Jefferies CEO Discusses F4Q10 Results - Earnings Call Transcript

Jefferies CEO Discusses F4Q10 Results - Earnings Call Transcript
By Seeking Alpha ,

Jefferies (JEF)

F4Q10 Earnings Call

December 20, 2010 9:00 a.m. ET

Executives

Rich Handler – Chairman and CEO

Peregrine Broadbent – EVP and CFO

Brian Friedman – Chairman, Executive Committee

Analysts

Meredith Whitney – Meredith Whitney Advisors

Chris Kotowski – Oppenheimer

Douglas Sipkin – Ticonderoga

Michael Wong - Morningstar

Jeff Harte - Sandler O'Neil

Steve Stelmach - FBR Capital Markets

Daniel Harris - Goldman Sachs

Patrick Davitt – Bank of America/Merrill Lynch

Richard Bove - Rochdale Securities

Joel Jeffrey - KBW

Presentation

Operator

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Welcome to the Jefferies fiscal 2010 year-end financial results conference call. [Operator Instructions.] As a reminder, this conference call is being recorded. A press release containing Jefferies 11-month fiscal 2010 financial results was distributed via Business Wire earlier this morning and can be accessed at Jefferies website at www.jefferies.com.

Some of the comments made in this conference call may include forward-looking statements. These forward-looking statements may contain statements about management’s current assumptions, expectations, strategic objectives, growth opportunities, business and prospects. These forward-looking statements are not statements of historical fact and represent only Jefferies' belief as to future performance. They usually include the words “continue,” “will,” “believe,” “should,” “estimate,” or other similar expressions.

Actual results could differ materially from those projected in these forward-looking statements. Please refer to Jefferies annual report on Form 10-K filed with the Securities and Exchange Commission on February 26th 2010, and in Jefferies Form 10-Qs and 8-Ks for a discussion of important factors that could cause actual results to differ materially from those projected in these forward-looking statements.

I would now like to introduce your host for today’s call, Mr. Richard Handler, Chairman and CEO of Jefferies. Mr. Handler, you may begin your conference.

Rich Handler

Good morning and thank you for joining Jefferies' 2010 fiscal fourth quarter and year-end preliminary results discussion. I am Rich Handler, CEO of Jefferies, and with me on the call today are Brian Friedman, chairman of our executive committee, and Peg Broadbent, our chief financial officer.

For the fourth quarter ended November 30, 2010, Jefferies posted net revenues of $695 million, net income to common shareholders of $71 million, and earnings per share of $0.35. Our preliminary fourth quarter results were driven by record quarterly investment banking revenues and a solid performance by our trading lines. We are pleased with the quality and breadth of our quarterly results, and we are experiencing strong momentum throughout our firm as we begin our 2011 fiscal year.

For the 11 months ended November 30, 2010, we were pleased to achieve record fiscal net revenues of over $2.2 billion. The previous full year record was $2.17 billion for the 12-month 2009 fiscal year. 2010 net income to common shareholders was $236 million, with earnings per common share of $1.15.

If we were to annualize our 2010 11-month results, Jefferies would have had $2.4 billion of total revenue, $257 million of net income, total trading revenues of $1.4 billion, and total banking revenues of $971 million.

Our preliminary results should be considered against a year that was often volatile but sometimes quiet, in which we invested heavily across our firm and recruited significant additional high-quality human capital.

Peg will take you through further details of our preliminary results in a moment. During the last six months of fiscal 2010, we have actively increased our long-term capital base by over $1 billion in aggregate, or nearly 18%, to just over $7 billion. In keeping with our philosophy of building long-term capital when the markets are attractive, but when we had no urgent need to use the capital.

Included in this over $1 billion is the $500 million in 3 7/8 five-year notes we issued in November, aimed primarily at increasing our corporate liquidity buffer to support the continued expansion of our sales and trading platform. Our cash balance was about $2.2 billion at November 30, with zero bank debt drawn. The weighted average life of our long-term debt is over 10 years.

As has been our practice forever, we do our best to deploy our capital cautiously and prudently for the long-term expansion of our firm. You have heard consistently from us about our focus on building and integrating one great Wall Street firm that is a clear leader in serving both issuers and investors in the global capital markets.

Our 2010 fiscal year results reaffirm that we are making solid progress, with net revenues and strong net income, despite a substantial investment for the future that was expensed in 2010. Our firm-wide priorities remain to devote our human and financial capital to add value and best serve our increasing client base; to attract and retain outstanding talented professionals who want a career serving clients and partnering to build a great firm; to operate our capital markets, sales and trading, research, investment banking, and asset management efforts in the most client-focused, integrated, and efficient manner possible; to extend our full-service reach broadly but profitably across the globe; to maintain the fair and proper balance between the interests of our employee partners and those of our shareholders; and to be recognized as one of the best full-service integrated global securities and investment banking firms.

In 2012, our firm will be 50 years old. We believe great firms are built one client at a time, one trade or deal at a time, and one talented employee partner at a time. Building a great firm takes enormous and relentless effort, passion, humility, and commitment.

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