SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/x/Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
/ /Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ___________________ to _________________.
Commission file number 1-9305
STIFEL FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1273600
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 N. Broadway
St. Louis, Missouri 63102-2188
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-342-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock, Par Value $.15 per share New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 report) 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/
Aggregate market value of voting stock held by non-affiliates of the
registrant at March 15, 1995 was $23,760,907.
Shares of Common Stock outstanding at March 15, 1995: 4,198,780 shares,
par value $.15 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December
31, 1994 are incorporated by reference to Part II hereof. Portions of the
Company's Proxy Statement filed with the SEC in connection with the
Company's Annual Meeting of Stockholders to be held April 25, 1995 are
incorporated by reference to Part III hereof. Exhibit Index located on
pages 23 - 25.
PART I
ITEM 1. BUSINESS
Stifel Financial Corp. ("Financial") was organized in fiscal year 1983
pursuant to a plan of reorganization whereby Stifel, Nicolaus & Company,
Incorporated ("Stifel, Nicolaus") became a wholly-owned subsidiary of
Financial. Stifel, Nicolaus is the successor to a partnership founded in
1890. The term "Company" as used herein means Financial and its
subsidiaries.
The Company offers securities-related financial services through its wholly
owned operating subsidiaries, Stifel, Nicolaus, Century Securities
Associates, Inc., Todd Investment Advisors, Inc. and Pin Oak Capital, Ltd.
These subsidiaries provide brokerage, trading, investment banking,
investment advisory, and related financial services primarily to customers
throughout the United States from 72 locations. The Company's customers
include individuals, corporations, municipalities and institutions.
Although the Company has customers throughout the United States, its major
geographic area of concentration is in the Midwest. On February 6, 1995
the Company entered into an agreement whereby, subject to certain
conditions, it has agreed to sell all of the assets related to its
operations in Oklahoma, which consists of 23 retail securities offices and
a municipal underwriting, trading, and institutional sales operation, and
three retail offices in Texas. During 1994 these operations comprised 14%
of the Company's total revenue.
Principal Sources of Revenue
The amounts of each of the principal sources of revenue of the Company for
the calendar year, the five-month transition period and each of the two
prior fiscal years is contained on page 18 of the Company's 1994 Annual
Report to Stockholders. Such information is hereby incorporated by
reference.
Commissions
During recent years, most of the Company's securities commissions resulted
from transactions with retail (individual) investor accounts. Retail
commissions are charged on both stock exchange and over-the-counter
transactions in accordance with the Company's commission schedule. In
certain cases, discounts from that schedule are granted, usually on large
trades or to active customers.
The percentage of total commission revenue from institutional customers is
not accounted for separately. Institutional accounts, which are primarily
fixed income, are serviced primarily by the Company's offices in St. Louis
and Oklahoma City. Retail investment executives also receive orders from
institutional customers from time to time.
Principal Transactions
The Company trades as principal in the over-the-counter market. It acts as
both principal and agent to facilitate the execution of customers' orders.
The Company "makes a market" in various securities of interest to its
customers through buying, selling and maintaining an inventory of these
securities. The Company does not engage in a significant amount of trading
for its own account. The Company also buys corporate and municipal bonds
for its own account in the secondary market, maintains an inventory, and
resells from that inventory to other dealers and to institutional and
retail customers.
Investment Banking
The Company manages the underwriting of both corporate and municipal
securities and participates as an underwriter in syndicates of issues
managed by other firms. The corporate and public finance departments are
responsible for originating underwritings, mergers and acquisitions,
placements, valuations, financial advisory work and other investment
banking matters. The Company acts as an underwriter and dealer in bonds
issued by states, cities and other political subdivisions and may act as
manager or participant in offerings managed by other firms. The majority
of the Company's municipal bond underwritings are originated and sold
through its offices in Oklahoma City and St. Louis. Such underwritings
represent an important part of the Company's revenues. As a result of the
negative publicity surrounding the ongoing formal investigation by the
Securities and Exchange Commission (SEC) into certain municipal bond issues
managed by the Oklahoma City office, the Company's ability to generate
future municipal bond underwritings in Oklahoma has been seriously impaired
(see also Item 7. Management Discussion and Analysis and Note H of the
Consolidated Financial Statements incorporated by reference herein) and as
previously noted, the Company has agreed to sell the assets of its Oklahoma
City based public finance operation.
Management expects the level of production of municipal bond underwritings
and related revenue generated by the St. Louis office, while somewhat
negatively impacted by the SEC investigation, to return to normal levels
during 1995.
The management of and participation in public offerings involves
significant risks. An underwriter may incur losses if it is unable to
resell, at a profit, the securities it has purchased. Under the Securities
Act of 1933, other statutes and court decisions, an underwriter is subject
to substantial liability for misstatements or omissions that are judged to
be material in prospectuses and other communications related to
underwritings. Underwriting commitments cause a charge against net capital
(as defined by Rule 15c3-1 of the Securities and Exchange Commission -- see
"Regulation"); and, consequently, the aggregate amount of underwriting
commitments at any one time may be limited by the amount of available net
capital of the Company.
Other Business
The Company has dealer-sales agreements with numerous distributors of
investment company shares. These agreements provide generally for dealer
discounts ranging up to 5.75 percent of the purchase price, depending upon
the size of the transaction.
The Company handles for its customers put and call option transactions
traded on the Chicago Board Options Exchange, Inc., American Stock
Exchange, Inc., Philadelphia Stock Exchange, Inc., and, to a much lesser
extent, in the over-the-counter market.
The Company has a wholly owned subsidiary, Century Securities Associates,
Inc. (CSA), an introducing broker-dealer. CSA contracts with independent
licensed brokers to sell securities and other investment products to retail
(individual) investor accounts. The customer accounts are carried by
Stifel, Nicolaus, the carrying broker-dealer. CSA is licensed in 50 states
and has 63 registered representatives. Management expects CSA to continue
to grow in significance to the Company's operation as a whole.
In 1993 the Company formed a subsidiary, Stifel Asset Management Corp.
(SAM), to act as a holding company for two investment advisory firms, Pin
Oak Capital, Ltd. (Pin Oak), and Todd Investment Advisors, Inc. (Todd).
Pin Oak, which operated formerly as the investment advisory division of
Stifel, Nicolaus, was formed as an investment advisory firm and began
operations during the five month transition period in 1993. SAM purchased
all of the outstanding stock of Todd, an investment advisory firm located
in Louisville, Kentucky, in December 1993. Both Pin Oak and Todd provide
investment advice and services to individual, fiduciary and corporate
clients. Combined assets under management for the two firms at December
31, 1994 was approximately $2,297,000,000. Pin Oak holds registrations as
an investment advisor in six states. Todd is registered as an investment
advisor in twelve states.
During fiscal 1993, the Company also formed a subsidiary for the purpose of
purchasing various types of mortgage loans which will be securitized and
sold to institutional investors through Stifel, Nicolaus. Attempts to
penetrate that market were unsuccessful and the subsidiary ceased
operations during 1994.
Various subsidiaries of the Company act as General Partners in certain
limited partnerships for which Stifel, Nicolaus has sold limited
partnership interests to the public. The subsidiaries may receive
distributions upon the dissolution of such partnerships, but the amount and
timing of receipts of such distributions, if any, cannot be determined at
this time and are subject to the usual risks and liabilities associated
with acting as a general partner.
Customer Financing
Securities are purchased for customers on either a cash or margin basis.
The customer deposits less than the full cost of the security when
securities are purchased on a margin basis. The Company makes a loan for
the balance of the purchase price. Such loans are collateralized by the
securities purchased. The amounts of the loans are subject to the margin
requirements of Regulation T of the Board of Governors of the Federal
Reserve System, New York Stock Exchange, Inc. ("NYSE") margin requirements,
and the Company's internal policies, which usually are more restrictive
than Regulation T or NYSE requirements. In permitting customers to
purchase securities on margin, the Company is subject to the risk of a
market decline which could reduce the value of its collateral below the
amount of the customers' indebtedness.
Research
The Company's research department provides retail and institutional
customers information and recommendations on the securities of specific
companies. These services are rendered without charge. The Company also
purchases research services from other firms.
Competition
The Company competes with other securities firms, some of which offer their
customers a broader range of brokerage services, have substantially greater
resources, and may have greater operating efficiencies. In addition, an
increasing number of specialized firms, as well as banks, savings and
loans, and other financial institutions, now offer discount brokerage
services to individual retail customers. These firms generally charge
lower commission rates to their customers without offering services such as
portfolio valuation, investment recommendations and research. Competition
from such discount brokerage services may adversely affect revenues of the
Company and other firms providing full retail brokerage services. Banks
also compete with brokerage firms by offering certain investment banking
and corporate finance services.
Although the Company operates in a competitive environment, management
believes that the expertise acquired in its market area over its 104-year
history, its personnel, and its equity capital provide it with the
resources necessary to compete.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The SEC is the federal agency
charged with the administration of the federal securities laws. Much of
the regulation of broker-dealers, however, has been delegated to self-
regulatory organizations, principally the National Association of
Securities Dealers, Inc., the Municipal Securities Rulemaking Board, and
the national securities exchanges, such as the NYSE. 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.
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, record keeping, and
the conduct of directors, officers and employees. Additional legislation,
changes in rules promulgated by the SEC and by self-regulatory
organizations, and changes in the interpretation or enforcement of existing
laws and rules often directly affect the method of operation and
profitability of broker-dealers. The SEC and the self-regulatory
organizations may conduct administrative proceedings which can result in
censures, 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 customers and the securities markets rather
than the protection of creditors and stockholders of broker-dealers.
As a broker-dealer and member of the NYSE, Stifel, Nicolaus is subject to
the Uniform Net Capital Rule (Rule 15c3-1) promulgated by the SEC which
provides that a broker-dealer doing business with the public shall not
permit its aggregate indebtedness (as defined) to exceed 15 times its net
capital (as defined) or, alternatively, that its net capital shall not be
less than 2 percent of aggregate debit balances (primarily receivables from
customers and broker-dealers) computed in accordance with the SEC's
Customer Protection Rule (Rule 15c3-3). The Uniform Net Capital Rule is
designed to measure the general financial integrity and liquidity of a
broker-dealer and the minimum net capital deemed necessary to meet the
broker-dealer's continuing commitments to its customers. Both methods
allow broker-dealers to increase their commitments to customers only to the
extent their net capital is deemed adequate to support an increase.
Management believes that the alternative method, which is utilized by most
full-service securities firms, is more directly related to the level of
customer business. Therefore, Stifel, Nicolaus computes its net capital
under the alternative method.
Under SEC rules, a broker-dealer may be required to reduce its business and
restrict withdrawal of subordinated capital if its net capital is less than
4 percent of aggregate debit balances and may be prohibited from expanding
its business and declaring cash dividends if its net capital is less than 5
percent of aggregate debit balances. A broker-dealer that fails to comply
with the Uniform Net Capital Rule may be subject to disciplinary actions by
the SEC and self-regulatory agencies, such as the NYSE, including censures,
fines, suspension, or expulsion. In computing net capital, various
adjustments are made to net worth to exclude assets which are not readily
convertible into cash and to state conservatively the other assets such as
a firm's position in securities. Compliance with the Uniform Net Capital
Rule may limit those operations of a firm such as Stifel, Nicolaus which
require the use of its capital for purposes of maintaining the inventory
required for a firm trading in securities, underwriting securities, and
financing customer margin account balances. Stifel, Nicolaus had net
capital of approximately $12,673,000 at December 31, 1994, which was
approximately 8.5 percent of aggregate debit balances and approximately
$9,696,000 in excess of required net capital.
Employees
There were 861 individuals employed by the Company as of February 28, 1995.
This includes both full and part-time personnel.
ITEM 2. PROPERTIES
The headquarters and administrative offices of the Company, Stifel,
Nicolaus and CSA are located in downtown Saint Louis, Missouri. Todd is
located in Louisville, Kentucky. Pin Oak is located in New York, New York.
Stifel Nicolaus has a retail branch office system located in 13 states,
primarily in the Midwest. The Company has a total of 72 locations in 15
states. The Company owns one building in Oklahoma City, Oklahoma, which is
utilized for retail branch office space. All other offices are located in
leased premises. The Company's management believes that at the present
time the facilities are suitable and adequate to meet its needs and that
such facilities have sufficient productive capacity and are appropriately
utilized.
The Company also leases communication and other equipment. Aggregate
annual rental expense for the twelve month period ended December 31, 1994,
for office space and equipment, was approximately $4,596,000. Further
information about the lease obligations of the Company is provided in Note
D to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits and arbitrations, some of
which claim substantial amounts, including punitive damage claims. While
results of litigation and arbitration cannot be predicted with certainty,
management, based on opinions of outside counsel, has provided for actions
most likely of adverse disposition and believes that the effects of
resolution of all such litigation and arbitration beyond the amounts
provided will not have a material adverse effect on the Company's
consolidated financial position. However, depending on the period of
resolution such effect could be material to the financial results of an
individual operating period.
The Securities and Exchange Commission is conducting a formal investigation
into possible violations of the federal securities laws in connection with
certain municipal bond issues managed by the Oklahoma City based public
finance department where the Company was the managing or co-managing
underwriter. The Company is cooperating fully with the investigation. At
this time no action or claims have been asserted against the Company.
However, management, based on discussions with legal counsel, is of the
opinion that claims asserted, if any, related to this investigation would
have no material effect on the Company's financial position.
See Note H to the Company's Consolidated Financial Statements, filed
herein.
Executive Officers of the Registrant
The following information is furnished pursuant to General Instruction G(3)
of Form 10-K with respect to the executive officers of Financial:
Positions or Offices Position with the
Name Age with the Company Company Since
George H. Walker III 64 Chairman of the Board of 1976
Financial and Stifel, Nicolaus
Gregory F. Taylor 45 President and Chief Executive Officer 1985
of Financial and Stifel, Nicolaus
Mark D. Knott 46 Secretary, Treasurer and Chief Financial 1986
Officer of Financial and Senior Vice
President and Chief Financial Officer
of Stifel, Nicolaus
Rick E. Maples 36 Senior Vice President and Director of 1984
Investment Banking - Corporate Finance
of Stifel, Nicolaus
Michael A. Murphy 44 Senior Vice President - Director of 1989
Retail Group of Stifel, Nicolaus
Lawrence E. Somraty 46 President of Century Securities 1977
Associates, Inc.
Gerald M. Cole 58 President and Chief Operating Officer 1993
of Stifel Asset Management
Corp. and Senior Vice
President of Stifel, Nicolaus
Charles R. Hartman 51 General Counsel and Senior Vice President 1994
of Stifel, Nicolaus
John H. Noonan 53 Director of Fixed Income Capital Markets 1994
and Senior Vice President of Stifel, Nicolaus
The following are brief summaries of the business experience during the
past five years of each of the executive officers.
Gerald M. Cole joined Stifel, Nicolaus and Stifel Asset Management in
November, 1993. He is President and Chief Operating Officer of Stifel
Asset Management Corp. and Senior Vice President of Stifel, Nicolaus.
Prior to joining Stifel Asset Management Corp. and Stifel, Nicolaus, Mr.
Cole served as Senior Executive Vice President of Kemper Financial Service
Investment Management, where he was responsible for the Cash Products
Group.
Charles R. Hartman joined Stifel, Nicolaus in June of 1994. He is the
General Counsel, Senior Vice President and Secretary of Stifel, Nicolaus.
Prior to joining Stifel, Nicolaus, Mr. Hartman was the Regional Counsel for
the Securities and Exchange Commission in Los Angeles, California and since
April of 1982 a Los Angeles partner in the law firm of Rogers & Wells.
Mark D. Knott joined Financial as Treasurer and Chief Financial Officer
and Stifel, Nicolaus as Chief Financial Officer and Senior Vice President
in 1986 and was elected Secretary of Financial in 1990.
Rick E. Maples joined Stifel, Nicolaus in 1984. He served as First Vice
President and Investment Banker of the Corporate Finance Department until
October, 1992, when he became Senior Vice President and Director of
Investment Banking - Corporate Finance Department of Stifel, Nicolaus.
Michael A. Murphy joined Stifel, Nicolaus in 1989. He is Senior Vice
President and Director of Retail Group of Stifel, Nicolaus. From 1989 -
1994, Mr. Murphy served as First Vice President and Director of Branch
Administration.
John H. Noonan joined Stifel, Nicolaus in August of 1994. He is Senior
Vice President and Director of the Fixed Income Group of Stifel, Nicolaus.
Prior to joining Stifel, Nicolaus, Mr. Noonan served as Vice President and
Manager of Capital Markets of Nuveen & Co., where he also served as a
member of the management committee.
Lawrence E. Somraty has been with Stifel, Nicolaus since 1977. He served
as Option Department Manager, Senior Registered Options Principal,
Investment Advisor and Branch Manager. He became the President of Century
Securities Associates, Inc. in January 1991.
Gregory F. Taylor was branch manager of Stifel, Nicolaus' Chicago branch
from October, 1985 until July, 1988. He became Executive Vice President and
Director of National Sales and Marketing of Stifel, Nicolaus in July, 1988,
Chief Operating Officer in November, 1991 and President and Chief Executive
Officer as of October 26, 1992. He was elected a Vice President of
Financial in October, 1991 and President and Chief Executive Officer as of
October 26, 1992.
George H. Walker III joined Stifel, Nicolaus in 1976, became President of
Stifel, Nicolaus in December, 1978, and became Chairman of Stifel, Nicolaus
in July, 1982. From the time of the organization of Financial in 1981 Mr.
Walker has served as its Chairman of the Board and, until October 26, 1992,
Mr. Walker served as its President and Chief Executive Officer. Mr. Walker
is a director of Laclede Steel Company, Laidlaw Corp., and EAC Corporation.
He is active in various community activities and is a former Chairman of
Downtown St. Louis, Inc. and Webster University. He currently is Chairman
of the Missouri Historical Society and a trustee of Webster University.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
a.) Market Information
The common stock of Financial is traded on the New York Stock Exchange and
Chicago Stock Exchange under the symbol "SF." The high/low sales prices
for Financial's Common Stock for each full quarterly period for the
calendar year, the five-month transition period, and the most recent fiscal
year are as follows:
Stock Price
High - Low
----------------------------------
Year 1994 By Quarter
----------------------------------
First $ 9 7/8 - 8 1/4
Second 8 1/2 - 7 1/4
Third 7 3/4 - 5 3/4
Fourth 5 3/4 - 5 1/4
----------------------------------
Transition Period 1993
----------------------------------
First $10 3/8 - 9 1/8
Nov. & Dec., 1993 9 5/8 - 8 3/4
----------------------------------
Fiscal Year 1993 By Quarter
----------------------------------
First $ 6 3/4 - 5 7/8
Second 7 1/4 - 6 1/8
Third 8 3/4 - 7 1/8
Fourth 9 3/8 - 7 7/8
----------------------------------
b.) Holders
The approximate number of stockholders of record on March 15, 1995 was
3,000.
c.) Dividends
Dividends paid were as follows:
Record Payment Cash Stock
Date Date Dividend Dividend
10/13/92 10/27/92 $0.10 5%
03/02/93 03/16/93 $0.025 - -
06/08/93 06/22/93 $0.025 - -
09/07/93 09/21/93 $0.025 - -
10/15/93 10/29/93 - - 5%
12/09/93 12/21/93 $0.03 - -
05/02/94 05/17/94 $0.03 - -
08/02/94 08/16/94 $0.03 - -
11/01/94 10/15/94 $0.03 - -
A regular quarterly cash dividend of $0.025 per share was established on
February 9, 1993. On November 30, 1993 the regular quarterly cash dividend
was increased to $0.03 per share.
ITEM 6. SELECTED FINANCIAL DATA
Stifel Financial Corp. and Subsidiaries
Financial Summary
(In thousands, except per share amounts)
Year Ended Five Months
December 31, Ended Year Ended July
---------------------------------------------------------------------------------
1994 Dec. 31, 1993 1993 1992 1991 1990
Revenues
Commissions $ 25,407 $ 11,949 $ 26,456 $ 25,204 $ 19,957 $ 20,520
Principal transactions 22,567 9,313 25,201 25,260 19,432 16,084
Investment banking 11,969 10,885 30,551 29,791 14,030 16,912
Interest 10,918 4,057 8,851 9,130 8,613 10,410
Sale of Investment company shares 9,674 4,906 10,741 8,638 5,411 5,528
Sale of unit investment trusts 2,736 1,362 3,220 2,611 2,188 2,218
Sale of Insurance products 2,207 1,263 1,614 1,676 1,950 2,001
Other 8,448 2,720 6,837 5,699 5,635 6,560
--------- --------- --------- --------- --------- ---------
93,926 46,455 113,471 108,009 77,216 80,233
Expenses
Employee compensation & benefits 60,652 29,421 68,657 63,891 46,126 46,908
Commissions & floor brokerage 2,120 845 2,485 2,437 2,055 2,217
Communications and office supplies 8,045 3,090 6,836 6,168 6,706 7,092
Occupancy & equipment rental 9,397 3,333 7,648 7,401 6,929 7,500
Promotional 2,868 1,231 2,925 2,206 1,604 1,627
Interest 6,138 1,763 4,838 5,505 5,892 7,420
Provision for litigation and bad debts 2,467 473 1,237 3,745 4,816 1,953
Restructuring charge 2,672 0 0 0 0 0
Other operating expenses 8,788 3,239 7,575 7,588 5,874 4,963
--------- --------- --------- --------- --------- ---------
103,147 43,395 102,201 98,941 80,002 79,680
Income (loss) before income taxes
and extraordinary credit (9,221) 3,060 11,270 9,068 (2,786) 553
Provision (Benefit) for Income Taxes
Current (1,962) 1,352 4,223 2,918 426 693
Deferred (1,756) (207) 9 445 (426) (488)
--------- --------- --------- --------- --------- ---------
(3,718) 1,145 4,232 3,363 0 205
Income (loss) before extraordinary
credit (5,503) 1,915 7,038 5,705 (2,786) 348
Extraordinary Credit -- tax benefit
from utilization of net operating
loss carryforward - - - - - - 648 - - - -
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (5,503) $ 1,915 $ 7,038 $ 6,353 $ (2,786) $ 348
========= ========= ========= ========= ========= =========
Per Share Data
Primary earnings (loss)(a) $ (1.29) $ 0.44 $ 1.68 $ 1.59 $ (0.71) $ 0.09
Fully Diluted earnings (loss)(a) (1.29) 0.39 1.40 1.34 (0.71) 0.09
Cash dividends 0.09 0.055 0.15 0.00 0.00 0.00
ITEM 6. SELECTED FINANCIAL DATA (Continued)
Stifel Financial Corp. and Subsidiaries
Financial Summary
(In thousands, except percentages)
Year Ended Five Months
December 31, Ended Year Ended July
---------------------------------------------------------------------------------
1994 Dec. 31, 1993 1993 1992 1991 1990
Other Data
Total Assets $ 222,208 $ 288,203 $ 196,539 $ 191,059 $ 121,997 $ 148,654
Long-term obligations $ 11,520 $ 11,520 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Stockholder's equity $ 34,226 $ 40,609 $ 38,995 $ 31,597 $ 24,740 $ 27,512
Net income as % average equity * N.M. 4.81% 19.94% 22.55% * N.M. 1.25%
Net income as % revenues * N.M. 4.12% 6.20% 5.88% * N.M. 0.4%
Average common shares and share
equivalents outstanding (a):
Primary 4,253 4,312 4,199 3,995 3,942 4,043
Fully Diluted 5,539 5,598 5,541 5,281 3,942 4,043
(a) Retroactively restated to reflect the 5 percent stock dividends declared
September 9, 1992, September 14, 1993, and January 24, 1995.
* Not Meaningful
The information called for in items 7 and 8 of Part II is set forth on the
pages listed below of the Company's 1994 Annual Report to Stockholders and
is incorporated herein by reference:
Pages In
Annual Report
To Stockholders
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation. 7 through 14
ITEM 8. Financial Statements and Supplementary Data. 15 through 33
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
ITEMS 10 THROUGH 13
Financial intends to file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A involving the
election of directors not later than 120 days after the end of its fiscal
year ended December 31, 1994. Accordingly, except to the extent included
in Part I under the caption "Executive Officers of the Registrant", the
information required by Part III (Items 10, 11, 12 and 13) is incorporated
herein by reference to such definitive proxy statement in accordance with
General Instruction G(3) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
Reference page(s)
Annual Report to
Stockholders
1. The following consolidated financial statements of
Stifel Financial Corp. and subsidiaries, included on
pages 15 through 24 in the 1994 Annual Report to
Stockholders, are incorporated by reference in Item 8
Report of Independent Accountants 15
Consolidated Statements of Financial Condition --
December 31, 1994 and December 31, 1993 16-17
Consolidated Statements of Operations --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 18
Consolidated Statements of Stockholders' Equity --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 21
Consolidated Statements of Cash Flows --
Year ended December 31, 1994, five-month
transition period ended December 31, 1993 and
fiscal years ended July 30, 1993 and July 31, 1992 19-20
Notes to Consolidated Financial Statements 22-32
2. The following consolidated financial statement
schedules of Stifel Financial Corp. and subsidiaries
are filed herewith pursuant to ITEM 14(d):
Report of Independent Accountants
Schedule I - Condensed Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
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 and,
therefore, have been omitted.
3. Exhibits
Exhibit No. (Referenced to Item 601(b) of Regulation S-K)
(a)(1) Restated Certificate of Incorporation of Financial
filed with the Secretary of State of Delaware on June 1, 1983,
incorporated herein by reference to Exhibit 3.1 to Financial's
Registration Statement on Form S-1, as amended (Registration
File No. 2-84232) filed July 19, 1983.
(a)(2) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware on May
11, 1987, incorporated herein by reference to Exhibit (3)(a)(2)
to Financial's Report on Form 10-K for the year ended July 31,
1987.
(a)(3) Certificate of Designation, Preferences, and Rights
of Series A Junior Participating Preferred Stock of Financial
filed with the Secretary of State of Delaware on July 10, 1987,
incorporated herein by reference to Exhibit (3)(a)(3) to
Financial's Report on Form 10-K for the year ended July 31,
1987.
(a)(4) Amendment to Restated Certificate of Incorporation of
Financial filed with the Secretary of State of Delaware on
November 28, 1989, incorporated herein by reference to Exhibit
(3)(a)(4) to Financial's Report on Form 10-K for the year ended
July 27, 1990.
(b) Amended and Restated By-Laws of Financial, incorporated
herein by reference to Exhibit 3(b)(1) to Financial's Report on
Form 10-K for fiscal year ended July 30, 1993.
4. Note Agreement dated as of October 15, 1988, between Financial and
Bankers United Life Assurance Company and Pacific Fidelity Life
Insurance Company, incorporated herein by reference to Exhibit 4 to
Financial's Report on Form 10-Q for the quarterly period ended April
28, 1989. The Company hereby agrees to furnish the Securities and
Exchange Commission copies of such instruments upon request.
10.(a)(1) Employment Agreement with George H. Walker III dated
August 21, 1987, incorporated herein by reference to Exhibit
10(c) to Financial's Report on Form 10-K for the fiscal year
ended July 31, 1987.
(a)(2) First Amendment to Employment Agreement with George H. Walker
III, incorporated herein by reference to Exhibit 10(a)(2) to
Financial's Report on Form 10-K for the fiscal year ended July 31,
1992.
(b) Form of Indemnification Agreement with directors dated as
of June 30, 1987, incorporated herein by reference to Exhibit
10.2 to Financial's Report on Form 8-K (date of earliest event
reported - June 22, 1987) filed July 14, 1987.
(c) 1983 Incentive Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 4(a) to Financial's
Registration Statement on Form S-8 (Registration File No. 2-
94326) filed November 14, 1984.
(d) 1985 Incentive Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 28C to Financial's
Registration Statement on Form S-8, as amended (Registration
File No. 33-10030) filed November 7, 1986.
(e) 1987 Non-qualified Stock Option Plan of Financial,
incorporated herein by reference to Exhibit 10(h) to
Financial's Report on Form 10-K for the fiscal year ended July
31, 1987.
(f) Amendment to 1983 Incentive Stock Option Plan, 1985
Incentive Stock Option Plan and 1987 Non-Qualified Stock Option
Plan, incorporated herein by reference to Exhibit 10(f) to
Financial's Report on Form 10-K for the fiscal year ended July
28, 1989.
(g)(1) 1993 Employee Stock Purchase Plan of Financial,
incorporated herein by reference to ANNEX A of Financial's
Definitive Proxy Statement (Registration File No. 33-16150)
filed October 28, 1992.
(g)(2) First Amendment to the 1993 Employee Stock Plan of
Financial, incorporated herein by reference to Exhibit 4.5 to
Financial's Registration Statement on Form S-8 (Registration
File No. 33-53097) filed April 11, 1994.
(h) Restricted Stock Agreement effective as of October 1, 1992
with Rick E. Maples, incorporated herein by reference to
Exhibit 10(l) to Financial's Report on Form 10-K for fiscal
year ended July 30, 1993.
(i) Employment and Non-Competition Agreement with Gregory F.
Taylor dated July 26, 1993, incorporated herein by reference to
Exhibit 10(m) to Financial's Report on Form 10-K for fiscal
year ended July 30, 1993.
(j) Dividend Reinvestment and Stock Purchase Plan of
Financial, incorporated herein by reference to Financial's
Registration Statement on Form S-3 (Registration File No. 33-
53699) filed May 18, 1994.
11. Statement regarding computation of per share earnings, filed
herewith.
13. Annual Report to Stockholders for the year ended December 31, 1994.
Except for those portions of pages expressly incorporated by
reference, the 1994 Annual Report to Stockholders is not deemed
filed as part of this Annual Report on Form 10-K.
21. List of Subsidiaries of Financial, filed herewith.
23. Consent of Independent Accountants, filed herewith.
27. Financial Data Schedule BD, filed herewith.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth quarter of
Financial's fiscal year ended December 31, 1994.
The Company filed a report on Form 8-K dated February 22, 1995. This
Form 8-K contained information under Item 7. Financial Statements, Pro
Forma Financial Information and Exhibits. The exhibit filed was a Press
Release dated February 7, 1995 announcing an agreement to sell the
assets of the Oklahoma division of Stifel, Nicolaus & Company,
Incorporated (a wholly-owned subsidiary of Stifel Financial Corp.) to
Capital West Securities, Inc. ("Capital West Securities"), an Oklahoma
corporation and a wholly-owned subsidiary of Capital West Financial
Corporation, an Oklahoma corporation.
SIGNATURES
Pursuant to the requirements of Section 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 St. Louis, State of Missouri, on the 24th day of March, 1995.
STIFEL FINANCIAL CORP.
(Registrant)
By /s/ Gregory F. Taylor
Gregory F. Taylor
(Principal Executive Officer)
/s/ Mark D. Knott
Mark D. Knott
(Principal Financial and
Accounting 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 on March 24, 1995, in the capacities indicated.
/s/ George H. Walker III Chairman of the Board
George H. Walker III
/s/ Gregory F. Taylor President, Chief Executive
Gregory F. Taylor Officer, and Director
/s/ Belle A. Cori Director
Belle A. Cori
/s/ Richard F. Ford Director
Richard F. Ford
/s/ John J. Goebel Director
John J. Goebel
/s/ Mark D. Knott Director
Mark D. Knott
/s/ Robert E. Lefton Director
Robert E. Lefton
/s/ James M. Oates Director
James M. Oates
Report of Independent Accountants
Board of Directors
Stifel Financial Corp.
St. Louis, Missouri:
Our report on the consolidated financial statements of Stifel Financial
Corp. and Subsidiaries has been incorporated by reference in this Form 10-K
from page 15 of the 1994 Annual Report to Stockholders of Stifel Financial
Corp. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index
on page 12 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand, L.L.P.
St. Louis, Missouri
February 24, 1995
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
STIFEL FINANCIAL CORP.
Dec. 31, 1994 Dec. 31, 1993
ASSETS
Cash $ 9,155 $ 9,155
Due from subsidiaries (a) 4,255,352 4,128,910
Investment in subsidiaries (a) 36,214,874 41,725,664
Office equipment and leasehold
improvements, at cost, less allowances
for depreciation and amortization of
$13,130,867 and $12,614,660, respectively 4,721,786 4,701,174
Investments, at cost 796,393 1,551,979
Goodwill and other intangible assets, net
of amortization of $358,536 and
$1,290,527, respectively 1,279,593 1,390,383
Other assets 731,945 1,289,257
----------- -----------
TOTAL ASSETS $48,009,098 $54,796,522
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to subsidiaries (a) $ 39,456 $ 631,375
Obligation under Capital Lease 1,029,282 931,274
Long-term debt 11,520,000 11,520,000
Other liabilities 1,193,949 1,104,656
----------- -----------
TOTAL LIABILITIES 13,782,687 14,187,305
----------- -----------
Stockholders' Equity:
Capital stock 648,743 617,886
Additional paid-in capital 18,491,086 17,268,905
Retained earnings 17,016,335 24,161,663
----------- -----------
36,156,164 42,048,454
Less cost of stock in treasury 1,731,974 1,240,452
Less unamortized stock awards 197,779 198,785
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 34,226,411 40,609,217
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $48,009,098 $54,796,522
=========== ===========
(a) Eliminated in consolidation.
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(continued)
CONDENSED STATEMENTS OF OPERATIONS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
Revenues:
Lease $2,162,292 $791,330 $1,801,167 $1,755,564
Other (7,522) 57,398 520,319 (4,472)
----------- -------- ---------- -----------
2,154,770 848,728 2,321,486 1,751,092
Expenses:
Depreciation and
amortization 2,325,301 870,926 2,004,720 1,963,040
Professional fees 236,506 121,574 549,122 648,007
Miscellaneous 128,882 38,636 258,866 95,929
---------- --------- ---------- ----------
2,690,689 1,031,136 2,812,708 2,706,976
---------- --------- ---------- ----------
Loss before income taxes (535,919) (182,408) (491,222) (955,884)
Provision (benefit)
for income taxes:
Current 53,406 (15,165) (42,308) (269,167)
Deferred (27,160) (34,501) (105,763) (157,629)
---------- ---------- ---------- -----------
26,246 (49,666) (148,071) (426,796)
---------- ---------- ---------- -----------
Loss before equity in
net (loss) income of
subsidiaries (562,165) (132,742) (343,151) (529,088)
Equity in net (loss) income
of subsidiaries (4,941,170) 2,048,059 7,381,245 6,881,695
------------ ---------- ---------- ----------
NET (LOSS) INCOME $(5,503,335) $1,915,317 $7,038,094 $6,352,607
============ ========== ========== ==========
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF CASH FLOWS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(5,503,335) $1,915,317 $7,038,094 $6,352,607
Non-cash items included in
net (loss) income:
Depreciation and
amortization 2,325,301 870,926 2,004,720 1,963,040
Unrealized loss on
investments 321,300 - - - - 69,515
Loss on sale of assets - - - - - - 1,764
Deferred tax benefit (27,160) (34,501) (105,763) (157,629)
Undistributed loss
(income) of subsidiaries 4,941,170 (2,048,059) (7,381,245) (6,881,695)
Amortization of restricted
stock awards and
stock benefits 107,341 421,968 506,373 180,963
--------- --------- --------- ---------
2,164,617 1,125,651 2,062,179 1,528,565
Net change in due to/due
from subsidiaries (718,361) (13,184) 1,094,158 91,786
Decrease (increase) in
other assets 1,365,788 840,208 (195,977) (44,631)
Increase in other
liabilities 180,271 156,311 513,107 220,104
--------- --------- --------- ---------
CASH PROVIDED BY OPERATING
ACTIVITIES 2,992,315 2,108,986 3,473,467 1,795,824
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Employee stock purchase plan 611,688 627,587 378,195 346,919
Exercised options 81,213 110,788 267,319 61,855
Dividend reinvestment plan 944 - - - - - -
Payments for:
Purchase of stock for
treasury (1,416,932) (1,329,374) (301,813) (84,969)
Restricted stock awards - - (33,937) (81,449) (38,265)
Principal payments
under capital lease (710,089) (263,096) (590,252) (583,263)
Stock dividend
fractional share payment - - (2,478) - - - -
Cash dividend (354,368) (215,361) (561,128) - -
----------- ----------- ---------- ---------
CASH USED FOR FINANCING
ACTIVITIES (1,787,544) (1,105,871) (889,128) (297,723)
----------- ----------- ---------- ---------
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
CONDENSED STATEMENTS OF CASH FLOWS
STIFEL FINANCIAL CORP.
Five
Year Months Year Ended
Ended Ended
Dec. 31, Dec. 31, July 30, July 31,
1994 1993 1993 1992
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Distributions/sales
received on investments 25,000 - - - - - -
Sales of office
equipment and leasehold
improvements 24,235 - - 16,430 7,665
Dissolution of
subsidiaries 505,000 - - - - - -
Payments for:
Investments in
subsidiaries - - (5,000) (529,259) - -
Acquisition of
investments (52,219) (250,000) (487,671) - -
Office equipment and
leasehold improvements (1,706,787) (748,115) (1,583,839) (1,505,766)
----------- ----------- ----------- -----------
CASH USED FOR INVESTING
ACTIVITIES (1,204,771) (1,003,115) (2,584,339) (1,498,101)
----------- ----------- ----------- -----------
Increase in cash 0 0 0 0
Cash (beginning of period) 9,155 9,155 9,155 9,155
----------- ----------- ----------- -----------
Cash (end of period) $9,155 $9,155 $9,155 $9,155
=========== =========== =========== ===========
Supplemental Disclosures of Cash Flow Information
Schedule of Non-cash Investing and Financing Activities
Assumption of debt for
acquisition of Todd $ - - $1,520,000 $ - - $ - -
Fixed assets acquired
under capital lease 808,000 257,000 - - 1,063,000
Stock dividends
distributed 1,287,000 - - 2,009,000 1,424,000
See Notes to Consolidated Financial Statements (Item 8)
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
STIFEL FINANCIAL CORP. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
Fiscal Year Ended December 31, 1994:
Deducted from asset
account: Allowances
for doubtful accounts $1,435,058 $ 0 $ 364,073 (1) $1,070,985
Deducted from asset
account: Allowances
for doubtful notes
receivables 0 3,040,969 480,352 (2) 2,560,617
Deducted from asset
account: Reserves
for investments 1,071,007 322,404 420,616 (3) 972,795
Deducted from asset
account: Reserves for
securities owned 450,000 0 450,000 (4) 0
Transition Period Ended December 31, 1993:
Deducted from asset
account: Allowances
for doubtful accounts 1,283,800 253,500 102,242 (1) 1,435,058
Deducted from asset
account: Reserves for
for investments 1,071,007 0 0 1,071,007
Deducted from asset
account: Reserves for
securities owned 450,000 0 0 450,000
Fiscal Year Ended July 30, 1993:
Deducted from asset
account: Allowances
for doubtful accounts 1,455,627 32,500 204,327 (1) 1,283,800
Deducted from asset
account: Reserves for
for investments 727,007 350,000 6,000 (3) 1,071,007
Deducted from asset
account: Reserves for
securities owned 0 450,000 0 450,000
Fiscal Year Ended July 31, 1992:
Deducted from asset
account: Allowances
for doubtful accounts 4,120,400 739,905 3,404,678 (1) 1,455,627
Deducted from asset
account: Reserves for
for investments 1,992,339 345,000 1,610,332 (3) 727,007
(1) Uncollected accounts written off and recoveries.
(2) Uncollected notes written off and recoveries.
(3) Investments disposed of.
(4) Securities disposed of.
EXHIBIT INDEX
Stifel Financial Corp. and Subsidiaries
Annual Report on Form 10-K
Year Ended December 31, 1994
Exhibit
Number Description
11. Statement regarding computation of
per share earnings.
13. 1994 Annual Report to Stockholders.*
21. Subsidiaries of Stifel Financial Corp.
23. Consent of Independent Accountants.
27. Financial Data Schedule BD.
* Certain portions of the Annual Report to Stockholders are incorporated
herein by reference; the Annual Report to Stockholders is not to be deemed
filed as a part of this Annual Report on Form 10-K.