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Section 1: 8-K (JEFFERIES GROUP LLC 8-K)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): June 21, 2016

Jefferies Group LLC

(Exact name of registrant as specified in its charter)

Delaware

1-14947

95-4719745

(State or other jurisdiction of
incorporation)

(Commission File Number)

(IRS Employer Identification
No.)


520 Madison Ave., New York, New York

10022

(Address of principal executive offices)

(Zip Code)


Registrant’s telephone number, including area code: 212-284-2550

 

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02.  Results of Operations and Financial Condition

On June 21, 2016, we issued a press release announcing financial results for the quarter ended May 31, 2016.  A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by reference.


Item 9.01.  Financial Statements and Exhibits

The following exhibit is furnished with this report:

Number              Exhibit

99                        June 21, 2016 press release.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Jefferies Group LLC

 
 
Date:

June 21, 2016

/s/ Roland T. Kelly

Roland T. Kelly

Assistant Secretary



EXHIBIT INDEX

Exhibit No.

Description

 

99

June 21, 2016 press release.

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Section 2: EX-99 (EXHIBIT 99)

Exhibit 99

Jefferies Reports Fiscal Second Quarter 2016 Financial Results

NEW YORK--(BUSINESS WIRE)--June 21, 2016--Jefferies Group LLC today announced financial results for its fiscal second quarter 2016.

Highlights for the three months ended May 31, 2016:

Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: “We are pleased to report quarterly results at a more normal level, reflecting better equity and fixed income secondary trading conditions, although new issue capital markets activity remained somewhat muted. Our equity net revenues were $224 million, compared to $228 million for the second quarter of last year. The two listed equity block positions, including KCG, that were marked down during the first quarter by $82 million, were marked back up during the second quarter by a total of $60 million. Fixed Income net revenues were $238 million for the quarter, with virtually all our fixed income business lines across all regions delivering improved performance. We are particularly pleased with these results as the trading environment was merely stable versus robust, and our performance shows the continued opportunity and potential of our business after a significant bottoms up rightsizing and strengthening, and an overall reduction in risk. Investment banking net revenues for the second quarter were $253 million, reflecting solid advisory revenue, but continued slow activity both in the new issue equity capital markets and in leveraged finance. Our third quarter investment banking backlog is showing encouraging improvement.

We believe our industry is experiencing yet another fundamental and strategic inflection point. We expect this will lead to further consolidation of market share and we are all working hard to ensure that Jefferies is a major beneficiary. To this end, we are particularly focused on continuing to expand our investment banking footprint in the U.S. and Europe, and are meeting and hiring talented individuals who we believe will enhance our ability to serve our clients.”

The attached financial tables should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended February 29, 2016 and our Annual Report on Form 10-K for the year ended November 30, 2015. Amounts herein pertaining to May 31, 2016 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 May 31, 2016.

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, the world's only independent full-service 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. 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

May 31, 2016

February 29, 2016

May 31, 2015

 
Revenues:
Commissions and other fees $   146,157 $   155,824 $   173,508
Principal transactions 318,180 (103,373 ) 155,962
Investment banking 253,046 230,930 404,262
Asset management fees and investment
income from managed funds 4,336 9,530 5,650
Interest income 220,175 221,945 240,552
Other revenues (4,977 ) (21,751 ) 28,576  
Total revenues 936,917 493,105 1,008,510
Interest expense 217,509   194,118   216,956  
Net revenues 719,408   298,987   791,554  
 
Non-interest expenses:
Compensation and benefits 415,316 349,743 480,770
 
Non-compensation expenses:
Floor brokerage and clearing fees 43,591 40,479 58,713
Technology and communications 66,499 64,989 72,361
Occupancy and equipment rental 24,926 24,585 24,420
Business development 22,587 24,854 26,401
Professional services 29,526 23,512 27,419
Other 14,366   20,701   16,758  
Total non-compensation expenses 201,495   199,120   226,072  
Total non-interest expenses 616,811   548,863   706,842  
Earnings (loss) before income taxes 102,597 (249,876 ) 84,712
Income tax expense (benefit) 48,655   (83,107 ) 24,530  
Net earnings (loss) 53,942 (166,769 ) 60,182
Net earnings attributable to noncontrolling interests 44   44   349  
Net earnings (loss) attributable to Jefferies Group LLC $   53,898   $   (166,813 ) $   59,833  
 
Pretax operating margin 14.3 %

(83.6)

%

10.7 %
Effective tax rate 47.4 % 33.3 % 29.0 %
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands)
(Unaudited)
     
Six Months Ended
May 31, 2016 May 31, 2015
 
Revenues:
Commissions and other fees $   301,981 $   340,430
Principal transactions 214,807 261,439
Investment banking 483,976 676,257
Asset management fees and investment
income (loss) from managed funds 13,866 (4,187 )
Interest income 442,120 469,422
Other revenues (26,728 ) 48,481  
Total revenues 1,430,022 1,791,842
Interest expense 411,627   408,616  
Net revenues 1,018,395   1,383,226  
 
Non-interest expenses:
Compensation and benefits 765,059 845,985
 
Non-compensation expenses:
Floor brokerage and clearing fees 84,070 113,793
Technology and communications 131,488 144,748
Occupancy and equipment rental 49,511 48,604
Business development 47,441 48,338
Professional services 53,038 51,675
Other 35,067   32,487  
Total non-compensation expenses 400,615   439,645  
Total non-interest expenses 1,165,674   1,285,630  
Earnings (loss) before income taxes (147,279 ) 97,596
Income tax expense (benefit) (34,452 ) 24,861  
Net earnings (loss) (112,827 ) 72,735
Net earnings attributable to noncontrolling interests 88   1,220  
Net earnings (loss) attributable to Jefferies Group LLC $   (112,915 ) $   71,515  
 
Pretax operating margin (14.5 )% 7.1 %
Effective tax rate 23.4 % 25.5 %
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data)
(Unaudited)
         
Quarter Ended
May 31, 2016 February 29, 2016 May 31, 2015

Revenues by Source

Equities $   223,540 $   1,745 $   228,198
Fixed income (1) 238,486   56,782   153,444
Total sales and trading 462,026   58,527   381,642
 
Equity 60,905 43,999 108,805
Debt 46,124   57,273   154,670
Capital markets 107,029 101,272 263,475
Advisory 146,017   129,658   140,787
Total investment banking 253,046   230,930   404,262
 

Asset management fees and investment income (losses)

from managed funds:
Asset management fees 6,964 11,205 4,903
Investment income (losses) from managed funds (2,628 ) (1,675 ) 747
Total 4,336   9,530   5,650
Net revenues $   719,408   $   298,987   $   791,554
 

Other Data

Number of trading days 64 61 63
Number of trading loss days 2 17 10
Number of trading loss days excluding KCG 1 12 5
 
Average firmwide VaR (in millions) (2) $ 8.25 $ 8.37 $ 12.80
Average firmwide VaR excluding KCG (in millions) (2) $ 6.04 $ 6.69 $ 9.86

 

 

   
(1) The results in the quarter ended May 31, 2015 include $35.7 million of net revenues globally from the Bache business. At May 31, 2016, we have transferred all of our client accounts to Société Générale S.A. and other brokers and completed the exit of the Bache business.
(2) 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, 2015.
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data)
(Unaudited)
       
Six Months Ended
May 31, 2016 May 31, 2015

Revenues by Source

Equities $   225,285 $   431,677
Fixed income (1) 295,268   279,479  
Total sales and trading 520,553   711,156  
 
Equity 104,904 187,876
Debt 103,397   215,546  
Capital markets 208,301 403,422
Advisory 275,675   272,835  
Total investment banking 483,976   676,257  
 
Asset management fees and investment losses from managed funds:
Asset management fees 18,169 18,888
Investment losses from managed funds (4,303 ) (23,075 )
Total 13,866   (4,187 )
Net revenues $   1,018,395   $   1,383,226  
 

Other Data

Number of trading days 125 124
Number of trading loss days 19 21
Number of trading loss days excluding KCG 13 14
 
Average firmwide VaR (in millions) (2) $ 8.31 $ 13.03
Average firmwide VaR excluding KCG (in millions) (2) $ 6.36 $ 9.58

 

   
(1) The results in the six months ended May 31, 2015 include $84.9 million of net revenues globally from the Bache business. At May 31, 2016, we have transferred all of our client accounts to Société Générale S.A. and other brokers and completed the exit of the Bache business.
(2) 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, 2015.
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Amounts in Millions, Except Where Noted)
(Unaudited)
       
Quarter Ended
May 31, 2016 February 29, 2016 May 31, 2015
 

Financial position:

Total assets (1) $   37,120 $   35,193 $   44,140
Average total assets for the period (1) $ 43,549 $ 44,669 $ 51,013
Average total assets less goodwill and intangible assets for the period (1) $ 41,678 $ 42,796 $ 49,118
 
Cash and cash equivalents (1) $ 2,839 $ 2,600 $ 3,289
Cash and cash equivalents and other sources of liquidity (1) (2) $ 4,603 $ 4,290 $ 4,951
Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 12.4 % 12.2 % 11.2 %

Cash and cash equivalents and other sources of liquidity - % total assets less

goodwill and intangible assets (1) (2)

13.1 % 12.9 % 11.7 %
 
Financial instruments owned (1) $ 15,119 $ 13,630 $ 18,843
Goodwill and intangible assets (1) $ 1,871 $ 1,869 $ 1,895
 
Total equity (including noncontrolling interests) $ 5,344 $ 5,262 $ 5,520
Total member's equity $ 5,339 $ 5,261 $ 5,480
Tangible member's equity (3) $ 3,468 $ 3,392 $ 3,584
 
 

Level 3 financial instruments:

Level 3 financial instruments owned (1) (4) $ 436 $ 489 $ 540
Level 3 financial instruments owned - % total assets (1) 1.2 % 1.4 % 1.2 %
Level 3 financial instruments owned - % total financial instruments (1) 2.9 % 3.6 % 2.9 %
Level 3 financial instruments owned - % tangible member's equity (1) 12.6 % 14.4 % 15.1 %
 

Other data and financial ratios:

Total capital (1) (5) $ 10,729 $ 10,588 $ 10,858
Leverage ratio (1) (6) 6.9 6.7 8.0
Adjusted leverage ratio (1) (7) 9.0 8.5 10.3
Tangible gross leverage ratio (1) (8) 10.2 9.8 11.8
 
Number of trading days 64 61 63
Number of trading loss days 2 17 10
Number of trading loss days excluding KCG 1 12 5
Average firmwide VaR (9) $ 8.25 $ 8.37 $ 12.80
Average firmwide VaR excluding KCG (9) $ 6.04 $ 6.69 $ 9.86
 
Number of employees, at period end 3,279 3,439 3,830
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS - FOOTNOTES
   
(1) Amounts pertaining to May 31, 2016 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 May 31, 2016.
 
(2) At May 31, 2016, 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 $1,096 million, in aggregate, and $669 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 amounts also included additional funds that were available under the committed senior secured revolving credit facility available for the working capital needs of Jefferies Bache. The corresponding amounts included in other sources of liquidity at February 29, 2016 were $1,061 million and $630 million, respectively, and at May 31, 2015, were $1,136 million and $527 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 members' 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 May 31, 2016, February 29, 2016 and May 31, 2015, total capital includes our long-term debt of $5,385 million, $5,326 million and $5,339 million, respectively, and total equity. Long-term debt included in total capital is reduced by amounts outstanding under the revolving credit facility, amounts that are non-recourse to Jefferies Group LLC 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). At May 31, 2016, February 29, 2016 and May 31, 2015, adjusted assets were $31,173 million, $28,920 million and $37,171 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, 2015.
 

CONTACT:
Jefferies Group LLC
Peregrine C. Broadbent, 212-284-2338
Chief Financial Officer

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