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Section 1: 8-K (JEFFERIES FINANCIAL GROUP 2ND QTR. 2018 FORM 8-K)

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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): July 26, 2018

JEFFERIES FINANCIAL GROUP INC.
(Exact Name of Registrant as Specified in Its Charter)

NEW YORK
(State or Other Jurisdiction of Incorporation)

1-5721
(Commission File Number)
13-2615557
(I.R.S. Employer Identification No.)
 
 
520 Madison Avenue
New York, New York
(Address of Principal Executive Offices)

10022
(Zip Code)

212-460-1900
(Registrant's Telephone Number, Including Area Code)

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:

|_| 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: o

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. o







Item 2.02. Results of Operations and Financial Condition

The information set forth in the press release issued by Jefferies Financial Group Inc. on July 26, 2018, attached hereto as Exhibit 99.1, is incorporated herein by reference.

Item 9.01(d). Exhibits

Exhibit No.    Description

99.1        Press Release issued by Jefferies Financial Group Inc. on July 26, 2018










































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.




Date: July 26, 2018




JEFFERIES FINANCIAL GROUP INC.
 
 
 
 
By:
/s/ Teresa S. Gendron
Name:
Teresa S. Gendron
Title:
Vice President and Chief Financial Officer





































EXHIBIT INDEX


Exhibit No.        Exhibit

99.1            Press Release dated July 26, 2018





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Section 2: EX-99.1 (JEFFERIES FINANCIAL GROUP 2ND QTR 2018 RESULTS EXHIBIT 99.1)

Exhibit


FOR IMMEDIATE RELEASE                                 July 26, 2018
Contact: Laura Ulbrandt (212) 460-1900



JEFFERIES FINANCIAL GROUP INC.
ANNOUNCES SECOND QUARTER 2018 RESULTS

INCREASES SHARE BUYBACK AUTHORIZATION BY ADDITIONAL 25 MILLION SHARES,
HAVING REPURCHASED OVER 24 MILLION SHARES IN THE SECOND QUARTER

INCREASES QUARTERLY DIVIDEND BY 25% TO 12.5 CENTS PER SHARE

New York, New York, July 26, 2018--Jefferies Financial Group Inc. (NYSE: JEF), formerly known as Leucadia National Corporation, today announced its financial results for the three and six month periods ended June 30, 2018. Net income attributable to Jefferies Financial Group common shareholders was $726 million, or $2.03 per diluted share, for the second quarter, and $850 million, or $2.33 per diluted share, for the first half of 2018.  Second quarter pre-tax income, from continuing and discontinued operations, was $1.02 billion, which includes the pre-tax gain of $873 million recorded as a result of the June closing of the previously reported sale of 48% of National Beef, partially offset by a $158 million unrealized mark to market write-down on our investment in HRG Group during the second quarter.
  
Rich Handler and Brian Friedman, CEO and President, respectively, of Jefferies Financial Group, said: "The second quarter witnessed several significant milestones for Jefferies Financial Group: we sold 48% of National Beef at an attractive valuation and triggered its deconsolidation; we agreed to sell our 75% interest in Garcadia, also at an attractive price; we changed our corporate name to Jefferies Financial Group Inc.; and we repurchased a total of over 24 million of our outstanding shares (7%) at an average price of $24.17 per share, or a total of $582 million returned to shareholders in the second quarter.  

"Our Board has authorized today the further repurchase of up to an additional 25 million shares, bringing our total authorization to 25.9 million shares.  We may buy shares from time to time in the open market or otherwise. In addition, our Board of Directors has declared a quarterly cash dividend equal to $0.125 per Jefferies common share, an increase of 25% from recent levels, payable on September 28, 2018 to record holders of Jefferies common shares on September 17, 2018.


Business Update

As previously reported, Jefferies Group LLC's second quarter results were strong, with total net revenues of $824 million. Net income of $99 million represented an annualized return on tangible equity of 10.8%1. Results for the quarter were led by Investment Banking, with net revenues of $507 million, up 42% compared to last year’s second quarter. Investment Banking results reflect solid execution across the board in both merger and acquisition advisory and financing, and are the result of our continuing efforts to broaden and deepen our client coverage and product capabilities. Equities revenues for the quarter were $175 million, consistent with last year’s second quarter. We believe we are well positioned for continued market share gains. Fixed income revenues were $121 million, light in comparison to last year; however, volumes picked up in April and May.

Berkadia’s debt origination and investment sales divisions continue to build momentum. Berkadia originated $6 billion in new financing for clients in the second quarter, up 25% from its previous second quarter high of $4.8 billion in 2017. Investment sales volume was $2.3 billion during the quarter, a 14% increase over the same period in 2017. Berkadia’s servicing portfolio is essentially flat compared to last year, weathering the ongoing wave of CMBS maturities. We recorded income from associated companies related to Berkadia of $25 million for the three months ended June 30, 2018.






During the second quarter, we also took steps to expand our asset management efforts, including the formation of a strategic relationship with Weiss Multi-Strategy Advisors LLC.  We invested $250 million in Weiss' strategy and will receive a profit share in the first year, and a revenue share thereafter. We are working with Weiss to assist in raising capital for new and developing strategies. In addition, we finalized an agreement with Schonfeld Strategic Advisors LLC to merge the business of Folger Hill Asset Management with Schonfeld's fundamental equities business, under the Schonfeld brand.  In connection with the merger, we have agreed to make an investment in the combined strategy and we'll own a revenue share in the management company.

As previously reported, we "right-sized" our investment in National Beef with the closing of the sale of 48% of National Beef to Marfrig. We received about $1.1 billion in cash, including both sale proceeds and pre-closing distributions, and recorded a pre-tax gain of $873 million. We continue to share in the profits and cash generated by National Beef, based on the 31% we retain. Throughout the second quarter, demand for beef and cattle supply remained strong, supporting favorable margin conditions.

Vitesse Energy Finance acquired interests in additional non-operated Bakken flowing wells and development acreage in April 2018, more than doubling total production to 7800 boe/day as of June 30, 2018 and nearly doubling its Bakken development acreage to more than 40,000 net acres.

Our results for the quarter were partly offset by a $158 million mark-to-market reduction in the value of our HRG position. On July 13, 2018, HRG completed its previously announced merger with Spectrum Brands, completing HRG's transformation and converting our 23% interest in HRG to a 14% ownership of Spectrum Brands.

Idaho Timber continued to enjoy a combination of higher than average selling prices, increased volume and favorable supply prices, contributing $19 million to pre-tax income for the second quarter. During the quarter, we also made progress building value in the remainder of our merchant banking portfolio, as we moved Linkem and Golden Queen further down the path to profit and cash generation.

We continue to expect a third quarter closing of our sale of 100% of our interest in Garcadia.

* * * *

More information on the Company’s results of operations for the three and six months ended June 30, 2018 will be provided upon filing of the Company’s Form 10-Q with the Securities and Exchange Commission.

This press 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 and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements include expectations relating to the Garcadia transaction disclosed in this press release. Forward-looking statements also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC.
Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).

1Return on tangible equity (a non-GAAP financial measure) equals Jefferies Group second quarter of 2018 annualized net income divided by Jefferies Group tangible equity (a non-GAAP financial measure) of $3,656 million at March 31, 2018. Tangible equity at March 31, 2018, is equal to Jefferies Group equity of $5,555 million less Intangible assets, net and goodwill of $1,898 million.





SUMMARY FOR JEFFERIES FINANCIAL GROUP AND SUBSIDIARIES
(In thousands, except per share amounts)
(Unaudited)

 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
 
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net revenues
 
$
911,159

 
$
856,861

 
$
1,806,594

 
$
2,163,387

 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes and income (loss) related to associated companies
 
$
4,162

 
$
32,153

 
$
9,825

 
$
501,721

 
 
 
 
 
 
 
 
 
Income (loss) related to associated companies
 
33,353

 
14,104

 
65,453

 
(114,470
)
 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
37,515

 
46,257

 
75,278

 
387,251

 
 
 
 
 
 
 
 
 
Income tax provision (benefit)
 
9,598

 
26,185

 
(38,831
)
 
117,428

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
27,917

 
20,072

 
114,109

 
269,823

 
 
 
 
 
 
 
 
 
Income from discontinued operations, net of income tax provision of $31,111, $24,435, $47,045 and $37,366
 
77,106

 
53,990

 
130,063

 
98,162

 
 
 
 
 
 
 
 
 
Gain on disposal of discontinued operations, net of income tax provision $229,553, $0, $229,553 and $0
 
643,921

 

 
643,921

 

 
 
 
 
 
 
 
 
 
Net income
 
748,944

 
74,062

 
888,093

 
367,985

 
 
 
 
 
 
 
 
 
Net (income) loss attributable to the noncontrolling interests
 
(136
)
 
1,446

 
1,208

 
1,969

 
 
 
 
 
 
 
 
 
Net income attributable to the redeemable noncontrolling interests
 
(22,108
)
 
(16,300
)
 
(36,904
)
 
(28,322
)
 
 
 
 
 
 
 
 
 
Preferred stock dividends
 
(1,171
)
 
(1,015
)
 
(2,343
)
 
(2,031
)
 
 
 
 
 
 
 
 
 
Net income attributable to Jefferies Financial Group Inc. common shareholders
 
$
725,529

 
$
58,193

 
$
850,054

 
$
339,601

 
 
 
 
 
 
 
 
 
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.08

 
$
0.06

 
$
0.31

 
$
0.73

Income from discontinued operations
 
0.15

 
0.10

 
0.26

 
0.19

Gain on disposal of discontinued operations
 
1.82

 

 
1.79

 

Net income
 
$
2.05

 
$
0.16

 
$
2.36

 
$
0.92

 
 
 
 
 
 
 
 
 
Number of shares in calculation
 
352,049

 
369,212

 
359,237

 
369,206

 
 
 
 
 
 
 
 
 
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.08

 
$
0.06

 
$
0.31

 
$
0.72

Income from discontinued operations
 
0.15

 
0.10

 
0.25

 
0.19

Gain on disposal of discontinued operations
 
1.80

 

 
1.77

 

Net income
 
$
2.03

 
$
0.16

 
$
2.33

 
$
0.91

 
 
 
 
 
 
 
 
 
Number of shares in calculation
 
356,075

 
371,552

 
362,685

 
375,684






A summary of results for the three months ended June 30, 2018 and 2017 is as follows (in thousands):
 
Financial Services
 
 
 
 
 
 
 
 
2018
Jefferies Group
 
Other Financial Services
 
Merchant Banking Portfolio
 
Corporate
 
Parent Company Interest
 
Total
Net revenues
$
823,742

 
$
35,770

 
$
48,653

 
$
2,994

 
$

 
$
911,159

 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
444,094

 
9,320

 
10,782

 
14,319

 

 
478,515

Cost of sales

 

 
90,690

 

 

 
90,690

Floor brokerage and clearing fees
45,046

 

 

 

 

 
45,046

Interest expense

 
7,874

 
1,655

 

 
14,750

 
24,279

Depreciation and amortization
17,288

 
1,624

 
12,116

 
877

 

 
31,905

Selling, general and other expenses
192,276

 
15,297

 
20,992

 
7,997

 

 
236,562

Total expenses
698,704

 
34,115

 
136,235

 
23,193

 
14,750

 
906,997

Income (loss) from continuing operations before income taxes and income related to associated companies
125,038

 
1,655

 
(87,582
)
 
(20,199
)
 
(14,750
)
 
4,162

Income related to associated companies

 
11,657

 
21,696

 

 

 
33,353

Income (loss) from continuing operations before income taxes
$
125,038

 
$
13,312

 
$
(65,886
)
 
$
(20,199
)
 
$
(14,750
)
 
37,515

Income tax provision from continuing operations
 
 
 
 
 
 
 
 
 
 
9,598

Income from discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
77,106

Gain on disposal of discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
643,921

Net income
 
 
 
 
 
 
 
 
 
 
$
748,944







 
Financial Services
 
 
 
 
 
 
 
 
2017
Jefferies Group
 
Other Financial Services
 
Merchant Banking Portfolio
 
Corporate
 
Parent Company Interest
 
Total
Net revenues
$
781,672

 
$
45,054

 
$
28,899

 
$
1,236

 
$

 
$
856,861

 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
450,522

 
8,893

 
10,459

 
11,013

 

 
480,887

Cost of sales

 

 
69,982

 

 

 
69,982

Floor brokerage and clearing fees
44,435

 

 

 

 

 
44,435

Interest expense

 
4,691

 
6,155

 

 
14,734

 
25,580

Depreciation and amortization
15,348

 
2,472

 
7,571

 
867

 

 
26,258

Selling, general and other expenses
148,655

 
9,530

 
11,187

 
8,194

 

 
177,566

Total expenses
658,960

 
25,586

 
105,354

 
20,074

 
14,734

 
824,708

Income (loss) from continuing operations before income taxes and income related to associated companies
122,712

 
19,468

 
(76,455
)
 
(18,838
)
 
(14,734
)
 
32,153

Income related to associated companies

 
13,555

 
549

 

 

 
14,104

Income (loss) from continuing operations before income taxes
$
122,712

 
$
33,023

 
$
(75,906
)
 
$
(18,838
)
 
$
(14,734
)
 
46,257

Income tax provision from continuing operations
 
 
 
 
 
 
 
 
 
 
26,185

Income from discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
53,990

Net income
 
 
 
 
 
 
 
 
 
 
$
74,062








A summary of results for the six months ended June 30, 2018 and 2017 is as follows (in thousands):

 
Financial Services
 
 
 
 
 
 
 
 
2018
Jefferies Group
 
Other Financial Services
 
Merchant Banking Portfolio
 
Corporate
 
Parent Company Interest
 
Total
Net revenues
$
1,644,661

 
$
7,840

 
$
148,032

 
$
6,061

 
$

 
$
1,806,594

 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
898,854

 
19,962

 
20,084

 
29,274

 

 
968,174

Cost of sales

 

 
172,625

 

 

 
172,625

Floor brokerage and clearing fees
87,222

 

 

 

 

 
87,222

Interest expense

 
13,644

 
2,637

 

 
29,496

 
45,777

Depreciation and amortization
33,654

 
3,458

 
21,206

 
1,747

 

 
60,065

Selling, general and other expenses
374,163

 
38,073

 
34,485

 
16,185

 

 
462,906

Total expenses
1,393,893

 
75,137

 
251,037

 
47,206

 
29,496

 
1,796,769

Income (loss) from continuing operations before income taxes and income related to associated companies
250,768

 
(67,297
)
 
(103,005
)
 
(41,145
)
 
(29,496
)
 
9,825

Income related to associated companies

 
41,702

 
23,751

 

 

 
65,453

Income (loss) from continuing operations before income taxes
$
250,768

 
$
(25,595
)
 
$
(79,254
)
 
$
(41,145
)
 
$
(29,496
)
 
75,278

Income tax (benefit) from continuing operations
 
 
 
 
 
 
 
 
 
 
(38,831
)
Income from discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
130,063

Gain on disposal of discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
643,921

Net income
 
 
 
 
 
 
 
 
 
 
$
888,093







 
Financial Services
 
 
 
 
 
 
 
 
2017
Jefferies Group
 
Other Financial Services
 
Merchant Banking Portfolio
 
Corporate
 
Parent Company Interest
 
Total
Net revenues
$
1,579,058

 
$
86,542

 
$
495,445

 
$
2,342

 
$

 
$
2,163,387

 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 

 
 
 
 
 
 
Compensation and benefits
911,194

 
17,176

 
22,325

 
24,207

 

 
974,902

Cost of sales

 

 
139,238

 

 

 
139,238

Floor brokerage and clearing fees
90,293

 

 

 

 

 
90,293

Interest expense

 
8,864

 
12,822

 

 
29,464

 
51,150

Depreciation and amortization
30,949

 
5,191

 
15,495

 
1,734

 

 
53,369

Selling, general and other expenses
291,640

 
20,700

 
23,468

 
16,906

 

 
352,714

Total expenses
1,324,076

 
51,931

 
213,348

 
42,847

 
29,464

 
1,661,666

Income (loss) from continuing operations before income taxes and income (loss) related to associated companies
254,982

 
34,611

 
282,097

 
(40,505
)
 
(29,464
)
 
501,721

Income (loss) related to associated companies

 
(118,957
)
 
4,487

 

 

 
(114,470
)
Income (loss) from continuing operations before income taxes
$
254,982

 
$
(84,346
)
 
$
286,584

 
$
(40,505
)
 
$
(29,464
)
 
387,251

Income tax provision from continuing operations
 
 
 
 
 
 
 
 
 
 
117,428

Income from discontinued operations, net of income tax provision
 
 
 
 
 
 
 
 
 
 
98,162

Net income
 
 
 
 
 
 
 
 
 
 
$
367,985








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