<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): July 19, 1994
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
----------------------------------------
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Item 5. OTHER EVENTS
SECOND QUARTER AND YEAR-TO-DATE 1994 EARNINGS
On July 19, 1994, Lehman Brothers Holdings Inc. (the
"Registrant") issued a press release with respect to its second
quarter and year-to-date 1994 earnings (the "Earnings Release").
In addition, on July 19, 1994 the Registrant also issued a press
release (the "Stock Award Release") in which it announced that
the Compensation and Benefits Committee of the Board of
Directors of the Registrant had approved the Lehman Brothers
Stock Award Program pursuant to which certain salaried, bonus
eligible employees will receive an award of restricted stock
units as a pre-tax advance against 1994 bonuses.
Copies of the Earnings Release and the Stock Award Release
follow.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following Exhibits are filed as part of this Report.
<TABLE>
<S> <C>
99.1 Press Release Relating to Second
Quarter 1994 Earnings
99.2 Selected Statistical Information
99.3 Consolidated Statement of Operations
(Three Months Ended June 30, 1994) (Preliminary and Unaudited)
99.4 Consolidated Statement of Operations
(Six Months Ended June 30, 1994) (Preliminary and Unaudited)
99.5 Press Release Relating to Lehman Brothers Stock Award Program
</TABLE>
The Exhibit Index to this Report is incorporated herein by reference.
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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: July 29, 1994
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EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to
Second Quarter 1994 Earnings
Exhibit 99.2 Selected Statistical Information
Exhibit 99.3 Consolidated Statement of Operations
(Three Months Ended June 30, 1994)
(Preliminary and Unaudited)
Exhibit 99.4 Consolidated Statement of Operations
(Six Months Ended June 30, 1994)
(Preliminary and Unaudited)
Exhibit 99.5 Press Release Relating to
Lehman Brothers Stock Award Program
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<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
LEHMAN BROTHERS
NEWS RELEASE
For Immediate Release Contact: Steven Faigen
(212) 526-4379
Public Relations
Shaun Butler
(212) 526-8381
Investor Relations
LEHMAN BROTHERS REPORTS SECOND QUARTER AND HALF-YEAR RESULTS
NEW YORK, July 19, 1994 -- Lehman Brothers Holdings Inc. today reported second
quarter net income from operations of $32 million compared to net income of $95
million for the businesses that comprised Lehman in the second quarter of 1993.
After accounting for the after-tax charge of $12 million relating to the Firm's
May 31 spin-off from the American Express Company, the Firm posted net income
of $20 million.
Quarterly earnings per common share were $0.11 and, when adjusted for the
spin-off charge, were $0.23. Both figures are adjusted for the shares
outstanding on the date of the Firm's spin-off from American Express.
Richard S. Fuld, Jr., Chairman and Chief Executive Officer, stated, "We are
pleased to be an independent public company, with a strong capital base that
will allow us to grow our business over time. The difficult market environment
that existed during our first quarter as an independent company clearly
affected our operating results. Lower syndicate volumes in both equities and
fixed income had a significantly adverse effect on our business. Market
volatility also impaired the profitability of our customer flow activity in
certain areas, resulting in a less favorable business mix. Higher revenue
performance from our mortgage-backed, derivatives, financial advisory and non
U.S. businesses helped to offset some of the weaknesses in our other business
activities."
Mr. Fuld added, "Despite the current environment, we continue to build Lehman's
global presence and remain committed to our client/customer-driven strategy.
While we recognize that continued investment is required to position the firm
for future growth and greater operating efficiencies, we must also continue our
cost reduction efforts."
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Revenues
Net revenues (gross revenues less interest expense) of $696 million for the
second quarter, declined by 22% from the prior year's period. The decrease in
net revenues reflected adverse market conditions in both the United States and
Europe that led to the sharp declines in underwriting and market making
activities.
Market making and principal transactions were $361 million, down 17% from the
prior year's quarter. Rising interest rates and increased market volatility
reduced the Firm's profitability in its customer flow activity and contributed
to lower revenues in fixed income, equities and foreign exchange. These
decreases were offset, in part, by stronger revenues in U.S. and foreign
governments, mortgage-backed securities and derivatives.
Investment banking revenues of $151 million represented a 27% decline from the
prior year's period. Revenues were impacted by a weak syndicate calendar in
fixed income and equities, offset, in part, by stronger results from financial
advisory activities. Despite the weaker underwriting environment, Lehman was
ranked the number two underwriter of U.S. debt and equity and the number four
underwriter of debt and equity worldwide, for the half year ended June 30,
1994.
Net interest and dividend revenues of $54 million decreased by 53% from the
prior year's period, reflecting the combination of reduced spreads on fixed
income products, higher funding costs and changes in hedging strategies.
Commission revenues of $117 million for the quarter were down slightly year to
year, with relatively sustained volumes of customer activity in listed
securities.
Expenses
Non-interest expenses of $646 million, excluding the spin-off charge, reflected
a 12% decline from last year's second quarter. Consistent with the lower
levels of business activity in the quarter, compensation and benefits decreased
to $364 million from $476 million in the prior year.
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Other non-interest expenses, excluding compensation and benefits and spin-off
expenses, increased 10% to $282 million in the second quarter of 1994.
Increases in these expense categories, which are less sensitive to business
volumes, reflected ongoing investments in the Firm's international franchise as
well as additional investments in systems and technology.
Capital
At June 30, 1994, Lehman's stockholders' equity was $3,310 million and total
capital (stockholders' equity and long-term debt) was $13,877 million. The
infusion of $1,050 million of common equity and $200 million of preferred
stock, in connection with the Firm's spin-off from American Express, occurred
in late May, 1994. Proceeds from the capital increase were used to repay
commercial paper and short-term debt.
Six Month Results
Net income from operations for the first half of 1994 was $87 million, before
the above-mentioned spin-off expenses as well as a charge of $13 million in
the first quarter related to the implementation of SFAS No. 112. Including
these charges, net income for the first half of 1994 was $62 million, down 52%
from the $129 million posted in 1993 for the Lehman businesses. For the first
six months of 1994, earnings per common share were $0.40; six month earnings
per share were $0.63, before charges for the spin-off and SFAS No. 112.
In March, 1994, the Lehman Board of Directors approved a change in the Firm's
fiscal year from December 31 to November 30. Consequently, the Firm will
report its next quarterly earnings period for the three months ended August 31,
1994.
Lehman Brothers Holdings Inc. is one of the leading global investment banks
serving institutional, corporate, government and high net worth individual
clients and customers through offices in New York, London, Tokyo and other
major cities, worldwide.
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EXHIBIT 99.2
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Lehman Brothers Holdings Inc.
Selected Statistical Information
(Preliminary and Unaudited)
<TABLE>
<CAPTION>
Lehman
Businesses
----------
6/30/94 3/31/94 6/30/93
------- ------- -------
<S> <C> <C> <C>
Balance Sheet (Dollars in Millions)
Total Assets (a) $119,000 $112,277 $105,495
Total Assets Excluding Matched Book (b) 75,000 71,147 60,423
Common Stockholders' Equity 2,601 1,275 1,224
Total Stockholders' Equity 3,310 2,033 1,982
Total Capital (long-term debt plus
stockholders' equity) 13,877 12,608 10,694
Financial Ratios (for the 3 months
ended)
Book Value per Common Share $24.64 N/A N/A
Return on Equity (%) 2.8 N/A N/A
Pretax Operating Margin (%) 7.0 10.4 18.0
Compensation & Benefits/Net
Revenues (%) (c) 52.3 53.1 53.3
Effective Tax Rate (%) (d) 34.6 38 41.1
Other Data (#s)
Common Stock Outstanding 105,557,170 N/A N/A
Employees 8,948 9,292 N/A
</TABLE>
(a) Reflects the FIN 39 adjustment to reported assets of $85.3 billion at June
30, 1993.
(b) Matched book defined as securities purchased under agreements to resell.
(c) For the period ended March 31, 1994, compensation expense excludes the
severance charge of $33 million.
(d) For the period ended June 30, 1994, the actual tax rate was 41.6%,
reflecting the non-deductibility of certain
spin-off expenses.
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EXHIBIT 99.3
<PAGE> 2
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS 5
(PRELIMINARY AND UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
Three Months June 30, 1993 (Note 1) Percentage of Dollar
Ended ------------------------------------ Change Inc/(Dec)
June 30, Lehman Businesses Lehman
1994 Businesses Sold Total Businesses
------------ ---------- ---------- ----- --------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Market making and principal
transactions $ 361 $ 433 $ 127 $ 560 (17)
Investment banking 151 206 60 266 (27)
Commissions 117 119 346 465 (2)
Interests and dividends 1,699 1,413 70 1,483 20
Other 13 19 174 193 (32)
----- ----- ----- -----
Total revenues 2,341 2,190 777 2,967 7
Interest expense 1,645 1,297 63 1,360 27
----- ----- ----- -----
Net revenues 696 893 714 1,607 (22)
Non-interest expenses: ----- ----- ----- -----
Compensation benefits 364 476 475 951 (24)
Communications 51 50 58 108 2
Brokerage, commissions and
clearance fees 43 43 (9) 34
Occupancy and equipment 43 42 42 84 2
Professional services 47 39 15 54 21
Advertising and market development 32 31 10 41 3
Depreciation and amortization 34 26 20 46 31
Other 32 25 53 78 28
Spin-off expenses 15
----- ----- ----- -----
Total non-interest expenses 661 732 664 1,396 (10)
----- ----- ----- -----
Income before taxes 35 161 50 211 (78)
Provision for income taxes 15 66 24 90 (77)
----- ----- ----- -----
Net income 20 95 26 121 (79)
Preferred stock dividends 7 12 12 (42)
----- ----- ----- -----
Net income applicable to
common stock $ 13 $ 83 $ 26 $ 109 (84)
===== ====== ===== =====
Number of shares used in per share
computation (Note 2) 105.7 105.7
===== =====
Earnings per common share $ .11 $1.04
===== =====
</TABLE>
Note 1: Certain prior period 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 calculations of earnings per share includes shares issued in the
spin-off.
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EXHIBIT 99.4
<PAGE> 2
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(PRELIMINARY AND UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA) 6
<TABLE>
<CAPTION>
Six Months Ended
Six Months June 30, 1993 (Note 1) Percentage of Dollar
Ended ------------------------------------ Change Inc/(Dec)
June 30, Lehman Businesses Lehman
1994 Businesses Sold Total Businesses
------------ ---------- ---------- ----- --------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Market making and principal
transactions $ 802 $ 870 $ 282 $ 1,152 (8)
Investment banking 326 370 124 494 (12)
Commissions 258 235 710 945 10
Interests and dividends 3,226 2,718 136 2,854 19
Other 30 38 345 383 (21)
----- ----- ----- -----
Total revenues 4,642 4,231 1,597 5,828 10
Interest expense 3,098 2,505 125 2,630 24
----- ----- ----- -----
Net revenues 1,544 1,726 1,472 3,198 (11)
----- ----- ----- -----
Non-interest expenses:
Compensation and benefits 814 937 984 1,921 (13)
Communications 101 96 109 205 5
Brokerage, commissions and
clearance fees 95 86 (18) 68 10
Occupancy and equipment 85 83 83 166 2
Professional services 89 74 32 106 20
Advertising and market development 63 62 26 88 2
Depreciation and amortization 65 50 40 90 30
Other 61 73 104 177 (16)
Severance charge 33
Spin-off expenses 15
Loss on sale of Shearson 535 535
Reserves for non-core businesses 32 120 152
----- ----- ----- -----
Total non-interest expenses 1,421 1,493 2,015 3,508 (5)
----- ----- ----- -----
Income (loss) from continuing operations
before taxes and cumulative effect
of change in accounting principle 123 233 (543) (310) (47)
Provision for income taxes 48 104 105 209 (54)
----- ----- ----- -----
Income (loss) from continuing operations
before cumulative effect of change in
accounting principle 75 129 (648) (519) (42)
Income from discontinued operations,
net of taxes:
Income from operations 24 24
Gain on disposal
Net income from discontinued operations 165 165
----- ----- ----- -----
189 189
----- ----- ----- -----
Income (loss) before cumulative effect
of change in accounting principle 75 129 (459) (330) (42)
Cumulative effect of change in
accounting principle (13)
----- ----- ----- -----
Net income (loss) 62 129 (459) (330) (52)
Preferred stock dividends 19 24 24 (21)
----- ----- ----- -----
Net income (loss) applicable to
common stock $ 43 $ 105 $(459) $(354) (59)
===== ====== ====== ======
Number of shares used in per share
computation (Note 2) 105.7 105.7
===== ======
Earnings per common share:
Income (loss) before cumulative effect
of change in accounting principle $ .52 $(3.14)
Discontinued operations - 1.79
Cumulative effect of change in
accounting principle (.12) -
----- -------
Net income (loss) $ .40 $(3.35)
===== =======
</TABLE>
Note 1: Certain prior period 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 calculations of earnings per share includes shares issued in the
spin-off.
#######
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EXHIBIT 99.5
<PAGE> 2
LEHMAN BROTHERS
NEWS RELEASE
For Immediate Release CONTACT: Steven Faigen
(212) 526-4379
LEHMAN BROTHERS INSTITUTES STOCK AWARD PROGRAM
NEW YORK, July 19, 1994 -- Lehman Brothers Holdings Inc. (NYSE: LEH) today
announced that the Compensation and Benefits Committee of the Board of
Directors has approved the Lehman Brothers Stock Award Program.
Under the program, salaried, bonus-eligible employees as of June 30, 1994 whose
total compensation exceeds $75,000 will receive an award of restricted stock
units, effective July 1, 1994, as a pre-tax advance against their 1994 bonuses.
Salaried, bonus-eligible employees with 1993 total compensation of $75,000 or
less will receive a one-time grant of 50 restricted stock units. Certain
vesting and sales restrictions will apply to all units, and they will convert
into Lehman Brothers common stock on a one-for-one basis in five years.
For the Operating Committee, total compensation is based on the financial
performance of the Firm. Under the Stock Award Program, Operating Committee
members will receive restricted stock units representing up to 50 percent of
their total 1994 compensation. Messrs. Richard S. Fuld, Jr., Chairman and Chief
Executive Officer, and T. Christopher Pettit, President and Chief Operating
Officer, will receive up to 62.5 percent of their total compensation in
restricted stock units. These awards carry the same vesting and sales
restrictions as those outlined above for other employees receiving awards.
The Stock Award Program has been launched now to encourage all employees to
increase shareholder value from Lehman Brothers' inception as a public company.
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<PAGE> 3
Stock Award Program p. 2
"This action represents a significant step toward our goal of both broadening
and increasing our level of employee ownership," stated Mr. Fuld. "The Stock
Award Program should drive shareholder value by providing Lehman Brothers
employees with a direct stake in the financial results of the Firm."
Approximately 5.2 million units will be awarded to employees this year,
excluding members of the Firm's Operating Committee as described earlier. In
order to meet the share requirements of the program, Lehman Brothers Holdings
Inc. has been authorized to repurchase shares in the open market, as
circumstances and events permit. The Firm also has the authority to issue
shares for these programs.
Lehman Brothers is a global investment bank with leadership positions in
corporate and municipal finance, advisory services and in securities sales,
trading and research. Lehman Brothers serves the financial needs of corporate,
governmental and institutional clients, and high-net-worth individuals, through
44 offices in major financial centers worldwide.
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