SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 001-15251
LABRANCHE & CO INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-4064735
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EXCHANGE PLAZA, NEW YORK, NEW YORK 10006
(Address of principal executive offices)
(212) 425-1144
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
The number of shares of the registrant's common stock outstanding as of May 15,
2002 was 58,967,432.
LABRANCHE & CO INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION...................................................................3
Item 1. Financial Statements....................................................................3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS...............................................3
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION.....................................................................................4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS...............................................6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS..........................................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................22
PART II OTHER INFORMATION......................................................................24
Item 6. Exhibits and Reports on Form 8-K.......................................................24
SIGNATURES...................................................................................25
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LABRANCHE & CO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)
For the Three Months Ended
March 31,
------------------------------------
2002 2001
--------------- -----------------
REVENUES:
Net gain on principal transactions $ 89,124 $ 81,460
Commissions 20,973 11,820
Other 12,583 4,480
-- --
--------------- ---------------
Total revenues 122,680 97,760
--------------- ---------------
EXPENSES:
Employee compensation and related benefits 31,073 24,592
Interest 12,836 12,145
Exchange, clearing and brokerage fees 7,777 3,037
Lease of exchange memberships 6,709 3,855
Depreciation and amortization of intangibles 3,330 6,133
Other 7,439 3,314
--------------- ---------------
Total expenses 69,164 53,076
--------------- ---------------
Income before provision for income taxes 53,516 44,684
PROVISION FOR INCOME TAXES 25,864 23,760
--------------- ---------------
Net income $ 27,652 $ 20,924
Series A Preferred dividends and discount accretion 2,076 388
--------------- ---------------
Net income available to common stockholders $ 25,576 $ 20,536
=============== ===============
Weighted-average shares outstanding:
Basic 58,705 50,240
Diluted 60,016 51,177
Earnings per share
Basic $ 0.44 $ 0.41
Diluted $ 0.43 $ 0.40
The accompanying notes are an integral part of
these condensed consolidated statements.
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LABRANCHE & CO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(000'S OMITTED)
As of
--------------------------------------
March 31, 2002 December 31, 2001
--------------- --------------------
(unaudited)
ASSETS
CASH AND CASH EQUIVALENTS $ 71,242 $ 52,043
CASH AND SECURITIES SEGREGATED UNDER FEDERAL REGULATIONS 35,852 78,368
SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL -- 59,113
RECEIVABLE FROM BROKERS, DEALERS AND CLEARING ORGANIZATIONS 247,558 177,506
RECEIVABLE FROM CUSTOMERS 14,098 11,005
SECURITIES OWNED, at market value:
Corporate equities 145,576 156,088
United States Government obligations 318,140 328,048
Options and other 69,420 69,474
COMMISSIONS RECEIVABLE 5,656 4,971
EXCHANGE MEMBERSHIPS CONTRIBUTED FOR USE, at market value 32,465 26,760
EXCHANGE MEMBERSHIPS OWNED, at cost (market value of $94,541 and $84,453,
respectively) 75,315 75,315
OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost,
less accumulated depreciation and amortization of $6,210 and $5,485, 6,476 6,475
respectively
INTANGIBLE ASSETS, net of accumulated amortization:
Specialist Stock List 389,738 392,332
Trade Name 25,011 25,011
Goodwill 466,231 469,963
OTHER ASSETS 78,081 68,365
--------------- --------------------
Total assets $ 1,980,859 $ 2,000,837
=============== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Payable to brokers and dealers $ 17,958 $ 62,879
Payable to customers 31,127 63,238
Securities sold, but not yet purchased, at market value 244,005 190,177
Accrued compensation 43,853 54,113
Accounts payable and other accrued expenses 66,569 65,813
Income taxes payable 17,701 14,753
--------------- --------------------
421,213 450,973
--------------- --------------------
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DEFERRED TAX LIABILITIES 169,670 165,541
--------------- --------------------
LONG TERM DEBT 357,830 363,170
--------------- --------------------
SUBORDINATED LIABILITIES
Exchange memberships, at market value 32,465 26,760
Other subordinated indebtedness 66,035 66,035
--------------- --------------------
98,500 92,795
--------------- --------------------
PREFERRED STOCK, liquidation value of $1,000 per share; 10,000,000 shares
authorized; 71,836 and 100,000 shares issued and outstanding as of March
31, 2002 and December 31, 2001, respectively 68,191 94,531
COMMON STOCK, $.01 par value, 200,000,000 shares authorized;
59,117,432 and 58,733,955 shares issued and outstanding as of
March 31, 2002 and December 31, 2001, respectively 591 587
ADDITIONAL PAID-IN-CAPITAL 675,948 671,422
RETAINED EARNINGS 194,356 168,780
UNEARNED COMPENSATION (5,440) (6,962)
--------------- --------------------
933,646 928,358
--------------- --------------------
Total liabilities and stockholders' equity $ 1,980,859 $ 2,000,837
=============== ====================
The accompanying notes are an integral part of
these condensed consolidated statements.
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LABRANCHE & CO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
Three Months Ended
--------------------------------------
March 31, 2002 March 31, 2001
--------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 27,652 $ 20,924
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of intangibles 3,330 6,133
Amortization of bond discount and debt issuance costs 515 422
Compensation expense related to stock-based compensation 2,061 2,227
Deferred tax provision 2,580 1,803
Acceleration of preferred stock discount accretion 1,485 --
Tax benefit related to employee stock transactions 3,733 17,479
Change in assets and liabilities:
Cash segregated under federal regulations 42,516 (12,967)
Securities purchased under agreements to resell 59,113 32,318
Receivable from brokers, dealers and clearing organizations (70,052) (120,439)
Receivable from customers (3,093) 9,181
Corporate equities 10,512 47,661
United States Government obligations 9,908 --
Options and other securities owned 54 6,032
Other assets (10,784) 2,658
Payable to brokers and dealers (26,080) (19,664)
Payable to customers (32,112) (8,441)
Securities sold, but not yet purchased 53,828 1,386
Accrued compensation (10,260) (17,656)
Accounts payable and other accrued expenses (16,060) 4,893
Income taxes payable (437) (10,329)
--------------- --------------------
Net cash provided by (used in) operating activities 48,409 (36,379)
--------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for office equipment and leasehold improvements (737) (319)
Net cash received from acquisitions -- 52,473
Payment for the purchase of an exchange membership -- (2,000)
--------------- --------------------
Net cash (used in) provided by investing activities (737) 50,154
--------------- --------------------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 3,991 8,556
Payment of preferred dividends (4,300) --
Payment for preferred stock buyback (28,164) --
--------------- --------------------
Net cash (used in) provided by financing activities (28,473) 8,556
--------------- --------------------
Increase in cash and cash equivalents 19,199 22,331
CASH AND CASH EQUIVALENTS, beginning of period 52,043 152,220
--------------- --------------------
CASH AND CASH EQUIVALENTS, end of the period $ 71,242 $ 174,551
=============== ====================
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Interest $ 21,506 $ 20,961
Income taxes 17,500 13,900
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES:
Acquisitions:
Intangibles assets $ -- $ 452,488
Fair value of tangible assets acquired, other than cash -- 71,555
Deferred tax liabilities related to intangible assets -- 95,995
Other liabilities -- 38,950
Common stock issuance -- 260,463
Exercise of options granted to former RPM stockholders 11,925 37,811
The accompanying notes are an integral part of
these condensed consolidated statements.
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LABRANCHE & CO INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
The condensed consolidated financial statements include the accounts of
LaBranche & Co Inc., a Delaware corporation (the "Holding Company"), and its
subsidiaries, LaBranche & Co. LLC, a New York limited liability company
("LaBranche"), and LaBranche Financial Services, Inc., a Delaware corporation
("LFSI" and, collectively with the Holding Company and LaBranche, the
"Company"). The Holding Company is the sole member of LaBranche and 100%
stockholder of LFSI. LaBranche is a registered broker-dealer and operates
primarily as a specialist in equity securities listed on the New York Stock
Exchange, Inc. (the "NYSE") and as a specialist in equities and options on the
American Stock Exchange (the "AMEX"). LFSI is a registered broker-dealer and a
member of the NYSE and other exchanges, and provides securities clearing and
other related services to its own individual and institutional customers,
including traders, professional investors and broker-dealers, and to customers
of introducing brokers, and also provides direct access floor brokerage services
to institutional customers. In addition, LFSI provides front-end order
execution, analysis and reporting solutions for the wholesale securities dealer
market. As of December 31, 2001, Henderson Brothers, Inc. ("Henderson Brothers")
and Internet Trading Technologies, Inc. ("ITTI"), former subsidiaries of the
Holding Company, were merged with and into another Holding Company subsidiary,
ROBB PECK McCOOEY Clearing Corporation ("RPM Clearing Corporation"), which
changed its name to LFSI in January 2002.
2. NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial
accounting and reporting for goodwill and other intangible assets acquired in a
business combination, requiring that the purchase method of accounting be used
in all business combinations initiated after June 30, 2001. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets acquired individually or with a group of assets. Under the new
standard, trade name and goodwill will no longer be amortized, instead these
assets will be tested at least annually for impairment by applying a fair-value
based test. The specialist stock lists will continue to be amortized over their
respective lives. Accordingly, effective January 1, 2002, the Company has ceased
amortization of goodwill and trade name and the amortization expense for these
intangible assets is no longer included in the results of operations. The
Company did not incur any impairment charges upon implementation of SFAS No.
142. However, it is possible that in the future, after periodic testing, the
Company may incur impairment charges related to the carrying value of goodwill
and intangible assets recorded in its financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 is effective for fiscal years
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beginning after December 15, 2001. The implementation of SFAS No. 144 is
unlikely to have a material impact on the Company's consolidated financial
statements.
3. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
INFORMATION
The unaudited interim condensed consolidated financial information as of
March 31, 2002 and for the three months ended March 31, 2002 and 2001 are
presented in the accompanying condensed consolidated financial statements. The
unaudited interim condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial information. The unaudited interim
condensed consolidated financial information reflects all adjustments, which
are, in the opinion of management, necessary for a fair presentation of the
results for such periods. This interim condensed consolidated financial
information as of March 31, 2002 should be read in conjunction with the audited
consolidated financial statements and notes thereto as of December 31, 2001
included in the Company's Form 10-K filed with the Securities and Exchange
Commission ("SEC") on March 22, 2002, as amended. Results of the interim periods
are not necessarily indicative of results to be obtained for a full fiscal year.
4. INCOME TAXES
The Company accounts for taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires the recognition of tax benefits or expenses on
temporary differences between the financial reporting and tax bases of its
assets and liabilities. Deferred tax assets and liabilities primarily relate to
stock-based compensation, amortization periods of certain intangibles and
differences between the financial and tax basis of assets acquired. The
Company's effective tax rate differs from the federal statutory rate primarily
due to its non-deductible amortization of intangible assets in 2002 and 2001.
The components of the provision for income taxes reflected on the condensed
consolidated statements of operations are set forth below (000's omitted):
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Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
------------------ --------------------
Current federal, state and local
Taxes $ 23,284 $ 21,957
Deferred tax provision 2,580 1,803
------------------ --------------------
Total provision for income taxes $ 25,864 $ 23,760
================== ====================
5. REGULATORY REQUIREMENTS
As a specialist and member of the NYSE, LaBranche is subject to SEC Rule
15c3-1 adopted and administered by the NYSE. LaBranche is required to maintain
minimum net capital, as defined, equivalent to the greater of $100,000 or 1/15
of aggregate indebtedness, as defined.
As of March 31, 2002 and December 31, 2001, LaBranche's net capital, as
defined under SEC Rule 15c3-1, was $459.2 million and $484.2 million,
respectively. As of those dates LaBranche exceeded the minimum requirements by
$456.6 million and $481.4 million, respectively. LaBranche's aggregate
indebtedness to net capital ratio on those dates was .08 to 1 and .09 to 1,
respectively.
The NYSE generally requires members registered as specialists to maintain a
minimum dollar regulatory capital amount in order to establish that they can
meet, with their own net liquid assets, their position requirement.
As of March 31, 2002 and December 31, 2001, LaBranche's NYSE minimum
required dollar amount of net liquid assets, as defined, was $446.0 million,
compared to actual net liquid assets, as defined, of $466.3 million and $491.5
million, respectively.
As a registered broker-dealer and NYSE member firm, LFSI is also subject to
SEC Rule 15c3-1, as adopted and administered by the NYSE. Under the alternative
method permitted by the rule, the minimum required net capital for LFSI is equal
to the greater of $250,000 or 2% of aggregate debit items, as defined.
As of March 31, 2002, LFSI's net capital as defined under SEC Rule 15c3-1
was $24.3 million and exceeded minimum requirements by $23.4 million. As of
December 31, 2001, the combined net capital of Henderson Brothers and RPM
Clearing Corporation as defined under SEC Rule 15c3-1 was $20.5 million which
exceeded minimum requirements by $19.7 million.
6. COMMITMENTS
During February 2002, LaBranche extended its $200 million committed line of
credit with a U.S. commercial bank through February 27, 2003.
Minimum rental commitments under existing non-cancelable leases for office
space and equipment are as follows:
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Year Ending December 31,:
-------------------------
2002 $ 2,409,788
2003 2,897,269
2004 2,477,486
2005 2,408,055
2006 1,627,957
Thereafter 1,499,982
These leases contain escalation clauses providing for increased rentals
based upon maintenance and tax increases.
7. EARNINGS PER SHARE
Earnings per share ("EPS") are computed in accordance with SFAS No. 128,
"Earnings Per Share." Basic EPS is calculated by dividing net income available
to common shareholders by the weighted-average number of common shares
outstanding. Diluted EPS includes the determinants of basic EPS and, in
addition, gives effect to dilutive potential common shares.
The computations of basic and diluted EPS are set forth below (000's
omitted, except per share data):
Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
------------------ --------------------
Net income $ 27,652 $ 20,924
Less preferred dividends and
accretion 2,076 388
------------------ --------------------
Numerator for basic and
diluted earnings per common
share - net income $ 25,576 $ 20,536
Denominator for basic
earnings per share -
weighted-average number
of common shares 58,705 50,240
Dilutive Shares
Stock options 821 509
Restricted stock 89 80
Restricted stock units 401 348
------------------ --------------------
Denominator for diluted
earnings per share -
weighted-average number
of common shares 60,016 51,177
Basic earnings per share $ 0.44 $ 0.41
Diluted earnings per share $ 0.43 $ 0.40
Under the treasury stock method of accounting, restricted stock units
representing 350,837 shares of common stock, 175,912 restricted shares of common
stock and options to purchase an aggregate of 3,099,534 shares of common stock
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were not included in the calculation of diluted earnings per share for the
three months ended March 31, 2002 due to their antidilutive effect.
8. EMPLOYEE INCENTIVE AWARDS
On January 17, 2002 options to purchase an aggregate of 1,470,000 shares of
common stock were granted to employees of the Company at a purchase price of
$35.00 per share. These options are subject to continuing service with the
Company and other restrictions and one third are exercisable on the second
anniversary of issuance and the remaining two thirds will become exercisable on
the third anniversary of issuance. These options will generally expire ten years
from the date of grant, unless sooner terminated or exercised. Pursuant to APB
No. 25, no compensation expense was recognized since, on the date of grant,
these options had no intrinsic value.
During July 2001, the board of directors approved an increase in the number
of shares of the Company's common stock available for issuance under the Equity
Incentive Plan by an additional 3,000,000 shares. The effectiveness of this
increase is subject to the approval of the stockholders of the Company at its
next annual meeting of stockholders, which is scheduled to take place on May 21,
2002.
9. REPURCHASE OF PREFERRED STOCK
During January 2002, the Company offered to repurchase up to 30,000 shares
of its outstanding Series A preferred stock for $1,000 per share, plus accrued
and unpaid dividends up to but not including the date of purchase. On February
15, 2002, the offer expired, and on February 19, 2002, the Company purchased all
of the approximately 28,164 shares that had been tendered for approximately
$28.5 million, including accrued but unpaid dividends. As a result of the
purchase, the Company recorded a one-time expense due to the acceleration of the
discount accretion on the shares purchased of approximately $1.5 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE "COMPANY," "LABRANCHE" OR "WE"
SHALL MEAN LABRANCHE & CO INC. AND ITS WHOLLY-OWNED SUBSIDIARIES.
LABRANCHE'S QUARTERLY AND ANNUAL OPERATING RESULTS ARE AFFECTED BY A WIDE
VARIETY OF FACTORS THAT COULD MATERIALLY AND ADVERSELY AFFECT ACTUAL RESULTS,
INCLUDING: A DECREASE IN TRADING VOLUME ON THE NEW YORK STOCK EXCHANGE,
EXCESSIVE VOLATILITY IN THE EQUITY SECURITIES MARKET AND CHANGES IN THE VALUE OF
OUR SECURITIES POSITIONS. AS A RESULT OF THESE AND OTHER FACTORS, LABRANCHE MAY
EXPERIENCE MATERIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS ON A QUARTERLY OR
ANNUAL BASIS, WHICH COULD MATERIALLY AND ADVERSELY AFFECT ITS BUSINESS,
FINANCIAL CONDITION, OPERATING RESULTS, AND STOCK PRICE. AN INVESTMENT IN
LABRANCHE INVOLVES VARIOUS RISKS, INCLUDING THOSE MENTIONED ABOVE AND THOSE THAT
ARE DETAILED FROM TIME TO TIME IN LABRANCHE'S SEC FILINGS.
CERTAIN STATEMENTS CONTAINED IN THIS REPORT, INCLUDING WITHOUT LIMITATION,
STATEMENTS CONTAINING THE WORDS "BELIEVES," "INTENDS," "EXPECTS," "ANTICIPATES"
AND WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. READERS ARE
CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE, AND SINCE SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THE
ACTUAL RESULTS AND PERFORMANCE OF LABRANCHE AND THE SPECIALIST INDUSTRY MAY TURN
OUT TO BE MATERIALLY DIFFERENT FROM THE RESULTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. LABRANCHE ALSO
DISCLAIMS ANY OBLIGATION TO UPDATE ITS VIEW OF ANY SUCH RISKS OR UNCERTAINTIES
OR TO PUBLICLY ANNOUNCE THE RESULT OF ANY REVISIONS TO THE FORWARD-LOOKING
STATEMENTS MADE IN THIS REPORT.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH LABRANCHE'S CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO CONTAINED IN THIS
REPORT.
REVENUES
Our revenues consist primarily of net gain earned from principal
transactions in securities for which we act as specialist, and commissions
revenue earned from specialist and clearance activities. Net gain on principal
transactions represents trading gains net of trading losses and SEC transaction
fees, and are earned by us when we act as principal buying and selling our
specialist stocks and options. Commissions revenue consists of fees we earn when
our specialists act as agents to match buyers and sellers for limit orders
executed by us on behalf of brokers or other trading professionals after a
specified period of time; we do not earn commissions when we match market
orders. In addition, commissions revenue includes fees charged to customers for
execution and clearance activities by our clearing subsidiary, LaBranche
Financial Services, Inc. ("LFSI"). Other revenue consists of proprietary trading
gains or losses, appreciation or depreciation of our nonmarketable investments,
interest income, and fees charged to customers for use of our front-end order
execution system developed by LFSI. For the three months ended March 31, 2002,
net gain on principal transactions represented 72.6% of our total revenues,
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commissions revenue represented 17.1% of our total revenues, and other revenues
represented 10.3% of our total revenues.
EXPENSES
Our largest operating expense is employee compensation and related
benefits, which primarily consist of salaries, wages and profitability-based
compensation. Profitability-based compensation includes compensation and
benefits paid to managing directors, trading professionals and other employees
based on our profitability.
RECENT DEVELOPMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 addresses financial
accounting and reporting for goodwill and other intangible assets acquired in a
business combination, requiring that the purchase method of accounting be used
in all business combinations initiated after June 30, 2001. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets acquired individually or with a group of assets. Under the new
standard, trade name and goodwill will no longer be amortized, instead these
assets will be tested at least annually for impairment by applying a fair-value
based test. The specialist stock lists will continue to be amortized over their
respective lives. We will perform the required impairment tests on our
intangible assets to determine if there is a need to write them down. Although
we do not expect to incur any impairment of our intangible assets, it is
possible that in the future the carrying value of our goodwill and intangible
assets may be reduced.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 is effective for fiscal years beginning after December 15,
2001. We do not believe the implementation of SFAS No. 144 will have a material
impact on our consolidated financial statements.
CRITICAL ACCOUNTING POLICIES
All of our principal securities transactions and the related gains and
losses are recorded on a trade date basis. Customer securities transactions and
the related revenues and expenses are recorded on a settlement date basis, which
does not differ materially from trade date basis. Securities owned and
securities sold, but not yet purchased are reflected at market value and
unrealized gains and losses are reflected in net gain on principal transactions.
Securities not readily marketable have been valued at fair value as determined
by management using standard industry valuation methods. The resulting gain or
loss is reflected in the accompanying statements of operations.
Our balance sheet contains significant intangible assets. These intangible
assets are comprised of our specialist stock lists, trade name and goodwill
acquired in connection with our various acquisitions and the limited partner
buyout that occurred in connection with our
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reorganization from partnership to corporate form in August 1999. The specialist
stock lists are being amortized on a straight-line basis over 15 to 40 years.
The allocations of purchase price and determinations of useful lives were based
upon independent appraisals for all acquisitions through March 2001. In
addition, the useful lives of the acquired specialist stock lists were
determined based upon analysis of historical turnover characteristics of the
specialist stocks comprising these lists. For acquisitions subsequent to March
2001, the allocations of purchase price and determinations of useful lives were
based upon management's analysis of revenues, consideration paid, common stock
listings and other relevant data and ratios. This information was analyzed and
compared to the results of the independent appraisals conducted on acquisitions
prior to March 2001.
As discussed under "Recent Developments," with the implementation of SFAS
No. 142 we no longer amortize goodwill and intangible assets with indefinite
useful lives, which includes goodwill and trade name. We will perform periodic
impairment tests on these assets to determine if there is a need to write them
down. Although we do not expect to incur any impairment of our intangible
assets, it is possible that in the future the carrying value of our goodwill and
intangible assets may be reduced.
REPURCHASE OF OUR PREFERRED STOCK
On January 18, 2002, we offered to repurchase up to 30,000 shares of our
outstanding Series A preferred stock for $1,000 per share, plus accrued and
unpaid dividends up to but not including the date of purchase. On February 15,
2002, the offer expired, and on February 19, 2002, we purchased all of the
approximately 28,164 shares that had been tendered for approximately $28.5
million, including accrued but unpaid dividends. As a result of the purchase, we
recorded a one-time expense due to the acceleration of the discount accretion on
the shares purchased of approximately $1.5 million.
TRUST DECS OFFERING
On February 8, 2002, certain managing directors of LaBranche & Co. LLC
entered into prepaid forward contracts with DECS Trust IX, a statutory business
trust, pursuant to which the trust agreed to purchase from the participating
managing directors, on a date which is expected to be February 8, 2005, an
aggregate of 3,800,000 shares of our common stock owned by these managing
directors, subject to the terms and conditions set forth in the contracts. The
trust concurrently sold 3,800,000 trust securities, known as DECS, to investors.
We did not receive, nor will we receive, any portion of the proceeds from the
sale of shares pursuant to the contracts or from the sale of the DECS. The
participating managing directors bore responsibility for payment of the expenses
incurred by them in connection with this transaction.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
REVENUES
Total revenues increased 25.5% to $122.7 million for the three months ended
March 31, 2002, from $97.8 million for the same period in 2001, due to increases
in net gain on principal transactions, commissions and other revenue. Net gain
on principal transactions increased 9.3% to $89.1 million for the three months
ended March 31, 2002, from $81.5 million for the same period in 2001. This
increase was primarily due to our acquisitions of ROBB PECK McCOOEY Financial
Services, Inc. ("RPM") on March 15, 2001, the interest in the Freedom Specialist
Inc., R. Adrian & Company, LLC and LaBranche & Co. LLC Joint Book (the "Joint
Book") which we did not previously own on September 20, 2001 and Bocklet &
Company, LLC ("Bocklet") on October 18, 2001. As a result of these acquisitions
we became the specialist for 218 additional common stock listings. In addition,
the increase was due to an increase in principal trading share volume in our
specialist stocks traded on the NYSE. These factors were partially offset by
unfavorable market conditions during the first quarter of 2002. Our share volume
as principal increased 56.1% to 8.9 billion shares for the three months ended
March 31, 2002, from 5.7 billion shares for the same period in 2001.
Commissions revenue increased 78.0% to $21.0 million for the three
months ended March 31, 2002, from $11.8 million for the same period in 2001.
This increase was primarily due to an increase in commissions revenue earned
by our LFSI subsidiary for execution and clearing services to $7.8 million
for the three months ended March 31, 2002 from $1.6 million for the same
period in 2001. In addition, floor brokerage income from our LaBranche & Co.
LLC subsidiary increased to $13.2 million from $10.2 million as a result of
the full quarter impact of our acquisition of RPM on the first quarter of
2002. The share volume executed by us as agent in our specialist stocks
increased by 42.9% to 2.0 billion shares for the three months ended March 31,
2002, from 1.4 billion shares for the same period in 2001.
Other revenue increased 180.0% to $12.6 million for the three months ended
March 31, 2002, from $4.5 million for the same period in 2001. This increase was
primarily due to the appreciation, by approximately $9.4 million, of the
minority position we hold in Lava Trading Inc., a company which provides market
data distribution, trading technology, electronic communications networks and
exchange connectivity for NASDAQ market makers, broker-dealers and large
institutional investors.
EXPENSES
Total expenses before provision for income taxes increased 30.3% to $69.2
million for the three months ended March 31, 2002, from $53.1 million for the
same period in 2001.
Employee compensation and related benefits expense increased 26.4% to $31.1
million for the three months ended March 31, 2002, from $24.6 million for the
same period in 2001. This increase was primarily due to our 2001 acquisitions,
which increased our average headcount by approximately 196 individuals for the
three months ended March 31, 2002 as compared to the
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same period in 2001. This increase was partially offset by a decrease in
profitability-based compensation. Employee compensation increased to 25.3% of
total revenues for the three months ended March 31, 2001, from 25.2% of total
revenues for the same period in 2001.
Interest expense increased 5.8% to $12.8 million for the three months ended
March 31, 2002, from $12.1 million for the same period in 2001. This increase
was primarily due to additional interest charges associated with the issuance of
$16.4 million of subordinated indebtedness in connection with the Bocklet
acquisition in October 2001, as well as a full quarter of interest on the $9.0
million of secured demand notes assumed in connection with the RPM acquisition.
Interest expense decreased to 10.5% of total revenues for the three months ended
March 31, 2002, from 12.4% of total revenues for the same period in 2001.
Exchange, clearing and brokerage fees expense increased 160.0% to $7.8
million for the three months ended March 31, 2002, from $3.0 million for the
same period in 2001. This increase was primarily due to an increase in fees
incurred by our clearing operations, increased principal trading volumes as a
result of our 2001 acquisitions and an increase in NYSE regulatory fees based
upon exchange seat use. Exchange, clearing and brokerage fees expense increased
to 6.3% of total revenues for the three months ended March 31, 2002, from 3.1%
of total revenues for the same period in 2001.
Lease of exchange memberships expense increased 71.8% to $6.7 million for
the three months ended March 31, 2002, from $3.9 million for the same period in
2001. This was the result of a 25-membership increase in the average number of
our leased memberships for the first quarter of 2002 as compared to the first
quarter of 2001. An increase in the average annual leasing cost of the
memberships from approximately $312,000 to $330,000 per membership also
contributed to the increase. Additionally, the increase was the result of
leasing 10 additional AMEX memberships during the first quarter of 2002 as the
result of our acquisition of Cranmer & Cranmer, Inc. in August 2001. Lease of
exchange memberships expense increased to 5.5% of total revenues for the three
months ended March 31, 2002, from 3.9% of total revenues for the same period in
2001.
Depreciation and amortization of intangibles expense decreased 45.9% to
$3.3 million for the three months ended March 31, 2002, from $6.1 million for
the same period in 2001. The decrease was due to the adoption of SFAS No. 142
commencing January 1, 2002, which requires that we cease amortization of
recorded goodwill and intangible assets with indefinite useful lives.
Amortization made up approximately $2.6 million of the $3.3 million total, and
depreciation comprised the remaining $0.7 million. Depreciation and amortization
of intangibles expense decreased to 2.7% of total revenues for the three months
ended March 31, 2002, from 6.3% of total revenues for the same period in 2001.
Other expenses increased 124.2% to $7.4 million for the three months ended
March 31, 2002, from $3.3 million for the same period in 2001. This increase was
due to a charge related to the buyback of approximately 28,164 shares of our
Series A preferred stock. The increase was also due to additional communication,
occupancy and legal and professional expenses as a result of our 2001
acquisitions and the general expansion of our business.
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INCOME BEFORE PROVISION FOR INCOME TAXES
Income before provision for income taxes increased 19.7% to $53.5 million
for the three months ended March 31, 2002, from $44.7 million for the same
period in 2001. This increase was due to the increase in our total revenues,
which was partially offset by the increase in employee compensation and related
benefits expense, exchange, clearing and brokerage fees, lease of exchange
memberships expense and other expenses.
INCOME TAXES
Provision for income taxes increased 8.8% to $25.9 million for the three
months ended March 31, 2002, from $23.8 million for the same period in 2001.
This increase was primarily due to an increase in our profitability.
LIQUIDITY
As of March 31, 2002, we had $1,980.9 million in assets, of which $107.1
million consisted of cash and short-term investments primarily in government
obligations maturing within three months, and cash and securities segregated
under federal regulations.
In February 2002, our LaBranche & Co. LLC subsidiary extended its
$200.0 million line-of-credit with a U.S. commercial bank until February 27,
2003. Borrowings under this U.S. commercial bank credit facility would be
secured by our inventory of specialist stocks and would bear interest at the
U.S. commercial bank's broker loan rate. To date, we have not utilized this
facility. In order to maintain the availability of funds under this credit
facility, we must comply with certain customary covenants.
As of March 31, 2002, the subordinated indebtedness of LaBranche & Co. LLC
aggregated $66.0 million (excluding subordinated liabilities related to
contributed exchange memberships) and consisted of the following:
- $35.0 million in senior subordinated notes,
- $20.0 million of which were privately placed pursuant to note
purchase agreements, mature on September 15, 2002 and bear
interest at an annual rate of 8.17%, payable on a quarterly
basis; and
- $15.0 million of which were privately placed pursuant to note
purchase agreements, mature on June 3, 2008 and bear interest at
an annual rate of 7.69%, payable on a quarterly basis.
- $31.0 million in junior subordinated notes,
- $8.0 million of which were issued to former limited partners,
family members of former employees and former equity owners of
Bocklet and their respective family members. These notes mature
on varying dates ranging from the second half of 2002 and the
second half of 2003 and bear
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interest at annual rates ranging from 8.0% to 10.0%, payable on
a quarterly basis;
- $9.0 million in secured demand note obligations which were
assumed in connection with our acquisition of RPM, of which $1.0
million matures in April 2003 and $8.0 million matures in June
2003, and bear interest at variable rates, payable monthly; and
- $14.0 million in secured demand note obligations to two former
members of Bocklet which were incurred in connection with our
acquisition of Bocklet, bear interest at an annual rate of 10.0%
and mature in October 2002.
Of the total $31.0 million of junior subordinated notes, $14.6 million have
automatic rollover provisions, which extend their respective maturities for an
additional year, unless the lender provides at least seven months' advance
notice prior to maturity. LaBranche & Co. LLC also is entitled to prepay the
junior subordinated notes and the secured demand note obligations without
penalty under the terms of the agreements relating thereto.
On August 24, 1999, in connection with our reorganization from partnership
to corporate form, we issued a $16.0 million senior note as partial payment for
the acquisition of a certain limited partnership interest in LaBranche & Co. LLC
(prior to its conversion to a limited liability company). The note is payable in
three annual installments and bears interest at the annual rate of 9.5%. We
repaid an aggregate principal amount of $11.0 million of this note in August
2000 and 2002, and the remaining principal amount of $5.0 million, plus accrued
and unpaid interest, is payable on August 24, 2002.
As of March 31, 2002, we had an aggregate of $13.6 million of outstanding
indebtedness, which we had assumed in connection with the RPM acquisition and
which consisted of:
- $3.0 million in subordinated notes issued to family members of former
employees of RPM which mature between the first half of 2003 and the
first half of 2006 and bear interest at annual rates ranging from
12.0% to 12.5%, payable on a quarterly basis;
- a $295,000 promissory note which has an automatic rollover provision
that extends the maturity for an additional year, unless the lender
provides notice at least 30 days prior to maturity, and bears interest
at an annual rate of 9.0% payable on a quarterly basis;
- $8.0 million in promissory notes issued to former RPM employees and
their family members which are payable in equal annual installments on
the anniversaries of issuance, mature on dates ranging from first half
of 2002 to the first half of 2005, and bear interest at annual rates
ranging from 8.0% to 12.0%, payable on a quarterly basis; and
- $2.3 million in notes representing deferred compensation owed to
former RPM employees which are payable in equal annual installments on
the anniversaries of
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issuance, mature on dates ranging from the first half of 2002 to the
second half of 2004 and bear interest at annual rates ranging from
9.5% to 10.0%, payable on a quarterly basis.
In connection with our acquisition of RPM, we issued 100,000 shares of our
nonconvertible Series A preferred stock to the former stockholders of RPM. Each
outstanding share of our Series A preferred stock entitles the holder to
cumulative preferred cash dividends at an annual rate of 8.0% of the liquidation
preference per share until the fourth anniversary of the closing of the merger,
10.0% until the fifth anniversary of the closing, and 10.8% thereafter.
Dividends are payable on the first day of January and the first day of July of
each year (or if such date is not a regular business day, then the next business
day thereafter). The first payment of dividends was made on July 1, 2001.
Dividends on the issued and outstanding shares of Series A preferred stock are
preferred and cumulative and accrue daily from the date on which they were
originally issued. On January 18, 2002, we offered to repurchase up to 30,000
shares of our outstanding Series A preferred stock for $1,000 per share, plus
accrued and unpaid dividends up to but not including the date of purchase. On
February 15, 2002, the offer expired, and on February 19, 2002, we purchased all
of the approximately 28,164 shares that had been tendered for a purchase price
of approximately $28.5 million, including accrued but unpaid dividends. As of
March 31, 2002, 71,836 shares of our Series A preferred stock were outstanding.
In connection with our acquisition of RPM, we succeeded to its liabilities
and obligations under its deferred compensation plan. The deferred compensation
plan provides for the payment, on or before December 15, 2007, of approximately
$30.2 million, plus interest at 8.0% per year, to certain former employees of
RPM. While the payment of benefits under this deferred compensation plan may be
accelerated in certain circumstances, no more than $6.0 million in deferred
compensation benefits (including interest) may be paid in any 12 consecutive
month period. We paid $6.0 million under the deferred compensation plan in March
2002. If the plan is terminated, the deferred compensation benefits (including
interest) of all participants, to the extent not previously paid, must be
distributed to the participants in a lump sum. The amounts payable under this
deferred compensation plan may be reduced to satisfy any indemnification
obligations of the plan participants to us under the agreements governing our
acquisition of RPM.
In connection with our acquisition of RPM, we succeeded to its liabilities
and obligations under the Robb Peck McCooey Pension Trust. The pension trust was
amended prior to our acquisition of RPM to freeze all future benefit accruals as
of March 15, 2001. The pension trust was terminated, effective as of August 31,
2001, and we contributed $1.2 million to the trust in May 2002 in order to
fund a deficiency in the required value of the assets of the trust.
We also assumed RPM's liabilities and obligations under its retention bonus
pool. The retention bonus pool requires $9.0 million to be paid as bonus
compensation on March 15, 2004 to as many as 31 former employees of RPM. The
portion of this retention bonus pool payable to each of these former
employees will be determined by the majority vote of a committee consisting
of Robert M. Murphy, George E. Robb, Jr. and Michael LaBranche or their
respective successors.
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On August 24, 1999, we issued $100.0 million aggregate principal amount of
Senior Notes. The Senior Notes bear interest at a rate of 9.5% annually and
mature in August 2004. The indenture covering the Senior Notes includes certain
covenants that, among other things, limit our ability to borrow money, pay
dividends on our stock or purchase our stock, make investments, engage in
transactions with stockholders and affiliates, create liens on our assets, and
sell assets or engage in mergers and consolidations, except in accordance with
certain specified conditions.
On March 2, 2000, we issued $250.0 million aggregate principal amount of
Senior Subordinated Notes. These Senior Subordinated Notes bear interest at a
rate of 12.0% annually and mature in March 2007. The indenture covering the
Senior Subordinated Notes includes certain covenants that, among other things,
limit our ability to borrow money, pay dividends on our stock or purchase our
stock, make investments, engage in transactions with stockholders and
affiliates, create liens on our assets, and sell assets or engage in mergers and
consolidations, except in accordance with certain specified conditions.
The Senior Subordinated Notes also require us, within 150 days after the
end of each fiscal year, to offer to redeem from all holders of the Senior
Subordinated Notes a principal amount equal to our Excess Cash Flow at a price
equal to 103.0% of the principal amount being offered for purchase plus accrued
and unpaid interest, if any, to the date of redemption. Each holder is entitled
to be offered his or her pro rata share based upon his or her ownership
percentage of the outstanding Senior Subordinated Notes. Excess Cash Flow is
defined for this purpose as 40.0% of the amount by which our consolidated EBITDA
exceeds the sum of our interest expense, tax expense, increase in net capital or
net liquid asset requirements, capital expenditures, any cash amounts related to
acquisitions of NYSE specialists or any cash payments related to our payment at
maturity of the principal amount of our existing or certain other indebtedness.
In May 2001, we offered to purchase an aggregate principal amount of
approximately $9.9 million of Senior Subordinated Notes pursuant to this Excess
Cash Flow offer requirement and no Senior Subordinated Notes were tendered. In
2002, we were not required to make an Excess Cash Flow offer to the holders of
Senior Subordinated Notes because we did not have Excess Cash Flow as of
December 31, 2001, as defined for this purpose.
As a registered broker-dealer, LaBranche & Co. LLC is subject to regulatory
requirements intended to ensure the general financial soundness and liquidity of
broker-dealers and requiring the maintenance of minimum levels of net capital,
as defined in SEC Rule 15c3-1. LaBranche & Co. LLC is required to maintain
minimum net capital, as defined, equivalent to the greater of $100,000 or 1/15
of aggregate indebtedness, as defined. NYSE Rule 326(c) also prohibits a
broker-dealer from repaying subordinated borrowings, paying cash dividends,
making loans to any parent, affiliates or employees, or otherwise entering into
transactions which would result in a reduction of its total net capital to less
than 150.0% of its required minimum capital. Moreover, broker-dealers are
required to notify the SEC prior to repaying subordinated borrowings, paying
dividends and making loans to any parent, affiliate or employee, or otherwise
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entering into transactions which, if executed, would result in a reduction of
30.0% or more of their excess net capital (net capital less minimum
requirement). The SEC has the ability to prohibit or restrict such transactions
if the result is deemed detrimental to the financial integrity of the
broker-dealer.
As of March 31, 2002 and December 31, 2001, LaBranche & Co. LLC's net
capital, as defined under SEC Rule 15c3-1, was $459.2 million and $484.2
million, respectively, which exceeded its minimum requirements by $456.6 million
and $481.4 million, respectively.
The NYSE generally requires its specialist firms to maintain a minimum
dollar regulatory capital amount in order to establish that they can meet, with
their own net liquid assets, their position requirement. As of March 31, 2002,
LaBranche & Co. LLC's NYSE minimum required dollar amount of net liquid assets,
as defined, was $446.0 million, compared to actual net liquid assets, as
defined, of $466.3 million.
Failure to maintain the required net capital and net liquid assets may
subject us to suspension or revocation of SEC registration or suspension or
expulsion by the NYSE.
As a registered broker-dealer and NYSE member firm, our LFSI subsidiary
also is subject to SEC Rule 15c3-1, as adopted and administered by the NYSE.
Under the alternative method permitted by the rule, LFSI's minimum required net
capital is equal to the greater of $250,000 or 2% of aggregate debit items, as
defined. As of March 31, 2002, LFSI's net capital, as defined under SEC Rule
15c3-1, was $24.3 million and exceeded its minimum requirements by $23.4
million.
We currently anticipate that our available cash resources will be
sufficient to meet our working capital, regulatory capital and capital
expenditure requirements through the end of 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
A majority of our specialist related revenues are derived from trading
as principal. Additionally, a high concentration of our specialist trading
revenue is generated from our ten most profitable specialist stocks. However,
the percentage of our specialist trading revenue generated from our ten most
profitable specialist stocks has decreased to 25.1% of principal trading
revenue for the quarter ended March 31, 2002 from 40.0% of principal trading
revenue for the same period last year. We are not overly reliant on a
particular group of specialist stocks, as the composition of our ten most
profitable specialist stocks changes from year to year. We also operate a
proprietary trading desk separately from our NYSE and AMEX specialist
operations, whose revenues represented (0.2)% of our total revenues for the
three months ended March 31, 2002 and (0.6)% of our total revenues for the
same period in 2001. We may continue to incur trading losses as a result of
these trading activities. These activities involve primarily the purchase,
sale or short sale of securities for our own account. These activities are
subject to a number of risks, including risks of price fluctuations and rapid
changes in the liquidity of markets. In any period, we may incur trading
losses in our specialist stocks for a variety of reasons, including price
fluctuations of our
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specialist stocks, lack of trading volume in our specialist stocks and the
performance of our specialist obligations. From time to time, we have large
position concentrations in securities of a single issuer or issuers engaged in a
specific industry. In general, because our inventory of securities is marked to
market on a daily basis, any significant price movement in these securities
could result in a reduction of our revenues and operating profits.
We have developed a risk management process, which is intended to balance
our ability to profit from our specialist activities with our exposure to
potential losses. In addition, we have trading limits relating to our
proprietary trading activities.
Although we have adopted risk management policies, we cannot be sure that
these policies have been formulated properly to identify or limit our risks.
Even if these policies are formulated properly, we cannot be sure that we will
successfully implement these policies. As a result, we may not be able to manage
our risks successfully or avoid trading losses.
LFSI has clearance activities that involve settlement and financing of
various customer securities transactions on a cash or margin basis. These
activities may expose LFSI to off-balance sheet risk in the event a customer or
other broker is unable to fulfill its contractual obligations and LFSI has to
purchase or sell securities at a loss. For margin transactions, LFSI may be
exposed to significant off-balance sheet risk in the event margin requirements
are not sufficient to fully cover losses that customers may incur in their
accounts.
LFSI seeks to control the risks associated with customer activities by
requiring customers to maintain margin collateral in compliance with various
regulatory and internal guidelines. LFSI monitors margin levels daily and,
pursuant to such guidelines, requires customers to deposit additional collateral
or to reduce positions when necessary.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
None.
(b) REPORTS ON FORM 8-K.
None.
All other items of this report are inapplicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 15, 2002 LABRANCHE & CO INC.
By: /s/ Harvey S. Traison
----------------------
Name: Harvey S. Traison
Title: Chief Financial Officer
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