Leucadia National Corporation (NYSE:LUK) today announced its
financial results for the three and six month periods ended June
30, 2017. Income before income taxes was $124.7 million and net
income attributable to Leucadia National Corporation common
shareholders was $58.2 million, or $0.16 per diluted share for the
three month period. Income before income taxes was $522.8 million
and net income attributable to Leucadia National Corporation common
shareholders was $339.6 million, or $0.91 per diluted share for the
six month period. During the second quarter, the stock price of HRG
Group reversed a portion of its earlier 2017 gains, resulting in an
unrealized mark-to-market decrease in value of $75.0 million for
the quarter and bringing the year-to-date net increase in value to
$100.2 million. The effective tax rate of 41% for the second
quarter includes a $9 million charge to revalue state and local
deferred tax assets related to recent legislation. The effective
tax rate of 30% for the six month period also includes a $32
million benefit (previously reported) resulting from the
repatriation of Jefferies earnings from certain of its foreign
subsidiaries, along with their associated foreign tax credits.
Rich Handler, CEO of Leucadia, and Brian Friedman, President of
Leucadia, said: "We are pleased with Leucadia's second quarter
results, reflecting a solid quarter for Jefferies, as previously
reported, continued good results at National Beef and progress
across Leucadia."
During the second quarter, Leucadia repurchased a total of 1.2
million common shares at an average price of $25.26 per share.
Under the current authorization, including share acquisitions this
quarter, we have repurchased a total of 10.0 million shares over
the past three years at an average price of $20.00 per share.
Leucadia currently has 15.0 million remaining shares authorized for
repurchase.
In addition, the Company announced today that its Board of
Directors has declared a quarterly cash dividend equal to $0.10 per
Leucadia common share payable on September 29, 2017 to record
holders of Leucadia common shares on September 18, 2017. This
reflects a 60 percent increase over Leucadia's historical rate of
$0.0625 per Leucadia common share.
Financial Services Businesses
As previously reported, Jefferies second quarter results
reflected solid results, with net revenues of $781.7 million.
Investment Banking benefited from an improved environment for debt
and equity new issuance. Jefferies core equity sales and trading
business enjoyed a solid quarter as well and, despite quiet market
activity and low volatility, its global cash equity businesses
continued to gain market share. Fixed Income results were impacted
by lower volumes and reduced volatility which prevailed throughout
much of the quarter. The sale of KCG, in which Jefferies held a 24%
equity interest, to Virtu Financial closed last week.
Momentum within Berkadia’s debt origination and investment sales
divisions has continued and strengthened in 2017. Berkadia
originated $9.3 billion in new financing so far this year, up 12%
over 2016, and the company heads into the third quarter with a
strong pipeline of new deals. Investment sales for the first
half of the year are also up 3% over 2016, with slightly improved
margins as well. Berkadia continues to be well positioned to
provide value to commercial real estate owners throughout the
current refinancing wave. We recorded income from associated
companies related to Berkadia of $16.2 million and $33.1 million
for the three and six month periods ended June 30, 2017.
We are pleased with the development of Leucadia Asset Management
("LAM"). We expect that the favorable investment returns and growth
in AUM that we experienced in the first six months will continue,
enabling LAM to take a meaningful place within our financial
services portfolio.
FXCM has restructured and stabilized its business following its
exit from U.S. operations in February. We have nearly recovered the
full amount of cash we invested in FXCM in 2015 and still have
$122.1 million of principal balance outstanding on our loan earning
a coupon of 20.5%, the maximum allowed under the credit agreement.
In May, FXCM agreed to sell its non-core interest in FastMatch to
Euronext for approximately $55.6 million, with a portion held in
escrow and subject to certain future adjustments including a
share of a $10 million earn-out if certain performance
targets of FastMatch are met. 100% of the proceeds from this sale
will be used to pay down our loan, while the remaining balance is
expected to be paid from additional non-core asset sales and
operating cash flow.
HomeFed held its grand opening in June for its 948 Escaya home
community, its first village at Otay Ranch, with 21 single family
detached model homes on display. Production construction has
commenced, with the first home closings anticipated during the
fourth quarter of 2017. HomeFed's results for the second quarter
include a tax benefit of $13 million related to the favorable
resolution of a tax item. We recorded income from associated
companies related to HomeFed of $9.3 million during the second
quarter.
Foursight Capital, our auto finance platform, continues to grow.
Its servicing portfolio is now $476 million and it has completed
its fourth securitization, AAA rated, during the quarter.
Merchant Banking Businesses
Beef demand and cattle supply continued to create favorable
margin conditions for National Beef during the quarter. National
Beef generated pre-tax income of $78.4 million for the second
quarter and $135.5 million year-to-date.
On May 24, HRG's majority owned subsidiary, Fidelity &
Guaranty Life (FGL), announced that it entered into a definitive
merger agreement under which CF Corporation will acquire FGL for
$31.10 per share. The transaction is expected to close in the
fourth quarter of 2017. This will significantly simplify HRG, which
continues its strategic review process.
Garcadia’s 2017 results have been impacted by lower
industry-wide sales trends and a few underperforming stores.
Management has addressed these issues and is putting extra emphasis
on managing costs in light of the current environment.
Distributions from Garcadia were $24.7 million during the first
half of the year.
Linkem, our fixed wireless broadband provider in Italy, ended
the quarter with 455,000 customers, up 13% from year-end. Linkem
ended the quarter with 2,127 base stations, 98% of which are LTE
enabled, covering over 60% of Italian households, including 19 of
the 20 largest cities in Italy. Linkem expects to achieve its
target to cover 80% of the population in the next few years and is
well positioned to capitalize on its standing as the fastest
growing broadband provider in Italy.
Vitesse anticipates production to exceed 4,000 boe/day
in late 2017 as most of the 31 gross drilled but uncompleted wells
Vitesse acquired in late 2016 are expected to be completed and
flowing to sales by year end. Over 80% of Vitesse's production for
2017 has been hedged at prices around $50/bbl. JETX has
transitioned from an operated to a non-operating strategy under the
guidance of the Vitesse management team. JETX owns
14,000 acres in the Eastern Eagle Ford ("EEF") in Brazos
& Grimes Counties Texas, and it also retains smaller acreage in
Houston County. In late 2016 JETX entered into a development joint
venture with Lonestar Resources (Nasdaq: LONE) to develop
Lonestar's and JETX's pooled EEF acreage. In June, Lonestar
announced that its Wildcat B#1H well had production averaging 2,123
boe/day for the first 30 days. JETX has a 50% interest in the well
which is among the best wells ever drilled in the EEF.
Idaho Timber generated increased revenues and pre-tax income, as
improved volumes were combined with a generally positive margin
environment. In addition, efforts to lower costs and increase
throughput in the sawmill division yielded enhanced margins.
Golden Queen Mining Company continues to ramp up its mining and
processing activities. During the quarter, a total of 12.6 thousand
ounces of gold and 51.9 thousand ounces of silver were produced.
Higher utilization rates, increased tonnage from the mine and
reduced downtime in the processing plants are reflective of efforts
to bring the operations to capacity.
* * * *
More information on the Company’s results of operations for the
three and six months ended June 30, 2017 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 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.
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 LEUCADIA
NATIONAL CORPORATION AND SUBSIDIARIES
(In thousands, except per share
amounts)
(Unaudited)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Net revenues $ 2,732,380 $ 2,625,358 $
5,600,362 $ 4,640,464 Income (loss) before
income taxes and income (loss) related to associated companies $
110,578 $ 87,572 $ 637,249 $ (234,443 ) Income (loss)
related to associated companies 14,104 51,890
(114,470 ) 71,942 Income (loss) before income taxes
124,682 139,462 522,779 (162,501 ) Income tax provision
(benefit) 50,620 68,850 154,794 (14,511 )
Net income (loss) 74,062 70,612 367,985 (147,990 )
Net loss attributable to the noncontrolling interests 1,446 760
1,969 1,812 Net income attributable to the redeemable
noncontrolling interests (16,300 ) (13,068 ) (28,322 ) (17,382 )
Preferred stock dividends (1,015 ) (1,015 ) (2,031 ) (2,031
) Net income (loss) attributable to Leucadia National
Corporation common shareholders $ 58,193 $ 57,289 $
339,601 $ (165,591 ) Basic earnings (loss) per common
share attributable to Leucadia National Corporation common
shareholders: Net income (loss) $ 0.16 $ 0.15 $ 0.92
$ (0.44 ) Number of shares in calculation 369,212
372,556 369,206 372,448 Diluted
earnings (loss) per common share attributable to Leucadia National
Corporation common shareholders: Net income (loss) $ 0.16 $
0.15 $ 0.91 $ (0.44 ) Number of shares in
calculation 371,552 372,556 375,684 372,448
A summary of results for the three months ended June 30, 2017
and 2016 is as follows (in thousands):
Other
Other
Financial
Merchant
Services
Banking
Businesses
Businesses
Parent
National
and
and
Corporate
Company
Jefferies
Beef
Investments
Investments
and Other
Interest
Total
2017
Net revenues $ 781,672 $ 1,875,519 $ 59,340 $
13,513 $ 2,336 $ — $
2,732,380
Expenses: Cost of sales — 1,750,569 — 69,982 — — 1,820,551
Compensation and benefits 450,522 9,832 14,948 4,404 11,867 —
491,573 Floor brokerage and clearing fees 44,435 — — — — — 44,435
Interest — 2,254 9,890 956 — 14,734 27,834 Depreciation and
amortization 15,348 24,459 2,659 7,384 867 — 50,717 Selling,
general and other expenses 148,655 9,980 12,905
7,812 7,340 — 186,692 Total
expenses 658,960 1,797,094 40,402 90,538
20,074 14,734 2,621,802 Income (loss)
before income taxes and income (loss) related to associated
companies 122,712 78,425 18,938 (77,025 ) (17,738 ) (14,734 )
110,578 Income related to associated companies — —
10,235 3,389 480 — 14,104 Income
(loss) before income taxes $ 122,712 $ 78,425 $
29,173 $ (73,636 ) $ (17,258 ) $ (14,734 ) $ 124,682
2016
Net revenues $ 720,930 $ 1,798,634 $ (14,113 ) $
109,415 $ 10,492 $ — $ 2,625,358
Expenses: Cost of sales — 1,690,908 — 85,462 — — 1,776,370
Compensation and benefits 415,316 9,635 15,929 7,505 9,706 —
458,091 Floor brokerage and clearing fees 43,591 — — — — — 43,591
Interest — 3,796 3,470 721 — 14,719 22,706 Depreciation and
amortization 14,633 22,785 3,369 9,038 944 — 50,769 Selling,
general and other expenses 139,910 8,655 9,560
20,499 7,635 — 186,259 Total expenses
613,450 1,735,779 32,328 123,225 18,285
14,719 2,537,786 Income (loss) before income
taxes and income related to associated companies 107,480 62,855
(46,441 ) (13,810 ) (7,793 ) (14,719 ) 87,572 Income related to
associated companies — — 45,322 5,966
602 — 51,890 Income (loss) before income taxes
$ 107,480 $ 62,855 $ (1,119 ) $ (7,844 ) $ (7,191 ) $
(14,719 ) $ 139,462
A summary of results for the six months ended June 30, 2017 and
2016 is as follows (in thousands):
Other
Other
Financial
Merchant
Services
Banking
Businesses
Businesses
Parent
National
and
and
Corporate
Company
Jefferies
Beef
Investments
Investments
and Other
Interest
Total
2017
Net revenues $ 1,579,058 $ 3,436,975 $ 115,563
$ 458,740 $ 10,026 $ — $ 5,600,362
Expenses: Cost of sales — 3,214,407 — 139,238 — — 3,353,645
Compensation and benefits 911,194 19,144 30,132 9,369 25,917 —
995,756 Floor brokerage and clearing fees 90,293 — — — — — 90,293
Interest — 4,068 19,861 1,825 — 29,464 55,218 Depreciation and
amortization 30,949 46,858 5,564 15,122 1,734 — 100,227 Selling,
general and other expenses 291,640 16,970 27,101
17,066 15,197 — 367,974 Total
expenses 1,324,076 3,301,447 82,658 182,620
42,848 29,464 4,963,113 Income (loss)
before income taxes and income (loss) related to associated
companies 254,982 135,528 32,905 276,120 (32,822 ) (29,464 )
637,249 Income (loss) related to associated companies — —
(122,768 ) 7,238 1,060 — (114,470 )
Income (loss) before income taxes $ 254,982 $ 135,528
$ (89,863 ) $ 283,358 $ (31,762 ) $ (29,464 ) $ 522,779
2016
Net revenues $ 1,021,716 $ 3,433,085 $ (126,080 ) $
234,395 $ 77,348 $ — $ 4,640,464
Expenses: Cost of sales — 3,260,374 — 164,048 — — 3,424,422
Compensation and benefits 765,435 18,968 29,192 14,749 19,154 —
847,498 Floor brokerage and clearing fees 84,070 — — — — — 84,070
Interest — 7,763 6,392 1,436 — 29,433 45,024 Depreciation and
amortization 29,223 45,411 6,091 17,767 1,887 — 100,379 Selling,
general and other expenses 281,305 16,305 17,980
41,329 16,595 — 373,514 Total
expenses 1,160,033 3,348,821 59,655 239,329
37,636 29,433 4,874,907 Income (loss)
before income taxes and income related to associated companies
(138,317 ) 84,264 (185,735 ) (4,934 ) 39,712 (29,433 ) (234,443 )
Income related to associated companies — — 58,315
12,794 833 — 71,942 Income
(loss) before income taxes $ (138,317 ) $ 84,264 $ (127,420
) $ 7,860 $ 40,545 $ (29,433 ) $ (162,501 )
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Leucadia National CorporationLaura Ulbrandt, 212-460-1900
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