<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 1-2493
NEW VALLEY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-5482050
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
100 S.E. SECOND STREET
MIAMI, FLORIDA 33131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(305) 579-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES X NO
------ ------
AS OF NOVEMBER 11, 1997, THERE WERE OUTSTANDING 9,581,698 OF THE
REGISTRANT'S COMMON SHARES, $.01 PAR VALUE.
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<PAGE> 2
NEW VALLEY CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
-----------------
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
Item 1. Consolidated Financial Statements:
<S> <C>
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996............................................. 3
Consolidated Statements of Operations for the three months
and nine months ended September 30, 1997 and 1996............. 4
Consolidated Statement of Changes in Shareholders' Equity
(Deficit) for the nine months ended September 30, 1997........ 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996............................. 6
Notes to the Quarterly Consolidated Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 18
Item 3. Defaults Upon Senior Securities................................... 18
Item 4. Submission of Matters to a Vote of Security-Holders............... 18
Item 6. Exhibits and Reports on Form 8-K.................................. 19
SIGNATURE............................................................................ 20
</TABLE>
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<PAGE> 3
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
----------------- -----------------
September 30, December 31,
----------------- -----------------
1997 1996
----------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................... $ 16,707 $ 57,282
Investment securities available for sale...................... 65,407 61,454
Trading securities owned...................................... 51,920 29,761
Restricted assets............................................. 1,029 2,080
Receivable from clearing brokers.............................. 1,628 23,870
Other current assets.......................................... 3,774 9,273
---------- ---------
Total current assets..................................... 140,465 183,720
---------- ---------
Investment in real estate......................................... 261,597 179,571
Investment securities available for sale.......................... 2,074 2,716
Restricted assets................................................. 5,566 6,766
Long-term investments, net........................................ 19,921 13,270
Furniture and equipment, net...................................... 9,508 9,225
Other assets...................................................... 27,702 11,272
---------- ---------
Total assets............................................. $ 466,833 $406,540
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities...................... $ 59,018 $ 44,888
Prepetition claims and restructuring accruals................. 15,723 15,526
Income taxes.................................................. 18,329 18,243
Securities sold, not yet purchased............................ 24,212 17,143
Note payable to related party................................. 12,000 --
Current portion of notes payable and long-term obligations ... 2,311 2,310
---------- ---------
Total current liabilities................................ 131,593 98,110
---------- ---------
Notes payable..................................................... 177,631 157,941
Other long-term obligations....................................... 16,409 12,282
Redeemable preferred shares....................................... 245,740 210,571
Shareholders' equity (deficit):
Cumulative preferred shares; liquidation preference of $69,769;
dividends in arrears, $133,248 and $115,944................ 279 279
Common Shares, $.01 par value; 850,000,000 shares
authorized; 9,577,624 shares outstanding................... 96 96
Additional paid-in capital.................................... 614,123 644,789
Accumulated deficit........................................... (743,798) (721,854)
Unearned compensation on stock options........................ (306) (731)
Unrealized gain on investment securities...................... 25,066 5,057
---------- ---------
Total shareholders' equity (deficit)..................... (104,540) (72,364)
---------- ---------
Total liabilities and shareholders' equity (deficit)..... $ 466,833 $406,540
========== =========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 4
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Principal transactions, net................................ $ 6,131 $ 3,926 $ 11,857 $ 18,836
Commissions................................................ 4,235 4,700 11,059 13,383
Real estate leasing........................................ 7,079 5,941 19,664 17,605
Interest and dividends..................................... 2,554 4,230 6,677 14,056
Other income............................................... 6,449 2,479 21,348 19,830
---------- ---------- --------- ---------
Total revenues......................................... 26,448 21,276 70,605 83,710
---------- ---------- --------- ---------
Cost and expenses:
Operating, general and administrative...................... 30,149 24,371 79,967 88,424
Interest................................................... 4,229 4,627 12,134 13,890
Provision for loss on long-term investment................. -- -- 3,796 --
---------- ---------- --------- ---------
Total costs and expenses............................... 34,378 28,998 95,897 102,314
---------- ---------- --------- ---------
Loss from continuing operations before income taxes
and minority interest...................................... (7,930) (7,722) (25,292) (18,604)
Income tax provision (benefit).................................. 24 (233) 119 67
Minority interests in loss from continuing operations
of consolidated subsidiary................................. 1,124 384 3,098 1,082
---------- ---------- --------- ---------
Loss from continuing operations................................. (6,830) (7,105) (22,313) (17,589)
Discontinued operations:
Income (loss) from discontinued operations................. -- (5,339) 583 (4,501)
Income (loss) on sale of discontinued operations........... 256 -- (214) --
---------- ---------- --------- ---------
Total discontinued operations.............................. 256 (5,339) 369 (4,501)
---------- ---------- --------- ---------
Net loss........................................................ (6,574) (12,444) (21,944) (22,090)
Dividend requirements on preferred shares....................... (17,567) (15,400) (50,297) (46,508)
Excess of carrying value of redeemable preferred
shares over cost of shares purchased....................... -- -- -- 4,279
---------- ---------- --------- ---------
Net loss applicable to Common Shares............................ $ (24,141) $ (27,844) $ (72,241) $ (64,319)
========== ========== ========= =========
Loss per common share:
Continuing operations...................................... $ (2.55) $ (2.35) $ (7.58) $ (6.25)
Discontinued operations.................................... .03 (.56) .04 (.47)
------- ------- ------- -------
Net loss per Common Share.................................. $ (2.52) $ (2.91) $ (7.54) $ (6.72)
======= ======= ======= =======
Number of shares used in computation............................ 9,578 9,578 9,578 9,578
======= ======= ======= =======
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 5
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Unearned
Class B Compensation
Preferred Common Paid-In Accumulated on Stock Unrealized
Shares Shares Capital Deficit Options Gain
------ ------ ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996............ $279 $96 $644,789 $(721,854) $ (731) $ 5,057
Net loss........................... (21,944)
Undeclared dividends and accretion
on redeemable preferred shares... (32,996)
Unrealized gain on investment
securities....................... 20,009
Public sale of subsidiary's
common stock..................... 2,715
Adjustment to unearned
compensation on stock options.... (385) 385
Compensation expense on stock
option grants.................... 40
---- --- -------- --------- -------- --------
Balance, September 30, 1997........... $279 $96 $614,123 $(743,798) $ (306) $ 25,066
==== === ======== ========= ======== ========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 6
NEW VALLEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------
Nine Months Ended
September 30,
------------------------------------
1997 1996
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................ $ (21,944) $ (22,090)
Adjustments to reconcile net loss to net cash
provided from (used for) operating activities:
Loss (income) from discontinued operations............................ (369) 4,501
Depreciation and amortization......................................... 6,635 3,507
Provision for loss on long-term investment............................ 3,796 --
Stock based compensation expense...................................... 2,213 --
Changes in assets and liabilities, net of effects from acquisitions:
Increase in receivables and other assets........................... (8,291) (5,963)
Decrease (increase) in income taxes................................ 86 (3,029)
Increase in accounts payable and accrued liabilities............... 5,951 8,786
--------- ---------
Net cash used for continuing operations.................................... (11,923) (14,288)
Net cash provided from (used for) discontinued operations.................. 1,779 (2,659)
--------- ---------
Net cash used for operating activities..................................... (10,144) (16,947)
--------- ---------
Cash flows from investing activities:
Sale or maturity of investment securities............................. 37,697 70,319
Purchase of investment securities..................................... (20,999) (17,644)
Sale or liquidation of long-term investments.......................... 2,807 14,500
Purchase of long-term investments..................................... (11,404) (2,639)
Purchase or improvements of real estate............................... (6,208) (24,882)
Sale of other assets.................................................. 5,561 --
Payment of prepetition claims......................................... (1,199) (6,723)
Return of prepetition claims paid..................................... 1,396 --
Decrease in restricted assets......................................... 2,251 29,011
Payment for acquisitions, net of cash acquired........................ (20,014) 1,915
--------- ---------
Net cash provided from (used for) investing activities..................... (10,112) 63,857
--------- ---------
Cash flows from financing activities:
Payment of preferred dividends........................................ -- (41,419)
Purchase of Class A preferred stock................................... -- (10,530)
Increase in margin loans payable...................................... -- 744
Sale of subsidiary's common stock..................................... 5,417 --
Proceeds from notes payable........................................... 19,993 --
Repayment of notes payable to related party........................... (21,500) --
Repayment of notes payable............................................ (20,703) --
Repayment of other obligations........................................ (3,526) (8,888)
--------- ---------
Net cash used for financing activities..................................... (20,319) (60,093)
--------- ---------
Net decrease in cash and cash equivalents.................................. (40,575) (13,183)
Cash and cash equivalents, beginning of period............................. 57,282 51,742
--------- ---------
Cash and cash equivalents, end of period................................... $ 16,707 $ 38,559
========= =========
</TABLE>
See accompanying Notes to Quarterly Consolidated Financial Statements
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<PAGE> 7
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. PRINCIPLES OF REPORTING
The consolidated financial statements include the accounts of New Valley
Corporation and Subsidiaries (the "Company"). The consolidated financial
statements as of September 30, 1997 presented herein have been prepared by
the Company without an audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position as of September 30, 1997 and the
results of operations and cash flows for all periods presented have been
made. Results for the interim periods are not necessarily indicative of
the results for an entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
These financial statements should be read in conjunction with the
consolidated financial statements in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, as filed with the Securities
and Exchange Commission.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income. The purpose of reporting comprehensive income is to
present a measure of all changes in equity that result from recognized
transactions and other economic events of the period other than
transactions with owners in their capacity as owners. SFAS 130 requires
that an enterprise classify items of other comprehensive income by their
nature in the financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet.
SFAS 130 is effective for fiscal years beginning after December 15, 1997,
with earlier application permitted. The Company has not yet determined the
impact of the implementation of SFAS 130.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 specifies revised
guidelines for determining an entity's operating segments and the type and
level of financial information to be disclosed. Once operating segments
have been determined, SFAS 131 provides for a two-tier test for
determining those operating segments that would need to be disclosed for
external reporting purposes. In addition to providing the required
disclosures for reportable segments, SFAS 131 also requires disclosure of
certain "second level" information by geographic area and for
products/services. SFAS 131 also makes a number of changes to existing
disclosure requirements. SFAS 131 is effective for fiscal years beginning
after December 15, 1997, with earlier application encouraged. The Company
has not yet determined the impact of the implementation of SFAS 131.
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<PAGE> 8
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
2. ACQUISITION
On January 31, 1997, the Company entered into a stock purchase agreement
(the "Purchase Agreement") with Brooke (Overseas) Ltd. ("Brooke
(Overseas)"), a wholly-owned subsidiary of Brooke Group Ltd. ("Brooke"), a
related party through the ownership of an approximate 42% voting interest
in the Company. Pursuant to the Purchase Agreement, the Company acquired
10,483 shares (the "BML Shares") of the common stock of BrookeMil Ltd.
("BML") from Brooke (Overseas) for a purchase price of $55,000, consisting
of $21,500 in cash and a $33,500 9% promissory note of the Company (the
"Note"). The BML Shares comprise 99.1% of the outstanding shares of BML, a
real estate development company in Russia. The Note is collateralized by
the BML Shares and, as of September 30, 1997, had a balance of $12,000
which is payable on December 31, 1997. The note was subsequently reduced
to a balance of $8,500 as of November 13, 1997.
BML is developing a three-phase complex on 2.2 acres of land in downtown
Moscow, for which it has a 49-year lease. In 1993, the first phase of the
project, Ducat Place I, a 46,500 sq. ft. Class-A office building, was
constructed and leased. On April 18, 1997, BML sold Ducat Place I to one
of its tenants for approximately $7,500, which purchase price has been
reduced to reflect prepayments of rent. In 1997, BML completed
construction of Ducat Place II, a 150,000 sq. ft. office building, which
has been substantially pre-leased to a number of leading international
companies. The third phase, Ducat Place III, is planned as a 400,000 sq.
ft. mixed-use complex, with construction anticipated to commence in 1999.
The Company is currently evaluating plans for financing the construction
of Ducat Place III.
The acquisition was treated as a purchase for financial reporting purposes
and, accordingly, these consolidated financial statements include the
operations of BML from the date of acquisition.
The purchase price was allocated as follows: current assets of
approximately $9,000, investment in real estate of $79,200, other assets
of $8,800, assumption of current liabilities of $35,146 and long-term
liabilities of $6,854. Current assets consisted primarily of an asset held
for sale of $6,400 related to the estimated proceeds from the sale of
Ducat Place I, net of $1,100 in accrued closing costs. Liabilities
included a $20,400 loan to a Russian bank for the construction of Ducat
Place II ("Construction Loan"). In addition, the liabilities of BML
included approximately $13,800 of rents and related payments prepaid by
tenants of Ducat Place II for periods generally ranging from 15 to 18
months. Proforma operating results for the nine months ended September 30,
1997 and 1996 are not presented herein as the historical operating results
of BML are not material to the historical operating results of the
Company.
In August 1997, BML refinanced all amounts due under the Construction Loan
with borrowings under a new credit facility with a Russian bank. The new
credit facility bears interest at 16% per year, matures no later than
August 2002, with principal payments commencing after the first year, and
is collateralized by a mortgage on Ducat Place II and guaranteed by the
Company. At September 30, 1997, borrowings under the new credit agreement
totaled $19,993.
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<PAGE> 9
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The components of the Company's investment in real estate at September 30,
1997 are as follows:
<TABLE>
<CAPTION>
U.S. BML TOTAL
---- --- -----
<S> <C> <C> <C>
Land .................................. $ 36,162 $ 20,773 $ 56,935
Buildings............................... 147,033 65,000 212,033
Construction-in-progress................ 29 -- 29
--------- --------- ---------
Total............................. 183,224 85,773 268,997
Less: accumulated depreciation......... (6,994) (406) (7,400)
-------- --------- --------
Net investment in real estate..... $176,230 $ 85,367 $261,597
======== ========= ========
</TABLE>
On November 10, 1997, the Company sold one of its shopping centers located
in Marathon, Florida for $5,400 which resulted in a gain on sale of
approximately $1,200.
3. DISCONTINUED OPERATIONS
During the fourth quarter of 1996, Thinking Machines Corporation
("Thinking Machines") adopted a plan to terminate its parallel processing
computer sales and service business. Consequently, the operating results
of this segment have been classified as discontinued operations, and the
quarterly results for 1996 have been reclassified. Accordingly, the
financial statements reflect the financial position and the results of
operations of the discontinued operations of Thinking Machines separately
from continuing operations.
Summarized operating results of the discontinued operations of Thinking
Machines are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues......................... $ -- $ 3,318 $3,386 $12,115
========== ======= ===== ======
Operating income (loss).......... $ -- $ (9,409) $ 950 $ (8,044)
========== ======= ====== =======
Income (loss) before income
taxes and minority interests.. $ -- $ (9,409) $ 950 $ (8,044)
Minority interests............... $ -- 4,070 (367) 3,543
---------- ------- ------ -------
Net income (loss)................ $ -- $ (5,339) $ 583 $ (4,501)
========== ======= ====== =======
</TABLE>
In April 1997, Thinking Machines sold the remaining part of its
discontinued operations for $2,405 in cash and a percentage of certain
future operating profits. The sale resulted in the Company recording a
loss on disposal of discontinued operations of $470, after the recognition
of minority interests of $592 and the write-off of goodwill of $1,410. In
July 1997, Thinking Machines received its first installment on the
operating profits from the discontinued operations which the Company
recorded as a gain on discontinued operations of $256.
4. INCOME TAXES
At September 30, 1997, the Company had approximately $100,000 of
unrecognized net deferred tax assets, comprised primarily of net operating
loss carryforwards, available to offset future taxable income for federal
tax purposes. A valuation allowance has been provided against the amount
as it is deemed more likely than not that the benefit of the deferred tax
assets will not be utilized. The Company continues to evaluate the
realizability of the deferred tax assets and its estimate is subject to
change. The income tax provision (benefit), which principally represented
the effects of state income taxes, for the nine months ended September 30,
1997 and 1996, does not bear a customary relationship with pre-tax
accounting income principally as a consequence of the change in the
valuation allowance relating to deferred tax assets.
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<PAGE> 10
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
5. INVESTMENT SECURITIES AVAILABLE FOR SALE
Investment securities classified as available for sale are carried at fair
value, with net unrealized gains included as a separate component of
shareholders' equity (deficit). The Company had realized gains on sales of
investment securities available for sale of $1,466 and $8,518 for the
three and nine months ended September 30, 1997, respectively.
The components of investment securities available for sale at September
30, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
---- ---- ---- -----
<S> <C> <C> <C>
Marketable equity securities:
RJR Nabisco common stock................ $23,378 $ 2,838 $26,216
Other marketable equity securities...... 10,604 24,395 $ 557 34,442
------ ------ -------- ------
Total marketable equity securities... 33,982 27,233 557 60,658
Marketable debt securities (short-term)....... 4,749 -- -- 4,749
Marketable debt securities (long-term)........ 3,684 -- 1,610 2,074
------- ---------- ------- -------
Total securities available for sale........... 42,415 27,233 2,167 67,481
Less long-term portion of investment
securities.............................. 3,684 -- 1,610 2,074
------- ---------- ------- -------
Investment securities - current portion....... $38,731 $27,233 $ 577 $65,407
====== ====== ======== ======
</TABLE>
As of September 30, 1997, the long-term portion of investment securities
available for sale consisted of marketable debt securities which mature in
two years.
In October 1997, the Company sold certain appreciated securities and
recognized a gain of approximately $11,000.
6. LONG-TERM INVESTMENTS
At September 30, 1997, long-term investments consisted primarily of
investments in limited partnerships of $18,719 and an equity investment in
a company of $1,000. The Company determined that an other than temporary
impairment in the value of its investment in a joint venture had occurred
and wrote-down this investment to zero in March 1997 with a charge to
operations of $3,796. The fair value of the Company's long-term
investments approximates its carrying amount. The Company's estimates of
the fair value of its long-term investments are subject to judgment and
are not necessarily indicative of the amounts that could be realized in
the current market.
In January 1997, the Company converted an investment in preferred stock
made in 1995 into a majority equity interest in a small on-line directory
assistance development stage company and, accordingly, began consolidating
the results of this company. This long-term investment of $1,001 was
written off in 1996 due to continuing losses of this company. In May 1997,
this company completed an initial public offering and, as a result, the
Company recorded $2,715 as additional paid-in capital which represented
its 50.1% ownership in this company's shareholders' equity after this
offering.
- 10 -
<PAGE> 11
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The Company is required under certain limited partnership agreements to
make additional investments up to an aggregate of $13,000 as of September
30, 1997. The Company's investments in limited partnerships are illiquid
and the ultimate realization of these investments are subject to the
performance of the underlying partnership and its management by the
general partners.
7. REDEEMABLE PREFERRED SHARES
At September 30, 1997, the Company had authorized and outstanding
2,000,000 and 1,071,462, respectively, of its Class A Senior Preferred
Shares. At September 30, 1997 and December 31, 1996, respectively, the
carrying value of such shares amounted to $245,740 and $210,571, including
undeclared dividends of $150,871 and $117,117, or $140.81 and $109.31 per
share. As of September 30, 1997, the unamortized discount on the Class A
Senior Preferred Shares was $5,057.
For the nine months ended September 30, 1997, the Company recorded $2,173
in compensation expense related to certain Class A Senior Preferred Shares
awarded to an officer of the Company in 1996. At September 30, 1997, the
balance of the deferred compensation and the unamortized discount related
to these award shares was $4,302 and $2,870, respectively.
8. PREFERRED SHARES NOT SUBJECT TO REDEMPTION REQUIREMENTS
The undeclared dividends, as adjusted for conversions of Class B Preferred
Shares into Common Shares, cumulatively amounted to $133,248 and $115,944
at September 30, 1997 and December 31, 1996, respectively. These
undeclared dividends represent $47.75 and $41.55 per share as of the end
of each period. No accrual was recorded for such undeclared dividends as
the Class B Preferred Shares are not mandatorily redeemable.
9. PREPETITION CLAIMS UNDER CHAPTER 11 AND RESTRUCTURING ACCRUALS
Those liabilities that are expected to be resolved as part of the
Company's First Amended Joint Chapter 11 Plan of Reorganization, as
amended (the "Joint Plan"), are classified in the Consolidated Balance
Sheets as prepetition claims and restructuring accruals. On January 18,
1995, approximately $550 million of prepetition claims were paid pursuant
to the Joint Plan. The prepetition claims remaining as of September 30,
1997 of $15,723 may be subject to future adjustments depending on pending
discussions with the various parties and the decisions of the Bankruptcy
Court.
10. CONTINGENCIES
LITIGATION
On or about March 13, 1997, a shareholder derivative suit was filed
against the Company, as a nominal defendant, its directors and Brooke in
the Delaware Chancery Court, by a shareholder of the Company. The suit
alleges that the Company's purchase of the BML Shares constituted a
self-dealing transaction which involved the payment of excessive
consideration by the Company. The plaintiff seeks (i) a declaration that
the Company's directors breached their fiduciary duties, Brooke aided and
abetted such breaches and such parties are therefore liable to the
Company, and (ii) unspecified damages to be awarded to the Company. The
Company's time to respond to the complaint has not yet expired. The
Company believes that the allegations are without merit, and it intends to
defend the suit vigorously.
- 11 -
<PAGE> 12
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The Company is also a defendant in various other lawsuits and may be
subject to unasserted claims primarily in connection with its activities
as a securities broker-dealer and participation in public underwritings.
These lawsuits involve claims for substantial or indeterminate amounts and
are in varying stages of legal proceedings. In the opinion of management,
after consultation with counsel, the ultimate resolution of these matters
will not have a material adverse effect on the Company's consolidated
financial position, results of operations, or cash flows.
Risks and Uncertainties
BML's real estate development and management operations in Russia could be
affected by uncertainties in Russia which may include, among others,
political or diplomatic developments, regional tensions, currency
repatriation restrictions, foreign exchange fluctuations, inflation, and
an undeveloped system of commercial laws and legislative reform relating
to foreign ownership in Russia.
- 12 -
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTRODUCTION
The Company's Consolidated Financial Statements include the accounts of
Ladenburg Thalmann & Co. Inc. ("Ladenburg"), BrookeMil Ltd. ("BML"), Thinking
Machines Corporation ("Thinking Machines") and other less significant
subsidiaries.
On January 19, 1995, the Company emerged from bankruptcy reorganization
proceedings and completed substantially all distributions to creditors under its
First Amended Joint Chapter 11 Plan of Reorganization, as amended (the "Joint
Plan"). The Joint Plan provided for, among other things, the sale of the
Company's money transfer business and the payment of all allowed claims.
ACQUISITION
On January 31, 1997, the Company entered into a stock purchase agreement (the
"Purchase Agreement") with Brooke (Overseas) Ltd. ("Brooke (Overseas)"), a
wholly-owned subsidiary of Brooke Group Ltd. ("Brooke"), a related party through
the ownership of an approximate 42% voting interest in the Company. Pursuant to
the Purchase Agreement, the Company acquired 10,483 shares (the "BML Shares") of
the common stock of BrookeMil Ltd. ("BML") from Brooke (Overseas) for a purchase
price of $55,000, consisting of $21,500 in cash and a $33,500 9% promissory note
of the Company (the "Note"). The BML Shares comprise 99.1% of the outstanding
shares of BML, a real estate development company in Russia. The Note is
collateralized by the BML Shares and, as of September 30, 1997, had a balance of
$12,000 which is payable on December 31, 1997.
BML is developing a three-phase complex on 2.2 acres of land in downtown Moscow,
for which it has a 49-year lease. In 1993, the first phase of the project, Ducat
Place I, a 46,500 sq. ft. Class-A office building, was constructed and leased.
On February 5, 1997, BML entered into an agreement to sell Ducat Place I to one
of its tenants for approximately $7,500, which purchase price has been reduced
to reflect prepayments of rent, and consummated the sale on April 18, 1997. In
1997, BML completed construction of Ducat Place II, a 150,000 sq. ft. office
building, which has been substantially pre-leased to a number of leading
international companies. The third phase, Ducat Place III, is planned as a
400,000 sq. ft. mixed-use complex, with construction anticipated to commence in
1999. The Company is currently evaluating plans for financing the construction
of Ducat Place III.
The acquisition was treated as a purchase for financial reporting purposes and,
accordingly, the Company's consolidated financial statements include the
operations of BML from the date of acquisition.
The purchase price was allocated as follows: current assets of approximately
$9,000, investment in real estate of $79,200, other assets of $8,800, assumption
of current liabilities of $35,146 and long-term liabilities of $6,854. Current
assets consisted primarily of an asset held for sale of $6,400 related to the
estimated proceeds from the sale of Ducat Place I, net of $1,100 in accrued
closing costs. Liabilities included a $20,400 loan ("Construction Loan") to a
Russian bank for the construction of Ducat Place II. In addition, the
liabilities of BML included approximately $13,800 of rents and related payments
prepaid by tenants of Ducat Place II for periods generally ranging from 15 to 18
months.
- 13 -
<PAGE> 14
RESULTS OF OPERATIONS
Consolidated total revenues were $70,605 for the nine months ended September 30,
1997 versus $83,710 for the same period last year. The decrease in revenues of
$13,105 is attributable primarily to the decrease in revenues of Ladenburg as a
result of a decline in net principal transactions of $6,979 and a decline of
$6,177 in other Ladenburg revenues. During the nine months ended September 30,
1997, Ladenburg experienced a decline in syndicate and underwriting activity,
commission income, and net trading profits over the comparable period in the
prior year.
For the three months and nine months ended September 30, 1997 and 1996, the
results of continuing operations of the Company's primary operating units, which
include Ladenburg (broker-dealer), the Company's U.S. office buildings and
shopping centers and BML (real estate), and Thinking Machines (computer
software), were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Broker-dealer:
Revenues .................. $ 16,900 $ 13,160 $ 38,756 $ 51,912
Expenses .................. 17,926 15,425 44,758 52,954
-------- -------- -------- --------
Operating loss before taxes $ (1,026) $ (2,265) $ (6,002) $ (1,042)
======== ======== ======== ========
Real estate:
Revenues .................. $ 7,079 $ 5,941 $ 19,664 $ 17,605
Expenses .................. 8,933 6,221 25,650 18,169
-------- -------- -------- --------
Operating loss before taxes
and minority interest .. $ (1,854) $ (280) $ (5,986) $ (564)
======== ======== ======== ========
Computer software:
Revenues .................. $ 70 $ 52 $ 364 $ 214
Expenses .................. 2,529 1,422 7,934 4,342
-------- -------- -------- --------
Operating loss before taxes
and minority interest .. $ (2,459) $ (1,370) $ (7,570) $ (4,128)
======== ======== ======== ========
Corporate and other:
Revenues .................. $ 2,399 $ 2,123 $ 11,821 $ 13,979
Expenses .................. 4,990 5,930 17,555 26,849
-------- -------- -------- --------
Operating loss before taxes
and minority interest .. $ (2,591) $ (3,807) $ (5,734) $(12,870)
======== ======== ======== ========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1996
Ladenburg's revenues for the third quarter of 1997 increased $3,740 as compared
to revenues for the third quarter of 1996. Ladenburg's expenses for the third
quarter of 1997 increased $2,501 as compared to expenses for the third quarter
of 1996 due primarily to an increase in performance-based compensation expense.
Revenues from the real estate operations for the third quarter of 1997 increased
$1,138 primarily due to $1,240 in revenues of BML for the third quarter of 1997.
Expenses of the real estate operations increased $2,712 due primarily to $2,686
in expenses of BML for the third quarter of 1997.
- 14 -
<PAGE> 15
Thinking Machines has had only minimal revenues from continuing operations to
date. Thinking Machines is developing and marketing a data mining software
product. Operating expenses of Thinking Machines consisted of selling, general
and administrative and research and development of $1,481 and $1,048,
respectively, for the third quarter of 1997 as compared to $572 and $850,
respectively, for the third quarter of 1996.
For the third quarter of 1997, the Company's revenues of $2,399 related to
corporate and other activities consisted primarily of net gains on investments
of $1,466 and interest and dividend income of $808 as compared to interest and
dividend income of $2,462 and net loss on investments of $867 for the same
period in the prior year.
Corporate and other expenses of $4,990 for the third quarter of 1997 consisted
primarily of employee compensation and benefits of $2,157 and professional fees
of $950. Corporate and other expenses for the third quarter of 1996 consisted
primarily of employee compensation and benefits of $1,493 and interest expense
of $1,139.
Income tax expense for the third quarter of 1997 was $24 versus an income tax
benefit of $233 for the third quarter of 1996. The income tax expense relates
principally to state income taxes of Ladenburg. The effective tax rate does not
bear a customary relationship with pre-tax accounting income principally as a
consequence of the change in the valuation allowance relating to deferred tax
assets.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
Ladenburg's revenues for the first nine months of 1997 decreased $13,156 as
compared to revenues for the first nine months of 1996. Ladenburg's expenses for
the first nine months of 1997 decreased $8,196 as compared to expenses for the
first nine months of 1996 due primarily to a decline in performance-based
compensation expense.
Revenues from the real estate operations for the first nine months of 1997
increased $2,059 primarily due to $2,019 in revenues of BML from the date of
acquisition to September 30, 1997. Expenses of the real estate operations
increased $7,481 due primarily to $7,164 in expenses of BML from the date of
acquisition to September 30, 1997.
Operating expenses of Thinking Machines consisted of selling, general and
administrative of $5,026 and research and development of $2,908 for the nine
months ended September 30, 1997. Operating expenses of Thinking Machines for the
first nine months of 1996 consisted of selling, general and administrative of
$2,486 and research and development of $1,856.
For the first nine months of 1997, the Company's revenues of $11,821 related to
corporate and other activities consisted primarily of net gains on investments
of $8,518 and interest and dividend income of $3,124 as compared to net gains on
investments of $2,294 and interest and dividend income of $10,342 for the same
period in the prior year.
Corporate and other expenses of $17,555 for the first nine months of 1997
consisted primarily of employee compensation and benefits of $7,171 and a $3,796
provision for loss on a long-term investment. Corporate and other expenses for
the first nine months of 1996 consisted primarily of employee compensation and
benefits of $4,700, expenses related to the investment in RJR Nabisco common
stock of $11,158, and interest expense of $3,589.
Income tax expense for the first nine months of 1997 was $119 versus $67 for the
first nine months of 1996. The effective tax rate does not bear a customary
relationship with pre-tax accounting income principally as a consequence of the
change in the valuation allowance relating to deferred tax assets.
- 15 -
<PAGE> 16
DISCONTINUED OPERATIONS
Thinking Machines had revenues and operating income of $3,386 and $950,
respectively, for the first nine months of 1997 as compared to revenues and
operating losses of $12,115 and $8,044, respectively, for the first nine months
of 1996 related to operations that have been classified as discontinued. The
decline in revenues was due to the sale of Thinking Machine's parallel
processing computer sales operation in December 1996 which had revenues of
$2,931 in the first nine months of 1996. In April 1997, Thinking Machines sold
the remaining part of its discontinued operations for $2,405 in cash and a
percentage of certain future operating profits. The sale resulted in the Company
recording a loss on disposal of discontinued operations of $470, after the
recognition of minority interests of $592 and the write-off of goodwill of
$1,410. In July 1997, Thinking Machines received its first installment on the
operating profits from the discontinued operations which the Company recorded as
a gain on discontinued operations of $256.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $85,610 at December 31, 1996 to
$8,872 at September 30, 1997 primarily as a result of the purchase of BML. As of
September 30, 1997, the Company was required under certain limited partnership
agreements to make additional investments for an aggregate of $13,000.
During the first nine months of 1997, the Company's cash and cash equivalents
decreased from $57,282 to $16,707 due primarily to the net cash paid for the BML
acquisition of $20,014 and the $21,500 paid on the note related to the BML
acquisition. In addition, the Company had net sales of investment securities of
$16,698 and net purchases of long-term investments of $8,597.
In August 1997, BML refinanced all amounts due under the Construction Loan with
borrowings under a new credit facility with a Russian bank. The new credit
facility bears interest at 16% per year, matures no later than August 2002, with
principal payments commencing after the first year, and is collateralized by a
mortgage on Ducat Place II and guaranteed by the Company. At September 30, 1997,
borrowings under the new credit agreement totaled $19,993.
The Company expects that its available working capital will be sufficient to
fund its currently anticipated cash requirements for 1997, including the
required payments on the Note issued in connection with the purchase of the BML
Shares and currently anticipated cash requirements of its operating businesses,
investments, commitments, and payments of principal and interest on its
outstanding indebtedness.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company and its representatives may from time to time make oral or written
"forward-looking statements" within the meaning of the Private Securities Reform
Act of 1995 (the "Reform Act"), including any statements that may be contained
in the foregoing "Management's Discussion and Analysis of Financial Condition
and Results of Operations", in this report and in other filings with the
Securities and Exchange Commission and in its reports to shareholders, which
represent the Company's expectations or beliefs with respect to future events
and financial performance. These forward-looking statements are subject to
certain risks and uncertainties and, in connection with the "safe-harbor"
provisions of the Reform Act, the Company is hereby identifying important
factors that could cause actual results to differ materially from those
contained in any forward-looking statements made by or on behalf of the Company.
Each of the Company's operating businesses, Ladenburg, BML, New Valley Realty,
and Thinking Machines are subject to intense competition, changes in consumer
preferences, and local economic conditions. Ladenburg is further subject to
uncertainties endemic to the securities industry including, without limitation,
the volatility of domestic and international financial, bond and stock markets,
- 16 -
<PAGE> 17
governmental regulation and litigation. BML's operations in Russia are also
subject to a high level of risk in light of Russia's substantial political
transformation from a centrally-controlled economy under communist rule to the
early stages of a pluralist market-oriented democracy. In connection therewith,
Russia has experienced dramatic political, social and economic reform although
there is no assurance that further reforms necessary to complete such
transformation will occur. The Russian economy has been characterized by, among
others, significant inflation, declining industrial productions, rising
unemployment and underemployment, and an unstable currency. In addition to the
foregoing, BML may be affected unfavorably by political or diplomatic
developments, regional tensions, currency repatriation restrictions, foreign
exchange fluctuations, a relatively untested judicial system, a still evolving
taxation system subject to constant changes which may be retroactive in effect,
and other developments in the law or regulations in Russia and, in particular,
the risks of expropriation, nationalization and confiscation of assets and
changes in legislation relating to foreign ownership. In addition, the system of
commercial laws, including the laws governing registration of interests in real
estate and the establishment and enforcement of security interests, is not well
developed and, in certain circumstances, inconsistent and adds to the risk of
investment in the real estate development business in Russia. BML and the
Company's U.S. office buildings and shopping centers are additionally subject to
the uncertainties relating to the real estate business, including, without
limitation, required capital improvements to facilities, local real estate
market conditions and federal, state, city and municipal laws and regulations
concerning, among others, zoning and environmental matters. Thinking Machines is
also subject to uncertainties relating to, without limitation, the development
and marketing of computer software products, including customer acceptance and
required funding, technological changes, capitalization, and the ability to
utilize and exploit its intellectual property and propriety software technology.
Uncertainties affecting the Company generally include, without limitation, the
effect of market conditions on the salability of the Company's investment
securities, the uncertainty of other potential acquisitions and investments by
the Company, developments relating to the Company's investments in RJR Nabisco,
the effects of governmental regulation on the Company's ability to target and/or
consummate any such acquisitions and the effects of limited management
experience in areas in which the Company may become involved.
Results actually achieved may differ materially from expected results included
in these statements as a result of these or other factors. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date on which such
statements are made. The Company does not undertake to update any
forward-looking statement that may be made from time to time on behalf of the
Company.
- 17 -
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is subject to pending claims which have arisen in the
ordinary course of its business. Management, after review and
consultation with counsel, considers that any liability from the
disposition of such lawsuits in the aggregate would not have a material
adverse effect on the consolidated financial position, results of
operations, or cash flows of the Company.
See Notes 9 and 10 to the "Notes to the Quarterly Consolidated
Financial Statements" in Part I, Item 1 to this Report.
Item 3. DEFAULTS UPON SENIOR SECURITIES
See Notes 7 and 8 to the "Notes to the Quarterly Consolidated Financial
Statements" in Part I, Item 1 to this Report.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
During the third quarter of fiscal 1997, the Company submitted certain
matters to a vote of security holders at its Annual Meeting of
Shareholders held on September 22, 1997 (the "Annual Meeting"). Proxies
for the Annual Meeting were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended.
At the Annual Meeting, every holder of record of $15.00 Class A
Increasing Rate Cumulative Senior Preferred Shares ($100 Liquidation
Value), $.01 par value (the "Class A Senior Preferred Shares"), $3.00
Class B Cumulative Convertible Preferred Shares ($25 Liquidation
Value), $.10 par value (the "Class B Preferred Shares") and Common
Shares, $.01 par value (the "Common Shares"), of the Company at the
close of business on July 28, 1997 (the "Record Date") was entitled to
vote, in person or by proxy, .4645 of one vote for each Class A Senior
Preferred Share, .05 of one vote for each Class B Preferred Share and
one vote for each Common Share, as the case may be, held by such
holder. As of the Record Date, the Company had outstanding 1,071,462
Class A Senior Preferred Shares, 2,790,776 Class B Preferred Shares and
9,577,624 Common Shares.
The holders of a majority of the outstanding shares entitled to vote at
the Annual Meeting were either present in person or represented by
proxy, and constituted a quorum for the transaction of business at the
Annual Meeting, as indicated in the following table:
<TABLE>
<CAPTION>
Present in Person or Represented by Proxy
Shares Votes Votes No. of No. of Percent
Outstanding Per Share Outstanding Shares Votes Of Class
----------- --------- ----------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Common Shares 9,577,624 1 9,577,624 8,545,394 8,545,394 89.2
Class A Senior 1,071,462 .4645 497,694 941,479 437,317 87.9
Preferred Shares
Class B 2,760,077 .05 137,804 2,335,575 116,779 84.7
Preferred Shares
Combined 13,405,163 10,213,122 11,822,448 9,099,490 88.2
</TABLE>
- 18 -
<PAGE> 19
The following constitutes a brief description of the matters voted upon
at the Annual Meeting and a tabulation of the results:
1. Five nominees were elected as directors of the Company by more
than the required plurality of affirmative votes of the holders of
Common Shares, Class A Senior Preferred Shares and Class B
Preferred Shares, voting together as a single class, to serve
until the next annual stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
NO. OF VOTES PERCENT OF VOTES NO. OF VOTES PERCENT OF VOTES
<S> <C> <C> <C> <C>
Arnold I. Burns 8,866,986 97.44 232,503 2.56
Ronald J. Kramer 8,906,696 97.88 192,794 2.12
Richard J. Lampen 8,905,878 97.87 193,612 2.13
Bennett S. LeBow 8,896,560 97.77 203,394 2.24
Howard M. Lorber 8,905,644 97.87 193,846 2.13
</TABLE>
2. Two nominees were elected as directors of the Company by more than
the required plurality of affirmative votes of the holders of
Class A Senior Preferred Shares, voting as a class, to serve until
the earlier of the date on which dividend arrearages have been
eliminated on such class of preferred shares or the next annual
stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
NO. OF VOTES PERCENT OF VOTES NO. OF VOTES PERCENT OF VOTES
<S> <C> <C> <C> <C>
Henry C. Beinstein 432,650 98.93 4,667 1.07
Barry W. Ridings 432,639 98.93 4,678 1.07
</TABLE>
3. Two nominees were elected as directors of the Company by more than
the required plurality of affirmative votes of the holders of
Class B Preferred Shares and Class A Senior Preferred Shares,
voting together as a single class, to serve until the earlier of
the date on which dividend arrearages have been eliminated on the
Class B Preferred Shares or the next annual stockholders' meeting:
<TABLE>
<CAPTION>
VOTED FOR DIRECTORS VOTE WITHHELD
NO. OF VOTES PERCENT OF VOTES NO. OF VOTES PERCENT OF VOTES
<S> <C> <C> <C> <C>
Henry C. Beinstein 545,527 98.45 8,568 1.55
Barry W. Ridings 545,512 98.45 8,584 1.55
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule (for SEC use only)
(b) REPORTS ON FORM 8-K
None
- 19 -
<PAGE> 20
SIGNATURE
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 thereunto duly authorized.
NEW VALLEY CORPORATION
(Registrant)
Date: November 14, 1997 By: /s/ROBERT M. LUNDGREN
---------------------
Robert M. Lundgren
Vice President, Treasurer
and Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer)
- 20 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,707
<SECURITIES> 65,407
<RECEIVABLES> 1,628
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 140,465
<PP&E> 261,597
<DEPRECIATION> 0
<TOTAL-ASSETS> 466,833
<CURRENT-LIABILITIES> 131,593
<BONDS> 177,631
96
245,740
<COMMON> 279
<OTHER-SE> (104,915)
<TOTAL-LIABILITY-AND-EQUITY> 466,833
<SALES> 0
<TOTAL-REVENUES> 70,605
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,796
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,134
<INCOME-PRETAX> (25,292)
<INCOME-TAX> 119
<INCOME-CONTINUING> (22,313)
<DISCONTINUED> 369
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,944)
<EPS-PRIMARY> (7.54)
<EPS-DILUTED> (7.54)
</TABLE>
