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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): December 20, 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 December 20, 2016, we issued a press release announcing financial results for the fiscal ended November 30, 2016.  A copy of the press release is attached hereto as Exhibit 99.

Item 9.01.  Financial Statements and Exhibits

 

The following exhibit is furnished with this report:

 

Number

Exhibit

 

99

December 20, 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:

December 20, 2016

/s/ Roland T. Kelly

Roland T. Kelly

Assistant Secretary



EXHIBIT INDEX

Exhibit No.

Description

 

99

December 20, 2016 press release.

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Section 2: EX-99 (EXHIBIT 99)

Exhibit 99

Jefferies Reports Fiscal Fourth Quarter 2016 Financial Results

NEW YORK--(BUSINESS WIRE)--December 20, 2016--Jefferies Group LLC today announced financial results for its fiscal fourth quarter 2016.

Highlights for the three months ended November 30, 2016:

Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: "We are pleased with our fourth quarter results, which reflect a strong performance in investment banking, a solid performance from our core equities business, and a continuing significant improvement in our fixed income results. Our investment banking results benefited from a record quarter of advisory fees, as well as increasingly active new issue capital markets. Our strong finish to the year, combined with the continued positive momentum in all of our businesses, positions us well for 2017. We thank our clients, our employees, our shareholders, our bondholders and all our business partners for their continued support."

The attached financial tables should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended August 31, 2016 and our Annual Report on Form 10-K for the year ended November 30, 2015. Amounts herein pertaining to November 30, 2016 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 year ended November 30, 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
November 30, 2016 August 31, 2016 November 30, 2015
 
Revenues:
Commissions and other fees $ 157,549 $ 152,044 $ 146,288
Principal transactions 137,362 167,483 (38,534 )
Investment banking 415,067 294,930 372,930
Asset management fees and investment
income from managed funds
1,319 15,877 8,020
Interest income 202,002 213,716 221,962
Other revenues 26,661   19,791   (8,736 )
Total revenues 939,960 863,841 701,930
Interest expense 198,191   209,391   188,843  
Net revenues 741,769   654,450   513,087  
 
Non-interest expenses:
Compensation and benefits 427,451 376,438 284,647
 
Non-compensation expenses:
Floor brokerage and clearing fees 42,946 40,189 40,680
Technology and communications 66,396 64,512 78,918
Occupancy and equipment rental 26,635 24,987 26,567
Business development 25,405 20,259 27,098
Professional services 29,763 29,761 27,613
Other 26,644   17,582   18,026  
Total non-compensation expenses 217,789   197,290   218,902  
Total non-interest expenses 645,240   573,728   503,549  
Earnings before income taxes 96,529 80,722 9,538
Income tax expense (benefit) 9,454   39,564   (10,572 )
Net earnings 87,075 41,158 20,110
Net earnings (loss) attributable to noncontrolling interests (105 ) (11 ) 148  
Net earnings attributable to Jefferies Group LLC $ 87,180   $ 41,169   $ 19,962  
 
Pretax operating margin 13.0 % 12.3 % 1.9 %
Effective tax rate (1) 9.8 % 49.0 % (110.8 )%
 
(1) The effective tax rate for the three months ended November 30, 2016 is impacted by revisions to previously forecasted results.
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands)
(Unaudited)
   
Year Ended November 30,
2016 2015
 
Revenues:
Commissions and other fees $ 611,574 $ 659,002
Principal transactions 519,652 172,608
Investment banking 1,193,973 1,439,007
Asset management fees and investment
income from managed funds
31,062 8,015
Interest income 857,838 922,189
Other revenues 19,724   74,074  
Total revenues 3,233,823 3,274,895
Interest expense 819,209   799,654  
Net revenues 2,414,614   2,475,241  
 
Non-interest expenses:
Compensation and benefits 1,568,948 1,467,131
 
Non-compensation expenses:
Floor brokerage and clearing fees 167,205 199,780
Technology and communications 262,396 313,044
Occupancy and equipment rental 101,133 101,138
Business development 93,105 105,963
Professional services 112,562 103,972
Other 79,293   69,986  
Total non-compensation expenses 815,694   893,883  
Total non-interest expenses 2,384,642   2,361,014  
Earnings before income taxes 29,972 114,227
Income tax expense 14,566   18,898  
Net earnings 15,406 95,329
Net earnings (loss) attributable to noncontrolling interests (28 ) 1,795  
Net earnings attributable to Jefferies Group LLC $ 15,434   $ 93,534  
 
Pretax operating margin 1.2 % 4.6 %
Effective tax rate 48.6 % 16.5 %
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data)
(Unaudited)
           
Quarter Ended
November 30, 2016 August 31, 2016 November 30, 2015

Revenues by Source

Equities $ 175,960 $ 148,308 $ 122,693
Fixed income (1) 149,423 195,335 9,444
Total Equities and Fixed Income 325,383 343,643 132,137
 
Equity 62,085 68,218 93,547
Debt 128,706 72,473 68,705
Capital markets 190,791 140,691 162,252
Advisory 224,276 154,239 210,678
Total investment banking 415,067 294,930 372,930
 
Asset management fees and investment income from managed funds:
Asset management fees 633 7,610 5,864
Investment income from managed funds 686 8,267 2,156

Total

1,319 15,877 8,020
Net revenues $ 741,769 $ 654,450 $ 513,087
 

Other Data

Number of trading days 63 65 63
Number of trading loss days 11 8 22
Number of trading loss days excluding KCG 4 4 23
 
Average firmwide VaR (in millions) (2) $ 8.46 $ 6.62 $ 9.72
Average firmwide VaR excluding KCG (in millions) (2) $ 5.93 $ 4.48 $ 8.46
 
(1) The results for the quarter ended November 30, 2015 include $0.4 million of negative revenues globally from the Bache business. During the second quarter of 2016, we 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)
       
Twelve Months Ended
November 30, 2016 November 30, 2015

Revenues by Source

Equities $ 549,553 $ 757,447
Fixed income (1) 640,026 270,772
Total Equities and Fixed income 1,189,579 1,028,219
 
Equity 235,207 408,474
Debt 304,576 398,179
Capital markets 539,783 806,653
Advisory 654,190 632,354
Total investment banking 1,193,973 1,439,007
 
Asset management fees and investment income (losses) from managed funds:
Asset management fees 26,412 31,819
Investment income (losses) from managed funds 4,650 (23,804)
Total 31,062 8,015
Net revenues $ 2,414,614 $ 2,475,241
 

Other Data

Number of trading days 253 252
Number of trading loss days 38 64
Number of trading loss days excluding KCG 21 55
 
Average firmwide VaR (in millions) (2) $ 7.91 $ 12.39
Average firmwide VaR excluding KCG (in millions) (2) $ 5.77 $ 9.97
 
(1) The results for the nine months ended November 30, 2015 include $80.2 million of net revenues globally from the Bache business. During the second quarter of 2016, we 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
November 30, 2016 August 31, 2016 November 30, 2015
 

Financial position:

Total assets (1) $ 36,941 $ 38,128 $ 38,564
Average total assets for the period (1) $ 43,412 $ 42,270 $ 48,722
Average total assets less goodwill and intangible assets for the period (1) $ 41,560 $ 40,408 $ 46,835
 
Cash and cash equivalents (1) $ 3,529 $ 3,159 $ 3,510
Cash and cash equivalents and other sources of liquidity (1) (2) $ 5,303 $ 4,873 $ 4,940
Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 14.4% 12.8% 12.8%
Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2) 15.1% 13.4% 13.5%
 
Financial instruments owned (1) $ 13,810 $ 14,328 $ 16,559
Goodwill and intangible assets (1) $ 1,847 $ 1,856 $ 1,882
 
Total equity (including noncontrolling interests) $ 5,371 $ 5,327 $ 5,509
Total member's equity $ 5,370 $ 5,321 $ 5,482
Tangible member's equity (3) $ 3,523 $ 3,465 $ 3,600
 
 

Level 3 financial instruments:

Level 3 financial instruments owned (1) (4) $ 413 $ 434 $ 542
Level 3 financial instruments owned - % total assets (1) 1.1% 1.1% 1.4%
Level 3 financial instruments owned - % total financial instruments (1) 3.0% 3.0% 3.3%
Level 3 financial instruments owned - % tangible member's equity (1) 11.7% 12.5% 15.1%
 

Other data and financial ratios:

Total long-term capital (1) (5) $ 10,501 $ 10,803 $ 10,797
Leverage ratio (1) (6) 6.9 7.2 7.0
Adjusted leverage ratio (1) (7) 8.6 8.7 8.7
Tangible gross leverage ratio (1) (8) 10.0 10.5 10.2
 
Number of trading days 63 65 63
Number of trading loss days 11 8 22
Number of trading loss days excluding KCG 4 4 23
Average firmwide VaR (9) $ 8.46 $ 6.62 $ 9.72
Average firmwide VaR excluding KCG (9) $ 5.93 $ 4.48 $ 8.46
 
Number of employees, at period end 3,329 3,323 3,557
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS - FOOTNOTES
   
(1) Amounts pertaining to November 30, 2016 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 year ended November 30, 2016.
 
(2) At November 30, 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 $1,455 million, in aggregate, and $319 million, being the total of the estimated amount of additional secured financing that could be reasonably expected to be obtained from our financial instruments that are currently not pledged at reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at August 31, 2016 were $1,384 million and $330 million, respectively, and at November 30, 2015, were $1,266 million and $164 million, respectively. The amounts included in other sources of liquidity at August 31, 2016 and November 30, 2015 have been reduced by $147 million and $141 million, respectively, from what was previously disclosed, to reflect adjustments for certain securities that have subsequently been identified to have been encumbered at such dates.
 
(3) Tangible member's equity (a non-GAAP financial measure) represents total member's equity less goodwill and identifiable intangible assets. We believe that tangible member's equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible member's equity, making these ratios meaningful for investors.
 
(4) Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned.
 
(5) At November 30, 2016, August 31, 2016 and November 30, 2015, total long-term capital includes our long-term debt of $5,131 million, $5,476 million and $5,288 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by the amount of debt maturing in less than one year, where applicable.
 
(6) Leverage ratio equals total assets divided by total equity.
 
(7) Adjusted leverage ratio (a non-GAAP financial measure) equals adjusted assets divided by tangible total equity, being total equity less goodwill and identifiable intangible assets. Adjusted assets (a non-GAAP financial measure) equals total assets less securities borrowed, securities purchased under agreements to resell, cash and securities segregated, goodwill and identifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). At November 30, 2016, August 31, 2016 and November 30, 2015, adjusted assets were $30,352 million, $30,318 million and $31,675 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:
For further information:
Jefferies Group LLC
Peregrine C. Broadbent, 212-284-2338
Chief Financial Officer

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