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FBR Announces Third Quarter 2011 Financial Results

ARLINGTON, Va., Oct 26, 2011 (GlobeNewswire via COMTEX) --

FBR & Co. (Nasdaq:FBRC) ("FBR" or the "Company"), a leading investment bank serving the middle market, today reported a net after-tax loss of $26.1 million, or $0.43 per share, for the quarter ended September 30, 2011. These results compare to a net after-tax loss of $6.6 million, or $0.10 per share, in the third quarter 2010 and a net after-tax loss of $2.7 million, or $0.04 per share in the second quarter 2011. For the first nine months of 2011, the after-tax loss was $30.8 million compared to a $40.6 million after-tax loss for the first nine months of 2010.

The Company's pre-tax loss for the third quarter 2011 was $25.8 million compared to a pre-tax loss of $7.6 million in the third quarter 2010 and pre-tax loss of $2.9 million in the second quarter 2011.

Third quarter 2011 net revenue was $20.1 million compared to $57.4 million for the third quarter 2010 and $49.2 million in the second quarter 2011. Net revenue for the third quarter by business area was as follows:

  --  $5.0 million in investment banking generated from seven transactions
      reflecting a significant industry-wide decline in capital raising
      activity. This compares to $29.8 million in the third quarter 2010 and
      $30.0 million in the prior quarter. $4.4 million of third quarter 2011
      banking revenue was generated from advisory services.
  --  $19.4 million in institutional brokerage, down from $23.4 million and
      $21.1 million in the third quarter 2010 and the second quarter 2011,
      respectively. Equities, including options, remained flat quarter over
      quarter at $20.9 million compared to $20.6 million in the third quarter
      2010 and $20.7 million in the prior quarter.
  --  $3.6 million in asset management, compared to $3.3 million in the third
      quarter 2010 and $3.9 million in the second quarter of this year. Assets
      under management were $1.36 billion at the end of the third quarter 2011
      compared to $1.45 billion at the end of the third quarter 2010 and $1.64
      billion as of June 30, 2011.
  --  In addition, the Company reported a $9.3 million net investment loss
      which included unrealized mark-to-market losses of $6.6 million in
      merchant banking portfolio holdings and other investment positions.


For the third quarter of 2011, total non-interest expenses were $45.9 million compared to $65.0 million in the third quarter 2010 and $52.1 million in the second quarter 2011. Non-compensation fixed expenses in the third quarter of 2011 totaled $14.8 million, compared to $17.2 million in third quarter of 2010 and $16.5 million in the second quarter of 2011. The Company ended the quarter with 426 employees compared to 501 at the beginning of the year.

Through the previously announced Self-Tender Offer completed in August, the Company repurchased 6.1 million shares at a purchase price of $2.55 per share. As of September 30, 2011, shareholders' equity totaled $243.3 million and the Company's book value per share was $4.31 compared to $4.57 at the end of the prior quarter and $4.60 at the end of 2010.

"Based on our expectations that market conditions will continue to be volatile for some time, we have recently taken steps that will result in an over 35% reduction in our fixed costs," said Richard J. Hendrix, President and Chief Executive Officer of FBR. "This restructuring positions the franchise to more consistently deliver profitability and long-term value for shareholders and employees. Importantly, it also fully preserves the most valuable part of our franchise -- the talent and ability to execute complex lead-managed equity offerings targeted to institutional investors."

Investors who wish to listen to the earnings call at 9:00 A.M. U.S. EDT, Thursday, October 27, 2011, may do so via the Web or conference call at:

Conference call dial-in number (toll-free): 877.303.6433

Conference call dial-in number (local): 224.357.2198

Conference call code: 12303330

Webcast link: http://investor.shareholder.com/media/eventdetail.cfm?eventid=99384&CompanyID=FBCM&e=1&mediaKey=A638ADF35B185A230531194DBE6AEB85

Replays of the earnings call will be available via webcast following the call.

FBR & Co. (Nasdaq:FBRC) ("FBR") 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; insurance; real estate; and technology, media & telecom. FBR Fund Advisers, Inc., a subsidiary of FBR, provides clients with a range of investment choices through The FBR Funds, a family of mutual funds. FBR is headquartered in the Washington, D.C. metropolitan area with offices throughout the United States and in London. For more information, please visit www.fbr.com.

The FBR & Co. 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. 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, 2010; 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             Nine months ended
                                      September 30,               September 30,


                                    2011         2010           2011         2010
                                 -----------  ----------     -----------  -----------
  REVENUES:
   Investment banking:
    Capital raising                    $ 598    $ 23,118        $ 38,633     $ 68,250
    Advisory                           4,434       6,671          12,968       13,127
   Institutional brokerage:
    Principal transactions             3,564       5,595          14,539       16,143
    Agency commissions                15,816      17,850          49,024       59,116
   Asset management fees               3,552       3,346          11,447       10,489
   Net investment (loss) income      (9,336)          47        (10,952)           95

   Interest, dividends & other         1,506         767           3,755        4,097
                                 -----------  ----------     -----------  -----------
    Total revenues                    20,134      57,394         119,414      171,317

  NON-INTEREST EXPENSES:
   Compensation and benefits          25,563      41,433          84,074      135,468
   Professional services               2,772       3,869           9,617       15,522
   Business development                2,315       2,809           9,547       10,581
   Clearing and brokerage fees         3,555       2,824           9,543        9,891
   Occupancy and equipment             4,503       5,905          15,427       18,526
   Communications                      4,247       5,082          12,700       15,220

   Other operating expenses            2,942       3,065           9,177       10,398
                                 -----------  ----------     -----------  -----------

    Total non-interest expenses       45,897      64,987         150,085      215,606
                                 -----------  ----------     -----------  -----------

   Loss before income taxes         (25,763)     (7,593)        (30,671)     (44,289)

   Income tax provision
    (benefit)                            373       (982)              97      (3,649)
                                 -----------  ----------     -----------  -----------


    Net loss                      $ (26,136)   $ (6,611)      $ (30,768)   $ (40,640)
                                 ===========  ==========     ===========  ===========

  Basic and diluted loss per
   share                            $ (0.43)    $ (0.10)        $ (0.49)     $ (0.64)
                                 ===========  ==========     ===========  ===========

  Weighted average shares -
   basic and diluted                  60,762      63,547          62,323       63,508
                                 ===========  ==========     ===========  ===========


  FBR & CO.
  CONSOLIDATED BALANCE SHEETS
  (Dollars in thousands, except per share amounts)
  (Unaudited)

                                    September    December
                                       30,          31,

  ASSETS                              2011         2010
                                   -----------  -----------

  Cash and cash equivalents          $ 120,814    $ 236,077
  Receivables:
   Due from brokers, dealers and
    clearing organizations              13,086       15,463
   Customers                             3,975       10,280
   Other                                 7,021       11,635
  Financial instruments owned, at
   fair value                          134,009       86,400
  Other investments, at cost            25,744       45,224
  Goodwill                               5,882        5,882
  Intangible assets, net                 2,237        2,583
  Furniture, equipment and
   leasehold improvements, net           6,922        9,741
  Prepaid expenses and other
   assets                                9,112        8,182
                                   -----------  -----------

    Total assets                     $ 328,802    $ 431,467
                                   ===========  ===========


  LIABILITIES AND SHAREHOLDERS'
   EQUITY

  Liabilities:
  Securities sold but not yet
   purchased, at fair value           $ 49,974     $ 55,444
  Accrued compensation and
   benefits                             15,646       53,305
  Accounts payable, accrued
   expenses and other liabilities       14,564       23,904
  Due to brokers, dealers and
   clearing organizations                5,299        7,323
                                   -----------  -----------

    Total liabilities                   85,483      139,976
                                   -----------  -----------



  Shareholders' equity:
  Common stock                              55           62
  Additional paid-in capital           411,476      423,935
  Restricted stock units                29,299       34,239
  Accumulated other comprehensive
   loss                                   (51)         (53)

  Accumulated deficit                (197,460)    (166,692)
                                   -----------  -----------

    Total shareholders' equity         243,319      291,491
                                   -----------  -----------

    Total liabilities and
     shareholders' equity            $ 328,802    $ 431,467
                                   ===========  ===========


  Book Value per Share                   $4.31        $4.60

  Shares Outstanding (in
   thousands)                           56,452       63,354


  FBR & CO.
  Financial & Statistical Supplement - Operating Results
  (Dollars in thousands)
  (Unaudited)




                                    Q-3 11      Q-2 11      Q-1 11      Q-4 10      Q-3 10
                                 -----------  ----------  ----------  ----------  ----------
  Revenues, net of interest
   expense                          $ 20,134    $ 49,182    $ 50,098    $ 75,270    $ 57,394

  Non-interest expenses:
   Variable                           10,272      14,974      15,860      29,683      21,329

   Fixed                              35,625      37,146      36,208      42,960      43,658
                                 -----------  ----------  ----------  ----------  ----------

  (Loss) income before income
   taxes                            (25,763)     (2,938)     (1,970)       2,627     (7,593)

  Income tax provision
   (benefit)                             373       (211)        (65)       (455)       (982)
                                 -----------  ----------  ----------  ----------  ----------


  Net (loss) income               $ (26,136)   $ (2,727)   $ (1,905)     $ 3,082   $ (6,611)
                                 ===========  ==========  ==========  ==========  ==========


  Fixed expenses                    $ 35,625    $ 37,146    $ 36,208    $ 42,960    $ 43,658
  Less: Non-cash expenses1             1,927       2,459       2,352       4,255       4,766
       Corporate transaction
        costs2                            --         986          --       1,302          --

       Severance                         442          --         806         549         646
                                 -----------  ----------  ----------  ----------  ----------


  Core fixed costs3                 $ 33,256    $ 33,701    $ 33,050    $ 36,854    $ 38,246
                                 ===========  ==========  ==========  ==========  ==========



  Statistical Data
  Net revenues per employee
   (annualized)                        $ 189       $ 444       $ 431       $ 601       $ 459
                                 ===========  ==========  ==========  ==========  ==========


  Employee count                         426         443         465         501         500
                                 ===========  ==========  ==========  ==========  ==========

  Net assets under management
   (in millions)
  Mutual funds                     $ 1,358.9   $ 1,635.3   $ 1,689.4   $ 1,582.7   $ 1,445.4
  Hedge and private equity
   funds                                 3.7         4.1         4.2         4.3         6.0
                                 -----------  ----------  ----------  ----------  ----------

    Total                          $ 1,362.6   $ 1,639.4   $ 1,693.6   $ 1,587.0   $ 1,451.4
                                 ===========  ==========  ==========  ==========  ==========


  1 Non-cash expenses include compensation costs associated with stock-based awards and
   amortization of intangible assets.

  2 Corporate transaction costs include costs related to reductions in physical space.

  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 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.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: FBR & Co.

CONTACT: Media:
Shannon Small
703.469.1190
ssmall@fbr.com
Investors:
Bradley J. Wright
703.312.9678
fbrcir@fbr.com
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