ARLINGTON, Va., July 29, 2009 (GLOBE NEWSWIRE) -- FBR Capital Markets Corporation (Nasdaq:FBCM) (FBR Capital Markets) today reported a net after-tax loss of $21.7 million, or $0.40 per diluted share, for the quarter ended June 30, 2009, compared to a net after-tax loss of $25.2 million, or $0.39 per diluted share, in the second quarter of 2008. These results include, for the second quarter of 2009, a $5.4 million non-cash intangible asset write down related to a money market fund in the Company's asset management business.
FBR Capital Markets' pre-tax core operating loss was $12.4 million for the second quarter of 2009 compared to a pre-tax core operating loss of $32.1 million in the second quarter of 2008. This non-GAAP measurement excludes specified non-core items and non-cash expenses including, for the second quarter of 2009, the $5.4 million intangible asset write down discussed above, $4.8 million in stock-based compensation, and $1.4 million of net investment income from investment funds and other long-term investments. On a GAAP basis, FBR Capital Markets reported a pre-tax loss of $21.6 million for the second quarter of 2009, compared to a pre-tax loss of $35.2 million for the second quarter of 2008. See "Non-GAAP Financial Measures" below for a reconciliation of our non-GAAP pre-tax core operating results to our GAAP pre-tax operating results for the specified 2009 and 2008 periods.
For the second quarter of 2009, net revenue was $47.3 million compared to $50.5 million in the second quarter of 2008. Revenue was down modestly from the first quarter as a result of a decrease in institutional brokerage revenue, driven principally by lower convertible securities trading revenues in the second quarter.
The Company's cost reductions significantly narrowed the core operating loss year over year. Second quarter 2009 non-compensation expenses, excluding the intangible write down, were $28.1 million compared with $37.4 million in the second quarter of 2008. Cash fixed costs for the second quarter of 2009 were $38.9 million which is consistent with the first quarter's cash fixed costs. The Company's focus on cost control, which resulted in a 24% reduction in fixed costs during the first half of 2009 compared to the same period in 2008, has supported further investments in building and strengthening the franchise.
During the second quarter, FBR Capital Markets completed two transactions that significantly transformed its ownership structure. In May 2009, the Company repurchased 16.7 million shares of its stock at a $4.35 share price. Later in the quarter, the Company completed a follow-on public offering that raised $90.1 million in new capital at $4.65 per share which enhanced liquidity and generated additional working capital. Together, these two transactions reduce the ownership stake of the previous majority owner to its current level of approximately 23% and provide capital for growth initiatives. As of June 30, 2009, shareholders' equity totaled $294.5 million with $233.5 million held in cash. Book value was $4.68 per share at the end of the quarter.
"In the second quarter, we continued to make significant progress in building our franchise as a leading full-service investment bank serving the middle market," said Richard J. Hendrix, President and Chief Executive Officer of FBR Capital Markets. "Looking forward, we are highly confident in our team. We have already realized significant banking revenue in the third quarter and our greater pipeline visibility gives us confidence that we will achieve material improvements in banking revenue in the second half of 2009. We also expect that our expanded institutional brokerage platform, which now includes high yield and bank loan trading, will provide additional revenue growth and help us achieve profitability over the remainder of 2009."
Investors wishing to listen to the earnings conference call at 9:00 A.M. U.S. EDT, Wednesday, July 29, 2009, may do so via the Web at: http://phx.corporate-ir.net/phoenix.zhtml?c=204322&p=irol-irhome.
Replays of the webcast will be available after the call.
FBR Capital Markets Corporation (Nasdaq:FBCM) provides investment banking, merger and acquisition advisory, institutional brokerage and research services through its subsidiary FBR Capital Markets & Co. FBR Capital Markets focuses capital and financial expertise on seven industry sectors: consumer; diversified industrials; energy & natural resources; financial institutions; insurance; real estate; and technology, media & telecom. Asset management services are provided by FBR Investment Management, Inc., and mutual funds are provided by FBR Fund Advisers, Inc.; both companies are subsidiaries of FBR Capital Markets Corporation. FBR Capital Markets is headquartered in the Washington, D.C. metropolitan area with offices throughout the United States and in London. For more information, please visit www.fbrcapitalmarkets.com.
The FBR Capital Markets Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6405
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 that 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 offerings, activity in the secondary securities markets, interest rates, costs of borrowing, interest spreads, 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 our future results and financial condition, see "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
FBR CAPITAL MARKETS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Quarter ended Six months ended
June 30, June 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
REVENUES:
Investment banking:
Capital raising $ 4,273 $ 3,961 $ 8,572 $ 68,870
Advisory 4,383 4,192 7,982 9,268
Institutional
brokerage:
Principal transactions 9,852 4,888 21,170 10,845
Agency commissions 23,824 29,891 52,176 55,707
Asset management:
Base management fees 2,612 4,153 5,045 8,797
Net investment income
(loss) 1,369 745 (78) (4,283)
Interest income 187 4,881 1,043 7,342
Other 828 282 1,321 526
---------- ---------- ---------- ----------
Total revenues 47,328 52,993 97,231 157,072
Interest expense -- 2,505 252 2,538
---------- ---------- ---------- ----------
Revenues, net of
interest expense 47,328 50,488 96,979 154,534
---------- ---------- ---------- ----------
NON-INTEREST EXPENSES:
Compensation and
benefits 35,553 48,273 72,551 119,136
Professional services 4,587 8,841 9,128 20,004
Business development 2,598 6,624 6,229 18,644
Clearing and brokerage
fees 3,760 3,367 7,057 6,965
Occupancy and equipment 7,803 8,361 15,760 16,968
Communications 5,192 6,165 10,353 12,208
Impairment of intangible
assets 5,350 -- 5,350 --
Other operating
expenses 4,125 4,080 7,749 6,813
---------- ---------- ---------- ----------
Total non-interest
expenses 68,968 85,711 134,177 200,738
---------- ---------- ---------- ----------
Loss before income
taxes (21,640) (35,223) (37,198) (46,204)
Income tax provision
(benefit) 104 (9,974) 713 (10,781)
---------- ---------- ---------- ----------
Net loss $ (21,744) $ (25,249) $ (37,911) $ (35,423)
========== ========== ========== ==========
Basic loss per share $ (0.40) $ (0.39) $ (0.67) $ (0.55)
========== ========== ========== ==========
Diluted loss per share $ (0.40) $ (0.39) $ (0.67) $ (0.55)
========== ========== ========== ==========
Weighted average shares
- basic (in thousands) 54,391 64,755 56,741 64,592
========== ========== ========== ==========
Weighted average
shares - diluted
(in thousands) 54,391 64,755 56,741 64,592
========== ========== ========== ==========
Non-GAAP Financial Measures
In addition to the financial results reported in accordance with generally accepted accounting principles (GAAP), we have disclosed non-GAAP pre-tax core operating losses for the quarters ended June 30, 2009 and 2008 in this press release. This non-GAAP measurement is used by management to analyze and assess the results of the core capital markets and asset management operating units. In determining core earnings (losses), we have excluded from GAAP financial results the following non-core operating items: (1) severance costs associated with reductions in headcount and (2) net investment income (losses) from our mortgage-backed securities and long-term investments. We also have excluded the following non-cash expenses: (1) impairment of intangible assets, (2) compensation costs associated with stock-based awards and (3) amortization of intangible assets. Management believes that this non-GAAP measurement assists investors in understanding the impact of these non-core items and non-cash expenses on the performance of the Company, and provides additional clarity around the firm's forward earnings capacity and trend.
A limitation of utilizing these non-GAAP measures is that the GAAP accounting effects of these events do in fact reflect the underlying financial results of our business and these effects should not be ignored in evaluating and analyzing our financial results. Therefore, management believes income (loss) before income taxes on a GAAP basis and core earnings (loss) before income taxes on a non-GAAP basis should be considered together.
The following table presents a reconciliation of the GAAP financial results to non-GAAP measurements discussed above (dollars in thousands).
Q2 - 09 Q1 - 09 Q4 - 08 Q3 - 08 Q2 - 08
--------- --------- --------- --------- ---------
-------------------------------------------------------------------
Net revenues
before net
investment
income/loss $ 45,959 $ 51,098 $ 47,828 $ 56,598 $ 49,743
-------------------------------------------------------------------
GAAP pre-
tax loss $ (21,640) $ (15,558) $(105,334) $ (46,682) $ (35,223)
Non-core
items:
Severance 191 560 10,425 3,575 838
Net
investment
loss, MBS -- 1,043 33,622 -- --
Net
investment
(income)
loss, long-
term
investments (1,369) 404 32,387 11,043 (745)
Non-cash
expenses:
Impairment
of
intangible
assets 5,350 -- -- -- --
Stock
com-
pensation
expense 4,786 4,341 6,806 5,540 2,785
Amortization
of
intangible
assets 291 291 291 291 291
--------- --------- --------- --------- ---------
Non-GAAP pre-
tax core
operating
(loss)
income $ (12,391) $ (8,919) $ (21,803) $ (26,233) $ (32,054)
========= ========= ========= ========= =========
FBR CAPITAL MARKETS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
ASSETS 30-Jun-09 31-Dec-08
----------- -----------
Cash and cash equivalents $ 233,468 $ 207,801
Receivables 12,487 32,110
Investments:
Mortgage-backed securities, at fair value -- 454,339
Long-term investments 34,619 41,174
Trading securities, at fair value 46,374 17,954
Due from brokers, dealers and clearing
organizations 12,174 --
Derivative assets, at fair value -- 264
Intangible assets, net 2,838 8,943
Furniture, equipment, software and
leasehold improvements, net 19,762 24,442
Prepaid expenses and other assets 10,875 13,342
----------- -----------
Total assets $ 372,597 $ 800,369
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Trading account securities sold but
not yet purchased, at fair value $ 24,123 $ 8,325
Repurchase agreements -- 416,037
Accrued compensation and benefits 24,286 43,919
Accounts payable, accrued expenses and
other liabilities 21,990 25,352
Due to brokers, dealers and clearing
organizations 7,713 3,009
----------- -----------
Total liabilities 78,112 496,642
----------- -----------
Shareholders' equity:
Common stock 63 60
Additional paid-in capital 418,300 396,059
Restricted stock units 15,620 9,309
Accumulated other comprehensive loss (104) (218)
Accumulated deficit (139,394) (101,483)
----------- -----------
Total shareholders' equity 294,485 303,727
----------- -----------
Total liabilities and shareholders'
equity $ 372,597 $ 800,369
=========== ===========
Book Value per Share $4.68 $5.18
Shares Outstanding (in thousands) 62,920 58,652
FBR CAPITAL MARKETS CORPORATION
Financial & Statistical Supplement - Operating Results
(Dollars in thousands)
(Unaudited)
Q-2 09 Q-1 09 Q-4 08 Q-3 08 Q-2 08
------------------------------------------------------
Revenues, net
of interest
expense $ 47,328 $ 49,651 $ (18,181) $ 45,555 $ 50,488
Non-interest
expenses:
Variable 19,405 21,143 17,801 30,640 31,860
Fixed 44,213 44,066 69,352 61,597 53,851
Impairment of
intangible
assets 5,350 -- -- -- --
------------------------------------------------------
Loss before
income taxes (21,640) (15,558) (105,334) (46,682) (35,223)
Income tax
provision
(benefit) 104 609 25,413 (18,122) (9,974)
------------------------------------------------------
Net loss $ (21,744) $ (16,167) $(130,747) $ (28,560) $ (25,249)
======================================================
Fixed expenses $ 44,213 $ 44,066 $ 69,352 $ 61,597 $ 53,851
Less: Non-cash
expenses 5,077 4,632 7,097 5,831 3,076
Severance 191 560 10,425 3,575 838
------------------------------------------------------
Cash fixed
costs $ 38,945 $ 38,874 $ 51,830 $ 52,191 $ 49,937
======================================================
Statistical
Data
-----------
Net assets
under
management
(in millions)
-------------
Mutual funds $ 1,364.9 $ 1,079.8 $ 1,179.4 $ 1,427.1 $ 1,533.8
Managed
accounts -- 128.8 216.6 276.8 275.7
Hedge & off-
shore funds 4.1 16.1 21.0 27.5 33.4
Private equity
and venture
capital funds 12.4 13.6 15.9 16.2 20.2
------------------------------------------------------
Total $ 1,381.4 $ 1,238.3 $ 1,432.9 $ 1,747.6 $ 1,863.1
======================================================
Employee count 554 550 568 652 700
======================================================