UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
Commission file number 0-15105
SCOTT & STRINGFELLOW FINANCIAL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Virginia 54-1315256
State or other jurisdiction of incorporation or organization I.R.S. Employer Identification No.
</TABLE>
909 East Main Street Richmond, Virginia 23219
(Address of principal executive offices) (zip code)
(804) 643-1811
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
none
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.10 per share
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 ....
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
On September 18, 1995, there were 2,109,420 shares of Scott & Stringfellow
Financial, Inc. Common Stock, par value $.10, issued and outstanding of which
1,277,820 shares were held by non-affiliates. The aggregate market value of
such Common Stock held by non-affiliates, based on the closing market price of
$13.00 on September 18, 1995 was approximately $16,611,660.
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
Certain Portions of the 1995 Annual Report to Shareholders (in Parts I and II)
Notice of Annual Meeting and Proxy Statement Dated September 21, 1995 (in Part
III) Exhibit Index Appears on Page 14
SCOTT & STRINGFELLOW FINANCIAL, INC.
FORM 10-K
For the Year Ended June 30, 1995
TABLE OF CONTENTS
Page
Item Number
PART I
1. Business 3
2. Properties 10
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
PART II
5. Market for Registrant's Common Stock and Related Shareholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 13
PART III
10. Directors and Executive Officers of Registrant 13
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial Owners and Management 13
13. Certain Relationships and Related Transactions 13
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13
Signatures 15
FINANCIAL STATEMENT SCHEDULES 18
EXHIBITS
<PAGE>
PART I
Item 1. BUSINESS
General
The Registrant, Scott & Stringfellow Financial, Inc., is a holding company
whose principal business activities are conducted through its wholly-owned
subsidiary, Scott & Stringfellow, Inc. ("Scott & Stringfellow"). Scott &
Stringfellow is a regional brokerage, investment banking, and financial services
firm headquartered in Richmond, Virginia. It operates 26 offices in communities
located across Virginia, North Carolina, and West Virginia. Its primary
activity is retail securities brokerage. Other significant activities include
institutional securities brokerage, management of and participation in the
underwriting of corporate and municipal securities, investment management
services, corporate and municipal finance, trading of taxable and tax-exempt
fixed income and equity securities, equity research, money market accounts,
retirement accounts, and the distribution of mutual fund and insurance products.
Scott & Stringfellow was originally founded as a partnership in 1893. On
June 20, 1995, the firm celebrated its 100th year as a member of the New York
Stock Exchange, Inc. ("NYSE"). Scott & Stringfellow is believed to be the
South's oldest continuous member of the New York Stock Exchange and one of only
three firms outside of New York which have been members for at least 100 years.
Scott & Stringfellow was incorporated in 1974. In 1986, Scott & Stringfellow
Financial, Inc. conducted an initial public offfering of its common stock,
increasing its capital in that year to approximately $14 million. Since 1986,
Scott & Stringfellow has pursued a growth strategy, increasing the number of its
branch offices from 14 to 26 through expansion into North Carolina and a merger
with Norfolk-based Investment Corporation of Virginia in 1989.
For the fiscal year ended June 30, 1995, approximately 52% of total revenues
were derived from commissions, 20% from principal transactions, 12% from
investment banking, 11% from interest and dividends, and 5% from advisory and
administrative fees and other sources. (See table entitled "Revenues by Source"
on pages 4 and 5 of this report.)
In addition to its NYSE membership, Scott & Stringfellow has seats on the
American Stock Exchange, Inc. ("AMEX") and the Chicago Stock Exchange, and is a
member of the National Association of Securities Dealers ("NASD"), the
Securities Investor Protection Corporation ("SIPC"), the Securities Industry
Association, and the Public Securities Association. Scott & Stringfellow's two
NYSE seats are leased to third parties under one year agreements which may be
canceled by either party subject to 90 days' notice. The AMEX seat is leased
to a third party under three month agreements which may be canceled by either
party subject to 90 days' notice. SIPC provides protection for client accounts
up to $500,000 each, with a limitation of $100,000 for claims for cash balances.
In addition to the SIPC protection, Scott & Stringfellow has obtained a separate
excess SIPC bond issued by an insurance company which increases the protection
of client accounts by an additional $2 million. The combined insurance coverage
of client accounts is therefore $2.5 million, with a limitation of $100,000 for
cash balances.
The Registrant has 26 offices located in 3 states. Retail sales activities
are conducted through registered investment brokers in all of its offices. Most
of its other activities are conducted at its main office located in Richmond,
Virginia. On June 30, 1995, the Registrant had approximately 479 employees
including 214 employees with full-time investment broker responsibilities. The
following table reflects the location of the Registrant's offices, the year each
office opened, and the number of investment brokers in each office as of June
30, 1995:
<PAGE>
Calendar
Year Number of
Branch Investment
Location Opened Brokers
Virginia
Richmond 1893 45
Blacksburg 1988 4
Charlottesville 1982 10
Chesterfield 1987 9
Culpepper 1971 3
Danville 1986 3
Harrisonburg 1991 3
Lexington 1986 3
Lynchburg 1984 10
Manassas 1987 6
Martinsville 1983 5
Norfolk 1978 27
Roanoke 1984 8
Staunton 1970 7
Tyson's Corner 1986 9
Virginia Beach 1995 1
Warrenton 1970 6
Winchester 1970 5
Total Virginia 164
North Carolina
Charlotte 1988 9
Greensboro 1988 17
Kinston 1988 2
North Wilkesboro 1988 2
Raleigh 1992 8
Wilmington 1990 4
Winston-Salem 1987 5
Total North Carolina 47
West Virginia
Bluefield 1971 3
Total Company 214
Revenues by Source
The following table sets forth the consolidated revenues of the Registrant
and its subsidiaries for the periods indicated in dollars and as a percentage of
total revenues.
<TABLE>
<CAPTION>
Years Ended June 30, 1995 June 24, 1994 June 25, 1993
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Commissions:
Listed $ 15,055,569 27.8 $ 13,831,469 26.6 $ 14,144,108 29.4
Over-the-Counter 5,220,192 9.7 4,379,746 8.4 3,208,133 6.7
Options 806,672 1.5 677,545 1.3 673,572 1.4
Mutual Funds 5,220,372 9.6 6,253,696 12.0 5,366,444 11.1
Other 1,997,878 3.7 1,509,726 2.9 683,961 1.4
Total Commissions 28,300,683 52.3 26,652,182 51.2 24,076,218 50.0
Principal Transactions:
Municipal Bond 3,094,290 5.7 1,722,348 3.3 2,458,842 5.1
Over-the-Counter 5,676,936 10.5 4,865,408 9.3 4,498,624 9.4
Corporate and Govt.
Bonds and Other 1,953,794 3.6 1,511,122 2.9 1,896,740 3.9
Total Principal Trans. 10,725,020 19.8 8,098,878 15.5 8,854,206 18.4
Investment Banking 6,257,511 11.6 10,631,124 20.4 9,374,097 19.5
Interest and Dividends 5,852,740 10.8 4,015,629 7.7 3,369,655 7.0
Advisory and Administrative
Service Fees 2,781,944 5.1 2,419,646 4.6 2,211,910 4.6
Other 201,391 0.4 290,119 0.6 259,641 0.5
Total Revenues $ 54,119,289 100.0 $ 52,107,578 100.0 $ 48,145,727 100.0
</TABLE>
The percentage contribution to total revenues of each aspect of the
Registrant's operations does not necessarily reflect a corresponding percentage
contribution to net income. Because of the interdependence of various
activities and departments of the Registrant's business, and the arbitrary
assumptions which would be involved in allocating overhead, including
administrative, operations, communications and data processing expenses, it is
not appropriate to state the percentage contribution to net income of each
aspect of the Registrant's operations.
Retail Brokerage
During fiscal 1995, revenues from the Registrant's retail brokerage activities
are estimated to represent approximately 90% of the Registrant's brokerage and
investment banking revenues and 75% of total revenues. Revenues from retail
brokerage activities are generated through customer purchases and sales of
stocks, bonds, mutual funds, and other securities. Commissions are charged on
both listed and over-the-counter agency transactions. When the Registrant
executes over-the-counter transactions as a dealer, it may charge mark-ups or
mark-downs in lieu of commissions. (See "Market-Making and Principal
Transactions.")
Retail commissions are charged in accordance with a schedule which the
Registrant has formulated, and which may be changed from time to time. In
certain cases, discounts from the schedule are granted to retail clients,
generally on large trades or to active customers. A significant portion of the
Registrant's retail clients are individuals who reside in the Southeastern
United States. The Registrant is not dependent on any single client or small
number of clients.
In addition to brokerage revenues, the Registrant's client accounts are a
significant source of interest income. Approximately 91% of interest and
dividend income and 10% of total revenues is attributable to interest charged on
client margin accounts. Balances in client margin accounts increased by 9%
during 1995 to a total of approximately $65 million at year-end, following a 20%
increase during 1994. As a service to its retail clients, the Registrant
provides margin accounts which allow the customer to pay less than the full cost
of a security purchased, with the balance of the purchase price being provided
by the Registrant as a loan secured by the securities purchased. Clients may
also borrow money from the Registrant for other purposes, provided the loan is
adequately secured by marketable securities held in a margin account. The
amount of such margin loans are subject to the margin requirements (Regulation
T) of the Board of Governors of the Federal Reserve System, NYSE margin
requirements, and the Registrant's internal policies, which in some instances
are more, but in no event less, stringent than requirements set by Regulation T
and the NYSE. In permitting customers to purchase securities on margin or
otherwise borrow money through a margin account, the Registrant bears the risk
of a market decline which could reduce the value of its collateral below
customers' indebtedness.
In addition to securities brokerage and margin lending services, the
Registrant also provides its retail clients specialized financial services
including equity and fixed income research, investment seminars, portfolio
evaluation, retirement planning, financial planning, individual retirement
account custodial services, money market services and other personal investment
advisory services. Fees are charged for some, but not all, of these services.
Advisory and administrative service fees, which also include investment
management fees, accounted for approximately 5% of the Registrant's total
revenues in 1995. (See also "Investment Management." )
Institutional Brokerage
The Registrant executes securities transactions for institutional investors
such as banks, mutual funds, insurance companies, and pension and profit-sharing
plans. The 10 investment brokers in the institutional equity and fixed income
sales departments account for a significant portion of these transactions.
Institutional investors normally purchase and sell securities in large
quantities which require special marketing and trading expertise. The
Registrant believes that a significant portion of its institutional brokerage
commissions are received as a consequence of providing institutions with
research reports and services regarding specific corporations and industries and
securities market information. The Registrant provides services to a nationwide
institutional client base as well as several institutional clients in Europe.
During fiscal 1995, revenues from institutional brokerage activities are
estimated to represent approximately 6% of the Registrant's brokerage and
investment banking revenues and 5% of total revenues.
Transactions for institutional investors are executed by the Registrant acting
as broker or as principal. The Company permits discounts from its commission
schedule to its institutional customers. The size of such discounts varies with
the size of particular transactions and other factors.
Market-Making and Principal Transactions
The Registrant actively engages in trading as principal in various phases of
the over-the-counter securities business. To facilitate trading by its
customers, the Registrant buys, sells, and maintains inventories of municipal
and corporate bonds and common stocks in order to "make markets" in those
securities. Revenues from principal transactions, which include trading profits
or losses and sales credits, depend upon the general trend of prices, the level
of activity in the securities markets, the skill of employees engaged in
market-making, and the size of the inventories. The activities of the
Registrant in trading as principal require the commitment of capital and create
an opportunity for profit and risk of loss due to market fluctuations. As of
June 30, 1995, Scott & Stringfellow made markets in the common stock or other
equity securities of approximately 130 NASDAQ listed corporations, emphasizing
local and regional companies, companies for which the Registrant has performed
investment banking services, or which are covered by the Registrant's research
department.
The following table shows, for the fiscal year ended June 30, 1995, the
highest, lowest, and average monthly inventories (based upon the aggregate,
rather than net, of both long and short positions) for securities in which the
Registrant trades as principal:
<TABLE>
<CAPTION>
Highest Lowest Average
Inventory Inventory Inventory
<S> <C> <C> <C>
Municipal Securities $ 10,975,935 $ 2,614,618 $ 6,191,087
Equity Securities (primarily common
stocks) 3,467,313 2,193,293 2,731,863
Corporate Debt Securities 851,336 208,248 468,052
Government and Other Securities 1,174,687 444,286 810,405
</TABLE>
In executing customers' orders to buy or sell over-the-counter securities in
which it makes a market, the Registrant may sell to or purchase from its
customers at a price which is approximately equal to the current inter-dealer
market price, plus or minus a mark-up or mark-down. Alternatively, the
Registrant may act as an agent and execute a customer's purchase or sell order
with another broker-dealer which acts as a market-maker, at the best
inter-dealer market price, in which case a commission is charged.
Personnel engaged in market-making and principal transactions include seven
professionals involved in municipal bond trading, six professionals in
over-the-counter equity trading, and four professionals in taxable debt
securities trading. Each trading department is subject to internal position
limits. The Registrant has established a credit committee for the purpose of
maintaining policies with regard to position limits and other areas of financial
risk.
Investment Banking
The Registrant participates in corporate and tax-exempt securities
distributions as a manager or as a member of an underwriting syndicate or
selling group. Corporate offerings involve common or preferred stock, debt
securities or other securities issued by corporations. Tax-exempt securities
are obligations issued by state and municipal governments, hospitals,
educational institutions, public utility systems, and industrial development
authorities. The following table sets forth corporate and tax-exempt
underwriting participations of the Registrant:
<TABLE>
<CAPTION>
Managed or Co-Managed Syndicate Participations
Fiscal Number of Amount of Number of Amount of
Years Issues Offering Issues Participations
Corporate Stock and Bond Offerings:
<S> <C> <C> <C> <C>
1995 2 $133,750,000 149 $154,448,702
1994 9 430,922,500 274 301,812,330
1993 9 1,207,690,313 244 268,304,018
1992 2 108,939,263 236 268,485,438
1991 1 26,563,000 92 85,523,000
Tax-Exempt Bond Offerings
1995 12 322,243,000 27 15,110,000
1994 48 1,851,323,000 31 30,775,000
1993 42 2,719,273,000 22 22,915,000
1992 41 1,409,034,000 14 10,800,000
1991 24 896,172,000 3 3,500,000
</TABLE>
The Registrant's underwriting activities, together with its selling group
participations, are an important source of securities for distribution to its
clients. Managed or co-managed offerings, in particular, are an important
source of revenue because of the availability of a large amount of securities
for distribution and management fees earned in connection with such offerings.
The Registrant's underwriting business is very competitive and is expected to
remain so in the near future. In particular, increased competition has
negatively impacted the Registrant's tax-exempt underwriting activities
resulting in reduced management fees which make such underwritings increasingly
less profitable. Despite this trend, the Registrant continues its efforts to
attract tax-exempt underwriting business. It is management's opinion that these
efforts are necessary to supply the Registrant's client base with an adequate
volume of regional tax-exempt securities. The Registrant's corporate stock and
bond offerings are highly dependent on market conditions
Participation in an underwriting syndicate or selling group involves both
economic and regulatory risks. An underwriting participant may incur losses if
it is unable to resell the securities it is committed to purchase, or if it is
forced to liquidate its commitment at less than the agreed purchase price. In
addition, under federal securities laws, other statutes and court decisions, an
underwriting participant or selling group member may be subject to substantial
liability for material misstatements or omissions in prospectuses and other
communications with respect to such offerings. Further, underwriting
commitments require a charge against net capital and the Registrant's ability to
make underwriting commitments may be limited by the requirement that it must at
all times be in compliance with the net capital rule. (See "Regulation".)
In addition to the underwriting and syndication activities described above,
the Registrant engages in other investment banking activities such as
structuring, managing, and marketing private offerings of corporate and
tax-exempt securities, assisting in arranging mergers and acquisitions, and
providing valuation and financial consulting services for gift and estate tax
purposes, employee stock ownership plans, mergers, acquisitions, stock purchase
agreements, and other corporate purposes. Fees generated by these investment
banking activities accounted for approximately 4% of the Registrant's total
revenues during 1995.
Investment Management
Scott & Stringfellow Capital Management, Inc. ("SSCM"), a subsidiary of the
Registrant, is a registered investment advisor which provides investment
management services for individuals and their estates and trusts, corporations,
charitable and educational foundations and employee benefit plans. As of June
30, 1995, SSCM had approximately $164 million of assets under management. Fee
income charged on investment accounts managed by SSCM, which are included in
advisory and administrative service fees, represented approximately 1.4% of
total revenues in 1995.
Research Services
The Registrant's research activities include reviewing and analyzing general
market conditions and specific industries and performing primary research on
individual companies, with particular emphasis on companies in the Southeastern
and Middle Atlantic United States; making investment recommendations; reviewing
client portfolios; publishing portfolio strategy recommendations; providing
investment seminars for the benefit of clients and investment brokers; providing
market and investment commentary through local media outlets; and responding to
inquiries from clients and investment brokers. The Registrant's primary
research effort is provided by eight in-house equity analysts and is
supplemented by two New York correspondent firms which cover over 1,100
companies worldwide and provide extensive coverage on the economy and securities
markets. The services provided by the Research Department are critically
important to virtually all revenue-generating activities of the firm, including
retail and institutional brokerage, market-making, and investment banking.
Research reports are made available without charge to the Registrant's clients.
Administration and Operations
The Registrant's operations and administrative personnel, which included 87
employees as of June 30, 1995, are responsible for the execution of orders;
processing of securities transactions; receipt, identification and delivery of
funds and securities; internal financial control; accounting functions; office
services; client services; custody of clients' securities; and compliance with
regulatory requirements.
There is considerable fluctuation in the volume of transactions which a
securities firm must handle. In the past, when the volume of trading in
securities reached record levels, the securities industry experienced
significant operating problems. The Registrant has never experienced any
significant operating difficulties, even during periods of exceptionally heavy
trading. There is, however, no assurance that heavy trading volume in the
future will not result in clearing and processing difficulties. The following
table sets forth the high, low, and average number of monthly sale and purchase
transactions processed by the Registrant during the periods shown.
Monthly
Fiscal Years High Low Average
1995 33,659 19,936 24,360
1994 25,141 18,857 21,485
1993 24,441 14,658 18,973
1992 22,696 14,627 18,341
1991 29,236 9,724 15,667
Beginning June 7, 1995, the settlement date for most securities transactions
was shortened from five days to three days following the transaction date.
Although the Registrant has not experienced any significant operating problems
as a result of this change, the full effects of this change on client behavior
and the securities industry may not be known for some time.
The Registrant currently utilizes the services of SunGard Financial Systems,
Inc. for the electronic data processing related to recording all data pertinent
to security transactions and general accounting.
The Registrant believes that its internal controls and safeguards against
securities theft, including use of depositories and periodic securities counts,
are adequate. As required by the NYSE and other regulatory bodies, the
Registrant carries fidelity bonds covering loss or theft of securities, as well
as employee dishonesty, forgery and alteration of checks or similar items, and
forgery of securities. Such bonds provide total coverage of $5,000,000 (subject
to a $500,000 deductible per claim, which changes to $250,000 as of July 1,
1995.)
All transactions are recorded and posted to the books daily; designated
personnel monitor them to ensure compliance with applicable laws, rules, and
regulations. Periodic reviews of certain controls are conducted, and
administrative and operations personnel meet frequently with management to
review operational conditions in the firm. The Registrant has an internal
auditor who has direct access to the Audit Committee of the Board of Directors,
which includes three outside directors.
Competition
The Registrant is engaged in the highly competitive securities brokerage and
financial services businesses. It competes directly with other regional
securities brokerage firms, large Wall Street securities firms, and discount
brokerage firms for a share of the retail brokerage business in its market area.
To an increasing degree, the Registrant also competes for various segments of
the retail financial service business with other institutions such as commercial
banks, savings institutions, mutual fund companies, life insurance companies and
financial planning firms. In particular, it is generally believed that legal
and regulatory changes will allow commercial banks and their holding companies
to compete more directly in the brokerage and investment banking businesses in
the near future.
In addition to the competition for retail investment business, there is
substantial competition among firms in the securities industry to attract and
retain experienced and productive investment brokers. (See "Employees.")
Many of these competitors have far greater personnel and financial resources
than the Registrant. Larger competitors are able to advertise their products
and services on a national or regional basis and have a far greater number and
variety of distribution outlets for their products. Discount brokerage firms
market their services through aggressive pricing and promotional efforts. In
addition, several regional competitors have much more extensive investment
banking activities than the Registrant and therefore possess a relative
advantage with regard to securities distribution.
Recent rapid advancements in computing and communications technology are
substantially changing the means by which financial services are delivered.
These changes are providing consumers with more direct access to a wide variety
of financial and investment services including market information and on-line
trading and account information. Advancements in technology also create demand
for more sophisticated levels of client services. Provision of these services
may entail considerable cost without an offsetting source of revenue. Although
management is committed to utilizing technological advancements to provide a
high level of client service, many of the Registrant's competitors have far
greater technological resources at their disposal.
The Registrant follows a strategy of attempting to offer superior service and
investment advice in order to differentiate itself from competitiors.
Employees
As of June 30, 1995, the Registrant had 479 full-time employees, of whom 214
had full-time investment broker responsibilities. None of the Registrant's
employees are covered by a collective bargaining agreement.
In large part, the Registrant's future success is dependent upon its
continuing ability to hire, train and retain qualified investment brokers.
During the fiscal year ended June 30, 1995, the Registrant hired 36 investment
brokers. The total number of investment brokers increased to 214 from 205
during the fiscal year reflecting the aforementioned new hires offset by
investment brokers leaving the Registrant's employ and employees transferred to
and from investment broker and other positions. The Registrant trains new
investment brokers who are required to take examinations given by the NYSE, the
NASD and certain state securities regulators in order to be registered and
qualified. To Registrant also provides for continuing training programs for
investment brokers. Beginning in 1995, investment brokers are required to meet
certain industry continuing education requirements. Competition is intense
among securities firms for investment brokers with good sales production
records.
The Registrant considers its employee relations to be good and considers its
compensation and employee benefits, which include medical, life, accidental
death and disability insurance, a profit sharing and 401(k) plan, an employee
stock purchase plan, educational assistance, as well as a flexible benefits plan
which allows pre-tax contributions for medical insurance premiums, out-of-pocket
medical expenses, and dependent care expenses, to be competitive with those
offered by other securities firms. In addition to the benefits offered to all
eligible employees, the Registrant maintains a stock option plan and a
non-qualified deferred compensation plan to attract and retain executive
personnel and investment brokers with outstanding sales production records.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The Securities and Exchange Commission
("SEC") is the federal agency charged with administration of the federal
securities laws. Much of the regulation of broker-dealers, however, has been
delegated to self-regulatory organizations, principally the NASD and the
national securities exchanges. These self-regulatory organizations adopt rules
(which are subject to approval by the SEC) which govern the industry and conduct
periodic examinations of member broker-dealers. Securities firms are also
subject to regulation by state securities commissions in the states in which
they are registered. Scott & Stringfellow is currently registered in 38 states
and the District of Columbia.
The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales practices, trade practices among
broker-dealers, capital structure of securities firms, uses and safekeeping of
clients' funds and securities, record keeping, and the conduct of directors,
officers and employees. Additional legislation, changes in rules promulgated by
the SEC and by self-regulatory organizations, or changes in interpretation or
enforcement of existing laws and rules, often affect directly the method of
operation and profitability of broker-dealers. The SEC and the self-regulatory
organizations may conduct administrative proceedings which can result in
censure, fines, suspension or expulsion of a broker-dealer, its officers or
employees. The principal purpose of regulation and discipline of broker-dealers
is the protection of clients and the securities market rather than the
protection of creditors or stockholders of broker-dealers.
One of the most important regulations with which the Registrant's
broker-dealer subsidiary must continually comply is SEC Rule 15c3-1 and a
similar rule of the NYSE which require the Registrant's broker-dealer subsidiary
to maintain a minimum amount of net capital, as defined. These rules, under the
alternative method, prohibit a broker or dealer from engaging in any securities
transactions at a time when its net capital is less than 2% of aggregate debit
items arising from customer transactions; in addition, restrictions may be
imposed on the operations of a broker or dealer if its net capital is less than
5% of aggregate debit items. At June 30, 1995, the Registrant's broker-dealer
subsidiary's net capital was 25% of aggregate debit items. (See note 6 of Notes
to Consolidated Financial Statements for fiscal 1995 incorporated herein by
reference.)
The laws,. rules and regulations of the various federal, state and other
regulatory bodies of which the business of the Registrant is subject are
constantly changing. While the management believes that it is currently in
compliance in all material respects with all laws, rules and regulations
applicable to its business, it cannot predict what effect any such changes might
have.
Item 2. PROPERTIES
The Registrant uses general office space for the conduct of its business. The
Registrant's main office is located in the Mutual Building, 909 East Main
Street, Richmond, Virginia, and its branch operations are conducted in various
office buildings located in 25 other municipalities in which it does business.
All of the Registrant's offices are leased. (See note 11 of Notes to
Consolidated Financial Statements for fiscal 1995 incorporated herein by
reference.) The Registrant is currently renovating its main office space, which
the Registrant believes will improve the efficiency of its departments by
co-location of functionally related activities and enhancement of areas
servicing its retail and investment banking clients. A portion of the
renovations were completed during 1995 and the remainder is expected to be
completed over the next two years. In addition, during 1995 the Registrant
renovated or relocated a number of its retail branch offices to accommodate the
expanding number of investment brokers and improve client service. Although the
Registrant's offices are leased, relocations and renovations often require
capital expenditures for leasehold improvements, furniture and equipment.
Item 3. LEGAL PROCEEDINGS
The Registrant has been named in legal actions relating to its securities
business. Management of the Registrant, after consultation with legal counsel,
believes the resolution of these various lawsuits and claims will have no
material adverse effect on the financial position of the Registrant.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Registrant as of June 30, 1995, are as follows:
<TABLE>
<CAPTION>
Name Age Positions with the Registrant
<S> <C> <C>
S. Buford Scott 62 Chairman of the Board
Frederic Scott Bocock 63 Vice Chairman of the Board
William P. Schubmehl 63 Director, President and Chief Executive Officer
John Sherman, Jr. 49 Director, Senior Vice President (1)
Steven C. DeLaney 40 First Vice President and Chief Financial Officer (2)
Sandra D. Glass 56 Senior Vice President
Victor L. Harper 53 Senior Vice President
Tullius C. Tupper 52 Senior Vice President
Norman L. Hancock 57 First Vice President and Chief Compliance Officer
Charles E. Mintz 40 First Vice President and Chief Administrative Officer
</TABLE>
(1) John Sherman, Jr. was named Executive Vice President and Chief Operating
Officer in July 1995
(2) Steven C. DeLaney was appointed to the Board of Directors and named Senior
Vice President in July 1995
S. Buford Scott has served as Chairman of the Board of Directors of the
Registrant and Scott & Stringfellow since 1974. He also served as its Chief
Executive Officer from 1974 until 1984. Mr. Scott is a member of the Boards of
Directors of Albemarle Corporation, Ethyl Corporation and Great Eastern Energy
and Development Corporation. He is also a Director of Sheltering Arms Hospital,
a Director of the Virginia Council on Economic Education, a Director of Richmond
Renaissance, a Director of the Atlantic Rural Exposition (State Fair of
Virginia), a Director of the Hollywood Cemetery Association, a Trustee of the
Securities Industry Foundation for Economic Education, and Chairman of Elk Hill
Farm, Inc.
Frederic Scott Bocock has served as Vice Chairman of the Board of Directors of
the Registrant and Scott & Stringfellow since 1984, and served as President of
Scott & Stringfellow from 1974 until 1984. Mr. Bocock serves as a Director and
Member of the Executive Board of Richmond Memorial Hospital, and is President of
the Men's Board of the Virginia Home. Mr. Bocock, S. Buford Scott and R.
Strother Scott, a First Vice President - Corporate Finance, are first cousins
and grandsons of Frederic William Scott, co-founder of Scott & Stringfellow.
William P. Schubmehl has been a Director of Scott & Stringfellow since 1981.
He joined Scott & Stringfellow in 1978 as a Vice President. He was elected
Senior Vice President in 1986 and Executive Vice President in 1990. In 1992 he
was elected President and Chief Executive Officer.
John Sherman, Jr. was elected Senior Vice President for Branch Administration
and Retail Sales of Scott & Stringfellow in August 1993. Mr. Sherman joined
Scott & Stringfellow in October 1988 as Vice President and manager of the
Kinston, North Carolina branch office. Prior to joining Scott & Stringfellow,
Mr. Sherman served as President of Shurgard Capital Investments located in
Seattle, Washington from January 1988 to October 1988. Prior to January 1988,
Mr. Sherman held the position of Vice President and Kinston branch manager of
Wheat, First Securities, Inc.
Steven C. DeLaney joined Scott & Stringfellow as a Vice President in July 1992
and was named First Vice President and Chief Financial Officer in October 1992.
He was elected to the Board of Directors of Scott & Stringfellow, Inc. in
October 1994. In July 1995, he was named a Senior Vice President and nominated
for election to the Board of Directors of the Registrant. His primary duties
include responsibility for the finance, accounting, operations and technology
functions. Prior to joining the Registrant, Mr. DeLaney was employed from 1976
to 1991 by a Virginia-based, financial services holding company during which
time he held various executive positions including President and Chief Operating
Officer and Chief Financial Officer.
Sandra D. Glass joined the Registrant in 1986 as Director of Operations.
Previously, she was a Senior Vice President and Director of Operations for
Schneider, Bernet & Hickman, Inc., a regional brokerage firm in Dallas, Texas
where she was employed from 1965 to 1985.
Victor L. Harper is a Senior Vice President and has served as a Director of
Scott & Stringfellow, Inc. since 1984. Before joining Scott & Stringfellow in
1984, Mr. Harper served as a Vice President and Director of Davenport and Co. Of
Virginia, Inc. He served with Davenport in various capacities from 1968 to
1984. Mr. Harper is also a Trustee and Vice Chairman for the Securities Industry
and Foundation for Economic Education.
Tullius C. Tupper joined the Registrant in 1988 as Manager of the Taxable
Fixed Income Department and became Manager of Fixed Income, including both
tax-exempt and taxable fixed income areas, in 1990. Prior to joining Scott &
Stringfellow in 1988, Mr. Tupper was employed by Wheat, First Securities, Inc.
where he had been employed in various positions from 1979 to 1988.
Norman L. Hancock joined Scott & Stringfellow in October 1992 as First Vice
President and Chief Compliance Officer. Prior to joining Scott & Stringfellow,
Mr. Hancock was with Wheat, First Securities, Inc. for 35 years. He was Senior
Vice President and Compliance Director with them for 18 years. He served as
cashier and personnel director in earlier years.
Charles E. Mintz was elected First Vice President and Chief Administrative
Officer in May 1995. Mr. Mintz joined Scott & Stringfellow in August 1990 as
manager of the Wilmington, North Carolina branch office. Prior to joining Scott
& Stringfellow, Mr. Mintz served as President of Fox, Graham & Mintz Securities,
Inc. from 1985 until its 1990 acquisition by Scott & Stringfellow. Prior to
1985, Mr. Mintz was the Myrtle Beach, South Carolina branch manager of Wheat,
First Securities, Inc.
All officers serve at the discretion of the Board of Directors.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated herein by reference to
the Corporate Information on page 25 of the Annual Report to Shareholders for
fiscal 1995. The computation of the approximate number of holders of the
Registrant's common stock is based on the number of holders of record as of June
30, 1995. Information on the holders of record of the Registrant's common stock
is maintained and produced by the Registrant's transfer agent, Mellon Securities
Transfer Company.
Item 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
page 11 of the Annual Report to Shareholders for fiscal 1995.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to
pages 12 to 15 of the Annual Report to Shareholders for fiscal 1995.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item, except for the required financial
statement schedules, is incorporated herein by reference to pages 16 to 24 of
the Annual Report to Shareholders for fiscal 1995. The financial statement
schedules, which include the Parent-only Condensed Financial Statements of the
Registrant and the Schedule of Short-term Borrowings, are included on pages 18
to 20 of this Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements on accounting and
financial disclosure.
PART III
The information required by Items 10, 11, 12, and 13, except for the
information regarding Executive Officers called for by Item 10, is incorporated
by reference to the Registrant's definitive Proxy Statement to be used in
connection with the solicitation of proxies to be voted at the Registrant's
Annual Meeting of Shareholders to be held October 17, 1995 which was filed with
the Commission pursuant to Regulation 240.14a(6)(c) on September 21, 1995.
The information regarding Executive Officers required by Item 10 is shown on
page 11 of this Form 10-K.
PART IV
.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) List of Financial Statements, Financial Statement Schedules, and Exhibits
(1) The following consolidated financial statements of the Registrant and
its subsidiaries, included in the Annual Report to Shareholders for fiscal
1995, are incorporated herein by reference:
Consolidated Statements of Financial Condition - June 30, 1995 and June
24, 1994.
Consolidated Statements of Income - Fiscal years ended June 30, 1995, June
24, 1994 and June 25, 1993.
Consolidated Statements of Changes in Stockholders' Equity - Fiscal years
ended June 30, 1995, June 24, 1994, and June 25, 1993.
Consolidated Statements of Cash Flows - Fiscal years ended June 30, 1995,
June 24, 1994, and June 25, 1993.
Notes to Consolidated Financial Statements.
(2) The following financial statement schedules of Scott & Stringfellow
Financial, Inc. are required by Section 210.5-04 of Regulation S-X:
Independent Auditors' Report on Financial Statement Schedules pg. 17
Schedule III - Condensed Financial Statements of Registrant pg. 18
Schedule IX - Short-term Borrowings pg. 20
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, or are inapplicable, or the
required information is included in the consolidated financial statements
or notes thereto and therefore have been omitted.
(3) The following exhibits are filed herewith or incorporated by reference
as indicated. Exhibit number refers to Item 601 of Regulation S-K:
EXHIBIT NUMBER PAGE
3. Articles of Incorporation Filed as Exhibits 3.1 through 3.4 to
Form S-18 Registration Statement
#33-8967 and incorporated herein
by reference
4. Material Contracts -
Other Material Contracts Filed as Exhibits 10.1 through 10.5
in Form S-18 Registration Statement
#33-8967 and incorporated herein
by reference
Master Borrowing Note Filed as Exhibit 10 with the
agreement with Crestar Bank Registrant's Annual Report on Form
10-K for the fiscal year ended June
24, 1994 and incorporated by reference
Broker Loan Agreement with Filed as Exhibit 10 with the
Crestar Bank Registrant's Annual Report on Form
10-K for the fiscal year ended June
24, 1994 and incorporated by reference
Broker Loan Agreement with Filed as Exhibit 10 with the
NationsBank of Virginia, N.A. Registrant's Annual Report on Form
10-K for the fiscal year ended June
24, 1994 and incorporated by reference
11. Statement re: Computation of
Earnings per Share Exhibit 11
13. Certain portions of the Annual
Report to Shareholders for the
year ended June 30, 1995, to
the extent specifically
incorporated by reference
herein Exhibit 13
22. List of Subsidiaries of Filed as Exhibit 22 with the
Registrant Registrant's Annual Report on Form
10-K for the fiscal year ended June
24, 1994 and incorporated by reference
23. Consent of Independent Auditors Exhibit 23
27. Financial Data Schedule Exhibit 27
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K for the fiscal year ended June 30,
1995.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Richmond, State of Virginia, on the 21st day of September, 1995.
SCOTT & STRINGFELLOW FINANCIAL, INC. (REGISTRANT)
BY /s/ William P. Schubmehl September 21, 1995
William P. Schubmehl Date
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ William P. Schubmehl President and Director September 21, 1995
------------------------ (Principal Executive Officer)
William P. Schubmehl
/s/ Steven C. DeLaney Senior Vice President, Chief September 21, 1995
------------------------ Financial Officer and Director
Steven C. DeLaney (Principal Financial /
Accounting Officer)
/s/ S. Buford Scott Director September 21, 1995
------------------------
S. Buford Scott
/s/ Frederic S. Bocock Director September 21, 1995
------------------------
Frederic S. Bocock
Director September 21, 1995
------------------------
William F. Calliott
/s/ David Plageman Director September 21, 1995
------------------------
David Plageman
/s/ John J. Muldowney Director September 21, 1995
------------------------
John. J. Muldowney
/s/ R. Bruce Campbell Director September 21, 1995
------------------------
R. Bruce Campbell
/s/ John Sherman, Jr. Director September 21, 1995
------------------------
John Sherman, Jr.
/s/ William W. Berry Director September 21, 1995
------------------------
William W. Berry
/s/ R. Gordon Smith Director September 21, 1995
------------------------
R. Gordon Smith
/s/ Robert L. Hintz Director September 21, 1995
------------------------
Robert L. Hintz
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Stockholders
Scott & Stringfellow Financial, Inc.
Under date of August 7, 1995, we reported on the consolidated statements of
financial condition of Scott & Stringfellow Financial, Inc. and subsidiaries as
of June 30, 1995 and June 24, 1994, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for the years ended June
30, 1995, June 24, 1994, and June 25, 1993, as contained in the 1995 annual
report to stockholders. These consolidated financial statements and our report
thereon are included in the 1995 annual report on Form 10-K. In connection with
our audits of the aforementioned consolidated financial statements, we also have
audited the related financial statement Schedules III and IX. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Richmond, Virginia
August 7, 1995
<PAGE>
Schedule III
Condensed Financial Statements of Registrant
Scott & Stringfellow Financial, Inc. (Parent only)
Condensed Statements of Financial Condition
June 30, June 24,
1995 1994
ASSETS
Investments in not readily
marketable securities $ 107,831 $ 107,831
Investments in subsidiaries (a) 25,453,608 24,214,952
Total Assets $ 25,561,439 $ 24,322,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Intercompany (a) $ 112,831 $ 107,831
Dividends payable 210,762 192,765
Total Liabilities 323,593 300,596
Stockholders' Equity:
Common stock, $0.10 par value. Authorized
10,000,000 shares; issued and outstanding
2,107,620 in 1995 and 2,102,896 shares
in 1994 210,762 210,290
Additional paid-in capital 9,964,773 9,671,859
Retained earnings 15,062,311 14,140,038
Total Stockholders' Equity 25,237,846 24,022,187
Total Liabilities and Stockholders' Equity $ 25,561,439 $ 24,322,783
Condensed Statements of Income
Years Ended
June 30, 1995 June 24, 1994 June 25, 1993
Equity in undistributed net income
from subsidiaries (a) $1,278,649 $ 1,633,204 $ 1,971,027
Cash dividends (a) 822,766 1,325,147 1,511,397
Net income $ 2,101,415 $ 2,958,351 $ 3,482,424
(a) Eliminated in consolidation
See Notes to Consolidated Financial Statements contained in the 1995 Annual
Report to Shareholders and incorporated herein by reference.
See accompanying independent auditors' report.
<PAGE>
Schedule III
Condensed Financial Statements of Registrant
Scott & Stringfellow Financial, Inc. (Parent only)
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended
June 30, 1995 June 24, 1994 June 25, 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net $ 2,101,415 $ 2,958,351 $ 3,482,424
cash provided by operating activities:
Equity in undistributed net income
of subsidiaries -1,278,649 -1,633,204 -1,971,027
Changes in assets and liabilities:
Inter-company payable 5,000 - -
Net cash provided by operating activities 827,766 1,325,147 1,511,397
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid -822,766 -1,325,147 -1,511,397
Purchase and retirement of common stock -564,151 -825,752 -156,900
Issuance of common stock 519,158 450,429 338,922
Net cash used in fnancing activities -867,759 -1,700,470 -1,329,375
CASH FLOWS FROM INVESTING ACTIVITIES
Distributions from subsidiary 564,151 825,752 156,900
Contributions to subsidiaries -524,158 -450,429 -338,922
Net cash provided by (used in) investing
activities 39,993 375,323 -182,022
Net change in cash and cash equivalents - - -
Cash and cash equivalents at beginning of year - - -
Cash and cash equivalents at end of year - - -
</TABLE>
See Notes to Consolidated Financial Statements contained in the 1995 Annual
Report to Shareholders and incorporated herein by reference.
See accompanying independent auditors' report.
<PAGE>
Schedule IX
Short-term Borrowings
Scott & Stringfellow Financial, Inc.
Year Ended June 30, 1995
<TABLE>
<CAPTION>
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balances Average Outstanding Outstanding Interest Rate
Short-term at end of Interest during the during the during the
Borrowings Period Rate Period Period Period
(1) (2) (3)
<S> <C> <C> <C> <C> <C>
Bank Borrowings $ 6,600,000 6.88% $ 16,000,000 $ 5,377,960 6.39%
</TABLE>
See accompanying independent auditors' report.
<PAGE>
Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Years Ended
June 30, 1995 June 24, 1994
Primary Fully Diluted Primary Fully Diluted
<S> <C> <C> <C> <C>
Weighted average shares
outstanding:
Common shares 2,097,533 2,097,533 2,105,248 2,105,248
Dilutive shares available
under stock options 11,382 12,029 10,145 10,145
Weighted average common
shares and common stock
equivalents outstanding (1) 2,108,915 2,109,562 2,115,393 2,115,393
Net earnings applicable to
common shares 2,101,415 2,101,415 2,958,351 2,958,351
Earnings per share $ 1.00 $ 1.00 $ 1.40 $ 1.40
</TABLE>
(1) Weighted average common stock and common stock equivalents outstanding have
been adjusted for all periods to reflect the effect of a 6:5 stock split
effected in the form of a 20% stock dividend declared on May 18, 1994, and
distributed on August 26, 1994 to shareholders of record on August 5, 1994.
The computation of per share earnings for the year ended June 25, 1993 was
filed on Exhibit 11, page E-16, of the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 24, 1994 and is hereby incorporated by reference.
Exhibit 13
SELECTED FINANCIAL DATA
(In thousands except per share amounts and Other Company Data)
<TABLE>
<CAPTION>
Years Ended
June 30, June 24, June 25, June 26, June 28,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Results of Operations:
Total Revenues $ 54,119 $ 52,108 $ 48,146 $ 46,240 $ 37,248
Income before income taxes 3,288 4,665 5,375 5,174 2,714
Net income 2,101 2,958 3,482 3,289 1,824
Per Share Data (1):
Earnings per share $ 1.00 $ 1.40 $ 1.65 $ 1.53 $ 0.83
Cash dividends per share (2) 0.40 0.35 0.58 0.68 0.59
Book value per share 11.97 11.42 10.42 9.37 8.58
Weighted average common shares
and equivalents outstanding 2,109 2,115 2,115 2,150 2,188
Financial Condition:
Total assets $ 93,266 $ 80,702 $ 79,484 $ 58,975 $ 53,976
Total liabilities 68,028 56,680 57,307 39,225 35,452
Total stockholders' equity 25,238 24,022 22,177 19,750 18,524
Other Financial Data:
Profit margin:
Pre-tax 6.1% 9.0% 11.2% 11.2% 7.3%
After-tax 3.9% 5.7% 7.2% 7.1% 4.9%
Return on average equity:
Pre-tax 13.3% 20.2% 25.5% 26.3% 14.7%
After-tax 8.5% 12.8% 16.5% 16.7% 9.9%
Other Company Data:
Total employees 479 458 418 387 370
Investment brokers 214 205 181 170 166
Branch offices 26 25 26 26 25
</TABLE>
(1) All per share items have been adjusted to reflect a 6:5 stock split
effected in the form of a 20% stock dividend declared on May 18, 1994 and
distributed on August 26, 1994 to shareholders of record on August 5, 1994.
(2) Includes $.29 special dividend in 1993, $.43 special dividend in 1992,
and $.38 special dividend in 1991.
<PAGE>
QUARTERLY RESULTS OF OPERATIONS - Unaudited
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended
1995 June 30 March 31 December 31 September 30
<S> <C> <C> <C> <C>
Revenues $ 14,988 $ 13,304 $ 13,059 $ 12,768
Expenses 14,083 12,638 12,268 11,842
Income before income taxes 905 666 791 926
Income taxes 327 242 282 336
Net income $ 578 $ 424 $ 509 $ 590
Earnings per common share $ 0.28 $ 0.20 $ 0.24 $ 0.28
<CAPTION>
Quarters Ended
1994 June 24 March 25 December 31 September 24
<S> <C> <C> <C> <C>
Revenues $ 12,425 $ 12,444 $ 13,795 $ 13,444
Expenses 11,644 11,577 12,367 11,855
Income before income taxes 781 867 1,428 1,589
Income taxes 280 321 513 593
Net income $ 501 $ 546 $ 915 $ 996
Earnings per common share $ 0.24 $ 0.26 $ 0.43 $ 0.47
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
General
The Company is the holding company for Scott & Stringfellow, Inc., a
regional brokerage, investment banking, and financial services firm
headquartered in Richmond, Virginia. Scott & Stringfellow, Inc. is the
South's oldest continuous member of the New York Stock Exchange. On June
20, 1995, the firm celebrated it's 100th year as a member of the New York
Stock Exchange and is one of only three firms outside of New York which has
been a member for at least 100 years. It operates 26 offices in communities
located across Virginia, North Carolina, and West Virginia, and has 479
employees including 214 Investment Brokers.
Scott & Stringfellow operated as a partnership from its founding in 1893
until its incorporation in 1974. In 1984 Scott & Stringfellow acquired
Horner, Barksdale & Co. of Lynchburg, Virginia, a securities brokerage firm
specializing in municipal bonds. The Company was established in 1986 in
connection with an initial public offering of common stock. In October
1989, Scott & Stringfellow acquired substantially all of the assets of
Investment Corporation of Virginia, a 52 year-old investment banking and
brokerage firm headquartered in Norfolk, Virginia. There have been no
significant acquisitions since 1989, although Scott & Stringfellow has
grown internally over the past several years in terms of the number of
Investment Brokers.
As a full-service firm, Scott & Stringfellow's securities brokerage
activities include both retail and institutional brokerage and the
distribution of mutual fund shares, money market funds, and insurance
products; and retirement account services including custodial services for
individual retirement accounts. These brokerage activities are supported
by an in-house equity research department and trading desks for over-the-
counter equities, municipal bonds and taxable fixed income securities. The
Company's investment banking activities include the management of and
participation in underwritings of corporate and municipal securities and
financial advisory services to public and private companies and
municipalities. Additionally, Scott & Stringfellow Capital Management, a
wholly owned subsidiary, provides fee-based, investment advisory services
to both individual and institutional clients.
The Company's profitability is largely sensitive to the market volume of
trading in securities and the relative level and volatility of market
prices for equity and fixed income securities. Approximately 80% of the
Company's total revenue is generated by commissions, sales credits, or
mark-ups on securities transactions. The remainder of the Company's total
revenue is generated by interest and dividend income, trading profits or
losses, investment banking activities, and advisory and administrative
service fees. Because of the interdependence of various activities and
departments of the Company's business, and the arbitrary assumptions which
would be involved in allocating overhead, including administrative,
operations, communications and data processing expenses, it is not
appropriate to state the percentage contribution to net income of each
aspect of the Company's operations. Many of the Company's activities have
high operating costs which do not decrease proportionately with reduced
levels of activity and may even increase during such periods. Moreover,
many of these operating costs may increase at a proportionately greater
rate than revenues during periods of increased activity. While the Company
attempts to build non-sales revenues and places an emphasis on the control
of fixed costs, its profitability is adversely affected by sustained
periods of reduced transaction volume or loss of brokerage clients. The
Company's profitability is also adversely affected when it is unable to
compensate for increases in fixed costs through increased transaction
volume or the pricing of its services.
Scott & Stringfellow is registered with the Securities and Exchange
Commission ("SEC") as a broker-dealer and Scott & Stringfellow Capital
Management is registered with the SEC as an investment advisor.
Accordingly, the Company is subject to all the SEC rules applicable to
broker-dealers and investment advisors and to any rules promulgated by
securities industry self-regulatory agencies, such as the National
Association of Securities Dealers, Inc. ("NASD") and the Municipal
Securities Rulemaking Board ("MSRB"). As a member of the New York Stock
Exchange, the Company is also subject to its rules and to a periodic
examination of the Company's broker-dealer operations. Scott &
Stringfellow is a member of the Securities Investor Protection Corporation
("SIPC") which insures customer accounts of member broker-dealers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds include its net income adjusted
for non-cash items, cash balances payable to clients, broker-dealers, and
others, and short-term bank financing. As set forth in the Consolidated
Statement of Cash Flows for the year ended June 30, 1995, presented in the
financial statements which follow, net income adjusted for non-cash items
for depreciation and amortization, gains on disposition of equipment,
deferred income taxes, and allowance for doubtful accounts amounted to $2.7
million. After adjustment for changes in assets and liabilities, cash
provided by operations was $3.7 million, of which $0.5 million was used for
investing activities and $1.8 million was used for financing activities,
resulting in an increase in cash and cash equivalents of $1.4 million.
During fiscal 1995, the Company's total assets increased by 16% to $93.3
million from $80.7 million at the end of fiscal 1994, primarily as a result
of increases in trading and investment securities and receivable from
customers. Approximately 90% of the Company's total assets are liquid,
consisting of cash or assets convertible into cash. The Company's largest
asset is its receivable from customers, representing borrowings from the
Company to finance the purchase of securities on margin. This receivable
from customers amounted to $65.0 million, or 70% of total assets, at June
30, 1995. Receivable from customers increased by 9% during fiscal year
1995, following a 20% increase during fiscal 1994. Another liquid asset,
trading and investment securities, amounted to $13.4 million, or 14% of
total assets at June 30, 1995.
The Company has historically funded its assets with equity capital,
customer credit balances, and short-term bank loans. At June 30, 1995,
total stockholders' equity was $25.2 million, or 27% of total assets. The
Company's largest liability, payable to customers, amounted to $50.8 million,
or 54% of total assets at June 30, 1995, as compared to $38.2 million or 47%
of total assets at June 24, 1994, reflecting an increase of
33% during fiscal 1995. The remaining funding was provided primarily by
short-term liabilities arising in the ordinary course of the Company's
business and by short-term bank loans. Short-term bank loans are used from
time to time to finance periodic increases in receivables from customers
and trading securities. Such loans are secured by either customer-owned
securities held in margin accounts or firm-owned securities held in
inventory accounts. The Company maintains lines of credit from established
financial institutions totaling $58.0 million, of which $6.6 million was
outstanding as of June 30, 1995. Additional bank lines of credit are
available on a short-term basis for the purpose of financing new
underwritings.
In fiscal 1995, the Company declared cash dividends of $0.8 million and
repurchased 47,683 shares of its common stock at a cost of $0.6 million.
The Company plans to continue repurchasing its common stock from time to
time as market conditions warrant. The Company issued 43,066 shares of
stock to the Company's employee stock purchase plan during fiscal 1995 for
proceeds of $0.4 million. This source of equity financing is expected to
increase in future years as participation in this plan and the balance of
its holdings increases.
Scott & Stringfellow is subject to the net capital requirements of the
Securities and Exchange Commission and the New York Stock Exchange which
are designed to measure the general financial soundness and liquidity of
broker-dealers. The Company has consistently operated well in excess of
the minimum regulatory requirements and believes that it ranks among the
best capitalized firms in the brokerage industry relative to its size. At
June 30, 1995, Scott & Stringfellow's net capital of $17.1 million exceeded
the minimum SEC requirement by approximately $15.7 million.
RESULTS OF OPERATIONS
The results of the Company's operations over the three year period
covered by fiscal years 1995, 1994, and 1993 have been marked by increasing
revenues but declining profit margins and net income. Steady growth in the
Company's core retail brokerage activities resulted in record revenues
during fiscal 1995 of over $54 million, representing a 4% increase over
fiscal 1994. Total revenues had grown by 8% from fiscal 1993 to fiscal
1994. However, an average annual increase of 9% in the Company's operating
expenses from fiscal 1993 to fiscal 1995 has resulted in a decline in net
income from $3.5 million in fiscal 1993 to $2.1 million in fiscal 1995.
The following table provides a summary of the changes in the major
categories of revenues and expenses in both dollar amounts and percentage
terms for the years ended June 30, 1995, June 24, 1994, and June 25, 1993,
and serves as a basis for the comparative discussion of the results of
operations for the last three fiscal years which follows. In this
discussion which follows, these three fiscal years are referred to as 1995,
1994, and 1993, respectively. Because the Company's fiscal periods end
with the last Friday of each month, the results of operations for fiscal
year 1995 include 53 weeks of acitivity while the results of operations for
fiscal years 1994 and 1993 include 52 weeks of activity.
CHANGES IN RESULTS OF OPERATIONS
(In thousands)
1995 vs. 1994 1994 vs.1993
Increase (decrease) Increase (decrease)
Amount Percent Amount Percent
Revenues
Commissions $ 1,649 6% $ 2,576 11%
Principal transactions 2,626 32% -755 -9%
Investment banking -4,373 -41% 1,257 13%
Interest and dividends 1,837 46% 646 19%
Advisory and administrative fees 362 15% 208 9%
Other -89 -30% 30 12%
Total revenues 2,012 4% 3,962 8%
Expenses
Employee compensation
and benefits 510 2% 3,467 11%
Communications 424 17% 170 7%
Occupancy and equipment 342 16% 118 6%
Advertising and sales promotion 311 22% 85 6%
Postage, stationery and supplies 194 13% 312 25%
Brokerage, clearing and
exchange fees 58 6% -20 -2%
Data processing 62 7% 105 14%
Interest 959 102% 179 23%
Other operating expenses 528 16% 257 8%
Total expenses 3,388 7% 4,673 11%
Income before income taxes -1,376 -30% -711 -13%
Income taxes -519 -30% -187 -10%
Net income - 857 -29% - 524 -15%
1995 Compared With 1994
Despite a 4% increase in total revenues, net income declined by 29% from
1994 to 1995 due to changes in the revenue mix and higher expenses.
Earnings per share also declined by 29% as average shares outstanding
remained virtually unchanged.
Total revenues increased by $2.0 million, or 4%, in 1995 to a record
$54.1 million. The increase in revenues reflected continued growth in the
Company's core retail brokerage operations as commissions increased by 6%
and principal transactions by 32%. Interest and dividend income also
increased, principally due to higher levels of customer margin borrowings.
Despite the increase in total revenues, a decline in investment banking
revenues of $4.4 million, or 41%, negatively impacted revenue growth and
overall profitability.
Commissions revenues rose 6% to $28.3 million, with commissions on
transactions in equity securities accounting for 125% of the $1.6 million
net increase. Commissions on exchange listed equities increased by $1.2
million, or 9%, and commissions on over-the-counter equities increased by
$0.8 million, or 19%. Commissions on other securities increased by $0.1
million. These increases were partially offset by a decline in commissions
on sales of mutual funds, annuities, and insurance products of $0.5
million, or 7%.
Revenues from principal transactions increased by 32% to $10.7 million
in 1995 from $8.1 million in 1994, as both sales credits on principal
transactions and trading profits posted increases from the prior year.
Higher transaction volume resulted in a $2.0 million, or 26%, increase in
sales credits on principal transactions. Sales credits on principal
transactions increased for all categories of securities, with equities
increasing by 20%, municipals increasing by 31%, and taxable fixed income
securities increasing by 36%. A $0.6 million increase in trading profits
accounted for the remainder of the overall increase in revenue from
principal transactions. In particular, municipal bond trading profits of
$0.3 million in 1995 partially reversed $0.4 million of municipal trading
losses posted in 1994.
Revenues from investment banking activities declined by $4.4 million,
or 41%, as the number of both managed and syndicate underwriting
participations declined significantly in 1995. A trend of reduced
underwriting activity began in the second half of fiscal 1994 as interest
rates began to rise. Rising interest rates continued through the first
half of fiscal 1995 before declining again in the second half, yet
underwriting activity failed to recover - especially in the case of
municipal bonds. Selling concessions on underwritten equity securities
declined by $2.3 million, or 45%, as the number of managed offerings
declined from 9 to 2 and the number of equity syndicate participations
declined from 274 to 149. The significant decline in new issues activity
also impacted tax-exempt bond offerings, as selling concessions on
municipal bond underwritings declined by $1.4 million, or 83%. In
addition, underwriting profits and management fees declined by 65% to $1.0
million from $2.9 million in 1994. The overall reduction in the volume of
underwriting transactions was only partially offset by an increase of $1.1
million, or 118%, in fee-based income from corporate and municipal finance
services.
Interest and dividend income grew significantly to $5.9 million in
1995 from $4.0 million in 1994, an increase of 46%. The Company's largest
source of interest income is interest received from clients on margin
account borrowings, which increased by $1.9 million, or 56%. The average
balances of client margin borrowings increased by approximately 14% from
1994 to 1995. Higher market interest rates during the first six months of
1995 as compared to the first six months of 1994 also contributed to the
increase.
Revenues from advisory and administrative fees increased by $0.4
million, or 15%, attributable to the growth of revenue from investment
advisory services provided by Scott & Stringfellow Capital Management, as
well as increases in postage and handling and other administrative service
fees.
While total revenues increased by $2.0 million, total expenses rose by
$3.4 million, or 7%, from $47.4 million in 1994 to $50.8 million in 1995.
Of particular significance was a 15% increase in total operating expenses
excluding compensation and interest, due in part to planned investments in
new investment brokers and support personnel, office facilities, and
equipment needed to help the Company grow and compete effectively in the
future. The average number of personnel employed during 1995 increased by
approximately 7% over 1994, contributing to increases in both compensation
and non-compensation expenses. In addition, cost increases in expense
categories such as stationery and supplies also contributed to the overall
increase in operating expenses.
The Company's largest expense item, compensation, increased by $0.5
million, or 2%, from 1994 to 1995. Commissions and related performance-
based compensation paid to investment brokers increased by $0.6 million, or
3%, as a result of higher commissions and related performance-based
compensation paid to Investment Brokers as a result of the higher level of
sales production. Administrative and professional salaries increased by
$0.7 million, or 9%. The number of support personnel increased to 265 at
year-end from 253 at the beginning of the year, which was up from 237 at
the beginning of 1994 - resulting in a 6% increase in the average number of
support personnel employed during 1995 versus 1994. The support-to-broker
personnel ratio increased slightly from 1.23 at June 24, 1994 to 1.24 at
June 30, 1995. The Company believes its support-to-broker personnel ratio
is appropriate by industry standards considering the Company's size and its
emphasis on retail client service. Employee benefits expense and payroll
taxes increased by $0.4 million, or 14%, in 1995 which was a function of
higher taxable compensation paid relative to total compensation, higher
employee count, and increased health insurance expense under the Company's
partially self-insured medical plan. Discretionary compensation expense,
which includes Company profit sharing contributions and bonuses paid to
employees based on calendar year profitability, declined by $1.3 million,
or 47%, as a result of the Company's lower level of profitability in 1995
as compared to 1994.
An increase in the number of quote machines and enhanced service
features provided for the use of Investment Brokers and other employees
accounted for the $0.4 million, or 17%, increase in communications
expense.
Occupancy and equipment expense increased by $0.3 million, or 16%, as
a result of increased rent expense on the Company's office spaces related
to relocations and renovations which have taken place over the last 2
years.
Advertising and sales promotion increased by $0.3 million, or 22%,
reflecting the qualification of a larger number of investment brokers for
incentive sales programs and a change in the method of estimation and
accrual of certain costs related to such programs.
Postage, stationery and supplies increased by $0.2 million, or 13%,
due to a combination of factors including high paper prices in effect for
the full year, an estimated 20% increase in the number of client statements
being mailed, and the 10% postage rate increase which took effect during
1995.
Interest expense increased by $1.0 million, or 102%, reflecting
increased borrowing levels for 1995 as compared to the previous year for
the purpose of financing higher levels of customer receivable balances, and
higher interest rates during the first half of 1995 relative to the first
half of 1994.
The $0.5 million increase in other operating expenses is partially
due to a $0.3 million increase in the Company's provision for losses on
certain legal matters.
1994 Compared With 1993
Despite an 8% increase in total revenues, net income declined 15% from
1993 to 1994. The earnings decline was concentrated in the second half of
1994 as net income for the first six months of 1994 was 10% higher than
1993 while net income for the last six month period was down 40%. Earnings
per share also declined by 15% in 1994 as average shares outstanding were
virtually unchanged from the prior period.
Total revenues increased by $4.0 million in 1994 to $52.1 million.
Commissions, investment banking fees, interest and dividends, and advisory
and administrative fees all showed significant percentage and dollar
increases from 1993 to 1994. The only revenue category failing to show an
increase was principal transactions, which declined by 9% from the year-
earlier period, primarily as a result of lower net revenues on underwritten
municipal bond transactions.
Commission revenues rose 11% to $26.7 million reflecting the continued
growth of the Company's core retail brokerage activities. A 17% increase
in mutual fund commissions and a 37% increase in over-the-counter equity
securities commissions accounted for $2.1 million of the $2.6 million
increase in total commission revenues and offset a 2% decline in
commissions on exchange listed securities. Notably, other commission
revenue increased $0.8 million, or 125%, due primarily to increased sales
of annuity products.
Revenue from principal transactions declined by 9% to $8.1 million
from $8.9 million as a $1.3 million decline in trading profits was only
partially offset by increased sales credits on principal transactions in
over-the-counter stocks. Municipal bond trading activity was impacted most
severely by deteriorating market conditions as trading losses of $0.4
million were posted in 1994 as compared to trading profits of $0.4 million
in 1993. The vast majority of the 1994 municipal bond trading loss
resulted from two managed underwritten offerings as secondary market
municipal trading losses were minimal.
Revenues from investment banking activities increased by 13% to $10.6
million from $9.4 million in the previous year. Of the $1.2 million
increase, underwriting profit and management fees accounted for $0.7
million even though the number of issues managed or co-managed was up only
slightly from 1993 to 1994. Syndicate participations, in both common stock
and tax-exempt bond offerings, continued to increase from 1993 to 1994.
Despite the 13% annual increase, investment banking revenues declined by
18% from the first half to second half of fiscal 1994. A significant
decline in tax-exempt bond underwritings, due to the rising interest rate
environment, was only partially offset by the revenues resulting from two
large managed equity offerings which were completed late in the 1994 fiscal
year.
Interest and dividend income increased from $3.4 million to $4.0
million, or 19%, due primarily to higher interest income on customer margin
loans. This increase reflected an increase in the average balances of
customer margin accounts and the rise in interest rates over the second six
months of 1994.
While total revenues increased by 8%, total operating expenses rose
11% to $47.4 million in 1994 compared to $42.8 million in 1993. An
increase of $3.5 million in compensation and benefits accounted for 74% of
the total $4.7 million increase in operating expenses while no other
operating expense category accounted for more than 7% of the total
increase.
Compensation and benefits, which represents 71% of the Company's total
operating expenses, increased by 11% from 1993 to 1994. Of the $3.5
million total increase, commissions and related performance-based
compensation paid to investment brokers as a result of the higher level of
sales production increased by $1.6 million or 10%. Salary expense rose 13%
to $7.8 million, accounting for $0.9 million of the total increase as the
number of support and administrative personnel increased from 237 to 253,
or 7%, during the year. During 1994, the Company continued to take steps
which were begun in 1993 to improve the quality and depth of its
administrative and support staff. Despite the increase in support
personnel, the support-to-broker ratio declined from 1.31 to 1.23 during
the year as the number of investment brokers increased from 181 to 205.
Employee bonuses and profit sharing contributions increased by $0.7 million
or 14%. The Company maintains a number of discretionary compensation
arrangements with employees which are based on calendar year gross revenues
and gross profits calculated on a departmental basis, the aggregate of
which does not always directly correlate with overall Company net profits
on a fiscal year basis. Payroll taxes, employee benefits and other
compensation accounted for the remaining $0.3 million increase in
compensation and benefits.
Postage, stationery and supplies increased by 25% or $0.3 million due
primarily by a 31% increase in postage expense. Approximately one-third of
the increase in postage expense was due to higher mailing costs associated
with the expanded monthly client statement which was introduced in July
1993. The remainder of the increase in postage, stationery and supplies
was caused by a higher level of other mailings and increased consumption of
stationery and supplies normally related to the recruitment of new
investment brokers and support staff.
Interest expense increased 23% in 1994 to $0.9 million from $0.8
million due to a higher level of average borrowings during 1994 as compared
to the previous year and higher average borrowing rates over the second
half of 1994. Other operating expenses increased by 8% due to higher local
taxes which are based primarily on calendar year gross receipts, increased
expenses for employee training and education, and a higher discretionary
provision for possible errors and losses, partially offset by a lower
provision for possible loss on certain loans in 1994 as compared to 1993.
The Company's income tax rate increased from 35.2% in 1993 to 36.6% in
1994 due to increases in certain expenses which are not deductible for tax
purposes.
EFFECTS OF INFLATION
The Company's assets consist largely of liquid, financial assets such
as cash, trading and investment securities valued at current market prices,
and receivable from customers, and are not significantly affected by
inflation. The Company's investment in fixed assets such as furniture,
equipment, and leasehold improvements is not material relative to its total
assets or equity capital, and the impact of inflation on replacement cost
of such assets should not materially affect the Company's profitability or
financial condition. The general rate of inflation does, however, affect
certain operating expenses such as compensation, communications, occupancy,
postage, stationery, supplies, and other general and administrative
expenses. Because of competitive factors in the securities brokerage
industry, increases in these costs resulting from inflation may not be
readily recoverable through increased fees for the Company's services and
may lead to adverse changes in results of operations and financial
condition.
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, June 24,
1995 1994
ASSETS
Cash and cash equivalents $ 3,761,381 $ 2,410,867
Cash segregated under Federal regulations 5,803 13,799
Receivable from brokers, dealers and
clearing organizations (note 2) 2,325,615 1,464,134
Receivable from customers (note 3) 64,968,861 59,700,274
Trading and investment securities,
at market value (note 4) 13,366,267 8,419,387
Exchange memberships, at adjusted cost (market
value $1,765,500 in 1995 and $1,921,500 in 1994) 838,100 838,100
Equipment and leasehold improvements, at cost
(less accumulated depreciation and amortization
of $4,926,656 in 1995 and $4,230,005 in 1994) 2,162,680 2,160,740
Deferred income taxes (note 7) 325,429 126,429
Other assets (note 9) 5,511,907 5,568,576
Total Assets $ 93,266,043 $ 80,702,306
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Drafts payable $ 1,425,385 $ 6,863,048
Short term bank loans (note 5) 6,600,000 2,100,000
Payable to brokers, dealers and clearing
organizations (note 2) 892,994 2,837,382
Payable to customers (note 3) 50,782,579 38,185,561
Securities sold under agreements to
repurchase 0 21,250
Securities sold, but not yet purchased,
at market value (note 4) 570,788 559,032
Accounts payable, accrued compensation
and other liabilities 7,756,451 6,113,846
Total Liabilities 68,028,197 56,680,119
Stockholders' Equity (notes 6, 8 and 10)
Common stock, $0.10 par value. Authorized
10,000,000 shares; issued and outstanding
2,107,620 in 1995 and 2,102,896 shares
in 1994 210,762 210,290
Additional paid-in capital 9,964,773 9,671,859
Retained earnings 15,062,311 14,140,038
Total Stockholders' Equity 25,237,846 24,022,187
Commitments and Contingencies (note 11)
Total Liabilities and Stockholders' Equity $ 93,266,043 $ 80,702,306
See notes to consolidated financial statements.
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended
June 30, June 24, June 25,
1995 1994 1993
<S> <C> <C> <C>
REVENUES
Commissions $ 28,300,683 $ 26,652,182 $ 24,076,218
Principal transactions 10,725,020 8,098,878 8,854,206
Investment banking 6,257,511 10,631,124 9,374,097
Interest and dividends 5,852,740 4,015,629 3,369,655
Advisory and administrative service fees 2,781,944 2,419,646 2,211,910
Other income 201,391 290,119 259,641
Total Revenues 54,119,289 52,107,578 48,145,727
EXPENSES
Employee compensation and benefits (note 8) 34,202,361 33,692,163 30,225,508
Communications 2,985,387 2,561,621 2,391,587
Occupancy and equipment 2,443,465 2,101,687 1,983,697
Advertising and sales promotion 1,745,289 1,433,942 1,348,514
Postage, stationery and supplies 1,741,974 1,548,291 1,235,975
Brokerage, clearing and exchange fees 1,010,292 952,735 972,927
Data processing 920,506 858,559 754,102
Interest 1,900,923 941,721 762,849
Other operating expenses 3,880,677 3,352,264 3,095,144
Total Expenses 50,830,874 47,442,983 42,770,303
Income before income taxes 3,288,415 4,664,595 5,375,424
Income taxes (note 7) 1,187,000 1,706,244 1,893,000
Net income $ 2,101,415 $ 2,958,351 3,482,424
Earnings per common share $1.00 $1.40 $1.65
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended June 30, 1995, June 24, 1994, and June 25,1993
<TABLE>
<CAPTION>
Common
Stock Common Additional
Number of Stock Paid-in Retained
Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance at June 26, 1992 1,756,573 $ 175,657 $ 9,269,487 $ 10,304,934 $ 19,750,078
Issuance of common stock
(notes 8 and 10) 28,434 2,843 336,079 - 338,922
Purchase and retirement of
common stock (note 10) -11,400 -1,140 -60,512 -95,248 -156,900
Cash dividends
($0.58 per share) - - - -1,237,840 -1,237,840
Net income - - - 3,482,424 3,482,424
Balance at June 25, 1993 1,773,607 177,360 9,545,054 12,454,270 22,176,684
Issuance of common stock
(notes 8 and 10) 37,806 3,781 446,648 - 450,429
Purchase and retirement of
common stock (note 10) -59,000 -5,900 -319,843 -500,009 -825,752
Cash dividends
($0.35 per share) - - - -737,525 -737,525
Stock split effected as a
stock dividend (note 10) 350,483 35,049 - -35,049 -
Net income - - - 2,958,351 2,958,351
Balance at June 24, 1994 2,102,896 210,290 9,671,859 14,140,038 24,022,187
Issuance of common stock
(notes 8 and 10) 52,407 5,240 513,918 - 519,158
Purchase and retirement of
common stock (note 10) -47,683 -4,768 -221,004 -338,379 -564,151
Cash dividends
($0.40 per share) - - - -840,763 -840,763
Net income - - - 2,101,415 2,101,415
Balance at June 30, 1995 2,107,620 $ 210,762 $ 9,964,773 $ 15,062,311 $ 25,237,846
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
June 30, June 24, June 25,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,101,415 $ 2,958,351 $ 3,482,424
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 720,494 643,185 545,743
(Gains) on disposition of equipment -1,712 - -
Deferred income taxes -199,000 19,000 -94,000
Write down of exchange memberships - 9,950 -
Allowance for doubtful accounts 87,000 - 216,161
Changes in assets and liabilities:
Cash segregated under Federal regulations 7,996 3,239,294 -3,249,127
Receivable from brokers, dealers and
clearing organizations -861,481 204,529 -163,419
Receivable from customers -5,355,587 -9,842,709 -12,492,208
Trading securities -4,938,079 3,095,131 -2,843,690
Other assets -154,458 1,838,187 -2,880,894
Payable to brokers, dealers and clearing organizations -1,944,388 1,160,164 1,054,457
Payable to customers 12,597,018 -601,683 7,220,014
Securities sold, but not yet purchased 11,756 -63,532 243,952
Accounts payable, accrued compensation
and other liabilities 1,624,608 -123,341 498,385
Net cash provided by (used for) operating activities 3,695,582 2,536,526 -8,462,202
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in drafts payable -5,437,663 6,785,168 77,880
Net change in short term bank loans 4,500,000 -7,200,000 9,300,000
Net change in securities sold under agreements to repurchase -21,250 3,707 -520
Cash dividends paid -822,766 -1,325,147 -1,511,397
Purchase and retirement of common stock -564,151 -825,752 -156,900
Issuance of common stock 519,158 450,429 338,922
Net cash provided by (used for) financing activities -1,826,672 -2,111,595 8,047,985
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of not readily marketable securities 196,637 76,321 16,671
Purchases of not readily marketable securities -205,438 -190,962 -63,438
Proceeds from disposition of investment real estate 804,638 - -
Proceeds from disposition of equipment 13,474 7,500 -
Purchases of equipment and leasehold improvements -721,384 -812,742 -1,229,497
Repayments of loans receivable 314,678 159,430 155,912
Increase in loans receivable -921,001 -811,442 -23,158
Net cash used for investing activities -518,396 -1,571,895 -1,143,510
Net increase (decrease) in cash and cash equivalents 1,350,514 -1,146,964 -1,557,727
Cash and cash equivalents at beginning of year 2,410,867 3,557,831 5,115,558
Cash and cash equivalents at end of year $ 3,761,381 $ 2,410,867 $ 3,557,831
Cash paid during the year for interest $ 1,905,064 $ 945,817 $ 749,025
Cash paid during the year for income taxes $ 1,231,106 $ 1,766,033 $ 1,930,487
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Scott & Stringfellow Financial, Inc. (the "Parent") is a holding company
which owns all of the outstanding capital stock of Scott & Stringfellow,
Inc. ("Scott & Stringfellow") and of other diversified financial services
subsidiaries.
Scott & Stringfellow, the Parent's principal subsidiary, is a broker-dealer
registered under the Securities Exchange Act of 1934. A summary of the
significant accounting policies of Scott & Stringfellow Financial, Inc. and
subsidiaries (collectively, the "Company") is presented below.
A. REPORTING PERIOD. The Company ends its fiscal year on the last Friday
in June. As a result, the Company's consolidated statements of income,
changes in stockholders' equity, and cash flows for the years ended June
30, 1995, June 24, 1994, and June 25, 1993 include the results of
operations, changes in stockholders' equity, and cash flows for fifty-three
weeks, fifty-two weeks, and fifty-two weeks, respectively.
B. PRINCIPLES OF CONSOLIDATION. The Company's consolidated financial
statements include all of the accounts of Scott & Stringfellow Financial,
Inc. and its subsidiaries, all of which are wholly owned. All material
intercompany balances and transactions have been eliminated in
consolidation.
C. SECURITIES TRANSACTIONS. Securities transactions and related revenues
and expenses are recorded on settlement date (normally the third business
day following the transaction date), which is not materially different from
a trade date basis. Prior to June 7, 1995, the settlement date was
normally the fifth business day following the transaction date.
Trading and investment securities are valued at market except for not
readily marketable securities, which are valued at estimated fair value as
determined by management. Unrealized gains and losses are included in
revenues from principal transactions in the accompanying consolidated
statements of income.
D. REPURCHASE AGREEMENTS. Securities sold under agreements to repurchase
are accounted for as financing transactions and are recorded at the amount
for which the securities will subsequently be reacquired.
E. INVESTMENT BANKING. Management fees on investment banking transactions
and selling concessions are recorded on settlement date, which is not
materially different from a trade date basis. Underwriting fees, net of
expenses, are generally recorded on the date the underwriting syndicate is
closed.
F. CONSOLIDATED STATEMENTS OF CASH FLOWS. For purposes of the
consolidated statements of cash flows, the Company considers cash and cash
equivalents to be comprised of cash on hand, cash on deposit with financial
institutions, and money market investments with original maturities of
ninety days or less. At June 30, 1995 and June 24, 1994, cash equivalents
included $1,301,212 and $1,253,868 of money market investments,
respectively.
G. INCOME TAXES. The Parent and its subsidiaries file consolidated income
tax returns. Deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial reporting
and income tax bases of assets and liabilities.
H. EQUIPMENT AND LEASEHOLD IMPROVEMENTS. The Company depreciates
furniture and equipment using straight-line and accelerated methods, based
on estimated useful lives of five to ten years. Leasehold improvements are
amortized over the lesser of the estimated useful lives of the improvements
or the terms of the related leases.
I. EARNINGS AND DIVIDENDS PER COMMON SHARE. Earnings and dividends per
common share are calculated by dividing net income and dividends,
respectively, by the weighted average shares of common stock and common
stock equivalents outstanding during the period. Common stock equivalents
include unexercised stock options
and are determined using the treasury stock method.
The number of shares used in the earnings and dividends per common share
calculations are 2,108,915 for the year ended June 30, 1995, 2,115,393 for
the year ended June 24, 1994 and 2,115,269 for the year ended June 25,
1993.
The weighted average shares of common stock and common stock equivalents
have been adjusted for all periods to reflect the effect of a 6:5 stock
split effected in the form of a 20% stock dividend distributed on August
26, 1994.
NOTE 2. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING
ORGANIZATIONS.
Receivable from and payable to brokers, dealers and clearing organizations
consist of the following:
June 30, June 24,
1995 1994
Receivable from brokers, dealers, and
clearing organizations:
Securities failed to deliver $ 431,779 $ 216,940
Deposits paid for securities borrowed 1,584,620 1,150,900
Receivable from clearing organizations 309,216 96,294
Total $ 2,325,615 $ 1,464,134
Payable to brokers, dealers, and
clearing organizations:
Securities failed to receive $ 265,653 $ 453,081
Deposits received for securities loaned 46,400 1,053,100
Payable to clearing organizations 580,941 1,331,201
Total $ 892,994 $ 2,837,382
NOTE 3. RECEIVABLE FROM AND PAYABLE TO CUSTOMERS
The balances represent the net amounts receivable from and payable to
customers in connection with normal cash and margin transactions. The
amounts receivable from customers are collateralized by securities held by
the Company, the value of which is not reflected in the accompanying
consolidated financial statements.
A substantial portion of receivables from customers are comprised of
customers residing in the southeastern portion of the United States.
Included in receivable from and payable to customers are balances with
officers and directors of the Company as follows:
June 30, June 24,
1995 1994
Receivable from $ 2,303,046 $ 2,174,218
Payable to $ 99,022 $ 111,161
NOTE 4. TRADING AND INVESTMENT SECURITIES
Trading and investment securities consist of the following:
June 30, June 24,
1995 1994
Owned:
U.S. government and government
agency obligations $ 190,635 $ 388,934
State and municipal obligations 10,159,029 4,799,478
Corporate bonds 280,260 441,020
Corporate stocks 2,215,813 2,288,830
Other 159,224 77,643
Sub-total 13,004,961 7,995,905
Not readily marketable securities, at
estimated fair value 361,306 423,482
Total $ 13,366,267 $ 8,419,387
Sold, but not yet purchased, at market value:
State and municipal obligations $ 86,239 $ 25,028
Corporate bonds 88,303 77,423
Corporate stocks 351,332 451,067
Other 44,914 5,514
Total $ 570,788 $ 559,032
NOTE 5. SHORT-TERM BANK LOANS
Short-term bank loans are secured by customer-owned securities purchased on
margin or firm-owned securities. Short-term bank loans are generally made
at the bank's broker call rate and are payable on demand. The value of
customer-owned securities and firm-owned securities pledged as collateral
at June 30, 1995 was approximately $20,000,000 and $1,800,000,
respectively.
NOTE 6. NET CAPITAL REQUIREMENTS
Scott & Stringfellow is subject to the net capital rules of the Securities
and Exchange Commission and the New York Stock Exchange, Inc. and elects to
compute its net capital requirements in accordance with the alternative
method.
Under this method, Scott & Stringfellow is required to maintain minimum net
capital, as defined, equal to two percent of aggregate debit balances
arising from customer transactions, as defined. The net capital rules also
provide that equity capital may not be withdrawn or cash dividends paid if
resulting net capital would be less than five percent of aggregate debits.
At June 30, 1995, Scott & Stringfellow's net capital of $17,074,172 was 25%
of aggregate debit balances and was $15,734,228 in excess of the minimum
net capital required.
NOTE 7. INCOME TAXES
The provision for income tax expense (benefit) consists of the following:
Years Ended
June 30, June 24, June 25,
1995 1994 1993
Current:
Federal $ 1,208,000 $ 1,502,924 $ 1,751,000
State 178,000 184,320 236,000
Total current 1,386,000 1,687,244 1,987,000
Deferred:
Federal -166,000 16,000 -78,000
State -33,000 3,000 -16,000
Total deferred -199,000 19,000 -94,000
Total $ 1,187,000 $ 1,706,244 $ 1,893,000
Income tax expense differs from the amount computed by applying the 34%
statutory Federal income tax rate to income before income taxes for the
following reasons:
<TABLE>
<CAPTION> <CAPTION>
Years Ended
June 30, June 24, June 25,
1995 1994 1993
<S> <C> <C> <C>
Federal tax, computed at statutory rate $ 1,118,000 $ 1,586,000 $ 1,827,600
State income taxes, net of Federal tax benefit 95,700 123,600 145,200
Tax-exempt interest and dividends, net of
non-deductible carrying charges -92,100 -69,500 -95,900
Meals and entertainment 51,500 25,700 19,500
Other, net 13,900 40,444 -3,400
Income tax expense $ 1,187,000 $ 1,706,244 $ 1,893,000
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
<TABLE>
<CAPTION>
June 30, June 24,
1995 1994
<S> <C> <C>
Deferred tax assets:
Deferred compensation $ 274,762 $ 121,050
Accrued expenses for financial reporting purposes 226,399 150,972
Loans receivable, principally due to allowance for
doubtful accounts 100,420 197,250
Total gross deferred tax assets 601,581 469,272
Less: valuation allowance - -
Deferred tax assets 601,581 469,272
Deferred tax liabilities:
Exchange seats, principally due to differences in
assigned values and tax bases -191,430 -195,261
Other, principally due to differences in assigned
values and tax bases of investments -84,722 -147,582
Total gross deferred tax liabilities -276,152 -342,843
Net deferred tax asset $ 325,429 $ 126,429
</TABLE>
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax assets is not necessary. Based
on the Company's historical earnings, future expectations of taxable income
and the reversing of gross deferred tax liabilities and potential net
operating loss carrybacks, management believes it is more likely than not
that the Company will realize the gross deferred tax assets. However,
there can be no assurances that the Company will generate taxable income in
any future period or that the reversal of timing differences attributable
to gross deferred tax liabilities will occur during the future tax periods
as currently expected.
NOTE 8. EMPLOYEE BENEFIT PLANS
The Company maintains an employee profit sharing plan which incorporates a
401(k) feature and covers substantially all employees. Employees may
contribute up to fifteen percent of their individual earnings to the plan
each year, subject to an annual limitation established by the Internal
Revenue Code. In addition to employee contributions, matching
contributions and profit sharing contributions may be made at the
discretion of the Company. Under the plan, matching contributions of
$280,143, $257,483, and $240,896 were made in 1995, 1994, and 1993,
respectively. Additional contributions, determined on the basis of
calendar year profitability, totaled $794,095 in 1995, $2,080,027 in 1994,
and $1,802,992 in 1993.
The Company also maintains a non-qualified and unfunded deferred
compensation plan for the benefit of selected highly compensated employees.
This plan allows the participants to defer compensation and to receive
discretionary profit sharing contributions beyond the Internal Revenue Code
limitations governing the Company's profit sharing plan. Company expense
pursuant to this plan amounted to $120,065 in 1995, $70,308 in 1994, and
$78,993 in 1993. At June 30, 1995 and June 24, 1994, the Company's
obligations under this plan amounted to $713,667 and $314,415,
respectively, which are included in other liabilities in the accompanying
consolidated statements of financial condition.
The Company also maintains an employee stock purchase plan, which allows
substantially all employees to acquire shares of the Company's common stock
through a payroll deduction program. Shares are issued to the plan trust
quarterly at a price equal to 85% of the fair market value as defined in
the plan. During 1995, a total of 43,066 shares of common stock were
issued to this plan at an average price of $10.34 per share. During 1994,
32,306 shares were issued at an average price of $12.23 per share. During
1993, 20,494 shares were issued at an average price of $12.55 per share.
NOTE 9. TRANSACTIONS WITH RELATED PARTIES
Loans to related entities and directors and officers of the Company,
exclusive of amounts included in receivable from customers as discussed in
note 3, amounted to $306,316 and $377,654 at June 30, 1995 and June 24,
1994, respectively. These loans mature according to varying terms and are
generally made at rates reflecting the Company's cost of funds at the time
the loans are made. The loans are included in other assets in the
accompanying consolidated statements of financial condition.
NOTE 10. COMMON STOCK TRANSACTIONS
During 1995, 1994, and 1993, the Company repurchased and retired 47,683,
59,000, and 11,400 shares, respectively, of its common stock. Of the
shares repurchased, 1,968 were repurchased from a director at a cost of
$21,648 in 1995, 4,000 were repurchased from a director at a cost of
$57,000 in 1994, and 6,400 were repurchased from a director at a cost of
$94,400 in 1993.
The Company has a stock option plan pursuant to which options to purchase
up to 480,000 shares of common stock may be granted to eligible employees.
Stock options granted under the plan will be either incentive stock
options, as defined by the Internal Revenue Code, or non-qualified stock
options. Stock appreciation rights may also be granted under the plan.
The following table summarizes stock share option activity:
Outstanding June 26, 1992 110,280
Granted 58,800
Canceled -5,400
Exercised -9,528
Outstanding June 25, 1993 154,152
Granted 80,400
Canceled -2,760
Exercised -6,600
Outstanding June 24, 1994 225,192
Granted 43,000
Canceled -12,247
Exercised -9,281
Outstanding June 30, 1995 246,664
All stock options activity has been restated to reflect the 6:5 stock split
effected in the form of a 20% stock dividend, which was declared on May 18,
1994 and distributed to stockholders on August 26, 1994. These options
become exercisable over periods ranging from two to seven years from the
date of grant and expire 10 years from the date of grant (between October
1997 and March 2005.) The outstanding options are exercisable at prices
ranging from $6.04 per share to $12.50 per share. 54,480 share options are
exercisable at June 30, 1995.
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company leases office space and certain data processing and
communications equipment under operating leases expiring at various dates
to 2005. Minimum future rental payments required under such leases that
have initial or remaining non-cancelable lease terms in excess of one year
as of June 30, 1995 are as follows:
Year Minimum Rental Commitments
Office Space Equipment Total
1996 $ 1,675,022 $ 471,897 $ 2,146,919
1997 1,470,058 439,764 1,909,822
1998 1,137,770 342,892 1,480,662
1999 1,018,776 88,446 1,107,222
2000 838,304 40,410 878,714
Thereafter 4,150,809 - 4,150,809
Total $ 10,290,739 $ 1,383,409 $ 11,674,148
Some of the Company's leases contain escalation clauses and renewal
options. Total rent expense under operating leases approximated $1,885,000
in 1995, $1,631,000 in 1994, and $1,533,000 in 1993.
As of June 30, 1995, the Company had a $1.5 million irrevocable letter of
credit available for the purpose of collateralizing certain customer option
positions. No amounts were outstanding with respect to this letter of
credit at June 30, 1995 or June 24, 1994.
The Company has been named in legal actions relating to its securities
business. In the opinion of management, based upon consultation with legal
counsel handling such matters, the resolution of open litigation is not
expected to have a material adverse effect on the financial position of the
Company.
NOTE 12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company records securities transactions on a settlement date basis,
generally the third business day following the transaction. The risk of
loss on unsettled transactions is identical to settled transactions and
relates to the customers' or brokers' inability to meet the terms and
conditions of their contracts. Credit risk is reduced by the industry
policy of obtaining and maintaining adequate collateral until the
commitment is completed.
The Company executes and clears customers transactions involving the sale
of securities not yet purchased as well as the writing or sale of option
contracts. Substantially all of these transactions, with the exception of
the writing of fully covered option contracts, are effected on a margin
basis subject to individual exchange regulations. These transactions may
expose the Company to significant off-balance-sheet risk in the event
margin requirements are not sufficient to fully cover losses that customers
may incur. In the event the customer fails to satisfy its obligations,
the Company may be required to purchase or sell financial instruments at
prevailing market prices in order to fulfill the customer's obligations.
The Company's customer financing and securities settlement activities
require the Company to pledge customer securities as collateral in support
of various secured financing sources. In addition, the Company pledges
customer securities as collateral to satisfy margin deposits of various
exchanges. Much of this collateral is held by independent third parties,
and if the third party is unable to meet is contractual obligation to
return customer securities pledged as collateral, the Company may be
exposed to the risk of acquiring these securities at prevailing market
prices in order to satisfy its customer obligations.
<PAGE>
REPORT ON MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying Consolidated Financial Statements and related financial
information contained in this annual report have been prepared by and are
the responsibility of management. These statements have been prepared in
accordance with generally accepted accounting principles and necessarily
include certain amounts that are based upon the judgement and estimates of
management.
.
Management maintains a system of internal accounting controls and
internal auditing procedures designed to provide reasonable assurance, at a
reasonable cost, of the accuracy and reliability of the Company's financial
records and the protection of its assets. The financial statements
contained in this annual report have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report follows. This audit includes a review
of the Company's internal accounting controls and internal auditing
procedures to the extent required by generally accepted auditing standards.
The Audit Committee of the Board of Directors, which includes three
outside directors, meets periodically with the internal auditor, the
independent auditors, and management to discuss auditing, internal
accounting, and financial reporting matters and to insure that each is
properly discharging its responsibilities. Both the independent and
internal auditors have access to the Audit Committee without the presence
of management.
Management believes that during fiscal 1995 its system of internal
accounting controls and internal auditing procedures were adequate to
accomplish their intended objectives of assuring the accuracy and
reliability of the Company's financial information and the protection and
control of its assets.
Steven C. DeLaney
Senior Vice President and Chief Financial Officer
C. Lewis Loth
Vice President and Controller
Mike D. Johnston
Vice President and Treasurer
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Scott & Stringfellow Financial, Inc.
We have audited the accompanying consolidated statements of financial
condition of Scott & Stringfellow Financial, Inc. and subsidiaries as of
June 30, 1995 and June 24, 1994, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for the years ended
June 30, 1995, June 24, 1994, and June 25, 1993. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Scott &
Stringfellow Financial, Inc. and subsidiaries at June 30, 1995 and June 24,
1994, and the results of their operations and their cash flows for the
years ended June 30, 1995, June 24, 1994, and June 25, 1993, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Richmond, Virginia
August 7, 1995
<PAGE>
Scott & Stringfellow Financial, Inc. Common Stock is traded on the
NASDAQ National Market System under the symbol "SCOT." As of June 30,
1995, there were 378 holders of record of the Company's Common Stock. The
table below provides a comparative summary of the prices for the Company's
Common Stock and cash dividends declared for the years ended June 30, 1995
and June 24, 1994.
Common Stock Prices (1) Dividends Per Share (2)
1995 1994 1995 1994
High Low High Low
First Quarter $ 14.88 $ 11.50 $ 15.00 $ 13.25 $ .10 $ .08
Second Quarter 11.75 11.00 15.50 14.00 .10 .09
Third Quarter 13.75 11.00 16.00 14.25 .10 .09
Fourth Quarter 13.50 12.09 15.50 13.50 .10 .09
(1) Common Stock prices are actual historical prices and have not been
adjusted for the August 1994 stock split
(2) All dividend per share amounts have been adjusted to reflect a 6:5
stock split effected in the form of a 20% stock dividend declared on May
18, 1994, and distributed on August 26, 1994, to shareholders of record on
August 5, 1994.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Scott & Stringfellow Financial, Inc.
We consent to the incorporation by reference in the registration statements (No.
33-23535 and No. 33-54700) on Form S-8 of Scott & Stringfellow Financial, Inc.
of our report dated August 7, 1995, relating to the consolidated statements of
financial condition of Scott & Stringfellow Financial, Inc. and subsidiaries as
of June 30, 1995 and June 24, 1994, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for the years ended June
30, 1995, June 24, 1994, and June 25, 1993, and our report dated August 7, 1995
on the financial statement schedules as of June 30, 1995 and June 24, 1994 and
for the years ended June 30, 1995, June 24, 1994, and June 25, 1993, which
reports appear or are incorporated by reference in the June 30, 1995 annual
report on Form 10-K of Scott & Striellow Financial, Inc.
KPMG Peat Marwick LLP
Richmond, Virginia
September 21, 1995
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,767,184
<RECEIVABLES> 65,709,856
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 1,584,620
<INSTRUMENTS-OWNED> 13,366,267
<PP&E> 2,162,680
<TOTAL-ASSETS> 93,266,043
<SHORT-TERM> 6,600,000
<PAYABLES> 60,811,009
<REPOS-SOLD> 0
<SECURITIES-LOANED> 46,400
<INSTRUMENTS-SOLD> 570,788
<LONG-TERM> 0
<COMMON> 210,762
0
0
<OTHER-SE> 25,027,084
<TOTAL-LIABILITY-AND-EQUITY> 93,266,043
<TRADING-REVENUE> 10,725,020
<INTEREST-DIVIDENDS> 5,852,740
<COMMISSIONS> 28,300,683
<INVESTMENT-BANKING-REVENUES> 6,257,511
<FEE-REVENUE> 2,781,944
<INTEREST-EXPENSE> 1,900,923
<COMPENSATION> 34,202,361
<INCOME-PRETAX> 3,288,415
<INCOME-PRE-EXTRAORDINARY> 2,101,415
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,101,415
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
