net income of $48.4 million, down 23% from the same period a year ago.  Earnings per share, excluding one-time items, hit 17 cents, topping Wall Street’s consensus estimate of 14 cents.  Net income figures included a $12 million after tax gain related to debt extinguishment treatment of Jefferies debt position by their broker-dealer's market-making desk, and $2 million in expenses related to their acquisition of Bache.

Net revenue slid 18.5% to $554 million.  Jefferies saw its investment banking unit revenue fall 10.6% to $261 million, while fixed income revenue surged to $140.7 million, up from $33.1 million a year ago.

The company came under intense scrutiny after Egan-Jones warned the company could be at risk given its large European exposure; the very recent image of MF Global going under stoked investor fears and the stock tanked.  But Handler went on an all-out offensive to clear his firm’s name.  The CEO opened his firm’s books, showing its exposure to peripheral European nations was relatively limited.  A few days later, the company halved its exposure to Portugal, Ireland, Italy, Greece and Spain, the so-called PIIGS.

“We are proud of our 3,851 employee-partners who successfully navigated an extremely challenging fourth quarter that included continuing global volatility compounded by a November filled with a barrage of misinformation about Jefferies. Our firm responded by reducing our total balance sheet by nearly one quarter, decreasing our leverage to 9.9x from 12.9x, maintaining the already high quality of our inventory, and delivering solid profitability,” explained Handler.

Beyond lowering their leverage ratio, Jefferies reduced its value at risk (VaR) from $10.48 million to $9.47 million.

Europe’s sovereign debt crisis has been the latest trouble to flail the global financial sector.  In the U.S., MF Global was the first victim, but big names like Goldman Sachs, Morgan Stanley, Citi, and even JPMorgan Chase have suffered from investor anxiety and ratings downgrades, among other problems.

Shares in Jefferies popped on earnings, as the company once again sought to calm investors and prove it is solvent.  Even though the stock is down more than 50% for the year, Jefferies surged 8.9% or $1.05 to $12.85 by 11:02 AM in New York.