Segment Information

6 Months Ended

May 31, 2019

We are a diversified financial services company engaged in investment banking and capital markets, asset management and direct investing. In 2018, we made a number of strategic changes including the sale of 48% of National Beef and 100% of our interest in Garcadia. During the fourth quarter of 2018, we transferred to Jefferies Group our 50% interest in Berkadia and our LAM seed investments, thereby amalgamating our primary financial services operating businesses into one platform. Culminating with the fourth quarter reorganization, we began managing our business across three reportable operating segments consisting of Jefferies Group, Merchant Banking and Corporate. In connection with this change, we have reclassified the prior periods to conform to our current presentation.

Jefferies Group is the largest independent U.S. headquartered global full-service integrated investment banking and securities firm.

Merchant Banking consists of our various merchant banking businesses and investments, primarily including National Beef, Spectrum Brands, Linkem, Vitesse Energy Finance and JETX Energy, WeWork, HomeFed, Idaho Timber and FXCM. Our Merchant Banking businesses and investments also include Berkadia and our LAM seed investments, prior to their transfer to Jefferies Group in the fourth quarter of 2018, and Garcadia, prior to its sale in August 2018.

Corporate assets primarily consist of financial instruments owned, the deferred tax asset (exclusive of Jefferies Group's deferred tax asset), cash and cash equivalents. Corporate revenues primarily include interest income. We do not allocate Corporate revenues or overhead expenses to the operating units.

As discussed further in Note 23, on June 5, 2018, we sold 48% of National Beef to Marfrig and deconsolidated our investment in National Beef. Results prior to June 5, 2018 are classified in discontinued operations and are not included in the table below. Our retained 31% interest in National Beef is accounted for under the equity method, and results subsequent to the June 5, 2018 closing are included in Merchant Banking in the table below.

Certain information concerning our segments is presented in the following table. Consolidated subsidiaries are reflected as of the date a majority controlling interest was acquired. As discussed above, Jefferies Group is reflected in our consolidated financial statements utilizing a one month lag for the three and six months ended June 30, 2018.



	For the Three Months Ended						For the Six Months Ended
	May 31, 2019			June 30, 2018			May 31, 2019			June 30, 2018
	(In thousands)
Net revenues:
Reportable Segments:
Jefferies Group (1)	$	901,851		$	822,557		$	1,587,569		$	1,643,803
Merchant Banking (1)	187,324			86,417			323,662			160,318
Corporate	8,974			2,994			13,167			6,061
Total net revenues related to reportable segments	1,098,149			911,968			1,924,398			1,810,182
Consolidation adjustments	3,508			(809		)	5,702			(3,588		)
Total consolidated net revenues	$	1,101,657		$	911,159		$	1,930,100		$	1,806,594

Income (loss) from continuing operations before income taxes:
Reportable Segments:
Jefferies Group (1)	$	155,138		$	121,865		$	217,723		$	244,603
Merchant Banking (1)	51,224			(50,058		)	71,329			(99,315		)
Corporate	(13,885		)	(21,215		)	(35,228		)	(42,740		)
Income from continuing operations before income taxes related to reportable segments	192,477			50,592			253,824			102,548
Parent Company interest	(14,766		)	(14,750		)	(29,528		)	(29,496		)
Consolidation adjustments	5,768			1,673			8,500			2,226
Total consolidated income from continuing operations before income taxes	$	183,479		$	37,515		$	232,796		$	75,278

Depreciation and amortization expenses:
Reportable Segments:
Jefferies Group (1)	$	18,968		$	17,288		$	36,630		$	33,654
Merchant Banking (1)	16,951			13,740			32,368			24,664
Corporate	867			877			1,722			1,747
Total consolidated depreciation and amortization expenses	$	36,786		$	31,905		$	70,720		$	60,065

(1)

Amounts related to LAM and Berkadia are included in Merchant Banking prior to their transfer to Jefferies Group in the fourth quarter of 2018. For the three and six months ended June 30, 2018, net revenues related to the net assets transferred were $15.8 million and $(20.8) million, respectively, and income from continuing operations before income taxes related to the net assets transferred was $29.8 million and $9.1 million, respectively.

Interest expense classified as a component of Net revenues relates to Jefferies Group. For the three months ended May 31, 2019 and June 30, 2018, interest expense classified as a component of Expenses was primarily comprised of parent company interest ($14.8 million and $14.8 million, respectively) and Merchant Banking ($8.4 million and $9.5 million, respectively). For the six months ended May 31, 2019 and June 30, 2018, interest expense classified as a component of Expenses was primarily comprised of parent company interest ($29.5 million and $29.5 million, respectively) and Merchant Banking ($16.6 million and $16.3 million, respectively).