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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