- Advisory revenue down only slightly year-to-date, despite sharp
decline in overall M&A market activity - Pre-tax profit margin
of 32% - Announced plans to open a Houston office, our tenth office
globally, with two Managing Directors focused on energy companies -
Recruited additional Managing Directors to lead our advisory
efforts in the global insurance sector and the European energy and
utilities, infrastructure and consumer and retail sectors -
Year-to-date we have recruited 13 Managing Directors; Advisory
focused Managing Directors are up nearly 100% in 18 months, and
total Managing Directors now stand at 61 - Announced that GHL
Acquisition Corp. a special purpose company formed by the Firm,
reached agreement to reduce by 15% the consideration to be paid in
its planned acquisition of Iridium Holdings, LLC NEW YORK, July 23
/PRNewswire-FirstCall/ -- Greenhill & Co., Inc. (NYSE: GHL)
today reported revenues of $54.1 million and net income of $10.3
million for the quarter ended June 30, 2009. Diluted earnings per
share were $0.35 per share for the quarter. The Firm's second
quarter revenues compare with revenues of $108.7 million for the
second quarter of 2008, which represents a decrease of $54.6
million or 50%. Revenues for the second quarter of 2008 included
gains and profit overrides of $53.8 million principally resulting
from mark-to-market accounting on energy related merchant banking
investments driven by a spike in energy prices, which gains and
profit overrides were reversed in their entirety in the third
quarter of 2008 when the value of those energy investments declined
significantly largely due to a sharp decline in energy prices. For
the six months ended June 30, 2009, revenues were $115.9 million,
compared to $184.0 million for the comparable period in 2008,
representing a decrease of $68.1 million or 37%. The Firm's second
quarter 2009 net income and diluted earnings per share compare with
net income of $29.3 million and diluted earnings per share of $1.04
in the second quarter of 2008, which represent decreases of 65% and
66%, respectively. For the six months ended June 30, 2009, net
income was $24.0 million, compared to net income of $48.5 million
for the comparable period in 2008, which represents a decrease of
51%. Diluted earnings per share for the six months ended June 30,
2009 were $0.82, compared to $1.72 for the same period in 2008,
representing a decrease of $0.90 per share or 52%, largely as a
result of the 2008 mark-to-market merchant banking gains referred
to above. 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 period may not be
indicative of future results. "The factors that have made Greenhill
unique all remained in place this quarter: advisory revenue
comparable to the prior year despite a decline of 45% in M&A
activity(1); shareholder-friendly compensation ratio maintained at
industry-best level; non-compensation costs held essentially
constant in absolute terms; and the expansion of our industry
sector expertise and geographic reach continued with the
recruitment of several more Managing Directors," Robert F.
Greenhill, Chairman, said. "We have continued to take advantage of
turmoil at our larger competitors by recruiting top talent in key
industry sectors in both North America and Europe. We have
essentially doubled the capacity of our advisory business at a
reasonable cost in less than 18 months, which positions us well for
a rebound in M&A activity globally," Simon A. Borrows, Co-Chief
Executive Officer, added. "While it is difficult to identify a
market upturn until well after it is in place, we believe that
improved credit conditions and the recent rebound in equity markets
should lead to increased transaction activity as has been the case
in past cycles. In that regard, we are heartened by the three
significant M&A transactions we announced in the first days of
the third quarter as well as by the level of strategic dialogue we
are seeing across many industries," Scott L. Bok, Co-Chief
Executive Officer, said. (1) Global M&A announced transaction
volume for the six months ended June 30, 2009 as compared to the
six months ended June 30, 2008. Source: Thomson Financial as of
July 15, 2009 Revenues Revenues By Source The following provides a
breakdown of total revenues by source for the three month and six
month periods ended June 30, 2009 and 2008, respectively: For the
Three Months Ended June 30, 2009 June 30, 2008 -------------
------------- Amount % of Total Amount % of Total ------ ----------
------ ---------- (in millions, unaudited) Financial advisory fees
$45.5 84% $49.9 46% Merchant banking & other revenues 8.6 16%
58.8 54% --- --- ---- --- Total revenues $54.1 100% $108.7 100% For
the Six Months Ended June 30, 2009 June 30, 2008 -------------
------------- Amount % of Total Amount % of Total ------ ----------
------ ---------- (in millions, unaudited) Financial advisory fees
$110.7 96% $119.3 65% Merchant banking & other revenues 5.2 4%
64.7 35% --- -- ---- --- Total revenues $115.9 100% $184.0 100%
Financial Advisory Revenues Financial advisory revenues were $45.5
million in the second quarter of 2009 compared to $49.9 million in
the second quarter of 2008, which represents a decrease of 9%. For
the six months ended June 30, 2009, advisory revenues were $110.7
million compared to $119.3 million for the comparable period in
2008, representing a decrease of 7%. Completed assignments in the
second quarter of 2009 included: -- the representation of
BearingPoint, Inc. on the sale of substantially all of its assets,
pursuant to a Section 363 process under Chapter 11; -- the
representation of Chrysler LLC in connection with the Chapter 11
proceedings to effectuate the sale of substantially all of its
operating assets and certain liabilities to a newly created entity
jointly owned by Fiat S.p.A., the U.S. Treasury and others; -- the
representation of Constar International Inc. in connection with its
pre-arranged Chapter 11 proceedings; -- the representation of The
Dow Chemical Company during its negotiations pertaining to the Rohm
& Haas settlement resolution; -- the representation of the
Independent Committee of the Board of Directors of EPCOR Power L.P.
on the transfer of its GP interest and LP interest from EPCOR
Utilities to a newly formed company, Capital Power Corporation; and
-- the representation of Shanks Group plc on its rights issue. The
slight decrease in our financial advisory fees in the second
quarter of 2009 as compared to the same period in 2008 reflected
the completion of fewer large transactions in a much slower global
M&A market. In the United States, the Firm announced in the
second quarter the recruitment of Alejandro G. Przygoda (former
Global Head of Insurance at UBS Investment Bank) and Steven A.
Friedman (former U.S. Co-Head of Insurance at UBS). Mr. Przygoda
and Mr. Friedman joined the Firm as a Managing Directors based in
New York and will focus on the insurance sector. The Firm also
announced the recruitment of Christopher D. Mize (former Co-Head of
the combined Bank of America Merrill Lynch Energy & Power
practice for the Americas) and Aaron R. Hoover (former Managing
Director of the Energy Group at Bank of America Merrill Lynch) as
Managing Directors. In conjunction with their recruitment,
Greenhill will establish a Houston office focused on energy
companies. In London, the Firm announced the recruitment of Anand
Jagannathan (former Global Head of Infrastructure at Dresdner
Kleinwort) and Vittorio Perona (former Head of Energy at Dresdner
Kleinwort) as Managing Directors. Mr. Jagannathan will focus on the
infrastructure sector in Europe and Mr. Perona will focus on the
European energy and utilities sector. The Firm also announced the
recruitment of Seamus Moorhead (former Co-Global Head of Consumer
Retail Investment Banking for UBS) and Charles Gournay (former
Managing Director in the Consumer and Retail group at UBS) as
Managing Directors based in London and focused on the consumer and
retail sectors. Merchant Banking & Other Revenues The following
table sets forth additional information relating to our merchant
banking and other revenues for the three month and six month
periods ended June 30, 2009 and 2008: For the Three For the Six
Months Months Ended June 30, Ended June 30, --------------
-------------- 2009 2008 2009 2008 ---- ---- ---- ---- (in
millions, unaudited) Management fees $4.5 $4.6 $9.0 $9.6 Net
realized and unrealized gains (losses) on investments in merchant
banking funds 0.9 18.1 (6.3) 19.3 Net realized and unrealized
merchant banking profit overrides 0.7 35.7 0.4 34.6 Other realized
and unrealized investment (loss) income 2.3 (0.6) 1.8 (1.3)
Interest income 0.2 1.0 0.3 2.5 --- --- --- --- Total merchant
banking & other revenues $8.6 $58.8 $5.2 $64.7 ---- ----- ----
----- The Firm earned $8.6 million in merchant banking and other
revenues in the second quarter of 2009 compared to $58.8 million in
the second quarter of 2008, representing a decrease of 85%. In the
second quarter of 2008, we benefited from $53.8 million of
unrealized investment gains and profit overrides principally
resulting from mark-to-market accounting on two publicly traded
energy companies in our merchant banking portfolio. During the
third quarter of 2008 the market value of those energy companies
declined significantly, largely due to a sharp decline in energy
prices, resulting in the reversal of the profit overrides and
unrealized investment gains. Excluding such profit overrides and
investment gains, our merchant banking and other revenues were
relatively comparable for the three months ended June 30, 2009 to
the same period in 2008. During the second quarter of 2009 our
merchant banking funds (and the Firm) recognized gains from ten
(10) of our portfolio companies and recorded losses on seven (7) of
our portfolio companies. For the six months ended June 30, 2009,
the Firm earned $5.2 million in merchant banking and other revenues
compared to $64.7 million in the six months ended June 30, 2008, a
decrease of 92%. Included in the 2008 second quarter merchant
banking revenues were investment gains and profit overrides of
$53.9 million principally related to the two publicly traded energy
companies referred to above. Absent this gain, the Firm earned
$10.8 million in merchant banking and other revenues in the six
months ended June 30, 2008. The decrease in merchant banking and
other revenues in the first six months of 2009 compared with the
same period in 2008 primarily resulted from a decline in investment
earnings from our merchant banking funds, lower interest earned on
cash balances and a reduction in management fee revenue from our
European fund due to foreign currency translation. At June 30,
2009, the Firm had principal investments of $108.8 million. Of that
amount, 27% of our investments related to the financial services
sector, 13% to the energy sector, and 60% to other industry sectors
(including the telecommunications-related investments in GHL
Acquisition Corp. and Iridium Holdings LLC). We held approximately
95% of our total principal investments in North American companies,
with the remainder in European companies. Our investments in
companies that became publicly traded after we first invested in
them represented 22% of our total investments. In terms of new
investment activity during the second quarter of 2009, our funds
invested $0.2 million, 8% of which was Firm capital. In the same
period in 2008, our funds invested $14.4 million, 10% of which was
Firm capital. During the quarter we announced that GHL Acquisition
Corp., a special purpose company formed by the Firm, reached
agreement to reduce by 15% the consideration to be paid in its
planned acquisition of Iridium Holdings, LLC. Completion of the
acquisition of Iridium by GHL Acquisition Corp. remains subject to
FCC approval as well as GHQ shareholder approval. Expenses
Operating Expenses Our total operating expenses for the second
quarter of 2009 were $37.0 million, compared to $61.6 million of
total operating expenses for the second quarter of 2008. This
represents a decrease in total operating expenses of $24.6 million
or 40%, reflecting principally a decrease in compensation expense
as described in more detail below. The pre-tax income margin was
32% in the second quarter of 2009 compared to 43% for the second
quarter of 2008. For the six months ended June 30, 2009, total
operating expenses were $76.4 million, compared to $107.0 million
of total operating expenses for the same period in 2008. The
decrease of $30.6 million or 29% relates principally to a decrease
in compensation expense described in more detail below. The pre-tax
income margin for the six months ended June 30, 2009 was 34%
compared to 42% for the comparable period in 2008. The following
table sets forth information relating to our operating expenses,
which are reported net of reimbursements: For the Three For the Six
Months Months Ended June 30, Ended June 30, --------------
-------------- 2009 2008 2009 2008 ---- ---- ---- ---- (in
millions, unaudited) Employee compensation & benefits expense
$25.2 $49.8 $53.7 $84.5 % of revenues 47% 46% 46% 46%
Non-compensation expense 11.7 11.8 22.7 22.5 % of revenues 22% 11%
20% 12% Total operating expense 37.0 61.6 76.4 107.0 % of revenues
68% 57% 66% 58% Total income before tax 17.1 47.1 39.5 77.0 Pre-tax
income margin 32% 43% 34% 42% "We are pleased we have been able to
keep our non-compensation costs essentially flat in absolute terms,
and that we have maintained our industry-low compensation ratio,"
Richard J. Lieb, Chief Financial Officer, commented. Compensation
and Benefits Expenses Our employee compensation and benefits
expenses in the second quarter of 2009 were $25.2 million, which
reflects a 47% ratio of compensation to revenues. This amount
compares to $49.8 million for the second quarter of 2008 which
reflected a 46% ratio of compensation to revenues. The decrease of
$24.6 million or 49% is due to the lower level of revenues in the
second quarter of 2009 compared to the same period in the prior
year. The increase in the ratio of compensation to revenues in the
second quarter of 2009 as compared to the same period in 2008
principally results from greater total base compensation expense
related to the large recruitment of Managing Directors during the
past year spread over significantly lower revenues. For the six
months ended June 30, 2009, our employee compensation and benefits
expenses were $53.7 million, compared to $84.5 million of
compensation and benefits expenses for the same period in the prior
year. The decrease of $30.8 million or 36% is due to lower revenues
in the first six months of 2009 compared to the same period in the
prior year. For the six months ended June 30, 2009 and 2008, the
ratio of compensation to revenues remained constant at 46%. 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
period may not be indicative of compensation expense in a future
period. Non-Compensation Expenses Our non-compensation expenses
were $11.7 million in the second quarter of 2009, compared to $11.8
million in the second quarter of 2008, representing a decrease of
1%. The decrease is principally related to lower interest expense
due to lower average borrowings outstanding and lower borrowing
rates, partially offset by the incurrence of greater professional
fees and higher travel costs and occupancy costs related to an
increase in personnel and the addition of new offices. For the
first six months of 2009, our non-compensation expenses were $22.7
million, compared to $22.5 million in the first six months of 2008,
representing an increase of 1%. The increase is principally related
to the incurrence of greater professional fees, the absence of
foreign currency gains and higher travel costs related to an
increase in personnel, partially offset by decreased interest
expense due to lower average borrowings outstanding and lower
borrowing rates. Non-compensation expenses as a percentage of
revenues in the three months ended June 30, 2009 were 22% compared
to 11% for the same period in the prior year. The increase in
non-compensation expenses as a percentage of revenues in the second
quarter of 2009 compared to the same period in the prior year
reflects a relatively constant amount of expenses spread over
significantly lower revenues. Non-compensation expenses as a
percentage of revenues in the six months ended June 30, 2009 were
20% compared to 12% for the same period in the prior year. The
increase in non-compensation expenses as a percentage of revenues
in the six months ended June 30, 2009 compared to the same period
in the prior year reflects a relatively constant amount of expenses
spread over significantly lower revenues. 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 second quarter of
2009 was $6.8 million, which reflects an effective tax rate of 40%.
This compares to a provision for taxes in the second quarter of
2008 of $17.7 million which reflects an effective tax rate of 38%
for the period. The decrease in the provision for taxes is
primarily due to lower pre-tax income offset by a higher effective
tax rate due to a greater proportion of our income being earned in
higher tax rate jurisdictions during the second quarter of 2009.
For the six months ended June 30, 2009, the provision for taxes was
$15.5 million, which reflects an effective tax rate of 39%. This
compares to a provision for taxes for the six months ended June 30,
2008 of $28.6 million, which reflects an effective tax rate of 37%
for the period. The decrease in the provision for taxes is
primarily due to lower pre-tax income offset by a higher effective
tax rate due to a greater proportion of our income being earned in
higher tax rate jurisdictions during the six months ended June 30,
2009. The effective tax rate can fluctuate as a result of
variations in the relative amounts of financial 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 period may not be indicative of the effective tax
rate in future periods. Liquidity and Capital Resources As of June
30, 2009, our cash totaled $55.0 million, our investments totaled
$108.8 million and we had $33.4 million in short-term debt. We had
total commitments (not reflected on our balance sheet) relating to
future investments in our merchant banking activities of $49.2
million as of June 30, 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 September 16, 2009 to common
stockholders of record on September 2, 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, Los Angeles, San
Francisco, and will shortly open an office in Houston. 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 For the Six Months Ended Ended June 30, June 30,
-------- -------- 2009 2008 2009 2008 ---- ---- ---- ---- Revenues
Financial advisory fees $45,511,600 $49,892,910 $110,656,294
$119,342,305 Merchant banking revenue 8,345,598 57,728,641
4,954,843 62,259,456 Interest income 243,538 1,048,124 316,278
2,448,299 ------- --------- ------- --------- Total revenues
54,100,736 108,669,675 115,927,415 184,050,060 Expenses Employee
compensation and benefits 25,215,512 49,838,192 53,655,786
84,513,169 Occupancy and equipment rental 3,022,834 2,770,988
5,572,830 5,385,936 Depreciation and amortization 1,277,820
1,146,535 2,431,581 2,252,356 Information services 1,256,388
1,325,522 2,745,994 3,059,004 Professional fees 1,552,136 1,287,675
2,984,252 2,211,974 Travel related expenses 1,984,481 1,652,221
3,896,168 3,599,115 Interest expense 341,958 911,155 695,604
2,067,341 Other operating expenses 2,301,531 2,715,864 4,402,035
3,907,927 --------- --------- --------- --------- Total expenses
36,952,660 61,648,152 76,384,250 106,996,822 Income before taxes
17,148,076 47,021,523 39,543,165 77,053,238 Provision for taxes
6,854,759 17,727,176 15,531,376 28,596,829 --------- ----------
---------- ---------- Consolidated net income 10,293,317 29,294,347
24,011,789 48,456,409 Less: Net income (loss) allocated to
non-controlling interests 509 375,975 (179,134) 325,776 --- -------
--------- ------- Net income allocated to common shareholders
$10,292,808 $28,918,372 $24,190,923 $48,130,633 ===========
=========== =========== =========== Average shares outstanding:
Basic 29,508,520 27,848,736 29,495,056 27,903,707 Diluted
29,623,249 27,904,439 29,572,969 27,962,961 Earnings per share:
Basic $0.35 $1.04 $0.82 $1.72 Diluted $0.35 $1.04 $0.82 $1.72
Dividends declared and paid per share $0.45 $0.45 $0.90 $0.90
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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