EX-99 2 f04-12_158kexhibits.txt EARNINGS PRESS RELEASE Exhibit 99.1 Press Release For Immediate Release Media Contact: Hannah Burns 212-526-4064 Investor Contact: Shaun Butler 212-526-8381 LEHMAN BROTHERS REPORTS RECORD REVENUES AND NET INCOME FOR FISCAL 2004 Fourth Quarter Net Income Increases 22% NEW YORK, December 15, 2004 - Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $585 million, or $1.96 per common share (diluted), for the fourth quarter ended November 30, 2004, representing increases of 22% and 15%, respectively, from net income of $481 million, or $1.71 per common share (diluted), in the fourth quarter of fiscal 2003. Third quarter 2004 net income was $505 million, or $1.71 per common share (diluted). For the 2004 full fiscal year, net income increased 39% to a record $2.4 billion compared to $1.7 billion in fiscal 2003, and earnings per common share (diluted) rose 24% to $7.90 from $6.35 in fiscal 2003. Full Year Business Highlights o Reported record net revenues, net income and earnings per share o Earned record net revenues in our Investment Banking segment, reflecting market share gains in merger and acquisition advisory and equity origination o Produced highest ever net revenues in our Capital Markets segment, with our sixth consecutive year of record Fixed Income net revenues and our second best year of Equity net revenues o Reported record net revenues in our Client Services segment and grew assets under management to $137 billion from $120 billion last year o Ranked #1 in both Equity and Fixed Income Research by Institutional Investor's "All America Research" polls o Achieved record international net revenues, posting record net revenues in Asia for the second consecutive year and our second best year of net revenues in Europe Richard S. Fuld, Jr., chairman and chief executive officer, said, "Due to excellent performance throughout the year and very strong fourth quarter results, we are reporting record annual net revenues, net income and earnings per share. Both our reputation as a trusted advisor to our clients and our momentum as a franchise have never been stronger." The Firm reported its third highest quarterly net revenues, which rose 25% to $2.9 billion, from $2.3 billion in the fourth quarter of fiscal 2003 and 10% from $2.6 billion in the third quarter of fiscal 2004. Record Investment Banking revenues, which rose 27% to $608 million from $477 million in the prior year's period, reflected a 95% increase in merger and acquisition advisory fees, to our highest level in almost four years, and record revenues from debt origination activity. Capital Markets net revenues increased 18% to $1.8 billion from $1.5 billion last year, and were driven by continued strength in the Firm's Fixed Income franchise and a rebound in Equity Capital Markets activity. A significant increase in the foreign exchange business and continued strength in mortgage products contributed to robust Fixed Income customer flow activity. The increase in Equity Capital Markets net revenues reflected a resurgence in the global equity markets, including a significant rise in trading volumes during the quarter. The Firm also achieved record net revenues in its Client Services segment, reflecting a record performance in the Asset Management business as assets under management rose to $137 billion. Private Client activity improved during the quarter, largely as a result of an increase in the distribution of equity products following the rally in the equity markets. 2 For the full 2004 fiscal year, net revenues increased 34% to a record $11.6 billion, from $8.6 billion for fiscal 2003, reflecting improved net revenues in each business segment, as well as each of the regions. Non-interest expenses for the quarter were $2.0 billion, compared to $1.6 billion in the fiscal 2003 fourth quarter and $1.9 billion in the trailing quarter of fiscal 2004. Compensation and benefits as a percentage of net revenues was 48.6% during the fourth quarter of fiscal 2004, compared to 48.0% for the fourth quarter of fiscal 2003 and 49.8% for the third quarter of fiscal 2004. For the full fiscal year, compensation and benefits as a percentage of net revenues was 49.5%, compared to 49.9% in fiscal 2003. Nonpersonnel expenses in the fiscal 2004 fourth quarter were $603 million, compared with $473 million in the fiscal fourth quarter of 2003 and $594 million in the fiscal third quarter of 2004. Nonpersonnel expenses for the full fiscal year of 2004 were $2.3 billion compared with $1.8 billion ($1.7 billion excluding a charge related to a global real estate configuration) in fiscal 2003. For the quarter ended November 30, 2004, the Firm's pre-tax margin was 30.5%, compared with 31.4% in the fourth quarter of fiscal 2003. For the full fiscal year, the Firm's pre-tax margin was 30.4%, compared with 29.3% for fiscal 2003. Return on average common equity was 17.0% for the fourth quarter of fiscal 2004, compared with 18.9% for the fourth quarter of fiscal 2003. For the full fiscal year, return on average common equity was 17.9%, compared with 18.2% for fiscal 2003. Return on average tangible common equity was 23.0% for the fourth quarter of fiscal 2004, compared with 20.6% for the fourth quarter of fiscal 2003. For the full fiscal year, return on average tangible common equity was 24.7%, compared with 19.2% for fiscal 2003. As of November 30, 2004, Lehman Brothers' total stockholders' equity was $14.9 billion, and total capital (stockholders' equity and long-term debt) was approximately $71.4 billion. Book value per common share was $49.32. Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high-net-worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private equity and wealth and 3 asset management services. The Firm is headquartered in New York, with regional headquarters in London and Tokyo and operates in a network of offices around the world. For further information about Lehman Brothers' services, products and recruitment opportunities, visit our Web site at www.lehman.com. Conference Call A conference call to discuss the Firm's financial results and outlook will be held at 9:30 a.m., EST on Wednesday, December 15, 2004. The call will be open to the public. Members of the public who would like to access the conference call should dial, from the U.S., 888-456-0338 or from outside the U.S., 212-547-0182. The pass code for all callers is LEHMAN. The conference call will also be accessible through the "Shareholders" section of the Firm's Web site under the subcategory "Webcasts." For those unable to listen to the live broadcast, a replay will be available on the Firm's Web site or by dialing 866-408-8449 (domestic) or 203-369-0633 (international). The replay will be available approximately one hour after the event and will remain available on the Lehman Brothers Web site until 5:00 p.m. EST on January 15, 2005, and by phone until 5:00 p.m. EST on January 7, 2005. Please direct any questions regarding the conference call to Shaun Butler at 212-526-8381, sbutler@lehman.com or Elizabeth Besen at 212-526-2733, ebesen@lehman.com. Cautionary Note Regarding Forward-Looking Statements This press release may contain forward-looking statements. These statements are not historical facts, but instead represent only the Firm's expectations, estimates, and projections regarding future events. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include risks and uncertainties relating to market fluctuations and volatility, industry competition and changes in the competitive environment, investor sentiment, liquidity risks, credit ratings changes, credit exposures and legal and regulatory changes and proceedings. The Firm's actual results and financial condition may differ, perhaps materially, from the anticipated results and financial condition in any such forward-looking statements. The Firm undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. For more information concerning the risks and other factors that could affect the Firm's future results and financial condition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Firm's most recent Annual Report to Shareholders and Quarterly Report on Form10-Q. # # # 4
LEHMAN BROTHERS HOLDINGS INC. SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data) Year Ended Quarters Ended ---------------- --------------------------------------------------------- 2004 2003 11/30/04 8/31/04 5/31/04 2/29/04 11/30/03 ---- ---- -------- ------- ------- ------- -------- Income Statement Net Revenues $11,576 $8,647 $2,883 $2,623 $2,926 $3,144 $2,298 Non-Interest Expenses: Compensation and Benefits 5,730 4,318 1,401 1,306 1,457 1,566 1,103 Non-personnel Expenses 2,309 1,716 603 594 585 527 473 Real Estate Related Charge 19 77 -- -- -- 19 -- Net Income (a) 2,369 1,699 585 505 609 670 481 Net Income Applicable to Common Stock 2,297 1,649 566 487 592 653 464 Earnings per Common Share: (b) Basic $8.36 $6.71 $2.07 $1.79 $2.14 $2.37 $1.82 Diluted $7.90 $6.35 $1.96 $1.71 $2.01 $2.21 $1.71 Financial Ratios (%) Return on Average Common Stockholders' Equity (annualized) (c) 17.9% 18.2% 17.0% 15.0% 18.6% 21.1% 18.9% Return on Average Tangible Common Stockholders' Equity (annualized) (d) 24.7% 19.2% 23.0% 20.9% 26.0% 29.7% 20.6% Pretax Margin (e) 30.4% 29.3% 30.5% 27.6% 30.2% 32.8% 31.4% Compensation and Benefits/Net Revenues 49.5% 49.9% 48.6% 49.8% 49.8% 49.8% 48.0% Effective Tax Rate (f) 32.0% 30.2% 33.5% 30.2% 31.1% 32.8% 30.5% Financial Condition Total Assets $358,500 $340,890 $346,499 $328,064 $312,061 Net Assets (g) 176,620 171,308 175,452 171,600 163,182 Long-Term Debt (h) 56,496 50,043 52,380 50,982 43,529 Preferred Securities Subject to Mandatory Redemption (h) -- -- -- -- 1,310 Common Stockholders' Equity 13,575 13,076 12,831 12,601 12,129 Total Stockholders' Equity 14,920 14,421 14,006 13,776 13,174 Total Stockholders' Equity Plus Junior Subordinated Debt(i) 15,920 15,421 15,391 15,086 14,484 Tangible Equity Capital (g) 12,640 11,763 11,536 11,296 10,681 Total Capital (j) 71,416 64,464 66,386 64,758 58,013 Book Value per Common Share (k) 49.32 48.10 47.05 45.45 44.17 Gross Leverage Ratio(l) 24.0x 23.6x 24.7x 23.8x 23.7x Net Leverage Ratio(g) 14.0x 14.6x 15.2x 15.2x 15.3x Other Data (#s) Employees 19,579 19,286 17,625 16,505 16,188 Assets Under Management (in billions) (m) $136.7 $130.9 $129.3 $128.0 $120.1 Common Stock Outstanding (in millions) 274.2 269.5 272.7 277.2 266.7 Weighted Average Shares (in millions): Basic 274.7 245.7 273.2 272.8 276.8 275.5 254.7 Diluted 290.7 259.9 288.5 285.0 294.2 294.7 271.2 See Footnotes to Selected Statistical Information on page 6. 5 LEHMAN BROTHERS HOLDINGS INC. FOOTNOTES TO SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data) (a) For the year ended November 30, 2004 and the quarter ended February 29, 2004 net income includes a $19 million pre-tax ($11 million after tax) charge related to reconfiguring certain of our real estate. For the year ended November 30, 2003 net income includes a $77 million pre-tax ($45 million after tax) charge related to reconfiguring certain of our real estate. (b) For the year ended November 30, 2004 and the quarter ended February 29, 2004 basic EPS and diluted EPS were both reduced by $0.04 as a result of the real estate charge. For the year ended November 30, 2003 basic EPS was reduced by $0.18 and diluted EPS was reduced by $0.17 as a result of the real estate charge. (c) Return on average common stockholders' equity is computed by dividing annualized net income applicable to common stock for the period by average common stockholders' equity. (See the reconciliation on page 10.) For the year and quarter ended November 30, 2003 average common stockholders' equity was appropriately weighted for the effect of the equity issued in connection with the Neuberger Berman Inc. acquisition on October 31, 2003. For the year ended November 30, 2004 and quarter ended February 29, 2004 return on average common stockholders' equity was reduced by 0.1% and 0.4%, respectively, as a result of the real estate charge. For the year ended November 30, 2003 return on average common stockholders' equity was reduced by 0.5% as a result of the real estate charge. (d) Return on average tangible common stockholders' equity is computed by dividing annualized net income applicable to common stock for the period by average tangible common stockholders' equity. Average tangible common stockholders' equity equals average total common stockholders' equity less average identifiable intangible assets and goodwill. (See the reconciliation on page 10.) For the year and quarter ended November 30, 2003 average tangible common stockholders' equity was appropriately weighted for the effect of the equity issued in connection with the Neuberger Berman Inc. acquisition on October 31, 2003. Management believes tangible common stockholders' equity is a meaningful measure because it reflects the common stockholders' equity deployed in our businesses. For the year ended November 30, 2004 and the quarter ended February 29, 2004 return on average tangible common stockholders' equity was reduced by 0.1% and 0.5%, respectively, as a result of the real estate charge. For the year ended November 30, 2003 return on average tangible common stockholders' equity was reduced by 0.5% as a result of the real estate charge. (e) Pretax margin for the year ended November 30, 2004 and the quarter ended February 29, 2004 was reduced by approximately 0.2% and 0.6%, respectively, as a result of the real estate charge. Pretax margin for the year ended November 30, 2003 was reduced by approximately 0.9% as a result of the real estate charge. (f) The effective tax rate for the year ended November 30, 2004 and the quarter ended February 29, 2004 was reduced by approximately 0.1% and 0.2%, respectively, as a result of the real estate charge. The effective tax rate for the year ended November 30, 2003 was reduced by approximately 0.3% as a result of the real estate charge. (g) Net leverage ratio is defined as net assets (total assets excluding cash and securities segregated and on deposit for regulatory and other purposes, secured financing arrangements, securities received as collateral and identifiable intangible assets and goodwill) divided by tangible equity capital (stockholders' equity plus junior subordinated debt (as defined below) less identifiable intangible assets and goodwill). (See the reconciliation on page 12.) We believe net assets is a more useful measure for investors than total assets when comparing companies in the securities industry because it excludes certain assets considered to have a low risk profile. We believe tangible equity capital to be a more representative measure of our equity for purposes of calculating net leverage because we do not view the amount of equity used to support identifiable intangible assets and goodwill as available to support our remaining net assets. For these reasons, we believe net leverage, based on net assets divided by tangible equity capital, both as defined above, to be a more meaningful measure of leverage to evaluate companies in the securities industry. These definitions of net assets, tangible equity capital and net leverage are used by many of our creditors and a leading rating agency. These measures are not necessarily comparable to similarly-titled measures presented by other companies in the securities industry because of different methods of calculation. (h) At November 30, 2004, August 31, 2004, May 31, 2004 and February 29, 2004, long-term debt includes $1.0 billion, $1.0 billion, $1.4 billion and $1.3 billion, respectively, of junior subordinated debentures issued to trusts that, prior to February 29, 2004, were classified as preferred securities subject to mandatory redemption. On and after February 29, 2004 these amounts are classified as long-term debt pursuant to the adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities--an interpretation of ARB No. 51" (FIN 46). The junior subordinated debentures issued to trusts at November 30, 2004, August 31, 2004, May 31, 2004 and February 29, 2004 and the preferred securities subject to mandatory redemption at the prior period ends are collectively referred to herein as "junior subordinated debt". (i) We believe total stockholders' equity plus junior subordinated debt to be a more meaningful measure of our equity because the junior subordinated debentures issued to trusts are subordinated and have maturities at issuance of 49 years and we can defer interest payments for up to 20 consecutive quarters if the junior subordinated debentures issued to trusts are not in default. In addition, a leading rating agency views these securities as equity capital for purposes of calculating net leverage. (See the reconciliation on page 12.) (j) Total capital includes long-term debt (including junior subordinated debt) and total stockholders' equity. We believe total capital is useful to investors as a measure of our financial strength. (k) The book value per common share calculation includes amortized restricted stock units granted under stock award programs, which have been included in total stockholders' equity. (l) Gross leverage ratio is defined as total assets divided by total stockholders' equity. (m) Assets under management have been restated to include discretionary cash management assets. LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF INCOME (Preliminary and Unaudited) (In millions, except per share data) Three Months Ended % Change from ------------------------------------------ ------------------------- Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, 2004 2004 2003 2004 2003 ----------- ----------- ---------- ---------- ----------- Revenues: Principal transactions $1,264 $1,217 $1,029 (a) Investment banking 608 526 477 (a) Commissions 392 348 335 Interest and dividends 3,350 2,769 2,343 Asset management and other 232 191 70 (a) ----------- ----------- ---------- Total revenues 5,846 5,051 4,254 Interest expense 2,963 2,428 1,956 ----------- ----------- ---------- Net revenues 2,883 2,623 2,298 10% 25% ----------- ----------- ---------- Non-interest expenses: Compensation and benefits 1,401 1,306 1,103 Technology and communications 214 195 157 Brokerage and clearance fees 116 114 95 Occupancy 108 107 89 Professional fees 61 74 53 Business development 56 56 44 Other 48 48 35 ----------- ----------- ---------- Total non-interest expenses 2,004 1,900 1,576 5% 27% ----------- ----------- ---------- Income before taxes and dividends on trust 879 723 722 preferred securities (b) Provision for income taxes 294 218 220 Dividends on trust preferred securities (b) -- -- 21 ----------- ----------- ---------- Net income $585 $505 $481 16% 22% =========== =========== ========== Net income applicable to common stock $566 $487 $464 16% 22% =========== =========== ========== Earnings per common share: Basic $2.07 $1.79 $1.82 16% 14% =========== =========== ========== Diluted $1.96 $1.71 $1.71 15% 15% =========== =========== ========== (a) 2003 reclassified to conform to the 2004 presentation. (b) At February 29, 2004, preferred securities subject to mandatory redemption were reclassified to junior subordinated debentures issued to trusts (a component of long-term debt) pursuant to the adoption of FIN 46. In periods subsequent to February 29, 2004, dividends on trust preferred securities are included in interest expense. See note (h) to the Selected Statistical Information on page 6. 7 LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF INCOME (Preliminary and Unaudited) (In millions, except per share data) Year Ended % Change from --------- -- --------- Nov 30, Nov 30, Nov 30, 2004 2003 2003 --------- --------- ---------------------- Revenues: Principal transactions $5,699 $4,272 (a) Investment banking 2,188 1,722 (a) Commissions 1,537 1,210 Interest and dividends 11,032 9,942 Asset management and other 794 141 (a) --------- --------- Total revenues 21,250 17,287 Interest expense 9,674 8,640 --------- --------- Net revenues 11,576 8,647 34% --------- --------- Non-interest expenses: Compensation and benefits 5,730 4,318 Technology and communications 764 598 Brokerage and clearance fees 453 367 Occupancy 421 319 Professional fees 252 158 Business development 211 149 Other 208 125 Real estate related charge 19 77 --------- --------- Total non-interest expenses 8,058 6,111 32% --------- --------- Income before taxes and dividends on trust preferred securities (b) 3,518 2,536 Provision for income taxes 1,125 765 Dividends on trust preferred securities (b) 24 72 --------- --------- Net income $2,369 $1,699 39% ========= ========= Net income applicable to common stock $2,297 $1,649 39% ========= ========= Earnings per common share: Basic $8.36 $6.71 25% ========= ========= Diluted $7.90 $6.35 24% ========= ========= (a) 2003 reclassified to conform to the 2004 presentation. (b) At February 29, 2004, preferred securities subject to mandatory redemption were reclassified to junior subordinated debentures issued to trusts (a component of long-term debt) pursuant to the adoption of FIN 46. In periods subsequent to February 29, 2004, dividends on trust preferred securities are included in interest expense. See note (h) to the Selected Statistical Information on page 6. 8 LEHMAN BROTHERS HOLDINGS INC. SEGMENT NET REVENUE INFORMATION (Preliminary and Unaudited) (In millions) Three Months Ended % Change from ----------------------------------------------- ------------------------- Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, 2004 2004 2003 2004 2003 ------------ ---------- ------------ ----------- ---------- Investment Banking: Debt Underwriting $288 $241 $275 Equity Underwriting 141 134 110 Merger and Acquisition Advisory 179 151 92 ------------ ---------- ------------ Total 608 526 477 16% 27% ------------ ---------- ------------ Capital Markets: Fixed Income 1,326 1,381 1,123 Equities 497 319 425 ------------ ---------- ------------ Total 1,823 1,700 1,548 7% 18% ------------ ---------- ------------ Client Services: Private Client 212 193 198 Asset Management 240 204 75 ------------ ---------- ------------ Total 452 397 273 14% 66% ------------ ---------- ------------ Total Net Revenues $2,883 $2,623 $2,298 10% 25% ============ ========== ============ Year Ended % Change from -------------------------- Nov 30, Nov 30, Nov 30, 2004 2003 2003 ----------- ---------- --------------------- Investment Banking: Debt Underwriting $1,002 $980 Equity Underwriting 560 363 Merger and Acquisition Advisory 626 379 ----------- ---------- Total 2,188 1,722 27% ----------- ---------- Capital Markets: Fixed Income 5,739 4,391 Equities 1,955 1,627 ----------- ---------- Total 7,694 6,018 28% ----------- ---------- Client Services: Private Client 854 766 Asset Management 840 141 ----------- ---------- Total 1,694 907 87% ----------- ---------- Total Net Revenues $11,576 $8,647 34% =========== ========== 9 LEHMAN BROTHERS HOLDINGS INC. RECONCILIATION OF AVERAGE COMMON STOCKHOLDERS' EQUITY TO AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY (Preliminary and Unaudited) (In millions) Quarter Ended --------------------------------------------------------------------------- Nov 30, Aug 31, May 31, Feb 29, Nov 30, 2004 2004 2004 2004 2003 ------------ ----------- ----------- ------------ ------------- Average common stockholders' equity $13,326 $12,954 $12,716 $12,365 $9,836 Less: average identifiable intangible assets and goodwill (3,469) (3,641) (3,617) (3,586) (836) ------------ ----------- ----------- ------------ ------------- Average tangible common stockholders' $9,857 $9,313 $9,099 $8,779 $9,000 equity ============ =========== =========== ============ ============= Year Ended --------------------------- Nov 30, Nov 30, 2004 2003 ------------ ----------- Average common stockholders' equity $12,843 $9,061 Less: average identifiable intangible assets and goodwill (3,547) (471) ------------ ----------- Average tangible common stockholders' $9,296 $8,590 equity ============ =========== 10 LEHMAN BROTHERS HOLDINGS INC. ASSETS UNDER MANAGEMENT (Preliminary and Unaudited) (In billions) As of ------------------------------------------------- Composition of Assets Under Management Nov 30, Aug 31, Nov 30, 2004 2004 2003 ----------- ----------- ------------ Money Markets $19.0 $20.9 $18.4 Fixed Income 51.7 51.2 49.2 Equity 54.3 48.2 43.1 Alternative Investments 11.7 10.6 9.4 ----------- ----------- ------------ Assets under Management (a) $136.7 $130.9 $120.1 =========== =========== ============ Assets Under Management Rollforward Three Months Year Ended Ended Nov 30, Nov 30, 2004 2004 ------------- ----------- Balance, beginning of period (a) $120.1 $130.9 Net additions 5.6 0.1 Net market appreciation 11.0 5.7 ------------- ----------- Total increase 16.6 5.8 ------------- ----------- Balance, end of period (a) $136.7 $136.7 ============= =========== (a) Total assets under management at August 31, 2004 and November 30, 2003 have been restated to include $4.8 billion and $3.9 billion, respectively, of discretionary cash management assets. 11 LEHMAN BROTHERS HOLDINGS INC. GROSS LEVERAGE and NET LEVERAGE CALCULATIONS (Preliminary and Unaudited) (In millions) Nov 30, Aug 31, May 31, Feb 29, Nov 30, 2004 2004 2004 2004 2003 -------------- ------------- ------------- ------------- ------------- Net assets: Total assets $358,500 $340,890 $346,499 $328,064 $312,061 Less: Cash and securities segregated and on deposit for regulatory and other purposes (4,100) (4,800) (4,606) (3,633) (3,100) Secured financing arrangements (reverse repo and securities borrowed) (169,800) (156,661) (158,441) (143,563) (138,812) Securities received as collateral (4,700) (4,463) (4,376) (5,658) (3,406) Identifiable intangible assets and goodwill (3,280) (3,658) (3,624) (3,610) (3,561) -------------- ------------- ------------- ------------- ------------- Net assets $176,620 $171,308 $175,452 $171,600 $163,182 ============== ============= ============= ============= ============= Tangible equity capital: Total stockholders' equity $14,920 $14,421 $14,006 $13,776 $13,174 Junior subordinated debentures issued to trusts (subject to a limit) (a) 1,000 1,000 1,154 1,130 1,068 Less: Identifiable intangible assets and goodwill (3,280) (3,658) (3,624) (3,610) (3,561) -------------- ------------- ------------- ------------- ------------- Tangible equity capital $12,640 $11,763 $11,536 $11,296 $10,681 ============== ============= ============= ============= ============= Gross leverage (total assets / total stockholders' equity) 24.0x 23.6x 24.7x 23.8x 23.7x Net leverage (net assets / tangible equity capital) 14.0x 14.6x 15.2x 15.2x 15.3x (a) Under the definition of tangible equity capital used by a leading rating agency, the maximum equity credit given to junior subordinated debentures issued to trusts is 10% of tangible equity capital. (Junior subordinated debentures issued to trusts are included in the calculation to determine the limit). Prior to February 29, 2004, junior subordinated debentures issued to trusts were classified as preferred securities subject to mandatory redemption. See note (h) to the Selected Statistical Information on page 6. 12