-----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, S5w/OEsDWeC1FIP8mof0C5H10EmOEgcWALCykEBFn7DOmEGGs+ZfZdZx7P6ahKkh Oy6ZqXLbNTJ0VCfl7vsbYQ== 0000950148-98-002411.txt : 19981109 0000950148-98-002411.hdr.sgml : 19981109 ACCESSION NUMBER: 0000950148-98-002411 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981106 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TECHNOLOGY GROUP INC CENTRAL INDEX KEY: 0000920424 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133757717 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-23644 FILM NUMBER: 98739679 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125884000 MAIL ADDRESS: STREET 1: 11100 SANTA MONICA BLVD STREET 2: 12TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90025 8-K 1 FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: November 6, 1998 Date of Earliest Event Reported: March 17, 1998 INVESTMENT TECHNOLOGY GROUP, INC. Delaware 0-23644 13-3757717 (State of (Commission File (IRS Employer Incorporation) Number) Identification Number) 380 Madison Avenue New York, New York 10017 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (212) 588-4000 ================================================================================ 2 ITEM 5. OTHER EVENTS On March 17, 1998, Jefferies Group, Inc. ("Group") and Investment Technology Group, Inc. ("ITGI") jointly announced plans to separate Group's 100% owned subsidiary, Jefferies & Company, Inc., and Group's 82.3% owned subsidiary, ITGI, through a proposed spin-off and related transactions. Attached and incorporated by reference is information regarding the proposed transactions filed in a Form 8-K on March 17, 1998 updated to include selected financial information for the quarter ended September 25, 1998. This information is available on the website of Group and ITGI (Exhibit 99.1). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibit Index. EXHIBIT NO. EXHIBIT DESCRIPTION 99.1 Unaudited financial information concerning Group and ITGI. SIGNATURES 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. Dated: November 6, 1998 INVESTMENT TECHNOLOGY GROUP, INC. By: /s/ JOHN R. MacDONALD ------------------------------- John R. MacDonald Senior Vice President and Chief Financial Officer EX-99.1 2 EXHIBIT 99.1 1 JEFFERIES GROUP, INC. UNAUDITED FINANCIAL INFORMATION RELATING TO PLANNED SPIN-OFF 2 ================================================================================
PAGE ---- Highlights Planned Transaction............................................................ 1-3 Selected Financial Information................................................. 4-6 Appendix Jefferies Group, Inc. Consolidating Statements of Financial Condition.......... A Jefferies Group, Inc. Consolidating Statements of Earnings for Three Months Ended September 25, 1998 & September 26, 1997.................... B Jefferies Group, Inc. Consolidating Statements of Earnings for Nine Months Ended September 25, 1998 & September 26, 1997.................... C Jefferies Group, Inc. Consolidating Statements of Earnings for Three Years Ended December 31, 1997 ......................................... D JEFCO Quarterly Statements of Earnings ........................................ E JEFCO Annual Statements of Earnings ........................................... F
This document contains statements concerning the timing, structure and ramifications of the proposed spin-off and related transactions that are intended to be "forward-looking statements," as that phrase is defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements, which can be identified by the use of terms such as "plan", "anticipate", "will", "would", "expect", "estimate" or variations of such terms, may not occur as presently anticipated in the event necessary approvals are not obtained or are not obtained on acceptable terms or in the event of adverse developments in the market for Jefferies Group or ITGI securities or in securities markets in general. As a result, no forward-looking statement should be regarded as a representation by Jefferies Group, ITGI or any other person that the presently anticipated events will occur as described herein. 3 PLANNED TRANSACTION ================================================================================ On March 17, 1998, Jefferies Group, Inc. and Investment Technology Group, Inc. announced plans to separate Jefferies & Company, Inc. and Investment Technology Group, Inc. through a spin-off. Jefferies Group, Inc. is a holding company for two principal lines of business: a full-service global investment bank serving institutions and small- to medium-sized corporations (referred to in this document as "JEFCO"); and 81.4 percent-owned Investment Technology Group, Inc., the leading provider of technology-based equity trading services and transaction research to institutional investors and brokers. According to the plan, Jefferies Group shareholders will own 100% of JEFCO and approximately 81.4% of ITGI when the transaction closes. The public ITGI shareholders will continue to own approximately 18.6% of ITGI. The spin-off will be accomplished by a tax-free distribution of 100% of the shares of a new holding company, JEFCO, to Jefferies Group shareholders. Jefferies Group's 15 million shares of ITGI would then be its only asset. (As of September 25, 1998, total outstanding shares of ITGI were 18.4 million.) The spin-off would be followed immediately by a tax-free merger of Jefferies Group and ITGI. Jefferies Group is seeking a ruling from the IRS regarding the tax-free nature of the distribution of JEFCO and expects to complete the transaction in January 1999. 1 4 PLANNED TRANSACTION ================================================================================ Jefferies Group and ITGI expect that both companies will have financial strength and flexibility for future growth. The spin-off plan calls for: o Increasing JEFCO's capital base through a combination of Jefferies Group stock option exercises, termination of Jefferies Group's deferred compensation plan, various tax benefits and a special dividend of approximately $50-75 million from ITGI to all of its stockholders. It is currently anticipated that at the transaction closing date, JEFCO will have a minimum equity capital base of $320 million and ITGI will have a minimum equity capital base of $20 million. o Assumption by JEFCO of Jefferies Group's existing $150 million senior unsecured debt obligation. o Establishing an employee stock ownership plan at JEFCO, which will further align the interests of employees and stockholders at JEFCO by providing equity-based compensation incentives linked directly to JEFCO's operating performance. The spin-off and restructuring transactions are contingent on a number of factors, including receipt of all required Board of Directors and shareholder approvals of Jefferies Group and ITGI, receipt of a favorable tax ruling from the IRS and other required regulatory and contractual approvals. 2 5 PLANNED TRANSACTION ================================================================================ ------------------- / JEF GROUP / /---------> / SHAREHOLDERS / / / 100% OWNERSHIP / / ------------------- / / / / / / / ------------------- / / / --------------------- / / JEFFERIES / / ITGI / / / --------- / / MINORITY INTEREST / / / GROUP, INC. /-----------------------------/ / ------------ / / / / / SPIN-OFF / / 81% OWNERSHIP / / 19% OWNERSHIP / ------------ ------------------- -------------------- / / / / / / / UPSTREAM MERGER / / / / --------------- / / / / - MERGE ITGI INTO JEF GROUP AND / / / / EXCHANGE MINORITY INTEREST SHARES / / / / IN ITGI FOR JEF GROUP SHARES / / / / - CHANGE JEF GROUP NAME TO ITGI / / / / / / / / / ------------ / ---------------- / / / / / INVESTMENT / / / "JEFCO" / ------------/ TECHNOLOGY /------------------ / / / GROUP, INC. / ----------- ---------------- - - - Post Spin-Off - - Post Spin-Off Minimum Equity: $320mm Minimum Equity: $20mm
3 6 JEFFERIES GROUP, INC. CONSOLIDATED FINANCIAL INFORMATION ================================================================================ SELECTED CONSOLIDATED FINANCIAL DATA - -------------------------------------------------------------------------------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------ ------------------------------ SEPTEMBER 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, 1998 1997 1998 1997 ------------------------------ ------------------------------ STATEMENT OF EARNINGS(a) Net Revenues $ 163,932 $ 166,263 $ 529,191 $ 487,482 Operating Income 32,009 26,405 99,151 83,299 Income Taxes 13,761 10,863 42,496 34,065 Minority Interest 2,572 1,122 5,677 3,669 ------------ ------------ ------------ ------------ Net Earnings $ 15,676 $ 14,420 $ 50,978 $ 45,565 EARNINGS PER SHARE Diluted Earnings $ 0.66 $ 0.63 $ 2.18 $ 2.01 Diluted Weighted Average Shares Outstanding 22,965 22,300 22,918 22,310
YEAR ENDED DECEMBER 31, ------------------------------------------------ 1997 1996 1995 ------------------------------------------------ STATEMENT OF EARNINGS(a) Net Revenues $ 703,038 $ 478,774 $ 351,222 Operating Income 115,950 83,187 53,238 Income Taxes 47,677 35,438 21,911 Minority Interest 4,706 4,189 2,798 ------------ ------------ ------------ Net Earnings $ 63,567 $ 43,560 $ 28,529 EARNINGS PER SHARE Diluted Earnings $ 2.80 $ 1.84 $ 1.19 Diluted Weighted Average Shares Outstanding 22,349 23,410 23,922
AS OF AS OF DECEMBER 31, ---------------- ------------------------------------------ SEPTEMBER 25, 1998 1997 1996 1995 ---------------- ------------------------------------------ FINANCIAL CONDITION(a) Cash, Cash Equivalents, and Short Term Investments $ 374,193 $ 224,465 $ 180,435 $ 72,821 Total Assets 2,588,426 2,099,542 1,568,087 1,536,969 Long-Term Debt 149,363 149,290 52,987 56,322 Stockholders' Equity 303,623 242,756 195,445 186,261 Shares Outstanding 21,030 20,286 20,726 22,514 SELECTED RATIOS: Pre-Tax Margin (as a % of Net Revenue) 19% 16% 17% 15% Return on Average Equity 25%(b) 30% 23% 17% Book Value Per Share Outstanding $ 14.44 $ 11.97 $ 9.43 $ 8.28
(a) ITGI is fully consolidated into Jefferies Group, Inc. The minority interest in ITGI is recorded as a liability. This liability representing the minority interest is increased each period by the minority's share of net income from ITGI and such amount is deducted from the determination of net earnings from Jefferies Group, Inc. (b) Annualized Return on Average Equity. 4 7 SEGMENT FINANCIAL INFORMATION - "JEFCO" ================================================================================ SELECTED FINANCIAL DATA The following represents historical financial information of Jefferies Group, Inc.'s core brokerage and banking business - "JEFCO." (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- SEPTEMBER 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, 1998 1997 1998 1997 ---------------------------- ---------------------------- STATEMENT OF EARNINGS(c) Net Revenues $ 103,738 $ 133,536 $ 380,270 $ 388,641 Contribution to Consolidated Jefferies Group, Inc. Net Earnings 4,364 9,073 25,481 28,226 EARNINGS PER SHARE Contribution to Consolidated Jefferies Group, Inc. Diluted Earnings(a) $ 0.19 $ 0.41 $ 1.11 $ 1.27
YEAR ENDED DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------------------------------------- STATEMENT OF EARNINGS(c) Net Revenues $ 569,528 $ 369,183 $ 279,939 Contribution to Consolidated Jefferies Group, Inc. Net Earnings 41,356 24,414 16,422 EARNINGS PER SHARE Contribution to Consolidated Jefferies Group, Inc. Diluted Earnings(a) $ 1.85 $ 1.04 $ 0.69
AS OF AS OF DECEMBER 31, ---------------- ------------------------------------------ SEPTEMBER 25, 1998 1997 1996 1995 ---------------- ------------------------------------------ FINANCIAL CONDITION(c) Cash, Cash Equivalents, and Short Term Investments $ 276,491 $ 173,202 $ 136,480 $ 54,861 Total Assets 2,430,991 1,994,684 1,493,117 1,497,351 Long-Term Debt 149,363 149,290 52,987 56,322 Stockholders' Equity 199,923 165,568 140,314 149,163 SELECTED RATIOS: Pre-Tax Margin (as a % of Net Revenue) 11% 12% 11% 10% Return on Average Equity 17%(b) 27% 17% 11%
(a) Contribution is calculated based on consolidated Jefferies Group, Inc. diluted weighted average shares outstanding. (b) Annualized Return on Average Equity. (c) Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. 5 8 SEGMENT FINANCIAL INFORMATION - "ITGI" ================================================================================ SELECTED FINANCIAL DATA The following represents historical financial information of Jefferies Group, Inc.'s equity ownership of approximately 81% currently of Investment Technology Group, Inc. - "ITGI." (Dollars in thousands except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- SEPTEMBER 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, 1998 1997 1998 1997 ---------------------------- ---------------------------- STATEMENT OF EARNINGS Net Revenues $ 57,680 $ 33,430 $ 149,958 $ 100,663 Contribution to Consolidated Jefferies Group, Inc. Net Earnings(a) 11,312 5,347 25,497 17,339 EARNINGS PER SHARE Contribution to Consolidated Jefferies Group, Inc. Diluted Earnings(b) $ 0.47 $ 0.22 $ 1.07 $ 0.74
YEAR ENDED DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------------------------------------- STATEMENT OF EARNINGS Net Revenues $ 136,896 $ 111,333 $ 72,328 Contribution to Consolidated Jefferies Group, Inc. Net Earnings(a) 22,211 19,146 12,107 EARNINGS PER SHARE Contribution to Consolidated Jefferies Group, Inc. Diluted Earnings(b) $ 0.95 $ 0.80 $ 0.50
AS OF AS OF DECEMBER 31, --------------- ------------------------------------------ SEPTEMBER 25, 1998 1997 1996 1995 --------------- ------------------------------------------ FINANCIAL CONDITION Cash, Cash Equivalents, and Short Term Investments $ 97,702 $ 51,263 $ 43,955 $ 17,960 Total Assets 166,652 113,641 82,798 55,318 Long-Term Debt 0 0 0 0 Selected Ratios: Pre-Tax Margin (as a % of Net Revenue) 38% 35% 37% 34%
(a) Contribution to consolidated Jefferies Group, Inc. net earnings represent Jefferies Group, Inc.'s ownership percentage of approximately 81% of ITGI. (b) Contribution is calculated based on consolidated Jefferies Group, Inc. diluted weighted average shares outstanding including earnings adjustments for stock options of ITGI. 6 9 APPENDIX A ================================================================================ JEFFERIES GROUP INC. CONSOLIDATING STATEMENTS OF FINANCIAL CONDITION AS OF SEPTEMBER 25, 1998 AND DECEMBER 31, 1997 The following table represents the historical assets and liabilities of Jefferies Group, Inc. broken down between its core brokerage and banking business - "JEFCO" - and its approximately 81% ownership interest of ITGI. (DOLLARS IN THOUSANDS)
AS OF SEPTEMBER 25, 1998 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(b) GROUP, INC. -------------- ------------- ------------ ASSETS Cash and cash equivalents $ 97,702 $ 60,248 $ 157,950 Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations 0 48,498 48,498 Receivables from brokers and dealers 5,377 1,835,225 1,835,225 Receivables from customers, officers and directors 0 146,763 146,763 Securities owned 272 135,861 136,133 Investments 11,308 139,119 150,427 Premises and equipment 19,270 20,422 39,692 Other assets 32,723 44,855 73,738 ------------ ------------ ------------ $ 166,652 $ 2,430,991 $ 2,588,426 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Bank loans $ 2,000 $ 0 $ 2,000 Payable to brokers and dealers 0 1,580,937 1,580,937 Payable to customers 0 185,070 185,070 Securities sold, not yet purchased 170 63,545 63,715 Accrued expenses and other liabilities 37,117 252,153 280,053 ------------ ------------ ------------ 39,287 2,081,705 2,111,775 Long-term debt 0 149,363 149,363 Minority interest 23,665 0 23,665 ------------ ------------ ------------ 62,952 2,231,068 2,284,803 Stockholders' equity 103,700 199,923 303,623 ------------ ------------ ------------ $ 166,652 $ 2,430,991 $ 2,588,426 ============ ============ ============
AS OF DECEMBER 31, 1997 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(b) GROUP, INC. ------------ ------------ ------------- ASSETS Cash and cash equivalents $ 51,263 $ 58,225 $ 109,488 Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations 0 30,977 30,977 Receivables from brokers and dealers 2,931 1,269,664 1,269,664 Receivables from customers, officers and directors 0 166,284 166,284 Securities owned 358 245,055 245,413 Investments 10,935 143,649 154,584 Premises and equipment 19,506 23,322 42,828 Other assets 28,648 57,508 80,304 ------------ ------------ ------------ $ 113,641 $ 1,994,684 $ 2,099,542 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Bank loans $ 0 $ 0 $ 0 Payable to brokers and dealers 0 981,705 981,705 Payable to customers 0 202,255 202,255 Securities sold, not yet purchased 3 188,700 188,703 Accrued expenses and other liabilities 19,875 307,166 318,258 ------------ ------------ ------------ 19,878 1,679,826 1,690,921 Long-term debt 0 149,290 149,290 Minority interest 16,575 0 16,575 ------------ ------------ ------------ 36,453 1,829,116 1,856,786 Stockholders' equity 77,188 165,568 242,756 ------------ ------------ ------------ $ 113,641 $ 1,994,684 $ 2,099,542 ============ ============ ============
(a) Each company's financial statements, which are shown here on a stand alone basis, include intercompany balances which would eliminate in consolidation. As a result, the sum of the two companies may not total the consolidated Jefferies Group, Inc. balance shown. (b) Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. 7 10 APPENDIX B ================================================================================ JEFFERIES GROUP, INC. CONSOLIDATING STATEMENTS OF EARNINGS FOR THREE MONTHS ENDED SEPTEMBER 25, 1998 AND SEPTEMBER 26, 1997 The following table represents the results of operations of Jefferies Group, Inc. broken down between its core brokerage and banking business - "JEFCO" - and its approximately 81% ownership interest of ITGI. (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED SEPTEMBER 25, 1998 ------------------------------------------------ JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. ------------------------------------------------ Total revenues $57,697 $124,041 $184,281 Interest expense 17 20,303 20,349 -------------------------------------------- Revenues, net of interest expense 57,680 103,738 163,932 Total non-interest expenses 31,949 97,460 131,923 -------------------------------------------- Earnings before income taxes and minority interest 25,731 6,278 32,009 Income taxes 11,847 1,914 13,761 -------------------------------------------- Earnings before minority interest 13,884 4,364 18,248 Minority interest 2,572 0 2,572 -------------------------------------------- Net earnings $11,312 $ 4,364 $ 15,676 EARNINGS PER SHARE Basic Earnings(b) $ 0.51 $ 0.19 $ 0.70 Diluted Earnings(b) $ 0.47 $ 0.19 $ 0.66
FOR THE THREE MONTHS ENDED SEPTEMBER 26, 1997 ------------------------------------------------ JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. ------------------------------------------------ Total revenues $33,437 $152,090 $184,823 Interest expense 7 18,554 18,560 -------------------------------------------- Revenues, net of interest expense 33,430 133,536 166,263 Total non-interest expenses 22,104 118,457 139,858 -------------------------------------------- Earnings before income taxes and minority interest 11,326 15,079 26,405 Income taxes 4,857 6,006 10,863 -------------------------------------------- Earnings before minority interest 6,469 9,073 15,542 Minority interest 1,122 0 1,122 -------------------------------------------- Net earnings $ 5,347 $ 9,073 $ 14,420 EARNINGS PER SHARE Basic Earnings(b) $ 0.25 $ 0.42 $ 0.67 Diluted Earnings(b) $ 0.22 $ 0.41 $ 0.63
(a) Each company's financial statements, which are shown here on a stand alone basis, include intercompany balances which would eliminate in consolidation. As a result, the sum of the two companies may not total the consolidated Jefferies Group, Inc. balance shown. (b) For ITGI and JEFCO, the earnings per share represent the contribution to consolidated Jefferies Group, Inc. earnings per share for basic and diluted. (c) Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. 8 11 APPENDIX C ================================================================================ JEFFERIES GROUP, INC. CONSOLIDATING STATEMENTS OF EARNINGS FOR NINE MONTHS ENDED SEPTEMBER 25, 1998 AND SEPTEMBER 26, 1997 The following table represents the results of operations of Jefferies Group, Inc. broken down between its core brokerage and banking business - "JEFCO" - and its approximately 81% ownership interest of ITGI. (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE NINE MONTHS ENDED SEPTEMBER 25, 1998 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. -------------------------------------------- Total revenues $ 149,989 $ 437,588 $ 586,521 Interest expense 31 57,318 57,330 ---------- ---------- ---------- Revenues, net of interest expense 149,958 380,270 529,191 Total non-interest expenses 92,510 338,567 430,040 ---------- ---------- ---------- Earnings before income taxes and minority interest 57,448 41,703 99,151 Income taxes 26,274 16,222 42,496 ---------- ---------- ---------- Earnings before minority interest 31,174 25,481 56,655 Minority interest 5,677 0 5,677 ---------- ---------- ---------- Net earnings $ 25,497 $ 25,481 $ 50,978 EARNINGS PER SHARE Basic Earnings(b) $ 1.14 $ 1.15 $ 2.29 Diluted Earnings(b) $ 1.07 $ 1.11 $ 2.18
FOR THE NINE MONTHS ENDED SEPTEMBER 26, 1997 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. -------------------------------------------- Total revenues $ 100,770 $ 434,531 $ 533,486 Interest expense 107 45,890 46,004 ---------- ---------- ---------- Revenues, net of interest expense 100,663 388,641 487,482 Total non-interest expenses 64,051 341,954 404,183 ---------- ---------- ---------- Earnings before income taxes and minority interest 36,612 46,687 83,299 Income taxes 15,604 18,461 34,065 ---------- ---------- ---------- Earnings before minority interest 21,008 28,226 49,234 Minority interest 3,669 0 3,669 ---------- ---------- ---------- Net earnings $ 17,339 $ 28,226 $ 45,565 EARNINGS PER SHARE Basic Earnings(b) $ 0.81 $ 1.31 $ 2.12 Diluted Earnings(b) $ 0.74 $ 1.27 $ 2.01
(a) Each company's financial statements, which are shown here on a stand alone basis, include intercompany balances which would eliminate in consolidation. As a result, the sum of the two companies may not total the consolidated Jefferies Group, Inc. balance shown. (b) For ITGI and JEFCO, the earnings per share represent the contribution to consolidated Jefferies Group, Inc. earnings per share for basic and diluted. (c) Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation of the JEFCO financial statements. 9 12 APPENDIX D ================================================================================ JEFFERIES GROUP, INC. CONSOLIDATING STATEMENTS OF EARNINGS FOR THREE YEARS ENDED DECEMBER 31, 1997 The following table represents the results of operations of Jefferies Group, Inc. broken down between its core brokerage and banking business - "JEFCO" - and its approximately 81% ownership interest of ITGI. (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31, 1997 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. ------------ ------------ ------------ Total revenues $ 137,042 $ 630,842 $ 764,504 Interest expense 146 61,314 61,466 ------------ ------------ ------------ Revenues, net of interest expense 136,896 569,528 703,038 Total non-interest expenses 89,636 500,838 587,088 ------------ ------------ ------------ Earnings before income taxes and minority interest 47,260 68,690 115,950 Income taxes 20,343 27,334 47,677 ------------ ------------ ------------ Earnings before minority interest 26,917 41,356 68,273 Minority interest 4,706 0 4,706 ------------ ------------ ------------ Net earnings $ 22,211 $ 41,356 $ 63,567 EARNINGS PER SHARE Basic Earnings(b) $ 1.03 $ 1.92 $ 2.95 Diluted Earnings(b) $ 0.95 $ 1.85 $ 2.80
FOR THE YEAR ENDED DECEMBER 31, 1996 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. ------------ ------------ ------------ Total revenues $ 111,556 $ 407,023 $ 516,626 Interest expense 223 37,840 37,852 ------------ ------------ ------------ Revenues, net of interest expense 111,333 369,183 478,774 Total non-interest expenses 70,332 326,997 395,587 ------------ ------------ ------------ Earnings before income taxes and minority interest 41,001 42,186 83,187 Income taxes 17,666 17,772 35,438 ------------ ------------ ------------ Earnings before minority interest 23,335 24,414 47,749 Minority interest 4,189 0 4,189 ------------ ------------ ------------ Net earnings $ 19,146 $ 24,414 $ 43,560 EARNINGS PER SHARE Basic Earnings(b) $ 0.84 $ 1.06 $ 1.90 Diluted Earnings(b) $ 0.80 $ 1.04 $ 1.84
FOR THE YEAR ENDED DECEMBER 31, 1995 -------------------------------------------- JEFFERIES ITGI(a) JEFCO(a)(c) GROUP, INC. ------------ ------------ ------------ Total revenues $ 72,381 $ 334,282 $ 405,587 Interest expense 53 54,343 54,365 ------------ ------------ ------------ Revenues, net of interest expense 72,328 279,939 351,222 Total non-interest expenses 47,440 251,589 297,984 ------------ ------------ ------------ Earnings before income taxes and minority interest 24,888 28,350 53,238 Income taxes 9,983 11,928 21,911 ------------ ------------ ------------ Earnings before minority interest 14,905 16,422 31,327 Minority interest 2,798 0 2,798 ------------ ------------ ------------ Net earnings $ 12,107 $ 16,422 $ 28,529 EARNINGS PER SHARE Basic Earnings(b) $ 0.52 $ 0.71 $ 1.23 Diluted Earnings(b) $ 0.50 $ 0.69 $ 1.19
(a) Each company's financial statements, which are shown here on a stand alone basis, include intercompany balances which would eliminate in consolidation. As a result, the sum of the two companies may not total the consolidated Jefferies Group, Inc. balance shown. (b) For ITGI and JEFCO, the earnings per share represent the contribution to consolidated Jefferies Group, Inc. earnings per share for basic and diluted. (c) Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. 10 13 APPENDIX E ================================================================================ JEFCO QUARTERLY STATEMENTS OF EARNINGS (Dollars in thousands)
1998 -------------------------------------------- 3rd Qtr 2nd Qtr 1st Qtr -------------------------------------------- Revenues: Commissions $ 49,399 $ 41,995 $ 42,022 Principal transactions 34,103 41,508 47,726 Corporate finance 13,489 41,716 54,399 Interest 25,934 23,111 18,968 Other 1,116 1,369 733 -------------------------------------------- Total revenues 124,041 149,699 163,848 Interest expense 20,303 20,058 16,957 -------------------------------------------- Revenues, net of interest expense 103,738 129,641 146,891 Non-interest expenses: Compensation and benefits 63,855 77,878 95,430 Floor Brokerage and clearing fees 8,399 7,729 7,360 Communications 12,213 12,486 10,912 Occupancy and equipment rental 3,347 3,436 3,613 Travel and promotional 4,203 5,125 4,954 Other 5,443 6,637 5,547 -------------------------------------------- Total non-interest expenses 97,460 113,291 127,816 -------------------------------------------- Earnings before income taxes 6,278 16,350 19,075 Income taxes 1,914 6,650 7,658 -------------------------------------------- Net earnings $ 4,364 $ 9,700 $ 11,417
1997 ------------------------------------------------------------ 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr ------------------------------------------------------------ Revenues: Commissions $ 43,124 $ 35,266 $ 35,742 $ 34,808 Principal transactions 45,582 47,687 45,188 40,624 Corporate finance 88,164 47,511 66,008 26,957 Interest 18,303 21,114 17,393 13,846 Other 1,138 512 1,117 758 -------------------------------------------------------- Total revenues 196,311 152,090 165,448 116,993 Interest expense 15,424 18,554 15,462 11,874 -------------------------------------------------------- Revenues, net of interest expense 180,887 133,536 149,986 105,119 Non-interest expenses: Compensation and benefits 117,788 87,473 99,536 68,822 Floor Brokerage and clearing fees 7,303 6,764 6,331 6,356 Communications 11,809 10,103 9,966 8,427 Occupancy and equipment rental 4,397 4,185 3,612 3,507 Travel and promotional 5,296 3,161 3,534 3,309 Other 12,291 6,771 5,605 4,492 -------------------------------------------------------- Total non-interest expenses 158,884 118,457 128,584 94,913 -------------------------------------------------------- Earnings before income taxes 22,003 15,079 21,402 10,206 Income taxes 8,873 6,006 8,280 4,175 -------------------------------------------------------- Net earnings $ 13,130 $ 9,073 $ 13,122 $ 6,031
1996 ------------------------------------------------------------ 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr ------------------------------------------------------------ Revenues: Commissions $ 29,680 $ 25,180 $ 27,539 $ 31,113 Principal transactions 36,085 40,835 33,179 35,108 Corporate finance 39,715 20,299 22,008 15,848 Interest 11,529 11,121 11,854 12,939 Other 503 1,688 168 632 -------------------------------------------------------- Total revenues 117,512 99,123 94,748 95,640 Interest expense 9,711 8,621 9,446 10,062 -------------------------------------------------------- Revenues, net of interest expense 107,801 90,502 85,302 85,578 Non-interest expenses: Compensation and benefits 68,402 56,823 54,965 54,256 Floor Brokerage and clearing fees 5,734 5,504 5,192 5,176 Communications 7,444 5,845 5,989 5,196 Occupancy and equipment rental 3,786 3,298 2,951 2,968 Travel and promotional 2,946 2,604 2,635 2,518 Other 7,281 5,100 5,539 4,845 -------------------------------------------------------- Total non-interest expenses 95,593 79,174 77,271 74,959 -------------------------------------------------------- Earnings before income taxes 12,208 11,328 8,031 10,619 Income taxes 5,212 4,701 3,464 4,395 -------------------------------------------------------- Net earnings $ 6,996 $ 6,627 $ 4,567 $ 6,224
NOTE: Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. 11 14 APPENDIX F - -------------------------------------------------------------------------------- JEFCO STATEMENTS OF EARNINGS
(Dollars in thousands) YEAR ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ------------------------------------ REVENUES: Commissions $148,940 $113,512 $ 95,892 Principal transactions 179,081 145,207 98,629 Corporate finance 228,640 97,870 72,003 Interest 70,656 47,443 65,784 Other 3,525 2,991 1,974 ------------------------------------ Total revenues 630,842 407,023 334,282 Interest expense 61,314 37,840 54,343 ------------------------------------ Revenues, net of interest expense 569,528 369,183 279,939 ------------------------------------ NON-INTEREST EXPENSES: Compensation and benefits 373,619 234,446 175,101 Floor brokerage and clearing fees 26,754 21,606 15,874 Telecommunications and data processing services 40,305 24,474 18,762 Occupancy and equipment rental 15,701 13,003 13,047 Travel and promotional 15,300 10,703 7,770 Other 29,159 22,765 21,035 ------------------------------------ Total non-interest expenses 500,838 326,997 251,589 ------------------------------------ Operating income 68,690 42,186 28,350 OTHER INCOME: Gain on initial public offering of Investment Technology Group, Inc. 0 0 0 ------------------------------------ Earnings from continuing operations before income taxes and cumulative effect of change in accounting principle 68,690 42,186 28,350 Income taxes 27,334 17,772 11,928 ------------------------------------ Earnings from continuing operations before cumulative effect of change in accounting principle 41,356 24,414 16,422 Cumulative effect on prior years of change in accounting principle 0 0 0 ------------------------------------ NET EARNINGS $ 41,356 $ 24,414 $ 16,422 ====================================
(Dollars in thousands) YEAR ENDED DECEMBER 31, ---------------------- 1994 1993 ---------------------- REVENUES: Commissions $ 89,459 $ 82,066 Principal transactions 67,412 83,361 Corporate finance 39,818 72,442 Interest 50,918 21,600 Other 948 1,458 ---------------------- Total revenues 248,555 260,927 Interest expense 41,587 17,457 ---------------------- Revenues, net of interest expense 206,968 243,470 ---------------------- NON-INTEREST EXPENSES: Compensation and benefits 127,826 143,008 Floor brokerage and clearing fees 15,999 12,430 Telecommunications and data processing services 16,014 15,217 Occupancy and equipment rental 11,657 10,021 Travel and promotional 7,538 6,869 Other 14,927 15,007 ---------------------- Total non-interest expenses 193,961 202,552 ---------------------- Operating Income 13,007 40,918 OTHER INCOME: Gain on initial public offering of Investment Technology Group, Inc. 38,420 0 ---------------------- Earnings from continuing operations before income taxes and cumulative effect of change in accounting principle 51,427 40,918 Income taxes 22,097 16,656 ---------------------- Earnings from continuing operations before cumulative effect of change in accounting principle 29,330 24,262 Cumulative effect on prior years of change in accounting principle 0 1,358 ---------------------- NET EARNINGS $ 29,330 $ 25,620 ======================
NOTE: Subsequent to the completion of the transaction, ITGI will be shown as a discontinued operation on the JEFCO financial statements. -----END PRIVACY-ENHANCED MESSAGE-----