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Jefferies Announces Third Quarter 2019 Financial Results

NEW YORK–(BUSINESS WIRE)–Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and nine month periods ended August 31, 2019.

Highlights for the three months ended August 31, 2019:

  • Net income attributable to Jefferies Financial Group common shareholders of $48 million, or $0.15 per diluted share, reflecting solid results at Jefferies Group and certain of our merchant banking investments, offset by a non-cash fair value reduction of $146 million to our investment in The We Company (we invested $9 million in We, have received $31 million in cash and continue to own approximately 0.8% of We’s fully diluted shares)
  • Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $83 million and net earnings of $65 million

    • Total Net Revenues of $777 million
    • Investment Banking Net Revenues of $403 million
    • Total Equities and Fixed Income Net Revenues of $342 million
    • Asset Management Revenues (before Allocated net interest1) of $29 million

  • Merchant Banking pre-tax loss of $43 million, reflecting strong performance by National Beef and a gain related to the purchase of the remaining interest in HomeFed, more than offset by the $146 million fair value adjustment to our investment in We
  • Return of capital through a special dividend of Spectrum Brands Common Stock, valued at approximately $450 million at announcement on September 16, 2019; approximately $330 million remaining to be purchased under previously authorized share buyback
  • Jefferies Financial Group had parent company liquidity of $1.4 billion at August 31, 2019

Highlights for the nine months ended August 31, 2019:

  • Net income attributable to Jefferies Financial Group common shareholders of $764 million, or $2.41 per diluted share, including the impact of a nonrecurring tax benefit of $545 million; adjusted net income of $219 million2, or $0.70 per diluted share2
  • Jefferies Group (Investment Banking, Capital Markets and Asset Management) pre-tax income of $301 million and net earnings of $221 million

    • Total Net Revenues of $2,365 million
    • Investment Banking Net Revenues of $1,129 million, below-normal due to the impact of market conditions in December and the shutdown of the U.S. Government in December and January
    • Total Equities and Fixed Income Net Revenues of $1,092 million
    • Asset Management Revenues (before Allocated net interest1) of $121 million
  • Merchant Banking pre-tax income of $28 million, reflecting strong performance from National Beef and Vitesse, and the 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 announced special dividend of Spectrum Brands common stock, share repurchases and cash dividends, totaling approximately $900 million; share repurchases during the nine months totaled 17.7 million shares for $352 million, or an average price of $19.87 per share

Rich Handler, our CEO, and Brian Friedman, our President, said:

“2019 is proving to be a year of solid progress on our strategy of simplifying Jefferies Financial Group to focus on Investment Banking, Capital Markets and Asset Management, reducing our share count and returning capital to our shareholders. The recently announced distribution of our Spectrum Brands position aligns directly with our strategy.

“So far this fiscal year, we have repurchased 17.7 million Jefferies shares for $352 million, or an average of $19.87 per share. Since April 1, 2018, we have repurchased an aggregate of 67.7 million shares at an average price of $22.07 per share. Combining share buybacks and dividends paid from April 1, 2018 through August 31, 2019 with the announced special dividend of Spectrum Brands common stock, we are returning to our shareholders an aggregate of $2.2 billion, or 21% of our common shareholders’ equity (28% of our tangible equity3) as of the beginning of this period. Even after this return of value to our shareholders and continuing investment in our business, we ended the third quarter with parent company liquidity of $1.4 billion. We are currently authorized to repurchase up to an additional $330 million (based on September 25 closing stock price) worth of shares.

“Jefferies Group’s third quarter revenues of $777 million reflect solid performances in Investment Banking, with revenues of $403 million, and in Sales and Trading where revenues were $342 million, although market volatility in August impacted activity levels in both the primary and secondary markets.

“Investment Banking Advisory revenues for the quarter were $213 million, an increase of 19% versus the second quarter and 14% versus last year’s third quarter. Our Investment Banking results reflect lower new issue transaction levels during the period versus the second quarter of this year and the third quarter of last year. Our fourth quarter Investment Banking backlog is very solid.

“Our Equities Sales and Trading business enjoyed another strong quarter, with revenues of $193 million. Prime Brokerage, Electronic Trading and our High Touch Cash businesses performed well during the quarter. Fixed Income Sales and Trading volumes were quite strong during June and July, but downward moves in interest rates during August reduced volumes for much of the last month of our fiscal quarter. More normal secondary activity levels have prevailed in the first few weeks of September.

“Our third quarter merchant banking results reflect strong performance by National Beef. While grilling season typically makes third quarter results stronger, the third quarter of 2019 represents the best quarter for National Beef since our initial investment. Our previously announced closing of the purchase of the remaining interest in HomeFed generated a gain of $72 million related to the write-up of our existing ownership interest to its estimated fair value on the acquisition date. Our third quarter results also include an adjustment to reduce the estimated fair value of our investment in We by $146 million. This is based on an estimate of value as of August 31, 2019, using available market information at that time, including a significant discount due to uncertainty regarding the timing and pricing of We’s IPO. As the facts at We become clearer, further adjustments may be made in future periods.”

Amounts herein pertaining to August 31, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised upon filing our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). More information on our results of operations for the three and nine month periods ended August 31, 2019 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC. Jefferies expects to file its Form 10-Q on or about October 8, 2019.

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).

 

____________________________

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 9 and 10.

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 13 for reconciliation to U.S. GAAP amounts.

3

 

Tangible equity of $7,808 million at March 31, 2018 is a non-GAAP measure and equals Jefferies Financial Group’s common shareholders’ equity of $10,259 million less Intangible assets, net and goodwill of $2,451 million.

 

Summary for Jefferies Financial Group Inc. and Subsidiaries

(In thousands, except per share amounts)

(Unaudited)

 

 

For the Three Months Ended

 

For the Nine Months Ended

August 31,

2019

 

September 30,

2018

 

August 31,

2019

 

September 30,

2018

 

 

 

 

 

 

 

 

Net revenues

$

856,778

 

 

$

1,150,846

 

 

$

2,786,878

 

 

$

2,957,440

 

 

 

 

 

 

 

 

 

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

$

(59,020

)

 

$

253,825

 

 

$

124,293

 

 

$

263,650

 

Income related to associated companies

72,283

 

 

18,867

 

 

121,766

 

 

84,320

 

Income from continuing operations before income taxes

13,263

 

 

272,692

 

 

246,059

 

 

347,970

 

Income tax provision (benefit)

(36,131

)

 

90,391

 

 

(522,626

)

 

51,560

 

Income from continuing operations

49,394

 

 

182,301

 

 

768,685

 

 

296,410

 

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

49,394

 

 

182,301

 

 

768,685

 

 

1,070,394

 

Net (income) loss attributable to the noncontrolling interests

116

 

 

12,000

 

 

(759

)

 

13,208

 

Net (income) loss attributable to the redeemable noncontrolling interests

242

 

 

(390

)

 

(47

)

 

(37,294

)

Preferred stock dividends

(1,275

)

 

(1,276

)

 

(3,827

)

 

(3,619

)

Net income attributable to Jefferies Financial Group Inc. common shareholders

$

48,477

 

 

$

192,635

 

 

$

764,052

 

 

$

1,042,689

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Income from continuing operations

$

0.16

 

 

$

0.56

 

 

$

2.44

 

 

$

0.86

 

Income from discontinued operations

 

 

 

 

 

 

0.26

 

Gain on disposal of discontinued operations

 

 

 

 

 

 

1.82

 

Net income

$

0.16

 

 

$

0.56

 

 

$

2.44

 

 

$

2.94

 

 

 

 

 

 

 

 

 

Number of shares in calculation

310,288

 

 

341,434

 

 

310,838

 

 

353,300

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Income from continuing operations

$

0.15

 

 

$

0.55

 

 

$

2.41

 

 

$

0.85

 

Income from discontinued operations

 

 

 

 

 

 

0.26

 

Gain on disposal of discontinued operations

 

 

 

 

 

 

1.80

 

Net income

$

0.15

 

 

$

0.55

 

 

$

2.41

 

 

$

2.91

 

 

 

 

 

 

 

 

 

Number of shares in calculation

311,897

 

 

350,307

 

 

317,181

 

 

357,169

 

A summary of results for the three months ended August 31, 2019 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

777,159

 

 

$

75,497

 

 

$

8,967

 

 

$

 

 

$

(4,845

)

 

$

856,778

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

411,936

 

 

23,496

 

 

11,450

 

 

 

 

 

 

446,882

 

Cost of sales

 

 

85,773

 

 

 

 

 

 

 

 

85,773

 

Floor brokerage and clearing fees

54,247

 

 

 

 

 

 

 

 

(3,389

)

 

50,858

 

Interest expense

 

 

8,893

 

 

 

 

14,770

 

 

 

 

23,663

 

Depreciation and amortization

21,170

 

 

17,880

 

 

830

 

 

 

 

 

 

39,880

 

Selling, general and other expenses

206,731

 

 

54,683

 

 

8,466

 

 

 

 

(1,138

)

 

268,742

 

Total expenses

694,084

 

 

190,725

 

 

20,746

 

 

14,770

 

 

(4,527

)

 

915,798

 

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

83,075

 

 

(115,228

)

 

(11,779

)

 

(14,770

)

 

(318

)

 

(59,020

)

Income related to associated companies

 

 

72,283

 

 

 

 

 

 

 

 

72,283

 

Income (loss) from continuing operations before income taxes

$

83,075

 

 

$

(42,945

)

 

$

(11,779

)

 

$

(14,770

)

 

$

(318

)

 

13,263

 

Income tax benefit from continuing operations

 

 

 

 

 

 

 

 

 

 

(36,131

)

Net income

 

 

 

 

 

 

 

 

 

 

$

49,394

 

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

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

777,615

 

 

$

369,309

 

 

$

8,714

 

 

$

 

 

$

(4,792

)

 

$

1,150,846

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

428,033

 

 

19,464

 

 

13,768

 

 

 

 

 

 

461,265

 

Cost of sales

 

 

84,876

 

 

 

 

 

 

 

 

84,876

 

Floor brokerage and clearing fees

45,745

 

 

 

 

 

 

 

 

(1,175

)

 

44,570

 

Interest expense

 

 

14,082

 

 

 

 

14,755

 

 

 

 

28,837

 

Depreciation and amortization

17,175

 

 

14,268

 

 

852

 

 

 

 

 

 

32,295

 

Selling, general and other expenses

199,561

 

 

36,954

 

 

9,461

 

 

 

 

(798

)

 

245,178

 

Total expenses

690,514

 

 

169,644

 

 

24,081

 

 

14,755

 

 

(1,973

)

 

897,021

 

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

87,101

 

 

199,665

 

 

(15,367

)

 

(14,755

)

 

(2,819

)

 

253,825

 

Income related to associated companies

 

 

18,867

 

 

 

 

 

 

 

 

18,867

 

Income (loss) from continuing operations before income taxes

$

87,101

 

 

$

218,532

 

 

$

(15,367

)

 

$

(14,755

)

 

$

(2,819

)

 

272,692

 

Income tax provision from continuing operations

 

 

 

 

 

 

 

 

 

 

90,391

 

Net income

 

 

 

 

 

 

 

 

 

 

$

182,301

 

A summary of results for the nine months ended August 31, 2019 is as follows (in thousands):

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

2,364,728

 

 

$

399,159

 

 

$

22,134

 

 

$

 

 

$

857

 

 

$

2,786,878

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,261,506

 

 

63,796

 

 

41,732

 

 

 

 

 

 

1,367,034

 

Cost of sales

 

 

233,109

 

 

 

 

 

 

 

 

233,109

 

Floor brokerage and clearing fees

168,698

 

 

 

 

 

 

 

 

(5,585

)

 

163,113

 

Interest expense

 

 

25,521

 

 

 

 

44,298

 

 

 

 

69,819

 

Depreciation and amortization

57,800

 

 

50,248

 

 

2,552

 

 

 

 

 

 

110,600

 

Selling, general and other expenses

575,926

 

 

119,867

 

 

24,857

 

 

 

 

(1,740

)

 

718,910

 

Total expenses

2,063,930

 

 

492,541

 

 

69,141

 

 

44,298

 

 

(7,325

)

 

2,662,585

 

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

300,798

 

 

(93,382

)

 

(47,007

)

 

(44,298

)

 

8,182

 

 

124,293

 

Income related to associated companies

 

 

121,766

 

 

 

 

 

 

 

 

121,766

 

Income (loss) from continuing operations before income taxes

$

300,798

 

 

$

28,384

 

 

$

(47,007

)

 

$

(44,298

)

 

$

8,182

 

 

246,059

 

Income tax benefit from continuing operations

 

 

 

 

 

 

 

 

 

 

(522,626

)

Net income

 

 

 

 

 

 

 

 

 

 

$

768,685

 

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

 

Jefferies

Group

 

Merchant

Banking

 

Corporate

 

Parent

Company

Interest

 

Consolidation

Adjustments

 

Total

Net revenues

$

2,421,418

 

 

$

529,627

 

 

$

14,775

 

 

$

 

 

$

(8,380

)

 

$

2,957,440

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1,327,760

 

 

59,507

 

 

43,045

 

 

 

 

(873

)

 

1,429,439

 

Cost of sales

 

 

257,501

 

 

 

 

 

 

 

 

257,501

 

Floor brokerage and clearing fees

135,808

 

 

 

 

 

 

 

 

(4,016

)

 

131,792

 

Interest expense

 

 

30,363

 

 

 

 

44,251

 

 

 

 

74,614

 

Depreciation and amortization

50,829

 

 

38,932

 

 

2,599

 

 

 

 

 

 

92,360

 

Selling, general and other expenses

575,317

 

 

108,427

 

 

27,238

 

 

 

 

(2,898

)

 

708,084

 

Total expenses

2,089,714

 

 

494,730

 

 

72,882

 

 

44,251

 

 

(7,787

)

 

2,693,790

 

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

331,704

 

 

34,897

 

 

(58,107

)

 

(44,251

)

 

(593

)

 

263,650

 

Income related to associated companies

 

 

84,320

 

 

 

 

 

 

 

 

84,320

 

Income (loss) from continuing operations before income taxes

$

331,704

 

 

$

119,217

 

 

$

(58,107

)

 

$

(44,251

)

 

$

(593

)

 

347,970

 

Income tax provision from continuing operations

 

 

 

 

 

 

 

 

 

 

51,560

 

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

 

 

 

 

 

 

 

 

 

 

$

1,070,394

 

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 May 31, 2019 and Annual Report on Form 10-K for the year ended November 30, 2018. Amounts herein pertaining to August 31, 2019 represent a preliminary estimate as of the date of this earnings release and may be revised in Jefferies Group LLC’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2019.

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

August 31, 2019

 

May 31, 2019

 

August 31, 2018

Revenues:

 

 

 

 

 

Commissions and other fees (1)

$

171,003

 

 

$

167,698

 

 

$

162,700

 

Principal transactions

148,873

 

 

248,831

 

 

143,308

 

Investment banking

412,533

 

 

430,087

 

 

465,326

 

Asset management fees

3,340

 

 

4,550

 

 

5,184

 

Interest

383,596

 

 

418,451

 

 

305,347

 

Other (1)

22,286

 

 

44,876

 

 

6,420

 

Total revenues

1,141,631

 

 

1,314,493

 

 

1,088,285

 

Interest expense

364,472

 

 

412,642

 

 

310,670

 

Net revenues

777,159

 

 

901,851

 

 

777,615

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

411,936

 

 

477,885

 

 

428,033

 

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

54,247

 

 

62,474

 

 

45,745

 

Technology and communications

86,649

 

 

81,645

 

 

76,877

 

Occupancy and equipment rental

29,300

 

 

29,748

 

 

25,559

 

Business development

36,526

 

 

36,349

 

 

39,733

 

Professional services

42,379

 

 

38,066

 

 

35,316

 

Underwriting costs

14,647

 

 

12,823

 

 

20,528

 

Other

18,400

 

 

7,723

 

 

18,723

 

Total non-compensation expenses

282,148

 

 

268,828

 

 

262,481

 

Total non-interest expenses

694,084

 

 

746,713

 

 

690,514

 

Earnings before income taxes

83,075

 

 

155,138

 

 

87,101

 

Income tax expense

18,250

 

 

45,319

 

 

26,923

 

Net earnings

64,825

 

 

109,819

 

 

60,178

 

Net loss attributable to noncontrolling interests

(143

)

 

(101

)

 

(4

)

Net earnings attributable to Jefferies Group LLC

$

64,968

 

 

$

109,920

 

 

$

60,182

 

 

 

 

 

 

 

 

Pre-tax operating margin

10.7

%

 

17.2

%

 

11.2

%

Effective tax rate

22.0

%

 

29.2

%

 

30.9

%

(1)

 

Certain reclassifications within revenue line items have been made for the three month periods ended May 31, 2019 and August 31, 2018. 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. These fees were previously presented as Other revenues in Jefferies Group LLC’s Consolidated Statements of Earnings and are now presented within Commissions and other fees. There is no impact on Total revenues as a result of this change in presentation.

 

Jefferies Group LLC and Subsidiaries

Consolidated Statements of Earnings

(Amounts in Thousands)

(Unaudited)

 

 

 

 

 

 

 

Nine Months Ended

 

 

August 31, 2019

 

August 31, 2018

Revenues:

 

 

 

Commissions and other fees (1)

$

493,843

 

 

$

482,194

 

Principal transactions

632,002

 

 

498,583

 

Investment banking

1,128,216

 

 

1,405,614

 

Asset management fees

14,559

 

 

16,130

 

Interest

1,163,022

 

 

870,490

 

Other (1)

79,354

 

 

58,678

 

Total revenues

3,510,996

 

 

3,331,689

 

Interest expense

1,146,268

 

 

910,271

 

Net revenues

2,364,728

 

 

2,421,418

 

 

 

 

 

 

Non-interest expenses:

 

 

 

Compensation and benefits

1,261,506

 

 

1,327,760

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

Floor brokerage and clearing fees

168,698

 

 

135,808

 

Technology and communications

247,464

 

 

222,335

 

Occupancy and equipment rental

87,587

 

 

75,143

 

Business development

103,430

 

 

124,233

 

Professional services

117,372

 

 

101,715

 

Underwriting costs

36,045

 

 

47,832

 

Other

41,828

 

 

54,888

 

Total non-compensation expenses

802,424

 

 

761,954

 

Total non-interest expenses

2,063,930

 

 

2,089,714

 

Earnings before income taxes

300,798

 

 

331,704

 

Income tax expense

79,789

 

 

234,337

 

Net earnings

221,009

 

 

97,367

 

Net earnings (loss) attributable to noncontrolling interests

140

 

 

(1

)

Net earnings attributable to Jefferies Group LLC

$

220,869

 

 

$

97,368

 

 

 

 

 

 

Pre-tax operating margin

12.7

%

 

13.7

%

Effective tax rate (2)

26.5

%

 

70.6

%

(1)

 

Certain reclassifications within revenue line items have been made for the nine month period ended August 31, 2018. 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. These fees were previously presented as Other revenues in Jefferies Group LLC’s Consolidated Statements of Earnings and are now presented within Commissions and other fees. There is no impact on Total revenues as a result of this change in presentation.

(2)

 

The effective tax rate for the nine months ended August 31, 2018 includes an estimated provisional tax charge of approximately $160 million as a result of the Tax Cuts and Jobs Act (“Tax Act”).

 

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

August 31, 2019

 

May 31, 2019

 

August 31, 2018

Net Revenues by Source:

 

 

 

 

 

Equities

$

193,229

 

 

$

206,083

 

 

$

170,611

 

Fixed income

148,334

 

 

173,253

 

 

139,846

 

Total sales and trading

341,563

 

 

379,336

 

 

310,457

 

 

 

 

 

 

 

 

Equity

97,494

 

 

108,022

 

 

139,220

 

Debt

101,689

 

 

151,511

 

 

138,515

 

Capital markets

199,183

 

 

259,533

 

 

277,735

 

Advisory

213,350

 

 

178,554

 

 

187,591

 

Other investment banking

(9,108

)

 

9,634

 

 

(13,732

)

Total investment banking

403,425

 

 

447,721

 

 

451,594

 

 

 

 

 

 

 

 

Other

12,374

 

 

32,218

 

 

4,910

 

 

 

 

 

 

 

 

Total Capital Markets (1) (2)

757,362

 

 

859,275

 

 

766,961

 

 

 

 

 

 

 

 

Asset management fees

3,340

 

 

4,550

 

 

5,184

 

Investment return (3) (4)

25,746

 

 

48,075

 

 

14,483

 

Allocated net interest (3) (5)

(9,289

)

 

(10,049

)

 

(9,013

)

Total Asset Management

19,797

 

 

42,576

 

 

10,654

 

 

 

 

 

 

 

 

Net Revenues

$

777,159

 

 

$

901,851

 

 

$

777,615

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

64

 

 

64

 

 

65

 

Number of trading loss days

10

 

 

4

 

 

11

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (6) (7)

$

9.71

 

 

$

8.70

 

 

$

7.53

 

 

(1)

 

Includes net interest revenue of $30.4 million, $16.4 million and $6.9 million for the quarters ended August 31, 2019, May 31, 2019, and August 31, 2018, respectively.

(2)

 

Allocated net interest is not separately disaggregated in presenting our Capital Markets reportable segment within our 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 footnote 4). 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 $2.0 million, $0.6 million and $3.3 million for the quarters ended August 31, 2019, May 31, 2019, and August 31, 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 11).

(6)

 

The quarters ended August 31, 2019 and May 31, 2019 information includes higher investments in certain separately managed accounts and funds, primarily due to the transfer of certain investments to Jefferies Group LLC on October 1, 2018 from Jefferies Financial Group Inc.

(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, 2018.

Contacts

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

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