Broadpoint Securities Group, Inc. Announces Closing of a $20 Million Equity Investment at $1.70 Per Share; Reports Fourth Quarter Results; Losses Narrow as Rebuilding Process Continues.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Broadpoint Securities Group, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : BPSG BPSG Boron-Doped Phosphosilicate Glass ) announced the closing of a $20 million investment in the Company at $1.70 per share. A fund managed by MAST Capital Management, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a Boston-based investment manager that focuses on special situations debt and equity investment opportunities, led the investment purchasing 7.1 million of the approximately 11.6 million shares issued. Participating in the investment were twenty-three Broadpoint employees, including Lee Fensterstock, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and three of the firm's business unit heads, Rob Fine and Rob Tirschwell, Heads of Broadpoint Descap, a division of Broadpoint Securities, Inc., the Company's mortgage and asset backed subsidiary, and Joe Mannello, Executive Managing Director and Head of Broadpoint Capital's new Debt Capital Markets Division. MatlinPatterson, Broadpoint's controlling shareholder, also participated. The Company also reported its financial results for the quarter and year ending December 31, 2007 and will hold a conference call on March 6, 2008 at 10 A.M. EST EST electroshock therapy. EST abbr. electroshock therapy to review its results. (See dial-in information below). Highlights include: * Loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before income taxes, excluding the impact of a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , improved $3.0 million to $6.9 million for the fourth quarter of 2007. Loss from continuing operations before income taxes was $9.6 million in the fourth quarter of 2007 compared to $9.9 million in the third quarter of 2007. The following table presents the impact of the restructuring charge on 2007 fourth quarter results: [TABLE OMITTED] * Reported a 22 percent increase in net revenue in the fourth quarter of 2007 compared to the third quarter of 2007 as a result of a strong performance in the Company's mortgage and asset-backed business as the Company experienced an increase in customer trading activity and spreads as a result of the dislocation dislocation, displacement of a body part, usually a bone. When a bone is dislocated, the ends of opposing bones are usually forced out of connection with one another. In the process, bruising of tissues and tearing of ligaments may occur. occurring in the credit markets. * Broadpoint Securities, Inc., the Company's mortgage and asset-backed broker-dealer, reported its strongest quarter in 18 months with total net revenue up 90 percent year-over-year and 77 percent versus the third quarter of 2007. * Implemented a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan designed to properly size the Company's infrastructure with its current levels of activity. As a result, the Company incurred approximately $2.7 million in restructuring costs during the fourth quarter, of an estimated $4.6 to $4.8 million in total restructuring costs. The plan includes a reduction in support headcount of approximately 50 percent, outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. the Company's clearing operations and data center management, and reducing non-compensation expenses. The Company anticipates this restructuring plan will be completed in the second quarter of 2008 and will eliminate approximately $8 million in annual operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . * Made strategic investments in the Company's fixed income platform with the hiring from BNY BNY Bank of New York Capital Markets of the employees comprising Broadpoint's new Debt Capital Markets Division and the formation of Broadpoint's Recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. and Restructuring Group. These investments will expand the Company's distribution capabilities, particularly in high yield and convertible bonds, and its debt advisory and debt capital markets capabilities. Lee Fensterstock, Chairman and CEO, said, "Since the launch of Broadpoint at the end of September and the $50 million investment by MatlinPatterson, we have made tangible progress toward our goal of building a premier investment bank serving mid-size companies and their investors. The Company has been stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. , our capital allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as to Broadpoint Descap has resulted in immediate profit improvement and our hiring from BNY Capital Markets of the employees forming our new Debt Capital Markets Group gives us significant product capability to more fully serve our institutional and corporate clients. I am gratified grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. at the vote of confidence MAST Capital Management, LLC, Matlin Patterson, and our employees have given us in our most recent capital raise." Peter McNierney, President and COO (Cell Of Origin) See mobile positioning. , said, "In the last six months while other firms are contracting, we have assembled a strong core of employee shareholders. New hires include sales, trading and banking professionals in Equity Capital Markets and Mortgage and Asset-Backed Sales & Trading, as well as a ten person Recapitalization and Restructuring banking group. We believe we present a very attractive platform for individuals and groups who want to be partners in an entrepreneurial environment where they can focus the firm's strong execution capabilities on their client base." Overview of Financial Results [TABLE OMITTED] Broadpoint's 2007 fourth quarter net revenues from continuing operations increased 22 percent to $10.6 million compared to the third quarter of 2007. The improvement in revenue was the result of a strong quarter in the mortgage and asset-backed fixed income business. Excluding the impact of the restructuring charge, loss from continuing operations before income taxes improved $3.0 million to a loss of $6.9 million. Loss from continuing operations before income taxes was $9.6 million in the fourth quarter compared to a loss of $9.9 million in the third quarter of 2007. Pre-tax operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in Equities for the three months ended December 31, 2007 declined slightly compared to the three months ended September 30, 2007. For the three months ended December 31, 2007, Fixed Income recorded a three-fold increase in pre-tax operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. on a 77 percent increase in net revenue. Other pre-tax income, excluding the impact of the restructuring charge, improved $1.8 million compared to the three months ended September 30, 2007. Other pre-tax loss was $7.4 million in the fourth quarter of 2007 compared to $6.5 million in the third quarter of 2007. Results for the three months ended September 30, 2007 included $1.9 million in costs related to accelerated vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of restricted stock and equity grants related to the MatlinPatterson investment. [TABLE OMITTED] Broadpoint's 2007 fourth quarter net revenues from continuing operations were $10.6 million compared to $15.7 million for the fourth quarter of 2006. Net revenue in Fixed Income for the fourth quarter of 2007 was up 90 percent compared to the fourth quarter of 2006. Equities net revenue was down 66 percent on lower revenue in both Investment Banking and Sales and Trading. For the fourth quarter of 2007, the Company reported a loss from continuing operations before income taxes of $9.6 million compared to a loss of $15.4 million a year ago. Negatively impacting results in the fourth quarter of 2007 was a $2.7 million charge related to the Company's restructuring plan. Results for the 2006 period were negatively impacted by a $7.9 million impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge related to the write-down of an intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Pre-tax operating loss in Equities for the three months ended December 31, 2007 increased $1.9 million compared to the same period a year ago as a result of a $7.0 million decline in revenue. For the three months ended December 31, 2007, Fixed Income recorded a $2.1 million improvement in pre-tax operating income compared to the three months ended December 31, 2006 on a $2.6 million increase in net revenue in the mortgage and asset-backed business. Contributing to the improvement in profitability was a reduction in compensation expense as a percentage of net revenue. Other pre-tax loss for the three months ended December 31, 2007 was $7.4 million compared to $13.0 million for the three months ended December 31, 2006. Other pre-tax loss, excluding the impact of the restructuring charge, improved $8.3 million compared to the three months ended December 31, 2006. Results for the three months ended December 31, 2006 included a $7.9 million charge related to the impairment on an intangible asset. [TABLE OMITTED] For the year ended December 31, 2007, Broadpoint's net revenues from continuing operations were $40.1 million compared to $72.9 million for the same period in 2006. Equities net revenue was down $41.1 million as a result of declines in both Sales and Trading and Investment Banking while Other net revenues increased $10.6 million as a result of a $10.2 million improvement in investment income. The Company reported a loss from continuing operations before income taxes of $31.6 million for 2007 compared to a loss from continuing operations before income taxes of $47.4 million for 2006. 2006 results include $6.9 million in compensation retention expense and a $7.9 million charge related to an impairment of an intangible asset. Pre-tax operating loss in Equities for the year ended December 31, 2007 declined by $17.2 million compared to the same period a year ago as a result of a $41.1 million decline in revenue. For the year ended December 31, 2007, Fixed Income recorded a $3.7 million improvement in pre-tax operating income compared to the year ended December 31, 2006 principally due to lower compensation expense as a percentage of net revenue in the mortgage and asset backed business. Other pre-tax loss, excluding the impact of the restructuring charge, improved $32.1 million compared to the year ended December 31, 2006. Results for the year ended December 31, 2006 included a $7.9 million charge related to an impairment of an intangible asset, $6.9 million in compensation retention costs, $7.6 million in losses related to the Company's investment portfolio, and a reduction of $2.6 million in occupancy expense as a result of the Company's efforts to reduce its overall real estate costs. Other On February 29, 2008, the Company completed its hiring of 47 employees of the New Jersey-based Fixed Income division of BNY Capital Markets, Inc. and the acquisition of certain related assets. BNY Capital Markets, Inc. is a subsidiary of The Bank of New York Mellon The Bank of New York Mellon Corporation (NYSE: BK), is a global financial services company formed on 1 July 2007 as result of the merger of The Bank of New York and Mellon Financial Corporation. Corporation. These new employees operate a comprehensive sales and trading platform that specializes in high yield, distressed, investment grade corporate, treasury, government agency, convertible bond, and equity securities. Joining Broadpoint were 47 professionals, including 9 traders Traders Individuals who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do this, their objective is to earn the bid/ask spread. , 20 salespeople sales·peo·ple pl.n. Persons who are employed to sell merchandise in a store or in a designated territory. , 8 desk analysts and 10 support staff. These employees have over 800 established account relationships with insurance companies, hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" , money managers, mutual funds, commercial banks, and corporations. As part of this transaction, 6.2 million shares of restricted stock, which will vest over a 5 year period, have been granted to employees of the new division pursuant to the Company's 2007 Incentive Compensation Plan, subject to shareholder approval to increase the number of shares authorized Shares authorized The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding. shares authorized See authorized capital stock. for issuance under the Plan. In addition, the employees will have the opportunity to share in the profits of the new division. Stockholders' Equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. Stockholders' equity as of December 31, 2007 was $82.3 million, compared to $51.6 million at December 31, 2006. Book value per share as of December 31, 2007 was $1.41, as compared to $3.46 at December 31, 2006. Non-GAAP Financial Measures This press release includes non-GAAP financial measures. In the tables presenting summary financial information, the Company has utilized a non-GAAP calculation of loss from continuing operations that has been adjusted to aid in understanding and analyzing our financial results for the period and year ending December 31, 2007. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of our business as it excludes, and will exclude, restructuring charges that are not indicative of the overall cost to run the existing businesses on a going forward basis. Our reference to these measures should not, however, be considered a substitute for results that are presented in a manner consistent with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . Conference Call Information Broadpoint Securities will hold a conference call Thursday, March 6, 2008, at 10:00 A.M. EST. This call will be webcast and can be accessed on the Investor Relations Investor relations The process by which the corporation communicates with its investors. portion of the Broadpoint Securities website at www.broadpointsecurities.com, as well as being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site. To participate on the call, please dial 888.713.4199, participant passcode 39344470 or request the Broadpoint earnings call. A recording of the call will be available for seven days by dialing 888.286.8010, participant passcode 63517140. About the Company Broadpoint Securities Group, Inc. (NASDAQ: BPSG) is an independent investment bank that serves the growing institutional market and corporate middle market by providing clients with strategic, research-based investment opportunities, as well as advisory and financing services. The Company offers a diverse range of products through Broadpoint's Equities division and its new Debt Capital Markets division, as well as Broadpoint Securities, Inc., its mortgage-backed security/asset-backed security trading subsidiary, and FA Technology Ventures Inc., its venture capital division. About MAST Capital Management, LLC MAST Capital Management, LLC is a Boston-based investment manager that focuses on special situations debt and equity investment opportunities. Founded in 2002, MAST currently manages over one billion in assets and commitments and seeks to invest primarily in small- to mid-sized companies. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains "forward-looking statements." These statements are not historical facts but instead represent the Company's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. The Company's forward-looking statements are subject to various risks and uncertainties, including the conditions of the securities markets, generally, and acceptance of the Company's services within those markets and other risks and factors identified from time to time in the Company's filings with the Securities and Exchange Commission. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in its forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any of its forward-looking statements. [TABLE OMITTED] |
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