Leucadia National Corporation (NYSE: LUK) today announced its
financial results for the three month period ended March 31, 2015.
Net income attributable to Leucadia National Corporation common
shareholders was $380.8 million, or $0.99 per diluted share. Net
revenues reflect realized and unrealized gains of $686.6 million
related to our recent FXCM investment, $18.6 million of which was
received in cash during the quarter, and $668.0 million of which
represents an unrealized fair value gain on the value of our
investment.
Rich Handler, CEO of Leucadia, and Brian Friedman, President of
Leucadia, said: “We took additional important steps this quarter to
continue to build Leucadia and its long-term value. In January, we
invested $279.0 million in FXCM, net of a $21.0 million investment
banking fee earned by Jefferies. Our investment stabilized FXCM’s
financial position, and has allowed management to focus on repaying
our loan and reinvigorating growth in FXCM’s business. We are
impressed with the quality and strength of FXCM’s management, and
are optimistic regarding FXCM’s long-term prospects.
“Our investment in FXCM was structured as a $300.0 million
two-year senior secured term loan with rights to a variable
proportion of certain distributions in connection with an FXCM sale
of assets or other events. These financial instruments are recorded
at fair value and, as required, will be marked-to-market each
quarter. The largest part of our gain of $686.6 million during the
quarter reflects the adjustment to fair value of our rights. We
determined fair value with the assistance of a nationally
recognized third-party independent valuation firm and it is based
on valuation models that are significantly impacted by various
inputs and assumptions, including, most significantly, FXCM’s
publicly traded stock price and its volatility. As we adjust this
fair value each quarter, we anticipate volatility in the FXCM
valuation, which could materially impact our earnings in a given
period. A $0.30 change in the price of FXCM’s shares (representing
about 14% of the price at March 31, 2015), would result in a change
of about $51 million in this valuation, assuming no change in any
other factors we considered. Please note that from March 31, 2015
through May 7, 2015, FXCM’s share price in fact declined by $0.31
per share. Separately, a 10% change in the assumed FXCM stock
volatility would result in a change of about $29 million in this
valuation, assuming no other change in any other factors we
considered. During the first quarter of 2015, we received $18.6
million of principal and interest payments from FXCM, and $287.6
million remained outstanding under the credit agreement as of March
31, 2015. As of May 7, 2015, we have received an additional $69.3
million, and $228.4 million remained outstanding under the credit
agreement. Our January net investment of $279.0 million has yielded
us so far cumulative cash of $87.9 million, the $228.4 loan balance
and our rights to cash distributions.
“The slowness experienced in Jefferies first quarter appears to
be passing, as results have strengthened across the board. That
said, Jefferies will be impacted by market conditions from time to
time. National Beef continues to face challenges as a result of the
drought that has reduced the number of cattle being processed in
its facilities, which is negatively impacting margins. We
experienced strong results at Berkadia and Garcadia, and continued
momentum at Linkem. We are pleased with the overall diversity and
strategic direction of our 23 investee companies.
“There were a number of additional transactions completed or
announced since January 1 that we believe are beneficial to
Leucadia. As the largest shareholder of HRG, we have worked closely
with the management team and other Board members, and support their
decision to explore strategic alternatives for Fidelity &
Guaranty Life, which we believe will maximize shareholder value for
all investors. We are also excited about Spectrum Brands’ announced
$1.4 billion acquisition of Armored AutoGroup, which also should
benefit our investment in HRG. We have also worked closely with the
management of KCG and were pleased that Jefferies advised the
company on the sale of Hotspot and served as sole arranger of their
recent $500 million debt refinancing. As a significant shareholder
of KCG, we applaud management’s decision to use a significant
portion of the proceeds of these transactions for a modified Dutch
auction tender offer totaling $330 million. We also are pleased
with the $1 billion+ launch of the flagship fund of Folger Hill, in
which Leucadia has invested $400 million. Management at Folger Hill
has already partnered with 15 investment teams and we look forward
to the long-term build out of the Folger Hill platform. We believe
our unique position of being a global investment banking firm
combined with a merchant banking platform will continue to allow us
to serve our clients, while at the same time continuing to
opportunistically source unique investments with attractive
risk/reward characteristics.”
For more information on the Company’s results of operations for
the three months ended March 31, 2015, please see the Company’s
Form 10-Q, which will be filed with the Securities and Exchange
Commission today.
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 business
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.
SUMMARY FOR LEUCADIA
NATIONAL CORPORATION AND SUBSIDIARIES
(In thousands, except per share
amounts)
(Unaudited)
For the Three MonthPeriod Ended March 31,
2015
2014
Net revenues
$ 3,184,683
$ 2,942,524 Net realized
securities gains
$ 15,089
$ 5,394
Income from continuing operations before
income taxes
and income related to associated
companies
$ 546,656 $ 137,060 Income related to associated companies
40,451 20,036
Income from continuing operations before income taxes
587,107 157,096 Income tax provision
212,678 56,250
Income from continuing operations 374,429 100,846
Loss from discontinued operations, net of taxes
– (8,909 ) Net
income 374,429 91,937 Net (income) loss attributable to the
noncontrolling interests 234 (2,537 ) Net loss attributable
to the redeemable noncontrolling interests 7,112 5,932
Preferred stock dividends
(1,016 )
(1,016 ) Net income attributable to Leucadia
National Corporation common shareholders
$
380,759 $ 94,316
Basic earnings (loss) per common share attributable
toLeucadia National Corporation common shareholders: Income from
continuing operations $ 1.00 $ .27 Loss from discontinued
operations
– (.02 )
Net income
$ 1.00 $
.25 Number of shares in calculation
373,541 368,487
Diluted earnings (loss) per common share
attributable toLeucadia National Corporation common
shareholders:
Income from continuing operations $ .99 $ .27 Loss from
discontinued operations
–
(.02 ) Net income
$ .99
$ .25 Number of
shares in calculation
377,713
377,348
Leucadia National CorporationLaura Ulbrandt, 212-460-1900
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