Jefferies Group LLC today announced financial results for its
fiscal second quarter 2016.
Highlights for the three months ended May 31, 2016:
- Total Sales and Trading Net Revenues of
$462 million
- Investment Banking Net Revenues of $253
million
- Total Net Revenues of $719 million
- Earnings Before Income Taxes of $103
million
- Net Earnings of $54 million (tax rate
47.4%)
Rich Handler, Chairman and Chief Executive Officer, and Brian
Friedman, Chairman of the Executive Committee, commented: “We are
pleased to report quarterly results at a more normal level,
reflecting better equity and fixed income secondary trading
conditions, although new issue capital markets activity remained
somewhat muted. Our equity net revenues were $224 million, compared
to $228 million for the second quarter of last year. The two listed
equity block positions, including KCG, that were marked down during
the first quarter by $82 million, were marked back up during the
second quarter by a total of $60 million. Fixed Income net revenues
were $238 million for the quarter, with virtually all our fixed
income business lines across all regions delivering improved
performance. We are particularly pleased with these results as the
trading environment was merely stable versus robust, and our
performance shows the continued opportunity and potential of our
business after a significant bottoms up rightsizing and
strengthening, and an overall reduction in risk. Investment banking
net revenues for the second quarter were $253 million, reflecting
solid advisory revenue, but continued slow activity both in the new
issue equity capital markets and in leveraged finance. Our third
quarter investment banking backlog is showing encouraging
improvement.
We believe our industry is experiencing yet another fundamental
and strategic inflection point. We expect this will lead to further
consolidation of market share and we are all working hard to ensure
that Jefferies is a major beneficiary. To this end, we are
particularly focused on continuing to expand our investment banking
footprint in the U.S. and Europe, and are meeting and hiring
talented individuals who we believe will enhance our ability to
serve our clients.”
The attached financial tables should be read in conjunction with
our Quarterly Report on Form 10-Q for the quarter ended February
29, 2016 and our Annual Report on Form 10-K for the year ended
November 30, 2015. Amounts herein pertaining to May 31,
2016 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 quarterly period ended May 31, 2016.
This release contains "forward-looking statements" within the
meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements include statements about
our future results and performance, including our future market
share and expected financial results. It is possible that the
actual results may differ materially from the anticipated results
indicated in these forward-looking statements. Please refer to our
most recent Annual Report on Form 10-K for a discussion of
important factors that could cause actual results to differ
materially from those projected in these forward-looking
statements.
Jefferies, the world's only independent full-service 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. Our firm provides a full
range of investment banking, sales, trading, research and strategy
across the spectrum of equities, fixed income and foreign exchange,
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) Quarter Ended
May 31, 2016
February 29, 2016
May 31, 2015
Revenues: Commissions and other fees $ 146,157 $
155,824 $ 173,508 Principal transactions 318,180
(103,373 ) 155,962 Investment banking 253,046 230,930 404,262 Asset
management fees and investment income from managed funds 4,336
9,530 5,650 Interest income 220,175 221,945 240,552 Other revenues
(4,977 ) (21,751 ) 28,576 Total revenues 936,917 493,105
1,008,510 Interest expense 217,509 194,118 216,956
Net revenues 719,408 298,987 791,554
Non-interest expenses: Compensation and benefits 415,316
349,743 480,770 Non-compensation expenses: Floor brokerage
and clearing fees 43,591 40,479 58,713 Technology and
communications 66,499 64,989 72,361 Occupancy and equipment rental
24,926 24,585 24,420 Business development 22,587 24,854 26,401
Professional services 29,526 23,512 27,419 Other 14,366
20,701 16,758 Total non-compensation expenses 201,495
199,120 226,072 Total non-interest expenses
616,811 548,863 706,842 Earnings (loss) before
income taxes 102,597 (249,876 ) 84,712 Income tax expense (benefit)
48,655 (83,107 ) 24,530 Net earnings (loss) 53,942
(166,769 ) 60,182 Net earnings attributable to noncontrolling
interests 44 44 349 Net earnings (loss)
attributable to Jefferies Group LLC $ 53,898 $
(166,813 ) $ 59,833 Pretax operating margin
14.3 %
(83.6)
%
10.7 % Effective tax rate 47.4 % 33.3 % 29.0 %
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS (Amounts in Thousands)
(Unaudited) Six Months Ended
May 31, 2016 May 31, 2015 Revenues:
Commissions and other fees $ 301,981 $ 340,430
Principal transactions 214,807 261,439 Investment banking 483,976
676,257 Asset management fees and investment income (loss) from
managed funds 13,866 (4,187 ) Interest income 442,120 469,422 Other
revenues (26,728 ) 48,481 Total revenues 1,430,022 1,791,842
Interest expense 411,627 408,616 Net revenues
1,018,395 1,383,226 Non-interest expenses:
Compensation and benefits 765,059 845,985 Non-compensation
expenses: Floor brokerage and clearing fees 84,070 113,793
Technology and communications 131,488 144,748 Occupancy and
equipment rental 49,511 48,604 Business development 47,441 48,338
Professional services 53,038 51,675 Other 35,067 32,487
Total non-compensation expenses 400,615 439,645
Total non-interest expenses 1,165,674 1,285,630
Earnings (loss) before income taxes (147,279 ) 97,596 Income
tax expense (benefit) (34,452 ) 24,861 Net earnings (loss)
(112,827 ) 72,735 Net earnings attributable to noncontrolling
interests 88 1,220 Net earnings (loss) attributable
to Jefferies Group LLC $ (112,915 ) $ 71,515
Pretax operating margin (14.5 )% 7.1 % Effective tax rate
23.4 % 25.5 %
JEFFERIES GROUP LLC AND
SUBSIDIARIES SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data) (Unaudited)
Quarter Ended May 31,
2016 February 29, 2016 May 31, 2015
Revenues by
Source
Equities $ 223,540 $ 1,745 $ 228,198 Fixed
income (1) 238,486 56,782 153,444 Total sales and
trading 462,026 58,527 381,642 Equity 60,905
43,999 108,805 Debt 46,124 57,273 154,670 Capital
markets 107,029 101,272 263,475 Advisory 146,017 129,658
140,787 Total investment banking 253,046 230,930
404,262
Asset management fees and investment
income (losses)
from managed funds: Asset management fees 6,964 11,205 4,903
Investment income (losses) from managed funds (2,628 ) (1,675 ) 747
Total 4,336 9,530 5,650
Net revenues $
719,408 $ 298,987
$ 791,554
Other
Data
Number of trading days 64 61 63 Number of trading loss days 2 17 10
Number of trading loss days excluding KCG 1 12 5 Average
firmwide VaR (in millions) (2) $ 8.25 $ 8.37 $ 12.80 Average
firmwide VaR excluding KCG (in millions) (2) $ 6.04 $ 6.69 $ 9.86
(1) The results in the quarter ended May 31, 2015
include $35.7 million of net revenues globally from the Bache
business. At May 31, 2016, we have transferred all of our client
accounts to Société Générale S.A. and other brokers and completed
the exit of the Bache business. (2) 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, 2015.
JEFFERIES GROUP LLC AND
SUBSIDIARIES SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data) (Unaudited)
Six Months Ended May 31,
2016 May 31, 2015
Revenues by
Source
Equities $ 225,285 $ 431,677 Fixed income (1) 295,268
279,479 Total sales and trading 520,553
711,156 Equity 104,904 187,876 Debt 103,397
215,546 Capital markets 208,301 403,422 Advisory 275,675
272,835 Total investment banking 483,976
676,257 Asset management fees and investment losses
from managed funds: Asset management fees 18,169 18,888 Investment
losses from managed funds (4,303 ) (23,075 ) Total 13,866
(4,187 )
Net revenues $ 1,018,395
$ 1,383,226
Other
Data
Number of trading days 125 124 Number of trading loss days 19 21
Number of trading loss days excluding KCG 13 14 Average
firmwide VaR (in millions) (2) $ 8.31 $ 13.03 Average firmwide VaR
excluding KCG (in millions) (2) $ 6.36 $ 9.58
(1) The results in the six months ended May 31, 2015
include $84.9 million of net revenues globally from the Bache
business. At May 31, 2016, we have transferred all of our client
accounts to Société Générale S.A. and other brokers and completed
the exit of the Bache business. (2) 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, 2015.
JEFFERIES GROUP LLC AND
SUBSIDIARIES FINANCIAL HIGHLIGHTS (Amounts in
Millions, Except Where Noted) (Unaudited)
Quarter Ended May 31, 2016 February
29, 2016 May 31, 2015
Financial
position:
Total assets (1) $ 37,120 $ 35,193 $ 44,140
Average total assets for the period (1) $ 43,549 $ 44,669 $ 51,013
Average total assets less goodwill and intangible assets for the
period (1) $ 41,678 $ 42,796 $ 49,118 Cash and cash
equivalents (1) $ 2,839 $ 2,600 $ 3,289 Cash and cash equivalents
and other sources of liquidity (1) (2) $ 4,603 $ 4,290 $ 4,951 Cash
and cash equivalents and other sources of liquidity - % total
assets (1) (2) 12.4 % 12.2 % 11.2 %
Cash and cash equivalents and other
sources of liquidity - % total assets less
goodwill and intangible assets (1) (2)
13.1 % 12.9 % 11.7 % Financial instruments owned (1) $
15,119 $ 13,630 $ 18,843 Goodwill and intangible assets (1) $ 1,871
$ 1,869 $ 1,895 Total equity (including noncontrolling
interests) $ 5,344 $ 5,262 $ 5,520 Total member's equity $ 5,339 $
5,261 $ 5,480 Tangible member's equity (3) $ 3,468 $ 3,392 $ 3,584
Level 3 financial
instruments:
Level 3 financial instruments owned (1) (4) $ 436 $ 489 $ 540 Level
3 financial instruments owned - % total assets (1) 1.2 % 1.4 % 1.2
% Level 3 financial instruments owned - % total financial
instruments (1) 2.9 % 3.6 % 2.9 % Level 3 financial instruments
owned - % tangible member's equity (1) 12.6 % 14.4 % 15.1 %
Other data and
financial ratios:
Total capital (1) (5) $ 10,729 $ 10,588 $ 10,858 Leverage ratio (1)
(6) 6.9 6.7 8.0 Adjusted leverage ratio (1) (7) 9.0 8.5 10.3
Tangible gross leverage ratio (1) (8) 10.2 9.8 11.8 Number
of trading days 64 61 63 Number of trading loss days 2 17 10 Number
of trading loss days excluding KCG 1 12 5 Average firmwide VaR (9)
$ 8.25 $ 8.37 $ 12.80 Average firmwide VaR excluding KCG (9) $ 6.04
$ 6.69 $ 9.86 Number of employees, at period end 3,279 3,439
3,830
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS - FOOTNOTES (1) Amounts
pertaining to May 31, 2016 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 quarterly period ended May
31, 2016. (2) At May 31, 2016, 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 $1,096
million, in aggregate, and $669 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. At
May 31, 2015 amounts also included additional funds that were
available under the committed senior secured revolving credit
facility available for the working capital needs of Jefferies
Bache. The corresponding amounts included in other sources of
liquidity at February 29, 2016 were $1,061 million and $630
million, respectively, and at May 31, 2015, were $1,136 million and
$527 million, respectively. (3)
Tangible member's equity (a non-GAAP
financial measure) represents total member's equity less goodwill
and identifiable intangible assets. We believe that tangible
members' equity is meaningful for valuation purposes, as financial
companies are often measured as a multiple of tangible member's
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) At May 31, 2016, February
29, 2016 and May 31, 2015, total capital includes our long-term
debt of $5,385 million, $5,326 million and $5,339 million,
respectively, and total equity. Long-term debt included in total
capital is reduced by amounts outstanding under the revolving
credit facility, amounts that are non-recourse to Jefferies Group
LLC 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). At May 31,
2016, February 29, 2016 and May 31, 2015, adjusted assets were
$31,173 million, $28,920 million and $37,171 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 equity. The tangible gross leverage ratio is used by
rating agencies in assessing our leverage ratio. (9) 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, 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160621005487/en/
Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief
Financial Officer
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