal in the over-the-counter market. It acts as
both principal and agent to facilitate the execution of customers' orders.
The Company "makes a market" in various securities of interest to its
customers through buying, selling and maintaining an inventory of these
securities. The Company does not engage in a significant amount of trading
for its own account. The Company also buys corporate and municipal bonds
for its own account in the secondary market, maintains an inventory, and
resells from that inventory to other dealers and to institutional and
retail customers.
Investment Banking
The Company manages the underwriting of both corporate and municipal
securities and participates as an underwriter in syndicates of issues
managed by other firms. The corporate and public finance departments are
responsible for originating underwritings, mergers and acquisitions,
placements, valuations, financial advisory work and other investment
banking matters. The Company acts as an underwriter and dealer in bonds
issued by states, cities and other political subdivisions and may act as
manager or participant in offerings managed by other firms. The majority
of the Company's municipal bond underwritings are originated and sold
through its offices in Oklahoma City and St. Louis. Such underwritings
represent an important part of the Company's revenues. As a result of the
negative publicity surrounding the ongoing formal investigation by the
Securities and Exchange Commission (SEC) into certain municipal bond issues
managed by the Oklahoma City office, the Company's ability to generate
future municipal bond underwritings in Oklahoma has been seriously impaired
(see also Item 7. Management Discussion and Analysis and Note H of the
Consolidated Financial Statements incorporated by reference herein) and as
previously noted, the Company has agreed to sell the assets of its Oklahoma
City based public finance operation.
Management expects the level of production of municipal bond underwritings
and related revenue generated by the St. Louis office, while somewhat
negatively impacted by the SEC investigation, to return to normal levels
during 1995.
The management of and participation in public offerings involves
significant risks. An underwriter may incur losses if it is unable to
resell, at a profit, the securities it has purchased. Under the Securities
Act of 1933, other statutes and court decisions, an underwriter is subject
to substantial liability for misstatements or omissions that are judged to
be material in prospectuses and other communications related to
underwritings. Underwriting commitments cause a charge against net capital
(as defined by Rule 15c3-1 of the Securities and Exchange Commission -- see
"Regulation"); and, consequently, the aggregate amount of underwriting
commitments at any one time may be limited by the amount of available net
capital of the Company.
Other Business
The Company has dealer-sales agreements with numerous distributors of
investment company shares. These agreements provide generally for dealer
discounts ranging up to 5.75 percent of the purchase price, depending upon
the size of the transaction.
The Company handles for its customers put and call option transactions
traded on the Chicago Board Options Exchange, Inc., American Stock
Exchange, Inc., Philadelphia Stock Exchange, Inc., and, to a much lesser
extent, in the over-the-counter market.
The Company has a wholly owned subsidiary, Century Securities Associates,
Inc. (CSA), an introducing broker-dealer. CSA contracts with independent
licensed brokers to sell securities and other investment products to retail
(individual) investor accounts. The customer accounts are carried by
Stifel, Nicolaus, the carrying broker-dealer. CSA is licensed in 50 states
and has 63 registered representatives. Management expects CSA to continue
to grow in significance to the Company's operation as a whole.
In 1993 the Company formed a subsidiary, Stifel Asset Management Corp.
(SAM), to act as a holding company for two investment advisory firms, Pin
Oak Capital, Ltd. (Pin Oak), and Todd Investment Advisors, Inc. (Todd).
Pin Oak, which operated formerly as the investment advisory division of
Stifel, Nicolaus, was formed as an investment advisory firm and began
operations during the five month transition period in 1993. SAM purchased
all of the outstanding stock of Todd, an investment advisory firm located
in Louisville, Kentucky, in December 1993. Both Pin Oak and Todd provide
investment advice and services to individual, fiduciary and corporate
clients. Combined assets under management for the two firms at December
31, 1994 was approximately $2,297,000,000. Pin Oak holds registrations as
an investment advisor in six states. Todd is registered as an investment
advisor in twelve states.
During fiscal 1993, the Company also formed a subsidiary for the purpose of
purchasing various types of mortgage loans which will be securitized and
sold to institutional investors through Stifel, Nicolaus. Attempts to
penetrate that market were unsuccessful and the subsidiary ceased
operations during 1994.
Various subsidiaries of the Company act as General Partners in certain
limited partnerships for which Stifel, Nicolaus has sold limited
partnership interests to the public. The subsidiaries may receive
distributions upon the dissolution of such partnerships, but the amount and
timing of receipts of such distributions, if any, cannot be determined at
this time and are subject to the usual risks and liabilities associated
with acting as a general partner.
Customer Financing
Securities are purchased for customers on either a cash or margin basis.
The customer deposits less than the full cost of the security when
securities are purchased on a margin basis. The Company makes a loan for
the balance of the purchase price. Such loans are collateralized by the
securities purchased. The amounts of the loans are subject to the margin
requirements of Regulation T of the Board of Governors of the Federal
Reserve System, New York Stock Exchange, Inc. ("NYSE") margin requirements,
and the Company's internal policies, which usually are more restrictive
than Regulation T or NYSE requirements. In permitting customers to
purchase securities on margin, the Company is subject to the risk of a
market decline which could reduce the value of its collateral below the
amount of the customers' indebtedness.
Research
The Company's research department provides retail and institutional
customers information and recommendations on the securities of specific
companies. These services are rendered without charge. The Company also
purchases research services from other firms.
Competition
The Company competes with other securities firms, some of which offer their
customers a broader range of brokerage services, have substantially greater
resources, and may have greater operating efficiencies. In addition, an
increasing number of specialized firms, as well as banks, savings and
loans, and other financial institutions, now offer discount brokerage
services to individual retail customers. These firms generally charge
lower commission rates to their customers without offering services such as
portfolio valuation, investment recommendations and research. Competition
from such discount brokerage services may adversely affect revenues of the
Company and other firms providing full retail brokerage services. Banks
also compete with brokerage firms by offering certain investment banking
and corporate finance services.
Although the Company operates in a competitive environment, management
believes that the expertise acquired in its market area over its 104-year
history, its personnel, and its equity capital provide it with the
resources necessary to compete.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with the administration of the federal securities laws. Much of
the regulation of broker-dealers, however, has been delegated to self-
regulatory organizations, principally the National Association of
Securities Dealers, Inc., the Municipal Securities Rulemaking Board, and
the national securities exchanges, such as the NYSE. These self-regulatory
organizations adopt rules (which are subject to approval by the SEC) which
govern 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.
The regulations to which broker-dealers are subject cover all aspects of
the securities business, including sales practices, trade practices among
broker-dealers, capital structure of securities firms, record keeping, and
the conduct of directors, officers and employees. Additional legislation,
changes in rules promulgated by the SEC and by self-regulatory
organizations, and changes in the interpretation or enforcement of existing
laws and rules often directly affect the method of operation and
profitability of broker-dealers. The SEC and the self-regulatory
organizations may conduct administrative proceedings which can result in
censures, fines, suspension or expulsion of a broker-dealer, its officers
or employees. The principal purpose of regulation and discipline of broker-
dealers is the protection of customers and the securities markets rather
than the protection of creditors and stockholders of broker-dealers.
As a broker-dealer and member of the NYSE, Stifel, Nicolaus is subject to
the Uniform Net Capital Rule (Rule 15c3-1) promulgated by the SEC which
provides that a broker-dealer doing business with the public shall not
permit its aggregate indebtedness (as defined) to exceed 15 times its net
capital (as defined) or, alternatively, that its net capital shall not be
less than 2 percent of aggregate debit balances (primarily receivables from
customers and broker-dealers) computed in accordance with the SEC's
Customer Protection Rule (Rule 15c3-3). The Uniform Net Capital Rule is
designed to measure the general financial integrity and liquidity of a
broker-dealer and the minimum net capital deemed necessary to meet the
broker-dealer's continuing commitments to its customers. Both methods
allow broker-dealers to increase their commitments to customers only to the
extent their net capital is deemed adequate to support an increase.
Management believes that the alternative method, which is utilized by most
full-service securities firms, is more directly related to the level of
customer business. Therefore, Stifel, Nicolaus computes its net capital
under the alternative method.
Under SEC rules, a broker-dealer may be required to reduce its business and
restrict withdrawal of subordinated capital if its net capital is less than
4 percent of aggregate debit balances and may be prohibited from expanding
its business and declaring cash dividends if its net capital is less than 5
percent of aggregate debit balances. A broker-dealer that fails to comply
with the Uniform Net Capital Rule may be subject to disciplinary actions by
the SEC and self-regulatory agencies, such as the NYSE, including censures,
fines, suspension, or expulsion. In computing net capital, various
adjustments are made to net worth to exclude assets which are not readily
convertible into cash and to state conservatively the other assets such as
a firm's position in securities. Compliance with the Uniform Net Capital
Rule may limit those operations of a firm such as Stifel, Nicolaus which
require the use of its capital for purposes of maintaining the inventory
required for a firm trading in securities, underwriting securities, and
financing customer margin account balances. Stifel, Nicolaus had net
capital of approximately $12,673,000 at December 31, 1994, which was
approximately 8.5 percent of aggregate debit balances and approximately
$9,696,000 in excess of required net capital.
Employees
There were 861 individuals employed by the Company as of February 28, 1995.
This includes both full and part-time personnel.
ITEM 2. PROPERTIES
The headquarters and administrative offices of the Company, Stifel,
Nicolaus and CSA are located in downtown Saint Louis, Missouri. Todd is
located in Louisville, Kentucky. Pin Oak is located in New York, New York.
Stifel Nicolaus has a retail branch office system located in 13 states,
primarily in the Midwest. The Company has a total of 72 locations in 15
states. The Company owns one building in Oklahoma City, Oklahoma, which is
utilized for retail branch office space. All other offices are located in
leased premises. The Company's management believes that at the present
time the facilities are suitable and adequate to meet its needs and that
such facilities have sufficient productive capacity and are appropriately
utilized.
The Company also leases communication and other equipment. Aggregate
annual rental expense for the twelve month period ended December 31, 1994,
for office space and equipment, was approximately $4,596,000. Further
information about the lease obligations of the Company is provided in Note
D to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits and arbitrations, some of
which claim substantial amounts, including punitive damage claims. While
results of litigation and arbitration cannot be predicted with certainty,
management, based on opinions of outside counsel, has provided for actions
most likely of adverse disposition and believes that the effects of
resolution of all such litigation and arbitration beyond the amounts
provided will not have a material adverse effect on the Company's
consolidated financial position. However, depending on the period of
resolution such effect could be material to the financial results of an
individual operating period.
The Securities and Exchange Commission is conducting a formal investigation
into possible violations of the federal securities laws in connection with
certain municipal bond issues managed by the Oklahoma City based public
finance department where the Company was the managing or co-managing
underwriter. The Company is cooperating fully with the investigation. At
this time no action or claims have been asserted against the Company.
However, management, based on discussions with legal counsel, is of the
opinion that claims asserted, if any, related to this investigation would
have no material effect on the Company's financial position.
See Note H to the Company's Consolidated Financial Statements, filed
herein.
Executive Officers of the Registrant
The following information is furnished pursuant to General Instruction G(3)
of Form 10-K with respect to the executive officers of Financial:
Positions or Offices Position with the
Name Age with the Company Company Since
George H. Walker III 64 Chairman of the Board of 1976
Financial and Stifel, Nicolaus
Gregory F. Taylor 45 President and Chief Executive Officer 1985
of Financial and Stifel, Nicolaus
Mark D. Knott 46 Secretary, Treasurer and Chief Financial 1986
Officer of Financial and Senior Vice
President and Chief Financial Officer
of Stifel, Nicolaus
Rick E. Maples 36 Senior Vice President and Director of 1984
Investment Banking - Corporate Finance
of Stifel, Nicolaus
Michael A. Murphy 44 Senior Vice President - Director of 1989
Retail Group of Stifel, Nicolaus
Lawrence E. Somraty 46 President of Century Securities 1977
Associates, Inc.
Gerald M. Cole 58 President and Chief Operating Officer 1993
of Stifel Asset Management
Corp. and Senior Vice
President of Stifel, Nicolaus
Charles R. Hartman 51 General Counsel and Senior Vice President 1994
of Stifel, Nicolaus
John H. Noonan 53 Director of Fixed Income Capital Markets 1994
and Senior Vice President of Stifel, Nicolaus
The following are brief summaries of the business experience during the
past five years of each of the executive officers.
Gerald M. Cole joined Stifel, Nicolaus and Stifel Asset Management in
November, 1993. He is President and Chief Operating Officer of Stifel
Asset Management Corp. and Senior Vice President of Stifel, Nicolaus.
Prior to joining Stifel Asset Management Corp. and Stifel, Nicolaus, Mr.
Cole served as Senior Executive Vice President of Kemper Financial Service
Investment Management, where he was responsible for the Cash Products
Group.
Charles R. Hartman joined Stifel, Nicolaus in June of 1994. He is the
General Counsel, Senior Vice President and Secretary of Stifel, Nicolaus.
Prior to joining Stifel, Nicolaus, Mr. Hartman was the Regional Counsel for
the Securities and Exchange Commission in Los Angeles, California and since
April of 1982 a Los Angeles partner in the law firm of Rogers & Wells.
Mark D. Knott joined Financial as Treasurer and Chief Financial Officer
and Stifel, Nicolaus as Chief Financial Officer and Senior Vice President
in 1986 and was elected Secretary of Financial in 1990.
Rick E. Maples joined Stifel, Nicolaus in 1984. He served as First Vice
President and Investment Banker of the Corporate Finance Department until
October, 1992, when he became Senior Vice President and Director of
Investment Banking - Corporate Finance Department of Stifel, Nicolaus.
Michael A. Murphy joined Stifel, Nicolaus in 1989. He is Senior Vice
President and Director of Retail Group of Stifel, Nicolaus. From 1989 -
1994, Mr. Murphy served as First Vice President and Director of Branch
Administration.
John H. Noonan joined Stifel, Nicolaus in August of 1994. He is Senior
Vice President and Director of the Fixed Income Group of Stifel, Nicolaus.
Prior to joining Stifel, Nicolaus, Mr. Noonan served as Vice President and
Manager of Capital Markets of Nuveen & Co., where he also served as a
member of the management committee.
Lawrence E. Somraty has been with Stifel, Nicolaus since 1977. He served
as Option Department Manager, Senior Registered Options Principal,
Investment Advisor and Branch Manager. He became the President of Century
Securities Associates, Inc. in January 1991.
Gregory F. Taylor was branch manager of Stifel, Nicolaus' Chicago branch
from October, 1985 until July, 1988. He became Executive Vice President and
Director of National Sales and Marketing of Stifel, Nicolaus in July, 1988,
Chief Operating Officer in November, 1991 and President and Chief Executive
Officer as of October 26, 1992. He was elected a Vice President of
Financial in October, 1991 and President and Chief Executive Officer as of
October 26, 1992.
George H. Walker III joined Stifel, Nicolaus in 1976, became President of
Stifel, Nicolaus in December, 1978, and became Chairman of Stifel, Nicolaus
in July, 1982. From the time of the organization of Financial in 1981 Mr.
Walker has served as its Chairman of the Board and, until October 26, 1992,
Mr. Walker served as its President and Chief Executive Officer. Mr. Walker
is a director of Laclede Steel Company, Laidlaw Corp., and EAC Corporation.
He is active in various community activities and is a former Chairman of
Downtown St. Louis, Inc. and Webster University. He currently is Chairman
of the Missouri Historical Society and a trustee of Webster University.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a.) Market Information
The common stock of Financial is traded on the New York Stock Exchange and
Chicago Stock Exchange under the symbol "SF." The high/low sales prices
for Financial's Common Stock for each full quarterly period for the
calendar year, the five-month transition period, and the most recent fiscal
year are as follows:
Stock Price
High - Low
----------------------------------
Year 1994 By Quarter
----------------------------------
First $ 9 7/8 - 8 1/4
Second 8 1/2 - 7 1/4
Third 7 3/4 - 5 3/4
Fourth 5 3/4 - 5 1/4
----------------------------------
Transition Period 1993
----------------------------------
First $10 3/8 - 9 1/8
Nov. & Dec., 1993 9 5/8 - 8 3/4
----------------------------------
Fiscal Year 1993 By Quarter
----------------------------------
First $ 6 3/4 - 5 7/8
Second 7 1/4 - 6 1/8
Third 8 3/4 - 7 1/8
Fourth 9 3/8 - 7 7/8
----------------------------------
b.) Holders
The approximate number of stockholders of record on March 15, 1995 was
3,000.
c.) Dividends
Dividends paid were as follows:
Record Payment Cash Stock
Date Date Dividend Dividend
10/13/92 10/27/92 $0.10 5%
03/02/93 03/16/93 $0.025 - -
06/08/93 06/22/93 $0.025 - -
09/07/93 09/21/93 $0.025 - -
10/15/93 10/29/93 - - 5%
12/09/93 12/21/93 $0.03 - -
05/02/94 05/17/94 $0.03 - -
08/02/94 08/16/94 $0.03 - -
11/01/94 10/15/94 $0.03 - -
A regular quarterly cash dividend of $0.025 per share was established on
February 9, 1993. On November 30, 1993 the regular quarterly cash dividend
was increased to $0.03 per share.
ITEM 6. SELECTED FINANCIAL DATA
Stifel Financial Corp. and Subsidiaries
Financial Summary
(In thousands, except per share amounts)
Year Ended Five Months
December 31, Ended Year Ended July
---------------------------------------------------------------------------------
1994 Dec. 31, 1993 1993 1992 1991 1990
Revenues
Commissions $ 25,407 $ 11,949 $ 26,456 $ 25,204 $ 19,957 $ 20,520
Principal transactions 22,567 9,313 25,201 25,260 19,432 16,084
Investment banking 11,969 10,885 30,551 29,791 14,030 16,912
Interest 10,918 4,057 8,851 9,130 8,613 10,410
Sale of Investment company shares 9,674 4,906 10,741 8,638 5,411 5,528
Sale of unit investment trusts 2,736 1,362 3,220 2,611 2,188 2,218
Sale of Insurance products 2,207 1,263 1,614 1,676 1,950 2,001
Other 8,448 2,720 6,837 5,699 5,635 6,560
--------- --------- --------- --------- --------- ---------
93,926 46,455 113,471 108,009 77,216 80,233
Expenses
Employee compensation & benefits 60,652 29,421 68,657 63,891 46,126 46,908
Commissions & floor brokerage 2,120 845 2,485 2,437 2,055 2,217
Communications and office supplies 8,045 3,090 6,836 6,168 6,706 7,092
Occupancy & equipment rental 9,397 3,333 7,648 7,401 6,929 7,500
Promotional 2,868 1,231 2,925 2,206 1,604 1,627
Interest 6,138 1,763 4,838 5,505 5,892 7,420
Provision for litigation and bad debts 2,467 473 1,237 3,745 4,816 1,953
Restructuring charge 2,672 0 0 0 0 0
Other operating expenses 8,788 3,239 7,575 7,588 5,874 4,963
--------- --------- --------- --------- --------- ---------
103,147 43,395 102,201 98,941 80,002 79,680
Income (loss) before income taxes
and extraordinary credit (9,221) 3,060 11,270 9,068 (2,786) 553
Provision (Benefit) for Income Taxes
Current (1,962) 1,352 4,223 2,918 426 693
Deferred (1,756) (207) 9 445 (426) (488)
--------- --------- --------- --------- --------- ---------
(3,718) 1,145 4,232 3,363 0 205
Income (loss) before extraordinary
credit (5,503) 1,915 7,038 5,705 (2,786) 348
Extraordinary Credit -- tax benefit
from utilization of net operating
loss carryforward - - - - - - 648 - - - -
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (5,503) $ 1,915 $ 7,038 $ 6,353 $ (2,786) $ 348
========= ========= ========= ========= ========= =========
Per Share Data
Primary earnings (loss)(a) $ (1.29) $ 0.44 $ 1.68 $ 1.59 $ (0.71) $ 0.09
Fully Diluted earnings (loss)(a) (1.29) 0.39 1.40 1.34 (0.71) 0.09
Cash dividends 0.09 0.055 0.15 0.00 0.00 0.00
ITEM 6. SELECTED FINANCIAL DATA (Continued)
Stifel Financial Corp. and Subsidiaries
Financial Summary
(In thousands, except percentages)
Year Ended Five Months
December 31, Ended Year Ended July
---------------------------------------------------------------------------------
1994 Dec. 31, 1993 1993 1992 1991 1990
Other Data
Total Assets $ 222,208 $ 288,203 $ 196,539 $ 191,059 $ 121,997 $ 148,654
Long-term obligations $ 11,520 $ 11,520 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Stockholder's equity $ 34,226 $ 40,609 $ 38,995 $ 31,597 $ 24,740 $ 27,512
Net income as % average equity * N.M. 4.81% 19.94% 22.55% * N.M. 1.25%
Net income as % revenues * N.M. 4.12% 6.20% 5.88% * N.M. 0.4%
Average common shares and share
equivalents outstanding (a):
Primary 4,253 4,312 4,199 3,995 3,942 4,043
Fully Diluted 5,539 5,598 5,541 5,281 3,942 4,043
(a) Retroactively restated to reflect the 5 percent stock dividends declared
September 9, 1992, September 14, 1993, and January 24, 1995.
* Not Meaningful
The information called for in items 7 and 8 of Part II is set forth on the
pages listed below of the Company's 1994 Annual Report to Stockholders and
is incorporated herein by reference:
Pages In
Annual Report
To Stockholders
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 7 through 14
ITEM 8. Financial Statements and Supplementary Data. 15 through 33
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
ITEMS 10 THROUGH 13
Financial intends to file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A involving the
election of directors not later than 120 days after the end of its fiscal
year ended December 31, 1994. Accordingly, except to the extent included
in Part I under the caption "Executive Officers of the Registrant", the
information required by Part III (Items 10, 11, 12 and 13) is incorporated
herein by reference to such definitive proxy statement in accordance with
General Instruction G(3) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Reference page(s)
Annual Report to
Stockholders
1. The following consolidated financial statements of
Stifel Financial Corp. and subsidiaries, included on
pages 15 through 24 in the 1994 Annual Report to
Stockholders, are incorporated by reference in Item 8
Report of Independent Accountants 15
Consolidated Statements of Financial Condition --
December 31, 1994 and December 31, 1993 16-17
Consolidated Statements of Operations --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 18
Consolidated Statements of Stockholders' Equity --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 21
Consolidated Statements of Cash Flows --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 19-20
Notes to Consolidated Financial Statements 22-32
2. The following consolidated financial statement
schedules of Stifel Financial Corp. and subsidiaries
are filed herewith pursuant to ITEM 14(d):
Report of Independent Accountants
Schedule I - Condensed Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and,
therefore, have been omitted.
3. Exhibits
Exhibit No. (Referenced to Item 601(b) of Regulation S-K)
(a)(1) Restated Certificate of Incorporation of Financial
filed with the Secretary of State of Delaware on June 1, 1983,
incorporated herein by reference to Exhibit 3.1 to Financial's
Registration Statement on Form S-1, as amended (Registration
File No. 2-84232) filed July 19, 1983.
(a)(2) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware on May
11, 1987, incorporated herein by reference to Exhibit (3)(a)(2)
to Financial's Report on Form 10-K for the year ended July 31,
1987.
(a)(3) Certificate of Designation, Preferences, and Rights
of Series A Junior Participating Preferred Stock of Financial
filed with the Secretary of State of Delaware on July 10, 1987,
incorporated herein by reference to Exhibit (3)(a)(3) to
Financial's Report on Form 10-K for the year ended July 31,
1987.
(a)(4) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware on
November 28, 1989, incorporated herein by reference to Exhibit
(3)(a)(4) to Financial's Report on Form 10-K for the year ended
July 27, 1990.
(b) Amended and Restated By-Laws of Financial, incorporated
herein by reference to Exhibit 3(b)(1) to Financial's Report on
Form 10-K for fiscal year ended July 30, 1993.
4. Note Agreement dated as of October 15, 1988, between Financial and
Bankers United Life Assurance Company and Pacific Fidelity Life
Insurance Company, incorporated herein by reference to Exhibit 4 to
Financial's Report on Form 10-Q for the quarterly period ended April
28, 1989. The Company hereby agrees to furnish the Securities and
Exchange Commission copies of such instruments upon request.
10.(a)(1) Employment Agreement with George H. Walker III dated
August 21, 1987, incorporated herein by reference to Exhibit
10(c) to Financial's Report on Form 10-K for the fiscal year
ended July 31, 1987.
(a)(2) First Amendment to Employment Agreement with George H. Walker
III, incorporated herein by reference to Exhibit 10(a)(2) to
Financial's Report on Form 10-K for the fiscal year ended July 31,
1992.
(b) Form of Indemnification Agreement with directors dated as
of June 30, 1987, incorporated herein by reference to Exhibit
10.2 to Financial's Report on Form 8-K (date of earliest event
reported - June 22, 1987) filed July 14, 1987.
(c) 1983 Incentive Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 4(a) to Financial's
Registration Statement on Form S-8 (Registration File No. 2-
94326) filed November 14, 1984.
(d) 1985 Incentive Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 28C to Financial's
Registration Statement on Form S-8, as amended (Registration
File No. 33-10030) filed November 7, 1986.
(e) 1987 Non-qualified Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 10(h) to
Financial's Report on Form 10-K for the fiscal year ended July
31, 1987.
(f) Amendment to 1983 Incentive Stock Option Plan, 1985
Incentive Stock Option Plan and 1987 Non-Qualified Stock Option
Plan, incorporated herein by reference to Exhibit 10(f) to
Financial's Report on Form 10-K for the fiscal year ended July
28, 1989.
(g)(1) 1993 Employee Stock Purchase Plan of Financial,
incorporated herein by reference to ANNEX A of Financial's
Definitive Proxy Statement (Registration File No. 33-16150)
filed October 28, 1992.
(g)(2) First Amendment to the 1993 Employee Stock Plan of
Financial, incorporated herein by reference to Exhibit 4.5 to
Financial's Registration Statement on Form S-8 (Registration
File No. 33-53097) filed April 11, 1994.
(h) Restricted Stock Agreement effective as of October 1, 1992
with Rick E. Maples, incorporated herein by reference to
Exhibit 10(l) to Financial's Report on Form 10-K for fiscal
year ended July 30, 1993.
(i) Employment and Non-Competition Agreement with Gregory F.
Taylor dated July 26, 1993, incorporated herein by reference to
Exhibit 10(m) to Financial's Report on Form 10-K for fiscal
year ended July 30, 1993.
(j) Dividend Reinvestment and Stock Purchase Plan of
Financial, incorporated herein by reference to Financial's
Registration Statement on Form S-3 (Registration File No. 33-
53699) filed May 18, 1994.
11. Statement regarding computation of per share earnings, filed
herewith.
13. Annual Report to Stockholders for the year ended December 31, 1994.
Except for those portions of pages expressly incorporated by
reference, the 1994 Annual Report to Stockholders is not deemed
filed as part of this Annual Report on Form 10-K.
21. List of Subsidiaries of Financial, filed herewith.
23. Consent of Independent Accountants, filed herewith.
27. Financial Data Schedule BD, filed herewith.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth quarter of
Financial's fiscal year ended December 31, 1994.
The Company filed a report on Form 8-K dated February 22, 1995. This
Form 8-K contained information under Item 7. Financial Statements, Pro
Forma Financial Information and Exhibits. The exhibit filed was a Press
Release dated February 7, 1995 announcing an agreement to sell the
assets of the Oklahoma division of Stifel, Nicolaus & Company,
Incorporated (a wholly-owned subsidiary of Stifel Financial Corp.) to
Capital West Securities, Inc. ("Capital West Securities"), an Oklahoma
corporation and a wholly-owned subsidiary of Capital West Financial
Corporation, an Oklahoma corporation.
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. Louis, State of Missouri, on the 24th day of March, 1995.
STIFEL FINANCIAL CORP.
(Registrant)
By /s/ Gregory F. Taylor
Gregory F. Taylor
(Principal Executive Officer)
/s/ Mark D. Knott
Mark D. Knott
(Principal Financial and
Accounting Officer)
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 on March 24, 1995, in the capacities indicated.
/s/ George H. Walker III Chairman of the Board
George H. Walker III
/s/ Gregory F. Taylor President, Chief Executive
Gregory F. Taylor Officer, and Director
/s/ Belle A. Cori Director
Belle A. Cori
/s/ Richard F. Ford Director
Richard F. Ford
/s/ John J. Goebel Director
John J. Goebel
/s/ Mark D. Knott Director
Mark D. Knott
/s/ Robert E. Lefton Director
Robert E. Lefton
/s/ James M. Oates Director
James M. Oates
Report of Independent Accountants
Board of Directors
Stifel Financial Corp.
St. Louis, Missouri:
Our report on the consolidated financial statements of Stifel Financial
Corp. and Subsidiaries has been incorporated by reference in this Form 10-K
from page 15 of the 1994 Annual Report to Stockholders of Stifel Financial
Corp. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index
on page 12 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand, L.L.P.
St. Louis, Missouri
February 24, 1995
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
STIFEL FINANCIAL CORP.
Dec. 31, 1994 Dec. 31, 1993
ASSETS
Cash $ 9,155 $ 9,155
Due from subsidiaries (a) 4,255,352 4,128,910
Investment in subsidiaries (a) 36,214,874 41,725,664
Office equipment and leasehold
improvements, at cost, less allowances
for depreciation and amortization of
$13,130,867 and $12,614,660, respectively 4,721,786 4,701,174
Investments, at cost 796,393 1,551,979
Goodwill and other intangible assets, net
of amortization of $358,536 and
$1,290,527, respectively 1,279,593 1,390,383
Other assets 731,945 1,289,257
----------- -----------
TOTAL ASSETS $48,009,098 $54,796,522
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to subsidiaries (a) $ 39,456 $ 631,375
Obligation under Capital Lease 1,029,282 931,274
Long-term debt 11,520,000 11,520,000
Other liabilities 1,193,949 1,104,656
----------- -----------
TOTAL LIABILITIES 13,782,687 14,187,305
----------- -----------
Stockholders' Equity:
Capital stock 648,743 617,886
Additional paid-in capital 18,491,086 17,268,905
Retained earnings 17,016,335 24,161,663
----------- -----------
36,156,164 42,048,454
Less cost of stock in treasury 1,731,974 1,240,452
Less unamortized stock awards 197,779 198,785
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 34,226,411 40,609,217
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $48,009,098 $54,796,522
=========== ===========
(a) Eliminated in consolidation.
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(continued)
CONDENSED STATEMENTS OF OPERATIONS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
Revenues:
Lease $2,162,292 $791,330 $1,801,167 $1,755,564
Other (7,522) 57,398 520,319 (4,472)
----------- -------- ---------- -----------
2,154,770 848,728 2,321,486 1,751,092
Expenses:
Depreciation and
amortization 2,325,301 870,926 2,004,720 1,963,040
Professional fees 236,506 121,574 549,122 648,007
Miscellaneous 128,882 38,636 258,866 95,929
---------- --------- ---------- ----------
2,690,689 1,031,136 2,812,708 2,706,976
---------- --------- ---------- ----------
Loss before income taxes (535,919) (182,408) (491,222) (955,884)
Provision (benefit)
for income taxes:
Current 53,406 (15,165) (42,308) (269,167)
Deferred (27,160) (34,501) (105,763) (157,629)
---------- ---------- ---------- -----------
26,246 (49,666) (148,071) (426,796)
---------- ---------- ---------- -----------
Loss before equity in
net (loss) income of
subsidiaries (562,165) (132,742) (343,151) (529,088)
Equity in net (loss) income
of subsidiaries (4,941,170) 2,048,059 7,381,245 6,881,695
------------ ---------- ---------- ----------
NET (LOSS) INCOME $(5,503,335) $1,915,317 $7,038,094 $6,352,607
============ ========== ========== ==========
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF CASH FLOWS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(5,503,335) $1,915,317 $7,038,094 $6,352,607
Non-cash items included in
net (loss) income:
Depreciation and
amortization 2,325,301 870,926 2,004,720 1,963,040
Unrealized loss on
investments 321,300 - - - - 69,515
Loss on sale of assets - - - - - - 1,764
Deferred tax benefit (27,160) (34,501) (105,763) (157,629)
Undistributed loss
(income) of subsidiaries 4,941,170 (2,048,059) (7,381,245) (6,881,695)
Amortization of restricted
stock awards and
stock benefits 107,341 421,968 506,373 180,963
--------- --------- --------- ---------
2,164,617 1,125,651 2,062,179 1,528,565
Net change in due to/due
from subsidiaries (718,361) (13,184) 1,094,158 91,786
Decrease (increase) in
other assets 1,365,788 840,208 (195,977) (44,631)
Increase in other
liabilities 180,271 156,311 513,107 220,104
--------- --------- --------- ---------
CASH PROVIDED BY OPERATING
ACTIVITIES 2,992,315 2,108,986 3,473,467 1,795,824
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Employee stock purchase plan 611,688 627,587 378,195 346,919
Exercised options 81,213 110,788 267,319 61,855
Dividend reinvestment plan 944 - - - - - -
Payments for:
Purchase of stock for
treasury (1,416,932) (1,329,374) (301,813) (84,969)
Restricted stock awards - - (33,937) (81,449) (38,265)
Principal payments
under capital lease (710,089) (263,096) (590,252) (583,263)
Stock dividend
fractional share payment - - (2,478) - - - -
Cash dividend (354,368) (215,361) (561,128) - -
----------- ----------- ---------- ---------
CASH USED FOR FINANCING
ACTIVITIES (1,787,544) (1,105,871) (889,128) (297,723)
----------- ----------- ---------- ---------
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF CASH FLOWS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Distributions/sales
received on investments 25,000 - - - - - -
Sales of office
equipment and leasehold
improvements 24,235 - - 16,430 7,665
Dissolution of
subsidiaries 505,000 - - - - - -
Payments for:
Investments in
subsidiaries - - (5,000) (529,259) - -
Acquisition of
investments (52,219) (250,000) (487,671) - -
Office equipment and
leasehold improvements (1,706,787) (748,115) (1,583,839) (1,505,766)
----------- ----------- ----------- -----------
CASH USED FOR INVESTING
ACTIVITIES (1,204,771) (1,003,115) (2,584,339) (1,498,101)
----------- ----------- ----------- -----------
Increase in cash 0 0 0 0
Cash (beginning of period) 9,155 9,155 9,155 9,155
----------- ----------- ----------- -----------
Cash (end of period) $9,155 $9,155 $9,155 $9,155
=========== =========== =========== ===========
Supplemental Disclosures of Cash Flow Information
Schedule of Non-cash Investing and Financing Activities
Assumption of debt for
acquisition of Todd $ - - $1,520,000 $ - - $ - -
Fixed assets acquired
under capital lease 808,000 257,000 - - 1,063,000
Stock dividends
distributed 1,287,000 - - 2,009,000 1,424,000
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
Fiscal Year Ended December 31, 1994:
Deducted from asset
account: Allowances
for doubtful accounts $1,435,058 $ 0 $ 364,073 (1) $1,070,985
Deducted from asset
account: Allowances
for doubtful notes
receivables 0 3,040,969 480,352 (2) 2,560,617
Deducted from asset
account: Reserves
for investments 1,071,007 322,404 420,616 (3) 972,795
Deducted from asset
account: Reserves for
securities owned 450,000 0 450,000 (4) 0
Transition Period Ended December 31, 1993:
Deducted from asset
account: Allowances
for doubtful accounts 1,283,800 253,500 102,242 (1) 1,435,058
Deducted from asset
account: Reserves for
for investments 1,071,007 0 0 1,071,007
Deducted from asset
account: Reserves for
securities owned 450,000 0 0 450,000
Fiscal Year Ended July 30, 1993:
Deducted from asset
account: Allowances
for doubtful accounts 1,455,627 32,500 204,327 (1) 1,283,800
Deducted from asset
account: Reserves for
for investments 727,007 350,000 6,000 (3) 1,071,007
Deducted from asset
account: Reserves for
securities owned 0 450,000 0 450,000
Fiscal Year Ended July 31, 1992:
Deducted from asset
account: Allowances
for doubtful accounts 4,120,400 739,905 3,404,678 (1) 1,455,627
Deducted from asset
account: Reserves for
for investments 1,992,339 345,000 1,610,332 (3) 727,007
(1) Uncollected accounts written off and recoveries.
(2) Uncollected notes written off and recoveries.
(3) Investments disposed of.
(4) Securities disposed of.
EXHIBIT INDEX
Stifel Financial Corp. and Subsidiaries
Annual Report on Form 10-K
Year Ended December 31, 1994
Exhibit
Number Description
11. Statement regarding computation of
per share earnings.
13. 1994 Annual Report to Stockholders.*
21. Subsidiaries of Stifel Financial Corp.
23. Consent of Independent Accountants.
27. Financial Data Schedule BD.
* Certain portions of the Annual Report to Stockholders are incorporated
herein by reference; the Annual Report to Stockholders is not to be deemed
filed as a part of this Annual Report on Form 10-K.
EX-11
2
EXHIBIT 11
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF CONSOLIDATED
EARNINGS PER SHARE
Five Months
Year Ended Ended Years Ended
Dec 31, 1994 Dec 31, 1993 July 30, 1993 July 31, 1992
------------ ------------ ------------- -------------
Pimary
Income (loss) before extraordinary credit $(5,503,335) $ 1,915,317 $ 7,038,094 $ 5,704,307
Extraordinary credit - Tax benefit from
utilization of net operating loss carry-
forward -- -- -- 648,300
------------ ----------- ----------- -----------
Net income (loss) $(5,503,335) $ 1,915,317 $ 7,038,094 $ 6,352,607
------------ ----------- ----------- -----------
Average number of common shares outstanding
during the period 4,145,900 4,175,017 4,085,488 3,943,412
Additional shares assuming exercise of stock
options 107,438 137,190 113,310 51,394
------------ ----------- ----------- -----------
Common shares and equivalents used to
calculate eargings (loss) per share 4,253,338 4,312,207 4,198,798 3,994,806
Primary earnings (loss) per share $ (1.29) $ 0.44 $ 1.68 $ 1.59
============ =========== =========== ===========
Fully Diluted
Income (loss) before extraordinary credit $(5,503,335) $ 1,915,317 $ 7,038,094 $ 5,704,307
After-tax interest savings assuming conversion
of Senior Convertible Notes 684,075 293,391 702,553 707,625
Extraordinary credit - Tax benefit from
utilization of net operating loss carry-
forward -- -- -- 648,300
------------ ----------- ----------- -----------
Net income (loss) $(4,819,260) $ 2,208,708 $ 7,740,647 $ 7,060,232
------------ ----------- ----------- -----------
Average number of common shares outstanding
during the period 4,145,900 4,175,017 4,085,488 3,943,412
Additional shares assuming exercise of stock
options 107,438 137,190 169,730 51,394
Additional shares assuming conversion of
Senior Convertible Notes 1,286,058 1,286,058 1,286,058 1,286,058
------------ ----------- ----------- -----------
Common shares and equivalents used to
calculate eargings (loss) per share 5,539,396 5,598,265 5,541,276 5,280,864
Fully diluted earnings (loss) per share $ (1.29) $ 0.39 $ 1.40 $ 1.34
============ =========== =========== ===========
------------------
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. For primary earnings per share computations, 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. For fully diluted earnings per share
computations, these purchases were assumed to have been made at the greater of the market price of the
common stock at the end of the period or average market price of the common stock during the period
or that part of the period for which the option was outstanding.
Represents the after-tax interest savings resulting from assumed conversion of $10,000,000 aggregate
principal 11.25% Senior Convertible Notes.
Represents the number of shares of common stock issuable upon conversion of $10,000,000 aggregate
principal 11.25% Senior Convertible Notes at a conversion price of $7.78 per share.
Net fully diluted loss per share computes to $0.87 for the year ended December 31, 1994. Since this is
anti-dilutive, fully diluted loss per share is equivalent to primary loss per share.
EX-13
3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General Business Environment
Stifel Financial Corp. and subsidiaries (the "Company") is principally
engaged in providing securities brokerage, public and corporate
investment banking, and investment advisory services to individuals,
institutions, municipalities, and corporations. These business
activities are sensitive to many factors, including the volatility and
price level of securities markets, securities trading volumes, interest
rates, inflation, tax policies, and investor sentiment. The Company has
historically been highly dependent upon investment banking revenues,
particularly from the municipal finance area, which vary significantly
from period to period because of market conditions and the volatility in
the amount of time and resources (period expenses) required to produce an
investment banking fee which is recognized when the transaction is
complete. Additionally, a significant portion of the Company's expenses
is relatively fixed. Consequently, net income can vary significantly
from period to period.
The securities business is highly competitive. The Company not only
competes with national and regional full-service and discount firms, but
increasingly with other financial institutions such as banks and mutual
fund companies which sell directly to the public.
The business environment for the securities industry during 1994 was one
of the most difficult in recent years, particularly for the fixed income
and other interest rate sensitive areas. In February 1994, the Federal
Reserve Board raised the discount rate for the first time in nearly five
years and subsequently raised short-term rates several more times
during 1994. This increase in short-term rates also resulted in higher
long-term rates which caused significant decreases in bond values and a
significant slowdown in issuances of municipal securities. In addition,
the industry suffered decreased retail trading volume in equities resulting
from investor uneasiness over the stock market as a result of the Federal
Reserve Board's actions.
A significant source of the Company's investment banking revenues has
traditionally originated from Oklahoma municipal securities issuances.
In addition to the effects of the business environment on municipal
securities underwriting, the Company's 1994 municipal investment banking
business was also negatively impacted by the Securities and Exchange
Commission ("SEC") investigation of certain Oklahoma municipal securities
issues. Although there has been no action taken by the SEC against the
Company, the negative publicity resulting from this investigation, when
coupled with the previously mentioned general decrease in issuances, has
caused a near stoppage of the Company's municipal investment banking
business in the state of Oklahoma. Additionally, the Company has
incurred, and expects to continue to incur in 1995, substantial legal
costs resulting from the SEC investigation.
In late calendar 1993, because of the factors affecting the municipal
finance business, management sought to decrease its dependence on that
source of revenue by strengthening its retail branch system.
Consequently, the Company pursued an aggressive recruitment of Investment
Executives and expansion of retail offices. Additionally, the Company
added key support staff in such areas as research, money management, and
product support.
In late 1994, as market conditions deteriorated, it became necessary to
eliminate unprofitable areas of the firm, including certain of the
branches opened during 1994. As a result, during the fourth quarter of
1994, management and the Board of Directors developed and began
implementation of a plan to restructure certain operations, primarily
related to retail sales operations and certain home office management and
product support functions. The plan of restructure included
approximately 70 position eliminations and the closing or downsizing of
31 office locations. The Company expects to realize substantial cost
savings resulting from this restructuring and downsizing.
Additionally, in December 1994, the Company was approached by a group of
investors (including two current employees and three former employees)
offering to purchase the Company's operations in Oklahoma and three
offices in Texas. After significant negotiations, the Company has
entered into an agreement to sell the assets of its Oklahoma-based
operations for cash, secured and subordinated notes, and warrants to
purchase a minority interest in the newly formed Company. In 1994, these
operations accounted for approximately 14% of the Company's revenue.
Upon completion of the plan of restructure, and should the agreement to
sell the Oklahoma operations and certain Texas offices be consummated as
expected in the second quarter of 1995, the number of retail securities and
other office locations will be reduced from 86 to 40 and the number of
Investment Executives to just under 300 from 365. The Company will no
longer be involved in the municipal investment banking business in
Oklahoma; however, the Company will provide retail securities clearing
services for the newly formed company and will be compensated for these
services.
Results of Operations
In 1993, the Company changed its fiscal year-end from the last Friday in
July to a calendar year-end. Accordingly, results of operations for the
transition period cover a five-month period. The following table
summarizes amounts and percentages of changes in the major categories of
revenues and expenses for the periods indicated:
Year Ended Five Months Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Fiscal Year
1994 vs 1993 1993 vs 1992 1993 vs 1992
Increase (Decrease) (Unaudited) (Unaudited)
-----------------------------------------------------------------------------------------------------------------
Amounts in thousands Amount Percentage Amount Percentage Amount Percentage
-----------------------------------------------------------------------------------------------------------------
Revenues:
Commissions $ (2,989) (10.5)% $ 1,941 19.4% $ 1,252 5.0%
Principal Transactions (665) (2.9) (1,969) (17.5) (59) (0.2)
Investment banking (18,316) (60.5) (266) (2.4) 760 2.6
Interest 1,602 17.2 (44) (1.1) (279) (3.1)
Sale of investment company shares (2,459) (20.3) 1,392 39.6 2,103 24.3
Sale of unit investment trusts (992) (26.6) 508 59.5 609 23.3
Sale of insurance products (175) (7.3) 767 155.0 (62) (3.7)
Other 2,360 38.8 (749) (21.6) 1,138 20.0
--------- ------- --------- ------ --------- -----
$(21,634) (18.7)% $ 1,580 3.5% $ 5,462 5.1%
========= ======= ========= ====== ========= =====
Expenses:
Employee compensation and benefits $(11,567) (16.0) $ 3,543 13.7% $ 4,766 7.5%
Commissions and floor brokerage (290) (12.0) (75) (8.1) 48 2.0
Communications and office supplies 864 12.0 345 12.6 668 10.8
Occupancy and equipment rental 1,599 20.5 150 4.7 247 3.3
Promotional (200) (6.5) 143 13.1 719 32.6
Interest 1,340 27.9 (549) (23.7) (667) (12.1)
Provision for litigation and bad debts 1,560 172.0 (632) (57.4) (2,508) (67.0)
Restructure charge 2,672 * N.M. 0 0 0 0
Other operating expenses 1,498 20.8 36 1.1 (13) (0.2)
--------- ------- --------- ------ --------- -----
$ (2,524) (2.4)% $ 2,961 7.3% $ 3,260 3.3%
========= ======= ========= ====== ========= =====
* Not meaningful
1994 As Compared to 1993
For 1994, the Company had a net loss of $5.5 million, or $1.29 per primary
share, on revenues of $93.9 million. During the twelve-month period ended
December 31, 1993, the Company had net income of $6.2 million, or $1.54 per
primary share, on $115.6 million in revenues. This $21.6 million (18.7%)
decrease in total revenues was the result of the aforementioned general market
conditions and the changes in the Company's operations.
Revenues declined from 1993 in every major revenue category except interest
income and investment advisory fees. Commissionable revenue (commissions,
principal transactions, sale of investment company shares, unit investment
trusts, and insurance products) in the aggregate decreased $7.3 million (10.4%)
from 1993. This decrease occurred despite significant efforts to upgrade and
add to the retail sales force. Every major commissionable product area had
decreased revenues from 1993 levels. The taxable fixed income, syndicate, and
mutual fund areas were off by 11%, 45%, and 20%, respectively, primarily due
to the generally decreased market activity caused by increasing interest rates.
Principal transactions, which includes inventory gains and losses as well as
commissionable sales credits, was lower in 1994 primarily due to losses in the
Company's equity inventories and substantially lower profits in the fixed
income inventories. These decreased trading results occurred in traditional
products, as the Company does not carry complex derivative products or
significant amounts of low-priced equities (penny stocks).
In terms of both amount and percentage, the largest decrease in revenues during
1994 occurred in the investment banking area. Investment banking revenues,
which includes managed fixed income and equity underwriting, financial
advisory, placement, and mergers and acquisition services, decreased $18.3
million (60.5%) from 1993 levels. Reflecting the historical cyclicality and
volatility of the securities markets, the investment banking area of the
Company had one of its worst years in 1994 following its best year ever in
1993. This trend was generally consistent industry-wide.
The most significant reason for the Company's decrease in this area was
the sharp fall-off in business in the municipal finance sector. 1993 saw
a record level of activity as municipal issuers took advantage of low and
declining interest rates to refinance and restructure outstanding issues
and issue new debt. 1994 saw a reversal of that interest rate trend which
eliminated the benefits of refundings that were unable to be accomplished
earlier and made new issuances more costly.
In addition to the significantly less favorable conditions in the industry
generally, the Company suffered additional decreases in business because of
the activities related to its Oklahoma City-based municipal finance operation.
Historically, the Company has been a major underwriter of Oklahoma municipal
issues. In 1994, in addition to the generally lower issuances of municipal
debt, the Company's revenue generation from Oklahoma issues decreased
substantially in part because of negative publicity relating to the SEC's
investigation of the Company's involvement in transactions in certain Oklahoma
municipal securities. This investigation, which began in 1993 and continued
throughout 1994, has not resulted in any actions against the Company, but has
been widely publicized, which has significantly impaired the ability of the
Company to generate investment banking revenues from its Oklahoma operations
and was a significant factor in the Company's decision to pursue the sale of
both its retail and investment banking businesses in Oklahoma.
Although affected somewhat by the negative publicity from Oklahoma, it is
encouraging to note that the St. Louis-based municipal investment banking
group performed better than the industry, generally, in 1994. Whereas
industry sources reported a 44% decline in municipal issuances in 1994,
the St. Louis-based group's revenues were off only 11%.
Interest income increased $1.6 million (17.2%), and net interest
(interest income less interest expense) increased $261,000. The revenue
increase is due to two factors: higher average customer borrowings and
higher interest rates charged to customers resulting from the increases
caused by the Federal Reserve's interest rate hikes. Because of the
generally corresponding rise in both rates charged to customers and the
Company's borrowing rates, the net interest retention percentage
decreased from 48.5% in 1993 to 43.7% in 1994.
Other revenues, which consists primarily of investment advisory fees and
account service fees, increased $2.4 million (38.8%). The most
significant component of this increase was from investment advisory fees.
On December 28, 1993, the Company acquired Todd Investment Advisors, Inc.
("Todd"), an asset management company located in Louisville, Kentucky.
During 1994, Todd's fees added $1.7 million to the Company's investment
advisory business.
Total expenses decreased $2,524,000 (2.4%), from $105,671,000 to
$103,147,000. While employee compensation and benefits, a major
component of total expenses, decreased significantly, almost all other
expense categories increased. In addition, the Company charged to
expenses $2,672,000 in the fourth quarter related to a restructuring and
downsizing plan approved by the Parent Company's Board of Directors (see
Note P of Notes to Consolidated Financial Statements filed herein).
Employee compensation and benefits decreased $11,567,000 (16%) from
$72,219,000 to $60,652,000, largely as a result of decreased variable
compensation which decreased $14,770,000 (29.2%) from $50,506,000 to
$35,736,000 as a direct result of decreased commissionable revenue and
profitability. The decrease was partially offset by an increase in salaries
and benefits which increased $3,997,000 (18.2%) from $21,813,000 to $25,810,000
as a result of the additional home office revenue support staff and the
opening of new branch locations. The additions were made to facilitate
revenue growth and to continue the firm's efforts to expand its retail
branch system and to increase administrative expertise in key areas.
Commission and floor brokerage decreased $290,000 (12%) from $2,410,000
to $2,120,000 as a result of decreased commissionable revenue.
Communication and supplies and occupancy and equipment rental increased
$864,000 (12%) from $7,181,000 to $8,045,000 and $1,599,000 (21%) from
$7,798,000 to $9,397,000, respectively, as a direct result of 13
additional branch offices opened in 1994.
Travel and promotion decreased $200,000 (6.5%) from $3,068,000 to
$2,868,000 as a result of the decreased general business environment.
Interest expense increased $1,340,000 (27.9%) from $4,798,000 to
$6,138,000 as a result of the Company's increased borrowing rates. The
Company's short-term borrowings bore interest at a weighted average of
6.81% at December 31, 1994, compared to a weighted average of 3.79% at
December 31, 1993.
Other expenses increased $1,498,000 (20.5%) from $7,290,000 to $8,788,000
largely as a result of the increase in professional fees which increased
$1,407,000 primarily as a result of the ongoing SEC investigation into
certain municipal bond issues managed by the Oklahoma City-based public
finance department (see Note H of Notes to Consolidated Financial
Statements filed herein).
Provision for litigation and bad debt increased $1,560,000 largely as a
result of reserving for doubtful collection of employee notes receivable
and advances of $2,467,000 (see Note M of Notes to Consolidated Financial
Statements filed herein).
In the fourth quarter, the Company charged to expenses $2,672,000 for
restructuring and downsizing unprofitable and potentially unprofitable
areas of the firm. Included in the costs are $1,400,000 net lease
commitments for 31 closed and reduced office locations; $875,000 for
approximately 70 terminated employees' severance and extended benefits,
and reserve for uncollectable notes receivable; $206,000 for leasehold
improvements related to closed offices; and $191,000 for contractual
commitments. The plan of restructuring and downsizing is expected to be
substantially completed during the first quarter of 1995.
Five Months Ended December 31, 1993 Compared With Five Months Ended
December 31, 1992
Results of operations for the five-month transition period ended December
31, 1993, compared to the same five-month period of the previous year
reflected favorable market conditions experienced by the industry as
total revenues increased slightly to $46,455,000 from $44,875,000, a
modest 3.5% increase over a strong five-month period of the previous
year. Total expenses, however, were up 7.3% or $2,961,000 to
$43,395,000 from $40,434,000 reflecting the costs associated with
management's commitment to growth and the pursuit of other sources of
revenues to mitigate market downturns. Accordingly, net income after tax
decreased $807,000 (30%) to $1,915,000 from $2,722,000 for the five-month
transition period compared to the previous year's five-month period.
Commissionable revenue (commissions, principal transactions, sales of
investment company shares, unit investment trusts, and insurance
products) for the five-month transition period ended December 31, 1993,
increased $2,639,000 (10%) to $28,793,000 from $26,154,000 as a result of
favorable markets for equity products, mutual funds, life insurance, and
annuity products. The increase also resulted from an increase in the
number of experienced full-time Investment Executives, which increased to
375 at December 31, 1993 from 355 at December 31, 1992.
Sale of investment company shares (mutual funds) increased 40% to
$4,906,000 from $3,514,000 in 1992's five-month period as a result of the
continued demand for this product as retail investors sought alternatives
to low interest-bearing depository products offered by banking
institutions. The increase was also reflective of the continued demand
for these products industry-wide.
Principal transactions decreased 17% to $9,313,000 from $11,282,000
primarily as a result of a decrease in sales of taxable fixed income
products, principally mortgage-backed securities, which were made less
attractive because of low coupon rates.
Sales of insurance products increased 155% to $1,263,000 from $496,000
from the previous five-month period largely as a result of the increased
demand for annuity and life insurance products precipitated by the 1993
tax law changes.
Sales of unit investment trusts increased 59% to $1,362,000 from $854,000
in the same period of the previous year largely as a result of
management's continued emphasis to provide proprietary offerings and the
retail investor's continued demand for this product.
Other revenues decreased 22% to $2,720,000 from $3,469,000 in the
previous year largely as a result of the recognition of a one-time gain
of $850,000 on the sale of a partnership investment in November 1992.
Investment Banking revenue decreased $266,000 (2.4%) from the comparable
five-month period in 1992. Indications are that the public finance
portion of Investment Banking, which was the most significant portion of
investment banking and which experienced excellent business conditions
over the past two years, may not reach levels achieved historically in
future periods.
Total expenses increased largely as a result of the increase in employee
compensation and benefits which increased $3,543,000 (13.7%) to
$29,421,000 from $25,878,000. The variable portion of compensation and
benefits increased $2,100,000 to $16,300,000 from $14,200,000 as a result
of an increase in commissionable revenues and bonuses paid for production
and profitability of certain functions.
Salaries and the other fixed portions of compensation and benefits
increased $1,400,000 (17%) to $9,500,000 from $8,100,000 as a result of
annual salary adjustments (approximately 6% firm-wide), increases in the
number of branch offices, an increase in the number of Investment
Executive trainees whose salaries are fixed during their training period,
and an increase in the number of professional staff in key areas of
revenue production and direct support such as investment banking,
trading, and research. In addition, staff was added to bolster the
firm's focus on developing alternative sources of revenues.
Communication and supplies, rent and depreciation, and travel and
promotion, increased $345,000 to $3,090,000 from $2,745,000, $150,000 to
$3,333,000 from $3,183,000 and $143,000 to $1,231,000 from $1,088,000,
respectively, as a result of the increase in the number of branch offices
opened during the period. The Company added 4 offices over the previous
year's total.
Interest expense decreased $549,000 to $1,763,000 from $2,312,000 as a
result of more favorable borrowing rates.
Provision for bad debt and litigation decreased $632,000 to $473,000 from
$1,105,000 due largely to a decrease in the amount of settlements paid
for claims by customers which decreased $600,000 to $600,000 from
$1,200,000.
Fiscal Year 1993 Compared with Fiscal Year 1992
Fiscal 1993 results reflected the continued momentum gained in fiscal
1992 as again both total revenues and profitability were record amounts.
Total revenues increased 5.1 percent to $113,471,000 from the previous
year's record high of $108,009,000. Net income rose $685,000 from
$6,353,000 in fiscal 1992, which included an extraordinary credit of
$648,000 from utilization of a tax loss carryforward, to $7,038,000 in
fiscal 1993.
Commissionable revenue (commissions, principal transactions, sales of
investment company shares, unit investment trusts, and insurance
products) contributed $3,843,000 or 70 percent of the total revenue
increase. The increase resulted from growth in the number of experienced
full-time Investment Executives, which increased from 330 in fiscal 1992
to 349 in fiscal 1993, as well as an increase in average productivity per
Investment Executive.
Sale of investment company shares (mutual funds), up $2,103,000 from
fiscal 1992 sales of $8,638,000 to $10,741,000 for fiscal 1993,
contributed 38 percent of the overall increase in revenues. The increase
resulted from private investors seeking alternatives to low interest-
bearing depository products offered by banking institutions. The
Company's increase in sales of investment company shares was also
reflective of an industry-wide increase.
Sale of unit investment trusts increased $609,000 from $2,611,000 in
fiscal 1992 to $3,220,000 in fiscal 1993 as a result of the Company's
emphasis on developing proprietary offerings and generally increased
demand from retail investors for this type of product.
Investment banking revenues increased only slightly from a very strong
$29,791,000 in fiscal 1992 to $30,551,000 in fiscal 1993 due to sustained
activity in the new issue market and continued low interest rates which
contributed significantly to the number of refundings by municipalities.
During fiscal 1993, the Company managed or co-managed 90 offerings. This
number remained relatively unchanged from fiscal 1992 levels.
Gross interest revenue declined $279,000 from $9,130,000 in fiscal 1992
to $8,851,000 in fiscal 1993, primarily as a result of declining interest
rates. However, more efficient financing resulted in lower interest
expense, which declined $667,000 from $5,505,000 in 1992 to $4,838,000 in
fiscal 1993. This resulted in net interest retention of $4,013,000 or
45.3 percent, up from the fiscal 1992 interest retention of $3,625,000 or
39.7 percent.
Other revenue increased $1,138,000 to $6,837,000 largely as a result of a
one-time gain of $850,000 on the sale of an investment by a non-
broker/dealer subsidiary of the Company. Other revenue also consisted of
investment advisory fees and account servicing fees, both of which rose
slightly in fiscal 1993.
Total expenses rose $3,260,000 in fiscal 1993 to $102,201,000 or 3.3
percent over the fiscal 1992 amount of $98,941,000. Employee
compensation and benefits increased $4,766,000 or 7.5 percent from
$63,891,000 in fiscal 1992 to $68,657,000 in fiscal 1993. Compensation
and benefits is comprised of both variable and fixed components. The
variable portion fluctuates with revenue production and profitability.
Variable compensation increased 4.4 percent from $46,123,000 in fiscal
1992 to $48,160,000 in fiscal 1993. The fixed portion of compensation
(primarily salary) increased $2,087,000 from $13,318,000 in fiscal 1992
to $15,405,000 in fiscal 1993. This increase resulted from annual salary
adjustments and the addition of 19 full-time and 15 part-time branch
support staff from the opening of 7 new branch offices, an increase of 14
Investment Executive trainees whose wages are fixed during their training
period, and the addition of 11 professional staff in key areas of revenue
production and support such as investment banking, research, and trading.
Communications and supplies, occupancy and equipment, and travel and
promotion increased $668,000, $247,000, and $719,000, respectively, in
fiscal 1993. These increases were directly related to management's
decision to continue to expand the retail brokerage area through new
office openings and in increased promotional and advertising costs
associated with the office openings.
Provision for litigation and bad debts continued its downward trend,
decreasing $2,508,000 from $3,745,000 in fiscal 1992 to $1,237,000 in
fiscal 1993. The decrease resulted from continued efforts to strengthen
risk management controls.
Other expenses remained relatively unchanged from $7,588,000 in fiscal
1992 to $7,575,000 in fiscal 1993.
Liquidity and Capital Resources
The Company's assets are highly liquid, consisting mainly of cash or
assets readily convertible into cash. These assets are financed
primarily by the Company's equity capital, customer credit balances,
short-term bank loans, proceeds from securities lending, long-term notes
payable, and other payables. Changes in securities market volumes,
related customer borrowing demands, underwriting activity, and levels of
securities inventory affect the amount of the Company's financing
requirements.
During the year ended December 31, 1994, cash and cash equivalents
increased $383,000. Cash provided by operating activities of $75,357,000
was primarily due to decreases in operating receivables of $8,926,000 due
to decreased borrowing by customers, a decrease in securities owned of
$63,191,000 due to the firm's decision to decrease its normal inventory
balances, and an increase in operating payables of $9,918,000 due to timing
differences of transactions. These increases in cash from operating
activities were offset by increases in notes receivables from officers
and employees of $5,427,000 resulting from the firm's recruiting of
Investment Executives and other employees.
The increase in cash provided by operating activities was used primarily
for repayments of short-term borrowings which decreased $71,300,000,
purchase of treasury shares of $1,417,000, and payment of cash dividends
of $356,000.
During the year, Stifel, Nicolaus obtained a revolving subordinated note
agreement in the amount of $5,500,000. The note will be used to finance
underwritings should the need arise. At December 31, 1994, Stifel,
Nicolaus had an advance of $50,000 against this revolving subordinated
note.
The proposed sale of assets of the Oklahoma City-based operations along
with the plan of restructuring should not have a negative impact on the
Company's liquidity or capital resources (see Notes P and Q of the Notes
to Consolidated Financial Statements).
The Company intends to vigorously pursue collection of receivables from
Investment Executives and other employees who have terminated their
employment with the Company. The Company does not anticipate that this
action will adversely effect liquidity or capital resources (see Note M
of the Notes to Consolidated Financial Statements).
The Company is presently being investigated by the SEC relating to its
involvement in certain Oklahoma municipal securities issues (see Note H
of the Notes to Consolidated Financial Statements). At this time, no
action or claim has been asserted against the Company. However,
management, based on discussions with legal counsel, is of the opinion
that claims asserted, if any, related to this investigation would have no
material adverse effect on the Company's liquidity or capital resources.
Management believes that funds from operations and available informal
short-term credit arrangements of $140,350,000 at December 31, 1994 and
the available revolving subordinated debt of $5,450,000 at December 31,
1994 will provide sufficient resources to meet its present and
anticipated financial needs.
Stifel, Nicolaus & Company, Incorporated, the Company's principal
broker/dealer subsidiary, is subject to certain requirements of the
Securities and Exchange Commission with regard to liquidity and capital
requirements (see Note E of the Notes to Consolidated Financial
Statements). At December 31, 1994, Stifel, Nicolaus had net capital of
approximately $12,673,000, which exceeded the minimum net capital
requirements by approximately $9,696,000.
Inflation
The Company's assets are primarily monetary, consisting of cash,
securities inventory, and receivables. These monetary assets are
generally liquid and turn over rapidly and, consequently, are not
significantly affected by inflation. However, the rate of inflation
affects various expenses of the Company, such as employee compensation
and benefits, communications, and occupancy and equipment, which may not
be readily recoverable in the price of its services.
Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", in the five-month transition period ended
December 31, 1993. The standard requires, among other provisions, that
companies adjust their deferred tax asset or liability to reflect current
rates and recognize the effect of the change in operations. The adoption
of this new standard did not have a material impact on the Company's
consolidated financial statements.
The Company deals in listed options and other products such as
collateralized mortgage obligations which derive their values from the
price of some other security or index. The Company does not deal in
complex derivative financial instruments, such as futures, forwards, and
swaps, and therefore has no disclosure requirements in accordance with
the Financial Accounting Standard Board's Statement 119, "Disclosure
About Derivative Financial Instruments and Fair Value of Financial
Instruments".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Board of Directors
Stifel Financial Corp.
St. Louis, Missouri
We have audited the accompanying consolidated statements of financial
condition of Stifel Financial Corp. and Subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year ended December 31,
1994, the five-month transition period ended December 31, 1993, and each
of the two years in the period ended July 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits 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 consolidated financial position of
Stifel Financial Corp. and Subsidiaries as of December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for
the year ended December 31, 1994, the five-month transition period ended
December 31, 1993, and each of the two years in the period ended July 30,
1993, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand, L.L.P.
St. Louis, Missouri
February 24, 1995
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands) December 31, 1994 December 31, 1993
-------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 6,925 $ 6,542
--------- ---------
Cash segregated for the exclusive benefit of customers 1,316 1,262
--------- ---------
Receivable from brokers and dealers:
Securities failed to deliver 3,105 4,804
Deposits paid for securities borrowed 3,530 6,150
Settlement balances with clearing organizations 15,198 6,331
--------- ---------
21,833 17,285
--------- ---------
Receivable from customers, less allowance for doubtful
accounts of $1,071 and $1,435, respectively 139,899 153,373
--------- ---------
Securities owned at market value:
U.S. Government obligations 4,642 9,630
State and municipal obligations 13,231 67,404
Corporate obligations 3,240 4,320
Corporate stocks 2,206 5,156
--------- ---------
23,319 86,510
--------- ---------
Membership in exchanges, at cost (approximate market
value: $1,655 and $1,514, respectively) 513 513
Office equipment and leasehold improvements, at cost
(less allowances for depreciation and amortization
of $13,518 and $12,973, respectively) 4,779 4,760
Goodwill, net of accumulated amortization
of $574 and $1,291, respectively 4,290 4,591
Notes and non-securities receivable from employees,
net of allowance for doubtful receivables of $2,561
and $0, respectively 5,620 2,754
Current income tax receivable 1,515 449
Deferred tax asset 4,638 2,903
Miscellaneous other assets 7,561 7,626
--------- ---------
TOTAL ASSETS $ 222,208 $ 288,568
========= =========
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(In thousands except share amounts) December 31, 1994 December 31, 1993
-------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings from banks $ 65,650 $ 136,950
--------- ---------
Payable to brokers and dealers:
Securities failed to receive 2,991 3,319
Deposits received from securities loaned 43,405 21,204
--------- ---------
46,396 24,523
--------- ---------
Payable to customers, including free credit balances
of $15,601 and $21,588, respectively 24,369 36,324
Market value of securities sold, but not yet purchased 4,252 3,907
Drafts payable 14,576 14,376
Accrued employee compensation 9,110 9,399
Obligation under capital leases 1,029 931
Accounts payable and accrued expenses 11,030 10,029
Long-term debt 11,520 11,520
Subordinated note 50 - -
--------- ---------
Total Liabilities 187,982 247,959
--------- ---------
Commitments and Contingencies (Note D, Note H, and Note I)
Stockholders' equity:
Preferred Stock -- $1 par value; authorized
3,000,000 shares; none issued
Common stock -- $.15 par value; authorized
10,000,000 shares; issued 4,324,951 and 4,119,239
shares, respectively; outstanding 4,085,615 and
3,968,786 shares, respectively 649 617
Additional paid-in capital 18,491 17,269
Retained earnings 17,016 24,162
--------- ---------
36,156 42,048
--------- ---------
Less:
Treasury stock, at cost 239,336 and 150,453 shares,
respectively 1,732 1,240
Unamortized expense of restricted stock awards 198 199
--------- ---------
Total Stockholders' Equity 34,226 40,609
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 222,208 $ 288,568
========= =========
See Notes to Consolidated Financial Statements
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Five-Month
Year Transition Period Fiscal Year Fiscal Year
Ended Ended Ended July 30, Ended July 31,
(In thousands, except per share amounts) December 31, 1994 December 31, 1993 1993 1992
--------------------------------------------------------------------------------------------------------------------
Revenues
Commissions $ 25,407 $ 11,949 $ 26,456 $ 25,204
Principal transactions 22,567 9,313 25,201 25,260
Investment banking 11,969 10,885 30,551 29,791
Interest 10,918 4,057 8,851 9,130
Sale of Investment company shares 9,674 4,906 10,741 8,638
Sale of Unit investment trusts 2,736 1,362 3,220 2,611
Sale of Insurance products 2,207 1,263 1,614 1,676
Other 8,448 2,720 6,837 5,699
--------- --------- --------- ---------
93,926 46,455 113,471 108,009
Expenses
Employee compensation & benefits 60,652 29,421 68,657 63,891
Commissions & floor brokerage 2,120 845 2,485 2,437
Communications and office supplies 8,045 3,090 6,836 6,168
Occupancy & equipment rental 9,397 3,333 7,648 7,401
Promotional 2,868 1,231 2,925 2,206
Interest 6,138 1,763 4,838 5,505
Provision for litigation and bad debts 2,467 473 1,237 3,745
Restructuring charge 2,672 - - - - - -
Other operating expenses 8,788 3,239 7,575 7,588
--------- --------- --------- ---------
103,147 43,395 102,201 98,941
Income (loss) before income taxes and
extraordinary credit (9,221) 3,060 11,270 9,068
Provision (Benefit) for Income Taxes
Current (1,983) 1,352 4,223 2,918
Deferred (1,735) (207) 9 445
--------- --------- --------- ---------
(3,718) 1,145 4,232 3,363
Income (loss) before extraordinary credit (5,503) 1,915 7,038 5,705
Extraordinary Credit -- tax benefit from
utilization of net operating loss carryforward - - - - - - 648
--------- --------- --------- ---------
Net income (loss) $ (5,503) $ 1,915 $ 7,038 $ 6,353
========= ========= ========= =========
Earnings (Loss) Per Common Share and
Share Equivalents:
Before extraordinary credit:
Primary earnings (loss) per share $ (1.29) $ 0.44 $ 1.68 $ 1.43
Fully diluted earnings (loss) per share $ (1.29) $ 0.39 $ 1.40 $ 1.22
Extraordinary credit:
Primary earnings per share - - - - - - $ 0.16
Fully diluted earnings per share - - - - - - $ 0.12
Net income (loss) per share:
Primary earnings (loss) per share $ (1.29) $ 0.44 $ 1.68 $ 1.59
Fully diluted earnings (loss) per share $ (1.29) $ 0.39 $ 1.40 $ 1.34
See Notes to Consolidated Financial Statements
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Five-Month
Year Transition Period Fiscal Year Fiscal Year
Ended Ended Ended July 30, Ended July 31,
(In thousands) December 31, 1994 December 31, 1993 1993 1992
---------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
(Loss) income before extraordinary credit $ (5,503) $ 1,915 $ 7,038 $ 5,705
Utilization of net operating loss
carryforward - - - - - - 648
--------- --------- --------- ---------
Net (loss) income (5,503) 1,915 7,038 6,353
Non-cash items included in earnings:
Depreciation and amortization 2,572 880 2,020 1,991
Provision for litigation and bad debt 2,467 473 1,237 3,745
Unrealized (gain) loss on investments (96) - - 440 371
Bonus notes amortization 1,134 321 600 763
Deferred compensation 538 202 429 387
Amortization of restricted stock
awards and stock benefits 107 65 177 181
Deferred tax benefit (1,735) (207) 9 445
Restructuring charge 2,672 - - - - - -
--------- --------- --------- ---------
2,156 3,649 11,950 14,236
Gain on sale of memberships in exchanges - - (179) - - - -
Decrease (increase) in operating
receivables:
Customers 13,474 (36,058) (11,047) (34,335)
Brokers and dealers (4,548) (3,063) 4,997 (13,806)
(Decrease) increase in operating
payables:
Customers (11,955) 8,158 4,722 2,512
Brokers and dealers 21,873 (9,607) 7,899 20,654
(Increase) decrease in assets:
Cash & U.S. Government securities
segregated for the exclusive
benefit of customers (54) (2) 1,993 479
Securities owned 63,191 (48,489) 898 (17,208)
Notes receivable from officers and
employees (5,427) (788) (1,148) (1,611)
Miscellaneous other assets (1,779) (497) (768) (648)
Increase (decrease) in liabilities:
Securities sold, not yet purchased 345 (2,542) 3,105 (209)
Drafts payable, accounts payable
and accrued expenses, and
employee compensation (1,919) (5,568) 4,127 4,219
--------- --------- --------- ---------
Cash Provided By (Used For)
Operating Activities $ 75,357 $ (94,986) $ 26,728 $ (25,717)
--------- ---------- --------- ----------
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Five-Month
Year Transition Period Fiscal Year Fiscal Year
Ended Ended Ended July 30, Ended July 31,
(In thousands) December 31, 1994 December 31, 1993 1993 1992
---------------------------------------------------------------------------------------------------------------------
Cash Provided By (Used For) Operating
Activities -- From Previous Page $ 75,357 $ (94,986) $ 26,728 $ (25,717)
Cash Flows From Financing Activities
Net proceeds (payments) for
short-term borrowings from banks (71,300) 97,275 (22,375) 30,750
Proceeds from:
Employee stock purchase plan 613 628 378 347
Exercised stock options 81 111 268 61
Subordinated borrowings 50 - - - - - -
Dividend reinvestment plan 1 - - - - - -
Payments for:
Purchase of stock for treasury (1,417) (1,329) (302) (85)
Restricted stock awards - - (34) (81) (38)
Principal payments under capital
lease obligation (710) (264) (591) (583)
Cash Dividends (356) (218) (561) - -
--------- --------- --------- ---------
Cash Provided By (Used For)
Financing Activities (73,038) 96,169 (23,264) 30,452
Cash Flows From Investing Activities
Proceeds from:
Sale of office equipment and
leasehold improvements 24 23 16 8
Sale of investments 32 509 1,103 - -
Sale of memberships in exchanges - - 840 - - - -
Payments for:
Acquisition of office equipment,
leasehold improvements and a building (1,734) (752) (1,634) (1,511)
Acquisition of investments (258) (250) (1,021) (494)
Acquisition of subsidiary - - (1,981) - - - -
--------- --------- --------- ---------
Cash Used For Investing Activities (1,936) (1,611) (1,536) (1,997)
--------- --------- --------- ---------
Increase (decrease) in cash & cash
equivalents 383 (428) 1,928 2,738
Cash and cash equivalents --
beginning of year 6,542 6,970 5,042 2,304
--------- --------- --------- ---------
Cash And Cash Equivalents --
end of period $ 6,925 $ 6,542 $ 6,970 $ 5,042
========= ========= ========= =========
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Five-Month
Year Transition Period Fiscal Year Fiscal Year
Ended Ended Ended July 30, Ended July 31,
December 31, 1994 December 31, 1993 1993 1992
---------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow
Information
Interest payments $ 5,897 $ 984 $ 4,424 $ 3,642
Income tax payments $ 118 $ 2,080 $ 6,619 $ 5,426
Schedule of Non-cash Investing and Financing
Activities
Assumption of debt for acquisition of Todd $ - - $ 1,520 $ - - $ - -
Fixed assets acquired under capital lease $ 808 $ 257 $ - - $ 1,063
Stock dividends distributed $ 1,287 $ - - $ 2,009 $ 1,424
See Notes to Consolidated Financial Statements
Stifel Financial Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unamortized
Additional Expense of
Common Stock Paid-In Retained Treasury Stock Restricted
(In thousands, except share amounts) Shares Amount Capital Earnings Shares Amount Stock Awards Total
--------------------------------------------------------------------------------------------------------------------------
Balance at July 26, 1991 3,736,611 $560 $13,663 $13,066 (386,887) $(2,261) $(289) $24,739
Purchase of treasury shares (13,350) (85) (85)
Employee benefit plans (24) 64,576 415 391
Stock options exercised 5 9,935 57 62
Amortization of restricted
stock awards 137 137
Net income for the year 6,353 6,353
5% stock dividend 186,704 27 1,324 (1,351) (16,286) 0
------------------------------------ ---------- --------- ----------- --------- ---------- ----------- ---------- --------
Balance at July 31, 1992 3,923,315 587 14,968 18,068 (342,012) (1,874) (152) 31,597
Cash dividends -- common
stock ($.15 per share) (561) (561)
Purchase of treasury shares (41,468) (302) (302)
Employee benefit plans 53 132,201 725 778
Stock options exercised (2) 47,019 270 268
Restricted stock awards granted 17 21,000 115 (132) 0
Amortization of restricted
stock awards 177 177
Net income for the year 7,038 7,038
5% stock dividend 196,033 30 2,052 (2,082) (9,163) 0
------------------------------------ ---------- --------- ----------- --------- ---------- ----------- ---------- --------
Balance at July 30, 1993 4,119,348 617 17,088 22,463 (192,423) (1,066) (107) 38,995
5% stock dividend - fractional
shares (109) (1) (1) (2)
Cash dividends -- common
stock ($.055 per share) (215) (215)
Purchase of treasury shares (137,771) (1,329) (1,329)
Employee benefit plans 163 144,416 907 1,070
Stock options exercised (17) 19,050 128 111
Restricted stock awards granted 21 12,600 100 (122) (1)
Amortization of restricted
stock awards 30 30
Net income for the period 1,915 1,915
Stock bonuses issued 15 3,675 20 35
------------------------------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- --------
Balance at December 31, 1993 4,119,239 617 17,269 24,162 (150,453) (1,240) (199) 40,609
Cash dividends - common
stock ($.09 per share) (356) (356)
Purchase of treasury shares (188,964) (1,417) (1,417)
Employee benefit plans 88 72,883 614 702
Stock options exercised (34) 13,884 115 81
Restricted stock awards granted (87) 24,500 194 (107) 0
Amortization of restricted
stock awards 108 108
Stock benefits 60 1 1
Dividend reinvestment 151 1 1
Net income for the year (5,503) (5,503)
5% stock dividend 205,712 32 1,255 (1,287) (11,397) 0 0
------------------------------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- -------
Balance at December 31, 1994 4,324,951 $649 $18,491 $17,016 (239,336) $(1,732) $(198) $34,226
See Notes to Consolidated Financial Statement
Stifel Financial Corp. and Subsidiaries
Notes To Consolidated Financial Statements
Note A -- Accounting and Reporting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Stifel
Financial Corp. (the "Parent") and its wholly owned subsidiaries,
principally Stifel, Nicolaus & Company, Incorporated ("Stifel,
Nicolaus"), collectively referred to as (the "Company"). Stifel,
Nicolaus is a broker dealer registered under the Securities Exchange Act
of 1934. Intercompany balances and transactions have been eliminated in
consolidation.
Where appropriate, prior years' financial information has been
reclassified to conform with the current year presentation.
In 1993, the Company changed its fiscal year-end to a calendar year-end.
Accordingly, results of operations for the transition period cover a
five-month period (22 weeks). Previously, the Company's full fiscal
year was the 52- or 53-week period ending the last Friday in July. The
year ended July 30, 1993 contained 52 weeks, and the year ended July 31,
1992 contained 53 weeks.
For purposes of presenting the consolidated statements of cash flows, the
Company has defined cash equivalents as short-term, highly liquid
investments with maturities of 90 days or less other than those held for
sale in the ordinary course of business.
Security Transactions
Security transactions are recorded on a trade date basis.
Trading securities owned and securities sold but not yet purchased are
carried at market value, and unrealized gains and losses are reflected in
operations. Securities held for investment, which are included in other
assets, are carried at the lower of historical cost or market for the
Parent. Investment securities of the subsidiaries are carried at market
value or fair value as determined by management.
Securities failed to deliver and receive represent the contract value of
securities that have not been delivered or received by settlement date.
Receivable from customers includes amounts due on cash and margin
transactions. The value of securities owned by customers and held as
collateral for these receivables is not reflected in the consolidated
statements of financial condition.
Securities accounts of officers and directors are included in amounts
receivable from and payable to customers, since they are subject to the
normal terms and regulations as to payment and, in the aggregate, are not
significant.
Fair Value
The Company's financial instruments are carried at fair value or amounts
that approximate fair value. Securities inventory and securities sold
but not yet purchased are valued using quoted market or dealer prices.
Customer receivables, primarily consisting of floating-rate loans
collateralized by margin securities, are charged interest at rates
similar to other such loans made throughout the industry. The Company's
remaining financial instruments are generally short-term in nature, and
their carrying values approximate market value. The Company has
estimated the fair value of its long-term debt using the discounted cash
flow analysis of payments. At December 31, 1994, the estimated fair
value of the notes was $12,368,000.
Income Taxes
During the transition period ended December 31, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." This standard required a change from the "deferred method
of accounting for income taxes" to the "asset and liability" method of
accounting for income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized based on the
differences between the financial statement carrying amounts and their
respective tax bases using enacted tax rates in effect in the years in
which the differences are expected to reverse. The cumulative effect of
this change in accounting for income taxes was not material to the
consolidated financial statements.
Other
Investment banking revenue is recorded as follows: management fees on
offering date, selling concessions on trade date, underwriting fees upon
completion of the underwriting, and other investment banking revenue upon
the completion of the service.
Amortization of capital leases is computed on a straight-line basis over
the estimated useful life of the asset. Leasehold improvements are
amortized over the lesser of the economic useful life of the improvement
or the term of the lease. Depreciation of office equipment is computed
on a straight-line basis for equipment purchased prior to January 1, 1994
and an accelerated method for equipment purchased thereafter.
Goodwill recognized in business combinations accounted for as purchases
is being amortized over 15 to 40 years on a straight-line basis.
Earnings (loss) per share of common stock is based upon the weighted
average number of common shares and share equivalents outstanding during
the periods. Common share equivalents include dilutive stock options
under the treasury stock method (see Note G) and dilutive shares from
Senior Convertible Notes under the if converted method (see Note J).
Note B -- Short-Term Borrowings From Banks
In the normal course of business, Stifel, Nicolaus borrows from various
banks on a demand basis with securities pledged as collateral. Available
credit arrangements with banks totaled $206,000,000 at December 31, 1994,
of which $140,350,000 was unused. There were no compensating balance
requirements under these arrangements. The Company's short-term
borrowings bore interest at a weighted average rate of 6.81% and 3.79% at
December 31, 1994 and 1993, respectively. Certain short-term borrowings
were collateralized by Company-owned securities valued at approximately
$29,278,165 on a settlement date basis. Short-term borrowings used to
finance receivables from customers were collateralized by customer-owned
securities valued at approximately $91,149,060 at December 31, 1994. The
value of these customer-owned securities is not reflected in the
consolidated statement of financial condition (see Note A).
Note C -- Subordinated Note
Stifel, Nicolaus has a revolving subordinated note agreement in the
amount of $5,500,000 which terminates January 31, 1997. The agreement,
approved by the New York Stock Exchange, Inc. (the "NYSE"), allows
Stifel, Nicolaus to borrow up to this amount and would be available for
the computation of adjusted net capital under the Uniform Net Capital
Rule of the Securities and Exchange Commission (the "SEC"). To the
extent that such notes are required for Stifel, Nicolaus' continued
compliance with minimum net capital requirements, they may not be repaid.
The rights of the note holders to receive any payment from Stifel,
Nicolaus under the terms of the notes are subordinated to the claims of
all present and future creditors of Stifel, Nicolaus which arise prior to
maturity. Under the terms of the note agreements, Stifel, Nicolaus must
meet various financial requirements specified in the agreements.
Stifel, Nicolaus is charged an annual commitment fee in an amount equal
to 1/2 of 1% of the average daily balance of the unused portion of the
amount available under the agreement. Such fee is payable quarterly.
During the year, Stifel, Nicolaus charged to operations $19,000 for this
fee.
At December 31, 1994, Stifel, Nicolaus had an advance outstanding against
the revolving subordinated note agreement of $50,000. Interest on this
advance is paid quarterly based upon the prime rate (8.5% at December 31,
1994). Future advances, if any, would be charged interest based on the
published "LIBOR" rate in effect during the term the advance is
outstanding.
Note D -- Commitments and Contingencies
In the normal course of business, Stifel, Nicolaus enters into
underwriting commitments. Settlement of transactions relating to such
underwriting commitments which were open December 31, 1994, had no
material effect on the consolidated financial statements.
In connection with margin deposit requirements of The Options Clearing
Corporation (the "OCC"), Stifel, Nicolaus has on deposit with OCC a
standby letter of credit amounting to $1,000,000 and has pledged cash and
customer-owned securities with a value of $11,200,257. At December 31,
1994, the letter of credit, cash, and securities satisfied a minimum
margin deposit requirement of $10,667,188. In addition, Stifel, Nicolaus
has on deposit with National Securities Clearing Corporation a standby
letter of credit amounting to $350,000.
Pursuant to the provisions of Rule 15c3-3 of the Securities and Exchange
Commission, Stifel, Nicolaus is required to maintain a Special Reserve
Bank Account for the exclusive benefit of customers ("15c3-3 Accounts").
Deposits to the 15c3-3 Accounts are required in the amount of the excess
of total customer-related credits over total customer-related debits, as
defined. Withdrawals from these 15c3-3 Accounts may be made to the
extent of the excess of the account balance over deposit requirements.
At December 31, 1994, no deposit was required; however, Stifel, Nicolaus
had cash and qualified securities in the amount of $1,316,419 on deposit
in its 15c3-3 Accounts.
The future minimum rental commitments at December 31, 1994 with initial
or remaining non-cancelable lease terms in excess of one year for office
space and equipment are as follows (see Note M):
Operating Leases
----------------------------------
Minimum
Payments Future
Under Minimum
Capital Leases Related Rental
Year Ending December 31, Leases Commitments Sublease Commitment
------------------------ -------- ----------- -------- ----------
1995 $ 325,000 $ 4,431,000 $(293,000) $ 4,138,000
1996 325,000 4,149,000 (40,000) 4,109,000
1997 325,000 2,373,000 0 2,373,000
1998 238,000 1,409,000 0 1,409,000
1999 0 1,099,000 0 1,099,000
Thereafter 0 2,718,000 0 2,718,000
---------- ----------- --------- -----------
Minimum Commitments 1,213,000 $16,179,000 $(333,000) $15,846,000
Less Interest 184,000 =========== ========= ===========
----------
Net Present Value of
Capital Lease Obligations $1,029,000
==========
Rental expense for the year ended December 31, 1994, the five-month
transition period ended December 31, 1993, the fiscal years ended July 30,
1993, and July 31, 1992, amounted to $4,596,000, $1,685,000, $4,021,000,
and $4,047,000, respectively.
Office equipment, under capital leases, with a recorded cost of
approximately $1,047,000, collateralizes the above capital lease
obligations and is included in the consolidated statements of financial
condition in the caption of office equipment and leasehold improvements.
Note E -- Net Capital Requirements and Dividend Restrictions
Stifel, Nicolaus is subject to the Uniform Net Capital Rule of the
Securities and Exchange Commission (the "rule") which requires the
maintenance of minimum net capital, as defined. Stifel, Nicolaus has
elected to use the alternative method permitted by the rule which
requires maintenance of minimum net capital equal to the greater of
$250,000 or 2 percent of aggregate debit balances arising from customer
transactions, as defined. The rule also provides that equity capital may
not be withdrawn or cash dividends paid if resulting net capital would be
less than 5 percent of aggregate debits.
At December 31, 1994, Stifel, Nicolaus had net capital of $12,672,856,
which was 8.5 percent of aggregate debit balances and $9,695,888 in
excess of minimum required net capital. At December 31, 1994, the net
assets of Stifel, Nicolaus were $35,323,892, of which $30,143,455 was
restricted as to the payment of dividends. In addition, there are
restrictions in the Parent's long-term note agreement on payment of
dividends by the Parent to its stockholders based on the amount of the
Company's cumulative consolidated net income, as defined. At December
31, 1994, $1,800,000 was available for payment of future dividends under
such provisions.
Note F -- Employee Benefit Plans
The Company has a profit sharing plan and an Employee Stock Purchase Plan
(the "ESPP") covering qualified employees as defined in the plans.
Contributions to the profit sharing plan were based upon a company match
of 50% of the employees' first $500 in annual contributions for the year
ended December 31, 1994, and the five-month transition period ended
December 31, 1993. Contributions prior to the transition period were
discretionary. Under the ESPP, the Company contributes 15% of the
purchase price of employee stock purchases of the Parent's stock.
The Company also has an Employee Stock Ownership Plan (the "ESOP")
covering qualified employees as defined in the plan. Employer
contributions are made to the ESOP on behalf of all eligible employees
based upon the relationship of individual compensation (up to a maximum
of $150,000) to total compensation. At December 31, 1994, the plan held
and has allocated 327,348 shares of Stifel Financial Corp. common stock
valued at $1,964,088.
The following approximate amounts were charged to operations for the
periods indicated:
Fiscal Year Ended
Year Ended Five Months Ended -------------------
December 31, December 31, July 30, July 31,
1994 1993 1993 1992
------------ ----------------- --------------------
Employee Stock Purchase $ 112,500 $ 92,000 $ 94,000 $ 56,000
Profit Sharing Plan 185,000 91,000 442,000 400,000
Employee Stock
Ownership Plan 91,000 442,000 400,000
Restricted stock awards were made to certain key employees in fiscal
years 1989, 1993, the five-month transition period, and the year ended
December 31, 1994. The shares are restricted as to resale over a five-
year service period for awards made in 1989 commencing in 1989, a three-
to five-year service period for awards made in 1993 commencing in 1993, a
three- to five-year service period for awards made in the transition
period commencing in the transition period, and a three- to five-year
service period for awards made in 1994 commencing in 1994. The
restrictions lapse with respect to 20 percent of such shares in fiscal
1991 and 1992 and 30 percent of such shares in fiscal 1993 and the five-
month transition period for awards made in 1989. For all other awards,
restrictions lapse ratably over the three- and five-year service periods.
The deferred cost of the restricted stock awards is amortized on a
straight-line basis. The Company charged to operations for the year
ended December 31, 1994, the five-month transition period, and for fiscal
years 1993 and 1992, approximately $108,000, $30,000, $177,000, and
$137,000, respectively.
Stifel, Nicolaus also has a deferred compensation plan available to
Investment Executives. The amounts charged to operations were
approximately $539,000, $202,000, $429,000, and $387,000 for the calendar
year 1994, for the five-month transition period, and for fiscal years
1993 and 1992, respectively.
Note G -- Stock Option Plans
Under the Company's 1983 and 1985 Incentive Stock Option Plans, the
Company may grant options up to an aggregate of 450,000 shares to key
employees. Under the Company's 1987 non-qualified stock option plan, the
Company may grant options up to an aggregate of 100,000 shares. All
options under these plans are granted at market value and expire 10 years
from the date of grant. The Company has also granted stock options to
external board members under a non-qualified plan. These options were
granted at market value and are exercisable one year from date of grant
and expire 10 years from date of grant. Activity, adjusted for stock
dividends distributed, under all plans for the year ended December 31,
1994, the five-month transition period ended December 31, 1993, and for
the two years ended July 30, 1993, respectively, is set forth on the
following table. All amounts and prices have been adjusted to reflect
the 5 percent stock dividends declared September 9, 1992, September 14,
1993, and January 24, 1995.
Shares Under Option Option Price Range
--------------------------------------------------------------------------------
Outstanding at July 27, 1991
(204,465 exercisable) 370,766 $4.75 - 11.66
--------------------------------------------------------------------------------
Granted 54,843 4.54 - 5.72
Exercised (11,501) 5.18 - 5.94
Canceled (32,082) 5.08 - 11.66
--------------------------------------------------------------------------------
Outstanding at July 31, 1992
(250,656 exercisable) 382,026 4.54 - 11.66
--------------------------------------------------------------------------------
Granted 6,885 5.19 - 6.46
Exercised (51,840) 4.54 - 7.66
Canceled (3,866) 5.18 - 11.66
--------------------------------------------------------------------------------
Outstanding at July 30, 1993
(301,536 exercisable) 333,205 4.54 - 9.83
--------------------------------------------------------------------------------
Granted 65,889 6.46 - 9.40
Exercised (20,002) 5.07 - 6.26
Canceled (2,076) 4.54 - 5.19
--------------------------------------------------------------------------------
Outstanding at December 31, 1993
(300,930 exercisable) 377,016 4.54 - 9.83
--------------------------------------------------------------------------------
Granted 47,939 5.71 - 7.26
Exercised (14,579) 5.08 - 7.61
Canceled (35,077) 4.54 - 6.79
--------------------------------------------------------------------------------
Outstanding at December 31, 1994
(271,542 exercisable) 375,299 $4.54 - 9.83
--------------------------------------------------------------------------------
All option plans are administered by the Compensation Committee of the
Board of Directors of the Parent which has the authority to interpret the
Plans, determine to whom options may be granted under the Plans,
determine the terms of each option, and cancel, with the consent of an
optionee, any option previously granted to such optionee and to grant a
new option in place thereof.
Note H -- Legal Proceedings
The Company is a defendant in several lawsuits and arbitrations, some of
which claim substantial amounts, including punitive damage claims. While
results of litigation cannot be predicted with certainty, management,
based on opinions of outside counsel, has provided for actions most
likely of adverse disposition and believes that the effects of resolution
of all such litigation and arbitration beyond the amounts provided will
not have a material adverse affect on the Company's consolidated
financial position. However, depending upon the period of resolution,
such effects could be material to the financial results of an individual
operating period.
The Securities and Exchange Commission is conducting a formal
investigation into possible violations of the federal securities laws in
connection with certain municipal bond issues managed by the Oklahoma
City-based public finance department where the Company was the managing
or co-managing underwriter. The Company is cooperating fully with the
investigation. At this time, no action or claims have been asserted
against the Company. However, management, based on discussions with
legal counsel, is of the opinion that claims asserted, if any, related to
this investigation would have no material effect on the Company's
financial position.
Note I -- Financial Instruments With Off-Balance-Sheet Credit Risk
In the normal course of business, the Company's activities involve the
execution, settlement, and financing of various securities transactions.
These activities may expose the Company to off-balance-sheet risk in the
event the customer or other party is unable to fulfill its contracted
obligations.
A portion of the Company's customer activity involves the sale of
securities not yet purchased ("short sales") and the writing of option
contracts through margin accounts. Such transactions may expose the
Company to significant off-balance-sheet risk in the event collateral is
not sufficient to cover losses which customers may incur upon significant
market changes.
The Company receives cash representing at least the market value of
securities loaned. In the event the other party to these transactions is
unable to return the securities loaned, the Company may be exposed to the
risk of replacing the securities at prevailing market prices.
The Company pledges customer securities as collateral for bank loans and
to satisfy margin deposits of clearing organizations (see Note B and Note
C). In the event such party is unable to return customer securities
pledged as collateral, the Company may be exposed to the risk of
acquiring the securities at prevailing market prices.
The Company, as a part of its normal brokerage activities, assumes short
positions in its inventory. The establishment of short positions exposes
the Company to off-balance-sheet risk in the event prices increase, as
the Company may be obligated to cover such positions. The Company does
not engage in proprietary trading of volatile securities such as short
options and futures. At December 31, 1994, 32 percent of the value of
the Company's short positions consisted of equity securities, and the
remainder consisted of debt securities.
The Company controls off-balance-sheet risk by monitoring the market
value and marking to market securities on a daily basis and by requiring
adjustments of collateral levels in accordance with industry regulations
and internal policies. The Company establishes credit limits for margin
trading and monitors compliance with the applicable limits on a daily
basis. Securities collateralizing customer accounts are held by the
Company or held by other depository institutions, principally the
Depository Trust Company.
Concentrations of Credit Risk
The Company maintains margin and cash security accounts for its customers
located throughout the United States. The majority of the Company's
customer receivables are serviced by branch locations in Missouri and
Illinois.
As a securities broker and dealer, a substantial portion of the Company's
transactions are collateralized. The Company's exposure to credit risk
associated with the nonperformance in fulfilling contractual obligations
pursuant to securities transactions can be directly impacted by volatile
trading markets which may impair the customers' or counterparties'
ability to satisfy their obligations to the Company. The Company
controls its exposure to credit risk by continually monitoring its
counterparties' position, and where deemed necessary, the Company may
require a deposit of additional collateral and/or a reduction or
diversification of positions.
The Company maintains its cash deposits in various financial
institutions, several of which include amounts in excess of that insured
by the Federal Deposit Insurance Corporation.
Note J -- Long-Term Debt
The Parent has outstanding $10,000,000 aggregate principal amount of its
11.25 percent Senior Convertible Notes due September 1, 1997 through
September 1, 2000. The notes are convertible into shares of the
Company's $.15 par value common stock at any time prior to maturity,
unless previously redeemed, at a conversion price of $7.78 per share.
Under certain conditions, the notes are redeemable in whole or in part at
the option of the Parent by payment of the principal and the accrued
interest on the notes to be redeemed plus a premium of 5.1 percent. The
premium decreases approximately one percentage point each September 1,
from 1995 to 1999. The Company is required to maintain consolidated
tangible net worth (as defined by the note agreement) at an amount not
less than $22,000,000 as long as any amount remains unpaid on any of the
11.25 percent Senior Convertible Notes. (Also see Note E)
The Parent has outstanding $1,520,000 in promissory notes issued for the
purchase of Todd Investment Advisors, Inc. The principal of the notes is
due on January 2, 1995, and January 2, 1996, in equal installments with
interest at 3.83% per annum on each installment of the unpaid balance.
Interest charged to operations during the year for these notes was
$58,216.
Note K -- Preferred Stock Purchase Rights
On June 30, 1987, the Company's Board of Directors declared a
distribution of one preferred stock purchase right for each share of the
Company's common stock. Each right will entitle the holder to buy 1/100
of a share of a Series A Junior Participating Preferred Stock at an
exercise price of $40 per right. The rights become exercisable on the
tenth day after public announcement that a person or group has acquired
20 percent or more of the Company's common stock or upon commencement or
announcement of intent to make a tender offer for 30 percent or more of
the outstanding shares of common stock without prior written consent of
the Company. The rights may be redeemed by the Company prior to becoming
exercisable by action of the Board of Directors at a redemption price of
$.05 per right. If the Company is acquired by any person after the
rights become exercisable, each right will entitle its holder to purchase
stock of the acquiring company having a market value of twice the
exercise price of each right. The rights were issued to shareholders of
record at the close of business on July 14, 1987 and expire in July,
1997.
Note L -- Income Taxes
The Company's (benefit) provision for income taxes consists of:
Year Ended Five Months Ended Year Ended
December 31, December 31, July 30, July 31,
1994 1993 1993 1992
Current:
Federal $(1,601,000) $ 1,092,000 $ 3,448,000 $ 2,516,000
State (382,000) 260,000 775,000 402,000
----------- ----------- ----------- -----------
$(1,983,000) $ 1,352,000 $ 4,223,000 $ 2,918,000
Deferred:
Federal $(1,401,000) $ (167,000) $ (22,000) $ 394,000
State (334,000) (40,000) 31,000 51,000
----------- ----------- ----------- -----------
$(1,735,000) $ (207,000) $ 9,000 $ 445,000
----------- ----------- ----------- -----------
$(3,718,000) $ 1,145,000 $ 4,232,000 $ 3,363,000
=========== =========== =========== ===========
The (benefit) provision for income taxes differs from the amount computed
by applying the statutory federal income tax rate to (loss) income before
income taxes for the following reasons:
Five Months
Year Ended Ended Year Ended
December 31, December 31, July 30, July 31,
1994 1993 1993 1992
------------ ----------- ----------- -----------
Federal tax computed at
statutory rates $(3,135,000) $ 1,040,000 $ 3,832,000 $ 3,083,000
State income taxes, net
of Federal income tax
benefit (450,000) 145,000 532,000 299,000
Tax-exempt interest, net
of related interest
expense (143,000) (7,000) (237,000) (246,000)
Other, net 10,000 (33,000) 105,000 227,000
----------- ----------- ----------- -----------
(Benefit) provision
for income taxes $(3,718,000) $ 1,145,000 $ 4,232,000 $ 3,363,000
=========== =========== =========== ===========
The company had a net operating loss carryforward in 1991, which was
fully utilized in 1992, resulting in an extraordinary credit of $648,000.
The net deferred tax asset includes the tax effect of the following
temporary differences:
December 31, December 31,
1994 1993
Deferred tax asset
Receivables from customers, principally due
to allowance for doubtful accounts $ 417,000 $ 436,000
Office equipment and leasehold improvements,
principally book over tax depreciation 784,000 598,000
Deferred Compensation 669,000 550,000
Deferred Revenue 217,000 193,000
Investments, principally due to valuation
allowance 242,000 274,000
Provision for litigation and settlements 1,017,000 1,005,000
Receivables from officers and employees,
principally due to allowance for doubtful
accounts 997,000 - -
Accrued Expenses 681,000 196,000
Other 9,000 63,000
---------- ----------
Deferred tax asset 5,033,000 3,315,000
---------- ----------
Deferred tax liability
Intangible assets, principally tax over book
amortization (215,000) (227,000)
Fee revenue installment receivable (180,000) (185,000)
---------- ----------
Total gross deferred tax liabilities (395,000) (412,000)
---------- ----------
Net deferred tax asset $4,638,000 $2,903,000
========== ==========
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary.
Based on the Company's historical earnings, future expectations of
taxable income, the future reversals of gross deferred tax liabilities,
and potential net operating loss carrybacks, management believes it is
more likely than not that the Company will realize the gross deferred tax
asset.
For years prior to the adoption of SFAS No. 109, "Accounting for Income
Taxes," the components of deferred income taxes are as follows:
Year Ended
---------------------------------
July 30, 1993 July 31, 1992
Accruals currently not deductible $ 259,000 $ (280,000)
Depreciation and amortization (55,000) (98,000)
Deferred compensation (143,000) (131,000)
Bad debts 58,000 833,000
Unrealized gains and losses 35,000 (59,000)
Other, net (145,000) 180,000
---------- ----------
Deferred income taxes $ 9,000 $ 445,000
========== ==========
Note M -- Related Party Transactions
Three directors of the Parent are associated with firms which provide
legal and consulting services to the Company. Additionally, several
employees of Stifel, Nicolaus, through their individual ownership or
interest in a corporation or partnership, provide leasing services
primarily for branch office space. The Company charged to operations in
the aggregate approximately $1,369,000, $315,000, $386,000, and $777,000
during the year ended December 31, 1994, the five-month transition period
ended December 31, 1993, and the fiscal years 1993 and 1992,
respectively, for these services which were primarily legal.
A director of the Parent has a general partnership interest in an
enterprise in which the Company also holds general and limited
partnership interests carried at approximately $530,000 at December 31,
1994, and $584,000 at December 31, 1993.
The Company has receivables aggregating $1,976,000 at December 31, 1994,
from two former employees who were also directors and officers of the
Company. These receivables arose from employment contracts which were to
be earned or forgiven if performance criteria defined in the contracts
were met. In 1994, the employees terminated with the Company. In the
fourth quarter of 1994, the Company filed suits to recover the balance of
the receivables.
Note N -- Transition Period and Comparable Prior Year
The Company changed its fiscal year from the last Friday in July to a
calendar year end. Comparative results of operations are shown below:
Calendar Year Five-Month Five Months
December 31, 1994 December 31, 1993 Transition Period Ended December 31, 1992
(unaudited) Ended December 31, 1993 (unaudited)
--------------------------------------------------------------------------------------------------------------------------------
Revenues:
Commissions $ 25,407,000 $ 28,396,000 $ 11,949,000 $ 10,008,000
Principal transactions 22,567,000 23,232,000 9,313,000 11,282,000
Investment banking 11,969,000 30,285,000 10,885,000 11,151,000
Interest 10,918,000 9,316,000 4,057,000 4,101,000
Sale of investment company shares 9,674,000 12,133,000 4,906,000 3,514,000
Sale of insurance products 2,207,000 2,382,000 1,263,000 496,000
Sale of unit investment trust 2,736,000 3,728,000 1,362,000 854,000
Other revenues 8,448,000 6,088,000 2,720,000 3,469,000
------------- ------------- ------------- -------------
Total Revenues 93,926,000 115,560,000 46,455,000 44,875,000
------------- ------------- ------------- -------------
Expenses:
Employee compensation & benefits 60,652,000 72,219,000 29,421,000 25,878,000
Commission & floor brokerage 2,120,000 2,410,000 845,000 920,000
Communication & office supplies 8,045,000 7,181,000 3,090,000 2,745,000
Occupancy & equipment rental 9,397,000 7,798,000 3,333,000 3,183,000
Promotional 2,868,000 3,068,000 1,231,000 1,088,000
Interest 6,138,000 4,798,000 1,763,000 2,312,000
Provision for litigation & bad debt 2,467,000 907,000 473,000 1,105,000
Restructuring charge 2,672,000 0 0 0
Other expense 8,788,000 7,290,000 3,239,000 3,203,000
------------- ------------- ------------- -------------
Total Expenses 103,147,000 105,671,000 43,395,000 40,434,000
------------------------------------- ---------------------- ---------------------- ---------------------- -------------
Pre-Tax Income(Loss) (9,221,000) 9,889,000 3,060,000 4,441,000
Income tax provision (benefit) (3,718,000) 3,658,000 1,145,000 1,719,000
------------------------------------- ---------------------- ---------------------- ---------------------- -------------
Net Income(Loss) $ (5,503,000) $ 6,231,000 $ 1,915,000 $ 2,722,000
============= ============= ============= =============
Note O -- Acquisition
On December 28, 1993 the Company purchased all of the outstanding stock
of Todd Investment Advisors, Inc. (Todd), an investment advisory firm
registered with the SEC under the Investment Advisory Act of 1940, for
$1,780,000 in cash and $1,520,000 in promissory notes, payable in two
installments. The transaction was accounted for as a purchase and
resulted in the recognition of goodwill of approximately $3,201,000,
which is being amortized on a straight-line basis over a fifteen year
period.
Unaudited pro forma financial data for the combined operations, assuming
the transaction had taken place at the beginning of the periods presented,
follows:
Five-Month
Transition Period Fiscal Year
Ended December 31, 1993 Ended July 30,1993
----------------------- ------------------
Revenue $ 47,251,000 $ 115,379,000
Net Income $ 1,945,000 $ 7,102,000
Primary Earnings Per Share $0.45 $1.69
Note P -- Plan of Restructuring
During the fourth quarter, the Board of Directors of the Parent Company
approved a restructuring and downsizing plan for the Company which was
implemented beginning in December 1994, and involved the closing or
downsizing of 31 office locations and termination of approximately 70
officers and employees. Included in the fourth quarter are charges to
expense for costs associated with the implementation of the plan which
includes the following:
Net Lease commitments for closed offices $ 1,400,000
Severance pay, extended benefits and
receivables written off for terminated employees 875,000
Abandonment of leasehold improvements 206,000
Contractual commitments 191,000
-----------
Total $ 2,672,000
===========
Such amounts are included in accounts payable and accrued expenses or the
allowance for doubtful notes receivable at December 31, 1994. The plan
of restructuring and downsizing is expected to be substantially completed
during the first quarter of 1995.
Note Q -- Subsequent Event
On February 7, 1995, the Company announced an agreement to sell the assets
of its Oklahoma City-based operations to Capital West Corp. subject to
certain conditions. Included in the agreement are the assets related to
the Company's retail offices in Oklahoma, several retail offices in Texas,
and the Oklahoma-based public finance, institutional trading, and sales
departments. If the transaction is consummated the Company will receive
cash, secured and subordinated notes, and warrants to purchase a minority
interest in Capital West Corp. In addition, the agreement calls for
Capital West Corp. to assume certain office and equipment lease
obligations of the Company. The sale would result in the reduction of
approximately 70 investment executives and approximately 50 support staff
located in 26 branch offices.
Unaudited pro forma financial information assuming the transaction had
taken place at the beginning of the year is presented below:
Unaudited Pro Forma Combined Results of Operations
Revenue $ 81,413,000
Net Loss 4,427,000
Loss Per Primary Share 1.04
The above pro forma statements do not purport to be indicative of results
which actually would have occurred had the sale been made on January 1,
1994.
On January 24, 1995, the Company's Board of Directors approved a 5 percent
stock dividend to be distributed and $.03 per share cash dividend to be
paid on February 24, 1995, to shareholders of record on February 10, 1995.
All shares issued and earnings per share amounts included in the
consolidated financial statements and notes thereto have been
retroactively adjusted to give effect to the 5 percent stock dividend.
(b) Supplementary Financial Information
Quarterly Operating Results (Unaudited)
Earnings Primary Fully Diluted
Before Net Earnings Earnings
Revenue Income Taxes Income Per Share Per Share
Year 1994 By Quarter
--------------------------------------------------------------------------------------------
First $ 25,827,000 $ 289,000 $ 179,000 $ 0.04 $ 0.04
Second 22,746,000 (1,224,000) (731,000) (0.17) (0.17)
Third 23,573,000 (681,000) (420,000) (0.10) (0.10)
Fourth 21,780,000 (7,605,000) (4,531,000) (1.10) (1.10)
---------------------------------------------------------------------------------------------
Transition Period 1993
---------------------------------------------------------------------------------------------
First Quarter $ 28,916,000 $ 2,540,000 $ 1,603,000 $ 0.37 $ 0.32
Nov. & Dec., 1993 17,539,000 520,000 312,000 0.07 0.07
---------------------------------------------------------------------------------------------
Fiscal Year 1993 By Quarter
---------------------------------------------------------------------------------------------
First $ 22,796,000 $ 1,569,000 $ 1,010,000 $ 0.25 $ 0.22
Second 32,015,000 3,873,000 2,413,000 0.58 0.47
Third 28,398,000 2,954,000 1,868,000 0.44 0.37
Fourth 30,262,000 2,874,000 1,747,000 0.41 0.34
---------------------------------------------------------------------------------------------
EX-21
4
EXHIBIT 21
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
SUBSIDIARIES OF STIFEL FINANCIAL CORP. (1)
STATE OF NAMES UNDER WHICH
NAME INCORPORATION SUBSIDIARY DOES BUSINESS
- Stifel, Nicolaus & Missouri Stifel, Nicolaus & Company,
Company, Incorporated Incorporated
- Alliance Realty Corp. Missouri Alliance Realty Corp.
- Century Securities Missouri Century Securities
Associates, Inc. Associates, Inc.
- Stifel, Nicolaus Arkansas Stifel, Nicolaus Insurance
Insurance Agency, Inc. (2) Agency, Inc.
- S-N Capital Corp. (2) Missouri S-N Capital Corp.
- Stifel Venture Corp. Missouri Stifel Venture Corp.
- S-N NAG Missouri S-N NAG
- Pin Oak Capital, Ltd.(3) Missouri Pin Oak Capital, Ltd.
- Stifel Asset Management Corp. Missouri Stifel Asset Management Corp.
- Todd Investment Advisors, Inc. (3) Kentucky Todd Investment Advisors, Inc.
---------------
(1) Does not include corporations in which registrant owns 50 percent or less
of the stock.
(2) Wholly owned subsidiary of Stifel, Nicolaus & Company, Incorporated.
(3) Wholly owned subsidiary of Stifel Asset Management Corp.
EX-23
5
EXHIBIT 23
STIFEL FINANCIAL CORP.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Stifel Financial Corp. and Subsidiaries on Form S-8 (file numbers 2-94326,
33-10030, 33-16150, 33-20568 and 33-53097) and on Form S-3 (file number
33-53699), of our report dated February 24, 1995 on our audits of the
consolidated financial statements and financial statement schedules of Stifel
Financial Corp. and Subsidiaries as of December 31, 1994 and December 31, 1993,
and for the year ended December 31, 1994, the five-month transition period
ended December 31, 1993 and the fiscal years ended July 30, 1993 and July 31,
1992, which report is incorporated by reference in this Annual Report on
Form 10-K.
/s/ Coopers & Lybrand, L.L.P.
St. Louis, Missouri
February 24, 1995