<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 13, 1999
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JEFFERIES GROUP, INC.
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(Exact Name of Registrant Specified in Charter)
Delaware 1-11665 95-2848406
- ---------------- ---------------- -------------------
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
11100 Santa Monica Boulevard, 11th Floor
Los Angeles, CA 90025
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (310) 445-1199
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-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
The registrant hereby incorporates by reference the press release dated
April 13, 1999 attached hereto as Exhibit 99.1
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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 hereunto duly authorized.
JEFFERIES GROUP, INC.
(Registrant)
By \s\ Clarence T. Schmitz
----------------------------------
Clarence T. Schmitz
Executive Vice President and
Chief Financial Officer
Dated: April 13, 1999
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EXHIBIT INDEX
Exhibit
Number Description
- --------- -----------
99.1 April 13, 1999 press release: Jefferies Group, Inc.
(NYSE: JEF) Releases First Quarter 1999 Earnings
<PAGE> 1
EXHIBIT 99.1
JEFFERIES GROUP, INC. (NYSE: JEF) RELEASES FIRST QUARTER 1999 EARNINGS
PRESS RELEASE CONTACT: STEPHEN MCMENAMIN
FOR IMMEDIATE RELEASE (203) 708-5988
JEFFERIES GROUP REPORTS 11% INCREASE IN EARNINGS
BEFORE ONE-TIME SPIN-OFF EXPENSES
LOS ANGELES, APRIL 13, 1999 -- JEFFERIES GROUP, INC. (NYSE: JEF) today announced
financial results for the first quarter ended March 26, 1999.
Total revenues for the first quarter of 1999 amounted to $200.1 million,
compared to $203.4 million for the first quarter of 1998. Earnings before
spin-off expenses, income taxes and minority interest amounted to $39.9 million,
compared to $32.6 million for the first quarter of 1998, or an increase of 22%.
Net earnings before spin-off expenses were $19.9 million versus $17.9 million
for 1998, an increase of 11%. Earnings per share (diluted) before spin-off
expenses were $0.83 on 23.5 million shares versus $0.77 on 22.9 million shares
in the same period in 1998.
One-time expenses in connection with the planned spin-off (see below) reduced
net earnings and diluted earnings per share by $3.3 million and $0.14 for the
first quarter of 1999, and by $0.5 million and $0.02 for the first quarter of
1998.
"Revenues from our brokerage businesses, assisted by exceptional gains from ITG,
enabled us to achieve substantial increases in our operating earnings for the
first quarter," said Frank E. Baxter, Chairman and CEO. "We accomplished this
in the midst of a difficult underwriting environment. We continue to provide
liquidity for our institutional clients and adapt to the opportunities in all
the markets we serve," he added.
PLANNED SPIN-OFF AND RELATED IMPACT ON QUARTERLY RESULTS
Jefferies Group previously announced plans to spin-off to its stockholders
Jefferies & Company, Inc. and other subsidiaries of Jefferies Group (referred to
in this press release as "New JEF"), and to thereafter effect a merger of
Investment Technology Group, Inc. (NASDAQ: ITGI) with and into Jefferies Group.
The merger will result in stockholders of Jefferies Group becoming direct
stockholders of ITGI and Jefferies Group ceasing to be ITGI's parent company.
Jefferies Group and ITGI have entered into definitive agreements for the merger
and related transactions and have distributed proxy statements for special
stockholders' meetings to approve the merger on April 20, 1999. The merger is
expected to occur five business days following approval of the merger at the
stockholders' meetings.
<PAGE> 2
Expenses incurred in connection with the spin-off had a significant impact on
operating results for the first quarter. Most of these expenses are anticipated
to be non-deductible for income tax purposes. Assuming consummation of the
spin-off, merger and related transactions, New JEF's results will include
spin-off expenses as a component of discontinued operations (see Attachment A).
The attached Consolidated Statements of Earnings for Jefferies Group footnotes
the impact of spin-off expenses incurred during each quarter.
Attachment B to this Press Release contains a Pro Forma Consolidated Condensed
Statement of Financial Condition for New JEF as of March 26, 1999.
* * * * * * *
Jefferies Group is an institutional brokerage firm and an investment bank that
focuses on capital raising, research, mergers and acquisitions, advisory and
restructuring services for small to medium-sized companies, and trading in
equity and taxable fixed-income securities, convertible bonds, options, futures
and international securities for institutional clients.
Through its wholly-owned, broker/dealer subsidiary, ITG Inc., ITGI is the
leading provider of technology-based equity trading services and transaction
research to institutional investors and brokers. ITG's services help clients to
access liquidity, execute trades more efficiently, and make better trading
decisions.
Further information regarding the planned spin-off, including historical
financial data on both companies, can be found at Jefferies Group's website,
www.jefco.com and ITGI's website, www.itginc.com.
This press release contains statements concerning the timing, structure and
ramifications of the proposed spin-off and related transactions that 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", "anticipate",
"will", "would", "expect", "estimate" or variations of such terms, may not occur
as presently anticipated in the event necessary approvals are not obtained or
are not obtained on acceptable terms or in the event of adverse developments in
the market for Jefferies Group or ITGI securities or in securities markets in
general. As a result, no forward-looking statement should be regarded as a
representation by Jefferies Group, ITGI or any other person that the presently
anticipated events will occur as described herein.
-- financial table follows --
<PAGE> 3
JEFFERIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 26, MARCH 27,
1999 1998
-------- ---------
<S> <C> <C>
Revenues:
Commissions ......................................... $100,914 $ 81,565
Principal transactions .............................. 55,324 47,412
Corporate finance ................................... 14,308 54,399
Interest ............................................ 27,049 18,958
Other ............................................... 2,538 1,074
-------- --------
Total revenues ................................ 200,133 203,408
Interest expense ....................................... 22,753 16,973
-------- --------
Revenues, net of interest expense ............. 177,380 186,435
-------- --------
Non-interest expenses:
Compensation and benefits ........................... 91,346 107,649
Floor brokerage and clearing fees ................... 11,040 9,065
Communications ...................................... 15,737 15,504
Occupancy and equipment rental ...................... 4,728 4,975
Travel and promotional .............................. 4,711 6,154
Software royalties .................................. 3,752 2,986
Other ............................................... 10,568 7,977
-------- --------
Total non-interest expenses ................... 141,882 154,310
-------- --------
Earnings before income taxes and
minority interest ............................. 35,498 32,125
Income taxes ........................................... 17,251 13,346
-------- --------
Earnings before minority interest ............. 18,247 18,779
Minority interest ...................................... 1,626 1,303
-------- --------
Net earnings .................................. $ 16,621 $ 17,476
======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Basic .................................................. $ 0.72 $ 0.79
======== ========
Diluted ................................................ $ 0.69 $ 0.75
======== ========
WEIGHTED AVERAGE SHARES OF COMMON STOCK:
Basic .................................................. 23,217 22,067
Diluted ................................................ 23,514 22,864
</TABLE>
NOTE - the above presentation reflects spin-off expenses which reduced "Earnings
before income taxes and minority interest" by $4,363 and $503, "Net earnings" by
$3,257 and $460, and "Earnings per share of common stock (diluted)" by $0.14 and
$0.02, in the quarters ended in 1999 and 1998, respectively.
<PAGE> 4
ATTACHMENT A
PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS OF "NEW JEF"
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following unaudited Pro Forma Consolidated Statements of Earnings of New JEF
for the first quarters of 1999 and 1998, reflect the historical results of New
JEF, as successor to Jefferies Group, assuming the spin-off is consummated and
the results of ITGI, net of spin-off expenses, are reported as discontinued
operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MARCH 26, MARCH 27,
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Commissions ....................................... $ 49,685 $ 42,022
Principal transactions ............................ 56,274 47,726
Corporate finance ................................. 14,308 54,399
Interest .......................................... 27,199 18,968
Other ............................................. 1,212 733
-------- --------
Total revenues .............................. 148,678 163,848
Interest expense ..................................... 22,574 16,957
-------- --------
Revenues, net of interest expense ........... 126,104 146,891
-------- --------
Non-interest expenses:
Compensation and benefits ......................... 76,421 95,430
Floor brokerage and clearing fees ................. 7,064 7,360
Communications .................................... 10,197 10,912
Occupancy and equipment rental .................... 3,340 3,613
Travel and promotional ............................ 3,458 4,954
Other ............................................. 5,254 5,396
-------- --------
Total non-interest expenses ................. 105,734 127,665
-------- --------
Earnings before income taxes ................ 20,370 19,226
Income taxes ......................................... 8,704 7,658
-------- --------
Earnings from continuing operations ......... 11,666 11,568
Discontinued operations, net of income taxes ......... 4,955 5,908
-------- --------
Net earnings ................................ $ 16,621 $ 17,476
======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Basic:
Earnings from continuing operations ............... $ 0.50 $ 0.52
Earnings from discontinued operations ............. 0.22 0.27
-------- --------
Net earnings ................................ $ 0.72 $ 0.79
======== ========
Diluted:
Earnings from continuing operations ............... $ 0.50 $ 0.51
Earnings from discontinued operations ............. 0.19 0.24
-------- --------
Net earnings ................................ $ 0.69 $ 0.75
======== ========
WEIGHTED AVERAGE SHARES OF COMMON STOCK:
Basic ............................................. 23,217 22,067
Diluted ........................................... 23,514 22,864
</TABLE>
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ATTACHMENT B
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION OF "NEW JEF"
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Statement of Financial
Condition of New JEF as of March 26, 1999, has been derived from unaudited
financial statements prepared by New JEF. These financial statements reflect the
financial condition of New JEF assuming the spin-off and related transactions
are consummated. In the opinion of management, the unaudited pro forma statement
of financial condition, which gives effect to the spin-off as if it had occurred
on March 26, 1999, includes all significant, normal and recurring adjustments
necessary for the fair presentation of the financial position. This unaudited
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the financial position that will actually occur when
the transaction is consummated.
In connection with the spin-off, it is anticipated that certain events will
increase both New JEF's stockholders' equity and the number of shares
outstanding. Following is a summary of such events:
1. ITGI will be separated from New JEF's business. As such, all of ITGI's
balance sheet items will be excluded from New JEF's Statement of Financial
Condition.
2. Prior to the spin-off, ITGI will declare and pay a special cash dividend to
all of its stockholders, including Jefferies Group, in the amount of $4 per
share. Jefferies Group owns 15 million shares of ITGI and would receive $60
million. Jefferies Group will contribute its entire share of the special cash
dividend to New JEF, or its subsidiaries, prior to the spin-off.
3. Because Jefferies Group is not adjusting the terms of stock options that were
issued prior to January 1, 1998 to reflect the economic impact of the spin-off,
most of these options were exercised prior to the end of the 1st quarter of
1999. It is anticipated that more options will be exercised before the spin-off
and that such exercises will result in proceeds of $3.2 million and related tax
benefits of $2.9 million.
4. New JEF's share of the transaction costs for the 2nd quarter of 1999 is
expected to be approximately $4.0 million.
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ATTACHMENT B (CONTINUED)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION OF "NEW JEF"
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 26, 1999 (UNAUDITED)
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ............................. $ 80,681 $ 59,225 (a) $ 139,906
Investment in ITGI .................................... 117,207 (117,207)(b)
Receivables from brokers and dealers .................. 2,753,685 2,753,685
Other assets .......................................... 550,144 2,918 (c) 553,062
---------- --------- -----------
Total assets ................................ 3,501,717 (55,064) 3,446,653
LIABILITIES & STOCKHOLDERS' EQUITY
Payable to brokers and dealers ........................ 2,456,070 2,456,070
Securities sold, not yet purchased, payables to
customers, and accrued expenses and other
liabilities ......................................... 482,155 482,155
Long-term debt ........................................ 149,411 149,411
---------- --------- -----------
Total liabilities ........................... 3,087,636 -- 3,087,636
---------- --------- -----------
Stockholders' equity .................................. 414,081 (55,064)(d) 359,017
---------- --------- -----------
Total liabilities and stockholders' equity .. $3,501,717 $ (55,064) $ 3,446,653
========== ========= ===========
Outstanding shares .................................... 23,589 (e) 23,900
========== ===========
Book value per share .................................. $ 17.55 $ 15.02
========== ===========
</TABLE>
<TABLE>
<S> <C>
(a) PRO FORMA CASH AND CASH EQUIVALENTS ADJUSTMENTS:
Special cash dividend from ITGI...................................... $ 60,000
Stock option exercise proceeds....................................... 3,225
Transaction costs.................................................... (4,000)
----------
Total................................................................ $ 59,255
==========
(b) REFLECTS THE SEPARATION OF ITGI FROM NEW JEF.
(c) PRO FORMA OTHER ASSET ADJUSTMENT REFLECTS THE STOCK OPTION EXERCISE TAX
BENEFIT.
(d) PRO FORMA STOCKHOLDERS' EQUITY ADJUSTMENTS:
Special cash dividend from ITGI...................................... $ 60,000
Stock option net exercise proceeds................................... 3,225
Transaction costs.................................................... (4,000)
Separation of ITGI from New JEF...................................... (117,207)
Stock option exercise tax benefit.................................... 2,918
----------
Total................................................................ $ (55,064)
==========
(e) OUTSTANDING SHARE ADJUSTMENTS (IN MILLIONS):
Shares outstanding at March 26, 1999................................. 23.6
Stock option exercises and restricted stock grants................... 0.3
----------
Pro forma outstanding shares at March 26, 1999....................... 23.9
==========
</TABLE>
