In return for the credit line, Odyssey Telecorp Inc., a one-year-old, telecom salvage firm formed by chairman Sean Doherty in Palo Alto, CA, promises to pay FECI up to $30 million at an undetermined date, based on Epic's performance. FECI also will receive a warrant to buy up to 15% of stock in privately held Odyssey.
In a prepared statement, FECI chairman/CEO Robert W. Anestis says his company expects to book a small accounting gain from the sale and claim a federal tax refund of $72 million on its 2002 return. FECI will also carry forward tax losses of $80 million on the Epik sale.
As GlobeSt.com previously reported, Anestis put Epik on the selling block in November, writing off the Orlando-based firm's entire book value of $238.1 million.
"Going forward, FECI will focus all of its resources on its two core operating businesses, Florida East Coast Railway LLC and Flagler Development Co., both of which generate significant earnings and cash flows for the company," Anestis says in the statement. "We will continue to unlock the value of our non-core real estate assets with the goal of creating additional shareholder value."
Flagler Development owns, develops, leases and manages 6.7 million sf of commercial and industrial space; owns 966 acres of entitled land; and 12,000 acres of additional Florida properties. Florida East Coast Railway, a regional freight railroad also owned by FECI, operates 351 miles of main line track from Jacksonville, FL to Miami.
In the third quarter, FECI lost $146.4 million or $4.02 per diluted share on revenue of $64.5 million compared to a profit of $2 million or five cents per diluted share on sales of $65.8 million in third quarter 2001. However,, excluding discontinued operations, Epik, building and land sales, and certain non-recurring items, FECI posted an operating profit of $9.6 million for the third quarter versus $13.2 million in the same 2001 period.
Odyssey's Doherty couldn't be reached at GlobeSt.com's publication deadline. FECI formed Epic in 1999 to lay fiber-optic cables under its rail beds. The telecommunications industry's downturn in 2000 crimped marketing and expansion plans for Epik. The company leases access to its fiber-optics network to telecommunications companies.
Florida East Coast Industries' class A common is trading on the New York Stock Exchange at about $21.80 per share.
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