-----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, Gfg0/Fe1C7dCYfZkqV8CsXE/5lDjxwR6CqAXUfDZZpiHS/WsGecGX0GhVTtQ5/LR mox18hs8lj6wivL6zPKBeg== 0000720672-96-000010.txt : 19960325 0000720672-96-000010.hdr.sgml : 19960325 ACCESSION NUMBER: 0000720672-96-000010 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950929 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: 96537350 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 SEPTEMBER 29, 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 September 29, 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 September 29, 1995: 4,167,797 par value $.15. Exhibit Index is on page 19 2 STIFEL FINANCIAL CORP. AND SUBSIDIARIES INDEX September 29, 1995 PAGE PART I. FINANCIAL CONDITION ---- Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition -- September 29, 1995 and December 31, 1994 3-4 Consolidated Statements of Operations -- Three Months Ended September 29, 1995 and September 30, 1994 5 Consolidated Statements of Operations -- Nine Months Ended September 29, 1995 and September 30, 1994 6 Consolidated Statements of Cash Flows-- Nine Months Ended September 29, 1995 and September 30, 1994 7-8 Notes to Consolidated Financial Statements 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 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
September 29, December 31, 1995 1994 (Unaudited) (Note) ------------- ------------ ASSETS Cash and cash equivalents $ 8,477,462 $ 6,925,192 Cash segregated for the exclusive benefit of customers 1,323,477 1,316,419 Receivable from brokers and dealers 11,769,558 21,832,542 Receivable from customers, less allowance for doubtful accounts of $804,916 and $1,070,984, respectively 146,383,776 139,898,597 Securities owned, at market value 24,582,762 23,318,907 Membership in exchanges, at cost (approximate market value: $1,840,000 and $1,655,000, respectively) 513,015 513,015 Office equipment, leasehold improvements, and building, at cost, less allowances for depreciation and amortization of $12,106,348 and $13,518,137, respectively 3,530,467 4,778,649 Goodwill, net of accumulated amortization of $762,930 and $573,600, respectively 4,048,930 4,290,479 Notes and non-securities receivable from employees, net of allowance for doubtful receivables of $2,298,807 and $2,560,617, respectively 5,245,967 5,620,239 Current income tax receivable 687,078 1,514,734 Deferred tax asset 3,633,580 4,638,900 Miscellaneous other assets 7,347,761 7,560,116 ------------ ------------ $217,543,833 $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 Unaudited Consolidated Financial Statements. 4 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
September 29, December 31, 1995 1994 (Unaudited) (Note) ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Short-term borrowings from banks $ 79,550,000 $ 65,650,000 Payable to brokers and dealers 38,574,379 46,395,629 Payable to customers, including free credit balances of $16,930,086 and $15,600,835, respectively 22,975,142 24,368,715 Market value of securities sold, but not yet purchased 3,633,182 4,252,110 Drafts payable 11,292,461 14,576,317 Accrued employee compensation 8,592,987 9,109,502 Obligation under capital lease 835,475 1,029,282 Accounts payable and accrued expenses 6,647,652 11,029,823 Long-term debt 10,760,000 11,520,000 ------------ ------------ Total Liabilities 182,861,278 187,931,378 Subordinated note 50,000 50,000 Stockholders' equity Common stock 648,743 648,743 Additional paid-in capital 18,251,484 18,491,086 Retained earnings 16,966,394 17,016,335 ------------ ------------ 35,866,621 36,156,164 Less cost of stock in treasury 1,049,393 1,731,974 Less unamortized expense of restricted stock awards 184,673 197,779 ------------ ------------ Total Stockholders' Equity 34,632,555 34,226,411 ------------ ------------ $217,543,833 $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 Unaudited Consolidated Financial Statements. 5 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 29, September 30, 1995 1994 ------------- ------------- REVENUES Commissions $ 7,112,756 $ 6,096,264 Principal transactions 4,244,225 6,748,741 Investment banking 2,643,439 2,782,011 Interest 3,161,972 2,810,076 Sale of investment company shares 2,125,729 2,230,935 Sale of insurance products 446,909 560,755 Sale of unit investment trusts 509,303 450,264 Other 2,810,797 1,893,953 ----------- ----------- 23,055,130 23,572,999 EXPENSES Employee compensation & benefits 13,755,464 14,657,910 Commissions & floor brokerage 556,680 524,253 Communication & office supplies 1,636,007 2,106,994 Occupancy & equipment rental 1,905,107 2,293,566 Promotional 400,412 677,559 Interest 1,926,141 1,533,933 Other operating expenses 2,393,248 2,459,381 ----------- ----------- 22,573,059 24,253,596 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 482,071 (680,597) Provision (benefit) for income taxes 320,242 (260,281) ----------- ----------- NET INCOME (LOSS) $ 161,829 $ (420,316) =========== =========== Net income (loss) per share: Primary $ 0.04 $ (0.10) Fully diluted $ 0.04 $ (0.10) Dividends declared per share $ 0.03 $ 0.03 Average common equivalent shares outstanding: Primary 4,251,530 4,204,768 Fully Diluted 5,537,588 5,490,826
See Notes to Unaudited Consolidated Financial Statements. 6 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 29, September 30, 1995 1994 ------------- ------------- REVENUES Commissions $21,341,145 $19,664,799 Principal transactions 14,858,341 17,079,261 Investment banking 7,770,434 9,972,321 Interest 9,444,505 7,939,749 Sale of investment company shares 6,263,474 7,992,100 Sale of insurance products 1,555,035 1,761,289 Sale of unit investment trusts 1,408,429 1,834,658 Other 8,056,426 5,901,561 ----------- ----------- 70,697,789 72,145,738 EXPENSES Employee compensation & benefits 42,697,709 46,087,537 Commissions & floor brokerage 1,751,450 1,550,351 Communication & office supplies 5,758,677 5,784,508 Occupancy & equipment rental 5,936,482 6,663,790 Promotional 1,412,096 2,208,903 Interest 6,008,814 4,312,391 Other operating expenses 6,376,388 7,153,911 ----------- ----------- 69,941,616 73,761,391 ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES 756,173 (1,615,653) Provision (benefit) for income taxes 430,091 (643,638) ----------- ----------- NET INCOME (LOSS) $ 326,082 $ (972,015) =========== =========== Net income (loss) per share: Primary $ 0.08 $ (0.23) Fully diluted $ 0.08 $ (0.23) Dividends declared per share $ 0.09 $ 0.06 Average common equivalent shares outstanding: Primary 4,244,719 4,302,365 Fully Diluted 5,530,777 5,588,423
See Notes to Unaudited Consolidated Financial Statements. 7 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 29, September 30, 1995 1994 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 326,082 $ (972,015) Non-cash items included in earnings: Depreciation and amortization 1,508,262 1,872,214 Bonus notes amortization 653,852 567,158 Deferred compensation 396,154 353,656 Deferred tax benefit 1,005,320 - - Provision for litigation and bad debts 1,039,742 839,597 Unrealized gains on investments (130,255) (403,317) Amortization of restricted stock awards 80,356 89,853 ------------ ------------ 4,879,513 2,347,146 (Increase) decrease in operating receivables: Customers (6,485,179) 17,601,168 Brokers and dealers 10,062,984 (18,363,370) (Decrease) increase in operating payables: Customers (1,393,573) (8,988,483) Brokers and dealers (7,821,250) 19,922,170 (Increase) decrease in assets: Cash segregated for the exclusive benefit of customers (7,058) 96,847 Securities owned (1,263,855) 67,471,113 Notes receivable from officers and employees (947,949) (2,635,462) Miscellaneous other assets (8,844) 834,543 (Decrease) increase in liabilities: Securities sold, not yet purchased (618,928) 3,456,828 Drafts payable, accounts payable and accrued expenses, and accrued employee compensation (9,110,696) (7,827,181) ------------ ------------ Cash (Used For) Provided By Operating Activities $(12,714,835) $ 73,915,319 ------------ ------------
See Notes to Unaudited Consolidated Financial Statements. 8 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
Nine Months Ended September 29, September 30, 1995 1994 ------------- ------------- Cash (Used For) Provided By Operating Activities - from previous page $(12,714,835) $ 73,915,319 CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) for short-term borrowings from banks 13,900,000 (72,350,000) Proceeds from: Employee stock purchase plan 755,274 611,688 Exercised stock options 123,503 58,424 Dividend reinvestment plan 8,786 423 Payments for: Retirement of long-term debt (760,000) - - Purchases of stock for treasury (511,834) (1,252,807) Principal payments under capital leases (193,807) (508,003) Cash dividends (376,023) (239,104) ------------ ------------ Cash Provided By (Used For) Financing Activities 12,945,899 (73,679,379) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of office equipment, leasehold improvements and building 915,090 5,411 Sale of investments 1,578,086 7,048 Payments for: Acquisition of office equipment and leasehold improvements (1,081,689) (1,355,459) Acquisition of investments (90,281) (84,888) ------------ ------------ Cash Provided By (Used For) Investing Activities 1,321,206 (1,427,888) ------------ ------------ Increase (decrease) in cash and cash equivalents 1,552,270 (1,191,948) Cash and cash equivalents - beginning of period 6,925,192 6,542,052 ------------ ------------ Cash and Cash Equivalents - end of period $ 8,477,462 $ 5,350,104 ============ ============ Supplemental disclosure of cash flow information: Income tax payments $ 343,900 $ 118,396 Interest payments $ 6,283,217 $ 4,566,281
See Notes to Unaudited 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 and nine months ended September 29, 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), is subject to the Securities and Exchange Commission's (SEC) uniform net capital rules. SN 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 September 29, 1995, SN had net capital of $18,421,594 which was 11% of its aggregate debit balances and $15,176,109 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 nine months related to the accruals follows: 10 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE C - PLAN OF RESTRUCTURING (continued)
Balance at Charged Balance at December During September 31, 1994 First Nine 29, 1995 Months Net Lease commitments for closed offices $1,400,000 $ 491,792 $ 908,208 Severance pay, extended benefits and receivables written off for terminated employees 875,000 478,517 396,483 Abandonment of leasehold improvements 206,000 197,271 8,729 Contractual commitments 191,000 161,000 30,000 ---------- ---------- ---------- Total $2,672,000 $1,328,580 $1,343,420 ========== ========== ==========
Such amounts are included in the consolidated statement of financial condition under the caption of Accounts payable and accrued expenses at September 29, 1995 and December 31, 1994. NOTE D - SALE OF OKLAHOMA-BASED OPERATIONS On May 25, 1995, the Company sold the assets of its Oklahoma- 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 senior 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 $67,245,569 Net Income $ 810,940 Earnings per primary share $ 0.19 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 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 has deferred recognition of the gain on the sale in the amount of $539,872 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 $539,872 are included in the caption Miscellaneous other assets at September 29, 1995. NOTE F - DIVIDEND On October 24, 1995, the board of directors declared a regular quarterly dividend of $0.03 per share, payable on November 21, 1995 to stockholders of record November 7, 1995. NOTE G - LEGAL PROCEEDINGS SN was named in suits filed by The Oklahoma Turnpike Authority (OTA) and The State of Oklahoma (Report filed on Form 8-K dated May 25, 1995 and Report filed on Form 8-K dated October 5, 1995, respectively). The OTA suit seeks $6.5 million compensatory damages and an unspecified amount of punitive damages. The State of Oklahoma seeks $7.6 million compensatory damages and treble punitive damages. The OTA suit alleges that an undisclosed fee paid to SN by a third party for the placement of a forward purchase contract in an advance refunding escrow for the proceeds of the 1992 OTA $660 million refinancing should have been paid to the OTA. The Oklahoma suit alleges that SN and two former SN executives committed violations of the Racketeer Influenced and Corrupt Organizations ("RICO"). This suit alleges the same facts as the Securities and Exchange Commission in its action against SN in August, 1995, which was settled by SN without admitting or denying the allegations. This settlement was reported in the Company's Form 10-Q filed August 14, 1995. While results of litigation cannot be predicted with certainty, at this time management believes that the effects of resolution of these suits will not have a material effect on 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 September 1995 and September 1994 The Company recorded net income of $162,000 for the three months ended September 29, 1995, compared to a net loss of $420,000 in the year earlier three month period. Primary earnings per share were $0.04 for the three months compared to a $0.10 loss per share in the year earlier three month period. The improvement was attributable to reduced operating expenses resulting form the sale of the Oklahoma division to Capital West Financial Corp., the downsizing and restructuring plan implemented in the last quarter of 1994, and the resurgence of the market which contributed to the increase in commissionable revenue. Total revenues for the three months decreased $518,000 (2.2%) to $23,055,000 from $23,573,000 primarily as a result of decreased principal transactions, municipal finance fees and underwriting fee income, some of which were the result of the sale of the Oklahoma-based operations to Capital West Financial Corp. Principal transactions decreased $2,505,000 (37.1%) to $4,244,000 from $6,749,000 as a result of decreased trading activity. Investment banking revenues decreased $139,000 (5.0%) to $2,643,000 from $2,782,000 due to the reduced number of refinancings by municipalities experienced industry wide and as a result of the negative publicity associated with the SEC investigation into certain municipal finance transactions by the former Oklahoma City public finance department. The decrease in municipal finance fee income was offset by the increase in corporate finance fee income which increased $891,000 (1291.3%) to $960,000 from $69,000 largely as a result of increased numbers of public offerings, particularly for financial institutions and Real Estate Investment Trust's (REIT's). Commissionable revenues (commissions, sale of investment company shares, sale of insurance products, and sale of unit investment trusts), increased $857,000 (9.2%) to $10,195,000 from $9,338,000 primarily as a result of increased agency commissions. The increase resulted from retail investors' more active participation in the market. 13 Other revenues increased $917,000 (48.4%) to $2,811,000 from $1,894,000 as a result of increases in managed account fees, money market distribution fees, and clearing revenues which increased $307,000, $284,000 and $209,000, respectively. Managed account fees increased because of the introduction of the managed account program in November, 1994. Money market distribution fees increased because of higher levels of customer funds invested in money market funds and SN's switch to omnibus processing of these funds. Clearing revenues increased as a direct result of the clearing for Capital West Securities, Inc. which began in June, 1995. Net interest decreased $40,000 (3.1%) largely as a result of an increase in interest expense which increased $392,000 (25.6%) to $1,926,000 from $1,534,000 due to increased borrowings from banks coupled with increased interest rates. The increase in interest expense was partially offset by an increase in interest revenues which increased $352,000 (12.5%) to $3,162,000 from $2,810,000, largely as a result of increased margin interest earned on higher average margin debit balances. Total expenses decreased $1,680,000 (6.9%) to $22,573,000 from $24,253,000, primarily due to reductions achieved as a result of the implementation of the plan of restructuring and downsizing which began in the fourth quarter of 1994 and the sale of the Oklahoma division to Capital West Financial Corp. Total employee compensation and benefits decreased $903,000 (6.2%) to $13,755,000 from $14,658,000. The variable portion of compensation increased $287,000 (3.4%) to $8,853,000 from $8,566,000, largely as a result of increased bonus expense which correlates to increased profitability and pay for performance incentives. Fixed compensation decreased $1,189,000 (19.5%) to $4,902,000 from $6,091,000, largely due to the sale of the Oklahoma division to Capital West Financial Corp. and the downsizing and restructuring plan aforementioned. The downsizing and restructuring plan and the sale of the Oklahoma division to Capital West Financial Corp., reduced the number of retail office locations by 38 (47.5%) to 42 from 80. The reduction in office locations contributed to the reduction in occupancy and equipment, communication and office supplies and promotional expenses which decreased $389,000 (17.0%), $471,000 (22.4%) and $276,000 (40.8%), respectively. Other expense decreased $66,000 (2.7%) to $2,393,000 from $2,459,000, as a result of decreased professional fees, primarily employment fees and consulting fees and decreased provision for accounts of doubtful collection, all of which were affected by the downsizing. These decreases were offset by an increase in legal fees resulting from matters surrounding the SEC investigation and related matters (see Note G of the Notes to Unaudited Consolidated Financial Statements). 14 Nine months ended September 1995 and September 1994 The Company recorded net income of $326,000 for the nine-month period ended September 29, 1995, compared to a net loss of $972,000 in the first nine months of last year, an improvement of $1,298,000. Primary earnings per share were $0.08, an increase of $0.31 per share compared to the previous year's $0.23 loss per primary share. The improved results are primarily attributable to decreased operating expenses, most significant of which was employee compensation and benefits. Total revenues decreased $1,448,000 (2.0%) to $70,698,000 from $72,146,000. Investment banking revenue decreased $2,201,000 (22.1%), principal transactions decreased $2,221,000 (13.0%), and commissionable revenues (commissions, sale of investment company shares, sale of insurance, and sale of unit investment trusts) decreased $685,000 (2.2%). These decreases, which were in large part due to the sale of the Oklahoma-based operations in May of 1995, were partially offset by an increase in other revenues of $2,154,000 (36.5%) to $8,056,000 from $5,902,000, which consists of managed account fees, money market distribution fees, and brokerage and clearing revenues which increased $631,000, $674,000, and $321,000 for the same reasons as explained in the management's discussion and analysis of results of operations for the three months ended September 29, 1995. In addition, a gain on sale of investments of $403,000 was recorded by Stifel Venture Corp. (the Company's wholly-owned venture capital subsidiary) during the period. As discussed in the three months ended September 29, 1995 management's discussion and analysis, corporate finance fees increased significantly, $2,736,000 (308.1%) to $3,624,000 from $888,000, partially offsetting the decreases in other investment banking activities of municipal finance fees and underwriting participation fees which decreased $2,204,000 (64.0%) and $1,347,000 (64.2%), respectively. Reductions in sale of investment company shares of $1,728,000 (21.6%), sale of insurance products of $206,000 (11.7%) and sale of unit investment trusts of $427,000 (23.3%) were offset by an increase in agency commissions of $1,676,000 (8.5%) as retail investors returned to the market to purchase individual equity issues. Municipal interest income decreased $700,000 (61.1%) offsetting increases in margin balance interest income of $1,981,000 (31.5%) and corporate interest income of $224,000 (44.8%). Despite these increases, net interest income decreased $192,000 (5.3%) to $3,436,000 from $3,628,000 which resulted from increased interest expense of $1,697,000 (39.4%) due to increased borrowing rates coupled with increased borrowings. 15 For the nine month period ended September 29, 1995 total expenses decreased $3,820,000 (5.2%) to $69,942,000 from $73,762,000. Except for professional fees and commissions and floor brokerage, all major categories of expenses decreased as a result of the downsizing and sale of the Oklahoma operations to Capital West Financial Corp. as noted in the management's discussion and analysis of results of operations for the three months ended September 29, 1995. Employee compensation and benefits, communication and supplies, occupancy and equipment rental, promotional, and other operating expenses decreased $3,390,000 (7.4%), $26,000 (0.4%), $728,000 (10.9%), $797,000 (36.1%), and $778,000 (10.9%), respectively. Professional fees increased $416,000 (13.8%), primarily as a result of the litigation resulting from the SEC investigation previously discussed. Commission and floor brokerage increased $201,000 (13.0%) correlating to the increased agency commission revenue. 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 nine months ended September 29, 1995, cash and cash equivalents increased $1,552,000 to $8,477,000 from $6,925,000 at December 31, 1994. Cash used for operating activities of $12,715,000 was attributed to a decrease in operating payables and liabilities of $18,326,000 offset by a decrease in operating receivables of $3,578,000 and cash provided by net income and non- cash items included in net income of $4,880,000, and increases in other assets of $2,228,000 primarily from Securities owned and Notes receivable from officers and employees. The cash used by operating activities was funded primarily by increasing short- term borrowings from banks by $13,900,000. SN 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 September 29, 1995, SN had net capital of approximately $18,422,000 which exceeded the minimum net capital requirements by approximately $15,176,000. 16 During 1994, SN obtained a revolving subordinated note in the amount of $5,500,000. At September 29, 1995, SN had available but unused informal and formal short-term credit arrangements of $126,450,000 and available but unused subordinated note of $5,450,000. 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-based operations along with the plan of restructuring will 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 settlement of the suits will not have a significant impact on the liquidity and capital resources of the firm. 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings The information required by this Item is contained in Note G of the Notes to Unaudited Consolidated Financial Statements included in this report and 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. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. (Reference to Item 601(b) of Regulation S-K) Description ------------------------- ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only) (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 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 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 (a wholly- owned subsidiary of Stifel Financial Corp.) to Capital West Financial Corporation, an Oklahoma corporation. The Company filed a report on Form 8-K dated October 5, 1995. This Form 8-K contained information under Item 5. Item 5 reported that the Attorney General of Oklahoma filed an action against SN, the registrant's subsidiary, and Robert Cochran, a former officer of the subsidiary. 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 STIFEL FINANCIAL CORP. AND SUBSIDIARIES EXHIBIT INDEX September 29, 1995 Exhibit Number Description ------- ----------- 11 Computation of Earnings (Loss) Per Share 27 Financial Data Schedule (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 September 29, September 30, 1995 1994 Fully Fully Primary Diluted Primary Diluted -------- -------- -------- -------- Net income (loss) $ 162 $ 162 $ (420) $ (420) After-tax interest savings assuming conversion of Senior Convertible Notes _ _ 157 _ _ 173 -------- -------- -------- -------- Net income (loss) adjusted for after-tax interest savings $ 162 $ 319 $ (420) $ (247) ======== ======== ======== ======== Average number of common shares outstanding during the period 4,180 4,180 4,125 4,125 Additional shares assuming exercise of stock options 72 72 80 80 Additional Shares assuming conversion of Senior Convertible Notes _ _ 1,286 _ _ 1,286 -------- -------- -------- -------- Average number of common shares used to calculate earnings (loss) per share 4,252 5,538 4,205 5,491 ======== ======== ======== ======== Net earnings (loss) per share $ 0.04 $ 0.04 $ (0.10) $ (0.10) ======= ======= ======== ======== Nine Months Ended Fully Fully Primary Diluted Primary Diluted -------- -------- -------- -------- Net income (loss) $ 326 $ 326 $ (972) $ (972) After-tax interest savings assuming conversion of Senior Convertible Notes _ _ 472 _ _ 508 -------- -------- -------- -------- Net income (loss) adjusted for after-tax interest savings $ 326 $ 798 $ (972) $ (464) ======== ======== ======== ======== Average number of common shares outstanding during the period 4,183 4,183 4,168 4,168 Additional shares assuming exercise of stock options 62 62 134 134 Additional Shares assuming conversion of Senior Convertible Notes _ _ 1,286 _ _ 1,286 -------- -------- -------- -------- Average number of common shares used to calculate earnings (loss) per share 4,245 5,531 4,302 5,588 ======== ======== ======== ======== Net earnings (loss) per share $ 0.08 $ 0.08 $ (0.23) $ (0.23) ======= ======= ======== ======== 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 $0.06 and $0.14 for three months and nine months ended September 29, 1995, respectively. Net fully diluted loss per share computes to $0.04 and $0.08 for three months and nine months ended September 30, 1994, respectively. Since these are anti-dilutive, fully diluted earnings (loss) per share is equivalent to primary earnings (loss) per share.
EX-27 3 EXHIBIT 27 - FINANCIAL DATA SCHEDULE - ARTICLE BD
BD EXHIBIT 27 STIFEL FINANCIAL CORP. AND SUBSIDIARIES FINANCIAL DATA SCHEDULE (UNAUDITED) ARTICLE BD THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DATED SEPTEMBER 29, 1995 AND THE STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-29-1995 9,800,939 157,856,337 0 5,722,300 24,582,762 3,530,467 217,543,833 79,550,000 50,885,012 0 38,033,084 3,633,182 10,760,000 648,743 0 0 33,983,812 217,543,833 14,858,341 9,444,505 30,568,083 7,770,434 1,869,710 6,008,814 42,697,709 756,173 756,173 0 0 326,082 0.08 0.08
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