<PAGE> 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 September 24, 1999
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 1-14947
JEFFERIES GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4719745
- -------------------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11100 Santa Monica Blvd., 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 September 24, 1999, the registrant had 23,979,887 common shares, $.0001
par value, outstanding.
Page 1 of 20
<PAGE> 2
JEFFERIES GROUP, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 24, 1999
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
September 24, 1999 (unaudited) and December 31, 1998......................... 3
Consolidated Statements of Earnings (unaudited) -
Three Months and Nine Months Ended September 24, 1999
and September 25, 1998....................................................... 4
Consolidated Statement of Changes in Stockholders' Equity (unaudited) -
Nine Months Ended September 24, 1999......................................... 5
Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 24, 1999 and September 25, 1998.................. 6
Notes to Consolidated Financial Statements (unaudited)......................... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 19
Item 6. Exhibits and Reports on Form 8-K............................................... 19
</TABLE>
Page 2 of 20
<PAGE> 3
JEFFERIES GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 24, December 31,
1999 1998
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents ................................................ $ 32,625 $ 55,581
Cash and securities segregated and on deposit for
regulatory purposes or deposited with clearing and
depository organizations ................................................ 54,297 62,518
Receivable from brokers and dealers ...................................... 2,269,595 2,018,090
Receivable from customers, officers and directors ........................ 199,572 93,526
Securities owned ......................................................... 211,621 100,797
Investments .............................................................. 135,861 93,463
Investment in discontinued operations of ITG ............................. -- 108,333
Premises and equipment ................................................... 31,728 20,524
Other assets ............................................................. 87,532 65,032
----------- -----------
$ 3,022,831 $ 2,617,864
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans ............................................................... $ -- $ 21,000
Payable to brokers and dealers ........................................... 1,974,374 1,602,906
Payable to customers ..................................................... 235,800 226,774
Securities sold, not yet purchased ....................................... 80,082 39,365
Accrued expenses and other liabilities ................................... 196,038 243,657
----------- -----------
2,486,294 2,133,702
Long-term debt ........................................................... 149,460 149,387
----------- -----------
2,635,754 2,283,089
=========== ===========
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value. Authorized
10,000,000 shares; none issued ....................................... -- --
Common stock, $.0001 par value. Authorized
100,000,000 shares; issued 24,007,899 shares in 1999
and 23,368,268 shares in 1998 ........................................ 2 234
Additional paid-in capital ............................................. 67,308 28,943
Retained earnings ...................................................... 321,695 344,441
Less:
Treasury stock, at cost, 28,012 shares in 1999 and
2,138,238 shares in 1998 ........................................... (587) (37,125)
Accumulated other comprehensive income (loss):
Currency translation adjustments ................................... 328 (49)
Additional minimum pension liability ............................... (1,669) (1,669)
----------- -----------
Total accumulated other comprehensive income (loss) .................. (1,341) (1,718)
----------- -----------
Total stockholders' equity ....................................... 387,077 334,775
----------- -----------
$ 3,022,831 $ 2,617,864
=========== ===========
</TABLE>
See accompanying unaudited notes to consolidated financial statements.
Page 3 of 20
<PAGE> 4
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- --------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Commissions ................................. $ 48,846 $ 49,399 $148,229 $133,416
Principal transactions ...................... 49,046 34,103 163,935 123,337
Corporate finance ........................... 16,199 13,489 66,491 109,604
Interest .................................... 27,576 25,934 83,718 68,013
Other ....................................... 4,141 1,116 7,442 3,218
--------- --------- --------- ---------
Total revenues ......................... 145,808 124,041 469,815 437,588
Interest expense .............................. 22,725 20,303 70,165 57,318
--------- --------- --------- ---------
Revenues, net of interest expense ............. 123,083 103,738 399,650 380,270
--------- --------- --------- ---------
Non-interest expenses:
Compensation and benefits ................... 76,743 63,855 244,256 237,163
Floor brokerage and clearing fees ........... 8,155 8,399 24,320 23,488
Communications .............................. 11,437 12,213 32,532 35,611
Occupancy and equipment rental .............. 4,234 3,347 11,359 10,396
Travel and promotional ...................... 4,042 4,203 11,635 14,282
Other ....................................... 2,981 4,891 14,640 16,523
--------- --------- --------- ---------
Total non-interest expenses ............ 107,592 96,908 338,742 337,463
--------- --------- --------- ---------
Earnings before income taxes .................. 15,491 6,830 60,908 42,807
Income taxes .................................. 6,651 1,914 25,625 16,222
--------- --------- --------- ---------
Earnings from continuing operations ........... 8,840 4,916 35,283 26,585
Earnings from discontinued
operations, net of income taxes ............. 91 10,760 11,238 24,393
--------- --------- --------- ---------
Net earnings ........................... $ 8,931 $ 15,676 $ 46,521 $ 50,978
========= ========= ========= =========
Earnings per share:
Basic:
Continuing operations ..................... $ 0.37 $ 0.22 $ 1.49 $ 1.20
Discontinued operations ................... -- 0.48 0.47 1.09
--------- --------- --------- ---------
Net earnings .............................. $ 0.37 $ 0.70 $ 1.96 $ 2.29
========= ========= ========= =========
Diluted:
Continuing operations ..................... $ 0.36 $ 0.21 $ 1.47 $ 1.16
Discontinued operations.................... 0.01 0.45 0.46 1.02
--------- --------- --------- ---------
Net earnings .............................. $ 0.37 $ 0.66 $ 1.93 $ 2.18
========= ========= ========= =========
Weighted average shares:
Basic ...................................... 23,971 22,432 23,708 22,233
Diluted .................................... 24,288 22,965 23,936 22,918
</TABLE>
See accompanying unaudited notes to consolidated financial statements.
Page 4 of 20
<PAGE> 5
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 24, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Accumulated Total
Additional Other Stock-
Common Paid-in Retained Treasury Comprehensive holders'
Stock Capital Earnings Stock Income (Loss) Equity
--------- ---------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 ............ $ 234 $ 28,943 $ 344,441 $ (37,125) $ (1,718) $ 334,775
Exercise of stock options,
including tax benefits
(1,108,880 shares) ........... 10 28,871 -- -- -- 28,881
Purchase of treasury stock
(375,601 shares) ............. -- -- -- (17,587) -- (17,587)
Capital Accumulation Plan
distributions, including tax
benefits (1,712,549 shares) .. -- 24,335 -- 30,737 -- 55,072
Change in proportionate
share of subsidiary's equity
related to stock issuances /
purchases at the subsidiary .. -- -- 1,121 -- -- 1,121
Issuance of restricted stock
(304,029 shares), net of
forfeitures, and additional
vesting of restricted stock
shares, including tax benefits 3 8,302 -- -- -- 8,305
Spin-off of Investment
Technology Group, Inc., net
of $60,000 cash dividend ..... (245) (23,143) (66,846) 23,388 -- (66,846)
Quarterly dividends
($.05 per share per quarter) -- -- (3,542) -- -- (3,542)
Comprehensive income:
Net earnings ................ -- -- 46,521 -- -- 46,521
Other comprehensive
income (loss), net of tax:
Translation adjustment ...... -- -- -- -- 377 377
---------
Comprehensive income .......... -- -- -- -- -- 46,898
--------- --------- --------- --------- --------- ---------
Balance,
September 24, 1999 ........... $ 2 $ 67,308 $ 321,695 $ (587) $ (1,341) $ 387,077
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying unaudited notes to consolidated financial statements.
Page 5 of 20
<PAGE> 6
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
Sept. 24, Sept. 25,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings .......................................................... $ 46,521 $ 50,978
--------- ---------
Adjustments to reconcile net earnings to net cash provided by (used in)
operations:
Depreciation and amortization ....................................... 6,607 11,727
(Increase) decrease in cash and securities segregated
and on deposit for regulatory purposes ............................ 8,221 (17,521)
(Increase) decrease in receivables:
Brokers and dealers ............................................... (251,505) (565,561)
Customers, officers and directors ................................. (106,046) 19,521
(Increase) decrease in securities owned ............................. (110,824) 109,194
(Increase) decrease in investments .................................. (42,398) 3,823
(Increase) decrease in investment in discontinued
operations ........................................................ 41,487 (30,242)
(Increase) decrease in other assets ................................. (22,500) 16,315
Increase (decrease) in operating payables:
Brokers and dealers ............................................... 371,468 599,232
Customers ......................................................... 9,026 (17,185)
Increase (decrease) in securities sold, not yet purchased ........... 40,717 (125,155)
Decrease in accrued expenses and other liabilities .................. (47,619) (54,338)
--------- ---------
Total adjustments ............................................ (103,366) (50,190)
--------- ---------
Net cash provided by (used in) operating activities .......... (56,845) 788
--------- ---------
</TABLE>
Continued on next page.
See accompanying unaudited notes to consolidated financial statements.
Page 6 of 20
<PAGE> 7
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
Sept. 24, Sept. 25,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from (payments on):
Bank loans ............................................................ (21,000) --
Repurchase of treasury stock .......................................... (17,587) (11,692)
Dividends paid ........................................................ (3,542) (3,113)
Exercise of stock options ............................................. 28,881 11,463
Issuance of common stock shares ....................................... -- 2,181
Issuance of restricted stock .......................................... 8,305 895
Capital Accumulation Plan distributions ............................... 55,072 6,086
Change in proportionate share of subsidiary's equity .................. 1,121 4,353
-------- --------
Net cash provided by financing activities ......................... 51,250 10,173
-------- --------
Cash flows from investing activities -
purchase of premises and equipment ......................................... (17,738) (8,654)
-------- --------
Effect of foreign currency translation on cash ............................... 377 (284)
-------- --------
Net increase (decrease) in cash and cash equivalents............... (22,956) 2,023
Cash and cash equivalents - beginning of period .............................. 55,581 58,225
-------- --------
Cash and cash equivalents - end of period .................................... $ 32,625 $ 60,248
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ................................................................. $ 69,060 $ 56,714
======== ========
Income taxes ............................................................. $ 12,440 $ 33,328
======== ========
</TABLE>
Supplemental disclosure of non-cash financing activities:
In April 1999, Jefferies Group, Inc. spun-off its investment in Investment
Technology Group, Inc., which resulted in a $66,846 reduction in stockholders'
equity.
See accompanying unaudited notes to consolidated financial statements.
Page 7 of 20
<PAGE> 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. ("Group") and all its subsidiaries ("Company"), including
Jefferies & Company, Inc. ("JEFCO"). The accounts of Investment Technology
Group, Inc. and all its subsidiaries (collectively "ITG"), including its wholly
owned subsidiary, ITG Inc. are included in the financial statements as
discontinued operations up to April 27, 1999 (the spin-off date). The accounts
of W & D Securities, Inc. ("W & D") are consolidated because of the nature and
extent of the Group's ownership interest in W & D. The Company and its
subsidiaries (after the discontinuance of ITG) are primarily engaged in a single
line of business as a securities broker-dealer, which includes several types of
services, such as principal and agency transactions in equity, convertible debt
and high yield securities, as well as corporate finance activities.
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 periods and should be read in conjunction with the
Company's annual report for the year ended December 31, 1998.
SECURITIES TRANSACTIONS
All transactions in securities, commission revenues and related expenses
are recorded on a trade-date basis.
Securities owned and securities sold, not yet purchased, are valued at
market, and unrealized gains or losses are reflected in revenues from principal
transactions.
COMMON AND PREFERRED STOCK
In conjunction with the spin-off of ITG, the stated par value per share of
both the Company's common and preferred stock was changed from $0.01 to $.0001
and 774,278 shares of treasury stock were retired. A total of $245,000 was
reclassified to the Company's additional paid-in capital account from the
Company's common stock account.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior period's amounts to
conform to the current period's presentation.
Page 8 of 20
<PAGE> 9
RECEIVABLE FROM, AND PAYABLE TO, BROKERS AND DEALERS
Receivable from and payable to brokers and dealers consists of the
following as of September 24, 1999 (in thousands of dollars):
<TABLE>
<S> <C>
Receivable from brokers and dealers:
Securities borrowed.............................. $ 2,129,032
Securities purchased under agreements to resell.. 10,540
Other............................................ 130,023
------------
$ 2,269,595
============
Payable to brokers and dealers:
Securities loaned................................ $ 1,958,067
Securities sold under agreements to repurchase... 6,378
Other............................................ 9,929
------------
$ 1,974,374
============
</TABLE>
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 September 24,
1999 (in thousands of dollars):
<TABLE>
<CAPTION>
Securities
Sold,
Securities Not Yet
Owned Purchased
---------- -------
<S> <C> <C>
Corporate equity securities ........................... $ 94,089 $ 60,519
High-yield securities ................................. 70,559 17,851
Corporate debt securities ............................. 40,200 1,219
U.S. Government and agency obligations ................ 5,975 --
Options ............................................... 798 493
-------- --------
$211,621 $ 80,082
======== ========
</TABLE>
INVESTMENTS
Investments consist of the following as of September 24, 1999 (in thousands
of dollars):
<TABLE>
<S> <C>
Debt and equity investments.......................... $ 60,939
Partnership interests................................ 65,405
Equity and debt interests in affiliates.............. 9,517
-----------
$ 135,861
===========
</TABLE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks and short term investments.
Cash equivalents are part of the cash management activities of the Company and
generally mature within 90 days. The following is a summary of cash and cash
equivalents as of September 24, 1999 (in thousands of dollars):
<TABLE>
<S> <C>
Cash in banks........................................ $ 16,136
Short term investments............................... 16,489
--------
$ 32,625
========
</TABLE>
Page 9 of 20
<PAGE> 10
EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the three month and nine
month periods ended September 24, 1999 and September 25, 1998 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------- --------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Earnings from continuing operations ............. $ 8,840 $ 4,916 $ 35,283 $ 26,585
Earnings from discontinued operations ........... 91 10,760 11,238 24,393
-------- -------- -------- --------
Net earnings for basic earnings per share ....... 8,931 15,676 46,521 50,978
Adjustment - stock options on subsidiary ....... (2) (484) (422) (1,061)
-------- -------- -------- --------
Adjusted earnings - diluted calculation ......... $ 8,929 $ 15,192 $ 46,099 $ 49,917
======== ======== ======== ========
Shares for basic and diluted calculations:
Average number of common shares ................. 23,971 20,956 23,702 20,824
Capital Accumulation Plan unissued shares ....... -- 1,476 6 1,409
-------- -------- -------- --------
Average shares used in basic computation ........ 23,971 22,432 23,708 22,233
Stock options ................................... 302 459 207 553
Other unissued common stock equivalents ......... 15 74 21 132
-------- -------- -------- --------
Average shares used in diluted computation ...... 24,288 22,965 23,936 22,918
======== ======== ======== ========
Earnings per share:
Basic:
Earnings from continuing operations ............. $ 0.37 $ 0.22 $ 1.49 $ 1.20
Earnings from discontinued operations ........... -- 0.48 0.47 1.09
-------- -------- -------- --------
Net earnings .................................... $ 0.37 $ 0.70 $ 1.96 $ 2.29
======== ======== ======== ========
Diluted:
Earnings from continuing operations ............. $ 0.36 $ 0.21 $ 1.47 $ 1.16
Earnings from discontinued operations ........... 0.01 0.45 0.46 1.02
-------- -------- -------- --------
Net earnings .................................... $ 0.37 $ 0.66 $ 1.93 $ 2.18
======== ======== ======== ========
</TABLE>
OTHER COMPREHENSIVE INCOME
The following summarizes other comprehensive income and accumulated other
comprehensive income at September 24, 1999 and for the three months then ended
(in thousands of dollars):
<TABLE>
<CAPTION>
Before-Tax Income Tax Net-of-Tax
Amount or Benefit Amount
---------- ---------- ----------
<S> <C> <C> <C>
Currency translation adjustments ... $ 1,017 $ -- $ 1,017
Minimum pension liability adjustment -- -- --
------- ----- -------
Other comprehensive income (loss) .. $ 1,017 $ -- $ 1,107
======= ===== =======
<CAPTION>
Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustments Adjustment Income (Loss)
----------- ----------- -------------
<S> <C> <C> <C>
Beginning at June 25, 1999 ......... $ (689) $(1,669) $(2,358)
Change in third quarter of 1999 .... 1,017 -- 1,017
------- ----- -------
Ending at September 24, 1999 ....... $ 328 $(1,669) $(1,341)
======= ===== =======
</TABLE>
Page 10 of 20
<PAGE> 11
The following summarizes other comprehensive income and accumulated other
comprehensive income at September 25, 1998 and for the three months then ended
(in thousands of dollars):
<TABLE>
<CAPTION>
Before-Tax Income Tax Net-of-Tax
Amount or Benefit Amount
---------- ---------- ----------
<S> <C> <C> <C>
Currency translation adjustments .... $ 328 $ -- $ 328
Minimum pension liability adjustment. -- -- --
------- ----- -------
Other comprehensive income (loss) ... $ 328 $ -- $ 328
======= ===== =======
Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustments Adjustment Income (Loss)
----------- ---------- -------------
<S> <C> <C> <C>
Beginning at June 26, 1998 .......... $(1,234) $(1,520) $(2,754)
Change in third quarter of 1998 ..... 328 -- 328
------- ------- -------
Ending at September 25, 1998 ........ $ (906) $(1,520) $(2,426)
======= ======= =======
</TABLE>
Comprehensive income for the three months ended September 24, 1999 and
September 25, 1998 was as follows:
<TABLE>
<CAPTION>
Sept. 24, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
Net earnings..................................... $ 8,931 $ 15,676
Other comprehensive income....................... 1,017 328
------- --------
Comprehensive income............................. $ 9,948 $ 16,004
======= ========
</TABLE>
The following summarizes other comprehensive income and accumulated other
comprehensive income at September 24, 1999 and for the nine months then ended
(in thousands of dollars):
<TABLE>
<CAPTION>
Before-Tax Income Tax Net-of-Tax
Amount or Benefit Amount
---------- ---------- ----------
<S> <C> <C> <C>
Currency translation adjustments ... $ 377 $ -- $ 377
Minimum pension liability adjustment -- -- --
------- ----- -------
Other comprehensive income (loss) .. $ 377 $ -- $ 377
======= ===== =======
<CAPTION>
Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustments Adjustment Income (Loss)
----------- ---------- -------------
<S> <C> <C> <C>
Beginning at December 31, 1998 ..... $ (49) $(1,669) $(1,718)
Change in 1999 ..................... 377 -- 377
------- ------- -------
Ending at September 24, 1999 ....... $ 328 $(1,669) $(1,341)
======= ======= =======
</TABLE>
Page 11 of 20
<PAGE> 12
The following summarizes other comprehensive income and accumulated other
comprehensive income at September 25, 1998 and for the nine months then ended
(in thousands of dollars):
<TABLE>
<CAPTION>
Before-Tax Income Tax Net-of-Tax
Amount or Benefit Amount
---------- ---------- ----------
<S> <C> <C> <C>
Currency translation adjustments ... $ (284) $ -- $ (284)
Minimum pension liability adjustment -- -- --
------- ------- -------
Other comprehensive income (loss) .. $ (284) $ -- $ (284)
======= ======= =======
<CAPTION>
Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustments Adjustment Income (Loss)
----------- ---------- -------------
<S> <C> <C> <C>
Beginning at December 31, 1997 ..... $ (622) $(1,520) $(2,142)
Change in 1998 ..................... (284) -- (284)
------- ------- -------
Ending at September 25, 1998 ....... $ (906) $(1,520) $(2,426)
======= ======= =======
</TABLE>
Comprehensive income for the nine months ended September 24, 1999 and
September 25, 1998 was as follows:
<TABLE>
<CAPTION>
Sept. 24, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
Net earnings..................................... $ 46,521 $ 50,978
Other comprehensive income....................... 377 (284)
--------- --------
Comprehensive income............................. $ 46,898 $ 50,694
========= ========
</TABLE>
NET CAPITAL REQUIREMENTS
As registered broker-dealers, JEFCO and W & D are subject to the Securities
and Exchange Commission's Uniform Net Capital Rule (Rule 15c3-1), which requires
the maintenance of minimum net capital. JEFCO and W & D 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 $250,000 or 2% of the
aggregate debit balances arising from customer transactions, as defined.
Net capital changes from day to day, but as of September 24, 1999, JEFCO's
and W & D's net capital was $219.2 million and $2.5 million, respectively, which
exceeded minimum net capital requirements by $213.8 million and $2.3 million,
respectively.
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):
<TABLE>
<CAPTION>
1st Qtr. 2nd Qtr. 3rd Qtr.
-------- -------- --------
<S> <C> <C> <C>
1999....... $.05 $.05 $.05
1998....... $.05 $.05 $.05
</TABLE>
OFF-BALANCE SHEET RISK
In the normal course of business, the Company had letters of credit
outstanding aggregating $36.1 million at September 24, 1999, to satisfy various
collateral requirements in lieu of depositing cash or securities.
Page 12 of 20
<PAGE> 13
SEGMENT REPORTING
The Company's business is predominantly in the United States with
approximately 9% of revenues and 1% of assets attributable to international
operations.
On April 27, 1999, Group and ITG consummated the separation of ITG from the
other Group businesses.
Financial information for the discontinued business segment is summarized
as follows (in thousands of dollars):
COMPONENTS OF DISCONTINUED OPERATIONS OF ITG
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
SEPT. 24, SEPT. 25, SEPT. 24, SEPT. 25,
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net earnings of ITG............................... $ 63 $ 13,884 $ 9,201 $ 31,174
Deferred taxes on ITG's IPO gain.................. -- -- 12,843 --
Less: Write-off of goodwill on JEF related to ITG -- -- 5,208 --
Less: Company's net spin-off related expenses..... (41) 552 3,807 1,104
Less: Minority interest in ITG.................... 13 2,572 1,791 5,677
----------- ----------- ------------ -----------
Discontinued operations of ITG.................... $ 91 $ 10,760 $ 11,238 $ 24,393
=========== =========== ============ ===========
</TABLE>
Cash paid for interest and income taxes
The interest paid and income taxes paid amounts included in the
Consolidated Statements of Cash Flows included amounts related to discontinued
operations of ITG (in thousands of dollars).
<TABLE>
<CAPTION>
SEPT. 24, SEPT. 25,
1999 1998
--------- ---------
<S> <C> <C>
Interest paid......................................... $ 31 $ 31
Income taxes paid..................................... $6,538 $23,530
</TABLE>
Page 13 of 20
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This document and in particular the section entitled "The Year 2000
Project" contains certain forward-looking statements. These statements 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," "will," "would,"
"expect," or variations of such terms, may not occur as presently anticipated
due to various uncertainties. As a result, no forward-looking statement should
be regarded as a representation by the Company or any other person that the
presently anticipated events will occur as described herein.
ANALYSIS OF FINANCIAL CONDITION
Total assets increased $404.9 million from $2,617.9 million at December 31,
1998 to $3,022.8 million at September 24, 1999. The increase in assets is mostly
due to an increase in the balances associated with JEFCO's securities borrowed
and loaned matched book business.
THIRD QUARTER 1999 VERSUS THIRD QUARTER 1998
Revenues, net of interest expense, increased 19% to $123.1 million,
compared to $103.7 million for the third quarter of 1998. The increase was due
primarily to a $14.9 million, or 44%, increase in principal transactions, a $3.0
million, or 271%, increase in other income, and a $2.7 million, or 20%, increase
in corporate finance, partially offset by a $780,000, or 14%, decrease in net
interest income and a $553,000, or 1%, decrease in commissions. Commission
revenues decreased mostly due to the Equities Division. Revenues from principal
transactions increased primarily due to increased trading gains related to other
proprietary trading. Corporate finance revenues increased despite the currently
difficult environment for underwritings. Net interest income (interest revenues
less interest expense) was down $780,000 mostly due to a reduction in other
interest income.
Total non-interest expenses increased 11% to $107.6 million, compared to
$96.9 million for the third quarter of 1998. Compensation and benefits increased
$12.9 million, or 20%, mostly due to an increase in incentive based compensation
accruals. Other expense decreased $1.9 million or 39%, mostly due to adjustments
of accruals for legal, bad debts and other miscellaneous expenses. Occupancy and
equipment rental increased $887,000 or 27%, due mostly to office space
relocation expenses. Communications decreased $776,000, or 6%, mostly due to a
reduction in Y2K costs. Both travel and promotional and floor brokerage and
clearing fees remained relatively unchanged.
Earnings before income taxes were up 127% to $15.5 million, compared to
$6.8 million for the same prior year period. The effective tax rate was
approximately 42.9% for the third quarter of 1999 and approximately 28.0% for
the third quarter of 1998. The increase in the tax rate is mostly due to the
favorable impact on the 1998 tax rate of a reversal of deferred taxes. The net
effect of the increase in earnings before income taxes and the increase in
effective tax rate was that earnings from continuing operations were up $3.9
million to $8.8 million, compared to $4.9 million for the same prior year
period.
Earnings from discontinued operations, net of income taxes, amounted to a
relatively minor $91,000 and represent adjustments to spin-off expenses recorded
in the second quarter of 1999.
Basic earnings from continuing operations per share were $0.37 for the
third quarter of 1999 on 23,971,000 shares compared to $0.22 in the 1998 period
on 22,432,000 shares. Diluted earnings from continuing operations per share were
$0.36 for the third quarter of 1999 on 24,288,000 shares compared to $0.21 in
the comparable 1998 period on 22,965,000 shares.
Page 14 of 20
<PAGE> 15
Basic net earnings per share were $0.37 for the third quarter of 1999 on
23,971,000 shares compared to $0.70 in the 1998 period on 22,432,000 shares.
Diluted net earnings per share were $0.37 for the third quarter of 1999 on
24,288,000 shares compared to $0.66 in the comparable 1998 period on 22,965,000
shares.
FIRST NINE MONTHS 1999 VERSUS FIRST NINE MONTHS 1998
Revenues, net of interest expense, increased 5% to $399.7 million, compared
to $380.3 million for the first nine months of 1998. The increase was due
primarily to a $40.6 million, or 33%, increase in principal transactions, a
$14.8 million, or 11%, increase in commissions, a $4.2 million, or 131%,
increase in other income, and a $2.9 million, or 27%, increase in net interest
income, offset by a $43.1 million, or 39%, decrease in corporate finance.
Commission revenues increased, led by the Equities and Convertible Divisions.
Revenues from principal transactions increased primarily due to increased
trading gains in the High Yield Division, Equities Division and in other
proprietary trading. Corporate finance revenues declined due to the currently
difficult environment for underwritings. Net interest income (interest revenues
less interest expense) was up mostly due to an excess of securities borrowed
interest income over securities loaned interest expense.
Total non-interest expenses increased slightly to $338.7 million, compared
to $337.5 million for the first nine months of 1998. Compensation and benefits
increased $7.1 million, or 3%, mostly due to an increase in incentive based
compensation accruals. Communications decreased $3.1 million, or 9%, including a
$1.2 million reduction in Y2K costs, mostly due to cost reduction measures taken
in the later part of 1998. Travel and promotional decreased $2.6 million, or
19%, largely due to a reduction in business travel. Other expense decreased $1.9
million, or 11%, mostly due to reductions in printing and postage/courier
expenses. Occupancy and equipment rental increased $1.0 million, or 9%, due
mostly to office space relocation expenses. Floor brokerage and clearing fees
increased $832,000, or 4%, due to increased volume of business executed on the
various exchanges.
Earnings before income taxes were up 42% to $60.9 million, compared to
$42.8 million for the same prior year period. The effective tax rate was
approximately 42.1% for the first nine months of 1999 and approximately 37.9%
for the first nine months of 1998. The increase in the tax rate is mostly due to
the favorable impact on the 1998 tax rate of a reversal of deferred taxes. The
net effect of the increase in earnings before income taxes and the increase in
effective tax rate was that earnings from continuing operations were up 33% to
$35.3 million, compared to $26.6 million for the same prior year period.
Earnings from discontinued operations, net of income taxes, were down $13.2
million, or 54%, mostly due to the cessation of ITG as a subsidiary of the
Company.
Basic earnings from continuing operations per share were $1.49 for the
first nine months of 1999 on 23,708,000 shares compared to $1.20 in the 1998
period on 22,233,000 shares. Diluted earnings from continuing operations per
share were $1.47 for the first nine months of 1999 on 23,936,000 shares compared
to $1.16 in the comparable 1998 period on 22,918,000 shares.
Basic net earnings per share were $1.96 for the first nine months of 1999
on 23,708,000 shares compared to $2.29 in the 1998 period on 22,233,000 shares.
Diluted net earnings per share were $1.93 for the first nine months of 1999 on
23,936,000 shares compared to $2.18 in the comparable 1998 period on 22,918,000
shares.
LIQUIDITY AND CAPITAL RESOURCES
During June 1999, JEFCO obtained a NASD Regulation approved $120,000,000
revolving credit facility to be used in connection with underwriting activities.
The revolving credit facility terminates in June 2001. Loans under this facility
bear interest at 2.5% over either the Federal funds rate or the London Interbank
Offered Rate. There have been no borrowings against the revolving credit
facility.
Page 15 of 20
<PAGE> 16
REVENUES BY SOURCE
The following provides a breakdown of total revenues by source for the
three months and nine months ended September 24, 1999 and September 25, 1998.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------
Sept. 24, 1999 Sept. 25, 1998
---------------------- -------------------------
% of % of
Total Total
Amount Revenues Amount Revenues
------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commissions and principal transactions:
Equities ......................... $ 64,123 44% $ 67,444 54%
International .................... 15,322 10 11,807 9
High Yield ....................... 6,700 5 6,207 5
Convertible ...................... 4,074 3 3,231 3
Other proprietary trading ........ 7,673 5 (5,187) (4)
------------------------ -----------------------
Total ........................ 97,892 67 83,502 67
Corporate finance ..................... 16,199 11 13,489 11
Interest .............................. 27,576 19 25,934 21
Other ................................. 4,141 3 1,116 1
------------------------ -----------------------
Total revenues ................. $ 145,808 100% $ 124,041 100%
======================== =======================
<CAPTION>
Nine Months Ended
------------------------------------------------------
Sept. 24, 1999 Sept. 25, 1998
------------------------ -------------------------
% of % of
Total Total
Amount Revenues Amount Revenues
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Commissions and principal transactions:
Equities ......................... $206,543 44% $184,019 42%
International .................... 41,651 9 37,386 9
High Yield ....................... 37,498 8 24,772 6
Convertible ...................... 14,477 3 8,619 2
Other proprietary trading ........ 11,995 2 1,957 0
---------------------- ----------------------
Total ........................ 312,164 66 256,753 59
Corporate finance ..................... 66,491 14 109,604 25
Interest .............................. 83,718 18 68,013 15
Other ................................. 7,442 2 3,218 1
---------------------- ----------------------
Total revenues ................. $469,815 100% $437,588 100%
====================== ======================
</TABLE>
THE YEAR 2000 PROJECT
The Y2K preparedness effort by the Company (the "Y2K Project") and its
subsidiaries began in late 1997 and early 1998 with an initial assessment of the
Company's systems, its risk of exposure, the steps necessary to achieve Y2K
compliance, and the resources necessary to implement those steps. As a result,
the Company engaged Keane, Inc. as independent Y2K consultants, and Ernst &
Young, LLP ("E&Y") to provide quarterly reviews of the Y2K Project as an
internal audit outsourcer and to provide the independent accountant's report
required by Release No. 34-40608. Together with the advice of these
professionals, the Company formulated and adopted a Y2K Master Plan.
Page 16 of 20
<PAGE> 17
The first phase of the Y2K Project, the Inventory, Assessment and Planning
phase, involved a complete assessment of the Company's systems, both information
technology ("IT") related and non-IT related, and a survey of all vendors and
key clients. Systems were categorized into one of three "Triage" Levels -
Mission Critical, Business Important, or Other, with "Mission Critical" defined
as those systems, the failure of which would result in the Company being unable
to conduct business. The Company also created the framework for the Remediation
and Testing phase that would follow, and set schedules for reaching the
Operational Sustainability and Fully Compliant phases. This planning process
provided a guide for each of the Company's divisions in its preparation of more
detailed project plans that outline specific areas of work on each system. The
Y2K Project called for the devotion of resources primarily to Mission Critical
systems during 1998, and Business Important and Other systems primarily in the
first quarter of 1999.
Current State of Readiness
The Company completed the first phase of the Y2K Project (Inventory,
Assessment and Planning) during 1998, and completed the Remediation and Testing
phase on September 30, 1999. The Company has polled each of its vendors about
their Y2K compliance. Of the 668 vendors contacted, 620 (92.3%) have responded
and all who responded have indicated that they are or intend to become Y2K
compliant by mid-1999. Though none of the remaining vendors provides Mission
Critical services, the Company intends to attempt to obtain assurances from the
remaining vendors as time permits. Notwithstanding these representations from
its vendors, the Company is not relying on vendor statements of readiness but
has independently tested each system and connection as part of the Y2K Project
and continues to monitor the compliance of key vendor products. The Company has
obtained assurances from all its vendors of Mission Critical systems that each
vendor is Y2K compliant and the Company has no reason to believe any of those
vendors will be unable to sustain Y2K compliance through the remainder of the
year. However, because the Company may be forced to rely on contingency plans,
which may have a material adverse effect on the Company's business and
operations, as discussed below, the Company continues to independently test each
system and connection for Y2K compliance.
The Company's representatives have also contacted and tested with certain
key clients. Due to the nature of the Company's business, the clients that
comprise the vast majority of the Company's revenues are institutional and are
regulated by various governmental and self-regulatory bodies. The Company has
obtained assurances on the Y2K compliance of a majority of its key clients
through public disclosures and filings. In addition, the Company intends to
proactively work with clients to ensure their continued access to the Company's
services through the Year 2000 and to supply contingency plans to clients in the
event client system failures prevent interaction with the Company through
traditional methods.
The Company has completed regression testing and implementation of all
systems needed to participate in the Securities Industry Association's ("SIA")
street-wide testing and successfully tested those systems in a forward date
environment during the SIA tests. The SIA tests resulted in no external Y2K
related errors and only minor internal errors. The Company has also obtained
compliant versions of all key systems from third party vendors and is testing
those systems.
As of October 1, 1999, the Company "locked down" all IT systems and is no
longer permitting any changes to production systems without business unit
approval, IT approval, and full Y2K testing. Other than the implementation of
the Company's new internal payroll system which is scheduled for completion on
November 1, 1999, the Company expects to resist all new development except
changes that are required by regulation, are necessary to correct a specific
production problem, or are part of a Y2K contingency plan.
The Company is working with its landlords and lessors to assure the
continued functionality of the Mission Critical non-IT systems upon which it is
dependent, and is in the process of preparing contingency plans for non-IT
failures as described below. Other than its internal audits and periodic
reporting requirements to the Commission and the NASD, the Company has not been
reviewed or audited by any state or federal regulators.
Page 17 of 20
<PAGE> 18
Costs to Address Y2K Issues
The Company's budget for the Y2K Project is $17.3 million. Current spending
rates and projected expenses indicate that the Company will stay within that
budget. As of September 1999, approximately $15.5 million of costs in the budget
have already been incurred. The remainder of the Y2K budget will be spent
re-testing software as a result of product upgrades, confirming the Y2K
compliance of vendors and clients, implementing the Y2K Contingency Plan, and as
a reserve for future remediation in the event of any Y2K failure.
Risks
Though the Company has now achieved Operational Sustainability, a number of
material risks remain which could have a materially adverse impact on the
Company. These risks generally arise as a result of either: (1) failures of
internal systems or (2) failures of third party systems. Despite the
considerable testing and remediation efforts the Company has undertaken, latent
errors in the Company's internal systems that remain undetected could cause
failures in those systems. Failures in one or more key systems would almost
certainly result in substantial impairment of the Company's ability to
efficiently process orders and trades or to perform its clearing functions.
Although the Company expects that the contingency plans discussed below will
allow it to continue operations, those contingency plans may not support the
volume of trading the Company is accustomed to and could therefore cause
substantial losses in revenue while they are relied upon. In the event failures
occur, lost data may result in failed trades and related violations of NASD and
SEC rules and regulations. To minimize the time during which it must rely on any
contingency plan, the Company plans to devote all available resources to
restoring normal system operations in the event any failures occur.
There is also a substantial risk that failures by third parties could
compromise the major order-processing systems upon which the Company is heavily
dependent. Vendors such as Automatic Data Processing, Inc. and the Securities
Industry Automation Corporation have represented to the Company that they either
are or intend to become Y2K compliant and the Company has worked closely with
each of these parties as they prepare for Y2K, but the failure of any one of
these systems could result in a significant interruption of normal business for
the Company. Due to the interdependence of the Company's systems on those third
party systems, the Company does not believe any effective replacement products
could be adopted if those systems are not remediated and is therefore focusing
its attention on assisting with the remediation and testing process and on
developing contingency plans.
In addition, there is also a risk that the Company's ability to conduct
transactions will be materially impaired by the failure of any significant
component of the national clearing and settlement system, failures of major
counterparties, exchanges or financial institutions in the marketplace. Failures
by one or more of the New York Stock Exchange, Inc., the Nasdaq Stock Market,
the Depository Trust Company, the National Securities Clearing Corporation or
any of the largest banks or brokerage firms could prevent the entire market from
effectively transmitting and receiving data after the Year 2000, despite the Y2K
compliance of the Company's systems. Although it is expected that each of these
parties will conduct extensive testing to ensure that each is Y2K compliant,
there can be no assurance that an unforeseen problem will not create a market
disruption that in turn affects the Company's Brokerage and Investment Banking
Business.
Contingency Plans
The Company has developed a Y2K Contingency Plan (the "Contingency Plan"),
a detailed mediation and recovery plan that covers each of the six significant
risks that may arise from a Y2K failure:
1) loss of data,
2) software failures,
3) telecommunications failures,
4) loss of key hardware,
5) loss of key personnel, and
6) loss of facilities.
Page 18 of 20
<PAGE> 19
The Contingency Plan addresses each of these risks with respect to each of
the Company's nine key business areas (Equities, International, High Yield,
Convertibles, Corporate Finance, Operations, Accounting, Facilities and
Technology), and addresses both internal systems and failures by key third party
information providers and other vendors. The Contingency Plan also sets forth an
approach to maintaining business continuity for each of the Company's key
business areas. The specific alternatives for failures of various systems are
set forth in the Contingency Plan and range from the use of cellular phones or
relocation of personnel in the event of a communication failure to the
installation of backup software or hardware.
The Contingency Plan provides an analysis of each reasonably possible
failure scenario for a given Mission Critical system or process. Specifically,
the Contingency Plan sets forth (1) the likelihood of failure of each Mission
Critical system or process, (2) the circumstances under which a failure in such
systems might occur, (3) the impact the failure would have on the competitive
environment of the Company, and (4) a detailed mitigation strategy for each type
of failure. Mitigation strategies typically list specific products or vendors
that can be used to replace failed systems, manual alternatives for ordinarily
automated processes and alternative sources for data or datastreams that are
interrupted or become unreliable. Additional mitigation strategies are offered
where appropriate. The Contingency Plan also includes a specific description of
start up procedures to reactivate systems that fail, itemizes the staffing and
equipment requirements that will be associated with repairing or re-starting a
given system and a contact list of key individuals familiar with the system or
process that should be contacted to assist with remediation or business
restoration procedures. The Contingency Plan is modeled on the recommendations
of the SIA, and a companion Event Management Plan has also been drafted. The
Company intends to continue to modify and improve upon the Contingency Plan
until the Year 2000 to account for additional detail, alternatives and
techniques developed by the Company or adopted by the Securities industry. The
Company also intends to staff a Coordination and Communication Center during
late December, and to implement its Event Management Plan through the transition
into the Year 2000.
Forward Looking Statements
The Company's projections in this section are based upon assumptions, which
it believes to be correct, but which are not guaranteed. Any change in those
assumptions could result in material variations in those projections, including
the projected costs for remediation and testing, the feasibility of using
contingency plans, and the impact of third party failures. Any such change could
have a material adverse impact on the Company and its results of operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Many aspects of the Company's business involve substantial risks of
liability. In the normal course of business, the Company and its subsidiaries
have been named as defendants or co-defendants in lawsuits involving primarily
claims for damages. The Company's management believes that pending litigation
will not have a material adverse effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K.
None.
Page 19 of 20
<PAGE> 20
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: November 5, 1999 By: /s/ Clarence T. Schmitz
------------------ --------------------------
Clarence T. Schmitz
Chief Financial Officer
Page 20 of 20
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AND THE CONSOLIDATED STATEMENTS
OF EARNINGS AS OF SEPTEMBER 24, 1999 AND FOR THE NINE MONTHS THEN ENDED AND THE
NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS FILED IN THE THIRD QUARTER 1999 JEFFERIES GROUP, INC. 10-Q FILING.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-24-1999
<EXCHANGE-RATE> 1
<CASH> 32,625
<RECEIVABLES> 329,595
<SECURITIES-RESALE> 10,540
<SECURITIES-BORROWED> 2,129,032
<INSTRUMENTS-OWNED> 135,861
<PP&E> 31,728
<TOTAL-ASSETS> 3,022,831
<SHORT-TERM> 0
<PAYABLES> 245,729
<REPOS-SOLD> 6,378
<SECURITIES-LOANED> 1,958,067
<INSTRUMENTS-SOLD> 80,082
<LONG-TERM> 149,460
0
0
<COMMON> 2
<OTHER-SE> 387,075
<TOTAL-LIABILITY-AND-EQUITY> 3,022,831
<TRADING-REVENUE> 163,935
<INTEREST-DIVIDENDS> 83,718
<COMMISSIONS> 148,229
<INVESTMENT-BANKING-REVENUES> 66,491
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 70,165
<COMPENSATION> 244,256
<INCOME-PRETAX> 60,908
<INCOME-PRE-EXTRAORDINARY> 60,908
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,521
<EPS-BASIC> 1.96
<EPS-DILUTED> 1.93
</TABLE>
