NYSE - OPY
NEW YORK and TORONTO, July 30 /CNW/ -
thousands of U.S.
share and per Three Months ended Six Months ended
share amounts June 30, June 30,
(unaudited) 2008 2007 2008 2007
Revenue $256,241 $226,750 $488,116 $440,866
Expenses $254,056 $198,864 $512,719 $384,798
before taxes $2,185 $27,886 $(24,603) $56,068
Net profit (loss) $1,646 $15,766 $(14,468) $32,556
Basic earnings (loss)
per share $0.12 $1.19 $(1.07) $2.48
Diluted earnings (loss)
per share $0.12 $1.16 $(1.07) $2.43
number of shares
outstanding 13,508,262 13,213,663 13,567,150 13,125,172
Book value per share $32.94 $30.17
Actual number of 13,340,094 13,233,630
Class A non-voting
and Class B shares
The Company's financial results are presented using accounting principles
generally accepted in the U.S.A.
Oppenheimer Holdings Inc. reported net profit of $1.6 million or $0.12
per share for the second quarter of 2008, compared to $15.8 million or
$1.19 per share in the second quarter of 2007. Revenue for the second quarter
of 2008 was $256.2 million, compared to revenue of $226.8 million in the
second quarter of 2007.
The net loss for the six months ended June 30, 2008 was $14.5 million or
$1.07 per share compared to a net profit of $32.6 million or $2.48 per share
in the first half of 2007. Revenue for the six months ended June 30, 2008 was
$488.1 million, an increase of 11% compared to $440.9 million for the same
period in 2007.
The Company's results for the three and six months ended June 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 the operating
results related to businesses to be acquired in the UK and Asia) 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 dramatic turnaround from a significant loss in the first
quarter to a nominal profit in the second quarter is extremely gratifying and
shows the strength of our franchise, although on a comparative basis with
2007, we are disappointed in our earnings performance. Conditions in the
securities markets remained quite stressed in the period with equity markets
down 8% and credit markets remaining seized in many asset classes. Oppenheimer
continues to be free of asset write-downs of any significance from proprietary
trading and does not anticipate any major issues in this regard going forward.
While the results of our Capital Markets business remain quite
disappointing due to the environment, we did see some increase in investment
banking activity in the second quarter and our activity levels in secondary
market sales and trading remained quite good. Leverage finance activity
related to new issuance remains moribund, although there was some pick-up
during the period in the trading markets for leveraged loans, and issuance by
clients in the equity and debt markets remained at significantly reduced
levels due to the lack of receptivity by investors.
The OIB business remained burdened with transition costs, which we
anticipate will be significantly reduced by the time we enter the fourth
quarter of 2008. Our plans to fully complete the transition of the business
should be accomplished by that time.
We continue to believe that the long-term benefit of this acquisition
will be substantial but do not foresee a quick return to profitability for the
enlarged Capital Markets business, given the state of the markets and of the
U.S. economy. Oppenheimer's liquidity remains strong allowing us to repurchase
shares during the quarter as well as continue to pay down long term debt. We
do not anticipate any need for additional capital to be raised 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.
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."
The three and six months ended June 30, 2008 were marked by an extremely
volatile market environment, with investors focused on record high oil and
food prices, a weak U.S. dollar, liquidity problems in the credit markets and
wide-spread asset write-downs. The U.S. economy appears to be in a recession
brought on by the uncertainties mentioned above. Intervention by the U.S.
Treasury and the U.S. Federal Reserve in the credit markets through their
support of investment banks, Fannie Mae and Freddie Mac will hopefully
continue to bolster confidence, to offset the severe decline in housing prices
and shorten the time to economic recovery.
Revenues for the OIB Division, approximately $70.2 million and
$125.0 million, respectively, for the three and six months ended
June 30, 2008, were substantially less (approximately 48% and 53%,
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 six months ended June 30, 2008 increased
33% and 37%, respectively, compared to the same periods in 2007 primarily as a
result of the acquired businesses. For the three and six months ended
June 30, 2008, 29% and 32%, respectively, of total commissions were generated
by the OIB Division's institutional equity business. Proprietary trading
results increased 60% and 42%, respectively, for the three and six months
ended June 30, 2008 compared to the same periods in 2007, with much of the
increase attributable to the acquired businesses, although preferred and
corporate trading showed significant increases for the period.
Advisory fees increased 3% and 7%, respectively, for the three and six
months ended June 30, 2008 compared to the same periods in 2007, primarily as
a result of increased fees from money market funds. During the period, the
Company introduced a FDIC insured bank sweep product that has been well
accepted by clients and will show increasing profitability over the next
several fiscal periods. Assets under management by the asset management group
decreased 5% to $16.4 billion at June 30, 2008 compared to $17.3 billion at
June 30, 2007, due to declining market values despite the fact that the number
of client accounts under management increased 7% at June 30, 2008 compared to
June 30, 2007. Included in assets under management at June 30, 2008 were
approximately $13.9 billion in assets under the Company's fee-based programs
($15.3 billion at June 30, 2007).
Net interest revenue decreased by 58% in both the three and six months
ended June 30, 2008 compared to the same periods of 2007, due primarily to
falling interest rates over the periods and reduced levels of client margin
borrowing. On April 28, 2008, the Company repaid $20.0 million of its senior
secured credit note, thereby reducing its outstanding indebtedness under the
senior secured credit note to $63.0 million.
The Company's expenses for the three and six months ended June 30, 2008
increased 28% and 33%, 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 $12.4 million and $27.7 million,
respectively, for the three and six months ended June 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 2008 and
continue to significantly decline in subsequent periods.Transition service
charges of $9.8 million and $20.6 million, respectively, in the three and six
months ended June 30, 2008 to be paid to CIBC for interim support of the
acquired businesses which will terminate upon the transition of those
businesses to Oppenheimer's platform, which is anticipated in the third
quarter of 2008, resulting in substantially reduced costs (with estimated
savings of $2 million per month).
Compensation expense for the period was substantially affected by the
acquisition, due to the addition of approximately 500 employees. Overall, in
the three months ended June 30, 2008, compensation costs increased 25%
compared to the same period of 2007. Offsetting the increase in compensation
expense for the three and six months ended June 30, 2008 was a decrease in
share-based compensation costs compared to the same periods in 2007. For the
three and six months ended June 30, 2008, clearing and exchange fees increased
109% and 113%, respectively, due to increased transaction volumes associated
with the acquired business. Communications and technology costs and occupancy
costs increased 51% and 45%, respectively, in the three months ended
June 30, 2008 and 38% and 40%, respectively, in the six months ended
June 30, 2008 compared to the same periods in 2007, primarily to support the
At June 30, 2008, shareholders' equity was approximately $439.4 million
and book value per share was $32.94 compared to shareholders' equity of
approximately $399 million and book value per share of $30.17 at
June 30, 2007. The basic weighted average number of Class A and Class B Shares
outstanding for the three months ended June 30, 2008 was 13,508,262 compared
to 13,213,663 outstanding for the three months ended June 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 quarter of 2008. The diluted weighted average number
of Class A and Class B Shares outstanding for the three months ended
June 30, 2008 was 13,649,203 compared to 13,543,221 outstanding for the three
months ended June 30, 2007, a net increase of 1%. The actual number of Class A
and Class B Shares outstanding at June 30, 2008 was 13,340,094 shares.
During the second quarter of 2008, the Company purchased and cancelled
308,976 Class A Shares (at an average price of $30.54 per share) pursuant to
an Issuer Bid, which expires on August 8, 2008. In accordance with its policy,
the Company does not purchase its shares pursuant to the Issuer Bid from the
end of the fiscal quarter until after the earnings release.
The Company today announced a quarterly dividend of U.S. $0.11 per share,
payable on August 29, 2008 to holders of Class A and Class B Shares of record
on August 15, 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.
For further information:
For further information: A.G. LOWENTHAL, (212) 668-8000; or E.K.
ROBERTS, (416) 322-1515