FBR Reports Fourth Quarter and Full Year 2014 Financial Results
February 10 2015 - 5:15PM
FBR & Co. (Nasdaq:FBRC) ("FBR" or the "Company"), a leading
investment bank serving the middle market, today reported net
after-tax earnings of $17.0 million, or $1.48 per diluted share for
the year ended December 31, 2014, compared to net after-tax
earnings of $92.9 million, or $7.17 per diluted share in 2013.
Pretax income for 2014 was $17.4 million on revenue of $182.1
million compared with $57.3 million on revenue of $259.8 million in
2013.
For the quarter ended December 31, 2014, net after-tax earnings
were $0.9 million, or $0.09 per diluted share, compared to net
after-tax earnings of $8.6 million, or $0.69 per diluted share in
the fourth quarter of 2013 and net after-tax earnings of $3.5
million, or $0.31 per diluted share in the third quarter of 2014.
Pretax loss for the quarter ended December 31, 2014 was $3.9
million on revenue of $28.6 million; this compares to pretax income
of $3.6 million on revenue of $40.6 million in fourth quarter of
2013, and $3.3 million of income on revenues of $42.1 million in
the third quarter of 2014.
Fourth quarter 2014 total expenses were $32.5 million, compared
to $37.0 million in the fourth quarter of 2013 and $38.8 million in
the third quarter of 2014. Non-compensation fixed expenses in the
fourth quarter of 2014 totaled $12.3 million, compared to $11.3
million in the fourth quarter of 2013 and $10.0 million in the
third quarter of 2014. The increase in our fourth quarter 2014
non-compensation fixed costs was due primarily to nonrecurring
charges associated with our move into new corporate headquarters in
Arlington, VA.
In the fourth quarter, the Company repurchased 517 thousand
shares at an average price of $25.23 per share. On February 10,
2015, the Board approved an increase in the Company's repurchase
authorization bringing the remaining total to one million shares.
This authorization represents 12% of the Company's total
outstanding shares at year end.
2014 Overview
- Investment banking revenue was $115.3 million in 2014 compared
to $196.2 million in 2013. These revenues resulted from the
completion of 55 transactions representing a total of $11.0 billion
in transaction volume, compared to 67 transactions totaling $16.9
billion in transaction volume in 2013. The 2014 revenue included
six 144As with an average deal size of $206 million compared to six
144As with an average deal size of $352 million in 2013. Also
included in these 2014 results was $11.4 million of advisory fees,
representing a 17% increase year-over-year.
- Institutional brokerage generated net revenue of $56.2 million
for 2014 compared to $53.7 million in 2013, driven entirely by a
$4.0 million increase in our cash equities business.
- The Company recognized net revenue of $10.7 million from a
combination of securities lending and corporate investments in 2014
compared to $9.9 million in 2013. The securities lending business
was added August 4, 2014.
- Non-compensation fixed expenses for 2014 were $43.9 million
compared to $43.6 million in 2013, inclusive of the elevated
occupancy costs from our move referenced above.
- Pretax operating margin for the year was 9.5% compared to 22.0%
in 2013 and return on equity was 6.2% for the year compared to
35.0% in 2013.
- The Company's tax provision in 2014 was $0.3 million and its
effective tax rate was 2%. These amounts reflect the Company's use
of previously reserved tax assets related to capital loss
carry-forwards and compare to a $27.5 million tax benefit in 2013.
The 2013 tax benefit resulted from the Company's valuation
allowance release with respect to a significant portion of its
deferred tax assets.
- The Company ended 2014 with 300 employees, maintaining a
consistent headcount throughout the year. Compensation and benefits
expense totaled $103.8 million and represented 57% of net revenue
for the year compared to 56% of net revenue in 2013.
- Over the course of the year, the Company repurchased 2.4
million shares at an average price of $26.92 per share, effectively
returning $64.1 million to shareholders.
- As of December 31, 2014, shareholders' equity totaled $260.4
million, with $109.0 million held in cash, and the Company's
tangible book value per share was $28.63, up 6.6% from $26.86 from
the end of 2013.
"Smaller average deal size in our equity capital markets
business led to reduced revenue for the year. Nonetheless, we
executed meaningful transactions across each of our industry
groups, increased market share and revenue on our cash equities
desk, and significantly increased the number of companies covered
by our equity research teams," said Richard J. Hendrix, Chairman
and Chief Executive Officer of FBR & Co. "I want to thank each
of our employees for their tireless work and total client focus
over the last year. As a result of those efforts, we are well
positioned to continue delivering for clients and shareholders in
2015."
Investors wishing to listen to the earnings call at
9:00 A.M. U.S. EST, Wednesday, February 11, 2015, may do so via the
Web or conference call at:
Webcast link:
http://edge.media-server.com/m/p/q43hrza5
Conference call dial-in number (domestic,
toll-free): 855.425.4204 Conference call dial-in number
(international): 484.756.4245 Access code: 62995181
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, 2013; and other
items throughout the Company's Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K.
Financial data follow.
|
FBR &
CO. |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
(Dollars in thousands, except per
share amounts) |
(Unaudited) |
|
|
|
|
|
|
Quarter Ended |
Year Ended |
|
December 31, |
December 31, |
|
|
|
|
|
|
2014 |
2013 |
2014 |
2013 |
REVENUES: |
|
|
|
|
Investment banking: |
|
|
|
|
Capital raising |
$ 8,137 |
$ 21,667 |
$ 103,902 |
$ 186,516 |
Advisory |
5,406 |
1,605 |
11,353 |
9,697 |
Institutional brokerage |
14,502 |
13,717 |
56,182 |
53,738 |
Net investment income |
1,774 |
2,963 |
17,774 |
6,920 |
Interest |
7,652 |
301 |
13,067 |
1,790 |
Dividends & other |
224 |
344 |
1,030 |
1,160 |
Total revenues |
37,695 |
40,597 |
203,308 |
259,821 |
Interest expense |
9,123 |
-- |
21,183 |
-- |
Revenues, net of interest
expense |
28,572 |
40,597 |
182,125 |
259,821 |
|
|
|
|
|
NON-INTEREST EXPENSES: |
|
|
|
|
Compensation and benefits |
16,670 |
22,395 |
103,811 |
144,720 |
Professional services |
2,234 |
3,098 |
13,259 |
12,326 |
Business development |
3,500 |
2,864 |
11,689 |
9,602 |
Clearing and brokerage
fees |
1,241 |
1,070 |
4,757 |
4,922 |
Occupancy and
equipment |
4,258 |
3,086 |
13,480 |
12,271 |
Communications |
2,893 |
2,788 |
11,514 |
11,101 |
Other operating
expenses |
1,714 |
1,715 |
6,255 |
7,609 |
Total non-interest
expenses |
32,510 |
37,016 |
164,765 |
202,551 |
|
|
|
|
|
(Loss) Income from continuing
operations before income taxes |
(3,938) |
3,581 |
17,360 |
57,270 |
|
|
|
|
|
Income tax (benefit)
provision |
(4,870) |
(3,603) |
341 |
(27,483) |
|
|
|
|
|
Income from continuing
operations, net of taxes |
932 |
7,184 |
17,019 |
84,753 |
Income from discontinued
operations, net of taxes |
-- |
1,415 |
-- |
8,159 |
Net income |
$ 932 |
$ 8,599 |
$ 17,019 |
$ 92,912 |
|
|
|
|
|
Basic earnings per share |
$ 0.10 |
$ 0.76 |
$ 1.66 |
$ 7.77 |
Diluted earnings per share |
$ 0.09 |
$ 0.69 |
$ 1.48 |
$ 7.17 |
|
|
|
|
|
Weighted average shares - basic |
9,220 |
11,320 |
10,283 |
11,963 |
Weighted average shares - diluted |
10,495 |
12,514 |
11,465 |
12,960 |
|
|
FBR &
CO. |
CONSOLIDATED BALANCE
SHEETS |
(Dollars in thousands, except per
share amounts) |
(Unaudited) |
|
|
|
|
December 31, |
December 31, |
ASSETS |
2014 |
2013 |
|
|
|
Cash and cash equivalents |
$ 108,962 |
$ 207,973 |
Receivables: |
|
|
Securities borrowed |
594,674 |
-- |
Due from brokers, dealers and
clearing organizations |
94,489 |
4,949 |
Customers |
3,349 |
4,485 |
Other |
5,227 |
658 |
Financial instruments owned, at fair
value |
166,047 |
144,743 |
Other investments, at cost |
7,000 |
7,681 |
Goodwill and intangibles |
4,921 |
-- |
Furniture, equipment and leasehold
improvements, net |
15,388 |
3,286 |
Deferred tax assets, net of valuation
allowance |
28,648 |
30,893 |
Prepaid expenses and other assets |
6,392 |
5,904 |
Total
assets |
$ 1,035,097 |
$ 410,572 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
|
|
Liabilities: |
|
|
Securities loaned |
$ 595,717 |
$ -- |
Securities sold but not yet purchased, at
fair value |
121,310 |
42,241 |
Accrued compensation and benefits |
34,571 |
58,502 |
Accounts payable, accrued expenses and other
liabilities |
23,093 |
10,351 |
Due to brokers, dealers and clearing
organizations |
-- |
8,701 |
Total liabilities |
774,691 |
119,795 |
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
Common stock |
8 |
11 |
Additional paid-in capital |
302,720 |
362,983 |
Restricted stock units |
34,353 |
21,487 |
Accumulated other comprehensive
income |
44 |
34 |
Accumulated deficit |
(76,719) |
(93,738) |
Total shareholders'
equity |
260,406 |
290,777 |
|
|
|
Total liabilities and
shareholders' equity |
$ 1,035,097 |
$ 410,572 |
|
|
|
|
|
|
Book Value per Share |
$29.18 |
$26.86 |
|
|
|
Tangible Book Value per
Share |
$28.63 |
$26.86 |
|
|
|
Shares Outstanding (in
thousands) |
8,923 |
10,824 |
|
|
FBR &
CO. |
Financial &
Statistical Supplement - Operating Results |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q-4 14 |
Q-3 14 |
Q-2 14 |
Q-1 14 |
Q-4 13 |
Revenues, net of interest expense |
$ 28,572 |
$ 42,097 |
$ 57,098 |
$ 54,358 |
$ 40,597 |
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
Variable |
4,560 |
13,214 |
22,279 |
19,763 |
10,809 |
Fixed |
27,950 |
25,575 |
25,844 |
25,580 |
26,207 |
|
|
|
|
|
|
(Loss) Income from continuing operations
before income taxes |
(3,938) |
3,308 |
8,975 |
9,015 |
3,581 |
Income tax (benefit) provision |
(4,870) |
(193) |
1,999 |
3,405 |
(3,603) |
|
|
|
|
|
|
Income from continuing operations, net of
taxes |
932 |
3,501 |
6,976 |
5,610 |
7,184 |
Income from discontinued operations, net of
taxes |
-- |
-- |
-- |
-- |
1,415 |
Net income |
$ 932 |
$ 3,501 |
$ 6,976 |
$ 5,610 |
$ 8,599 |
|
|
|
|
|
|
Return on equity (trailing twelve
months) |
6.2% |
8.6% |
9.0% |
22.4% |
35.0% |
|
|
|
|
|
|
Fixed expenses from continuing
operations |
$ 27,950 |
$ 25,575 |
$ 25,844 |
$ 25,580 |
$ 26,207 |
Less: Non-cash expenses1 |
2,593 |
2,406 |
2,374 |
2,173 |
2,199 |
Corporate transaction
costs2 |
1,132 |
-- |
-- |
-- |
-- |
Core fixed costs from continuing
operations3 |
$ 24,225 |
$ 23,169 |
$ 23,470 |
$ 23,407 |
$ 24,008 |
|
|
|
|
|
|
|
|
|
|
|
|
Statistical Data (Continuing
Operations) |
|
|
|
|
|
Revenues per employee (annualized) |
$ 381 |
$ 548 |
$ 766 |
$ 745 |
$ 538 |
|
|
|
|
|
|
Employee count |
300 |
307 |
298 |
292 |
302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Non-cash expenses include
compensation costs associated with stock-based awards and
amortization of intangibles. |
|
|
|
|
|
|
2 Corporate transaction
costs include non-recurring costs related to moving into new office
space. |
|
|
|
|
|
|
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 on the performance of
the Company. |
|
|
|
|
|
|
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. |
CONTACT: Media
Shannon Hawkins
703.469.1190
shawkins@fbr.com
Investors:
Bradley J. Wright
703.312.9678
bwright@fbr.com
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