Jefferies Group LLC - FORM 8-K - EX-99 - EXHIBIT 99 - March 22, 2011

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Exhibit 99

Jefferies Reports Quarterly Financial Results

NEW YORK--(BUSINESS WIRE)--March 22, 2011--Jefferies Group, Inc. (NYSE: JEF) today announced financial results for its fiscal first quarter ended February 28, 2011.

Highlights for the three months ended February 28, 2011 versus the three months ended March 31, 2010:

  • Record net revenues of $758 million, up 31% versus $580 million
  • Net income to Common Shareholders of $87 million, up 21% versus $72 million
  • Net earnings per common share of $0.42, up 20% versus $0.35
  • Investment Banking revenues of $239 million, up 21% versus $198 million
  • Global Trading revenues of $495 million, up 32% versus $375 million

"We are pleased to report Jefferies best quarterly revenues in our history and our second most profitable quarter ever,” commented Richard B. Handler, Chairman and Chief Executive Officer of Jefferies. “We believe we are on the right track to balance the realization of solid short-term growth and results, with the important investment needed to allow Jefferies to continue to evolve long-term and continue to be the best firm possible to serve our clients, employees and shareholders."

A conference call with management discussion of these financial results will be held today, Tuesday, March 22, 2011, at 9:00 AM Eastern. Investors and securities industry professionals may access the management discussion by calling 877-710-9938 or 702-928-7183. A one-week replay of the call will also be available at 800-642-1687 or 706-645-9291 (conference ID # 49569122). A live audio webcast and delayed replay can also be accessed at Jefferies.com.

Jefferies Group, Inc. (NYSE: JEF), a global securities and investment banking firm, has served companies and investors for nearly 50 years.

 

JEFFERIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
           
Three Months Ended (13)
Feb 28, 2011       Mar 31, 2010
Revenues:
Commissions $ 119,921 $ 134,438
Principal transactions 290,151 150,380
Investment banking 239,059 198,337

Asset management fees and investment income from managed funds

23,868 6,599
Interest 273,216 218,935
Other   20,461           16,679  
Total revenues 966,676 725,368
Interest expense   208,294           145,313  
Net revenues 758,382 580,055

Interest on mandatorily redeemable preferred interest of consolidated subsidiaries

  16,438           2,048  

Net revenues, less mandatorily redeemable preferred interest

  741,944           578,007  
 
Non-interest expenses:
Compensation and benefits 442,892 319,801
Floor brokerage and clearing fees 28,132 30,729
Technology and communications 43,675 40,209
Occupancy and equipment rental 17,979 19,706
Business development 19,938 13,361
Professional services 13,276 14,423
Other   13,121           17,322  
Total non-interest expenses   579,013           455,551  
Earnings before income taxes 162,931 122,456
Income tax expense   60,886           46,369  
Net earnings 102,045 76,087
Net earnings to noncontrolling interests   14,704           3,943  
Net earnings to common shareholders $ 87,341         $ 72,144  
Earnings per common share:
Basic $ 0.42         $ 0.35  
Diluted $ 0.42         $ 0.35  
 
Weighted average common shares:
Basic 199,141 198,507
Diluted 203,257 202,630
 
Effective tax rate 37 % 38 %
 
 
Jefferies Group, Inc. And Subsidiaries
Selected Statistical Information
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
                       

Quarters Ended (13)

  2/28/2011         11/30/2010         8/31/2010         5/31/2010         3/31/2010         12/31/2009  

Statement of Earnings

Net revenues, less mandatorily redeemable preferred interest

$ 741,944 $ 664,870 $ 519,806 $ 665,518 $ 578,007 $ 529,804
 
Non-interest expenses:
Compensation and benefits 442,892 405,440 308,797 384,311 319,801 239,352
Non-compensation expenses   136,121         135,852         134,511         137,527         135,750         123,019  
Earnings before income taxes 162,931 123,578 76,498 143,680 122,456 167,433
Income tax expense   60,886         46,126         33,873         56,189         46,369         68,006  
Net earnings 102,045 77,452 42,625 87,491 76,087 99,427
Net earnings (loss) to noncontrolling interests   14,704         14,735         (2,129 )       3,665         3,943         6,819  
Net earnings to common shareholders $ 87,341       $ 62,717       $ 44,754       $ 83,826       $ 72,144       $ 92,608  
Diluted earnings per common share $ 0.42       $ 0.31       $ 0.22       $ 0.41       $ 0.35       $ 0.46  
 

Financial Ratios

Pretax operating margin 22 % 19 % 15 % 22 % 21 % 32 %
Compensation and benefits / net revenues 58 % 60 % 60 % 58 % 55 % 45 %
Effective tax rate 37 % 37 % 44 % 39 % 38 % 41 %
 
 
Jefferies Group, Inc. And Subsidiaries
Selected Statistical Information
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
                       
Quarters Ended (13)
  2/28/2011       11/30/2010         8/31/2010         5/31/2010       3/31/2010       12/31/2009

Revenues by Source

Equities $ 177,358 $ 155,071 $ 109,280 $ 179,505 $ 174,299 $ 116,414
Fixed Income   318,097       227,876         161,010         218,144       200,820       211,747
Total 495,455 382,947 270,290 397,649 375,119 328,161
 
 
Equity 49,684 48,369 19,151 73,677 34,217 27,404
Debt   62,967       86,814         77,564         109,767       101,846       77,829
Capital markets 112,651 135,183 96,715 183,444 136,063 105,233
Advisory   126,408       156,701         149,478         72,514       62,274       88,636
Investment banking 239,059 291,884 246,193 255,958 198,337 193,869
 
Asset management fees and investment income / (loss)

from managed funds:

Asset management fees 16,117 6,083 3,996 7,165 4,017 8,472
Investment (loss) / income from managed funds   7,751       (1,102 )       (3,210 )       6,764       2,582       5,930
Total   23,868       4,981         786         13,929       6,599       14,402

Net revenues

  758,382       679,812         517,269         667,536       580,055       536,432
Interest on mandatorily redeemable preferred interest of consolidated subsidiaries   16,438       14,942         (2,537 )       2,018       2,048       6,628

Net Revenues, less mandatorily redeemable preferred interest

$ 741,944     $ 664,870       $ 519,806       $ 665,518     $ 578,007     $ 529,804
 

Other Data

Number of trading days 61 63 65 64 61 64
Full time employees (end of period) - 3,084 2,971 2,821 2,729 2,628
Common shares outstanding 177,068 171,694 171,241 171,591 171,845 165,638
Weighted average common shares:
Basic 199,141 194,901 195,601 196,944 198,507 196,255
Diluted 203,257 199,017 195,612 201,064 202,630 200,383
 
JEFFERIES GROUP, INC. AND SUBSIDIARIES
COMMON SHARES OUTSTANDING AND COMMON SHARES FOR BASIC AND DILUTED EPS CALCULATIONS
(Unaudited)
 
 

February 28, 2011

 

 
Common shares outstanding

177,067,710

 

Outstanding restricted stock units

27,978,062

 

Adjusted shares outstanding

205,045,772

 

 

Note - All share information below for EPS purposes is based upon weighted-average balances for the applicable period.

 

Three months ended

 

February 28, 2011

 

 
Shares outstanding (weighted average)

(1)

176,056,990

 

Unearned restricted stock

(2)

(5,694,886)

 

Earned restricted stock units

(3)

24,242,055

 

Other issuable shares

(4)

4,536,424

 

Common Shares for Basic EPS

199,140,583

 

 
Stock options

(5)

11,013

 

Mandatorily redeemable convertible preferred stock

(6)

4,105,138

 

Convertible debt

(7)

-  

 

Common Shares for Diluted EPS

203,256,734

 

 

(1)

 

Shares outstanding represents shares issued less shares repurchased in treasury stock. Shares issued includes public and private offerings, earned and unearned restricted stock, distributions related to restricted stock units, deferred compensation plans, employee stock purchase plan and stock option exercises. Shares issued does not include undistributed earned and unearned restricted stock units.

 

(2)

As certain restricted stock is contingent upon a future service condition, unearned shares are removed from shares outstanding in the calculation of basic EPS as Jefferies' obligation to issue these shares remains contingent.
 

(3)

As earned restricted stock units are no longer contingent upon a future service condition and are issuable upon a certain date in the future, earned restricted stock units are added to shares outstanding in the calculation of basic EPS.
 

(4)

Other shares issuable include shares issuable to settle previously granted restricted stock awards and shares issuable under certain deferred compensation plans.
 

(5)

Calculated under the treasury stock method. The treasury stock method assumes the issuance of only a net incremental number of shares as proceeds from issuance are assumed to be used to repurchase shares at the average stock price for the period.
 

(6)

Calculated under the if-converted method. The if-converted method assumes the conversion of convertible securities at the beginning of the period.
 

(7)

Represents the potential common shares issuable under the conversion spread (the excess conversion value over the accreted debt value) based on the average stock price for the period.
 
Jefferies Group, Inc. And Subsidiaries
Financial Highlights
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
                       
Quarters Ended (13)
2/28/2011     11/30/2010     8/31/2010     5/31/2010     3/31/2010     12/31/2009
 
 
Net earnings to common shareholders $ 87,341 $ 62,717 $ 44,754 $ 83,826 $ 72,144 $ 92,608
Basic EPS (1) $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35 $ 0.46
Diluted EPS (1) $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35 $ 0.46
Effective tax rate 37 % 37 % 44 % 39 % 38 % 41 %
 
Total assets (in millions) (2) $ 40,428 $ 36,727 $ 32,672 $ 33,145 $ 34,023 $ 28,121
Average total assets for quarter (in millions) (2) $ 42,598 $ 40,184 $ 36,475 $ 36,329 $ 35,976 $ 30,407
Cash and cash equivalents (in millions) $ 1,164 $ 2,189 $ 2,090 $ 994 $ 1,025 $ 1,853
Level 3 assets (in millions) (2) (3) $ 607 $ 572 $ 486 $ 503 $ 648 $ 884
Level 3 assets - % total assets (2) 1.5 % 1.6 % 1.5 % 1.5 % 1.9 % 3.1 %
Level 3 assets - % total financial instruments owned (2) 3.3 % 3.6 % 3.4 % 3.7 % 5.0 % 9.3 %
Level 3 assets - % common stockholders' equity (2) 23.5 % 23.1 % 20.9 % 22.1 % 28.1 % 38.5 %
 
Total common stockholders' equity (in millions) $ 2,578 $ 2,478 $ 2,326 $ 2,275 $ 2,305 $ 2,298
Adjusted common stockholders' equity (in millions) (4) $ 2,737 $ 2,639 $ 2,469 $ 2,416 $ 2,435 $ 2,352
Common book value per share (5) $ 14.56 $ 14.43 $ 13.58 $ 13.26 $ 13.41 $ 13.87
Adjusted book value per share (6) $ 13.35 $ 13.17 $ 12.36 $ 12.06 $ 12.11 $ 12.18
Tangible common book value per share (7) $ 12.47 $ 12.29 $ 11.44 $ 11.12 $ 11.27 $ 11.65
Adjusted tangible book value per share (6) $ 11.55 $ 11.33 $ 10.52 $ 10.23 $ 10.28 $ 10.27
 
Total capitalization (in millions) (8) $ 7,164 $ 7,031 $ 6,344 $ 5,749 $ 5,808 $ 5,792
Leverage ratio (2) (9) 13.8 13.1 12.4 12.8 12.9 10.7
Adjusted leverage ratio (2) (10) 14.4 13.2 12.2 12.3 11.3 9.0
 
Average firmwide VaR (in millions) (11) $ 10.51 6.45 8.64 8.25 11.21 6.46
 
Common shares outstanding 177,068 171,694 171,241 171,591 171,845 165,638
Adjusted shares outstanding (12) 205,046 200,429 199,867 200,286 201,101 193,042
Share issued during quarter 7,084 1,888 372 1,659 8,682 819
Shares purchased during the quarter 1,482 1,082 525 1,620 2,474 4,479
 
Number of employees 3,082 3,084 2,971 2,821 2,729 2,628
 
 
Footnotes (13)
           
(1 ) The following details the calculation of basic and diluted earnings per share as included in our quarterly and annual reports.
 
Quarters Ended
  2/28/2011     11/30/2010     8/31/2010       5/31/2010     3/31/2010     12/31/2009
Earnings for basic earnings per common share:
Net earnings $ 102,045 $ 77,452 $ 42,625 $ 87,491 $ 76,087 $ 99,427
Net earnings (loss) to noncontrolling interests   14,704     14,735     (2,129 )     3,665     3,943     6,819
Net earnings to common shareholders 87,341 62,717 44,754 83,826 72,144 92,608
Less: Allocation of earnings to participating securities (A)   3,925     2,650     1,674       2,842     2,108     1,437
Net earnings available to common shareholders $ 83,416   $ 60,067   $ 43,080     $ 80,984   $ 70,036   $ 91,171
Earnings for diluted earnings per common share:
Net earnings $ 102,045 $ 77,452 $ 42,625 $ 87,491 $ 76,087 $ 99,427
Net earnings (loss) to noncontrolling interests   14,704     14,735     (2,129 )     3,665     3,943     6,819
Net earnings to common shareholders 87,341 62,717 44,754 83,826 72,144 92,608
Add: Convertible preferred stock dividends (B) 1,016 1,016 - 1,016 1,016 1,016
Less: Allocation of earnings to participating securities (A)   3,907     2,653     1,674       2,830     2,104     1,423
Net earnings available to common shareholders $ 84,450   $ 61,080   $ 43,080     $ 82,012   $ 71,056   $ 92,201
Weighted Average Common Shares:
Basic 199,141 194,901 195,601 196,944 198,507 196,255
Diluted 203,257 199,017 195,612 201,064 202,630 200,383
Earnings per common share:
Basic $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35 $ 0.46
Diluted $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35 $ 0.46
 
(A) Represents dividends declared during the period on participating securities plus an allocation of undistributed earnings to participating securities. Losses are not allocated to participating securities. Participating securities represent restricted stock and restricted stock units for which requisite service has not yet been rendered and amounted to weighted average shares of 9,403,000, 8,599,000, 7,661,000, 6,780,000, 5,815,000 and 3,092,000 for the three months ended February 28, 2011, November 30, 2010, August 31, 2010, May 31, 2010, March 31, 2010 and December 31, 2009, respectively. Dividends declared on participating securities during the three months ended February 28, 2011, November, 30, 2010, August 31, 2010, May 31, 2010 and March 31, 2010 amounted to approximately $686,000, $632,000, $559,000, $568,000 and $494,000, respectively. No dividends were declared during three months ended December 31, 2009. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed.
(B) The conversion of our mandatorily redeemable convertible preferred stock was considered anti-dilutive for our three-months ended August 31, 2010.

 

 

 

(2)

  This amount represents a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three months ended February 28, 2011.
 

(3)

Level 3 assets represent those financial instruments classified as such under ASC 820, accounted for at fair value and included within Financial instruments owned. Level 3 assets for which we bear no economic exposure were $209.8 million at February 28, 2011, which is reflective of the portion of our Level 3 assets that are financed by nonrecourse secured financing attributable to third party or employee noncontrolling interests in certain consolidated entities.
 

(4)

Adjusted common stockholders’ equity (non-GAAP financial measure) represents total common stockholders’ equity plus the unrecognized compensation cost related to nonvested share based awards, i.e. granted restricted stock and restricted stock units which contain future service requirements. As of February 28, 2011, unrecognized compensation cost related to nonvested share based awards was $159,508. We believe that adjusted common stockholders’ equity is a meaningful measure as it reflects the current capital outstanding to stockholders, including employee common shareholders, that would be required to be paid out in liquidation.
 

(5)

Common book value per share equals total common stockholders' equity divided by common shares outstanding.
 

(6)

Adjusted book value per share (non-GAAP financial measure) equals adjusted common stockholders’ equity divided by adjusted shares outstanding. Adjusted tangible book value per share (non-GAAP financial measure) equals adjusted common stockholders’ equity less goodwill and identifiable intangible assets divided by adjusted common shares outstanding. As of February 28, 2011, goodwill and identifiable intangible assets equals $369,414. Previous quarters have been conformed to reflect this calculation. We believe these are meaningful measures as investors often incorporate the dilutive effects of outstanding capital in their valuations.
 

(7)

Tangible common book value per share (non-GAAP financial measure) equals tangible common stockholders' equity divided by common shares outstanding. As of February 28, 2011, tangible common stockholders' equity equals total common stockholders' equity of $2,577,703 less goodwill and identifiable intangible assets of $369,414. We believe that tangible common book value per share and tangible common stockholders' equity is meaningful as a valuation of financial companies are often measured as a multiple of tangible common stockholders' equity making these ratios meaningful for investors.
 

(8)

Total capitalization includes our long-term debt, mandatorily redeemable convertible preferred stock, mandatorily redeemable preferred interest of consolidated subsidiaries and total stockholders' equity.
 

(9)

Leverage ratio equals total assets divided by total stockholders' equity.
 

(10)

Adjusted leverage ratio (non-GAAP financial measure) equals adjusted assets divided by tangible stockholders' equity. Adjusted assets (non-GAAP financial measure) equals total assets less securities borrowed, securities purchased under agreements to resell, cash and securities segregated, goodwill and indentifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). As of February 28, 2011, adjusted assets were $36,709,148. We believe that adjusted assets is a meaningful measure as it excludes certain assets that are considered of lower risk as they are generally self-financed by customer liabilities through our securities lending activities.
 

(11)

VaR is 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 "Market Risk" in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in our Transition Report on Form 10-K for the eleven months ended November 30, 2010.
 

(12)

Adjusted shares outstanding equals common shares outstanding plus outstanding restricted stock units.
 

(13)

As indicated in our Transition Report on Form 10-K for the eleven months ended November 30, 2010, we made correcting adjustments to our historical financial statements for the quarters of 2010 and 2009. For additional information on these adjustments, see Note 1, Organization and Basis of Presentation, and Note 23, Selected Quarterly Financial Data (Unaudited), of the Consolidated Financial Statements of our Transition Report on Form 10-K for the eleven months ended November 30, 2010.

CONTACT:
Jefferies Group, Inc.
Peregrine C. Broadbent, 212-284-2338
Chief Financial Officer

Jefferies Group LLC Reports