LEHMAN BROTHERS
PRESS RELEASE
For Immediate Release Media Contact: Hannah Burns
212-526-4064
Investor Contact: Shaun Butler
212-526-8381
LEHMAN BROTHERS REPORTS RECORD REVENUES,
NET INCOME AND EARNINGS PER SHARE FOR FISCAL 2005
-Fiscal Fourth Quarter Net Income and Earnings Per Share Increase 41% from
the Prior Year-
NEW YORK- December 13, 2005 - Lehman Brothers Holdings Inc. (ticker symbol: LEH)
today reported net income of $823 million, or $2.76 per common share (diluted),
for the fourth quarter ended November 30, 2005, both up 41% from net income of
$585 million, or $1.96 per common share (diluted), in the fourth quarter of
fiscal 2004. Third quarter fiscal 2005 net income was $879 million, or $2.94 per
common share (diluted).
For the 2005 full fiscal year, net income and earnings
per common share (diluted) both increased 38% to a record $3.3 billion and
$10.87, respectively, compared to $2.4 billion and $7.90, respectively, in
fiscal 2004.
Full Year Business Highlights
o Reported record net income and earnings per share (diluted) for the second
consecutive year
o Achieved record net revenues in every segment and in every
region for the year
o Received upgrade from Standard & Poor's, in October 2005,
on the Firm's long-term senior debt rating to A+ from A
o Became first firm to achieve #1 ranking in all four categories in
Institutional Investor's ranking of the best institutional equity
trading desks: we were #1 in NYSE-listed trading and NYSE-listed
sales-trading and we were #1 in NASDAQ trading and NASDAQ sales-trading
o Ranked #1 in both Equity and Fixed Income Research by Institutional
Investor's "All-America Research" polls for the third consecutive year
o Grew assets under management to a record $175 billion
Richard S. Fuld, Jr., chairman and chief executive officer, said, "By every
measure, we delivered another strong quarter and finished the year with our best
results ever. Record performances for the year across all of our segments and
regions continue to demonstrate the diversity, depth and scale of our global
franchise. Reaching this new level of performance is a testament to our
commitment to deliver the Firm's full platform to our clients worldwide and
provide best-in-class total returns to our shareholders."
The Firm reported net revenues (total revenues less interest expense) for the
fourth quarter of fiscal 2005 of $3.7 billion, an increase of 28% from $2.9
billion reported in the fourth quarter of fiscal 2004 and a decrease of 4% from
the $3.9 billion reported in the third quarter of fiscal 2005. Investment
Banking revenues were a record for the quarter, increasing 34% to $817 million
from $608 million in the fourth quarter of fiscal 2004. These results were
driven by record merger and acquisition advisory revenue, which increased 54%
from the prior year's period, and solid performances in equity and debt
origination, which increased 48% and 15%, respectively, from the prior year's
period. Capital Markets net revenues increased 30% to $2.4 billion in the fourth
quarter of fiscal 2005 from $1.8 billion in the prior year's fourth quarter on
strong performances from both Fixed Income and Equities Capital Markets. Fixed
Income Capital Markets revenues increased 22% in the fourth quarter of fiscal
2005 over the prior year's period, primarily due to higher revenues in interest
rate products and high grade credit. Equities Capital Markets revenues, which
increased 49% compared to the fourth quarter of fiscal 2004, were driven by
increased customer flow activity across most products, and represented the
second highest quarterly level ever. The Firm also reported its second highest
revenue quarter ever in Investment Management, with net revenues increasing 13%
to $509 million in the fourth quarter of fiscal 2005, from $452 million in the
fourth quarter of fiscal 2004. This strong performance was driven by record
revenues in the Private Investment Management business and record assets under
management, which grew to $175 billion. In addition, the Firm posted its highest
level ever of non-U.S. revenues in the fourth quarter of fiscal 2005, reflecting
the Firm's increased scale in Europe and Asia.
For the full 2005 fiscal year, net revenues increased 26% to a record $14.6
billion, from $11.6 billion for fiscal 2004, with record net revenues in each
business segment and in each region.
Non-interest expenses for the fourth quarter of fiscal 2005 were $2.5 billion,
compared to $2.6 billion in the third quarter of fiscal 2005 and $2.0 billion in
the fiscal 2004 fourth quarter. Compensation and benefits as a percentage of net
revenues was 48.7% during the fourth quarter of fiscal 2005 compared to
2
49.5% for the third quarter of fiscal 2005 and 48.6% for the fourth quarter of
fiscal 2004. For the full 2005 fiscal year, compensation and benefits as a
percentage of net revenues was 49.3%, compared to 49.5% in fiscal 2004.
Nonpersonnel expenses in the fiscal 2005 fourth quarter were $675 million,
compared with $653 million in the third quarter of fiscal 2005 and $603 million
in the fourth quarter of fiscal 2004. Nonpersonnel expenses for the full year of
fiscal 2005 were $2.6 billion, compared with $2.3 billion in fiscal 2004.
For both the year and quarter ended November 30, 2005, the Firm's pretax margin
was 33.0%, compared with 30.5% in the fourth quarter of fiscal 2004 and 30.4%
for fiscal 2004. Return on average common equity was 20.9% for the fourth
quarter of fiscal 2005, compared with 17.0% for the fourth quarter of fiscal
2004. For the full 2005 fiscal year, return on average common equity was 21.6%,
compared with 17.9% for fiscal 2004. Return on average tangible common equity
was 26.5% for the fourth quarter of fiscal 2005, compared with 23.0% for the
fourth quarter of fiscal 2004. For the full 2005 fiscal year, return on average
tangible common equity was 27.8%, compared with 24.7% for fiscal 2004.
As of November 30, 2005, Lehman Brothers' total stockholders' equity was $16.8
billion, and total capital (stockholders' equity and long-term debt) was
approximately $79.5 billion. Book value per common share was $57.50.
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, with
regional headquarters in 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 today at 9:30 a.m. EST. 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
866-414-6059 (domestic) or 203-369-0673 (international). The replay will be
available approximately one hour after the event and will remain available on
the Lehman Brothers
3
Web site until 5:00 p.m. EST on January 30, 2006, and by phone until 5:00 p.m.
EST on January 30, 2006.
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.
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
Year Ended At or for the Quarter Ended
------------------------------------------------------------------------------
2005 2004 11/30/05 8/31/05 5/31/05 2/28/05 11/30/04
---- ---- -------- ------- ------- ------- --------
Income Statement
Net Revenues $14,630 $11,576 $3,690 $3,852 $3,278 $3,810 $2,883
Non-Interest Expenses:
Compensation and Benefits 7,213 5,730 1,798 1,906 1,623 1,886 1,401
Non-personnel Expenses 2,588 2,309 675 653 642 618 603
Real Estate Reconfiguration Charge -- 19 -- -- -- -- --
Net Income 3,260 2,369 823 879 683 875 585
Net Income Applicable to Common Stock 3,191 2,297 807 864 664 856 566
Earnings per Common Share:
Basic $11.47 $8.36 $2.93 $3.10 $2.37 $3.07 $2.07
Diluted $10.87 $7.90 $2.76 $2.94 $2.26 $2.91 $1.96
Financial Ratios
Return on Average Common Stockholders'
Equity (annualized) (a) 21.6% 17.9% 20.9% 23.0% 18.2% 24.5% 17.0%
Return on Average Tangible Common
Stockholders' Equity (annualized) (b) 27.8% 24.7% 26.5% 29.4% 23.5% 32.0% 23.0%
Pretax Margin 33.0% 30.4% 33.0% 33.6% 30.9% 34.3% 30.5%
Compensation and Benefits/Net Revenues 49.3% 49.5% 48.7% 49.5% 49.5% 49.5% 48.6%
Effective Tax Rate 32.5% 32.0% 32.4% 32.0% 32.6% 33.0% 33.5%
Financial Condition
Total Assets $410,000 $384,295 $370,595 $363,692 $357,168
Net Assets (c) 211,340 194,208 193,989 183,387 175,221
Long-Term Debt 62,672 62,920 59,809 59,366 56,486
Common Stockholders' Equity 15,699 15,239 14,783 14,409 13,575
Total Stockholders' Equity 16,794 16,334 15,878 15,754 14,920
Total Stockholders' Equity Plus Junior
Subordinated Notes(c) 18,820 18,133 17,384 16,979 15,920
Tangible Equity Capital (c) 15,560 14,871 14,098 13,705 12,636
Total Capital (d) 79,466 79,254 75,687 75,120 71,406
Book Value per Common Share (e) 57.50 54.91 53.27 51.75 49.32
Gross Leverage Ratio(f) 24.4x 23.5x 23.3x 23.1x 23.9x
Net Leverage Ratio(c) 13.6x 13.1x 13.8x 13.4x 13.9x
Other Data
Employees 22,919 22,047 20,717 20,267 19,579
Assets Under Management (in billions) $175 $164 $151 $148 $137
Common Stock Outstanding (in millions) 271.4 269.3 272.5 275.4 274.2
Weighted Average Shares (in millions):
Basic 278.2 274.7 275.9 278.6 279.6 278.6 273.2
Diluted 293.6 290.7 292.6 293.7 294.0 294.0 288.5
See Footnotes to Selected Statistical Information on page 6.
5
LEHMAN BROTHERS HOLDINGS INC.
FOOTNOTES TO SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)
(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 notes, less identifiable intangible assets and
goodwill. We believe total stockholders' equity plus junior subordinated
notes to be a more meaningful measure of our equity because the junior
subordinated notes are subordinated and have maturities at issuance from 30
to 49 years. 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 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
------------------------------------------ -------------------------
Nov 30, Aug 31, Nov 30, Aug 31, Nov 30,
2005 2005 2004 2005 2004
----------- ----------- ---------- ---------- -----------
Revenues:
Principal transactions $1,887 $2,085 $1,264
Investment banking 817 815 608
Commissions 476 420 392
Interest and dividends 5,627 5,078 3,350
Asset management and other 248 241 232
----------- ----------- ----------
Total revenues 9,055 8,639 5,846
Interest expense 5,365 4,787 2,963
----------- ----------- ----------
Net revenues 3,690 3,852 2,883 (4)% 28%
----------- ----------- ----------
Non-interest expenses:
Compensation and benefits 1,798 1,906 1,401
Technology and communications 222 217 214
Brokerage and clearance fees 127 127 116
Occupancy 126 122 108
Professional fees 79 72 61
Business development 64 56 56
Other 57 59 48
----------- ----------- ----------
Total non-interest expenses 2,473 2,559 2,004 (3)% 23%
----------- ----------- ----------
Income before provision for income taxes 1,217 1,293 879
Provision for income taxes 394 414 294
----------- ----------- ----------
Net income $823 $879 $585 (6)% 41%
=========== =========== ==========
Net income applicable to common stock $807 $864 $566 (7)% 43%
=========== =========== ==========
Earnings per common share:
Basic $2.93 $3.10 $2.07 (5)% 42%
=========== =========== ==========
Diluted $2.76 $2.94 $1.96 (6)% 41%
=========== =========== ==========
7
LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)
Year Ended
--------------------------------- % Change from
Nov 30, Nov 30, Nov 30,
2005 2004 2004
---------------- ------------- --------------------
Revenues:
Principal transactions $7,811 $5,699
Investment banking 2,894 2,188
Commissions 1,728 1,537
Interest and dividends 19,043 11,032
Asset management and other 944 794
---------------- -------------
Total revenues 32,420 21,250
Interest expense 17,790 9,674
---------------- -------------
Net revenues 14,630 11,576 26%
---------------- -------------
Non-interest expenses:
Compensation and benefits 7,213 5,730
Technology and communications 834 764
Brokerage and clearance fees 503 453
Occupancy 490 421
Professional fees 282 252
Business development 234 211
Other 245 208
Real estate reconfiguration charge - 19
---------------- -------------
Total non-interest expenses 9,801 8,058 22%
---------------- -------------
Income before taxes and dividends on trust preferred securities 4,829 3,518
Provision for income taxes 1,569 1,125
Dividends on trust preferred securities - 24
---------------- -------------
Net income $3,260 $2,369 38%
================ =============
Net income applicable to common stock $3,191 $2,297 39%
================ =============
Earnings per common share:
Basic $11.47 $8.36 37%
================ =============
Diluted $10.87 $7.90 38%
================ =============
8
LEHMAN BROTHERS HOLDINGS INC.
SEGMENT NET REVENUE INFORMATION
(Preliminary and Unaudited)
(In millions)
Quarter Ended % Change from
----------------------------------------------- -------------------------
Nov 30, Aug 31, Nov 30, Aug 31, Nov 30,
2005 2005 2004 2005 2004
------------ ------------ ------------ ----------- ----------
Investment Banking:
Global Finance - Debt $332 $336 $288
Global Finance - Equity 209 255 141
Advisory Services 276 224 179
------------ ------------ ------------
Total 817 815 608 -% 34%
------------ ------------ ------------
Capital Markets:
Fixed Income 1,624 1,889 1,326
Equities 740 637 497
------------ ------------ ------------
Total 2,364 2,526 1,823 (6)% 30%
------------ ------------ ------------
Investment Management:
Asset Management 265 272 240
Private Investment Management 244 239 212
------------ ------------ ------------
Total 509 511 452 -% 13%
------------ ------------ ------------
Total Net Revenues $3,690 $3,852 $2,883 (4)% 28%
============ ============ ============
Year Ended
---------------------------- % Change from
Nov 30, Nov 30, Nov 30,
2005 2004 2004
----------- ------------ ---------------------
Investment Banking:
Global Finance - Debt $1,304 $1,002
Global Finance - Equity 824 560
Advisory Services 766 626
----------- ------------
Total 2,894 2,188 32%
----------- ------------
Capital Markets:
Fixed Income 7,334 5,739
Equities 2,473 1,955
----------- ------------
Total 9,807 7,694 27%
----------- ------------
Investment Management:
Asset Management 1,026 840
Private Investment Management 903 854
----------- ------------
Total 1,929 1,694 14%
----------- ------------
Total Net Revenues $14,630 $11,576 26%
=========== ============
9
LEHMAN BROTHERS HOLDINGS INC.
RECONCILIATION OF AVERAGE COMMON STOCKHOLDERS' EQUITY TO
AVERAGE TANGIBLE COMMON STOCKHOLDERS' EQUITY
(Preliminary and Unaudited)
(In millions)
Quarter Ended
---------------------------------------------------------------------------
Nov 30, Aug 31, May 31, Feb 28, Nov 30,
2005 2005 2005 2005 2004
------------ ----------- ----------- ------------ -------------
Average common stockholders' equity $15,469 $15,011 $14,596 $13,992 $13,326
Less: average identifiable intangible
assets and goodwill (3,261) (3,274) (3,280) (3,279) (3,471)
------------ ----------- ----------- ------------ -------------
Average tangible common stockholders' $12,208 $11,737 $11,316 $10,713 $9,855
equity ============ =========== =========== ============ =============
Year Ended
---------------------------
Nov 30, Nov 30,
2005 2004
------------ -----------
Average common stockholders' equity $14,741 $12,843
Less: average identifiable intangible
assets and goodwill (3,273) (3,547)
------------ -----------
Average tangible common stockholders' $11,468 $9,296
equity ============ ===========
10
LEHMAN BROTHERS HOLDINGS INC.
ASSETS UNDER MANAGEMENT
(Preliminary and Unaudited)
(In billions)
At
-----------------------------------------------
Nov 30, Aug 31, Nov 30,
Composition of Assets Under Management 2005 2005 2004
--------- --------- ---------
Equity $ 75 $ 70 $ 54
Fixed Income 55 53 52
Money Markets 29 26 19
Alternative Investments 16 15 12
------ ------ -----
Total Assets Under Management $ 175 $ 164 $ 137
====== ====== =====
Year Ended Quarter Ended
----------------------------- -------------
Nov 30, Nov 30, Nov 30,
Assets Under Management Rollforward 2005 2004 2005
--------- -------- ---------
Opening balance $ 137 $ 120 $ 164
Net additions 26 6 9
Net market appreciation 12 11 2
------- ----- ------
Total increase 38 17 11
------- ----- -----
Ending balance $ 175 $ 137 $ 175
======= ===== ======
11
LEHMAN BROTHERS HOLDINGS INC.
GROSS LEVERAGE and NET LEVERAGE CALCULATIONS
(Preliminary and Unaudited)
(In millions)
Nov 30, Aug 31, May 31, Feb 28, Nov 30,
2005 2005 2005 2005 2004
-------------- ------------- ------------- ------------- -------------
Net assets:
Total assets $410,000 $384,295 $370,595 $363,692 $357,168
Less:
Cash and securities segregated and on
deposit for regulatory and other
purposes (5,700) (4,531) (3,935) (4,278) (4,085)
Securities received as collateral (5,000) (5,419) (4,207) (3,767) (4,749)
Collateralized agreements (184,700) (176,875) (165,178) (168,986) (169,829)
Identifiable intangible assets and
goodwill (3,260) (3,262) (3,286) (3,274) (3,284)
-------------- ------------- ------------- ------------- -------------
Net assets $211,340 $194,208 $193,989 $183,387 $175,221
============== ============= ============= ============= =============
Tangible equity capital:
Total stockholders' equity $16,794 $16,334 $15,878 $15,754 $14,920
Junior subordinated notes 2,026 1,799 1,506 1,225 1,000
Less: Identifiable intangible assets and
goodwill (3,260) (3,262) (3,286) (3,274) (3,284)
-------------- ------------- ------------- ------------- -------------
Tangible equity capital $15,560 $14,871 $14,098 $13,705 $12,636
============== ============= ============= ============= =============
Gross leverage (total assets / total
stockholders' equity) 24.4x 23.5x 23.3x 23.1x 23.9x
Net leverage (net assets / tangible equity
capital) 13.6x 13.1x 13.8x 13.4x 13.9x
12