Jefferies Group LLC today announced financial results for its
fiscal third quarter 2015.
Highlights for the three months ended August 31, 2015, with
adjusted amounts excluding the operating results and wind down
costs of our Bache business, which reflects a substantial portion
of the final wind-down costs and write-offs, and the final period
of meaningful operations:
- Investment Banking Net Revenues of $390
million
- Total Sales and Trading Net Revenues of
$185 million
- Total Adjusted Net Revenues of $583
million (excluding Bache)
- Adjusted Net Earnings of $47 million
(excluding Bache)
- Net Earnings of $2 million (including
Bache)
Highlights for the nine months ended August 31, 2015, with
adjusted amounts excluding the operating results and wind down
costs of our Bache business:
- Investment Banking Net Revenues of
$1,066 million
- Total Sales and Trading Net Revenues of
$896 million
- Total Adjusted Net Revenues of $1,882
million (excluding Bache)
- Adjusted Net Earnings of $153 million
(excluding Bache)
- Net Earnings of $75 million (including
Bache)
Richard B. Handler, Chairman and Chief Executive Officer, and
Brian P. Friedman, Chairman of the Executive Committee,
commented:
“Despite solid results in Investment Banking and Equities, our
overall results are disappointing. Our Net Revenues for the quarter
were $583 million and our Net Earnings were $47 million, excluding
Bache. After a solid second quarter, the third quarter’s sales and
trading environment was initially slow due to concerns about a
possible Greek exit from the Euro, and then became more volatile
and challenging in the second half of the quarter as news of
China's economic growth deceleration led to a further deterioration
of trading volumes and continuing declines in global asset prices.
A substantial increase in volatility affected almost every
asset class globally. This significantly impacted, among other
areas, the distressed side of the credit market, most notably in
the energy sector.”
“Fixed Income net revenues were negative $14 million for the
quarter, reflecting the slow environment and the volatility
that resulted in mark-to-market write-downs in our inventory.
Trading results of our high yield distressed sales and trading
business for the quarter particularly impacted our results
negatively. As is the nature of the distressed market making
business, Jefferies assumes positions in sectors where the firm's
clients and the market are most active, with mark to market gains
and losses recognized on a daily basis. During the last nine
months, losses totaling $90 million were recorded across more than
25 distressed energy positions. For the nine month period we
recognized negative revenues in respect of the ten largest
individual loss-making positions of about $4 million to $19 million
each, or an average of about $8 million. These markdowns, combined
with lower activity levels and more modest inventory write downs in
several other areas of our global fixed income business,
accounted for much of the balance of negative pressure on our
fixed income results. As one of the leading investment banking
platforms serving the energy sector, with meaningful recent
involvement in restructurings and financings, we continue to be
committed to our energy clients.”
“We believe most of the issues we faced this past quarter in
Fixed Income were due to distinct factors that began about a year
ago and the largest portion of which relates to the turmoil in the
oil and gas industry. For the first nine months of 2015, we have
provided liquidity and traded approximately $5 billion in
distressed energy securities for our clients. Our exposures in our
distressed energy trading business decreased approximately 50%
during the quarter and are currently down to $70 million in total
net market value. We believe that, with our exposures in distressed
securities reduced to current levels, there should be no similar
impact on our future results.”
“While adversely affected by the sell-off in the global markets
during August, our core Equities business performed reasonably.
Equities Net Revenues for the period were $203 million. Jefferies
Investment Banking Net Revenues were a very solid $390 million,
including our best quarter ever in Equity Capital markets. For the
nine months ended August 31, 2015, our fee based investment
represented 54% of net revenues, a similar proportion to the
comparable period a year ago. Our investment banking backlog
remains robust and diverse in terms of products, sectors and
regions. Our level 3 assets remain below 3% of our inventory,
and all of our balance sheet and liquidity metrics are in line with
every one of our historical ranges. We reduced our KCG
position during the quarter by tendering 6.5 million shares at $14
per share, realizing $91 million in cash.”
"We have substantially completed the unwind of Bache within our
expectations of timing, cost and write-offs. We have transferred
virtually all client accounts to Societe Generale and other service
providers. No meaningful risk pertaining to this business remained
on our books at the end of the third quarter. To put into
perspective how the impact Bache has had on our recent
results, in 2014 our firmwide net income of $158
million included a net loss of $100 million with respect
to Bache. Similarly, for the 2015 full fiscal year, we
expect Jefferies will incur the same net loss in
respect of Bache as we did in 2014, or about
$100 million, including all material final-wind down costs. For the
first nine months of 2015, our results include a net loss of $77
million with respect to Bache. These overall results included a
write-off of goodwill of $52 million in 2014 and non-cash
write-offs of $24 million in 2015 on a pre-tax basis. We are
pleased finally to be able to move on.”
“While market dislocations occur from time to time, they
typically have allowed us opportunities to take advantage of our
unique competitive position as we continue to invest across
Jefferies to improve our capabilities to serve our growing client
base. We have made key hires this summer in Investment Banking,
Equities and Fixed Income, and we expect to continue to grow our
market share by serving well our existing and new clients
globally.”
“With our business mix simplified and more focused with the
unwind of Bache, Jefferies should be able to deliver more
consistent and stronger results. Our progress and momentum across
the rest of our firm have been offset by the trading losses and
sluggish activity of a handful of businesses. Our overriding goal
is to deliver results in this fourth quarter and in 2016 that
reflect the full earnings power of the Jefferies franchise in
Equities, Fixed Income and Investment Banking.”
The attached financial tables should be read in connection with
our Quarterly Report on Form 10-Q for the quarter ended
May 31, 2015 and our Annual Report on Form 10-K for the year
ended November 30, 2014. Amounts pertaining to August 31, 2015
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 quarterly period ended August 21, 2015. Adjusted financial
measures referenced above are non-GAAP financial measures, which
management believes provide meaningful information to enable
investors to evaluate the Company's results in the context of
exiting the Bache business. Refer to the Supplemental Schedules on
pages 6-8 for a reconciliation of Adjusted measures to the
respective direct U.S. GAAP financial measures.
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, expected financial results and unwind costs of Bache. 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, 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 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 August 31,
2015 May 31, 2015 August 31, 2014
Revenues: Commissions $ 172,284 $ 173,508 $
159,085 Principal transactions (50,297 ) 155,962 144,354 Investment
banking 389,820 404,262 467,793 Asset management fees and
investmentincome from managed funds 4,182 5,650 8,463 Interest
income 230,805 240,552 249,251 Other revenues 34,329
28,576 26,489 Total revenues 781,123
1,008,510 1,055,435 Interest expense 202,195
216,956 212,126 Net revenues 578,928
791,554 843,309
Non-interest expenses: Compensation and benefits 336,499 480,770
477,268 Non-compensation expenses: Floor brokerage and
clearing fees 45,307 58,713 55,967 Technology and communications
89,378 72,361 67,286 Occupancy and equipment rental 25,967 24,420
28,477 Business development 30,527 26,401 27,800 Professional
services 24,684 27,419 31,231 Other 19,473
16,758 19,645 Total non-compensation expenses
235,336 226,072 230,406
Total non-interest expenses 571,835 706,842
707,674 Earnings before income taxes 7,093
84,712 135,635 Income tax expense 4,609 24,530
51,762 Net earnings 2,484 60,182 83,873 Net
earnings attributable to noncontrolling interests 427
349 312 Net earnings attributable to
Jefferies Group LLC $ 2,057 $ 59,833
$ 83,561 Pretax operating margin 1.2 % 10.7 %
16.1 % Effective tax rate 65.0 % 29.0 % 38.2 %
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS (Amounts in Thousands)
(Unaudited) Nine Months Ended August 31,
2015 August 31, 2014 Revenues:
Commissions $ 512,714 $ 488,526 Principal transactions 211,142
566,133 Investment banking 1,066,077 1,213,262 Asset management
fees and investmentincome (loss) from managed funds (5 ) 15,319
Interest income 700,227 782,059 Other revenues 82,810
57,962 Total revenues 2,572,965 3,123,261 Interest
expense 610,811 657,932 Net revenues
1,962,154 2,465,329 Non-interest
expenses: Compensation and benefits 1,182,484 1,390,043
Non-compensation expenses: Floor brokerage and clearing fees
159,100 159,500 Technology and communications 234,126 201,849
Occupancy and equipment rental 74,571 81,652 Business development
78,865 79,193 Professional services 76,359 81,395 Other
51,960 54,656 Total non-compensation expenses
674,981 658,245 Total non-interest
expenses 1,857,465 2,048,288 Earnings
before income taxes 104,689 417,041 Income tax expense
29,470 155,962 Net earnings 75,219 261,079 Net
earnings attributable to noncontrolling interests 1,647
3,760 Net earnings attributable to Jefferies
Group LLC $ 73,572 $ 257,319
Pretax operating margin 5.3 % 16.9 % Effective tax rate 28.2 % 37.4
%
JEFFERIES GROUP LLC AND SUBSIDIARIES
CONSOLIDATED ADJUSTED SELECTED FINANCIAL DATA (Amounts in
Thousands) (Unaudited)
Quarter Ended August 31, 2015 GAAP
Adjustments Adjusted Net revenues $ 578,928 $
(4,289 ) (1) $ 583,217 Non-interest expenses: Compensation
and benefits 336,499 22,117 (2) 314,382 Non-compensation expenses
235,336 37,708 (3) 197,628
Total non-interest expenses 571,835
59,825 (4) 512,010 Operating income
(loss) $ 7,093 $ (64,114 ) $ 71,207
Net earnings (loss) $ 2,484 $ (44,318 )
$ 46,802 Compensation ratio (a) 58.1 % 53.9 %
Quarter Ended May 31, 2015 GAAP
Adjustments Adjusted Net revenues $ 791,554 $
35,697 (1) $ 755,857 Non-interest expenses: Compensation and
benefits 480,770 34,473 (2) 446,297 Non-compensation expenses
226,072 38,536 (3) 187,536
Total non-interest expenses 706,842
73,009 633,833 Operating income (loss)
$ 84,712 $ (37,312 ) $ 122,024
Net earnings (loss) $ 60,182 $ (25,505 )
$ 85,687 Compensation ratio (a) 60.7 % 59.0 %
Quarter Ended August 31, 2014 GAAP
Adjustments Adjusted Net revenues $ 843,309 $
47,928 (1) $ 795,381 Non-interest expenses: Compensation and
benefits 477,268 22,602 (2) 454,666 Non-compensation expenses
230,406 36,068 (3) 194,338
Total non-interest expenses 707,674
58,670 649,004 Operating income (loss)
$ 135,635 $ (10,742 ) $ 146,377
Net earnings (loss) $ 83,873 $ (5,660 )
$ 89,533 Compensation ratio (a) 56.6 % 57.2 %
(a) Reconciliation of the compensation ratio for U.S. GAAP to
Adjusted is a derivation of the reconciliation of the components
above.
This presentation of Adjusted financial information is an
unaudited non-GAAP financial measure. Adjusted financial
information begins with information prepared in accordance with
U.S. GAAP and then those results are adjusted to exclude the
operations of the Company's Bache business. The Company believes
that the disclosed Adjusted measures and any adjustments thereto,
when presented in conjunction with comparable U.S. GAAP measures
are useful to investors as they enable investors to evaluate the
Company's results in the context of exiting the Bache business.
These measures should not be considered a substitute for, or
superior to, measures of financial performance prepared in
accordance with U.S. GAAP.
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED
ADJUSTED SELECTED FINANCIAL DATA (Amounts in Thousands)
(Unaudited) Nine
Months Ended August 31, 2015 GAAP Adjustments
Adjusted Net revenues $ 1,962,154 $ 80,562 (1) $
1,881,592 Non-interest expenses: Compensation and benefits
1,182,484 80,570 (2) 1,101,914 Non-compensation expenses
674,981 114,841 (3) 560,140
Total non-interest expenses 1,857,465 195,411
(4) 1,662,054 Operating income (loss)
$ 104,689 $ (114,849 ) $ 219,538
Net earnings (loss) $ 75,219 $ (77,437
) $ 152,656 Compensation ratio (a) 60.3 % 58.6
%
Nine Months Ended August 31, 2014
GAAP Adjustments Adjusted Net revenues
$ 2,465,329 $ 147,890 (1) $ 2,317,439 Non-interest expenses:
Compensation and benefits 1,390,043 76,824 (2) 1,313,219
Non-compensation expenses 658,245 104,511
(3) 553,734 Total non-interest expenses
2,048,288 181,335 1,866,953
Operating income (loss) $ 417,041 $
(33,445 ) $ 450,486 Net earnings (loss)
$ 261,079 $ (17,130 ) $ 278,209
Compensation ratio (a) 56.4 % 56.7 %
(a) Reconciliation of the compensation ratio for U.S. GAAP to
Adjusted is a derivation of the reconciliation of the components
above.
This presentation of Adjusted financial information is an
unaudited non-GAAP financial measure. Adjusted financial
information begins with information prepared in accordance with
U.S. GAAP and then those results are adjusted to exclude the
operations of the Company's Bache business. The Company believes
that the disclosed Adjusted measures and any adjustments thereto,
when presented in conjunction with comparable U.S. GAAP measures
are useful to investors as they enable investors to evaluate the
Company's results in the context of exiting the Bache business.
These measures should not be considered a substitute for, or
superior to, measures of financial performance prepared in
accordance with U.S. GAAP.
JEFFERIES GROUP LLC AND
SUBSIDIARIESCONSOLIDATED ADJUSTED SELECTED FINANCIAL
DATAFOOTNOTES
(1) Revenues generated by the Bache business, including
commissions, principal transaction revenues and net interest
revenue, for the presented period have been classified as a
reduction of revenue in the presentation of Adjusted financial
measures.
(2) Compensation expense and benefits recognized during the
presented period for employees whose sole responsibilities pertain
to the activities of the Bache business, including front office
personnel and dedicated support personnel, have been classified as
a reduction of Compensation and benefits expense in the
presentation of Adjusted financial measures.
(3) Expenses directly related to the operations of the Bache
business for the presented periods have been excluded from Adjusted
non-compensation expenses. These expenses include Floor brokerage
and clearing fees, amortization of capitalized software used
directly by the Bache business in conducting its business
activities, technology and occupancy expenses directly related to
conducting Bache business operations and business development and
professional services expenses incurred by the Bache business as
part of its client sales and trading activities, including
estimates of certain support costs dedicated to the Bache
business.
(4) Total non-interest expenses for the three and nine months
ended August 31, 2015 include costs of $33.1 million and $61.7
million, respectively, on a pre-tax basis, related to our exit of
the Bache business. The after-tax effect of these costs is
$23.7 million and $44.2 million for the three and nine months ended
August 31, 2015, respectively. These costs consist primarily
of severance, retention and benefit payments for employees,
incremental amortization of outstanding restricted stock and cash
awards, contract termination costs and incremental amortization
expense of capitalized software expected to no longer be used
subsequent to the wind-down of the business. We expect to
incur additional costs of $11.8 million and $8.5 million on a
pre-tax and post-tax basis, respectively, over the remainder of
fiscal 2015.
JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED
STATISTICAL INFORMATION (Amounts in Thousands, Except Other
Data) (Unaudited) Quarter
Ended August 31, 2015 May 31, 2015 August 31,
2014
Revenues by
Source
Equities $ 203,077 $ 228,198 $ 171,708 Fixed income (18,151 )
153,444 195,345 Total sales and trading 184,926
381,642 367,053 Equity 127,051 108,805 93,309 Debt
113,928 154,670 175,597 Capital markets 240,979
263,475 268,906 Advisory 148,841 140,787 198,887
Total investment banking 389,820 404,262 467,793
Asset management fees and investment income (loss)from
managed funds: Asset management fees 7,067 4,903 7,379 Investment
(loss) income from managed funds (2,885 ) 747 1,084 Total
4,182 5,650 8,463
Net revenues $
578,928 $ 791,554 $
843,309
Other
Data
Number of trading days 65 63 64 Number of trading loss days 21 10 9
Number of trading loss days excluding KCG 18 5 2 Average
firmwide VaR (in millions) (A) $ 13.77 $ 12.80 $ 13.50 Average
firmwide VaR excluding KCG (in millions) (A) $ 12.16 $ 9.86 $ 8.25
(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, 2014.
JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED
STATISTICAL INFORMATION (Amounts in Thousands, Except Other
Data) (Unaudited) Nine Months
Ended August 31, 2015 August 31, 2014
Revenues by
Source
Equities $ 634,754 $ 537,769 Fixed income 261,328 698,979
Total sales and trading 896,082 1,236,748
Equity 314,927 271,773 Debt 329,474 495,635
Capital markets 644,401 767,408 Advisory 421,676 445,854
Total investment banking 1,066,077 1,213,262
Asset management fees and investment income (loss)from
managed funds: Asset management fees 25,955 21,752 Investment
(loss) income from managed funds (25,960 ) (6,433 ) Total (5 )
15,319
Net revenues $ 1,962,154
$ 2,465,329
Other
Data
Number of trading days 189 188 Number of trading loss days 42 27
Number of trading loss days excluding KCG 32 11 Average
firmwide VaR (in millions) (A) $ 13.29 $ 14.88 Average firmwide VaR
excluding KCG (in millions) (A) $ 10.47 $ 9.80
(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, 2014.
JEFFERIES GROUP LLC AND SUBSIDIARIES FINANCIAL
HIGHLIGHTS (Amounts in Millions, Except Where Noted)
(Unaudited) Quarter Ended
August 31, 2015 May 31, 2015 August 31, 2014
Financial
position:
Total assets (1) $ 42,785 $ 44,142 $ 44,764 Average total assets
for the period (1) $ 48,327 $ 51,013 $ 51,369 Average total assets
less goodwill and intangible assets for the period (1) $ 46,432 $
49,118 $ 49,387 Cash and cash equivalents (1) $ 3,442 $
3,289 $ 4,035 Cash and cash equivalents and other sources of
liquidity (1) (2) $ 5,151 $ 4,951 $ 5,913 Cash and cash equivalents
and other sources of liquidity - % total assets (1) (2) 12.0 % 11.2
% 13.2 % Cash and cash equivalents and other sources of liquidity -
% total assets less goodwill
and intangible assets (1) (2)
12.6 % 11.7 % 13.8 % Financial instruments owned (1) $
18,892 $ 18,843 $ 18,420 Goodwill and intangible assets (1) $ 1,891
$ 1,895 $ 1,978 Total equity (including noncontrolling
interests) $ 5,514 $ 5,520 $ 5,602 Total member's equity $ 5,481 $
5,480 $ 5,571 Tangible member's equity (3) $ 3,590 $ 3,584 $ 3,593
Bache assets (4) $ 263 $ 2,955 $ 3,641
Level 3 financial
instruments:
Level 3 financial instruments owned (1) (5) (6) $ 474 $ 540 $ 462
Level 3 financial instruments owned - % total assets (1) (6) 1.1 %
1.2 % 1.0 % Total Level 3 financial instruments owned - % total
financial instruments (1) (6) 2.5 % 2.9 % 2.5 % Level 3 financial
instruments owned - % tangible member's equity (1) (6) 13.2 % 15.1
% 12.9 %
Other data and
financial ratios:
Total capital (1) (7) $ 10,850 $ 10,860 $ 11,970 Leverage ratio (1)
(8) 7.8 8.0 8.0 Adjusted leverage ratio (1) (9) 10.3 10.3 10.5
Tangible gross leverage ratio (1) (10) 11.4 11.8 11.9 Leverage
ratio - excluding impacts of the Leucadia transaction (1) (11) 9.8
10.1 10.1 Number of trading days 65 63 64 Number of trading
loss days 21 10 9 Number of trading loss days excluding KCG 18 5 2
Average firmwide VaR (12) $ 13.77 $ 12.80 $ 13.50 Average firmwide
VaR excluding KCG (12) $ 12.16 $ 9.86 $ 8.25 Number of
employees, at period end 3,665 3,830 3,885
JEFFERIES GROUP LLC AND
SUBSIDIARIESFINANCIAL HIGHLIGHTS - FOOTNOTES
(1) Amounts pertaining to August 31, 2015 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
quarterly period ended August 31, 2015.
(2) At August 31, 2015, 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 $1,263 million, in
aggregate, and $446 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. At May 31,
2015 and August 31, 2014 amounts also included additional funds
that were 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 at May 31, 2015 were $1,135 million and $527 million,
respectively, and at August 31, 2014, were $1,530 million and $348
million, respectively.
(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) Bache assets (a non-GAAP financial measure) includes Cash
and cash equivalents, Cash and securities segregated, Financial
instruments owned, Securities purchased under agreements to resell
and Receivables attributable to our Bache business.
(5) 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.
(6) In May 2015, the Financial Accounting Standards Board issued
Accounting Standards Update No. 2015-07, “Fair Value Measurement
(Topic 820) - Disclosures for Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent).” The
guidance removes the requirement to include investments in the fair
value hierarchy for which the fair value is measured at net asset
value using the practical expedient under “Fair Value Measurements
and Disclosures (Topic 820).” The guidance also removes the
requirement to make certain disclosures for all investments that
are eligible to be measured at fair value using the net asset value
practical expedient. Rather, those disclosures are limited to
investments for which we have elected to measure the fair value
using that practical expedient. The guidance is effective
retrospectively and we have early adopted this guidance during the
second quarter of fiscal 2015.
(7) At August 31, 2015, May 31, 2015 and August 31, 2014, total
capital includes our long-term debt of $5,337 million, $5,340
million and $6,368 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.
(8) Leverage ratio equals total assets divided by total
equity.
(9) 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 August 31, 2015, May 31, 2015 and
August 31, 2014, adjusted assets were $37,241 million, $37,172
million and $38,100 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.
(10) 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.
(11) Leverage ratio - excluding impacts of the Leucadia
transaction (a non-GAAP financial measure) is calculated as
follows:
August 31, May 31,
August 31, $ millions
2015 2015 2014
Total assets $ 42,785 $ 44,142 $ 44,764 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
120 116 42 Total assets excluding transaction
impacts $ 40,948 $ 42,301 $ 42,849
Total equity $ 5,514 $ 5,520 $ 5,602 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
(41 ) (31 ) (58 ) Total equity excluding transaction impacts $
4,172 $ 4,188 $ 4,243 Leverage ratio -
excluding impacts of the Leucadia transaction 9.8 10.1
10.1
(12) 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, 2014.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150917005632/en/
Jefferies Group LLCPeregrine C. Broadbent, 212-284-2338Chief
Financial Officer
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