Jefferies Group LLC - FORM 8-K - EX-99 - EXHIBIT 99 - June 21, 2011

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Exhibit 99

Jefferies Reports Quarterly Financial Results

NEW YORK--(BUSINESS WIRE)--June 21, 2011--Jefferies Group, Inc. (NYSE: JEF) today announced financial results for its fiscal second quarter and first half ended May 31, 2011.

Highlights for the three months ended May 31, 2011 (which reflect the firm’s $4.6 million charitable contribution to the relief efforts in Japan, as well as the $4.8 million in out-of-pocket costs incurred through May 31 in connection with the firm’s acquisition of Prudential Bache scheduled to close on July 1), versus the three months ended May 31, 2010:

  • Net revenues of $727 million, up 9% versus $668 million
  • Net income to Common Shareholders of $81 million ($87 million without the unusual expense items) versus $84 million
  • Net earnings per common share of $0.36 ($0.39 without the unusual expense items) versus $0.41
  • Record quarterly Investment Banking net revenues of $328 million, up 28% versus $256 million

Highlights for the six months ended May 31, 2011 versus the five months ended May 31, 2010:

  • Net revenues of $1.5 billion versus $995 million
  • Net income to Common Shareholders of $168 million ($174 million without the unusual expense items) versus $116 million
  • Net earnings per common share of $0.78 ($0.80 without the unusual expense items) versus $0.57
  • Record six month Investment Banking net revenues of $567 million versus $352 million

"We are very pleased with these solid results, which reflect our continued momentum in investment banking, and the durability of our sales and trading platform, despite the challenging market environment that persisted throughout the quarter,” commented Richard B. Handler, Chairman and Chief Executive Officer of Jefferies. “While we have much more work to do, we are pleased with our team, our strategic position, our diversified business mix, and our integrated approach to delivering one firm for the benefit of every client."

A conference call with management discussion of these financial results will be held today, Tuesday, June 21, 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 # 72366780). 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 (14) Six Months

Ended

  Five Months

Ended (14)

May 31, 2011   May 31, 2010 May 31, 2011   May 31, 2010
Revenues:
Commissions $ 129,291 $ 146,001 $ 249,212 $ 228,956
Principal transactions 175,316 153,986 465,468 246,642
Investment banking 328,421 255,958 567,480 352,257
Asset management fees and
investment income from managed funds 10,547 13,929 34,415 11,018
Interest 304,425 243,183 577,641 386,168
Other   22,117       18,983     42,578       27,363  
Total revenues 970,117 832,040 1,936,794 1,252,404
Interest expense   242,952       164,504     451,246       257,234  
Net revenues 727,165 667,536 1,485,548 995,170

Interest on mandatorily redeemable preferred interest of

consolidated subsidiaries   4,415       2,018     20,854       2,513  

Net revenues, less mandatorily redeemable preferred

interest   722,750       665,518     1,464,694       992,657  
 
Non-interest expenses:
Compensation and benefits 431,936 384,311 874,828 568,407
Floor brokerage and clearing fees 31,384 35,509 59,517 54,089
Technology and communications 49,850 41,932 93,525 68,054
Occupancy and equipment rental 20,437 19,056 38,416 31,016
Business development 22,457 15,216 42,395 24,985
Professional services 16,099 11,284 29,375 21,694
Other   20,103       14,530     33,223       27,818  
Total non-interest expenses   592,266       521,838     1,171,279       796,063  
Earnings before income taxes 130,484 143,680 293,415 196,594
Income tax expense   45,784       56,189     106,670       76,403  
Net earnings 84,700 87,491 186,745 120,191
Net earnings to noncontrolling interests   4,084       3,665     18,788       3,994  
Net earnings to common shareholders $ 80,616     $ 83,826   $ 167,957     $ 116,197  
Earnings per common share:
Basic $ 0.36     $ 0.41   $ 0.78     $ 0.57  
Diluted $ 0.36     $ 0.41   $ 0.78     $ 0.57  
 
Weighted average common shares:
Basic 210,751 196,944 205,054 197,759
Diluted 214,870 201,064 209,172 201,881
 
Effective tax rate 35 % 39 % 36 % 39 %
 
 
Jefferies Group, Inc. And Subsidiaries
Selected Statistical Information
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
             
Quarters Ended (14)
  5/31/2011       2/28/2011       11/30/2010       8/31/2010       5/31/2010       3/31/2010  

Statement of Earnings

Net revenues, less mandatorily redeemable preferred

interest $ 722,750 $ 741,944 $ 664,870 $ 519,806 $ 665,518 $ 578,007
 
Non-interest expenses:
Compensation and benefits 431,936 442,892 405,440 308,797 384,311 319,801
Non-compensation expenses   160,330       136,121       135,852       134,511       137,527       135,750  
Earnings before income taxes 130,484 162,931 123,578 76,498 143,680 122,456
Income tax expense   45,784       60,886       46,126       33,873       56,189       46,369  
Net earnings 84,700 102,045 77,452 42,625 87,491 76,087
Net earnings (loss) to noncontrolling interests   4,084       14,704       14,735       (2,129 )     3,665       3,943  
Net earnings to common shareholders $ 80,616     $ 87,341     $ 62,717     $ 44,754     $ 83,826     $ 72,144  
Diluted earnings per common share $ 0.36     $ 0.42     $ 0.31     $ 0.22     $ 0.41     $ 0.35  
 

Financial Ratios

Pretax operating margin 18 % 22 % 19 % 15 % 22 % 21 %
Compensation and benefits / net revenues 59 % 58 % 60 % 60 % 58 % 55 %
Effective tax rate 35 % 37 % 37 % 44 % 39 % 38 %
 
 
Jefferies Group, Inc. And Subsidiaries
Selected Statistical Information
(Amounts in Thousands, Except Per Share Amounts)
(Unaudited)
                   
Quarters Ended (14)
  5/31/2011       2/28/2011       11/30/2010       8/31/2010       5/31/2010       3/31/2010  

Revenues by Source

Equities $

165,076

 

$

177,358

 

$ 155,071 $ 109,280 $

179,505

 

$

174,299

 

Fixed Income   223,121       318,097       227,876       161,010       218,144       200,820  
Total 388,197 495,455 382,947 270,290 397,649 375,119
 
 
Equity 52,039 49,684 48,369 19,151 73,677 34,217
Debt   131,806       62,967       86,814       77,564       109,767       101,846  
Capital markets 183,845 112,651 135,183 96,715 183,444 136,063
Advisory   144,576       126,408       156,701       149,478       72,514       62,274  
Investment banking 328,421 239,059 291,884 246,193 255,958 198,337
 

Asset management fees and investment income / (loss)

from managed funds:
Asset management fees 5,019 16,117 6,083 3,996 7,165 4,017
Investment (loss) / income from managed funds   5,528       7,751       (1,102 )     (3,210 )     6,764       2,582  
Total   10,547       23,868       4,981       786       13,929       6,599  
Net revenues   727,165       758,382       679,812       517,269       667,536       580,055  

Interest on mandatorily redeemable preferred interest

of consolidated subsidiaries

  4,415       16,438       14,942       (2,537 )     2,018       2,048  

Net Revenues, less mandatorily redeemable

preferred interest

$ 722,750     $ 741,944     $ 664,870     $ 519,806     $ 665,518     $ 578,007  
 

Other Data

Number of trading days 64 61 63 65 64 61
Full time employees (end of period) 3,222 3,082 3,084 2,971 2,821 2,729
Common shares outstanding 202,154 177,068 171,694 171,241 171,591 171,845
Weighted average common shares:
Basic 210,751 199,141 194,901 195,601 196,944 198,507
Diluted 214,870 203,257 199,017 195,612 201,064 202,630
 
 
JEFFERIES GROUP, INC. AND SUBSIDIARIES
COMMON SHARES OUTSTANDING AND COMMON SHARES FOR BASIC AND DILUTED EPS CALCULATIONS
(Amounts in Thousands)
(Unaudited)
   
 
May 31, 2011
 
Common shares outstanding 202,154
Outstanding restricted stock units 25,566  
Adjusted shares outstanding 227,720
 

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

 
Three months ended
May 31, 2011 		Six months ended
May 31, 2011
 
Shares outstanding (weighted average) (1) 191,015 183,619
Unearned restricted stock (2) (5,922 ) (5,793 )
Earned restricted stock units (3) 22,815 23,533
Other issuable shares (4) 2,843   3,695  
Common Shares for Basic EPS 210,751 205,054
 
Stock options (5) 11 11
Mandatorily redeemable convertible preferred stock (6) 4,108 4,107
Convertible debt (7) -   -  
Common Shares for Diluted EPS 214,870 209,172
 
(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 (14)
  5/31/2011       2/28/2011       11/30/2010       8/31/2010       5/31/2010       3/31/2010  
 
 
Net earnings to common shareholders $ 80,616 $ 87,341 $ 62,717 $ 44,754 $ 83,826 $ 72,144
Basic EPS (1) $ 0.36 $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35
Diluted EPS (1) $ 0.36 $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35
Effective tax rate 35 % 37 % 37 % 44 % 39 % 38 %
 
Total assets (in millions) (2) $ 40,967 $ 40,428 $ 36,727 $ 32,672 $ 33,145 $ 34,023
Average total assets for quarter (in millions) (2) $ 47,207 $ 42,598 $ 40,184 $ 36,475 $ 36,329 $ 35,976
Cash and cash equivalents (in millions) $ 2,499 $ 1,164 $ 2,189 $ 2,090 $ 994 $ 1,025
Level 3 assets (in millions) (2) (3) $ 718 $ 612 $ 572 $ 486 $ 503 $ 648
Level 3 assets (in millions) with economic exposure (2)(4) $ 483 $ 402 $ 368 $ 370 $ 360 $ 442
Level 3 assets - % total assets (2) 1.8 % 1.5 % 1.6 % 1.5 % 1.5 % 1.9 %
Level 3 assets - % total financial instruments owned (2) 4.0 % 3.4 % 3.6 % 3.4 % 3.7 % 5.0 %

Level 3 assets with economic exposure - % common

stockholders' equity (2)

15.3 % 15.6 % 14.9 % 15.9 % 15.8 % 19.2 %
 
Total common stockholders' equity (in millions) $ 3,165 $ 2,578 $ 2,478 $ 2,326 $ 2,275 $ 2,305
Adjusted common stockholders' equity (in millions) (5) $ 3,347 $ 2,737 $ 2,639 $ 2,469 $ 2,416 $ 2,435
Common book value per share (6) $ 15.66 $ 14.56 $ 14.43 $ 13.58 $ 13.26 $ 13.41
Adjusted book value per share (7) $ 14.70 $ 13.35 $ 13.17 $ 12.36 $ 12.06 $ 12.11
Tangible common book value per share (8) $ 13.83 $ 12.47 $ 12.29 $ 11.44 $ 11.12 $ 11.27
Adjusted tangible book value per share (7) $ 13.07 $ 11.55 $ 11.33 $ 10.52 $ 10.23 $ 10.28
 
Total capitalization (in millions) (9) $ 8,223 $ 7,164 $ 7,031 $ 6,344 $ 5,749 $ 5,808
Leverage ratio (2) (10) 11.7 13.8 13.1 12.4 12.8 12.9
Adjusted leverage ratio (2) (11) 12.5 14.4 13.2 12.2 12.3 11.3
 
Average firmwide VaR (in millions) (12) $ 12.68 $ 10.51 6.45 8.64 8.25 11.21
 
Common shares outstanding 202,154 177,068 171,694 171,241 171,591 171,845
Adjusted shares outstanding (13) 227,720 205,046 200,429 199,867 200,286 201,101
Share issued during quarter 25,376 7,084 1,888 372 1,659 8,682
Shares purchased during the quarter 158 1,482 1,082 525 1,620 2,474
 
Number of employees 3,222 3,082 3,084 2,971 2,821 2,729
 
   
Footnotes (14)
           
(1) The following details the calculation of basic and diluted earnings per share as included in our quarterly and annual reports.
 
Quarters Ended
  5/31/2011     2/28/2011     11/30/2010     8/31/2010       5/31/2010       3/31/2010
Earnings for basic earnings per common share:
Net earnings $ 84,700 $ 102,045 $ 77,452 $ 42,625 $ 87,491 $ 76,087
Net earnings (loss) to noncontrolling interests   4,084     14,704     14,735     (2,129 )     3,665       3,943
Net earnings to common shareholders 80,616 87,341 62,717 44,754 83,826 72,144
Less: Allocation of earnings to participating securities (A)   3,756     3,925     2,650     1,674       2,842       2,108
Net earnings available to common shareholders $ 76,860   $ 83,416   $ 60,067   $ 43,080     $ 80,984     $ 70,036
Earnings for diluted earnings per common share:
Net earnings $ 84,700 $ 102,045 $ 77,452 $ 42,625 $ 87,491 $ 76,087
Net earnings (loss) to noncontrolling interests   4,084     14,704     14,735     (2,129 )     3,665       3,943
Net earnings to common shareholders 80,616 87,341 62,717 44,754 83,826 72,144
Add: Convertible preferred stock dividends (B) 1,016 1,016 1,016 - 1,016 1,016
Less: Allocation of earnings to participating securities (A)   3,748     3,907     2,653     1,674       2,830       2,104
Net earnings available to common shareholders $ 77,884   $ 84,450   $ 61,080   $ 43,080     $ 82,012     $ 71,056
Weighted Average Common Shares:
Basic 210,751 199,141 194,901 195,601 196,944 198,507
Diluted 214,870 203,257 199,017 195,612 201,064 202,630
Earnings per common share:
Basic $ 0.36 $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35
Diluted $ 0.36 $ 0.42 $ 0.31 $ 0.22 $ 0.41 $ 0.35
  (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 10,260,000, 9,403,000, 8,599,000, 7,661,000, 6,780,000 and 5,815,000 for the three months ended May 31, 2011, February 28, 2011, November 30, 2010, August 31, 2010, May 31, 2010 and March 31, 2010, respectively. Dividends declared on participating securities during the three months ended May 31, 2011, February 28, 2011, November, 30, 2010, August 31, 2010, May 31, 2010 and March 31, 2010 amounted to approximately $794,000, $686,000, $632,000, $559,000, $568,000 and $494,000, 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 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 period ended May 31, 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 $235.2 million at May 31, 2011, 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 assets with economic exposure represents Level 3 assets adjusted for Level 3 assets that are either financed by nonrecourse secured financings or attributable to third party or employee noncontrolling interests in certain consolidated subsidiaries.
 
(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 May 31, 2011, unrecognized compensation cost related to nonvested share based awards was $181,313. 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 May 31, 2011, goodwill and identifiable intangible assets equals $369,844. 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 May 31, 2011, tangible common stockholders' equity equals total common stockholders' equity of $3,165,281 less goodwill and identifiable intangible assets of $369,844. 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 capitalization 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 May 31, 2011 is reduced by the amount of debt maturing in less than one year.
 
(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 indentifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). As of May 31, 2011, adjusted assets were $39,144.2 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 "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.
 
(13) Adjusted shares outstanding equals common shares outstanding plus outstanding restricted stock units.
 
(14) 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 2010 quarters. 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