LUK Leucadia National Corp.

Jefferies Group LLC today announced financial results for its fiscal first quarter 2014.

Highlights for the three months ended February 28, 2014:

• Net revenues of $899 million
• Net earnings of $112 million
• Investment banking net revenues of $414 million
• Equities net revenues of $189 million
• Fixed Income net revenues of $286 million

Richard B. Handler, Chairman and Chief Executive Officer of Jefferies, commented: “We are pleased with our strong results for the first quarter, which include record net earnings of $112 million for the period. Our results reflect another strong performance in investment banking, with revenues in excess of $400 million for the second successive quarter, and a solid performance in both equities and fixed income. Our combined equities and FICC revenues were $475 million. Excluding the impact of Knight Capital and Harbinger Group, sales and trading revenues were $488 million, a 19% increase versus the fourth quarter on a comparable basis. Our investment banking business continued to benefit from strong equities and leveraged finance new issues markets. Our holdings of shares of Knight Capital and Harbinger Group were both marked down in the first quarter by $13 million in aggregate, compared to a total mark-up of $110 million in the fourth quarter of last year, the impact of which was recorded in our equities revenues.”

The financial tables attached should be read in connection with 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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGS(Amounts in Thousands)(Unaudited)             Successor Predecessor Quarter Ended Quarter Ended Quarter Ended February 28, 2014 November 30, 2013 February 28, 2013   Revenues: Commissions $ 162,063 $ 156,435 $ 146,240 Principal transactions 238,363 289,430 300,278 Investment banking 414,320 417,044 288,278

Asset management fees and investment  income from managed funds

 

9,957 12,017 10,883 Interest income 249,268 224,911 249,277 Other revenues   23,069  

39,320

  27,004

Total revenues

1,097,040 1,139,157

1,021,960

Interest expense   198,012   188,609   203,416 Net revenues 899,028 950,548 818,544

Interest on mandatorily redeemable preferred interests of  consolidated subsidiaries

 

-   -   10,961

Net revenues, less interest on mandatorily redeemable preferred

  interests of consolidated subsidiaries

899,028   950,548   807,583   Non-interest expenses: Compensation and benefits 507,899 546,257 474,217   Non-compensation expenses: Floor brokerage and clearing fees 49,513 52,706 46,155 Technology and communications 64,306 67,578 59,878 Occupancy and equipment rental 27,017 28,271 24,309 Business development 26,476 22,759 24,927 Professional services 24,304 18,014 24,135 Other   17,244   39,303   14,475 Total non-compensation expenses   208,860   228,631   193,879 Total non-interest expenses   716,759   774,888   668,096 Earnings before income taxes 182,269 175,660 139,487 Income tax expense   66,877   61,186   48,645 Net earnings 115,392 114,474 90,842 Net earnings attributable to noncontrolling interests   2,960   4,531   10,704

Net earnings attributable to Jefferies Group LLC/ common  shareholders

$ 112,432 $ 109,943 $ 80,138 JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Other Data) (Unaudited)             Successor Predecessor Quarter Ended Quarter Ended Quarter Ended February 28, 2014 November 30, 2013 February 28, 2013

Revenues by Source

Equities $ 188,823 $ 289,727 $ 167,354 Fixed income 285,928 227,136 352,029 Other   -   4,624   -   Total 474,751 521,487 519,383     Equity 94,738 118,348 61,380 Debt   173,038   162,031   140,672   Capital markets 267,776 280,379 202,052 Advisory   146,544   136,665   86,226   Investment banking 414,320 417,044 288,278  

Asset management fees and investment income (loss)

  from managed funds:

Asset management fees 9,446 5,563 11,083 Investment income (loss) from managed funds   511   6,454   (200 ) Total   9,957   12,017   10,883   Net revenues   899,028   950,548   818,544   Interest on mandatorily redeemable preferred interests of consolidated subsidiaries   -   -   10,961   Net revenues, less mandatorily redeemable preferred interests of consolidated subsidiaries $ 899,028 $ 950,548 $ 807,583    

Other Data

Number of trading days 61 63 60   Average firmwide VaR (in millions) (A) $ 16.27 $ 12.61 $ 9.27 Average firmwide VaR excluding Knight Capital (in millions) (A) $ 12.64 $ 10.37 $ 5.99 Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (in millions) (A) $ 9.23 $ 7.32 $ 5.99  

(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 calcuation 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 Quarter Ended Quarter Ended February 28, 2014 November 30, 2013 February 28, 2013  

Results:

Net earnings attributable to Jefferies Group LLC / common shareholders (in thousands) $ 112,432 $ 109,943 $ 80,138 Pretax operating margin 20.3 % 18.5 % 17.3 % Effective tax rate 36.7 % 34.8 % 34.9 %  

Financial position:

Total assets (1) $ 43,440 $ 40,177 $ 37,800 Average total assets for quarter (1) $ 49,075 $ 46,439 $ 45,418 Average total assets less goodwill and intangible assets for quarter (1) $ 47,089 $ 44,455 $ 45,039   Cash and cash equivalents (1) $ 2,865 $ 3,561 $ 3,018 Cash and cash equivalents and other sources of liquidity (1) (2) $ 4,467 $ 5,282 $ 4,726 Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 10.3 % 13.1 % 12.5 % Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2) 10.8 % 13.8 % 12.6 %   Financial instruments owned (1) $ 18,126 $ 16,650 $ 16,414 Goodwill and intangible assets (1) $ 1,987 $ 1,986 $ 380   Total equity (including noncontrolling interests) $ 5,462 $ 5,422 $ 3,688 Total member's / common stockholders' equity $ 5,432 $ 5,305 $ 3,332 Tangible member's / common stockholders' equity (3) $ 3,445 $ 3,318 $ 2,952

 

Level 3 financial instruments:

Level 3 financial instruments owned (1) (4) $ 495 $ 457 $ 505 Level 3 financial instruments owned - % total assets (1) 1.1 % 1.1 % 1.3 % Level 3 financial instruments owned - % total financial instruments owned (1) 2.7 % 2.7 % 3.1 % Level 3 financial instruments owned - % tangible member's / common stockholders' equity (1) 14.4 % 13.8 % 17.1 %  

Other data and financial ratios:

Total capital (1) (5) $ 11,219 $ 11,199 $ 9,624 Leverage ratio (1) (6) 8.0 7.4 10.2 Adjusted leverage ratio (1) (7) 10.4 9.5 10.4 Tangible gross leverage ratio (1) (8) 12.0 11.5 12.7 Leverage ratio - excluding merger impacts (1) (9) 10.0 9.3 N/A   Number of trading days 61 63 60   Average firmwide VaR (10) $ 16.27 $ 12.61 $ 9.27 Average firmwide VaR excluding Knight Capital (10) $ 12.64 $ 10.37 $ 5.99 Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (10) $ 9.23 $ 7.32 $ 5.99   Number of employees, at quarter end 3,838 3,797 3,841 JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL HIGHLIGHTS - FOOTNOTES     (1) Amounts pertaining to February 28, 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 February 28, 2014.   (2) As of February 28, 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 $1,130 million, in aggregate, and $472 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 November 30, 2013, were $1,317 million and $404 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 February 28, 2014 and November 30, 2013, total capital includes our long-term debt of $5,757 million and $5,777 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 February 28, 2014, November 30, 2013 and February 28, 2013 adjusted assets were $36,273 million, $32,559 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:                                 February 28,   November 30, $ millions 2014 2013 Total assets $ 43,440 $ 40,177 Goodwill and acquisition accounting fair value adjustments on the merger with Leucadia (1,957 ) (1,957 ) Net amortization to date on asset related purchase accounting adjustments   32     27   Total assets excluding the impact of the merger $ 41,515   $ 38,247     Total equity $ 5,462 $ 5,422 Equity arising from merger consideration (1,426 ) (1,426 ) Preferred stock assumed by Leucadia 125 125 Net amortization to date of purchase accounting adjustments, net of tax   (37 )   (25 ) Total equity excluding the impact of the merger $ 4,124   $ 4,096     Leverage ratio - excluding merger impacts   10.0     9.3   (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 calcuation 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.

For further information:Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief Financial Officer