Zacks_Analysts' Blog : LUK's 1Q Slips on Higher Taxes - Analyst Blog

Leucadia National Corporation (LUK) reported its financial results for the first quarter on May 5. In the first quarter, the company generated its net income from continuing operations of 5 cents per share, down compared with 80 cents per share earnings in the year-ago quarter, due primarily to higher taxes in the quarter. Results were also below the Zacks Consensus Estimate of 45 cents.

Revenue

In the first quarter 2011, revenue jumped 9.5% year over year to $284.0 million from $259.3 million in the year-ago comparable quarter. The improvement was attributed to strong performances across most of the segments.

In the quarter, revenue from the Manufacturing segment was $63.8 million, down 1.7% year over year and accounted for 22.5% of total revenue. Oil and Gas Drilling segment accounted for 11.3% of revenue and totaled $32.1 million.

Revenue generated from the Gaming Entertainment operations was roughly 10.8% of the total revenue, and increased 13.7% to $30.8 million, while revenue of $85.4 million from the Domestic Real Estate segment accounted for 30.1% of the total revenue.

Revenue from the Medical Product Development segment was $0.1 million. Proceeds from Other operations were $16.1 million, up from $13.3 million in the first quarter of 2010 and accounted for about 5.7% of the total revenue, while the Corporate segment revenue of $55.8 million accounted for 19.6% of revenue.

Margins

Expenses were $204.5 million in the quarter, down slightly from $211.5 million in the year-ago quarter. In relation to revenue, expenses dipped to 72% from 81.5% in the earlier year.

Balance Sheet

Exiting the first quarter, Leucadia’s cash and cash equivalents plummeted 28.9% sequentially to $313.9 million while its long-term debt dipped by 2.7% to $1,506.2 million compared with $1,548.5 million in the previous quarter.

Cash Flow

Cash flow from operating activities was a net outflow of $17.8 million in the quarter compared with a net outflow of $72.0 million in the previous year. Spending on property, equipment and leasehold improvements decreased in the quarter to $4.1 million compared with $6.5 million in the comparable quarter of 2010.

Leucadia is engaged in manufacturing, telecommunications, oil and gas drilling services, property management and services, gaming entertainment, real estate activities, medical product development operations and various other investment activities in the United States.

The company faces competition from other companies like Apollo Investment Corporation (AINV) and The Blackstone Group (BX). We currently maintain our Neutral recommendation on Leucadia.