SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
OR
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 001-15251
LABRANCHE & CO INC.
(Exact name of registrant as specified in its charter)
| Delaware | 13-4064735 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
One Exchange Plaza, New York, New York 10006
(Address of principal executive offices)
(212) 425-1144
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of the registrant’s common stock outstanding as of November 9, 2004 was 60,038,190.
| PART I |
FINANCIAL INFORMATION | 3 | ||
| Item 1. |
Financial Statements | 3 | ||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 37 | ||
| Item 4. |
Controls and Procedures | 43 | ||
| PART II |
OTHER INFORMATION | 44 | ||
| 47 | ||||
-2-
| Item 1. | Financial Statements. |
LaBRANCHE & CO INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000’s omitted except per share data)
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||
| REVENUES: |
||||||||||||||
| Net gain on principal transactions |
$ | 38,997 | $ | 45,019 | $ | 131,740 | $ | 157,013 | ||||||
| Commissions |
22,064 | 23,371 | 71,311 | 70,746 | ||||||||||
| Net realized and unrealized gain on non-marketable investments |
178 | 472 | 24,527 | 765 | ||||||||||
| Other |
3,421 | 2,042 | 7,697 | 6,518 | ||||||||||
| Total revenues |
64,660 | 70,904 | 235,275 | 235,042 | ||||||||||
| EXPENSES: |
||||||||||||||
| Employee compensation and related benefits |
21,985 | 25,324 | 72,421 | 76,239 | ||||||||||
| Interest |
16,006 | 12,113 | 47,700 | 36,041 | ||||||||||
| Exchange, clearing and brokerage fees |
10,101 | 9,260 | 28,684 | 30,858 | ||||||||||
| Lease of exchange memberships |
3,804 | 6,118 | 11,902 | 18,773 | ||||||||||
| Depreciation and amortization of intangibles |
3,057 | 3,128 | 9,162 | 9,717 | ||||||||||
| Goodwill impairment |
37,600 | — | 37,600 | — | ||||||||||
| Exchange memberships impairment |
— | — | 18,327 | — | ||||||||||
| Debt repurchase premium |
— | — | 49,028 | — | ||||||||||
| Other |
9,941 | 8,665 | 29,927 | 23,812 | ||||||||||
| Total expenses |
102,494 | 64,608 | 304,751 | 195,440 | ||||||||||
| Income (loss) before minority interest and provision (benefit) for income taxes |
(37,834 | ) | 6,296 | (69,476 | ) | 39,602 | ||||||||
| MINORITY INTEREST |
161 | 167 | 530 | 294 | ||||||||||
| Income (loss) before provision (benefit) for income taxes |
(37,995 | ) | 6,129 | (70,006 | ) | 39,308 | ||||||||
| PROVISION (BENEFIT) FOR INCOME TAXES |
(1,533 | ) | 2,917 | (16,958 | ) | 18,979 | ||||||||
| Net income (loss) |
(36,462 | ) | 3,212 | (53,048 | ) | 20,329 | ||||||||
| Preferred dividends and discount accretion |
142 | 950 | 2,254 | 3,059 | ||||||||||
| Net income (loss) applicable to common stockholders |
$ | (36,604 | ) | $ | 2,262 | $ | (55,302 | ) | $ | 17,270 | ||||
| Weighted-average common shares outstanding: |
||||||||||||||
| Basic |
59,926 | 59,649 | 59,852 | 59,557 | ||||||||||
| Diluted |
59,926 | 60,171 | 59,852 | 60,134 | ||||||||||
| Earnings (loss) per share: |
||||||||||||||
| Basic |
$ | (0.61 | ) | $ | 0.04 | $ | (0.92 | ) | $ | 0.29 | ||||
| Diluted |
$ | (0.61 | ) | $ | 0.04 | $ | (0.92 | ) | $ | 0.29 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
-3-
LaBRANCHE & CO INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(000’s omitted except per share data)
| As of |
||||||||
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 437,650 | $ | 491,885 | ||||
| Cash and securities segregated under federal regulations |
4,605 | 3,959 | ||||||
| Securities purchased under agreements to resell |
72,000 | 13,000 | ||||||
| Receivable from brokers, dealers and clearing organizations |
147,811 | 142,639 | ||||||
| Receivable from customers |
6,568 | 3,434 | ||||||
| Securities owned, at market value: |
||||||||
| Corporate equities |
491,660 | 265,568 | ||||||
| Options |
109,141 | 73,694 | ||||||
| Exchange-traded funds |
172,989 | 102,626 | ||||||
| U.S. Government obligations |
250 | — | ||||||
| Commissions receivable |
4,903 | 4,613 | ||||||
| Exchange memberships contributed for use, at market value |
10,845 | 15,000 | ||||||
| Exchange memberships owned, at adjusted cost (market value of $47,910 and $58,870, respectively) |
59,332 | 77,319 | ||||||
| Office equipment and leasehold improvements, at cost, less accumulated depreciation and amortization of $10,188 and $8,931, respectively |
3,724 | 4,659 | ||||||
| Intangible assets, net of accumulated amortization: |
||||||||
| Specialist stock lists |
363,798 | 371,580 | ||||||
| Trade name |
25,011 | 25,011 | ||||||
| Goodwill |
251,993 | 289,593 | ||||||
| Income taxes receivable |
17,047 | — | ||||||
| Other assets |
43,149 | 75,022 | ||||||
| Total assets |
$ | 2,222,476 | $ | 1,959,602 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: |
||||||||
| Payable to brokers and dealers |
$ | 77,762 | $ | 45,172 | ||||
| Payable to customers |
4,627 | 9,010 | ||||||
| Securities sold, but not yet purchased, at market value: |
||||||||
| Corporate equities |
360,033 | 232,942 | ||||||
| Options |
84,578 | 67,079 | ||||||
| Exchange-traded funds |
261,842 | 115,140 | ||||||
| U.S. Government obligations |
22,450 | — | ||||||
| Accrued compensation |
27,121 | 42,833 | ||||||
| Accounts payable and other accrued expenses |
31,232 | 99,844 | ||||||
| Income taxes payable |
— | 8,588 | ||||||
| Deferred tax liabilities |
158,152 | 172,846 | ||||||
| Short term debt |
2,000 | 101,971 | ||||||
| Long term debt |
481,538 | 255,606 | ||||||
| Subordinated liabilities: |
||||||||
| Exchange memberships contributed for use, at market value |
10,845 | 15,000 | ||||||
| Other subordinated indebtedness |
17,285 | 20,285 | ||||||
| Total liabilities |
1,539,465 | 1,186,316 | ||||||
| Minority interest |
530 | 322 | ||||||
| Commitments and contingencies |
||||||||
| Preferred stock, Series A, $.01 par value, liquidation value of $1,000 per share; 10,000,000 shares authorized; -0- and 39,186 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
— | 38,317 | ||||||
| Common stock, $.01 par value, 200,000,000 shares authorized; 60,038,190 and 59,791,036 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
600 | 598 | ||||||
| Additional paid-in capital |
685,808 | 682,816 | ||||||
| Retained earnings (accumulated deficit) |
(3,927 | ) | 51,374 | |||||
| Unearned compensation |
— | (141 | ) | |||||
| Total stockholders’ equity |
682,481 | 772,964 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,222,476 | $ | 1,959,602 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
LaBRANCHE & CO INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000’s omitted)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | (53,048 | ) | $ | 20,329 | |||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization of intangibles |
9,162 | 9,717 | ||||||
| Amortization of debt issuance costs and bond discount |
6,977 | 1,596 | ||||||
| Minority interest in consolidated subsidiary |
530 | 294 | ||||||
| Compensation expense related to stock-based compensation |
3,161 | 2,611 | ||||||
| Deferred tax provision |
12,840 | 4,510 | ||||||
| Exchange memberships impairment |
18,327 | — | ||||||
| Goodwill impairment |
37,600 | — | ||||||
| Acceleration of preferred stock discount accretion |
496 | 918 | ||||||
| Tax benefit related to employee stock transactions |
— | 433 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Cash and securities segregated under federal regulations |
(646 | ) | 8,950 | |||||
| Securities purchased under agreements to resell |
(59,000 | ) | 15,300 | |||||
| Receivable from brokers, dealers and clearing organizations |
(5,172 | ) | (75,676 | ) | ||||
| Receivable from customers |
(3,134 | ) | 8,068 | |||||
| U.S. Government obligations |
— | 395,840 | ||||||
| Securities owned, at market value: |
||||||||
| Corporate equities |
(226,092 | ) | (146,742 | ) | ||||
| Options |
(35,447 | ) | (3,321 | ) | ||||
| Exchange-traded funds |
(70,363 | ) | (128,069 | ) | ||||