- Pre-tax profit margin for full year remained strong at 35% NEW
YORK, Jan. 28 /PRNewswire-FirstCall/ -- Greenhill & Co., Inc.
(NYSE: GHL) today reported revenues of $221.9 million and net
income of $49.0 million for the year ended December 31, 2008.
Diluted earnings per share were $1.74 per share for the year ended
December 31, 2008. The Firm's 2008 revenues compare with revenues
of $400.4 million for 2007, which represents a decrease of $178.5
million or 45%. The Firm's 2008 net income and diluted earnings per
share compare with $115.3 million of net income and $4.01 of
diluted earnings per share, respectively, for the year ended
December 31, 2007, representing decreases of 58% and 57%,
respectively. The Firm's fourth quarter revenues were $52.8
million, which compare with revenues of $97.0 million for the
fourth quarter of 2007, representing a decrease of $44.2 million or
46%. The Firm's fourth quarter net income was $12.5 million, which
compares with net income of $28.5 million in the fourth quarter of
2007, representing a decrease of $16.0 million or 56%. Diluted
earnings per share for the fourth quarter of 2008 were $0.44, which
compares with $1.02 for the fourth quarter of 2007, representing a
decrease of $0.58 per share or 57%. The Firm's quarterly revenues
and net income can fluctuate materially depending on the number and
size of completed transactions on which it advised, the number and
size of merchant banking gains (or losses) and other factors.
Accordingly, the revenues and net income in any particular quarter
may not be indicative of future results. "In these extraordinary
times, boards of directors and senior managements more than ever
want truly independent advice from senior bankers who have judgment
and experience but no conflicts of interest. Since our founding,
this has been Greenhill's model. Today, with a 13-year history and
48 Managing Directors based in 8 offices across 5 countries, we are
well positioned to provide such advice on a wide range of
transactions and issues in all major markets. We are pleased to
report that, despite unprecedented market challenges in completing
transactions, we produced strong advisory revenue for the fourth
quarter. We earned significant revenue from advising clients on
completed M&A transactions, as well as from advising companies
in financial distress. We also completed our first fund placement
assignment since recruiting a team focused in that area earlier in
2008," Robert F. Greenhill, Chairman, commented. "Apart from our
revenue production and growth over time, what has truly
distinguished Greenhill from its many large and small competitors,
has been its financial discipline. In 2008, we again produced
industry leading revenue productivity, pretax profit margins and
returns on equity, despite investing in our franchise by adding
three new offices and increasing our Managing Director count by an
extraordinary 40%. In addition, our balance sheet has remained
simple and transparent, our robust dividend has been maintained and
we ended the year with cash balances in excess of our modest debt,
leaving us well positioned for future challenges or opportunities,"
Scott L. Bok, Co-Chief Executive Officer, said. "Looking forward,
we believe Greenhill's competitive position today is far stronger
than ever. Some of our competitors have disappeared through
bankruptcy or merger. Those that remain have undergone massive
shareholder dilution through new equity issuances, implemented
extraordinary staff reductions and face the prospect of increased
capital requirements and regulation. This turmoil not only creates
opportunities for us to win new clients, but continues to produce
extraordinary recruiting opportunities to further expand our
industry expertise and geographic reach. We do not know how long
the economy and financial markets will remain weak, but we intend
to continue to take advantage of market weakness to expand and
develop the Greenhill franchise in a cost effective manner in
preparation for better times ahead," Simon A. Borrows, Co-Chief
Executive Officer, added. Revenues Revenues By Source The following
provides a breakdown of total revenues by source for the three
month periods and years ended December 31, 2008 and 2007,
respectively: For the Three Months Ended December 31, 2008 December
31, 2007 Amount % of Total Amount % of Total (in millions,
unaudited) Advisory fees $61.9 NM $87.0 90% Merchant banking &
other revenue (9.1) NM 10.0 10% Total revenues $52.8 100% $97.0
100% For the Year Ended December 31, 2008 December 31, 2007 Amount
% of Total Amount % of Total (in millions, unaudited) Advisory fees
$218.2 98% $366.7 92% Merchant banking & other revenue 3.7 2%
33.7 8% Total revenues $221.9 100% $400.4 100% Historical Revenues
by Source For the Year Ended December 31, 2008 2007 2006 2005 2004
Advisory fees $218.2 $366.7 $209.8 $142.1 $130.9 Merchant banking
& other revenue 3.7 33.7 80.8 79.1 21.0 Total revenues $221.9
$400.4 $290.6 $221.2 $151.9 Advisory Revenues Full Year Advisory
revenues were $218.2 million in the year ended December 31, 2008
compared to $366.7 million in the year ended December 31, 2007,
which represents a decrease of 41%. At the same time, worldwide
completed M&A volume decreased by 32%, from $4,013 billion in
2007 to $2,735 billion in 2008(1). From a longer term perspective,
our 2008 advisory revenues were 67% higher than in 2004, the year
of our IPO. We earned advisory revenue from 65 different clients in
2008, compared to 74 in 2007. We earned $1 million or more from 37
clients in 2008, compared to 47 in 2007. The ten largest fee-paying
clients contributed 54% to our total revenues, and none of those
clients had in any prior year been among our ten largest fee-paying
clients. One client represented approximately 10% of total revenues
in 2008 and one client represented 12% of total revenues in 2007.
Historical Advisory Revenues by Client Location For the Year Ended
December 31, 2008 2007 2006 2005 2004 United States 47% 36% 47% 44%
54% Europe 44% 58% 51% 55% 43% Canada, Latin America & Other 9%
6% 2% 1% 3% (1) Source: Thompson Financial as of January 19, 2009.
Historical Advisory Revenues by Industry For the Year Ended
December 31, 2008 2007 2006 2005 2004 Communications & Media
11% 12% 15% 21% 29% Consumer Goods & Retail 7% 20% 4% 8% 25%
Financial Services 20% 26% 10% 12% 17% Healthcare 8% 1% 21% - 12%
Technology 1% 2% 4% 2% 1% Energy & Utilities 13% 6% 7% 6% 10%
Real Estate, Lodging & Leisure 8% 5% 4% 1% 4% General
Industrial & Other 32% 28% 35% 50% 2% The decrease in our
advisory fees in 2008 as compared to 2007 resulted from fewer
completed assignments that were smaller in scale. Fourth Quarter
Advisory revenues were $61.9 million in the fourth quarter of 2008
compared to $87.0 million in the fourth quarter of 2007, which
represents a decrease of 29%. Completed assignments in the fourth
quarter of 2008 included: -- the acquisition by Cheil Worldwide,
Inc. of Beattie McGuinness Bungay Ltd; -- the merger of Delta Air
Lines with Northwest Airlines; -- the sale by MAN AG of its 70%
stake in MAN Ferrostaal AG to International Petroleum Investment
Company (IPIC); -- the acquisition by Moody's Corporation of Fermat
International; -- the closing of Tenaska Power Fund II, L.P. with
approximately $2.4 billion of commitments, with our Fund Placement
Advisory Group acting as global placement agent; -- the acquisition
by Tesco plc of the 50% stake in Tesco Personal Finance Group
Limited that it did not already own from The Royal Bank of Scotland
Group plc; and -- the sale of THUS Group plc to Cable &
Wireless plc. The decrease in our advisory fees in the fourth
quarter of 2008 as compared to the same period in 2007 was due to a
decrease in the scale of the completed assignments. During the
fourth quarter, the Firm announced plans to expand its operations
to Chicago to cover the industrial sector and Midwest clients.
Glenn Tilles, Doug Jackson and Chris Roehm, all formerly
Chicago-based Managing Directors with Lehman Brothers who focused
on industrial clients, joined the Firm as Managing Directors. Also
during the fourth quarter, we announced plans to expand our
operations to Tokyo. Kensuke Hotta, formerly Chairman of Morgan
Stanley Japan, and Hiroto Yamada, formerly head of Merrill Lynch
Japan's M&A Group, joined the Firm as Managing Directors in
this new office. Additionally, we announced the hiring of Chris
Cooke as Managing Director to join our Fund Placement Advisory
Group in London. Mr. Cooke was formerly with CQS, a leading
London-based hedge fund and, prior to that, a Managing Director
with Lehman Brothers' Fund Placement Group. In January 2009, Chris
Riley (Frankfurt) and Edward Wakefield (London) were both promoted
to Managing Director. In all, Greenhill currently has 48 Managing
Directors and 6 Senior Advisors. Merchant Banking & Other
Revenues The following table sets forth additional information
relating to our merchant banking fund management and other income:
For the For the Three Months Year Ended December 31, Ended December
31, 2008 2007 2008 2007 (in millions, unaudited) Management fees
$4.5 $4.6 $19.2 $17.3 Net realized and unrealized gains (losses) on
investments in merchant banking funds (15.0) 3.4 (17.5) 7.0 Net
realized and unrealized merchant banking profit overrides (1.8) 0.2
(2.7) 1.8 Other realized and unrealized investment income 2.9 0.3
1.1 2.2 Interest income 0.3 1.5 3.6 5.4 Merchant banking &
other revenues $(9.1) $10.0 $3.7 $33.7 Full Year For the year ended
December 31, 2008, the Firm earned $3.7 million in merchant banking
and other revenue compared to $33.7 million in 2007, a decrease of
89%. This decrease principally resulted from a decline in the fair
market value of our merchant banking funds, offset by slightly
higher management fees due to greater assets under management.
During 2008 our merchant banking funds (and the Firm) recognized
gains from nine (9) of our portfolio companies and recorded losses
on eighteen (18) of our portfolio companies. For the year ended
December 31, 2008, our merchant banking funds invested a total of
$139.3 million in new investments and add-on investments in
existing portfolio companies, as compared to $254.0 million for the
year ended December 31, 2007. In addition, during 2008 the Firm
invested $8.0 million in GHL Acquisition Corp. (AMEX:GHQ), our
special purpose acquisition company, and $22.9 million in Iridium
Holdings, LLC ("Iridium"), a leading provider of voice and data
mobile satellite services. GHQ has an agreement to acquire Iridium
in a transaction, which is subject to stockholder approval, various
regulatory approvals and other customary closing conditions. Fourth
Quarter The Firm recorded negative ($9.1) million in merchant
banking and other revenue in the fourth quarter of 2008 compared to
$10.0 million in the fourth quarter of 2007. This decrease is
primarily attributable to a decline in the fair market value of the
GCP portfolio and lower interest income, offset by an increase in
the value of other principal investments. At December 31, 2008, the
Firm had principal investments of $108.4 million, nearly all of
which either were through investments in our four merchant banking
funds, GHQ or Iridium. Of that amount, 21% of our investments
related to the energy sector, 28% to the financial services sector
and 51% to other industry sectors. We held approximately 98% of our
total principal investments in North American companies, with the
remainder in European companies. Our investments in companies that
have become publicly traded after we first invested in them
represented 25% of our total investments. In terms of new merchant
banking investment activity during the fourth quarter of 2008, our
funds invested $9.4 million, 10% of which was Firm capital. In the
same period in 2007, our funds invested $18.9 million, 12% of which
was Firm capital. "This was another difficult quarter for our
merchant banking portfolios. While we are disappointed in these
results, we have avoided extraordinary losses through more modest
use of leverage than the typical merchant banking fund. We believe
current weak economic and financial conditions should provide
attractive opportunities to invest the substantial committed but
unspent capital that remains in our three active funds," Robert H.
Niehaus, Chairman of Greenhill Capital Partners, commented.
Expenses Operating Expenses Our total operating expenses for the
year ended December 31, 2008 were $144.0 million, which compares to
$223.2 million of total operating expenses for the year ended
December 31, 2007. This represents a decrease in total operating
expenses of $79.2 million or 36%, reflecting principally a decrease
in compensation expense which is described in more detail below.
The pre-tax income margin was 35% in 2008 compared to 44% in 2007.
Fourth Quarter Our total operating expenses for the fourth quarter
of 2008 were $33.1 million, which compares to $53.7 million of
total operating expenses for the fourth quarter of 2007. This
represents a decrease in total operating expenses of $20.6 million
or 38%, reflecting principally a decrease in compensation expense
which is described in more detail below. The pre-tax income margin
was 38% in the fourth quarter of 2008 compared to 45% in the fourth
quarter of 2007. The following table sets forth information
relating to our operating expenses, which are reported net of
reimbursements: For the For the Three Months Year Ended December
31, Ended December 31, 2008 2007 2008 2007 (in millions, unaudited)
Employee compensation & benefits expense $24.2 $43.9 $102.0
$183.5 % of revenues 46% 45% 46% 46% Non-compensation expense 8.9
9.8 42.0 39.7 % of revenues 17% 10% 19% 10% Total operating expense
33.1 53.7 144.0 223.2 % of revenues 63% 55% 65% 56% Minority
interest in net income of affiliates (0.3) 0.1 (0.5) 0.1 Total
income before tax 20.0 43.2 78.4 177.1 Pre-tax income margin 38%
45% 35% 44% Compensation and Benefits Expenses Full Year For the
year ended December 31, 2008, our employee compensation and
benefits expenses were $102.0 million, which reflects a 46% ratio
of compensation to revenues. This amount compares to $183.5 million
for the year ended December 31, 2007, which reflects a 46% ratio of
compensation to revenues. The decrease of $81.5 million or 44% is
due to the lower level of revenues in 2008 as compared to 2007.
Fourth Quarter Our employee compensation and benefits expenses in
the fourth quarter of 2008 were $24.2 million compared to $43.9
million for the fourth quarter of 2007. The decrease of $19.7
million or 45% is primarily due to lower level of revenues for the
fourth quarter of 2008 compared to the comparable period in 2007.
For the quarter ended December 31, 2008 the ratio of compensation
expense to revenues was 46% as compared to 45% for the same period
in 2007. Our compensation expense is generally based upon revenue
and can fluctuate materially in any particular quarter depending
upon the amount of revenue recognized as well as other factors.
Accordingly, the amount of compensation expense recognized in any
particular quarter may not be indicative of compensation expense in
a future period. Non-Compensation Expenses Full Year For the year
ended December 31, 2008, our non-compensation expenses were $42.0
million, which compared to $39.7 million for the year ended
December 31, 2007, representing an increase of $2.3 million or 6%.
The increase is principally related to higher occupancy costs
associated with rental rate increases and new office space,
increased information service costs primarily attributable to the
growth in personnel, and higher interest expense related to greater
average short term borrowings, partially offset by the absence of a
provision for legal contingencies and a decline in foreign currency
gains during the twelve months of 2008 as compared to the same
period in 2007. Non-compensation expenses as a percentage of
revenues were 19% and 10% for the years ended December 31, 2008 and
2007, respectively. This increase in non-compensation expenses as a
percentage of revenue in the twelve months ended December 31, 2008
as compared to the same period in the prior year reflects slightly
higher expenses spread over significantly lower revenues. Fourth
Quarter Our non-compensation expenses were $8.9 million in the
fourth quarter of 2008, which compared to $9.8 million in the
fourth quarter of 2007, representing a decrease of $0.9 million or
9%. The decrease is principally related to the absence of a
provision for legal contingencies and lower travel costs offset by
higher professional fees and decreased foreign currency gains in
the fourth quarter of 2008 as compared to the same period in 2007.
Non-compensation expenses as a percentage of revenues in the three
months ended December 31, 2008 were 17% compared to 10% for the
same period in the prior year. This increase in non-compensation
expenses as a percentage of revenue in the three months ended
December 31, 2008 as compared to the same period in the prior year
reflects slightly lower expenses spread over lower revenues. The
Firm's non-compensation expenses as a percentage of revenue can
vary as a result of a variety of factors including fluctuation in
revenue amounts, the amount of recruiting and business development
activity, the amount of reimbursement of engagement-related
expenses by clients, the amount of short term borrowings, interest
rate and currency movements and other factors. Accordingly, the
non-compensation expenses as a percentage of revenue in any
particular period may not be indicative of the non-compensation
expenses as a percentage of revenue in future periods. Provision
for Income Taxes Full Year For the year ended December 31, 2008,
the provision for taxes was $29.4 million, which reflects an
effective tax rate of approximately 38%. This compares to a
provision for taxes for the year ended December 31, 2007 of $61.8
million, which reflects an effective tax rate of approximately 35%
for the year. The decrease in the provision for income taxes
principally results from lower pre-tax income partially offset by a
slightly higher effective tax rate as a greater proportion of our
pre-tax income was earned in higher tax rate jurisdictions during
2008 as compared to 2007. Fourth Quarter The provision for taxes in
the fourth quarter of 2008 was $7.5 million, which reflects an
effective tax rate of approximately 38%. This compares to a
provision for taxes in the fourth quarter of 2007 of $14.7 million,
which reflects an effective tax rate of approximately 34% for the
period. The decrease in the provision for income taxes principally
results from lower pre-tax income partially offset by a slightly
higher effective tax rate as a greater proportion of our pre-tax
income was earned in higher tax rate jurisdictions. The effective
tax rate can fluctuate as a result of variations in the relative
amounts of advisory and merchant banking income earned in the tax
jurisdictions in which the Firm operates and invests. Accordingly,
the effective tax rate in any particular quarter may not be
indicative of the effective tax rate in future periods. Liquidity
and Capital Resources As of December 31, 2008, our cash and short
term investment securities totaled $62.8 million, our investments
totaled $108.4 million and we had $26.5 million in short term debt.
We had total commitments (not reflected on our balance sheet)
relating to future investments in our merchant banking activities
of $52.3 million as of December 31, 2008. These commitments are
expected to be drawn on from time to time over a period of up to
five years from the relevant commitment dates. Dividend The Board
of Directors of Greenhill & Co., Inc. has declared a dividend
of $0.45 per share to be paid on March 18, 2009 to common
stockholders of record on March 4, 2009. Greenhill & Co., Inc.
is a leading independent investment bank that provides financial
advice on significant mergers, acquisitions and restructurings;
assists private funds in raising capital from investors; and
manages merchant banking funds. It acts for clients located
throughout the world from its offices in New York, London,
Frankfurt, Toronto, Tokyo, Dallas, San Francisco and Chicago.
Cautionary Note Regarding Forward-Looking Statements The preceding
discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes that appear
below. We have made statements in this discussion that are
forward-looking statements. In some cases, you can identify these
statements by forward-looking words such as "may", "might", "will",
"should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential" or "continue", the negative of these terms
and other comparable terminology. These forward-looking statements,
which are subject to risks, uncertainties and assumptions about us,
may include projections of our future financial performance, based
on our growth strategies and anticipated trends in our business.
These statements are only predictions based on our current
expectations and projections about future events. There are
important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from the
results, level of activity, performance or achievements expressed
or implied by the forward-looking statements. These factors
include, but are not limited to, those discussed in our Report on
Form 10-K under the caption "Risk Factors". Greenhill & Co.,
Inc. and Subsidiaries Condensed Consolidated Statements of Income
(Unaudited) For the Three Months Ended For the Year Ended December
31, December 31, 2008 2007 2008 2007 Revenues Advisory fees
$61,850,384 $86,957,417 $218,196,923 $366,662,286 Merchant banking
revenue (9,354,149) 8,494,571 121,203 28,304,543 Interest income
264,251 1,545,414 3,554,921 5,455,582 Total revenues 52,760,486
96,997,402 221,873,047 400,422,411 Expenses Employee compensation
and benefits 24,182,102 43,893,245 102,049,624 183,456,281
Occupancy and equipment rental 2,706,780 2,697,703 10,640,820
9,780,212 Depreciation and amortization 1,165,305 1,130,743
4,592,176 4,228,714 Information services 1,146,962 1,202,300
5,671,879 5,149,724 Professional fees 1,612,968 1,343,448 4,784,812
4,326,002 Travel related expenses 1,394,082 1,792,016 6,999,759
6,782,611 Interest expense 654,802 942,607 3,580,292 3,023,763
Other operating expenses 204,472 722,160 5,695,323 6,474,027 Total
expenses 33,067,473 53,724,222 144,014,685 223,221,334 Income
before taxes and minority interest 19,693,013 43,273,180 77,858,362
177,201,077 Minority interest in net income of affiliates (347,003)
64,506 (511,670) 91,610 Income before taxes 20,040,016 43,208,674
78,370,032 177,109,467 Provision for taxes 7,504,124 14,682,659
29,391,962 61,833,195 Net income $12,535,892 $28,526,015
$48,978,070 $115,276,272 Average common shares outstanding: Basic
28,692,044 27,884,741 28,166,520 28,634,769 Diluted 28,743,525
27,995,716 28,214,015 28,728,293 Earnings per share: Basic $0.44
$1.02 $1.74 $4.03 Diluted $0.44 $1.02 $1.74 $4.01 Dividends
declared and paid per common share $0.45 $0.38 $1.80 $1.26 Contact:
Richard J. Lieb, Chief Financial Officer Greenhill & Co., Inc.
(212) 389-1800 DATASOURCE: Greenhill & Co., Inc. CONTACT:
Richard J. Lieb, Chief Financial Officer, Greenhill & Co.,
Inc., +1-212-389-1800
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