LEHMAN BROTHERS Exhibit 99.1
Press Release
For Immediate Release Media Contact: Hannah Burns
(212) 526-4064
Investor Contact: Shaun Butler
(212) 526-8381
LEHMAN BROTHERS REPORTS SECOND QUARTER RESULTS
- Second Highest Ever Quarterly Revenues, Net Income and Earnings
Per Common Share -
NEW YORK - June 14, 2005 -- Lehman Brothers Holdings Inc. (ticker symbol: LEH)
today reported net income of $683 million, or $2.26 per common share (diluted),
for the second quarter ended May 31, 2005, up 12% from both net income of $609
million and diluted earnings per common share of $2.01, in the second quarter of
fiscal 2004. Second quarter 2005 net income and earnings per common share
declined compared to both net income of $875 million and diluted earnings per
common share of $2.91 from the record first quarter of 2005.
For the first half of the fiscal year, the Firm reported record net income of
$1.6 billion and record diluted earnings per common share of $5.17, up 22% from
the first half of fiscal 2004.
Second Quarter Business Highlights
o Reported record Investment Management net revenues, driven by a
steady increase in Assets Under Management to a record
$151 billion
o Posted record results in Asia for the second consecutive quarter
Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "Although we
faced tougher markets this quarter, we are announcing our second best quarter
ever. The Firm is truly benefiting from the regional diversification and
increased depth and scale of business that we have worked so hard to achieve.
With our continued discipline around expense and risk management, we are
well-positioned to continue to deliver strong returns to our shareholders."
Net revenues (total revenues less interest expense) for the second quarter were
$3.3 billion, up 12%, from $2.9 billion for the same period in fiscal 2004, and
down 14% compared to $3.8 billion in the first quarter of 2005. For the first
six months of fiscal 2005, the Firm reported record net revenues of $7.1
billion, an increase of 17% from $6.1 billion for the first half of fiscal 2004.
Investment Banking revenues increased 6% to $579 million for the second quarter
of fiscal 2005, from $546 million for the same period a year ago, reflecting the
second highest debt underwriting revenue level ever and the second highest
quarterly equity underwriting revenue in almost five years. Capital Markets
revenues increased 14% to $2.2 billion in the second quarter of fiscal 2005,
from $2.0 billion in the second quarter of 2004. Within this segment, the Fixed
Income business reported revenues of $1.8 billion in the second quarter of
fiscal 2005, a 23% increase from $1.4 billion reported in the prior year, and
down 15% versus the first fiscal quarter of 2005. Mortgages and real estate
remained resilient, driven by high levels of securitization and asset
monetization activity. Customer flow activity was strong, despite a challenging
environment affected by increased volatility in interest rates and credit and by
widening credit spreads. Equities Capital Markets revenues decreased 9%, to $474
million, compared to $520 million for the prior year's second quarter, largely
attributable to challenging conditions in the convertibles market. Record
Investment Management revenues, which increased 10% to $472 million in the
second quarter of fiscal 2005, from $429 million in the second quarter of fiscal
2004, were driven by a record Asset Management performance, with revenues
increasing 33% compared to a year ago, contributed largely by Neuberger Berman
and private equity results.
For the second quarter of fiscal 2005, non-U.S. net revenues were $1.3 billion
or 40% of the Firm's total net revenues and up 45% from the prior year's
quarter. Asia reported record results for the second consecutive quarter,
reflecting continued strength in fixed income and investment banking. European
net revenues increased 58%, driven by strong performances in interest rate
products, mortgage securitizations and equity derivatives.
Non-interest expenses for the quarter were $2.3 billion, compared to $2.0
billion for the second quarter of fiscal 2004 and $2.5 billion for the first
quarter of fiscal 2005. Compensation and benefits as a percentage of net
revenues was 49.5% during the second quarter of fiscal 2005, consistent with the
first quarter of fiscal 2005, and compared to 49.8% for the second quarter of
fiscal 2004. Non-personnel expenses in the fiscal 2005 second quarter were $642
million, compared to $618 million in the first quarter of fiscal 2005 and $585
million in the second quarter of fiscal 2004.
2
For the quarter ended May 31, 2005, the Firm's pretax margin was 30.9%, compared
to 30.2% in the fiscal 2004 second quarter and 34.3% in the fiscal 2005 first
quarter. For the fiscal 2005 second quarter, the Firm's return on average common
equity was 18.2%, compared to 18.6% in the fiscal 2004 second quarter and 24.5%
in the fiscal 2005 first quarter. Return on average tangible common equity was
23.5% for the second quarter of fiscal 2005, compared with 26.0% in the second
quarter of fiscal 2004 and 32.0% in the first quarter of fiscal 2005.
As of May 31, 2005, Lehman Brothers stockholders' equity totaled $15.9 billion,
and total capital (stockholders' equity and long-term debt) was approximately
$76 billion. Book value per common share was $53.27.
Lehman Brothers (ticker symbol: LEH), an innovator in global finance, serves the
financial needs of corporations, governments and municipalities, institutional
clients, and high net worth individuals worldwide. Founded in 1850, Lehman
Brothers maintains leadership positions in equity and fixed income sales,
trading and research, investment banking, private investment management, asset
management and private equity. The Firm is headquartered in New York, London,
and Tokyo and operates in a network of offices around the world. For further
information about Lehman Brothers' services, products and recruitment
opportunities, visit our Web site at www.lehman.com.
Conference Call
A conference call, to discuss the Firm's financial results and outlook, will be
held at 9:30 a.m., EDT today. The call will be open to the public. Members of
the public who would like to access the conference call should dial, from the
U.S., 888-323-4182 or from outside the U.S., 517-623-4500. The pass code for all
callers is LEHMAN. The conference call will also be accessible through the
"Shareholders" section of the Firm's Web site under the subcategory "Webcasts."
For those unable to listen to the live broadcast, a replay will be available on
the Firm's Web site or by dialing 866-416-1185 (domestic) or 203-369-0716
(international). The replay will be available approximately one hour after the
event and will remain available on the Lehman Brothers Web site until 5:00 p.m.
EDT on July 14, 2005, and by phone until 11:59 p.m. EDT on July 14, 2005. Please
direct any questions regarding the conference call to Shaun Butler at
212-526-8381, sbutler@lehman.com or Elizabeth Besen at 212-526-2733,
ebesen@lehman.com.
3
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements. These statements are
not historical facts, but instead represent only the Firm's expectations,
estimates and projections regarding future events. These statements are not
guarantees of future performance and involve certain risks and uncertainties
that are difficult to predict, which may include risks and uncertainties
relating to market fluctuations and volatility, industry competition and changes
in the competitive environment, investor sentiment, liquidity and credit
ratings, credit exposures, operational risks and legal and regulatory matters.
The Firm's actual results and financial condition may differ, perhaps
materially, from the anticipated results and financial condition in any such
forward-looking statements and, accordingly, readers are cautioned not to place
undue reliance on such statements. The Firm undertakes no obligation to update
any forward-looking statements, whether as a result of new information, future
events or otherwise. For more information concerning the risks and other factors
that could affect the Firm's future results and financial condition, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Firm's most recent Annual Report on Form 10-K and Quarterly
Report on Form 10-Q.
# # #
4
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
At or for the Quarter Ended
--------------------------------------------------------------------------
5/31/05 2/28/05 11/30/04 8/31/04 5/31/04
------- ------- -------- ------- -------
Income Statement
Net Revenues $3,278 $3,810 $2,883 $2,623 $2,926
Non-Interest Expenses:
Compensation and Benefits 1,623 1,886 1,401 1,306 1,457
Non-personnel Expenses 642 618 603 594 585
Net Income 683 875 585 505 609
Net Income Applicable to Common Stock 664 856 566 487 592
Earnings per Common Share:
Basic $2.37 $3.07 $2.07 $1.79 $2.14
Diluted $2.26 $2.91 $1.96 $1.71 $2.01
Financial Ratios (%)
Return on Average Common Stockholders' Equity
(annualized) (a) 18.2% 24.5% 17.0% 15.0% 18.6%
Return on Average Tangible Common Stockholders'
Equity (annualized) (b) 23.5% 32.0% 23.0% 20.9% 26.0%
Pretax Margin 30.9% 34.3% 30.5% 27.6% 30.2%
Compensation and Benefits/Net Revenues 49.5% 49.5% 48.6% 49.8% 49.8%
Effective Tax Rate 32.6% 33.0% 33.5% 30.2% 31.1%
Financial Condition
Total Assets $372,000 $363,692 $357,168 $340,890 $346,499
Net Assets (c) 195,210 183,387 175,221 171,308 175,452
Long-Term Debt 59,809 59,366 56,486 50,043 52,380
Common Stockholders' Equity 14,783 14,409 13,575 13,076 12,831
Total Stockholders' Equity 15,878 15,754 14,920 14,421 14,006
Total Stockholders' Equity Plus Junior Subordinated
Debentures and Perpetual Subordinated Notes(c) 17,384 16,979 15,920 15,421 15,391
Tangible Equity Capital (c) 14,094 13,705 12,636 11,763 11,536
Total Capital (d) 75,687 75,120 71,406 64,464 66,386
Book Value per Common Share (e) 53.27 51.75 49.32 48.10 47.05
Gross Leverage Ratio(f) 23.4x 23.1x 23.9x 23.6x 24.7x
Net Leverage Ratio(c) 13.9x 13.4x 13.9x 14.6x 15.2x
Other Data (#s)
Employees 20,717 20,267 19,579 19,286 17,625
Assets Under Management (in billions) $151.2 $147.7 $136.7 $130.9 $129.3
Common Stock Outstanding (in millions) 272.5 275.4 274.2 269.5 272.7
Weighted Average Shares (in millions):
Basic 279.6 278.6 273.2 272.8 276.8
Diluted 294.0 294.0 288.5 285.0 294.2
See Footnotes to Selected Statistical Information on page 6.
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LEHMAN BROTHERS HOLDINGS INC.
FOOTNOTES TO SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(a) Return on average common stockholders' equity is computed by dividing
annualized net income applicable to common stock for the period by average
common stockholders' equity. See the reconciliation on page 10.
(b) Return on average tangible common stockholders' equity is computed by
dividing annualized net income applicable to common stock for the period by
average tangible common stockholders' equity. Average tangible common
stockholders' equity equals average total common stockholders' equity less
average identifiable intangible assets and goodwill. See the reconciliation
on page 10. Management believes tangible common stockholders' equity is a
meaningful measure because it reflects the common stockholders' equity
deployed in our businesses.
(c) Net leverage ratio is defined as net assets (total assets excluding: 1)
cash and securities segregated and on deposit for regulatory and other
purposes, 2) securities received as collateral, 3) securities purchased
under agreements to resell, 4) securities borrowed and 5) identifiable
intangible assets and goodwill) divided by tangible equity capital. We
believe net assets is a measure more useful to investors than total assets
when comparing companies in the securities industry because it excludes
certain assets considered to have a low risk profile and identifiable
intangible assets and goodwill. We believe tangible equity capital to be a
more representative measure of our equity for purposes of calculating net
leverage because such measure includes total stockholders' equity plus
junior subordinated debentures and perpetual subordinated notes, less
identifiable intangible assets and goodwill. We believe total stockholders'
equity plus junior subordinated debentures and perpetual subordinated notes
to be a more meaningful measure of our equity because the junior
subordinated debentures are subordinated and have maturities at issuance of
49 years and we can defer interest payments for up to 20 consecutive
quarters if the junior subordinated debentures are not in default and the
perpetual subordinated notes have no stated maturity. In addition, a
leading rating agency views these securities as equity capital for purposes
of calculating net leverage. See the reconciliation on page 12. Further, we
do not view the amount of equity used to support identifiable intangible
assets and goodwill as available to support our remaining net assets.
Accordingly, we believe net leverage, based on net assets divided by
tangible equity capital, both as defined above, to be a more meaningful
measure of leverage to evaluate companies in the securities industry. These
definitions of net assets, tangible equity capital and net leverage are
used by many of our creditors and a leading rating agency. These measures
are not necessarily comparable to similarly-titled measures provided by
other companies in the securities industry because of different methods of
calculation.
(d) Total capital includes long-term debt (including junior subordinated
debentures and perpetual subordinated notes) and total stockholders'
equity. We believe total capital is useful to investors as a measure of our
financial strength.
(e) The book value per common share calculation includes amortized restricted
stock units granted under stock award programs, which have been included in
total stockholders' equity.
(f) Gross leverage ratio is defined as total assets divided by total
stockholders' equity.
6
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Quarter Ended % Change from
------------------------------------------- ---------------------------
May 31, Feb 28, May 31, Feb 28, May 31,
2005 2005 2004 2005 2004
------------ ----------- ----------- ----------- ------------
Revenues:
Principal transactions $1,644 $2,195 $1,479
Investment banking 579 683 546
Commissions 421 411 407
Interest and dividends 4,454 3,884 2,609
Asset management and other 237 218 187
------------ ----------- -----------
Total revenues 7,335 7,391 5,228
Interest expense 4,057 3,581 2,302
------------ ----------- -----------
Net revenues 3,278 3,810 2,926 (14)% 12%
------------ ----------- -----------
Non-interest expenses:
Compensation and benefits 1,623 1,886 1,457
Technology and communications 195 200 185
Brokerage and clearance fees 129 120 116
Occupancy 123 119 104
Professional fees 69 62 70
Business development 61 53 55
Other 65 64 55
------------ ----------- -----------
Total non-interest expenses 2,265 2,504 2,042 (10)% 11%
------------ ----------- -----------
Income before provision for income taxes 1,013 1,306 884
Provision for income taxes 330 431 275
------------ ----------- -----------
Net income $ 683 $ 875 $ 609 (22)% 12%
============ =========== ===========
Net income applicable to common stock $ 664 $ 856 $ 592 (22)% 12%
============ =========== ===========
Earnings per common share:
Basic $2.37 $3.07 $2.14 (23)% 11%
============ =========== ===========
Diluted $2.26 $2.91 $2.01 (22)% 12%
============ =========== ===========
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LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Six Months Ended % Change from
-------------------------- ---------------------
May 31, May 31, May 31,
2005 2004 2004
------------ ------------ ---------------------
Revenues:
Principal transactions $3,839 $3,218
Investment banking 1,262 1,054
Commissions 832 797
Interest and dividends 8,338 4,913
Asset management and other 455 371
------------ ------------
Total revenues 14,726 10,353
Interest expense 7,638 4,283
------------ ------------
Net revenues 7,088 6,070 17%
------------ ------------
Non-interest expenses:
Compensation and benefits 3,509 3,023
Technology and communications 395 355
Brokerage and clearance fees 249 223
Occupancy 242 206
Professional fees 131 117
Business development 114 99
Other 129 112
Real estate related charge - 19
------------ ------------
Total non-interest expenses 4,769 4,154 15%
------------ ------------
Income before taxes and dividends on trust preferred 2,319 1,916
securities (a)
Provision for income taxes 761 613
Dividends on trust preferred securities (a) - 24
------------ ------------
Net income $1,558 $1,279 22%
============ ============
Net income applicable to common stock $1,520 $1,245 22%
============ ============
Earnings per common share:
Basic $ 5.44 $ 4.50 21%
============ ============
Diluted $ 5.17 $ 4.23 22%
============ ============
(a) At February 29, 2004, preferred securities subject to mandatory redemption
were reclassified to junior subordinated debentures issued to trusts (a
component of long-term debt) pursuant to the adoption of FIN 46. In periods
subsequent to February 29, 2004, dividends on trust preferred securities
are included in interest expense.
8
LEHMAN BROTHERS HOLDINGS INC.
SEGMENT NET REVENUE INFORMATION
(Preliminary and Unaudited)
(In millions)
Quarter Ended % Change from
-------------------------------------------- ---------------------------
May 31, Feb 28, May 31, Feb 28, May 31,
2005 2005 2004 2005 2004
------------ ---------- ------------ ------------ -----------
Investment Banking:
Global Finance - Debt $ 310 $ 326 $ 256
Global Finance - Equity 172 188 142
Advisory Services 97 169 148
------------ ---------- ------------
Total 579 683 546 (15)% 6%
------------ ---------- ------------
Capital Markets:
Fixed Income 1,753 2,068 1,431
Equities 474 622 520
------------ ---------- ------------
Total 2,227 2,690 1,951 (17)% 14%
------------ ---------- ------------
Investment Management:
Asset Management 255 234 192
Private Investment Management 217 203 237
------------ ---------- ------------
Total 472 437 429 8% 10%
------------ ---------- ------------
Total Net Revenues $3,278 $3,810 $2,926 (14)% 12%
============ ========== ============
Six Months Ended % Change from
-------------------------- ---------------------
May 31, May 31, May 31,
2005 2004 2004
----------- ---------- ---------------------
Investment Banking:
Global Finance - Debt $ 636 $ 473
Global Finance - Equity 360 285
Advisory Services 266 296
----------- ----------
Total 1,262 1,054 20%
----------- ----------
Capital Markets:
Fixed Income 3,821 3,032
Equities 1,096 1,139
----------- ----------
Total 4,917 4,171 18%
----------- ----------
Client Services:
Asset Management 489 396
Private Investment Management 420 449
----------- ----------
Total 909 845 8%
----------- ----------
Total Net Revenues $7,088 $6,070 17%
=========== ==========
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LEHMAN BROTHERS HOLDINGS INC.
RECONCILIATION OF AVERAGE COMMON STOCKHOLDERS' EQUITY TO
AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY
(Preliminary and Unaudited)
(In millions)
Quarter Ended
--------------------------------------------------------------------------------------
May 31, Feb 28, Nov 30, Aug 31, May 31,
2005 2005 2004 2004 2004
---------------- -------------- ------------- ------------- --------------
Average common stockholders' equity $14,596 $13,992 $13,326 $12,954 $12,716
Less: average identifiable intangible
assets and goodwill (3,282) (3,279) (3,471) (3,641) (3,617)
---------------- -------------- ------------- ------------- --------------
Average tangible common stockholders' $11,314 $10,713 $ 9,855 $ 9,313 $ 9,099
equity
================ ============== ============= ============= ==============
10
LEHMAN BROTHERS HOLDINGS INC.
ASSETS UNDER MANAGEMENT
(Preliminary and Unaudited)
(In billions)
May 31, Feb 28, May 31,
Composition of Assets Under Management 2005 2005 2004
---- ---- ----
Equity $ 61.6 $ 59.1 $ 47.2
Fixed Income 54.4 53.7 49.5
Money Markets 21.2 21.8 22.5 (a)
Alternative Investments 14.0 13.1 10.1
-------- -------- --------
Total Assets under Management $151.2 $147.7 $129.3 (a)
====== ====== ======
Quarter Ended
________________________________________________
May 31, Feb 28, May 31,
Assets Under Management Rollforward 2005 2005 2004
---- ---- ----
Balance, beginning of period $147.7 $136.7 $128.0
Net additions 3.1 7.0 2.5
Net market appreciation / (depreciation) 0.4 4.0 (1.2)
---------- --------- ---------
Total increase 3.5 11.0 1.3
---------- -------- ---------
Balance, end of period $ 151.2 $147.7 $129.3 (a)
======= ====== =======
(a) Total assets under management at May 31, 2004 have been restated to include
$4.5 billion of discretionary cash management assets.
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LEHMAN BROTHERS HOLDINGS INC.
GROSS LEVERAGE and NET LEVERAGE CALCULATIONS
(Preliminary and Unaudited)
(In millions)
May 31, Feb 28, Nov 30, Aug 31, May 31,
2005 2005 2004 2004 2004
------------- ------------- -------------- --------------- -------------
Net assets:
Total assets $372,000 $363,692 $357,168 $340,890 $346,499
Less:
Cash and securities segregated and on
deposit for regulatory and other
purposes (4,100) (4,278) (4,085) (4,800) (4,606)
Securities received as collateral (4,200) (3,767) (4,749) (4,463) (4,376)
Collateralized agreements (165,200) (168,986) (169,829) (156,661) (158,441)
Identifiable intangible assets and
goodwill (3,290) (3,274) (3,284) (3,658) (3,624)
------------- ------------- -------------- --------------- -------------
Net assets $195,210 $183,387 $175,221 $171,308 $175,452
============= ============= ============== =============== =============
Tangible equity capital:
Total stockholders' equity $ 15,878 $ 15,754 $ 14,920 $ 14,421 $ 14,006
Perpetual subordinated notes (a) 281 - - - -
Junior subordinated debentures (subject
to a limit) (b) 1,225 1,225 1,000 1,000 1,154
Less: Identifiable intangible assets
and goodwill (3,290) (3,274) (3,284) (3,658) (3,624)
------------- ------------- -------------- --------------- -----------
Tangible equity capital $ 14,094 $ 13,705 $ 12,636 $ 11,763 $ 11,536
============= ============= ============== =============== ===========
Gross leverage (total assets / total
stockholders' equity) 23.4x 23.1x 23.9x 23.6x 24.7x
Net leverage (net assets / tangible equity
capital) 13.9x 13.4x 13.9x 14.6x 15.2x
(a) In March 2005, Lehman Brothers UK Capital Funding LP, a special purpose
entity, issued (euro)225 million ($297 million) fixed rate to constant
maturity swap-linked guaranteed non-voting non-cumulative perpetual
preferred securities (the "Preferred Securities"). A corresponding
principal amount of subordinated notes (the "Perpetual Subordinated Notes")
were issued by Lehman Brothers Holdings plc to Lehman Brothers UK Capital
Funding LP. We accounted for this transaction in accordance with FIN 46R,
which requires us to deconsolidate Lehman Brothers UK Capital Funding LP
and classify the Perpetual Subordinated Notes within Subordinated
Indebtedness in the Consolidated Statement of Financial Condition, in the
same manner we classify junior subordinated debentures.
(b) Under the definition of tangible equity capital used by a leading rating
agency, the maximum equity credit given to junior subordinated debentures
is 10% of tangible equity capital. (Junior subordinated debentures are
included in the calculation to determine the limit.)
12