8-K 1 8-K MARCH 1995 - 11 - 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): March 21, 1995 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 First Quarter 1995 On March 22, 1995, Lehman Brothers Holdings Inc. (the "Registrant") issued a press release with respect to its first quarter 1995 earnings (the "Earnings Release"). Copies of the Earnings Release follow. Debt Ratings On March 21, 1995, Moody's Investor Service lowered the ratings on the Registrant's long-term senior debt from A-3 to Baa-1. Moody's confirmed the Registrants' P-2 rating for its commercial paper. Item 7. Financial Statements and Exhibits (c) Exhibits The following Exhibits are filed as part of this Report. 99.1 Press Release Relating to First Quarter 1995 Earnings 99.2 Selected Statistical Information (Preliminary and Unaudited) 99.3 Consolidated Statement of Operations (Three Months Ended February 28, 1995) (Preliminary and Unaudited) 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/ Robert Matza__________ Robert Matza Chief Financial Officer (Principal Financial Officer) Date: March 24, 1995 EXHIBIT INDEX Exhibit No. Exhibit Exhibit 99.1 Press Release Relating to First Quarter 1995 Earnings Exhibit 99.2 Selected Statistical Information (Preliminary and Unaudited) Exhibit 99.3 Consolidated Statement of Operations (Three Months Ended February 28, 1995) (Preliminary and Unaudited) EXHIBIT 99.1 For Immediate Release MEDIA CONTACT: Steven H. Faigen (212) 526-4379 INVESTOR CONTACT: Shaun Butler (212) 526-8381 LEHMAN BROTHERS REPORTS 1995 FISCAL YEAR FIRST QUARTER EARNINGS NEW YORK, March 22, 1995 _ Lehman Brothers Holdings Inc. (NYSE: LEH) today reported net income of $45 million or $0.31 per share of common stock for the first quarter ended February 28, 1995. By comparison, the Firm reported net income of $46 million for the fourth quarter of 1994 and $42 million for the first quarter of 1994 (or $73 million before an $18 million aftertax severance charge and a $13 million aftertax charge relating to a change in accounting principle). Richard S. Fuld, Jr., Chairman and Chief Executive Officer, said: "Despite the difficult environment, revenues have not varied significantly in any of the last four quarters, while costs have declined. As a result, pre-tax margins have improved for the second quarter in a row. By continuing to focus on cost reduction, enhancing the competitive position of our core businesses and investing to attain critical mass in newer businesses that best leverage existing strengths, we are well positioned to benefit from a market turnaround." Net revenues for the first quarter (total revenues less interest expense) were $707 million versus $708 million in the fourth quarter of 1994 and $868 million in the first quarter of 1994. Principal transaction revenues increased 23 percent versus the fourth quarter of 1994, although these revenues remained below the levels achieved in the first quarter of 1994. Investment banking revenues declined as a result of low levels of fixed income and equity origination, which have persisted since the second quarter of 1994. Non-interest expenses were $637 million versus $643 million for the fourth quarter of last year and $780 million from last year's first quarter. Compensation and benefits expense was $360 million in the first quarter of 1995. This expense was essentially flat versus the fourth quarter of 1994. Compared to the first quarter of 1994, compensation and benefits expense decreased by 20 percent. Nonpersonnel expenses of $277 million decreased by $40 million on an annualized basis from the fourth quarter of 1994 and $80 million versus the first quarter of 1994, excluding the severance charge. At the end of the first quarter, the Firm's headcount was 8,428 versus 8,512 at the end of the fourth quarter of 1994 and down from a peak of 9,400 employees reached during January of 1994. Mr. Fuld added: "Cost reduction remains a priority as the Firm continues to take the steps needed to meet the $300 million annualized savings target set late last year. Headcount continued to decline and nonpersonnel expenses continued their downward trend after reaching a peak in the second quarter of 1994. Using the third quarter of 1994 as a benchmark, total expenses have fallen by approximately $182 million on an annualized basis." As of February 28, 1995, Lehman Brothers' stockholders' equity was $3,426 million and total capital (stockholders' equity and long-term debt) was $14,603 million. Book value per common share was $24.69. Lehman Brothers is a global investment bank with leadership positions in corporate finance, advisory services, municipal finance and securities 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. EXHIBIT 99.2 LEHMAN BROTHERS HOLDINGS INC. SELECTED STATISTICAL INFORMATION (Preliminary and Unaudited) (Dollars in millions, except per share data) Eleven Quarters Ended months ended 2/28/95 11/30/94 8/31/94 6/30/94 3/31/94 November 30, 1994 (a) Income Statement Net Revenues $ 707 $ 708 $ 719 $ 719 $868 $2,738 Non-Interest Expenses: Compensation and Benefits 360 356 388 364 450 1,413 Non-Personnel Expenses 277 287 298 305 297 1,084 After-Tax Income from Operations (excluding special charges) 45 46 22 32 73 156 Special Charges (aftertax): Spin-Off Expenses (12) (12) Severance Charge (18) (18) Accounting Change (13) (13) Net Income 45 46 22 20 42 113 Financial Ratios (%) Return on Common Equity (annualized) 5.1 5.2 1.6 2.8 N/A 4.0 Pre-Tax Operating Margin (excluding) special charges) 9.9 9.1 4.6 6.8 14.0 8.8 Compensation & Benefits/ Net Revenues (b) 50.9 50.3 53.9 50.7 51.8 51.6 Effective Tax Rate 35.8 29.2 35.1 34.6 38.0 33.7 Balance Sheet Total Assets $127,000 $109,947 $121,246 $118,511 $112,277 Total Assets Excluding Matched Book (c) 85,000 72,457 76,677 74,375 71,147 Common Stockholders' Equity 2,718 2,687 2,652 2,602 1,275 Total Stockholders' Equity 3,426 3,395 3,360 3,310 2,033 Total Capital (long- term debt plus stockholders equity) 14,603 14,716 14,187 13,877 12,608 Book Value per Common Share (d) 24.69 24.35 23.97 24.65 N/A Other Data (#s) Common Stock Outstanding 104,494,667 104,537,690 105,528,914 105,554,748 N/A Employees 8,428 8,512 8,926 8,948 9,292
(a) The results for the month of June 1994 are reflected in both the second and third quarters of 1994. Thus the four quarters of 1994 are not additive. (b) For the period ended March 31, 1994, compensation expense excludes the severance charge of $33 million. (c) Matched book is defined as securities purchased under agreements to resell. (d) Beginning August 31, 1994 this calculation includes restricted stock units granted under the 1994 Lehman Stock Award Program. Exhibit 99.3 LEHMAN BROTHERS HOLDINGS INC. CONSOLIDATED STATEMENT OF OPERATIONS (Preliminary and Unaudited) (In millions, except per share data) Three Months Three Months Percentage of Ended Ended Dollar February 28, March 31, Change 1995 1994 (Note 1) Inc/(Dec) Lehman Businesses Revenues: Principal transactions $ 359 $ 462 (22)% Investment banking 137 175 (22) Commissions 105 141 (26) Interest and dividends 2,501 1,527 64 Other 10 16 (38) Total revenues 3,112 2,321 34 Interest expense 2,405 1,453 66 Net revenues 707 868 (19) Non-interest expenses: Compensation and benefits 360 450 (20) Brokerage, commissions and clearance fees 64 74 (14) Communications 47 50 (6) Professional services 42 42 Occupancy and equipment 45 42 7 Business development 29 31 (6) Depreciation and amortization 27 31 (13) Other 23 27 (15) Severance charge 33 Total non-interest expenses 637 780 (18) Income before taxes and cumulative effect of change in accounting principle 70 88 (20) Provision for income taxes 25 33 (24) Income before cummulative effect of change in accounting principle 45 55 (18) Cumulative effect of change in accounting principle (13) Net income $ 45 $ 42 7 Net income applicable to common stock $ 34 $ 30 13 Number of shares used in earnings per 110.2 105.7 common share computation(Note 2) Earnings per common share: Income before cumulative effect of change in accounting principle $0.31 $0.41 Cumulative effect of change in accounting principle (0.12) Net income $0.31 $0.29
Note 1:Certain amounts have been reclassified to conform to the current year's presentation. Note 2:Pursuant to SEC requirements, the number of common shares used in the 1994 calculation of earnings per share includes shares issued in the spin-off.