Jefferies Reports First Quarter 2012 Financial Results

NEW YORK & LONDON--()--Jefferies Group, Inc. (NYSE: JEF) announced today financial results for its fiscal first quarter ended February 29, 2012.

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,
2012

  November 30,
2011
 

August 31,
2011

 

May 31,
2011

  February 28,
2011
  November 30,
2010

Statement of Earnings

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,
2011

  February 28,
2011
  November 30,
2010

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
COMMON SHARES OUTSTANDING AND COMMON SHARES FOR BASIC AND DILUTED EPS CALCULATIONS
(Amounts in Thousands)
(Unaudited)

   

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
February 29, 2012

 
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)
           
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
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)
                                         

Three Months
Ended
Feb 29, 2012

     

Debt Accounting
Gain and Certain
Acquisition Items

     

Three Months Ended
(Excluding Debt
Accounting Gain and
Certain Acquisition
Items)
Feb 29, 2012

Three Months
Ended
Nov 30, 2011

     

Debt Accounting
Gain and Certain
Acquisition Items

     

Three Months Ended
(Excluding Debt
Accounting Gain and
Certain Acquisition
Items)
Nov 30, 2011

Twelve Months
Ended
Nov 30, 2011

     

Debt Accounting
Gain and Certain
Acquisition Items

     

Twelve Months Ended
(Excluding Debt
Accounting Gain and
Certain Acquisition
Items)
Nov 30, 2011

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.

Contacts

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

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Contacts

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