This summary is based on the first quarter fiscal 2008 earnings call conducted by Lehman Brothers Holdings Inc. (LEH: chart) on March 18, 2008.

Management:

- Director IR: Ed Grieb
- CFO: Erin Callan
- Treasurer: Paolo Tonucci

Key Investors Issues

- Net income was $489 million or 81 cents a share down 57% year over year from $1.15 billion or $1.96 a share in 2007.
- Net revenues dropped 31% to $3.5 billion.
- The firm repurchased 13 million shares at an average price of $59 a share and increase the common stock dividend rate to 68 cents per share.

First Quarter Highlights

Net revenues of $3.5 billion were down 31% from $5 billion in the prior year despite increases in client revenues driving the capital markets businesses.

- Non US accounted for 62% of firm wide revenues, at $2.2 billion, up 7% over the prior year as mark-to-market adjustment affected the European performance and offset strength in part in Asia.
- In Europe and the Middle East, the firm posted revenues of $760 million, down 44% year over year.

Net income was $489 million or 81 cents a share down 57% year over year from $1.15 billion or $1.96 a share in 2007 reflecting the impact of a difficult market environment and the resulting mark to market adjustments that came with asset re-pricing.

- Despite the declining performance, the firm noted two competing forces at work, a strong revenue run rate performance of the business.
- The $5.3 billion run rate performance of the client franchise was partially offset by $1.8 billion of net mark-to-market adjustments.
- With respect to the strong core client activity, the organization continues to be focused on key strategic objectives and business diversification.
- Strong equity capital markets results and banking and investment management gain from revenues and market share, geographical diversification, non US revenue this quarter were 62% of the total.

Over the period headcount declined by an additional 1,100 to 28,000 and non personnel expenses totaled $1 billion.

- The firm had lease termination and other asset write offs associated with the mortgage origination business which amounted to $34 million which was $18 million in the fourth quarter.
- Increased costs of occupancy were offset by decreases in professional fees, business development and technology costs.
- Long term capital rose to $153 billion, including the issuance of long term debt of $19 billion, and a $1.9 billion in preferred stock.

The firm repurchased 13 million shares at an average price of $59 a share and the Board approved the continuation of the stock repurchase program for the management of the firm’s equity.

- The annual common stock dividend rate was increased to 68 cents per share which translates to about $50 million annually.
- In terms of derivative counter parties, exposures approximately 94% continues to be investment grade as the counter party.
- With respect to Archstone, the firm currently hold $2.3 billion of the non investment grade debt related to that transaction and $2.2 billion of equity, both currently carried materially below par.
- The firm is actively delivering that company through asset dispositions at attractive levels and improving the financial profile.

Business Segments:

- Investment banking posted revenues of $867 million which was up 2% year over year as corporate derivative revenues were very strong.
- Pretax income was $182 million, with advisory revenues up 34% to $330 million.
- The firm is advising on several large completed transactions in the period that were landmark deals, such as Imperial Tobacco, Chinalco, Rio Tinto, IBM-Cognos and MGI Pharma-Eisai.
- In addition, it has significant M&A advisory mandates in the pipeline, and was ranked number two in global announced M&A with a 21% market share.

In equity origination, revenues were $215 million, up 23% year over year.

- The volume of equity origination totaled $5.8 billion, down 12% a year ago, though the firm was ranked number one in US equity follow on issuance.
- In addition, corporate equity derivative revenues contributed more modestly during the period but did contribute meaningfully in Europe.
- Fixed income origination revenues were $322 million down 25% year over year given market conditions but were up 38% from last quarter’s level.
- While the volume fee pipelines remained reasonably strong at quarter end, the firm anticipates a smaller pipeline going forward as a result of current market conditions, with the volume pipeline up 7% with a fee backlog of $750 million.
- The M&A volume was $268 billion, equity origination pipeline was $29 billion and debt origination was $40 billion.

- Capital markets posted revenues of $1.7 billion across debt and equities, down 52% year over year.
- Pretax income was $237 million and despite the robust customer activity, capital markets business did incur significant mark-to-market adjustments across numerous fixed income products which was consistent with broader market trends.
- The firm views mark-to-market adjustments as more temporary in nature as they reflect mark-to-market accounting related to the pricing of similar transactions in a liquidity constrained environment and driven by technical factors which may not reflect intrinsic value.

The gross revenue reduction for mark-to-market pre-hedges was $4.7 billion and the firm had $600 million of gains on structured notes that offset the total gross write down.