Discontinued Operations

6 Months Ended

May 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

On June 5, 2018, we sold 48% of National Beef to Marfrig for $907.7 million in cash, reducing our ownership in National Beef to 31%. Marfrig also acquired an additional 3% of National Beef from other equity owners and owns 51% of National Beef. Jefferies will continue to designate two board members and have a series of other rights in respect of our continuing equity interest, with a lockup period of five years and thereafter fair market value liquidity protections. As of the closing of the sale on June 5, 2018, we deconsolidated our investment in National Beef and account for our remaining interest under the equity method of accounting.

The sale of National Beef meets the GAAP criteria to be classified as a discontinued operation as the sale represents a strategic shift that has a major effect in our operations and financial results. As such, we classified the results of National Beef prior to June 5, 2018 as a discontinued operation and reported those results in Income from discontinued operations, net of income tax provision in the Consolidated Statements of Operations.

A summary of the results of discontinued operations for National Beef for the three and six months ended June 30, 2018 through the June 5, 2018 transaction with Marfrig is as follows (in thousands):



	For the Three Months Ended June 30, 2018		For the Six Months Ended June 30, 2018

Revenues:
Beef processing services	$	1,355,691	$	3,137,611
Interest income	63		131
Other	959		4,329
Total revenues	1,356,713		3,142,071

Expenses:
Compensation and benefits	7,207		17,414
Cost of sales	1,214,207		2,884,983
Interest expense	2,207		4,316
Depreciation and amortization	18,440		43,959
Selling, general and other expenses	6,435		14,291
Total expenses	1,248,496		2,964,963

Income from discontinued operations before income taxes	108,217		177,108
Income tax provision	31,111		47,045
Income from discontinued operations, net of income tax provision	$	77,106	$	130,063

Net income attributable to the redeemable noncontrolling interests in the Consolidated Statements of Operations includes $22.7 million and $37.1 million related to National Beef's noncontrolling interests for the three and six months ended June 30, 2018, respectively. Pre-tax income from discontinued operations attributable to Jefferies Financial Group Inc. common shareholders was $85.5 million and $140.0 million for the three and six months ended June 30, 2018, respectively.

As discussed above, we account for our retained 31% ownership of National Beef subsequent to the sale to Marfrig under the equity method. During the three and six months ended May 31, 2019, we recorded $34.9 million and $62.1 million, respectively, in Income related to associated companies from our 31% ownership in National Beef and we received distributions from National Beef of $54.9 million during the six months ended May 31, 2019. The pre-tax income of 100% of National Beef during the three and six months ended May 31, 2019 was $119.3 million and $213.8 million, respectively. From June 5, 2018 through June 30, 2018, we recorded $24.4 million in Income related to associated companies from our 31% ownership in National Beef and we received distributions from National Beef of $13.1 million. The pre-tax income of 100% National Beef from June 5, 2018 through June 30, 2018 was $80.4 million.

During the three and six months ended June 30, 2018, we have also recorded a pre-tax gain on the National Beef transaction of $873.5 million ($643.9 million after-tax) which is reported in Gain on disposal of discontinued operations, net of income tax provision in the Consolidated Statements of Operations. Included in the $873.5 million pre-tax gain on the sale of National Beef is approximately $352.4 million related to the remeasurement of our retained 31% interest in National Beef to fair value.