GREENHILL & CO., INC. 
By NEW YORK,
The Firm's 2007 revenues compare with revenues of
The Firm's fourth quarter revenues were
The Firm's quarterly revenues and net income can fluctuate materially depending on the number and size of completed transactions on which it advised, the number and size of merchant banking gains (or losses) and other factors. Accordingly, the revenues and net income in any particular quarter may not be indicative of future results.
"We are pleased to report another quarter and full year of outstanding results, particularly in the face of the economic and market turmoil that began several months ago. Our employee productivity, advisory revenue, total revenue and net income all rose to new records for the year. We finished with a strong fourth quarter relative to all the benchmarks on which we focus. In achieving these results, we benefited from a substantial increase in the number of large transactions on which we advised, which is a direct result of the strengthening of our brand name, the extension of our efforts in recent years to new geographies and new industries, and the fact that clients increasingly prefer un-conflicted advice from an independent firm," Robert F. Greenhill, Chairman, commented.
"A major source of our success in growing advisory revenue faster than our
major competitors continues to be the fact that we focus on serving major
corporations worldwide rather than private equity or hedge funds. We believe
we are therefore well positioned to benefit from the recent meaningful shift
in M&A activity toward strategic rather than private equity deals. While the
types of transactions on which we are advising have changed since credit
conditions tightened, advisory activity levels at Greenhill's offices have
remained strong in both the U.S. and
"Another source of our success has been our diversity of revenue sources. Over our Firm's 12 year life, the diversity of our revenue sources has served us well as economic and market conditions have changed. Our geographic diversity was of particular benefit to us in 2007 in that European clients contributed well over half the Firm's advisory revenue. Our diversity in terms of transaction type has also proved valuable over time. While restructuring- related advisory activity was at a cyclical low in 2007, we have benefited strongly from such assignments in the past and expect to do so again if economic conditions worsen. Finally, while our revenue in 2007 was derived predominantly from our advisory business, our merchant banking business was a major revenue source in the prior two years. We are pleased with the development of our initial investments in our second fund, and the current more difficult economic conditions should present additional attractive investment opportunities going forward," Simon A. Borrows, Co-Chief Executive Officer, added.
Revenues
Revenues By Source
The following provides a breakdown of total revenues by source for the
three month periods and years ended
For the Three Months Ended
December 31, 2007 December 31, 2006
Amount % of Total Amount % of Total
(in millions, unaudited)
Financial Advisory $87.0 90% $59.1 81%
Merchant Banking Fund
Management & Other 10.0 10% 13.6 19%
Total Revenues $97.0 100% $72.7 100%
For the Year Ended
December 31, 2007 December 31, 2006
Amount % of Total Amount % of Total
(in millions, unaudited)
Financial Advisory $366.7 92% $209.8 72%
Merchant Banking Fund
Management & Other 33.7 8% 80.8 28%
Total Revenues $400.4 100% $290.6 100%
Historical Revenue by Source
For the Year Ended December 31,
2007 2006 2005 2004 2003
Financial Advisory $366.7 $209.8 $142.1 $130.9 $121.3
Merchant Banking
Fund Management
& Other 33.7 80.8 79.1 21.0 5.4
Total Revenue $400.4 $290.6 $221.2 $151.9 $126.7
Financial Advisory Revenues
Full Year
Financial advisory revenues were
We earned advisory revenue from 74 different clients in 2007, compared to
72 in 2006. We earned
(1) Source: Thompson Financial as of January 22, 2008.
(2) Data for three of the four investment banks reflect November fiscal
year ends.
Historical Financial Advisory Revenue by Client Location
For the Year Ended December 31,
2007 2006 2005 2004 2003
United States 36% 47% 44% 54% 48%
Europe 58% 51% 55% 43% 44%
Canada, Latin
America & Other 6% 2% 1% 3% 8%
Historical Financial Advisory Revenue by Industry
For the Year Ended December 31,
2007 2006 2005 2004 2003
Communications
& Media 12% 15% 21% 29% 24%
Consumer Goods
& Retail 20% 4% 8% 25% 26%
Financial Services 26% 10% 12% 17% 15%
Technology 2% 4% 2% 1% 7%
Energy & Utilities 6% 7% 6% 10% 9%
Real Estate, Lodging
& Leisure 5% 4% 1% 4% 1%
General Industrial
& Other 29% 56% 50% 14% 18%
The increase in our financial advisory revenues in 2007 reflected generally high levels of M&A volume, increasing demand for independent advisors and our continuing business development efforts.
Fourth Quarter
Financial advisory revenues were
Completed assignments in the fourth quarter of 2007 included:
-- the sale of Ceridian Corporation to a consortium including Thomas H.
Lee Partners and Fidelity National Financial;
-- the acquisition by Fortis SA/NV, as part of a consortium, of ABN AMRO
Holding NV;
-- the acquisition by IHOP Corp. of Applebee's International, Inc.;
-- the sale of Oakland Mall LLC to a consortium including California State
Teachers' Retirement System and Urban Retail Properties;
-- the sale of Rentokil Initial plc's French Electronic Security business
to United Technologies Corp.;
-- the sale of Schenck Process Holding GmbH by HgCapital to Industri
Kapital Limited; and
-- the restructuring and merger of Visa USA with certain of its
international affiliates.
The increase in our financial advisory revenues in the fourth quarter of 2007 reflected generally high levels of M&A volume, increasing demand for independent advisors and our continuing business development efforts.
The Firm also announced during the fourth quarter of 2007 the recruitment of Douglas J. Black Q.C. (Senior Partner and Vice Chairman of Fraser Milner Casgrain LLP, a prominent Canadian law firm) as Senior Advisor for the Canadian region and John P. Frazee, Jr. (retired President/COO and Director of Sprint Corporation, retired Chairman and CEO of Centel Corporation) as Senior Advisor for the New York office.
In
Merchant Banking Fund Management & Other
The following table sets forth additional information relating to our merchant banking fund management and other income:
For the For the
Three Months Year
Ended December 31, Ended December 31,
2007 2006 2007 2006
(in millions, unaudited)
Management fees $4.6 $3.9 $17.3 $15.2
Net realized and unrealized
gains on investments in
merchant banking 3.4 5.0 7.0 27.1
Merchant banking overrides 0.2 3.1 1.8 34.6
Other unrealized
investment income 0.3 0.6 2.2 0.8
Interest income 1.5 1.0 5.4 3.1
Merchant banking &
other revenues $10.0 $13.6 $33.7 $80.8
Full Year
For the year ended
Fourth Quarter
The Firm earned
During the fourth quarter of 2007, GCP sold in the open market substantial portions of its remaining share holdings of Crown Castle International Corp. (NYSE: CCI) and Heartland Payment Systems (NYSE: HPY). Both sales were made at significant premiums to the original cost basis of the investments. In addition, GCP made an in-kind distribution of its remaining holdings of Energy Transfer Equity (NYSE: ETE).
In terms of new investment activity during the fourth quarter of 2007, GCP
invested an additional
In
Greenhill SAVP, our venture capital fund invested
"We entered the current more difficult market climate with modest leverage on our major investments, little exposure to the most negatively impacted industry sectors and with substantial funds available to be invested from all three of our current funds. We are hopeful that current market conditions will provide attractive opportunities for investing new capital, as was the case for us in the period of the last economic downturn from 2001 through 2003," Robert H. Niehaus, Chairman of Greenhill Capital Partners, commented.
Expenses
Operating Expenses
Our total operating expenses for the year ended
Fourth Quarter
Our total operating expenses for the fourth quarter of 2007 were
The following table sets forth information relating to our operating expenses, which are reported net of reimbursements:
For the For the
Three Months Year
Ended December 31, Ended December 31,
2007 2006 2007 2006
(in millions, unaudited)
Employee Compensation &
Benefits Expenses $43.9 $34.1 $183.5 $134.1
% of Revenues 45% 47% 46% 46%
Non-Compensation Expenses 9.8 10.5 39.7 37.4
% of Revenues 10% 14% 10% 13%
Total Operating Expenses 53.7 44.6 223.2 171.5
% of Revenues 55% 61% 56% 59%
Minority Interest in Net
Income of Affiliates 0.1 0.1 0.1 1.9
Total Income Before Tax 43.2 28.0 177.1 117.3
Pre-tax Income Margin 45% 38% 44% 40%
"We again kept our non-compensation expense growth significantly lower than our growth in revenues, demonstrating the scalability of our business model. In addition, we are pleased at our continuing ability to maintain a compensation ratio that is beneficial for our shareholders," said John D. Liu, Chief Financial Officer.
Compensation and Benefits Expenses
Full Year
For the year ended
Fourth Quarter
Our employee compensation and benefits expenses in the fourth quarter of
2007 were
Our compensation expense is generally based upon revenue and can fluctuate materially in any particular quarter depending upon the amount of revenue recognized as well as other factors. Accordingly, the amount of compensation expense recognized in any particular quarter may not be indicative of compensation expense in a future period.
Non-Compensation Expenses
Full Year
For the year ended
Non-compensation expenses as a percentage of revenues were 10% and 13% for
the years ended
Fourth Quarter
Our non-compensation expenses were
Non-compensation expenses as a percentage of revenues in the three months
ended
The Firm's non-compensation expenses as a percentage of revenue can vary as a result of a variety of factors including fluctuation in revenue amounts, the amount of recruiting and business development activity, the amount of reimbursement of engagement-related expenses by clients, the amount of short term borrowings, interest rate and currency movements and other factors. Accordingly, the non-compensation expenses as a percentage of revenue in any particular period may not be indicative of the non-compensation expenses as a percentage of revenue in future periods.
Provision for Income Taxes
Full Year
For the year ended
Fourth Quarter
The provision for taxes in the fourth quarter of 2007 was
The effective tax rate can fluctuate as a result of variations in the relative amounts of advisory and merchant banking income earned in the tax jurisdictions in which the Firm operates and invests. Accordingly, the effective tax rate in any particular quarter may not be indicative of the effective tax rate in future periods.
Liquidity and Capital Resources
As of
We had total commitments (not reflected on our balance sheet) relating to
future investments in GCP, GCPE, Greenhill SAVP and other merchant banking
activities of
The Firm did not repurchase any shares of its common stock in open market
during the fourth quarter of 2007. In January of 2008, our Board of Directors
increased our authorization to repurchase shares of our common stock so that
we now have authorization to repurchase up to
"Repurchasing shares has been another means for us to return cash to shareholders. We were opportunistic in aggressively repurchasing shares on market weakness in 2007, and we will continue to monitor market conditions to seek to reduce our share count at favorable prices," said John D. Liu, Chief Financial Officer.
Dividend
The Board of Directors of Greenhill & Co., Inc. has declared a dividend of
"We see dividends as both an indication to shareholders of our confidence in the ongoing earnings capacity of our business and as an important means of returning value to our shareholders given our strong balance sheet and the low capital requirements of our business," John D. Liu, Chief Financial Officer, commented.
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,
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 Report on Form 10-K under the caption "Risk Factors".
Contact: John D. Liu,
Chief Financial Officer
Greenhill & Co., Inc.
(212) 389-1800
Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
For the Three Months For the Year
Ended December 31, Ended December 31,
2007 2006 2007 2006
Revenues
Financial advisory
fees $86,957,417 $59,124,600 $366,662,286 $209,849,768
Merchant banking
revenue 8,494,571 12,605,028 28,304,543 77,640,023
Interest income 1,545,414 1,011,158 5,455,582 3,155,774
Total Revenues 96,997,402 72,740,786 400,422,411 290,645,565
Expenses
Employee
compensation
and benefits 43,893,245 34,085,511 183,456,281 134,133,733
Occupancy and
equipment rental 2,697,703 2,304,550 9,780,212 8,973,490
Depreciation and
amortization 1,130,743 958,948 4,228,714 3,008,579
Information services 1,202,300 1,079,051 5,149.724 4,349,274
Professional fees 1,343,448 766,044 4,326,002 3,410,404
Travel related
expenses 1,792,016 2,046,190 6,782,611 5,819,923
Other operating
expenses 722,160 3,043,253 6,474,027 11,165,830
Interest expense 942,607 364,006 3,023,763 627,286
Total Expenses 53,724,222 44,647,553 223,221,334 171,488,519
Income before Tax
and Minority
Interest 43,273,180 28,093,233 177,201,077 119,157,046
Minority interest
in net income of
affiliates 64,506 103,331 91,610 1,858,119
Income before
Tax 43,208,674 27,989,902 177,109,467 117,298,927
Provision for taxes 14,682,659 7,979,707 61,833,195 41,632,982
Net Income $28,526,015 $20,010,195 $115,276,272 $75,665,945
Average common shares
outstanding:
Basic 27,884,741 29,432,530 28,634,769 29,518,085
Diluted 27,995,716 29,600,815 28,728,293 29,627,747
Earnings per share
Basic $1.02 $0.68 $4.03 $2.56
Diluted $1.02 $0.68 $4.01 $2.55
SOURCE Greenhill & Co., Inc.
