FBR Reports Third Quarter Financial Results
October 22 2013 - 5:04PM
FBR & Co. (Nasdaq:FBRC) ("FBR" or the "Company"), a leading
investment bank serving the middle market, today reported net
income of $6.4 million, or $0.48 per diluted share, for the third
quarter of 2013 compared to a net loss of $3.4 million, or $0.27
per diluted share, in the third quarter of 2012, and net income of
$46.5 million, or $3.52 per diluted share, for the second quarter
of 2013. For the first nine months of 2013, the Company reported
net after-tax income of $88.2 million compared to a net after-tax
loss of $2.4 million for the first nine months of 2012.
Third quarter 2013 pretax operating income was $3.1 million on
$34.1 million of revenue. This compares to a $5.6 million pretax
operating loss on $23.9 million of revenue in the third quarter of
2012 and $14.6 million of pretax operating income on $67.2 million
of revenue in the second quarter of 2013. For the first nine months
of 2013, the Company's pretax operating income was $53.7 million on
revenue of $219.2 million, compared to a pretax operating loss of
$5.3 million on $92.6 million in revenue for the first nine
months of 2012.
Compensation and benefits expenses were 53% of net revenue
during the third quarter of 2013, maintaining the year to date
ratio of 56%. Headcount was 269 at quarter end. Revenue per head on
a trailing twelve month basis was $1.1 million. Non-compensation
fixed expenses in the third quarter of 2013 totaled $11.0 million
compared to $10.9 million in the third quarter of 2012, and $10.2
million in the prior quarter.
Third Quarter Overview
- Investment banking revenue was $19.6 million in the quarter
compared to $10.7 million in the third quarter of 2012 and $52.0
million in the second quarter of 2013. This revenue was generated
from 14 transactions raising over $4 billion in capital and
representing a balance of products and all industry groups.
- In a quarter with the lowest daily cash equity volumes in
recent history, institutional brokerage generated net revenue of
$13.2 million compared to $11.3 million in the third quarter of
2012 and $13.1 million in the second quarter of 2013. During the
quarter, stronger performance across our non-equities trading
businesses offset the weak environment for cash equities.
- The Company earned $1.2 million of net investment income,
interest and dividends during the quarter.
- The Company continues to use its net operating loss
carry-forwards and as a result, has a year-to-date effective tax
rate of approximately 4.5%. Additionally, the Company released its
valuation allowance with respect to a significant portion of its
deferred tax assets in the second quarter resulting in a
year-to-date tax benefit of $27.8 million. Looking forward to 2014,
the Company expects to return to a more normalized tax rate.
- Net income from discontinued operations was $3.6 million,
reflecting additional gains from last year's sale of the asset
management business. The final payment from this sale is scheduled
to occur in the fourth quarter.
In October, the Company announced the addition of a team of 29
seasoned research, sales and trading professionals from Lazard
Capital Markets, LLC. This team will significantly expand FBR's
small cap equities platform, specifically in the healthcare, media,
and consumer sectors.
Shareholders' equity was $306.5 million as of September 30,
2013, compared to $315.5 million on June 30, 2013. This decrease
reflects the repurchase of 777 thousand shares of common stock at
an average price of $26.28 per share. Earlier this week, the Board
authorized the Company to repurchase up to an additional 2.5
million shares. As of September 30, 2013, the Company's cash
balance was $201.7 million and its book value per share was $26.40,
up $0.58 in the quarter and 38% since the beginning of the
year.
"Because our business model entails a high mix of underwriting
revenue, overall revenue will continue to be volatile on a
quarterly basis. Our third quarter results reflect the lower end of
that volatility, but also reflect the impact of our cost-cutting
work as we generated meaningful operating profit at those lower
revenues," said Richard J. Hendrix, Chairman and Chief Executive
Officer of FBR. "I want to thank our entire team at FBR for their
exceptional performance on behalf of clients and shareholders
throughout the first nine months of this year."
Investors wishing to listen to the earnings call at 9:00 A.M.
U.S. EDT, Wednesday, October 23, 2013, may do so via the Web or
conference call at:
Webcast link: http://www.media-server.com/m/p/yu8h3gvo
Conference call dial-in number (domestic, toll-free):
877.303.6433
Conference call dial-in number (international): 224.357.2198
Access code: 71548348
Replays of the earnings call will be available via webcast
following the call.
FBR & Co. (Nasdaq:FBRC) provides investment banking,
merger and acquisition advisory, institutional brokerage, and
research services through its subsidiary FBR Capital Markets &
Co. FBR focuses capital and financial expertise on the following
industry sectors: consumer; diversified industrials;
energy & natural resources; financial institutions;
healthcare; insurance; real estate; and technology,
media & telecom. FBR is headquartered in the Washington,
D.C. metropolitan area with offices throughout the United States.
For more information, please visit www.fbr.com.
Statements in this release concerning future performance,
developments, events, market forecasts, revenues, expenses,
earnings, run rates and any other guidance on present or future
periods constitute forward-looking statements. These
forward-looking statements are subject to a number of factors,
risks and uncertainties that might cause actual results to differ
materially from stated expectations or current circumstances. These
factors include, but are not limited to, the effect of demand for
public and private securities offerings, activity in the secondary
securities markets, interest rates, the risks associated with
merchant banking investments, the realization of gains and losses
on principal investments, available technologies, competition for
business and personnel, and general economic, political and market
conditions. For a discussion of these and other risks and important
factors that could affect FBR's future results and financial
condition, see "Risk Factors" in Part I, Item 1A and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2012; and other
items throughout the Company's Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K.
FBR &
CO. |
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CONSOLIDATED STATEMENTS
OF OPERATIONS |
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(Dollars in thousands, except per
share amounts) |
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(Unaudited) |
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Quarter Ended September
30, |
Nine Months Ended
September 30, |
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2013 |
2012 |
2013 |
2012 |
REVENUES: |
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Investment banking: |
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Capital raising |
$ 15,998 |
$ 8,552 |
$ 164,849 |
$ 39,567 |
Advisory |
3,616 |
2,191 |
8,092 |
6,315 |
Institutional brokerage: |
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Principal
transactions |
5,984 |
4,096 |
16,643 |
14,351 |
Agency commissions |
7,210 |
7,169 |
23,378 |
25,286 |
Net investment income |
650 |
1,231 |
3,957 |
4,222 |
Interest, dividends &
other |
598 |
650 |
2,305 |
2,825 |
Total
revenues |
34,056 |
23,889 |
219,224 |
92,566 |
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EXPENSES: |
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Compensation and benefits |
17,992 |
14,826 |
122,325 |
49,554 |
Professional services |
2,393 |
2,703 |
9,228 |
9,294 |
Business development |
1,995 |
1,644 |
6,738 |
6,648 |
Clearing and brokerage
fees |
940 |
1,746 |
3,852 |
6,030 |
Occupancy and
equipment |
2,835 |
4,142 |
9,185 |
11,683 |
Communications |
2,567 |
2,956 |
8,313 |
9,564 |
Other operating
expenses |
2,184 |
1,450 |
5,894 |
5,076 |
Total
expenses |
30,906 |
29,467 |
165,535 |
97,849 |
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Income (loss) from
continuing operations before income taxes |
3,150 |
(5,578) |
53,689 |
(5,283) |
Income tax provision
(benefit) |
361 |
(1,262) |
(27,771) |
(1,240) |
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Income (loss) from continuing
operations, net of taxes |
2,789 |
(4,316) |
81,460 |
(4,043) |
Income from discontinued
operations, net of taxes |
3,622 |
959 |
6,744 |
1,615 |
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Net income
(loss) |
$ 6,411 |
$ (3,357) |
$ 88,204 |
$ (2,428) |
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Basic earnings per
share: |
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Income (loss) from continuing
operations, net of taxes |
$ 0.23 |
$ (0.35) |
$ 6.69 |
$ (0.30) |
Income from discontinued
operations, net of taxes |
0.30 |
0.08 |
$ 0.55 |
$ 0.12 |
Net income (loss) |
$ 0.53 |
$ (0.27) |
$ 7.24 |
$ (0.18) |
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Diluted earnings per
share: |
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Income (loss) from continuing
operations, net of taxes |
$ 0.21 |
$ (0.35) |
$ 6.19 |
$ (0.30) |
Income from discontinued
operations, net of taxes |
0.27 |
0.08 |
0.51 |
0.12 |
Net income (loss) |
$ 0.48 |
$ (0.27) |
$ 6.70 |
$ (0.18) |
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Weighted average shares - basic |
12,137 |
12,545 |
12,180 |
13,519 |
Weighted average shares - diluted |
13,335 |
12,545 |
13,157 |
13,519 |
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FBR &
CO. |
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CONSOLIDATED BALANCE
SHEETS |
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(Dollars in thousands, except per
share amounts) |
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(Unaudited) |
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ASSETS |
September 30,
2013 |
December 31,
2012 |
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Cash and cash equivalents |
$ 201,722 |
$ 174,925 |
Receivables: |
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Due from brokers, dealers and
clearing organizations |
19,800 |
4,670 |
Customers |
11,337 |
2,579 |
Other |
18,154 |
10,902 |
Financial instruments owned, at fair
value |
140,531 |
121,404 |
Other investments, at cost |
5,681 |
8,388 |
Furniture, equipment and leasehold
improvements, net |
3,110 |
3,693 |
Deferred tax assets, net of valuation
allowance |
29,975 |
-- |
Prepaid expenses and other assets |
5,259 |
6,883 |
Total
assets |
$ 435,569 |
$ 333,444 |
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LIABILITIES AND SHAREHOLDERS'
EQUITY |
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Liabilities: |
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Securities sold but not yet purchased, at
fair value |
$ 33,020 |
$ 56,929 |
Accrued compensation and benefits |
63,273 |
19,075 |
Accounts payable, accrued expenses and other
liabilities |
14,447 |
13,878 |
Due to brokers, dealers and clearing
organizations |
18,296 |
3,698 |
Total liabilities |
129,036 |
93,580 |
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Shareholders' equity: |
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Common stock |
11 |
12 |
Additional paid-in capital |
384,413 |
402,668 |
Employee stock loan receivable, including
accrued interest |
-- |
(307) |
Restricted stock units |
19,525 |
25,235 |
Accumulated other comprehensive income
(loss) |
1,030 |
(1,094) |
Accumulated deficit |
(98,446) |
(186,650) |
Total shareholders' equity |
306,533 |
239,864 |
Total liabilities
and shareholders' equity |
$ 435,569 |
$ 333,444 |
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Book Value per Share |
$26.40 |
$19.18 |
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Shares Outstanding (in
thousands) |
11,612 |
12,505 |
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FBR &
CO. |
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Financial &
Statistical Supplement - Operating Results |
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(Dollars in thousands) |
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(Unaudited) |
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Q-3 13 |
Q-2 13 |
Q-1 13 |
Q-4 12 |
Q-3 12 |
Revenues |
$ 34,056 |
$ 67,242 |
$ 117,926 |
$ 58,926 |
$ 23,889 |
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Expenses: |
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Variable |
6,587 |
29,572 |
57,966 |
24,693 |
5,263 |
Fixed |
24,319 |
23,038 |
24,053 |
25,022 |
24,204 |
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Income (loss) from continuing operations
before income taxes |
3,150 |
14,632 |
35,907 |
9,211 |
(5,578) |
Income tax provision (benefit) |
361 |
(29,591) |
1,459 |
162 |
(1,262) |
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Income (loss) from continuing operations, net
of taxes |
2,789 |
44,223 |
34,448 |
9,049 |
(4,316) |
Income from discontinued operations, net of
taxes |
3,622 |
2,316 |
806 |
23,070 |
959 |
Net income (loss) |
$ 6,411 |
$ 46,539 |
$ 35,254 |
$ 32,119 |
$ (3,357) |
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Fixed expenses from continuing
operations |
$ 24,319 |
$ 23,038 |
$ 24,053 |
$ 25,022 |
$ 24,204 |
Less: Non-cash expenses1 |
2,212 |
2,189 |
1,839 |
2,000 |
1,948 |
Corporate transaction
costs2 |
-- |
-- |
-- |
867 |
646 |
Severance |
-- |
-- |
-- |
-- |
61 |
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Core fixed costs from continuing
operations3 |
$ 22,107 |
$ 20,849 |
$ 22,214 |
$ 22,155 |
$ 21,549 |
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Statistical Data (Continuing
Operations) |
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Revenues per employee (annualized) |
$ 506 |
$ 1,015 |
$ 1,835 |
$ 921 |
$ 387 |
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Employee count |
269 |
265 |
257 |
256 |
247 |
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1 Non-cash expenses include
compensation costs associated with stock-based awards and
amortization of intangible assets. |
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2 Corporate transaction
costs include costs related to reductions in physical space and
restructuring costs. |
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3 Core fixed costs is a
non-GAAP measurement used by management to analyze and assess the
Company's fixed operating costs. Management believes that this
non-GAAP measurement assists investors in understanding the impact
of the items noted in footnotes 1 and 2 and severance costs on the
performance of the Company. |
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A limitation of utilizing this
non-GAAP measure is that the GAAP accounting effects of these items
do in fact reflect the underlying financial results of the
Company and these effects should not be ignored in evaluating and
analyzing the Company's financial results. Therefore, management
believes fixed expenses on a GAAP basis and core fixed costs on a
non-GAAP basis should be considered together. |
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CONTACT: Investors:
Bradley J. Wright
703.312.9678 or bwright@fbr.com
Media:
Shannon Hawkins Small
703.469.1190 or ssmall@fbr.com
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