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 7, 1997
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
<PAGE>
Item 5. Other Events
On January 7, 1997, Lehman Brothers Holdings Inc. (the "Registrant")
issued a press release with respect to its year end and fourth quarter 1996
earnings (the "Earnings Release"). In addition, the registrant announced that it
intends to increase its dividend rate from $0.20 per share annually to $0.24 per
share.
Copy of the Earnings Release follows.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following Exhibits are filed as part of this Report.
99.1 Press Release Relating to Year End and
Fourth Quarter 1996 Earnings
99.2 Consolidated Statement of Operations
(Three Months Ended November 30, 1996)
(Preliminary and Unaudited)
99.3 Consolidated Statement of Operations
(Twelve Months ended Novmber 30, 1996)
(Preliminary and Unaudited)
99.4 Selected Statistical Information
The Exhibit Index to this Report is incorporated herein by reference.
<PAGE>
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/ Charles B. Hintz
Charles B. Hintz
Chief Financial Officer
(Principal Financial Officer)
Date: January 8, 1997
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to
Year End and Fourth Quarter 1996 Earnings
Exhibit 99.2 Consolidated Statement of Operations
(Three Months Ended November 30, 1996)
(Preliminary and Unaudited)
Exhibit 99.3 Consolidated Statement of Operations
(Tweleve Months Ended November 30, 1996)
(Preliminary and Unaudited)
Exhibit 99.4 Selected Statistical Information
<PAGE>
EXHIBIT 99.1
LEHMAN BROTHERS
News Release
-----------------------------------------------------------
For Immediate Release MEDIA CONTACT: William J. Ahearn
(212) 526-4379
INVESTOR CONTACT: Shaun Butler
(212) 526-8381
LEHMAN BROTHERS REPORTS
RECORD EARNINGS
-- Dividend Raised To $0.24 Per Share Annually --
NEW YORK, January 7, 1997 -- Lehman Brothers Holdings Inc. (NYSE: LEH)
today reported record net operating income of $177 million for the
fourth quarter ended Nov. 30, 1996, before taking into account the
effect of a non-recurring charge for severance costs, which reduced net
income to $127 million. For the full fiscal year, after the special
item, the Firm earned a record $416 million.
Lehman Brothers also said that it intends to increase its dividend rate
by 20 percent -- from $0.20 per share annually to $0.24 per share --
effective for dividends declared and payable subsequent to Nov. 30,
1996.
"The fourth quarter was an excellent one for Lehman Brothers -- by
far, the best we've had since the Firm went public in 1994," said
Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "The
record revenues and net income for the quarter reflected balanced
strength in all of our global businesses: fixed income, equity, and
investment
- more -
<PAGE>
Fourth Quarter 1996/page 2
banking. In 1996, Lehman Brothers was ranked third among all global
underwriters of debt and equity securities, and advised on M&A
transactions with a total value of more than $98 billion."
Net operating income increased by 121 percent over the $80 million
reported for the fourth quarter of 1995, excluding special items in
both the current year and 1995. For the full fiscal year, net income
increased 84 percent from $253 million in fiscal year 1995. Including
the impact of the non-recurring charge, and the payment of special
preferred dividends to American Express Company and Nippon Life
Insurance Company, net income per share for the 1996 fourth quarter was
$0.96, an increase of 96 percent from $0.49 in the year-ago quarter.
For the full year, earnings per share were $3.24, compared with $1.76
for the 1995 fiscal year.
The following discussion of the Firm's fourth quarter and fiscal year
results excludes the effect of special items in both the current year
and 1995.
Net revenues (total revenues less interest expense) for the fourth
quarter were $1.068 billion, an increase of 41 percent from $755
million in the fourth quarter of 1995. During the 1996 quarter, equity
and debt underwriting and trading, foreign exchange, high yield,
emerging markets and M&A advisory showed particular strength.
Non-interest expenses for the 1996 fourth quarter were $789 million;
nonpersonnel expenses for the same period were $247 million, down from
$254 million in the previous year's fourth quarter. For the full year,
non-interest expense was $2.723 billion; nonpersonnel expenses were
$976 million, a decrease of 8 percent from $1.061 billion in 1995. As a
percent of net revenues, nonpersonnel expenses for the full year
dropped dramatically, from 36 percent in 1995 to 28 percent in 1996,
reflecting the Firm's success in its continued focus on expense
management. Compensation and benefits as a percentage of net revenues
remained at 50.7 percent for the seventh successive quarter.
The Firm's pre-tax operating margin for the 1996 fourth quarter was
26.1 percent,
- more -
<PAGE>
Fourth Quarter 1996/page 3
compared with 15.6 percent in the fourth quarter of 1995; for the full
year, pre-tax operating margin was 20.9 percent, compared with 13.2
percent in 1995. Return on common equity increased to 20.6 percent for
the 1996 fourth quarter, compared with 9.3 percent for the fourth
quarter of 1995; for the full year, return on common equity was 13.9
percent, compared with 7.5 percent in 1995.
As a result of an extensive review of the Firm's businesses and
resource allocations, Lehman Brothers exited or scaled back certain
businesses during the fourth quarter of 1996, including: exiting the
precious metals business in the U.S., Europe, and Asia; exiting energy
trading in the U.S. and Europe; consolidating Asian fixed income risk
management activities into one center in Tokyo; refocusing foreign
exchange trading activities; and combining the Firm's New York Private
Client Services offices. The result of these actions was a
non-recurring charge of $50 million after taxes. The expected benefits
of the elimination of the expenses associated with those businesses far
exceed any potential revenue loss.
Including the effect of the non-recurring charge, the Firm's pre-tax
margin was 18.2 percent for the fourth quarter, and 18.5 percent for
the full fiscal year. Return on common equity was 13.7 percent for the
quarter, and 12.1 percent for the full year, including the effect of
the non-recurring charge and preferred dividends.
As of Nov. 30, 1996, Lehman Brothers stockholders' equity was
$3.874 billion and total capital (stockholders' equity and long-term
debt) was $19.796 billion. Book value per common share was $28.84.
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.
# # #
Financial Statements Attached
<PAGE>
EXHIBIT 99.2
LEHMAN BROTHERS HOLDINGS INC. Page 4
CONSOLIDATED STATEMENT OF OPERATIONS
(Preliminary and Unaudited)
(In millions, except per share data)
Three Months Ended Percentage of
November 30, November 30, Dollar Change
1996 1995 Inc/(Dec)
-------------- ------------- ------------
Revenues:
Principal transactions $ 465 $ 434 7%
Investment banking 310 261 19
Commissions 96 108 (11)
Interest and dividends 2,929 2,802 5
Other 13 8 63
-------- --------
Total revenues 3,813 3,613 6
Interest expense 2,745 2,729 1
------ -----
Net revenues 1,068 884 21
------ ------
Non-interest expenses:
Compensation and benefits 542 433 25
Brokerage, commissions and
clearance fees 65 58 12
Occupancy and equipment 37 41 (10)
Professional services 39 36 8
Communications 34 43 (21)
Business development 26 26
Depreciation and amortization 22 25 (12)
Other 24 25 (4)
Severance charge 84
Restructuring charge _____ 97
-------
Total non-interest expenses 873 784 11
------ ------
Income before taxes 195 100 95
Provision for income taxes 68 31 119
------- -------
Net income $ 127 $ 69 84
======= =======
Net income applicable to common
stock $ 113 $ 58 95
======= =======
Average common and common
equivalent shares outstanding 116.9 117.1
===== =====
Earnings per common share $0.96 $0.49
===== =====
<PAGE>
EXHIBIT 99.3
LEHMAN BROTHERS HOLDINGS INC. Page 5
CONSOLIDATED STATEMENT OF OPERATIONS
(Preliminary and Unaudited)
(In millions, except per share data)
Twelve Months Ended Percentage of
November 30, November 30, Dollar Change
1996 (Note 1) 1995 Inc/(Dec)
-------------- ------------ ----------
Revenues:
Principal transactions $1,579 $1,393 13%
Investment banking 981 801 22
Commissions 362 450 (20)
Interest and dividends 11,298 10,788 5
Other 40 44 (9)
-------- --------
Total revenues 14,260 13,476 6
Interest expense 10,816 10,405 4
------ ------
Net revenues 3,444 3,071 12
------- ------
Non-interest expenses:
Compensation and benefits 1,747 1,544 13
Brokerage, commissions and
clearance fees 241 241
Occupancy and equipment 151 174 (13)
Professional services 150 159 (6)
Communications 147 180 (18)
Business development 101 110 (8)
Depreciation and amortization 91 105 (13)
Other 95 92 3
Severance charge 84
Restructuring charge _____ 97
-------
Total non-interest expenses 2,807 2,702 4
----- -----
Income before taxes 637 369 73
Provision for income taxes 221 127 74
------ ------
Net income $ 416 $ 242 72
======= ======
Net income applicable to
common stock $ 378 $ 200 89
======= ======
Average common and common
equivalent shares outstanding 116.4 113.4
===== =====
Earnings per common share $3.24 $1.76
===== =====
Note 1: Certain amounts have been reclassified to conform to the current
presentation.
<PAGE>
EXHIBIT 99.4
<TABLE>
<CAPTION>
LEHMAN BROTHERS HOLDINGS INC. Page 6
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
Twelve Months Quarters Ended
--------------------------- --------------------------------------------
1996 1995 (a) 11/30/96 8/31/96 5/31/96 2/29/96 11/30/95 (a)
---- -------- -------- ------- ------- ------- ---------
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $3,444 $2,942 $1,068 $722 $833 $821 $755
Non-Interest Expenses:
Compensation and Benefits 1,747 1,494 542 366 422 416 383
Nonpersonnel Expenses (b) 976 1,061 247 240 242 246 254
Net Income from Operations 253
Excluding Special Items 466 177 77 108 104 80
Net After-Tax Gain from Sale
of Omnitel 47 47
Special Charges (after-tax):
Severance charge (50) (50)
Restructuring Charge (58) (58)
Net Income 416 242 127 77 108 104 69
Net Income Applicable to
Common Stock 378 200 113 71 102 93 58
Earnings per Common Share $3.24 $1.76 $0.96 $0.60 $0.89 $0.79 $0.49
Financial Ratios (%) (c)
Return on Common Equity
(annualized) 13.9 7.5 20.6 9.0 13.4 12.6 9.3
Pretax Operating Margin 20.9 13.2 26.1 16.0 20.2 19.2 15.6
Compensation & Benefits/
Net Revenues (d) 50.7 50.8 50.7 50.7 50.7 50.7 50.7
Effective Tax Rate (e) 35.4 34.5 36.7 33.6 36.0 34.0 32.5
Balance Sheet
Total Assets $129,000 $125,666 $133,725 $128,702 $115,303
Total Assets Excluding
Matched Book (f) 96,000 90,216 89,864 84,608 79,069
Common Stockholders' Equity (g) 3,366 3,233 3,058 3,015 2,990
Total Stockholders' Equity (h) 3,874 3,741 3,566 3,523 3,698
Total Capital (long-term debt
plus
stockholders' equity) 19,796 17,955 17,135 16,994 16,463
Book Value per Common Share (i) 28.84 27.74 27.29 26.41 25.67
Other Data (#s)
Employees 7,556 7,762 7,794 7,703 7,771
Common Stock Outstanding 100,449,144 100,027,645 100,398,499 102,443,232 104,565,875
Average Common and Common
Equivalent Shares Outstanding 116,373,585 113,414,684 116,947,549 117,205,775 114,788,688 116,932,697 117,090,034
</TABLE>
(a) Net revenues and non-interest expenses exclude the effects of the sale of
Omnitel.
(b) Excludes special items of $84 million and $97 million relating to severance
and real estate- and occupancy-related expenses and severance payments in
the twelve months and quarters ended November 30, 1996 and November 30,
1995, respectively.
(c) Financial ratios exclude the severance charge, special items, Omnitel and
the dividend on the Company's Redeemable Voting Preferred Stock.
(d) The actual Compensation & Benefits/Net Revenues ratio, including gross
proceeds and the $50 million expense related to the sale of Omnitel, was
50.3% and 49.0% for the twelve months and quarter ended November 30, 1995,
respectively.
(e) The effective tax rate, including the severance charge was 34.7% and 34.9%
for the twelve months and quarter ended November 30, 1996, respectively.
The effective tax rate, including the effects of the sale of Omnitel and
the restructuring charge, was 34.3% and 31.3% for the twelve months and
quarter ended November 30, 1995, respectively.
(f) Matched book is defined as the lower of securities purchased under
agreements to resell or securities sold under agreements to repurchase.
(g) The increase in common stockholders' equity at 8/31/96, reflects an
increase in common stock issuable due to restricted stock units granted
under the Lehman Stock Award Program effective July 1.
(h) In February 1996, the Company repurchased the $200 million 8.44% Cumulative
Preferred Stock owned by American Express with the proceeds from the
issuance of $200 million of Quarterly Income Capital Securities Series A
Subordinated Debentures with an interest rate of 8.3% maturing in 2035.
The repurchase of the Preferred Stock included a premium of $2 million
over the par value, which represents a one-time decrease in income
available to common shareholders for purposes of calculating earnings
per share. (i) This calculation includes restricted stock units granted
under the Lehman Stock Award Programs included in stockholders' equity.
