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NEUBERGER BERMAN INC.
605 Third Avenue [NEUBERGER BERMAN LOGO]
New York, NY 10158-3698
Tel 212-476-9000
PRESS RELEASE
Contact: Robert Matza
Executive Vice President and Chief Administrative Officer
(212) 476-9808
FOR IMMEDIATE RELEASE
NEUBERGER BERMAN'S SECOND QUARTER NET OPERATING INCOME $35.1
MILLION, OR $0.71 PER SHARE, EXCLUDING TAX BENEFIT
MUTUAL FUNDS REGISTER NET CASH INFLOWS OF $98 MILLION, REVERSING TREND
9 OF 11 FUNDS, REPRESENTING 97% OF EQUITY MUTUAL FUND ASSETS,
OUTPERFORM BENCHMARKS IN FIRST HALF
New York, NY, July 19, 2000...Neuberger Berman (NYSE: NEU) today reported net
operating income of $35.1 million, or $0.71 per share (basic and diluted),
excluding a financial statement tax benefit of $3.7 million, for the second
quarter ended June 30, 2000. This compares with pro forma net income from
operations of $32.8 million, or $0.66 per share, in the prior year quarter. All
pro forma results for 1999 assume that the Company's initial public offering,
completed on October 13, 1999, as well as reorganization and other related
transactions, had occurred at the beginning of that year.
Net income for the quarter of $38.7 million, or $0.79 per share (basic) and
$0.78 per share (diluted), reflects a financial statement tax benefit related to
the change in the price of the
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Company's stock from March 31, 2000 to June 30, 2000, in connection with the
Company's Employee Defined Contribution Stock Incentive Plan. Excluding this
benefit, the effective tax rate was 43.1%. In accordance with newly issued
accounting interpretations, this is the last quarter that this benefit will be
adjusted for unvested shares.
Net revenues after interest expense in the quarter were $151.8 million, up 5%
from pro forma net revenues after interest expense of $144.9 million in the 1999
period. Assets under management were $54.4 billion at quarter-end, down from
$55.5 billion at March 31, 2000 and $56.8 billion at June 30, 1999.
SIX MONTH RESULTS
Net operating income for the first half of 2000 was $69.2 million, or $1.40 per
share (basic and diluted), excluding the previously described financial
statement tax benefit of $9.8 million, or $.20 per share, and including a first
quarter pretax charge of approximately $750,000 for employees' severance
payments related to outsourcing certain mutual fund administrative activities.
Net income and net revenues after interest expense were $78.9 million and $307.2
million, respectively, for the first half of 2000, up considerably from $67.5
million and $290.5 million, respectively, in the comparable 1999 period.
Continuing the Company's authorized $50 million common stock repurchase program,
312,095 shares were purchased during the quarter in negotiated transactions for
approximately $11.0 million. Since the program's inception, 994,480 shares have
been repurchased for approximately $28.6 million.
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Jeffrey B. Lane, President and Chief Executive Officer, said, "Midway through
our first full year as a public company, we are exceedingly pleased with the
Company's progress. Our intense focus on diversifying our products and
investment styles, while striving for better performance, is clearly producing
results. This is evidenced by the positive net cash flow of $98 million in the
quarter in mutual funds. This represents a reversal of the trend of net cash
outflows experienced in the recent past, i.e., $482 million in the previous
quarter and over $4 billion for 1999. Institutional separate accounts also
registered a decline in net cash outflows, primarily in fixed income, to $257
million in the quarter, down from $640 million in the previous quarter. In
addition, despite continued uncertainty in the securities markets, nine of
eleven funds, representing 97% of our equity mutual fund assets, outperformed
their benchmarks year-to-date.
"Meanwhile, progress in the Private Asset Management segment continued apace,
also despite an erratic marketplace. Assets under management were $21.8 billion
at quarter-end, down slightly from the previous quarter and up from $20.8
billion on June 30, 1999 and $21.5 billion at year-end 1999, while net revenues
and pretax income year-to-date are up 13% and 9%, respectively, versus 1999
levels. We are particularly pleased with the productivity of our national sales
force of 32 Client Consultants, who have generated $428 million in new assets in
the first six months of this year.
"Our focus at Neuberger Berman remains unchanged: we are striving to build
shareholder value, over time, by growing the amount of assets we manage, by
providing strong relative
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investment performance, and by giving our clients the premier service they
expect and deserve."
PRIVATE ASSET MANAGEMENT
NET REVENUES: $72.0 MILLION VS. $66.0 MILLION*, UP 9%
PRETAX INCOME: $34.8 MILLION VS. $32.8 MILLION*, UP 6%
Assets under management in this segment, at $21.8 billion as of quarter-end,
were up 5% from year-ago levels and down only slightly from the previous
quarter, despite some market deterioration in the past three months. While
clients, in the normal course of events, withdraw assets for personal reasons,
any such withdrawals were offset by the addition of net new assets from the
national sales force of $222 million in the quarter and $428 million
year-to-date. Growth in net revenues and pretax income for the segment continued
strong, both in the quarter and first half versus the comparable periods last
year.
Private Asset Management accounted for more than 58% of consolidated pretax
operating income for the first half of 2000, compared with just under 55% in the
prior year period.
* Pro forma
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MUTUAL FUND AND INSTITUTIONAL
NET REVENUES: $54.6 MILLION VS. $57.7 MILLION*, DOWN 5%
PRETAX INCOME: $18.5 MILLION VS. $20.7 MILLION*, DOWN 11%
Assets under management in this segment were $32.6 billion at June 30, 2000,
down from $35.9 billion at the end of the second quarter of 1999 and down
slightly from the previous quarter and year-end 1999 levels. Net cash outflows
have improved dramatically, declining to $209 million in the quarter from $1.2
billion in the previous quarter. Year-to-date outflows of $1.4 billion compare
favorably with the first six months of 1999, in which outflows were at a $4.5
billion level. This significant drop is attributable to the Company's concerted
efforts to diversify its product line and improve investment performance, and it
is important to note that mutual funds experienced positive net cash flow of $98
million in the second quarter. In addition, although net revenues and pretax
income for the second quarter and six months of 2000 were below levels reported
in the prior year periods, the rate of decline has improved versus previous
quarter-over-quarter comparisons.
All but two of the equity funds outperformed their benchmarks for the first half
of the year, some by a significant margin. In addition, two previously announced
funds, the Technology Fund and the Institutional Cash Fund, were launched in
May.
* Pro forma
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PROFESSIONAL SECURITIES SERVICES
NET REVENUES: $25.2 MILLION VS. $21.1 MILLION*, UP 19%
PRETAX INCOME: $8.3 MILLION VS. $4.4 MILLION*, UP 90 %
The improved performance in this segment versus the prior year quarter is
primarily attributable to increased activity among both existing and new
clients, particularly in the Professional Investor Clearing Services sector and
in principal transactions.
* Pro forma
* * *
Neuberger Berman is an investment advisory company that has provided clients
with a broad range of investment products, services and strategies for more than
60 years. The Company engages in private asset management, mutual funds and
institutional management, and professional securities services for individuals,
institutions, corporations, pension funds, foundations and endowments. Its
website, and this news release, can be accessed at www.nb.com.
Statements made in this release that 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, without limitation, the adverse effect from a decline in the securities
markets or a decline in the Company's products' performance, a general downturn
in the economy, competition from other companies, changes in government policy
or regulation, inability of the Company to attract or retain key employees,
inability of the Company to implement its operating strategy and acquisition
strategy, inability of the Company to manage rapid expansion and unforeseen
costs and other effects related to legal proceedings or investigations of
governmental and self-regulatory organizations.
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NEUBERGER BERMAN INC. AND SUBSIDIARIES
CONSOLIDATED AND PRO FORMA CONDENSED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDING
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FAV (UNFAV)
--------------------------------------------------- ----------------------------
ACTUAL ACTUAL PRO FORMA (1) CHANGE FROM
--------------- ---------------- --------------- ----------------------------
JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30,
2000 2000 1999 2000 1999
--------------- ---------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees $100,580 $ 96,951 $ 94,565 3.7% 6.4%
Commissions 33,241 39,828 35,897 (16.5%) (7.4%)
Interest 56,809 51,025 36,488 11.3% 55.7%
Principal transactions in securities 3,698 5,076 3,031 (27.1%) 22.0%
Clearance fees 3,276 3,622 2,401 (9.6%) 36.4%
Other income 1,613 838 1,784 92.5% (9.6%)
-------- -------- --------
GROSS REVENUES 199,217 197,340 174,166 1.0% 14.4%
Interest expense 47,407 41,928 29,309 (13.1%) (61.7%)
-------- -------- --------
NET REVENUES AFTER INTEREST EXPENSE 151,810 155,412 144,857 (2.3%) 4.8%
-------- -------- --------
OPERATING EXPENSES:
Employee compensation and benefits 61,307 65,933 58,271 7.0% (5.2%)
Information technology 6,005 5,221 4,765 (15.0%) (26.0%)
Rent and occupancy 4,454 4,164 3,412 (7.0%) (30.5%)
Brokerage, clearing and exchange fees 2,202 2,843 2,156 22.5% (2.1%)
Advertising and sales promotion 1,202 2,452 3,407 51.0% 64.7%
Distribution and fund administration 4,448 4,392 5,067 (1.3%) 12.2%
Professional fees 2,819 2,277 2,570 (23.8%) (9.7%)
Depreciation and amortization 2,060 2,460 2,796 16.3% 26.3%
Other expenses 5,709 5,452 4,521 (4.7%) (26.3%)
-------- -------- --------
TOTAL OPERATING EXPENSES 90,206 95,194 86,965 5.2% (3.7%)
-------- -------- --------
NET INCOME BEFORE TAXES 61,604 60,218 57,892 2.3% 6.4%
Provision for income taxes 22,899(2) 19,977(2) 25,067 (14.6%) 8.6%
-------- -------- --------
NET INCOME $ 38,705 $ 40,241 $ 32,825 (3.8%) 17.9%
======== ======== ========
NET INCOME PER COMMON SHARE
Net income per share - Basic $ 0.79 $ 0.81 $ 0.66
======== ======== ========
Net income per share - Diluted $ 0.78 $ 0.81 $ 0.66
======== ======== ========
Weighted average common shares
outstanding - Basic 49,174 49,476 50,022
======== ======== ========
Weighted average common shares
outstanding - Diluted 49,473 49,476 50,022
======== ======== ========
</TABLE>
Notes:
(1) Given the firm's conversion from partnership to corporation in the fourth
quarter of 1999, management believes that the best measure by which to
assess the firm's performance in 1999 is operating results on a pro forma
basis, as if the IPO, reorganization and related transactions had taken
place at the beginning of 1999.
The Pro Forma Condensed Statement of Income gives effect to the following
items:
- 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.
- Adjustment to reflect compensation expense paid in corporate form.
- Adjustment to reflect provision for income taxes in corporate form
and reverse actual unincorporated business tax and state and local
taxes.
(2) Provision for income taxes for the three months ended June 30 and March
31, 2000, reflects a financial statement tax benefit of $3,653 and $6,097,
respectively, related to the change in the price of the Company's stock in
connection with the Company's Employee Defined Contribution Incentive
Plan.
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NEUBERGER BERMAN INC. AND SUBSIDIARIES
CONSOLIDATED AND PRO FORMA CONDENSED STATEMENTS OF INCOME (UNAUDITED)
FOR THE PERIODS ENDING
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FAV (UNFAV)
------------------------------ --------------
ACTUAL PRO FORMA(1) CHANGE FROM
-------------- -------------- --------------
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1999
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees $197,531 $189,171 4.4%
Commissions 73,069 74,248 (1.6%)
Interest 107,834 76,739 40.5%
Principal transactions in securities 8,774 5,115 71.5%
Clearance fees 6,898 5,214 32.3%
Other income 2,451 2,854 (14.1%)
-------- --------
GROSS REVENUES 396,557 353,341 12.2%
Interest expense 89,335 62,868 (42.1%)
-------- --------
NET REVENUES AFTER INTEREST EXPENSE 307,222 290,473 5.8%
-------- --------
OPERATING EXPENSES:
Employee compensation and benefits 127,240 115,576 (10.1%)
Information technology 11,226 8,947 (25.5%)
Rent and occupancy 8,618 6,557 (31.4%)
Brokerage, clearing and exchange fees 5,045 5,177 2.5%
Advertising and sales promotion 3,654 6,123 40.3%
Distribution and fund administration 8,840 10,286 14.1%
Professional fees 5,096 4,934 (3.3%)
Depreciation and amortization 4,520 4,891 7.6%
Other expenses 11,161 8,885 (25.6%)
-------- --------
TOTAL OPERATING EXPENSES 185,400 171,376 (8.2%)
-------- --------
NET INCOME BEFORE TAXES 121,822 119,097 2.3%
Provision for income taxes 42,876(2) 51,569 16.9%
-------- --------
NET INCOME $ 78,946 $ 67,528 16.9%
======== ========
NET INCOME PER COMMON SHARE
Net income per share - Basic $ 1.60 $ 1.35
======== ========
Net income per share - Diluted $ 1.60 $ 1.35
======== ========
Weighted average common shares
outstanding - Basic 49,325 50,022
======== ========
Weighted average common shares
outstanding - Diluted 49,475 50,022
======== ========
</TABLE>
Notes:
(1) Given the firm's conversion from partnership to corporation in the fourth
quarter of 1999, management believes that the best measure by which to
assess the firm's performance in 1999 is operating results on a pro forma
basis, as if the IPO, reorganization and related transactions had taken
place at the beginning of 1999.
The Pro Forma Condensed Statement of Income gives effect to the following
items:
- 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.
- Adjustment to reflect compensation expense paid in corporate form.
- Adjustment to reflect provision for income taxes in corporate form
and reverse actual unincorporated business tax and state and local
taxes.
(2) Provision for income taxes for the six months ended June 30, 2000,
reflects a financial statement tax benefit of $9,750, related to the
change in the price of the Company's stock in connection with the
Company's Employee Defined Contribution Incentive Plan.
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NEUBERGER BERMAN INC. AND SUBSIDIARIES
SELECTED SEGMENT DATA (UNAUDITED)
FOR THE PERIODS ENDING
(IN THOUSANDS, EXCEPT FOR ASSETS UNDER MANAGEMENT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FAV (UNFAV)
-------------------------------------------------- --------------------------------
ACTUAL ACTUAL PRO FORMA CHANGE FROM
--------------- -------------- --------------- --------------------------------
JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30,
2000 2000 1999 2000 1999
--------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
PRIVATE ASSET MANAGEMENT
NET REVENUES AFTER INTEREST EXPENSE $ 72,002 $ 73,539 $ 66,027 (2.1%) 9.0%
NET INCOME BEFORE TAXES $ 34,821 $ 36,173 $ 32,789 (3.7%) 6.2%
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1) $ 21,796 $ 22,213 $ 20,834 (1.9%) 4.6%
MARKET FLOWS (IN MILLIONS) (1)
Net additions $ 196 $ 37 $ 192
Market appreciation (depreciation) (613) 638 1,307
--------- --------- ---------
Total increase (decrease) $ (417) $ 675 $ 1,499
========= ========= =========
MUTUAL FUND & INSTITUTIONAL
NET REVENUES AFTER INTEREST EXPENSE $ 54,589 $ 55,754 $ 57,716 (2.1%) (5.4%)
NET INCOME BEFORE TAXES $ 18,459 $ 16,504 $ 20,726 11.8% (10.9%)
ASSETS UNDER MANAGEMENT
(IN MILLIONS) (1)(2) $ 32,610 $ 33,257 $ 35,930 (1.9%) (9.2%)
MARKET FLOWS (IN MILLIONS)(1)(2)
Net withdrawals $ (209) $ (1,195) $ (2,451)
Market appreciation (depreciation) (438) 1,591 2,753
--------- --------- ---------
Total increase (decrease) $ (647) $ 396 $ 302
========= ========= =========
PROFESSIONAL SECURITIES SERVICES
NET REVENUES AFTER INTEREST EXPENSE $ 25,219 $ 26,119 $ 21,114 (3.4%) 19.4%
NET INCOME BEFORE TAXES $ 8,324 $ 7,541 $ 4,377 10.4% 90.2%
TOTAL
NET REVENUES AFTER INTEREST EXPENSE $ 151,810 $ 155,412 $ 144,857 (2.3%) 4.8%
NET INCOME BEFORE TAXES $ 61,604 $ 60,218 $ 57,892 2.3% 6.4%
ASSETS UNDER MANAGEMENT (IN MILLIONS) $ 54,406 $ 55,470 $ 56,764 (1.9%) (4.2%)
MARKET FLOWS (IN MILLIONS)
Net withdrawals $ (13) $ (1,158) $ (2,259)
Market appreciation (depreciation) (1,051) 2,229 4,060
--------- --------- ---------
Total increase (decrease) $ (1,064) $ 1,071 $ 1,801
========= ========= =========
</TABLE>
NOTE 1: Segment assets under management and related market flows for prior
periods have been reclassified to reflect presentation consistent
with current period segment reporting.
NOTE 2: For the three months ended June 30, 2000, Mutual Fund &
Institutional includes $76 million of client assets invested in the
Fund Advisory Service wrap mutual fund program with third party
funds.
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NEUBERGER BERMAN INC. AND SUBSIDIARIES
SELECTED SEGMENT DATA (UNAUDITED)
FOR THE PERIODS ENDING
(IN THOUSANDS, EXCEPT FOR ASSETS UNDER MANAGEMENT)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FAV (UNFAV)
-------------------------------- ---------------
ACTUAL PRO FORMA CHANGE FROM
--------------- -------------- ---------------
JUNE 30, JUNE 30, JUNE 30,
2000 1999 1999
--------------- -------------- ---------------
<S> <C> <C> <C>
PRIVATE ASSET MANAGEMENT
NET REVENUES AFTER INTEREST EXPENSE $ 145,541 $ 129,127 12.7%
NET INCOME BEFORE TAXES $ 70,994 $ 65,150 9.0%
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1) $ 21,796 $ 20,834 4.6%
MARKET FLOWS (IN MILLIONS) (1)
Net additions $ 233 $ 216
Market appreciation 25 2,351
--------------------------------
Total increase $ 258 $ 2,567
================================
MUTUAL FUND & INSTITUTIONAL
NET REVENUES AFTER INTEREST EXPENSE $ 110,343 $ 120,222 (8.2%)
NET INCOME BEFORE TAXES $ 34,963 $ 44,504 (21.4%)
ASSETS UNDER MANAGEMENT
(IN MILLIONS) (1)(2) $ 32,610 $ 35,930 (9.2%)
MARKET FLOWS (IN MILLIONS) (1)(2)
Net withdrawals $ (1,404) $ (4,538)
Market appreciation 1,153 3,148
--------------------------------
Total decrease $ (251) $ (1,390)
================================
PROFESSIONAL SECURITIES SERVICES
NET REVENUES AFTER INTEREST EXPENSE $ 51,338 $ 41,124 24.8%
NET INCOME BEFORE TAXES $ 15,865 $ 9,443 68.0%
TOTAL
NET REVENUES AFTER INTEREST EXPENSE $ 307,222 $ 290,473 5.8%
NET INCOME BEFORE TAXES $ 121,822 $ 119,097 2.3%
ASSETS UNDER MANAGEMENT (IN MILLIONS) $ 54,406 $ 56,764 (4.2%)
MARKET FLOWS (IN MILLIONS)
Net withdrawals $ (1,171) $ ( 4,322)
Market appreciation 1,178 5,499
--------------- --------------
Total increase $ 7 $ 1,177
=============== ==============
</TABLE>
NOTE 1: Segment assets under management and related market flows for prior
periods have been reclassified to reflect presentation consistent
with current period segment reporting.
NOTE 2: For the six months ended June 30, 2000, Mutual Fund &
Institutional includes $76 million of client assets invested in the
Fund Advisory Service wrap mutual fund program with third party
funds.
10
