NYSE - OPY
NEW YORK and TORONTO, Oct. 31 /CNW/ -
Expressed in thousands
of U.S. dollars, except
share and per share Three Months ended Nine Months ended
amounts September 30, September 30,
(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
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.
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,
For further information:
For further information: A.G. LOWENTHAL, (212) 668-8000; or E.K.
ROBERTS, (416) 322-1515