SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 27, 1998
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________ to ______________
Commission File Number 1-8989
The Bear Stearns Companies Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3286161
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
245 Park Avenue, New York, New York 10167
(Address of principal executive offices) (Zip Code)
(212)272-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 7, 1998, the latest practicable date, there were 113,760,906 shares of
Common Stock, $1 par value, outstanding.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 27, 1998 (Unaudited) and
June 30, 1997
Consolidated Statements of Income (Unaudited) for the three-and nine-month
periods ended March 27, 1998 and March 27, 1997
Consolidated Statements of Cash Flows (Unaudited) for the nine-month periods
ended March 27, 1998 and March 27, 1997
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Assets
March 27, June 30,
1998 1997
------------- ---------------
(Unaudited)
(In thousands)
Cash and cash equivalents $ 383,836 $ 1,249,132
Cash and securities deposited with
clearing organizations or
segregated in compliance with
federal regulations 1,847,212 1,448,814
Securities purchased under agreements
to resell 38,069,683 28,340,599
Receivable for securities provided as
collateral 6,405,267 -
Securities borrowed 52,555,867 40,711,280
Receivables:
Customers 13,612,769 8,572,521
Brokers, dealers and others 1,343,663 1,227,947
Interest and dividends 503,241 405,892
Financial instruments owned, at
fair value 50,340,391 38,437,280
Property, equipment and leasehold
improvements, net of accumulated
depreciation and amortization 454,615 379,533
Other assets 857,758 660,537
------------- ---------------
Total Assets $166,374,302 $121,433,535
============= ===============
See Notes to Consolidated Financial Statements.
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Liabilities and Stockholders' Equity
March 27, June 30,
1998 1997
------------- ---------------
(Unaudited)
(In thousands, except share
data)
Short-term borrowings $ 16,460,605 $ 14,416,671
Securities sold under agreements
to repurchase 53,167,994 39,431,216
Obligation to return securities received as
collateral 8,369,696 -
Payables:
Customers 37,786,738 29,921,386
Brokers, dealers and others 3,912,361 2,808,359
Interest and dividends 615,409 452,662
Financial instruments sold, but not
yet purchased, at fair value 27,565,223 20,784,796
Accrued employee compensation and benefits 1,089,759 907,337
Other liabilities and accrued expenses 1,073,794 964,409
------------- ---------------
150,041,579 109,686,836
------------- ---------------
Commitments and contingencies
Long-term borrowings 12,160,379 8,120,328
------------- ---------------
Guaranteed Preferred Beneficial Interests in
Company Subordinated Debt Securities 200,000 200,000
Preferred stock issued by subsidiary 150,000 150,000
------------- ---------------
Stockholders' Equity
Preferred Stock 687,500 437,500
Common Stock, $1.00 par value;
200,000,000 shares authorized;
167,784,941 shares issued at
March 27, 1998 and June 30, 1997 167,785 167,785
Paid-in capital 1,883,674 1,874,016
Retained earnings 1,445,975 1,031,736
Capital Accumulation Plan 694,967 655,007
Treasury stock, at cost
Adjustable Rate Cumulative
Preferred Stock, Series A - 2,520,750
shares at March 27, 1998 and
June 30, 1997 (103,421) (103,421)
Common Stock - 53,486,935 shares and
50,191,531 shares at March 27, 1998
and June 30, 1997, respectively (947,022) (772,551)
Note receivable from ESOP Trust (7,114) (13,701)
------------- ---------------
Total Stockholders' Equity 3,822,344 3,276,371
------------- ---------------
Total Liabilities and Stockholders' Equity $166,374,302 $121,433,535
============= ===============
See Notes to Consolidated Financial Statements.
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three-Months Ended Nine-Months Ended
------------------------------ ----------------------------
March 27, March 27, March 27, March 27,
1998 1997 1998 1997
------------- --------------- ------------ -------------
(In thousands, except share
data)
Revenues
Commissions $ 226,067 $ 191,817 $ 670,007 $ 536,971
Principal transactions 452,742 407,336 1,234,768 1,131,467
Investment banking 197,407 188,706 695,619 480,538
Interest and dividends 1,037,202 712,685 3,083,071 2,118,552
Other income 14,203 10,757 50,228 36,456
------------- --------------- ------------ -------------
Total Revenues 1,927,621 1,511,301 5,733,693 4,303,984
Interest expense 877,392 576,836 2,613,611 1,740,701
------------- --------------- ------------ -------------
Revenues, net of interest expense 1,050,229 934,465 3,120,082 2,563,283
------------- --------------- ------------ -------------
Non-interest expenses
Employee compensation and benefits 513,254 464,596 1,548,244 1,265,793
Floor brokerage, exchange
and clearance fees 40,975 36,587 124,082 102,600
Communications 31,898 26,085 88,855 75,419
Depreciation and amortization 29,375 22,533 82,819 63,951
Occupancy 25,962 22,658 74,895 65,949
Advertising and market development 22,680 15,890 58,691 47,329
Data processing and equipment 11,919 10,019 36,613 25,780
Other expenses 108,443 60,322 313,417 171,615
------------- --------------- ------------ -------------
Total non-interest expenses 784,506 658,690 2,327,616 1,818,436
------------- --------------- ------------ -------------
Income before provision for
income taxes 265,723 275,775 792,466 744,847
Provision for income taxes 99,404 110,294 304,307 294,405
------------- --------------- ------------ -------------
Net income $ 166,319 $ 165,481 $ 488,159 $ 450,442
============= =============== ============ =============
Net income applicable to
common shares 157,193 159,552 467,184 432,543
============= =============== ============ =============
Earnings per share $ 1.15 $ 1.14 $ 3.37 $ 3.05
============= =============== ============ =============
Weighted average common and
common equivalent shares
outstanding 150,084,539 146,932,199 151,899,468 148,978,719
============= =============== ============ =============
Cash dividends declared
per common share $ 0.15 $ 0.14 $ 0.45 $ 0.43
============= =============== ============ =============
See Notes to Consolidated Financial Statements.
THE BEAR STEARNS COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine-Months Ended
------------------------------
March 27, March 27,
1998 1997
--------------- ------------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 488,159 $ 450,442
Adjustments to reconcile net income to cash used in
operating activities:
Depreciation and amortization 82,819 63,951
Deferred income taxes (87,962) (74,804)
Other 85,475 57,119
(Increases) decreases in operating assets:
Cash and securities deposited with clearing
organizations or segregated in compliance
with federal regulations (398,398) 327,217
Securities purchased under agreements to resell (9,729,084) (4,592,958)
Securities borrowed (11,844,587) (4,689,826)
Receivables:
Customers (5,040,248) (697,726)
Brokers, dealers and others (115,716) (2,154,686)
Financial instruments owned (9,837,709) (13,029,174)
Other assets (100,229) 118,307
Increases (decreases) in operating liabilities:
Securities sold under agreements to repurchase 13,736,778 8,789,664
Payables:
Customers 7,865,352 4,591,730
Brokers, dealers and others 1,100,571 (274,862)
Financial instruments sold, but not yet purchased 6,679,454 6,832,070
Accrued employee compensation and benefits 104,422 81,023
Other liabilities and accrued expenses 259,077 (194,832)
--------------- ------------
Cash used in operating activities (6,751,826) (4,397,345)
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings 2,043,934 3,424,778
Issuance of long-term borrowings 5,178,436 1,942,402
Net proceeds from issuance of subsidiary securities - 199,884
Net proceeds from issuance of Cumulative
Preferred Stock, Series E 245,000 -
Capital Accumulation Plan 51,010 -
Common Stock distributions 7,552 15
Note repayment from ESOP Trust 6,587 6,099
Payments for:
Retirement of Senior Notes (1,147,105) (767,984)
Treasury stock purchases (179,976) (154,339)
Cash dividends paid (70,348) (70,200)
--------------- ------------
Cash provided by financing activities 6,135,090 4,580,655
--------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, equipment and leasehold
improvements (157,901) (85,817)
Purchases of investment securities and other assets (96,061) (42,442)
Proceeds from sales of investment securities and other
assets 5,402 3,737
--------------- ------------
Cash used in investing activities (248,560) (124,522)
--------------- ------------
Net (decrease) increase in cash and cash equivalents (865,296) 58,788
Cash and cash equivalents, beginning of period 1,249,132 127,847
--------------- ------------
Cash and cash equivalents, end of period $ 383,836 $ 186,635
=============== ============
See Notes to Consolidated Financial Statements.
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of The Bear Stearns Companies Inc. and its subsidiaries (the
"Company"). All material intercompany transactions and balances have been
eliminated. Certain prior period amounts have been reclassified to conform
with the current period's presentation or restated for the effects of stock
dividends. The consolidated financial statements reflect all adjustments
which, in the opinion of management, are normal and recurring and are
necessary for a fair statement of the results for the interim periods
presented. The consolidated financial statements are prepared in conformity
with generally accepted accounting principles which require management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The nature of the Company's business is
such that the results of any interim period may not be indicative of the
results to be expected for an entire fiscal year.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments owned and financial instruments sold, but not yet
purchased consist of the Company's proprietary trading and investment
accounts, at fair value, as follows:
March 27, June 30,
In thousands 1998 1997
- -------------------------------------------------------------------------------
Financial instruments owned:
US government and agency $ 9,188,501 $ 9,163,407
Other sovereign governments 6,359,891 1,847,691
Corporate equity and convertible debt 12,479,543 11,280,199
Corporate debt 4,523,007 4,961,737
Derivative financial instruments 4,055,429 2,780,231
Mortgages and other mortgage-backed
securities 13,032,447 7,858,200
Other 701,573 545,815
------- -------
$ 50,340,391 $ 38,437,280
============ ============
Financial instruments sold, but not yet purchased:
US government and agency $ 9,012,839 $ 8,687,884
Other sovereign governments 6,326,646 1,479,278
Corporate equity 4,698,671 4,985,396
Corporate debt 918,506 1,099,700
Derivative financial instruments 6,568,023 4,412,986
Other 40,538 119,552
------ -------
$ 27,565,223 $ 20,784,796
============ ============
The adoption of Statement of Financial Accounting Standards ("SFAS") 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125," has increased Financial instruments owned by approximately $2.2
billion of which Other sovereign governments increased by $1.6 billion and
U.S. government and agency increased by $450 million. Financial
instruments sold, but not yet purchased increased by approximately $300
million principally consisting of U.S. governments and agencies. The
remaining increases were not material.
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES
At March 27, 1998, the Company was contingently liable for unsecured
letters of credit of approximately $2.1 billion and letters of credit of
approximately $114.5 million secured by financial instruments that are
principally used as deposits for securities borrowed and to satisfy margin
deposits at option and commodity exchanges.
The Company is contingently liable pursuant to an unconditional guaranty of
commercial paper issued by a third party. The commercial paper is supported by
participations in the right to the return of cash collateral posted in
securities lending transactions. The Company's risk is partially mitigated by
securities pledged under such agreements. At March 27, 1998, the Company was
contingently liable for approximately $5.0 billion under such guaranty.
In the normal course of business, the Company has been named as a defendant
in several lawsuits which involve claims for substantial amounts. Although the
ultimate outcome of these suits cannot be ascertained at this time, it is the
opinion of management, after consultation with counsel, that the resolution of
such suits will not have a material adverse effect on the results of operations
or the financial condition of the Company.
4. NET CAPITAL REQUIREMENTS
The Company's principal operating subsidiary, Bear Stearns & Co. Inc. ("Bear
Stearns") and Bear Stearns' wholly owned subsidiary, Bear, Stearns
Securities Corp. ("BSSC"), are registered broker-dealers and, accordingly,
are subject to Securities and Exchange Commission Rule 15c3-1 (the "Net
Capital Rule") and the capital rules of the New York Stock Exchange, Inc.
("NYSE") and other principal exchanges of which Bear Stearns and BSSC are
members. Bear Stearns and BSSC have consistently operated in excess of the
minimum net capital requirements imposed by the capital rules. Included in
the computation of net capital of Bear Stearns is net capital of BSSC in
excess of 5% of aggregate debit items arising from customer transactions, as
defined. At March 27, 1998, Bear Stearns' net capital, as defined, of $1.3
billion exceeded the minimum requirement by $1.27 billion.
Bear Stearns International Limited ("BSIL") and certain other wholly owned,
London-based subsidiaries are subject to regulatory capital requirements of
the Securities and Futures Authority.
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. EARNINGS PER SHARE
EPS is computed by dividing net income available to common stockholders by
the weighted average number of common shares outstanding during each period
presented. Common shares include the assumed distribution of shares of
common stock issued or issuable under various employee benefit plans
including certain of the Company's deferred compensation arrangements, with
appropriate adjustments made to net income for expense accruals related
thereto.
6. CASH FLOW INFORMATION
Cash payments for interest approximated interest expense for the nine-months
ended March 27, 1998 and March 27, 1997. Income taxes paid totaled $432.2
million and $329.2 million for the nine-months ended March 27, 1998 and
March 27, 1997, respectively.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, in its capacity as a dealer in over-the-counter derivative
financial instruments and in connection with its proprietary market-making
and trading activities, enters into transactions in a variety of cash and
derivative financial instruments in order to reduce its exposure to market
risk, which includes interest rate, exchange rate, equity price and
commodity price risk. SFAS 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," defines a derivative
as a future, forward, swap, or option contract, or other financial
instruments with similar characteristics such as caps, floors and collars.
Generally these financial instruments represent future commitments to
exchange interest payment streams or currencies or to purchase or sell
other financial instruments at specific terms at specified future dates.
Option contracts provide the holder with the right, but not the obligation,
to purchase or sell a financial instrument at a specific price before or on
an established date. These financial instruments may have market and/or
credit risk in excess of amounts recorded in the Consolidated Statements of
Financial Condition.
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)
In order to measure derivative activity, notional or contract amounts are
frequently utilized. Notional/contract amounts, which are not included on
the balance sheet, are used to calculate contractual cash flows to be
exchanged and are generally not actually paid or received, with the
exception of currency swaps and foreign exchange forwards and
mortgage-backed securities forwards. The notional/contract amounts of
financial instruments that give rise to off-balance-sheet market risk are
indicative only of the extent of involvement in the particular class of
financial instrument and are not necessarily an indication of overall market
risk.
The following table represents the notional/contract amounts of the
Company's outstanding derivative financial instruments as of March 27, 1998
and June 30, 1997:
March 27, June 30,
In billions 1998 1997
---------------------------------------------------------------------------
Interest Rate:
Swap agreements, including options, swaptions,
caps, collars, and floors $266.7 $208.3
Futures contracts 56.2 34.3
Options held 5.1 4.0
Options written 1.9 0.7
Foreign Exchange:
Futures contracts 22.2 19.9
Forward contracts 12.8 13.6
Options held 16.0 10.0
Options written 11.5 9.4
Mortgage-Backed Securities:
Forward Contracts 74.7 40.5
Equity:
Swap agreements 13.8 6.0
Futures contracts 0.9 0.6
Options held 5.0 2.8
Options written 3.7 2.9
THE BEAR STEARNS COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)
The derivative instruments used in the Company's trading and dealer
activities are recorded at fair value on a daily basis with the resulting
unrealized gains or losses recorded in the Consolidated Statements of
Financial Condition and the related income or loss reflected in revenues
derived from principal transactions.
The fair values of derivative financial instruments held or issued for
trading purposes as of March 27, 1998 and June 30, 1997 were as follows:
March 27, June 30,
1998 1997
--------------------------------------------------
In millions Assets Liabilities Assets Liabilities
----------------------------------------------------------------------------
Swap agreements $965 $1,462 $730 $1,250
Futures and forward
contracts 306 233 172 248
Options held 2,789 1,880
Options written 4,919 2,927
The average monthly fair values of the derivative financial instruments for
the nine-months ended March 27, 1998 and the fiscal year ended June 30, 1997
were as follows:
March 27, June 30,
1998 1997
------------------------------------------------
In millions Assets Liabilities Assets Liabilities
----------------------------------------------------------------------------
Swap agreements $1,013 $1,360 $ 734 $1,029
Futures and forward
contracts 306 298 245 218
Options held 2,493 1,120
Options written 3,862 1,657
The notional/contract amounts of these instruments do not represent the
Company's potential risk of loss due to counterparty nonperformance. Credit risk
arises from the potential inability of counterparties to perform in accordance
with the terms of the contract. The Company's exposure to credit risk associated
with counterparty nonperformance is limited to the net replacement cost of
over-the-counter contracts in a gain position which are recognized in the
Company's Consolidated Statements of Financial Condition. Exchange-traded
financial instruments, such as futures and options, generally do not give rise
to significant counterparty exposure due to the margin requirements of the
individual exchanges. Generally, options written do not give rise to
counterparty credit risk since they obligate the Company (not its counterparty)
to perform. The Company's net replacement cost of derivatives in a gain position
after consideration of collateral at March 27, 1998 and June 30, 1997 was
approximately $1,389.0 million and $540.8 million, respectively.
8. TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES
As of January 1, 1998, the Company adopted SFAS 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125," which was
effective for transfers and pledges of certain financial assets and
collateral made after December 31, 1997. The adoption of SFAS 127 created
additional assets and liabilities on the Company's Consolidated Statement
of Financial Condition related to the recognition of securities provided
and received as collateral. At March 27, 1998, the impact of SFAS 127 on
the Company's Consolidated Statement of Financial Condition was an increase
to total assets and total liabilities of $8,496.0 million. This was
reflected in the Company's Consolidated Statement of Cash Flows for the
nine-months ended March 27, 1998 as a non-cash item.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's principal business activities, investment banking, securities
trading and brokerage, are, by their nature, highly competitive and subject to
various risks, in particular volatile trading markets and fluctuations in the
volume of market activity. Consequently, the Company's net income and revenues
in the past have been, and are likely to continue to be, subject to wide
fluctuations, reflecting the impact of many factors including, securities market
conditions, the level and volatility of interest rates, competitive conditions,
and the size and timing of transactions. Moreover, the results of operations for
a particular interim period may not be indicative of results to be expected for
an entire fiscal year. Certain statements contained in this discussion are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks and uncertainties, including those previously mentioned, which
could cause actual results to differ materially from those discussed in the
forward-looking statements.
For a description of the Company's business, including its trading in cash
instruments and derivative products, its underwriting and trading policies, and
their respective risks, and the Company's risk management policies and
procedures, see the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997.
Three-Months Ended March 27, 1998 Compared to March 27, 1997
Favorable economic and market conditions characterized the March 1998
quarter reflecting a stable interest rate environment and a steadily growing
U.S. economic operating environment. Net income in the 1998 quarter was $166.3
million, an increase of 0.5% from the $165.5 million in the comparable prior
year quarter. Revenues, net of interest expense ("net revenues"), increased
12.4% to $1,050.2 million from $934.5 million in the 1997 quarter. This increase
was attributable to increases in all revenue categories. Earnings per share were
$1.15 for the 1998 quarter versus $1.14 for the comparable 1997 quarter.
Commission revenues increased 17.9% in the 1998 quarter to $226.1 million
from $191.8 million in the comparable 1997 quarter. The Company benefited from a
21.8% increase in average daily NYSE volume and a 19.0% increase in average
daily OTC volume in the 1998 quarter from the 1997 quarter. Commission revenues
derived from the firm's institutional equities, private client services and
securities clearance revenues all increased.
Revenues from principal transactions increased 11.1% in the 1998 quarter to
$452.7 million from $407.3 million in the comparable 1997 quarter, reflecting
increases in revenues derived from the Company's equity activities, principally
in the convertible bonds, risk arbitrage and international equities areas.
Revenues derived from the Company's fixed income activities remained relatively
constant with increases in the high yield and government bond securities areas
offset by decreases in the corporate bonds, mortgage-backed securities and
emerging markets areas. Revenues derived from the Company's foreign exchange &
other derivative financial instruments activities in the 1998 quarter also
remained relatively constant from the comparable 1997 quarter.
The Company's principal transaction revenues by reporting categories, including
derivatives, are as follows:
Three-Months Ended Three-Months Ended
March 27, 1998 March 27, 1997
-------------- --------------
Fixed Income $ 227,364 $ 225,693
Equity 152,206 104,855
Foreign Exchange & Other
Derivative Financial Instruments 73,172 76,788
------ ------
$ 452,742 $ 407,336
=========- =========
Investment banking revenues increased 4.6% to $197.4 million in the 1998 quarter
from $188.7 million in the comparable 1997 quarter. This increase reflected an
increase in underwriting revenues, offset by a decrease in merger and
acquisition fees and advisory fees. The increase in underwriting revenues was
principally due to increased levels of high yield and municipals new issue
volume partially offset by a decrease in emerging markets new issue volume as
compared to the 1997 quarter.
Net interest and dividends (revenues from interest and net dividends, less
interest expense) increased 17.6% to $159.8 million in the 1998 quarter from
$135.8 million in the comparable 1997 quarter. This increase was primarily
attributable to higher levels of margin debt and customer short activity.
Average margin debt increased to $45.8 billion in the 1998 quarter from $31.7
billion in the comparable 1997 quarter and average customer shorts increased
to $57.5 billion from $40.5 billion. Average free credit balances increased to
$11.5 billion in the 1998 quarter from $8.1 billion in the comparable 1997
quarter.
Employee compensation and benefits increased 10.5% to $513.3 million in the 1998
quarter from $464.6 million in the comparable 1997 quarter. The increase was
attributable to an increase in discretionary bonuses and salesmen's commissions
related to increased revenues. Employee compensation and benefits, as a
percentage of net revenues, decreased to 48.9% in the 1998 quarter from 49.7% in
the comparable 1997 quarter.
All other expenses increased 39.8% to $271.3 million in the 1998 quarter from
$194.1 million in the comparable 1997 quarter. Floor brokerage, exchange and
clearance fees increased $4.4 million or 12.0% in the 1998 quarter from the
comparable 1997 quarter reflecting the increase in the volume of securities
transactions processed. Depreciation expense increased reflecting computer
equipment upgrades. The increase in other operating expenses was primarily
related to increases in accruals for expenses associated with the Capital
Accumulation Plan for Senior Managing Directors (the "CAP Plan"), EDP
professional fees and legal expenses. EDP professional fees increased due to
additional consultants hired for various technology initiatives, including costs
relating to the Year 2000 Issue.
The Company's effective tax rate decreased to 37.4% in the 1998 quarter compared
to 40.0% in the comparable 1997 quarter due to a higher level of tax preference
items in the 1998 quarter.
Nine-Months Ended March 27, 1998
Compared to March 27, 1997
Net income for the nine-months ended March 27, 1998 was $488.2 million, an
increase of 8.4% from $450.4 million for the comparable 1997 period. Revenues,
net of interest expense ("net revenues"), increased 21.7% to $3.1 billion in the
1998 period from $2.6 billion in the 1997 period. The increase was attributable
to increases in all revenue categories, particularly investment banking and
commissions. Earnings per share were $3.37 for the 1998 period versus $3.05 for
the comparable 1997 period.
Commission revenues increased 24.8% in the 1998 period to $670.0 million from
$537.0 million in the comparable 1997 period. The Company benefited from an
increase in the average daily NYSE volume and average daily OTC volume in the
1998 period. As a result, revenues from the firm's institutional equities and
private client services increased as well as securities clearance revenues.
Revenues from principal transactions increased 9.1% in the 1998 period to
$1,234.8 million from $1,131.5 million in the comparable 1997 period, reflecting
increases in revenues derived from the Company's equity activities, principally
the convertible bonds and risk arbitrage areas. Additionally, principal
transaction revenues derived from foreign exchange and derivative activities
increased in the 1998 period. The increase in revenues from these activities was
partially offset by decreases in revenues derived from the Company's fixed
income activities, principally mortgage-backed securities and corporate bonds.
The Company's principal transaction revenues by reporting categories, including
derivatives, are as follows:
Nine-Months Ended Nine-Months Ended
March 27, 1998 March 27, 1997
--------------- --------------
Fixed Income $ 668,488 $ 700,060
Equity 353,401 261,345
Foreign Exchange & Other
Derivative Financial Instruments 212,879 170,062
------- -------
$1,234,768 $1,131,467
========== ==========
Investment banking revenues increased 44.8% to $695.6 million in the 1998 period
from $480.5 million in the comparable 1997 period. This increase reflected an
increase in merger and acquisition fees and advisory fees as well as an increase
in underwriting revenues. The increase in underwriting revenues was principally
due to increased levels of equity and high yield new issue volume as compared to
the 1997 period.
Net interest and dividends (revenues from interest and net dividends, less
interest expense) increased 24.2% to $469.5 million in the 1998 period from
$377.9 million in the comparable 1997 period. This increase was primarily
attributable to higher levels of margin debt and customer short activity.
Average margin debt increased to $44.3 billion in the 1998 period from $29.1
billion in the comparable 1997 period and average customer shorts increased to
$54.9 billion from $37.5 billion. Average free credit balances increased to
$10.6 billion in the 1998 period from $7.8 billion in the comparable 1997
period.
Employee compensation and benefits increased 22.3% to $1,548.2 million in the
1998 period from $1,265.8 million in the comparable 1997 period. The increase
was attributable to higher incentive and discretionary bonus accruals and an
increase in salesmen's commissions resulting from increased revenues. Employee
compensation and benefits, as a percentage of net revenues, increased to 49.6%
in the 1998 period from 49.4% in the comparable 1997 period.
All other expenses increased 41.0% to $779.4 million in the 1998 period from
$552.6 million in the comparable 1997 period. Floor brokerage, exchange and
clearance fees increased $21.5 million or 20.9% in the 1998 period from the
comparable 1997 period reflecting the increase in the volume of securities
transactions processed. Expenses related to depreciation and data processing
increased reflecting computer equipment upgrades. The increase in other
operating expenses was primarily related to increases in accruals for expenses
associated with the CAP Plan, EDP professional fees and legal expenses. EDP
professional fees increased due to additional consultants hired for various
technology initiatives, including costs relating to the Year 2000 Issue.
The Company's effective tax rate decreased to 38.4% in the 1998 period compared
to 39.5% in the comparable 1997 period due to a higher level of tax preference
items in the 1998 period.
Liquidity and Capital Resources
Financial Leverage
The Company maintains a highly liquid balance sheet with a majority of the
Company's assets consisting of marketable securities inventories, which are
marked to market daily, and collateralized receivables arising from
customer-related and proprietary securities transactions. Collateralized
receivables consist of resale agreements secured predominantly by U.S.
government and agency securities, customer margin loans and securities borrowed
which are typically secured by marketable corporate debt and equity securities.
The Company's total assets and financial leverage can fluctuate significantly
depending largely upon economic and market conditions, volume of activity,
customer demand, and underwriting commitments.
The Company's total assets at March 27, 1998 increased to $166.4 billion
from $121.4 billion at June 30, 1997. The increase is primarily attributable to
the growth in securities borrowed, financial instruments owned, at fair value,
and securities purchased under agreements to resell. Approximately $8.5 billion
of the increase in total assets was related to the Company's adoption of SFAS
127. The adoption of SFAS 127 increased both total assets and total liabilities
by the same amount and did not require any additional funding.
The Company's ability to support fluctuations in total assets is a function of
its ability to obtain short-term secured and unsecured funding and its access to
sources of long-term capital in the form of long-term borrowings and equity,
which together form its capital base. The Company continuously monitors the
adequacy of its capital base which is a function of asset quality and liquidity.
Highly liquid assets, such as U.S. government and agency securities, typically
are funded by the use of repurchase agreements and securities lending
arrangements which require very low levels of margin. In contrast, assets of
lower quality or liquidity require higher levels of overcollateralization, or
margin, and consequently increased levels of capital, in order to obtain secured
financing. Accordingly, the mix of assets being held by the Company
significantly influences the amount of leverage the Company can employ and the
adequacy of its capital base.
Funding Strategy
The Company's general funding strategy provides for the diversification of its
short-term funding sources in order to maximize liquidity. Sources of short-term
funding consist principally of collateralized borrowings, including repurchase
transactions and securities lending arrangements, customer free credit balances,
unsecured commercial paper,
medium-term notes and bank borrowings generally having maturities from overnight
to one year.
Repurchase transactions, whereby securities are sold with a commitment for
repurchase by the Company at a future date, represent the dominant component of
secured short-term funding.
The Company continued to increase the utilization of its medium-term note
financing in order to extend maturities of its debt and achieve additional
diversification of its funding sources. An increase in the Company's Euro-Dragon
Medium Term Note Programme from $3.5 billion to $5.0 billion became effective in
April 1998. In addition to short-term funding sources, the Company utilizes
long-term senior debt, including medium-term notes, as a longer term source of
unsecured financing. During the nine-months ended March 27, 1998 the Company
issued $5.2 billion in long-term debt which, net of retirements, served to
increase long-term debt to $12.2 billion at March 27, 1998 from $8.1 billion at
June 30, 1997. The substantial increase in long-term borrowings reflects the
Company's intent to further extend maturities to finance balance sheet growth
and favorable market conditions for issuance.
The Company maintains an alternative funding strategy focused on the liquidity
and self-funding ability of the underlying assets. The objective of the strategy
is to maintain sufficient sources of alternative funding to enable the Company
to fund debt obligations maturing within one year without issuing any new
unsecured debt, including commercial paper. The most significant source of
alternative funding is the Company's ability to hypothecate or pledge its
unencumbered assets as collateral for short-term funding.
As part of the Company's alternative funding strategy, the Company regularly
monitors and analyzes the size, composition, and liquidity characteristics of
the assets being financed and evaluates its liquidity needs in light of current
market conditions and available funding alternatives. Through this analysis, the
Company can continuously evaluate the adequacy of its equity base and the
schedule of maturing term-debt supporting its present asset levels. The Company
can then seek to adjust its maturity schedule, in light of market conditions and
funding alternatives.
As part of the Company's alternative funding strategy, the Company maintains a
committed revolving-credit facility (the "facility") totaling $3.7 billion which
permits borrowing on a secured basis by Bear Stearns & Co. Inc. ("Bear
Stearns"), Bear Stearns Securities Corp. ("BSSC") and certain affiliates. The
facility provides that up to $1.85 billion of the total facility may be borrowed
by the Company on an unsecured basis. Secured borrowings can be collateralized
by both investment-grade and non-investment-grade financial instruments. In
addition, this agreement provides for defined margin levels on a wide range of
eligible financial instruments that may be pledged under the secured portion of
the facility. The facility terminates in October 1998 . There were no borrowings
outstanding under the facility at March 27, 1998.
Capital Resources
The Company conducts a substantial portion of all of its operating activities
within its regulated broker-dealer subsidiaries, Bear Stearns, BSSC, Bear
Stearns International Limited ("BSIL") and Bear Stearns International Trading
Limited ("BSIT"). In connection therewith, a substantial portion of the
Company's long-term borrowings and equity have been used to fund investments in,
and advances to, Bear Stearns, BSSC, BSIL and BSIT. The Company regularly
monitors the nature and significance of those assets or activities conducted
outside the broker-dealer subsidiaries and attempts to fund such assets with
either capital or borrowings having maturities consistent with the nature and
the liquidity of the assets being financed.
During the nine-months ended March 27, 1998, the Company repurchased 4,278,141
shares of Common Stock in connection with the CAP Plan at a cost of
approximately $183.6 million. The Company intends, subject to market conditions,
to continue to purchase in future periods a sufficient number of shares of
Common Stock in the open market to enable the Company to issue shares in respect
of all compensation deferred and any additional amounts allocated to
participants under the CAP Plan. In accordance with the terms of the CAP Plan,
the Company will distribute to CAP Plan participants approximately 3.8 million
shares of common stock on or after June 30, 1998. These shares represent CAP
Units which were previously credited to their respective accounts and have
reached the end of their deferral period. Repurchases of Common Stock pursuant
to the CAP Plan are not made pursuant to the Company's Stock Repurchase Plan
(the "Repurchase Plan") authorized by the Board of Directors and are not
included in calculating the maximum aggregate number of shares of Common Stock
that the Company may repurchase under the Repurchase Plan. As of May 7, 1998
there have been no purchases under the Repurchase Plan.
On April 21, 1998, the Company issued 4,000,000 depositary shares representing
1,000,000 shares of Cumulative Preferred Stock, Series F ("Series F Preferred
Stock"), having an aggregate liquidation preference of $200,000,000. Each
depositary share represents a one-fourth interest in a share of Series F
Preferred Stock. Dividends on the Series F Preferred Stock are payable at an
annual rate of 5.72%. Series F Preferred Stock is redeemable at the option of
the Company at any time on or after April 15, 2008, in whole or in part, at a
redemption price of $200 per share (equivalent to $50 per depositary share),
plus accrued but unpaid dividends to the redemption date.
On May 5, 1998, the Company redeemed 7,500,000 depositary shares representing
937,500 shares of 7.88% Cumulative Preferred Stock, Series B for a redemption
price of $25 per depositary share plus accrued and unpaid dividends of $0.1094
per depositary share.
Cash Flows
Cash and cash equivalents decreased by $865.3 million during the nine-months
ended March 27, 1998 to $383.8 million. Cash used in operating activities during
the nine-months ended March 27, 1998 was $6.8 billion, mainly representing
increases in securities borrowed, financial instruments owned and securities
purchased under agreements to resell partially offset by increases in securities
sold under agreements to repurchase, financial instruments sold, but not yet
purchased and payables to customers and brokers, dealers and others. Financing
activities provided cash of $6.1 billion, primarily derived from issuance of
long-term borrowings and proceeds from short-term borrowings partially offset by
retirement of senior notes.
Regulated Subsidiaries
As registered broker-dealers, Bear Stearns and BSSC are subject to the net
capital requirements of the Securities and Exchange Commission, the New York
Stock Exchange, Inc. and the Commodity Futures Trading Commission, which are
designed to measure the general financial soundness and liquidity of
broker-dealers. Bear Stearns and BSSC have consistently operated in excess of
the minimum net capital requirements imposed by these agencies. Additionally,
BSIL and BSIT, London-based broker-dealer subsidiaries, are subject to the
regulatory capital requirements of the Securities and Futures Authority, a
self-regulatory organization established pursuant to the United Kingdom
Financial Services Act of 1986.
Merchant Banking and Non-Investment-Grade Debt Securities
As part of the Company's merchant banking activities, it participates from time
to time in principal investments in leveraged acquisitions. As part of these
activities, the Company originates, structures and invests in merger,
acquisition, restructuring, and leveraged capital transactions, including
leveraged buyouts. The Company's principal investments in these transactions are
generally made in the form of equity investments or subordinated loans, and have
not required significant levels of capital investment. At March 27, 1998, the
Company's aggregate investments in leveraged transactions and its exposure
related to any one transaction was not material.
As part of the Company's fixed-income securities activities, the Company
participates in the trading and sale of high yield, non-investment-grade debt
securities, non-investment-grade mortgage loans and the securities of companies
that are the subject of pending bankruptcy proceedings (collectively "high yield
securities"). Non-investment-grade mortgage loans are principally secured by
residential properties and include both non-performing loans and real estate
owned. At March 27, 1998, the Company held high yield securities of $2.7 billion
in long inventory and $203.4 million in short inventory.
These investments generally involve greater risk than investment-grade debt
securities due to credit considerations, liquidity of secondary trading markets
and vulnerability to general economic conditions.
The level of the Company's high yield securities inventories, and the impact of
such activities upon the Company's results of operations, can fluctuate from
period to period as a result of customer demands and economic and market
considerations. Bear Stearns' Risk Committee continuously monitors exposure to
market and credit risk with respect to high yield securities inventories and
establishes limits with respect to overall market exposure and concentrations of
risk by both individual issuer and industry group.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year and therefore,
without consideration of the impact of the upcoming change in the century. Such
programs may not be able to accurately process dates ending in the year 2000 and
after, and the Company has determined that it needs to modify or replace
portions of its software so that its computer systems will properly utilize
dates beyond December 31, 1999.
Over a year ago, the Company established a task force to review and develop an
action plan to address the Year 2000 issue. Such ongoing assessment and
monitoring has continued and includes having the Company assess the degree of
compliance of its significant vendors, clients and correspondents to determine
the extent to which the Company is vulnerable to those third parties' failure to
remediate their own Year 2000 issue. The Company also participates actively on
various industry-wide testing committees.
The Company has and will continue to utilize both internal and external
resources to reprogram, or replace, and test the software for Year 2000
modifications. The Company's total projected Year 2000 project cost, including
the estimated costs and time associated with the impact of third party Year 2000
issues, are based on presently available information. Such project cost will
primarily be expensed as incurred. To date, the amounts incurred and expensed
related to the assessment of, and preliminary efforts in connection with, the
Year 2000 project and the development of a remediation plan have not been
material to the operation of the Company. The remaining cost of the Year 2000
project will be funded through operating cash flows and is not expected to have
a material effect on future results of operations.
The Company presently believes that with modification to existing software and
conversions to new software, the Year 2000 issue can be mitigated. It is
anticipated that the Company will complete the reprogramming and replacement
phase of the project by the end of calendar 1998 which will give the Company
calendar 1999 as a test period. However, if such modifications and conversions
are not completed on a timely basis, the
Year 2000 issue could have a material impact on the operations of the Company.
Additionally, there can be no assurance that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
EMU
Europe's Economic and Monetary Union ("EMU") will result in the replacement of
certain European currencies with "Euro." The Company is addressing the
technological implications that will result from EMU. Costs associated with EMU
are being expensed by the Company during the period in which they are incurred.
Effects of Statement of Financial Accounting Standards
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which revises and standardizes pensions and other postretirement benefit plan
disclosures. The Statement is effective for fiscal years beginning after
December 15, 1997. The effect of SFAS 132 is not expected to be material to the
Company's financial statement disclosures.
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------- -----------
The Company's principal business activities by their nature engender significant
market and credit risks. Managing these risks is critical to the success and
stability of the Company. As a result, comprehensive risk management policies
and procedures have been established to identify, control and monitor each of
these major risks. Additionally, the Company's diverse portfolio of business
activities helps to reduce the impact that volatility in any particular market
may have on its net revenues. In addition to market risk, the Company is also
subject to credit risk, operating risk and funding risk.
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument as a result of
fluctuations in interest and currency exchange rates and in equity and commodity
prices. Market risk is inherent to both derivative and non-derivative financial
instruments, and accordingly, the scope of the Company's market risk management
procedures extends beyond derivatives to include all market risk sensitive
financial instruments. The Company's exposure to market risk is directly related
to its role as a financial intermediary in customer-related transactions and to
its proprietary trading and arbitrage activities. For a discussion of the
Company's primary market risk exposures, which includes interest rate risk,
foreign exchange rate risk, and equity price risk, and a discussion of how those
exposures are managed see the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997.
Value at Risk
The estimation of potential losses that could arise from changes in market
conditions is typically accomplished through the use of statistical models which
seek to predict risk of loss based on historical price and volatility patterns.
Such statistical models are commonly known as value at risk. Value at risk is
used to describe a probabilistic approach to measuring the exposure to market
risk. This approach utilizes statistical concepts to estimate the probability of
the value of a financial instrument falling above or below a specified amount.
The calculation utilizes the standard deviation of historical changes in value
of the market risk sensitive financial instruments (i.e., volatility) to
estimate the amount of change in the current value that could occur at a
specified probability level.
Measuring market risk using statistical risk management models has recently
become the main focus of risk management efforts by many companies whose
earnings are significantly exposed to changes in the fair value of financial
instruments. The Company believes that statistical models alone do not provide a
reliable method of monitoring and controlling risk. While value at risk models
are relatively sophisticated, the quantitative risk information generated is
limited by the parameters established in creating the related models. The
financial instruments being evaluated may have features which may trigger a
potential loss in excess of the amounts previously disclosed if the changes in
market rates or prices exceed the confidence level of the
model used. Therefore, such models do not substitute for the experience or
judgment of senior management and traders, who have extensive knowledge of the
markets and adjust positions and revise strategies as they deem necessary. The
Company uses these models only as a supplement to other risk management tools.
For purposes of Securities and Exchange Commission disclosure requirements, the
Company has performed an entity-wide value at risk analysis of virtually all of
the Company's financial assets and liabilities, including all reported financial
instruments owned and sold, repurchase and resale agreements, and funding assets
and liabilities. The value at risk related to non-trading financial instruments
has been included in this analysis and not reported separately because the
amounts were not material. The calculation is based on a methodology which uses
a one-day interval and a 95% confidence level. Interest rate and foreign
exchange rate risk use a Monte Carlo value at risk approach. For interest rates,
each country's yield curve has five factors which describe possible curve
movements. These were generated from principal component analysis. In addition,
volatility and spread risk factors were used, where appropriate. Inter-country
correlations were also used. Equity price risk was measured using a historical
value at risk for June 1997 and a combination of historical and Monte Carlo
value at risk approaches commencing March 1998. The effect of this change in
approach was not material. Equity derivatives were treated as correlated with
various indices, of which the Company used approximately forty. Parameter
estimates, such as volatilities and correlations, were based on daily tests
through March 27, 1998. The total value at risk presented below is less than the
sum of the individual components due to the benefit of diversification among the
risks.
This table illustrates the value at risk for each component of market risk as
of:
March 27, June 30,
in millions 1998 1997
- ----------- ----- -----
MARKET RISK
Interest $ 9.6 $ 11.6
Currency 2.0 3.2
Equity 8.1 8.9
Diversification benefit (7.0) (8.7)
----- ------
Total $ 12.7 $ 15.0
====== ======
As previously discussed, the Company utilizes a wide variety of market risk
management methods, including: limits for each trading activity; marking all
positions to market on a daily basis; daily profit and loss statements; position
reports; aged inventory position reports; and independent verification of all
inventory pricing. Additionally, trading department management reports
positions, profits and losses, and trading strategies to the Risk Committee on a
weekly basis. The Company believes that these procedures, which stress timely
communication between trading department management and senior management, are
the most important elements of the risk management process.
PART II - Other Information
Item 1. Legal Proceedings
A.I.A. Holding, S.A., et al. v. Lehman Brothers, Inc., et al.
As previously reported in the Company's 1997 Form 10-K, Bear Stearns is a
defendant in litigation pending in the United States District Court for the
Southern District of New York.
On March 27, 1998, the court dismissed plaintiffs' claims for negligence and
negligent misrepresentation with prejudice and dismissed plaintiffs' claims for
fraud, constructive fraud, aiding and abetting fraud, breach of fiduciary duty
and aiding and abetting breach of fiduciary duty with leave to replead.
A.R. Baron & Company, Inc.
As previously reported in the Company's 1997 Form 10-K, Bear Stearns is a
defendant in litigation pending in the United States District Court for the
Southern District of New York.
On January 13, 1998, the Berwecky and Perry cases were consolidated for all
purposes and lead plaintiffs and lead counsel for plaintiffs were appointed. On
April 1, 1998, an amended consolidated class action complaint was filed alleging
the same claims against the same defendants as were asserted in the
pre-consolidated complaints. Plaintiffs purport to represent a class consisting
of all persons who acquired Baron securities from Baron between July 20, 1995
and June 28, 1996. Damages in an unspecified amount are sought.
Deutch v. Silverman, et al.
On April 27, 1998, a shareholder of Cendant Corp. ("Cendant") commenced a
purported derivative action on behalf of Cendant in the United States District
Court for the District of New Jersey against Bear Stearns Companies Inc., Bear,
Stearns & Company, Inc., and certain present and former directors and/or
officers of Cendant, CUC International, Inc. ("CUC") and/or HFS, Inc. ("HFS").
The Complaint alleges, among other things, that the Bear Stearns defendants
committed gross negligence in connection with acting as a financial advisor to
HFS with respect to a merger between CUC and HFS. Damages in an unspecified
amount are sought.
In re Granite Partners, L.P., Granite Corportation and Quartz Hedge Fund
As previously reported in the Company's 1997 Form 10-K and Form 10-Q for the
second quarter of 1998, Bear Stearns is a defendant in litigation pending in the
United States District Court for the Southern District of New York.
On March 19, 1998, plaintiffs' motions for class certification in the Primavera
and Montpellier actions was denied.
NASDAQ Antitrust Litigation
As previously reported in the Company's 1997 Form 10-K and 1998 Form 10-Qs, over
30 market-makers, including Bear Stearns, are defendants in litigation pending
in the United States District Court for the Southern District of New York.
On March 23, 1998, plaintiffs and the class agreed to a proposed settlement with
the one defendant that had not settled previously, and on March 30, 1998, the
court preliminarily approved the settlement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Re Computation of Per Share Earnings
(12) Statement Re Computation of Ratio of Earnings to
Fixed Charges
(27) Financial Data Schedule
(b) Reports on Form 8-K
During the quarter, the Company filed the following Current
Reports on Form 8-K.
(i)A Current Report on Form 8-K dated January 14,
1998, pertaining to an exhibit related to the
Company's 6.15% Cumulative Preferred Stock,
Series E.
(ii) A Current Report on Form 8-K dated January 15,
1998, pertaining to the Company's results of
operations for the six-months ended December 31,
1997.
(iii) A Current Report on Form 8-K dated January 21,
1998, pertaining to the declaration of quarterly
dividends.
(iv) A Current Report on Form 8-K dated January 21,
1998, pertaining to an opinion of Weil, Gotshal &
Manges LLP as to tax matters related to the
Company's Medium Term Note Program.
(v)A Current Report on Form 8-K dated January 30,
1998, pertaining to the Supplemental Indenture to
the Indenture, dated May 31, 1991, between the
Company and The Chase Manhattan Bank.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Bear Stearns Companies Inc.
(Registrant)
Date: May 8, 1998 By: /s/ Samuel L. Molinaro Jr.
--------------------------
Samuel L. Molinaro Jr.
Senior Vice President - Finance
and Chief Financial Officer
THE BEAR STEARNS COMPANIES INC.
FORM 10-Q
Exhibit Index
Exhibit No. Description
Page
(11) Statement Re Computation of Per Share Earnings 30
(12) Statement Re Computation of Earnings to Fixed Charges 31
(27) Financial Data Schedule 32