EX-99 2 f05-03_158kexhibits.txt EX-99 LEHMAN BROTHERS PRESS RELEASE For Immediate Release Media Contact: Hannah Burns (212) 526-4064 Investor Contact: Shaun Butler (212) 526-8381 LEHMAN BROTHERS REPORTS RECORD QUARTERLY RESULTS - Reports Record Net Revenues, Net Income and Earnings Per Share For First Quarter - NEW YORK, March 15, 2005 -- Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $875 million, or $2.91 per common share (diluted), for the first quarter ended February 28, 2005, representing increases of 31% and 32%, respectively, from net income of $670 million, or $2.21 per common share (diluted), reported for the first quarter of fiscal 2004, and increases of 50% and 48%, respectively, from net income of $585 million, or $1.96 per common share (diluted) for the fourth quarter of fiscal 2004. First Quarter Business Highlights o Achieved record revenues in Investment Banking, Capital Markets, Europe and Asia o Advising on four of the top ten M&A transactions announced in the first fiscal quarter o Grew assets under management to $148 billion from $137 billion at the end of last quarter Richard S. Fuld, Jr., chairman and chief executive officer, said, "This was truly a great quarter. These record results reflect an outstanding performance from all of our businesses and regions and the earnings power of the Firm. We have never been stronger than we are today and are very well-positioned for the future. Our performance and momentum are clearly the result of how well we are working together as one Firm to deliver on our client-focused strategy." The Firm reported record net revenues (total revenues less interest expense) for the first quarter of fiscal 2005 of $3.8 billion, a 21% increase from $3.1 billion in the first quarter of fiscal 2004, and a 32% increase from $2.9 billion in the fourth quarter of fiscal 2004. Investment Banking revenues increased 34% to a record $683 million for the first quarter of fiscal 2005, from $508 million for the same period a year ago, reflecting improved performance across all products, including record results in debt origination and continued strength in M&A activity. Record Capital Markets net revenues, which increased 21% to $2.7 billion from $2.2 billion in the first quarter of fiscal 2004, were driven by record results in Fixed Income Capital Markets and strong results in Equities Capital Markets. The record results in Fixed Income Capital Markets reflect a strong performance across all major businesses, and in particular mortgages and interest rate products. Improved global equity markets and increased secondary activity contributed to another quarter of solid performance in Equities Capital Markets. Investment Management, formerly Client Services, net revenues increased 5% to $437 million for the first quarter of fiscal 2005, from $416 million in the same period a year ago. Net revenues in Asset Management reflected a continued increase in Assets Under Management from strong net inflows as well as market appreciation. A slight decline in Private Investment Management net revenues was largely attributable to a decline in fixed income production as investors allocated a larger proportion of investments into cash. Non-interest expenses were $2.5 billion in the first quarter of fiscal 2005, compared to $2.1 billion in the first quarter of fiscal 2004, and $2.0 billion in the fourth quarter of fiscal 2004. Compensation and benefits as a percentage of net revenues were 49.5% during the first quarter of fiscal 2005, consistent with the Firm's full year 2004 ratio. Non-personnel expenses in the first quarter of fiscal 2005 were $618 million, compared with $527 million (excluding the $19 million 2 real estate reconfiguration charge) in the previous fiscal year's first quarter, and $603 million in the previous fiscal year's fourth quarter. For the quarter ended February 28, 2005, the Firm's pre-tax margin was 34.3% versus 32.8% in the first quarter of fiscal 2004, and 30.5% in the fourth quarter of fiscal 2004. Return on average common equity was 24.5% for the first quarter of fiscal 2005, compared to 21.1% for the first quarter of fiscal 2004, and 17.0% for the fourth quarter of fiscal 2004. Return on average tangible common equity was 32.0% for the first quarter of fiscal 2005, compared with 29.7% for the first quarter of fiscal 2004, and 23.0% for the fourth quarter of fiscal 2004. As of February 28, 2005, Lehman Brothers total stockholders' equity was $15.8 billion, and long-term debt was $59.3 billion (including junior subordinated debentures of $1.2 billion), for total capital of $75.1 billion. Book value per common share was $51.75. 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 investment management, asset management and private equity. The Firm is headquartered in New York, 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 March 15, 2005. 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 866-443-1209 (domestic) or 203-369-1089 (international). The replay will be available approximately one hour after the event and will remain available on the Lehman Brothers Web site until 3 5:00 p.m. EDT on April 15, 2005, and by phone until 11:59 p.m. EDT on April 15, 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 and credit ratings, credit exposures, operational risks and legal and regulatory matters. 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 and, accordingly, readers are cautioned not to place undue reliance on such 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 on Form 10-K. ### 4
LEHMAN BROTHERS HOLDINGS INC. SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data) Quarter Ended ------------------------------------------------------------------ 2/28/05 11/30/04 8/31/04 5/31/04 2/29/04 ------- -------- ------- ------- ------- Income Statement ---------------- Net Revenues $3,810 $2,883 $2,623 $2,926 $3,144 Non-Interest Expenses: Compensation and Benefits 1,886 1,401 1,306 1,457 1,566 Non-personnel Expenses 618 603 594 585 527 Real Estate Reconfiguration Charge -- -- -- -- 19 Net Income 875 585 505 609 670 Net Income Applicable to Common Stock 856 566 487 592 653 Earnings per Common Share: Basic $3.07 $2.07 $1.79 $2.14 $2.37 Diluted $2.91 $1.96 $1.71 $2.01 $2.21 Financial Ratios (%) ---------------- Return on Average Common Stockholders' Equity (annualized) (a) 24.5% 17.0% 15.0% 18.6% 21.1% Return on Average Tangible Common Stockholders' Equity (annualized) (b) 32.0% 23.0% 20.9% 26.0% 29.7% Pretax Margin 34.3% 30.5% 27.6% 30.2% 32.8% Compensation and Benefits/Net Revenues 49.5% 48.6% 49.8% 49.8% 49.8% Effective Tax Rate 33.0% 33.5% 30.2% 31.1% 32.8% Financial Condition ------------------- Total Assets $370,000 $357,168 $340,890 $346,499 $328,064 Net Assets (c) 189,630 175,221 171,308 175,452 171,600 Long-Term Debt 59,320 56,486 50,043 52,380 50,982 Common Stockholders' Equity 14,409 13,575 13,076 12,831 12,601 Total Stockholders' Equity 15,754 14,920 14,421 14,006 13,776 Total Stockholders' Equity Plus Junior Subordinated Debentures(c) 16,979 15,920 15,421 15,391 15,086 Tangible Equity Capital (c) 13,709 12,636 11,763 11,536 11,296 Total Capital (d) 75,074 71,406 64,464 66,386 64,758 Book Value per Common Share (e) 51.75 49.32 48.10 47.05 45.45 Gross Leverage Ratio(f) 23.5x 23.9x 23.6x 24.7x 23.8x Net Leverage Ratio(c) 13.8x 13.9x 14.6x 15.2x 15.2x Other Data (#s) ---------- Employees 20,267 19,579 19,286 17,625 16,505 Assets Under Management (in billions) $147.7 $136.7 $130.9 $129.3 $128.0 Common Stock Outstanding (in millions) 275.4 274.2 269.5 272.7 277.2 Weighted Average Shares (in millions): Basic 278.6 273.2 272.8 276.8 275.5 Diluted 294.0 288.5 285.0 294.2 294.7 See Footnotes to Selected Statistical Information on page 6. 5 LEHMAN BROTHERS HOLDINGS INC. FOOTNOTES TO SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (a) 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 9. (b) 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 9. Management believes tangible common stockholders' equity is a meaningful measure because it reflects the common stockholders' equity deployed in our businesses. (c) Net leverage ratio is defined as net assets (total assets excluding: 1) cash and securities segregated and on deposit for regulatory and other purposes, 2) securities received as collateral, 3) securities purchased under agreements to resell, 4) securities borrowed and 5) identifiable intangible assets and goodwill) divided by tangible equity capital. We believe net assets is a measure more useful to investors than total assets when comparing companies in the securities industry because it excludes certain assets considered to have a low risk profile and identifiable intangible assets and goodwill. We believe tangible equity capital to be a more representative measure of our equity for purposes of calculating net leverage because such measure includes total stockholders' equity plus junior subordinated debentures, less identifiable intangible assets and goodwill. We believe total stockholders' equity plus junior subordinated debentures to be a more meaningful measure of our equity because the junior subordinated debentures 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 are not in default. In addition, a leading rating agency views these securities as equity capital for purposes of calculating net leverage. Further, we do not view the amount of equity used to support identifiable intangible assets and goodwill as available to support our remaining net assets. Accordingly, 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. See the reconciliation on page 11. 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 provided by other companies in the securities industry because of different methods of calculation. (d) Total capital includes long-term debt (including junior subordinated debentures) and total stockholders' equity. We believe total capital is useful to investors as a measure of our financial strength. (e) 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. (f) Gross leverage ratio is defined as total assets divided by total stockholders' equity. 6 LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF INCOME (Preliminary and Unaudited) (In millions, except per share data) Quarter Ended % Change from ----------------------------------------- ------------------------- Feb 28, Nov 30, Feb 29, Nov 30, Feb 29, 2005 2004 2004 2004 2004 ----------- ---------- ---------- ---------- ----------- Revenues: Principal transactions $2,195 $1,264 $1,739 Investment banking 683 608 508 Commissions 411 392 390 Interest and dividends 3,884 3,350 2,304 Asset management and other 218 232 184 ----------- ---------- ---------- Total revenues 7,391 5,846 5,125 Interest expense 3,581 2,963 1,981 ----------- ---------- ---------- Net revenues 3,810 2,883 3,144 32% 21% ----------- ---------- ---------- Non-interest expenses: Compensation and benefits 1,886 1,401 1,566 Technology and communications 200 214 170 Brokerage and clearance fees 120 116 107 Occupancy 119 108 102 Professional fees 62 61 47 Business development 53 56 44 Other 64 48 57 Real estate reconfiguration charge - - 19 ----------- ---------- ---------- Total non-interest expenses 2,504 2,004 2,112 25% 19% ----------- ---------- ---------- Income before taxes and dividends on trust preferred securities (a) 1,306 879 1,032 Provision for income taxes 431 294 338 Dividends on trust preferred securities (a) -- -- 24 ----------- ---------- ---------- Net income $875 $585 $670 50% 31% =========== ========== ========== Net income applicable to common stock $856 $566 $653 51% 31% =========== ========== ========== Earnings per common share: Basic $3.07 $2.07 $2.37 48% 30% =========== ========== ========== Diluted $2.91 $1.96 $2.21 48% 32% =========== ========== ========== (a) We adopted FIN 46R effective February 29, 2004, which required us to deconsolidate the trusts that issued the trust preferred securities. Accordingly, at and subsequent to February 29, 2004, trust preferred securities were reclassified to junior subordinated debentures (a component of Subordinated indebtedness). Dividends on trust preferred securities presented in the Consolidated Statement of Income through February 29, 2004, are included in Interest expense in periods subsequent to February 29, 2004. 7 LEHMAN BROTHERS HOLDINGS INC. SEGMENT NET REVENUE INFORMATION (Preliminary and Unaudited) (In millions) Quarter Ended % Change from -------------------------------------------- ----------------------- Feb 28, Nov 30, Feb 29, Nov 30, Feb 29, 2005 2004 2004 2004 2004 ----------- ---------- ----------- ---------- --------- Investment Banking: Debt Underwriting $326 $288 $217 Equity Underwriting 188 141 143 Merger and Acquisition Advisory 169 179 148 ----------- ---------- ----------- Total 683 608 508 12% 34% ----------- ---------- ----------- Capital Markets: Fixed Income 2,068 1,326 1,601 Equities 622 497 619 ----------- ---------- ----------- Total 2,690 1,823 2,220 48% 21% ----------- ---------- ----------- Investment Management: Private Investment Management 203 212 212 Asset Management 234 240 204 ----------- ---------- ----------- Total 437 452 416 (3)% 5% ----------- ---------- ----------- Total Net Revenues $3,810 $2,883 $3,144 32% 21% =========== ========== =========== 8 LEHMAN BROTHERS HOLDINGS INC. RECONCILIATION OF AVERAGE COMMON STOCKHOLDERS' EQUITY TO AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY (Preliminary and Unaudited) (In millions) Quarter Ended ---------------------------------------------------------------------------- Feb 28, Nov 30, Aug 31, May 31, Feb 29, 2005 2004 2004 2004 2004 ------------ ------------ ------------ ------------ ------------ Average common stockholders' equity $13,992 $13,326 $12,954 $12,716 $12,365 Less: average identifiable intangible assets and goodwill (3,277) (3,471) (3,641) (3,617) (3,586) ------------ ------------ ------------ ------------ ------------ Average tangible common stockholders' $10,715 $ 9,855 $ 9,313 $ 9,099 $ 8,779 equity ============ ============ ============ ============ ============ 9 LEHMAN BROTHERS HOLDINGS INC. ASSETS UNDER MANAGEMENT (Preliminary and Unaudited) (In billions) Feb 28, Nov 30, Feb 29, Composition of Assets Under Management 2005 2004 2004 ---- ---- ---- Money Markets $ 21.8 $ 19.0 $ 20.1 Fixed Income 53.7 51.7 50.5 Equity 59.1 54.3 47.5 Alternative Investments 13.1 11.7 9.9 -------- -------- -------- Assets under Management $147.7 $136.7 $128.0 (a) ====== ====== ====== Quarter Ended --------------------------------------------- Feb 28, Nov 30, Feb 29, Assets Under Management Rollforward 2005 2004 2004 ---- ---- ---- Balance, beginning of period $136.7 $130.9 $120.1 Net additions 7.0 0.1 2.9 Net market appreciation 4.0 5.7 5.0 -------- -------- -------- Total increase 11.0 5.8 7.9 ------- -------- -------- Balance, end of period $147.7 $136.7 $128.0 (a) ====== ====== ====== (a) Total assets under management at February 29, 2004 have been restated to include $4.2 billion of discretionary cash management assets. 10 LEHMAN BROTHERS HOLDINGS INC. GROSS LEVERAGE and NET LEVERAGE CALCULATIONS (Preliminary and Unaudited) (In millions) Feb 28, Nov 30, Aug 31, May 31, Feb 29, 2005 2004 2004 2004 2004 ------------ ------------- -------------- ------------- ------------ Net assets: Total assets $370,000 $357,168 $340,890 $346,499 $328,064 Less: Cash and securities segregated and on deposit for regulatory and other purposes (4,300) (4,085) (4,800) (4,606) (3,633) Secured financing arrangements (reverse repo and securities borrowed) (169,000) (169,829) (156,661) (158,441) (143,563) Securities received as collateral (3,800) (4,749) (4,463) (4,376) (5,658) Identifiable intangible assets and goodwill (3,270) (3,284) (3,658) (3,624) (3,610) ------------ ------------- -------------- ------------- ------------ Net assets $189,630 $175,221 $171,308 $175,452 $171,600 ============ ============= ============== ============= ============ Tangible equity capital: Total stockholders' equity $15,754 $14,920 $14,421 $14,006 $13,776 Junior subordinated debentures (subject to a limit) (a) 1,225 1,000 1,000 1,154 1,130 Less: Identifiable intangible assets and goodwill (3,270) (3,284) (3,658) (3,624) (3,610) ------------ ------------- -------------- ------------- ------------ Tangible equity capital $13,709 $12,636 $11,763 $11,536 $11,296 ============ ============= ============== ============= ============ Gross leverage (total assets / total stockholders' equity) 23.5x 23.9x 23.6x 24.7x 23.8x Net leverage (net assets / tangible equity capital) 13.8x 13.9x 14.6x 15.2x 15.2x (a) Under the definition of tangible equity capital used by a leading rating agency, the maximum equity credit given to junior subordinated debentures is 10% of tangible equity capital. (Junior subordinated debentures are included in the calculation to determine the limit). 11