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Jefferies Group Inc. Reports Operating Results (10-Q)

July 09, 2012 | About:

10qk

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Jefferies Group Inc. (JEF) filed Quarterly Report for the period ended 2012-05-31.

Jefferies Group, Inc. has a market cap of $2.63 billion; its shares were traded at around $12.63 with a P/E ratio of 14.5 and P/S ratio of 0.7. The dividend yield of Jefferies Group, Inc. stocks is 2.4%.

Highlight of Business Operations:

Non-interest expense of $600.0 million and $1,209.2 million for the three and six months ended May 31, 2012, respectively, reflect a $7.7 million, or 1%, and $38.0 million, or 3%, respectively, increase over the 2011 comparable periods. This net increase is primarily attributable to the costs in 2012 of the Global Commodities Group, and higher technology and communication costs, partially offset by lower compensation and benefit costs and by lower floor brokerage and clearing fees consistent with decreased equities revenue. Compensation costs as a percentage of Net revenues for the three and six month periods ended May 31, 2012 were 59.6% and 58.4%, respectively, as compared to 59.4% and 58.9% for the three and six month periods ended May 31, 2011, respectively.

Net revenues, before interest on mandatorily redeemable preferred interest, for the three months ended May 31, 2012 were $711.0 million, a decrease of 2%, as compared to $727.2 million for the three months ended May 31, 2011. Our 2012 results include the results of Jefferies Bache, acquired in July 2011. Secondary trading activity was muted in 2012 by global economic uncertainty, contributing to a decline in equities revenues on low volumes compared to the 2011 quarter. Investment banking revenue, while strong, decreased 10% to $297.0 million for the three months ended May 31, 2012 from $328.4 million for the three months ended May 31, 2011. Asset management revenue was negatively impacted by write-downs on certain of our investments in unconsolidated funds.

Investment banking revenue decreased 10% to $297.0 million for the three months ended May 31, 2012, as compared to revenue of $328.4 million for the three months ended May 31, 2011, principally driven by decreased advisory revenue. In the three months ended May 31, 2012, we served as financial advisor on 25 merger and acquisition transactions having an aggregate transaction value of approximately $10 billion, as compared to 29 transactions with an aggregate transaction value of $23 billion during the comparable quarter in the prior year. Notable transactions completed in the second quarter of fiscal 2012 included acting as joint financial advisor to Williams Companies Inc. on its $2.5 billion acquisition of Caiman Eastern Midstream, sole advisor to Physiotherapy Associates in its $510 million sale to Court Square Capital Partners, sole advisor to Semtech Corporation in its $494 million acquisition of Gennum Corporation and acting as joint financial advisor to Cordillera Energy Partners III, LLC in its $2.85 billion merger with Apache Corporation.

For the six months ended May 31, 2012, we recorded investment banking revenue of $582.8 million, 3% higher than the six months ended May 31, 2011. Our capital markets business produced revenue of $323.9 million compared to $296.5 million for the six months ended May 31, 2011, reflective of the improved market environment for debt underwritings and our success in winning book runner roles in the 2012 period. Revenue from our advisory business decreased 4%, or $12.1 million, for the six months ended May 31, 2012 as compared to revenue of $271.0 million for the six months ended May 31, 2011.

The provision for income taxes was a tax expense of $38.2 million and an effective tax rate of 35.8% for the three months ended May 31, 2012, compared with a provision of $45.8 million and an effective tax rate of 35.1% for the three months ended May 31, 2011. Income tax expense was $90.4 million and $106.7 million and the effective tax rate was 35.4% and 36.4% for the six months ended May 31, 2012 and 2011, respectively. The change in our effective tax rate for the periods ended May 31, 2012 as compared to the comparable period in the prior fiscal year is primarily attributable to differences in the mix of taxable profits by business and region.

Read the The complete Report

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