-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ghNA5HhSDIW05Zhpe8rTQ4UWkCJEIN+BRtCuHLhzJJzrEc7djaMZkq+4zQ/78BTV EjnQp4Cqgtk94nmq7laBlg== 0000950148-94-000256.txt : 19940610 0000950148-94-000256.hdr.sgml : 19940610 ACCESSION NUMBER: 0000950148-94-000256 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940325 FILED AS OF DATE: 19940506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEFFERIES GROUP INC CENTRAL INDEX KEY: 0000717867 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 952848406 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11669 FILM NUMBER: 94526485 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 STREET 2: 10TH FLR CITY: LOS ANGELES STATE: CA ZIP: 90025 10-Q 1 FORM 10-Q FOR PERIOD ENDING 3/25/94 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 March 25, 1994 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 0-11669 JEFFERIES GROUP, INC. __________________________________________________________________________ (Exact name of registrant as specified in its charter) DELAWARE 95-2848406 - - ------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11100 Santa Monica Boulevard, 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 March 25, 1994, the Registrant had 5,745,043 common shares, $.01 par value, outstanding. Page 1 of 17 Pages 2 JEFFERIES GROUP, INC. AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q MARCH 25, 1994
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition - March 25, 1994 (unaudited) and December 31, 1993 3 Consolidated Statements of Earnings - Three Months Ended March 25, 1994 (unaudited) and March 26, 1993 (unaudited) 4 Consolidated Statements of Changes in Stockholders' Equity - Three Months Ended March 25, 1994 (unaudited) 5 Consolidated Statements of Cash Flows - Three Months Ended March 25, 1994 (unaudited) and March 26, 1993 (unaudited) 6 Notes to Consolidated Financial Statements (unaudited) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 15
Page 2 of 17 Pages 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (DOLLARS IN THOUSANDS)
March 25, December 31, 1994 1993 ---------- ---------- ASSETS (unaudited) Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 23,678 $ 26,910 Receivable from brokers and dealers . . . . . . . . . . . . . . . . . 1,101,139 1,069,384 Receivable from customers, officers and directors . . . . . . . . . . 122,903 116,935 Securities owned . . . . . . . . . . . . . . . . . . . . . . . . . . 133,823 114,808 Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 19,860 18,638 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,169 41,728 ---------- ---------- $1,440,572 $1,388,403 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 45,928 Payable to brokers and dealers . . . . . . . . . . . . . . . . . . . 696,382 615,216 Payable to customers . . . . . . . . . . . . . . . . . . . . . . . . 429,792 405,726 Securities sold, not yet purchased . . . . . . . . . . . . . . . . . 70,171 74,235 Accrued expenses and other liabilities . . . . . . . . . . . . . . . 82,958 92,772 ---------- ---------- 1,279,303 1,233,877 Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . 10,027 9,968 ---------- ---------- 1,289,330 1,243,845 ---------- ---------- Stockholders' equity: Preferred stock, $.01 par value. Authorized 1,000,000 shares; none issued . . . . . . . . . . . -- -- Common stock $.01 par value. Authorized 25,000,000 shares; issued 8,979,930 shares in 1994 and 8,907,817 shares in 1993 . . . . . . . . . . . . . . . . . . . . . . . . 90 89 Additional paid-in capital . . . . . . . . . . . . . . . . . . . 36,983 34,930 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 152,497 146,949 Less treasury stock, at cost; 3,234,887 shares in 1994; and 3,212,390 shares in 1993 . . . . . . . . . . . . . (36,648) (35,695) Less currency translation adjustments . . . . . . . . . . . . . . (617) (652) Less additional minimum pension liability . . . . . . . . . . . . (1,063) (1,063) ---------- ---------- Total stockholders' equity . . . . . . . . . . . . . . . . . 151,242 144,558 ---------- ---------- $1,440,572 $1,388,403 ========== ==========
See accompanying notes to consolidated financial statements. Page 3 of 17 Pages 4 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For The Three Months Ended --------------------------- March 25, March 26, 1994 1993 ---------- ---------- Revenues: Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,654 $ 31,205 Principal transactions . . . . . . . . . . . . . . . . . . . . . . . 17,654 25,582 Corporate finance . . . . . . . . . . . . . . . . . . . . . . . . . 8,875 7,655 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,338 3,526 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,169 380 ---------- ---------- Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . 75,690 68,348 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 6,488 2,894 ---------- ---------- Revenues, net of interest expense . . . . . . . . . . . . . . . . . 69,202 65,454 ---------- ---------- Non-interest expenses: Compensation and benefits . . . . . . . . . . . . . . . . . . . . . 36,617 36,588 Floor brokerage and clearing fees . . . . . . . . . . . . . . . . . 4,399 3,626 Telecommunications and data processing services . . . . . . . . . . 4,504 4,091 Occupancy and equipment rental . . . . . . . . . . . . . . . . . . . 3,356 3,051 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,080 6,827 ---------- ---------- Total non-interest expenses . . . . . . . . . . . . . . . . . . 58,956 54,183 ---------- ---------- Earnings before income taxes and cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . 10,246 11,271 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,407 4,005 ---------- ---------- Earnings before cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . . . $ 5,839 $ 7,266 Cumulative effect on prior years of change in accounting principle . . . . . . . . . . . . . . . . . . . . . . . . -- 1,358 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624 ========== ========== Earnings per share of common stock: Primary earnings per share - Earnings before cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . . . $ .95 $ 1.46 Cumulative effect on prior years of change in accounting principle . . . . . . . . . . . . . . . . . . . -- .27 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.73 ========== ========== Fully diluted earnings per share - Earnings before cumulative effect of change in accounting principle . . . . . . . . . . . . . . . . . . . $ .95 $ 1.20 Cumulative effect on prior years of change in accounting principle . . . . . . . . . . . . . . . . . . . -- .21 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.41 ========== ========== Weighted average shares of common stock: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,051,000 4,971,000 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,075,000 6,367,000
See accompanying notes to consolidated financial statements. Page 4 of 17 Pages 5 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 25, 1994 (DOLLARS IN THOUSANDS)
Currency Add'l Total Additional Trans- Minimum Stock- Common Paid-in Retained Treasury lation Pension holders' Stock Capital Earnings Stock Adjustment Liability Equity ------ ---------- ---------- ---------- ---------- --------- ---------- Balance, December 31, 1993. $ 89 $ 34,930 $146,949 $(35,695) $ (652) $ (1,063) $144,558 Exercise of stock options (82,113 shares).. 1 2,053 145 2,199 Purchase of 35,925 shares of treasury stock............. (1,201) (1,201) Capital Accum- ulation Plan distribution (3,428 shares)..... 103 103 Cash dividends, $.05 per share.... (291) (291) Translation adjust- ment.............. 35 35 Net earnings....... 5,839 5,839 ----- --------- --------- --------- --------- --------- --------- Balance, March 25, 1994.... $ 90 $ 36,983 $152,497 $(36,648) $ (617) $ (1,063) $151,242 ===== ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements. Page 5 of 17 Pages 6 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
For The Three Months Ended -------------------------- March 25, March 26, 1994 1993 -------- --------- Cash flows from operating activities: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624 -------- --------- Adjustments to reconcile net earnings to net cash provided (used) by operations: Depreciation and amortization . . . . . . . . . . . . . . . . . . 1,686 1,520 (Increase) decrease in receivables: Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . (31,755) (84,140) Customers, officers and directors . . . . . . . . . . . . . . . (5,968) (20,244) (Increase) decrease in securities owned . . . . . . . . . . . . . (19,015) (23,852) (Increase) decrease in other assets . . . . . . . . . . . . . . . 2,559 (8,629) Increase (decrease) in operating payables: Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . 81,166 31,553 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,066 52,778 Increase (decrease) in securities sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . . . . (4,064) 25,349 Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . (9,814) 14,299 -------- --------- Total adjustments . . . . . . . . . . . . . . . . . . . 38,861 (11,366) -------- --------- Net cash provided (used) by operating activities . . . . . . . . . . . . . . . . 44,700 (2,742) -------- ---------
Continued on next page. See accompanying notes to consolidated financial statements. Page 6 of 17 Pages 7 JEFFERIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED) (DOLLARS IN THOUSANDS)
For The Three Months Ended -------------------------- March 25, March 26, 1994 1993 -------- -------- Cash flows from financing activities: Net proceeds (payments) from bank loans . . . . . . . . . . . . . (45,928) -- Net payments for: Repurchase of treasury stock . . . . . . . . . . . . . . . . . (1,201) (355) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (291) (231) Distribution of CAP plan shares . . . . . . . . . . . . . . . . . 103 -- Proceeds from exercise of stock options . . . . . . . . . . . . . 2,199 29 -------- -------- Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . (45,118) (557) -------- -------- Cash flows from investing activities - purchase of premises and equipment . . . . . . . . . . . . . . . (2,849) (2,056) -------- -------- Effect of foreign currency translation on cash . . . . . . . . . . . . 35 (65) -------- -------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . (3,232) (5,420) Cash and cash equivalents - beginning of period . . . . . . . . . . . . 26,910 21,078 -------- -------- Cash and cash equivalents - end of period . . . . . . . . . . . . . . . $ 23,678 $ 15,658 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,495 $ 1,665 ======== ======== Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,531 $ 1,431 ======== ========
See accompanying notes to consolidated financial statements. Page 7 of 17 Pages 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. and all wholly owned subsidiaries, including Jefferies & Company, Inc. (Jefferies) and Investment Technology Group, Inc. (ITG). The accounts of W & D Securities, Inc. (W & D) are also consolidated because of the nature and extent of the Company's ownership interest in W & D. Jefferies Group, Inc. and its subsidiaries are engaged in securities brokerage and trading, corporate finance and other financial services. The term "Company" refers, unless the context requires otherwise, to Jefferies Group, Inc., its subsidiaries, predecessor entities, and W & D. 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 period and should be read in conjunction with the Company's annual report for the year ended December 31, 1993. SECURITIES TRANSACTIONS The Company records its commission and principal transaction revenues and related expenses on a trade date basis. 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 March 25, 1994:
(Dollars in Thousands) -------------------------- Securities Sold Securities Not Yet Owned Purchased --------- -------- Corporate equity securities . . . . . . . . . . . . . . . . . . $ 61,368 $ 56,637 High-yield securities . . . . . . . . . . . . . . . . . . . . . 40,989 10,049 Corporate debt securities . . . . . . . . . . . . . . . . . . . 28,622 3,389 U.S. Government and Agency obligations . . . . . . . . . . . . . 2,767 -- Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 96 --------- -------- $ 133,823 $ 70,171 ========= ========
In the regular course of its business, Jefferies takes securities positions as a market-maker to facilitate customer transactions and for investment purposes. In making markets and when trading for its own account, Jefferies exposes its own capital to the risk of fluctuations in market value. Trading profits (or losses) depend primarily upon the skills of the employees engaged in market-making and position taking, the amount of capital allocated to positions in securities and the general trend of prices in the securities markets. Jefferies monitors its risk by maintaining its securities positions at or below certain pre-established levels. These levels reduce certain opportunities to realize profits in the event that the value of such securities increases. However, they also reduce the risk of loss in the event of a decrease in such value and result in controlled interest costs incurred on funds provided to maintain such positions. Page 8 of 17 Pages 9 The Jefferies' Capital Division includes the activities of the Corporate Finance Department and the Taxable Fixed Income Division. The Taxable Fixed Income Division trades high grade and non-investment grade public and private debt securities. The Division specializes in trading and making markets in over 300 unrated or less than investment grade corporate debt securities and accounts for these positions at market value. Risk of loss upon default by the borrower is significantly greater with respect to unrated or less than investment grade corporate debt securities than with other corporate debt securities. These securities are generally unsecured and are often subordinated to other creditors of the issuer. These issuers usually have high levels of indebtedness and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than are investment grade issuers. There is a limited market for some of these securities and market quotes are generally available from a small number of dealers. INCOME TAXES In 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. NET CAPITAL REQUIREMENTS As registered broker-dealers, Jefferies, W & D and ITG are subject to the Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital. Jefferies, W & D and ITG 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 $200,000 or 2% of the aggregate debit balances arising from customer transactions, as defined. Net capital changes from day to day, but as of March 25, 1994, Jefferies' net capital of $66.0 million exceeded its minimum net capital requirements by $56.2 million. ITG's net capital of $3.8 million exceeded its minimum net capital requirements by $3.6 million. W & D's net capital of $750,000 exceeded its minimum net capital requirements by $550,000. 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. 1994.................. $.05 1993.................. $.05
OFF-BALANCE SHEET RISK In the normal course of business, the Company is involved in the execution, settlement and financing of various customer and principal securities transactions. Customer activities are transacted on a cash, margin or Page 9 of 17 Pages 10 delivery-versus-payment basis. Securities transactions are subject to the risk of counterparty or customer nonperformance. However, transactions are collateralized by the underlying security, thereby reducing the associated risk to change in the market value of the security through settlement date or to the extent of margin balances. The Company also has contractual commitments arising in the ordinary course of business for bank loans, stock loaned, securities sold, not yet purchased, repurchase agreements, future purchases and sales of foreign currency, security transactions on a when-issued basis and underwriting. Transactions in these financial instruments contain varying degrees of off-balance sheet risk as the market values of the securities underlying the financial instruments may be in excess of the contract amount. The settlement of these transactions is not expected to have a material effect upon the Company's accompanying consolidated financial statements. In the normal course of business, the Company had letters of credit outstanding aggregating $22.2 million at March 25, 1994, to satisfy various collateral requirements in lieu of depositing cash or securities. SUBSEQUENT EVENT - INVESTMENT TECHNOLOGY GROUP, INC. INITIAL PUBLIC OFFERING In March, 1994, the Company formed a new subsidiary, Investment Technology Group, Inc. (the "ITG Holding Company") for the purpose of eventually holding 100% of the stock of the broker-dealer subsidiary Investment Technology Group, Inc. whose name was then changed to ITG Inc. On March 15, 1994, the ITG Holding Company filed with the Securities and Exchange Commission a Registration Statement with respect to the offer of 3,700,000 shares of its common stock (which includes 450,000 shares subject to an over-allotment option granted to the underwriters), in an initial public offering (the "Offering"). The filing indicated an anticipated offering price of between $12 and $14 per share. Immediately prior to the consummation of the offering, the ITG Holding Company will issue 15,000,0000 shares of its common stock in exchange for all of the issued and outstanding shares of common stock of ITG Inc. held by the Company. As a result of these transactions, ITG Inc. will become a wholly-owned subsidiary of the ITG Holding Company which will become a wholly-owned subsidiary of the Company. Following the offering, the Company will own 82.2% of the outstanding common stock of the ITG Holding Company. Immediately prior to the Offering, the ITG Holding Company declared a dividend payable to its sole stockholder, the Company, in an amount of $17.0 million, which dividend was paid by the issuance of a note in the full amount of such dividend and may be increased or decreased based on the actual proceeds of the Offering. Any future payment of dividends will be at the discretion of the ITG Holding Company's Board of Directors and will depend on the ITG Holding Company's financial condition, results of operations, capital requirements and other factors deemed relevant by such Board of Directors. However, the ITG Holding Company anticipates that all future earnings will be retained by the ITG Holding Company for working capital and that the ITG Holding Company will not pay any dividends to its stockholders. In addition, immediately prior to the Offering, the ITG Holding Company entered into an intercompany borrowing agreement with the Company permitting the borrowing by the ITG Holding Company of up to $15,000,000. Any outstanding balance will be due March 31, 1999 and will accrue interest at 1.75% above the one month London Interbank Offering Rate. On May 3, 1994, the Registration Statement went effective and an underwriting agreement was signed with an offering price of $13 per share. Page 10 of 17 Pages 11 SUBSEQUENT EVENT - JEFFERIES GROUP, INC. ISSUES $50,000,000 IN SENIOR NOTES In April, 1994, Jefferies Group, Inc. issued $50,000,000 face value of 8.875% Senior Notes due 2004 (the "Notes") in a private placement. The Notes were issued at a price equal to 98.6047% of the principal amount and mature on May 1, 2004. The Notes pay interest semi-annually on May 1 and November 1. The Notes will be senior unsecured obligations of Jefferies Group, Inc., and will rank pari passu in right of payment with all existing and future senior indebtedness and senior in right of payment to all subordinated indebtedness of Jefferies Group, Inc. Page 11 of 17 Pages 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 1994 VERSUS FIRST QUARTER 1993 Revenues, net of interest expense, increased $3.7 million, or 6%, in the first quarter of 1994 compared to the same prior year period. The increase was due primarily to an $8.4 million, or 27%, increase in commissions, a $1.2 million, or 16%, increase in corporate finance, a $1.2 million increase in net interest income (interest revenues less interest expense) and a $789,000 increase in other revenues. These increases were partially offset by a $7.9 million, or 31%, decrease in principal transactions. Commission revenues increased mostly due to higher commission revenues in the Equity Division and the Investment Technology Group. Corporate finance revenues increased due to an increase in underwriting fees. Net interest income increased as the $4.8 million increase in interest revenues exceeded the $3.6 million increase in interest expense. Interest revenues increased due to interest on higher stock borrow and customer margin balances. The related increases in interest on stock loan and customer short balances only partially offset the higher interest revenues. Partially offsetting the increase in interest expense was the elimination of interest on the Company's convertible debt securities, which were converted into shares of the Company's Common Stock late in 1993. Other revenues increased due mostly to foreign currency transaction gains. Revenues from principal transactions declined primarily due to decreased Taxable Fixed Income Division trading revenues. Total non-interest expenses increased $4.8 million, or 9%, in the first quarter of 1994 compared to the same prior year period. Other expense increased $3.3 million, or 48%, primarily due to higher trade volume and business expansion and includes increased expenses in soft dollar, marketing, research, software royalties, reserves and corporate finance finder fees. Floor brokerage and clearing fees increased $773,000, or 21%, due to increased volumes of business executed on the various exchanges. Telecommunications and data processing services increased $413,000, or 10%, due to higher trade volume and business expansion. Occupancy and equipment rental increased $305,000, or 10%, due to business expansion. Compensation and benefits remained relatively unchanged from last year. An increase in commissions paid and salaries was offset by a decrease in profitability based compensation. As a result of the above, earnings before income taxes and cumulative effect of change in accounting principle were down $1.0 million, or 9%. Earnings before cumulative effect of change in accounting principle were down 20% to $5.8 million, as compared to $7.3 million in the 1993 period. The effective tax rate was approximately 43% in the first quarter of 1994 compared to approximately 36% in the 1993 period. The 1993 quarter included a $1.1 million adjustment of prior years' estimated tax liabilities to actual which resulted in a lower tax rate for 1993. The cumulative effect of the change in accounting for income taxes required by SFAS 109 was a $1.4 million benefit in 1993. This increased 1993's net earnings to $8.6 million. Primary earnings per share were $.95 in the first quarter of 1994 on 6,051,000 shares compared to $1.73 in the 1993 period on 4,971,000 shares. Primary shares increased largely due to the conversion, late in 1993, of $29,731,000 aggregate principal amount of 8 1/2% Convertible Subordinated Debentures and $1,690,000 aggregate principal amount of 7% Convertible Subordinated Notes into an aggregate of 1,366,092 shares of the Company's Common Stock. Fully diluted earnings per Page 12 of 17 Pages 13 share were $.95 in the first quarter of 1994 on 6,075,000 shares compared to $1.41 in the 1993 period on 6,367,000 shares. The cumulative effect of the change in accounting principle increased 1993's earnings per share for the first quarter by $.27 on primary shares and $.21 on fully diluted shares. During the first quarter of 1994, the Company repurchased 35,925 shares of its common stock versus repurchases of 15,000 shares for the comparable 1993 period. Page 13 of 17 Pages 14 The Company's principal activities, securities brokerage and the trading of and market-making in securities, are highly competitive and extremely volatile. The earnings of the Company are subject to wide fluctuations since many factors over which the Company has little or no control, particularly the overall volume of trading and the volatility and general level of market prices, may significantly affect its operations. The following provides a breakdown of total revenues by division for the three months ended March 25, 1994 and March 26, 1993.
For the Three Months Ended -------------------------------------- March 25, 1994 March 26, 1993 -------------- -------------- % of % of Total Total Amount Revenues Amount Revenues ------ -------- ------ -------- (Dollars in Thousands) Equity Division . . . . . . . . . . . . . . . $29,878 40% $26,665 39% International Division . . . . . . . . . . . . 9,880 13 7,450 11 Capital Division . . . . . . . . . . . . . . . 12,378 16 18,805 28 Investment Technology Group . . . . . . . . . 14,249 19 10,491 15 Convertible Division . . . . . . . . . . . . . 1,838 2 2,819 4 Other Unallocated Revenues . . . . . . . . . . 7,467 10 2,118 3 ------- --- ------- --- Total revenues . . . . . . . . . . . . . . . . $75,690 100% $68,348 100% ======== === ======= ===
Page 14 of 17 Pages 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11. Computation of Earnings Per Share (Page 16 attached) (b) Reports on Form 8-K. There were no reports filed on Form 8-K during the quarter ended March 25, 1994. Page 15 of 17 Pages 16 EXHIBIT 11 JEFFERIES GROUP, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
For The Three Months Ended ------------------------ March 25, March 26, 1994 1993* --------- --------- Common stock and common stock equivalents: Average common stock outstanding . . . . . . . . . . . . . . . . . . 5,721 4,628 Common stock equivalent shares related to employee stock options and restricted stock . . . . . . . . . . . . . . . . . . . 330 343 ------- ------- Total average common stock and common stock equivalents used for primary computation . . . . . . . . . . . . . . . . . . 6,051 4,971 Average common stock assumed issued pursuant to convertible subordinated debentures and an adjustment of average common stock equivalents to period-end market price, if higher than average price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1,396 ------- ------- Total average common stock, common stock equivalents and other dilutive securities . . . . . . . . . . . . . . . . . . 6,075 6,367 ======= ======= Earnings: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624 Adjustment to subsidiary earnings - common stock equivalents on subsidiary . . . . . . . . . . . . . . . . . . . . 90 -- ------- ------ Total earnings for primary computation . . . . . . . . . . . . . . . . . . . . . . . 5,749 8,624 Eliminate interest expense (net of taxes) on convertible subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . -- 371 ------- ------- Total earnings for fully diluted computation . . . . . . . . . . . . . . . . . . . . $ 5,749 $ 8,995 ======= ======= Earnings per share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.73 ======= ======= Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.41 ======= =======
* The 1993 first quarter includes a benefit for the cumulative effect of changes in accounting principle of $.27 and $.21 per share primary and fully diluted, respectively. Page 16 of 17 Pages 17 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: May 6, 1994 By: /s/ Alan D. Browning ----------- --------------------- Alan D. Browning Executive Vice President, Chief Financial Officer and Chief Administrative Officer Page 17 of 17 Pages -----END PRIVACY-ENHANCED MESSAGE-----