In early November the company announced that it anticipated write-downs of approximately $1.2 billion in mortgage inventory net of hedges. At November 30, total net inventory write-downs were $1.9 billion. These write-downs served to reduce fourth quarter earnings per share (diluted) by $8.21. Including these write-downs the company reported a loss for the fourth quarter ended November 30, 2007 of $6.90 per share(1). For the comparable fourth quarter of 2006, the company reported earnings per share (diluted) of $4.00. The net loss for the fourth quarter of 2007 was $854 million as compared with net income of $563 million for the fourth quarter of 2006. Net revenues for the 2007 fourth quarter were a loss of $379 million down from revenues of $2.4 billion for the 2006 fourth quarter.
"We are obviously upset with our 2007 results, particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses," said James E. Cayne, chairman and chief executive officer. "Our underlying fixed income franchise remains strong and we have taken steps to size the division to market conditions. We are taking appropriate measures to position Bear Stearns for renewed profitability in 2008 by focusing our resources on the businesses with growth potential in the current environment, while streamlining our operations in areas with lower expected activity levels. We are confident that these efforts will ensure Bear Stearns remains a strong and profitable competitor in the global marketplace in the years to come."
"When Bear Stearns became a public company, consistent with our entrepreneurial roots and to ensure alignment of interests between management and shareholders, we designed our executive compensation programs to pay for performance. In a year in which we produced unacceptable results, the plans are working as they were designed -- and the members of the executive committee will not receive any bonuses for 2007."
A brief discussion of the firm's business segments follows:
CAPITAL MARKETS
Fourth Quarter
Net revenues in Capital Markets, which includes Institutional Equities, Fixed Income and Investment Banking, were a loss of $956 million in the fourth quarter of 2007, down from net revenues of $1.9 billion in the fourth quarter ended November 30, 2006.
-- Institutional Equities net revenues were $384 million, down 11% from $430 million in the fourth quarter of 2006. Record results from international equity sales and trading and continued strong results from domestic equity sales drove this quarterly performance partially offset by reduced performance in structured equity products.
-- Fixed Income net revenues were a loss of $1.5 billion, down from net revenues of $1.1 billion in the fourth quarter of 2006. The continued re-pricing of credit risk and the severe dislocation in the structured products market led to illiquidity in the fixed income markets, lower levels of client activity across the fixed income sector and a significant revaluation of mortgage inventory. Total write-downs were $1.9 billion in the quarter net of hedges.
-- Investment Banking net revenues were $205 million in the fourth quarter of 2007, down 44% from the $364 million in the comparable prior-year period. This decrease reflects lower fees from fixed income underwriting which were partially offset by continued strong merger and acquisition activity levels.
Full Year
Capital Markets net revenues were $3.9 billion in fiscal year 2007, a decrease of 46% from the $7.3 billion reported in 2006.
-- Institutional Equities net revenues in the 2007 fiscal year were up 10% to a record $2.2 billion from $2.0 billion in fiscal 2006. International sales and trading, risk arbitrage and principal strategies all delivered record results.
-- Fixed Income net revenues were $685 million in 2007, down from $4.2 billion in 2006. Results for 2007 were heavily influenced by the severe market conditions across the fixed income sector. More broadly, the re-pricing of credit also led to significantly lower net revenue levels due to illiquidity in the markets as trading activity levels deteriorated across the spectrum of fixed income products.
-- Investment Banking reported net revenues of $1.1 billion in fiscal 2007, down 8% from $1.2 billion in the prior fiscal year. Increases in equity underwriting and higher transaction volumes in advisory areas were more than offset by lower fixed income underwriting net revenues and merchant banking results.
GLOBAL CLEARING SERVICES
Fourth Quarter
Fourth quarter 2007 Global Clearing Services net revenues were $276 million, up 2% from $271 million in the fourth quarter of 2006. Net interest revenues increased due to higher margin debt balances. Average customer margin debt balances for the quarter ended November 30, 2007 were $82.1 billion, up from $72.0 billion in the prior year quarter. Customer short balances averaged $84.6 billion during the fourth quarter of 2007, down from the prior year fourth quarter average of $90.0 billion.
Full Year
Net revenues for the 2007 fiscal year in Global Clearing Services were a record $1.2 billion, up 11% from $1.1 billion in fiscal 2006. Net interest revenues increased due to higher average customer margin debt and average customer short balances. Average customer margin debt balances in 2007 were $90.3 billion compared with $68.4 billion in the fiscal year ended November 30, 2006. Customer short balances averaged $95.6 billion during the 2007 fiscal year, up from the average of $82.6 billion for the 2006 fiscal year.
WEALTH MANAGEMENT
Fourth Quarter
Wealth Management net revenues were $272 million in the fourth quarter of 2007, up 10% from $247 million in the fourth quarter of 2006.
-- Private Client Services net revenues were a record $161 million in the fourth quarter of 2007, an increase of 20% from $134 million in the 2006 quarter. Increased equity in client accounts, higher client activity levels and the continued growth in fee-based assets drove the quarterly revenue increase.
-- Asset Management net revenues were $111 million for the fourth quarter of 2007 down slightly from $113 million in the prior year quarter. Performance and management fees increased compared with the year ago period but were offset by reduced principal gains.
Full Year
Wealth Management net revenues were $830 million in fiscal 2007, a decrease of 3% compared with $858 million in fiscal 2006.
-- Net revenues from Private Client Services rose 15% to a record $602 million for the 2007 fiscal year from $522 million for fiscal 2006. Higher performance and management fees due to strong performance and higher levels of fee-based assets drove record results.
-- Asset Management reported net revenues of $228 million in the 2007 fiscal year, down 32% from $336 million in the prior year. The decline resulted from write-offs associated with receivables from and investments in the hedge funds, and lower management fees related to proprietary hedge fund products. Assets under management decreased due to a transfer of assets to a newly formed minority-owned affiliated asset manager and reductions in alternative assets under management. As of November 30, 2007 assets under management decreased to $44.6 billion from $52.5 billion as of November 30, 2006.
EXPENSES
Fourth Quarter
-- Compensation expenses were $326 million in the quarter ended November 30, 2007, down 69% from $1.1 billion in the 2006 quarter.
-- Non-compensation expenses were $666 million in the 2007 quarter, up 42% from $468 million in the 2006 quarter. The increase is related to severance and legal expense as well as higher occupancy fees, professional fees, and communications and technology costs.
Full Year
-- In the fiscal year ended November 30, 2007, compensation as a percentage of net revenues was 57.6% as compared with 47.1% for the 2006 fiscal year.
-- Non-compensation expenses for the fiscal year 2007 were $2.3 billion, 34% higher than the $1.7 billion reported in 2006. Expenses rose due to higher occupancy expenses, professional fees, and communications and technology costs associated with increased headcount as well as a write-down of intangible assets, representing goodwill and specialist rights of Bear Wagner Specialists and severance charges included in other expenses.
For fiscal year 2007 the pre-tax margin was 3.2% versus 34.1% in fiscal year 2006.
As of November 30, 2007, total capital, including stockholders' equity and long-term borrowings, was $80.3 billion. Book value on November 30, 2007 was $84.09 per share, based on 136.2 million shares outstanding. The company repurchased approximately 12.0 million shares of its common stock at a total cost of $1.7 billion during fiscal 2007.
Quarterly Common Stock Cash Dividend Declared
The Board of Directors of The Bear Stearns Companies Inc. declared a regular quarterly cash dividend of $0.32 per share on the outstanding shares of common stock payable January 25, 2008, to stockholders of record on January 15, 2008.
Quarterly Preferred Stock Cash Dividends Declared
The Board of Directors of The Bear Stearns Companies Inc. declared the following regular quarterly dividends: (i) a cash 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 January 15, 2008 to stockholders of record on December 31, 2007.
About Bear Stearns
Founded in 1923, Bear Stearns (NYSE: BSC | charts | news | PowerRating) is a leading financial services firm serving governments, corporations, institutions and individuals worldwide. The Company's core business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private client services. Headquartered in New York City, the company has approximately 14,000 employees worldwide. For additional information about Bear Stearns, please visit the firm's Web site at bearstearns.com.
Financial Tables Attached
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" in the company's 2006 Annual Report to Stockholders and similar sections 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 on December 20, 2007, at 10:00 a.m., (ET). Those wishing to listen to the conference call should dial 1-800-374-2412 (or 1-706-634-7253 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 1-800-642-1687 (or 1-706-645-9291 for international callers) at approximately 1:00 p.m. E.S.T. The pass code for the replay is 26183824. The replay will be available until midnight on January 4, 2007. If you have any questions on how to obtain access to the conference call, please contact Anthea Zeimann at 1-212-272-4417 or via email at azeimann@bear.com.
(1) Due to the net loss in the fourth quarter of 2007, unvested units and stock options from stock compensation awards were not included in the computation of diluted net loss per share because to do so would have been antidilutive. The full year diluted earnings per share computation includes the dilutive effect of weighted average CAP plan and restricted stock units, together with the dilutive effect of stock options. The exclusion of such unvested units and stock options in the fourth quarter increased the computation of loss per share by $.62 per share.
THE BEAR STEARNS COMPANIES INC. SEGMENT DATA ---------------------------------------------------------------------- (UNAUDITED) ---------------------------------------------------------------------- Three Months Ended --------------------------------------- November 30, November 30, August 31, 2007 2006 2007 ------------ ------------ ----------- (in millions) NET REVENUES Capital Markets Institutional Equities $ 384 $ 430 $ 719 Fixed Income (1,545) 1,116 118 Investment Banking 205 364 211 ------------ ------------ ----------- Total Capital Markets (956) 1,910 1,048 Global Clearing Services 276 271 332 Wealth Management Private Client Services(1) 161 134 148 Asset Management 111 113 (186) ------------ ------------ ----------- Total Wealth Management 272 247 (38) Other(2) 29 (15) (11) ------------ ------------ ----------- Total net revenues $ (379) $ 2,413 $ 1,331 ============ ============ =========== PRE-TAX INCOME Capital Markets $ (1,587) $ 809 $ 242 Global Clearing Services 145 108 153 Wealth Management 81 31 (227) Other(3) (10) (55) 7 ------------ ------------ ----------- Total pre-tax (loss)/income $ (1,371) $ 893 $ 175 ============ ============ =========== (1) Private Client Services Detail: Gross Revenues, before transfer to Capital Markets Segment $ 191 $ 163 $ 169 Revenue transferred to Capital Markets Segment (30) (29) (21) ------------ ------------ ----------- Private Client Services net revenues $ 161 $ 134 $ 148 ============ ============ =========== % Change From ------------------------ November 30, August 31, 2006 2007 ------------------------ NET REVENUES Capital Markets Institutional Equities (11%) (47%) Fixed Income nm nm Investment Banking (44%) (3%) Total Capital Markets nm nm Global Clearing Services 2% (17%) Wealth Management Private Client Services(1) 20% 9% Asset Management (2%) nm Total Wealth Management 10% nm Other(2) nm nm Total net revenues nm nm PRE-TAX INCOME Capital Markets nm nm Global Clearing Services 34% (5%) Wealth Management 161% nm Other(3) 82% nm Total pre-tax (loss)/income nm nm (1) Private Client Services Detail: Gross Revenues, before transfer to Capital Markets Segment Revenue transferred to Capital Markets Segment Private Client Services net revenues Twelve Months Ended % Change -------------------------- -------- November 30, November 30, 2007 2006 ------------ ------------ (in millions) NET REVENUES Capital Markets Institutional Equities $ 2,158 $ 1,961 10% Fixed Income 685 4,190 (84%) Investment Banking 1,076 1,170 (8%) ------------ ------------ Total Capital Markets 3,919 7,321 (46%) Global Clearing Services 1,200 1,077 11% Wealth Management Private Client Services(1) 602 522 15% Asset Management 228 336 (32%) ------------ ------------ Total Wealth Management 830 858 (3%) Other(2) (4) (29) 86% ------------ ------------ Total net revenues $ 5,945 $ 9,227 (36%) ============ ============ PRE-TAX INCOME Capital Markets $ (232) $ 2,801 nm Global Clearing Services 566 465 22% Wealth Management (45) 69 nm Other(3) (96) (188) 49% ------------ ------------ Total pre-tax (loss)/income $ 193 $ 3,147 (94%) ============ ============ (1) Private Client Services Detail: Gross Revenues, before transfer to Capital Markets Segment $ 710 $ 620 Revenue transferred to Capital Markets Segment (108) (98) ------------ ------------ Private Client Services net revenues $ 602 $ 522 ============ ============ (2) Includes consolidation and elimination entries. (3) Includes certain legal costs and costs related to the Capital Accumulation Plan for Senior Managing Directors ("CAP Plan"). nm - not meaningful Note: Certain prior period items have been reclassified to conform to the current period's presentation.
THE BEAR STEARNS COMPANIES INC. ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME ---------------------------------------------------------------------- (UNAUDITED) ---------------------------------------------------------------------- Three Months Ended ------------------------------------------ November 30, November 30, August 31, 2007 2006 2007 --------------- ------------- ------------ (in millions, except share and per share data) REVENUES Commissions $ 328 $ 291 $ 354 Principal transactions (1,543) 1,258 301 Investment banking 348 394 277 Interest and dividends 2,724 2,378 3,369 Asset management and other income 181 153 39 ------------ ------------- ------------ Total revenues 2,038 4,474 4,340 Interest expense 2,417 2,061 3,009 ------------ ------------- ------------ Revenues, net of interest expense (379) 2,413 1,331 ------------ ------------- ------------ NON-INTEREST EXPENSES Employee compensation and benefits 326 1,052 664 Floor brokerage, exchange and clearance fees 80 58 80 Communications and technology 156 130 151 Occupancy 74 55 69 Advertising and market development 44 39 49 Professional fees 109 82 91 Other expenses 203 104 52 ------------ ------------- ------------ Total non-interest expenses 992 1,520 1,156 ------------ ------------- ------------ (Loss)/income before provision for income taxes (1,371) 893 175 (Benefit from)/provision for income taxes (517) 330 4 ------------ ------------- ------------ Net (loss)/income $ (854) $ 563 $ 171 Preferred stock dividends 5 5 5 ------------ ------------- ------------ Net (loss)/income applicable to common shares $ (859) $ 558 $ 166 ============ ============= ============ Adjusted net (loss)/income used for diluted earnings per share (1) $ (878) $ 584 $ 168 ============ ============= ============ Basic earnings per share $ (6.90) $ 4.42 $ 1.30 ============ ============= ============ Diluted earnings per share$ (6.90)(2) $ 4.00 $ 1.16 ============ ============= ============ Weighted average common shares outstanding: Basic 127,119,245 129,182,315 128,949,234 ============ ============= ============ Diluted 127,119,245(2) 145,923,131 145,105,029 ============ ============= ============ Cash dividends declared per common share $ 0.32 $ 0.28 $ 0.32 ============ ============= ============ % Change From ------------------------ November 30, August 31, 2006 2007 ------------------------ REVENUES Commissions 13% (7%) Principal transactions nm nm Investment banking (12%) 26% Interest and dividends 15% (19%) Asset management and other income 18% 364% Total revenues (54%) (53%) Interest expense 17% (20%) Revenues, net of interest expense (116%) (128%) NON-INTEREST EXPENSES Employee compensation and benefits (69%) (51%) Floor brokerage, exchange and clearance fees 38% 0% Communications and technology 20% 3% Occupancy 35% 7% Advertising and market development 13% (10%) Professional fees 33% 20% Other expenses 95% 290% Total non-interest expenses (35%) (14%) (Loss)/income before provision for income nm nm taxes (Benefit from)/provision for income taxes nm nm Net (loss)/income nm nm Preferred stock dividends (0%) (0%) Net (loss)/income applicable to common nm nm shares Adjusted net (loss)/income used for diluted nm nm earnings per share (1) Basic earnings per share nm nm Diluted earnings per share nm nm Weighted average common shares outstanding: Basic Diluted Cash dividends declared per common share (1) Represents net (loss)/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) Due to the net loss in the fourth quarter of 2007, the Diluted EPS calculation excludes 15.1 million dilutive potential common shares, as they were antidilutive. nm - not meaningful
THE BEAR STEARNS COMPANIES INC. ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME ---------------------------------------------------------------------- (UNAUDITED) ---------------------------------------------------------------------- Twelve Months Ended % Change --------------------------- -------- November 30, November 30, 2007 2006 ------------- ------------ (in millions, except share and per share data) REVENUES Commissions $ 1,269 $ 1,163 9% Principal transactions 1,323 4,995 (74%) Investment banking 1,380 1,334 3% Interest and dividends 11,556 8,536 35% Asset management and other income 623 523 19% ------------- ------------ Total revenues 16,151 16,551 (2%) Interest expense 10,206 7,324 39% ------------- ------------ Revenues, net of interest expense 5,945 9,227 (36%) ------------- ------------ NON-INTEREST EXPENSES Employee compensation and benefits 3,425 4,343 (21%) Floor brokerage, exchange and clearance fees 279 227 23% Communications and technology 578 479 21% Occupancy 264 198 33% Advertising and market development 179 147 22% Professional fees 362 280 29% Impairment of goodwill and nm specialist rights 227 - Other expenses 438 406 8% ------------- ------------ Total non-interest expenses 5,752 6,080 (5%) ------------- ------------ Income before provision for income taxes 193 3,147 (94%) (Benefit from)/provision for income taxes (40) 1,093 (104%) ------------- ------------ Net income $ 233 $ 2,054 (89%) Preferred stock dividends 21 21 (0%) ------------- ------------ Net income applicable to common shares $ 212 $ 2,033 (90%) ============= ============ Adjusted net income used for diluted earnings per share (1)$ 223 $ 2,121 (89%) ============= ============ Basic earnings per share $ 1.68 $ 15.79 (89%) ============= ============ Diluted earnings per share $ 1.52 $ 14.27 (89%) ============= ============ Weighted average common shares outstanding: Basic 130,208,999 131,711,382 ============= ============ Diluted 146,442,842 148,575,469 ============= ============ Cash dividends declared per common share $ 1.28 $ 1.12 ============= ============ (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. nm - not meaningful
THE BEAR STEARNS COMPANIES INC. ---------------------------------------------------------------------- SELECTED FINANCIAL INFORMATION ---------------------------------------------------------------------- (UNAUDITED) ---------------------------------------------------------------------- Twelve Months Ended -------------------------- November 30, November 30, 2007 2006 -------------------------- Results ------------------------------------------- Revenues, net of interest expense $ 5,945 $ 9,227 Net income/(loss) $ 233 $ 2,054 Net income/(loss) applicable to common shares $ 212 $ 2,033 Adjusted net income/(loss) used for diluted earnings per share (1) $ 223 $ 2,121 Financial Position ------------------------------------------- Stockholders' equity, at period end $ 11,801 $ 12,129 Total capital, at period end (2) $ 80,339 $ 66,699 Common Share Data ------------------------------------------- Basic earnings per share $ 1.68 $ 15.79 Diluted earnings per share $ 1.52 $ 14.27 Book value per common share, at period end $ 84.09 $ 86.39 Weighted average common shares outstanding: Basic 130,208,999 131,711,382 Diluted 146,442,842 148,575,469 Common shares outstanding, at period end (3) 136,155,586 145,693,021 Financial Ratios ------------------------------------------- Return on average common equity (annualized) 1.8% 19.1% Adjusted pre-tax profit margin (4) 3.5% 35.8% Pre-tax profit margin (5) 3.2% 34.1% After-tax profit margin (6) 3.9% 22.3% Compensation & benefits / Revenues, net of interest expense 57.6% 47.1% Non-compensation / Revenues, net of interest expense 39.1% 18.8% Financial Ratios (pro forma) (7) ------------------------------------------- Diluted earnings per share $ 2.41 n/a Return on average common equity (annualized) 2.8% n/a Adjusted pre-tax profit margin (4) 7.4% n/a Pre-tax profit margin (5) (8) 6.9% n/a After-tax profit margin (6) (8) 6.0% n/a Non-compensation / Revenues, net of interest expense (8) 35.5% n/a Other Data (in billions, except employees) ------------------------------------------- Margin debt balances, at period end $ 85.8 $ 78.6 Margin debt balances, average for period $ 90.3 $ 68.4 Customer short balances, at period end $ 88.0 $ 95.8 Customer short balances, average for period $ 95.6 $ 82.6 Securities borrowed, at period end $ 63.0 $ 57.6 Securities borrowed, average for period $ 64.3 $ 55.0 Free credit balances, at period end $ 36.1 $ 32.6 Free credit balances, average for period $ 36.6 $ 32.8 Assets under management, at period end $ 44.6 $ 52.5 Employees, at period end 14,153 13,566 n/a - not applicable Three Months Ended --------------------------------------- November 30, August 31, May 31, 2007 2007 2007 --------------------------------------- (in millions, except common share data and other data) Results ------------------------------ Revenues, net of interest expense $ (379) $ 1,331 $ 2,512 Net income/(loss) $ (854) $ 171 $ 362 Net income/(loss) applicable to common shares $ (859) $ 166 $ 356 Adjusted net income/(loss) used for diluted earnings per share (1) $ (878) $ 168 $ 375 Financial Position ------------------------------ Stockholders' equity, at period end $ 11,801 $ 13,000 $ 13,308 Total capital, at period end (2) $ 80,339 $ 78,151 $ 75,098 Common Share Data ------------------------------ Basic earnings per share $ (6.90) $ 1.30 $ 2.78 Diluted earnings per share $ (6.90) $ 1.16 $ 2.52 Book value per common share, at period end $ 84.09 $ 91.82 $ 92.50 Weighted average common shares outstanding: Basic 127,119,245 128,949,234 131,684,419 Diluted 127,119,245 145,105,029 148,745,798 Common shares outstanding, at period end (3) 136,155,586 144,582,401 144,748,090 Financial Ratios ------------------------------ Return on average common equity (annualized) (29.1%) 5.3% 11.6% Adjusted pre-tax profit margin (4) n/a 13.4% 23.3% Pre-tax profit margin (5) n/a 13.1% 22.0% After-tax profit margin (6) n/a 12.9% 14.4% Compensation & benefits / Revenues, net of interest expense n/a 49.9% 49.0% Non-compensation / Revenues, net of interest expense n/a 37.0% 28.9% Financial Ratios (pro forma) (7) ------------------------------ Diluted earnings per share n/a n/a $ 3.40 Return on average common equity (annualized) n/a n/a 15.6% Adjusted pre-tax profit margin (4) n/a n/a 32.4% Pre-tax profit margin (5) (8) n/a n/a 30.7% After-tax profit margin (6) (8) n/a n/a 19.3% Non-compensation / Revenues, net of interest expense (8) n/a n/a 20.3% Other Data (in billions, except employees) ------------------------------ Margin debt balances, at period end $ 85.8 $ 85.2 $ 108.4 Margin debt balances, average for period $ 82.1 $ 102.2 $ 95.4 Customer short balances, at period end $ 88.0 $ 81.9 $ 109.0 Customer short balances, average for period $ 84.6 $ 102.2 $ 101.9 Securities borrowed, at period end $ 63.0 $ 59.5 $ 65.4 Securities borrowed, average for period $ 61.1 $ 69.7 $ 66.6 Free credit balances, at period end $ 36.1 $ 35.8 $ 36.4 Free credit balances, average for period $ 36.3 $ 38.4 $ 38.0 Assets under management, at period end $ 44.6 $ 57.8 $ 59.8 Employees, at period end 14,153 15,516 15,120 n/a - not applicable Three Months Ended ----------------------------------------- February 28, November 30, August 31, 2007 2006 2006 ----------------------------------------- (in millions, except common share data and other data) Results ----------------------------- Revenues, net of interest expense $ 2,482 $ 2,413 $ 2,129 Net income/(loss) $ 554 $ 563 $ 438 Net income/(loss) applicable to common shares $ 548 $ 558 $ 432 Adjusted net income/(loss) used for diluted earnings per share (1) $ 572 $ 584 $ 449 Financial Position ----------------------------- Stockholders' equity, at period end $ 13,274 $ 12,129 $ 11,722 Total capital, at period end (2) $ 71,768 $ 66,699 $ 61,923 Common Share Data ----------------------------- Basic earnings per share $ 4.23 $ 4.42 $ 3.34 Diluted earnings per share $ 3.82 $ 4.00 $ 3.02 Book value per common share, at period end $ 90.57 $ 86.39 $ 81.52 Weighted average common shares outstanding: Basic 133,094,747 129,182,315 132,086,016 Diluted 149,722,654 145,923,131 148,899,406 Common shares outstanding, at period end (3) 145,129,095 145,693,021 146,303,331 Financial Ratios ----------------------------- Return on average common equity (annualized) 18.3% 20.5% 15.8% Adjusted pre-tax profit margin (4) 35.3% 38.9% 32.7% Pre-tax profit margin (5) 33.7% 37.0% 31.3% After-tax profit margin (6) 22.3% 23.3% 20.6% Compensation & benefits / Revenues, net of interest expense 48.5% 43.6% 48.1% Non-compensation / Revenues, net of interest expense 17.8% 19.4% 20.5% Financial Ratios (pro forma) (7) ----------------------------- Diluted earnings per share n/a n/a n/a Return on average common equity (annualized) n/a n/a n/a Adjusted pre-tax profit margin (4) n/a n/a n/a Pre-tax profit margin (5) (8) n/a n/a n/a After-tax profit margin (6) (8) n/a n/a n/a Non-compensation / Revenues, net of interest expense (8) n/a n/a n/a Other Data (in billions, except employees) ----------------------------- Margin debt balances, at period end $ 86.6 $ 78.6 $ 68.9 Margin debt balances, average for period $ 81.3 $ 72.0 $ 68.8 Customer short balances, at period end $ 95.1 $ 95.8 $ 85.6 Customer short balances, average for period $ 94.0 $ 90.0 $ 82.1 Securities borrowed, at period end $ 59.4 $ 57.6 $ 53.1 Securities borrowed, average for period $ 59.9 $ 57.6 $ 54.7 Free credit balances, at period end $ 37.1 $ 32.6 $ 36.5 Free credit balances, average for period $ 33.8 $ 34.4 $ 35.9 Assets under management, at period end $ 54.1 $ 52.5 $ 50.2 Employees, at period end 14,409 13,566 13,134 n/a - not applicable Three Months Ended ---------------------------- May 31, February 28, 2006 2006 ---------------------------- (in millions, except common share data and other data) Results ------------------------------------------ Revenues, net of interest expense $ 2,499 $ 2,185 Net income/(loss) $ 539 $ 514 Net income/(loss) applicable to common shares $ 534 $ 509 Adjusted net income/(loss) used for diluted earnings per share (1) $ 558 $ 529 Financial Position ------------------------------------------ Stockholders' equity, at period end $ 11,708 $ 11,166 Total capital, at period end (2) $ 58,355 $ 57,589 Common Share Data ------------------------------------------ Basic earnings per share $ 4.12 $ 3.92 Diluted earnings per share $ 3.72 $ 3.54 Book value per common share, at period end $ 79.30 $ 75.46 Weighted average common shares outstanding: Basic 132,810,062 132,738,565 Diluted 149,945,896 149,417,369 Common shares outstanding, at period end (3) 147,021,508 145,163,510 Financial Ratios ------------------------------------------ Return on average common equity (annualized) 20.1% 20.1% Adjusted pre-tax profit margin (4) 35.1% 36.1% Pre-tax profit margin (5) 33.4% 34.4% After-tax profit margin (6) 21.6% 23.5% Compensation & benefits / Revenues, net of interest expense 48.8% 47.9% Non-compensation / Revenues, net of interest expense 17.8% 17.7% Financial Ratios (pro forma) (7) ------------------------------------------ Diluted earnings per share n/a n/a Return on average common equity (annualized) n/a n/a Adjusted pre-tax profit margin (4) n/a n/a Pre-tax profit margin (5) (8) n/a n/a After-tax profit margin (6) (8) n/a n/a Non-compensation / Revenues, net of interest expense (8) n/a n/a Other Data (in billions, except employees) ------------------------------------------ Margin debt balances, at period end $ 72.7 $ 64.5 Margin debt balances, average for period $ 68.4 $ 64.5 Customer short balances, at period end $ 81.7 $ 78.1 Customer short balances, average for period $ 80.2 $ 78.2 Securities borrowed, at period end $ 52.1 $ 52.4 Securities borrowed, average for period $ 54.8 $ 52.9 Free credit balances, at period end $ 34.1 $ 30.6 Free credit balances, average for period $ 30.8 $ 29.9 Assets under management, at period end $ 47.9 $ 45.4 Employees, at period end 12,519 12,061 n/a - not applicable (1) Represents net income/(loss) 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) Includes stockholders' equity and long-term borrowings. (3) 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. (4) Represents the ratio of income before both CAP Plan costs and provision for income taxes to revenues, net of interest expense. (5) Represents the ratio of income before provision for income taxes to revenues, net of interest expense. (6) Represents the ratio of net income to revenues, net of interest expense. (7) Excludes the effect of the $227.5 million pre-tax non-cash charge related to the write down of intangible assets, representing goodwill and specialist rights of Bear Wagner Specialists taken in the quarter ended May 31, 2007. (8) In addition to excluding the effect of the non-cash charge related to the write down of intangible assets, this ratio also excludes the effect of the reduction of $10 million in costs associated with the CAP Plan related to the write down of intangible assets.
SOURCE: The Bear Stearns Companies, Inc.
The Bear Stearns Companies, Inc. Elizabeth Ventura, 212-272-9251 or John Quinn, 212-272-5934
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