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Goldman Sachs Group 10-Q 2009
FORM 10-Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
     
x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
     
    For the quarterly period ended March 27, 2009
 
or
     
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
     
    For the transition period from                        to
 
Commission File Number: 001-14965
 
The Goldman Sachs Group, Inc.
 
     
Delaware   13-4019460
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
85 Broad Street, New York, NY   10004
(Address of principal executive offices)   (Zip Code)
 
(212) 902-1000
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x  Yes  o  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     o  Yes  o  No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x     Accelerated filer o
 
Non-accelerated filer o (Do not check if a smaller reporting company)  Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o  Yes  x  No
 
 
As of April 24, 2009, there were 503,420,969 shares of the registrant’s common stock outstanding.
 


 

 
 
QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 27, 2009
 
INDEX
 
             
        Page
Form 10-Q Item Number:
 
No.
 
           
         
           
         
        2  
        3  
        4  
        5  
        6  
        7  
        77  
        78  
           
      81  
           
      143  
           
      143  
           
         
           
      144  
           
      146  
           
      147  
       
    148  
 EX-12.1: STATEMENT RE: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
 EX-15.1: LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
 EX-31.1: RULE 13A-14(A) CERTIFICATIONS
 EX-32.1: SECTION 1350 CERTIFICATIONS


1


Table of Contents

 
 
Item 1:   Financial Statements (Unaudited)
 
THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
 
(UNAUDITED)
 
                         
    Three Months
  Three Months
  One Month
    Ended March   Ended February   Ended December
    2009   2008   2008
    (in millions, except per share amounts)
 
Revenues
                       
Investment banking
  $ 823     $ 1,166     $ 135  
Trading and principal investments
    5,706       4,877       (964 )
Asset management and securities services
    989       1,341       327  
                         
Total non-interest revenues
    7,518       7,384       (502 )
                         
Interest income
    4,362       11,245       1,687  
Interest expense
    2,455       10,294       1,002  
                         
Net interest income
    1,907       951       685  
                         
Net revenues, including net interest income
    9,425       8,335       183  
                         
Operating expenses
                       
Compensation and benefits
    4,712       4,001       744  
                         
Brokerage, clearing, exchange and distribution fees
    536       790       165  
Market development
    68       144       16  
Communications and technology
    173       187       62  
Depreciation and amortization
    511       170       72  
Amortization of identifiable intangible assets
    38       84       39  
Occupancy
    241       236       82  
Professional fees
    135       178       58  
Other expenses
    382       402       203  
                         
Total non-compensation expenses
    2,084       2,191       697  
                         
Total operating expenses
    6,796       6,192       1,441  
                         
                         
Pre-tax earnings/(loss)
    2,629       2,143       (1,258 )
Provision/(benefit) for taxes
    815       632       (478 )
                         
Net earnings/(loss)
    1,814       1,511       (780 )
Preferred stock dividends
    155       44       248  
                         
Net earnings/(loss) applicable to common shareholders
  $ 1,659     $ 1,467     $ (1,028 )
                         
Earnings/(loss) per common share
                       
Basic
  $ 3.48     $ 3.39     $ (2.15 )
Diluted
    3.39       3.23       (2.15 )
                         
Dividends declared per common share
  $     $ 0.35     $ 0.47  (1)
                         
Average common shares outstanding
                       
Basic
    477.4       432.8       485.5  
Diluted
    489.2       453.5       485.5  
 
 
(1) Rounded to the nearest penny. Exact dividend amount was $0.4666666 per common share and was reflective of a four-month period (December 2008 through March 2009), due to the change in the firm’s fiscal year-end.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
 
(UNAUDITED)
 
                         
    As of
    March
  November
  December
    2009   2008   2008
    (in millions, except share
    and per share amounts)
 
Assets
                       
Cash and cash equivalents
  $ 35,417     $ 15,740     $ 13,805  
Cash and securities segregated for regulatory and other purposes (includes $45,539, $78,830 and $69,549 at fair value as of March 2009, November 2008 and December 2008, respectively)
    69,586       106,664       112,499  
Collateralized agreements:
                       
Securities purchased under agreements to resell, at fair value, and federal funds sold (includes $142,655, $116,671 and $127,032 at fair value as of March 2009, November 2008 and December 2008, respectively)
    143,155       122,021       129,532  
Securities borrowed (includes $88,818, $59,810 and $86,057 at fair value as of March 2009, November 2008 and December 2008, respectively)
    228,245       180,795       203,341  
Receivables from brokers, dealers and clearing organizations
    20,421       25,899       28,038  
Receivables from customers and counterparties (includes $2,036, $1,598 and $2,474 at fair value as of March 2009, November 2008 and December 2008, respectively)
    50,065       64,665       58,339  
Trading assets, at fair value (includes $26,599, $26,313 and $42,004 pledged as collateral as of March 2009, November 2008 and December 2008, respectively)
    349,591       338,325       534,964  
Other assets
    28,810       30,438       31,707  
                         
Total assets
  $ 925,290     $ 884,547     $ 1,112,225  
                         
                         
Liabilities and shareholders’ equity
                       
Deposits (includes $6,781, $4,224 and $5,792 at fair value as of March 2009, November 2008 and December 2008, respectively)
  $ 44,504     $ 27,643     $ 32,130  
Collateralized financings:
                       
Securities sold under agreements to repurchase, at fair value
    133,395       62,883       260,421  
Securities loaned (includes $9,932, $7,872 and $11,276 at fair value as of March 2009, November 2008 and December 2008, respectively)
    18,928       17,060       21,576  
Other secured financings (includes $19,812, $20,249 and $20,172 at fair value as of March 2009, November 2008 and December 2008, respectively)
    39,793       38,683       39,045  
Payables to brokers, dealers and clearing organizations
    14,940       8,585       14,417  
Payables to customers and counterparties
    205,077       245,258       231,308  
Trading liabilities, at fair value
    147,221       175,972       186,031  
Unsecured short-term borrowings, including the current portion of unsecured long-term borrowings (includes $19,923, $23,075 and $25,600 at fair value as of March 2009, November 2008 and December 2008, respectively)
    44,596       52,658       54,093  
Unsecured long-term borrowings (includes $17,689, $17,446 and $18,146 at fair value as of March 2009, November 2008 and December 2008, respectively)
    188,534       168,220       185,564  
Other liabilities and accrued expenses (includes $1,922, $978 and $1,400 at fair value as of March 2009, November 2008 and December 2008, respectively)
    24,749       23,216       24,586  
                         
Total liabilities
    861,737       820,178       1,049,171  
                         
Commitments, contingencies and guarantees
                       
                         
Shareholders’ equity
                       
Preferred stock, par value $0.01 per share; aggregate liquidation preference of $18,100 as of March 2009, November 2008 and December 2008
    16,507       16,471       16,483  
Common stock, par value $0.01 per share; 4,000,000,000 shares authorized, 700,596,595, 680,953,836 and 680,986,058 shares issued as of March 2009, November 2008 and December 2008, respectively, and 462,273,124, 442,537,317 and 442,553,372 shares outstanding as of March 2009, November 2008 and December 2008, respectively
    7       7       7  
Restricted stock units and employee stock options
    4,761       9,284       9,463  
Nonvoting common stock, par value $0.01 per share; 200,000,000 shares authorized, no shares issued and outstanding
                 
Additional paid-in capital
    34,429       31,071       31,070  
Retained earnings
    40,366       39,913       38,579  
Accumulated other comprehensive income/(loss)
    (357 )     (202 )     (372 )
Common stock held in treasury, at cost, par value $0.01 per share; 238,323,471, 238,416,519 and 238,432,686 shares as of March 2009, November 2008 and December 2008, respectively
    (32,160 )     (32,175 )     (32,176 )
                         
Total shareholders’ equity
    63,553       64,369       63,054  
                         
Total liabilities and shareholders’ equity
  $ 925,290     $ 884,547     $ 1,112,225  
                         
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
 
(UNAUDITED)
 
                         
    Three Months
  Year Ended
  One Month
    Ended March   November   Ended December
    2009   2008   2008
    (in millions)
 
Preferred stock
                       
Balance, beginning of period
  $ 16,483     $ 3,100     $ 16,471  
Issued
          13,367        
Preferred stock accretion
    24       4       12  
                         
Balance, end of period
    16,507       16,471       16,483  
Common stock
                       
Balance, beginning of period
    7       6       7  
Issued
          1        
                         
Balance, end of period
    7       7       7  
Restricted stock units and employee stock options
                       
Balance, beginning of period
    9,463       9,302       9,284  
Issuance and amortization of restricted stock units and employee stock options
    498       2,254       192  
Delivery of common stock underlying restricted stock units
    (5,164 )     (1,995 )      
Forfeiture of restricted stock units and employee stock options
    (36 )     (274 )     (13 )
Exercise of employee stock options
          (3 )      
                         
Balance, end of period
    4,761       9,284       9,463  
Additional paid-in capital
                       
Balance, beginning of period
    31,070       22,027       31,071  
Issuance of common stock warrants
          1,633        
Issuance of common stock, including the delivery of common stock underlying restricted stock units and proceeds from the exercise of employee stock options
    5,174       8,081       (1 )
Cancellation of restricted stock units in satisfaction of withholding tax requirements
    (847 )     (1,314 )      
Preferred and common stock issuance costs
          (1 )      
Excess net tax benefit/(provision) related to share-based compensation
    (968 )     645        
                         
Balance, end of period
    34,429       31,071       31,070  
Retained earnings
                       
Balance, beginning of period
    38,579       38,642       39,913  
Cumulative effect of adjustment from adoption of FIN 48
          (201 )      
                         
Balance, beginning of period, after cumulative effect of adjustments
    38,579       38,441       39,913  
Net earnings/(loss)
    1,814       2,322       (780 )
Dividends and dividend equivalents declared on common stock and restricted stock units
    (3 )     (642 )     (233 )
Dividends declared on preferred stock
          (204 )     (309 )
Preferred stock accretion
    (24 )     (4 )     (12 )
                         
Balance, end of period
    40,366       39,913       38,579  
Accumulated other comprehensive income/(loss)
                       
Balance, beginning of period
    (372 )     (118 )     (202 )
Currency translation adjustment, net of tax
    25       (98 )     (32 )
Pension and postretirement liability adjustment, net of tax
    9       69       (175 )
Net unrealized gains/(losses) on available-for-sale securities,
net of tax
    (19 )     (55 )     37  
                         
Balance, end of period
    (357 )     (202 )     (372 )
Common stock held in treasury, at cost
                       
Balance, beginning of period
    (32,176 )     (30,159 )     (32,175 )
Repurchased
    (2 (1)     (2,037 )     (1 (1)
Reissued
    18       21        
                         
Balance, end of period
    (32,160 )     (32,175 )     (32,176 )
                         
Total shareholders’ equity
  $ 63,553     $ 64,369     $ 63,054  
                         
 
 
(1) Relates to repurchases of common stock by a broker-dealer subsidiary to facilitate customer transactions in the ordinary course of business and shares withheld to satisfy withholding tax requirements.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
 
(UNAUDITED)
 
                         
    Three Months
  Three Months
  One Month
    Ended March   Ended February   Ended December
    2009   2008   2008
    (in millions)
 
Cash flows from operating activities
                       
Net earnings/(loss)
  $ 1,814     $ 1,511     $ (780 )
Non-cash items included in net earnings
                       
Depreciation and amortization
    611       259       104  
Amortization of identifiable intangible assets
    38       84       39  
Share-based compensation
    468       480       180  
Changes in operating assets and liabilities
                       
Cash and securities segregated for regulatory and other purposes
    43,126       15,650       (5,835 )
Net receivables from brokers, dealers and clearing organizations
    8,140       (7,234 )     3,693  
Net payables to customers and counterparties
    (17,879 )     42,226       (7,635 )
Securities borrowed, net of securities loaned
    (27,552 )     (19,127 )     (18,030 )
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell and federal funds sold
    (140,648 )     (20,263 )     190,027  
Trading assets, at fair value
    180,563       (46,347 )     (192,883 )
Trading liabilities, at fair value
    (38,810 )     15,037       10,059  
Other, net
    (6,674 )     (5,425 )     7,156  
                         
Net cash provided by/(used for) operating activities
    3,197       (23,149 )     (13,905 )
Cash flows from investing activities
                       
Purchase of property, leasehold improvements and equipment
    (278 )     (403 )     (61 )
Proceeds from sales of property, leasehold improvements and equipment
    28       42       4  
Business acquisitions, net of cash acquired
    (190 )     (2,156 )     (59 )
Proceeds from sales of investments
    75       26       141  
Purchase of available-for-sale securities
    (1,440 )     (1,109 )     (95 )
Proceeds from sales of available-for-sale securities
    892       647       26  
                         
Net cash used for investing activities
    (913 )     (2,953 )     (44 )
Cash flows from financing activities
                       
Unsecured short-term borrowings, net
    (4,680 )     879       2,816  
Other secured financings (short-term), net
    5,222       2,384       (1,068 )
Proceeds from issuance of other secured financings (long-term)
    2,322       4,107       437  
Repayment of other secured financings (long-term), including the current portion
    (2,435 )     (2,373 )     (349 )
Proceeds from issuance of unsecured long-term borrowings
    14,689       19,874       9,310  
Repayment of unsecured long-term borrowings, including the current portion
    (8,325 )     (8,461 )     (3,686 )
Derivative contracts with a financing element, net
    670       (420 )     66  
Deposits, net
    12,374       11,591       4,487  
Common stock repurchased
    (2 )     (1,561 )     (1 )
Dividends and dividend equivalents paid on common stock, preferred stock and restricted stock units
    (545 )     (201 )      
Proceeds from issuance of common stock
    27       64       2  
Excess tax benefit related to share-based compensation
    11       552        
                         
Net cash provided by financing activities
    19,328       26,435       12,014  
                         
Net increase/(decrease) in cash and cash equivalents
    21,612       333       (1,935 )
Cash and cash equivalents, beginning of period
    13,805       10,282       15,740  
                         
Cash and cash equivalents, end of period
  $ 35,417     $ 10,615     $ 13,805  
                         
 
SUPPLEMENTAL DISCLOSURES:
 
Cash payments for interest, net of capitalized interest, were $3.42 billion, $10.64 billion and $459 million during the three months ended March 2009 and February 2008 and one month ended December 2008, respectively.
 
Cash payments for income taxes, net of refunds, were $256 million, $670 million and $171 million during the three months ended March 2009 and February 2008 and one month ended December 2008, respectively.
 
Non-cash activities:
The firm assumed $16 million, $534 million and $0 of debt in connection with business acquisitions during the three months ended March 2009 and February 2008 and one month ended December 2008, respectively. The firm did not issue any common stock in connection with business acquisitions for the three months ended March 2009 and February 2008 and one month ended December 2008.
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
 
(UNAUDITED)
 
                         
    Three Months
  Three Months