Greenhill & Co. Reports Second Quarter Earnings Per Share of
$0.27 NEW YORK, July 21 /PRNewswire-FirstCall/ -- Greenhill &
Co., Inc. (NYSE: GHL) today reported revenues of $34.9 million and
pro forma net income of $7.8 million for the quarter ended June 30,
2004. Pro forma diluted earnings per share were $0.27 per share for
the quarter ended June 30, 2004. The Firm's second quarter revenues
compare with revenues of $37.8 million for the second quarter of
2003, which represents a decrease of $2.9 million or 8%. On a
year-to-date basis, revenue through June 30, 2004 was $64.4
million, compared to $54.6 million for the comparable period in
2003, representing an increase of $9.8 million or 18%. The Firm's
quarterly revenues can fluctuate materially depending on the number
and size of completed transactions on which it advised, as well as
other factors. Accordingly, the revenues in any particular quarter
may not be indicative of future results. For the second quarter
actual net income was $7.8 million and earnings per share were
$0.27. Although actual and pro forma second quarter net income and
earnings per share were similar this quarter, we believe that the
pro forma results more accurately depict our results as a public
company and will provide the most meaningful basis for comparison
among present, historical and future periods. Prior to our initial
public offering we operated as a limited liability company and our
earnings did not fully reflect either the compensation expense we
expect to pay our managing directors or the taxes that we expect to
pay as a corporation. Additionally, a portion of our earnings
attributable to our European operations was recorded as minority
interest. Our pro forma results increase compensation expense and
tax expense to amounts we expect to pay as a public corporation and
eliminate the minority interest. The Firm's second quarter pro
forma net income compares with pro forma net income of $9.4 million
in the second quarter of 2003, which represented a decrease of $1.6
million or 17%. On a year-to-date basis, pro forma net income was
$14.3 million through June 30, 2004, compared to pro forma net
income of $12.4 million for the comparable period in 2003, which
represents an increase of $1.9 million or 15%. The Firm had net
income of $7.8 million and $17.4 million in the second quarters of
2004 and 2003, respectively. The Firm had net income of $18.3
million and $23.0 million for the six months ended June 30, 2004
and 2003, respectively. "We are pleased with our financial results,
and our confidence in our business model has grown following the
completion of our initial public offering. The IPO has raised our
visibility to prospective clients as well as enhanced our ability
to attract new talent," Robert F. Greenhill, Chairman and CEO,
said. 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, 2004 and June 30, 2003,
respectively: Revenue by Principal Source of Revenue (unaudited)
(in millions) Three Months Ended Six Months Ended 6/30/04 6/30/03
6/30/04 6/30/03 % of % of % of % of Amount Total Amount Total
Amount Total Amount Total Financial Advisory $27.8 80% $36.4 96%
$53.3 83% $52.0 95% Merchant Banking & Interest Income 7.1 20%
1.4 4% 11.1 17% 2.6 5% Total Revenue $34.9 100% $37.8 100% $64.4
100% $54.6 100% Financial Advisory Revenues Financial Advisory
Revenues were $27.8 million in the second quarter of 2004 compared
to $36.4 million in the second quarter of 2003, which represents a
decrease of 24%. For the six months ended June 30, 2004, Financial
Advisory Revenues were $53.3 million compared to $52.0 million for
the comparable period in 2003, representing an increase of 3%.
Completed transactions in the second quarter of 2004 included: the
restructuring and sale of Allegiance Telecom, Inc. to XO
Communications, Inc.; the sale of assets of Atlantic Electric &
Gas Ltd. to Scottish and Southern Energy plc; the merger of Informa
Group plc with Taylor & Francis Group plc; and the acquisition
of International Multifoods by J.M. Smucker Company. Announced
transactions in the second quarter of 2004 included Marsh &
McClennan Companies, Inc.'s acquisition of Kroll Inc. and the
buyback of a minority interest by the Cayzer Trust Company Limited.
"While the current improving economy has led to a decline in
restructuring-related activity, more traditional M&A activity
has begun to increase for us as well as for the market generally,"
Scott L. Bok and Simon A. Borrows, Co-Presidents, commented.
Merchant Banking & Interest Income The Firm earned $7.1 million
in Merchant Banking & Interest Income in the second quarter of
2004 compared to $1.4 million in the second quarter of 2003,
representing an increase of 407%. This increase is primarily due to
unrealized principal investment gains in the Greenhill Capital
Partners (GCP) portfolio, including the Firm's proportionate share
of the gain relating to the initial public offering of Global
Signal Inc. (NYSE:GSL) in June, as well as the recognition of
profit overrides associated with gains in the GCP portfolio. In the
first six months of 2004, the Company earned $11.1 million in
Merchant Banking & Interest Income compared to $2.6 million in
the first six months of 2003, an increase of 327%. "We continue to
see a good flow of investment opportunities while harvesting a
number of successful investments made in recent years," commented
Robert H. Niehaus, Chairman of GCP. Expenses Operating Expenses The
following table sets forth information relating to our actual and
pro forma operating expenses, which are reported net of
reimbursements: Actual and Pro Forma Operating Expenses (unaudited)
(in millions) Three Months Ended Six Months Ended 6/30/04 6/30/03
6/30/04 6/30/03 Actual Compensation & Benefit Expense $13.5
$6.3 $22.8 $11.0 % of Revenues 39% 17% 35% 20% Pro Forma
Compensation & Benefit Expense 15.7 17.0 29.0 24.6 % of
Revenues 45% 45% 45% 45% Non-Compensation Expense: Other Operating
Expenses 5.0 3.8 9.2 7.1 Depreciation & Amortization 0.8 0.8
1.5 1.6 Total Non-Compensation Expenses 5.8 4.6 10.7 8.7 % of
Revenues 17% 12% 17% 16% Total Actual Operating Expenses 19.3 10.9
33.5 19.7 % of Revenues 55% 29% 52% 36% Total Pro Forma Operating
Expenses 21.5 21.6 39.7 33.3 % of Revenues 62% 57% 62% 61%
Compensation and Benefits Our actual compensation and benefits
expense in the second quarter of 2004 was $13.5 million and for the
six months ended June 30, 2004 was $22.8 million. Our compensation
and benefits expense for the period since completion of our IPO
reflects a 45% ratio of compensation to revenues. One factor in
determining compensation expense was the accounting impact of the
introduction into our compensation packages of equity-related
compensation in the form of restricted stock units. The principal
component of our operating expenses is compensation and benefits
expense. Because we were a limited liability company prior to our
IPO, payments for services rendered by our managing directors
generally were accounted for as distributions of members' capital
or minority interest expense rather than as compensation expense.
As a result, our pre-IPO compensation and benefits expense has not
reflected a large portion of payments for services rendered by our
managing directors and understates the expected operating costs to
be incurred as a public company. As a corporation, we include all
payments for services rendered by our managing directors in
compensation and benefits expense. On a pro forma basis, Total
Compensation and Benefits Expense was $15.7 million in the second
quarter of 2004 compared to $17.0 million in the second quarter of
2003, an 8% decrease. The pro forma analysis reflects a 45% ratio
of compensation to revenues for the relevant periods. For the six
months ended June 30, 2004, on a pro forma basis, Total
Compensation and Benefits Expense was $29.0 million compared to
$24.6 million for the six months ended June 30, 2003, which
represents an 18% increase. The pro forma analysis reflects a 45%
ratio of compensation to revenues for the relevant periods.
Non-Compensation Expense Our non-compensation expenses were $5.8
million in the second quarter of 2004, which compared to $4.6
million in the second quarter of 2003, representing an increase of
26%. The increase is related principally to increases in rent
expense of $0.4 million, recruiting expenses of $0.4 million and
expenses associated with operating as a public entity of $0.3
million. For the first six months of 2004, our non-compensation
expenses were $10.7 million, which compared to $8.7 million in the
first six months of 2004, representing an increase of 23%.
Non-compensation expense as a percentage of revenue in the three
months and six months ended June 30, 2004 were 17% and 17%,
respectively. This compares to 12% and 16% for the three months and
six months ended June 30, 2003, respectively. The increase in these
expenses as a percentage of revenue is principally related to
increases in rent from new office space and the costs of being a
public company. Provision for Income Taxes As a limited liability
company, Greenhill was not subject to U.S. federal or state income
taxes and its U.K. controlled affiliate Greenhill & Co.
International LLP, as a limited liability partnership, was
generally not subject to U.K. income taxes. As of completion of our
IPO in May 2004, we are subject to federal, foreign and state
corporate income taxes. The Provision for Taxes in the second
quarter of 2004 was $5.6 million. On a pro forma basis, assuming a
tax rate of 42% for the full period, our Provision for Taxes would
be $5.6 million. This compares to a pro forma Provision for Taxes
in the second quarter of 2003 on a similar basis of $6.8 million,
which represents an 18% decrease. For the six months ended June 30,
2004, on a pro forma basis assuming a tax rate of 42% for the full
period, our Provision for Taxes was $10.4 million compared to pro
forma provision for taxes of $8.9 million for the six months ended
June 30, 2003, which represents a 17% increase. Liquidity and
Capital Resources Our cash balance was $85.6 million as of June 30,
2004, and we have no debt. Our shareholders' equity as of June 30,
2004 was $109.4 million. We had total commitments (not reflected on
our balance sheet) relating to future principal investments in
Greenhill Capital Partners of $20.3 million as of June 30, 2004.
Subsequently, on July 1, 2004, we funded $6.8 million of this
amount as part of a capital call from Greenhill Capital Partners to
fund several pending investments, which reduced our cash balance
and remaining commitments. Further capital calls may be made at any
time through June 2005, depending on the timing and level of
investments by GCP, although we do not expect these commitments to
be drawn in full. Dividend The Board of Directors of Greenhill
& Co., Inc. has declared a dividend of $0.08 per share to be
paid on September 14, 2004 to common stockholders of record on
August 19, 2004. Greenhill & Co., Inc. is an independent
investment banking firm that (i) provides financial advice on
significant mergers, acquisitions, restructurings and similar
corporate finance matters and (ii) manages merchant banking funds
and commits capital to those funds. Greenhill acts for clients
located throughout the world from offices in New York, London and
Frankfurt. 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 Registration Statement on Form S-1 (Commission
file number 333-113526) under the caption "Risk Factors." Greenhill
& Co., Inc. and Subsidiaries Condensed Consolidated Statements
of Income (Unaudited) Three Months Ended Six Months Ended June 30,
June 30, 2004 2003 2004 2003 Revenues Financial advisory fees
$27,801,947 $36,391,860 $53,339,242 $51,962,502 Merchant banking
revenue 6,878,759 1,218,929 10,886,486 2,410,788 Interest income
172,438 224,837 192,941 251,357 Total Revenues 34,853,144
37,835,626 64,418,669 54,624,647 Expenses Compensation and benefits
13,519,168 6,310,369 22,755,368 10,987,616 Occupancy and equipment
rental 1,477,520 1,017,778 2,831,872 2,081,576 Depreciation and
amortization 759,488 817,010 1,531,550 1,627,773 Information
services 664,738 689,769 1,425,301 1,302,927 Professional fees
563,271 480,074 847,779 684,352 Travel related expenses 802,969
810,259 1,696,168 1,531,736 Other operating expenses 1,538,349
765,507 2,443,918 1,518,915 Total Expenses 19,325,503 10,890,766
33,531,956 19,734,895 Income before Tax and Minority Interest
15,527,641 26,944,860 30,886,713 34,889,752 Minority interest in
net income of subsidiary 2,092,353 8,514,231 6,487,050 10,645,603
Income before Tax 13,435,288 18,430,629 24,399,663 24,244,149
Provision for taxes 5,626,649 1,054,552 6,110,951 1,270,401 Net
Income $7,808,639 $17,376,077 $18,288,712 $22,973,748 Average
common shares outstanding: Basic 28,494,540 26,758,276 Diluted
28,537,025 26,800,762 Earnings per share: Basic $0.27 $0.68 Diluted
$0.27 $0.68 Pro forma average common shares outstanding: Basic
28,494,540 25,000,000 26,758,276 25,000,000 Diluted 28,537,025
25,000,000 26,800,762 25,000,000 Pro forma earnings per share:
Basic $0.27 $0.38 $0.53 $0.49 Diluted $0.27 $0.38 $0.53 $0.49 See
Notes to the Pro Forma Condensed Consolidated Statement of Income
Greenhill & Co., Inc. and Subsidiaries Pro Forma Condensed
Consolidated Statements of Income (Unaudited) Pro Forma Pro Forma
Three Months Ended Six Months Ended June 30, June 30, (a) 2004 2003
2004 2003 (in thousands except per share data) Total revenues
$34,853 $37,836 $64,419 $54,625 Compensation and benefits (b)
15,684 17,026 28,989 24,581 Other expenses 5,806 4,580 10,777 8,747
Total expenses 21,490 21,606 39,766 33,328 Income before tax and
minority interest 13,363 16,230 24,653 21,297 Minority interest in
net income of subsidiary (c) - - - - Income before tax 13,363
16,230 24,653 21,297 Provision for taxes (d) 5,612 6,817 10,354
8,945 Net income $7,751 $9,413 $14,299 $12,352 Pro forma average
common shares outstanding: (e) Basic 28,494,540 25,000,000
26,758,276 25,000,000 Diluted 28,537,025 25,000,000 26,800,762
25,000,000 Pro forma earnings per share: Basic $0.27 $0.38 $0.53
$0.49 Diluted $0.27 $0.38 $0.53 $0.49 See Notes to the Pro Forma
Condensed Consolidated Statement of Income Notes to the Pro Forma
Condensed Consolidated Statement of Income (a) Prior to the initial
public offering we were a limited liability company and our
historical earnings did not fully reflect the compensation expense
we expect to pay our managing directors or taxes that we expect to
pay as a public corporation. Additionally, a portion of our
earnings attributable to our European operations was recorded as
minority interest. We believe that the pro forma results, which
increase compensation expense and tax expense to amounts we expect
to pay as a corporation and eliminate the minority interest, more
accurately depict our results as a public company. (b) Because the
Firm had been a limited liability company prior to IPO, payments
for services rendered by managing directors generally had been
accounted for as distributions of members' capital rather than as
compensation expense. As a corporation, the Firm includes all
payments for services rendered by managing directors in
compensation and benefits expense. Compensation and benefits
expense, reflecting the Firm's conversion to corporate form, will
consist of cash compensation and non-cash compensation related to
the restricted stock units awarded to employees at the time of the
Firm's initial public offering consummated on May 11, 2004, as well
as any additional restricted stock units awarded in the future. It
is the Firm's policy that total compensation and benefits,
including that payable to the managing directors, will not exceed
50% of total revenues each year (although the Firm retains the
ability to change this policy in the future). Adjustments to
increase compensation expense for the three months ended June 30,
2004 and 2003 of $2.2 million and $10.7 million, respectively, have
been made to record total compensation and benefits expense at 45%
of total revenues. Adjustments to increase compensation expense for
the six months ended June 30, 2004 and 2003 of $6.2 million and
$13.6 million, respectively, have been made to record total
compensation and benefits expense at 45% of total revenues. (c) For
the three months ended June 30, 2004 and 2003, historical income
before tax has been increased by $2.1 million and $8.5 million,
respectively, to reflect the elimination on a pro forma basis of
minority interests held by the European managing directors in
Greenhill & Co. International. For the six months ended June
30, 2004 and 2003, historical income before tax has been increased
by $6.5 million and $10.6 million, respectively, to reflect the
elimination on a pro forma basis of minority interests held by the
European managing directors in Greenhill & Co. International.
(d) As a limited liability company, the Firm was generally not
subject to income taxes except in foreign and local jurisdictions.
For the three months ended June 30, 2004 and 2003, adjustments of
$0.0 million and $5.8 million, respectively, have been made to
adjust the Firm's effective tax rate to 42.0%, reflecting assumed
federal, foreign, state and local income taxes as a corporation.
For the six months ended June 30, 2004 and 2003, adjustments of
$4.2 million and $7.7 million, respectively, have been made to
increase the Firm's effective tax rate to 42.0%, reflecting assumed
federal, foreign, state and local income taxes as a corporation.
(e) For 2004 the actual and pro forma numbers of common shares
outstanding give effect to (i) 25,000,000 shares issued in
connection with the reorganization of the Firm in conjunction with
the initial public offering as if it occurred on January 1, 2004
and (ii) the weighted average of the 5,750,000 shares and the
common stock equivalents issued in conjunction with the initial
public offering. For 2003 the pro forma number of common shares
outstanding gives effect to the shares issued in connection with
the reorganization of the Firm as if it occurred on January 1,
2003. Contact: John D. Liu, Chief Financial Officer Greenhill &
Co., Inc. (212) 389-1800 DATASOURCE: Greenhill & Co., Inc.
CONTACT: John D. Liu, Chief Financial Officer, Greenhill & Co.,
Inc., +1-212-389-1800
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