Jefferies Group LLC today announced financial results for its fiscal fourth quarter 2014.
Highlights for the three months ended November 30, 2014, with adjusted amounts excluding the operating results and goodwill and intangible asset impairments attributable to our Bache business:
- Total Net revenues of $538 million
- Total Adjusted Net Revenues (excluding Bache) of $494 million1
- Pre-tax earnings of negative $101 million, which includes both a goodwill impairment of $52 million and a write off of $8 million of intangible assets related to our Bache business, and a $52 million bad debt provision in respect of a receivable from OW Bunker
- Adjusted Operating income (excluding Bache) of positive $30 million1
- Net earnings of negative $93 million, reflecting the same items as noted in pre-tax earnings; the charge due to the impairment of Bache goodwill is not tax-deductible and the full-year tax rate has been trued up for the final regional mix of pre-tax earnings, which was significantly impacted by the OW Bunker bad debt provision
- Adjusted Net earnings (excluding Bache) of $19 million1
Highlights for the twelve months ended November 30, 2014:
- Total Net revenues of $3,003 million
- Investment Banking Net revenues of $1,529 million
- Equities and Fixed Income Net revenues of $1,457 million
- Total Adjusted Net revenues (excluding Bache) of $2,828 billion1
- Pre-tax earnings of $316 million
- Adjusted Operating income (excluding Bache) of $517 million1
- Net earnings of $168 million
- Adjusted Net earnings of $325 million1
Richard B. Handler, Chairman and Chief Executive Officer, and Brian P. Friedman, Chairman of the Executive Committee, commented: “After four consecutive strong quarters, we experienced a very challenging fourth quarter. Our Net revenues for the quarter were $538 million and our pre-tax earnings were negative $101 million. Excluding Bache, our adjusted Net revenues for the quarter were $494 million and our adjusted pre-tax profits were $30 million. Despite these results and our decision in respect of pursuing strategic alternatives for our Bache business, we believe Jefferies' prospects for 2015 are solid, with our Investment Banking backlog currently robust, and an expectation of more normal trading markets.”
1 Adjusted financial measures are non-GAAP financial measures. Management believes such measures provide meaningful information to investors as they enable investors to evaluate the Company's results in the context of our pursuing various strategic alternatives for the Bache business. Refer to the Supplemental Schedules on pages 6-7 for a reconciliation of Adjusted measures to the respective direct U.S. GAAP financial measures.
“Heightened volatility from mid-September through mid-November and a tepid trading environment throughout the quarter led to poor Fixed Income results, including mark-to-market write-downs in our inventory. Fixed Income revenues were $61 million for the quarter, compared to $227 million for the fourth quarter of last year, a decline of 73%, or $166 million. In particular, our distressed trading revenues for the quarter were negative $55 million versus positive $29 million for the comparable quarter last year, a decline of $84 million, much of which is unrealized. This decline was primarily due to mark to market inventory losses as a result of the broad sell-off in distressed and post-reorganization securities that followed the September 30 court decision regarding Fannie Mae and Freddie Mac. Mark downs between about $1 million and $5 million per name were recorded in securities of over twenty distressed and post re-organization issuers held by our core trading desks, including Freddie Mac and Fannie Mae, various issues in the energy and transport sectors, as well as several high yield municipal issuers, with most of the mark downs below $2 million per issuer. As is the nature of the distressed market making business, Jefferies holds positions of varying sizes across sectors where the firm is most active, with mark to market gains and losses recognized on a daily basis. The balance of our Fixed Income year-over-year quarterly revenue decline of about $82 million is primarily attributable to slower activity, heightened volatility and more modest inventory write downs in our other U.S. and international credit businesses, where no write downs exceeded $3 million for any individual security position.”
“While adversely impacted by events in October, our core Equities business otherwise performed well. Equities Net revenues for the period were $158 million compared to $290 million in the same quarter last year, a decrease of $132 million. $126 million of this decrease may be attributed to the mark to market gains of $110 million recorded in last year's fourth quarter in respect of KCG and Harbinger, and the $16 million mark to market loss we recorded this quarter with respect to our investment in KCG. The Harbinger position was sold to Leucadia, at the then market price, during the second quarter of fiscal 2014.”
“Jefferies Investment Banking Net revenues of $316 million are below last year's $417 million fourth quarter, primarily as a result of dampened capital markets activity due to the unsettled markets, which in turn led to the postponement of deals into future periods. The impact from the unusual publicity in late October and November was immaterial.”
“As a result of the growth and margin challenges we have recently faced in the Bache business we acquired in mid-2011, we are pursuing strategic alternatives for this business, and discussions with third parties in this regard are already underway. We are focused on the potential combination of Bache with another similar business that improves the combined businesses' competitive standing and margin. In connection with this, we have reversed the entire $52 million in goodwill and $8 million of the intangible assets that were both allocated to the Bache business as a function of the purchase accounting that arose upon our 2013 transaction with Leucadia. This goodwill was not initially recorded as a result of our acquisition of Bache, which we acquired below tangible book value. This amount is included in our non-compensation expenses, as is a 100% bad debt provision in respect of a $52 million receivable we hold from OW Bunker, which abruptly declared bankruptcy in early November after saying it uncovered risk-management issues that would result in $150 million in losses and a separate fraud that would result in a further $125 million in losses, the combined effect of which would wipe out its equity. We provided futures clearing and execution services to OW Bunker, which was a public company in Denmark, the stock market capitalization of which was over $1 billion only six weeks before its bankruptcy filing. The amount of our receivable was increased considerably by the relatively high volatility in energy prices at the time of OW Bunker's failure to meet margin calls and during our realization process. We are pursuing a recovery of the amounts owed to us by OW Bunker. Since the bankruptcy process is in its early stages and we cannot currently estimate what portion of the receivable is likely to be recovered, we have written off the entire amount and value our unsecured creditor position at zero.”
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. These forward looking statements are usually preceded by the words “believe,” “intend,” “expect” or similar expressions. Forward looking statements include our belief as to our future prospects, including our strategy for our Bache business. Forward looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. We will not update any forward looking statement to reflect future events or circumstances, except as required by applicable law.
The attached financial tables should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended August 31, 2014 and 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 LUK, a diversified holding company.
| JEFFERIES GROUP LLC AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
| (Amounts in Thousands) | |||||||||
| (Unaudited) | |||||||||
| Successor | |||||||||
| Quarter Ended | Quarter Ended | Quarter Ended | |||||||
| November 30, 2014 | August 31, 2014 | November 30, 2013 | |||||||
| Revenues: | |||||||||
| Commissions | $ | 180,275 | $ | 159,085 | $ | 156,435 | |||
| Principal transactions | (21,071) | 144,354 | 289,430 | ||||||
| Investment banking | 316,012 | 467,793 | 417,044 | ||||||
|
Asset management fees and investment income from managed funds |
1,728 | 8,463 | 12,017 | ||||||
| Interest income | 237,911 | 249,251 | 224,911 | ||||||
| Other revenues | 20,919 | 26,489 | 39,320 | ||||||
| Total revenues | 735,774 | 1,055,435 | 1,139,157 | ||||||
| Interest expense | 198,195 | 212,126 | 188,609 | ||||||
| Net revenues | 537,579 | 843,309 | 950,548 | ||||||
| Non-interest expenses: | |||||||||
| Compensation and benefits | 308,187 | 477,268 | 546,257 | ||||||
| Non-compensation expenses: | |||||||||
| Floor brokerage and clearing fees | 55,829 | 55,967 | 52,706 | ||||||
| Technology and communications | 66,363 | 67,286 | 67,578 | ||||||
| Occupancy and equipment rental | 26,115 | 28,477 | 28,271 | ||||||
| Business development | 27,791 | 27,800 | 22,759 | ||||||
| Professional services | 28,206 | 31,231 | 18,014 | ||||||
| Bad debt provision | 48,989 | 927 | (2,639) | ||||||
| Goodwill impairment | 54,000 | - | - | ||||||
| Other | 23,580 | 18,718 | 41,942 | ||||||
| Total non-compensation expenses | 330,873 | 230,406 | 228,631 | ||||||
| Total non-interest expenses | 639,060 | 707,674 | 774,888 | ||||||
| Earnings (loss) before income taxes | (101,481) | 135,635 | 175,660 | ||||||
| Income tax expense (benefit) | (8,763) | 51,762 | 61,186 | ||||||
| Net earnings (loss) | (92,718) | 83,873 | 114,474 | ||||||
| Net earnings attributable to noncontrolling interests | (360) | 312 | 4,531 | ||||||
| Net earnings (loss) attributable to Jefferies Group LLC | $ | (92,358) | $ | 83,561 | $ | 109,943 | |||
| Pretax operating margin | -18.9% | 16.1% | 18.5% | ||||||
| Effective tax rate | 8.6% | 38.2% | 34.8% | ||||||
| JEFFERIES GROUP LLC AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
| (Amounts in Thousands) | |||||||||
| (Unaudited) | |||||||||
| Successor | Predecessor | ||||||||
| Year Ended | Nine Months Ended | Quarter Ended | |||||||
| November 30, 2014 | November 30, 2013 | February 28, 2013 | |||||||
| Revenues: | |||||||||
| Commissions | $ | 668,801 | $ | 472,596 | $ | 146,240 | |||
| Principal transactions | 545,062 | 399,091 | 300,278 | ||||||
| Investment banking | 1,529,274 | 1,003,517 | 288,278 | ||||||
|
Asset management fees and investment income from managed funds |
17,047 | 36,093 | 10,883 | ||||||
| Interest income | 1,019,970 | 714,248 | 249,277 | ||||||
| Other revenues | 78,881 | 94,195 | 27,004 | ||||||
| Total revenues | 3,859,035 | 2,719,740 | 1,021,960 | ||||||
| Interest expense | 856,127 | 579,059 | 203,416 | ||||||
| Net revenues | 3,002,908 | 2,140,681 | 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 |
3,002,908 | 2,137,313 | 807,583 | ||||||
| Non-interest expenses: | |||||||||
| Compensation and benefits | 1,698,230 | 1,213,908 | 474,217 | ||||||
| Non-compensation expenses: | |||||||||
| Floor brokerage and clearing fees | 215,329 | 150,774 | 46,155 | ||||||
| Technology and communications | 268,212 | 193,683 | 59,878 | ||||||
| Occupancy and equipment rental | 107,767 | 86,701 | 24,309 | ||||||
| Business development | 106,984 | 63,115 | 24,927 | ||||||
| Professional services | 109,601 | 72,802 | 24,135 | ||||||
| Bad debt provision | 53,572 | 179 | 1,945 | ||||||
| Goodwill impairment | 54,000 | - | - | ||||||
| Other | 73,653 | 91,856 | 12,530 | ||||||
| Total non-compensation expenses | 989,118 | 659,110 | 193,879 | ||||||
| Total non-interest expenses | 2,687,348 | 1,873,018 | 668,096 | ||||||
| Earnings before income taxes | 315,560 | 264,295 | 139,487 | ||||||
| Income tax expense | 147,199 | 94,686 | 48,645 | ||||||
| Net earnings | 168,361 | 169,609 | 90,842 | ||||||
| Net earnings attributable to noncontrolling interests | 3,400 | 8,418 | 10,704 | ||||||
| Net earnings attributable to Jefferies Group LLC/common stockholders | $ | 164,961 | $ | 161,191 | $ | 80,138 | |||
| Pretax operating margin | 10.5% | 12.4% | 17.3% | ||||||
| Effective tax rate | 46.6% | 35.8% | 34.9% | ||||||
| JEFFERIES GROUP LLC AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED ADJUSTED SELECTED FINANCIAL DATA | ||||||||||
| (Amounts in Thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Successor | ||||||||||
| Quarter Ended November 30, 2014 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
| Net revenues | $ | 537,579 | $ | 43,627 | (1) | $ | 493,952 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 308,187 | 27,163 | (2) | 281,024 | ||||||
| Non-compensation expenses | 330,873 | 148,287 | (3) | 182,586 | ||||||
| Total non-interest expenses | 639,060 | 175,450 | 463,610 | |||||||
| Operating income (loss) | $ | (101,481) | $ | (131,823) | $ | 30,342 | ||||
| Net earnings (loss) | $ | (92,718) | $ | (111,899) | $ | 19,181 | ||||
| Compensation ratio (a) | 57.3% | 56.9% | ||||||||
| Successor | ||||||||||
| Quarter Ended August 31, 2014 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
| Net revenues | $ | 843,309 | $ | 43,350 | (1) | $ | 799,959 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 477,268 | 26,416 | (2) | 450,852 | ||||||
| Non-compensation expenses | 230,406 | 38,944 | (4) | 191,462 | ||||||
| Total non-interest expenses | 707,674 | 65,360 | 642,314 | |||||||
| Operating income (loss) | $ | 135,635 | $ | (22,010) | $ | 157,645 | ||||
| Net earnings (loss) | $ | 83,873 | $ | (13,591) | $ | 97,464 | ||||
| Compensation ratio (a) | 56.6% | 56.4% | ||||||||
| Successor | ||||||||||
| Quarter Ended November 30, 2013 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
| Net revenues | $ | 950,548 | $ | 45,760 | (1) | $ | 904,788 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 546,257 | 42,816 | (2) | 503,441 | ||||||
| Non-compensation expenses | 228,631 | 35,037 | (4) | 193,594 | ||||||
| Total non-interest expenses | 774,888 | 77,853 | 697,035 | |||||||
| Operating income | $ | 175,660 | $ | (32,093) | $ | 207,753 | ||||
| Net earnings (loss) | $ | 114,474 | $ | (22,311) | $ | 136,785 | ||||
| Compensation ratio (a) | 57.5% | 55.6% | ||||||||
(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 pursuing various strategic alternatives for 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) | ||||||||||
| Successor | ||||||||||
| Year Ended November 30, 2014 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
|
Net revenues, less interest on mandatorily redeemable preferred interests of consolidated subsidiaries |
$ | 3,002,908 | $ | 175,283 | (1) | $ | 2,827,625 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 1,698,230 | 118,412 | (2) | 1,579,818 | ||||||
| Non-compensation expenses | 989,118 | 258,760 | (3) | 730,358 | ||||||
| Total non-interest expenses | 2,687,348 | 377,172 | 2,310,176 | |||||||
| Operating income (loss) | $ | 315,560 | $ | (201,889) | $ | 517,449 | ||||
| Net earnings (loss) | $ | 168,361 | $ | (156,442) | $ | 324,803 | ||||
| Compensation ratio (a) | 56.6% | 55.9% | ||||||||
| Successor | ||||||||||
| Nine Months Ended November 30, 2013 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
|
Net revenues, less interest on mandatorily redeemable preferred interests of consolidated subsidiaries |
$ | 2,137,313 | $ | 140,701 | (1) | $ | 1,996,612 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 1,213,908 | 101,414 | (2) | 1,112,494 | ||||||
| Non-compensation expenses | 659,110 | 106,129 | (4) | 552,981 | ||||||
| Total non-interest expenses | 1,873,018 | 207,543 | 1,665,475 | |||||||
| Operating income (loss) | $ | 264,295 | $ | (66,842) | $ | 331,137 | ||||
| Net earnings (loss) | $ | 169,609 | $ | (44,925) | $ | 214,534 | ||||
| Compensation ratio (a) | 56.8% | 55.7% | ||||||||
|
Predecessor |
||||||||||
| Quarter Ended February 28, 2013 | ||||||||||
| GAAP | Adjustments | Adjusted | ||||||||
|
Net revenues, less interest on mandatorily redeemable preferred interests of consolidated subsidiaries |
$ | 807,583 | $ | 59,532 | (1) | $ | 748,051 | |||
| Non-interest expenses: | ||||||||||
| Compensation and benefits | 474,217 | 35,981 | (2) | 438,236 | ||||||
| Non-compensation expenses | 193,879 | 36,441 | (4) | 157,438 | ||||||
| Total non-interest expenses | 668,096 | 72,422 | 595,674 | |||||||
| Operating income (loss) | $ | 139,487 | $ | (12,890) | $ | 152,377 | ||||
| Net earnings (loss) | $ | 90,842 | $ | (7,249) | $ | 98,091 | ||||
| Compensation ratio (a) | 58.7% | 58.6% | ||||||||
(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 pursuing various strategic alternatives for 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 |
| FOOTNOTES |
| (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) | The following expenses incurred as part of the Bache business during the period presented are excluded from Adjusted non-compensation expenses: |
| Quarter Ended | Year Ended November | |||||||||
| November 30, | 30, 2014 | |||||||||
| $ thousands | 2014 | |||||||||
|
Floor brokerage, technology and communications, business development, professional services and other estimated expenses directly incurred by the Bache business in conducting operations |
$ | 36,553 | $ | 147,026 | ||||||
| Bad debt expense incurred on customer default and close-out | 52,300 | 52,300 | ||||||||
| Impairment of goodwill attributed to the Bache reporting unit | 51,900 | 51,900 | ||||||||
|
Impairment of certain intangible assets attributed to the Bache
reporting unit |
7,534 | 7,534 | ||||||||
| $ | 148,287 | $ | 258,760 | |||||||
| (4) |
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 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. |
| JEFFERIES GROUP LLC AND SUBSIDIARIES | ||||||||||
| SELECTED STATISTICAL INFORMATION | ||||||||||
| (Amounts in Thousands, Except Other Data) | ||||||||||
| (Unaudited) | ||||||||||
| Successor | ||||||||||
| Quarter Ended | Quarter Ended | Quarter Ended | ||||||||
| November 30, 2014 | August 31, 2014 | November 30, 2013 | ||||||||
|
Revenues by Source |
||||||||||
| Equities | $ | 158,452 | $ | 171,708 | $ | 289,727 | ||||
| Fixed income | 61,387 | 195,345 | 227,136 | |||||||
| Total | 219,839 | 367,053 | 516,863 | |||||||
| Other | - | - | 4,624 | |||||||
| Equity | 67,910 | 93,309 | 118,348 | |||||||
| Debt | 131,901 | 175,597 | 162,031 | |||||||
| Capital markets | 199,811 | 268,906 | 280,379 | |||||||
| Advisory | 116,201 | 198,887 | 136,665 | |||||||
| Investment banking | 316,012 | 467,793 | 417,044 | |||||||
|
Asset management fees and investment income (loss) from managed funds:
|
||||||||||
| Asset management fees | 4,930 | 7,379 | 5,563 | |||||||
| Investment (loss) income from managed funds | (3,202 | ) | 1,084 | 6,454 | ||||||
| Total | 1,728 | 8,463 | 12,017 | |||||||
| Net revenues | $ | 537,579 | $ | 843,309 | $ | 950,548 | ||||
|
Other Data |
||||||||||
| Number of trading days | 63 | 64 | 63 | |||||||
| Average firmwide VaR (in millions) (A) | $ | 12.75 | $ | 13.50 | $ | 12.61 | ||||
| Average firmwide VaR excluding Knight Capital (in millions) (A) | $ | 8.77 | $ | 8.25 | $ | 10.37 | ||||
| Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (in millions) (A) | $ | 8.77 | $ | 8.25 | $ | 7.32 | ||||
| (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 | |||||||||||
| SELECTED STATISTICAL INFORMATION | |||||||||||
| (Amounts in Thousands, Except Other Data) | |||||||||||
| (Unaudited) | |||||||||||
| Successor | Predecessor | ||||||||||
| Year Ended | Nine Months Ended | Quarter Ended | |||||||||
| November 30, 2014 | November 30, 2013 | February 28, 2013 | |||||||||
|
Revenues by Source |
|||||||||||
| Equities | $ | 696,221 | $ | 582,355 | $ | 167,354 | |||||
| Fixed income | 760,366 | 504,092 | 352,029 | ||||||||
| Total | 1,456,587 | 1,086,447 | 519,383 | ||||||||
| Other | - | 4,624 | - | ||||||||
| Equity | 339,683 | 228,394 | 61,380 | ||||||||
| Debt | 627,536 | 415,932 | 140,672 | ||||||||
| Capital markets | 967,219 | 644,326 | 202,052 | ||||||||
| Advisory | 562,055 | 369,191 | 86,226 | ||||||||
| Investment banking | 1,529,274 | 1,013,517 | 288,278 | ||||||||
|
Asset management fees and investment income (loss) from managed funds: |
|||||||||||
| Asset management fees | 26,682 | 26,473 | 11,083 | ||||||||
| Investment (loss) income from managed funds | (9,635 | ) | 9,620 | (200 | ) | ||||||
| Total | 17,047 | 36,093 | 10,883 | ||||||||
| Net revenues | 3,002,908 | 2,140,681 | 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 |
$ | 3,002,908 | $ | 2,137,313 | $ | 807,583 | |||||
|
Other Data |
|||||||||||
| Number of trading days | 251 | 191 | 60 | ||||||||
| Average firmwide VaR (in millions) (A) | $ | 14.35 | $ | 10.79 | $ | 9.27 | |||||
| Average firmwide VaR excluding Knight Capital (in millions) (A) | $ | 9.54 | $ | 7.78 | $ | 5.99 | |||||
| Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (in millions) (A) | $ | 8.55 | $ | 6.77 | $ | 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 | |||||||
| November 30, 2014 | August 31, 2014 | November 30, 2013 | |||||||
|
Financial position: |
|||||||||
| Total assets (1) | $ | 44,517 | $ | 44,764 | $ | 40,177 | |||
| Average total assets for the period (1) | $ | 51,030 | $ | 51,369 | $ | 46,439 | |||
| Average total assets less goodwill and intangible assets for the period (1) | $ | 49,077 | $ | 49,387 | $ | 44,455 | |||
| Cash and cash equivalents (1) | $ | 4,080 | $ | 4,035 | $ | 3,561 | |||
| Cash and cash equivalents and other sources of liquidity (1) (2) | $ | 5,500 | $ | 5,913 | $ | 5,282 | |||
| Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) | 12.4% | 13.2% | 13.1% | ||||||
| Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2) | 12.9% | 13.8% | 13.8% | ||||||
| Financial instruments owned (1) | $ | 18,648 | $ | 18,420 | $ | 16,650 | |||
| Goodwill and intangible assets (1) | $ | 1,904 | $ | 1,978 | $ | 1,986 | |||
| Total equity (including noncontrolling interests) | $ | 5,471 | $ | 5,602 | $ | 5,422 | |||
| Total member's equity | $ | 5,432 | $ | 5,571 | $ | 5,305 | |||
| Tangible member's equity (3) | $ | 3,527 | $ | 3,593 | $ | 3,318 | |||
| Bache assets (4) | $ | 4,202 | $ | 3,641 | $ | 3,534 | |||
|
Level 3 financial instruments: |
|||||||||
| Level 3 financial instruments owned (1) (5) | $ | 527 | $ | 499 | $ | 457 | |||
| Level 3 financial instruments owned with economic exposure (1) (6) | $ | 527 | $ | 480 | $ | 457 | |||
| Level 3 financial instruments owned - % total assets (1) | 1.2% | 1.1% | 1.1% | ||||||
| Level 3 financial instruments owned - % total financial instruments owned (1) | 2.8% | 2.7% | 2.7% | ||||||
| Level 3 financial instruments owned with economic exposure - % total financial instruments owned (1) | 2.8% | 2.6% | 2.7% | ||||||
| Level 3 financial instruments owned with economic exposure - % tangible member's equity (1) | 14.9% | 13.4% | 13.8% | ||||||
|
Other data and financial ratios: |
|||||||||
| Total capital (1) (7) | $ | 11,276 | $ | 11,970 | $ | 11,199 | |||
| Leverage ratio (1) (8) | 8.1 | 8.0 | 7.4 | ||||||
| Adjusted leverage ratio (1) (9) | 10.3 | 10.5 | 9.5 | ||||||
| Tangible gross leverage ratio (1) (10) | 12.1 | 11.9 | 11.5 | ||||||
| Leverage ratio - excluding impacts of the Leucadia transaction (1) (11) | 10.3 | 10.1 | 9.3 | ||||||
| Number of trading days | 63 | 64 | 63 | ||||||
| Average firmwide VaR (12) | $ | 12.75 | $ | 13.50 | $ | 12.61 | |||
| Average firmwide VaR excluding Knight Capital (12) | $ | 8.77 | $ | 8.25 | $ | 10.37 | |||
| Average firmwide VaR excluding Knight Capital and Harbinger Group Inc. (12) | $ | 8.77 | $ | 8.25 | $ | 7.32 | |||
| Number of employees, at period end | 3,915 | 3,885 | 3,797 | ||||||
| JEFFERIES GROUP LLC AND SUBSIDIARIES | ||
| FINANCIAL HIGHLIGHTS - FOOTNOTES | ||
| (1) | Amounts pertaining to November 30, 2014 represent a preliminary estimate as of the date of this earnings release and may be revised in our Annual Report on Form 10-K for the fiscal year ended November 30, 2014. | |
| (2) | At November 30, 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 $1,057 million, in aggregate, and $364 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 at August 31, 2014 were $1,530 million and $348 million, and at November 30, 2013, were $1,317 million and $404 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) |
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.
|
|
| (7) | As of November 30, 2014, August 31, 2014 and November 30, 2013, total capital includes our long-term debt of $5,806 million, $6,368 million and $5,777 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 November 30, 2014, August 31, 2014 and November 30, 2013, adjusted assets were $36,906 million, $38,100 million and $32,559 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: | |
| November 30, | August 31, | November 30, | |||||||||||||
| $ millions | 2014 | 2014 | 2013 | ||||||||||||
| Total assets | $ | 44,517 | $ | 44,764 | $ | 40,177 | |||||||||
| 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 | 108 | 42 | 27 | ||||||||||||
| Total assets excluding transaction impacts | $ | 42,668 | $ | 42,849 | $ | 38,247 | |||||||||
| Total equity | $ | 5,471 | $ | 5,602 | $ | 5,422 | |||||||||
| 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 | (9 | ) | (58 | ) | (25 | ) | |||||||||
| Total equity excluding transaction impacts | $ | 4,161 | $ | 4,243 | $ | 4,096 | |||||||||
| Leverage ratio - excluding impacts of the Leucadia transaction | 10.3 | 10.1 | 9.3 | ||||||||||||
| (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, 2013. |
Jefferies Group LLC
Peregrine C. Broadbent, 212-284-2338
Chief
Financial Officer
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