<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 March 25, 1994
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 0-11669
JEFFERIES GROUP, INC.
__________________________________________________________________________
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-2848406
- - ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11100 Santa Monica Boulevard, Los Angeles, California 90025
- - --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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 March 25, 1994, the Registrant had 5,745,043 common shares, $.01 par
value, outstanding.
Page 1 of 17 Pages
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JEFFERIES GROUP, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 25, 1994
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
March 25, 1994 (unaudited) and December 31, 1993 3
Consolidated Statements of Earnings - Three Months
Ended March 25, 1994 (unaudited) and March 26, 1993
(unaudited) 4
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended March 25, 1994 (unaudited) 5
Consolidated Statements of Cash Flows - Three Months
Ended March 25, 1994 (unaudited) and March 26, 1993
(unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
Page 2 of 17 Pages
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 25, December 31,
1994 1993
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 23,678 $ 26,910
Receivable from brokers and dealers . . . . . . . . . . . . . . . . . 1,101,139 1,069,384
Receivable from customers, officers and directors . . . . . . . . . . 122,903 116,935
Securities owned . . . . . . . . . . . . . . . . . . . . . . . . . . 133,823 114,808
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 19,860 18,638
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,169 41,728
---------- ----------
$1,440,572 $1,388,403
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 45,928
Payable to brokers and dealers . . . . . . . . . . . . . . . . . . . 696,382 615,216
Payable to customers . . . . . . . . . . . . . . . . . . . . . . . . 429,792 405,726
Securities sold, not yet purchased . . . . . . . . . . . . . . . . . 70,171 74,235
Accrued expenses and other liabilities . . . . . . . . . . . . . . . 82,958 92,772
---------- ----------
1,279,303 1,233,877
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . 10,027 9,968
---------- ----------
1,289,330 1,243,845
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 1,000,000 shares; none issued . . . . . . . . . . . -- --
Common stock $.01 par value.
Authorized 25,000,000 shares; issued
8,979,930 shares in 1994 and 8,907,817
shares in 1993 . . . . . . . . . . . . . . . . . . . . . . . . 90 89
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 36,983 34,930
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 152,497 146,949
Less treasury stock, at cost; 3,234,887 shares
in 1994; and 3,212,390 shares in 1993 . . . . . . . . . . . . . (36,648) (35,695)
Less currency translation adjustments . . . . . . . . . . . . . . (617) (652)
Less additional minimum pension liability . . . . . . . . . . . . (1,063) (1,063)
---------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . 151,242 144,558
---------- ----------
$1,440,572 $1,388,403
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 17 Pages
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JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The Three Months Ended
---------------------------
March 25, March 26,
1994 1993
---------- ----------
<S> <C> <C>
Revenues:
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,654 $ 31,205
Principal transactions . . . . . . . . . . . . . . . . . . . . . . . 17,654 25,582
Corporate finance . . . . . . . . . . . . . . . . . . . . . . . . . 8,875 7,655
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,338 3,526
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,169 380
---------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . 75,690 68,348
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 6,488 2,894
---------- ----------
Revenues, net of interest expense . . . . . . . . . . . . . . . . . 69,202 65,454
---------- ----------
Non-interest expenses:
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . 36,617 36,588
Floor brokerage and clearing fees . . . . . . . . . . . . . . . . . 4,399 3,626
Telecommunications and data processing services . . . . . . . . . . 4,504 4,091
Occupancy and equipment rental . . . . . . . . . . . . . . . . . . . 3,356 3,051
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,080 6,827
---------- ----------
Total non-interest expenses . . . . . . . . . . . . . . . . . . 58,956 54,183
---------- ----------
Earnings before income taxes and
cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . 10,246 11,271
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,407 4,005
---------- ----------
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . . . . . . $ 5,839 $ 7,266
Cumulative effect on prior years of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . -- 1,358
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624
========== ==========
Earnings per share of common stock:
Primary earnings per share -
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . . . . . . $ .95 $ 1.46
Cumulative effect on prior years of change
in accounting principle . . . . . . . . . . . . . . . . . . . -- .27
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.73
========== ==========
Fully diluted earnings per share -
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . . . . . . $ .95 $ 1.20
Cumulative effect on prior years of change
in accounting principle . . . . . . . . . . . . . . . . . . . -- .21
---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.41
========== ==========
Weighted average shares of common stock:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,051,000 4,971,000
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,075,000 6,367,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 17 Pages
<PAGE> 5
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 25, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Currency Add'l Total
Additional Trans- Minimum Stock-
Common Paid-in Retained Treasury lation Pension holders'
Stock Capital Earnings Stock Adjustment Liability Equity
------ ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1993. $ 89 $ 34,930 $146,949 $(35,695) $ (652) $ (1,063) $144,558
Exercise of stock
options
(82,113 shares).. 1 2,053 145 2,199
Purchase of 35,925
shares of treasury
stock............. (1,201) (1,201)
Capital Accum-
ulation Plan
distribution
(3,428 shares)..... 103 103
Cash dividends,
$.05 per share.... (291) (291)
Translation adjust-
ment.............. 35 35
Net earnings....... 5,839 5,839
----- --------- --------- --------- --------- --------- ---------
Balance,
March 25, 1994.... $ 90 $ 36,983 $152,497 $(36,648) $ (617) $ (1,063) $151,242
===== ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 17 Pages
<PAGE> 6
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 25, March 26,
1994 1993
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624
-------- ---------
Adjustments to reconcile net earnings to net
cash provided (used) by operations:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 1,686 1,520
(Increase) decrease in receivables:
Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . (31,755) (84,140)
Customers, officers and directors . . . . . . . . . . . . . . . (5,968) (20,244)
(Increase) decrease in securities owned . . . . . . . . . . . . . (19,015) (23,852)
(Increase) decrease in other assets . . . . . . . . . . . . . . . 2,559 (8,629)
Increase (decrease) in operating payables:
Brokers and dealers . . . . . . . . . . . . . . . . . . . . . . 81,166 31,553
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,066 52,778
Increase (decrease) in securities sold, not
yet purchased . . . . . . . . . . . . . . . . . . . . . . . . . (4,064) 25,349
Increase (decrease) in accrued expenses and
other liabilities . . . . . . . . . . . . . . . . . . . . . . . (9,814) 14,299
-------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . . 38,861 (11,366)
-------- ---------
Net cash provided (used) by
operating activities . . . . . . . . . . . . . . . . 44,700 (2,742)
-------- ---------
</TABLE>
Continued on next page.
See accompanying notes to consolidated financial statements.
Page 6 of 17 Pages
<PAGE> 7
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------
March 25, March 26,
1994 1993
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds (payments) from bank loans . . . . . . . . . . . . . (45,928) --
Net payments for:
Repurchase of treasury stock . . . . . . . . . . . . . . . . . (1,201) (355)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (291) (231)
Distribution of CAP plan shares . . . . . . . . . . . . . . . . . 103 --
Proceeds from exercise of stock options . . . . . . . . . . . . . 2,199 29
-------- --------
Net cash provided (used) by
financing activities . . . . . . . . . . . . . . . . (45,118) (557)
-------- --------
Cash flows from investing activities -
purchase of premises and equipment . . . . . . . . . . . . . . . (2,849) (2,056)
-------- --------
Effect of foreign currency translation on cash . . . . . . . . . . . . 35 (65)
-------- --------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . . . . (3,232) (5,420)
Cash and cash equivalents - beginning of period . . . . . . . . . . . . 26,910 21,078
-------- --------
Cash and cash equivalents - end of period . . . . . . . . . . . . . . . $ 23,678 $ 15,658
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,495 $ 1,665
======== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,531 $ 1,431
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7 of 17 Pages
<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. and all wholly owned subsidiaries, including Jefferies &
Company, Inc. (Jefferies) and Investment Technology Group, Inc. (ITG). The
accounts of W & D Securities, Inc. (W & D) are also consolidated because of the
nature and extent of the Company's ownership interest in W & D. Jefferies
Group, Inc. and its subsidiaries are engaged in securities brokerage and
trading, corporate finance and other financial services. The term "Company"
refers, unless the context requires otherwise, to Jefferies Group, Inc., its
subsidiaries, predecessor entities, and W & D.
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 period and should be read in conjunction with the
Company's annual report for the year ended December 31, 1993.
SECURITIES TRANSACTIONS
The Company records its commission and principal transaction revenues and
related expenses on a trade date basis.
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 March 25, 1994:
<TABLE>
<CAPTION>
(Dollars in Thousands)
--------------------------
Securities
Sold
Securities Not Yet
Owned Purchased
--------- --------
<S> <C> <C>
Corporate equity securities . . . . . . . . . . . . . . . . . . $ 61,368 $ 56,637
High-yield securities . . . . . . . . . . . . . . . . . . . . . 40,989 10,049
Corporate debt securities . . . . . . . . . . . . . . . . . . . 28,622 3,389
U.S. Government and Agency obligations . . . . . . . . . . . . . 2,767 --
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 96
--------- --------
$ 133,823 $ 70,171
========= ========
</TABLE>
In the regular course of its business, Jefferies takes securities positions
as a market-maker to facilitate customer transactions and for investment
purposes. In making markets and when trading for its own account, Jefferies
exposes its own capital to the risk of fluctuations in market value. Trading
profits (or losses) depend primarily upon the skills of the employees engaged
in market-making and position taking, the amount of capital allocated to
positions in securities and the general trend of prices in the securities
markets.
Jefferies monitors its risk by maintaining its securities positions at or
below certain pre-established levels. These levels reduce certain
opportunities to realize profits in the event that the value of such securities
increases. However, they also reduce the risk of loss in the event of a
decrease in such value and result in controlled interest costs incurred on
funds provided to maintain such positions.
Page 8 of 17 Pages
<PAGE> 9
The Jefferies' Capital Division includes the activities of the Corporate
Finance Department and the Taxable Fixed Income Division. The Taxable Fixed
Income Division trades high grade and non-investment grade public and private
debt securities. The Division specializes in trading and making markets in
over 300 unrated or less than investment grade corporate debt securities and
accounts for these positions at market value. Risk of loss upon default by the
borrower is significantly greater with respect to unrated or less than
investment grade corporate debt securities than with other corporate debt
securities. These securities are generally unsecured and are often
subordinated to other creditors of the issuer. These issuers usually have high
levels of indebtedness and are more sensitive to adverse economic conditions,
such as recession or increasing interest rates, than are investment grade
issuers. There is a limited market for some of these securities and market
quotes are generally available from a small number of dealers.
INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," which requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
NET CAPITAL REQUIREMENTS
As registered broker-dealers, Jefferies, W & D and ITG are subject to the
Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1),
which requires the maintenance of minimum net capital. Jefferies, W & D and
ITG 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 $200,000 or 2% of the aggregate debit balances arising from customer
transactions, as defined.
Net capital changes from day to day, but as of March 25, 1994, Jefferies' net
capital of $66.0 million exceeded its minimum net capital requirements by $56.2
million. ITG's net capital of $3.8 million exceeded its minimum net capital
requirements by $3.6 million. W & D's net capital of $750,000 exceeded its
minimum net capital requirements by $550,000.
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.
<S> <C>
1994.................. $.05
1993.................. $.05
</TABLE>
OFF-BALANCE SHEET RISK
In the normal course of business, the Company is involved in the execution,
settlement and financing of various customer and principal securities
transactions. Customer activities are transacted on a cash, margin or
Page 9 of 17 Pages
<PAGE> 10
delivery-versus-payment basis. Securities transactions are subject to the risk
of counterparty or customer nonperformance. However, transactions are
collateralized by the underlying security, thereby reducing the associated risk
to change in the market value of the security through settlement date or to the
extent of margin balances.
The Company also has contractual commitments arising in the ordinary course
of business for bank loans, stock loaned, securities sold, not yet purchased,
repurchase agreements, future purchases and sales of foreign currency, security
transactions on a when-issued basis and underwriting. Transactions in these
financial instruments contain varying degrees of off-balance sheet risk as the
market values of the securities underlying the financial instruments may be in
excess of the contract amount. The settlement of these transactions is not
expected to have a material effect upon the Company's accompanying consolidated
financial statements.
In the normal course of business, the Company had letters of credit
outstanding aggregating $22.2 million at March 25, 1994, to satisfy various
collateral requirements in lieu of depositing cash or securities.
SUBSEQUENT EVENT - INVESTMENT TECHNOLOGY GROUP, INC. INITIAL PUBLIC OFFERING
In March, 1994, the Company formed a new subsidiary, Investment Technology
Group, Inc. (the "ITG Holding Company") for the purpose of eventually holding
100% of the stock of the broker-dealer subsidiary Investment Technology Group,
Inc. whose name was then changed to ITG Inc.
On March 15, 1994, the ITG Holding Company filed with the Securities and
Exchange Commission a Registration Statement with respect to the offer of
3,700,000 shares of its common stock (which includes 450,000 shares subject to
an over-allotment option granted to the underwriters), in an initial public
offering (the "Offering"). The filing indicated an anticipated offering price
of between $12 and $14 per share. Immediately prior to the consummation of the
offering, the ITG Holding Company will issue 15,000,0000 shares of its common
stock in exchange for all of the issued and outstanding shares of common stock
of ITG Inc. held by the Company. As a result of these transactions, ITG Inc.
will become a wholly-owned subsidiary of the ITG Holding Company which will
become a wholly-owned subsidiary of the Company. Following the offering, the
Company will own 82.2% of the outstanding common stock of the ITG Holding
Company.
Immediately prior to the Offering, the ITG Holding Company declared a
dividend payable to its sole stockholder, the Company, in an amount of $17.0
million, which dividend was paid by the issuance of a note in the full amount
of such dividend and may be increased or decreased based on the actual proceeds
of the Offering. Any future payment of dividends will be at the discretion of
the ITG Holding Company's Board of Directors and will depend on the ITG Holding
Company's financial condition, results of operations, capital requirements and
other factors deemed relevant by such Board of Directors. However, the ITG
Holding Company anticipates that all future earnings will be retained by the
ITG Holding Company for working capital and that the ITG Holding Company will
not pay any dividends to its stockholders.
In addition, immediately prior to the Offering, the ITG Holding Company
entered into an intercompany borrowing agreement with the Company permitting
the borrowing by the ITG Holding Company of up to $15,000,000. Any outstanding
balance will be due March 31, 1999 and will accrue interest at 1.75% above the
one month London Interbank Offering Rate.
On May 3, 1994, the Registration Statement went effective and an underwriting
agreement was signed with an offering price of $13 per share.
Page 10 of 17 Pages
<PAGE> 11
SUBSEQUENT EVENT - JEFFERIES GROUP, INC. ISSUES $50,000,000 IN SENIOR NOTES
In April, 1994, Jefferies Group, Inc. issued $50,000,000 face value of 8.875%
Senior Notes due 2004 (the "Notes") in a private placement. The Notes were
issued at a price equal to 98.6047% of the principal amount and mature on May
1, 2004. The Notes pay interest semi-annually on May 1 and November 1. The
Notes will be senior unsecured obligations of Jefferies Group, Inc., and will
rank pari passu in right of payment with all existing and future senior
indebtedness and senior in right of payment to all subordinated indebtedness of
Jefferies Group, Inc.
Page 11 of 17 Pages
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 1994 VERSUS FIRST QUARTER 1993
Revenues, net of interest expense, increased $3.7 million, or 6%, in the
first quarter of 1994 compared to the same prior year period. The increase was
due primarily to an $8.4 million, or 27%, increase in commissions, a $1.2
million, or 16%, increase in corporate finance, a $1.2 million increase in net
interest income (interest revenues less interest expense) and a $789,000
increase in other revenues. These increases were partially offset by a $7.9
million, or 31%, decrease in principal transactions. Commission revenues
increased mostly due to higher commission revenues in the Equity Division and
the Investment Technology Group. Corporate finance revenues increased due to
an increase in underwriting fees. Net interest income increased as the $4.8
million increase in interest revenues exceeded the $3.6 million increase in
interest expense. Interest revenues increased due to interest on higher stock
borrow and customer margin balances. The related increases in interest on
stock loan and customer short balances only partially offset the higher
interest revenues. Partially offsetting the increase in interest expense was
the elimination of interest on the Company's convertible debt securities, which
were converted into shares of the Company's Common Stock late in 1993. Other
revenues increased due mostly to foreign currency transaction gains. Revenues
from principal transactions declined primarily due to decreased Taxable Fixed
Income Division trading revenues.
Total non-interest expenses increased $4.8 million, or 9%, in the first
quarter of 1994 compared to the same prior year period. Other expense
increased $3.3 million, or 48%, primarily due to higher trade volume and
business expansion and includes increased expenses in soft dollar, marketing,
research, software royalties, reserves and corporate finance finder fees.
Floor brokerage and clearing fees increased $773,000, or 21%, due to increased
volumes of business executed on the various exchanges. Telecommunications and
data processing services increased $413,000, or 10%, due to higher trade volume
and business expansion. Occupancy and equipment rental increased $305,000, or
10%, due to business expansion. Compensation and benefits remained relatively
unchanged from last year. An increase in commissions paid and salaries was
offset by a decrease in profitability based compensation.
As a result of the above, earnings before income taxes and cumulative effect
of change in accounting principle were down $1.0 million, or 9%.
Earnings before cumulative effect of change in accounting principle were down
20% to $5.8 million, as compared to $7.3 million in the 1993 period. The
effective tax rate was approximately 43% in the first quarter of 1994 compared
to approximately 36% in the 1993 period. The 1993 quarter included a $1.1
million adjustment of prior years' estimated tax liabilities to actual which
resulted in a lower tax rate for 1993.
The cumulative effect of the change in accounting for income taxes required
by SFAS 109 was a $1.4 million benefit in 1993. This increased 1993's net
earnings to $8.6 million.
Primary earnings per share were $.95 in the first quarter of 1994 on
6,051,000 shares compared to $1.73 in the 1993 period on 4,971,000 shares.
Primary shares increased largely due to the conversion, late in 1993, of
$29,731,000 aggregate principal amount of 8 1/2% Convertible Subordinated
Debentures and $1,690,000 aggregate principal amount of 7% Convertible
Subordinated Notes into an aggregate of 1,366,092 shares of the Company's
Common Stock. Fully diluted earnings per
Page 12 of 17 Pages
<PAGE> 13
share were $.95 in the first quarter of 1994 on 6,075,000 shares compared to
$1.41 in the 1993 period on 6,367,000 shares. The cumulative effect of the
change in accounting principle increased 1993's earnings per share for the
first quarter by $.27 on primary shares and $.21 on fully diluted shares.
During the first quarter of 1994, the Company repurchased 35,925 shares of
its common stock versus repurchases of 15,000 shares for the comparable 1993
period.
Page 13 of 17 Pages
<PAGE> 14
The Company's principal activities, securities brokerage and the trading of
and market-making in securities, are highly competitive and extremely volatile.
The earnings of the Company are subject to wide fluctuations since many factors
over which the Company has little or no control, particularly the overall
volume of trading and the volatility and general level of market prices, may
significantly affect its operations. The following provides a breakdown of
total revenues by division for the three months ended March 25, 1994 and March
26, 1993.
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------------------
March 25, 1994 March 26, 1993
-------------- --------------
% of % of
Total Total
Amount Revenues Amount Revenues
------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Equity Division . . . . . . . . . . . . . . . $29,878 40% $26,665 39%
International Division . . . . . . . . . . . . 9,880 13 7,450 11
Capital Division . . . . . . . . . . . . . . . 12,378 16 18,805 28
Investment Technology Group . . . . . . . . . 14,249 19 10,491 15
Convertible Division . . . . . . . . . . . . . 1,838 2 2,819 4
Other Unallocated Revenues . . . . . . . . . . 7,467 10 2,118 3
------- --- ------- ---
Total revenues . . . . . . . . . . . . . . . . $75,690 100% $68,348 100%
======== === ======= ===
</TABLE>
Page 14 of 17 Pages
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Computation of Earnings Per Share
(Page 16 attached)
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended
March 25, 1994.
Page 15 of 17 Pages
<PAGE> 16
EXHIBIT 11
JEFFERIES GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The
Three Months Ended
------------------------
March 25, March 26,
1994 1993*
--------- ---------
<S> <C> <C>
Common stock and common stock
equivalents:
Average common stock outstanding . . . . . . . . . . . . . . . . . . 5,721 4,628
Common stock equivalent shares
related to employee stock
options and restricted stock . . . . . . . . . . . . . . . . . . . 330 343
------- -------
Total average common stock and
common stock equivalents
used for primary computation . . . . . . . . . . . . . . . . . . 6,051 4,971
Average common stock assumed issued
pursuant to convertible
subordinated debentures and an
adjustment of average common
stock equivalents to period-end
market price, if higher than
average price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1,396
------- -------
Total average common stock,
common stock equivalents
and other dilutive securities . . . . . . . . . . . . . . . . . . 6,075 6,367
======= =======
Earnings:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 8,624
Adjustment to subsidiary earnings - common stock
equivalents on subsidiary . . . . . . . . . . . . . . . . . . . . 90 --
------- ------
Total earnings for
primary computation . . . . . . . . . . . . . . . . . . . . . . . 5,749 8,624
Eliminate interest expense (net of
taxes) on convertible
subordinated debentures . . . . . . . . . . . . . . . . . . . . . . . -- 371
------- -------
Total earnings for
fully diluted computation . . . . . . . . . . . . . . . . . . . . $ 5,749 $ 8,995
======= =======
Earnings per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.73
======= =======
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .95 $ 1.41
======= =======
</TABLE>
* The 1993 first quarter includes a benefit for the cumulative effect of
changes in accounting principle of $.27 and $.21 per share primary and fully
diluted, respectively.
Page 16 of 17 Pages
<PAGE> 17
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: May 6, 1994 By: /s/ Alan D. Browning
----------- ---------------------
Alan D. Browning
Executive Vice President,
Chief Financial Officer
and Chief Administrative
Officer
Page 17 of 17 Pages
