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Jefferies Reports Third Quarter 2014 Financial Results


    Jefferies Group LLC today announced financial results for its fiscal third quarter 2014.

    Highlights for the three months ended August 31, 2014:

    • Total Net revenues of $843 million
    • Pre-tax earnings of $136 million
    • Net earnings of $84 million
    • Record Investment Banking net revenues of $468 million
    • Equities net revenues of $172 million
    • Fixed Income net revenues of $195 million
    • Total Sales and Trading net revenues of $367 million

    Highlights for the nine months ended August 31, 2014:

    • Record Total Net revenues of $2,465 million
    • Record Pre-tax earnings of $417 million
    • Record Net earnings of $257 million
    • Record Investment Banking net revenues of $1,213 million
    • Equities net revenues of $538 million
    • Fixed Income net revenues of $699 million
    • Total Sales and Trading net revenues of $1,237 million

    Richard B. Handler, Chairman and Chief Executive Officer, and Brian P. Friedman, Chairman of the Executive Committee, commented: “These results represent the best third quarter and the best first nine-months Jefferies has achieved in our over 50-year history. Our third quarter performance was driven by $468 million in Investment Banking net revenues. These record investment banking results reflect solid contributions from equity and debt capital markets, strong performance in our merger and acquisition advisory business, and broad participation across our industry groups and geographies. Our sales and trading business results were also solid for the quarter and are $367 million. We continue to expand our client reach and believe we are gaining market share across the board as we leverage our unique position as the largest non-bank, full-service global investment banking firm based in the U.S. The overall environment is reasonable, and our competitive position has never been stronger.”

    The attached financial tables should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended May 31, 2014 and our Annual Report on Form 10-K for the year ended November 30, 2013. On September 2, 2014, we issued a press release announcing preliminary financial results for the fiscal third quarter of 2014, which were also filed with a Current Report on Form 8-K. Actual results as reported herein differ from those preliminary results as a result of our routine financial reporting close process, which has now been finalized. Differences in the actual results for the fiscal third quarter of 2014 reported herein from the preliminary results are attributed to revenue allocations to business divisions, conclusions on revenue arrangements, fair value estimates and adjustments to expense accruals.

    Jefferies, the global investment banking firm focused on serving clients for over 50 years, is a leader in providing insight, expertise and execution to investors, companies and governments. The firm provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income, foreign exchange, futures and commodities, as well as wealth management, in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Leucadia National Corporation (NYSE:LUK), a diversified holding company.

     

        JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands) (Unaudited)                                               Successor   Predecessor       Quarter Ended   Quarter Ended   Nine Months Ended   Six Months Ended   Quarter Ended       August 31, 2014     August 31, 2013     August 31, 2014   August 31, 2013   February 28, 2013                                         Revenues:                                       Commissions     $ 159,085     $ 153,402     $ 488,526     $ 316,161   $ 146,240 Principal transactions       144,354       (24,910)       566,133       109,661     300,278 Investment banking       467,793       309,339       1,213,262       586,473     288,278

    Asset management fees and investment

       

     

                                    income from managed funds       8,463       13,549       15,319       24,076     10,883 Interest income       249,251       230,672       782,059       489,337     249,277 Other revenues       26,489       28,630       57,962       54,875     27,004 Total revenues       1,055,435       710,682       3,123,261       1,580,583     1,021,960 Interest expense       212,126       178,987       657,932       390,450     203,416 Net revenues       843,309       531,695       2,465,329       1,190,133     818,544

    Interest on mandatorily redeemable preferred interests of

                                          consolidated subsidiaries       -       -       -       3,368     10,961

    Net revenues, less interest on mandatorily redeemable preferred

                                         

    interests of consolidated subsidiaries

          843,309       531,695       2,465,329       1,186,765     807,583                                         Non-interest expenses:                                       Compensation and benefits       477,268       293,771       1,390,043       667,651     474,217                                         Non-compensation expenses:                                       Floor brokerage and clearing fees       55,967       49,166       159,500       98,068     46,155 Technology and communications       67,286       62,266       201,849       126,105     59,878 Occupancy and equipment rental       28,477       26,205       81,652       58,430     24,309 Business development       27,800       17,624       79,193       40,356     24,927 Professional services       31,231       25,269       81,395       54,788     24,135 Other       19,645       34,012       54,656       52,732     14,475 Total non-compensation expenses       230,406       214,542       658,245       430,479     193,879                                         Total non-interest expenses       707,674       508,313       2,048,288       1,098,130     668,096                                         Earnings before income taxes       135,635       23,382       417,041       88,635     139,487                                         Income tax expense       51,762       8,493       155,962       33,500     48,645 Net earnings       83,873       14,889       261,079       55,135     90,842

     

                                         

    Net earnings attributable to noncontrolling interests

          312       3,149       3,760       3,887     10,704

    Net earnings attributable to Jefferies Group LLC/common
      stockholders

        $ 83,561     $ 11,740     $ 257,319     $ 51,248   $ 80,138                                         Pretax operating margin       16.1%       4.4%       16.9%       7.5%     17.3% Effective tax rate       38.2%       36.3%       37.4%       37.8%     34.9%                                        

     

        JEFFERIES GROUP LLC AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Other Data) (Unaudited)                                           Successor     Predecessor         Quarter Ended     Quarter Ended     Nine Months Ended     Six Months Ended     Quarter Ended         August 31, 2014     August 31, 2013     August 31, 2014     August 31, 2013     February 28, 2013    

    Revenues by Source

                                        Equities   $ 171,708     $ 151,038     $ 537,769         $ 292,628     $ 167,354     Fixed income     195,345       47,769       698,979           276,956       352,029     Total     367,053       198,807       1,236,748           569,584       519,383                                                                                 Equity     93,309       56,482       271,773           110,046       61,380     Debt     175,597       120,187       495,635           253,901       140,672     Capital markets     268,906       176,669       767,408           363,947       202,052     Advisory     198,887       142,670       445,854           232,526       86,226     Investment banking     467,793       319,339       1,213,262           596,473       288,278                                          

    Asset management fees and investment income (loss)

                                from managed funds:                                                                             Asset management fees     7,379       9,578       21,752           20,910       11,083                                                     Investment income (loss) from managed funds     1,084       3,971       (6,433

    )

     

     

        3,166       (200 )                                                   Total     8,463       13,549       15,319           24,076       10,883                                                     Net revenues     843,309       531,695       2,465,329           1,190,133       818,544                                                    

    Interest on mandatorily redeemable preferred interests of consolidated subsidiaries

        -       -       -           3,368       10,961                                                    

    Net revenues, less mandatorily redeemable preferred interests of consolidated subsidiaries

      $ 843,309     $

    531,695

        $ 2,465,329         $ 1,186,765     $ 807,583                                          

    Other Data

                                        Number of trading days     64       64       188           128       60                                           Average firmwide VaR (in millions) (A)   $ 13.50     $ 11.02     $ 14.88         $ 9.89     $ 9.27     Average firmwide VaR excluding Knight Capital (in millions) (A)   $ 8.25     $ 7.24     $ 9.80         $ 6.51     $ 5.99    

    Average firmwide VaR excluding Knight Capital and Harbinger Group

                                                 

    Inc. (in millions) (A)

      $ 8.25     $ 7.24     $ 8.48         $ 6.51     $ 5.99                                                           (A)   VaR estimates the potential loss in value of our trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value at risk" in Part II, Item 7 "Management´s Discussion and Analysis" in our Annual Report on Form 10-K for the year ended November 30, 2013.      

     

        JEFFERIES GROUP LLC AND SUBSIDIARIES   FINANCIAL HIGHLIGHTS   (Amounts in Millions, Except Where Noted)   (Unaudited)                           Successor       Quarter Ended   Quarter Ended   Quarter Ended       August 31, 2014     May 31, 2014