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Leucadia National 10-Q 2012
lnc3rdqtr2012form10q.htm




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, 2012

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
(State or other jurisdiction of
13-2615557
(I.R.S. Employer
incorporation or organization)
Identification Number)
   
315 Park Avenue South, New York, New York
(Address of principal executive offices)
10010-3607
(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           _____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES               X                                NO           _____

 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x
 
Accelerated filer  o
Non-accelerated filer    o
(Do not check if a smaller reporting company)
Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES            _____                          NO                 X     

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding of each of the issuer’s classes of common stock, at October 25, 2012: 244,582,588.


 
 

 

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2012 and December 31, 2011
(Dollars in thousands, except par value)
(Unaudited)

   
September 30,
   
December 31,
 
   
2012
   
2011
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 772,144     $ 168,490  
Investments
    390,378       150,135  
Trade, notes and other receivables, net
    315,030       339,010  
Inventory
    354,487       354,578  
Current deferred tax asset
    77,870       144,281  
Prepaids and other current assets
    191,507       64,889  
Current assets of discontinued operations
    38,065       32,096  
Total current assets
    2,139,481       1,253,479  
Non-current investments ($408,360 and $432,768 collateralizing repurchase agreements)
    1,446,303       2,226,875  
Intangible assets, net and goodwill
    862,376       876,589  
Deferred tax asset, net
    1,492,671       1,440,605  
Other assets
    248,083       407,370  
Property, equipment and leasehold improvements, net
    856,213       884,109  
Investments in associated companies ($794,102 and $1,198,029 measured
               
  using fair value option)
    1,560,329       1,991,795  
Non-current assets of discontinued operations
    134,728       182,367  
Total
  $ 8,740,184     $ 9,263,189  
                 
LIABILITIES
               
Current liabilities:
               
Trade payables and expense accruals
  $ 412,692     $ 374,321  
Other current liabilities
    36,008       41,570  
Securities sold under agreements to repurchase
    394,289       417,479  
Debt due within one year
    445,409       29,264  
Current liabilities of discontinued operations
    14,325       14,498  
Total current liabilities
    1,302,723       877,132  
Other non-current liabilities
    95,676       96,316  
Long-term debt
    911,832       1,874,389  
Non-current liabilities of discontinued operations
    708       1,182  
Total liabilities
    2,310,939       2,849,019  
                 
Commitments and contingencies
               
                 
Redeemable noncontrolling interests in subsidiary
    236,137       235,909  
                 
EQUITY
               
Common shares, par value $1 per share, authorized 600,000,000 shares;
               
244,582,588 shares issued and outstanding, after deducting
               
47,006,711 shares held in treasury
    244,583       244,583  
Additional paid-in capital
    1,581,646       1,570,684  
Accumulated other comprehensive income
    518,705       912,421  
Retained earnings
    3,847,008       3,446,708  
Total Leucadia National Corporation shareholders’ equity
    6,191,942       6,174,396  
Noncontrolling interest
    1,166       3,865  
Total equity
    6,193,108       6,178,261  
                 
Total
  $ 8,740,184     $ 9,263,189  

See notes to interim consolidated financial statements.

 
2

 

LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the periods ended September 30, 2012 and 2011
(In thousands, except per share amounts)
(Unaudited)

   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenues and Other Income:
                       
Beef processing services
  $ 1,909,203     $     $ 5,613,374     $  
Manufacturing
    66,638       63,398       191,846       191,773  
Gaming entertainment
    30,255       28,611       91,964       89,900  
Investment and other income
    27,192       100,467       203,696       352,135  
Net securities gains
    154,207       7,275       581,669       539,215  
      2,187,495       199,751       6,682,549       1,173,023  
Expenses:
                               
Cost of sales:
                               
   Beef processing services
    1,830,127             5,430,674        
   Manufacturing
    54,706       55,899       157,903       168,104  
Direct operating expenses for gaming entertainment
    22,080       21,184       67,117       65,006  
Interest
    21,106       27,512       71,294       84,237  
Salaries and incentive compensation
    30,280       8,847       92,756       55,933  
Depreciation and amortization
    30,372       13,450       100,582       39,208  
Selling, general and other expenses
    56,688       56,139       187,643       149,196  
      2,045,359       183,031       6,107,969       561,684  
Income from continuing operations before income taxes
                               
   and income (losses) related to associated companies
    142,136       16,720       574,580       611,339  
Income taxes
    61,208       13,723       231,021       242,069  
Income from continuing operations before income (losses)
                               
  related to associated companies
    80,928       2,997       343,559       369,270  
Income (losses) related to associated companies, net of income
                               
tax provision (benefit) of $17,682, $(161,516), $33,155
                               
and $(257,784)
    36,017       (296,812 )     72,236       (470,656 )
Income (loss) from continuing operations
    116,945       (293,815 )     415,795       (101,386 )
Income from discontinued operations, net of income tax
                               
provision (benefit) of $357, $254, $(1,638) and $(65)
    2,015       1,690       2,632       5,581  
Gain (loss) on disposal of discontinued operations, net of income tax
                               
provision (benefit) of $(2,491), $416, $(2,491) and $915
    (4,626 )     773       (4,626 )     1,697  
Net income (loss)
    114,334       (291,352 )     413,801       (94,108 )
Net (income) loss attributable to the noncontrolling interest
    972       330       1,067       (98 )
Net (income) attributable to the redeemable noncontrolling interests
    (8,632 )      –        (14,568 )      –   
Net income (loss) attributable to Leucadia National
                               
  Corporation common shareholders
  $ 106,674     $ (291,022 )   $ 400,300     $ (94,206 )




(continued)





See notes to interim consolidated financial statements.

 
3

 


LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (continued)
For the periods ended September 30, 2012 and 2011
(In thousands, except per share amounts)
(Unaudited)

   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Basic earnings (loss) per common share attributable
                       
   to Leucadia National Corporation common shareholders:
                       
   Income (loss) from continuing operations
  $ .45     $ (1.20 )   $ 1.64     $ (.42 )
   Income from discontinued operations
    .01       .01       .01       .02  
   Gain (loss) on disposal of discontinued operations
    (.02 )      –         (.01 )      .01  
Net income (loss)
  $ .44     $ (1.19 )   $ 1.64     $ (.39 )
                                 
Diluted earnings (loss) per common share attributable
                               
   to Leucadia National Corporation common shareholders:
                               
   Income (loss) from continuing operations
  $ .44     $ (1.20 )   $ 1.62     $ (.42 )
   Income from discontinued operations
    .01       .01       .01       .02  
   Gain (loss) on disposal of discontinued operations
     (.02 )      –         (.01 )      .01  
Net income (loss)
  $ .43     $ (1.19 )   $ 1.62     $ (.39 )
                                 
Amounts attributable to Leucadia National Corporation
                               
   common shareholders:
                               
   Income (loss) from continuing operations, net of taxes
  $ 109,285     $ (293,485 )   $ 402,294     $ (101,484 )
   Income from discontinued operations, net of taxes
    2,015       1,690       2,632       5,581  
   Gain (loss) on disposal of discontinued operations, net of taxes
     (4,626 )      773       (4,626 )        1,697  
Net income (loss)
  $ 106,674     $ (291,022 )   $ 400,300     $ (94,206 )



















See notes to interim consolidated financial statements.


 
4

 

LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
For the periods ended September 30, 2012 and 2011
(In thousands)
(Unaudited)

   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income (loss)
  $ 114,334     $ (291,352 )   $ 413,801     $ (94,108 )
Other comprehensive income (loss):
                               
Net unrealized holding gains (losses) on investments arising
                               
   during the period, net of income tax provision (benefit) of
                               
   $24,482, $(271,181), $(55,800) and $(286,454)
    44,097       (488,431 )     (100,502 )     (515,939 )
Less: reclassification adjustment for net (gains) losses included
                               
   in net income (loss), net of income tax provision (benefit) of
                               
   $(38,182), $(631), $(161,994) and $(193,395)
    (68,772 )     (1,135 )     (291,772 )     (348,328 )
Net change in unrealized holding gains (losses) on investments,
                               
   net of income tax provision (benefit) of $(13,700),
                               
   $(271,812), $(217,794) and $(479,849)
    (24,675 )     (489,566 )     (392,274 )     (864,267 )
                                 
Net unrealized foreign exchange gains (losses) arising during
                               
   the period, net of income tax provision (benefit) of $488,
                               
   $(550), $(2,013) and $608
    879       (990 )     (3,627 )     1,096  
Less: reclassification adjustment for foreign exchange gains
                               
   (losses) included in net income (loss), net of income tax provision
                               
   (benefit) of $0, $0, $0 and $0
     –         –         –         –   
Net change in unrealized foreign exchange gains (losses),
                               
   net of income tax provision (benefit) of $488, $(550),
                               
   $(2,013) and $608
    879        (990 )     (3,627 )     1,096  
                                 
Net unrealized gains (losses) on derivatives arising during the
                               
   period, net of income tax provision (benefit) of $0, $0,
                               
   $(85) and $0
                (153 )      
Less: reclassification adjustment for derivative gains (losses)
                               
   included in net income (loss), net of income tax provision (benefit)
                               
   of $0, $0, $0 and $0
     –         –         –         –   
Net change in unrealized derivative gains (losses), net of income
                               
   tax provision (benefit) of $0, $0, $(85) and $0
     –         –        (153 )      –   
                                 
Net pension and postretirement gain (loss) arising during the
                               
   period, net of income tax provision (benefit) of $0, $0, $0 and $0
                       
Less: reclassification adjustment for pension and postretirement (gains)
                               
   losses included in net income (loss), net of income tax provision
                               
   (benefit) of $433, $(5), $1,299 and $(8)
    780         (8 )     2,338         (13 )
Net change in pension liability and postretirement benefits,
                               
    net of income tax provision (benefit) of $433, $(5), $1,299 and $(8)
    780         (8 )     2,338         (13 )
                                 
Other comprehensive (loss), net of income taxes
    (23,016 )     (490,564 )     (393,716 )     (863,184 )
                                 
Comprehensive income (loss)
    91,318       (781,916 )     20,085       (957,292 )
Comprehensive (income) loss attributable to the noncontrolling interest
    972       330       1,067       (98 )
Comprehensive (income) attributable to the redeemable
                               
       noncontrolling interests
    (8,632 )      –        (14,568 )      –   
                                 
Comprehensive income (loss) attributable to Leucadia National
                               
  Corporation common shareholders
  $ 83,658     $ (781,586 )   $ 6,584     $ (957,390 )







See notes to interim consolidated financial statements.

 
5

 


LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2012 and 2011
(In thousands)
(Unaudited)

   
2012
   
2011
 
             
Net cash flows from operating activities:
           
Net income (loss)
  $ 413,801     $ (94,108 )
Adjustments to reconcile net income (loss) to net cash provided by operations:
               
  Deferred income tax provision (benefit)
    233,585       (31,009 )
  Depreciation and amortization of property, equipment and leasehold improvements
    77,281       50,102  
  Other amortization
    57,425       22,075  
  Share-based compensation
    10,732       18,843  
  Excess tax benefit from exercise of stock options
          (242 )
  Provision for doubtful accounts
    8,920       157  
  Net securities gains
    (581,669 )     (539,215 )
  (Income) losses related to associated companies
    (105,391 )     728,440  
  Distributions from associated companies
    77,632       37,454  
  Net gains related to real estate, property and equipment, and other assets
    (5,289 )     (92,194 )
  Income related to Fortescue’s Pilbara project, net of proceeds received
    107,881       21,994  
  (Gain) loss on disposal of discontinued operations
    7,117       (2,612 )
  Change in estimated litigation reserve
          (2,241 )
  Net change in:
               
Trade, notes and other receivables
    (32,557 )     (6,990 )
Inventory
    1,495       3,058  
Prepaids and other assets
    7,116       505  
Trade payables and expense accruals
    (11,699 )     (51,308 )
Other liabilities
    7,799       (36,259 )
Income taxes payable
    (9,183 )     (7,895 )
Other
    (1,883 )     4,399  
Net cash provided by operating activities
    263,113       22,954  
                 
Net cash flows from investing activities:
               
Acquisitions of property, equipment and leasehold improvements
    (51,161 )     (30,889 )
Acquisitions of and capital expenditures for real estate investments
    (4,885 )     (7,768 )
Proceeds from disposals of real estate, property and equipment, and other assets
    8,779       24,095  
Net change in restricted cash
    4,769       10,472  
Proceeds from disposal of discontinued operations, net of expenses and cash
               
  of operations sold
    26,611       3,192  
Acquisitions, net of cash acquired
    (25,232 )     (86,206 )
Advances on notes and other receivables
    (2,907 )     (3,650 )
Collections on notes, loans and other receivables
    16,549       14,348  
Investments in associated companies
    (2,457 )     (560,082 )
Capital distributions and loan repayment from associated companies
    464,162       292,543  
Purchases of investments (other than short-term)
    (1,114,280 )     (2,896,466 )
Proceeds from maturities of investments
    245,194       344,014  
Proceeds from sales of investments
    1,363,132       2,780,148  
Other
    1,650       3,498  
Net cash provided by (used for) investing activities
    929,924       (112,751 )

(continued)



See notes to interim consolidated financial statements.

 
6

 

LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
For the nine months ended September 30, 2012 and 2011
(In thousands)
(Unaudited)

   
2012
   
2011
 
             
Net cash flows from financing activities:
           
Issuance of debt, net of issuance costs
  $ 1,022     $ 99,737  
Reduction of debt
    (571,551 )     (144,183 )
Issuance of common shares
          7,126  
Distributions to redeemable noncontrolling interests
    (12,722 )      
Excess tax benefit from exercise of stock options
          242  
Other
    (6,132 )     (8,195 )
Net cash used for financing activities
    (589,383 )     (45,273 )
Net increase (decrease) in cash and cash equivalents
    603,654       (135,070 )
Cash and cash equivalents at January 1,
    168,490       441,340  
Cash and cash equivalents at September 30,
  $ 772,144     $ 306,270  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the year for:
               
Interest
  $ 99,253     $ 110,654  
Income tax payments, net
  $ 36,620     $ 24,417  



































See notes to interim consolidated financial statements.

 
7

 

LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2012 and 2011
(In thousands, except par value)
(Unaudited)


   
Leucadia National Corporation Common Shareholders
             
   
Common
         
Accumulated
                         
   
Shares
   
Additional
   
Other
                         
   
$1 Par
   
Paid-In
   
Comprehensive
   
Retained
         
Noncontrolling
       
   
Value
   
Capital
   
Income
   
Earnings
   
Subtotal
   
Interest
   
Total
 
                                           
Balance, January 1, 2011
  $ 243,808     $ 1,542,964     $ 1,687,363     $ 3,482,623     $ 6,956,758     $ 6,623     $ 6,963,381  
Net loss
                            (94,206 )     (94,206 )     98       (94,108 )
Other comprehensive loss, net of taxes
                    (863,184 )             (863,184 )             (863,184 )
Contributions from noncontrolling interests
                                            628       628  
Distributions to noncontrolling interests
                                            (5,088 )     (5,088 )
Change in interest in consolidated subsidiary
            (1,982 )                     (1,982 )     2,700       718  
Share-based compensation expense
            18,843                       18,843               18,843  
Exercise of warrants to purchase common
                                                       
shares
    523       (523 )                                    
Exercise of options to purchase common
                                                       
shares, including excess tax benefit
    256       7,112                       7,368               7,368  
Purchase of common shares for treasury
    (4 )     (151 )                     (155 )             (155 )
                                                         
Balance, September 30, 2011
  $ 244,583     $ 1,566,263     $ 824,179     $ 3,388,417     $ 6,023,442     $ 4,961     $ 6,028,403  
                                                         
                                                         
Balance, January 1, 2012
  $ 244,583     $ 1,570,684     $ 912,421     $ 3,446,708     $ 6,174,396     $ 3,865     $ 6,178,261  
Net income
                            400,300       400,300       (1,067 )     399,233  
Other comprehensive loss, net of taxes
                    (393,716 )             (393,716 )             (393,716 )
Contributions from noncontrolling interests
                                            139       139  
Distributions to noncontrolling interests
                                            (3,159 )     (3,159 )
Change in interest in consolidated subsidiary
            (1,388 )                     (1,388 )     1,388        
Change in fair value of redeemable
                                                       
noncontrolling interests
            1,618                       1,618               1,618  
Share-based compensation expense
            10,732                       10,732               10,732  
                                                         
Balance, September 30, 2012
  $ 244,583     $ 1,581,646     $ 518,705     $ 3,847,008     $ 6,191,942     $ 1,166     $ 6,193,108  





See notes to interim consolidated financial statements.

 
8

 


LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements

1.
Significant Accounting Policies

The unaudited interim consolidated financial statements, which reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes necessary to fairly state 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, 2011, which are included in the Company’s Annual Report filed on Form 10-K for such year (the “2011 10-K”).  Results of operations for interim periods are not necessarily indicative of annual results of operations.  The consolidated balance sheet at December 31, 2011 was extracted from the audited annual financial statements and does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements.

Effective January 1, 2012, the Company adopted new Financial Accounting Standards Board (“FASB”) guidance with respect to the improvement of the comparability of fair value measurements presented and disclosed in financial statements issued in accordance with GAAP and International Financial Reporting Standards.  The amendment includes requirements for measuring fair value and for disclosing information about fair value measurements, but does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The guidance did not have a significant impact on the Company’s consolidated financial statements.

Effective January 1, 2012, the Company adopted new FASB guidance on the presentation of comprehensive income.  This amendment eliminated the previous option to report other comprehensive income and its components in the statement of changes in equity; instead, it requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  This amendment was applied retrospectively.  Adoption of this amendment changed the presentation of the Company’s consolidated financial statements but did not have any impact on its consolidated financial position, results of operations or cash flows.

Effective January 1, 2012, the Company adopted new FASB guidance with respect to the simplification of how entities test for goodwill impairment.  This amendment permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance did not have a significant impact on the Company’s consolidated financial statements.

Certain amounts for prior periods have been reclassified to be consistent with the 2012 presentation, and to reflect as a discontinued operation Keen Energy Services, LLC (“Keen”).  For more information, see Note 16.

2.  
Acquisitions

As more fully discussed in the 2011 10-K, the Company acquired a controlling interest in National Beef Packing Company, LLC (“National Beef”) in December 2011.  Unaudited pro forma operating results for the Company for the three and nine month periods ended September 30, 2011, assuming the acquisition had occurred as of January 1, 2010, are as follows (in thousands, except per share amounts):


 
9

 


   
For the Three
   
For the Nine
 
   
Month Period
   
Month Period
 
   
Ended September 30, 2011
   
Ended September 30, 2011
 
             
Revenues and other income
  $ 2,035,350     $ 6,434,887  
Net loss attributable to Leucadia National Corporation
               
  common shareholders
  $ (255,435 )   $ (7,014 )
Basic loss per common share attributable to Leucadia
               
  National Corporation common shareholders
  $ (1.04 )   $ (.03 )
Diluted loss per common share attributable to Leucadia
               
  National Corporation common shareholders
  $ (1.04 )   $ (.03 )

Pro forma adjustments principally reflect an increase to depreciation and amortization expenses related to the fair value of property and equipment and amortizable intangible assets.  The unaudited pro forma data is not indicative of future results of operations or what would have resulted if the acquisition had actually occurred as of January 1, 2010.

3.  
Segment Information

The primary measure of segment operating results and profitability used by the Company is income (loss) from continuing operations before income taxes.  As a result of the classification of Keen as a discontinued operation, the Company no longer has an oil and gas drilling services segment.  Associated companies are not considered to be a reportable segment, but are reflected in the table below under income (loss) from continuing operations before income taxes.  Certain information concerning the Company’s segments for the three and nine month periods ended September 30, 2012 and 2011 is presented in the following table (in thousands).

 
10

 


   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues and other income:
                       
Beef Processing Services
  $ 1,909,358     $     $ 5,615,003     $  
Manufacturing:
                               
Idaho Timber
    42,241       42,116       123,949       124,129  
Conwed Plastics
    24,416       21,256       68,005       67,695  
Gaming Entertainment
    30,257       28,616       91,972       89,918  
Domestic Real Estate
    3,474       3,110       10,304       91,861  
Medical Product Development
    81       105       280       278  
Other Operations
    18,735       18,882       55,386       49,628  
Corporate
    158,933       85,666       717,650       749,514  
Total consolidated revenues and other
                               
  income
  $ 2,187,495     $ 199,751     $ 6,682,549     $ 1,173,023  
                                 
Income (loss) from continuing operations
                               
  before income taxes:
                               
Beef Processing Services
  $ 41,959     $     $ 71,299     $  
Manufacturing:
                               
Idaho Timber
    1,700       (290 )     6,030       (2,285 )
Conwed Plastics
    4,079       1,221       9,479       6,251  
Gaming Entertainment
    3,345       1,989       9,329       10,482  
Domestic Real Estate
    (4,217 )     (792 )     (7,399 )     80,481  
Medical Product Development
    (11,254 )     (18,457 )     (32,559 )     (31,900 )
Other Operations
    (4,244 )     (472 )     (13,564 )     (14,465 )
Income (losses) related to associated
                               
  companies
    53,699       (458,328 )     105,391       (728,440 )
Corporate
    110,768       33,521       531,965       562,775  
Total consolidated income (loss) from
                               
  continuing operations before income
                               
  taxes
  $ 195,835     $ (441,608 )   $ 679,971     $ (117,101 )
                                 
Depreciation and amortization expenses:
                               
Beef Processing Services
  $ 20,803     $     $ 61,868     $  
Manufacturing:
                               
Idaho Timber
    1,333       1,327       3,995       3,971  
Conwed Plastics
    1,836       1,599       4,522       5,082  
Gaming Entertainment
    2,324       4,177       10,838       12,561  
Domestic Real Estate
    897       854       2,640       2,602  
Medical Product Development
    206       214       629       635  
Other Operations
    2,748       2,998       8,272       7,031  
Corporate
    3,385       5,581       16,521       16,065  
Total consolidated depreciation and
                               
  amortization expenses
  $ 33,532     $  16,750     $ 109,285     $  47,947  

Revenues and other income for each segment include amounts for services rendered and products sold, as well as segment reported amounts classified as investment and other income and net securities gains (losses) in the Company’s consolidated statements of operations.  Corporate securities gains include gains of $125,826,000 and $543,713,000 for the three and nine month 2012 periods, respectively, and $527,351,000 for the nine month 2011 period resulting from sales of common shares of Fortescue Metals Group Ltd (“Fortescue”).  In the nine month 2011 period, other income for the domestic real estate segment includes a gain on forgiveness of debt of $81,848,000.

 
11

 


Other operations includes pre-tax losses of $8,134,000 and $2,876,000 for the three month periods ended September 30, 2012 and 2011, respectively, and $23,447,000 and $18,702,000 for the nine month periods ended September 30, 2012 and 2011, respectively, for the investigation and evaluation of various energy related projects.  There were no significant operating revenues associated with these activities; however, other income for the three and nine month 2011 periods includes $1,847,000 and $4,726,000, respectively, with respect to government grants to reimburse the Company for certain of its prior expenditures, which were fully expensed as incurred.

Depreciation and amortization expenses for the manufacturing and other operations segments include amounts classified as cost of sales.

For the three and nine month 2012 periods, interest expense was primarily comprised of beef processing services ($2,988,000 and $9,288,000, respectively) and corporate ($18,118,000 and $62,006,000, respectively).  For 2011, interest expense was primarily comprised of corporate; interest expense for other segments was not significant.

4.
Investments in Associated Companies

 
A summary of investments in associated companies at September 30, 2012 and December 31, 2011 is as follows:

   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(In thousands)
 
Investments in associated companies accounted for
           
  under the equity method of accounting:
           
Jefferies High Yield Holdings, LLC (“JHYH”)
  $ 341,262     $ 323,262  
Berkadia Commercial Mortgage LLC (“Berkadia”)
    169,145       193,496  
Garcadia companies
    74,749       72,303  
Linkem S.p.A. (“Linkem”)
    67,245       86,332  
HomeFed Corporation (“HomeFed”)
    47,570       47,493  
Brooklyn Renaissance Plaza
    33,419       31,931  
Other
    32,837       38,949  
  Total accounted for under the equity method of accounting
    766,227