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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 MARCH 31, 2000
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, 32ND FLOOR
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 [ ]
AS OF MAY 12, 2000, THERE WERE OUTSTANDING 23,120,162 OF THE REGISTRANT'S
COMMON SHARES, $.01 PAR VALUE.
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NEW VALLEY CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of March 31,
2000 and December 31, 1999.................................... 3
Condensed Consolidated Statements of Operations for
the three months ended March 31, 2000 and 1999................ 4
Condensed Consolidated Statement of Changes in
Stockholders' Deficiency for the three months
ended March 31, 2000.......................................... 5
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 2000 and 1999................ 6
Notes to the Condensed Consolidated Financial
Statements .................................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk................................................... 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 20
Item 2. Changes in Securities and Use of Proceeds......................... 20
Item 5. Other Information................................................. 20
Item 6. Exhibits and Reports on Form 8-K.................................. 20
SIGNATURE........................................................................... 21
</TABLE>
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NEW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
---------------- -----------------
2000 1999
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 17,601 $ 11,512
Investment securities available for sale.............................. 48,689 48,722
Trading securities owned.............................................. 11,106 15,707
Restricted assets..................................................... 937 3,239
Receivable from clearing brokers...................................... 21,120 10,903
Other current assets.................................................. 1,417 1,360
--------- ---------
Total current assets.............................................. 100,870 91,443
--------- ---------
Investment in real estate, net............................................. 53,879 53,353
Furniture and equipment, net............................................... 8,251 8,409
Restricted assets.......................................................... 4,295 5,195
Long-term investments, net................................................. 7,757 8,730
Investment in joint venture................................................ 48,667 48,680
Other assets............................................................... 5,140 4,858
--------- ---------
Total assets...................................................... $228,859 $220,668
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Margin loans payable.................................................. $ 4,306 $ 983
Current portion of notes payable...................................... 8,471 294
Accounts payable and accrued liabilities.............................. 31,487 30,963
Prepetition claims and restructuring accruals......................... 12,263 12,279
Income taxes.......................................................... 16,137 16,285
Securities sold, not yet purchased.................................... 3,368 7,625
--------- ---------
Total current liabilities......................................... 76,032 68,429
--------- ---------
Notes payable.............................................................. 11,272 19,519
Other long-term liabilities................................................ 43,898 41,341
Commitments and contingencies..............................................
Stockholders' equity:
Common Shares, $.01 par value; 100,000,000 shares
authorized; 23,159,862 and 23,192,862 shares outstanding............ 232 232
Additional paid-in capital............................................ 868,345 868,673
Accumulated deficit................................................... (777,843) (779,639)
Unearned compensation on stock options................................ (83) (333)
Accumulated other comprehensive income................................ 7,006 2,446
--------- ---------
Total stockholders' equity................................................. 97,657 91,379
--------- ---------
Total liabilities and stockholders' equity........................ $228,859 $220,668
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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NEW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
2000 1999
-------------------- --------------------
<S> <C> <C>
Revenues:
Principal transactions, net................................ $ 11,336 $ 4,776
Commissions................................................ 13,029 11,126
Corporate finance fees..................................... 4,236 1,438
Gain on sale of investments, net........................... 4,753 499
Loss from joint venture.................................... (226) (1,503)
Real estate leasing........................................ 771 2,230
Computer sales and service................................. -- 251
Interest and dividends..................................... 1,494 1,261
Other income............................................... 148 2,692
---------- ---------
Total revenues......................................... 35,541 22,770
-------- --------
Cost and expenses:
Selling, general and administrative........................ 30,602 26,592
Interest................................................... 2,167 2,325
--------- ---------
Total costs and expenses............................... 32,769 28,917
-------- --------
Income (loss) from continuing operations before income taxes
and minority interests..................................... 2,772 (6,147)
Income tax provision............................................ 36 15
Minority interests in income (loss) from continuing operations
of consolidated subsidiaries........................... 940 (480)
---------- ----------
Income (loss) from continuing operations........................ 1,796 (5,682)
Discontinued operations:
Gain on disposal of discontinued operations................ -- 4,100
------------ ---------
Income from discontinued operations.................... -- 4,100
------------ ---------
Net income (loss)............................................... 1,796 (1,582)
Dividend requirements on preferred shares....................... -- (22,219)
------------ --------
Net income (loss) applicable to Common Shares................... $ 1,796 $ (23,801)
========= ========
Income (loss) per Common Share (basic and diluted):
Continuing operations...................................... $ 0.08 $ (2.92)
Discontinued operations.................................... -- .43
---------- --------
Net income (loss) per Common Share......................... $ 0.08 $ (2.49)
========= =======
Number of shares used in computation............................ 23,163,829 9,577,624
========== =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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NEW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' DEFICIENCY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
UNEARNED ACCUMULATED
COMPENSATION OTHER
COMMON PAID-IN ACCUMULATED ON STOCK COMPREHENSIVE
SHARES CAPITAL DEFICIT OPTIONS INCOME TOTAL
------ ------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999............ $232 $868,673 $(779,639) $(333) $2,446 $ 91,379
Net income......................... 1,796 1,796
Unrealized gain on investment
securities....................... 4,560 4,560
Repurchases of common stock........ (166) (166)
Adjustment to unearned compensation
on stock options................. (389) 250 (139)
Compensation expense on stock
option grants.................... 227 227
---- -------- ---------- ----- ----- ------
Balance, March 31, 2000............... $232 $868,345 $(777,843) $ (83) $7,006 $ 97,657
=== ======= ======== ===== ===== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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NEW VALLEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,796 $ (1,582)
Adjustments to reconcile net income (loss) to net cash (used for)
provided from operating activities:
Income from discontinued operations -- (4,100)
Loss from joint venture 226 1,503
Depreciation and amortization 376 898
Stock based compensation expense 88 774
Gain on sale of investments (4,753) (449)
Minority interests in income (loss) from continuing operations
of consolidated subsidiaries 940 (480)
(Increase) decrease in receivables and other assets (4,537) 14,744
Decrease in accounts payable and accrued liabilities (2,212) (6,664)
-------- --------
Net cash (used for) provided from continuing operations (8,076) 4,644
Net cash provided from discontinued operations -- 4,100
-------- --------
Net cash (used for) provided from operating activities (8,076) 8,744
-------- --------
Cash flows from investing activities:
Sale or maturity of investment securities 14,849 2,947
Purchase of investment securities (5,503) (6,858)
Purchase of long-term investments (504) (2,500)
Sale of real estate -- 920
Purchase of and additions to real estate (674) (1,615)
Purchase of furniture and fixtures (66) (312)
Payment of prepetition claims and restructuring accruals (15) (24)
Decrease (increase) in restricted assets 3,202 (2,827)
Investment in joint venture (213) --
-------- --------
Net cash provided from (used for) investing activities 11,076 (10,269)
-------- --------
Cash flows from financing activities:
Increase (decrease) in margin loans payable 3,324 (9,044)
Proceeds from participating loan -- 4,473
Repurchase of Common Shares (166) --
Payment of notes payable (69) (36)
-------- --------
Net cash provided from (used for) financing activities 3,089 (4,607)
-------- --------
Net increase (decrease) in cash and cash equivalents 6,089 (6,132)
Cash and cash equivalents, beginning of period 11,512 16,444
-------- --------
Cash and cash equivalents, end of period $ 17,601 $ 10,312
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED 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 its majority-owned subsidiaries ("New Valley" or the
"Company"). The consolidated financial statements as of March 31, 2000
presented herein have been prepared by the Company and are unaudited. In
the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position
as of March 31, 2000 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 the entire year.
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, 1999 as filed with the Securities and
Exchange Commission (Commission File Number 1-2493).
USE OF ESTIMATES
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.
RECLASSIFICATIONS
Certain reclassifications have been made to prior interim period financial
information to conform to the current interim period presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS
133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending
on whether a derivative is designated as part of a hedge transaction and,
if it is, the type of hedge transaction. The Company has not yet
determined the impact that the adoption of SFAS 133 will have on its
earnings or statement of financial position.
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NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
2. INVESTMENT IN WESTERN REALTY
WESTERN REALTY DEVELOPMENT LLC
In February 1998, the Company and Apollo Real Estate Investment Fund III,
L.P. ("Apollo") organized Western Realty Development LLC ("Western Realty
Development") to make real estate and other investments in Russia. The
Company agreed to contribute the real estate assets of BrookeMil,
including Ducat Place II and the site for Ducat Place III, to Western
Realty Development and Apollo agreed to contribute up to $69,625,
including the investment in Western Realty Repin discussed below.
The ownership and voting interests in Western Realty Development are held
equally by Apollo and the Company. Apollo will be entitled to a preference
on distributions of cash from Western Realty Development to the extent of
its investment commitment of $43,750, of which $40,213 had been funded
through March 31, 2000, together with a 15% annual rate of return. The
Company will then be entitled to a return of its investment commitment of
$23,750, of which $20,213 has been funded through March 31, 2000, together
with a 15% annual rate of return; subsequent distributions will be made
70% to the Company and 30% to Apollo. Western Realty Development is
managed by a Board of Managers consisting of an equal number of
representatives chosen by Apollo and the Company. Material corporate
transactions by Western Realty Development will generally require the
unanimous consent of the Board of Managers. Accordingly, the Company has
accounted for its non-controlling interest in Western Realty Development
using the equity method of accounting. The Company recognizes losses
incurred by Western Realty Development to the extent that cumulative
earnings of Western Realty Development are not sufficient to satisfy
Apollo's preferred return.
Western Realty Development has made a $30,000 participating loan to, and
payable out of a 30% profits interest in, Western Tobacco Investments LLC
("WTI"), which holds the interests of Brooke (Overseas) Ltd., a subsidiary
of Brooke Group Ltd., ("Brooke") the Company's principal stockholder, in
Liggett-Ducat Ltd. and the new factory constructed by Liggett-Ducat Ltd.
on the outskirts of Moscow. Western Realty Development is entitled to
receive a 15% annual rate of return on amounts advanced on the loan under
certain circumstances in the event of a sale or refinancing of WTI or the
new factory. Western Realty Development has recognized income of $1,412
and $1,002, which represents the 15% return on the loan plus 30% of any
net income applicable to common interests of WTI, for the three months
ended March 31, 2000 and 1999, respectively.
Summarized financial information as of March 31, 2000 and December 31,
1999 and for three months ended March 31, 2000 and 1999 for Western Realty
Development follows:
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
Current assets $ 2,950 $ 3,557
Participating loan receivable 39,261 37,849
Real estate, net 77,579 77,988
Furniture and fixtures, net 249 249
Other noncurrent assets 273 320
Goodwill, net 636 722
Notes payable - current 6,707 6,445
Other current liabilities 6,391 7,067
Notes payable - long term 6,436 8,211
Other long-term liabilities 752 752
Members' equity 100,662 98,210
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NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Revenues $2,390 $3,448
Costs and expenses 2,170 4,425
Accretion of return on participating loan 1,412 1,002
Income tax provision -- 16
Net income 1,632 9
</TABLE>
WESTERN REALTY REPIN LLC
In June 1998, the Company and Apollo organized Western Realty Repin LLC
("Western Realty Repin") to make a loan to BrookeMil Ltd. ("BrookeMil"), a
99.1% owned subsidiary of the Company. The proceeds of the loan will be
used by BrookeMil for the acquisition and preliminary development of two
adjoining sites totaling 10.25 acres located in Moscow across the Moscow
River from the Kremlin. BrookeMil is planning the development of a hotel,
office, retail and residential complex on the Kremlin sites. BrookeMil
owned 96.8% of one site and 100% of the other site at March 31, 2000.
Apollo will be entitled to a preference on distributions of cash from
Western Realty Repin to the extent of its investment of $25,875, together
with a 20% annual rate of return, and the Company will then be entitled to
a return of its investment of $10,525, together with a 20% annual rate of
return. Subsequent distributions will be made 50% to the Company and 50%
to Apollo. Western Realty Repin is managed by a Board of Managers
consisting of an equal number of representatives chosen by Apollo and the
Company. Material corporate transactions by Western Realty Repin will
generally require the unanimous consent of the Board of Managers.
Through March 31, 2000, Western Realty Repin had advanced $36,400 to
BrookeMil, of which $25,875 was funded by Apollo and is classified in
other long-term obligations on the consolidated balance sheet at March 31,
2000. The loan bears no fixed interest and is payable only out of
distributions by the entities owning the Kremlin sites to BrookeMil. Such
distributions must be applied first to pay the principal of the loan and
then as contingent participating interest on the loan. Any rights of
payment on the loan are subordinate to the rights of all other creditors
of BrookeMil. BrookeMil used a portion of the proceeds of the loan to
repay the Company for certain expenditures on the Kremlin sites previously
incurred. The loan is due and payable upon the dissolution of BrookeMil
and is collateralized by a pledge of the Company's shares of BrookeMil.
As of March 31, 2000, BrookeMil had invested $32,678 in the Kremlin sites
and held $1,664 in cash and receivables from an affiliate, which were
restricted for future investment in the Kremlin sites. In connection with
the acquisition of a 34.8% interest in one of the Kremlin sites, BrookeMil
agreed with the City of Moscow to invest an additional $22,000 by May 2000
in the development of the property. In April 2000, Western Realty Repin
arranged short-term financing to fund the investment. Under the terms of
the investment, BrookeMil is required to make additional construction
expenditures on the site of $22,000 by June 2002. Failure to make the
expenditures could result in forfeiture of the 34.8% interest in the site.
The Company has accounted for the formation of Western Realty Repin as a
financing by Apollo and a contribution of assets into a consolidated
subsidiary by the Company, which is eliminated in consolidation. Based on
the distribution terms contained in the Western Realty Repin LLC
agreement, the 20% annual rate of return preference to be received by
Apollo on funds advanced to Western Realty is treated as interest cost in
the consolidated statement of operations to the extent of the Company's
net investment in the Kremlin sites. New Valley's investment in the
Kremlin sites, net of the participating loan of $33,686, was $656 at March
31, 2000.
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<PAGE> 10
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The development of Ducat Place III and the Kremlin sites will require
significant amounts of debt and other financing. The Company is
considering potential financing alternatives on behalf of Western Realty
Development and BrookeMil. However, in light of the recent economic
turmoil in Russia, there is a risk that such financing will not be
available on acceptable terms. Failure to obtain sufficient capital for
the projects would force Western Realty Development and BrookeMil to
curtail or delay the planned development of Ducat Place III and the
Kremlin sites.
3. INVESTMENT SECURITIES AVAILABLE FOR SALE
Investment securities classified as available for sale are carried at fair
value, with net unrealized gains included as a component of stockholders'
equity. The Company had realized gains on sales of investment securities
available for sale of $4,753 and $499 for the three months ended March 31,
2000 and 1999, respectively.
The components of investment securities available for sale at March 31,
2000 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
---- ---------- ---------- -----
<S> <C> <C> <C> <C>
Marketable equity securities...................$41,246 $14,230 $10,837 $44,639
Notes receivable............................... 437 -- -- 437
Marketable warrants............................ -- 3,613 -- 3,613
------- ------- --------- -------
Investment securities..........................$41,683 $17,843 $10,837 $48,689
====== ====== ====== ======
</TABLE>
4. LONG-TERM INVESTMENTS
At March 31, 2000, long-term investments consisted primarily of
investments in limited partnerships of $7,757. The Company believes the
fair value of the limited partnerships exceeds their carrying amount by
approximately $5,335 based on the indicated market values of the
underlying investment portfolio provided by the partnerships. The
Company's estimate 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. The Company's investments in
limited partnerships are illiquid, and the ultimate realization of these
investments is subject to the performance of the underlying partnership
and its management by the general partners.
Also included in long-term investments are various Internet-related
businesses that are carried at $4,549 at March 31, 2000. These investments
include an approximate 3% indirect interest in JFAX.COM, Inc. owned
through a pass-through entity and a 33.3% interest in AtomicPop LLC. JFAX
is an Internet-based messaging and communications services provider to
individuals and businesses, which completed an initial public offering in
July 1999. AtomicPop LLC is engaged in the online music industry. The
Company also owns smaller interests in other Internet companies. The
Company accounts for its investment in AtomicPop LLC and its investment in
one other Internet company under the equity method.
5. REDEEMABLE PREFERRED SHARES
In connection with the Company's recapitalization in June 1999, each of
the Company's Class A Senior Preferred Shares was reclassified and changed
into 20 Common Shares and one Warrant to purchase Common Shares. The
Company reflected dividend arrearages on such shares of $15,170 in the
consolidated statement of operations for the three months ended March 31,
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NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1999. For the three months ended March 31, 1999, the Company also recorded
$826 in compensation expense related to Class A Senior Preferred Shares
awarded to an officer of the Company in 1996.
6. PREFERRED SHARES NOT SUBJECT TO REDEMPTION REQUIREMENTS
In connection with the Company's recapitalization in June 1999, each of
the Company's Class B Preferred Shares was reclassified and changed into
one-third of a Common Share and five Warrants to purchase Common Shares.
The Company reflected dividend arrearages on such shares of $7,049 in the
consolidated statement of operations for the three months ended March 31,
1999.
7. CONTINGENCIES
LAWSUITS
In March 1997, a stockholder derivative suit was filed against the
Company, as a nominal defendant, its directors and Brooke in the Delaware
Chancery Court by a stockholder of the Company. The suit alleges that the
Company's purchase of the BrookeMil shares from Brooke (Overseas) Ltd. in
January 1997 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. In December 1999, another stockholder of the
Company commenced an action in Delaware Chancery Court substantially
similar to the March 1997 action. This stockholder alleges, among other
things, that the consideration paid by the Company for the BrookeMil
shares was excessive, unfair and wasteful, that the special committee of
the Company's board lacked independence, and that the appraisal by the
independent appraisal firm and the fairness opinion by the independent
investment bank were flawed. Brooke and the Company believe that the
allegations in both cases are without merit. By order of the court, both
actions were consolidated. Brooke and the Company recently filed a motion
to dismiss the consolidated action. Although there can be no assurances,
management is of the opinion, after consultation with counsel, that the
ultimate resolution of this matter will not have a material adverse effect
on the Company's consolidated financial position, results of operations or
cash flows.
In July 1999, a purported class action was commenced on behalf of the
Company's former Class B preferred shareholders against the Company,
Brooke and certain directors and officers of the Company in Delaware
Chancery Court. The complaint alleges that the recapitalization, approved
by a majority of each class of the Company's stockholders in May 1999, was
fundamentally unfair to the Class B preferred shareholders, the proxy
statement relating to the recapitalization was materially deficient and
the defendants breached their fiduciary duties to the Class B preferred
shareholders in approving the transaction. The plaintiffs seek class
certification of the action and an award of unspecified compensatory
damages as well as all costs and fees. Brooke and the Company believe that
the allegations are without merit. Brooke and the Company recently filed a
motion to dismiss the action. Although there can be no assurances, in the
opinion of management, after consultation with counsel, the ultimate
resolution of this matter will not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash
flows.
The Company is a defendant in various 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 and claims involve 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.
-11-
<PAGE> 12
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
RUSSIAN OPERATIONS
The Russian Federation continues to experience economic difficulties
following the financial crisis of August 1998. Consequently, the country's
currency continues to devalue, there is continued volatility in the debt
and equity markets, hyperinflation persists, confidence in the banking
sector has yet to be restored and there continues to be a general lack of
liquidity in the economy. In addition, laws and regulations affecting
businesses operating within the Russian Federation continue to evolve.
The Russian Federation's return to economic stability is dependent to a
large extent on the effectiveness of the measures taken by the government,
decisions of international lending organizations, and other actions,
including regulatory and political developments, which are beyond the
Company's control.
Russian Taxation: Russian taxation is subject to varying interpretations
and constant changes. Furthermore, the interpretation of tax legislation
by tax authorities as applied to the transactions and activity of the
Company may not coincide with that of management. As a result,
transactions may be challenged by tax authorities and the Company may be
assessed additional taxes, penalties and interest, which can be
significant.
Management regularly reviews the Company's taxation compliance with
applicable legislation, laws and decrees and current interpretations and
from time to time potential exposures are identified. At any point in time
a number of open matters may exist, however, management believes that
adequate provision has been made for all material liabilities. Tax years
remain open to review by the authorities for three years.
8. STOCK OPTION PLANS
On March 22, 2000, the Company granted incentive and non-qualified stock
options to purchase a total of 1,196,299 Common Shares. The grant of these
options is conditioned upon the approval of the plan by the Company's
stockholders at the annual meeting to be held on May 24, 2000. The
recipients of the options were approximately 100 employees of Ladenburg.
The exercise price of the options was $3.875 per share, the fair market
value on the date of grant. The options have terms of between seven and
ten years and vest over periods of three to five years after the date of
grant.
-12-
<PAGE> 13
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
9. BUSINESS SEGMENT INFORMATION
The following table presents certain financial information of the
Company's continuing operations before taxes and minority interests as of
and for the three months ended March 31, 2000 and 1999. The operations of
BrookeMil are included in real estate operations, while the Company's
interest in Western Realty Development, which is accounted for on the
equity method, is included in corporate and other activities.
<TABLE>
<CAPTION>
BROKER- COMPUTER CORPORATE
DEALER REAL ESTATE SOFTWARE AND OTHER TOTAL
------ ----------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Revenues.................... $31,287 $ 771 $ -- $ 3,483 $35,541
Operating income (loss)..... 4,883 (1,983) (40) (88) 2,772
Identifiable assets......... 50,039 57,826 409 120,585 228,859
Depreciation and
amortization............. 220 149 -- 7 376
Capital expenditures........ 66 674 -- -- 740
THREE MONTHS ENDED MARCH 31, 1999
Revenues.................... $19,030 $ 2,323 $ 251 $ 1,166 $ 22,770
Operating income (loss)..... 25 (1,225) (1,601) (3,346) (6,147)
Identifiable assets......... 38,957 91,091 985 123,605 254,638
Depreciation and
amortization............. 198 532 120 48 898
Capital expenditures........ -- 1,615 26 286 1,927
</TABLE>
10. INCOME FROM DISCONTINUED OPERATIONS
The Company recorded a gain on disposal of discontinued operations of
$4,100 for the three months ended March 31, 1999 related to the settlement
of a lawsuit originally initiated by the Company's former Western Union
telegraph business.
-13-
<PAGE> 14
NEW VALLEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
11. PRO FORMA FINANCIAL INFORMATION
The following table presents unaudited pro forma results from continuing
operations as if the recapitalization, the sale of Thinking Machines'
assets in June 1999 and the sale of five U.S. shopping centers in August
1999 had occurred on January 1, 1999. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had these transactions been consummated as of
such date.
THREE MONTHS ENDED
MARCH 31, 1999
------------------
Revenues............................ $21,173
======
Loss from continuing operations..... $ (4,428)
=======
Loss from continuing operations
applicable to Common Shares...... $ (4,428)
=======
Loss from continuing operations
per common share................. $ (0.19)
======
12. COMPREHENSIVE INCOME
Comprehensive income of the Company includes net income and changes in the
value of investment securities available for sale that have not been
included in net income. Comprehensive income (loss) applicable to Common
Shares for the three months ended March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Net income (loss) applicable to Common Shares...... $ 1,796 $(23,801)
Unrealized gain (loss) on investment securities.... 4,560 (5,418)
------- --------
Total comprehensive income (loss).................. $ 6,356 $(29,219)
======= =======
</TABLE>
-14-
<PAGE> 15
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 Condensed Consolidated Financial Statements include the accounts
of Ladenburg Thalmann & Co. Inc. ("Ladenburg"), an 80.1% owned subsidiary,
BrookeMil Ltd. ("BrookeMil"), a 99.1% owned subsidiary, Thinking Machines
Corporation ("Thinking Machines"), a 72.7% owned subsidiary, and other
subsidiaries.
RESULTS OF OPERATIONS
Consolidated total revenues were $35,541 for the three months ended March 31,
2000 versus $22,770 for the same period last year. The increase in revenues of
$12,771 is attributable primarily to the $12,257 increase in revenues from
Ladenburg and increased gains on the sale of investments of $4,254 offset by
lower real estate leasing revenues of $1,459.
For the first quarters of 2000 and 1999, the results of operations of the
Company's primary operating units, which include Ladenburg (broker-dealer), the
Company's U.S. office buildings and shopping centers and BrookeMil (real
estate), and Thinking Machines (computer software), were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Broker-dealer:
Revenues............................................... $31,287 $19,030
Expenses............................................... 26,404 19,005
------ ------
Operating income before
taxes and minority interests....................... $ 4,883 $ 25
======= =========
Real estate:
Revenues............................................... $ 771 $ 2,323
Expenses............................................... 2,754 3,548
------- -------
Operating loss before taxes
and minority interests............................. $ (1,983) $ (1,225)
======= =======
Computer software:
Revenues............................................... $ -- $ 251
Expenses............................................... 40 1,852
------- -------
Operating loss before taxes
and minority interests............................. $ (40) $ (1,601)
======= =======
Corporate and other:
Revenues............................................... $ 3,483 $ 1,166
Expenses............................................... 3,571 4,512
------- -------
Operating loss before taxes
and minority interests............................. $ (88) $ (3,346)
======== =======
</TABLE>
-15-
<PAGE> 16
Ladenburg's revenues for the first quarter of 2000 increased $12,257 as compared
to revenues for the first quarter of 1999 primarily due to increased principal
transactions of $6,560, corporate finance fees of $2,798 and commissions of
$1,906. Ladenburg's expenses for the first quarter of 2000 increased $7,399 as
compared to expenses for the first quarter of 1999 due primarily to an increase
in incentive based compensation associated with the increased revenues.
Revenues from the real estate operations for the first quarter of 2000 decreased
$1,552 primarily due to the sale of five of the Company's seven U.S. shopping
centers in August 1999. Expenses of the real estate operations decreased $794 in
the 2000 period due primarily to the sale of the shopping centers. BrookeMil
incurred expenses of $1,618 and $1,391 for the three month periods ended March
31, 2000 and 1999, respectively. BrookeMil's expenses consisted primarily of
accrued interest expense of $1,596 and $978 associated with the participating
loan from Western Realty Repin to BrookeMil in connection with the development
of the Kremlin sites.
On June 2, 1999, Thinking Machines sold substantially all its assets consisting
of its Darwin(R) software and services business to Oracle Corporation. Prior to
the sale, Thinking Machines had only minimal revenues from continuing
operations.
Operating expenses of Thinking Machines consisted primarily of interest expense
of $30 for the first quarter of 2000. Thinking Machines had revenues of $251 for
the three months ended March 31, 1999. Direct costs of these revenues were $90
for the period. Operating expenses of Thinking Machines consisted of primarily
selling, general and administrative of $684 and research and development of
$1,000 for the three months ended March 31, 1999.
For the first quarter of 2000, the Company's revenues of $3,483 related to
corporate and other activities primarily consisted of net gains on investments
of $4,753 and interest and dividends income of $382. For the same period in the
prior year, revenues related to corporate and other activities were $1,166,
which primarily consisted of net gains on investments of $499 and interest and
dividends income of $492. Corporate revenues in the 2000 period were offset by
$1,478 of losses associated with losses from the operations of certain
internet-related businesses accounted for on the equity method and a $226 loss
from joint venture. Corporate revenues in 1999 were offset by a $1,503 loss from
joint venture.
Corporate and other expenses of $3,571 for the first quarter of 2000 consisted
primarily of employee compensation and benefits of $1,535, expenses associated
with the management of the Company's marketable securities of $471 and expenses
of a non-significant consolidated subsidiary of $100. Corporate and other
expenses of $4,512 for the first quarter of 1999 consisted primarily of employee
compensation and benefits of $2,280 and expenses of a non-significant
consolidated subsidiary of $493.
Income tax for the first quarter of 2000 was $36 versus $15 for the first
quarter of 1999 due to state tax expense. 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.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter 2000, the Company's cash and cash equivalents increased
from $11,512 to $17,601 due primarily to net sales of $8,842 of marketable
securities and long-term investments.
Cash used for operating activities for the three months ended March 31, 2000 was
$8,076 as compared to cash provided from operating activities of $8,744 from the
prior year. The difference is primarily due to an increase of $10,217 in
receivables from clearing brokers versus a decrease of $9,986 in the 1999
period. The amount was offset by an increase in net income of $3,378.
Cash provided from investing activities for the three months ended March 31,
2000 was $11,076 compared to cash flows used for investing activities of $10,269
for the three months ended March 31, 1999. The difference is primarily
attributable to net sales of $8,842 of marketable securities and long-term
investments in 2000 versus net purchases of $6,411 in 1999. The difference is
-16-
<PAGE> 17
also attributable to a decrease in restricted assets of $3,202 for the three
months ended March 31, 2000 versus an increase in restricted assets of $2,827 in
the 1999 period. The decrease in restricted assets during three months ended
March 31, 2000 was primarily the result of a $2,516 reduction in a letter of
credit which collateralizes a long-term lease of commercial office space.
The capital expenditures of $674 for the three months ended March 31, 2000
related to the development of the Kremlin sites. BrookeMil also held $1,664 in
restricted cash and receivables from an affiliate, at March 31, 2000, which is
restricted for future investment in the Kremlin sites. The capital expenditures
of $1,615 for the three months ended March 31, 1999 related principally to the
development of the Kremlin sites.
In connection with the acquisition of a 34.8% interest in one of the Kremlin
sites, BrookeMil agreed with the City of Moscow to invest an additional $22,000
by May 2000 in the development of the property. In April 2000, Western Realty
Repin arranged short-term financing to fund the investment. Under the terms of
the investment, BrookeMil is required to make additional construction
expenditures on the site of $22,000 by June 2002. Failure to make the
expenditures could result in forfeiture of the 34.8% interest in the site.
In June 1998, New Valley and Apollo organized Western Realty Repin to make a
loan to BrookeMil. The proceeds from the loan will be used by BrookeMil for the
acquisition and preliminary development of the Kremlin sites. Through March 31,
2000, Western Realty Repin has advanced $36,400 (of which $25,875 was funded by
Apollo) to BrookeMil. The loan bears no fixed interest and is payable only out
of distributions by the entities owning the Kremlin sites to BrookeMil. Such
distributions must be applied first to pay the principal of the loan and then as
contingent participating interest on the loan. Any rights of payment on the loan
are subordinate to the rights of all other creditors of BrookeMil. BrookeMil
used a portion of the proceeds to repay New Valley for certain expenditures on
the Kremlin sites previously incurred. The loan is due and payable upon the
dissolution of BrookeMil and is collateralized by a pledge of New Valley's
shares of BrookeMil.
The development of Ducat Place III and the Kremlin sites will require
significant amounts of debt and other financing. New Valley is considering
potential financing alternatives on behalf of Western Realty Development and
BrookeMil. However, in light of the recent economic turmoil in Russia, there is
a risk that such financing will not be available on acceptable terms. Failure to
obtain sufficient capital for the projects would force Western Realty
Development and BrookeMil to curtail or delay the planned development of Ducat
Place III and the Kremlin sites.
Cash flows provided from financing activities were $3,089 for the three months
ended March 31, 2000 as compared to cash used for financing activities of $4,607
for the three months ended March 31, 1999. The increase was primarily due to an
increase of $3,324 in the Company's margin loans versus a $9,044 net payment on
the Company's margin loans in the 1999 period. The increase was offset by the
issuance of $4,473 of the participating loan in the 1999 period.
New Valley has lent Thinking Machines an additional $721, bearing interest at
15% per annum, since Thinking Machines sold its Darwin(R) software and services
business to Oracle Corporation in June 1999.
On October 5, 1999, New Valley's Board of Directors authorized the repurchase of
up to 2,000,000 Common Shares from time to time on the open market or in
privately negotiated transactions depending on market conditions. As of May 12,
2000, New Valley had repurchased 114,900 shares for approximately $475.
The Company expects that its available working capital will be sufficient to
fund its currently anticipated cash requirements for 2000, including the
currently anticipated cash requirements of its operating businesses,
investments, commitments, and payments of principal and interest on its
outstanding indebtedness.
MARKET RISK
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument as a result of
fluctuations in interest and currency exchange rates, equity and commodity
prices, changes in the implied volatility of interest rate, foreign exchange
rate, equity and commodity prices and also changes in the credit ratings of
either the issuer or its related country of origin. Market risk is inherent to
both derivative and non-derivative financial instruments, and accordingly, the
scope of the Company's market risk management procedures extends beyond
derivatives to include all market risk sensitive financial instruments.
-17-
<PAGE> 18
Current and proposed underwriting, corporate finance, merchant banking and other
commitments are subject to due diligence reviews by Ladenburg's senior
management, as well as professionals in the appropriate business and support
units involved. Credit risk related to various financing activities is reduced
by the industry practice of obtaining and maintaining collateral. The Company
monitors its exposure to counterparty risk through the use of credit exposure
information, the monitoring of collateral values and the establishment of credit
limits.
EQUITY PRICE RISK
Ladenburg maintained inventories of trading securities at March 31, 2000 with
fair values of $11,106 in long positions and $3,368 in short positions.
Ladenburg performed an entity-wide analysis of the its financial instruments and
assessed the related risk and materiality. Based on this analysis, in the
opinion of management, the market risk associated with the Ladenburg's financial
instruments at March 31, 2000 will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.
The Company held investment securities available for sale totaling $48,689 at
March 31, 2000. Approximately 24% of these securities represent an investment in
RJ Reynolds Tobacco Holdings, Inc. and Nabisco Group Holdings Corp., which are
defendants in numerous tobacco products-related litigation, claims and
proceedings. An adverse outcome in any of these proceedings could have a
significant effect on the value of the Company's investment.
The Company also holds long-term investments in limited partnerships and limited
liability companies. The Company's investments in limited partnerships are
illiquid, and the ultimate realization of these investments is subject to the
performance of the investee entities.
FOREIGN MARKET RISK
BrookeMil's and Western Realty Development's operations are conducted in Russia.
The Russian Federation continues to experience economic difficulties following
the financial crisis of August 1998. Consequently, the country's currency
continues to devalue, there is continued volatility in the debt and equity
markets, hyperinflation persists, confidence in the banking sector has yet to be
restored and there continues to be a general lack of liquidity in the economy.
In addition, laws and regulations affecting businesses operating within the
Russian Federation continue to evolve.
The Russian Federation's return to economic stability is dependent to a large
extent on the effectiveness of the measures taken by the government, decisions
of international lending organizations, and other actions, including regulatory
and political developments, which are beyond the control of companies operating
in the Russian Federation. The operations of BrookeMil and Western Realty
Development may be significantly affected by these factors for the foreseeable
future.
YEAR 2000 COSTS
The "Year 2000 issue" is the result of computer programs that were written using
two digits rather than four digits to define the applicable year. If New
Valley's or its subsidiaries' computer programs with date-sensitive functions
are not Year 2000 compliant, they may recognize a date using "00" as the Year
1900 rather than the Year 2000. This could result in system failure or
miscalculations causing disruption to operations, including, among other things,
an inability to process transactions or engage in similar normal business
activities. Published reports have stated that Year 2000 miscalculations could
occur throughout the Year 2000. To date, neither the Company nor its
subsidiaries have experienced any material disruptions to their business
operations.
NEW VALLEY AND BROOKEMIL. Both New Valley and BrookeMil use personal computers
for all transactions. All such computers and related systems and software are
less than three years old and are Year 2000 compliant. As a result, New Valley
and BrookeMil are Year 2000 compliant.
LADENBURG. Ladenburg is Year 2000 compliant. Ladenburg's plan addressed external
interfaces with third party computer systems necessary in the broker-dealer
industry. It also addressed internal operations software necessary to continue
operations on a daily basis. Ladenburg's Year 2000 plan cost approximately $650.
The cost was inclusive of hardware and software upgrades and replacements as
well as consulting.
-18-
<PAGE> 19
EXTERNAL SERVICE PROVIDERS. The modifications for Year 2000 compliance by New
Valley and its subsidiaries were completed in 1999. However, the failure of New
Valley's service providers, including Ladenburg's clearing agent, to resolve
their own processing issues in a timely manner could result in a material
financial risk. To date, New Valley is unaware of any incidents that have
occurred where its external service providers were not Year 2000 complaint.
It is unclear whether the Russian government and other organizations who provide
significant infrastructure services in Russia have addressed the Year 2000
problem sufficiently to mitigate potential substantial disruption of these
infrastructure services. The substantial disruption of these services would have
an adverse affect on the operations of BrookeMil and Western Realty Development.
Furthermore, the current financial crisis in Russia could affect the ability of
the government and other organizations to fund Year 2000 compliance programs. To
date, New Valley is not aware of any Year 2000 related issues reported in
Russia.
Although New Valley and its subsidiaries have confirmed that their service
providers adequately addressed Year 2000 issues, there can be no complete
assurance of success, or that interaction with other service providers will not
impair New Valley's or its subsidiaries' services.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
New Valley 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, 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 stockholders, which represent New
Valley'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
Private Securities Reform Act, New Valley has identified under "Risk Factors" in
Item 1 of the Company's Form 10-K for the year ended December 31, 1999 filed
with the Securities and Exchange Commission and in this section important
factors that could cause actual results to differ materially from those
contained in any forward-looking statements made by or on behalf of New Valley.
Each of New Valley's operating businesses, Ladenburg, BrookeMil and New Valley
Realty, and its interests in Western Realty Development and Western Realty
Repin, are subject to intense competition, changes in consumer preferences, and
local economic conditions. BrookeMil, Western Realty Development, Western Realty
Repin and New Valley Realty 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. Uncertainties affecting New Valley
generally include, without limitation, the effect of market conditions on the
salability of New Valley's investment securities, the uncertainty of other
potential acquisitions and investments by New Valley, the effects of
governmental regulation on New Valley's ability to target and/or consummate any
such acquisitions and the effects of limited management experience in areas in
which New Valley may become involved.
Results actually achieved may differ materially from expected results included
in these forward-looking 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. New Valley does not undertake to update any
forward-looking statement that may be made from time to time on behalf of New
Valley.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Market Risk" is incorporated
herein by reference.
-19-
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
See Note 7 to the Notes to the Condensed Consolidated Financial
Statements in Part I, Item 1 of this Report.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
No securities of the Company which were not registered under the
Securities Act of 1933 have been issued or sold by the Company during
the quarter ended March 31, 2000, except (i) on January 19, 2000, the
Company granted to each of the four non-employee directors of the
Company options to purchase 10,000 Common Shares at an exercise price
of $4.6875 per share; and (ii) on March 22, 2000, the Company granted
to approximately 100 employees of Ladenburg options to purchase
1,196,299 Common Shares at an exercise price of $3.875. The foregoing
transactions were effected in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933 or
did not involve a "sale" under the Securities Act of 1933.
Item 5. OTHER INFORMATION
On April 27, 2000, the Company withdrew its application to have its
Common Shares and Warrants quoted on the Nasdaq SmallCap Market due to
the Company's inability to meet the minimum bid price listing
requirement of $4 per Common Share. The Company intends to refile its
application when it is able to satisfy the applicable listing
requirements.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 New Valley Corporation 2000 Long-Term Incentive Plan
(incorporated by reference to Appendix A to the Company's
Proxy Statement dated April 18, 2000).
10.2 New Valley Corporation Non-Employee Directors Stock Option
Program (incorporated by reference to Appendix B to the
Company's Proxy Statement dated April 18, 2000).
27 Financial Data Schedule (for SEC use only)
(b) REPORTS ON FORM 8-K
None
-20-
<PAGE> 21
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: May 15, 2000 By: /s/ J. BRYANT KIRKLAND III
-----------------------------
J. Bryant Kirkland III
Vice President, Treasurer
and Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer)
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 17,601
<SECURITIES> 59,795
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,870
<PP&E> 67,660
<DEPRECIATION> 5,530
<TOTAL-ASSETS> 228,859
<CURRENT-LIABILITIES> 76,032
<BONDS> 11,272
0
0
<COMMON> 232
<OTHER-SE> 97,425
<TOTAL-LIABILITY-AND-EQUITY> 228,859
<SALES> 0
<TOTAL-REVENUES> 35,541
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,167
<INCOME-PRETAX> 1,832
<INCOME-TAX> 36
<INCOME-CONTINUING> 1,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,796
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
