Attached files
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| 8-K - FORM 8-K - PENSON WORLDWIDE INC | d365181d8k.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On May 31 2012, Penson Financial Services, Inc. (“PFSI”), the U.S. broker-dealer subsidiary of Penson Worldwide, Inc. (the “Company”) completed the sale of certain assets of its futures clearing business to Knight Execution & Clearing Services LLC (“Knight”) for an initial purchase price of $5.0 million in cash, which is subject to certain adjustments and earnout provisions. Additionally, on June 5, 2012, PFSI completed the transfer to Apex Clearing Corporation (“Apex Clearing”) of certain assets and liabilities relating to its securities clearing business that resulted in the transfer of approximately $135.9 million of net assets in exchange for an approximately 94% equity interest in Apex Clearing Holdings LLC (“Apex Holdings”), the parent company of Apex Clearing.
The following pro forma condensed consolidated financial information has been developed by applying pro forma adjustments to the historical financial statements of the Company. The following unaudited pro forma condensed consolidated balance sheet data as of March 31, 2012 of the Company has been prepared to give effect to the transactions as if the sale of certain assets of PFSI’s futures division and the transfer of certain assets and liabilities of its securities clearing business had occurred on March 31, 2012. The following unaudited pro forma condensed consolidated statements of operations of the Company for the quarter ended March 31, 2012 and year ended December 31, 2011 have been prepared to give effect to the transactions as if the sale of certain assets of PFSI’s futures division and the transfer of certain assets and liabilities of its securities clearing business had occurred on January 1, 2011.
The unaudited pro forma condensed consolidated financial information includes pro forma adjustments that are factually supportable and directly attributable to the transactions. In addition, with respect to the unaudited pro forma condensed consolidated statements of operations, only those unaudited pro forma adjustments that are expected to have a continuing impact on the consolidated results have been included. The pro forma adjustments do not include the effects of additional transactions that may occur subsequent to the sale of certain assets of PFSI’s futures division and the transfer of certain assets and liabilities of the securities clearing business.
The unaudited pro forma adjustments are based on available preliminary information and certain assumptions that the Company believes are reasonable under the circumstances. The Company is still evaluating the impact of any adjustments and earnout provisions related to the sale of certain assets of its futures clearing business and therefore cannot yet determine the gain or loss that will be recognized. Additionally, the Company is still evaluating the accounting treatment of the Apex Holdings transaction and therefore the full impact of the transaction is not reflected. As part of the Apex Holdings transaction, the Company’s promissory note to Broadridge in the original amount of approximately $20.5 million was terminated and discharged without payment. The effect of the termination of this promissory note has not been reflected in the pro forma adjustments as the Company is still evaluating the accounting treatment of the Apex Holdings transaction.
The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The following unaudited pro forma condensed consolidated financial information is not necessarily indicative of the results that might have occurred had the sale of the assets taken place on March 31, 2012 for balance sheet purposes, or on January 1, 2011 for statement of operations purposes, and is not intended to be a projection of future results. All pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma condensed consolidated financial information.
The Unaudited pro forma condensed consolidated financial information should be read in conjunction with the following documents (i) The Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and (ii) The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
Penson Worldwide, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition
As of March 31, 2012
(In thousands)
| Historical Penson Worldwide, Inc. |
Pro Forma Adjustments |
Pro Forma Consolidated |
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| ASSETS | ||||||||||||
| Cash and cash equivalents |
$ | 22,599 | $ | 62,158 | (a)(b) | $ | 84,757 | |||||
| Cash and securities — segregated under federal and other regulations |
2,719,217 | (2,704,217 | )(b) | 15,000 | ||||||||
| Receivable from broker-dealers and clearing organizations |
395,381 | (395,381 | )(b) | — | ||||||||
| Receivable from customers, net |
1,012,107 | (995,514 | )(b) | 16,593 | ||||||||
| Receivable from correspondents |
82,108 | (76,061 | )(b) | 6,047 | ||||||||
| Securities borrowed |
363,104 | (363,104 | )(b) | — | ||||||||
| Securities owned, at fair value |
32,201 | (506 | )(b) | 31,695 | ||||||||
| Deposits with clearing organizations |
555,629 | (537,441 | )(b) | 18,188 | ||||||||
| Property and equipment, net |
20,246 | (2,996 | )(b) | 17,250 | ||||||||
| Investment in Apex Clearing Holdings LLC |
— | 135,872 | (c) | 135,872 | ||||||||
| Other assets |
76,318 | (43,790 | )(b) | 32,528 | ||||||||
| Assets held-for-sale |
1,683,918 | — | 1,683,918 | |||||||||
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| Total assets |
$ | 6,962,828 | $ | (4,920,980 | ) | $ | 2,041,848 | |||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Payable to broker-dealers and clearing organizations |
$ | 354,847 | $ | (345,955 | )(b) | $ | 8,892 | |||||
| Payable to customers |
3,806,637 | (3,806,637 | )(b) | — | ||||||||
| Payable to correspondents |
129,546 | (92,047 | )(b) | 37,499 | ||||||||
| Short-term bank loans |
88,500 | (88,500 | )(b) | — | ||||||||
| Notes payable |
265,454 | — | 265,454 | |||||||||
| Securities loaned |
577,353 | (577,353 | )(b) | — | ||||||||
| Securities sold, not yet purchased, at fair value |
571 | (115 | )(b) | 456 | ||||||||
| Accounts payable, accrued and other liabilities |
74,955 | (11,200 | )(b) | 63,755 | ||||||||
| Liabilities associated with assets held-for-sale |
1,636,415 | — | 1,636,415 | |||||||||
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| Total liabilities |
6,934,278 | (4,921,807 | ) | 2,012,471 | ||||||||
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| Commitments and contingencies |
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| STOCKHOLDERS’ EQUITY | ||||||||||||
| Preferred stock |
— | — | ||||||||||
| Common stock |
328 | 328 | ||||||||||
| Additional paid-in capital |
282,823 | 282,823 | ||||||||||
| Accumulated other comprehensive income |
4,597 | 4,597 | ||||||||||
| Accumulated deficit |
(201,349 | ) | 827 | (b) | (200,522 | ) | ||||||
| Treasury stock |
(57,849 | ) | (57,849 | ) | ||||||||
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| Total stockholders’ equity |
28,550 | 827 | 29,377 | |||||||||
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| Total liabilities and stockholders’ equity |
$ | 6,962,828 | $ | (4,920,980 | ) | $ | 2,041,848 | |||||
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Penson Worldwide, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Quarter Ended March 31, 2012
(In thousands, except per share amounts)
| Historical Penson Worldwide, Inc. |
Pro Forma Adjustments |
Pro Forma Consolidated |
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| Revenues |
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| Clearing and commission fees |
$ | 19,223 | $ | (19,223 | )(d) | $ | — | |||||
| Technology |
5,252 | (1,713 | )(d) | 3,539 | ||||||||
| Interest, gross |
12,271 | (12,215 | )(d) | 56 | ||||||||
| Other |
(2,985 | ) | (6,514 | )(d) | (9,499 | ) | ||||||
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| Total revenues |
33,761 | (39,665 | ) | (5,904 | ) | |||||||
| Interest expense from securities operations |
4,481 | (4,481 | )(d) | — | ||||||||
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| Net revenues |
29,280 | (35,184 | ) | (5,904 | ) | |||||||
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| Expenses |
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| Employee compensation and benefits |
19,996 | (14,345 | )(d) | 5,651 | ||||||||
| Floor brokerage, exchange and clearance fees |
7,966 | (7,885 | )(d) | 81 | ||||||||
| Communications and data processing |
16,893 | (15,304 | )(d) | 1,589 | ||||||||
| Occupancy and equipment |
4,590 | (3,715 | )(d) | 875 | ||||||||
| Bad debt expense |
2,692 | (2,362 | )(d) | 330 | ||||||||
| Other expenses |
10,595 | (5,773 | )(d) | 4,822 | ||||||||
| Interest expense on long-term debt |
9,538 | — | (d) | 9,538 | ||||||||
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| 72,270 | (49,384 | ) | 22,886 | |||||||||
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| Loss from continuing operations before income taxes |
(42,990 | ) | 14,200 | (28,790 | ) | |||||||
| Income tax benefit |
97 | (28 | )(d) | 69 | ||||||||
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| Loss from continuing operations |
$ | (43,087 | ) | $ | 14,228 | $ | (28,859 | ) | ||||
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| Loss per share from continuing operations- basis and diluted |
$ | (1.54 | ) | $ | (1.03 | ) | ||||||
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Penson Worldwide, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2011
(In thousands, except per share amounts)
| Historical Penson Worldwide, Inc. |
Pro Forma Adjustments |
Pro Forma Consolidated |
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| Revenues |
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| Clearing and commission fees |
$ | 104,359 | $ | (104,359) | (d) | $ | — | |||||
| Technology |
22,055 | (7,857) | (d) | 14,198 | ||||||||
| Interest, gross |
81,541 | (81,523) | (d) | 18 | ||||||||
| Other |
30,853 | (30,853) | (d) | — | ||||||||
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| Total revenues |
238,808 | (224,592) | 14,216 | |||||||||
| Interest expense from securities operations |
21,476 | (21,476) | (d) | — | ||||||||
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| Net revenues |
217,332 | (203,116) | 14,216 | |||||||||
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| Expenses |
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| Employee compensation and benefits |
75,907 | (48,892) | (d) | 27,015 | ||||||||
| Floor brokerage, exchange and clearance fees |
35,765 | (35,653) | (d) | 112 | ||||||||
| Communications and data processing |
60,450 | (53,847) | (d) | 6,603 | ||||||||
| Occupancy and equipment |
22,917 | (17,495) | (d) | 5,422 | ||||||||
| Bad debt expense |
50,640 | (4,830) | (d) | 45,810 | ||||||||
| Goodwill and intangible asset impairment |
137,421 | (137,421) | (d) | — | ||||||||
| Other expenses |
26,421 | (18,522) | (d) | 7,899 | ||||||||
| Interest expense on long-term debt |
40,942 | — | (d) | 40,942 | ||||||||
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| 450,463 | (316,660) | 133,803 | ||||||||||
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| Loss from continuing operations before income taxes |
(233,131) | 113,544 | (119,587) | |||||||||
| Income tax expense (benefit) |
(10,064) | 4,882 | (d) | (5,182) | ||||||||
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| Loss from continuing operations |
$ | (223,067) | $ | 108,662 | $ | (114,405) | ||||||
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| Loss per share from continuing operations- basis and diluted |
$ | (7.92) | $ | (4.06) | ||||||||
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Penson Worldwide, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Historical Penson Worldwide, Inc.
These amounts represent our condensed consolidated historical statement of financial condition and statement of operations information. Amounts for the quarter ended March 31, 2012 were derived from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. Amounts for the year ended December 31, 2011 were derived from our 2011 Annual Report on Form 10-K.
Pro Forma Adjustments
The pro forma adjustments reflect the sale of certain assets of PFSI’s futures division. Under the terms of the Asset Purchase Agreement, Knight paid to the Company $5.0 million in cash, subject to certain adjustments and earnout provisions.
Pro Forma Adjustments
(a) Amounts represent the balance sheet effects of the sale of certain assets of PFSI’s futures division and the transfer of certain assets and liabilities of the securities clearing business.
(b) Amount represents cash proceeds of $5.0 million received from Knight and the transfer of certain assets and liabilities of the securities clearing business.
(c) Amount represents equity interest in Apex Holdings. The investment in Apex Holdings includes the estimated fair value of the clearing contracts that were contributed in the transaction.
(d) Amounts represent the income statement effects of the sale of certain assets of PFSI’s futures division and the transfer of certain assets and liabilities of the securities clearing business . The Company’s pro forma income taxes for each period presented were calculated excluding income tax impacts associated with PFSI’s futures division.