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): January 27, 2000
Friedman, Billings, Ramsey Group, Inc.
(Exact name of Registrant as specified in its charter)
Virginia 54-1837743 001-13731
(State or other (I.R.S. Employer incorporation or (Commission File Number)
jurisdiction of organization)
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
1. On January 27, 2000, Friedman, Billings, Ramsey Group, Inc. issued a
press release announcing its earnings for the 4th quarter 1999. The entire text
of that press release is being filed herewith and attached as exhibit 99.1.
2. On January 27, 2000, Friedman, Billings, Ramsey Group, Inc. held a
conference call announcing its earnings for the 4th quarter 1999. The entire
text of that conference call is being filed herewith and attached as exhibit
99.2.
3. Friedman, Billings, Ramsey Group, Inc., attaches herewith, as
exhibit 99.3, Financial & Statistical Supplement - Operating Results,
financial schedule of its operating results for the 4th quarter 1999 and
year-to-date 1999.
99.1 Press Release dated January 27, 2000.
99.2 Conference Call script dated January 27, 2000.
99.3 Financial & Statistical Supplement - Operating Results.
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
Chairman and Co-Chief Executive Officer
Exhibit 1 - 99.1
For Immediate Release
Media Contact: Michael W. Robinson (703)-312-1830 or mrobinson@fbr.com
Investor Contact: David A.R. Allan (703)-469-1080
Friedman Billings Ramsey Group Reports Earnings of $0.21 Per Share in
Fourth Quarter
Company Posts Best Quarter Since 1Q 1998
ARLINGTON, Va., January 27, 2000 - Friedman, Billings, Ramsey Group, Inc. (NYSE:
FBR) today reported net income of $10.2 million or $0.21 per share for the
quarter ended December 31, 1999, compared with a net loss of $3.8 million or
$0.08 per share, in the fourth quarter of 1998.
Revenue for the fourth quarter was $67.6 million compared with $19.1 million in
the fourth quarter of 1998, a 255 percent increase. The Company said that
activity in its Internet-focused technology businesses, notably venture capital
and investment banking, was the primary driver of revenue in the fourth quarter.
"The results of the efforts we have made over the last two years,especially in
the technology sector, made this our best quarter since the first quarter of
1998," said Chairman and Co-Chief Executive Officer Emanuel J. Friedman.
"Technology venture capital, in particular, emerged as a major driver of
revenue, generating about half of our gross revenues in the fourth quarter. FBR
Group now comprises three complementary businesses - the investment banking
business, including Research and Sales & Trading, that we built since the firm's
inception through 1997, the venture capital business that we initiated in 1997,
and our own Internet properties - fbr.com and Offering MarketplaceSm - that we
began developing in 1999."
Friedman continued, "In addition, as we said in our pre-announcement two
weeks ago, if you look across all three businesses, you see that imbedded within
FBR is an Internet-centric investment firm that contributed some $50 million to
our fourth quarter revenues."
In the fourth quarter, FBR advised, financed, or raised capital for 20
emerging Internet-related companies, including nine venture capital investments,
six managed public offerings, and five corporate finance (private placement and
M&A) assignments. W. Russell Ramsey, President and Co-Chief Executive Officer,
said, "As our fourth quarter results reflect, our focus on Internet technology,
and especially our venture capital efforts, became significant contributors to
revenues during the quarter. We have four venture capital investments that are
already public, and another two that are expected to go public in the first
quarter. In addition, our venture funds have a portfolio of private
- more -
companies valued at $92 million. Our venture capital and private equity funds
have yet-to-be-deployed capital in excess of $190 million. Our location in
the technology NetPlex surrounding Washington, DC, has contributed to the
impressive deal flow our venture capital funds are seeing."
Revenue from venture capital and private equity, including unrealized
gains, accounted for $39.5 million in the fourth quarter. The Company's four
managed venture capital and private equity funds ended the year with $481
million in assets under management. These venture capital and private equity
funds generate revenue for the Company in three ways: base management fees, a
return on principal invested, and a carried interest in the gains of the funds.
[A selected list of FBR Technology Venture Partner's (FBRTVP)venture capital
companies is attached.]
Revenue for the full year ended December 31, 1999 was $139.0 million,
compared with $122.9 million in 1998, a 13 percent increase. FBR reported a
net loss of $7.0 million or $0.14 per share for the full year 1999, compared
with a net loss of $16.2 million or $0.33 per share, in 1998.
The Company noted that the reported results for 1999 include $10.4 million
or $0.21 per share of unrealized investment depreciation that had previously
reduced shareholders' equity, as well as $7.3 million or $0.15 per share to
develop and market the Company's online investment bank, fbr.com, and its
related Offering Marketplace technology. Before this depreciation and fbr.com
development and marketing expense, FBR would have generated a net profit for the
year of $10.7 million or $0.22 per share.
In 1999, FBR participated in more than 100 investment banking
transactions. Investment banking revenue, which includes underwriting and
corporate finance revenue, amounted to $45.2 million in 1999.
Vice Chairman and Co-Chief Executive Officer Eric F. Billings said, "Our
success in the technology sector in 1999 results from the same vertical
approach to industry specialization that has been successful in financial
services and real estate. In 1999, we saw the benefits of this approach in
other sectors, including energy, insurance, and business and consumer growth, as
well as technology."
Billings continued, "Our 1999 investment banking revenues reflect a
balanced mix - with roughly one-third of revenues coming from technology,
one-third from financial services, and one-third generated by real estate
and other sectors including energy, and business and consumer growth companies."
FBR ended the year with $878.8 million in total assets under management.
The Company had institutional brokerage revenue of $39.3 million in 1999. Asset
management revenue - excluding technology venture capital - amounted to $7.3
million in 1999.
FBR had shareholders' equity of $189.0 million and book value of $3.86 per
share based on 49.0 million shares outstanding at December 31, 1999.
- more -
A live webcast of FBR's conference call on today's results will be
available at http://vcall.com/auto/companies/fbr/default.htm 9 a.m.
(Eastern Time). Replays of the webcast will be available afterward.
Friedman, Billings, Ramsey Group, Inc.(NYSE: FBR) is a leading investment
firm specializing in Internet technology and other selected industries.
Headquartered in Northern Virginia, home to an array of leading global Internet
companies, FBR is a provider of capital and financial expertise throughout a
company's lifecycle. FBR's businesses include venture capital, investment
banking, online financial services, and research on more than 430 companies.
FBR has offices in Arlington and Reston, Va., London, Irvine, Ca., Boston, and
Chicago. For more information, see www.fbr.com.
# # #
Statements concerning future performance, developments, negotiations or
events, expectations or plans and objectives for future operations or for growth
and market forecasts, and any other guidance on present and future periods,
constitute forward-looking statements that are subject to a number of factors
risks and uncertainties that might cause actual results to differ materially
from stated expectations or current circumstances. These factors include but
are not limited to competition among venture capital firms and the high degree
of risk associated with venture capital investments, the effect of demand for
public offerings, activity in the secondary securities markets, available
technologies, competition for business and personnel, and general economic,
political and market conditions.
Note to Editors: 3 pages follow this page.
Selected FBR Technology Venture Partners (FBRTVP)
Portfolio Companies
Company Symbol
Public
CareerBuilder, Inc. CBDR
LifeMinders.com, Inc. LFMN
Network Access Solutions Corp. NASC
Proxicom, Inc. PXCM
IPOs In Registration
VarsityBooks.com Inc. VSTY
webMethods, Inc. WEBM
Private Companies
B2Emarkets, Inc.
Call Technologies, Inc.
Entevo Corporation
homebytes.com incorporated
Iconixx Corporation
InforMax, Inc.
Intranets.com
Pathnet, Inc.
RadioWave.com, Inc.
Riverbed Technologies
Shop2u, Inc.
Ultraprise Corporation
XYPOINT Corporation
MarketSwitch Corporation
EqualFooting.com, Inc.
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
December 31,
1999 % 1998 %
-------- ---------- -------- ----------
REVENUES:
Investment banking 18,020 26.7% $ 6,391 33.5%
Institutional brokerage 10,083 14.9% 10,086 52.9%
Asset management fees 37,677 55.7% 3,803 20.0%
Gains and losses, net (173) -0.2% (4,614) -24.2%
Interest and dividends 1,989 2.9% 3,393 17.8%
Total revenues 67,596 100.0% 19,059 100.0%
-------- ---------- -------- ----------
EXPENSES:
Compensation and
benefits 45,759 67.7% 14,487 76.0%
Business development
and professional
services 5,418 8.0% 4,011 21.1%
Interest 163 0.2% 247 1.3%
Other 6,060 9.0% 4,123 21.6%
Total expenses 57,400 84.9% 22,868 120.0%
Net income (loss) before
income taxes 10,196 15.1% (3,809) -20.0%
Provision (benefit) for
income taxes 0.0% 0.0%
Net income (loss) $ 10,196 15.1% $ (3,809) -20.0%
========== ======== ========== ===========
Basic and diluted
earnings (loss)
per share $ 0.21 $ (0.08)
Weighted average
shares (in thousands) 48,883 49,066
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Year ended
December 31,
1999 % 1998 %
--------------- ------------ ------------- ------------
REVENUES:
Investment banking $ 45,183 32.5% $112,147 91.3%
Institutional brokerage 39,293 28.3% 46,284 37.7%
Asset management fees 45,312 32.6% 11,397 9.3%
Gains and losses, net (290) -0.2% (63,111) -51.4%
Interest and dividends 9,468 6.8% 16,151 13.1%
--------------- ------------ ------------- ------------
Total revenues 138,966 100.0% 122,868 100.0%
--------------- ------------ ------------- ------------
EXPENSES:
Compensation
and benefits 98,424 70.8% 82,599 67.2%
Business development
and professional
services 23,582 17.0% 29,314 23.9%
Interest 1,323 0.9% 4,927 4.0%
Other 22,608 16.3% 22,237 18.1%
--------------- ------------ ------------- -------------
Total expenses 145,937 105.0% 139,077 113.2%
--------------- ------------ ------------- ------------
Net loss before
income taxes (6,971) -5.0% (16,209) -13.2%
Benefit for
income taxes - 0.0% - 0.0%
--------------- ------------ ------------- ------------
Net loss $ (6,971) -5.0% $ (16,209) -13.2%
=============== ============ ============= ============
Basic and diluted
loss per share $ (0.14) $ (0.33)
=============== =============
Weighted average
shares (in
thousands) 48,872 49,763
=============== ============
Exhibit 2 - 99.2
4Q EARNINGS RELEASE
Conference Call Script
January 27, 2000
[Speaker]
Good morning. This is David Allan, Director of Investor Relations, of Friedman
Billings Ramsey Group. Before beginning our call, I would like to remind
everyone that 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. These forward-looking statements 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 high degree of risk
associated with venture capital investment, competition among venture capital
firms, competition for business and personnel, available technologies and
general economic, political and market conditions. Additional information
concerning factors that could cause actual results to differ materially is
contained in FBR's Annual Report on Form 10K and quarterly reports on Form 10Q.
I would now like to turn over the call to our Chairman, Emanuel J. Friedman.
[New speaker: Manny Friedman]
Thank you and good morning. As I'm sure you've seen by now, Friedman Billings
Ramsey reported net income of $10.2 million or $0.21 per share for the fourth
quarter of 1999. This made the last quarter our best since the first quarter
of 1998. Revenue for the quarter was $67.6 million, which is a 255% increase
over fourth quarter 1998 revenue of $19.1 million.
The biggest contributor to this quarter was activity in the Internet technology
sector. This business includes venture capital, investment banking, and sales &
trading. Roughly half of total revenue for the quarter came from venture
capital.
Revenue for the full year was $139 million, compared with $123 million in 1998 -
a 13% increase, and the second highest annual revenue in the history of the
company.
When you look at FBR today, you see a company that has three businesses, each
with different operating characteristics. Each of these businesses should be
valued using a methodology appropriate to its characteristics. We intend to
continue providing guidance with respect to these characteristics to enable our
analysts and investors to evaluate these businesses accordingly. First, there
is our original business, which generated revenues of $20 million in 1992,
rising to $250 million in 1997. Second, there are the venture capital
businesses that we founded in 1997. Third, there is our Internet business
represented by fbr.com, our online investment bank, and also our Offering
Marketplace technology. We believe these Internet businesses are an important
investment in our future.
As you will hear in more detail later on this call, our technology venture
capital business emerged in the fourth quarter as a business that we expect to
be an important contributor to shareholder value in future periods. This is the
fastest growing part of our business, with the potential for significant and
recurring returns to our company. This is also one of the most attractive asset
classes in the world to investors, as we have seen in our public vehicles
focused on the creation of Internet companies.
Heading into 2000, we are delighted with the state of our business. In the last
couple of years, we have made the transition from being primarily an investment
bank, highly dependent on revenues from the financial services and real estate
sectors, to being a much more diverse investment firm.
We have built a growing technology practice that generated $50 million in the
last quarter. And we have done this while maintaining the capital markets
infrastructure in our established areas -- and other sectors such as energy,
insurance, and business and consumer growth - which all made meaningful revenue
contributions in 1999.
During 1999, we went from having virtually no online presence to owning a
state-of-the-art online investment bank, fbr.com, and it's electronic
distribution technology: Offering Marketplace. And we have formed strategic
alliances with Fidelity Investments, MicroStrategy's Strategy.com and the DDL
Investment Incubator in London.
FBR enters 2000 with a three-component business model that positions us for
success: a core business that is much more diverse than before...an online
and Internet-centric practice that encompasses everything we do...and a venture
capital firm that serves as a catalyst for our growth.
I would now like to turn the call over to Bob Smith, Chief Operating Officer,
who will give you additional detail on the quarter and the year.
[New Speaker: Bob Smith]
Thank you, Manny.
Before I discuss today's results, I would like to welcome Kurt Harrington, our
new CFO. Many of you know Kurt from prior calls - he has been a key member of
our executive team for almost three years, and earlier this week I was
delighted to announce his appointment as CFO. Kurt came to FBR after six years
at Jupiter National, a publicly traded Venture Capital firm, and six years with
MCI, where he joined the finance and accounting team after the AT&T divestiture,
and helped guide MCI's growth from 1984 to 1990.
This morning, FBR reported net loss of $7 million or $0.14 per share for the
full year 1999. These reported results included $10.4 million or $0.21 per
share of unrealized investment depreciation that had previously reduced
shareholders' equity, as well as $7.3 million or $0.15 per share to develop and
market the Company's online investment bank, fbr.com, and its related Offering
Marketplace technology. Before this depreciation -- and before the fbr.com
expenses - FBR would have generated a net profit for the year of $10.7 million
or $0.22 per share.
This morning, I would like to cover three areas.
1. Our growing venture capital business;
2. Our core strengths in investment banking; and
3. Our value-added consultative approach to financing.
As Manny said, the fourth quarter of 1999 marks the first time that venture
capital has contributed significant revenue to FBR.
Accordingly, I would like to take this opportunity to detail how venture capital
contributes to FBR and builds shareholder value.
FBR benefits from our venture capital businesses in three ways. First, we earn
a base fee on the assets we manage. Second, we earn a return on the principal
that FBR itself invests in these funds. Third, we earn a carried interest or
a "carry" on the investment gains of the funds.
For the most part, our venture capital and private equity funds are "two and
twenty" -- in other words, a two percent management fee and a 20 percent carry.
In accordance with accepted industry practice, the venture capital funds and the
private equity funds are all "marked to market" at the end of each quarter.
A common question is - "Will this venture capital-related revenue recur or is it
'one-time' in nature?"
The key to answering this question knowing what companies are presently in the
venture capital funds, and what capital remains to be invested. We have
provided, with this morning's release, a list of the venture capital investments
of FBR Technology Venture Partners. Of the $300 million in venture capital and
private equity we have raised to date, $190 million -- or two-thirds of the
total capital -- is yet to be deployed - what we refer to as "dry powder".
In sum, with a critical level of capital raised -- and several portfolio
companies already public, planning to go public or with prospects of other
transactions this year - we are optimistic about this business. Let me remind
you that -- at year end -- our first technology fund, with $35 million invested,
was up about seven times.
I would like to turn now to the performance of the investment banking business,
including our capital markets business. The core people and capabilities that
form our investment banking business today are essentially the same firm that
generated $256 million in revenues in 1997, and average revenues of $173 million
over the last three years. On the foundation of the core businesses in 1997,
we have built new and broader capabilities over the last two years, with new
expertise and new sectors. The results are apparent in 1999, with deal revenue
from a broad spectrum of industry sectors and research coverage initiated on 190
new companies.
Revenue from investment banking amounted to $45.2 million for the year. We came
on strong in the last quarter with a lead-managed offering for NetCreations, an
"opt-in" e-mail company, co-managed offerings for well-known companies such as
ASD Systems and Cysive, and a significant M&A transaction in which we
represented Long Beach Financial in its sale to Washington Mutual.
While most of our investment banking revenue was derived from technology in the
fourth quarter, our investment banking revenues for the full year 1999 reflect a
balanced mix of revenues from our well-established strengths in financial
services, real estate, and newer sectors.
We estimate that roughly one third of all investment banking revenue for the
year was generated by technology...while one third was generated by financial
services ...and the final third was generated by real estate and other sectors
such as energy, insurance, and business & consumer growth.
Some notable transactions for the firm outside the technology sector include a
recapitalization for Key Energy, representation of Building One Services in its
recapitalization with Apollo Group, and a private placement for Greenpoint
Financial.
I also want to mention that our capital markets businesses -- Sales & Trading on
a combined basis, supported by Research -- reported the highest net revenues in
the history of the firm - almost $40 million.
Whether we are working with an energy, insurance, or an Internet company, FBR
takes a vertical industry approach. Our team - investment banking, research,
and Sales & Trading -- understands the particular industry from top to bottom.
Built on these pillars of industry expertise is the value-added, consultative
approach to financing that enables us to advise companies from the early
stages ...through private and public capital raising ... to M&A and other
advisory assignments. We do this through the corporate lifecycle and provide
value-added capital markets expertise to our brokerage clients as well. The
transactions I just mentioned - Key Energy, Building One and Greenpoint -- are
all good examples of this value-added approach.
Finally, I recognized our new CFO, Kurt Harrington, at the beginning of my
remarks. Before I end, I would like to make mention of the three other
executive appointments that we announced earlier this week. Eric Generous, who
was one of my first contacts with FBR in 1989, is our new Chief Administrative
Officer. He will concentrate initially on the technology and information
systems that are the underpinnings of our brokerage business.
Bill Ginivan, who came to us as Deputy General Counsel from Sallie Mae after our
IPO, and was previously with the SEC, is our new Chief Legal Officer. Bill was
my client when I was a practicing lawyer, and he and I worked on the formation
of Sallie Mae's investment banking subsididary, Education Securities, Inc. I am
grateful to Bill for his willingness to allow me now to become his client!
Doris McGhee has joined our team as Director of Human Resources. Doris comes to
FBR with more than 20 years of Human Resources experience, including her own
consulting practice, and was also with Sallie Mae and the Federal Home Loan Bank
Board. Our people are one of our biggest assets, and I am delighted to have
Doris on board to make sure we hire and retain the best people, and provide
them with the most productive work environment possible.
I would now like to open up the call for your questions. Manny, Russ Ramsey,
and Kurt are here, and Eric Billings joins us from our Boston office.
If there are no further questions, that concludes our conference call for today.
Thank you for joining us and have a good day.
# # #
Exhibit 3 - 99.3
FRIEDMAN, BILLINGS, RAMSEY GROUP, INC.
Financial & Statistical Supplement -Operating Results (unaudited)
(Dollars in thousands, except per share data)
YTD 1999 Q-4 99
Revenues
Investment banking:
Underwriting ................... $ 22,642 $ 6,200
Corporate finance ..... ........ 22,541 11,820
Institutional brokerage:
Principal sales credits......... 24,305 5,035
Agency commissions ............. 14,988 5,048
Gains and losses- net:
Trading ......................... (2,247) (563)
Investment ...................... 1,957 390
Asset management:
Incentive........................ 35,903 35,298
Base............................. 9,409 2,379
Interest and dividends ........... 9,468 1,989
------- -------
Total revenues .................. 138,966 67,596
------- -------
Expenses
Compensation and benefits.......... 98,424 45,759
Business development
& professional services.......... 23,582 5,418
Clearing and
brokerage fees ............ ...... 4,693 1,386
Occupancy & equipment ............. 6,674 1,952
Communications .................... 4,323 1,240
Interest expense .................. 1,323 163
Other operating expenses........... 6,918 1,482
------- -------
Total expenses ................... 145,937 57,400
-------- --------
Net income (loss)
before taxes .................... (6,971) 10,196
-------- -------
Provision (benefit)
for income taxes .................. -- --
Net income (loss) ................. $ (6,971) $ 10,196
======== ========
Net income (loss)
before taxes as a
percentage of revenue.............. -5.0% 15.1%
ROE (annualized).................... -3.7% 22.7%
Total shareholders'
equity............................ $ 188,969 $ 188,969
Basic & diluted
earnings (loss)
per share.......................... $ (0.14) $ 0.21
Ending shares
outstanding
(in thousands)..................... 48,961 48,961
Book value
per share.......................... $ 3.86 $ 3.86
Assets under management
(in millions)
Managed accounts .................. $ 180.2 $ 180.2
Hedge & offshore funds.............. 151.6 151.6
Mutual Funds ....................... 66.1 66.1
Private equity & venture capital ... 480.9 480.9
-------- --------
Total............................... $ 878.8 $ 878.8
======== ========
Employee count ..................... 390 390
======== ========