Jefferies

Press Release

FOR IMMEDIATE RELEASE
Jefferies Reports Fiscal Third-Quarter 2013 Financial Results

NEW YORK, September 17, 2013 -- Jefferies Group LLC today announced financial results for its fiscal third quarter 2013. 

Highlights for the three months ended August 31, 2013: 

  • Net revenues of $517 million
  • Net earnings of $12 million
  • Investment banking net revenues of $319 million
  • Equities net revenues of $151 million
  • Fixed Income net revenues of $33 million

“With the significant change in expectations regarding interest rates, we experienced a very challenging summer in our fixed income businesses due to the rising rate environment, spread widening, redemptions experienced by our client base which heavily muted trading, and related mark-to-market write downs within our inventory (with no single meaningful item).  At the same time, we recorded strong results in our investment banking activities and continued improvement in equities.  Finally, our European business had a strong third-quarter, with meaningful benefit from our corporate broking effort, Jefferies Hoare Govett.  Our investment in Knight Capital was marked down by $16 million in the third-quarter, reflecting the decline in the Knight stock price.  The impact of this mark-down is recorded in our Equities net revenues line item,” commented Richard B. Handler, Chairman and Chief Executive Officer of Jefferies.

“Fixed income markets were most unsettled in June, while July and August were more balanced, but witnessed subdued summer activity levels.  Since Labor Day, client flows have been stronger and fixed income performance has markedly improved to more normal levels.  Momentum in Investment Banking appears to be building for our fourth-quarter and into 2014, as our backlog is strong and improving,” added Mr. Handler.

Our revenues, expenses and net earnings for the third-quarter of 2013 are impacted by the following items:

  • Revenues include an additional $27 million of positive net interest income due to the amortization of premiums arising from the one-time fair value adjustment of our long-term debt to fair value as of the date of our merger with Leucadia and the concurrent assumption of our mandatorily redeemable convertible preferred stock by Leucadia.
  • Professional fees include an additional $3.6 million of merger related and other legal fees. 
  • Other expenses include the following items aggregating $17 million:  $8 million of incremental amortization expense associated with intangible assets and internally developed software recognized upon the merger with Leucadia and approximately $9 million in litigation settlement costs.  Our litigation settlement costs include a final judgment awarded on our last outstanding auction-rate securities matter.

Without these costs, our non-compensation costs would be $180 million.

Excluding the above revenue items, our compensation ratio would have been 59.5%, consistent with recent periods.  Our total headcount at August 31, 2013 was 3,805, an increase of 20 employees compared to May 31, 2013.

Peregrine C. Broadbent, Chief Financial Officer of Jefferies commented: “As the table below shows, our balance sheet, capital, liquidity and risk metrics continue to demonstrate our continued conservative management philosophy and remain virtually unchanged from prior quarters.  At period end, our gross leverage ratio, excluding the impact of the Leucadia purchase accounting, was 9.41 times equity and Level 3 assets were $500 million and remain at about 3% of inventory.


 


August 31, 2013

 


May 31, 2013

  • Total assets, excluding goodwill and intangibles1

$ 36.8 billion

 

$ 37.0 billion

  • Tangible member's/common shareholders'  equity1

$ 3.18 billion

 

$ 3.17 billion

  • Liquidity buffer1

 $ 5.6 billion

 

  $ 5.2 billion

  • Level 3 assets

$ 500 million

 

$ 502 million

  • Average VaR2

      $ 11.02 million

 

$ 8.77 million

  • Average VaR excluding Knight Capital holdings2

        $  7.24 million

 

 $ 5.77 million



1 This represents a non-GAAP measure.  Refer to the Financial Highlights table on page 5 and related footnotes.
2 This measure is reflected on a period basis.

The financial tables attached should be read in connection with our Quarterly Report on Form 10-Q for the quarter ended May 31, 2013 and our Annual Report on Form 10-K for the year ended November 30, 2012.

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, and also select asset and wealth management strategies, in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Leucadia National Corporation (NYSE: LUK), a diversified holding company.

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 For further information, please contact: 

 

Peregrine C. Broadbent
Chief Financial Officer
Jefferies Group LLC
(212) 284-2338