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): June 18, 1998
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
Second Quarter Earnings
On June 18, 1998 Lehman Brothers Holdings Inc. (the "Registrant")
issued a press release with respect to its second quarter 1998 earnings
(the "Earnings Release").
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 Second Quarter
1998 Earnings
99.2 Consolidated Statement of Income
(Three Months Ended May 31, 1998)
(Preliminary and Unaudited)
99.3 Consolidated Statement of Income
(Six Months ended May 31, 1998)
(Preliminary and Unadudited)
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: June 18, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to Second Quarter
1998 Earnings
Exhibit 99.2 Consolidated Statement of Income
(Three Months Ended May 31, 1998)
(Preliminary and Unaudited)
Exhibit 99.3 Consolidated Statement of Income
(Six Months ended May 31, 1998)
(Preliminary and Unadudited)
Exhibit 99.4 Selected Statistical Information
<PAGE>
[OBJECT OMITTED]
For Immediate Release MEDIA CONTACT: William J. Ahearn
(212) 526-4379
INVESTOR CONTACT: Shaun Butler
(212) 526-8381
LEHMAN BROTHERS REPORTS
RECORD EARNINGS OF $324 MILLION IN SECOND QUARTER,
UP 168 PERCENT FROM A YEAR AGO
Return on Equity Rises to 30% Level, Net Revenues Increase by 72%
NEW YORK, June 18, 1998 -- Lehman Brothers Holdings Inc. (NYSE: LEH) today
reported net income of $324 million, or $2.12 per common share (diluted), for
the second quarter ended May 31, 1998. Net income increased by 168 percent over
the $121 million reported for the second quarter of fiscal 1997. Earnings per
share increased by 123 percent from $0.95 (diluted) in the year-ago quarter. The
quarter represented the highest quarterly earnings Lehman Brothers has ever
posted, surpassing the $197 million earned in the fiscal 1997 third quarter by
more than $125 million.
For the first six months of fiscal 1998, net income was a record $511 million,
an increase of 93 percent from $265 million in net income for the first half of
fiscal 1997.
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<PAGE>
Second Quarter 1998/page 2
"This was an outstanding quarter and first six months for Lehman Brothers," said
Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "For the quarter,
our revenues, profits, operating margin and return on equity were all at record
levels, while our costs remained firmly under control. The significant increases
in revenues and earnings clearly reflected the continuing successful shift in
the Firm's business mix to higher margin, high ROE activities, particularly M&A
advisory, high yield, and equities."
Net revenues (total revenues less interest expense) for the second quarter were
$1.473 billion, an increase of 72 percent from $854 million in the second
quarter of fiscal 1997. Mr. Fuld noted that the increase in net revenues
reflected across-the-board strength in Lehman Brothers' fixed income, equity and
investment banking businesses. In particular, the Firm's global merger and
acquisition advisory business, fixed income and equity derivatives, leveraged
lending and high yield origination, and real estate and mortgage activities
showed significant strength in the second quarter. He also noted that the Firm
entered the fiscal 1998 third quarter with record totals in its calendar of
upcoming lead-managed equity underwritings and in its pipeline of M&A advisory
assignments.
For the first six months of fiscal 1998, net revenues were $2.518 billion, an
increase of 42 percent from $1.779 billion in the fiscal 1997 first half.
Non-interest expenses for the second quarter were $997 million. Nonpersonnel
expenses for the same period were $250 million, essentially the same as in the
previous fiscal year's second quarter despite planned investments in a number of
key strategic businesses and increased expense related to a higher volume of
business activity. Also reflecting the Firm's continued successful focus on
expense management, nonpersonnel expenses as a percentage
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<PAGE>
Second Quarter 1998/page 3
of net revenues decreased to 17.0 percent from 29.2 percent a year ago.
Compensation and benefits as a percentage of net revenues remained at 50.7
percent for the 13th successive quarter.
For the fiscal 1998 first half, non-interest expense was $1.767 billion.
Nonpersonnel expenses were $490 million, compared with $486 million in the first
six months of fiscal 1997.
For the fiscal 1998 second quarter, the Firm's pre-tax margin was 32.4 percent,
up from 20.2 percent in the second quarter of fiscal 1997. Return on common
equity was 29.9 percent for the quarter ended May 31, 1998, up from 12.8 percent
for the second quarter of fiscal 1997, and 17.6 percent for the fiscal 1998
first quarter. For the first six months of fiscal 1998, the Firm's pre-tax
margin was 29.8 percent, compared with 22.0 percent for the first six months of
fiscal 1997; for the same period, return on common equity was 23.9 percent,
compared with 14.4 percent in fiscal 1997. (Return on common equity for the
current fiscal quarter and six months is calculated using net income before
adjusting for a special preferred dividend.)
As of May 31, 1998, Lehman Brothers stockholders' equity was $5.1 billion and
total capital (stockholders' equity and long-term debt) was $31.9 billion. Book
value per common share was $35.93.
As a result of the level of earnings Lehman Brothers attained in the first six
months of 1998, earnings per share calculations include the impact of a special
preferred dividend of $50 million expected to be paid to American Express
Company and to Nippon Life Insurance Company at year end. American Express and
Nippon Life are entitled to receive an annual non-cumulative preferred dividend
equal to 50 percent of the amount by which the Firm's net income for the full
fiscal year exceeds $400 million, up to a maximum of $50 million per year,
through mid-year 2002.
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<PAGE>
Lehman Brothers is a global investment bank with leadership positions in
corporate finance, advisory services, municipal finance and fixed income and
equity 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.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Three Months Ended Percentage of
May 31 May 31 Dollar Change
1998 1997 Inc/(Dec)
------------- ------------ -------------
Revenues:
Principal transactions $ 588 $ 326 80%
Investment banking 495 274 81
Commissions 124 91 36
Interest and dividends 4,307 3,099 39
Other 40 16 150
------- -------
Total revenues 5,554 3,806 46
Interest expense 4,081 2,952 38
----- -----
Net revenues 1,473 854 72
----- ------
Non-interest expenses:
Compensation and benefits 747 433 72
Brokerage, commissions and
clearance fees 60 61 (2)
Professional services 43 47 (9)
Communications 38 36 6
Occupancy and equipment 32 34 (6)
Business development 29 26 12
Depreciation and amortization 22 21 5
Other 26 24 8
------ -------
Total non-interest expenses 997 682 46
----- ------
Income before taxes 476 172 177
Provision for income taxes 152 51 198
----- -------
Net income $ 324 $ 121 168
====== ======
Net income applicable to common stock $ 268 $ 114 135
====== ======
Average shares
Basic 120.6 118.0
===== =====
Diluted 126.3 120.4
===== =====
Earnings per common share
Basic $2.22 $ 0.97
===== ======
Diluted $2.12 $ 0.95
===== ======
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EXHIBIT 99.3
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Six Months Ended Percentage of
May 31 May 31 Dollar Change
1998 1997 Inc/(Dec)
------------ ----------- -----------
Revenues:
Principal transactions 1,011 $ 672 50%
Investment banking 843 514 64
Commissions 241 188 28
Interest and dividends 7,981 6,377 25
Other 58 54 7
------- --------
Total revenues 10,134 7,805 30
Interest expense 7,616 6,026 26
------ -----
Net revenues 2,518 1,779 42
------ -----
Non-interest expenses:
Compensation and benefits 1,277 902 42
Brokerage, commissions and
clearance fees 114 118 (3)
Professional services 85 88 (3)
Communications 74 70 6
Occupancy and equipment 68 69 (1)
Business development 55 51 8
Depreciation and amortization 44 43 2
Other 50 47 6
------- -------
Total non-interest expenses 1,767 1,388 27
----- -----
Income before taxes 751 391 92
Provision for income taxes 240 126 90
----- -----
Net income $ 511 $ 265 93
====== ======
Net income applicable to common stock $ 448 $ 252 78
====== ======
Average shares
Basic 120.6 117.5
===== =====
Diluted 125.6 119.8
===== =====
Earnings per common share
Basic $3.71 $2.15
===== =====
Diluted $3.57 $2.11
===== =====
<PAGE>
EXHIBIT 99.4
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Quarters Ended
--------------
5/31/98 2/28/98 11/30/97 8/31/97 5/31/97 2/28/97
------- ------- -------- ------- ------- -------
Income Statement
- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues $1,473 $1,045 $1,023 $1,071 $ 854 $ 925
Non-Interest Expenses:
Compensation and Benefits 747 530 519 543 433 469
Nonpersonnel Expenses 250 240 239 247 249 237
Net Income 324 187 185 197 121 144
Net Income Applicable to
Common Stock 268 180 160 160 114 138
Earnings per Common Share (a)
Basic $2.22 $1.49 $1.34 $1.34 $0.97 $1.18
Diluted $2.12 $1.44 $1.30 $1.30 $0.95 $1.16
Financial Ratios (%)
- --------------------
Return on Common Equity
(annualized) (b) 25.2 17.6 18.3 20.5 12.8 16.1
Pretax Operating Margin 32.4 26.3 25.9 26.2 20.2 23.7
Compensation & Benefits/
Net Revenues 50.7 50.7 50.7 50.7 50.7 50.7
Effective Tax Rate 32.0 32.0 30.0 30.0 30.0 34.0
Balance Sheet
- -------------
Total Assets $179,000 $175,643 151,705 $147,894 $145,118 $149,493
Total Assets Excluding
Matched Book (c) 130,000 124,225 108,099 104,626 105,025 114,474
Common Stockholders' Equity 4,326 4,175 4,015 3,795 3,630 3,504
Total Stockholders' Equity 5,084 4,683 4,523 4,303 4,138 4,012
Total Capital (long-term debt
plus stockholders' equity 31,929 28,597 24,784 23,207 22,083 21,308
Book Value per Common Share (d) 35.93 34.56 33.39 31.86 30.67 29.76
Other Data (#s)
- ---------------
Employees 8,387 8,314 8,340 8,190 7,788 7,602
Common Stock Outstanding (e) 117,114,203 118,551,437 116,612,074 101,939,516 101,541,385 101,263,173
Average Shares
Basic 120,633,663 120,638,144 118,976,492 118,722,434 118,009,833 116,994,151
Diluted 126,301,259 124,797,348 123,003,138 122,363,228 120,420,733 119,085,890
</TABLE>
(a) Effective December 1997, basic and diluted earnings per share replaced the
primary and fully diluted calculations in accordance with Statement of
Financial Accounting Standards No. 128.
(b) Return on common equity calculated using net income after adjusting for
special preferred dividends.
(c) Matched book is defined as the lower of securities purchased under
agreements to resell or securities sold under agreements to repurchase.
(d) This calculation includes restricted stock units granted under the Lehman
Stock Award Programs included in stockholders' equity.
(e) The increase at 11/30/97 represents the establishment of a trust to provide
common stock voting rights to employees who hold restricted stock units.
The establishment of the trust did not impact the total number of shares
used in the computation of earnings per common share.
