<PAGE> 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.
<PAGE> 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
<PAGE> 3
<TABLE>
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
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited) (Note)
------------ ------------
<S> <C> <C>
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
============ ============
</TABLE>
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.
<PAGE> 4
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited) (Note)
----------- ------------
<S> <C> <C>
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
============ ============
</TABLE>
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.
<PAGE> 5
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended
June 30, 1995 June 24, 1994
------------- -------------
<S> <C> <C>
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
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30, 1995 June 24, 1994
------------- -------------
<S> <C> <C>
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
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30, 1995 June 24, 1994
------------- -------------
<S> <C> <C>
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
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
<TABLE>
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30, 1995 June 24, 1994
------------- -------------
<S> <C> <C>
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
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 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:
<PAGE> 10
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
NOTE C - PLAN OF RESTRUCTURING (continued)
<CAPTION>
Charged
Balance at During Balance at
December First Six June
31, 1994 Months 30, 1995
---------- ---------- ----------
<S> <C> <C> <C>
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
========== ========== ==========
</TABLE>
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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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%).
<PAGE> 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.
<PAGE> 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.
<PAGE> 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)
<PAGE> 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.
<PAGE> 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)
<PAGE> 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)
<TABLE>
EXHIBIT 11
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
<CAPTION>
Three Months Ended
June 30, 1995 June 24, 1994
Fully Fully
Primary Diluted Primary Diluted
<S> <C> <C> <C> <C>
Net income (loss) $ 348 $ 348 $ (731) $ (731)
After-tax interest savings assuming conversion
of Senior Convertible Notes <F1> _ _ 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 <F2> 49 71 103 103
Additional Shares assuming conversion of Senior
Convertible Notes <F3> _ _ 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<F4> $ (0.17) $ (0.17)<F4>
======= ======= ======== ========
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 <F1> _ _ 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 <F2> 51 70 126 127
Additional Shares assuming conversion of Senior
Convertible Notes <F3> _ _ 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<F4> $ (0.13) $ (0.13)<F4>
======= ======= ======== ========
<FN>
<F1>Represents the after-tax interest savings resulting from assumed conversion of $10,000,000 aggregate principal
11.25% Senior Convertible Notes.
<F2>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.
<F3>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.
<F4>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.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,528,360
<RECEIVABLES> 153,630,894
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 3,808,900
<INSTRUMENTS-OWNED> 23,291,031
<PP&E> 4,313,137
<TOTAL-ASSETS> 211,633,170
<SHORT-TERM> 61,805,000
<PAYABLES> 54,625,728
<REPOS-SOLD> 0
<SECURITIES-LOANED> 38,024,970
<INSTRUMENTS-SOLD> 7,624,446
<LONG-TERM> 10,760,000
<COMMON> 648,743
0
0
<OTHER-SE> 34,094,283
<TOTAL-LIABILITY-AND-EQUITY> 211,633,170
<TRADING-REVENUE> 10,614,116
<INTEREST-DIVIDENDS> 6,282,533
<COMMISSIONS> 20,373,386
<INVESTMENT-BANKING-REVENUES> 5,126,995
<FEE-REVENUE> 1,222,062
<INTEREST-EXPENSE> 4,082,673
<COMPENSATION> 28,942,245
<INCOME-PRETAX> 274,102
<INCOME-PRE-EXTRAORDINARY> 274,102
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,253
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
