The Company
The Company is a diversified holding company engaged in a variety of businesses, including manufacturing, telecommunications, land based contract oil and gas drilling, property management and services, gaming entertainment, real estate activities, medical product development and winery operations. The Company also has significant
investments in the common stock of two public companies that are accounted for at fair value, one of which is a full service investment bank and the other an independent auto finance company. The Company also owns equity interests in operating businesses and investment partnerships which are accounted for under the equity method of accounting, including a broker-dealer engaged in making markets and trading of high yield and special situation securities and an operating copper mine in Spain. The
Company concentrates on return on investment and cash flow to maximize long-term shareholder value. Additionally, the Company continuously evaluates the retention and disposition of its existing operations and investigates possible acquisitions of new businesses. In identifying possible acquisitions, the Company tends to seek assets and companies that are out of favor or troubled and, as a result, are selling substantially below the values the Company believes to be present.
The worldwide recession, turmoil in public securities markets and lack of liquidity in the credit markets have put a strain on many businesses and caused great uncertainty about asset values in nearly all industry sectors. If these economic and market conditions continue for some time, the Company expects that some extraordinary
investment opportunities will be available. However, it also expects that financing these investment opportunities may be difficult. The Company has available liquidity on its balance sheet and could dispose of existing businesses or investments if additional internal liquidity is needed to take advantage of investment opportunities. Although no assurance can be given that the Company will be successful in acquiring new businesses, making new investments or in raising sufficient
capital for any such opportunities, the Company does intend to pursue those opportunities that it considers to be the most compelling.
Shareholders’ equity has grown from a deficit of $7,700,000 at December 31, 1978 (prior to the acquisition of a controlling interest in the Company by the Company’s Chairman and President), to a positive shareholders’ equity of $4,361,600,000 at December 31, 2009, equal to a book value per common share of the Company
(a “common share”) of negative $.04 at December 31, 1978 and $17.93 at December 31, 2009. Shareholders’ equity and book value per share amounts have been reduced by the $811,900,000 special cash dividend paid in 1999.
In December 2009, Berkadia Commercial Mortgage LLC (“Berkadia”), a joint venture between Berkshire Hathaway Inc. (“Berkshire Hathaway”) and the Company, acquired the North American commercial mortgage origination and servicing business of Capmark Financial Group Inc. (“Capmark”). The Company
and Berkshire Hathaway each have a 50% equity interest in Berkadia, and each party contributed $217,200,000 of equity capital.
The Company’s manufacturing operations are conducted through Idaho Timber, LLC (“Idaho Timber”) and Conwed Plastics, LLC (“Conwed Plastics”). Acquired in May 2005, Idaho Timber is headquartered in Boise, Idaho and primarily remanufactures dimension lumber and remanufactures, packages and/or produces
other specialized wood products. Conwed Plastics manufactures and markets lightweight plastic netting used for a variety of purposes including, among other things, building and construction, erosion control, packaging, agricultural, carpet padding, filtration and consumer products.
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The Company’s telecommunications operations are conducted through its 75% owned subsidiary, STi Prepaid, LLC (“STi Prepaid”), which acquired the assets of Telco Group, Inc. and its affiliates (“Telco”) in March 2007. STi Prepaid is a provider of international prepaid phone cards and other telecommunications
services in the U.S.
The Company’s land based contract oil and gas drilling operations are conducted by Keen Energy Services, LLC (“Keen”), formerly known as Goober Drilling, LLC. In November 2009,
the Company acquired the remaining equity interests in Keen that it did not previously own and Keen became a consolidated subsidiary.
The Company’s property management and services operations are conducted through ResortQuest International, Inc. (“ResortQuest”). Acquired in June 2007, ResortQuest is engaged in offering property management and other services to vacation properties in beach and mountain resort locations in the continental U.S.
The Company’s gaming entertainment operations are conducted through its controlling interest in Premier Entertainment Biloxi, LLC (“Premier”), which is the owner of the Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”), located in Biloxi, Mississippi.
The Company’s domestic real estate operations include a mixture of commercial properties, residential land development projects and other unimproved land, all in various stages of development.
The Company’s medical product development operation is conducted through Sangart, Inc. (“Sangart”), which became a majority-owned subsidiary in 2005. Sangart is developing a product called MP4OX, formerly known as Hemospan®, which is a solution of cell-free hemoglobin administered intravenously to provide
rapid oxygen delivery to oxygen deprived tissues.
The Company’s winery operations consist of Pine Ridge Vineyards in Napa Valley, California, Archery Summit in the Willamette Valley of Oregon, Chamisal Vineyards in the Edna Valley of California and a vineyard development project in the Columbia Valley of Washington. The wineries primarily produce and sell wines in the
premium, ultra premium and luxury segments of the premium table wine market.
The Company owns approximately 25% of the outstanding common shares of AmeriCredit Corp. (“ACF”), a company listed on the New York Stock Exchange, Inc. (“NYSE”) (Symbol: ACF). ACF is an independent auto finance company that is in the business of purchasing and servicing automobile sales finance contracts,
historically for consumers who are typically unable to obtain financing from other sources. The Company accounts for its investment in ACF at fair value, which was $639,800,000 at December 31, 2009 market prices; unrealized gains or losses are reflected in the Company’s consolidated statements of operations.
The Company owns approximately 29% of the outstanding common shares of Jefferies Group, Inc. (“Jefferies”), a company listed on the NYSE (Symbol: JEF). Jefferies is a full-service global investment bank and institutional securities firm serving companies and their investors. The Company accounts for its investment
in Jefferies at fair value, which was $1,152,900,000 at December 31, 2009 market prices; unrealized gains or losses are reflected in the Company’s consolidated statements of operations.
In 2007, the Company and Jefferies expanded and restructured the Company’s equity investment in Jefferies Partners Opportunity Fund II, LLC (“JPOF II”) and formed Jefferies High Yield Holdings, LLC (“JHYH”). Through its wholly-owned subsidiary, JHYH makes markets in high yield and special situation
securities and provides research coverage on these types of securities.
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The Company owns 30% of Cobre Las Cruces, S.A. (“CLC”), a former subsidiary of the Company that owns the Las Cruces copper mine in the Pyrite Belt of Spain. During 2005, the Company sold a 70% interest in CLC to Inmet Mining Corporation (“Inmet”), a Canadian-based global mining company, in exchange for
5,600,000 newly issued Inmet common shares, representing approximately 9.98% of Inmet’s current outstanding common shares. CLC is currently producing copper cathode and expects to reach commercial production (approximately 60% of design capacity) in May 2010. The market value of the Inmet common shares was $339,100,000 at December 31, 2009.
In August 2006, pursuant to a subscription agreement with Fortescue Metals Group Ltd (“Fortescue”) and its subsidiary, FMG Chichester Pty Ltd (“FMG”), the Company invested in Fortescue’s Pilbara iron ore and infrastructure project in Western Australia. Fortescue is a publicly traded company on the
Australian Stock Exchange (Symbol: FMG); after considering the sale of 30,000,000 common shares for net cash proceeds of $121,500,000 during the first quarter of 2010, the Company currently owns 247,986,000 common shares of Fortescue (approximately 8% of the outstanding shares). The Company also owns a $100,000,000 note of FMG that matures in August 2019; interest on the note is calculated as 4% of the revenue, net of government royalties, invoiced from the iron ore produced from two specified
project areas. The market value of the Fortescue common shares was $1,108,000,000 at December 31, 2009, including the shares sold in 2010.
The Company and certain of its subsidiaries have substantial federal net operating loss carryforwards (“NOLs”) of approximately $5,985,000,000 at December 31, 2009. The Company has recorded a valuation allowance to fully reserve for substantially all of its net deferred tax asset, which includes the NOLs.
As used herein, the term “Company” refers to Leucadia National Corporation, a New York corporation organized in 1968, and its subsidiaries, except as the context otherwise may require.
Investor Information
The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Company files periodic reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). Such reports, proxy statements
and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding the Company and other issuers that file electronically. Material
filed by the Company can also be inspected at the offices of the NYSE, 20 Broad Street, New York, NY 10005, on which the Company’s common shares are listed. The Company has submitted to the NYSE a certificate of the Chief Executive Officer of the Company, dated May 11, 2009, certifying that he is not aware of any violations by the Company of NYSE corporate governance listing standards.
The Company’s website address is www.leucadia.com. The Company makes available, without charge through its website, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.
Cautionary Statement for Forward-Looking Information
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Statements included in this Report may contain forward-looking statements. Such statements may relate, but are not limited, to projections of revenues, income or loss, development expenditures, plans for growth and future operations, competition and regulation, as well as assumptions relating to the foregoing. Such
forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this Report, the words “estimates,” “expects,” “anticipates,” “believes,” “plans,” “intends” and variations of such
words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements.
Factors that could cause actual results to differ materially from any results projected, forecasted, estimated or budgeted or may materially and adversely affect the Company’s actual results include, but are not limited to, those set forth in Item 1A. Risk Factors and elsewhere in this Report and in the Company’s other public
filings with the SEC.
Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof. The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this Report or to reflect the occurrence of unanticipated
events.
Financial Information about Segments
The Company’s reportable segments consist of the consolidated operating units identified above, which offer different products and services and are managed separately. While in bankruptcy, Premier was deconsolidated and classified as an investment in an associated company from September 2006 until August 2007. Premier
was once again consolidated upon its emergence from bankruptcy and has been reported as an operating segment since that date. Prior to its consolidation in November 2009, the Company’s investment in Keen was classified as an investment in an associated company. Other operations primarily consist of the Company’s wineries and energy projects.
Associated companies include equity interests in other entities that the Company accounts for under the equity method of accounting. Investments in associated companies that are accounted for under the equity method of accounting include HomeFed Corporation (“HomeFed”), a corporation engaged in real estate activities,
JHYH, Berkadia and CLC. In the past the Company has made non-controlling investments in investment partnerships that are engaged in investing and/or securities transactions activities which were accounted for under the equity method of accounting; however, the only remaining material investment of this kind is the Company’s interest in Pershing Square IV, L.P. (“Pershing Square”). Associated companies also include the Company’s investments in ACF and Jefferies, which
are accounted for at fair value rather than under the equity method of accounting.
Corporate assets primarily consist of investments and cash and cash equivalents and corporate revenues primarily consist of investment and other income and securities gains and losses. Corporate assets include the Company’s investment in Fortescue. Corporate assets, revenues, overhead expenses and interest
expense are not allocated to the operating units.
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Conwed Plastics has manufacturing facilities located in Belgium and Mexico, and STi Prepaid has a customer care unit located in the Dominican Republic. These are the only foreign operations with non-U.S. revenue or assets that the Company consolidates, and are not material. Unconsolidated non-U.S. based investments
include 39% of Light and Power Holdings Ltd., the parent company of the principal electric utility in Barbados, a small Caribbean-based telecommunications provider, the 30% ownership in CLC and the investments in Fortescue and Inmet. From time to time the Company invests in the securities of non-U.S. entities or in investment partnerships that invest in non-U.S. securities.