EX-99.1 3 fbrg02qtr3earnings.txt THIRD QUARTER EARNINGS RELEASE EXHIBIT 99.1 [GRAPHIC OMITTED][GRAPHIC OMITTED] Investor Contact: Kurt Harrington 703.312.9647 or kharrington@fbr.com Media Contacts: Bob Leahy 703.312.9745 or bleahy@fbr.com Bill Dixon 703.469.1092 or bdixon@fbr.com -------------- Friedman, Billings, Ramsey Group Reports Third Quarter 2002 Results Net Income of $15.1 million, or $0.33 per share (basic) ARLINGTON, Va., October 30, 2002 - Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) today reported net income after tax of $15.1 million, or $0.33 (basic), $0.31 (diluted) per share, for the quarter ended September 30, 2002, compared with a loss of $22.4 million, or $(0.49) (basic), $(0.49) (diluted) per share in the third quarter of 2001. Revenue in the third quarter of 2002 was $81.7 million, compared with $21.8 million in the third quarter of 2001. The company's results for the quarter reflect almost $9.0 million of non-cash markdowns in the company's asset management and technology sector investments, primarily attributable to publicly-traded securities due to the volatility of the public equity markets in the quarter. As of September 30, the company's long-term equity investments (excluding FBR Asset Investment Corporation and trading securities) were valued at approximately $62 million. For the first nine months of the year, FBR reported net income after tax of $43.2 million (including an extraordinary gain of $0.9 million), or $0.94 (basic), $0.90 (diluted) per share on revenue of $209.3 million, versus a net loss of $23.4 million, or $(0.49) (basic), $(0.49) (diluted) per share on revenue of $99.4 million for the first nine months of 2001. "Third quarter revenue was the highest since the first quarter of 1998," said Emanuel J. Friedman, Chairman and Co-CEO. "Our results were driven by continued year over year revenue growth and earnings improvement across investment banking, institutional brokerage and asset management." By business unit, the company reported investment banking revenues for the quarter of $58.9 million, a 431% increase over the same quarter a year ago. Institutional brokerage revenue in Q3 was $14.4 million, a 42% increase over the third quarter of 2001. Asset management revenue for the quarter was $8.7 million, a 117% increase over the third quarter of the previous year. Additionally, the company recorded a $(2.2) million technology sector net investment and incentive loss for the quarter, compared with a $(6.6) million loss in the third quarter of 2001. "We continue to be pleased with the achievements of the first nine months of the year across all sectors of our business, particularly in view of the ongoing state of the capital markets," said Vice Chairman and Co-Chief Executive Officer Eric F. Billings. "FBR is strongly positioned to capture revenues despite changing conditions in the U.S. capital markets, offering innovative funding solutions and contrarian research views. While our financial institutions and real estate investment banking groups were particularly strong in the quarter, we continued to build out our capabilities across all of our sectors, with new hires and the opening of our San Francisco office. The combination of our relatively debt free status, almost $260 million in equity (including employee loans), prudent hiring and cost discipline should allow us to achieve acceptable returns even in difficult markets." In investment banking, FBR continued to be a top ranking lead-managing underwriter. For the first nine months of 2002, according to CommScan Equidesk, FBR ranked 12th (by dollar volume raised) as a lead manager of IPOs and secondaries across all industries and all market capitalizations (16 deals, $1.7 billion raised). This dollar volume excludes the more than $450 million that FBR raised in two 144A institutional equity placements. Including this amount, FBR's dollar volume would exceed $2.14 billion. Additionally, FBR ranked first for the quarter ended September 30 in weighted aftermarket performance of its lead-managed public transactions priced from January 1, 2001 through September 30, 2002 (for lead managers of more than 5 transactions) across all industries and all capitalizations (29 transactions) according to CommScan Equidesk. During the third quarter of 2002, FBR raised approximately $1.1 billion in capital and advised on transactions with a total value of $120 million. The firm completed 6 equity raises, lead-managing 2 public underwritings - including a more than $500 million sole managed follow-on offering for AmeriCredit Corp. (NYSE:ACF) - and 3 private placements - including a more than $400 million institutional equity placement for American Financial Realty Trust - co-managed 1 public underwriting; and completed 2 M&A as well as 3 other advisory assignments. In institutional brokerage, year over year performance was up significantly with sequential quarter revenue down slightly due to the seasonal weakness of the third quarter. FBR expanded to 8 the number of offices with sales and trading operations through the opening of its San Francisco office, and relocated its New York operations to expanded permanent facilities in midtown Manhattan. In asset management, at September 30, 2002, FBR had approximately $8.8 billion in gross assets under management and net assets of $2.2 billion. Of these net assets, FBR has the potential to earn incentive fees on more than $750 million. FBR manages ten equity, fixed income and money market mutual funds, five hedge funds, and four private equity and venture capital funds, in addition to FBR Asset Investment Corp. (NYSE: FB) and other separate accounts. While base and incentive asset management fees remained strong in the quarter, overall asset management revenue declined from the previous quarter reflecting the effect of market volatility on the company's equity investment portfolio. FBR continued to benefit from the growth and performance of FBR Asset in the quarter. In its asset management business, FBR generates revenue as manager of FBR Asset in the form of base and incentive management fees, and also generates income as a minority shareholder of FBR Asset. During the third quarter, FBR Group generated asset management fee revenue (before expenses) of $6.8 million from FBR Asset, and income from its minority stake in FBR Asset of $3.6 million. FBR Asset is a separate public company that invests in mortgage-backed securities, mezzanine and senior loans and equity securities. Shareholders' equity and basic book value calculations as of September 30, 2002 exclude $23.8 million and 4 million shares relating to the Employee Stock Purchase and Loan Program that was implemented during 2001. Assuming repayment of these loans as of September 30, 2002, book value per share would be $5.13. FBR had 46.4 million common shares outstanding, shareholders' equity of $234.6 million, and basic book value per share of $5.06 as of September 30, 2002, compared with 45.5 million common shares outstanding, shareholders' equity of $185.3 million and book value per share of $4.06 as of December 31, 2001. Total assets as of September 30, 2002 were $499.1 million, including net cash and liquid assets of $130.1 million (net of short-term debt of $70.1 million, $40 million of which was repaid in early October, and the proceeds of a $76.4 million syndicate short position related to an underwriting in late September which was covered in October). Friedman, Billings, Ramsey Group, Inc., headquartered in Arlington, Va., is a financial holding company for businesses that provide investment banking, institutional brokerage, specialized asset management, and banking products and services. FBR focuses capital and financial expertise on six industry sectors: financial services, real estate, technology, energy, healthcare, and diversified industries. FBR also has offices in Atlanta, Bethesda, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Irvine, London, New York, Portland, San Francisco, Seattle, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. For more information, see http://www.fbr.com. A live webcast of FBR's conference call will be available at 9 a.m. (Eastern Time) via http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=FBR. Replays of the webcast will be available afterward. ---------------------------------------------------------- # # # Statements 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, the high degree of risk associated with technology and other venture capital investments, available technologies, competition for business and personnel, and general economic, political and market conditions. Financial information follows: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Quarter ended September 30, 2002 % 2001 % REVENUES: Investment banking $58,910 72.1% $11,084 50.9% Institutional brokerage 14,372 17.6% 10,092 46.3% Asset management Base fees 7,208 8.8% 5,836 26.8% Incentive and investment income (loss) 1,545 1.9% (1,805) -8.3% Technology sector investment and incentive loss (2,202) -2.7% (6,592) -30.3% Interest, dividends and other 1,879 2.3% 3,168 14.6% Total revenues 81,712 100.0% 21,783 100.0% EXPENSES: Compensation and benefits 45,725 56.0% 24,276 111.4% Business development and professional services 8,650 10.6% 7,639 35.1% Interest 608 0.7% 322 1.5% Other 8,737 10.7% 11,936 54.8% Total expenses 63,720 78.0% 44,173 202.8% Net income (loss) before income taxes and extraordinary gain 17,992 22.0% (22,390) -102.8% Income tax provision 2,343 2.9% -- 0.0% Net income (loss) before extraordinary gain 15,649 19.1% (22,390) -102.8% Extraordinary gain -- 0.0% -- 0.0% Income tax provision on extraordinary gain 536 0.6% -- 0.0% Net income (loss) $15,113 18.5% $(22,390) -102.8% Basic earnings (loss) per share before extraordinary gain $0.34 $(0.49) Diluted earnings (loss) per share before extraordinary gain $0.32 $(0.49) Basic earnings (loss) per share $0.33 $(0.49) Diluted earnings (loss) per share $0.31 $(0.49) Weighted average shares - basic 46,370 45,808 Weighted average shares - diluted 49,526 45,808 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (Unaudited) Nine months ended September 30, 2002 % 2001 % REVENUES: Investment banking $119,555 57.1% $53,793 54.1% Institutional brokerage 48,501 23.2% 33,974 34.2% Asset management Base fees 20,837 9.9% 13,934 14.0% Incentive and investment income 20,769 9.9% 5,651 5.7% Technology sector investment and incentive loss (5,733) -2.7% (15,378) -15.5% Interest, dividends and other 5,407 2.6% 7,414 7.5% Total revenues 209,336 100.0% 99,388 100.0% EXPENSES: Compensation and benefits 115,455 55.2% 73,283 73.7% Business development and professional services 23,044 11.0% 21,170 21.3% Interest 1,408 0.7% 737 0.8% Other 24,769 11.8% 27,617 27.8% Total expenses 164,676 78.7% 122,807 123.6% Net income (loss) before income taxes and extraordinary gain 44,660 21.3% (23,419) -23.6% Income tax provision 2,343 1.1% -- 0.0% Net income (loss) before extraordinary gain 42,317 20.2% (23,419) -23.6% Extraordinary gain 1,413 0.7% -- 0.0% Income tax provision on extraordinary gain 536 0.3% -- 0.0% Net income (loss) $43,194 20.6% $(23,419) -23.6% Basic earnings (loss) per share before extraordinary gain $0.92 $(0.49) Diluted earnings (loss) per share before extraordinary gain $0.88 $(0.49) Basic earnings (loss) per share $0.94 $(0.49) Diluted earnings (loss) per share $0.90 $(0.49) Weighted average shares - basic 45,995 48,122 Weighted average shares - diluted 48,218 48,122 Financial & Statistical Supplement -Operating Results (unaudited) (Dollars in thousands, except per share data) YTD 2002 Q-3 02 Q-2 02 Q-1 02 Revenues Investment banking: Underwriting $67,666 $30,108 $25,248 $12,310 Corporate finance 47,476 26,175 9,827 11,474 Investment gains 4,413 2,627 1,595 191 Institutional brokerage: Principal transactions 21,173 5,743 8,372 7,058 Agency commissions 27,328 8,629 9,954 8,745 Asset management: Base management fees 20,837 7,208 7,633 5,996 Incentive income 8,967 4,282 2,902 1,783 Net investment income loss 11,802 (2,737) 8,517 6,022 Technology sector investment and incentive loss (5,733) (2,202) (2,432) (1,099) Interest, dividends and other 5,407 1,879 1,638 1,890 Total revenues 209,336 81,712 73,254 54,370 Expenses Compensation and benefits 115,455 45,725 38,411 31,319 Business development & professional services 23,044 8,650 7,982 6,412 Clearing and brokerage fees 3,886 1,443 1,817 626 Occupancy & equipment 6,564 2,309 2,046 2,209 Communications 6,275 2,009 2,187 2,079 Interest expense 1,408 608 430 370 Other operating expenses 8,044 2,976 2,602 2,466 Restructuring and software impairment charges -- -- -- -- Total expenses 164,676 63,720 55,475 45,481 Net income (loss) before taxes and extraordinary gain 44,660 17,992 17,779 8,889 Income tax provision (benefit) 2,343 2,343 -- -- Net income (loss) before extraordinary gain $42,317 $15,649 $17,779 $8,889 Extraordinary gain 1,413 -- -- 1,413 Income tax provision on extraordinary gain 536 536 -- -- Net income (loss) $43,194 $15,113 $17,779 $10,302 Net income (loss) before taxes and extraordinary gain as a percentage of revenue 21.3% 22.0% 24.3% 16.3% ROE (annualized) 27.4% 26.7% 34.4% 21.7% Total shareholders' equity $234,625 $234,625 $218,368 $194,590 Basic earnings (loss) per share $0.94 $0.33 $0.39 $0.23 Diluted earnings (loss) per share $0.90 $0.31 $0.36 $0.22 Ending shares outstanding (in thousands) 46,396 46,396 46,339 45,751 Book value per share $5.06 $5.06 $4.71 $4.25 Assets under management (in millions) Managed accounts Hedge & offshore funds Mutual funds Private equity & venture capital Total Gross assets under management (in millions) Managed accounts $7,356.0 $7,356.0 $4,152.3 $2,757.7 Hedge & offshore funds 232.3 232.3 216.0 209.2 Mutual funds 1,071.2 1,071.2 1,313.4 1,270.4 Private equity funds 41.7 41.7 46.1 46.4 Technology sector funds 54.0 54.0 56.6 60.4 Total $8,755.2 $8,755.2 $5,784.4 $4,344.1 Net assets under management (in millions) Managed accounts $849.7 $849.7 $748.5 $394.5 Hedge & offshore funds 162.9 162.9 188.5 157.7 Mutual funds 1,064.4 1,064.4 1,297.7 1,214.1 Private equity funds 40.1 40.1 45.5 45.5 Technology sector funds 48.6 48.6 52.3 55.8 Total $2,165.7 $2,165.7 $2,332.5 $1,867.6 Productive assets under management (in millions) Managed accounts $7,356.0 $7,356.0 $4,152.3 $2,757.7 Hedge & offshore funds 162.9 162.9 188.5 157.7 Mutual funds 1,064.4 1,064.4 1,297.7 1,214.1 Private equity funds 92.5 92.5 94.8 95.3 Technology sector funds 248.5 248.5 248.1 249.3 Total $8,924.3 $8,924.3 $5,981.4 $4,474.1 Employee count 464 464 445 441 YTD 2001 Q-4 01 Q-3 01 Q-2 01 Q-1 01 Revenues Investment banking: Underwriting $47,853 $20,928 $9,857 $9,414 $7,654 Corporate finance 28,534 7,080 1,153 18,057 2,244 Investment gains 6,762 1,348 74 5,340 -- Institutional brokerage: Principal transactions 26,330 10,817 4,158 5,383 5,972 Agency commissions 27,084 8,623 5,934 5,962 6,565 Asset management: Base management fees 19,744 5,810 5,836 5,191 2,907 Incentive income 3,628 1,811 975 474 368 Net investment income loss 9,532 5,698 (2,780) 5,009 1,605 Technology sector investment and incentive loss (18,100) (2,722) (6,592) (1,684) (7,102) Interest, dividends and other 9,422 2,008 3,168 2,006 2,240 Total revenues 160,789 61,401 21,783 55,152 22,453 Expenses Compensation and benefits 108,112 34,829 24,276 32,756 16,251 Business development & professional services 28,879 7,709 7,639 8,205 5,326 Clearing and brokerage fees 7,087 1,981 1,786 1,588 1,732 Occupancy & equipment 10,852 2,468 3,001 2,883 2,500 Communications 5,832 1,612 1,555 1,498 1,167 Interest expense 1,083 346 322 334 81 Other operating expenses 9,415 2,249 2,853 2,778 1,535 Restructuring and software impairment charges 5,151 2,410 2,741 -- -- Total expenses 176,411 53,604 44,173 50,042 28,592 Net income (loss) before taxes and extraordinary gain (15,622) 7,797 (22,390) 5,110 (6,139) Income tax provision (benefit) (1,760) (1,760) -- -- -- Net income (loss) before extraordinary gain $(13,862) $9,557 $(22,390) $5,110 $(6,139) Extraordinary gain 1,148 1,148 -- -- -- Income tax provision on extraordinary gain -- -- -- -- -- Net income (loss) $(12,714) $10,705 $(22,390) $5,110 $(6,139) Net income (loss) before taxes and extraordinary gain as a percentage of revenue -9.7% 12.7% -102.8% 9.3% -27.3% ROE (annualized) -6.4% 23.9% -47.9% 9.9% -11.5% Total shareholders' equity $185,311 $185,311 $173,667 $200,313 $211,001 Basic earnings (loss) per share $(0.27) $0.24 $(0.49) $0.10 $(0.12) Diluted earnings (loss) per share $(0.27) $0.24 $(0.49) $0.10 $(0.12) Ending shares outstanding (in thousands) 45,605 45,605 45,514 46,100 49,391 Book value per share $4.06 $4.06 $3.82 $4.35 $4.27 Assets under management (in millions) Managed accounts $250.2 $250.2 $237.5 $142.4 $126.1 Hedge & offshore funds 164.6 164.6 176.1 186.6 164.7 Mutual funds 1,004.0 1,004.0 1,008.3 1,153.1 148.5 Private equity & venture capital 295.5 295.5 305.6 341.2 336.2 Total $1,714.3 $1,714.3 $1,727.5 $1,823.3 $775.5 Gross assets under management (in millions) Managed accounts $1,371.4 Hedge & offshore funds 260.6 Mutual funds 1,005.8 Private equity funds 48.3 Technology sector funds 71.0 Total $2,757.1 Net assets under management (in millions) Managed accounts $250.2 Hedge & offshore funds 153.4 Mutual funds 1,001.7 Private equity funds 47.6 Technology sector funds 64.9 Total $1,517.8 Productive assets under management (in millions) Managed accounts $1,371.4 Hedge & offshore funds 153.5 Mutual funds 1,001.7 Private equity funds 93.3 Technology sector funds 248.2 Total $2,868.1 Employee count 433 433 502 488 400