SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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) January 21, 1999
DONALDSON, LUFKIN & JENRETTE, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
1-6862 13-1898818
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(Commission File Number) (I.R.S. Employer
(Identification No.)
277 Park Avenue, New York, New York 10172
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 892-3000
Item 5. Other Events
A press release dated January 21, 1999, issued by Donaldson, Lufkin &
Jenrette, Inc., is filed herewith as an exhibit concerning fourth quarter
financial results and the information concerning the Company contained therein
is hereby incorporated in its entirety by reference.
(c) Exhibit
Exhibit 99.1 Press release dated January 21, 1999.
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.
Donaldson, Lufkin & Jenrette, Inc.
/s/ Marjorie White
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Marjorie White
Secretary
January 25, 1999
FOR IMMEDIATE RELEASE
Media Contact: Investor Contact:
Catherine M. Conroy Kevin Zuccala
212-892-3275 212-892-4693
DLJ'S FOURTH QUARTER NET DOWN 32 PERCENT TO $68.7 MILLION
FULL YEAR NET OF $371 MILLION IS FIRM'S SECOND BEST YEAR EVER
New York, NY - January 21, 1999 - Donaldson, Lufkin & Jenrette, Inc.
(NYSE: DLJ) today announced net income of $68.7 million, or $0.47 per share
(diluted) for the fourth quarter of 1998. These results are 32 percent and 39
percent lower, respectively, than the $101.4 million, or $0.77 per share
(diluted and adjusted for a two-for-one stock split in May 1998) reported for
the fourth quarter of 1997. For the full year ended December 31, 1998, DLJ
reported net income of $371 million, or $2.65 per share (diluted and
split-adjusted). These results, which mark the second best year in the firm's
39-year history, were 9.2 percent and 16.1 percent lower, respectively, than
the record results reported for 1997.
For 1998, DLJ's total revenues were a record $5.4 billion, 16.5
percent greater than the previous record of $4.6 billion set in 1997. DLJ's net
revenues, or total revenues minus interest expense, rose to a record $4.0
billion in 1998.
DLJ's return on equity for the fourth quarter of 1998 was 10.1
percent. For the year, return on equity was 16.5 percent. Book value per common
share (split-adjusted) at December 31, 1998 was $20.44 per share, 30 percent
higher than at the end 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, "This was a remarkable year for DLJ - one that demonstrated the
inherent strength of our client-focused franchises. Despite the problems that
the industry and DLJ encountered in the third quarter, 1998 was DLJ's second
best year ever. We earned record revenues, generating new highs in commissions,
underwriting income and fee income in 1998. We significantly expanded our
market share as an underwriter of common stock and convertible bonds to finish
1998 in fourth place as a lead manager of common stocks and in second place as
a lead manager of convertible bonds. This complements our number one ranking as
a lead manager of high-yield bonds, a position that we have maintained for six
consecutive years. Most notably in 1998, fee income, primarily from DLJ's role
as a financial advisor on merger and acquisition assignments, rose 55 percent
to a record $1.2 billion."
They continued, "Our Pershing correspondent services business achieved
record profitability in 1998, benefiting from productivity improvements and
record volume on the nation's exchanges. DLJdirect, our online internet
brokerage service, earned record revenues of $117.9 million in 1998, up 61
percent from the prior year. Client assets in DLJdirect accounts nearly doubled
to $8.9 billion and the average number of trades per day in 1998 increased by
87 percent to 11,400 per day. This year is off to an even stronger start with
average trades per day in the first week exceeding 21,000."
They added, "DLJ made a significant investment in 1998 in building up
its international presence, particularly in London. We expanded our investment
banking business and launched an international equities group that officially
began trading on January 4, 1999. Our investment in this expansion effort was
not offset by any meaningful revenues in 1998 from the new equities operation."
FOURTH QUARTER HIGHLIGHTS
Total revenues for the fourth quarter of 1998 were $1.29 billion,
approximately 3 percent less than the record $1.33 billion reported for the
fourth quarter of 1997. Net revenues, or total revenues minus interest expense,
rose 4 percent to a record $958.0 million for the quarter.
Commissions rose 24 percent to a record $228.9 million as trading
volume on the nation's exchanges continued to rise to record levels, benefiting
DLJ's institutional equities business as well as its Pershing correspondent
services business and DLJdirect. Underwriting income rose 11 percent to $282.5
million as new issue calendars for equities, convertible bonds and corporate
bonds reopened in the middle of the fourth quarter. For the quarter, fee income
rose 28 percent to $300.6 million.
Fourth quarter trading income, although down 78 percent from the
comparable period a year ago, recovered significantly compared to the third
quarter of 1998 when credit spreads across the range of fixed income securities
increased dramatically. Investment gains, largely attributed to the performance
of the firm's portfolio of merchant banking investments, recorded a loss of
$7.2 million in the fourth quarter. DLJ did not sell any substantial portfolio
assets during the quarter. The loss reflects the impact of a regular quarterly
mark-to-market valuation of the portfolio.
RECORD FULL-YEAR REVENUES IN MOST CATEGORIES
Net income for 1998 declined 9 percent from 1997's record high to $371
million. DLJ's total revenues were a record $5.4 billion in 1998, 16.5 percent
greater than the previous record of $4.6 billion set in 1997. DLJ's net
revenues, or total revenues minus interest expense, rose to a record $4.0
billion in 1998.
Commissions, underwriting income, fee income and interest income were
also at record levels in 1998. Commissions rose 24 percent in 1998 to $855
million as a result of strong performances by DLJ's institutional equities
business,
its Private Client and DLJdirect units and its Pershing correspondent services
business. Underwriting income grew 19 percent to a record $1.1 billion as DLJ
increased its market share as a lead manager of common stock, convertible
offerings and high-yield bonds in 1998. Interest income increased 33 percent to
a record $2.2 billion.
Third quarter trading losses and markdowns on securities inventories
offset these strong results. For the year, DLJ reported trading losses of $92.8
million versus trading gains of $363.2 million in 1997. These losses were
attributable primarily to the firm's proprietary trading activities in emerging
markets and other fixed-income securities. DLJ discontinued its emerging
markets proprietary debt trading group in September and has made other
adjustments to lower its risk profile.
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; online,
interactive brokerage services; and asset management. Founded in 1959 and
headquartered in New York City, DLJ employs approximately 8,500 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
DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS (UNAUDITED)
(in thousands, except per share data and financial ratios)
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QUARTERS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
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Revenues:
Commissions $ 228,868 $ 185,159 $ 854,679 $ 690,156
Underwritings 282,511 253,795 1,077,712 905,607
Fees 300,551 234,729 1,191,655 767,259
Interest-net (1) 456,540 562,002 2,189,108 1,652,135
Principal transactions-net:
Trading 6,918 30,974 (92,782) 363,190
Investment (7,186) 44,560 126,031 194,527
Other 18,847 18,171 60,639 67,595
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Total revenues 1,287,049 1,329,390 5,407,042 4,640,469
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Costs and expenses:
Compensation and benefits 527,437 496,929 2,231,655 1,908,201
Interest 329,058 408,703 1,455,851 1,153,167
Brokerage, clearing, exchange
fees, and other 68,032 65,208 258,625 231,402
Occupancy and equipment 80,078 57,158 269,975 189,915
Communications 25,155 18,053 89,793 63,965
Other operating expenses 146,139 121,339 500,643 432,719
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Total costs and expenses 1,175,899 1,167,390 4,806,542 3,979,369
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Income before provision for
income taxes 111,150 162,000 600,500 661,100
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Provision for income taxes 42,500 60,650 229,700 252,850
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Net income $ 68,650 $ 101,350 $ 370,800 $ 408,250
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Dividends on preferred stock $ 5,289 $ 2,970 $ 21,310 $ 12,144
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Earnings applicable to
common shares $ 63,361 $ 98,380 $ 349,490 $ 396,106
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Earnings per share (2):
Basic $ 0.52 $ 0.88 $ 2.93 $ 3.59
Diluted $ 0.47 $ 0.77 $ 2.65 $ 3.16
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Weighted average common shares (2):
Basic 122,916 111,776 119,260 110,318
Diluted 133,493 128,280 131,980 125,498
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DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS (UNAUDITED)
(in thousands, except per share data and financial ratios)
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QUARTERS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
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BALANCE SHEET DATA AT END OF PERIOD:
Long-term borrowings (3) $ 3,482,003 $ 2,128,159
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Redeemable preferred stock $ 200,000 $ 200,000
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Total stockholders' equity (2,4) . $ 2,927,699 $ 2,061,490
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Book value per common share
outstanding . $ 20.44 $ 15.72
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Common shares and RSUs outstanding
at end of period 124,895 118,415
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OTHER FINANCIAL DATA AT END OF PERIOD:
Ratio of long-term borrowings to total
capitalization (5) . 51.9% 48.5%
Return on average common stockholders'
equity (6) 10.1% 21.7% 16.5% 24.1%
(1) Interest-net is net of interest expense to finance U.S. Government,
agency and mortgage-backed securities of $702.3 million, $761.5 million,
$3,045.3 million and $2,859.0 million, respectively.
(2) 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) During the fourth quarter of 1998, the Company issued $250 million in
Senior Notes due 2001, and an aggregate of $100 million of Medium-Term
Notes due in 1999.
(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.