Exhibit 99.1
| | | Contact: Rick Berry |
| | | Chief Financial Officer |
| | | 600 Travis Street, Suite 5800 |
| | | |
| | | 713.993.4614 |
Sanders Morris Harris Group Reports Second Quarter Income
from Continuing Operations of $2.0 Million
HOUSTON, August 10, 2009 – Sanders Morris Harris Group Inc. (NASDAQ: SMHG) today reported second quarter income from continuing operations of $2.0 million, or $0.07 per share. The results compared to a loss from continuing operations of $11.6 million, or $0.42 per share, in the preceding quarter. In the second quarter of 2008, income from continuing operations was $6.5 million, or $0.24 per share, aided by pretax investment gains of $8.5 million.
Client assets increased from $8.5 billion on March 31, 2009, to $9.5 billion at the end of the second quarter. The Company’s Wealth/Asset Management division earned $4.4 million pretax in the period, compared to $9.1 million, including pretax investment gains of $4.7 million, during the 2008 period. Investment gains and losses are included in “Principal transactions” and “Equity in income of limited partnerships” in our consolidated statement of operations.
“In the context of a very difficult market, our operating businesses fared well. We had net client asset inflows of $75.9 million and saw our client assets increase by 11% due to market recovery,” said George L. Ball, Chairman of Sanders Morris Harris Group. “Additionally, we have completed the bulk of our cost reduction program which is projected to save $4.3 million annually. The benefits of this program began to accrue in the second quarter and should be fully recognized in the third.”
Cash flow from operating activities in the latest quarter was $25.8 million, up from $20.2 million in the year-earlier period. Second quarter 2009 income from continuing operations included $1.8 million of after-tax income related to the increase in the value of the Company’s portfolio of equities and partnership interests, reflecting the improved equity and fixed income markets. In the prior quarter, the Company had a loss of $1.3 million from those investments.
The second quarter 2009 results from continuing operations include an after-tax loss of $271,000 related to certain of the Company’s Capital Markets Business that is to be sold. That business, which includes major portions of our investment banking and institutional equity businesses, is to be sold to a new broker-dealer to be formed by Siwanoy Capital, LLC in a transaction expected to be closed in the third quarter. As part of the transaction, the Company will be reimbursed by Siwanoy Capital, LLC for any losses incurred between January 1, 2009 and the closing date.
The Company lost $9.6 million, or $0.35 per share, from continuing operations during the six months ended June 30, 2009, compared to income of $4.8, or $0.18 per share, during the first six months of 2008. The 2009 results include a $9.6 million after tax goodwill (and other intangible assets) impairment charge. Revenue was $96.3 million during the 2009 period compared to $92.8 million during the prior year period.
Conference Call
The Company will host a conference call on Monday, August 10th to discuss first quarter 2009 financial and operational results. The call will begin at 9:00 a.m. Central Time, and is open to the public. To listen to the conference call, use U.S. dial-in number (800) 447-0521 or International dial-in number (847) 413-3238 and enter pass code 25000661. It is recommended that listeners phone in at least 10 minutes before the call is scheduled to begin to avoid delay. For those unable to listen to the live call, a replay of the conference call in its entirety will be available approximately two hours after its completion for 10 days by dialing (888) 843-8996 (U.S.), (630) 652-3044 (International) and entering the pass code 25000661.
About Sanders Morris Harris Group
Sanders Morris Harris Group is a wealth/asset management company that manages approximately $9.5 billion in client assets. Client assets include the gross value of assets under management directly or via outside managers and assets held in brokerage accounts for clients by outside clearing firms. Its corporate philosophy of investment in common aligns its interests with those of its clients. Sanders Morris Harris has more than 600 employees in 21 states. Additional information is available at www.smhgroup.com.
In addition to the historical information, this press release contains certain forward-looking statements under federal securities laws, including statements regarding Sanders Morris Harris Group’s expected future business prospects, revenue and income. These forward-looking statements are based upon current expectations and involve certain risks and uncertainties that could cause actual results to differ materially from any such statement. These risks and uncertainties, many of which are beyond the Company's control, include but are not limited to (1) trading volume in the securities markets; (2) volatility of the securities markets and interest rates; (3) changes in regulatory requirements that could affect the demand for the Company's services or the cost of doing business; (4) general economic conditions, both domestic and foreign, especially in the regions where the Company does business; (5) changes in the rate of inflation and related impact on securities markets; (6) competition from existing financial institutions and other new participants in the securities markets; (7) legal developments affecting the litigation experience of the securities industry; (8) successful implementation of technology solutions; (9) changes in valuations of the Company’s trading and warrant portfolios resulting from mark-to-market adjustments; (10) dependence on key personnel; (11) demand for the Company's services; and (12) litigation and securities law liabilities. The Company does not undertake any obligation to publicly update or revise any forward-looking statements.
Selected Condensed Operating Information
(in thousands, except per share amounts)
(unaudited)
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Revenue | | $ | 55,075 | | | $ | 52,147 | | | $ | 96,274 | | | $ | 92,799 | |
| Expenses | | | 52,194 | | | | 41,103 | | | | 109,932 | | | | 80,043 | |
| Net | | | 2,881 | | | | 11,044 | | | | (13,658 | ) | | | 12,756 | |
| Equity in income of limited partnerships | | | 1,486 | | | | 4,831 | | | | 988 | | | | 3,271 | |
| Income (loss) from continuing operations before income taxes | | | 4,367 | | | | 15,875 | | | | (12,670 | ) | | | 16,027 | |
| (Provision) benefit for income taxes | | | (1,282 | ) | | | (4,345 | ) | | | 5,191 | | | | (3,323 | ) |
| Income (loss) from continuing operations, net of income taxes | | | 3,085 | | | | 11,530 | | | | (7,479 | ) | | | 12,704 | |
| Loss from discontinued operations, net of tax of $293, $237, $1,124 and $469, respectively | | | (460 | ) | | | (273 | ) | | | (1,688 | ) | | | (666 | ) |
| Net income (loss) | | | 2,625 | | | | 11,257 | | | | (9,167 | ) | | | 12,038 | |
| Less: Net income attributable to the noncontrolling interest | | | (1,092 | ) | | | (5,065 | ) | | | (2,144 | ) | | | (7,953 | ) |
| Net income (loss) attributable to Sanders Morris Harris Group Inc. | | $ | 1,533 | | | $ | 6,192 | | | $ | (11,311 | ) | | $ | 4,085 | |
| | | | | | | | | | | | | | | | | |
| Basic income (loss) per common share: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.07 | | | $ | 0.24 | | | $ | (0.35 | ) | | $ | 0.18 | |
| Discontinued operations | | | (0.02 | ) | | | (0.01 | ) | | | (0.06 | ) | | | (0.02 | ) |
| Net income (loss) | | $ | 0.05 | | | $ | 0.23 | | | $ | (0.41 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | | | | | |
| Diluted income (loss) per common share: | | | | | | | | | | | | | | | | |
| Continuing operations | | $ | 0.07 | | | $ | 0.24 | | | $ | (0.35 | ) | | $ | 0.18 | |
| Discontinued operations | | | (0.02 | ) | | | (0.01 | ) | | | (0.06 | ) | | | (0.02 | ) |
| Net income (loss) | | $ | 0.05 | | | $ | 0.23 | | | $ | (0.41 | ) | | $ | 0.16 | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 27,733 | | | | 26,760 | | | | 27,619 | | | | 25,739 | |
| Diluted | | | 28,338 | | | | 26,918 | | | | 27,619 | | | | 25,932 | |
| | | | | | | | | | | | | | | | | |
| Amounts attributable to Sanders Morris Harris Group Inc. common shareholders: | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations, net of tax | | $ | 1,993 | | | $ | 6,465 | | | $ | (9,623 | ) | | $ | 4,751 | |
| Discontinued operations, net of tax | | | (460 | ) | | | (273 | ) | | | (1,688 | ) | | | (666 | ) |
| Net income (loss) | | $ | 1,533 | | | $ | 6,192 | | | $ | (11,311 | ) | | $ | 4,085 | |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, 2009 | | | June 30, 2009 | |
| | Amount | | | Diluted EPS | | | Amount | | | Diluted EPS | |
| GAAP to Non-GAAP Reconciliation: | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations, net of tax, attributable to Sanders Morris Harris Group Inc. | | $ | 1,993 | | | $ | 0.07 | | | $ | (9,623 | ) | | $ | (0.35 | ) |
| Addback: | | | | | | | | | | | | | | | | |
| Goodwill/other intangible assets impairment charge, net of tax | | | - | | | | - | | | | 9,580 | | | | 0.35 | |
| Investment portfolio gains, net of tax | | | (1,838 | ) | | | (0.06 | ) | | | (583 | ) | | | (0.02 | ) |
| Loss attributed to the Capital Markets Business, net of tax | | | 271 | | | | 0.01 | | | | 1,407 | | | | 0.05 | |
| Net operating income of business to be retained | | $ | 426 | | | $ | 0.02 | | | $ | 781 | | | $ | 0.03 | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | 28,338 | | | | | | | | 27,619 | |
| | | | | | | | | | | | | | | | | |
| Balance sheet data: | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 40,590 | | | | | | | | | | | | | |
| Other tangible net assets | | | 73,274 | | | | | | | | | | | | | |
| Tangible net assets | | $ | 113,864 | | | | | | | | | | | | | |
| Shareholders' equity | | $ | 210,279 | | | | | | | | | | | | | |
| | | Six Months Ended | | | Three Months Ended | |
| | June 30, 2009 | | | June 30, 2009 | | | March 31, 2009 | |
| Cash flow data: | | | | | | | | | | | | |
| Cash provided by (used in) operating activities | | $ | 15,370 | | | $ | 25,807 | | | $ | (10,437 | ) |
| | | | | | | | | | | | | |
| | | Six Months Ended | | | Three Months Ended | |
| | | June 30, 2008 | | | June 30, 2008 | | | March 31, 2008 | |
| Cash provided by (used in) operating activities | | $ | 15,572 | | | $ | 20,161 | | | $ | (4,589 | ) |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Revenue: | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | 24,397 | | | $ | 27,354 | | | $ | 45,739 | | | $ | 53,809 | |
| Capital Markets | | | | | | | | | | | | | | | | |
| Investment banking | | | 2,500 | | | | 4,742 | | | | 4,003 | | | | 5,398 | |
| Institutional brokerage | | | 5,926 | | | | 4,981 | | | | 11,072 | | | | 8,738 | |
| Prime brokerage services | | | 19,923 | | | | 10,664 | | | | 34,363 | | | | 21,184 | |
| Capital Markets Total | | | 28,349 | | | | 20,387 | | | | 49,438 | | | | 35,320 | |
| Corporate Support | | | 2,329 | | | | 4,406 | | | | 1,097 | | | | 3,670 | |
| Total | | $ | 55,075 | | | $ | 52,147 | | | $ | 96,274 | | | $ | 92,799 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before equity in income (loss) of limited partnerships and income taxes: | | | | | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | 5,926 | | | $ | 9,465 | | | $ | 11,600 | | | $ | 18,872 | |
| Capital Markets | | | | | | | | | | | | | | | | |
| Investment banking | | | (964 | ) | | | 542 | | | | (2,541 | ) | | | (2,630 | ) |
| Institutional brokerage | | | 852 | | | | 382 | | | | 1,198 | | | | 373 | |
| Prime brokerage services | | | 450 | | | | 940 | | | | 777 | | | | 1,447 | |
| Capital Markets Total | | | 338 | | | | 1,864 | | | | (566 | ) | | | (810 | ) |
| Corporate Support | | | (3,383 | ) | | | (285 | ) | | | (24,692 | ) | | | (5,306 | ) |
| Total | | $ | 2,881 | | | $ | 11,044 | | | $ | (13,658 | ) | | $ | 12,756 | |
| | | | | | | | | | | | | | | | | |
| Equity in income (loss) of limited partnerships: | | | | | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | (407 | ) | | $ | 4,725 | | | $ | (1,155 | ) | | $ | 5,377 | |
| Capital Markets | | | - | | | | - | | | | - | | | | - | |
| Investment banking | | | - | | | | - | | | | - | | | | - | |
| Institutional brokerage | | | - | | | | - | | | | - | | | | - | |
| Prime brokerage services | | | - | | | | - | | | | - | | | | - | |
| Capital Markets Total | | | - | | | | - | | | | - | | | | - | |
| Corporate Support | | | 1,893 | | | | 106 | | | | 2,143 | | | | (2,106 | ) |
| Total | | $ | 1,486 | | | $ | 4,831 | | | $ | 988 | | | $ | 3,271 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before income taxes: | | | | | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | 5,519 | | | $ | 14,190 | | | $ | 10,445 | | | $ | 24,249 | |
| Capital Markets | | | | | | | | | | | | | | | | |
| Investment banking | | | (964 | ) | | | 542 | | | | (2,541 | ) | | | (2,630 | ) |
| Institutional brokerage | | | 852 | | | | 382 | | | | 1,198 | | | | 373 | |
| Prime brokerage services | | | 450 | | | | 940 | | | | 777 | | | | 1,447 | |
| Capital Markets Total | | | 338 | | | | 1,864 | | | | (566 | ) | | | (810 | ) |
| Corporate Support | | | (1,490 | ) | | | (179 | ) | | | (22,549 | ) | | | (7,412 | ) |
| Total | | $ | 4,367 | | | $ | 15,875 | | | $ | (12,670 | ) | | $ | 16,027 | |
| | | | | | | | | | | | | | | | | |
| Net income attributable to the noncontrolling interest in consolidated companies: | | | | | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | (1,092 | ) | | $ | (5,065 | ) | | $ | (2,144 | ) | | $ | (7,953 | ) |
| | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before income taxes attributable to Sanders Morris Harris Group Inc.: | | | | | | | | | | | | | | | | |
| Asset/Wealth Management | | $ | 4,427 | | | $ | 9,125 | | | $ | 8,301 | | | $ | 16,296 | |
| Capital Markets | | | | | | | | | | | | | | | | |
| Investment banking | | | (964 | ) | | | 542 | | | | (2,541 | ) | | | (2,630 | ) |
| Institutional brokerage | | | 852 | | | | 382 | | | | 1,198 | | | | 373 | |
| Prime brokerage services | | | 450 | | | | 940 | | | | 777 | | | | 1,447 | |
| Capital Markets Total | | | 338 | | | | 1,864 | | | | (566 | ) | | | (810 | ) |
| Corporate Support | | | (1,490 | ) | | | (179 | ) | | | (22,549 | ) | | | (7,412 | ) |
| Total | | $ | 3,275 | | | $ | 10,810 | | | $ | (14,814 | ) | | $ | 8,074 | |
