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
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