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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): September 19, 2017

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 Avenue, 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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company: 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 


Item 2.02.

Results of Operations and Financial Condition

On September 19, 2017, we issued a press release announcing financial results for our fiscal quarter ended August 31, 2017.  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 September 19, 2017 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:

September 19, 2017

/s/ Roland T. Kelly

Roland T. Kelly

Assistant Secretary



EXHIBIT INDEX

Exhibit No.

Description

 

99

September 19, 2017 press release.

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Section 2: EX-99 (EXHIBIT 99)

Exhibit 99

Jefferies Reports Fiscal Third Quarter 2017 Financial Results

NEW YORK--(BUSINESS WIRE)--September 19, 2017--Jefferies Group LLC today announced financial results for its fiscal third quarter 2017.

Highlights for the three months ended August 31, 2017:

Highlights for the nine months ended August 31, 2017:

Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: “Our third quarter net revenues of more than $800 million represent our best third quarter in Jefferies' history (excluding Bache), and are significantly above the revenues of $654 million for the same quarter last year and $683 million for the second quarter of this year (excluding last quarter's $96 million gain on our KCG position, which has now been sold).”

“Our third quarter performance was led by a quarterly record $476 million in Investment Banking revenues. We have been focused on building our Investment Banking business for many years, with the last two years affording us yet another important opportunity to recruit and expand upon our already broad footprint. The continued successful development of our investment banking platform should lead to greater stability in our results and compounding benefits to our overall platform.”

“Jefferies' Investment Banking net revenues reflect record quarterly debt capital markets net revenues, solid results in our equity capital markets effort and a strong performance in mergers, acquisitions and advisory, as well as broad participation across our industry groups, including healthcare, energy, technology media and telecommunications, financial services, industrials and consumer. This third quarter alone, our 789 global investment banking professionals completed 381 debt financings raising $91 billion of capital, 34 equity financings raising $16 billion of capital and 50 merger and acquisitions transactions aggregating $29 billion in total deal size. Our Investment Banking backlog remains robust.”

“Our Equities and Fixed Income results were solid, while volumes and volatility were subdued for much of the quarter. We are driving growth in market share in our core equities business, while our fixed income efforts are much improved, with increased capital efficiency and lower overall risk.”

“Our non-compensation costs include $4.4 million of the more than $5.0 million we, our clients and our employees donated to charities for Hurricane Harvey relief. We are proud Jefferies could deliver our platform to support those in need in the aftermath of this horrible disaster.”

The attached financial tables should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended May 31, 2017, our Annual Report on Form 10-K for the year ended November 30, 2016 and our amended Annual Report on Form 10-K/A for the year ended November 30, 2016. Amounts herein pertaining to August 31, 2017 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 quarter ended August 31, 2017.


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
August 31, 2017 May 31, 2017 August 31, 2016
 
Revenues:
Commissions and other fees $ 139,082 $ 152,643 $ 152,044
Principal transactions 185,215 287,070 167,483
Investment banking 475,702 351,863 294,930

Asset management fees and investment
  income (loss) from managed funds

5,465 (2,697 ) 15,877
Interest 230,496 227,804 213,716
Other 12,371   22,272   19,791  
Total revenues 1,048,331 1,038,955 863,841
Interest expense 247,639   259,661   209,391  
Net revenues 800,692   779,294   654,450  
 
Non-interest expenses:
Compensation and benefits 462,933 450,522 376,438
 
Non-compensation expenses:
Floor brokerage and clearing fees 44,869 47,494 40,189
Technology and communications 72,440 67,478 64,512
Occupancy and equipment rental 27,736 23,594 24,987
Business development 23,125 26,466 20,259
Professional services 25,007 26,413 29,761
Other 22,318   21,146   17,582  
Total non-compensation expenses 215,495   212,591   197,290  
Total non-interest expenses 678,428   663,113   573,728  
Earnings before income taxes 122,264 116,181 80,722
Income tax expense 38,439   46,391   39,564  
Net earnings 83,825 69,790 41,158
Net earnings (loss) attributable to noncontrolling interests 10   39   (11 )
Net earnings attributable to Jefferies Group LLC $ 83,815   $ 69,751   $ 41,169  
 
Pretax operating margin 15.3 % 14.9 % 12.3 %
Effective tax rate 31.4 % 39.9 % 49.0 %
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands)
(Unaudited)
       
Nine Months Ended
August 31, 2017 August 31, 2016
 
Revenues:
Commissions and other fees $ 437,547 $ 454,025
Principal transactions 693,242 382,290
Investment banking 1,235,586 778,906

Asset management fees and investment
  income from managed funds

11,694 29,743
Interest income 660,323 655,836
Other 58,691   (6,937 )
Total revenues 3,097,083 2,293,863
Interest expense 721,584   621,018  
Net revenues 2,375,499   1,672,845  
 
Non-interest expenses:
Compensation and benefits 1,373,627 1,141,497
 
Non-compensation expenses:
Floor brokerage and clearing fees 138,221 124,259
Technology and communications 205,425 196,000
Occupancy and equipment rental 77,145 74,498
Business development 72,223 67,700
Professional services 83,544 82,799
Other 62,670   52,649  
Total non-compensation expenses 639,228   597,905  
Total non-interest expenses 2,012,855   1,739,402  
Earnings (loss) before income taxes 362,644 (66,557 )
Income tax expense 95,009   5,112  
Net earnings (loss) 267,635 (71,669 )
Net earnings attributable to noncontrolling interests 50   77  
Net earnings (loss) attributable to Jefferies Group LLC $ 267,585   $ (71,746 )
 
Pretax operating margin 15.3 % (4.0 )%
Effective tax rate 26.2 % (7.7 )%
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data)
(Unaudited)
             
Quarter Ended
August 31, 2017 May 31, 2017 August 31, 2016

Revenues by Source

Equities $ 176,789 $ 271,522 $ 148,308
Fixed income 142,736   158,606   195,335
Total Equities and Fixed income 319,525   430,128   343,643
 
Equity 86,081 74,902 68,218
Debt 186,261   125,847   72,473
Capital markets 272,342 200,749 140,691
Advisory 203,360   151,114   154,239
Total Investment banking 475,702   351,863   294,930
 

Asset management fees and investment income (loss) from
  managed funds:

Asset management fees

4,272 4,115 7,610
Investment income (loss) from managed funds 1,193   (6,812 ) 8,267
Total 5,465   (2,697 ) 15,877
Net revenues $ 800,692   $ 779,294   $ 654,450
 

Other Data

Number of trading days 65 64 65
Number of trading loss days 3 3 8
 
Average firmwide VaR (in millions) (1) $ 6.51 $ 9.21 $ 6.62
 
(1)   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, 2016.
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
SELECTED STATISTICAL INFORMATION
(Amounts in Thousands, Except Other Data)
(Unaudited)
         
Nine Months Ended
August 31, 2017 August 31, 2016

Revenues by Source

Equities $ 605,025 $ 373,593
Fixed income 523,194   490,603
Total Equities and Fixed income 1,128,219   864,196
 
Equity 222,549 173,122
Debt 474,736   175,870
Capital markets 697,285 348,992
Advisory 538,301   429,914
Total investment banking 1,235,586   778,906
 

Asset management fees and investment income (loss) from managed funds:

Asset management fees 16,368 25,779
Investment income (loss) from managed funds (4,674 ) 3,964
Total 11,694   29,743
Net revenues $ 2,375,499   $ 1,672,845
 

Other Data

Number of trading days 189 190
Number of trading loss days 9 27
 
Average firmwide VaR (in millions) (1) $ 8.63 $ 7.73
 
(1)   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, 2016.
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Amounts in Millions, Except Where Noted)
(Unaudited)
           
Quarter Ended
August 31, 2017 May 31, 2017 August 31, 2016
 

Financial position:

Total assets (1) $ 39,358 $ 40,079 $ 38,128
Average total assets for the period (1) $ 45,311 $ 45,650 $ 42,270
Average total assets less goodwill and intangible assets for the period (1) $ 43,467 $ 43,806 $ 40,408
 
Cash and cash equivalents (1) $ 4,807 $ 4,357 $ 3,159
Cash and cash equivalents and other sources of liquidity (1) (2) $ 6,191 $ 5,817 $ 4,873
Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 15.7 % 14.5 % 12.8 %

Cash and cash equivalents and other sources of liquidity - % total assets less
  goodwill and intangible assets (1) (2)

16.5 % 15.2 % 13.4 %
 
Financial instruments owned (1) $ 14,037 $ 13,881 $ 14,328
Goodwill and intangible assets (1) $ 1,841 $ 1,844 $ 1,856
 
Total equity (including noncontrolling interests) (1) $ 5,655 $ 5,565 $ 5,327
Total Jefferies Group LLC member's equity (1) $ 5,654 $ 5,565 $ 5,321
Tangible Jefferies Group LLC member's equity (1) (3) $ 3,813 $ 3,721 $ 3,465
 
 

Level 3 financial instruments:

Level 3 financial instruments owned (1) (4) $ 348 $ 310 $ 434
Level 3 financial instruments owned - % total assets 0.9 % 0.8 % 1.1 %
Level 3 financial instruments owned - % total financial instruments (1) 2.5 % 2.2 % 3.0 %

Level 3 financial instruments owned - % tangible Jefferies Group LLC member's
  equity

9.1 % 8.3 % 12.5 %
 

Other data and financial ratios:

Total long-term capital (1) (5) $ 11,038 $ 10,762 $ 10,803
Leverage ratio (1) (6) 7.0 7.2 7.2
Tangible gross leverage ratio (1) (7) 9.8 10.3 10.5
 
Number of trading days 65 64 65
Number of trading loss days 3 3 8
Average firmwide VaR (8) $ 6.51 $ 9.21 $ 6.62
 
Number of employees, at period end 3,438 3,324 3,323
 

 
JEFFERIES GROUP LLC AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS - FOOTNOTES
 
(1) Amounts pertaining to August 31, 2017 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, 2017.
 
(2) At August 31, 2017, 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 $1,083 million, in aggregate, and $301 million, being the estimated amount of additional secured financing that could be reasonably expected to be obtained from our financial instruments that are currently not pledged after considering reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at May 31, 2017 were $1,149 million and $311 million, respectively, and at August 31, 2016, were $1,384 million and $330 million, respectively.
 
(3) Tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) represents total Jefferies Group LLC member's equity less goodwill and identifiable intangible assets. We believe that tangible Jefferies Group LLC member's equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible 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 August 31, 2017, May 31, 2017 and August 31, 2016, total long-term capital includes our long-term debt of $5,383 million, $5,197 million and $5,476 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, as applicable.
 
(6) Leverage ratio equals total assets divided by total equity.
 
(7) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible Jefferies Group LLC member's equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio.
 
(8) 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, 2016.

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

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