NEW YORK, Jan. 27 /PRNewswire-FirstCall/ -- -- Quarterly revenue up
26%, net income up 39% and earnings per share up 30% compared to
prior year -- Annual revenue up 35%, net income up 47% and earnings
per share up 37% compared to prior year -- Financial Advisory
annual revenue down only 1% despite a 40%(1) decline in
industry-wide completed transaction volume globally -- Pre-tax
profit margin of 35% for quarter and 38% for year; compensation
ratio remained at 46% for the year, consistent with prior year --
Completed sale of certain merchant banking assets, resulting in a
gain of approximately $22 million in the quarter; the Firm will
focus entirely on client advisory activities going forward --
Recruited 14 Managing Directors and 4 Senior Advisors in 2009;
total Managing Directors in Financial Advisory business now 55
Greenhill & Co., Inc. (NYSE:GHL) today reported revenues of
$298.6 million and net income of $71.2 million for the year ended
December 31, 2009. Diluted earnings per share were $2.39 per share
for the year ended December 31, 2009. The Firm's 2009 revenues
compare with revenues of $221.9 million for 2008, which represents
an increase of $76.7 million or 35%. The Firm's 2009 net income and
diluted earnings per share compare with $48.5 million of net income
and $1.74 of diluted earnings per share, respectively, for the year
ended December 31, 2008, representing increases of 47% and 37%,
respectively. The Firm's fourth quarter revenues were $66.4
million, which compare with revenues of $52.8 million for the
fourth quarter of 2008, representing an increase of $13.6 million
or 26%. The Firm's fourth quarter net income was $17.0 million,
which compares with net income of $12.2 million in the fourth
quarter of 2008, representing an increase of $4.8 million or 39%.
Diluted earnings per share for the fourth quarter of 2009 were
$0.57, which compares with $0.44 for the fourth quarter of 2008,
representing an increase of $0.13 per share, or 30%. The Firm's
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 investment gains (or losses) and other factors.
Accordingly, the revenues and net income in any particular period
may not be indicative of future results. "Our strong 2009 results
demonstrate growth in our market share and continued control of our
costs. Our total revenue and profitability grew substantially
despite a difficult operating environment. Our advisory revenue was
flat versus the prior year while most of our large competitors
suffered steep declines consistent with the decline in overall
transaction activity. We believe this outperformance is the result
of a strategy that focuses entirely on client advisory activities
and an ongoing recruiting effort for senior bankers that is clearly
bearing fruit. Many of our most significant recent transaction
announcements came from managing directors who joined us in the
past two years. And while growth has always been an important part
of our strategy, cost control has always been equally important. We
maintained a 46% compensation ratio in both years of the 2008-09
financial crisis. And our non-compensation costs grew only modestly
despite going from 5 to 10 offices and adding significant
personnel. This combination of growth and cost control has again
put us at the top of our peer group in terms of pretax profit
margin and return on equity," Robert F. Greenhill, Chairman, said.
"While 2009 was a very weak year by historic standards in terms of
global M&A transactions, we saw a meaningful increase in
advisory activity in the latter part of the year which has
continued into 2010. Higher stock prices, better credit conditions
and signs of a strengthening economy are likely all contributing to
a rebound in CEO and board level interest in strategic
transactions. To date this increase has been primarily seen in
North America, although history has shown that a rebound in
transaction activity typically impacts all major markets similarly
over time. Having nearly doubled the managing director count in our
advisory business during the financial crisis, we believe we are
well positioned to further increase our market share as more
transaction activity returns," Scott L. Bok, Co-Chief Executive
Officer, added. "We believe our focused strategy is a great source
of strength for the Firm going forward. We are now entirely focused
on client advisory activities. This avoids any distraction of our
management or client advisory teams, and also avoids any meaningful
commitment of capital to principal investments or new ventures,
thereby benefiting our profit margin and return on equity. While
this strategy is far narrower than those being pursued by nearly
all our large and small competitors, we believe it provides ample
opportunity for further growth. We opened several offices and added
many new industry sectors in the past two years but still fall far
short of covering all important industry sectors in all important
geographic markets. We expect to continue to expand our
capabilities in a disciplined manner although we are unlikely to
add as many senior bankers this year as we did in the last two."
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 periods and years ended
December 31, 2009 and 2008, respectively: For the Three Months
Ended December 31, 2009 December 31, 2008 -----------------
----------------- Amount % of Total Amount % of Total ------
---------- ------ ---------- (in millions, unaudited) Financial
advisory fees $63.0 95% $61.9 NM Merchant banking & other
revenues 3.4 5% (9.1) NM ----- ----- ----- ----- Total revenues
$66.4 100% $52.8 100% For the Year Ended December 31, 2009 December
31, 2008 ----------------- ----------------- Amount % of Total
Amount % of Total ------ ---------- ------ ---------- (in millions,
unaudited) Financial advisory fees $216.0 72% $218.2 98% Merchant
banking & other revenues 82.6 28% 3.7 2% ----- ----- -----
----- Total revenues $298.6 100% $221.9 100% Historical Revenues by
Source For the Year Ended December 31,
------------------------------- 2009 2008 2007 2006 2005 ---- ----
---- ---- ---- Financial advisory fees $216.0 $218.2 $366.7 $209.8
$142.1 Merchant banking & other revenues 82.6 3.7 33.7 80.8
79.1 ---- ---- ---- ---- ---- Total revenues $298.6 $221.9 $400.4
$290.6 $221.2 Financial Advisory Revenues Full Year Financial
advisory revenues were $216.0 million in the year ended December
31, 2009 compared to $218.2 million in the year ended December 31,
2008, which represents a decrease of 1%. At the same time,
worldwide completed M&A volume decreased by 40%, from $2,855
billion in 2008 to $1,725 billion in 2009(1). From a longer term
perspective, our 2009 advisory revenues were 52% higher than in
2005, our first full year as a public company. We earned advisory
revenue from 78 different clients in 2009, compared to 65 in 2008.
We earned $1 million or more from 43 clients in 2009, compared to
37 in 2008. 47% of those 2009 clients were new to the Firm compared
to 24% in 2008. The ten largest fee-paying clients contributed 41%
and 54% to our total revenues in 2009 and 2008, respectively, and
only four of those clients had in any prior year been among our ten
largest fee-paying clients. One client represented approximately
10% of total revenues in 2009 and a different client represented
approximately 10% of total revenues in 2008. Historical Financial
Advisory Revenues by Client Location For the Year Ended December
31, ------------------------------- 2009 2008 2007 2006 2005 ----
---- ---- ---- ---- North America 65% 53% 37% 50% 44% Europe 34%
44% 61% 49% 55% Asia, Latin America & Other 1% 3% 2% 1% 1%
Historical Financial Advisory Revenues by Industry For the Year
Ended December 31, ------------------------------- 2009 2008 2007
2006 2005 ---- ---- ---- ---- ---- Financial Services 19% 18% 26%
10% 12% Healthcare 16% 8% 1% 21% - Technology 10% 1% 2% 4% 2%
Consumer Goods & Retail 8% 7% 20% 4% 8% Energy & Utilities
8% 13% 6% 7% 6% Fund Placement 2% 2% - - - Real Estate, Lodging
& Leisure 2% 8% 5% 4% 1% Communications & Media 1% 11% 12%
15% 21% General Industrial & Other 34% 32% 28% 35% 50% The
slight decrease in our financial advisory fees in 2009 as compared
to 2008 resulted from a decrease in the scale of completed
assignments partially offset by an increase in the volume of
transaction activity. Fourth Quarter Financial advisory revenues
were $63.0 million in the fourth quarter of 2009 compared to $61.9
million in the fourth quarter of 2008, which represents an increase
of 2%. Completed assignments in the fourth quarter of 2009
included: -- the sale of nine of Dynegy Inc.'s power plants to LS
Power Equity Partners; -- the acquisition by Emerson Electric Co.
of Avocent Corporation; -- the financial restructuring of NCI
Building Systems; -- the acquisition by PartnerRe Ltd. of ParisRE
Holdings Ltd; -- the representation of Tennenbaum DIP Opportunity
Fund, LLC as exclusive global advisor and placement agent; and --
the acquisition by Wells Fargo & Company of Prudential
Financial's noncontrolling interest in their retail brokerage joint
venture. The increase in our financial advisory fees in the fourth
quarter of 2009 as compared to the same period in 2008 generally
reflected an increase in the volume of transaction activity offset
in part by a decrease in the scale of the completed assignments.
The Firm announced in January 2010 the recruitment of William D.
Perez as a Senior Advisor focused on building Greenhill's client
advisory activities. Mr. Perez, former Chief Executive Officer of
Wm. Wrigley Jr. Company, will work closely with Greenhill Managing
Directors focused on the consumer products industry. In January
2010, Lawrence Chu (New York) was promoted to Managing Director.
Mr. Chu focuses on the telecom industry. Merchant Banking &
Other Revenues The following table sets forth additional
information relating to our merchant banking and other revenues for
the three month periods and years ended December 31, 2009 and 2008:
For the Three Months For the Year Ended December 31, Ended December
31, ------------------ ------------------ 2009 2008 2009 2008 ----
---- ---- ---- (in millions, unaudited) Management fees $4.2 $4.5
$17.4 $19.2 Net realized and unrealized gains (losses) on
investments in merchant banking funds 5.2 (15.0) 3.5 (17.5) Net
realized and unrealized merchant banking profit overrides (0.4)
(1.8) (0.7) (2.7) Other realized & unrealized investment
income. (27.4) 2.9 40.3 1.1 Sale of certain merchant banking assets
21.8 - 21.8 - Interest income - 0.3 0.3 3.6 --- --- --- --- Total
merchant banking & other revenues $3.4 $(9.1) $82.6 $3.7 ----
----- ----- ---- Full Year For the year ended December 31, 2009,
the Firm earned $82.6 million in merchant banking and other
revenues compared to $3.7 million in 2008, an increase of $78.9
million. The increase in merchant banking and other revenues
resulted primarily from the $42.2 million unrealized gain on the
Firm's investment in Iridium Communications, Inc. (NASDAQ:IRDM) and
the $21.8 million gain related to the sale of certain merchant
banking assets in connection with the Firm's previously announced
plan to separate from its merchant banking activities and focus
entirely on client advisory services. In 2009 there was a slight
increase in the fair market value of our investments in the
merchant banking funds as compared to a decline in the fair market
value in 2008. During 2009, the merchant banking funds (and the
Firm) recognized gains from thirteen of their portfolio companies
and recorded losses on nine of their portfolio companies. During
2008, the merchant banking funds (and the Firm) recognized gains
from nine of its portfolio companies and recorded losses on
seventeen of its portfolio companies. During 2009, the merchant
banking funds invested $62.4 million, 10% of which was Firm
capital. In the same period in 2008 the funds invested $143.5
million, 11% of which was Firm capital. Fourth Quarter The Firm
earned $3.4 million in merchant banking and other revenues in the
fourth quarter of 2009 compared to negative ($9.1) million in the
fourth quarter of 2008. The gain recognized in the fourth quarter
of 2009 principally resulted from the sale of certain merchant
banking assets of $21.8 million and an increase in the fair market
value of our investment in the merchant banking funds of $4.8
million, offset by a decline in the fair market value of our
investment in Iridium of $26.9 million. At December 31, 2009, the
Firm had principal investments of $150.4 million, including our
investment in Iridium of $76.1 million, which reflects a 5%
discount to market due to certain restrictions on the sale of our
Iridium interests. Of the total amount, 15% of our investments
related to the financial services sector, 9% to the energy sector,
25% to other industry sectors and 51% to the investment in Iridium.
We held approximately 97% of our total principal investments in
North American companies, with the remainder in European companies.
Our investments in companies that are publicly traded after we
first invested in them, including Iridium, represented 56% of our
total principal investments. During the fourth quarter of 2009 the
merchant banking funds (and the Firm) recognized gains from ten of
their portfolio companies and recorded losses on two of its
portfolio companies. During the fourth quarter of 2008 the merchant
banking funds (and the Firm) recognized gains from six of their
portfolio companies and recorded losses on sixteen of their
portfolio companies. During the fourth quarter of 2009, the
merchant banking funds invested $47.4 million, 10% of which was
Firm capital. In the same period in 2008 the funds invested $9.4
million, 10% of which was Firm capital. The investment gains or
losses in our merchant banking and other investment portfolio may
fluctuate significantly over time due to factors beyond our
control, such as performance of each company in our portfolio,
equity market valuations, commodity prices and merger and
acquisition opportunities. Revenue recognized from gains (or
losses) recorded in any particular period are not necessarily
indicative of revenue that may be realized and/or recognized in
future periods. Expenses Operating Expenses Full Year Our total
operating expenses for the year ended December 31, 2009 were $184.8
million, which compares to $144.0 million of total operating
expenses for the year ended December 31, 2008. The increase of
$40.8 million, or 28%, relates principally to an increase in
compensation expense described in more detail below. Our pre-tax
income margin was 38% in 2009 compared to 35% in 2008. Fourth
Quarter Our total operating expenses for the fourth quarter of 2009
were $43.5 million, which compares to $33.1 million of total
operating expenses for the fourth quarter of 2008. This represents
an increase in total operating expenses of $10.4 million, or 31%,
reflecting principally an increase in compensation expense which is
described in more detail below. Our pre-tax income margin was 35%
in the fourth quarter of 2009 compared to 37% in the fourth quarter
of 2008. The following table sets forth information relating to our
operating expenses, which are reported net of reimbursements: For
the Three Months For the Year Ended December 31, Ended December 31,
------------------ ------------------ 2009 2008 2009 2008 ---- ----
---- ---- (in millions, unaudited) Employee compensation &
benefits expense $31.5 $24.2 $138.3 $102.0 % of revenues 47% 46%
46% 46% Non-compensation expense 12.0 8.9 46.5 42.0 % of revenues
18% 17% 16% 19% Total operating expense 43.5 33.1 184.8 144.0 % of
revenues 65% 63% 62% 65% Total income before tax 23.0 19.7 113.9
77.9 Pre-tax income margin 35% 37% 38% 35% "We are pleased that we
were able to maintain our historic compensation ratio despite a
difficult operating environment and substantial growth in the Firm,
and that we were able to do so without any changes to our basic
compensation structure that could have had the effect of deferring
additional expense to future years. We are also pleased that our
non-compensation expenses grew only modestly despite opening
multiple new offices and adding significant headcount," Richard J.
Lieb, Chief Financial Officer, commented. Compensation and Benefits
Expenses Full Year For the year ended December 31, 2009 and 2008,
the ratio of compensation expense to revenues remained constant at
46%. Our employee compensation and benefits expenses amounted to
$138.3 million for the year ended December 31, 2009 compared to
$102.0 million of compensation and benefits expenses for the same
period in the prior year. The increase of $36.3 million or 36% is
due to the higher level of revenues in 2009 as compared to 2008.
Fourth Quarter Our employee compensation and benefits expenses in
the fourth quarter of 2009 were $31.5 million compared to $24.2
million for the fourth quarter of 2008. The increase of $7.3
million or 30% is primarily due to higher level of revenues for the
fourth quarter of 2009 compared to the comparable period in 2008.
For the quarter ended December 31, 2009 the ratio of compensation
expense to revenues was 47% as compared to 46% for the same period
in 2008. Our compensation expense is generally based upon revenue
and can fluctuate materially in any particular period depending
upon the amount of revenue recognized as well as other factors.
Accordingly, the amount of compensation expense recognized in any
particular period may not be indicative of compensation expense in
a future period. Non-Compensation Expenses Full Year For the year
ended December 31, 2009, our non-compensation expenses were $46.5
million, which compared to $42.0 million for the year ended
December 31, 2008, representing an increase of $4.5 million or 11%.
The increase is principally related to the absence of foreign
currency gains compared with 2008, higher professional fees
attributable to the sale of certain merchant banking assets and an
advisory assignment, higher occupancy costs related to the addition
of new offices, partially offset by decreased interest expense due
to lower average borrowings outstanding. Non-compensation expenses
as a percentage of revenues were 16% and 19% for the years ended
December 31, 2009 and 2008, respectively. This decrease in
non-compensation expenses as a percentage of revenue in the year
ended December 31, 2009 as compared to the same period in the prior
year reflects higher expenses spread over significantly higher
revenues. Fourth Quarter Our non-compensation expenses were $12.0
million in the fourth quarter of 2009, compared to $8.9 million in
the fourth quarter of 2008, representing an increase of $3.1
million or 35%. The increase is principally related to the absence
of foreign currency gains realized in the fourth quarter of 2008,
increased travel and occupancy costs related to an increase in
personnel and the addition of new offices. Partially offsetting
this increase is a decline in interest expense due to lower average
borrowings outstanding. Non-compensation expenses as a percentage
of revenues in the three months ended December 31, 2009 were 18%
compared to 17% for the same period in the prior year. This
increase in non-compensation expenses as a percentage of revenue in
the three months ended December 31, 2009 as compared to the same
period in the prior year results from the incurrence of higher
expenses in the fourth quarter of 2009 as compared to the same
period in 2008. 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 Full Year For the year ended
December 31, 2009, the provision for taxes was $42.7 million, which
reflects an effective tax rate of 38%. This compares to a provision
for taxes for the year ended December 31, 2008 of $29.4 million,
which also reflects an effective tax rate of 38% for the year. The
increase in the provision for income taxes principally results from
higher pre-tax income. The effective tax rate for 2009 reflected
the benefit of the sale of certain merchant banking assets, which
was structured as a tax free transaction, offset by a significantly
greater portion of our 2009 earnings generated in the U.S., which
is a higher tax jurisdiction. Fourth Quarter The provision for
taxes in the fourth quarter of 2009 was $6.0 million, which
reflects an effective tax rate of 26%. This compares to a provision
for taxes in the fourth quarter of 2008 of $7.5 million, which
reflects an effective tax rate of 38% for the period. The decrease
in the provision for income taxes and effective tax rate
principally results from the sale of certain merchant banking
assets, which was structured as a tax free transaction. The
effective tax rate can fluctuate as a result of variations in the
relative amounts of financial advisory and investment income earned
in the tax jurisdictions in which the Firm operates and invests.
Accordingly, the effective tax rate in any particular period may
not be indicative of the effective tax rate in future periods.
Liquidity and Capital Resources As of December 31, 2009, we had
cash of $74.5 million, investments of $150.4 million and short-term
debt of $37.2 million. We had total commitments (not reflected on
our balance sheet) relating to future investments in our merchant
banking activities of $47.0 million as of December 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 March
17, 2010 to common stockholders of record on March 3, 2010.
Greenhill & Co., Inc. is a leading independent investment bank
focused on providing financial advice on significant mergers,
acquisitions, restructurings, financings and capital raising to
corporations, partnerships, institutions and governments. It acts
for clients located throughout the world from its offices in New
York, London, Frankfurt, Tokyo, Toronto, Chicago, Dallas, Houston,
Los Angeles and San Francisco. 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, the level of M&A activity in
the market, 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 For the Twelve Months Ended
December 31, Ended December 31, ---------------------
--------------------- 2009 2008 2009 2008 ---- ---- ---- ----
Revenues Financial advisory fees $62,965,085 $61,850,384
$215,993,403 $218,196,923 Merchant banking and other revenues
3,454,319 (9,354,149) 82,300,303 121,203 Interest income 16,384
264,251 352,028 3,554,921 ----------- ----------- -----------
----------- Total revenues 66,435,788 52,760,486 298,645,734
221,873,047 Expenses Employee compensation and benefits 31,481,247
24,182,102 138,297,822 102,049,624 Occupancy and equipment rental
3,383,769 2,706,780 11,705,610 10,640,820 Depreciation and
amortization 779,380 1,165,305 4,117,499 4,592,176 Information
services 1,322,427 1,146,962 5,703,865 5,671,879 Professional fees
2,083,080 1,612,968 6,755,764 4,784,812 Travel related expenses
2,150,787 1,394,082 7,773,539 6,999,759 Interest expense 307,900
654,802 1,294,804 3,580,292 Other operating expenses 1,940,081
204,472 9,103,528 5,695,323 ----------- ----------- -----------
----------- Total expenses 43,448,671 33,067,473 184,752,431
144,014,685 Income before taxes 22,987,117 19,693,013 113,893,303
77,858,362 Provision for taxes 5,951,052 7,504,124 42,735,740
29,391,962 ----------- ----------- ----------- -----------
Consolidated net income 17,036,065 12,188,889 71,157,563 48,466,400
Less: Net income (loss) allocated to non-controlling interests
31,193 (347,003) (82,451) (511,670) ----------- -----------
----------- ----------- Net income allocated to common shareholders
$17,004,872 $12,535,892 $71,240,014 $48,978,070 ===========
=========== =========== =========== Average shares outstanding:
Basic 29,781,092 28,692,044 29,663,616 28,166,520 Diluted
29,935,675 28,743,525 29,753,609 28,214,015 Earnings per share:
Basic $0.57 $0.44 $2.40 $1.74 Diluted $0.57 $0.44 $2.39 $1.74
Dividends declared and paid per share $0.45 $0.45 $1.80 $1.80 (1)
Source: Global M&A completed transaction volume for the year
ended December 31, 2009 as compared to the year ended December 31,
2008. Source: Thomson Financial as of January 19, 2010. 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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