GREENHILL
CONTACT: John D. Liu,
Chief Financial Officer
Greenhill & Co., Inc.
(212) 389-1800
FOR IMMEDIATE RELEASE
---------------------
GREENHILL & CO. REPORTS SECOND QUARTER EARNINGS PER SHARE OF $0.20;
DIVIDEND INCREASED TO $0.12 PER SHARE
NEW YORK, July 21, 2005 - Greenhill & Co., Inc. (NYSE: GHL) today reported
revenues of $29.5 million and net income of $6.3 million for the quarter ended
June 30, 2005. Diluted earnings per share were $0.20 per share for the quarter
ended June 30, 2005. The Firm also announced that the Board of Directors
increased the quarterly dividend to $0.12 per share.
The Firm's second quarter revenues compared with revenues of $34.9 million for
the second quarter of 2004, which represents a decrease of $5.4 million or 15%.
On a year-to-date basis, revenue through June 30, 2005 was $73.4 million,
compared to $64.4 million for the comparable period in 2004, representing an
increase of $9.0 million or 14%.
The Firm's quarterly revenues can fluctuate materially depending on the number
and size of completed transactions on which it advised, as well as other
factors. Accordingly, the revenues in any particular quarter may not be
indicative of future results.
The Firm's second quarter net income in 2005 compared with pro forma net income
of $7.8 million in the second quarter of 2004, which represents a decrease of
$1.5 million or 19%. On a year-to-date basis, net income was $17.0 million
through June 30, 2005, compared to pro forma net income of $14.3 million for the
comparable period in 2004, which represents an increase of $2.7 million or 19%.
The Firm had actual net income of $7.8 million and $18.3 million for the three
and six months ended June 30, 2004, respectively.
We believe that pro forma results for the three and six months ended June 30,
2004, more accurately depict our results as a public company and will provide
the most meaningful basis for comparison among present, historical and future
periods. Prior to our initial public offering we operated as a limited liability
company and our earnings did not fully reflect either the compensation expense
we pay our managing directors or the taxes that we pay as a corporation.
Additionally, a portion of our earnings attributable to our European operations
was recorded as minority interest prior to our initial public offering. Our pro
forma results increase compensation expense and tax expense to amounts we would
have paid as a public corporation and eliminate the minority interest
attributable to our European operations.
"While M&A activity has remained strong, and there is a high degree of activity
in all our offices, the timetables of our various assignments were such that no
major transactions on which we were advising closed in the second quarter. We
have often said our progress is best measured
on an annual rather than quarterly basis, and we can confirm that there is no
change in our confidence in our financial outlook as a result of this quarter's
advisory revenue results. The further increase in our quarterly dividend should
be viewed as evidence of that confidence," Robert F. Greenhill, Chairman and
CEO, said.
REVENUES
REVENUES BY SOURCE
The following provides a breakdown of total revenues by source for the
three-month and six-month periods ended June 30, 2005 and June 30, 2004,
respectively:
<TABLE>
Three Months Ended
----------------------------------------------------------
June 30, 2005 June 30, 2004
-------------------------- --------------------------
Amount % of Total Amount % of Total
---------- ---------- ---------- ----------
(in millions, unaudited)
Financial Advisory........................... $ 16.3 55% $ 27.8 80%
Merchant Banking Fund Management & Other..... 13.2 45% 7.1 20%
-------- ---- ------- ----
Total Revenues............................... $ 29.5 100% $ 34.9 100%
</TABLE>
<TABLE>
Six Months Ended
----------------------------------------------------------
June 30, 2005 June 30, 2004
-------------------------- --------------------------
Amount % of Total Amount % of Total
---------- ---------- ---------- ----------
(in millions, unaudited)
Financial Advisory........................... $ 55.8 76% $ 53.3 83%
Merchant Banking Fund Management & Other..... 17.6 24% 11.1 17%
------- ---- ------- ----
Total Revenues............................... $ 73.4 100% $ 64.4 100%
</TABLE>
FINANCIAL ADVISORY REVENUES
Financial Advisory Revenues were $16.3 million in the second quarter of 2005
compared to $27.8 million in the second quarter of 2004, which represents a
decrease of 41%. This decrease was due to a lower incidence of completed
assignments during the second quarter of 2005 compared to the second quarter of
2004. For the six months ended June 30, 2005, Financial Advisory Revenues were
$55.8 million compared to $53.3 million for the comparable period in 2004,
representing an increase of 5%.
Completed assignments in the second quarter of 2005 included the sale of Deutz
AG's marine service business for medium and large engines to Wartsila.
"There have been several recent announcements relating to major U.S. and
European transactions on which we are advising, all of which remained pending as
of the end of the quarter. These pending transactions, as well as other ongoing
advisory assignments, the continuing integration of recently recruited managing
directors and the growing strength of our brand name as a leading independent
advisor, give us confidence in our continuing success," Scott L. Bok and Simon
A. Borrows, Co-Presidents, commented.
The Firm also announced during the second quarter of 2005 the recruitment of
Mark Hootnick, a U.S. based restructuring specialist formerly with Miller
BuckfireYing & Co. as a Managing Director, and Karl-Hermann Baumann, former
Chairman of Siemens AG as a Senior Advisor based in Germany.
MERCHANT BANKING FUND MANAGEMENT & OTHER REVENUES
The Firm earned $13.2 million in Merchant Banking Fund Management & Other
Revenues in the second quarter of 2005 compared to $7.1 million in the second
quarter of 2004, representing an increase of 86%. This increase is primarily due
to higher asset management fees resulting from greater assets under management,
higher realized and unrealized principal investment gains in the Greenhill
Capital Partners (GCP) portfolio, an increase in the recognized amounts of
profit overrides associated with gains in the GCP portfolio and an increase in
interest income.
In particular, in the second quarter GCP benefited from a significant increase
in the value of its holdings in Global Signal Inc. (NYSE:GSL) and the sale of
substantially all of the assets of Everlast Energy LLC, as well as dividends
from and increases in the value of other investments.
For the first six months of 2005, the Company earned $17.6 million in Merchant
Banking Fund Management & Other Revenues compared to $11.1 million in the first
six months of 2004, an increase of 59%. The increase is again primarily due to
higher asset management fees, realized and unrealized investment gains, profit
overrides and interest income.
The Firm also announced the final closing on June 8, 2005 of Greenhill Capital
Partners II, L.P. ("GCP II"), our second merchant banking fund. GCP II received
total commitments from investors of $875 million, including an $88 million
capital commitment from the Firm. In addition to the Firm's capital commitment,
managing directors and other professionals of the Firm committed $136 million of
personal capital to GCP II. Commitments will be drawn down from time to time to
make investments over a period of up to five years.
"We have continued to benefit from strong operating performances from many of
our portfolio companies across each of our three focus sectors: energy,
financial services and telecommunications. We are also pleased by the new
investment opportunities we are seeing for our new, larger fund," Robert H.
Niehaus, Chairman of Greenhill Capital Partners, commented.
EXPENSES
OPERATING EXPENSES
The following table sets forth information relating to our actual and pro forma
operating expenses, which are reported net of reimbursements:
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
2005 2004 2005 2004
--------- ---------- ---------- ---------
(in millions, unaudited)
Actual Compensation & Benefits Expense....... $ 11.7 $ 13.5 $ 31.7 $ 22.8
% of Revenues........................... 40% 39% 43% 35%
Pro Forma Compensation & Benefits Expense(a). 11.7 15.7 31.7 29.0
% of Revenues........................... 40% 45% 43% 45%
</TABLE>
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
2005 2004 2005 2004
--------- ---------- ---------- ----------
(in millions, unaudited)
Non-Compensation Expense:
Other Operating Expenses................ 7.1 5.0 13.2 9.2
Depreciation & Amortization............. 0.7 0.8 1.3 1.5
---- ----- ----- ----
Total Non-Compensation Expense............... 7.8 5.8 14.5 10.7
% of Revenues........................... 26% 17% 20% 17%
Total Actual Operating Expense............... 19.5 19.3 46.2 33.5
% of Revenues........................... 66% 55% 63% 52%
Total Pro Forma Operating Expense (a)........ 19.5 21.5 46.2 39.7
% of Revenues........................... 66% 62% 63% 62%
</TABLE>
(a) We have operated as a public company since our initial public offering
in May 2004, and the amounts for the three months and six months ended
June 30, 2005 reflect actual expenses; the amounts for the three
months and six months ended June 30, 2004 reflect pro forma expenses.
Compensation and Benefits Expense
Our Compensation and Benefits Expense in the second quarter of 2005 was $11.7
million, which reflects a 40% ratio of compensation to revenues. This amount
compares to a pro forma Compensation and Benefits Expense of $15.7 million in
the second quarter of 2004, which reflected a 45% ratio of compensation to
revenues. The decrease of $4.0 million or 25% is due to the lower level of
revenues in the second quarter of 2005 compared to the second quarter of 2004
and a decision to reduce the compensation ratio in a low revenue period. For the
six months ended June 30, 2005, our Compensation and Benefits Expense was $31.7
million, which compares against $29.0 million of pro forma Compensation and
Benefits Expense for the six months ended June 30, 2004. The increase of $2.7
million or 9% is due to the higher level of revenues in the first six months of
2005 compared to the comparable period in 2004 partially offset by the decision
to reduce the compensation ratio in the second quarter of 2005. For the six
months ended June 30, 2005, the ratio of compensation to revenues was 43%,
compared to a 45% ratio of pro forma compensation to revenues for the comparable
period in 2004.
The principal component of our operating expenses is compensation and benefits
expense. Because we were a limited liability company prior to our initial public
offering in May 2004, payments for services rendered by our managing directors
generally were accounted for as distributions of members' capital or minority
interest expense attributable to our European operations rather than as
compensation expense. As a result, our pre-IPO compensation and benefits expense
did not reflect a large portion of payments for services rendered by our
managing directors and understated the operating costs that we expect we would
have incurred as a public company. Our pro forma compensation and benefits
expense reflects a 45% ratio of such expenses to revenues, which is consistent
with the ratio we used as a public company in 2004. As a corporation, we include
all payments for services rendered by our managing directors in compensation and
benefits expense.
For the three months and six months ended June 30, 2004, actual Compensation and
Benefits Expense was $13.5 million and $22.8 million, respectively.
Non-Compensation Expenses
Our non-compensation expenses were $7.8 million in the second quarter of 2005,
which compared to $5.8 million in the second quarter of 2004, representing an
increase of 34%. The increase is related principally to greater travel expenses
($0.6 million) and information services ($0.3 million) as a result of additional
personnel and business development activity, a third-party fee related to the
fundraising for GCP II ($1.0 million) and an increase in occupancy costs for
additional office space in New York and Dallas ($0.2 million), offset in part by
lower depreciation expense ($0.1 million).
For the first six months of 2005, our non-compensation expenses were $14.5
million, which compared to $10.7 million in the first six months of 2004,
representing an increase of 36%. The increase is related principally to the
write-off of uncollectible accounts ($1.0 million), the third-party fee related
to the fundraising for GCP II, greater travel expenses ($0.7 million) and
information services ($0.4 million) as a result of additional personnel and
business development activity, and increases in expenses associated with
operating as a public entity ($0.7 million), offset in part by lower
depreciation expense ($0.3 million).
Non-compensation expenses as a percentage of revenue in the three months and six
months ended June 30, 2005 were 26% and 20%, respectively. This compares to 17%
for both the three months and six months ended June 30, 2004, respectively. The
increase in these expenses as a percentage of revenue is principally related to
lower revenues in the second quarter of 2005, as well as nonrecurring charges
for the write-off of uncollectible accounts, the third party placement fee for
the new merchant banking fund, additional personnel and business development
costs, and the costs of operating as a public company.
The Firm's non-compensation expense as a percentage of revenue can vary as a
result of a variety of factors including fluctuation in quarterly revenue
amounts, the amount of recruiting and business development activity, the amount
of reimbursement of engagement-related expenses by clients, currency movements
and other factors. Accordingly, the non-compensation expense as a percentage of
revenue in any particular quarter may not be indicative of the non-compensation
expense as a percentage of revenue in future periods.
PROVISION FOR INCOME TAXES
The Provision for Taxes in the second quarter of 2005 was $3.6 million, which
reflects a 36% effective tax rate. This compares to a pro forma Provision for
Taxes in the second quarter of 2004 of $5.6 million based on an assumed 42%
effective tax rate for the full period. The decrease of $2.0 million or 36% is
due to both a lower level of income and a lower effective tax rate in the second
quarter of 2005 as compared to the same period in the prior year. The lower
effective rate in the second quarter of 2005 resulted principally from the
realization in 2005 of a higher proportion of investment income, which benefits
from relatively lower state tax rates than U.S. advisory income.
For the six months ended June 30, 2005, our Provision for Income Taxes was $10.0
million, which reflects a 37% effective tax rate. This compares to a pro forma
Provision for Taxes of $10.4 million based on an effective tax rate of 42% for
the full period. The decrease of $0.4 million or 4% is due to a lower effective
tax rate in the six months ended June 30, 2005 as compared to the same period in
the prior year. The decrease in the effective rate for the six
months ended June 30, 2005 resulted from a higher proportion of foreign sourced
advisory earnings and investment income, which benefit from relatively lower tax
rates than U.S. advisory income.
As a limited liability company, Greenhill was not subject to U.S. federal or
state income taxes and its U.K. controlled affiliate Greenhill & Co.
International LLP, as a limited liability partnership, was generally not subject
to U.K. income taxes. Since completion of our initial public offering in May
2004, we have been subject to federal, foreign and state corporate income taxes.
Actual income taxes for the three and six months ended June 30, 2004 were $5.6
million and $6.1 million.
The effective tax rate can fluctuate as a result of variations in the relative
amounts of advisory and merchant banking income earned in the tax jurisdictions
in which the Firm operates and invests. Accordingly, the effective tax rate in
any particular quarter may not be indicative of the effective tax rate in future
periods.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2005, our cash totaled $94.4 million, and we had no debt. Our
stockholders' equity as of June 30, 2005 was $135.9 million.
We had total commitments (not reflected on our balance sheet) relating to future
principal investments in merchant banking funds of $95.7 million as of June 30,
2005, including the commitment to GCP II referred to above. These commitments
are expected to be drawn on from time to time over a period of up to five years.
The Firm repurchased 41,180 shares of its common stock at an average price of
$32.04 during the second quarter of 2005. The Board of Directors of Greenhill &
Co., Inc. has authorized the additional repurchase in open market transactions
of up to $25.0 million of common stock, which represents as increase from the
$6.6 million of share repurchase authority remaining from prior Board approvals.
DIVIDEND
The Board of Directors of Greenhill & Co., Inc. has declared a dividend of $0.12
per share to be paid on September 14, 2005 to common stockholders of record on
August 24, 2005.
OFFERING OF SHARES
In May 2005, certain of our managing directors completed the sale of 4.6 million
shares of our common stock in an underwritten offering. The Firm did not receive
any proceeds from or incur any out of pocket expenses in connection with this
offering.
.................................................................................
Greenhill & Co., Inc. is an independent investment banking firm that (i)
provides financial advice on significant mergers, acquisitions, restructurings
and similar corporate finance matters and (ii) manages merchant banking funds
and commits capital to those funds. Greenhill acts for clients located
throughout the world from offices in New York, London and Frankfurt, and Dallas.
Cautionary Note Regarding Forward-Looking Statements
The preceding discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes that appear below. We
have made statements in this discussion that are forward-looking statements. In
some cases, you can identify these statements by forward-looking words such as
"may", "might", "will", "should", "expect", "plan", "anticipate", "believe",
"estimate", "predict", "potential" or "continue", the negative of these terms
and other comparable terminology. These forward-looking statements, which are
subject to risks, uncertainties and assumptions about us, may include
projections of our future financial performance, based on our growth strategies
and anticipated trends in our business. These statements are only predictions
based on our current expectations and projections about future events. There are
important factors that could cause our actual results, level of activity,
performance or achievements to differ materially from the results, level of
activity, performance or achievements expressed or implied by the
forward-looking statements. These factors include, but are not limited to, those
discussed in our Registration Statement on Form S-1 (Commission file number
333-124082) under the caption "Risk Factors".
GREENHILL & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
2005 2004 2005 2004
--------------- --------------- --------------- ---------------
REVENUES
Financial advisory fees $ 16,316,783 $ 27,801,947 $ 55,787,498 $ 53,339,242
Merchant banking revenue 12,328,021 6,878,759 16,262,628 10,886,486
Interest income 817,834 172,438 1,340,019 192,941
--------------- --------------- --------------- ---------------
Total Revenues 29,462,638 34,853,144 73,390,145 64,418,669
EXPENSES
Employee compensation and benefits 11,732,768 13,519,168 31,653,161 22,755,368
Occupancy and equipment rental 1,631,539 1,477,520 2,963,745 2,831,872
Depreciation and amortization 646,038 759,488 1,274,161 1,531,550
Information services 940,560 664,738 1,808,306 1,425,301
Professional fees 1,651,947 563,271 2,275,815 847,779
Travel related expenses 1,413,937 802,969 2,404,384 1,696,168
Other operating expenses 1,504,300 1,538,349 3,781,577 2,443,918
--------------- --------------- --------------- ---------------
Total Expenses 19,521,089 19,325,503 46,161,149 33,531,956
Income before Tax and Minority Interest 9,941,549 15,527,641 27,228,996 30,886,713
Minority interest in net income of subsidiary 130,717 2,092,353 228,975 6,487,050
--------------- --------------- --------------- ---------------
Income before Tax 9,810,832 13,435,288 27,000,021 24,399,663
Provision for taxes 3,557,565 5,626,649 9,995,017 6,110,951
--------------- --------------- --------------- ---------------
Net Income $ 6,253,267 $ 7,808,639 $ 17,005,004 $ 18,288,712
=============== =============== =============== ===============
Average common shares outstanding:
Basic 30,986,722 28,494,540 30,950,653 26,758,276
Diluted 31,080,138 28,537,025 31,021,351 26,800,762
Earnings per share
Basic $ 0.20 $ 0.27 $ 0.55 $ 0.68
Diluted $ 0.20 $ 0.27 $ 0.55 $ 0.68
Pro forma average shares outstanding (see
notes a and e):
Basic 30,986,722 28,494,540 30,950,653 26,758,276
Diluted 31,080,138 28,537,025 31,021,351 26,800,762
Pro forma earnings per share (see note a):
Basic $ 0.20 $ 0.27 $ 0.55 $ 0.53
Diluted $ 0.20 $ 0.27 $ 0.55 $ 0.53
</TABLE>
See notes to Pro Forma Condensed Consolidated Statements of Income.
GREENHILL & CO., INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------ ---------------------------
2005 2004 2005 2004
--------- ------------ ------------ ------------
(a) (ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
(in thousands, except per share data)
Total Revenues $ 29,463 $ 34,853 $ 73,390 $ 64,419
Compensation and benefits (b) 11,733 15,684 31,653 28,989
Other expenses 7,788 5,806 14,508 10,777
--------- ------------ ------------ ------------
Total expenses 19,521 21,490 46,161 39,766
--------- ------------ ------------ ------------
Income before tax and minority interest 9,942 13,363 27,229 24,653
Minority interest in net income of subsidiary (c) 131 - 229 -
--------- ------------ ------------ ------------
Income before tax 9,811 13,363 27,000 24,653
Tax expense (d) 3,558 5,612 9,995 10,354
--------- ------------ ------------ ------------
Net income $ 6,253 $ 7,751 $ 17,005 $ 14,299
========== ============ ============ ============
Actual and pro forma average common shares
outstanding: (e)
Basic 30,987 28,495 30,951 26,758
Diluted 31,080 28,537 31,021 26,801
Actual and pro forma earnings per share:
Basic $ 0.20 $ 0.27 $ 0.55 $ 0.53
Diluted $ 0.20 $ 0.27 $ 0.55 $ 0.53
</TABLE>
See notes to Pro Forma Condensed Consolidated Statements of Income.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(a) Prior to the initial public offering we were a limited liability company
and our historical earnings did not fully reflect the compensation expense
we pay our managing directors or taxes that we pay as a public corporation.
Additionally, a portion of our earnings attributable to our European
operations was recorded as minority interest. We believe that the pro forma
results, which increase compensation expense and tax expense to amounts we
expect we would have paid as a corporation and eliminate the minority
interest of our European operations, more accurately depict our results as
a public company. During the three and six months ended June 30, 2005, we
operated as a public company for the entire period, and the amounts
presented above reflect actual results of operations for that period. The
amounts for the three and six months ended June 30, 2004 include the pro
forma results of operations as if the Firm operated as a public company
during the period January 1, 2004 to the date of our public offering on May
11, 2004 combined with the actual results of operations for the period
after the public offering.
(b) Because the Firm had been a limited liability company prior to the initial
public offering, payments for services rendered by managing directors
generally had been accounted for as distributions of members' capital
rather than as compensation expense. As a corporation, the Firm includes
all payments for services rendered by managing directors in compensation
and benefits expense.
Compensation and benefits expense, reflecting the Firm's conversion to
corporate form, consists of cash compensation and non-cash compensation
related to the restricted stock units awarded to employees at the time of
the Firm's initial public offering consummated on May 11, 2004, as well as
any additional restricted stock units awarded in the future. It is the
Firm's policy that total compensation and benefits, including that payable
to the managing directors, will not exceed 50% of total revenues each year
(although the Firm retains the ability to change this policy in the
future). An adjustment to increase compensation expense for the three and
six months ended June 30, 2004 of $2.2 million and $6.2 million,
respectively, has been made to record total compensation and benefits
expense at 45% of total revenues, which is consistent with the compensation
expense ratio we used as a public company in 2004.
(c) For the three and six months ended June 30, 2004, historical income before
tax has been increased by $2.1 million and $6.5 million, respectively, to
reflect the elimination on a pro forma basis of minority interests held by
the European managing directors in Greenhill & Co. International.
(d) As a limited liability company, the Firm was generally not subject to
income taxes except in foreign and local jurisdictions. For the six months
ended June 30, 2004, the provision for taxes was increased by $4.2 million
on a pro forma basis to adjust the Firm's effective tax rate to 42%,
reflecting assumed federal, foreign, state and local income taxes as if we
were a corporation on January 1, 2004.
(e) For the three and six months ended June 30, 2004 the actual and pro forma
numbers of common shares outstanding give effect to (i) 25,000,000 shares
issued in connection with the reorganization of the Firm in conjunction
with the initial public offering as if it occurred on January 1, 2004 and
(ii) the weighted average of the 5,750,000 shares and the common stock
equivalents issued in conjunction with and subsequent to the initial public
offering.
