SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-5721 LEUCADIA NATIONAL CORPORATION (Exact name of registrant as specified in its Charter) New York 13-2615557 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 315 Park Avenue South, New York, New York 10010-3607 (Address of principal executive offices) (Zip Code) (212) 460-1900 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) _____________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES NO --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, at November 6, 1996: 60,373,010.
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. <TABLE> <CAPTION> LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1996 and December 31, 1995 (Dollars in thousands, except par value) SEPTEMBER 30, December 31, 1996 1995 ------------- ------------ (Unaudited) <S> <C> <C> ASSETS Investments: Available for sale (aggregate cost of $2,502,701 and $2,618,363) $ 2,486,395 $ 2,664,471 Trading securities (aggregate cost of $56,154 and $52,153) 55,620 55,702 Held to maturity (aggregate fair value of $70,025 and $65,416) 70,201 64,546 Policyholder loans 18,045 17,768 Other long-term investments, including accrued interest income 87,115 77,994 ----------- ----------- Total investments 2,717,376 2,880,481 Cash and cash equivalents 428,626 266,158 Reinsurance receivable, net 264,797 261,267 Trade, notes and other receivables, net 490,776 497,753 Prepaids and other assets 228,688 238,306 Property, equipment and leasehold improvements, net 101,485 111,374 Deferred policy acquisition costs 110,626 92,144 Deferred income taxes 108,206 103,466 Separate and variable accounts 522,131 472,837 Investments in associated companies 195,359 184,088 ----------- ----------- Total $ 5,168,070 $ 5,107,874 =========== =========== LIABILITIES Customer banking deposits $ 210,731 $ 203,061 Trade payables and expense accruals 217,021 209,362 Other liabilities 144,799 134,772 Income taxes payable 42,134 39,596 Policy reserves 1,941,036 1,971,080 Unearned premiums 467,413 434,773 Separate and variable accounts 521,097 472,837 Debt, including current maturities 494,332 520,862 ----------- ----------- Total liabilities 4,038,563 3,986,343 ----------- ----------- Minority interest 9,154 10,040 ----------- ----------- SHAREHOLDERS' EQUITY Common shares, par value $1 per share, authorized 150,000,000 shares; 60,345,525 and 60,163,824 shares issued and outstanding, after deducting 54,343,721 and 54,319,654 shares held in treasury 60,346 60,164 Additional paid-in capital 160,681 159,914 Net unrealized gain (loss) on investments (9,960) 30,086 Retained earnings 909,286 861,327 ----------- ----------- Total shareholders' equity 1,120,353 1,111,491 ----------- ----------- Total $ 5,168,070 $ 5,107,874 =========== =========== </TABLE> See notes to interim consolidated financial statements. -2-
<TABLE> <CAPTION> LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the periods ended September 30, 1996 and 1995 (Unaudited) For the Three For the Nine Month Period Ended Month Period Ended September 30, September 30, ----------------------- ------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- (In thousands, except per share amounts) <S> <C> <C> <C> <C> REVENUES: Insurance revenues and commissions $ 241,209 $ 250,155 $ 751,088 $ 727,677 Manufacturing 35,970 42,428 114,555 131,234 Finance 11,879 13,512 37,891 40,292 Investment and other income 81,353 73,952 224,144 219,222 Equity in losses of associated companies (15,698) (847) (21,401) (1,552) Net securities gains 23,083 11,787 34,658 11,559 ----------- ----------- ------------ ------------ 377,796 390,987 1,140,935 1,128,432 ----------- ----------- ------------ ------------ EXPENSES: Provision for insurance losses and policy benefits 211,296 214,442 644,151 619,507 Amortization of deferred policy acquisition costs 21,075 25,981 74,504 73,344 Manufacturing cost of goods sold 25,348 31,571 83,295 100,783 Interest 13,356 14,318 40,638 38,723 Salaries 23,090 22,272 68,756 65,885 Selling, general and other expenses 54,584 53,400 160,122 153,484 ---------- ----------- ------------ ------------ 348,749 361,984 1,071,466 1,051,726 ----------- ----------- ------------ ------------ Income before income taxes 29,047 29,003 69,469 76,706 ----------- ----------- ------------ ------------ Income taxes: Current 2,446 (4,202) 6,751 144 Deferred 7,416 11,479 14,759 21,104 ----------- ----------- ------------ ------------ 9,862 7,277 21,510 21,248 ----------- ----------- ------------ ------------ Net income $ 19,185 $ 21,726 $ 47,959 $ 55,458 =========== =========== ============ ============ Earnings per common and dilutive common equivalent share $.32 $.37 $.79 $.94 ==== ==== ==== ==== Fully diluted earnings per common share $.31 $.36 $.79 $.93 ==== ==== ==== ==== </TABLE> See notes to interim consolidated financial statements -3-
<TABLE> <CAPTION> LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1996 and 1995 (Unaudited) 1996 1995 ---- ---- (Thousands of dollars) <S> <C> <C> NET CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 47,959 $ 55,458 Adjustments to reconcile net income to net cash provided by operations: Provision for deferred income taxes 14,759 21,104 Depreciation and amortization of property, equipment and leasehold improvements 13,630 13,241 Other amortization 79,920 72,844 Provision for doubtful accounts 11,921 11,515 Net securities (gains) (34,658) (11,559) (Gain) on disposal of real estate, property and equipment (5,879) (2,514) (Gain) on sale of Transportation Capital Corp. (1,516) -- Equity in losses of associated companies 21,401 1,552 Purchases of investments classified as trading (253,215) (97,894) Proceeds from sales of investments classified as trading 244,296 124,337 Deferred policy acquisition costs incurred and deferred (83,068) (89,605) Net change in: Reinsurance receivable (3,662) 40,335 Trade, notes and other receivables (37,608) (48,597) Prepaids and other assets (34,017) (14,297) Trade payables and expense accruals 16,085 (24,611) Other liabilities 10,183 (2,636) Income taxes payable 2,421 (2,069) Policy reserves (35,112) 9,850 Unearned premiums 29,901 50,648 Other 1,193 883 ------------ ------------- Net cash provided by operating activities 4,934 107,985 ------------ ------------- NET CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of real estate, property, equipment and leasehold improvements (19,551) (43,821) Proceeds from disposals of real estate, property and equipment 31,061 16,112 Advances on loan receivables (90,805) (118,702) Investment in Providential Life in 1996 and MK Gold Company in 1995 (11,194) (22,474) Principal collections on loan receivables 104,792 93,727 Purchases of investments (other than short-term) (1,690,184) (1,176,314) Proceeds from maturities of investments 446,891 450,783 Proceeds from sales of investments 1,407,940 720,242 ------------- ------------ Net cash provided by (used for) investing activities 178,950 (80,447) ------------- ------------ NET CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short-term borrowings 232 115 Net change in customer banking deposits 7,671 19,539 Net change in policyholder account balances (6,381) (13,456) Issuance of long-term debt, net of issuance costs 8,788 101,390 Reduction of long-term debt (31,726) (3,096) Sale of common shares and exercise of warrants, net of expenses -- 43,736 ------------- ------------ Net cash (used for) provided by financing activities (21,416) 148,228 ------------- ------------ Net increase in cash and cash equivalents 162,468 175,766 Cash and cash equivalents at January 1, 266,158 252,495 ------------- ------------ Cash and cash equivalents at September 30, $ 428,626 $ 428,261 ============= ============ </TABLE> See notes to interim consolidated financial statements. -4-
<TABLE> <CAPTION> LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the nine months ended September 30, 1996 and 1995 (Unaudited) Net Common Unrealized Shares Additional Gain $1 Par Paid-In (Loss) on Retained Value Capital Investments Earnings Total ----- ------- ----------- -------- ----- (Thousands of dollars) <S> <C> <C> <C> <C> <C> BALANCE, JANUARY 1, 1995 $ 56,100 $ 98,175 $ (41,309) $ 768,849 $ 881,815 Exercise of options to purchase common shares 368 1,912 2,280 Purchase of stock for treasury (29) (698) (727) Exercise of warrants to purchase common shares (net of expenses) and related income tax benefit 3,188 47,736 50,924 Issuance of common shares, net of underwriting discounts 478 12,391 12,869 Net change in unrealized gain (loss) on investments 55,535 55,535 Net income 55,458 55,458 ---------- ----------- ----------- ----------- ------------- BALANCE, SEPTEMBER 30, 1995 $ 60,105 $ 159,516 $ 14,226 $ 824,307 $ 1,058,154 ========== =========== =========== =========== ============= BALANCE, JANUARY 1, 1996 $ 60,164 $ 159,914 $ 30,086 $ 861,327 $ 1,111,491 Exercise of options to purchase common shares 206 1,323 1,529 Purchase of stock for treasury (24) (556) (580) Net change in unrealized gain (loss) on investments (40,046) (40,046) Net income 47,959 47,959 ---------- ----------- ----------- ----------- ------------- BALANCE, SEPTEMBER 30, 1996 $ 60,346 $ 160,681 $ (9,960) $ 909,286 $ 1,120,353 ========== =========== =========== =========== ============= </TABLE> See notes to interim consolidated financial statements. -5-
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited interim consolidated financial statements, which reflect all adjustments (consisting only of normal recurring items) that management believes necessary to present fairly results of interim operations, should be read in conjunction with the Notes to Consolidated Financial Statements (including the Summary of Significant Accounting Policies) included in the Company's audited consolidated financial statements for the year ended December 31, 1995, which are included in the Company's Annual Report filed on Form 10-K for such year (the "1995 10-K"). Results of operations for interim periods are not necessarily indicative of annual results of operations. The consolidated balance sheet at December 31, 1995 was extracted from the audited annual financial statements and does not include all disclosures required by generally accepted accounting principles for annual financial statements. Certain amounts for prior periods have been reclassified to be consistent with the 1996 presentation. 2. In April 1996, the Company formed a joint venture (the "JV") with PepsiCo, Inc. whereby the JV will be the exclusive bottler and distributor of PepsiCo beverages in a large portion of central and eastern Russia, Kyrgyzstan and Kazakstan. The JV will be capitalized with equity contributions of approximately $79,000,000 by the Company and $26,500,000 by PepsiCo. As of September 30, 1996, the Company contributed $27,000,000; the balance will be funded in stages when needed by the JV. The Company has a 75% economic interest in the JV and PepsiCo owns the remaining 25%. Under the terms of the joint venture agreement, the Company and PepsiCo have equal voting rights over all significant aspects of the JV's operations. Accordingly, since the Company does not control the JV despite its larger economic interest, the Company accounts for its share of the JV's operating results under the equity method of accounting. During the nine and three month periods ended September 30, 1996 the Company recorded $9,510,000 and $6,730,000, respectively, of losses from the Company's equity interest in the JV. 3. In September 1996, the Company commenced a tender offer to purchase for cash all of the outstanding $125,000,000 aggregate principal amount of its 10 3/8% Senior Subordinated Notes due 2002 (the "10 3/8% Notes") at a price of $1,072.50 per $1,000 principal amount, plus accrued interest. To finance the tender offer, in October 1996 the Company sold $135,000,000 principal amount of its newly authorized 7 7/8% Senior Subordinated Notes due 2006 (the "7 7/8% Notes") in an underwritten public offering at 99.487% of the principal amount. As of November 6, 1996, $114,000,000 of the net proceeds of the offering were used to purchase $102,656,000 aggregate principal amount of the 10 3/8% Notes plus accrued interest through the tender offer and open market purchases. In the fourth quarter of 1996, the Company will report a pre-tax extraordinary loss on early extinguishment of these 10 3/8% Notes of approximately $10,600,000. The Company intends to retire the 10 3/8% Notes that remain outstanding either through open market purchases or through early redemption of the 10 3/8% Notes in June 1997. The refinancing of the 10 3/8% Notes will result in annual expense savings of approximately $2,600,000. 4. Earnings per common and dilutive common equivalent share were calculated by dividing net income by the sum of the weighted average number of common shares outstanding and the incremental weighted average number of shares issuable upon exercise of outstanding options and warrants for the periods they were outstanding. The number of shares used to calculate primary earnings per share amounts was 60,556,000 and 58,927,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and 60,534,000 and 59,427,000 for the three month periods ended September 30, 1996 and 1995, respectively. -6-
Fully diluted earnings per share were calculated as described above and also assumes the outstanding 5 1/4% Convertible Subordinated Debentures due 2003 had been converted into common shares and earnings increased for the interest on such debentures, net of the income tax effect. The number of shares used to calculate fully diluted earnings per share was 64,037,000 and 62,481,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and 64,022,000 and 62,984,000 for the three month periods ended September 30, 1996 and 1995, respectively. 5. Cash paid for interest and income taxes (net of refunds) was $40,842,000 and $4,335,000, respectively, for the nine month period ended September 30, 1996 and $37,138,000 and $2,221,000, respectively, for the nine month period ended September 30, 1995. -7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF INTERIM OPERATIONS. The following should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 1995 10-K. LIQUIDITY AND CAPITAL RESOURCES During the nine month periods ended September 30, 1996 and 1995, the Company operated profitably and net cash was provided from operations. During the nine month period ended September 30, 1996, the Company did not utilize its bank credit agreement facilities, except for certain minor amounts borrowed to meet daily cash requirements. In December 1995, the Company entered into an agreement with the California Department of Insurance to settle its Proposition 103 liability for $17,700,000. The settlement did not exceed reserves established in prior years. The Company paid the settlement amount during the first quarter of 1996. In April 1996, the Company formed a joint venture (the "JV") with PepsiCo, Inc. whereby the JV will be the exclusive bottler and distributor of PepsiCo beverages in a large portion of central and eastern Russia, Kyrgyzstan and Kazakstan. In return for an equity contribution of approximately $79,000,000, of which $27,000,000 was contributed as of September 30, 1996, the Company received a 75% economic interest in the JV and PepsiCo owns the remaining 25%. The remaining equity contribution will be funded in stages when needed by the JV. During the period that the JV is building production and distribution capacity and market share, the Company believes the JV will continue to experience operating losses. In addition, the Company expects that the JV will borrow funds from third party lenders to finance working capital needs and capital expenditures, including construction of bottling plants and distribution centers. In July 1996, the Company committed to invest up to $25,000,000 for a substantial equity interest in a real estate project in Brooklyn, New York, consisting of an 809,000 square foot office building, garage and Marriott hotel, which is being constructed. The Company's equity investment is expected to be contributed toward the end of the two year construction period. The Empire Group has agreed to lease approximately 286,500 square feet of the office space, for which it will receive certain benefits, primarily from the City of New York, with a present value of approximately $36,000,000. In October 1996, the Company sold $135,000,000 principal amount of its newly authorized 7 7/8% Senior Subordinated Notes due 2006 in an underwritten public offering at 99.487% of the principal amount. As of November 6, 1996, $114,000,000 of the net proceeds of the offering were used to purchase $102,656,000 aggregate principal amount of the 10 3/8% Senior Subordinated Notes due 2002 (the "10 3/8% Notes") plus accrued interest through a tender offer and in open market purchases. The Company intends to retire the 10 3/8% Notes that remain outstanding either through open market purchases or through early redemption of the 10 3/8% Notes in June 1997. In the fourth quarter of 1996, the Company will report a pre-tax extraordinary loss on early extinguishment of these 10 3/8% Notes of approximately $10,600,000. The refinancing of the 10 3/8% Notes will result in annual expense savings of approximately $2,600,000. During 1996, the Company sold certain "available for sale" securities and invested the proceeds in securities with longer duration. As more fully described in the 1995 10-K, securities classified as "available for sale" are carried at fair value with unrealized gains and losses reflected as a separate component of shareholders' equity, net of taxes. Principally as a result of increases in market interest rates during 1996, the unrealized gain on investments at the end of 1995 decreased to an unrealized loss of $9,960,000 as of September 30, 1996. While this has resulted in a decrease in shareholders' equity and book value per share, it had no effect on results of operations or cash flows. -8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF INTERIM OPERATIONS, continued. RESULTS OF OPERATIONS THE 1996 PERIODS COMPARED TO THE 1995 PERIODS Earned premium revenues of the Colonial Penn P&C Group were $368,405,000 and $363,757,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and $115,697,000 and $128,568,000 for the three month periods ended September 30, 1996 and 1995, respectively. The increase in earned premiums during the nine month period ended September 30, 1996 compared to the nine month period ended September 30, 1995 principally resulted from growth in voluntary automobile business. Earned premiums from voluntary automobile policies were 8.6% higher during the nine month period ended September 30, 1996 compared to the nine month period ended September 30, 1995, and voluntary automobile policies in force at September 30, 1996 increased 4.4% from December 31, 1995. The premium growth reflects the Group's continued ability to generate new business that exceeds lapsed business, a continuing trend that began during the first quarter of 1995. Despite the growth in voluntary automobile business, earned premium revenues decreased during the three month period ended September 30, 1996 compared to the three month period ended September 30, 1995 principally due to a retroactive reinsurance agreement on certain service business and lower assignments from state assigned risk automobile pools. Although the retroactive reinsurance agreement applicable to certain service business resulted in decreased premium revenues, operating results for the nine and three month periods ended September 30, 1996 were not materially affected by this transaction. Earned premium revenues and commissions of the Empire Group were $248,838,000 and $238,069,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and $79,925,000 and $80,727,000 for the three month periods ended September 30, 1996 and 1995, respectively. The increase in earned premiums during the nine month period ended September 30, 1996 compared to the nine month period ended September 30, 1995 principally relates to higher premium rates charged on certain lines of business, particularly related to increased minimum automobile liability coverage required by New York State in 1996, partially offset by a decrease in the number of policies in force. The Empire Group is continuing its program, which began in the fourth quarter of 1995, of raising prices to cover increased loss costs in certain lines of business and reducing volume in business lines that have not been profitable. The Company's loss ratios for its property and casualty operations were as follows: Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1996 1995 1996 1995 ---- ---- ---- ---- Loss Ratio: GAAP 89.6% 88.5% 87.7% 87.2% SAP 88.6% 85.3% 85.7% 84.5% Expense Ratio: GAAP 16.3% 16.7% 17.2% 16.1% SAP 15.3% 15.5% 15.9% 15.4% Combined Ratio: GAAP 105.9% 105.2% 104.9% 103.3% SAP 103.9% 100.8% 101.6% 99.9% -9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF INTERIM OPERATIONS, continued. The combined ratios reflect less favorable claims experience due to severe winter storms and greater aggregate catastrophe losses estimated at approximately $4,090,000 and $2,990,000 for the nine month periods ended September 30, 1996 and 1995, respectively. Additionally, the combined ratios of the Colonial Penn P&C Group increased as a result of conservative loss reserving policies on increasing levels of new voluntary automobile business and, in the first quarter of 1996, a retroactive adjustment to its New Jersey automobile pool involuntary assignment offset in part by a favorable settlement of a special risk claim. The costs incurred to acquire new business combined with the Colonial Penn P&C Group's conservative loss reserving policies, depress operating results while the business grows. The combined ratios of the Empire Group also reflect reserve strengthening in certain lines of business and for the nine month period ended September 30, 1996, an unusually high assessment from the New York State workers' compensation fund, severance benefits for certain employees and a reduction in the estimate of fees earned as a servicing carrier for the New York Public Automobile Pool and assigned risk business. The difference between the SAP and GAAP combined ratios principally reflects adjustments to SAP reinsurance reserves and, in 1996 the accounting for certain expenses which are treated differently under SAP and GAAP. Earned premium revenues of the life and health insurance operations were $133,845,000 and $125,851,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and $45,587,000 and $40,860,000 for the three month periods ended September 30, 1996 and 1995, respectively. Premium revenues and provision for insurance losses and policy benefits of the life and health operations reflect the acquisition of Providential Life Insurance Company in April 1996 and the growth of the Graded Benefit Life product, partially offset by the continued run-off of the closed block of agent sold Medicare supplement business, which had less favorable loss experience in 1996. Included in the operating results of this segment is a $3,500,000 gain in the third quarter of 1995 from the termination of a reinsurance agreement. Excluding this reinsurance gain in 1995, the segment's operating results were not materially different in the 1996 periods compared to the 1995 periods. Manufacturing revenues decreased in the 1996 periods principally due to the sale of a division, the closing of a factory and the discontinuance of certain non-performing product lines, during 1996 and 1995. Pre-tax results for this segment improved in the 1996 periods compared to the 1995 periods primarily due to manufacturing and operating efficiencies. In addition, during the nine month period ended September 30, 1996, the Company recorded charges of $3,260,000 related to the sale and shutdown of three divisions. Exclusive of these charges, this segment was profitable in the nine month period ended September 30, 1996. During the third quarter of 1995, the Company sold a division and recognized a loss of approximately $1,100,000. Finance revenues and operating profits reflect the level of consumer instalment loans. Such loans approximated $239,824,000 at September 30, 1996 and $278,391,000 at December 31, 1995. The decline in operating profit in the 1996 periods compared to the 1995 periods also reflects greater losses on automobile loans and increased interest expense on customer banking deposits. The Company has continued to experience increased competition in its automobile lending business resulting in reduced volume and increased loan losses. The Company has tightened its underwriting standards in an effort to improve its loan loss experience. In addition, the Company has implemented changes to its automobile lending program to preserve its presence in the marketplace. The Company is unable to predict if these changes will improve its ability to generate increased loan volume on a profitable basis. Investment and other income increased in the 1996 periods compared to the 1995 periods principally due to higher yields, a $5,500,000 gain related to the settlement of certain litigation during the third quarter of 1996, a gain of approximately $1,500,000 from the sale of its subsidiary, Transportation Capital Corp. in the nine month period ended September 30, 1996, and increased gains from sales of real estate properties. In the nine month period ended September 30, 1995, the Company recorded a gain, net of expenses, of approximately $3,800,000 related to the settlement of certain litigation. -10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF INTERIM OPERATIONS, continued. Equity in losses of associated companies primarily reflects recognition of losses for the nine and three month periods ended September 30, 1996 from the Company's equity investments in the PepsiCo JV of approximately $9,510,000 and $6,730,000, respectively, MK Gold Company of approximately $5,820,000 and $1,900,000, respectively, and a write-off of $6,540,000 representing the Company's investment in an unsuccessful well drilled by its Siberian oil exploration joint venture (all in the third quarter). The Company's equity in the earnings of Caja de Ahorro y Seguro S.A. for the nine and three month periods ended September 30, 1996 and 1995 were not material. Net securities gains were $34,658,000 and $11,559,000 for the nine month period ended September 30, 1996 and 1995, respectively, and $23,083,000 and $11,787,000 for the three month periods ended September 30, 1996 and 1995, respectively. Principally during the third quarter of 1996, the Company sold its interest in Rockefeller Center Properties, Inc. and recorded a gain of $8,440,000. Additionally, net securities gains for the third quarter of 1996 include a $5,660,000 gain on the sale of a Jordan Associated Company. Net securities gains for 1995 include a $8,152,000 gain (principally in the third quarter) on the sale of the Company's interest in Washington Mutual, Inc. The increase in selling, general and other expenses in the nine month period ended September 30, 1996 compared to the nine month period ended September 30, 1995 principally reflects the loss on disposal of certain manufacturing divisions discussed above and recognition of $4,000,000 of excess trading stamp liability in the nine month period ended September 30, 1995. The 1996 and 1995 provisions for income taxes reflect reductions resulting from the resolution of certain federal income tax contingencies and, for the nine month period ended September 30, 1995, a reduction for the favorable resolution of a state tax matter. The number of shares used to calculate primary earnings per share amounts was 60,556,000 and 58,927,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and 60,534,000 and 59,427,000 for the three month periods ended September 30, 1996 and 1995, respectively. The number of shares used to calculate fully diluted earnings per share amounts was 64,037,000 and 62,481,000 for the nine month periods ended September 30, 1996 and 1995, respectively, and 64,022,000 and 62,984,000 for the three month periods ended September 30, 1996 and 1995, respectively. The change in the number of shares utilized in calculating per share amounts was principally related to the sale of common shares in an underwritten public offering in September 1995. -11-
PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. A) EXHIBITS. 27 Financial Data Schedule. B) REPORTS ON FORM 8-K. None -12-
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LEUCADIA NATIONAL CORPORATION (Registrant) Date: November 13, 1996 By: /s/ Barbara L. Lowenthal -------------------------------- Barbara L. Lowenthal Vice President and Comptroller (Chief Accounting Officer) -13-
EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule. -14-