FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
[X] QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 1-8254
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THACKERAY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2446697
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
509 Madison Ave.
Suite 1714
New York, New York 10022
--- ---- --- ---- -----
(Address of principal executive offices) (Zip Code)
(212) 759-3695
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(Registrant's telephone number, including area code)
Unchanged
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,107,401 shares of common
stock, $.10 par value, as of August 10, 2002.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
2002 2001
---- ----
ASSETS: (UNAUDITED)
CASH AND CASH EQUIVALENTS $ 2,180,000 $ 2,656,000
INVESTMENT IN AND ADVANCES TO
REAL ESTATE PARTNERSHIP -- 555,000
INVESTMENTS IN REAL ESTATE 1,951,000 1,951,000
OTHER ASSETS 174,000 21,000
------------ ------------
TOTAL ASSETS $ 4,305,000 $ 5,183,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 243,000 $ 257,000
OTHER LIABILITIES 121,000 121,000
------------ ------------
TOTAL LIABILITIES 364,000 378,000
------------ ------------
STOCKHOLDERS' EQUITY
COMMON STOCK, $.10 PAR VALUE
(20,000,000 SHARES AUTHORIZED;
5,107,401 SHARES ISSUED AND OUTSTANDING) 511,000 511,000
CAPITAL IN EXCESS OF PAR VALUE 43,542,000 43,542,000
ACCUMULATED DEFICIT (40,106,000) (39,095,000)
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS) (6,000) (153,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,941,000 4,805,000
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,305,000 $ 5,183,000
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
---- ----
EQUITY IN NET LOSS FROM REAL ESTATE PARTNERSHIP ($ 162,000) ($ 723,000)
GENERAL AND ADMINISTRATIVE EXPENSE (189,000) (153,000)
INTEREST INCOME 10,000 51,000
----------- -----------
LOSS BEFORE INCOME TAXES (341,000) (825,000)
INCOME TAX BENEFIT ---- ---
----------- -----------
NET LOSS ($ 341,000) ($ 825,000)
=========== ===========
LOSS PER SHARE ($0.07) ($ 0.16)
=========== ===========
NUMBER OF SHARES 5,107,401 5,107,401
=========== ===========
COMPREHENSIVE INCOME (LOSS):
- ----------------------------
NET LOSS ($ 341,000) ($ 825,000)
EQUITY IN OTHER COMPREHENSIVE INCOME
FROM REAL ESTATE PARTNERSHIP RELATING TO
CASH FLOW HEDGES --- ---
INCOME TAX PROVISION --- ---
----------- -----------
OTHER COMPREHENSIVE INCOME, NET OF TAX --- ---
----------- -----------
COMPREHENSIVE LOSS ($ 341,000) ($ 825,000)
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
---- ----
EQUITY IN NET LOSS FROM REAL ESTATE PARTNERSHIP ($ 800,000) ($1,847,000)
GENERAL AND ADMINISTRATIVE EXPENSE (328,000) (283,000)
INTEREST INCOME 19,000 119,000
----------- -----------
LOSS BEFORE INCOME TAXES (1,109,000) (2,011,000)
INCOME TAX BENEFIT 98,000 ---
----------- -----------
NET LOSS ($1,011,000) ($2,011,000)
=========== ===========
LOSS PER SHARE ($ 0.20) ($ 0.39)
=========== ===========
NUMBER OF SHARES 5,107,401 5,107,401
=========== ===========
COMPREHENSIVE INCOME (LOSS):
- ----------------------------
NET LOSS ($1,011,000) ($2,011,000)
EQUITY IN OTHER COMPREHENSIVE INCOME
FROM REAL ESTATE PARTNERSHIP RELATING TO
CASH FLOW HEDGES 245,000 ---
INCOME TAX PROVISION (98,000) ---
----------- -----------
OTHER COMPREHENSIVE INCOME, NET OF TAX 147,000 ---
----------- -----------
COMPREHENSIVE LOSS ($ 864,000) ($2,011,000)
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ($1,011,000) ($2,011,000)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH USED IN OPERATING
ACTIVITIES:
DEFERRED INCOME TAX BENEFIT (98,000) ---
EQUITY IN NET LOSS FROM REAL ESTATE
PARTNERSHIP 800,000 1,847,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(DECREASE) IN ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES (14,000) (46,000)
INCREASE IN OTHER ASSETS, NET (153,000) (29,000)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (476,000) (239,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
ADVANCES TO REAL ESTATE PARTNERSHIP (---) (3,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (---) (3,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (476,000) (242,000)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 2,656,000 4,879,000
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,180,000 $ 4,637,000
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
THACKERAY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
1. BASIS OF PRESENTATION
The significant accounting policies followed by the Company in the
preparation of these unaudited interim financial statements are
consistent with the accounting policies followed in the audited annual
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
Certain information and footnote disclosures included in the audited
financial statements have been omitted. For additional information,
reference is made to the financial statements and notes thereto
included in the Company's Annual Report to Stockholders for the year
ended December 3l, 2001.
The net loss applicable to common stock for the three months and six
months ended June 30, 2002 and 2001 was divided by the number of shares
outstanding during the period to determine per share data.
2. REAL ESTATE PARTNERSHIP
In October 2001, the Company's Real Estate Partnership ("Partnership")
with Belz Enterprises received equity and debt funding in excess of
$120 million for the Partnership's 925,000 sq.ft. Festival Bay,
Orlando, Florida retail/entertainment center which is under
construction. Thackeray contributed $1,750,000 to the equity portion of
the funding.
In connection with the financing, the partnership agreement was
materially revised and amended to provide for certain adjustments in
the economic rights and obligations of the partners.
The Partnership has incurred net losses and negative operating cash
flows since inception of operations in 1999, as the project is still
being developed and has limited operating activity. Accordingly,
Thackeray's balance of its investment in and advances to the
Partnership has been reduced to zero during the first six months of
2002.
6
The following are the condensed statements of operations of the
Partnership (000's omitted) for the first six months of 2002 and 2001:
2002 2001
---- ----
Rental revenue $ 1,250 $ 949
Operating expenses (1,101) (781)
Interest expense (1,369) (1,641)
Depreciation and Amortization expense (1,237) (1,163)
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Net Loss $ (2,457) $(2,636)
========= =======
The increase in rental revenue is largely attributable to percentage
rent collected in 2002 from the multi-plex theatre tenant as well as
rent received from the skate park tenant, which opened in January 2002.
Interest expense decreased primarily from higher interest
capitalization in the first half of 2002 versus the same period in 2001
attributable to the increase in assets under construction.
The increase in depreciation and amortization is attributable to the
increase in assets placed in service for the six months ended June 30,
2002 versus the same period in 2001.
The credit agreement entered into in October 2001 by the Partnership
contains certain default provisions that require, among others, that
the construction of the project be completed by January 31, 2003, and a
significant number of major tenant spaces be fully leased, operating
and paying full base rent by January 31, 2003 and thereafter.
Development efforts for the project are on-going and based on the
current status of the construction of the project and anticipated
construction progress going forward, the partners believe that the
construction deadline under the loan agreement will be achieved.
Leasing efforts for the project are also on-going; however, the project
continues to experience sluggish leasing activity pending an economic
recovery and an increase in Orlando tourism levels. The Partnership
plans to pursue negotiations with the lenders to extend the deadline
under the loan agreement related to achieving the required tenancy
levels by January 31, 2003.
There can be no assurance that the minimum lease requirement under the
loan agreement will be met or that the lenders will agree to extend the
related deadline. The Partnership's failure to meet the required loan
provisions would provide the lenders with the ability to accelerate the
Partnership's loan repayment, which would have a material adverse
effect on the Partnership and on the Company, and would raise
substantial doubt about the Partnership's and the Company's ability to
continue as a going concern.
7
The realization of the Company's real estate assets related to the
Partnership is dependent upon the Partnership meeting certain required
provisions under its construction loan agreement, the availability of
additional funding from the partners to fund any construction cost
overruns and any operating deficits and the successful future
development, leasing and operation of the real estate project.
3. INCOME TAXES
The Company anticipates it will generate a loss for the year ending
December 31, 2002, and therefore it expects that no Federal or State
income taxes will be payable for the year ending December 31, 2002. For
the year ended December 31, 2001, the Company also reported a loss for
income tax purposes. In addition, for both periods, given the
uncertainty over whether the Company will realize benefits from such
losses against future taxable income, no net deferred income tax assets
have been recorded. Accordingly, in the aggregate, taking into
consideration both results of operations and other comprehensive
income, no Federal or State income tax provisions or benefits have been
recorded for the three-month periods ended June 30, 2002 and 2001,
however, a deferred income tax provision and benefit in opposite
amounts have been separately reported in 2002 that are specifically
attributable to other comprehensive income and results of operations.
4. STATEMENTS OF CASH FLOWS
There were no interest payments for the three and six months ended June
30, 2002 and 2001.
There were no income tax payments during the three and six months ended
June 30, 2002 and 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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(1) Forward Looking Information
-------------------------------
This report contains "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of
1995. Such forward looking statements are based upon
management's expectations, estimates, projections and
assumptions. Words such as "expects", "anticipates", "intends",
"plans", "believes", "estimates", and variations of such words
and similar expressions are intended to identify such forward
looking statements which include, but are not limited to,
projections of capital expenditures, earnings, income taxes
payable, financing and capital infusions. These forward looking
statements are subject to risks and uncertainties which could
cause the Company's actual results or performance to differ
materially from those expressed or implied in such statements.
These risks and uncertainties include, but are not limited to
the following: general risks affecting the real estate
industry, including the need to enter into new leases or renew
leases on unfavorable terms to generate rental revenues,
competition for tenants from other owners of retail properties,
competition from other retailers, successful
8
operations by and the financial condition of tenants,
particularly major tenants, adverse changes in Orlando, Florida
and national economic and market conditions, and access to and
adequacy of financing to complete the Company' Festival Bay
project in Orlando, Florida.
(2) Material Changes in Financial Condition
-------------------------------------------
The Company anticipates that its current cash and cash
equivalent balance will be sufficient to fund its requirements
for the foreseeable future.
The Company anticipates that the Partnership's real estate
project, Festival Bay, will continue to experience sluggish
leasing activity pending an economic recovery and an increase
in Orlando tourism levels. The Partnership plans to pursue
negotiations with the lenders to extend the deadline under the
loan agreement related to achieving the required tenant
leasing and occupancy levels by January 31, 2003. There can be
no assurance that the minimum lease requirement under the loan
agreement will be met or that the lenders will agree to extend
the related deadline. The Partnership's failure to meet the
required loan provisions would provide the lenders with the
ability to accelerate the Partnership's loan repayment, which
would have a material adverse effect on the Partnership and on
the Company, and would raise substantial doubt about the
Partnership's and the Company's ability to continue as a going
concern.
The Festival Bay construction budget was revised in July 2002
to $132.4 million, which represents an increase of
approximately $5 million over the most recent 2001 version. As
a consequence, additional preferential priority capital has
been and is being invested in the project by our partner,
thereby negatively impacting the prospective return to the
Company on a future sale or disposition of Festival Bay. There
is also no assurance that actual construction costs will not
exceed the $132.4 million total, as change orders and other
events may act to further increase construction costs and
diminish potential returns to the Company.
At June 30, 2002 there were no commitments for capital
expenditures.
9
(3) Material Changes in Results of Operations
---------------------------------------------
The Company's share in the net losses of the Partnership was
$800,000 in the first half of 2002 versus $1,847,000 for the
same period in 2001 as its investment in the Partnership was
written down to zero in 2002.
General and administrative expenses for the first half 2002
were $45,000 higher than the amount incurred in the first half
2001, principally due to increased insurance expense.
Interest income for the six months ended June 30, 2002 was
$19,000 versus $119,000 for the comparable period in 2001. The
decrease results from the Company's maintaining lower cash
investment balances as well as receiving lower interest rates
on invested cash.
In addition, the Company's share of the other comprehensive
income of the Partnership in the first half of 2002 was
$147,000, after taxes, and related to the favorable changes in
interest rates impacting the value of the cash flow hedges at
the Partnership level.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not applicable.
Part II. Other Information
--------------------------
Item 5. Other Information
-------------------------
Change in Registrant's Certifying Accountants
---------------------------------------------
On August 15, 2002, the Board of Directors of Thackeray
Corporation engaged Lazar Levine & Felix LLP ("Lazar Levine")
to serve as the Company's independent public accountants for
the year ending December 31, 2002, in accordance with the
recommendation of the Audit Committee and unanimous approval
by the Company's Board of Directors. The Company's previous
accountants were Arthur Andersen & Co.
In the years ended December 31, 2001 and December 31, 2000,
and through the date hereof, the Company did not consult with
Lazar Levine with respect to the application of accounting
principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered
on the Company's financial statements, or any other matters or
reportable events as set forth in items 304(a)(2)(i) and (ii)
of Regulation S-K.
10
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On May 30, 2002 the Company filed a current report on Form 8-K.
On June 6, 2002 the Company filed Form 8-K/A to amend the report filed
on Form 8-K dated May 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THACKERAY CORPORATION
By: /s/ Jules Ross
---------------------------------------
Jules Ross
Vice President, Finance,
(Principal Financial Officer)
Date: August 19, 2002
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EXHIBIT INDEX
TO
THACKERAY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTERLY PERIOD ENDED JUNE 30, 2002
Exhibit No. Description of Document
- ----------- -----------------------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
12