UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
NOVEMBER 1, 1999
DATE OF REPORT
NEUBERGER BERMAN INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 333-84525
DELAWARE 06-1523639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
605 Third Avenue
New York, NY 10158
(212) 476-9000
ITEM 5. OTHER EVENTS
Third Quarter 1999 Financial Results and $50 Million Share
Repurchase Program
On November 1, 1999, Neuberger Berman Inc. ("Corporation") reported
results of operations for the three and nine months ended September
30, 1999. The Corporation also announced that its Board of Directors
has authorized the discretionary repurchase of up to $50 million of
the Corporation's common stock. A copy of the press release issued
by the Corporation is attached as Exhibit 99.1 and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The Exhibits listed on the Exhibit Index on page 2 of this Form 8-K
are filed herewith.
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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.
Neuberger Berman Inc.
(Registrant)
Date: November 1, 1999 By: /s/ Jeffrey B. Lane
----------------------------
Jeffrey B. Lane
President and Chief Executive
Officer
EXHIBIT INDEX
99.1 Press release issued by the Corporation on November 1, 1999, with respect
to results of operations for the three and nine months ended September 30,
1999, and details of discretionary share repurchase program filed
herewith.
PRESS RELEASE
For further information
Contact: Robert Matza
Chief Administrative Officer
(212) 476-9808
FOR IMMEDIATE RELEASE
Monday November 1, 1999
NEUBERGER BERMAN REPORTS THIRD-QUARTER
RESULTS AND $50 MILLION SHARE REPURCHASE PROGRAM
New York, November 1, 1999: Neuberger Berman Inc. (NYSE:NEU) today reported pro
forma net income of $32.5 million, or $0.65 per share, for the third quarter
ended September 30, 1999. Net income on a pro forma basis for the comparable
period last year was $36.7 million, or $0.73 per share. Pro forma net revenues
after interest expense in the quarter were $140.0 million, down slightly from
$146.4 million in the prior-year period.
Pro forma net income for the first nine months of 1999 was $100.0 million,
or $2.00 per share, versus $115.6 million, or $2.31 per share in 1998. Pro forma
net revenues after interest expense were $425.7 million, compared to $433.5
million for the first nine months of 1998.
Neuberger Berman's initial public offering was completed on October 13,
1999. Pro forma results assume that the incorporation and other transactions
related to the IPO had occurred at the beginning of each fiscal year.
Jeffrey B. Lane, President and Chief Executive Officer, said, "The public
offering of Neuberger Berman stock was a momentous event in the firm's 60-year
history. We are combining a distinguished heritage and reputation for
performance and service with a financial and management structure designed to
compete effectively in the next century and to serve future
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2
generations of investors. Our long-term goal is clear: to achieve profitable
growth in our three core businesses--Private Asset Management, Mutual Fund and
Institutional, and Professional Securities Services. Moreover, nearly every one
of our employees now owns shares, which we believe will be a strong motivator as
we build shareholder value and maintain the highest standards of client service
and investment performance. In addition, we intend to pursue external
opportunities for expansion, including joint ventures and/or strategic
acquisitions."
"The Private Asset Management segment continued to show year-over-year
earnings improvement. However, our immediate goal is to reverse the recent
downturn in assets under management and related revenues in the Mutual Fund and
Institutional segment. The pace of net cash outflows continued to slow in the
third quarter to $738.0 million, down substantially from a peak of $2.2 billion
in the first quarter of 1999. The addition of several seasoned portfolio
managers, a restructuring of certain investment teams, and more diversification
in our product offerings and investment styles have produced improvement in the
performance of our portfolios in 1999."
The Company also announced that its Board of Directors has authorized the
discretionary repurchase of up to $50.0 million of the Company's common stock.
"This repurchase program reflects our confidence in Neuberger Berman's prospects
for long-term growth and profitability," said Mr. Lane, "and in our ability to
build shareholder value over time." The Company said that purchases may be made
from time to time in the open market and in negotiated transactions, subject to
market conditions. Neuberger Berman currently has approximately 50 million
shares outstanding.
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3
OVERVIEW
Third Quarter (historical)
Net revenues after interest expense: $139.1 million versus $145.6
million, down 4.5%
Net income before taxes: $70.9 million versus $73.8 million, down 3.9 %
Assets under management for the Company were $51.5 billion at September
30, 1999, up $1.6 billion (or 3.2%) from September 30, 1998.
PRIVATE ASSET MANAGEMENT
Third Quarter (historical)
Net revenues after interest expense: $65.3 million versus $60.4 million, up 8.0%
Net income before taxes: $45.1 million versus $43.6 million, up 3.6%
Assets under management for the Private Asset Management segment reached
$19.1 billion at September 30, 1999, up $3.5 billion (or 22.4%) from September
30, 1998. This segment provides asset management services to individuals,
wealthy families, and smaller institutions. It also offers customized advisory
services and through its trust companies offers estate, financial and retirement
planning, trust administration, and fiduciary services.
The Company continued to focus on two key initiatives to generate asset
growth and profitability: the expansion of the national sales force and the
addition of investment teams with pre-existing client relationships. Three sales
professionals joined the firm in the third quarter and the Company expects to
open regional offices in Philadelphia and Houston by the end of the first
quarter next year. Neuberger Berman's reputation, in-house research, and trust
services capabilities continue to be significant attractions to investment
professionals.
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MUTUAL FUND AND INSTITUTIONAL
Third Quarter (historical)
Net revenues after interest expense: $57.4 million versus $65.3
million, down 12.2%
Net income before taxes: $22.0 million versus $27.8 million, down 20.9%
Assets under management in the Mutual Fund and Institutional segment were
$32.3 billion at September 30, 1999, down $1.9 billion (or 5.5%) from September
30, 1998. Although the Company experienced net cash outflows of $0.7 billion in
third-quarter 1999, this represents a continued decline in net cash outflows
from $1.6 billion in second-quarter 1999 and $2.2 billion in first-quarter 1999.
This segment offers a wide range of investment products as well as advisory
services to mutual funds and institutional clients.
Mutual fund performance has improved in 1999, although it was
disappointing in the quarter, as value stocks slipped back from their solid
performance in the second quarter and the market was exceptionally narrow. The
Company's mutual fund business continues to pursue an aggressive multi-channel
distribution strategy, targeting both the number and penetration of its
relationships with various types of institutions. The Company has also launched
a Fund Advisory Service that offers clients professional advice in building a
customized portfolio of Neuberger Berman and outside mutual funds.
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PROFESSIONAL SECURITIES SERVICES
Third Quarter (historical)
Net revenues after interest expense: $16.5 million versus $19.9
million, down 17.1%
Net income before taxes: $3.7 million versus $2.4 million, up 57.9%
The decline in revenues in the Professional Securities Services segment in
the quarter was the result of a decline in commission revenues, combined with a
decrease in average net customer balances for the period, which led to lower net
interest revenues. Expenses on an operating basis were down slightly, excluding
a onetime charge of $4.1 million in last year's third quarter primarily related
to the postponed IPO. This business leverages the Company's infrastructure by
providing professional investor clearing services, research sales and syndicate,
market-maker trading, and trust and custody services. Neuberger Berman's ongoing
focus in this segment is to explore cross-selling opportunities with new and
existing clients that could benefit from the capabilities the Company offers.
* * *
Neuberger Berman is an investment advisory firm that, through its
subsidiaries, has provided clients with a broad range of investment products,
services, and strategies for over 60 years. Neuberger Berman's web site, and
this earnings release, can be viewed at www.nb.com.
Statements made in this release which look forward in time involve risks and
uncertainties and are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such risks and uncertainties
include the ability of the Company to successfully implement its operating
strategy and acquisition strategy, the Company's ability to manage rapid
expansion, changes in economic cycles, competition from other companies, changes
in governmental regulations applicable to the Company and other risk factors
detailed in the Company's Securities and Exchange Commission filings, including
the Company's Prospectus dated October 6, 1999.
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Neuberger Berman Inc. NEUBERGER BERMAN
Pro Forma Condensed Statement of Income (Unaudited) ----------------
For the Period and Quarter Ending September 30, 1999 and 1998
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Nine months ended
Three months ended September September
1999 1998 % Change 1999 1998 % Change
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<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Investment advisory and
administrative fees $ 95,490 $ 96,638 -1.2% $ 279,888 $ 291,039 -3.8%
Commissions 32,921 37,857 -13.0% 107,169 105,702 1.4%
Interest 37,601 40,150 -6.3% 114,340 119,903 -4.6%
Principal transactions in securities 882 796 10.8% 5,997 3,498 71.4%
Clearance fees 2,945 2,959 -0.5% 8,159 7,845 4.0%
Other income 683 269 153.9% 3,537 2,643 33.8%
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Gross revenues 170,522 178,669 -4.6% 519,090 530,630 -2.2%
Interest expense (1) 30,570 32,309 -5.4% 93,438 97,131 -3.8%
------------------------ ---------------------
Net revenues after interest expense 139,952 146,360 -4.4% 425,652 433,499 -1.8%
------------------------ ---------------------
OPERATING EXPENSES:
Employee compensation and benefits (2) 56,193 54,473 3.2% 171,769 156,227 9.9%
Information technology 4,746 3,532 34.4% 13,476 10,961 22.9%
Rent and occupancy 4,654 3,300 41.0% 11,211 8,985 24.8%
Brokerage, clearing and exchange fees 1,124 3,530 -68.2% 7,803 8,893 -12.3%
Advertising and sales promotion 755 1,722 -56.2% 6,878 8,757 -21.5%
Distributor and fund administration 2,393 3,207 -25.4% 7,907 9,577 -17.4%
Professional fees 1,903 4,745 -59.9% 6,837 8,932 -23.5%
Depreciation and amortization 2,940 1,866 57.6% 7,831 5,017 56.1%
Other expenses 7,941 5,225 52.0% 15,540 12,291 26.4%
------------------------ ---------------------
Total operating expenses 82,649 81,600 1.3% 249,252 229,640 8.5%
------------------------ ---------------------
Net income before taxes 57,303 64,760 -11.5% 176,400 203,859 -13.5%
Provision for income taxes (3) 24,812 28,041 76,381 88,271
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Net income $ 32,491 $ 36,719 -11.5% $ 100,019 $ 115,588 -13.5%
======================== =====================
Pro forma shares outstanding 50,022 50,022 50,022 50,022
Pro forma basic earnings per share $ 0.65 $ 0.73 -11.5% $ 2.00 $ 2.31 -13.5%
</TABLE>
Notes:
(1) Adjustment to reflect decrease in interest expense due to the repayment of
short term borrowings and a portion of the subordinated note from net
proceeds of the IPO and increase in interest expense due to refinancing
the balance of the subordinated note.
(2) Adjustment to reflect compensation expense paid in corporate form.
(3) Adjustment to reflect provision for income taxes in corporate form.
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7
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Neuberger Berman, LLC and Subsidiaries NEUBERGER BERMAN
and Neuberger Berman Management Inc. ----------------
Combined Statement of Income (Unaudited)
For the Period and Quarter Ending September 30, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Historical Historical
Three months ended Nine months ended
September September
1999 1998 % Change 1999 1998 % Change
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<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees $ 95,490 $ 96,638 -1.2% $279,888 $291,039 -3.8%
Commissions 32,921 37,857 -13.0% 107,169 105,702 1.4%
Interest 37,601 40,150 -6.3% 114,340 119,903 -4.6%
Principal transactions in securities 882 796 10.8% 5,997 3,498 71.4%
Clearance fees 2,945 2,959 -0.5% 8,159 7,845 4.0%
Other income 683 269 153.9% 3,537 2,643 33.8%
----------------------- -----------------------
Gross revenues 170,522 178,669 -4.6% 519,090 530,630 -2.2%
Interest expense 31,401 33,055 -5.0% 96,554 99,149 -2.6%
----------------------- -----------------------
Net revenues after interest expense 139,121 145,614 -4.5% 422,536 431,481 -2.1%
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OPERATING EXPENSES:
Employee compensation and benefits 34,492 35,451 -2.7% 105,557 100,597 4.9%
Information technology 4,746 3,532 34.4% 13,476 10,961 22.9%
Rent and occupancy 4,654 3,300 41.0% 11,211 8,985 24.8%
Brokerage, clearing and exchange fees 1,124 3,530 -68.2% 7,803 8,893 -12.3%
Advertising and sales promotion 755 1,722 -56.2% 6,878 8,757 -21.5%
Distributor and fund administration 2,393 3,207 -25.4% 7,907 9,577 -17.4%
Professional fees 1,903 4,745 -59.9% 6,837 8,932 -23.5%
Depreciation and amortization 2,940 1,866 57.6% 7,831 5,017 56.1%
Other expenses 7,941 5,225 52.0% 15,540 12,291 26.4%
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Total operating expenses 60,948 62,578 -2.6% 183,040 174,010 5.2%
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Net income before principal compensation
and taxes 78,173 83,036 -5.9% 239,496 257,471 -7.0%
Principal compensation 7,274 9,278 22,965 29,203
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Net income before taxes 70,899 73,758 -3.9% 216,531 228,268 -5.1%
Taxes 10,492 2,258 15,044 7,064
----------------------- -----------------------
Net income $ 60,407 $ 71,500 -15.5% $201,487 $221,204 -8.9%
======================= =======================
</TABLE>
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8
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Neuberger Berman, LLC and Subsidiaries NEUBERGER BERMAN
and Neuberger Berman Management Inc. ----------------
Statement of Income by Segment (Unaudited)
For the Period and Quarter Ending September 30, 1999 and 1998
(in thousands, except for Assets Under Management)
<TABLE>
<CAPTION>
Historical Historical
As of or for the three As of or for the nine
months ended September months ended September
1999 1998 % Change 1999 1998 % Change
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<S> <C> <C> <C> <C> <C> <C>
PRIVATE ASSET MANAGEMENT
Net revenues after interest expense $ 65,271 $ 60,408 8.0% $ 194,398 $ 177,216 9.7%
Net income before taxes $ 45,148 $ 43,583 3.6% $ 137,991 $ 126,103 9.4%
Assets under management (in millions) $ 19,131 $ 15,627 $ 19,131 $ 15,627
Market flows
Net assets additions (withdrawals) $ 136,846 $ (141,711) $ 445,831 $ 209,254
Market appreciation (depreciation) (1,510,050) (2,174,859) 779,955 (272,931)
-------------------------- --------------------------
Total increase (decrease) $(1,373,204) $(2,316,570) $ 1,225,786 $ (63,677)
========================== ==========================
MUTUAL FUNDS & INSTITUTIONAL
Net revenues after interest expense $ 57,352 $ 65,308 -12.2% $ 172,801 $ 198,489 -12.9%
Net income before taxes $ 22,002 $ 27,801 -20.9% $ 64,155 $ 84,516 -24.1%
Assets under management (in millions) $ 32,325 $ 34,228 $ 32,325 $ 34,228
Market flows
Net assets additions (withdrawals) $ (737,971) $(1,223,666) $(4,504,084) $ (862,790)
Market appreciation (depreciation) (3,197,055) (5,831,619) (853,320) (2,866,345)
-------------------------- --------------------------
Total increase (decrease) $(3,935,026) $(7,055,285) $(5,357,404) $(3,729,135)
========================== ==========================
PROFESSIONAL SECURITIES SERVICES
Net revenues after interest expense $ 16,498 $ 19,898 -17.1% $ 55,337 $ 55,776 -0.8%
Net income before taxes $ 3,749 $ 2,374 57.9% $ 14,385 $ 17,649 -18.5%
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