NYSE - OPY NEW YORK and TORONTO, Oct. 31 /PRNewswire-FirstCall/ --
Expressed in thousands of U.S. dollars, except share and per share
Three Months ended Nine Months ended amounts September 30,
September 30,
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(unaudited) 2008 2007 2008 2007 Revenue $222,187 $215,173 $710,303
$656,039 Expenses $225,898 $188,152 $738,617 $572,950 Profit (loss)
before taxes $(3,711) $27,021 $(28,314) $83,089 Net profit (loss)
$(2,477) $16,274 $(16,945) $48,830 Basic earnings (loss) per share
$(0.18) $1.23 $(1.26) $3.70 Diluted earnings (loss) per share
$(0.18) $1.19 $(1.26) $3.61 Weighted average number of shares
outstanding 13,476,365 13,264,228 13,484,645 13,197,999 Book value
per share $32.87 $31.33 Actual number of Class A non-voting and
Class B shares outstanding 13,172,669 13,274,380 The Company's
financial results are presented using accounting principles
generally accepted in the U.S.A. Oppenheimer Holdings Inc. reported
a net loss of $2.5 million or $0.18 per share for the third quarter
of 2008, compared to net profit of $16.3 million or $1.23 per
share in the third quarter of 2007. Revenue for the third quarter
of 2008 was $222.2 million, compared to revenue of
$215.2 million in the third quarter of 2007. The net loss for
the nine months ended September 30, 2008 was $16.9 million or
$1.26 per share compared to net profit of $48.8 million or $3.70
per share for the nine months ended September 30, 2007. Revenue for
the nine months ended September 30, 2008 was $710.3 million, an
increase of 8% compared to revenue of $656.0 million for the same
period in 2007. The Company's results for the three and nine months
ended September 30, 2008 were impacted by the current economic
environment, as well as by its acquisition on January 14, 2008 of a
major part of CIBC World Markets' U.S. Capital Markets Businesses.
The acquired businesses including operations in the United Kingdom
and Israel along with the Company's existing Investment Banking,
Corporate Syndicate, Institutional Sales and Trading and Equities
Research divisions were combined to form the Oppenheimer Investment
Banking Division (OIB Division). Albert (Bud) Lowenthal, Chairman
and CEO, commented on the results for the quarter: "The investment
environment during the third quarter was as hostile to investors as
anything seen in decades. The credit markets around the world
ceased to function as banks became fearful of doing business with
some of the largest financial institutions in the world. In
mid-September, Lehman Brothers filed the largest bankruptcy in
history. In the aftermath, governments around the world pledged
trillions of dollars to financial institutions for the purchase of
tarnished assets, and to the guarantee of debt and performance on
behalf of their domestic institutions. During the quarter, there
was a dramatic decline in accessing financial leverage by investors
and institutions, as they sought but could not obtain additional
credit or even retain credit lines previously obtained.
Oppenheimer's results, although not affected by asset write-downs,
continued to be impacted by costs associated with the acquisition
in January. Commitments made to high levels of compensation
associated with acquired employees coupled with transition expenses
resulted in another period of disappointing results. While each
quarter in fiscal 2008 has incurred sequentially lower expenses
than the previous period, revenues have dropped even faster within
the acquired businesses. Coupled with this was the inability to
earn principal trading profits due to dysfunctional markets, and a
decline in private client revenues resulting from both seasonal
factors and more importantly, broadly declining debt and equity
markets. While Oppenheimer was able to maintain good control of its
risk profile and avoid write-downs of proprietary positions, we
nonetheless observed a lack of liquidity across broad markets
including municipal bonds, convertible debt and high yield
securities. At the same time, yields on broad classes of assets
showed historic increases as investors sold what they could,
instead of what they might choose to sell, as a source of funds to
reduce incurred debt. Leverage finance largely shut down during the
period and investment banking revenues declined substantially from
the level of the combined businesses during the prior year. While
we are extremely disappointed with our performance during the
quarter, and for the fiscal year as a whole, we can point with
pride to the ability of our firm to continue to attract highly
capable new employees and new clients who view Oppenheimer and its
stable and easily understood business to be a solid choice for the
years ahead. Our Private Client Business continues to be quite
healthy with strong financial advisor retention, and the attraction
of experienced new financial advisors as well as new clients to our
enhanced platform. Although we anticipate continued difficult
conditions ahead for the next few quarters, we can see beyond to a
bright future. As previously stated, we continue to believe that
the long-term benefit of our January acquisition will be
substantial; however we do not foresee a quick return to
profitability for the enlarged Capital Markets business segment,
given the present state of the markets and of the U.S. economy.
Oppenheimer's liquidity remains strong, allowing us to repurchase
our shares during the quarter. We do not anticipate a need for
additional capital in the near future, either through the issuance
of debt or equity. We will continue to manage our business for the
long term with a close control of costs and risks within our
business." The three and nine months ended September 30, 2008 were
marked by one of the most difficult economic environments in over
50 years. It combined periods of high inflation with an extremely
volatile market. Investors focused on the seized credit markets,
high oil and food prices, a weak U.S. dollar (which suddenly
strengthened against virtually all other currencies as the quarter
came to a close), and the job losses that are associated with a
recessionary environment as well as widespread asset write-downs by
financial institutions. Intervention by the U.S. Treasury and the
U.S. Federal Reserve in the credit markets through their support of
commercial and investment banks as well as Fannie Mae and Freddie
Mac will hopefully provide the needed liquidity to the capital
markets and the economic system as a whole. Revenues for the OIB
Division, approximately $50.3 million and $175.3 million,
respectively, for the three and nine months ended
September 30, 2008, were substantially less (approximately 65%
and 58%, respectively) than the comparable fiscal period last year
on a pro-forma combined basis, due to significantly reduced
investment banking activity. As previously reported, the results of
the OIB Division will be tracked for the five years following the
acquisition for purposes of determining payments that may be due to
CIBC as part of the purchase price. Commissions for the three and
nine months ended September 30, 2008 increased 36% and 37%,
respectively, compared to the same periods in 2007 primarily as a
result of the acquired businesses. For the three and nine months
ended September 30, 2008, 35% and 33%, respectively, of total
commissions were generated by the OIB Division's institutional
equity business. Proprietary trading results decreased 107% and
13%, respectively, for the three and nine months ended September
30, 2008 compared to the same periods in 2007, primarily due to
losses in convertible bond arbitrage arising from extremely
difficult market conditions in the third quarter of 2008. Advisory
fees decreased 7% for the three months ended September 30, 2008 and
increased 2% for the nine months ended September 30, 2008 compared
to the same periods in 2007. Declining market values of client
assets negatively impacted fee levels in the third quarter of 2008.
Assets under management by the asset management group decreased 15%
to $14.8 billion at September 30, 2008 compared to $17.4 billion at
September 30, 2007, due to declining market values despite the fact
that the number of client accounts under management increased 9% at
September 30, 2008 compared to September 30, 2007. Included in
assets under management at September 30, 2008 were approximately
$11.9 billion in assets under the Company's fee-based programs
($14.3 billion at September 30, 2007). Interest income
declined with lower shortterm interest rates in the three and nine
months ended September 30, 2008 compared to the same periods in
2007. Net interest revenue decreased by 57% and 58%, respectively,
in the three and nine months ended September 30, 2008 compared to
the same periods in 2007. The Company's expenses for the three and
nine months ended September 30, 2008 increased 20% and 29%,
respectively, compared to the same periods of 2007, primarily due
to the effect of the Company's recent acquisition. Acquisition
related expenses included accrued expenses of $11.6 million and
$39.3 million, respectively, for the three and nine months ended
September 30, 2008 for future payments of deferred incentive
compensation to former CIBC employees for awards made by CIBC prior
to the January 14, 2008 acquisition by the Company. Such payments
will decline to $7.0 million in the fourth quarter of 2008 and
continue to significantly decline in subsequent periods. Transition
service charges of $7.3 million and $32.3 million, respectively, in
the three and nine months ended September 30, 2008 to be paid to
CIBC for interim support of the acquired businesses substantially
terminated upon the transition of those businesses to Oppenheimer's
platform, in mid-August 2008. This will result in substantially
reduced costs going forward (with estimated savings of $2 million
per month). The transition of the UK business to the Company's
platform in the fourth quarter will also reduce expenses going
forward and permit the full integration of the acquired business.
In light of the current economic environment, the Company has
undertaken initiatives to reduce costs across all expense
categories. Compensation costs increased 11% and 25%, respectively,
in the three and nine months ended September 30, 2008 compared to
the same periods of 2007. The main drivers of the increase were the
increased compensation expense associated with personnel within the
acquired business. For the three and nine months ended September
30, 2008, clearing and exchange fees increased 62% and 95%,
respectively, due to increased transaction volumes associated with
the acquired business as well as transition service charges.
Communications and technology costs and occupancy costs increased
59% and 47%, respectively, in the three months ended September 30,
2008 and 45% and 43%, respectively, in the nine months ended
September 30, 2008 compared to the same periods in 2007, primarily
to support the OIB Division. At September 30, 2008, shareholders'
equity was approximately $433.0 million and book value per
share was $32.87 compared to shareholders' equity of approximately
$415.9 million and book value per share of $31.33 at September 30,
2007. The basic weighted average number of Class A and Class B
Shares outstanding for the three months ended September 30, 2008
was 13,476,365 compared to 13,264,228 outstanding for the three
months ended September 30, 2007, an increase of 2% due primarily to
the exercise of stock options and vesting of stock awards in the
fourth quarter of 2007 and the first quarter of 2008 which was
offset by the cancellation of Class A Shares purchased pursuant to
the Issuer Bid in the second and third quarters of 2008. The
diluted weighted average number of Class A and Class B Shares
outstanding for the three months ended September 30, 2008 was
13,476,365 compared to 13,698,959 outstanding for the three months
ended September 30, 2007, a net decrease of 2% as a result of
repurchasing Class A Shares pursuant to the Issuer Bid. The actual
number of Class A and Class B Shares outstanding at September 30,
2008 was 13,172,669 shares. In accordance with its Senior Secured
Credit Note and its Subordinated Note, the Company has provided
certain covenants to its lenders including the maintenance of a
maximum leverage ratio. At September 30, 2008, the Company was in
compliance with this covenant on both facilities. Based on
financial results for the fiscal year to date and the current
environment for the Company's business, the Company cannot
presently predict whether it will continue to be in compliance with
this covenant for the fourth quarter of 2008. The Company is
reviewing steps it can take to avoid a breach of this covenant
including reducing controllable expenses and making voluntary
payments on the Senior Secured Credit Note to reduce the
outstanding balance. In addition, the Company has begun discussions
with representatives of the senior facility lender group in order
to pursue obtaining a waiver of the covenant. Issuer Bid On August
18, 2008, the Company announced its intention to purchase up to
700,000 of its Class A Shares through the facilities of the New
York Stock Exchange commencing August 19, 2008 and ending August
18, 2009. All shares purchased will be cancelled. During the third
quarter of 2008, the Company purchased and cancelled 167,500 Class
A Shares (at an average price of $24.90 per share) pursuant both to
an Issuer Bid, which expired on August 8, 2008 and to the current
Issuer Bid which expires on August 18, 2009. Dividend The Company
today announced a quarterly dividend of U.S. $0.11 per share,
payable on November 28, 2008 to holders of Class A and Class B
Shares of record on November 14, 2008. Oppenheimer, through its
principal subsidiaries, Oppenheimer & Co. Inc. (a U.S.
broker-dealer) and Oppenheimer Asset Management Inc., offers a wide
range of investment banking, securities, investment management and
wealth management services from 86 offices in 21 states and through
local broker-dealers in 3 foreign jurisdictions. OPY Credit Corp.
offers syndication as well as trading of issued corporate loans.
Oppenheimer employs over 3,300 people. Oppenheimer offers trust and
estate services through Oppenheimer Trust Company. Evanston
Financial Corporation is engaged in mortgage brokerage and
servicing. In addition, through its subsidiary, Freedom
Investments, Inc. and the BUYandHOLD division of Freedom,
Oppenheimer offers online discount brokerage and dollar-based
investing services. This press release includes certain
"forward-looking statements" relating to anticipated future
performance. For a discussion of the factors that could cause
future performance to be different than anticipated, reference is
made to the Company's Annual Report on Form 10-K for the year ended
December 31, 2007. DATASOURCE: Oppenheimer Holdings Inc. CONTACT:
A.G. LOWENTHAL, (212) 668-8000; or E.K. ROBERTS, (416) 322-1515
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