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SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 95-4719745 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
520 Madison Avenue, 10th Floor, New York, New York | 10022 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller reporting companyo |
INDEX TO QUARTERLY REPORT ON FORM 10-Q
AUGUST 31, 2011
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EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
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August 31, | November 30, | |||||||
2011 | 2010 | |||||||
ASSETS | ||||||||
Cash and cash equivalents (including $283,968 in 2011 and $202,565 in 2010, from VIEs) | $ | 2,014,950 | $ | 2,188,998 | ||||
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations | 5,321,012 | 1,636,755 | ||||||
Financial instruments owned, at fair value, including securities pledged of $14,035,813 and $12,338,728 in 2011 and 2010, respectively: | ||||||||
Corporate equity securities (including $79,927 in 2011 and $120,606 in 2010 from VIEs) | 1,676,598 | 1,565,793 | ||||||
Corporate debt securities (including $300,652 in 2011 and $462,462 in 2010 from VIEs) | 4,213,249 | 3,630,616 | ||||||
Government, federal agency and other sovereign obligations | 5,531,554 | 5,191,973 | ||||||
Mortgage- and asset-backed securities (including $38,629 in 2011 and $43,355 in 2010 from VIEs) | 4,787,608 | 4,921,565 | ||||||
Loans and other receivables (including $372,105 in 2011 and $362,465 in 2010 from VIEs) | 528,681 | 434,573 | ||||||
Derivatives (including $5,147 in 2011 and $7,579 in 2010 from VIEs) | 916,142 | 119,268 | ||||||
Investments, at fair value (including $1,621 in 2011 and $15,612 in 2010 from VIEs) | 116,833 | 77,784 | ||||||
Physical commodities | 369,281 | — | ||||||
Total financial instruments owned, at fair value (including $798,081 in 2011 and $1,012,079 in 2010 from VIEs) | 18,139,946 | 15,941,572 | ||||||
Investments in managed funds | 73,900 | 131,585 | ||||||
Other investments | 572,764 | 220,323 | ||||||
Securities borrowed | 7,815,663 | 8,152,678 | ||||||
Securities purchased under agreements to resell | 4,505,358 | 3,252,322 | ||||||
Securities received as collateral | 40,401 | 48,616 | ||||||
Receivables: | ||||||||
Brokers, dealers and clearing organizations (including $177,793 in 2011 and $195,485 in 2010 from VIEs) | 3,743,143 | 2,550,234 | ||||||
Customers | 1,319,664 | 1,328,365 | ||||||
Fees, interest and other (including $6,763 in 2011 and $127 in 2010 from VIEs) | 224,545 | 165,603 | ||||||
Premises and equipment | 170,501 | 142,729 | ||||||
Goodwill | 366,823 | 364,964 | ||||||
Other assets (including $446 in 2011 and $370 in 2010 from VIEs) | 816,573 | 601,799 | ||||||
Total assets (including $1,267,051 in 2011 and $1,410,626 in 2010 from VIEs) | $ | 45,125,243 | $ | 36,726,543 | ||||
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) — CONTINUED
(Dollars in thousands, except per share amounts)
August 31, | November 30, | |||||||
2011 | 2010 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Short-term borrowing | $ | 353,000 | $ | — | ||||
Financial instruments sold, not yet purchased, at fair value: | ||||||||
Corporate equity securities (including $19,341 in 2011 and $2,708 in 2010 from VIEs) | 1,736,221 | 1,638,372 | ||||||
Corporate debt securities (including $202,037 in 2011 and $443,100 in 2010 from VIEs) | 2,472,045 | 2,375,925 | ||||||
Government, federal agency and other sovereign obligations (including $15,605 in 2011 and $0 in 2010 from VIEs) | 5,278,235 | 4,735,288 | ||||||
Mortgage- and asset-backed securities | 82,072 | 129,384 | ||||||
Loans (including $142,645 in 2011 and $150,100 in 2010 from VIEs) | 155,646 | 171,278 | ||||||
Derivatives (including $1,241 in 2011 and $136 in 2010 from VIEs) | 595,942 | 59,552 | ||||||
Total financial instruments sold, not yet purchased, at fair value (including $380,869 in 2011 and $596,044 in 2010 from VIEs) | 10,320,161 | 9,109,799 | ||||||
Securities loaned | 3,338,391 | 3,108,977 | ||||||
Securities sold under agreements to repurchase | 10,935,811 | 10,684,056 | ||||||
Obligation to return securities received as collateral | 40,401 | 48,616 | ||||||
Payables: | ||||||||
Brokers, dealers and clearing organizations (including $134,477 in 2011 and $157,134 in 2010 from VIEs) | 2,754,164 | 1,885,357 | ||||||
Customers | 7,708,390 | 3,716,357 | ||||||
Accrued expenses and other liabilities (including $7,411 in 2011 and $94,402 in 2010 from VIEs) | 1,164,164 | 1,142,850 | ||||||
Long-term debt | 4,580,978 | 3,778,681 | ||||||
Mandatorily redeemable convertible preferred stock | 125,000 | 125,000 | ||||||
Mandatorily redeemable preferred interest of consolidated subsidiaries (including $313,095 in 2011 and $315,885 in 2010 from VIEs) | 313,095 | 315,885 | ||||||
Total liabilities (including $835,852 in 2011 and $1,163,465 in 2010 from VIEs) | 41,633,555 | 33,915,578 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $.0001 par value. Authorized 500,000,000 shares; issued 203,525,528 shares in 2011 and 200,301,656 shares in 2010 | 20 | 20 | ||||||
Additional paid-in capital | 2,227,985 | 2,218,123 | ||||||
Retained earnings | 1,036,879 | 850,654 | ||||||
Less: | ||||||||
Treasury stock, at cost, 3,211,223 shares in 2011 and 28,607,510 shares in 2010 | (56,102 | ) | (539,530 | ) | ||||
Accumulated other comprehensive loss: | ||||||||
Currency translation adjustments | (25,628 | ) | (42,859 | ) | ||||
Additional minimum pension liability | (8,419 | ) | (8,419 | ) | ||||
Total accumulated other comprehensive loss | (34,047 | ) | (51,278 | ) | ||||
Total common stockholders’ equity | 3,174,735 | 2,477,989 | ||||||
Noncontrolling interests | 316,953 | 332,976 | ||||||
Total stockholders’ equity | 3,491,688 | 2,810,965 | ||||||
Total liabilities and stockholders’ equity | $ | 45,125,243 | $ | 36,726,543 | ||||
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Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: | ||||||||||||||||
Commissions | $ | 154,896 | $ | 118,571 | $ | 404,108 | $ | 347,527 | ||||||||
Principal transactions | (74,003 | ) | 71,044 | 391,464 | 317,686 | |||||||||||
Investment banking | 293,750 | 246,193 | 861,230 | 598,450 | ||||||||||||
Asset management fees and investment income from managed funds | 3,086 | 786 | 37,501 | 11,804 | ||||||||||||
Interest | 353,006 | 239,557 | 930,647 | 625,725 | ||||||||||||
Other | 63,369 | 16,879 | 105,948 | 44,240 | ||||||||||||
Total revenues | 794,104 | 693,030 | 2,730,898 | 1,945,432 | ||||||||||||
Interest expense | 284,822 | 175,761 | 736,068 | 432,995 | ||||||||||||
Net revenues | 509,282 | 517,269 | 1,994,830 | 1,512,437 | ||||||||||||
Interest on mandatorily redeemable preferred interest of consolidated subsidiaries | (14,671 | ) | (2,537 | ) | 6,183 | (26 | ) | |||||||||
Net revenues, less mandatorily redeemable preferred interest | 523,953 | 519,806 | 1,988,647 | 1,512,463 | ||||||||||||
Non-interest expenses: | ||||||||||||||||
Compensation and benefits | 299,640 | 308,797 | 1,174,468 | 877,204 | ||||||||||||
Floor brokerage and clearing fees | 32,959 | 30,111 | 92,475 | 84,199 | ||||||||||||
Technology and communications | 60,039 | 46,135 | 153,563 | 114,189 | ||||||||||||
Occupancy and equipment rental | 22,581 | 18,433 | 60,997 | 49,448 | ||||||||||||
Business development | 21,853 | 17,420 | 64,248 | 42,405 | ||||||||||||
Professional services | 19,061 | 13,008 | 48,437 | 34,702 | ||||||||||||
Other | 12,582 | 9,404 | 45,805 | 37,222 | ||||||||||||
Total non-interest expenses | 468,715 | 443,308 | 1,639,993 | 1,239,369 | ||||||||||||
Earnings before income taxes | 55,238 | 76,498 | 348,654 | 273,094 | ||||||||||||
Income tax expense | 1,228 | 33,873 | 107,899 | 110,277 | ||||||||||||
Net earnings | 54,010 | 42,625 | 240,755 | 162,817 | ||||||||||||
Net (loss) earnings to noncontrolling interests | (14,265 | ) | (2,129 | ) | 4,523 | 1,865 | ||||||||||
Net earnings to common shareholders | $ | 68,275 | $ | 44,754 | $ | 236,232 | $ | 160,952 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.30 | $ | 0.22 | $ | 1.07 | $ | 0.79 | ||||||||
Diluted | $ | 0.30 | $ | 0.22 | $ | 1.07 | $ | 0.79 | ||||||||
Weighted average common shares: | ||||||||||||||||
Basic | 218,426 | 195,601 | 209,544 | 196,943 | ||||||||||||
Diluted | 222,541 | 195,612 | 213,661 | 201,062 |
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Nine Months | Eleven Months | |||||||
Ended | Ended | |||||||
August 31, 2011 | November 30, 2010 | |||||||
Common stock, par value $0.0001 per share | ||||||||
Balance, beginning of period | $ | 20 | $ | 19 | ||||
Issued | 1 | 1 | ||||||
Retired | (1 | ) | — | |||||
Balance, end of period | 20 | 20 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 2,218,123 | 2,036,087 | ||||||
Benefit plan share activity (1) | 29,281 | 19,230 | ||||||
Share-based expense, net of forfeitures and clawbacks | 46,484 | 149,799 | ||||||
Proceeds from exercise of stock options | 95 | 108 | ||||||
Acquisitions and contingent consideration | 419 | 419 | ||||||
Tax benefit for issuance of share-based awards | 31,619 | 2,965 | ||||||
Dividend equivalents on share-based plans | 6,590 | 9,515 | ||||||
Issuance of treasury stock | 97,773 | — | ||||||
Retirement of treasury stock | (202,399 | ) | — | |||||
Balance, end of period | 2,227,985 | 2,218,123 | ||||||
Retained earnings | ||||||||
Balance, beginning of period | 850,654 | 688,039 | ||||||
Net earnings to common shareholders | 236,232 | 223,666 | ||||||
Dividends | (50,007 | ) | (61,051 | ) | ||||
Balance, end of period | 1,036,879 | 850,654 | ||||||
Treasury stock, at cost | ||||||||
Balance, beginning of period | (539,530 | ) | (384,379 | ) | ||||
Purchases | (96,929 | ) | (140,071 | ) | ||||
Returns / forfeitures | (19,165 | ) | (15,080 | ) | ||||
Issued | 397,122 | — | ||||||
Retirement of treasury stock | 202,400 | — | ||||||
Balance, end of period | (56,102 | ) | (539,530 | ) | ||||
Accumulated other comprehensive (loss) income | ||||||||
Balance, beginning of period | (51,278 | ) | (41,626 | ) | ||||
Currency adjustment | 17,231 | (8,490 | ) | |||||
Pension adjustment, net of tax | — | (1,162 | ) | |||||
Balance, end of period | (34,047 | ) | (51,278 | ) | ||||
Total common stockholders’ equity | 3,174,735 | 2,477,989 | ||||||
Noncontrolling interests | ||||||||
Balance, beginning of period | 332,976 | 321,538 | ||||||
Net earnings to noncontrolling interests | 4,523 | 16,601 | ||||||
Contributions | 1,713 | 12,433 | ||||||
Distributions | (22,056 | ) | (15,177 | ) | ||||
Deconsolidation of asset management entity | (203 | ) | (5,477 | ) | ||||
Adoption of accounting changes to ASC 810 | — | 3,058 | ||||||
Balance, end of period | 316,953 | 332,976 | ||||||
Total stockholders’ equity | $ | 3,491,688 | $ | 2,810,965 | ||||
(1) | Includes grants related to the Incentive Plan, Deferred Compensation Plan and Directors’ Plan. |
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Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net earnings to common shareholders | $ | 68,275 | $ | 44,754 | $ | 236,232 | $ | 160,952 | ||||||||
Other comprehensive income: | ||||||||||||||||
Currency translation adjustments | (6,266 | ) | 17,381 | 17,231 | (13,602 | ) | ||||||||||
Total other comprehensive (loss) income (1) | (6,266 | ) | 17,381 | 17,231 | (13,602 | ) | ||||||||||
Comprehensive income | $ | 62,009 | $ | 62,135 | $ | 253,463 | $ | 147,350 | ||||||||
(1) | Total other comprehensive income, net of tax, is attributable to common shareholders. No other comprehensive income is attributable to noncontrolling interests. |
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Nine Months Ended | Eight Months Ended | |||||||
August 31, 2011 | August 31, 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 240,755 | $ | 162,817 | ||||
Adjustments to reconcile net earnings to net cash used in operating activities: | ||||||||
Depreciation and amortization | 53,786 | 27,490 | ||||||
Bargain purchase gain | (52,509 | ) | — | |||||
Fees related to assigned management agreements | (2,728 | ) | (2,589 | ) | ||||
Interest on mandatorily redeemable preferred interests of consolidated subsidiaries | 6,183 | (26 | ) | |||||
Accruals related to various benefit plans and stock issuances, net of estimated forfeitures | 56,601 | 30,821 | ||||||
Increase in cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations | (555,008 | ) | (248,032 | ) | ||||
(Increase) decrease in receivables: | ||||||||
Brokers, dealers and clearing organizations | (840,670 | ) | 226,379 | |||||
Customers | 185,110 | (216,894 | ) | |||||
Fees, interest and other | (56,909 | ) | 7,625 | |||||
Decrease in securities borrowed | 375,677 | 283,616 | ||||||
Increase in financial instruments owned | (1,124,290 | ) | (4,687,754 | ) | ||||
(Increase) decrease in other investments | (353,053 | ) | 22,359 | |||||
Decrease (increase) in investments in managed funds | 57,685 | (9,672 | ) | |||||
(Increase) decrease in securities purchased under agreements to resell | (1,229,802 | ) | 324,488 | |||||
Increase in other assets | (153,776 | ) | (118,625 | ) | ||||
Increase (decrease) in payables: | ||||||||
Brokers, dealers and clearing organizations | 810,130 | 816,626 | ||||||
Customers | 610,233 | (75,927 | ) | |||||
Increase (decrease) in securities loaned | 197,357 | (408,214 | ) | |||||
Increase in financial instruments sold, not yet purchased | 797,320 | 2,429,942 | ||||||
Increase in securities sold under agreements to repurchase | 219,933 | 1,361,466 | ||||||
Decrease in accrued expenses and other liabilities | (251,027 | ) | (18,579 | ) | ||||
Net cash used in operating activities | (1,009,002 | ) | (92,683 | ) | ||||
Cash flows from investing activities: | ||||||||
Net payments on premises and equipment | (60,275 | ) | (24,678 | ) | ||||
Cash paid for acquisition during the period, net of cash acquired | (318,196 | ) | — | |||||
Cash received from contingent consideration | 2,733 | 1,927 | ||||||
Cash paid for contingent consideration | (754 | ) | (8,101 | ) | ||||
Net cash used in investing activities | (376,492 | ) | (30,852 | ) | ||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS — CONTINUED (Unaudited)
(Dollars in thousands)
Nine Months Ended | Eight Months Ended | |||||||
August 31, 2011 | August 31, 2010 | |||||||
Cash flows from financing activities: | ||||||||
Excess tax benefits from the issuance of share-based awards | $ | 33,311 | $ | 2,148 | ||||
Gross proceeds from short-term borrowings | 2,881,000 | 2,296,000 | ||||||
Gross payments on short-term borrowings | (2,829,027 | ) | (2,296,000 | ) | ||||
Net proceeds from (payments on): | ||||||||
Issuance of common shares | 494,895 | — | ||||||
Issuance of senior notes, net of issuance costs | 794,587 | 543,510 | ||||||
Mandatorily redeemable preferred interest of consolidated subsidiaries | (8,973 | ) | (17,077 | ) | ||||
Noncontrolling interest | (20,343 | ) | (12,577 | ) | ||||
Repurchase of common stock | (96,929 | ) | (114,893 | ) | ||||
Dividends | (43,417 | ) | (38,709 | ) | ||||
Exercise of stock options, not including tax benefits | 95 | 108 | ||||||
Net cash provided by financing activities | 1,205,199 | 362,510 | ||||||
Effect of foreign currency translation on cash and cash equivalents | 6,247 | (2,202 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (174,048 | ) | 236,773 | |||||
Cash and cash equivalents at beginning of period | 2,188,998 | 1,853,167 | ||||||
Cash and cash equivalents at end of period | $ | 2,014,950 | $ | 2,089,940 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 667,376 | $ | 428,903 | ||||
Income taxes, net | 143,058 | 180,420 | ||||||
Acquisitions: | ||||||||
Fair value of assets acquired | $ | 4,703,533 | ||||||
Liabilities assumed | (4,229,011 | ) | ||||||
Bargain purchase gain | (52,509 | ) | ||||||
Total purchase price | 422,013 | |||||||
Anticipated cash payment for acquisition subsequent to August 31, 2011 | (2,474 | ) | ||||||
Cash acquired | (101,343 | ) | ||||||
Cash paid for acquisition during the period, net of cash acquired | $ | 318,196 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Three Months | Eight Months | |||||||
Ended | Ended | |||||||
August 31, 2010 | August 31, 2010 | |||||||
Previously reported Net earnings to common shareholders | $ | 46,256 | $ | 164,795 | ||||
Netting of interest revenues and expense | — | — | ||||||
Differences with clearing bank | (1,738 | ) | (3,453 | ) | ||||
Other items (1) | 236 | (390 | ) | |||||
Total adjustments | (1,502 | ) | (3,843 | ) | ||||
Adjusted Net earnings to common shareholders | $ | 44,754 | $ | 160,952 | ||||
(1) | Other items — Includes the effect of certain other immaterial adjustments. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Three Months Ended | Eight Months Ended | |||||||||||||||
August 31, 2010 | August 31, 2010 | |||||||||||||||
As Previously | As Previously | |||||||||||||||
Reported | Adjusted | Reported | Adjusted | |||||||||||||
Principal transactions | $ | 74,282 | $ | 71,044 | $ | 324,037 | $ | 317,686 | ||||||||
Interest | 152,546 | 239,557 | 430,902 | 625,725 | ||||||||||||
Total revenues | 609,257 | 693,030 | 1,756,961 | 1,945,432 | ||||||||||||
Interest expense | 89,159 | 175,761 | 237,493 | 432,995 | ||||||||||||
Net revenues | 520,098 | 517,269 | 1,519,468 | 1,512,437 | ||||||||||||
Net revenues, less mandatorily redeemable perferred interest | 522,635 | 519,806 | 1,519,494 | 1,512,463 | ||||||||||||
Floor brokerage and clearing fees | 30,244 | 30,111 | 84,702 | 84,199 | ||||||||||||
Total non-interest expenses | 443,441 | 443,308 | 1,239,874 | 1,239,369 | ||||||||||||
Earnings before income taxes | 79,194 | 76,498 | 279,620 | 273,094 | ||||||||||||
Income tax expense | 35,067 | 33,873 | 112,960 | 110,277 | ||||||||||||
Net earnings | 44,127 | 42,625 | 166,660 | 162,817 | ||||||||||||
Net earnings to common shareholders | 46,256 | 44,754 | 164,795 | 160,952 | ||||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.22 | $ | 0.81 | $ | 0.79 | ||||||||
Diluted | $ | 0.23 | $ | 0.22 | $ | 0.81 | $ | 0.79 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Level 1: | Quoted prices are available in active markets for identical assets or liabilities as of the reported date. | ||
Level 2: | Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these financial instruments include cash instruments for which quoted prices are available but traded less frequently, derivative instruments whose fair value have been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data, and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed. | ||
Level 3: | Instruments that have little to no pricing observability as of the reported date. These financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Assets acquired: | ||||
Cash and cash equivalents | $ | 101,343 | ||
Cash and securities segregated | 3,130,586 | |||
Financial instruments owned, at fair value | 918,598 | |||
Securities purchased under agreements to resell | 1,489 | |||
Receivables: | ||||
Brokers, dealers and clearing organizations | 313,939 | |||
Customers | 173,477 | |||
Fees, interest and other | 122 | |||
Premises and equipment | 13,584 | |||
Indefinite-lived intangible exchange memberships and licences (1) | 11,219 | |||
Finite-lived intangible customer relationships (1)(2) | 5,800 | |||
Trade names (1)(3) | 1,300 | |||
Other assets | 32,076 | |||
Total assets | $ | 4,703,533 | ||
Liabilities assumed: | ||||
Short-term borrowings | $ | 301,027 | ||
Financial instruments sold, not yet purchased, at fair value | 267,200 | |||
Payables: | ||||
Brokers, dealers and clearing organizations | 43,588 | |||
Customers | 3,384,263 | |||
Accrued expenses and other liabilities | 232,933 | |||
Total liabilities | $ | 4,229,011 | ||
Fair value of net assets acquired | $ | 474,522 | ||
Purchase price: | ||||
Cash | $ | 422,013 | ||
Total purchase price | $ | 422,013 | ||
Bargain purchase gain | $ | 52,509 |
(1) | Intangible assets are recorded within Other assets on the Consolidated Statements of Financial Condition. | |
(2) | The fair value of the finite-lived customer relationships will be amortized on a straight line basis over a weighted-average useful life of approximately 9.6 years. | |
(3) | The fair value of the Bache trade name will be amortized on a straight line basis over a useful life of 1.5 years. |
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Three months ended | Nine months ended | Eight months ended | ||||||||||||||
(in millions, except per share data) | August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | ||||||||||||
Total net revenues | $ | 473.3 | $ | 566.7 | $ | 2,079.7 | $ | 1,703.0 | ||||||||
Net earnings to common shareholders | $ | 16.7 | $ | 37.6 | $ | 198.4 | $ | 210.8 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.07 | $ | 0.18 | $ | 0.90 | $ | 1.03 | ||||||||
Diluted | $ | 0.07 | $ | 0.18 | $ | 0.90 | $ | 1.03 | ||||||||
Weighted average common shares: | ||||||||||||||||
Basic | 218,426 | 195,601 | 209,544 | 196,943 | ||||||||||||
Diluted (1) | 218,431 | 195,612 | 213,661 | 201,062 |
(1) | The conversion of our mandatorily redeemable convertible preferred stock was considered anti-dilutive for the purposes of the pro forma calculation for the three months ended August 31, 2011. |
a) | the bargain purchase gain of $52.5 million has been excluded from Net revenues and Net earnings for the periods ended August 31, 2011 and included in Net revenues and Net earnings for the eight months ended August 31, 2010; | ||
b) | an adjustment to reflect Global Commodities Group’s physical commodities at market value; | ||
c) | acquisition costs totaling $4.4 million recognized in Professional services has been excluded from the periods ended August 31, 2011 and included in the eight months ended August 31, 2010; | ||
d) | additional amortization expense on the acquired intangible assets and internally developed software of $0.2 million and $1.6 million for the three month and nine month periods ended August 31, 2011 and $.07 million and $1.9 million for the three and eight month periods ended August 31, 2010; | ||
e) | the recording of income tax expense resulting from the pro forma adjustments before tax at an effective rate of 44.9% and 36.5% for the three month and nine month periods ended August 31, 2011 and 45.4% and 33.8% for the three and eight month periods ended August 31, 2010. |
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August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Cash and cash equivalents: | ||||||||
Cash in banks | $ | 807,414 | $ | 325,227 | ||||
Money market investments | 1,207,536 | 1,863,771 | ||||||
Total cash and cash equivalents | $ | 2,014,950 | $ | 2,188,998 | ||||
Cash and securities segregated (1) | $ | 5,321,012 | $ | 1,636,755 | ||||
(1) | Consists of deposits at exchanges and clearing organizations, as well as deposits in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, which subjects Jefferies as a broker dealer carrying client accounts, to requirements related to maintaining cash or qualified securities in a segregated reserve account for the exclusive benefit of its clients; and Jefferies Bache, LLC which, as a futures commission merchant, is subject to the segregation requirements pursuant to the Commodity Exchange Act. |
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As of August 31, 2011 | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
and Cash | ||||||||||||||||||||
Collateral | ||||||||||||||||||||
Level 1 (3) | Level 2 (3) | Level 3 | Netting (2) | Total | ||||||||||||||||
Assets: | ||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||
Corporate equity securities | $ | 1,523,277 | $ | 141,909 | $ | 11,412 | $ | — | $ | 1,676,598 | ||||||||||
Corporate debt securities | 7,438 | 4,150,581 | 55,230 | — | 4,213,249 | |||||||||||||||
Collateralized debt obligations | — | 92,298 | 96,664 | — | 188,962 | |||||||||||||||
U.S. government and federal agency securities | 1,932,703 | 230,780 | — | — | 2,163,483 | |||||||||||||||
Municipal securities | — | 682,807 | 686 | — | 683,493 | |||||||||||||||
Sovereign obligations | 1,994,296 | 690,154 | 128 | — | 2,684,578 | |||||||||||||||
Residential mortgage-backed securities | — | 3,787,720 | 171,519 | — | 3,959,239 | |||||||||||||||
Commercial mortgage-backed securities | — | 488,196 | 40,195 | — | 528,391 | |||||||||||||||
Other asset-backed securities | — | 107,538 | 3,478 | — | 111,016 | |||||||||||||||
Loans and other receivables | — | 364,518 | 164,163 | — | 528,681 | |||||||||||||||
Derivatives | 967,618 | 1,557,787 | 155 | (1,609,418 | ) | 916,142 | ||||||||||||||
Investments at fair value | — | 24,405 | 92,428 | — | 116,833 | |||||||||||||||
Physical commodities | — | 369,281 | — | — | 369,281 | |||||||||||||||
Total financial instruments owned | $ | 6,425,332 | $ | 12,687,974 | 636,058 | $ | (1,609,418 | ) | $ | 18,139,946 | ||||||||||
Level 3 assets for which the firm does not bear economic exposure (1) | (68,987 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure | $ | 567,071 | ||||||||||||||||||
Cash and securities segregated and on deposit for regulatory purposes | $ | 407,096 | $ | — | $ | — | $ | — | $ | 407,096 | ||||||||||
Securities received as collateral | $ | 40,401 | $ | — | $ | — | $ | — | $ | 40,401 | ||||||||||
Liabilities: | ||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||
Corporate equity securities | $ | 1,622,547 | $ | 113,615 | $ | 59 | $ | — | $ | 1,736,221 | ||||||||||
Corporate debt securities | 21,901 | 2,450,144 | — | — | 2,472,045 | |||||||||||||||
U.S. government and federal agency securities | 2,381,050 | 351,749 | — | — | 2,732,799 | |||||||||||||||
Sovereign obligations | 1,830,082 | 715,354 | — | — | 2,545,436 | |||||||||||||||
Residential mortgage-backed securities | — | 81,955 | — | — | 81,955 | |||||||||||||||
Commercial mortgage-backed securities | — | 117 | — | — | 117 | |||||||||||||||
Loans | — | 144,188 | 11,458 | — | 155,646 | |||||||||||||||
Derivatives | 674,857 | 1,836,983 | 3,601 | (1,919,499 | ) | 595,942 | ||||||||||||||
Total financial instruments sold, not yet purchased | $ | 6,530,437 | $ | 5,694,105 | $ | 15,118 | $ | (1,919,499 | ) | $ | 10,320,161 | |||||||||
Obligation to return securities received as collateral | $ | 40,401 | $ | — | $ | — | $ | — | $ | 40,401 |
(1) | Consists of Level 3 assets attributable to third party or employee noncontrolling interests in certain consolidated entities. | |
(2) | Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty. |
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(3) | There were no significant transfers between Level 1 and Level 2 for the three-months and nine-months ended August 31, 2011. |
As of November 30, 2010 | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
and Cash | ||||||||||||||||||||
Collateral | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting (2) | Total | ||||||||||||||||
Assets: | ||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||
Corporate equity securities | $ | 1,453,744 | $ | 89,430 | $ | 22,619 | $ | — | $ | 1,565,793 | ||||||||||
Corporate debt securities | 25 | 3,557,183 | 73,408 | — | 3,630,616 | |||||||||||||||
Collateralized debt obligations | — | 27,863 | 31,121 | — | 58,984 | |||||||||||||||
U.S. government and federal agency securities | 2,322,204 | 210,422 | — | — | 2,532,626 | |||||||||||||||
Municipal securities | — | 477,462 | 472 | — | 477,934 | |||||||||||||||
Sovereign obligations | 1,600,762 | 580,651 | — | — | 2,181,413 | |||||||||||||||
Residential mortgage-backed securities | — | 3,912,708 | 132,359 | — | 4,045,067 | |||||||||||||||
Commercial mortgage-backed securities | — | 524,614 | 6,004 | — | 530,618 | |||||||||||||||
Other asset-backed securities | — | 286,329 | 567 | — | 286,896 | |||||||||||||||
Loans and other receivables | — | 206,977 | 227,596 | — | 434,573 | |||||||||||||||
Derivatives | 279,811 | 176,069 | — | (336,612 | ) | 119,268 | ||||||||||||||
Investments at fair value | — | — | 77,784 | — | 77,784 | |||||||||||||||
Total financial instruments owned | $ | 5,656,546 | $ | 10,049,708 | 571,930 | $ | (336,612 | ) | $ | 15,941,572 | ||||||||||
Level 3 assets for which the firm does not bear economic exposure (1) | (204,139 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure | $ | 367,791 | ||||||||||||||||||
Securities received as collateral | $ | 48,616 | $ | — | $ | — | $ | — | $ | 48,616 | ||||||||||
Liabilities: | ||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||
Corporate equity securities | $ | 1,554,489 | $ | 83,845 | $ | 38 | $ | — | $ | 1,638,372 | ||||||||||
Corporate debt securities | — | 2,375,925 | — | — | 2,375,925 | |||||||||||||||
U.S. government and federal agency securities | 1,688,684 | 51,604 | — | — | 1,740,288 | |||||||||||||||
Municipal securities | — | 170 | — | — | 170 | |||||||||||||||
Sovereign obligations | 2,180,667 | 814,163 | — | — | 2,994,830 | |||||||||||||||
Residential mortgage-backed securities | — | 127,547 | — | — | 127,547 | |||||||||||||||
Commerical mortgage-backed securities | — | 1,837 | — | — | 1,837 | |||||||||||||||
Loans | — | 124,050 | 47,228 | — | 171,278 | |||||||||||||||
Derivatives | 241,860 | 240,866 | 2,346 | (425,520 | ) | 59,552 | ||||||||||||||
Total financial instruments sold, not yet purchased | $ | 5,665,700 | $ | 3,820,007 | $ | 49,612 | $ | (425,520 | ) | $ | 9,109,799 | |||||||||
Obligation to return securities received as collateral | $ | 48,616 | $ | — | $ | — | $ | — | $ | 48,616 |
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(1) | Consists of Level 3 assets which are either financed by nonrecourse secured financings or attributable to third party or employee noncontrolling interests in certain consolidated entities. | |
(2) | Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty. |
• | Exchange Traded Equity Securities: Exchange-traded equity securities are measured based on quoted exchange prices, which are generally obtained from pricing services, and are categorized as Level 1 in the fair value hierarchy. | |
• | Non-exchange Traded Equity Securities: Non-exchange traded equity securities are measured primarily using broker quotations, pricing service data from external providers and prices observed for recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange traded equity securities are categorized as Level 3 financial instruments and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration). | |
• | Equity warrants: Non-exchange traded equity warrants are generally classified within Level 3 of the fair value hierarchy and are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. |
• | Corporate Bonds: Corporate bonds are measured primarily using pricing service data from external providers and broker quotations, where available, prices observed for recently executed market transactions of comparable size, and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Corporate bonds measured |
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using alternative valuation techniques are classified within Level 3 of the fair value hierarchy and comprise a limited portion of our corporate bonds. | ||
• | High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and convertible bonds are classified within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing service data from external providers, where available, and prices observed for recently executed market transactions of comparable size. Where pricing data is less observable, valuations are classified in Level 3 and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s subsequent financings or recapitalizations, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers. | |
• | Auction Rate Securities: Auction rate securities (“ARS”) included within corporate debt securities include ARS backed by pools of student loans and auction rate preferred securities issued by closed end mutual funds. ARS are measured using market data provided by external service providers, as available. The fair value of ARS is also determined by benchmarking to independent market data and adjusting for projected cash flows, level of seniority in the capital structure, leverage, liquidity and credit rating, as appropriate. ARS are classified within Level 3 of the fair value hierarchy based on our assessment of the transparency of the external market data received. |
• | U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices and categorized in Level 1 of the fair value hierarchy. | |
• | U.S. Agency Issued Debt Securities: Callable and non-callable U.S. agency issued debt securities are measured primarily based on quoted market prices obtained from external pricing services. Non-callable U.S. agency securities are generally classified within Level 1 of the fair value hierarchy and callable U.S. agency securities are classified within Level 2. |
• | G-7 Government and non-G-7 Government Bonds: G-7 government and non-G-7 government bonds are measured based on quoted market prices obtained from external pricing services. G-7 government bonds are categorized within Level 1 of the fair value hierarchy and non-G-7 government bonds are generally categorized within Level 2. | |
• | Emerging Market Sovereign Debt Securities: Valuations are primarily based on market price quotations from external data providers, where available, or recently executed independent transactions of comparable size. To the extent market price quotations are not available or recent transactions have not been observed, valuation techniques incorporating foreign currency curves, interest rate yield curves and country spreads for bonds of similar issuers, seniority and maturity are used to determine fair value. Emerging market sovereign debt securities are generally classified within Level 2 of the fair value hierarchy. |
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• | Agency Residential Mortgage-Backed Securities: Agency residential mortgage-backed securities include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations, interest-only and principal-only securities and to-be-announced securities and are generally measured using market price quotations from external data providers and categorized within Level 2 of the fair value hierarchy. | |
• | Agency Residential Inverse Interest-Only Securities (“Agency Inverse IOs”): The fair value of agency inverse IOs is estimated using expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral. We use prices observed for recently executed transactions to develop market-clearing spread and yield curve assumptions. Valuation inputs with regard to underlying collateral incorporate weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer, and weighted average loan age. Agency inverse IOs are categorized within Level 2 of the fair value hierarchy. We also use vendor data in developing assumptions, as appropriate. | |
• | Non-Agency Residential Mortgage-Backed Securities: Fair values are determined primarily using discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. |
• | Agency Commercial Mortgage-Backed Securities: GNMA project loan bonds and FNMA DUS mortgage-backed securities are generally measured by using prices observed for recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. GNMA project loan bonds and FNMA DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy. | |
• | Non-Agency Commercial Mortgage-Backed Securities: Non-agency commercial mortgage-backed securities are measured using pricing data obtained from third party services and prices observed for recently executed market transactions and are categorized within Level 2 and Level 3 of the fair value hierarchy. |
• | Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market price quotations from external data providers where sufficient observability exists as to the extent of market transaction data supporting the pricing data. Corporate loans categorized within Level 3 are measured based on market price quotations that are considered to be less transparent, market prices for debt securities of the same creditor, and estimates of future cash flow incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure. | |
• | Participation Certificates in GNMA Project and Construction Loans: Valuations of participation certificates in GNMA project and construction loans are based on observed market prices of recently executed purchases of similar loans which are then used to derive a market implied spread. The market implied spread is used as the |
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(Unaudited)
primary input in estimating the fair value of loans at the measurement date. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions. | ||
• | Project Loans: Valuation of project loans are based on benchmarks of prices for recently executed transactions of related realized collateralized securities and are classified within Level 2 of the fair value hierarchy. | |
• | Escrow and Trade Claim Receivables: Escrow and trade claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. Escrow and trade claim receivables are categorized within Level 2 where fair value is based on recent trade activity in the same security. |
• | Listed Derivative Contracts: Listed derivative contracts are measured based on quoted exchange prices, which are generally obtained from pricing services, and are categorized as Level 1 in the fair value hierarchy. | |
• | OTC Derivative Contracts: OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current period transaction. Inputs to valuation models are appropriately calibrated to market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized in Level 2 of the fair value hierarchy given the observability of the inputs to the valuation models. | |
OTC options include OTC equity and commodity options measured using Black-Scholes models with key inputs impacting the valuation including the underlying security or commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, and valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves. Credit defaults swaps include both index and single-name credit default swaps. External prices are available as inputs in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from third parties. |
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August 31, 2011 | ||||||||||||
Unfunded | Redemption Frequency | |||||||||||
Fair Value (f) | Commitments | (if currently eligible) | ||||||||||
Equity Long/Short Hedge Funds(a) | $ | 27,282 | $ | — | Monthly, Quarterly, Semiannually | |||||||
High Yield Hedge Funds(b) | 993 | — | — | |||||||||
Fund of Funds(c) | 881 | 127 | Annually | |||||||||
Private Equity Funds(d) | 21,198 | 5,897 | — | |||||||||
Commodity Funds(e) | 14,569 | — | Bi-Monthly | |||||||||
Total(g) | $ | 64,923 | $ | 6,025 | ||||||||
November 30, 2010 | ||||||||||||
Unfunded | Redemption Frequency | |||||||||||
Fair Value (f) | Commitments | (if currently eligible) | ||||||||||
Equity Long/Short Hedge Funds(a) | $ | 19,865 | $ | — | Quarterly, Semiannually | |||||||
High Yield Hedge Funds(b) | 1,561 | — | — | |||||||||
Fund of Funds(c) | 2,622 | 131 | Annually | |||||||||
Private Equity Funds(d) | 26,567 | 6,792 | — | |||||||||
Other Investments(h) | 287 | — | At Will | |||||||||
Total(g) | $ | 50,902 | $ | 6,923 | ||||||||
(a) | This category includes investments in hedge funds that invest in both long and short equity securities in domestic and international markets in both public and private sectors. At August 31, 2011 and November 30, 2010, investments representing approximately 98% and 67%, respectively, of the fair value in this category are redeemable with 30 - 90 days prior written notice. At November 30, 2010, investments representing approximately 30% of fair value cannot be redeemed until the lock-up period expired on December 31, 2010. At August 31, 2011 and November 30, 2010, investments representing approximately 2% and 3% respectively, of fair value cannot be redeemed as they are in liquidation and distributions will be received through the liquidation of the underlying assets of the funds. We are unable to estimate when the underlying assets will be liquidated. At August 31, 2011 and November 30, 2010, an investment representing less than 1% of fair value has no redemption provisions; distributions are received through the liquidation of the underlying assets of the fund which is estimated to be within one to two years. | |
(b) | This category includes investments in funds that invest in domestic and international public high yield debt, private high yield investments, senior bank loans, public leveraged equities, distressed debt, and private equity investments. There are no redemption provisions and distributions are received through the liquidation of the underlying assets of the funds. At August 31, 2011 and November 30, 2010, these investments are currently in liquidation and we are unable to estimate when the underlying assets will be fully liquidated. | |
(c) | This category includes investments in fund of funds that invest in various private equity funds. At August 31, 2011 and November 30, 2010, approximately 95% and 41%, respectively, of the fair value of investments in this category is managed by us and has no redemption provisions. Distributions are received through the liquidation of the underlying assets of the fund of funds, which are estimated to be liquidated in one to three years. At August 31, 2011 we requested redemption for investments representing approximately 5% of fair value at August 31, 2011, however we are unable to estimate when these funds will be returned. At November 30, 2010, investments representing approximately 59% of the fair value were approved for redemption and the funds’ net asset values were received in the first quarter of 2011. |
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(d) | At August 31, 2011 and November 30, 2010, investments representing approximately 81% and 74% respectively, include investments in private equity funds that invest in the equity of various private companies in the energy, technology, internet service and telecommunication service industries including acquired or restructured companies. These investments cannot be redeemed; distributions are received through the liquidation of the underlying assets of the funds and are expected to liquidate in one to ten years. At August 31, 2011, a fund that invests in Croatian companies represents approximately 19% of the total investment in private equity funds. At November 30, 2010, funds that invest in Croatian and Vietnamese companies represent approximately 26% of the total investment in private equity funds. | |
(e) | At August 31, 2011, this category included investments in funds that invest in various commodity futures contracts on futures exchanges and forward contracts, exchange-traded options on futures contracts and other commodity-related or commodity-linked financial instruments. These investments can be redeemed on the fifteenth and last calendar day of each month with prior written notice within five business days. | |
(f) | Fair value has been estimated using the net asset value derived from each of the funds’ partner capital statements. | |
(g) | Investments at fair value, in the Consolidated Statements of Financial Condition at August 31, 2011 and November 30, 2010 include $51.9 million and $26.9 million, respectively, of direct investments which are not investment companies and therefore are not part of this disclosure table. | |
(h) | Other Investments at November 30, 2010 included investments in closed-ended funds that invested in Vietnamese equity and debt instruments. |
August 31, 2011 | November 30, 2010 | |||||||||||||||
Financial | Financial | |||||||||||||||
Financial | Instruments Sold, | Financial | Instruments Sold, | |||||||||||||
Instruments | Not Yet | Instruments | Not Yet | |||||||||||||
Owned | Purchased | Owned | Purchased | |||||||||||||
Exchange closing prices | 10 | % | 16 | % | 9 | % | 17 | % | ||||||||
Recently observed transaction prices | 7 | % | 2 | % | 5 | % | 2 | % | ||||||||
Data providers/pricing services | 67 | % | 74 | % | 65 | % | 60 | % | ||||||||
Broker quotes | 1 | % | 1 | % | 12 | % | 19 | % | ||||||||
Valuation techniques | 15 | % | 7 | % | 9 | % | 2 | % | ||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||
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Three Months Ended August 31, 2011 | ||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||
Total gains/ | Purchases, | unrealized gains/ | ||||||||||||||||||||||||||
losses | sales, | (losses) relating to | ||||||||||||||||||||||||||
(realized and | settlements, | Transfers | Transfers | Balance, | instruments still held | |||||||||||||||||||||||
Balance, | unrealized) | and issuances, | into | out of | August 31, | at August 31, 2011 | ||||||||||||||||||||||
May 31, 2011 | (1) | net | Level 3 | Level 3 | 2011 | (1) | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 18,230 | $ | 1,720 | $ | 2,631 | $ | 861 | $ | (12,030 | ) | $ | 11,412 | $ | (154 | ) | ||||||||||||
Corporate debt securities | 39,688 | (4,069 | ) | 6,230 | 14,425 | (1,044 | ) | 55,230 | (7,349 | ) | ||||||||||||||||||
Collateralized debt obligations | 84,046 | (3,417 | ) | 9,325 | 19,029 | (12,319 | ) | 96,664 | (5,413 | ) | ||||||||||||||||||
Municipal securities | 858 | 11 | (183 | ) | — | — | 686 | 1 | ||||||||||||||||||||
Sovereign obligations | — | — | 128 | — | — | 128 | — | |||||||||||||||||||||
Residential mortgage-backed securities | 206,721 | (12,527 | ) | 15,276 | 41,510 | (79,461 | ) | 171,519 | (12,917 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 33,516 | (3,652 | ) | (292 | ) | 17,364 | (6,741 | ) | 40,195 | (3,690 | ) | |||||||||||||||||
Other asset-backed securities | 9,352 | (329 | ) | 2,773 | 99 | (8,417 | ) | 3,478 | (329 | ) | ||||||||||||||||||
Loans and other receivables | 261,056 | 710 | (92,362 | ) | 27,077 | (32,318 | ) | 164,163 | (116 | ) | ||||||||||||||||||
Investments at fair value | 71,008 | 2,397 | 19,045 | 11 | (33 | ) | 92,428 | (938 | ) | |||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 38 | $ | 21 | $ | — | $ | — | $ | — | $ | 59 | $ | 20 | ||||||||||||||
Net derivatives (2) | 2,739 | 696 | — | — | 11 | 3,446 | 687 | |||||||||||||||||||||
Loans | 6,398 | (230 | ) | 5,290 | — | — | 11,458 | (230 | ) |
(1) | Realized and unrealized gains/ losses are reported in Principal transactions in the Consolidated Statements of Earnings. | |
(2) | Net derivatives represent Financial instruments owned — Derivatives and Financial instruments sold, not yet purchased — Derivatives. |
• | Non-agency residential mortgage-backed securities, collateralized debt obligations, and commercial mortgage backed securities due to less observable trading activity and vendor quotes that were not corroborated to market transactions; | |
• | Loans and other receivables due to lower number of contributors comprising vendor quotes to support classification in Level 2; and | |
• | Corporate debt securities due to lack of observable market transactions. |
• | Non-agency residential mortgage-backed securities, collateralized debt obligations, other asset-backed securities, and commercial mortgage backed securities for which market trades were observed in the period for either identical or similar securities or for which vendor prices were corroborated to actual market transactions; | |
• | Loans and other receivables due to greater number of contributors comprising vendor quotes supporting classification into Level 2; and |
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(Unaudited)
• | Corporate equity securities due to announced market transactions or more observable market data on comparable securities used as a benchmark. |
Three Months Ended August 31, 2010 | ||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||
Total gains/ | unrealized gains/ | |||||||||||||||||||||||||||
losses | Purchases, | (losses) relating to | ||||||||||||||||||||||||||
Balance, | (realized and | sales, | Transfers | Transfers | Balance, | instruments still held | ||||||||||||||||||||||
May 31, | unrealized) | settlements, | into | out of | August 31, | at August 31, 2010 | ||||||||||||||||||||||
2010 | (1) | and issuances | Level 3 | Level 3 | 2010 | (1) | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 21,918 | $ | 1,327 | $ | 2,751 | $ | — | $ | (417 | ) | $ | 25,579 | $ | (789 | ) | ||||||||||||
Corporate debt securities | 100,275 | (714 | ) | 3,149 | 54 | (1,480 | ) | 101,284 | (813 | ) | ||||||||||||||||||
Collateralized debt obligations | 21,957 | (495 | ) | 352 | 4,492 | — | 26,306 | (615 | ) | |||||||||||||||||||
U.S. issued municipal securities | 436 | (7 | ) | — | — | — | 429 | (7 | ) | |||||||||||||||||||
Residential mortgage-backed securities | 148,833 | 5,914 | (8,770 | ) | 23,143 | (1,281 | ) | 167,839 | 404 | |||||||||||||||||||
Commercial mortgage-backed securities | 1,000 | — | 50 | — | (1,000 | ) | 50 | — | ||||||||||||||||||||
Other asset-backed securities | 369 | — | (369 | ) | — | — | — | — | ||||||||||||||||||||
Loans and other receivables | 145,181 | (4,735 | ) | (55,105 | ) | — | — | 85,341 | (4,139 | ) | ||||||||||||||||||
Investments at fair value | 72,297 | 8,060 | (3,724 | ) | 2,723 | — | 79,356 | 9,145 | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 38 | $ | — | $ | — | $ | 58 | $ | — | $ | 96 | $ | — | ||||||||||||||
Corporate debt securities | 14,365 | (1,275 | ) | (13,090 | ) | — | — | — | — | |||||||||||||||||||
Net derivatives (2) | 1,271 | 523 | — | — | (500 | ) | 1,294 | 523 | ||||||||||||||||||||
Loans | 68,242 | — | (42,130 | ) | — | — | 26,112 | — |
(1) | Realized and unrealized gains/ losses are reported in Principal transactions in the Consolidated Statements of Earnings. | |
(3) | Net derivatives represent Financial instruments owned — derivatives and Financial instruments sold, not yet purchased — derivatives. |
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(Unaudited)
Nine Months Ended August 31, 2011 | ||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||
Total gains/ | Purchases, | unrealized gains/ | ||||||||||||||||||||||||||
losses | sales, | (losses) relating to | ||||||||||||||||||||||||||
Balance, | (realized and | settlements, | Transfers | Transfers | Balance, | instruments still held | ||||||||||||||||||||||
November 30, | unrealized) | and issuances, | into | out of | August 31, | at August 31, 2011 | ||||||||||||||||||||||
2010 | (1) | net | Level 3 | Level 3 | 2011 | (1) | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 22,619 | $ | 2,905 | $ | (3,040 | ) | $ | 816 | $ | (11,888 | ) | $ | 11,412 | $ | (422 | ) | |||||||||||
Corporate debt securities | 73,408 | (487 | ) | (22,533 | ) | 6,304 | (1,462 | ) | 55,230 | (5,906 | ) | |||||||||||||||||
Collateralized debt obligations | 31,121 | 10,423 | 54,351 | 779 | (10 | ) | 96,664 | 9,632 | ||||||||||||||||||||
Municipal securities | 472 | 89 | 125 | — | — | 686 | 78 | |||||||||||||||||||||
Sovereign obligations | — | — | 128 | — | — | 128 | — | |||||||||||||||||||||
Residential mortgage-backed securities | 132,359 | (8,354 | ) | 64,906 | 29,901 | (47,293 | ) | 171,519 | (25,284 | ) | ||||||||||||||||||
Commercial mortgage-backed securities | 6,004 | 1,625 | 25,574 | 6,992 | — | 40,195 | 112 | |||||||||||||||||||||
Other asset-backed securities | 567 | (604 | ) | 3,156 | 926 | (567 | ) | 3,478 | (604 | ) | ||||||||||||||||||
Loans and other receivables | 227,596 | 2,476 | (57,473 | ) | 9,006 | (17,442 | ) | 164,163 | (1,452 | ) | ||||||||||||||||||
Investments at fair value | 77,784 | 9,326 | 8,421 | — | (3,103 | ) | 92,428 | 6,495 | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 38 | $ | 21 | $ | — | $ | — | $ | — | $ | 59 | $ | 20 | ||||||||||||||
Net derivatives (2) | 2,346 | 1,100 | — | — | — | 3,446 | 1,200 | |||||||||||||||||||||
Loans | 47,228 | (230 | ) | (35,540 | ) | — | — | 11,458 | (230 | ) |
(1) | Realized and unrealized gains/ losses are reported in Principal transactions in the Consolidated Statements of Earnings. | |
(2) | Net Derivatives represent Financial instruments owned — derivatives and Financial instruments sold, not yet purchased — Derivatives. |
• | Non-agency residential mortgage-backed securities and commercial asset backed securities due to a tightening in the historical trading period used for corroborating market data and a greater scrutiny of vendor prices; | |
• | Loans and other receivables due to lower number of contributors comprising vendor quotes to support classification in Level 2; and | |
• | Corporate debt securities due to lack of observable market transactions. |
• | Non-agency residential mortgage-backed securities for which market trades were observed in the period for either identical or similar securities or for which vendor prices were corroborated to actual market transactions; | |
• | Loans and other receivables due to greater number of contributors comprising vendor quotes supporting classification into Level 2; and | |
• | Corporate equity securities due to announced market transactions or more observable market data on comparable securities used as a benchmark. |
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(Unaudited)
Eight Months Ended August 31, 2010 | ||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||
Purchases, | unrealized gains/ | |||||||||||||||||||||||||||
Total gains/ | sales, | (losses) relating to | ||||||||||||||||||||||||||
Balance, | losses | settlements, | Transfers | Transfers | Balance, | instruments still | ||||||||||||||||||||||
December | (realized and | and | into | out of | August 31, | held at August 31, | ||||||||||||||||||||||
31, 2009 | unrealized) (1) | issuances | Level 3 | Level 3 | 2010 | 2010 (1) | ||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Financial instruments owned: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | 43,042 | $ | (20,125 | ) | $ | 5,467 | $ | 143 | $ | (2,948 | ) | $ | 25,579 | $ | (22,524 | ) | |||||||||||
Corporate debt securities | 116,648 | (1,056 | ) | (1,084 | ) | 75 | (13,299 | ) | 101,284 | 1,060 | ||||||||||||||||||
Collateralized debt obligations | 9,570 | 5,397 | 4,067 | 7,272 | — | 26,306 | 4,840 | |||||||||||||||||||||
U.S. issued municipal securities | 420 | 9 | — | — | — | 429 | 9 | |||||||||||||||||||||
Sovereign obligations | 196 | — | — | — | (196 | ) | — | — | ||||||||||||||||||||
Residential mortgage-backed securities | 136,496 | 21,857 | (5,893 | ) | 23,435 | (8,056 | ) | 167,839 | 6,888 | |||||||||||||||||||
Commercial mortgage-backed securities | 3,215 | 11 | (1,241 | ) | — | (1,935 | ) | 50 | — | |||||||||||||||||||
Other asset-backed securities | 110 | — | (110 | ) | — | — | — | — | ||||||||||||||||||||
Loans and other receivables | 506,542 | 38,029 | (302,151 | ) | — | (157,079 | ) | 85,341 | 14,960 | |||||||||||||||||||
Investments at fair value | 65,564 | 13,744 | (3,991 | ) | 4,039 | — | 79,356 | 11,029 | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Financial instruments sold, not yet purchased: | ||||||||||||||||||||||||||||
Corporate equity securities | $ | — | $ | — | $ | — | $ | 96 | $ | — | $ | 96 | $ | — | ||||||||||||||
Corporate debt securities | — | (2,210 | ) | 2,210 | — | — | — | — | ||||||||||||||||||||
Net derivatives (2) | 6,835 | (3,585 | ) | — | — | (1,956 | ) | 1,294 | (3,585 | ) | ||||||||||||||||||
Loans | 352,420 | (344 | ) | (214,670 | ) | — | (111,294 | ) | 26,112 | — |
(1) | Realized and unrealized gains/ losses are reported in Principal transactions in the Consolidated Statements of Earnings. | |
(2) | Net derivatives represent Financial instruments owned — derivatives and Financial instruments sold, not yet purchased — derivatives. |
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(Unaudited)
August 31, 2011 | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Number of | Number of | |||||||||||||||
Fair Value | Contracts | Fair Value | Contracts | |||||||||||||
Interest rate contracts | $ | 417,666 | 93,251 | $ | 512,254 | 134,486 | ||||||||||
Foreign exchange contracts | 501,063 | 105,139 | 546,885 | 109,033 | ||||||||||||
Equity contracts | 951,232 | 2,329,567 | 665,190 | 2,090,700 | ||||||||||||
Commodity contracts | 595,268 | 172,621 | 749,278 | 181,285 | ||||||||||||
Credit contracts | 60,331 | 85 | 41,834 | 58 | ||||||||||||
Total | 2,525,560 | 2,700,663 | 2,515,441 | 2,515,562 | ||||||||||||
Counterparty/cash-collateral netting | (1,609,418 | ) | (1,919,499 | ) | ||||||||||||
Total per Consolidated Statement of Financial Condition | $ | 916,142 | $ | 595,942 | ||||||||||||
�� | ||||||||||||||||
November 30, 2010 | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Number of | Number of | |||||||||||||||
Fair Value | Contracts | Fair Value | Contracts | |||||||||||||
Interest rate contracts | $ | 77,295 | 41,166 | $ | 126,281 | 43,243 | ||||||||||
Foreign exchange contracts | 20,263 | 1,165 | 17,004 | 290 | ||||||||||||
Equity contracts | 275,760 | 1,166,365 | 249,229 | 1,133,464 | ||||||||||||
Commodity contracts | 62,727 | 103,562 | 76,911 | 35,071 | ||||||||||||
Credit contracts | 19,835 | 18 | 15,647 | 15 | ||||||||||||
Total | 455,880 | 1,312,276 | 485,072 | 1,212,083 | ||||||||||||
Counterparty/cash-collateral netting | (336,612 | ) | (425,520 | ) | ||||||||||||
Total per Consolidated Statement of Financial Condition | $ | 119,268 | $ | 59,552 | ||||||||||||
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(Unaudited)
Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||||||||||||
Gain (Loss) | Gain (Loss) | Gain (Loss) | Gain (Loss) | |||||||||||||
Interest rate contracts | $ | (103,572 | ) | $ | (90,599 | ) | $ | (190,800 | ) | $ | (127,358 | ) | ||||
Foreign exchange contracts | 2,200 | (1,185 | ) | (5,981 | ) | (369 | ) | |||||||||
Equity contracts | (74,564 | ) | (14,345 | ) | (178,433 | ) | (61,613 | ) | ||||||||
Commodity contracts | 8,512 | 2,231 | 41,102 | 5,963 | ||||||||||||
Credit contracts | 11,383 | 449 | 17,123 | (50,313 | ) | |||||||||||
Total | $ | (156,041 | ) | $ | (103,449 | ) | $ | (316,989 | ) | $ | (233,690 | ) | ||||
OTC derivative assets (1) (2) (4) | ||||||||||||||||||||
Greater Than | Cross-Maturity | |||||||||||||||||||
0 - 12 Months | 1 - 5 Years | 5 Years | Netting (3) | Total | ||||||||||||||||
Commodity swaps, options and forwards | $ | 102,889 | $ | 11,396 | $ | — | $ | (782 | ) | $ | 113,503 | |||||||||
Equity options | 17,992 | — | — | — | 17,992 | |||||||||||||||
Credit default swaps | 468 | 33,476 | 11,381 | (263 | ) | 45,062 | ||||||||||||||
Total return swaps | 518 | 17 | — | — | 535 | |||||||||||||||
Foreign currency forwards, swaps and options | 191,540 | 36,420 | 3 | (9,973 | ) | 217,990 | ||||||||||||||
Fixed income forwards | 92 | — | — | — | 92 | |||||||||||||||
Interest rate swaps and caps | 46,301 | 88,646 | 142,426 | (14,560 | ) | 262,813 | ||||||||||||||
Total | $ | 359,800 | $ | 169,955 | $ | 153,810 | $ | (25,578 | ) | 657,987 | ||||||||||
Cross product counterparty netting | (17,588 | ) | ||||||||||||||||||
Total OTC derivative assets included in Financial instruments owned | $ | 640,399 | ||||||||||||||||||
(1) | At August 31, 2011, we held exchange traded derivative assets and other credit enhancements of $308.0 million. | |
(2) | OTC derivative assets in the table above are gross of collateral received. OTC derivative assets are recorded net of collateral received on the Consolidated Statements of Financial Condition. At August 31, 2011, cash collateral received was $32.2 million. | |
(3) | Amounts represent the netting of receivable balances with payable balances within product category for the same counterparty across maturity categories. | |
(4) | Derivative fair values include counterparty netting within product category. |
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(Unaudited)
OTC derivative liabilities (1)(2)(4) | ||||||||||||||||||||
Greater Than | Cross-Maturity | |||||||||||||||||||
0 - 12 Months | 1 - 5 Years | 5 Years | Netting (3) | Total | ||||||||||||||||
Commodity swaps, options and forwards | $ | 258,951 | $ | 15,251 | $ | — | $ | (782 | ) | $ | 273,420 | |||||||||
Equity options | 11,079 | 1,895 | — | — | 12,974 | |||||||||||||||
Credit default swaps | 1,001 | 23,309 | — | (263 | ) | 24,047 | ||||||||||||||
Total return swaps | — | 1,443 | — | — | 1,443 | |||||||||||||||
Foreign currency forwards, swaps and options | 238,109 | 37,407 | — | (9,973 | ) | 265,543 | ||||||||||||||
Interest rate swaps and caps | 47,157 | 164,399 | 167,734 | (14,560 | ) | 364,730 | ||||||||||||||
Total | $ | 556,297 | $ | 243,704 | $ | 167,734 | $ | (25,578 | ) | 942,157 | ||||||||||
Cross product counterparty netting | (17,588 | ) | ||||||||||||||||||
Total OTC derivative liabilities included in Financial instruments sold, not yet purchased | $ | 924,569 | ||||||||||||||||||
(1) | At August 31, 2011, we held exchange traded derivative liabilities and other credit enhancements of $13.7 million. | |
(2) | OTC derivative liabilities in the table above are gross of collateral pledged. OTC derivative liabilities are recorded net of collateral pledged on the Consolidated Statements of Financial Condition. At August 31, 2011, cash collateral pledged was $342.3 million. | |
(3) | Amounts represent the netting of receivable balances with payable balances within product category for the same counterparty across maturity categories. | |
(4) | Derivative fair values include counterparty netting within product category. |
Counterparty credit quality (1): | ||||
A or higher | $ | 439,724 | ||
B to BBB | 185,906 | |||
Lower than B | 6,982 | |||
Unrated | 7,787 | |||
Total | $ | 640,399 | ||
(1) | We utilize the credit ratings of external rating agencies when available. When external credit ratings are not available, we may utilize internal credit ratings determined by our credit risk management. Credit ratings determined by credit risk management use methodologies that produce ratings generally consistent with those produced by external rating agencies. |
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(Unaudited)
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(Unaudited)
Assets obtained | As of August 31, 2011 | |||||||||||
Securitization Type | as proceeds | Total Assets (4) | Assets Retained | |||||||||
Residential mortgage-backed securities | $ | 1,490.1 | (3) | $ | 7,097.2 | $ | 679.8 | (1)(2) | ||||
Commercial mortgage-backed securities | 134.2 | (3) | 3,076.4 | 73.0 | (1)(2) | |||||||
Project loans | 0.3 | (5) | 90.0 | 0.3 | (6) |
(1) | At August 31, 2011, the securities issued in these securitizations are comprised of government agency-backed securities. | |
(2) | A significant portion of these securities have been subsequently sold in secondary-market transactions to third parties. As of September 30, 2011, we continue to hold approximately $403.9 million and $53.4 million of these Residential mortgage-backed securities and Commercial mortgage-backed securities, respectively, in inventory. | |
(3) | Initial fair value of securities received on date of asset transfer that were issued by securitization vehicles. | |
(4) | Represents unpaid principal amount of assets in the securitization vehicles. | |
(5) | Initial fair value of servicing rights received on transferred project loans. | |
(6) | Represents amortized servicing rights on transferred project loans. |
Assets obtained | As of November 30, 2010 | |||||||||||
Securitization Type | as proceeds | Total Assets (6) | Assets Retained | |||||||||
Residential mortgage-backed securities | $ | 2,203.1 | (3) | $ | 6,549.5 | $ | 684.7 | (1)(2) | ||||
Commercial mortgage-backed securities | 105.7 | (3) | 2,005.4 | 40.4 | (1)(2) | |||||||
Project loans | 0.1 | (4) | 107.8 | 0.1 | (5) |
(1) | At November 30, 2010, the securities issued in these securitizations are comprised of government agency-backed securities. | |
(2) | A significant portion of these securities have been subsequently sold in secondary-market transactions to third parties. As of September 30, 2011, we continue to hold approximately $60.9 million and $28.6 million of these Residential mortgage- backed securities and Commercial mortgage-backed securities, respectively, in inventory. | |
(3) | Initial fair value of securities received on date of asset transfer that were issued by securitization vehicles. | |
(4) | Initial fair value of servicing rights received on transferred project loans. | |
(5) | Represents amortized servicing rights on transferred project loans. |
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(Unaudited)
(6) | Represents unpaid principal amount of assets in the securitization vehicles. |
Nine Months | Eight Months | |||||||||||||||
Three Months Ended (1) | Ended | Ended | ||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2011 | 2010 | 2011 (1) | 2010 (1) | |||||||||||||
Residential mortgage-backed securities | $ | 24.8 | $ | 11.5 | $ | 55.3 | $ | 26.3 | ||||||||
Commercial mortgage-backed securities | 2.0 | 0.7 | 4.0 | 0.9 |
(1) | There were no beneficial interests held on project loans for the three and nine months ended August 31, 2011. Cash flows received on beneficial interests in securitization vehicles of project loans were de minimis for the three and eight months ended August 31, 2010. |
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August 31, 2011 | November 30, 2010 | |||||||||||||||||||||||
Mortgage- and | Mortgage- and | |||||||||||||||||||||||
Asset-backed | Asset-backed | |||||||||||||||||||||||
High Yield | Securitizations | Other | High Yield | Securitizations | Other | |||||||||||||||||||
Cash | $ | 283.7 | $ | — | $ | 0.3 | $ | 202.6 | $ | — | $ | — | ||||||||||||
Financial instruments owned | 779.2 | 11.6 | 7.3 | 889.8 | 101.4 | 21.0 | ||||||||||||||||||
Securities borrowed | 238.9 | — | — | 455.8 | — | — | ||||||||||||||||||
Receivable from brokers and dealers | 177.8 | — | — | 195.5 | — | — | ||||||||||||||||||
Other | 24.7 | — | — | 11.6 | 0.1 | — | ||||||||||||||||||
$ | 1,504.3 | $ | 11.6 | $ | 7.6 | $ | 1,755.3 | $ | 101.5 | $ | 21.0 | |||||||||||||
Financial instruments sold, not yet purchased | $ | 383.6 | $ | — | $ | — | $ | 602.6 | $ | — | $ | — | ||||||||||||
Payable to brokers and dealers | 134.5 | — | — | 157.1 | — | — | ||||||||||||||||||
Mandatorily redeemable interests (1) | 1,047.9 | — | — | 1,047.9 | — | — | ||||||||||||||||||
Promissory note (2) | — | — | 4.1 | — | — | 4.4 | ||||||||||||||||||
Secured financing (3) | — | 11.6 | — | — | 101.4 | — | ||||||||||||||||||
Other | 36.9 | — | 0.3 | 36.3 | 0.1 | — | ||||||||||||||||||
$ | 1,602.9 | $ | 11.6 | $ | 4.4 | $ | 1,843.9 | $ | 101.5 | $ | 4.4 | |||||||||||||
(1) | After consolidation, which eliminates our interests and the interests of our consolidated subsidiaries, JSOP and JESOP, the carrying amount of the mandatorily redeemable financial interests pertaining to the above VIEs included within Mandatorily redeemable preferred interests of consolidated subsidiaries in the Consolidated Statements of Financial Condition was approximately $313.1 million and $315.9 million at August 31, 2011 and November 30, 2010, respectively. | |
(2) | The promissory note represents an amount due to us and is eliminated in consolidation. | |
(3) | Secured financing is included within Accrued expenses and other liabilities in the Consolidated Statements of Financial Condition. Approximately $8.9 million and $15.7 million of the secured financing represents an amount held by us in inventory and is eliminated in consolidation at August 31, 2011 and November 30, 2010, respectively. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
August 31, 2011 | ||||||||||||
Maximum exposure | ||||||||||||
to loss in non- | ||||||||||||
VIE Assets | consolidated VIEs | Carrying Amount | ||||||||||
Collateralized loan obligations | $ | 1,794.1 | $ | 45.5 | (2) | $ | 45.5 | |||||
Mortgage- and asset-backed vehicles — Non-agency (1) | 92,722.8 | 847.6 | (2) | 847.6 | ||||||||
Mortgage- and asset-backed vehicles — Agency (1) | 7,296.5 | 2,090.7 | (2) | 2,090.7 | ||||||||
Asset management vehicle | 1,167.1 | 3.0 | (2) | 3.0 | ||||||||
Private equity vehicles | 96.3 | 131.5 | 64.0 | |||||||||
Total | $ | 103,076.8 | $ | 3,118.3 | $ | 3,050.8 | ||||||
(1) | VIE assets represent the unpaid principal balance of the assets in these vehicles at August 31, 2011. | |
(2) | Our maximum exposure to loss in these non-consolidated VIEs is limited to our investment. |
November 30, 2010 | ||||||||||||
Maximum exposure | ||||||||||||
to loss in non- | ||||||||||||
VIE Assets | consolidated VIEs | Carrying Amount | ||||||||||
Collateralized loan obligations | $ | 1,937.8 | $ | 35.3 | (2) | $ | 35.3 | |||||
Mortgage- and asset-backed vehicles — Non-agency (1) | 91,285.1 | 852.1 | (2) | 852.1 | ||||||||
Mortgage- and asset-backed vehicles — Agency (1) | 7,464.8 | 1,840.9 | (2) | 1,840.9 | ||||||||
Asset management vehicle | 760.4 | 18.1 | (2) | 18.1 | ||||||||
Private equity vehicles | 63.9 | 131.0 | 49.7 | |||||||||
Total | $ | 101,512.0 | $ | 2,877.4 | $ | 2,796.1 | ||||||
(1) | VIE assets represent the unpaid principal balance of the assets in these vehicles at November 30, 2010. | |
(2) | Our maximum exposure to loss in these non-consolidated VIEs is limited to our investment. |
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(Unaudited)
August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Total assets | $ | 1,369.6 | $ | 890.4 | ||||
Total liabilities | 975.2 | 566.4 | ||||||
Total equity | 394.4 | 324.0 | ||||||
Our total equity balance | 197.2 | 162.0 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(Unaudited)
Nine Months | ||||
Ended | ||||
August 31, 2011 | ||||
Balance, at beginning of period | $ | 364,964 | ||
Add: Contingent consideration | 825 | |||
Add: Translation adjustments | 1,034 | |||
Balance, at end of period | $ | 366,823 | ||
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(Unaudited)
August 31, 2011 | ||||||||||||||||
Weighted | ||||||||||||||||
average | ||||||||||||||||
Accumulated | Net carrying | remaining | ||||||||||||||
Gross cost | amortization | amount | lives (years) | |||||||||||||
Exchange and clearing organization membership interests and registrations | $ | 11,219 | $ | — | $ | 11,219 | N/A | |||||||||
Customer relationships | 10,542 | (2,425 | ) | 8,117 | 6.8 | |||||||||||
Trade name | 1,300 | (144 | ) | 1,156 | 1.3 | |||||||||||
Other | 100 | (7 | ) | 93 | 14.0 | |||||||||||
$ | 23,161 | $ | (2,576 | ) | $ | 20,585 | ||||||||||
November 30, 2010 | ||||||||||||||||
Weighted | ||||||||||||||||
average | ||||||||||||||||
Accumulated | Net carrying | remaining | ||||||||||||||
Gross cost | amortization | amount | lives (years) | |||||||||||||
Customer relationships | $ | 4,742 | $ | (1,726 | ) | $ | 3,016 | 4.2 | ||||||||
Other | 100 | (2 | ) | 98 | 14.8 | |||||||||||
$ | 4,842 | $ | (1,728 | ) | $ | 3,114 | ||||||||||
Estimated future | ||||
amortization | ||||
Fiscal Year | expense | |||
2011 (Period from September to November) | $ | 570 | ||
2012 | 2,203 | |||
2013 | 1,243 | |||
2014 | 853 | |||
2015 | 695 | |||
2016 | 695 |
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(Unaudited)
Nine Months | Eleven Months | |||||||
Ended | Ended | |||||||
August 31, 2011 | November 30, 2010 | |||||||
Balance, beginning of period | $ | 8,263 | $ | 8,500 | ||||
Add: Acquisition | 347 | 87 | ||||||
Less: Amortization | (278 | ) | (324 | ) | ||||
Balance, end of period | $ | 8,332 | $ | 8,263 | ||||
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August 31, | November 30, | |||||||
2011 | 2010 | |||||||
7.75% Senior Notes, due 2012 (effective interest rate of 8.08%) (1) | $ | 305,232 | $ | 305,969 | ||||
5.875% Senior Notes, due 2014 (effective interest rate of 6.00%) | 249,234 | 249,048 | ||||||
3.875% Senior Note, due 2015 (effective interest rate of 3.92%) | 499,140 | 499,000 | ||||||
5.5% Senior Notes, due 2016 (effective interest rate of 5.57%) | 348,997 | 348,854 | ||||||
5.125% Senior Notes, due 2018 (effective interest rate of 5.18%) | 797,342 | — | ||||||
8.5% Senior Notes, due 2019 (effective interest rate of 8.31%) | 707,977 | 708,529 | ||||||
6.875% Senior Note, due 2021 (effective interest rate of 6.99%) | 545,737 | 545,510 | ||||||
6.45% Senior Debentures, due 2027 (effective interest rate of 6.55%) | 346,633 | 346,544 | ||||||
3.875% Convertible Senior Debentures, due, 2029 (effective interest rate of 7.20%) | 287,944 | 282,577 | ||||||
6.25% Senior Debentures, due 2036 (effective interest rate of 6.37%) | 492,742 | 492,650 | ||||||
$ | 4,580,978 | $ | 3,778,681 | |||||
(1) | Our 7.75% Senior Notes, due in 2012, are payable in March 2012. |
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August 31, 2011 | November 30, 2010 | |||||||
JSOP | $ | 279,033 | $ | 282,469 | ||||
JESOP | 32,277 | 32,645 | ||||||
Other (1) | 5,643 | 17,862 | ||||||
Noncontrolling interests | $ | 316,953 | $ | 332,976 | ||||
(1) | Other includes consolidated asset management entities and investment vehicles set up for the benefit of our employees or clients. |
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Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net pension cost included the following components: | ||||||||||||||||
Service cost (1) | $ | 44 | $ | 50 | $ | 131 | $ | 134 | ||||||||
Interest cost on projected benefit obligation | 591 | 603 | 1,774 | 1,630 | ||||||||||||
Expected return on plan assets | (644 | ) | (644 | ) | (1,933 | ) | (1,738 | ) | ||||||||
Net loss amortization | 223 | 171 | 671 | 464 | ||||||||||||
Net periodic pension cost | $ | 214 | $ | 180 | $ | 643 | $ | 490 | ||||||||
(1) | Service cost relates to administrative expenses incurred during the periods. |
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(Unaudited)
Nine Months Ended | Weighted Average Grant | |||||||
August 31, 2011 | Date Fair Value | |||||||
(Shares in 000s) | ||||||||
Restricted stock | ||||||||
Balance, beginning of period | 4,918 | $ | 22.82 | |||||
Grants (1) | 2,798 | $ | 22.96 | |||||
Forfeited | (55 | ) | $ | 23.29 | ||||
Fulfillment of service requirement (1) | (1,307 | ) | $ | 22.41 | ||||
Balance, end of period (2) | 6,354 | $ | 22.96 | |||||
(1) | Includes approximately 444,000 shares of restricted stock granted with no future service requirements during the nine months ended August 31, 2011. These shares are shown as granted and vested during the period. The weighted average grant date fair value of these shares was approximately $23.53. | |
(2) | Represents restricted stock with a future service requirement. |
Weighted | ||||||||||||||||
Nine Months Ended | Average Grant | |||||||||||||||
August 31, 2011 | Date Fair Value | |||||||||||||||
(Shares in 000s) | ||||||||||||||||
Future | No Future | Future | No Future | |||||||||||||
Service | Service | Service | Service | |||||||||||||
Required | Required | Required | Required | |||||||||||||
Restricted stock units | ||||||||||||||||
Balance, beginning of period | 3,998 | 24,730 | $ | 24.04 | $ | 14.74 | ||||||||||
Grants | 1,356 | 303 | (1) | $ | 21.13 | $ | 21.78 | |||||||||
Distribution of underlying shares | — | (4,953 | ) | $ | — | $ | 16.28 | |||||||||
Forfeited | (16 | ) | (279 | ) | $ | 16.54 | $ | 19.23 | ||||||||
Fulfillment of service requirement | (301 | ) | 301 | $ | 20.06 | $ | 20.06 | |||||||||
Balance, end of period | 5,037 | 20,102 | $ | 23.53 | $ | 14.47 | ||||||||||
(1) | Includes approximately 280,000 dividend equivalents declared on restricted stock units during the nine months ended August 31, 2011. The weighted average grant date fair value of these dividend equivalents was approximately $21.60. |
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(Unaudited)
Nine Months Ended | ||||||||
(Shares in 000s) | August 31, 2011 | |||||||
Weighted | ||||||||
Average | ||||||||
Options | Exercise Price | |||||||
Outstanding at beginning of period | 26 | $ | 9.89 | |||||
Exercised | (12 | ) | $ | 8.03 | ||||
Outstanding at end of period | 14 | $ | 11.44 | |||||
Options exercisable at end of period | 14 | $ | 11.44 |
Outstanding, | ||||||||
Net of Expected | Options | |||||||
August 31, 2011 | Forfeitures | Exercisable | ||||||
Number of options | 14 | 14 | ||||||
Weighted-average exercise price | 11.44 | 11.44 | ||||||
Aggregate intrinsic value | 70 | 70 | ||||||
Weighted-average remaining contractual term, in years | 1.11 | 1.11 |
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(Unaudited)
Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||||||||||||
Earnings for basic earnings per common share: | ||||||||||||||||
Net earnings | $ | 54,010 | $ | 42,625 | $ | 240,755 | $ | 162,817 | ||||||||
Net (loss) earnings to noncontrolling interests | (14,265 | ) | (2,129 | ) | 4,523 | 1,865 | ||||||||||
Net earnings to common shareholders | 68,275 | 44,754 | 236,232 | 160,952 | ||||||||||||
Less: Allocation of earnings to participating securities (1) | 3,410 | 1,674 | 11,136 | 5,452 | ||||||||||||
Net earnings available to common shareholders | $ | 64,865 | $ | 43,080 | $ | 225,096 | $ | 155,500 | ||||||||
Earnings for diluted earnings per common share: | ||||||||||||||||
Net earnings | $ | 54,010 | $ | 42,625 | $ | 240,755 | $ | 162,817 | ||||||||
Net (loss) earnings to noncontrolling interests | (14,265 | ) | (2,129 | ) | 4,523 | 1,865 | ||||||||||
Net earnings to common shareholders | 68,275 | 44,754 | 236,232 | 160,952 | ||||||||||||
Add: Convertible preferred stock dividends (2) | 1,016 | — | 3,047 | 2,708 | ||||||||||||
Less: Allocation of earnings to participating securities (1) | 3,415 | 1,674 | 11,116 | 5,465 | ||||||||||||
Net earnings available to common shareholders | $ | 65,876 | $ | 43,080 | $ | 228,163 | $ | 158,195 | ||||||||
Shares: | ||||||||||||||||
Average common shares used in basic computation | 218,426 | 195,601 | 209,544 | 196,943 | ||||||||||||
Stock options | 5 | 11 | 9 | 14 | ||||||||||||
Mandatorily redeemable convertible preferred stock (2) | 4,110 | — | 4,108 | 4,105 | ||||||||||||
Convertible debt | — | — | — | — | ||||||||||||
Average common shares used in diluted computation | 222,541 | 195,612 | 213,661 | 201,062 | ||||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.30 | $ | 0.22 | $ | 1.07 | $ | 0.79 | ||||||||
Diluted | $ | 0.30 | $ | 0.22 | $ | 1.07 | $ | 0.79 |
(1) | Represents dividends declared during the period on participating securities plus an allocation of undistributed earnings to participating securities. Losses are not allocated to participating securities. Participating securities represent restricted stock and restricted stock units for which requisite service has not yet been rendered and amounted to weighted average shares of 11,239,000 and 7,661,000 for the three months ended August 31, 2011 and 2010, respectively, and 10,297,000 and 6,797,000 for the nine months ended August 31, 2011 and eight months ended August 31, 2010, respectively. Dividends declared on participating securities during the three and nine months ended August 31, 2011 amounted to approximately $934,000 and $2,414,000, respectively, and $559,000 and $1,621,000 for the three and eight months ended August 31, 2010, respectively. Undistributed earnings are allocated to participating securities based upon their right to share in earnings if all earnings for the period had been distributed. | |
(2) | For the three months ended August 31, 2010, the mandatorily redeemable convertible preferred stock of 4,105,138 outstanding at August 31, 2010 was considered anti-dilutive and therefore excluded in the computation of Diluted earnings per share for that period. |
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(Unaudited)
1st Quarter | 2nd Quarter | 3rd Quarter | ||||||||||
2011 | $ | 0.075 | $ | 0.075 | $ | 0.075 | ||||||
2010 | $ | 0.075 | $ | 0.075 | $ | 0.075 |
Jurisdiction | Tax Year | |
United States | 2006 | |
United Kingdom | 2008 | |
New Jersey | 2006 | |
New York State | 2001 | |
New York City | 2003 |
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Expected Maturity Date | ||||||||||||||||||||||||
2013 | 2015 | 2017 | Notional/ | |||||||||||||||||||||
and | and | and | Maximum | |||||||||||||||||||||
2011 | 2012 | 2014 | 2016 | Later | Payout | |||||||||||||||||||
Equity commitments | $ | 0.5 | $ | 0.2 | $ | 7.6 | $ | 2.9 | $ | 631.1 | $ | 642.3 | ||||||||||||
Loan commitments | 33.2 | 12.1 | 381.0 | 67.6 | 33.0 | 526.9 | ||||||||||||||||||
Mortgage-related commitments | 542.4 | 23.6 | 815.9 | — | — | 1,381.9 | ||||||||||||||||||
Forward starting repos | 0.2 | — | — | — | — | 0.2 | ||||||||||||||||||
Derivative contracts: | ||||||||||||||||||||||||
Derivative contracts — non credit related | 13,681.8 | 12,499.3 | 50,550.6 | — | — | 76,731.7 | ||||||||||||||||||
Derivative contracts — credit related | 10.0 | — | 392.0 | 586.2 | 40.0 | 1,028.2 | ||||||||||||||||||
Total derivative contracts | 13,691.8 | 12,499.3 | 50,942.6 | 586.2 | 40.0 | 77,759.9 | ||||||||||||||||||
$ | 14,268.1 | $ | 12,535.2 | $ | 52,147.1 | $ | 656.7 | $ | 704.1 | $ | 80,311.2 | |||||||||||||
External Credit Rating | ||||||||||||||||||||||||
Below | Notional/ | |||||||||||||||||||||||
AAA/ | Investment | Maximum | ||||||||||||||||||||||
Aaa | AA/Aa | BBB/Baa | Grade | Unrated | Payout | |||||||||||||||||||
Loan commitments | $ | — | $ | 30.0 | $ | 73.0 | $ | 54.1 | $ | 369.8 | $ | 526.9 | ||||||||||||
Derivative contracts- credit related: | ||||||||||||||||||||||||
Index credit default swaps | 20.0 | 345.0 | — | 412.0 | 251.2 | 1,028.2 | ||||||||||||||||||
Total credit related commitments | $ | 20.0 | $ | 375.0 | $ | 73.0 | $ | 466.1 | $ | 621.0 | $ | 1,555.1 | ||||||||||||
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(Unaudited)
Total | Corporate | Corporate | ||||||||||||||||||||||
Corporate | Lending | Lending | ||||||||||||||||||||||
Greater Than | Lending | Exposure at | Commitments | |||||||||||||||||||||
Credit Ratings | 0 - 12 Months | 1 - 5 Years | 5 Years | Exposure (1) | Fair Value (2) | (3) | ||||||||||||||||||
A | $ | 10.0 | $ | — | $ | 20.0 | $ | 30.0 | $ | — | $ | 30.0 | ||||||||||||
BBB | 32.7 | 43.3 | 8.0 | 84.0 | 11.0 | 73.0 | ||||||||||||||||||
Non-investment grade | 42.1 | 38.7 | — | 80.8 | 26.7 | 54.1 | ||||||||||||||||||
Unrated | 31.3 | 635.5 | — | 666.8 | 297.0 | 369.8 | ||||||||||||||||||
Total | $ | 116.1 | $ | 717.5 | $ | 28.0 | $ | 861.6 | $ | 334.7 | $ | 526.9 | ||||||||||||
(1) | Total corporate lending exposure represents the potential loss assuming the fair value of funded loans and lending commitments were zero. | |
(2) | The corporate lending exposure carried at fair value includes $337.1 million of funded loans included in Financial instruments owned — Loans and $(2.4) million of lending commitments recorded in Financial instruments sold — Derivatives in the Consolidated Statement of Financial Condition as of August 31, 2011. | |
(3) | Amounts represent the notional amount of lending commitments less the amount of funded commitments reflected in the Consolidated Statements of Financial Condition. |
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(Unaudited)
Net Capital | Excess Net Capital | |||||||
Jefferies | $ | 762,729 | $ | 693,313 | ||||
Jefferies Execution | $ | 15,651 | $ | 15,401 | ||||
Jefferies High Yield Trading | $ | 527,962 | $ | 527,712 | ||||
Jefferies Bache Securities, LLC | $ | 3,464 | $ | 3,214 |
Adjusted Net Capital | Excess Net Capital | |||||||
Jefferies Bache, LLC | $ | 248,824 | $ | 41,335 |
• | Net revenues and expenses directly associated with each reportable business segment are included in determining earnings before taxes. |
• | Net revenues and expenses not directly associated with specific reportable business segments are allocated based on the most relevant measures applicable, including each reportable business segment’s net revenues, headcount and other factors. |
• | Reportable business segment assets include an allocation of indirect corporate assets that have been fully allocated to our reportable business segments, generally based on each reportable business segment’s capital utilization. |
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(Unaudited)
Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||||||||||||
Capital Markets: | ||||||||||||||||
Net revenues | $ | 506.2 | $ | 516.5 | $ | 1,957.3 | $ | 1,500.6 | ||||||||
Expenses | $ | 463.7 | $ | 435.0 | $ | 1,616.0 | $ | 1,218.8 | ||||||||
Asset Management: | ||||||||||||||||
Net revenues | $ | 3.1 | $ | 0.8 | $ | 37.5 | $ | 11.8 | ||||||||
Expenses | $ | 5.0 | $ | 8.3 | $ | 24.0 | $ | 20.6 | ||||||||
Total: | ||||||||||||||||
Net revenues | $ | 509.3 | $ | 517.3 | $ | 1,994.8 | $ | 1,512.4 | ||||||||
Expenses | $ | 468.7 | $ | 443.3 | $ | 1,640.0 | $ | 1,239.4 |
August 31, 2011 | August 31, 2010 | |||||||
Segment Assets: | ||||||||
Capital Markets | $ | 45,080.9 | $ | 32,539.5 | ||||
Asset Management | 44.3 | 132.6 | ||||||
Total Assets | $ | 45,125.2 | $ | 32,672.1 | ||||
Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||||||||||||
Americas (1) | $ | 372,727 | $ | 428,037 | $ | 1,611,117 | $ | 1,294,118 | ||||||||
Europe (2) | 127,229 | 85,485 | 363,114 | 215,034 | ||||||||||||
Asia (including Middle East) | 9,326 | 3,747 | 20,599 | 3,285 | ||||||||||||
Net Revenues | $ | 509,282 | $ | 517,269 | $ | 1,994,830 | $ | 1,512,437 | ||||||||
(1) | Substantially all relates to U.S. results. | |
(2) | Substantially all relates to U.K. results. |
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• | the description of our business and risk factors contained in our Transition Report on Form 10-K for the transition period from January 1, 2010 to November 30, 2010 and filed with the SEC on February 2, 2011; | ||
• | the discussion of our analysis of financial condition and results of operations contained in this report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; | ||
• | the notes to the consolidated financial statements contained in this report; and | ||
• | cautionary statements we make in our public documents, reports and announcements. |
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Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
(Dollars in thousands, except for per share amounts) | August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | ||||||||||||
Net revenues, less mandatorily redeemable preferred interest | $ | 523,953 | $ | 519,806 | $ | 1,988,647 | $ | 1,512,463 | ||||||||
Non-interest expenses | 468,715 | 443,308 | 1,639,993 | 1,239,369 | ||||||||||||
Earnings before income taxes | 55,238 | 76,498 | 348,654 | 273,094 | ||||||||||||
Income tax expense | 1,228 | 33,873 | 107,899 | 110,277 | ||||||||||||
Net earnings | 54,010 | 42,625 | 240,755 | 162,817 | ||||||||||||
Net (loss) earnings to noncontrolling interests | (14,265 | ) | (2,129 | ) | 4,523 | 1,865 | ||||||||||
Net earnings to common shareholders | 68,275 | 44,754 | 236,232 | 160,952 | ||||||||||||
Earnings per diluted common share | $ | 0.30 | $ | 0.22 | $ | 1.07 | $ | 0.79 | ||||||||
Effective tax rate | 2 | % | 44 | % | 31 | % | 40 | % |
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Three Months Ended | ||||||||||||||||
August 31, 2011 | August 31, 2010 | |||||||||||||||
% of Net | % of Net | |||||||||||||||
(in thousands) | Amount | Revenues | Amount | Revenues | ||||||||||||
Equities | $ | 126,850 | 25 | % | $ | 109,280 | 21 | % | ||||||||
Fixed income | 33,087 | 7 | 161,010 | 31 | ||||||||||||
Other | 52,509 | 10 | — | — | ||||||||||||
Total sales and trading | 212,446 | 42 | 270,290 | 52 | ||||||||||||
Equity | 58,629 | 12 | 19,151 | 4 | ||||||||||||
Debt | 128,058 | 25 | 77,564 | 15 | ||||||||||||
Capital markets | 186,687 | 37 | 96,715 | 19 | ||||||||||||
Advisory | 107,063 | 21 | 149,478 | 29 | ||||||||||||
Investment banking | 293,750 | 58 | 246,193 | 48 | ||||||||||||
Asset management fees and investment income from managed funds: | ||||||||||||||||
Asset management fees | 3,127 | 1 | 3,996 | 1 | ||||||||||||
Investment income from managed funds | (41 | ) | — | (3,210 | ) | (1 | ) | |||||||||
Total | 3,086 | 1 | 786 | — | ||||||||||||
Net revenues | 509,282 | 100 | % | 517,269 | 100 | % | ||||||||||
Interest on mandatorily redeemable preferred interest of consolidated subsidiaries | (14,671 | ) | (2,537 | ) | ||||||||||||
Net revenues, less mandatorily redeemable preferred interest | $ | 523,953 | $ | 519,806 | ||||||||||||
Nine Months Ended | Eight Months Ended | |||||||||||||||
August 31, 2011 | August 31, 2010 | |||||||||||||||
% of Net | % of Net | |||||||||||||||
(in thousands) | Amount | Revenues | Amount | Revenues | ||||||||||||
Equities | $ | 469,284 | 23 | % | $ | 401,701 | 27 | % | ||||||||
Fixed income | 574,306 | 29 | 500,482 | 33 | ||||||||||||
Other | 52,509 | 3 | — | — | ||||||||||||
Total Sales and Trading | 1,096,099 | 55 | 902,183 | 60 | ||||||||||||
Equity | 160,352 | 8 | 102,288 | 7 | ||||||||||||
Debt | 322,831 | 16 | 236,363 | 15 | ||||||||||||
Capital markets | 483,183 | 24 | 338,651 | 22 | ||||||||||||
Advisory | 378,047 | 19 | 259,799 | 17 | ||||||||||||
Investment banking | 861,230 | 43 | 598,450 | 39 | ||||||||||||
Asset management fees and investment income from managed funds: | ||||||||||||||||
Asset management fees | 24,263 | 1 | 10,436 | 1 | ||||||||||||
Investment income from managed funds | 13,238 | 1 | 1,368 | — | ||||||||||||
Total | 37,501 | 2 | 11,804 | 1 | ||||||||||||
Net revenues | 1,994,830 | 100 | % | 1,512,437 | 100 | % | ||||||||||
Interest on mandatorily redeemable preferred interest of consolidated subsidiaries | 6,183 | (26 | ) | |||||||||||||
Net revenues, less mandatorily redeemable preferred interest | $ | 1,988,647 | $ | 1,512,463 | ||||||||||||
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Three Months | Three Months | Nine Months | Eight Months | |||
Ended | Ended | Ended | Ended | |||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||
65 days | 65 days | 190 days | 167 days |
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Nine Months | Eight Months | |||||||||||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||||||||||
(in thousands) | 2011 | 2010 | % Change | 2011 | 2010 | % Change | ||||||||||||||||||
Equity | $ | 58,629 | $ | 19,151 | 206 | % | $ | 160,352 | $ | 102,288 | 57 | % | ||||||||||||
Debt | 128,058 | 77,564 | 65 | % | 322,831 | 236,363 | 37 | % | ||||||||||||||||
Capital markets | 186,687 | 96,715 | 93 | % | 483,183 | 338,651 | 43 | % | ||||||||||||||||
Advisory | 107,063 | 149,478 | -28 | % | 378,047 | 259,799 | 46 | % | ||||||||||||||||
Total | $ | 293,750 | $ | 246,193 | 19 | % | $ | 861,230 | $ | 598,450 | 44 | % | ||||||||||||
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Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | |||||||||||||
Asset management fees: | ||||||||||||||||
Fixed Income | $ | 992 | $ | 1,002 | $ | 2,729 | $ | 2,589 | ||||||||
Equities | (950 | ) | 94 | 3,087 | 2,022 | |||||||||||
Convertibles | 771 | 2,611 | 10,163 | 3,086 | ||||||||||||
Commodities | 2,314 | 289 | 8,284 | 2,739 | ||||||||||||
3,127 | 3,996 | 24,263 | 10,436 | |||||||||||||
Investment (loss) income from managed funds (1) | (41 | ) | (3,210 | ) | 13,238 | 1,368 | ||||||||||
Total | $ | 3,086 | $ | 786 | $ | 37,501 | $ | 11,804 | ||||||||
(1) | Of the total investment income from managed funds, approximately $-0- and $0.1 million is attributed to noncontrolling interest holders for the three months ended August 31, 2011 and August 31, 2010, respectively, and approximately $-0- and $(0.1) million is attributed to noncontrolling interest holders for the nine months ended August 31, 2011 and the eight months ended August 31, 2010, respectively. |
August 31, 2011 | August 31, 2010 | |||||||
Assets under management (1)(3): | ||||||||
Equities | $ | 273 | $ | 78 | ||||
Convertibles | 2,187 | 1,759 | ||||||
Commodities | 596 | — | ||||||
3,056 | 1,837 | |||||||
Assets under management by related parties (2): | ||||||||
Private equity (4) | 649 | 592 | ||||||
649 | 592 | |||||||
Total | $ | 3,705 | $ | 2,429 | ||||
(1) | Assets under management include assets actively managed by us including hedge funds and managed accounts. Assets under management do not include the assets of funds that are consolidated due to the level or nature of our investment in such funds. |
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(2) | Related party managed funds in which we have a 50% or less interest in the entities that manage these assets or otherwise receive a portion of the management and/or incentive fees. | |
(3) | Assets under management are based on the fair value of the assets. | |
(4) | Assets under management represent either the capital commitment to a fund or carrying value of a fund depending on how management fees are calculated as governed by the partnership or management agreement. |
Nine Months | Eight Months | |||||||||||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||||||||||
August 31, | August 31, | % | August 31, | August 31, | % | |||||||||||||||||||
(in millions) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Balance, beginning of period | $ | 3,315 | $ | 2,325 | 43 | % | $ | 2,556 | $ | 4,024 | -36 | % | ||||||||||||
Net cash flow | 561 | 261 | 992 | (1,313 | ) | |||||||||||||||||||
Net market (depreciation) appreciation | (171 | ) | (157 | ) | 157 | (282 | ) | |||||||||||||||||
390 | 104 | 1,149 | (1,595 | ) | ||||||||||||||||||||
Balance, end of period | $ | 3,705 | $ | 2,429 | 53 | % | $ | 3,705 | $ | 2,429 | 53 | % | ||||||||||||
(notional account value) | August 31, | August 31, | ||||||
(in millions) | 2011 | 2010 | ||||||
Managed Accounts: | ||||||||
Equities | $ | 148 | $ | 147 | ||||
Commodities | 1,279 | 496 | ||||||
$ | 1,427 | $ | 643 | |||||
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Nine Months | Eight Months | |||||||||||||||
(notional account value) | Three Months Ended | Ended | Ended | |||||||||||||
(in millions) | August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | ||||||||||||
Balance, beginning of period | $ | 1,314 | $ | 618 | $ | 949 | $ | 560 | ||||||||
Net account additions | 140 | 36 | 372 | 136 | ||||||||||||
Net account (depreciation) appreciation | (27 | ) | (11 | ) | 106 | (53) | ||||||||||
Balance, end of period | $ | 1,427 | $ | 643 | $ | 1,427 | $ | 643 | ||||||||
August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Unconsolidated funds (1) | $ | 73,383 | $ | 131,024 | ||||
Consolidated funds (2) | 22,677 | 53,843 | ||||||
Total | $ | 96,060 | $ | 184,867 | ||||
(1) | Our invested capital in unconsolidated funds is reported within Investments in managed funds on the Consolidated Statement of Financial Condition. | |
(2) | Includes hedge funds actively managed by us. Due to the level or nature of our investment in such funds, certain funds are consolidated and the assets and liabilities of these funds are reflected in our consolidated financial statements primarily within Financial instruments owned. We do not recognize asset management fees for funds that we have consolidated. |
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Nine Months | Eight Months | |||||||||||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||||||||||
(in thousands) | August 31, 2011 | August 31, 2010 | Change | August 31, 2011 | August 31, 2010 | Change | ||||||||||||||||||
Compensation and benefits | $ | 299,640 | $ | 308,797 | (3 | )% | $ | 1,174,468 | $ | 877,204 | 34 | % | ||||||||||||
Floor brokerage and clearing fees | 32,959 | 30,111 | 9 | 92,475 | 84,199 | 10 | ||||||||||||||||||
Technology and communications | 60,039 | 46,135 | 30 | 153,563 | 114,189 | 34 | ||||||||||||||||||
Occupancy and equipment rental | 22,581 | 18,433 | 23 | 60,997 | 49,448 | 23 | ||||||||||||||||||
Business development | 21,853 | 17,420 | 25 | 64,248 | 42,405 | 52 | ||||||||||||||||||
Professional services | 19,061 | 13,008 | 47 | 48,437 | 34,702 | 40 | ||||||||||||||||||
Other | 12,582 | 9,404 | 34 | 45,805 | 37,222 | 23 | ||||||||||||||||||
Total non-compensation expenses | 169,075 | 134,511 | 26 | % | 465,525 | 362,165 | 29 | % | ||||||||||||||||
Non-interest expenses | $ | 468,715 | $ | 443,308 | 6 | % | $ | 1,639,993 | $ | 1,239,369 | 32 | % | ||||||||||||
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August 31, 2011 | November 30, 2010 | |||||||||||||||
Financial | Financial | |||||||||||||||
Instruments | Instruments | |||||||||||||||
Financial | Sold, | Financial | Sold, | |||||||||||||
Instruments | Not Yet | Instruments | Not Yet | |||||||||||||
Owned | Purchased | Owned | Purchased | |||||||||||||
Corporate equity securities | $ | 1,676,598 | $ | 1,736,221 | $ | 1,565,793 | $ | 1,638,372 | ||||||||
Corporate debt securities | 4,213,249 | 2,472,045 | 3,630,616 | 2,375,925 | ||||||||||||
Government, federal agency and other sovereign obligations | 5,531,554 | 5,278,235 | 5,191,973 | 4,735,288 | ||||||||||||
Mortgage and asset-backed securities | 4,787,608 | 82,072 | 4,921,565 | 129,384 | ||||||||||||
Loans and other receivables | 528,681 | 155,646 | 434,573 | 171,278 | ||||||||||||
Derivatives | 916,142 | 595,942 | 119,268 | 59,552 | ||||||||||||
Investments | 116,833 | — | 77,784 | — | ||||||||||||
Physical commodities | 369,281 | — | — | — | ||||||||||||
$ | 18,139,946 | $ | 10,320,161 | $ | 15,941,572 | $ | 9,109,799 | |||||||||
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Financial Instruments Sold, | ||||||||||||||||
Financial Instruments Owned | Not Yet Purchased | |||||||||||||||
August 31, | November 30, | August 31, | November 30, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Residential mortgage-backed securities | $ | 171,519 | $ | 132,359 | $ | — | $ | — | ||||||||
Loans and other receivables | 164,163 | 227,596 | 11,458 | 47,228 | ||||||||||||
Collateralized debt obligations | 96,664 | 31,121 | — | — | ||||||||||||
Investments at fair value | 92,428 | 77,784 | — | — | ||||||||||||
Corporate debt securities | 55,230 | 73,408 | — | — | ||||||||||||
Commercial mortgage-backed securities | 40,195 | 6,004 | — | — | ||||||||||||
Corporate equity securities | 11,412 | 22,619 | 59 | 38 | ||||||||||||
Other asset-backed securities | 3,478 | 567 | — | — | ||||||||||||
Municipal securities | 686 | 472 | — | — | ||||||||||||
Derivatives | 155 | — | 3,601 | 2,346 | ||||||||||||
Sovereign obligations | 128 | — | — | — | ||||||||||||
Total Level 3 assets | 636,058 | 571,930 | 15,118 | 49,612 | ||||||||||||
Level 3 assets for which the firm bears no economic exposure (1) | (68,987 | ) | (204,139 | ) | — | — | ||||||||||
Level 3 assets for which the firm bears economic exposure | $ | 567,071 | $ | 367,791 | $ | 15,118 | $ | 49,612 | ||||||||
(1) | Consists of Level 3 assets which are financed by nonrecourse secured financing or attributable to third party or employee noncontrolling interests in certain consolidated entities. |
Nine Months | Eight Months | |||||||||||||||
Three Months Ended | Ended | Ended | ||||||||||||||
(in millions) | August 31, 2011 | August 31, 2010 | August 31, 2011 | August 31, 2010 | ||||||||||||
Assets: | ||||||||||||||||
Transfers from Level 3 to Level 2 | $ | 152.4 | $ | 4.2 | $ | 81.8 | $ | 183.5 | ||||||||
Transfers from Level 2 to Level 3 | 120.4 | 30.4 | 54.7 | 35.0 | ||||||||||||
Net gains (losses) | (19.2 | ) | 9.4 | 17.4 | 57.9 | |||||||||||
Liabilities: | ||||||||||||||||
Transfers from Level 3 to Level 2 | $ | — | $ | 0.5 | $ | — | $ | 113.3 | ||||||||
Transfers from Level 2 to Level 3 | — | 0.1 | — | 0.1 | ||||||||||||
Net gains (losses) | (0.5 | ) | 0.8 | (0.9 | ) | 6.1 |
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August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Cash and cash equivalents: | ||||||||
Cash in banks | $ | 807,414 | $ | 325,227 | ||||
Money market investments | 1,207,536 | 1,863,771 | ||||||
Total cash and cash equivalents | $ | 2,014,950 | $ | 2,188,998 | ||||
August 31, 2011 | November 30, 2010 | |||||||||||||||
Unencumbered | Unencumbered | |||||||||||||||
Liquid Financial | Liquid Financial | Liquid Financial | Liquid Financial | |||||||||||||
Instruments | Instruments | Instruments | Instruments | |||||||||||||
Corporate equity securities | $ | 1,523,277 | $ | 123,426 | $ | 1,453,744 | $ | 264,603 | ||||||||
Corporate debt securities | 2,898,420 | 225,350 | 2,813,465 | 223,455 | ||||||||||||
Government, federal agency and other sovereign obligations | 5,426,776 | 200,228 | 5,159,605 | 168,523 | ||||||||||||
Mortgage- and asset-backed securities | 3,769,460 | 169,295 | 3,607,895 | — | ||||||||||||
Physical commodities | 369,281 | 251,538 | — | — | ||||||||||||
$ | 13,987,214 | $ | 969,837 | $ | 13,034,709 | $ | 656,581 | |||||||||
• | Contingency Funding Plan.Our Contingency Funding Plan is designed based on a model of a potential liquidity contraction over a one year time period. This incorporates potential cash outflows during a liquidity stress event, including, but not limited to, the following: (a) repayment of all unsecured debt maturing within one year and no incremental unsecured debt issuance; (b) maturity rolloff of outstanding letters of credit with no further issuance and replacement with cash collateral; (c) higher margin requirements than currently existing on assets in securities financing activity, including repurchase agreements, (d) lower availability of secured funding; (e) client cash |
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withdrawals; (f) the anticipated funding of outstanding investment commitments and (g) certain accrued expenses and other liabilities and fixed costs. | ||
• | Cash Capital Policy.We maintain a cash capital model that measures long-term funding sources against requirements. Sources of cash capital include our equity, preferred stock and the noncurrent portion of long-term borrowings. Uses of cash capital include the following: (a) illiquid assets such as equipment, goodwill, net intangible assets, exchange memberships, deferred tax assets and certain investments; (b) a portion of securities inventory that is not expected to be financed on a secured basis in a credit stressed environment (i.e., margin requirements) and (c) drawdowns of unfunded commitments. To ensure that we do not need to liquidate inventory in the event of a funding crisis, we seek to maintain surplus cash capital, which is reflected in the leverage ratios we maintain. Our total capital of $8.2 billion as of August 31, 2011 exceeded our cash capital requirements. |
August 31, | November 30, | |||||||||||
2011 | 2010 | % Change | ||||||||||
Total assets | $ | 45,125.2 | $ | 36,726.5 | 23 | % | ||||||
Financial instruments owned | 18,139.9 | 15,941.6 | 14 | % | ||||||||
Financial instruments sold, not yet purchased | 10,320.2 | 9,109.8 | 13 | % | ||||||||
Total Level 3 assets | 636.1 | 571.9 | 11 | % | ||||||||
Level 3 assets for which we have economic exposure | 567.1 | 367.8 | 54 | % | ||||||||
Securities borrowed | 7,815.7 | 8,152.7 | -4 | % | ||||||||
Securities purchased under agreements to resell | 4,505.4 | 3,252.3 | 39 | % | ||||||||
Total securities borrowed and securities purchased under agreements to resell | $ | 12,321.1 | $ | 11,405.0 | 8 | % | ||||||
Securities loaned | $ | 3,338.4 | $ | 3,109.0 | 7 | % | ||||||
Securities sold under agreements to repurchase | 10,935.8 | 10,684.1 | 2 | % | ||||||||
Total securities loaned and securities sold under agreements to repurchase | $ | 14,274.2 | $ | 13,793.1 | 3 | % | ||||||
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Nine Months | Eleven Months | |||||||
Ended | Ended | |||||||
August 31, 2011 | November 30, 2010 | |||||||
Securities Purchased Under Agreements to Resell | ||||||||
Period end | 4,505 | 3,252 | ||||||
Period average | 6,006 | 3,769 | ||||||
Maximum month end | 8,838 | 4,983 | ||||||
Securities Sold Under Agreements to Repurchase | ||||||||
Period end | 10,936 | 10,684 | ||||||
Period average | 13,169 | 11,464 | ||||||
Maximum month end | 15,797 | 14,447 |
August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Total assets | $ | 45,125,243 | $ | 36,726,543 | ||||
Deduct: Securities borrowed | (7,815,663 | ) | (8,152,678 | ) | ||||
Securities purchased under agreements to resell | (4,505,358 | ) | (3,252,322 | ) | ||||
Add: Financial instruments sold, not yet purchased | 10,320,161 | 9,109,799 | ||||||
Less: Derivative liabilities | (595,942 | ) | (59,552 | ) | ||||
Subtotal | 9,724,219 | 9,050,247 | ||||||
Deduct: Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations | (5,321,012 | ) | (1,636,755 | ) | ||||
Goodwill and intangible assets | (387,408 | ) | (368,078 | ) | ||||
Adjusted assets | $ | 36,820,021 | $ | 32,366,957 | ||||
Total stockholders’ equity | $ | 3,491,688 | $ | 2,810,965 | ||||
Deduct: Goodwill and intangible assets | (387,408 | ) | (368,078 | ) | ||||
Tangible stockholders’ equity | $ | 3,104,280 | $ | 2,442,887 | ||||
Leverage ratio (1) | 12.9 | 13.1 | ||||||
Adjusted leverage ratio (2) | 11.9 | 13.2 | ||||||
(1) | Leverage ratio equals total assets divided by total stockholders’ equity. |
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August 31, | November 30, | |||||||
2011 | 2010 | |||||||
Long-Term Debt (1) | $ | 4,275,746 | $ | 3,778,681 | ||||
Mandatorily Redeemable Convertible Preferred Stock | 125,000 | 125,000 | ||||||
Mandatorily Redeemable Preferred Interest of Consolidated Subsidiaries | 313,095 | 315,885 | ||||||
Total Stockholders’ Equity | 3,491,688 | 2,810,965 | ||||||
Total Capital | $ | 8,205,529 | $ | 7,030,531 | ||||
(1) | Long-term debt for purposes of evaluating long-term capital at August 31, 2011 excludes $305.2 million of our 7.75% Senior Notes as the notes mature in less than one year from the balance sheet date. |
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Rating | Outlook | |||||||
Moody’s Investors Service | Baa2 | Stable | ||||||
Standard and Poor’s | BBB | Stable | ||||||
Fitch Ratings | BBB | Stable |
Expected Maturity Date | ||||||||||||||||||||||||
2013 | 2015 | 2017 | ||||||||||||||||||||||
and | and | and | ||||||||||||||||||||||
2011 | 2012 | 2014 | 2016 | Later | Total | |||||||||||||||||||
Debt obligations: | ||||||||||||||||||||||||
Senior notes (contractual principal payments net of unamortized discounts and premiums) | $ | — | 305.2 | 249.2 | 848.1 | 3,178.5 | $ | 4,581.0 | ||||||||||||||||
Interest payment obligations on senior notes | 267.3 | 265.7 | 510.6 | 454.1 | 1,225.3 | 2,723.0 | ||||||||||||||||||
Mandatorily redeemable convertible preferred stock | — | — | — | — | 125.0 | 125.0 | ||||||||||||||||||
Interest payment obligations on Mandatorily redeemable convertible preferred stock | 4.1 | 4.1 | 8.1 | 8.1 | 77.7 | 102.1 | ||||||||||||||||||
Total debt obligations | 271.4 | 575.0 | 767.9 | 1,310.3 | 4,606.5 | 7,531.1 | ||||||||||||||||||
Commitments and guarantees: | ||||||||||||||||||||||||
Equity commitments | 0.5 | 0.2 | 7.6 | 2.9 | 631.1 | 642.3 | ||||||||||||||||||
Loan commitments | 33.2 | 12.1 | 381.0 | 67.6 | 33.0 | 526.9 | ||||||||||||||||||
Mortgage-related commitments | 542.4 | 23.6 | 815.9 | — | — | 1,381.9 | ||||||||||||||||||
Forward starting repos | 0.2 | — | — | — | — | 0.2 | ||||||||||||||||||
Derivative contracts: | ||||||||||||||||||||||||
Derivative contracts — non credit related | 13,681.8 | 12,499.3 | 50,550.6 | — | — | 76,731.7 | ||||||||||||||||||
Derivative contracts — credit related | 10.0 | — | 392.0 | 586.2 | 40.0 | 1,028.2 | ||||||||||||||||||
Total commitments and guarantees | 14,268.1 | 12,535.2 | 52,147.1 | 656.7 | 704.1 | 80,311.2 | ||||||||||||||||||
$ | 14,539.5 | $ | 13,110.2 | $ | 52,915.0 | $ | 1,967.0 | $ | 5,310.6 | $ | 87,842.3 | |||||||||||||
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August 31, 2011 | November 30, 2010 | |||||||
Common stockholders’ equity | $ | 3,174,735 | $ | 2,477,989 | ||||
Less: Goodwill and intangible assets | (387,408 | ) | (368,078 | ) | ||||
Tangible common stockholders’ equity | $ | 2,787,327 | $ | 2,109,911 | ||||
Common stockholders’ equity | $ | 3,174,735 | $ | 2,477,989 | ||||
Add: Unrecognized compensation (6) | 185,101 | 160,960 | ||||||
Adjusted common stockholders’ equity | $ | 3,359,836 | $ | 2,638,949 | ||||
Tangible common stockholders’ equity | $ | 2,787,327 | $ | 2,109,911 | ||||
Add: Unrecognized compensation (6) | 185,101 | 160,960 | ||||||
Adjusted tangible common stockholders’ equity | $ | 2,972,428 | $ | 2,270,871 | ||||
Shares outstanding | 200,314,305 | 171,694,146 | ||||||
Outstanding restricted stock units (5) | 25,138,787 | 28,734,563 | ||||||
Adjusted shares outstanding | 225,453,092 | 200,428,709 | ||||||
Common book value per share (1) | $ | 15.85 | $ | 14.43 | ||||
Adjusted common book value per share (2) | $ | 14.90 | $ | 13.17 | ||||
Tangible common book value per share (3) | $ | 13.91 | $ | 12.29 | ||||
Adjusted tangible common book value per share (4) | $ | 13.18 | $ | 11.33 | ||||
(1) | Common book value per share equals common stockholders’ equity divided by common shares outstanding. | |
(2) | Adjusted common book value per share equals adjusted common stockholders’ equity divided by adjusted shares outstanding. | |
(3) | Tangible common book value per share equals tangible common stockholders’ equity divided by common shares outstanding. | |
(4) | Adjusted tangible common book value per share equals adjusted tangible common stockholders’ equity divided by adjusted shares outstanding. | |
(5) | Outstanding restricted stock units, which give the recipient the right to receive common shares at the end of a specified deferral period, are granted in connection with our share-based employee incentive plans and include both awards that contain future service requirements and awards for which the future service requirements have been met. | |
(6) | Unrecognized compensation relates to granted restricted stock and restricted stock units which contain future service requirements. |
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Net Capital | Excess Net Capital | |||||||
Jefferies | $ | 762,729 | $ | 693,313 | ||||
Jefferies Execution | $ | 15,651 | $ | 15,401 | ||||
Jefferies High Yield Trading | $ | 527,962 | $ | 527,712 | ||||
Jefferies Bache Securities, LLC | $ | 3,464 | $ | 3,214 |
Adjusted Net Capital | Excess Net Capital | |||||||
Jefferies Bache, LLC | $ | 248,824 | $ | 41,335 |
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• | inventory position and exposure limits, on a gross and net basis; | ||
• | scenario analyses, stress tests and other analytical tools that measure the potential effects on our trading net revenues of various market events, including, but not limited to, a large widening of credit spreads, a substantial decline in equities markets and significant moves in selected emerging markets; and | ||
• | risk limits based on a summary measure of risk exposure referred to as Value-at-Risk. |
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Daily VaR(1) | ||||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Value-at-Risk in trading portfolios | ||||||||||||||||||||||||
VaR at | Average VaR Three Months Ended | |||||||||||||||||||||||
Risk Categories | 8/31/11 | 5/31/11 | 2/28/11 | 8/31/11 | 5/31/11 | 2/28/11 | ||||||||||||||||||
Interest Rates | $ | 9.16 | $ | 7.78 | $ | 7.81 | $ | 8.59 | $ | 9.03 | $ | 6.32 | ||||||||||||
Equity Prices | $ | 3.95 | $ | 5.53 | $ | 3.18 | $ | 5.88 | $ | 6.53 | $ | 5.55 | ||||||||||||
Currency Rates | $ | 1.46 | $ | 0.61 | $ | 0.50 | $ | 1.06 | $ | 0.77 | $ | 0.56 | ||||||||||||
Commodity Prices | $ | 0.96 | $ | 1.87 | $ | 2.04 | $ | 1.36 | $ | 1.33 | $ | 1.45 | ||||||||||||
Diversification Effect2 | -$5.12 | -$6.62 | -$4.14 | -$6.41 | -$4.98 | -$3.37 | ||||||||||||||||||
Firmwide | $ | 10.41 | $ | 9.17 | $ | 9.39 | $ | 10.48 | $ | 12.68 | $ | 10.51 | ||||||||||||
Daily VaR(1) | ||||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Value-at-Risk Highs and Lows for Three Months Ended | ||||||||||||||||||||||||
8/31/11 | 5/31/11 | 2/28/11 | ||||||||||||||||||||||
Risk Categories | High | Low | High | Low | High | Low | ||||||||||||||||||
Interest Rates | $ | 14.85 | $ | 6.18 | $ | 13.67 | $ | 3.09 | $ | 9.99 | $ | 3.26 | ||||||||||||
Equity Prices | $ | 12.73 | $ | 1.81 | $ | 11.92 | $ | 2.59 | $ | 9.36 | $ | 3.13 | ||||||||||||
Currency Rates | $ | 1.88 | $ | 0.32 | $ | 1.49 | $ | 0.04 | $ | 1.20 | $ | 0.10 | ||||||||||||
Commodity Prices | $ | 2.76 | $ | 0.77 | $ | 2.38 | $ | 0.70 | $ | 2.90 | $ | 0.53 | ||||||||||||
Firmwide | $ | 15.69 | $ | 7.05 | $ | 18.88 | $ | 8.45 | $ | 13.56 | $ | 7.65 | ||||||||||||
(1) | VaR is the potential loss in value of our trading positions due to adverse market movements over a defined time horizon with a specific confidence level. For the VaR numbers reported above, a one-day time horizon and 95% confidence level were used. | |
(2) | Equals the difference between firmwide VaR and the sum of the VaRs by risk categories. This effect is due to the market categories not being perfectly correlated. |
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($ in millions)
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(c) Total Number of | (d) Maximum Number | |||||||||||||||
(a) Total | Shares Purchased as | of Shares that May | ||||||||||||||
Number of | (b) Average | Part of Publicly | Yet Be Purchased | |||||||||||||
Shares | Price Paid | Announced Plans or | Under the Plans or | |||||||||||||
Period | Purchased (1) | per Share | Programs (2) | Programs (3) | ||||||||||||
June 1 — June 30, 2011 | 228,396 | $ | 20.08 | 200,000 | 9,459,440 | |||||||||||
July 1 — July 31, 2011 | 605,920 | 19.29 | 582,564 | 8,876,876 | ||||||||||||
August 1 — August 31, 2011 | 2,310,243 | 16.92 | 2,217,436 | 6,659,440 | ||||||||||||
Total | 3,144,559 | �� | 3,000,000 | |||||||||||||
(1) | We repurchased an aggregate of 144,559 shares other than as part of a publicly announced plan or program. We repurchased these securities in connection with our stock compensation plans which allow participants to use shares to satisfy certain tax liabilities arising from the vesting of restricted stock or the distribution of restricted stock units. The number above does not include unvested shares forfeited back to us pursuant to the terms of our stock compensation plans. | |
(2) | On December 14, 2009 we announced the authorization by our Board of Directors of the repurchase, from time to time, of up to an aggregate of 15,000,000 shares of our common stock, inclusive of prior authorizations. | |
(3) | On September 20, 2011 we announced the authorization by our Board of Directors of the repurchase, from time to time, of up to an aggregate of 20,000,000 shares of our common stock, inclusive of prior authorizations. This additional authorization is not reflected in the above table. |
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Exhibits | ||
3.1 | Amended and Restated Certificate of Incorporation of Jefferies Group, Inc. is incorporated herein by reference to Exhibit 3 of the Registrant’s Form 8-K filed on May 26, 2004. | |
3.2 | Certificate of Designations of 3.25% Series A Cumulative Convertible Preferred Stock is incorporated herein by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on February 21, 2006. | |
3.3 | By-Laws of Jefferies Group, Inc are incorporated herein by reference to Exhibit 3 of Registrant’s Form 8-K filed on December 4, 2007. | |
10.1 | Selling Agent Agreement, dated August 5, 2011, among Jefferies Group, Inc. and Jefferies & Company, Inc. is incorporated herein by reference to Exhibit 1.1 of Registrant’s Form 8-K filed on August 11, 2011. | |
31.1* | Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. | |
31.2* | Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. | |
32* | Rule 13a-14(b)/15d-14(b) and Section 1350 of Title 18 U.S.C. Certification by the Chief Executive Officer and Chief Financial Officer. | |
101** | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Financial Condition at August 31, 2011 and November 30, 2010, (ii) the Consolidated Statements of Earnings for the Three and Nine Months Ended August 31, 2011 and the Three and Eight Months Ended August 31, 2010, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended August 31, 2011 and the Eleven Months Ended November 30, 2010, (iv) the Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended August 31, 2011 and the Three and Eight Months Ended August 31, 2010, (v) the Consolidated Statements of Cash Flows for the Nine Months Ended August, 2011 and the Eight Months Ended August 31, 2010, and (vi) Notes to Consolidated Financial Statements. |
* | Filed herewith. | |
** | Furnished herewith. |
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JEFFERIES GROUP, INC. (Registrant) | ||||
Date: October 7, 2011 | By: | /s/ Peregrine C. Broadbent | ||
Peregrine C. Broadbent | ||||
Chief Financial Officer (duly authorized officer) | ||||
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