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Leucadia 2013 Earnings Down, Stake up in HomeFed

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Leucadia National Corporation posted disappointing financial results for 2013 on Feb 28. In fourth-quarter 2013, earnings per share from continuing operations were 1 cent versus $1.85 recorded in the year-ago quarter.

In 2013, net income fell 56.8% year over year to $369.2 million compared with $854.5 million in 2012. Earnings per share from continuing operations were $1.06, way below $3.53 recorded in 2012.   


Leucadia generated net revenue of $2,921.9 million in the fourth quarter of 2013, up 5.3% year over year. In 2013, revenues were $10,429.5 million, up 10.9% year over year.
The company reports its revenue results under four heads, the results of which are briefly discussed below.
Revenues generated from the Beef Processing Services segment were $7.5 billion, accounting for 71.8% of total revenue in 2013. Investment Banking & Capital Markets, the segment created after the merger with Jefferies in Mar 2013, generated $2.1 billion in revenues, roughly 20.5% of total revenue.

Leucadia’s Other Operations segment consists of manufacturing, energy projects, asset management and real estate businesses. Revenues generated were $347.3 million in 2013 versus $333.4 million in 2012. Revenues from the Corporate segment were $460.5 million, down compared with $1,591.0 million in 2012.

Expenses incurred by Leucadia in 2013 were $10,076.5 million, up 24.8% year over year and represented 96.6% of total revenue. Of total expenses, cost of sales accounted for 75.1% while selling, general and other expenses represented 7.5%. Compensation and benefits paid in the quarter amounted to $1,352.7 million.
Balance Sheet

Exiting fourth-quarter 2013, Leucadia had cash and cash equivalents balance of $3,907.6 million, down compared with $4,410.1 in the preceding quarter. Long-term debt increased to $8,180.9 million versus $7,559.5 million at the end of third-quarter 2013.

Cash Flow

Leucadia generated net cash flow from operating activities of $702.3 million, up compared with $645.4 million in 2012. Capital spending on property, equipment and leasehold more than doubled to $166.1 million from $79.0 million in 2012. In 2013, Leucadia paid dividends totaling $91.3 million.

Concurrent with the financial results, Leucadia announced having received its board of directors’ approval for payment of a quarterly cash dividend of $0.0625 per share on Mar 28 to shareholders of record as on Mar 17.

Also, Leucadia announced to have signed an agreement with HomeFed Corporation to sell certain of its real estate properties and investments in an associated company to the latter. These along with $18.4 million cash — total worth being $178.5 million as on Dec 31, 2013 — will be exchanged with HomeFed’s 7.5 million common shares.

The transaction, expected to close in first-quarter 2014, will increase Leucadia’s holding in HomeFed from 31% to 65%. HomeFed Corporation primarily invests in and develops residential real estate projects in California.

Leucadia currently has $10.2 billion market capitalization. The company primarily engages in beef processing, manufacturing, real estate activities and various other investment-related activities in the United States.
Other major players in the diversified operations industry include Noble Group Limited and 3M Company (MMM - Free Report) . While Noble Group carries a Zacks Rank #1 (Strong Buy), 3M Company has a Zacks Rank #2 (Buy).

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