LaBranche & Co Inc. Reports Second Quarter 2008 Results

LaBranche & Co Inc. (NYSE: LAB) today reported financial results for the second quarter and six months ended June 30, 2008. The second quarter 2008 results include a pre-tax unrealized loss on the Company's shares of NYSE Euronext, Inc. common stock (the "NYX shares") of $33.2 million and a $5.1 million pre-tax expense on early extinguishment of $169.1 million of our public debt. As a result, the Company reported an after-tax net loss of $21.3 million, or $0.34 per share, for the 2008 second quarter. This compares to a net loss of $368.9 million, or $6.00 per share, for the 2007 second quarter, which also includes a $54.6 million pre-tax unrealized loss on the Company's NYX shares as well as a non-cash pre-tax impairment charge related to the Company’s goodwill and stock listing rights of $164.1 million and $335.3 million, respectively. On a pro-forma basis, the Company reported net income for the second quarter of 2008 of $1.7 million, or $0.03 per diluted share, compared to pro-forma net income of $6.6 million, or $0.11 per share, for the second quarter of 2007. Included in these results are pre-tax, non-cash charges of $2.4 million and $5.1 million in the second quarter of 2008 and 2007, respectively. These pro-forma results exclude the unrealized loss on the NYX shares in each period, the expense on early extinguishment of debt in the second quarter of 2008 and the impairment charge related to the Company’s goodwill and stock listing rights in the second quarter of 2007. The Company’s results for the first six months of 2008 include a pre-tax unrealized loss on the Company's NYX shares of $112.5 million and a $6.0 million pre-tax expense on early extinguishment of $249.9 million of our public debt. As a result, the Company reported an after-tax net loss of $61.6 million, or $0.99 per share, for the six months ended June 30, 2008. This compares to a net loss of $374.5 million, or $6.10 per share, for the six months ended June 30, 2007, which also included a $58.8 million pre-tax unrealized loss on the Company's NYX shares as well as the goodwill and stock listing rights non-cash impairment charges described above. On a pro-forma basis, the Company reported net income for the six months ended June 30, 2008 of $9.5 million, or $0.15 per diluted share, compared to pro-forma net income of $3.4 million, or $0.06 per share, for the six months ended June 30, 2007. Included in these results are pre-tax, non-cash charges of $4.3 million and $10.6 million for the six months ended June 30, 2008 and 2007, respectively. These pro-forma results exclude the unrealized loss on the NYX shares in each period, the expense on early extinguishment of debt in the 2008 and the impairment charge related to the Company’s goodwill and stock listing rights in 2007. LaBranche & Co Inc. is the parent of LaBranche & Co. LLC, one of the largest Specialists in exchange-listed securities. LaBranche is also the parent of LaBranche Structured Holdings, Inc., whose subsidiaries are specialists and market-makers in options, exchange-traded funds and futures on various exchanges domestically and internationally. Another subsidiary of the Company, LaBranche Financial Services, LLC, provides mainly securities execution and brokerage services to institutional investors. Certain statements contained in this release, including without limitation, statements containing the words "believes", "intends", "expects", "anticipates", and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such forward-looking statements are not guarantees of future performance, and since such statements involve risks and uncertainties, the actual results and performance of LaBranche and the industry may turn out to be materially different from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. LaBranche also disclaims any obligation to update its view of any such risks or uncertainties or to publicly announce the result of any revisions to the forward-looking statements made in this release. LaBranche & Co Inc. Condensed Consolidated Statements of Operations (all data in thousands, except per share data)   Three Months Ended June 30,   Six Months Ended June 30, 2008   2007 2008   2007   (unaudited) (unaudited) (unaudited) (unaudited) REVENUES: Net gain on principal transactions $ 43,567 $ 64,014 $ 103,747 $ 112,933 Commissions and other fees 9,950 11,927 19,959 24,688 Net loss on investments (36,344) (53,673) (117,769) (58,528) Interest income 17,469 67,348 47,394 132,005 Other   2,460   1,158   2,753   1,282 Total revenues   37,102   90,774   56,084   212,380   Interest Expense: Fixed interest on debt 8,504 12,726 19,367 25,521 Inventory financing   20,808   79,230   51,620   150,159 Total interest expense   29,312   91,956   70,987   175,680 Revenues, net of interest expense 7,790 (1,182) (14,903) 36,700   EXPENSES: Employee compensation and related benefits 19,594 24,188 48,124 48,086 Exchange, clearing and brokerage fees 9,743 10,597 20,401 19,651 Lease of exchange memberships and trading license fees 416 630 843 1,312 Depreciation and amortization of intangibles 907 3,617 1,797 7,129 Goodwill impairment -- 164,100 -- 164,100 Stock list impairment -- 335,264 -- 335,264 Restructuring -- 849 -- 1,073 Early extinguishment of debt 5,119 -- 6,005 -- Other   6,919   10,059   14,267   19,565 Total expenses   42,698   549,304   91,437   596,180   Loss before benefit for income taxes (34,908) (550,486) (106,340) (559,480)   BENEFIT FOR INCOME TAXES   (13,571)   (181,542)   (44,766)   (184,981)   Net loss $ (21,337) $ (368,944) $ (61,574) $ (374,499)   Weighted average common shares outstanding: Basic 61,993 61,471 61,924 61,370 Diluted 61,993 61,471 61,924 61,370   Loss per share: Basic $ (0.34) $ (6.00) $ (0.99) $ (6.10) Diluted $ (0.34) $ (6.00) $ (0.99) $ (6.10) LaBranche & Co Inc. Condensed Consolidated Statements of Financial Condition (all data in thousands)     June 30, 2008 December 31, 2007 (1) ASSETS (unaudited) (audited) Cash and cash equivalents $ 276,877 $ 504,654 Cash and securities segregated under federal regulations 1,191 1,573 Receivable from brokers, dealers and clearing organizations 356,979 343,729 Financial instruments owned, at fair value 3,681,377 4,267,395 Commissions and other fees receivable -- 23 Exchange memberships owned, at adjusted cost (market value of $8,258 and $7,790, respectively) 1,315 1,315 Office equipment and leasehold improvements, at cost, less accumulated depreciation and amortization of $12,650 and $10,990, respectively 16,821 17,652 Goodwill and other intangible assets, net 109,229 109,229 Income tax receivable 2,416 11,802 Other assets   36,651   41,219   Total assets $ 4,482,856 $ 5,298,591   LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Payable to brokers, dealers and clearing organizations $ 181,157 $ 104,759 Payable to customers 36 93 Financial instruments sold, but not yet purchased, at fair value 3,529,085 4,062,995 Accrued compensation 25,844 16,729 Accounts payable and other accrued expenses 29,464 36,980 Other liabilities 12,277 12,583 Deferred tax liabilities 26,132 71,024 Short term debt -- 5,700 Long term debt   209,888   459,811   Total liabilities   4,013,883   4,770,674   Total stockholders’ equity   468,973   527,917   Total liabilities and stockholders' equity $ 4,482,856 $ 5,298,591 (1) Certain of the Company’s December 31, 2007 balances have been reclassified to conform to the presentation in the current period, deferred tax assets were netted against deferred tax liabilities. This reclassification did not affect stockholders’ equity or earnings. LaBranche & Co Inc. Regulation G Requirement: Reconciliation of Non-GAAP Financial Measures (all data in thousands, except per share data) (unaudited)   In evaluating the Company's financial performance, management reviews results from operations, which excludes non-operating charges. Pro-forma earnings per share is a non-GAAP (generally accepted accounting principles) performance measure, but the Company believes that it is useful to assist investors in gaining an understanding of the trends and operating results for the Company's core business. Pro-forma earnings per share should be viewed in addition to, and not in lieu of, the Company's reported results under U.S. GAAP.   The following is a reconciliation of U.S. GAAP results to pro-forma results for the periods presented: Three Months Ended June 30, 2008   2007 Amounts as reported   (1) (2) Adjustments   Pro forma amounts   Amounts as reported   (1) Adjustments   Pro forma amounts Revenues, net of interest expense $ 7,790 $ 33,206 (1)   $ 40,996 $ (1,182) $ 54,618 (1) $ 53,436 Total expenses   42,698   (5,119) (2)   37,579   549,304   (499,364) (3)   49,940 (Loss) income before (benefit) provision for income taxes   (34,908)   38,325   3,417   (550,486)   553,982   3,496 (Benefit) provision for income taxes   (13,571)   15,330   1,759   (181,542)   178,425   (3,117) Net (loss) income applicable to common stockholders $ (21,337) $ 22,995 $ 1,658 $ (368,944) $ 375,557 $ 6,613 Basic per share $ (0.34) $ 0.37 $ 0.03 $ (6.00) $ 6.11 $ 0.11 Diluted per share $ (0.34) $ 0.37 $ 0.03 $ (6.00) $ 6.11 $ 0.11 Six Months Ended June 30, 2008   2007 Amounts as reported   (1) (2) Adjustments   Pro forma amounts   Amounts as reported   (1) Adjustments   Pro forma amounts Revenues, net of interest expense $ (14,903) $ 112,452 (1)   $ 97,549 $ 36,700 $ 58,787 (1) $ 95,487 Total expenses   91,437   (6,005) (2)   85,432   596,180   (499,364) (3)   96,816 (Loss) income before (benefit) provision for income taxes   (106,340)   118,457   12,117   (559,480)   558,151   (1,329) (Benefit) provision for income taxes   (44,766)   47,383   2,617   (184,981)   180,239   (4,742) Net (loss) income applicable to common stockholders $ (61,574) $ 71,074 $ 9,500 $ (374,499) $ 377,912 $ 3,413 Basic per share $ (0.99) $ 1.14 $ 0.15 $ (6.10) $ 6.16 $ 0.06 Diluted per share $ (0.99) $ 1.14 $ 0.15 $ (6.10) $ 6.16 $ 0.06 (1) Revenue adjustment reflects loss in each accounting period, based on the change in fair market value of the Company’s restricted and unrestricted NYX shares at the end of each such period versus the beginning of such period. (2) Expense adjustment reflects costs associated with early extinguishment of debt in accounting period. (3) Relates to the write-down of the carrying value of the Company’s goodwill and stock listing rights to reflect the results of the Company’s impairment evaluation under SFAS No. 142 and SFAS No.144.