Bear Stearns Reports Record Results for First Quarter 2004, Net Income up 32% to $361.1 Million.Business Editors NEW YORK--(BUSINESS WIRE)--March 17, 2004 The Bear Stearns The Bear Stearns Companies, Inc. (NYSE: BSC) is the parent company of Bear, Stearns & Co. Inc., one of the largest global investment banks and securities trading and brokerage firms in the world. Companies Inc. (NYSE NYSE See: New York Stock Exchange :BSC (Binary Synchronous Communications) See bisync. ) -- Return on Equity Reaches 21.3%, Earnings Rise to $2.57 Per Share -- Investment Banking Revenue Up 35% -- Global Clearing Services Revenue Up 24% -- Wealth Management Revenue Up 32% -- Fixed Income Reports Record Revenue of $822.3 Million The Bear Stearns Companies Inc. (NYSE:BSC) today reported earnings per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) of $2.57 for the first quarter ended February February: see month. 29, 2004, up 29% from $2.00 per share for the first quarter of 2003. Net income for the first quarter of 2004 was $361.1 million, up 32% from $274.3 million for the first quarter of 2003. Net revenues for the 2004 first quarter were $1.7 billion, up 14% from $1.5 billion for the 2003 first quarter. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on common stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. for the first quarter of 2004 was 21.3% and 20.4% for the trailing 12-month period ended February 29, 2004. "The power and diversity of our franchise is clearly demonstrated in this quarter's outstanding performance," said James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. E. Cayne, chairman and chief executive officer of The Bear Stearns Companies Inc. "Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before are at an all time high, with each of our major businesses producing improved results. These superior returns validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data our strategy to 'Deliver the Firm' to our clients. Our fixed income division continues to garner market share and customer flow across the full spectrum of our businesses as we serve our customers better and more comprehensively than ever before. In Equities, Global Clearing, Investment Banking and Wealth Management, the plans we put into place in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of improving equity market conditions are now coming to fruition fru·i·tion n. 1. Realization of something desired or worked for; accomplishment: labor finally coming to fruition. 2. Enjoyment derived from use or possession. 3. . We are particularly gratified grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. by the market share gains we have experienced due to these efforts. It is an exciting time for Bear Stearns and a great start to 2004." A brief discussion of the firm's business segments follows: CAPITAL MARKETS Capital Markets net revenues for the first quarter of 2004 were $1.4 billion, up 9% from $1.3 billion for the first quarter ended February 28, 2003. -- Institutional Equities net revenues were $297.4 million, up 8% from $276.5 million for the first quarter of 2003. Revenues rose significantly in the domestic and international equity sales and trading and risk arbitrage The purchase of stock in a corporation that appears to be the target of an imminent takeover in the hope of making large profits if the takeover occurs. Risk arbitrage is practiced by investors called risk arbitrageurs. areas, reflecting greater customer activity. A decline in customer activity levels and reduced market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the resulted in lower levels of equity derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. and convertible arbitrage Convertible Arbitrage An investing strategy that involves the long position on a convertible security and a short position in its converting common stock. Notes: revenues. Due to a change of control, the results of the majority owned subsidiary Bear Wagner Specialists, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control are reported on a consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: basis for the first time. This change in reporting accounts for a substantial portion of the increase in net revenues. -- Fixed Income net revenues were $822.3 million, up 4% from $791.2 million in the year ago quarter. Fixed Income reported its best ever quarterly results with all three major product areas -- mortgages, credit and interest rate -- demonstrating excellent performance. In the mortgage area, active customer flow in the secondary market across the full spectrum of product offerings drove revenues. The leveraged finance, high yield, and foreign exchange areas also reported exceptional results as strong growth in the non-mortgage related businesses continued. -- Investment Banking net revenues were $253.2 million in the first quarter of 2004, up 35% from the $187.8 million in the comparable prior year period. Merger and acquisition advisory fees increased, while equity, high grade and high yield underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results improved with more positive market conditions. GLOBAL CLEARING SERVICES First quarter 2004 Global Clearing Services net revenues were $217.6 million, up 24% from $175.8 million in the first quarter of 2003. Average customer margin debt balances for the quarter ended February 29, 2004 were $46.6 billion, up 28% from $36.3 billion in the prior year quarter. Increased customer activity coupled with higher customer margin balances drove net revenue growth. More robust customer activity was also apparent in stock borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. and customer short balances, which approached all time highs during the first quarter of this year. WEALTH MANAGEMENT Wealth Management net revenues for the quarter ended February 29, 2004 were $152.8 million, up 32% from $115.6 million in the first quarter of 2003. More favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. equity markets this quarter led to increased customer activity yielding higher net revenues. -- Private Client Services net revenues were $110.9 million in the first quarter of 2004, an increase of 32% from $84.2 million in the 2003 first quarter. This revenue growth was fueled by the rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective in the equity markets, increased trading volume and the continued hiring of highly productive brokers. -- Asset Management net revenues grew 33% to $41.9 million for the first quarter of 2004 from $31.4 million in the prior year's quarter due to increased management fees. Assets under management rose to $29.1 billion as of February 29, 2004 from $23.3 billion as of February 28, 2003. EXPENSES -- Compensation as a percentage of net revenues was 49.2% in the first quarter of 2004 as compared with 50.0% for the quarter ended February 28, 2003. -- Non-compensation expenses were $345.8 million for the quarter ended February 29, 2004, an increase of 4% from $332.3 million in the 2003 quarter. The increase in non-compensation expenses is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the consolidation of the results of Bear Wagner Specialist, LLC in the February 2004 income statement. Excluding the Bear Wagner consolidation, non-compensation expenses declined by 4% from the first quarter of 2003 to $319 million. The pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta profit margin increased to 30.8% in the first quarter of 2004 from 28.1% in the quarter ended February 28, 2003. As of February 29, 2004, total capital, including stockholders' equity and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. borrowings, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $40.0 billion. Book value as of February 29, 2004 was $51.19 per share, based on 144.3 million shares outstanding. Founded in 1923, The Bear Stearns Companies Inc. (NYSE: BSC) is the parent company of Bear, Stearns & Co. Inc., a leading investment banking and securities trading securities trading, financial activity involving transactions of property such as stocks, bonds, commodities, and currency (see securities). Although the trading of stocks and bonds dates back several centuries in many Western nations, the development of the and brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. firm. With approximately $40.0 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales and trading, securities research, private client services, derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. , foreign exchange and futures sales and trading, asset management and custody The care, possession, and control of a thing or person. The retention, inspection, guarding, maintenance, or security of a thing within the immediate care and control of the person to whom it is committed. The detention of a person by lawful authority or process. services. Through Bear, Stearns Securities Corp., it offers financing, securities lending Securities Lending When a brokerage lends securities owned by its clients to short sellers. Notes: This allows brokers to create additional revenue (commissions) on the short sale transaction. , clearing and technology solutions to hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" , broker-dealers and investment advisors Investment Advisor 1. A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission. 2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and . Headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , the company has approximately 10,500 employees worldwide. For additional information about Bear Stearns, please visit the firm's website at http://www.bearstearns.com. Financial Tables Attached Certain statements contained in this discussion are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" and "Risk Management" in the company's 2003 Annual Report to Stockholders which has been filed with the Securities and Exchange Commission. A conference call to discuss the company's results will be held on Wednesday Wednesday: see week. , March 17, 2004, at 10 a.m., EST EST electroshock therapy. EST abbr. electroshock therapy . The call will be open to the public. Those wishing to listen to the conference call should dial 1-888-792-1069 (or 1-703-871-3019 for international callers) at least 15 minutes prior to the commencement of the call to ensure connection. The conference call will also be accessible through our website at http://www.bearstearns.com. For those unable to listen to the live broadcast of the call, a replay will be available on our website or by dialing 1-888-266-2081 (or 1-703-925-2533 for international callers) at approximately 1 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. . The pass code for the replay is 406521. The replay will be available until midnight on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , April 2, 2004. If you have any questions on how to obtain access to the conference call, please contact Joanne Joanne is a common given name for females, being a variant of Joanna, the feminine form of John and is derived from the Latin name Johanna and has a hebrew meaning of "God is Gracious" People with the given name Joanne:
THE BEAR STEARNS COMPANIES INC.
SEGMENT DATA
(UNAUDITED)
Three Months Ended % Change From
--------------------------------- -------------------
February February November February November
29, 2004 28, 2003 30, 2003 28, 2003 30, 2003
---------- -------- ---------- -------- --------
(In thousands)
NET REVENUES
Capital Markets
Institutional
Equities $297,400 $276,461 $266,254 7.6% 11.7%
Fixed Income 822,268 791,217 648,948 3.9% 26.7%
Investment
Banking 253,179 187,764 250,322 34.8% 1.1%
---------- --------- ---------
Total Capital
Markets 1,372,847 1,255,442 1,165,524 9.4% 17.8%
Global Clearing
Services 217,614 175,778 219,960 23.8% (1.1%)
Wealth Management
Private Client
Services (1) 110,897 84,153 105,082 31.8% 5.5%
Asset Management 41,890 31,432 39,884 33.3% 5.0%
---------- --------- ---------
Total Wealth
Management 152,787 115,585 144,966 32.2% 5.4%
Other (2) (17,325) (31,371) 827 44.8% nm
----------- --------- --------
Total net
revenues $1,725,923 $1,515,434 $1,531,277 13.9% 12.7%
========== ========== ==========
PRE-TAX INCOME
Capital Markets $516,369 $465,919 $433,239 10.8% 19.2%
Global Clearing
Services 78,502 52,150 87,127 50.5% (9.9%)
Wealth
Management 20,867 5,719 (1,301) 264.9% nm
Other (2) (84,760) (98,589) (82,302) 14.0% (3.0%)
---------- ---------- ----------
Total pre-tax
income $530,978 $425,199 $436,763 24.9% 21.6%
========== ========== ==========
(1) Private Client
Services Detail:
Gross Revenues,
before transfer to
Capital Markets
Segment $137,629 $103,469 $128,979
Revenue
transferred to
Capital Markets
segment (26,732) (19,316) (23,897)
-------- -------- --------
Private Client
Services net
revenues $110,897 $84,153 $105,082
========= ========= =========
(2) Includes consolidation and elimination entries, unallocated
revenues (predominantly interest) and certain corporate administrative
functions, including certain legal costs and costs related to the
Capital Accumulation Plan for Senior Managing Directors ("CAP Plan").
Note: Certain reclassifications have been made to prior period amounts
within the Wealth Management segment to conform to the current
period's presentation.
nm - not meaningful
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended % Change From
--------------------------------- -------------------
February February November February November
29, 2004 28, 2003 30, 2003 28, 2003 30, 2003
-------- --------- --------- -------------------
(In thousands, except share and
per share data)
REVENUES
Commissions $308,103 $241,915 $288,441 27.4% 6.8%
Principal
transactions 946,862 968,464 790,486 (2.2%) 19.8%
Investment
banking 260,410 167,583 225,763 55.4% 15.3%
Interest and
dividends 520,464 434,159 495,514 19.9% 5.0%
Other income 45,606 25,794 64,842 76.8% (29.7%)
--------- --------- ----------
Total
revenues 2,081,445 1,837,915 1,865,046 13.3% 11.6%
Interest
expense 355,522 322,481 333,769 10.2% 6.5%
--------- ---------- ----------
Revenues, net
of interest
expense 1,725,923 1,515,434 1,531,277 13.9% 12.7%
--------- ---------- ----------
NON-INTEREST EXPENSES
Employee
compensation
and benefits 849,148 757,889 748,880 12.0% 13.4%
Floor brokerage,
exchange and
clearance fees 56,900 44,680 43,498 27.4% 30.8%
Communications
and technology 93,828 92,740 88,786 1.2% 5.7%
Occupancy 33,615 34,943 34,959 (3.8%) (3.8%)
Advertising and
market
development 25,901 25,210 29,239 2.7% (11.4%)
Professional
fees 41,800 28,453 39,248 46.9% 6.5%
Other expenses 93,753 106,320 109,904 (11.8%) (14.7%)
-------- -------- --------
Total
non-interest
expenses 1,194,945 1,090,235 1,094,514 9.6% 9.2%
--------- --------- ---------
Income before
provision for
income taxes 530,978 425,199 436,763 24.9% 21.6%
Provision for
income taxes 169,913 150,946 148,436 12.6% 14.5%
-------- -------- --------
Net income $361,065 $274,253 $288,327 31.7% 25.2%
-------- -------- --------
Net income
applicable
to common
shares $353,646 $266,261 $280,533 32.8% 26.1%
======== ======== ========
Adjusted net income
used for diluted
earnings per
share (1) $378,778 $293,756 $308,521 28.9% 22.8%
======== ======== ========
Basic earnings
per share $2.88 $2.21 $2.43 30.3% 18.5%
======== ======== ========
Diluted
earnings per
share $2.57 $2.00 $2.19 28.5% 17.4%
======== ======== ========
Weighted average
common shares
outstanding:
Basic 129,118,964 129,773,603 124,090,961
=========== =========== ===========
Diluted 147,108,483 147,029,224 140,876,365
=========== =========== ===========
Cash dividends
declared per
common share $0.20 $0.17 $0.20
======= ====== =======
(1) Represents net income reduced for preferred stock dividends and
increased for costs related to the CAP Plan. For earnings per share,
the costs related to the CAP Plan (net of tax) are added back as the
shares related to the CAP Plan are included in weighted average common
shares outstanding.
THE BEAR STEARNS COMPANIES INC.
SELECTED FINANCIAL INFORMATION
(UNAUDITED)
Three Months Ended
-------------------------------------
February 29, November 30, August 31,
2004 2003 2003
------------ ------------------------
(In thousands, except common share
data and other data)
Results
--------
Revenues, net of interest
expense $1,725,923 $1,531,277 $1,485,060
Net income $361,065 $288,327 $313,415
Net income applicable to
common shares $353,646 $280,533 $305,621
Adjusted net income used for
diluted earnings per share (1) $378,778 $308,521 $334,180
Financial Position
------------------
Stockholders' equity, at
period end $7,817,777 $7,470,088 $6,875,668
Total stockholders' equity and
trust issued preferred
securities, at period end $8,080,277 $8,032,588 $7,438,168
Total capital, at period end $40,014,851 $37,463,053 $34,438,022
Common Share Data
-----------------
Basic earnings per share $2.88 $2.43 $2.54
Diluted earnings per share $2.57 $2.19 $2.30
Book value per common share,
at period end $51.19 $48.69 $45.46
Weighted average common shares
outstanding:
Basic 129,118,964 124,090,961 128,681,694
Diluted 147,108,483 140,876,365 145,599,540
Common shares outstanding,
at period end (2) 144,320,701 142,369,836 146,662,752
Financial Ratios
----------------
Return on average common equity
(annualized) 21.3% 19.6% 21.3%
Adjusted pre-tax profit margin (3) 33.3% 31.7% 35.8%
Pre-tax profit margin (4) 30.8% 28.5% 32.5%
After-tax profit margin (5) 20.9% 18.8% 21.1%
Compensation & benefits / Revenues, net
of interest expense 49.2% 48.9% 45.9%
Other Data (in billions, except employees)
------------------------------------------
Margin debt balances, at period end $47.9 $45.7 $41.6
Margin debt balances, average for
period $46.6 $42.2 $43.3
Customer short balances, at
period end $77.0 $72.6 $66.3
Customer short balances, average for
period $74.3 $70.1 $68.0
Stock borrowed, at period end $57.0 $54.3 $52.1
Stock borrowed, average for period $58.5 $57.4 $54.2
Free credit balances, at period end $26.1 $24.9 $22.0
Free credit balances, average for
period $26.5 $22.9 $21.2
Assets under management,
at period end $29.1 $27.1 $25.7
Employees, at period end 10,431 10,532 10,515
Three Months Ended
------------------------
May 31, February 28,
2003 2003
------------------------
(In thousands, except common
share data and other data)
Results
--------
Revenues, net of interest expense $1,462,720 $1,515,434
Net income $280,411 $274,253
Net income applicable to common shares $272,616 $266,261
Adjusted net income used for diluted earnings
per share (1) $299,533 $293,756
Financial Position
------------------
Stockholders' equity, at period end $6,714,397 $6,529,628
Total stockholders' equity and trust issued
preferred securities, at period end $7,276,897 $7,092,128
Total capital, at period end $33,520,967 $31,987,917
Common Share Data
-----------------
Basic earnings per share $2.27 $2.21
Diluted earnings per share $2.05 $2.00
Book value per common share, at period end $43.52 $41.64
Weighted average common shares outstanding:
Basic 128,711,363 129,773,603
Diluted 146,062,838 147,029,224
Common shares outstanding, at period end (2) 146,915,258 146,659,224
Financial Ratios
----------------
Return on average common equity (annualized) 19.7% 19.9%
Adjusted pre-tax profit margin (3) 32.4% 31.2%
Pre-tax profit margin (4) 29.3% 28.1%
After-tax profit margin (5) 19.2% 18.1%
Compensation & benefits / Revenues, net of
interest expense 47.3% 50.0%
Other Data (in billions, except employees)
------------------------------------------
Margin debt balances, at period end $44.1 $38.1
Margin debt balances, average for period $39.5 $36.3
Customer short balances, at period end $66.2 $56.5
Customer short balances, average for period $62.0 $57.0
Stock borrowed, at period end $48.6 $41.7
Stock borrowed, average for period $47.9 $45.1
Free credit balances, at period end $20.4 $18.7
Free credit balances, average for period $19.3 $18.9
Assets under management, at period end $24.4 $23.3
Employees, at period end 10,472 10,506
(1) Represents net income reduced for preferred stock dividends and
increased for costs related to the CAP Plan and the redemption of
preferred stock. For earnings per share, the costs related to the CAP
Plan (net of tax) are added back as the shares related to the CAP Plan
are included in weighted average common shares outstanding.
(2) Represents shares used to calculate book value per common share.
Common shares outstanding include units issued under certain stock
compensation plans which will be distributed as shares of common
stock.
(3) Represents the ratio of income before both CAP Plan costs and
provision for income taxes to revenues, net of interest expense.
(4) Represents the ratio of income before provision for income taxes
to revenues, net of interest expense.
(5) Represents the ratio of net income to revenues, net of interest
expense.
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