FBR & Co. (Nasdaq:FBRC) ("FBR" or the "Company"), a leading
investment bank serving the middle market, today reported net
income of $46.5 million, or $3.52 per diluted share, for the second
quarter of 2013 compared to net income of $0.5 million, or $0.03
per diluted share, in the second quarter of 2012, and net income of
$35.3 million, or $2.65 per diluted share, for the first quarter of
2013. For the first half of 2013, the company reported net income
of $81.8 million, or $6.24 per diluted share, compared to net
income of $0.9 million, or $0.06 per diluted share for the first
half of 2012.
Second quarter 2013 pretax operating income was $14.6 million on
$67.2 million of revenue. This compares to $0.3 million in
pretax operating income on $33.7 million of revenue in the second
quarter of 2012 and $35.9 million of pretax operating income on
$117.9 million of revenue in the first quarter of 2013. The
Company's first half 2013 pretax operating income was $50.5 million
on revenue of $185.2 million, both representing the best
performance for any two consecutive quarters since the first half
of 2007.
As a result of the Company's improved operating performance, its
outlook regarding prospective operating performance and analysis of
other relevant factors, the Company determined that the release of
a significant component of the valuation allowance on its deferred
tax assets was appropriate under generally accepted accounting
principles ("GAAP") as of June 30, 2013. The Company's net income
from continuing operations for the second quarter of 2013 includes
a $29.6 million tax benefit reflecting the valuation allowance
reversal and the Company's utilization of a portion of its net
operating loss carryforwards.
Compensation and benefits expenses were 56% of net revenue
during the second quarter of 2013, which compares to 50% in the
year earlier period and 56% in the prior quarter. Headcount was 265
at quarter end compared with 257 last quarter. Revenue per head on
a trailing twelve month basis was $1.05 million. Non-compensation
fixed expenses in the second quarter of 2013 totaled $10.2 million
compared to $10.8 million in the second quarter of 2012, and $11.1
million in the prior quarter.
Second Quarter Overview
- Investment banking revenue was $52.0 million in the quarter
compared to $19.0 million in the second quarter of 2012 and $101.3
million in the first quarter of 2013. This revenue was
generated from 16 transactions, both public and private, including
four large sole-managed transactions.
- Institutional brokerage generated net revenue of $13.1 million
in the quarter compared to $12.3 million in the second quarter of
2012 and $13.7 million in the first quarter of 2013. Despite
continued pressure on market volumes, equity commissions were up
for the third consecutive quarter and represented a 12% improvement
over the second quarter of 2012.
- The Company earned $1.2 million of net investment income from
principal investing activities during the quarter.
During the quarter the Company repurchased 150 thousand shares
of its common stock for $3.1 million, inclusive of a self-tender,
but primarily through open market purchases. Since 2010, we
have repurchased 5.4 million shares or approximately 30% of shares
outstanding, at an average price of $13.29 per share, for a total
of $72 million. The Company has 778 thousand shares remaining under
its previously disclosed repurchase authorization.
Shareholders' equity was $315 million as of June 30, 2013, up
from $267 million on March 31, 2013, representing an increase of
$76 million in the first half of the year. As of June 30,
2013, the Company's cash balance was $227 million and its book
value per share was $25.82, up 35% from the beginning of the
year.
"I'd like to thank all of our employees for delivering a great
performance in the first half of this year. Clearly our
financial results were much improved, and the second quarter
continued a number of positive trends for the company," said
Richard J. Hendrix, Chairman and Chief Executive Officer of
FBR. "Most importantly, we continued to deliver great ideas
and execution to our clients. Going forward, we will work to
build on the momentum we have established and to enhance our
position as a leading underwriter of US equities."
Investors wishing to listen to the earnings call at 9:00 A.M.
U.S. EDT, Wednesday, July 17, 2013, may do so via the Web or
conference call at:
Webcast link:
http://investor.shareholder.com/media/eventdetail.cfm?eventid=131477&CompanyID=FBCM&e=1&mediaKey=A638ADF35B185A230531194DBE6AEB85
Conference call dial-in number (domestic, toll-free):
877.303.6433
Conference call dial-in number (international): 224.357.2198
Access code: 99936653
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;
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.
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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 June
30, |
Six Months Ended June
30, |
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2013 |
2012 |
2013 |
2012 |
REVENUES: |
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Investment banking: |
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Capital raising |
$ 49,165 |
$ 16,841 |
$ 148,851 |
$ 31,015 |
Advisory |
2,872 |
2,118 |
4,476 |
4,124 |
Institutional brokerage: |
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Principal
transactions |
4,798 |
3,753 |
10,659 |
10,255 |
Agency commissions |
8,324 |
8,567 |
16,168 |
18,117 |
Net investment income |
1,209 |
1,090 |
3,307 |
2,991 |
Interest, dividends &
other |
874 |
1,363 |
1,707 |
2,175 |
Total
revenues |
67,242 |
33,732 |
185,168 |
68,677 |
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EXPENSES: |
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Compensation and benefits |
37,923 |
16,880 |
104,334 |
34,728 |
Professional services |
3,379 |
3,759 |
6,835 |
6,591 |
Business development |
2,610 |
2,444 |
4,743 |
5,004 |
Clearing and brokerage
fees |
1,307 |
1,900 |
2,911 |
4,284 |
Occupancy and
equipment |
3,068 |
3,499 |
6,350 |
7,541 |
Communications |
2,776 |
3,063 |
5,745 |
6,608 |
Other operating
expenses |
1,547 |
1,865 |
3,711 |
3,626 |
Total
expenses |
52,610 |
33,410 |
134,629 |
68,382 |
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Income from continuing
operations before income taxes |
14,632 |
322 |
50,539 |
295 |
Income tax (benefit)
provision |
(29,591) |
15 |
(28,132) |
22 |
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Income from continuing
operations, net of taxes |
44,223 |
307 |
78,671 |
273 |
Income from discontinued
operations, net of taxes |
2,316 |
184 |
3,122 |
656 |
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Net
income |
$ 46,539 |
$ 491 |
$ 81,793 |
$ 929 |
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Basic earnings per
share: |
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Income from continuing
operations, net of taxes |
$ 3.64 |
$ 0.03 |
$ 6.45 |
$ 0.02 |
Income from discontinued
operations, net of taxes |
0.19 |
0.01 |
0.25 |
0.05 |
Net income |
$ 3.83 |
$ 0.04 |
$ 6.70 |
$ 0.07 |
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Diluted earnings per
share: |
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Income from continuing
operations, net of taxes |
$ 3.35 |
$ 0.02 |
$ 6.00 |
$ 0.02 |
Income from discontinued
operations, net of taxes |
0.17 |
0.01 |
0.24 |
0.04 |
Net income |
$ 3.52 |
$ 0.03 |
$ 6.24 |
$ 0.06 |
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Weighted average shares - basic |
12,166 |
13,874 |
12,201 |
13,984 |
Weighted average shares - diluted |
13,216 |
14,314 |
13,102 |
14,306 |
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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 |
June 30, 2013 |
December 31,
2012 |
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Cash and cash equivalents |
$ 226,734 |
$ 174,925 |
Receivables: |
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Due from brokers, dealers and
clearing organizations |
25,631 |
4,670 |
Customers |
6,589 |
2,579 |
Other |
14,613 |
10,902 |
Financial instruments owned, at fair
value |
139,262 |
121,404 |
Other investments, at cost |
5,681 |
8,388 |
Furniture, equipment and leasehold
improvements, net |
3,150 |
3,693 |
Prepaid expenses and other assets |
35,084 |
6,883 |
Total
assets |
$ 456,744 |
$ 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 |
$ 40,042 |
$ 56,929 |
Accrued compensation and benefits |
62,928 |
19,075 |
Accounts payable, accrued expenses and other
liabilities |
14,019 |
13,878 |
Due to brokers, dealers and clearing
organizations |
24,296 |
3,698 |
Total liabilities |
141,285 |
93,580 |
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Shareholders' equity: |
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Common stock |
12 |
12 |
Additional paid-in capital |
401,401 |
402,668 |
Employee stock loan receivable, including
accrued interest |
-- |
(307) |
Restricted stock units |
18,755 |
25,235 |
Accumulated other comprehensive income
(loss) |
147 |
(1,094) |
Accumulated deficit |
(104,856) |
(186,650) |
Total shareholders' equity |
315,459 |
239,864 |
Total liabilities
and shareholders' equity |
$ 456,744 |
$ 333,444 |
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Book Value per Share |
$25.82 |
$19.18 |
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Shares Outstanding (in
thousands) |
12,219 |
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-2 13 |
Q-1 13 |
Q-4 12 |
Q-3 12 |
Q-2 12 |
Revenues |
$ 67,242 |
$ 117,926 |
$ 58,926 |
$ 23,889 |
$ 33,732 |
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Expenses: |
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Variable |
29,572 |
57,966 |
24,693 |
5,263 |
8,791 |
Fixed |
23,038 |
24,053 |
25,022 |
24,204 |
24,619 |
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Income (loss) from continuing operations
before income taxes |
14,632 |
35,907 |
9,211 |
(5,578) |
322 |
Income tax (benefit) provision |
(29,591) |
1,459 |
162 |
(1,262) |
15 |
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Income (loss) from continuing operations, net
of taxes |
44,223 |
34,448 |
9,049 |
(4,316) |
307 |
Income from discontinued operations, net of
taxes |
2,316 |
806 |
23,070 |
959 |
184 |
Net income (loss) |
$ 46,539 |
$ 35,254 |
$ 32,119 |
$ (3,357) |
$ 491 |
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Fixed expenses from continuing
operations |
$ 23,038 |
$ 24,053 |
$ 25,022 |
$ 24,204 |
$ 24,619 |
Less: Non-cash expenses1 |
2,189 |
1,839 |
2,000 |
1,948 |
1,804 |
Corporate transaction
costs2 |
-- |
-- |
867 |
646 |
-- |
Severance |
-- |
-- |
-- |
61 |
-- |
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Core fixed costs from continuing
operations3 |
$ 20,849 |
$ 22,214 |
$ 22,155 |
$ 21,549 |
$ 22,815 |
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Statistical Data (Continuing
Operations) |
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Revenues per employee (annualized) |
$ 1,015 |
$ 1,835 |
$ 921 |
$ 387 |
$ 521 |
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Employee count |
265 |
257 |
256 |
247 |
259 |
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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. |
CONTACT: Investors:
Bradley J. Wright
703.312.9678 or bwright@fbr.com
Media:
Shannon Small
703.469.1190 or ssmall@fbr.com
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