Leucadia National Corporation (NYSE:LUK) today announced its
financial results for the three and six month periods ended June
30, 2015. Adjusted net income attributable to Leucadia National
Corporation common shareholders, which excludes the operating
results of Jefferies' Bache business, was $42.3 million, or $0.11
per diluted share, for the second quarter, and $430.1 million, or
$1.12 per diluted share, for the six months ended June 30, 2015.
Including the results of the Bache business, net income
attributable to Leucadia National Corporation common shareholders
was $16.4 million, or $0.04 per diluted share, for the second
quarter, and $397.2 million, or $1.04 per diluted share, for the
six months ended June 30, 2015.
Rich Handler, CEO of Leucadia, and Brian Friedman, President of
Leucadia, said: “During the second quarter we made steady progress
across many of our businesses in building value and positioning
them for future growth. We are pleased to have recorded good
results at Jefferies and look forward to finalizing its transfer of
Bache. In addition, HRG completed its $1.4 billion acquisition of
Armored AutoGroup, Folger Hill reached $1.1 billion in assets under
management, and Berkadia and Garcadia delivered solid growth and
profits.”
Financial Services Businesses
Jefferies reported strong second quarter revenues, with
investment banking revenues in excess of $400 million, an increase
of 49% compared to this year’s first quarter and 22% versus the
second quarter last year. Equity net revenues were also strong, and
Fixed income net revenues, excluding Bache, reflected a 56%
increase over the slow first quarter.
In April, Jefferies agreed with Societe General S.A. to transfer
certain of the client activities of its Bache business. During the
second quarter, Jefferies transferred about 50% of Bache’s client
accounts to Societe General S.A. and other brokers, and expects to
be substantially complete by the end of the summer.
We continued to experience good progress in the development of
our various asset management platforms. Launched in March 2015,
Folger Hill continued to grow assets under management and add
quality portfolio managers, and is now poised to fully implement
its investment strategy. Despite choppy markets due to developments
in China and Greece, Topwater extended its streak of positive
months to 20, showcasing the value of its first-loss model. Mazama
also performed well, particularly relative to its peers, and has
seen some traction in its fundraising efforts. The Strategic
Investment Division, with its flagship Structured Alpha fund,
produced positive results in the first half and is considering ways
to expand its suite of systematic trading strategies.
We are pleased with the first half results of FXCM, in which we
invested in January. We are seeing the business stabilize and
generate improvements in performance. During the second quarter, we
received an additional $75.9 million in cash payments from FXCM.
Our January net investment of $279.0 million has yielded us so far
cumulative cash of $94.5 million, the remaining outstanding $228.4
million principal loan balance and our rights to residual cash
distributions. Reflecting a reduction in the share price of FXCM,
at the end of the second quarter, we reduced the fair value
carrying amount of our investment in FXCM by $112.1 million.
Berkadia had a fast start to 2015. During the first half of the
year, Berkadia originated $7.6 billion of new financing for its
clients, up more than 100% from 2014. Similarly, Berkadia’s
investment sales volume was up 75% versus 2014, to $2.7 billion
during the first half. We believe Berkadia is well positioned to
continue to grow as the commercial real estate refinancing wave
picks up steam over the next several years. During the second
quarter, we received cash distributions from Berkadia of $31
million, bringing our total distributions received for the first
half of 2015 to $50 million.
Our Specialty Finance platform, which includes Foursight Capital
and Chrome Capital, is continuing to grow. During the first half of
the year, originations from these two companies grew to over $120
million, up 68% over 2014. Foursight completed its second
securitization in May. Additionally, we moved the servicing for the
Chrome portfolio onto the Foursight platform.
Merchant Banking Businesses
National Beef continued to struggle with difficult market
conditions during the first half of 2015, as the slow rebuilding of
the domestic cattle herd continued to limit cattle available for
processing. The relatively high price of beef was not sufficient to
offset the costs of cattle and a decline in the “drop credit,” the
amount received for non-core products such as offal, hides and
rendering.
During the second quarter, the stock price of HRG Group
increased 4.2%, generating an unrealized mark-to-market increase in
value of $24.2 million for the second quarter. On April 6, HRG
announced it is exploring strategic alternatives for its
publicly-traded subsidiary, Fidelity & Guarantee Life. On May
21, HRG’s largest subsidiary, Spectrum Brands, which is 58% owned
by HRG, completed its $1.4 billion acquisition of Armored
AutoGroup. We expect great progress at Spectrum Brands and solid
further value creation at HRG.
Garcadia’s sales growth continued to outpace the national
average during the first half of 2015, with Garcadia’s same-store
new vehicle sales up 21.6%, while the industry was up 4.4%. This
strong sales growth, combined with the additional emphasis
management has put on growing our services and parts businesses
resulted in same-store net income growing by nearly 20%. Although
we continue to look at acquisition opportunities, no acquisitions
have been made thus far in 2015, and we will continue to be patient
and prudent at this point in the cycle. We received cash
distributions from Garcadia, in addition to rent on the dealership
land we own, of $25.6 million during the first half of the
year.
Linkem, our Italian fixed wireless broadband service provider,
has been focused on growing its geographic footprint and migrating
its network to LTE. Since the start of the year, Linkem has added
over 200 greenfield LTE sites and 55% of its 1,275 base stations
are currently LTE-enabled. Linkem continues to grow its subscriber
base, remains EBITDA positive, and has maintained its strong
operating metrics throughout the transition.
Conwed, our plastics manufacturing company, posted an 18%
increase in revenues compared to the second quarter of 2014, driven
by two acquisitions last year: 80% of Filtrexx International in
March and 100% of Weaver Express in August. Pre-tax profits
for the second quarter increased 60% year over-year due to the
impact of the acquisitions and lower prices for resin, Conwed’s key
raw material.
Idaho Timber has been impacted by weak prices, affected by
declining demand from China and excess product availability, which
limited improvements in sales. The company continued to enjoy a
strong market position with its core customers, particularly in the
decking space.
Construction at our Golden Queen joint venture's Soledad
Mountain project is advancing on time and on budget. We expect the
commissioning of the processing facilities during the fourth
quarter of 2015. Gold and silver mining operations are expected to
run through 2027 and an ancillary business generating crushed stone
for construction aggregate and concrete products could last up to
30 years.
In East Texas, Juneau Energy has leased over 45,000 net acres.
The acreage is split between the core area of the Eastern Eagle
Ford in Brazos and Burleson counties and the Buda-Georgetown-Glen
Rose (“stack-and-frack”) play in Houston and Leon counties. The
acreage offsets key operators, such as Anadarko, Apache, EOG and
ENXP. The impact of lower oil prices has been offset to a large
degree by the 30% reduction in drilling and service costs, which
has increased Juneau’s expected returns. In Oklahoma, Juneau's
development joint venture with a local developer has successfully
drilled and completed seven wells, including six horizontal
Mississippian oil wells in Alfalfa County. Juneau and its operating
partner continue to drill new wells, delivering performance above
type curve and actual costs below budget. At current oil prices,
the wells should generate strong returns. Juneau’s assets have
maintained value in today’s environment and hold the promise of
excellent returns over the cycle.
Vitesse Energy owns over 21,000 net acres and associated
non-operated oil and gas production from approximately 1,000 gross
producing wells in the core of the Bakken Field, primarily located
in Williams, McKenzie and Mountrail counties of North Dakota.
Vitesse has grown production to 2,300 net barrels of oil equivalent
per day and generated $4 million of pretax earnings during the
first six months of 2015. The fall in oil prices has reduced the
number of rigs drilling in the Bakken to 75, down from over 200 in
the fall of 2014. Nevertheless, the pace of development on
Vitesse’s “core of the core” acreage position has remained fairly
constant, as operators have reduced drilling and completion costs
by at least 30%, such that rates of return on these new horizontal
wells are attractive and are similar to those experienced in 2014.
Vitesse has hedged a significant majority of its currently flowing
production for the balance of 2015 through mid-year 2020.
Specifically, 2016 production is effectively pre-sold through a
swap at a fixed WTI price of $57/bbl. 2017 production is hedged
with a WTI price floor of $55/bbl and ceiling of $65/bbl, 2018
production is hedged with a WTI price floor of $50/bbl and a
ceiling of $75/bbl, and 2019 production is hedged with a WTI price
floor of $50/bbl and a ceiling of $79/bbl.
Oregon LNG continues to slog through the slow process of
permitting its LNG site and natural gas pipeline in Oregon,
however, we can’t predict whether or when this project will be
brought to fruition.
For more information on the Company’s results of operations for
the three and six months ended June 30, 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 Months Ended June 30, For the Six
Months Ended June 30, 2015 2014 2015 2014 Net
revenues $ 2,839,463 $ 2,851,963 $ 6,024,146 $
5,794,487 Net realized securities gains $ 9,093
$ 12,274 $ 24,182 $ 17,055
Income (loss) from continuing operations before income taxes and
income related to associated companies $ (29,344 ) $ 82,574 $
517,312 $ 219,634 Income related to associated companies
29,807 35,345 70,258 55,381
Income from continuing operations before income taxes 463 117,919
587,570 275,015 Income tax provision (benefit) (14,571 )
47,729 198,107 103,979 Income from
continuing operations 15,034 70,190 389,463 171,036 Loss
from discontinued operations, including gain on disposal, net of
taxes — (3,740 ) — (12,649 ) Net income 15,034
66,450 389,463 158,387 Net (income) loss attributable to the
noncontrolling interests 356 912 590 (1,625 ) Net (income)
loss attributable to the redeemable noncontrolling interests 2,031
(1,273 ) 9,143 4,659 Preferred stock dividends (1,015 )
(1,015 ) (2,031 ) (2,031 ) Net income attributable to
Leucadia National Corporation common shareholders $ 16,406 $
65,074 $ 397,165 $ 159,390 Basic
earnings (loss) per common share attributable to Leucadia National
Corporation common shareholders: Income from continuing operations
$ 0.04 $ 0.18 $ 1.04 $ 0.45 Loss from discontinued operations —
(0.01 ) — (0.03 ) Net income $ 0.04 $ 0.17
$ 1.04 $ 0.42 Number of shares in
calculation 373,654 371,979 373,611 370,506
Diluted earnings (loss) per common share attributable
to Leucadia National Corporation common shareholders: Income from
continuing operations $ 0.04 $ 0.18 $ 1.04 $ 0.45 Loss from
discontinued operations — (0.01 ) — (0.03 ) Net
income $ 0.04 $ 0.17 $ 1.04 $ 0.42
Number of shares in calculation 373,662 373,179
377,783 373,201
LEUCADIA NATIONAL CORPORATION
CONSOLIDATED
ADJUSTED SELECTED FINANCIAL DATA
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended June 30, 2015 GAAP
Adjustments Adjusted Net revenues $ 2,839,463
$ (34,589 ) $ 2,804,874 Income from continuing operations
before income taxes $ 463 $ 38,420 $ 38,883
Net income attributable to Leucadia National Corporation common
shareholders $ 16,406 $ 25,940 $ 42,346 Basic
earnings per common share attributable to Leucadia National
Corporation common shareholders $ 0.04 $ 0.11 Diluted
earnings per common share attributable to Leucadia National
Corporation common shareholders $ 0.04 $ 0.11 Six
Months Ended June 30, 2015 GAAP Adjustments Adjusted
Net revenues $ 6,024,146 $ (84,522 ) $ 5,939,624
Income from continuing operations before income taxes $
587,570 $ 51,064 $ 638,634 Net income
attributable to Leucadia National Corporation common shareholders $
397,165 $ 32,901 $ 430,066 Basic earnings per
common share attributable to Leucadia National Corporation common
shareholders $ 1.04 $ 1.13 Diluted earnings per
common share attributable to Leucadia National Corporation common
shareholders $ 1.04 $ 1.12
Adjustments:
Revenues generated by the Bache business, including commissions,
principal transaction revenues and net interest revenue, have been
classified as a reduction of revenue in the calculation above.
Expenses directly related to the operations of the Bache
business have been excluded from Adjusted income from continuing
operations before income taxes. These expenses include floor
brokerage and clearing fees, amortization of capitalized software
used directly by the Bache business in conducting its business
activities, technology and occupancy expenses directly related to
conducting Bache business operations and business development and
professional services expenses incurred by the Bache business as
part of its client sales and trading activities, including
estimates of certain support costs dedicated to the Bache business.
They also include compensation expense and benefits expense for
employees whose sole responsibilities pertain to the activities of
the Bache business, including front office personnel and dedicated
support personnel. Costs related to the exit of the Bache business
have also been excluded.
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version on businesswire.com: http://www.businesswire.com/news/home/20150805005834/en/
Laura Ulbrandt, 212-460-1900
Leucadia (NYSE:LUK)
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