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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): March 20, 2000
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
First Quarter Earnings
On March 20, 2000 Lehman Brothers Holdings Inc. (the "Registrant")
issued a press release with respect to its first quarter 2000 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 First Quarter 2000 Earnings
99.2 Consolidated Statement of Income
(Three Months Ended February 29, 2000)
(Preliminary and Unaudited)
99.3 Selected Statistical Information
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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/ John L. Cecil
---------------------------------
John L. Cecil
Chief Financial and Administrative Officer
(Principal Financial Officer)
Date: March 20, 2000
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EXHIBIT INDEX
Exhibit No. Exhibit
Exhibit 99.1 Press Release Relating to First Quarter 2000 Earnings
Exhibit 99.2 Consolidated Statement of Income
(Three Months Ended February 29, 2000)
(Preliminary and Unaudited)
Exhibit 99.3 Selected Statistical Information
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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 FIRST QUARTER EARNINGS OF $541 MILLION,
UP 156% FROM A YEAR AGO
NEW YORK, March 20, 2000 - Lehman Brothers Holdings Inc. (NYSE: LEH) today
reported net income of $541 million, or $3.69 per common share (diluted), for
the first quarter ended February 29, 2000. Net income increased by 156 percent
over the $211 million reported for the first quarter of fiscal 1999. Net income
per share increased 135 percent from $1.57 (diluted) in the year-ago quarter.
The results for the fiscal 2000 first quarter were the best in the Firm's
history in terms of revenues, net income, operating margin and return on equity.
"This was an extremely strong quarter for Lehman Brothers, one which not only
reflects the significant strength of the Firm today, but also underscores our
ability to continue to enhance the organization's potential going forward," said
Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "Our businesses
across the board performed extremely well this quarter, with equities and
investment banking posting record revenues, and fixed income and private client
services producing very strong results. The Firm is clearly hitting on all
cylinders."
Net revenues (total revenues less interest expense) for the first quarter were
$2.202 billion, an increase of 97 percent from $1.118 billion in the first
quarter of fiscal 1999. The revenue total was the highest in the Firm's history,
surpassing the next highest quarterly total by more than $700 million. Mr. Fuld
noted that the gains in the first quarter reflected record performance in equity
underwriting and M&A advisory activities, as well as significant increases in
the Firm's institutional customer flow activities across most equity and fixed
income products.
Mr. Fuld also pointed out that the breadth of Lehman Brothers' revenues for the
first quarter of fiscal 2000 underscores the success of the Firm's efforts to
diversify its revenue mix by business and by region. Mr. Fuld said the quarter
continued the trend of significant revenue generation from each of the Firm's
major business units, with equities actually representing the largest share of
revenues for the period.
Non-interest expenses for the quarter were $1,408 million, compared with $809
million in the fiscal 1999 first quarter. Nonpersonnel expenses in the fiscal
2000 first quarter were $263 million, compared with $242 million in the previous
year's first quarter. Nonpersonnel expenses as a percentage of net revenues
decreased in the quarter to 11.9 percent from 21.7 percent a year ago.
Compensation and benefits as a percentage of net revenues was 52 percent, as the
Firm stepped up its rate of investment to accelerate its growth, and take
advantage of rapidly expanding opportunities in a number of businesses,
particularly investment banking, equities, and Europe. The Firm also increased
its investment in information technology and e-commerce activities, to support
its growth strategy.
For the fiscal 2000 first quarter, the Firm's return on common equity was a
record 36.8 percent, more than double the 17.2 percent ROE of a year ago. For
the quarter ended February 29, 2000, pre-tax operating margin was also a record
at 36.1 percent, compared with 27.6 percent in the year-ago first quarter.
Return on common equity for the first fiscal quarter of 2000 is calculated using
net income before adjusting for a special preferred dividend.
As a result of the level of earnings Lehman Brothers attained in the first
quarter of fiscal 2000, 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.
As of February 29, 2000, Lehman Brothers stockholders' equity and trust
preferred securities totaled $7.3 billion and total capital (stockholders'
equity, trust preferred securities, and long-term debt) was $39.6 billion. Book
value per common share was $48.79.
Lehman Brothers is a global investment bank with leadership positions in
corporate finance, advisory services, private equity, 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 Information Attached)
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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
February 29 February 28 Dollar Change
2000 1999 Inc/(Dec)
-------------- ------------- ---------------
Revenues:
<S> <C> <C> <C>
Principal transactions $ 1,114 $ 534
Investment banking 602 313
Commissions 229 146
Interest and dividends 4,313 3,581
Other 82 17
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Total revenues 6,340 4,591
Interest expense 4,138 3,473
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Net revenues 2,202 1,118 97%
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Non-interest expenses:
Compensation and benefits 1,145 567
Technology and communications 84 82
Brokerage and clearance 58 58
Business development 35 28
Professional fees 32 22
Occupancy 30 28
Other 24 24
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Total non-interest expenses 1,408 809 74%
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Income before taxes and dividends
on trust preferred securities 794 309 157%
Provision for income taxes 239 96
Dividends on trust preferred securities 14 2
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Net income $ 541 $ 211 156%
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Net income applicable to common stock $ 482 $ 198 143%
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Earnings per common share
Basic $3.92 $1.62
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Diluted $3.69 $1.57
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</TABLE>
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LEHMAN BROTHERS HOLDINGS INC.
SEGMENT INFORMATION
(Preliminary and Unaudited)
(In millions)
Three Months Ended
February 29 February 28 Percentage
2000 1999 Change
-------------- ------------- --------------
Investment Banking:
Net Revenue $ 593 $ 309 92%
Pre-tax 179 84 113%
Capital Markets:
Net Revenue 1,339 687 95%
Pre-tax 506 203 149%
Client Services:
Net Revenue 270 122 121%
Pre-tax 109 22 395%
Total Firm:
Net Revenue $ 2,202 $ 1,118 97%
Pre-tax 794 309 157%
Note - Segment lines include the following business activities:
Investment Banking -
o Equity and debt underwriting
o Mergers and acquisitions and other financial advisory
Capital Markets -
o Institutional sales and trading in equity and fixed income products
Client Services -
o Customer flow and asset management services to high net worth retail clients
o Private equity management and incentive fees
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EXHIBIT 99.3
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Quarters Ended Twelve Months
------------------------------------------------------------------- ------------------
2/29/00 11/30/99 8/31/99 5/31/99 2/28/99 1999
------------ -------------- ------------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement
Net Revenues $2,202 $1,411 $1,356 $1,455 $1,118 $5,340
Non-Interest Expenses:
Compensation and Benefits 1,145 715 688 738 567 2,707
Nonpersonnel Expenses 263 258 251 251 242 1,002
Net Income 541 301 290 330 211 1,132
Net Income Applicable to
Common Stock 482 292 279 268 198 1,037
Earnings per Common Share
Basic $3.92 $2.41 $2.30 $2.19 $1.62 $8.53
Diluted $3.69 $2.28 $2.20 $2.09 $1.57 $8.15
Financial Ratios (%)
Return on Common Equity
(annualized) (a) 36.8 21.6 22.1 26.3 17.2 21.8
Return on Common Equity
(annualized) (b) 33.3 21.6 22.1 22.1 17.2 20.8
Pretax Operating Margin 36.1 31.1 30.8 32.0 27.6 30.5
Compensation & Benefits/
Net Revenues 52.0 50.7 50.7 50.7 50.7 50.7
Effective Tax Rate 30.1 28.0 27.0 27.0 31.0 28.0
Balance Sheet
Total Assets $214,000 $192,244 $202,149 $191,543 $179,305
Total Assets Excluding Matched Book (c) 137,000 130,022 136,106 128,822 121,881
Common Stockholders' Equity 5,986 5,595 5,192 4,935 4,731
Total Stockholders' Equity + Trust
Preferred Securities 7,296 6,993 6,660 6,453 5,964
Total Capital (d) 39,610 37,684 36,517 34,915 32,682
Book Value per Common Share (e) 48.79 45.50 42.91 40.58 38.72
Other Data (#s)
Employees 9,026 8,893 8,729 8,511 8,695
Common Stock Outstanding 120,150,218 119,912,810 120,070,089 119,700,830 118,977,746
Average Shares
Basic 123,027,441 120,761,065 121,317,358 122,144,018 121,942,892 121,477,059
Diluted (f) (g) 131,205,984 128,994,372 129,063,197 130,364,705 125,776,277 129,282,672
</TABLE>
(a) Return on common equity calculated using net income before adjusting for
special preferred dividends.
(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) Total capital includes long-term debt, Trust Preferred Securities and
stockholders' equity.
(e) This calculation includes restricted stock units granted under the Lehman
Stock Award Programs included in stockholders' equity.
(f) For the quarters ended November 30, August 31 and May 31, 1999, the
assumed conversion of Series A and B Convertible Preferred Stock into
2,118,396, 2,607,680 and 2,912,505 common shares had the effect of decreasing
diluted earnings per share by $0.01. For the year ended November 30, 1999 the
assumed conversion of Series A and B Convertible Preferred Stock into
2,779,737 common shares had the effect of decreasing diluted earnings per share
by $0.04.
(g) For the quarter ended February 29, 2000, the assumed conversion of Series A
and B convertible Preferred Stock into 1,221,740 common shares had the effect of
decreasing diluted earnings per share by $0.02.
