FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of Report (date of earliest event reported): October 22, 1998
Friedman, Billings, Ramsey Group, Inc.
(Exact name of Registrant as specified in its charter)
001-13731
(Commission File Number)
Virginia 54-1870350 (I.R.S. Employer incorporation or
(State or other organization)
jurisdiction of
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)
Item 5. Other Events
On October 22, 1998, Friedman, Billings, Ramsey Group, Inc. issued a press
release reporting its third quarter 1998 results. A copy of the press release is
being filed herewith. The following Exhibit is filed as part of this report:
99.1 Press Release dated October 22, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
By: /s/ Emanuel J. Friedman
Chief Executive Officer
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Exhibit 1
For Immediate Release
Investor Contact: David Allan, FBR (703) 469-1080
Media Contact: Melanie Nelson, FBR (703) 312-9623
FRIEDMAN, BILLINGS, RAMSEY GROUP,INC. REPORTS 3Q RESULTS
WASHINGTON, D.C., October 22, 1998 - Friedman, Billings, Ramsey Group, Inc.
(NYSE:FBG) today reported a net loss for the third quarter 1998 of $35.4 million
or $0.71 per share compared with pro forma net income of $10.5 million or $0.26
per share pro forma for the third quarter of 1997.
The Company noted that the net loss was primarily due to $39.5 million in
pre-tax losses on trading inventory sustained by the firm's principal
broker-dealer subsidiary Friedman, Billings, Ramsey &Co., Inc. Before the
trading losses, revenue for the quarter ended September 30, 1998 was $18 million
compared with 1997 third quarter revenue of $69 million.
Net loss for the nine-month period ended September 30, 1998 was $12.4 million or
$0.25 per share. For the nine-month period, revenue, before trading losses,
amounted to $158 million compared with $143 million in 1997.
"Our net loss is attributable to unprecedented volatility in the capital markets
which has led to the decline in the value of almost every asset class in the
world," said Emanuel J. Friedman, Chairman and CEO. "With the Russell 2000 down
from its 12-month high by as much as 31 percent during the quarter, the sectors
we focus on -- small and mid cap stocks in the United States - have been
particularly affected. At the same time, the virtual halt of underwriting
activity diminished our revenue line in the third quarter as it did for most
investment banks in the United States."
Friedman noted, "We went public in December 1997 to raise the capital needed for
our firm to execute against a long-term business plan in good times and in bad.
While we could not have foreseen the turmoil of the last four months, we are
fortunate now to be among the better positioned firms in our industry with just
under $200 million of equity and virtually no debt."
Friedman said, "We believe that the decisive action we took during the third
quarter to reduce our expenses and limit our trading exposure has strengthened
our position to not only weather a protracted market downturn, but also to take
advantage of opportunities presented by market volatility."
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FBR said that, in response to conditions in the capital markets, the firm
implemented a comprehensive cost-reduction program during the third quarter. The
cost-cutting program included a previously reported reduction in total headcount
of 7 percent as well as significant reductions in operating expenses and
discretionary budgets such as advertising.
The Company said that it estimated that these expense reductions will save more
than $2.5 million or approximately 4 percent of the Company's annual operating
expenses. FBR further noted that its fixed costs have historically been among
the lowest in the investment banking industry at about 15 percent of 1997
revenue.
Friedman said, "In addition to reducing our already low fixed costs, we made
considerable progress during the quarter on the effort we began earlier this
year to greatly limit our trading exposure on a going forward basis." FBR said
that during the quarter it dramatically reduced the trading inventory position
of its broker-dealer, Friedman, Billings, Ramsey &Co., Inc. from $138 million to
$23 million, reflecting primarily liquidations as well as transfers to the
Company's long-term investment account. This step was taken to reduce the
Company's exposure to small and mid caps stocks and to reduce its concentration
in sectors that have been most affected by the recent market downturn. As of the
market close Tuesday, October 20, the Company said it had further reduced the
trading inventory of its broker-dealer to less than $15 million.
Investment Banking
FBR's investment banking revenue totaled $8 million in the third quarter.
Corporate finance, which includes mergers and acquisitions, private placements,
advisory services and thrift conversions, represented $4 million of this total.
"Due to the exceptional turmoil in the world's capital markets since July, our
underwriting business suffered in the third quarter along with all other
investment banks," said W. Russell Ramsey, President of FBR. "As a result of
this slowdown, we now perceive a growing backlog of potential underwriting
business from companies seeking to access the capital markets. Given our
exceptionally low cost structure, our participation in a resurgence of
underwriting activity should have a direct positive impact on our operating
performance."
Asset Management
FBR ended the quarter with over $723.5 million in total assets under management,
of which $536.3 million are incentive-based assets. Total assets under
management have increased 75
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percent from September 30, 1997. Asset management revenues in the third quarter
were $2 million, representing an increase of 63 percent over the comparable
period in 1997.
The Company noted that, despite the recent dramatic market declines, three of
its four private investment partnerships had positive returns through September
30, 1998.
Vice Chairman and Chief Operating Officer Eric F. Billings noted, "We are
especially proud of the performance of our private investment partnerships
during the recent market turmoil. We believe that the fact that these funds have
had positive returns attests to our ability to build long-term value even in
difficult times."
Highlights in Asset Management for the third quarter include:
* FBR Asset Investment Corp. had shareholders equity of approximately $174
million and net asset value of $18.36 per share as of September 30, 1998.
During the quarter, FBR Asset Investment Corp. authorized the repurchase of up
to 2,000,000 shares of its common stock.
* FBR Technology Venture Partners L.P., a venture capital fund focused on
tele-communications, e-commerce and Internet-related companies, closed on July
31, 1998 with $50 million in committed capital. To date, the fund has made 13
investments, including 10 firms in the Greater Washington, D.C. region, one
company in Seattle, one in Mountain View, Calif. and one in Boston.
* FBR added a real estate mutual fund to its family of funds through the
acquisition of GrandView Advisors, Inc. and its namesake mutual fund, which now
operates as the FBR Realty Growth Fund trading under the symbol GVRGX.
Share Repurchase Program
Friedman, Billings, Ramsey Group, Inc. said that, since it announced a 2.5
million share repurchase program on July 22, it had purchased 533,092 shares of
the Company's common stock as of the end of the third quarter, which reduced the
number of shares outstanding to 49,495,908.
As of September 30, 1998, FBR shareholders' equity was $193.4 million
and book value per share was $3.91.
Friedman, Billings, Ramsey Group, Inc. reported that, during the third quarter,
the Voting Trust in which substantially all of the Company's Class B shares were
previously deposited was terminated by the holders of the trust certificates,
and the Class B shares released to the beneficial owners.
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Friedman, Billings, Ramsey Group, Inc. is a publicly traded, full-service
investment banking and asset management firm (NYSE: FBG). Asset management
operations include FBR Asset Investment Corp., private investment partnerships,
venture capital and private equity partnerships, and the FBR family of mutual
funds. FBR makes a market in more than 375 securities and provides research
coverage on more than 400 publicly traded companies. The Company's website can
be accessed at http://www.fbr.com.
Two Pages of Financial Information Follow this Page.
Statements concerning future performance, developments or events, concerning
expectations for growth, filed backlog and market forecasts, and any other
guidance on present and future periods, constitute forward-looking statements
which are subject to a number of factors, risks and uncertainties, which might
cause actual results or developments 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, the price of securities in the secondary market, competition
for business and personnel, and general economic, political and market
conditions. # # #
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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts)
(Unaudited)
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<S> <C> <C> <C> <C> <C> <C>
Three months ended
September 30,
Revenues: 1998 % 1997 % %Increase
(Decrease)
Investment banking $8,457 39.3% $53,554 78.5% -84.2%
Institutional 11,481 53.4% 10,948 16.0% 4.9%
brokerage
Asset Management fees 2,119 9.8% 1,297 1.9% 63.4%
Gains and losses, net (47,022) -218.6% 1,066 1.6% -4511.1%
Interest and dividends 3,456 16.1% 1,368 2.0% 152.6%
Total Revenues (21,509) -100.0% 68,233 100.0% -131.5%
Operating Expenses:
Compensation and 10,870 50.5% 40,595 59.5% -73.2%
benefits
Business Development 6,212 28.9% 3,095 4.6% 100.7%
Interest 1,553 7.2% 571 0.8% 172.0%
Other 10,585 49.2% 6,424 9.4% 64.8%
Total Operating
Expenses 29,220 135.8% 50,685 74.3% -42.3%
Net income (loss)
before income taxes (50,729) -235.8% 17,548 25.7% -389.1%
Provision (benefit) for
income taxes (15,317) -71.2% - - -
Net income (loss) ($35,412) -164.6% $17,548 25.7% -301.8%
Net income, proforma $- $10,529(1)
Earnings (loss) per
share (basic and
diluted) ($0.71) $0.44 -261.4%
Proforma earnings per
share (basic and
diluted) - $0.26(1)
Weighted average shares
(in thousands) 49,780 40,029 24.4%
Book value per share $3.91(2) $1.45(2)
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(1) Presented on a proforma basis, which reflects estimated Federal and state
income taxes.
(2) As of the end of the period.
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FRIEDMAN, BILLINGS, RAMSEY GROUP, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
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Nine months ended
September 30,
Revenues: 1998 % 1997 % %Increase
(Decrease)
Investment banking $105,756 101.9% $105,709 78.3% 0.0%
Institutional 36,198 34.9% 28,358 21.0% 27.6%
brokerage
Asset Management fees 7,594 7.3% 3,182 2.4% 138.7%
Gains and losses, net (58,497) -56.4% (5,392) -4.0% 984.9%
Interest and dividends 12,758 12.3% 3,061 2.3% 316.8%
Total Revenues 103,809 100.0% 134,918 100.0% (23.1%)
Operating Expenses:
Compensation and 68,112 65.6% 85,138 63.1% -20.0%
benefits
Business Development 15,762 15.2% 8,018 5.9% 96.6%
Interest 4,680 4.5% 2,301 1.7% 103.4%
Other 27,655 26.6% 15,631 11.6% 76.9%
Total Operating
Expenses 116,209 111.9% 111,088 82.3% 4.6%
Net income (loss)
before income taxes (12,400) -11.9% 23,830 17.7% -152.0%
Provision (benefit) for
income taxes - - - - -
Net income (loss) ($12,400) -11.9% $23,830 17.7% -152.0%
Net income, proform $- $14,298(1)
Earnings (loss) per
share (basic and
diluted) ($0.25) $0.60 -141.7%
Proforma earnings per
share (basic and
diluted) - $0.36(1)
Weighted average shares
(in thousands) 49,945 40,029 24.8%
Book value per share $3.91(2) $1.45(2)
(1) Presented on a proforma basis, which reflects estimated Federal and state
income taxes.
(2) As of the end of the period.
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