LaBranche & Co. Inc.
LaBranche & Co Inc. Reports Fourth Quarter and Full Year 2009 Results
Wednesday 20 January 2010
NEW YORK-- LaBranche & Co Inc. ( On a pro-forma basis, the Company reported net income from continuing operations for the fourth quarter of 2009 of $3.8 million, or $0.07 per share, compared to pro-forma net income from continuing operations of $14.2 million, or $0.24 per share, for the fourth quarter of 2008, as a result of the Company’s agreement to sell its DMM operations. These pro-forma results include the interest expense on the Company’s public debt of $5.4 million in the fourth quarter of 2009 and $5.9 million in the fourth quarter of 2008. The Company’s public debt will be redeemed in full on February 15, 2010 and the Company will have no interest payments on public debt going forward. These pro-forma results exclude the loss on the NYX shares in the fourth quarters of 2009 and 2008, the income on early extinguishment of debt in the fourth quarter of 2008 and the results of the Company’s discontinued DMM operations in each period, due to the pending sale of its DMM operations. The Company reported an after-tax net loss of $97.8 million, or $1.78 per share, for the twelve months ended December 31, 2009, which compares to a net loss of $66.0 million, or $1.07 per share, for the twelve months ended December 31, 2008. On a pro-forma basis, the Company reported a net loss from continuing operations for the twelve months ended December 31, 2009 of $35.5 million, or $0.65 per share, compared to pro-forma net income from continuing operations of $22.6 million, or $0.37 per share, for the twelve months ended December 31, 2008, as a result of the Company’s agreement to sell its DMM operations. These pro-forma results include the interest expense on the Company’s public debt of $21.8 million in the year ended December 31, 2009 and $31.5 million in the year ended December 31, 2008. These pro-forma results exclude the loss on the NYX shares, the income or loss on early extinguishment of debt and the results of the Company’s discontinued DMM operations in 2009 and 2008. The Company also announced that its Board of Directors has approved a redemption of all its remaining outstanding 11% Senior Notes due 2012, in the aggregate principal amount of $189.3 million, at the current redemption price of 102.75% plus accrued and unpaid interest thereon, pursuant to the optional redemption provisions of the indenture governing the notes. The redemption will be completed on February 15, 2010. Upon completion of the redemption, the indenture will be terminated and the Company will have no outstanding public debt, resulting in a reduction of the Company’s interest expense by approximately $21 million per year. The Company's Board of Directors also intends to increase the Company's share repurchase authorization from the approximately $23.4 million remaining under the current authorization to $100 million upon completion of the sale of the Company’s DMM operations. Repurchases may be made in open market transactions, privately negotiated transactions, in a tender offer, Dutch auction or otherwise, in compliance with applicable state and federal securities laws. The timing and amounts of any purchases will be based on market conditions and other factors, including price and regulatory requirements. The Company is the parent of LaBranche Structured Holdings, Inc., whose subsidiaries are market-makers in options, exchange-traded funds and futures on various exchanges domestically and internationally, LaBranche & Co. LLC, one of the largest market-makers on the 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 the Company 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. The Company 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. Condensed Consolidated Statements of Operations (all data in thousands, except per share data) (unaudited) Three Months Ended Twelve Months Ended 2008 (1) 2008 (1) -- ____________ (1) In accordance with FASB accounting standards the results of the DMM business have been reclassified as a discontinued LaBranche & Co Inc. Condensed Consolidated Statements of Financial Condition (all data in thousands) December 31, 2008 (1) -- Office equipment and leasehold improvements, at cost, less accumulated 11,680 16,522 ____________ (1) In accordance with FASB accounting standards the assets and liabilities related to the sale of the DMM business have LaBranche & Co Inc. 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: Amounts as (1) (2) Pro forma Amounts as (1) (2) Pro forma Revenues, net of interest $ 23,187 $11,002 (1 ) $ 34,189 $ 52,042 $ 36,987 (1 ) $ 89,029 -- (Loss) income before (5,051 ) 11,002 5,951 (13,853 ) 36,377 22,524 (Benefit) provision for (2,265 ) 4,401 2,136 (6,244 ) 14,551 8,307 (Loss) income from (2,786 ) 6,601 $ 3,815 (7,609 ) 21,826 $ 14,217 Amounts as (1) (2) Pro forma Amounts as (1) (2) Pro forma Revenues, net of interest $ 34,445 $ 6,268 (1 ) $40,713 $ 27,353 $ 181,376 (1 ) $ 208,729 (5,395)(2 ) (Loss) income before (67,428 ) 5,506 (61,922 ) (153,403 ) 186,771 33,368 (Benefit) provision for (28,604 ) 2,202 (26,402 ) (63,986 ) 74,708 10,722 (Loss) income from (38,824 ) 3,304 (35,520 ) (89,417 ) 112,063 22,646 __________________ (1) Revenue adjustment reflects (gain) loss in each accounting period, based on the change in fair market value of the (2) Expense adjustment reflects the (income) expense associated with early extinguishment of the Company’s debt in (3) In the first quarter of 2008, the Company recognized a tax benefit due to the release of a tax reserve for an expired tax
December 31,
December 31,
2009
2009
REVENUES:
Net gain on principal transactions
$
38,114
$
96,718
$
51,196
$
240,546
Commissions and other fees
6,996
8,215
29,957
26,035
Net loss on investments
(11,066
)
(40,497
)
(8,204
)
(189,929
)
Interest income
8
4,982
2,031
67,011
Other
1,478
567
4,611
2,741
Total revenues
35,530
69,985
79,591
146,404
Interest Expense:
Debt
5,393
5,874
21,838
31,521
Inventory financing
6,950
12,069
23,308
87,530
Total interest expense
12,343
17,943
45,146
119,051
Revenues, net of interest expense
23,187
52,042
34,445
27,353
EXPENSES:
Employee compensation and related benefits
11,799
46,902
39,757
108,231
Exchange, clearing and brokerage fees
8,460
12,844
33,893
41,083
Lease of exchange memberships and trading license fees
42
30
138
177
Depreciation and amortization of intangibles
1,051
945
3,999
3,624
Early extinguishment of debt
(610
)
(762
)
5,395
Other
6,886
5,784
24,848
22,246
Total expenses
28,238
65,895
101,873
180,756
Loss from continuing operations before benefit for income taxes
(5,051
)
(13,853
)
(67,428
)
(153,403
)
Benefit for income taxes
(2,265
)
(6,244
)
(28,604
)
(63,986
)
Loss from continuing operations
(2,786
)
(7,609
)
(38,824
)
(89,417
)
Discontinued operations:
(Loss) income from operations of discontinued unit
(86,702
)
14,680
(68,532
)
39,023
(Benefit) provision for income taxes
(17,002
)
5,872
(9,536
)
15,569
(Loss) income from discontinued operations
(69,700
)
8,808
(58,996
)
23,454
Net (loss) income
$
(72,486
)
$
1,199
$
(97,820
)
$
(65,963
)
Weighted average common shares outstanding:
Basic
52,398
59,891
54,935
61,418
Diluted
52,398
60,270
54,935
61,418
Basic net (loss) income per common share:
Continuing operations
$
(0.05
)
$
(0.13
)
$
(0.71
)
$
(1.45
)
Discontinued operations
$
(1.33
)
$
0.15
$
(1.07
)
$
0.38
Total operations
$
(1.38
)
$
0.02
$
(1.78
)
$
(1.07
)
Diluted net (loss) income per common share:
Continuing operations
$
(0.05
)
$
(0.13
)
$
(0.71
)
$
(1.45
)
Discontinued operations
$
(1.33
)
$
0.15
$
(1.07
)
$
0.38
Total operations
$
(1.38
)
$
0.02
$
(1.78
)
$
(1.07
)
operation for all periods presented.
December 31, 2009
ASSETS
(unaudited)
(audited)
Cash and cash equivalents
$
186,737
$
304,179
Cash and securities segregated under federal regulations
1,727
1,876
Receivable from brokers, dealers and clearing organizations
70,270
91,354
Receivable from customers
42,790
Financial instruments owned, at fair value
3,378,738
3,169,653
Exchange memberships owned, at adjusted cost
(market value of $5,529 and $3,910, respectively)
1,096
1,202
depreciation and amortization of $15,234 and $14,362, respectively
Available for sale
32,748
115,544
Deferred tax assets
25,457
--
Income tax receivable
12,208
--
Other assets
16,712
31,285
Total assets
$
3,780,163
$
3,731,615
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Payable to brokers, dealers and clearing organizations
$
615,245
$
105,037
Payable to customers
43,515
36
Financial instruments sold, but not yet purchased, at fair value
2,568,202
2,852,223
Accrued compensation
9,431
75,747
Accounts payable and other accrued expenses
17,526
29,179
Other liabilities
12,945
12,840
Income tax payable
1,968
5,834
Available for sale
749
3,197
Deferred tax liabilities
--
5,349
Short term debt
189,323
--
Long term debt
--
199,323
Total liabilities
3,458,904
3,288,765
Total stockholders’ equity
321,259
442,850
Total liabilities and stockholders' equity
$
3,780,163
$
3,731,615
been reclassified as available for sale for all periods presented.
Regulation G Requirement: Reconciliation of Non-GAAP Financial Measures
(all data in thousands, except per share data)
(unaudited)
Three Months Ended December 31,
2009
2008
reported
Adjustments
amounts
reported
Adjustments
amounts
expense
Total expenses
28,238
28,238
65,895
610 (2
)
66,505
(benefit) provision
for income taxes
income taxes
continuing operations
Basic per share
$
(0.05
)
$0.12
$
0.07
$
(0.13
)
$
0.37
$
0.24
Diluted per share
$
(0.05
)
$0.12
$
0.07
$
(0.13
)
$
0.37
$
0.24
Twelve Months Ended December 31,
2009
2008
reported
Adjustments
amounts
reported
Adjustments
amounts
expense
Total expenses
101,873
762 (2
)
102,635
180,756
175,361
(benefit) provision
for income taxes
income taxes (3)
continuing operations
Basic per share
$
(0.71
)
$
0.06
$(0.65
)
$
(1.45
)
$
1.82
$
0.37
Diluted per share
$
(0.71
)
$
0.06
$(0.65
)
$
(1.45
)
$
1.82
$
0.37
Company’s NYX shares at the end of each such period versus the beginning of such period.
accounting period.
year, which resulted in a reduced provision for income taxes.