10-Q 1 maxcor_q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2004 Commission File Number 0-25056 ------- MAXCOR FINANCIAL GROUP INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 59-3262958 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One Seaport Plaza - 19th Floor New York, New York 10038 --------------------------------------- (Address of principal executive office) (646) 346-7000 ---------------------------- (Registrant's telephone number, including area code) 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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The number of shares of common stock, par value $.001 per share, of the registrant outstanding as of May 13, 2004 was 7,121,855. The Exhibit Index is on Page 27. Page 1 of 59 Pages MAXCOR FINANCIAL GROUP INC. INDEX ----- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): 3 Consolidated Statements of Financial Condition 4 Consolidated Statements of Operations 5 Consolidated Statements of Changes in Stockholders' Equity 6 Consolidated Statements of Cash Flows 7 Notes to the Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures about Market Risk 23 Item 4. Controls and Procedures 23 PART II. OTHER INFORMATION Item 1. Legal Proceedings 24 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 24 Item 6. Exhibits and Reports on Form 8-K 25 Signatures 26 Exhibit Index 27 Page 2 of 59 Pages PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED FINANCIAL STATEMENTS --------------------------------- MARCH 31, 2004 -------------- (Unaudited) Page 3 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION ---------------------------------------------- (Unaudited) -----------
ASSETS March 31, 2004 December 31, 2003 ------ ----------------- ----------------- Cash and cash equivalents $ 42,959,472 $ 67,170,247 Securities purchased under agreements to resell 351,677,161 1,446,677,977 Deposits with clearing organizations 11,322,895 8,848,729 Receivable from broker-dealers and customers 37,359,047 22,324,106 Securities failed-to-deliver 82,434,525 90,669,388 Securities owned 42,344,619 6,687,124 Prepaid expenses and other assets 6,507,957 7,003,794 Deferred tax asset 719,310 734,408 Fixed assets 12,718,555 13,010,863 ----------------- ----------------- Total assets $ 588,043,541 $ 1,663,126,636 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities: Securities sold under agreements to repurchase $ 342,336,436 $ 1,470,461,908 Payable to broker-dealers and customers 6,270,471 Securities failed-to-receive 77,379,365 66,544,835 Securities sold, not yet purchased 47,374,070 22,428 Accounts payable and accrued liabilities 19,973,815 21,137,048 Accrued compensation payable 19,730,184 30,198,757 Income taxes payable 2,341,211 1,469,456 Deferred taxes payable 4,854,012 5,043,758 Obligations under capitalized leases 469,179 703,944 Revolving credit facility 5,000,000 7,500,000 ----------------- ----------------- 525,728,743 1,603,082,134 ----------------- ----------------- Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value, 1,000,000 shares authorized; none issued at March 31, 2004 and December 31, 2003 Common stock, $.001 par value, 30,000,000 shares authorized; 12,847,876 and 12,794,626 shares issued at March 31, 2004 and December 31, 2003, respectively 12,848 12,795 Additional paid-in capital 38,972,722 38,718,445 Treasury stock at cost; 5,680,903 and 5,655,903 shares of common stock held at March 31, 2004 and December 31, 2003, respectively ( 17,052,821) ( 16,771,571) Retained earnings 38,336,634 36,178,583 Accumulated other comprehensive income: Foreign currency translation adjustments 2,045,415 1,906,250 ----------------- ----------------- Total stockholders' equity 62,314,798 60,044,502 ----------------- ----------------- Total liabilities and stockholders' equity $ 588,043,541 $ 1,663,126,636 ================= =================
The accompanying notes are an integral part of these consolidated financial statements. Page 4 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Unaudited) -----------
For the Three Months Ended -------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Revenue: Commission income $ 48,050,301 $ 41,149,353 Principal transactions 3,500,510 ( 4,081,752) Interest income 1,926,968 639,716 Other ( 375,616) ( 319,478) -------------- -------------- Gross revenue 53,102,163 37,387,839 Interest expense on securities indebtedness 1,695,279 45,098 -------------- -------------- Net revenue 51,406,884 37,342,741 -------------- -------------- Costs and expenses: Compensation and related costs 33,975,005 29,807,150 Communication costs 3,406,872 3,240,791 Travel and entertainment 2,774,983 1,911,897 Occupancy and equipment rental 2,538,472 1,108,520 Clearing and execution fees 1,012,354 869,471 Depreciation and amortization 809,143 765,735 Other interest expense 53,249 36,477 General, administrative and other expenses 1,904,804 1,682,724 -------------- -------------- 46,474,882 39,422,765 -------------- -------------- Income (loss) before provision for income taxes, minority interest and extraordinary item 4,932,002 ( 2,080,024) Provision (benefit) for income taxes 2,326,562 ( 1,079,919) -------------- -------------- Income (loss) before minority interest and extraordinary item 2,605,440 ( 1,000,105) Minority interest in income of consolidated subsidiary ( 175,985) -------------- -------------- Income (loss) before extraordinary item 2,605,440 ( 1,176,090) Extraordinary gain on purchase of minority interest 2,957,547 -------------- -------------- Net income $ 2,605,440 $ 1,781,457 ============== ============== Basic earnings (loss) per share: Income (loss) before extraordinary item $ .36 ($ .16) Extraordinary gain on purchase of minority interest .41 -------------- -------------- Net income $ .36 $ .25 ============== ============== Diluted earnings (loss) per share: Income (loss) before extraordinary item $ .32 ($ .16) Extraordinary gain on purchase of minority interest .41 -------------- -------------- Net income $ .32 $ .25 ============== ============== Cash dividends per share of common stock $ .0625 $ ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. Page 5 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ---------------------------------------------------------- FOR THE PERIODS ENDED DECEMBER 31, 2003 AND MARCH 31, 2004 ---------------------------------------------------------- (Unaudited)
Accumulated Additional Other Comprehensive Common Paid-in Treasury Retained Comprehensive Income Stock Capital Stock Earnings Income Total ------------ ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2002 $ 12,233 $ 36,517,908 ($ 11,208,967) $ 20,741,779 $ 1,530,133 $ 47,593,086 Comprehensive income Net income for the year ended December 31, 2003 $ 16,314,792 16,314,792 16,314,792 Foreign currency translation adjustment (inclusive of income tax benefit of $2,712) 376,117 376,117 376,117 ------------ Comprehensive income $ 16,690,909 ============ Exercise of stock options, including tax benefit of $763,293 562 2,200,537 ( 826,303) 1,374,796 Acquisition of treasury stock ( 4,736,301) ( 4,736,301) Common stock dividends ( 877,988) ( 877,988) ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2003 12,795 38,718,445 ( 16,771,571) 36,178,583 1,906,250 60,044,502 Comprehensive income Net income for the three months ended March 31, 2004 $ 2,605,440 2,605,440 2,605,440 Foreign currency translation adjustment (inclusive of income tax benefit of $172,864) 139,165 139,165 139,165 ------------ Comprehensive income $ 2,744,605 ============ Exercise of stock options, including tax benefit of $63,619 53 254,277 254,330 Acquisition of treasury stock ( 281,250) ( 281,250) Common stock dividends ( 447,389) ( 447,389) ------------ ------------ ------------ ------------ ------------ ------------ Balance at March 31, 2004 $ 12,848 $ 38,972,722 ($ 17,052,821) $ 38,336,634 $ 2,045,415 $ 62,314,798 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. Page 6 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited)
For the Three Months Ended ------------------------------------ March 31, 2004 March 31, 2003 ---------------- ---------------- Cash flows from operating activities: Net income $ 2,605,440 $ 1,781,457 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 809,143 765,735 Provision for doubtful accounts 11,064 1,403 Gain on purchase of minority interest ( 2,957,547) Gain on disposal of fixed assets ( 37,267) Minority interest in net earnings of consolidated subsidiary 175,985 Unreimbursed losses of contractual arrangements 318,561 529,348 Deferred income taxes ( 158,090) ( 31,569) Change in assets and liabilities: Decrease in securities purchased under agreements to resell 1,095,000,816 (Increase) decrease in deposits with clearing organizations ( 2,474,166) 2,047 Increase in receivable from broker-dealers and customers ( 14,851,496) ( 1,879,810) Decrease (increase) in securities failed-to-deliver 8,234,863 ( 14,688,312) (Increase) decrease in securities owned ( 35,654,326) 9,585,405 Decrease (increase) in prepaid expenses and other assets 599,668 ( 1,646,479) Decrease in securities sold under agreements to repurchase ( 1,128,125,472) Increase (decrease) in payable to broker-dealers and customers 6,270,471 ( 6,553,339) Increase in securities failed-to-receive 10,834,530 14,540,884 Increase in securities sold, not yet purchased 47,351,642 Decrease in accounts payable and accrued liabilities ( 1,614,896) ( 1,713,652) Decrease in accrued compensation payable ( 10,915,804) ( 7,646,665) Increase (decrease) in income taxes payable 891,582 ( 432,415) ---------------- ---------------- Net cash used in operating activities ( 20,903,737) ( 10,167,524) ---------------- ---------------- Cash flows from investing activities: Purchase of fixed assets ( 866,567) ( 5,688,342) Purchase of minority interest ( 2,613,156) Proceeds from the sale of fixed assets 220,593 ---------------- ---------------- Net cash used in investing activities ( 645,974) ( 8,301,498) ---------------- ----------------
The accompanying notes are an integral part of these consolidated financial statements. Page 7 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) (Continued)
For the Three Months Ended -------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Cash flows from financing activities: Proceeds from exercise of options 190,711 142,610 (Repayments) borrowings under revolving credit facility, net ( 2,500,000) 15,000,000 Repayment of obligations under capitalized leases ( 29,510) ( 46,923) Common stock dividends ( 447,389) Proceeds from asset sales under sale-leaseback transactions 5,220,658 Acquisition of treasury stock ( 281,250) ( 1,256,077) -------------- -------------- Net cash (used in) provided by financing activities ( 3,067,438) 19,060,268 -------------- -------------- Effect of exchange rate changes on cash 406,374 ( 179,009) -------------- -------------- Net (decrease) increase in cash and cash equivalents ( 24,210,775) 412,237 Cash and cash equivalents at beginning of period 67,170,247 52,781,616 -------------- -------------- Cash and cash equivalents at end of period $ 42,959,472 $ 53,193,853 ============== ============== Supplemental disclosures of cash flow information: Interest paid $ 1,667,619 $ 171,738 Income taxes paid 990,612 453,847 Income tax benefit on option exercises 63,619 14,110
The accompanying notes are an integral part of these consolidated financial statements. Page 8 of 59 Pages MAXCOR FINANCIAL GROUP INC. --------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------- NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION: ----------------------------------------------- Maxcor Financial Group Inc. ("MFGI") is a publicly-held financial services holding company that was incorporated in Delaware in 1994. In August 1996, MFGI acquired Euro Brokers Investment Corporation ("EBIC"), a privately held international and domestic inter-dealer broker. EBIC, incorporated in December 1986 in connection with a management buyout of predecessor operations dating to 1970, through its subsidiaries and businesses is primarily an inter-dealer broker of money market instruments, derivative products and selected securities, with principal offices in New York, London and Tokyo, other offices in Stamford (CT), Switzerland and Mexico, as well as correspondent relationships with other brokers throughout the world. Maxcor Financial Inc. ("MFI"), a U.S. registered broker-dealer subsidiary, also conducts institutional sales and trading operations in various fixed income and equity securities and institutional securities financing operations. The consolidated financial statements include the accounts of MFGI and its majority-owned subsidiaries and other entities over which it exercises control (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated. The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Certain reclassifications have been made to previously reported balances to conform with the current presentation. Operating results for the interim period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. For further information, refer to the audited consolidated financial statements of the Company included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 ("2003 Form 10-K"). Page 9 of 59 Pages NOTE 2 - EARNINGS PER SHARE: --------------------------- In accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share," the control number for determining the dilutive impact of common stock equivalents on earnings per share is the amount before extraordinary item. Since this amount for the three months ended March 31, 2003 was a loss, the impact of common stock equivalents on earnings per share for the prior period was considered antidilutive, even though the impact solely on net income per share was dilutive. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three months ended March 31, 2004 and March 31, 2003:
Three Months Ended ------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Income (loss) before extraordinary item $ 2,605,440 ($ 1,176,090) Extraordinary gain on purchase of minority interest 2,957,547 -------------- -------------- Net income $ 2,605,440 $ 1,781,457 ============== ============== Weighted average common shares outstanding - basic calculations 7,153,981 7,130,991 Dilutive effect of stock options and warrants 928,533 -------------- -------------- Weighted average common shares outstanding - diluted calculations 8,082,514 7,130,991 Basic earnings per share: Income (loss) before extraordinary item $ .36 ($ .16) Extraordinary gain on purchase of minority interest .41 -------------- -------------- Net income $ .36 $ .25 ============== ============== Diluted earnings per share: Income (loss) before extraordinary item $ .32 ($ .16) Extraordinary gain on purchase of minority interest .41 -------------- -------------- Net income $ .32 $ .25 ============== ============== Antidilutive common stock equivalents: Options 1,715,000 Warrants 425,000
NOTE 3 - REPURCHASE AND REVERSE REPURCHASE AGREEMENTS: ----------------------------------------------------- Transactions involving the purchase of U.S. Treasury and federal agency securities under agreements to resell (reverse repurchase agreements) and the sale of U.S. Treasury and federal agency securities under agreements to repurchase (repurchase agreements) are treated as collateralized financings and recorded at contracted amounts, plus accrued interest. These amounts are presented on a net-by-counterparty basis when the requirements of Financial Accounting Standards Board (FASB) Interpretation No. 41 are satisfied. Income and expense on these agreements are recognized as interest over the life of the transaction. Page 10 of 59 Pages NOTE 3 - REPURCHASE AND REVERSE REPURCHASE AGREEMENTS (Continued): ----------------------------------------------------------------- The Company monitors the fair value of the securities purchased and sold under these agreements daily and obtains additional collateral or returns excess collateral when appropriate. Securities received as collateral for reverse repurchase agreements are used to secure repurchase agreements. As of March 31, 2004, the fair value of securities received as collateral under reverse repurchase agreements of $593.3 million was repledged under repurchase agreements. NOTE 4 - STOCKHOLDERS' EQUITY: ----------------------------- Preferred stock: --------------- Pursuant to the Company's adoption of a shareholder rights plan (the "Plan") in December 1996, the Company authorized the creation of Series A Junior Participating Preferred Stock and reserved 300,000 shares thereof for issuance upon exercise of the rights that, pursuant to the Plan, were at the time dividended to holders of common stock. Common stock, options and warrants: ---------------------------------- At December 31, 2003, the Company had 7,138,723 shares of common stock outstanding and held 5,655,903 shares in treasury. During the three months ended March 31, 2004 the Company repurchased 25,000 shares under its existing share repurchase program for an aggregate purchase price of $281,250. This program was authorized by the Board of Directors in July 2001 and was expanded in September 2001 and again in April 2004. As of March 31, 2004, the remaining authorization under this expanded program was 669,193 shares. In addition, during the three months ended March 31, 2004, the Company issued 53,250 shares pursuant to options exercised under the Company's 1996 Stock Option Plan and 2002 Stock Option Plan. As a result of these activities, at March 31, 2004, the Company had 7,166,973 shares of common stock outstanding and held 5,680,903 shares in treasury. In January 2004, the Company cancelled all 425,000 warrants issued and outstanding under a warrant program established to provide employee inducements and incentives in connection with the formation of a leveraged finance department. The warrants had been issued in April 2002 at an exercise price of $5.875 per warrant, with vesting over four years at the rate of 50% on the second anniversary of the grant date and 25% on each of the third and fourth anniversaries. The Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its option and warrant plans. Accordingly, the Company has not recognized any compensation cost associated with these instruments since the market prices of the underlying stock on the option and warrant grant dates were not greater than the option exercise prices. As required by Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation-Transition and Page 11 of 59 Pages NOTE 4 - STOCKHOLDERS' EQUITY (Continued): ----------------------------------------- Disclosure-an Amendment of FASB Statement No. 123," the Company has disclosed below its estimated pro forma net income and earnings per share if compensation for awards issued under its option and warrant plans had been recognized using the fair value method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," with such fair value estimated using the Black-Scholes option pricing model. The pro forma benefit for stock-based compensation during the three months ended March 31, 2004 includes the reversal of the aggregate pro forma expense of $444,153 previously determined for prior periods for the cancelled leveraged finance warrants. Three Months Ended ------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Net income, as reported $ 2,605,440 $ 1,781,457 Total stock-based compensation benefit (expense) determined under fair value based method for all awards, net of related tax effects 212,516 ( 213,563) -------------- -------------- Pro forma net income $ 2,817,956 $ 1,567,894 ============== ============== Three Months Ended ------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Earnings per share: Basic, as reported $ .36 $ .25 Basic, pro forma $ .39 $ .22 Diluted, as reported $ .32 $ .25 Diluted, pro forma $ .35 $ .22 Dividends: --------- On March 16, 2004, the Company paid a quarterly common stock dividend of $.0625 per share to holders of record on February 27, 2004. Based upon 7,158,223 total shares outstanding on February 27, 2004, this payment totaled $447,389. NOTE 5 - NTL WHEN-ISSUED EQUITY TRADES: -------------------------------------- On January 10, 2003, NTL Inc. ("NTL") emerged from Chapter 11 bankruptcy under an amended plan of reorganization providing for the issuance of 50 million shares of common stock. MFI and other participants in the when-issued trading market for NTL shares, which began in September 2002 after confirmation of NTL's prior plan of reorganization that contemplated the issuance of 200 million shares, expected the settlement of their when-issued trades would be adjusted to reflect the equivalent of a one-for-four reverse stock split. A number of buyers of NTL when-issued shares, seizing upon a Nasdaq advisory issued on January 14, 2003 that Nasdaq would neither cancel nor adjust such trades, either have retained the full, unadjusted number of shares delivered to them as a result of certain automated settlement processes or are demanding compensation for the remaining unadjusted number of shares not delivered to them if settlement was made on an adjusted basis. Page 12 of 59 Pages NOTE 5 - NTL WHEN-ISSUED EQUITY TRADES (Continued): -------------------------------------------------- In February 2003, MFI filed a suit in the Supreme Court of the State of New York, naming all of its counterparties to its NTL when-issued trades, in order to seek a uniform, adjusted settlement of these trades. Similar proceedings, some seeking settlement on an adjusted basis, others on an unadjusted basis, have been commenced by other parties to NTL when-issued trades against their counterparties, including MFI, both in this Court and before NASD. Included in principal transactions for the three months ended March 31, 2003 is a loss of $5.9 million recorded on the settlement of MFI's NTL when-issued trades. This loss includes the estimated damages payable if the above proceedings conclude that all of MFI's NTL when-issued trades, other than permanently adjusted settlements by mutual agreement, should have settled on an unadjusted basis. This loss was partially offset by an $800,000 principal transaction gain recorded during the three months ended June 30, 2003 on NTL shares determined no longer to constitute a hedge against such an outcome. In March 2004, the New York State Supreme Court granted a summary judgment motion made by MFI and issued a decision stating that all NTL when-issued trades among the parties before the Court should be settled on an adjusted and uniform basis. Following this decision, MFI in March 2004 reached a permanent settlement of this dispute with its one NTL counterparty who had brought a claim before NASD, resulting in the reversal of $625,000 of the $5.1 million net loss recorded by MFI during 2003. This reversal is included as a gain in principal transactions for the three months ended March 31, 2004. As a result of this settlement, MFI's dispute with its remaining NTL counterparties is now fully centralized in only one forum (New York State Supreme Court). However, because the Court's summary judgment decision remains subject to the entry of a final order implementing its terms and possible appeal, MFI only intends to reverse additional portions of the 2003 net loss to the extent it achieves additional permanent resolutions, whether by mutual consent, completion of the appeals process or otherwise, with any of its remaining counterparties. General, administrative and other expenses for the three months ended March 31, 2004 and March 31, 2003 include legal fees related to the NTL when-issued trade disputes of $118,000 and $200,000, respectively. NOTE 6 - TOKYO BASED VENTURE: ---------------------------- Since 1994, the Company has held an interest in a Tokyo-based derivatives brokering venture (the "Tokyo Venture") structured under Japanese law as a Tokumei Kumiai ("TK"). A TK is a contractual arrangement in which an investor invests in a business of a TK operator by making a capital contribution to the TK operator and, in return, becomes entitled to a specified percentage of the profits of the business while also becoming obligated to fund a specified percentage of the losses of the business. The Company has a 57.25% interest in the Tokyo Venture, with Nittan Capital Group Limited ("Nittan"), the TK operator, holding a 42.75% interest. Although the operations of the Tokyo Venture have always been run and managed by persons appointed by the Company, it does not operate in a legal entity separately distinguishable from Nittan, and accordingly, the Company accounts for its share of the results of operations of the Tokyo Venture in other income as non-equity income or loss from contractual arrangement. Page 13 of 59 Pages NOTE 6 - TOKYO BASED VENTURE (Continued): ---------------------------------------- Summarized operating results of the Tokyo Venture for the three month periods ended March 31, 2004 and March 31, 2003, along with the Company's share of those results, are presented below: Three Months Ended -------------------------------- March 31, 2004 March 31, 2003 -------------- -------------- Revenues $ 1,074,965 $ 1,666,459 Expenses 1,631,404 2,591,084 -------------- -------------- Loss ($ 556,439) ($ 924,625) ============== ============== Company's share ($ 318,561) ($ 529,348) ============== ============== NOTE 7 - NET CAPITAL REQUIREMENTS: --------------------------------- MFI, as a U.S. broker-dealer, is subject to the Uniform Net Capital Rule (rule 15c3-1) of the Securities and Exchange Commission ("SEC"), which requires the maintenance of minimum regulatory net capital. MFI has elected to use the alternative method, as permitted by the rule, which requires that MFI maintain minimum regulatory net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions, as defined; or 4% of the funds required to be segregated pursuant to the Commodity Exchange Act and regulations thereunder. MFI's membership in the Government Securities Division of the Fixed Income Clearing Corporation ("GSD-FICC") requires it to maintain minimum excess regulatory net capital of $10,000,000 and minimum net worth (including subordinated borrowing) of $25 million. At March 31, 2004, MFI had regulatory net capital of $43.9 million, a regulatory net capital requirement of $250,000 and net worth of $55.1 million. Euro Brokers Ltd. ("EBL"), a U.K. brokerage subsidiary of the Company, is a Type D registered firm of the Financial Services Authority ("FSA"), required to maintain a financial resources requirement generally equal to six weeks' average expenditures plus the amount of less liquid assets on hand. At March 31, 2004, EBL had financial resources in accordance with FSA's rules of (pound)4.5 million ($8.3 million) and a financial resources requirement of (pound)3.5 million ($6.4 million). NOTE 8 - SEGMENT REPORTING: -------------------------- In accordance with the requirements for interim period reporting under Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), the Company is reporting the operating revenues (commission income, principal transactions and information sales revenue) and net income (loss) attributable to its operating segments. The Company has defined its operating segments based upon geographic location. Although all segments are engaged in the brokerage business, they are managed separately to reflect their unique market, employment and regulatory environments. The reportable segments for the three-month periods respectively ended March 31, 2004 and March 31, 2003 as defined by SFAS 131 consist of the United States, United Kingdom and Japan. United States amounts are principally derived from the Company's New York office, but include all U.S. based operations, with operating revenues and net income for the three months ended March 31, 2003 reflecting the Page 14 of 59 Pages NOTE 8 - SEGMENT REPORTING (Continued): -------------------------------------- net loss of $5.9 million recorded in that quarter on NTL when-issued equity trades (see Note 5). The net income for the United Kingdom segment for the three months ended March 31, 2003 reflects the $3.0 million extraordinary gain realized on the February 2003 purchase of the minority interest in EBL and includes the results for EBL, for periods prior to the purchase, net of such minority interest. Japan amounts primarily reflect the non-equity losses from contractual arrangement (Tokyo Venture). See Note 6 for additional disclosure of the revenues and expenses of the Tokyo Venture. Other geographic segments which did not meet the SFAS 131 materiality thresholds for the year ended December 31, 2003 and which are not expected to meet these thresholds for the year ended December 31, 2004 have been included in "All Other."
United States United Kingdom Japan All Other Total Three months ended ------------- ------------- ------------- ------------- ------------- March 31, 2004 Operating revenues $ 27,790,960 $ 21,242,184 $ $ 2,517,667 $ 51,550,811 Net income (loss) 1,469,343 755,534 ( 318,560) 699,123 2,605,440 Assets 575,318,487 31,565,404 183,190 6,572,103 613,639,184 Three months ended March 31, 2003 Operating revenues $ 19,153,515 $ 16,792,169 $ $ 1,246,918 $ 37,192,602 Net income (loss) ( 2,029,204) 4,141,266 ( 545,312) 214,707 1,781,457 Assets 124,814,640 24,410,009 176,432 3,553,580 152,954,661
Included below are reconciliations of reportable segment assets to the Company's consolidated totals as reported in the Consolidated Statements of Financial Condition in this report and in the Company's Form 10-Q for the quarterly period ended March 31, 2003. As of March 31, ------------------------------ 2004 2003 ------------- ------------- Total for reportable segments $ 607,067,081 $ 149,401,081 Other assets 6,572,103 3,553,580 Elimination of intersegment receivables ( 12,499,659) ( 6,526,733) Elimination of investments in other segments ( 13,095,984) ( 13,095,984) ------------- ------------- $ 588,043,541 $ 133,331,944 ============= ============= Page 15 of 59 Pages References in this report to "we," "us" and "our" mean Maxcor Financial Group Inc. and its subsidiaries and other businesses, unless the context requires otherwise. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies The following is a discussion of certain of our significant accounting policies (see Note 2 to the Consolidated Financial Statements for the fiscal year ended December 31, 2003 in the 2003 Form 10-K) that we consider to be of particular importance because they require difficult, complex or subjective judgments on matters that are often inherently uncertain. Securities positions are carried at fair values generally based on quoted market prices. From time to time quoted market prices are not available for certain municipal or other securities positions. For such securities, we, with the assistance of independent pricing services, determine fair values by analyzing securities with similar characteristics that have quoted market prices. Consideration is given to the size of our individual positions relative to the overall market activity in such positions when determining the impact our sale would have on fair values. The assumptions used in valuing our securities positions may be incorrect and the actual value realized upon disposition could be different from the current carrying value. Included in accounts payable and accrued liabilities are reserves for certain contingencies to which we may have exposure, such as the employer portion of National Insurance Contributions in the U.K., interest and claims on securities settlement disputes, such as the NTL matter, and reserves for certain income tax contingencies. The determination of the amounts of these reserves requires significant judgment on our part. We consider many factors in determining the amount of these reserves, such as legal precedent and case law and historic experience. The assumptions used in determining the estimates of reserves may be incorrect and the actual costs of resolution of these items could be greater or less than the reserve amounts. Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 Commission income represents revenues generated on brokerage transactions conducted on an agency (including name give-up) or matched riskless principal basis. For the three months ended March 31, 2004, these revenues increased $6,900,948 to $48,050,301, compared to $41,149,353 for the comparable period in 2003, reflecting increases in London and New York. In London, the increase primarily reflected increased commissions generated by our inter-dealer brokerage operations, which included improved brokerage of derivatives products and the expansion during 2003 of our securities brokerage operations, and the currency effects of translating strengthened British pound sterling amounts to U.S. dollars. The increase in New York was primarily attributable to increased commissions generated by our inter-dealer brokerage operations, which included improved brokerage of money market products. Page 16 of 59 Pages Principal transactions represent the net gains or losses generated from securities transactions involving the assumption of market risk for a period of time. For the three months ended March 31, 2004, these activities resulted in a gain of $3,500,510, compared to a loss of $4,081,752 for the three months ended March 31, 2003. This change primarily reflected the $5.9 million loss recorded by MFI during the three months ended March 31, 2003 on the settlement of its NTL when-issued equity trades and, during the three months ended March 31, 2004, the reversal of $625,000 of this loss, as well as a $1.5 million gain resulting from the resolution of contingencies associated with the settlement of certain principal transactions in the aftermath of the September 11th attacks. As discussed in Note 5 to the Consolidated Financial Statements included in this report, the recording of this $5.9 million loss during the first quarter of 2003 (which was partially offset by a gain of $800,000 recorded during the second quarter of 2003) reflected the contingency that all of MFI's NTL when-issued trades, other than permanently adjusted settlements by mutual agreement, should have settled on an unadjusted basis. In March 2004, the New York State Supreme Court granted a summary judgment motion made by MFI and issued a decision stating that all NTL when-issued trades among the parties before the Court should be settled on an adjusted and uniform basis. Following this decision, MFI in March 2004 reached a permanent settlement of this dispute with its one NTL counterparty who had brought a claim before NASD, resulting in the reversal of $625,000 of the $5.1 million net loss recorded by MFI during 2003. As a result of this settlement, MFI's dispute with its remaining NTL counterparties is now fully centralized in only one forum (New York State Supreme Court). However, because the Court's summary judgment decision remains subject to the entry of a final order implementing its terms and possible appeal, MFI only intends to reverse additional portions of the 2003 net loss to the extent it achieves additional permanent resolutions, whether by mutual consent, completion of the appeals process or otherwise, with any of its remaining counterparties. Interest income for the three months ended March 31, 2004 increased $1,287,252 to $1,926,968, compared to $639,716 for the three months ended March 31, 2003, primarily reflecting financing income earned on reverse repurchase agreements in connection with the institutional securities financing operations we started in 2003 and coupon and financing income associated with securities positions taken by our restructured institutional corporate bond sales and trading operations. Other items for the three months ended March 31, 2004 resulted in a loss of $375,616, as compared to a loss of $319,478 for the three months ended March 31, 2003. This increased loss resulted from the expiration of an information licensing agreement in the second half of 2003, which generated $125,000 of licensing income during the three months ended March 31, 2003, and foreign exchange losses during the first quarter of 2004, as compared to foreign exchange gains during the first quarter of 2003. Offsetting these decreases was a narrowing of the losses incurred by the Tokyo Venture. For the three months ended March 31, 2004, we recorded a loss of $318,561 on our 57.25% interest in this venture, as compared to a loss of $529,348 for the three months ended March 31, 2003. Page 17 of 59 Pages For the three months ended March 31, 2004, interest expense on securities indebtedness increased $1,650,181 to $1,695,279, compared to $45,098 for the three months ended March 31, 2003, primarily as a result of interest expense incurred on repurchase agreements in connection with our institutional securities financing operations and coupon and financing expense on securities positions taken by our institutional corporate bond sales and trading operations. Compensation and related costs for the three months ended March 31, 2004 increased $4,167,855 to $33,975,005, compared to $29,807,150 for the three months ended March 31, 2003, primarily as a result of increased brokerage staff in connection with the expansion of products in London and New York, the overall increase in net revenues (resulting in higher incentive-based compensation), and the currency effects of translating strengthened British pound sterling amounts to U.S. dollars. Communication costs for the three months ended March 31, 2004 increased $166,081 to $3,406,872, compared to $3,240,791 for the three months ended March 31, 2003, primarily as a result of the currency effects of translating strengthened British pound sterling amounts to U.S. dollars. Travel and entertainment costs for the three months ended March 31, 2004 increased $863,086 to $2,774,983, compared to $1,911,897 for the three months ended March 31, 2003, reflective in part of expansion efforts in New York and London and the overall increase in net revenues. Occupancy and equipment rental represent expenses incurred in connection with our office premises, including base rent and related escalations, maintenance, electricity and real estate taxes, as well as rental costs for equipment under operating leases. For the three months ended March 31, 2004, these costs increased $1,429,952 to $2,538,472, compared to $1,108,520 for the three months ended March 31, 2003, primarily due to an increase of $673,000 to an accrual in London for excess office space (arising from a terminated sublet) designated for sublease. This adjustment was based upon a reassessment of the length of time it will take to generate sublease income on this space. Also contributing to the increase in these costs were increased costs for office space in London and rental costs on new equipment in New York leased from General Electric Capital Corporation. Clearing and execution fees are fees paid to clearing organizations for transaction settlements and credit enhancements and to other broker-dealers (including ECNs) for providing access to various markets and exchanges for executing transactions. For the three months ended March 31, 2004, these costs increased $142,883 to $1,012,354, compared to $869,471 for the three months ended March 31, 2003, primarily as a result of the increase in transaction volumes from our institutional sales and trading businesses and our emerging market debt brokerage business. Depreciation and amortization expense consists principally of depreciation of communication and computer equipment and automobiles under capitalized leases and amortization of leasehold improvements and software. For the three months ended March 31, 2004, depreciation and amortization increased $43,408 to $809,143, compared to $765,735 for the three months ended March 31, 2003, primarily as a result of the depreciation and amortization in New York of furniture and leasehold improvements purchased for our new headquarters. Page 18 of 59 Pages Other interest expense represents interest costs incurred on non-securities related indebtedness, such as revolving credit facilities and capital lease obligations. For the three months ended March 31, 2004 and the three months ended March 31, 2003, these costs were $53,249 and $36,477, respectively. General, administrative and other expenses include such expenses as corporate insurance, office supplies and expenses, professional fees, food costs and dues to various industry associations. For the three months ended March 31, 2004, these expenses increased $222,080 to $1,904,804, as compared to $1,682,724 for the three months ended March 31, 2003, primarily as a result of increases in various general and administrative costs such as corporate insurance, securities licensing fees and office expenses. These costs also included professional fees incurred during the three months ended March 31, 2004 and the three months ended March 31, 2003 in connection with the NTL when-issued trade disputes of $118,000 and $200,000, respectively. During the three months ended March 31, 2004, the Company recorded a provision for income taxes of $2,326,562, as compared to a benefit for income taxes during the three months ended March 31, 2003 of $1,079,919. The benefit reflected the Company's pre-tax loss, before extraordinary item, during the first quarter of 2003, incurred primarily as a result of the $5.9 million loss recorded for the NTL when-issued trade disputes. For the three months ended March 31, 2003, minority interest in consolidated subsidiary resulted in a reduction of the net income from EBL of $175,985. The lack of minority interest in the current period is the result of the Company's purchase of the minority interest of EBL in February 2003. During the three months ended March 31, 2003, we recorded an extraordinary gain of $2,957,547 as the result of our February 2003 discounted purchase of the 50% minority shareholding held in EBL. We purchased this interest, pursuant to the terms of an EBL shareholders agreement that we enforced in a U.K. court proceeding, as a result of the failure of the minority shareholder to provide certain requested funding to EBL in late 2000. The discounted purchase price, calculated under the agreement as 70% of the book value attributable to this shareholding as of December 2000, resulted in an extraordinary gain of $2,957,547. The gain reflected the excess of $5,570,703, the amount recorded for the 50% interest in EBL as of the February 2003 purchase date, over the purchase price of $2,613,156. Page 19 of 59 Pages Liquidity and Capital Resources A substantial portion of our assets, similar to other brokerage firms, is liquid, consisting of cash, cash equivalents and assets readily convertible into cash, such as receivables from broker-dealers and customers and securities owned. Cash and cash equivalents at March 31, 2004 reflect a reduction from the level at December 31, 2003, principally due to the timing of employee bonus payments, which occurred in February 2004, and cash resources used for securities positions (including repurchase and reverse repurchase agreements) in connection with our institutional sales and trading operations and our institutional securities financing operations. U.S. Treasury and federal agency securities purchased under agreements to resell (reverse repurchase agreements) and U.S. Treasury and federal agency securities sold under agreements to repurchase (repurchase agreements) are collateralized financings on which we seek to earn an interest spread. The balances recorded on these transactions, reflected on the Consolidated Statements of Financial Condition respectively as "securities purchased under agreements to resell" and "securities sold under agreements to repurchase," are the contracted amounts, plus accrued interest. The reduction in these balances from those at December 31, 2003 reflect the increased customer demand for financing that occurs at a calendar year end. We monitor the fair value of the securities purchased and sold under these agreements and obtain additional collateral or return excess collateral where appropriate. Securities owned and securities sold, not yet purchased reflect securities positions taken in connection with sales and trading operations and in our firm investment account. Securities positions taken by our sales and trading businesses are often for the purpose of facilitating anticipated customer needs and are typically hedged with offsetting positions of a similar nature. Securities owned are financed either from cash resources, by margin borrowings (if available) from broker-dealers that clear certain of these transactions on our behalf or by repurchase agreements. We are able to make delivery on securities sold, not yet purchased by borrowing such securities either from clearing firms that clear certain of these transactions on our behalf or through reverse repurchase agreements. In the ordinary course of settling our U.S. Treasury and federal agency securities transactions (including repurchase and reverse repurchase agreements) we have securities failed-to-deliver and failed-to-receive obligations. These fails are generally resolved shortly afterwards through proper receipt/delivery. As reflected on the Consolidated Statements of Financial Condition, and as detailed in the table below, we had net assets relating to securities positions (including repurchase and reverse repurchase agreements) of $15.3 million at March 31, 2004, an increase of $8.2 million as compared to net assets relating to securities positions of $7.1 million at December 31, 2003. Page 20 of 59 Pages
(in millions) March 31, 2004 December 31, 2003 ----------------- ----------------- Securities purchased under agreements to resell $ 351.7 $ 1,446.7 Receivable from clearing firm(1) 12.3 Securities failed-to-deliver 82.4 90.7 Securities owned 42.3 6.7 Securities sold under agreements to repurchase ( 342.3) ( 1,470.5) Payable to broker-dealers and customers(2) ( 6.3) Securities failed to receive ( 77.4) ( 66.5) Securities sold, not yet purchased ( 47.4) ----------------- ----------------- Net assets relating to securities positions $ 15.3 $ 7.1 ================= =================
(1) Included in receivable from broker-dealers and customers on the Consolidated Statements of Financial Condition and comprised of cash proceeds received against short sales in our firm investment account and the cash margin requirement maintained with our clearing firm for sales and trading positions. (2) Trade date adjustment for the net purchase on March 31, 2004 of U.S. Treasury securities (which are self-cleared). MFI is a member of the GSD-FICC for the purpose of clearing transactions in U.S. Treasury and federal agency securities and repurchase agreements collateralized by such instruments. Pursuant to such membership, MFI is required to maintain excess regulatory net capital of $10,000,000 and a minimum net worth (including subordinated borrowing) of $25 million. In addition, MFI is required to maintain a clearing deposit with GSD-FICC, based upon the level and nature of its trading activity (with a minimum deposit of $5,000,000), as well as certain minimum collateral deposits with MFI's clearing brokers. The aforementioned deposits have been reflected as deposits with clearing organizations on the Consolidated Statements of Financial Condition. EBL is a Type D registered firm of the FSA in the U.K., required to maintain a financial resources requirement generally equal to six weeks average expenditures plus the amount of less liquid assets on hand (a $6.4 million requirement at March 31, 2004). At March 31, 2004, we had $5,000,000 outstanding under a three-year revolving credit facility entered into by Euro Brokers Inc. ("EBI"), a U.S. subsidiary, with The Bank of New York ("BONY") in March 2003. This facility, as amended in November 2003, provides for borrowings of up to $10 million and is secured by EBI's receivables and the stock issued by EBI to its direct parent. The agreement with BONY contains certain covenants which require EBI separately, and MFGI on a consolidated basis, to maintain certain financial ratios and conditions. Borrowings under this facility bear interest at a variable rate based upon two types of borrowing options, (1) an "alternate base rate" option which incurs interest at the Prime Rate plus a margin or (2) a Eurodollar option which incurs interest at rates quoted in the London interbank market plus a margin. Commitment fees of .35% per annum are charged on the unused portion of this facility. As of March 31, 2004, we had authorization remaining for the repurchase of up to 669,193 shares of our common stock under our existing share repurchase program authorized by our Board of Directors in July 2001. The program originally authorized the repurchase of up to 709,082 shares (10% of the then-outstanding Page 21 of 59 Pages shares), was initially expanded in the immediate aftermath of the September 11th attacks to authorize the repurchase of up to 1,200,000 shares, and was further expanded in April 2003 by an additional 700,000 shares, for a total of 1,900,000 shares. As has been the case with prior repurchase program authorizations, purchases are to be made from time to time as market and business conditions warrant, and accordingly, there is no guarantee as to the timing or number of shares to be repurchased. In April 2004, our Board of Directors declared a common stock cash dividend of $.0625 per share for our fiscal first quarter. The dividend is payable on June 15, 2004 to holders of record on May 28, 2004. In light of the new tax legislation pertaining to dividends and our recent performance, we believe that the dividend, which on an annual basis is anticipated to be $.25 per share, is a tax-efficient way to return value to our shareholders while at the same time enabling us to retain sufficient earnings for growth opportunities. In the ordinary course of our businesses, we are subject to extensive regulation at international, federal and state levels by various regulatory bodies which are charged with safeguarding the integrity of the securities and other financial markets and protecting the interest of customers. The compliance requirements of these different regulatory bodies may include, but are not limited to, net capital or stockholders' equity requirements. We believe that all of our ongoing liquidity needs will be met in timely fashion from our cash and cash equivalents and other resources. Moreover, we have historically met regulatory net capital and stockholders' equity requirements and believe we will be able to continue to do so in the future. Forward-Looking Statements Certain statements contained in this Item 2 and elsewhere in this report, as well as other oral and written statements made by us to the public, contain and incorporate by reference forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Wherever possible, we have identified these forward-looking statements by words such as "believes," "anticipates," "expects," "may," "intends" and similar phrases. Such forward-looking statements, which describe our current beliefs concerning future business conditions and the outlook for our company and business, are subject to significant uncertainties, many of which are beyond our control. Actual results or performance could differ materially from that which we expect. Uncertainties include factors such as: market and economic conditions, including the level of trading volumes in the instruments we broker and interest rate volatilities; the effects of any additional terrorist acts or acts of war and governments' military and other responses to them; the success of our technology development and deployment; the status of our relationships with employees, clients, business partners, vendors and clearing firms; possible third-party litigations or regulatory actions against us or other unanticipated contingencies; the scope of our trading gains and losses; the actions of our competitors; and government regulatory changes. For a fuller description of these and additional uncertainties, reference is made to the "Competition," "Regulation," "Cautionary Statements," "Management's Discussion and Analysis of Page 22 of 59 Pages Financial Condition and Results of Operations" and the "Quantitative and Qualitative Disclosures about Market Risk" sections of the 2003 Form 10-K. The forward-looking statements made herein are only made as of the date of this report and we undertake no obligation to publicly update such forward-looking statements to reflect new information or subsequent events or circumstances. Item 3. Quantitative and Qualitative Disclosures about Market Risk In January 2004, we restructured our institutional corporate bond sales and trading operations. The table below provides information at March 31, 2004, about the securities positions associated with these operations. Our market risk analysis did not otherwise materially change from the market risk analysis as of December 31, 2003 presented in the 2003 Form 10-K.
As of March 31, 2004: -------------------- 2004 2005 2006 2007 2008 After 2008 Total Fair Value ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Trading: ------- Interest rate sensitivity: Securities owned: Corporate bonds $ 2,083,000 $ 2,086,000 $ 1,882,000 $ 1,521,000 $ 16,640,000 $ 24,212,000 $ 26,136,653 (weighted average interest rate-6.12%) U.S. Treasury securities 1,353,000 580,000 8,273,000 10,206,000 10,510,219 (weighted average interest rate-3.81%) Securities sold, not yet purchased: Corporate bonds (490,000) (1,226,000) (1,733,000) (3,415,000) (16,897,000) (23,761,000) (24,593,950) (weighted average interest rate-6.09%) U.S. Treasury securities (565,000) (3,834,000) (7,185,000) (11,584,000) (12,592,193) (weighted average interest rate-4.25%)
Item 4. Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2004. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our periodic SEC reports has been appropriately recorded, processed, summarized and reported. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period ended March 31, 2004, and has concluded that there was no change during this quarterly period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Page 23 of 59 Pages PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note 5 to the Consolidated Financial Statements (unaudited) included as a part of this report for a discussion of the proceedings in the Supreme Court of the State of New York involving the disputed settlement of our NTL Inc. when-issued equity trades. Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities (e) Issuer Purchases of Equity Securities The following table is a summary of all purchases made by us of our common stock during the three months ended March 31, 2004 and, as of each month end during such three-month period, the maximum number of shares that could still be purchased under our share repurchase program: Issuer Purchase of Equity Securities (1)
Total Number of Maximum Number of Shares Purchased Shares that May Yet Total Number of Average as Part of Publicly be Purchased Under Shares Price Paid Announced Plans the Plans or Period Purchased Per Share or Programs Programs ------ --------- --------- -------- -------- January 1 to January 31, 2004 -- -- -- 694,193 February 1 to February 29, 2004 -- -- -- 694,193 March 1 to March 31, 2004 25,000 $ 11.25 25,000 669,193 --------- --------- -------- Total: 25,000 $ 11.25 25,000
--------------------------- (1) Following the full utilization of earlier share repurchase authorizations announced on May 15, 2000 (833,744 shares) and January 26, 2001 (787,869 shares), we announced on July 26, 2001, a further authorization by our Board of Directors of a share repurchase program for up to 709,082 shares (10% of our then-outstanding shares). On September 18, 2001, in the immediate aftermath of the September 11th attacks, we announced the expansion of this authorization to bring the total repurchase authorization up to 1,200,000 shares. On April 24, 2003, we announced the further expansion of this authorization by an additional 700,000 shares, for a total repurchase authorization of 1,900,000 shares. These authorizations have no expiration date and delegate to our senior management the discretion to purchase shares, through open market, privately negotiated and/or block transactions, at times, amounts and prices it deems financially prudent in light of prevailing market, business and financial conditions. Page 24 of 59 Pages Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 10.1.1 Agreement for Securities Clearance Services, dated as of April 1, 2004, by and between Refco Securities, LLC and Maxcor Financial Inc. (1) 31.1 Rule 13a-14(a) Certification of Principal Executive Officer 31.2 Rule 13a-14(a) Certification of Principal Financial Officer 32 18 U.S.C. Section 1350 Certifications of Principal Executive and Financial Officers (b) Reports on Form 8-K During the three months ended March 31, 2004, we filed one current report on Form 8-K, dated February 17, 2004. The Form 8-K attached two press releases, one announcing the declaration by our Board of Directors of a quarterly dividend on our common stock of $.0625 per share, and the other announcing our unaudited financial results for the full year and fourth quarter ended December 31, 2003. ------------------------ (1) Portions of this exhibit have been redacted and confidential treatment requested pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Page 25 of 59 Pages SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: May 14, 2004 MAXCOR FINANCIAL GROUP INC. (Registrant) /s/ GILBERT D. SCHARF ---------------------------------------------- Gilbert D. Scharf, Chief Executive Officer /s/ STEVEN R. VIGLIOTTI ---------------------------------------------- Steven R. Vigliotti, Chief Financial Officer Page 26 of 59 Pages EXHIBIT INDEX Exhibit Description Page ------- ----------- ---- 10.1 Agreement for Securities Clearance Services, dated as of 28 April 1, 2004, by and between Refco Securities, LLC and Maxcor Financial Inc. (1) 31.1 Rule 13a-14(a) Certification of Principal Executive Officer 57 31.2 Rule 13a-14(a) Certification of Principal Financial Officer 58 32 18 U.S.C. Section 1350 Certifications of Principal Executive 59 and Financial Officers ------------------------ (1) Portions of this exhibit have been redacted and confidential treatment requested pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Page 27 of 59 Pages