LaBranche & Co Inc. Reports Second Quarter 2008 Results
NEW YORK--(BUSINESS WIRE)--LaBranche & Co Inc. (NYSE: LAB) today reported financial results for the second quarter and six months ended June 30, 2008. The second quarter 2008 results include a pre-tax unrealized loss on the Company's shares of NYSE Euronext, Inc. common stock (the "NYX shares") of $33.2 million and a $5.1 million pre-tax expense on early extinguishment of $169.1 million of our public debt. As a result, the Company reported an after-tax net loss of $21.3 million, or $0.34 per share, for the 2008 second quarter. This compares to a net loss of $368.9 million, or $6.00 per share, for the 2007 second quarter, which also includes a $54.6 million pre-tax unrealized loss on the Company's NYX shares as well as a non-cash pre-tax impairment charge related to the Company’s goodwill and stock listing rights of $164.1 million and $335.3 million, respectively.
On a pro-forma basis, the Company reported net income for the second quarter of 2008 of $1.7 million, or $0.03 per diluted share, compared to pro-forma net income of $6.6 million, or $0.11 per share, for the second quarter of 2007. Included in these results are pre-tax, non-cash charges of $2.4 million and $5.1 million in the second quarter of 2008 and 2007, respectively. These pro-forma results exclude the unrealized loss on the NYX shares in each period, the expense on early extinguishment of debt in the second quarter of 2008 and the impairment charge related to the Company’s goodwill and stock listing rights in the second quarter of 2007.
The Company’s results for the first six months of 2008 include a pre-tax unrealized loss on the Company's NYX shares of $112.5 million and a $6.0 million pre-tax expense on early extinguishment of $249.9 million of our public debt. As a result, the Company reported an after-tax net loss of $61.6 million, or $0.99 per share, for the six months ended June 30, 2008. This compares to a net loss of $374.5 million, or $6.10 per share, for the six months ended June 30, 2007, which also included a $58.8 million pre-tax unrealized loss on the Company's NYX shares as well as the goodwill and stock listing rights non-cash impairment charges described above.
On a pro-forma basis, the Company reported net income for the six months ended June 30, 2008 of $9.5 million, or $0.15 per diluted share, compared to pro-forma net income of $3.4 million, or $0.06 per share, for the six months ended June 30, 2007. Included in these results are pre-tax, non-cash charges of $4.3 million and $10.6 million for the six months ended June 30, 2008 and 2007, respectively. These pro-forma results exclude the unrealized loss on the NYX shares in each period, the expense on early extinguishment of debt in the 2008 and the impairment charge related to the Company’s goodwill and stock listing rights in 2007.
LaBranche & Co Inc. is the parent of LaBranche & Co. LLC, one of the largest Specialists in exchange-listed securities. LaBranche is also the parent of LaBranche Structured Holdings, Inc., whose subsidiaries are specialists and market-makers in options, exchange-traded funds and futures on various exchanges domestically and internationally. Another subsidiary of the Company, LaBranche Financial Services, LLC, provides mainly securities execution and brokerage services to institutional investors.
Certain statements contained in this release, including without limitation, statements containing the words "believes", "intends", "expects", "anticipates", and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such forward-looking statements are not guarantees of future performance, and since such statements involve risks and uncertainties, the actual results and performance of LaBranche and the industry may turn out to be materially different from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. LaBranche also disclaims any obligation to update its view of any such risks or uncertainties or to publicly announce the result of any revisions to the forward-looking statements made in this release.
| LaBranche & Co Inc. | |||||||||||
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Condensed Consolidated Statements of Operations |
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(all data in thousands, except per share data) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2008 | 2007 | 2008 | 2007 | ||||||||
|
|
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||
| REVENUES: | |||||||||||
| Net gain on principal transactions | $ | 43,567 | $ | 64,014 | $ | 103,747 | $ | 112,933 | |||
| Commissions and other fees | 9,950 | 11,927 | 19,959 | 24,688 | |||||||
| Net loss on investments | (36,344) | (53,673) | (117,769) | (58,528) | |||||||
| Interest income | 17,469 | 67,348 | 47,394 | 132,005 | |||||||
| Other | 2,460 | 1,158 | 2,753 | 1,282 | |||||||
| Total revenues | 37,102 | 90,774 | 56,084 | 212,380 | |||||||
| Interest Expense: | |||||||||||
|
Fixed interest on debt |
8,504 | 12,726 | 19,367 | 25,521 | |||||||
| Inventory financing | 20,808 | 79,230 | 51,620 | 150,159 | |||||||
| Total interest expense | 29,312 | 91,956 | 70,987 | 175,680 | |||||||
| Revenues, net of interest expense | 7,790 | (1,182) | (14,903) | 36,700 | |||||||
| EXPENSES: | |||||||||||
| Employee compensation and related benefits | 19,594 | 24,188 | 48,124 | 48,086 | |||||||
| Exchange, clearing and brokerage fees | 9,743 | 10,597 | 20,401 | 19,651 | |||||||
| Lease of exchange memberships and trading license fees | 416 | 630 | 843 | 1,312 | |||||||
| Depreciation and amortization of intangibles | 907 | 3,617 | 1,797 | 7,129 | |||||||
| Goodwill impairment |
-- |
164,100 | -- | 164,100 | |||||||
| Stock list impairment | -- | 335,264 | -- | 335,264 | |||||||
| Restructuring | -- | 849 | -- | 1,073 | |||||||
| Early extinguishment of debt | 5,119 | -- | 6,005 | -- | |||||||
| Other | 6,919 | 10,059 | 14,267 | 19,565 | |||||||
| Total expenses | 42,698 | 549,304 | 91,437 | 596,180 | |||||||
| Loss before benefit for income taxes | (34,908) | (550,486) | (106,340) | (559,480) | |||||||
| BENEFIT FOR INCOME TAXES | (13,571) | (181,542) | (44,766) | (184,981) | |||||||
| Net loss | $ | (21,337) | $ | (368,944) | $ | (61,574) | $ | (374,499) | |||
| Weighted average common shares outstanding: | |||||||||||
| Basic | 61,993 | 61,471 | 61,924 | 61,370 | |||||||
| Diluted | 61,993 | 61,471 | 61,924 | 61,370 | |||||||
| Loss per share: | |||||||||||
| Basic | $ | (0.34) | $ | (6.00) | $ | (0.99) | $ | (6.10) | |||
| Diluted | $ | (0.34) | $ | (6.00) | $ | (0.99) | $ | (6.10) | |||
| LaBranche & Co Inc. | ||||||
|
Condensed Consolidated Statements of Financial Condition |
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(all data in thousands) |
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| June 30, 2008 | December 31, 2007 (1) | |||||
| ASSETS | (unaudited) | (audited) | ||||
| Cash and cash equivalents | $ | 276,877 | $ | 504,654 | ||
| Cash and securities segregated under federal regulations | 1,191 | 1,573 | ||||
| Receivable from brokers, dealers and clearing organizations | 356,979 | 343,729 | ||||
| Financial instruments owned, at fair value | 3,681,377 | 4,267,395 | ||||
| Commissions and other fees receivable |
-- |
23 | ||||
| Exchange memberships owned, at adjusted cost | ||||||
| (market value of $8,258 and $7,790, respectively) | 1,315 | 1,315 | ||||
| Office equipment and leasehold improvements, at cost, less accumulated depreciation and amortization of $12,650 and $10,990, respectively |
16,821 |
17,652 |
||||
| Goodwill and other intangible assets, net | 109,229 | 109,229 | ||||
| Income tax receivable | 2,416 | 11,802 | ||||
| Other assets | 36,651 | 41,219 | ||||
| Total assets | $ | 4,482,856 | $ | 5,298,591 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| LIABILITIES: | ||||||
| Payable to brokers, dealers and clearing organizations | $ | 181,157 | $ | 104,759 | ||
| Payable to customers | 36 | 93 | ||||
| Financial instruments sold, but not yet purchased, at fair value | 3,529,085 | 4,062,995 | ||||
| Accrued compensation | 25,844 | 16,729 | ||||
| Accounts payable and other accrued expenses | 29,464 | 36,980 | ||||
| Other liabilities | 12,277 | 12,583 | ||||
| Deferred tax liabilities | 26,132 | 71,024 | ||||
| Short term debt | -- | 5,700 | ||||
| Long term debt | 209,888 | 459,811 | ||||
| Total liabilities | 4,013,883 | 4,770,674 | ||||
| Total stockholders’ equity | 468,973 | 527,917 | ||||
| Total liabilities and stockholders' equity | $ | 4,482,856 | $ | 5,298,591 | ||
(1) Certain of the Company’s December 31, 2007 balances have been reclassified to conform to the presentation in the current period, deferred tax assets were netted against deferred tax liabilities. This reclassification did not affect stockholders’ equity or earnings.
|
LaBranche & Co Inc. |
| Regulation G Requirement: Reconciliation of Non-GAAP Financial Measures |
| (all data in thousands, except per share data) |
| (unaudited) |
| In evaluating the Company's financial performance, management reviews results from operations, which excludes non-operating charges. Pro-forma earnings per share is a non-GAAP (generally accepted accounting principles) performance measure, but the Company believes that it is useful to assist investors in gaining an understanding of the trends and operating results for the Company's core business. Pro-forma earnings per share should be viewed in addition to, and not in lieu of, the Company's reported results under U.S. GAAP. |
| The following is a reconciliation of U.S. GAAP results to pro-forma results for the periods presented: |
| Three Months Ended June 30, | |||||||||||||||||
| 2008 | 2007 | ||||||||||||||||
| Amounts as reported |
(1) (2)
Adjustments |
Pro forma amounts | Amounts as reported |
(1)
Adjustments |
Pro forma amounts | ||||||||||||
| Revenues, net of interest expense |
$ |
7,790 |
$ |
33,206 (1) |
$ |
40,996 |
$ |
(1,182) |
$ |
54,618 (1) |
$ |
53,436 |
|||||
| Total expenses | 42,698 | (5,119) (2) | 37,579 | 549,304 | (499,364) (3) | 49,940 | |||||||||||
| (Loss) income before (benefit) provision for income taxes |
(34,908) |
38,325 |
3,417 |
(550,486) |
553,982 |
3,496 |
|||||||||||
| (Benefit) provision for income taxes |
(13,571) |
15,330 |
1,759 |
(181,542) |
178,425 |
(3,117) |
|||||||||||
| Net (loss) income applicable to common stockholders |
$ |
(21,337) |
$ |
22,995 |
$ |
1,658 |
$ |
(368,944) |
$ |
375,557 |
$ |
6,613 |
|||||
| Basic per share | $ | (0.34) | $ | 0.37 | $ | 0.03 | $ | (6.00) | $ | 6.11 | $ | 0.11 | |||||
| Diluted per share | $ | (0.34) | $ | 0.37 | $ | 0.03 | $ | (6.00) | $ | 6.11 | $ | 0.11 | |||||
| Six Months Ended June 30, | |||||||||||||||||
| 2008 | 2007 | ||||||||||||||||
| Amounts as reported |
(1) (2)
Adjustments |
Pro forma amounts | Amounts as reported |
(1)
Adjustments |
Pro forma amounts | ||||||||||||
| Revenues, net of interest expense |
$ |
(14,903) |
$ |
112,452 (1) |
$ |
97,549 |
$ |
36,700 |
$ |
58,787 (1) |
$ |
95,487 |
|||||
| Total expenses | 91,437 | (6,005) (2) | 85,432 | 596,180 | (499,364) (3) | 96,816 | |||||||||||
| (Loss) income before (benefit) provision for income taxes |
(106,340) |
118,457 |
12,117 |
(559,480) |
558,151 |
(1,329) |
|||||||||||
| (Benefit) provision for income taxes |
(44,766) |
47,383 |
2,617 |
(184,981) |
180,239 |
(4,742) |
|||||||||||
| Net (loss) income applicable to common stockholders |
$ |
(61,574) |
$ |
71,074 |
$ |
9,500 |
$ |
(374,499) |
$ |
377,912 |
$ |
3,413 |
|||||
| Basic per share | $ | (0.99) | $ | 1.14 | $ | 0.15 | $ | (6.10) | $ | 6.16 | $ | 0.06 | |||||
| Diluted per share | $ | (0.99) | $ | 1.14 | $ | 0.15 | $ | (6.10) | $ | 6.16 | $ | 0.06 | |||||
(1) Revenue adjustment reflects loss in each accounting period, based on the change in fair market value of the Company’s restricted and unrestricted NYX shares at the end of each such period versus the beginning of such period.
(2) Expense adjustment reflects costs associated with early extinguishment of debt in accounting period.
(3) Relates to the write-down of the carrying value of the Company’s goodwill and stock listing rights to reflect the results of the Company’s impairment evaluation under SFAS No. 142 and SFAS No.144.
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