<PAGE>
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 March 31, 1994
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 Identification
Incorporation or Organization) No.)
315 Park Avenue South
New York, New York 10010-3607
(212) 460-1900
- - ---------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
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 Section 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 May 6,
1994: 27,973,623.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1994 and December 31, 1993
(Dollars in thousands, except par value)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- - ------
Investments:
Available for sale (aggregate cost of
$2,385,158 and $2,447,180) $2,384,367 $2,524,493
Trading securities (aggregate cost of
$39,409 and $40,578) 38,630 41,984
Held to maturity (aggregate market value
of $76,270 and $77,243) 75,711 74,796
Policyholder loans 17,954 18,138
Other long-term investments, including
accrued interest income 31,841 38,559
---------- ----------
Total investments 2,548,503 2,697,970
Cash and short-term investments 342,292 291,414
Reinsurance receivable, net 445,623 462,671
Trade, notes and other receivables, net 461,976 390,394
Prepaids and other assets 160,847 161,441
Property, equipment and leasehold
improvements, net 99,392 99,741
Deferred policy acquisition costs
and value of insurance in force 60,394 55,410
Deferred income taxes 137,675 114,001
Separate and variable accounts 355,010 335,357
Investments in associated companies 85,684 80,873
---------- ----------
Total $4,697,396 $4,689,272
========== ==========
LIABILITIES
- - -----------
Customer banking deposits $ 170,904 $ 173,365
Trade payables and expense accruals 162,164 164,533
Other liabilities 131,242 110,396
Income taxes payable 39,430 40,378
Policy reserves 2,101,631 2,105,408
Unearned premiums 402,515 380,260
Separate and variable accounts 354,355 334,636
Liability for unredeemed trading stamps 54,159 58,541
Debt, including current maturities 396,426 401,335
---------- ----------
Total liabilities 3,812,826 3,768,852
---------- ----------
Minority interest 12,064 12,564
---------- ----------
SHAREHOLDERS' EQUITY
- - --------------------
Common shares, par value $1 per share,
authorized 150,000,000 shares; 27,948,823
and 27,897,023 shares issued and
outstanding, after deducting 30,261,364
and 30,260,664 shares held in treasury 27,949 27,897
Additional paid-in capital 125,452 125,013
Net unrealized gain (loss) on investments (148) 49,912
Retained earnings 719,253 705,034
---------- ----------
Total shareholders' equity 872,506 907,856
---------- ----------
Total $4,697,396 $4,689,272
========== ==========
</TABLE>
See notes to interim consolidated financial statements.
-2-<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 1994 and 1993
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues:
Insurance revenues and commissions $217,583 $221,537
Manufacturing 46,650 44,599
Trading stamps 5,207 6,704
Finance 9,670 7,507
Investment and other income 58,465 66,769
Net securities gains (losses) (1,467) 12,970
-------- --------
336,108 360,086
-------- --------
Expenses:
Provision for insurance losses and policy benefits 207,993 205,013
Insurance commissions 719 1,011
Cost of goods sold:
Manufacturing 32,489 30,805
Trading stamps 55 701
Interest 10,771 9,176
Salaries 20,927 20,997
Selling, general and other expenses 40,878 50,760
Minority interest 242 477
-------- --------
314,074 318,940
-------- --------
Income before income taxes and cumulative
effects of changes in accounting principles 22,034 41,146
-------- --------
Provision for income taxes:
Currently payable 3,931 3,205
Applied to deferred taxes 3,884 12,089
-------- --------
7,815 15,294
-------- --------
Income before cumulative effects of
changes in accounting principles 14,219 25,852
Cumulative effects of changes in accounting principles - 129,195
-------- --------
Net income $ 14,219 $155,047
======== ========
Earnings per common and dilutive common equivalent share:
Income before cumulative effects of changes
in accounting principles $.49 $ .88
Cumulative effects of changes in accounting principles - 4.37
---- -----
Net income $.49 $5.25
==== =====
Fully diluted earnings per common share:
Income before cumulative effects of changes
in accounting principles $.49 $ .87
Cumulative effects of changes in accounting principles - 4.25
---- -----
Net income $.49 $5.12
==== =====
</TABLE>
See notes to interim consolidated financial statements.
-3-<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1994 and 1993
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net cash flows from operating activities:
- - ----------------------------------------
Net income $ 14,219 $ 155,047
Adjustments to reconcile net income to net
cash provided by operations:
Cumulative effects of changes in accounting principles - (129,195)
Reduction of SFAS 109 deferred tax asset, principally
the benefit from utilization of tax loss carryforwards 3,884 12,089
Depreciation and amortization of property,
equipment and leasehold improvements 4,246 4,068
Other amortization 23,961 21,198
Provision for doubtful accounts 2,869 2,129
Net securities (gains) losses 1,467 (12,970)
Equity in losses of associated companies 2,765 845
(Gain) related to El Salvador government bonds receivable (8,458) -
Purchases of investments classified as trading (24,340) -
Proceeds from sales of investments classified as trading 26,371 -
Net change in reinsurance receivable 17,048 15,870
Net change in trade, notes and other receivables (44,019) (49,705)
Net change in prepaids and other assets (13,084) (14,187)
Deferred policy acquisition costs incurred and deferred (25,863) (21,981)
Net change in trade payables and expense accruals (3,908) 2,806
Net change in other liabilities 20,317 14,649
Net change in income taxes (908) (2,576)
Net change in policy reserves 1,550 (21,652)
Net change in unearned premiums 22,255 33,021
Decrease in liability for unredeemed trading stamps (4,382) (3,202)
Minority interest 242 477
Other 532 (1,277)
--------- ---------
Net cash provided by operating activities 16,764 5,454
--------- ---------
Net cash flows from investing activities:
- - ----------------------------------------
Acquisition of property, equipment and
leasehold improvements (4,705) (4,103)
Proceeds from disposals of property,
equipment and leasehold improvements 931 1,168
Advances on loan receivables (38,709) (30,012)
Principal collections on loan receivables 30,876 26,988
Purchases of investments (other than short-term) (295,293) (637,688)
Proceeds from maturities of investments 123,026 81,108
Proceeds from sales of investments 230,675 219,012
-------- ---------
Net cash provided by (used for) investing activities 46,801 (343,527)
-------- ---------
Net cash flows from financing activities:
- - ----------------------------------------
Net change in credit agreement and other
short-term borrowings (340) (1,742)
Net change in customer banking deposits (2,386) (43)
Net change in policyholder account balances (5,327) (66,515)
Issuance of long-term debt, net of issuance costs - 96,786
Reduction of long-term debt (4,604) (722)
Purchase of common shares for treasury (30) (526)
-------- ---------
Net cash provided by (used for) financing activities (12,687) 27,238
-------- ---------
Net increase (decrease) in cash and
short-term investments 50,878 (310,835)
Cash and short-term investments at January 1, 291,414 670,599
-------- ---------
Cash and short-term investments at March 31, $ 342,292 $ 359,764
========= =========
</TABLE>
See notes to interim consolidated financial statements.
-4-<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended March 31, 1994 and 1993
(Dollars in thousands, except par value)
(Unaudited)
<TABLE>
<CAPTION>
Net
Common Unrealized
Shares Additional Gain
$1 Par Paid-In (Loss) on Retained
Value Capital Investments Earnings Total
------ ---------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $27,945 $123,656 $ 9 $466,551 $618,161
Exercise of options to
purchase common shares 98 825 923
Purchase of stock for
treasury (12) (514) (526)
Net change in unrealized
gain (loss) on investments 206 206
Income tax benefit related
to warrant and option
transactions recognized
upon adoption of SFAS 109 9,410 9,410
Net income 155,047 155,047
------- -------- -------- -------- --------
Balance, March 31, 1993 $28,031 $133,377 $ 215 $621,598 $783,221
======= ======== ======== ======== ========
Balance, January 1, 1994 $27,897 $125,013 $ 49,912 $705,034 $907,856
Exercise of options to
purchase common shares 53 468 521
Purchase of stock for
treasury (1) (29) (30)
Net change in unrealized
gain (loss) on investments (50,060) (50,060)
Net income 14,219 14,219
------- -------- -------- -------- --------
Balance, March 31, 1994 $27,949 $125,452 $ (148) $719,253 $872,506
======= ======== ======== ======== ========
</TABLE>
See notes to interim consolidated financial statements.
-5-<PAGE>
<PAGE>
LEUCADIA NATIONAL CORPORATION
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, 1993, which are included in the Company's
Annual Report filed on Form 10-K for such year (the "1993 10-K").
Results of operations for interim periods are not necessarily
indicative of annual results of operations. The consolidated
balance sheet at December 31, 1993 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 1994 presentation.
2. As more fully described in the 1993 10-K, the results of the most
recent statistical studies of trading stamp redemptions indicate
that the recorded liability for unredeemed trading stamps is in
excess of the amount that ultimately will be required to redeem
trading stamps outstanding. Although the Company believes a
significant change in redemption patterns has occurred, the amount
of the excess may be different than is indicated by these studies.
Accordingly, the Company is amortizing the aggregate apparent
excess over a five year period. The amount of amortization of
such apparent excess, which is reflected in results of operations
in the caption "Cost of goods sold," was approximately $3,000,000
for each of the three month periods ended March 31, 1994 and 1993.
Based on the latest studies, the unamortized apparent excess at
March 31, 1994 was approximately $14,140,000. The Company
provided the liability for unredeemed trading stamps based on the
estimate that approximately 75% of stamps issued during the three
month periods ended March 31, 1994 and 1993 ultimately will be
redeemed.
3. In March 1993, in settlement of claims related to El Salvador's
1986 seizure of the assets of Compania de Alumbrado Electrico de
San Salvador, S.A. ("CAESS"), the Company received cash of
approximately $5,300,000 and approximately $12,000,000 principal
amount of 6% U.S. dollar denominated El Salvador Government bonds
due in instalments through 1996. The Company has recognized the
gain on the cash basis. During the first quarter of 1994, the
Company disposed of the remaining bonds and reported a pre-tax
gain of approximately $8,458,000, which gain is included in the
caption "Investment and other income." Gains recognized in 1993
were not significant.
4. During the first quarter of 1994, the Company agreed to acquire a
30% interest in Caja de Ahorro y Seguro S.A. ("Caja") for a
preliminary purchase price (subject to audit adjustment) of
approximately $46,000,000, including costs. Caja is a holding
company whose subsidiaries are engaged in property and casualty
insurance, life insurance and banking in Argentina. Caja has
(unaudited) assets in excess of approximately $500,000,000.
Reliable historical operating data for Caja is not available. The
acquisition closed in April 1994. The Company believes that Caja
will not constitute a "significant subsidiary."
5. During 1992, the Company concluded that the profitability of its
existing block of single premium deferred annuity ("SPDA")
business was unlikely to achieve acceptable operating results in
the future. Accordingly, principally starting in the fourth
quarter of 1992, the Company offered certain of its existing SPDA
policyholders the opportunity to exchange their policies for SPDA
policies of an unrelated insurer and entered into a
-6-<PAGE>
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
reinsurance agreement (which closed in stages in 1992 and 1993) to
reinsure certain blocks of SPDA business with a second unrelated
insurer. In connection with the 1993 SPDA closing (which involved
reinsurance of policies with account balances of approximately
$47,187,000 on the date of closing in 1993) there was no
significant net gain or loss. The Company is maximizing the
return on any remaining SPDA policies by reducing crediting rates
to the minimum permitted. As a result, the Company believes a
substantial portion of the remaining SPDA policyholders will
terminate their policies over a period of time.
6. Effective as of January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"), Statement of Financial Accounting Standards
No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions" ("SFAS 106"), Statement of Financial Accounting
Standards No. 112 "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"), Statement of Financial Accounting
Standards No. 113 "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts" ("SFAS 113") and
Financial Accounting Standards Board's Emerging Issues Task Force
Consensus No. 93-6 "Accounting for Multiple-Year Retrospectively
Rated Contracts by Ceding and Assuming Enterprises" ("EITF 93-6").
As a result of adoption of SFAS 109, SFAS 106, SFAS 112 and EITF
93-6, the cumulative effects of such changes through January 1,
1993 were recorded as of the date of adoption and were principally
reflected in results of operations as "Cumulative effects of
changes in accounting principles." In addition, as a result of
adoption of SFAS 109, certain acquired intangibles were reduced
(for benefits of acquired tax loss carryforwards) and
shareholders' equity was directly increased (as a result of prior
stock transactions).
A summary of the amounts included in cumulative effects of changes
in accounting principles and related per share amounts, for the
three month period ended March 31, 1993 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Per Share
Amount Primary Fully Diluted
------ ------- -------------
<S> <C> <C> <C>
SFAS 109 $127,152 $4.31 $4.18
SFAS 106, less income taxes
of $2,298 (4,461) (.15) (.15)
SFAS 112, less income taxes
of $1,632 (3,168) (.11) (.10)
EITF 93-6, less income taxes
of $4,982 9,672 .32 .32
-------- ---- -----
$129,195 $4.37 $4.25
======== ===== =====
</TABLE>
7. 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 29,146,000 for 1994 and 29,514,000
for 1993.
-7-<PAGE>
<PAGE>
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
Fully diluted earnings per share was calculated as described above
and, for 1993, also assumes the outstanding 5 1/4% Convertible
Subordinated Debentures due 2003 had been converted into Common
Shares for the period they were outstanding and earnings increased
for the interest on such debentures, net of the income tax effect.
Conversion was not assumed for the 1994 period since the effect of
such assumed conversion would have been to increase earnings per
share. The number of shares used to calculate fully diluted
earnings per share was 29,146,000 for 1994 and 30,383,000 for
1993.
8. Cash paid for interest and income taxes (net of refunds) was
$13,405,000 and $4,944,000, respectively, for the three month
period ended March 31, 1994 and $7,741,000 and $5,740,000,
respectively, for the three month period ended March 31, 1993.
-8-<PAGE>
<PAGE>
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 1993 10-K.
Liquidity and Capital Resources
--------------------------------
During each of the three month periods ended March 31, 1994 and 1993,
the Company operated profitably and net cash was provided from
operations.
During the first quarter of 1994, the Company did not utilize its bank
Credit Agreement facilities, except for certain minor amounts borrowed
to meet daily cash requirements.
In March 1993, in settlement of claims related to El Salvador's 1986
seizure of CAESS's assets, the Company received cash of approximately
$5,300,000 and approximately $12,000,000 principal amount of 6% U.S.
dollar denominated El Salvador Government bonds due in instalments
through 1996. During the first quarter of 1994, the Company disposed
of the remaining bonds for cash and a pre-tax gain of approximately
$8,458,000.
During the first quarter of 1994, the Company agreed to acquire a 30%
interest in Caja for a preliminary purchase price (subject to audit
adjustment) of approximately $46,000,000, including costs. Caja is a
holding company whose subsidiaries are engaged in property and
casualty insurance, life insurance and banking in Argentina. Caja has
(unaudited) assets in excess of approximately $500,000,000. Reliable
historical operating data for Caja is not available. The acquisition
closed in April 1994. The Company believes that Caja will not
constitute a "significant subsidiary."
As more fully described in the 1993 10-K, as of December 31, 1993 the
Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities,"
which requires securities classified as "available for sale" to be
carried at market value with the corresponding adjustment reflected
directly in shareholders' equity. Principally as a result of
increases in market interest rates during 1994, the unrealized gain on
investments at the end of 1993 became an unrealized loss of $148,000
as of March 31, 1994. While this has resulted in a reduction in
shareholders' equity, it had no effect on cash flows. Further, the
Company believes that the high quality and relatively short duration
of its investment portfolios will enable it to take advantage of
higher interest rates and suffer relatively smaller reductions in
aggregate market value than others in its industries.
New Jersey's insurance laws require all automobile insurers to share
in the losses of the newly established successor (the "MTF") to its
insurance pool for high risk drivers (the "JUA") based on their
depopulation share of the JUA, as set by the New Jersey Department of
Insurance. Although the amount of the MTF deficit has not yet been
finalized, based on certain current estimates of the MTF deficit
(which are subject to change), the Colonial Penn property and casualty
group, subsidiaries of the Company, would be assessed approximately
$15,800,000. In February 1994, the Colonial Penn property and
casualty group paid approximately $5,300,000 of this possible
assessment into a court mandated escrow account. While the New Jersey
Insurance Department has adopted regulations which would permit an
insurer, with the approval of the Insurance Department, to recover
amounts paid to the MTF through surcharges to policyholders, there can
be no assurance that the Colonial Penn
-9-<PAGE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Interim Operations, continued
-----------------------------
property and casualty group would be permitted to surcharge its
policyholders for all or even part of any future deficit assessment.
The Colonial Penn property and casualty group had previously provided
for its portion of the MTF loss.
Results of Operations
----------------------
Three Months Ended March 31, 1994 Compared to the Three Months Ended
---------------------------------------------------------------------
March 31, 1993
---------------
Earned premium revenues of the property and casualty insurance
operations were approximately $174,382,000 and $174,784,000 for the
three month periods ended March 31, 1994 and 1993, respectively. The
decrease reflects a decline in premium levels applicable to the
Colonial Penn property and casualty insurance group offset in part by
increases in certain premium rates and increased premium volume
applicable to the Empire Insurance Group. The decline in earned
premiums of the Colonial Penn property and casualty insurance
operations was anticipated. The Company believes its present
marketing efforts have resulted in new business which to some degree
offsets the normal attrition of existing business at Colonial Penn.
The Company believes it is likely that new business generated will be
greater than business lost through normal attrition by the end of
1994, although there can be no assurance that this will be achieved.
Earned premium revenues of the life and health insurance operations
were approximately $43,201,000 and $46,753,000 for the three month
periods ended March 31, 1994 and 1993, respectively. The decrease in
earned premium revenues principally results from the run-off of the
agent sold medicare supplement business, which the Company ceased
marketing at December 31, 1992 due to inadequate profitability.
Manufacturing revenues increased in the first quarter of 1994 compared
to the first quarter of 1993, principally at the divisions selling
padding, absorbent and erosion control products, electrical products
and commercial office furnishings and acoustical products.
Trading stamp revenues decreased in the 1994 period compared to the
1993 period principally due to reduced demand from existing customers.
Finance revenues reflect the level of consumer instalment loans. As
more fully described in the 1993 10-K, based on its experience in
providing collateralized automobile loans to individuals with poor
credit histories, the Company concluded that there were excellent
opportunities for successful expansion of this business. Accordingly,
on a controlled basis the Company is increasing its investments in
such loans. Such loans approximated $84,918,000 at March 31, 1994 and
$73,321,000 at December 31, 1993.
Investment and other income decreased in the first quarter of 1994
compared to the first quarter of 1993. The decrease was the result of
a lower level of investments due to the disposition of certain life
insurance product lines and lower available interest rates.
Investment and other income for the 1993 period includes revenues
related to the Company's former motivation subsidiary, whose net
assets were transferred to a new joint venture in early 1993, in
exchange for a 45% equity interest in the joint venture. Investment
and other income for the 1994 period includes approximately $8,458,000
related to the disposition of the El Salvador government bonds
receivable, as described more fully above.
Net securities gains (losses) were ($1,467,000) for the first quarter
of 1994 compared to $12,970,000 for the first quarter of 1993.
Included in the 1994
-10-<PAGE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Interim Operations, continued
-----------------------------
period are provisions for write-downs of investments of approximately
$3,568,000.
Provision for insurance losses and policy benefits of the life and
health operations decreased in 1994 compared to 1993 principally due
to lower earned premiums and insurance in force (including the single
premium whole life business that was sold in June 1993).
The Company's loss ratios for its property and casualty operations
were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Loss Ratio:
GAAP 88.9% 78.2%
SAP 88.9% 77.2%
Expense Ratio:
GAAP 17.1% 21.8%
SAP 16.2% 17.4%
Combined Ratio:
GAAP 106.0% 100.0%
SAP 105.1% 94.6%
</TABLE>
The provision for insurance losses and policy benefits includes
aggregate catastrophe losses and related loss adjustment expenses
estimated at approximately $15,950,000 (including approximately
$10,900,000 related to the California earthquake) and $9,400,000 for
the three month periods ended March 31, 1994 and 1993, respectively.
The increase in catastrophe losses in 1994 as compared to 1993
accounted for approximately 36% of the increase in the GAAP loss
ratio. In addition, the loss experience of Colonial Penn's automobile
insurance business in the 1993 period reflects lower frequency of
claims and settlement of prior years claims at amounts less than had
been provided.
The increase in manufacturing cost of goods sold in the first quarter
of 1994 compared to the similar period ended in 1993 principally
reflects the increase in manufacturing sales. Pre-tax income related
to the manufacturing operations was not materially different for the
1994 and 1993 periods.
Cost of goods sold applicable to the trading stamp operations in each
period reflects amortization of the apparent excess in the liability
for unredeemed trading stamps of approximately $3,000,000. The
Company provided the liability for unredeemed trading stamps based on
the estimate that approximately 75% of trading stamps issued in 1994
and 1993 ultimately will be redeemed.
Interest expense increased in the three month period ended March 31,
1994 compared to the three month period ended March 31, 1993.
Interest expense principally reflects the increased level of
borrowings resulting from the sale of $200,000,000 of new debt during
1993.
In the 1993 period, selling, general and other expenses included
expenses related to the Company's former motivation subsidiary which,
as described above, was contributed to a joint venture in early 1993.
The 1993 period includes cumulative effects of changes in accounting
principles of $129,195,000, as more fully described in Notes to
Interim Consolidated Financial Statements.
-11-<PAGE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Interim Operations, continued
-----------------------------
The number of shares used to calculate primary earnings per share
amounts was 29,146,000 for 1994 and 29,514,000 for 1993. The number
of shares used to calculate fully diluted earnings per share amounts
was 29,146,000 for 1994 and 30,383,000 for 1993. The decrease in the
number of shares utilized in calculating per share amounts was
principally caused by the decrease in the market price of the
Company's common stock. In addition, for fully diluted per share
amounts, the 5 1/4% Convertible Subordinated Debentures due 2003 were
not assumed to have been converted in 1994 since the effect of such
assumed conversion would have been to increase earnings per share.
-12-<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
Phlcorp Tender Offer:
As described more fully in the 1993 10-K, a class action
complaint was pending against the Company and others in
connection with the Company's tender offer to purchase up to
5,200,000 common shares of PHLCORP, Inc., which expired in
February 1988.
The parties to this action have entered into a settlement
agreement, which, on April 29, 1994, after notice and hearing,
was approved by the Court. The settlement will have no
material effect on the Company.
Item 6. Exhibits and Reports on Form 8-K.
-----------------------------------
a) Exhibits:
NONE
b) Reports on Form 8-K:
NONE
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<PAGE>
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: May 12, 1994 By /s/ Joseph A. Orlando
--------------------------
Joseph A. Orlando
Vice President and Comptroller
(Principal Financial and
Accounting Officer)
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