Oppenheimer Holdings Inc. Reports Operating Results (10-Q)

Author's Avatar
Nov 06, 2009
Oppenheimer Holdings Inc. (OPY, Financial) filed Quarterly Report for the period ended 2009-09-30.

Fahnestock Viner Holdings Inc. is a holding company and carries on no active business. The company is engaged in the securities brokerage and trading business and offers investment advisory and other related financial services. The operating subsidiaries are engaged in a broad range of activities in the securities brokerage business including retail securities brokerage bond trading and investment banking-offering both corporate and public finance services underwriting research market making and investment advisory and asset management services. Oppenheimer Holdings Inc. has a market cap of $351.5 million; its shares were traded at around $27.1 with a P/E ratio of 30.2 and P/S ratio of 0.4. The dividend yield of Oppenheimer Holdings Inc. stocks is 1.6%. Oppenheimer Holdings Inc. had an annual average earning growth of 27.6% over the past 5 years.

Highlight of Business Operations:

Oppenheimer Holdings Inc. reported a net profit of $7.9 million or $0.60 per share for the third quarter of 2009, compared to a net loss of $2.5 million or $0.18 per share in the third quarter of 2008. Revenue for the third quarter of 2009 was $262.1 million, compared to revenue of $222.2 million in the third quarter of 2008, an increase of 18%.

The net profit for the nine months ended September 30, 2009 was $13.0 million or $1.00 per share compared to a net loss of $16.9 million or $1.26 per share for the nine months ended September 30, 2008. Revenue for the nine months ended September 30, 2009 was $718.1 million, compared to revenue of $710.3 million for the same period in 2008.

Advisory fees declined 24% and 30%, respectively, and interest income declined 43% and 51%, respectively, in the three and nine months ended September 30, 2009 compared to the same periods in 2008. Advisory fees were $38.7 million in the third quarter of 2009 compared to $51.1 million in the third quarter of 2008 as a result of a decrease in assets under management of 17% as well as a decrease of $6.2 million in fees derived from money market funds. Assets under fee-based programs were $13.6 billion at June 30, 2009 (which forms a basis for fees earned in the third quarter of 2009) compared to $16.4 billion at June 30, 2008, reflecting market losses sustained. Assets under fee-based programs at September 30, 2009 were $15.4 billion reflecting improving markets. The September 30th market value of fee-based client assets forms the basis for fees earned in the fourth quarter. Advisory fees were $109.9 million in the nine months ended September 30, 2009 compared to $157.6 million in the same period in 2008 as a result of a decrease in assets under management during the period of 26% as well as a decrease of $14.8 million in fees derived from money market funds. Lower interest bearing balances coupled with a decline in interest rates resulted in lower margin interest revenues of $4.9 million and $18.5 million, respectively, in the three and nine months ended September 30, 2009 over last years comparable periods. Clients continued to pay down debt resulting in lower average customer debit balances which decreased by 28% and 36%, respectively, in the three and nine months ended September 30, 2009 compared to the same periods in 2008.

Overall compensation and related expenses increased by 24% for the three months ended September 30, 2009 and were flat for the nine months ended September 30, 2009 compared to the same periods in 2008. In the three and nine months ended September 30, 2009, production and incentive-related compensation increased $29.9 million and $7.9 million, respectively, deferred compensation costs increased $6.6 million and $10.4 million, respectively, and share-based compensation, directly related to an increased share price during the respective periods, increased $1.9 million and $10.5 million, respectively, compared to the same periods in 2008. These increases were partially offset by a decrease of $8.6 million and $31.7 million, respectively, in the three and nine months ended September 30, 2009 for expenses related to deferred compensation obligations to former CIBC employees compared to the same periods in 2008.

Other expenses decreased 5% and 22%, respectively, for the three and nine months ended September 30, 2009 compared to the same periods in 2008. The three and nine months ended September 30, 2008 included substantial transition costs related to the acquisition of the acquired businesses which have terminated, as described above. Such transition costs amounted to $7.3 million and $32.3 million, respectively, in other expenses in the three and nine months ended September 30, 2008. Included in other expenses for the nine months ended September 30, 2009 is the approximately $2 million departure tax payable to the government of Canada in connection with the move of the domicile of the corporation from Canada to the U.S. on May 11, 2009. In addition, legal costs have increased by approximately $5.3 million and $9.9 million, respectively, in the three and nine months ended September 30, 2009 compared to the same periods in 2008. As a result of the regulatory environment stemming from recent economic conditions and the ARS matters discussed above, the Company expects legal costs to remain at high levels in the coming periods.

The effective interest rate on the Senior Secured Credit Note for the three months ended September 30, 2009 was 5.10%. Interest expense, as well as interest paid on a cash basis for the three and nine months ended September 30, 2009, on the Senior Secured Credit Note was $486,200 and $1.7 million, respectively ($1.3 million and $4.3 million, respectively for the three and nine months ended September 30, 2008). On September 30, 2009, the Company made a scheduled repayment of principal in the amount of $4.4 million bringing the outstanding balance to $32.9 million. Of the $32.9 million principal amount outstanding at September 30, 2009, $10.9 million of principal is expected to be paid within 12 months.

Read the The complete ReportOPY is in the portfolios of Private Capital of Private Capital Management.