Leucadia National Corporation (NYSE:LUK) today announced its financial results for the three month period ended March 31, 2017. Income before income taxes was $398 million and net income attributable to Leucadia National Corporation common shareholders was $281 million, or $0.75 per diluted share. The effective tax rate of 26% reflects a $32 million benefit 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 yet another quarter of strong performance across Leucadia. Jefferies' first quarter represents the fourth straight quarter of improved results. Jefferies' recorded net revenues for the twelve months ended February 28, 2017 aggregate to nearly $3 billion and reflect the benchmark level of our capabilities during a stable environment. First quarter performance was driven by well-balanced contributions of $408 million from Investment Banking and $380 million from Equities and Fixed Income, reflecting improved debt capital markets performance, a solid contribution by equity capital markets, a good quarter for advisory activities and a sales and trading environment that was reasonably robust for much of the quarter.

"Subsequent to the end of the first quarter, Virtu Financial agreed to acquire KCG at a price of $20.00 per share, which would generate a further $98 million gain for our 24% interest in KCG held at Jefferies, most of which we expect to record in our second quarter. The transaction is expected to close during the third quarter. Cumulative net revenues since 2012 from KCG and Jefferies' KCG investment would be $419 million, including fees received by Jefferies for its services.

"National Beef, in what is typically a lighter seasonal quarter for beef processing, more than doubled its pre-tax income from a year ago, reflecting solid margin conditions throughout the quarter. Our other businesses, including Berkadia, Garcadia, Idaho Timber and Vitesse, performed well during the quarter. Leucadia Asset Management, while still in its early stages, has weathered its start-up costs and is now making positive contributions to our operating results. The value of our HRG position was marked up $175 million this quarter. Our results include the pre-tax gain of $180 million related to the previously announced sale of Conwed Plastics, offset by a non-cash $130 million markdown to adjust the value of our FXCM equity investment to fair value (reducing our cumulative gains to about $300 million). While we are disappointed to be marking down our equity investment in FXCM, we have nearly recovered the full amount of cash we invested, and look forward to continued repayments on a principal balance of $123 million and owning a remaining equity investment value of $187 million."

More information on the Company’s results of operations for the three months ended March 31, 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.

     

 

   
 

SUMMARY FOR LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES

(In thousands, except per share amounts)

(Unaudited)

 

For the Three Months Ended
March 31,

2017 2016
 
Net revenues $ 2,867,982   $ 2,015,106  
 
Income (loss) before income taxes and income (loss) related to associated companies $ 526,671 $ (322,015 )
 
Income (loss) related to associated companies (128,574 ) 20,052  
 
Income (loss) before income taxes 398,097 (301,963 )
 
Income tax provision (benefit) 104,174   (83,361 )
 
Net income (loss) 293,923 (218,602 )
 
Net loss attributable to the noncontrolling interests 523 1,052
 
Net income attributable to the redeemable noncontrolling interests (12,022 ) (4,314 )
 
Preferred stock dividends (1,016 ) (1,016 )
 
Net income (loss) attributable to Leucadia National Corporation common shareholders $ 281,408   $ (222,880 )
 

Basic earnings (loss) per common share attributable to Leucadia National
Corporation common shareholders:

Net income (loss) $ 0.76   $ (0.60 )
 
Number of shares in calculation 369,267   372,367  
 

Diluted earnings (loss) per common share attributable to Leucadia
National Corporation common shareholders:

Net income (loss) $ 0.75   $ (0.60 )
 
Number of shares in calculation 375,721   372,367  
 

A summary of results for the three months ended March 31, 2017 and 2016 is as follows (in thousands):

      Jefferies    

National
Beef

    

Other
Financial
Services
Businesses
and
Investments

    

Other
Merchant
Banking
Businesses
and
Investments

    

Corporate
and Other

    

Parent
Company
Interest

     Total

2017

Net revenues $ 797,386   $ 1,561,456   $ 56,223   $ 445,227   $ 7,690   $ —   $ 2,867,982  
 
Expenses:
Cost of sales — 1,463,838 — 69,256 — — 1,533,094
Compensation and benefits 460,672 9,312 15,184 4,965 14,050 — 504,183
Floor brokerage and clearing fees 45,858 — — — — — 45,858
Interest — 1,814 9,971 869 — 14,730 27,384
Depreciation and amortization 15,601 22,399 2,905 7,738 867 — 49,510
Selling, general and other expenses 142,985   6,990   14,196   9,254   7,857   —   181,282  
Total expenses 665,116   1,504,353   42,256   92,082   22,774   14,730   2,341,311  

Income (loss) before income taxes
and income (loss) related to
associated companies

132,270 57,103 13,967 353,145 (15,084 ) (14,730 ) 526,671
Income (loss) related to associated companies —   —   (133,003 ) 3,849   580   —   (128,574 )
Income (loss) before income taxes $ 132,270   $ 57,103   $ (119,036 ) $ 356,994   $ (14,504 ) $ (14,730 ) $ 398,097  
 
     

Jefferies

    

National
Beef

      

Other
Financial
Services
Businesses
and
Investments

    

Other
Merchant
Banking
Businesses
and
Investments

      

Corporate
and Other

      

Parent
Company
Interest

    

Total

2016

Net revenues $ 300,786   $ 1,634,451   $ (111,967 ) $ 124,980   $ 66,856   $ —   $ 2,015,106  
 
Expenses:
Cost of sales — 1,569,466 — 78,586 — — 1,648,052
Compensation and benefits 350,119 9,333 13,263 7,244 9,448 — 389,407
Floor brokerage and clearing fees 40,479 — — — — — 40,479
Interest — 3,967 2,922 715 — 14,714 22,318
Depreciation and amortization 14,590 22,626 2,722 8,729 943 — 49,610
Selling, general and other expenses 141,395   7,650   8,420   20,830   8,960   —   187,255  
Total expenses 546,583   1,613,042   27,327   116,104   19,351   14,714   2,337,121  

Income (loss) before income taxes
and income related to associated
companies

(245,797 ) 21,409 (139,294 ) 8,876 47,505 (14,714 ) (322,015 )
Income related to associated companies —   —   12,993   6,828   231   —   20,052  
Income (loss) before income taxes $ (245,797 ) $ 21,409   $ (126,301 ) $ 15,704   $ 47,736   $ (14,714 ) $ (301,963 )
 

The following table reconciles financial results reported in accordance with generally accepted accounting principles ("GAAP") to non-GAAP financial results. This press release contains non-GAAP financial information to aid investors in viewing our businesses and investments through the eyes of management while facilitating a comparison across historical periods. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, reported results prepared in accordance with GAAP.

     
Net Revenues
(In millions)
Leucadia cumulative net revenues related to KCG through first quarter 2017 (GAAP) $ 126
Estimated net revenues subsequent to first quarter 2017 (1) 98
Jefferies net revenues related to KCG prior to Leucadia merger (2) 195
Cumulative net revenues through date of sale (Non-GAAP) (1) $ 419
 
(1)   Assumes acquisition of KCG by Virtu Financial closes. In April 2017, Virtu Financial agreed to acquire KCG at a price of $20.00 per share. The transaction is expected to close during the third quarter.
(2) Jefferies became a wholly-owned subsidiary of Leucadia on March 1, 2013.