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| SIEB > SEC Filings for SIEB > Form 10-Q on 15-May-2009 | All Recent SEC Filings |
15-May-2009
Quarterly Report
This discussion should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2008, and our unaudited Consolidated Financial Statements and the Notes thereto contained elsewhere in this Quarterly Report.
Business Environment
The stock markets posted new lows in the first quarter 2009 as a result of the financial crisis affecting the global economy. Competition in the brokerage industry remains intense.
Like other securities firms, we are directly affected by general economic and market conditions including fluctuations in volume and prices of securities, changes and prospects for changes in interest rates and demand for brokerage and investment banking services, all of which can affect our relative profitability. In periods of reduced financial market activity, profitability is likely to be adversely affected because certain expenses remain relatively fixed, including salaries and related costs, portions of communications costs and occupancy expenses. Accordingly, earnings or loss for any period should not be considered representative of any other period.
On January 22, 2008, our Board of Directors authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. The Company purchased 4,382 shares at an average price of $1.68 in the first quarter of 2009.
Critical Accounting Policies
We generally follow accounting policies standard in the brokerage industry and believe that our policies appropriately reflect our financial position and results of operations. Our management makes significant "estimates" that effect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities included in the financial statements. The estimates relate primarily to revenue and expense items in the normal course of business as to which we receive no confirmations, invoices, or other documentation at the time the books are closed for a period. We use our best judgment, based on our knowledge of these revenue transactions and expenses incurred, to estimate the amounts of such revenue and expense. We are not aware of any material differences between the estimates used in closing our books for the last five years and the actual amounts of revenue and expenses incurred when we subsequently receive the actual confirmations, invoices or other documentation. Estimates are also used in determining the useful lives of intangible assets, and the fair market value of intangible assets. Our management believes that its estimates are reasonable.
Results of Operations
We had a net loss of $332,000 and $128,000 for the three months ended March 31, 2009 and 2008, respectively.
Total revenues for the three months ended March 31, 2009 were $7.0 million, a decrease of $897,000 or 11.4% from the same period in 2008.
Commission and fee income for the three months ended March 31, 2009 was $4.6 million, a decrease of $1.6 million or 26.4% from the same period in 2008 due to a decrease in institutional trading, commission recapture and retail customer trading. Retail customer volumes decreased; however, the average commission charged per trade increased due to more retail customers executing trades via the phone, which has a higher commission charge per ticket.
Investment banking revenues for the three months ended March 31, 2009 were $1.9 million, an increase of $620,000 or 49.3% from the same period in 2008 due to our participation in more new issues in the debt markets.
Trading profits were $531,000 for the three months ended March 31, 2009, an increase of $492,000 or 1261.5% from the same period in 2008 primarily due to the addition of a debt sales-trader and an increase in trading volume.
Interest and dividends for the three months ended March 31, 2009 were $26,000, a decrease of $374,000 or 93.5% primarily due to lower yields on investments in U.S. Treasury Bills and lower cash balances.
Total expenses for the three months ended March 31, 2008 were $8.4 million, an increase of $354,000 or 4.4% from the same period in 2008.
Employee compensation and benefit costs for the three months ended March 31, 2009 was $3.0 million, a decrease of $237,000 or 7.2% for the same period in 2008. This decrease was due to a reduction in headcount from 2008 to 2009.
Clearing and floor brokerage costs for the three months ended March 31, 2009 were $1.5 million, a decrease of $104,000 or 6.6% from the same period in 2008 due to a decrease in volume of trade executions for retail customers and commission recapture operations offset by an increase in execution charges for institutional debt customers.
Professional fees were $2.0 million for the three months ended March 31, 2009, an increase of $763,000, or 64.3% for the same period in 2008 primarily due to an increase in legal fees relating to a dispute with a former employee.
Advertising and promotion expenses for the three months ended March 31, 2009 were $278,000, a decrease of $25,000 or 8.3% from the same period in 2008 primarily due to a decrease in print advertising, brochures and direct mailings to our retail customer base.
Communications expense for the three months ended March 31, 2009, was $638,000, a decrease of $6,000 or 1.0% from the same period in 2008 primarily due to a decrease in quotation costs associated with our retail customer base.
Occupancy costs for the three months ended March 31, 2009 were $323,000, a decrease of $3,000 or 1.0% from the same period in 2008 due to a decrease in rents in the Florida branches.
Other general and administrative expenses were $681,000, a decrease of $34,000 or 4.8% from the same period in 2008 primarily due to a decrease in office expense, registration fees, insurance, supplies, subscriptions, offset by increases in depreciation, travel and entertainment, postage and subscriptions.
Income from Siebert's equity investment in Siebert Brandford Shank & Co., LLC, an entity in which Siebert holds a 49% equity interest ("SBS"), for the three months ended March 31, 2009 was $912,000 compared to a loss of $47,000, from the same period in 2008. This increase was due to SBS participating in more and larger managed and co-managed transactions. SBS serves as an underwriter for municipal underwritings. Loss from our equity investment in SBS Financial Products Company, LLC, an entity in which we hold a 33% equity interest ("SBSFPC") for the three months ended March 31, 2009, was $68,000 as compared to a loss of $10,000 from the same period in 2008. This loss was due to the mark to market loss in positions. Income and loss from equity investees is considered to be integral to our operations and material to the results of operations.
For the three months ended March 31, 2009 and 2008 we recorded a benefit for taxes of $200,000 and $54,000 due to our loss before taxes of $532,000 and $182,000, respectively.
Our assets are highly liquid, consisting generally of cash, money market funds and commercial paper. Our total assets at March 31, 2009 were $45 million. As of that date, $29 million, or 65%, of our total assets were regarded by us as highly liquid.
Siebert is subject to the net capital requirements of the SEC, the NYSE and other regulatory authorities. At March 31, 2009, Siebert's regulatory net capital was $23.1 million, $22.8 million in excess of its minimum capital requirement of $250,000.
On January 22, 2008, the Board of Directors of the Company authorized a buy back of up to 300,000 shares of common stock. Shares will be purchased from time to time, in our discretion, in the open market and in private transactions. The Company purchased 4,382 shares at an average price of $1.68 in the first quarter of 2009.
Siebert has entered into a Secured Demand Note Collateral Agreement with SBS under which Siebert is obligated to lend to SBS up to $1.2 million pursuant to a secured promissory note on a subordinated basis. Amounts pledged by Siebert under the facility are reflected on our balance sheet as "cash equivalents - restricted". SBS pays Siebert interest on this amount at the rate of 4% per annum. The facility expires on August 31, 2010, at which time SBS is obligated to repay to Siebert any amounts borrowed by SBS thereunder.
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