-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KdnawcNW4P1CjTkdnb9gHj1y83AlhnaOyZUx7MbnKf5JhSpP4CgXOIBxyJniIKC3 G9swmyIdM9yYd35mJDsA6w== 0000806085-98-000144.txt : 19980924 0000806085-98-000144.hdr.sgml : 19980924 ACCESSION NUMBER: 0000806085-98-000144 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980923 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-09466 FILM NUMBER: 98713472 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR STREET 2: 3 WORLD FINANCIAL CNTR CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: AMERICAN EXPRESS TOWER 15TH FL STREET 2: 2 WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 8-K 1 LEHMAN BROTHERS HOLDINGS INC. 3RD QUARTER 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): September 23, 1998 LEHMAN BROTHERS HOLDINGS INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-9466 13-3216325 (Commission File Number) (IRS Employer Identification No.) 3 World Financial Center New York, New York 10285 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code: (212) 526-7000 Item 5. Other Events Third Quarter Earnings On September 23, 1998 Lehman Brothers Holdings Inc. (the "Registrant") issued a press release with respect to its third quarter 1998 earnings (the "Earnings Release"). Copy of the Earnings Release follows. Item 7. Financial Statements and Exhibits (c) Exhibits The following Exhibits are filed as part of this Report. 99.1 Press Release Relating to Third Quarter 1998 Earnings 99.2 Consolidated Statement of Income (Three Months Ended August 31, 1998) (Preliminary and Unaudited) 99.3 Consolidated Statement of Income (Nine Months ended August 31, 1998) (Preliminary and Unadudited) 99.4 Selected Statistical Information The Exhibit Index to this Report is incorporated herein by reference. 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. LEHMAN BROTHERS HOLDINGS INC. By: /s/ John L. Cecil John L. Cecil Chief Financial Officer (Principal Financial Officer) Date: September 23, 1998 EXHIBIT INDEX Exhibit No. Exhibit Exhibit 99.1 Press Release Relating to Third Quarter 1998 Earnings Exhibit 99.2 Consolidated Statement of Income (Three Months Ended August 31, 1998) (Preliminary and Unaudited) Exhibit 99.3 Consolidated Statement of Income (Nine Months ended August 31, 1998) (Preliminary and Unadudited) Exhibit 99.4 Selected Statistical Information [GRAPHIC OMITTED] EXHIBIT 99.1 For Immediate Release MEDIA CONTACT: William J. Ahearn (212) 526-4379 INVESTOR CONTACT: Shaun Butler (212) 526-8381 LEHMAN BROTHERS REPORTS EARNINGS OF $151 MILLION IN THIRD QUARTER; RECORD OF $662 MILLION FOR NINE MONTHS ANNOUNCES PROGRAM TO BUY BACK 7.5 MILLION SHARES Net Income For First Nine Months Surpasses All of 1997; Return on Equity Over 20% NEW YORK, September 23, 1998--Lehman Brothers Holdings Inc. (NYSE: LEH) today reported net income of $151 million, or $1.10 per common share (diluted), for the third quarter ended August 31, 1998. Net income was down from the $197 million, or $1.30 per share (diluted) reported for the third quarter of fiscal 1997. The Firm also announced that its Board of Directors authorized the repurchase of up to an additional 7.5 million shares of Lehman Brothers stock, as part of the Firm's program to actively manage its capital position and common shares outstanding. The Board had already authorized the repurchase of up to 4.5 million shares earlier this year. At August 31, 1998, Lehman Brothers had approximately 117 million common shares outstanding. -- more -- Third Quarter 1998/page 2 For the first nine months of fiscal 1998, net income was a record $662 million, an increase of 43 percent from $462 million for the first nine months of fiscal 1997. As previously announced, Lehman Brothers said that earnings for the current-year third quarter included a reduction in net income of approximately $60 million, reflecting the impact of significant volatility in Russian and other emerging markets. This includes trading losses and additional credit reserves that the Firm has set aside to offset the possible future impact of counterparty exposures. "Given the almost unprecedented volatility in global markets, the third quarter clearly proved to be a difficult period for Lehman Brothers and the industry in general," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "However, our numbers show that the Firm is benefiting from the significant improvement we have made in shifting our business mix over the past few years. Even with the turmoil in fixed income markets globally, our strength in equities and M&A advisory throughout the quarter enabled us to post a level of quarterly net income that boosted the Firm to record earnings for the first nine months of the fiscal year." Mr. Fuld noted that earnings for the first nine months of fiscal 1998 have already surpassed Lehman Brothers' full year net income for 1997 of $647 million. Net revenues (total revenues less interest expense) for the third quarter were $930 million, down from $1,071 million in the third quarter of fiscal 1997. For the first nine months of fiscal 1998, net revenues were $3.448 billion, an increase of 21 percent from $2.850 billion in the fiscal 1997 first nine months. -- more -- Third Quarter 1998/page 3 Mr. Fuld noted that despite a significant slowdown in underwriting towards the end of the quarter, the Firm posted its highest-ever total of investment banking fees in the fiscal 1998 third quarter. The Firm's equity business also posted strong results, driven by a large origination calendar, derivatives activities, and record customer volumes. Non-interest expenses for the quarter were $723 million. Compensation and benefits as a percentage of net revenues remained at 50.7 percent for the 14th consecutive quarter. Non-personnel expenses for the third quarter were $251 million, essentially flat with the previous fiscal year's quarter, despite continued investments in a number of key strategic businesses, and increased technology expenditures related to the Year 2000 and European Monetary Union. For the first nine months of fiscal 1998, non-interest expenses were $2.490 billion. Non-personnel expenses were $741 million, compared with $733 million in the first nine months of fiscal 1997. For the first nine months, the Firm's pre-tax margin was 27.8 percent, compared with 23.6 percent for the first nine months of fiscal 1997; for the same period, return on common equity was 20.1 percent, compared with 16.5 percent in fiscal 1997. For the fiscal 1998 third quarter, the Firm's pre-tax margin was 22.3 percent, compared with 26.2 percent in the third quarter of fiscal 1997. Return on common equity was 13 percent for the quarter ended August 31, 1998, compared with 20.5 percent for the third quarter of 1997. Return on common equity is calculated before any adjustments for special preferred dividends. -- more -- Third Quarter 1998/page 4 As of August 31, 1998, Lehman Brothers stockholders' equity was $5.349 billion, and total capital (stockholders' equity and long-term debt) was $33.730 billion. Book value per common share was $36.35. Lehman Brothers is a global investment bank with leadership positions in corporate finance, advisory services, municipal finance and fixed income and equity sales, trading and research. Lehman Brothers serves the financial needs of corporate, government and institutional clients, and high-net-worth individuals through offices in major financial centers worldwide. # # # Financial Statements Attached EXHIBIT 99.2 LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF INCOME (Preliminary and Unaudited) (In millions, except per share data) Three Months Ended Percentage of ------------------ ------------- August 31 August 31 Dollar Change 1998 1997 Inc/(Dec) -------------- ----------- ----------- Revenues: Investment banking $ 493 $ 396 24% Principal transactions 131 389 (66) Commissions 137 111 23 Interest and dividends 5,254 3,554 48 Other (52) 19 # --------- ------- Total revenues 5,963 4,469 33 Interest expense 5,033 3,398 48 ----- ----- Net revenues 930 1,071 (13) ------ ----- Non-interest expenses Compensation and benefits 472 543 (13) Brokerage, commissions and clearance fees 61 54 13 Professional services 49 43 14 Communications 37 35 6 Occupancy and equipment 34 35 (3) Business development 29 25 16 Depreciation and amortization 23 22 5 Other 18 33 (45) ------ ------- Total non-interest expenses 723 790 (8) ----- ------ Income before taxes 207 281 (26) Provision for income taxes 56 84 (33) ----- ------- Net income $151 $ 197 (23) ==== ====== Net income applicable to common stock $139 $ 160 (13) ==== ====== Average shares Basic 121.5 118.7 ===== ===== Diluted 126.2 122.4 ===== ===== Earnings per common share Basic $ 1.15 $ 1.34 ====== ====== Diluted $ 1.10 $ 1.30 ====== ====== # denotes greater than 100% EXHIBIT 99.3 LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF INCOME (Preliminary and Unaudited) (In millions, except per share data) Nine Months Ended Percentage of ----------------- ------------- August 31 August 31 Dollar Change 1998 1997 Inc/(Dec) ------------------------------------ Revenues: Investment banking $ 1,336 $ 910 47% Principal transactions 1,142 1,061 8 Commissions 378 299 26 Interest and dividends 13,235 9,931 33 Other 6 73 (92) -------- -------- Total revenues 16,097 12,274 31 Interest expense 12,649 9,424 34 ------ ------ Net revenues 3,448 2,850 21 ------ ------ Non-interest expenses: Compensation and benefits 1,749 1,445 21 Brokerage, commissions and clearance fees 175 172 2 Professional services 134 131 2 Communications 111 105 6 Occupancy and equipment 102 104 (2) Business development 84 76 11 Depreciation and amortization 67 65 3 Other 68 80 (15) ------ ------- Total non-interest expenses 2,490 2,178 14 ----- ----- Income before taxes 958 672 43 Provision for income taxes 296 210 41 ------- ------ Net income $ 662 $ 462 43 ====== ====== Net income applicable to common stock $ 587 $ 412 42 ====== ====== Average shares Basic 120.9 117.9 ===== ===== Diluted 125.8 120.6 ===== ===== Earnings per common share Basic $4.86 $3.49 ===== ===== Diluted $4.67 $3.41 ===== ===== EXHIBIT 99.4 LEHMAN BROTHERS HOLDINGS INC. SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data)
Quarters Ended -------------- 8/31/98 5/31/98 2/28/98 11/30/97 8/31/97 5/31/97 ------- ------- ------- -------- ------- ------- Income Statement Net Revenues $930 $1,473 $1,045 $1,023 $1,071 $ 854 Non-Interest Expenses: Compensation and Benefits 472 747 530 519 543 433 Nonpersonnel Expenses 251 250 240 239 247 249 Net Income 151 324 187 185 197 121 Net Income Applicable to Common Stock 139 268 180 160 160 114 Earnings per Common Share (a) Basic $1.15 $2.22 $1.49 $1.34 $1.34 $0.97 Diluted $1.10 $2.12 $1.44 $1.30 $1.30 $0.95 Financial Ratios (%) Return on Common Equity (annualized) (b) 13.0 29.9 17.6 18.3 20.5 12.8 Return on Common Equity (annualized) (c) 13.0 25.2 17.6 16.4 17.2 12.8 Pretax Operating Margin 22.3 32.4 26.3 25.9 26.2 20.2 Compensation & Benefits/ Net Revenues 50.7 50.7 50.7 50.7 50.7 50.7 Effective Tax Rate 27.0 32.0 32.0 30.0 30.0 30.0 Balance Sheet Total Assets $191,000 $179,067 $175,643 $151,705 $147,894 $145,118 Total Assets Excluding Matched Book (d) 134,000 130,140 124,225 108,099 104,626 105,025 Common Stockholders' Equity 4,391 4,326 4,175 4,015 3,795 3,630 Total Stockholders' Equity 5,349 5,084 4,683 4,523 4,303 4,138 Total Capital (long-term debt plus stockholders' equity) 33,730 31,929 28,597 24,784 23,207 22,083 Book Value per Common Share (e) 36.35 35.93 34.56 33.39 31.86 30.67 Other Data (#s) Employees 8,839 8,387 8,314 8,340 8,190 7,788 Common Stock Outstanding (f) 116,673,240 117,114,203 118,551,437 116,612,074 101,939,516 101,541,385 Average Shares Basic 121,523,227 120,633,663 120,638,144 118,976,492 118,722,434 118,009,833 Diluted 126,222,483 126,301,259 124,797,348 123,003,138 122,363,228 120,420,733
(a) Effective December 1997, basic and diluted earnings per share replaced the primary and fully diluted calculations in accordance with Statement of Financial Accounting Standards No. 128. (b) Return on common equity calculated using net income before adjusting for special preferred dividends. (c) Return on common equity calculated using net income after adjusting for special preferred dividends. (d) Matched book is defined as the lower of securities purchased under agreements to resell or securities sold under agreements to repurchase. (e) This calculation includes restricted stock units granted under the Lehman Stock Award Programs included in stockholders' equity. (f) The increase at 11/30/97 represents the establishment of a trust to provide common stock voting rights to employees who hold restricted stock units. The establishment of the trust did not impact the total number of shares used in the computation of earnings per common share. -----END PRIVACY-ENHANCED MESSAGE-----