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

Highlights for the three months ended August 31, 2014:

  • Total Net revenues of $843 million
  • Pre-tax earnings of $136 million
  • Net earnings of $84 million
  • Record Investment Banking net revenues of $468 million
  • Equities net revenues of $172 million
  • Fixed Income net revenues of $195 million
  • Total Sales and Trading net revenues of $367 million

Highlights for the nine months ended August 31, 2014:

  • Record Total Net revenues of $2,465 million
  • Record Pre-tax earnings of $417 million
  • Record Net earnings of $257 million
  • Record Investment Banking net revenues of $1,213 million
  • Equities net revenues of $538 million
  • Fixed Income net revenues of $699 million
  • Total Sales and Trading net revenues of $1,237 million

Richard B. Handler, Chairman and Chief Executive Officer, and Brian P. Friedman, Chairman of the Executive Committee, commented: “These results represent the best third quarter and the best first nine-months Jefferies has achieved in our over 50-year history. Our third quarter performance was driven by $468 million in Investment Banking net revenues. These record investment banking results reflect solid contributions from equity and debt capital markets, strong performance in our merger and acquisition advisory business, and broad participation across our industry groups and geographies. Our sales and trading business results were also solid for the quarter and are $367 million. We continue to expand our client reach and believe we are gaining market share across the board as we leverage our unique position as the largest non-bank, full-service global investment banking firm based in the U.S. The overall environment is reasonable, and our competitive position has never been stronger.”

The attached financial tables should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended May 31, 2014 and our Annual Report on Form 10-K for the year ended November 30, 2013. On September 2, 2014, we issued a press release announcing preliminary financial results for the fiscal third quarter of 2014, which were also filed with a Current Report on Form 8-K. Actual results as reported herein differ from those preliminary results as a result of our routine financial reporting close process, which has now been finalized. Differences in the actual results for the fiscal third quarter of 2014 reported herein from the preliminary results are attributed to revenue allocations to business divisions, conclusions on revenue arrangements, fair value estimates and adjustments to expense accruals.

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 Ended Quarter Ended Nine Months Ended Six Months Ended Quarter Ended August 31, 2014 August 31, 2013 August 31, 2014 August 31, 2013 February 28, 2013   Revenues: Commissions $ 159,085 $ 153,402 $ 488,526 $ 316,161 $ 146,240 Principal transactions 144,354 (24,910) 566,133 109,661 300,278 Investment banking 467,793 309,339 1,213,262 586,473 288,278

Asset management fees and investment

 

income from managed funds 8,463 13,549 15,319 24,076 10,883 Interest income 249,251 230,672 782,059 489,337 249,277 Other revenues   26,489   28,630   57,962   54,875   27,004 Total revenues 1,055,435 710,682 3,123,261 1,580,583 1,021,960 Interest expense   212,126   178,987   657,932   390,450   203,416 Net revenues 843,309 531,695 2,465,329 1,190,133 818,544

Interest on mandatorily redeemable preferred interests of

consolidated subsidiaries   -   -   -   3,368   10,961

Net revenues, less interest on mandatorily redeemable preferred

interests of consolidated subsidiaries

  843,309   531,695   2,465,329   1,186,765   807,583   Non-interest expenses: Compensation and benefits 477,268 293,771 1,390,043 667,651 474,217   Non-compensation expenses: Floor brokerage and clearing fees 55,967 49,166 159,500 98,068 46,155 Technology and communications 67,286 62,266 201,849 126,105 59,878 Occupancy and equipment rental 28,477 26,205 81,652 58,430 24,309 Business development 27,800 17,624 79,193 40,356 24,927 Professional services 31,231 25,269 81,395 54,788 24,135 Other   19,645   34,012   54,656   52,732   14,475 Total non-compensation expenses   230,406   214,542   658,245   430,479   193,879   Total non-interest expenses   707,674   508,313   2,048,288   1,098,130   668,096   Earnings before income taxes 135,635 23,382 417,041 88,635 139,487   Income tax expense   51,762   8,493   155,962   33,500   48,645 Net earnings 83,873 14,889 261,079 55,135 90,842

 

Net earnings attributable to noncontrolling interests

  312   3,149   3,760   3,887   10,704

Net earnings attributable to Jefferies Group LLC/common  stockholders

$ 83,561 $ 11,740 $ 257,319 $ 51,248 $ 80,138   Pretax operating margin 16.1% 4.4% 16.9% 7.5% 17.3% Effective tax rate 38.2% 36.3% 37.4% 37.8% 34.9%     JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Other Data) (Unaudited)                     Successor   Predecessor   Quarter Ended Quarter Ended Nine Months Ended Six Months Ended Quarter Ended August 31, 2014   August 31, 2013   August 31, 2014 August 31, 2013   February 28, 2013  

Revenues by Source

Equities $ 171,708 $ 151,038 $ 537,769 $ 292,628 $ 167,354 Fixed income   195,345   47,769   698,979       276,956   352,029   Total 367,053 198,807 1,236,748 569,584 519,383     Equity 93,309 56,482 271,773 110,046 61,380 Debt   175,597   120,187   495,635       253,901   140,672   Capital markets 268,906 176,669 767,408 363,947 202,052 Advisory   198,887   142,670   445,854       232,526   86,226   Investment banking 467,793 319,339 1,213,262 596,473 288,278  

Asset management fees and investment income (loss)

from managed funds:   Asset management fees 7,379 9,578 21,752 20,910 11,083   Investment income (loss) from managed funds   1,084   3,971   (6,433

)

 

    3,166   (200 )   Total   8,463   13,549   15,319     24,076   10,883     Net revenues   843,309   531,695   2,465,329     1,190,133   818,544    

Interest on mandatorily redeemable preferred interests of consolidated subsidiaries

  -   -   -     3,368   10,961    

Net revenues, less mandatorily redeemable preferred interests of consolidated subsidiaries

$ 843,309 $

531,695

$ 2,465,329   $ 1,186,765 $ 807,583    

Other Data

Number of trading days 64 64 188 128 60   Average firmwide VaR (in millions) (A) $ 13.50 $ 11.02 $ 14.88 $ 9.89 $ 9.27 Average firmwide VaR excluding Knight Capital (in millions) (A) $ 8.25 $ 7.24 $ 9.80 $ 6.51 $ 5.99

Average firmwide VaR excluding Knight Capital and Harbinger Group

Inc. (in millions) (A)

$ 8.25 $ 7.24 $ 8.48 $ 6.51 $ 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 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 Quarter Ended Quarter Ended Quarter Ended August 31, 2014 May 31, 2014   August 31, 2013  

Financial position:

Total assets (1) $ 44,764 $ 43,610 $ 38,830 Average total assets for the period (1) $ 51,369 $ 50,379 $ 45,824 Average total assets less goodwill and intangible assets for the period (1) $ 49,387 $ 48,394 $ 43,840   Cash and cash equivalents (1) $ 4,035 $ 3,958 $ 4,119 Cash and cash equivalents and other sources of liquidity (1) (2) $ 5,913 $ 5,824 $ 5,574 Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 13.2 % 13.4 % 14.4 %

Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1)(2)

13.8 % 14.0 % 15.1 %   Financial instruments owned (1) $ 18,420 $ 17,144 $ 13,698 Goodwill and intangible assets (1) $ 1,978 $ 1,984 $ 1,988   Total equity (including noncontrolling interests) $ 5,602 $ 5,527 $ 5,241 Total member's / common stockholders' equity $ 5,571 $ 5,496 $ 5,164 Tangible member's / common stockholders' equity (3) $ 3,593 $ 3,512 $ 3,176  

Level 3 financial instruments:

Level 3 financial instruments owned (1) (4) $ 499 $ 490 $ 444 Level 3 financial instruments owned with economic exposure (1) (5) $ 480 $ 490 $ 441 Level 3 financial instruments owned - % total assets (1) 1.1 % 1.1 % 1.1 % Level 3 financial instruments owned - % total financial instruments owned (1) 2.7 % 2.9 % 3.2 % Level 3 financial instruments owned with economic exposure - % total financial instruments owned (1) 2.6 % 2.9 % 3.2 %

Level 3 financial instruments owned with economic exposure - % tangible member's / common stockholders' equity (1)

13.4 % 14.0 % 13.9 %  

Other data and financial ratios:

Total capital (1) (6) $ 11,970 $ 11,941 $ 11,034 Leverage ratio (1) (7) 8.0 7.9 7.4 Adjusted leverage ratio (1) (8) 10.5 10.0 9.3 Tangible gross leverage ratio (1) (9) 11.9 11.9 11.6 Leverage ratio - excluding impacts of the Leucadia transaction (1) (10) 10.1 10.0 9.4   Number of trading days 64 63 64   Average firmwide VaR (11) $ 13.50 $ 14.94 $ 11.02 Average firmwide VaR excluding Knight Capital (11) $ 8.25 $ 8.63 $ 7.24 Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (11) $ 8.25 $ 7.97 $ 7.24   Number of employees, at period end 3,885 3,785 3,805     JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL HIGHLIGHTS - FOOTNOTES     (1) Amounts pertaining to August 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 August 31, 2014.   (2) As of August 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 $1,530 million, in aggregate, and $348 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, 2014 were $1,202 million and $664 million, and as of August 31, 2013, were $1,145 million and $310 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)

Level 3 financial instruments owned with economic exposure represent Level 3 financial instruments owned adjusted for Level 3 financial instruments that are financed by nonrecourse secured financing or attributable to third party or employee noncontrolling interests in certain consolidated entities.

 

  (6) As of August 31, 2014, May 31, 2014 and August 31, 2013, total capital includes our long-term debt of $6,368 million, $6,414 million and $5,793 million, respectively, 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.   (7) Leverage ratio equals total assets divided by total equity.   (8) 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 August 31, 2014, May 31, 2014 and August 31, 2013 adjusted assets were $38,100 million, $35,577 million and $30,112 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.   (9) 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.   (10) Leverage ratio - excluding impacts of the Leucadia transaction (a non-GAAP financial measure) is calculated as follows:               August 31,     May 31,     August 31, $ millions 2014 2014   2013 Total assets $ 44,764 $ 43,610 $ 38,830 Goodwill and acquisition accounting fair value adjustments on the transaction with Leucadia (1,957 ) (1,957 ) (1,957 ) Net amortization to date on asset related purchase accounting adjustments   42     37     18   Total assets excluding transaction impacts $ 42,849   $ 41,690   $ 36,891     Total equity $ 5,602 $ 5,527 $ 5,241 Equity arising from transaction consideration (1,426 ) (1,426 ) (1,426 ) Preferred stock assumed by Leucadia 125 125 125 Net amortization to date of purchase accounting adjustments, net of tax   (58 )   (48 )   (17 )   Total equity excluding transaction impacts $ 4,243   $ 4,178   $ 3,923     Leverage ratio - excluding impacts of the Leucadia transaction   10.1     10.0     9.4     (11)   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.  

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

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