-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OG1+UT9Yy47K1ydHAz7NwaJn22M9llLTJ/c3wyP2f/vId+pnmtJmpcHHshFiHF32 vM+wuMSR0iWjgJA6YrxL3g== 0001048750-98-000009.txt : 19980817 0001048750-98-000009.hdr.sgml : 19980817 ACCESSION NUMBER: 0001048750-98-000009 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRIEDMAN BILLINGS RAMSEY GROUP INC CENTRAL INDEX KEY: 0001048750 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 541870350 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13731 FILM NUMBER: 98689785 BUSINESS ADDRESS: STREET 1: 1001 19TH STREET N. CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7033129500 MAIL ADDRESS: STREET 1: 1001 NINETEENTH ST N CITY: ARLINGTON STATE: VA ZIP: 22209 10-Q/A 1 QUARTERLY REPORT FORM 10-Q/A AMENDMENT NO. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 001-13731 Friedman, Billings, Ramsey Group, Inc. (Exact name of Registrant as specified in its charter) Virginia 54-1837743 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 Nineteenth Street North Arlington, VA 22209 (Address of principal executive offices) (Zip code) (703) 312-9500 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: Title Outstanding Class A Common Stock 13,416,421 as of July 31, 1998 Class B Common Stock 36,577,579 as of July 31, 1998 This Amendment No. 1 to Quarterly Report on Form 10-Q/A (the "Amendment") of Friedman, Billings, Ramsey Group, Inc. (the "Company") is being filed for the sole purpose of correcting Part I, Item 1 - "Financial Statements of Operations- Six Months Ended June 30, 1998" in which amounts in the 1997 and 1998 columns (specifically, "gains and losses, net -trading"), had been erroneously transposed during Edgar formatting, as well as correcting rounding errors. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. FORM 10-Q/A FOR THE QUARTER ENDED JUNE 30, 1998 INDEX Page Number Part I. FINANCIAL INFORMATION Item 1. Financial Statements - (unaudited) Consolidated Balance Sheets- December 31, 1997 and June 30, 1998 3 Consolidated Statements of Operations- Three Months Ended June 30, 1997 and 1998 5 Six Months Ended June 30, 1997 and 1998 6 Consolidated Statement of Cash Flows- Six Months Ended June 30, 1997 and 1998 7 Notes to Consolidated Financial Statements 8 SIGNATURES 14 EXHIBIT INDEX 14 FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
(Audited) (Unaudited) December 31, June 30, 1997 1998 ----------- ---------- Assets Cash and cash equivalents................................................ $ 205,709 $ 71,246 Short-term investments, at market value.................................. 1,982 -- Receivables: Investment banking...................................................... 7,232 9,565 Asset management fees................................................... 4,426 5,898 Other................................................................... 2,465 10,654 Due from clearing organization........................................... 15,650 51,621 Marketable trading securities, at market value: Corporate equities...................................................... 60,299 118,092 Corporate bonds......................................................... 18,485 19,899 Deferred tax asset....................................................... 2,402 390 Long-term investments, at fair value..................................... 36,352 57,008 Furniture, equipment and leasehold improvements, net of accumulated depreciation and amortization of $2,198, and $2,681, respectively..... 3,471 6,193 Prepaid expenses and other assets........................................ 854 2,878 ----------- ---------- Total assets.................................................... $ 359,327 $ 353,444 =========== ==========
The accompanying notes are an integral part of these consolidated statements. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
(Audited) (Unaudited) December 31, June 30, 1997 1998 -------------- ----------- Liabilities and Shareholders' Equity Liabilities: Trading account securities sold but not yet purchased, at market value: Corporate equities........................................................ $ 10,726 $ 13,656 Corporate and U.S. government bonds....................................... 5,947 5,508 Due to issuer- underwriting................................................. -- 23,183 Accounts payable and accrued expenses....................................... 30,423 23,621 Accrued compensation and benefits........................................... 19,023 30,222 Dividends payable........................................................... 24,000 -- Income taxes payable........................................................ -- 4,509 Short-term subordinated revolving loan...................................... 40,000 -- Long-term secured loans..................................................... 2,416 2,169 Other .................................................................... 146 917 ------------- ----------- Total liabilities...................................................... 132,681 103,785 ------------- ----------- Commitments and contingencies (Note 8)........................................... -- -- Shareholders' equity: Preferred Stock, $0.01 par value, 15,000,000 shares authorized, none issued and outstanding................................................... -- -- Class A Common Stock, $0.01 par value, 150,000,000 shares authorized,....... 13,451,421 issued and outstanding............................................ 135 135 Class B Common Stock $0.01 par value, 100,000,000 shares authorized,........ 36,577,579 shares issued and outstanding..................................... 366 366 Additional paid-in capital.................................................. 208,843 208,843 Retained earnings........................................................... 17,302 40,315 ------------- ----------- Total shareholders' equity............................................. 226,646 249,659 ------------- ----------- Total liabilities and shareholders' equity............................. $ 359,327 $ 353,444 ============= ===========
The accompanying notes are an integral part of these consolidated statements. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited)
For the Three Months Ending June 30, 1997 1998 --------- -------- Revenues: Investment banking- Underwriting................................................ $ 29,424 $ 16,314 Corporate finance........................................... 769 28,935 Institutional brokerage- Principal sales credits..................................... 5,954 7,639 Agency commissions.......................................... 1,740 4,335 Gains and losses, net- Trading (3,040) (7,490) Investment.................................................. 805 (274) Asset management.............................................. 1,072 2,283 Interest, dividends, and other................................ 917 5,592 --------- -------- Total revenues......................................... 37,641 57,334 --------- -------- Expenses: Compensation and benefits................................... 24,848 28,898 Business development and sales support...................... 2,823 5,260 Professional services....................................... 1,546 2,984 Clearing and brokerage fees................................. 897 1,649 Occupancy and equipment..................................... 679 899 Communications.............................................. 559 877 Interest expense............................................ 1,006 1,468 Other operating expenses.................................... 1,263 2,705 --------- -------- Total expenses......................................... 33,621 44,740 --------- -------- Net income before taxes .................................... 4,020 12,594 Income tax provision........................................ -- 5,161 --------- -------- Net income.................................................. $ 4,020 $ 7,433 ========= ======== Basic and diluted net income per share...................... $ 0.10 $ 0.15 ========= ======== Weighted average shares outstanding......................... 40,029 50,029 ========= ======== Pro forma statements of operations data (Note 3): Net income before tax....................................... $ 4,020 Pro forma income tax provision.............................. 1,608 --------- Pro forma net income........................................ $ 2,412 ========= Pro forma basic and diluted net income per share............ $ 0.06 ========= Weighted average shares outstanding......................... 40,029 =========
The accompanying notes are an integral part of these consolidated statements. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited) For the Six Months Ending June 30, 1997 1998 -------- -------- Revenues: Investment banking- Underwriting................................................ $ 42,603 $ 64,024 Corporate finance........................................... 9,552 32,596 Institutional brokerage- Principal sales credits..................................... 12,867 16,673 Agency commissions.......................................... 4,543 8,043 Gains and losses, net- Trading .................................................... (7,393) (13,411) Investment.................................................. 935 2,730 Asset management.............................................. 1,885 5,452 Interest, dividends and other................................. 1,693 9,211 -------- -------- Total revenues......................................... 66,685 125,318 -------- -------- Expenses: Compensation and benefits................................... 44,543 57,241 Business development and sales support...................... 4,923 9,534 Professional services....................................... 2,831 5,516 Clearing and brokerage fees................................. 1,914 2,992 Occupancy and equipment..................................... 1,187 1,663 Communications.............................................. 995 1,703 Interest expense............................................ 1,730 3,127 Other operating expenses.................................... 2,280 5,212 -------- -------- Total expenses......................................... 60,403 86,988 -------- -------- Net income before taxes .................................... 6,282 38,330 Income tax provision........................................ -- 15,318 -------- -------- Net income.................................................. $ 6,282 $ 23,012 ======== ======== Basic and diluted net income per share...................... $ 0.16 $ 0.46 ======== ======== Weighted average shares outstanding......................... 40,029 50,029 ======== ======== Pro forma statements of operations data (Note 3): Net income before tax....................................... $ 6,282 Pro forma income tax provision.............................. 2,513 -------- Pro forma net income........................................ $ 3,769 ======== Pro forma basic and diluted net income per share............ $ 0.09 ======== Weighted average shares outstanding......................... 40,029 ========
The accompanying notes are an integral part of these consolidated statements. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in thousands) (Unaudited)
For the Six Months Ending June 30, 1997 1998 ------- -------- Cash flows from operating activities: Net income ............................................................. $ 6,282 $ 23,012 Adjustments to reconcile net income to net cash used in operating activities-- Income and special allocations on investments in limited partnerships. (1,688) (4,751) Depreciation and amortization......................................... 394 484 Changes in operating assets: Receivables-- Due to/from clearing organization................................. (10,944) (35,971) Investment banking................................................ 5,709 (2,333) Asset management fees............................................. (55) (1,472) Other............................................................. 167 (8,189) Marketable trading account securities............................... (5,415) (59,207) Prepaid expenses and other assets................................... 436 (2,024) Deferred tax asset.................................................. -- 2,012 Changes in operating liabilities: Due to issuer- underwriting......................................... -- 23,183 Trading account securities sold but not yet purchased............... (33,604) 2,491 Borrowings (repayments) on short-term subordinated loans............ 20,000 (40,000) Repayments on short-term revolving loan and line of credit.......... (1,000) -- Accounts payable and accrued expenses............................... (85) (6,802) Income taxes payable................................................ -- 4,509 Accrued compensation and benefits................................... 10,969 11,199 Other............................................................... (12) 771 ------- ------- Net cash used in operating activities............................. (8,846) (93,088) ------- ------- Cash flows from investment activities: Purchases of fixed assets............................................... (892) (3,205) Long-term investments................................................... (225) (15,905) Sale (purchase) of short-term investments............................ (12) 1,982 ------- ------- Net cash used in investing activities............................. (1,129) (17,128) ------- ------- Cash flows from financing activities: Repayments of long-term secured loans................................... (162) (247) Distributions........................................................... (10,146) -- Capital contributions................................................... 272 -- Dividend payments....................................................... -- (24,000) ------- ------- Net cash used in financing activities............................. (10,036) (24,247) ------- ------- Net decrease in cash and cash equivalents................................. (20,011) (134,463) Cash and cash equivalents, beginning of period............................ 20,681 205,709 ------- ------- Cash and cash equivalents, end of period................................. $ 670 $71,246 ======= ======= Supplemental Cash Flow Information: Income taxes paid...................................................... $ -- $ 8,795 ======= =======
The accompanying notes are an integral part of these consolidated statements. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Nature of Operations: Organization Friedman, Billings, Ramsey Group, Inc., a Virginia corporation (the "Company"), is the sole parent holding company for three subsidiary holding companies, Friedman, Billings, Ramsey Capital Markets, Inc. ("FBRCM"), FBR Capital Management, Inc. ("FBRAM", formerly Friedman, Billings, Ramsey Asset Management, Inc.) and FBR Holdings, Inc. The principal subsidiary of FBRCM is Friedman, Billings, Ramsey & Co., Inc. ("FBRC"), a registered broker-dealer. The principal subsidiary of FBRAM is Friedman, Billings, Ramsey Investment Management, Inc. ("FBRIM"), a registered investment advisor. FBR Holdings, Inc. is an investment holding company formed to make and hold long-term investments. All of the subsidiaries of FBRCM and FBRAM are hereafter collectively referred to as the "Operating Entities". FBRC is a member of the National Association of Securities Dealers, Inc. FBRC acts as an introducing broker executing transactions primarily for institutional customers and forwards all such transactions to clearing brokers on a fully disclosed basis. FBRC does not hold funds or securities for, or owe funds or securities to, customers. FBRC receives underwriting revenues from underwriting public offerings of debt and equity securities. These revenues are comprised of selling concessions and management and underwriting fees. FBRC also receives corporate finance fees from private placement offerings and from providing merger and acquisition, financial restructuring, and other advisory services. FBRC concentrates its underwriting and corporate finance activities primarily on bank, thrift and specialty finance institutions, technology companies and real estate investment trusts ("REITS"). FBRIM acts as general partner of investment limited partnerships and also manages investment accounts and a REIT, and is the principal owner in two investment holding companies organized as limited liability companies. Reincorporation Merger In December 1997, Friedman, Billings, Ramsey Group, Inc., a Delaware corporation (the "Old Holding Company") and its operating entities terminated their status as subchapter S corporations and converted to subchapter C corporations as defined under the Internal Revenue Code (the "Conversion"). Prior to the Conversion, the Old Holding Company declared a distribution to its shareholders of $54 million representing previously undistributed subchapter S corporation earnings. As of December 31, 1997, $30 million of the distribution had been paid. The Old Holding Company was then merged with and into the Company, with the Company as the surviving corporation. As a result of the merger, shareholders of the Company received 330 shares of Class B Common Stock of the Company for each share in the Old Holding Company. The effects of the reincorporation merger have been given retroactive application in the consolidated financial statements for all periods presented. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Initial Public Offering Subsequent to the reincorporation merger, the Company issued 10,000,000 new Class A common shares and certain selling shareholders sold 1,000,000 Class A common shares in an initial public offering (the "Offering"). The net proceeds to the Company from the Offering approximated $185,000,000. Simultaneously with the Offering, certain selling shareholders sold 2,451,421 shares of Class B common stock to PNC Bank Corp. These shares were automatically converted to Class A common shares upon the sale. Nature of Operations The Company is primarily engaged in a single line of business as a securities firm, which comprises several types of services, such as underwriting, principal and agency securities trading transactions, asset management and long-term equity investing, primarily in the United States. The operations related to the Company's foreign entities are not material to these consolidated financial statements. The securities industry generally, and specifically in volatile or illiquid markets, is subject to numerous risks, including the risk of losses associated with the underwriting, ownership, and trading of securities and the risks of reduced revenues in periods of reduced demand for security offerings and activity in secondary trading markets. Changing or negative economic trends, such as inflation or interest rate volatility, political trends, such as regulatory and legislative changes, and overall or specific market trends can influence the liquidity and value of the Company's investments, and impact the level of security offerings underwritten by the Company, all of which could adversely affect the Company's revenues and profitability. Many aspects of the Company's business involve substantial risks of liability. An underwriter is exposed to substantial liability under Federal and state securities laws, other Federal and state laws and court decisions, including decisions with respect to underwriters' liability and limitations on indemnification of underwriters by issuers. Underwriters may be held liable for material misstatements or omissions of fact in a prospectus used in connection with the securities being offered or for statements made by its securities analysts or other personnel. While the Company has never been subject to such litigation, in recent years there has been an increasing incidence of litigation involving the securities industry, including class actions that seek substantial damages. The Company is also subject to the risk of litigation, including litigation that may be without merit. As the Company intends actively to defend such litigation, significant legal expenses could be incurred. An adverse resolution of any future lawsuits against the Company could materially affect the Company's operating results and financial condition. Concentrations of Risk The Company's historical revenues have been derived primarily from investment banking transactions in the financial services and real estate industries and the industry consolidation sector. As a result of the Company's dependence on specific industries and the consolidation sector, any downturn in the market for securities in these areas could adversely impact the Company's results of operations and financial condition. A substantial portion of the Company's revenues in a year may be derived from a small number of underwriting transactions or may be concentrated in a particular industry. Revenues derived from two unrelated investment banking transactions accounted for approximately 38 percent of the Company's revenues for the six months ended June 30, 1997. Two unrelated investment banking transactions accounted for 32 percent of the Company's revenues in the six months ended June 30, 1998. Trading positions in two marketable securities, both corporate equities of issuers classified as REITs, accounted for $57.6 million or 48.7 percent of the Company's equity trading securities positions as of June 30, 1998. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Summary of Significant Accounting Policies: Basis of Presentation The Company's financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") with respect to Form 10-Q and reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Pursuant to such rules and regulations, certain footnote disclosures which are contained in the Company's Annual Report on 10-K for the year ended December 31, 1997 ("1997 Annual Report") have been omitted. It is recommended that these consolidated financial statements be read in conjunction with the audited consolidated financial statements included in the 1997 Annual Report. The Consolidated Balance Sheet as of December 31, 1997 was derived from the audited financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the 1998 presentation. Net Income Per Share In March 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share." SFAS No. 128 is effective for financial statements issued after December 15, 1997. SFAS No. 128 requires dual presentation of basic and diluted income per share. Basic income per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share includes the impact of potentially dilutive options, warrants, or convertible debt and convertible preferred equity securities. Options to purchase 4,269,900 shares of common stock at $20 per share were outstanding as of June 30, 1998, but were not included in calculating diluted net income per share as their effect would have been anti-dilutive. Therefore, there is no difference between the amounts of basic and diluted net income per share in these statements. In February 1998, the SEC issued Staff Accounting Bulletin ("SAB") No. 98, concerning the computation of earnings per share. SAB 98 amends previous guidance concerning the impact of equity interests issued in proximity to an initial public offering on the computation of weighted average shares outstanding. SAB 98 also amends the requirements to present historical earnings per share information when a company converts from a non-taxable, to a taxable entity. SAB 98 has been applied in the accompanying consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Compensation A significant component of compensation expense relates to incentive bonuses. Incentive bonuses are accrued based on the contribution of key business units using certain pre-defined formulas. Since the bonus determinations are also based on aftermarket security performance and other factors, amounts originally accrued may not ultimately be paid. All of the Company's compensation plans are reviewed and evaluated on a quarterly basis. Pursuant to this policy, the Company reduced $9.5 million of previously accrued bonuses in the six month period ending June 30, 1998. 3. Income Taxes: Through December 20, 1997, the Company and its U.S. Operating Entities, with the exception of its subsidiaries which are limited liability corporations ("LLC"s), had elected to be taxed as subchapter S corporations under the Internal Revenue Code. Subchapter S corporations and LLCs are not taxed on their income; rather their income or loss pass directly through to their shareholders (or members in the case of LLCs). As a result, there is no provision for income taxes in these financial statements for the periods prior to December 20, 1997. The accompanying consolidated statements of operations include pro forma adjustments for income tax expense, which would have been recorded had the Company been subject to federal and state corporate income taxes, for all periods presented. 4. Long-Term Investments: Long-term investments primarily include non-readily marketable investments in limited investment partnerships and other equity investments, including privately held companies. Long-term investments also include illiquid warrants for stock of corporations to which the Company has provided investment banking services, carried at nominal values. Long-term investments are reported at their estimated fair values. The principal private company investment consists of a $25 million investment in FBR Asset Investment Corporation ("FBR-Asset"), a privately held real estate investment trust formed in 1997. FBR-Asset's investments as of June 30, 1998 consist of corporate equities- 21% (79% of these are publicly traded REITs), mortgage-backed securities-59%, corporate bonds-5%, and cash and equivalents-15%. 5. Asset Management Revenue: Certain of the Company's subsidiaries, as investment advisers, receive management fees for the management of the business and affairs of limited partnerships or investment companies, based upon the amount of assets under management, as well as incentive performance fees or special allocations of net income based upon the operating results. Incentive performance fees and special allocations are calculated on at least an annual period, which generally coincides with the calendar year. As of December 31, 1997, and June 30, 1997 and June 30, 1998, unrecorded special allocations were $1.5 million, $3.4 million, and $4.2 million, respectively. As the ultimate amount of such fees and allocations may vary with future performance, these fees and allocations are not recorded as revenue until such time as they become due and payable. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Borrowings: Subordinated Revolving Loans As of June 30, 1998, the Company had two unsecured revolving subordinated loan agreements with its clearing broker and an affiliate of its clearing broker. Available credit lines under these agreements were $15 million and $10 million. As of June 30, 1998 there were no amounts outstanding under these lines. Borrowing capacity under the credit lines expire as follows: $15 million in July 1998, and $10 million in October 1998. The Company did not renew the line that expired in July, 1998. 7. Net Capital Computation: FBRC is subject to the Net Capital Rule, which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At June 30, 1998, FBRC had net capital of $65.4 million, which was $61.4 million in excess of its required net capital of $4.0 million. FBRC's aggregate indebtedness to net capital ratio was .92 to 1 at June 30, 1998. 8. Commitments and Contingencies: Leases The Company leases premises under long-term lease agreements requiring minimum annual rental payments with annual adjustments based upon increases in the consumer price index, plus the pass-through of certain operating and other costs above a base amount. Future minimum aggregate annual rentals payable under these non-cancelable leases and rentals for certain equipment leases for the years ending December 31, 1999 through 2003 and the aggregate amount thereafter, are as follows: Year Ending December 31, (in Thousands) 1999................................................ 2,546 2000................................................ 2,609 2001................................................ 2,789 2002................................................ 2,766 2003................................................ 2,696 Thereafter.......................................... 225 ------- $13,631 ======= FBR Business Development Capital ("FBR-BDC") In May 1998, the Company organized an interim loan fund designed to extend financing to "middle-market" businesses in need of subordinated debt or mezzanine financing that is not readily available from traditional banks or in the capital markets. In connection therewith, the Company provided FBR-BDC with a loan for its operations and commitments of $6.6 million as of June 30, 1998. Subsequent to June 30, 1998, the Company made three additional loans to FBR-BDC totaling $17.9 million, and expects to provide loans up to $15 million in the aggregate during the remainder of 1998, to be used by the fund. FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Distributions: In 1997, prior to its initial public offering, the Company declared distributions to its shareholders totaling $72,570,582. There were no dividends declared during the six months ended June 30, 1998. However, $24 million of distributions declared in 1997 were paid in the first quarter of 1998 to S corporation shareholders. 10. Shareholders' Equity At June 30, 1998, the Company has three stock-based compensation and benefit plans discussed below. In July 1998, the Company's Board of Directors approved a plan to repurchase up to 2.5 million shares of the Company's Class "A" Common Stock from time to time. In accordance with the repurchase plan, a portion of the stock acquired in the repurchase plan will be used in the three stock-based compensation and benefit plans. As of July 31, 1998, the Company had repurchased 35,000 shares of its class A common stock pursuant to this plan. 1997 Stock and Annual Incentive Plan Under the 1997 Stock and Annual Incentive Plan the Company may grant options, stock appreciation rights, "performance" awards and restricted and unrestricted stock (collectively, the "Awards") to purchase up to 9.9 million shares of Class A Common Stock to participants in the 1997 Plan. As of December 31, 1997, 4,384,400 stock options were granted to employees. The options were granted at the initial public offering price of $20 per share and become exercisable as follows: 10 percent, 40 percent, and 50 percent at the end of three, four, and five years, respectively. As of June 30, 1998 no options had been exercised or had expired. As of June 30, 1998, 114,500 options had been cancelled upon the departure of employees, and 75,000 additional options have been committed to new employees. Non-Employee Director Stock Compensation Plan Under the Non-Employee Director Stock Compensation Plan (the "Director Plan"), the Company may grant options or stock (in lieu of annual director fees) up to 100,000 shares of Class A Common Stock. There were no awards made under this plan during the six months ending June 30, 1998. Employee Stock Purchase Plan Under the 1997 Employee Stock Purchase Plan (the "Purchase Plan") 1,000,000 shares of Class A Common Stock were reserved for future issuance of stock. The Purchase Plan will permit eligible employees to purchase common stock through payroll deductions at a price equal to 85 percent of the fair market value as determined by the plan. The plan will not result in compensation expense in future periods. As of June 30, 1998, the Purchase Plan had not yet been offered to employees; therefore, no stock had been purchased under the Purchase Plan. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Friedman, Billings, Ramsey Group, Inc. 08/14/98 By: /s/ Kurt R. Harrington ---------- --------------------------------------- Date Kurt R. Harrington, Treasurer (Principal Accounting Officer) EXHIBIT INDEX EXHIBIT 27.01 Financial Data Schedule. EX-27.01 2 FDS -AMENDED
BD This schedule contains summary financial information extracted from the unaudited Consolidated Balance Sheet as of June 30, 1998 and the unaudited Consolidated Statements of Operations for the six months ended June 30, 1998, which are contained in the body of the accompanying Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 71,246 26,117 0 0 137,991 6,193 353,444 0 70,026 0 0 19,164 2,169 0 0 249,659 0 353,444 3,262 9,211 8,043 96,620 5,452 3,127 57,241 38,330 38,330 0 0 23,012 0.46 0.46
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