DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette, Inc.
277 Park Avenue, New York, New York 10172 - (212) 892-3000
FOR IMMEDIATE RELEASE
Media Contact: Investor Contact:
Catherine M. Conroy Kevin Zuccala
Donaldson, Lufkin & Jenrette Donaldson, Lufkin & Jenrette
212-892-3275 212-892-4693
DLJ REPORTS EARNINGS OF $25.7 MILLION OR $0.15 PER SHARE
FOR THE THIRD QUARTER OF 1998
New York, NY - October 13, 1998 - Donaldson, Lufkin & Jenrette, Inc.
(NYSE: DLJ) today announced that its net income for the third quarter of 1998
was $25.7 million, or $0.15 per share (diluted and adjusted for a two-for-one
stock split in May 1998). These results are 79 percent and 84 percent lower,
respectively, than the $120.3 million, or $0.93 per share, reported for the
third quarter of 1997.
Net revenues, or total revenues minus interest expense, declined 30
percent from the $989 million reported in the third quarter of 1997 to $695
million for the current quarter of 1998. Return on equity for the third quarter
of 1998 was 3.4 percent versus 27.7 percent for the third quarter of 1997. Book
value per common share at September 30, 1998 was $19.93.
For the nine-month period ending September 30, 1998, DLJ reported net
income of $302 million, approximately two percent less than the $307 million
reported for the comparable period in 1997. Net revenues for the first nine
months of 1998, or total revenues minus interest expense, rose 17 percent to
$3.0 billion. Return on equity for the first nine months of 1998 was 17.9
percent versus 24.9 percent for the comparable period of 1997.
In a joint statement, Joe L. Roby, President and Chief Executive
Officer of Donaldson, Lufkin & Jenrette, Inc., and John S. Chalsty, DLJ's
Chairman, said, "As everyone realizes, this was a difficult period for the
securities industry. Unprecedented volatility in the world's capital markets
brought new issue calendars to a standstill for much of the quarter and caused
interest rate spreads over Treasuries on fixed-income securities to widen
dramatically. Underwriting revenues, which accounted for 29 percent of our net
revenues in the first half of 1998 slowed substantially in the third quarter.
Underwriting revenues for the third quarter of 1998 were $122 million, 59
percent lower than in the comparable quarter of 1997. This decline in
underwriting income, along with the impact of trading losses in domestic
fixed-income securities and in Russia and other emerging markets, offset the
strong gains that DLJ realized in commissions, fees and net interest income
during the third quarter of 1998."
They noted, "DLJ has a history of using industry turmoil to its
advantage and we hope to capitalize on current conditions with as much success
as we did in previous market downturns. We will be alert to opportunities to
strengthen our firm in the current market environment."
THIRD QUARTER COMPARISONS: RECORD COMMISSIONS
As a result Of sustained high volume in the U.S. stock market,
revenues from commissions increased by more than 26 percent to a record $225
million during the third quarter of 1998. DLJ's franchises in institutional
equities, correspondent clearing services, and private client and on-line
investment services for individuals benefited from volume levels in the
quarter.
Fee income, arising primarily from the firm's role as a financial
advisor on merger and acquisition assignments, increased by approximately 50
percent from the third quarter a year ago to $317 million. For the nine months
ended September 30, 1998, DLJ ranked sixth as a financial advisor as measured
by the dollar volume of its announced U.S. merger and acquisition assignments.
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DLJ's private funds business as well as its merchant banking and asset
management businesses also contributed to this gain in fee income.
Net interest income rose 68 percent to $203 million.
For the third quarter of 1998, underwriting income was $122 million,
or 59 percent less than in the comparable quarter a year ago. At September 30,
1998, DLJ was the number-one ranked lead underwriter of high-yield bonds and
the fourth most active lead underwriter of common stocks.
For the third quarter of 1998, DLJ reported a net loss of $234 million
in dealer and trading revenues compared to revenues of $85 million for the
comparable quarter of 1997. These losses arose from the combined impact of
trading losses and mark-to-market valuations of its inventory of fixed-income
securities as well as the trading losses it incurred in Russian and other
emerging markets securities. At September 30, 1998, DLJ's exposure to emerging
markets securities, as measured by the aggregate of its net position for each
country, was less than $100 million.
NINE-MONTH COMPARISON: RECORD COMMISSIONS, UNDERWRITING AND FEE INCOME
Commission revenues for the nine-month period ending September 30,
1998, increased 24 percent to a record $626 million, as a result of sustained
strong volume in the U.S. equity markets. Results at DLJ's Pershing
correspondent services division for the first nine months of 1998 exceed the
division's full year performances in both 1997 and 1996.
Underwriting income for the nine-month period ending September 30, 1998
rose 22 percent to a record $795 million as a result of exceptionally active
new issue calendars in the first half of the year. Fee income for the nine
months rose 67 percent to a record $891 million, primarily as a result of
strong market share gains in the firm's merger and acquisition advisory
business. Trading gains for the nine-month period were a negative $100 million
as a result of third- quarter losses. Net interest income for the period rose
more than 75 percent to $606 million.
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DLJ COMMON STOCK INVESTMENT PLAN
DLJ also announced that it is establishing a DLJ Stock Fund as one of
the investment options available to employees who participate in the firm's
401(k)/profit sharing plan. Eligible employees may transfer as much as 50
percent of their current plan balances into the new DLJ Stock Fund. The Bank of
New York, acting as Investment Manager for the plan, has been authorized to
purchase a sufficient number of shares of DLJ common stock, but in no event more
than three million shares, to satisfy the initial demand as well as all future
demand for shares by the plan's participants.
Donaldson, Lufkin & Jenrette is a leading integrated investment and
merchant bank serving institutional, corporate, government and individual
clients. DLJ's businesses include securities underwriting; sales and trading;
investment and merchant banking; financial advisory services; investment
research; venture capital; correspondent brokerage services; on-line,
interactive brokerage services; and asset management. Founded in 1959 and
headquartered in New York City, DLJ employs approximately 8,150 people
worldwide and maintains offices in 14 cities in the United States and 11 cities
in Europe, Latin America and Asia. The company's common stock trades on the New
York Stock Exchange under the ticker symbol DLJ. For more information on
Donaldson, Lufkin & Jenrette, refer to the company's world wide web site at
http://www.dlj.com.
Financial Tables Follow
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DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS (UNAUDITED)
(in thousands, except per share data and financial ratios)
---------------------------------------------------------
Quarters Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------------------------------------------------------
Revenues:
Commissions $ 225,345 $ 178,301 $ 625,811 $ 504,997
Underwritings 121,727 294,452 795,201 651,812
Fees 317,297 209,703 891,104 532,530
Interest-net (1) 577,515 400,413 1,732,568 1,090,133
Principal transactions-net:
Trading (234,423) 84,908 (99,700) 332,216
Investment 44,724 85,587 133,217 149,967
Other 17,642 15,132 41,792 49,424
----------- ----------- ----------- -----------
Total revenues 1,069,827 1,268,496 4,119,993 3,311,079
----------- ----------- ----------- -----------
Costs and expenses:
Compensation and benefits 387,168 545,493 1,704,218 1,411,272
Interest 374,686 279,287 1,126,793 744,464
Brokerage, clearing, exchange
fees, and other 61,356 56,409 190,593 166,194
Occupancy and equipment 65,849 47,452 189,897 132,757
Communications 23,479 16,141 64,638 45,912
Other operating expenses 115,689 135,614 354,504 311,380
----------- ----------- ----------- -----------
Total costs and expenses 1,028,227 1,080,396 3,630,643 2,811,979
----------- ----------- ----------- -----------
Income before provision for
income taxes 41,600 188,100 489,350 499,100
----------- ----------- ----------- -----------
Provision for income taxes 15,900 67,800 187,200 192,200
----------- ----------- ----------- -----------
Net income $ 25,700 $ 120,300 $ 302,150 $ 306,900
=========== =========== =========== ===========
Dividends on preferred stock $ 5,289 $ 2,970 $ 16,021 $ 9,174
=========== =========== =========== ===========
Earnings applicable to
common shares $ 20,411 $ 117,330 $ 286,129 $ 297,726
=========== =========== =========== ===========
Earnings per share (2):
Basic $ 0.17 $ 1.06 $ 2.42 $ 2.71
Diluted $ 0.15 $ 0.93 $ 2.18 $ 2.40
=========== =========== =========== ===========
Weighted average common
shares (2):
Basic 121,569 111,116 118,025 109,826
Diluted 134,478 126,786 131,386 124,278
=========== =========== ========= ===========
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DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS (UNAUDITED)
(in thousands, except per share data and financial ratios)
---------------------------------------------------------
Quarters Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------------------------------------------------------
BALANCE SHEET DATA AT END OF PERIOD:
Long-term borrowings (3) $ 3,137,104 $ 2,029,574
=========== ===========
Redeemable preferred stock $ 200,000 $ 200,000
=========== ===========
Total stockholders' equity (2,4) $ 2,862,060 $ 1,963,911
=========== ===========
Book value per common share
outstanding $ 19.93 $ 14.93
=========== ===========
Common shares and RSUs outstanding
at end of period 124,802 118,178
=========== ===========
OTHER FINANCIAL DATA AT END OF PERIOD:
Ratio of long-term borrowings to total
capitalization (5) 50.6% 50.5%
Return on average common stockholders'
equity (6) 3.4% 27.7% 17.9% 24.9%
(1) Interest-net is net of interest expense to finance U.S. Government,
agency and mortgage-backed securities of $794.2 million, $731.8 million,
$2,343.0 million and $2,097.6 million, respectively.
(2) The Board Of Directors declared a two-for-one stock split of the
Company's common stock and the stockholders approved an increase in the
number of authorized common shares from 150 million to 300 million. The
stock split was effected in the form of a 100% stock dividend to
stockholders of record on April 27, 1998, and was paid on May 11, 1998.
The par value of the common stock remained at $10 per share. All share
and per share amounts have been restated for the effect of the stock
split.
Basic earnings per common share amounts have been calculated by dividing
earnings applicable to common shares (net income less preferred
dividends) by the weighted average actual common shares outstanding,
i.e., excluding the effect of potentially dilutive securities. Diluted
earnings per common share include the dilutive effects of the Restricted
Stock Unit Plan and the dilutive effect of options and convertible debt
calculated under the treasury stock method and "if-converted" method,
respectively.
(3) In July 1998, the Company issued an aggregate of $125 million Medium-Term
Notes due 2003.
In August 1998, in connection with the formation of a bankruptcy-remote
collateralized loan obligation, a subsidiary of the Company issued Senior
Secured Floating Rate Notes in the principal amounts of $200 million and
$250 million due March 15, 2005 and September 15, 2005, respectively.
(4) In July 1998, the Company sold an aggregate of five million shares of
newly issued common stock to its parent companies, Equitable Companies
Incorporated and AXA Group for $300 million.
(5) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock, and stockholders' equity) exclude current
maturities (one year or less) of long-term borrowings.
(6) Return on average common stockholders' equity is calculated on an
annualized basis for periods of less than one full year using a
four-point average and is based on earnings applicable to common shares.
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