Greenhill & Co. Reports Second Quarter Earnings per Share of $1.04

- Third largest revenue quarter in history of the Firm

NEW YORK, July 31 /PRNewswire-FirstCall/ -- Greenhill & Co., Inc.
(NYSE: GHL) today reported revenues of $108.7 million and net income of $28.9
million for the quarter ended June 30, 2008. Diluted earnings per share were
$1.04 per share for the quarter.
The Firm's second quarter revenues compare with revenues of $140.6 million
for the second quarter of 2007, which represents a decrease of $31.9 million
or 23%. On a year-to-date basis, revenues through June 30, 2008 were $184.0
million, compared to $184.1 million for the comparable period in 2007,
representing a decrease of $0.1 million or 0.1%.
The Firm's second quarter net income and diluted earnings per share in
2008 compare with net income of $42.7 million and diluted earnings per share
of $1.47 in the second quarter of 2007, which represents decreases of 32% and
29%, respectively. On a year-to-date basis, net income was $48.1 million
through June 30, 2008, compared to net income of $51.4 million for the
comparable period in 2007, which represents a decrease of 6%. Diluted
earnings per share for the six months ended June 30, 2008 were $1.72, which
compares to $1.75 for the same period in 2007, representing a decrease of
$0.03 per share or 2%.
The Firm's quarterly revenues and net income can fluctuate materially
depending on the number and size of completed transactions on which it
advised, the number and size of merchant banking gains (or losses) and other
factors. Accordingly, the revenues and net income in any particular quarter
may not be indicative of future results.
"In the twelve months since credit availability was sharply reduced and
global transaction activity began to decline, Greenhill's revenue has remained
strong, its pretax profit margin has consistently remained above 40%, its
balance sheet has remained transparent and unleveraged, and its return on
equity has remained consistent with historic high levels. Our outstanding
results in this challenging period, which echo the success we had in the
difficult 2001-2003 period, are evidence of the strength and diversity of our
business model," Robert F. Greenhill, Chairman, said.
"Our Merchant Banking business has continued to generate excellent
performance. While investors sometimes focus almost exclusively on our
Advisory business, Merchant Banking has generated 24% of our total revenue in
the period since January 2005, when our first fund began to mature. Today we
have three funds actively investing, which together manage more than three
times the assets we managed in our highly successful first fund. And GHL
Acquisition Corp., our special purpose acquisition company, provides another
potential significant source of Merchant Banking revenue," Scott L. Bok, Co-
Chief Executive Officer, added.
"In our Advisory business, our corporate clients continue to generate
significant M&A activity, our status as a leading independent advisor
continues to attract new clients, and we continue to benefit from significant
advisory revenue that is unconnected to completion of publicly announced
transactions. Equally important, we have attracted substantial additional
talent while our competitors have been distracted by internal problems. We
continue to see opportunities to attract new talent to expand our industry
sector and geographic coverage, and our strong financial results give us the
flexibility to continue to take advantage of those expansion opportunities,"
Simon A. Borrows, Co-Chief Executive Officer, said.

Revenues

Revenues By Source
The following provides a breakdown of total revenues by source for the
three month and six month periods ended June, 2008 and 2007, respectively:

For the Three Months Ended
June 30, 2008 June 30, 2007
% of % of
Amount Total Amount Total
(in millions, unaudited)

Advisory fees $49.9 46% $127.0 90%
Merchant banking & other revenues 58.8 54% 13.6 10%
Total revenues $108.7 100% $140.6 100%

For the Six Months Ended
June 30, 2008 June 30, 2007
% of % of
Amount Total Amount Total
(in millions, unaudited)

Advisory fees $119.3 65% $163.3 89%
Merchant banking & other revenues 64.7 35% 20.8 11%
Total revenues $184.0 100% $184.1 100%

Advisory Revenues
Advisory revenues were $49.9 million in the second quarter of 2008
compared to $127.0 million in the second quarter of 2007, which represents a
decrease of 61%. For the six months ended June 30, 2008, advisory revenues
were $119.3 million compared to $163.3 million for the comparable period in
2007, representing a decrease of 27%.
Completed assignments in the second quarter of 2008 included:
-- the representation of the board of directors of Applera Corporation on
the merger of its Applied Biosystems business with Invitrogen Corporation;
-- the sale of American Financial Realty Trust to Gramercy Capital Corp;
-- the acquisition by G4S plc of ArmorGroup International plc;
-- the acquisition by G4S plc of Global Solutions Limited;
-- the acquisition by Hancock Timber Resource Group of TimberStar
Southwest; and
-- the representation of the special committee of the board of directors
of Wendy's International, Inc. on its merger with Triarc Companies, Inc.
The decrease in our advisory fees in the second quarter of 2008 as
compared to the same period in 2007 was due to fewer completed assignments
that were smaller in scale.
The Firm announced in the second quarter the recruitment of Gil H. Ha
(former Senior Managing Director at Evercore Partners). Mr. Ha will join the
Firm as a Managing Director based in New York and will be focused on the
telecommunications sector. The Firm also announced the recruitment of
Christopher D. Kirsten (former Global Head of the Private Fund Marketing Group
at Lehman Brothers), Patrick Dunleavy, and Neil Banta as a Managing Directors
based in New York to lead our Fund Placement Advisory Group. Mr. Dunleavy and
Mr. Banta both have served as Managing Directors in the Private Fund Marketing
Group at Lehman Brothers as well.
Merchant Banking & Other Revenues
The following table sets forth additional information relating to our
merchant banking and other income:

For the For the
Three Months Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
(in millions, unaudited)

Management fees $4.6 $4.2 $9.6 $8.1
Net gains on investments
in merchant banking funds 18.1 4.7 19.3 5.6

Merchant banking profit overrides 35.7 1.9 34.6 2.5
Other investment (loss) income (0.6) 0.8 (1.3) 1.8
Interest income 1.0 2.0 2.5 2.8
Merchant banking & other revenues $58.8 $13.6 $64.7 $20.8

The Firm earned $58.8 million in merchant banking and other revenues in
the second quarter of 2008 compared to $13.6 million in the second quarter of
2007, representing an increase of 332%. This increase was primarily
attributable to unrealized investment gains in our merchant banking portfolio
and related accrued carried interest and slightly higher management fees,
offset by principal investment losses and lower interest income. We benefited
from substantial gains in investments in two energy companies, both of which
became publicly traded companies after we first invested in them. These gains
more than offset significant losses on two private financial services
companies and smaller losses on other public and private financial services
companies. In total, during the second quarter of 2008 our merchant banking
funds (and the Firm) recognized gains from eight (8) of our portfolio
companies and recorded losses on five (5) of our portfolio companies.
As of the quarter end, the Firm had principal investments of $150.2
million, nearly all of which either were through investments in our four
merchant banking funds or GHL Acquisition Corp. (our special purpose
acquisition company). Of that amount, 49% of our investments related to the
energy sector, 24% to the financial services sector and 27% to other industry
sectors. We held 98% of our total principal investments in North American
companies, with the remainder in European companies. Our investments in
companies that have become publicly traded after we first invested in them
represented 59% of our total investments.
In terms of new investment activity during the second quarter of 2008, our
funds invested $18.1 million, 10% of which was Firm capital. In the same
period in 2007, our funds invested $128.4 million, 12% of which was Firm
capital. During the second quarter of 2008, Greenhill Capital Partners made
an in-kind distribution of its remaining shareholdings of Heartland Payment
Systems (NYSE: HPY).
For the first six months of 2008, the Firm earned $64.7 million in
merchant banking and other revenues compared to $20.8 million in the first six
months of 2007, an increase of 211%. This increase was primarily due to
unrealized investment gains in our merchant banking portfolio and related
accrued carried interest and slightly higher management fees offset by
principal investment losses and lower interest income.
"Our moderate use of leverage has continued to limit losses in our
merchant banking portfolio, and our diversified focus on energy, financial
services and other sectors has allowed us to generate significant gains in a
period of generally sharply declining market valuations. Equally important,
the early results of our second US fund, on top of the accomplishments of our
first fund, position us well for future fund raising," Robert H. Niehaus,
Chairman of Greenhill Capital Partners, commented.
Expenses
Operating Expenses
Our total operating expenses for the second quarter of 2008 were $61.6
million, which compares to $75.0 million of total operating expenses for the
second quarter of 2007. This represents a decrease in total operating
expenses of $13.4 million or 18%, which relates principally to a decrease in
compensation expense and is described in more detail below. The pre-tax
income margin was 43% in the second quarter of 2008 compared to 47% for the
second quarter of 2007.
For the six months ended June 30, 2008, total operating expenses were
$107.0 million, which compares to total operating expenses of $104.4 million
for the comparable period in 2007. The increase of $2.6 million or 3% relates
principally to an increase in certain non-compensation expenses described in
more detail below. The pre-tax income margin for the six months ended June
30, 2008 was 42% compared to 43% for the comparable period in 2007.
The following table sets forth information relating to our operating
expenses, which are reported net of reimbursements:

For the For the
Three Months Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
(in millions, unaudited)
Employee compensation &
benefits expense $49.8 $64.4 $84.5 $84.6
% of revenues 46% 46% 46% 46%

Non-compensation expense 11.8 10.6 22.5 19.8
% of revenues 11% 8% 12% 11%
Total operating expense 61.6 75.0 107.0 104.4
% of revenues 57% 53% 58% 57%
Minority interest in net
income of affiliates 0.4 0.1 0.3 0.1
Total income before tax 46.7 65.5 76.7 79.6
Pre-tax income margin 43% 47% 42% 43%

"We remain committed to a shareholder-friendly compensation ratio
throughout market cycles, as well as to holding our non-compensation costs to
minimal levels, while still investing in the expansion of our business by
adding additional talent and incurring the incremental costs that go along
with that expansion," Richard J. Lieb, Chief Financial Officer, commented.
Compensation and Benefits Expenses
Our employee compensation and benefits expenses in the second quarter of
2008 were $49.8 million, which reflects a 46% ratio of compensation to
revenues. This amount compares to $64.4 million for the second quarter of
2007 which also reflected a 46% ratio of compensation to revenues. The
decrease of $14.6 million or 23% is due to the lower level of revenues in the
second quarter of 2008 as compared to the same period in the prior year.
For the six months ended June 30, 2008 and 2007, the ratio of compensation
to revenues remained constant at 46%. Since revenues were comparable for the
six months ended June 30, 2008 and 2007 our year-to-date employee compensation
and benefits expense was $84.5 million in 2008 as compared to $84.6 million of
compensation and benefits expense for the six months ended June 30, 2007.
Our compensation expense is generally based upon revenue and can fluctuate
materially in any particular quarter depending upon the amount of revenue
recognized as well as other factors. Accordingly, the amount of compensation
expense recognized in any particular quarter may not be indicative of
compensation expense in a future period.
Non-Compensation Expenses
Our non-compensation expenses were $11.8 million in the second quarter of
2008, which compared to $10.6 million in the second quarter of 2007,
representing an increase of 11%. The increase is principally related to
higher occupancy cost and other costs for our London and Frankfurt offices, an
increase in recruitment costs and the absence of foreign currency gains during
the second quarter of 2008 as compared to the prior year.
For the first six months of 2008, our non-compensation expenses were $22.5
million, which compared to $19.8 million in the first six months of 2007,
representing an increase of 14%. The increase is principally related to
higher occupancy cost and other costs for our London and Frankfurt offices, an
increase in interest expense related to greater short-term borrowings during
the first six months of 2008 as compared to the same period in 2007, and
higher costs for information services and recruiting fees related to an
increase in personnel.
Non-compensation expenses as a percentage of revenues in the three months
ended June 30, 2008 were 11% compared to 8% for the same period in the prior
year. This increase in non-compensation expenses as a percentage of revenue
in the second quarter of 2008 as compared to the same period in the prior year
reflects a higher amount of expenses spread over lower revenues. Non-
compensation expenses as a percentage of revenues in the six months ended June
30, 2008 were 12% compared to 11% for the same period in the prior year. This
increase in non-compensation expenses as a percentage of revenue in the six
months ended June 30, 2008 as compared to the same period in the prior year
reflects a higher amount of expenses spread over a similar amount of revenues.
The Firm's non-compensation expenses as a percentage of revenue can vary
as a result of a variety of factors including fluctuation in revenue amounts,
the amount of recruiting and business development activity, the amount of
reimbursement of engagement-related expenses by clients, the amount of short
term borrowings, interest rate and currency movements and other factors.
Accordingly, the non-compensation expenses as a percentage of revenue in any
particular period may not be indicative of the non-compensation expenses as a
percentage of revenue in future periods.
Provision for Income Taxes
The provision for taxes in the second quarter of 2008 was $17.7 million,
which reflects an effective tax rate of approximately 38%. This compares to a
provision for taxes in the second quarter of 2007 of $22.8 million, which
reflects an effective tax rate of approximately 35%. The decrease in the
provision for taxes results from lower pre-tax income in the period partially
offset by a higher effective rate due to a greater proportion of our pre-tax
income being earned in higher tax rate jurisdictions during the period.
For the six months ended June 30, 2008, the provision for taxes was $28.6
million, which reflects an effective tax rate of approximately 37%. This
compares to a provision for taxes for the six months ended June 30, 2007 of
$28.1 million, which reflects an effective tax rate of approximately 35% for
the period. The increase in the provision for taxes is primarily due to a
higher effective tax rate due to a greater proportion of our income being
earned in higher tax rate jurisdictions during the current period.
The effective tax rate can fluctuate as a result of variations in the
relative amounts of advisory and merchant banking income earned in the tax
jurisdictions in which the Firm operates and invests. Accordingly, the
effective tax rate in any particular quarter may not be indicative of the
effective tax rate in future periods.
Liquidity and Capital Resources
As of June 30, 2008, our cash and short-term investment securities totaled
$80.2 million, our investments totaled $150.2 million and we had $78.0 million
in short-term debt.
We had total commitments (not reflected on our balance sheet) relating to
future investments in our merchant banking activities, of $76.0 million as of
June 30, 2008. These commitments are expected to be drawn on from time to
time over a period of up to five years from the relevant commitment dates of
each fund.
The Firm repurchased 162,250 shares of its common stock in open market
purchases at an average price of $61.63 during the second quarter of 2008 and
had remaining authorization to repurchase up to $85.0 million of common stock
in open market transactions.
Dividend
The Board of Directors of Greenhill & Co., Inc. has declared a dividend of
$0.45 per share to be paid on September 17, 2008 to common stockholders of
record on September 3, 2008.
Greenhill & Co., Inc. is a leading independent investment bank that
provides financial advice on significant mergers, acquisitions and
restructurings; assists private funds in raising capital from investors; and
manages merchant banking funds. It acts for clients located throughout the
world from its offices in New York, London, Frankfurt, Toronto, Dallas and San
Francisco.
Cautionary Note Regarding Forward-Looking Statements
The preceding discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes that appear below. We
have made statements in this discussion that are forward-looking statements.
In some cases, you can identify these statements by forward-looking words such
as "may", "might", "will", "should", "expect", "plan", "anticipate",
"believe", "estimate", "predict", "potential" or "continue", the negative of
these terms and other comparable terminology. These forward-looking
statements, which are subject to risks, uncertainties and assumptions about
us, may include projections of our future financial performance, based on our
growth strategies and anticipated trends in our business. These statements are
only predictions based on our current expectations and projections about
future events. There are important factors that could cause our actual
results, level of activity, performance or achievements to differ materially
from the results, level of activity, performance or achievements expressed or
implied by the forward-looking statements. These factors include, but are not
limited to, those discussed in our Report on Form 10-K under the caption "Risk
Factors".
Contact: Richard J. Lieb,
Chief Financial Officer
Greenhill & Co., Inc.
(212) 389-1800

Greenhill & Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)

For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Revenues
Advisory fees $49,892,910 $126,916,746 $119,342,305 $163,246,880
Merchant banking
revenue 57,728,641 11,716,656 62,259,456 18,056,525
Interest income 1,048,124 1,960,373 2,448,299 2,768,371
Total revenues 108,669,675 140,593,775 184,050,060 184,071,776

Expenses
Employee
compensation
and benefits 49,838,192 64,384,474 84,513,169 84,615,729
Occupancy and
equipment rental 2,770,988 2,225,157 5,385,936 4,487,030
Depreciation and
amortization 1,146,535 1,042,612 2,252,356 2,038,298
Information services 1,325,522 1,331,473 3,059,004 2,563,187
Professional fees 1,287,675 1,049,434 2,211,974 1,884,931
Travel related
expenses 1,652,221 1,919,609 3,599,115 3,742,818
Interest expense 911,155 928,997 2,067,341 1,246,492
Other operating
expenses 2,715,864 2,110,723 3,907,927 3,799,041
Total expenses 61,648,152 74,992,479 106,996,822 104,377,526

Income before
tax and minority
interest 47,021,523 65,601,296 77,053,238 79,694,250

Minority interest
in net income
of affiliates 375,975 86,828 325,776 124,537

Income before
tax 46,645,548 65,514,468 76,727,462 79,569,713

Provision for taxes 17,727,176 22,786,272 28,596,829 28,121,602

Net Income $28,918,372 $42,728,196 $48,130,633 $51,448,111

Average common
shares outstanding:
Basic 27,848,736 28,970,657 27,903,707 29,201,696
Diluted 27,904,439 29,087,226 27,962,961 29,332,144
Earnings per share:
Basic $1.04 $1.47 $1.72 $1.76
Diluted $1.04 $1.47 $1.72 $1.75

Dividends declared
and paid per common
share $0.45 $0.25 $0.90 $0.50

SOURCE Greenhill & Co., Inc.

Richard J. Lieb, Chief Financial Officer of Greenhill & Co., Inc.,
+1-212-389-1800