Toggle SGML Header (+)


Section 1: 8-K (FORM 8-K)

Form 8-K
false 0001084580 0001084580 2020-01-08 2020-01-08 0001084580 jef:M4.850SeniorNotesDue2027Member 2020-01-08 2020-01-08 0001084580 jef:M5.125SeniorNotesDue2023Member 2020-01-08 2020-01-08

 

 

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): January 8, 2020

 

Jefferies Group LLC

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-14947

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

4.850% Senior Notes Due 2027

 

JEF /27A

 

New York Stock Exchange

5.125% Senior Notes Due 2023

 

JEF /23

 

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 2.02. Results of Operations and Financial Condition

On January 8, 2020, our parent company, Jefferies Financial Group Inc., issued a press release containing financial results for our quarter and year ended November 30, 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

   

January 8, 2020 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: January 8, 2020

 

 

 

/s/ Roland T. Kelly

 

 

 

Roland T. Kelly

 

 

 

Managing Director and Associate General Counsel

(Back To Top)

Section 2: EX-99 (EX-99)

EX-99

EXHIBIT 99

 

FOR IMMEDIATE RELEASE    January 8, 2020

Jefferies Announces 2019 Financial Results

New York, New York, January 8, 2020—Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and twelve month periods ended November 30, 2019.

Highlights for the three months ended November 30, 2019:

 

   

Net income attributable to Jefferies Financial Group common shareholders of $196 million, or $0.62 per diluted share, primarily reflecting the previously reported $205 million pre-tax gain from the sale of our remaining 31% interest in National Beef, partially offset by a non-cash fair value reduction of $69 million to our investment in The We Company. Results also reflect strong performance in Equities and Fixed Income sales and trading, solid Investment Banking advisory revenues, continued modest results in Leveraged Finance new issuance and solid results at certain of our merchant banking investments

 

   

Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $24 million and net earnings of $23 million

 

   

Total Net Revenues of $748 million

 

   

Investment Banking Net Revenues of $393 million

 

   

Total Equities and Fixed Income Net Revenues of $363 million

 

   

Asset Management Revenues (before Allocated net interest1) of $(4) million

 

   

Merchant Banking pre-tax income of $238 million, reflecting strong performance by National Beef prior to the closing of the sale of our interest, the related pre-tax gain of $205 million, and solid results at certain of our merchant banking investments, offset by the $69 million fair value adjustment to reduce the value of our investment in We

 

   

Return of excess capital, including special dividend of Spectrum Brands Common Stock, share repurchases and cash dividends, totaling approximately $642 million

 

   

Jefferies Financial Group had parent company liquidity of $2.2 billion at November 30, 2019

Highlights for the twelve months ended November 30, 2019:

 

   

Net income attributable to Jefferies Financial Group common shareholders of $960 million, or $3.03 per diluted share, including the impact of a nonrecurring tax benefit of $545 million; adjusted net income of $415 million2, or $1.32 per diluted share2

 

   

Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $325 million and net earnings of $244 million

 

   

Total Net Revenues of $3,113 million

 

   

Investment Banking Net Revenues of $1,522 million, down 20% from 2018 record of $1,914 million

 

   

Total Equities and Fixed Income Net Revenues of $1,455 million, up 19% from 2018

 

   

Asset Management Revenues (before Allocated net interest1) of $117 million

 

   

Merchant Banking pre-tax income of $267 million, reflecting strong operating performance from National Beef and Vitesse, the $205 million pre-tax gain related to the sale of our remaining 31% interest in National Beef and the $72 million gain related to the HomeFed transaction, offset by fair value adjustments to both our investment in We and some of our mark-to-market investments in public companies

 

   

Return of excess capital, including special dividend of Spectrum Brands common stock, share repurchases and cash dividends, totaling approximately $1.1 billion; share repurchases during the twelve months ended November 30, 2019 totaled 25.9 million shares for $506 million, or an average price of $19.52 per share

Please refer to the Jefferies Financial Group Annual Letter from our CEO and President for discussion of results and broader perspective on our strategy and outlook. We expect to file our Form 10-K on or about January 28, 2020.

 

1


*    *    *    *

Amounts herein pertaining to November 30, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Annual Report on Form 10-K with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and twelve month periods ended November 30, 2019 will be provided upon filing our Annual Report on Form 10-K 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).

For further information, please 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

 

 

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 pages 8 and 9.

2 

Jefferies Financial Group adjusted net income, a non-GAAP measure, is defined as Jefferies Financial Group’s net income less accumulated other comprehensive income nonrecurring tax benefit. Jefferies Financial Group adjusted diluted earnings per share, a non-GAAP measure, is defined as Jefferies Financial Group’s diluted earnings per share less accumulated other comprehensive income non-recurring tax benefit. Refer to schedule on page 12 for reconciliation to U.S. GAAP amounts.

 

2


Summary for Jefferies Financial Group Inc. and Subsidiaries

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months
Ended
November 30,
2019
    Two Months
Ended
November 30,
2018
    Twelve
Months
Ended
November 30,
2019
    Eleven
Months
Ended
November 30,
2018
 

Net revenues

   $ 1,106,098     $ 806,594     $ 3,892,976     $ 3,764,034  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 151,320     $ (24,573   $ 275,613     $ 239,077  

Income (loss) related to associated companies

     81,229       (27,297     202,995       57,023  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     232,549       (51,870     478,608       296,100  

Income tax provision (benefit)

     38,671       (32,552     (483,955     19,008  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     193,878       (19,318     962,563       277,092  

Income from discontinued operations, net of income tax provision of $0, $0, $0 and $47,045

     —         —         —         130,063  

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

     —         —         —         643,921  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     193,878       (19,318     962,563       1,051,076  

Net (income) loss attributable to the noncontrolling interests

     2,606       (233     1,847       12,975  

Net (income) loss attributable to the redeemable noncontrolling interests

     333       31       286       (37,263

Preferred stock dividends

     (1,276     (851     (5,103     (4,470
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Jefferies Financial Group Inc. common shareholders

   $ 195,541     $ (20,371   $ 959,593     $ 1,022,318  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per common share attributable to Jefferies Financial Group Inc. common shareholders:

        

Income (loss) from continuing operations

   $ 0.63     $ (0.06   $ 3.07     $ 0.82  

Income from discontinued operations

     —         —         —         0.27  

Gain on disposal of discontinued operations

     —         —         —         1.84  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 0.63     $ (0.06   $ 3.07     $ 2.93  
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares in calculation

     310,266       329,101       310,694       347,261  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per common share attributable to Jefferies Financial Group Inc. common shareholders:

        

Income (loss) from continuing operations

   $ 0.62     $ (0.06   $ 3.03     $ 0.81  

Income from discontinued operations

     —         —         —         0.26  

Gain on disposal of discontinued operations

     —         —         —         1.83  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 0.62     $ (0.06   $ 3.03     $ 2.90  
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares in calculation

     316,566       329,101       317,032       351,275  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

3


A summary of results for the three months ended November 30, 2019 is as follows (in thousands):

 

     Jefferies
Group
     Merchant
Banking
     Corporate     Parent
Company
Interest
    Consolidation
Adjustments
    Total  

Net revenues

   $ 747,802      $ 347,210      $ 10,699     $ —       $ 387     $ 1,106,098  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

              

Compensation and benefits

     422,548        19,036        16,273       —         —         457,857  

Cost of sales

     —          86,532        —         —         —         86,532  

Floor brokerage and clearing fees

     58,773        —          —         —         1,254       60,027  

Interest expense

     —          8,608        —         8,750       —         17,358  

Depreciation and amortization

     21,404        19,944        923       —         —         42,271  

Selling, general and other expenses

     221,206        55,783        14,963       —         (1,219     290,733  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     723,931        189,903        32,159       8,750       35       954,778  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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

     23,871        157,307        (21,460     (8,750     352       151,320  

Income related to associated companies

     —          81,161        —         —         68       81,229  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

   $ 23,871      $ 238,468      $ (21,460   $ (8,750   $ 420       232,549  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

Income tax provision from continuing operations

                 38,671  
              

 

 

 

Net income

               $ 193,878  
              

 

 

 

A summary of results for the two months ended November 30, 2018 is as follows (in thousands):

 

     Jefferies
Group
     Merchant
Banking
    Corporate     Parent
Company
Interest
    Consolidation
Adjustments
    Total  

Net revenues

   $ 761,958      $ 42,204     $ 7,525     $ —       $ (5,093   $ 806,594  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

             

Compensation and benefits

     408,504        17,662       7,177       —         —         433,343  

Cost of sales

     —          49,570       —         —         —         49,570  

Floor brokerage and clearing fees

     53,260        —         —         —         (842     52,418  

Interest expense

     —          4,796       —         9,839       —         14,635  

Depreciation and amortization

     17,467        9,920       570       —         —         27,957  

Selling, general and other expenses

     204,764        41,688       7,811       —         (1,019     253,244  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     683,995        123,636       15,558       9,839       (1,861     831,167  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     77,963        (81,432     (8,033     (9,839     (3,232     (24,573

Loss related to associated companies

     —          (27,297     —         —         —         (27,297
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

   $ 77,963      $ (108,729   $ (8,033   $ (9,839   $ (3,232     (51,870
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

Income tax benefit from continuing operations

                (32,552
             

 

 

 

Net loss

              $ (19,318
             

 

 

 

 

4


A summary of results for the twelve months ended November 30, 2019 is as follows (in thousands):

 

     Jefferies
Group
     Merchant
Banking
     Corporate     Parent
Company
Interest
    Consolidation
Adjustments
    Total  

Net revenues

   $ 3,112,530      $ 746,369      $ 32,833     $ —       $ 1,244     $ 3,892,976  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

              

Compensation and benefits

     1,684,054        82,832        58,005       —         —         1,824,891  

Cost of sales

     —          319,641        —         —         —         319,641  

Floor brokerage and clearing fees

     227,471        —          —         —         (4,331     223,140  

Interest expense

     —          34,129        —         53,048       —         87,177  

Depreciation and amortization

     79,204        70,192        3,475       —         —         152,871  

Selling, general and other expenses

     797,132        175,650        39,820       —         (2,959     1,009,643  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,787,861        682,444        101,300       53,048       (7,290     3,617,363  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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

     324,669        63,925        (68,467     (53,048     8,534       275,613  

Income related to associated companies

     —          202,927        —         —         68       202,995  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

   $ 324,669      $ 266,852      $ (68,467   $ (53,048   $ 8,602       478,608  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

Income tax benefit from continuing operations

                 (483,955
              

 

 

 

Net income

               $ 962,563  
              

 

 

 

A summary of results for the eleven months ended November 30, 2018 is as follows (in thousands):

 

     Jefferies
Group
     Merchant
Banking
    Corporate     Parent
Company
Interest
    Consolidation
Adjustments
    Total  

Net revenues

   $ 3,183,376      $ 571,831     $ 22,300     $ —       $ (13,473   $ 3,764,034  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

             

Compensation and benefits

     1,736,264        77,169       50,222       —         (873     1,862,782  

Cost of sales

     —          307,071       —         —         —         307,071  

Floor brokerage and clearing fees

     189,068        —         —         —         (4,858     184,210  

Interest expense

     —          35,159       —         54,090       —         89,249  

Depreciation and amortization

     68,296        48,852       3,169       —         —         120,317  

Selling, general and other expenses

     780,081        150,115       35,049       —         (3,917     961,328  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,773,709        618,366       88,440       54,090       (9,648     3,524,957  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     409,667        (46,535     (66,140     (54,090     (3,825     239,077  

Income related to associated companies

     —          57,023       —         —         —         57,023  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

   $ 409,667      $ 10,488     $ (66,140   $ (54,090   $ (3,825     296,100  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

Income tax provision from continuing operations

                19,008  

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

              $ 1,051,076  
             

 

 

 

 

5


The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2019 and Annual Report on Form 10-K for the year ended November 30, 2018. Amounts herein pertaining to November 30, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Annual Report on Form 10-K for the year ended November 30, 2019.

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

     Quarter Ended  
     November 30,
2019
    August 31,
2019
    November 30,
2018
 

Revenues:

      

Commissions and other fees (1)

   $ 182,466     $ 171,003     $ 181,271  

Principal transactions (2)

     135,981       147,993       25,713  

Investment banking

     400,513       412,533       504,589  

Asset management fees and revenues (2)

     3,935       4,220       5,084  

Interest

     333,507       383,596       336,605  

Other (1)

     17,134       22,286       44,681  
  

 

 

   

 

 

   

 

 

 

Total revenues

     1,073,536       1,141,631       1,097,943  

Interest expense

     325,734       364,472       335,985  
  

 

 

   

 

 

   

 

 

 

Net revenues

     747,802       777,159       761,958  
  

 

 

   

 

 

   

 

 

 

Non-interest expenses:

      

Compensation and benefits

     422,548       411,936       408,504  

Non-compensation expenses:

      

Floor brokerage and clearing fees

     58,773       54,247       53,260  

Technology and communications

     87,931       86,649       83,320  

Occupancy and equipment rental

     31,885       29,300       25,809  

Business development

     34,728       36,526       39,523  

Professional services

     45,296       42,379       38,170  

Underwriting costs

     14,617       14,647       16,485  

Other

     28,153       18,400       18,924  
  

 

 

   

 

 

   

 

 

 

Total non-compensation expenses

     301,383       282,148       275,491  
  

 

 

   

 

 

   

 

 

 

Total non-interest expenses

     723,931       694,084       683,995  
  

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     23,871       83,075       77,963  

Income tax expense

     495       18,250       16,313  
  

 

 

   

 

 

   

 

 

 

Net earnings

     23,376       64,825       61,650  

Net earnings (loss) attributable to noncontrolling interests

     (1,784     (143     257  
  

 

 

   

 

 

   

 

 

 

Net earnings attributable to Jefferies Group LLC

   $ 25,160     $ 64,968     $ 61,393  
  

 

 

   

 

 

   

 

 

 

Pre-tax operating margin

     3.2     10.7     10.2

Effective tax rate

     2.1     22.0     20.9

 

(1)

In the third quarter of 2019, Jefferies Group LLC reorganized the presentation of certain other fees, primarily related to prime brokerage services offered to clients. Jefferies Group LLC’s Consolidated Statement of Earnings reflects the reclassification of revenues of $7.6 million from Other revenues to Commissions and other fees for the three months ended November 30, 2018. There is no impact on Total revenues as a result of this change in presentation.

(2)

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Such arrangements did not exist prior to the first quarter of 2019 and Jefferies Group LLC’s Consolidated Statement of Earnings reflects the reclassification of revenues of $0.9 million from Principal transactions revenues to Asset management fees and revenues for the three months ended August 31, 2019. There is no impact on Total revenues as a result of this change in presentation.

 

6


Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

     Twelve Months Ended  
     November 30,
2019
    November 30,
2018
 

Revenues:

    

Commissions and other fees (1)

   $ 676,309     $ 663,465  

Principal transactions

     766,192       524,296  

Investment banking

     1,528,729       1,910,203  

Asset management fees and revenues

     20,285       21,214  

Interest

     1,496,529       1,207,095  

Other (1)

     96,488       103,359  
  

 

 

   

 

 

 

Total revenues

     4,584,532       4,429,632  

Interest expense

     1,472,002       1,246,256  
  

 

 

   

 

 

 

Net revenues

     3,112,530       3,183,376  
  

 

 

   

 

 

 

Non-interest expenses:

    

Compensation and benefits

     1,684,054       1,736,264  

Non-compensation expenses:

    

Floor brokerage and clearing fees

     227,471       189,068  

Technology and communications

     335,395       305,655  

Occupancy and equipment rental

     119,472       100,952  

Business development

     138,158       163,756  

Professional services

     162,668       139,885  

Underwriting costs

     50,662       64,317  

Other

     69,981       73,812  
  

 

 

   

 

 

 

Total non-compensation expenses

     1,103,807       1,037,445  
  

 

 

   

 

 

 

Total non-interest expenses

     2,787,861       2,773,709  
  

 

 

   

 

 

 

Earnings before income taxes

     324,669       409,667  

Income tax expense

     80,284       250,650  
  

 

 

   

 

 

 

Net earnings

     244,385       159,017  

Net earnings (loss) attributable to noncontrolling interests

     (1,644     256  
  

 

 

   

 

 

 

Net earnings attributable to Jefferies Group LLC

   $ 246,029     $ 158,761  
  

 

 

   

 

 

 

Pre-tax operating margin

     10.4     12.9

Effective tax rate (2)

     24.7     61.2

 

(1)

In the third quarter of 2019, Jefferies Group LLC reorganized the presentation of certain other fees, primarily related to prime brokerage services offered to clients. Jefferies Group LLC’s Consolidated Statement of Earnings reflects the reclassification of revenues of $28.3 million from Other revenues to Commissions and other fees for the twelve months ended November 30, 2018. There is no impact on Total revenues as a result of this change in presentation.

(2)

The effective tax rate for the twelve months ended November 30, 2018 includes an estimated provisional tax charge of approximately $165 million as a result of the Tax Cuts and Jobs Act (“Tax Act”).

 

7


Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

     Quarter Ended  
     November 30,
2019
    August 31,
2019
    November 30,
2018
 

Net Revenues by Source:

      

Equities

   $ 200,128     $ 193,229     $ 164,086  

Fixed income

     163,016       148,334       86,826  
  

 

 

   

 

 

   

 

 

 

Total sales and trading

     363,144       341,563       250,912  
  

 

 

   

 

 

   

 

 

 

Equity

     105,119       97,494       127,942  

Debt

     100,359       101,689       152,335  
  

 

 

   

 

 

   

 

 

 

Capital markets

     205,478       199,183       280,277  

Advisory

     195,035       213,350       224,312  

Other investment banking

     (7,501     (9,108     17,523  
  

 

 

   

 

 

   

 

 

 

Total investment banking

     393,012       403,425       522,112  
  

 

 

   

 

 

   

 

 

 

Other

     4,948       12,374       22,448  
  

 

 

   

 

 

   

 

 

 

Total Capital Markets (1) (2)

     761,104       757,362       795,472  
  

 

 

   

 

 

   

 

 

 

Asset management fees and revenues (3)

     3,935       4,220       5,084  

Investment return (3) (4) (5)

     (7,637     24,866       (23,783

Allocated net interest (4) (6)

     (9,600     (9,289     (14,815
  

 

 

   

 

 

   

 

 

 

Total Asset Management

     (13,302     19,797       (33,514
  

 

 

   

 

 

   

 

 

 
  

 

 

   

 

 

   

 

 

 

Net Revenues

   $ 747,802     $ 777,159     $ 761,958  
  

 

 

   

 

 

   

 

 

 

Other Data:

      

Number of trading days

     63       64       63  

Number of trading loss days

     10       10       18  

Average firmwide VaR (in millions) (7)

   $ 7.70     $ 9.71     $ 9.59  

 

(1)

Includes net interest revenue of $22.6 million, $30.4 million and $19.7 million for the quarters ended November 30, 2019, August 31, 2019, and November 30, 2018, respectively.

(2)

Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within Jefferies Group LLC’s Net Revenues by Source. This presentation is aligned to our Capital Markets internal performance measurement.

(3)

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Such arrangements did not exist prior to the first quarter of 2019 and Jefferies Group LLC’s Net Revenues by Source reflects the reclassification of revenues of $0.9 million from Investment return revenues to Asset management fees and revenues for the three months ended August 31, 2019. There is no impact on Total Asset Management revenues as a result of this change in presentation.

(4)

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 footnotes 5 and 6). 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.

(5)

Includes net interest expense of $5.2 million, $2.0 million and $4.2 million for the quarters ended November 30, 2019, August 31, 2019, and November 30, 2018, respectively.

(6)

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 10).

(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, 2019.

 

8


Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

     Twelve Months Ended  
     November 30,
2019
    November 30,
2018
 

Net Revenues by Source:

    

Equities

   $ 773,979     $ 665,557  

Fixed income

     681,362       559,712  
  

 

 

   

 

 

 

Total sales and trading

     1,455,341       1,225,269  
  

 

 

   

 

 

 

Equity

     361,972       454,555  

Debt

     407,336       635,606  
  

 

 

   

 

 

 

Capital markets

     769,308       1,090,161  

Advisory

     767,421       820,042  

Other investment banking

     (14,617     3,638  
  

 

 

   

 

 

 

Total investment banking

     1,522,112       1,913,841  
  

 

 

   

 

 

 

Other

     58,535       45,316  
  

 

 

   

 

 

 

Total Capital Markets (1) (2)

     3,035,988       3,184,426  
  

 

 

   

 

 

 

Asset management fees and revenues

     20,285       21,214  

Investment return (3) (4)

     96,805       16,971  

Allocated net interest (3) (5)

     (40,548     (39,235
  

 

 

   

 

 

 

Total Asset Management

     76,542       (1,050
  

 

 

   

 

 

 

Net Revenues

   $ 3,112,530     $ 3,183,376  
  

 

 

   

 

 

 

Other Data:

    

Number of trading days

     250       252  

Number of trading loss days

     33       45  

Average firmwide VaR (in millions) (6)

   $ 8.79     $ 7.56  

 

(1)

Includes net interest revenue of $74.0 million and $8.5 million for the twelve months ended November 30, 2019 and 2018, respectively.

(2)

Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within Jefferies Group LLC’s 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 footnotes 4 and 5). 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 $8.9 million and $8.4 million for the twelve months ended November 30, 2019 and 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 10).

(6)

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, 2019.

 

9


Jefferies Group LLC and Subsidiaries

Financial Highlights

(Amounts in Millions, Except Where Noted)

(Unaudited)

 

     Quarter Ended  
     November 30,
2019
    August 31,
2019
    November 30,
2018
 

Financial position:

      

Total assets (1)

   $ 43,516     $ 43,094     $ 41,169  

Average total assets for the period (1)

   $ 52,539     $ 53,097     $ 49,427  

Average total assets less goodwill and intangible assets for the period (1)

   $ 50,727     $ 51,281     $ 47,653  

Cash and cash equivalents (1)

   $ 5,568     $ 4,665     $ 5,146  

Cash and cash equivalents and other sources of liquidity (1) (2)

   $ 6,918     $ 6,074     $ 6,604  

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

     15.9     14.1     16.0

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

     16.6     14.7     16.8

Financial instruments owned (1)

   $ 16,363     $ 16,371     $ 16,400  

Goodwill and intangible assets (1)

   $ 1,814     $ 1,811     $ 1,825  

Total equity (including noncontrolling interests) (1)

   $ 6,130     $ 6,190     $ 6,182  

Total Jefferies Group LLC member’s equity (1)

   $ 6,125     $ 6,183     $ 6,180  

Tangible Jefferies Group LLC member’s equity (1) (3)

   $ 4,311     $ 4,372     $ 4,356  

Level 3 financial instruments:

      

Level 3 financial instruments owned (1) (4)

   $ 307     $ 363     $ 337  

Level 3 financial instruments owned - % total assets (1) (4)

     0.7     0.8     0.8

Level 3 financial instruments owned - % total financial instruments (1) (4)

     1.9     2.2     2.1

Level 3 financial instruments owned - % tangible Jefferies Group LLC member’s equity (1) (4)

     7.1     8.3     7.7

Other data and financial ratios:

      

Total long-term capital (1) (5)

   $ 12,343     $ 12,219     $ 11,840  

Leverage ratio (1) (6)

     7.1       7.0       6.7  

Tangible gross leverage ratio (1) (7)

     9.7       9.4       9.0  

Number of trading days

     63       64       63  

Number of trading loss days

     10       10       18  

Average firmwide VaR (8)

   $ 7.70     $ 9.71     $ 9.59  

Number of employees, at period end

     3,815       3,776       3,596  

 

10


Jefferies Group LLC and Subsidiaries

Financial Highlights - Footnotes

 

(1)

Amounts pertaining to November 30, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019.

(2)

At November 30, 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 $973 million, in aggregate, and $377 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 August 31, 2019 were $1,063 million and $345 million, respectively, and at November 30, 2018, were $959 million and $499 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 November 30, 2019, August 31, 2019 and November 30, 2018, total long-term capital includes Jefferies Group LLC’s long-term debt of $6,214 million, $6,030 million and $5,657 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under the revolving credit facility, amounts from secured term loans and 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 Jefferies Group LLC’s leverage ratio.

(8)

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, 2019.

 

11


Jefferies Financial Group Inc.

Non-GAAP Reconciliations

The following tables reconcile 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.

Jefferies Financial Group Net Income and Earnings Per Share GAAP Reconciliation

Reconciliation of Jefferies Financial Group net income to adjusted net income (a non-GAAP measure) and diluted earnings per share to adjusted diluted earnings per share (a non-GAAP measure) (in thousands, except per share amounts):

 

     Twelve months
ended
November 30, 2019
 

Jefferies Financial Group net income (GAAP)

   $ 959,593  

Accumulated other comprehensive income tax benefit (1)

     (544,583
  

 

 

 

Jefferies Financial Group adjusted net income (non-GAAP)

   $ 415,010  
  

 

 

 

Jefferies Financial Group diluted earnings per share (GAAP)

   $ 3.03  

Accumulated other comprehensive income tax benefit (1)

     (1.71
  

 

 

 

Jefferies Financial Group adjusted diluted earnings per share (non-GAAP)

   $ 1.32  
  

 

 

 

 

(1)

During the second quarter of 2019, in connection with the closing of our corporate available for sale portfolio, we realized a non-cash tax benefit of $545 million. This tax benefit was generated primarily through activity during 2008 to 2010 and since then has remained an unrealized balance within equity until the liquidation of the portfolio. This realization did not impact total equity, as the increase in retained earnings was offset by a corresponding decrease in accumulated other comprehensive income.

 

12

(Back To Top)