<PAGE> 1
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): January 24, 1994
LEHMAN BROTHERS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-6817 13-2518466
(Commission File Number) (IRS Employer Identification No.)
Three World Financial Center
New York, New York 10285
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including
area code: (212) 298-2000
----------------------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS.
FOURTH QUARTER AND YEAR-TO-DATE 1993 EARNINGS
Filed herewith are the preliminary and unaudited Consolidated
Statements of Operations of Lehman Brothers Inc. ("the Company"), for the
quarter and year ended December 31, 1993, which Consolidated Statements of
Operations will be superseded by information contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993. All adjustments
which are, in the opinion of management, necessary for a fair presentation of
the Consolidated Statements of Operations for the periods presented have been
included. Certain amounts for fourth quarter and year-to-date 1992 reflect
reclassifications to conform to the current periods' presentation. In
addition, filed herewith are unaudited pro forma Consolidated Statements of
Operations for the years ended December 31, 1993 and 1992, respectively, which
reflect, among other things, the elimination of revenues and expenses of
certain of the Company's retail and asset management businesses, as well as
certain other assets related to such businesses (the "SLBD Results of
Operations"), the loss on the sale of such businesses and the sale of a
non-core business. The presentation herein of historical information for 1993
(the "Current Presentation") differs from the presentations set forth in the
Reports on Form 10-Q for the first, second and third quarters of 1993, which
presentations reflect SLBD Results of Operations, the loss on the sale of such
businesses and reserves for certain non-core businesses in one line item called
"Retail/Asset Management." In the Current Presentation, SLBD Results of
Operations are included in all applicable line items through July 31, 1993 (the
date of the closing of the sale of the Company's retail and asset management
businesses).
LEHMAN BROTHERS HOLDINGS INC. TO BECOME INDEPENDENT CORPORATION
On January 24, 1994, American Express Company ("American Express")
announced plans to issue a special dividend to its common shareholders. Such
special dividend will consist of the common shares of Lehman Brothers Holdings
Inc. (the "Parent") which American Express owns immediately preceding such
dividend, including common stock which it receives in exchange for the Parent's
$250 million Money Market Cumulative Preferred(sm) Stock. Prior to the issuance
of such dividend, the Parent's equity capital will increase by $1.25 billion,
bringing its equity capital to approximately $3.3 billion. The additional
equity will be the result of the purchase of i) $160 million of newly-issued
Parent common stock by certain employees of the Parent and its subsidiaries
(including the Company), approximately $60 million of which would come from an
employee ownership plan that was established in 1993; and ii) $200 million of
newly-issued Parent preferred stock and $890 million of newly-issued Parent
common stock, each by American Express.
In addition, American Express' plan to spin-off the Parent provides
that American Express would receive 50% of any of the Parent's net income in
excess of $400 million per year, with a cap of $50 million per year, for each
of the next eight years. Such plan also
- 2 -
<PAGE> 3
provides for American Express to receive certain contingent revenue and
earnings related participations due to the Company from Travelers Corporation
for a period of three and five years, respectively, in connection with the sale
last year of the Company's retail and asset management businesses.
Final terms of the proposed transaction, which is subject to certain
conditions, have not yet been determined. The completion of the proposed
transaction, which is expected to occur during the second quarter of 1994,
would result in the Parent emerging as an independent publicly owned
corporation.
The Company does not expect the proposed transaction to affect its
capital structure, liquidity or results of operations; therefore, such
transaction is not reflected in the Company's Pro Forma Financial Statements
which are exhibits hereto.
- 3 -
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information:
LEHMAN BROTHERS INC.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth in Exhibits
99.3, 99.4 and 99.5 is presented in order to illustrate the effects of
the elimination of the SLBD Results of Operations, the loss on the
sale of certain of the Company's retail and asset management
businesses and the sale of Shearson Lehman Hutton Mortgage Corporation
(the "SLHMC Transaction").
The pro forma financial statements for the Company assume for
statement of operations purposes that the Primerica Transaction (as
hereinafter defined) and the SLHMC Transaction were consummated as of
the first day of the period reported and assume for balance sheet
purposes that such Transactions were consummated on the last day of
the period reported.
The pro forma financial information is presented for comparative
purposes only and is not necessarily indicative of the Company's
results of operations or financial position in the future or of what
the Company's results of operations or financial position would have
been had the Primerica Transaction and the SLHMC Transaction been
consummated on or as of the dates referred to in the immediately
preceding paragraph. The pro forma financial information should be
read in conjunction with the consolidated financial statements of the
Company and the notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.
<TABLE>
<S> <C>
(c) Exhibits
The following Exhibits are filed as a part of this Report.
99.1 Consolidated Statement of Operations
(Three Months Ended December 31, 1993)
(Preliminary and Unaudited)
99.2 Consolidated Statement of Operations
(Year Ended December 31, 1993)
(Preliminary and Unaudited)
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
<S> <C>
99.3 Historical and Pro Forma Consolidated
Statements of Operations
(Year Ended December 31, 1993)
(Unaudited)
99.4 Historical and Pro Forma Consolidated
Statements of Operations
(Year Ended December 31, 1992)
(Unaudited)
</TABLE>
The Exhibit Index to this Report is incorporated herein by reference.
- 5 -
<PAGE> 6
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 INC.
BY: /S/ ROBERT MATZA
---------------------
ROBERT MATZA
CHIEF FINANCIAL OFFICER
DATE: FEBRUARY 24, 1994
- 6 -
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
Exhibit 99.1 Consolidated Statement of Operations
(Three Months Ended December 31, 1993)
(Preliminary and Unaudited)
Exhibit 99.2 Consolidated Statement of Operations
(Year Ended December 31, 1993)
(Preliminary and Unaudited)
Exhibit 99.3 Historical and Pro Forma
Consolidated Statements of Operations
(Year Ended December 31, 1993)
(Unaudited)
Exhibit 99.4 Historical and Pro Forma
Consolidated Statements of Operations
(Year Ended December 31, 1992)
(Unaudited)
</TABLE>
- 7 -
<PAGE> 1
LEHMAN BROTHERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Preliminary and unaudited
(in millions)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------------
<S> <C> <C>
Revenues 1993 1992
---- ----
Market making and principal transactions $ 271 $ 316
Investment banking 184 119
Commissions 111 416
Interest and dividends 1,236 1,245
Other 14 179
----- -----
Total Revenues 1,816 2,275
Interest Expense 1,137 1,113
----- -----
Net Revenues 679 1,162
----- -----
Non-interest expenses
Compensation and benefits 348 712
Communications 34 84
Brokerage, commissions and clearance fees 33 28
Professional services 31 42
Occupancy and equipment 20 77
Advertising and market development 24 51
Depreciation and amortization 24 41
Other 32 132
----- -----
Total non-interest expenses 546 1,167
----- -----
Income (loss) from continuing operations before taxes
and preferred dividend of subsidiary 133 (5)
Provision for (benefit from) income taxes 33 (4)
----- -----
Income (loss) from continuing operations before preferred
dividend of subsidiary 100 (1)
Income from discontinued operations, net of taxes 21
Preferred dividend of subsidiary (17) (17)
----- -----
Net income $ 83 $ 3
====== =====
</TABLE>
<PAGE> 1
LEHMAN BROTHERS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Preliminary and unaudited
(in millions)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
Revenues 1993 1992
---- ----
<S> <C> <C>
Market making and principal transactions $1,376 $1,509
Commissions 1,265 1,641
Investment banking 794 720
Interest and dividends 5,029 4,974
Other 467 676
------ ------
Total Revenues 8,931 9,520
Interest Expense 4,585 4,573
------ ------
Net Revenues 4,346 4,947
------ ------
Non-interest expenses
Compensation and benefits 2,564 2,982
Communications 271 332
Occupancy and equipment 186 266
Professional services 154 163
Advertising and market development 131 176
Depreciation and amortization 135 167
Brokerage, commissions and clearance fees 112 92
Other 263 450
Loss on sale of SLBD 535
Reserves for non-core businesses 141
------ ------
Total non-interest expenses 4,492 4,628
------ ------
(Loss) income from continuing operations before taxes,
cumulative effect of changes in accounting
principles and preferred dividend of subsidiary (146) 319
Provision for income taxes 234 147
------ ------
(Loss) income from continuing operations before
cumulative effect of changes in accounting principles and
preferred dividend of subsidiary (380) 172
Income from discontinued operations, net of taxes
Income from operations 24 77
Gain on disposal 165
------ ------
189 77
------ ------
(Loss) income before cumulative effect of changes
in accounting principles and preferred dividend of
subsidiary (191) 249
Cumulative effect of changes in accounting
principles (8)
Preferred dividend of subsidiary (68) (68)
------ ------
Net (loss) income $ (259) $ 173
====== ======
</TABLE>
<PAGE> 1
LEHMAN BROTHERS INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in millions)
<TABLE>
<CAPTION>
Year Ended December 31, 1993
--------------------------------------------------------------------------
Pro Forma Adjustments
----------------------------------------------------------
Revenues
Historical SLBD SLHMC Total
---------- ---- ----- -----
<S> <C> <C> <C> <C>
Market making and principal transactions $1,376 $(323)(a) $1,053
Commissions 1,265 (828)(a) 437
Investment banking 794 (170)(a) 624
Interest and dividends 5,029 (148)(a) $ (13)(b) 4,868
Other 467 (356)(a) (56)(b) 55
------- ------ ------ -------
Total Revenues 8,931 (1,825) (69) 7,037
Interest Expense 4,585 (125)(a),(d) (7)(b) 4,453
------ ------- ------- ------
Net Revenues 4,346 (1,700) (62) 2,584
------ ------- ------- ------
Non-interest Expenses
Compensation and benefits 2,564 (1,147)(a) (17)(b) 1,400
Communications 271 (126)(a) (4)(b) 141
Occupancy and equipment 186 (104)(a) (3)(b) 79
Professional services 154 (40)(a) (2)(b) 112
Advertising and market development 131 (33)(a) (1)(b) 97
Depreciation and amortization 135 (44)(a) 91
Brokerage, commissions and clearance fees 112 32 (a) 144
Other 263 (110)(a) (35)(b) 118
Loss on sale of SLBD 535 (535)(a)
Reserves for non-core businesses 141 (120)(c) 21
------ -------- ------- -------
Total non-interest Expenses 4,492 (2,107) (182) 2,203
------ -------- ------- -------
(Loss) income from continuing operations
before taxes (146) 407 120 381
Provision for income taxes 234 (153)(a),(e) 41 122
------ ------- ------- ------
(Loss) income from continuing operations $(380) $ 560 $ 79 $ 259
====== ====== ====== =====
</TABLE>
<PAGE> 2
LEHMAN BROTHERS INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
For the Year Ended December 31, 1993
- ------------------------------------
Since The Boston Company, Inc. ("Boston") is reported as a
discontinued operation in the Company's financial statements, its results are
not reflected in the Company's 1993 results from continuing operations. The
pro forma adjustments to the statement of operations give effect to the items
described below:
a) Adjustment reflects the elimination of revenues and expenses of
certain of the Company's retail and asset management businesses,
as well as certain other assets related to such businesses
("SLBD") and the loss on the sale of such assets (the "Primerica
Transaction"). (Primerica Corporation was a predecessor in
interest of Travelers Corporation). Also eliminated is the
income tax expense of $149 million related to these items.
b) Adjustment reflects the elimination of revenues and expenses of
SLHMC.
c) Adjustment to reserves for non-core businesses reflects the
elimination of the reserves related to the sale of SLHMC. Also
eliminated is the income tax benefit of $41 million related to
these items. Adjustments have not been made for reserves taken
in the first quarter of 1993 related to certain non-core
partnership syndication activities in which the Company is no
longer actively engaged.
d) Adjustment reflects reduced interest expense of approximately $61
million resulting from the utilization of cash proceeds (from the
sales of Boston, SLBD and SLHMC) to reduce the Company's
short-term debt and term notes, certain of which notes were
obligations owed to Holdings, offset by interest expense of $72
million allocated to SLBD and SLHMC for the carrying costs of
buildings, improvements and equipment and certain acquisition
related debt, which is not directly eliminated by the Primerica
Transaction or the sale of SLHMC other than through the
utilization of available sales proceeds.
e) Adjustment (d) is tax effected at a rate of 40%.
<PAGE> 1
LEHMAN BROTHERS INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in millions)
<TABLE>
<CAPTION>
Year Ended December 31, 1992
---------------------------------------------------------------
Pro Forma Adjustments
-----------------------------------------------
Revenues
Historical SLBD SLHMC Total
---------- ------- ------ ------
<S> <C> <C> <C> <C>
Market making and principal transactions $1,509 $ (575)(a) $ 934
Commissions 1,641 (1,231)(a) 410
Investment banking 720 (218)(a) 502
Interest and dividends 4,974 (226)(a) $ (31)(b) 4,717
Other 676 (531)(a) (88)(b) 57
------ ------- ------ ------
Total Revenues 9,520 (2,781) (119) 6,620
Interest Expense 4,573 (252)(a),(c) (24)(b) 4,297
------ ------ ------ ------
Net Revenues 4,947 (2,529) (95) 2,323
------ ------- ------ ------
Non-interest Expenses
Compensation and benefits 2,982 (1,736)(a) (23)(b) 1,223
Communications 332 (194)(a) (6)(b) 132
Occupancy and equipment 266 (183)(a) (4)(b) 79
Professional services 163 (66)(a) (3)(b) 94
Advertising and market development 176 (84)(a) (2)(b) 90
Depreciation and amortization 167 (89)(a) (1)(b) 77
Brokerage, commissions and clearance fees 92 52 (a) 144
Other 450 (136)(a) (61)(b) 253
------ ------ ------ ------
Total non-interest Expenses 4,628 (2,436) (100) 2,092
------ ------- ------ ------
Income from continuing operations
before taxes and cumulative effect of
changes in accounting principles 319 (93) 5 231
Provision for income taxes 147 (49)(a),(d) 2(b) 100
------ ------ ----- ------
Income from continuing operations
before cumulative effect of changes
in accounting principles $ 172 $ (44) $ 3 $ 131
===== ======= ====== ======
</TABLE>
<PAGE> 2
LEHMAN BROTHERS INC. AND SUBSIDIARIES
HISTORICAL AND PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
For the Year Ended December 31, 1992
Since Boston is reported as a discontinued operation in the Company's financial
statements, its results are not reflected in the Company's 1992 results from
continuing operations. The pro forma adjustments to the statement of
operations give effect to the items described below:
a) Adjustment reflects the elimination of revenues and expenses of
SLBD.
b) Adjustment reflects the elimination of revenues and expenses of
SLHMC.
c) Adjustment reflects reduced interest expense of approximately
$121 million resulting from the utilization of cash proceeds to
reduce the Company's short-term debt and term notes, certain of
which notes were obligations owed to Holdings, offset by interest
expense of $102 million allocated to SLBD and SLHMC for the
carrying costs of buildings, improvements and equipment and
certain acquisition related debt, which is not directly
eliminated by the Primerica Transaction or the SLHMC Transaction
other than through the utilization of available sales proceeds.
d) Adjustment (c) is tax effected at a rate of 40%.
