Investors Capital Holdings, Ltd. (NYSE Amex: ICH), a financial services holding company, posted annual net income of $0.32 million for the fiscal year (FY) ended March 31, 2010 compared to a net loss of $1.83 million for the prior period (FY 2009).

Adjusted EBITDA was $1.48 million for FY 2010 compared to a negative $0.26 million in FY 2009. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), described below, is a key metric utilized by the firm in evaluating its financial performance.

The turnaround, achieved despite a market-driven 3.0% decline in overall revenue, was aided by a 6.4% increase in advisory revenue and a 21.4% decrease in operating expenses from the implementation of cost cutting initiatives.

The rise in the Company’s advisory revenues reflects an increase in assets under management, surpassing the $1 billion level in FY 2010 due to rising markets, improved managed portfolio performance, and additional investor contributions. Advisory services are delivered through Investors Capital Advisory Services (ICAS), the investment advisory division of Investors Capital Corporation (ICC), ICH’s wholly-owned broker-dealer and registered investment advisor subsidiary.

The Company reduced its operating expenses by 21.4% for FY 2010, including a 40.3% decline in advertising and communications expense, a 39.2% decrease in regulatory, legal and professional expenses, and a 12.3% drop in compensation and benefits. These reductions enabled the Company to post operating income of $0.86 million in FY 2010 compared to an operating loss of $2.17 million in FY 2009.

Investors Capital continues to benefit from improving overall quality of its registered representatives, a key component of its strategy for achieving growth in revenues and net income. The firm strives continually to improve the quality of its representatives by helping them grow their practices, terminating representatives with low-production or quality of services, and recruiting more established, higher-quality representatives. Assisted by these efforts, the firm’s average revenue per representative rose to $137,961 for FY 2010, an increase of 12.1% compared to FY 2009.

Investors Capital’s net capital position was a healthy $3.39 million at March 31, 2010 (an excess of $2.91 million) versus $1.94 million (an excess of $1.41 million) a year earlier. The firm’s net capital ratio improved to 2.13:1 for FY 2010 compared to 4.10:1 for FY 2009. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that ICC maintain net capital of $100,000 and a ratio of specified aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1.

“When I look around at the current environment we’re in, there are many lessons to be learned,” said Timothy B. Murphy, President and CEO of Investors Capital Holdings, Ltd. “We see net capital violations and firms growing too fast by sacrificing quality for quantity. Our strategy of controlled growth, prudent management of expenses, and long-term vision to maximize operational efficiency has enabled us to thrive during the recent market disruption.”

“If we continue to do what we do best, live our brand, and provide our representatives with 5-star service every day, we put ourselves in the best possible position to recruit higher-end advisors and drive consistent growth for many years to come,” Mr. Murphy added.

About Investors Capital Holdings, Ltd.:

Investors Capital Holdings, Ltd. (NYSE Amex: ICH) of Lynnfield, Massachusetts is a financial services holding company that operates primarily through its independent broker/dealer and investment advisor subsidiary, Investors Capital Corporation. Our mission is to provide premier, concierge-level service and support to our valued registered representatives, including advisory programs, strategic practice management and marketing services, and technology, to help them grow their businesses and exceed their clients’ expectations. Business units include Investors Capital Corporation, ICC Insurance Agency, Inc., and Investors Capital Holdings Securities Corporation. For more information, please call (800) 949-1422 x4814 or visit www.investorscapital.com.

Certain statements contained in this press release that are not historical fact may be deemed to be forward-looking statements under federal securities laws. There are many factors that could cause our future actual results to differ materially from those suggested by or forecast in the forward-looking statements. Such factors include, but are not limited to, general economic conditions, interest rate fluctuations, regulatory changes affecting the financial services industry, competitive factors effecting demand for our services, availability of funding, and other risks including those identified in the Company’s Securities and Exchange Commission filings.

Investors Capital Holdings, Ltd., 230 Broadway, Lynnfield, Massachusetts 01940, Distributor.
INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
   
March 31, March 31,
2010   2009
Assets
Current Assets
Cash and cash equivalents $ 5,812,865 $ 6,151,613
Deposit with clearing organization, restricted 175,000 175,000
Accounts receivable 6,042,188 5,198,575
Accounts receivable - Fidelity Bond - 956,223
Note receivable 140,598 8,674
Loans receivable from registered representatives (current), net of allowance 769,263 737,571
Prepaid income taxes 559,007 295,608
Marketable securities owned, at fair value 57,933 85,436
Investments 50,000
Prepaid expenses   957,674     858,679  
14,564,527 14,467,379
 
Property and equipment, net 774,182 950,620
 
Long Term Investments
Loans receivable from registered representatives 292,884 129,358
Note receivable 595,000 747,617
Investments 184,319 127,143
Non-qualified deferred compensation investment 929,897 533,665
Cash surrender value life insurance policies   551,398     406,089  
2,553,498 1,943,872
Other Assets
Other assets 25,069 44,511
Capitalized software, net 138,497 -
Deferred tax asset, net   838,773     1,097,952  
1,002,339 1,142,463
 
TOTAL ASSETS $ 18,894,547   $ 18,504,334  
 
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 817,761 $ 2,029,286
Accrued expenses 2,358,656 2,347,761
Commissions payable 3,488,415 2,860,093
Notes payable 1,130,922 1,044,805
Unearned revenues 101,931 94,259
Securities sold, not yet purchased, at fair value   5,693     7,056  
7,903,378 8,383,260
Long-Term Liabilities
Non-qualified deferred compensation plan   793,735     541,993  
793,735 541,993
 
Total liabilities   8,697,113     8,925,253  
 

 
 
Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,595,804 issued and 6,591,919 outstanding at March 31, 2010;
6,570,177 issued and 6,566,292 outstanding at March 31, 2009 65,958 65,702
Additional paid-in capital 12,095,862 11,852,467
Accumulated deficit (1,964,084 ) (2,285,622 )
Less: Treasury stock, 3,885 shares at cost (30,135 ) (30,135 )
Accumulated other comprehensive income   29,833     (23,331 )
Total stockholders' equity 10,197,434 9,579,081
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,894,547     $ 18,504,334  
INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
   
YEARS ENDED
March 31,
2010 2009  
Revenues:
Commission $ 64,997,188 $ 68,219,314
Advisory fees 11,798,894 11,090,508
Other fee income 1,013,718 804,877
Marketing revenue 995,767 981,100
Other income   382,370   511,589  
Total revenue 79,187,937 81,607,388
 
Commission and advisory fees   64,045,046   65,609,588  
 
Gross profit   15,142,891   15,997,800  
 
Operating expenses:
 
Advertisement and marketing 744,933 1,279,756
Communications   653,393   1,060,641  
Selling expenses   1,398,326   2,340,397  
 
Compensation and benefits 8,007,675 9,135,686
Regulatory, legal and professional 2,312,812 3,805,231
Occupancy 853,548 1,032,914
Other Administrative expenses 1,687,644 1,815,393
Interest expense   26,213   36,845  
Administrative expenses 12,887,892 15,826,069
   
Total operating expenses 14,286,218 18,166,466
 
Operating income (loss) before income taxes 856,673 (2,168,666 )
 
Provision (benefit) for income taxes   535,135   (338,667 )
 
Net income (loss) $ 321,538 $ (1,829,999 )
 
Basic and diluted net income (loss) per share $ 0.05 $ (0.29 )
 
Basic and diluted dividends per common share $ - $ -  
 
 
Shares used in basic and diluted per share calculations   6,503,476   6,415,385  

Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.

Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.

Adjusted EBITDA may be reconciled with net income (loss) as follows:
  Years Ended March 31,
  2010       2009  
 
Adjusted EBITDA: $ 1,475,538 $ (261,102 )
 
Adjustments to GAAP Net income (loss):
Income tax benefit (535,135 ) 351,658
Interest expense (26,213 ) (36,845 )
Income tax expense 0 (12,991 )
Depreciation (349,001 ) (386,625 )
Non-cash compensation (243,651 ) (844,702 )
Non-recurring professional fees to evaluate strategic business opportunities 0 (639,392 )
   
Net income (loss) $ 321,538     $ (1,829,999 )

Copyright Business Wire 2010

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