Fourth Quarter 2008 Earnings and Dividend Declaration



    OPY on the NYSE

    NEW YORK and TORONTO, Jan. 29 /CNW/ -

    
    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
    -------------------------------------------------------------------------
    (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.





For further information:

For further information: A.G. LOWENTHAL, (212) 668-8000; or E.K.
ROBERTS, (416) 322-1515


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