FBR Reports Fourth Quarter and Full Year 2013 Financial Results

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| Source: FBR & Co.

ARLINGTON, Va., Feb. 4, 2014 (GLOBE NEWSWIRE) -- FBR & Co. (Nasdaq:FBRC) ("FBR" or the "Company"), a leading investment bank serving the middle market, today reported net after-tax earnings of $92.9 million, or $7.17 per diluted share for the year ended December 31, 2013, compared to net after-tax earnings of $29.7 million, or $2.15 per diluted share in 2012. Pretax income from continuing operations for 2013 was $57.3 million on revenue of $259.8 million compared with $3.9 million on revenue of $151.5 million in 2012.

For the quarter ended December 31, 2013, net after-tax earnings were $8.6 million, or $0.69 per diluted share, compared to net after-tax earnings of $32.1 million, or $2.40 per diluted share in the fourth quarter of 2012 and net after-tax earnings of $6.4 million, or $0.48 per diluted share in the third quarter of 2013. Pretax income from continuing operations for the quarter ended December 31, 2013 was $3.6 million compared to $9.2 million in fourth quarter of 2012 and $3.1 million in the third quarter of 2013.

Fourth quarter 2013 revenue was $40.6 million compared to $58.9 million for the fourth quarter of 2012 and $34.1 million for the third quarter of 2013.

Fourth quarter 2013 total expenses were $37.0 million, compared to $49.7 million in the fourth quarter of 2012 and $30.9 million in the third quarter of 2013. The increase in total expense quarter-over-quarter was primarily due to higher compensation as a result of higher revenues and increased transaction expenses. Non-compensation fixed expenses from continuing operations in the fourth quarter of 2013 totaled $11.3 million, compared to $10.9 million in the fourth quarter of 2012 and $11.0 million in the third of quarter 2013.

2013 Overview

  • Investment banking revenue was $196.2 million in 2013 compared to $90.7 million in 2012. These revenues result from the completion of 66 transactions representing a total of $16 billion in transaction volume.
  • Institutional brokerage generated net revenue of $53.7 million for 2013 compared to $52.5 million in 2012. 
  • The Company earned $9.9 million in net investment income, interest and dividends in 2013 compared to $8.4 million in 2012. 
  • Non-compensation fixed expenses for 2013 were $43.6 million compared to $45.1 million in 2012, reflecting the Company's ongoing focus on reducing costs.
  • Pretax operating margin from continuing operations for the year was 22% and return on equity was 35% for the year.
  • The Company's valuation allowance release with respect to a significant portion of its deferred tax assets resulted in a tax benefit of $27.5 million for the year.
  • During the fourth quarter of 2013, the Company received final payment of $19.3 million from the 2012 sale of its asset management business with net income from discontinued operations totaling $8.2 million for the year.
  • The Company ended 2013 with 302 employees up from 256 at the beginning of the year with the increase relating mostly to the group hire accomplished in the fourth quarter of 2013. Compensation and benefits expenses were 56% of net revenue for the year.
  • As of December 31, 2013, shareholders' equity totaled $290.8 million, with $208.0 million held in cash, and the Company's tangible book value per share was $26.86, up from $19.18 from the end of 2012.

In the fourth quarter, the Company repurchased 885 thousand shares at an average price of $25.80 per share. Included in the fourth quarter purchases were 737 thousand shares at $25.75 per share from affiliates of Crestview Partners. For the year ended December 31, 2013, the Company returned capital of $55.5 million to shareholders through the repurchase of 2.4 million shares at an average price of $23.36 per share. Following these purchases, the Company continues to have Board authorization to purchase an additional 1.6 million shares.

"We are pleased that the foundation we have laid over the past several years paid off in 2013 from a profitability and shareholder return perspective," said Richard J. Hendrix, Chairman and Chief Executive Officer of FBR & Co. "In 2014, we intend to follow the same formula that yielded success in 2013- clients first, expenses low, and capital management that adds to operating returns."

Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EST, Wednesday, February 5, 2014, may do so via the Web or conference call at:

Webcast link: http://www.media-server.com/m/p/4eotmjfu

Conference call dial-in number (domestic, toll-free): 855.425.4204

Conference call dial-in number (international): 484.756.4245

Access code: 34080404

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.

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,
         
  2013 2012 2013 2012
REVENUES:        
Investment banking:        
Capital raising  $ 21,667  $ 44,577  $ 186,516  $ 84,144
Advisory  1,605  210  9,697  6,525
Institutional brokerage:        
Principal transactions  4,730  5,002  21,373  19,353
Agency commissions  8,987  7,833  32,365  33,119
Net investment income  2,963  684  6,920  4,906
Interest, dividends & other  645  620  2,950  3,445
Total revenues  40,597  58,926  259,821  151,492
         
EXPENSES:        
Compensation and benefits  22,395  33,118  144,720  82,672
Professional services  3,098  3,545  12,326  12,839
Business development  2,864  2,746  9,602  9,394
Clearing and brokerage fees  1,070  1,460  4,922  7,490
Occupancy and equipment  3,086  4,072  12,271  15,755
Communications  2,788  2,989  11,101  12,553
Other operating expenses  1,715  1,785  7,609  6,861
Total expenses  37,016  49,715  202,551  147,564
         
Income from continuing operations before income taxes  3,581  9,211 57,270 3,928
Income tax (benefit) provision  (3,603)  162  (27,483)  (1,078)
         
Income from continuing operations, net of taxes  7,184  9,049  84,753  5,006
Income from discontinued operations, net of taxes  1,415  23,070  8,159  24,685
         
Net income  $ 8,599  $ 32,119  $ 92,912  $ 29,691
         
Basic earnings per share:        
Income from continuing operations, net of taxes  $ 0.63  $ 0.72  $ 7.09  $ 0.38
Income from discontinued operations, net of taxes  0.13  1.84  0.68  1.86
Net income  $ 0.76  $ 2.56  $ 7.77  $ 2.24
         
Diluted earnings per share:        
Income from continuing operations, net of taxes  $ 0.58  $ 0.68  $ 6.54  $ 0.36
Income from discontinued operations, net of taxes  0.11  1.72  0.63  1.79
Net income  $ 0.69  $ 2.40  $ 7.17  $ 2.15
         
Weighted average shares - basic  11,320  12,545  11,963  13,274
Weighted average shares - diluted  12,514  13,401  12,960  13,798
         
     
FBR & CO.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
     
  December 31, December 31,
ASSETS 2013 2012
     
Cash and cash equivalents  $ 207,973  $ 174,925
Receivables:    
Due from brokers, dealers and clearing organizations  4,949  4,670
Customers  4,485  2,579
Other  658  10,902
Financial instruments owned, at fair value  144,743  121,404
Other investments, at cost  7,681  8,388
Furniture, equipment and leasehold improvements, net  3,286  3,693
Deferred tax assets, net of valuation allowance  30,893  --
Prepaid expenses and other assets  5,904  6,883
Total assets  $ 410,572  $ 333,444
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
Liabilities:    
Securities sold but not yet purchased, at fair value  $ 42,241  $ 56,929
Accrued compensation and benefits  58,502  19,075
Accounts payable, accrued expenses and other liabilities  10,351  13,878
Due to brokers, dealers and clearing organizations  8,701  3,698
Total liabilities  119,795  93,580
     
Shareholders' equity:    
Common stock  11  12
Additional paid-in capital  362,983  402,668
Employee stock loan receivable, including accrued interest  --  (307)
Restricted stock units  21,487  25,235
Accumulated other comprehensive income (loss)  34  (1,094)
Accumulated deficit  (93,738)  (186,650)
Total shareholders' equity  290,777  239,864
Total liabilities and shareholders' equity  $ 410,572  $ 333,444
     
Book Value per Share $26.86 $19.18
     
Shares Outstanding (in thousands) 10,824 12,505
     
           
FBR & CO.          
Financial & Statistical Supplement - Operating Results           
(Dollars in thousands)          
(Unaudited)          
           
  Q-4 13 Q-3 13 Q-2 13 Q-1 13 Q-4 12
Revenues   $ 40,597  $ 34,056  $ 67,242  $ 117,926  $ 58,926
           
Expenses:          
Variable  10,809  6,587  29,572  57,966  24,693
Fixed  26,207  24,319  23,038  24,053  25,022
           
Income from continuing operations before income taxes  3,581  3,150  14,632  35,907  9,211
Income tax (benefit) provision  (3,603)  361  (25,700)  1,459  162
           
Income from continuing operations, net of taxes  7,184  2,789  40,332  34,448  9,049
Income from discontinued operations, net of taxes  1,415  3,622  2,316  806  23,070
Net income   $ 8,599  $ 6,411  $ 42,648  $ 35,254  $ 32,119
           
Fixed expenses from continuing operations  $ 26,207  $ 24,319  $ 23,038  $ 24,053  $ 25,022
Less: Non-cash expenses1  2,199  2,212  2,189  1,839  2,000
 Corporate transaction costs2  --   --   --   --   867
           
Core fixed costs from continuing operations3  $ 24,008  $ 22,107  $ 20,849  $ 22,214  $ 22,155
           
Statistical Data (Continuing Operations)          
Revenues per employee (annualized)  $ 538  $ 506  $ 1,015  $ 1,835  $ 921
           
Employee count  302  269  265  257  256
           
Non-cash expenses include compensation costs associated with stock-based awards.
           
2 Corporate transaction costs include costs related to reductions in physical space and restructuring costs.
           
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.
           
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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