- 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, . 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. DATASOURCE: Lehman
Brothers Holdings Inc. CONTACT: Media, Kerrie Cohen,
+1-212-526-4092, or Investors, Ed Grieb, +1-212-526-0588, both for
Lehman Brothers Holdings Inc. Web site: http://www.lehman.com/
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