Jefferies Group Inc. (JEF) filed Quarterly Report for the period ended 2009-09-30.
Jefferies Group Inc. is a holding company whose affiliated companies including its principal operating subsidiary Jefferies & Company Inc. offer a variety of services for institutional investors and middle-market companies. Subsidiaries of Jefferies Group Inc. together comprise a full-service investment bank and institutional securities firm focused on the middle market. Jefferies offers financial advisory capital raising mergers and acquisitions and restructuring services to small and mid-cap companies. Jefferies Group Inc. has a market cap of $4.53 billion; its shares were traded at around $26.24 with and P/S ratio of 2.6. Jefferies Group Inc. had an annual average earning growth of 21.9% over the past 10 years.
Highlight of Business Operations:
Level 3 Assets and Liabilities — Level 3 assets were $842.2 million and $469.4 million as of September 30, 2009 and December 31, 2008, respectively, and represented approximately 9% and 10%, respectively, of total assets measured at fair value. Level 3 liabilities were $504.0 million and $11.7 million as of September 30, 2009 and December 31, 2008, respectively, and represented approximately 9% and 0.4%, respectively, of total liabilities measured at fair value. While our financial instruments sold, not yet purchased, which are included within liabilities on our Consolidated Statement of Financial Condition, are accounted for at fair value, we do not account for any of our other liabilities at fair value. At September 30, 2009 and December 31, 2008, Level 3 financial instruments were comprised of the following asset and liability classes:
During the three and nine months ended September 30, 2009, we had transfers of assets of $4.3 million and $119.3 million, respectively, from Level 2 to Level 3 and transfers of $10.9 million and $100.7 million, respectively, from Level 3 to Level 2. Transfers of assets from Level 2 to Level 3 during the three and nine months ended September 30, 2009 were primarily related corporate equity warrants and corporate debt securities where observable transaction data became less available for the specific class of securities in inventory that were transferred. During the nine months ended September 30, 2009, transfers of assets from Level 2 to Level 3 were primarily related to residential mortgage-backed securities where observable transaction data was less available and some high yield corporate bond positions as market quotes became less observable throughout the quarter due to less frequent or nominal market activity and the opaqueness of observable credit spreads. Transfers of assets from Level 3 to Level 2 for the three and nine months ended September 30, 2009 were primarily related to high yield corporate bonds where pricing information, trading activity observed and recently executed transactions provided transparency for purposes of determining fair values and related to residential mortgage-backed securities. During the three and nine months ended September 30, 2009, we had transfers of liabilities of $-0- million and $3.0 million, respectively, from Level 2 to Level 3 and transfers of liabilities of $1.6 and $5.1 million from Level 3 to Level 2. Net gains on Level 3 assets of $75.4 million for the three months ended September 30, 2009 are attributed primarily to increases in the fair value of certain mortgage-backed securities and corporate loans. For the nine months ended September 30, 2009, net gains on Level 3 assets of $30.1 million were primarily attributed to increases in the fair value of certain mortgage-backed securities, partially offset by equity warrants and certain equity securities due to declining underlying equity prices and increased market volatility, declines in the pricing for certain corporate debt securities and net writedowns on auction rate securities as market-based pricing levels and redemptions dampened in the second quarter of 2009. Net losses on Level 3 liabilities were $1.0 million and $0.8 million for the three and nine months ended September 30, 2009, respectively.
JEF is in the portfolios of Ian Cumming of Leucadia National, Ron Baron of Baron Funds, John Keeley of Keeley Fund Management, Tweedy Browne of Tweedy Browne CO LLC.
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