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Bear Stearns Annual Report 2006

Bear Stearns Annual Report 2006

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Published by highfinance
Now defunct, in 2006 Bear Stearns celebrated "Eighty Three Years of Profitability"
Now defunct, in 2006 Bear Stearns celebrated "Eighty Three Years of Profitability"

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Published by: highfinance on Oct 22, 2008
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10/15/2011

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 ANNUAL REPORT
A F I R M C O M M I T M E N T
TWENTY YEARS AS
 APUBLIC COMPANY 
EIGHTY-THREE YEARS OF
PROFITABILITY 
2006
 
A FIRM COMMITMENT
to provide superior service to our clients,best-in-class returns to ourstockholders and a superior workplace for our people.Our commitment is backed by our guidingprinciples.More than words on paper,they are the
CORNERSTONES
of our culture.AlthoughBear Stearns has grown and changed dramatically in the 83 years we have been in existence,these
FUNDAMENTAL
beliefs still serve as the foundation of our success:Respect,Integrity,Meritocracy,Innovation and Philanthropy.These core
VALUES
ring as true today as they didthe day we first opened our doors on Wall Street and 20 years ago when we moved from apartnership to a public entity.In this day and age,treating others with
RESPECT
and operatingwith the highest degree of
INTEGRITY
may seem commonplace.For us,it is the code of conductwe live by.Bear Stearns wascreated as a
MERITOCRACY
:aplace where individuals arejudged on the
QUALITY
of theirwork and their contribution tothe whole,not pre-judged basedon their socioeconomic class,race or religion.Understandingthat our people are the firm,we seek to attract and keep themost talented individuals.More than 800 of theseindividuals have been with the firm for 20 years or more.You will see a number ofthem pictured and highlightedthroughout this 20th anniversaryannual report.We appreciatetheir
WISDOM
,dedication and their tremendous contribution to the firm over time,just as wewelcome the new
TALENT
who will grow and guide us through the next
TWENTY YEARS
.At atime when change and speed seem to be prized for their own sake,we contend that continuityand consistent
INNOVATION
create a balanced foundation for a lasting organization.Ourstockholders have benefited from this approach year after
PROFITABLE
year.Hand-in-handwith our profitability is the desire to give back to our communities and to those in need.Webelieve our policies on
PHILANTHROPY
support both our employees’ wishes and our ability tonurture a well-rounded workforce.From these actions,we strive to foster an environmentof
CARING
within the corporation.To our employees,to our stockholders,to our clients,Bear Stearns has – and always will have –
A FIRM COMMITMENT
.
2006
 
2
THEBEARSTEARNS COMPANIES INC.
(1) 
As of November 30, 2006, the Company elected, under FIN No.39, “Offsetting Amounts Related to Certain Contracts,”to net cash collateral received or paid against its derivatives inventory, on a counterparty basis, provided that the legal right of offset exists.The Consolidated Statements of FinanciaCondition as of November 30, 2005, 2004, 2003, and 2002 have been adjusted to conform to the current year’s presentation.
(2) 
In accordance with FIN No.46 (R), the Company has deconsolidated Bear Stearns Capital Trust III effective beginning with the quarter ended February 29, 2004.As a result, the Debentures issued by the Company to Bear Stearns Capital Trust III are included within long-term borrowings.The $262.5 million of Preferred Securities issued by Capital Trust III is still outstanding, providing the funding for such Debentures.The Preferred Securities issued by Capital Trust III are no longer included in the Company’s Consolidated Statements of Financial Condition.As of November 30, 2003 and 2002,Guaranteed Preferred Beneficial Interests in Company Subordinated Debt Securities consists of $300 million of Preferred Securities issued by Bear Stearns Capital Trust II and $262.5 million of Preferred Securities issued by Bear Stearns Capital Trust III.
(3) 
For book value purposes, at November 30, 2006, common stockholders’equity was adjusted by $816 million and common stock outstanding was adjusted by 4.6 million units, which represents stock-based compensation associated with fiscal 2006 awards that was reflected in stockholders’ equity as of the grant date in December 2006, in accordance with SFAS No.123 (R), “Share-based Payment.In previous years, stock-based compensation granted in December was included in stockholders’equity at November year-end.
(4) 
Common shares outstanding include units issued under certain stock compensation plans, which will be distributed as shares of common stock.
(5) 
Represents the ratio of income before provision for income taxes to revenues, net of interest expense.
Fiscal years ended November 30,
2006
2005200420032002
RESULTS
Revenues, net of interest expense
$ 9,227,165
$ 7,410,794$6,812,883$ 5,994,491$ 5,128,236Employee compensation and benefits
4,343,499
3,553,2163,253,8622,880,6952,508,197Non-compensation expenses
1,737,036
1,650,5191,536,8671,341,5271,309,076Total expenses
6,080,535
5,203,7354,790,7294,222,2223,817,273Net income
$ 2,053,871
$ 1,462,177$ 1,344,733$ 1,156,406$878,345Net income applicable to common shares
$ 2,032,508
$1,437,856$ 1,316,661$ 1,125,031$842,739
FINANCIAL POSITION
Total assets
(1)
$350,432,595
$287,292,637$252,112,691$209,181,240$181,452,776Long-term borrowings
$ 54,569,916
$ 43,489,616$36,843,277$29,430,465$ 23,681,399Guaranteed Preferred BeneficialInterests in Company SubordinatedDebt Securities
(2)
$
$
$
$562,500$562,500Stockholders’ equity
$ 12,129,384
$ 10,791,432$ 8,990,872$ 7,470,088$ 6,382,083
COMMON SHARE DATA
Basic earnings per share
$15.79
$11.42$10.88$9.44$7.00Diluted earnings per share
$14.27
$10.31$9.76$8.52$6.47Cash dividends declared per common share
$1.12
$1.00$0.85$0.74$0.62Book value per common share
$86.39
(3)
$71.08$59.13$48.69$39.94Common shares outstanding
(4)
145,693,021
146,431,767144,484,099142,369,836145,591,496
FINANCIAL RATIOS
Return on average common equity
19.1%
16.5%19.1%20.2%18.1%Profit margin
(5)
34.1%
29.8%29.7%29.6%25.6%
OTHER DATA
Assets under management (in billions)
$52.5
$41.9$37.8$29.2$24.0Average value-at-risk (in millions)
$28.6
$20.5$15.8$15.8$16.5Employees
13,566
11,84310,96110,53210,574
(in thousands, except common share data, financial ratios and other data) 
Financial Highlights

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