UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM
TO
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Commission File Number: 000-51730
Thomas Weisel Partners Group, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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20-3550472
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Montgomery Street
San Francisco, California 94104
(415) 364-2500
(Address, including zip code, and telephone number, including area code, of registrants principal executive office)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
þ
Yes
o
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
o
Yes
þ
No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As
of May 8, 2008 there were 31,295,363 shares of the registrants common stock outstanding,
including 6,639,478 exchangeable shares of TWP Acquisition Company (Canada), Inc., a wholly-owned
subsidiary of the registrant. Each exchangeable share is exchangeable at any time into a share of
common stock of the registrant, entitles the holder to dividend and other rights substantially
economically equivalent to those of a share of common stock, and, through a voting trust, entitles
the holder to a vote on matters presented to common shareholders.
Where You Can Find More Information
We are required to file annual, quarterly and current reports, proxy statements and other
information required by the Securities Exchange Act of 1934, as amended, with the SEC. You may read
and copy any document we file with the SEC at the SECs public reference room located at
100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are also available to the public
from the SECs internet site at http://www.sec.gov.
We maintain a public internet site at http://www.tweisel.com and make available free of charge
through this site our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, Proxy Statements and Forms 3, 4 and 5 filed on behalf of directors and executive
officers, as well as any amendments to those reports filed or furnished pursuant to the Exchange
Act as soon as reasonably practicable after we electronically file such material with, or furnish
it to, the SEC. We also post on our website the charters for our Board of Directors Audit
Committee, Compensation Committee and Corporate Governance and Nominations Committee, as well as
our Corporate Governance Guidelines, our Code of Conduct and Ethics governing our directors,
officers and employees and other related materials. In addition, we also post on our website,
under Investment Banking Transactions and International Investment Banking Completed
Transactions, links to listings of our completed, filed and announced investment banking
transactions. The information on our website is not part of this Quarterly Report.
Our Investor Relations Department can be contacted at Thomas Weisel Partners Group, Inc.,
One Montgomery Street, San Francisco, California 94104, Attention: Investor Relations; telephone:
415-364-2500; e-mail: investorrelations@tweisel.com.
When we use the terms Thomas Weisel Partners, we, us, our, the firm and the
company we mean Thomas Weisel Partners Group, Inc., a Delaware corporation, and its consolidated
subsidiaries, taken as a whole, as well as any predecessor entities, unless the context otherwise
indicates.
-ii-
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q in Item 2 Managements Discussion and Analysis of
Financial Condition and Results of Operations and in other sections includes forward-looking
statements. In some cases, you can identify these statements by forward-looking words such as
may, might, will, should, expect, plan, anticipate, believe, estimate, predict,
potential, intend or continue, the negative of these terms and other comparable terminology.
These forward-looking statements, which are subject to risks, uncertainties and assumptions about
us, may include expectations as to our future financial performance, which in some cases may be
based on our growth strategies and anticipated trends in our business. These statements are based
on our current expectations and projections about future events. There are important factors that
could cause our actual results, level of activity, performance or achievements to differ materially
from the results, level of activity, performance or achievements expressed or implied by the
forward-looking statements. In particular, you should consider the numerous risks outlined in Part
I, Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 and in Part II, Item 1A Risk Factors of this Quarterly Report on Form 10-Q.
See Where You Can Find More Information on the preceding page.
Although we believe the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness
of any of these forward-looking statements. You should not rely upon forward-looking statements as
predictions of future events. We are under no duty to update any of these forward-looking
statements after the date of this filing to conform our prior forward-looking statements to actual
results or revised expectations.
Forward-looking statements include, but are not limited to, the following:
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Our statements in Part I, Item 1 Unaudited Condensed Consolidated Financial
Statements and in Part I, Item 3 Quantitative and Qualitative Disclosures About Market
Risk regarding the carrying value, fair value, applied discount and expected maturity date
of our Contingent Payment Senior Note, because they are based on estimates regarding the
term of repayment of such note, which estimates, in turn, are based on projected
distribution events.
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Our statement in Part I, Item 1 Unaudited Condensed Consolidated Financial
Statements that, with respect to an aggregate of $20.4 million of remaining commitments we
have made to unaffiliated funds, we currently anticipate transferring these investments and
the related commitments to funds sponsored by us.
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Our statement in Part I, Item 1 Unaudited Condensed Consolidated Financial
Statements that as of March 31, 2008 there was $37.0 million of total unrecognized
compensation expense related to non-vested restricted stock unit awards that is expected to
be recognized over a weighted-average period of 3.2 years, and our statement in Part I,
Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations that as of March 31, 2008, there was (i) $5.7 million of unrecognized
compensation expense related to non-vested restricted stock unit awards made in connection
with our initial public offering and that this cost is expected to be recognized over a
weighted-average period of 0.8 years, and (ii) $31.3 million of unrecognized compensation
expense related to non-vested restricted stock unit awards made subsequent to our initial
public offering and that this cost is expected to be recognized over a weighted-average
period of 3.5 years, in each case because these statements depend on estimates of employee
attrition in the future.
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Our statements in Part I, Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations that -
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one of our strategies is to expand our trading in Canadian securities as
our energy and mining analysts begin to make a greater impact on our U.S. and
European accounts, and we currently plan to hire U.S. based energy bankers and
analysts to capitalize on our capabilities in these sectors;
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o
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during the three months ended June 30, 2008 we plan to reduce headcount by 13%;
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o
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we currently plan to continue to selectively upgrade our talent pool, particularly in revenue generating areas;
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we may carry out repurchases of our common stock from time to time in the
future and our Board of Directors may authorize additional repurchases in the
future, in each case for the purpose of settling obligations to deliver common stock
in the future to employees who have received Restricted Stock Units under our Equity
Incentive Plan;
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we expect the electronic trading program to increase our market share of
the expanding volume of shares traded by institutional clients through alternative
trading platforms; and
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o
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we believe that our current level of equity capital, which includes a
portion of the net proceeds from our follow-on offering of common stock, funds
anticipated to be provided by operating activities and funds available under
temporary loan agreements, will be adequate to meet our liquidity and regulatory
capital requirements for the next 12 months.
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-iii-
PART I FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share and per share data)
(Unaudited)
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March 31, 2008
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December 31, 2007
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ASSETS
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Cash and cash equivalents
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$
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110,538
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$
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157,003
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Restricted cash
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6,718
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6,718
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Securities owned
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217,714
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220,440
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Receivable from clearing brokers
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5,990
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Corporate finance and syndicate receivablesnet of allowance for doubtful accounts of $1,168 and $725,
respectively
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10,116
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18,609
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Investments in partnerships and other securities
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55,783
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60,502
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Other investments
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12,911
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51,184
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Property and equipmentnet of depreciation and amortization of $97,243 and $93,389, respectively
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22,661
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21,317
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Receivables from related partiesnet of allowance for doubtful loans of $1,849 and $1,849, respectively
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3,162
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3,190
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Goodwill
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95,841
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Other intangible assetsnet of amortization of $3,360 and zero, respectively
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40,573
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Deferred tax asset
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19,886
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21,093
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Other assets
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36,258
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26,624
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Total assets
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$
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638,151
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$
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586,680
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LIABILITIES AND SHAREHOLDERS EQUITY
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Liabilities:
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Securities sold, but not yet purchased
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$
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146,012
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$
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163,933
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Payable to clearing brokers
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15,583
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4,778
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Accrued compensation
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13,043
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56,863
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Accrued expenses and other liabilities
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59,856
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60,094
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Notes payable
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26,581
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27,385
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Deferred tax liability
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14,835
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Total liabilities
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275,910
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313,053
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Commitments and contingencies (See Note 14 to the unaudited condensed consolidated financial statements)
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Shareholders equity:
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Exchangeable common stockpar value $0.01 per share, 6,639,478 and zero shares authorized, issued
and outstanding, respectively
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66
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Common stockpar value $0.01 per share, 100,000,000 shares authorized, 25,779,768 and 25,235,470
shares issued, respectively
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258
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252
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Additional paid-in capital
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469,355
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358,720
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Accumulated deficit
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(102,993
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)
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(85,188
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)
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Accumulated other comprehensive lossnet of tax benefits
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(4,031
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)
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(157
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)
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Treasury stockat cost, 62,600 and zero shares, respectively
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(414
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)
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Total shareholders equity
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362,241
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273,627
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Total liabilities and shareholders equity
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$
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638,151
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$
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586,680
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See accompanying notes to unaudited condensed consolidated financial statements.
1
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended March 31,
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2008
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2007
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Revenues:
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Investment banking
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$
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11,496
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$
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39,292
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Brokerage
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36,134
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28,856
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Asset management
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349
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5,715
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Interest income
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3,025
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4,348
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Other revenue
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920
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Total revenues
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51,004
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79,131
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Interest expense
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(2,080
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)
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(2,442
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)
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Net revenues
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48,924
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76,689
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Expenses excluding interest:
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Compensation and benefits
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40,389
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43,990
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Brokerage execution, clearance and account administration
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6,478
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4,713
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Communications and data processing
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5,864
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4,711
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Depreciation and amortization of property and equipment
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1,887
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1,724
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Amortization of other intangible assets
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3,360
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Marketing and promotion
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4,047
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3,613
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Occupancy and equipment
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5,387
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4,051
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Other expense
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7,964
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5,005
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Total expenses excluding interest
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75,376
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67,807
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Income (loss) before taxes
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(26,452
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)
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8,882
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Provision for taxes (tax benefit)
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(8,647
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)
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3,481
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Net income (loss)
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$
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(17,805
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)
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$
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5,401
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Earnings (loss) per share:
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Basic earnings (loss) per share
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$
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(0.54
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)
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$
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0.21
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Diluted earnings (loss) per share
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$
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(0.54
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)
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$
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0.20
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Weighted average shares used in computation of per share data:
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Basic weighted average shares outstanding
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32,989
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26,070
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Diluted weighted average shares outstanding
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32,989
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26,882
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See accompanying notes to unaudited condensed consolidated financial statements.
2
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended March 31,
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2008
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2007
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CASH FLOW FROM OPERATING ACTIVITIES:
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Net income (loss)
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$
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(17,805
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)
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$
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5,401
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Non-cash items included in net income (loss):
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Depreciation and amortization of property and equipment
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1,887
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1,724
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Amortization of other intangible assets
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3,360
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Share-based compensation expense
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3,939
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2,679
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Deferred tax benefit
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1,207
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|
464
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Provision for doubtful corporate finance and syndicate receivable accounts
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443
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(39
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)
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Provision (credit) for facility lease loss
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(208
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)
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Deferred rent expense
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(173
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)
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(167
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)
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Unrealized
and realized loss (gain) on partnership and other investmentsnet
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2,045
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(1,393
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)
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Interest amortization on notes payable
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145
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149
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Other
|
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21
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Net effect of changes in operating assets and liabilitiesnet of effects from acquisition:
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Securities owned and securities sold, but not yet purchasednet
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|
(5,977
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)
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|
12,048
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|
Corporate finance and syndicate receivablesnet
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|
|
11,983
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|
|
|
10,030
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Distributions from investment partnerships
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|
934
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|
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|
569
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Other assets
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|
|
(10,421
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)
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|
|
(903
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)
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Receivable from/payable to clearing brokersnet
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11,611
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|
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(25,566
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)
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Accrued expenses and other liabilities
|
|
|
(17,137
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)
|
|
|
(1,572
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)
|
Accrued compensation
|
|
|
(56,948
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)
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|
(13,865
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)
|
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Net cash used in operating activities
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|
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(70,907
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)
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(10,628
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)
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CASH FLOW FROM INVESTING ACTIVITIES:
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Purchase of property and equipment
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(1,395
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)
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(393
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)
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Acquisitionnet of cash received
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(8,109
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)
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|
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Partnership investments purchased
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(1,180
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)
|
|
|
(536
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)
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Purchases of other investments
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|
|
(3,292
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)
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|
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(37,687
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)
|
Proceeds from sale of other investments
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|
|
41,603
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|
|
|
24,520
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|
|
|
|
|
|
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|
Net cash provided by (used in) investing activities
|
|
|
27,627
|
|
|
|
(14,096
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
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Addition of capital lease obligation
|
|
|
103
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|
|
|
|
|
Repayment of capital lease obligation
|
|
|
(58
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)
|
|
|
(33
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)
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Repayment of notes payable
|
|
|
(934
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)
|
|
|
(933
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)
|
Cash paid
for net settlement of equity awards
|
|
|
(824
|
)
|
|
|
|
|
Repurchase of common stock
|
|
|
(414
|
)
|
|
|
(461
|
)
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(2,127
|
)
|
|
|
(1,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(1,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(46,465
|
)
|
|
|
(26,151
|
)
|
CASH AND CASH EQUIVALENTSBeginning of period
|
|
|
157,003
|
|
|
|
144,085
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTSEnd of period
|
|
$
|
110,538
|
|
|
$
|
117,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURE
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,868
|
|
|
$
|
2,214
|
|
|
|
|
|
|
|
|
Cash paid for taxes
|
|
$
|
20
|
|
|
$
|
1,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing activities:
|
|
|
|
|
|
|
|
|
Issuance of
common shares and exchangeable common shares for acquisition of
Westwind
|
|
$
|
107,604
|
|
|
$
|
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
3
THOMAS WEISEL PARTNERS GROUP, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Organization
Thomas Weisel Partners Group, Inc., a Delaware corporation, together with its subsidiaries
(collectively, the Company), is an investment banking firm headquartered in San Francisco. The
Company operates and is managed as a single operating segment providing investment services that
include investment banking, brokerage, research and asset management. The Company operates on an
integrated basis to best meet the needs of its clients.
The Company conducts its investment banking, brokerage and research business through the
following subsidiaries:
|
|
|
Thomas Weisel Partners LLC (TWP) TWP is a registered broker-dealer under the
Securities Exchange Act of 1934, is a member of the New York Stock Exchange, Inc.
(NYSE), American Stock Exchange and the Financial Industry Regulatory Authority
(FINRA) and is also a registered introducing broker under the Commodity Exchange Act
and a member of the National Futures Association. TWP introduces on a fully disclosed
basis its proprietary and customer securities transactions to other broker-dealers for
clearance and settlement. TWP conducts certain of its activities through affiliate
branch offices in Canada and the United Kingdom (U.K.) and through a representative
office in Switzerland.
|
|
|
|
|
Thomas Weisel Partners Canada Inc. (TWPC) TWPC is an investment dealer registered
in the Canadian provinces of Ontario, Quebec, Alberta, British Columbia, Saskatchewan,
Manitoba and Nova Scotia and is a member of the Investment Dealers Association of
Canada. TWPC introduces on a fully disclosed basis its proprietary and customer
securities transactions to another broker-dealer for clearance and settlement.
|
|
|
|
|
Thomas Weisel International Private Limited (TWIPL) and Thomas Weisel Partners (UK)
Limited (TWP UK) TWIPL and TWP UK are U.K. securities firms authorized by the
Financial Services Authority in the United Kingdom.
|
|
|
|
|
Thomas Weisel Partners (USA), Inc. (TWP USA) TWP USA is a U.S. broker-dealer and
is registered with the Securities and Exchange Commission and FINRA. Under an operating
agreement it has with TWPC, TWP USA introduces on a fully disclosed basis its
proprietary and customer securities transactions to another broker-dealer for clearance
and settlement.
|
TWPC, TWP UK and TWP USA were acquired by the Company in January 2008 as a result of its
acquisition of Westwind Capital Corporation (see Note 2 Acquisition).
The Company primarily conducts its asset management business through Thomas Weisel Capital
Management LLC (TWCM), a registered investment adviser under the Investment Advisers Act of 1940,
which is a general partner of a series of investment funds in venture capital and fund of funds
through the following subsidiaries (the Asset Management Subsidiaries):
|
|
|
Thomas Weisel Global Growth Partners LLC (TWGGP), a registered investment adviser
under the Investment Advisers Act of 1940, which provides fund management and private
investor access to venture and growth managers. TWGGP also manages investment funds that
are active buyers of secondary interests in private equity funds, as well as portfolios
of direct interests in venture-backed companies;
|
|
|
|
|
Thomas Weisel Healthcare Venture Partners LLC (TWHVP), the managing general partner
of a venture capital fund that invests in the emerging life sciences and medical
technology sectors, including medical devices, specialty pharmaceuticals, emerging
biopharmaceuticals, drug delivery technologies and biotechnology;
|
|
|
|
|
Thomas Weisel India Opportunity LLC (TWIO), the managing general partner of a fund
of funds targeting venture capital and private equity funds primarily investing in growth
businesses in India; and
|
|
|
|
|
Thomas Weisel Venture Partners LLC (TWVP), the managing general partner of an early
stage venture capital fund that invests in emerging information technology companies.
|
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP) for interim
financial information and Regulation S-X, Article 10 under the Securities Exchange Act of 1934.
Because the Company provides investment services to its clients, it follows certain accounting
guidance used by the brokerage and investment industry.
The preparation of the Companys condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the condensed consolidated
4
financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual amounts could differ
from those estimates and such differences could be material to the condensed consolidated financial
statements.
The condensed consolidated financial statements and these notes are unaudited and exclude some
of the disclosures required in annual financial statements. Management believes it has made all
necessary adjustments (consisting of only normal recurring items) so that the condensed
consolidated financial statements are presented fairly and that estimates made in preparing its
condensed consolidated financial statements are reasonable and prudent. The condensed consolidated
statements of operations may not be indicative of future results.
These condensed consolidated financial statements should be read in conjunction with the
Companys consolidated financial statements included in its Annual Report on Form 10-K for the year
ended December 31, 2007.
NOTE 2 ACQUISITION
On January 2, 2008, the Company acquired Westwind Capital Corporation (Westwind), a
full-service, institutionally oriented, independent investment bank focused on the energy and
mining sectors. Westwind, which was founded in 2002 and headquartered in Toronto, has additional
offices in Calgary and the U.K. Under the agreement, the Company indirectly acquired 100 percent
of Westwinds outstanding shares and Westwind became an indirect subsidiary of the Company. The
Company acquired Westwind in order to further expand its geographic coverage in both Canada and
the U.K., as well as expand its industry coverage into the energy and mining sectors of the
economy.
The purchase price was allocated between the business acquisition and the non-compete
agreements executed with Westwinds employee shareholders on a fair value basis. Total
consideration was approximately $155 million, which consisted of $45 million in cash, 7,009,112
shares of the Companys common stock valued at $15.35 per share (based on the average closing
price over a five day period starting two days prior to the acquisition announcement date of
October 1, 2007 and ending two days after the announcement date) and direct acquisition costs of
$2.8 million consisting primarily of legal, accounting and advisory fees. Common stock issued
includes 6,639,478 exchangeable shares, which are shares issued by a Canadian subsidiary of the
Company and are exchangeable for shares of the Companys common stock.
The Company accounted for its acquisition of Westwind utilizing the purchase method as
required by Statement of Financial Accounting Standards No. 141,
Business Combinations
(SFAS
No. 141). The results of operations for the acquired business are included in the accompanying
condensed consolidated statements of operations since the acquisition date and, in accordance
with the purchase method, all assets and liabilities were recorded at fair value as of the
acquisition date.
The following sets forth the Companys preliminary allocation of the purchase price
consideration (
in thousands
):
|
|
|
|
|
Cash
|
|
$
|
36,891
|
|
Securities owned
|
|
|
9,953
|
|
Goodwill
|
|
|
98,315
|
|
Other intangible assets
|
|
|
21,500
|
|
Other tangible liabilities assumed net
|
|
|
(19,398
|
)
|
Deferred tax liabilities on acquired identifiable intangible assets
|
|
|
(7,275
|
)
|
|
|
|
|
Total purchase price allocation for the business acquisition
|
|
|
139,986
|
|
Non-compete intangible asset
|
|
|
23,321
|
|
Deferred tax liability on acquired non-compete intangible asset
|
|
|
(7,880
|
)
|
|
|
|
|
Total consideration
|
|
$
|
155,427
|
|
|
|
|
|
Under business combination accounting, the total purchase price was allocated to Westwinds
net tangible and identifiable intangible assets based on their estimated fair values as of January
2, 2008. The excess of the purchase price over the net tangible and identifiable intangible assets
was recorded as goodwill. In addition to the acquisition of the business, the Company also entered
into non-compete agreements with the majority of the Westwind employee shareholders who became
employees of the Company subsequent to the acquisition. These non-compete agreements generally
apply for a period of 1 to 3 years following the employees
departure from the Company (if that departure occurs within the first
three years following the Companys acquisition of Westwind) and include
a liquidated damages provision that would require employees who breach the non-compete agreement to
pay the Company an amount equal to 50% of the consideration received for their shares in Westwind.
The allocation of the purchase price is preliminary and estimates and assumptions are subject
to change. The primary areas of the purchase price allocation that are not yet finalized relate to
the valuation of intangible assets, goodwill, deferred tax liabilities and non-publicly traded
securities, as well as direct acquisition costs and certain legal matters.
The goodwill balance recorded as of the acquisition date of $98.3 million is not deductible
for tax purposes and is a result of the premium paid to acquire a full service investment bank with
seasoned banking and institutional personnel primarily focused on the energy and mining sectors of
the economy. Acquiring Westwind provides the Company access
5
to growth verticals, energy and mining, and a greater international presence. The difference
between the goodwill balance recorded on the acquisition date and the amount presented within the
condensed consolidated statements of financial condition is due to a currency translation
adjustment of $2.5 million.
The following sets forth the other intangible assets recorded as a result of the Westwind
acquisition (
dollar amounts in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
|
|
|
Fair Value
|
|
|
Amortization
|
|
|
Value
|
|
|
|
|
|
|
January 2,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
Useful Life
|
|
Customer relationships
|
|
$
|
18,800
|
|
|
$
|
1,215
|
|
|
$
|
17,585
|
|
|
7.5 years
|
Non-compete agreements
|
|
|
23,321
|
|
|
|
1,465
|
|
|
|
21,856
|
|
|
3.0 years
|
Investment banking backlog
|
|
|
2,700
|
|
|
|
680
|
|
|
|
2,020
|
|
|
1.0 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets
|
|
$
|
44,821
|
|
|
$
|
3,360
|
|
|
$
|
41,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between the net book value of the other intangible assets presented above and
the amount presented within the consolidated statements of financial condition is due to a currency
translation adjustment of $0.9 million.
In performing the purchase price allocation, the Company considered, among other factors, its
intention for future use of the acquired assets, analyses of historical financial performance and
estimates of future performance of Westwinds operations. The fair value of other intangible
assets was based on the income approach.
The following sets forth the amortization of the other intangible assets based on accelerated
and straight-line methods of amortization over the respective useful lives as of March 31, 2008 (
in
thousands
):
|
|
|
|
|
Remainder of 2008
|
|
$
|
11,989
|
|
2009
|
|
|
11,569
|
|
2010
|
|
|
10,688
|
|
2011
|
|
|
2,275
|
|
2012
|
|
|
1,755
|
|
Thereafter
|
|
|
3,185
|
|
|
|
|
|
Total amortization
|
|
$
|
41,461
|
|
|
|
|
|
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information for the three months ended March
31, 2007 give effect to the Companys acquisition of Westwind as if the acquisition had occurred
as of January 1, 2007. The unaudited pro forma financial information is based on historical
financial statements of the Company and Westwind.
The unaudited pro forma financial information was prepared using the purchase method of
accounting under SFAS No. 141 with the Company treated as the accounting acquiror. The unaudited
pro forma financial information does not purport to be indicative of the results that would have
actually been achieved had such transactions been completed as of the assumed date and for the
period presented, or which may be achieved in the future.
The following sets forth the unaudited pro forma financial information for the three months
ended March 31, 2007 (
in thousands, except per share data
):
|
|
|
|
|
Pro forma net revenues
|
|
$
|
93,017
|
|
Pro forma income before taxes
|
|
$
|
6,719
|
|
Pro forma net income
|
|
$
|
3,888
|
|
|
|
|
|
|
Pro forma earnings per share:
|
|
|
|
|
Pro forma basic earnings per share
|
|
$
|
0.12
|
|
Pro forma diluted earnings per share
|
|
$
|
0.11
|
|
|
|
|
|
|
Pro forma weighted average shares used in the computation of per share data:
|
|
|
|
|
Pro forma basic weighted average shares outstanding
|
|
|
33,079
|
|
Pro forma diluted weighted average shares outstanding
|
|
|
33,891
|
|
6
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 157 Fair Value Measurements (SFAS No.
157)
. In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157,
which defines fair value, establishes a framework for measuring fair value in GAAP and expands
disclosures about fair value measurements. The primary focus of this statement is to increase
consistency and comparability in fair value measurements, as well as provide better information
about the extent to which fair value is used to measure recognized assets and liabilities, the
inputs used to develop the measurements and the effect fair value measurements have on earnings for
the period, if any. The Company adopted SFAS No. 157 as of January 1, 2008. Adoption of SFAS No.
157 did not have a material impact on the Companys condensed consolidated statements of financial
condition, operations and cash flows. Under provisions set forth in
FSP 157-2, the Company has elected to defer adoption of SFAS No. 157 until
January 1, 2009 for nonfinancial assets and nonfinancial liabilities that are not recognized or
disclosed at fair value in the financial statements on a recurring basis, for which, the Company
does not expect the adoption of SFAS No. 157 to have a material impact on its condensed
consolidated statements of financial condition, results of operations or cash flows in future
periods.
The Companys financial assets and liabilities measured and reported at fair value are
classified and disclosed in one of the following categories:
|
|
|
Level 1 Quoted prices are available in active markets for identical investments as of
the reporting date. The type of investments included in Level I include listed equities. As
required by SFAS No. 157, the Company does not adjust the quoted price for these
investments, even in situations where it holds a large position and a
sale could reasonably be expected to affect the quoted price.
|
|
|
|
|
Level 2 Pricing inputs are other than quoted prices in active markets, which are
either directly or indirectly observable as of the reporting date, and fair value is
determined through the use of models or other valuation methodologies. Investments which
are generally included in this category are convertible bonds, U.S. Treasury securities and
other debt securities.
|
|
|
|
|
Level 3 Pricing inputs are unobservable for the investment and includes situations
where there is little, if any, market activity for the investment. The inputs into the
determination of fair value require significant management judgment or estimation.
Investments that are included in this category generally are general partnership interests
in private investment funds, warrants and convertible bonds that cannot be publicly offered
or sold unless registration has been affected under the Securities Act of 1933.
|
In certain cases, the inputs used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, the financial asset or liabilitys level within the fair value
hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The Companys assessment of the significance of a particular input to the fair value measurement in
its entirety requires judgment, and it considers factors specific to the financial asset or
liability.
The Company has valued its investments, in the absence of observable market prices, using the
valuation methodologies described above applied on a consistent basis. Where little market activity
exists for a financial asset or liability, managements determination of fair value is based on
the best information available in the circumstances, and may incorporate managements own
assumptions and involves a significant degree of managements judgment.
Investments for which market prices are not observable are generally either private
investments in the equity of operating companies or investments in funds managed by others. Fair
values of private investments are determined by reference to public market or private transactions
or valuations for comparable companies or assets in the relevant asset class when such amounts are
available. Generally these valuations are derived by multiplying a key performance metric of the
investee company or asset by the relevant valuation multiple observed for comparable companies or
transactions, adjusted by management for differences between the investment and the referenced
comparable. Private investments may also be valued at cost for a period of time after an
acquisition as the best indicator of fair value.
The determination of fair value using these Level 3 methodologies takes into consideration a
range of factors, including but not limited to the price at which the investment was acquired, the
nature of the investment, local market conditions, trading values on public exchanges for
comparable securities, current and projected operating performance and financing transactions
subsequent to the acquisition of the investment. These valuation methodologies involve a
significant degree of management judgment.
Statement of Financial Accounting Standards No. 159 The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS No. 159)
. In February 2007, the FASB issued SFAS No. 159,
which permits entities to choose to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value and establishes
presentation and disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and liabilities. The Company
adopted SFAS No. 159 as of January 1, 2008. The Company has elected not to apply the provisions of
SFAS No. 159 to fair value its assets and liabilities and instead will continue to fair value its
assets and liabilities according to preexisting fair value policies for specified types of eligible
items.
7
Statement of Financial Accounting Standards No. 141R Business Combinations (SFAS No.
141R).
In December 2007, the FASB issued SFAS No. 141R, which improves the relevance,
representational faithfulness and comparability of the information that a reporting entity provides
in its financial reports about a business combination and its effects. SFAS No. 141R applies
prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008. Early adoption of
SFAS No. 141R is not permitted. The Company is currently evaluating the impact, if any, that the
adoption of SFAS No. 141R will have on its condensed consolidated statements of financial
condition, operations and cash flows.
Statement of Financial Accounting Standards No. 160 Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (SFAS No. 160).
In December 2007,
the FASB issued SFAS No. 160, which improves the relevance, comparability and transparency of the
financial information that a reporting entity provides in its consolidated financial statements by
establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008. Early adoption of SFAS
No. 160 is not permitted. The Company is currently evaluating the impact, if any, that the adoption
of SFAS No. 160 will have on its condensed consolidated statements of financial condition,
operations and cash flows.
Statement of Financial Accounting Standards No. 161 Disclosures about Derivative
Instruments and Hedging Activities an Amendment of FASB Statement No. 133 (SFAS No. 161).
In
March 2008, the FASB issued SFAS No. 161, which enhances disclosures about an entitys derivative
instruments and hedging activities and thereby improves the transparency of financial reporting.
SFAS No. 161 is effective for financial statements issued for fiscal years, and interim periods
within those fiscal years, beginning after November 15, 2008. Early adoption of SFAS No. 161 is
encouraged. SFAS No. 161 encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The Company is currently evaluating the impact, if any, that the
adoption of SFAS No. 161 will have on its condensed consolidated statements of financial condition,
operations and cash flows.
NOTE 4 SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED
Securities owned and securities sold, but not yet purchased were as follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
Sold, But
|
|
|
|
|
|
|
Sold, But
|
|
|
|
|
|
|
|
Not Yet
|
|
|
|
|
|
|
Not Yet
|
|
|
|
Owned
|
|
|
Purchased
|
|
|
Owned
|
|
|
Purchased
|
|
Equity securities
|
|
$
|
38,273
|
|
|
$
|
106,880
|
|
|
$
|
30,957
|
|
|
$
|
130,252
|
|
Convertible bonds
|
|
|
172,953
|
|
|
|
23,301
|
|
|
|
189,483
|
|
|
|
18,351
|
|
Warrants
|
|
|
6,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
|
|
|
|
15,831
|
|
|
|
|
|
|
|
15,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities owned and securities sold, but not yet purchased
|
|
$
|
217,714
|
|
|
$
|
146,012
|
|
|
$
|
220,440
|
|
|
$
|
163,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2008 and December 31, 2007, securities sold, but not yet purchased were
collateralized by securities owned that are held at the clearing brokers.
Convertible bonds include certain securities that cannot be publicly offered or sold unless
registration has been affected under the Securities Act of 1933. The estimated fair value of these
securities included in the convertible bonds owned was $13.2 million and $15.9 million at March 31,
2008 and December 31, 2007, respectively.
The warrants provide the Company with the right to purchase common shares in both public and
private companies. All warrants were non-transferable as of March 31, 2008 and certain of them
have restricted periods during which the warrant may not be exercised.
NOTE 5 INVESTMENTS IN PARTNERSHIPS AND OTHER SECURITIES
Investments in partnerships and other securities primarily consist of investments in private
equity partnerships and direct investments in private companies. Included in private equity
partnerships are the general partner investments in investment partnerships and the adjustments
recorded to reflect these investments at fair value. The Company waived certain management fees
with respect to certain of these partnerships through March 31, 2007. These waived fees constitute
deemed contributions to the investment partnerships that serve to satisfy the Companys general
partner commitment, as provided in the underlying investment partnerships partnership agreements.
The Company may be allocated a special profits interest in respect of previously waived management
fees based on the subsequent investment performance of the respective partnerships.
The investment partnerships in which the Company is a general partner may allocate carried
interest and make carried interest distributions to the general partner if the partnerships
investment performance reaches a threshold as defined in the respective partnership agreements.
The Company recognizes the allocated carried interest if and when this threshold is met.
8
NOTE 6 OTHER INVESTMENTS
Other investments consist of investments with maturities greater than three months from the
purchase date and were recorded at fair value as follows (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Auction rate securities
|
|
$
|
10,114
|
|
|
$
|
46,150
|
|
Municipal debt securities
|
|
|
1,016
|
|
|
|
4,016
|
|
Other
|
|
|
1,781
|
|
|
|
1,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other investments
|
|
$
|
12,911
|
|
|
$
|
51,184
|
|
|
|
|
|
|
|
|
The auction rate securities (ARS) are variable rate debt instruments, having long-term
maturity dates (approximately 17 to 32 years), but whose interest rates are reset through an
auction process, most commonly at intervals of 7, 28 and 35 days. The interest earned on these
investments is exempt from Federal income tax. All of the Companys auction rate securities are
backed by pools of student loans and all were rated AAA/Aaa at March 31, 2008 and December 31,
2007.
In January 2008, the Company sold a substantial portion of its auction rate securities
holdings through the normal auction process and used the proceeds to fund its acquisition of
Westwind. The net proceeds from sales during the three months ended March 31, 2008 were $35.8
million.
During the three months ended March 31, 2008 liquidity issues in the global credit markets
resulted in the failure of auctions for the Companys ARS. The Company continues to receive
interest when due on its ARS at a weighted-average Federal tax exempt interest rate of 4.6% as of
March 31, 2008 and expects to continue to receive interest when due in the future. The principal
associated with failed auctions will not be accessible until successful auctions occur, a buyer is
found outside of the auction process, the issuers and the underwriters establish a different form
of financing to replace these securities or final payments come due according to the contractual
maturities. As a result of the auction failures, the Company evaluated the credit risk and compared
the yields on its ARS to similarly rated municipal issues and determined that its ARS had a fair
value decline of $0.2 million during the three months ended March 31, 2008.
NOTE 7 RELATED PARTY TRANSACTIONS
Receivables from related parties consisted of the following (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Co-Investment Fund loans to employees and former employees
|
|
$
|
3,985
|
|
|
$
|
3,973
|
|
Employee loans and other related party receivables
|
|
|
1,026
|
|
|
|
1,066
|
|
Less Allowance for doubtful loans
|
|
|
(1,849
|
)
|
|
|
(1,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total receivables from related parties
|
|
$
|
3,162
|
|
|
$
|
3,190
|
|
|
|
|
|
|
|
|
Related Party Loans
Co-Investment Funds
In 2000 and 2001 the Company established an investment program for
employees wherein employees who qualified as accredited investors were able to contribute up to 4%
of their compensation to private equity funds (the Co-Investment Funds). The Co-Investment Funds
were established solely for employees of the Company and invested side-by-side with the Companys
affiliates, Thomas Weisel Capital Partners, L.P. (a private equity fund formerly managed by the
Company) and Thomas Weisel Venture Partners L.P. As part of this program, the Company made loans to
employees for capital contributions to the Co-Investment Funds in amounts up to 400% of employees
contributions. The Company holds as collateral the investment in the Co-Investment Funds and
establishes a reserve that reduces the carrying value of the receivable to the fair value of the
collateralized ownership interest of the employees and former employees in the Co-Investment Funds.
The Company discontinued the investment program for employees in 2002. During the three months
ended March 31, 2008 and 2007 the Co-Investment Funds did not make any distributions to credit
towards repayment of loans to employees.
Other Related Party Transactions
The Company provides personal office services to Mr. Weisel, its Chairman and Chief Executive
Officer. According to an agreement he has with the Company, Mr. Weisel reimburses the Company for
out-of-pocket expenses the Company incurs for these services. Amounts incurred by the Company for
these services for the three months ended March 31, 2008 and 2007 were approximately $118,000 and
$91,000, respectively. The receivable from Mr. Weisel at March 31, 2008 and December 31, 2007 was
approximately $118,000 and $160,000, respectively.
9
In addition, Mr. Weisel and certain other employees of the Company from time to time use an
airplane owned by Ross Investments Inc. (Ross), an entity wholly-owned by Mr. Weisel, for
business travel. The Company and Ross have adopted a time-sharing agreement in accordance with
Federal Aviation Regulation 91.501 to govern the Companys use of the Ross aircraft, pursuant to
which the Company reimburses Ross for the travel expenses in an amount generally comparable to the
expenses the Company would have incurred for business travel on commercial airlines for similar
trips. For the three months ended March 31, 2008 and 2007, the Company paid approximately $6,000
and $37,000, respectively, to Ross on account of such expenses. These amounts are included in
marketing and promotion expense within the condensed consolidated statements of operations. As of
March 31, 2008 and December 31, 2007, the Company did not have any amounts payable to Ross.
NOTE 8 NOTES PAYABLE
Notes payable consisted of the following (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
December 31, 2007
|
|
|
|
Principal
|
|
|
Carrying
|
|
|
Principal
|
|
|
Carrying
|
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
|
Amount
|
|
Senior Note, floating mid-term AFR
(4)
+ 2.25%
(1)
|
|
$
|
13,000
|
|
|
$
|
12,322
|
|
|
$
|
13,000
|
|
|
$
|
12,267
|
|
Senior Note, floating mid-term AFR
(4)
+ 2.25%
(1)
|
|
|
10,000
|
|
|
|
9,479
|
|
|
|
10,000
|
|
|
|
9,436
|
|
Contingent Payment Senior Note, non interest bearing
(2)
|
|
|
2,384
|
|
|
|
1,980
|
|
|
|
2,384
|
|
|
|
1,948
|
|
Secured Note, floating at LIBOR + 2.85%
(3)
|
|
|
2,800
|
|
|
|
2,800
|
|
|
|
3,734
|
|
|
|
3,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
28,184
|
|
|
$
|
26,581
|
|
|
$
|
29,118
|
|
|
$
|
27,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company has recorded the debt principal at a discount to reflect the below-market stated
interest rate of these notes at inception. The Company amortizes the discount to interest
expense so that the interest expense approximates the Companys incremental borrowing rate.
The effective interest rates at March 31, 2008 and December 31, 2007 were 5.32% and 6.65%,
respectively.
|
|
(2)
|
|
The Contingent Payment Senior Note has a variable due date based upon distributions received
from certain private equity funds. The Company has recorded the debt principal at a discount
and amortizes the discount to interest expense so that the interest expense on this
non-interest bearing note approximates the Companys incremental borrowing rate. During the
three months ended March 31, 2008 and 2007, the Company did not receive any distributions to
repay the principal on this note.
|
|
(3)
|
|
Amounts are due in equal monthly installments through December 2008. The note is secured by
all the fixed assets and leasehold improvements of the Company. The effective interest rates
at March 31, 2008 and December 31, 2007 were 6.03% and 8.45%, respectively.
|
|
(4)
|
|
Applicable Federal Rate.
|
As of March 31, 2008 and December 31, 2007, the fair value for each of the notes payable
presented above approximates the carrying value as of March 31, 2008 and December 31, 2007,
respectively.
The weighted-average interest rate for notes payable was 5.56% and 7.79% at March 31, 2008 and
December 31, 2007, respectively.
Scheduled principal payments for notes payable at March 31, 2008 were as follows (
in
thousands
):
|
|
|
|
|
Remainder of 2008
|
|
$
|
2,800
|
|
2009
|
|
|
|
|
2010
|
|
|
|
|
2011
|
|
|
25,384
|
|
2012
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
28,184
|
|
|
|
|
|
Covenants
The Senior Notes, Contingent Payment Senior Note and Secured Note shown above include
financial covenants including restrictions on additional indebtedness and requirements that the
notes be repaid should the Company enter into a transaction to liquidate or dispose of all or
substantially all of its property, business or assets. The Secured Note also contains various
covenants and restrictions, the most restrictive of which require the Company to maintain a minimum
net worth.
At March 31, 2008 the Company was not in compliance with a covenant it has with the holder of
its Secured Note not to exceed a quarterly or annual net after-tax loss greater than $10 million.
In the quarter ended March 31, 2008 the Companys net after-tax loss exceeded $10 million. The
Company paid all outstanding principal and interest to the note holder in May 2008.
The Company was in compliance with all other covenants at March 31, 2008.
10
NOTE 9 FINANCIAL INSTRUMENTS
The following is a summary of the fair value of the major categories of financial instruments
held by the Company (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
|
|
Securities owned
|
|
$
|
217,714
|
|
|
$
|
220,440
|
|
Investments in partnerships and other securities
|
|
|
55,783
|
|
|
|
60,502
|
|
Other investments
|
|
|
12,911
|
|
|
|
51,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
286,408
|
|
|
$
|
332,126
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Securities sold, but not yet purchased
|
|
$
|
146,012
|
|
|
$
|
163,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
146,012
|
|
|
$
|
163,933
|
|
|
|
|
|
|
|
|
The following is a summary of the Companys financial assets and liabilities that are
accounted for at fair value on a recurring basis as of March 31, 2008 by level in accordance with the fair value
hierarchy described in Note 3 - Recent Accounting Pronouncements (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
34,067
|
|
|
$
|
4,206
|
|
|
$
|
|
|
|
$
|
38,273
|
|
Convertible bonds
|
|
|
|
|
|
|
159,707
|
|
|
|
13,246
|
|
|
|
172,953
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
6,488
|
|
|
|
6,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in partnerships and other securities
|
|
|
|
|
|
|
|
|
|
|
55,783
|
|
|
|
55,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
|
|
|
|
|
|
|
|
10,114
|
|
|
|
10,114
|
|
Municipal debt securities
|
|
|
|
|
|
|
1,016
|
|
|
|
|
|
|
|
1,016
|
|
Other
|
|
|
325
|
|
|
|
|
|
|
|
1,456
|
|
|
|
1,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
34,392
|
|
|
$
|
164,929
|
|
|
$
|
87,087
|
|
|
$
|
286,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, but not yet purchased
Equity securities
|
|
$
|
106,880
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
106,880
|
|
Convertible bonds
|
|
|
|
|
|
|
23,301
|
|
|
|
|
|
|
|
23,301
|
|
U.S. Treasury securities
|
|
|
|
|
|
|
15,831
|
|
|
|
|
|
|
|
15,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
106,880
|
|
|
$
|
39,132
|
|
|
$
|
|
|
|
$
|
146,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The following is a summary of changes in fair value of the Companys financial assets that
have been classified as Level 3 at March 31, 2008 (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnerships
|
|
|
Auction
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
and Other
|
|
|
Rate
|
|
|
|
|
|
|
|
|
|
Bonds Owned
|
|
|
Warrants
|
|
|
Securities
|
|
|
Securities
|
|
|
Other
|
|
|
Total
|
|
Balance December 31, 2007
|
|
$
|
15,941
|
|
|
$
|
|
|
|
$
|
60,502
|
|
|
$
|
|
|
|
$
|
1,018
|
|
|
$
|
77,461
|
|
Realized and unrealized losses
|
|
|
(1,579
|
)
|
|
|
(350
|
)
|
|
|
(4,965
|
)
|
|
|
(236
|
)
|
|
|
(35
|
)
|
|
|
(7,165
|
)
|
Purchases and salesnet
|
|
|
4,801
|
|
|
|
6,998
|
(1)
|
|
|
246
|
|
|
|
1,800
|
|
|
|
473
|
|
|
|
14,318
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(160
|
)
|
Net transfers in (out)
|
|
|
(5,917
|
)
|
|
|
|
|
|
|
|
|
|
|
8,550
|
|
|
|
|
|
|
|
2,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2008
|
|
$
|
13,246
|
|
|
$
|
6,488
|
|
|
$
|
55,783
|
|
|
$
|
10,114
|
|
|
$
|
1,456
|
|
|
$
|
87,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During the three months ended March 31, 2008, the Company acquired $7.7 million of
warrants as a result of the Westwind acquisition. In addition, the Company exercised $0.7
million of warrants during the three months ended March 31, 2008 and $0.1 million of
warrants expired.
|
The total net unrealized losses during the three months ended March 31, 2008 of
$6.9 million relates to financial assets held by the Company as of March 31, 2008.
Realized and unrealized gains and losses from other investments and investments in
partnerships and other securities are included in asset management revenues on the condensed
consolidated statements of operations. Realized and unrealized gains and losses from warrants are
included in investment banking revenues on the condensed consolidated statements of operations.
Realized and unrealized gains and losses from securities owned and securities sold, but not yet
purchased, except those related to warrants, are included in brokerage revenues on the condensed
consolidated statements of operations.
NOTE 10 EARNINGS (LOSS) PER SHARE
The following table is a reconciliation of basic and diluted earnings (loss) per share (
in
thousands, except per share data
):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Net income (loss)
|
|
$
|
(17,805
|
)
|
|
$
|
5,401
|
|
Basic weighted average shares outstanding
|
|
|
32,989
|
|
|
|
26,070
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Weighted average restricted stock units
|
|
|
|
|
|
|
709
|
|
Weighted average warrant
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
32,989
|
|
|
|
26,882
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.54
|
)
|
|
$
|
0.21
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.54
|
)
|
|
$
|
0.20
|
|
Potential dilutive shares consist of the incremental common stock issuable for outstanding
restricted stock units, stock options and a warrant (both vested and non-vested) using the treasury
stock method. Potential dilutive shares are excluded from the computation of earnings (loss) per
share if their effect is anti-dilutive. The anti-dilutive stock options totaled 85,216 and 32,831
for the three months ended March 31, 2008 and 2007, respectively. The anti-dilutive warrant
totaled 486,486 shares for the three months ended March 31, 2008.
12
NOTE 11 COMPREHENSIVE INCOME (LOSS)
The following table is a reconciliation of net income (loss) reported in our condensed
consolidated statements of operations to comprehensive income (loss) (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Net income (loss)
|
|
$
|
(17,805
|
)
|
|
$
|
5,401
|
|
Currency translation adjustment
|
|
|
(4,031
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(21,836
|
)
|
|
$
|
5,403
|
|
|
|
|
|
|
|
|
NOTE 12 SHARE-BASED COMPENSATION
The Thomas Weisel Partners Group, Inc. Amended and Restated Equity Incentive Plan (the Equity
Incentive Plan) provides for the awards of non-qualified and incentive stock options, restricted
stock and restricted stock units and other share-based awards to officers, directors, employees,
consultants and advisors of the Company. The total number of shares issuable under the Equity
Incentive Plan is 6,150,000 shares. Awards of stock options and restricted stock units reduce the
number of shares available for future issuance. The number of shares available for future issuance
under the Equity Incentive Plan at March 31, 2008 was approximately 1,168,000 shares.
At the Companys Annual Meeting of Shareholders on May 19, 2008 the Companys shareholders
will vote on a proposal to amend the Equity Incentive Plan, which includes increasing the maximum
number of shares that may be issued thereunder by 5,000,000 shares.
The Company accounts for share-based compensation at fair value, in accordance with provisions
under SFAS No. 123(R),
Share-Based Payment
.
Restricted Stock Units
A summary of non-vested restricted stock unit activity for the three months ended March 31,
2008 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
Non-vested December 31, 2007
|
|
|
2,341,570
|
|
|
$
|
16.71
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
2,233,711
|
|
|
|
10.06
|
|
Vested
|
|
|
(681,160
|
)
|
|
|
16.38
|
|
Cancelled
|
|
|
(206,670
|
)
|
|
|
14.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested March 31, 2008
|
|
|
3,687,451
|
|
|
$
|
12.85
|
|
|
|
|
|
|
|
|
|
The fair value of the shares vested during the three months ended March 31, 2008 and 2007 was
$7.4 million and $8.3 million, respectively.
As of March 31, 2008 there was $37.0 million of total unrecognized compensation expense
related to non-vested restricted stock unit awards. This cost is expected to be recognized over a
weighted-average period of 3.2 years.
The Company recorded $3.9 million and $2.7 million in non-cash compensation expense during the
three months ended March 31, 2008 and 2007, respectively, with respect to grants of restricted
stock units.
NOTE 13 INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income
Taxes
(SFAS No. 109), which requires the recognition of deferred tax assets and liabilities based
upon temporary differences between the financial reporting and tax bases of its assets and
liabilities. Valuation allowances are established when necessary to reduce deferred tax assets when
it is more likely than not that a portion or all of the deferred tax assets will not be realized.
On January 1, 2007, the Company adopted the provisions of FIN No. 48,
Accounting for
Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109
(FIN No. 48), which
clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial
statements in accordance with SFAS No. 109, and prescribes a recognition threshold and measurement
attributes for the financial statement recognition and measurement of a tax position taken, or
expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company is subject to Federal and state tax authority examination on the 2007 and 2006 tax
years. The adoption of
FIN 48 did not have a material impact on the Companys condensed consolidated statements of
financial condition, operations and
13
cash flows. During the three months ended March 31, 2008,
there have been no changes in uncertain tax positions that have had a material impact to the
Companys tax positions.
The Companys effective tax rate for the three months ended March 31, 2008 and 2007 was 32.7%
and 39.2%, respectively. The decrease in the effective tax rate was primarily the result of amounts
deductible for vested restricted stock units that are less than the cumulative compensation cost
recognized for financial reporting purposes. The shortfall in excess of the remaining additional
paid-in capital from excess tax benefits from previously vested awards of $1.6 million was
recognized in the condensed consolidated statements of operations as a decrease to the tax benefit. Additionally, the rate
decreased due to the impact of lower Canadian statutory tax rates related to the Westwind
acquisition.
NOTE 14 COMMITMENTS, GUARANTEES AND CONTINGENCIES
Commitments
Lease Commitments
The Company leases office space and computer equipment under noncancelable operating leases
which extend to 2016 and which may be extended as prescribed under renewal options in the lease
agreements. The Company has entered into several noncancelable sub-lease agreements for certain
facilities or floors of facilities which are co-terminus with the Companys lease for the
respective facilities or floors of facilities. Facility and computer equipment lease expenses
charged to operations for the three months ended March 31, 2008 and 2007 was $4.2 million and
$3.4 million, respectively.
Fund Capital Commitments
At March 31, 2008, the Companys Asset Management Subsidiaries had commitments to invest an
additional $2.1 million into affiliated investment partnerships. Such commitments may be satisfied
by direct investments and are generally required to be made as investment opportunities are
identified by the underlying partnerships. The Companys Asset Management Subsidiaries
commitments at March 31, 2008 were as follows (
in thousands
):
|
|
|
|
|
Global Growth Partners I
|
|
$
|
710
|
|
Global Growth Partners II
|
|
|
528
|
|
Thomas Weisel Healthcare Venture Partners
|
|
|
439
|
|
Thomas Weisel India Opportunity Fund
|
|
|
354
|
|
Thomas Weisel Venture Partners
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
Total Fund Capital Commitments
|
|
$
|
2,066
|
|
|
|
|
|
In addition to the commitments within the table above, the Company has committed $25.2 million
to investments in unaffiliated funds. Through March 31, 2008, the Company has funded $4.8 million
of these commitments and the remaining unfunded portion as of March 31, 2008 was $20.4 million. The
Company currently anticipates transferring these investments and the related commitments to funds
sponsored by the Company. These commitments may be called in full at any time.
Guarantees
Broker-Dealer Guarantees and Indemnification
The Companys customers transactions are introduced to the clearing brokers for execution,
clearance and settlement. Customers are required to complete their transactions on settlement date,
generally three business days after the trade date. If customers do not fulfill their contractual
obligations to the clearing brokers, the Company may be required to reimburse the clearing brokers
for losses on these obligations. The Company has established procedures to reduce this risk by
monitoring trading within accounts and requiring deposits in excess of regulatory requirements.
The Company is a member of various securities exchanges. Under the standard membership
agreements, members are required to guarantee the performance of other members and, accordingly, if
another member becomes unable to satisfy its obligations to the exchange, all other members would
be required to meet the shortfall. The Companys liability under these arrangements is not
quantifiable and could exceed the cash and securities it has posted as collateral. However,
management believes that the potential for the Company to be required to make payments under these
arrangements is remote. The Company has not recorded any loss contingency for this indemnification.
Guaranteed Compensation
Consistent with practice in prior years, guaranteed compensation agreements were entered into
during the three months ended March 31, 2008. These obligations are being accrued ratably over the
service period of the agreements. Total unaccrued obligations at March 31, 2008 for services to be
provided subsequent to March 31, 2008 were $6.9 million, of which $0.6 million, $5.0 million and
$1.3 million is to be paid in 2008, 2009 and 2010, respectively.
14
Director and Officer Indemnification
In connection with its initial public offering, the Company entered into agreements that
provide indemnification to its directors, officers and other persons requested or authorized by the
Board to take actions on behalf of the Company for all losses, damages, costs and expenses incurred
by the indemnified person arising out of such persons service in such capacity, subject to the
limitations imposed by Delaware law. The Company has not recorded any loss contingency for this
indemnification.
Tax Indemnification Agreement
In connection with its initial public offering, the Company entered into a tax indemnification
agreement to indemnify the members of Thomas Weisel Partners Group LLC against the full amount of
certain increases in taxes that relate to activities of Thomas Weisel Partners Group LLC and its
affiliates prior to the Companys initial public offering. The tax indemnification agreement
included provisions that permit the Company to control any tax proceeding or contest which might
result in it being required to make a payment under the tax indemnification agreement. The Company
has not recorded any loss contingency for this indemnification.
Contingencies
Loss Contingencies
The Company is involved in a number of judicial, regulatory and arbitration matters arising in
connection with its business. The outcome of matters the Company is involved in cannot be
determined at this time and the results cannot be predicted with certainty. There can be no
assurance that these matters will not have a material adverse effect on the Companys results of
operations in any future period and a significant judgment could have a material adverse impact on
the Companys condensed consolidated statements of financial condition, results of operations and
cash flows. The Company may in the future become involved in additional litigation in the ordinary
course of its business, including litigation that could be material to the Companys business.
In accordance with SFAS No. 5,
Accounting for Contingencies,
the Company reviews the need for
any loss contingency reserves and establishes reserves when, in the opinion of management, it is
probable that a matter would result in liability, and the amount of loss, if any, can be reasonably
estimated. Generally, with respect to matters the Company is involved in, in view of the inherent
difficulty of predicting the outcome of these matters, particularly in cases in which claimants
seek substantial or indeterminate damages, it is not possible to determine whether a liability has
been incurred or to reasonably estimate the ultimate or minimum amount of that liability until the
case is close to resolution, in which case no reserve is established until that time.
The following discussion describes significant developments with respect to the Companys
litigation matters that have occurred subsequent to December 31, 2007.
Investment Banking Matters
In re Leadis Technology, Inc. Securities Litigation
The Company has been a defendant in a
purported class action litigation brought in connection with Leadis Technology, Inc.s initial
public offering in June 2004 in which the Company served as a co-manager for Leadis. The
consolidated complaint, filed in the United States District Court for the Northern District of
California on August 8, 2005, alleged violations of Federal securities laws against Leadis and
certain of its directors and officers as well as the companys underwriters, including the Company,
based on alleged misstatements and omissions in the registration statement. On March 1, 2006 the
complaint against the Company in this matter was dismissed by the court with prejudice.
Subsequently, on March 28, 2006, the plaintiffs in this matter appealed the dismissal to the United
States Court of Appeals for the Ninth Circuit and on February 21, 2008 the Appeals Court granted
the appeal. The Company believes it has meritorious defenses to these actions and intends to
vigorously defend such actions as they apply to the Company.
In re Merix Securities Litigation
The Company has been a defendant in a purported class
action suit brought in connection with an offering in January 2004 involving Merix Corporation in
which it served as co-lead manager for Merix. On September 15, 2005, the United States District
Court for the District of Oregon entered an order dismissing all claims against the underwriter
defendants, including the Company, and the Merix defendants. A portion of the claim under
Section 12(a)(2) of the Securities Exchange Act of 1934 was dismissed with prejudice, and the
remainder of that claim and the Section 11 claim were dismissed with leave to re-file. Plaintiffs
subsequently filed an amended complaint and on September 28, 2006 the Court dismissed the remaining
claims with prejudice. Following the September 28, 2006 dismissal, plaintiffs filed a notice of
appeal to the United States Court of Appeals for the Ninth Circuit and on February 21, 2008 the
Appeals Court granted the appeal. The Company believes it has meritorious defenses to these
actions and intends to vigorously defend such actions as they apply to the Company.
Settled Matters
In re Friedmans Inc. Securities Litigation
In September 2003, the Company acted as lead
manager on a follow-on offering of common stock of Friedmans Inc. Subsequent to that offering a
class action suit was filed against Friedmans and its directors, senior officers and outside
accountants as well as Friedmans underwriters, including the Company, in the United States
District Court for the Northern District of Georgia, alleging that the registration statement for
the offering and a previous registration statement dated
15
February 2, 2002 were fraudulent and materially misleading. During the three months ended
March 31, 2008, the plaintiffs claims were settled. The Companys portion of the settlement
amount was not material to the Companys condensed consolidated statements of financial condition,
operations and cash flows.
NOTE 15 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CREDIT RISK OR MARKET RISK
Concentration of Credit Risk and Market Risk
The majority of the Companys transactions, and consequently the concentration of its credit
exposure, is with its clearing brokers. The clearing brokers are also the primary source of
short-term financing for both securities purchased and securities sold, not yet purchased by the
Company. The Companys securities owned may be pledged by the clearing brokers. The amount
receivable from or payable to the clearing brokers in the Companys condensed consolidated
statements of financial condition represents amounts receivable or payable in connection with the
trading of proprietary positions and the clearance of customer securities transactions. As of March
31, 2008 and December 31, 2007, the Companys cash on deposit with the clearing brokers was not
collateralizing any liabilities to the clearing brokers.
In addition to the clearing brokers, the Company is exposed to credit risk from other brokers,
dealers and other financial institutions with which it transacts business. In the event
counterparties do not fulfill their obligations, the Company may be exposed to credit risk. The
Company seeks to control credit risk by following an established credit approval process and
monitoring credit limits with counterparties.
The Companys trading activities include providing brokerage services to institutional and
retail clients. To facilitate these customer transactions, the Company purchases proprietary
securities positions (long positions) in equity securities, convertible and other fixed income
securities. The Company also enters into transactions to sell securities not yet purchased (short
positions), which are recorded as liabilities on the condensed consolidated statements of
financial condition. The Company is exposed to market risk on these long and short securities
positions as a result of decreases in market value of long positions and increases in market value
of short positions. Short positions create a liability to purchase the security in the market at
prevailing prices. Such transactions result in off-balance sheet market risk as the Companys
ultimate obligation to satisfy the sale of securities sold, not yet purchased may exceed the amount
recorded in the condensed consolidated statements of financial condition. To mitigate the risk of
losses, these securities positions are marked to market daily and are monitored by management to
ensure compliance with limits established by the Company. The associated interest rate risk of
these securities is not deemed material to the Company.
The Company is also exposed to market risk through its investments in partnerships and through
certain loans to employees collateralized by such investments. In addition, as part of the
Companys investment banking and asset management activities, and generally in connection with the
development of new asset management products, the Company from time to time takes long and short
positions in publicly traded equities and related options and other derivative instruments and
makes private equity investments, all of which expose the Company to market risk. These activities
are subject, as applicable, to risk guidelines and procedures designed to manage and monitor market
risk.
NOTE 16 REGULATED BROKER-DEALER SUBSIDIARIES
TWP and TWP USA are registered U.S. broker-dealers that are subject to the Uniform Net Capital
Rule (the Net Capital Rule) under the Securities Exchange Act of 1934 administered by the SEC and
NYSE, which requires the maintenance of minimum net capital. TWP and TWP USA have elected to use
the alternative method to compute net capital as permitted by the Net Capital Rule, which requires
that TWP and TWP USA maintain minimum net capital, as defined, of $1.0 million and $100,000,
respectively. These rules also require TWP and TWP USA to notify and sometimes obtain approval from
the SEC and NYSE for significant withdrawals of capital or loans to affiliates.
Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash
dividends or make any unsecured advances or loans to its parent or employees if such payment would
result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum
dollar amount requirement.
TWPC is a registered investment dealer in Canada and is subject to the capital requirements of
the Investment Dealers Association of Canada. In addition, TWPIL and TWP UK are registered U.K.
broker-dealers and are subject to the capital requirements of the Financial Securities Authority.
16
The table below summarizes the minimum capital requirements for the Companys broker-dealer
subsidiaries (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
|
Required Net
|
|
|
|
|
|
|
Excess Net
|
|
|
|
Capital
|
|
|
Net Capital
|
|
|
Capital
|
|
TWP
|
|
$
|
1,000
|
|
|
$
|
26,174
|
|
|
$
|
25,174
|
|
TWPC
|
|
|
245
|
|
|
|
13,851
|
|
|
|
13,606
|
|
TWP UK
|
|
|
1,423
|
|
|
|
3,759
|
|
|
|
2,336
|
|
Other broker-dealer subsidiaries
|
|
|
164
|
|
|
|
1,915
|
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,832
|
|
|
$
|
45,699
|
|
|
$
|
42,867
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 17 SEGMENT INFORMATION
The following table represents net revenues by geographic area (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
United States
|
|
$
|
41,535
|
|
|
$
|
76,687
|
|
Other countries
|
|
|
7,389
|
|
|
|
2
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
48,924
|
|
|
$
|
76,689
|
|
|
|
|
|
|
|
|
No single customer accounted for 10% or more of the Companys net revenues during the three
months ended March 31, 2008. During the three months ended March 31, 2007, net revenues included
$13.4 million, or 17%, generated from a single transaction. Net revenues from countries other than
the United States during the three months ended March 31, 2008 consist primarily of net revenues
from Canada, which accounted for 62% of net revenues from other countries.
The following table represents long lived assets by geographic area based on the physical
location of the assets (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
United States
|
|
$
|
20,737
|
|
|
$
|
20,908
|
|
Other countries
|
|
|
1,924
|
|
|
|
409
|
|
|
|
|
|
|
|
|
Total long lived assetsnet
|
|
$
|
22,661
|
|
|
$
|
21,317
|
|
|
|
|
|
|
|
|
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes that appear elsewhere in this Quarterly
Report on
Form 10-Q
. This discussion contains forward-looking statements reflecting our current
expectations that involve risks and uncertainties. Actual results and the timing of events may
differ significantly from those projected in forward-looking statements due to a number of factors,
including those set forth in Part I, Item 1A Risk Factors of our Annual Report on
Form 10-K
for
the fiscal year ended December 31, 2007 and in Part II, Item 1A Risk Factors of this Quarterly
Report on
Form 10-Q
. See Where You Can Find More Information on page -ii- of this Quarterly
Report on
Form 10-Q
.
Overview
We are an investment bank focused principally on growth companies and growth investors. Our
business is managed as a single operating segment, and we generate revenues by providing financial
services that include investment banking, brokerage, research and asset management. We take a
comprehensive approach in providing these services to growth companies.
During the three months ended March 31, 2008, we executed on the following initiatives:
|
|
|
Acquisition of Westwind
- On January 2, 2008, we completed our acquisition of
Westwind for approximately $155 million. Westwind is a full-service, institutionally
oriented, independent investment bank focused on growth companies and growth
investors, particularly in the energy and mining sectors. Westwind, which was founded
in 2002 and headquartered in Toronto, has additional offices in Calgary and the U.K.
Westwinds mining and energy teams expand our industry coverage. In addition, with
Westwinds presence in Toronto, Calgary and London, our geographic coverage further
extends into both Canada and the U.K. through this acquisition. Subsequent to the
acquisition of Westwind, we have 15 office locations and a global reach that spans
five countries.
|
17
|
|
|
Integrating Westwind is our primary focus for 2008. One of our strategies is to
expand our trading in Canadian securities as our energy and mining analysts begin to
make a greater impact on our U.S. and European accounts, and we currently plan to hire
U.S. based energy bankers and analysts to capitalize on Westwinds capabilities in
Canada. In Europe, where we integrated our offices in early 2008, we are combining
our sales forces and marketing the combined companies products and expertise.
|
|
|
|
|
As the acquisition of Westwind occurred on January 2, 2008, the consolidated results
of operations for the three months ended March 31, 2007 presented below do not include
Westwind results.
|
|
|
|
|
Reduction in Headcount
- During the three months ended March 31, 2008, we reduced
total headcount by 9% of the total workforce, and during the three months ended June
30, 2008 we plan to reduce headcount by another 13%, which will bring the total
reduction to 22%. Subsequent to this reduction we will have approximately 600
employees going forward. We currently plan to continue to selectively upgrade our
talent pool, particularly in revenue generating areas.
|
|
|
|
|
Repurchase of Common Stock
- During the period beginning on March 31, 2008 and
ending on May 8, 2008, we repurchased a total of 1,124,655 shares of our common stock from
the open market. The shares were classified as treasury stock upon repurchase and we
intend to use these shares to settle obligations to deliver common stock in the
future to employees who have received Restricted Stock Units under our Equity
Incentive Plan. These repurchases were executed pursuant to an authorization by our
Board of Directors to repurchase up to 2,000,000 shares of common stock for the
purpose of settling obligations to deliver common stock in the future to employees
who have received Restricted Stock Units under our Equity Incentive Plan. Additional
repurchases pursuant to this authority may be carried out from time to time in the
future. Furthermore, our Board of Directors may authorize additional repurchases for
the purpose of settling obligations to deliver common stock in the future to
employees who have received Restricted Stock Units under our Equity Incentive Plan.
|
We are exposed to volatility and trends in the general securities market and the economy, and
we are currently facing difficult market and economic conditions. Due to the recent downturn in
the market and the possibility of an economic recession, client activity levels have decreased
resulting in, among other things, lower overall investment banking activity. It is difficult to
predict when conditions will change.
Consolidated Results of Operations
Our results of operations depend on a number of market factors, including market conditions
and valuations for growth companies and growth investors, as well as general securities market
conditions. Trends in the securities markets are also affected by general economic trends,
including fluctuations in interest rates, flows of funds into and out of the markets and other
conditions. In addition to these market factors, our revenues from period to period are
substantially affected by the timing of investment banking transactions in which we are involved.
Fees for many of the services we provide are earned only upon the completion of a transaction.
Accordingly, our results of operations in any individual year or quarter may be affected
significantly by whether and when significant transactions are completed.
Notwithstanding this exposure to volatility and trends, in order to provide value to our
clients, we have made a long-term commitment to maintaining a substantial, full-service integrated
business platform. As a result of this commitment, if business conditions result in decreases to
our revenues, we may not experience corresponding decreases in the expense of operating our
business.
The following table provides a summary of our results of operations (
dollar amounts in
thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2008
|
|
2007
|
|
% Change
|
Net revenues
|
|
$
|
48,924
|
|
|
$
|
76,689
|
|
|
|
(36.2)
|
%
|
Income (loss) before taxes
|
|
|
(26,452
|
)
|
|
|
8,882
|
|
|
nm
|
Net income (loss)
|
|
|
(17,805
|
)
|
|
|
5,401
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.54
|
)
|
|
$
|
0.21
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.54
|
)
|
|
$
|
0.20
|
|
|
|
|
|
18
Revenues
The following table sets forth our revenues, both in dollar amounts and as a percentage of net
revenues (
dollar amounts in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$
|
11,496
|
|
|
$
|
39,292
|
|
|
|
(70.7)
|
%
|
Brokerage
|
|
|
36,134
|
|
|
|
28,856
|
|
|
|
25.2
|
|
Asset management
|
|
|
349
|
|
|
|
5,715
|
|
|
|
(93.9
|
)
|
Interest income
|
|
|
3,025
|
|
|
|
4,348
|
|
|
|
(30.4
|
)
|
Other revenue
|
|
|
|
|
|
|
920
|
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
51,004
|
|
|
|
79,131
|
|
|
|
(35.5
|
)
|
Interest expense
|
|
|
(2,080
|
)
|
|
|
(2,442
|
)
|
|
|
(14.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
48,924
|
|
|
$
|
76,689
|
|
|
|
(36.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
|
23.5
|
%
|
|
|
51.2
|
%
|
|
|
|
|
Brokerage
|
|
|
73.9
|
|
|
|
37.6
|
|
|
|
|
|
Asset management
|
|
|
0.7
|
|
|
|
7.5
|
|
|
|
|
|
Interest income
|
|
|
6.2
|
|
|
|
5.7
|
|
|
|
|
|
Other revenue
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
104.3
|
|
|
|
103.2
|
|
|
|
|
|
Interest expense
|
|
|
(4.3
|
)
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Banking Revenue
Our investment banking revenues include (i) management fees, underwriting fees, selling
concessions and agency placement fees earned through our participation in public offerings and
private placements of equity and debt securities, including convertible debt, and realized and
unrealized gains and losses on warrants received in investment banking transactions and (ii) fees
earned as strategic advisor in mergers and acquisitions and similar transactions. Investment
banking revenues are typically recognized at the completion of each transaction. Underwriting
revenues are presented net of related expenses. Unreimbursed expenses associated with private
placement and advisory transactions are recorded as non-compensation expenses.
The following table sets forth our investment banking revenues and the number of investment
banking transactions (
dollar amounts in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
% Change
|
|
Investment banking revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raising
|
|
$
|
7,388
|
|
|
$
|
14,761
|
|
|
|
(50.0)
|
%
|
Strategic advisory
|
|
|
4,108
|
|
|
|
24,531
|
|
|
|
(83.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total investment banking revenues
|
|
$
|
11,496
|
|
|
$
|
39,292
|
|
|
|
(70.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital raising
|
|
|
19
|
|
|
|
10
|
|
|
|
|
|
Strategic advisory
|
|
|
4
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment banking transactions
|
|
|
23
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue per transaction
|
|
$
|
500
|
|
|
$
|
2,311
|
|
|
|
|
|
Three Months Ended March 31, 2008 versus 2007
Investment banking revenue decreased $27.8
million in the three months ended March 31, 2008 from 2007. Our average revenue per transaction
decreased to $0.5 million during the three months ended March 31, 2008 from $2.3 million in 2007.
During the three months ended March 31, 2008 and 2007 we closed 23 and 17 investment banking
transactions, respectively. The change in our average revenue per transactions is primarily due to
our acquisition of Westwind which, historically, has completed a larger number of smaller sized
transactions. In addition, during the three months ended March 31, 2007 our investment banking
revenue included $13.4 million in revenue generated from a single strategic advisory transaction.
During the three months ended March 31, 2008 and 2007, approximately 44.4% and 57.9%, respectively,
of our investment banking revenue was earned from the five largest transactions during the
respective periods.
19
Capital raising revenue accounted for approximately 64.3% and 37.6% of our investment banking
revenue in the three months ended March 31, 2008 and 2007, respectively. Capital raising revenue
decreased $7.4 million to $7.4 million in the three months ended March 31, 2008. Our average
revenue per capital raising transaction decreased to $0.4 million during the three months ended
March 31, 2008 from $1.5 million in 2007. During the three months ended March 31, 2008 and 2007 we
closed 19 and 10 capital raising transactions, respectively.
Strategic advisory revenue accounted for approximately 35.7% and 62.4% of our investment
banking revenue in the three months ended March 31, 2008 and 2007, respectively. Strategic advisory
revenue decreased $20.4 million to $4.1 million in the three months ended March 31, 2008. Our
average revenue per strategic advisory transaction decreased to $1.0 million during the three
months ended March 31, 2008 from $3.5 million in 2007. In addition, during the three months ended
March 31, 2007 our strategic advisory revenue included $13.4 million in revenue generated from a
single transaction. During the three months ended March 31, 2008 and 2007, we closed 4 and 7
strategic advisory transactions, respectively.
Brokerage Revenue
Our brokerage revenues include (i) commissions paid by customers from brokerage transactions
in equity securities, (ii) spreads paid by customers on convertible debt securities, (iii) trading
gains and losses which result from market making activities from our commitment of capital to
facilitate customer transactions and from proprietary trading activities relating to our
convertible debt and special situations trading groups, (iv) advisory fees paid to us by
high-net-worth individuals and institutional clients of our private client services group, which
are generally based on the value of the assets we manage and (v) fees paid to us for research.
Three Months Ended March 31, 2008 versus 2007
Brokerage revenue increased $7.3 million in
the three months ended March 31, 2008 from 2007. This increase is primarily due to our acquisition
of Westwind in January 2008 which generated $4.3 million of brokerage revenues during the three
months ended March 31, 2008. The remaining increase in brokerage revenues is due to improvements in
our institutional trading business, partially offset by trading losses and decreases in trading
volumes in our convertible debt trading business.
The combined average daily volume on the New York Stock Exchange, Nasdaq and the Toronto Stock
Exchange was approximately 4.4 billion shares during the three months ended March 31, 2008, an
increase of 10.6% from the comparable period in 2007. Our combined average daily customer trading
volume increased 39.3% for the three months ended March 31, 2008 from 2007 primarily due to
increased customer trading as a result of our acquisition of Westwind.
We believe the steps we have taken over the past year, including (i) increasing our focus on
middle markets customers, who account for an increasing amount of trading commissions within the
brokerage industry and who, in may cases, are engaging in investing activities that utilize our
equity research, (ii) developing our product offerings within electronic trading in order to
attract and retain trading volume from customers who are shifting away from utilizing full-service
brokerage services and increasing their use of alternative trading systems and (iii) broadening our
geographic coverage, including through the acquisition of Westwind, has resulted in our increased
trading volume for institutional customers.
Asset Management Revenue
Our asset management revenues include (i) fees from investment partnerships we manage, (ii)
allocation of the appreciation and depreciation in the fair value of our investments in the
underlying partnerships, (iii) fees we earn from the management of equity distributions received by
our clients and (iv) other asset management-related realized and unrealized gains and losses on
investments not associated with investment partnerships.
The following table sets forth our asset management revenues (
dollar amounts in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
% Change
|
|
Asset management revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
$
|
3,660
|
|
|
$
|
3,879
|
|
|
|
(5.6)
|
%
|
Private equity realized and unrealized gains and lossesnet
|
|
|
(2,089
|
)
|
|
|
1,383
|
|
|
nm
|
Other securities realized and unrealized gains and lossesnet
|
|
|
(1,222
|
)
|
|
|
453
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
Total asset management revenues
|
|
$
|
349
|
|
|
$
|
5,715
|
|
|
|
(93.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008 versus 2007
Asset management revenue decreased $5.4
million in the three months ended March 31, 2008 from 2007. The fluctuation was due to decreases in
investment gains in partnerships of $3.5 million due to a decrease in the fair value of underlying
investments in two of our investment funds and decreases in investment gains in other securities of
$1.7 million.
Investment gains in partnerships decreased $3.5 million in the three months ended March 31,
2008 from 2007. This fluctuation was primarily due to an increase in unrealized and realized
investment losses from Thomas Weisel Healthcare Venture Partners and
20
Thomas Weisel Global Growth Partners II of $3.6 million and $0.6 million, respectively. This
decrease was partially offset by an increase in unrealized and realized investment gains from
Thomas Weisel Venture Partners of $0.7 million.
Investment gains in other securities decreased $1.7 million in the three months ended March
31, 2008 from 2007 primarily due to a decline in the value of equity securities held by our small
mid-cap growth public equity funds.
Other Revenue
Three Months Ended March 31, 2007
Other revenue of $0.9 million recorded during the three
months ended March 31, 2007 relates to the gain, net of selling costs, on the sale of certain
software previously developed for internal use. At the time of sale there were no amounts
capitalized relating to this software.
Net Revenues by Geographic Segment
The following table sets forth our net revenues by geographic segment (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
% Change
|
|
United States
|
|
$
|
41,535
|
|
|
$
|
76,687
|
|
|
|
(45.8)
|
%
|
Other countries
|
|
|
7,389
|
|
|
|
2
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
48,924
|
|
|
$
|
76,689
|
|
|
|
(36.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from countries other than the United States increased $7.4 million during the
three months ended March 31, 2008 from 2007 as a result of our acquisition of Westwind in January
2008. During the three months ended March 31, 2008, net revenues from countries other than the
United States consisted primarily of net revenues from Canada, which accounted for approximately
62% of net revenues from other countries.
No single customer accounted for 10% or more of our net revenues during the three months ended
March 31, 2008. During the three months ended March 31, 2007 net revenues included $13.4 million,
or 17%, generated from a single strategic advisory transaction.
Expenses Excluding Interest
The following table sets forth information relating to our expenses excluding interest, both
in dollar amounts and as a percentage of net revenues (
dollar amounts in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
% Change
|
|
Expenses excluding interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$
|
40,389
|
|
|
$
|
43,990
|
|
|
|
(8.2)
|
%
|
Non-compensation expense
|
|
|
34,987
|
|
|
|
23,817
|
|
|
|
46.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses excluding interest
|
|
$
|
75,376
|
|
|
$
|
67,807
|
|
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
82.6
|
%
|
|
|
57.4
|
%
|
|
|
|
|
Non-compensation expense
|
|
|
71.5
|
|
|
|
31.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
154.1
|
%
|
|
|
88.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of employees
|
|
|
673
|
|
|
|
592
|
|
|
|
|
|
Compensation and Benefits Expense
Compensation and benefits expense to secure the services of our employees has been the largest
component of our total expenses. Compensation and benefits expense includes salaries, overtime,
bonuses, commissions, share-based compensation, benefits, severance, employment taxes and other
employee costs.
We pay discretionary bonuses based on a combination of company and individual performance, and
we have entered into guaranteed contractual agreements with employees that require specified bonus
payments, both of which are accrued over the related service periods. These bonuses make up a
significant portion of our compensation and benefits expense, particularly for our senior
professionals.
Share-based awards constitute a portion of our compensation expense, vest over a three or
four-year service period, are subject to continued employment and, accordingly, are recorded as
non-cash compensation expense ratably over the service period beginning at the date of grant. As a
result, our aggregate compensation expense has been, and will continue to be, impacted as we
recognize multiple years of share-based compensation expense associated with the vesting of prior
year grants. As of March 31, 2008, there was (i) $5.7 million of unrecognized compensation expense
related to non-vested restricted stock unit awards made in connection with our
21
initial public offering, which is expected to be recognized over a weighted-average period of
0.8 years and (ii) an additional $31.3 million of unrecognized compensation expense related to
non-vested restricted stock unit awards made subsequent to our initial public offering, which is
expected to be recognized over a weighted-average period of 3.5 years.
Three Months Ended March 31, 2008 versus 2007
Compensation and benefits expense decreased
$3.6 million in the three months ended March 31, 2008 from 2007. The fluctuation is primarily due
to a decrease of $10.4 million in bonus expense during the three months ended March 31, 2008 from
2007. This overall decrease is partially offset by an increase in salary expense of $3.9 million
due to an increase in the number of employees resulting from the Westwind acquisition in January
2008, as well as an increase of $1.3 million of share-based compensation expense.
Non-Compensation Expenses
Our non-compensation expenses include brokerage execution, clearance and account
administration, communications and data processing, depreciation and amortization of property and
equipment, amortization of other intangible assets, marketing and promotion, occupancy and
equipment and other expenses.
Three Months Ended March 31, 2008 versus 2007
Non-compensation expense increased $11.2
million in the three months ended March 31, 2008 from 2007. The fluctuation was due in part to the
amortization of identifiable intangible assets of $3.4 million acquired as a result of the Westwind
acquisition in January 2008. In addition, other expense increased $3.0 million primarily due to
increased professional expense of $1.1 million, insurance expense of $0.3 million and foreign
currency exchange losses of $0.2 million. In addition, brokerage execution, clearance and account
administration, occupancy and equipment expense and communication and data processing expense
increased by $1.8 million, $1.3 million and $1.2 million, respectively, during the three months
ended March 31, 2008 from 2007. The fluctuation in these expenses was primarily due to increased
expenses associated with our expansion into Canada, Europe and the midwest, including operating
expenses as the result of our acquisition of Westwind.
Provision for Taxes
We account for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes
,
which requires the recognition of deferred tax assets and liabilities based upon temporary
differences between the financial reporting and tax bases of our assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets when it is more likely than
not that a portion or all of the deferred tax assets will not be realized.
The deferred tax liability of $14.8 million as of March 31, 2008 is related to the other
intangible assets recorded as a result of the Westwind acquisition.
Our effective tax rate for the three months ended March 31, 2008 and 2007 was 32.7% and 39.2%,
respectively. The decrease in our effective tax rate was primarily the result of amounts
deductible for vested restricted stock units that are less than the cumulative compensation cost
recognized for financial reporting purposes. The shortfall in excess of the remaining additional
paid-in capital from excess tax benefits from previously vested
awards was recognized in the condensed consolidated statements of operations as a decrease to the tax benefit. Additionally, our rate decreased due to
the impact of lower Canadian statutory tax rates related to the Westwind acquisition.
Liquidity and Capital Resources
We believe that our current level of equity capital, which includes a portion of the net
proceeds from our follow-on offering of common stock, funds anticipated to be provided by operating
activities and funds available under temporary loan agreements, will be adequate to meet our
liquidity and regulatory capital requirements for the next 12 months.
Cash Flows
Cash and cash equivalents were $110.5 million at March 31, 2008, a decrease of $46.5 million
from $157.0 million at December 31, 2007.
Operating
activities used $70.9 million of cash and cash equivalents during the three months
ended March 31, 2008. In February 2008, we made aggregate cash bonus payments to our employees of
$25.6 million, as well as an aggregate cash payment of $24.8 million to our employees attributable
to the acceleration of the payment of 2008 mid-year retention bonuses and certain severance
expenses, each of which were related to the integration of Westwind. During the three months ended
March 31, 2008 we had a decrease in accrued expenses and other
liabilities of $17.1 million which
is due to the fact that we have made cash payments to settle accrued expenses that were recorded as
of December 31, 2007, $7.5 million of which relate to payments for our managed syndicate deals that
settled in 2008. Further contributing to the decrease in cash and cash equivalents was our net
loss for the period of $17.8 million.
The overall decrease in our cash and cash equivalents from operating activities is partially
offset by collection of $16.3 million of corporate finance and
syndicate receivables outstanding as of December 31, 2007. In addition, non-cash items
included in our net loss for the three months ended March 31, 2008 included amortization of other
intangible assets recorded as a result of the Westwind acquisition of $3.4 million, share-based
compensation expense of $3.9 million and depreciation and amortization of property and equipment of
$1.9 million.
Investing activities provided $27.6 million of cash and cash equivalents during the three
months ended March 31, 2008. The net proceeds from sales of other investments during the three
months ended March 31, 2008 were $38.3 million. We used these proceeds to fund our $45.0 million
cash payment for the acquisition of Westwind in January 2008 and
to fund bonus and severance payments discussed in operating
activities above. Cash received as a result of our
acquisition of Westwind was $36.9 million. In addition, during the three months ended March 31,
2008 we purchased property and equipment of $1.4 million and we made contributions of $1.2 million
to our private equity partnerships.
Financing
activities used $2.1 million of cash during the three months ended March 31, 2008
primarily due to the repayment of notes payable of $0.9 million.
In addition, we net settled $0.8 million of equity awards that became deliverable to
our employees and repurchased shares of our common stock from the open market for $0.4 million.
22
Auction Rate Securities
As of March 31, 2008 we held $10.1 million in auction rate securities (ARS), which are
variable rate debt instruments, having long-term maturity dates (approximately 17 to 32 years), but
whose interest rates are reset through an auction process, most commonly at intervals of 7, 28 and
35 days. All of our auction rate securities are backed by pools of student loans and all were rated
AAA/Aaa as of March 31, 2008. Our intent with respect to these investments has been not to hold
these securities to maturity, but rather to use the periodic auction feature, when available, to
provide liquidity.
In January 2008, we sold a substantial portion of our auction rate securities holdings through
the normal auction process and used the proceeds to fund our acquisition of Westwind. The net
proceeds from sales during the three months ended March 31, 2008 were $35.8 million.
During the three months ended March 31, 2008, liquidity issues in the global credit markets
resulted in the failure of auctions for our ARS. We continue to receive interest when due on our
ARS at a weighted-average Federal tax exempt interest rate of 4.6% and expect to continue to
receive interest when due in the future. The principal associated with failed auctions will not be
accessible until successful auctions occur, a buyer is found outside of the auction process, the
issuers and the underwriters establish a different form of financing to replace these securities,
or final payments come due according to the contractual maturities. As a result of the auction
failures, we evaluated the credit risk and compared the yields on our ARS to similarly rated
municipal issues and determined that our ARS had a fair value decline of $0.2 million during the
three months ended March 31, 2008. While the recent auction failures will limit our ability to
liquidate these investments for some period of time, we do not believe the auction failures will
materially impact our ability to fund our working capital needs, capital expenditures or other
business requirements.
Debt Financing
In connection with our initial public offering of common stock, we issued $33 million of
unsecured senior notes to our former Class D and Class D-1 shareholders and are required to make
principal and interest payments on these notes in accordance with their terms. As of March 31,
2008, the outstanding principal balance under these notes was $25.4 million and is due in January
2011.
We also have a financing arrangement with General Electric Capital Corporation that is secured
by furniture, equipment and leasehold improvements, with a 3-year term and a variable interest rate
at LIBOR plus 2.85%. As of March 31, 2008, the outstanding balance under this facility was $2.8
million and is due in December 2008.
At March 31, 2008 we were not in compliance with a covenant we have with General Electric
Capital Corporation related to a covenant not to exceed a quarterly or annual net after-tax loss
greater than $10 million. In the quarter ended March 31, 2008 our net after-tax loss exceeded $10
million. We paid all outstanding principal and interest to General Electric Capital Corporation in
May 2008.
In
April 2008, Thomas Weisel Partners LLC, our primary U.S.
broker-dealer subsidiary, entered into a $25.0 million revolving
note and subordinated loan agreement. Through the date of this
filing, no amounts have been drawn under this loan agreement.
Bonus and Share-Based Compensation
The timing of bonus compensation payments to our employees may significantly affect our cash
position and liquidity from period to period. While our employees are generally paid salaries
semi-monthly during the year, bonus payments, which make up a larger portion of total compensation,
have historically been paid in February and July. In February 2008, we made aggregate cash bonus
payments to our employees of approximately $25.6 million and, in addition, granted equity awards
with a grant date fair value of $22.4 million. In addition, in February 2008 we made aggregate cash
payments of $24.8 million to our employees attributable to the acceleration of the payment of 2008
mid-year retention bonuses, which had historically been paid in July, and certain severance
expenses, each of which were related to the integration of Westwind.
On February 9, 2008, 255,372 shares of freely transferable common stock became deliverable to
our employees in respect of share-based awards granted on February 9, 2007. We elected to settle a
portion of these vesting shares through a net settlement feature provided for in SFAS No. 123(R),
Share-Based Payment,
to meet the minimum employee statutory income tax withholding requirements.
We made a payment of $0.8 million related to the net settlement of shares that vested on February
9, 2008. Our cash position and liquidity will be effected to the extent we elect to continue to
settle a portion of vesting shares through net settlement in the future.
23
Regulatory Net Capital and Other Amounts Required to be Maintained at Broker-Dealer Subsidiary
We have the following registered securities broker-dealers:
|
|
|
Thomas Weisel Partners LLC (TWP)
|
|
|
|
|
Thomas Weisel Partners (USA), Inc. (TWP USA)
|
|
|
|
|
Thomas Weisel Partners Canada Inc. (TWPC)
|
|
|
|
|
Thomas Weisel Partners (UK) Limited (TWP UK)
|
|
|
|
|
Thomas Weisel International Private Limited (TWIPL)
|
TWP and TWP USA are registered U.S. broker-dealers that are subject to the Uniform Net Capital
Rule (the Net Capital Rule) under the Securities Exchange Act of 1934 administered by the SEC and
NYSE, which requires the maintenance of minimum net capital. SEC and NYSE regulations also provide
that equity capital may not be withdrawn or cash dividends paid if certain minimum net capital
requirements are not met.
TWPC is a registered investment dealer in Canada and is subject to the capital requirements of
the Investment Dealers Association of Canada. TWPIL and TWP UK are registered U.K. broker-dealers
and are subject to the capital requirements of the Financial Securities Authority.
The table below summarizes the minimum capital requirements for our broker-dealer subsidiaries
(
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
|
Required Net
|
|
|
|
|
|
|
Excess Net
|
|
|
|
Capital
|
|
|
Net Capital
|
|
|
Capital
|
|
TWP
|
|
$
|
1,000
|
|
|
$
|
26,174
|
|
|
$
|
25,174
|
|
TWPC
|
|
|
245
|
|
|
|
13,851
|
|
|
|
13,606
|
|
TWP UK
|
|
|
1,423
|
|
|
|
3,759
|
|
|
|
2,336
|
|
Other broker-dealer subsidiaries
|
|
|
164
|
|
|
|
1,915
|
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,832
|
|
|
$
|
45,699
|
|
|
$
|
42,867
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory net capital requirements change based on certain investment and underwriting
activities.
Our clearing brokers are also the primary source of the short-term financing of our securities
inventory. In connection with the provision of the short-term financing, we are required to
maintain deposits with our clearing brokers. These deposits are included in our net receivable
from or payable to clearing brokers.
Due to the nature of our investment banking and brokerage businesses, liquidity is of critical
importance to us. Accordingly, we regularly monitor our liquidity position, including our cash and
net capital positions. In April 2008, TWP entered into a $25.0 million revolving note and
subordinated loan agreement. From time to time we may borrow funds under this subordinated loan
agreement or under similar liquidity facilities. Such funds would constitute capital for purposes
of calculating our net capital position.
Acquisition of Westwind
On January 2, 2008, we completed our acquisition of Westwind and at the closing of this
transaction we made a cash payment of $45 million as the cash portion of the consideration for this
acquisition. In addition, total costs related to our acquisition of Westwind are estimated to be
$2.8 million.
Off-Balance Sheet Arrangements
As
of March 31, 2008, we do not have any off-balance sheet
arrangements that have an impact on our condensed consolidated statements of financial condition, operations or cash flows.
24
Contractual Obligations
The following table provides a summary of our contractual obligations as of March 31, 2008 (
in
thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period
|
|
|
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of 2008
|
|
|
2009-2010
|
|
|
2011-2012
|
|
|
Thereafter
|
|
|
Total
|
|
Notes payable
(1)
|
|
$
|
3,650
|
|
|
$
|
2,079
|
|
|
$
|
25,489
|
|
|
$
|
|
|
|
$
|
31,218
|
|
Capital leases
(2)
|
|
|
18
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
Operating leases
(3)
|
|
|
14,233
|
|
|
|
36,013
|
|
|
|
24,506
|
|
|
|
28,148
|
|
|
|
102,900
|
|
General partner commitment to invest in private
equity funds
(4)
|
|
|
1,204
|
|
|
|
787
|
|
|
|
75
|
|
|
|
|
|
|
|
2,066
|
|
Guaranteed compensation payments
|
|
|
548
|
|
|
|
6,348
|
|
|
|
|
|
|
|
|
|
|
|
6,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
19,653
|
|
|
$
|
45,297
|
|
|
$
|
50,070
|
|
|
$
|
28,148
|
|
|
$
|
143,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes the notes payable with remaining principal amount of $25.4 million as of March 31,
2008 that were issued in connection with our initial public offering, the secured fixed asset
financing of $2.8 million, as well as the related estimated interest payable for all notes.
|
|
(2)
|
|
Includes estimated interest payable related to capital lease liability.
|
|
(3)
|
|
Operating lease expense is presented net of sub-lease rental income.
|
|
(4)
|
|
The private equity fund commitments have no specific contribution dates. The timing of
these contributions is presented based upon estimated contribution dates.
|
In addition to the contractual obligations within the table above, we have committed $25.2
million to investments in unaffiliated funds. Through March 31, 2008, we have funded $4.8 million
of these commitments and the remaining unfunded portion as of March 31, 2008 was $20.4 million. We
currently anticipate transferring these investments and the related commitments to funds sponsored
by us. These commitments may be called in full at any time.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions about future events that affect
the amounts reported in our condensed consolidated financial statements and their notes. Actual
results could differ significantly from those estimates. The accounting policies that are most
important to the presentation of our financial condition and results of operations and require
managements most difficult, subjective and complex judgments include the following:
|
|
|
Fair Value of Financial Instruments
|
|
|
|
|
Investment in Partnerships and Other Securities
|
|
|
|
|
Liability for Lease Losses
|
|
|
|
|
Legal and Other Contingent Liabilities
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
|
|
|
Deferred Tax Valuation Allowance
|
For further discussion regarding these policies, please refer to Part II, Item 7 -
Managements Discussion and Analysis of Financial Condition and Results of Operations Critical
Accounting Policies and Estimates of our Annual Report on Form 10-K for the year ended December 31,
2007. In addition to the above, as a result of our acquisition of Westwind in January 2008, we
have identified the following critical accounting policies.
Business Combinations
In accordance with business combination accounting under Statement of Financial Accounting
Standards No. 141,
Business Combinations
, we allocate the purchase price of acquired businesses to
the tangible and intangible assets acquired and liabilities assumed based on estimated fair values.
Such allocations require management to make significant estimates and assumptions, especially with
respect to intangible assets acquired.
Managements estimates of fair value are based upon assumptions believed to be reasonable.
These estimates are based on information obtained from management of the acquired companies and are
inherently uncertain. Critical estimates in valuing certain of the intangible assets include, but
are not limited to, (i) future expected cash flows from acquired businesses and (ii) the acquired
companys brand and market position.
25
Unanticipated events and circumstances may occur which may affect the accuracy or validity of
such assumptions, estimates or actual results.
Goodwill
In accordance with Statement of Financial Accounting Standards No. 142,
Goodwill and Other
Intangible Assets
(SFAS No. 142), we are required to evaluate goodwill to determine whether it is
impaired. Accordingly, we will test the value of our goodwill for impairment at least annually
and, under certain circumstances, we may be required to recognize an impairment charge. The
provisions of SFAS No. 142 require that a two-step impairment test be performed on goodwill. In the
first step, we compare the fair value of the reporting unit to its carrying value. If the fair
value of the reporting unit exceeds the carrying value of the net assets assigned to that unit,
goodwill is considered not impaired and we are not required to perform further testing. If the
carrying value of the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then we must perform the second step of the impairment test in order to determine
the implied fair value of the reporting units goodwill. If the carrying value of a reporting
units goodwill exceeds its implied fair value, then we would record an impairment loss equal to
the difference.
While we believe our estimates and judgments about future cash flows are reasonable, future
impairment charges may be required if the expected cash flow estimates, as projected, do not occur
or if events change requiring us to revise our estimates, and thereby result in non-cash charges to
our earnings in the period in which we make the adjustment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our business and financing activities directly expose us to various types of risks, including
(i) market risk relating to, among other things, the changes in the market value of equity or debt
instruments and (ii) interest rate risk relating to the effect of changes in interest rates and the
yield curve on the value of debt instruments that we hold and our payment obligations in respect of
notes that we have issued. We are also exposed to other risks in the conduct of our business such
as credit risk and the effects of inflation. Our exposure to these risks could be material to our
consolidated financial statements. Set forth below is a discussion of some of these risks together
with quantitative information regarding the aggregate amount and value of financial instruments
that we hold or in which we maintain a position or that we have issued and that remain outstanding,
in each case, as of March 31, 2008 and December 31, 2007. Due to the nature of our business, in
particular our trading business, the amount or value of financial instruments that we hold or
maintain a position in will fluctuate on a daily and intra-day basis and the year-end values and
amounts presented below are not necessarily indicative of the exposures to market risk, interest
rate risk and other risks we may experience at various times throughout any given year.
Market Risk
Market risk represents the risk of loss that may result from the change in value of a
financial instrument due to fluctuations in its market price. Market risk may be exacerbated in
times of trading illiquidity when market participants refrain from transacting in normal quantities
and/or at normal bid-offer spreads. Our exposure to market risk is directly related to our role as
a financial intermediary in customer trading and to our market-making and investment activities,
which activities include committing from time to time to purchase large blocks of stock from
publicly-traded issuers or their significant shareholders. We trade in equity and convertible debt
securities as an active participant in both listed and OTC equity and convertible debt markets and
typically maintain securities in inventory to facilitate our market-making activities and customer
order flow. Market risk is inherent in financial instruments.
The following tables categorize our market risk sensitive financial instruments by type of
security and, where applicable, by contractual maturity date.
26
As of March 31, 2008 (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
Maturity Date
|
|
|
Total
|
|
|
as of
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
March 31,
|
|
|
|
of 2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Amount
|
|
|
2008
|
|
Inventory positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds long
|
|
$
|
6,306
|
|
|
$
|
4,086
|
|
|
$
|
3,000
|
|
|
$
|
9,108
|
|
|
$
|
25,306
|
|
|
$
|
122,680
|
|
|
$
|
170,486
|
|
|
$
|
172,953
|
|
Warrants long
(1)
|
|
|
469
|
|
|
|
5,359
|
|
|
|
203
|
|
|
|
216
|
|
|
|
241
|
|
|
|
|
|
|
|
6,488
|
|
|
|
6,488
|
|
Equity securities long
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long
|
|
|
6,775
|
|
|
|
9,445
|
|
|
|
3,203
|
|
|
|
9,324
|
|
|
|
25,547
|
|
|
|
122,680
|
|
|
|
176,974
|
|
|
|
217,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds short
|
|
|
|
|
|
|
|
|
|
|
2,705
|
|
|
|
|
|
|
|
5,000
|
|
|
|
14,266
|
|
|
|
21,971
|
|
|
|
23,301
|
|
U.S.
Treasury securities short
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,831
|
|
Equity securities short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short
|
|
|
|
|
|
|
5,000
|
|
|
|
2,705
|
|
|
|
|
|
|
|
15,000
|
|
|
|
14,266
|
|
|
|
36,971
|
|
|
|
146,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,114
|
(2)
|
|
|
10,114
|
|
|
|
10,114
|
|
Municipal debt securities
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,016
|
|
|
|
1,016
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,781
|
|
|
|
|
(1)
|
|
Maturity date is based on the warrant expiration date. However, we made an assumption of
expiration date when none was available.
|
|
(2)
|
|
Represents contractual maturity date. Please refer to further discussion regarding auction
rate securities included in the Liquidity and Capital Resources section above.
|
As of December 31, 2007 (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
Maturity Date
|
|
|
Total
|
|
|
as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Amount
|
|
|
2007
|
|
Inventory positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
bonds long
|
|
$
|
9,305
|
|
|
$
|
4,063
|
|
|
$
|
1,005
|
|
|
$
|
5,348
|
|
|
$
|
21,949
|
|
|
$
|
120,050
|
|
|
$
|
161,720
|
|
|
$
|
189,483
|
|
Equity
securities
long
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long
|
|
|
9,305
|
|
|
|
4,063
|
|
|
|
1,005
|
|
|
|
5,348
|
|
|
|
21,949
|
|
|
|
120,050
|
|
|
|
161,720
|
|
|
|
220,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
bonds short
|
|
|
|
|
|
|
|
|
|
|
2,705
|
|
|
|
|
|
|
|
1,000
|
|
|
|
12,031
|
|
|
|
15,736
|
|
|
|
18,351
|
|
U.S. Treasury
securities short
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,330
|
|
Equity
securities short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short
|
|
|
|
|
|
|
5,000
|
|
|
|
2,705
|
|
|
|
|
|
|
|
11,000
|
|
|
|
12,031
|
|
|
|
30,736
|
|
|
|
163,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities
|
|
|
37,600
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,550
|
(2)
|
|
|
46,150
|
|
|
|
46,150
|
|
Municipal debt
securities
|
|
|
4,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016
|
|
|
|
4,016
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,018
|
|
|
|
|
(1)
|
|
Represents earlier of contractual maturity or repricing date, which we believe represents the
market risk inherent in the underlying instrument. Please refer to further discussion
regarding auction rate securities included in the Liquidity and Capital Resources section
above.
|
|
(2)
|
|
Represents contractual maturity date. Please refer to further discussion regarding auction
rate securities included in the Liquidity and Capital Resources section above.
|
In connection with our asset management activities, we provide seed investment funds for new
asset management products to be invested in long and short positions in publicly traded equities
and related options and other derivative instruments. These seed investments are included in the
tables presented above.
27
In addition to the positions set forth in the table above, we maintain investments in private
equity, venture capital and other investment funds we manage or have managed. These investments
are carried at fair value in accordance with industry guidance and as of March 31, 2008 and
December 31, 2007 the carrying amount of these investments was $55.8 million and $60.5 million,
respectively.
From time to time we may use a variety of risk management techniques and hedging strategies in
the ordinary course of our brokerage activities, including establishing position limits by product
type and industry sector, closely monitoring inventory turnover, maintaining long and short
positions in related securities and using exchange-traded equity options and other derivative
instruments.
In connection with our brokerage activities, management reviews reports appropriate to the
risk profile of specific trading activities. Typically, market conditions are evaluated and
transaction details and securities positions are reviewed. These activities seek to ensure that
trading strategies are within acceptable risk tolerance parameters, particularly when we commit our
own capital to facilitate client trading. Our accounting department is actively involved in
ensuring the integrity and clarity of the daily profit and loss statements, to the extent that we
maintain trading positions for a period longer than one day. Activities include price verification
procedures, position reconciliation and review of transaction booking. We believe that these
procedures, which stress timely communications between our traders, institutional brokerage
management and senior management, are important elements in evaluating and addressing market risk.
Interest Rate Risk
Interest rate risk represents the potential loss from adverse changes in market interest
rates. As we may hold U.S. Treasury securities and other fixed income securities, as well as
convertible debt securities, and incur interest-sensitive liabilities from time to time, we are
exposed to interest rate risk arising from changes in the level and volatility of interest rates
and in the shape of the yield curve. Certain of these interest rate risks may be managed through
the use of short positions in U.S. government and corporate debt securities and other instruments.
In addition, we issued floating rate notes to California Public Employees Retirement System and
Nomura America Investment, Inc. and are, therefore, exposed to the risk of higher interest payments
on those notes if interest rates rise.
The tables below provide information about our financial instruments that are sensitive to
changes in interest rates. For inventory positions, other investments and notes payable the table
presents principal cash flows with contractual maturity dates.
28
As of March 31, 2008 (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
|
|
Maturity Date
|
|
|
Total
|
|
|
as of
|
|
|
|
Remainder
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
March 31,
|
|
|
|
of 2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Amount
|
|
|
2008
|
|
Inventory positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds
long
|
|
$
|
6,306
|
|
|
$
|
4,086
|
|
|
$
|
3,000
|
|
|
$
|
9,108
|
|
|
$
|
25,306
|
|
|
$
|
122,680
|
|
|
$
|
170,486
|
|
|
$
|
172,953
|
|
|
Convertible bonds
short
|
|
|
|
|
|
|
|
|
|
|
2,705
|
|
|
|
|
|
|
|
5,000
|
|
|
|
14,266
|
|
|
|
21,971
|
|
|
|
23,301
|
|
U.S. Treasury
securities short
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short
|
|
|
|
|
|
|
5,000
|
|
|
|
2,705
|
|
|
|
|
|
|
|
15,000
|
|
|
|
14,266
|
|
|
|
36,971
|
|
|
|
39,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate
securities
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,114
|
(6)
|
|
|
10,114
|
|
|
|
10,114
|
|
Municipal debt
securities
(2)
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,016
|
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Note,
floating mid-term
AFR + 2.25%
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
12,322
|
|
Senior Note,
floating mid-term
AFR + 2.25%
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
9,479
|
|
Contingent Payment
Senior Note, non
interest bearing
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,384
|
|
|
|
|
|
|
|
|
|
|
|
2,384
|
|
|
|
1,980
|
|
Secured Note,
floating
at LIBOR +
2.85%
(5)
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
|
|
|
|
2,800
|
|
|
|
|
(1)
|
|
The weighted average interest rate was 4.56% at March 31, 2008.
|
|
(2)
|
|
The weighted average interest rate was 3.10% at March 31, 2008.
|
|
(3)
|
|
We have recorded the debt principal at a discount to reflect the below-market stated interest
rate of these notes. We amortize the discount to interest expense so that the interest expense
approximates our incremental borrowing rate. The weighted average interest rate was 5.32% at
March 31, 2008.
|
|
(4)
|
|
The Contingent Payment Senior Note has a variable due date based upon distributions received
from certain private equity funds. We have recorded the debt principal at a discount and
amortize the discount to interest expense so that the interest expense on this non-interest
bearing note approximates our incremental borrowing rate. The weighted average interest rate
was 6.55% March 31, 2008.
|
|
(5)
|
|
The weighted average interest rate was 6.60% at March 31, 2008.
|
|
(6)
|
|
Represents contractual maturity date. Please refer to further discussion regarding auction
rate securities included in the Liquidity and Capital Resources section above.
|
29
As of December 31, 2007 (
in thousands
):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
Maturity Date
|
|
|
Total
|
|
|
Value as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
Amount
|
|
|
2007
|
|
Inventory positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible bonds long
|
|
$
|
9,305
|
|
|
$
|
4,063
|
|
|
$
|
1,005
|
|
|
$
|
5,348
|
|
|
$
|
21,949
|
|
|
$
|
120,050
|
|
|
$
|
161,720
|
|
|
$
|
189,483
|
|
|
Convertible bonds short
|
|
|
|
|
|
|
|
|
|
|
2,705
|
|
|
|
|
|
|
|
1,000
|
|
|
|
12,031
|
|
|
|
15,736
|
|
|
|
18,351
|
|
U.S.
Treasury securities short
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short
|
|
|
|
|
|
|
5,000
|
|
|
|
2,705
|
|
|
|
|
|
|
|
11,000
|
|
|
|
12,031
|
|
|
|
30,736
|
|
|
|
33,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities
(1)
|
|
|
37,600
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,550
|
(7)
|
|
|
46,150
|
|
|
|
46,150
|
|
Municipal debt securities
(2)
|
|
|
4,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016
|
|
|
|
4,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Note, floating
mid-term AFR + 2.25%
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
12,267
|
|
Senior Note, floating
mid-term AFR + 2.25%
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
9,436
|
|
Contingent Payment
Senior Note
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,384
|
|
|
|
|
|
|
|
|
|
|
|
2,384
|
|
|
|
1,948
|
|
Secured Note, floating at
LIBOR + 2.85%
(5)
|
|
|
3,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,734
|
|
|
|
3,734
|
|
|
|
|
(1)
|
|
The weighted average interest rate was 5.42% at December 31, 2007.
|
|
(2)
|
|
The weighted average interest rate was 3.80% at December 31, 2007.
|
|
(3)
|
|
We have recorded the debt principal at a discount to reflect the below-market stated interest
rate of these notes at inception. We amortize the discount to interest expense so that the
interest expense approximates our incremental borrowing rate. The weighted average interest
rate was 6.65% at December 31, 2007.
|
|
(4)
|
|
The Contingent Payment Senior Note has a variable due date based upon distributions received
from certain private equity funds. We have recorded the debt principal at a discount and
amortize the discount to interest expense so that the interest expense on this non-interest
bearing note approximates our incremental borrowing rate. The weighted average interest rate
was 15.64% at December 31, 2007.
|
|
(5)
|
|
The weighted average interest rate was 8.17% at December 31, 2007.
|
|
(6)
|
|
Represents earlier of contractual maturity or repricing date, which we believe represents the
interest rate risk inherent in the underlying instrument. Please refer to further discussion
regarding auction rate securities included in the Liquidity and Capital Resources section
above.
|
|
(7)
|
|
Represents contractual maturity date. Please refer to further discussion regarding auction
rate securities included in the Liquidity and Capital Resources section above.
|
Credit Risk
Our broker-dealer subsidiaries place and execute customer orders. The orders are then settled
by unrelated clearing organizations that maintain custody of customers securities and provide
financing to customers. The majority of our transactions, and consequently the concentration of our
credit exposure, is with our clearing brokers. The clearing brokers are also the primary source of
our short-term financing (securities sold, but not yet purchased), which is collateralized by cash
and securities owned by us and held by the clearing brokers. Our securities owned may be pledged by
the clearing brokers. The amount receivable from/payable to the clearing brokers represents amounts
receivable/payable in connection with the proprietary and customer trading activities. As of March
31, 2008 and December 31, 2007, our cash on deposit with the clearing brokers of $49.0 million and
$135.9 million, respectively, was not collateralizing any liabilities to the clearing brokers. In
addition to the clearing brokers, we are exposed to credit risk from other brokers, dealers and
other financial institutions with which we transact business.
Through indemnification provisions in our agreement with our clearing organizations, customer
activities may expose us to off-balance sheet credit risk. We may be required to purchase or sell
financial instruments at prevailing market prices in the event a customer fails to settle a trade
on its original terms or in the event cash and securities in customer margin accounts are not
sufficient to fully cover customer obligations. We seek to control the risks associated with
brokerage services for our customers through customer screening and selection procedures as well as
through requirements that customers maintain margin collateral in compliance with governmental and
self-regulatory organization regulations and clearing organization policies.
30
Effects of Inflation
Due to the fact that our assets are generally liquid in nature, they are not significantly
affected by inflation. However, the rate of inflation affects our expenses, such as employee
compensation, office leasing costs and communications charges, which may not be readily recoverable
in the price of services offered by us. To the extent inflation results in rising interest rates
and has other adverse effects upon the securities markets, it may adversely affect our financial
position and results of operations.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material
information required to be disclosed in our periodic reports filed or submitted under the
Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms. Our
disclosure controls and procedures are also designed to ensure that information required to be
disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer as
appropriate, to allow timely decisions regarding required disclosure.
During the quarter ended March 31, 2008, we carried out an evaluation, under the supervision
and with the participation of management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of March 31, 2008.
There were no changes in our internal control over financial reporting in the three months
ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as
exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The following describes significant developments with respect to our litigation matters that
occurred in the three months ended March 31, 2008, and through the filing date, and should be read
in conjunction with our discussion set forth under Note 16 Commitments, Guarantees and
Contingencies in Part VI, Item 15 of our Annual Report on Form 10-K for the year ended December 31,
2007.
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In re Leadis Technology, Inc. Securities Litigation
We have been a defendant in a
purported class action litigation brought in connection with Leadis Technology, Inc.s
initial public offering in June 2004 where we served as a co-manager for Leadis. The
consolidated complaint, filed in the United States District Court for the Northern District
of California on August 8, 2005, alleged violations of Federal securities laws against
Leadis and certain of its directors and officers as well as the companys underwriters,
including us, based on alleged misstatements and omissions in the registration statement.
On March 1, 2006 the complaint against us in this matter was dismissed by the court with
prejudice. Subsequently, on March 28, 2006, the plaintiffs in this matter appealed the
dismissal to the United States Court of Appeals for the Ninth Circuit and on February 21,
2008 the Appeals Court granted the appeal. We believe we have meritorious defenses to
these actions and intend to vigorously defend such actions as they apply to us.
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In re Merix Securities Litigation Plaintiffs Appeal Granted
We have been a
defendant in a purported class action suit brought in connection with an offering in
January 2004 involving Merix Corporation in which we served as co-lead manager for Merix.
On September 15, 2005, the United States District Court for the District of Oregon entered
an order dismissing all claims against the underwriter defendants, including us, and the
Merix defendants. A portion of the claim under Section 12(a)(2) of the Securities Exchange
Act of 1934 was dismissed with prejudice, and the remainder of that claim and the
Section 11 claim were dismissed with leave to re-file. Plaintiffs subsequently filed an
amended complaint and on September 28, 2006 the Court dismissed the remaining claims with
prejudice. Following the September 28, 2006 dismissal, plaintiffs filed a notice of appeal
to the United States Court of Appeals for the Ninth Circuit and on February 21, 2008 the
Appeals Court granted the appeal. We believe we have meritorious defenses to these
actions and intend to vigorously defend such actions as they apply to us.
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In re Friedmans Inc. Securities Litigation
In September 2003, we acted as lead
manager on a follow-on offering of common stock of Friedmans Inc. Subsequent to that
offering a class action suit was filed against Friedmans and its directors, senior
officers and outside accountants as well as Friedmans underwriters, including us, in the
United States District Court for the Northern District of Georgia, alleging that the
registration statement for the offering and a previous registration statement dated
February 2, 2002 were fraudulent and materially misleading. During the three months ended
March 31, 2008, the plaintiffs claims were settled. Our portion of the settlement amount
was not material to our condensed consolidated statements of financial condition,
operations and cash flows.
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31
Item 1A. Risk Factors
The following discussion supplements the risk factors previously disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2007.
An impairment in the carrying value of goodwill could negatively effect our consolidated statements
of financial position, results of operations and cash flows.
Under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible
Assets
, we are required to evaluate goodwill to determine whether it is impaired under the
guidelines of the standard. Accordingly, we will test the value of our goodwill for impairment at
least annually and, under certain circumstances, we may be required to recognize an impairment
charge. While we believe our estimates and judgments about future cash flows are reasonable, future
impairment charges may be required if the expected cash flow estimates, as projected, do not occur
or if events change requiring us to revise our estimates, and thereby result in non-cash charges to
our earnings in the period in which we make the adjustment.
As
of March 31, 2008, we had $95.8 million of goodwill related to our acquisition of Westwind.
While we currently believe that the fair value of goodwill approximates its carrying value,
materially different assumptions regarding future performance of our businesses could result in
significant impairment losses in the future.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Common Stock during the Three Months Ended March 31, 2008
During the three months ended March 31, 2008, we repurchased the following shares of our
common stock from the open market:
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Average Purchase
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Month
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Number of Shares
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Price per Share
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Total Cost
(1)
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January
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$
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February
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March
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62,600
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$
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6.59
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412,534
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Total
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62,600
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$
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6.59
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$
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412,534
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(1)
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Total cost does not include commissions paid to third-party brokers to execute these
purchases.
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These repurchases were funded through cash and cash equivalents. The shares were classified as
treasury stock upon repurchase and we intend to use these shares to settle obligations to deliver
common stock in the future to employees who have received Restricted Stock Units under our Equity
Incentive Plan.
Subsequent
Repurchases of Common Stock
During
the period beginning on April 1, 2008 and ending on May 8, 2008, we repurchased an
additional 1,062,055 shares of our common stock from the open market. The shares were classified as
treasury stock upon repurchase and we intend to use these shares to settle obligations to deliver
common stock in the future to employees who have received Restricted Stock Units under our Equity
Incentive Plan.
These repurchases, as well as the repurchases carried out during the three months ended March
31, 2008, were executed pursuant to an authorization by our Board of Directors to repurchase up to
2,000,000 shares of common stock for the purpose of settling obligations to deliver common stock in
the future to employees who have received Restricted Stock Units under our Equity Incentive Plan.
Additional repurchases pursuant to this authority may be carried out from time to time in the
future. Furthermore, our Board of Directors may authorize additional repurchases for the purpose
of settling obligations to deliver common stock in the future to employees who have received
Restricted Stock Units under our Equity Incentive Plan.
Net
Settlement of Restricted Stock Unit Awards
During
the three months ended March 31, 2008, 82,043 shares of
common stock that were otherwise scheduled to be delivered to
employees in respect of vesting Restricted Stock Units were withheld
from delivery (under the terms of grants under the Equity Incentive
Plan) to offset tax withholding obligations of the employee
recipients that occur upon the vesting of Restricted Stock Units. In
lieu of delivering these shares to the employee recipients, we
satisfied a portion of their tax withholding obligations with cash in
an amount equivalent to the value of such shares on the scheduled
delivery date.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Refer to the Exhibit Index for a list of the exhibits being filed or furnished with or
incorporated by reference into this Quarterly Report on Form 10-Q.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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THOMAS WEISEL PARTNERS GROUP, INC.
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Date: May 9, 2008
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By:
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/s/ Thomas W. Weisel
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Name:
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Thomas W. Weisel
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Title:
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Chairman and Chief Executive Officer
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Date: May 9, 2008
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By:
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/s/ Shaugn S. Stanley
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Name:
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Shaugn S. Stanley
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Title:
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Chief Financial Officer
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S-1
EXHIBIT INDEX
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Incorporated by Reference
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Exhibit
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File
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Date of
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Exhibit
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Filed
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Number
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Exhibit Description
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Form
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Number
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First Filing
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Number
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Herewith
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2.1
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Plan of Reorganization and
Merger Agreement, dated as
of October 14, 2005, by and
among Thomas Weisel Partners
Group LLC, Thomas Weisel
Partners Group, Inc. and
TWPG Merger Sub LLC
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S-1/A
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333-129108
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12/13/2005
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2.1
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2.2
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Agreement and Plan of Merger
between Thomas Weisel
Partners Group, Inc. and
Thomas Weisel Partners Group
LLC
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10-K
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000-51730
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3/29/2006
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2.2
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2.3
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Arrangement Agreement dated
as of September 30, 2007 by
and among Thomas Weisel
Partners Group, Inc., TWP
Acquisition Company
(Canada), Inc., Westwind
Capital Corporation, and
Lionel Conacher, as
Shareholders Representative
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8-K
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000-51730
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10/1/2007
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2.1
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3.1
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Certificate of Incorporation
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S-1
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333-129108
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10/19/2005
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3.1
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3.2
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By-Laws
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S-1
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333-129108
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10/19/2005
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3.2
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3.3
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Certificate of Designations,
Preferences and Rights of
the Special Voting Preferred
Stock of Thomas Weisel
Partners Group, Inc.
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8-K
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000-51730
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1/1/2008
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3.3
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4.1
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Form of Common Stock
Certificate
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10-K
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000-51730
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3/29/2006
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4.1
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4.2
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Registration Rights Agreement
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10-K
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000-51730
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3/29/2006
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4.2
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4.3
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Warrant
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10-K
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000-51730
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3/29/2006
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4.3
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31.1
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Rule 13a-14(a) Certification
of Chief Executive Officer
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X
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31.2
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Rule 13a-14(a) Certification
of Chief Financial Officer
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X
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32.1
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Section 1350 Certification
of Chief Executive Officer
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X
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32.2
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Section 1350 Certification
of Chief Financial Officer
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X
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