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 22, 1999
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 22, 1999 Lehman Brothers Holdings Inc. (the "Registrant")
issued a press release with respect to its second quarter 1999 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 1999 Earnings
99.2 Consolidated Statement of Income
(Three Months Ended May 31, 1999)
(Preliminary and Unaudited)
99.3 Consolidated Statement of Income
(Six Months Ended May 31, 1999)
(Preliminary and Unaudited)
99.4 Selected Statistical Information
<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/ John L. Cecil
-----------------------------------------------
John L. Cecil
Chief Financial and
Administrative Officer
(Principal Financial Officer)
Date: June 22, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to Second Quarter 1999 Earnings
Exhibit 99.2 Consolidated Statement of Income
(Three Months Ended May 31, 1999)
(Preliminary and Unaudited)
Exhibit 99.3 Consolidated Statement of Income
(Six Months Ended May 31, 1999)
(Preliminary and Unaudited)
Exhibit 99.4 Selected Statistical Information
<PAGE>
[GRAPHIC OMITTED]
EXHIBIT 99.1
For Immediate Release Media Contact: William J. Ahearn
(212) 526-4379
Investor Contact: Shaun Butler
(212) 526-8381
LEHMAN BROTHERS REPORTS
RECORD EARNINGS OF
$330 MILLION IN SECOND QUARTER
Return on Equity Rises to 26.3%; Six Month Earnings a Record $540 Million
NEW YORK, June 22, 1999 -- Lehman Brothers Holdings Inc. (NYSE: LEH) today
reported net income of $330 million, or $2.09 per common share (diluted), for
the second quarter ended May 31, 1999. The quarter's performance represented the
highest quarterly earnings Lehman Brothers has ever posted, surpassing the $324
million earned in the fiscal 1998 second quarter, and increasing by 56% from the
$211 million earned in the first quarter of 1999.
For the first six months of fiscal 1999, net income was a record $540 million,
an increase of 6 percent from $511 million in net income for the first half of
fiscal 1998.
- more -
Second Quarter 1999/page 2
Net income applicable to common shareholders was unchanged from the second
quarter of fiscal 1998; however, it increased by 35 percent over the 1999 first
quarter. Earnings per share decreased slightly from the $2.12 (diluted) posted
in the year earlier quarter, but increased by 33 percent from $1.57 (diluted) in
the fiscal 1999 first quarter.
"As the numbers indicate, this was a terrific quarter and first six months for
Lehman Brothers," said Richard S. Fuld, Jr., Chairman and Chief Executive
Officer. "In the second half of 1998, we showed that the Firm could be
profitable in difficult market conditions. In the second quarter just ended, we
demonstrated that Lehman Brothers can be among the top performers in the
industry in good market conditions."
Mr. Fuld noted that the strong performance in revenues, operating margin, net
income, and return on equity in the fiscal 1999 second quarter reflected the
continuing successful shift in the Firm's business mix to high-return,
franchise-based activities, particularly equities and M&A advisory.
Net revenues (total revenues less interest expense) for the second quarter were
$1.455 billion, down slightly from $1.473 billion in the second quarter of
fiscal 1998. Mr. Fuld noted that the quarter was the second best the Firm had
ever posted in terms of net revenues, reflecting across-the-board strength in
Lehman Brothers' investment banking, equities, and fixed income businesses. In
particular, the Firm's Global Equities business posted its best quarter ever,
which was indicative of an active syndicate calendar, record revenues in
derivatives, and strong sales and trading activity in the U.S. and Europe.
Investment banking activity also remained strong, particularly in Europe and in
M&A advisory around the world.
For the first six months of fiscal 1999, net revenues were a record $2.573
billion,
- more -
Second Quarter 1999/page 3
compared with $2.518 billion in the fiscal 1998 first half.
Non-interest expenses for the second quarter were $989 million. Nonpersonnel
expenses for the same period were $251 million, essentially the same as in the
previous fiscal year's second quarter, despite continued investments in a number
of key strategic businesses. Compensation and benefits as a percentage of net
revenues remained at 50.7 percent for the 17th successive quarter.
For the fiscal 1999 first half, non-interest expenses were $1.798 billion.
Nonpersonnel expenses were $493 million, compared with $490 million in the first
six months of fiscal 1998.
For the fiscal 1999 second quarter, the Firm's pre-tax margin was 32.0 percent,
relatively unchanged from the second quarter of fiscal 1998, and up from 27.6
percent in the first quarter of fiscal 1999. Return on common equity was 26.3
percent for the quarter ended May 31, 1999, compared with 29.9 percent a year
ago and 17.2 percent in the current year's first quarter. For the first six
months of fiscal 1999, the Firm's pre-tax margin was 30.1 percent, compared with
29.8 percent for the first six months of fiscal 1998; for the same period,
return on common equity was 21.8 percent, compared with 23.9 percent in fiscal
1998. (Return on common equity for the second fiscal quarter and six months of
both 1999 and 1998 is calculated using net income before adjusting for a special
preferred dividend.)
As of May 31, 1999, Lehman Brothers stockholders' equity and trust preferred
securities were $6.5 billion and total capital (stockholders' equity, trust
preferred, and long-term debt) was $34.9 billion. Book value per common share
was $40.58.
- more -
<PAGE>
Second Quarter 1999/page 4
As a result of the level of earnings Lehman Brothers attained in the first six
months of 1999 and 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.
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)
<TABLE>
<CAPTION>
Three Months Ended Percentage of
May 31 May 31 Dollar Change
1999 1998 Inc/(Dec)
-------------- ------------- ---------------
Revenues:
<S> <C> <C> <C>
Principal transactions $663 $588 13%
Investment banking 467 495 (6)
Commissions 168 124 35
Interest and dividends 3,627 4,307 (16)
Other 7 40 (83)
-------- -------
Total revenues 4,932 5,554 (11)
Interest expense 3,477 4,081 (15)
----- -----
Net revenues 1,455 1,473 (1)
----- -----
Non-interest expenses
Compensation and benefits 738 747 (1)
Technology and communications 81 79 3
Brokerage and clearance 61 63 (3)
Business development 30 29 3
Occupancy 28 28
Professional fees 28 25 12
Other 23 26 (12)
------ --------
Total non-interest expenses 989 997 (1)
----- -------
Income before taxes and dividends
on trust preferred securities 466 476 (2)
Provision for income taxes 126 152 (17)
Dividends on trust preferred securities 10 -
------- --------
Net income $330 $324 2
==== ====
Net income applicable to common stock $268 $268
==== ====
Earnings per common share
Basic $2.19 $2.22
====== =====
Diluted $2.09 $2.12
====== =====
</TABLE>
<PAGE>
EXHIBIT 99.3
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Percentage of
May 31 May 31 Dollar Change
1999 1998 Inc/(Dec)
-------------- ------------- ---------------
Revenues:
<S> <C> <C> <C>
Principal transactions $1,189 $1,011 18%
Investment banking 788 843 (7)
Commissions 314 241 30
Interest and dividends 7,208 7,981 (10)
Other 24 58 (59)
------- ---------
Total revenues 9,523 10,134 (6)
Interest expense 6,950 7,616 (9)
----- -----
Net revenues 2,573 2,518 2
----- -----
Non-interest expenses
Compensation and benefits 1,305 1,277 2
Technology and communications 163 160 2
Brokerage and clearance 119 120 (1)
Business development 58 53 9
Occupancy 56 58 (3)
Professional fees 50 49 2
Other 47 50 (6)
------- -------
Total non-interest expenses 1,798 1,767 2
----- -----
Income before taxes and dividends
on trust preferred securities 775 751 3
Provision for income taxes 222 240 (8)
Dividends on trust preferred securities 13 -
------- --------
Net income $540 $511 6
==== ====
Net income applicable to common stock $466 $448 4
==== ====
Earnings per common share
Basic $3.82 $3.71
======= =====
Diluted $3.66 $3.57
======= =====
</TABLE>
<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
------------ --- --------------- --------------- ------------- -------------- ---------------
5/31/99 2/28/99 11/30/98 8/31/98 5/31/98 2/28/98
------------ --- --------------- --------------- ------------- -------------- ---------------
Income Statement
<S> <C> <C> <C> <C> <C> <C>
Net Revenues $1,455 $1,118 $665 $930 $1,473 $1,045
Non-Interest Expenses:
Compensation and Benefits 738 567 337 472 747 530
Nonpersonnel Expenses 251 242 234 251 250 240
Net Income 330 211 74 151 324 187
Net Income Applicable to
Common Stock 268 198 62 139 268 180
Earnings per Common Share (a)
Basic $2.19 $1.62 $0.51 $1.15 $2.22 $1.49
Diluted $2.09 $1.57 $0.51 $1.10 $2.12 $1.44
Financial Ratios (%)
Return on Common Equity
(annualized) (b) 26.3 17.2 5.6 13.0 29.9 17.6
Return on Common Equity
(annualized) (c) 22.1 17.2 5.6 13.0 25.2 17.6
Pretax Operating Margin 32.0 27.6 14.1 22.3 32.4 26.3
Compensation & Benefits/
Net Revenues 50.7 50.7 50.7 50.7 50.7 50.7
Effective Tax Rate 27.0 31.0 20.5 27.0 32.0 32.0
Balance Sheet
Total Assets $192,000 $179,305 $153,890 $191,074 $179,067 $175,643
Total Assets Excluding
Matched Book (d) 129,000 121,881 111,509 133,787 130,140 124,225
Common Stockholders' Equity 4,935 4,731 4,505 4,391 4,326 4,175
Total Stockholders'
Equity+Trust Preferred 6,453 5,964 5,413 5,349 5,084 4,683
Securities
Total Capital (e) 34,915 32,682 32,754 33,730 31,929 28,597
Book Value per Common Share(f) 40.58 38.72 37.06 36.35 35.93 34.56
Other Data (#s)
Employees 8,511 8,695 8,873 8,839 8,387 8,314
Common Stock Outstanding 119,700,830 118,977,746 113,657,877 116,673,240 117,114,203 118,551,437
Average Shares
Basic 122,144,018 121,942,892 120,726,366 121,523,227 120,633,663 120,638,144
Diluted (g) 130,364,705 125,776,277 122,527,953 126,222,483 126,301,259 124,797,348
</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 before adjusting for
special preferred dividends.
(c) Return on common equity calculated using net income after adjusting for
special preferred dividends.
(d) Matched book is defined as the lower of securities purchased under
agreements to resell or securities sold under agreements to repurchase.
(e) Total capital includes long-term debt and stockholders' equity, as well as,
Trust Preferred Securities, where applicable.
(f) This calculation includes restricted stock units granted under the Lehman
Stock Award Programs included in stockholders' equity.
(g) For the quarter ended May 31, 1999, reflects assumed conversion of Series A
and B Convertible Preferred Stock into 2,912,505 common shares which had
the effect of decreasing diluted earnings per share by $0.01.
