Jefferies Reports Second Quarter 2014 Financial Results

  Jefferies Reports Second Quarter 2014 Financial Results  Business Wire  NEW YORK -- June 17, 2014  Jefferies Group LLC today announced financial results for its fiscal second quarter 2014.  Highlights for the three months ended May 31, 2014:    *Net revenues of $723 million   *Net earnings of $61 million   *Investment banking net revenues of $331 million   *Trading net revenues of $395 million  Highlights for the six months ended May 31, 2014:    *Net revenues of $1,622 million   *Net earnings of $174 million   *Investment banking net revenues of $745 million   *Trading net revenues of $870 million  Richard B. Handler, Chairman and Chief Executive Officer of Jefferies, commented: “We are pleased to report quarterly results well-above those of the same quarter last year, due to an over 19% increase in our investment banking net revenues and an almost 7% increase in our overall trading net revenues. Our momentum has continued in investment banking and we are continuing to add to our team to capitalize further on our broad capabilities. Without the impact of marking to market certain equity block holdings, our equity and fixed income net revenues each declined about 5% in the most recent quarter compared to the same quarter last year. During the second quarter, clients have been cautious and generally less active in trading due to the unsettled markets, but we believe Jefferies’ results reflect gains in market share. Our industry and competitors are in the midst of significant changes. We believe our platform, strategy, business mix and unique culture will allow us to continue to provide a differentiated and value-added service to our clients.”  The attached financial tables should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended February 28, 2014 and our Annual Report on Form 10-K for the year ended November 30, 2013.  Jefferies, the global investment banking firm focused on serving clients for over 50 years, is a leader in providing insight, expertise and execution to investors, companies and governments. The firm provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income, foreign exchange, futures and commodities, as well as wealth management, in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Leucadia National Corporation (NYSE:LUK), a diversified holding company.  JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands) (Unaudited)                                                                                    Successor                                     Predecessor                      Quarter       Six Months      Quarter         Quarter                      Ended         Ended           Ended           Ended                      May 31,       May 31, 2014    May 31,         February                      2014                          2013            28, 2013                                                                       Revenues: Commissions          $  167,378    $  329,441      $  162,759      $ 146,240 Principal               183,416       421,779         134,571        300,278 transactions Investment banking      331,149       745,469         277,134        288,278 Asset management fees and investment income       (3,101)       6,856           10,527         10,883 (loss) from managed funds Interest income         283,540       532,808         258,665        249,277 Other revenues         8,404        31,473         26,245        27,004 Total revenues          970,786       2,067,826       869,901        1,021,960 Interest expense       247,794      445,806        211,463       203,416 Net revenues            722,992       1,622,020       658,438        818,544 Interest on mandatorily redeemable preferred              -            -              3,368         10,961 interests of consolidated subsidiaries Net revenues, less interest on mandatorily redeemable             722,992      1,622,020      655,070       807,583 preferred interests of consolidated subsidiaries                                                                       Non-interest expenses: Compensation and        404,876       912,775         373,880        474,217 benefits                                                                       Non-compensation expenses: Floor brokerage         54,020        103,533         48,902         46,155 and clearing fees Technology and          70,257        134,563         63,839         59,878 communications Occupancy and           26,673        53,175          32,225         24,309 equipment rental Business                24,917        51,393          22,732         24,927 development Professional            25,345        50,164          29,519         24,135 services Other                  17,767       35,011         18,720        14,475 Total non-compensation       218,979      427,839        215,937       193,879 expenses Total non-interest     623,855      1,340,614      589,817       668,096 expenses Earnings before         99,137        281,406         65,253         139,487 income taxes Income tax expense     37,323       104,200        25,007        48,645 Net earnings            61,814        177,206         40,246         90,842 Net earnings attributable to        488          3,448          738           10,704 noncontrolling interests Net earnings attributable to Jefferies Group      $  61,326     $  173,758      $  39,508       $ 80,138 LLC/common stockholders                                                                        JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Other Data) (Unaudited)                                                                               Successor                                          Predecessor                 Quarter Ended   Six Months Ended   Quarter         Quarter                                                    Ended           Ended                 May 31, 2014    May 31, 2014       May 31,         February                                                    2013            28, 2013 Revenues by Source Equities        $  177,238      $  366,061         $ 141,590       $ 167,354 Fixed income      217,706       503,634         229,187       352,029  Total              394,944         869,695           370,777         519,383                                                                                                                                         Equity             83,726          178,464           53,564          61,380 Debt              147,000       320,038         133,714       140,672  Capital            230,726         498,502           187,278         202,052 markets Advisory          100,423       246,967         89,856        86,226   Investment         331,149         745,469           277,134         288,278 banking                                                                     Asset management fees and investment income (loss) from managed funds: Asset management         4,927           14,373            11,332          11,083 fees Investment loss from         (8,028   )     (7,517     )     (805    )      (200    ) managed funds Total             (3,101   )     6,856           10,527        10,883   Net revenues      722,992       1,622,020       658,438       818,544  Interest on mandatorily redeemable preferred         -             -               3,368         10,961   interests of consolidated subsidiaries Net revenues, less mandatorily redeemable      $  722,992     $  1,622,020      $ 655,070      $ 807,583  preferred interests of consolidated subsidiaries                                                                     Other Data Number of          63              124               64              60 trading days                                                                     Average firmwide VaR    $  14.94        $  15.60           $ 8.77          $ 9.27 (in millions) (A) Average firmwide VaR excluding       $  8.63         $  10.60           $ 5.77          $ 5.99 Knight Capital (in millions) (A) Average firmwide VaR excluding Knight Capital and     $  7.97         $  8.59            $ 5.77          $ 5.99 Harbinger Group Inc. (in millions) (A)                                                                      (A) VaR estimates the potential loss in value of our trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value at risk" in Part II, Item 7 "Management's Discussion and Analysis" in our Annual Report on Form 10-K for the year ended November 30, 2013.  JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (Amounts in Millions, Except Where Noted) (Unaudited)                                                                                 Successor                                        Predecessor                   Quarter Ended   Six Months       Quarter         Quarter                                   Ended            Ended           Ended                   May 31, 2014    May 31, 2014     May 31,         February                                                    2013            28, 2013                                                                     Results: Net earnings attributable to Jefferies Group   $  61,326       $  173,758       $  39,508       $  80,138 LLC / common stockholders (in thousands) Pretax operating            13.7    %       17.3     %       10.0   %        17.3   % margin Effective tax        37.6    %       37.0     %       38.3   %        34.9   % rate                                                                     Financial position: Total assets      $  43,610       $  43,610        $  38,938       $  37,800 (1) Average total assets for the    $  50,379       $  49,749        $  47,150       $  45,418 period (1) Average total assets less goodwill and      $  48,394       $  47,764        $  45,157       $  45,039 intangible assets for the period (1)                                                                     Cash and cash     $  3,958        $  3,958         $  3,403        $  3,018 equivalents (1) Cash and cash equivalents and other sources     $  5,824        $  5,824         $  5,187        $  4,726 of liquidity (1) (2) Cash and cash equivalents and other sources        13.4    %       13.4     %       13.3   %        12.5   % of liquidity - % total assets (1) (2) Cash and cash equivalents and other sources of liquidity -       14.0    %       14.0     %       14.0   %        12.6   % % total assets less goodwill and intangible assets (1) (2)                                                                     Financial instruments       $  17,144       $  17,144        $  15,270       $  16,414 owned (1) Goodwill and intangible        $  1,984        $  1,984         $  1,982        $  380 assets (1)                                                                     Total equity (including        $  5,527        $  5,527         $  5,183        $  3,688 noncontrolling interests) Total member's / common          $  5,496        $  5,496         $  5,147        $  3,332 stockholders' equity Tangible member's / common            $  3,512        $  3,512         $  3,165        $  2,952 stockholders' equity (3)                                                                     Level 3 financial instruments: Level 3 financial         $  490          $  490           $  447          $  505 instruments owned (1) (4) Level 3 financial instruments          1.1     %       1.1      %       1.1    %        1.3    % owned - % total assets (1) Level 3 financial instruments owned - % total      2.9     %       2.9      %       2.9    %        3.1    % financial instruments owned (1) Level 3 financial instruments owned - % tangible             14.0    %       14.0     %       14.1   %        17.1   % member's / common stockholders' equity (1)                                                                     Other data and financial ratios: Total capital     $  11,941       $  11,941        $  11,271       $  9,624 (1) (5) Leverage ratio       7.9             7.9              7.5             10.2 (1) (6) Adjusted leverage ratio       10.0            10.0             9.9             10.4 (1) (7) Tangible gross leverage ratio       11.9            11.9             11.7            12.7 (1) (8) Leverage ratio - excluding          10.0            10.0             9.5             N/A merger impacts (1) (9)                                                                     Number of            63              124              64              60 trading days                                                                     Average firmwide VaR      $  14.94        $  15.60         $  8.77         $  9.27 (10) Average firmwide VaR excluding         $  8.63         $  10.60         $  5.77         $  5.99 Knight Capital (10) Average firmwide VaR excluding         $  7.97         $  8.59          $  5.77         $  5.99 Knight Capital and Harbinger Group Inc. (10)                                                                     Number of employees, at        3,785           3,785            3,785           3,841 period end                                                                                                     JEFFERIES GROUP LLC AND SUBSIDIARIES                        FINANCIAL HIGHLIGHTS - FOOTNOTES  (1) Amounts pertaining to May 31, 2014 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three months ended May 31, 2014.  (2) As of May 31, 2014, other sources of liquidity include high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities of $1,202 million, in aggregate, and $664 million, being the total of the estimated amount of additional secured financing that could be reasonably expected to be obtained from our financial instruments that are currently not pledged at reasonable financing haircuts and additional funds available under the committed senior secured revolving credit facility available for working capital needs of Jefferies Bache. The corresponding amounts included in other sources of liquidity as of May 31, 2013 were $1,221 million and $562 million, and as of February 28, 2013, were $1,132 million and $576 million, respectively.  (3) Tangible member's / common stockholders' equity (a non-GAAP financial measure) represents total member's / common stockholders' equity less goodwill and identifiable intangible assets. We believe that tangible member's / common stockholders' equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible member's / common stockholders' equity, making these ratios meaningful for investors.  (4) Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned.  (5) As of May 31, 2014 and 2013, total capital includes our long-term debt of $6,414 million and $6,088 million, respectively, and total equity. As of February 28, 2013, total capital includes our long term debt, mandatorily redeemable convertible preferred stock, mandatorily redeemable preferred interest of consolidated subsidiaries, in aggregate $5,936 million, and total equity. Long-term debt included in total capital is reduced by amounts outstanding under the revolving credit facility and the amount of debt maturing in less than one year, where applicable.  (6) Leverage ratio equals total assets divided by total equity.  (7) Adjusted leverage ratio (a non-GAAP financial measure) equals adjusted assets divided by tangible total equity, being total equity less goodwill and identifiable intangible assets. Adjusted assets (a non-GAAP financial measure) equals total assets less securities borrowed, securities purchased under agreements to resell, cash and securities segregated, goodwill and identifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). As of May 31, 2014, May 31, 2013 and February 28, 2013 adjusted assets were $35,577 million, $31,648 million and $34,343 million, respectively. We believe that adjusted assets is a meaningful measure as it excludes certain assets that are considered of lower risk as they are generally self-financed by customer liabilities through our securities lending activities.  (8) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible member's / common stockholders' equity. The tangible gross leverage ratio is used by Rating Agencies in assessing our leverage ratio.  (9) Leverage ratio - excluding merger impacts (a non-GAAP financial measure) is calculated as follows:                                                  May 31,       May 31, $ millions                                         2014             2013 Total assets                                       $ 43,610         $ 38,938 Goodwill and acquisition accounting fair value adjustments on the merger with                 (1,957 )         (1,957 ) Leucadia Net amortization to date on asset related           37             9       purchase accounting adjustments Total assets excluding the impact of the           $ 41,690        $ 36,990  merger                                                                      Total equity                                       $ 5,527          $ 5,183 Equity arising from merger consideration             (1,426 )         (1,426 ) Preferred stock assumed by Leucadia                  125              125 Net amortization to date of purchase                (48    )        (8     ) accounting adjustments, net of tax Total equity excluding the impact of the           $ 4,178         $ 3,874   merger                                                                      Leverage ratio - excluding merger impacts           10.0           9.5                                                                                    (10) VaR estimates the potential loss in value of our trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value at risk" in Part II, Item 7 "Management's Discussion and Analysis" in our Annual Report on Form 10-K for the year ended November 30, 2013.  Contact:  Jefferies Group LLC Peregrine C. Broadbent, 212-284-2338 Chief Financial Officer  
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