- Improved Advisor Productivity and Market Conditions Lift Assets to
- Board of Directors Approves Quarterly Dividend of
Three Months Ended
|Financial Highlights (unaudited)||(dollars in thousands, except per share data)|
|Earnings Per Share — diluted||
|Adjusted Earnings Per Share||
|A full reconciliation of GAAP measures to non-GAAP measures, along with an explanation of these metrics, follows later in this release.|
"Our positive financial performance in the first quarter was a direct reflection of the hard work of our advisors to position their clients as market conditions improved," stated
|Metric Highlights (unaudited)|
|Advisory and Brokerage Assets (billions)(1)||
|Advisory Assets Under Custody (billions)(2)||
|(1) 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.|
(2) Advisory assets under custody is a component of advisory and brokerage assets.
- Advisory assets in the Company's fee-based platforms were
$130.2 billionat March 31, 2013, up 17.5% from $110.8 billionat March 31, 2012.
- Net new advisory assets, which exclude market movement, were
$3.0 billionfor the first quarter of March 31, 2013. Growth in net new advisory assets was primarily driven by strong advisor productivity and the growth in Independent RIA assets.
- Commission revenue increased 4.7% for the first quarter of 2013 compared to the prior year period reflecting the improvement in advisor productivity and strong market performance.
- Advisory revenue increased 12.1% for the first quarter of 2013 compared to the prior year period, driven by strong net new advisory asset flows and overall improving market levels.
- Recurring revenue, a statistical measure reflecting the level of stability in the Company's performance, represented 65.4% of net revenue for the first quarter of 2013.
- The Company incurred
$5 millionof expense in the first quarter of 2013 primarily for services provided by outside consultants. In the near-term, the Company anticipates incurring $6 millionto $8 millionin expense in the second quarter of 2013, and remains on track to incur approximately $40 millionfor the entire year.
The Financial Times named sixteen
Barron's named three
In February, six financial advisors and nine advisor teams affiliated with
Conference Call and Additional Information
The Company will hold a conference call to discuss results at
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 404-537-3406 (international) and entering passcode 32126208. The telephonic replay will be available until
|Condensed Consolidated Statements of Operations|
|(Dollars in thousands, except per share data)|
Three Months Ended
|Transaction and other||89,378||74,572||19.9%|
|Compensation and benefits||98,780||89,012||11.0%|
|General and administrative||77,771||67,566||15.1%|
|Depreciation and amortization||19,774||17,175||15.1%|
|Total operating expenses||872,085||802,354||8.7%|
|Non-operating interest expense||12,160||16,032||(24.2)%|
|Loss on extinguishment of debt||—||16,524||*|
|Income before provision for income taxes||90,551||66,863||35.4%|
|Provision for income taxes||35,834||25,684||39.5%|
|Earnings per share|
|* Not Meaningful|
The Company reports Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per share to eliminate the effects of items that it does not consider indicative of its core operating performance. 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:
a. Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings per share do not reflect all cash expenditures, or contractual commitments; and do not reflect changes in, or cash requirements for, working capital needs; and
b. 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, except per share data):
|Three Months Ended|
|Income tax expense||35,834||25,684|
|Amortization of purchased intangible assets(a)||9,776||9,832|
|Depreciation and amortization of fixed assets||9,998||7,343|
|Employee share-based compensation expense(b)||3,962||4,160|
|Acquisition and integration related expenses(c)||444||1,858|
|Restructuring and conversion costs(d)||6,263||2,010|
|Debt extinguishment costs(e)||—||16,543|
|Total EBITDA Adjustments||13,435||24,885|
|Three Months Ended|
|Employee share-based compensation expense(h)||2,902||3,167|
|Acquisition and integration related expenses(i)||(1,079)||1,146|
|Restructuring and conversion costs||3,864||1,240|
|Debt extinguishment costs||—||10,207|
|Total EBITDA Adjustments||7,394||15,954|
|Amortization of purchased intangible assets(g)||6,032||6,066|
|Adjusted Earnings per share(j)||
|Weighted average shares outstanding — diluted||107,297||112,529|
(a) Represents amortization of intangible assets 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 for equity awards granted to employees, officers, and directors. Such awards are measured based on the grant-date fair value and share-based compensation expense is recognized over the requisite service period of the individual grants, which generally equals the vesting period.
(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 months ended March 31, 2013, approximately
(d) Represents organizational restructuring charges, conversion and other related costs incurred resulting from the expansion of the Service Value Commitment, the 2011 consolidation of
(e) Represents expenses incurred in
(f) Generally, represents certain excise and other taxes. Results for the three months ended March 31, 2013 include
(g) Generally, EBITDA Adjustments and amortization of purchased intangible assets have been tax effected using a federal rate of 35% and the applicable effective state rate, which was 3.30%, net of the federal tax benefit, for the three months ended March 31, 2013 and 2012, except as noted in Notes (h) and (i) in this table.
(h) 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 we receive 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 expense for vesting of incentive stock options was
(i) Represents the after-tax expense of acquisition and related costs for which the Company receives a tax deduction. In addition, the results for the three months ended March 31, 2013 reflect a
(j) 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:
|For the Three Months Ended|
|Earnings per share — diluted||
|EBITDA Adjustments per share||0.07||0.14|
|Amortization of purchased intangible assets per share||0.06||0.05|
|Adjusted Earnings per share||
Non-GAAP Financial Measures
Adjusted Earnings represent net income before: (a) employee share-based compensation expense, (b) acquisition and integration related expenses (c) amortization of intangible assets resulting from various acquisitions, (d) debt extinguishment costs, (e) restructuring and conversion costs and (f) other. 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.
Statements in this press release regarding the Company's future financial and operating results, growth, business strategy, plans, and ability and plans to repurchase shares and pay dividends in the future, including projected costs, projected savings, anticipated productivity gains and anticipated improvements to the Company's operating model, services and technology as a result of the Service Value Commitment, 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 April 25, 2013. 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 and fees 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; execution of the Company's plans related to the Service Value Commitment, including the Company's ability to successfully transform and transition business processes to third party service providers; the Company's success in negotiating and developing commercial arrangements with third party service providers that will enable the Company to realize the service improvements and efficiencies expected to result from the Service Value Commitment; the performance of third party service providers to which business processes are transitioned from the Company; the Company's ability to control operating risks, information technology systems risks and sourcing risks; 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 2012 Annual Report on Form 10-K. 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 earnings release, 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.
Securities offered through LPL Financial. Member FINRA/
CONTACT: Investor Relations Trap KlomanSource:
LPL FinancialPhone: (617) 897-4574 Email: email@example.com Media Relations Betsy Weinberger LPL FinancialPhone: (858) 900-7122 Email: firstname.lastname@example.org
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