-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FTKEkVUPlvQkU9W0HyOK1BWku45fTfmj1KQG6iOifTCUwALOiDR2n1kF6Ax9BsJ0 tQgjihHZM8UHRA4aARFlcg== 0000720672-96-000009.txt : 19960325 0000720672-96-000009.hdr.sgml : 19960325 ACCESSION NUMBER: 0000720672-96-000009 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19960322 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STIFEL FINANCIAL CORP CENTRAL INDEX KEY: 0000720672 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 431273600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09305 FILM NUMBER: 96537349 BUSINESS ADDRESS: STREET 1: 500 N. BROADWAY STREET 2: 14TH FLOOR CITY: ST LOUIS STATE: MO ZIP: 63102-2188 BUSINESS PHONE: 3143422000 MAIL ADDRESS: STREET 1: 500 N BROADWAY CITY: ST LOUIS STATE: MO ZIP: 63102-2188 10-Q/A 1 FORM 10-Q/A NO. 1; DATED JUNE 30, 1995 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A No. 1 (Mark One) /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 (Former name, former address, and former fiscal year, if changed since last report) 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 reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Shares of common stock outstanding at June 30, 1995: 4,171,498 par value $.15. Exhibit Index is on page 19. 2 STIFEL FINANCIAL CORP. AND SUBSIDIARIES INDEX PAGE PART I. FINANCIAL CONDITION ---- Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition -- June 30, 1995 and December 31, 1994 3-4 Consolidated Statements of Operations -- Three Months Ended June 30, 1995 and June 24, 1994 5 Consolidated Statements of Operations -- Six Months Ended June 30, 1995 and June 24, 1994 6 Consolidated Statements of Cash Flows-- Six Months Ended June 30, 1995 and June 24, 1994 7-8 Notes to Consolidated Financial Statements 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16-17 Signatures 18 3 PART I. FINANCIAL CONDITION Item 1. Financial Statements (Unaudited) The financial statements are amended in entirety as set forth below. STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31, 1995 1994 (Unaudited) (Note) ------------ ------------ ASSETS Cash and cash equivalents $ 8,207,862 $ 6,925,192 Cash segregated for the exclusive benefit of customers 1,320,498 1,316,419 Receivable from brokers and dealers 15,780,370 21,832,542 Receivable from customers, less allowance for doubtful accounts of $804,916 and $1,070,984, respectively 134,983,109 139,898,597 Securities owned, at market value 23,291,031 23,318,907 Membership in exchanges, at cost (approximate market value: $1,707,000 and $1,655,000, respectively) 513,015 513,015 Office equipment, leasehold improvements, and building, at cost, less allowances for depreciation and amortization of $11,874,433 and $13,518,137, respectively 4,313,137 4,778,649 Goodwill, net of accumulated amortization of $704,364 and $573,600, respectively 4,159,715 4,290,479 Notes and non-securities receivable from employees, net of allowance for doubtful receivables of $2,547,208 and $2,560,617, respectively 5,542,187 5,620,239 Current income tax receivable 1,641,870 1,514,734 Deferred tax asset 4,655,513 4,638,900 Miscellaneous other assets 7,224,863 7,560,116 ------------ ------------ $211,633,170 $222,207,789 ============ ============
NOTE: The Consolidated Statement of Financial Condition at December 31, 1994 has been derived from the audited financial statements at that date. See Notes to Consolidated Financial Statements. 4 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
June 30, December 31, 1995 1994 (Unaudited) (Note) ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Short-term borrowings from banks $ 61,805,000 $ 65,650,000 Payable to brokers and dealers 39,176,777 46,395,629 Payable to customers, including free credit balances of $16,670,993 and $15,600,835, respectively 21,495,176 24,368,715 Market value of securities sold, but not yet purchased 7,624,446 4,252,110 Drafts payable 12,562,883 14,576,317 Accrued employee compensation 8,517,468 9,109,502 Obligation under capital lease 902,493 1,029,282 Accounts payable and accrued expenses 9,995,901 11,029,823 Long-term debt 10,760,000 11,520,000 ------------ ------------ Total Liabilities 172,840,144 187,931,378 Subordinated note 4,050,000 50,000 Stockholders' equity Common stock 648,743 648,743 Additional paid-in capital 18,248,803 18,491,086 Retained earnings 16,929,712 17,016,335 ------------ ------------ 35,827,258 36,156,164 Less cost of stock in treasury 866,623 1,731,974 Less unamortized expense of restricted stock awards 217,609 197,779 ------------ ------------ Total Stockholders' Equity 34,743,026 34,226,411 ------------ ------------ $211,633,170 $222,207,789 ============ ============
NOTE: The Consolidated Statement of Financial Condition at December 31, 1994 has been derived from the audited financial statements at that date. See Notes to Consolidated Financial Statements. 5 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, 1995 June 24, 1994 ------------- ------------- REVENUES Commissions $ 7,339,724 $ 6,494,369 Principal transactions 5,258,027 5,813,990 Investment banking 4,379,242 2,275,490 Interest 3,084,843 2,695,122 Sale of investment company shares 2,066,331 2,427,907 Sale of insurance products 559,912 581,908 Sale of unit investment trusts 472,314 369,161 Other 2,587,730 2,087,827 ----------- ----------- 25,748,123 22,745,774 EXPENSES Employee compensation & benefits 15,369,093 14,745,643 Commissions & floor brokerage 620,733 541,225 Communication & office supplies 1,967,431 1,697,206 Occupancy & equipment rental 2,060,807 2,215,681 Promotional 488,147 718,345 Interest 1,995,378 1,489,311 Other operating expenses 2,653,558 2,562,802 ----------- ----------- 25,155,147 23,970,213 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 592,976 (1,224,439) Provision (benefit) for income taxes 244,762 (493,357) ----------- ----------- NET INCOME (LOSS) $ 348,214 $ (731,082) =========== =========== Net income (loss) per share: Primary $ 0.08 $ (0.17) Fully diluted $ 0.08 $ (0.17) Dividends declared per share $ 0.03 $ 0.03 Average common equivalent shares outstanding: Primary 4,244,461 4,301,110 Fully Diluted 5,551,581 5,587,168
See Notes to Consolidated Financial Statements. 6 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended June 30, 1995 June 24, 1994 ------------- ------------- REVENUES Commissions $14,228,389 $13,568,535 Principal transactions 10,614,116 10,330,520 Investment banking 5,126,995 7,190,310 Interest 6,282,533 5,129,673 Sale of investment company shares 4,137,745 5,761,165 Sale of insurance products 1,108,126 1,200,534 Sale of unit investment trusts 899,126 1,384,394 Other 5,245,629 4,007,608 ----------- ----------- 47,642,659 48,572,739 EXPENSES Employee compensation & benefits 28,942,245 31,429,627 Commissions & floor brokerage 1,194,770 1,026,098 Communication & office supplies 4,122,670 3,677,514 Occupancy & equipment rental 4,031,375 4,370,224 Promotional 1,011,684 1,531,344 Interest 4,082,673 2,778,458 Other operating expenses 3,983,140 4,694,530 ----------- ----------- 47,368,557 49,507,795 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 274,102 (935,056) Provision (benefit) for income taxes 109,849 (383,357) ----------- ----------- NET INCOME (LOSS) $ 164,253 $ (551,699) =========== =========== Net income (loss) per share: Primary $ 0.04 $ (0.13) Fully diluted $ 0.04 $ (0.13) Dividends declared per share $ 0.06 $ 0.03 Average common equivalent shares outstanding: Primary 4,235,411 4,322,442 Fully Diluted 5,540,322 5,608,500
See Notes to Consolidated Financial Statements. 7 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, 1995 June 24, 1994 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 164,253 $ (551,699) Non-cash items included in earnings: Depreciation and amortization 1,018,879 1,233,684 Bonus notes amortization 464,444 164,209 Deferred compensation 476,678 207,296 Deferred tax benefit (16,613) - - Provision for litigation and bad debts 400,000 541,928 Unrealized (gains) losses on investments (130,255) 15,000 Amortization of restricted stock awards 61,670 68,661 ----------- ----------- 2,439,056 1,679,079 Decrease (increase) in operating receivables: Customers 4,915,488 17,005,715 Brokers and dealers 6,052,172 (591,282) (Decrease) increase in operating payables: Customers (2,873,539) (11,509,836) Brokers and dealers (7,218,852) 26,973,376 (Increase) decrease in assets: Cash segregated for the exclusive benefit of customers (4,079) (1,992) Securities owned 27,876 58,852,675 Notes receivable from officers and employees (774,949) (992,935) Miscellaneous other assets (168,620) 326,104 Increase (decrease) in liabilities: Securities sold, not yet purchased 3,372,336 (1,944,238) Drafts payable, accounts payable and accrued expenses, and accrued employee compensation (4,516,068) (5,530,865) ----------- ----------- Cash Provided By Operating Activities $ 1,250,821 $84,265,801 ----------- -----------
See Notes to Consolidated Financial Statements. 8 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
Six Months Ended June 30, 1995 June 24, 1994 ------------- ------------- Cash Provided By Operating Activities - - from previous page $ 1,250,821 $84,265,801 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net payments for short-term borrowings from banks (3,845,000) (82,700,000) Proceeds from: Subordinated borrowings 4,000,000 - - Employee stock purchase plan 755,274 611,688 Exercised stock options 123,507 58,444 Dividend reinvestment plan 5,544 - - Payments for: Settlement of long-term debt (760,000) - - Purchases of stock for treasury (342,757) (559,267) Principal payments under capital leases (126,789) (335,157) Cash dividends (250,876) (119,876) ----------- ----------- Cash Used For Financing Activities (441,097) (83,044,168) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of office equipment and leasehold improvements 499,149 1,930 Sale of investments 1,139,091 7,048 Payments for: Acquisition of office equipment and leasehold improvements (1,022,883) (985,457) Acquisition of investments (142,411) (42,660) ----------- ----------- Cash Provided By (Used For) Investing Activities 472,946 (1,019,139) ----------- ----------- Increase in cash and cash equivalents 1,282,670 202,494 Cash and cash equivalents - beginning of period 6,925,192 6,542,052 ----------- ----------- Cash and Cash Equivalents - end of period $ 8,207,862 $ 6,744,546 =========== =========== Supplemental disclosure of cash flow information: Income tax payments $ 341,777 $ 117,360 Interest payments $ 4,115,303 $ 2,836,260
See Notes to Consolidated Financial Statements. 9 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The consolidated financial statements include the accounts of Stifel Financial Corp. and its subsidiaries (collectively referred to as the Company). The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. NOTE B - NET CAPITAL REQUIREMENT As a registered broker-dealer and member of the New York Stock Exchange, the Company's principal wholly-owned subsidiary, Stifel, Nicolaus & Company, Incorporated (SN & Co.), is subject to the Securities and Exchange Commission's (SEC) uniform net capital rules. SN & Co. has elected to operate under the alternative method of the rule, which prohibits a broker-dealer from engaging in any securities transactions when its net capital is less than 2% of its aggregate debit balances, as defined, arising from customer transactions. The SEC may also require a member firm to reduce its business and restrict withdrawal of subordinated capital if its net capital is less than 4% of aggregate debit balances, and may prohibit a member firm from expanding its business and declaring cash dividends if its net capital is less than 5% of aggregate debit balances. At June 30, 1995, SN & Co. had net capital of $19,660,664 which was 12% of its aggregate debit balances and $16,316,765 in excess of the 2% net capital requirement. NOTE C - PLAN OF RESTRUCTURING During the fourth quarter of 1994, the Board of Directors of the 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. Detail of the activity during the first six months related to the accruals follows: 10 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE C - PLAN OF RESTRUCTURING (continued)
Charged Balance at During Balance at December First Six June 31, 1994 Months 30, 1995 ---------- ---------- ---------- Net Lease commitments for closed offices $1,400,000 $ 278,745 $1,121,255 Severance pay, extended benefits and receivables written off for terminated employees 875,000 307,123 567,877 Abandonment of leasehold improvements 206,000 188,285 17,715 Contractual commitments 191,000 161,000 30,000 ---------- ---------- ---------- Total $2,672,000 $ 935,153 $1,736,847 ========== ========== ==========
Such amounts are included in the consolidated statement of financial condition under the caption of Accounts payable and accrued expenses at June 30, 1995 and December 31, 1994. NOTE D - SALE OF OKLAHOMA-BASED OPERATIONS On May 25, 1995, the Company sold the assets of its Oklahoma City-based operations to Capital West Financial Corporation. Included 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. The Company received cash, secured and subordinated notes, and warrants to purchase a minority interest in Capital West Financial Corporation. In addition, Capital West Financial Corporation assumed or subleased certain office and equipment lease obligations of the Company. The sale resulted in the reduction of approximately 70 investment executives and approximately 50 support staff located in 26 branch offices. Pro forma financial information assuming the transaction had taken place at the beginning of the year is presented below: Pro Forma Combined Results of Operations Revenue $ 44,190,439 Net Income $ 606,600 Earnings per primary share $ 0.14 The above pro forma financial information do not purport to be indicative of results which actually would have occurred had the sale been made on January 1, 1995. 11 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE E - MISCELLANEOUS OTHER ASSETS SN & Co. received secured and senior notes with a face amount of $1,850,000 bearing interest at a 10% annual rate with the final payments due May 24, 2000 in connection with the sale of its Oklahoma based assets (see Note D). The notes were recorded at a discounted rate of 17%. SN & Co. has deferred recognition of the gain on the sale in the amount of $570,120 and has deferred recognition of any interest income related to the notes until such time that Capital West Financial Corporation has demonstrated the ability to generate earnings and cash flow to fund interest and principal payments when scheduled. The notes receivable net of the discount of $335,617 and deferred gain of $570,120 are included in the caption Miscellaneous Other Assets at June 30, 1995. NOTE F - DIVIDEND On July 19, 1995, the board of directors declared a regular quarterly dividend of $0.03 per share, payable on August 22, 1995 to stockholders of record August 8, 1995. NOTE G - SUBSEQUENT EVENT On August 3, 1995, SN & Co. announced a settlement with the SEC. The settlement concluded a two year investigation of the Company's Oklahoma City based municipal finance activities. Among other things, the SEC alleged that SN & Co., through its Oklahoma Public Finance office, committed fraud in connection with the sale of municipal securities by failing to disclose that it received payments from third parties that sold or brokered investments to municipal issuers represented by the Oklahoma Public Finance office. The allegations by the SEC were settled by SN & Co. without admitting or denying the allegations of the complaint. The settlement permanently enjoins SN & Co. from future antifraud and bookkeeping violations of the securities laws and required SN & Co. to pay a total of $1,436,000, including $1,186,000 in reimbursement to certain issuers and a fine of $250,000. These payments were made on August 11, 1995. All amounts that SN & Co. was required to pay have been fully accrued, and it is expected that this settlement will have no material adverse impact on SN & Co.'s or the Company's financial position. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three months ended June 1995 and June 1994 The Company recorded net income of $348,000 for the three months ended June 30, 1995, compared to a net loss of $731,000 in the year earlier three month period. Primary earnings per share was $0.08 for the three months compared to a $0.17 loss per share in the year earlier three month period. The improvement is primarily attributable to the recent growth in Commissionable revenues and investment banking revenues. Total revenues for the three months increased $3,002,000 (13.2%) to $25,748,000 from $22,746,000 in the year earlier three month period. Investment banking revenues and commissionable revenues rose $2,104,000 (92.4%) and $565,000 (5.7%), respectively. Investment banking revenues increased due to an increase in public offerings and the completion of a significant merger and acquisition transaction. The three months ended June 30, 1995 saw an upturn in retail investor activity from the level experienced in the same period one year earlier. Commissionable revenues (commissions, sale of investment company shares, sale of insurance, and sale of unit investment trusts) increased $565,000 (5.7%) to $10,438,000 from $9,873,000 principally due to the increase in agency commissions. The increase resulted from the retail investors' increased participation in the market as a result of moderation of interest rates in the second quarter contrasted with the uncertainty and hesitation created in the previous year's second quarter as interest rates rose. Total commissionable revenues increased despite the decrease in the number of Investment Executives to 277 at June 30, 1995 from 379 at June 24, 1994. The reduction in Investment Executives was mostly the result of the May 25, 1995 sale of retail securities offices to Capital West Financial Corporation. On May 25, 1995, the Company sold the assets and business associated with retail offices in Oklahoma, several retail offices in Texas, and the Oklahoma-based public finance, institutional trading, and sales departments of its Oklahoma City- based operations to Capital West Financial Corporation (see Note D of the Notes to unaudited Consolidated Financial Statements). SN & Co. will serve as the fully disclosed clearing firm for Capital West Financial Corporation's broker/dealer. 13 Gross interest revenues increased $390,000 (14.5%) due mostly to higher margin rates charged to customers in line with the general rise in interest rates from a year ago; however, net interest retention decreased $116,000 (9.6%) to $1,090,000 from $1,206,000 as a result of an increase in average borrowing rates as compared to the previous year's second quarter coupled with an increase in funding of non-interest bearing assets. Total expenses increased $1,185,000 (4.9%) to $25,155,000 from $23,970,000, primarily due to increased employee compensation and benefits and increased interest expenses. Employee compensation and benefits increased a net of $623,000 (4.2%) which is comprised of an increase of $1,233,000 (14.2%) in variable compensation related to the revenue increase and a decrease in salaries of $610,000 (10.0%) resulting from the restructuring, downsizing and sale of the Oklahoma based operations (see Notes C and D to the unaudited Consolidated Financial Statements). In addition certain other expense categories reflected decreases from the previous year's level resulting from the plan of restructuring and sale of the Oklahoma operations. Among the more significant of these categories were occupancy & equipment and promotional expense which decreased $155,000 (7.0%) and $230,000 (32.0%), respectively. Communication & office supplies and commissions & floor brokerage increased $270,000 (15.9%) and $80,000 (14.8%), respectively. The communication increase is primarily due to the implementation of new communication and quote technology. The variable expense of commissions & floor brokerage increased because of the increased commissionable activity. Other expense increased $91,000 (3.5%) primarily as a result of increases in professional fees (mostly legal). Six months ended June 1995 and June 1994 The Company recorded net income of $164,000, for the six- months ended June 30, 1995, compared to a net loss of $552,000 in the first six months of last year, an improvement of $716,000. Primary earnings per share was $0.04, an increase of $0.17 per share compared to the previous year's $0.13 loss per primary share. The improved profitability is primarily attributable to decreased operating expenses, particularly employee compensation and benefits and promotional expenses. Total revenues decreased $930,000 (1.9%) to $47,643,000 from $48,573,000. Investment banking revenues decreased $2,063,000 (28.7%) and commissionable revenues (commissions, sale of investment company shares, sale of insurance, and sale of unit investment trusts) decreased $1,541,000 (7.0%). These decreases were partially offset by increased interest revenues of $1,153,000 (22.5%) and other revenues which increased $1,238,000 (30.9%). 14 Although total investment banking revenues decreased from last year's first half, the corporate finance portion increased substantially. However, the corporate finance increase was more than offset by decreased public finance activity which was negatively affected by the publicity associated with the SEC investigation (see Note G of the Notes to unaudited Consolidated Financial Statements) as well as by the industry wide decrease in public finance activity. Agency commission revenues for the six- month period increased $659,000 (4.9%), principally because of retail investors' increased participation in the market. Sale of investment company shares, sale of insurance products and sale of unit investment trusts decreased $1,623,000 (28.2%), $92,000 (7.7%) and $485,000 (35.0%), respectively. As noted in the three month comments, retail inventory activity began increasing in the second quarter. Principal transactions increased $284,000 (2.7%) because of increased trading profits over that of the first six months of 1994 which were negatively impacted by increased interest rates causing substantial losses in fixed income inventories last year. Other revenues increased $1,238,000 (30.9%) as a result of an increase in realized gains on venture capital investments, managed account fees, and brokerage and clearing revenues. Interest revenues increased $1,153,000 (22.5%) resulting from the same circumstances noted in discussion of the three months ended June 1995 results of operations. Total expenses decreased $2,139,000 (4.3%) to $47,369,000 from $49,508,000 primarily due to decreased variable compensation, other variable expenses which relate to the decreased six month revenue and certain fixed expenses resulting from the cost containment efforts and the sale of the Oklahoma operations. Total employee compensation and benefits decreased $2,487,000 (7.9%). This is the result of a decrease of $1,230,000 (6.5%) in variable compensation correlating to the decreased revenue production and decreased fixed salaries and benefits of $1,257,000 (9.9%) resulting from the plan of restructuring and downsizing. In addition, certain expense categories reflected decreases from the previous year's level which reflect the expected reduction resulting from the plan of restructuring. These categories include, in addition to those previously mentioned, occupancy & equipment and promotional expense which decreased $339,000 (7.8%) and $520,000 (33.9%), respectively. Communication & office supplies increased $445,000 (12.1%) primarily due to the implementation of new communication and quote technology. Other expenses decreased $711,000 (15.1%) as a result of decreased settlements of litigation, provisions for bad debts, charitable contributions and customer statement processing which decreased $48,000, $238,000, $293,000 and $119,000, respectively. 15 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 senior convertible notes, subordinated note, and other payables. Changes in securities market volumes, related customer borrowing demands, and levels of securities inventory affect the amount of the Company's financing requirements. Because of the nature of the Company's business, the changes in operating asset and liability account balances relative to net income for any particular accounting period can be quite large and therefore are not very useful indicators of long-term trends in the Company's cash flow from operations. For the six months ended June 30, 1995, cash and cash equivalents increased $1,283,000 (18.5%) to $8,208,000 from $6,925,000 at December 31, 1994. The cash provided by operating activities were principally attributed to net income adjusted for non-cash charges of $2,439,000 and an increase in the market value of securities sold, not yet purchased of $3,372,000. The cash provided was partially used to decrease drafts payable, accounts payable and accrued expenses, and accrued employee compensation of $4,516,000. Proceeds from the drawdown of a revolving subordinated note was primarily used to reduce short- term borrowings from banks. SN & Co. is subject to requirements of the Securities and Exchange Commission with regard to liquidity and capital requirements (see Note B of the Notes to unaudited Consolidated Financial Statements). At June 30, 1995, SN & Co. had net capital of approximately $19,661,000 which exceeded the minimum net capital requirements by approximately $16,317,000. During 1994, SN & Co. obtained a revolving subordinated note in the amount of $5,500,000. At June 30, 1995, SN & Co. had available but unused informal and formal short-term credit arrangements of $144,195,000 and available but unused subordinated note of $1,450,000. Management believes that funds from operations, available unused informal and formal short-term credit arrangements and the available but unused subordinated note will provide sufficient resources to meet the present and anticipated financial needs. The 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 C and D of the Notes to unaudited Consolidated Financial Statements). As discussed in Note G of the Notes to unaudited Consolidated Financial Statements, the recent settlement with the Securities and Exchange Commission will not have a significant impact on the liquidity and capital resources of the firm. 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings There were no material changes, during the six months ended June 30, 1995, in the legal proceedings previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Such information is hereby incorporated by reference. On August 3, 1995, SN & Co. announced a settlement with the SEC. The settlement concluded a two year investigation of the Company's Oklahoma City based municipal finance activities. Among other things, the SEC alleged that SN & Co., through its Oklahoma Public Finance office, committed fraud in connection with the sale of municipal securities by failing to disclose that it received payments from third parties that sold or brokered investments to municipal issuers represented by the Oklahoma Public Finance office. The allegations by the SEC were settled by SN & Co. without admitting or denying the allegations of the complaint. The settlement permanently enjoins SN & Co. from future antifraud and bookkeeping violations of the securities laws and required SN & Co. to pay a total of $1,436,000, including $1,186,000 in reimbursement to certain issuers and a fine of $250,000. These payments were made on August 11, 1995. All amounts that SN & Co. was required to pay have been fully accrued, and it is expected that this settlement will have no material adverse impact on SN & Co.'s or the Company's financial position. Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual meeting of Stockholders was held on April 25, 1995, for the election of six directors and for the ratification of Coopers & Lybrand as the Company's independent accountants for the year ending December 31, 1995. (b) Proxies for the meeting were solicited pursuant to Regulation 14 under the Act. There was no solicitation in opposition to the Board of Directors' proposals as listed in the Proxy Statement and all of the proposals were passed. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. Sequential (Reference to Item 601(b) Page of Regulation S-K) Description Number ------------------------- ----------- ---------- 11 Computation of 20-21 Earnings Per Share 27 Financial Data Schedule 22 (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only) 17 Item 6. Exhibits and Reports on Form 8-K (continued) (b) Reports on Form 8-K The Company filed a report on Form 8-K (and amendment) dated May 25, 1995. This Form 8-K contained information under Item 2. Acquisition or Disposition of Assets, Item 5. Other Events and Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Item 2 described the sale of the Oklahoma division (including three Texas offices). Item 5 reported that the Oklahoma Turnpike Authority filed an action against SN & Co. and two former officers. Item 7 provided the pro forma financial information and exhibits. The exhibits filed were an Amended and Restated Purchase Agreement by and among SN & Co. and Capital West Financial Corporation and a press release dated May 25, 1995 announcing the sale of assets of the Oklahoma division and three Texas offices of SN & Co. (a wholly-owned subsidiary of Stifel Financial Corp.) to Capital West Financial Corporation, an Oklahoma corporation. 18 SIGNATURES Pursuant to the requirements 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. STIFEL FINANCIAL CORP. (Registrant) Date: March 15, 1996 By /s/ Gregory F. Taylor Gregory F. Taylor (Chief Executive Officer) Date: March 15, 1996 By /s/ Stephen J. Bushmann Stephen J. Bushmann (Principal Financial Officer) 19 EXHIBIT INDEX Exhibit Sequential Number Description Page Number ------- ----------- ----------- 11 Computation of Earnings (Loss) Per Share 20-21 27 Financial Data Schedule 22 (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only) EX-11 2 EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 STIFEL FINANCIAL CORP. AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE (In Thousands, Except Per Share Amounts) (UNAUDITED)
Three Months Ended June 30, 1995 June 24, 1994 Fully Fully Primary Diluted Primary Diluted Net income (loss) $ 348 $ 348 $ (731) $ (731) After-tax interest savings assuming conversion of Senior Convertible Notes _ _ 170 _ _ 168 -------- -------- -------- -------- Net income (loss) adjusted for after-tax interest savings $ 348 $ 518 $ (731) $ (563) ======== ======== ======== ======== Average number of common shares outstanding during the period 4,195 4,195 4,198 4,198 Additional shares assuming exercise of stock options 49 71 103 103 Additional Shares assuming conversion of Senior Convertible Notes _ _ 1,286 _ _ 1,286 -------- -------- -------- -------- Average number of common shares used to calculate earnings per share 4,244 5,552 4,301 5,587 ======== ======== ======== ======== Net earnings (loss) per share $ 0.08 $ 0.08 $ (0.17) $ (0.17) ======= ======= ======== ======== Six Months Ended Fully Fully Primary Diluted Primary Diluted Net income (loss) $ 164 $ 164 $ (552) $ (552) After-tax interest savings assuming conversion of Senior Convertible Notes _ _ 337 _ _ 332 -------- -------- -------- -------- Net income (loss) adjusted for after-tax interest savings $ 164 $ 501 $ (552) $ (220) ======== ======== ======== ======== Average number of common shares outstanding during the period 4,184 4,184 4,196 4,196 Additional shares assuming exercise of stock options 51 70 126 127 Additional Shares assuming conversion of Senior Convertible Notes _ _ 1,286 _ _ 1,286 -------- -------- -------- -------- Average number of common shares used to calculate earnings per share 4,235 5,540 4,322 5,609 ======== ======== ======== ======== Net earnings (loss) per share $ 0.04 $ 0.04 $ (0.13) $ (0.13) ======= ======= ======== ======== 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 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 and assumed purchases of stock from the Employee Stock Purchase Plan (ESPP). 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 or shares assumed purchased through the ESPP. 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 or shares assumed purchased through the ESPP. 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 $7.7757 per share. Net fully diluted earnings per share computes to $0.09 and $0.09 for three months and six months ended June 30, 1995, respectively. Net fully diluted loss per share computes to $0.10 and $0.04 for three months and six months ended June 24, 1994, respectively. Since these are anti-dilutive, fully diluted earnings per share is equivalent to primary earnings per share.
EX-27 3 EXHIBIT 27 - FINANCIAL DATA SCHEDULE - ARTICLE BD
BD THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATED JUNE 30, 1995 AND THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 9,528,360 153,630,894 0 3,808,900 23,291,031 4,313,137 211,633,170 61,805,000 54,625,728 0 38,024,970 7,624,446 10,760,000 648,743 0 0 34,094,283 211,633,170 10,614,116 6,282,533 20,373,386 5,126,995 1,222,062 4,082,673 28,942,245 274,102 274,102 0 0 164,253 0.04 0.04
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