UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 2, 2005
LEUCADIA NATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK
(State or Other Jurisdiction of Incorporation)
1-5721 13-2615557
(Commission File Number) (IRS Employer Identification No.)
315 PARK AVENUE SOUTH, NEW YORK, NEW YORK 10010
(Address of Principal Executive Offices) (Zip Code)
212-460-1900
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01. Completion of Acquisition or Disposition of Assets.
As more fully described in Leucadia National Corporation's (the "Company")
Form 8-K dated May 2, 2005, on that date the Company acquired all of the issued
and outstanding capital stock of Idaho Timber Corporation and certain affiliated
companies (collectively, "ITC") for aggregate cash consideration of
$138,900,000, including working capital adjustments and expenses of the
acquisition. This Form 8-K/A amends the aforementioned Form 8-K by including the
financial statements and exhibits set forth under Item 9.01.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of business acquired:
Audited combined financial statements of ITC for the fiscal year ended
March 25, 2005 described below
o Report of Independent Auditors
o Combined Balance Sheet as of March 25, 2005
o Combined Statement of Income for the year ended March 25,
2005
o Combined Statement of Stockholders' Equity for the year
ended March 25, 2005
o Combined Statement of Cash Flows for the year ended March
25, 2005
o Notes to Combined Financial Statements
(b) Pro forma financial information:
The accompanying unaudited pro forma consolidated balance sheet information
as of March 31, 2005 assumes the acquisition of ITC (the "Acquisition") had
occurred on March 31, 2005. The accompanying unaudited pro forma consolidated
statements of operations for the year ended December 31, 2004 and the three
months ended March 31, 2005 are presented to reflect the Acquisition as if it
had occurred on January 1, 2004. ITC historically had either a 52 or 53 week
fiscal year, ending on the last Friday in March. In order to prepare the 2004
pro forma consolidated financial statements, the Company used ITC's audited
combined balance sheet and audited combined statement of income as of and for
the fiscal year ended March 25, 2005. In order to prepare the unaudited pro
forma consolidated statements of operations for the three months ended March 31,
2005, the Company used ITC's unaudited combined statement of income for the
twelve week period ended March 25, 2005. As a result, ITC's operating results
for the twelve week period ended March 25, 2005 is included in both pro forma
consolidated statements of operations presented.
Certain of the pro forma adjustments reflect a preliminary allocation of
the purchase price and necessarily involve certain significant estimates. The
Company has not finalized its allocation of the purchase price, and will not
finalize its allocation until an independent third-party appraisal of the fair
value of the assets acquired is completed. When finalized, any changes to the
preliminary purchase price allocation could result in offsetting changes to
property and equipment, identifiable intangible assets and/or goodwill. However,
the Company does not expect that its final allocation of the purchase price will
be materially different from the preliminary allocation presented herein.
The accompanying unaudited pro forma consolidated financial statements
should be read in conjunction with the Company's historical consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 2004
and its Quarterly Report on Form 10-Q for the period ended March 31, 2005 and
the historical combined financial statements and notes thereto of ITC, which are
included in this Report under Item 9.01(a). The unaudited pro forma consolidated
financial statements are presented for informational purposes only and are not
necessarily indicative of actual results had the foregoing transactions occurred
as described in the preceding paragraph, nor do they purport to represent
results of future operations.
2
(c) Exhibits:
23.1 Consent of PricewaterhouseCoopers LLP with respect to the
incorporation by reference of the combined financial statements of
Idaho Timber Corporation and Related Companies into the Company's
Registration Statements on Form S-8 (File No. 2-84303), Form S-8 and
S-3 (File No. 33-6054), Form S-8 and S-3 (File No. 33-26434), Form S-8
and S-3 (File No. 33-30277), Form S-8 (File No. 33-61682), Form S-8
(File No. 33-61718), Form S-8 (File No. 333-51494), Form S-3 (File No.
333-118102), Form S-3 (File No. 333-122047) and Form S-4 (File No.
333-125806).
3
Report of Independent Auditors
To the Board of Directors
and Stockholders of Idaho Timber Corporation and Related Companies
In our opinion, the accompanying combined balance sheet and the related combined
statements of income, of stockholders' equity and of cash flows present fairly,
in all material respects, the financial position of Idaho Timber Corporation and
Related Companies (the "Company") at March 25, 2005, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Salt Lake City, Utah
July 7, 2005
4
Idaho Timber Corporation
Combined Balance Sheet
--------------------------------------------------------------------------------
March 25,
2005
-----------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,048,001
Certificate of deposit 1,250,000
Accounts receivable, net 25,532,091
Inventories 26,849,591
Timber and timberland 14,324,527
Deferred income taxes 643,281
Prepaid expenses and other current assets 1,746,800
-----------------
Total current assets 71,394,291
Deferred income taxes 34,467
Property and equipment, net 4,762,540
-----------------
Total assets $ 76,191,298
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,178,187
Book overdraft 8,031,570
Due to related parties 2,370,672
Distributions payable to stockholders 6,490,000
Accrued expenses 9,543,643
-----------------
Total current liabilities 28,614,072
Deferred income taxes 14,797
Line of credit 11,851,371
-----------------
Total liabilities 40,480,240
-----------------
Commitments and contingencies (Note 9 and 12)
Stockholders' equity:
Common stock, $1 par value, 3,000,000 shares authorized,
1,224,945 shares issued and 1,040,607 shares outstanding 1,224,945
Additional paid-in capital 7,539,153
Retained earnings 32,854,597
Treasury stock, at cost, 184,338 shares (5,907,637)
-----------------
Total stockholders' equity 35,711,058
-----------------
Total liabilities and stockholders' equity $ 76,191,298
=================
The accompanying notes are an integral part of these
combined financial statements.
5
Idaho Timber Corporation
Combined Statement of Income
--------------------------------------------------------------------------------
Year Ended March 25,
2005
------------------------------
NET SALES $ 401,957,950
COST OF GOODS SOLD 341,067,075
-----------------------------
Gross profit 60,890,875
-----------------------------
OPERATING EXPENSES:
Salaries, wages and benefits 6,844,663
Management and employee bonuses 6,833,132
Selling, general and administrative 2,408,869
Depreciation 165,843
-----------------------------
Total operating expenses 16,252,507
-----------------------------
Operating income 44,638,368
-----------------------------
OTHER INCOME (EXPENSE):
Interest income 185,187
Interest expense (489,544)
-----------------------------
Total other income (expense) (304,357)
-----------------------------
Income before income taxes 44,334,011
Provision for income taxes 888,973
-----------------------------
Net income $ 43,445,038
=============================
The accompanying notes are an integral part of these
combined financial statements.
6
Idaho Timber Corporation
Combined Statement of Stockholders' Equity
--------------------------------------------------------------------------------
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
--------------- -------------- ---------------- --------------- ----------------
Balance at March 26, 2004 $ 1,224,945 $7,539,153 $ 25,744,559 $(5,907,637) $28,601,020
Net income - - 43,445,038 - 43,445,038
Distributions to stockholders - - (36,335,000) - (36,335,000)
--------------- -------------- ---------------- --------------- ----------------
Balance at March 25, 2005 $ 1,224,945 $7,539,153 $ 32,854,597 $(5,907,637) $35,711,058
============== ============== ================ =============== ================
The accompanying notes are an integral part of these
combined financial statements.
7
Idaho Timber Corporation
Combined Statement of Cash Flows
--------------------------------------------------------------------------------
Year Ended March 25,
2005
------------------------------
Cash flows from operating activities:
Net income $ 43,445,038
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 807,553
Gain on sale of property and equipment (88,588)
Deferred income taxes (122,372)
Changes in operating assets and liabilities
Accounts receivable, net (1,591,147)
Inventories 175,189
Timber and timberland (3,984,338)
Prepaid expenses and other current assets 627,116
Other assets 66,346
Accounts payable 105,175
Accrued expenses 2,559,261
------------------------------
Net cash provided by operating activities 41,999,233
------------------------------
Cash flows from investing activities:
Certificate of deposit (1,250,000)
Purchase of property and equipment (415,449)
Proceeds from sale of equipment 106,918
------------------------------
Net cash used in investing activities (1,558,531)
------------------------------
Cash flows from financing activities:
Book overdraft 1,819,654
Payments on line of credit (123,002,764)
Advances on line of credit 110,093,475
Decrease in amounts due to related parties (2,421,812)
Distributions paid to stockholders (29,845,000)
------------------------------
Net cash used in financing activities (43,356,447)
------------------------------
Net decrease in cash (2,915,745)
Cash and cash equivalents at beginning of year 3,963,746
------------------------------
Cash and cash equivalents at end of year $ 1,048,001
==============================
Supplemental cash flow information:
Interest paid $ 505,219
Income taxes paid $ 1,318,566
Distributions payable to stockholders $ 6,490,000
The accompanying notes are an integral part of these
combined financial statements.
8
Idaho Timber Corporation
Notes to Combined Financial Statements
--------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the accounts of Idaho Timber
Corporation and the accounts of related companies engaged in the
production, sale, manufacturing and distribution of lumber products which
have common ownership and are under common control (collectively, the
Company). The combined financial statements are not those of a separate
legal entity. The related companies combined herein for the year ended
March 25, 2005 include:
Idaho Timber Corporation
Idaho Timber Corporation of Boise, Inc.
Idaho Timber Corporation of Texas, Inc.
Idaho Timber Corporation of Idaho, Inc.
Idaho Timber Corporation of Kansas, Inc.
Idaho Timber Corporation of Carthage, Inc.
Idaho Timber Corporation of Montana, Inc.
Idaho Timber Corporation of Mountain Home, Inc.
Idaho Timber Corporation of Albuquerque, Inc., dba Sagebrush Sales
Idaho Timber Corporation of North Carolina, Inc.
Alumni Forest Products, Inc., dba Idaho Timber of Florida
Idaho Cedar Sales
All significant intercompany balances and profits have been eliminated.
Nature of Business
The Company's primary operating activities include dimensional lumber
remanufacturing and lumber milling.
Fiscal Year End
The Company's fiscal year comprises 52 or 53 weeks, ending on the last
Friday of March.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash held in lockbox and
local bank accounts, and short-term investments maturing 90-days or less
at the time of acquisition. The book overdraft balance represents
outstanding checks in the zero balance accounts.
Accounts Receivable
The Company extends non-interest bearing trade credit to its customers in
the ordinary course of business. To minimize credit risk, ongoing credit
evaluations of customers' financial condition are performed; however
collateral is not required. The Company maintains an allowance for
doubtful accounts which is based on its historical collections experience
as well as its evaluation of current conditions and trends affecting its
customers.
Inventories
Inventories include logs, lumber and building materials held for sale and
lumber purchased for remanufacturing. Inventories are stated at the lower
of cost, determined using the first-in, first-out method, or market.
9
Timber and Timberland
Timber and timberland are shown at cost, less the cost of timber
harvested. The cost of timber harvested is determined on the basis of
timber removals at rates based on the estimated volume of recoverable
timber. All timber and timberland is classified as a current asset based
on the term of the individual timber deeds.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight-line and declining-balance methods based on the following
estimated useful lives:
Buildings and improvements 7 - 40 years
Machinery and equipment 3 - 10 years
Expenditures for maintenance and repairs are charged to expense as
incurred. When an asset is sold or otherwise disposed of, the cost and
associated accumulated depreciation are removed from the accounts and the
resulting gain or loss is recognized in the combined statement of income.
Property and equipment are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets
may not be recoverable. If the expected undiscounted cash flows are less
than the carrying amount of the asset, an impairment loss is recognized
based on the excess of the carrying amount of the asset over the fair
value.
Revenue Recognition
Revenues are recognized when the following revenue recognition criteria
are met (1) persuasive evidence of an arrangement exists; (2) there is a
fixed or determinable price; (3) delivery has occurred; and (4)
collectibility is reasonably assured. These criteria are satisfied (and
revenue is recognized) upon delivery of product to the customer, as
shipping terms are FOB destination.
Certain customers receive volume discounts between 2-3%, which are netted
against sales and accounts receivable.
Cost of Goods Sold
Cost of goods sold includes product costs, warehousing costs, depreciation
and inbound and outbound shipping and handling costs.
Income Taxes
All of the companies combined herein, except Idaho Timber Corporation and
Idaho Timber Corporation of Mountain Home, Inc., have elected to be taxed
under Subchapter S of the Internal Revenue Code. Any taxable income or
loss from the Subchapter S companies is included in the tax returns of the
stockholders. Accordingly no tax provision has been recorded for the
Subchapter S companies in the accompanying combined financial statements.
Idaho Timber Corporation (ITC) and Idaho Timber Corporation of Mountain
Home, Inc. (Mountain Home) file separate federal and state tax returns.
These companies use the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and tax
bases of assets and liabilities measured using the enacted tax rates and
laws that are expected to be in effect when the differences are expected
to reverse.
10
Recently Issued Accounting Standards
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs--an
Amendment of ARB No. 43, Chapter 4". This standard provides clarification
that abnormal amounts of idle facility expense, freight, handling costs
and spoilage should be recognized as current period charges. Additionally,
this standard requires that the allocation of fixed production overhead to
the cost of production be based on the normal capacity of the production
facilities. The provisions of this standard are effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. The
adoption of this standard is not expected to have a significant effect on
the Company's financial position, results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets". This statement amends Accounting Principles Board Opinion No. 29,
"Accounting for Non-monetary Transactions" and requires companies to
record non-monetary exchanges of assets (except exchanges of non-monetary
assets that do not have commercial substance) at fair value. SFAS No. 153
is effective for non-monetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The adoption of this standard is not
expected to have a significant effect on the Company's financial position,
results of operations or cash flows.
In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - a replacement of APB No. 20 and FAS No. 3". This statement
replaces Accounting Principles Board Opinion No. 20, "Accounting Changes"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements", and generally requires retrospective application to prior
periods' financial statements of voluntary changes in accounting
principle. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005. The adoption of this standard is not expected to have a significant
effect on the Company's financial position, results of operations or cash
flows.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
March 25,
2005
------------------
Accounts receivable $ 25,742,293
Less allowance for doubtful accounts (210,202)
------------------
$ 25,532,091
==================
11
3. INVENTORIES
Inventories consist of the following:
March 25,
2005
------------------
Raw materials $ 2,996,471
Work in process 339,812
Finished goods 23,513,308
------------------
$ 26,849,591
==================
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
March 25,
2005
------------------
Land $ 895,558
Buildings and improvements 6,233,740
Machinery and equipment 11,059,522
------------------
18,188,820
Less accumulated depreciation (13,426,280)
------------------
$ 4,762,540
==================
Depreciation of property and equipment totaled $807,553 for the year ended
March 25, 2005.
5. DUE TO RELATED PARTIES
Due to related parties represent amounts owed to non-combined affiliates.
The amounts arise from the use of a shared cash concentration account by
both the Company and the non-combined affiliates. Under this arrangement,
the Company paid interest of $46,909 for the year ended March 25, 2005 to
these non-combined affiliates at an effective interest rate of 1.85%.
6. DISTRIBUTIONS
During the year ended March 25, 2005, the Company paid distributions to
stockholders of $29,845,000. In addition, prior to March 25, 2005, the
Company approved additional distributions of $6,490,000. The distributions
were paid subsequent to year-end.
12
7. ACCRUED EXPENSES
Accrued expenses consist of the following:
March 25,
2005
------------------
Management and employee bonuses $ 7,075,132
Accrued payroll and vacation 1,132,751
Workers compensation insurance premiums and health claims payable 821,593
Income taxes payable 514,167
------------------
$ 9,543,643
==================
8. LINE OF CREDIT
During the year ended March 25, 2005, the Company had an unsecured,
revolving $55,000,000 line-of-credit agreement with Bank of America.
During the commitment period, the line-of-credit is reduced annually by
amounts ranging from $5,000,000 to $15,000,000. During the year ended
March 25, 2005, the line of credit was reduced to $50,000,000. The
line-of-credit bears interest at a rate equal to the LIBOR plus an
applicable interest margin ranging from 1.25-2.50%, based on the Company's
funded debt to EBITDA ratio which is evaluated and adjusted on a quarterly
basis. The effective interest rate at March 25, 2005 was 4.04%. The
line-of-credit agreement expires on October 1, 2008.
The line-of-credit agreement contains financial covenants, the most
restrictive of which requires the Company to maintain certain ratios
including funded debt to EBITDA, debt service coverage and asset coverage.
The covenants also limit capital expenditures and the payment of
distributions. The Company was in compliance with the covenants as of
March 25, 2005.
9. LEASE OBLIGATIONS
The Company leases certain land and buildings under non-cancelable
operating leases with initial terms of 1 to 10 years. Future minimum lease
payments are as follows:
For the years ending
March 31, 2006 $ 175,608
March 30, 2007 147,939
March 28, 2008 112,158
---------------
$ 435,705
===============
Total rent expense under non-cancelable operating leases for the year
ended March 25, 2005, was $196,210.
13
10. INCOME TAXES
The provision for income taxes consists of the following:
Year Ended
March 25, 2005
----------------------
Current:
Federal $ 783,451
State 227,894
Deferred (122,372)
----------------------
$ 888,973
======================
A reconciliation of the Company's effective tax rate to the statutory U.S.
Federal tax rate (35%) is as follows:
Year Ended
March 25, 2005
----------------------
Provision for income taxes at statutory rate $ 15,166,904
Tax effect of Subchapter S company income not subject to income taxes (14,563,785)
State income taxes (net of federal income tax benefit) 135,975
Other permanent items 149,879
--------------------
$ 888,973
====================
The principal components of the Company's deferred tax balances are as
follows:
March 25,
2005
---------------------
Deferred tax assets:
ITC
Accrued expenses $ 369,875
Mountain Home
Inventories 277,204
Property and equipment 34,467
--------------------
Total deferred tax assets 681,546
---------------------
Deferred tax liabilities:
ITC
Property and equipment (14,797)
Mountain Home
Other taxes (3,798)
---------------------
Total deferred tax liabilities (18,595)
---------------------
Net deferred tax assets $ 662,951
=====================
14
The deferred tax assets and liabilities are classified as follows:
March 25,
2005
---------------------
Current deferred tax assets
ITC $ 369,875
Mountain Home 273,406
---------------------
Total current deferred tax assets $ 643,281
---------------------
Long-term deferred tax asset
Mountain Home $ 34,467
---------------------
Long-term deferred tax liability
ITC $ (14,797)
=====================
11. PROFIT SHARING PLAN
The Company has a profit sharing retirement plan (the "Plan") for
full-time employees who have completed one year of service and have
attained age 21. Contributions to the Plan are made at the discretion of
the Company's Board of Directors. Contribution expense related to the Plan
for fiscal year ended March 25, 2005 was $1,051,501.
The Plan also includes a 401(k) option for elective contributions by all
full-time active employees. The Company matches the first $500 of the
employees' annual contributions to the Plan. Expense attributable to the
employer match was $137,385 for the year ended March 25, 2005.
12. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal matters arising in the normal
course of business. In the opinion of management, the Company's liability,
if any, related to these matters is not expected to have a material
adverse impact on the Company's financial position, results of operations
or cash flows. The outcome of legal matters in which the Company is
presently involved is not probable or reasonably estimable.
13. RELATED PARTY TRANSACTIONS
During the year ended March 25, 2005, a note due from related parties was
paid in full. The Company received a total of $161,994 in interest
payments on the note during the year, which had an interest rate of 8.30%.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, certificate of deposit,
accounts receivable, accounts payable and the line of credit at March 25,
2005 approximate fair value.
15
15. CONCENTRATIONS OF CREDIT RISK
The Company's remanufacturing and milling operations are located
throughout the United States.
The Company sells primarily remanufactured dimensional lumber products to
customers in the construction and wood product industries in the United
States. At March 25, 2005, no single customer exceeded 10% of the Company
accounts receivable balance.
16. SUBSEQUENT EVENTS
On May 2, 2005, the Company was acquired by Leucadia National Corporation.
Subsequent to the acquisition, the line of credit was paid off.
16
Leucadia National Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
(In thousands)
Leucadia ITC Prior to
Historical Acquisition Pro Forma Pro Forma As
March 31, 2005 March 25, 2005 Adjustments Adjusted
-------------- -------------- ----------------- ---------------
Assets
Current assets:
Cash and cash equivalents $ 693,603 $ 1,048 $ (139,966) (a) $ 554,685
Investments 953,475 1,250 (1,250) (a) 953,475
Trade, notes and other receivables, net 346,090 25,532 - 371,622
Prepaids and other current assets 53,777 43,564 1,000 (b) 100,098
2,400 (c)
(643) (d)
-------------- -------------- --------------- ---------------
Total current assets 2,046,945 71,394 (138,459) 1,979,880
Non-current investments 698,408 - - 698,408
Notes and other receivables, net 13,886 - - 13,886
Other assets 221,348 34 51,000 (e) 278,632
6,284 (f)
(34) (d)
Property, equipment and
leasehold improvements, net 1,321,645 4,763 25,600 (g) 1,352,008
Investments in associated companies 455,029 - - 455,029
-------------- -------------- --------------- --------------
Total $ 4,757,261 $ 76,191 $ (55,609) $ 4,777,843
============== ============== =============== ==============
Liabilities
Current liabilities:
Trade payables and expense accruals $ 402,289 $ 22,124 $ (8,032) (h) $ 416,381
Deferred revenue 51,548 - - 51,548
Other current liabilities 88,641 6,490 - 95,131
Customer banking deposits due within
one year 16,463 - - 16,463
Debt due within one year 71,284 - - 71,284
Income taxes payable 14,204 - - 14,204
-------------- -------------- --------------- --------------
Total current liabilities 644,429 28,614 (8,032) 665,011
Long-term deferred revenue 162,633 - - 162,633
Other non-current liabilities 205,603 15 (15) (d) 205,603
Non-current customer banking deposits 5,471 - - 5,471
Long-term debt 1,480,509 11,851 (11,851) (h) 1,480,509
-------------- -------------- --------------- --------------
Total liabilities 2,498,645 40,480 (19,898) 2,519,227
-------------- -------------- --------------- --------------
Commitments and contingencies
Minority interest 17,801 - - 17,801
-------------- -------------- --------------- --------------
Shareholders' Equity
Common stock 107,614 1,041 (1,041) (i) 107,614
Additional paid-in capital 598,712 1,815 (1,815) (i) 598,712
Accumulated other comprehensive income 115,465 - - 115,465
Retained earnings 1,419,024 32,855 (32,855) (i) 1,419,024
-------------- -------------- --------------- --------------
Total shareholders' equity 2,240,815 35,711 (35,711) 2,240,815
-------------- -------------- --------------- --------------
Total $ 4,757,261 $ 76,191 $ (55,609) $ 4,777,843
============== ============== =============== ==============
17
Leucadia National Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
ITC Prior to
Leucadia Acquisition
Historical Fiscal Year
Year Ended Ended
December 31, March 25, Pro Forma Pro Forma
2004 2005 Adjustments As Adjusted
---------------- --------------- --------------- ---------------
Revenues:
Telecommunications $ 1,582,948 $ - $ - $ 1,582,948
Healthcare 257,262 - - 257,262
Manufacturing 64,055 401,958 - 466,013
Finance 10,037 - - 10,037
Investment and other income 204,873 185 - 205,058
Net securities gains 142,936 - - 142,936
---------------- --------------- --------------- ---------------
2,262,111 402,143 - 2,664,254
---------------- --------------- --------------- ---------------
Expenses:
Cost of sales:
Telecommunications 1,129,248 - - 1,129,248
Healthcare 216,333 - - 216,333
Manufacturing 45,055 341,067 2,379 (j) 391,901
3,400 (k)
Interest 96,787 490 - 97,277
Salaries 187,880 13,677 - 201,557
Depreciation and amortization 226,080 166 595 (l) 231,941
5,100 (m)
Selling, general and other expenses 305,443 2,409 - 307,852
---------------- --------------- --------------- ---------------
2,206,826 357,809 11,474 2,576,109
---------------- --------------- --------------- ---------------
Income from continuing operations before income taxes
and equity in income of associated companies 55,285 44,334 (11,474) 88,145
Income tax provision (benefit) (20,192) 889 (689)(n) (17,892)
2,100 (o)
---------------- --------------- --------------- ---------------
Income from continuing operations before
equity in income of associated companies 75,477 43,445 (12,885) 106,037
Equity in income of associated companies, net of taxes 76,479 - - 76,479
---------------- --------------- --------------- ---------------
Income from continuing operations $ 151,956 $ 43,445 $ (12,885) $ 182,516
================ =============== =============== ===============
Basic earnings per common share:
Income from continuing operations $1.42 $1.71
Number of shares used in calculation 106,692 106,692
Diluted earnings per common share:
Income from continuing operations $1.40 $1.67
Number of shares used in calculation 112,746 112,746
18
Leucadia National Corporation and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
Leucadia ITC Prior to
Historical Acquisition
Three Months Twelve Weeks
Ended Ended
March 31, March 25, Pro Forma Pro Forma
2005 2005 Adjustments As Adjusted
----------------- ----------------- ----------------- ----------------
Revenues:
Telecommunications $ 421,495 $ - $ - $ 421,495
Healthcare 67,438 - - 67,438
Manufacturing 20,874 87,164 - 108,038
Finance 101 - - 101
Investment and other income 50,822 - - 50,822
Net securities gains 55 - - 55
----------------- ----------------- ----------------- ------------------
560,785 87,164 - 647,949
----------------- ----------------- ----------------- ------------------
Expenses:
Cost of sales:
Telecommunications 303,019 - - 303,019
Healthcare 56,464 - - 56,464
Manufacturing 14,709 73,440 594 (j) 89,343
600 (k)
Interest 24,809 103 - 24,912
Salaries 44,767 3,373 - 48,140
Depreciation and amortization 46,516 41 149 (l) 47,981
1,275 (m)
Selling, general and other expenses 78,412 1,556 - 79,968
----------------- ----------------- ----------------- ------------------
568,696 78,513 2,618 649,827
----------------- ----------------- ----------------- ------------------
Income (loss) from continuing operations before
income taxes and equity in income of
associated companies (7,911) 8,651 (2,618) (1,878)
Income tax provision 624 126 262 (n) 1,046
34 (o)
----------------- ----------------- ----------------- ------------------
Income (loss) from continuing operations before
equity in income of associated companies (8,535) 8,525 (2,914) (2,924)
Equity in income of associated companies,
net of taxes 11,148 - - 11,148
----------------- ----------------- ----------------- ------------------
Income from continuing operations $ 2,613 $ 8,525 $ (2,914) $ 8,224
================= ================= ================= ==================
Basic earnings per common share:
Income from continuing operations $0.02 $0.08
Number of shares used in calculation 107,609 107,609
Diluted earnings per common share:
Income from continuing operations $0.02 $0.08
Number of shares used in calculation 107,880 107,880
19
Notes to Unaudited Pro Forma Consolidated Financial Statements
The unaudited pro forma consolidated balance sheet as of March 31, 2005
reflects the adjustments necessary to record the acquisition by the Company of
Idaho Timber Corporation and certain affiliated companies (collectively, "ITC")
(the "Acquisition") as though it had occurred on March 31, 2005.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 2004 and the unaudited pro forma consolidated statement of
operations for the three months ended March 31, 2005 have been prepared assuming
the Acquisition had occurred on January 1, 2004 and reflect the effects of
certain adjustments to the historical financial statements that result from the
Acquisition. The Acquisition was funded from available cash resources.
ITC historically had either a 52 or 53 week fiscal year, ending on the last
Friday in March. In order to prepare the pro forma consolidated financial
statements, the Company used ITC's audited combined balance sheet and audited
combined statement of income as of and for the year ended March 25, 2005. In
order to prepare the unaudited pro forma consolidated statements of operations
for the three months ended March 31, 2005, the Company used ITC's unaudited
combined statement of income for the twelve week period ended March 25, 2005. As
a result, ITC's operating results for the twelve week period ended March 25,
2005 is included in both pro forma consolidated statements of operations
presented.
The following notes pertain to the unaudited pro forma consolidated
financial statements:
(a) Represents the purchase price of $138,900,000 (including expenses of
$2,400,000 and working capital adjustments of $4,500,000), and
reflects that the cash, cash equivalents and investments of ITC (an
aggregate of $2,298,000) were not purchased by the Company.
(b) Represents adjustments to reflect finished goods and work in process
inventory at estimated selling prices, less the sum of costs of
disposal and a reasonable profit allowance, and costs to complete for
work in process inventory.
(c) Represents an increase to adjust timber and timberland to estimated
fair value.
(d) Represents the adjustment necessary to eliminate the historical
deferred income taxes of ITC. See also note (n) below.
(e) Represents the preliminary estimate of the fair value of identifiable
intangible assets which will be recognized apart from goodwill,
substantially all of which are customer-related intangible assets. The
fair value is primarily based upon Company's estimates of future
results of operations and cash flows, and a preliminary independent
third-party appraisal. The intangible assets are expected to be
amortized over a ten year period.
(f) Represents the preliminary amount allocated to goodwill, including
amounts for the assembled workforce.
(g) Represents the preliminary adjustment to recognize property and
equipment at fair value. The estimated useful life is fifteen years
for amounts allocated to buildings and improvements, and three to five
years for equipment.
(h) Represents the retirement of ITC's line of credit which was funded
with a portion of the purchase price. Outstanding checks totaling
$8,032,000 (reflected as trade payables and expense accruals) are
funded by the line of credit when presented for payment; as a result,
a pro forma adjustment is applied to allocate a portion of the
purchase price to the satisfaction of these obligations.
(i) Represents the adjustment necessary to eliminate the historical
stockholders' equity accounts of ITC.
20
(j) For both periods, represents an increase to depreciation expense that
is classified as cost of sales related to the preliminary adjustment
to fair value of property and equipment (see note (g) above).
(k) For the three months ended March 31, 2005, represents the estimated
portion of the fair value adjustment to timber and timberland
(referred to in note (c) above) which would have been amortized during
the period. For the year ended December 31, 2004, includes the
amortization of the full amount of the timber and timberland
adjustment, and the adjustment to inventory referred to in note (b)
above.
(l) For both periods, represents an increase to depreciation expense that
is classified as depreciation and amortization related to the
preliminary adjustment to fair value of property and equipment (see
note (g) above).
(m) For both periods, represents an increase to amortization expense
related to the preliminary adjustment to fair value of identifiable
intangible assets referred to in note (e) above.
(n) All but two of the ITC entities purchased by the Company had
previously elected to be taxed under Subchapter S of the Internal
Revenue Code; accordingly, any taxable income or loss from the
Subchapter S entities were reported by the shareholders of those
corporations and no tax expense was reflected in those ITC entities'
historical financial statements. The adjustment represents the
elimination of the historical federal income tax provision or benefit
of ITC entities that were not taxed under Subchapter S. The Company
has not reflected an adjustment for any federal income tax expense or
benefit for ITC's historical results or for pre-tax pro forma
adjustments because of the Company's consolidated federal income
benefits that would have offset any federal income tax. Such federal
income tax benefits have previously been fully reserved for in the
Company's valuation allowance.
The Company has not yet determined whether it will elect to treat the
Acquisition as an acquisition of assets for income tax purposes, and
has assumed for the pro forma consolidated financial statements that
the accounting and tax basis of ITC's assets and liabilities are the
same. However, should the Company ultimately decide to retain the
pre-acquisition tax basis of ITC's assets, it would not recognize a
net deferred tax liability for the excess of the purchase accounting
book values over the historical tax basis due to the existing full
valuation allowance for the Company's deferred tax assets.
(o) For both periods, represents the incremental state income tax
provision that would have been recorded for the ITC pro forma adjusted
pre-tax income which was generated by entities that historically
elected to be taxed under Subchapter S.
21
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 hereunto duly authorized.
Date: July 14, 2005
LEUCADIA NATIONAL CORPORATION
/s/ Joseph A. Orlando
------------------------------
Name: Joseph A. Orlando
Title: Vice President and Chief
Financial Officer
22