SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 12, 2005
Morgan Stanley
(Exact name of registrant as specified in its charter)
| Delaware | 1-11758 | 36-3145972 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 1585 Broadway, New York, New York | 10036 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 761-4000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 8.01. Other | Events |
On August 17, 2005, Morgan Stanley (the “Company”) announced that its Board of Directors had approved management’s recommendation to sell the Company’s aircraft leasing business. The Company is filing this Current Report on Form 8-K (the “Form 8-K”) to update the historical consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2004 (the “2004 Form 10-K”) and Quarterly Reports on Form 10-Q for the quarterly periods ended February 28, 2005 and May 31, 2005 for discontinued operations that have resulted from the classification of the Company’s aircraft leasing business to “held for sale” in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). In accordance with SFAS No. 144, revenues and expenses associated with the Company’s aircraft leasing business have been classified as discontinued operations in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2005 that was filed with the Securities and Exchange Commission (the “SEC”) on October 7, 2005.
Under requirements of the SEC, the same classification as discontinued operations required by SFAS No. 144 is also required for previously issued financial statements for each of the three years presented in the Company’s 2004 Form 10-K and for the periods presented in the Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended February 28, 2005 and May 31, 2005, if those financial statements are incorporated by reference in subsequent filings with the SEC made under the Securities Act of 1933, as amended, even though those financial statements relate to periods prior to the announcement of the proposed sale of the aircraft leasing business. This reclassification has no effect on the Company’s reported net income for any reporting period.
The net (loss) gain from discontinued operations that has been recast from continuing operations was as follows (dollars in millions):
| Fiscal 2004 |
Fiscal 2003 |
Fiscal 2002 |
Fiscal 2001 |
Fiscal 2000 | ||||
| $(103) |
$(233) | $(82) | $(73) | $14 |
Beginning in the third quarter of fiscal 2005, the Company renamed three of its business segments. The Individual Investor Group was renamed “Retail Brokerage,” Investment Management was renamed “Asset Management” and Credit Services was renamed “Discover.” In addition, beginning in the third quarter of fiscal 2005, the principal components of the residential mortgage loan business previously included in the Discover business segment are managed by and included within the results of the Institutional Securities business segment.
The historical financial information in Exhibits 99.1, 99.2, 99.3 and 99.4 has been revised and updated from its previous presentation solely to reflect the reclassifications for discontinued operations and the transfer of the principal components of the residential mortgage loan business from the Discover business segment to the Institutional Securities business segment described above for the following periods:
| • | fiscal years ended November 30, 2004, 2003, 2002, 2001 and 2000 |
| • | three months ended February 28, 2005, February 29, 2004, May 31, 2005 and May 31, 2004 |
| • | six months ended May 31, 2005 and May 31, 2004 |
There is no requirement to update or modify any other disclosures included in the 2004 Form 10-K and the Quarterly Reports on Form 10-Q for the quarterly periods ended February 28, 2005 and May 31, 2005.
2
| Item 9.01. Financial | Statements and Exhibits |
| 15 | Letter of awareness from Deloitte & Touche LLP, dated October 12, 2005, concerning unaudited interim financial information. | |
| 23.1 | Consent of Deloitte & Touche LLP | |
| 23.2 | Consent of BK Associates, Inc. | |
| 23.3 | Consent of Morten Beyer & Agnew, Inc. | |
| 23.4 | Consent of Airclaims Limited. | |
| 99.1 | Consolidated Financial Statements and notes thereto recast for discontinued operations and the transfer of the principal components of the residential mortgage loan business from the Discover business segment to the Institutional Securities business segment for the fiscal years ended November 30, 2004, 2003, and 2002 and Management’s Discussion and Analysis of Financial Condition and Results of Operations (which replaces and supersedes Part II, Item 8 and Item 7, respectively, of the 2004 Form 10-K filed with the SEC on February 11, 2005). | |
| 99.2 | Condensed Consolidated Financial Statements and notes thereto recast for discontinued operations and the transfer of the principal components of the residential mortgage loan business from the Discover business segment to the Institutional Securities business segment for the three months ended February 28, 2005 and February 29, 2004 and Management’s Discussion and Analysis of Financial Condition and Results of Operations (which replaces and supersedes Part I, Item 1 and Item 2, respectively, of the Quarterly Report on Form 10-Q for the quarter ended February 28, 2005 filed with the SEC on April 6, 2005). | |
| 99.3 | Condensed Consolidated Financial Statements and notes thereto recast for discontinued operations and the transfer of the principal components of the residential mortgage loan business from the Discover business segment to the Institutional Securities business segment for the three and six months ended May 31, 2005 and May 31, 2004 and Management’s Discussion and Analysis of Financial Condition and Results of Operations (which replaces and supersedes Part I, Item 1 and Item 2, respectively, of the Quarterly Report on Form 10-Q for the quarter ended May 31, 2005 filed with the SEC on July 8, 2005). | |
| 99.4 | Selected Financial Data recast for discontinued operations for the fiscal years ended November 30, 2004, 2003, 2002, 2001 and 2000 (which replaces and supersedes Part II, Item 6 of the 2004 Form 10-K filed with the SEC on February 11, 2005). | |
| 3 |
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MORGAN STANLEY (Registrant) | ||
| By: | /s/ DAVID H. SIDWELL | |
| David H. Sidwell, Chief Financial Officer | ||
| By: | /s/ PAUL C. WIRTH | |
| Paul C. Wirth, Controller | ||
Date: October 12, 2005
4
Exhibit 15
To the Board of Directors and Shareholders of Morgan Stanley:
We have made a review, in accordance with the standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim condensed consolidated financial information of Morgan Stanley and subsidiaries as of February 28, 2005 and for the three-month periods ended February 28, 2005 and February 29, 2004, and have issued our report dated April 4, 2005 (October 12, 2005 as to the effects of discontinued operations and segment classification discussed in Note 22) (which report included an explanatory paragraph regarding the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-based Payment”). As indicated in such report, because we did not perform an audit, we expressed no opinion on that information.
Additionally, we have made a review, in accordance with the standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim condensed consolidated financial information of Morgan Stanley and subsidiaries as of May 31, 2005 and for the six-month periods ended May 31, 2005 and May 31, 2004, and have issued our report dated July 7, 2005 (October 12, 2005 as to the effects of discontinued operations and segment classification discussed in Note 22) (which report included an explanatory paragraph regarding the adoption of SFAS No. 123R, “Share-based Payment”). As indicated in such report, because we did not perform an audit, we expressed no opinion on that information.
We are aware that our reports referred to above, which are included in this Current Report on Form 8-K, are incorporated by reference in the following Registration Statements:
| Filed on Form S-3: |
| Registration Statement No. 33-57202 |
| Registration Statement No. 33-60734 |
| Registration Statement No. 33-89748 |
| Registration Statement No. 33-92172 |
| Registration Statement No. 333-07947 |
| Registration Statement No. 333-27881 |
| Registration Statement No. 333-27893 |
| Registration Statement No. 333-27919 |
| Registration Statement No. 333-46403 |
| Registration Statement No. 333-46935 |
| Registration Statement No. 333-76111 |
| Registration Statement No. 333-75289 |
| Registration Statement No. 333-34392 |
| Registration Statement No. 333-47576 |
| Registration Statement No. 333-83616 |
| Registration Statement No. 333-106789 |
| Registration Statement No. 333-117752 |
| Filed on Form S-4: |
| Registration Statement No. 333-25003 |
| Filed on Form S-8: |
| Registration Statement No. 33-63024 |
| Registration Statement No. 33-63026 |
| Registration Statement No. 33-78038 |
| Registration Statement No. 33-79516 |
| Registration Statement No. 33-82240 |
| Registration Statement No. 33-82242 |
| Registration Statement No. 33-82244 |
| Registration Statement No. 333-04212 |
| Registration Statement No. 333-28141 |
| Registration Statement No. 333-28263 |
| Registration Statement No. 333-62869 |
| Registration Statement No. 333-78081 |
| Registration Statement No. 333-95303 |
| Registration Statement No. 333-85148 |
| Registration Statement No. 333-85150 |
| Registration Statement No. 333-108223 |
We also are aware that the aforementioned reports, pursuant to Rule 436(c) under the Securities Act of 1933, are not considered a part of the Registration Statements prepared or certified by an accountant or reports prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ DELOITTE & TOUCHE LLP
New York, New York
October 12, 2005
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of Morgan Stanley of our report dated February 7, 2005 (October 12, 2005 as to the effects of discontinued operations and segment classification discussed in Note 27) (which report expresses an unqualified opinion and contains an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123,” in 2003), included in this Current Report on Form 8-K of Morgan Stanley.
| Filed on Form S-3: |
| Registration Statement No. 33-57202 |
| Registration Statement No. 33-60734 |
| Registration Statement No. 33-89748 |
| Registration Statement No. 33-92172 |
| Registration Statement No. 333-07947 |
| Registration Statement No. 333-27881 |
| Registration Statement No. 333-27893 |
| Registration Statement No. 333-27919 |
| Registration Statement No. 333-46403 |
| Registration Statement No. 333-46935 |
| Registration Statement No. 333-76111 |
| Registration Statement No. 333-75289 |
| Registration Statement No. 333-34392 |
| Registration Statement No. 333-47576 |
| Registration Statement No. 333-83616 |
| Registration Statement No. 333-106789 |
| Registration Statement No. 333-117752 |
| Filed on Form S-4: |
| Registration Statement No. 333-25003 |
| Filed on Form S-8: |
| Registration Statement No. 33-63024 |
| Registration Statement No. 33-63026 |
| Registration Statement No. 33-78038 |
| Registration Statement No. 33-79516 |
| Registration Statement No. 33-82240 |
| Registration Statement No. 33-82242 |
| Registration Statement No. 33-82244 |
| Registration Statement No. 333-04212 |
| Registration Statement No. 333-28141 |
| Registration Statement No. 333-28263 |
| Registration Statement No. 333-62869 |
| Registration Statement No. 333-78081 |
| Registration Statement No. 333-95303 |
| Registration Statement No. 333-85148 |
| Registration Statement No. 333-85150 |
| Registration Statement No. 333-108223 |
/s/ DELOITTE & TOUCHE LLP
New York, New York
October 12, 2005
Exhibit 23.2
CONSENT OF BK ASSOCIATES, INC.
We hereby consent to the reference to us appearing in: (i) Note 18 to Morgan Stanley’s consolidated financial statements and notes thereto recast for discontinued operations for the fiscal years ended November 30, 2004, 2003 and 2002 included as exhibit 99.1 in the Current Report on Form 8-K of Morgan Stanley to which this consent is attached (the “Current Report”), (ii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three months ended February 28, 2005 and February 29, 2004, included as exhibit 99.2 in the Current Report, and (iii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three and six months ended May 31, 2005 and May 31, 2004, included as exhibit 99.3 in the Current Report and to the incorporation by reference of those references in the following Registration Statements of Morgan Stanley:
Filed on Form S-3:
Registration Statement No. 33-57202
Registration Statement No. 33-60734
Registration Statement No. 33-89748
Registration Statement No. 33-92172
Registration Statement No. 333-07947
Registration Statement No. 333-27881
Registration Statement No. 333-27893
Registration Statement No. 333-27919
Registration Statement No. 333-46403
Registration Statement No. 333-46935
Registration Statement No. 333-76111
Registration Statement No. 333-75289
Registration Statement No. 333-34392
Registration Statement No. 333-47576
Registration Statement No. 333-83616
Registration Statement No. 333-106789
Registration Statement No. 333-117752
Filed on Form S-4:
Registration Statement No. 333-25003
Filed on Form S-8:
Registration Statement No. 33-63024
Registration Statement No. 33-63026
Registration Statement No. 33-78038
Registration Statement No. 33-79516
Registration Statement No. 33-82240
Registration Statement No. 33-82242
Registration Statement No. 33-82244
Registration Statement No. 333-04212
Registration Statement No. 333-25003
Registration Statement No. 333-28141
Registration Statement No. 333-28263
Registration Statement No. 333-62869
Registration Statement No. 333-78081
Registration Statement No. 333-95303
Registration Statement No. 333-85148
Registration Statement No. 333-85150
Registration Statement No. 333-108223
BK ASSOCIATES, INC.
| By: |
 |
Name: John F. Keitz
Title: President
October 11, 2005
Exhibit 23.3
CONSENT OF MORTEN BEYER & AGNEW, INC
We hereby consent to the reference to us appearing in: (i) Note 18 to Morgan Stanley’s consolidated financial statements and notes thereto recast for discontinued operations for the fiscal years ended November 30, 2004, 2003 and 2002 included as exhibit 99.1 in the Current Report on Form 8-K of Morgan Stanley to which this consent is attached (the “Current Report”), (ii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three months ended February 28, 2005 and February 29, 2004, included as exhibit 99.2 in the Current Report, and (iii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three and six months ended May 31, 2005 and May 31, 2004, included as exhibit 99.3 in the Current Report and to the incorporation by reference of those references in the following Registration Statements of Morgan Stanley:
Filed on Form S-3:
Registration Statement No. 33-57202
Registration Statement No. 33-60734
Registration Statement No. 33-89748
Registration Statement No. 33-92172
Registration Statement No. 333-07947
Registration Statement No. 333-27881
Registration Statement No. 333-27893
Registration Statement No. 333-27919
Registration Statement No. 333-46403
Registration Statement No. 333-46935
Registration Statement No. 333-76111
Registration Statement No. 333-75289
Registration Statement No. 333-34392
Registration Statement No. 333-47576
Registration Statement No. 333-83616
Registration Statement No. 333-106789
Registration Statement No. 333-117752
Filed on Form S-4:
Registration Statement No. 333-25003
Filed on Form S-8:
Registration Statement No. 33-63024
Registration Statement No. 33-63026
Registration Statement No. 33-78038
Registration Statement No. 33-79516
Registration Statement No. 33-82240
Registration Statement No. 33-82242
Registration Statement No. 33-82244
Registration Statement No. 333-04212
Registration Statement No. 333-25003
Registration Statement No. 333-28141
Registration Statement No. 333-28263
Registration Statement No. 333-62869
Registration Statement No. 333-78081
Registration Statement No. 333-95303
Registration Statement No. 333-85148
Registration Statement No. 333-85150
Registration Statement No. 333-108223
MORTEN BEYER & AGNEW, INC
| Name: | Robert F. Agnew |
| Title: | President & COO |
| October | 11, 2005 |
Exhibit 23.4
CONSENT OF AIRCLAIMS LIMITED
We hereby consent to the reference to us appearing in: (i) Note 18 to Morgan Stanley’s consolidated financial statements and notes thereto recast for discontinued operations for the fiscal years ended November 30, 2004, 2003 and 2002 included as exhibit 99.1 in the Current Report on Form 8-K of Morgan Stanley to which this consent is attached (the “Current Report”), (ii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three months ended February 28, 2005 and February 29, 2004, included as exhibit 99.2 in the Current Report, and (iii) Note 16 to Morgan Stanley’s condensed consolidated financial statements and notes thereto recast for discontinued operations for the three and six months ended May 31, 2005 and May 31, 2004, included as exhibit 99.3 in the Current Report and to the incorporation by reference of those references in the following Registration Statements of Morgan Stanley:
Filed on Form S-3:
Registration Statement No. 33-57202
Registration Statement No. 33-60734
Registration Statement No. 33-89748
Registration Statement No. 33-92172
Registration Statement No. 333-07947
Registration Statement No. 333-27881
Registration Statement No. 333-27893
Registration Statement No. 333-27919
Registration Statement No. 333-46403
Registration Statement No. 333-46935
Registration Statement No. 333-76111
Registration Statement No. 333-75289
Registration Statement No. 333-34392
Registration Statement No. 333-47576
Registration Statement No. 333-83616
Registration Statement No. 333-106789
Registration Statement No. 333-117752
Filed on Form S-4:
Registration Statement No. 333-25003
Filed on Form S-8:
Registration Statement No. 33-63024
Registration Statement No. 33-63026
Registration Statement No. 33-78038
Registration Statement No. 33-79516
Registration Statement No. 33-82240
Registration Statement No. 33-82242
Registration Statement No. 33-82244
Registration Statement No. 333-04212
Registration Statement No. 333-25003
Registration Statement No. 333-28141
Registration Statement No. 333-28263
Registration Statement No. 333-62869
Registration Statement No. 333-78081
Registration Statement No. 333-95303
Registration Statement No. 333-85148
Registration Statement No. 333-85150
Registration Statement No. 333-108223
| Airclaims Limited | ||
| By: |
 | |
| Name: | Edward Pieniazek | |
| Title: | Director, Consultancy & Information Services | |
October 12, 2005
|
|
Airclaims Limited Cardinal Point, Newall Road, Heathrow Airport, London TW6 2AS Telephone (44) 020 8897 1066 Facsimile (44) 20 8897 0300 Telex 934679 http://www.airclaims.com http://www.airclaimsstore.com Registered Head Office as above. Registered in England No. 710284. VAT Reg. No. GB 224 1906 87 |
Exhibit 99.1
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction.
Morgan Stanley (the “Company”) is a global financial services firm that maintains leading market positions in each of its business segments—Institutional Securities, Retail Brokerage, Asset Management and Discover. The Company’s Institutional Securities business includes securities underwriting and distribution; financial advisory services, including advice on mergers and acquisitions, restructurings, real estate and project finance; sales, trading, financing and market-making activities in equity securities and related products and fixed income securities and related products, including foreign exchange and commodities; principal investing and real estate investment management; providing benchmark indices and risk management analytics; and research. The Company’s Retail Brokerage business provides comprehensive brokerage, investment and financial services designed to accommodate individual investment goals and risk profiles. The Company’s Asset Management business provides global asset management products and services for individual and institutional investors through three principal distribution channels: a proprietary channel consisting of the Company’s representatives; a non-proprietary channel consisting of third-party broker-dealers, banks, financial planners and other intermediaries; and the Company’s institutional channel. The Company’s Discover business offers Discover®-branded cards and other consumer finance products and services, and includes the operation of Discover Network, a network of merchant and cash access locations primarily in the U.S. Morgan Stanley-branded credit cards and personal loan products that are offered in the U.K. are also included in the Discover business segment. The Company provides its products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals.
The Company’s results of operations for the 12 months ended November 30, 2004 (“fiscal 2004”), November 30, 2003 (“fiscal 2003”) and November 30, 2002 (“fiscal 2002”) are discussed below.
| 1 |
|
Results of Operations.
Executive Summary.
Financial Information.
| Fiscal Year |
||||||||||||
| 2004 |
2003(1) |
2002(1) |
||||||||||
| Net revenues (dollars in millions): |
||||||||||||
| Institutional Securities |
$ | 13,113 | $ | 11,301 | $ | 9,156 | ||||||
| Retail Brokerage |
4,615 | 4,242 | 4,268 | |||||||||
| Asset Management |
2,738 | 2,276 | 2,506 | |||||||||
| Discover |
3,533 | 3,303 | 3,471 | |||||||||
| Intersegment Eliminations |
(291 | ) | (305 | ) | (327 | ) | ||||||
| Consolidated net revenues |
$ | 23,708 | $ | 20,817 | $ | 19,074 | ||||||
| Income before taxes(2) (dollars in millions): |
||||||||||||
| Institutional Securities |
$ | 4,281 | $ | 4,066 | $ | 2,812 | ||||||
| Retail Brokerage |
371 | 464 | 120 | |||||||||
| Asset Management |
827 | 482 | 656 | |||||||||
| Discover |
1,221 | 1,027 | 1,142 | |||||||||
| Intersegment Eliminations |
118 | 121 | 129 | |||||||||
| Consolidated income before taxes |
$ | 6,818 | $ | 6,160 | $ | 4,859 | ||||||
| Consolidated net income (dollars in millions) |
$ | 4,486 | $ | 3,787 | $ | 2,988 | ||||||
| Basic earnings per common share: |
||||||||||||
| Income from continuing operations |
$ | 4.25 | $ | 3.74 | $ | 2.84 | ||||||
| Loss from discontinued operations |
(0.10 | ) | (0.22 | ) | (0.08 | ) | ||||||
| Basic earnings per common share |
$ | 4.15 | $ | 3.52 | $ | 2.76 | ||||||
| Diluted earnings per common share: |
||||||||||||
| Income from continuing operations |
$ | 4.15 | $ | 3.66 | $ | 2.76 | ||||||
| Loss from discontinued operations |
(0.09 | ) | (0.21 | ) | (0.07 | ) | ||||||
| Diluted earnings per common share |
$ | 4.06 | $ | 3.45 | $ | 2.69 | ||||||
| Statistical Data. |
||||||||||||
| Book value per common share(3) |
$ | 25.95 | $ | 22.93 | $ | 20.24 | ||||||
| Return on average common equity |
16.8 | % | 16.5 | % | 14.1 | % | ||||||
| Effective income tax rate |
28.5 | % | 29.0 | % | 34.4 | % | ||||||
| Consolidated assets under management or supervision (dollars in billions): |
||||||||||||
| Equity |
$ | 251 | $ | 207 | $ | 172 | ||||||
| Fixed income |
130 | 123 | 127 | |||||||||
| Money market |
87 | 64 | 66 | |||||||||
| Other(4) |
79 | 68 | 55 | |||||||||
| Total(5) |
$ | 547 | $ | 462 | $ | 420 | ||||||
| Worldwide employees |
53,284 | 51,196 | 55,726 | |||||||||
2
| Statistical Data (Continued). | Fiscal Year |
|||||||||||
| 2004 |
2003(1) |
2002(1) |
||||||||||
| Institutional Securities: |
||||||||||||
| Mergers and acquisitions completed transactions (dollars in billions)(6): |
||||||||||||
