EXHIBIT 99.2
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
PAGE NUMBER
------------
Financial Statements - Credit Suisse First Boston Corporation
Condensed Consolidated Statements of Financial Condition as of September 30, 2000
and December 31, 1999 (Unaudited)........................................................ 7
Condensed Consolidated Statements of Income for the nine-month periods ended
September 30, 2000 and 1999.............................................................. 9
Condensed Consolidated Statements of Changes in Stockholder's Equity for
the nine-month period ended September 30, 2000 and for the year ended
December 31, 1999 (Unaudited)............................................................ 10
Condensed Consolidated Statements of Cash Flows for the nine-month periods ended
September 30, 2000 and 1999 (Unaudited).................................................. 11
Notes to Condensed Consolidated Financial Statements (Unaudited)............................ 12
6
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Financial Condition (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
September 30, December 31,
2000 1999
------------- ------------
ASSETS
Cash and cash equivalents............................................... $ 195,665 $ 101,411
Cash and securities segregated for regulatory purposes or deposited with
clearing organizations.................................................... 3,873,448 2,678,975
Collateralized short-term agreements:
Securities purchased under agreements to resell........................... 38,660,378 28,016,598
Securities borrowed....................................................... 58,601,418 39,126,463
Securities pledged as collateral............................................. 5,003,775 1,316,264
Receivables:
Customers................................................................. 947,603 1,020,488
Brokers, dealers and other................................................ 3,605,658 3,833,917
Financial instruments owned, at value:
U.S. government and agencies.............................................. 10,309,506 7,503,760
Non - U.S. government securities.......................................... 304,454 78,322
Corporate debt............................................................ 7,910,419 5,719,556
Equities and other........................................................ 12,745,519 7,791,803
Office facilities, at cost (net of accumulated depreciation and amortization of
$250,364 and $187,684, respectively)...................................... 228,370 216,220
Goodwill (net of accumulated amortization of $258,259 and $238,370,
respectively)............................................................. 272,110 291,999
Other assets and deferred amounts............................................ 699,922 442,901
------------ ------------
Total Assets................................................................. $143,358,245 $ 98,138,677
============ ============
See accompanying notes to condensed consolidated financial statements.
7
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Financial Condition (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
September 30, December 31,
2000 1999
------------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-term borrowings........................................................... $ 9,889,223 $ 2,839,897
Collateralized short-term financings:
Securities sold under agreements to repurchase.............................. 55,607,180 43,478,449
Securities loaned........................................................... 28,506,980 19,427,088
Obligation to return pledged securities......................................... 5,918,727 2,178,896
Payables:
Customers................................................................... 4,927,287 3,592,682
Brokers, dealers and other.................................................. 9,436,461 2,571,790
Financial instruments sold not yet purchased, at value:
U.S. government and agencies................................................ 15,164,430 12,622,131
Non - U.S government securities............................................. 391,708 132,323
Corporate debt.............................................................. 2,600,976 1,471,526
Equities and other.......................................................... 1,554,437 1,527,957
Accounts payable and accrued expenses........................................... 2,829,934 2,045,401
Subordinated borrowings......................................................... 4,150,000 4,150,000
------------- ------------
Total liabilities...................................................... 140,977,343 96,038,140
Stockholder's equity:
Common stock, $1.00 par value; 1,000 shares authorized, issued and
outstanding............................................................. 1 1
Paid-in capital............................................................. 2,083,968 1,951,503
Retained earnings........................................................... 296,933 149,033
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Total stockholder's equity............................................. 2,380,902 2,100,537
------------- ------------
Total Liabilities and Stockholder's Equity...................................... $ 143,358,245 $ 98,138,677
============= ============
See accompanying notes to condensed consolidated financial statements.
8
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Income (UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
2000 1999
------------ ------------
Revenues:
Commissions.............................................................. $ 560,563 $ 337,339
Underwritings............................................................ 1,033,087 621,264
Fees..................................................................... 740,250 528,292
Interest and dividend (expense) income, net of interest (income) expense
of $(6,256,665) and $4,684,368, respectively.......................... (91,919) 7,067
Principal transactions-net............................................... 870,387 583,104
Other.................................................................... 18,553 10,972
------------ ------------
Total revenues........................................................ 3,130,921 2,088,038
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Costs and Expenses:
Compensation and benefits................................................ 2,229,499 1,583,343
Communications and technology............................................ 137,091 104,479
Brokerage, clearing, exchange fees and other............................. 107,932 96,013
Occupancy and related costs.............................................. 124,661 112,957
Other operating expenses................................................. 316,515 202,229
------------ ------------
Total costs and expenses.............................................. 2,915,698 2,099,021
------------ ------------
Income (loss) before provision (benefit) for income taxes ................... 215,223 (10,983)
------------ ------------
Provision (benefit) for income taxes......................................... 67,323 (22,033)
------------ ------------
Net income................................................................... $ 147,900 $ 11,050
============ ============
See accompanying notes to condensed consolidated financial statements.
9
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Changes in Stockholder's Equity (UNAUDITED)
Year Ended December 31,1999 and Nine Months Ended September 30, 2000
(IN THOUSANDS)
Common Paid-in Retained
Stock Capital Earnings Total
------ ------- --------- -------
Balances at December 31, 1998................... $ 1 $ 1,486,425 $ 133,213 $ 1,619,639
Net income...................................... - - 15,820 15,820
Credit Suisse Group Share Plan Activity......... - 465,078 - 465,078
--- ----------- --------- -----------
Balances at December 31, 1999................... 1 1,951,503 149,033 2,100,537
Net income...................................... - - 147,900 147,900
Credit Suisse Group Share Plan Activity......... - 132,465 - 132,465
--- ----------- --------- -----------
Balances at September 30, 2000.................. $ 1 $ 2,083,968 $ 296,933 $ 2,380,902
=== =========== ========= ===========
See accompanying notes to condensed consolidated financial statements
10
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows (UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
September 30,
2000 1999
------------ ------------
Cash flows from operating activities:
Net income............................................................... $ 147,900 $ 11,050
Adjustment to reconcile net income to net cash (used
in) provided by operating activities:
Depreciation and amortization......................................... 76,371 67,443
Deferred taxes........................................................ (222,312) 36,803
Stock compensation.................................................... 111,671 103,694
(Increase) decrease in operating assets:
Cash and securities segregated for regulatory
purposes or deposited with clearing organizations..................... (1,194,473) (149,960)
Collateralized short-term agreements..................................... (30,118,735) (15,974,956)
Securities pledged as collateral......................................... (3,687,511) 50,335
Receivables.............................................................. 301,144 (344,946)
Financial instruments owned, at value.................................... (10,176,457) (7,615,530)
Other assets and deferred amounts........................................ (34,709) (12,616)
Increase (decrease) in operating liabilities:
Collateralized short-term financings..................................... 21,208,623 19,303,737
Obligation to return pledged securities.................................. 3,739,831 2,266,960
Payables................................................................. 8,199,276 (1,951,061)
Financial instruments sold not yet purchased, at value................... 3,957,614 3,327,938
Accounts payable and accrued expenses.................................... 805,327 2,113,485
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Net cash (used in) provided by operating activities................... (6,886,440) 1,232,376
------------- -----------
Cash flows from investing activities:
Net payment for other assets............................................. (68,632) (50,030)
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Net cash used in investing activities................................. (68,632) (50,030)
------------- -----------
Cash flows from financing activities:
Net proceeds from (payments for) short-term borrowings................... 7,049,326 (1,182,606)
------------- -----------
Net cash provided by (used in) financing activities................... 7,049,326 (1,182,606)
------------- -----------
Net increase (decrease) in cash and cash equivalents......................... 94,254 (260)
Cash and cash equivalents at beginning of period............................. 101,411 116,215
------------- -----------
Cash and cash equivalents at end of period................................... $ 195,665 $ 115,955
============= ===========
See accompanying notes to condensed consolidated financial statements.
11
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (UNAUDITED)
(IN THOUSANDS, EXCEPT WHERE INDICATED OTHERWISE)
September 30, 2000
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include Credit Suisse First
Boston Corporation and its wholly owned subsidiary, Special Situations Holdings,
Inc. - Westbridge ("Westbridge") (together with Westbridge, "CSFB Corp.").
During 1999, Westbridge was established for the purpose of holding certain
investment securities. CSFB Corp. is a wholly owned subsidiary of Credit Suisse
First Boston, Inc. (the "Parent Company"), whose ultimate parent is Credit
Suisse Group. ("CSG"). All significant intercompany balances and transactions
have been eliminated.
Certain financial information that is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
but is not required for interim reporting purposes has been condensed or
omitted. These condensed consolidated financial statements reflect, in the
opinion of management, all adjustments (consisting of normal, recurring
accruals) necessary for a fair presentation of the condensed consolidated
financial position and results of operations for the interim periods presented.
The results of operations for interim periods are not necessarily indicative of
results for the entire year. These financial statements should be read in
conjunction with CSFB Corp.'s Consolidated Financial Statements and notes
thereto as of and for the year ended December 31, 1999, included as Exhibit
99.2 to the Credit Suisse First Boston (USA), Inc.'s Current Report on
Form 8-K dated November 3, 2000.
In 1988, First Boston Inc., the then parent of CSFB Corp., and CS Holding (now
CSG), formed CS First Boston, Inc. with CS Holding becoming a significant
shareholder. Subsequent purchases by CSG in 1990, 1994, and 1996 increased
ownership to 100%. Goodwill, which resulted from the excess of the purchase
price over the fair value of the acquired net assets at the dates of
acquisition, is being amortized over a 20-year life at a current annual rate of
approximately $26.5 million. In accordance with Staff Accounting Bulletin No. 54
issued by the Securities and Exchange Commission, "Pushdown Basis of Accounting
in Financial Statements of Subsidiaries", and as a result of the Subsequent
Events discussed in Footnote 9, goodwill related to the purchases above was
pushed down from CSG to CSFB Corp.
To prepare condensed consolidated financial statements in conformity with
generally accepted accounting principles management must estimate certain
amounts that affect the reported assets and liabilities, disclosure of
contingent assets and liabilities, and reported revenues and expenses. Actual
results could differ from those estimates.
Certain reclassifications have been made to previously issued financial
statements to conform to the current presentation.
2. INCOME TAXES
CSFB Corp. is included in a consolidated federal income tax return and combined
New York State and New York City income tax returns filed by the Parent Company.
The Parent Company allocates federal, state and city income taxes to its
subsidiaries on a separate return basis. Any credits for losses will be paid by
the Parent Company to the extent that such credits are for tax benefits that
have been utilized in the consolidated federal or combined state and city income
tax return. The amount due to the Parent Company amounted to $289,635 for the
nine-month period ended September 30, 2000. The amount due from the Parent
Company based on the allocation of tax benefits amounted to $58,836 for the
nine-month period ended September 30, 1999.
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CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (UNAUDITED) - (Continued)
3. BORROWINGS
Short-term borrowings are generally demand obligations with interest
approximating Federal fund rates. Such borrowings are generally used to
facilitate the securities settlement process, to finance securities inventories,
and to finance securities purchased by customers on margin.
At September 30, 2000 and December 31, 1999, CSFB Corp.'s outstanding
subordinated borrowings were as follows:
September 30, December 31,
2000 1999
------------- ------------
Revolving Subordinated Loan Agreements:
Due May 31, 2003 $ 500,000 $ 500,000
Due December 31, 2005 1,000,000 1,000,000
Due February 28, 2008 1,150,000 1,150,000
Equity Subordination Agreements:
Due April 30, 2005 500,000 500,000
Due September 30, 2007 450,000 450,000
Due July 31, 2008 550,000 550,000
----------- -----------
Total subordinated borrowings $ 4,150,000 $ 4,150,000
=========== ===========
The above subordinated loan agreements are with the Parent Company. The
agreements are at floating interest rates and are equivalent to those obtained
by the Parent Company for its subordinated borrowings. The weighted average
effective interest rate at September 30, 2000 and December 31, 1999 for these
borrowings was 7.02% and 6.45%, respectively. The fair value of these borrowings
approximates the amounts reflected in the Condensed Consolidated Statements of
Financial Condition.
The borrowings under these agreements qualify as regulatory capital and the
agreements include all statutory restrictions specified by the Uniform Net
Capital Rule under the Securities Exchange Act of 1934, including restrictive
covenants relating to additional subordinated borrowings and to minimum levels
of net capital, as defined, and consolidated stockholder's equity.
For the nine-month periods ended September 30, 2000 and 1999, interest paid on
all borrowings and financing arrangements was $6,027,000 and $4,227,000,
respectively.
4. NET CAPITAL
CSFB Corp. is subject to the requirements of several regulatory bodies,
including the Uniform Net Capital Rule under the Securities Exchange Act of 1934
(the "Exchange Act"). As such, it is subject to the NYSE's net capital rule,
which conforms to the Uniform Net Capital Rule under rule 15c3-1 of the Exchange
Act. Under the alternative method permitted by this rule, the required net
capital may not be less than two percent of aggregate debit balances arising
from customer transactions or four percent of segregated funds, whichever is
greater. If a member firm's capital is less than four percent of aggregate debit
balances, the NYSE may require the firm to reduce its business. If a member
firm's net capital is less than five percent of aggregate debit balances, the
NYSE may prevent the firm from expanding its business and declaring cash
dividends. At September 30, 2000, CSFB Corp.'s net capital of $2,757,695 was
78.24 percent of aggregate debit balances and in excess of the minimum
requirement of $77,170 by $2,680,525.
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CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (UNAUDITED) - (Continued)
5. DERIVATIVE FINANCIAL INSTRUMENTS
CSFB Corp. enters into various transactions involving derivatives. In general,
derivatives are contractual agreements that derive their values from the
performance of underlying assets, interest or currency exchange rates, or a
variety of indices. CSFB Corp. enters into derivative transactions for trading
purposes or to provide products for its clients. These transactions involve
options, forwards, futures and swaps.
For further discussion of these matters, refer to Note 7 of CSFB Corp.'s
Consolidated Financial Statements as of and for the year ended December 31,
1999, included as Exhibit 99.2 to Credit Suisse First Boston (USA), Inc's
Current Report on Form 8-K dated November 3, 2000.
The notional or contract amounts indicate the extent of CSFB Corp.'s involvement
in the derivative instruments noted above. They do not measure CSFB Corp.'s
exposure to market or credit risk and do not represent the future cash
requirements of such contracts. The notional (contract) amounts for derivatives
outstanding at September 30, 2000 and December 31,1999 are as follows:
September 30, December 31,
2000 1999
------------- -------------
(In billions)
Options written............................................... $ 11.3 $ 38.7
Options purchased............................................. $ 16.1 $222.8
Forward contracts purchased................................... $ 22.9 $ 20.5
Forward contracts sold........................................ $ 17.0 $ 15.4
Futures contracts purchased................................... $ 31.6 $ 25.1
Futures contracts sold........................................ $ 74.5 $ 39.9
Swaps......................................................... $ 3.7 $ 2.4
During 1999, CSFB Corp. purchased options on interest rate strips tied to U.S.
Treasury Bills. At December 31, 1999, the notional amount of the underlying U.S.
Treasury Bills represented $200,600,000 of the total purchased options and had a
market value of $200. These options expired unexercised on January 15, 2000.
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CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (UNAUDITED) - (Continued)
The fair values of derivatives outstanding at September 30, 2000 and December
31, 1999 are as follows:
September 30, 2000 December 31, 1999
----------------------- ------------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
(In millions)
Options..................................... $ 348.2 $ 207.1 $ 415.6 $ 344.8
Forward contracts........................... $ 130.7 $ 271.7 $ 398.9 $ 358.6
Futures contracts........................... $ 110.4 $ 23.1 $ 8.0 $ 24.8
Swaps....................................... $ 10.6 $ 10.3 $ 8.7 $ 22.7
The average fair values of derivatives for the periods ended September 30, 2000
and December 31, 1999 are as follows:
Nine Months Ended Year Ended
September 30, 2000 December 31, 1999
----------------------- -----------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
(In millions)
Options..................................... $ 358.3 $ 348.5 $ 566.7 $ 410.9
Forward contracts........................... $ 322.6 $ 305.7 $ 370.9 $ 369.4
Futures contracts........................... $ 45.8 $ 58.6 $ 50.8 $ 109.0
Swaps....................................... $ 12.9 $ 7.5 $ 4.8 $ 6.7
6. CONCENTRATIONS OF CREDIT RISK
Risk is an inherent part of CSFB Corp.'s business activities. The principal
types of risks involved in CSFB Corp.'s activities are market risk, credit,
country or counterparty risk and transaction risk. CSFB Corp. has developed an
infrastructure designed to control, monitor and manage each type of risk. For a
further discussion of these matters, refer to Notes 8 and 9 of CSFB Corp.'s
Consolidated Financial Statements as of and for the year ended December 31,
1999, included as Exhibit 99.2 to Credit Suisse First Boston (USA), Inc.'s
Current Report on Form 8-K dated November 3, 2000.
Risks associated with letters of credit, guarantees and underwriting commitments
are not significant.
7. INDUSTRY SEGMENT DATA
CSFB Corp. operates and manages its businesses and presents segment information
through three principal operating segments: Investment Banking ("IBD"), Fixed
Income ("FID") and Equities. The following is a summary of CSFB Corp.'s segment
data:
IBD FID Equities Other Total
--- --- -------- ----- -----
(In millions)
FOR THE NINE MONTHS ENDED:
SEPTEMBER 30, 2000:
Net revenues (expenses) ......... $ 1,287.1 $ 333.4 $ 1,548.0 $ (37.6) $ 3,130.9
Depreciation and amortization ... 16.6 22.1 17.8 19.9 76.4
Net interest (expense) income ... (17.6) 135.9 (198.1) (12.1) (91.9)
Income (loss) before income taxes $ 269.6 $ (206.8) $ 409.6 $ (257.2) $ 215.2
SEPTEMBER 30, 1999:
Net revenues (expenses) ......... $ 802.1 $ 516.8 $ 881.0 $ (111.9) $ 2,088.0
Depreciation and amortization ... 13.7 19.9 13.9 19.9 67.4
Net interest (expense) income ... (9.5) 238.3 (103.4) (118.3) 7.1
Income (loss) before income taxes $ 164.0 $ (50.5) $ 239.7 $ (364.2) $ (11.0)
15
CREDIT SUISSE FIRST BOSTON CORPORATION AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (UNAUDITED) - (Continued)
8. LEGAL PROCEEDINGS
CSFB Corp. has been named as a defendant in a number of actions relating to its
various businesses including various civil actions and arbitrations arising out
of its activities as a broker-dealer in securities, as an underwriter and as an
employer, and arising out of alleged employee misconduct. From time to time,
CSFB Corp. is also involved in proceedings with and investigations by,
government agencies and self-regulatory organizations. Some of the actions have
been brought on behalf of various classes of claimants and seek damages of
material or indeterminate amounts. Although the ultimate outcome of litigation
involving CSFB Corp. cannot be predicted with certainty, after reviewing these
actions with its counsel, management believes it has meritorious defenses to all
such actions and intends to defend each of these vigorously.
Although there can be no assurance that such actions, proceedings,
investigations and litigation will not have a material adverse effect on the
results of operations of CSFB Corp. in any future period, depending in part on
the results for such period, in the opinion of management of CSFB Corp., based
upon advice of counsel, the ultimate resolution of such actions, proceedings,
investigations and litigation against CSFB Corp. will not have a material
adverse effect on the consolidated financial condition and/or results of CSFB
Corp.
9. SUBSEQUENT EVENTS
On September 8, 2000, Credit Suisse Group, through a subsidiary, agreed to
purchase all of the outstanding shares of common stock of Donaldson, Lufkin &
Jenrette, Inc. - series designated Donaldson, Lufkin & Jenrette, Inc. - DLJ
Common Stock (the "Acquisition"). The purchase will close on November 3, 2000.
Beginning on October 6, 2000, Donaldson, Lufkin & Jenrette, Inc. ("DLJ") and the
Parent Company initiated a series of transfers relating to certain proprietary
fixed income and equity portfolios maintained by DLJ and certain of its
subsidiaries, to CSFB Corp. and certain of its affiliates. In connection with
these transfers, CSFB Corp. and certain of its affiliates made an aggregate cash
payment of approximately $4.5 billion to DLJ and its subsidiaries.
On November 3, 2000, and simultaneous with the closing of the Acquisition, the
Parent Company will transfer all of the outstanding shares of CSFB Corp. to DLJ
in exchange for newly issued shares of DLJ. As a result of the transfer, CSFB
Corp. will become a direct wholly owned subsidiary of DLJ. Effective November 6,
2000, DLJ will change its name to Credit Suisse First Boston (USA), Inc.
16