EX-99 2 f05-12_138kexhibits.txt 8K EXHIBITS 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 REVENUES, NET INCOME AND EARNINGS PER SHARE FOR FISCAL 2005 -Fiscal Fourth Quarter Net Income and Earnings Per Share Increase 41% from the Prior Year- NEW YORK- December 13, 2005 - Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $823 million, or $2.76 per common share (diluted), for the fourth quarter ended November 30, 2005, both up 41% from net income of $585 million, or $1.96 per common share (diluted), in the fourth quarter of fiscal 2004. Third quarter fiscal 2005 net income was $879 million, or $2.94 per common share (diluted). For the 2005 full fiscal year, net income and earnings per common share (diluted) both increased 38% to a record $3.3 billion and $10.87, respectively, compared to $2.4 billion and $7.90, respectively, in fiscal 2004. Full Year Business Highlights o Reported record net income and earnings per share (diluted) for the second consecutive year o Achieved record net revenues in every segment and in every region for the year o Received upgrade from Standard & Poor's, in October 2005, on the Firm's long-term senior debt rating to A+ from A o Became first firm to achieve #1 ranking in all four categories in Institutional Investor's ranking of the best institutional equity trading desks: we were #1 in NYSE-listed trading and NYSE-listed sales-trading and we were #1 in NASDAQ trading and NASDAQ sales-trading o Ranked #1 in both Equity and Fixed Income Research by Institutional Investor's "All-America Research" polls for the third consecutive year o Grew assets under management to a record $175 billion Richard S. Fuld, Jr., chairman and chief executive officer, said, "By every measure, we delivered another strong quarter and finished the year with our best results ever. Record performances for the year across all of our segments and regions continue to demonstrate the diversity, depth and scale of our global franchise. Reaching this new level of performance is a testament to our commitment to deliver the Firm's full platform to our clients worldwide and provide best-in-class total returns to our shareholders." The Firm reported net revenues (total revenues less interest expense) for the fourth quarter of fiscal 2005 of $3.7 billion, an increase of 28% from $2.9 billion reported in the fourth quarter of fiscal 2004 and a decrease of 4% from the $3.9 billion reported in the third quarter of fiscal 2005. Investment Banking revenues were a record for the quarter, increasing 34% to $817 million from $608 million in the fourth quarter of fiscal 2004. These results were driven by record merger and acquisition advisory revenue, which increased 54% from the prior year's period, and solid performances in equity and debt origination, which increased 48% and 15%, respectively, from the prior year's period. Capital Markets net revenues increased 30% to $2.4 billion in the fourth quarter of fiscal 2005 from $1.8 billion in the prior year's fourth quarter on strong performances from both Fixed Income and Equities Capital Markets. Fixed Income Capital Markets revenues increased 22% in the fourth quarter of fiscal 2005 over the prior year's period, primarily due to higher revenues in interest rate products and high grade credit. Equities Capital Markets revenues, which increased 49% compared to the fourth quarter of fiscal 2004, were driven by increased customer flow activity across most products, and represented the second highest quarterly level ever. The Firm also reported its second highest revenue quarter ever in Investment Management, with net revenues increasing 13% to $509 million in the fourth quarter of fiscal 2005, from $452 million in the fourth quarter of fiscal 2004. This strong performance was driven by record revenues in the Private Investment Management business and record assets under management, which grew to $175 billion. In addition, the Firm posted its highest level ever of non-U.S. revenues in the fourth quarter of fiscal 2005, reflecting the Firm's increased scale in Europe and Asia. For the full 2005 fiscal year, net revenues increased 26% to a record $14.6 billion, from $11.6 billion for fiscal 2004, with record net revenues in each business segment and in each region. Non-interest expenses for the fourth quarter of fiscal 2005 were $2.5 billion, compared to $2.6 billion in the third quarter of fiscal 2005 and $2.0 billion in the fiscal 2004 fourth quarter. Compensation and benefits as a percentage of net revenues was 48.7% during the fourth quarter of fiscal 2005 compared to 2 49.5% for the third quarter of fiscal 2005 and 48.6% for the fourth quarter of fiscal 2004. For the full 2005 fiscal year, compensation and benefits as a percentage of net revenues was 49.3%, compared to 49.5% in fiscal 2004. Nonpersonnel expenses in the fiscal 2005 fourth quarter were $675 million, compared with $653 million in the third quarter of fiscal 2005 and $603 million in the fourth quarter of fiscal 2004. Nonpersonnel expenses for the full year of fiscal 2005 were $2.6 billion, compared with $2.3 billion in fiscal 2004. For both the year and quarter ended November 30, 2005, the Firm's pretax margin was 33.0%, compared with 30.5% in the fourth quarter of fiscal 2004 and 30.4% for fiscal 2004. Return on average common equity was 20.9% for the fourth quarter of fiscal 2005, compared with 17.0% for the fourth quarter of fiscal 2004. For the full 2005 fiscal year, return on average common equity was 21.6%, compared with 17.9% for fiscal 2004. Return on average tangible common equity was 26.5% for the fourth quarter of fiscal 2005, compared with 23.0% for the fourth quarter of fiscal 2004. For the full 2005 fiscal year, return on average tangible common equity was 27.8%, compared with 24.7% for fiscal 2004. As of November 30, 2005, Lehman Brothers' total stockholders' equity was $16.8 billion, and total capital (stockholders' equity and long-term debt) was approximately $79.5 billion. Book value per common share was $57.50. 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, 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 today at 9:30 a.m. EST. Members of the public who would like to access the conference call should dial, from the U.S., 888-323-4182 or from outside the U.S., 517-623-4500. 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 866-414-6059 (domestic) or 203-369-0673 (international). The replay will be available approximately one hour after the event and will remain available on the Lehman Brothers 3 Web site until 5:00 p.m. EST on January 30, 2006, and by phone until 5:00 p.m. EST on January 30, 2006. 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 and Quarterly Report on Form 10-Q. # # # 4
LEHMAN BROTHERS HOLDINGS INC. SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data) At or for the Year Ended At or for the Quarter Ended ------------------------------------------------------------------------------ 2005 2004 11/30/05 8/31/05 5/31/05 2/28/05 11/30/04 ---- ---- -------- ------- ------- ------- -------- Income Statement Net Revenues $14,630 $11,576 $3,690 $3,852 $3,278 $3,810 $2,883 Non-Interest Expenses: Compensation and Benefits 7,213 5,730 1,798 1,906 1,623 1,886 1,401 Non-personnel Expenses 2,588 2,309 675 653 642 618 603 Real Estate Reconfiguration Charge -- 19 -- -- -- -- -- Net Income 3,260 2,369 823 879 683 875 585 Net Income Applicable to Common Stock 3,191 2,297 807 864 664 856 566 Earnings per Common Share: Basic $11.47 $8.36 $2.93 $3.10 $2.37 $3.07 $2.07 Diluted $10.87 $7.90 $2.76 $2.94 $2.26 $2.91 $1.96 Financial Ratios Return on Average Common Stockholders' Equity (annualized) (a) 21.6% 17.9% 20.9% 23.0% 18.2% 24.5% 17.0% Return on Average Tangible Common Stockholders' Equity (annualized) (b) 27.8% 24.7% 26.5% 29.4% 23.5% 32.0% 23.0% Pretax Margin 33.0% 30.4% 33.0% 33.6% 30.9% 34.3% 30.5% Compensation and Benefits/Net Revenues 49.3% 49.5% 48.7% 49.5% 49.5% 49.5% 48.6% Effective Tax Rate 32.5% 32.0% 32.4% 32.0% 32.6% 33.0% 33.5% Financial Condition Total Assets $410,000 $384,295 $370,595 $363,692 $357,168 Net Assets (c) 211,340 194,208 193,989 183,387 175,221 Long-Term Debt 62,672 62,920 59,809 59,366 56,486 Common Stockholders' Equity 15,699 15,239 14,783 14,409 13,575 Total Stockholders' Equity 16,794 16,334 15,878 15,754 14,920 Total Stockholders' Equity Plus Junior Subordinated Notes(c) 18,820 18,133 17,384 16,979 15,920 Tangible Equity Capital (c) 15,560 14,871 14,098 13,705 12,636 Total Capital (d) 79,466 79,254 75,687 75,120 71,406 Book Value per Common Share (e) 57.50 54.91 53.27 51.75 49.32 Gross Leverage Ratio(f) 24.4x 23.5x 23.3x 23.1x 23.9x Net Leverage Ratio(c) 13.6x 13.1x 13.8x 13.4x 13.9x Other Data Employees 22,919 22,047 20,717 20,267 19,579 Assets Under Management (in billions) $175 $164 $151 $148 $137 Common Stock Outstanding (in millions) 271.4 269.3 272.5 275.4 274.2 Weighted Average Shares (in millions): Basic 278.2 274.7 275.9 278.6 279.6 278.6 273.2 Diluted 293.6 290.7 292.6 293.7 294.0 294.0 288.5 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) 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. (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 10. 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 notes, less identifiable intangible assets and goodwill. We believe total stockholders' equity plus junior subordinated notes to be a more meaningful measure of our equity because the junior subordinated notes are subordinated and have maturities at issuance from 30 to 49 years. In addition, a leading rating agency views these securities as equity capital for purposes of calculating net leverage. See the reconciliation on page 12. 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. 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 notes) 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 ------------------------------------------ ------------------------- Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, 2005 2005 2004 2005 2004 ----------- ----------- ---------- ---------- ----------- Revenues: Principal transactions $1,887 $2,085 $1,264 Investment banking 817 815 608 Commissions 476 420 392 Interest and dividends 5,627 5,078 3,350 Asset management and other 248 241 232 ----------- ----------- ---------- Total revenues 9,055 8,639 5,846 Interest expense 5,365 4,787 2,963 ----------- ----------- ---------- Net revenues 3,690 3,852 2,883 (4)% 28% ----------- ----------- ---------- Non-interest expenses: Compensation and benefits 1,798 1,906 1,401 Technology and communications 222 217 214 Brokerage and clearance fees 127 127 116 Occupancy 126 122 108 Professional fees 79 72 61 Business development 64 56 56 Other 57 59 48 ----------- ----------- ---------- Total non-interest expenses 2,473 2,559 2,004 (3)% 23% ----------- ----------- ---------- Income before provision for income taxes 1,217 1,293 879 Provision for income taxes 394 414 294 ----------- ----------- ---------- Net income $823 $879 $585 (6)% 41% =========== =========== ========== Net income applicable to common stock $807 $864 $566 (7)% 43% =========== =========== ========== Earnings per common share: Basic $2.93 $3.10 $2.07 (5)% 42% =========== =========== ========== Diluted $2.76 $2.94 $1.96 (6)% 41% =========== =========== ========== 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, 2005 2004 2004 ---------------- ------------- -------------------- Revenues: Principal transactions $7,811 $5,699 Investment banking 2,894 2,188 Commissions 1,728 1,537 Interest and dividends 19,043 11,032 Asset management and other 944 794 ---------------- ------------- Total revenues 32,420 21,250 Interest expense 17,790 9,674 ---------------- ------------- Net revenues 14,630 11,576 26% ---------------- ------------- Non-interest expenses: Compensation and benefits 7,213 5,730 Technology and communications 834 764 Brokerage and clearance fees 503 453 Occupancy 490 421 Professional fees 282 252 Business development 234 211 Other 245 208 Real estate reconfiguration charge - 19 ---------------- ------------- Total non-interest expenses 9,801 8,058 22% ---------------- ------------- Income before taxes and dividends on trust preferred securities 4,829 3,518 Provision for income taxes 1,569 1,125 Dividends on trust preferred securities - 24 ---------------- ------------- Net income $3,260 $2,369 38% ================ ============= Net income applicable to common stock $3,191 $2,297 39% ================ ============= Earnings per common share: Basic $11.47 $8.36 37% ================ ============= Diluted $10.87 $7.90 38% ================ ============= 8 LEHMAN BROTHERS HOLDINGS INC. SEGMENT NET REVENUE INFORMATION (Preliminary and Unaudited) (In millions) Quarter Ended % Change from ----------------------------------------------- ------------------------- Nov 30, Aug 31, Nov 30, Aug 31, Nov 30, 2005 2005 2004 2005 2004 ------------ ------------ ------------ ----------- ---------- Investment Banking: Global Finance - Debt $332 $336 $288 Global Finance - Equity 209 255 141 Advisory Services 276 224 179 ------------ ------------ ------------ Total 817 815 608 -% 34% ------------ ------------ ------------ Capital Markets: Fixed Income 1,624 1,889 1,326 Equities 740 637 497 ------------ ------------ ------------ Total 2,364 2,526 1,823 (6)% 30% ------------ ------------ ------------ Investment Management: Asset Management 265 272 240 Private Investment Management 244 239 212 ------------ ------------ ------------ Total 509 511 452 -% 13% ------------ ------------ ------------ Total Net Revenues $3,690 $3,852 $2,883 (4)% 28% ============ ============ ============ Year Ended ---------------------------- % Change from Nov 30, Nov 30, Nov 30, 2005 2004 2004 ----------- ------------ --------------------- Investment Banking: Global Finance - Debt $1,304 $1,002 Global Finance - Equity 824 560 Advisory Services 766 626 ----------- ------------ Total 2,894 2,188 32% ----------- ------------ Capital Markets: Fixed Income 7,334 5,739 Equities 2,473 1,955 ----------- ------------ Total 9,807 7,694 27% ----------- ------------ Investment Management: Asset Management 1,026 840 Private Investment Management 903 854 ----------- ------------ Total 1,929 1,694 14% ----------- ------------ Total Net Revenues $14,630 $11,576 26% =========== ============ 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 28, Nov 30, 2005 2005 2005 2005 2004 ------------ ----------- ----------- ------------ ------------- Average common stockholders' equity $15,469 $15,011 $14,596 $13,992 $13,326 Less: average identifiable intangible assets and goodwill (3,261) (3,274) (3,280) (3,279) (3,471) ------------ ----------- ----------- ------------ ------------- Average tangible common stockholders' $12,208 $11,737 $11,316 $10,713 $9,855 equity ============ =========== =========== ============ ============= Year Ended --------------------------- Nov 30, Nov 30, 2005 2004 ------------ ----------- Average common stockholders' equity $14,741 $12,843 Less: average identifiable intangible assets and goodwill (3,273) (3,547) ------------ ----------- Average tangible common stockholders' $11,468 $9,296 equity ============ =========== 10 LEHMAN BROTHERS HOLDINGS INC. ASSETS UNDER MANAGEMENT (Preliminary and Unaudited) (In billions) At ----------------------------------------------- Nov 30, Aug 31, Nov 30, Composition of Assets Under Management 2005 2005 2004 --------- --------- --------- Equity $ 75 $ 70 $ 54 Fixed Income 55 53 52 Money Markets 29 26 19 Alternative Investments 16 15 12 ------ ------ ----- Total Assets Under Management $ 175 $ 164 $ 137 ====== ====== ===== Year Ended Quarter Ended ----------------------------- ------------- Nov 30, Nov 30, Nov 30, Assets Under Management Rollforward 2005 2004 2005 --------- -------- --------- Opening balance $ 137 $ 120 $ 164 Net additions 26 6 9 Net market appreciation 12 11 2 ------- ----- ------ Total increase 38 17 11 ------- ----- ----- Ending balance $ 175 $ 137 $ 175 ======= ===== ====== 11 LEHMAN BROTHERS HOLDINGS INC. GROSS LEVERAGE and NET LEVERAGE CALCULATIONS (Preliminary and Unaudited) (In millions) Nov 30, Aug 31, May 31, Feb 28, Nov 30, 2005 2005 2005 2005 2004 -------------- ------------- ------------- ------------- ------------- Net assets: Total assets $410,000 $384,295 $370,595 $363,692 $357,168 Less: Cash and securities segregated and on deposit for regulatory and other purposes (5,700) (4,531) (3,935) (4,278) (4,085) Securities received as collateral (5,000) (5,419) (4,207) (3,767) (4,749) Collateralized agreements (184,700) (176,875) (165,178) (168,986) (169,829) Identifiable intangible assets and goodwill (3,260) (3,262) (3,286) (3,274) (3,284) -------------- ------------- ------------- ------------- ------------- Net assets $211,340 $194,208 $193,989 $183,387 $175,221 ============== ============= ============= ============= ============= Tangible equity capital: Total stockholders' equity $16,794 $16,334 $15,878 $15,754 $14,920 Junior subordinated notes 2,026 1,799 1,506 1,225 1,000 Less: Identifiable intangible assets and goodwill (3,260) (3,262) (3,286) (3,274) (3,284) -------------- ------------- ------------- ------------- ------------- Tangible equity capital $15,560 $14,871 $14,098 $13,705 $12,636 ============== ============= ============= ============= ============= Gross leverage (total assets / total stockholders' equity) 24.4x 23.5x 23.3x 23.1x 23.9x Net leverage (net assets / tangible equity capital) 13.6x 13.1x 13.8x 13.4x 13.9x 12