1
Exhibit 99
2
LEHMAN BROTHERS HOLDINGS INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
Eight months ended August 31, 1994
---------------------------------------------------------
Pro Forma
----------------------------------
Actual Adjustments Total
------ ----------- ------
Revenues
Market making and principal
transactions $ 1,054 $ $ 1,054
Investment banking 421 421
Commissions 332 332
Interest and dividends 4,547 4,547
Other 41 41
------- -------- -------
Total revenues 6,395 6,395
Interest expense 4,365 (18) (a) 4,347
------- -------- -------
Net revenues 2,030 18 2,048
------- -------- -------
Non-interest expenses
Compensation and benefits 1,057 1,057
Brokerage, commissions and
clearance fees 178 178
Communications 135 135
Professional services 122 122
Occupancy and equipment 115 115
Depreciation and amortization 86 86
Advertising and market development 85 85
Other 76 76
Severance charge 33 33
Spin-off expenses 15 (15) (b)
------- -------- -------
Total non-interest expenses 1,902 (15) 1,887
------- -------- -------
Income before taxes and cumulative
effect of change in accounting principle 128 33 161
Provision for income taxes 48 10 (c) 58
------- -------- -------
Income before cumulative effect of
change in accounting principle 80 23 103
------- -------- -------
Preferred stock dividends 27 1 (d) 28
------- -------- -------
Income before cumulative effect of change
in accounting principle applicable to
common stock $ 53 $ 22 $ 75
======= ======== =======
Number of shares used in earnings
per share computation (e) 110.9
=======
Pro forma earnings per common share $ .68
=======
See notes to pro forma consolidated financial statements.
1
3
LEHMAN BROTHERS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
1. Basis of Reporting
The pro forma financial data has been prepared by the Company based on
certain adjustments to the consolidated financial statements of the Company.
The pro forma statement of operations reflects adjustments for the Concurrent
Transactions and the Stock Award Program as if such transactions had occurred
on the first day of the period reported on.
The pro forma financial data does not purport to present the results
of operations of the Company had the Concurrent and Stock Award Program
Transactions actually occurred as of such dates, nor is it necessarily
indicative of results of operations that may be achieved in the future.
To broaden and increase the level of employee ownership in Holdings,
the Compensation Committee approved the Stock Award Program pursuant to which
it awarded, subject to vesting provisions and transfer restrictions, 5.2
million Employee RSUs and determined to award the Executive RSUs to the
executive officers of Lehman Brothers if certain performance goals are
achieved. The Employee RSUs and the Executive RSUs will comprise part of the
bonuses awarded for 1994. Stockholders' equity increased by approximately $78
million (prior to forfeitures) with an offsetting decrease in accrued
liabilities with respect to the award of the Employee RSUs; however, the number
of Executive RSUs to be awarded, if any, will be determined upon completion of
the performance period. Holdings will meet the share requirements for the
Stock Award Program and other Common Stock based compensation and benefit plans
by repurchasing shares in the open market or issuing such shares.
PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS:
The pro forma adjustments to the statement of operations give effect
to the items described below:
(a) Reduced interest expense of approximately $18 million in the
first eight months of 1994, resulting from the utilization of
the cash proceeds to the Company from the Equity Investment.
(b) The elimination of the charges which resulted from the
Concurrent Transactions and certain related expenses.
(c) Adjustment (a) above, tax effected at an assumed rate of 40%
plus the actual tax expense on (b) above.
2
4
LEHMAN BROTHERS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
(d) Elimination of the dividend on the Money Market Cumulative
Preferred Stock partially offset by the addition of the
dividend on the Cumulative Preferred Stock. Holders of the
Redeemable Preferred Stock will be entitled to receive, in the
aggregate, an annual dividend equal to 50% of the Company's net
income in excess of $400 million per year, with a maximum
dividend of $50 million per year, for each of the next eight
years commencing on or about the distribution Date. On a pro
forma basis, no such dividends would have been payable in 1994.
(e) The number of shares used in the earnings per share
computation includes the weighted average common stock
outstanding for the eight months ended August 31, 1994, of
105,588,233, the 73,056 RSUs awarded as of the Distribution
(See Note 3) and the 5,200,000 Employee RSUs awarded
July 1, 1994. The Employee RSUs although not awarded until
July 1, 1994, are assumed outstanding from January 1, 1994 for
the pro forma statement of operations.
3