Goldman Sachs 2000 Annual Report Download - page 31

2000 versus 1999. Net revenues were $16.59 billion,
an increase of 24% compared with 1999. Net revenue
growth was strong in both our Asset Management and
Securities Services and Global Capital Markets segments,
which grew 43% and 18%, respectively. Net earnings were
$3.07 billion, or $6.00 per diluted share. Excluding the
charge related to our combination with SLK, net earnings in
2000 were $3.25 billion, or $6.35 per diluted share, and
return on average shareholders’ equity was 27%.
1999 versus 1998. Net revenues were $13.35 billion, an
increase of 57% compared with 1998. Global Capital
Markets net revenues grew significantly over 1998, as sub-
stantially all businesses recovered from the market turmoil
of 1998, and Asset Management and Securities Services
increased 16% compared with 1998. Our net earnings of
$2.71 billion, or $5.57 per diluted share, in 1999 were
reduced by $672 million, or $1.38 per diluted share, due to
nonrecurring items recognized in connection with our con-
version to corporate form. For a further discussion of the
nonrecurring charges and benefits affecting our operating
results in 1999, see “—Operating Expenses” and “ —
Provision for Taxes” below.
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Overview
The following table sets forth a summary of our financial results:
Financial Overview
Year Ended November
Pro Forma
(in millions, except per share amounts) 2000(1) 1999(2) 1998(3) (4)1999(4)
Net revenues $16,590 $13,345 $8,520 $13,338
Pre-tax earnings 5,020 1,992 2,921 4,250
Net earnings 3,067 2,708 2,428 2,550
Diluted earnings per share 6.00 5.57 — 5.27
(1) In 2000, our pre-tax earnings and net earnings included a charge of $290 million and $180 million, respectively, related to our combination
with SLK. Excluding this charge, our diluted earnings per share were $6.35.
(2) In 1999, our pre-tax earnings and net earnings were reduced by nonrecurring items recognized in connection with our conversion to corporate
form. For a further discussion of these nonrecurring items, see “ —Operating Expenses” and “—Provision for Taxes” below.
(3) As a partnership, payments for services rendered by profit participating limited partners were accounted for as distributions of partners’ capital
rather than as compensation and benefits expense. In addition, we were generally not subject to U.S. federal or state income taxes. As a result,
pre-tax earnings and net earnings in 1998 are not comparable with 2000 or 1999.
(4) On May 7, 1999, we converted from a partnership to a corporation and completed our initial public offering. Pro forma net earnings reflect the
results of Goldman Sachs as if our conversion to corporate form and related transactions had taken place at the beginning of 1999.
Pro forma results do not give effect to the following items due to their nonrecurring nature:
• the employee initial public offering awards of restricted stock units, for which future service was not required as a condition to the delivery
of the underlying shares of common stock;
• the initial irrevocable contribution of shares of common stock to the defined contribution plan;
• the recognition of certain net tax assets; and
• a contribution to The Goldman Sachs Foundation, a charitable foundation.
Pro forma results give effect to the following items:
• interest expense on junior subordinated debentures issued to retired limited partners in exchange for their partnership interests;
• the amortization of the restricted stock units awarded to employees in connection with our initial public offering, for which future service was
required as a condition to the delivery of the underlying shares of common stock; and
• the provision for income taxes in corporate form.
For the purpose of calculating pro forma diluted average common shares outstanding for the year ended November 1999, we used the initial
public offering price of $53 per share from the beginning of fiscal 1999 until May 4, 1999, the day trading in our common stock commenced.
Pro forma results are not necessarily indicative of the results of operations that might have occurred had our conversion to corporate form and
related transactions actually taken place at the beginning of 1999.