ARLINGTON, Va., April 22, 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 $5.6 million, or $0.46 per diluted share, for the first quarter of 2014 compared to net after-tax earnings of $35.3 million, or $2.65 per diluted share, in the first quarter of 2013 and net after-tax earnings of $8.6 million, or $0.69 per diluted share, for the quarter ended
December 31, 2013.
Pretax income from continuing operations was $9.0 million in the first quarter of 2014 compared to $35.9 million in the first quarter of 2013 and $3.6 million in the fourth quarter of 2013. First quarter 2014 revenue was $54.4 million compared to $117.9 million in the first quarter of 2013 and $40.6 million in the most recent quarter. Pretax operating margin was 17% for the first quarter of this year, compared to 30% in the first quarter of 2013 and 9% in the fourth quarter of 2013.
Non-compensation fixed expenses in the first quarter of 2014 totaled $10.6 million, compared to $11.1 million and $11.3 million in the first and fourth quarters of 2013, respectively. Compensation and benefits were 57.6% of net revenue during the first quarter of 2014, which compares to 55.7% for the full year 2013.
First Quarter Overview
- Investment banking revenue was $36.6 million compared to $101.3 million in the first quarter of 2013 and $23.3 million in the fourth quarter of 2013. This revenue was generated from 16 client engagements representing $2.6 billion in transaction value.
- Institutional brokerage generated net revenue of $15.1 million compared to $13.7 million in the first quarter and $13.7 million in the fourth quarter of 2013. These results were higher than any individual quarter in 2013. In a difficult quarter for credit trading industry-wide, our convertible and credit securities desks combined for their second highest quarterly revenue over the last eight quarters.
- The Company earned $2.6 million in net gains from principal investing activities during the quarter.
- FBR ended the first quarter of 2014 with headcount of 292 compared to 257 at the end of the first quarter of last year; this increase is primarily attributable to the group hire at the end of last year and more active college recruiting in 2013.
The Company's effective tax rate was approximately 38% for the first quarter 2014. To the extent that capital gains are generated over the remainder of the year, our ability to utilize capital loss carry-forwards will reduce our effective rate. For the full year 2014, we expect our effective tax rate to approximate 30%.
For the quarter ended March 31, 2014, FBR repurchased 262 thousand shares at an average price of $26.16 per share. The Company continues to have authority to repurchase up to 1.4 million additional shares.
Shareholders' equity was $297.9 million as of March 31, 2014, up from $290.8 million on
December 31, 2013. As of March 31, 2014, the Company's tangible book value per share was $27.30, up from $26.86 from the beginning of the year and $21.76 at the end of the first quarter last year.
"We are pleased with this quarter's results. Despite a very tough comparison with the same quarter last year, our margins and returns are where we would expect at these revenue levels," said Richard J. Hendrix, Chairman and Chief Executive Officer of FBR. "Based on our current pipeline, market share, and overall activity level, we are optimistic about the remainder of 2014 and feel that the business is positioned well for growth in a constructive capital markets environment."
Investors wishing to listen to the earnings call at 9:00 A.M. U.S. EDT, Wednesday, April 23, 2014, may do so via the Web or conference call at:
Webcast link: http://www.media-server.com/m/p/67tn8zk6
Conference call dial-in number (domestic, toll-free): 855.425.4204
Conference call dial-in number (international): 484.756.4245
Access code: 14412137
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, 2013; and other items throughout the Company's Form 10-K, and Current Reports on Form 8-K.
| FBR & CO. | ||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (Dollars in thousands, except per share amounts) | ||
| (Unaudited) | ||
| Quarter Ended | ||
| March 31, | ||
| 2014 | 2013 | |
| REVENUES: | ||
| Investment banking: | ||
| Capital raising | $ 33,316 | $ 99,686 |
| Advisory | 3,323 | 1,604 |
| Institutional brokerage | 15,091 | 13,705 |
| Net investment income | 3,834 | 2,098 |
| Interest, dividends and other | 471 | 833 |
| Total revenues | 56,035 | 117,926 |
| Interest expense | 1,677 | -- |
| Revenues, net of interest expense | 54,358 | 117,926 |
| EXPENSES: | ||
| Compensation and benefits | 31,300 | 66,411 |
| Professional services | 2,938 | 3,456 |
| Business development | 2,368 | 2,133 |
| Clearing and brokerage fees | 1,224 | 1,604 |
| Occupancy and equipment | 3,152 | 3,282 |
| Communications | 2,892 | 2,969 |
| Other operating expenses | 1,469 | 2,164 |
| Total expenses | 45,343 | 82,019 |
| Income from continuing operations before income taxes | 9,015 | 35,907 |
| Income tax provision | 3,405 | 1,459 |
| Income from continuing operations, net of taxes | 5,610 | 34,448 |
| Income from discontinued operations, net of taxes | -- | 806 |
| Net income | $ 5,610 | $ 35,254 |
| Basic earnings per share: | ||
| Income from continuing operations, net of taxes | $ 0.51 | $ 2.81 |
| Income from discontinued operations, net of taxes | -- | 0.06 |
| Net income | $ 0.51 | $ 2.87 |
| Diluted earnings per share: | ||
| Income from continuing operations, net of taxes | $ 0.46 | $ 2.59 |
| Income from discontinued operations, net of taxes | -- | 0.06 |
| Net income | $ 0.46 | $ 2.65 |
| Weighted average shares - basic | 10,968 | 12,268 |
| Weighted average shares - diluted | 12,087 | 13,292 |
| FBR & CO. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Dollars in thousands, except per share amounts) | ||
| (Unaudited) | ||
| March 31, | December 31, | |
| ASSETS | 2014 | 2013 |
| Cash and cash equivalents | $ 170,166 | $ 207,973 |
| Receivables: | ||
| Due from brokers, dealers and clearing organizations | 237,780 | 4,949 |
| Customers | 3,089 | 4,485 |
| Other | 2,026 | 658 |
| Financial instruments owned, at fair value | 158,252 | 144,743 |
| Other investments, at cost | 2,681 | 7,681 |
| Furniture, equipment and leasehold improvements, net | 3,651 | 3,286 |
| Deferred tax assets, net of valuation allowance | 28,654 | 30,893 |
| Prepaid expenses and other assets | 5,506 | 5,904 |
| Total assets | $ 611,805 | $ 410,572 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Liabilities: | ||
| Securities sold but not yet purchased, at fair value | $ 257,987 | $ 42,241 |
| Accrued compensation and benefits | 33,259 | 58,502 |
| Accounts payable, accrued expenses and other liabilities | 11,637 | 10,351 |
| Due to brokers, dealers and clearing organizations | 11,059 | 8,701 |
| Total liabilities | 313,942 | 119,795 |
| Shareholders' equity: | ||
| Common stock | 10 | 11 |
| Additional paid-in capital | 357,522 | 362,983 |
| Restricted stock units | 28,406 | 21,487 |
| Accumulated other comprehensive income, net of taxes | 53 | 34 |
| Accumulated deficit | (88,128) | (93,738) |
| Total shareholders' equity | 297,863 | 290,777 |
| Total liabilities and shareholders' equity | $ 611,805 | $ 410,572 |
| Book Value per Share | $27.30 | $26.86 |
| Shares Outstanding (in thousands) | 10,911 | 10,824 |
| FBR & CO. | |||||
| Financial & Statistical Supplement - Operating Results | |||||
| (Dollars in thousands) | |||||
| (Unaudited) | |||||
| Q-1 14 | Q-4 13 | Q-3 13 | Q-2 13 | Q-1 13 | |
| Revenues, net of interest expense | $ 54,358 | $ 40,597 | $ 34,056 | $ 67,242 | $ 117,926 |
| Expenses: | |||||
| Variable | 19,763 | 10,809 | 6,587 | 29,572 | 57,966 |
| Fixed | 25,580 | 26,207 | 24,319 | 23,038 | 24,053 |
| Income from continuing operations before income taxes | 9,015 | 3,581 | 3,150 | 14,632 | 35,907 |
| Income tax provision (benefit) | 3,405 | (3,603) | 361 | (25,700) | 1,459 |
| Income from continuing operations, net of taxes | 5,610 | 7,184 | 2,789 | 40,332 | 34,448 |
| Income from discontinued operations, net of taxes | -- | 1,415 | 3,622 | 2,316 | 806 |
| Net income | $ 5,610 | $ 8,599 | $ 6,411 | $ 42,648 | $ 35,254 |
| Fixed expenses from continuing operations | $ 25,580 | $ 26,207 | $ 24,319 | $ 23,038 | $ 24,053 |
| Less: Non-cash expenses1 | 2,173 | 2,199 | 2,212 | 2,189 | 1,839 |
| Core fixed costs from continuing operations2 | $ 23,407 | $ 24,008 | $ 22,107 | $ 20,849 | $ 22,214 |
| Statistical Data (Continuing Operations) | |||||
| Revenues per employee (annualized) | $ 745 | $ 538 | $ 506 | $ 1,015 | $ 1,835 |
| Employee count | 292 | 302 | 269 | 265 | 257 |
| 1 Non-cash expenses include compensation costs associated with stock-based awards. | |||||
| 2 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 non-cash expenses noted in footnote 1. | |||||
| 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. | |||||