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):November 30, 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
Fourth Quarter Earnings
On January 7, 1998, Lehman Brothers Holdings Inc. (the "Registrant")
issued a press release with respect to its fourth quarter 1997 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 Fourth Quarter 1997
Earnings
99.2 Consolidated Statement of Income
(Three Months Ended November 30, 1997)
(Preliminary and Unaudited)
99.3 Consolidated Statement of Income
(Twelve Months ended November 30, 1997)
(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 7, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to
Fourth Quarter 1997 Earnings
Exhibit 99.2 Consolidated Statement of Income
(Three Months Ended November 30, 1997)
(Preliminary and Unaudited)
Exhibit 99.3 Consolidated Statement of Income
(Twelve Months Ended November 30, 1997)
(Preliminary and Unaudited)
Exhibit 99.4 Selected Statistical Information
<PAGE>
EXHIBIT 99.1
LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER NEW YORK, NY 10285-1000
[GRAPHIC OMITTED]
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 OF $647 MILLION FOR 1997,
UP 56% FROM 1996
Fourth Quarter Earnings Of $185 Million
Up 46 Percent From A Year Ago
NEW YORK, January 7, 1998--Lehman Brothers Holdings Inc. (NYSE: LEH) today
reported that net income was a record $647 million for the full year of fiscal
1997, an increase of 56 percent from $416 million for fiscal 1996. For the
fiscal 1997 fourth quarter, net income was $185 million, or $1.30 per common
share, an increase of 46 percent over the $127 million reported for the fourth
quarter of fiscal 1996.
"Clearly, 1997 was an excellent year for Lehman Brothers," said Richard S. Fuld,
Jr., Chairman and Chief Executive Officer. "Despite extremely volatile
markets throughout most of the fourth quarter, our results for the full year
reflected continued strength in all our major businesses -- equities, fixed
income and investment banking. By every measure, our progress since becoming
a public company in 1994 has been strong, steady, and impressive."
- more -
<PAGE>
Full Year 1997/page 2
Mr. Fuld noted that in addition to posting record earnings for the full fiscal
year, the fiscal 1997 fourth quarter matched the fiscal 1997 third quarter as
the best in the Firm's history, on an earnings-per-share basis.
"That performance is particularly noteworthy in light of the difficult trading
environment that we experienced throughout much of the fourth quarter," he said.
"The Firm's ability to sustain strong quarterly earnings in a period of
significant volatility in global markets underscores the success we've had in
building our capabilities across a diverse range of strategic, higher-margin
businesses."
For the full fiscal year, net revenues (total revenues less interest expense)
were $3.873 billion, an increase of 12 percent from $3.444 billion in fiscal
1996. Mr. Fuld noted that the increase in net revenues on a year-over-year basis
reflected particular strength in several businesses on which Lehman Brothers has
been focusing throughout 1997, including the Firm's global merger and
acquisition advisory business, merchant banking, high yield origination, equity
underwriting, and mortgage and real estate activities. Net revenues for the
fourth quarter were $1.023 billion, down slightly from $1.068 billion in the
fourth quarter of fiscal 1996.
For the full 12 months of fiscal 1997, non-interest expenses were $2.936
billion. Non-personnel expenses were $972 million, compared with $976 million in
the 1996 fiscal year. Non-interest expenses for the fourth quarter were $758
million. Non-personnel expenses for the same period were $239 million, down from
$247 million in both the previous fiscal year's fourth quarter and in the third
quarter of fiscal 1997. Mr. Fuld noted that compensation and benefits as a
percentage of net revenues remained at 50.7 percent for the 11th successive
quarter.
For the full year of fiscal 1997, the Firm's pre-tax margin was 24.2
percent, compared with 18.5
- more -
<PAGE>
Full Year 1997/page 3
percent for the 12 months of fiscal 1996. For the full year, return on common
equity was 17 percent, compared with 12.3 percent in all of fiscal 1996. For the
fiscal 1997 fourth quarter, the Firm's pre-tax margin was 25.9 percent, compared
with 18.2 percent in the fourth quarter of fiscal 1996. Return on common equity
was 18.3 percent for the quarter ended November 30, 1997, compared with 14.6
percent for the fourth quarter of fiscal 1996. (Return on equity calculations
exclude the impact of special preferred dividends in 1997 and 1996.)
As of November 30, 1997, Lehman Brothers stockholders' equity was $4.523
billion, compared with $3.874 billion a year earlier. Total capital at November
30, 1997 (stockholders' equity and long-term debt) was $24.784 billion.
Book value per common share was $33.39.
As a result of the level of earnings Lehman Brothers attained in 1997, the Firm
will pay a special preferred dividend of $50 million to American Express Company
and to Nippon Life Insurance Company. 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.
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 STATEMENTS OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Percentage of
November 30 November 30 Dollar Change
1997 1996 Inc/(Dec)
-------------- ------------- -------------
Revenues:
<S> <C> <C> <C>
Principal transactions $ 357 $ 465 (23)%
Investment banking 408 310 32
Commissions 124 96 29
Interest and dividends 3,704 2,929 26
Other 16 13 23
------- -------
Total revenues 4,609 3,813 21
Interest expense 3,586 2,745 31
----- -----
Net revenues 1,023 1,068 (4)
----- -----
Non-interest expenses:
Compensation and benefits 519 542 (4)
Brokerage, commissions and clearance fees 52 65 (20)
Professional services 42 39 8
Occupancy and equipment 37 37
Communications 36 34 6
Business development 27 26 4
Depreciation and amortization 21 22 (5)
Other 24 24
Severance charge 84
------ ------
Total non-interest expenses 758 873 (13)
------ ------
Income before taxes 265 195 36
Provision for income taxes 80 68 18
------ ------
Net income $ 185 $ 127 46
====== =======
Net income applicable to common stock $ 160 $ 113 42
====== =======
Average common and common
equivalent shares outstanding 123.0 116.9
===== =====
Earnings per common share $1.30 $0.96
===== =====
</TABLE>
<PAGE>
EXHIBIT 99.3
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended Percentage of
November 30 November 30 Dollar Change
1997 1996 Inc/(Dec)
-------------- ------------- ------------
Revenues:
<S> <C> <C> <C>
Principal transactions $1,418 $1,579 (10)%
Investment banking 1,318 981 34
Commissions 423 362 17
Interest and dividends 13,635 11,298 21
Other 89 40 #
-------- --------
Total revenues 16,883 14,260 18
Interest expense 13,010 10,816 20
------ ------
Net revenues 3,873 3,444 12
------ ------
Non-interest expenses:
Compensation and benefits 1,964 1,747 12
Brokerage, commissions and clearance fees 224 241 (7)
Professional services 173 150 15
Occupancy and equipment 141 151 (7)
Communications 141 147 (4)
Business development 103 101 2
Depreciation and amortization 86 91 (5)
Other 104 95 9
Severance charge 84
-------- ------
Total non-interest expenses 2,936 2,807 5
----- -----
Income before taxes 937 637 47
Provision for income taxes 290 221 31
------ ------
Net income $ 647 $ 416 56
====== ======
Net income applicable to common stock $ 572 $ 378 51
====== ======
Average common and common
equivalent shares outstanding 121.1 116.4
===== =====
Earnings per common share $4.72 $3.24
===== =====
</TABLE>
# denotes greater than 100%
<PAGE>
EXHIBIT 99.4
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Twelve Months Quarters Ended
1997 1996 11/30/97 8/31/97 5/31/97 2/28/97 11/30/96
---- ---- -------- ------- ------- ------- --------
Income Statement
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $3,873 $3,444 $1,023 $1,071 $ 854 $ 925 $1,068
Non-Interest Expenses:
Compensation and Benefits 1,964 1,747 519 543 433 469 542
Nonpersonnel Expenses (a) 972 976 239 247 249 237 247
Net Income from Operations
Excluding Severance charge 647 466 185 197 121 144 177
Severance charge (after tax) (50)
(50)
Net Income 647 416 185 197 121 144 127
Preferred Stock Dividends 75 38 25 37 7 6 14
Net Income Applicable to
Common Stock 572 378 160 160 114 138 113
Earnings per Common Share $4.72 $3.24 $1.30 $1.30 $0.95 $1.16 $0.96
Financial Ratios (%)
Return on Common Equity (b) 17.0 12.3 18.3 20.5 12.8 16.1 14.6
Return on Common Equity
Including Redeemable 15.6 12.1 16.4 17.2 12.8 16.1 13.7
Preferred
Pretax Operating Margin 24.2 18.5 25.9 26.2 20.2 23.7 18.2
Compensation & Benefits/
Net Revenues 50.7 50.7 50.7 50.7 50.7 50.7 50.7
Effective Tax Rate (c) 30.9 35.4 30.0 30.0 30.0 34.0 36.7
Balance Sheet
Total Assets $152,000 $147,894 $145,118 $149,493 $128,596
Total Assets Excluding
Matched Book (d) 108,000 104,626 105,025 114,474 96,256
Common Stockholders' Equity 4,015 3,795 3,630 3,504 3,366
Total Stockholders' Equity 4,523 4,303 4,138 4,012 3,874
Total Capital (long-term debt
plus
stockholders' equity) 24,784 23,207 22,083 21,308 19,796
Book Value per Common Share (e) 33.39 31.86 30.67 29.76 28.84
Other Data (#s)
Employees 8,340 8,190 7,788 7,602 7,556
Common Stock Outstanding (f) 116,612,074 101,939,516 101,541,385 101,263,173 100,449,144
Average Common and Common
Equivalent Shares Outstanding 121,064,929 116,373,585 123,003,138 122,363,228 120,420,733 118,460,215 116,947,549
</TABLE>
(a) Excludes $84 million relating to severance in the twelve months and the
quarter ended November 30, 1996.
(b) Return on Common Equity excludes the effect of a special preferred dividend
payable to American Express Company and to Nippon Life Insurance Company.
Excluding $50 million ($84 million pre-tax) relating to severance in the
twelve months and the quarter ended November 30, 1996 ROE was 13.9% and
20.6%, respectively.
(c) The effective tax rate, including the severance charge was 34.7% and 34.9%
for the twelve months and the quarter ended November 30, 1996 respectively.
(d) Matched book is defined as the lower of securities purchased under
agreements to resell or securities sold under agreements to repurchase.
(e) This calculation includes restricted stock units granted under the Lehman
Stock Award Programs included in stockholders' equity.
(f) The increase at 11/30/97 represents the establishment of a trust to provide
common stock voting rights to a substantial number of employees who hold
restricted stock units (RSUs). The establishment of the trust did not
impact the total number of shares used in the computation of earnings per
common share as the RSUs have historically been viewed as common stock
equivalents for purposes of these computations.
