Lehman Brothers - Past Quarterly Earnings

Past Quarterly Earnings

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First Quarter 2002
Lehman Brothers Reports First Quarter Earnings of $298 Million

NEW YORK, March 20, 2002 —
Lehman Brothers Holdings Inc. (ticker symbol: LEH) today reported net income of $298 million, or $0.99 per common share (diluted), for the first quarter ended February 28, 2002, compared with $387 million, or $1.39 per common share (diluted) reported for the first quarter of fiscal 2001, and $201 million, or $0.73 per common share (diluted) in the fiscal 2001 fourth quarter (excluding the $0.27 per share effect of a special charge related to the events of September 11th).

"In the first quarter, we saw a significant rebound in profitability from the fourth quarter of fiscal 2001, which had been impacted by the loss of the Firm's downtown New York headquarters facilities on September 11," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "While market conditions remain difficult for many investment banking activities, Lehman Brothers' first quarter performance clearly demonstrates the resiliency of our organization, the diversity of the earnings power of our global franchise, and the hard work, dedication, and professionalism of our employees around the world."

Net revenues (total revenues less interest expense) for the first quarter were $1.6 billion, down 15 percent from $1.9 billion in the first quarter of fiscal 2001, and an increase of 33 percent from $1.2 billion in the fiscal 2001 fourth quarter. Mr. Fuld noted that the level of revenues recorded in the first quarter reflected record fixed income capital markets revenues, and strong performance in equity and debt origination and high-net-worth activities, offset by an industry-wide weakness in M&A advisory and equity capital markets.

Specifically, Mr. Fuld pointed out that equity and equity-related underwriting revenues grew by over 50 percent, compared with the previous fiscal year's first quarter. In fixed income origination, the Firm continued to gain market share, ending the quarter as the third-ranked underwriter of investment grade bond issues. Debt capital markets posted record results, as the continued favorable fixed income environment resulted in extremely strong institutional customer flow across all credit products, including high grade bonds, municipals, and mortgages. Mr. Fuld also noted that equity capital markets revenues, while lower than in the previous fiscal year, reflected an increase in market share in both listed and NASDAQ trading, as the Firm recaptured volume temporarily lost as a result of its relocation to back-up trading facilities after September 11.

Non-interest expenses for the quarter were $1,166 million, down 11 percent from $1,310 million in the fiscal 2001 first quarter. Nonpersonnel expenses in the fiscal 2002 first quarter were $347 million, compared with $350 million in the previous fiscal year's first quarter. Compensation and benefits as a percentage of net revenues remained at 51 percent during the first quarter of fiscal 2002.

For the quarter ended February 28, 2002, the Firm's pre-tax operating margin was 27.4 percent, compared with 20.2 percent in the fiscal 2001 fourth quarter (excluding the effect of the special charge), and 30.4 percent in the fiscal 2001 first quarter. For the fiscal 2002 first quarter, the Firm's return on common equity was 14.6 percent, compared with 10.0 percent in the preceding quarter (excluding the effect of the special charge), and 21.2 percent in the fiscal 2001 first quarter. Return on common equity is calculated before any adjustments for special preferred dividends.

During the first quarter of fiscal 2002, a final special preferred dividend of $25 million was accrued for payment on the Redeemable Voting Preferred Stock owned by American Express Company and Nippon Life Insurance Company. The final special preferred dividend is 50 percent of the amount by which the Firm's net income in the first half of fiscal 2002 exceeds $200 million, up to a maximum of $25 million. The maximum amount was accrued during the first quarter of fiscal 2002, as the Firm's net income during the quarter exceeded $250 million.

As of February 28, 2002, Lehman Brothers stockholders' equity and trust preferred securities totaled $9.4 billion, and total capital (stockholders' equity, trust preferred securities, and long-term debt) was approximately $47 billion. Book value per common share was $32.47.

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 equity, and private client services. The Firm is headquartered in New York, 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 our Website at www.lehman.com.

Conference Call
A conference call to discuss the Firm's financial results and outlook will be held at 10:00 a.m. EST on Wednesday, March 20, 2002. Members of the public who would like to access the conference call should dial, from the U.S., 888-843-7190, or, from outside the U.S., 712-257-3681. The passcode for all callers is LEHMAN. The conference call will also be accessible through the "Shareholders" section of the Firm's web site, www.lehman.com. For those unable to listen to the live broadcast, a replay will be available on the Firm's web site or by dialing 800-947-6615 (within the U.S.) or 402-220-4611 (from outside the U.S.) beginning approximately one hour after the event, and remaining available until 5:00 p.m. on April 3, 2002.

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 market, credit or counterparty, liquidity, legal and operational risks. 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. For more information concerning the risks and other factors that could affect the Firm's future results and financial condition, see "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Firm's most recent Annual Report to Shareholders.

Financial Information Attached

LEHMAN BROTHERS HOLDINGS INC.
SELECTED STATISTICAL INFORMATION
(Preliminary and Unaudited)
(Dollars in millions, except per share data)

	Quarters Ended
	2/28/02	11/30/01	8/31/01	5/31/01	2/28/01
Income Statement
Net Revenues	$1,606	$1,203	$1,628	$2,022	$1,883
Non-Interest Expenses:
Compensation and Benefits	819	615	830	1,032	960
Nonpersonnel Expenses	347	345	363	365	350
Net Income ^(a)	298	130	309	430	387
Net Income Applicable to Common Stock	262	119	298	369	375
Earnings per Common Share
Basic	$1.07	$0.49	$1.24	$1.51	$1.52
Diluted	$0.99	$0.46	$1.14	$1.38	$1.39
Diluted (excluding special charge)	$0.99	$0.73	$1.14	$1.38	*$1.39*

Financial Ratios (%)
Return on Common Equity (annualized, excluding the special charge and special preferred dividends, where applicable) ^(b)	14.6	10.0	16.2	23.4	21.2
Return on Common Equity (annualized) ^(c)	13.4	6.3	16.2	20.6	21.2

Pretax Operating Margin (excluding special charge)	27.4	20.2	26.7	30.9	30.4
Pretax Operating Margin	27.4	9.6	26.7	30.9	30.4
Compensation & Benefits/
Net Revenues	51.0	51.1	51.0	51.0	51.0
Effective Tax Rate (excluding special charge)	29.0	11.5	25.8	29.0	30.0
Effective Tax Rate	29.0	(24.4)	25.8	29.0	30.0

Balance Sheet
Total Assets	$260,000	$247,816	$243,337	$235,936	$236,287
Total Assets Excluding Matched Book ^(d)	170,000	164,538	156,393	152,890	155,766
Common Stockholders' Equity	7,948	7,759	7,411	7,279	7,047
Total Stockholders' Equity + Preferred Securities Subject to Mandatory Redemption	9,358	9,169	8,821	8,689	8,457
Total Capital ^(e)	47,300	47,470	48,157	46,425	44,769
Net Leverage ^(f)	18.2x	17.9x	17.7x	17.6x	18.4x
Book Value per Common Share ^(g)	32.47	31.81	30.83	29.93	28.90

Other Data (#s)
Employees	12,851	13,090	13,281	12,426	11,925
Common Stock Outstanding	244,169,647	237,534,091	239,046,975	244,202,014	247,321,056
Weighted Average Shares
Basic	245,284,387	241,933,119	240,414,784	243,852,453	246,154,488
Diluted	265,202,416	261,545,485	261,755,211	266,878,412	270,689,336

(a)	Fourth quarter 2001 net income includes a $71 million after tax special charge ($127 million pre-tax).
(b)	Return on common equity calculated using net income before adjusting for special charge and special preferred dividends, where applicable.
(c)	Return on common equity calculated using net income after adjusting for special charge and special preferred dividends, where applicable.
(d)	Matched book is defined as the lower of securities purchased under agreements to resell or securities sold under agreements to repurchase.
(e)	Total capital includes long-term debt, stockholders' equity and preferred securities subject to mandatory redemption.
(f)	Net leverage ratio is calculated using total assets excluding matched book to total stockholders' equity and other preferred securities.
(g)	This calculation includes restricted stock units granted under the Lehman Stock Award Programs included in stockholders' equity.

LEHMAN BROTHERS HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME
(Preliminary and Unaudited)
(In millions, except per share data)

			Three Months Ended		Percentage of Dollar Change Inc/(Dec)
			February 28 2002	February 28 2001	Percentage of Dollar Change Inc/(Dec)
Revenues:
	Principal transactions		$ 569	$ 998
	Investment banking		470	483
	Commissions		289	278
	Interest and dividends		2,886	4,981
	Other		12	12
		Total revenues	4,226	6,752
	Interest expense		2,620	4,869
		Net revenues	1,606	1,883	(15)%
Non-interest expenses:
	Compensation and benefits		819	960
	Technology and communications		122	112
	Brokerage and clearance fees		75	77
	Occupancy		69	41
	Business development		34	50
	Professional fees		20	47
	Other		27	23
		Total non-interest expenses	1,166	1,310	(11)%
Income before taxes and dividends on trust preferred securities			440	573
	Provision for income taxes		128	172
	Dividends on trust preferred securities		14	14
Net income			$ 298	$ 387	(23)%
		Preferred stock dividends	36	12
Net income applicable to common stock			$ 262	$ 375	(30)%

Earnings per common share
	Basic		$1.07	$1.52
	Diluted		$0.99	$1.39

LEHMAN BROTHERS HOLDINGS INC.
SEGMENT NET REVENUE INFORMATION
(Preliminary and Unaudited)
(In millions)

		Three Months Ended
		February 28 2002	February 28 2001
Investment Banking:
	Debt Underwriting	205	183
	Equity Underwriting	163	105
	Merger and Acquisition Advisory	91	183
	Total	459	471
Capital Markets:
	Fixed Income	681	523
	Equities	264	685
	Total	945	1,208
Client Services:
	Private Client	191	192
	Private Equity	11	12
	Total	202	204
Total Lehman		1,606	1,883