UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________ |
FORM 8-K |
CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported): November 12, 2010 |
Investors Capital Holdings, Ltd. (Exact name of registrant as specified in its charter) |
Delaware | 333-43664 | 04-3284631 |
(State or Other Jurisdiction | (Commission | (IRS Employer |
of Incorporation) | File Number) | Identification No.) |
230 Broadway East Lynnfield, MA 01940 (Address of Principal Executive Offices) (Zip Code) |
Registrant's telephone number, including area code: (800) 949-1422 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy thefiling obligation of the registrant under any of the following provisions: [] (Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Item 2.02 Results of Operations and Financial Condition.
On November 12, 2010 the Registrant issued a news release, a copy of which is set forth in Exhibit 2.02 hereto, announcing financial results for the Registrant for the fiscal quarter ended September 30, 2010.
SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Investors Capital Holdings, Ltd. By/s/Timothy B. Murphy Timothy B. Murphy, Chief Executive Officer |
Date: November 17, 2010 |
Exhibit 2.02 |
FOR IMMEDIATE RELEASE
Contact:
Robert Foney, Chief Marketing Officer
781.477.4814
rfoney@investorscapital.com
www.investorscapital.com
Investors Capital Holdings Q2 Revenues Rise 7.9%
CEO Murphy likes firm’s strong positioning, growth, and stability
Lynnfield, Mass. (November 12, 2010)– Investors Capital Holdings, Ltd. (NYSE Amex: ICH, “the Company”), a financial services holding company, posted second quarter total revenue of $20.43 million for the period ended September 30, 2010 (“the quarter”) compared to total revenue of $18.94 million for the quarter ended September 30, 2009 (“prior period”). The Company operates primarily through its wholly-owned subsidiary, Investors Capital Corporation (“ICC”), a dually registered broker-dealer and investment advisory firm.
Total revenue for the quarter grew by $1.49 million, or 7.9%, compared to the prior period. The increase is due primarily to a rise in commissionable revenues as markets continue to rebound from the recent recession. Commission revenue, which accounts for 81.8% of total revenue, increased 8.8% to $16.72 million. Advisory fees, which account for 15.1% of total revenue, grew 7.6% to $3.09 million. The rise in advisory revenue reflects growth in market asset values, as well as new investment contributions.
“We are pleased to see continued growth in revenues generated by our registered representatives, particularly in our advisory platforms,” said Timothy B. Murphy, the Company’s President and CEO. “Ours is a service business, and by keeping the delivery of 5-star service every day to ouradvisors forefront in all that we do, our revenue, profitability, and recruiting goals become achievable.”
At quarter end, the firm’s net capital position remained stable at $2.72 million for the quarter (an excess of $2.22 million) with a net capital ratio of 2.78:1. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that Investors Capital maintain net capital of $100,000 and a ratio of specified aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1.
Investors Capital continues to benefit from improving the overall quality of its representatives, a key component of the Company’s strategy for achieving growth in revenues and net income. The firm seeks to continually improve the quality of its representatives by helping them improve their skills and practices, recruiting established, high-quality representatives, and terminating low-quality advisors. The firm’s average revenue per representative, based on a rolling 12-month period, rose again in the second quarter to $140,440, an increase of 24.8% over $112,519 for the prior period.
Total expenses increased by $2.54 million, or 13.7%, principally as a result of increases in commissions and advisory fees paid to representatives; compensation; and regulatory, legal, and professional fees. Increases in reserves for estimated legal and regulatory settlements, including recent estimated settlements with the Massachusetts Securities Division, were a significant factor in the Company posting a net loss of $0.64 million for the quarter compared to net income of $0.21 million for the prior period.
“We settled a regulatory matter with the State that greatly impacted our earnings this quarter,” said Murphy. “We are pleased to have this issue resolved; and we look forward to pursuing profitability going forward.”
Adjusted EBITDA was $0.48 million loss for the quarter compared to $0.59 million for the prior period, due primarily to increased operating expenses. Adjusted EBITDA, a non-GAAP financial measure described below, is a key metric utilized by the firm in evaluating its financial performance.
About Investors Capital Holdings, Ltd.:
Investors Capital Holdings, Ltd. (NYSE Amex: ICH) of Lynnfield, Massachusetts is a financial services holding company that operates primarily through its independent broker/dealer and investment advisor subsidiary, Investors Capital Corporation. Our mission is to provide premier 5-star service and support to our valued registered representatives, including advisory programs, strategic practice management and marketing services, and technology, to help them grow their businesses and exceed their clients’ expectations. Business units include Investors Capital Corporation, ICC Insurance Agency, Inc., and Investors Capital Holdings Securities Corporation. For more information, please call (800) 949-1422 x4814 or visitwww.investorscapital.com.
Certain statements contained in this press release that are not historical fact may be deemed to be forward-looking statements under federal securities laws. There are many factors that could cause our future actual results to differ materially from those suggested by or forecast in the forward-looking statements. Such factors include, but are not limited to, general economic conditions, interest rate fluctuations, regulatory changes affecting the financial services industry, competitive factors effecting demand for our services, availability of funding, and other risks including those identified in the Company’s Securities and Exchange Commission filings.
Investors Capital Holdings, Ltd., 230 Broadway, Lynnfield, Massachusetts 01940, Distributor.
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INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||
September 30, 2010 | March 31, 2010 | ||
Assets | |||
Current Assets | |||
Cash and cash equivalents | $ 6,242,404 | $ 5,812,865 | |
Deposit with clearing organization, restricted | 175,000 | 175,000 | |
Accounts receivable | 4,858,612 | 6,042,188 | |
Note receivable - (current) | 34,299 | 140,598 | |
Loans receivable from registered representatives (current), net of allowance | 725,070 | 769,263 | |
Prepaid income taxes | - | 559,007 | |
Securities owned at fair value | 25,711 | 57,933 | |
Investments | 50,000 | 50,000 | |
Prepaid expenses | 975,571 | 957,674 | |
13,086,667 | 14,564,528 | ||
Property and equipment, net | 624,402 | 774,182 | |
Long Term Investments | |||
Accounts Receivable | 330,000 | - | |
Loans receivable from registered representatives | 298,263 | 292,884 | |
Note receivable | 595,000 | 595,000 | |
Investments | 191,078 | 184,319 | |
Non-qualified deferred compensation investment | 921,607 | 929,897 | |
Cash surrender value life insurance policies | 586,116 | 551,398 | |
2,922,064 | 2,553,498 | ||
Other Assets | |||
Other assets | 13,728 | 25,069 | |
Deferred tax asset, net | 1,312,540 | 838,773 | |
Capitalized software, net | 122,277 | 138,497 | |
1,448,545 | 1,002,339 | ||
TOTAL ASSETS | $ 18,081,678 | $ 18,894,547 | |
Liabilities and Stockholders' Equity | |||
Current Liabilities | |||
Accounts payable | $ 1,192,538 | $ 817,761 | |
Accrued expenses | 2,439,284 | 2,358,656 | |
Notes payable | 341,626 | 1,130,922 | |
Commissions payable | 3,298,135 | 3,488,415 | |
Income Taxes Payable | 20,187 | - | |
Unearned revenues | 199,947 | 101,931 | |
Securities sold, not yet purchased, at fair value | 855 | 5,693 | |
7,492,572 | 7,903,378 | ||
Long-Term Liabilities | |||
Non-qualified deferred compensation plan | 951,806 | 793,735 | |
951,806 | 793,735 | ||
Total liabilities | 8,444,378 | 8,697,113 | |
Stockholders' Equity: | |||
Common stock, $.01 par value, 10,000,000 shares authorized; | |||
6,625,016 issued and 6,621,131 outstanding at September 30, 2010; | |||
6,570,177 issued and 6,566,292 outstanding at March 31, 2009 | 66,250 | 65,958 | |
Additional paid-in capital | 12,183,944 | 12,095,862 | |
Accumulated deficit | (2,618,555) | (1,964,084) | |
Less: Treasury stock, 3,885 shares at cost | (30,135) | (30,135) | |
Accumulated other comprehensive income | 35,796 | 29,833 | |
Total stockholders' equity | 9,637,300 | 10,197,434 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 18,081,678 | $ 18,894,547 |
INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||
THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED) | |||
2010 | 2009 | ||
Revenue: | |||
$ 16,715,60 | $ 15,357,927 | ||
Commissions | 9 | ||
Advisory fees | 3,090,414 | 2,871,553 | |
Other fee income | 143,364 | 106,661 | |
Other revenue | 481,177 | 599,658 | |
Total revenue | 20,430,564 | 18,935,799 | |
Expenses: | |||
Commissions and advisory fees | 16,098,685 | 14,348,474 | |
Compensation and benefits | 2,040,010 | 1,817,574 | |
Regulatory, legal and professional services | 1,315,436 | 511,359 | |
Brokerage, clearing and exchange fees | 497,837 | 673,784 | |
Technology and communications | 322,141 | 294,069 | |
Marketing and promotion | 302,805 | 275,900 | |
Occupancy and equipment | 213,444 | 210,591 | |
Other administrative | 256,052 | 369,114 | |
Interest | 4,241 | 6,034 | |
Total operating expenses | 21,050,651 | 18,506,899 | |
Operating (loss) income | (620,087) | 428,900 | |
Provision for income taxes | 23,594 | 222,202 | |
Net (loss) income | $ (643,681) | $ 206,698 | |
Basic and diluted net (loss) income per share | $ (0.10) | $ 0.03 | |
Basic dividends per common share | $ - | $ - | |
Shares used in basic and diluted per share calculations | 6,523,675 | 6,499,394 |
Adjusted EBITDA |
Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.
Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.
Adjusted EBITDA may be reconciled with net income (loss) as follows:
Quarters Ended September 30, | |||
2010 | 2009 | ||
Adjusted EBITDA: | $ (484,499) | $ 590,964 | |
Adjustments to GAAP Net income (loss): | |||
Income tax benefit | - | 80,337 | |
Interest expense | (4,241) | (6,034) | |
Income tax expense | (23,594) | (302,539) | |
Depreciation and amortization | (89,360) | (87,858) | |
Non-cash compensation | (41,987) | (68,174) | |
Net (loss) income | $ (643,681) | $ 206,696 |