NYSE - OPY
NEW YORK, NY, July 29, 2011 /PRNewswire/ -
Expressed in thousands of dollars,
except per share amounts |
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Three Months ended
June 30, |
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Six
Months ended
June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
(unaudited) |
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Revenue |
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$244,518 |
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$256,996 |
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$497,935 |
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$503,171 |
Expenses |
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$242,814 |
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$240,850 |
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$486,402 |
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$471,165 |
Profit before income taxes |
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$1,704 |
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$16,146 |
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$11,533 |
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$32,006 |
Net profit (loss) attributable to
Oppenheimer Holdings Inc. |
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$(309) |
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$9,202 |
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$4,777 |
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$18,370 |
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Basic earnings (loss) per share |
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($0.02) |
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$0.69 |
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$0.35 |
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$1.38 |
Diluted earnings (loss) per share |
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($0.02) |
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$0.66 |
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$0.34 |
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$1.32 |
Book value per share at June 30 |
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$36.30 |
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$35.34 |
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- |
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Business Review
Oppenheimer Holdings Inc. reported a net loss of
$309,000 or ($0.02) per share for the second quarter of 2011
compared to a net profit of $9.2
million or $0.69 per share in
the second quarter of 2010. Revenue for the second quarter of 2011
was $244.5 million compared to
revenue of $257.0 million in the
second quarter of 2010, a decrease of 4.9%. Client assets entrusted
to the Company and under management totaled approximately
$73.9 billion while client assets
under fee-based programs offered by the asset management groups
totaled approximately $19.7 billion
at June 30, 2011 ($66.9 billion and $14.7
billion, respectively, at June 30,
2010). Second quarter results were negatively impacted by
costs of $4.6 million associated with
refinancing our long-term debt as well as significant continuing
costs associated with auction rate securities matters.
Net profit for the six months ended June 30, 2011 was $4.8
million or $0.35 per share
compared to $18.4 million or
$1.38 per share in the same period of
2010. Revenue for the six months ended June
30, 2011 was $497.9 million, a
decrease of 1.0% compared to $503.2
million in the same period of 2010.
Repercussions from the tsunami in Japan, volatile commodity prices, and
uncertainty around sovereign debt quality both in Europe and the U.S. has led to a slowing of
economic growth amid protracted high levels of unemployment. Amid
these conditions, the U.S. equity and debt markets were volatile
but with extremely low volume levels and low levels of investor
participation. While corporate earnings are likely to continue to
show improvement over the near term, the confidence of consumers
remains low and the protracted decline in housing prices continues
to restrict job growth and consumer spending. The lack of agreement
on the U.S debt ceiling adds a significant element of uncertainty
as do the long- term budget issues facing the U.S. These issues,
coupled with the threat of a downgrading in the U.S credit rating,
create a lack of confidence that will be a drag on the economy and
the willingness of businesses to create new jobs.
Oppenheimer's results were significantly
affected by the conditions described above as well as by matters
more closely tied to the Company. The Company's institutional
business, both equity and fixed income, was adversely affected by
low volume levels, volatility and client reluctance to try to
decipher the markets' future direction amid the volatility of price
action during the second quarter of 2011. Investment banking income
declined for the period mostly due to the comparison to 2010 when
that quarter's income was favorably impacted by a large fee earned
on a single transaction. Fee based programs within our asset
management business continued to show favorable comparisons as the
equity markets were near their highs at the time these fee amounts
were determined. The effective tax rate for the three-month period
ended June 30, 2011 was negatively
impacted by remeasurements of deferred tax assets arising from net
operating losses related to the Company's Israeli subsidiary,
resulting in tax expense of $466,000,
and from state net operating losses and gross timing differences,
resulting in net tax expense of $188,000.
Commenting on the quarter's results Albert Lowenthal, Chairman and CEO, said "We are
disappointed with our results for the second quarter of 2011 as
well as the first half of the year. We have found that current
market conditions, coupled with the protracted period of low
interest rates, provide little opportunity to significantly and
positively impact our results without substantially increasing the
levels of risk-taking, which has not been the Company's model. The
costs associated with dealing with our clients' holdings of auction
rate securities (ARS) continues to be a burden on the business,
although we continue to see progress on the redemption by issuers,
albeit slower than we would like.
As previously reported, we issued $200 million of high-yield debt during the second
quarter of 2011 to pay down existing debt and to fund future
growth. We believe that our timing was good, although the costs
associated with the issuance and the ongoing debt service costs
(which are fixed compared to variable) negatively impacted the
results for the period.
We remain optimistic for the remainder of the
year, as we continue to expect renewed growth in the economy and
some resolution to issues facing the economy and the banking
system."
Highlights of the Company's results for the
three and six months ended June 30,
2011 follow:
Revenue and Expenses
Revenue - Second Quarter 2011
- Commission revenue was $120.8
million for the second quarter of 2011, a decrease of 13.5%
compared to $139.6 million in the
second quarter of 2010. Weak investor sentiment and volatile
markets in the 2011 period contributed to the decline.
- Principal transactions revenue was $13.3
million in the second quarter of 2011 compared to
$16.8 million in the second quarter
of 2010, a decrease of 20.6%. The decrease stems from lower income
from firm investments (a net loss of $2.0
million for the second quarter of 2011 compared to a net
loss of $144,000 for the second
quarter of 2010) and lower fixed income trading revenue
($15.4 million in the second quarter
of 2011 compared to $17.4 million in
the second quarter of 2010).
- Interest revenue was $13.6
million in the second quarter of 2011, an increase of 21.9%
compared to $11.2 million in the
second quarter of 2010. The increase is primarily attributable to
increased interest earned by the government trading desk of
$515,000 as a result of higher
inventory balances as well as an increase in margin revenue of
$757,000 as a result of higher margin
debit balances.
- Investment banking revenue was $33.7
million in the second quarter of 2011, a decrease of 7.2%
compared to $36.3 million in the
second quarter of 2010 with decreased fee income related to private
placements of $10.4 million, offset
by an increase of $6.3 million in
advisory services and an increase of $1.5
million in fees relating to equity issuances.
- Advisory fees were $50.1 million in the second quarter of 2011,
an increase of 13.8% compared to $44.0
million in the second quarter of 2010. Asset management fees
increased by $6.7 million in the
second quarter of 2011 compared to the same period in 2010 as a
result of an increase in the value of assets under management of
17.1% during the period. Asset management fees are calculated based
on client assets under management at the end of the prior quarter
which totaled $19.9 billion at
March 31, 2011 ($17.0 billion at March 31,
2010). The increase in asset management fees was offset by a
decrease in fees earned on money market products of $581,000 as the Company continues to waive money
market fee income. The Company waived $6.3 million in money market fees during the
period ($5.7 million in the second
quarter of 2010).
- Other revenue was $13.0 million
in the second quarter of 2011, an increase of 42.5% compared to
$9.1 million in the second quarter of
2010 primarily as a result of a $2.5
million increase in the mark-to-market value of
Company-owned life insurance policies that relate to our employee
deferred compensation programs (which are largely offset by an
increase in employee compensation liabilities and expense). In
addition, fees generated from Oppenheimer Multifamily Housing &
Healthcare Finance, Inc. ("OMHHF") (formerly called Evanston
Financial Corporation) increased by $2.0
million in the second quarter of 2011 compared to the second
quarter of 2010.
Revenue - Year-to-date 2011
- Commission revenue was $257.6
million for the six months ended June
30, 2011, a decrease of 7.3% compared to $277.8 million in the same period of 2010.
- Principal transactions revenue was $24.3
million in the six months ended June
30, 2011 compared to $37.0
million in the same period of 2010, a decrease of 34.2%. The
decrease stems from lower income from loan trading and sales
($484,000 for the six months ended
June 30, 2011 compared to
$4.7 million in the same period of
2010) as a result of the loss of personnel and lower fixed income
trading revenue ($24.9 million in the
six months ended June 30, 2011
compared to $31.4 million in the same
period of 2010).
- Interest revenue was $28.4
million in the six months ended June
30, 2011, an increase of 36.9% compared to $20.8 million in the same period of 2010. The
increase is primarily attributable to interest earned by the
government trading desk of $4.4
million as a result of higher inventory balances as well as
an increase in margin revenue of $1.3
million as a result of higher margin debit balances.
- Investment banking revenue was $62.2
million in the six months ended June
30, 2011, an increase of 1.0% compared to $61.5 million in the same period of 2010.
- Advisory fees were $98.5 million in the six months ended
June 30, 2011, an increase of 13.5%
compared to $86.8 million in the same
period of 2010. Asset management fees increased by $11.9 million in the six months ended
June 30, 2010 compared to the same
period in 2010 as a result of an increase in the value of assets
under management during the period. The increase in asset
management fees was offset by a decrease in fees earned on money
market products of $892,000 as the
Company continues to waive money market fee income. The
Company waived $12.2 million in money
market fees during the period ($11.8
million in the second quarter of 2010).
- Other revenue was $26.9 million
in the six months ended June 30,
2011, an increase of 38.9% compared to $19.4 million in the same period of 2010
primarily as a result of a $2.7
million increase in the mark-to-market value of
Company-owned life insurance policies that relate to our employee
deferred compensation programs as well as a $5.5 million increase in fees generated from
OMHHF in the six months ended June 30,
2011 compared to the same period in 2010.
Expenses - Second Quarter 2011
- Compensation and related expenses decreased 2.4% in the second
quarter of 2011 to $160.4 million
compared to $164.3 million in the
second quarter of 2010. Decreases in production-related
compensation expense of $2.7 million
tracked the decrease in revenue in the second quarter of 2011
compared to the second quarter of 2010. In addition, share-based
compensation expense decreased by $3.5
million in response to the decline in the Company's stock
price in the second quarter of 2011, partially offset by an
increase in deferred compensation expense of $2.1 million compared to the second quarter of
2010.
- Clearing and exchange fees decreased 19.5% to $6.3 million in the second quarter of 2011
compared to $7.8 million in the same
period of 2010 due to lower trade execution costs and floor
brokerage fees.
- Communications and technology expenses decreased 1.4% to
$16.1 million in the second quarter
of 2011 from $16.3 million in the
same period of 2010.
- Occupancy and equipment costs of $18.5
million in the second quarter of 2011 increased 1.4%
compared to $18.3 million in the
second quarter of 2010 due primarily to higher equipment rental
costs in the second quarter of 2011 compared to the second quarter
of 2010.
- Interest expense increased 67.0% to $10.7 million in the second quarter of 2010 from
$6.4 million in the same period in
2010 primarily due to increased debt service costs of $2.2 million incurred on the $200 million senior secured note which was issued
to refinance and retire the Company's senior secured credit note
($22.4 million) and subordinated note
($100 million) in April 2011. In addition, the loss of $1.6 million on the Company's interest rate cap
which hedged the subordinated note was reclassified from other
comprehensive income into interest expense in the second quarter of
2011.
- Other expenses increased 11.0% to $30.8
million in the second quarter of 2011 from $27.8 million in the same period in 2010
primarily due to increased legal costs of $1.4 million relating to client litigation and
arbitration activity and legal costs to resolve regulatory matters
and professional consulting fees of $1.0
million.
Expenses - Year-to-date 2011
- Compensation and related expenses increased 2.6% in the six
months ended June 30, 2011 to
$330.9 million compared to
$322.5 million in the same period of
2010. The increase was primarily due to increases in share-based
compensation expense and deferred compensation expense of
$3.1 million and $2.8 million, respectively, in the six months
ended June 30, 2011 compared to the
same period in 2010.
- Clearing and exchange fees decreased 12.3% to $12.6 million in the six months ended
June 30, 2011 compared to
$14.4 million in the same period of
2010 due to lower trade execution costs and floor brokerage
fees.
- Communications and technology expenses decreased 2.2% to
$32.0 million in the six months ended
June 30, 2011 from $32.7 million in the same period of 2010 due to
lower telecommunications costs in the six months ended June 30, 2011 compared to the same period in
2010.
- Occupancy and equipment costs of $37.1
million in the six months ended June
30, 2011 increased by 0.9% compared to $36.7 million in the same period of 2010.
- Interest expense increased 57.8% to $18.4 million in the six months ended
June 30, 2011 from $11.7 million in the same period in 2010
primarily due to increased debt service costs of $2.1 million incurred on the $200 million senior secured note which was issued
to refinance and retire the Company's senior secured credit note
($22.4 million) and subordinated note
($100 million) in April 2011. In addition, the loss of $1.6 million on the Company's interest rate cap
which hedged the subordinated note was reclassified from other
comprehensive income into interest expense in the second quarter of
2011.
- Other expenses increased 4.3% to $55.4
million in the six months ended June
30, 2011 from $53.1 million in
the same period in 2010 primarily due to increased legal costs of
$832,000 relating to client
litigation and arbitration activity and legal costs to resolve
regulatory matters and professional consulting fees of $1.4 million.
Stockholders' Equity and Dividend
Declaration
- At June 30, 2011, total equity
was $500.7 million compared to
$497.6 million at December 31, 2010.
- At June 30, 2011, book value per
share was $36.30 (compared to
$35.34 at June
30, 2010) and tangible book value per share was $23.85 (compared to $22.18 at June 30,
2010).
- The Company announced today a quarterly cash dividend in the
amount of $0.11 per share, payable on
August 26, 2011 to holders of Class A
non-voting and Class B voting common stock of record on
August 12, 2011.
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OPPENHEIMER HOLDINGS
INC. |
SUMMARY STATEMENT OF OPERATIONS
(UNAUDITED) |
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$ in thousands, except
share and
per share amounts |
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Three Months Ended |
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Six Months
Ended |
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06/30/11 |
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06/30/10 |
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% Δ |
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06/30/11 |
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06/30/10 |
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% Δ |
REVENUE |
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Commissions |
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$120,790 |
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$139,582 |
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-13% |
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$257,645 |
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$277,779 |
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-7% |
Principal transactions, net |
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13,313 |
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16,778 |
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-21% |
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24,304 |
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36,957 |
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-34% |
Interest |
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13,649 |
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11,198 |
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22% |
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28,438 |
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20,776 |
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37% |
Investment banking |
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33,717 |
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36,336 |
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-7% |
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62,158 |
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61,520 |
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1% |
Advisory fees |
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50,055 |
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43,984 |
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14% |
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98,504 |
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86,778 |
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14% |
Other |
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12,994 |
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9,118 |
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43% |
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26,886 |
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19,361 |
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39% |
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244,518 |
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256,996 |
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-5% |
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497,935 |
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503,171 |
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-1% |
EXPENSES |
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Compensation & related expenses |
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160,436 |
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164,304 |
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-2% |
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330,851 |
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322,483 |
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3% |
Clearing & exchange fees |
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6,300 |
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7,823 |
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-19% |
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12,613 |
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14,385 |
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-12% |
Communications & technology |
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16,069 |
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16,300 |
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-1% |
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32,008 |
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32,740 |
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-2% |
Occupancy & equipment costs |
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18,524 |
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18,262 |
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1% |
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37,070 |
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36,722 |
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1% |
Interest |
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10,669 |
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6,389 |
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67% |
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18,443 |
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11,690 |
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58% |
Other |
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30,816 |
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27,772 |
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11% |
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55,417 |
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53,145 |
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4% |
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242,814 |
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240,850 |
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1% |
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486,402 |
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471,165 |
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3% |
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Profit before income taxes |
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1,704 |
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16,146 |
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-89% |
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11,533 |
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32,006 |
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-64% |
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Income tax provision |
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1,266 |
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6,284 |
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-80% |
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5,334 |
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12,780 |
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-58% |
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Net profit for the period |
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438 |
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9,862 |
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-96% |
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6,199 |
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19,226 |
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-68% |
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Less net profit attributable to
non-controlling interest, net of tax |
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747 |
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660 |
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13% |
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1,422 |
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856 |
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66% |
Net profit (loss) attributable to
Oppenheimer Holdings Inc. |
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($309) |
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$9,202 |
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N/A |
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$4,777 |
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$18,370 |
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-74% |
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Profit (loss) per share attributable
to Oppenheimer Holdings Inc. |
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Basic |
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($0.02) |
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$0.69 |
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$0.35 |
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$1.38 |
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Diluted |
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($0.02) |
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$0.66 |
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$0.34 |
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$1.32 |
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Weighted avg. shares outstanding |
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13,658,720 |
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13,069,014 |
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13,605,020 |
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13,323,410 |
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Actual shares outstanding |
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13,668,625 |
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13,172,669 |
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13,668,625 |
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13,172,669 |
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Company Information
Oppenheimer, through its principal subsidiaries,
Oppenheimer & Co. Inc. (a U.S. broker-dealer) and Oppenheimer
Asset Management Inc., offers a wide range of investment banking,
securities, investment management and wealth management services
from over 94 offices in 26 states and through local broker-dealers
in 4 foreign jurisdictions. Oppenheimer employs over 3,600
people. The Company offers trust and estate services through
Oppenheimer Trust Company. OPY Credit Corp. offers syndication as
well as trading of issued corporate loans. Oppenheimer Multifamily
Housing & Healthcare Finance, Inc. (formerly Evanston Financial
Corporation) is engaged in mortgage brokerage and servicing. In
addition, through Freedom Investments, Inc. and the BUYandHOLD
division of Freedom, Oppenheimer offers online discount brokerage
and dollar-based investing services.
Forward-Looking Statements
This press release includes certain
"forward-looking statements" relating to anticipated future events
or performance. For a discussion of the factors that could
cause future events or performance to be different than
anticipated, reference is made to Factors Affecting
"Forward-Looking Statements" and Part 1A - Risk Factors in
Oppenheimer's Annual Report on Form 10-K for the year ended
December 31, 2010.
SOURCE Oppenheimer Holdings Inc.