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Section 1: 8-K (8-K)

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false0000096223 0000096223 2019-11-29 2019-11-29



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): November 29, 2019

JEFFERIES FINANCIAL GROUP INC.
(Exact name of registrant as specified in its charter)
New York
001-05721
13-2615557
 
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
520 Madison Avenue
New York,
New York
10022
 
(Address of Principal Executive Offices)
(Zip Code)
 
(212) 460-1900
Registrant's telephone number, including area code

(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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock; Par Value $1.00 Per Share
JEF
New York Stock Exchange

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 2.01. Completion of Acquisition or Disposition of Assets

As previously announced, on November 17, 2019, Jefferies Financial Group Inc. ("we" or "Jefferies") entered into a Membership Interest Purchase Agreement (the "Agreement") with NBM US Holdings, Inc., a Delaware corporation ("Buyer") and a wholly owned subsidiary of Marfrig Global Foods S.A., a Brazilian corporation (sociedade por ações) ("Marfrig"), and Marfrig, pursuant to which Buyer (or in certain circumstances one or more of the other members of National Beef) will purchase from us our remaining equity units of National Beef Packing Company, LLC, a Delaware limited liability company ("National Beef"), representing approximately 31% of the outstanding equity of National Beef. On November 29, 2019, we consummated the transaction contemplated by the Agreement. At closing, we received a total of $970 million in cash, including $790.6 million from Marfrig and other shareholders and $179.4 million from final distributions from National Beef. As a result of the closing, we no longer hold an equity interest in National Beef.


Item 9.01. Financial Statements and Exhibits

(b) Pro Forma Financial Information

Attached hereto as Exhibit 99 are the following unaudited pro forma condensed financial statements: unaudited pro forma balance sheet as of August 31, 2019 and unaudited pro forma statements of operations for the nine months ended August 31, 2019 and the eleven months ended November 30, 2018, that reflect the sale of Jefferies interest in National Beef.

(d) Exhibits

Exhibit No.    Description

99        Unaudited pro forma financial statement information

104        Cover Page Interactive Data File (embedded within the Inline XBRL document)

























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: December 5, 2019
                        
JEFFERIES FINANCIAL GROUP INC.
 
 
 
 
By:
/s/ Teresa S. Gendron
Name:
Teresa S. Gendron
Title:
Vice President and Chief Financial Officer




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Section 2: EX-99 (EXHIBIT 99 UNAUDITED PRO FORMA FINANCIAL STATEMENT INFORMATION)

Exhibit


Exhibit 99

Jefferies Financial Group Inc.
Unaudited Pro Forma Condensed Consolidated Financial Information


On November 29, 2019, Jefferies Financial Group Inc. ("Jefferies", "we" or the "Company") completed the previously announced sale of its remaining 31% equity interest in National Beef Packing Company, LLC ("National Beef") to Marfrig Global Foods S.A. ("Marfrig") and certain other shareholders. We received a total of $970 million in cash, including $790.6 million from Marfrig and other shareholders and $179.4 million from final distributions from National Beef. Effective November 29, 2019, we no longer hold an equity interest in National Beef.

The Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition is presented as if the transaction had occurred as of the most recently filed Consolidated Statement of Financial Condition (as of August 31, 2019). The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended August 31, 2019 and the eleven months ended November 30, 2018 are presented as if the transaction had occurred immediately prior to the first day of the earliest period presented (prior to January 1, 2018).

On June 5, 2018, we completed the sale of 48% of National Beef to Marfrig, reducing our ownership in National Beef from 79% to 31%. As of the closing of the sale on June 5, 2018, we deconsolidated our investment in National Beef and accounted for our remaining 31% interest in National Beef under the equity method of accounting. We classified the results of National Beef prior to June 5, 2018 as discontinued operations in the Consolidated Statements of Operations. As such, pro forma adjustments to remove the remaining 31% interest in National Beef in these financial statements are from June 5, 2018 forward.

This unaudited pro forma condensed consolidated financial information has been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the Company’s Transition Report on Form 10–K for the eleven months ended November 30, 2018 ("2018 10-K") and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2019 ("2019 Q3 10-Q"), as filed with the Securities and Exchange Commission.

The following unaudited pro forma condensed consolidated financial information is derived from the Company’s historical consolidated financial statements. Historical financial information for the eleven months ended November 30, 2018 has been derived from audited historical consolidated financial statements included in the Company's 2018 10-K. Historical financial information for the Company as of and for the nine months ended August 31, 2019 has been derived from unaudited historical consolidated financial statements included in the Company’s 2019 Q3 10-Q.

The unaudited pro forma condensed consolidated financial statements are based upon available information and certain assumptions considered reasonable by the Company. This unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates, nor is it necessarily indicative of our future operating results.







JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition
August 31, 2019
(Dollars in thousands, except par value)
 
 
 
Pro Forma Adjustments
 
 
 
 
Jefferies Historical
 
Sale of 31% Interest in National Beef
 
 
Pro Forma
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
$
6,011,350

 
$
969,850

 
(a)
$
6,981,200

Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations
658,335

 

 
 
658,335

Trading assets, at fair value, including securities pledged of $12,087,982
17,195,916

 

 
 
17,195,916

Loans to and investments in associated companies
2,346,297

 
(718,771
)
 
(b)
1,627,526

Securities borrowed
7,895,149

 

 
 
7,895,149

Securities purchased under agreements to resell
4,499,995

 

 
 
4,499,995

Receivables
5,826,350

 

 
 
5,826,350

Intangible assets, net and goodwill
1,921,793

 

 
 
1,921,793

Deferred tax asset, net
509,772

 
(63,448
)
 
(c)
446,324

Other assets
2,398,251

 

 
 
2,398,251

Total assets
$
49,263,208

 
$
187,631

 
 
$
49,450,839

 
 
 
 
 
 
 
LIABILITIES
 

 
 

 
 
 
Short-term borrowings
$
518,914

 
$

 
 
$
518,914

Trading liabilities, at fair value
10,296,315

 

 
 
10,296,315

Securities loaned
2,182,865

 

 
 
2,182,865

Securities sold under agreements to repurchase
8,236,981

 

 
 
8,236,981

Other secured financings
2,508,589

 

 
 
2,508,589

Payables, expense accruals and other liabilities
7,350,914

 

 
 
7,350,914

Long-term debt
7,968,785

 

 
 
7,968,785

Total liabilities
39,063,363

 

 
 
39,063,363

 
 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
MEZZANINE EQUITY
 

 
 

 
 
 
Redeemable noncontrolling interests
27,064

 

 
 
27,064

Mandatorily redeemable convertible preferred shares
125,000

 

 
 
125,000

 
 
 
 
 
 
 
EQUITY
 

 
 

 
 
 
Common shares, par value $1 per share, authorized 600,000,000 shares; 299,867,942 shares issued and outstanding, after deducting 17,178,934 shares held in treasury
299,868

 

 
 
299,868

Additional paid-in capital
3,731,712

 

 
 
3,731,712

Accumulated other comprehensive income (loss)
(266,452
)
 
23

 
(b)
(266,429
)
Retained earnings
6,255,314

 
187,608

 
(d)
6,442,922

Total Jefferies Financial Group Inc. shareholders’ equity
10,020,442

 
187,631

 
 
10,208,073

Noncontrolling interests
27,339

 

 
 
27,339

Total equity
10,047,781

 
187,631

 
 
10,235,412

 
 
 
 
 
 
 
Total
$
49,263,208

 
$
187,631

 
 
$
49,450,839










See accompanying notes to unaudited pro forma condensed consolidated financial statements.





JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the nine months ended August 31, 2019
(In thousands, except per share amounts)
 
 
 
Pro Forma Adjustments
 
 
 
 
Jefferies Historical
 
Sale of 31% Interest in National Beef
 
 
Pro Forma
Revenues:
 
 
 
 
 
 
Commissions and other fees
$
493,560

 
$

 
 
$
493,560

Principal transactions
465,451

 

 
 
465,451

Investment banking
1,126,479

 

 
 
1,126,479

Interest income
1,243,278

 

 
 
1,243,278

Manufacturing revenues
248,227

 

 
 
248,227

Other
351,544

 

 
 
351,544

Total revenues
3,928,539

 

 
 
3,928,539

Interest expense of Jefferies Group
1,141,661

 

 
 
1,141,661

Net revenues
2,786,878

 

 
 
2,786,878

 
 
 
 
 
 
 
Expenses:
 

 
 

 
 
 

Compensation and benefits
1,367,034

 

 
 
1,367,034

Cost of sales
233,109

 

 
 
233,109

Floor brokerage and clearing fees
163,113

 

 
 
163,113

Interest expense
69,819

 

 
 
69,819

Depreciation and amortization
110,600

 

 
 
110,600

Selling, general and other expenses
718,910

 

 
 
718,910

Total expenses
2,662,585

 

 
 
2,662,585

Income before income taxes and income (loss) related to associated companies
124,293

 

 
 
124,293

Income (loss) related to associated companies
121,766

 
(137,918
)
 
(b)
(16,152
)
Income before income taxes
246,059

 
(137,918
)
 
 
108,141

Income tax provision (benefit)
(522,626
)
 
(34,851
)
 
(e)
(557,477
)
Net income
768,685

 
(103,067
)
 
 
665,618

Net income attributable to the noncontrolling interests
(759
)
 

 
 
(759
)
Net income attributable to the redeemable noncontrolling interests
(47
)
 

 
 
(47
)
Preferred stock dividends
(3,827
)
 

 
 
(3,827
)
Net income attributable to Jefferies Financial Group Inc. common shareholders
$
764,052

 
$
(103,067
)
 
 
$
660,985

 
 
 
 
 
 
 
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
Net income
$
2.44

 
 
 
 
$
2.11

Number of shares used in calculation
310,838

 
 
 
 
310,838

 
 
 
 
 
 
 
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
Net income
$
2.41

 
 
 
 
$
2.08

Number of shares used in calculation
317,181

 
 
 
 
317,181








See accompanying notes to unaudited pro forma condensed consolidated financial statements.





JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the eleven months ended November 30, 2018
(In thousands, except per share amounts)
 
 
 
Pro Forma Adjustments
 
 
 
 
Jefferies Historical
 
Elimination of Discontinued Operations
 
Sale of 31% Interest in National Beef
 
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
 
Commissions and other fees
$
634,271

 
$

 
$

 
 
$
634,271

Principal transactions
232,224

 

 

 
 
232,224

Investment banking
1,904,870

 

 

 
 
1,904,870

Interest income
1,294,325

 

 

 
 
1,294,325

Manufacturing revenues
357,427

 

 

 
 
357,427

Other
586,611

 

 

 
 
586,611

Total revenues
5,009,728

 

 

 
 
5,009,728

Interest expense of Jefferies Group
1,245,694

 

 

 
 
1,245,694

Net revenues
3,764,034

 

 

 
 
3,764,034

 
 
 
 
 
 
 
 
 
Expenses:
 

 
 

 
 

 
 
 

Compensation and benefits
1,862,782

 

 

 
 
1,862,782

Cost of sales
307,071

 

 

 
 
307,071

Floor brokerage and clearing fees
184,210

 

 

 
 
184,210

Interest expense
89,249

 

 

 
 
89,249

Depreciation and amortization
120,317

 

 

 
 
120,317

Selling, general and other expenses
961,328

 

 

 
 
961,328

Total expenses
3,524,957

 

 

 
 
3,524,957

Income from continuing operations before income taxes and income (loss) related to associated companies
239,077

 

 

 
 
239,077

Income (loss) related to associated companies
57,023

 

 
(110,049
)
 
(b)
(53,026
)
Income from continuing operations before income taxes
296,100

 

 
(110,049
)
 
 
186,051

Income tax provision (benefit)
19,008

 

 
(27,787
)
 
(e)
(8,779
)
Income from continuing operations
277,092

 

 
(82,262
)
 
 
194,830

Income from discontinued operations, including gain on disposal, net of taxes
773,984

 
(773,984
)
 

 
 

Net income
1,051,076

 
(773,984
)
 
(82,262
)
 
 
194,830

Net loss attributable to the noncontrolling interests
12,975

 

 

 
 
12,975

Net income attributable to the redeemable noncontrolling interests
(37,263
)
 
37,141

 

 
 
(122
)
Preferred stock dividends
(4,470
)
 

 

 
 
(4,470
)
Net income attributable to Jefferies Financial Group Inc. common shareholders
$
1,022,318

 
$
(736,843
)
 
$
(82,262
)
 
 
$
203,213

 
 
 
 
 
 
 
 
 
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.82

 
 
 
 
 
 
$
0.58

Income from discontinued operations, including gain on disposal
2.11

 
 
 
 
 
 

Net income
$
2.93

 
 
 
 
 
 
$
0.58

Number of shares used in calculation
347,261

 
 
 
 
 
 
347,261

 
 
 
 
 
 
 
 
 
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.81

 
 
 
 
 
 
$
0.58

Income from discontinued operations, including gain on disposal
2.09

 
 
 
 
 
 

Net income
$
2.90

 
 
 
 
 
 
$
0.58

Number of shares used in calculation
351,275

 
 
 
 
 
 
351,275

See accompanying notes to unaudited pro forma condensed consolidated financial statements.





JEFFERIES FINANCIAL GROUP INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1. Basis of Presentation

The Company's Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition is presented as if the sale of the 31% interest in National Beef had occurred as of the most recently filed Consolidated Statement of Financial Condition (as of August 31, 2019). The Company's Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended August 31, 2019 and the eleven months ended November 30, 2018 are presented as if the sale of the 31% interest in National Beef had occurred immediately prior to the first day of the earliest period presented (prior to January 1, 2018).

The pro forma adjustments reflect the sale of the 31% interest in National Beef. Retained earnings in the Unaudited Pro Forma Condensed Consolidated Statement of Financial Condition includes the after-tax gain on sale that would have been recorded if the transaction had occurred on August 31, 2019. The estimated gain (including related estimated transaction costs) is not included in the Unaudited Pro Forma Condensed Consolidated Statements of Operations as it represents a non-recurring item.

Note 2. Adjustments to Unaudited Pro Forma Condensed Consolidated Financial Statements

(a)
Represents the increase in cash and cash equivalents resulting from the pro forma consideration received ($970.0 million), net of estimated transaction costs ($0.2 million).

(b)
Represents the elimination of National Beef's historical financial information.

(c) Adjustment to record tax effect of pro forma gain at a combined federal and state statutory tax rate of 25.3%.

(d)
To record the pro forma after-tax gain of $187.6 million that would have been recorded if the transaction had occurred on August 31, 2019. As such, this pro forma gain is based on the net book value of National Beef as of August 31, 2019 and does not reflect activity subsequent to that date. The Company estimates that it will recognize a pre-tax gain from the sale of about $210 million ($157 million after-tax) in the fourth quarter of 2019.

(e)
Adjustment to record the tax effect of the pro forma adjustments at a combined federal and state statutory tax rate of 25.3% for the nine months ended August 31, 2019 and 25.2% for the eleven months ended November 30, 2018.




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