Jefferies Reports Fiscal Second Quarter 2015 Financial Results
Jefferies Group LLC today announced financial results for its fiscal second quarter 2015.
Highlights for the three months ended May 31, 2015, with adjusted amounts excluding the operating results of our Bache business:
- Investment banking net revenues of $404 million
- Total Net revenues of $792 million
- Total Adjusted Net revenues (excluding Bache net revenues) of $757 million
- Adjusted Net earnings (excluding Bache net loss) of $86 million
- Net earnings of $60 million (including Bache exit costs of $20 million on an after-tax basis)
Highlights for the six months ended May 31, 2015, with adjusted amounts excluding the operating results of our Bache business:
- Investment banking net revenues of $676 million
- Total Net revenues of $1,383 million
- Total Adjusted Net revenues (excluding Bache net revenues) of $1,299 million
- Adjusted Net earnings (excluding Bache net loss) of $106 million
- Net earnings of $73 million (including Bache exit costs of $20 million on an after-tax basis)
Richard B. Handler, Chairman and Chief Executive Officer, and Brian P. Friedman, Chairman of the Executive Committee, commented: “We are pleased to report quarterly revenues above those of the first quarter and the same period last year. Investment banking net revenues were in excess of $400 million, an increase of 49% compared to this year’s first quarter and 22% versus the second quarter last year. Our momentum has continued in investment banking and our current backlog for the third quarter is comparable to the backlog of three months ago. Our equity net revenues were strong versus the first quarter and the same quarter last year. Excluding Bache, Fixed income net revenues increased by 56% versus the slow first quarter, but declined by 29% compared to the year ago quarter. Fixed income results improved each month during the quarter. We continue to unwind the Bache business and to date have transferred about 50% of client accounts to Societe Generale and other brokers. We expect to have substantially completed the unwind of Bache by the end of the summer.”
The attached financial tables should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended February 28, 2015 and our Annual Report on Form 10-K for the year ended November 30, 2014. Adjusted financial measures referenced above are non-GAAP financial measures, which management believes provide meaningful information to enable investors to evaluate the Company´s results in the context of exiting the Bache business. Refer to the Supplemental Schedules on pages 5-7 for a reconciliation of Adjusted measures to the respective direct U.S. GAAP financial measures.
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 and foreign exchange, 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) Quarter Ended May 31, 2015 February 28, 2015 May 31, 2014 Revenues: Commissions $ 173,508 $ 166,922 $ 167,378 Principal transactions 155,962 105,477 183,416 Investment banking 404,262 271,995 331,149 Asset management fees and investmentincome (loss) from managed funds 5,650 (9,837 ) (3,101 ) Interest income 240,552 228,870 283,540 Other revenues 28,576 19,905 8,404 Total revenues 1,008,510 783,332 970,786 Interest expense 216,956 191,660 247,794 Net revenues 791,554 591,672 722,992 Non-interest expenses: Compensation and benefits 480,770 365,215 404,876 Non-compensation expenses: Floor brokerage and clearing fees 58,713 55,080 54,020 Technology and communications 72,361 72,387 70,257 Occupancy and equipment rental 24,420 24,184 26,673 Business development 26,401 21,937 24,917 Professional services 27,419 24,256 25,345 Other 16,758 15,729 17,767 Total non-compensation expenses 226,072 213,573 218,979 Total non-interest expenses 706,842 578,788 623,855 Earnings before income taxes 84,712 12,884 99,137 Income tax expense 24,530 331 37,323 Net earnings 60,182 12,553 61,814 Net earnings attributable to noncontrolling interests 349 871 488 Net earnings attributable to Jefferies Group LLC $ 59,833 $ 11,682 $ 61,326 Pretax operating margin 10.7 % 2.2 % 13.7 % Effective tax rate 29.0 % 2.6 % 37.6 %
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands) (Unaudited) Six Months Ended May 31, 2015 May 31, 2014 Revenues: Commissions $ 340,430 $ 329,441 Principal transactions 261,439 421,779 Investment banking 676,257 745,469 Asset management fees and investment
income (loss) from managed funds (4,187 ) 6,856 Interest income 469,422 532,808 Other revenues 48,481 31,473 Total revenues 1,791,842 2,067,826 Interest expense 408,616 445,806 Net revenues 1,383,226 1,622,020 Non-interest expenses: Compensation and benefits 845,985 912,775 Non-compensation expenses: Floor brokerage and clearing fees 113,793 103,533 Technology and communications 144,748 134,563 Occupancy and equipment rental 48,604 53,175 Business development 48,338 51,393 Professional services 51,675 50,164 Other 32,487 35,011 Total non-compensation expenses 439,645 427,839 Total non-interest expenses 1,285,630 1,340,614 Earnings before income taxes 97,596 281,406 Income tax expense 24,861 104,200 Net earnings 72,735 177,206 Net earnings attributable to noncontrolling interests 1,220 3,448 Net earnings attributable to Jefferies Group LLC $ 71,515 $ 173,758 Pretax operating margin 7.1 % 17.3 % Effective tax rate 25.5 % 37.0 %
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED ADJUSTED SELECTED FINANCIAL DATA (Amounts in Thousands) (Unaudited) Quarter Ended May 31, 2015 GAAP Adjustments Adjusted Net revenues $ 791,554 $ 34,589 (1) $ 756,965 Non-interest expenses: Compensation and benefits 480,770 34,473 (2) 446,297 Non-compensation expenses 226,072 38,536 (3) 187,536 Total non-interest expenses 706,842 73,009 (4) 633,833 Operating income (loss) $ 84,712 $ (38,420 ) $ 123,132 Net earnings (loss) $ 60,182 $ (25,940 ) $ 86,122 Compensation ratio (a) 60.7 % 59.0 % Quarter Ended February 28, 2015 GAAP Adjustments Adjusted Net revenues $ 591,672 $ 49,933 (1) $ 541,739 Non-interest expenses: Compensation and benefits 365,215 23,980 (2) 341,235 Non-compensation expenses 213,573 38,597 (3) 174,976 Total non-interest expenses 578,788 62,577 516,211 Operating income (loss) $ 12,884 $ (12,644 ) $ 25,528 Net earnings (loss) $ 12,553 $ (6,961 ) $ 19,514 Compensation ratio (a) 61.7 % 63.0 % Quarter Ended May 31, 2014 GAAP Adjustments Adjusted Net revenues $ 722,992 $ 50,734 (1) $ 672,258 Non-interest expenses: Compensation and benefits 404,876 29,756 (2) 375,120 Non-compensation expenses 218,979 36,573 (3) 182,406 Total non-interest expenses 623,855 66,329 557,526 Operating income (loss) $ 99,137 $ (15,595 ) $ 114,732 Net earnings (loss) $ 61,814 $ (8,341 ) $ 70,155 Compensation ratio (a) 56.0 % 55.8 % (a) Reconciliation of the compensation ratio for U.S. GAAP to Adjusted is a derivation of the reconciliation of the components above. This presentation of Adjusted financial information is an unaudited non-GAAP financial measure. Adjusted financial information begins with information prepared in accordance with U.S. GAAP and then those results are adjusted to exclude the operations of the Company´s Bache business. The Company believes that the disclosed Adjusted measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures are useful to investors as they enable investors to evaluate the Company´s results in the context of exiting the Bache business. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.
JEFFERIES GROUP LLC AND SUBSIDIARIES CONSOLIDATED ADJUSTED SELECTED FINANCIAL DATA (Amounts in Thousands) (Unaudited) Six Months Ended May 31, 2015 GAAP Adjustments Adjusted Net revenues $ 1,383,226 $ 84,522 (1) $ 1,298,704 Non-interest expenses: Compensation and benefits 845,985 58,453 (2) 787,532 Non-compensation expenses 439,645 77,133 (3) 362,512 Total non-interest expenses 1,285,630 135,586 (4) 1,150,044 Operating income (loss) $ 97,596 $ (51,064 ) $ 148,660 Net earnings (loss) $ 72,735 $ (32,901 ) $ 105,636 Compensation ratio (a) 61.2 % 60.6 % &