FOR IMMEDIATE RELEASE
CONTACT: Elizabeth Ventura (212) 272-9251
Rebecca Haas (212) 272-8188
THE BEAR STEARNS COMPANIES INC.
REPORTS SECOND FISCAL QUARTER RESULTS;
DECLARES QUARTERLY COMMON AND PREFERRED CASH DIVIDENDS
NEW YORK -June 20, 2001- The Bear Stearns Companies Inc. (NYSE:BSC) today
reported net earnings per diluted share of $1.18 for the second quarter ended
May 25, 2001, up 53.2% from $0.77 per share for the comparable quarter a year
ago. The prior year results included a 63 cent per share litigation charge
without which operating earnings were $1.40 per share. Net income was $169.5
million, up 43.2% from $118.4 million for the quarter ended May 26, 2000. Net
revenues for the second quarter were $1.37 billion, up 3.6% from $1.32 billion
for the prior year quarter ended May 26, 2000. The annualized after-tax return
on common stockholders' equity for the quarter ended May 25, 2001 was 15.0%, and
for the trailing 12-month period ended May 25, 2001 was 16.3%.
James E. Cayne, president and chief executive officer, commented on the
quarter, "The strength of our franchise is evident in times such as these where
we are able to achieve solid results despite tumultuous market conditions. In
the midst of weak operating environments for equities and investment banking,
our fixed income division had a record quarter. Bear Stearns was the number one
underwriter for mortgage-backed securities for fiscal 2001.
"The firm continues to move forward with its overall strategy of growing
profitable businesses. On April 24, 2001 we closed on the acquisition of the
NYSE specialist that expanded our newly renamed joint venture Wagner Stott Bear.
We also closed our $1.5 billion merchant banking fund. In our global clearing
services business we continue to add a number of significant new accounts in
both our prime broker and fully disclosed areas.
5
"Finally, our margin improvement program is beginning to show early
promise in creating a more efficient organization. We have embarked on our
second phase of the program, which includes implementing strategic sourcing
initiatives and cost rationalizations. Much of the expense of these programs is
recorded as one time costs in this quarter with corresponding savings to be
achieved going forward."
A BRIEF DISCUSSION OF THE FIRM'S BUSINESS SEGMENTS, COMPARED TO THE PRIOR YEAR
QUARTER, FOLLOWS:
CAPITAL MARKETS
- ---------------
Net revenues for the Capital Markets segment were a record $1.02 billion for the
quarter ended May 25, 2001, up 23.5% from $825.4 million for the quarter ended
May 26, 2000.
o Institutional Equities net revenues were $348.4 million for the second
quarter of 2001, down 17.3% versus $421.3 million for the second quarter of
last year. Increases in the average daily trading volume on both the NYSE
and the NASDAQ year over year helped to drive institutional commission
revenues, which ended the quarter higher as compared to the same quarter in
the prior year. However, generally weaker market conditions resulted in
reduced revenues from market making activities as well as declines in
equity derivatives businesses.
o Fixed Income net revenues were up 181.0% to $514.3 million for the quarter
ended May 25, 2001, from $183.0 million for the quarter ended May 26, 2000.
Record fixed income principal transactions revenues were reported for the
current quarter, driven by superior results from our mortgage-backed
securities areas as well as strong results from corporate bond, high yield,
asset-backed, credit derivative and government bond trading. The three
interest rate reductions during the quarter by the Federal Reserve
contributed to the improved fixed income trading environment in stark
contrast to the rising rate environment of the prior year period. For the
three and six months ended May 2001, Bear Stearns ranked as the leading
underwriter of mortgage-backed securities.
6
o Investment Banking net revenues were $156.3 million for the quarter ended
May 25, 2001, down 29.3% from $221.1 million for the quarter ended May 26,
2000. The decline reflects the continued weakness in the equity
underwriting environment, partly offset by improvements in corporate debt
and municipal underwriting activity as the declining interest rate
environment coupled with narrowing credit spreads has led to a more
favorable debt issuance market. The weakness in the equities market
environment also contributed to reduced mergers and acquisitions activity
industry-wide, resulting in decreased fee income as compared to the prior
year period.
GLOBAL CLEARING SERVICES
- ------------------------
Net revenue for Global Clearing Services were $207.4 million for the quarter
ended May 25, 2001, down 27.8% from $287.1 million for the quarter ended May 26,
2000. Reduced customer margin debt balances versus the prior year period, driven
by weakened equity market conditions, contributed to a decrease in net interest
revenues for the quarter ended May 25, 2001. Average customer margin debt
balances were $37.8 billion during the quarter ended May 25, 2001 versus $59.7
billion in the prior year quarter ended May 26, 2000. However, margin balances
ended the quarter at $42.2 billion reflecting improving market conditions.
WEALTH MANAGEMENT
- -----------------
Wealth Management net revenues for the quarter ended May 25, 2001 were $133.9
million, down 13.5% from $154.9 million for the quarter ended May 26, 2000. The
reduction is attributable to a decline in revenues from our Private Client
Services area, partially offset by a significant increase in Asset Management
revenues as compared to the prior year period. A weak retail environment driven
by economic uncertainty and volatile markets during the first two months of the
quarter led to the decline in revenues from our Private Client Services area.
However, this decline was largely offset by a strong performance from our Asset
Management business, reflecting an improvement in performance-based fees as well
7
as an increase in management fees on the firm's mutual fund and alternative
investment products. As of May 25, 2001, assets under management stood at $22.4
billion, up 53.9% from last year. Alternative investment products under
management grew 97.9% to $5.0 billion as of May 25, 2001.
EXPENSES
- --------
o Compensation as a percentage of net revenues was 54.3% versus 53.3% for the
quarters ended May 25, 2001 and May 26, 2000, respectively. Compensation as
a percentage of net revenues was adversely impacted during the quarter by
the decline in net interest profit and continued weakness in investment
banking revenues.
o Non-compensation expenses were $359.0 million for the quarter ended May 25,
2001, a decrease of 20.4% from $451.0 million for the comparable prior year
quarter ended May 26, 2000. However, excluding the litigation charge that
is included in the May 2000 quarter, expenses were up 19.3% due to
non-recurring costs for severance and accelerated amortization costs
associated with our pending relocation aggregating $31 million, as well as
an increase in the CAP Plan expense.
o Pre-tax, pre CAP Plan profit margin was 22.5% in the current quarter as
compared to 13.7% in the prior year period or 25.0% without the litigation
charge.
As of May 25, 2001 total capital, including stockholders' equity and
long-term borrowings, was $27.6 billion. Book value as of May 25, 2001 was
$32.57 per share, based on 156,485,942 shares outstanding.
QUARTERLY CASH DIVIDENDS DECLARED
- ---------------------------------
The Board of Directors of The Bear Stearns Companies Inc. declared a regular
quarterly cash dividend of 15 cents per share on the outstanding shares of
common stock, payable July 31, 2001 to stockholders of record on July 17, 2001.
The board also declared a quarterly cash dividend of 68.75 cents per share on
the outstanding shares of Adjustable Rate Cumulative Preferred Stock, Series A,
payable July 15, 2001 to stockholders of record on June 29, 2001. In addition,
other regular dividends declared by the Board of Directors include: (i) a cash
8
dividend of $3.075 per share on the outstanding shares of 6.15% Cumulative
Preferred Stock, Series E (which is equivalent to 76.875 cents per related
depositary share); (ii) a cash dividend of $2.86 per share on the outstanding
shares of 5.72% Cumulative Preferred Stock, Series F (which is equivalent to
71.50 cents per related depositary share); and (iii) a cash dividend of $2.745
per share on the outstanding shares of 5.49% Cumulative Preferred Stock, Series
G (which is equivalent to 68.625 cents per related depositary share) all payable
July 15, 2001 to stockholders of record on June 29, 2001.
Founded in 1923, The Bear Stearns Companies Inc. is the parent company of
Bear, Stearns & Co. Inc., a leading worldwide investment banking and securities
trading and brokerage firm serving corporations, governments, institutions and
individuals worldwide. With approximately $27.6 billion in total capital, the
company's business includes corporate finance and mergers and acquisitions,
public finance, institutional equities and fixed income sales and trading,
private client services, foreign exchange and futures sales and trading, equity
and fixed income research, derivatives, asset management and custody services.
Through Bear, Stearns Securities Corp., it offers prime broker and broker dealer
services, including securities lending. Headquartered in New York City, the
company had approximately 11,000 employees as of May 25, 2001, located in
domestic offices in Atlanta, Boston, Chicago, Dallas, Denver, Los Angeles, San
Francisco and San Juan; and an international presence in Beijing, Buenos Aires,
Dublin, Hong Kong, London, Lugano, Sao Paulo, Seoul, Shanghai, Singapore and
Tokyo. For additional information about Bear Stearns, please visit our Web site
at http://www.bearstearns.com.
Certain statements contained in this discussion are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties, which could
cause actual results to differ materially from those discussed in the
forward-looking statements. For a discussion of the risks and uncertainties that
may affect the company's future results, please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Management"
9
in the Company's 2000 Annual Report to Stockholders and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Quantitative
and Qualitative Disclosures about Market Risk" in the company's Quarterly
Reports on Form 10-Q, which have been filed with the Securities and Exchange
Commission.
A conference call to discuss the company's results will be held at 10:00 a.m.,
E.S.T. The call will be open to the public. Those wishing to listen to the
conference call should dial 1-888-792-1079 (or 1-703-871-3092 for international
callers) at least 10 minutes prior to the commencement of the call to ensure
connection. The conference call will also be accessible through our Web site at
http://www.bearstearns.com. For those unable to listen to the live broadcast of
the call, a replay will be available on our Web site or by dialing
1-888-266-2081 (or 1-703-925-2533 for international callers) approximately one
hour after the completion of the conference call. The passcode for the replay is
5306662. If you have any questions on how to obtain access to the conference
call, please contact Rebecca Haas at 1-212-272-8188 or via email at
rhaas@bear.com.
***
Financial Tables Attached
10
THE BEAR STEARNS COMPANIES INC.
-------------------------------
SEGMENT DATA
------------
(UNAUDITED)
-----------
Percentage
Three Months Ended Percentage Change From Six Months Ended Change
-------------------------------------- ---------------------- -------------------- ----------
NET REVENUES May 25, May 26, February 23, May 26, February 23, May 25, May 26,
2001 2000 2001 2000 2001 2001 2000
------- ------- ------------ ------- ------------ ------- -------
(In thousands) (In thousands)
Capital Markets
Institutional Equities $ 348,350 $ 421,271 $ 341,171 (17%) 2% $ 689,521 $ 797,414 (14%)
Fixed Income 514,286 183,014 340,389 181% 51% 854,675 518,297 65%
Investment Banking 156,349 221,078 119,975 (29%) 30% 276,324 515,961 (46%)
----------- ----------- ----------- ----------- -----------
Total Capital Markets 1,018,985 825,363 801,535 23% 27% 1,820,520 1,831,672 (1%)
Global Clearing Services 207,383 287,068 223,900 (28%) (7%) 431,283 555,042 (22%)
Wealth Management 133,917 154,851 144,588 (14%) (7%) 278,505 364,655 (24%)
Other (a) 8,373 54,024 43,764 (85%) (81%) 52,137 76,003 (31%)
----------- ----------- ----------- ----------- -----------
Total Net Revenues $ 1,368,658 $ 1,321,306 $ 1,213,787 4% 13% $ 2,582,445 $ 2,827,372 (9%)
=========== =========== =========== =========== ===========
PRE-TAX INCOME
Capital Markets $ 276,392 $ 222,398 $ 188,281 24% 47% $ 464,673 $ 541,854 (14%)
Global Clearing Services 65,859 136,511 79,133 (52%) (17%) 144,992 255,721 (43%)
Wealth Management 4,209 10,827 16,204 (61%) (74%) 20,413 76,190 (73%)
Other (a) (79,631) (203,917) (30,654) 61% (160%) (110,285) (254,143) 57%
----------- ----------- ----------- ----------- -----------
Total Pre-Tax Income $ 266,829 $ 165,819 $ 252,964 61% 5% $ 519,793 $ 619,622 (16%)
=========== =========== =========== =========== ===========
(a) Other is comprised of consolidation/elimination entries, unallocated
revenues (predominantly interest) and certain corporate administrative
functions, including the accrual related to the litigation charge for the
three months and six months ended May 2000 and costs related to the Capital
Accumulation Plan for Senior Managing Directors.
Note: Certain reclassifications have been made to prior period amounts to
conform to the current period's presentation.
11
THE BEAR STEARNS COMPANIES INC.
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
-----------
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- -----------------------
MAY 25, MAY 26, MAY 25, MAY 26,
2001 2000 2001 2000
------- ------- ------- -------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues
Commissions $ 290,767 $ 321,690 $ 573,168 $ 632,101
Principal transactions 722,569 504,286 1,312,140 1,145,427
Investment banking 181,389 235,829 319,713 544,048
Interest and dividends 1,215,744 1,414,878 2,302,343 2,784,637
Other income 38,913 17,351 78,194 69,396
------------- ------------- ------------- -------------
Total Revenues 2,449,382 2,494,034 4,585,558 5,175,609
Interest expense 1,080,724 1,172,728 2,003,113 2,348,237
------------- ------------- ------------- -------------
Revenues, net of interest expense 1,368,658 1,321,306 2,582,445 2,827,372
------------- ------------- ------------- -------------
Non-interest expenses
Employee compensation and benefits 742,834 704,528 1,385,093 1,423,183
Floor brokerage, exchange and clearance fees 41,092 41,236 76,665 79,670
Communications and technology 113,504 106,362 228,538 222,403
Occupancy 37,294 34,666 68,551 66,773
Advertising and market development 33,705 31,874 67,537 59,248
Other expenses 133,400 236,821 236,268 356,473
------------- ------------- ------------- -------------
Total non-interest expenses 1,101,829 1,155,487 2,062,652 2,207,750
------------- ------------- ------------- -------------
Income before provision for income taxes and
cumulative effect of change in accounting principle 266,829 165,819 519,793 619,622
Provision for income taxes 97,336 47,442 184,346 223,064
------------- ------------- ------------- -------------
Income before cumulative effect of change in
accounting principle 169,493 118,377 335,447 396,558
Cumulative effect of change in accounting principle,
net of tax -- -- (6,273) --
------------- ------------- ------------- -------------
Net income $ 169,493 $ 118,377 $ 329,174 $ 396,558
============= ============= ============= =============
Net income applicable to common shares $ 159,715 $ 108,599 $ 309,618 $ 377,002
============= ============= ============= =============
Adjusted net income used for diluted earnings
per share (1) $ 183,046 $ 117,084 $ 350,590 $ 414,363
============= ============= ============= =============
Basic earnings per share $ 1.23 $ 0.77 $ 2.34 (2) $ 2.67
============= ============= ============= =============
Diluted earnings per share $ 1.18 $ 0.77 $ 2.24 (2) $ 2.67
============= ============= ============= =============
Weighted average number of common shares outstanding:
Basic 145,455,590 152,446,615 147,164,834 155,042,809
============= ============= ============= =============
Diluted 154,825,604 152,624,273 156,749,394 155,152,977
============= ============= ============= =============
Cash dividends declared per common share $ 0.15 $ 0.10 (3) $ 0.30 $ 0.25
============= ============= ============= =============
(1) Represents net income reduced for preferred stock dividends and increased
for costs related to the Capital Accumulation Plan (the "Plan"). For
earnings per share, the costs related to the Plan are added back as the
shares related to such Plan are included in weighted average shares
outstanding.
(2) Amount reflects earnings per share after change in accounting principle.
Basic earnings per share and diluted earnings per share before the change
in accounting principle were $2.38 and $2.28, respectively.
(3) This cash dividend relates to the two month period ended February 25, 2000
and was declared to coincide with the company's new quarterly periods
resulting from the company's change in fiscal year-end.
Note: Certain reclassifications have been made to prior period amounts to
conform to the current period's presentation.
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THE BEAR STEARNS COMPANIES INC.
-------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
-----------
THREE MONTHS ENDED
--------------------------------------
MAY 25, 2001 FEBRUARY 23, 2001
------------ -----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues
Commissions $ 290,767 $ 282,401
Principal transactions 722,569 589,571
Investment banking 181,389 138,324
Interest and dividends 1,215,744 1,086,599
Other income 38,913 39,281
------------ ------------
Total Revenues 2,449,382 2,136,176
Interest expense 1,080,724 922,389
------------ ------------
Revenues, net of interest expense 1,368,658 1,213,787
------------ ------------
Non-interest expenses
Employee compensation and benefits $ 742,834 $ 642,259
Floor brokerage, exchange and clearance fees 41,092 35,573
Communications and technology 113,504 115,034
Occupancy 37,294 31,257
Advertising and market development 33,705 33,832
Other expenses 133,400 102,868
------------ ------------
Total non-interest expenses 1,101,829 960,823
------------ ------------
Income before provision for income taxes and cumulative
effect of change in accounting principle 266,829 252,964
Provision for income taxes 97,336 87,010
------------ ------------
Income before cumulative effect of change in accounting principle 169,493 165,954
Cumulative effect of change in accounting principle, net of tax - (6,273)
------------ ------------
Net income $ 169,493 $ 159,681
============ ============
Net income applicable to common shares $ 159,715 $ 149,903
============ ============
Adjusted net income used for diluted earnings per share (1) $ 183,046 $ 167,544
============ ============
Basic earnings per share 1.23 1.11 (2)
============ ============
Diluted earnings per share $ 1.18 $ 1.06 (2)
============ ============
Weighted average number of common shares outstanding:
Basic 145,455,590 149,080,028
============ ============
Diluted 154,825,604 158,617,123
============ ============
Cash dividends declared per common share $ 0.15 $ 0.15
============ ============
(1) Represents net income reduced for preferred stock dividends and increased
for costs related to the Plan. For earnings per share, the costs related to
the Plan are added back as the shares related to such Plan are included in
weighted average shares outstanding.
(2) Amount reflects earnings per share after change in accounting principle.
Basic earnings per share and diluted earnings per share before the change
in accounting principle were $1.15 and $1.10, respectively.
Note: Certain reclassifications have been made to prior period amounts to
conform to the current period's presentation.
13
THE BEAR STEARNS COMPANIES INC.
-------------------------------
SELECTED FINANCIAL INFORMATION
------------------------------
(UNAUDITED)
-----------
(In thousands, except per share amounts and other data)
-------------------------------------------------------
QUARTERS ENDED QUARTERS ENDED
------------------------------- ------------------------------
MAY 25, FEBRUARY 23, NOVEMBER 30, AUGUST 25,
2001 2001 2000 2000
------------ ------------ ------------ ------------
INCOME STATEMENT
Revenues, net of interest expense $ 1,368,658 $ 1,213,787 $ 1,376,828 $ 1,271,478
Net income $ 169,493 $ 159,681 $ 195,189 $ 181,436
Net income applicable to common shares $ 159,715 $ 149,903 $ 185,411 $ 171,658
Adjusted net income used for diluted earnings
per share $ 183,046 $ 167,544 $ 201,625 $ 197,567
Earnings per common share:
Basic $ 1.23 $ 1.11(1) $ 1.37 $ 1.33
Diluted $ 1.18 $ 1.06(1) $ 1.36 $ 1.32
FINANCIAL RATIOS
Return on average common equity (annualized) 15.0% 13.6% 18.8% 18.8%
Adjusted pre-tax profit margin (2) 22.5% 23.4% 22.6% 24.8%
Pre-tax profit margin (3) 19.5% 20.8% 20.5% 21.2%
After-tax profit margin (4) 12.4% 13.2% 14.2% 14.3%
Compensation & benefits/Revenues, net of
interest expense 54.3% 52.9% 52.8% 52.2%
BALANCE SHEET
Stockholders' equity, at period end $ 5,534,723 $ 5,621,405 $ 5,654,288 $ 4,911,600
Total stockholders' equity and trust issued
preferred securities, at period end $ 6,297,223 $ 6,121,405 $ 6,154,288 $ 5,411,600
Total capital, at period end $ 27,566,286 $ 25,768,270 $ 26,250,176 $ 24,768,473
Book value per common share, at period end $ 32.57 $ 31.94 $ 31.51 29.58
OTHER DATA (IN MILLIONS, EXCEPT SHARE
AND EMPLOYEE DATA)
Margin debit balances, at period end $ 42,200 $ 37,600 $ 41,900 $ 56,000
Margin debit balances, average for period $ 37,800 $ 42,000 $ 52,900 $ 56,400
Customer short balances, at period end $ 61,400 $ 53,800 $ 57,200 $ 60,000
Customer short balances, average for period $ 50,600 $ 55,000 $ 59,900 $ 59,800
Stock borrowed, at period end $ 45,900 $ 41,400 $ 49,300 $ 48,800
Stock borrowed, average for period $ 45,400 $ 49,300 $ 51,800 $ 50,700
Free credit balances, at period end $ 15,900 $ 17,300 $ 16,500 $ 13,000
Free credit balances, average for period $ 17,900 $ 18,300 $ 15,100 $ 14,800
Assets under management, at period end $ 22,400 $ 21,500 $ 19,500 $ 16,600
Employees, at period end 10,855 11,298 11,201 10,807
Common shares and common share equivalents
outstanding, at period end 156,485,942 159,125,959 158,039,960 159,098,866
Weighted average number of common shares
outstanding:
Basic 145,455,590 149,080,028 147,585,214 148,816,237
Diluted 154,825,604 158,617,123 148,697,431 149,242,192
QUARTERS ENDED
-------------------------------
MAY 26, FEBRUARY 25,
2000 2000
------------ ------------
INCOME STATEMENT
Revenues, net of interest expense $ 1,321,306 $ 1,506,066
Net income $ 118,377 $ 278,181
Net income applicable to common shares $ 108,599 $ 268,403
Adjusted net income used for diluted earnings
per share $ 117,084 $ 297,278
Earnings per common share:
Basic $ 0.77 $ 1.89
Diluted $ 0.77 $ 1.89
FINANCIAL RATIOS
Return on average common equity (annualized) 11.0% 27.9%
Adjusted pre-tax profit margin (2) 13.7% 33.5%
Pre-tax profit margin (3) 12.5% 30.1%
After-tax profit margin (4) 9.0% 18.5%
Compensation & benefits/Revenues, net of 53.3% 47.7%
interest expense
BALANCE SHEET
Stockholders' equity, at period end $ 4,865,282 $ 4,937,291
Total stockholders' equity and trust issued
preferred securities, at period end $ 5,365,282 $ 5,437,291
Total capital, at period end $ 24,614,465 $ 23,185,770
Book value per common share, at period end $ 28.74 $ 28.21
OTHER DATA (IN MILLIONS, EXCEPT SHARE
AND EMPLOYEE DATA)
Margin debit balances, at period end $ 52,100 $ 61,500
Margin debit balances, average for period $ 59,700 $ 56,600
Customer short balances, at period end $ 58,800 $ 66,900
Customer short balances, average for period $ 61,800 $ 64,700
Stock borrowed, at period end $ 47,400 $ 56,100
Stock borrowed, average for period $ 53,000 $ 53,300
Free credit balances, at period end $ 14,000 $ 13,500
Free credit balances, average for period $ 15,000 $ 15,300
Assets under management, at period end $ 14,600 $ 13,700
Employees, at period end 10,373 10,210
Common shares and common share equivalents
outstanding, at period end 160,568,727 162,607,443
Weighted average number of common shares
outstanding:
Basic 152,446,615 157,641,253
Diluted 152,624,273 157,685,693
(1) After change in accounting principle.
(2) Represents the ratio of income before both CAP Plan costs and provision
for income taxes to revenues, net of interest expense.
(3) Represents the ratio of income before provision for income taxes to
revenues, net of interest expense.
(4) Represents the ratio of net income to revenues, net of interest expense.
14