##### Table of Contents



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 June 30, 2003

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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
incorporation or organization) |  | (I.R.S. Employer
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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares of the registrants common stock outstanding as of August
12, 2003 was 59,556,605.





---

TABLE OF CONTENTS



|                             |                                                                                                |                                                          |  |  |  |  |  | 
|---------------------------- | ---------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | Item 1. Financial Statements.                                                                 
|                             |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS         
|                             |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|                             |                                                                                                | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                             |                                                                                                | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
|                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                             | Item 3. Quantitative and Qualitative Disclosures about Market Risk.                           
|PART II OTHER INFORMATION   
|                             | SIGNATURES                                                                                    
|CERTIFICATION               
|CERTIFICATION               
|CERTIFICATION               
|CERTIFICATION               



---



##### Table of Contents



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 |                                                          |    | 17 |  
|                             | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                          |    | 30 |  
|PART II OTHER INFORMATION    |                                                                                               |                                                          | 36 |   
|                             | SIGNATURES                                                                                    |                                                          |    | 40 |  
|                             | CERTIFICATIONS                                                                                |                                                          |    | 41 |  

-2-



---



##### Table of Contents






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)

|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |        |         |         | 
|-------------------------------------------------------------- | ------- | ------------------------------------------ | -------------- | ------ | --------------------------- | ------ | ------------------------- | ------ | ----------- | ------ | ----------- | ------ | ------- | ------- | ------ | ------ | ------- | ------- | 
|                                                               |         |                                            |                |        | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                               |         |                                            |                |        |                             |        |                          
|                                                               |         |                                            |                |        | 2003                        |        | 2002                      |        | 2003        |        | 2002       
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |            
|                                                               |         |                                            |                |        | (unaudited)                 |        | (unaudited)               |        | (unaudited) |        | (unaudited)
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |            
|REVENUES:                                                      |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               |         | Net gain on principal transactions         |                | $      | 60,103                      |        |                           | $      | 72,731      |        |             | $      | 111,906 |         |        | $      | 161,855 |        
|                                                               |         | Commissions                                |                |        | 24,859                      |        |                           |        | 22,420      |        |             |        | 47,375  |         |        |        | 43,393  |        
|                                                               |         | Other                                      |                |        | 2,542                       |        |                           |        | 2,957       |        |             |        | 4,857   |         |        |        | 15,540  |        
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               |         |                                            | Total revenues |        |                             | 87,504 |                           |        |             | 98,108 |             |        |         | 164,138 |        |        |         | 220,788 | 
|EXPENSES:                                                      |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               |         | Employee compensation and related benefits |                |        | 25,096                      |        |                           |        | 31,080      |        |             |        | 50,915  |         |        |        | 62,153  |        
|                                                               |         | Interest                                   |                |        | 12,207                      |        |                           |        | 12,848      |        |             |        | 23,928  |         |        |        | 25,684  |        
|                                                               |         | Exchange, clearing and brokerage fees      |                |        | 10,936                      |        |                           |        | 9,203       |        |             |        | 21,598  |         |        |        | 16,980  |        
|                                                               |         | Lease of exchange memberships              |                |        | 6,186                       |        |                           |        | 6,398       |        |             |        | 12,655  |         |        |        | 13,107  |        
|                                                               |         | Depreciation & amortization of intangibles |                |        | 3,279                       |        |                           |        | 3,359       |        |             |        | 6,589   |         |        |        | 6,689   |        
|                                                               |         | Other                                      |                |        | 7,767                       |        |                           |        | 6,996       |        |             |        | 15,147  |         |        |        | 14,435  |        
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               |         |                                            | Total expenses |        |                             | 65,471 |                           |        |             | 69,884 |             |        |         | 130,832 |        |        |         | 139,048 | 
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|Income before minority interest and provision for income taxes |         |                                            | 22,033         |        |                             |        | 28,224                    |        |             |        | 33,306      |        |         |         | 81,740 |       
|MINORITY INTEREST                                              |         |                                            | 127            |        |                             |        |                          |        |             |        | 127         |        |         |         |       |       
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|Income before provision for income taxes                       |         |                                            | 21,906         |        |                             |        | 28,224                    |        |             |        | 33,179      |        |         |         | 81,740 |       
|PROVISION FOR INCOME TAXES                                     |         |                                            | 10,316         |        |                             |        | 13,283                    |        |             |        | 16,062      |        |         |         | 39,147 |       
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|Net income                                                     |         | $                                          | 11,590         |        |                             | $      | 14,941                    |        |             | $      | 17,117      |        |         | $       | 42,593 |       
|Series A Preferred dividends and discount accretion            |         |                                            | 942            |        |                             |        | 1,741                     |        |             |        | 2,109       |        |         |         | 3,817  |       
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|Net income available to common stockholders                    |         | $                                          | 10,648         |        |                             | $      | 13,200                    |        |             | $      | 15,008      |        |         | $       | 38,776 |       
|                                                               |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|Weighted average shares outstanding:                           |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               | Basic   |                                            |                | 59,525 |                             |        |                           | 58,859 |             |        |             | 59,510 |         |         |        | 58,782 |        
|                                                               | Diluted |                                            |                | 60,256 |                             |        |                           | 59,991 |             |        |             | 60,284 |         |         |        | 59,995 |        
|Earnings per share:                                            |         |                                            |                |        |                             |        |                           |        |             |        |             |        |         |         |        |       
|                                                               | Basic   |                                            | $              | 0.18   |                             |        | $                         | 0.22   |             |        | $           | 0.25   |         |         | $      | 0.66   |        
|                                                               | Diluted |                                            | $              | 0.18   |                             |        | $                         | 0.22   |             |        | $           | 0.25   |         |         | $      | 0.65   |        

The accompanying notes are an integral part of these condensed consolidated statements.

-3-



---



##### Table of Contents






LaBRANCHE & CO INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(000s omitted except share data)

|                                                                                                                                        |                       |   |             |         |              |   |           |         | 
|--------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ----------- | ------- | ------------ | - | --------- | ------- | 
|                                                                                                                                        |                       |   | As of      
|                                                                                                                                        |                       |   |            
|                                                                                                                                        |                       |   | June 30,    |         | December 31,
|                                                                                                                                        |                       |   | 2003        |         | 2002        
|                                                                                                                                        |                       |   |             |         |             
|                                                                                                                                        |                       |   | (unaudited) |         | (audited)   
|ASSETS                                                                                                                                  |                       |   |             |         |              |   |           |        
|Cash and cash equivalents                                                                                                               |                       | $ | 377,208     |         |              | $ | 77,033    |        
|Cash and securities segregated under federal regulations                                                                                |                       |   | 20,946      |         |              |   | 16,012    |        
|Securities purchased under agreements to resell                                                                                         |                       |   | 11,000      |         |              |   | 26,000    |        
|Receivable from brokers, dealers and clearing organizations                                                                             |                       |   | 223,420     |         |              |   | 145,387   |        
|Receivable from customers                                                                                                               |                       |   | 6,518       |         |              |   | 12,425    |        
|United States Government obligations                                                                                                    |                       |   |            |         |              |   | 395,840   |        
|Securities owned, at market value:                                                                                                      |                       |   |             |         |              |   |           |        
|                                                                                                                                        | Corporate equities    |   |             | 221,549 |              |   |           | 106,295 | 
|                                                                                                                                        | Exchange-traded funds |   |             | 233,538 |              |   |           | 21,455  | 
|                                                                                                                                        | Options               |   |             | 59,585  |              |   |           | 61,478  | 
|Commissions receivable                                                                                                                  |                       |   | 4,836       |         |              |   | 4,379     |        
|Exchange memberships contributed for use, at market value                                                                               |                       |   | 18,000      |         |              |   | 26,176    |        
|Exchange memberships owned, at cost (market value of $58,826 and $78,337, respectively)                                                 |                       |   | 77,828      |         |              |   | 77,815    |        
|Office equipment and leasehold improvements, at cost,
less accumulated depreciation and amortization of $7,904 and $6,987, respectively |                       |   | 5,330       |         |              |   | 6,089     |        
|Intangible assets, net of accumulated amortization:                                                                                     |                       |   |             |         |              |   |           |        
|                                                                                                                                        | Specialist stock list |   |             | 376,768 |              |   |           | 381,956 | 
|                                                                                                                                        | Trade name            |   |             | 25,011  |              |   |           | 25,011  | 
|                                                                                                                                        | Goodwill              |   |             | 470,537 |              |   |           | 470,598 | 
|Other assets                                                                                                                            |                       |   | 56,528      |         |              |   | 58,853    |        
|                                                                                                                                        |                       |   |             |         |              |   |           |        
|Total assets                                                                                                                            |                       | $ | 2,188,602   |         |              | $ | 1,912,802 |        
|                                                                                                                                        |                       |   |             |         |              |   |           |        

-4-



---



##### Table of Contents



|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------------- | --------- | ------------- | ------- | ----------------- | --------- | ------- | ------- | 
|                                                                                                                                                                                              |                                                          |                                       |           | As of        
|                                                                                                                                                                                              |                                                          |                                       |           |              
|                                                                                                                                                                                              |                                                          |                                       |           | June 30, 2003 |         | December 31, 2002
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                  
|                                                                                                                                                                                              |                                                          |                                       |           | (unaudited)   |         | (audited)        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                          |                                                          |                                       |           |               |         |                   |           |        
|Liabilities:                                                                                                                                                                                  |                                                          |                                       |           |               |         |                   |           |        
|                                                                                                                                                                                              | Payable to brokers and dealers                           |                                       | $         | 32,667        |         |                   | $         | 16,417  |        
|                                                                                                                                                                                              | Payable to customers                                     |                                       |           | 14,022        |         |                   |           | 21,971  |        
|                                                                                                                                                                                              | Securities sold, but not yet purchased, at market value: |                                       |           |               |         |                   |           |         |        
|                                                                                                                                                                                              |                                                          | Corporate equities                    |           |               | 287,836 |                   |           |         | 106,685 | 
|                                                                                                                                                                                              |                                                          | Exchange-traded funds                 |           |               | 141,239 |                   |           |         | 4,359   | 
|                                                                                                                                                                                              |                                                          | Options                               |           |               | 54,981  |                   |           |         | 63,695  | 
|                                                                                                                                                                                              | Accrued compensation                                     |                                       |           | 39,896        |         |                   |           | 55,185  |        
|                                                                                                                                                                                              | Accounts payable and other accrued expenses              |                                       |           | 50,245        |         |                   |           | 52,268  |        
|                                                                                                                                                                                              | Income taxes payable                                     |                                       |           | 11,880        |         |                   |           | 13,201  |        
|                                                                                                                                                                                              | Deferred tax liabilities                                 |                                       |           | 180,358       |         |                   |           | 179,924 |        
|                                                                                                                                                                                              | Long term debt                                           |                                       |           | 355,253       |         |                   |           | 354,948 |        
|                                                                                                                                                                                              | Subordinated liabilities                                 |                                       |           |               |         |                   |           |         |        
|                                                                                                                                                                                              |                                                          | Exchange memberships, at market value |           |               | 18,000  |                   |           |         | 26,176  | 
|                                                                                                                                                                                              |                                                          | Other subordinated indebtedness       |           |               | 28,285  |                   |           |         | 28,285  | 
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        
|                                                                                                                                                                                              | Total liabilities                                        |                                       |           | 1,214,662     |         |                   |           | 923,114 |        
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        
|Minority Interest                                                                                                                                                                             |                                                          |                                       | 127       |               |         |                   |          |        
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        
|Preferred stock, liquidation value of $1,000 per share; 10,000,000 shares
authorized; 39,186 and 63,836 shares issued and outstanding as of June 30, 2003
and December 31, 2002, respectively |                                                          |                                       | 37,985    |               |         |                   | 61,361    |        
|Common stock, $.01 par value, 200,000,000 shares authorized;
59,551,645 and 59,504,148 shares issued and outstanding as of June 30, 2003 and
December 31, 2002, respectively                  |                                                          |                                       | 596       |               |         |                   | 595       |        
|Additional paid-in-capital                                                                                                                                                                    |                                                          |                                       | 681,206   |               |         |                   | 679,601   |        
|Retained earnings                                                                                                                                                                             |                                                          |                                       | 254,550   |               |         |                   | 249,065   |        
|Unearned compensation                                                                                                                                                                         |                                                          |                                       | (524      | )             |         |                   | (934      | )      
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        
|                                                                                                                                                                                              | Total stockholders equity                               |                                       |           | 973,813       |         |                   |           | 989,688 |        
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        
|Total liabilities and stockholders equity                                                                                                                                                    |                                                          | $                                     | 2,188,602 |               |         | $                 | 1,912,802 |        
|                                                                                                                                                                                              |                                                          |                                       |           |               |         |                   |           |        

The accompanying notes are an integral part of these condensed consolidated statements.

-5-



---



##### Table of Contents






LaBRANCHE & CO INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000s omitted)

|                                      |                                                                               |                                                               |                                           |        |                  |         |               |        |         |        |  
|------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------- | ----------------------------------------- | ------ | ---------------- | ------- | ------------- | ------ | ------- | ------ | -
|                                      |                                                                               |                                                               |                                           |        | Six Months Ended
|                                      |                                                                               |                                                               |                                           |        |                 
|                                      |                                                                               |                                                               |                                           |        | June 30, 2003    |         | June 30, 2002
|                                      |                                                                               |                                                               |                                           |        |                  |         |              
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                               |                                                               |                                           |        |                  |         |               |       
|                                      | Net income                                                                    |                                                               | $                                         | 17,117 |                  |         | $             | 42,593 |        
|                                      | Adjustments to reconcile net income to net cash used in operating activities: |                                                               |                                           |        |                  |         |               |        |        
|                                      |                                                                               | Depreciation and amortization of intangibles                  |                                           |        | 6,589            |         |               |        | 6,689   |       
|                                      |                                                                               | Amortization of bond discount and debt issuance costs         |                                           |        | 1,053            |         |               |        | 1,044   |       
|                                      |                                                                               | Minority interest in income of consolidated subsidiary        |                                           |        | 127              |         |               |        |        |       
|                                      |                                                                               | Compensation expense related to stock-based compensation      |                                           |        | 1,801            |         |               |        | 1,618   |       
|                                      |                                                                               | Deferred tax provision                                        |                                           |        | 1,153            |         |               |        | 4,738   |       
|                                      |                                                                               | Acceleration of preferred stock discount accretion            |                                           |        | 918              |         |               |        | 1,485   |       
|                                      | Tax benefit related to employee stock transactions                            |                                                               |                                           | 61     |                  |         |               | 3,733  |        
|                                      | Change in assets and liabilities:                                             |                                                               |                                           |        |                  |         |               |        |        
|                                      |                                                                               | Cash and securities segregated under federal regulations      |                                           |        | (4,934           | )       |               |        | 54,252  |       
|                                      |                                                                               | Securities purchased under agreements to resell               |                                           |        | 15,000           |         |               |        | 47,094  |       
|                                      |                                                                               | Receivable from brokers, dealers and clearing organizations   |                                           |        | (78,034          | )       |               |        | (89,594 | )     
|                                      |                                                                               | Receivable from customers                                     |                                           |        | 5,906            |         |               |        | 3,844   |       
|                                      |                                                                               | United States Government obligations                          |                                           |        | 395,840          |         |               |        | 5,491   |       
|                                      |                                                                               | Securities owned, Corporate equities                          |                                           |        | (115,254         | )       |               |        | (41,878 | )     
|                                      |                                                                               | Securities owned, Exchange-traded funds                       |                                           |        | (212,083         | )       |               |        |        |       
|                                      |                                                                               | Securities owned, Options and other                           |                                           |        | 1,894            |         |               |        | (6,847  | )     
|                                      |                                                                               | Commissions receivable                                        |                                           |        | (457             | )       |               |        | (392    | )     
|                                      |                                                                               | Other assets                                                  |                                           |        | 1,577            |         |               |        | (5,536  | )     
|                                      |                                                                               | Payable to brokers and dealers                                |                                           |        | 16,250           |         |               |        | (19,539 | )     
|                                      |                                                                               | Payable to customers                                          |                                           |        | (7,949           | )       |               |        | (29,505 | )     
|                                      |                                                                               | Securities sold, but not yet purchased, Corporate equities    |                                           |        | 181,151          |         |               |        | 67,401  |       
|                                      |                                                                               | Securities sold, but not yet purchased, Exchange-traded funds |                                           |        | 136,880          |         |               |        |        |       
|                                      |                                                                               | Securities sold, but not yet purchased, Options               |                                           |        | (8,715           | )       |               |        | 6,073   |       
|                                      |                                                                               | Accrued compensation                                          |                                           |        | (15,289          | )       |               |        | (264    | )     
|                                      |                                                                               | Accounts payable and other accrued expenses                   |                                           |        | (1,030           | )       |               |        | (18,573 | )     
|                                      |                                                                               | Income taxes payable                                          |                                           |        | (2,041           | )       |               |        | (16,004 | )     
|                                      |                                                                               |                                                               |                                           |        |                  |         |               |       
|                                      |                                                                               |                                                               | Net cash provided by operating activities |        |                  | 337,531 |               |        |         | 17,923 |  
|                                      |                                                                               |                                                               |                                           |        |                  |         |               |       
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                               |                                                               |                                           |        |                  |         |               |       
|                                      | Payments for office equipment and leasehold improvements                      |                                                               |                                           | (641   | )                |         |               | (1,779 | )      
|                                      | Payments for exchange memberships                                             |                                                               |                                           | (13    | )                |         |               |       |        
|                                      |                                                                               |                                                               |                                           |        |                  |         |               |       
|                                      |                                                                               |                                                               | Net cash used in investing activities     |        |                  | (654    | )             |        |         | (1,779 | )
|                                      |                                                                               |                                                               |                                           |        |                  |         |               |       

-6-



---



##### Table of Contents



|                                                          |                                                                          |                                                  |         |                  |         |               |        |         |         |  
|--------------------------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------------ | ------- | ---------------- | ------- | ------------- | ------ | ------- | ------- | -
|                                                          |                                                                          |                                                  |         | Six Months Ended
|                                                          |                                                                          |                                                  |         |                 
|                                                          |                                                                          |                                                  |         | June 30, 2003    |         | June 30, 2002
|                                                          |                                                                          |                                                  |         |                  |         |              
|CASH FLOWS FROM FINANCING ACTIVITIES:                     |                                                                          |                                                  |         |                  |         |               |        |        
|                                                          | Proceeds from the exercise of stock options                              |                                                  |         | 216              |         |               |        | 4,196   |        
|                                                          | Payment of common stock dividends                                        |                                                  |         | (9,523           | )       |               |        |        |        
|                                                          | Payment of preferred stock dividends                                     |                                                  |         | (2,745           | )       |               |        | (4,300  | )      
|                                                          | Payment for preferred stock buyback                                      |                                                  |         | (24,650          | )       |               |        | (28,164 | )      
|                                                          |                                                                          |                                                  |         |                  |         |               |        |        
|                                                          |                                                                          | Net cash used in financing activities            |         |                  | (36,702 | )             |        |         | (28,268 | )
|                                                          |                                                                          |                                                  |         |                  |         |               |        |        
|                                                          |                                                                          | Increase/(Decrease) in cash and cash equivalents |         |                  | 300,175 |               |        |         | (12,124 | )
|CASH AND CASH EQUIVALENTS, beginning of the period        |                                                                          |                                                  | 77,033  |                  |         |               | 52,043 |        
|                                                          |                                                                          |                                                  |         |                  |         |               |        |        
|CASH AND CASH EQUIVALENTS, end of the period              |                                                                          | $                                                | 377,208 |                  |         | $             | 39,919 |        
|                                                          |                                                                          |                                                  |         |                  |         |               |        |        
|SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:                 |                                                                          |                                                  |         |                  |         |               |        |        
|                                                          | Interest                                                                 |                                                  | $       | 21,555           |         |               | $      | 22,485  |        
|                                                          | Income taxes                                                             |                                                  |         | 16,193           |         |               |        | 48,960  |        
|SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES: |                                                                          |                                                  |         |                  |         |               |        |        
|                                                          | Net increase in additional paid-in capital related to stock based awards |                                                  |         | 2,016            |         |               |        | 5,811   |        

The accompanying notes are an integral part of these condensed consolidated statements.

-7-



---



##### Table of Contents






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), LaBranche Financial Services, Inc., a New York corporation
(LFSI), LaBranche Structured Products, LLC, a New York limited liability
company (LSP), LABDR Services, Inc., a Delaware corporation (LABDR), and
LaBranche & Co. B.V., a Netherlands private limited liability company (BV and
collectively with the Holding Company, LaBranche, LFSI, LSP and LABDR, the
Company). The Holding Company is the sole member of LaBranche and LSP, the
100% stockholder of LFSI and LABDR, and the sole owner of BV. LaBranche is a
registered broker-dealer and operates primarily as a specialist in equity
securities and rights listed on the New York Stock Exchange (the NYSE) and in
equity securities 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, securities execution and other related services
to its own retail customers, customers of introducing brokers and institutional
customers, including traders, professional investors and broker-dealers. LFSI
also provides direct-access floor brokerage services to institutional
customers. LSP is a registered broker-dealer and operates as a specialist in
options, Exchange Traded Funds (ETFs) and futures on the AMEX and the New
York Board of Trade (NYBOT) and acts as a market-marker in ETFs on several
exchanges. LABDR was recently incorporated to provide disaster recovery
services and back-up facilities to other Holding Company subsidiaries. BV
represents LaBranche in European markets and provides client services to
LaBranches European listed companies.

2.     INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL INFORMATION

The unaudited interim condensed consolidated financial information as of
June 30, 2003 and for the six months ended June 30, 2003 and 2002 is 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 June 30, 2003 should be read in conjunction with the audited
consolidated financial statements and notes thereto as of December 31, 2002
included in the Companys Form 10-K filed with the Securities and Exchange
Commission (SEC) on March 20, 2003. Results of the interim periods are not
necessarily indicative of results to be obtained for a full fiscal year.

-8-



---



##### Table of Contents



3.     GOODWILL AND OTHER INTANGIBLE ASSETS

With the adoption of Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets on January 1, 2002, which was
issued by the Financial Accounting Standards Board (FASB), the acquired trade
name and goodwill are no longer amortized. The acquired specialist stock lists,
however, will continue to be amortized over their respective lives. The Company
tests the acquired trade name, goodwill and specialist stock lists for
impairment at least annually or when events and circumstances indicate
impairment testing may be necessary by applying a fair-value based test in
accordance with SFAS No. 142 and No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. It is possible that in the future, after
periodic testing, the Company may incur impairment charges related to the
carrying value of acquired goodwill and intangible assets recorded in its
financial statements.

The gross carrying amount, accumulated amortization and net carrying
amount of the Companys acquired specialist stock lists are set forth below
(000s omitted):

|                         |  |                     |         |                         |  |   |         |  
|------------------------ |  | ------------------- | ------- | ----------------------- |  | - | ------- | -
|                         |  | As of June 30, 2003 |         | As of December 31, 2002
|                         |  |                     |         |                        
|Gross carrying amount    |  | $                   | 406,190 |                         |  | $ | 406,190 |  
|Accumulated amortization |  |                     | (29,422 | )                       |  |   | (24,234 | )
|                         |  |                     |         |                         |  |   |         |  
|Net carrying amount      |  | $                   | 376,768 |                         |  | $ | 381,956 |  
|                         |  |                     |         |                         |  |   |         |  

Amortization expense associated with the Companys acquired specialist
stock lists was $2.6 million and $5.2 million for each of the three-month and
six-month periods ended June 30, 2003 and 2002, respectively. Estimated
amortization expense for the existing specialist stock lists is $10.4 million
for each of the fiscal years ending December 31, 2004 through December 31,
2008.

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, other compensation accruals,
amortization periods of certain intangibles and differences between the
financial and tax bases of assets acquired. The Companys effective tax rate
differs from the combined federal, state and local statutory rates primarily
due to its non-deductible amortization of intangible assets and the
non-deductible expense recorded due to the acceleration of the discount
accretion as a result of the repurchase of the Companys Series A preferred
stock in 2002 and 2003.

-9-



---



##### Table of Contents



The components of the provision for income taxes reflected on the
condensed consolidated statements of operations are set forth below (000s
omitted):

|                                       |                                  |   |                             |        |                           |   |        |        |      |   |        |        |  |   |        |        | 
|-------------------------------------- | -------------------------------- | - | --------------------------- | ------ | ------------------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                       |                                  |   | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                       |                                  |   |                             |        |                          
|                                       |                                  |   | 2003                        |        | 2002                      |   | 2003   |        | 2002
|                                       |                                  |   |                             |        |                           |   |        |        |     
|Current federal, state and local taxes |                                  | $ | 10,813                      |        |                           | $ | 13,708 |        |      | $ | 14,909 |        |  | $ | 34,409 |       
|Deferred tax (benefit)/provision       |                                  |   | (497                        | )      |                           |   | (425   | )      |      |   | 1,153  |        |  |   | 4,738  |       
|                                       |                                  |   |                             |        |                           |   |        |        |      |   |        |        |  |   |        |       
|                                       | Total provision for income taxes |   | $                           | 10,316 |                           |   | $      | 13,283 |      |   | $      | 16,062 |  |   | $      | 39,147 | 
|                                       |                                  |   |                             |        |                           |   |        |        |      |   |        |        |  |   |        |       

5.     CAPITAL AND NET LIQUID ASSET REQUIREMENTS

LaBranche, as a specialist and member of the NYSE and AMEX, is subject to
SEC Rule 15c3-1, as adopted and administered by the NYSE, AMEX and the SEC.
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 June 30, 2003 and December 31, 2002, LaBranches net capital, as
defined under SEC Rule 15c3-1, was $473.9 million and $472.0 million,
respectively, which exceeded the minimum requirements by $471.9 million and
$467.4 million, respectively. LaBranches aggregate indebtedness to net capital
ratio on those dates was .06 to 1 and .15 to 1, 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 June 30, 2003 and December 31, 2002, 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 $483.0 million and $465.2
million, respectively.

The AMEX generally requires its equity specialist firms to maintain a cash
or liquid asset position of the greater of (a) $600,000, or (b) an amount
sufficient to assume a position of sixty trading units of each security in
which the specialist is registered. Because LaBranche adheres to the NYSEs net
liquid asset requirements, it automatically satisfies the AMEX liquid asset
requirements.

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 and the SEC. Under
the alternative method permitted by the rule, the minimum required net capital
for LFSI is equal to the greater of $1.5 million or 2% of aggregate debit
items, as defined. As of June 30, 2003 and December 31, 2002, LFSIs net
capital, as defined under SEC Rule 15c3-1, was $16.5 million and $19.4 million,
respectively, which exceeded the minimum requirements by $15.0 million and
$17.9 million, respectively.

As a registered broker-dealer and AMEX member firm, LSP is subject to SEC
Rule 15c3-1, as adopted and administered by the AMEX and the SEC. LSP 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 June 30, 2003
and December 31, 2002, LSPs net capital, as defined under SEC Rule 15c3-1, was
$18.1 million and $6.9 million, respectively, which exceeded minimum
requirements by $18.0 million and $6.8 million, respectively.

-10-



---



##### Table of Contents



6. RECENT TRANSACTION

On April 22, 2003, LSP formed an options specialist joint account on the
AMEX (the Joint Account) with Botta Capital Management, LLC (Botta). LSP
contributed $1.5 million of capital for the operations of the Joint Account and
manages the Joint Accounts business on the trading floor of the AMEX. Botta
contributed its right to act as specialist in certain AMEX option listings. Net
profits of the Joint Account, on an annual basis, generated from specialist
activities in the Joint Accounts AMEX listed options are shared by LSP and
Botta at a ratio of 66% and 34%, respectively. However, LSP is required to bear
100% of any net losses incurred on an annual basis. After the fourth
anniversary of the formation of the Joint Account, Botta will no longer have
any interest in the Joint Account or the AMEX option listings it contributed to
the Joint Account.

The results of the Joint Account have been included in the Companys
condensed consolidated financial statements since April 22, 2003, in accordance
with FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest
Entities. Bottas share of the net income and net assets of the Joint Account
are classified as minority interest on the condensed consolidated statements of
operations and financial condition, respectively.

7. DERIVATIVE FINANCIAL INSTRUMENTS

LSP uses derivative financial instruments, including exchange-traded
options, ETFs and domestic and foreign futures contracts, for trading purposes
and to financially hedge other positions or transactions as part of its
specialist and market-making business and overall risk management process.
These financial instruments subject LSP to varying degrees of market, credit
and foreign exchange risk. LSP records its derivative trading activities at
market value, with corresponding gains or losses recorded in net gain on
principal transactions. Any gains or losses from foreign currency transactions
are recorded in other income. In order to minimize risk, management continually
monitors positions, profit and loss, volatility and other standard risk
measures on a real-time basis and communicates its risk tolerance to LSPs
traders.

The following table indicates the fair value of LSPs ETFs,
exchange-traded options and futures contracts:

|                        |  |                |         |                    |  |        |         |             |  |   |        |  |  |   |        | 
|----------------------- |  | -------------- | ------- | ------------------ |  | ------ | ------- | ----------- |  | - | ------ |  |  | - | ------ | 
|                        |  | As of June 30, |         | As of December 31,
|                        |  | 2003           |         | 2002              
|                        |  |                |         |                   
|(000's omitted)         |  | Assets         |         | Liabilities        |  | Assets |         | Liabilities
|                        |  |                |         |                    |  |        |         |            
|ETFs                    |  | $              | 233,538 |                    |  | $      | 141,239 |             |  | $ | 21,455 |  |  | $ | 4,359  | 
|Exchange-traded options |  |                | 59,585  |                    |  |        | 54,981  |             |  |   | 61,478 |  |  |   | 63,695 | 
|Futures contracts       |  |                | 2,469   |                    |  |        | 1,774   |             |  |   | 97     |  |  |   | 41     | 

8. 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 stockholders 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.

-11-



---



##### Table of Contents



The computations of basic and diluted EPS are set forth below (000s
omitted, except per share data):

|                                                                                                 |                        |   |                             |     |                           |   |        |     |      |   |        |     |  |   |        |     | 
|------------------------------------------------------------------------------------------------ | ---------------------- | - | --------------------------- | --- | ------------------------- | - | ------ | --- | ---- | - | ------ | --- |  | - | ------ | --- | 
|                                                                                                 |                        |   | Three Months Ended June 30, |     | Six Months Ended June 30,
|                                                                                                 |                        |   |                             |     |                          
|                                                                                                 |                        |   | 2003                        |     | 2002                      |   | 2003   |     | 2002
|                                                                                                 |                        |   |                             |     |                           |   |        |     |     
|Net income                                                                                       |                        | $ | 11,590                      |     |                           | $ | 14,941 |     |      | $ | 17,117 |     |  | $ | 42,593 |    
|Less preferred dividends
and accretion                                                           |                        |   | 942                         |     |                           |   | 1,741  |     |      |   | 2,109  |     |  |   | 3,817  |    
|                                                                                                 |                        |   |                             |     |                           |   |        |     |      |   |        |     |  |   |        |    
|Numerator for basic and
diluted earnings per share
 net income available to
common stockholders |                        | $ | 10,648                      |     |                           | $ | 13,200 |     |      | $ | 15,008 |     |  | $ | 38,776 |    
|Denominator for basic
earnings per share  weighted-average number of
common shares              |                        |   | 59,525                      |     |                           |   | 58,859 |     |      |   | 59,510 |     |  |   | 58,782 |    
|Dilutive Shares                                                                                  |                        |   |                             |     |                           |   |        |     |      |   |        |     |  |   |        |    
|                                                                                                 | Stock options          |   |                             | 432 |                           |   |        | 684 |      |   |        | 475 |  |   |        | 761 | 
|                                                                                                 | Restricted stock       |   |                             |    |                           |   |        | 32  |      |   |        |    |  |   |        | 36  | 
|                                                                                                 | Restricted stock units |   |                             | 299 |                           |   |        | 416 |      |   |        | 299 |  |   |        | 416 | 
|                                                                                                 |                        |   |                             |     |                           |   |        |     |      |   |        |     |  |   |        |    
|Denominator for diluted
earnings per
share  weighted-average
number of common shares            |                        |   | 60,256                      |     |                           |   | 59,991 |     |      |   | 60,284 |     |  |   | 59,995 |    
|Basic earnings per share                                                                         |                        | $ | 0.18                        |     |                           | $ | 0.22   |     |      | $ | 0.25   |     |  | $ | 0.66   |    
|Diluted earnings per share                                                                       |                        | $ | 0.18                        |     |                           | $ | 0.22   |     |      | $ | 0.25   |     |  | $ | 0.65   |    

The exercise prices for options to purchase an aggregate of 1,807,500 and
1,732,500 shares of common stock exceeded the average market price of the
Companys common stock for the three and six months ended June 30, 2003 and
2002, respectively. Accordingly the calculation of diluted earnings per share
does not include the antidilutive effect of these options for the three and six
months ended June 30, 2003 and 2002.

9. EMPLOYEE INCENTIVE PLANS

During March 2003, the board of directors of the Company approved, subject
to the subsequent approval of the Companys shareholders, the adoption of the
Senior Executive Bonus Plan, effective as of January 1, 2003. The purpose of
the Senior Executive Bonus Plan is to provide for the payment to the Companys
Chief Executive Officer and next four most highly compensated executive
officers of bonuses which are exempt from the $1.0 million deduction limitation
imposed by Section 162(m) of the Internal Revenue Code of 1986, as amended. The
adoption of the Senior Executive Bonus Plan was approved by a majority of the
stockholders of the Company at its annual meeting of stockholders on May 20,
2003.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB
Statement No. 123. SFAS No. 148 provides two additional methods, the modified
prospective and the retroactive restatement methods, for an entity that
voluntarily changes to the fair-value based method of accounting for
stock-based employee compensation, in addition to the prospective method
required by SFAS No. 123. Prior to January 1, 2003, the Company elected to
account for stock

-12-



---



##### Table of Contents



based employee compensation in accordance with Accounting Principles Board
Opinion (APB) No. 25. Pursuant to APB No. 25, the Company did not recognize
any compensation expense since, on the date of grant, the Companys stock
options had no intrinsic value. On January 1, 2003, the Company adopted the
prospective method provided by SFAS No. 148 to account for stock-based employee
compensation. Accordingly, the Company expenses the fair value, as of the date
of grant, of stock options issued to employees on or after January 1, 2003 over
the related service periods. The Company has not issued any stock options since
January 1, 2003.

If the Company had recognized compensation expense for options granted
prior to January 1, 2003 under the fair-value based method of SFAS No. 123, its
net income would have decreased by approximately $1.8 million and $1.9 million
for the three months ended June 30, 2003 and 2002, respectively, and
approximately $3.6 million for each of the six-month periods ended June 30,
2003 and 2002, resulting in pro forma net income and earnings per share as
follows:

|                                                                                          |  |                             |        |                           |  |      |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ------------------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                          |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                                                          |  |                             |        |                          
|(000's omitted, except per share data)                                                    |  | 2003                        |        | 2002                      |  | 2003 |        | 2002
|                                                                                          |  |                             |        |                           |  |      |        |     
|Net income available to common stockholders, as
reported                                  |  | $                           | 10,648 |                           |  | $    | 13,200 |      |  | $ | 15,008 |   |  | $ | 38,776 |  
|Add: Stock-based compensation expense included in
reported net income (net of tax effect) |  |                             | 510    |                           |  |      | (235   | )    |  |   | 928    |   |  |   | 838    |  
|Less: Stock-based compensation expense under SFAS
123 (net of tax effect)                 |  |                             | (2,303 | )                         |  |      | (1,693 | )    |  |   | (4,514 | ) |  |   | (4,436 | )
|                                                                                          |  |                             |        |                           |  |      |        |      |  |   |        |   |  |   |        |  
|Pro forma net income available to common
stockholders                                     |  |                             | 8,855  |                           |  |      | 11,272 |      |  |   | 11,422 |   |  |   | 35,178 |  
|Diluted EPS, as reported                                                                  |  |                             | 0.18   |                           |  |      | 0.22   |      |  |   | 0.25   |   |  |   | 0.65   |  
|Pro forma diluted EPS                                                                     |  |                             | 0.15   |                           |  |      | 0.19   |      |  |   | 0.19   |   |  |   | 0.59   |  

The effect of applying SFAS No. 123 in the pro forma disclosure above may
not be representative of the potential effect stock-based compensation would
have on net income in future periods.

10. BUSINESS SEGMENTS

Segment information is presented in accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information.
Currently, the Company views its business under two separate segments: the
Specialist segment and the Execution and Clearing segment. The Companys
business segments are based upon the nature of the financial services provided,
their revenue sources and the Companys management organization.

The Companys Specialist segment operates as a specialist in equities and
rights on the NYSE and in equities, options, ETFs and futures on the AMEX and
the NYBOT and provides support services for the specialist activities. In
addition, this segment acts as a market marker in ETFs on several exchanges.
The Specialist segment currently includes the operations of LaBranche, LSP,
LABDR and BV.

-13-



---



##### Table of Contents



The Companys Execution and Clearing segment provides securities
execution, securities clearing and other related services to its own retail
customers, customers of introducing brokers and institutional customers,
including traders, professional investors and broker-dealers. This segment also
provides direct access floor brokerage services to institutional customers. The
Execution and Clearing segment currently includes the operations of LFSI.

Revenues and expenses directly associated with each segment are included
in determining its operating results. Other expenses, such as certain employee
compensation and company-wide professional fees, which are not directly
attributable to a particular segment, generally are allocated to each segment
based on its resource usage levels or other appropriate measures. Certain
revenues, administrative expenses and corporate overhead expenses are not
specifically allocated by management when reviewing the Companys segments
performance, and appear in the Other section. Selected financial information
for each segment is set forth below (000s omitted):

|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|----------------------------------------- |  | --------------------------- | --------- | ------------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                          |  | Three Months Ended June 30, |           | Six Months Ended June 30,
|                                          |  |                             |           |                          
|                                          |  | 2003                        |           | 2002                      |  | 2003 |           | 2002
|                                          |  |                             |           |                           |  |      |           |     
|Specialist Segment:                       |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Revenues                                  |  | $                           | 74,598    |                           |  | $    | 87,805    |      |  | $ | 139,373   |   |  | $ | 192,616   |  
|Operating expenses                        |  |                             | 33,394    |                           |  |      | 40,163    |      |  |   | 66,704    |   |  |   | 78,492    |  
|Depreciation and amortization expense     |  |                             | 2,920     |                           |  |      | 3,082     |      |  |   | 5,879     |   |  |   | 6,142     |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Income before minority interest and taxes |  |                             | 38,284    |                           |  |      | 44,560    |      |  |   | 66,790    |   |  |   | 107,982   |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Segment Assets                            |  |                             | 2,012,461 |                           |  |      | 1,854,879 |      |  |   | 2,012,461 |   |  |   | 1,854,879 |  
|                                          | 
|Execution and Clearing Segment:           |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Revenues                                  |  | $                           | 12,907    |                           |  | $    | 10,219    |      |  | $ | 24,401    |   |  | $ | 18,969    |  
|Operating expenses                        |  |                             | 15,307    |                           |  |      | 12,338    |      |  |   | 29,888    |   |  |   | 24,533    |  
|Depreciation and amortization expense     |  |                             | 343       |                           |  |      | 273       |      |  |   | 689       |   |  |   | 539       |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Loss before minority interest and taxes   |  |                             | (2,743    | )                         |  |      | (2,392    | )    |  |   | (6,176    | ) |  |   | (6,103    | )
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Segment Assets                            |  |                             | 76,474    |                           |  |      | 123,977   |      |  |   | 76,474    |   |  |   | 123,977   |  

-14-



---



##### Table of Contents



|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|----------------------------------------- |  | --------------------------- | --------- | ------------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                          |  | Three Months Ended June 30, |           | Six Months Ended June 30,
|                                          |  |                             |           |                          
|                                          |  | 2003                        |           | 2002                      |  | 2003 |           | 2002
|                                          |  |                             |           |                           |  |      |           |     
|Other: (1)                                |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Revenues                                  |  | $                           | (1        | )                         |  | $    | 84        |      |  | $ | 364       |   |  | $ | 9,203     |  
|Operating expenses                        |  |                             | 13,491    |                           |  |      | 14,024    |      |  |   | 27,651    |   |  |   | 29,334    |  
|Depreciation and amortization expense     |  |                             | 16        |                           |  |      | 4         |      |  |   | 21        |   |  |   | 8         |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Loss before minority interest and taxes   |  |                             | (13,508   | )                         |  |      | (13,944   | )    |  |   | (27,308   | ) |  |   | (20,139   | )
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Segment Assets                            |  |                             | 99,667    |                           |  |      | 38,302    |      |  |   | 99,667    |   |  |   | 38,302    |  
|                                         
|Total:                                    |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Revenues                                  |  | $                           | 87,504    |                           |  | $    | 98,108    |      |  | $ | 164,138   |   |  | $ | 220,788   |  
|Operating expenses                        |  |                             | 62,192    |                           |  |      | 66,525    |      |  |   | 124,243   |   |  |   | 132,359   |  
|Depreciation and amortization expense     |  |                             | 3,279     |                           |  |      | 3,359     |      |  |   | 6,589     |   |  |   | 6,689     |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Income before minority interest and taxes |  |                             | 22,033    |                           |  |      | 28,224    |      |  |   | 33,306    |   |  |   | 81,740    |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  
|Assets                                    |  |                             | 2,188,602 |                           |  |      | 2,017,158 |      |  |   | 2,188,602 |   |  |   | 2,017,158 |  
|                                          |  |                             |           |                           |  |      |           |      |  |   |           |   |  |   |           |  



---

|(1) |  | Other is comprised primarily of the interest on the Holding Companys
indebtedness, unallocated corporate administrative expenses, including
legal costs, unallocated revenues (primarily income from non-marketable
investments as well as interest income), and elimination entries.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11. STOCKHOLDERS EQUITY

On January 16, 2003, the board of directors declared an $0.08 per share
cash dividend payable on February 14, 2003 to holders of record of the
Companys common stock on January 31, 2003. This dividend was paid on February
14, 2003.

On April 14, 2003, the board of directors declared an $0.08 per share cash
dividend payable on May 14, 2003 to holders of record of the Companys common
stock on April 30, 2003. This dividend was paid on May 14, 2003.

During January 2003, 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
4, 2003, the offer expired, and on February 6, 2003, the Company purchased all
of the approximately 24,650 shares that had been tendered for approximately
$24.8 million, including accrued but unpaid dividends. As a result of the
purchase, the Company recorded an expense due to the acceleration of the
discount accretion on the shares purchased of approximately $0.9 million, which
was included in other expenses.

12. COMMITMENTS AND CONTINGENCIES

The Company and, in particular, certain of the business operations
conducted by LFSIs predecessor in interest, ROBB PECK McCOOEY Clearing
Corporation, have been the target, from time to time, of various claims and
lawsuits incidental to the ordinary course of their respective businesses.
While the ultimate outcome of those claims and lawsuits which currently are
pending cannot be predicted with certainty, the Company believes, based on its
understanding of the facts of these proceedings, that their ultimate
resolution, in the aggregate,

-15-



---



##### Table of Contents



will not have a material adverse effect on the Companys financial
condition or results of operations.

On April 22, 2003, the NYSE announced that it was reviewing the trading
practices of several specialist firms, including the Companys subsidiary
specialist firm, LaBranche. The investigation presently focuses on the trading
requirement that NYSE specialist firms not intervene in a natural match between
a buyer and a seller.

In connection with this investigation, the NYSEs Division of Enforcement
recently served LaBranche with a so-called Charge Memorandum as a result of
LaBranches refusal to furnish the NYSEs Division of Enforcement with copies
of all personal e-mail messages sent or received by certain of its specialists
and other employees since January 2002. LaBranche personnel have given a number
of on-the-record interviews to the NYSE, and LaBranche has produced numerous
documents, including many thousands of e-mail messages, but has not produced
personal e-mail messages in order to protect its employees privacy rights and
because it does not believe that such messages have any bearing on any of
LaBranches business activities or are at all relevant to the pending NYSE
investigation. LaBranche has sought to comply with the NYSEs Division of
Enforcement inquiry by offering to furnish copies of the disputed e-mail
messages to an independent third party for a determination of whether they are
relevant to the ongoing investigation, but the NYSEs Division of Enforcement
has refused this offer. The Company believes that it is fully cooperating with
this ongoing investigation, but it intends to contest vigorously the NYSEs
Division of Enforcement efforts to obtain copies of its specialists and other
employees non-business e-mail messages. Toward this end, LaBranche filed with
the NYSE on August 12, 2003 a formal answer to the Charge Memorandum, in which
it denied the NYSEs Division of Enforcement charge that it has failed to
cooperate with the NYSEs investigation.

While the Company believes that
LaBranche
 has operated in accordance with all applicable requirements, the
investigation is ongoing and there can be no assurance as to the outcome of the
investigation or its effects, if any, on the Companys financial condition.

13. SUBSEQUENT EVENT

On July 17, 2003, the board of directors declared an $0.08 per share cash
dividend payable on August 14, 2003 to holders of record of the Companys
common stock on July 31, 2003. The payment of future dividends is within the
discretion of the board of directors and will depend on the Companys future
earnings, capital requirements, applicable regulatory restrictions, financial
condition and other relevant factors.

-16-



---



##### Table of Contents






Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context otherwise requires, the Company or we shall mean
LaBranche & Co Inc. and its wholly-owned subsidiaries.

This discussion should be read in conjunction with the Companys Condensed
Consolidated Financial Statements and the Notes thereto contained in this
report.

General

We currently view our business as operating principally in two separate
segments: the specialist segment and the execution and clearing segment. Our
specialist segment operates as a specialist in equities and rights on the New
York Stock Exchange (the NYSE) and in equities, options, Exchange Traded
Funds (ETFs) and futures on the American Stock Exchange (the AMEX) and the
New York Board of Trade (NYBOT), a market-maker in ETFs on several exchanges,
and provides support services for our specialist activities. Our execution and
clearing segment provides securities clearing, securities execution and other
related services to its own retail customers, customers of introducing brokers
and institutional customers, including traders, professional investors and
broker-dealers. Our execution and clearing segment also provides direct access
floor brokerage services to institutional customers. Certain revenues and
administrative and corporate overhead expenses, which consist primarily of
interest on our public debt, are not specifically related to our two principal
segments, and thus are treated as other revenues and expenses. Our specialist
segment currently includes the operations of our LaBranche & Co. LLC, LaBranche
Structured Products, LLC (LSP), LABDR Services, Inc. (LABDR), and LaBranche
& Co. B.V. (BV) subsidiaries. Our execution and clearing segment currently
includes the operations of our LaBranche Financial Services, Inc. (LFSI)
subsidiary.

Recent Developments

In January 2003, the Financial Accounting Standard Board (FASB) issued
FASB Interpretation (FIN) No. 46, Consolidation of Variable Interest
Entities. FIN 46 requires a company to consolidate a variable interest entity
(VIE) if the company has variable interests that give it a majority of the
expected losses or a majority of the expected residual returns of the entity.
FIN 46 is effective immediately for VIEs created after January 31, 2003. For
VIEs created prior to February 1, 2003, FIN 46 will apply in the first interim
period or fiscal year beginning after June 15, 2003. The implementation of FIN
46 has not had a material impact on our financial statements.

In May 2003, the FASB issued Statement of Financial Standards (SFAS) No.
150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. SFAS No. 150 is

-17-



---



##### Table of Contents



effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective for the interim period beginning after June
15, 2003. We have not entered into or modified any financial instruments with
characteristics of both liabilities and equity as defined under SFAS No. 150
since May 31, 2003. The implementation of SAFS No. 150 has not had a material
impact on our 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 are
recorded on a settlement date basis and the related revenues and expenses are
recorded on a trade date basis. Corporate equities, ETFs, options and other
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. United States Government obligations, together with
related interest receivable as reported in other assets, are reflected at
market value, with interest income included in other income. The market value
for equity securities for which we act as specialist on both the AMEX and NYSE
is based on the closing price posted by the exchange on which they are traded.
The market value for ETFs and futures contracts is also based on the closing
price posted on the exchanges on which they are traded. The market value of our
exchange-traded options is based on the national best bid/offer as determined
by our options clearing agent.

Investments in non-marketable securities consist of private equity,
limited liability company and limited partnership investments, and are included
in other assets on the statement of financial condition. These investments do
not have readily available price quotations. These investments are accounted
for under the equity method, which approximates fair value, or are accounted
for at fair value as estimated by our management. In determining the estimated
fair value, we consider all appropriate factors relevant to such investments
and consistently apply industry standard methodology for arriving at fair
value. Gains and losses for changes in fair value are included in other
revenues in the accompanying consolidated statement 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 1999 in connection with our reorganization from
partnership to corporate form. The allocations of purchase price and
determinations of useful lives were based on independent appraisals for
material acquisitions through March 2001. The useful lives of the acquired
specialist stock lists were determined based on 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 on managements analysis of revenues,
consideration paid, common stock listings and other relevant data and ratios.
This information was analyzed and compared with the results of the independent
appraisals conducted on acquisitions prior to April 2001.

Since the implementation of SFAS No. 142, Goodwill and Other Intangible
Assets, on January 1, 2002, acquired trade name and goodwill are no longer
amortized. Our acquired specialist stock lists, however, continue to be
amortized over their respective lives. We test

-18-



---



##### Table of Contents



goodwill for impairment at least annually or when events and circumstances
indicate impairment testing may be necessary by applying a fair-value based
test in accordance with SFAS No. 142 and No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets. The fair value test involves a comparison of
the fair value of the reporting unit to the carrying value of the reporting
unit. The fair value of the reporting unit is determined using both its market
capitalization, when applicable, and the present value of its estimated future
cash flows based on certain management assumptions. If the carrying amount of
the reporting unit exceeds its estimated fair value, we will determine if
impairment is necessary through additional testing. Additionally, we test our
specialist stock lists and trade name intangible assets whenever events or
circumstances indicate that their carrying amount may not be recoverable. If
the carrying value of the specialist stock lists and trade name exceeds their
fair value, an impairment loss would be recognized for the excess of carrying
value over fair value. It is possible that in the future, as a result of
periodic testing, we may incur impairment charges related to the carrying value
of goodwill and intangible assets recorded in our financial statements.

Results of Operations

Specialist Segment Operating
Results

|                                          |                        |      |               |        |              |      |              |        |              |        |         |         |  |   |         |         |  |  |       |       |     |  |       |       |  
|----------------------------------------- | ---------------------- | ---- | ------------- | ------ | ------------ | ---- | ------------ | ------ | ------------ | ------ | ------- | ------- |  | - | ------- | ------- |  |  | ----- | ----- | --- |  | ----- | ----- | -
|                                          |                        |      |               |        |              |      |              |        |              |        |         |         |  |   |         |         |  |  | Three |       | Six
|                                          |                        |      | For the Three |        | For the Six  |      | Months       |        | Months      
|                                          |                        |      | Months Ended  |        | Months Ended |      | 2003 vs 2002 |        | 2003 vs 2002
|                                          |                        |      | June 30,      |        | June 30,     |      | Percentage   |        | Percentage  
|(000's omitted)                           |                        | 2003 |               | 2002   |              | 2003 |              | 2002   |              | Change |         | Change 
|                                          |                        |      |               |        |              |      |              |        |              |        |         |        
|Revenues:                                 |                        |      |               |        |              |      |              |        |              |        |         |         |  |   |         |         |  |  |       |       |     |  |       |      
|Net gain on principal transactions        |                        | $    | 60,103        |        |              | $    | 72,731       |        |              | $      | 111,906 |         |  | $ | 161,855 |         |  |  | (17.4 | )%    |     |  | (30.9 | )%   
|Commissions                               |                        |      | 12,358        |        |              |      | 13,004       |        |              |        | 23,631  |         |  |   | 26,197  |         |  |  | (5.0  | )     |     |  | (9.8  | )    
|Other                                     |                        |      | 2,137         |        |              |      | 2,070        |        |              |        | 3,836   |         |  |   | 4,564   |         |  |  | 3.2   |       |     |  | (16.0 | )    
|                                          |                        |      |               |        |              |      |              |        |              |        |         |         |  |   |         |         |  |  |       |       |     |  |       |      
|                                          | Total segment revenues |      |               | 74,598 |              |      |              | 87,805 |              |        |         | 139,373 |  |   |         | 192,616 |  |  |       | (15.0 | )   |  |       | (27.6 | )
|                                          | Operating expenses     |      |               | 36,314 |              |      |              | 43,245 |              |        |         | 72,583  |  |   |         | 84,634  |  |  |       | (16.0 | )   |  |       | (14.2 | )
|                                          |                        |      |               |        |              |      |              |        |              |        |         |         |  |   |         |         |  |  |       |       |     |  |       |      
|Income before minority interest and taxes |                        | $    | 38,284        |        |              | $    | 44,560       |        |              | $      | 66,790  |         |  | $ | 107,982 |         |  |  | (14.1 | )     |     |  | (38.1 | )    

Revenues from our specialist segment consist primarily of net gain earned
from principal transactions in securities for which we act as specialist. Net
gain on principal transactions represents trading gains net of trading losses
and Securities and Exchange Commission (SEC) transaction fees, where
applicable, and are earned by us when we act as principal buying and selling
our specialist stocks, rights, options, ETFs and futures. Also included in net
gain on principal transactions are accrued dividends receivable or payable on
our stock positions, net gains and losses resulting from our market-making
activities in ETFs, the trading of futures used to hedge our ETF positions, and
the trading of equities underlying the rights, ETFs and options for which we
act as specialist. These revenues are primarily affected by changes in share
volume traded and fluctuations in price of our stocks, options, ETFs and
futures, in which we are the specialist or in which we make a market.

-19-



---



##### Table of Contents



Commissions revenue generated by our specialist segment consists primarily
of fees earned when our specialists act as agents by executing limit orders on
behalf of brokers, professional traders and broker-dealers after a specified
period of time; we do not earn commissions when we match market orders.

Other revenue at our specialist segment consists primarily of interest
income, proprietary trading gains or losses and earnings or losses from an
investment in a hedge fund by LaBranche & Co. LLC.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Net gain on principal transactions decreased as a result of a decrease in
the dollar value and share volume of principal shares traded during the second
quarter of 2003 as compared to the same period in 2002. During the second
quarter of 2003, the aggregate dollar value of principal trades decreased 26.0%
to $187.9 billion from $253.9 billion for the same period in 2002, and the
aggregate share volume of principal trades decreased 16.9% to 7.4 billion
shares during the second quarter of 2003 from 8.9 billion shares for the same
period in 2002. Of the total $60.1 million and $72.7 million of net gain on
principal transactions during the second quarter of 2003 and 2002,
respectively, $5.2 million and ($0.7) million, respectively, were from our
derivative trading activities.

Commissions revenue earned by our specialist segment decreased, despite an
increase in the share volume executed by us as agent, due to the competitive
price pressures within the marketplace and our billing structure, which is
designed to provide our customers with the lowest possible execution price. The
total share volume executed by us as agent in our specialist stocks increased
15.0% to 2.3 billion shares for the three months ended June 30, 2003, from 2.0
billion shares for the same period in 2002.

Other revenue earned by our specialist segment increased slightly as a
result of additional interest income related to stock-borrow transactions from
our expanded LSP operations and an increase in earnings from our hedge fund
investment. This increase was partially offset by a decline in interest income
at LaBranche & Co. LLC due to significantly lower interest rates for our
short-term treasury investments and stock-borrow transactions.

Operating expenses for our specialist segment decreased primarily due to a
reduction in employee compensation and related benefits expense, interest
expense and lease of exchange membership expense. These decreases were
partially offset by an increase in exchange, clearing and brokerage fees
expense. For a further discussion of operating expenses, see Operating
Expenses below.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Net gain on principal transactions decreased as a result of the
unfavorable market conditions resulting from global economic and geopolitical
uncertainties during the first quarter of 2003 as compared to the same period
in 2002. The decrease in the dollar value and share volume of principal trades
throughout the first six months of 2003 also contributed to this decline. The
aggregate dollar value of principal trades decreased 26.2% to $379.7 billion
for

-20-



---



##### Table of Contents



the six months ended June 30, 2003 from $514.4 billion for the same period
in 2002, and the aggregate share volume of principal trades decreased 15.3% to
15.0 billion shares for the six months ended June 30, 2003, from 17.7 billion
shares for the same period in 2002. Of the total $111.9 million and $161.9
million of net gain on principal transactions, during the first six months of
2003 and 2002, respectively, $7.0 million and ($0.4) million, respectively,
were from our derivative trading activities.

Commissions revenue earned by our specialist segment decreased, despite an
increase in the share volume executed by us as agent, as a result of our
billing structure, which is designed to provide our customers with the lowest
possible execution price. The total share volume executed by us as agent in our
specialist stocks increased 10.0% to 4.4 billion shares for the six months
ended June 30, 2003, from 4.0 billion shares for the same period in 2002.

Other revenue earned by our specialist segment decreased primarily due to
a decline in interest income as a result of significantly lower interest rates
for our short-term treasury investments and stock-borrow transactions. The
decrease in other revenue was partially offset by an increase in proprietary
trading revenues, as well as an increase in interest income related to
stock-borrow transactions at our LSP subsidiary due to expanded trading
activities.

Operating expenses for our specialist segment decreased primarily due to a
reduction in employee compensation and related benefits expense, interest
expense and lease of exchange membership expense. These decreases were
partially offset by an increase in exchange, clearing and brokerage fees
expense. For a further discussion of operating expenses, see Operating
Expenses below.

Execution and Clearing Segment
Operating Results

|                                        |                        |      |                      |        |                    |      |              |        |              |        |        |        |  |   |        |        |  |  |              |      |            |  |       |      | 
|--------------------------------------- | ---------------------- | ---- | -------------------- | ------ | ------------------ | ---- | ------------ | ------ | ------------ | ------ | ------ | ------ |  | - | ------ | ------ |  |  | ------------ | ---- | ---------- |  | ----- | ---- | 
|                                        |                        |      |                      |        |                    |      |              |        |              |        |        |        |  |   |        |        |  |  | Three Months |      | Six Months
|                                        |                        |      | For the Three Months |        | For the Six Months |      | 2003 vs 2002 |        | 2003 vs 2002
|                                        |                        |      | Ended June 30,       |        | Ended June 30,     |      | Percentage   |        | Percentage  
|(000s omitted)                         |                        | 2003 |                      | 2002   |                    | 2003 |              | 2002   |              | Change |        | Change
|                                        |                        |      |                      |        |                    |      |              |        |              |        |        |       
|Revenues:                               |                        |      |                      |        |                    |      |              |        |              |        |        |        |  |   |        |        |  |  |              |      |            |  |       |     
|Commissions                             |                        | $    | 12,501               |        |                    | $    | 9,416        |        |              | $      | 23,744 |        |  | $ | 17,196 |        |  |  | 32.8         | %    |            |  | 38.1  | %   
|Other                                   |                        |      | 406                  |        |                    |      | 803          |        |              |        | 657    |        |  |   | 1,773  |        |  |  | (49.4        | )    |            |  | (62.9 | )   
|                                        |                        |      |                      |        |                    |      |              |        |              |        |        |        |  |   |        |        |  |  |              |      |            |  |       |     
|                                        | Total segment revenues |      |                      | 12,907 |                    |      |              | 10,219 |              |        |        | 24,401 |  |   |        | 18,969 |  |  |              | 26.3 |            |  |       | 28.6 | 
|                                        | Operating expenses     |      |                      | 15,650 |                    |      |              | 12,611 |              |        |        | 30,577 |  |   |        | 25,072 |  |  |              | 24.1 |            |  |       | 22.0 | 
|                                        |                        |      |                      |        |                    |      |              |        |              |        |        |        |  |   |        |        |  |  |              |      |            |  |       |     
|Loss before minority interest and taxes |                        | $    | (2,743               | )      |                    | $    | (2,392       | )      |              | $      | (6,176 | )      |  | $ | (6,103 | )      |  |  | 14.7         |      |            |  | 1.2   |     

Our execution and clearing segments commissions revenue includes fees
charged to customers for execution, clearance and direct-access floor brokerage
services.

Our execution and clearing segments other revenues consist of interest
income, proprietary trading gains or losses and fees charged to customers for
the use of our proprietary front-end order execution system.

-21-



---



##### Table of Contents



Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Commissions revenue from our execution and clearing segment increased
primarily due to the growth and expansion of our institutional execution
services. This increase was partially offset by a decrease in commission income
from clearance activities and retail execution services.

Other revenue from our execution and clearing segment decreased primarily
due to a decline in interest income as a result of significantly lower interest
rates for our short-term investments and reduced margin balances, as well as a
decline in proprietary trading revenues. This decrease was also due to a
decline in fees received from customers using our proprietary front-end order
execution system.

The increase in operating expenses for our execution and clearing segment
was primarily due to an increase in employee compensation and related benefits
expense and other expenses. For a further discussion of operating expenses, see
Operating Expenses below.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Commissions revenue from our execution and clearing segment increased
primarily due to the growth and expansion of our institutional execution
services. This increase was partially offset by a reduction in commission
income from clearance activities.

Other revenue from our execution and clearing segment decreased primarily
due to a decline in interest income as a result of significantly lower interest
rates for our short-term investments and reduced margin balances, as well as a
decline in proprietary trading revenues. This decrease was also due to a
decline in fees received from customers using our proprietary front-end order
execution system.

The increase in operating expenses for our execution and clearing segment
was primarily due to an increase in employee compensation and related benefits
expense, exchange, clearing and brokerage fees and other expenses. For a
further discussion of operating expenses, see Operating Expenses below.

Other Operating Results

|                                        |                        |      |                      |        |                    |      |              |        |              |        |         |        |  |   |         |        |  |  |              |        |            |  |       |       |  
|--------------------------------------- | ---------------------- | ---- | -------------------- | ------ | ------------------ | ---- | ------------ | ------ | ------------ | ------ | ------- | ------ |  | - | ------- | ------ |  |  | ------------ | ------ | ---------- |  | ----- | ----- | -
|                                        |                        |      |                      |        |                    |      |              |        |              |        |         |        |  |   |         |        |  |  | Three Months |        | Six Months
|                                        |                        |      | For the Three Months |        | For the Six Months |      | 2003 vs 2002 |        | 2003 vs 2002
|                                        |                        |      | Ended June 30,       |        | Ended June 30,     |      | Percentage   |        | Percentage  
|(000s omitted)                         |                        | 2003 |                      | 2002   |                    | 2003 |              | 2002   |              | Change |         | Change
|                                        |                        |      |                      |        |                    |      |              |        |              |        |         |       
|Other Revenues                          |                        | $    | (1                   | )      |                    | $    | 84           |        |              | $      | 364     |        |  | $ | 9,203   |        |  |  | (101.2       | )%     |            |  | (96.0 | )%   
|                                        |                        |      |                      |        |                    |      |              |        |              |        |         |        |  |   |         |        |  |  |              |        |            |  |       |      
|                                        | Total segment revenues |      |                      | (1     | )                  |      |              | 84     |              |        |         | 364    |  |   |         | 9,203  |  |  |              | (101.2 | )          |  |       | (96.0 | )
|                                        | Operating expenses     |      |                      | 13,507 |                    |      |              | 14,028 |              |        |         | 27,672 |  |   |         | 29,342 |  |  |              | (3.7   | )          |  |       | (5.7  | )
|                                        |                        |      |                      |        |                    |      |              |        |              |        |         |        |  |   |         |        |  |  |              |        |            |  |       |      
|Loss before minority interest and taxes |                        | $    | (13,508              | )      |                    | $    | (13,944      | )      |              | $      | (27,308 | )      |  | $ | (20,139 | )      |  |  | (3.1         | )      |            |  | 35.6  |      

-22-



---



##### Table of Contents



The portion of our revenues that is not generated from our two principal
business segments consists primarily of appreciation or depreciation of our
non-marketable investments and interest income.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Other revenue decreased due to a decline in interest income as a result of
significantly lower interest rates for our short to medium term investments.

Operating expenses decreased primarily due to a decline in interest
expense. For a further discussion of operating expenses see, Operating
Expenses below.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Other revenue decreased due to an approximately $8.7 million appreciation
in the value of our non-marketable investments during the first quarter of
2002. Other revenues also decreased due to a decline in interest income as a
result of significantly lower interest rates for our short to medium term
investments.

Operating expenses decreased primarily due to a decline in interest
expense as well as a reduction in charges related to the repurchases of our
Series A preferred stock. For a further discussion of operating expenses see,
Operating Expenses below.

Operating Expenses

|                                           |                                                   |      |               |        |              |      |              |        |              |        |        |         |  |   |        |         |  |  |       |      |   |  |       |      |  
|------------------------------------------ | ------------------------------------------------- | ---- | ------------- | ------ | ------------ | ---- | ------------ | ------ | ------------ | ------ | ------ | ------- |  | - | ------ | ------- |  |  | ----- | ---- | - |  | ----- | ---- | -
|                                           |                                                   |      | For the Three |        | For the Six  |      | Three Months |        | Six Months  
|                                           |                                                   |      | Months Ended  |        | Months Ended |      | 2003 vs 2002 |        | 2003 vs 2002
|                                           |                                                   |      | June 30,      |        | June 30,     |      | Percentage   |        | Percentage  
|(000's omitted)                            |                                                   | 2003 |               | 2002   |              | 2003 |              | 2002   |              | Change |        | Change 
|                                           |                                                   |      |               |        |              |      |              |        |              |        |        |        
|Expenses:                                  |                                                   |      |               |        |              |      |              |        |              |        |        |         |  |   |        |         |  |  |       |      |   |  |       |     
|Employee compensation and related benefits |                                                   | $    | 25,096        |        |              | $    | 31,080       |        |              | $      | 50,915 |         |  | $ | 62,153 |         |  |  | (19.3 | )%   |   |  | (18.1 | )%  
|Interest                                   |                                                   |      | 12,207        |        |              |      | 12,848       |        |              |        | 23,928 |         |  |   | 25,684 |         |  |  | (5.0  | )    |   |  | (6.8  | )   
|Exchange, clearing and brokerage fees      |                                                   |      | 10,936        |        |              |      | 9,203        |        |              |        | 21,598 |         |  |   | 16,980 |         |  |  | 18.8  |      |   |  | 27.2  |     
|Other operating expenses                   |                                                   |      | 17,232        |        |              |      | 16,753       |        |              |        | 34,391 |         |  |   | 34,231 |         |  |  | 2.9   |      |   |  | 0.5   |     
|                                           |                                                   |      |               |        |              |      |              |        |              |        |        |         |  |   |        |         |  |  |       |      |   |  |       |     
|                                           | Total expenses before minority interest and taxes |      |               | 65,471 |              |      |              | 69,884 |              |        |        | 130,832 |  |   |        | 139,048 |  |  |       | (6.3 | ) |  |       | (5.9 | )
|Provision for income taxes                 |                                                   | $    | 10,316        |        |              | $    | 13,283       |        |              | $      | 16,062 |         |  | $ | 39,147 |         |  |  | (22.3 | )    |   |  | (59.0 | )   

Our largest operating expense is employee compensation and related
benefits. Our specialist segments employee compensation and related benefits
expense consists of salaries, wages and profitability-based compensation paid
to our floor traders and related support staff. The employee compensation and
related benefits expense related to our execution and clearing segment consists
of salaries, wages and profitability-based compensation paid to our execution
and clearing professionals, as well as compensation based on commissions earned
by various trading professionals. Profitability-based compensation may include
cash awards and stock-based compensation paid or granted to managing directors,
trading professionals and other employees based on our profitability.

-23-



---



##### Table of Contents



Interest expense is primarily generated from the indebtedness not
allocated to either of our two principal segments. This indebtedness was
incurred in connection with our reorganization from partnership to corporate
form in 1999, our subsequent acquisitions and the issuance of promissory notes
in exchange for our preferred stock. The interest expense at our specialist
segment is primarily the result of subordinated indebtedness that has been
approved by the NYSE for inclusion in our net capital as well as margin
interest expense related to our derivative specialist and market-making
business. Customers free credit balances and bank loans generate interest
expense at our execution and clearing segment.

Exchange, clearing and brokerage fees expense at our specialist segment
consists primarily of fees paid by us to the NYSE, AMEX, the Depository Trust
Clearing Corporation (DTCC) and to third party execution and clearing
companies. The fees paid by us to these entities are primarily based on the
volume of transactions executed by us as principal and as agent, a fee based on
exchange seat use, an allocation fee requiring specialist firms to share the
cost of newly allocated listings, technology fees, a flat annual fee and
execution and clearing fees. Our execution and clearing segments exchange,
clearing and brokerage fees expense consists of commissions paid to third
parties for introduction of customers, use of certain proprietary information
and third party execution fees.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Employee compensation and related benefits expense decreased as a result
of a reduction in profitability-based compensation accruals and other employee
benefit accruals. The decrease was partially offset by an increase in
employee salaries due to the hiring of additional trading and support personnel
for LSPs trading activities and for LFSIs institutional execution services
group, which increased our average number of employees by approximately 29
individuals for the three months ended June 30, 2003, as compared to the same
period in 2002. Employee compensation and related benefits expense decreased to
28.7% of total revenues for the three months ended June 30, 2003, from 31.7% of
total revenues for the same period in 2002.

Interest expense decreased as the result of our repayment of $20.0 million
senior subordinated notes during 2002, as well as the repayment of $33.1
million principal amount of subordinated indebtedness and promissory notes
during the second half of 2002. This decrease was partially offset by an
increase in margin interest charges as a result of the growth and expansion of
derivative trading activities, as well as the interest expense related to the
$8.0 million aggregate principal amount of notes issued by us in August 2002 in
exchange for 8,000 shares of our Series A preferred stock. Interest expense
increased to 14.0% of total revenues for the three months ended June 30, 2003,
from 13.1% of total revenues for the same period in 2002.

Exchange, clearing and brokerage fees expense increased primarily at our
specialist segment due to the expansion of our derivative trading business,
which led to an increase in commission expense, as well as a new NYSE
technology fee that became effective as of January 1, 2003. Exchange, clearing
and brokerage fees expense increased to 12.5% of total

-24-



---



##### Table of Contents



revenues for the three months ended June 30, 2003, from 9.4% of total
revenues for the same period in 2002.

Other operating expenses increased primarily due to an increase in
communication expenses due to the growth and expansion of our exchange and
clearing segment. This increase was partially offset by a decline in lease of
exchange memberships expense, the result of a slight decrease in the number of
NYSE seats leased during the three months ended June 30, 2003, as well as a
reduction in average seat rental cost on the AMEX.

Provision for income taxes decreased due to the decline in our income
before provision for income taxes.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Employee compensation and related benefits expense decreased as a result
of a reduction in profitability-based compensation accruals and other employee
benefit accruals. The decrease was partially offset by an increase in
employee salaries due to the hiring of additional trading and support personnel
for LSPs trading activities and for LFSIs institutional execution services
group, which increased our average number of employees by approximately 35
individuals for the six months ended June 30, 2003, as compared to the same
period in 2002. Employee compensation and related benefits expense increased to
31.0% of total revenues for the six months ended June 30, 2003, from 28.2% of
total revenues for the same period in 2002.

Interest expense decreased as the result of our repayment of $20.0 million
senior subordinated notes during 2002, as well as the repayment of $34.8
million principal amount of subordinated indebtedness and promissory notes.
This decrease was partially offset by an increase in margin interest charges as
a result of the growth and expansion of our derivative trading activities, as
well as the interest expense related to the $8.0 million aggregate principal
amount of notes issued by us in August 2002 in exchange for 8,000 shares of our
Series A preferred stock. Interest expense increased to 14.6% of total revenues
for the six months ended June 30, 2003, from 11.6% of total revenues for the
same period in 2002.

Exchange, clearing and brokerage fees expense increased at our specialist
segment due to the expansion of our derivative trading business, which led to
an increase in commission expense, a new NYSE technology fee that became
effective as of January 1, 2003, as well as an increase in NYSE allocation
fees. This increase was also due to the growth and expansion of our execution
and clearing segment. Exchange, clearing and brokerage fees expense increased
to 13.2% of total revenues for the six months ended June 30, 2003, from 7.7% of
total revenues for the same period in 2002.

Other operating expenses increased primarily due to an increase in
communication and directed brokerage arrangement expenses due to the growth and
expansion of our exchange and clearing segment. This increase was partially
offset by a decline in legal and professional fees, as well as lease of
exchange memberships expense, which was the result of a slight decrease in

-25-



---



##### Table of Contents



the number of NYSE seats leased during the six months ended June 30, 2003,
as well as a reduction in average seat rental cost on the AMEX.

Provision for income taxes decreased due to the decline in our income
before provision for income taxes.

Liquidity

As of June 30, 2003, we had $2,188.6 million in assets, of which $409.2
million consisted of cash and short-term investments primarily in United States
Government obligations maturing within three months, cash and securities
segregated under federal regulations and overnight repurchase agreements. As of
June 30, 2003 cash and cash equivalents increased as a result of
investing cash in United States Government obligations with maturities within
three months, which are classified as cash and cash equivalents.

In October 2002, our LaBranche & Co. LLC subsidiary amended and restated
its $200.0 million committed line-of-credit agreement with a U.S. commercial
bank, and extended the line-of-credit to October 31, 2003. The line-of-credit
may be extended by LaBranche & Co. LLC, subject to the banks approval, for
additional one-year terms by giving written notice to the bank at least 30 days
prior to the then-current scheduled termination date. Amounts outstanding under
the U.S. commercial bank credit facility would be secured by our inventory of
specialist stocks and 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
financial and other covenants.

In connection with our acquisition of ROBB PECK McCOOEY Financial
Services, Inc. (RPM), we assumed 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
beginning March 15, 2001. During the first quarter of 2003, we paid $3.6
million in deferred compensation plan benefits. 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 one lump
sum. The amounts payable under this deferred compensation plan may be reduced
to satisfy certain indemnification obligations of the plan participants to us
under the agreements governing our acquisition of RPM.

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,
provided they are still employed on the payment date. 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.

-26-



---



##### Table of Contents



In connection with our acquisition of RPM, we also 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 March 15, 2005, 10.0% until March 15,
2006, 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), with the first payment
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. We have made all dividend payments to the
holders of shares of our Series A preferred stock on the appropriate dates
since issuance.

On January 6, 2003, 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 4,
2003, the offer expired, and on February 6, 2003, we purchased all of the
approximately 24,650 shares that had been tendered for approximately $24.8
million, including accrued but unpaid dividends. As a result of the purchase,
we recorded an expense due to the acceleration of the discount accretion on the
shares purchased of approximately $0.9 million, which was included in other
expenses. As of June 30, 2003, approximately 39,186 shares of our Series A
preferred stock were outstanding. Of these remaining shares, 9,760
shares are held in escrow in order to satisfy the potential
indemnification obligations of the former RPM stockholders to us
under the agreements governing our acquisition of RPM.

On January 16, 2003, our board of directors declared an $0.08 per share
cash dividend payable on February 14, 2003 to holders of record of our common
stock on January 31, 2003. This dividend was paid on February 14, 2003. On
April 14, 2003, our board of directors declared an $0.08 per share cash
dividend payable on May 14, 2003 to holders of record of our common stock on
April 30, 2003. This dividend was paid on May 14, 2003. On July 17, 2003, our
board of directors declared an $0.08 per share cash dividend payable on August
14, 2003 to holders of record of our common stock on July 31, 2003. The payment
of future dividends is within the discretion of our board of directors and will
depend on our future earnings, capital requirements, applicable regulatory
restrictions, financial condition and other relevant factors.

As of June 30, 2003, the subordinated indebtedness of LaBranche & Co. LLC
aggregated $28.3 million (excluding subordinated liabilities related to
contributed exchange memberships) and consisted of senior subordinated notes,
junior subordinated notes and a secured demand note obligation. These notes
mature on various dates between February 2004 and June 2008, and bear interest
at annual rates ranging from 7.69% to 11.0%. In July 2003, LaBranche & Co. LLC
prepaid, without penalty, the secured demand note in the principal amount of
$8.0 million, plus accrued interest. The note had an annual interest rate of
11.0% on the cash collateral and 4.0% on the non-cash collateral securing the
note. The junior subordinated notes have automatic rollover provisions, which
extend the maturities for an additional year, unless the lender provides at
least seven months advance notice prior to maturity. LaBranche & Co. LLC is
also entitled to prepay the junior subordinated notes without penalty under the
terms of the agreements relating thereto.

As of June 30, 2003, $10.0 million of our outstanding indebtedness
consisted of one note of $2.0 million, which matures in June 2004 and bears
interest at an annual rate of 8.0%. The remaining notes in the aggregate
principal amount of $8.0 million mature in August 2007

-27-



---



##### Table of Contents



and bear interest at annual rates ranging from 9.0% to 10.0%.

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. On May 13, 2003, we offered to purchase
approximately $30.5 million aggregate principal amount of Senior Subordinated
Notes based on our Excess Cash Flow for the year ended December 31, 2002. This
offer expired on June 11, 2003 without the tender of any Senior Subordinated
Notes.

As a 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, affiliates or employees, or otherwise
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

-28-



---



##### Table of Contents



financial integrity of the broker-dealer. As of June 30, 2003, LaBranche &
Co. LLCs net capital, as defined under SEC Rule 15c3-1, was $473.9 million,
which exceeded the minimum requirements by $471.9 million.

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 June 30, 2003,
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 $483.0 million.

The AMEX generally requires its equity specialist firms to maintain a cash
or liquid asset position of the greater of (a) $600,000, or (b) an amount
sufficient to assume a position of sixty trading units of each security in
which the specialist is registered. Because LaBranche & Co. LLC adheres to the
NYSEs net liquid asset requirements, it automatically satisfies the AMEX
liquid asset requirements.

As a registered broker-dealer and member firm of the NYSE, LFSI also is
subject to SEC Rule 15c3-1, as adopted and administered by the NYSE and the
SEC. Under the alternative method permitted by the rule, the minimum required
net capital of LFSI as of June 30, 2003 was equal to the greater of $1.5
million or 2.0% of aggregate debit items as defined. As of June 30, 2003,
LFSIs net capital, as defined under SEC Rule 15c3-1, was $16.5 million and
exceeded minimum net capital requirements by $15.0 million.

As a registered broker-dealer and AMEX member firm, LSP is subject to SEC
Rule 15c3-1, as adopted and administered by the AMEX and the SEC. LSP 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 June 30, 2003,
LSPs net capital, as defined under SEC Rule 15c3-1, was $18.1 million, which
exceeded minimum net capital requirements by $18.0 million.

Failure by any of our broker-dealer subsidiaries to maintain its required
net capital and net liquid assets, where appropriate, may subject it to
suspension or revocation of its SEC registration or its suspension or expulsion
by the NYSE and/or AMEX.

We currently anticipate that our available cash resources and credit
facilities will be sufficient to meet our working capital, regulatory capital
and capital expenditure requirements through at least the next twelve months.

-29-



---



##### Table of Contents



Credit Ratings

Our $100.0 million Senior Notes and our $250.0 million Senior Subordinated
Notes were both sold to public investors on their respective issuance dates.
The following table sets forth the credit ratings on both of these issues as of
June 30, 2003:

|                          |  |                            |  |                   |  |  |  | 
|------------------------- |  | -------------------------- |  | ----------------- |  |  |  | 
|                          |  | Moody's Investors Services |  | Standard
& Poors
|                          |  |                            |  |                  
|Senior Notes              |  | Baa3                       |  | BB+              
|Senior Subordinated Notes |  | Ba1                        |  | BB-              




Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Because our specialist equity activities on the NYSE and AMEX expose our
capital to significant risks, managing these risks is a constant priority for
us. Our central role in the auction process helps us to reduce risks by
enabling us to incorporate up-to-date market information in the management of
our inventory, subject to our specialist obligations. We have developed a risk
management process which is designed to balance our ability to profit from our
specialist activities with our exposure to potential losses. Our risk
management process includes participation by our executive operating committee,
our floor management committee, our floor team captains and our specialists.

Executive Operating Committee.Our executive operating committee is
composed of four executive officers of LaBranche & Co. LLC. This committee is
responsible for approving all risk management policies and trading guidelines
for particular specialist stocks, after receiving input and proposals by the
floor management committee. In addition, our executive operating committee
reviews all unusual situations reported to it by our floor management
committee.

Floor Management Committee.Our floor management committee is composed of
seven senior floor specialists. This committee is responsible for formulating
and overseeing our overall risk management policies and risk guidelines for
each of our specialist stocks. In arriving at these policies and guidelines,
our floor management committee considers the advice and input of our floor team
captains. Our floor management committee meets with all floor team captains no
less than once a month to review and, if necessary, revise the risk management
policies for LaBranche & Co. LLC and/or for particular specialist stocks. In
addition, a member of our floor management committee is always available on the
trading floor to review and assist with any unusual situations reported by a
captain. Our floor management committee reports to our executive operating
committee about each of these situations.

Floor Team Captains.We have 24 floor team captains who monitor the
activities of LaBranche & Co. LLCs specialists throughout the trading day from
various positions at LaBranche & Co. LLCs trading posts. The captains observe
trades and constantly review trading positions on a real-time basis through our
information systems. In addition, the captains are readily available to assist
LaBranche & Co. LLCs specialists in determining when to deviate from our
policies and guidelines to react to any unusual situations or market
conditions. The captains must report these unusual situations to management,
including any deviations from our policies and guidelines. Captains meet with
each specialist at least once a week to evaluate the specialists adherence to
our risk management policies and guidelines. Captains

-30-



---



##### Table of Contents



also meet among themselves at least twice weekly to review risk policies
and guidelines and, if appropriate, make new recommendations to the floor
management committee.

Specialists.LaBranche & Co. LLCs specialists conduct auctions based on
the conditions of the marketplace. In doing so, specialists observe our risk
management policies and guidelines notwithstanding their responsibility to
create a fair and orderly market. Specialists must immediately notify a captain
of any unusual situations or market conditions requiring a deviation from our
policies and guidelines.

Our equity specialist operations on the AMEX are conducted by five equity
specialists. We have one floor captain on the AMEX, who monitors the trading
activities of the AMEX equity specialists by observing trades and reviewing
positions on a real time basis. In addition, we have an off-floor manager that
monitors the AMEX equity positions and gains and losses on a real-time basis.
The floor captain and manager regularly communicate with management and seek to
ensure that our AMEX equity specialists adhere to all risk management policies
set by LaBranche & Co. LLCs executive operating committee.

Circuit Breaker Rules.The NYSE and AMEX have instituted certain circuit
breaker rules intended to halt trading in all NYSE/AMEX listed stocks in the
event of a severe market decline. The circuit breaker rules impose temporary
halts in trading when the Dow Jones Industrial Average drops a certain number
of points. Current circuit breaker levels are set quarterly at 10, 20 and 30
percent of the Dow Jones Industrial Average closing values of the previous
month, rounded to the nearest 50 points. These rules provide investors extra
time to respond to severe market declines and provide us an opportunity to
insure compliance with our risk management policies.

Equity Market Risk

As a specialist on the NYSE, a high concentration of LaBranche & Co. LLCs
trading revenue is generated from its ten and twenty-five most profitable
specialist stocks. However, the percentage of LaBranche & Co. LLCs specialist
trading revenue generated from its ten most profitable specialist stocks has
decreased from 28.1% to 20.4% and 25.2% to 20.1% of total principal trading
revenue for the three and six months ended June 30, 2002 and 2003,
respectively. The percentage of LaBranche & Co. LLCs specialist trading
revenue generated from its twenty-five most profitable specialist stocks has
decreased from 48.5% to 38.0% and 45.4% to 38.3% of total principal trading
revenue for the three and six months ended June 30, 2002 and 2003,
respectively. LaBranche & Co. LLC is not overly reliant on a particular group
of specialist stocks, as the composition of its ten and twenty-five most
profitable specialist stocks changes continuously.

Our specialist activities are subject to a number of risks, including
risks of price fluctuations, rapid changes in the liquidity of markets and
foreign exchange risk related to American Depositary Receipts (ADRs). In any
period, we may incur trading losses in our specialist stocks for a variety of
reasons, including price fluctuations of our specialist stocks, lack of trading
volume in our specialist stocks and the performance of our specialist
obligations. From time to time, we may have large position concentrations in
securities of a

-31-



---



##### Table of Contents



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. We have invested substantial capital, along with the NYSE, in
real-time, on-line systems which give management instant access to specific
trading information at any time during the trading day, including our aggregate
long and short positions, our capital and profit-and-loss information on an
aggregate or per issue basis. Subject to the specialists obligation to
maintain a fair and orderly market and to applicable regulatory requirements,
we constantly seek to manage our trading positions relative to our principal
trading revenues.

Derivatives Market Risk

As a specialist and market maker in options, ETFs and futures, LSP is
responsible for creating a fair and orderly market, and trades securities as
principal out of both obligation and inclination. As is true with LaBranche &
Co. LLCs equity trading, LSPs options, ETFs, futures and foreign currency
trading exposes it to certain risks, such as price fluctuations, foreign
currency movements and changes in the liquidity of markets. In addition, these
derivative instruments expose LSP to volatility, credit and foreign exchange
risk, among other types of risks.

In order to manage these risks, LSP has a risk management team. These
individuals utilize a third party software application to monitor LSPs
positions on a real-time basis. By monitoring actual and theoretical profit and
loss, volatility and other standard risk measures, these individuals seek to
ensure that all LSP traders are within the parameters set by management. LSPs
traders use futures, the stocks underlying certain positions and foreign
currencies in an attempt to hedge market and foreign currency risk. LSPs
aggregate risk is under constant evaluation by both the risk management team
and traders, and all significant trading strategies and positions are discussed
between both groups. LSPs option, future and ETF trading is executed solely on
national and foreign exchanges. These trades clear through the Options Clearing
Corporation, the National Securities Clearing Corporation or the applicable
exchange clearing organization, thereby reducing potential credit risk.

The following chart illustrates how the specified movements in the
underlying securities prices of LSPs entire portfolio would have impacted
profits and losses from its trading activities:

|                 |  |                                                     |      |       |  |    |     |       |  |        |    |   |  |   |     |  |  |   |     |  
|---------------- |  | --------------------------------------------------- | ---- | ----- |  | -- | --- | ----- |  | ------ | -- | - |  | - | --- |  |  | - | --- | -
|(000's omitted)  |  | Profit or (Loss) if the underlying securities move:
|                 |  | -15.0%                                              |      | -5.0% |  | 0% |     | +5.0% |  | +15.0%
|                 |  |                                                     |      |       |  |    |     |       |  |       
|Portfolio as of: |  |                                                     |      |       |  |    |     |       |  |        |    |   |  |   |     |  |  |   |     |  
|March 31, 2003   |  | $                                                   | 610  |       |  | $  | 396 |       |  | $      | (5 | ) |  | $ | 194 |  |  | $ | (44 | )
|June 30, 2003    |  |                                                     | (930 | )     |  |    | (47 | )     |  |        | (7 | ) |  |   | 295 |  |  |   | 610 |  

-32-



---



##### Table of Contents



The numbers in the above table are based on certain theoretical
assumptions and thus do not fully represent the profit or loss exposure to
changes in volatility, interest rates and dividends. The zero percent change
column represents the loss LSP would experience on a daily basis if the market
remained unchanged.

Execution, Clearing and Operational Risk

As a specialist on the NYSE and AMEX and a market maker for certain
securities, LaBranche & Co. LLC and LSP are engaged in various securities
trading and lending activities. In connection with their activities as
specialists and market makers, LaBranche & Co. LLC and LSP assume positions in
stocks, rights, options, ETFs, futures and foreign currencies. LaBranche & Co.
LLC and LSP are exposed to credit risk associated with the nonperformance of
counterparties in fulfilling their contractual obligations pursuant to these
securities transactions. LaBranche & Co. LLC and LSP also are exposed to market
risk associated with the sale of securities not yet purchased, which can be
directly impacted by volatile trading on the NYSE, AMEX and other exchanges.
Additionally, in the event of nonperformance and unfavorable market price
movements, LaBranche & Co. LLC and LSP may be required to purchase or sell
financial instruments, which may result in a loss.

LFSIs execution and clearing services 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 customers or
other brokers are unable to fulfill their contractual obligations and it 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.

Before conducting business with a prospective customer, LFSI reviews the
prospective customers experience in the securities industry, financial
condition and personal background. For current customers, 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. In addition, LFSI performs a background check on every customer.

In each of our segments, we rely heavily on our information systems in
conducting our risk management. Accordingly, working in conjunction with the
NYSE, we have made significant investments in our trade processing and
execution systems. Our use of, and dependence on, technology has allowed us to
sustain our significant growth over the past several years. Management members
and floor captains at our NYSE and AMEX operations must constantly monitor our
positions and transactions in order to mitigate our risks and identify
troublesome trends as they occur. The substantial capital we have invested,
along with the NYSE, in real-time, on-line systems give management instant
access to specific trading information at any time during the trading day,
including:



| |  |  | our aggregate long and short positions;
| | - |  | ---------------------------------------

-33-



---



##### Table of Contents





| |  |  | the various positions of each of our trading professionals;                                    
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | our overall position in a particular stock;                                                    
|
| |  |  | capital and profit-and-loss information on an aggregate, per
specialist or per issue basis; and
|
| |  |  | average position size.                                                                         

Our information systems send and receive data from the NYSE and AMEX
through dedicated data feeds. The NYSE supplies us with specialist position
reporting system terminals both on the trading floor and in our offices. These
terminals allow us to monitor our NYSE trading profits and losses as well as
our positions. For our AMEX equity operations, our in-house technology staff
has developed applications to monitor our current positions and profits and
losses. Our derivative trading operation utilizes a third-party software
application to monitor its positions and profits and losses on a real-time
basis.

During 2002, we developed and implemented a business continuity plan which
includes a comprehensive disaster recovery plan. We have a back-up disaster
recovery center in New Jersey which has connectivity with our LaBranche & Co.
LLC, LFSI and LSP subsidiaries. We are in the process of establishing a second
back-up facility which will serve our LFSI and LSP subsidiaries in another New
York state location and also will act as a secondary disaster recovery facility
for our LaBranche & Co. LLC operations. We expect this second site to be fully
operational by September 30, 2003.

Regulatory Risk

As registered broker-dealers, LaBranche & Co. LLC, LFSI and LSP are
subject to certain regulatory requirements intended to insure their general
financial soundness and liquidity. These subsidiaries are subject to SEC Rule
15c3-1, 15c3-3 and other requirements as adopted and administered by both the
NYSE and AMEX.

LFSI must comply with the rules and regulations related to the custody of
customers assets issued under the Securities Exchange Act of 1934 and by the
exchanges of which it is a member. In addition, the recently-enacted USA
Patriot Act requires U.S. financial institutions, including banks,
broker-dealers, futures commission merchants and investment companies, to
implement policies, procedures and controls which are reasonably designed to
detect and report instances of money laundering and the financing of terrorism.
As a result of this legislation, in July 2002, LFSI hired a compliance
professional to establish and monitor LFSIs anti-money laundering practices.

-34-



---



##### Table of Contents



Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the
Exchange Act). Based upon that evaluation, our Chief Executive Officer and
Chief
Financial Officer concluded that our disclosure controls and procedures are
effective, in all material respects, with respect to the recording, processing,
summarizing and reporting, within the time periods specified in the Securities
and Exchange Commissions rules and forms, of information required to be
disclosed by us in the reports that we file or submit under the Exchange Act.

There have not been any changes in our internal control over
financial reporting during the fiscal quarter to which this report relates that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

-35-



---



##### Table of Contents






PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Company and, in particular, certain of the business operations
conducted by LFSIs predecessor in interest, ROBB PECK McCOOEY Clearing
Corporation, have been the target, from time to time, of various claims and
lawsuits incidental to the ordinary course of their respective businesses.
While the ultimate outcome of those claims and lawsuits which currently are
pending cannot be predicted with certainty, we believe, based on our
understanding of the facts of these proceedings, that their ultimate
resolution, in the aggregate, will not have a material adverse effect on our
financial condition or results of operations.

On April 22, 2003, the NYSE announced that it was reviewing the trading
practices of several specialist firms, including our subsidiary specialist
firm, LaBranche & Co. LLC. The investigation presently focuses on the trading
requirement that NYSE specialist firms not intervene in a natural match between
a buyer and a seller.

In connection with this investigation, the NYSEs Division of Enforcement
recently served our LaBranche & Co. LLC subsidiary with a so-called Charge
Memorandum as a result of LaBranche & Co. LLCs refusal to furnish the NYSEs
Division of Enforcement with copies of all personal e-mail messages sent or
received by certain of its specialists and other employees since January 2002.
LaBranche & Co. LLC personnel have given a number of on-the-record interviews
to the NYSE, and LaBranche & Co. LLC has produced numerous documents, including
many thousands of e-mail messages, but has not produced personal e-mail
messages in order to protect its employees privacy rights and because it does
not believe that such messages have any bearing on any of LaBranche & Co. LLCs
business activities or are at all relevant to the pending NYSE investigation.
LaBranche & Co. LLC has sought to comply with the NYSEs Division of
Enforcement inquiry by offering to furnish copies of the disputed e-mail
messages to an independent third party for a determination of whether they are
relevant to the ongoing investigation, but the NYSEs Division of Enforcement
has refused this offer. We believe that we are fully cooperating with this
ongoing investigation, but we intend to contest vigorously the NYSEs Division
of Enforcement efforts to obtain copies of its specialists and other
employees non-business e-mail messages. Toward this end, LaBranche & Co. LLC
filed with the NYSE on August 12, 2003 a formal answer to the Charge
Memorandum, in which it denied the NYSEs Division of Enforcement charge that
it has failed to cooperate with the NYSEs investigation.

While we believe that
LaBranche & Co. LLC has operated in accordance with all applicable requirements, the
investigation is ongoing and there can be no assurance as to the outcome of the
investigation or its effects, if any, on our financial condition.

Believing that it is inappropriate for him to continue to serve as Vice
Chairman and Director of the NYSE while the NYSEs investigation of LaBranche &
Co. LLCs trading practices is ongoing and particularly in the aftermath of the
issuance by the NYSEs Division of Enforcement of the Charge Memorandum
described above, Robert M. Murphy, the Chief Executive Officer of LaBranche &
Co. LLC, resigned from his positions with the NYSE on August 7, 2003.

-36-



---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.

The Companys Annual Meeting of Stockholders was held on May 20, 2003. The
following proposals were adopted by the margins indicated:



| | 1. |  | To elect three Class I directors, each of whom is to serve
for a term of three years.
| | -- |  | -------------------------------------------------------------------------------------

|                       |  |                  |            |                    |  |  |         | 
|---------------------- |  | ---------------- | ---------- | ------------------ |  |  | ------- | 
|                       |  | Number of Shares
|                       |  |                 
|                       |  | For              |            | Withheld Authority
|                       |  |                  |            |                   
|Michael LaBranche      |  |                  | 48,783,658 |                    |  |  | 490,570 | 
|Alfred O. Hayward, Jr. |  |                  | 48,342,815 |                    |  |  | 931,413 | 
|Robert M. Murphy       |  |                  | 48,833,438 |                    |  |  | 440,790 | 



| | 2. |  | To approve the Senior Executive Bonus Plan which provides for
the payment to the Companys Chief Executive Officer and next four
most highly compensated executive officers of bonuses which are
exempt from $1.0 million deduction limitation imposed by Section
162(m) of the Internal Revenue Code of 1986, as amended.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |            |           | 
|------- |  | ---------- | --------- | 
|For     |  | 37,251,424
|Against |  |            | 4,730,871 | 
|Abstain |  |            | 49,996    | 



| | 3. |  | To approve our appointment of KPMG LLP as our independent
auditors for the fiscal year ending December 31, 2003.
| | -- |  | ----------------------------------------------------------------------------------------------------------------

|        |  |            |         | 
|------- |  | ---------- | ------- | 
|For     |  | 49,017,049
|Against |  |            | 250,563 | 
|Abstain |  |            | 6,616   | 

Item 5. Other Information.

We have included in this Form 10-Q filing, and from time to time our
management may make, statements which may constitute forward-looking
statements within the meaning of the safe harbor provisions of The Private
Securities Litigation Reform Act of 1995. The Company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 NYSE or the AMEX, excessive volatility in the equity securities
market and changes in the value of our securities positions. As a result of
these and other factors, we may experience material fluctuations in future
operating results on a quarterly or annual basis, which could

-37-



---



##### Table of Contents



materially and
adversely affect our business, financial condition, operating results and stock
price. An investment in the Company involves various risks, including
those mentioned above and those that are detailed from time to time in our SEC
filings.

Certain statements contained in this report, including without limitation,
statements containing the words believe, intend, expect, anticipate and
words of similar import, also may 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 the Company 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. The Company 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.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits.

|            |  |                                                                                                                                                                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                             
|31.1        |  | Certification of George M.L. LaBranche, IV,
Chairman, Chief Executive Officer and President, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                             
|31.2        |  | Certification of Harvey S. Traison, Senior Vice
President and Chief Financial Officer, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                             
|32.1        |  | Certification of George M.L. LaBranche, IV,
Chairman, Chief Executive Officer and President, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, regarding the
information contained in LaBranches Quarterly Report on Form
10-Q for the period ended June 30, 2003.
|            |  |                                                                                                                                                                                                                                                                             
|32.2        |  | Certification of Harvey S. Traison, Senior Vice
President and Chief Financial Officer, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, regarding the information
contained in LaBranches Quarterly Report on Form 10-Q for the
period ended June 30, 2003.      

(b)  Reports on Form 8-K.

-38-



---



##### Table of Contents





| |  |  | (i) On April 3, 2003, we filed a Form 8-K, dated April 3,
2003, with respect to the announcement of our expected
financial results for the first quarter of 2003.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (ii) On April 15, 2003, we filed a Form 8-K, dated April 15,
2003, with respect to our first quarter earnings announcement.                                      

All other items of this report are inapplicable.

-39-



---



##### Table of Contents






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.

|                |  |                     |  |                                                   |  | 
|--------------- |  | ------------------- |  | ------------------------------------------------- |  | 
|August 12, 2003 |  | LABRANCHE & CO INC. |  |                                                  
|                |  |                     |  |                                                   |  | 
|                |  |                     |  |                                                   |  | 
|                |  | By:                 |  | /s/ Harvey S. Traison                             |  | 
|                |  |                     |  |                                                   |  | 
|                |  | Name:               |  | Harvey S. Traison                                 |  | 
|                |  | Title:              |  | Senior Vice President and Chief
Financial Officer |  | 

-40-



---



##### Table of Contents



EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                             
|31.1        |  | Certification of George M.L. LaBranche, IV, Chairman, Chief Executive
Officer and President, pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                             
|31.2        |  | Certification of Harvey S. Traison, Senior Vice President and Chief
Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                             
|32.1        |  | Certification of George M.L. LaBranche, IV, Chairman, Chief Executive
Officer and President, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, regarding the information contained in LaBranches Quarterly
Report on Form 10-Q for the period ended June 30, 2003.
|            |  |                                                                                                                                                                                                                                                                             
|32.2        |  | Certification of Harvey S. Traison, Senior Vice President and Chief
Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, regarding the information contained in LaBranches Quarterly Report
on Form 10-Q for the period ended June 30, 2003.      

-41-