11-K 1 kl00658_11k.txt FINANCIAL STATEMENTS & SUPPLEMENTAL SCHEDULE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 11-K ---------------- [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ -------------------------------- COMMISSION FILE NUMBER 1-7657 -------------------------------- A. Full title of the plan and the address of the plan, if different from that of the issuer named below: LEHMAN BROTHERS SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: LEHMAN BROTHERS HOLDINGS INC. 745 Seventh Avenue NEW YORK, NY 10019 FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Lehman Brothers Savings Plan Years Ended December 31, 2004 and 2003 with Report of Independent Registered Public Accounting Firm Lehman Brothers Savings Plan Financial Statements and Supplemental Schedule Years Ended December 31, 2004 and 2003 Contents Report of Independent Registered Public Accounting Firm..................... 1 Financial Statements Statements of Net Assets Available for Benefits............................. 2 Statements of Changes in Net Assets Available for Benefits.................. 3 Notes to Financial Statements............................................... 4 Supplemental Schedule Schedule H, Line 4(i)--Schedule of Assets Held at End of Year............... 11 Report of Independent Registered Public Accounting Firm Employee Benefit Plans Committee Lehman Brothers Holdings Inc. We have audited the accompanying statements of net assets available for benefits of the Lehman Brothers Savings Plan (the "Plan") as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan sponsor's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2004 and 2003, and the changes in its net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held at end of year as of December 31, 2004, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan sponsor's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP June 23, 2005 1 Lehman Brothers Savings Plan Statements of Net Assets Available for Benefits December 31, 2004 2003 ---------------------------- (in thousands) Assets Investments, at fair value $ 1,376,184 $ 700,381 Participant loans 9,733 7,507 Other receivables 3,168 2,122 ---------------------------- Total assets 1,389,085 710,010 Liabilities Accrued and other liabilities 169 56 ---------------------------- Net assets available for benefits $ 1,388,916 $ 709,954 ============================ See Notes to Financial Statements. 2 Lehman Brothers Savings Plan Statements of Changes in Net Assets Available for Benefits Years Ended December 31, 2004 2003 --------------------------- (in thousands) Investment income: Interest and dividends $ 20,756 $ 15,746 Net realized and unrealized appreciation in fair value of investments 158,394 116,825 -------------------------- 179,150 132,571 Contributions: Employer 3,751 2,122 Participants 69,351 52,885 Rollovers 11,201 5,446 -------------------------- 84,303 60,453 Transfers in from other Plans: Neuberger Berman Pension and Profit Sharing Plans 472,248 -- -------------------------- 472,248 -- Administrative fees (403) (334) Participant withdrawals (56,336) (32,083) -------------------------- (56,739) (32,417) Net increase 678,962 160,607 Net assets available for benefits, beginning of year 709,954 549,347 -------------------------- Net assets available for benefits, end of year $ 1,388,916 $ 709,954 ========================== See Notes to Financial Statements. 3 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 1. Description of the Plan General The Lehman Brothers Savings Plan (the "Plan") is a defined contribution plan. The Plan became effective January 1, 1984 and was most recently restated on June 14, 2004. Under the terms of the Plan, qualified employees of Lehman Brothers Holdings Inc. ("Lehman") and its participating subsidiaries (collectively, the "Company") are eligible to participate in the Plan as soon as administratively possible following their date of employment. The Neuberger Berman, LLC Profit Sharing Plan and the Neuberger Berman, LLC Pension Plan were merged into the Plan, effective June 14, 2004. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). A complete description of the Plan is contained in the Plan document available to all participants from the Lehman Brothers Holdings Inc. Employee Benefit Plans Committee (the "Plan Administrator"). Contributions Upon enrollment, a participant may elect to contribute, on a pre-tax basis, between one and fifty percent of eligible compensation, as defined in the Plan document. The Company may make a contribution, in Lehman stock or cash, on behalf of eligible participants who have 12 months of service and are employees on the last day of the Plan year. The amount of the contribution, if any, will be determined by the Company's Board of Directors. If a Company contribution is made it will be allocated as follows: 1. Participants with annual compensation below $37,800 per year, who are not Investment Representatives, Investment Representative Trainees, Branch Managers, or Institutional Salespeople, will receive a Company contribution of $400 plus a matching contribution of 100 percent of the first $600 of their pre-tax contributions. 2. Participants with annual compensation between $37,800 and $100,000 per year will receive a matching contribution of up to 100 percent of the first $1,000 of their pre-tax contributions, only if there are funds remaining after contributions are made for the participants making less than $37,800 per year. 3. Company contributions are not made for participants with annual compensation in excess of $100,000 per year. For the 2004 and 2003 plan years, Company contributions were made in cash, which was invested in the Lehman Brothers Common Stock Fund. 4 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 1. Description of the Plan (continued) Participant's pre-tax contributions are not subject to tax until distribution. The Internal Revenue Code of 1986, as amended (the "Code"), provides that pre-tax contributions (and any elective deferrals to other plans containing a cash or deferred arrangement) will be included in a participant's gross income to the extent such contributions exceed the statutory limitation. The maximum limitation amount was $13,000 for 2004 and $12,000 for 2003. The Company's contributions on behalf of a participant, as well as the income and appreciation on amounts invested in the Plan, are also not subject to tax until distributed. As allowed under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), the Plan was amended to allow participants to contribute Catch-Up contributions, as defined in EGTRRA, to the Plan. Any participant who is at least 50 years old as of December 31 of any plan year may elect to contribute, on a pre-tax basis, between one and twenty-five percent of eligible compensation, as defined in the Plan document, as Catch-Up contributions. The maximum limitation for Catch-Up contributions was $3,000 for 2004 and $2,000 for 2003. Rollover contributions represent contributions to the Plan of certain assets previously held on behalf of participants by other qualified plans. Valuation of Participant Accounts Separate accounts are maintained for each participant whereby the participant's account is credited for contributions and credited or charged, as appropriate, for investment experience. Participant accounts are also charged for withdrawals and loans. The periodic allocation of investment experience is based upon the participant's beneficial interest in each of the investment funds on the valuation date. Investments Investment of contributions among the investment funds can be made in increments of 1%, with a maximum of 50% of contributions permitted to be invested in the Lehman Brothers Common Stock Fund ("Lehman Fund"). Participants can elect to change their contribution rate and investment direction of new contributions on a daily basis. Participants may also elect to transfer existing fund balances among investment funds on a daily basis. 5 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 1. Description of the Plan (continued) Investments (continued) The following table presents the fair value of investments held by the Plan at December 31, 2004 and 2003, respectively:
December 31, 2004 2003 ----------------------- (in thousands) Investments, at fair value: Mutual Funds $1,036,631 $ 403,440 Stable Value Fund 187,656 157,882 Lehman Brothers Holdings Inc. Common Stock 111,757 100,655 American Express Company Common Stock 40,138 38,402 Self Directed Accounts 2 2 ----------------------- Total $1,376,184 $ 700,381 ======================= The following table presents the net appreciation in fair value of investments held by the Plan at December 31, 2004 and 2003, respectively: Years Ended December 31, 2004 2003 ----------------------- (in thousands) Net appreciation in fair value of investments: Mutual Funds $ 138,628 $ 74,167 Lehman Brothers Holdings Inc. Common Stock 13,847 32,284 American Express Company Common Stock 5,919 10,374 ----------------------- Total $ 158,394 $ 116,825 =======================
6 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 1. Description of the Plan (continued) Investments (continued) The following is a schedule of investments held in excess of 5% of the net assets available for benefits at the end of 2004 and 2003: Funds Fair Value at December 31, 2004 2003 -------------------------- (in thousands) Neuberger Berman Value Equity $ 476,962 $ - Lehman Brothers Holdings Inc. Common Stock 111,757 100,655 Vanguard Institutional Index 107,479 92,375 Fidelity Large-Cap Stock 77,185 76,340 Putnam International Equity A * 37,427 American Express Company Common Stock Fund * 38,402 * - Investment was less than 5% of the net assets available for benefits Benefits A participant may elect, after attaining the age of 59-1/2, to withdraw all or a portion of the value of their accounts, provided that each withdrawal is at least $1,000 (or is 100% of the value of their account if less than $1,000). Withdrawals by actively employed participants, before the age of 59-1/2, are permitted for pre-tax contributions and pre-1989 earnings thereon, only after meeting specified financial hardship criteria and after obtaining approval from the Employee Benefit Plans Committee of the Company. Participants can elect to withdraw all or a portion of their rollover contributions made to the Plan. Although hardship and rollover withdrawals are allowed, a participant may be subject to an additional 10% tax imposed by the Code. If a participant's employment with the Company terminates for a reason other than death, the participant may receive his distribution in one or more payments at such time and such amount as he elects from time to time, provided that partial distributions must be at least $1,000 and distribution must in all events begin after attainment of age 70-1/2. If a participant's account does not exceed $5,000, payment will be made automatically after termination in an immediate lump sum. Upon death, the balance in the participant's account is paid to the designated beneficiary (as provided by the Plan) in a lump-sum payment, but the beneficiary may elect instead to receive one or more payments over a period of up to five years following death if the account exceeds $5,000. 7 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 1. Description of the Plan (continued) Vesting Plan participants are 100 percent vested in all amounts in their respective Plan accounts. Risks and Uncertainties The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits. Income Tax Status The Plan received a determination letter from the Internal Revenue Service dated August 19, 2003, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. Participant Loans Receivable Participants may borrow from their plan accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. Loan terms range from 1 year to 5 years or up to 10 years for the purchase of a primary residence, as long as documentation is provided. The loans are secured by one half of the balance in the participant's accounts and bear interest at the rate of prime plus one percent. Principal and interest are paid ratably through biweekly, semi-monthly or monthly payroll deductions, depending on the frequency with which the employee is paid. Participants who terminate with outstanding loan balances have 90 days following termination of employment to repay the loan. Loans not repaid in that timeframe (or the grace period for curing the default) will be reported as taxable distributions. Outstanding loan balances will also be treated as taxable distributions for those participants who request a distribution of their account prior to repaying their loan. For the years ended December 31, 2004 and 2003, $624,343 and $694,980, respectively, in outstanding loan balances have been reported as taxable distributions to participants. 8 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 2. Summary of Significant Accounting Policies Valuation of Investments Investments in mutual funds are valued at the quoted redemption prices on the last business day of the Plan year. Investments in the common stock of American Express and the Company are valued at the quoted market price on the last business day of the Plan year. Short-term investments are valued at cost plus accrued interest, which approximate fair value. Deposits with insurance companies in connection with contracts which are fully benefit-responsive, are valued at cost plus accrued interest. Fair value of such contracts approximated $190,665,000 and $163,534,000 as of December 31, 2004 and December 31, 2005, respectively. Interest rates on such contracts reset on a quarterly basis and yields averaged 4.30% and 4.82% for 2004 and 2003, respectively. As of December 31, 2004 and December 31, 2003, the crediting interest rates were 4.38% and 4.33%, respectively. The Funds' investments in such contracts are guaranteed by the insurer as to principal plus interest. No valuation reserves were recorded by the Plan in 2004 and 2003. Unpriced securities are generally not traded on any public exchange and are valued at $0. Purchase and sales of securities are reflected on a trade-date basis. Dividend and Interest Income Dividend income is recorded on the ex-dividend date. Income from other investments is recorded on the accrual basis. Use of Estimates The preparation of financial statements in accordance with United States generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 3. Third Party Administrative Fees Fidelity Management Trust Company holds the investments of the Plan and performs record keeping for the Plan. Except to the extent paid by the Company, all expenses of the Plan are paid by the Plan. In 2004 and 2003, the Plan was charged $403,370 and $335,784 for third party administrative expenses incurred during the respective years. The Company paid all expenses not directly relating to the administration of the Plan. 9 Lehman Brothers Savings Plan Notes to Financial Statements (continued) December 31, 2004 4. Plan Termination While it has not expressed any intent to do so, the Company has the right to terminate the Plan at any time subject to the provisions set forth in ERISA and the Code. 5. Subsequent Events The Plan was amended on February 16, 2005 to discontinue the American Express Stock Fund, effective January 31, 2007. Furthermore, the Plan was also amended to make any direct transfer of assets from the American Express Stock Fund into the Lehman Fund exempt from any Plan provision that limits transfers into the Lehman Fund. The Plan was amended on March 2, 2005 to provide past service credit to anyone employed by SIB Mortgage Corp. on February 29, 2004 who became an employee of the Company on March 1, 2004 and remained employed by a participating affiliate of the Company on December 31, 2004. The Plan was also amended on March 2, 2005 to provide past service credit to anyone employed by CNL Commercial Finance, Inc. on December 17, 2004 who became an employee of the Company on December 18, 2004. 10 Supplemental Schedule EIN: #13-3216325 Plan #003 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held at End of Year December 31, 2004
Par Value/ Current Value Number of at December Shares 31, 2004 ----------------------------------- Stable Value Fund Bank of America Contract #04-009 39,823,147 39,823,147 ING Life Insurance and Annuity Co. Contract # 60014 39,818,746 39,818,746 JPMorgan Chase Bank Contract # 431429 39,821,065 39,821,065 State Street Bank & Trust Contract # 104006 38,866,595 38,866,595 UBS AG Contract # 5186 25,701,998 25,701,998 Fidelity Management Trust Co. (a) Contract # GDLE 3,624,843 3,624,844 ------------------ 187,656,395 Stock Funds American Express Company Common Stock 3,353,210.245 40,137,927 Lehman Brothers Holdings Inc. Common Stock (a) 10,234,173.864 111,757,179 ------------------ 151,895,106 Mutual Funds Fidelity Select Computers (a) 9,227.836 324,358 Fidelity Select Electronics (a) 30,861.523 1,165,948 Fidelity Equity Income (a) 121,118.995 6,392,661 Fidelity Select Software (a) 21,302.126 1,117,723 Fidelity Capital and Income (a) 3,956,581.908 33,512,249 Fidelity Select Biotech (a) 52,926.338 3,051,203 Fidelity Select Healthcare (a) 36,030.594 4,615,159 Fidelity Select Technology (a) 45,775.372 2,755,220 Fidelity Select Telecomm (a) 23,790.745 884,302 Fidelity Asset Manager (a) 1,306,668.028 21,181,089 Fidelity Low Price Stock (a) 851,161.715 34,259,259 Fidelity Diversified International (a) 1,620,597.138 46,413,902 Fidelity Large-Cap Stock (a) 5,279,404.762 77,184,898 Fidelity Freedom 2010 (a) 101,384.743 1,380,860 Fidelity Freedom 2020 (a) 240,928.436 3,363,361 Fidelity Freedom 2030 (a) 209,922.693 2,955,712 Fidelity Select Developing Comm (a) 36,578.528 707,063 Fidelity US Bond Index (a) 3,042,953.417 33,898,501
11 EIN: #13-3216325 Plan #003 Lehman Brothers Savings Plan Schedule H, Line 4(i)--Schedule of Assets Held At End of Year (continued) December 31, 2004
Par Value/ Current Value Number of at December Shares 31, 2004 ----------------------------- Mutual Funds (continued) Fidelity Freedom 2040 (a) 210,255.363 $ 1,738,812 NB Partners Invt (a) 374,119.859 9,386,667 Pimco Emerging Co Is 265,537.280 6,152,499 Pimco TOT Return Adm 1,410,154.364 15,046,347 Drey Fndrs Discvry F 24,344.497 700,391 NB Genesis Trust (a) 0.000 0 NB Genesis Inv (a) 767,781.536 22,910,601 Strong Opportunity 0.000 0 Templeton Dev Mkts A 260,549.849 4,825,383 Janus Adv Wrldwide I 0.000 0 Calamos Growth 586,619.736 31,079,114 Vanguard Institutional Index 970,819.032 107,479,375 LB 10 Uncommon Val (a) 1,370,906.179 17,369,381 Putnam International Equity A 0.000 0 NB Fasciano Invt (a) 137,138.141 5,877,741 MFS Value Fund A 121,748.442 2,817,259 Vanguard Tot Stk Mkt Adm 342,727.088 9,860,258 Hartford Cap App IA 104,639.985 5,591,097 TRP Mid Cap Value 611,610.386 14,060,923 NB High Inc Bond Inv (a) 507,383.124 4,825,214 American Cap World G&I R4 113,420.006 3,840,401 Neuberger Focus Inv (a) 292,282.274 10,995,659 NB International Inv (a) 435,240.649 7,921,380 NB Socially Responsible Inv (a) 92,632.942 2,027,735 NB Value Equity (a) 10,597,262.060 476,961,571 ------------------ 1,036,631,276 Self Directed Accounts Monte Carlo Corp. * 1,000 - Omnimax Inc. * 2,000 - Paratech International Inc. * 4,000 - Buscemi's Intl Inc/New * 20 - Westmore Intl Inc. * 500 - Strips-Tint-05/15/2008 2,000 1,788 First Capital Holdings Corp. * 100 - Access International Education Ltd. 80 8 Xebec * 700 - ------------------ 1,796 Total Investments before Loan Account 1,376,184,573 ------------------ Loan Account 9,732,630 ------------------ Total Investments $ 1,385,917,203 ==================
* Unpriced Securities, valued at zero (a) Indicates party-in-interest to the Plan 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Lehman Brothers Holdings Inc. Employee Benefit Plans Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. LEHMAN BROTHERS SAVINGS PLAN By: /s/ Wendy M. Uvino ------------------------------ Wendy M. Uvino Chairperson Lehman Brothers Holdings Inc. Employee Benefit Plans Committee June 28, 2005 13 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 23 Consent of Independent Auditors 14