LaBranche & Co. Inc.
LaBranche & Co Inc. Reports Third Quarter 2010 Results
Tuesday 19 October 2010
On a pro-forma basis, the Company reported a net loss from continuing operations for the third quarter of 2010 of $10.5 million, or $0.25 per share, compared to pro-forma net loss from continuing operations of $11.4 million, or $0.21 per share, for the third quarter of 2009.
The Company reported an after-tax net loss of $24.2 million, or $0.54 per share, for the nine months ended September 30, 2010, which includes an after-tax charge of $4.3 million related to the redemption in February 2010 of all its remaining outstanding 11% Senior Notes due 2012. This compares to an after-tax net loss of $25.3 million, or $0.45 per share, for the nine months ended September 30, 2009, which includes after-tax income of $0.5 million related to the redemption of a portion of the Company's outstanding 11% Senior Notes due 2012.
On a pro-forma basis, the Company reported an after-tax net loss from continuing operations for the nine months ended September 30, 2010 of $23.5 million, or $0.52 per share, compared to an after-tax pro-forma net loss from continuing operations of $38.1 million, or $0.68 per share, for the nine months ended September 30, 2009. These pro-forma results exclude the expense and income, respectively, on early extinguishment of debt in the related periods as well as discontinued operations relating to the disposition of the Company's former Designated Market Maker business.
The negative results reported for the third quarter of 2010 are primarily attributable to losses in the Company's equity options market-making division and losses in its institutional brokerage business. During the third quarter of 2010, the Company stopped offering execution services in leveraged loan and fixed income products in its institutional brokerage business. The Company also made personnel changes and continued to reduce the equity options positions in its options market making business that generated a substantial portion of the losses in the third quarter.
In October 2010, FINRA approved a proposed merger of LaBranche Structured Products, LLC ("LSP") and LaBranche Financial Services, LLC ("LFS") into one combined entity. The Company expects to consummate the merger in the fourth quarter of 2010. The surviving entity in the merger will change its name to LaBranche Capital, LLC. The Company believes that this merger will enable it to more efficiently deploy its resources by aggregating the capital of LSP and LFS into one firm and by enabling the Company to continue to reduce additional redundancies and expenses.
In the third quarter of 2010, the Company continued its efforts to substantially cut overhead and other operational costs, such as employee compensation, communication and inventory financing costs. The Company believes that these cost-cutting measures will better align our cost structure with our continuing operations.
The loss per share reported above for the Company's 2010 three-month and nine-month periods was significantly affected by the Company's repurchases, net of issuances, of approximately 12.3 million shares of its outstanding common stock since September 30, 2009. Following these repurchases, the Company had approximately 41.3 million shares of common stock outstanding as of September 30, 2010 versus 53.6 million shares outstanding as of September 30, 2009. As of September 30, 2010, the Company had approximately $52.6 million available for repurchase under its board-authorized repurchase plan.
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 and LaBranche Financial Services, LLC, which provides 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 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) |
|||||||||||||||||
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||||||||||
|
|
|
September 30, |
|
September 30, |
|
||||||||||||
|
|
|
|
2010 |
|
|
|
2009 (1) |
|
|
2010 |
|
|
|
2009 (1) |
|
||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
||||||||
|
Net (loss) gain on trading |
|
$ |
(3,784 |
) |
|
$ |
11,863 |
|
|
$ |
17,361 |
|
|
$ |
16,303 |
|
|
|
Commissions and other fees |
|
$ |
2,095 |
|
|
|
7,222 |
|
|
|
11,081 |
|
|
|
22,961 |
|
|
|
Other |
|
$ |
429 |
|
|
|
727 |
|
|
|
2,198 |
|
|
|
5,194 |
|
|
|
Total revenues |
|
|
(1,260 |
) |
|
|
19,812 |
|
|
|
30,640 |
|
|
|
44,458 |
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
||||||||
|
Debt |
|
$ |
- |
|
|
|
5,388 |
|
|
|
2,639 |
|
|
|
16,445 |
|
|
|
Inventory financing |
|
$ |
2,316 |
|
|
|
5,269 |
|
|
|
11,581 |
|
|
|
16,359 |
|
|
|
Total interest expense |
|
|
2,316 |
|
|
|
10,657 |
|
|
|
14,220 |
|
|
|
32,804 |
|
|
|
Revenues, net of interest expense |
|
|
(3,576 |
) |
|
|
9,155 |
|
|
|
16,420 |
|
|
|
11,654 |
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
||||||||
|
Employee compensation and related benefits |
|
|
5,413 |
|
|
|
11,164 |
|
|
|
21,966 |
|
|
|
27,958 |
|
|
|
Exchange, clearing, brokerage and license fees |
|
|
2,950 |
|
|
|
9,521 |
|
|
|
13,209 |
|
|
|
25,433 |
|
|
|
Depreciation and amortization |
|
|
479 |
|
|
|
1,025 |
|
|
|
1,451 |
|
|
|
2,948 |
|
|
|
Early extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
7,192 |
|
|
|
(762 |
) |
|
|
Other |
|
|
5,416 |
|
|
|
6,591 |
|
|
|
17,903 |
|
|
|
19,867 |
|
|
|
Total expenses |
|
|
14,258 |
|
|
|
28,301 |
|
|
|
61,721 |
|
|
|
75,444 |
|
|
|
Loss from continuing operations before benefit for income taxes |
|
|
(17,834 |
) |
|
|
(19,146 |
) |
|
|
(45,301 |
) |
|
|
(63,790 |
) |
|
|
Benefit for income taxes |
|
|
(7,385 |
) |
|
|
(7,720 |
) |
|
|
(17,480 |
) |
|
|
(26,196 |
) |
|
|
Loss from continuing operations |
|
|
(10,449 |
) |
|
|
(11,426 |
) |
|
|
(27,821 |
) |
|
|
(37,594 |
) |
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
||||||||
|
Income (loss) from operations of discontinued unit |
|
|
- |
|
|
|
4,123 |
|
|
|
(365 |
) |
|
|
19,583 |
|
|
|
Provision (Benefit) for income taxes |
|
|
- |
|
|
|
1,597 |
|
|
|
(4,019 |
) |
|
|
7,323 |
|
|
|
Income from discontinued operations |
|
|
- |
|
|
|
2,526 |
|
|
|
3,654 |
|
|
|
12,260 |
|
|
|
Net (loss) |
|
$ |
(10,449 |
) |
|
$ |
(8,900 |
) |
|
$ |
(24,167 |
) |
|
$ |
(25,334 |
) |
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
||||||||
|
Basic |
|
|
42,082 |
|
|
|
53,638 |
|
|
|
44,409 |
|
|
|
55,790 |
|
|
|
Diluted |
|
|
42,082 |
|
|
|
53,638 |
|
|
|
44,409 |
|
|
|
55,790 |
|
|
|
Basic net (loss) income per common share: |
|
|
|
|
|
|
|
|
|
||||||||
|
Continuing operations |
|
$ |
(0.25 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.62 |
) |
|
$ |
(0.67 |
) |
|
|
Discontinued operations (1) |
|
$ |
- |
|
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
$ |
0.22 |
|
|
|
Total operations |
|
$ |
(0.25 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.54 |
) |
|
$ |
(0.45 |
) |
|
|
Diluted net (loss) income per common share: |
|
|
|
|
|
|
|
|
|
||||||||
|
Continuing operations |
|
$ |
(0.25 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.62 |
) |
|
$ |
(0.67 |
) |
|
|
Discontinued operations (1) |
|
$ |
- |
|
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
$ |
0.22 |
|
|
|
Total operations |
|
$ |
(0.25 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.54 |
) |
|
$ |
(0.45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________ |
|||||||||||||||||
|
(1) In accordance with Financial Accounting Standards Board Accounting Standards the results of the |
|||||||||||||||||
|
DMM business have been reclassified as a discontinued operation for all periods presented. |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
||
|
LaBranche & Co Inc. Condensed Consolidated Statements of Financial Condition (all data in thousands) |
|
||||||||
|
|
|
As of |
|||||||
|
|
|
September 30, |
|
|
|
December 31, |
|
||
|
|
|
|
2010 |
|
|
|
|
2009 |
|
|
|
|
(unaudited) |
|
|
|
(audited) |
|
||
|
ASSETS |
|
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
83,557 |
|
|
|
$ |
186,737 |
|
|
Cash and securities segregated under federal regulations |
|
|
1,727 |
|
|
|
|
1,727 |
|
|
Receivable from brokers, dealers and clearing organizations |
|
|
225,571 |
|
|
|
|
70,270 |
|
|
Receivable from customers |
|
|
- |
|
|
|
|
42,790 |
|
|
Financial instruments owned, at fair value |
|
|
1,092,525 |
|
|
|
|
3,308,210 |
|
|
Office equipment and leasehold improvements, at cost, less accumulated depreciation and |
|
|
- |
|
|
|
|
|
|
|
amortization of $10,221 and $9,736, respectively |
|
|
10,435 |
|
|
|
|
11,680 |
|
|
Held for sale |
|
|
- |
|
|
|
|
32,748 |
|
|
Deferred tax assets |
|
|
38,915 |
|
|
|
|
25,457 |
|
|
Income tax receivable |
|
|
2,083 |
|
|
|
|
12,208 |
|
|
Other assets |
|
|
8,811 |
|
|
|
|
17,808 |
|
|
Total assets |
|
$ |
1,463,624 |
|
|
|
$ |
3,709,635 |
|
|
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
||
|
Liabilities: |
|
|
|
|
|
|
|
||
|
Payable to brokers, dealers and clearing organizations |
|
$ |
183,590 |
|
|
|
$ |
615,245 |
|
|
Payable to customers |
|
|
34 |
|
|
|
|
43,515 |
|
|
Financial instruments sold, but not yet purchased, at fair value |
|
|
1,018,046 |
|
|
|
|
2,497,674 |
|
|
Accrued compensation |
|
|
3,695 |
|
|
|
|
9,431 |
|
|
Accounts payable and other accrued expenses |
|
|
7,739 |
|
|
|
|
17,526 |
|
|
Other liabilities |
|
|
2,681 |
|
|
|
|
12,945 |
|
|
Income tax payable |
|
|
2 |
|
|
|
|
1,968 |
|
|
Held for sale |
|
|
- |
|
|
|
|
749 |
|
|
Short-term debt |
|
|
- |
|
|
|
|
189,323 |
|
|
Total liabilities |
|
|
1,215,787 |
|
|
|
|
3,388,376 |
|
|
|
|
|
|
|
|
|
|
||
|
Total stockholders' equity |
|
|
247,837 |
|
|
|
|
321,259 |
|
|
|
|
|
|
|
|
|
|
||
|
Total liabilities and stockholders' equity |
|
$ |
1,463,624 |
|
|
|
$ |
3,709,635 |
|
|
|
|
|
|
|
|
|
|
||
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 continuing operations excluding non-operating items. 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 our continuing 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.
Commencing in the first quarter of 2010, the Company is no longer adjusting its GAAP revenues to give pro forma effect to gains/losses in its NYX shares due to the fact that the Company sold approximately 2.1 million of its 3.1 million previously-owned NYX shares, leaving the Company with approximately 1.0 million NYX shares. Therefore, the adjustments that reflected the loss in the Company's NYX shares that were made in the Company's earnings release for the third quarter of 2009 have been removed from this Regulation G reconciliation of non-GAAP financial measures. In the earnings release for the third quarter of 2009, the Company had adjusted reported revenues by a gain of $5.1 million and a loss of $31.9 million for the three and nine months ended September 30, 2009, respectively, to reflect the fair value of the Company's NYX shares in those periods. These adjustment amounts are removed in this earnings release to enable the reader to compare similar measures in each period.
The following is a reconciliation of U.S. GAAP results from continuing operations to our pro-forma results from continuing operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
Three Months Ended September 30, |
||||||||||||||||||||||
|
|
|
2010 |
|
|
2009 |
|
||||||||||||||||||
|
|
|
Amounts as |
|
|
(1) |
|
|
Pro forma |
|
Amounts as |
|
|
(1) |
|
|
Pro forma |
||||||||
|
|
|
reported |
|
Adjustments |
|
amounts |
|
reported |
|
Adjustments |
|
amounts |
||||||||||||
|
Revenues, net of interest expense, from |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
continuing operations |
|
$ |
(3,576 |
) |
|
$ |
- |
|
|
|
(3,576 |
) |
|
$ |
9,155 |
|
|
$ |
- |
|
|
|
9,155 |
|
|
Total expenses |
|
|
14,258 |
|
|
|
- |
|
|
|
14,258 |
|
|
|
28,301 |
|
|
|
- |
|
|
|
28,301 |
|
|
(Loss) income before (benefit) provision |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
for income taxes |
|
|
(17,834 |
) |
|
|
- |
|
|
|
(17,834 |
) |
|
|
(19,146 |
) |
|
|
- |
|
|
|
(19,146 |
) |
|
(Benefit) provision for income taxes |
|
|
(7,385 |
) |
|
|
- |
|
|
|
(7,385 |
) |
|
|
(7,720 |
) |
|
|
- |
|
|
|
(7,720 |
) |
|
(Loss) income from continuing operations |
|
$ |
(10,449 |
) |
|
$ |
- |
|
|
$ |
(10,449 |
) |
|
$ |
(11,426 |
) |
|
$ |
- |
|
|
$ |
(11,426 |
) |
|
Basic per share |
|
$ |
(0.25 |
) |
|
$ |
- |
|
|
$ |
(0.25 |
) |
|
$ |
(0.21 |
) |
|
$ |
- |
|
|
$ |
(0.21 |
) |
|
Diluted per share |
|
$ |
(0.25 |
) |
|
$ |
- |
|
|
$ |
(0.25 |
) |
|
$ |
(0.21 |
) |
|
$ |
- |
|
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
Nine Months Ended September 30, |
||||||||||||||||||||||
|
|
|
|
2010 |
|
|
2009 |
||||||||||||||||||
|
|
|
Amounts as |
|
|
(1) |
|
|
Pro forma |
|
Amounts as |
|
|
(1) |
|
|
Pro forma |
||||||||
|
|
|
reported |
|
Adjustments |
|
amounts |
|
reported |
|
Adjustments |
|
amounts |
||||||||||||
|
Revenues, net of interest expense, from |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
continuing operations |
|
$ |
16,420 |
|
|
$ |
- |
|
|
|
16,420 |
|
|
$ |
11,654 |
|
|
$ |
- |
|
|
|
11,654 |
|
|
Total expenses |
|
|
61,721 |
|
|
|
(7,192 |
) |
|
|
54,529 |
|
|
|
75,444 |
|
|
|
762 |
|
|
|
76,206 |
|
|
(Loss) income before (benefit) provision |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
for income taxes |
|
|
(45,301 |
) |
|
|
7,192 |
|
|
|
(38,109 |
) |
|
|
(63,790 |
) |
|
|
(762 |
) |
|
|
(64,552 |
) |
|
(Benefit) provision for income taxes |
|
|
(17,480 |
) |
|
|
2,877 |
|
|
|
(14,603 |
) |
|
|
(26,196 |
) |
|
|
(305 |
) |
|
|
(26,501 |
) |
|
(Loss) income from continuing operations |
|
$ |
(27,821 |
) |
|
$ |
4,315 |
|
|
$ |
(23,506 |
) |
|
$ |
(37,594 |
) |
|
$ |
(457 |
) |
|
$ |
(38,051 |
) |
|
Basic per share |
|
$ |
(0.62 |
) |
|
$ |
0.10 |
|
|
$ |
(0.52 |
) |
|
$ |
(0.67 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.68 |
) |
|
Diluted per share |
|
$ |
(0.62 |
) |
|
$ |
0.10 |
|
|
$ |
(0.52 |
) |
|
$ |
(0.67 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.68 |
) |
|
__________________ |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(1) Expense adjustment reflects the (income) expense associated with early extinguishment of the Company's debt in accounting period. |
||||||||||||||||||||||||
SOURCE: LaBranche & Co Inc.
LaBranche & Co Inc.
Jeffrey A. McCutcheon, 212-820-6220
Senior Vice President & Chief Financial Officer