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Exhibit 99.2
[LETTERHEAD OF NEUBERGER BERMAN]
NEUBERGER BERMAN INC.
605 Third Avenue
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 THIRD QUARTER
EARNINGS PER SHARE UP 9.2% TO $0.71
NET INCOME $35.3 MILLION, UP 8.5%
MUTUAL FUND AND INSTITUTIONAL SEGMENT RECORDS POSITIVE CASH FLOW OF $224
MILLION, REVERSING TWO-YEAR TREND
New York, NY, October 19, 2000...Neuberger Berman (NYSE: NEU) today reported an
8.5% increase in net income to $35.3 million, or $0.71 per share (diluted) and
$0.72 per share (basic), for the third quarter ended September 30, 2000. Pro
forma net income from operations in the prior year quarter was $32.5 million, or
$0.65 per share. 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 revenues after interest expense in the third quarter were $151.7 million, up
6.7% from pro forma net revenues after interest expense of $142.2 million in the
1999 period. Assets under management reached $56.5 billion at quarter-end, a
9.8% increase from the prior year and a 3.8% rise from $54.4 billion at June 30,
2000.
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The Company's common stock repurchase program continued in the quarter with the
purchase of 107,224 shares in negotiated transactions for approximately $5
million. Since the inception of the $50 million program, 1,101,704 shares have
been repurchased for approximately $34 million.
NINE MONTH RESULTS
For the first nine months of the year 2000, net operating income was $104.5
million, or $2.11 per share (diluted) and $2.12 per share (basic). This excludes
a financial statement tax benefit of $9.8 million, or $0.20 per share, in the
first six months of the year related to the change in the Company's stock price
in connection with the Employee Defined Contribution Stock Incentive Plan. In
the comparable 1999 nine-month period, pro forma net income from operations was
$100.0 million, or $2.00 per share. Net revenues after interest expense were
$458.9 million in the 2000 period, up 6.1% from pro forma net revenues after
interest expense of $432.6 million a year ago.
REWARDING FIRST YEAR
Jeffrey B. Lane, Neuberger Berman's President and Chief Executive Officer, said,
"We are extremely pleased with the progress we've made toward achieving the
ambitious goals we set at the time of our public offering only one year ago. The
Company is in the strongest financial position ever, cash flows have turned
positive in the Mutual Fund and Institutional segment, we are more diversified
in products and investment styles than ever before, and our investment
performance is measurably improved, despite extreme volatility in the securities
markets. Most
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important, we have preserved, and even improved upon, the reputation for
excellence, integrity and client service Neuberger Berman has enjoyed, and
deserved, for over 60 years.
"This quarter's results are particularly gratifying, as it witnessed the
reversal of the negative cash flows recorded for the past two years by the
Mutual Fund and Institutional segment. The return to positive net cash flows of
$224 million demonstrates that the actions we've taken thus far to achieve the
diversification and performance our clients require were on target. That we were
able to achieve such improvement in an extremely erratic and often unpredictable
marketplace is even more satisfying, and reinforces our conviction that
virtually all investors - large and small, individuals and institutions - can
benefit from professional advice and guidance. We expect that our record,
despite the market volatility, can help attract both new clients and the high
caliber investment professionals we seek to continue our success and
profitability.
"Another highlight of the quarter," said Mr. Lane, "was the successful
introduction of our employee Wealth Accumulation Plan. This voluntary program
allows employees to defer a portion of their compensation and invest, at a
discount, in the Company's common stock. The plan further demonstrates our
belief in the benefits of employee ownership as a means of reinforcing the
concept of partnership, retaining key personnel, and aligning employees'
interests with those of the stockholders. The plan was very well-subscribed to
by the eligible employees, which I believe is an indication of their confidence,
and mine, in our Company's future."
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PRIVATE ASSET MANAGEMENT
NET REVENUES: $68.7 MILLION VS. $65.3 MILLION*, UP 5.3%
PRETAX INCOME: $32.8 MILLION VS. $31.6 MILLION*, UP 3.8%
At quarter-end, assets under management in this segment were $22.3 billion, an
increase of 13.6% from $19.6 billion the prior year, and up slightly from $21.8
billion at the end of the previous quarter. Portfolio performance in the period
continued to be strong, despite the volatility of the securities markets, while
the national sales force added $157 million of new assets in what is a
seasonally slow period. This brings the year-to-date total of new assets
generated by these Client Consultants to just under $600 million, in line with
the full year 1999.
The Company remains very positive about its efforts to expand the sales force,
which increased to 33 in number this quarter, and attract investment teams with
existing client relationships. The Company is optimistic that it will achieve
its lift-out and sales goals for 2000.
* Pro forma
MUTUAL FUND AND INSTITUTIONAL
NET REVENUES: $59.4 MILLION VS. $59.6 MILLION*, DOWN 0.2%
PRETAX INCOME: $22.2 MILLION VS. $22.5 MILLION*, DOWN 1.7%
Assets under management in this segment reached $34.2 billion at quarter-end, an
increase of 7.4% from $31.8 billion last year and up 4.9% from $32.6 billion at
the end of the previous quarter. Net revenues and pretax income were also up
8.9% and 20.0%, respectively, from the
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previous quarter. Most significantly, cash flow for the segment was positive by
$224 million, reversing a two-year negative trend, and representing a
substantial improvement from net cash outflows of almost $1 billion in last
year's quarter and $209 million in the previous quarter. Year-to-date, net cash
outflows stand at $1.2 billion, significantly better than the $5.5 billion
recorded in the first nine months of 1999.
The marked improvement in this segment is attributable to the advancements made
toward the Company's stated goal of diversifying its product line and improving
investment performance. The success of that effort is evidenced in particular by
the positive net cash flows in mutual funds of $270 million and $98 million in
this quarter and in the previous quarter of this year, respectively. In
addition, over 70% of equity mutual fund assets have outperformed their
benchmarks thus far this year.
The Company's efforts to diversify its mutual fund product line continued with
this week's announcement of the agreement to acquire Fasciano Company, Inc., an
investment advisor to the Fasciano Fund, a small capitalization blend fund with
approximately $240 million in assets.
* Pro forma
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PROFESSIONAL SECURITIES SERVICES
NET REVENUES: $23.5 MILLION VS. $17.3 MILLION*, UP 35.4%
PRETAX INCOME: $7.0 MILLION VS. $3.2 MILLION*, UP 121 .0%
The significantly improved performance in this segment, as compared to the same
quarter last year, is primarily attributable to greater activity in the
Professional Investor Clearing Services sector among both long-standing and new
clients. In comparison with the segment's results in the previous quarter,
revenues from principal transactions were not as robust because of unfavorable
market conditions. More importantly, Professional Investor Clearing Services,
which represents a more stable and recurring source of revenues, continued to
grow.
* 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, estate planning and
trust services, 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
------------- --------- ------------- --------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
2000 2000 1999 2000 1999
------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees $101,108 $100,580 $ 97,696 0.5% 3.5%
Commissions 33,179 33,241 32,921 (0.2%) 0.8%
Interest 54,294 56,809 37,601 (4.4%) 44.4%
Principal transactions in securities 1,774 3,698 882 (52.0%) 101.1%
Clearance fees 3,193 3,276 2,945 (2.5%) 8.4%
Other income 1,782 1,613 683 10.5% 160.9%
------------- --------- -------------
GROSS REVENUES 195,330 199,217 172,728 (2.0%) 13.1%
Interest expense 43,680 47,407 30,570 7.9% (42.9%)
------------- --------- -------------
NET REVENUES AFTER INTEREST EXPENSE 151,650 151,810 142,158 (0.1%) 6.7%
------------- --------- -------------
OPERATING EXPENSES:
Employee compensation and benefits 59,228 61,307 56,193 3.4% (5.4%)
Information technology 5,503 6,005 4,885 8.4% (12.7%)
Rent and occupancy 4,523 4,454 4,654 (1.5%) 2.8%
Brokerage, clearing and exchange fees 2,446 2,202 2,636 (11.1%) 7.2%
Advertising and sales promotion 1,311 1,202 755 (9.1%) (73.6%)
Distribution and fund administration 5,343 4,448 4,599 (20.1%) (16.2%)
Professional fees 2,774 2,819 1,903 1.6% (45.8%)
Depreciation and amortization 2,907 2,060 2,940 (41.1%) 1.1%
Other expenses 5,637 5,709 6,290 1.3% 10.4%
------------- --------- -------------
TOTAL OPERATING EXPENSES 89,672 90,206 84,855 0.6% (5.7%)
------------- --------- -------------
NET INCOME BEFORE TAXES 61,978 61,604 57,303 0.6% 8.2%
Provision for income taxes 26,713 22,899(2) 24,812 (16.7%) (7.7%)
------------- --------- -------------
NET INCOME $ 35,265 $ 38,705 $ 32,491 (8.9%) 8.5%
============= ========= =============
NET INCOME PER COMMON SHARE
Net income per share - Basic $ 0.72 $ 0.79 $ 0.65
============= ========= =============
Net income per share - Diluted $ 0.71 $ 0.78 $ 0.65
============= ========= =============
Weighted average common shares
outstanding - Basic 48,945 49,174 50,022
============= ========= =============
Weighted average common shares
outstanding - Diluted 49,695 49,473 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, 2000,
reflects a financial statement tax benefit of $3,653 related to the change
in the price of the Company's stock in connection with the Company's
Employee Defined Contribution Incentive Plan. In accordance with newly
issued accounting interpretations, the three months ended June 30, 2000
was the last quarter that this benefit will be adjusted for unvested
shares.
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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>
NINE MONTHS ENDED FAV (UNFAV)
----------------------------- -------------
ACTUAL PRO FORMA(1) CHANGE FROM
------------- ------------- -------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Investment advisory and administrative fees $298,639 $286,867 4.1%
Commissions 106,248 107,169 (0.9%)
Interest 162,128 114,340 41.8%
Principal transactions in securities 10,548 5,998 75.9%
Clearance fees 10,091 8,159 23.7%
Other income 4,233 3,536 19.7%
------------- -------------
GROSS REVENUES 591,887 526,069 12.5%
Interest expense 133,015 93,438 (42.4%)
------------- -------------
NET REVENUES AFTER INTEREST EXPENSE 458,872 432,631 6.1%
------------- -------------
OPERATING EXPENSES:
Employee compensation and benefits 186,468 171,769 (8.6%)
Information technology 16,729 13,832 (20.9%)
Rent and occupancy 13,141 11,211 (17.2%)
Brokerage, clearing and exchange fees 7,491 7,813 4.1%
Advertising and sales promotion 4,965 6,878 27.8%
Distribution and fund administration 14,183 14,885 4.7%
Professional fees 7,870 6,837 (15.1%)
Depreciation and amortization 7,427 7,831 5.2%
Other expenses 16,798 15,175 (10.7%)
------------- -------------
TOTAL OPERATING EXPENSES 275,072 256,231 (7.4%)
------------- -------------
NET INCOME BEFORE TAXES 183,800 176,400 4.2%
Provision for income taxes 69,589(2) 76,381 8.9%
------------- -------------
NET INCOME $114,211 $100,019 14.2%
============= =============
NET INCOME PER COMMON SHARE
Net income per share - Basic $ 2.32 $ 2.00
============= =============
Net income per share - Diluted $ 2.31 $ 2.00
============= =============
Weighted average common shares
outstanding - Basic 49,197 50,022
============= =============
Weighted average common shares
outstanding - Diluted 49,548 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 nine months ended September 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. In accordance with
newly issued accounting interpretations, the six months ended June 30,
2000 was the last period that this benefit will be adjusted for unvested
shares.
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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
------------- --------- ------------- -------- -------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
2000 2000 1999 2000 1999
------------- --------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
PRIVATE ASSET MANAGEMENT
------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 68,745 $ 72,002 $ 65,271 (4.5%) 5.3%
NET INCOME BEFORE TAXES $ 32,802 $ 34,821 $ 31,592 (5.8%) 3.8%
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1) $ 22,286 $ 21,796 $ 19,614 2.2% 13.6%
MARKET FLOWS (IN MILLIONS)(1)
Net additions (withdrawals) $ (161) $ 196 $ 137
Market appreciation (depreciation) 651 (613) (1,356)
------------- --------- ------------
Total increase (decrease) $ 490 $ (417) $ (1,219)
============= ========= ============
MUTUAL FUND & INSTITUTIONAL
---------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 59,448 $ 54,589 $ 59,559 8.9% (0.2%)
NET INCOME BEFORE TAXES $ 22,160 $ 18,459 $ 22,537 20.0% (1.7%)
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1)(2) $ 34,214 $ 32,610 $ 31,842 4.9% 7.4%
MARKET FLOWS (IN MILLIONS)(1)(2)
Net additions (withdrawals) $ 224 $ (209) $ (995)
Market appreciation (depreciation) 1,380 (438) (3,094)
------------- --------- ------------
Total increase (decrease) $ 1,604 $ (647) $ (4,089)
============= ========= ============
PROFESSIONAL SECURITIES SERVICES
--------------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 23,457 $ 25,219 $ 17,328 (7.0%) 35.4%
NET INCOME BEFORE TAXES $ 7,016 $ 8,324 $ 3,174 (15.7%) 121.0%
TOTAL
-----
NET REVENUES AFTER INTEREST EXPENSE $ 151,650 $ 151,810 $ 142,158 (0.1%) 6.7%
NET INCOME BEFORE TAXES $ 61,978 $ 61,604 $ 57,303 0.6% 8.2%
ASSETS UNDER MANAGEMENT (IN MILLIONS) $ 56,500 $ 54,406 $ 51,456 3.8% 9.8%
MARKET FLOWS (IN MILLIONS)
Net additions (withdrawals) $ 63 $ (13) $ (858)
Market appreciation (depreciation) 2,031 (1,051) (4,450)
------------- --------- ------------
Total increase (decrease) $ 2,094 $ (1,064) $ (5,308)
============= ========= ============
</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: As of September 30, 2000, Mutual Fund & Institutional includes $95
million of client assets invested in the Fund Advisory Service wrap mutual
fund program with third party funds, an increase of $19 million from the
prior quarter.
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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>
NINE MONTHS ENDED FAV (UNFAV)
---------------------------- -------------
ACTUAL PRO FORMA CHANGE FROM
------------- ------------- -------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
PRIVATE ASSET MANAGEMENT
------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 214,286 $ 194,398 10.2%
NET INCOME BEFORE TAXES $ 103,796 $ 96,742 7.3%
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1) $ 22,286 $ 19,614 13.6%
MARKET FLOWS (IN MILLIONS)(1)
Net additions (withdrawals) $ 72 $ 353
Market appreciation (depreciation) 676 995
------------- -------------
Total increase (decrease) $ 748 $ 1,348
============= =============
MUTUAL FUND & INSTITUTIONAL
---------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 169,791 $ 179,781 (5.6%)
NET INCOME BEFORE TAXES $ 57,123 $ 67,041 (14.8%)
ASSETS UNDER MANAGEMENT (IN MILLIONS)(1)(2) $ 34,214 $ 31,842 7.4%
MARKET FLOWS (IN MILLIONS)(1)
Net additions (withdrawals) $ (1,180) $ (5,533)
Market appreciation (depreciation) 2,533 54
------------- -------------
Total increase (decrease) $ 1,353 $ (5,479)
============= =============
PROFESSIONAL SECURITIES SERVICES
--------------------------------
NET REVENUES AFTER INTEREST EXPENSE $ 74,795 $ 58,452 28.0%
NET INCOME BEFORE TAXES $ 22,881 $ 12,617 81.4%
TOTAL
-----
NET REVENUES AFTER INTEREST EXPENSE $ 458,872 $ 432,631 6.1%
NET INCOME BEFORE TAXES $ 183,800 $ 176,400 4.2%
ASSETS UNDER MANAGEMENT (IN MILLIONS) $ 56,500 $ 51,456 9.8%
MARKET FLOWS (IN MILLIONS)
Net additions (withdrawals) $ (1,108) $ (5,180)
Market appreciation (depreciation) 3,209 1,049
------------- -------------
Total increase (decrease) $ 2,101 $ (4,131)
============= =============
</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: As of September 30, 2000, Mutual Fund & Institutional includes $95
million of client assets invested in the Fund Advisory Service wrap
mutual fund program with third party funds.
10
