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 investment
    income (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 %                               &