SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 30, 1999
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
501 N. Broadway, St. Louis, Missouri 63102-2102
- ---------------------------------------- ----------
(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 October 29, 1999:
6,711,856, par value $0.15.
<PAGE>2
Stifel Financial Corp. And Subsidiaries
Form 10-Q Index
September 30, 1999
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Financial Condition --
September 30, 1999 and December 31, 1998....................... 3-4
Consolidated Statements of Operations --
Three Months Ended September 30, 1999 and September 30,1998..... 5
Consolidated Statements of Operations --
Nine Months Ended September 30, 1999 and September 30,1998...... 6
Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1999 and September 30,1998...... 7-8
Notes to Consolidated Financial Statements........................ 9-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 12-17
Item 3. Quantitative and Qualitative Disclosures about Market
Risk ............................................................ 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 18
Item 6. Exhibit(s) and Report(s) on Form 8-K......................... 18
Signatures............................................................ 19
<PAGE>3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED) (In thousands, except par values and share amounts)
September 30, December 31,
1999 1998
------------- ------------
ASSETS
Cash and cash equivalents $ 19,458 $ 12,835
Cash segregated for the exclusive
benefit of customers 180 177
Receivable from brokers and dealers 25,874 23,946
Receivable from customers, net of
allowance for doubtful receivables of
$556 and $556, respectively 240,875 213,709
Securities owned, at fair value 27,283 38,632
Membership in exchanges, at cost 513 513
Office equipment and leasehold
improvements, at cost, net of
allowances for depreciation and
amortization of $12,856 and $12,361,
respectively 7,668 5,315
Goodwill, net of accumulated amortization
of $715 and $1,721, respectively 1,654 3,874
Notes receivable from and advances to
officers and employees, net of
allowance for doubtful receivables
from former employees of $526 and
$482, respectively 7,914 6,460
Deferred tax asset 3,410 3,213
Other assets 31,087 26,331
------------- ------------
Total Assets $ 365,916 $ 335,005
============= ============
<PAGE>4
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
(UNAUDITED) (In thousands, except par values and share amounts)
September 30, December 31,
1999 1998
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings from banks $ 53,075 $ 62,890
Payable to brokers and dealers 147,016 104,769
Payable to customers 30,922 37,306
Securities sold, but not yet purchased, at
fair value 3,166 998
Drafts payable 9,851 18,210
Accrued employee compensation 14,664 18,320
Obligations under capital leases 1,234 848
Accounts payable and accrued expenses 13,919 16,117
Long-term debt 34,968 20,570
------------- ------------
Total Liabilities 308,815 280,028
Stockholders' Equity
Preferred stock -- $1 par value; authorized
3,000,000 shares; none issued - - - -
Common stock -- $0.15 par value; authorized
10,000,000 shares; issued 7,376,176
and 7,219,335 shares, respectively 1,106 1,084
Additional paid-in capital 43,208 41,867
Retained earnings 22,750 18,291
------------- ------------
67,064 61,242
Less:
Treasury stock, at cost, 645,909 and
222,743 shares, respectively 6,307 2,162
Unamortized expense of restricted
stock awards 791 1,081
Unearned employee stock ownership plan
shares, at cost, 223,667 and 235,866
shares, respectively 2,865 3,022
------------- ------------
Total Stockholders' Equity 57,101 54,977
------------- ------------
$ 365,916 $ 335,005
============= ============
See Notes to Consolidated Financial Statements.
<PAGE>5
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended
September 30, September 30,
1999 1998
------------- -------------
REVENUES
Commissions $ 15,282 $ 14,231
Principal transactions 6,319 4,235
Investment banking 2,507 6,557
Interest 5,333 4,765
Other 6,072 4,471
------------- -------------
35,513 34,259
EXPENSES
Employee compensation and benefits 21,807 22,108
Communications and office supplies 2,254 2,065
Occupancy and equipment rental 2,900 2,344
Interest 2,663 2,439
Commissions and floor brokerage 650 726
Other operating expenses 3,066 3,016
------------- -------------
33,340 32,698
------------- -------------
INCOME BEFORE INCOME TAXES 2,173 1,561
Provision for income taxes 742 594
------------- -------------
NET INCOME $ 1,431 $ 967
============= =============
Net income per share:
Basic $ 0.22 $ 0.14
Diluted $ 0.21 $ 0.13
Dividends declared per share $ 0.03 $ 0.03
Average common equivalent shares
outstanding:
Basic 6,570 6,879
Diluted 6,925 7,197
See Notes to Consolidated Financial Statements.
<PAGE>6
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
REVENUES
Commissions $ 49,958 $ 41,822
Principal transactions 18,742 19,792
Investment banking 8,021 13,787
Interest 14,237 14,634
Other 19,407 14,135
------------- -------------
110,365 104,170
EXPENSES
Employee compensation and benefits 68,614 65,991
Communications and office supplies 6,620 6,151
Occupancy and equipment rental 8,411 6,672
Interest 6,735 7,861
Commissions and floor brokerage 2,099 2,076
Other operating expenses 9,493 8,340
------------- -------------
101,972 97,091
------------- -------------
INCOME BEFORE INCOME TAXES 8,393 7,079
Provision for income taxes 2,931 2,836
------------- -------------
NET INCOME $ 5,462 $ 4,243
============= =============
Net income per share:
Basic $ 0.81 $ 0.62
Diluted $ 0.77 $ 0.59
Dividends declared per share $ 0.09 $ 0.09
Average common equivalent shares
outstanding:
Basic 6,712 6,843
Diluted 7,065 7,224
See Notes to Consolidated Financial Statements.
<PAGE>7
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(In thousands)
Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 5,462 $ 4,243
Noncash items included in
earnings:
Depreciation and amortization 1,971 1,337
Bonus notes amortization 1,316 1,157
Gain on sale of subsidiary (1,496) - -
Deferred items (163) 1,936
Restricted stock awards amortization 297 351
------------- -------------
7,387 9,024
Decrease (increase) in assets:
Operating receivables (29,094) 48,192
Cash segregated for the exclusive
benefit of customers (3) 1
Securities owned 11,349 (7,201)
Notes receivable from officers and
employees (2,770) (4,219)
Other assets (194) (3,196)
Increase (decrease) in liabilities:
Operating payables 35,863 36,715
Securities sold, but not yet purchased 2,168 (2,802)
Drafts payable, accrued employee
compensation, and accounts payable
and accrued expenses (13,639) (13,975)
------------- -------------
Cash Flows From Operating Activities 11,067 62,539
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from:
Sale of property 15 72
Sale of subsidiary 4,744 - -
Payments for:
Acquisition of office equipment and
leasehold improvements (3,274) (3,021)
Acquisition of investments (6,012) (5,808)
------------- -------------
Cash Flows From Investing Activities (4,527) (8,757)
<PAGE>8
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
UNAUDITED (In Thousands)
Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net (9,815) (64,775)
Proceeds from:
Issuance of stock 1,667 1,441
Issuance of long-term debt 14,398 10,970
Payments for:
Repurchase of stock (4,984) (283)
Principal payments under capital
lease obligation (538) (384)
Cash dividends (645) (606)
------------- -------------
Cash Flows From Financing Activities 83 (53,637)
Increase in cash and cash
equivalents 6,623 145
Cash and cash equivalents -
beginning of period 12,835 15,366
------------- -------------
Cash and Cash Equivalents -
end of period $ 19,458 $ 15,511
============= =============
Supplemental disclosure of cash
flow information:
Income tax payments $ 2,925 $ 3,939
Interest payments $ 6,563 $ 8,092
Schedule of noncash investing and
financing activities:
Employee stock ownership plan $ 116 - -
Fixed assets acquired under
capital lease $ 924 $ 495
Restricted stock awards and stock
units, net of forfeitures $ 499 $ 1,264
Stock Dividend $ 77 $ 30
See Notes to Consolidated Financial Statements.
<PAGE>9
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - REPORTING POLICIES
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 30, 1999 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1999. 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, 1998.
Where appropriate, prior years' financial information has been
reclassified to conform with the current year presentation.
Comprehensive Income
The Company has no components of other comprehensive income,
therefore comprehensive income equals net income.
NOTE B - NET CAPITAL REQUIREMENT
The Company's principal subsidiary, Stifel, Nicolaus &
Company, Incorporated ("SN & Co."), is subject to the Uniform Net
Capital Rule 15c3-1 under the Securities Exchange Act of 1934, as
amended (the "Rule"), which requires the maintenance of minimum
net capital, as defined. SN & Co. has elected to use the
alternative method permitted by the Rule which requires
maintenance of minimum net capital equal to the greater of
$250,000 or 2 percent of aggregate debit items arising from
customer transactions, as defined. The Rule also provides that
equity capital may not be withdrawn and cash dividends may not be
paid if resulting net capital would be less than 5 percent of
aggregate debit items.
At September 30, 1999, SN & Co. had net capital of
$32,755,000, which was 12.33% of its aggregate debit items, and
$27,444,000 in excess of the minimum required net capital.
<PAGE>10
NOTE C - SEGMENT REPORTING
The Company's reportable segments include private client,
capital markets, and other. The private client segment includes
54 branch offices and 115 independent contractor offices of the
Company's broker-dealer subsidiaries located throughout the U.S.,
primarily in the Midwest. These branches provide securities
brokerage services, including the sale of equities, mutual funds,
fixed income products, and insurance, to their private clients.
The capital markets segment includes management and participation
in underwritings (exclusive of sales credits, which are included
in the private client segment), mergers and acquisitions, public
finance, trading, research, and market making. Investment
advisory fees and clearing income is included in other.
Intersegment revenues and charges are eliminated between
segments. The Company evaluates the performance of its segments
and allocates resources to them based on various factors,
including prospects for growth, return on investment, and return
on revenues.
Information concerning operations in these segments of
business is as follows (in thousands):
- -------------------------------------------------------------------------------
Three Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------------
Revenues
Private Client $ 30,453 $ 27,898
Capital Markets 3,513 5,433
Other 1,547 928
- -------------------------------------------------------------------------------
Total Revenues $ 35,513 $ 34,259
===============================================================================
Operating Contribution
Private Client $ 3,972 $ 3,312
Capital Markets 120 75
Other (51) 183
- -------------------------------------------------------------------------------
Total Operating Contribution 4,041 3,570
- -------------------------------------------------------------------------------
Unallocated Overhead (1,868) (2,009)
- -------------------------------------------------------------------------------
Pre-Tax Income $ 2,173 $ 1,561
===============================================================================
- -------------------------------------------------------------------------------
Nine Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------------
Revenues
Private Client $ 92,572 $ 84,951
Capital Markets 11,672 15,198
Other 6,121 4,021
- -------------------------------------------------------------------------------
Total Revenues $110,365 $104,170
===============================================================================
Operating Contribution
Private Client $ 14,675 $ 12,761
Capital Markets 412 1,946
Other 2,441 953
- -------------------------------------------------------------------------------
Total Operating Contribution 17,528 15,660
Unallocated Overhead (9,135) (8,581)
- ------------------------------------------------------------------------------
Pre-Tax Income $ 8,393 $ 7,079
===============================================================================
The Company has not disclosed asset information by segment, as
the information is not produced internally and its preparation is
impracticable.
<PAGE>11
NOTE D - EARNINGS PER SHARE ("EPS")
Basic EPS is calculated by dividing net income by the weighted-
average number of common shares outstanding. Diluted EPS is
similar to basic EPS but adjusts for the effect of potential
common shares.
The components of the basic and diluted earnings per share
calculation for the three and nine months ended September 30, are
as follows (in thousands, except per share amounts):
- -------------------------------------------------------------------------------
Three Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------------
Income Available to Common Stockholders
Net Income $ 1,431 $ 967
- -------------------------------------------------------------------------------
Weighted Average Shares Outstanding
Basic Weighted Average Shares Outstanding: 6,570 6,879
Potential Common Shares From Employee Benefit
Plans 355 318
Diluted Weighted Average Shares Outstanding 6,925 7,197
- -------------------------------------------------------------------------------
Basic Earnings Per Share $ 0.22 $ 0.14
Diluted Earnings Per Share $ 0.21 $ 0.13
===============================================================================
- -------------------------------------------------------------------------------
Nine Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------------
Income Available to Common Stockholders
Net Income $ 5,462 $ 4,243
- -------------------------------------------------------------------------------
Weighted Average Shares Outstanding
Basic Weighted Average Shares Outstanding: 6,712 6,843
Potential Common Shares From Employee Benefit
Plans 353 381
Diluted Weighted Average Shares Outstanding 7,065 7,224
- -------------------------------------------------------------------------------
Basic Earnings Per Share $ 0.81 $ 0.62
Diluted Earnings Per Share $ 0.77 $ 0.59
===============================================================================
NOTE E- SALE OF SUBSIDIARY
On April 27, 1999, the Company completed the sale of one of
its investment advisory subsidiaries, Todd Investment Advisors to
a subsidiary of Western & Southern Life Insurance Company("W&S"),
a significant shareholder. The Company recorded a pre-tax gain of
approximately $1.5 million and is included in other income.
NOTE F - NOTE PAYABLE
On July 30, 1999, the Company issued an additional
$5,000,000 long term notes payable to W&S, due June 30, 2004 with
interest payable monthly at the rate of 8% per annum.
NOTE G - SUBSEQUENT EVENTS
On October 27, 1999, the Company's Board of Directors declared
a regular quarterly cash dividend of $0.03 per share, payable on
November 24, 1999 to stockholders of record as of the close of
business on November 10, 1999.
******
<PAGE>12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Nine months ended September 1999 as compared to nine months ended
September 1998
The Company recorded net earnings of $5.5 million or $0.77 per
diluted share on total revenues of $110.4 million for the nine
months ended September 30, 1999 compared to net earnings of $4.2
million or $0.59 per diluted share on total revenues of $104.2
million for the same period one year earlier.
The Company's expansion of its Private Client Group, which
began in 1998, was evident during 1999 when compared to the same
period one year earlier. Private client branch offices,
investment executives, and independent contractors increased by
11, 30, and 24, respectively over 1998 representing increases of
26%, 10%, and 19%. Additionally, investor confidence in the
equity markets remained strong as indicated by the increase in
the major market index_The Dow Jones Industrial Average (the
"Dow") _ and increased trading volumes on the New York Stock
Exchange ("NYSE") and NASDAQ. From September 30, 1998 to
September 30, 1999, the Dow increased 2,494 (32%) from 7,843 to
10,337, while trading volumes on the NYSE and NASDAQ increased
19% and 29%, respectively, over 1998 which contributed to a 18%
increase in the number of customer trades by the Company.
Total revenues increased $6.2 million (6%) primarily as a
result of growth in commissions and other revenues which
increased $8.1 million (20%) and $5.3 million (37%) respectively,
partially offset by decreases in principal transactions,
investment banking and interest revenues, which declined $1.1
million (5%), $5.8 million (42%) and $397,000 (3%) respectively.
Revenues from commissions rose due to private client expansion
and strong markets as referred to above. Main components of the
increase were from sales of over-the-counter equities, insurance
products, and mutual funds, which increased 39%, 52%, and 18%
respectively.
Other revenues increased, principally due to growth in managed
account service fees, and growth in money market account fees
which increased 15% and 37%, respectively and the Company's $1.5
million pre-tax gain on the sale of one of its investment
advisory subsidiaries, Todd Investment Advisors, Inc. completed
on April 27, 1999.
Revenues from principal transactions decreased due to
decreased revenues generated by the sale of unit investment
trusts, principally during the first quarter of 1998, offset by
increased sales of taxable and nontaxable fixed income products
which increased $551,000 (36%) and $924,000 (42%), respectively
and an inventory loss in the quarter ending September 30, 1998 of
$1.1 million on certain equity investments.
<PAGE>13
Investment banking revenues declined principally due to a
decrease in municipal bond underwritings of $422,000 (22%), and
decreased new issue equity underwritings and participations in
corporate offerings of $3.6 million, and a decrease in financial
advisory fees for private placements of $1.8 million (67%)
principally related to an advisory fee in the 1998 third quarter.
Interest revenue declined as a result of decreased average
borrowings by customers, combined with decreases in the rates
charged to those customers.
Total expenses increased $4.9 million (5%) principally as a
result of increased compensation and benefits and increased
expenses related to the Company's expansion, and provisions for
litigation offset by a decline in interest expense.
Employee compensation and benefits, a significant portion of
the Company's total expense, increased $2.6 million (4%) in the
first nine months of 1999. The fixed component of compensation,
primarily salaries, increased $1.7 million (9%) as a result of
normal year-to-year salary increases and the addition of 22 non-
sales associates. The majority of personnel increases resulted
from the expansion of the Private Client Group, and related
product support departments. The increase in the variable
component of compensation of $965,000 (2%) grew in conjunction
with the increases in revenues and profitability.
Occupancy and equipment rental increased $1.7 million (26%),
principally due to the addition of eleven branch offices and
increased depreciation expense related to increases in
capitalized equipment to upgrade technology and support private
client expansion.
Other operating expenses increased $1.2 million (14%)
principally due to increases in the provision for litigation
related primarily to the Company's former Oklahoma operations.
Interest expense declined $1.1 million (14%) due to decreased
borrowings by the Company to finance customer margin accounts,
combined with decreases in the rates paid on those borrowings.
The effective tax rate for the first nine months ended
September 30, 1999 decreased from the same period one year
earlier primarily due to the tax effect of the gain on the
disposition of Todd and reduced state taxes.
<PAGE>14
Three months ended September 1999 as compared to three months
ended September 1998
The Company recorded net earnings of $1.4 million or $0.21 per
diluted share on total revenues of $35.5 million for the third
quarter ended September 30, 1999 compared to net earnings of
$967,000 or $0.13 per diluted share on total revenues of $34.3
million for the same period one year earlier. The explanation of
revenue and expense fluctuations presented for the nine month
period are generally applicable to the three month operations
with exception of the following items:
Principal transactions increased $2.1 million (49%) due to
increased demand for taxable and nontaxable fixed income products
and a decrease in inventory losses on certain equity investments
in the 1998 third quarter.
Interest revenue increased $569,000 (11.9%) as a result of
increased average borrowings by customers.
Interest expense increased $224,000 (9.2%) due to increased
borrowings by the Company to finance customer margin accounts and
increased notes payable.
Year 2000
- ---------
The Year 2000 issue is the result of computer programs
currently written in two-digit format, rather than four-digit, to
define the applicable year, which affects the ability of computer
systems to accurately process dates ending after December 31,
1999.
As of September 1999, the Company has completed all remedies
and testing on its internal computer systems which the Company
believes are necessary to prepare for the Year 2000. In addition,
the Company believes the third party vendor that provides record
keeping and transaction processing for the Company's customer
accounts has adequately demonstrated its readiness for Year 2000.
The Company participated in the industry-wide testing of
securities transaction processing in a simulated Year 2000
environment with the third party vendor in March and April 1999
with no significant problems noted. The Company has also reviewed
the testing of other record keeping functions on the third party
vendor's system that was performed in January 1999 by other users
of the vendor's system. No significant items were noted. The
Company will continue to perform testing of the vendor's system
through the remainder of 1999. As of November 1999 the vendor has
implemented a programming code "freeze" to ensure a stable
processing system for the millennium rollover.
Internal remedies for the Company, performed over the past
several years, have included a review of all vendor supplied
software and replacement with Year 2000 compliant versions when
necessary and updates to programming code on its small number of
internally created AS/400 programs. The Company has also
replaced substantially all computer hardware with Year 2000
compliant systems as part of its business plan for upgrading its
technological capabilities.
<PAGE>15
The Company believes that the incremental costs associated
with modifications for internal software and systems has not been
material to the Company's financial statements. However, the
interdependent nature of securities transactions and the success
of the Company's external counterparties and vendors, including
the third-party vendor mentioned above, in dealing with this
issue could significantly influence the Company's estimate of the
impact the Year 2000 will have on its business.
The Company has identified and developed contingency plans,
i.e. staffing, processing alternatives, etc., for its internally
provided mission critical systems. The Company is monitoring the
development of contingency plans by its mission critical third
party vendors. In particular, the third party vendor mentioned
above has developed contingency plans, which include: extra
staffing; increased communications with major exchanges and
utilities over the January 1, 2000 weekend; moratoriums on staff
vacations and time off during December/January period; and
heightened readiness to invoke normal disaster recovery plan
(backup power, hot site readiness).
Forward-Looking Statements
- --------------------------
The Management's Discussion and Analysis of Financial
Condition and Results of Operations, including the discussion
under "Year 2000," contains forward-looking statements within the
meaning of federal securities laws. Actual results are subject to
risks and uncertainties, including both those specific to the
Company and those specific to the industry which could cause
results to differ materially from those contemplated. The risks
and uncertainties include, but are not limited to, third-party or
Company failures to achieve timely, effective remediation of the
Year 2000 issues, general economic conditions, actions of
competitors, regulatory actions, changes in legislation and
technology changes. Undue reliance should not be placed on the
forward-looking statements, which speak only as of the date of
this Quarterly Report. The Company does not undertake any
obligation to publicly update any forward-looking statements.
Liquidity and Capital Resources
- -------------------------------
The majority of the Company's assets are highly liquid,
consisting mainly of cash or assets readily convertible into
cash. These assets are financed primarily by the Company's equity
capital, customer credit balances, short-term bank loans,
proceeds from securities lending, long term notes payable, and
other payables. Changes in securities market volumes, related
customer borrowing demands, underwriting activity, and levels of
securities inventory affect the amount of the Company's financing
requirements.
During the first nine months of 1999, the Company repurchased
513,969 shares, using existing board authorizations, at an
average price of $9.43 per share, to meet obligations under the
Company's employee benefit plans. On July 29, 1999, Directors of
the Company authorized the repurchase of up to 250,000 additional
common shares.
<PAGE>17
On July 30,1999, the Company issued an additional $ 5,000,000
long term notes payable to W&S, due June 30, 2004 with interest
payable monthly at the rate of 8% per annum.
Management believes the funds from operations, available
informal short-term credit arrangements, and long-term
borrowings, at September 30, 1999, will provide sufficient
resources to meet the present and anticipated financing needs.
Stifel, Nicolaus & Company, Incorporated, the Company's
principal broker-dealer subsidiary, is subject to certain
requirements of the Securities and Exchange Commission with
regard to liquidity and capital requirements. At September 30,
1999, Stifel, Nicolaus had net capital of approximately $32.8
million which exceeded the minimum net capital requirements by
approximately $27.4 million.
<PAGE>18
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes from the information
provided in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes in the legal proceedings
previously reported in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998. Such information is hereby
incorporated by reference.
Item 6. Exhibit(s) and Report(s) on Form 8-K
(a) Exhibit No.
(Reference to Item 601(b)
of Regulation S-K) Description
- -------------------------------------------------------------------------------
27 Financial Data Schedule
(furnished to the Securities and Exchange
Commission for Electronic Data
Gathering, Analysis, and Retrieval
[EDGAR] purposes only)
(b) Report(s) on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended September 30, 1999.
<PAGE>19
SIGNATURES
Pursuant to the requirement of 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: November 12, 1999 By /s/Ronald J. Kruszewski
--------------------
Ronald J. Kruszewski
(President and
Chief Executive Officer)
Date: November 12, 1999 By /s/James M. Zemlyak
----------------
James M. Zemlyak
(Principal Financial and
Accounting Officer)
<PAGE>20
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
EXHIBIT INDEX
September 30, 1999
Exhibit
Number Description
- -------------------------------------------------------------------------------
27 Financial Data Schedule
(furnished to the Securities and Exchange
Commission for Electronic Data
Gathering, Analysis, and Retrieval
[EDGAR] purposes only)
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND THE
CONSOLIDATED STATEMENT OF OPERATIONS OF STIFEL FINANCIAL CORP.
FILED AS PART OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTER ENDED SEPTEMBER 30, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,638
<RECEIVABLES> 258,325
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 16,338
<INSTRUMENTS-OWNED> 27,283
<PP&E> 7,668
<TOTAL-ASSETS> 365,916
<SHORT-TERM> 53,075
<PAYABLES> 71,579
<REPOS-SOLD> 0
<SECURITIES-LOANED> 146,026
<INSTRUMENTS-SOLD> 3,166
<LONG-TERM> 34,968
<COMMON> 1,106
0
0
<OTHER-SE> 55,995
<TOTAL-LIABILITY-AND-EQUITY> 365,916
<TRADING-REVENUE> 18,742
<INTEREST-DIVIDENDS> 14,237
<COMMISSIONS> 49,958
<INVESTMENT-BANKING-REVENUES> 8,021
<FEE-REVENUE> 1,504
<INTEREST-EXPENSE> 6,735
<COMPENSATION> 68,614
<INCOME-PRETAX> 8,393
<INCOME-PRE-EXTRAORDINARY> 8,393
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,462
<EPS-BASIC> .81
<EPS-DILUTED> .77
</TABLE>
