| MF Global Reports Third Quarter 2010 Results | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strategic Initiatives Offsetting Macro Headwinds NEW YORK, Feb 04, 2010 -- MF Global Holdings Ltd. (NYSE: MF), a leading intermediary offering customized solutions in global cash, derivatives and related markets, today reported financial results for the third fiscal quarter of 2010, ended December 31, 2009. Third Quarter Highlights
"We advanced our growth strategy during the quarter by expanding our institutional and retail product offerings and enhancing the level of service we provide our clients," said Bernard Dan, chief executive officer of MF Global. "We experienced growth in three of our four revenue streams quarter-over-quarter, driven by solid performance in commodities, foreign exchange and retail." Mr. Dan continued, "MF Global's ongoing commitment to our strategic initiatives continues to help offset the broader macro challenges of weak volume growth, narrow spreads and lower interest rates." Third Quarter 2010 Financial Results Revenue, net of interest and transaction-based expenses (net revenue), was $251.0 million in the third quarter, compared with net revenue of $422.0 million for the same period last year. The decline in net revenue was primarily due to lower interest rates and narrower spreads as well as a one-time gain of $62.1 million related to a legal settlement in the same period last year. GAAP net loss applicable to common shareholders in the third quarter was $22.3 million, or a loss of $0.18 per basic and diluted share, compared with net income of $27.9 million or $0.23 per basic and diluted share in the same period last year. Adjusted earnings per fully diluted share was $0.01 for the third quarter versus $0.17 per fully diluted share for the same period last year.2 "MF Global continues to demonstrate considerable progress on our plan, as we optimize our capital structure, streamline our expense base and improve our scalability," said Randy MacDonald, chief financial officer of MF Global. "While macro conditions remain challenging, particularly in the fixed income business, shifts in government programs, such as the closing of several liquidity facility programs, could drive spreads wider in the near term," Mr. MacDonald continued. "We remain focused on improving our institutional platform by expanding, diversifying and rationalizing key businesses and believe these decisions will ultimately benefit long-term shareholders by delivering a higher growth, higher margin business." Employee compensation and benefits (excluding non-recurring IPO awards) during the quarter totaled $151.6 million, or 60.4 percent of net revenue compared with $217.3 million, or 51.5 percent of net revenue in the same period last year. The increase in compensation and benefits percentage was primarily due to lower net revenues. Non-compensation expense in the third quarter of 2010 was $96.3 million compared with $109.4 million for the same period last year. The decrease was primarily due to the continued rationalizing of the company's cost structure, which was partially offset by the company's domestication to Delaware and re-engineering costs associated with the effort to create a more scalable infrastructure. Business Developments Domicile changed to Delaware On January 4, 2010, MF Global moved its corporate domicile from Bermuda to Delaware and changed its name to "MF Global Holdings Ltd." The change of corporate domicile and name change did not affect MF Global's day-to-day business and operations. The domestication was designed to increase flexibility in responding to the current and anticipated regulatory landscape as well as support MF Global's growth strategies, including diversifying the business within financial services. Repayment of $200 million of revolving credit facility The company repaid $200 million of its revolving credit facility ahead of schedule with free cash. The revolving credit facility expires in June 2012. Approved as underwriter for the Federal Home Loan Bank and Freddie Mac MF Global was approved by the Federal Home Loan Bank (FHLB) System as an underwriter and reallowance dealer. This approval now allows MF Global Inc., a subsidiary of MF Global Holdings Ltd., to directly participate in the underwriting of the FHLB System's debt programs, including full access to FHLB's discount window. Additionally, MF Global has been approved as an official underwriter of Freddie Mac's debt programs. This approval now allows MF Global Inc. to directly participate in the underwriting of Freddie Mac's debt programs, including Discount Note window postings, Reference Bills, and Medium- and Long-Term Fixed Rate and Callable Debt. Realignment of U.S. equity business MF Global announced the strategic realignment of its U.S. equity business, including the expansion of its U.S. equity derivatives, portfolio trading and electronic trading services teams. In addition, the company reached an agreement to sell its U.S. equity interdealer broker business. Earnings Conference Call Information MF Global will hold a conference call to discuss the third quarter 2010 results today at 7:30 a.m. EST. The call is open to the public.
Listeners to the call should dial in approximately 10 minutes prior to the start of the call. Webcast information A live audio webcast of the presentation will also be available on the investor relations section of the MF Global Web site, at http://www.mfglobalinvestorrelations.com, and will be available for replay shortly after the event. About MF Global MF Global Holdings Ltd. (NYSE: MF), is a leading intermediary offering customized solutions in global cash, derivatives and related markets. It provides execution and clearing services for exchange-traded and over-the-counter derivative products as well as for non-derivative foreign exchange products and securities in the cash market. MF Global is uniquely diversified across products, trading markets, customers and regions. Its worldwide client base includes financial institutions, industrial groups, hedge funds and other asset managers as well as professional traders and private/retail clients. MF Global operates in 13 countries on more than 70 exchanges, providing access to some of the largest financial markets in the world and is the leader by volume on many of these markets. For more information, please visit www.mfglobal.com. Forward-Looking Statement SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements in this press release, including statements relating to the Company's future revenues and earnings, plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. We caution you not to place undue reliance on these forward-looking statements. We refer you to the Company's latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q on file with the Securities and Exchange Commission (SEC), and any amendments thereto, for a description of the risks and uncertainties the Company faces. This press release includes certain non-GAAP financial measures, as defined under SEC rules. A reconciliation of these measures is included in the financial information later in this release, which is available on the Company's website at www.mfglobal.com. Non-GAAP Financial Measures In this press release, we provide certain earnings per share ratios based on a fully diluted number of shares ("fully diluted shares"). In accordance with the regulations of the U.S. Securities and Exchange Commission (SEC), earnings per share ratios based on fully diluted shares are considered to be non-GAAP financial measures because fully diluted shares represents shares outstanding, as determined on a GAAP basis, with certain adjustments that are made outside of GAAP. We use fully diluted shares for certain ratios for the reasons described further below. We also provide information related to "adjusted earnings per fully diluted share", which represents "adjusted earnings" (also a non-GAAP financial measure) divided by our fully diluted shares. "Adjusted earnings" excludes the following items from "Net loss/income applicable to common shareholders": Stock compensation expense related to IPO awards; Severance expense; Exchange membership gains and losses; Impairment of goodwill; a Tax rate adjustment related to our change in corporate domicile; and Broker-related loss and associated costs. We use "adjusted earnings per fully diluted share" for the same reasons why we present fully diluted share ratios and also because our management believes that the measure provides a more useful metric of our operating performance. In particular, we exclude stock compensation expense related to IPO awards and broker-related loss and associated costs because we believe that they reflect losses or expenses arising from one-time events. We exclude Impairment of goodwill; Exchange membership gains and losses; and a Tax rate adjustment related to our change in corporate domicile because we believe that these gains and losses do not reflect our operating performance and do not help our shareholders understand our past or future financial performance, even though accounting rules require us to record these gains and losses. "Adjusted earnings per fully diluted share" for the three months ended December 31, 2008 as reported in this press release, differs from "adjusted earnings per fully diluted share" for the three months ended December 31, 2008, as reported in our press release dated February 5, 2009. Because of a change in SEC guidance, we now exclude two items from "adjusted earnings" that we previously did not exclude: severance expense and foreign currency translation loss. The presentation of fully diluted shares and ratios based on fully diluted shares are not intended to be considered in isolation from, as a substitute for or as superior to, the financial information prepared and presented in accordance with GAAP, and our presentation of this measure may be different from non-GAAP financial measures used by other companies. To determine fully diluted shares, both the numerator and denominator of the EPS calculation require adjustment. For the numerator, interest and amortization of issuance costs on our Convertible Notes, net of tax and dividends on the Series A and B Preferred Stock must be added back to net loss/income applicable to common shareholders. For the denominator, weighted average shares of common stock outstanding is adjusted at December 31, 2009 and 2008 to add back shares underlying restricted stock and stock unit awards ("IPO awards") granted in connection with our IPO which are not considered dilutive under U.S. GAAP and, therefore, not included in diluted shares of common stock outstanding. These shares are not considered dilutive because, in part, of the value of these awards in relation to the market price of our shares of outstanding common stock. In addition, shares of common stock outstanding are also adjusted at December 31, 2009 and 2008 to include the impact of our outstanding Series A Preferred Stock, Series B Preferred Stock and Convertible Notes, on an if-converted basis. For the three months ended December 31, 2009 weighted average shares of common stock outstanding is adjusted by 4.2 million, 12.0 million, 14.4 million and 19.6 million shares, related to IPO awards, Series A Preferred Stock, Series B Preferred Stock and Convertible Notes, respectively. For the three months ending December 31, 2008 common shares outstanding is adjusted for 4.6 million, 12.0 million, 14.4 million and 20.1 million, related to IPO awards, Series A Preferred Stock, Series B Preferred Stock and Convertible Notes, respectively. We believe it is meaningful to investors to present ratios based on fully diluted shares because it demonstrates the dilution that investors will experience at the end of the three-year vesting period of our IPO awards and when our Series A Preferred Stock, Series B Preferred Stock and Convertible Notes are converted. It is also how our management internally views dilution. 1 GAAP net loss includes a number of unusual items, such as gains on exchange memberships, stock compensation expense related to IPO awards, impairment of goodwill, broker related loss costs, adjustments for tax rate changes, and severance charges. 2 Adjusted earnings per fully diluted share is a non-GAAP measure. Please see definitions of non-GAAP financial measures in this release.
SOURCE: MF Global Holdings Ltd.
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