Exhibit 99.1
GLEACHER & COMPANY ANNOUNCES SECOND QUARTER RESULTS WITH NET
REVENUES OF $54.5 MILLION
NEW YORK, N.Y., July 22, 2010 — Gleacher & Company, Inc. (NASDAQ: GLCH), reported today financial results for the second quarter ended June 30, 2010. The Company will hold a conference call today, July 22, 2010, at 4:30 P.M. (EDT) (See Conference Call Information below) to discuss these results.
Results for the second quarter and six months ended June 30, 2010 and June 30, 2009
(In thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30 | | | June 30 | |
| Net Revenues (including net interest income): | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| |
| Net revenues | | $ | 54,533 | | | $ | 92,745 | | | $ | 133,836 | | | $ | 163,305 | |
| |
| (Loss)/ income from continuing operations before income taxes (GAAP) | | | (7,035 | ) | | | 19,015 | | | | (9,086 | ) | | | 28,351 | |
| |
| | | | | | | | | | | | | | | | | |
| Add back: | | | | | | | | | | | | | | | | |
| Expense associated with early termination of a real estate lease | | | 3,190 | | | | — | | | | 3,190 | | | | — | |
Compensation expense(1) | | | — | | | | — | | | | 13,306 | | | | — | |
| |
Adjusted (loss) / income from continuing operations before income taxes (Non-GAAP)(2) | | $ | (3,845 | ) | | $ | 19,015 | | | $ | 7,410 | | | $ | 28,351 | |
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| | |
| (1) | | Compensation expense associated with the resignations of the former Chief Executive Officer and the former Chief Financial Officer of which $12.7 million is a non-cash expense. |
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| (2) | | See the paragraph captioned “Non-GAAP Financial Measures” for additional information. |
Results of the second quarter include:
| | • | | Net revenues of $54.5 million for the second quarter of 2010, compared to $92.7 million for the second quarter of 2009 |
| |
| | • | | Pre-tax loss of $7.0 million includes a $3.2 million charge for the termination of a lease as part of the consolidation of our New York City offices |
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| | • | | Annualized net revenue per employee of $0.6 million |
Eric Gleacher, Chairman and Chief Executive Officer, said, “Our operating results reflect the unfavorable market environment experienced in the second quarter. However, our firm remains well-capitalized to weather industry volatility and continue to take market share when conditions
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improve. At quarter end, we had in excess of $225 million in tangible equity supporting a liquid balance sheet with no significant long-term debt.”
Peter McNierney, President and Chief Operating Officer, said, “We have made significant investments in diversifying our business, expanding our client-facing headcount and consolidating our branding. These efforts position us well for success over the long term.”
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Overview of Financial Results for the Quarters Ended June 30, 2010 and June 30, 2009
(In thousands except per share amounts)
(Unaudited Consolidated Statements of Operations)
| | | | | | | | | |
| | | Three Months Ended | |
| | | June 30, | |
| | | 2010 | | | 2009 | |
| |
Revenues: | | | | | | | | |
| Principal transactions | | $ | 33,035 | | | $ | 65,264 | |
| Commissions | | | 5,139 | | | | 4,693 | |
| Investment banking | | | 6,827 | | | | 13,036 | |
| Investment (losses) / gains, net | | | (1,662 | ) | | | 991 | |
| Interest | | | 12,379 | | | | 11,504 | |
| Fees and other | | | 1,575 | | | | 1,679 | |
| |
| Total revenues | | | 57,293 | | | | 97,167 | |
| Interest expense | | | 2,760 | | | | 4,422 | |
| |
| Net revenues | | | 54,533 | | | | 92,745 | |
| |
Expenses (excluding interest): | | | | | | | | |
| Compensation and benefits* | | | 44,875 | | | | 63,565 | |
| Clearing, settlement and brokerage | | | 1,579 | | | | 1,169 | |
| Communications and data processing | | | 3,638 | | | | 2,653 | |
| Occupancy, depreciation and amortization | | | 5,671 | | | | 1,939 | |
| Amortization of intangible assets | | | 960 | | | | 499 | |
| Selling | | | 1,273 | | | | 1,187 | |
| Other | | | 3,572 | | | | 2,718 | |
| |
| Total expenses (excluding interest) | | | 61,568 | | | | 73,730 | |
| |
| (Loss) / income before income taxes and discontinued operations | | | (7,035 | ) | | | 19,015 | |
| |
| Income tax (benefit) / expense | | | (1,800 | ) | | | 2,880 | |
| |
| (Loss) / income from continuing operations | | | (5,235 | ) | | | 16,135 | |
| Loss from discontinued operations, net of taxes | | | (2 | ) | | | (14 | ) |
| |
| Net (loss) / income | | $ | (5,237 | ) | | $ | 16,121 | |
| |
| | | | | | | | | |
Per share data: | | | | | | | | |
| Basic (loss) / earnings per share: | | | | | | | | |
| Continuing operations | | $ | (0.04 | ) | | $ | 0.19 | |
| Discontinued operations | | | — | | | | — | |
| |
| Net (loss) / income per share | | $ | (0.04 | ) | | $ | 0.19 | |
| |
| Diluted (loss) / earnings per share: | | | | | | | | |
| Continuing operations | | $ | (0.04 | ) | | $ | 0.18 | |
| Discontinued operations | | | — | | | | — | |
| |
| Net (loss) / income per share | | $ | (0.04 | ) | | $ | 0.18 | |
| |
| Weighted average common and common equivalent shares outstanding: | | | | | | | | |
| Basic | | | 121,228 | | | | 83,326 | |
| Diluted | | | 121,228 | | | | 90,221 | |
| |
| | | | | | | | | |
* Compensation and benefits detail: | | | | | | | | |
| Salary, bonus and benefits | | $ | 37,433 | | | $ | 56,106 | |
| Earnout associated with BNY transaction | | | 2,466 | | | | 5,153 | |
| Employee stock-based compensation | | | 4,976 | | | | 2,306 | |
| |
| Total | | $ | 44,875 | | | $ | 63,565 | |
| |
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Discussion of operating results for the second quarter of 2010 compared to the second quarter of 2009
Net revenues for the second quarter of 2010 were $54.5 million, a decrease of $38.2 million, or 41 percent, from $92.7 million in the second quarter of 2009. Pre-tax loss from continuing operations in the second quarter was $7.0 million compared to pre-tax income from continuing operations of $19.0 million in the prior year quarter. The second quarter pre-tax loss includes a $3.2 million occupancy expense related to the termination of a lease as part of the consolidation of our office space in New York City.
Revenues from principal transactions and commissions were $38.2 million in the second quarter of 2010, a decrease of $31.8 million, or 45 percent, compared to the second quarter of 2009, primarily due to decreased revenues of $14.2 million in corporate bonds and $17.8 million in mortgage and asset backed securities. Investment banking revenues decreased $6.2 million compared to the second quarter of 2009 to $6.8 million, due to a decrease in capital markets activity and advisory activity. Investment losses were $1.7 million compared to a gain of $1.0 million in the second quarter of 2009 due to a decrease in the value of the Company’s investment in the FATV fund. Net interest income increased by $2.5 million over the second quarter of 2009 to $9.6 million in the second quarter of 2010, due to the combination of coupon interest generated on higher mortgage and asset backed securities inventory levels and lower funding costs. Fees and other revenues of $1.6 million remained relatively unchanged compared to the $1.7 million in the second quarter of 2009.
Non-interest expenses for the second quarter of 2010 of $61.6 million decreased $12.1 million, or 16 percent, compared to $73.7 million in the second quarter of 2009. In the second quarter of 2010, compensation and benefits expense was $44.9 million, a decrease of $18.7 million, or 29 percent, over the prior year quarter, primarily due to the decrease in revenues which was partially offset by increased headcount. Clearing, settlement and brokerage costs were $1.6 million, an increase of $0.4 million, or 35 percent, compared to the prior year quarter due to an increase in the costs associated with new fixed income products traded. Communications and data processing expense of $3.6 million increased by $1.0 million compared to the second quarter of 2009 due to increased headcount across our business segments. Occupancy, depreciation and amortization expense of $5.7 million increased $3.7 million, or 192 percent, compared to the second quarter of 2009 due to a $3.2 million charge associated with the termination of a lease as part of the consolidation of our office space in New York City, expenses associated with our move to 1290 Avenue of the Americas and an increase in our office space to accommodate the increase in personnel. Amortization of intangibles increased $0.5 million, or 92 percent, to $1.0 million in the second quarter of 2010 due to the acquisition of Gleacher Partners, which occurred in June of 2009. Selling expense remained relatively unchanged. Other expenses increased $0.9 million, or 31 percent, to $3.6 million in the second quarter of 2010 primarily due to an increase in professional service fees and a SIPC assessment fee.
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Overview of Financial Results for the Six Months Ended June 30, 2010 and June 30, 2009
(In thousands except per share amounts)
(Unaudited Consolidated Statements of Operations)
| | | | | | | | | |
| | | Six Months Ended | |
| | | June 30, | |
| | | 2010 | | | 2009 | |
| |
Revenues: | | | | | | | | |
| Principal transactions | | $ | 79,341 | | | $ | 117,305 | |
| Commissions | | | 9,304 | | | | 9,595 | |
| Investment banking | | | 21,925 | | | | 18,226 | |
| Investment gains / (losses), net | | | (1,512 | ) | | | 982 | |
| Interest | | | 28,540 | | | | 22,152 | |
| Fees and other | | | 2,485 | | | | 3,169 | |
| |
| Total revenues | | | 140,083 | | | | 171,429 | |
| Interest expense | | | 6,247 | | | | 8,124 | |
| |
| Net revenues | | | 133,836 | | | | 163,305 | |
| |
Expenses (excluding interest): | | | | | | | | |
| Compensation and benefits* | | | 113,076 | | | | 116,000 | |
| Clearing, settlement and brokerage | | | 2,954 | | | | 1,981 | |
| Communications and data processing | | | 6,845 | | | | 4,940 | |
| Occupancy, depreciation and amortization | | | 7,917 | | | | 3,727 | |
| Amortization of intangible assets | | | 2,038 | | | | 756 | |
| Selling | | | 2,468 | | | | 2,112 | |
| Other | | | 7,624 | | | | 5,438 | |
| |
| Total expenses (excluding interest) | | | 142,922 | | | | 134,954 | |
| |
| (Loss) / income before income taxes and discontinued operations | | | (9,086 | ) | | | 28,351 | |
| |
| Income tax (benefit) / expense | | | (3,643 | ) | | | 7,237 | |
| |
| (Loss) / income from continuing operations | | | (5,443 | ) | | | 21,114 | |
| (Loss) / income from discontinued operations, net of taxes | | | (5 | ) | | | 28 | |
| |
| Net (loss) / income | | $ | (5,448 | ) | | $ | 21,142 | |
| |
| | | | | | | | | |
Per share data: | | | | | | | | |
| Basic (loss) / earnings per share: | | | | | | | | |
| Continuing operations | | $ | (0.05 | ) | | $ | 0.27 | |
| Discontinued operations | | | — | | | | — | |
| |
| Net (loss) / income per share | | $ | (0.05 | ) | | $ | 0.27 | |
| |
| Diluted (loss) / earnings per share: | | | | | | | | |
| Continuing operations | | $ | (0.05 | ) | | $ | 0.25 | |
| Discontinued operations | | | — | | | | — | |
| |
| Net (loss) / income per share | | $ | (0.05 | ) | | $ | 0.25 | |
| |
| Weighted average common and common equivalent shares outstanding: | | | | | | | | |
| Basic | | | 120,546 | | | | 79,158 | |
| Diluted | | | 120,546 | | | | 85,105 | |
| |
| | | | | | | | | |
* Compensation and benefits detail: | | | | | | | | |
| Salary, bonus and benefits | | $ | 83,941 | | | $ | 101,099 | |
| Earnout associated with BNY transaction | | | 5,590 | | | | 9,875 | |
| Employee stock-based compensation | | | 23,545 | | | | 5,026 | |
| |
| Total | | $ | 113,076 | | | $ | 116,000 | |
| |
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Discussion of operating results for the first six months of 2010 compared to the first six months of 2009
Net revenues for the first six months of 2010 were $133.8 million, a decrease of $29.5 million, or 18 percent, from $163.3 million in the first six months of 2009. Pre-tax loss from continuing operations in the first six months of 2010 was $9.1 million compared to pre-tax income from continuing operations of $28.4 million in the first six months of 2009. The first six months of 2010 includes compensation expense of $13.3 million related to the resignations of the former Chief Executive Officer and the former Chief Financial Officer and $3.2 million in occupancy expense related to the termination of a lease as part of the consolidation of our office space in New York City.
Revenues from principal transactions and commissions were $88.6 million in the first six months of 2010, a decrease of $38.3 million, or 30 percent, compared to the first six months of 2009, primarily due to decreased revenues of $23.0 million in corporate bonds and $14.3 million in mortgage and asset backed securities. Investment banking revenues increased $3.7 million compared to the first six months of 2009 to $21.9 million, due to an increase in capital markets activity. Investment losses were $1.5 million compared to a gain of $1.0 million in the first six months of 2009 due to a decrease in the value of the Company’s investment in the FATV fund. Net interest income increased by $8.3 million over the first six months of 2009 to $22.3 million in the first six months of 2010, due to the combination of coupon interest generated on higher mortgage and asset backed securities inventory levels and lower funding costs. Fees and other revenues of $2.5 million decreased by $0.7 million compared to the first six months of 2009, primarily due to a decrease in payments received for equity research.
Non-interest expenses for the first six months of 2010 of $142.9 million increased $8.0 million, or 6 percent, compared to $135.0 million in the first six months of 2009. In the first six months of 2010, compensation and benefits expense was $113.1 million, a decrease of $2.9 million, or 3 percent, over the six month period in 2009, primarily due to the decrease in revenues, which was offset by the $13.3 million expense associated with the resignations of the former CEO and the former CFO as well as the compensation and benefit expense associated with an increase in headcount. Clearing, settlement and brokerage costs were $3.0 million, an increase of $1.0 million, or 49 percent, compared to the first six months in 2009 due to an increase in the costs associated with new fixed income products traded. Communications and data processing expense of $6.8 million increased by $1.9 million compared to the first six months of 2009 due to increased headcount across our business segments. Occupancy, depreciation and amortization expense of $7.9 million increased $4.2 million, or 112 percent, compared to the first six months of 2009 due to a $3.2 million charge associated with the termination of a lease as part of the consolidation of our office space in New York City, expenses associated with our move to 1290 Avenue of the Americas and an increase in our office space to accommodate the increase in personnel. Amortization of intangibles increased $1.3 million, or 170 percent, to $2.0 million in the first six months of 2010 due to the acquisition of Gleacher Partners, which occurred in June of 2009. Selling expense increased $0.4 million primarily due to an increase in investment banking related sales activity. Other expenses increased $2.2 million, or 40 percent, to $7.6 million in the first six months of 2010 primarily due to an increase in professional service fees and a SIPC assessment fee.
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Consolidated Statements of Financial Condition
(In thousands except per share amounts)
(Unaudited Consolidated Statements of Financial Condition)
| | | | | | | | | |
| | | June 30, | | December 31, |
| As of | | 2010 | | 2009 |
| |
Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 20,407 | | | $ | 24,997 | |
| Cash segregated for regulatory purposes | | | 100 | | | | 100 | |
| Receivables from: | | | | | | | | |
| Brokers, dealers and clearing agencies | | | 12,928 | | | | 19,797 | |
| Others | | | 18,974 | | | | 17,105 | |
| Securities owned, at fair value | | | 955,223 | | | | 979,701 | |
| Investments | | | 17,638 | | | | 19,326 | |
| Office equipment and leasehold improvements, net | | | 5,791 | | | | 3,069 | |
| Goodwill | | | 106,451 | | | | 105,694 | |
| Intangible assets | | | 17,225 | | | | 19,263 | |
| Income taxes receivable | | | 16,035 | | | | — | |
| Deferred tax assets, net | | | 25,471 | | | | 16,137 | |
| Other assets | | | 11,215 | | | | 10,974 | |
| |
| Total Assets | | $ | 1,207,458 | | | $ | 1,216,163 | |
| |
| | | | | | | | | |
Liabilities | | | | | | | | |
| Payables to: | | | | | | | | |
| Brokers, dealers and clearing agencies | | $ | 691,043 | | | $ | 691,495 | |
| Others | | | 12,977 | | | | 14,180 | |
| Securities sold, but not yet purchased, at fair value | | | 85,576 | | | | 72,988 | |
| Accrued compensation | | | 26,631 | | | | 70,728 | |
| Accounts payable | | | 2,397 | | | | 2,203 | |
| Accrued expenses | | | 5,485 | | | | 4,754 | |
| Income taxes payable | | | 6,068 | | | | 2,397 | |
| Deferred tax liabilities | | | 2,673 | | | | 2,817 | |
| Mandatorily redeemable preferred stock | | | 24,536 | | | | 24,419 | |
| |
| Total Liabilities | | | 857,386 | | | | 885,981 | |
| |
Commitments and Contingencies | | | | | | | | |
| Subordinated debt | | | 909 | | | | 1,197 | |
| |
Stockholders’ Equity | | | | | | | | |
| Common stock; $.01 par value; authorized 200,000,000 shares; issued 128,901,290 and 125,056,247 shares, respectively; and outstanding 128,654,837 and 124,357,163 shares, respectively | | | 1,289 | | | | 1,251 | |
| Additional paid-in capital | | | 437,000 | | | | 411,633 | |
| Deferred compensation | | | 276 | | | | 534 | |
| Accumulated deficit | | | (88,590 | ) | | | (83,142 | ) |
| Treasury stock, at cost (246,453 shares and 699,084 shares, respectively) | | | (812 | ) | | | (1,291 | ) |
| |
| Total Stockholders’ Equity | | | 349,163 | | | | 328,985 | |
| |
| Total Liabilities and Stockholders’ Equity | | $ | 1,207,458 | | | $ | 1,216,163 | |
| |
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Income Tax Note
The Company’s effective income tax rate from continuing operations for the three-month period ended June 30, 2010 of 25.6% resulted in an income tax benefit of approximately $1.8 million. The Company calculated its income tax provision using its actual year to date effective tax rate (“discrete rate”) rather than its estimated annual effective tax rate. The effective rate differs from the federal statutory rate of 35% due to the initial application of the discrete rate during the quarter, non-deductible preferred stock dividends, state and local income taxes and non-deductible meals and entertainment expense. The Company used the discrete rate because a reliable estimate of the annual effective tax rate could not be calculated due to the magnitude of permanent items in relation to a range of possible outcomes of our operating results caused by continued market volatility.
The Company’s effective income tax rate from continuing operations for the six-month period ended June 30, 2010 of 40.1% resulted in an income tax benefit of approximately $3.6 million. The effective income tax rate is calculated using the discrete rate and differs from the federal statutory rate of 35% primarily due to non-deductible preferred stock dividends, state and local income taxes and non-deductible meals and entertainment expense, partially offset by a benefit recorded in the first quarter due to the reversal of prior year non-deductible share-based compensation previously granted to the Company’s former CEO.
Non-GAAP Financial Measures
The Company has presented non-GAAP financial measures to enhance an investor’s evaluation of the Company’s operating results.
Annualized net revenue per employee, stated previously in this press release, may be viewed as a non-GAAP financial measure. We calculate this number by dividing our net revenue for the quarter by the average number of employees during the period and multiplying by four. Our annualized net revenue per average number of employees during the second quarter of 2010, calculated using our second quarter net revenues of $54.5 million, and an average of 346 employees, was $0.6 million.
Adjusted income from continuing operations, stated previously in this press release, is a non-GAAP financial measure. We calculate this number by adding back to our GAAP pre-tax loss, the expense recorded in the second quarter related to terminating our lease at 12 East 49th Street in midtown Manhattan as part of the consolidation of our office locations in New York City, and the severance expense, related employee benefits and the remaining stock based compensation amortization for the former CEO and the former CFO since the respective dates of their resignations that was recorded in the first quarter.
Tangible equity, stated previously in this press release is a non-GAAP financial measure. Tangible equity has been calculated by subtracting goodwill of $106.2 million and intangible assets of $17.2 million from total stockholders’ equity of $349.2 million.
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Conference Call Information
The Company will hold a conference call today, July 22, 2010, at 4:30 P.M. (EDT). This call will be webcast and can be accessed on the Investor Relations portion of the Company’s website at www.gleacher.com, as well as through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson’s individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (www.streetevents.com), a password protected event management site. To participate on the call, please dial 888.713.4217 for domestic calls or 617.213.4869 for international calls, participant passcode 54595440 or request the Gleacher & Company earnings call. For those who cannot listen to the live broadcast, a recording of the call will be available for seven days following the call by dialing 888.286.8010 for domestic calls or 617.801.6888 for international calls, participant passcode 11324948.
About Gleacher & Company
Gleacher & Company, Inc. (NASDAQ: GLCH), is an independent investment bank that provides corporations and institutional investors with strategic, research-based investment opportunities, capital raising, and financial advisory services, including merger and acquisition, restructuring, recapitalization, and strategic alternative analysis services. For more information, please visit www.gleacher.com.
Forward Looking Statements
This press release contains “forward-looking statements.” These statements are not historical facts but instead represent the Company’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. The Company’s forward-looking statements are subject to various risks and uncertainties, including the conditions of the securities markets, generally, and acceptance of the Company’s services within those markets and other risks and factors identified from time to time in the Company’s filings with the Securities and Exchange Commission. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in its forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any of its forward-looking statements.
For Additional Information Please Contact:
| | | |
|
Investor Contact | | Media Contact |
| Peter McNierney | | Ray Young |
| President and Chief Operating Officer | | Halldin Public Relations |
| Gleacher & Company, Inc. | | 916.781.0659 |
| 212.273.7100 | | |
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