NEW YORK & LONDON--()--Jefferies Group, Inc. (NYSE: JEF) announced today financial results for its fiscal first quarter ended February 29, 2012.
“We believe our firm is unique today in our intense focus on offering an integrated, global capital markets platform to our clients and an entrepreneurial culture to our employee-partners.”
Highlights for the three months ended February 29, 2012, versus the three months ended February 28, 2011:
- Record net record revenues of $780 million, versus $758 million
- Net income to common shareholders of $77 million, versus $87 million (after $41 million versus $31 million of aggregate earnings to noncontrolling interests and interest on mandatorily redeemable preferred interests substantially at Jefferies High Yield Trading)
- Net earnings per common share of $0.33, versus $0.42
- Investment banking revenues of $286 million, up 20% versus $239 million
- Fixed income revenues of $339 million, versus $318 million
“These solid results reflect our continued growth in investment banking and strong performance in fixed income,” commented Richard B. Handler, Chairman and Chief Executive Officer of Jefferies. "We believe our firm is unique today in our intense focus on offering an integrated, global capital markets platform to our clients and an entrepreneurial culture to our employee-partners.”
A conference call with management discussion of these financial results will be held today, March 20, 2012, 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 855-859-2056 or 404-537-3406 (conference ID # 58239317). A live audio webcast and delayed replay can also be accessed at Jefferies.com.
Jefferies Group, Inc. (NYSE: JEF) is the global investment banking firm focused on serving clients for nearly 50 years. The firm is a leader in providing insight, expertise and execution to investors, companies and governments, and provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income and commodities, as well as offers select asset and wealth management strategies, in the U.S., Europe and Asia.
| JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands, Except Per Share Amounts) (Unaudited) |
|||||||||
| Three Months Ended | |||||||||
| February 29, 2012 |
February 28, 2011 |
||||||||
| Revenues: | |||||||||
| Commissions | $ | 117,499 | $ | 119,921 | |||||
| Principal transactions | 280,835 | 290,151 | |||||||
| Investment banking | 285,795 | 239,059 | |||||||
|
Asset management fees and investment income from managed funds |
5,634 | 23,868 | |||||||
| Interest | 274,708 | 273,216 | |||||||
| Other | 42,340 | 20,461 | |||||||
| Total revenues | 1,006,811 | 966,676 | |||||||
| Interest expense | 226,845 | 208,294 | |||||||
| Net revenues | 779,966 | 758,382 | |||||||
|
Interest on mandatorily redeemable preferred interest of consolidated subsidiaries |
21,844 | 16,438 | |||||||
|
Net revenues, less mandatorily redeemable preferred interest |
758,122 | 741,944 | |||||||
| Non-interest expenses: | |||||||||
| Compensation and benefits | 446,462 | 442,892 | |||||||
| Floor brokerage and clearing fees | 27,838 | 28,132 | |||||||
| Technology and communications | 61,450 | 43,675 | |||||||
| Occupancy and equipment rental | 22,565 | 17,979 | |||||||
| Business development | 22,247 | 19,938 | |||||||
| Professional services | 13,693 | 13,276 | |||||||
| Other | 14,998 | 13,121 | |||||||
| Total non-interest expenses | 609,253 | 579,013 | |||||||
| Earnings before income taxes | 148,869 | 162,931 | |||||||
| Income tax expense | 52,152 | 60,886 | |||||||
| Net earnings | 96,717 | 102,045 | |||||||
| Net earnings to noncontrolling interests | 19,581 | 14,704 | |||||||
| Net earnings to common shareholders | $ | 77,136 | $ | 87,341 | |||||
| Earnings per common share: | |||||||||
| Basic | $ | 0.33 | $ | 0.42 | |||||
| Diluted | $ | 0.33 | $ | 0.42 | |||||
| Weighted average common shares: | |||||||||
| Basic | 218,049 | 199,141 | |||||||
| Diluted | 222,162 | 203,257 | |||||||
| Effective tax rate | 35.0 | % | 37.4 | % | |||||
| JEFFERIES GROUP, INC. AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||||||||||||||
| Quarters Ended | ||||||||||||||||||||||||
|
February 29, |
November 30, 2011 |
August 31, |
May 31, |
February 28, 2011 |
November 30, 2010 |
|||||||||||||||||||
|
Statement of Earnings |
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|
Net revenues, less mandatorily redeemable preferred interest |
$ | 758,122 | $ | 556,544 | $ | 523,953 | $ | 722,750 | $ | 741,944 | $ | 664,870 | ||||||||||||
| Non-interest expenses: | ||||||||||||||||||||||||
| Compensation and benefits | 446,462 | 308,137 | 299,640 | 431,936 | 442,892 | 405,440 | ||||||||||||||||||
| Non-compensation expenses | 162,791 | 177,727 | 169,075 | 160,330 | 136,121 | 135,852 | ||||||||||||||||||
| Earnings before income taxes | 148,869 | 70,680 | 55,238 | 130,484 | 162,931 | 123,578 | ||||||||||||||||||
| Income tax expense | 52,152 | 25,066 | 1,228 | 45,784 | 60,886 | 46,126 | ||||||||||||||||||
| Net earnings | 96,717 | 45,614 | 54,010 | 84,700 | 102,045 | 77,452 | ||||||||||||||||||
| Net earnings (loss) to noncontrolling interests | 19,581 | (2,772 | ) | (14,265 | ) | 4,084 | 14,704 | 14,735 | ||||||||||||||||
| Net earnings to common shareholders | $ | 77,136 | $ | 48,386 | $ | 68,275 | $ | 80,616 | $ | 87,341 | $ | 62,717 | ||||||||||||
| Diluted earnings per common share | $ | 0.33 | $ | 0.21 | $ | 0.30 | $ | 0.36 | $ | 0.42 | $ | 0.31 | ||||||||||||
|
Financial Ratios |
||||||||||||||||||||||||
| Pretax operating margin | 20 | % | 13 | % | 11 | % | 18 | % | 22 | % | 19 | % | ||||||||||||
| Compensation and benefits / Net revenues | 57 | % | 56 | % | 59 | % | 59 | % | 58 | % | 60 | % | ||||||||||||
| Effective tax rate | 35.0 | % | 35.5 | % | 2.2 | % | 35.1 | % | 37.4 | % | 37.3 | % | ||||||||||||
| JEFFERIES GROUP, INC. AND SUBSIDIARIES SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Per Share Amounts) (Unaudited) |
||||||||||||||||||||||
| Quarters Ended | ||||||||||||||||||||||
| February 29, 2012 |
November 30, 2011 |
August 31, 2011 |
May 31, |
February 28, 2011 |
November 30, 2010 |
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|
Revenues by Source |
||||||||||||||||||||||
| Equities | $ | 136,215 | $ | 124,305 | $ | 126,850 | $ | 165,076 | $ | 177,358 | $ | 155,071 | ||||||||||
| Fixed Income | 339,147 | 140,651 | 33,087 | 223,121 | 318,097 | 227,876 | ||||||||||||||||
| Other | 13,175 | 21,106 | 52,509 | - | - | - | ||||||||||||||||
| Total | 488,537 | 286,062 | 212,446 | 388,197 | 495,455 | 382,947 | ||||||||||||||||
| Equity | 46,187 | 26,936 | 58,629 | 52,039 | 49,684 | 48,369 | ||||||||||||||||
| Debt | 89,695 | 62,090 | 128,058 | 131,806 | 62,967 | 86,814 | ||||||||||||||||
| Capital markets | 135,882 | 89,026 | 186,687 | 183,845 | 112,651 | 135,183 | ||||||||||||||||
| Advisory | 149,913 | 172,272 | 107,063 | 144,576 | 126,408 | 156,701 | ||||||||||||||||
| Investment banking | 285,795 | 261,298 | 293,750 | 328,421 | 239,059 | 291,884 | ||||||||||||||||
|
Asset management fees and investment (loss)/income from managed funds: |
||||||||||||||||||||||
| Asset management fees | 11,888 | 9,162 | 3,127 | 5,019 | 16,117 | 6,083 | ||||||||||||||||
| Investment (loss) / income from managed funds | (6,254 | ) | (2,539 | ) | (41 | ) | 5,528 | 7,751 | (1,102 | ) | ||||||||||||
| Total | 5,634 | 6,623 | 3,086 | 10,547 | 23,868 | 4,981 | ||||||||||||||||
| Net revenues | 779,966 | 553,983 | 509,282 | 727,165 | 758,382 | 679,812 | ||||||||||||||||
| Interest on mandatorily redeemable preferred interest of consolidated subsidiaries | 21,844 | (2,561 | ) | (14,671 | ) | 4,415 | 16,438 | 14,942 | ||||||||||||||
| Net revenues, less mandatorily redeemable preferred interest | $ | 758,122 | $ | 556,544 | $ | 523,953 | $ | 722,750 | $ | 741,944 | $ | 664,870 | ||||||||||
|
Other Data |
||||||||||||||||||||||
| Number of trading days | 61 | 63 | 65 | 64 | 61 | 63 | ||||||||||||||||
| Full time employees (end of quarter) | 3,851 | 3,898 | 3,842 | 3,222 | 3,082 | 3,084 | ||||||||||||||||
| Common shares outstanding | 205,819 | 197,160 | 200,314 | 202,154 | 177,068 | 171,694 | ||||||||||||||||
| Weighted average common shares: | ||||||||||||||||||||||
| Basic | 218,049 | 215,628 | 218,426 | 210,751 | 199,141 | 194,901 | ||||||||||||||||
| Diluted | 222,162 | 215,629 | 222,541 | 214,870 | 203,257 | 199,017 | ||||||||||||||||
|
JEFFERIES GROUP, INC. AND SUBSIDIARIES |
|
February 29, 2012 |
||||||||
| Common shares outstanding |
|
205,819 |
||||||
| Outstanding restricted stock units | 22,563 | |||||||
| Adjusted shares outstanding | 228,382 | |||||||
|
Note - All share information below for EPS purposes is based upon weighted-average balances for the applicable period. |
||||||||
|
Three Months Ended |
||||||||
| Shares outstanding (weighted average) | (1) | 201,687 | ||||||
| Unearned restricted stock | (2) | (9,319 | ) | |||||
| Earned restricted stock units | (3) | 18,871 | ||||||
| Other issuable shares | (4) | 6,810 | ||||||
| Common Shares for Basic EPS | 218,049 | |||||||
| Stock options | (5) | 3 | ||||||
| Mandatorily redeemable convertible preferred stock | (6) | 4,110 | ||||||
| Convertible debt | (7) | - | ||||||
| Common Shares for Diluted EPS | 222,162 | |||||||
| (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) |
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| Quarters Ended | ||||||||||||||||||||||||
| February 29, 2012 |
November 30, 2011 |
August 31, 2011 |
May 31, 2011 |
February 28, 2011 |
November 30, 2010 |
|||||||||||||||||||
| Net earnings to common shareholders | $ | 77,136 | $ | 48,386 | $ | 68,275 | $ | 80,616 | $ | 87,341 | $ | 62,717 | ||||||||||||
| Basic EPS (1) | $ | 0.33 | $ | 0.21 | $ | 0.30 | $ | 0.36 | $ | 0.42 | $ | 0.31 | ||||||||||||
| Diluted EPS (1) | $ | 0.33 | $ | 0.21 | $ | 0.30 | $ | 0.36 | $ | 0.42 | $ | 0.31 | ||||||||||||
| Effective tax rate | 35.0 | % | 35.5 | % | 2.2 | % | 35.1 | % | 37.4 | % | 37.3 | % | ||||||||||||
| Total assets (in millions) (2) | $ | 34,564 | $ | 34,971 | $ | 45,125 | $ | 40,967 | $ | 40,428 | $ | 36,727 | ||||||||||||
| Average total assets for quarter (in millions) (2) | $ | 42,158 | $ | 50,087 | $ | 51,992 | $ | 47,207 | $ | 42,598 | $ | 40,184 | ||||||||||||
| Cash and cash equivalents (in millions) | $ | 2,589 | $ | 2,394 | $ | 2,015 | $ | 2,499 | $ | 1,164 | $ | 2,189 | ||||||||||||
| Financial instruments owned (in millions) (2) | $ | 14,101 | $ | 16,679 | $ | 18,140 | $ | 17,768 | $ | 18,253 | $ | 15,942 | ||||||||||||
| Level 3 financial instruments owned (in millions) (2) (3) | $ | 490 | $ | 498 | $ | 636 | $ | 725 | $ | 612 | $ | 572 | ||||||||||||
| Level 3 financial instruments owned with economic exposure (in millions) (2)(4) | $ | 435 | $ | 452 | $ | 567 | $ | 533 | $ | 403 | $ | 368 | ||||||||||||
| Level 3 financial instruments owned - % total assets (2) | 1.4 | % | 1.4 | % | 1.4 | % | 1.8 | % | 1.5 | % | 1.6 | % | ||||||||||||
| Level 3 financial instruments owned - % total financial instruments owned (2) | 3.5 | % | 3.0 | % | 3.5 | % | 4.1 | % | 3.4 | % | 3.6 | % | ||||||||||||
| Level 3 financial instruments owned with economic exposure - % total financial instruments owned (2) | 3.1 | % | 2.7 | % | 3.1 | % | 3.0 | % | 2.2 | % | 2.3 | % | ||||||||||||
| Level 3 financial instruments owned with economic exposure - % common stockholders' equity (2) | 13.2 | % | 14.0 | % | 17.9 | % | 16.8 | % | 15.6 | % | 14.9 | % | ||||||||||||
| Total common stockholders' equity (in millions) | $ | 3,288 | $ | 3,224 | $ | 3,175 | $ | 3,165 | $ | 2,578 | $ | 2,478 | ||||||||||||
| Adjusted common stockholders' equity (in millions) (5) | $ | 3,473 | $ | 3,424 | $ | 3,360 | $ | 3,347 | $ | 2,737 | $ | 2,639 | ||||||||||||
| Common book value per share (6) | $ | 15.97 | $ | 16.35 | $ | 15.85 | $ | 15.66 | $ | 14.56 | $ | 14.43 | ||||||||||||
| Adjusted book value per share (7) | $ | 15.21 | $ | 15.05 | $ | 14.90 | $ | 14.70 | $ | 13.35 | $ | 12.84 | ||||||||||||
| Tangible common book value per share (8) | $ | 14.10 | $ | 14.40 | $ | 13.91 | $ | 13.83 | $ | 12.47 | $ | 12.29 | ||||||||||||
| Adjusted tangible book value per share (7) | $ | 13.52 | $ | 13.36 | $ | 13.18 | $ | 13.07 | $ | 11.55 | $ | 11.05 | ||||||||||||
| Total capital (in millions) (9) | $ | 8,320 | $ | 8,227 | $ | 8,206 | $ | 8,223 | $ | 7,164 | $ | 7,031 | ||||||||||||
| Leverage ratio (2) (10) | 9.5 | 9.9 | 12.9 | 11.7 | 13.8 | 13.1 | ||||||||||||||||||
| Adjusted leverage ratio (2) (11) | 8.9 | 9.4 | 11.9 | 12.5 | 14.4 | 13.2 | ||||||||||||||||||
| Average firmwide VaR (in millions) (12) | $ | 9.90 | $ | 9.43 | $ | 10.64 | $ | 12.96 | $ | 10.59 | $ | 6.45 | ||||||||||||
| Common shares outstanding | 205,819 | 197,160 | 200,314 | 202,154 | 177,068 | 171,694 | ||||||||||||||||||
| Adjusted shares outstanding (13) | 228,382 | 227,461 | 225,453 | 227,720 | 205,046 | 205,491 | ||||||||||||||||||
| Share issued during quarter | 11,864 | 2,072 | 1,824 | 25,376 | 7,084 | 1,888 | ||||||||||||||||||
| Shares purchased during the quarter | 3,160 | 5,135 | 3,145 | 158 | 1,482 | 1,082 | ||||||||||||||||||
| Number of employees | 3,851 | 3,898 | 3,842 | 3,222 | 3,082 | 3,084 | ||||||||||||||||||
| Footnotes | ||||||||||||||||||||||||
| (1) | The following details the calculation of basic and diluted earnings per share as included in our quarterly and annual reports. | |||||||||||||||||||||||
| Quarters Ended | ||||||||||||||||||||||||
| February 29, 2012 |
November 30, 2011 |
August 31, 2011 |
May 31, 2011 |
February 28, 2011 |
November 30, 2010 |
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| Earnings for basic earnings per common share: | ||||||||||||||||||||||||
| Net earnings | $ |
96,717 |
|
$ | 45,614 | $ | 54,010 | $ |
84,700 |
|
$ | 102,045 | $ |
77,452 |
|
|||||||||
| Net earnings (loss) to noncontrolling interests | 19,581 | (2,772 | ) | (14,265 | ) | 4,084 | 14,704 | 14,735 | ||||||||||||||||
| Net earnings to common shareholders | 77,136 | 48,386 | 68,275 | 80,616 | 87,341 | 62,717 | ||||||||||||||||||
| Less: Allocation of earnings to participating securities (A) | 4,643 | 2,560 | 3,410 | 3,756 | 3,925 | 2,650 | ||||||||||||||||||
| Net earnings available to common shareholders | $ | 72,493 | $ | 45,826 | $ | 64,865 | $ | 76,860 | $ | 83,416 | $ | 60,067 | ||||||||||||
| Earnings for diluted earnings per common share: | ||||||||||||||||||||||||
| Net earnings | $ | 96,717 | $ | 45,614 | $ | 54,010 | $ | 84,700 | $ | 102,045 | $ | 77,452 | ||||||||||||
| Net earnings (loss) to noncontrolling interests | 19,581 | (2,772 | ) | (14,265 | ) | 4,084 | 14,704 | 14,735 | ||||||||||||||||
| Net earnings to common shareholders | 77,136 | 48,386 | 68,275 | 80,616 | 87,341 | 62,717 | ||||||||||||||||||
| Add: Convertible preferred stock dividends (B) | 1,016 | - | 1,016 | 1,016 | 1,016 | 1,016 | ||||||||||||||||||
| Less: Allocation of earnings to participating securities (A) | 4,639 | 2,560 | 3,415 | 3,748 | 3,907 | 2,653 | ||||||||||||||||||
| Net earnings available to common shareholders | $ | 73,513 | $ | 45,826 | $ | 65,876 | $ | 77,884 | $ | 84,450 | $ | 61,080 | ||||||||||||
| Weighted Average Common Shares: | ||||||||||||||||||||||||
| Basic | 218,049 | 215,628 | 218,426 | 210,751 | 199,141 | 194,901 | ||||||||||||||||||
| Diluted | 222,162 | 215,629 | 222,541 | 214,870 | 203,257 | 199,017 | ||||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||
| Basic | $ | 0.33 | $ | 0.21 | $ | 0.30 | $ | 0.36 | $ | 0.42 | $ | 0.31 | ||||||||||||
| Diluted | $ | 0.33 | $ | 0.21 | $ | 0.30 | $ | 0.36 | $ | 0.42 | $ | 0.31 | ||||||||||||
| (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 14,198,000, 11,755,000, 11,239,000, 10,260,000, 9,403,000 and 8,599,000 for the three months ended February 29, 2012, November 30, 2011, August 31, 2011, May 31, 2011, February 28, 2011 and November 30, 2010, respectively. Dividends declared on participating securities during the three months ended February 29, 2012, November 30, 2011, August 31, 2011, May 31, 2011, February 28, 2011 and November 30, 2010 amounted to approximately $959,000, $959,000, $934,000, $794,000, $686,000 and $632,000, respectively. 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 November 30, 2011. | ||||||||||||||||||||||||
| (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 29, 2012. | |||||||||||||||||||||||
| (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 $55.5 million at February 29, 2012, which is reflective of the portion of our Level 3 assets that are financed by nonrecourse secured financing or attributable to third party or employee noncontrolling interests in certain consolidated entities. | |||||||||||||||||||||||
| (4) | Level 3 financial instruments owned with economic exposure represents Level 3 financial instruments owned adjusted for Level 3 assets that are financed by nonrecourse secured financing or attributable to third party or employee noncontrolling interests in certain consolidated entities. | |||||||||||||||||||||||
| (5) | 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 29, 2012, unrecognized compensation cost related to nonvested share based awards was $184.9 million. 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. | |||||||||||||||||||||||
| (6) | Common book value per share equals total common stockholders' equity divided by common shares outstanding. | |||||||||||||||||||||||
| (7) | 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 29, 2012, goodwill and identifiable intangible assets equals $385.3 million. 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. | |||||||||||||||||||||||
| (8) | Tangible common book value per share (non-GAAP financial measure) equals tangible common stockholders' equity divided by common shares outstanding. As of February 29, 2012, tangible common stockholders' equity equals total common stockholders' equity of $3,287.7 million less goodwill and identifiable intangible assets of $385.3 million. 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. | |||||||||||||||||||||||
| (9) | Total capital includes our long-term debt, mandatorily redeemable convertible preferred stock, mandatorily redeemable preferred interest of consolidated subsidiaries and total stockholders' equity. Long-term debt included in total capitalization at February 29, 2012 is reduced by the amount of debt maturing in less than one year and revolving credit facility. | |||||||||||||||||||||||
| (10) | Leverage ratio equals total assets divided by total stockholders' equity. | |||||||||||||||||||||||
| (11) | 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 identifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). As of February 29, 2012, adjusted assets were $28,871.3 million. 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. | |||||||||||||||||||||||
| (12) | 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 "Value at Risk" in Part II, Item 7 "Management's Discussion and Analysis" in our Annual Report on Form 10-K for the twelve months ended November 30, 2011. | |||||||||||||||||||||||
| (13) | Adjusted shares outstanding equals common shares outstanding plus outstanding restricted stock units. On November 29, 2011, we granted 6,339,000 shares of restricted stock as part of year-end compensation. These shares of restricted stock were issued in the first quarter of 2012 and are included in the November 30, 2011 adjusted shares outstanding. On November 29, 2010, we granted 5,062,000 shares of restricted stock as part of year-end compensation. These shares of restricted stock were issued in the first quarter of 2011 and are included in the November 30, 2010 adjusted shares outstanding. | |||||||||||||||||||||||
| JEFFERIES GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION (Amounts in Thousands, Except Per Share Amounts) (Unaudited) |
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|
Three Months |
Debt Accounting |
Three Months Ended |
Three Months |
Debt Accounting |
Three Months Ended |
Twelve Months |
Debt Accounting |
Twelve Months Ended |
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| Net revenues | $ | 779,966 | $ |
12,085 |
|
(A) | $ | 767,881 | $ | 553,983 | $ |
20,175 |
|
(F) | $ | 533,808 | $ | 2,548,813 | $ |
72,684 |
|
(G) | $ | 2,476,129 | |||||||||||||||||||||||||||||
| Compensation and benefits | 446,462 | 5,821 | (B) | $ | 440,641 | 308,137 | 2,721 | (B) | 305,416 | 1,482,604 | 11,785 | (H) | 1,470,819 | ||||||||||||||||||||||||||||||||||||||||
| Noncompensation expenses | 162,791 | 701 | (C) | $ | 162,090 | 177,727 | 704 | (C) | 177,023 | 643,253 | 7,826 | (I) | 635,427 | ||||||||||||||||||||||||||||||||||||||||
| Total non-interest expenses | 609,253 | 6,522 | 602,731 | 485,864 | 3,425 | 482,439 | 2,125,857 | 19,611 | 2,106,246 | ||||||||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | 148,869 | 5,563 | 143,306 | 70,680 | 16,750 | 53,930 | 419,334 | 53,073 | 366,261 | ||||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | 52,152 | 2,041 | (D) | 50,111 | 25,066 | 6,985 | (D) | 18,081 | 132,966 | 235 | (D) | 132,731 | |||||||||||||||||||||||||||||||||||||||||
| Net earnings | 96,717 | 3,522 | 93,195 | 45,614 | 9,765 | 35,849 | 286,368 | 52,838 | 233,530 | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings to common shareholders | $ | 77,136 | $ | 3,522 | $ | 73,614 | $ | 48,386 | $ | 9,765 | $ | 38,621 | $ | 284,618 | $ | 52,838 | $ | 231,780 | |||||||||||||||||||||||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.33 | $ | 0.01 | $ | 0.32 | $ | 0.21 | $ | 0.04 | $ | 0.17 | $ | 1.28 | $ | 0.23 | $ | 1.04 | |||||||||||||||||||||||||||||||||||
| Diluted | $ | 0.33 | $ | 0.01 | (E) | $ | 0.32 | $ | 0.21 | (E) | $ | 0.04 | (E) | $ | 0.17 | (E) | $ | 1.28 | $ | 0.23 | (E) | $ | 1.04 | ||||||||||||||||||||||||||||||
| Weighted average common shares: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | 218,049 | 218,049 | 218,049 | 215,628 | 215,628 | 215,628 | 211,056 | 211,056 | 211,056 | ||||||||||||||||||||||||||||||||||||||||||||
| Diluted | 222,162 | 218,052 | 222,162 | 215,629 | 215,629 | 215,629 | 215,171 | 211,063 | 215,171 | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits/Net revenues | 57.2 | % | 57.4 | % | 55.6 | % | 57.2 | % | 58.2 | % | 59.4 | % | |||||||||||||||||||||||||||||||||||||||||
| Effective tax rate | 35.0 | % | 35.0 | % | 35.5 | % | 33.5 | % | 31.7 | % | 36.2 | % | |||||||||||||||||||||||||||||||||||||||||
The adjustments to selected financial information presented above and the presentation of the selected financial information for the three months ended February 29, 2012 and the three and twelve months ended November 30, 2011 excluding the effects of a debt accounting gain and certain items identified and recognized in connection with the acquisition of Hoare Govett from The Royal Bank of Scotland Group plc on February 1, 2012 and the acquisition of the Global Commodities Group (the "Bache entities") from Prudential Financial, Inc. ("Prudential") on July 1, 2011 are "non-GAAP financial measures." We believe this presentation provides meaningful information to shareholders as it provides comparability in our results of operations for the three months ended February 29, 2012 and the three and twelve months ended November 30, 2011 with the results of prior periods.
| FOOTNOTES TO SELECTED FINANCIAL INFORMATION | |
| (A) | Within Total revenues in the first quarter of 2012, we recognized Other revenues of $13.2 million comprised primarily of a gain on debt extinguishment of $9.9 million relating to trading activities in our own debt and a bargain purchase gain of $3.4 million resulting from the acquisition of Hoare Govett. This is offset within Net Revenues by additional interest expense of $1.2 million from subsequent amortization of debt discounts upon reissuance of our long-term debt. |
| (B) | The three months ended February 29, 2012 is comprised of compensation expense related to the amortization of retention and stock replacement awards granted in connection with the acquisition of the Bache entities, amortization of retention awards granted in connection with the acquisition of Hoare Govett and bonus costs for employees as a result of the completion of the Hoare Govett acquisition. The three months ended November 30, 2011 is comprised of amortization of retention and stock replacement awards granted in connection with the acquisition of the Bache entities. |
| (C) | Reflects the amortization of intangible assets recognized in connection with the acquisition of Hoare Govett and the Bache entities for the three months ended February 29, 2012 and the amortization of intangible assets recognized in connection with the acquisition of the Bache entities for the three months ended November 30, 2011. |
| (D) | Reflects the net tax expense on the debt accounting gain, Hoare Govett bargain purchase gain and Hoare Govett and Bache related expense items taxed at a domestic and foreign marginal tax rate of 41.4% and 25.3%, respectively. For the three and twelve months ended November 30, 2011, the total domestic marginal tax rate of 41.7% was applied. The bargain purchase gain of $52.5 million on the acquisition of the Global Commodities Group recognized in the three months ended August 31, 2011, is not a taxable item. |
| (E) | The conversion of our mandatorily redeemable convertible preferred stock was considered anti-dilutive for purposes of these calculations. |
| (F) | In accordance with Debt Extinguishment Accounting under ASC 405 and 470, we recorded a gain on debt extinguishment of $20.2 million in Other revenues relating to trading activities in our own long term debt, specifically our 5.125% Senior Notes due 2018 and our 3.875% Convertible Senior Debentures due 2029. |
| (G) | Includes a gain on debt extinguishment of $20.2 million in the fourth quarter of 2011 and a bargain purchase gain of $52.5 million resulting from the acquisition of the Global Commodities Group from Prudential recorded in Other revenues in the third quarter of 2011. |
| (H) | Includes compensation expense recognized in connection with the acquisition of the Global Commodities Group related to 1) severance costs for certain employees of the acquired Bache entities that were terminated subsequent to the acquisition, 2) the amortization of stock awards granted to former Bache employees as replacement awards for previous Prudential stock awards that were forfeited in the acquisition, 3) bonus costs for employees as a result of the completion of the acquisition and 4) the amortization of retention awards. |
| (I) | Includes the amortization of intangible assets of $0.7 million recognized during the three months ended November 30, 2011 in connection with the acquisition of the Bache entities as well as expenses (primarily professional fees) totaling $7.1 million related to the acquisition and the integration of the Bache entities within Jefferies Group, Inc. recorded during the nine months ended August 31, 2011. |