UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 23, 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 Disposition of Assets.
On December 23, 2005 (the "Closing Date"), Leucadia National
Corporation (the "Company") completed the sale of its telecommunications
subsidiary, WilTel Communications Group, LLC ("WilTel"), to Level 3
Communications, Inc. ("Level 3") for aggregate consideration of $486 million
(including $16 million for excess working capital, which is subject to
adjustment, and $100 million in cash to reflect that amount of cash left in
WilTel), and 115 million newly issued shares of Level 3 common stock. In
connection with the sale, the Company retained certain assets and liabilities of
WilTel that were not purchased by Level 3. The retained assets include (i)
WilTel's headquarters building located in Tulsa, Oklahoma, (ii) cash and cash
equivalents in excess of $100 million, (iii) corporate aircraft and related
capital lease obligations, and (iv) marketable securities. In addition, the
Company retained all of WilTel's right to receive cash payments from SBC
Communications Inc. totaling $236 million, pursuant to the previously announced
Termination, Mutual Release and Settlement Agreement dated June 15, 2005 among
the Company, WilTel and SBC. Prior to the closing, WilTel repaid its long-term
debt obligations using its funds, together with funds advanced by the Company.
The retained liabilities also include WilTel's defined benefit pension plan and
supplemental retirement plan obligation and certain other employee related
liabilities and other claims.
The agreement with Level 3 requires that all parties make the
appropriate filings to treat the purchase of WilTel as a purchase of assets for
federal, state and local income and franchise tax purposes. As a result,
WilTel's operating loss carryforwards, including any tax loss carryforwards
generated by the sale, will remain with the Company. The Company currently
estimates that after the closing it has federal net operating loss carryforwards
of approximately $4.9 billion, which are subject to qualifications, limitations
and uncertainties as discussed in the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, and in the Company's Quarterly Reports on Form
10-Q filed during 2005.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired
Not applicable.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial information
should be read in conjunction with the historical consolidated financial
statements and related notes of the Company and its subsidiaries for the years
ended December 31, 2004, 2003 and 2002, and for the nine months ended September
30, 2005, which have been previously filed with the Securities and Exchange
Commission.
2
The unaudited pro forma consolidated financial information is presented
for informational purposes only, is based upon estimates by the Company's
management and is not intended to be indicative of the Company's actual
consolidated financial position after the transaction was consummated on the
Closing Date, and they may not be indicative of consolidated results of
operations in the future.
On December 23, 2005, the Company completed the sale to Level 3 of all
of the membership interests in WilTel, excluding certain specified WilTel assets
and liabilities. The following unaudited pro forma consolidated balance sheet as
of September 30, 2005 has been prepared assuming that the transaction was
consummated on that date. The following unaudited pro forma consolidated
statements of operations have been prepared assuming that the transaction was
consummated on January 1, 2002; however, the unaudited pro forma consolidated
statements of operations do not contain any pro forma adjustments to reflect
hypothetical earnings on the sale proceeds received.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the following notes:
1. Pro Forma Adjustments for the Sale: The unaudited pro forma
balance sheet reflects the purchase price paid by Level 3 of
$486 million (including $16 million for excess working
capital, which is subject to adjustment, and $100 million in
cash to reflect that amount of cash left in WilTel), and 115
million newly issued shares of Level 3 common stock with an
aggregate market value of $339 million based on the $2.95 per
share closing price of Level 3 common stock on December 22,
2005. In addition, the Company retained all of WilTel's right
to receive cash payments from SBC Communications Inc. totaling
$236 million, pursuant to the previously announced
Termination, Mutual Release and Settlement Agreement dated
June 15, 2005 among the Company, WilTel and SBC. The pro forma
adjustments include the recognition of $204.3 million of this
amount as a receivable, which represents the amount of the SBC
payment that had not been accrued in the historical financial
statements as of September 30, 2005. The pro forma balance
sheet also reflects the elimination of the historical assets
and liabilities of WilTel purchased by Level 3, estimated
expenses and other charges related to the transaction,
estimated deferred income tax expense and estimated after-tax
gain on the sale of $146 million.
As discussed above, WilTel's headquarters building located in
Tulsa, Oklahoma was not sold to Level 3. The Company believes
that the closing of this transaction is a change in
circumstances that indicates the carrying amount of the
headquarters building may not be recoverable, and the Company
will be evaluating the recoverability of this asset in
connection with the preparation of its annual report on Form
10-K for the year ended December 31, 2005. Although the
Company has not yet determined how much the carrying amount of
the headquarters building needs to be adjusted (if any), the
pro forma adjustments include a pre-tax charge of
approximately $40 million to reduce the gain on sale for a
possible impairment.
3
The unaudited pro forma consolidated statements of operations
reflect the elimination of the historical operating results of
WilTel, which will be classified as a discontinued operation.
The pro forma adjustments reflected on the unaudited pro forma
consolidated statements of operations are the same adjustments
the Company expects to record when it reclassifies WilTel's
historical operating results as a discontinued operation in
its annual report on Form 10-K for the year ended December 31,
2005.
2. Pro Forma Adjustments for Debt Repayment: The purchase
agreement with Level 3 required the payment in full of
WilTel's obligations under its credit agreement prior to
closing ($357.5 million outstanding at September 30, 2005) and
required the Company to obtain a release for WilTel from any
obligation under the outstanding mortgage note secured by its
headquarters building ($59.7 million outstanding at September
30, 2005). These obligations were paid in full in November
2005; the pro forma adjustments reflect this repayment along
with accrued interest, the write-off of unamortized debt
expenses and the reversal of accrued arrangement fees that
will not be paid.
4
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 2005
PRO FORMA
PRO FORMA ADJUSTMENTS
ADJUSTMENTS FOR DEBT PRO FORMA
HISTORICAL FOR THE SALE REPAYMENT AS ADJUSTED
---------- ------------ --------- -----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ 567,876 $ 386,000 $ (417,633) $ 536,243
Investments 992,027 339,250 - 1,331,277
Trade, notes and other receivables, net 472,173 (82,225) - 389,948
Prepaids and other current assets 165,288 (23,788) - 141,500
----------- ---------- ---------- -----------
Total current assets 2,197,364 619,237 (417,633) 2,398,968
Non-current investments 801,611 - - 801,611
Notes and other receivables, net 10,883 - - 10,883
Intangible assets, net and goodwill 83,698 - - 83,698
Deferred tax asset, net 1,097,351 (82,109) 2,234 1,017,476
Other assets 207,759 (22,632) (9,094) 176,033
Property, equipment and leasehold improvements 1,238,674 (946,726) - 291,948
Investments in associated companies, net 424,478 - - 424,478
----------- ---------- ---------- -----------
Total $ 6,061,818 $ (432,230) $ (424,493) $ 5,205,095
=========== ========== ========== ===========
LIABILITIES
Current liabilities:
Trade payables and expense accruals $ 413,110 $ (214,497) $ (430) $ 198,183
Deferred income 58,248 (56,577) - 1,671
Other current liabilities 76,312 (28,650) (963) 46,699
Debt due within one year 185,410 - (70,549) 114,861
Income taxes payable 16,039 - - 16,039
----------- ---------- ---------- -----------
Total current liabilities 749,119 (299,724) (71,942) 377,453
Long-term deferred income 190,051 (190,051) - -
Other non-current liabilities 187,272 (88,313) (1,925) 97,034
Long-term debt 1,380,219 (113) (346,654) 1,033,452
----------- ---------- ---------- -----------
Total liabilities 2,506,661 (578,201) (420,521) 1,507,939
----------- ---------- ---------- -----------
Commitments and contingencies
Minority interest 12,448 - - 12,448
SHAREHOLDERS' EQUITY
Common shares 108,030 - - 108,030
Additional paid-in capital 612,517 - - 612,517
Accumulated other comprehensive income 27,913 - - 27,913
Retained earnings 2,794,249 145,971 (3,972) 2,936,248
----------- ---------- ---------- -----------
Total shareholders' equity 3,542,709 145,971 (3,972) 3,684,708
----------- ---------- ---------- -----------
Total $ 6,061,818 $ (432,230) $ (424,493) $ 5,205,095
=========== ========== ========== ===========
5
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE SALE AS ADJUSTED
---------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES AND OTHER INCOME:
Telecommunications $ 1,368,867 $ (1,297,872) $ 70,995
Healthcare 182,791 - 182,791
Manufacturing 223,991 - 223,991
Investment and other income 187,527 (74,811) 112,716
Net securities gains 135,009 (2,277) 132,732
----------- ------------ -----------
2,098,185 (1,374,960) 723,225
----------- ------------ -----------
EXPENSES:
Cost of sales:
Telecommunications 963,094 (920,990) 42,104
Healthcare 154,100 - 154,100
Manufacturing 189,140 - 189,140
Interest 75,166 (23,719) 51,447
Salaries and incentive compensation 158,146 (103,423) 54,723
Depreciation and amortization 138,987 (120,238) 18,749
Selling, general and other expenses 240,499 (129,656) 110,843
----------- ------------ -----------
1,919,132 (1,298,026) 621,106
----------- ------------ -----------
Income from continuing operations before income taxes
and equity in income of associated companies 179,053 (76,934) 102,119
Income tax provision (benefit) (1,131,719) - (1,131,719)
----------- ------------ -----------
Income from continuing operations before equity in
income of associated companies 1,310,772 (76,934) 1,233,838
Equity in income of associated companies, net of taxes 11,962 - 11,962
----------- ------------ -----------
Income from continuing operations $ 1,322,734 $ (76,934) $ 1,245,800
=========== ============ ===========
Basic earnings per common share from continuing operations $ 12.28 $ 11.57
=========== ===========
Diluted earnings per common share from continuing operations $ 11.54 $ 10.87
=========== ===========
Number of shares used in calculation:
Basic 107,717 107,717
=========== ===========
Diluted 115,590 115,590
=========== ===========
6
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE SALE AS ADJUSTED
---------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES AND OTHER INCOME:
Telecommunications $ 1,582,948 $ (1,582,948) $ -
Healthcare 257,262 - 257,262
Manufacturing 64,055 - 64,055
Finance 10,037 - 10,037
Investment and other income 204,873 (34,829) 170,044
Net securities gains 142,936 (6,372) 136,564
----------- ------------ ---------
2,262,111 (1,624,149) 637,962
----------- ------------ ---------
EXPENSES:
Cost of sales:
Telecommunications 1,129,248 (1,129,248) -
Healthcare 216,333 - 216,333
Manufacturing 45,055 - 45,055
Interest 96,787 (34,077) 62,710
Salaries and incentive compensation 187,880 (139,546) 48,334
Depreciation and amortization 226,080 (206,455) 19,625
Selling, general and other expenses 305,443 (171,416) 134,027
----------- ------------ ---------
2,206,826 (1,680,742) 526,084
----------- ------------ ---------
Income from continuing operations before income taxes
and equity in income of associated companies 55,285 56,593 111,878
Income tax provision (benefit) (20,192) - (20,192)
----------- ------------ ---------
Income from continuing operations before equity in
income of associated companies 75,477 56,593 132,070
Equity in income of associated companies, net of taxes 76,479 - 76,479
----------- ------------ ---------
Income from continuing operations $ 151,956 $ 56,593 $ 208,549
=========== ============ =========
Basic earnings per common share from continuing operations $ 1.42 $ 1.95
=========== =========
Diluted earnings per common share from continuing operations $ 1.40 $ 1.91
=========== =========
Number of shares used in calculation:
Basic 106,692 106,692
=========== =========
Diluted 112,746 112,746
=========== =========
7
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE SALE AS ADJUSTED
---------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES AND OTHER INCOME:
Telecommunications $ 231,930 $ (231,930) $ -
Healthcare 71,039 - 71,039
Manufacturing 53,327 - 53,327
Finance 55,091 - 55,091
Investment and other income 127,631 (3,337) 124,294
Net securities gains 9,953 (25) 9,928
--------- ---------- ---------
548,971 (235,292) 313,679
--------- ---------- ---------
EXPENSES:
Cost of sales:
Telecommunications 167,653 (167,653) -
Healthcare 61,280 - 61,280
Manufacturing 38,998 - 38,998
Interest 43,002 (5,100) 37,902
Salaries and incentive compensation 58,394 (19,300) 39,094
Depreciation and amortization 57,297 (39,165) 18,132
Selling, general and other expenses 154,100 (27,609) 126,491
--------- ---------- ---------
580,724 (258,827) 321,897
--------- ---------- ---------
Income (loss) from continuing operations before income taxes,
minority expense of trust preferred securities
and equity in income of associated companies (31,753) 23,535 (8,218)
Income tax provision (benefit) (43,442) 8,268 (35,174)
--------- ---------- ---------
Income from continuing operations before minority expense
of trust preferred securities and equity in
income of associated companies 11,689 15,267 26,956
Minority expense of trust preferred securities, net of taxes (2,761) - (2,761)
Equity in income of associated companies, net of taxes 76,947 52,087 129,034
--------- ---------- ---------
Income from continuing operations $ 85,875 $ 67,354 $ 153,229
========= ========== =========
Basic earnings per common share from continuing operations $ 0.94 $ 1.67
========= =========
Diluted earnings per common share from continuing operations $ 0.93 $ 1.66
========= =========
Number of shares used in calculation:
Basic 91,896 91,896
========= =========
Diluted 92,551 92,551
========= =========
8
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE SALE AS ADJUSTED
---------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
REVENUES AND OTHER INCOME:
Telecommunications $ - $ - $ -
Healthcare - - -
Manufacturing 50,744 - 50,744
Finance 87,812 - 87,812
Investment and other income 133,667 - 133,667
Net securities gains (37,066) - (37,066)
--------- -------- ---------
235,157 - 235,157
--------- -------- ---------
EXPENSES:
Cost of sales:
Telecommunications - - -
Healthcare - - -
Manufacturing 33,963 - 33,963
Interest 32,975 - 32,975
Salaries and incentive compensation 41,814 - 41,814
Depreciation and amortization 16,253 - 16,253
Selling, general and other expenses 149,296 - 149,296
--------- -------- ---------
274,301 - 274,301
--------- -------- ---------
Income (loss) from continuing operations before income taxes,
minority expense of trust preferred securities
and equity in income of associated companies (39,144) - (39,144)
Income tax provision (benefit) (144,075) - (144,075)
--------- -------- ---------
Income from continuing operations before minority expense
of trust preferred securities and equity in
income of associated companies 104,931 - 104,931
Minority expense of trust preferred securities, net of taxes (5,521) - (5,521)
Equity in income of associated companies, net of taxes 54,712 13,374 68,086
--------- -------- ---------
Income from continuing operations $ 154,122 $ 13,374 $ 167,496
========= ======== =========
Basic earnings per common share from continuing operations $ 1.85 $ 2.01
========= =========
Diluted earnings per common share from continuing operations $ 1.83 $ 1.99
========= =========
Number of shares used in calculation:
Basic 83,501 83,501
========= =========
Diluted 84,025 84,025
========= =========
9
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: December 29, 2005
LEUCADIA NATIONAL CORPORATION
/s/ Joseph A. Orlando
----------------------------------------
Name: Joseph A. Orlando
Title: Vice President and Chief
Financial Officer
10