Lehman Brothers - Past Quarterly Earnings

Past Quarterly Earnings

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First Quarter 1998
Lehman Brothers Reports First Quarter Earnings of $187 Million, Up 30 Percent from a Year Ago

NEW YORK, March 25, 1998 —
Lehman Brothers Holdings Inc. (NYSE: LEH) today reported net income of $187 million, or $1.44 per common share (diluted), for the first quarter ended February 28, 1998. Net income increased by 30 percent over the $144 million reported for the first quarter of fiscal 1997. Net income per share increased by 24 percent from $1.16 (diluted) in the year-ago quarter. On an earnings-per-share basis, the fiscal 1998 first quarter was the best in the Firm's history.

"The first quarter was another excellent one for Lehman Brothers," said Richard S. Fuld, Jr., Chairman and Chief Executive Officer. "Despite seasonal lulls in trading and underwriting that extended well into January, the full quarter reflected the across-the-board strength we have seen in our major businesses for the past year-and-a-half. The Firm's earnings momentum and profitability increased significantly throughout the quarter."

Net revenues (total revenues less interest expense) for the first quarter were $1.045 billion, an increase of 13 percent from $925 million in the first quarter of fiscal 1997. Mr. Fuld noted that the Firm's revenue gains in the first quarter reflected continued strong performance in a number of its higher-margin businesses, such as mergers and acquisition advisory, equity trading, derivatives, mortgages and real estate, and high yield trading and origination.

Non-interest expenses for the quarter were $770 million, compared with $706 million in the fiscal 1997 first quarter. Nonpersonnel expenses in the fiscal 1998 quarter were $240 million, an increase of 1.3 percent from the previous year's first quarter. Reflecting the Firm's continued successful focus on expense management, nonpersonnel expenses as a percentage of net revenues decreased to 23 percent from 25.6 percent a year ago. Compensation and benefits as a percentage of net revenues remained at 50.7 percent for the 12th successive quarter.

For the 1998 first quarter, the Firm's pre-tax operating margin was 26.3 percent, compared with 23.7 percent in the fiscal year-ago first quarter. Return on common equity increased to 17.6 percent for the quarter ended February 28, 1998, compared with 16.1 percent a year ago. For all of fiscal 1997, pre-tax operating margin was 24.2 percent; return on common equity was 17 percent.

As of February 28, 1998, Lehman Brothers stockholders' equity was $4.683 billion and total capital (stockholders' equity and long-term debt) was $28.597 billion. Book value per common share was $34.56.

Lehman Brothers is a global investment bank with leadership positions in corporate finance advisory services, municipal finance, and fixed income and equity sales, trading, and research. Lehman Brothers serves the financial needs of corporate, government and institutional clients, and high-net-worth individuals through offices in major financial centers worldwide.

Financial Statements Attached

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

	Quarters Ended					Twelve Months
	2/28/98	11/30/97	8/31/97	5/31/97	2/28/97	1997
Income Statement
Net Revenues	$1,045	$1,023	$1,071	$ 854	$ 925	$3,873
Non-Interest Expenses:
Compensation and Benefits	530	519	543	433	469	1,964
Nonpersonnel Expenses	240	239	247	249	237	972
Net Income	187	185	197	121	144	647
Net Income Applicable to Common Stock	180	160	160	114	138	572
Earnings per Common Share (a)
Basic Diluted	$1.49 $1.44	$1.34 $1.30	$1.34 $1.30	$0.97 $0.95	$1.18 $1.16	$4.84 $4.72

Financial Ratios (%) (b)
Return on Common Equity
(annualized)	17.6	18.3	20.5	12.8	16.1	17.0
Pretax Operating Margin	26.3	25.9	26.2	20.2	23.7	24.2
Compensation & Benefits/
Net Revenues	50.7	50.7	50.7	50.7	50.7	50.7
Effective Tax Rate	32.0	30.0	30.0	30.0	34.0	30.9

Balance Sheet
Total Assets	$176,000	$151,705	$147,894	$145,118	$149,493
Total Assets Excluding
Matched Book (c)	124,000	108,099	104,626	105,025	114,474
Common Stockholders' Equity	4,175	4,015	3,795	3,630	3,504
Total Stockholders' Equity	4,683	4,523	4,303	4,138	4,012
Total Capital (long-term debt plus stockholders' equity)	28,597	24,784	23,207	22,083	21,308
Book Value per Common Share (d)	34.56	33.39	31.86	30.67	29.76

Other Data (#s)
Employees	8,314	8,340	8,190	7,788	7,602
Common Stock Outstanding (e)	118,551,437	116,612,074	101,939,516	101,541,385	101,263,173
Average Shares
Basic Diluted	120,638,144 124,797,348	118,976,492 123,003,138	118,722,434 122,363,228	118,009,833 120,420,733	116,994,151 119,085,890	118,162,896 121,064,929

(a) Effective December 1997, basic and diluted earnings per share replaced the primary and fully diluted calculations in accordance with Statement of Financial Accounting Standards No. 128.
(b) Financial ratios exclude the severance charge and the dividend on the Company’s Redeemable Voting Preferred Stock.
(c) Matched book is defined as the lower of securities purchased under agreements to resell or securities sold under agreements to repurchase.
(d) This calculation includes restricted stock units granted under the Lehman Stock Award Programs included in stockholders’ equity.
(e) The increase at 11/30/97 represents the establishment of a trust to provide common stock voting rights to employees who hold restricted stock units. The establishment of the trust did not impact the total number of shares used in the computation of earnings per common share.

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

		Three Months Ended
	February 28 1998	February 28 1997	Percentage of Dollar Change Inc/(Dec)
Revenues:
Principal transactions	$ 423	$ 346	22%
Investment banking	348	240	45
Commissions	117	97	21
Interest and dividends	3,674	3,278	12
Other	18	38	(53)
Total revenues	4,580	3,999	15
Interest expense	3,535	3,074	15
Net revenues	1,045	925	13
Non-interest expenses:
Compensation and benefits	530	469	13
Brokerage, commissions and clearance fees	54	57	(5)
Professional services	42	41	2
Occupancy and equipment	36	35	3
Communications	36	34	6
Business development	26	25	4
Depreciation and amortization	22	22
Other	24	23	4
Total non-interest expenses	770	706	9
Income before taxes	275	219	26
Provision for income taxes	88	75	17
Net income	$ 187	$ 144	30
Net income applicable to common stock	$ 180	$ 138	30
Average shares
Basic	120.6	117.0
Diluted	124.8	119.1
Earnings per common share
Basic	$ 1.49	$ 1.18
Diluted	$ 1.44	$ 1.16

# denotes greater than 100%