Oppenheimer Holdings Inc. - Third Quarter 2007 Earnings and Dividend Announcement
October 26 2007 - 8:30AM
PR Newswire (US)
Listed NYSE - OPY TORONTO, Oct. 26 /PRNewswire-FirstCall/ --
Expressed in thousands of U.S. dollars, except share and per share
Three Months ended Nine Months ended amounts September 30,
September 30,
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(unaudited) 2007 2006 2007 2006 Revenue $215,173 $188,463 $656,039
$582,537 Expenses $188,152 $175,189 $572,950 $524,057 Profit before
taxes $27,021 $13,274 $83,089 $58,480 Net profit $16,274 $7,673
$48,830 $34,027 Basic earnings per share $1.23 $0.60 $3.70 $2.66
Diluted earnings per share $1.19 $0.51 $3.61 $1.99 Basic weighted
average number of shares outstanding 13,264,228 12,784,096
13,197,999 12,810,492 Book value per share $31.33 $27.00 Actual
number of Class A non-voting and Class B shares outstanding
13,274,380 12,812,202 The Company's financial results are presented
using accounting principles generally accepted in the U.S.A.
Oppenheimer Holdings Inc. reported net profit of $16.3 million or
$1.23 per share for the third quarter of 2007, an increase of
approximately 112% when compared to net profit of $7.7 million or
$0.60 per share in the third quarter of 2006. Revenue for the third
quarter of 2007 was $215.2 million, an increase of 14% compared to
revenue of $188.5 million in the third quarter of 2006. Net profit
for the nine months ended September 30, 2007 was $48.8 million or
$3.70 per share compared to $34.0 million or $2.66 per share in the
same period of 2006, an increase of 44% in net profit. Revenue for
the nine months ended September 30, 2007 was $656.0 million
compared to $582.5 million for the same period in 2006, an increase
of 13%. Revenue and profit before taxes for the nine months ended
September 30, 2007 were up 16% and 95%, respectively, compared to
the same period in 2006 excluding (a) a non-recurring gain of $12.4
million (most of which was generated in the first quarter of 2006)
related to the exchange of the Company's three NYSE memberships for
cash and NYSE Group common shares and (b) a non-recurring gain on
the early extinguishment of the Company's outstanding Debentures in
the amount of $3.6 million (cumulatively $0.72 per share). During
the third quarter, equity and debt markets were extremely volatile
reflecting substantial uncertainty about the impact of defaults and
foreclosures in the sub-prime mortgage market, as well as the
inability of the credit markets to assess the creditworthiness of
numerous issuers of commercial paper and asset backed securities.
This, together with high oil and gas prices, a weak U.S. dollar and
uncertainty about the chances of a recession in the United States,
caused a sell-off in the U.S. securities markets during most of
July and August. This was followed by a strong rally in September
following the Federal Reserve's announcement of a reduction in the
discount rate and later in the benchmark federal funds rate. For
the Company, in the three and nine months ended September 30, 2007,
this volatility resulted in increased commission levels, and higher
assets under management at the beginning of the quarter resulted in
improved asset management fees. Investment banking activity showed
strong results in the three and nine months ended September 30,
2007 compared to the same periods of 2006 (although such results
were lower than the first and second quarters of 2007). These
results reflect the Company's increased investment in its corporate
finance effort, as well as the increased level of activity for
smaller issuers. In the three months ended September 30, 2007,
interest income was flat; in the nine months ended September 30,
2007, interest income showed a modest increase as a result of an
increase in average stock borrow balances of approximately 13%
compared to the same period of 2006 that more than offset a small
decrease in average customer debit balances. There was little
change in proprietary trading results in the three and nine months
ended September 30, 2007 compared to the same periods in 2006. As
previously reported, the Company has no exposure to the issues
surrounding sub-prime mortgages. Assets under management by the
asset management group increased 22% to $17.4 billion at September
30, 2007 compared to $14.3 billion at September 30, 2006,
reflecting organic growth and increases in market value. The
Company continues to build its base of annualized revenues through
employee and client education emphasizing the benefits of a
professionally directed asset allocation process. The Company's
expenses for the three and nine months ended September 30, 2007
increased 7% and 9%, respectively, compared to the same periods of
2006, primarily due to increased compensation and related costs.
The increase in compensation costs is primarily attributable to the
increased levels of business in the three and nine months ended
September 30, 2007 compared to the same periods of 2006. Another
large component of the year-to-date increase in compensation costs
is attributable to share-based compensation costs. In the nine
months ended September 30, 2007, share-based compensation expenses
amounted to $7.1 million ($4.9 million in the comparable period of
2006). Communications and data processing costs increased in the
three and nine months ended September 30, 2007 compared to the same
periods in 2006, reflecting the Company's investment in its
technology platform. Despite higher interest rates, interest
expense declined in the three and nine months ended September 30,
2007 compared to the same periods in 2006, primarily reflecting
lower levels of bank borrowing and the impact of principal payments
on the Company's senior secured credit note which totaled $40.8
million through September 30, 2007. The decrease in the effective
tax rate for the three months ended September 30, 2007 was a result
of favorable resolutions of tax matters during the period. At
September 30, 2007, shareholders' equity was approximately $415
million and book value per share was $31.33 compared to
shareholders' equity of approximately $346 million and book value
per share of $27.00 at September 30, 2006. The basic weighted
average number of Class A and Class B Shares outstanding for the
three months ended September 30, 2007 was 13,264,228 compared to
12,784,096 outstanding for the three months ended September 30,
2006, an increase of 4% due to the exercise of employee stock
options, awards of Class A Shares pursuant to the Employee Share
Plan and the purchase of Class A Shares by the Company's 401(K)
Plan. The actual number of Class A and Class B Shares outstanding
at September 30, 2007 was 13,274,380. During the third quarter of
2007, the Company did not purchase any Class A Shares pursuant to
its Normal Course Issuer Bid (which commenced on August 9, 2007,
and terminates on August 8, 2008). The diluted weighted average
number of Class A and Class B Shares outstanding for the three
months ended September 30, 2007 was 13,698,959 compared to
15,773,199 outstanding for the three months ended September 30,
2006, a net decrease of 13% due to the redemption, on July 31,
2006, of $141 million of its variable rate exchangeable debentures
(the "Debentures") and the redemption, on October 23, 2006, of the
remaining $20 million of Debentures issued on January 6, 2003 as
partial payment for the acquisition of the U.S. Private Client and
Asset Management Divisions of CIBC World Markets, Inc. The
Debentures were exchangeable into 6.9 million Class A Shares of the
Company. These redemptions were funded by the issuance of a senior
secured credit note in the amount of $125 million ($83.5 million
currently outstanding), increased bank call loans, and internally
available funds. Dividend The Company is announcing a quarterly
dividend of U.S. $0.11 per share, payable on November 23, 2007 to
holders of Class A and Class B Shares of record on November 9,
2007. These dividends are qualified dividends for U.S. and Canadian
tax purposes. The Company, through its principal subsidiaries,
Oppenheimer & Co. Inc. (a U.S. broker-dealer) and Oppenheimer
Asset Management Inc., offers a full range of services from 81
offices in 21 states and through local broker-dealers in 2 foreign
jurisdictions. The Company offers trust and estate services through
Oppenheimer Trust Company. Evanston Financial Corporation is
engaged in mortgage brokerage and servicing. In addition, through
its subsidiary, Freedom Investments, Inc. and the BUYandHOLD
division of Freedom, the Company offers online discount brokerage
and dollar-based investing services. This press release includes
certain "forward-looking statements" relating to anticipated future
performance. For a discussion of the factors that could cause
future performance to be different than anticipated, reference is
made to the Company's Annual Report on Form 10-K for the year ended
December 31, 2006. DATASOURCE: Oppenheimer Holdings Inc. CONTACT:
A.G. LOWENTHAL, (212) 668-8000; or E.K. ROBERTS, (416) 322-1515
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