- Quarterly advisory revenue of $65.1 million; highest quarterly
advisory revenue since first quarter 2008 NEW YORK, April 23
/PRNewswire-FirstCall/ -- Greenhill & Co., Inc. (NYSE: GHL)
today reported revenues of $61.8 million and net income of $13.7
million for the quarter ended March 31, 2009. Diluted earnings per
share were $0.47 per share for the quarter. The Firm's first
quarter revenues compare with revenues of $75.4 million for the
first quarter of 2008, which represents a decrease of $13.6 million
or 18%. The Firm's first quarter net income and diluted earnings
per share in 2009 compare with net income of $19.2 million and
diluted earnings per share of $0.68 per share in the first quarter
of 2008, which represents decreases of 28% and 31%, respectively.
The Firm's quarterly revenues and net income can fluctuate
materially depending on the number and size of completed
transactions on which it advised, the number and size of merchant
banking gains (or losses) and other factors. Accordingly, the
revenues and net income in any particular quarter may not be
indicative of future results. "We are off to a good start in 2009
in the face of what has continued to be a difficult environment. We
had our highest quarterly advisory revenue since a year ago, and
the tone of our advisory business is good. For confidentiality or
other reasons, an increasing portion of our advisory revenue is
coming from assignments that are not evidenced by publicly
announced, completed transactions where our role is disclosed.
Regardless of whether assignments are disclosed or not, or whether
they lead to near term announced transactions, the important thing
is that we continue to add major companies throughout the world to
the roster of clients that see us as their trusted advisor," Robert
F. Greenhill, Chairman, said. "Each of the three areas of our
Financial Advisory business is seeing a good level of activity,
although obviously considerable near term uncertainty remains in
the market and economy. We have seen a recent increase in new
M&A assignments, some of which relate to financial distress but
many others are simply strategic transactions in consolidating
industries. We believe that the turmoil at our major competitors,
an increasing concern by CEOs and Boards of Directors with
conflicts of interest, and our increased geographic and industry
sector breadth are all contributing to our level of M&A
activity relative to what the market may be seeing generally. Our
Financing Advisory & Restructuring team has seen a substantial
increase in activity in recent months, and we expect that trend to
continue as more companies face financing and/or restructuring
challenges. Finally, our Fund Placement Advisory team that joined
us less than a year ago has now developed a substantial backlog of
attractive assignments, as even long established fund groups
increasingly conclude that they would benefit from assistance in
raising their next funds," Scott L. Bok, Co-Chief Executive
Officer, added. "We have continued to show steadfast discipline in
terms of controlling costs and focusing on profitability. Our
non-compensation costs were up only slightly versus their level a
year ago in absolute terms, continuing the favorable trend we
showed last year. Meanwhile, our compensation ratio has remained at
a level that is highly beneficial to our shareholders despite
significant recruitment of new managing directors. Our ability in
the last several quarters to compensate a large number of new
senior recruits within our historic aggregate compensation
parameters has essentially eliminated the up front cost to
shareholders that is often associated with such recruiting drives.
This puts us in a position to continue to take advantage of what we
see as a historic opportunity to attract senior talent from our
large competitors. Indeed, that opportunity has improved even
further since the beginning of the year, and we expect it to remain
in place for some time to come as the financial services industry
continues to evolve in response to recent challenges," Simon A.
Borrows, Co-Chief Executive Officer, said. Revenues Revenues by
Source The following provides a breakdown of total revenues by
source for the three month period ended March 31, 2009 and 2008,
respectively: For the Three Months Ended March 31, 2009 March 31,
2008 Amount % of Total Amount % of Total (in millions, unaudited)
Financial advisory fees $65.1 NM $69.5 92% Merchant banking &
other revenue (3.3) NM 5.9 8% Total revenues $61.8 100% $75.4 100%
Financial Advisory Revenues Financial advisory revenues were $65.1
million in the first quarter of 2009 compared to $69.5 million in
the first quarter of 2008, which represents a decrease of 6%.
Completed assignments in the first quarter of 2009 included: -- The
acquisition by Roche Holding Ltd., of the outstanding publicly held
interest in Genentech, Inc; and -- The sale by TUI AG of its
shipping division Hapag-Lloyd AG to 'Albert Ballin' Holding GmbH
& Co. KG. The slight decrease in our financial advisory fees in
the first quarter of 2009 as compared to the same period in 2008
reflected the completion of fewer assignments. The Firm also
recognized significant advisory revenue during the quarter from
certain strategic advisory assignments, which were not publicly
announced, as well as retainer fee revenue from our Financing
Advisory & Restructuring Group. The Firm announced in the first
quarter of 2009 the recruitment of Kirk Wilson (former Vice
Chairman and senior member of Morgan Stanley's Financial
Institutions Group) as a Managing Director based in New York and
Robert Collins (former Managing Director and Head of Infrastructure
Investment Banking for the Americas at Morgan Stanley) as a
Managing Director to join our Chicago office, as well as James
Stewart (former Managing Director, Real Estate, Lodging and Leisure
at UBS) to open our Los Angeles office. The Firm also announced in
the first quarter the formation of the Financing Advisory &
Restructuring Group in New York and London with the addition of Ken
Goldsbrough (former Managing Director and Head of Media,
Communications & Entertainment at GE Capital) as a Managing
Director in London and Andrew Kramer (former Head of Restructuring
for the Americas at UBS) as a Managing Director in New York. In
addition, the Firm announced the recruitment of Kenneth Goldman as
a Senior Advisor focused on strategic advisory activities with
technology companies in Silicon Valley and John Paynter as a Senior
Advisor in London focused on expanding the Firm's European advisory
services. Merchant Banking & Other Revenues The following table
sets forth additional information relating to our merchant banking
fund management and other income: For The Three Months Ended March
31, 2009 2008 (in millions, unaudited) Management fees $4.5 $5.0
Net realized and unrealized gains (losses) on investments in
merchant banking funds (7.1) 1.2 Net realized and unrealized
merchant banking profit overrides (0.3) (1.1) Other realized and
unrealized investment income (loss) (0.4) (0.6) Interest income -
1.4 Total merchant banking & other revenues $(3.3) $5.9 The
Firm recorded negative $(3.3) million in merchant banking fund
management and other revenues in the first quarter of 2009 compared
to revenues of $5.9 million in the first quarter of 2008. This
decrease principally resulted from a decline in the fair market
value of our merchant banking funds, lower interest earned on cash
balances and a reduction in management fee revenue from our
European fund due to the foreign currency translation adjustment.
During the first quarter of 2009 our merchant banking funds (and
the Firm) recognized gains from five (5) of our portfolio companies
and recorded losses on nine (9) of our portfolio companies. At
March 31, 2009, the Firm had principal investments of $104.8
million. Of that amount, 17% of our investments related to the
energy sector, 27% to the financial services sector and 56% to
other industry sectors. We held approximately 97% of our total
principal investments in North American companies, with the
remainder in European companies. Our investments in companies that
have become publicly traded after we first invested in them
represented 25% of our total investments. In terms of new
investment activity during the first quarter of 2009, our funds
invested $9.3 million, 13% of which was Firm capital. In the same
period in 2008, our funds invested $13.7 million, 10% of which was
Firm capital. Expenses Operating Expenses Our total operating
expenses for the first quarter of 2009 were $39.4 million, which
compares to $45.4 million of total operating expenses for the first
quarter of 2008. This represents a decrease in total operating
expenses of $6.0 million or 13%, reflecting principally a decrease
in compensation expense and is described in more detail below. The
pre-tax income margin was 36% in the first quarter of 2009 compared
to 40% for the first quarter of 2008. The following table sets
forth information relating to our operating expenses, which are
reported net of reimbursements: For The Three Months Ended March
31, 2009 2008 (in millions, unaudited) Employee compensation &
benefits expense $28.4 $34.7 % of revenues 46% 46% Non-compensation
expense 11.0 10.7 % of revenues 18% 14% Total operating expense
39.4 45.4 % of revenues 64% 60% Total income before tax 22.4 30.0
Pre-tax income margin 36% 40% Compensation and Benefits Expenses
Our employee compensation and benefits expenses in the first
quarter of 2009 were $28.4 million, which reflects a 46% ratio of
compensation to revenues. This amount compares to $34.7 million for
the three months ended March 31, 2008, which also reflected a 46%
ratio of compensation to revenues. The decrease of $6.3 million or
18% is due to the lower level of revenues in the first quarter of
2009 compared to the comparable period in 2008. Our compensation
expense is generally based upon revenue and can fluctuate
materially in any particular quarter depending upon the amount of
revenue recognized as well as other factors. Accordingly, the
amount of compensation expense recognized in any particular quarter
may not be indicative of compensation expense in a future period.
Non-Compensation Expenses Our non-compensation expenses were $11.0
million in the first quarter of 2009, which compared to $10.7
million in the first quarter of 2008, representing an increase of
3%. The increase is principally related the incurrence of
professional fees attributable to an advisory engagement and the
absence of foreign currency gains in the first quarter of 2009 as
compared to the first quarter of 2008, partially offset by
decreased interest expense due to lower average borrowings
outstanding and lower borrowing rates. Non-compensation expenses as
a percentage of revenue in the three months ended March 31, 2009
were 18% as compared to 14% for the three months ended March 31,
2008. The increase in non-compensation expenses as a percentage of
revenue in the first quarter of 2009 as compared to the same period
in 2008 reflects a slightly higher amount of non-compensation
expenses spread over lower revenue. The Firm's non-compensation
expenses as a percentage of revenue can vary as a result of a
variety of factors including fluctuation in revenue amounts, the
amount of recruiting and business development activity, the amount
of reimbursement of engagement-related expenses by clients, the
amount of short term borrowings, interest rate and currency
movements and other factors. Accordingly, the non-compensation
expenses as a percentage of revenue in any particular period may
not be indicative of the non-compensation expenses as a percentage
of revenue in future periods. Provision for Income Taxes The
provision for taxes in the first quarter of 2009 was $8.7 million,
which reflects an effective tax rate of approximately 39%. This
compares to a provision for taxes in the first quarter of 2008 of
$10.9 million based on an effective tax rate of approximately 36%
for the period. The decrease in the provision for taxes is due to
the lower pre-tax income in the period partially offset by a higher
effective tax rate resulting from a greater proportion of our
pre-tax income being earned in higher tax rate jurisdictions during
the period. The effective tax rate can fluctuate as a result of
variations in the relative amounts of advisory and merchant banking
income earned in the tax jurisdictions in which the Firm operates
and invests. Accordingly, the effective tax rate in any particular
quarter may not be indicative of the effective tax rate in future
periods. Liquidity and Capital Resources As of March 31, 2009, our
cash totaled $42.3 million, our investments totaled $104.8 million
and we had $49.4 million in debt. We had total commitments (not
reflected on our balance sheet) relating to future investments in
our merchant banking activities, of $47.2 million as of March 31,
2009. These commitments are expected to be drawn on from time to
time over a period of up to five years from the relevant commitment
dates of each fund. Dividend The Board of Directors of Greenhill
& Co., Inc. has declared a dividend of $0.45 per share to be
paid on June 10, 2009 to common stockholders of record on May 27,
2009. Greenhill & Co., Inc. is a leading independent investment
bank that provides financial advice on significant mergers,
acquisitions and restructurings; assists private funds in raising
capital from investors; and manages merchant banking funds. It acts
for clients located throughout the world from its offices in New
York, London, Frankfurt, Toronto, Tokyo, Chicago, Dallas, San
Francisco, and will shortly open an office in Los Angeles.
Cautionary Note Regarding Forward-Looking Statements The preceding
discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes that appear
below. We have made statements in this discussion that are
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" 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 projections of our future financial performance, based
on our growth strategies and anticipated trends in our business.
These statements are only predictions 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. These factors
include, but are not limited to, those discussed in our Report on
Form 10-K under the caption "Risk Factors". Greenhill & Co.,
Inc. and Subsidiaries Condensed Consolidated Statements of Income
(Unaudited) For the Three Months Ended March 31, 2009 2008 Revenues
Financial advisory fees $65,144,694 $69,449,395 Merchant banking
revenue (3,390,755) 4,530,815 Interest income 72,740 1,400,175
Total revenues 61,826,679 75,380,385 Expenses Employee compensation
and benefits 28,440,274 34,674,978 Occupancy and equipment rental
2,549,996 2,614,948 Depreciation and amortization 1,153,761
1,105,821 Information services 1,489,606 1,733,482 Professional
fees 1,432,116 924,299 Travel related expenses 1,911,687 1,946,894
Interest expense 353,646 1,156,186 Other operating expenses
2,100,504 1,192,062 Total expenses 39,431,590 45,348,670 Income
before taxes 22,395,089 30,031,715 Provision for taxes 8,676,617
10,869,653 Consolidated net income $13,718,472 $19,162,062 Net
income (loss) allocated to non-controlling interests $(179,643)
$(50,199) Net income allocated to common shareholders $13,898,115
$19,212,261 Average shares outstanding: Basic 29,404,027 28,116,288
Diluted 29,457,672 28,190,108 Earnings per share: Basic $0.47 $0.68
Diluted $0.47 $0.68 Dividends declared and paid per share: $0.45
$0.45 Contact: Richard J. Lieb, Chief Financial Officer Greenhill
& Co., Inc. (212) 389-1800 DATASOURCE: Greenhill & Co.,
Inc. CONTACT: Richard J. Lieb, Chief Financial Officer, Greenhill
& Co., Inc., +1-212-389-1800
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