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.
<PAGE>
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-
<PAGE>
<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-
<PAGE>
<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-
<PAGE>
<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-
<PAGE>
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-
<PAGE>
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-
<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
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<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: November 13, 1996 By: /s/ Barbara L. Lowenthal
--------------------------------
Barbara L. Lowenthal
Vice President and Comptroller
(Chief Accounting Officer)
-13-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule.
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 428,626
<SECURITIES> 2,717,376
<RECEIVABLES> 755,573
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 101,485
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,168,070
<CURRENT-LIABILITIES> 0
<BONDS> 494,332
0
0
<COMMON> 60,346
<OTHER-SE> 1,060,007
<TOTAL-LIABILITY-AND-EQUITY> 5,168,070
<SALES> 114,555
<TOTAL-REVENUES> 1,140,935
<CGS> 83,295
<TOTAL-COSTS> 801,950
<OTHER-EXPENSES> 228,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,638
<INCOME-PRETAX> 69,469
<INCOME-TAX> 21,510
<INCOME-CONTINUING> 47,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,959
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
