SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 20, 2000
THE GOLDMAN SACHS GROUP, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE NO. 001-14965 NO. 13-4019460
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(State or Other Jurisdiction of (Commission File (IRS Employer
Incorporation) Number) Identification No.)
85 BROAD STREET
NEW YORK, NEW YORK 10004
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 902-1000
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On June 20, 2000, The Goldman Sachs Group, Inc. reported net earnings
of $755 million, or $1.48 per diluted share, for its fiscal second quarter ended
May 26, 2000.
BUSINESS SEGMENTS
GLOBAL CAPITAL MARKETS
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Net revenues in Global Capital Markets, which includes Investment
Banking and Trading and Principal Investments, were $2.99 billion, 10% above the
second quarter of 1999 and 10% lower than the record first quarter of 2000.
INVESTMENT BANKING. Investment Banking generated net revenues of $1.59
billion, a 59% increase from last year's second quarter and 29% above the prior
quarter. Revenue growth was strong in all major regions, particularly in Europe.
Net revenues in the Financial Advisory business increased 40% over the
same period in 1999, primarily due to increased mergers and acquisitions
activity in the high technology, financial institutions, and energy and power
sectors.
Underwriting net revenues increased 79% compared to the same 1999
period as the firm capitalized on strong equity new issue activity in the
communications, media and entertainment and high technology sectors.
TRADING AND PRINCIPAL INVESTMENTS. Net revenues in Trading and
Principal Investments were $1.40 billion for the quarter, 19% lower than the
second quarter of 1999 and 33% lower than the record first quarter of 2000.
FICC net revenues decreased 30% compared to a strong second quarter of
1999, as higher interest rates and widening credit spreads led to a slowdown in
new issue transactions and general declines in secondary market activity across
many fixed income products.
Net revenues in Equities rose by 76% over the same 1999 period as
increased customer flow and higher levels of market volatility led to growth in
most components of the business. Net revenue growth was particularly strong in
equity derivatives and Pan-European shares compared to the same prior year
period.
Principal Investments experienced negative net revenues of $321 million
as significant market declines in technology and telecommunications stocks led
to a partial reversal of unrealized gains recorded primarily in the prior two
quarters. These negative net revenues, when adjusted for the related reduction
in compensation expense and taxes, lowered the firm's earnings per diluted share
in the second quarter by $0.19.
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ASSET MANAGEMENT AND SECURITIES SERVICES
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Asset Management and Securities Services net revenues were $1.16
billion, 55% above the same prior year period, but essentially unchanged from
the prior quarter.
Asset Management net revenues increased 65% over last year's second
quarter, primarily reflecting a 34% increase in average assets under management
as well as favorable changes in the composition of assets managed.
Securities Services net revenues were 45% higher than the same 1999
period, due to continued growth in the firm's prime brokerage business and
increased customer balances in securities lending and margin lending.
Commissions increased 54% compared to the same period last year as
transaction volumes in global equity markets rose to record levels.
EXPENSES
Operating expenses were $2.90 billion. The ratio of compensation and
benefits to net revenues was 50% for the second quarter of 2000. Excluding the
effects of the initial public offering awards and the charitable contributions,
non-compensation-related expenses rose 42% compared to the same period in 1999,
primarily due to costs associated with higher employment levels, global
expansion and growth in business activity. The firm's effective tax rate for
the second quarter was 40%.
CAPITAL
As of May 26, 2000, total capital was $36.6 billion, consisting of
$11.9 billion in stockholders' equity and $24.7 billion in long-term debt. Book
value per share was $24.60, based on common shares outstanding, including
restricted stock units granted to employees with no future service requirements,
of 483,995,863 at period end. The firm repurchased 588,000 shares of its common
stock during the quarter.
DIVIDEND
The Board of Directors of The Goldman Sachs Group, Inc. declared a
dividend of $0.12 per share to be paid on August 24, 2000, to voting and
nonvoting common shareholders of record on July 24, 2000.
Cautionary Note Regarding Forward-Looking Statements
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Statements in this Current Report on Form 8-K may constitute
"forward-looking
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statements." These forward-looking statements represent only the firm's belief
regarding future events, many of which, by their nature, are inherently
uncertain and outside of its control. For a discussion of some of the risks and
factors that could affect the firm's future results, see "Business - Certain
Factors That May Affect Our Business" in the firm's Annual Report on Form 10-K
for the fiscal year ended November 26, 1999.
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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENT NET REVENUES
(unaudited)
($ in millions)
THREE MONTHS ENDED CHANGE FROM SIX MONTHS ENDED CHANGE FROM
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May 26, February 25, May 28, February 25, May 28, May 26, May 28, May 28,
2000 2000 1999 2000 1999 2000 1999 1999
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Global Capital Markets
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Financial Advisory $ 712 $ 583 $ 510 22 % 40 % $ 1,295 $ 1,032 25 %
Underwriting 882 653 492 35 79 1,535 872 76
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Investment Banking $ 1,594 $ 1,236 $ 1,002 29 59 $ 2,830 $ 1,904 49
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FICC $ 634 $ 1,016 $ 911 (38) (30) $ 1,650 $ 1,787 (8)
Equities 1,086 858 618 27 76 1,944 1,073 81
Principal Investments (321) 214 189 N.M. N.M. (107) 215 N.M.
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Trading and Principal
Investments $ 1,399 $ 2,088 $ 1,718 (33) (19) $ 3,487 $ 3,075 13
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Total Global Capital
Markets $ 2,993 $ 3,324 $ 2,720 (10) 10 $ 6,317 $ 4,979 27
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Asset Management and
Securities Services
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Asset Management $ 354 $ 306 $ 214 16 % 65 % $ 660 $ 416 59 %
Securities Services 252 238 174 6 45 490 381 29
Commissions 556 625 361 (11) 54 1,181 688 72
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Total Asset Management
and Securities Services $ 1,162 $ 1,169 $ 749 (1) 55 $ 2,331 $ 1,485 57
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Total net revenues $ 4,155 $ 4,493 $ 3,469 (8) 20 $ 8,648 $ 6,464 34
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* * *
ASSETS UNDER SUPERVISION
(unaudited)
($ in millions)
AS OF CHANGE FROM AS OF
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May 31, February 29, May 31, February 28, May 31, November 30, November 30,
2000 2000 1999 2000 1999 1999 1998
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Assets under management $276,610 $ 279,617 $ 206,553 (1) % 34 % $ 258,045 $ 194,821
Other client assets 235,103 272,991 176,369 (14) 33 227,424 142,018
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Total assets under
supervision (1) $511,713 $ 552,608 $ 382,922 (7) 34 $ 485,469 $ 336,839
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<FN>
(1) Substantially all assets under supervision are valued as of calendar month end.
</FN>
5
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
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May 26, February 25, May 28, May 26, May 28,
2000 2000 1999 (1) (2) 2000 1999
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(in millions, except share and per share amounts)
Revenues
Global capital markets
Investment banking $ 1,585 $ 1,230 $ 1,002 $ 2,815 $ 1,904
Trading and principal investments 1,335 2,096 1,719 3,431 3,117
Asset management and securities services 942 944 616 1,886 1,159
Interest income 4,334 3,694 3,018 8,028 6,031
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Total revenues 8,196 7,964 6,355 16,160 12,211
Interest expense 4,041 3,471 2,886 7,512 5,747
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Revenues, net of interest expense 4,155 4,493 3,469 8,648 6,464
Operating expenses
Compensation and benefits, excluding employee
initial public offering awards 2,077 2,247 1,953 4,324 3,228
Nonrecurring employee initial public offering awards - - 2,257 - 2,257
Amortization of employee initial public offering
awards 101 111 39 212 39
Brokerage, clearing and exchange fees 154 129 109 283 220
Market development 111 106 78 217 155
Communications and technology 100 93 71 193 149
Depreciation and amortization 102 101 61 203 158
Occupancy 101 95 67 196 145
Professional services and other 151 132 121 283 212
Charitable contribution - - 200 - 200
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Total operating expenses 2,897 3,014 4,956 5,911 6,763
Pre-tax earnings / (loss) 1,258 1,479 (1,487) 2,737 (299)
Provision / (benefit) for taxes 503 592 (1,827) 1,095 (1,646)
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Net earnings $ 755 $ 887 $ 340 $ 1,642 $ 1,347
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Earnings per share
Basic $ 1.56 $ 1.83 $ 0.72 $ 3.39 $ 2.84
Diluted 1.48 1.76 0.71 3.23 2.81
Average common shares outstanding
Basic 484,380,052 484,576,498 474,712,271 484,478,275 474,712,271
Diluted 510,262,727 505,387,044 479,908,301 507,824,885 479,908,301
<FN>
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(1) Includes approximately ten weeks as a partnership and three weeks as a corporation.
(2) Nonrecurring items recognized in connection with the firm's initial public
offering reduced net earnings by $672 million and diluted earnings per share
by $1.40 for the three months ended May 28, 1999.
</FN>
6
SIGNATURE
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 hereunto duly authorized.
THE GOLDMAN SACHS GROUP, INC.
(Registrant)
Date: June 20, 2000 By: /s/ Gregory K. Palm
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Name: Gregory K. Palm
Title: General Counsel