EX-99.1 2 a13-5274_1ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

GLEACHER & COMPANY REPORTS FOURTH QUARTER

AND YEAR END 2012 FINANCIAL RESULTS

 

Company Announces Sale of ClearPoint

Company Concludes Formal Strategic Review

 

NEW YORK, N.Y., February 15, 2013 — Gleacher & Company, Inc. (Nasdaq: GLCH) today reported net revenues of $50.9 million, net loss from continuing operations of ($11.5) million, or ($10.8) million on a non-GAAP basis, and diluted loss per share of ($0.10), or ($0.09) on a non-GAAP basis for the quarter ended December 31, 2012.  The Company also announced that it has entered into an agreement with Homeward Residential, Inc., a wholly owned subsidiary of Ocwen Financial Corporation (NYSE: OCN) pursuant to which Homeward will purchase substantially all of the assets of ClearPoint.  Finally, having considered a range of opportunities during its previously announced strategic review, including partnering with one or more equity investors, strategic acquisitions and divestitures, and business combinations, the Company determined that the available opportunities were not in the best interests of Gleacher’s stockholders at this time.

 

Highlights

 

·                  FY2012 dominated by restructuring the management team and compensation methodologies, and a review of strategic alternatives.  The Company suffered a natural interruption in revenue generation as a result of those actions.

·                  Q4 results benefitted by performance in Investment Banking and Credit Products; MBS & Rates suffered from weaker sales volumes.

·                  ClearPoint entered into an agreement to sell substantially all of its assets to Homeward.

·                  Company concludes formal strategic review.

·                  The Board of Directors renewed the Company’s stock repurchase program, authorizing up to $10 million in stock repurchases.

 

Thomas Hughes, Chief Executive Officer, said, “We accomplished a great deal during the course of 2012, and I believe we are better positioned to begin sustained growth and profitability.  We have assembled a management team and producers who possess deep experience serving clients in the product efforts that comprise our strategy.  We have revamped our compensation methodologies in an effort to achieve our stated goal of a 60% compensation to revenue ratio in the coming years.  And we have entered into an agreement to sell ClearPoint in a transaction that we expect will close in the first quarter.”

 

Mr. Hughes continued, “While the revenue decline in MBS & Rates has been natural in the face of all of our restructuring efforts in that business, we are not satisfied with those results.  However, we recruited outstanding talent in this Business Unit, we believe our ability to serve customers in this product segment is strong, and once we have fully integrated our Rangemark capabilities with Sales & Trading, our customer interface will be even more compelling.  We are pleased with our performance in Investment Banking and Credit Products.  Our Real Estate Finance team now ranks #1 in M&A transactions executed for REITs, and our Credit Products business grew its market share throughout 2012.”

 

Mr. Hughes, commenting on the strategic review, said, “Assisted by our financial advisor, we looked at a wide variety of strategic transactions, including merger, acquisition and business combinations.  Although we did not

 

1



 

believe any proposal we received during the process adequately reflected Gleacher’s value, we will, as before, be opportunistic in considering value-building strategic initiatives that may accelerate our growth and improve stockholder returns.  That said, we made significant strategic progress during the course of the year, we believe in our business strategy and in the capabilities of our team, and we intend to continue our business expansion and fortify our brand.”

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(In thousands, except for per share amounts)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

50,876

 

$

43,330

 

$

61,240

 

$

203,595

 

$

261,172

 

Pre-tax loss from continuing operations

 

(11,293

)

(5,024

)

(236

)

(53,353

)

(61,877

)

Net (loss)/income from continuing operations

 

(11,486

)

(2,801

)

1,765

 

(77,955

)

(64,084

)

Discontinued operations, net of taxes

 

224

 

33

 

383

 

265

 

(18,040

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP pre-tax (loss)/income from continuing operations*

 

(10,590

)

(5,059

)

n/a

 

(28,939

)

20,267

 

Non-GAAP net (loss)/income from continuing operations*

 

(10,783

)

(2,821

)

n/a

 

(24,397

)

12,132

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Diluted - continuing operations

 

$

(0.10

)

$

(0.02

)

$

0.01

 

$

(0.66

)

$

(0.52

)

Diluted - continuing operations (Non-GAAP)*

 

(0.09

)

(0.02

)

n/a

 

(0.21

)

0.09

 

 


*Designates non-GAAP financial results.  A reconciliation of the Company’s GAAP results to non-GAAP financial results is set forth below under the caption “Non-GAAP Financial Results.”

 

The Company has included in this press release “non-GAAP financial results.”  A non-GAAP financial result is a numerical measure of financial position or results of operations that includes amounts that are excluded, or excludes amounts that are included, in the most directly comparable result calculated and presented in accordance with generally accepted accounting principles (“GAAP”).

 

In the financial data included in this press release, the items for which the Company adjusted its GAAP results consist of the following:

 

·                  legal, consulting and advisory costs incurred in connection with our strategic review process during the second, third and fourth quarter of 2012,

·                  impairment of goodwill and intangibles recorded during the second quarter of 2012 and the third quarter of 2011, as well as other non-compensation expenses incurred in connection with the Investment Banking realignment in the third quarter of 2011,

·                  the change in the valuation allowance on the deferred tax assets, initially established in the second quarter of 2012,

·                  severance expense recorded during the first quarter of 2012 (partially reversed in the third quarter of 2012) and third quarter of 2011,

·                  compensation expense related to the resignation of the former interim CEO in the second quarter of 2011, and

·                  the bargain purchase gain related to the ClearPoint acquisition in the first quarter of 2011.

 

For detailed information on the adjustments made, and a reconciliation of the non-GAAP financial results included in this press release to the most directly comparable GAAP financial metrics, refer to

 

2



 

“Non-GAAP Financial Results” below.  While the Company believes that the non-GAAP financial results included herein are instructive, they should only be considered together with their corresponding GAAP financial metrics.

 

Business Segment Results (including Non-GAAP results)

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December, 31

 

(In thousands of dollars)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

Investment Banking

 

$

12,680

 

$

1,499

 

$

2,936

 

$

27,442

 

$

26,611

 

MBS & Rates

 

6,081

 

8,943

 

14,668

 

40,637

 

103,857

 

Credit Products

 

16,039

 

18,804

 

20,019

 

74,432

 

71,056

 

ClearPoint

 

13,615

 

12,899

 

20,815

 

53,375

 

46,924

 

Net revenues - operating segments

 

48,415

 

42,145

 

58,438

 

195,886

 

248,448

 

Other

 

2,461

 

1,185

 

2,802

 

7,709

 

10,394

*

Total

 

$

50,876

 

$

43,330

 

$

61,240

 

$

203,595

 

$

258,842

*

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax (loss)/income from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

Investment Banking

 

$

2,061

 

$

(257

)

$

(1,249

)

$

4,576

 

$

4,584

*

MBS & Rates

 

(5,434

)

1,814

 

3,465

 

127

 

33,120

 

Credit Products

 

(795

)

2,619

*

3,400

 

4,070

*

9,738

 

ClearPoint

 

(13

)

(524

)

(779

)

(5,891

)

(3,686

)

Pre-tax (loss)/income - operating segments

 

(4,181

)

3,652

*

4,837

 

2,882

 

43,756

*

Other

 

(6,409

)*

(8,711

)*

(5,073

)

(31,821

)*

(23,489

)*

Total

 

$

(10,590

)*

$

(5,059

)*

$

(236

)

$

(28,939

)*

$

20,267

*

 


*Designates non-GAAP financial results.  A reconciliation of the Company’s GAAP results to its non-GAAP financial results is set forth below under the caption “Non-GAAP Financial Results.”

 

3



 

Investment Banking

 

Net revenues were $12.7 million for the quarter ended December 31, 2012, an improvement of $11.2 million compared to the third quarter of 2012 and $9.7 million compared to the fourth quarter of 2011.  Net revenues also slightly improved year-over-year and were $27.4 million for the year ended December 31, 2012, compared to the prior year of $26.6 million.

 

The composition of the division’s investment banking revenues was as follows:

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(In thousands)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

 

$

12,636

 

$

914

 

$

2,936

 

$

24,332

 

$

20,954

 

Capital Markets

 

44

 

585

 

 

3,110

 

5,657

 

Total:

 

$

12,680

 

$

1,499

 

$

2,936

 

$

27,442

 

$

26,611

 

 

MBS & Rates

 

Net revenues were $6.1 million for the quarter ended December 31, 2012, a decline of $2.9 million and $8.6 million compared to the third quarter of 2012 and fourth quarter of 2011, respectively.  The market environment proved challenging for the division, which experienced reduced sales and trading revenues on lower spreads and market volatility.  These declines were partially offset by higher net interest income due to higher average inventory levels when compared to the third quarter of 2012, as net interest income was $7.5 million in the fourth quarter of 2012 compared to $4.0 million in the third quarter of 2012 (net interest income was $13.3 million in the fourth quarter of 2011).  Revenues for the third quarter of 2012 also included approximately $0.7 million of other revenue, related to the clawback of certain stock-based compensation grants of former employees which were subject to non-competition and/or other forfeiture provisions.

 

Net revenues of $40.6 million for the year ended December 31, 2012, declined by $63.2 million compared to the prior year.  This was largely attributable to the previously reported leadership transition and accompanying turnover experienced during the second and third quarter of 2012, resulting in a repositioning and rebuilding of the division which is substantially complete. In addition, the division recognized lower net interest income year-over-year on lower average inventory levels and the prior year also includes non-agency asset-backed securities gains of approximately $26.5 million.

 

4



 

Credit Products

 

Net revenues were $16.0 million for the quarter ended December 31, 2012, a decline of $2.8 million compared to the third quarter of 2012 and $4.0 million compared to the fourth quarter of 2011.  The declines were primarily due to lower commissions and principal transaction revenues due to spreads tightening, which was partially offset by higher volumes.

 

Net revenues of $74.4 million for the year ended December 31, 2012 improved by $3.4 million compared to the prior year, due to higher volumes and an expanded product profile, partially offset by spread compression.

 

ClearPoint

 

Net revenues were $13.6 million for the quarter ended December 31, 2012, an increase of $0.7 million compared to the third quarter of 2012 due to improved pricing margins, and a decline of $7.2 million compared to the fourth quarter of 2011 on lower volumes.  Net revenues during the fourth and third quarter of 2012 reflect limits placed on ClearPoint’s daily average loan commitments to a level aligned with its distribution capabilities.

 

Net revenues for the year ended December 31, 2012 were $53.4 million, an improvement of $6.5 million compared to the prior year.  This increase was due to higher daily loan commitments primarily arising in the first quarter of 2012, prior to the implementation of the previously mentioned limits, coupled with lower daily average loan commitments in the prior year, as the division’s operations had commenced on January 3, 2011.

 

Subsequent to the liquidity constraints experienced during the first half of 2012, the division has been managed to operate at or near break-even levels.  On February 14, 2013, the Company entered into an agreement to sell substantially all of ClearPoint’s assets to Homeward Residential, Inc., and we expect the transaction to close in the first quarter of 2013.  The Company estimates it will recognize a loss of approximately $5.0 million in connection with this disposition.

 

ClearPoint will be reclassified as a discontinued operation in the first quarter of 2013.

 

Other

 

Net revenues were $2.5 million for the quarter ended December 31, 2012, an improvement of $1.3 million compared to the third quarter of 2012 and a decline of $0.3 million compared to the fourth quarter of 2011.  Changes in net revenues are primarily related to changes in value of the Company’s FATV investment.

 

5



 

Consolidated Compensation and Benefits Expenses (including Non-GAAP results)

 

Compensation and benefits expense was $41.6 million for the fourth quarter of 2012, an increase of $16.0 million ($14.7 million on a non-GAAP basis) compared to compensation and benefits expense in the third quarter of 2012, and $8.1 million compared to compensation and benefits expense in the fourth quarter of 2011.

 

Our compensation ratio from continuing operations was 81.7% for the fourth quarter of 2012, compared to 58.9% for the third quarter of 2012 (62.0% on a non-GAAP basis) and 54.7% for the fourth quarter of 2011.  The Company’s compensation as a percentage of net revenue when compared to the third quarter of 2012 was significantly influenced by the Company’s decision to pay year-end bonus compensation primarily in the form of cash.  In making this determination, the Company considered a variety of factors including the significant discount to which the Company’s stock trades in relation to its book value.  Compensation expense for the fourth quarter of 2012 was also impacted by approximately $0.9 million of retention payments made to certain key employees as a result of general uncertainties stemming from the strategic review process and $1.2 million of compensation guarantees principally incurred in the MBS & Rates division in connection with the division’s rebuild.

 

The Company’s compensation and benefits as a percentage of net revenues was 70.4% (70.3% on a non-GAAP basis) for the year ended December 31, 2012, compared to 62.2% (61.4% on a non-GAAP basis) for the prior year.  The disparity between the ratios year-over-year is directly related to the lower net revenues, as well as the Company’s election to pay primarily cash compensation in the current year, compared to a mix of cash and stock in the prior year.

 

Consolidated Non-Compensation Expenses (including Non-GAAP results)

 

Non-compensation expenses were $20.6 million for the fourth quarter of 2012 ($19.9 million on a non-GAAP basis), compared to $22.8 million for the third quarter of 2012 ($21.5 million on a non-GAAP basis) and $28.0 million for the fourth quarter of 2011.  Included within non-compensation expenses are ClearPoint broker fees and loan processing fees of $9.3 million, $9.4 million and $16.0 million for the fourth quarter of 2012, third quarter of 2012 and fourth quarter of 2011, respectively, driven by the level of ClearPoint loan commitment volumes in each respective period.

 

Non-GAAP non-compensation expenses excludes legal, consulting and advisory fees incurred in connection with our strategic alternatives process of $0.7 million, $1.3 million and $3.0 million for the fourth quarter and third quarter of 2012 and year ended December 31, 2012, respectively.

 

Provision for Income Taxes

 

Fourth Quarter 2012

 

The Company’s effective income tax rate from continuing operations for the three months ended December 31, 2012 was negative 1.7%, resulting in income tax expense of approximately $0.2 million.  The income tax expense is primarily attributable to an increase in the deferred tax asset valuation allowance and provision to return tax adjustments.

 

6



 

Year Ended 2012

 

The Company’s effective income tax rate from continuing operations for the year ended December 31, 2012 was negative 46.1%, resulting in income tax expense of approximately $24.6 million.  The abnormal tax rate differs from the federal statutory tax rate of 35% primarily due to the establishment of a valuation allowance against substantially all of the Company’s deferred tax assets (negative 61%) in the second quarter of 2012, as well as the non-deductible discrete item attributable to the write-off of goodwill (negative 14%) and tax expense associated with stock-based compensation shortfalls (negative 6%).

 

Discontinued Operations

 

The Company has classified the results of its Equities segment as discontinued operations due to the Company’s decision to exit the business on August 22, 2011.  Results of these discontinued operations are presented in the following table:

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(In thousands)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

Net revenues

 

$

 

$

11

 

$

269

 

$

54

 

$

13,064

 

Total expenses (excluding interest)

 

(224

)

(22

)

7

 

(349

)

38,808

*

Income/(loss) from discontinued operations before income taxes

 

224

 

33

 

262

 

403

 

(25,744

)

Income tax (benefit)/expense

 

 

 

(121

)

138

 

(7,704

)

Income/(loss) from discontinued operations, net of taxes

 

$

224

 

$

33

 

$

383

 

$

265

 

$

(18,040

)

 


*Included within the table above for the year ended December 31, 2011 is a goodwill and intangible impairment charge of approximately $14.3 million and a restructuring charge of $7.1 million.

 

7



 

Non-GAAP Financial Results

 

The Company has included in this press release certain financial metrics that were not prepared in accordance with accounting principles generally accepted in the United States.  These non-GAAP financial results, which include presentations of net revenues, compensation and benefits, non-compensation expenses, income before income taxes from continuing operations, provision for income taxes, net income from continuing operations, compensation expense ratios, pre-tax margin, return on average tangible equity and diluted earnings per share, are presented as an additional aid in understanding and analyzing the Company’s financial results for the quarters ended December 31, 2012, September 30, 2012, and December 31, 2011 and the years ended December 31, 2012 and 2011.  Specifically, the Company believes that the non-GAAP results provide useful information by excluding certain items that may not be indicative of the Company’s core operating results or business outlook and also to emphasize information that the Company believes is important in understanding the Company’s performance.  These non-GAAP amounts exclude items reflected as adjustments within the “Reconciliation of GAAP to Non-GAAP Income from Continuing Operations” table below.  The Company believes these non-GAAP results will allow for a better evaluation of the operating performance of the Company’s business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior periods and future periods.  References to these non-GAAP results should not be considered a substitute for results that are presented in a manner consistent with GAAP.

 

A limitation of utilizing these non-GAAP financial results is that the GAAP accounting effects of these excluded items do in fact reflect the underlying financial results of the Company’s business, and these effects should not be ignored in evaluating and analyzing its financial results.  Therefore, the Company believes that non-GAAP results should always be considered together with their corresponding GAAP results.

 

8



 

Reconciliation of GAAP to Non-GAAP (Loss)/Income from Continuing Operations

 

 

 

Three Months Ended December 31, 2012

 

Three Months Ended December 31, 2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Dollars in thousands, except per share amounts)

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

$

50,876

 

$

 

$

50,876

 

$

61,240

 

$

 

$

61,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding interest):

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

41,554

 

 

41,554

 

33,478

 

 

33,478

 

Non-compensation expenses

 

20,615

 

(703

)(1)

19,912

 

27,998

 

 

27,998

 

Total expenses (excluding interest)

 

62,169

 

(703

)

61,466

 

61,476

 

 

61,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/income from continuing operations before income taxes

 

(11,293

)

703

 

(10,590

)

(236

)

 

(236

)

Provision for income taxes

 

193

 

(2)

193

 

(2,001

)

 

(2,001

)

Net (loss)/income from continuing operations

 

$

(11,486

)

$

703

 

$

(10,783

)

$

1,765

 

$

 

$

1,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted - continuing operations

 

$

(0.10

)

 

 

$

(0.09

)(3)

$

0.01

 

 

 

$

0.01

 

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

81.7

%

 

 

81.7

%

54.7

%

 

 

54.7

%

(Loss)/income from continuing operations before income taxes

 

(22.2

)%

 

 

(20.8

)%

(0.0

)%

 

 

(0.0

)%

 


(1)   Represents legal, consulting and advisory fees incurred in connection with our strategic review process.

 

(2)   No tax provision has been reflected as the Company has provided for a valuation allowance on its deferred tax assets and has fully utilized its available net operating loss carry-back capacity.

 

(3)   Non-GAAP net loss from continuing operations divided by 119.0 million dilutive shares for the three months ended December 31, 2012.

 

9



 

Reconciliation of GAAP to Non-GAAP (Loss)/Income from Continuing Operations (Continued)

 

 

 

Three Months Ended December 31, 2012

 

Three Months Ended September 30, 2012

 

 

 

(Unaudited)

 

(Unaudited)

 

(Dollars in thousands, except per share amounts)

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

$

50,876

 

$

 

$

50,876

 

$

43,330

 

$

 

$

43,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding interest):

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

41,554

 

 

41,554

 

25,534

 

1,320

(1)

26,854

 

Non-compensation expenses

 

20,615

 

(703

)(2)

19,912

 

22,820

 

(1,285

)(2)

21,535

 

Total expenses (excluding interest)

 

62,169

 

(703

)

61,466

 

48,354

 

35

 

48,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/income from continuing operations before income taxes

 

(11,293

)

703

 

(10,590

)

(5,024

)

(35

)

(5,059

)

Provision for income taxes

 

193

 

(3)

193

 

(2,223

)

(15

)(4)

(2,238

)

Net (loss)/income from continuing operations

 

$

(11,486

)

$

703

 

$

(10,783

)

$

(2,801

)

$

(20

)

$

(2,821

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted - continuing operations

 

$

(0.10

)

 

 

$

(0.09

)(5)

$

(0.02

)

 

 

$

(0.02

)

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

81.7

%

 

 

81.7

%

58.9

%

 

 

62.0

%

Loss from continuing operations before income taxes

 

(22.2

)%

 

 

(20.8

)%

(11.6

)%

 

 

(11.7

)%

 


(1)         Represents the reversal of previously accrued severance expense (of which $1.0 million is non-cash stock-based compensation).

 

(2)         Represents legal, consulting and advisory fees incurred in connection with our strategic review process.

 

(3)         No tax provision has been reflected as the Company has provided for a valuation allowance on its deferred tax assets and has fully utilized its available net operating loss carry-back capacity.

 

(4)         The statutory income tax rate of 43.6% differs from the federal statutory rate of 35% due to state and local taxes.

 

(5)         Non-GAAP net loss from continuing operations divided by 119.0 million dilutive shares for the three months ended December 31, 2012.

 

10



 

Reconciliation of GAAP to Non-GAAP (Loss)/Income from Continuing Operations (Continued)

 

 

 

Year Ended December 31, 2012

 

Year Ended December 31, 2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Dollars in thousands, except per share amounts)

 

GAAP

 

Adjustments

 

Non-GAAP

 

GAAP

 

Adjustments

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

$

203,595

 

$

 

$

203,595

 

$

261,172

 

$

(2,330

)(1)

$

258,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses (excluding interest):

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

143,414

 

(330

)(2)

143,084

 

162,537

 

(3,632

)(3)

158,905

 

Non-compensation expenses

 

113,534

 

(24,084

)(4)

89,450

 

160,512

 

(80,842

)(5)

79,670

 

Total expenses (excluding interest)

 

256,948

 

(24,414

)

232,534

 

323,049

 

(84,474

)

238,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/income from continuing operations before income taxes

 

(53,353

)

24,414

 

(28,939

)

(61,877

)

82,144

 

20,267

 

Provision for income taxes

 

24,602

 

(29,144

)(6)

(4,542

)

2,207

 

5,928

(7)

8,135

 

Net (loss)/income from continuing operations

 

$

(77,955

)

$

53,558

 

$

(24,397

)

$

(64,084

)

$

76,216

 

$

12,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted - continuing operations

 

$

(0.66

)

 

 

$

(0.21

)(8)

$

(0.52

)

 

 

$

0.09

(8)

As a percentage of net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

70.4

%

 

 

70.3

%

62.2

%

 

 

61.4

%

(Loss)/income from continuing operations before income taxes

 

(26.2

)%

 

 

(14.2

)%

(23.7

)%

 

 

7.8

%

 


(1)         Represents the bargain purchase gain related to the ClearPoint acquisition on January 3, 2011.

 

(2)         Represents severance expense recognized during the first quarter of 2012.

 

(3)         Includes (i) severance and stock-based compensation expense of $1.9 million related to the investment banking realignment, which resulted in the termination of 32 investment banking employees and certain administrative positions, and (ii) $1.7 million due to the resignation of the former interim CEO in the second quarter of 2011.

 

(4)         Represents the goodwill impairment charge recognized during the second quarter of  2012 of $21.1 million, as well as $3.0 million of legal, consulting and advisory fees incurred in connection with our strategic review process.

 

(5)         Includes goodwill and intangible impairment charges of $80.2 million and other non-compensation expenses of $0.6 million as a result of the investment banking realignment.

 

(6)         Represents the change in the valuation allowance on the Company’s deferred tax assets.

 

(7)         The effective income tax rate of 7.2% differs from the federal statutory rate of 35% primarily due to non-tax deductible goodwill, the non-taxable bargain purchase gain and state and local taxes.

 

(8)         Non-GAAP net (loss)/income from continuing operations divided by 119.0 million and 129.5 million dilutive shares for the year ended December 31, 2012 and 2011, respectively.

 

11



 

Reconciliation of GAAP to Non-GAAP Pre-Tax (Loss)/Income from Continuing Operations — by Segment

 

Three Months Ended December 31, 2012

 

 

 

 

 

 

 

Other

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues - GAAP

 

$

2,461

 

 

 

 

 

 

Expenses - GAAP

 

9,573

 

 

 

 

 

Adjustments

 

(703

)(1)

 

 

 

 

Expenses - non GAAP

 

8,870

 

 

 

 

 

Pre-tax loss from continuing operations - non GAAP

 

$

(6,409

)

 

 

 

 

 

 

Three Months Ended September 30, 2012

 

 

 

 

 

Credit Products

 

Other

 

(In thousands)

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Revenues - GAAP

 

$

18,804

 

Revenues – GAAP

 

$

1,185

 

Expenses - GAAP

 

14,865

 

Expenses – GAAP

 

11,181

 

Adjustments

 

1,320

(2)

Adjustments

 

(1,285

)(1)

Expenses - non GAAP

 

16,185

 

Expenses – non GAAP

 

9,896

 

Pre-tax income from continuing operations - non GAAP

 

$

2,619

 

Pre-tax loss from continuing operations – non GAAP

 

$

(8,711

)

 


(1)         Represents legal, consulting and advisory fees incurred in connection with our strategic review process.

 

(2)         Represents the reversal of previously accrued severance expense (of which $1.0 million is non-cash stock-based compensation).

 

12



 

Reconciliation of GAAP to Non-GAAP Pre-Tax (Loss)/Income from Continuing Operations — by Segment (Continued)

 

Year Ended December 31, 2012

 

 

 

 

Credit Products

 

Other

(In thousands)

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Revenues - GAAP

 

$

74,432

 

Revenues - GAAP

 

$

7,709

 

 

 

 

 

 

 

 

 

Expenses - GAAP

 

70,692

 

Expenses - GAAP

 

63,614

 

 

 

 

 

 

 

 

 

Adjustments

 

(330

)(1)

Adjustments

 

(24,084

)(2)

 

 

 

 

 

 

 

 

Expenses - non GAAP

 

70,362

 

Expenses - non GAAP

 

39,530

 

 

 

 

 

 

 

 

 

Pre-tax income from continuing operations - non GAAP

 

$

4,070

 

Pre-tax loss from continuing operations - non GAAP

 

$

(31,821

)

 

Year Ended December 31, 2011

 

 

 

 

 

Investment Banking

 

Other

 

(In thousands)

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Revenues - GAAP

 

$

26,611

 

Revenues – GAAP

 

$

12,724

 

 

 

 

 

 

 

 

 

Adjustments

 

 

Adjustments

 

(2,330

)(3)

 

 

 

 

 

 

 

 

Revenues - non GAAP

 

26,611

 

Revenues – non GAAP

 

10,394

 

 

 

 

 

 

 

 

 

Expenses - GAAP

 

24,321

 

Expenses – GAAP

 

116,063

 

 

 

 

 

 

 

 

 

Adjustments

 

(2,294

)(4)

Adjustments

 

(82,180

)(5)

 

 

 

 

 

 

 

 

Expenses - non GAAP

 

22,027

 

Expenses – non GAAP

 

(33,883

)

 

 

 

 

 

 

 

 

Pre-tax loss from continuing operations - non GAAP

 

$

4,584

 

Pre-tax loss from continuing operations – non GAAP

 

$

(23,489

)

 


(1)  Represents severance expense recognized during the first quarter of 2012.

 

(2)  Represents the goodwill impairment charge recognized during the three months ended June 30, 2012 of $21.1 million, as well as $3.0 million of legal, consulting and advisory fees incurred in connection with our strategic review process.

 

(3)  Represents the bargain purchase gain related to the ClearPoint acquisition on January 3, 2011.

 

(4)  Represents (i) severance and stock-based compensation expense of $1.9 million related to the investment banking realignment, which resulted in the termination of 32 investment banking employees and certain administrative positions, and also includes (ii) other non-compensation expenses of $0.4 million as a result of the investment banking realignment.

 

(5)  Includes (i) goodwill and intangible impairment charges of $80.2 million related to the investment banking realignment, (ii) $1.7 million due to the resignation of the former interim CEO in the second quarter of 2011 and (iii) other non-compensation expenses of $0.2 million in connection with the company-wide strategic review conducted in the third quarter of 2011.

 

13



 

Return on Tangible Equity — Annualized (Non-GAAP)

 

Presented below is information on the Company’s annualized return on average tangible stockholders’ equity (Non-GAAP):

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(Dollars in thousands)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income from continuing operations

 

$

(10,783

)(1)

$

(2,821

)(1)

$

1,765

 

$

(24,397

)(1)

$

12,132

(1)

Plus: Amortization of intangibles, net of tax

 

96

 

71

 

70

 

278

 

1,540

 

Net (loss)/income from continuing operations, adjusted (non-GAAP)

 

(10,687

)

(2,750

)

1,835

 

(24,119

)

13,672

 

Net (loss)/income from continuing operations, adjusted (non-GAAP) - annualized

 

$

(42,748

)

$

(11,000

)

$

7,340

 

$

(24,119

)

$

13,672

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total stockholders’ equity (GAAP)

 

$

184,679

 

$

190,333

 

$

262,135

 

$

215,356

 

$

314,313

 

Less: Average intangible assets

 

(5,228

)

(4,002

)

(25,469

)

(13,042

)

(79,938

)

Average tangible stockholders’ equity (non-GAAP)

 

$

179,451

 

$

186,331

 

$

236,666

 

$

202,314

 

$

234,375

 

Annualized return on tangible equity (non-GAAP)

 

(23.8

)%

(5.9

)%

3.1

%

(11.9

)%

5.8

%

 

Return on Average Stockholders’ Equity - Annualized (GAAP)

 

Presented below is information on the Company’s annualized return on average stockholders’ equity, which is the most directly comparable GAAP metric to the Non-GAAP metric above:

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(Dollars in thousands)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income from continuing operations

 

$

(11,486

)

$

(2,801

)

$

1,765

 

$

(77,955

)

$

(64,084

)

Net (loss)/income from continuing operations - annualized

 

$

(45,944

)

$

(11,204

)

$

7,060

 

$

NM

(2)

$

NM

(2)

 

 

 

 

 

 

 

 

 

 

 

 

Average total stockholders’ equity

 

$

184,679

 

$

190,333

 

$

262,135

 

$

215,356

 

$

314,313

 

Annualized return on stockholders’ equity

 

(24.9

)%

(5.9

)%

2.7

%

NM

(2)

NM

(2)

 


(1)  Designates non-GAAP financial results.  A reconciliation of the Company’s GAAP results to non-GAAP financial results is set forth above under the caption “Reconciliation of GAAP to Non-GAAP Income from Continuing Operations.”

 

(2)  Not meaningful

 

14



 

Summary Results of Operations

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

(In thousands, except for per share amounts)

 

2012

 

2012

 

2011

 

2012

 

2011

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Principal transactions

 

$

7,908

 

$

15,652

 

$

17,515

 

$

52,771

 

$

89,108

 

Commissions

 

18,240

 

17,830

 

20,581

 

71,418

 

71,347

 

Investment banking

 

12,765

 

1,996

 

3,345

 

30,553

 

33,069

 

Investment gains, net

 

1,077

 

163

 

457

 

1,233

 

2,996

 

Interest income

 

11,165

 

6,879

 

19,993

 

48,796

 

66,194

 

Gain from bargain purchase - ClearPoint Funding, Inc. acquisition

 

 

 

 

 

2,330

 

Fees and other

 

2,288

 

2,959

 

2,965

 

11,651

 

8,041

 

Total revenues

 

53,443

 

45,479

 

64,856

 

216,422

 

273,085

 

Interest expense

 

2,567

 

2,149

 

3,616

 

12,827

 

11,913

 

Net revenues

 

50,876

 

43,330

 

61,240

 

203,595

 

261,172

 

Non-interest expenses

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

41,554

 

25,534

 

33,478

 

143,414

 

162,537

 

Impairment of goodwill and intangible assets

 

 

 

 

21,096

 

80,244

 

Clearing, settlement and brokerage

 

9,128

 

9,461

 

16,185

 

40,281

 

35,203

 

Communications and data processing

 

3,107

 

3,224

 

3,363

 

12,806

 

13,471

 

Professional fees

 

2,676

 

4,282

 

1,906

 

15,504

 

8,135

 

Occupancy, depreciation and amortization

 

2,272

 

2,277

 

2,344

 

8,919

 

8,455

 

Business development

 

897

 

823

 

1,137

 

3,719

 

4,620

 

Other

 

2,535

 

2,753

 

3,063

 

11,209

 

10,384

 

Total non-interest expenses

 

62,169

 

48,354

 

61,476

 

256,948

 

323,049

 

Loss from continuing operations before income taxes and discontinued operations

 

(11,293

)

(5,024

)

(236

)

(53,353

)

(61,877

)

Income tax expense/(benefit)

 

193

 

(2,223

)

(2,001

)

24,602

 

2,207

 

(Loss)/income from continuing operations

 

(11,486

)

(2,801

)

1,765

 

(77,955

)

(64,084

)

Income/(loss) from discontinued operations, net of taxes

 

224

 

33

 

383

 

265

 

(18,040

)

Net (loss)/income

 

$

(11,262

)

$

(2,768

)

$

2,148

 

$

(77,690

)

$

(82,124

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic (loss)/income per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

$

(0.02

)

$

0.01

 

$

(0.66

)

$

(0.52

)

Discontinued operations

 

 

 

 

 

(0.15

)

Net (loss)/income per share

 

$

(0.10

)

$

(0.02

)

$

0.02

 

$

(0.65

)

$

(0.67

)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss)/income per share

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.10

)

$

(0.02

)

$

0.01

 

$

(0.66

)

$

(0.52

)

Discontinued operations

 

 

 

 

 

(0.15

)

Net (loss)/income per share

 

$

(0.10

)

$

(0.02

)

$

0.02

 

$

(0.65

)

$

(0.67

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

119,046

 

118,699

 

122,647

 

118,977

 

123,439

 

Diluted

 

119,046

 

118,699

 

127,696

 

118,977

 

123,439

 

 

15



 

Consolidated Statements of Financial Condition (Unaudited)

 

 

 

December 31,

 

September 30,

 

December 31,

 

(In thousands, except for share and per share amounts)

 

2012

 

2012

 

2011

 

Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

44,868

 

$

28,482

 

$

36,672

 

Cash and securities segregated for regulatory and other purposes

 

13,000

 

4,000

 

9,612

 

Securities purchased under agreements to resell

 

 

132,608

 

1,523,227

 

Receivables from

 

 

 

 

 

 

 

Brokers, dealers and clearing organizations

 

12,824

 

125,008

 

58,776

 

Related parties

 

1,474

 

1,372

 

1,337

 

Others

 

12,563

 

10,029

 

16,161

 

Financial instruments owned, at fair value

 

1,096,181

 

1,100,731

 

1,554,660

 

Investments

 

20,478

 

19,253

 

18,310

 

Office equipment and leasehold improvements, net

 

5,311

 

5,726

 

6,735

 

Goodwill

 

1,212

 

 

21,096

 

Intangible assets

 

5,303

 

3,940

 

4,311

 

Income taxes receivable

 

7,394

 

4,807

 

12,102

 

Deferred tax assets, net

 

 

2,654

 

30,766

 

Other assets

 

9,030

 

9,106

 

9,791

 

Total Assets

 

$

1,229,638

 

$

1,447,716

 

$

3,303,556

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Payables to:

 

 

 

 

 

 

 

Brokers, dealers and clearing organizations

 

$

638,009

 

$

791,172

 

$

1,108,664

 

Related parties

 

2,944

 

594

 

4,939

 

Others

 

2,251

 

2,804

 

3,243

 

Securities sold under agreements to repurchase

 

159,386

 

103,562

 

1,478,081

 

Securities sold, but not yet purchased, at fair value

 

132,730

 

262,274

 

184,996

 

Secured borrowings

 

64,908

 

66,575

 

213,611

 

Accrued compensation

 

34,199

 

17,203

 

26,274

 

Accounts payable and accrued expenses

 

9,866

 

10,750

 

18,223

 

Income taxes payable

 

3,755

 

3,804

 

3,979

 

Deferred tax liabilities

 

 

 

1,622

 

Subordinated debt

 

595

 

595

 

801

 

Total Liabilities

 

1,048,643

 

1,259,333

 

3,044,433

 

Stockholders’ Equity

 

 

 

 

 

 

 

Common stock ($.01 par value; authorized 200,000,000 shares)

 

1,337

 

1,337

 

1,337

 

Additional paid-in capital

 

453,938

 

451,850

 

463,497

 

Deferred compensation

 

124

 

124

 

161

 

Accumulated deficit

 

(263,577

)

(254,172

)

(185,887

)

Treasury stock, at cost

 

(10,827

)

(10,756

)

(19,985

)

Total Stockholders’ Equity

 

180,995

 

188,383

 

259,123

 

Total Liabilities and Stockholders’ Equity

 

$

1,229,638

 

$

1,447,716

 

$

3,303,556

 

 

 

 

 

 

 

 

 

Common stock (in shares)

 

 

 

 

 

 

 

Shares issued:

 

133,769,219

 

133,769,219

 

133,714,786

 

Shares outstanding:

 

124,440,655

 

124,570,033

 

120,883,601

 

 

 

 

 

 

 

 

 

Treasury stock (in shares):

 

9,328,564

 

9,199,186

 

12,831,185

 

 

 

 

 

 

 

 

 

 

16



 

Conference Call Information

 

The Company will hold a conference call today, February 15, 2013, at 8:30 A.M. (EST).  This event can be accessed on the Investor Relations portion of the Gleacher & Company website at www.gleacher.com, as well as through the Thomson StreetEvents Network.  Individual investors can listen to the call at www.earnings.com, Thomson’s individual investor portal, powered by StreetEvents.  Institutional investors can access the call via Thomson StreetEvents (www.streetevents.com), a password protected event management site.  To participate on the call, please dial 888.680.0869 (domestic) or 617.213.4854 (international), participant passcode 28016360, or request the Gleacher & Company earnings call.

 

Pre-registration is available at any time prior to and during the call, which provides immediate entry into the call.  Pre-registration can be accessed at the following website:

 

www.theconferencingservice.com/prereg/key.process?key=PARRDNEUV

 

For those who cannot listen to the live broadcast, a recording of the call will be available for seven days following the call by dialing 888.286.8010 (domestic) or 617.801.6888 (international), participant passcode 55469646.

 

About Gleacher & Company

 

Gleacher & Company, Inc. (Nasdaq: GLCH) is an independent investment bank that provides corporate and institutional clients with strategic and financial advisory services, including merger and acquisition, restructuring, recapitalization, and strategic alternative analysis, as well as capital raising, research based investment analysis, and securities brokerage services, and, through a subsidiary, engages in residential mortgage lending. For more information, please visit www.gleacher.com.

 

Forward Looking Statements

 

This press release contains “forward-looking statements.”  These statements are not historical facts but instead represent the Company’s belief or plans regarding future events, many of which are inherently uncertain and outside of the Company’s control.  The Company often, but not always, identifies forward-looking statements by using words or phrases such as “anticipate,” “estimate,” “plan,” “project,” “target,” “expect,” “continuing,” “ongoing,” “believe” and “intend.”  The Company’s forward-looking statements are based on facts as the Company understands them at the time the Company makes any such statement as well as estimates and judgments based on these facts.  The Company’s forward-looking statements may turn out to be inaccurate for a variety of reasons, many of which are outside of its control.   Factors that could render the Company’s forward-looking statements subsequently inaccurate include the conditions of the securities markets, generally, and demand for the Company’s services within those markets, the risk of further credit rating downgrades of the U.S. government by major credit rating agencies, the impact of international and domestic sovereign debt uncertainties, the possibilities of localized or global economic recession and other risks and factors identified from time to time in the Company’s filings with the Securities and Exchange Commission.  Moreover, the Company’s previously disclosed strategic plan, which is designed to improve its operating results, is still being implemented. This plan may not be successful.  You are cautioned not to place undue reliance on these forward-looking statements.  The Company does not undertake to update any of its forward-looking statements.

 

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For Additional Information Please Contact:

 

Investor Contact

 

Media Contact

Gleacher & Company, Inc.

 

Joele Frank, Wilkinson Brimmer Katcher

Thomas J. Hughes

 

Andrew Siegel / Nick Lamplough

Chief Executive Officer

 

212.355.4449

212.273.7100

 

 

 

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