- Expects to Report a Net Loss of $2.8 billion, or ($5.14) Per Share -
NEW YORK, June 9 /PRNewswire-FirstCall/ -- Lehman Brothers Holdings
Inc. (ticker symbol: LEH) announced today that continued challenging market
conditions will result in an expected net loss of approximately $2.8
billion, or ($5.14) per common share (diluted) for the second quarter ended
May 31, 2008, compared to net income of $489 million, or $0.81 per common
share (diluted), for the first quarter of fiscal 2008 and $1.3 billion, or
$2.21 per common share (diluted), for the second quarter of fiscal 2007.
For the first half of fiscal 2008, the Firm expects to report a net loss of
approximately $2.3 billion, or ($4.33) per common share (diluted), compared
to net income of $2.4 billion, or $4.17 per common share (diluted), for the
first half of fiscal 2007.
The Firm expects to report net revenues (total revenues less interest
expense) for the second quarter of fiscal 2008 of negative ($0.7) billion,
compared to $3.5 billion for the first quarter of 2008 and $5.5 billion for
the second quarter of fiscal 2007. Net revenues for the second quarter of
fiscal 2008 reflect negative mark to market adjustments and principal
trading losses, net of gains on certain debt liabilities. Additionally, the
Firm incurred losses on hedges this quarter, as gains from some hedging
activity were more than offset by other hedging losses. For the first six
months of fiscal 2008, the Firm expects to report net revenues of $2.8
billion, compared to $10.6 billion for the first half of fiscal 2007.
During the fiscal second quarter, the Firm further strengthened its
liquidity and capital position (all below amounts estimated as of May 31,
2008):
-- Grew the Holding Company liquidity pool to an estimated $45 billion
from $34 billion at the end of the prior quarter
-- Decreased gross assets by approximately $130 billion and net assets by
approximately $60 billion(1)
-- Reduced gross leverage to under 25.0x from 31.7x at the end of the
first quarter, and reduced net leverage to under 12.5x from 15.4x(2)
-- Reduced exposure to residential mortgages, commercial mortgages and
real estate investments by an estimated 15-20% in each asset class
-- Reduced acquisition finance exposures by an estimated 35%
-- Reduced aggregate non-investment grade inventory (including funded
acquisition finance assets) by an estimated 20%
-- Completed the budgeted full year fiscal 2008 unsecured funding plan
-- Increased the Firm's long-term capital through the issuance of $4
billion of convertible preferred stock in April and approximately $5.5
billion of public benchmark long-term debt(3)
Chairman and Chief Executive Officer Richard S. Fuld, Jr. said, "I am
very disappointed in this quarter's results. Notwithstanding the solid
underlying performance of our client franchise, we had our first-ever
quarterly loss as a public company. However, with our strengthened balance
sheet and the improvement in the financial markets since March, we are
well-positioned to serve our clients and execute our strategy."
Business Segments
Capital Markets is expected to report net revenues of negative ($2.4)
billion in the second quarter of fiscal 2008, compared to $1.7 billion in
the first quarter of fiscal 2008 and $3.6 billion in the second quarter of
fiscal 2007. Fixed Income Capital Markets is expected to report net
revenues of negative ($3.0) billion, compared to $0.3 billion in the first
quarter of 2008 and $1.9 billion in the second quarter of 2007. Excluding
mark to market adjustments, related hedges and structured note liability
gains, client activity in securitized products, municipals and commodities
remained strong, while credit, interest rate and financing were down from
last quarter but each up versus the year ago period. Equities Capital
Markets is expected to report net revenues of $0.6 billion, a decrease from
$1.4 billion in the first quarter of fiscal 2008 and $1.7 billion in the
second quarter of 2007, as record revenues in prime brokerage and solid
execution services activity were offset, in part, by lower volatility
revenues as well as estimated losses of approximately $0.3 billion on
private equity and principal investments.
Investment Banking is expected to report net revenues of $0.9 billion,
consistent with $0.9 billion in the first quarter of fiscal 2008 and a
decrease from $1.2 billion in the second quarter of fiscal 2007. Debt
underwriting revenues are expected to be $0.3 billion, consistent with $0.3
billion in the first quarter of fiscal 2008 and a decrease from $0.5
billion in the second quarter of 2007, as strong high grade debt
underwriting revenues were offset by continued weakness in high yield new
issuance. Equity underwriting revenues are expected to be $0.3 billion, an
increase from $0.2 billion in the first quarter of fiscal 2008 and
consistent with $0.3 billion in the second quarter of 2007. Merger and
acquisition advisory revenues are expected to be $0.2 billion, a decrease
from $0.3 billion in both the first quarter of fiscal 2008 and the second
quarter of 2007.
Investment Management is expected to report net revenues of $0.9
billion, a decrease from record revenues of $1.0 billion in the first
quarter of fiscal 2008 and an increase from $0.8 billion in the second
quarter of fiscal 2007. Asset management revenues are expected to be $0.5
billion, a decrease from $0.6 billion in the first quarter of fiscal 2008
on lower gains from minority interests in third party alternative
investment managers, and consistent with $0.5 billion in the second quarter
of 2007. The Firm expects to report assets under management of
approximately $277 billion, consistent with the prior quarter. Private
Investment Management is expected to report revenues of $0.4 billion,
consistent with $0.4 billion in the first quarter of fiscal 2008 and an
increase from $0.3 billion in the second quarter of 2007, with strength
across both fixed income and equity products.
Firm Profitability and Capital
Non-interest expenses for the second quarter of fiscal 2008 are
expected to be $3.4 billion, compared to $2.8 billion in the first quarter
of fiscal 2008 and $3.6 billion in the second quarter of fiscal 2007.
Compensation expense was approximately $2.3 billion in the second quarter
of 2008, compared to $1.8 billion in the first quarter of fiscal 2008.
Non-personnel expenses for the period were approximately $1.1 billion,
compared to $1.0 billion in the first quarter of fiscal 2008. The expected
tax rate is 32%.
As of May 31, 2008, Lehman Brothers' total stockholders' equity was an
estimated $26 billion, and total long-term capital was approximately $156
billion.(3) Estimated book value per common share was approximately $34.(4)
Lehman Brothers (ticker symbol: LEH), an innovator in global finance,
serves the financial needs of corporations, governments and municipalities,
institutional clients, and high net worth individuals worldwide. Founded in
1850, Lehman Brothers maintains leadership positions in equity and fixed
income sales, trading and research, investment banking, private investment
management, asset management and private equity. The Firm is headquartered
in New York, with regional headquarters in London and Tokyo, and operates
in a network of offices around the world. For further information about
Lehman Brothers' services, products and recruitment opportunities, visit
the Firm's Web site at http://www.lehman.com. Lehman Brothers Inc. is a member of
SIPC.
Pre-Announcement Conference Call
A conference call to discuss the Firm's pre-announced financial results
will be held today at 10:00 a.m. ET. The call will be open to the public.
For members of the public who would like to access the conference call, it
will be available through the "Shareholders" section of the Firm's Web site
under the subcategory "Events and Presentations." The conference call will
also be available by phone by dialing, from the U.S., 1-888-942-9651 or,
from outside the U.S., 1-210-234-0083 at least fifteen minutes prior to the
start of the conference call. The pass code for all callers is "9876082".
For those unable to listen to the live broadcast, a replay will be
available on the Firm's Web site or by dialing 1-888-567-0405 (domestic) or
1-402-998-1779 (international). The replay will be available immediately
after the beginning of the call and will remain available on the Lehman
Brothers Web site and by phone until 11:59 p.m. ET on June 15, 2008.
Second Quarter Earnings Call
The Firm will announce its full second quarter fiscal 2008 results on
Monday, June 16, 2008 in a press release that will be issued at
approximately 8:15 a.m. ET. The press release will also be available on the
Firm's Web site: http://www.lehman.com.
A conference call to discuss the Firm's financial results and outlook
will be held at 10:00 a.m. ET that day. The call will be open to the
public. For members of the public who would like to access the conference
call, it will be available through the "Shareholders" section of the Firm's
Web site under the subcategory "Events and Presentations." The conference
call will also be available by phone by dialing, from the U.S.,
1-800-988-9465 or, from outside the U.S., 1-312-470-7006 at least fifteen
minutes prior to the start of the conference call. The pass code for all
callers is "3713056". For those unable to listen to the live broadcast, a
replay will be available on the Firm's Web site or by dialing
1-800-890-3520 (domestic) or 1-203-369-3844 (international). The replay
will be available immediately after the beginning of the call and will
remain available on the Lehman Brothers Web site and by phone until 11:59
p.m. ET on July 16, 2008.
Please direct any questions regarding the conference call to Ed Grieb
at 212-526-0588, egrieb@lehman.com.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements. These
statements are not historical facts, but instead represent only the Firm's
expectations, estimates and projections regarding future events. These
statements are not guarantees of future performance and involve certain
risks and uncertainties that are difficult to predict, which may include
risks and uncertainties relating to market fluctuations and volatility,
industry competition and changes in the competitive environment, investor
sentiment, liquidity and credit ratings, credit exposures, operational
risks and legal and regulatory matters. The Firm's actual results and
financial condition may differ, perhaps materially, from the anticipated
results and financial condition in any such forward-looking statements and,
accordingly, readers are cautioned not to place undue reliance on such
statements. The Firm undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise. For more information concerning the risks and other factors that
could affect the Firm's future results and financial condition, see "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Firm's most recent Annual Report on Form
10-K and Quarterly Report on Form 10-Q.
The Firm's financial statements for the second fiscal quarter of 2008
are not finalized until they are filed in its Quarterly Report on Form 10-Q
for the second fiscal quarter of 2008. The Firm is required to consider all
available information through the finalization of its financial statements
and the possible impact of such information on its financial condition and
results of operations for the reporting period, including the impact of
such information on the complex and subjective judgments and estimates the
Firm made in preparing certain of the preliminary information included in
this Press Release. Subsequent information or events may lead to material
differences between the preliminary results of operations described in this
Press Release and the results of operations that will be described in the
Firm's subsequent earnings release and between such subsequent earnings
release and the results of operations described in the Firm's Quarterly
Report on Form 10-Q for the second fiscal quarter of 2008. Those
differences may be adverse. Readers should consider this possibility in
reviewing the earnings information in this Press Release.
LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except share data)
At or for the Quarter Ended % Change from
May 31, Feb 29, May 31, Feb 29, May 31,
2008 2008 2007 2008 2007
Net Revenues $(668) $ 3,507 $5,512 NM NM
Non-Interest Expenses
Compensation and Benefits 2,325 1,841 2,718 26% -14%
Non-personnel Expenses 1,094 1,003 915 9% 20%
Income Before Taxes (4,087) 663 1,879 NM NM
Net Income (2,774) 489 1,273 NM NM
Net Income Applicable to
Common Stock (2,873) 465 1,256 NM NM
Earnings per Common Share
Basic $(5.14) $0.84 $2.33 NM NM
Diluted $(5.14) $0.81 $2.21 NM NM
Weighted Average Shares
(in millions):
Basic 559.3 551.5 538.2
Diluted 559.3 572.8 568.1
Book Value per Common
Share(4) 34.21 39.45 37.15
Effective Tax Rate 32.1% 26.3% 32.3%
Six Months for the %Change
Period Ended from
May 31, May 31, May 31,
2008 2007 2007
Net Revenues $2,839 $ 10,559 -73%
Non-Interest Expenses
Compensation and Benefits 4,166 5,206 -20%
Non-personnel Expenses 2,097 1,775 18%
Income Before Taxes (3,424) 3,578 NM
Net Income (2,285) 2,419 NM
Net Income Applicable to Common Stock (2,408) 2,385 NM
Earnings per Common Share
Basic $(4.33) $4.42 NM
Diluted $(4.33) $4.17 NM
Weighted Average Shares (in millions):
Basic 555.5 539.7
Diluted 555.5 571.8
Book Value per Common Share(4) 34.21 37.15
Effective Tax Rate 33.3% 32.4%
LEHMAN BROTHERS HOLDINGS INC.
BUSINESS SEGMENT NET REVENUE INFORMATION
(Preliminary and Unaudited)
(In millions)
Business Segments Quarter Ended % Change from
May 31, Feb 29, May 31, Feb 29, May 31,
2008 2008 2007 2008 2007
Capital Markets
Fixed Income $(2,975) $262 $1,902
Equities 601 1,410 1,692
Total (2,374) 1,672 3,594 NM NM
Investment Banking:
Global Finance
- Debt 288 322 540
Global Finance
- Equity 330 215 333
Advisory Services 240 330 277
Total 858 867 1,150 -1% -25%
Investment Management:
Asset Management 496 618 460
Private Investment
Management 352 350 308
Total 848 968 768 -12% 10%
Total Net Revenues $(668) $ 3,507 $ 5,512 NM NM
Business Segments Six Months Ended May 31, % Change from
2008 2007 May 31, 2007
Capital Markets
Fixed Income $(2,714) $4,075
Equities 2,011 3,021
Total (703) 7,096 NM
Investment Banking:
Global Finance - Debt 610 968
Global Finance - Equity 545 508
Advisory Services 570 524
Total 1,725 2,000 -14%
Investment Management:
Asset Management 1,114 876
Private Investment Management 703 587
Total 1,817 1,463 24%
Total Net Revenues $2,839 $10,559 -73%
LEHMAN BROTHERS HOLDINGS INC.
MARK TO MARKET ADJUSTMENTS GAIN/(LOSS) (5)
(Preliminary and Unaudited)
(In billions)
At or for the three months ended
May 31, 2008 Feb 29, 2008
Gross Net Gross Net
Residential
mortgage-related positions $(2.4) $(2.0) $(3.0) $(0.8)
Other asset-backed
(non-residential)-related positions (0.3) (0.3) (0.2) (0.1)
Commercial
mortgage-related positions (0.7) (1.1) (1.1) (0.7)
Real estate held for sale (0.3) (0.3) (0.3) (0.3)
Acquisition finance
(unfunded and funded) (0.3) (0.4) (0.7) (0.5)
$(4.0) $(4.1) $(5.3) $(2.4)
Debt liabilities measured
at fair value(6) 0.4 0.4 0.6 0.6
$(3.6) $(3.7) $(4.7) $(1.8)
LEHMAN BROTHERS HOLDINGS INC.
FOOTNOTES
(Preliminary and Unaudited)
NM = Not meaningful.
Certain prior-period amounts reflect reclassifications to conform to
the presentation in the current period.
(1) The Firm calculates net assets by excluding from total assets: (i)
cash and securities segregated and on deposit for regulatory and
other purposes; (ii) collateralized lending agreements; and (iii)
identifiable intangible assets and goodwill. Net assets as presented
are not necessarily comparable to similarly-titled measures provided
by other companies in the securities industry because of different
methods of presentation.
(2) Gross Leverage ratio is defined as total assets divided by total
stockholders' equity. Net leverage ratio is defined as net assets
(see note (1) above) divided by tangible equity capital, which is
calculated by including stockholders' equity and junior subordinated
notes and excluding identifiable intangible assets and goodwill. The
Firm believes tangible equity capital to be a more meaningful measure
of our equity base as it includes stockholder's equity and junior
subordinated notes (which are considered to be equity-like
instruments due to their subordinated and long-term nature) and
excludes identifiable intangible assets and goodwill (which are fully
supported by equity). The Firm believes net leverage based on net
assets to be a more useful measure of leverage, because it excludes
certain low-risk, non-inventory assets and utilizes tangible equity
capital as a measure of our equity base. Net leverage as presented is
not necessarily comparable to similarly-titled measures provided by
other companies in the securities industry because of different
methods of presentation.
(3) Total long-term capital includes long-term borrowings (excluding any
borrowings with remaining maturities within one year of the financial
statement date) and total stockholders' equity. The Firm believes
total long-term capital is useful to investors as a measure of its
financial strength.
(4) The book value per common share calculation includes amortized
restricted stock units granted under employee stock award programs,
which have been included in total stockholders' equity.
(5) The table presents certain components of negative mark to market
adjustments incurred during the second quarter of fiscal year 2008.
Caution should be utilized when evaluating the amounts in the table
as they represent only certain components of revenue associated with
the Firm's general business activities. The mark to market
adjustments presented in the table are reflected within the revenues
associated with the Firm's Capital Markets business segment.
(6) Represents the amount of gains on debt liabilities for which the Firm
elected to fair value under SFAS No. 157 and SFAS No. 159. These
gains represent the effect of changes in the Firm's credit spread and
exclude any Interest income or expense as well as any gain or loss
from the embedded derivative components of these instruments. Changes
in valuations are allocated to the businesses within the Firm's
Capital Markets business segment in relation to funding requirements
of the underlying positions.
SOURCE Lehman Brothers Holdings Inc.
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Related links:
http://www.lehman.com
CONTACT:
Media, Kerrie Cohen, +1-212-526-4092, or
Investors, Ed Grieb, +1-212-526-0588, both for Lehman Brothers
Holdings Inc.
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