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Jefferies Announces First Quarter 2020 Financial Results

All-Time Record Quarterly Results at Jefferies Group

Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three months ended February 29, 2020.

Highlights for the three months ended February 29, 2020:

  • Net income attributable to Jefferies Financial Group common shareholders of $113 million, or $0.37 per diluted share
  • Pre-tax income of $158 million
  • Jefferies Group quarterly record total net revenues of $1,171 million, pre-tax income of $235 million, net earnings of $171 million and return on tangible equity of 16.1%1
    • Record Investment Banking net revenues of $577 million, including record Advisory net revenues of $343 million
    • Total Equities and Fixed Income net revenues of $494 million
    • Asset Management revenues (before allocated net interest2) of $33 million
  • Merchant Banking pre-tax loss of $54 million
    • Positive contributions from Vitesse, Idaho Timber and FXCM, were more than offset by noncash charges to write-off the value of HomeFed's Fulton Mall joint venture investment related to a softening of the Brooklyn real estate market, and to write-down the value of our investment in JETX to reflect the impact of oil price declines during the quarter; also includes a gain of about $60 million from effective short-term hedges against mark-to-market and fair value decreases in our Merchant Banking investments
  • Repurchases of 14.7 million shares for $325.5 million, or an average price of $22.21; 277.1 million shares outstanding and 300.4 million shares outstanding on a fully diluted basis3 at February 29, 2020
    • Additional share repurchases since quarter-end of 8.0 million shares for $139.7 million, or $17.44 per share; pro forma4 for the 8.0 million share repurchases, 269.1 million shares outstanding and 292.4 million shares outstanding on a fully diluted basis
  • Jefferies Financial Group had parent company liquidity of $1.9 billion at February 29, 2020. Jefferies Group continues to maintain a large liquidity buffer of $6.4 billion of cash and unencumbered liquid collateral at February 29, 2020, which represents 14% of its total balance sheet.

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

"Jefferies Group's all-time quarterly record net revenues of $1.17 billion and return on tangible equity of 16.1%1 demonstrate the scalability, operating leverage and opportunity of our business. For years, we have invested and believed in the capacity of our team and operations, as well as the uniqueness of our culture and business model, and are gratified by these results. We had determined that 2020 would be a year in which we would seek to realize on the potential and capabilities of our Investment Banking, Equities, Fixed Income and Asset Management platforms, and these first quarter results demonstrate our considerable progress. Our first quarter also reflects record performance in mergers, acquisitions and advisory, solid results in equity underwriting and better performance in debt underwriting, with broad contribution from our sector teams and regional presence. Our Equities and Fixed Income results were strong and we believe consistent with our continually enhanced market position.

"Our all-time record quarterly results are all but ancient history, given the recent lightspeed change in the economy and financial markets, but do highlight that Jefferies entered this period of duress in the healthiest position in our history. The global Coronavirus affliction has wreaked havoc on the global economy and all financial markets. Our Investment Banking backlog remains solid, reflecting what our clients want to achieve, but there is little visibility on what can realistically get accomplished under current market conditions. While waiting for conditions to improve for more traditional transactions, we are pivoting to more actionable investment banking solutions that are possible due to our full service capabilities, such as rescue financings, rights offerings, restructurings and alternative methods of getting much needed liquidity to our clients. We are hopeful that the combination of time for the health crisis to pass, along with the onset of much needed large-scale government stimulus, will allow the economy to begin to heal, with the eventual return of some form of normalcy for our clients. The three week initial shock of the economic shutdown has adversely affected our Equities, Fixed Income and Asset Management businesses. More recently, those businesses have begun to stabilize. Jefferies Group's securities inventory and asset management investments remain diversified and the aggregate of all mark-to-market losses recognized to date have been reasonable. We have already experienced some rebound from the lowest levels last week.

"Our firm was able to transform swiftly to a "virtual organization," with most people working from home and as a result, our ability to serve our clients even with highly elevated trading volumes, is remarkably strong. We believe we are gaining market share, at least that is what our clients are telling us. Our people have proven to be the difference maker once again in a period of stress. We are committed to navigating these challenging conditions, leaning upon the strength of our employee-led culture, and our "never stronger" capital position, competitive strength and brand. We are determined to devote all resources throughout our global firm to best assist our broad client base in dealing with the multitude of challenges and opportunities this environment presents.

"Jefferies Group’s $46.2 billion balance sheet at quarter-end continues to be straightforward, highly liquid and supported by ample long term and permanent capital. Consistent with recent period ends, Level 3 assets continue to be modest at a total of $346 million, or less than 2% of total inventory. Our distressed energy exposure is a fraction of that of a few years ago. Additionally, Jefferies Finance, our corporate lending joint venture, has current loan commitments across various industries, but none in the energy or hospitality sectors. Only a very small proportion of Jefferies Finance's revolving credit to clients are to the energy, leisure/gaming and hospitality sectors.

"Jefferies Financial Group had parent company liquidity of $1.9 billion at February 29, 2020. This reflects significant asset sales over the course of the past several years and strong cash flow generation from our remaining businesses, and is after significant share buybacks and dividends. Consistent with our historic practice, Jefferies Group continues to maintain a large liquidity buffer which totaled $6.4 billion of cash and unencumbered liquid collateral at February 29, 2020, representing 14% of its total balance sheet.

"Jefferies book value per share was $33.74 and tangible book value per fully diluted share5 was $24.74 at the end of the first quarter, and, pro forma4 for the 8.0 million of incremental shares repurchased since quarter end, Jefferies tangible book value per fully diluted share5 was $24.94."

Separately, Jefferies announced that having completed the repurchase of shares under the previous authorization, the Board of Directors has approved a share repurchase authorization of $100 million. Shares may be repurchased by Jefferies from time to time in the open market, through block trades or otherwise.

In addition, the Jefferies Board of Directors declared a quarterly cash dividend equal to $0.15 per Jefferies common share payable on May 29, 2020 to record holders of Jefferies common shares on May 18, 2020.

We expect to file our Form 10-Q on or about April 8, 2020.

Amounts herein pertaining to February 29, 2020 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 month period ended February 29, 2020 will be provided upon filing our Quarterly Report on Form 10-Q with the SEC.

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

Return on tangible equity (a non-GAAP financial measure) equals our first quarter of 2020 annualized net earnings attributable to Jefferies Group LLC divided by our tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) of $4,311 million at November 30, 2019. Refer to page 8.

 

2

Allocated net interest represents the allocation of a ratable portion 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 all its business lines. Refer to Jefferies Group LLC's summary of Net Revenues by Source on page 7.

 

3

Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group's common shares outstanding plus restricted stock units and other shares. Refer to schedule on page 10 for reconciliation to U.S. GAAP amounts.

 

4

Pro forma adjustments are non-GAAP measures and adjust the February 29, 2020 shares outstanding and book value by the share repurchases made subsequent to quarter end. Refer to schedule on page 10 for reconciliation to U.S. GAAP amounts.

 

5

Tangible book value per fully diluted share, a non-GAAP measure, is defined as Tangible book value divided by shares outstanding on a fully diluted basis. Tangible book value, a non-GAAP measure, is defined as Jefferies Financial Group shareholders' equity (book value) less Intangible assets, net and goodwill. Shares outstanding on a fully diluted basis, a non-GAAP measure, is defined as Jefferies Financial Group's common shares outstanding plus restricted stock units and other shares. Refer to schedule on page 10 for reconciliation to U.S. GAAP amounts.

 

Summary for Jefferies Financial Group Inc. and Subsidiaries
(In thousands, except per share amounts)
(Unaudited)

 

 

 

Three Months
Ended
February 29,
2020

 

Three Months
Ended
February 28,
2019

 

 

 

 

 

Net revenues

 

$

1,386,328

 

 

$

828,443

 

 

 

 

 

 

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

 

$

225,649

 

 

$

22,004

 

Income (loss) related to associated companies

 

(67,855

)

 

27,313

 

Income before income taxes

 

157,794

 

 

49,317

 

Income tax provision

 

45,773

 

 

2,302

 

Net income

 

112,021

 

 

47,015

 

Net (income) loss attributable to the noncontrolling interests

 

2,129

 

 

(1,066

)

Net loss attributable to the redeemable noncontrolling interests

 

282

 

 

138

 

Preferred stock dividends

 

(1,422

)

 

(1,276

)

Net income attributable to Jefferies Financial Group Inc. common shareholders

 

$

113,010

 

 

$

44,811

 

 

 

 

 

 

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

 

 

 

 

Net income

 

$

0.37

 

 

$

0.14

 

 

 

 

 

 

Number of shares in calculation

 

302,406

 

 

315,175

 

 

 

 

 

 

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

 

 

 

 

Net income

 

$

0.37

 

 

$

0.14

 

 

 

 

 

 

Number of shares in calculation

 

308,280

 

 

318,752

 

A summary of results for the three months ended February 29, 2020 is as follows (in thousands):

 

 

Investment
Banking and
Capital
Markets (1)

 

Asset
Management (1)

 

Merchant
Banking (1)

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

1,148,829

 

 

$

20,329

 

 

$

204,559

 

 

$

9,792

 

 

$

 

 

$

2,819

 

 

$

1,386,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

620,924

 

 

22,221

 

 

17,190

 

 

9,858

 

 

 

 

 

 

670,193

 

Cost of sales (2)

52,874

 

 

6,307

 

 

72,443

 

 

 

 

 

 

 

 

131,624

 

Interest expense

 

 

 

 

8,773

 

 

 

 

12,781

 

 

 

 

21,554

 

Depreciation and amortization

19,116

 

 

625

 

 

18,841

 

 

888

 

 

 

 

 

 

39,470

 

Selling, general and other expenses

205,958

 

 

12,105

 

 

73,080

 

 

6,800

 

 

 

 

(105

)

 

297,838

 

Total expenses

898,872

 

 

41,258

 

 

190,327

 

 

17,546

 

 

12,781

 

 

(105

)

 

1,160,679

 

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

249,957

 

 

(20,929

)

 

14,232

 

 

(7,754

)

 

(12,781

)

 

2,924

 

 

225,649

 

Loss related to associated companies

 

 

 

 

(67,855

)

 

 

 

 

 

 

 

(67,855

)

Income (loss) from before income taxes

$

249,957

 

 

$

(20,929

)

 

$

(53,623

)

 

$

(7,754

)

 

$

(12,781

)

 

$

2,924

 

 

157,794

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

45,773

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

112,021

 

 

A summary of results for the three months ended February 28, 2019 is as follows (in thousands):

 

 

Investment
Banking and
Capital Markets (1)

 

Asset
Management (1)

 

Merchant
Banking (1)

 

Corporate

 

Parent
Company
Interest

 

Consolidation
Adjustments

 

Total

Net revenues

$

658,247

 

 

$

30,745

 

 

$

132,692

 

 

$

4,193

 

 

$

 

 

$

2,566

 

 

$

828,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

361,314

 

 

16,854

 

 

13,903

 

 

17,521

 

 

 

 

 

 

409,592

 

Cost of sales (2)

47,136

 

 

4,732

 

 

66,921

 

 

 

 

 

 

 

 

118,789

 

Interest expense

 

 

 

 

8,256

 

 

 

 

14,762

 

 

 

 

23,018

 

Depreciation and amortization

17,330

 

 

455

 

 

15,294

 

 

855

 

 

 

 

 

 

33,934

 

Selling, general and other expenses

177,350

 

 

7,740

 

 

29,022

 

 

7,160

 

 

 

 

(166

)

 

221,106

 

Total expenses

603,130

 

 

29,781

 

 

133,396

 

 

25,536

 

 

14,762

 

 

(166

)

 

806,439

 

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

55,117

 

 

964

 

 

(704

)

 

(21,343

)

 

(14,762

)

 

2,732

 

 

22,004

 

Income related to associated companies

 

 

220

 

 

27,093

 

 

 

 

 

 

 

 

27,313

 

Income (loss) before income taxes

$

55,117

 

 

$

1,184

 

 

$

26,389

 

 

$

(21,343

)

 

$

(14,762

)

 

$

2,732

 

 

49,317

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

2,302

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

$

47,015

 

 

(1)

 

We now present Asset Management as a separate reporting segment. Prior year amounts have been reclassified to conform to current segment disclosure.

(2)

 

Includes Floor brokerage and clearing fees.

  

The following financial tables provide information for the results of Jefferies Group LLC and should be read in conjunction with Jefferies Group LLC's Annual Report on Form 10-K for the year ended November 30, 2019. Amounts herein pertaining to February 29, 2020 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 February 29, 2020.

 

Jefferies Group LLC and Subsidiaries

 

Consolidated Statements of Earnings

 

(Amounts in Thousands)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

February 29, 2020

 

November 30, 2019

 

February 28, 2019

Revenues:

 

 

 

 

 

Commissions and other fees (1)

$

179,535

 

 

$

182,466

 

 

$

155,142

 

Principal transactions

371,902

 

 

137,256

 

 

234,298

 

Investment banking

592,002

 

 

400,513

 

 

285,596

 

Asset management fees and revenues (2)

11,720

 

 

3,935

 

 

7,031

 

Interest

294,668

 

 

333,507

 

 

360,975

 

Other (1)(2)

29,729

 

 

15,859

 

 

11,830

 

Total revenues

1,479,556

 

 

1,073,536

 

 

1,054,872

 

Interest expense

308,860

 

 

325,734

 

 

369,154

 

Net revenues

1,170,696

 

 

747,802

 

 

685,718

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

Compensation and benefits

635,230

 

 

422,548

 

 

371,685

 

 

 

 

 

 

 

 

Non-compensation expenses:

 

 

 

 

 

Floor brokerage and clearing fees

60,580

 

 

58,773

 

 

51,977

 

Technology and communications

89,184

 

 

87,931

 

 

79,170

 

Occupancy and equipment rental

27,503

 

 

31,885

 

 

28,539

 

Business development

29,957

 

 

34,728

 

 

30,555

 

Professional services

44,665

 

 

45,296

 

 

36,927

 

Underwriting costs

17,529

 

 

14,617

 

 

8,575

 

Other

30,670

 

 

28,153

 

 

15,705

 

Total non-compensation expenses

300,088

 

 

301,383

 

 

251,448

 

Total non-interest expenses

935,318

 

 

723,931

 

 

623,133

 

Earnings before income taxes

235,378

 

 

23,871

 

 

62,585

 

Income tax expense

64,013

 

 

495

 

 

16,220

 

Net earnings

171,365

 

 

23,376

 

 

46,365

 

Net earnings (loss) attributable to noncontrolling interests

(2,024

)

 

(1,784

)

 

384

 

Net earnings attributable to Jefferies Group LLC

$

173,389

 

 

$

25,160

 

 

$

45,981

 

 

 

 

 

 

 

 

Pre-tax operating margin

20.1

%

 

3.2

%

 

9.1

%

Effective tax rate

27.2

%

 

2.1

%

 

25.9

%

(1)

 

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. Jefferies Group LLC's Consolidated Statement of Earnings reflects the reclassification of revenues of $7.8 million from Other revenues to Commissions and other fees for the three months ended February 28, 2019. There is no impact on Total revenues as a result of this change in presentation.

  

(2)

 

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Jefferies Group LLC's Consolidated Statement of Earnings reflects the reclassification of revenues of $0.4 million from Other revenues to Asset management fees and revenues for the three months ended February 28, 2019. There is no impact on Total revenues as a result of this change in presentation.

  

Jefferies Group LLC and Subsidiaries

Selected Statistical Information

(Amounts in Thousands, Except Other Data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

February 29, 2020

 

November 30, 2019

 

February 28, 2019

Net Revenues by Source:

 

 

 

 

 

Advisory

$

343,158

 

 

$

195,035

 

 

$

180,482

 

 

 

 

 

 

 

 

Equity underwriting

131,692

 

 

105,119

 

 

51,337

 

Debt underwriting

117,152

 

 

100,359

 

 

53,777

 

Total underwriting

248,844

 

 

205,478

 

 

105,114

 

Other investment banking

(14,529

)

 

(7,501

)

 

(7,642

)

Total investment banking

577,473

 

 

393,012

 

 

277,954

 

 

 

 

 

 

 

 

Equities

245,641

 

 

200,128

 

 

174,539

 

Fixed income

248,182

 

 

163,016

 

 

196,759

 

Total capital markets

493,823

 

 

363,144

 

 

371,298

 

 

 

 

 

 

 

 

Other

77,533

 

 

4,948

 

 

8,995

 

 

 

 

 

 

 

 

Total Investment Banking and Capital Markets (1) (2)

1,148,829

 

 

761,104

 

 

658,247

 

 

 

 

 

 

 

 

Asset management fees and revenues (3)

11,720

 

 

3,935

 

 

7,031

 

Investment return (3) (4) (5)

20,839

 

 

(7,637

)

 

32,050

 

Allocated net interest (4) (6)

(10,692

)

 

(9,600

)

 

(11,610

)

Total Asset Management

21,867

 

 

(13,302

)

 

27,471

 

 

 

 

 

 

 

 

Net Revenues

$

1,170,696

 

 

$

747,802

 

 

$

685,718

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

Number of trading days

61

 

 

63

 

 

59

 

Number of trading loss days

4

 

 

10

 

 

9

 

 

 

 

 

 

 

 

Average firmwide VaR (in millions) (7)

$

7.39

 

 

$

7.70

 

 

$

9.06

 

 

(1)

 

Includes net interest revenue of $2.9 million, $22.6 million and $4.6 million for the quarters ended February 29, 2020, November 30, 2019, and February 28, 2019, respectively.

 

(2)

 

Allocated net interest is not separately disaggregated in presenting our Investment Banking and Capital Markets reportable segment within Jefferies Group LLC's Net Revenues by Source. This presentation is aligned to our Investment Banking and Capital Markets internal performance measurement.

 

(3)

 

In the fourth quarter of 2019, Jefferies Group LLC reorganized the presentation of revenues from arrangements which entitle us to certain portions of revenues and/or profits of strategic asset management partners. Jefferies Group LLC's Net Revenues by Source reflects the reclassification of revenues of $0.4 million from Investment return revenues to Asset management fees and revenues for the three months ended February 28, 2019. There is no impact on Total Asset Management revenues as a result of this change in presentation.

 

(4)

 

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 footnotes 5 and 6). This disaggregation is intended to increase transparency and to make clearer actual Investment return. 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.

 

(5)

 

Includes net interest expense of $6.4 million, $5.2 million and $1.2 million for the quarters ended February 29, 2020, November 30, 2019, and February 28, 2019, respectively.

 

(6)

 

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 8).

 

(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, 2019.

  

Jefferies Group LLC and Subsidiaries

Financial Highlights

(Amounts in Millions, Except Where Noted)

(Unaudited)

 

 

 

 

 

 

 

Quarter Ended

 

February 29,
2020

 

November 30,
2019

 

February 28,
2019

Financial position:

 

 

 

 

 

Total assets (1)

$

46,203

 

 

$

43,516

 

 

$

43,134

 

Average total assets for the period (1)

$

55,333

 

 

$

52,539

 

 

$

52,934

 

Average total assets less goodwill and intangible assets for the period (1)

$

53,518

 

 

$

50,727

 

 

$

51,109

 

 

 

 

 

 

 

Cash and cash equivalents (1)

$

4,901

 

 

$

5,568

 

 

$

4,132

 

Cash and cash equivalents and other sources of liquidity (1) (2)

$

6,371

 

 

$

6,918

 

 

$

5,691

 

Cash and cash equivalents and other sources of liquidity - % total assets (1) (2)

13.8

%

 

15.9

%

 

13.2

%

Cash and cash equivalents and other sources of liquidity - % total assets less
goodwill and intangible assets (1) (2)

14.4

%

 

16.6

%

 

13.8

%

 

 

 

 

 

 

Financial instruments owned (1)

$

17,897

 

 

$

16,363

 

 

$

16,900

 

Goodwill and intangible assets (1)

$

1,810

 

 

$

1,814

 

 

$

1,826

 

Right-of-use assets (1) (3)

$

512

 

 

N/A

 

N/A

 

 

 

 

 

 

Total equity (including noncontrolling interests) (1)

$

6,332

 

 

$

6,130

 

 

$

6,157

 

Total Jefferies Group LLC member's equity (1)

$

6,313

 

 

$

6,125

 

 

$

6,151

 

Tangible Jefferies Group LLC member's equity (1) (4)

$

4,503

 

 

$

4,311

 

 

$

4,326

 

 

 

 

 

 

 

Level 3 financial instruments:

 

 

 

 

 

Level 3 financial instruments owned (1) (5)

$

346

 

 

$

307

 

 

$

395

 

Level 3 financial instruments owned - % total assets (1) (5)

0.7

%

 

0.7

%

 

0.9

%

Level 3 financial instruments owned - % total financial instruments (1) (5)

1.9

%

 

1.9

%

 

2.3

%

Level 3 financial instruments owned - % tangible Jefferies Group LLC member's equity (1) (5)

7.7

%

 

7.1

%

 

9.1

%

 

 

 

 

 

 

Other data and financial ratios:

 

 

 

 

 

Total long-term capital (1) (6)

$

12,706

 

 

$

12,343

 

 

$

11,899

 

Leverage ratio (1) (7)

7.3

 

 

7.1

 

 

7.0

 

Tangible gross leverage ratio (1) (8)

9.9

 

 

9.7

 

 

9.5

 

Adjusted tangible gross leverage ratio (1) (3) (9)

11.0

 

 

N/A

 

N/A

 

 

 

 

 

 

Number of trading days

61

 

 

63

 

 

59

 

Number of trading loss days

4

 

 

10

 

 

9

 

Average firmwide VaR (10)

$

7.39

 

 

$

7.70

 

 

$

9.06

 

 

 

 

 

 

 

Number of employees, at period end

3,822

 

 

3,815

 

 

3,613

 

N/A — Not Applicable

 

Jefferies Group LLC and Subsidiaries

Financial Highlights - Footnotes

 

 

 

 

 

 

 

 

 

(1)

 

Amounts pertaining to February 29, 2020 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 February 29, 2020.

 

   

(2)

 

At February 29, 2020, other sources of liquidity include high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities of $638 million, in aggregate, and $832 million, being the estimated amount of additional secured financing that could be reasonably expected to be obtained from Jefferies Group LLC's financial instruments that are currently not pledged after considering reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at November 30, 2019 were $973 million and $377 million, respectively, and at February 28, 2019, were $1,194 million and $365 million, respectively.

 

   

(3)

 

Jefferies Group LLC adopted the new lease standard on December 1, 2019 using a modified retrospective transition approach. Accordingly, reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical periods. We elected not to reassess whether existing contracts are or contain leases, or the lease classification and initial direct costs of existing leases upon transition. At transition on December 1, 2019, the adoption of this standard resulted in the recognition of ROU assets of $520 million, reflected in Premises and equipment in Jefferies Group LLC's Consolidated Statement of Financial Condition.

 

   

(4)

 

Tangible Jefferies Group LLC member's equity (a non-GAAP financial measure) represents total Jefferies Group LLC member's equity less goodwill and identifiable intangible assets. We believe that tangible Jefferies Group LLC member's equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible equity, making these ratios meaningful for investors.

 

   

(5)

 

Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned.

 

   

(6)

 

At February 29, 2020, November 30, 2019, and February 28, 2019, total long-term capital includes Jefferies Group LLC's long-term debt of $6,374 million, $6,214 million and $5,742 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by amounts outstanding under the revolving credit facility, amounts from secured term loans and the amount of debt maturing in less than one year, as applicable.

 

   

(7)

 

Leverage ratio equals total assets divided by total equity.

 

   

(8)

 

Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible Jefferies Group LLC member's equity. The tangible gross leverage ratio is used by rating agencies in assessing Jefferies Group LLC's leverage ratio.

 

   

(9)

 

Adjusted tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and identifiable intangible assets and right-of-use assets divided by tangible Jefferies Group LLC member's equity less right-of-use assets.

 

   

(10)

 

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, 2019.

  

Jefferies Financial Group Inc.
Non-GAAP Reconciliation

The following table reconciles Jefferies Financial Group non-GAAP measures to their respective U.S. GAAP measures. Management believes such non-GAAP measures are useful to investors as they allow them to view our results through the eyes of management, while facilitating a comparison across historical periods. These measures should not be considered a substitute for, or superior to, measures prepared in accordance with U.S. GAAP.

Jefferies Financial Group Book Value and Shares Outstanding GAAP Reconciliation

The table below reconciles our book value to tangible book value and our common shares outstanding to fully diluted shares outstanding (in thousands, except per share amounts):

 

 

 

As Reported,
February 29,
2020

 

Pro Forma
Adjustments (1)

 

Pro Forma,
February 29,
2020

 

 

 

 

 

 

 

Book value (GAAP)

 

$

9,348,955

 

 

$

(139,711

)

 

$

9,209,244

 

Less, Intangibles assets, net and goodwill

 

(1,918,068

)

 

 

 

(1,918,068

)

Tangible book value (non-GAAP)

 

$

7,430,887

 

 

$

(139,711

)

 

$

7,291,176

 

 

 

 

 

 

 

 

Common shares outstanding (GAAP)

 

277,109

 

 

(8,009

)

 

269,100

 

Restricted stock units ("RSUs")

 

22,267

 

 

 

 

22,267

 

Other

 

1,004

 

 

 

 

1,004

 

Fully diluted shares outstanding (non-GAAP) (2)

 

300,380

 

 

(8,009

)

 

292,371

 

 

 

 

 

 

 

 

Book value per share outstanding

 

$

33.74

 

 

 

 

$

34.22

 

Tangible book value per fully diluted share outstanding

 

$

24.74

 

 

 

 

$

24.94

 

 

(1) Reflects the repurchase of 8.0 million shares of the Company's common stock for $139.7 million after February 29, 2020.

(2) Fully diluted shares outstanding exclude preferred shares as they are antidilutive. Fully diluted shares outstanding include vested RSUs as well as the target number of RSUs issuable under the senior executive compensation plans.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200326005706/en/

Contacts

Teresa S. Gendron
Chief Financial Officer
Jefferies Financial Group Inc.
Tel. (212) 460-1932