Jefferies Financial (JEF) 8-K Announces Third Quarter 2018 Results

FOR IMMEDIATE RELEASE                                 October 25, 2018

Contact: Laura Ulbrandt (212) 460-1900

JEFFERIES FINANCIAL GROUP INC.

ANNOUNCES THIRD QUARTER 2018 RESULTS

New York, New York, October 25, 2018--Jefferies Financial Group Inc. (NYSE: JEF) today announced its financial results for the three and nine month periods ended September 30, 2018. Consistent with the estimates in our press release of October 4, 2018, Net income attributable to Jefferies common shareholders was $193 million, or $0.55 per diluted share, for the third quarter, and $1.04 billion, or $2.91 per diluted share, for the nine month period. Pre-tax income, from continuing and discontinued operations, was $273 million for the three month period and $1.4 billion for the nine month period. The results for the third quarter include a pre-tax gain of $222 million recorded as a result of the August closing of the previously reported sale of our interests in Garcadia and its associated real estate, partially offset by a $49 million mark-to-market decrease in the value of our Spectrum Brands investment and a $48 million pre-tax impairment charge related to our investment in Golden Queen, of which $12 million is attributable to the noncontrolling interest.

Rich Handler, our CEO, and Brian Friedman, our President, said, "As we discussed during our recent Investor Day, we are pleased and confident in our momentum and future prospects."

Our Board of Directors has declared a quarterly cash dividend equal to $0.125 per Jefferies common share, payable on November 30, 2018 to record holders of Jefferies common shares on November 19, 2018. Our Board also has approved changing our fiscal year-end to November 30. Effective with the fourth quarter of 2018, our reporting will be harmonized with our wholly-owned subsidiary, Jefferies Group LLC.

* * * *

More information on the Company’s results of operations for the three and nine months ended September 30, 2018 will be provided upon filing of the Company’s Form 10-Q with the Securities and Exchange Commission.

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements about our future and statements that are not historical facts. These forward-looking statements are usually preceded by the words “should,” “expect,” “intend,” “may,” “will,” or similar expressions. Forward-looking statements may contain expectations regarding revenues, earnings, operations, and other results, and may include statements of future performance, plans, and objectives. Forward-looking statements also include statements pertaining to our strategies for future development of our businesses and products. Forward-looking statements represent only our belief regarding future events, many of which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors, including Risk Factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in reports we file with the SEC. You should read and interpret any forward-looking statement together with reports we file with the SEC.

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s).

SUMMARY FOR JEFFERIES FINANCIAL GROUP AND SUBSIDIARIES

(In thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Net revenues	$	1,150,846		$	857,223		$	2,957,440		$	3,020,610
Income (loss) from continuing operations before income taxes and income (loss) related to associated companies	$	253,825		$	(4,509	)	$	263,650		$	497,212
Income (loss) related to associated companies	18,867			30,057			84,320			(84,413		)
Income from continuing operations before income taxes	272,692			25,548			347,970			412,799
Income tax provision	90,391			9,770			51,560			127,198
Income from continuing operations	182,301			15,778			296,410			285,601
Income from discontinued operations, net of income tax provision of $0, $53,490, $47,045 and $90,856	—			120,989			130,063			219,151
Gain on disposal of discontinued operations, net of income tax provision $0, $0, $229,553 and $0	—			—			643,921			—
Net income	182,301			136,767			1,070,394			504,752
Net (income) loss attributable to the noncontrolling interests	12,000			(28		)	13,208			1,941
Net income attributable to the redeemable noncontrolling interests	(390		)	(36,216		)	(37,294		)	(64,538		)
Preferred stock dividends	(1,276		)	(1,172		)	(3,619		)	(3,203		)
Net income attributable to Jefferies Financial Group Inc. common shareholders	$	192,635		$	99,351		$	1,042,689		$	438,952
Basic earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Income from continuing operations	$	0.56		$	0.04		$	0.86		$	0.77
Income from discontinued operations	—			0.23			0.26			0.42
Gain on disposal of discontinued operations	—			—			1.82			—
Net income	$	0.56		$	0.27		$	2.94		$	1.19
Number of shares in calculation	341,434			367,828			353,300			368,736
Diluted earnings per common share attributable to Jefferies Financial Group Inc. common shareholders:
Income from continuing operations	$	0.55		$	0.04		$	0.85		$	0.76
Income from discontinued operations	—			0.23			0.26			0.41
Gain on disposal of discontinued operations	—			—			1.80			—
Net income	$	0.55		$	0.27		$	2.91		$	1.17
Number of shares in calculation	350,307			370,198			357,169			375,233

A summary of results for the three months ended September 30, 2018 is as follows (in thousands):

	Financial Services
2018	Jefferies Group		Other Financial Services		Merchant Banking		Corporate			Parent Company Interest			Total
Net revenues	$	774,749	$	45,457	$	321,948	$	8,692		$	—		$	1,150,846
Expenses:
Compensation and benefits	428,033		9,973		9,493		13,766			—			461,265
Cost of sales	—		—		84,876		—			—			84,876
Floor brokerage and clearing fees	44,570		—		—		—			—			44,570
Interest expense	—		12,723		1,359		—			14,755			28,837
Depreciation and amortization	17,175		1,379		12,889		852			—			32,295
Selling, general and other expenses	198,817		16,008		21,716		8,637			—			245,178
Total expenses	688,595		40,083		130,333		23,255			14,755			897,021
Income (loss) from continuing operations before income taxes and income related to associated companies	86,154		5,374		191,615		(14,563		)	(14,755		)	253,825
Income related to associated companies	—		16,502		2,365		—			—			18,867
Income (loss) from continuing operations before income taxes	$	86,154	$	21,876	$	193,980	$	(14,563	)	$	(14,755	)	272,692
Income tax provision from continuing operations													90,391
Net income													$	182,301

A summary of results for the three months ended September 30, 2017 is as follows (in thousands):

	Financial Services
2017	Jefferies Group		Other Financial Services			Merchant Banking			Corporate			Parent Company Interest			Total
Net revenues	$	802,909	$	22,742		$	29,657		$	1,915		$	—		$	857,223
Expenses:
Compensation and benefits	462,933		9,072			10,656			10,810			—			493,471
Cost of sales	—		—			71,596			—			—			71,596
Floor brokerage and clearing fees	42,852		—			—			—			—			42,852
Interest expense	—		4,966			5,909			—			14,737			25,612
Depreciation and amortization	15,928		2,244			9,723			865			—			28,760
Selling, general and other expenses	153,084		15,941			23,865			6,551			—			199,441
Total expenses	674,797		32,223			121,749			18,226			14,737			861,732
Income (loss) from continuing operations before income taxes and income (loss) related to associated companies	128,112		(9,481		)	(92,092		)	(16,311		)	(14,737		)	(4,509		)
Income (loss) related to associated companies	—		31,119			(1,062		)	—			—			30,057
Income (loss) from continuing operations before income taxes	$	128,112	$	21,638		$	(93,154	)	$	(16,311	)	$	(14,737	)	25,548
Income tax provision from continuing operations															9,770
Income from discontinued operations, net of income tax provision															120,989
Net income															$	136,767

A summary of results for the nine months ended September 30, 2018 is as follows (in thousands):

	Financial Services
2018	Jefferies Group		Other Financial Services			Merchant Banking		Corporate			Parent Company Interest			Total
Net revenues	$	2,419,410	$	53,297		$	469,980	$	14,753		$	—		$	2,957,440
Expenses:
Compensation and benefits	1,326,887		29,935			29,577		43,040			—			1,429,439
Cost of sales	—		—			257,501		—			—			257,501
Floor brokerage and clearing fees	131,792		—			—		—			—			131,792
Interest expense	—		26,367			3,996		—			44,251			74,614
Depreciation and amortization	50,829		4,837			34,095		2,599			—			92,360
Selling, general and other expenses	572,980		54,081			56,201		24,822			—			708,084
Total expenses	2,082,488		115,220			381,370		70,461			44,251			2,693,790
Income (loss) from continuing operations before income taxes and income related to associated companies	336,922		(61,923		)	88,610		(55,708		)	(44,251		)	263,650
Income related to associated companies	—		58,204			26,116		—			—			84,320
Income (loss) from continuing operations before income taxes	$	336,922	$	(3,719	)	$	114,726	$	(55,708	)	$	(44,251	)	347,970
Income tax provision from continuing operations														51,560
Income from discontinued operations, net of income tax provision														130,063
Gain on disposal of discontinued operations, net of income tax provision														643,921
Net income														$	1,070,394

A summary of results for the nine months ended September 30, 2017 is as follows (in thousands):

	Financial Services
2017	Jefferies Group		Other Financial Services			Merchant Banking		Corporate			Parent Company Interest			Total
Net revenues	$	2,381,967	$	109,284		$	525,102	$	4,257		$	—		$	3,020,610
Expenses:
Compensation and benefits	1,374,127		26,248			32,981		35,017			—			1,468,373
Cost of sales	—		—			210,834		—			—			210,834
Floor brokerage and clearing fees	133,145		—			—		—			—			133,145
Interest expense	—		13,830			18,731		—			44,201			76,762
Depreciation and amortization	46,877		7,435			25,218		2,599			—			82,129
Selling, general and other expenses	444,724		36,641			47,333		23,457			—			552,155
Total expenses	1,998,873		84,154			335,097		61,073			44,201			2,523,398
Income (loss) from continuing operations before income taxes and income (loss) related to associated companies	383,094		25,130			190,005		(56,816		)	(44,201		)	497,212
Income (loss) related to associated companies	—		(87,838		)	3,425		—			—			(84,413		)
Income (loss) from continuing operations before income taxes	$	383,094	$	(62,708	)	$	193,430	$	(56,816	)	$	(44,201	)	412,799
Income tax provision from continuing operations														127,198
Income from discontinued operations, net of income tax provision														219,151
Net income														$	504,752