BOSTON, Oct. 31, 2012 /PRNewswire/ -- LPL
Financial Holdings Inc. (NASDAQ: LPLA) (the "Company"), parent
company of LPL Financial LLC ("LPL Financial"), today announced
third quarter net income of $34.3
million, or $0.31 per diluted
share, down $2.1 million compared to
third quarter 2011 net income of $36.4
million, or $0.32 per diluted
share. Adjusted Earnings, a non-GAAP measure, which excludes
certain non-cash charges and other adjustments, were $53.0 million, or $0.47 per diluted share, up $1.4 million or 2.8% compared to $51.6 million, or $0.46 per diluted share, in the third quarter of
2011. Net revenues for the third quarter of 2012 increased 2.8% to
$907.2 million, from $882.9 million in the prior year period. A
reconciliation of GAAP measures to our non-GAAP measures, along
with an explanation of these metrics, is provided below.
For the first nine months of 2012, net income of $115.0 million was down 12.2% compared to
$130.9 million for the same period in
2011. Adjusted Earnings for the nine months ended
September 30, 2012 were $171.2
million, an increase of 0.8% compared to $169.7 million for the nine months ended
September 30, 2011. Net revenues for the first nine months of
2012 were $2.7 billion, an increase
of 2.5% over the comparable period of 2011.
"With the backdrop of an uncertain economic environment,
individual investors continued to take a cautious approach to
engaging with the markets, which led to the subdued levels of
advisor productivity we experienced this quarter," said
Mark Casady, LPL Financial chairman
and CEO. "The cornerstone of our success has always been our
conflict-free service to our advisors, which enables them to build
trusted relationships with their clients and to grow assets on our
platform. This foundation remains firmly intact. Our platform
continues to attract a diverse set of advisors, including larger
practices, RIAs, and retirement producers, in addition to core and
financial institution based advisors. For the first nine months of
2012, we added 323 net new advisors. In addition, we continued to
see strong asset flows, as reflected by the $2.9 billion in net new advisory assets for the
quarter, representing 10% annualized growth. The performance of
these fundamentals contributed to recurring revenues growing to 67%
of net revenues this quarter."
Total advisory and brokerage assets were $371.4 billion at the end of the quarter, which
increased 17.4% from $316.4 billion
as of September 30, 2011 and increased 5.2% from $353.0 billion as of June
30, 2012. Supported by net new advisory assets of
$2.9 billion during the third
quarter, advisory assets under custody were $118.6 billion at quarter-end.
Dan Arnold, chief financial
officer, commented, "We are focused on optimizing the cost to serve
our advisors by managing both our payout rate and our expenses. LPL
Financial has been attracting an increasing number of large
practices, and these offices continue to add production at a
greater rate than more traditional practices. Our ability to
support these larger practices speaks to the flexibility and
attractiveness of our platform, but at the same time we recognize
the need to manage our cost to serve these businesses. We are
collaborating with these large advisor branches to establish a
mutually beneficial structure to promote our combined success on a
sustainable basis. With regards to our expenses, we remain
committed to managing our cost structure in light of the
challenging market conditions. Our expenses remained in line with
the second quarter, as increased levels of conference expense were
partially offset by tighter controls on discretionary expenses,
reduced professional fees and management of our compensation
expense."
Mr. Arnold continued, "We maintain our flexibility in managing
our capital resources as a result of our strong free cash flow
performance. Based upon our liquidity and our belief that our share
price does not reflect the long term earnings power of the Company,
we expanded our share repurchases beyond mitigating the expected
dilution resulting from future stock option exercises. In the third
quarter, we spent $54.6 million
buying back 1.9 million shares at a weighted average price of
$28.67 per share, which reduced our
diluted weighted average share count to 111.9 million. The Board
likewise approved additional future repurchases of up to
$150 million, providing us with
ongoing flexibility to manage capital efficiently. Lastly, the
Board approved a $0.12 per share
quarterly dividend, to be paid on November
30, 2012 to all stockholders of record on November 15, 2012. These actions reflect the
success of the Company and our positive outlook on future capital
resources."
Mr. Casady concluded, "We now have the tools and services
necessary to serve over 90 percent of the assets in the retail
market, broadening and deepening our growth opportunities along
several fronts. We have driven positive developments across
the investments we have made over the last few years. Our
acquisitions and investments in the retirement, high-net worth,
trust services and mass market spaces have expanded our ability to
serve advisors in a variety of settings and target markets. We are
seeing the benefit of our investments through the development of
new business opportunities. Fortigent and Concord have teamed together to attract new
business to LPL and are winning incremental assets from trust
departments within several of our existing Institution Services
clients. Our retirement solution is working with new and larger
retirement plan business. With our wider strategic footprint in
place, our focus is now firmly on enhancing the fundamentals of the
Company to drive future financial success."
Financial Highlights
- Total advisory and brokerage assets ended at $371.4 billion as of September 30, 2012, up
17.4% compared to $316.4 billion as
of September 30, 2011. Key drivers of this trend include:
- Advisory assets in the Company's fee-based platforms were
$118.6 billion at September 30,
2012, up 23.2% from $96.3 billion at
September 30, 2011.
- Net new advisory assets, which exclude market movement, were
$2.9 billion for the three months
ended September 30, 2012. On an annualized basis, this
represents 9.8% growth.
- Net revenue for the third quarter of 2012 increased 2.8% to
$907.2 million from $882.9 million in the third quarter of 2011. Key
drivers of this trend include:
- Commission revenue increased 0.9% for the third quarter of 2012
compared to the prior year period.
- Advisory revenue decreased 0.2% for the third quarter of 2012
compared to the prior year period. The continued shift of advisors
to the Independent RIA platform and a re-pricing in one of the
Company's significant custom clearing agreements have caused the
rate of revenue growth to diverge from the rate of advisory asset
growth.
- Asset-based revenue increased 11.5% for the third quarter of
2012 compared to the prior year period, in part due to the
Company's successful integration of UVEST onto the LPL platform and
market appreciation.
- Recurring revenue, a statistical measure reflecting a level of
stability in the Company's performance, represented 66.5% of net
revenue for the quarter, compared to 63.1% for the prior year
period.
- Revenues generated from the Company's cash sweep programs
increased 8.9% to $34.4 million
compared to $31.6 million in the
prior year period. The assets in the Company's cash sweep programs
averaged $22.1 billion for the third
quarter of 2012 and $22.2 billion in
the year-ago quarter. Revenues benefited from an increase in the
effective federal funds rate, which averaged 0.14% for the third
quarter of 2012 compared to 0.08% for the same period in the prior
year. These benefits were partially offset by new assets earning a
lower weighted average fee than the existing base, resulting from a
contract renegotiation in the first quarter as previously
communicated.
- The Board declared a quarterly cash dividend of $0.12 per share on the Company's outstanding
common stock, to be paid on November 30,
2012 to all stockholders of record on November 15, 2012. The declarations of
future quarterly dividends, as well as the timing of record and
payment dates, remain subject to approval by the Board.
- During the third quarter of 2012, the Company repurchased 1.9
million shares of its common stock for a total of $54.6 million, or a weighted average price of
$28.67 per share. The Company
continued repurchasing shares in October and spent approximately
$20.2 million buying back 0.7 million
shares through October 26 at a
weighted average price of $28.59 per
share. The Board has approved an additional share repurchase
program in which the Company may purchase up to $150.0 million of its outstanding common stock
from time to time in open market or privately negotiated
transactions. As a result, the Company was authorized to repurchase
up to $155.3 million in additional
shares as of October 26, 2012.
Operational Highlights
- The Company added 495 net new advisors during the twelve months
ended September 30, 2012, excluding the attrition of 124
advisors from the UVEST conversion. During the third quarter of
2012, the number of advisors declined by 15, which was driven by
the loss of a bank program with 181 advisors. The bank's parent
company consolidated the bank's external operations onto the
broker-dealer platform of an affiliate within its organization.
- Assets under custody on the LPL Financial Independent RIA
platform, which provides integrated advisory fee- and
commission-based capabilities for independent advisors, grew 75.2%
to $35.4 billion as of
September 30, 2012 encompassing 180 RIA firms, compared to
$20.2 billion and 142 RIA firms as of
September 30, 2011. Of the $35.4
billion in assets under custody, $18.6 billion were in advisory fee accounts
custodied by LPL, and $16.8 billion
were in LPL brokerage accounts.
- In August, LPL Financial hosted more than 2,500 financial
advisors in San Diego for its
annual advisor conference, focus12: Building a Winning Business.
For three days, advisors attended keynote presentations and
participated in educational meetings, workshops, technology
demonstrations and coaching sessions. The advisors also networked
with each other, approximately 500 LPL Financial employees, and
over 1,100 product providers and other partners representing a
diverse array of investment, insurance, and technology
solutions.
- In September, the Company expanded its Model Wealth Portfolios
platform through the addition of two new portfolios from LPL
Financial Research as well as two managed alternative investment
portfolios from Fortigent Holdings Company, Inc. ("Fortigent").
This expansion provides access to the two new models designed by
LPL Financial Research using its proprietary quad-core approach to
create bond-like exposure without holding bonds as well as
Fortigent's alternative strategy models designed to capture
performance with lower volatility in client portfolios. These
strategies enable advisors to help meet their clients' needs in
today's rapidly-evolving financial environment.
- In the third quarter, LPL Financial received broad industry
recognition for its advisors, technology and services.
- Cogent Research, a leading independent research firm, released
a study which showed that 22% of all advisors, and 29% of advisors
working for a national wirehouse, said that they are considering a
move to a new firm in the next two years. In that study, LPL
received the highest ranking among all broker-dealers as the
leading destination, with 43% of advisors indicating they would
consider LPL.
- Five of LPL Financial's leading advisors were recognized in the
"2012 Top 100 Independent Wealth Advisors" ranking by
Barron's. Rankings were based in part on assets under
management, as well as revenue generated by each advisor and the
overall quality of the practice.
- LPL Financial ranked 26th in the Barron's
2012 survey of the "Top 40 Wealth Managers" in the United States. The annual ranking, which
was published in the September 17
issue of Barron's, is based on the over $18 billion in assets under management in LPL
Financial accounts of advisors' clients of $5 million or more as of June 30, 2012.
Conference Call and Additional Information
The Company will hold a conference call to discuss results at
8:00 a.m. EDT on Wednesday, October 31, 2012. The conference
call can be accessed by dialing 877-303-3145 (domestic) or
408-427-3861 (international) and entering passcode 36208482. For
additional information, please visit the Company's website to
access the Q3 2012 Financial Supplement.
The conference call will also be webcast simultaneously on the
Investor Relations section of the Company's website (www.lpl.com),
where a replay of the call will also be available following the
live webcast. A telephonic replay will be available two hours after
the call and can be accessed by dialing 855-859-2056 (domestic) or
408-537-3406 (international) and entering passcode 36208482. The
telephonic replay will be available until 11:59 p.m. on November 7,
2012.
|
Financial Highlights and Key
Metrics
(Dollars in thousands, except per share data and
where noted)
|
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
2012
|
|
2011
|
|
%
Change
|
|
2012
|
|
2011
|
|
%
Change
|
|
Financial Highlights (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
$
|
907,228
|
|
|
$
|
882,857
|
|
|
2.8
|
%
|
|
$
|
2,716,844
|
|
|
$
|
2,650,722
|
|
|
2.5
|
%
|
|
Net Income
|
$
|
34,299
|
|
|
$
|
36,428
|
|
|
(5.8)
|
%
|
|
$
|
114,980
|
|
|
$
|
130,934
|
|
|
(12.2)
|
%
|
|
Earnings Per Share — diluted
|
$
|
0.31
|
|
|
$
|
0.32
|
|
|
(3.1)
|
%
|
|
$
|
1.02
|
|
|
$
|
1.15
|
|
|
(11.3)
|
%
|
|
Non-GAAP
Measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings(1)
|
$
|
52,999
|
|
|
$
|
51,567
|
|
|
2.8
|
%
|
|
$
|
171,172
|
|
|
$
|
169,747
|
|
|
0.8
|
%
|
|
Adjusted Earnings Per Share(1)
|
$
|
0.47
|
|
|
$
|
0.46
|
|
|
2.2
|
%
|
|
$
|
1.52
|
|
|
$
|
1.51
|
|
|
0.7
|
%
|
|
Adjusted EBITDA(1)
|
$
|
108,000
|
|
|
$
|
111,596
|
|
|
(3.2)
|
%
|
|
$
|
344,534
|
|
|
$
|
358,924
|
|
|
(4.0)
|
%
|
|
As of
September 30,
|
|
2012
|
|
2011
|
|
%
Change
|
|
Metric
Highlights (unaudited)
|
|
|
|
|
|
|
Advisors(2)
|
13,170
|
|
|
12,799
|
|
|
2.9
|
%
|
|
Advisory and Brokerage Assets
(billions)(3)
|
$
|
371.4
|
|
|
$
|
316.4
|
|
|
17.4
|
%
|
|
Advisory Assets Under Custody
(billions)(4)(5)
|
$
|
118.6
|
|
|
$
|
96.3
|
|
|
23.2
|
%
|
|
Net New Advisory Assets (billions)(6)
|
$
|
8.2
|
|
|
$
|
9.8
|
|
|
(16.3)
|
%
|
|
Insured Cash Account Balances
(billions)(5)
|
$
|
14.2
|
|
|
$
|
14.2
|
|
|
—
|
%
|
|
Money Market Account Balances
(billions)(5)
|
$
|
7.4
|
|
|
$
|
8.9
|
|
|
(16.9)
|
%
|
|
|
|
(1)
|
Adjusted
EBITDA, Adjusted Earnings, and Adjusted Earnings per share have
limitations as analytical tools and
|
|
should not
be considered in isolation or as substitutes for analysis of the
Company's results as reported under
|
|
GAAP. Some
of these limitations are:
|
- Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings per
share do not reflect all cash expenditures, future requirements for
capital expenditures, or contractual commitments;
- Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings per
share do not reflect changes in, or cash requirements for, working
capital needs; and
- Adjusted EBITDA does not reflect the significant interest
expense, or the cash requirements necessary to service interest or
principal payments, on debt.
The reconciliation from net income to non-GAAP measures Adjusted
EBITDA and Adjusted Earnings for the periods presented is as
follows (in thousands):
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
(unaudited)
|
|
Net
income
|
$
|
34,299
|
|
|
$
|
36,428
|
|
|
$
|
114,980
|
|
|
$
|
130,934
|
|
|
Interest
expense
|
12,826
|
|
|
16,603
|
|
|
42,297
|
|
|
52,929
|
|
|
Income tax
expense
|
19,939
|
|
|
25,634
|
|
|
73,429
|
|
|
88,165
|
|
|
Amortization of purchased intangible assets and
software(a)
|
9,971
|
|
|
9,909
|
|
|
29,751
|
|
|
29,132
|
|
|
Depreciation and amortization of all other fixed
assets
|
8,452
|
|
|
9,313
|
|
|
23,259
|
|
|
26,662
|
|
|
EBITDA
|
85,487
|
|
|
97,887
|
|
|
283,716
|
|
|
327,822
|
|
|
EBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
Employee share-based compensation
expense(b)
|
4,439
|
|
|
3,833
|
|
|
13,775
|
|
|
11,120
|
|
|
Acquisition and integration related
expenses(c)
|
10,528
|
|
|
1,241
|
|
|
17,442
|
|
|
4,205
|
|
|
Restructuring and conversion costs(d)
|
1,217
|
|
|
8,086
|
|
|
5,391
|
|
|
13,520
|
|
|
Debt extinguishment costs(e)
|
—
|
|
|
—
|
|
|
16,652
|
|
|
—
|
|
|
Equity issuance and related offering
costs(f)
|
4,040
|
|
|
421
|
|
|
4,486
|
|
|
2,062
|
|
|
Other(g)
|
2,289
|
|
|
128
|
|
|
3,072
|
|
|
195
|
|
|
Total
EBITDA Adjustments
|
22,513
|
|
|
13,709
|
|
|
60,818
|
|
|
31,102
|
|
|
Adjusted
EBITDA
|
$
|
108,000
|
|
|
$
|
111,596
|
|
|
$
|
344,534
|
|
|
$
|
358,924
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
(unaudited)
|
|
Net
income
|
$
|
34,299
|
|
|
$
|
36,428
|
|
|
$
|
114,980
|
|
|
$
|
130,934
|
|
|
After-Tax:
|
|
|
|
|
|
|
|
|
EBITDA Adjustments(h)
|
|
|
|
|
|
|
|
|
Employee share-based compensation
expense(i)
|
3,357
|
|
|
2,933
|
|
|
10,330
|
|
|
8,511
|
|
|
Acquisition and integration related
expenses(j)
|
4,307
|
|
|
765
|
|
|
9,014
|
|
|
2,594
|
|
|
Restructuring and conversion costs
|
751
|
|
|
4,989
|
|
|
3,326
|
|
|
8,342
|
|
|
Debt extinguishment costs
|
—
|
|
|
—
|
|
|
10,274
|
|
|
—
|
|
|
Equity issuance and related offering
costs(k)
|
3,986
|
|
|
260
|
|
|
4,262
|
|
|
1,272
|
|
|
Other
|
1,412
|
|
|
79
|
|
|
1,895
|
|
|
120
|
|
|
Total EBITDA Adjustments
|
13,813
|
|
|
9,026
|
|
|
39,101
|
|
|
20,839
|
|
|
Amortization of purchased intangible assets and
software(h)
|
6,152
|
|
|
6,113
|
|
|
18,356
|
|
|
17,974
|
|
|
Acquisition related benefit for a net operating loss
carry-
forward(l)
|
(1,265)
|
|
|
—
|
|
|
(1,265)
|
|
|
—
|
|
|
Adjusted
Earnings
|
$
|
52,999
|
|
|
$
|
51,567
|
|
|
$
|
171,172
|
|
|
$
|
169,747
|
|
|
Adjusted
Earnings per share(m)
|
$
|
0.47
|
|
|
$
|
0.46
|
|
|
$
|
1.52
|
|
|
$
|
1.51
|
|
|
Weighted
average shares outstanding — diluted(n)
|
111,877
|
|
|
111,173
|
|
|
112,436
|
|
|
112,483
|
|
___________________
|
(a)
|
Represents
amortization of intangible assets and software as a result of the
Company's purchase
|
|
|
accounting
adjustments from its 2005 merger transaction, as well as various
acquisitions.
|
|
|
|
(b)
|
Represents
share-based compensation based on the grant date fair value under
the Black-Scholes
|
|
|
valuation
model for: i) stock options awarded to employees and officers; ii)
restricted stock awarded to
|
|
|
non-employee directors; and iii) beginning in the
third quarter of 2012, shares awarded to employees
|
|
|
under the
2012 Employee Stock Purchase Plan ("ESPP").
|
|
|
|
(c)
|
Represents
acquisition and integration costs resulting from various
acquisitions, including changes in the
|
|
|
estimated
fair value of future payments, or contingent consideration,
required to be made to former
|
|
|
shareholders of certain acquired entities. During the
three and nine months ended September 30, 2012,
|
|
|
approximately $9.2 million and $9.9 million,
respectively, was recognized as a charge against
earnings
|
|
|
due to a
net increase in the estimated fair value of contingent
consideration.
|
|
|
|
(d)
|
Represents
organizational restructuring charges and conversion and other
related costs incurred resulting
|
|
|
from the
2011 consolidation of UVEST Financial Services Group, Inc.
("UVEST") and the 2009
|
|
|
consolidation of Associated Securities Corp., Inc.,
Mutual Service Corporation and Waterstone Financial
|
|
|
Group,
Inc. (together, the "Affiliated Entities"). As of September 30,
2012, approximately 86% and 98%,
|
|
|
respectively, of costs related to these two
initiatives had been recognized. The remaining costs
largely
|
|
|
consist of
the amortization of transition payments that have been made in
connection with these two
|
|
|
conversions for the retention of advisors and
financial institutions that are expected to be recognized
into
|
|
|
earnings
by December 2014.
|
|
|
|
(e)
|
Represents
expenses incurred resulting from the early extinguishment and
repayment of amounts under
|
|
|
the prior
senior secured credit facilities, including the write-off of $16.5
million of unamortized debt
|
|
|
issuance
costs that have no future economic benefit, as well as various
other charges incurred in
|
|
|
connection
with the repayment of the prior senior secured credit facilities
and the establishment of the new
|
|
|
senior
secured credit facilities.
|
|
|
|
(f)
|
Represents
equity issuance and offering costs incurred in the three and nine
months ended
|
|
|
September
30, 2012 and 2011, related to the closing of a secondary offering
in the second quarter of
|
|
|
2012, and
the closing of a secondary offering in the second quarter of 2011.
In addition, results for the
|
|
|
three and
nine months ended September 30, 2012 include a $3.9 million charge
relating to the late deposit
|
|
|
of
withholding taxes related to the exercise of certain non-qualified
stock options in connection with the
|
|
|
Company's
2010 initial public offering.
|
|
|
|
(g)
|
Represents
certain excise and other taxes. In addition, results for the three
and nine months ended
|
|
|
September
30, 2012 include approximately $2.3 million for consulting services
aimed at enhancing the
|
|
|
Company's
performance in support of its advisors while operating at a lower
cost.
|
|
|
|
(h)
|
EBITDA
adjustments and amortization of purchased intangible assets and
software have been tax effected
|
|
|
using a
federal rate of 35% and the applicable effective state rate, which
was 3.30% for the three and nine
|
|
|
months
ended September 30, 2012 and 2011, net of the federal tax
benefit.
|
|
|
|
(i)
|
Represents
the after-tax expense of non-qualified stock options for which the
Company receives a tax
|
|
|
deduction
upon exercise, restricted stock awards for which the Company
receives a tax deduction upon
|
|
|
vesting,
shares awarded to employees under the ESPP for which the Company
receives a tax deduction,
|
|
|
and the
full expense impact of incentive stock options granted to employees
that have vested and qualify
|
|
|
for
preferential tax treatment and conversely, for which the Company
does not receive a tax deduction.
|
|
|
Share-based compensation for vesting of incentive
stock options was $1.6 million and $1.5 million,
|
|
|
respectively, for the three months ending September
30, 2012 and 2011. For the nine month periods
|
|
|
ending
September 30, 2012 and 2011, share-based compensation for vesting
of incentive stock options
|
|
|
was $4.8
million and $4.3 million, respectively.
|
|
|
|
(j)
|
Represents
the after-tax expense of acquisition and related costs for which
the Company receives a tax
|
|
|
deduction.
The three and nine months ended September 30, 2012 included a $5.7
million reduction of
|
|
|
expense
relating to the fair value of contingent consideration for the
stock acquisition of Concord Wealth
|
|
|
Management
("Concord"), that is not deductible for tax purposes and that the
Company does not consider
|
|
|
to be
indicative of its core performance.
|
|
|
|
(k)
|
Represents
the after-tax expense of equity issuance and offering costs related
to the closing of a
|
|
|
secondary
offering that occurred in the second quarter of 2012, and the
closing of a secondary offering
|
|
|
that
occurred in the second quarter of 2011. Results for the three and
nine months ended September 30,
|
|
|
2012
include the full expense impact of a $3.9 million charge relating
to the late deposit of withholding
|
|
|
taxes
related to the exercise of certain non-qualified stock options in
connection with the Company's 2010
|
|
|
initial
public offering, that is not deductible for tax
purposes.
|
|
|
|
(l)
|
Represents
the expected tax benefit available to the Company from the
accumulated net operating losses
|
|
|
of Concord
that arose prior to its acquisition by the Company; such benefits
were recorded in the third
|
|
|
quarter of
2012.
|
|
|
|
(m)
|
Represents
Adjusted Earnings, a non-GAAP measure, divided by weighted average
number of shares
|
|
|
outstanding on a fully diluted basis. Set forth is a
reconciliation of earnings per share on a fully diluted
|
|
|
basis, as
calculated in accordance with GAAP to Adjusted Earnings per share,
a non-GAAP measure:
|
|
Three
Months Ended
September 30,
|
|
Nine
Months Ended
September 30,
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
(unaudited)
|
|
Earnings
per share — diluted
|
$
|
0.31
|
|
|
$
|
0.32
|
|
|
$
|
1.02
|
|
|
$
|
1.15
|
|
|
Adjustment
for allocation of undistributed earnings to stock
units
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
After-Tax:
|
|
|
|
|
|
|
|
|
EBITDA Adjustments per share
|
0.12
|
|
|
0.09
|
|
|
0.35
|
|
|
0.19
|
|
|
Amortization of purchased intangible assets and
software
|
0.05
|
|
|
0.05
|
|
|
0.16
|
|
|
0.16
|
|
|
Acquisition related benefit for a net operating loss
carry-
forward
|
(0.01)
|
|
|
—
|
|
|
(0.01)
|
|
|
—
|
|
|
Adjusted
Earnings per share
|
$
|
0.47
|
|
|
$
|
0.46
|
|
|
$
|
1.52
|
|
|
$
|
1.51
|
|
|
(n)
|
Included
within the weighted average share count for the three and nine
months ended September 30,
|
|
|
2012, is
approximately 850,000 shares resulting from the distribution
pursuant to the 2008 Nonqualified
|
|
|
Deferred
Compensation Plan that were not included in the weighted average
share count for the three and
|
|
|
nine
months ended September 30, 2011.
|
|
|
|
|
(2)
|
Advisors
are defined as those independent financial advisors and financial
advisors at financial institutions who
|
|
are
licensed to do business with the Company's broker-dealer
subsidiaries. The Company consolidated the
|
|
operations
of UVEST with LPL Financial which resulted, as expected, in the
attrition of 124 advisors during the
|
|
trailing
twelve months ended September 30, 2012. Excluding attrition from
the integration of the UVEST
|
|
platform,
the Company added 495 net new advisors during the twelve months
ended September 30, 2012.
|
|
|
|
|
(3)
|
Advisory
and brokerage assets are comprised of assets that are custodied,
networked, and non-networked and
|
|
reflect
market movement in addition to new assets, inclusive of new
business development and net of
|
|
attrition.
Such totals do not include the market value of other client assets
as of September 30, 2012,
|
|
comprised
of $41.6 billion held in retirement plans supported by advisors
licensed with LPL Financial, $11.1
|
|
billion of
trust assets supported by Concord and $58.7 billion of assets
supported by Fortigent Holdings
|
|
Company,
Inc. Data regarding certain of these assets was not available at
September 30, 2011, and therefore
|
|
is not
meaningful for comparison. In addition, retirement plan assets
represent assets that are custodied with
|
|
26
third-party providers of retirement plan administrative services
who provide reporting feeds. The Company
|
|
estimates
the total assets in retirement plans served to be between $65.0
billion and $80.0 billion. If the
|
|
Company
receives reporting feeds in the future from providers from whom it
does not currently receive feeds,
|
|
the
Company intends to include and identify such additional assets in
this metric.
|
|
|
|
|
(4)
|
In
reporting financial and operating results for the three and nine
months ended September 30, 2012 and 2011,
|
|
the
Company renamed this business metric advisory assets under custody
(formerly known as advisory assets
|
|
under
management). Advisory assets under custody are comprised of
advisory assets under management in
|
|
the
Company's corporate RIA platform, and Independent RIA assets in
advisory accounts custodied by the
|
|
Company.
|
|
|
|
|
(5)
|
Advisory
assets under custody, insured cash account balances and money
market account balances are
|
|
components
of advisory and brokerage assets.
|
|
|
|
|
(6)
|
Represents
net new advisory assets consisting of funds from new accounts and
additional funds deposited into
|
|
existing
advisory accounts that were custodied in the Company's fee-based
advisory platforms during the nine
|
|
months
ended September 30, 2012 and 2011. Net new advisory assets for the
three months ended
|
|
September
30, 2012 and 2011 were $2.9 billion and $3.0 billion,
respectively.
|
Non-GAAP Financial Measures
Adjusted Earnings represent net income before: (a) employee
share-based compensation expense, (b) amortization of intangible
assets and software, a component of depreciation and amortization,
resulting from previous acquisitions, (c) debt extinguishment costs
(d) restructuring and conversion costs and (e) equity issuance and
related offering costs. Reconciling items are tax effected using
the income tax rates in effect for the applicable period, adjusted
for any potentially non-deductible amounts. Adjusted Earnings per
share represents Adjusted Earnings divided by weighted average
outstanding shares on a fully diluted basis. The Company prepared
Adjusted Earnings and Adjusted Earnings per share to eliminate the
effects of items that it does not consider indicative of its core
operating performance. The Company believes this measure provides
investors with greater transparency by helping illustrate the
underlying financial and business trends relating to results of
operations and financial condition and comparability between
current and prior periods. Adjusted Earnings and Adjusted Earnings
per share are not measures of the Company's financial performance
under GAAP and should not be considered as an alternative to net
income or earnings per share or any other performance measure
derived in accordance with GAAP, or as an alternative to cash flows
from operating activities as a measure of profitability or
liquidity.
Adjusted EBITDA is defined as EBITDA (net income plus interest
expense, income tax expense, depreciation and amortization),
further adjusted to exclude certain non-cash charges and other
adjustments set forth in the table above. The Company presents
Adjusted EBITDA because the Company considers it a useful financial
metric in assessing the Company's operating performance from period
to period by excluding certain items that the Company believes are
not representative of its core business, such as certain material
non-cash items and other adjustments that are outside the control
of management. Adjusted EBITDA is not a measure of the Company's
financial performance under GAAP and should not be considered as an
alternative to net income or any other performance measure derived
in accordance with GAAP, or as an alternative to cash flows from
operating activities as a measure of profitability or liquidity. In
addition, Adjusted EBITDA can differ significantly from company to
company depending on long-term strategic decisions regarding
capital structure, the tax jurisdictions in which companies operate
and capital investments.
Forward-Looking Statements
Statements in this press release regarding the Company's future
financial and operating results, growth, business strategy,
projected costs, plans, liquidity, and ability and plans to
repurchase shares and pay dividends in the future, as well as any
other statements that are not purely historical, constitute
forward-looking statements. These forward-looking statements
are based on the Company's historical performance and its plans,
estimates and expectations as of October
30, 2012. The words "anticipates," "believes,"
"expects," "may," "plans," "predicts," "will" and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Forward-looking statements are not guarantees
that the future results, plans, intentions or expectations
expressed or implied by the Company will be achieved. Matters
subject to forward-looking statements involve known and unknown
risks and uncertainties, including economic, legislative,
regulatory, competitive and other factors, which may cause actual
financial or operating results, levels of activity, or the timing
of events, to be materially different than those expressed or
implied by forward-looking statements. Important factors that
could cause or contribute to such differences include: changes in
general economic and financial market conditions, including retail
investor sentiment; fluctuations in the value of assets under
custody; effects of competition in the financial services industry;
changes in the number of the Company's financial advisors and
institutions, and their ability to market effectively financial
products and services; changes in interest rates payable by banks
participating in the Company's cash sweep program, including the
Company's success in negotiating agreements with current or
additional counterparties; the Company's success in integrating the
operations of acquired businesses; the effect of current, pending
and future legislation, regulation and regulatory actions,
including disciplinary actions imposed by self-regulatory
organizations; and the other factors set forth in Part I, "Item 1A.
Risk Factors" in the Company's 2011 Annual Report on Form
10-K. For example, the Company may be unable to successfully
integrate the systems and operations related to our acquisitions of
Concord, Fortigent and Veritat
Advisors, Inc. and realize the expected synergies from these
transactions. Except as required by law, the Company specifically
disclaims any obligation to update any forward-looking statements
as a result of developments occurring after the date of this
quarterly report, even if its estimates change, and you should not
rely on those statements as representing the Company's views as of
any date subsequent to the date of this press release.
About LPL Financial
LPL Financial, a wholly owned subsidiary of LPL Financial
Holdings Inc. (NASDAQ: LPLA), is the nation's largest independent
broker-dealer (based on total revenues, Financial Planning
magazine, June 1996-2012), a top RIA custodian, and a leading
independent consultant to retirement plans. LPL Financial offers
integrated technology, comprehensive clearing and compliance
services, practice management programs and training, and
independent research to over 13,100 financial advisors and
approximately 685 financial institutions. In addition, LPL
Financial supports over 4,500 financial advisors licensed with
insurance companies by providing customized clearing, advisory
platforms and technology solutions. LPL Financial and its
affiliates have approximately 2,900 employees with primary offices
in Boston, Charlotte, and San
Diego. For more information, please visit www.lpl.com.
Securities offered through LPL Financial. Member
FINRA/SIPC
LPLA-F
|
Investor Relations
|
Media
Relations
|
|
Trap
Kloman
|
Betsy
Weinberger
|
|
LPL
Financial
|
LPL
Financial
|
|
Phone:
(617)
897-4574
|
Phone:
(858) 900-7122
|
|
Email:
investor.relations@lpl.com
|
Email:
betsy.weinberger@lpl.com
|
|
|
|
Michael
Herley
|
|
Kekst
& Company
|
|
Phone:
(212) 521-4897
|
|
Email:
michael-herley@kekst.com
|
|
LPL
Financial Holdings Inc.
Condensed Consolidated Statements of
Operations
(Dollars in thousands, except per share
data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
September 30,
|
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2012
|
|
2011
|
|
%
Change
|
|
2012
|
|
2011
|
|
%
Change
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
442,129
|
|
|
$
|
438,294
|
|
|
0.9
|
%
|
|
$
|
1,353,025
|
|
|
$
|
1,350,053
|
|
|
0.2
|
%
|
|
Advisory fees
|
267,334
|
|
|
267,878
|
|
|
(0.2)
|
%
|
|
786,507
|
|
|
776,254
|
|
|
1.3
|
%
|
|
Asset-based fees
|
100,024
|
|
|
89,691
|
|
|
11.5
|
%
|
|
300,049
|
|
|
270,018
|
|
|
11.1
|
%
|
|
Transaction and other fees
|
84,730
|
|
|
78,476
|
|
|
8.0
|
%
|
|
238,196
|
|
|
220,980
|
|
|
7.8
|
%
|
|
Other
|
13,011
|
|
|
8,518
|
|
|
52.7
|
%
|
|
39,067
|
|
|
33,417
|
|
|
16.9
|
%
|
|
Net revenues
|
907,228
|
|
|
882,857
|
|
|
2.8
|
%
|
|
2,716,844
|
|
|
2,650,722
|
|
|
2.5
|
%
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
630,103
|
|
|
623,886
|
|
|
1.0
|
%
|
|
1,887,146
|
|
|
1,862,301
|
|
|
1.3
|
%
|
|
Compensation and benefits
|
91,309
|
|
|
77,337
|
|
|
18.1
|
%
|
|
273,355
|
|
|
242,889
|
|
|
12.5
|
%
|
|
General and administrative
|
99,118
|
|
|
76,063
|
|
|
30.3
|
%
|
|
251,141
|
|
|
204,675
|
|
|
22.7
|
%
|
|
Depreciation and amortization
|
18,423
|
|
|
19,222
|
|
|
(4.2)
|
%
|
|
53,010
|
|
|
55,794
|
|
|
(5.0)
|
%
|
|
Restructuring charges
|
1,211
|
|
|
7,684
|
|
|
(84.2)
|
%
|
|
4,962
|
|
|
13,035
|
|
|
(61.9)
|
%
|
|
Total operating expenses
|
840,164
|
|
|
804,192
|
|
|
4.5
|
%
|
|
2,469,614
|
|
|
2,378,694
|
|
|
3.8
|
%
|
|
Non-operating interest expense
|
12,826
|
|
|
16,603
|
|
|
(22.7)
|
%
|
|
42,297
|
|
|
52,929
|
|
|
(20.1)
|
%
|
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
*
|
|
16,524
|
|
|
—
|
|
|
*
|
|
Total expenses
|
852,990
|
|
|
820,795
|
|
|
3.9
|
%
|
|
2,528,435
|
|
|
2,431,623
|
|
|
4.0
|
%
|
|
Income
before provision for income
taxes
|
54,238
|
|
|
62,062
|
|
|
(12.6)
|
%
|
|
188,409
|
|
|
219,099
|
|
|
(14.0)
|
%
|
|
Provision
for income taxes
|
19,939
|
|
|
25,634
|
|
|
(22.2)
|
%
|
|
73,429
|
|
|
88,165
|
|
|
(16.7)
|
%
|
|
Net
income
|
$
|
34,299
|
|
|
$
|
36,428
|
|
|
(5.8)
|
%
|
|
$
|
114,980
|
|
|
$
|
130,934
|
|
|
(12.2)
|
%
|
|
Earnings
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.31
|
|
|
$
|
0.33
|
|
|
(6.1)
|
%
|
|
$
|
1.05
|
|
|
$
|
1.19
|
|
|
(11.8)
|
%
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
0.32
|
|
|
(3.1)
|
%
|
|
$
|
1.02
|
|
|
$
|
1.15
|
|
|
(11.3)
|
%
|
___________________
* Not Meaningful
|
LPL
Financial Holdings Inc.
Financial Highlights
(Dollars in thousands, except per share data and
where noted)
(Unaudited)
|
|
|
Three
Month Quarterly Results
|
|
Q3
2012
|
|
Q2
2012
|
|
Q1
2012
|
|
Q4
2011
|
|
Q3
2011
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
442,129
|
|
|
$
|
447,243
|
|
|
$
|
463,653
|
|
|
$
|
404,382
|
|
|
$
|
438,294
|
|
|
Advisory fees
|
267,334
|
|
|
268,192
|
|
|
250,981
|
|
|
251,219
|
|
|
267,878
|
|
|
Asset-based fees
|
100,024
|
|
|
102,784
|
|
|
97,241
|
|
|
89,706
|
|
|
89,691
|
|
|
Transaction and other fees
|
84,730
|
|
|
78,894
|
|
|
74,572
|
|
|
71,227
|
|
|
78,476
|
|
|
Other
|
13,011
|
|
|
10,730
|
|
|
15,326
|
|
|
12,119
|
|
|
8,518
|
|
|
Net revenues
|
907,228
|
|
|
907,843
|
|
|
901,773
|
|
|
828,653
|
|
|
882,857
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Production(1)
|
630,103
|
|
|
630,136
|
|
|
626,907
|
|
|
586,123
|
|
|
623,886
|
|
|
Compensation and benefits
|
91,309
|
|
|
93,034
|
|
|
89,012
|
|
|
79,237
|
|
|
77,337
|
|
|
General and administrative
|
99,118
|
|
|
84,457
|
|
|
67,566
|
|
|
58,553
|
|
|
76,063
|
|
|
Depreciation and amortization
|
18,423
|
|
|
17,412
|
|
|
17,175
|
|
|
16,947
|
|
|
19,222
|
|
|
Restructuring charges
|
1,211
|
|
|
2,057
|
|
|
1,694
|
|
|
8,372
|
|
|
7,684
|
|
|
Total operating expenses
|
840,164
|
|
|
827,096
|
|
|
802,354
|
|
|
749,232
|
|
|
804,192
|
|
|
Non-operating interest expense
|
12,826
|
|
|
13,439
|
|
|
16,032
|
|
|
15,835
|
|
|
16,603
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
16,524
|
|
|
—
|
|
|
—
|
|
|
Total expenses
|
852,990
|
|
|
840,535
|
|
|
834,910
|
|
|
765,067
|
|
|
820,795
|
|
|
INCOME
BEFORE PROVISION FOR
INCOME TAXES
|
54,238
|
|
|
67,308
|
|
|
66,863
|
|
|
63,586
|
|
|
62,062
|
|
|
PROVISION
FOR INCOME TAXES
|
19,939
|
|
|
27,806
|
|
|
25,684
|
|
|
24,138
|
|
|
25,634
|
|
|
NET
INCOME
|
$
|
34,299
|
|
|
$
|
39,502
|
|
|
$
|
41,179
|
|
|
$
|
39,448
|
|
|
$
|
36,428
|
|
|
EARNINGS
PER SHARE
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.31
|
|
|
$
|
0.36
|
|
|
$
|
0.38
|
|
|
$
|
0.36
|
|
|
$
|
0.33
|
|
|
Diluted
|
$
|
0.31
|
|
|
$
|
0.35
|
|
|
$
|
0.37
|
|
|
$
|
0.35
|
|
|
$
|
0.32
|
|
|
FINANCIAL
CONDITION
|
|
|
|
|
|
|
|
|
|
|
Total Cash & Cash Equivalents
(billions)
|
$
|
0.4
|
|
|
$
|
0.5
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
Total Assets (billions)
|
$
|
3.7
|
|
|
$
|
3.6
|
|
|
$
|
3.8
|
|
|
$
|
3.8
|
|
|
$
|
3.7
|
|
|
Total Debt (billions)(2)
|
$
|
1.3
|
|
|
$
|
1.3
|
|
|
$
|
1.4
|
|
|
$
|
1.3
|
|
|
$
|
1.3
|
|
|
Stockholders' Equity (billions)
|
$
|
1.2
|
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
$
|
1.3
|
|
|
KEY
METRICS
|
|
|
|
|
|
|
|
|
|
|
Advisors
|
13,170
|
|
|
13,185
|
|
|
12,962
|
|
|
12,847
|
|
|
12,799
|
|
|
Production Payout(1)
|
87.4
|
%
|
|
86.7
|
%
|
|
86.4
|
%
|
|
88.0
|
%
|
|
87.0
|
%
|
|
Advisory and Brokerage Assets (billions)
|
$
|
371.4
|
|
|
$
|
353.0
|
|
|
$
|
354.1
|
|
|
$
|
330.3
|
|
|
$
|
316.4
|
|
|
Advisory Assets Under Management
(billions)
|
$
|
118.6
|
|
|
$
|
111.4
|
|
|
$
|
110.8
|
|
|
$
|
101.6
|
|
|
$
|
96.3
|
|
|
Net New Advisory Assets (billions)(3)
|
$
|
2.9
|
|
|
$
|
2.8
|
|
|
$
|
2.5
|
|
|
$
|
1.0
|
|
|
$
|
3.0
|
|
|
Insured Cash Account Balances (billions)
(4)
|
$
|
14.2
|
|
|
$
|
14.6
|
|
|
$
|
13.9
|
|
|
$
|
14.4
|
|
|
$
|
14.2
|
|
|
Money Market Account Balances
(billions)(4)
|
$
|
7.4
|
|
|
$
|
8.5
|
|
|
$
|
7.7
|
|
|
$
|
8.0
|
|
|
$
|
8.9
|
|
|
Adjusted EBITDA(5)
|
$
|
108,000
|
|
|
$
|
111,579
|
|
|
$
|
124,955
|
|
|
$
|
100,796
|
|
|
$
|
111,596
|
|
|
Adjusted Earnings(5)
|
$
|
52,999
|
|
|
$
|
54,973
|
|
|
$
|
63,199
|
|
|
$
|
48,838
|
|
|
$
|
51,567
|
|
|
Adjusted Earnings per share(5)
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
0.56
|
|
|
$
|
0.44
|
|
|
$
|
0.46
|
|
_____________________________
|
(1)
|
Production
expense is comprised of commission and advisory fees and brokerage,
clearing and exchange
|
|
fees.
Production payout, a statistical measure, excludes brokerage,
clearing and exchange fees and is
|
|
calculated
as commission and advisory fees divided by commission and advisory
revenues.
|
|
|
|
(2)
|
Represents
borrowings on the Company's senior secured credit facilities,
revolving line of credit and bank
|
|
loans
payable.
|
|
|
|
(3)
|
Represents
net new advisory assets consisting of funds from new accounts and
additional funds deposited into
|
|
existing
advisory accounts that are custodied in the Company's fee-based
advisory platforms during the three
|
|
month
periods then ended.
|
|
|
|
(4)
|
Represents
insured cash and money market account balances as of the end of
each reporting period.
|
|
|
|
(5)
|
The
reconciliation from net income to non-GAAP measures Adjusted EBITDA
and Adjusted Earnings for the
|
|
periods
presented is as follows (in thousands, except per share
data):
|
|
Q3
2012
|
|
Q2
2012
|
|
Q1
2012
|
|
Q4
2011
|
|
Q3
2011
|
|
(unaudited)
|
|
Net
income
|
$
|
34,299
|
|
|
$
|
39,502
|
|
|
$
|
41,179
|
|
|
$
|
39,448
|
|
|
$
|
36,428
|
|
|
Interest
expense
|
12,826
|
|
|
13,439
|
|
|
16,032
|
|
|
15,835
|
|
|
16,603
|
|
|
Income tax
expense
|
19,939
|
|
|
27,806
|
|
|
25,684
|
|
|
24,138
|
|
|
25,634
|
|
|
Amortization of purchased intangible assets
and
software(a)
|
9,971
|
|
|
9,948
|
|
|
9,832
|
|
|
9,849
|
|
|
9,909
|
|
|
Depreciation and amortization of all other
fixed
assets
|
8,452
|
|
|
7,464
|
|
|
7,343
|
|
|
7,098
|
|
|
9,313
|
|
|
EBITDA
|
85,487
|
|
|
98,159
|
|
|
100,070
|
|
|
96,368
|
|
|
97,887
|
|
|
EBITDA
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Employee share-based compensation
expense(b)
|
4,439
|
|
|
5,176
|
|
|
4,160
|
|
|
3,858
|
|
|
3,833
|
|
|
Acquisition and integration related
expenses(c)
|
10,528
|
|
|
5,056
|
|
|
1,858
|
|
|
(8,020)
|
|
|
1,241
|
|
|
Restructuring and conversion costs(d)
|
1,217
|
|
|
2,164
|
|
|
2,010
|
|
|
8,532
|
|
|
8,086
|
|
|
Debt extinguishment costs(e)
|
—
|
|
|
109
|
|
|
16,543
|
|
|
—
|
|
|
—
|
|
|
Equity issuance and related offering
costs(f)
|
4,040
|
|
|
446
|
|
|
—
|
|
|
—
|
|
|
421
|
|
|
Other(g)
|
2,289
|
|
|
469
|
|
|
314
|
|
|
58
|
|
|
128
|
|
|
Total
EBITDA Adjustments
|
22,513
|
|
|
13,420
|
|
|
24,885
|
|
|
4,428
|
|
|
13,709
|
|
|
Adjusted
EBITDA
|
$
|
108,000
|
|
|
$
|
111,579
|
|
|
$
|
124,955
|
|
|
$
|
100,796
|
|
|
$
|
111,596
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2012
|
|
Q2
2012
|
|
Q1
2012
|
|
Q4
2011
|
|
Q3
2011
|
|
(unaudited)
|
|
Net
income
|
$
|
34,299
|
|
|
$
|
39,502
|
|
|
$
|
41,179
|
|
|
$
|
39,448
|
|
|
$
|
36,428
|
|
|
After-Tax:
|
|
|
|
|
|
|
|
|
|
|
EBITDA Adjustments(h)
|
|
|
|
|
|
|
|
|
|
|
Employee share-based compensation
expense(i)
|
3,357
|
|
|
3,806
|
|
|
3,167
|
|
|
2,961
|
|
|
2,933
|
|
|
Acquisition and integration related
expenses(j)
|
4,307
|
|
|
3,561
|
|
|
1,146
|
|
|
(4,948)
|
|
|
765
|
|
|
Restructuring and conversion costs
|
751
|
|
|
1,335
|
|
|
1,240
|
|
|
5,264
|
|
|
4,989
|
|
|
Debt extinguishment costs
|
—
|
|
|
67
|
|
|
10,207
|
|
|
—
|
|
|
—
|
|
|
Equity issuance and related offering
costs(k)
|
3,986
|
|
|
275
|
|
|
—
|
|
|
—
|
|
|
260
|
|
|
Other
|
1,412
|
|
|
289
|
|
|
194
|
|
|
36
|
|
|
79
|
|
|
Total EBITDA Adjustments
|
13,813
|
|
|
9,333
|
|
|
15,954
|
|
|
3,313
|
|
|
9,026
|
|
|
Amortization of purchased intangible
assets
and software(h)
|
6,152
|
|
|
6,138
|
|
|
6,066
|
|
|
6,077
|
|
|
6,113
|
|
|
Acquisition related benefit for a net
operating
loss carry-forward(l)
|
(1,265)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Adjusted
Earnings
|
$
|
52,999
|
|
|
$
|
54,973
|
|
|
$
|
63,199
|
|
|
$
|
48,838
|
|
|
$
|
51,567
|
|
|
Adjusted
Earnings per share(m)
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
0.56
|
|
|
$
|
0.44
|
|
|
$
|
0.46
|
|
|
Weighted
average shares outstanding — diluted
(n)
|
111,877
|
|
|
112,834
|
|
|
112,529
|
|
|
111,095
|
|
|
111,173
|
|
______________________________
|
(a)
|
Represents
amortization of intangible assets and software as a result of the
Company's purchase accounting
|
|
adjustments from its 2005 merger transaction, as well
as various acquisitions.
|
|
|
|
(b)
|
Represents
share-based compensation expense based on the grant date fair value
under the Black-Scholes
|
|
valuation
model for: i) stock options awarded to employees and officers; ii)
restricted stock awarded to non-
|
|
employee
directors; and iii) beginning in the third quarter of 2012, shares
awarded to employees under the
|
|
ESPP.
|
|
|
|
(c)
|
Represents
acquisition and integration costs resulting from various
acquisitions, including changes in the
|
|
estimated
fair value of future payments, or contingent consideration,
required to be made to former
|
|
shareholders of certain acquired entities. During the
third quarter of 2012, approximately $9.2 million was
|
|
recognized
as a charge against earnings due to a net increase in the estimated
fair value of contingent
|
|
consideration. Also, as previously disclosed, the
Company has been involved in a legal dispute with a
third-
|
|
party
indemnitor under a purchase and sale agreement with respect to the
indemnitor's refusal to make
|
|
indemnity
payments that the Company believed were required under the purchase
and sale agreement. The
|
|
Company
settled this legal dispute in the fourth quarter of 2011.
Accordingly, the Company received a $10.5
|
|
million
cash settlement, $9.8 million of which has been excluded from the
presentation of Adjusted EBITDA, a
|
|
non-GAAP
measure.
|
|
|
|
(d)
|
Represents
organizational restructuring charges and conversion and other
related costs incurred resulting from
|
|
the 2011
consolidation of UVEST and the 2009 consolidation of the Affiliated
Entities. As of September 30,
|
|
2012,
approximately 86% and 98%, respectively, of costs related to these
two initiatives had been
|
|
recognized. The remaining costs largely consist of
the amortization of transition payments that have been
|
|
made in
connection with these two conversions for the retention of advisors
and financial institutions that are
|
|
expected
to be recognized into earnings by December 2014.
|
|
|
|
(e)
|
Represents
expenses incurred resulting from the early extinguishment and
repayment of the prior senior
|
|
secured
credit facilities, including the write-off of $16.5 million of
unamortized debt issuance costs that have no
|
|
future
economic benefit, as well as various other charges incurred in
connection with the repayment of the prior
|
|
senior
secured credit facilities and the establishment of the new senior
secured credit facilities.
|
|
|
|
(f)
|
Represents
equity issuance and offering costs related to the closing of a
secondary offering in the second
|
|
quarter of
2012, and the closing of a secondary offering in the second quarter
of 2011. In addition, results for
|
|
the three
months ended September 30, 2012, include a $3.9 million charge
relating to the late deposit of
|
|
withholding taxes related to the exercise of certain
non-qualified stock options in connection with the
|
|
Company's
2010 initial public offering.
|
|
|
|
(g)
|
Represents
certain excise and other taxes. In addition, results for the three
months ended September 30, 2012
|
|
include
approximately $2.3 million for consulting services aimed at
enhancing the Company's performance in
|
|
support of
its advisors while operating at a lower cost.
|
|
|
|
(h)
|
EBITDA
Adjustments and amortization of purchased intangible assets, a
component of depreciation and
|
|
amortization, have been tax effected using a federal
rate of 35% and the applicable effective state rate,
which
|
|
was 3.30%
for the periods presented, net of the federal tax
benefit.
|
|
|
|
(i)
|
Represents
the after-tax expense of non-qualified stock options for which the
Company receives a tax
|
|
deduction
upon exercise, restricted stock awards for which the Company
receives a tax deduction upon
|
|
vesting,
shares awarded to employees under the ESPP for which the Company
receives a tax deduction, and
|
|
the full
expense impact of incentive stock options granted to employees that
have vested and qualify for
|
|
preferential tax treatment and conversely, for which
the Company does not receive a tax deduction. Share-
|
|
based
compensation for vesting of incentive stock options was $1.6
million, $1.6 million, $1.6 million, $1.5
|
|
million
and $1.5 million for the three months ended September 30, 2012,
June 30, 2012, March 31, 2012,
|
|
December
31, 2011 and September 30, 2011, respectively.
|
|
|
|
(j)
|
Represents
the after-tax expense of acquisition and related costs for which
the Company receives a tax
|
|
deduction.
The three months ended September 30, 2012 included a $5.7 million
reduction of expense relating
|
|
to the
fair value of contingent consideration for the stock acquisition of
Concord, that is not deductible for tax
|
|
purposes
and that the Company does not consider to be indicative of its core
performance.
|
|
|
|
(k)
|
Represents
the after-tax expense of equity issuance and offering costs related
to the closing of a secondary
|
|
offering
in the second quarter of 2012, and the closing of a secondary
offering in the second quarter of 2011.
|
|
Results
for the three months ended September 30, 2012 include the full
expense impact of a $3.9 million
|
|
charge
relating to the late deposit of withholding taxes related to the
exercise of certain non-qualified stock
|
|
options in
connection with the Company's 2010 initial public offering, that is
not deductible for tax purposes.
|
|
|
|
(l)
|
Represents
the expected tax benefit available to the Company from the
accumulated net operating losses of
|
|
Concord
that arose prior to its acquisition by the Company; such benefits
were recorded in the third quarter of
|
|
2012.
|
|
|
|
(m)
|
Set forth
is a reconciliation of earnings per share on a fully diluted basis
as calculated in accordance with
|
|
GAAP to
Adjusted Earnings per share, a non-GAAP measure:
|
|
Q3
2012
|
|
Q2
2012
|
|
Q1
2012
|
|
Q4
2011
|
|
Q3
2011
|
|
(unaudited)
|
|
Earnings
per share — diluted
|
$
|
0.31
|
|
|
$
|
0.35
|
|
|
$
|
0.37
|
|
|
$
|
0.35
|
|
|
$
|
0.32
|
|
|
Adjustment
for allocation of undistributed
earnings to stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
|
After-Tax:
|
|
|
|
|
|
|
|
|
|
|
EBITDA Adjustments per share
|
0.12
|
|
|
0.08
|
|
|
0.14
|
|
|
0.03
|
|
|
0.09
|
|
|
Amortization of purchased intangible
assets
and software
|
0.05
|
|
|
0.06
|
|
|
0.05
|
|
|
0.05
|
|
|
0.05
|
|
|
Acquisition related benefit for a net
operating
loss carry-forward
|
(0.01)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Adjusted
Earnings per share
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
0.56
|
|
|
$
|
0.44
|
|
|
$
|
0.46
|
|
|
|
|
(n)
|
The
weighted average share count for the quarters in 2012 includes
approximately 850,000 shares resulting
|
|
from the
distribution pursuant to the 2008 Nonqualified Deferred
Compensation Plan that were not previously
|
|
included
in the quarterly weighted average share count.
|
SOURCE LPL Financial Holdings Inc.