SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9305 STIFEL FINANCIAL CORP. ---------------------- (Exact name of registrant as specified in its charter) DELAWARE 43-1273600 - --------------------------------- ------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 501 N. Broadway, St. Louis, Missouri 63102-2102 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 314-342-2000 (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes[x] No[ ] Shares of common stock outstanding at October 29, 1999: 6,711,856, par value $0.15.
2 Stifel Financial Corp. And Subsidiaries Form 10-Q Index September 30, 1999 PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Statements of Financial Condition -- September 30, 1999 and December 31, 1998....................... 3-4 Consolidated Statements of Operations -- Three Months Ended September 30, 1999 and September 30,1998..... 5 Consolidated Statements of Operations -- Nine Months Ended September 30, 1999 and September 30,1998...... 6 Consolidated Statements of Cash Flows-- Nine Months Ended September 30, 1999 and September 30,1998...... 7-8 Notes to Consolidated Financial Statements........................ 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 12-17 Item 3. Quantitative and Qualitative Disclosures about Market Risk ............................................................ 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................ 18 Item 6. Exhibit(s) and Report(s) on Form 8-K......................... 18 Signatures............................................................ 19
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (In thousands, except par values and share amounts) September 30, December 31, 1999 1998 ------------- ------------ ASSETS Cash and cash equivalents $ 19,458 $ 12,835 Cash segregated for the exclusive benefit of customers 180 177 Receivable from brokers and dealers 25,874 23,946 Receivable from customers, net of allowance for doubtful receivables of $556 and $556, respectively 240,875 213,709 Securities owned, at fair value 27,283 38,632 Membership in exchanges, at cost 513 513 Office equipment and leasehold improvements, at cost, net of allowances for depreciation and amortization of $12,856 and $12,361, respectively 7,668 5,315 Goodwill, net of accumulated amortization of $715 and $1,721, respectively 1,654 3,874 Notes receivable from and advances to officers and employees, net of allowance for doubtful receivables from former employees of $526 and $482, respectively 7,914 6,460 Deferred tax asset 3,410 3,213 Other assets 31,087 26,331 ------------- ------------ Total Assets $ 365,916 $ 335,005 ============= ============
4 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED) (UNAUDITED) (In thousands, except par values and share amounts) September 30, December 31, 1999 1998 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Short-term borrowings from banks $ 53,075 $ 62,890 Payable to brokers and dealers 147,016 104,769 Payable to customers 30,922 37,306 Securities sold, but not yet purchased, at fair value 3,166 998 Drafts payable 9,851 18,210 Accrued employee compensation 14,664 18,320 Obligations under capital leases 1,234 848 Accounts payable and accrued expenses 13,919 16,117 Long-term debt 34,968 20,570 ------------- ------------ Total Liabilities 308,815 280,028 Stockholders' Equity Preferred stock -- $1 par value; authorized 3,000,000 shares; none issued - - - - Common stock -- $0.15 par value; authorized 10,000,000 shares; issued 7,376,176 and 7,219,335 shares, respectively 1,106 1,084 Additional paid-in capital 43,208 41,867 Retained earnings 22,750 18,291 ------------- ------------ 67,064 61,242 Less: Treasury stock, at cost, 645,909 and 222,743 shares, respectively 6,307 2,162 Unamortized expense of restricted stock awards 791 1,081 Unearned employee stock ownership plan shares, at cost, 223,667 and 235,866 shares, respectively 2,865 3,022 ------------- ------------ Total Stockholders' Equity 57,101 54,977 ------------- ------------ $ 365,916 $ 335,005 ============= ============ See Notes to Consolidated Financial Statements.
5 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share amounts) Three Months Ended September 30, September 30, 1999 1998 ------------- ------------- REVENUES Commissions $ 15,282 $ 14,231 Principal transactions 6,319 4,235 Investment banking 2,507 6,557 Interest 5,333 4,765 Other 6,072 4,471 ------------- ------------- 35,513 34,259 EXPENSES Employee compensation and benefits 21,807 22,108 Communications and office supplies 2,254 2,065 Occupancy and equipment rental 2,900 2,344 Interest 2,663 2,439 Commissions and floor brokerage 650 726 Other operating expenses 3,066 3,016 ------------- ------------- 33,340 32,698 ------------- ------------- INCOME BEFORE INCOME TAXES 2,173 1,561 Provision for income taxes 742 594 ------------- ------------- NET INCOME $ 1,431 $ 967 ============= ============= Net income per share: Basic $ 0.22 $ 0.14 Diluted $ 0.21 $ 0.13 Dividends declared per share $ 0.03 $ 0.03 Average common equivalent shares outstanding: Basic 6,570 6,879 Diluted 6,925 7,197 See Notes to Consolidated Financial Statements.
6 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share amounts) Nine Months Ended September 30, September 30, 1999 1998 ------------- ------------- REVENUES Commissions $ 49,958 $ 41,822 Principal transactions 18,742 19,792 Investment banking 8,021 13,787 Interest 14,237 14,634 Other 19,407 14,135 ------------- ------------- 110,365 104,170 EXPENSES Employee compensation and benefits 68,614 65,991 Communications and office supplies 6,620 6,151 Occupancy and equipment rental 8,411 6,672 Interest 6,735 7,861 Commissions and floor brokerage 2,099 2,076 Other operating expenses 9,493 8,340 ------------- ------------- 101,972 97,091 ------------- ------------- INCOME BEFORE INCOME TAXES 8,393 7,079 Provision for income taxes 2,931 2,836 ------------- ------------- NET INCOME $ 5,462 $ 4,243 ============= ============= Net income per share: Basic $ 0.81 $ 0.62 Diluted $ 0.77 $ 0.59 Dividends declared per share $ 0.09 $ 0.09 Average common equivalent shares outstanding: Basic 6,712 6,843 Diluted 7,065 7,224 See Notes to Consolidated Financial Statements.
7 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(In thousands) Nine Months Ended September 30, September 30, 1999 1998 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 5,462 $ 4,243 Noncash items included in earnings: Depreciation and amortization 1,971 1,337 Bonus notes amortization 1,316 1,157 Gain on sale of subsidiary (1,496) - - Deferred items (163) 1,936 Restricted stock awards amortization 297 351 ------------- ------------- 7,387 9,024 Decrease (increase) in assets: Operating receivables (29,094) 48,192 Cash segregated for the exclusive benefit of customers (3) 1 Securities owned 11,349 (7,201) Notes receivable from officers and employees (2,770) (4,219) Other assets (194) (3,196) Increase (decrease) in liabilities: Operating payables 35,863 36,715 Securities sold, but not yet purchased 2,168 (2,802) Drafts payable, accrued employee compensation, and accounts payable and accrued expenses (13,639) (13,975) ------------- ------------- Cash Flows From Operating Activities 11,067 62,539 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from: Sale of property 15 72 Sale of subsidiary 4,744 - - Payments for: Acquisition of office equipment and leasehold improvements (3,274) (3,021) Acquisition of investments (6,012) (5,808) ------------- ------------- Cash Flows From Investing Activities (4,527) (8,757)
8 STIFEL FINANCIAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) UNAUDITED (In Thousands) Nine Months Ended September 30, September 30, 1999 1998 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Short-term borrowings, net (9,815) (64,775) Proceeds from: Issuance of stock 1,667 1,441 Issuance of long-term debt 14,398 10,970 Payments for: Repurchase of stock (4,984) (283) Principal payments under capital lease obligation (538) (384) Cash dividends (645) (606) ------------- ------------- Cash Flows From Financing Activities 83 (53,637) Increase in cash and cash equivalents 6,623 145 Cash and cash equivalents - beginning of period 12,835 15,366 ------------- ------------- Cash and Cash Equivalents - end of period $ 19,458 $ 15,511 ============= ============= Supplemental disclosure of cash flow information: Income tax payments $ 2,925 $ 3,939 Interest payments $ 6,563 $ 8,092 Schedule of noncash investing and financing activities: Employee stock ownership plan $ 116 - - Fixed assets acquired under capital lease $ 924 $ 495 Restricted stock awards and stock units, net of forfeitures $ 499 $ 1,264 Stock Dividend $ 77 $ 30 See Notes to Consolidated Financial Statements.
9 STIFEL FINANCIAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - REPORTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Stifel Financial Corp. and its subsidiaries (collectively referred to as the "Company"). The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Where appropriate, prior years' financial information has been reclassified to conform with the current year presentation. Comprehensive Income The Company has no components of other comprehensive income, therefore comprehensive income equals net income. NOTE B - NET CAPITAL REQUIREMENT The Company's principal subsidiary, Stifel, Nicolaus & Company, Incorporated ("SN & Co."), is subject to the Uniform Net Capital Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Rule"), which requires the maintenance of minimum net capital, as defined. SN & Co. has elected to use the alternative method permitted by the Rule which requires maintenance of minimum net capital equal to the greater of $250,000 or 2 percent of aggregate debit items arising from customer transactions, as defined. The Rule also provides that equity capital may not be withdrawn and cash dividends may not be paid if resulting net capital would be less than 5 percent of aggregate debit items. At September 30, 1999, SN & Co. had net capital of $32,755,000, which was 12.33% of its aggregate debit items, and $27,444,000 in excess of the minimum required net capital.
10 NOTE C - SEGMENT REPORTING The Company's reportable segments include private client, capital markets, and other. The private client segment includes 54 branch offices and 115 independent contractor offices of the Company's broker-dealer subsidiaries located throughout the U.S., primarily in the Midwest. These branches provide securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance, to their private clients. The capital markets segment includes management and participation in underwritings (exclusive of sales credits, which are included in the private client segment), mergers and acquisitions, public finance, trading, research, and market making. Investment advisory fees and clearing income is included in other. Intersegment revenues and charges are eliminated between segments. The Company evaluates the performance of its segments and allocates resources to them based on various factors, including prospects for growth, return on investment, and return on revenues. Information concerning operations in these segments of business is as follows (in thousands): - ------------------------------------------------------------------------------- Three Months Ended September 30, 1999 1998 - ------------------------------------------------------------------------------- Revenues Private Client $ 30,453 $ 27,898 Capital Markets 3,513 5,433 Other 1,547 928 - ------------------------------------------------------------------------------- Total Revenues $ 35,513 $ 34,259 =============================================================================== Operating Contribution Private Client $ 3,972 $ 3,312 Capital Markets 120 75 Other (51) 183 - ------------------------------------------------------------------------------- Total Operating Contribution 4,041 3,570 - ------------------------------------------------------------------------------- Unallocated Overhead (1,868) (2,009) - ------------------------------------------------------------------------------- Pre-Tax Income $ 2,173 $ 1,561 =============================================================================== - ------------------------------------------------------------------------------- Nine Months Ended September 30, 1999 1998 - ------------------------------------------------------------------------------- Revenues Private Client $ 92,572 $ 84,951 Capital Markets 11,672 15,198 Other 6,121 4,021 - ------------------------------------------------------------------------------- Total Revenues $110,365 $104,170 =============================================================================== Operating Contribution Private Client $ 14,675 $ 12,761 Capital Markets 412 1,946 Other 2,441 953 - ------------------------------------------------------------------------------- Total Operating Contribution 17,528 15,660 Unallocated Overhead (9,135) (8,581) - ------------------------------------------------------------------------------ Pre-Tax Income $ 8,393 $ 7,079 =============================================================================== The Company has not disclosed asset information by segment, as the information is not produced internally and its preparation is impracticable.
11 NOTE D - EARNINGS PER SHARE ("EPS") Basic EPS is calculated by dividing net income by the weighted- average number of common shares outstanding. Diluted EPS is similar to basic EPS but adjusts for the effect of potential common shares. The components of the basic and diluted earnings per share calculation for the three and nine months ended September 30, are as follows (in thousands, except per share amounts): - ------------------------------------------------------------------------------- Three Months Ended September 30, 1999 1998 - ------------------------------------------------------------------------------- Income Available to Common Stockholders Net Income $ 1,431 $ 967 - ------------------------------------------------------------------------------- Weighted Average Shares Outstanding Basic Weighted Average Shares Outstanding: 6,570 6,879 Potential Common Shares From Employee Benefit Plans 355 318 Diluted Weighted Average Shares Outstanding 6,925 7,197 - ------------------------------------------------------------------------------- Basic Earnings Per Share $ 0.22 $ 0.14 Diluted Earnings Per Share $ 0.21 $ 0.13 =============================================================================== - ------------------------------------------------------------------------------- Nine Months Ended September 30, 1999 1998 - ------------------------------------------------------------------------------- Income Available to Common Stockholders Net Income $ 5,462 $ 4,243 - ------------------------------------------------------------------------------- Weighted Average Shares Outstanding Basic Weighted Average Shares Outstanding: 6,712 6,843 Potential Common Shares From Employee Benefit Plans 353 381 Diluted Weighted Average Shares Outstanding 7,065 7,224 - ------------------------------------------------------------------------------- Basic Earnings Per Share $ 0.81 $ 0.62 Diluted Earnings Per Share $ 0.77 $ 0.59 =============================================================================== NOTE E- SALE OF SUBSIDIARY On April 27, 1999, the Company completed the sale of one of its investment advisory subsidiaries, Todd Investment Advisors to a subsidiary of Western & Southern Life Insurance Company("W&S"), a significant shareholder. The Company recorded a pre-tax gain of approximately $1.5 million and is included in other income. NOTE F - NOTE PAYABLE On July 30, 1999, the Company issued an additional $5,000,000 long term notes payable to W&S, due June 30, 2004 with interest payable monthly at the rate of 8% per annum. NOTE G - SUBSEQUENT EVENTS On October 27, 1999, the Company's Board of Directors declared a regular quarterly cash dividend of $0.03 per share, payable on November 24, 1999 to stockholders of record as of the close of business on November 10, 1999. ******
12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Nine months ended September 1999 as compared to nine months ended September 1998 The Company recorded net earnings of $5.5 million or $0.77 per diluted share on total revenues of $110.4 million for the nine months ended September 30, 1999 compared to net earnings of $4.2 million or $0.59 per diluted share on total revenues of $104.2 million for the same period one year earlier. The Company's expansion of its Private Client Group, which began in 1998, was evident during 1999 when compared to the same period one year earlier. Private client branch offices, investment executives, and independent contractors increased by 11, 30, and 24, respectively over 1998 representing increases of 26%, 10%, and 19%. Additionally, investor confidence in the equity markets remained strong as indicated by the increase in the major market index_The Dow Jones Industrial Average (the "Dow") _ and increased trading volumes on the New York Stock Exchange ("NYSE") and NASDAQ. From September 30, 1998 to September 30, 1999, the Dow increased 2,494 (32%) from 7,843 to 10,337, while trading volumes on the NYSE and NASDAQ increased 19% and 29%, respectively, over 1998 which contributed to a 18% increase in the number of customer trades by the Company. Total revenues increased $6.2 million (6%) primarily as a result of growth in commissions and other revenues which increased $8.1 million (20%) and $5.3 million (37%) respectively, partially offset by decreases in principal transactions, investment banking and interest revenues, which declined $1.1 million (5%), $5.8 million (42%) and $397,000 (3%) respectively. Revenues from commissions rose due to private client expansion and strong markets as referred to above. Main components of the increase were from sales of over-the-counter equities, insurance products, and mutual funds, which increased 39%, 52%, and 18% respectively. Other revenues increased, principally due to growth in managed account service fees, and growth in money market account fees which increased 15% and 37%, respectively and the Company's $1.5 million pre-tax gain on the sale of one of its investment advisory subsidiaries, Todd Investment Advisors, Inc. completed on April 27, 1999. Revenues from principal transactions decreased due to decreased revenues generated by the sale of unit investment trusts, principally during the first quarter of 1998, offset by increased sales of taxable and nontaxable fixed income products which increased $551,000 (36%) and $924,000 (42%), respectively and an inventory loss in the quarter ending September 30, 1998 of $1.1 million on certain equity investments.
13 Investment banking revenues declined principally due to a decrease in municipal bond underwritings of $422,000 (22%), and decreased new issue equity underwritings and participations in corporate offerings of $3.6 million, and a decrease in financial advisory fees for private placements of $1.8 million (67%) principally related to an advisory fee in the 1998 third quarter. Interest revenue declined as a result of decreased average borrowings by customers, combined with decreases in the rates charged to those customers. Total expenses increased $4.9 million (5%) principally as a result of increased compensation and benefits and increased expenses related to the Company's expansion, and provisions for litigation offset by a decline in interest expense. Employee compensation and benefits, a significant portion of the Company's total expense, increased $2.6 million (4%) in the first nine months of 1999. The fixed component of compensation, primarily salaries, increased $1.7 million (9%) as a result of normal year-to-year salary increases and the addition of 22 non- sales associates. The majority of personnel increases resulted from the expansion of the Private Client Group, and related product support departments. The increase in the variable component of compensation of $965,000 (2%) grew in conjunction with the increases in revenues and profitability. Occupancy and equipment rental increased $1.7 million (26%), principally due to the addition of eleven branch offices and increased depreciation expense related to increases in capitalized equipment to upgrade technology and support private client expansion. Other operating expenses increased $1.2 million (14%) principally due to increases in the provision for litigation related primarily to the Company's former Oklahoma operations. Interest expense declined $1.1 million (14%) due to decreased borrowings by the Company to finance customer margin accounts, combined with decreases in the rates paid on those borrowings. The effective tax rate for the first nine months ended September 30, 1999 decreased from the same period one year earlier primarily due to the tax effect of the gain on the disposition of Todd and reduced state taxes.
14 Three months ended September 1999 as compared to three months ended September 1998 The Company recorded net earnings of $1.4 million or $0.21 per diluted share on total revenues of $35.5 million for the third quarter ended September 30, 1999 compared to net earnings of $967,000 or $0.13 per diluted share on total revenues of $34.3 million for the same period one year earlier. The explanation of revenue and expense fluctuations presented for the nine month period are generally applicable to the three month operations with exception of the following items: Principal transactions increased $2.1 million (49%) due to increased demand for taxable and nontaxable fixed income products and a decrease in inventory losses on certain equity investments in the 1998 third quarter. Interest revenue increased $569,000 (11.9%) as a result of increased average borrowings by customers. Interest expense increased $224,000 (9.2%) due to increased borrowings by the Company to finance customer margin accounts and increased notes payable. Year 2000 - --------- The Year 2000 issue is the result of computer programs currently written in two-digit format, rather than four-digit, to define the applicable year, which affects the ability of computer systems to accurately process dates ending after December 31, 1999. As of September 1999, the Company has completed all remedies and testing on its internal computer systems which the Company believes are necessary to prepare for the Year 2000. In addition, the Company believes the third party vendor that provides record keeping and transaction processing for the Company's customer accounts has adequately demonstrated its readiness for Year 2000. The Company participated in the industry-wide testing of securities transaction processing in a simulated Year 2000 environment with the third party vendor in March and April 1999 with no significant problems noted. The Company has also reviewed the testing of other record keeping functions on the third party vendor's system that was performed in January 1999 by other users of the vendor's system. No significant items were noted. The Company will continue to perform testing of the vendor's system through the remainder of 1999. As of November 1999 the vendor has implemented a programming code "freeze" to ensure a stable processing system for the millennium rollover. Internal remedies for the Company, performed over the past several years, have included a review of all vendor supplied software and replacement with Year 2000 compliant versions when necessary and updates to programming code on its small number of internally created AS/400 programs. The Company has also replaced substantially all computer hardware with Year 2000 compliant systems as part of its business plan for upgrading its technological capabilities.
15 The Company believes that the incremental costs associated with modifications for internal software and systems has not been material to the Company's financial statements. However, the interdependent nature of securities transactions and the success of the Company's external counterparties and vendors, including the third-party vendor mentioned above, in dealing with this issue could significantly influence the Company's estimate of the impact the Year 2000 will have on its business. The Company has identified and developed contingency plans, i.e. staffing, processing alternatives, etc., for its internally provided mission critical systems. The Company is monitoring the development of contingency plans by its mission critical third party vendors. In particular, the third party vendor mentioned above has developed contingency plans, which include: extra staffing; increased communications with major exchanges and utilities over the January 1, 2000 weekend; moratoriums on staff vacations and time off during December/January period; and heightened readiness to invoke normal disaster recovery plan (backup power, hot site readiness). Forward-Looking Statements - -------------------------- The Management's Discussion and Analysis of Financial Condition and Results of Operations, including the discussion under "Year 2000," contains forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to the Company and those specific to the industry which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, third-party or Company failures to achieve timely, effective remediation of the Year 2000 issues, general economic conditions, actions of competitors, regulatory actions, changes in legislation and technology changes. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this Quarterly Report. The Company does not undertake any obligation to publicly update any forward-looking statements. Liquidity and Capital Resources - ------------------------------- The majority of the Company's assets are highly liquid, consisting mainly of cash or assets readily convertible into cash. These assets are financed primarily by the Company's equity capital, customer credit balances, short-term bank loans, proceeds from securities lending, long term notes payable, and other payables. Changes in securities market volumes, related customer borrowing demands, underwriting activity, and levels of securities inventory affect the amount of the Company's financing requirements. During the first nine months of 1999, the Company repurchased 513,969 shares, using existing board authorizations, at an average price of $9.43 per share, to meet obligations under the Company's employee benefit plans. On July 29, 1999, Directors of the Company authorized the repurchase of up to 250,000 additional common shares.
17 On July 30,1999, the Company issued an additional $ 5,000,000 long term notes payable to W&S, due June 30, 2004 with interest payable monthly at the rate of 8% per annum. Management believes the funds from operations, available informal short-term credit arrangements, and long-term borrowings, at September 30, 1999, will provide sufficient resources to meet the present and anticipated financing needs. Stifel, Nicolaus & Company, Incorporated, the Company's principal broker-dealer subsidiary, is subject to certain requirements of the Securities and Exchange Commission with regard to liquidity and capital requirements. At September 30, 1999, Stifel, Nicolaus had net capital of approximately $32.8 million which exceeded the minimum net capital requirements by approximately $27.4 million.
18 Item 3. Quantitative and Qualitative Disclosure about Market Risk There have been no material changes from the information provided in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. PART II. OTHER INFORMATION Item 1. Legal Proceedings There have been no material changes in the legal proceedings previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Such information is hereby incorporated by reference. Item 6. Exhibit(s) and Report(s) on Form 8-K (a) Exhibit No. (Reference to Item 601(b) of Regulation S-K) Description - ------------------------------------------------------------------------------- 27 Financial Data Schedule (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only) (b) Report(s) on Form 8-K There were no reports on Form 8-K filed during the quarter ended September 30, 1999.
19 SIGNATURES Pursuant to the requirement of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STIFEL FINANCIAL CORP. (Registrant) Date: November 12, 1999 By /s/Ronald J. Kruszewski -------------------- Ronald J. Kruszewski (President and Chief Executive Officer) Date: November 12, 1999 By /s/James M. Zemlyak ---------------- James M. Zemlyak (Principal Financial and Accounting Officer)
20 STIFEL FINANCIAL CORP. AND SUBSIDIARIES EXHIBIT INDEX September 30, 1999 Exhibit Number Description - ------------------------------------------------------------------------------- 27 Financial Data Schedule (furnished to the Securities and Exchange Commission for Electronic Data Gathering, Analysis, and Retrieval [EDGAR] purposes only)