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Gleacher & Company Reports Second Quarter 2012 Financial Results

Stocks in this article: GLCH

- impairment of goodwill recorded during the second quarter of 2012,

- valuation allowance on deferred tax assets recorded during the second quarter of 2012,

- severance expense recorded during the first quarter of 2012,

- compensation expense related to the resignation of the former interim CEO in the second quarter of 2011, and

- the bargain purchase gain related to the ClearPoint acquisition in the first quarter of 2011.

Impairment of Goodwill

During the second quarter of 2012, the Company recorded a $21.1 million impairment of goodwill relating to both the MBS & Rates (previously captioned MBS/ABS & Rates) and Investment Banking reporting units. The evaluation was performed and the impairment was recognized as a result of the Company’s market capitalization remaining significantly below its book value for an extended period of time.

Deferred Tax Asset – Valuation Allowance

During the second quarter of 2012, the Company provided for a valuation allowance of $32.1 million on its net deferred tax assets, as the Company entered into a cumulative loss in the most recent three-year period, inclusive of the current quarter operating results. Such an assessment generally weighs the Company’s recent financial reporting losses to a greater extent than its projections of future taxable income.

The impairment of goodwill and the valuation allowance on the Company’s deferred tax assets are non-cash charges and had no impact to the Company’s liquidity or the net capital of the Company’s broker-dealer subsidiary.

For detailed information on the adjustments made, and a reconciliation of the non-GAAP financial results included in this press release to the most directly comparable GAAP financial metrics, refer to “Non-GAAP Financial Results” below. While the Company believes that the non-GAAP financial results included herein are instructive, they should only be considered together with their corresponding GAAP financial metrics.

 
Business Segment Results (including Non-GAAP results)
             

Three Months Ended

Six Months Ended

June March June June June
(In thousands of dollars) 2012 2012 2011 2012 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Net revenues:
Investment Banking $ 8,730 $ 4,533 $ 8,956 $ 13,263 $ 16,600

MBS & Rates 1

5,282 20,331 23,770 25,613 75,476

Credit Products 2

17,872 21,717 14,851 39,589 35,316
ClearPoint   11,316     15,545     7,008     26,861     13,366  
Net revenues - operating segments 43,200 62,126 54,585 105,326 140,758
Other   1,447     2,617     1,794     4,064    

2,680

*

Total $ 44,647   $ 64,743   $ 56,379   $ 109,390   $

143,438

*

 
Pre-tax (loss)/income from continuing operations:
Investment Banking $ 2,195 $ 579 $ 3,728 $ 2,774 $ 4,991
MBS & Rates (1,746 ) 5,487 6,542 3,741 25,407
Credit Products 1,285

962

*

631

2,247

*

2,843
ClearPoint   (2,512 )  

(2,853

)   (1,451 )   (5,365 )   (2,571 )
Pre-tax (loss)/income - operating segments (778 )

4,175

*

9,450 3,397 30,670
Other  

(9,877

)*

  (7,807 )  

(5,349

)*

 

(17,684

)*

 

(14,171

)*

Total $

(10,655

)*

$

(3,632

)*

$

4,101

*

$

(14,287

)*

$

16,499

*

 
*Designates non-GAAP financial results. A reconciliation of the Company’s GAAP results to its non-GAAP financial results is set forth below under the caption “Non-GAAP Financial Results.”
 

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