-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oc4PZno0cGjW6V0ERIr4AEqnfV2zyuxw9RkaOm4q3158XapOUy0fRRi59e5FtqJP yjzKGYuXH11/m58U2/xM1A== /in/edgar/work/20000811/0000950148-00-001684/0000950148-00-001684.txt : 20000921 0000950148-00-001684.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950148-00-001684 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEFFERIES GROUP INC /DE/ CENTRAL INDEX KEY: 0001084580 STANDARD INDUSTRIAL CLASSIFICATION: [6211 ] IRS NUMBER: 954719745 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14947 FILM NUMBER: 692594 BUSINESS ADDRESS: STREET 1: 11100 SANTA MONICA BLVD CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: 3104451199 MAIL ADDRESS: STREET 1: 11100 SANTA MONICA BLVD CITY: LOS ANGELES STATE: CA ZIP: 90025 FORMER COMPANY: FORMER CONFORMED NAME: JEF HOLDING CO INC DATE OF NAME CHANGE: 19990419 10-Q 1 e10-q.txt FORM 10-Q; QUARTERLY REPORT DATED 6/30/00 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 -------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ----------- Commission file number 1-14947 JEFFERIES GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 95-4719745 - -------------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11100 Santa Monica Blvd., Los Angeles, California 90025 - ----------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 445-1199 --------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of June 30, 2000, the registrant had 24,284,119 common shares, $.0001 par value, outstanding. Page 1 of 18 2 JEFFERIES GROUP, INC. AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q JUNE 30, 2000
Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition - June 30, 2000 (unaudited) and December 31, 1999.............................. 3 Consolidated Statements of Earnings (unaudited) - Three Months and Six Months Ended June 30, 2000 and June 25, 1999............ 4 Consolidated Statement of Changes in Stockholders' Equity (unaudited) - Six Months Ended June 30, 2000............................................... 5 Consolidated Statements of Cash Flows (unaudited) - Six Months Ended June 30, 2000 and June 25, 1999............................. 6 Notes to Consolidated Financial Statements (unaudited)......................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 14 Item 4. Submission of Matters to a Vote of Security Holders............................ 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings.............................................................. 17 Item 6. Exhibits and Reports on Form 8-K............................................... 17
Page 2 of 18 3 JEFFERIES GROUP, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, December 31, 2000 1999 -------------------- -------------------- ASSETS (unaudited) Cash and cash equivalents................................. $ 94,032 $ 77,197 Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations................................. 63,010 18,317 Receivable from brokers and dealers....................... 3,292,141 1,965,469 Receivable from customers, officers and directors......... 216,856 226,449 Securities owned.......................................... 274,888 376,506 Investments............................................... 130,502 119,100 Premises and equipment.................................... 37,842 39,117 Other assets.............................................. 75,995 74,097 -------------------- -------------------- $ 4,185,266 $ 2,896,252 ==================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY Bank loans................................................ $ 77,000 $ -- Payable to brokers and dealers............................ 2,818,172 1,663,955 Payable to customers...................................... 313,357 271,811 Securities sold, not yet purchased........................ 193,346 186,420 Accrued expenses and other liabilities.................... 210,512 228,004 -------------------- -------------------- 3,612,387 2,350,190 Long-term debt............................................ 149,533 149,485 -------------------- -------------------- 3,761,920 2,499,675 -------------------- -------------------- STOCKHOLDERS' EQUITY: Preferred stock, $.0001 par value. Authorized 10,000,000 shares; none issued........................ -- -- Common stock, $.0001 par value. Authorized 100,000,000 shares; issued 24,687,758 shares in 2000 and 24,027,899 shares in 1999......................... 2 2 Additional paid-in capital.............................. 73,040 62,367 Retained earnings....................................... 359,706 334,742 Less: Treasury stock, at cost, 403,639 shares in 2000 and 28,012 shares in 1999............................... (8,518) (587) Accumulated other comprehensive income (loss): Currency translation adjustments.................... (701) 236 Additional minimum pension liability................ (183) (183) -------------------- -------------------- Total accumulated other comprehensive income (loss)... (884) 53 -------------------- -------------------- Total stockholders' equity........................ 423,346 396,577 -------------------- -------------------- $ 4,185,266 $ 2,896,252 ==================== ====================
See accompanying unaudited notes to consolidated financial statements. Page 3 of 18 4 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended -------------------------------- --------------------------------- June 30, June 25, June 30, June 25, 2000 1999 2000 1999 -------------- -------------- -------------- -------------- Revenues: Commissions......................... $ 54,070 $ 49,698 $ 112,650 $ 99,383 Principal transactions.............. 59,037 58,615 138,420 114,889 Corporate finance................... 19,657 35,984 34,874 50,292 Interest ........................... 46,962 28,943 84,651 56,142 Asset management.................... 2,214 979 4,308 979 Other .............................. 678 1,110 2,475 2,322 -------------- -------------- -------------- -------------- Total revenues........................ 182,618 175,329 377,378 324,007 Interest expense...................... 38,277 24,866 69,376 47,440 -------------- -------------- -------------- -------------- Revenues, net of interest expense..... 144,341 150,463 308,002 276,567 -------------- -------------- -------------- -------------- Non-interest expenses: Compensation and benefits........... 87,530 91,892 188,217 167,513 Floor brokerage and clearing fees... 9,309 8,301 18,765 16,165 Communications...................... 11,598 10,898 23,710 21,095 Occupancy and equipment rental...... 4,605 3,785 9,165 7,125 Travel and promotional.............. 4,960 4,135 9,762 7,593 Other............................... 4,958 6,405 10,801 11,659 -------------- -------------- -------------- -------------- Total non-interest expenses........... 122,960 125,416 260,420 231,150 -------------- -------------- -------------- -------------- Earnings before income taxes.......... 21,381 25,047 47,582 45,417 Income taxes.......................... 9,009 10,270 20,186 18,974 -------------- -------------- -------------- -------------- Earnings from continuing operations... 12,372 14,777 27,396 26,443 Earnings from discontinued operations, net of income taxes..... -- 6,192 -- 11,147 -------------- -------------- -------------- -------------- Net earnings.......................... $ 12,372 $ 20,969 $ 27,396 $ 37,590 ============== ============== ============== ============== Earnings per share: Basic: Continuing operations............. $ 0.51 $ 0.62 $ 1.14 $ 1.12 Discontinued operations........... -- 0.26 -- 0.47 -------------- -------------- -------------- -------------- Net earnings...................... $ 0.51 $ 0.88 $ 1.14 $ 1.59 ============== ============== ============== ============== Diluted: Continuing operations............. $ 0.51 $ 0.61 $ 1.13 $ 1.11 Discontinued operations........... -- 0.26 -- 0.45 -------------- -------------- -------------- -------------- Net earnings...................... $ 0.51 $ 0.87 $ 1.13 $ 1.56 ============== ============== ============== ============== Weighted average shares: Basic............................... 24,052 23,936 24,000 23,576 Diluted............................. 24,258 24,114 24,217 23,808
See accompanying unaudited notes to consolidated financial statements. Page 4 of 18 5 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2000 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Accumulated Total Additional Other Stock- Common Paid-in Retained Treasury Comprehensive holders' Stock Capital Earnings Stock Income (Loss) Equity ---------------------------------------------------------------------------------- Balance, December 31, 1999.............. $2 $62,367 $334,742 $(587) $53 $396,577 Exercise of stock options, including tax benefits (66,354 shares)................ -- 1,274 -- -- -- 1,274 Purchase of treasury stock (375,627 shares)............... -- -- -- (7,931) -- (7,931) Issuance of common stock (182,461 shares)............... -- 3,402 -- -- -- 3,402 Issuance of restricted stock (411,044 shares), net of forfeitures, and additional vesting of restricted stock shares, including tax benefits. -- 5,269 -- -- -- 5,269 Employee stock ownership plan amortization and stock purchases, net................. -- 728 -- -- -- 728 Quarterly dividends ($.05 per share per quarter)... -- -- (2,432) -- -- (2,432) Comprehensive income: Net earnings.................. -- -- 27,396 -- -- 27,396 Other comprehensive income (loss), net of tax: Translation adjustment........ -- -- -- -- (937) (937) --------- Comprehensive income............ -- -- -- -- -- 26,459 ---------------------------------------------------------------------------------- Balance, June 30, 2000................. $2 $73,040 $359,706 $ (8,518) $(884) $423,346 ==================================================================================
See accompanying unaudited notes to consolidated financial statements Page 5 of 18 6 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
Six Months Ended ------------------------------------- June 30, June 25, 2000 1999 ---------------- ---------------- Cash flows from operating activities: Net earnings............................................ $ 27,396 $ 37,590 ---------------- ---------------- Adjustments to reconcile net earnings to net cash used in operations: Depreciation and amortization......................... 5,697 4,473 (Increase) decrease in cash and securities segregated and on deposit for regulatory purposes.............. (44,693) 45,267 (Increase) decrease in receivables: Brokers and dealers................................. (1,326,672) (911,414) Customers, officers and directors................... 9,593 (92,444) (Increase) decrease in securities owned............... 101,618 (120,409) Increase in investments............................... (11,402) (7,254) Increase in investment in discontinued operations..... -- 41,534 Increase in other assets.............................. (1,898) (28,871) Increase in operating payables: Brokers and dealers................................. 1,154,217 995,949 Customers........................................... 41,546 (3,882) Increase in securities sold, not yet purchased........ 6,926 52,573 Decrease in accrued expenses and other liabilities.... (17,492) (67,637) ---------------- ---------------- Total adjustments.............................. (82,560) (92,115) ---------------- ---------------- Net cash used in operating activities.......... (55,164) (54,525) ---------------- ----------------
Continued on next page. See accompanying unaudited notes to consolidated financial statements. Page 6 of 18 7 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED) (DOLLARS IN THOUSANDS) Six Months Ended ------------------------------------ June 30, June 25, 2000 1999 ---------------- ---------------- Cash flows from financing activities: Net proceeds from (payments on): Bank loans................................................ 77,000 (21,000) Repurchase of treasury stock.............................. (7,931) (17,000) Dividends paid............................................ (2,432) (2,343) Exercise of stock options................................. 1,274 27,710 Issuance of common stock shares........................... 3,402 -- Issuance of restricted stock.............................. 5,269 6,570 Employee Stock Ownership Plan stock purchases............. (349) -- Capital Accumulation Plan distributions................... -- 55,072 Change in proportionate share of subsidiary's equity...... -- 1,121 ---------------- ---------------- Net cash provided by financing activities.............. 76,233 50,130 ---------------- ---------------- Cash flows from investing activities - purchase of premises and equipment............................. (3,297) (7,603) ---------------- ---------------- Effect of foreign currency translation on cash................... (937) (640) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents... 16,835 (12,638) Cash and cash equivalents - beginning of period.................. 77,197 55,581 ---------------- ---------------- Cash and cash equivalents - end of period........................ $ 94,032 $ 42,943 ================ ================ Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest..................................................... $ 66,786 $ 45,783 ================ ================ Income taxes................................................. $ 1,051 $ 8,701 ================ ================
See accompanying unaudited notes to consolidated financial statements. Page 7 of 18 8 JEFFERIES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements include the accounts of Jefferies Group, Inc. ("Group") and all its subsidiaries ("Company"), including Jefferies & Company, Inc. ("JEFCO"). The accounts of Investment Technology Group, Inc. and all its subsidiaries (collectively "ITGI"), including its wholly owned subsidiary, ITG Inc. are included in the financial statements as discontinued operations. The accounts of W & D Securities, Inc. ("W & D") are consolidated because of the nature and extent of Group's ownership interest in W & D. The Company is primarily engaged in a single line of business, as a securities broker-dealer, which includes several types of services, such as principal and agency transactions in equity, convertible debt and high yield securities, as well as corporate finance activities. All significant intercompany accounts and transactions are eliminated in consolidation. The consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for the fair statement of the results for the interim periods and should be read in conjunction with the Company's annual report for the year ended December 31, 1999. SECURITIES TRANSACTIONS All transactions in securities, commission revenues and related expenses are recorded on a trade-date basis. Securities owned and securities sold, not yet purchased, are valued at market, and unrealized gains or losses are reflected in revenues from principal transactions. RECLASSIFICATIONS Certain reclassifications have been made to the prior period's amounts to conform to the current period's presentation. RECEIVABLE FROM, AND PAYABLE TO, BROKERS AND DEALERS Receivable from and payable to brokers and dealers consists of the following as of June 30, 2000 (in thousands of dollars): Receivable from brokers and dealers: Securities borrowed.............................. $ 3,060,279 Securities purchased under agreements to resell.. 2,597 Other............................................ 229,265 -------------- $ 3,292,141 ============== Payable to brokers and dealers: Securities loaned................................ $ 2,722,237 Securities sold under agreements to repurchase... 2,597 Other............................................ 93,338 -------------- $ 2,818,172 ==============
Page 8 of 18 9 JEFFERIES GROUP, INC. AND SUBSIDIARIES SECURITIES OWNED AND SECURITIES SOLD, NOT YET PURCHASED The following is a summary of the market value of major categories of securities owned and securities sold, not yet purchased, as of June 30, 2000 (in thousands of dollars):
Securities Sold, Securities Not Yet Owned Purchased ---------------- ---------------- Corporate equity securities.......................... $ 156,126 $ 184,440 High-yield securities................................ 70,146 6,714 Corporate debt securities............................ 43,983 1,338 U.S. Government and agency obligations............... 3,403 -- Options.............................................. 1,230 854 ---------------- ---------------- $ 274,888 $ 193,346 ================ ================
INVESTMENTS Investments consist of the following as of June 30, 2000 (in thousands of dollars): Debt and equity investments.......................... $ 21,620 Partnership interests................................ 63,542 Equity and debt interests in affiliates.............. 45,340 ---------------- $ 130,502 ================
CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in banks and short term investments. Cash equivalents are part of the cash management activities of the Company and generally mature within 90 days. The following is a summary of cash and cash equivalents as of June 30, 2000 (in thousands of dollars): Cash in banks........................................ $ 90,040 Short term investments............................... 3,992 ---------------- $ 94,032 ================
Page 9 of 18 10 JEFFERIES GROUP, INC. AND SUBSIDIARIES EARNINGS PER SHARE The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the three month and six month periods ended June 30, 2000 and June 25, 1999 (in thousands, except per share amounts):
Three Months Ended Six Months Ended ------------------------------- ------------------------------- June 30, June 25, June 30, June 25, 2000 1999 2000 1999 ------------- -------------- ------------- -------------- Earnings from continuing operations..... $ 12,372 $ 14,777 $ 27,396 $ 26,443 Earnings from discontinued operations... -- 6,192 -- 11,147 ------------- -------------- ------------- -------------- Net earnings for basic earnings per share 12,372 20,969 27,396 37,590 Adjustment - stock options on subsidiary -- (35) -- (420) ------------- -------------- ------------- -------------- Adjusted earnings - diluted calculation. $ 12,372 $ 20,934 $ 27,396 $ 37,170 ============= ============== ============= ============== Shares for basic and diluted calculations: Average number of common shares......... 24,052 23,936 24,000 23,568 Capital Accumulation Plan unissued shares -- -- -- 8 ------------- -------------- ------------- -------------- Average shares used in basic computation 24,052 23,936 24,000 23,576 Stock options........................... 147 166 155 208 Other unissued common stock equivalents. 59 12 62 24 ------------- -------------- ------------- -------------- Average shares used in diluted computation............................. 24,258 24,114 24,217 23,808 ============= ============== ============= ============== Earnings per share: Basic: Earnings from continuing operations..... $ 0.51 $ 0.62 $ 1.14 $ 1.12 Earnings from discontinued operations... -- 0.26 -- 0.47 ------------- -------------- ------------- -------------- Net earnings............................ $ 0.51 $ 0.88 $ 1.14 $ 1.59 ============= ============== ============= ============== Diluted: Earnings from continuing operations..... $ 0.51 $ 0.61 $ 1.13 $ 1.11 Earnings from discontinued operations... -- 0.26 -- 0.45 ------------- -------------- ------------- -------------- Net earnings............................ $ 0.51 $ 0.87 $ 1.13 $ 1.56 ============= ============== ============= ==============
ASSET MANAGEMENT The following summarizes revenues from asset management for the three month and six month periods ended June 30, 2000 and June 25, 1999 (in thousands, except per share amounts):
Three Months Ended Six Months Ended -------------------------------------- ------------------------------------- June 30, June 25, June 30, June 25, 2000 1999 2000 1999 ----------------- ----------------- ---------------- ---------------- HIGH YIELD $ $ $ $ Performance based.... 1,509 -- 3,010 -- Asset based.......... 349 -- 427 -- INTERNATIONAL........ 356 979 871 979 ---------------- ---------------- --------------- --------------- Total .............. $ 2,214 $ 979 $ 4,308 $ 979 ================ ================ =============== ===============
OTHER COMPREHENSIVE INCOME The following summarizes other comprehensive income and accumulated other comprehensive income at June 30, 2000 and for the three months then ended (in thousands of dollars): Page 10 of 18 11 JEFFERIES GROUP, INC. AND SUBSIDIARIES
Before-Tax Income Tax Net-of-Tax Amount or Benefit Amount ------------------ ---------------- ----------------- Currency translation adjustments............ $ (771) $ -- $ (771) Minimum pension liability adjustment........ -- -- -- ------------------ ---------------- ----------------- Other comprehensive income (loss)........... $ (771) $ -- $ (771) ================== ================ ================= Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustments Adjustment Income (Loss) ------------------ ---------------- ------------------ Beginning at March 31, 2000................. $ 70 $ (183) $ (113) Change in second quarter of 2000............ (771) -- (771) ------------------ ---------------- ------------------ Ending at June 30, 2000..................... $ (701) $ (183) $ (884) ================== ================ ==================
The following summarizes other comprehensive income and accumulated other comprehensive income at June 25, 1999 and for the three months then ended (in thousands of dollars):
Before-Tax Income Tax Net-of-Tax Amount or Benefit Amount ------------------- ----------------- ------------------ Currency translation adjustments............ $ (187) $ -- $ (187) Minimum pension liability adjustment........ -- -- -- ------------------- ----------------- ------------------ Other comprehensive income (loss)........... $ (187) $ -- $ (187) =================== ================= ==================
Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustments Adjustment Income (Loss) ------------------- ------------------ ------------------ Beginning at March 26, 1999................. $ (502) $ (1,669) $ (2,171) Change in second quarter of 1999............ (187) -- (187) ------------------- ------------------ ------------------ Ending at June 25, 1999..................... $ (689) $ (1,669) $ (2,358) =================== ================== ==================
Comprehensive income for the three months ended June 30, 2000 and June 25, 1999 was as follows:
June 30, June 25, 2000 1999 ------------------- ------------------- Net earnings................................ $ 12,372 $ 20,969 Other comprehensive income.................. (771) (187) ------------------- ------------------- Comprehensive income........................ $ 11,601 $ 20,782 =================== ===================
The following summarizes other comprehensive income and accumulated other comprehensive income at June 30, 2000 and for the six months then ended (in thousands of dollars):
Before-Tax Income Tax Net-of-Tax Amount or Benefit Amount ------------------- ----------------- ------------------ Currency translation adjustments............ $ (937) $ -- $ (937) Minimum pension liability adjustment........ -- -- -- ------------------- ----------------- ------------------ Other comprehensive income (loss)........... $ (937) $ -- $ (937) =================== ================= ==================
Page 11 of 18 12 JEFFERIES GROUP, INC. AND SUBSIDIARIES
Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustments Adjustment Income (Loss) ------------------- ----------------- ------------------- Beginning at December 31, 1999.............. $ 236 $ (183) $ 53 Change in first half of 2000................ (937) -- (937) ------------------- ----------------- ------------------- Ending at June 30, 2000..................... $ (701) $ (183) $ (884) =================== ================= ===================
The following summarizes other comprehensive income and accumulated other comprehensive income at June 25, 1999 and for the six months then ended (in thousands of dollars):
Before-Tax Income Tax Net-of-Tax Amount or Benefit Amount ------------------- ----------------- ------------------ Currency translation adjustments............ $ (640) $ -- $ (640) Minimum pension liability adjustment........ -- -- -- ------------------- ----------------- ------------------ Other comprehensive income (loss)........... $ (640) $ -- $ (640) =================== ================= ================== Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustments Adjustment Income (Loss) ------------------- ------------------ ------------------ Beginning at December 31, 1998.............. $ (49) $ (1,669) $ (1,718) Change in first half of 1999................ (640) -- (640) ------------------- ------------------ ------------------ Ending at June 25, 1999..................... $ (689) $ (1,669) $ (2,358) =================== ================== ==================
Comprehensive income for the six months ended June 30, 2000 and June 25, 1999 was as follows:
June 30, June 25, 2000 1999 ------------------- ------------------- Net earnings................................ $ 27,396 $ 37,590 Other comprehensive income.................. (937) (640) ------------------- ------------------- Comprehensive income........................ $ 26,459 $ 36,950 =================== ===================
NET CAPITAL REQUIREMENTS As registered broker-dealers, JEFCO and W & D are subject to the Securities and Exchange Commission's Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. JEFCO and W & D have elected to use the alternative method permitted by the Rule, which requires that they each maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of the aggregate debit balances arising from customer transactions, as defined. Net capital changes from day to day, but as of June 30, 2000, JEFCO's and W & D's net capital was $207.3 million and $2.3 million, respectively, which exceeded minimum net capital requirements by $201.2 million and $2.0 million, respectively. Page 12 of 18 13 JEFFERIES GROUP, INC. AND SUBSIDIARIES QUARTERLY DIVIDENDS In 1988, the Company instituted a policy of paying regular quarterly dividends. There are no restrictions on the Company's present ability to pay dividends on common stock, other than the governing provisions of the Delaware General Corporation Law. Dividends per Common Share (declared and paid): 1st Qtr. 2nd Qtr. -------- -------- 2000....... $.05 $.05 1999....... $.05 $.05 OFF-BALANCE SHEET RISK In the normal course of business, the Company had letters of credit outstanding aggregating $33.0 million at June 30, 2000, to satisfy various collateral requirements in lieu of depositing cash or securities. SEGMENT REPORTING The Company's business is predominantly in the United States with approximately 8% of revenues and 2% of assets attributable to international operations. On April 27, 1999, Group and ITGI consummated the separation of ITGI from the other Group businesses. Financial information for the discontinued business segment is summarized as follows (in thousands of dollars): COMPONENTS OF DISCONTINUED OPERATIONS OF ITGI
THREE MONTHS SIX MONTHS ENDED ENDED ----------------- ----------------- JUNE 25, 1999 JUNE 25, 1999 ----------------- ----------------- Net earnings of ITGI.............................. $ 779 $ 9,137 Deferred taxes on ITGI's IPO gain................. 12,843 12,843 Less: Write-off of goodwill on JEF related to ITGI 5,207 5,207 Less: Company's net spin-off related expenses..... 2,071 3,848 Less: Minority interest in ITGI................... 152 1,778 ----------------- ----------------- Discontinued operations of ITGI................... $ 6,192 $ 11,147 ================= =================
Cash paid for interest and income taxes The interest paid and income taxes paid amounts included in the Consolidated Statements of Cash Flows included amounts related to discontinued operations of ITGI (in thousands of dollars). JUNE 25, 1999 ---------------- Interest paid................................... $ 31 Income taxes paid............................... $ 6,538
Page 13 of 18 14 JEFFERIES GROUP, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ANALYSIS OF FINANCIAL CONDITION Total assets increased $1,289.0 million from $2,896.3 million at December 31, 1999 to $4,185.3 million at June 30, 2000. The increase in assets is mostly due to an increase in the balances associated with JEFCO's securities borrowed and loaned matched book business. SECOND QUARTER 2000 VERSUS SECOND QUARTER 1999 Revenues, net of interest expense, decreased 4% to $144.3 million, compared to $150.5 million for the second quarter of 1999. The decrease was due primarily to a $16.3 million, or 45%, decrease in corporate finance, partially offset by a $4.6 million, or 113%, increase in net interest income (interest revenues less interest expense), a $4.4 million, or 9%, increase in commissions, a $1.2 million, or 126%, increase in asset management and a $422,000, or 1%, increase in principal transactions. Commissions and principal transactions revenue increased mostly due to the International and Equities Divisions. Corporate finance revenues decreased due to a reduction in high yield debt underwritings. Net interest income was up mostly due to increased interest income on proprietary securities positions and from securities borrowed. Asset management increased due to the Opportunity Funds, two of which began trading in January 2000. Other income decreased due to a decrease in correspondent revenues. Total non-interest expenses decreased 2% to $123.0 million, compared to $125.4 million for the second quarter of 1999. Compensation and benefits decreased $4.4 million, or 5%, mostly due to a decrease in incentive based compensation accruals. Other expense decreased $1.4 million or 23%, primarily due to a reduction in general litigation expenses. Floor brokerage and clearing fees increased $1.0 million, or 12%, due to increased volume of business executed on the various exchanges. Travel and promotional increased $825,000, or 20%, primarily due to increased business travel. Occupancy and equipment rental increased $820,000, or 22%, mostly due to higher office rental expenses. Communications increased $700,000, or 6%, due mostly to increased trade volume. Earnings before income taxes were down 15% to $21.4 million, compared to $25.0 million for the same prior year period. The effective tax rate was approximately 42% for the second quarter of 2000 compared to 41% for the second quarter of 1999. Earnings from continuing operations were down $2.4 million to $12.4 million, compared to $14.8 million for the same prior year period. Earnings from discontinued operations, net of income taxes, amounted to zero in the second quarter of 2000, due to the cessation of ITGI as a subsidiary of the Company in April 1999. Basic earnings from continuing operations per share were $0.51 for the second quarter of 2000 on 24,052,000 shares compared to $0.62 in the 1999 period on 23,936,000 shares. Diluted earnings from continuing operations per share were $0.51 for the second quarter of 2000 on 24,258,000 shares compared to $0.61 in the comparable 1999 period on 24,114,000 shares. Basic net earnings per share were $0.51 for the second quarter of 2000 on 24,052,000 shares compared to $0.88 in the 1999 period on 23,936,000 shares. Diluted net earnings per share were $0.51 for the second quarter of 2000 on 24,258,000 shares compared to $0.87 in the comparable 1999 period on 24,114,000 shares. FIRST HALF 2000 VERSUS FIRST HALF 1999 Revenues, net of interest expense, increased 11% to $308.0 million, compared to $276.6 million for the first half of 1999. The increase was due primarily to a $23.5 million, or 20%, increase in principal transactions, a $13.3 million, or 13%, increase in commissions, a $6.6 million, or 76%, increase in net interest income (interest revenues less interest expense), a $3.3 million, or 340%, increase in asset management, partially offset by a $15.4 million, or 31%, decrease in corporate finance. Commissions and principal transactions revenue increased mostly due to the Page 14 of 18 15 JEFFERIES GROUP, INC. AND SUBSIDIARIES Equities and International Divisions. Corporate finance revenues decreased due to a reduction in high yield debt underwritings. Net interest income was up mostly due to increased interest income on proprietary securities positions. Asset management increased due to the Opportunity Funds, two of which began trading in January 2000. Other income remained relatively unchanged. Total non-interest expenses increased 13% to $260.4 million, compared to $231.2 million for the first half of 1999. Compensation and benefits increased $20.7 million, or 12%, mostly due to an increase in incentive based compensation accruals. Communications increased $2.6 million, or 12%, due mostly to increased trade volume. Floor brokerage and clearing fees increased $2.6 million, or 16%, due to increased volume of business executed on the various exchanges. Travel and promotional increased $2.2 million, or 29%, primarily due to higher expenses associated with account executive T&Es and customer events. Occupancy and equipment rental increased $2.0 million, or 29%, mostly due to higher office rental expenses. Other expense decreased $858,000, or 7%, primarily due to a reduction in general litigation expenses. Earnings before income taxes were up 5% to $47.6 million, compared to $45.4 million for the same prior year period. The effective tax rate was approximately 42% for both the first half of 2000 and 1999. Earnings from continuing operations were up $1.0 million to $27.4 million, compared to $26.4 million for the same prior year period. Earnings from discontinued operations, net of income taxes, amounted to zero in the first half of 2000, due to the cessation of ITGI as a subsidiary of the Company in April 1999. Basic earnings from continuing operations per share were $1.14 for the first half of 2000 on 24,000,000 shares compared to $1.12 in the 1999 period on 23,576,000 shares. Diluted earnings from continuing operations per share were $1.13 for the first half of 2000 on 24,217,000 shares compared to $1.11 in the comparable 1999 period on 23,808,000 shares. Basic net earnings per share were $1.14 for the first half of 2000 on 24,000,000 shares compared to $1.59 in the 1999 period on 23,576,000 shares. Diluted net earnings per share were $1.13 for the first half of 2000 on 24,217,000 shares compared to $1.56 in the comparable 1999 period on 23,808,000 shares. LIQUIDITY AND CAPITAL RESOURCES During June 2000, JEFCO terminated its NASD Regulation, Inc. - approved $120 million revolving credit facility. There have been no borrowings against the revolving credit facility in either 2000 or 1999. Page 15 of 18 16 JEFFERIES GROUP, INC. AND SUBSIDIARIES REVENUES BY SOURCE The following provides a breakdown of total revenues by source for the three months and six months ended June 30, 2000 and June 25, 1999.
Three Months Ended -------------------------------------------------------------- June 30, 2000 June 25, 1999 ---------------------------- ----------------------------- % of % of Total Total Amount Revenues Amount Revenues ------ -------- --------- -------- (Dollars in thousands) Commissions and principal transactions: Equities................................ $ 77,450 43% $ 73,678 42% International........................... 19,764 11 11,523 6 High Yield.............................. 7,928 4 16,437 9 Convertible............................. 6,060 3 5,207 3 Other proprietary trading............... 1,905 1 1,468 1 ------------- ------ ---------- ------- Total................................... 113,107 62 108,313 61 Corporate finance........................... 19,657 11 35,984 21 Interest.................................... 46,962 26 28,943 16 Asset management............................ 2,214 1 979 1 Other....................................... 678 -- 1,110 1 ------------- ------ ---------- ------- Total revenues.......................... $ 182,618 100% $ 175,329 100% ============= ====== ========== ======= Six Months Ended -------------------------------------------------------------- June 30, 2000 June 25, 1999 ----------------------------- ----------------------------- % of % of Total Total Amount Revenues Amount Revenues ------ -------- ------------ -------- (Dollars in thousands) Commissions and principal transactions: Equities................................ $ 169,559 45% $ 142,420 44% International........................... 44,517 12 26,329 8 High Yield.............................. 20,616 6 30,798 10 Convertible............................. 13,042 3 10,403 3 Other proprietary trading............... 3,336 1 4,322 1 ------------- ------ ----------- ------ Total................................... 251,070 67 214,272 66 Corporate finance........................... 34,874 9 50,292 16 Interest.................................... 84,651 22 56,142 17 Asset management............................ 4,308 1 979 -- Other....................................... 2,475 1 2,322 1 ------------- ------ ----------- ------ Total revenues.......................... $ 377,378 100% $ 324,007 100% ============= ====== =========== ======
Page 16 of 18 17 JEFFERIES GROUP, INC. AND SUBSIDIARIES ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) Date of Meeting -- May 26, 2000 Type of Meeting -- Annual Meeting of Shareholders (b) Not applicable (c)(1) At the meeting, with respect to the matters under consideration, the following votes were cast in the following manner:
For Withheld Non-vote --- -------- -------- ELECTION OF DIRECTORS Frank E. Baxter ............................ 21,014,367 38,251 -- W. Patrick Campbell......................... 20,850,037 202,581 -- Richard G. Dooley........................... 21,012,665 39,953 -- Richard B. Handler.......................... 21,012,440 40,178 -- Sheldon B. Lubar............................ 21,012,665 39,953 -- Frank J. Macchiarola........................ 21,015,315 37,303 -- John C. Shaw, Jr............................ 21,014,467 38,151 --
(d) Not applicable PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Many aspects of the Company's business involve substantial risks of liability. In the normal course of business, the Company and its subsidiaries have been named as defendants or co-defendants in lawsuits involving primarily claims for damages. The Company's management believes that pending litigation will not have a material adverse effect on the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K. None. Page 17 of 18 18 JEFFERIES GROUP, INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JEFFERIES GROUP, INC. -------------------------- (Registrant) Date: August 11, 2000 By: /s/ Joseph A. Schenk -------------------- ----------------------------- Joseph A. Schenk Chief Financial Officer Page 18 of 18 EX-27 2 ex27.txt FINANCIAL DATAT SCHEDULE
BD THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AND THE CONSOLIDATED STATEMENTS OF EARNINGS AS OF JUNE 30, 2000 AND FOR THE SIX MONTHS THEN ENDED AND THE NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS FILED IN THE 2000 JEFFERIES GROUP, INC. SECOND QUARTER 10-Q FILING. 1,000 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 94,032 446,121 2,597 3,060,279 274,888 37,842 4,185,266 77,000 406,695 2,597 2,722,237 193,346 149,533 0 0 2 423,344 4,185,266 138,420 84,651 112,650 34,874 4,308 69,376 188,217 47,582 47,582 0 0 27,396 1.14 1.13
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