Jefferies Group LLC today announced financial results for its
fiscal first quarter 2017.
Highlights for the three months ended February 28, 2017:
- Total Net Revenues of $796 million
- Investment Banking Net Revenues of $408
million
- Total Equities and Fixed Income Net
Revenues of $379 million
- Earnings Before Income Taxes of $124
million
- Net Earnings of $114 million
Rich Handler, Chairman and Chief Executive Officer, and Brian
Friedman, Chairman of the Executive Committee, commented: "Our
first quarter represents the fourth consecutive quarter of
improving results. Net revenues, for the last 12 months through
February 2017, aggregate to nearly $3 billion and reflect the
benchmark level of the firm's capabilities during a stable
environment. Our first quarter performance was driven by
well-balanced contributions of $408 million from Investment Banking
and $379 million from Equities and Fixed Income. Our Investment
Banking results reflect an improved Debt Capital markets
performance, a solid contribution by Equity Capital Markets and
another good quarter for our Advisory activities. The sales and
trading environment was reasonably robust for much of the quarter.
Fixed Income revenues were $222 million, an increase of 48% versus
the fourth quarter of last year and nearly four times greater than
the revenues of last year’s challenging first quarter. Equities
revenues were a solid $157 million. The tax rate for the quarter
was 8% and reflects a $32 million, or 26%, net tax benefit which
resulted from the repatriation of earnings, along with their
associated foreign tax credits, from certain foreign
subsidiaries."
The attached financial tables should be read in conjunction with
our Annual Report on Form 10-K for the year ended November 30,
2016. Amounts herein pertaining to February 28, 2017 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 quarter
ended February 28, 2017.
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, a global, full-service 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
February 28, 2017 November 30, 2016
February 29, 2016 Revenues: Commissions
and other fees $ 145,822 $ 157,549 $ 155,824 Principal transactions
220,957 137,362 (103,373 ) Investment banking 408,021 415,067
230,930
Asset management fees and investmentincome
from managed funds
8,926 1,319 9,530 Interest 202,023 202,002 221,945 Other 24,048
26,661 (21,751 ) Total revenues 1,009,797 939,960
493,105 Interest expense 214,284 198,191 194,118
Net revenues 795,513 741,769 298,987
Non-interest expenses: Compensation and benefits 460,172
427,451 349,743 Non-compensation expenses: Floor brokerage
and clearing fees 45,858 42,946 40,479 Technology and
communications 65,507 66,396 64,989 Occupancy and equipment rental
25,815 26,635 24,585 Business development 22,632 25,405 24,854
Professional services 32,124 29,763 23,512 Other 19,206
26,644 20,701 Total non-compensation expenses 211,142
217,789 199,120 Total non-interest expenses
671,314 645,240 548,863 Earnings (loss) before
income taxes 124,199 96,529 (249,876 ) Income tax expense (benefit)
10,179 9,454 (83,107 ) Net earnings (loss) 114,020
87,075 (166,769 ) Net earnings (loss) attributable to
noncontrolling interests 1 (105 ) 44 Net earnings
(loss) attributable to Jefferies Group LLC $ 114,019 $
87,180 $ (166,813 ) Pretax operating margin 15.6 %
13.0 % (83.6 )% Effective tax rate (1) 8.2 % 9.8 % 33.3 %
(1) The effective tax rate for the three months ended
February 28, 2017 reflects a $32 million, or 26%, net tax benefit,
which resulted from the repatriation of earnings, along with their
associated foreign tax credits, from certain foreign subsidiaries.
The effective tax rate for the three months ended November 30, 2016
was impacted by revisions to previously forecasted results during
the year ended November 30, 2016.
JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL
INFORMATION (Amounts in Thousands, Except Other Data)
(Unaudited) Quarter Ended
February 28, 2017 November 30, 2016
February 29, 2016
Revenues by
Source
Equities $ 156,714 $ 175,960 $ 1,745 Fixed income 221,852
149,423 56,782 Total Equities and Fixed income
378,566 325,383 58,527 Equity 61,566
62,085 43,999 Debt 162,628 128,706 57,273
Capital markets 224,194 190,791 101,272 Advisory 183,827
224,276 129,658 Total Investment banking 408,021
415,067 230,930
Asset management fees and investment
income (loss) frommanaged funds:
Asset management fees 7,981 633 11,205 Investment income (loss)
from managed funds 945 686 (1,675 ) Total 8,926
1,319 9,530
Net revenues $
795,513 $ 741,769 $
298,987
Other
Data
Number of trading days 60 63 61 Number of trading loss days 3 11 17
Number of trading loss days, excluding KCG 3 4 12 Average
firmwide VaR (in millions) (1) $ 10.30 $ 8.46 $ 8.37 Average
firmwide VaR, excluding KCG (in millions) (1) $ 8.26 $ 5.93 $ 6.69
(1)
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, 2016.
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL
HIGHLIGHTS (Amounts in Millions, Except Where Noted)
(Unaudited) Quarter Ended
February 28, 2017 November 30, 2016
February 29, 2016
Financial
position:
Total assets (1) $ 37,703 $ 36,941 $ 35,193 Average total assets
for the period (1) $ 44,490 $ 43,412 $ 44,669 Average total assets
less goodwill and intangible assets for the period (1) $ 42,644 $
41,560 $ 42,796 Cash and cash equivalents (1) $ 4,080 $
3,529 $ 2,600 Cash and cash equivalents and other sources of
liquidity (1) (2) $ 5,886 $ 5,303 $ 4,085 Cash and cash equivalents
and other sources of liquidity - % total assets (1) (2) 15.6 % 14.4
% 11.6 %
Cash and cash equivalents and other
sources of liquidity - % total assets lessgoodwill and intangible
assets (1) (2)
16.4 % 15.1 % 12.3 % Financial instruments owned (1) $
13,253 $ 13,810 $ 13,630 Goodwill and intangible assets (1) $ 1,843
$ 1,847 $ 1,869 Total equity (including noncontrolling
interests) $ 5,472 $ 5,371 $ 5,262 Total member's equity $ 5,472 $
5,370 $ 5,261 Tangible member's equity (3) $ 3,629 $ 3,523 $ 3,392
Level 3 financial
instruments:
Level 3 financial instruments owned (1) (4) $ 365 $ 413 $ 489 Level
3 financial instruments owned - % total assets (1) 1.0 % 1.1 % 1.4
% Level 3 financial instruments owned - % total financial
instruments (1) 2.8 % 3.0 % 3.6 % Level 3 financial instruments
owned - % tangible member's equity (1) 10.1 % 11.7 % 14.4 %
Other data and
financial ratios:
Total long-term capital (1) (5) $ 11,388 $ 10,501 $ 10,588 Leverage
ratio (1) (6) 6.9 6.9 6.7 Adjusted leverage ratio (1) (7) 8.9 8.6
8.5 Tangible gross leverage ratio (1) (8) 9.9 10.0 9.8
Number of trading days 60 63 61 Number of trading loss days 3 11 17
Number of trading loss days, excluding KCG 3 4 12 Average firmwide
VaR (9) $ 10.30 $ 8.46 $ 8.37 Average firmwide VaR, excluding KCG
(9) $ 8.26 $ 5.93 $ 6.69 Number of employees, at period end
3,319 3,329 3,439
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
- FOOTNOTES (1) Amounts pertaining to
February 28, 2017 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, 2017.
(2) At February 28, 2017, 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 $1,308 million, in
aggregate, and $498 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. The
corresponding amounts included in other sources of liquidity at
November 30, 2016 were $1,455 million and $319 million,
respectively, and at February 29, 2016, were $1,061 million and
$424 million, respectively. The amounts included in other sources
of liquidity at February 29, 2016 have been reduced by $205 million
from what was previously disclosed to reflect adjustments for
certain securities that have subsequently been identified to have
been encumbered. (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
member's 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 February 28, 2017, November 30,
2016 and February 29, 2016, total long-term capital includes our
long-term debt of $5,915 million, $5,131 million and $5,326
million, respectively, and total equity. Long-term debt included in
total long-term capital is reduced by 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 February 28, 2017, November 30, 2016 and February
29, 2016, adjusted assets were $32,155 million, $30,352 million and
$28,920 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, 2016.
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version on businesswire.com: http://www.businesswire.com/news/home/20170321005591/en/
Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief
Financial Officer
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