Gleacher & Company, Inc. : Gleacher & Company Reports Fourth Quarter and Year End 2012 Financial Results
02/15/2013| 06:35am US/Eastern
Recommend:
0
Company Announces Sale of ClearPoint
Company Concludes Formal Strategic Review
Gleacher & Company, Inc. (Nasdaq: GLCH) today reported net revenues of
$50.9 million, net loss from continuing operations of ($11.5) million,
or ($10.8) million on a non-GAAP basis, and diluted loss per share of
($0.10), or ($0.09) on a non-GAAP basis for the quarter ended December
31, 2012. The Company also announced that it has entered into an
agreement with Homeward Residential, Inc., a wholly owned subsidiary of
Ocwen Financial Corporation (NYSE: OCN) pursuant to which Homeward will
purchase substantially all of the assets of ClearPoint. Finally, having
considered a range of opportunities during its previously announced
strategic review, including partnering with one or more equity
investors, strategic acquisitions and divestitures, and business
combinations, the Company determined that the available opportunities
were not in the best interests of Gleacher's stockholders at this time.
Highlights
FY2012 dominated by restructuring the management team and compensation
methodologies, and a review of strategic alternatives. The Company
suffered a natural interruption in revenue generation as a result of
those actions.
Q4 results benefitted by performance in Investment Banking and Credit
Products; MBS & Rates suffered from weaker sales volumes.
ClearPoint entered into an agreement to sell substantially all of its
assets to Homeward.
Company concludes formal strategic review.
The Board of Directors renewed the Company's stock repurchase program,
authorizing up to $10 million in stock repurchases.
Thomas Hughes, Chief Executive Officer, said, "We accomplished a great
deal during the course of 2012, and I believe we are better positioned
to begin sustained growth and profitability. We have assembled a
management team and producers who possess deep experience serving
clients in the product efforts that comprise our strategy. We have
revamped our compensation methodologies in an effort to achieve our
stated goal of a 60% compensation to revenue ratio in the coming years.
And we have entered into an agreement to sell ClearPoint in a
transaction that we expect will close in the first quarter."
Mr. Hughes continued, "While the revenue decline in MBS & Rates has been
natural in the face of all of our restructuring efforts in that
business, we are not satisfied with those results. However, we recruited
outstanding talent in this Business Unit, we believe our ability to
serve customers in this product segment is strong, and once we have
fully integrated our Rangemark capabilities with Sales & Trading, our
customer interface will be even more compelling. We are pleased with our
performance in Investment Banking and Credit Products. Our Real Estate
Finance team now ranks #1 in M&A transactions executed for REITs, and
our Credit Products business grew its market share throughout 2012."
Mr. Hughes, commenting on the strategic review, said, "Assisted by our
financial advisor, we looked at a wide variety of strategic
transactions, including merger, acquisition, and business combinations.
Although we did not believe any proposal we received during the process
adequately reflected Gleacher's value, we will, as before, be
opportunistic in considering value-building strategic initiatives that
may accelerate our growth and improve stockholder returns. That said, we
made significant strategic progress during the course of the year, we
believe in our business strategy and in the capabilities of our team,
and we intend to continue our business expansion and fortify our brand."
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(In thousands, except for per share amounts)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues
$
50,876
$
43,330
$
61,240
$
203,595
$
261,172
Pre-tax loss from continuing operations
(11,293
)
(5,024
)
(236
)
(53,353
)
(61,877
)
Net (loss)/income from continuing operations
(11,486
)
(2,801
)
1,765
(77,955
)
(64,084
)
Discontinued operations, net of taxes
224
33
383
265
(18,040
)
Non-GAAP pre-tax (loss)/income from continuing operations*
(10,590
)
(5,059
)
n/a
(28,939
)
20,267
Non-GAAP net (loss)/income from continuing operations*
(10,783
)
(2,821
)
n/a
(24,397
)
12,132
(Loss)/earnings per share:
Diluted - continuing operations
$
(0.10
)
$
(0.02
)
$
0.01
$
(0.66
)
$
(0.52
)
Diluted - continuing operations (Non-GAAP)*
(0.09
)
(0.02
)
n/a
(0.21
)
0.09
*Designates non-GAAP financial results. A reconciliation of the
Company's GAAP results to non-GAAP financial results is set forth below
under the caption "Non-GAAP Financial Results."
The Company has included in this press release "non-GAAP financial
results." A non-GAAP financial result is a numerical measure of
financial position or results of operations that includes amounts that
are excluded, or excludes amounts that are included, in the most
directly comparable result calculated and presented in accordance with
generally accepted accounting principles ("GAAP").
In the financial data included in this press release, the items for
which the Company adjusted its GAAP results consist of the following:
legal, consulting and advisory costs incurred in connection with our
strategic review process during the second, third and fourth quarter
of 2012,
impairment of goodwill and intangibles recorded during the second
quarter of 2012 and the third quarter of 2011, as well as other
non-compensation expenses incurred in connection with the Investment
Banking realignment in the third quarter of 2011,
the change in the valuation allowance on the deferred tax assets,
initially established in the second quarter of 2012,
severance expense recorded during the first quarter of 2012 (partially
reversed in the third quarter of 2012) and third quarter of 2011,
compensation expense related to the resignation of the former interim
CEO in the second quarter of 2011, and
the bargain purchase gain related to the ClearPoint acquisition in the
first quarter of 2011.
For detailed information on the adjustments made, and a reconciliation
of the non-GAAP financial results included in this press release to the
most directly comparable GAAP financial metrics, refer to "Non-GAAP
Financial Results" below. While the Company believes that the non-GAAP
financial results included herein are instructive, they should only be
considered together with their corresponding GAAP financial metrics.
Business Segment Results (including Non-GAAP results)
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December, 31
(In thousands of dollars)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues:
Investment Banking
$
12,680
$
1,499
$
2,936
$
27,442
$
26,611
MBS & Rates
6,081
8,943
14,668
40,637
103,857
Credit Products
16,039
18,804
20,019
74,432
71,056
ClearPoint
13,615
12,899
20,815
53,375
46,924
Net revenues - operating segments
48,415
42,145
58,438
195,886
248,448
Other
2,461
1,185
2,802
7,709
10,394*
Total
$
50,876
$
43,330
$
61,240
$
203,595
$
258,842*
Pre-tax (loss)/income from continuing operations:
Investment Banking
$
2,061
$
(257
)
$
(1,249
)
$
4,576
$
4,584*
MBS & Rates
(5,434
)
1,814
3,465
127
33,120
Credit Products
(795
)
2,619*
3,400
4,070*
9,738
ClearPoint
(13
)
(524
)
(779
)
(5,891
)
(3,686
)
Pre-tax (loss)/income - operating segments
(4,181
)
3,652*
4,837
2,882
43,756*
Other
(6,409)*
(8,711)*
(5,073
)
(31,821)*
(23,489)*
Total
$
(10,590)*
$
(5,059)*
$
(236
)
$
(28,939)*
$
20,267*
*Designates non-GAAP financial results. A reconciliation of the
Company's GAAP results to its non-GAAP financial results is set forth
below under the caption "Non-GAAP Financial Results."
Investment Banking
Net revenues were $12.7 million for the quarter ended December 31, 2012,
an improvement of $11.2 million compared to the third quarter of 2012
and $9.7 million compared to the fourth quarter of 2011. Net revenues
also slightly improved year-over-year and were $27.4 million for the
year ended December 31, 2012, compared to the prior year of $26.6
million.
The composition of the division's investment banking revenues was as
follows:
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(In thousands)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Advisory
$
12,636
$
914
$
2,936
$
24,332
$
20,954
Capital Markets
44
585
-
3,110
5,657
Total:
$
12,680
$
1,499
$
2,936
$
27,442
$
26,611
MBS & Rates
Net revenues were $6.1 million for the quarter ended December 31, 2012,
a decline of $2.9 million and $8.6 million compared to the third quarter
of 2012 and fourth quarter of 2011, respectively. The market environment
proved challenging for the division, which experienced reduced sales and
trading revenues on lower spreads and market volatility. These declines
were partially offset by higher net interest income due to higher
average inventory levels when compared to the third quarter of 2012, as
net interest income was $7.5 million in the fourth quarter of 2012
compared to $4.0 million in the third quarter of 2012 (net interest
income was $13.3 million in the fourth quarter of 2011). Revenues for
the third quarter of 2012 also included approximately $0.7 million of
other revenue, related to the clawback of certain stock-based
compensation grants of former employees which were subject to
non-competition and/or other forfeiture provisions.
Net revenues of $40.6 million for the year ended December 31, 2012,
declined by $63.2 million compared to the prior year. This was largely
attributable to the previously reported leadership transition and
accompanying turnover experienced during the second and third quarter of
2012, resulting in a repositioning and rebuilding of the division which
is substantially complete. In addition, the division recognized lower
net interest income year-over-year on lower average inventory levels and
the prior year also includes non-agency asset-backed securities gains of
approximately $26.5 million.
Credit Products
Net revenues were $16.0 million for the quarter ended December 31, 2012,
a decline of $2.8 million compared to the third quarter of 2012 and $4.0
million compared to the fourth quarter of 2011. The declines were
primarily due to lower commissions and principal transaction revenues
due to spreads tightening, which was partially offset by higher volumes.
Net revenues of $74.4 million for the year ended December 31, 2012
improved by $3.4 million compared to the prior year, due to higher
volumes and an expanded product profile, partially offset by spread
compression.
ClearPoint
Net revenues were $13.6 million for the quarter ended December 31, 2012,
an increase of $0.7 million compared to the third quarter of 2012 due to
improved pricing margins, and a decline of $7.2 million compared to the
fourth quarter of 2011 on lower volumes. Net revenues during the fourth
and third quarter of 2012 reflect limits placed on ClearPoint's daily
average loan commitments to a level aligned with its distribution
capabilities.
Net revenues for the year ended December 31, 2012 were $53.4 million, an
improvement of $6.5 million compared to the prior year. This increase
was due to higher daily loan commitments primarily arising in the first
quarter of 2012, prior to the implementation of the previously mentioned
limits, coupled with lower daily average loan commitments in the prior
year, as the division's operations had commenced on January 3, 2011.
Subsequent to the liquidity constraints experienced during the first
half of 2012, the division has been managed to operate at or near
break-even levels. On February 14, 2013, the Company entered into an
agreement to sell substantially all of ClearPoint's assets to Homeward
Residential, Inc., and we expect the transaction to close in the first
quarter of 2013. The Company estimates it will recognize a loss of
approximately $5.0 million in connection with this disposition.
ClearPoint will be reclassified as a discontinued operation in the first
quarter of 2013.
Other
Net revenues were $2.5 million for the quarter ended December 31, 2012,
an improvement of $1.3 million compared to the third quarter of 2012 and
a decline of $0.3 million compared to the fourth quarter of 2011.
Changes in net revenues are primarily related to changes in value of the
Company's FATV investment.
Consolidated Compensation and Benefits Expenses (including Non-GAAP
results)
Compensation and benefits expense was $41.6 million for the fourth
quarter of 2012, an increase of $16.0 million ($14.7 million on a
non-GAAP basis) compared to compensation and benefits expense in the
third quarter of 2012, and $8.1 million compared to compensation and
benefits expense in the fourth quarter of 2011.
Our compensation ratio from continuing operations was 81.7% for the
fourth quarter of 2012, compared to 58.9% for the third quarter of 2012
(62.0% on a non-GAAP basis) and 54.7% for the fourth quarter of 2011.
The Company's compensation as a percentage of net revenue when compared
to the third quarter of 2012 was significantly influenced by the
Company's decision to pay year-end bonus compensation primarily in the
form of cash. In making this determination, the Company considered a
variety of factors including the significant discount to which the
Company's stock trades in relation to its book value. Compensation
expense for the fourth quarter of 2012 was also impacted by
approximately $0.9 million of retention payments made to certain key
employees as a result of general uncertainties stemming from the
strategic review process and $1.2 million of compensation guarantees
principally incurred in the MBS & Rates division in connection with the
division's rebuild.
The Company's compensation and benefits as a percentage of net revenues
was 70.4% (70.3% on a non-GAAP basis) for the year ended December 31,
2012, compared to 62.2% (61.4% on a non-GAAP basis) for the prior year.
The disparity between the ratios year-over-year is directly related to
the lower net revenues, as well as the Company's election to pay
primarily cash compensation in the current year, compared to a mix of
cash and stock in the prior year.
Non-compensation expenses were $20.6 million for the fourth quarter of
2012 ($19.9 million on a non-GAAP basis), compared to $22.8 million for
the third quarter of 2012 ($21.5 million on a non-GAAP basis) and $28.0
million for the fourth quarter of 2011. Included within non-compensation
expenses are ClearPoint broker fees and loan processing fees of $9.3
million, $9.4 million and $16.0 million for the fourth quarter of 2012,
third quarter of 2012 and fourth quarter of 2011, respectively, driven
by the level of ClearPoint loan commitment volumes in each respective
period.
Non-GAAP non-compensation expenses excludes legal, consulting and
advisory fees incurred in connection with our strategic alternatives
process of $0.7 million, $1.3 million and $3.0 million for the fourth
quarter and third quarter of 2012 and year ended December 31, 2012,
respectively.
Provision for Income Taxes
Fourth Quarter 2012
The Company's effective income tax rate from continuing operations for
the three months ended December 31, 2012 was negative 1.7%, resulting in
income tax expense of approximately $0.2 million. The income tax expense
is primarily attributable to an increase in the deferred tax asset
valuation allowance and provision to return tax adjustments.
Year Ended 2012
The Company's effective income tax rate from continuing operations for
the year ended December 31, 2012 was negative 46.1%, resulting in income
tax expense of approximately $24.6 million. The abnormal tax rate
differs from the federal statutory tax rate of 35% primarily due to the
establishment of a valuation allowance against substantially all of the
Company's deferred tax assets (negative 61%) in the second quarter of
2012, as well as the non-deductible discrete item attributable to the
write-off of goodwill (negative 14%) and tax expense associated with
stock-based compensation shortfalls (negative 6%).
Discontinued Operations
The Company has classified the results of its Equities segment as
discontinued operations due to the Company's decision to exit the
business on August 22, 2011. Results of these discontinued operations
are presented in the following table:
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(In thousands)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net revenues
$
-
$
11
$
269
$
54
$
13,064
Total expenses (excluding interest)
(224
)
(22
)
7
(349
)
38,808*
Income/(loss) from discontinued operations before income taxes
224
33
262
403
(25,744
)
Income tax (benefit)/expense
-
-
(121
)
138
(7,704
)
Income/(loss) from discontinued operations, net of taxes
$
224
$
33
$
383
$
265
$
(18,040
)
*Included within the table above for the year ended December 31, 2011 is
a goodwill and intangible impairment charge of approximately $14.3
million and a restructuring charge of $7.1 million.
Non-GAAP Financial Results
The Company has included in this press release certain financial metrics
that were not prepared in accordance with accounting principles
generally accepted in the United States. These non-GAAP financial
results, which include presentations of net revenues, compensation and
benefits, non-compensation expenses, income before income taxes from
continuing operations, provision for income taxes, net income from
continuing operations, compensation expense ratios, pre-tax margin,
return on average tangible equity and diluted earnings per share, are
presented as an additional aid in understanding and analyzing the
Company's financial results for the quarters ended December 31, 2012,
September 30, 2012, and December 31, 2011 and the years ended December
31, 2012 and 2011. Specifically, the Company believes that the non-GAAP
results provide useful information by excluding certain items that may
not be indicative of the Company's core operating results or business
outlook and also to emphasize information that the Company believes is
important in understanding the Company's performance. These non-GAAP
amounts exclude items reflected as adjustments within the
"Reconciliation of GAAP to Non-GAAP Income from Continuing Operations"
table below. The Company believes these non-GAAP results will allow for
a better evaluation of the operating performance of the Company's
business and facilitate a meaningful comparison of the Company's results
in the current period to those in prior periods and future periods.
References to these non-GAAP results should not be considered a
substitute for results that are presented in a manner consistent with
GAAP.
A limitation of utilizing these non-GAAP financial results is that the
GAAP accounting effects of these excluded items do in fact reflect the
underlying financial results of the Company's business, and these
effects should not be ignored in evaluating and analyzing its financial
results. Therefore, the Company believes that non-GAAP results should
always be considered together with their corresponding GAAP results.
Reconciliation of GAAP to Non-GAAP (Loss)/Income from Continuing
Operations
Three Months Ended December 31, 2012
Three Months Ended December 31, 2011
(Dollars in thousands, except per share amounts)
(Unaudited)
(Unaudited)
GAAP
Adjustments
Non-GAAP
GAAP
Adjustments
Non-GAAP
Net revenues:
$
50,876
$
-
$
50,876
$
61,240
$
-
$
61,240
Expenses (excluding interest):
Compensation and benefits
41,554
-
41,554
33,478
-
33,478
Non-compensation expenses
20,615
(703
)1
19,912
27,998
-
27,998
Total expenses (excluding interest)
62,169
(703
)
61,466
61,476
-
61,476
(Loss)/income from continuing operations before income taxes
(11,293
)
703
(10,590
)
(236
)
-
(236
)
Provision for income taxes
193
-
2
193
(2,001
)
-
(2,001
)
Net (loss)/income from continuing operations
$
(11,486
)
$
703
$
(10,783
)
$
1,765
$
-
$
1,765
(Loss)/earnings per share:
Diluted - continuing operations
$
(0.10
)
$
(0.09
)3
$
0.01
$
0.01
As a percentage of net revenues:
Compensation and benefits
81.7
%
81.7
%
54.7
%
54.7
%
(Loss)/income from continuing operations before income taxes
(22.2
%)
(20.8
%)
(0.0
%)
(0.0
%)
1
Represents legal, consulting and advisory fees incurred in
connection with our strategic review process.
2
No tax provision has been reflected as the Company has provided for
a valuation allowance on its deferred tax assets and has fully
utilized its available net operating loss carry-back capacity.
3
Non-GAAP net loss from continuing operations divided by 119.0
million dilutive shares for the three months ended December 31, 2012.
Reconciliation of GAAP to Non-GAAP (Loss)/Income from
Continuing Operations (Continued)
Three Months Ended December 31, 2012
Three Months Ended September 30, 2012
(Dollars in thousands, except per share amounts)
(Unaudited)
(Unaudited)
GAAP
Adjustments
Non-GAAP
GAAP
Adjustments
Non-GAAP
Net revenues:
$
50,876
$
-
$
50,876
$
43,330
$
-
$
43,330
Expenses (excluding interest):
Compensation and benefits
41,554
-
41,554
25,534
1,320
1
26,854
Non-compensation expenses
20,615
(703
)2
19,912
22,820
(1,285
)2
21,535
Total expenses (excluding interest)
62,169
(703
)
61,466
48,354
35
48,389
(Loss)/income from continuing operations before income taxes
(11,293
)
703
(10,590
)
(5,024
)
(35
)
(5,059
)
Provision for income taxes
193
-
3
193
(2,223
)
(15
)4
(2,238
)
Net (loss)/income from continuing operations
$
(11,486
)
$
703
$
(10,783
)
$
(2,801
)
$
(20
)
$
(2,821
)
Loss per share:
Diluted - continuing operations
$
(0.10
)
$
(0.09
)5
$
(0.02
)
$
(0.02
)
As a percentage of net revenues:
Compensation and benefits
81.7
%
81.7
%
58.9
%
62.0
%
Loss from continuing operations before income taxes
(22.2
%)
(20.8
%)
(11.6
%)
(11.7
%)
1
Represents the reversal of previously accrued severance expense (of
which $1.0 million is non-cash stock-based compensation).
2
Represents legal, consulting and advisory fees incurred in
connection with our strategic review process.
3
No tax provision has been reflected as the Company has provided for
a valuation allowance on its deferred tax assets and has fully
utilized its available net operating loss carry-back capacity.
4
The statutory income tax rate of 43.6% differs from the federal
statutory rate of 35% due to state and local taxes.
5
Non-GAAP net loss from continuing operations divided by 119.0
million dilutive shares for the three months ended December 31, 2012.
Reconciliation of GAAP to Non-GAAP (Loss)/Income from
Continuing Operations (Continued)
Year Ended December 31, 2012
Year Ended December 31, 2011
(Dollars in thousands, except per share amounts)
(Unaudited)
(Unaudited)
GAAP
Adjustments
Non-GAAP
GAAP
Adjustments
Non-GAAP
Net revenues:
$
203,595
$
-
$
203,595
$
261,172
$
(2,330
)1
$
258,842
Expenses (excluding interest):
Compensation and benefits
143,414
(330
)2
143,084
162,537
(3,632
)3
158,905
Non-compensation expenses
113,534
(24,084
)4
89,450
160,512
(80,842
)5
79,670
Total expenses (excluding interest)
256,948
(24,414
)
232,534
323,049
(84,474
)
238,575
(Loss)/income from continuing operations before income taxes
(53,353
)
24,414
(28,939
)
(61,877
)
82,144
20,267
Provision for income taxes
24,602
(29,144
)6
(4,542
)
2,207
5,928
7
8,135
Net (loss)/income from continuing operations
$
(77,955
)
$
53,558
$
(24,397
)
$
(64,084
)
$
76,216
$
12,132
Earnings per share:
Diluted - continuing operations
$
(0.66
)
$
(0.21
)8
$
(0.52
)
$
0.09
8
As a percentage of net revenues:
Compensation and benefits
70.4
%
70.3
%
62.2
%
61.4
%
(Loss)/income from continuing operations before income taxes
(26.2
%)
(14.2
%)
(23.7
%)
7.8
%
1
Represents the bargain purchase gain related to the ClearPoint
acquisition on January 3, 2011.
2
Represents severance expense recognized during the first quarter of
2012.
3
Includes (i) severance and stock-based compensation expense of
$1.9 million related to the investment banking realignment, which
resulted in the termination of 32 investment banking employees and
certain administrative positions, and (ii) $1.7 million due to the
resignation of the former interim CEO in the second quarter of
2011.
4
Represents the goodwill impairment charge recognized during the
second quarter of 2012 of $21.1 million, as well as $3.0 million of
legal, consulting and advisory fees incurred in connection with our
strategic review process.
5
Includes goodwill and intangible impairment charges of $80.2 million
and other non-compensation expenses of $0.6 million as a result of
the investment banking realignment.
6
Represents the change in the valuation allowance on the Company's
deferred tax assets.
7
The effective income tax rate of 7.2% differs from the federal
statutory rate of 35% primarily due to non-tax deductible goodwill,
the non-taxable bargain purchase gain and state and local taxes.
8
Non-GAAP net (loss)/income from continuing operations divided by
119.0 million and 129.5 million dilutive shares for the year ended
December 31, 2012 and 2011, respectively.
Reconciliation of GAAP to Non-GAAP Pre-Tax (Loss)/Income from
Continuing Operations - by Segment
Three Months Ended December 31, 2012
Other
(In thousands)
Revenues - GAAP
$
2,461
Expenses - GAAP
9,573
Adjustments
(703
)1
Expenses - non GAAP
8,870
Pre-tax loss from continuing operations - non GAAP
$
(6,409
)
Three Months Ended September 30, 2012
Credit Products
Other
(In thousands)
(in thousands)
Revenues - GAAP
$
18,804
Revenues - GAAP
$
1,185
Expenses - GAAP
14,865
Expenses - GAAP
11,181
Adjustments
1,320
2
Adjustments
(1,285
)1
Expenses - non GAAP
16,185
Expenses - non GAAP
9,896
Pre-tax income from continuing operations - non GAAP
$
2,619
Pre-tax loss from continuing operations - non GAAP
$
(8,711
)
1
Represents legal, consulting and advisory fees incurred in
connection with our strategic review process.
2
Represents the reversal of previously accrued severance expense (of
which $1.0 million is non-cash stock-based compensation).
Reconciliation of GAAP to Non-GAAP Pre-Tax (Loss)/Income from
Continuing Operations - by Segment (Continued)
Year Ended December 31, 2012
Credit Products
Other
(In thousands)
(In thousands)
Revenues - GAAP
$
74,432
Revenues - GAAP
$
7,709
Expenses - GAAP
70,692
Expenses - GAAP
63,614
Adjustments
(330
)1
Adjustments
(24,084
)2
Expenses - non GAAP
70,362
Expenses - non GAAP
39,530
Pre-tax income from continuing operations - non GAAP
$
4,070
Pre-tax loss from continuing operations - non GAAP
$
(31,821
)
Year Ended December 31, 2011
Investment Banking
Other
(In thousands)
(In thousands)
Revenues - GAAP
$
26,611
Revenues - GAAP
$
12,724
Adjustments
-
Adjustments
(2,330
)3
Revenues - non GAAP
26,611
Revenues - non GAAP
10,394
Expenses - GAAP
24,321
Expenses - GAAP
116,063
Adjustments
(2,294
)4
Adjustments
(82,180
)5
Expenses - non GAAP
22,027
Expenses - non GAAP
(33,883
)
Pre-tax loss from continuing operations - non GAAP
$
4,584
Pre-tax loss from continuing operations - non GAAP
$
(23,489
)
1
Represents severance expense recognized during the first quarter of
2012.
2
Represents the goodwill impairment charge recognized during the
three months ended June 30, 2012 of $21.1 million, as well as $3.0
million of legal, consulting and advisory fees incurred in
connection with our strategic review process.
3
Represents the bargain purchase gain related to the ClearPoint
acquisition on January 3, 2011.
4
Represents (i) severance and stock-based compensation expense of
$1.9 million related to the investment banking realignment, which
resulted in the termination of 32 investment banking employees and
certain administrative positions, and also includes (ii) other
non-compensation expenses of $0.4 million as a result of the
investment banking realignment.
5
Includes (i) goodwill and intangible impairment charges of $80.2
million related to the investment banking realignment, (ii) $1.7
million due to the resignation of the former interim CEO in the
second quarter of 2011 and (iii) other non-compensation expenses of
$0.2 million in connection with the company-wide strategic review
conducted in the third quarter of 2011.
Return on Tangible Equity - Annualized (Non-GAAP)
Presented below is information on the Company's annualized return on
average tangible stockholders' equity (Non-GAAP):
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(Dollars in thousands)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net (loss)/income from continuing operations
$
(10,783
)1
$
(2,821
)1
$
1,765
$
(24,397
)1
$
12,132
1
Plus: Amortization of intangibles, net of tax
96
71
70
278
1,540
Net (loss)/income from continuing operations, adjusted (non-GAAP)
(10,687
)
(2,750
)
1,835
(24,119
)
13,672
Net (loss)/income from continuing operations, adjusted (non-GAAP)
- annualized
$
(42,748
)
$
(11,000
)
$
7,340
$
(24,119
)
$
13,672
Average total stockholders' equity (GAAP)
$
184,679
$
190,333
$
262,135
$
215,356
$
314,313
Less: Average intangible assets
(5,228
)
(4,002
)
(25,469
)
(13,042
)
(79,938
)
Average tangible stockholders' equity (non-GAAP)
$
179,451
$
186,331
$
236,666
$
202,314
$
234,375
Annualized return on tangible equity (non-GAAP)
(23.8
%)
(5.9
%)
3.1
%
(11.9
%)
5.8
%
Return on Average Stockholders' Equity - Annualized (GAAP)
Presented below is information on the Company's annualized return on
average stockholders' equity, which is the most directly comparable GAAP
metric to the Non-GAAP metric above:
Three Months Ended
Years Ended
December 31,
September 30,
December 31,
December 31,
December 31,
(Dollars in thousands)
2012
2012
2011
2012
2011
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net (loss)/income from continuing operations
$
(11,486
)
$
(2,801
)
$
1,765
$
(77,955
)
$
(64,084
)
Net (loss)/income from continuing operations - annualized
$
(45,944
)
$
(11,204
)
$
7,060
$
NM2
$
NM2
Average total stockholders' equity
$
184,679
$
190,333
$
262,135
$
215,356
$
314,313
Annualized return on stockholders' equity
(24.9
%)
(5.9
%)
2.7
%
NM2
NM2
1
Designates non-GAAP financial results. A reconciliation of the
Company's GAAP results to non-GAAP financial results is set forth
above under the caption "Reconciliation of GAAP to Non-GAAP Income
from Continuing Operations."
2
Not meaningful
Summary Results of Operations
Three Months Ended
Years Ended
(In thousands, except for per share amounts)
December 31,
September 30,
December 31,
December 31,
December 31,
2012
2012
2011
2012
2011
Revenues:
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Principal transactions
$
7,908
$
15,652
$
17,515
$
52,771
$
89,108
Commissions
18,240
17,830
20,581
71,418
71,347
Investment banking
12,765
1,996
3,345
30,553
33,069
Investment gains, net
1,077
163
457
1,233
2,996
Interest income
11,165
6,879
19,993
48,796
66,194
Gain from bargain purchase - ClearPoint Funding, Inc. acquisition
-
-
-
-
2,330
Fees and other
2,288
2,959
2,965
11,651
8,041
Total revenues
53,443
45,479
64,856
216,422
273,085
Interest expense
2,567
2,149
3,616
12,827
11,913
Net revenues
50,876
43,330
61,240
203,595
261,172
Non-interest expenses
Compensation and benefits
41,554
25,534
33,478
143,414
162,537
Impairment of goodwill and intangible assets
-
-
-
21,096
80,244
Clearing, settlement and brokerage
9,128
9,461
16,185
40,281
35,203
Communications and data processing
3,107
3,224
3,363
12,806
13,471
Professional fees
2,676
4,282
1,906
15,504
8,135
Occupancy, depreciation and amortization
2,272
2,277
2,344
8,919
8,455
Business development
897
823
1,137
3,719
4,620
Other
2,535
2,753
3,063
11,209
10,384
Total non-interest expenses
62,169
48,354
61,476
256,948
323,049
Loss from continuing operations before income taxes and discontinued
operations
(11,293)
(5,024)
(236)
(53,353)
(61,877)
Income tax expense/(benefit)
193
(2,223)
(2,001)
24,602
2,207
(Loss)/income from continuing operations
(11,486)
(2,801)
1,765
(77,955)
(64,084)
Income/(loss) from discontinued operations, net of taxes
224
33
383
265
(18,040)
Net (loss)/income
$
(11,262)
$
(2,768)
$
2,148
$
(77,690)
$
(82,124)
Earnings per share:
Basic (loss)/income per share
Continuing operations
$
(0.10)
$
(0.02)
$
0.01
$
(0.66)
$
(0.52)
Discontinued operations
-
-
-
-
(0.15)
Net (loss)/income per share
$
(0.10)
$
(0.02)
$
0.02
$
(0.65)
$
(0.67)
Diluted (loss)/income per share
Continuing operations
$
(0.10)
$
(0.02)
$
0.01
$
(0.66)
$
(0.52)
Discontinued operations
-
-
-
-
(0.15)
Net (loss)/income per share
$
(0.10)
$
(0.02)
$
0.02
$
(0.65)
$
(0.67)
Weighted average number of shares of common stock:
Basic
119,046
118,699
122,647
118,977
123,439
Diluted
119,046
118,699
127,696
118,977
123,439
Consolidated Statements of Financial Condition (Unaudited)
(In thousands, except for share and per share amounts)
December 31,
September 30,
December 31,
2012
2012
2011
Assets:
Cash and cash equivalents
$
44,868
$
28,482
$
36,672
Cash and securities segregated for regulatory and other purposes
13,000
4,000
9,612
Securities purchased under agreements to resell
-
132,608
1,523,227
Receivables from
Brokers, dealers and clearing organizations
12,824
125,008
58,776
Related parties
1,474
1,372
1,337
Others
12,563
10,029
16,161
Financial instruments owned, at fair value
1,096,181
1,100,731
1,554,660
Investments
20,478
19,253
18,310
Office equipment and leasehold improvements, net
5,311
5,726
6,735
Goodwill
1,212
-
21,096
Intangible assets
5,303
3,940
4,311
Income taxes receivable
7,394
4,807
12,102
Deferred tax assets, net
-
2,654
30,766
Other assets
9,030
9,106
9,791
Total Assets
$
1,229,638
$
1,447,716
$
3,303,556
Liabilities and Stockholders' Equity
Liabilities
Payables to:
Brokers, dealers and clearing organizations
$
638,009
$
791,172
$
1,108,664
Related parties
2,944
594
4,939
Others
2,251
2,804
3,243
Securities sold under agreements to repurchase
159,386
103,562
1,478,081
Securities sold, but not yet purchased, at fair value
132,730
262,274
184,996
Secured borrowings
64,908
66,575
213,611
Accrued compensation
34,199
17,203
26,274
Accounts payable and accrued expenses
9,866
10,750
18,223
Income taxes payable
3,755
3,804
3,979
Deferred tax liabilities
-
-
1,622
Subordinated debt
595
595
801
Total Liabilities
1,048,643
1,259,333
3,044,433
Stockholders' Equity
Common stock ($.01 par value; authorized 200,000,000 shares)
1,337
1,337
1,337
Additional paid-in capital
453,938
451,850
463,497
Deferred compensation
124
124
161
Accumulated deficit
(263,577
)
(254,172
)
(185,887
)
Treasury stock, at cost
(10,827
)
(10,756
)
(19,985
)
Total Stockholders' Equity
180,995
188,383
259,123
Total Liabilities and Stockholders' Equity
$
1,229,638
$
1,447,716
$
3,303,556
Common stock (in shares)
Shares issued:
133,769,219
133,769,219
133,714,786
Shares outstanding:
124,440,655
124,570,033
120,883,601
Treasury stock (in shares):
9,328,564
9,199,186
12,831,185
Conference Call Information
The Company will hold a conference call today, February 15, 2013, at
8:30 A.M. (EST). This event can be accessed on the Investor Relations
portion of the Gleacher & Company 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 888.680.0869 (domestic) or 617.213.4854 (international),
participant passcode 28016360, or request the Gleacher & Company
earnings call.
Pre-registration is available at any time prior to and during the call,
which provides immediate entry into the call. Pre-registration can be
accessed at the following website:
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 (domestic) or 617.801.6888 (international), participant
passcode 55469646.
About Gleacher & Company
Gleacher & Company, Inc. (Nasdaq: GLCH) is an independent investment
bank that provides corporate and institutional clients with strategic
and financial advisory services, including merger and acquisition,
restructuring, recapitalization, and strategic alternative analysis, as
well as capital raising, research based investment analysis, and
securities brokerage services, and, through a subsidiary, engages in
residential mortgage lending. 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 or plans regarding future events, many of which are inherently
uncertain and outside of the Company's control. The Company often, but
not always, identifies forward-looking statements by using words or
phrases such as "anticipate," "estimate," "plan," "project," "target,"
"expect," "continuing," "ongoing," "believe" and "intend." The Company's
forward-looking statements are based on facts as the Company understands
them at the time the Company makes any such statement as well as
estimates and judgments based on these facts. The Company's
forward-looking statements may turn out to be inaccurate for a variety
of reasons, many of which are outside of its control. Factors that could
render the Company's forward-looking statements subsequently inaccurate
include the conditions of the securities markets, generally, and demand
for the Company's services within those markets, the risk of further
credit rating downgrades of the U.S. government by major credit rating
agencies, the impact of international and domestic sovereign debt
uncertainties, the possibilities of localized or global economic
recession and other risks and factors identified from time to time in
the Company's filings with the Securities and Exchange Commission.
Moreover, the Company's previously disclosed strategic plan, which is
designed to improve its operating results, is still being implemented.
This plan may not be successful. 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.
Investors Gleacher & Company, Inc. Thomas J.
Hughes, 212-273-7100 Chief Executive Officer or Media Joele
Frank, Wilkinson Brimmer Katcher Andrew Siegel / Nick Lamplough,
212-355-4449
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