LaBranche & Co. Inc.
LaBranche & Co Inc. Reports First Quarter 2010 Results
Tuesday 20 April 2010
On a pro-forma basis, the Company reported net income from continuing operations for the first quarter of 2010 of $2.0 million, or $0.04 per diluted share, compared to a pro-forma net loss from continuing operations of $32.9 million, or $0.56 per share, for the first quarter of 2009. These pro-forma results exclude the expense on early extinguishment of debt in the first quarter of 2010.
Commencing 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 has sold approximately 2.0 million of its 3.1 million previously-owned NYX shares, leaving the Company with approximately 1.1 million NYX shares. Adjustments that had been made in prior periods to reflect the gains/losses in our NYX shares have been removed from the attached Regulation G reconciliation to enable the reader to compare similar measures in this quarter to the comparable prior-year period. The first quarter 2010 and 2009 results reported above include an after-tax gain on our NYX shares of $2.2 million and an after-tax loss of $17.8 million, respectively.
In the quarter ended March 31, 2010, the Company recorded a net additional tax benefit of $2.9 from the reduction of tax contingency reserves mainly due to the disposition of the DMM business and the completion of a tax audit offset by the establishment of a deferred tax asset valuation allowance. The $2.9 million tax benefit consisted of a $3.8 million tax benefit reflected in discontinued operations offset by a $0.9 million tax expense reflected in continuing operations.
On January 22, 2010, the Company sold LaBranche & Co. LLC's designated market maker ("DMM") business and related assets and retained all cash and other non-DMM assets of LaBranche & Co. LLC, including its NYX shares. On February 15, 2010, the Company redeemed all its remaining outstanding public indebtedness in the aggregate principal amount of $189.3 million, resulting in a reduction of the Company's interest expense by approximately $21 million per year. The results reported for the first quarter of 2010 include approximately $2.6 million in interest paid by the Company on this indebtedness in 2010 until the redemption was completed. On March 1, 2010, the Company purchased approximately 8.5 million shares of its common stock pursuant to a tender offer. Following completion of the tender offer, the Company has approximately 43 million shares of common stock issued and outstanding.
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, fixed income 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.
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LaBranche & Co Inc. |
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Three Months Ended |
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2010 |
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2009 (1) |
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REVENUES: |
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Net gain (loss) on trading |
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$ |
27,723 |
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$ |
(35,783 |
) |
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Commissions and other fees |
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5,338 |
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7,889 |
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Other |
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1,184 |
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1,973 |
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Total revenues |
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34,245 |
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(25,921 |
) |
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Interest Expense: |
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Debt |
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2,639 |
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5,664 |
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Inventory financing |
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5,083 |
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5,636 |
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Total interest expense |
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7,722 |
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11,300 |
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Revenues, net of interest expense |
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26,523 |
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(37,221 |
) |
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EXPENSES: |
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Employee compensation and related benefits |
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11,493 |
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6,051 |
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Exchange, clearing, brokerage and license fees |
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4,944 |
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4,808 |
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Depreciation and amortization of intangibles |
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488 |
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943 |
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Early extinguishment of debt |
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7,192 |
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-- |
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Other |
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6,225 |
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6,184 |
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Total expenses |
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30,342 |
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17,986 |
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Loss from continuing operations before benefit for income taxes |
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(3,819 |
) |
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(55,207 |
) |
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Benefit for income taxes |
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(1,549 |
) |
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(22,346 |
) |
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Loss from continuing operations |
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(2,270 |
) |
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(32,861 |
) |
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Discontinued operations: |
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(Loss) income from operations of discontinued unit |
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(365 |
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5,594 |
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(Benefit) provision for income taxes |
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(4,019 |
) |
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2,480 |
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(Loss) income from discontinued operations |
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3,654 |
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3,114 |
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Net (loss) income |
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$ |
1,384 |
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$ |
(29,747 |
) |
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Weighted average common shares outstanding: |
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Basic |
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48,540 |
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58,390 |
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Diluted |
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48,792 |
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58,390 |
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Basic net income (loss) per common share: |
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Continuing operations |
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$ |
(0.05 |
) |
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$ |
(0.56 |
) |
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Discontinued operations |
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$ |
0.08 |
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$ |
0.05 |
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Total operations |
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$ |
0.03 |
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$ |
(0.51 |
) |
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Diluted net income (loss) per common share: |
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Continuing operations |
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$ |
(0.05 |
) |
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$ |
(0.56 |
) |
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Discontinued operations |
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$ |
0.08 |
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$ |
0.05 |
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Total operations |
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$ |
0.03 |
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$ |
(0.51 |
) |
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(1) |
In accordance with FASB accounting standards the results of the DMM business have been reclassified as a discontinued operation for all periods presented. |
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LaBranche & Co Inc. Condensed Consolidated Statements of Financial Condition (all data in thousands) |
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March 31, 2010 |
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December 31, 2009 |
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ASSETS |
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(unaudited) |
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(audited) |
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Cash and cash equivalents |
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$ |
95,328 |
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$ |
186,737 |
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Cash and securities segregated under federal regulations |
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1,327 |
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1,727 |
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Receivable from brokers, dealers and clearing organizations |
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59,685 |
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70,270 |
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Receivable from customers |
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22,227 |
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42,790 |
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Financial instruments owned, at fair value |
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2,358,370 |
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3,378,738 |
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Exchange memberships owned, at adjusted cost |
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1,221 |
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1,096 |
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Office equipment and leasehold improvements, at cost, less accumulated |
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11,282 |
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11,680 |
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Available for sale |
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-- |
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32,748 |
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Deferred tax assets |
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20,315 |
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25,457 |
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Income tax receivable |
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15,560 |
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12,208 |
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Other assets |
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10,407 |
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16,712 |
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Total assets |
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$ |
2,595,722 |
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$ |
3,780,163 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES: |
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Payable to brokers, dealers and clearing organizations |
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$ |
398,039 |
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$ |
615,245 |
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Payable to customers |
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21,133 |
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43,515 |
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Financial instruments sold, but not yet purchased, at fair value |
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1,877,903 |
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2,568,202 |
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Accrued compensation |
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5,030 |
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9,431 |
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Accounts payable and other accrued expenses |
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12,431 |
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17,526 |
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Other liabilities |
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5 |
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12,945 |
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Income tax payable |
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1,668 |
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1,968 |
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Available for sale |
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-- |
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749 |
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Short term debt |
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-- |
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189,323 |
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Total liabilities |
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2,316,209 |
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3,458,904 |
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Total stockholders' equity |
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279,513 |
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321,259 |
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Total liabilities and stockholders' equity |
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$ |
2,595,722 |
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$ |
3,780,163 |
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LaBranche & Co Inc. |
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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 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 2.0 million of its 3.1 million previously-owned NYX shares, leaving the Company with approximately 1.1 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 first quarter of 2009 have been removed from this Regulation G reconciliation of non-GAAP financial measures. In the earnings release for the first quarter of 2009, the Company had adjusted reported revenues by $29.7 million to reflect the loss in fair value of the Company's NYX shares in that period. The $29.7 million adjustment was removed in this earnings release to enable the reader to compare similar measures in each period.
The following is a reconciliation of U.S. GAAP results from continuing operations to our pro-forma results from continuing operations for the periods presented:
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Three Months Ended March 31, |
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2010 |
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2009 |
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Amounts as reported |
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(1) Adjustments |
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Pro forma amounts |
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Amounts as reported |
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Adjustments |
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Pro forma amounts |
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Revenues, net of interest expense, from continuing operations |
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$ |
26,523 |
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$ |
-- |
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$ |
26,523 |
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$ |
(37,221 |
) |
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$ |
-- |
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$ |
(37,221 |
) |
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Total expenses |
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30,342 |
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(7,192 |
) |
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23,150 |
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|
17,986 |
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-- |
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17,986 |
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(Loss) income before (benefit) provision for income taxes |
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(3,819 |
) |
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7,192 |
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3,373 |
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(55,207 |
) |
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-- |
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(55,207 |
) |
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(Benefit) provision for income taxes |
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(1,549 |
) |
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2,877 |
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1,328 |
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(22,346 |
) |
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-- |
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(22,346 |
) |
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(Loss) income from continuing operations |
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(2,270 |
) |
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|
4,315 |
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$ |
2,045 |
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(32,861 |
) |
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-- |
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$ |
(32,861 |
) |
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Basic per share |
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$ |
(0.05 |
) |
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$ |
0.09 |
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$ |
0.04 |
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$ |
(0.56 |
) |
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$ |
-- |
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$ |
(0.56 |
) |
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Diluted per share |
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$ |
(0.05 |
) |
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$ |
0.09 |
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$ |
0.04 |
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$ |
(0.56 |
) |
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$ |
-- |
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$ |
(0.56 |
) |
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__________________
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(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