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
<PAGE>
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
<PAGE>
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(Audited) (Unaudited)
December 31, June 30,
1997 1998
----------- ----------
<C> <C>
<S>
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
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
(Audited) (Unaudited)
December 31, June 30,
1997 1998
-------------- -----------
<C> <C>
<S>
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
============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
For the Three Months
Ending June 30,
1997 1998
--------- --------
<C> <C>
<S>
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
=========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
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
-------- --------
<C> <C>
<S>
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
========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
For the Six Months
Ending June 30,
1997 1998
------- --------
<C> <C>
<S>
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
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 71,246
<RECEIVABLES> 26,117
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 137,991
<PP&E> 6,193
<TOTAL-ASSETS> 353,444
<SHORT-TERM> 0
<PAYABLES> 70,026
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 19,164
<LONG-TERM> 2,169
0
0
<COMMON> 249,659
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 353,444
<TRADING-REVENUE> 3,262
<INTEREST-DIVIDENDS> 9,211
<COMMISSIONS> 8,043
<INVESTMENT-BANKING-REVENUES> 96,620
<FEE-REVENUE> 5,452
<INTEREST-EXPENSE> 3,127
<COMPENSATION> 57,241
<INCOME-PRETAX> 38,330
<INCOME-PRE-EXTRAORDINARY> 38,330
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,012
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
</TABLE>
