Toggle SGML Header (+)


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):   March 28, 2019

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))

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 March 28, 2019, our parent company, Jefferies Financial Group Inc., issued a press release containing financial results for our quarter ended February 28, 2019.  A copy of the press release is attached hereto as Exhibit 99 and is incorporated herein by reference.

The information provided in this Item 2.02, including Exhibit 99, is intended to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.


Item 9.01.

Financial Statements and Exhibits

  The following exhibit is furnished with this report:
 

Number

Exhibit

 
99 March 28, 2019 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:

March 28, 2019

/s/ Roland T. Kelly

Roland T. Kelly

Assistant Secretary

 



INDEX TO EXHIBITS


Exhibit No.

Description

 

99

March 28, 2019 press release.

(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

Exhibit 99

Jefferies Announces First Quarter 2019 Financial Results

NEW YORK--(BUSINESS WIRE)--March 28, 2019--Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three months ended February 28, 2019.

Highlights for the three months ended February 28, 2019:

Rich Handler, our CEO, and Brian Friedman, our President, said:

"We are pleased with our first quarter results as they reflect resilient and solid performance in the face of an extremely challenging environment. The trading environment was especially poor throughout December and our results in both Equities and Fixed Income are excellent considering the volatility and risk of this period. While our Investment Banking results are sub-par relative to historical standards and trend, these results are acceptable to us and not indicative of anything going forward, activity was very light during the December market downturn and this was further exacerbated by the government shutdown for five weeks to the end of January.

"With the U.S. Government open for business, the new issue markets snapped open in March and our business has resumed its more normal pace. Our current Investment Banking backlog for capital raising and mergers and acquisitions is robust and the trading environment is good. We expect to continue to reap the benefits of high quality new hires we have made across our platform, particularly in Investment Banking.


"Our Asset Management business performed well during the first quarter. Asset Management revenues for the period, before Allocated net interest1, totaled $39 million, with good performances across most of our platform.

"Investment Banking revenues were $278 million for the first quarter, $156 million lower than last year’s first quarter. During the period, industry-wide U.S. equity and leverage finance capital market activity declined by about two-thirds from first quarter levels last year3. Our Capital Markets revenues for the quarter were $105 million, down $144 million, or 58%, from the same quarter last year. Advisory revenues were $180 million, 6% lower than in the same quarter last year, and compared to an industry-wide decline of 10% in overall advisory revenues in our addressable market4 across the U.S. and Europe3.

"Total Sales and Trading revenues were $371 million for the first quarter, slightly higher than the $369 million reported for the first quarter of 2018, which was a much healthier trading environment. Both our Fixed Income and Equity businesses performed well during the period, successfully navigating the increased volatility and more muted activity levels during the early part of the quarter.

"Our Merchant Banking first quarter results reflect continued strong performance from National Beef and a mark-to-market increase in the value of our investment in Spectrum Brands, together with continuing contributions from HomeFed and Idaho Timber. We recorded pre-tax income of $27 million for the three months ended February 28, 2019 in respect of our 31% investment in National Beef. Our results for the quarter include a $36 million mark-to-market increase on our Spectrum Brands investment.

"Our first quarter results were negatively impacted by a $25 million non-cash decrease in the mark-to-market value of our oil hedge portfolio within our Vitesse investment, as oil prices recovered to $57/bbl from $51/bbl at November 30, 2018. Excluding the impact of the fair value decline, Vitesse's adjusted pre-tax income2 was $10 million. This hedge portfolio represents options and collars intended to effectively assure the sale of Vitesse's expected next one to two years' worth of oil production at prices we deem attractive.

We expect to file our Form 10-Q on or about April 9, 2019.

Amounts herein pertaining to February 28, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission ("SEC"). More information on our results of operations for the three month period ended February 28, 2019 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC.


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 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).

_____________________________

1   Allocated net interest represents the allocation of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management reportable segment, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity, which allocation is consistent with Jefferies Group LLC's policy of allocating such items to its business lines. Refer to Jefferies Group LLC's summary of Net Revenues by Source on page 7.
2 Vitesse's adjusted pre-tax income excluding hedging losses, a non-GAAP measure, is defined as Vitesse's pre-tax loss less unrealized hedging losses. Refer to schedule on page 9 for reconciliation to U.S. GAAP amounts.
3 Source of industry-wide U.S. equity activity and industry-wide decline in overall advisory revenues is Dealogic and source of leverage finance capital market activity is Leveraged Commentary & Data.
4 Addressable market included all M&A deals less than $5.0 billion in size and all deals with an undisclosed deal value.
 

         

Summary for Jefferies Financial Group Inc. and Subsidiaries

(In thousands, except per share amounts)

(Unaudited)

 

Three Months
Ended
February 28,
2019

Three Months
Ended
March 31,
2018

 
Net revenues $ 828,443   $ 895,435  
 

Income from continuing operations before income taxes and income related to

associated companies

$ 22,004 $ 5,663
Income related to associated companies 27,313   32,100  
Income from continuing operations before income taxes 49,317 37,763
Income tax provision (benefit) 2,302   (48,429 )
Income from continuing operations 47,015 86,192
Income from discontinued operations, net of income tax provision of $0 and $15,934   52,957  
Net income 47,015 139,149
Net (income) loss attributable to the noncontrolling interests (1,066 ) 1,344
Net (income) loss attributable to the redeemable noncontrolling interests 138 (14,796 )
Preferred stock dividends (1,276 ) (1,172 )
Net income attributable to Jefferies Financial Group Inc. common shareholders $ 44,811   $ 124,525  
 

Basic earnings per common share attributable to Jefferies Financial Group Inc.

common shareholders:

Income from continuing operations $ 0.14 $ 0.23
Income from discontinued operations   0.11  
Net income $ 0.14   $ 0.34  
 
Number of shares in calculation 315,175   366,427  
 

Diluted earnings per common share attributable to Jefferies Financial Group Inc.

common shareholders:

Income from continuing operations $ 0.14 $ 0.23
Income from discontinued operations   0.11  
Net income $ 0.14   $ 0.34  
 
Number of shares in calculation 318,752   373,461  
 

A summary of results for the three months ended February 28, 2019 is as follows (in thousands):

     

Jefferies
Group

   

Merchant
Banking

    Corporate    

Parent
Company
Interest

   

Consolidation
Adjustments

    Total
Net revenues $ 685,718   $ 136,338   $ 4,193   $   $ 2,194   $ 828,443
 
Expenses:
Compensation and benefits 371,685 20,386 17,521 409,592
Cost of sales 66,921 66,921
Floor brokerage and clearing fees 51,977 (109 ) 51,868
Interest expense 8,256 14,762 23,018
Depreciation and amortization 17,662 15,417 855 33,934
Selling, general and other expenses 181,809   32,566   7,160     (429 ) 221,106
Total expenses 623,133   143,546   25,536   14,762   (538 ) 806,439

Income (loss) from continuing

operations before income taxes and

income related to associated companies

62,585 (7,208 ) (21,343 ) (14,762 ) 2,732 22,004
Income related to associated companies   27,313         27,313

Income (loss) from continuing

operations before income taxes

$ 62,585   $ 20,105   $ (21,343 ) $ (14,762 ) $ 2,732   49,317
Income tax provision from continuing operations 2,302
Net income $ 47,015
 

A summary of results for the three months ended March 31, 2018 is as follows (in thousands):

     

Jefferies
Group

   

Merchant
Banking

    Corporate    

Parent
Company
Interest

   

Consolidation
Adjustments

    Total
Net revenues $ 821,246   $ 73,901   $ 3,067   $   $ (2,779 ) $ 895,435  
 
Expenses:
Compensation and benefits 455,633 19,942 14,957 (873 ) 489,659
Cost of sales 81,935 81,935
Floor brokerage and clearing fees 43,819 (1,643 ) 42,176
Interest expense 6,752 14,746 21,498
Depreciation and amortization 16,366 10,924 870 28,160
Selling, general and other expenses 182,690   35,705   8,765     (816 ) 226,344  
Total expenses 698,508   155,258   24,592   14,746   (3,332 ) 889,772  

Income (loss) from continuing

operations before income taxes and

income related to associated companies

122,738 (81,357 ) (21,525 ) (14,746 ) 553 5,663
Income related to associated companies   32,100         32,100  

Income (loss) from continuing

operations before income taxes

$ 122,738   $ (49,257 ) $ (21,525 ) $ (14,746 ) $ 553   37,763
Income tax benefit from continuing operations (48,429 )

Income from discontinued operations,

net of income tax provision

52,957  
Net income $ 139,149  
 

The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2018. Amounts herein pertaining to February 28, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Quarterly Report on Form 10-Q for the quarter ended February 28, 2019.

 
Jefferies Group LLC and Subsidiaries
Consolidated Statements of Earnings
(Amounts in Thousands)
(Unaudited)
             
Quarter Ended

February 28,
2019

November 30,
2018

February 28,
2018

Revenues:
Commissions and other fees $ 147,326 $ 173,645 $ 147,902
Principal transactions 234,298 25,713 217,473
Investment banking 285,596 504,589 439,991
Asset management fees 6,669 5,084 4,930
Interest 360,975 336,605 257,816
Other 20,008   52,307   18,483  
Total revenues 1,054,872 1,097,943 1,086,595
Interest expense 369,154   335,985   265,349  
Net revenues 685,718   761,958   821,246  
 
Non-interest expenses:
Compensation and benefits 371,685 408,504 455,633
 
Non-compensation expenses:
Floor brokerage and clearing fees 51,977 53,260 43,819
Technology and communications 79,170 83,320 69,077
Occupancy and equipment rental 28,539 25,809 24,591
Business development 30,555 39,523 42,107
Professional services 36,927 38,170 30,408
Underwriting costs 8,575 16,485 14,275
Other 15,705   18,924   18,598  
Total non-compensation expenses 251,448   275,491   242,875  
Total non-interest expenses 623,133   683,995   698,508  
Earnings before income taxes 62,585 77,963 122,738
Income tax expense 16,220   16,313   183,557  
Net earnings (loss) 46,365 61,650 (60,819 )
Net earnings (loss) attributable to noncontrolling interests 384   257   (1 )
Net earnings (loss) attributable to Jefferies Group LLC $ 45,981   $ 61,393   $ (60,818 )
 
Pre-tax operating margin 9.1 % 10.2 % 14.9 %
Effective tax rate (1) 25.9 % 20.9 % 149.6 %
 
(1)   The effective tax rate for the three months ended February 28, 2018 includes an estimated provisional tax charge of approximately $164 million as a result of the Tax Cuts and Jobs Act ("Tax Act").
 

 
Jefferies Group LLC and Subsidiaries
Selected Statistical Information
(Amounts in Thousands, Except Other Data)
(Unaudited)
               
Quarter Ended

February 28,
2019

November 30,
2018

February 28,
2018

Net Revenues by Source:
Equities $ 174,539 $ 164,086 $ 155,777
Fixed income 196,759   86,826   213,053  
Total sales and trading 371,298   250,912   368,830  
 
Equity 51,337 127,942 79,840
Debt 53,777   152,335   168,994  
Capital markets 105,114 280,277 248,834
Advisory 180,482 224,312 191,157
Other investment banking (7,642 ) 17,523   (6,218 )
Total investment banking 277,954   522,112   433,773  
 
Other 8,995 22,448 8,097
     
Total Capital Markets (1) (2) 658,247   795,472   810,700  
 
Asset management fees 6,669 5,084 4,930
Investment return (3) (4) 32,412 (23,783 ) 12,379
Allocated net interest (3) (5) (11,610 ) (14,815 ) (6,763 )
Total Asset Management 27,471 (33,514 ) 10,546
     
Net Revenues $ 685,718   $ 761,958   $ 821,246  
 
Other Data:
Number of trading days 59 63 60
Number of trading loss days 9 18 7
 
Average firmwide VaR (in millions) (6) (7) $ 9.06 $ 9.59 $ 6.30
 
(1)   Includes net interest revenue of $4.6 million, $19.7 million and $0.7 million for the quarters ended February 28, 2019, November 30, 2018 and February 28, 2018, respectively.
(2) Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within our Net Revenues by Source. This presentation is aligned to our Capital Markets internal performance measurement.
(3) Beginning with the first quarter of 2019, Net revenues attributed to the Investment return in Jefferies Group LLC's Asset Management reportable segment have been disaggregated to separately present Investment return and Allocated net interest (see footnote 4). This disaggregation is intended to increase transparency and to make clearer actual Investment return. We offer third-party investors the opportunity to co-invest in our asset management funds and separately managed accounts alongside Jefferies Group LLC. We believe that aggregating Investment return and Allocated net interest would obscure the Investment return by including an amount that is unique to Jefferies Group LLC's credit spreads, debt maturity profile, capital structure, liquidity risks and allocation methods, none of which are pertinent to the Investment returns generated by the performance of the portfolio.
(4) Includes net interest expense of $1.2 million, $4.2 million and $1.5 million for the quarters ended February 28, 2019, November 30, 2018 and February 28, 2018, respectively.
(5) Allocated net interest represents the allocation of Jefferies Group LLC's long-term debt interest expense to Jefferies Group LLC's Asset Management reportable segment, net of interest income on Jefferies Group LLC's Cash and cash equivalents and other sources of liquidity (refer to page 8).
(6) The quarter ended November 30, 2018 information includes two months of Jefferies Group LLC's investments in certain separately managed accounts and funds, which were transferred to Jefferies Group LLC on October 1, 2018 from Jefferies Financial Group Inc. The quarter ended February 28, 2019 information includes three months of these investments.
(7) VaR estimates the potential loss in value of Jefferies Group LLC's 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 Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2018.
 

 
Jefferies Group LLC and Subsidiaries
Financial Highlights
(Amounts in Millions, Except Where Noted)
(Unaudited)
             
Quarter Ended

February 28,
2019

November 30,
2018

February 28,
2018

Financial position:
Total assets (1) $ 43,134 $ 41,169 $ 41,163
Average total assets for the period (1) $ 52,934 $ 49,427 $ 49,105
Average total assets less goodwill and intangible assets for the period (1) $ 51,109 $ 47,653 $ 47,261
 
Cash and cash equivalents (1) $ 4,132 $ 5,146 $ 5,017
Cash and cash equivalents and other sources of liquidity (1) (2) $ 5,691 $ 6,604 $ 6,335
Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 13.2 % 16.0 % 15.4 %

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

goodwill and intangible assets (1) (2)

13.8 % 16.8 % 16.1 %
 
Financial instruments owned (1) $ 16,900 $ 16,400 $ 15,318
Goodwill and intangible assets (1) $ 1,826 $ 1,825 $ 1,842
 
Total equity (including noncontrolling interests) (1) $ 6,157 $ 6,182 $ 5,499
Total Jefferies Group LLC member's equity (1) $ 6,151 $ 6,180 $ 5,498
Tangible Jefferies Group LLC member's equity (1) (3) $ 4,326 $ 4,356 $ 3,656
 
Level 3 financial instruments:
Level 3 financial instruments owned (1) (4) (5) $ 395 $ 337 $ 323
Level 3 financial instruments owned - % total assets (1) (4) 0.9 % 0.8 % 0.8 %
Level 3 financial instruments owned - % total financial instruments (1) (4) 2.3 % 2.1 % 2.1 %

Level 3 financial instruments owned - % tangible Jefferies Group LLC

member's equity (1) (4)

9.1 % 7.7 % 8.8 %
 
Other data and financial ratios:
Total long-term capital (1) (6) $ 11,899 $ 11,840 $ 11,991
Leverage ratio (1) (7) 7.0 6.7 7.5
Tangible gross leverage ratio (1) (8) 9.5 9.0 10.8
 
Number of trading days 59 63 60
Number of trading loss days 9 18 7
Average firmwide VaR (5) (9) $ 9.06 $ 9.59 $ 6.30
 
Number of employees, at period end 3,613 3,596 3,438
 

Jefferies Group LLC and Subsidiaries
Financial Highlights - Footnotes
 
(1) Amounts pertaining to February 28, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC's Quarterly Report on Form 10-Q for the quarter ended February 28, 2019.
 
(2) At February 28, 2019, 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 $1,194 million, in aggregate, and $365 million, being the estimated amount of additional secured financing that could be reasonably expected to be obtained from Jefferies Group LLC's financial instruments that are currently not pledged after considering reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at November 30, 2018 were $959 million and $499 million, respectively, and at February 28, 2018, were $930 million and $388 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) The quarter ended November 30, 2018 information includes two months of Jefferies Group LLC's capital investments in certain separately managed accounts and funds, which were transferred to Jefferies Group LLC on October 1, 2018 from Jefferies Financial Group Inc. The quarter ended February 28, 2019 information includes three months of these capital investments.
 
(6) At February 28, 2019, November 30, 2018 and February 28, 2018, total long-term capital includes Jefferies Group LLC's long-term debt of $5,742 million, $5,657 million and $6,492 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under the revolving credit facility and the amount of debt maturing in less than one year, as applicable.
 
(7) Leverage ratio equals total assets divided by total equity.
 
(8) 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 Jefferies Group LLC's leverage ratio.
 
(9) VaR estimates the potential loss in value of Jefferies Group LLC's 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 Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2018.
 

Jefferies Financial Group Inc.
Non-GAAP Reconciliations

The following table reconciles Jefferies Financial Group non-GAAP measures to their respective U.S. GAAP measures. Management believes such non-GAAP measures are useful to investors as they allow them to view our results through the eyes of management, while facilitating a comparison across historical periods. These measures should not be considered a substitute for, or superior to, measures prepared in accordance with U.S. GAAP.


Vitesse Adjusted Pre-Tax Income GAAP Reconciliation

Reconciliation of Vitesse pre-tax loss to adjusted pre-tax income (a non-GAAP measure) (in thousands):

   

Three months ended
February 28, 2019

 
Vitesse pre-tax loss (GAAP) $ (15,846 )
Unrealized hedging loss 25,406  
Vitesse adjusted pre-tax income (non-GAAP) $ 9,560  
 

CONTACT:
Teresa S. Gendron
Chief Financial Officer
Jefferies Financial Group Inc.
Tel. (212) 460-1932

Peregrine C. Broadbent
Chief Financial Officer
Jefferies Group LLC
Tel. (212) 284-2338

(Back To Top)