OPY on the NYSE NEW YORK and TORONTO, Jan. 29
/PRNewswire-FirstCall/ -- Expressed in thousands of U.S. dollars,
except Three Months ended Year ended share and per share December
31, December 31, amounts 2008 2007 2008 2007
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(unaudited) REVENUE $209,767 $258,358 $920,070 $914,397 EXPENSES
$217,496 $214,053 $956,113 $787,003 PROFIT (LOSS) BEFORE TAXES
$(7,729) $44,305 $(36,043) $127,394 NET PROFIT (LOSS) $(3,824)
$26,537 $(20,770) $75,367 PROFIT (LOSS) PER SHARE: - BASIC $(0.29)
$2.00 $(1.57) $5.70 - DILUTED $(0.29) $1.94 $(1.57) $5.57 BASIC
WEIGHTED AVERAGE NUMBER OF CLASS A NON-VOTING AND CLASS B SHARES
OUTSTANDING 13,022,155 13,298,336 13,199,580 13,223,442 BOOK VALUE
PER SHARE $32.75 $33.22 TOTAL CLASS A NON-VOTING AND CLASS B SHARES
OUTSTANDING 12,999,145 13,366,276 Oppenheimer Holdings Inc.
reported a net loss for the three months ended December 31, 2008 of
$3.8 million or $(0.29) per share compared to a net profit of $26.5
million or $2.00 per share in the same period of 2007. Revenue for
the three months ended December 31, 2008 was $209.8 million, a
decrease of 19% compared to revenue of $258.4 million in the same
period of 2007. The turmoil in the financial markets during the
fourth quarter of 2008 substantially impacted all of the Company's
businesses resulting in reduced revenues. The Company incurred
increased expenses associated with the acquisition of a major part
of CIBC World Markets' U.S. Capital Markets Businesses in January
2008. Performance fees associated with the Company's management of
alternative investments did not make a significant contribution to
the Company's results in fiscal 2008. By comparison, the fourth
quarter of 2007 was the strongest quarter in the Company's history
in terms of both revenue and net profit associated with its
management of alternative investments. The net loss for the year
ended December 31, 2008 was $20.8 million or $(1.57) per share,
compared to net profit of $75.4 million or $5.70 per share in the
same period of 2007. Revenue for the year ended December 31, 2008
was $920.1 million compared to $914.4 million for the same period
in 2007, an increase of 1%. As previously reported, the Company's
results were impacted throughout the year 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, Hong Kong and Israel were
combined with the Company's existing Investment Banking, Corporate
Syndicate, Institutional Sales and Trading and Equities Research
divisions to form the Oppenheimer Investment Banking Division (OIB
Division). The Company did not foresee in 2007 the extremely
challenging environment that would develop during 2008 when it
determined to expand its existing capital markets business.
Agreements made for compensation to former employees of CIBC World
Markets as well as support payments made to CIBC during the
transition of the acquired businesses to the Company's platform
substantially and negatively impacted the Company's financial
results throughout the 2008 year. Fiscal 2008 was the most
difficult economic environment in over 50 years. It began with a
period of substantially increasing commodity prices and a weakening
U.S. dollar during the first six months and ended with a complete
reversal of each of these trends amid falling home prices, seized
credit markets, failing financial institutions, weakening economic
activity and increasing unemployment as economists recognized the
presence of the longest period of recession in the post-war period.
Intervention in the credit markets by the U.S. Treasury and the
U.S. Federal Deposit Insurance Corporation ("FDIC") through their
support of commercial and investment banks as well as Fannie Mae
and Freddie Mac and the prompt reduction of interest rates by the
Federal Reserve to the lowest levels in history failed to staunch
the lack of confidence brought on by illiquid markets and a falling
economy. Further intervention in the credit markets both in the
U.S. and around the world should begin to restore confidence in
2009 resulting in improved economic conditions and markets.
Revenues for the OIB Division, approximately $45.4 million and
$220.7 million, respectively, for the three months and year ended
December 31, 2008, were substantially less (approximately 39% and
41%, respectively) than the comparable fiscal periods 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 acquisition price. Commissions for the three
months and year ended December 31, 2008 increased 30% and 35%,
respectively, compared to the same periods in 2007 primarily as a
result of the acquired businesses. For both the three months and
year ended December 31, 2008, 32% of total commissions were
generated by the OIB Division's institutional equity business.
Proprietary trading results decreased 185% and 50%, respectively,
for the three months and year ended December 31, 2008 compared to
the same periods in 2007, primarily due to losses in convertible
bond arbitrage and failed hedging strategies as the prices of U.S.
Treasuries diverged from the rest of the credit market during the
difficult market conditions experienced in the third and fourth
quarters of 2008. Advisory fees decreased 56% and 20%,
respectively, for the three months and year ended December 31, 2008
compared to the same periods in 2007. Declining market values of
client assets negatively impacted fee levels in the third and
fourth quarters of 2008 as well as assets under management which
decreased 28% to $12.5 billion at December 31, 2008 compared to
$17.5 billion at December 31, 2007. In addition, performance fees
earned as a result of participation as a general partner in various
alternative investments amounted to $1.3 million in fiscal 2008
compared with $44.8 million in fiscal 2007. The number of client
accounts under management increased 1% at December 31, 2008
compared to December 31, 2007. Included in assets under management
at December 31, 2008 were approximately $9.8 billion in assets
under the Company's fee-based programs ($15.4 billion at December
31, 2007). Interest income declined amidst lower short-term
interest rates and lower client debit balances in the three months
and year ended December 31, 2008 compared to the same periods in
2007. Net interest revenue decreased by 56% and 57%, respectively,
in the three months and year ended December 31, 2008 compared to
the same periods in 2007. The Company's expenses for the three
months and year ended December 31, 2008 increased 2% and 21%,
respectively, compared to the same periods of 2007, primarily due
to the effect of the Company's recent acquisition. Acquisition
related expenses included $845.6 thousand and $40.2 million,
respectively, for the three months and year ended December 31, 2008
for 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 significantly decline in future
periods. These accrued expenses are net of an expense reversal of
$6.1 million recorded in November 2008 arising from the resolution
of a number of issues with CIBC associated with the implementation
and interpretation of the Acquisition Agreement. Transition service
charges of $1.7 million and $27.3 million, respectively, in the
three months and year ended December 31, 2008 were incurred for
interim support of the acquired businesses which substantially
terminated upon the transition of those businesses to Oppenheimer's
platform in the second half of 2008. The Company continues to
review its costs across all expense categories but expects to have
reduced costs of approximately $7 million per month in 2009
compared to 2008 due to the elimination of many costs associated
with last year's acquisition. Compensation costs decreased 6% and
increased 16%, respectively, in the three months and year ended
December 31, 2008 compared to the same periods of 2007. The main
drivers of the increase for the year ended December 31, 2008 were
the increased compensation expense associated with personnel within
the acquired businesses. The reduction in deferred incentive
compensation award payments, discussed above, significantly
contributed to the reduction in compensation related costs during
the three months ended December 31, 2008. With the decline in
revenue, the variable components of compensation expense also
declined. For the three months and year ended December 31, 2008,
clearing and exchange fees increased 75% and 89%, respectively, due
to increased transaction volumes associated with the acquired
businesses as well as transition service charges. Communications
and technology costs and occupancy costs increased 42% and 48%,
respectively, in the three months ended December 31, 2008 and 44%
in both the three months and the year ended December 31, 2008
compared to the same periods in 2007, primarily to support the OIB
Division. The Company's overall tax rate for the three month period
ended December 31, 2008 was impacted by adjustments to the state
income tax provision to reflect amounts recorded for prior years.
At December 31, 2008, shareholders' equity was approximately $425.7
million and book value per share was $32.75 compared to
shareholders' equity of approximately $444.0 million and book value
per share of $33.22 at December 31, 2007. The basic weighted
average number of Class A non-voting and Class B shares outstanding
for the three months ended December 31, 2008 was 13,022,155
compared to 13,298,336 outstanding for the three months ended
December 31, 2007, a net decrease of 2% due primarily to the
repurchase of Class A Shares for cancellation pursuant to its
Normal Course Issuer Bid. During the fourth quarter of 2008, the
Company purchased 173,524 Class A Shares pursuant to its Normal
Course Issuer Bid (which commenced on August 19, 2008, and
terminates on August 18, 2009) at an average price per share of
$20.63. The Company's book value per share was impacted by
operating losses and dividends, offset by the effect of share-based
awards and the issuance of warrants in connection with the
acquisition of the capital markets businesses in January 2008. The
diluted weighted average number of Class A non-voting and Class B
shares outstanding for the three months ended December 31, 2008 was
13,022,155 compared to 13,646,546 outstanding for the three months
ended December 31, 2007, a net decrease of 5% due primarily to the
repurchase of Class A Shares for cancellation pursuant to the
Issuer Bid. As previously announced, on December 16, 2008, the
Company and its subsidiaries reached an agreement with a syndicate
led by Morgan Stanley Senior Funding, Inc. to amend certain terms
of its existing Senior Secured Credit Note to, among other things,
(a) change the fixed charge coverage ratio and total leverage ratio
for the fiscal quarter ended December 31, 2008 and for future
fiscal quarters through June 30, 2013; (b) increase the amount of
quarterly loan amortization payments for fiscal quarters through
December 31, 2010 beginning in the fiscal quarter ending March 31,
2009; and (c) increase the interest rate payable on the outstanding
balance of the loan. In addition, the Company made a voluntary
pre-payment of principal in the amount of $15 million plus interest
which reduced the balance outstanding on the Senior Secured Credit
Note to $47.7 million. The Company has also reached agreement with
Canadian Imperial Bank of Commerce to amend certain financial terms
(including an increase in the rate of interest to be paid on the
loan) and certain covenants in its $100 million subordinated loan
agreement in line with the agreement reached with the senior
lenders. With these amendments in place, the Company believes that
it has adequate funding arrangements for the foreseeable future. On
October 31, 2008, Moody's placed the Company's Corporate Family
Rating and Senior Secured Credit Note ($47.7 million outstanding at
December 31, 2008) rating on review for possible downgrade. In that
report, Moody's listed as factors that could result in a rating
downgrade; the inability to reach an agreement with the lenders on
amended terms to the Senior Secured Credit Note and the ability to
maintain leverage at a predetermined benchmark. As described above,
the Company reached an agreement with both its senior and
subordinated lenders. Due to the non-recurring nature of
approximately $85 million in costs associated with the acquisition
of the capital markets businesses from CIBC in the year ended
December 31, 2008, the Company expects its leverage position to
significantly improve in 2009. The Company believes it did not
achieve the prescribed leverage levels in the quarter ended
December 31, 2008 to sustain its current credit rating. Dividend
Today, the Company announced a regular quarterly cash dividend of
U.S. $0.11 per Class A and Class B Share payable on February 27,
2009 to shareholders of record on February 13, 2009. 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 4 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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