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/raid1/www/Hosts/bankrupt/TCR_Public/030804.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, August 4, 2003, Vol. 7, No. 152 Headlines ABRAXAS PETROLEUM: March Working Capital Deficit Tops $1.9-Mill. AEROGEN INC: Red Ink Continued to Flow in Second Quarter 2003 AFC ENT.: Reports Improved Q2 Comparative Store Sales Results AIR CANADA: Ernst & Young Provides Update on CCAA Restructuring AIRGATE PCS: Will Webcast Fiscal Q3 Conference Call on August 15 ALASKA COMMS: Reports Improved Q2 Results After Asset Sale Gain ALLIED WASTE: Inks Pact to Convert $1BB of 6.5% Preferred Shares AMERCO: Gets Clearance to Hire Ordinary Course Professionals AMERICAN AIRLINES: Joins Sabre Travel Network DCA 3-Year Option AMERICAN WAGERING: Tapping Gordon & Silver as Bankruptcy Counsel ANC RENTAL: Lehman Seeks Nod to File Cerberus Pacts Under Seal ANDERSON SAND: Icoworks Unit to Conduct Co.'s Equipment Auction APPLICA INC: Second Quarter Net Loss Stays Flat at $2.8 Million ASIA GLOBAL CROSSING: Trustee Wants to Hire G.E.M. as Custodian BELL CANADA: June Working Capital Deficit Tops $919 Million BIOTRANSPLANT INC: Court Okays Asset Purchase Pact with Miltenyi BUCKEYE: Posts $5MM Net Loss After $5MM Asset Impairment Charges BURLINGTON: Court Approves WL Ross' $614-Million Bid for Assets CALYPTE BIOMEDICAL: June 30 Net Capital Deficit Widens to $11MM CENTURYTEL INC: June 30 Working Capital Deficit Widens to $237MM CHIPPAC INC: Red Ink Continued to Flow Second Quarter 2003 CHIQUITA BRANDS: Reports Improved Second Quarter Fin'l Results CINCINNATI BELL: Elects Bruce L. Byrnes to Board of Directors COASTAL BANCORP: Fitch Withdraws Pref. Rating after Redemption COGECO CABLE: Increases Internet Service Speed to 3.0 Mbps CONGOLEUM CORP: Seeks Bondholders' Consent to Amend Indenture CONSECO FINANCE: Takes Action to Challenge Various Claims CONSECO INC: Reaches Agreement with TOPrS & Creditors Committees CONSECO INC: Court Approves Kroll's Engagement as Investigator CORRPRO: Continues Negotiating Extension of Credit Facilities COTT CORP: S&P Ups Corp. Credit & Senior Debt Ratings to BB/BB+ CROWN CASTLE: Second Quarter Net Loss Hits $100 Million Mark CWMBS INC: Fitch Assigns Lower-B Ratings to Classes B-3 & B-4 DENNY'S CORP: Poor Performance Spurs S&P to Downgrade Ratings DENNY'S CORP: June 25 Balance Sheet Insolvency Stands at $293MM DIAMOND ENTERTAINMENT: Requests Ex-Auditors to Submit SEC Report DILLARD'S INC: S&P Lowers and Removes Low-B Ratings from Watch EPOCH 2001-1: S&P Junks Ratings on Class III and IV Notes FEP RECEIVABLES: Fitch Affirms Note Ratings from 2 Transactions FLEMING COMPANIES: Bringing-In Kekst & Company as PR Consultant FLEXTRONICS: $500-Mil. Senior Subordinated Notes Gets BB- Rating GRAHAM PACKAGING: Commencing 8-3/4% Sr. Debt Exchange Offer G&C WHOLESALE: Leo M. Tahajian Charged in $5 Million Bank Fraud GAYLORD ENTERTAINMENT: Reports Strong Growth for Second Quarter GEO SPECIALTY: Obtains Covenant Waiver under Sr. Credit Facility GRAPHIC PACKAGING: Gets Consents to Amend 8-5/8% Note Indenture HYPERTENSION DIAGNOSTICS: Ernst & Young Airs Going Concern Doubt INTERLINE BRANDS: June 27 Net Capital Deficit Widens to $248MM INT'L UTILITY: Misses Interest Payment on 10.75% Sr. Sub. Notes KAISER: Government Seeks Stay Relief to Permit Debt Set-Off KMART CORP: E. David Coolidge Discloses 10,000 Shares Ownership LB-UBS COMMERCIAL: Fitch Assigns Low-B Ratings to 3 Note Classes MADISON RIVER: Second Quarter 2003 Net Loss Narrows to $3.8 Mil. MAGELLAN HEALTH: Files 2nd Amended Plan & Disclosure Statement MARSH SUPERMARKETS: Hosting First Quarter Conference Call Today MDC CORPORATION: Completes Plan of Arrangement with Maxxcom Inc. MIRANT CORP: Court Fixes November 19 Bar Date for All Creditors NEWCOM INT'L: Operating Losses Prompt Going Concern Uncertainty NORSKE SKOG: 16% US Dollar Slide Erodes Second Quarter Gains NORSKE SKOG: Extends Senior Debt Exchange Offer to August 15 NRG ENERGY: Court Okays Leonard Street's Engagement as Counsel OGLEBAY NORTON: Defers Interest Payment on 10% Senior Sub. Notes OM GROUP: Completes Sale of Precious Metals Business to Umicore PACIFICARE HEALTH: 2nd Quarter Results Show Marked Improvement P-COM INC: June 30 Balance Sheet Insolvency Doubles to $30 Mill. PENN TRAFFIC: Court Approves Permanent $270-Mill. DIP Financing PERSONNEL GROUP: Second Quarter Results Enter Positive Territory PG&E NATIONAL: USGen Wants to Honor Prepetition Property Taxes POLAROID: Cardinale & Maiorelli Seeks Access to Produced Docs. PRIMEDEX HEALTH: Prepackaged Chapter 11 Filing in the Offing PRIME HOSPITALITY: Second Quarter Net Loss Balloons to $18 Mill. PRIMEDIA INC: Second Quarter Results Reflect Solid Performance PUTNAM LOVELL: Fitch Affirms Low-B/Junk Ratings on 3 Classes QUEBECOR MEDIA: 2nd Quarter Performance Improved Significantly RIVERWOOD INT'L: Extends Consent Solicitations for Senior Notes SAFETY-KLEEN: Delaware Court Confirms Plan of Reorganization SAFETY-KLEEN: Wants Approval to Settle with Committee & Andersen SCHUFF: Operating Income Cut Prompts S&P to Lower Rating to B- SERVICEWARE TECHNOLOGIES: Reports Improved Performance for Q2 SK GLOBAL: Seeks Court Injunction Against Utility Companies SMTC CORP: Schedules Q2 Results Teleconference for Aug. 11, 2003 SOLUTIA: Weak Performance & Refinancing Risk Cause Rating Drop STEAKHOUSE PARTNERS: Obtains Court Nod for $5M DIP Financing Pact STELCO: S&P Keeps Watch Due to Cost-Reduction Ability Concerns SUMMIT PROPERTIES: Senior Unsecured Debt Rating Down to BB+ SUPERIOR TELECOM: Files Chapter 11 Reorganization Plan in Del. TELESYSTEM INT'L: Second Quarter Results Enter Positive Zone TOWER AUTOMOTIVE: Commences Exchange Offer for 12% Senior Notes VERTIS INC: Reports Net Loss of $72 Million for Second Quarter VICAR OPERATING: S&P Affirms B+/B- Ratings and Changes Outlook WALKING COMPANY: Commences Store Closing Sales at 29 Locations WHEELING-PITTSBURGH: Formally Emerges from Bankruptcy Proceeding WHEELING-PITTSBURGH: Consummates Plan of Reorganization WORLDCOM: MCI Continues to Serve Federal Government Customers WORLDCOM INC: CWA President Morton Bahr Applauds GSA Decision ZALE CORPORATE: S&P Ratchets Rating to BB+ after Tender Offer * BOND PRICING: For the week of August 4 - 8, 2003 ********* ABRAXAS PETROLEUM: March Working Capital Deficit Tops $1.9-Mill. ---------------------------------------------------------------- Abraxas Petroleum Corporation has incurred net losses in five of the last six years, and there can be no assurance that operating income and net earnings will be achieved in future periods. Revenues, profitability and future rate of growth are substantially dependent upon prevailing prices for crude oil and natural gas and the volumes of crude oil, natural gas and natural gas liquids produced by Abraxas. During 2002, crude oil and natural gas prices began to increase from 2001 levels and increased further in the first quarter of 2003. In addition, because the Company's proved reserves will decline as crude oil, natural gas and natural gas liquids are produced, unless Abraxas acquires additional properties containing proved reserves or conducts successful exploration and development activities, its reserves and production will decrease. Its ability to acquire or find additional reserves in the near future will be dependent, in part, upon the amount of available funds for acquisition, exploitation, exploration and development projects. In order to provide Abraxas with liquidity and capital resources, the Company has sold certain of its producing properties. However, its production levels have declined as it has been unable to replace the production represented by the properties sold with new production from the producing properties Abraxas has invested in with the proceeds of the property sales. In addition, under the terms of its new senior credit agreement and its new notes, the Company is subject to limitations on capital expenditures. As a result, Abraxas will be limited in its ability to replace existing production with new production and might suffer a decrease in the volume of crude oil and natural gas it produces. If crude oil and natural gas prices return to depressed levels or if Abraxas production levels continue to decrease, the Company's revenues, cash flow from operations and financial condition will be materially adversely affected. Results of Operations The Company's financial results depend upon many factors, particularly the following factors which most significantly affect its results of operations: * the sales prices of crude oil, natural gas liquids and natural gas; * the level of total sales volumes of crude oil, natural gas liquids and natural gas; * the ability to raise capital resources and provide liquidity to meet cash flow needs; * the level of and interest rates on borrowings; and * the level and success of exploration and development activity. During the three months ended March 31, 2003, operating revenue from crude oil, natural gas and natural gas liquid sales increased to $12.8 million compared to $10.9 million in the three months ended March 31, 2002. The increase in revenue was primarily due to increased prices realized during the period, partially offset by a decline in production volumes. Higher commodity prices impacted crude oil and natural gas revenue by $7.2 million while reduced production volumes had a $5.6 million negative impact on revenue. Lease operating expenses for the three months ended March 31, 2003 decreased to $2.7 million from $3.9 million for the same period in 2002. The decrease in LOE was primarily due to the sale of Canadian Abraxas and Grey Wolf in January 2003. LOE related to the properties sold was $2.0 million for the first quarter of 2002 compared to $379,000 during the first quarter of 2003 through the date of the sale. Partially offsetting the decline was an increase in production tax expense due to higher commodity prices in the quarter ended March 31, 2003 compared to the same period of 2002. General & Administrative expenses decreased by $0.3 million to $1.4 million during the quarter ended March 31, 2003 for the first three months of 2003 from $1.7 million for the first three months of 2002. The decrease in G&A expense was primarily due to a reduction in personnel in connection with the sale of Canadian Abraxas and Grey Wolf on January 23, 2003. Depreciation, depletion and amortization expense decreased to $3.1 million for the three months ended March 31, 2003 from $6.8million for the same period of 2002. The decline in DD&A was primarily due to the sale of Canadian properties in January 2003, as well as ceiling limitation write-downs in the second quarter of 2002. Interest expense decreased from $8.4 million for the first three months of 2002 to $5.2 million in 2003. The decrease in interest expense was due to the reduction in long-term debt in the first quarter of 2003 as compared to the same period of 2002. The reduction in debt was the result of the financial transactions which occurred on January 23, 2003. Liquidity and Capital Resources At March 31, 2003, Abraxas' current liabilities of approximately $12.9 million exceeded the Company's current assets of $11.0 million resulting in a working capital deficit of $1.9 million. This compares to a working capital deficit of approximately $65.7 million at December 31, 2002. However, as a result of the financial restructuring completed in January 2003, Abraxas' current liabilities were significantly reduced. Current liabilities at March 31, 2003 consisted of trade payables of $5.2 million, revenues due third parties of $2.5 million and accrued interest of $2.5 million related to the new notes, which was paid in kind May 1 with the issuance of additional notes. After giving effect to the scheduled principal reductions required during 2003 under its new senior credit agreement Abraxas will have cash interest expense of approximately $4.0 million. The Company does not expect to make cash interest payments with respect to the outstanding new notes, and the issuance of additional new notes in lieu of cash interest payments thereon will not affect its working capital balance. AEROGEN INC: Red Ink Continued to Flow in Second Quarter 2003 ------------------------------------------------------------- Aerogen, Inc. (Nasdaq: AEGN) announced financial results for the three months and six months ended June 30, 2003. The net loss for the three months ended June 30, 2003 was $3.6 million, compared with a net loss of $7.0 million for the same period in 2002. The net loss for the six months ended June 30, 2003 was $7.9 million, compared with $14.1 million for the same period in 2002. The decrease in net loss was primarily the result of increased product revenues and lower operating expenses. Revenues for the three months ended June 30, 2003 were $1.1 million, compared with $0.2 million for the same period in 2002. Revenues for the six months ended June 30, 2003 were $2.7 million compared with $0.3 million for the same period in 2002. The increase in revenues for the three month and six month period ending June 30, 2003 were primarily due to the increased sales of the Aeroneb(R) Professional Nebulizer System and higher royalty revenues from a consumer company that has licensed our aerosol generator technology. Cost of products sold for the three months ended June 30, 2003 was $0.6 million, compared with $0.2 million for the same period in 2002. Cost of products sold for the six months ended June 30, 2003 was $1.4 million, compared with $0.5 million for the same period in 2002. Cost of products sold increased with higher product sales, and were 62% of product sales for the three months ended June 30, 2003 and 64% for the six months ended June 30, 2003. In the three months and six months ended June 30, 2002, product margins were negative. Research and development expenses for the three months ended June 30, 2003 were $3.0 million, compared with $4.9 million for the same period in 2002. Research and development expenses for the six months ended June 30, 2003 were $6.2 million, compared with $10.0 million for the same period in 2002. The decrease in research and development spending was primarily due to reduction in payroll expenses resulting from fewer employees, suspension of development on the Aerodose(R) insulin inhaler, and completion of development of the clinical version of the Aerodose(R) respiratory inhaler. Selling, general and administrative expenses for the three months ended June 30, 2003 were $1.5 million, compared with $2.2 million for the same period in 2002. Selling, general and administrative expenses for the six months ended June 30, 2003 were $3.4 million, as compared with $4.3 million for the same period in 2002. The decrease in selling, general and administrative expenses in the three months ended June 30, 2003, as compared with the same period of 2002, was primarily due to reduction in payroll expenses resulting from fewer employees, decreased expenses associated with marketing and selling products, and reductions in travel, partially offset by increased legal expenses. The decrease in expenses in the first six months of 2003 over the same period in 2002, was primarily due to reduction in payroll expenses resulting from fewer employees and decreased expenses associated with marketing and selling our products, partially offset by increased legal expenses. Financial Outlook As of June 30, 2003, Aerogen had cash, cash equivalents and short- term investments totaling $1.7 million, compared with $8.9 million at December 31, 2002. Cash expenditures, net of cash receipts, for the three months and six months ended June 30, 2003 were approximately $2.8 million and $7.2 million, respectively. As a result of our continued losses and current cash resources, we will need to raise additional funds through public or private financings, collaborative relationships or other arrangements within the next few weeks in order to continue as a going concern. Collaborative arrangements, if necessary to raise additional funds, may require us to relinquish rights to either certain of our products or technologies or desirable marketing territories, or all of these. We are pursuing efforts to raise such additional funds; however, if we are not successful, we may have to curtail significantly, or cease entirely, our operations, and/or seek bankruptcy protection. "While the Aerogen team continues to be most enthusiastic about the multiple applications identified for improvements of respiratory therapy associated with the now developed core aerosol generator technology, financing of the business plan is taking more time than we had contemplated. We continue to pursue all opportunities available to us," said Jane E. Shaw, Aerogen's Chairman and Chief Executive Officer. Aerogen, a specialty pharmaceutical company, develops inhaler and nebulizer products based on its OnQ(TM) Aerosol Generator technology to improve the treatment of respiratory disorders. Aerogen also has development collaborations with pharmaceutical and biotechnology companies for delivery of novel compounds that treat respiratory and other disorders. Aerogen currently markets products that include the Aeroneb(R) Professional Nebulizer System, for use in the hospital, and the Aeroneb(R) Portable Nebulizer System, for home use. Aerogen's first drug product in the acute care setting, inhaled amikacin for pulmonary infections, is currently in Phase 2 clinical trials. Additional products are in the feasibility and pre-clinical stages of development and in test marketing. Aerogen is headquartered in Mountain View, California, with a campus in Galway, Ireland. For more information, visit http://www.aerogen.com * * * Liquidity and Going Concern Uncertainty Aerogen, Inc.'s June 30, 2003 balance sheet shows an accumulated deficit of about $100 million that eroded its total shareholders' equity to about $8 million from about $16 million recorded six months ago. In its SEC Form 10-Q for the quarter ended March 31, 2003, the Company stated: "The Company's recurring net losses from operations and negative cash flows from operations, in light of the Company's current liquidity and capital resources, raise substantial doubt regarding the Company's ability to continue as a going concern for a reasonable period of time. Since inception, we have financed our operations primarily through equity financings, product revenues, research and development revenues, and the interest earned on related proceeds. The process of developing our products will continue to require significant research and development, clinical trials and regulatory approvals. These activities, together with manufacturing, selling, general and administrative expenses, are expected to result in substantial operating losses for the next several years. "[The Company's] condensed consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The continued operation of the Company is dependent on our ability to obtain adequate funding and eventually establish profitable operations. As of March 31, 2003, we had $4.5 million in cash and cash equivalents. During the first three months of 2003, our expenditures have been approximately $1.6 million per month. We need to raise additional funds through public or private financings, collaborative relationships or other arrangements by early June 2003 in order to continue as a going concern. We cannot be certain that such additional funding will be available on terms attractive to us, or at all. Furthermore, additional equity or debt financing may involve substantial dilution to our existing stockholders, restrictive covenants or high interest rates. Collaborative arrangements, if necessary to raise additional funds, may require us to relinquish rights to either certain of our products or technologies or desirable marketing territories, or all of these. We will also explore other potential options, such as a merger or sale. If our efforts are unsuccessful, the Company will have to significantly curtail operations even further, or cease operations altogether and explore liquidation alternatives." AFC ENT.: Reports Improved Q2 Comparative Store Sales Results ------------------------------------------------------------- AFC Enterprises, Inc. (Nasdaq: AFCEE), the franchisor and operator of Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally, announced operating performance results for the second quarter of 2003, which included the Company's fiscal period 5 (previously discussed in a news release on June 2, 2003), period 6 (5/19-6/15) and period 7 (6/16- 7/13). The Company also reviewed other business matters. The results include the operating performance of the Seattle Coffee Company, which was sold to Starbucks Corporation, effective July 14, 2003. Overall Performance Domestic System-wide Comparable Store Sales AFC reported that blended domestic system-wide comparable store sales at its restaurants, bakeries and cafes were down 3.1 percent for the second quarter of 2003, compared to an increase of 0.4 percent for the second quarter of 2002. This figure represented a modest improvement over the first quarter of 2003 when the Company reported a decrease of 5.0 percent. The second quarter of 2003 showed comparable store sales improvements in each consecutive period, with period 7 down 1.9 percent, representing AFC's most improved blended comparable sales performance in 2003. The Company remains committed to identifying and implementing additional traffic and average check builders for its restaurants, bakeries and cafes. Ongoing promotional enhancements and continued operational efficiencies helped secure an overall increase in average check in the second quarter of 2003, with Church's up 1.9 percent, Cinnabon up 1.1 percent, Seattle Coffee Company up 5.0 percent, but with Popeyes down 0.6 percent. Popeyes recently introduced a nationally advertised launch of its Po'Boy sandwiches, which helped drive traffic but had a slightly adverse impact on average check due to its lower introductory price point. As part of the Company's 100-Day Plan, which commenced on June 1, 2003, each brand has begun implementing action oriented solutions to help improve comparable store sales. Specific strategies include: * Popeyes revised domestic system promotions and limited time offers with more favorable price-points and product types. Part of this strategy includes the brand focusing on limited time offers with a boneless chicken and seafood focus that eliminates discounting of the core menu. * Church's focus on the rollout of such items as big buffalo tenders and jalapeno cheese biscuits, in addition to promoting more mixed offerings. Church's is developing a new print and billboard strategy for non-media markets and is accelerating drive-thru initiatives. * Cinnabon continues to concentrate on driving destination appeal, by focusing on increased portability, addressing nutrition conce concerns and expanding product variety. Specific product initiatives include CinnaPoppers, Souffle Bites, Petite Delights and Minibon Delight rolls. Despite these sales building initiatives, AFC has lowered its previously projected full-year 2003 blended domestic system-wide comparable store sales of down 2.0-3.0 percent to down 2.5-3.5 percent to reflect a more conservative outlook. By brand, AFC expects domestic system-wide comparable store sales growth for 2003 to be down 1.5-2.5 percent for Popeyes, down 3.5-4.5 percent for Church's, and down 5.5-6.5 percent for Cinnabon. New System-wide Openings The AFC system opened 75 restaurants, bakeries and cafes during the second quarter of 2003, compared to 100 total system-wide openings in the second quarter of 2002. This unit opening decrease over prior year was primarily a result of franchisees having a more cautious approach and greater sensitivity to the challenging economic environment. In addition, due to the temporary suspension of certain domestic franchise sales-related activities, the Company is currently unable to capitalize on traditional venue driven development opportunities that can be signed and opened within the same year. Of the 75 openings in the second quarter, 47 were in international markets and the remaining 28 were domestic. Popeyes opened 23 restaurants internationally, of which 17 are located in Korea and Mexico. On a system-wide basis, AFC had 4,150 units at the end of period 7, 2003. The total unit count figure excluding continental U.S. and Canadian Seattle's Best Coffee(R) and Torrefazione Italia(R) Coffee cafes that were sold as part of the Seattle Coffee Company sale to Starbucks Corporation on July 14, 2003, was 4,006 units. AFC is now anticipating that 345-370 new unit openings will occur in 2003. This number is comprised of 175-180 Popeyes units, 55-65 Church's units, 70-75 Cinnabon units and 45-50 Seattle's Best Coffee international units. This number is down from the 400-425 new unit openings previously projected and reflects the elimination of the previously anticipated future domestic openings for Seattle Coffee Company and an overall more cautious outlook. This revised estimate represents 185-210 net new units that will be added to the system in 2003 as a result of an estimated 160 unit closings. Unit closings traditionally occur due to a loss or expiration of lease rights and closing of under-performing units. The Company has critically assessed which units are expected to close in formulating its most current estimation. Commitments and Conversions As previously stated, the Company has temporarily suspended certain domestic franchise sales-related activities, including the sale of new commitments and the sale of Company-owned units to franchisees (conversions) because it has not yet finalized its 2003 franchise offering circulars or renewed its state franchise registrations, both of which require AFC's 2002 audited financial statements. At the end of period 7 2003, AFC had a total of 2,542 outstanding commitments for future development. AFC will reengage in domestic franchise sales after finalizing and filing the 2003 franchise offering circulars and renewing its franchise registrations. The process will immediately follow the release of its 2002 audited financial statements and the release of the quarterly 2003 financial statements, as may be required. AFC anticipates proceeds from conversions in 2003 will be $5 million or less, which represents a significant reduction from previous estimates of $20-$30 million for 2003. Given today's economic environment, the Company is taking an opportunistic approach regarding conversions to help ensure the proper buyer, market and value for such transactions. Due to the temporary suspension of domestic franchise sales- related activities and the elimination of future North American commitments for Seattle Coffee Company, AFC now projects to sign approximately 500-550 new commitments for future development in 2003, in comparison to the 750 originally estimated. "Although we are seeing some recovery in our comparable sales performance, AFC has taken a conservative position in our overall operational performance outlook," said Dick Holbrook, President and COO of AFC Enterprises. "This will provide us the opportunity to have our brand building initiatives for the remainder of the year prove their success. We also expect that our commitments and openings should return to a more normalized level next year once we are able to fully engage in our franchise sales activities." Additional Key Business Matters Audit Committee Investigation and Nasdaq Listing Status As previously announced on July 23, 2003, the Audit Committee of the Board of Directors of AFC is engaged in an investigation into quarter-end adjustments to reserve, asset and accrual accounts on the books of the Company and certain other related matters. The Nasdaq Listing Qualifications Panel has required that it be informed of the results of the investigation by August 8, 2003, before making a determination on AFC's continued listing on the Nasdaq National Market. Seattle Coffee Company Sale Transaction As announced on July 14, 2003, AFC completed the sale of its Seattle Coffee Company subsidiary to Starbucks Corporation for approximately $72.0 million in cash, subject to certain adjustments. Net proceeds from the transaction are expected to be between $60-$62 million after final adjustments. The immediate use of a portion of the net proceeds was to pay down debt. However, in the future, the Company intends to use the remaining proceeds to purchase additional shares of AFC common stock, pending board authorization and credit facility covenant compliance. Share Repurchase AFC has not repurchased any additional shares of common stock during 2003. AFC expects to continue its repurchase program following the release of the financial statements. The Company currently has $22 million authorized for additional share repurchase and management will request an increase in the authorized amount from its board of directors. There is no assurance that AFC will be able to obtain the additional authorization or when shares may ultimately be repurchased. Credit Facility On July 14, 2003, AFC's lenders approved a third amendment to the Company's credit facility agreement. The amendment requires AFC to use at least fifty percent of the net cash proceeds from the sale of the Seattle Coffee Company for the repayment of term loan debt. It also provides AFC the ability to utilize the remaining amount of the net cash proceeds for share repurchases and/or dividend payments, based on the Company's ability to meet certain covenant requirements, or for debt repayment or other general corporate purposes. Under the terms of its recent amendment, AFC must file its financials by August 22, 2003. Productivity Initiative As previously announced, AFC is currently implementing an in-depth productivity improvement initiative to increase the efficiency and effectiveness of its overhead spending. Once all ideas are implemented, the annual improvement in overhead spending, under this initiative, is expected to be approximately $10 million on a run-rate basis. Implementation has either begun or has already been completed for the majority of the ideas. Non-Recurring Expenses AFC is currently projecting to incur $14-$15 million of unusual expenses in 2003. This is an increase from the $9-$10 million originally estimated. These expenses relate to the implementation of the productivity initiative, the extended audit process for fiscal years 2002, 2001 and 2000, shareholder litigation and charges related to the amendments to the Company's credit facility agreement. Commenting on AFC's key business matters, Chairman and CEO Frank Belatti said, "While all of us are extremely disappointed with the length of time of the ongoing audit and the added costs associated with it, we continue to focus on the business and our portfolio of brands. The sale of Seattle Coffee Company demonstrates the Company's efforts to ensure that shareholder value is always maximized and we remain focused on that goal." AFC Enterprises, Inc. is the franchisor and operator of 4,150 restaurants, bakeries and cafes as of July 13, 2003, in the United States, Puerto Rico and 35 foreign countries under the brand names Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally. AFC's primary objective is to be the world's Franchisor of Choice(R) by offering investment opportunities in highly recognizable brands and exceptional franchisee support systems and services. AFC Enterprises had system-wide sales of approximately $2.7 billion in 2002 and can be found on the World Wide Web at http://www.afce.com * * * As reported in Troubled Company Reporter's July 18, 2003 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit and senior secured bank loan ratings of AFC Enterprises Inc., on CreditWatch with negative implications. The rating action follows AFC's announcement that it would miss the NASDAQ's July 16 deadline for filing its 2002 10-K annual report. AFC is a quick-service restaurant operator. AIR CANADA: Ernst & Young Provides Update on CCAA Restructuring --------------------------------------------------------------- Air Canada advises that the Eighth Report of the Monitor, a comprehensive update on the airline's restructuring under the Companies' Creditors Arrangement Act (CCAA), has been completed by Ernst and Young Inc. and is now available at http://www.aircanada.com The report includes an update on the following: a) the equity solicitation process; b) the Amex Bank of Canada Charge Card Partner Agreement; c) pension matters; d) the status of discussions with labor unions; e) negotiations with aircraft lessors; f) the General Electric Capital Aviation Services (GECAS) aircraft/financing agreement; g) repudiation of real estate leases; h) restructuring of other contractual agreements; i) product distribution systems; j) the Unsecured Creditor Committee; k) ancillary proceedings under Section 304 of the US Bankruptcy Code; l) operating results; m) cash flow projections to October 24, 2003; n) estimated obligations of the Company arising subsequent to April 1, 2003; and o) progress in the development of the restructuring plan. AIRGATE PCS: Will Webcast Fiscal Q3 Conference Call on August 15 ---------------------------------------------------------------- AirGate PCS, Inc. (OTCBB:PCSA), a PCS Affiliate of Sprint, announced that its third quarter fiscal 2003 conference call is scheduled to begin at 9:00 a.m. Eastern time on Friday, August 15, 2003. The live broadcast of AirGate PCS' quarterly conference call will be available on-line at http://www.airgatepcsa.comand http://www.companyboardroom.com The on-line replay will follow shortly after the call and continue through September 15, 2003. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. During this call AirGate PCS will review the Company's financial and operating results for the third quarter ended June 30, 2003. AirGate PCS, Inc., excluding its unrestricted subsidiary iPCS, is the PCS Affiliate of Sprint with the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in territories within three states located in the Southeastern United States. The territories include over 7.1 million residents in key markets such as Charleston, Columbia, and Greenville-Spartanburg, South Carolina; and Augusta and Savannah, Georgia. iPCS, Inc., a wholly owned unrestricted subsidiary of AirGate PCS, Inc., is the PCS Affiliate of Sprint with the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in 37 markets in Illinois, Michigan, Iowa and eastern Nebraska. The territories include over 7.4 million residents in key markets such as Grand Rapids, Michigan; Champaign-Urbana and Springfield, Illinois; and the Quad Cities areas of Illinois and Iowa. AirGate and iPCS are separate corporate entities that have discrete and independent financing sources, debt obligations and sources of revenue. As an unrestricted subsidiary, iPCS's lenders, noteholders and creditors do not have a lien or encumbrance on assets of AirGate. Further, AirGate generally cannot provide capital or other financial support to iPCS. iPCS has filed a Chapter 11 petition under the federal bankruptcy laws for the purpose of effecting a court-ordered reorganization. At March 31, 2003, Airgate PCS Inc.'s balance sheet shows a total shareholders' equity deficit of about $361 million. ALASKA COMMS: Reports Improved Q2 Results After Asset Sale Gain --------------------------------------------------------------- Alaska Communications Systems Group, Inc., (Nasdaq:ALSK) reported financial results for the second quarter ended June 30, 2003. Revenues for the second quarter of 2003 increased sequentially to $84.8 million and EBITDA was $29.0 million. This compared to revenues of $92.9 million and EBITDA of $35.9 million for the second quarter of 2002, which included $11.1 million of access revenue as a result of a favorable court ruling related to a dispute. ACS reported net income of $92.7 million for the second quarter of 2003, compared to net income of $3.6 million for the same period in 2002. During the second quarter of 2003, the Company recorded a gain related to the sale of a majority interest in its directories business of approximately $97.6 million. On May 8, 2003, ACS announced the successful completion of the initial public offering of its directories business. Adjusted for the sale of the directory business, pro forma second quarter revenues were $81.4 million and EBITDA was $27.6 million. This represents a $5.2 million sequential increase in revenues and a $1.8 million increase in EBITDA over the preceding quarter on a pro forma basis. The Company also announced that the Anchorage Assembly unanimously approved ACS' ten-year $10.4 million proposal to upgrade and manage the city's existing 911 system. The upgrade will include improved network services, improved address and location data, better work stations for dispatchers and enhanced map display equipment for the Anchorage Police Department and the Anchorage Fire Department. "The second quarter generated strong improvements in our operating and financial results for the Company," commented Chuck Robinson, Chairman and CEO of ACS. "The successful IPO of our directories business enabled us to pay off over $112 million in debt and increase our cash by over $31 million. Moving forward, we will capitalize on this improved financial position to invest in selected strategic initiatives, like our new innovative service bundling programs introduced this quarter and our advanced CDMA 1X network, offering exciting new customer features and improved coverage rolling out in the second half of the year. We believe these programs will allow us to continue to serve Alaska as the premier telecommunications company offering the most integrated spectrum of services to both consumers and businesses throughout the State." "We are pleased with the sequential increase in revenue in the second quarter at each of our business units," commented Kevin P. Hemenway, Senior Vice President and CFO of ACS. "Most noteworthy was an exceptional performance by our wireless business, with strong revenues, EBITDA, and increasing MOU. Additionally, our local telephone business continued to benefit from the aggressive restructuring program we undertook a year ago, as EBITDA margins were 50.2% for the period. While we continued to experience traditional access line losses as a result of the unbalanced regulatory environment and an erosion of the total number of access lines in the market, this loss of traditional access lines was partially offset by the increase of approximately 6,300 in enterprise telephone lines associated with the State of Alaska. In addition, we made meaningful progress in the operation of the State contract during the quarter as we completed the inventory of units served for the State, resulting in approximately $1.5 million in out-of-quarter revenue and $1.6 million in out-of- quarter costs. The bulk of this labor intensive effort to properly account for the State's services for which we can bill is now substantially complete, and we expect to see gradual sequential improvement to EBITDA margins in this segment moving forward, while continuing to address the transformation of the State's network to our advanced IP platform." "During the quarter, we paid off $112.8 million in debt, successfully managed our capital expenditures and, as a result, entered the third quarter with $64.7 million in cash and an available $75 million line of credit," added Mr. Hemenway. "Additionally, we retain an ownership interest in the directories business currently valued in the market at over $18 million. The successful spin-off of our directories business enabled us to improve our credit profile as our net leverage ratio declined to 4.1x and our interest coverage ratio increased to 2.4x, on a pro forma basis after giving effect to the transaction. With the company's improved credit profile, we are currently exploring opportunities to raise additional capital to support the future growth of the business and to refinance our senior secured credit facilities with some combination of new senior and senior secured indebtedness." Quarter Summary -- Local telephone revenues for the second quarter were up both on a sequential basis and on a normalized basis year-over-year. Due to the effect of the Company's aggressive cost reduction program, local telephone EBITDA margins increased to 50.2% from 49.1% for the same period last year. Access lines ended at 339,397 including 21,169 enterprise telephone lines resulting from the State of Alaska contract. Traditional access lines ended the quarter at 318,228, a sequential decrease of 2,319 as the Company was impacted by the erosion in its access line base from competitive bypass and the elimination of second lines as customers move to broadband and wireless solutions. During the quarter the company launched several new service bundles aimed at winning back local telephone customers, which ACS expects to have an impact on traditional access lines in the third quarter and going forward. Local network service revenues were consistent year-over-year. Excluding the $11.1 million settlement, access revenues were up 5% compared to the previous year. Deregulated and other revenues were up $0.8 million from last year as both rents and billing and collection revenues increased. -- Cellular revenues grew by an impressive 7.0% from the prior year period and the Company added almost 1,800 subscribers. ARPU (Average Revenue per Unit) improved by $1.94 to $48.24 and MOU (Minutes of Use) increased by 19.9% from the same period last year. -- Directory business. On May 8th, 2003, ACS announced the completion of the initial public offering of its directories business through a Canadian income trust fund. The offering raised net proceeds of $142.2 million for ACS. The Company's retained 12.58% interest carried a market valuation of $18.4 million as of June 30, 2003. Prior to the closing of the IPO, Directory contributed $3.4 million in revenues and $1.6 million in EBITDA during the quarter. -- Internet revenues were up significantly on both a sequential and year-over-year basis. This reflects the success of the Company's DSL rollout and increased revenues from the Company's State of Alaska contract, including $1.5 million in retroactive revenue recorded during the second quarter. ACS ended the quarter with over 14,800 DSL subscribers, an increase of approximately 900 subscribers on a sequential basis. -- Interexchange revenues were up sequentially from the preceding quarter and EBITDA margins improved. During the quarter, the Company completed the grooming of its database to remove inactive subscribers, leading to a sequential decrease of approximately 13,400 subscribers. -- Operating expenses for the quarter, before depreciation and amortization and the gain on disposal of assets, were flat with the prior year period but grew by $1.9 million on a sequential basis due to the positive increase in sales and higher costs of sales and expenses related to the Company's State of Alaska contract. Alaska Communications Systems (S&P, BB- Corporate Credit Rating, Negative) is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. ACS currently serves approximately 318,000 access lines, 83,000 cellular customers, 44,000 long distance customers and 45,000 Internet customers throughout the State. More information can be found on the Company's Web site at http://www.alsk.com ALLIED WASTE: Inks Pact to Convert $1BB of 6.5% Preferred Shares ---------------------------------------------------------------- Allied Waste Industries, Inc. (NYSE: AW) has reached an agreement with the holders of its $1 billion face amount 6-1/2% Series A Senior Convertible Preferred Stock (which will have an accreted value of approximately $1.295 billion at July 31, 2003) to exchange all of their shares of Series A Preferred Stock for shares of Allied Waste common stock. Valuing the Series A Preferred Stock at the accreted value and using an approximation of the average closing price of Allied Waste shares for the 20 trading days prior to July 31, 2003, the Company expects to issue 110.5 million shares of common stock to the holders of the Series A Preferred Stock, effectively valuing the securities at market. The Transaction was approved by a committee of independent directors of the Company's Board of Directors, which is comprised entirely of Directors not affiliated with the holders of the Series A Preferred Stock, and was approved by the full Board of Directors. The Transaction is subject to certain approvals, including approval by Allied Waste shareholders. The Company expects to file a proxy statement with the Securities and Exchange Commission and to schedule a special meeting of shareholders as soon as practicable. The holders of the Series A Preferred Stock, which include Apollo Advisors, The Blackstone Group, DLJ Merchant Banking Partners and Greenwich Street Capital Partners, and their respective affiliates, have agreed to vote in favor of the Transaction. Under the terms of the agreement, the holders will be restricted from selling the shares of common stock they receive in the Transaction for one year subsequent to the closing. The existing shareholder agreement between the holders of the Series A Preferred Stock and the Company will remain in place with essentially no changes. "This Transaction represents another important step in improving Allied Waste's balance sheet and accelerating the Company's progression toward investment grade attributes," said Tom Van Weelden, Chairman and CEO of Allied Waste. "In addition to the capital markets transactions we completed in April, we believe this Transaction will enhance our ability to align the cost of our capital structure with improving credit characteristics over time. The holders of the Series A Preferred Stock have been important supporters of Allied Waste for more than four years, and their conversion to common shareholders also serves as a strong vote of confidence in the Company's prospects." "The Transaction underscores our commitment to reduce the Company's leverage and deliver value to all of our owners," said Pete Hathaway, Executive Vice President and CFO of Allied Waste. "As a result of the Transaction, we will save more than $500 million that would have been incurred over the life of the security by eliminating the dividend and reducing future interest payments. These savings will be applied to debt reduction." "Apollo and Blackstone fully support this exchange. We believe this will help simplify the Company's capital structure by removing the dividend and liquidation preference of the preferred stock as obligations of the Company," said Leon D. Black, founder and senior partner of Apollo and Stephen A. Schwarzman, President and CEO of The Blackstone Group. "Our confidence in the Company's prospects and its management makes us comfortable increasing our common stock exposure as the combination of operating leverage and prudent financial leverage benefit the Company in an economic recovery." Apollo Advisors, The Blackstone Group, DLJ Merchant Banking Partners and Greenwich Street Capital Partners, and their respective affiliates purchased the $1 billion of Senior A Preferred Stock in 1999 in conjunction with Allied Waste's acquisition of Browning-Ferris Industries, Inc. Goldman, Sachs & Co. advised the committee of independent directors of the Board of Directors and UBS Warburg LLC advised the management of Allied Waste in connection with this transaction. Allied Waste Industries, Inc., a leading waste services company, provides collection, recycling and disposal services to residential, commercial and industrial customers in the United States. As of June 30, 2003, the Company operated 333 collection companies, 171 transfer stations, 171 active landfills and 64 recycling facilities in 39 states. As previously reported, Allied Waste Industries, Inc.'s $450 million of 7-7/8% senior notes due 2013 were rated BB-, Ba3 and BB- by Standard & Poor's, Moody's and Fitch, respectively. AMERCO: Gets Clearance to Hire Ordinary Course Professionals ------------------------------------------------------------ AMERCO, pursuant to Sections 105(a), 327 and 331 of the Bankruptcy Code, sought and obtained the Court's authority to retain professionals it utilized in the ordinary course of business and to compensate these professionals for postpetition services without the need for additional Court approval, subject to certain limitations. AMERCO will pay, without formal Court application, 100% of the interim fees and disbursements to each Ordinary Course Professional upon submission to AMERCO of an appropriate invoice. However, the interim fees and disbursements per Ordinary Course Professional should not exceed a total of $50,000 per month throughout this Chapter 11 case. To the extent that the requested payments exceed $50,000 per month, AMERCO will file a request for payment subject to Court approval pursuant to Sections 330 and 331 of the Bankruptcy Code. Furthermore, AMERCO, every 120 days or at other Court-ordered interval, will file a statement with the Court and serve this Statement to the U.S. Trustee, and any official committee that include these information: (a) the name of the Ordinary Course Professional; (b) the aggregate amount paid as compensation for services rendered and reimbursement of expenses incurred during the previous 120 days; and (c) a general description of the services rendered by the Ordinary Course Professional. (AMERCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERICAN AIRLINES: Joins Sabre Travel Network DCA 3-Year Option --------------------------------------------------------------- Sabre Travel Network, a Sabre Holdings (NYSE: TSG) company, and American Airlines (NYSE: AMR) announced that American has agreed to participate in the Sabre Direct Connect Availability Three-Year Option, which commits the carrier to a three-year term at the highest level of participation in the Sabre global distribution system in exchange for a reduced booking fee rate that is fixed for three years. Through the DCA Three-Year Option, airlines agree to provide all published fares to all Sabre GDS users, including Sabre Connected online and offline travel agencies. This includes published fares that the airlines sell through any third-party Web site and through their own Web site and reservation offices. "Lower distribution costs plus broader availability of our fares to the largest subscriber base means Sabre DCA is a real winner for American," said Craig Kreeger, American's vice president- Sales. "Innovative solutions for today's marketplace make Sabre our preferred GDS provider." In the Sabre GDS, airlines sign a participating carrier agreement enabling them to choose from one of several optional levels of connectivity to the system. DCA is the highest level and provides airlines with a wide range of services to market and sell their flight and fare information through the travel network of more than 56,000 travel agency locations worldwide. The DCA Three Year- Option extends the term of current 30-day agreements with airlines to three years at a fixed booking fee rate. The program now includes bookings made in the U.S., U.S. Virgin Islands, Caribbean, and Europe. "The Sabre DCA Three Year Option is a win-win-win for all parties," said John Stow, president of Sabre Travel Network. "American Airlines lowers distribution costs, Sabre Travel Network gains a three year commitment from the airline, travel agencies enhance customer service and travelers gain access to all American fares through the channel of their choice. The Sabre GDS now offers travelers an unmatched level of inventory through Sabre Connected travel agents. No other GDS comes close to having the level of product now available through our system." The Program - How it Works: -- Participating airlines commit to the highest level of participation in the Sabre GDS (DCA level) for three years. -- Participating airlines provide all Sabre GDS users broad access to schedules, seat availability and published fares, including Web fares and other promotional fares, but excluding opaque fares and private discounts. -- Participating airlines furnish generally the same customer perks and amenities to passengers booked through the Sabre GDS as those afforded through other GDS's and Web sites. -- Sabre Travel Network provides participating airlines with a reduction to their current applicable DCA booking fee. -- Sabre Travel Network fixes the DCA booking fee rate for three years. Sabre Travel Network, a Sabre Holdings company, provides access to the world's leading global distribution system and products and services enabling agents at more than 56,000 agency locations worldwide to be travel experts. About 35 percent of the world's travel is booked through the Sabre GDS. Originally developed in 1960, it was the first system to connect the buyers and sellers of travel. Today the system includes more than 400 airlines, approximately 60,000 hotels, 53 car rental companies, nine cruise lines, 36 railroads and 232 tour operators. Sabre Holdings Corporation (NYSE: TSG) is a world leader in travel commerce, retailing travel products and providing distribution and technology solutions for the travel industry. More information about Sabre Holdings is available at http://www.sabre-holdings.com/ American Airlines is the world's largest carrier. American, American Eagle and the AmericanConnection regional carriers serve nearly 275 cities in 50 countries and territories with approximately 4,300 daily flights. The combined network fleet numbers more than 1,100 aircraft. American Airlines is a founding member of the oneworld Alliance. As reported in Troubled Company Reporter's June 24, 2003 edition, Standard & Poor's Ratings Services raised its ratings of AMR Corp. (B-/Negative/--) and subsidiary American Airlines Inc., (B-/Negative/--), including raising the corporate credit ratings of each to 'B-' from 'CCC'. The ratings were removed from CreditWatch, where they were placed with developing implications on March 28, 2003. S&P says the outlook is negative. AMR's balance sheet shows that the carrier is insolvent with liabilities exceeding assets by more than $100 million. AMERICAN WAGERING: Tapping Gordon & Silver as Bankruptcy Counsel ---------------------------------------------------------------- American Wagering, Inc., wants the U.S. Bankruptcy Court for the District of Nevada to approve its application to employ Gordon & Silver, Ltd., as its reorganization counsel. Members of Gordon & Silver have emphasizing insolvency and reorganization matters and have been actively involved in many of the largest bankruptcy cases filed in this District within the last several years. The Debtor assures the Court that Gordon & Silver is familiar with the bankruptcy practice and is well qualified to act in the capacity as attorneys for the Debtors. Gordon & Silver will: i) prepare schedules, statements, applications and reports for which the services of an attorney are necessary; ii) advise Debtor of its rights and obligations and its performance of its duties during the administration of these cases; iii) assist Debtor in formulating a plan of reorganization and disclosure statement and obtain approval and confirmation thereof; iv) represent Debtor in all proceedings before this Court or other courts with jurisdiction over these cases; and v) represent Debtor in a proposed sale of substantially all its assets. The Debtor will compensate Gordon & Silver in their current hourly rates, which range from: paraprofessionals $110 per hour associates $120 to $285 per hour shareholders $290 to $450 per hour Gerald M. Gordon, Esq., will the engagement team and he agrees to be compensated at his current hourly rate of $450 per hour. American Wagering, Inc., headquartered in Reno, Nevada, filed for Chapter 11 protection on July 25, 2003 (Bankr. Nev. Case No. 03- 52529). Thomas H. Fell, Esq., at Gordon & Silver, Ltd., represents the Debtor in their restructuring efforts. When the Company filed for protection from its creditors, it listed $13,694,623 in total assets and $13,688,935 in total debts. ANC RENTAL: Lehman Seeks Nod to File Cerberus Pacts Under Seal -------------------------------------------------------------- Lehman Brothers Inc. asks the Court to permit it to file two Letter Agreements with Cerberus Capital Management, L.P. under seal and to establish confidentiality requirements. Section 107(b) of the Bankruptcy Code provides that court records may be filed under seal to protect an entity's trade secrets or confidential research, development, commercial information, or to protect a person from scandalous or defamatory matters. William P. Bowden, Esq., at Ashby & Geddes, in Wilmington, Delaware, asserts that the Letter Agreements contain certain highly confidential commercial information, qualifying it for appropriate protection under Section 107(b). Thus, Mr. Bowden contends, only the ANC Rental Corp. Debtors and the Official Committee of Unsecured Creditors should be entitled to receive a copy of the Letter Agreements, provided they agree to the terms of a non-disclosure agreement. Mr. Bowden notes that substantially all the assets of the Debtors will be sold to Cerberus or its designee subject to higher and better bids for a purchase price consisting of $230,000,000 in cash, subject to certain potentially material adjustments, and the assumption of the Debtors' obligations on their postpetition financing, their surety bond program with Liberty Mutual Insurance and substantially all their postpetition operating liabilities. Lehman and Cerberus disclosed their transactions with each other in connection with the proposed acquisition of the Debtors' assets. This Disclosure informs the Court and all parties-in- interest substantially all the material terms of three letter agreements between the parties. One document is an agreement that gives Cerberus the right to acquire 50% of Lehman's allowed secured claim. The other two agreements are the Letter Agreements, consisting of two engagement letters for Lehman to render investment-banking services to Cerberus post-closing if Cerberus acquires the Debtors' assets. These engagement letters contain the terms by which Cerberus would compensate Lehman for those services, which terms were intensively negotiated between Cerberus and Lehman. The terms are substantially disclosed in the Disclosure with the sole exception of the prices to be charged by Lehman for the various services. This pricing constitutes confidential information to Lehman and is entitled to the protection of Section 107(b). As a general rule, all papers filed with the court are public record and open to examination free of charge at any reasonable time. However, Section 107(b) provides that the Court will "(1) protect an entity with respect to a trade secret or confidential research, development, or commercial informational or (2) protect a person with respect to scandalous or defamatory matter contained in a paper filed in a case under this title." Once a document is submitted to the Court, it becomes a judicial record and the public has a common law right to inspect and copy any records. Unless one of the exceptions in Section 107(b) applies, it is presumed that the public has the right to this information. But this presumption is not absolute. Every court has supervisory power over its own records and files, and a court can deny access to certain records and files where the court files may become a vehicle for improper purposes. Examples of a court limiting access include where records contain confidential business information or could be used to promote public scandal. As a result of the mandatory language of Section 107(b), if the information in question fits any of the specified categories, the Court is required to protect a requesting interested party and has no discretion to deny the application. The discretion lies not in whether a court may protect an interested party, but in whether the matter complained of falls within the exception and in what type of protective remedy is necessary under the facts of each case. Mr. Bowden asserts that the Letter Agreements contain highly confidential business information that meets the requirements of Section 107(b). To prevail under Section 107(b), Lehman must show that it is an interested party and that the information meets the requirements of Section 107(b). In analyzing this issue, the Court must decide whether the disclosure of the information contained in the Letter Agreements is commercial information, the disclosure of which could subject Lehman to harm. According to Mr. Bowden, commercial information is information, which would cause "an unfair advantage to competitors by providing them with information as to the commercial operations of the debtor." The Letter Agreements contain the prices at which Lehman may render services to Cerberus. If disclosed, this information may give other persons who seek to use Lehman's services an unfair negotiating advantage against Lehman and would also give Lehman's investment banking competitors an unfair advantage when competing with Lehman for business. (ANC Rental Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANDERSON SAND: Icoworks Unit to Conduct Co.'s Equipment Auction --------------------------------------------------------------- Icoworks, Inc. (OTCBB:ICOW) and (FRANKFURT:ICOW.F) announced that Icoworks Inc.'s subsidiary, Icoworks Services Ltd., will be conducting a one-day, unreserved, live and online auction to liquidate the equipment from Anderson Sand and Gravel Ltd. with previewing on Monday, August 25th from 9:00 A.M. to 5:00 P.M. MST. Assets featured at the sale will include: crushing equipment, wheel loaders, crawler tractors, hydraulic excavators, 11 dump trucks, trailers, pick-ups, SUV's, screens and conveyors, shop equipment, pumps, and office equipment. To preview these and other assets to be auctioned, please visit http://www.icoworks.comfor a catalogue and location and time details. "As part of our value-added services, the Icoworks' team has done an excellent job of getting this equipment ready for sale in a very short period of time. We are pleased to be working with the receiver, PricewaterhouseCoopers Ltd., to quickly and effectively liquidate this equipment to maximize the returns for the creditors," stated Mr. Graham Douglas, President of Icoworks Holdings. As part of Icoworks' continued strategy to maximize auction item values and increase exposure, interested bidders will be able to bid in person or online through Icoworks' live Internet auction partner, BidSpotter, Inc. BidSpotter has been involved in the setup, implementation, administration and reconciliation of consumer, industrial and real estate auctions around the world. To date, BidSpotter.com has provided webcast services to over 100 auction houses, has completed more than 400 successful live Internet auction webcasts and represents thousands of bidders from 87 different countries and every state in the USA. Icoworks Inc. has acquired a 56% interest in Icoworks Holdings Inc. -- http://www.icoworks.com-- an integrated commercial/Industrial Auction company. In November of 2002 Icoworks Inc. announced its intent to merge with Icoworks Holdings. Icoworks Inc. plans to acquire the remaining 44% interest in Icoworks Holdings by issuing two shares of its common stock for each remaining share of Icoworks Holdings. The Icoworks merger remains subject to approval by the shareholders. The shareholder meeting will be held once requisite regulatory documents have been prepared and filed. Icoworks, through its subsidiaries, offers a complete array of industrial, oilfield and commercial appraisal, liquidation and auction services. Every Icoworks auction or liquidation benefits from many years of experience in the industry, and a corresponding network of almost 200,000 proven purchasers. Icoworks Holdings has a 25-year history of profitability, qualified experienced management, excellent industry contacts, and a high-quality reputation for finding qualified buyers for their sellers. APPLICA INC: Second Quarter Net Loss Stays Flat at $2.8 Million --------------------------------------------------------------- Applica Incorporated (NYSE: APN) announced that second-quarter sales for 2003 were $136.8 million, a decrease of 18.6% from the second quarter of 2002. For the first six months of 2003, net sales declined 17.0% to $258.1 million. The decreases were largely the result of lower sales to key retailers and planned lower contract manufacturing sales. Applica reported a net loss for the 2003 second quarter of $2.8 million, compared with a loss of $2.1 million for the 2002 second quarter. The second-quarter 2003 earnings included $1.5 million of equity in the net earnings of a joint venture in which Applica owns a 50% interest. For the first half of 2003, Applica reported net income of $16.8 million as compared to a loss of $84.1 million for the same period last year. The 2003 first-half earnings included $39.0 million of equity in the net earnings of a joint venture. The equity in net earnings resulted primarily from an unrealized gain in the fair value of an investment held by the joint venture. Harry D. Schulman, Applica's President and Chief Executive Officer, commented, "In July, our joint venture company, Anasazi Partners, sold its equity interest in ZonePerfect Nutrition Company. ZonePerfect markets and sells a leading brand of nutrition bars, as well as other nutrition products. We expect the related cash distribution to Applica to occur before the end of the third quarter." Applica's gross profit margin was 28.7% in the second quarter as compared to 31.8% in the second quarter of 2002. The decrease is primarily attributable to higher plastic resin prices and unabsorbed overhead related to lower production levels. The gross margin for the first half of 2003 was 30.0% as compared to 30.5% in the first half of 2002. Mr. Schulman continued, "As we previously announced, [Thurs]day we repurchased $30 million of our 10% notes. We intend to purchase up to an additional $40 million in the fourth quarter using the cash distribution we will receive from our joint venture investment." EBITDA was $5.0 million for the 2003 second quarter and $10.8 million for the first half. EBITDA represents a non-GAAP (generally accepted accounting principles) financial measure. At June 30, 2003, total debt as a percentage of total capitalization was 43.8%, with total debt of $184.7 million and shareholders' equity of $237.4 million. The Company's book value per share was $10.09 at June 30, 2003. Capital expenditures for the first six months ended June 30, 2003 and 2002, were $7.6 million and $8.5 million, respectively. Applica Incorporated and its subsidiaries are manufacturers, marketers and distributors of a broad range of branded and private-label small electric consumer goods. The Company manufactures and distributes small household appliances, pest control products, home environment products, pet care products and professional personal care products. Applica markets products under licensed brand names, such as Black & Decker(R), its own brand names, such as Windmere(R), LitterMaid(R) and Applica(TM), and other private-label brand names. Applica's customers include mass merchandisers, specialty retailers and appliance distributors primarily in North America, Latin America and the Caribbean. The Company operates manufacturing facilities in China and Mexico. Applica also manufactures products for other consumer products companies. Additional information regarding the Company is available at http://www.applicainc.com As previously reported in Troubled Company Reporter, Standard & Poor's raised its senior secured bank loan rating on Miami Lakes, Florida-based Applica Inc.'s $205 million revolving credit facility due December 2005 to double-'B'-minus from single-'B'- plus. At the same time, Standard & Poor's affirmed its single-'B'-plus corporate credit rating on the small appliance manufacturer and marketer. The outlook is stable. ASIA GLOBAL CROSSING: Trustee Wants to Hire G.E.M. as Custodian --------------------------------------------------------------- Pursuant to Section 327(a) of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure, Robert L. Geltzer, Asia Global Crossing Ltd.'s Chapter 7 Trustee, sought and obtained the Court's authority to employ G.E.M. Auction Corp. as his custodian effective June 18, 2003. Mr. Geltzer says that G.E.M. has assisted in various custodian duties in the past, including securing premises, changing locks, providing security, inventorying assets, transporting documents and storing them safely. Specifically, G.E.M. will: (i) assist the Trustee in garnering, securing, safeguarding, packing, transporting and storing any and all books and records of the Debtors; (ii) determine the value of any and all furniture, fixtures and equipment located on the Debtors' premises and make recommendations to the Trustee as to disposition of same; and (iii) secure the Debtors' premises by changing the locks, and, at the Trustee's request, retain security guards to oversee the premises during the period the accountants are reviewing the books and records. According to Robert Moneypenney, CEO of G.E.M. Auction Corp., G.E.M. does not hold or represent any interest adverse to any interest of the Trustee, the Debtors or their creditors with respect to the matters it will be engaged. Hence, G.E.M. is a "disinterested person" pursuant to Section 101(14) of the Bankruptcy Code. Moreover, G.E.M. is not a creditor of the Debtors and has no relevant connection with any parties-in- interest or their attorneys. Upon preliminary investigation, the Debtors' estate possesses little in terms of valuable assets, which will be sold. Thus, Mr. Geltzer is confident that G.E.M.'s existing $200,000 bond with the Clerk of Court constitutes sufficient protection. Mr. Moneypenney tells the Court that G.E.M. will charge $200 per hour for the services to be provided. Moreover, G.E.M. will seek reimbursement for their out-of-pocket expenses. (Global Crossing Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) BELL CANADA: June Working Capital Deficit Tops $919 Million ----------------------------------------------------------- For the second quarter of 2003, BCE Inc. (TSX, NYSE: BCE) reported earnings per share of $0.50 (total earnings applicable to common shares of $461 million), compared to $0.01 per common share (total earnings applicable to common shares of $6 million) last year. Second quarter 2002 earnings per share included net charges of $0.48. Total revenue was $4.9 billion and EBITDA(1) was $1.9 billion, essentially flat over last year. Excluding the impacts of the sale of Bell Canada's directories business on November 29, 2002, and the May 30, 2002 CRTC Price Cap decision, BCE's total revenue growth for the quarter was 2.8% and total EBITDA growth for the quarter was 6.5%. Similarly, for the first half of the year, revenue and EBITDA were up 3.7% and 7.0% respectively. "During the quarter, we implemented a new business structure that simplifies Bell Canada and sharpens our customer focus," said Michael Sabia, President and CEO of Bell Canada Enterprises. "This represented a significant initiative for the company, one that was completed quickly while maintaining the highest levels of customer service." "Our consumer business continues to provide strong growth for the company. We expanded our Cellular and PCS subscriber base by 13%, increased our DSL High-Speed Internet subscriber base to 1.3 million, and grew Bell ExpressVu revenues by 23%." "On the business side, however, our results reflect the impact of an uncertain economic environment and soft demand from our business customers, particularly our wholesale customers." "Challenges on the regulatory and economic fronts aside, our productivity improvement initiatives continue to drive solid growth in EBITDA. At the same time, the tightening of our capital expenditures helped achieve a $400 million turnaround in our cash flow position. Given our strengthening financial position, we paid down $1.5 billion in debt during the second quarter," concluded Mr. Sabia. - Excluding the impacts of the sale of Bell Canada's directories business and the Price Cap decision, BCE's total revenue grew by 2.8% due to higher Wireless, DSL High-Speed Internet, and Satellite TV services revenues at Bell Canada, strong television advertising revenues at Bell Globemedia, and increased revenues from CGI, due mainly to its acquisition of Cognicase Inc. - Excluding the impacts of the sale of Bell Canada's directories business and the Price Cap decision, total EBITDA grew by 6.5% as a result of higher revenues and cost control initiatives. As a percentage of revenues, EBITDA margin was at 39.7% in the second quarter of 2003 compared to 38.3% for the same period last year. - Operating income (operating revenues less operating expenses, amortization expense, net benefits plan expense and restructuring and other charges) increased by $380 million to $1.1 billion. Excluding the impacts of the sale of Bell Canada's directories business and the Price Cap decision, operating income increased by $490 million. This was due to increased EBITDA earned in the second quarter of 2003 without the restructuring and other charges incurred in the prior year, partially offset by an increase in the net pension expense. - Earnings per share were $0.50 compared to $0.01 last year. Second quarter 2002 earnings per share included net losses of $393 million consisting of losses from discontinued operations and restructuring and other charges, partially offset by net gains on investments. Excluding these items, net earnings per share for the second quarter of 2002 were at $0.49. The increase of $0.01 per share reflected the net growth in operations. - Free cash flow of $332 million for the second quarter of 2003 improved significantly from the negative $76 million for the same period last year. This resulted mainly from increased cash from operations and reduced capital expenditures. - BCE's net debt to capitalization ratio decreased from 48.8% at December 31, 2002 to 46.7% at June 30, 2003, reflecting free cash flow generation applied towards debt repayments. Outlook BCE confirmed its annual financial guidance of $19.3 billion to $20.0 billion for revenue, $7.4 billion to $7.8 billion for EBITDA, and $1.85 to $1.95 for net earnings per share. BCE is Canada's largest communications company. It has 25 million customer connections through the wireline, wireless, data/Internet and satellite services it provides, largely under the Bell brand. BCE's media interests are held by Bell Globemedia, including CTV and The Globe and Mail. As well, BCE has e-commerce capabilities provided under the BCE Emergis brand. BCE shares are listed in Canada, the United States and Europe. At June 30, 2003, Bell Canada's balance sheet disclosed a working capital deficit of about $919 million. BIOTRANSPLANT INC: Court Okays Asset Purchase Pact with Miltenyi ---------------------------------------------------------------- BioTransplant, Inc. (OTC Bulletin Board: BTRNQ.OB) announced that the United States Bankruptcy Court in Boston, Massachusetts has approved the sale of its Eligix(TM) HDM Cell Separation System to Miltenyi Biotec GmbH. The Company expects to consummate the transaction within ten business days, subject to the satisfactory completion of customary closing conditions by both parties. In connection with the sale, Miltenyi will acquire all intellectual property and physical assets associated with the Eligix business in exchange for an upfront payment of $450,000 and royalties of 4-10% of future sales. The Eligix(TM) HDM Cell Separation Systems use monoclonal antibodies to remove unwanted cells from bone marrow, peripheral blood stem cell and donor leukocyte grafts used in transplant procedures. As previously announced on February 27, 2003, BioTransplant and Eligix, Inc., its wholly-owned subsidiary, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Boston Massachusetts. BioTransplant Incorporated, a Delaware corporation located in Medford, Massachusetts, is a life science company whose primary assets are intellectual property rights that it has exclusively licensed to third parties. On February 27, 2003, the Company and Eligix, Inc., its wholly-owned subsidiary, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Boston Massachusetts. The Company has exclusively licensed Siplizumab (MEDI-507), a monoclonal antibody product, to MedImmune, Inc. The Company's assets also include the AlloMune System technologies, which are intended to treat a variety of hematologic malignancies and improve outcomes for solid organ transplants, and the Eligix HDM Cell Separation Systems, which use monoclonal antibodies to remove unwanted cells from bone marrow, peripheral blood stem cell and donor leukocyte grafts used in transplant procedures. BioTransplant also has an interest in Immerge BioTherapeutics, Inc., a joint venture with Novartis, to further develop both companies' individual technology bases in xenotransplantation. BUCKEYE: Posts $5MM Net Loss After $5MM Asset Impairment Charges ---------------------------------------------------------------- Buckeye Technologies Inc. (NYSE:BKI) incurred a loss of $5.2 million after tax (14 cents per share) in the quarter ended June 30, 2003. The loss was due to a $5.4 million after tax impairment of idle equipment, principally an uninstalled airlaid machine acquired with the purchase of Walkisoft in 1999, and severance payments to employees at the Lumberton plant whose closure was previously announced. Excluding the impairment and restructuring charges, the Company achieved one cent earnings per share ($0.2 million after tax) in April-June 2003. This compares to a loss of seven cents per share ($2.6 million after tax) in the same period a year ago, which excluded impairment and restructuring charges of $6.9 million after tax. During fiscal year 2003, the Company incurred a loss of $24.9 million after tax (67 cents per share), including impairment and restructuring costs of $24.7 million after tax (also 67 cents per share). This compares to a loss of $26 million after tax (74 cents per share) in fiscal year 2002, which included a $19.1 million after tax (54 cents per share) impairment and restructuring charge. Excluding impairment and restructuring charges, the Company's results improved by 19 cents per share from a loss of $6.9 million after tax in fiscal year 2002 (20 cents per share) to a loss of $0.2 million after tax in fiscal year 2003 (one cent per share). Net sales for the April-June quarter were $168 million, 5% above the $160.1 million in the same quarter of the prior year. Net sales for fiscal year 2003 were $641.1 million, 1% above the $635.2 million achieved in the prior year. Buckeye Chairman, David B. Ferraro, commented that, "April-June was another challenging quarter. We have strengthened our operations by increasing productivity and achieving numerous cost reductions. Pricing and product mix of our specialty cellulose business is improving, and we intend to reduce our fluff pulp production substantially over the next several years. This shift of a higher percentage of our products to specialty applications will improve our results in fiscal year 2004 and beyond." Mr. Ferraro went on to say, "Our focus remains on debt reduction. During the year we just completed, we reduced our net debt by $25.4 million (from $630.4 million to $605 million). As we go forward, we plan to limit capital spending to $40 million in fiscal year 2004 and apply our free cash flow to further debt reduction." Buckeye, a leading manufacturer and marketer of specialty cellulose and absorbent products, is headquartered in Memphis, Tennessee, USA. The Company currently operates facilities in the United States, Germany, Canada, Ireland and Brazil. Its products are sold worldwide to makers of consumer and industrial goods. * * * As previously reported, Standard & Poor's lowered its ratings on Buckeye Technologies Inc, with negative outlook. Ratings Lowered Ratings Buckeye Technologies Inc. To From Corporate credit rating BB BB+ Subordinated debt rating B+ BB- BURLINGTON: Court Approves WL Ross' $614-Million Bid for Assets --------------------------------------------------------------- The Bankruptcy Court approved an amended acquisition proposal of $614 million (subject to adjustment) from WL Ross & Co. LLC, as the highest and best received from the auction conducted on July 28, 2003. The agreement contemplates the sale of Burlington Industries (OTC Bulletin Board: BRLG) to WL Ross & Co. LLC, with a concurrent sale of Burlington's Lees carpet business to Mohawk Industries, Inc. (NYSE: MHK) The amended WL Ross acquisition agreement has been incorporated into the Company's plan of reorganization. The related disclosure statement is scheduled to be reviewed by the Court at a hearing in late August. If approved, Burlington expects the plan to become effective in October 2003. With operations in the United States, Mexico and India and a global manufacturing and product development network based in Hong Kong, Burlington Industries is one of the world's most diversified marketers and manufacturers of softgoods for apparel and interior furnishings. CALYPTE BIOMEDICAL: June 30 Net Capital Deficit Widens to $11MM --------------------------------------------------------------- Calypte Biomedical Corporation (OTC Bulletin Board: CYPT), the developer and marketer of the only two FDA approved HIV-1 antibody tests for use with urine samples, announced financial results for the second quarter and six-months ended June 30, 2003. Revenues for the quarter totaled $749,000, versus revenues of $1.2 million for the comparable period in 2002 and $784,000 for the previous quarter ended March 31, 2003. The net loss attributable to common stockholders for the quarter was $8.0 million, compared to a net loss of $5.0 million for the three months ended June 30, 2002. The net loss for the second quarter of 2003 and 2002 included $4.4 million and $3.1 million, respectively, in non-cash charges that were primarily related to the grants of common stock and options and warrants as compensation for services and non-cash interest expense related primarily to the accounting for Calypte's convertible debt financing instruments. For the six months ended June 30, 2003, revenues totaled $1.5 million, versus revenues of $2.4 million for the same period last year. The net loss attributable to common stockholders was $14.3 million, compared to a net loss of $5.6 million for the six months ended June 30, 2002. The net loss for the six months ended June 30, 2003 and 2002 included $8.3 million and $3.3 million, respectively, in non-cash charges that were primarily related to the grants of common stock and options and warrants as compensation for services and non-cash interest expense related primarily to the accounting for Calypte's convertible debt financing instruments. In 2002, there were also $1.3 million in credits related to a non-cash gain on settlement of debt. "Calypte continues to move ahead as we aggressively execute our business plan," stated Tony Cataldo, Calypte's Executive Chairman. "This quarter was an eventful time for the Company. We have recently announced an expanding distribution agreement in the Middle East and named a second distributor serving the large Chinese market. We appointed Dr. Richard George and Dr. Ron Mink to head our Rapid HIV business. Also, the FDA authorized use of our HIV-1 serum Western Blot as a supplemental test for existing HIV rapid products and we named a new president and chief operating officer to our management team." Commenting on his tenure with Calypte since his appointment at the beginning of June, Mr. Oyakawa, Calypte's President and Chief Operating Officer stated, "My number one priority, to transition this company into a sales and marketing mode, will become evident in the next several months. I have personally met with all of our larger US customers and, as part of restructuring our direct sales force, will reorganize this effort to take advantage of our partners' skills. We also have the potential for several significant orders now that the federal government has given AIDS the priority it deserves. Africa is a prime area where there is both need and now, government funding. I expect our urine-based rapid screening test to enter such international markets within the next several months. My goal is to see Calypte become a significant player in the global marketplace." "Further," Mr. Oyakawa continued, "while we focus on adding new business, we have already achieved significant reductions in our burn rate of approximately $2 million per year annualized. This, coupled with our capital financing as announced separately today, will allow us to begin implementing the consolidation of our manufacturing facilities in Rockville to further reduce overhead." At June 30, 2003, Calypte's balance sheet shows a working capital deficit of about $9 million, and a total shareholders' equity deficit of about $11 million. Calypte Biomedical Corporation, headquartered in Alameda, California, is a public healthcare company dedicated to the development and commercialization of urine-based diagnostic products and services for Human Immunodeficiency Virus Type 1 (HIV-1), sexually transmitted diseases and other infectious diseases. Calypte's tests include the screening EIA and supplemental Western Blot tests, the only two FDA-approved HIV-1 antibody tests that can be used on urine samples, as well as an FDA-approved serum HIV-1 antibody Western Blot test. The Company believes that accurate, non-invasive urine-based testing methods for HIV and other infectious diseases may make important contributions to public health by helping to foster an environment in which testing may be done safely, economically, and painlessly. CENTURYTEL INC: June 30 Working Capital Deficit Widens to $237MM ---------------------------------------------------------------- CenturyTel, Inc. (NYSE: CTL) announces operating results for second quarter 2003. -- Revenues from continuing operations increased 34.5% from second quarter 2002 to $590.1 million. -- Operating Cash Flow, defined as operating income plus depreciation and amortization, excluding nonrecurring items, rose to $305.2 million, an increase of 39.7%. -- Net income, excluding nonrecurring items, grew 1.5% to $87.4 million. Reported under GAAP, net income grew 10.9% to $87.4 million from $78.8 million. -- Diluted earnings per share, excluding nonrecurring items, were $.60 in both periods, while GAAP diluted earnings per share increased 9.1% to $.60 from $.55. -- Free cash flow, excluding nonrecurring items, climbed to $109.6 million from $60.5 million. CenturyTel, Inc.'s June 30, 2003 balance sheet shows that its total current liabilities outweighed its total current assets by about $237 million. "CenturyTel's results for the second quarter reflect continuing demand for communications services in rural markets and smaller cities where CenturyTel offers bundled services including local, local distance and broadband," Glen F. Post, III, chairman and chief executive officer, said. "Our 29.2% increase in revenues from Other Operations primarily reflects the continued strong growth in our long distance and Internet operations." Consolidated revenues from continuing operations for the second quarter rose 34.5% to $590.1 million from $438.7 million. Operating cash flow from continuing operations, excluding nonrecurring items, grew to $305.2 million from $218.5 million, a 39.7% increase. The Company achieved a consolidated cash flow margin of 51.7% for the quarter. Income from continuing operations for the quarter, excluding nonrecurring items, increased 79.0% to $87.4 million from $48.8 million in second quarter 2002, primarily due to contributions from the properties acquired from Verizon in third quarter 2002. Diluted earnings per share from continuing operations, excluding nonrecurring items, increased 76.5% to $.60 from $.34. Diluted earnings per share, excluding nonrecurring items, were $.60 in both second quarter 2003 and 2002. The wireless business sold by the Company in August 2002 contributed $.26 to second quarter 2002 earnings per share, including $.05 related to discontinuation of depreciation on the assets held for sale. Telephone revenues for second quarter reached $515.0 million, a 35.3% increase over $380.5 million in second quarter 2002. Increases in telephone revenues and telephone operating expenses were primarily due to the Verizon acquisitions in third quarter 2002. In our legacy markets, growth in vertical services and increased revenue from rate increases more than offset declines in access and toll revenues. Telephone operating income, excluding nonrecurring items, increased 46.2% to $173.6 million from $118.7 million, and telephone operating cash flow, excluding nonrecurring items, rose 36.9% to $285.9 million from $208.9 million a year ago. CenturyTel's second quarter 2003 telephone cash flow margin was 55.5% while the operating income margin was 33.7%. Other operations revenues grew 29.2% to $75.2 million during second quarter 2003, compared with $58.2 million in second quarter 2002. CenturyTel's long distance revenues increased 25.4% to $43.2 million. CenturyTel now serves more than 720,000 long distance customers and nearly 68,000 DSL customers, adding more than 30,800 and 7,300 customers, respectively, during the quarter. Internet revenues increased 35.0% to $19.9 million in second quarter 2003 from $14.7 million in second quarter 2002. CenturyTel CLEC revenues were $5.1 million for second quarter 2003. "Through the first half of 2003, we generated free cash flow of nearly $250 million. Our strong cash flow and solid balance sheet provide us the flexibility to respond to opportunities and challenges as they arise," Post said. Under generally accepted accounting principles, the Company reported a 10.9% increase in net income to $87.4 million and a 9.1% increase in diluted earnings per share reaching $.60 for second quarter 2003, compared to $78.8 million and $.55 per diluted share, respectively, in second quarter 2002. Net income in second quarter 2002 included a nonrecurring $15 million pre-tax ($9.8 million after-tax) charge related to a reserve for uncollectible revenues primarily from WorldCom and a nonrecurring $2.4 million after-tax gain on the sale of a PCS license. For the first six months of 2003, revenues from continuing operations increased to $1.171 billion from $861.6 million for the same period in 2002, a 35.9% increase. Operating cash flow from continuing operations, excluding nonrecurring items, was $603.0 million for the first half of 2003 compared to $429.8 million a year ago, a 40.3% increase. Income from continuing operations, excluding nonrecurring items, increased 79.0% to $168.1 million from $93.9 million in 2002. For the third quarter 2003, CenturyTel expects total revenues of $590 to $605 million and diluted earnings per share of $.55 to $.60. For the full year 2003, diluted earnings per share is expected to be in the range of $2.28 to $2.34, increased from our previous guidance of $2.14 to $2.22. The increase in 2003 earnings per share guidance is driven by the financial results for second quarter exceeding our expectations, the anticipated impact of stronger telephone revenues and lower total expenses than originally forecast for second half 2003, and the contribution from LightCore, which operates the fiber assets acquired from Digital Teleport, Inc. in June 2003. These outlook figures are presented on a GAAP basis, excluding nonrecurring items and the potential impact of any future mergers, acquisitions, divestitures or other similar business transactions. CenturyTel, Inc. provides communications services including local, long distance, Internet access and data services to more than 3 million customers in 22 states. The company, headquartered in Monroe, Louisiana, is publicly traded on the New York Stock Exchange under the symbol CTL, and is included in the S&P 500 Index. CenturyTel is the 8th largest local exchange telephone company, based on access lines, in the United States. Visit CenturyTel at http://www.centurytel.com CHIPPAC INC: Red Ink Continued to Flow Second Quarter 2003 ---------------------------------------------------------- ChipPAC, Inc. (Nasdaq: CHPC), one of the world's largest and most diversified providers of semiconductor assembly and test services, announced results for the second quarter ended June 30, 2003. Revenue for the three months ended June 30, 2003, increased 10.1% to $106.8 million, compared to $97.1 million in the same quarter a year ago. This is an increase of 20.6% compared to the quarter ended March 31, 2003, ahead of prior guidance of 10% to 15% sequential growth. Net loss was $4.5 million compared to a net loss of $7.1 million in the same quarter a year ago. Excluding the write-off of debt issuance costs in both periods, the net loss in the second quarter ended June 30, 2003 improved 20.8% from the same period a year ago, from a loss per share of $(0.05) to $(0.03) in the second quarter. Prior guidance for the three months ended June 30, 2003 was for net loss to be in the range of $(0.02) to $(0.05) per diluted share. Dennis McKenna, Chairman and Chief Executive Officer of ChipPAC, commented, "Our company was able to achieve 20.6% sequential revenue growth during the second quarter despite weak demand from our wireless handset customers, and constrained capacity for some advanced packages. This revenue growth is a result of our continued strategy of positioning ChipPAC across a broad base of customers and electronic applications. Communications was one of the bright spots in the quarter, with WLAN and high-density flash memory using our industry leading stack technology. We also saw strength in our computing segment, with strong demand in graphics and chipsets for mobile, desktop and server applications." McKenna continued, "At the same time, the outsourcing trend continues to pick-up as companies look to maximize their return on assets and gain access to advanced packaging and test technologies. The latest example was Cirrus Logic, which announced it was selling its test operation assets in Austin, Texas to ChipPAC for installation in ChipPAC's China facility. This transaction reinforces the importance of China and acknowledges our number one position in this fast growing market." Robert Krakauer, Chief Financial Officer of ChipPAC, said, "Despite strong top line growth over this past quarter of more than 20% sequentially, we continue to be challenged by higher material costs and currency fluctuations. Average selling prices were flat during the quarter versus the prior quarter. While we continue to support the ramp in volume of new customer programs into our manufacturing facilities in the second half of this year, we are continuing to focus on improving efficiencies and productivity to further reduce costs. Increased unit volume improved capacity utilization to 68% during the quarter resulting in operating leverage and improved gross margins. The overall unit volume increase was 21%, led by a 33.4% increase in unit volume at our China facility in the second quarter compared to the first quarter 2003. This was a record unit and revenue level for us in China. Finally, we were able to further strengthen our liquidity position by completing a private offering of $150 million of convertible subordinated notes and eliminating all short-term debt. This has put ChipPAC's balance sheet in the best financial position since our leveraged buyout in 1999. We are in a position to make the necessary investments in our strategic initiatives and in our customers." Outlook Krakauer continued, "We are targeting a return to profitability in the fourth quarter. We will be completing the final phase of product transfers, facilities consolidations and restructuring in the third quarter to improve our productivity and efficiency going forward. In Malaysia we have entered into an agreement to sell one of our buildings in Kuala Lumpur, in a cash transaction that we expect to be recorded in the third quarter. The transaction is subject to customary closing conditions, including receipt of governmental approvals and buyer due diligence rights, which we believe will be met in the third quarter. As a result of these activities, we will be able to improve efficiencies, productivity and reduce our costs. We are currently finalizing the rationalization of our asset base and together with a labor restructuring, we expect to incur material special charges in the third quarter." McKenna concluded, "We believe some of the strength in the second quarter was the result of wafer and assembly build rates in advance of demand. As a result, we expect to see a slower start to the third quarter, with improvements through the remainder of the period. Overall, we are confident in our growth prospects for the second half of the year based on new customer wins, market share position at existing customers, increased outsourcing trends and growth in our core markets. We also expect to see continued growth in our stacked die technology, as feature rich phones require these multi-die solutions. We see limited competition in this area and we believe customers see us as a key means to ensure their competitive position in the portable wireless market. In addition, we have started to see significant production requirements for flip chip interconnect packages. We expect flip chip revenue and volume growth in the second half of the year to grow over 50% from the first half. Importantly, our technology leadership and broad product portfolio position ChipPAC to participate with a wider customer base." "Entering the third quarter, we expect revenue growth will be flat to up 3% over the second quarter 2003 as inventory replenishments from the second quarter will slow in the third quarter as demand is met. This would be year over year revenue growth of 11% to 14%. Overall, we expect the net loss for the third quarter to be in the range of $(0.05) to $(0.08) per share, excluding special charges and the potential gain on the sale of our Malaysia building. A key assumption to our revenue and profitability in the third quarter will be a more active build cycle of the communications segment, namely, the wireless handset segment, which we expect will be backend loaded in the quarter. The combination of improved volumes, a more favorable product mix, and our continuing cost reduction activities, should result in an improved profit outlook for the fourth quarter." ChipPAC Inc., is a full-portfolio provider of semiconductor packaging design, assembly, test and distribution services. The company combines a history of innovation and service with more than a decade of experience satisfying some of the largest customers in the industry. With advanced process technology capabilities and a global manufacturing presence spanning Korea, China, Malaysia and the United States, ChipPAC has a reputation for providing dependable, high quality packaging solutions. For more information, visit the company's Web site at www.chippac.com. As reported in Troubled Company Reporter's July 21, 2003 edition, Standard & Poor's Ratings Services raised its bank loan rating for ChipPAC Inc. to 'BB-' from 'B+', reflecting a material reduction in the company's bank facility following the repayment of the remaining balance of the outstanding term loan. The bank facility retains an unused $50 million revolving credit facility. At the same time, Standard & Poor's affirmed ChipPAC's corporate credit and other ratings. The outlook remains negative. CHIQUITA BRANDS: Reports Improved Second Quarter Fin'l Results -------------------------------------------------------------- Chiquita Brands International, Inc. (NYSE: CQB) reported second quarter net income of $57 million, up from $48 million a year ago. "In the face of tough competition and significant pricing pressure in most markets, we are continuing to make steady progress against the goals we outlined last year, including the completion of two significant transactions in the second quarter," said Cyrus Freidheim, chairman and chief executive officer. "In May, we completed the sale of our vegetable canning business, which allows us to focus firmly on the growth and profitability of our core fresh produce business and strengthen our balance sheet by reducing debt. In June, we completed the sale of our banana division in Armuelles, Panama, which will help us drive better performance through lower costs. In addition, we are pleased with our market performance in North America, Europe and Asia." FINANCIAL HIGHLIGHTS - Net sales for the quarter were $840 million, up $397 million from the second quarter of 2002. The acquisition of Atlanta AG, a fresh produce distributor the company acquired in late March 2003, accounted for $327 million of the increase. The remainder resulted from higher volume of bananas, increased sales of other fresh fruit and favorable European exchange rates. - 2003 second quarter operating income from continuing operations was $60 million compared to $55 million pro forma in the year- ago period, adjusted for the change in cost accounting explained at the end of the release. (Historical second quarter 2002 operating income, not adjusted for the accounting change, was $58 million.) - 2003 second quarter operating income includes the following items: a $21 million gain from the previously announced sale of the company's banana operations in Armuelles, Panama; and $11 million in charges, primarily related to restructuring at Atlanta, write-downs of joint ventures and severance, most of which are included in the company's cost of sales. - 2003 second quarter operating income includes a $5 million balance sheet currency translation gain. 2002 second quarter income included an unusually large balance sheet translation gain of $20 million. The balance sheet translation results from the required revaluing of certain European assets -- primarily trade receivables from the sale of bananas -- at quarter-end euro/dollar exchange rates. DISCONTINUED OPERATIONS Net income for the second quarter of 2003 includes $9 million from discontinued operations, while net income in the year-ago second quarter included $2 million from discontinued operations. Operating income for both 2003 and 2002 excludes earnings of the following companies that have been sold: Castellini Group, a U.S. wholesale distribution business sold in December 2002; Progressive Produce Corp., a California packing and distribution company sold in January 2003; and Chiquita Processed Foods, a vegetable canning business sold in May 2003. Operating results of these companies are included in discontinued operations in the financial statements for all periods until sold. Discontinued operations for the second quarter of 2003 also includes an $8 million gain on the sale of CPF and a $3 million gain on the sale of a port operation owned by Atlanta. SEGMENT RESULTS Fresh Produce Fresh Produce second quarter operating income was $58 million, compared to $54 million last year on a pro forma basis after adjusting for the accounting change. (Historical fresh produce operating income for the second quarter of 2002, not adjusted for the accounting change, was $57 million.) The improvements in 2003 operating results were primarily due to: - $21 million gain on the sale of the Armuelles banana production division; - $17 million from reduced production, advertising and personnel expenses; - $4 million net benefit from fresh produce sales in Europe (comprised of $41 million from favorable European currency exchange rates, offset by $26 million in lower local pricing in Europe and $11 million in hedging costs); and - $3 million from increased banana volume in Europe. The favorable items above were partially offset by: - $15 million effect of the lower balance sheet currency translation gain in 2003; - $11 million in restructuring costs associated with Atlanta, write-downs of certain joint ventures, and severance related to company cost reduction programs; - $10 million of higher costs associated with purchased fruit, fuel and paper; and - $5 million adverse effect from lower pricing in North America. On a U.S. dollar basis, banana prices in the company's core European markets (EU-15 countries, Norway and Switzerland) rose 12 percent in the quarter due to a stronger euro. At the same time, the volume of bananas the company sold in core Europe rose 10 percent because Chiquita increased sales of its premium-label fruit and second-label fruit by approximately the same amount each, after winning new business. On a local currency basis, average banana prices in the company's core European markets fell 10 percent, as a result of the stronger euro and as discount retailers continued to make headway in Germany and the United Kingdom. Banana prices in North America fell 4 percent in the quarter from the strong level a year ago when a flood in Costa Rica and a strike in Honduras diminished industry supply, raising the spot- market price. The volume of bananas the company sold in North America was flat in the quarter compared to a year ago. On a U.S. dollar basis, banana prices in Asia, where the company currently has a small presence, mainly in Japan, were flat compared to a year ago. Local banana prices in Asia fell 7 percent from strong 2002 levels when industry volume to Japan declined. The volume of bananas the company sold in Asia during the quarter rose 6 percent from a year ago, as Chiquita continued to increase its business in the region. On March 27, 2003, Chiquita purchased the remaining equity interests of Atlanta, which had $1.3 billion of net sales in 2002. Starting with the second quarter of 2003, Atlanta's results were fully consolidated in Chiquita's financial statements. Atlanta's operating loss for the quarter was $2 million, including $7 million of restructuring charges and a write-down of an investment. In the 2002 second quarter, Atlanta was an investment accounted for under the equity method, and its net income was breakeven. Processed Foods On May 27, 2003, the company sold its vegetable canning business, which comprised more than 90 percent of net sales in the Processed Foods segment. The vegetable canning business is reported as a discontinued operation in the financial tables accompanying this release. Remaining operations in the Processed Foods segment consist of processed fruit ingredient products, which are produced in Latin America and sold in North America, Europe and the Far East, and other consumer products, primarily edible oils sold through a joint venture in Honduras. Net sales in the second quarter of 2003 for these remaining operations were $12 million, up from $9 million for these operations in 2002. Second quarter operating income was approximately $2 million, up from $1 million in 2002. ARMUELLES, PANAMA DIVISION As previously announced, on June 30, 2003, the company sold its Puerto Armuelles Fruit Co. banana production division for $20 million to a worker cooperative led by members of the Armuelles banana workers' union. In connection with this transaction, the cooperative signed a 10-year contract to supply Chiquita with fruit at market prices. Sales proceeds included $15 million in cash financed by a Panamanian bank and $5 million from a loan provided by Chiquita. This loan will be repaid to the company through an agreed-upon discount to the price per box during the initial years of the contract. As part of the transaction, Chiquita paid $20 million in workers' severance and certain other liabilities. As a result of this sale and other productivity improvements taken before the transaction was completed, the company expects its costs related to Armuelles to be approximately $12 million lower in 2003 than in 2002. The company expects annual savings from the transaction to total approximately $15 million to $18 million by the end of 2004 compared to 2002 costs. In the second quarter, the company recognized a gain of $21 million from the sale of PAFCO assets and settlement of PAFCO severance and other liabilities. COST REDUCTIONS During the fourth quarter of 2002, Chiquita initiated a series of global performance-improvement programs to reduce costs over three years. The company anticipated that its gross cost reductions would be partially offset by implementation expenses, such as severance, and possible cost increases affecting the industry. The company announced targets for 2005, adjusted for the sale of its canning division, of $110 million in gross annual cost reductions and $70 million in net annual cost reductions, after potential offsetting industry-wide cost increases but before implementation expenses. The annual targets are presented in Exhibit B. For 2003, the company now expects its gross cost reductions to exceed the previously announced target of $40 million. In the first six months of the year, the company realized $24 million of actual cost savings, including productivity improvements at Armuelles, Panama. The company also previously announced that it expected 2003 gross cost reductions to be largely offset by increased purchased fruit, fuel and paper costs of $25 million. The company now expects increased costs for purchased fruit, fuel and paper to total $27 million this year because of higher-than- forecasted fuel prices. In addition, the company has previously announced that it expects implementation expenses associated with its cost reduction programs to total $10-15 million, excluding restructuring at Atlanta AG. ASSET SALES In September 2002, the company set a goal to divest $100-150 million of non-core assets by the end of 2005. By June 30, 2003, Chiquita had sold assets for proceeds totaling approximately $320 million, including $106 million in debt assumed by the buyers. DEBT In September 2002, the company set a goal of reducing total debt to $400 million by the end of 2005. The change from $517 million at Dec. 31, 2002, to $482 million at June 30, 2003, set forth in Exhibit C, results primarily from: - The sale in May of CPF, which had $81 million of debt at Dec. 31, 2002; - $50 million in payments on debt; - A new $65 million term loan in March to repay Atlanta AG's lenders; - The purchase of a ship in January for $14 million; and - $17 million primarily for seasonal working capital associated with other fresh fruit. ACCOUNTING CHANGE In the first quarter of 2003, the company changed its accounting for certain tropical production and logistics expenses during interim periods. Previously, the company used a standard costing method, which allocates those costs evenly throughout the year based on volume. The company has now adopted an actual costing method, which recognizes the costs as incurred. This new method, which the company's auditors, Ernst & Young, have approved as a preferred method, has no effect on total-year costs or results. Under the former accounting policy, $3 million of costs incurred in the 2002 second quarter were deferred and fully expensed by year-end. Had the new policy been in effect last year, the company's net income for the second quarter of 2002 would have decreased by $3 million to $45 million, or $1.12 per share, on a pro forma basis. To assist investors in comparing year-to- year quarterly results, the company has provided both historical 2002 numbers and 2002 numbers on a pro forma basis, adjusted as if the new accounting policy had been in effect last year, in the financial highlights above and in the tables at the end of the release. Chiquita Brands International is a leading international marketer, producer and distributor of high-quality fresh and processed foods. The company's Chiquita Fresh Group is one of the largest banana producers in the world and a major supplier of bananas in North America and Europe. The company also distributes and markets a variety of other fresh fruits and vegetables and processed foods. For more information, visit the company's Web site at http://www.chiquita.com As reported in the Troubled Company Reporter's April 22, 2003 edition, Standard & Poor's Ratings Services assigned its 'B-' rating to Chiquita Brands' $250 million senior unsecured notes due 2009. Standard & Poor's also assigned its 'B' corporate credit rating to Chiquita. The outlook is positive. The senior unsecured notes were rated one notch below the corporate credit rating, reflecting their junior position to the large amount of secured debt and priority debt at the operating subsidiaries. CINCINNATI BELL: Elects Bruce L. Byrnes to Board of Directors ------------------------------------------------------------- Cincinnati Bell Inc. (NYSE:CBB) elected Bruce L. Byrnes, (55) vice chairman of the board and president of Global Beauty Care and Global Health Care of Procter and Gamble, to the Company's Board of Directors effective August 1, 2003. "We are very pleased to have Bruce join our board of directors," stated Phil Cox, chairman of the board. "Procter and Gamble is a great company with an enviable record of financial and commercial success. Bruce's leadership in delivering innovation to build consumer, customer and shareholder value make him an outstanding addition to our board." Byrnes holds a B.A. from Princeton University. Prior to becoming vice chairman and president of Global Beauty and Global Health Care in 2002, his career includes several key positions within P&G, the most recent being president of global health care and corporate new ventures. In addition, Lawrence J. Bouman is resigning from the board of directors effective August 1, 2003. Bouman joined the board in 2001 when the scope of the company became national. He will pursue other board opportunities now that the company has returned to a local focus. "We thank Larry for his significant business contributions including his valuable assistance throughout the company's restructuring," said Phil Cox, Cincinnati Bell's chairman. "We owe him a debt of gratitude for his service." Cincinnati Bell is one of the nation's most respected and best performing local exchange and wireless providers with a legacy of unparalleled customer service excellence. The company was recently ranked number one in customer satisfaction, for the third year in a row, by J.D. Power and Associates for residential long distance among mainstream users. Cincinnati Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. Cincinnati Bell is headquartered in Cincinnati, Ohio. For more information, visit http://www.cincinnatibell.com As reported in Troubled Company Reporter's July 25, 2003 edition, Standard & Poor's Ratings Services raised the corporate credit rating of incumbent local exchange carrier Cincinnati Bell Inc. to 'B' from 'B-'. Ratings on Cincinnati Bell's secured debt, which includes its $941 million bank credit facility and $50 million senior secured notes, are raised to 'B+' from 'B-'. "The upgrade of the secured debt reflects both the higher corporate credit rating and permanent reduction of bank debt," said credit analyst Michael Tsao. Ratings have been removed from CreditWatch, where they had been placed with positive implications on July 1, 2003 after Cincinnati Bell announced that it planned to issue new notes to reduce bank debt. The outlook is positive. Total debt is currently about $2.5 billion. COASTAL BANCORP: Fitch Withdraws Pref. Rating after Redemption -------------------------------------------------------------- Fitch Ratings is withdrawing its rating on Coastal Bancorp, Inc.'s 9.12% Series A Cumulative Preferred Stock Securities which are being redeemed, in full, by CBSA. Rating Withdrawn: -- Preferred Stock 'BB-'. COGECO CABLE: Increases Internet Service Speed to 3.0 Mbps ---------------------------------------------------------- Cogeco Cable is further enhancing its Standard High Speed Internet service by increasing its download speed by 50%, from 2.0 Mbps to 3.0 Mbps. This initiative ensures that Cogeco Cable will continue to provide its subscribers with High Speed Internet that is up to twice as fast as DSL high speed Internet by telephone that has download speeds varying between 1.5 and 2.0 Mbps. The new download speed will be operational in all areas served by Cogeco Cable by July 31st without altering the present price structure, while enabling customers to continue to benefit from cable's ability to deliver the best Internet service available on the market. According to Ron Perrotta, Vice-President of Marketing and Sales at Cogeco Cable, "The increased speed serves to highlight the exceptional quality of our cable broadband network and the strength of our research and development team-capabilities that enable Cogeco Cable to maintain its leadership position on the feature that consumers continue to rank as the most important - speed." "Our customers will enjoy even greater access to the limitless learning and leisure opportunities awaiting them on the Internet. We believe this is the ideal way to continue providing our customers with high quality service and pursue future development on a solid footing," added Mr. Perrotta. Cogeco Cable is the second largest cable system operator in both Ontario and Quebec and the fourth largest in Canada based on the number of customers with basic service. As of May 31, 2003, Cogeco Cable provided roughly 1,181,000 service units to the approximately 1,389,000 cabled households located in the territories it serves. Through its two-way broadband network, Cogeco Cable provides its primarily residential customers with analog and digital video service and high-speed Internet services. Subordinate voting shares of Cogeco Cable are listed on the Toronto Stock Exchange. * * * As previously reported in the Feb. 27, 2003, issue of the Troubled Company Reporter, Standard & Poor's Ratings Services lowered its ratings on cable operator Cogeco Cable Inc., due to relatively weak credit measures that were not in line with the rating category. The long-term corporate credit rating was lowered to 'BB+' from 'BBB-', and the ratings on the company's first-priority senior secured debt were lowered to 'BBB-' from 'BBB'. The outlook is stable. CONGOLEUM CORP: Seeks Bondholders' Consent to Amend Indenture ------------------------------------------------------------- Congoleum Corporation (AMEX:CGM) announced that as part of its strategy to resolve its asbestos liabilities, it sought bondholders' approval of certain amendments to the indenture governing its 8-5/8% Senior Notes due 2008. These amendments reflect the finalization of negotiations with representatives of certain current and future asbestos personal injury claimants regarding the expected principal economic terms of the Company's anticipated pre-packaged Chapter 11 plan of reorganization and address, among other things, the amount and terms of a note Congoleum will contribute to a trust for the benefit of the claimants. The amendments are intended to expressly provide Congoleum with greater flexibility to pursue approval of its pre- packaged plan of reorganization under Chapter 11 of the Bankruptcy Code. The plan of reorganization that has been negotiated leaves its bondholders, trade creditors, and other unsecured non-asbestos related creditors unimpaired. The amendments to the indenture would expressly permit Congoleum to issue a promissory note to the plan trust as part of the Company's anticipated pre-packaged Chapter 11 plan of reorganization. The promissory note will be subordinated to the Company's 8-5/8% Senior Notes due 2008 and its revolving credit facility. The principal amount of the promissory note will initially be $2,738,234.75 and will be subject to increase as of the later of June 30, 2005 and the last trading day of the 90 consecutive trading day period commencing on the first anniversary of the effective date of the Company's confirmed pre-packaged Chapter 11 plan of reorganization in an amount equal to the excess, if any, of the amount by which 51% of the Company's market capitalization as of the Principal Adjustment Date exceeds $2,738,234.75. The Company expects that interest on outstanding principal of the plan note will accrue at a rate of 9% per annum. The Company further expects that interest on the initial $2,738,234.75 will accrue and be payable quarterly and that interest on the Additional Principal Amount will accrue quarterly and be added to the Additional Principal Amount as additional principal. The Company expects that upon the earlier of August 1, 2008 and the date that all of the Senior Notes are repaid in full, interest on the then outstanding Additional Principal Amount will then accrue and be payable quarterly. The Company further expects that all principal on the plan note then outstanding together with any accrued but unpaid interest will be payable in full on the tenth anniversary of the date of the plan note, subject to the right of the plan trust to accelerate all amounts then owed on the plan note following an uncured event of default under the plan note. The Company understands that, pursuant to a pledge agreement, the Company's controlling shareholder, American Biltrite Inc. (AMEX:ABL), will pledge all of the shares of the Company's common stock that American Biltrite owns, together with any other equity interests and rights American Biltrite may own or hold in the Company, as of the date of the plan note as collateral for the Company's obligations under the plan note. The Company expects that American Biltrite would be allowed to prepay the principal amount of the plan note, in whole or in part, without any penalty or premium at any time following the Principal Adjustment Date and that any interest that may have accrued but not yet been paid at the time of any principal repayment would be due and payable at the time of the principal repayment. The Company also understands that in the event American Biltrite sells all or substantially all of the shares of Congoleum stock it owns within three years of the Principal Adjustment Date, American Biltrite would be obligated to pay the plan trust an amount equal to 50% of any excess of the value of 51% of the equity value of Congoleum implied by such stock sale by American Biltrite over $2,738,234.75 plus any Additional Principal Amount. The Company further understands that in the event American Biltrite pre-pays the note or pays any amounts to cure an event of default of the note, or pays an amount to the plan trust as a result of selling its Congoleum stock, the Company would be obligated to reimburse American Biltrite for such payments, such obligation to be reflected in a note to be issued by the Company to American Biltrite with terms substantially similar to the terms of the plan note issued by the Company to the plan trust. Adoption of the proposed amendments to the indenture requires the consent of holders representing a majority of the aggregate principal amount of the outstanding notes as of the record date. Roger S. Marcus, Chairman of the Board, commented, "Completing our economic negotiations represents another important milestone for Congoleum's resolution of its asbestos problem. These negotiations included participation by a representative for future claimants as well as representatives for current claimants. While this added to the difficulty of reaching an agreement, it also marks a hurdle we believe we have now cleared. With our plan in what we hope is substantially final form, we can now seek final approval from our lenders and proceed with circulating our plan of reorganization to claimants for their approval, which we expect to begin shortly. While challenges remain ahead, we are encouraged by the challenges we have overcome. We continue to anticipate filing our pre- packaged Chapter 11 case in September with the votes needed to approve the plan, and hope to obtain confirmation of our plan by the end of the year. We have worked hard to craft a plan that protects the interests of our suppliers, customers, lenders, employees and shareholders, and we appreciate their continued support." The solicitation is being made upon the terms and is subject to the conditions set forth in the Consent Solicitation Statement dated July 30, 2003 and related documents. Copies of those documents can be obtained by contacting The Altman Group, Inc., the consent agent for the consent solicitation, at (212) 681-9600. The consent solicitation was scheduled to expire at 3 p.m., New York City time, on Friday, August 1, 2003, unless extended by Congoleum. Congoleum Corporation is a leading manufacturer of resilient flooring, serving both residential and commercial markets. Its sheet, tile and plank products are available in a wide variety of designs and colors, and are used in remodeling, manufactured housing, new construction and commercial applications. The Congoleum brand name is recognized and trusted by consumers as representing a company that has been supplying attractive and durable flooring products for over a century. CONSECO FINANCE: Takes Action to Challenge Various Claims --------------------------------------------------------- The Conseco Finance Corp. Debtors object to seven claims that have been amended by later-filed claims. The Debtors want the Amended Claims disallowed and expunged in their entirety. The Amended Claims assert $17,860 in debtor obligations. The Amended Claims are survived by seven Claims asserting $17,157 in debtor liability. The CFC Debtors also found 31 objectionable Claims. They want the Claims disallowed because the Claims duplicate other claims previously filed. The Duplicate Claims are unnecessary because Surviving Claims already assert the creditor's claim. The Duplicate Claims total $29,342,454 are survived by 31 remaining claims asserting $27,330,757 in obligations. Among the largest Duplicate Claims are: Duplicate Amount Surviving Amount ---------------- ---------------- Jesse Benavides $10,272,427 $10,272,427 Colamer Investments 6,206,931 6,206,931 Peter McKenzie 5,500,000 5,500,000 The Debtors also want 21 claims disallowed and expunged in their entirety because the claimants failed to provide sufficient documentation to support the claims. The Debtors object to $438 in priority claims and $221,289,926 in unsecured claims. 21st Mortgage Corporation filed seven claims each for $16,077,918. Vanderbilt Mortgage & Finance Inc. filed four claims for $15,163,430 each and an additional claim for $48,059,971. Approximately 101 claimants have asserted claims against the CFC Debtors' estates where there is no liability. The CFC Debtors assert that the No Liability Claims are not enforceable against them or their property under any agreement or applicable law and, therefore, should be expunged and disallowed for all purposes. The No Liability Claims comprise of $21,283,635 in secured claims, $97,069 in priority claims and $73,042,266 in unsecured claims. Among the largest claims are: Lynn & Burt Bazzle $19,943,764 David Casas 25,058,926 Daniel Lackey 16,117,851 The CFC Debtors report that 35 claimants filed proofs of claim without supporting documentation. The claimants failed to file the requisite documentation to support their claims and, thus, have failed to comply with Rule 3001(c) of the Federal Rules of Bankruptcy Procedure. The No Supporting Documentation Claims include $3,310 in secured claims, $27,159 in priority claims and $67,490 in unsecured claims. The Debtors want the Claims disallowed and expunged. The CFC Debtors ask Judge Doyle to disallow and expunge one Non- Debtor Claim. The creditor filing this claim asserts liability against an entity that is not a debtor in these cases. Furthermore, the creditor has not asserted liability against any of the Debtors. Thus, the Non-Debtor claim is not enforceable against the CFC Debtors or their property under applicable law. (Conseco Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO INC: Reaches Agreement with TOPrS & Creditors Committees ---------------------------------------------------------------- Conseco, Inc. (OTCBB:CNCEQ) has reached an agreement in principle with the Official Committee of Trust Originated Preferred Securities (TOPrS) Holders and the Official Committee of Unsecured Creditors in its bankruptcy proceeding. Under the agreement, which is subject to the approval of the bankruptcy court, the TOPrS committee will support an amended plan of reorganization. If the court approves the settlement, Conseco said it plans to file with the bankruptcy court a Fifth Amended Plan of Reorganization that incorporates the settlement terms and continues to reflect a $3.8 billion enterprise valuation. "This agreement, if approved, would clear the way to a consensual reorganization plan -- a significant positive step toward completing our reorganization," said William J. Shea, Conseco's president and chief executive officer. "Our Chapter 11 team will continue to diligently work through the remaining process, while our managers and 4,400 associates prepare for the challenges that await us when we emerge from bankruptcy." Upon emergence, Conseco, Inc. will be engaged exclusively in the insurance business. Copies of the Fifth Amended Joint Plan of Reorganization will be available, when filed, at http://www.bmccorp.net/conseco CONSECO INC: Court Approves Kroll's Engagement as Investigator -------------------------------------------------------------- The Conseco Holding Company Debtors and the Official Committee of Unsecured Creditors joint sought the Court's authority to employ and retain Kroll Associates to assist with investigative and research services in the Board of Directors' selection process, nunc pro tunc to May 15, 2003. The investigation process will include: -- a search of Kroll's internal files; -- an electronic database research of public records; -- searches of local, national and industry media sources; -- a biographical verification; -- field investigations of past or pending civil and regulatory proceedings; -- field investigations of past or present allegations of criminal conduct; -- identification of past relationships with Company directors or senior management (past or present); -- identification of associations with insurance regulators or other insurers placed into supervision, conservatorship, receivership or increased oversight by any state insurance department; -- search for compliance with the Sarbanes-Oxley Act; and -- identification of past or current relationships with terrorist groups or individuals as described in the Patriot Act. The current hourly rates of Kroll professionals are: Analysts $250 Managing Directors 325 Senior Managing Directors 375 Robert J. Viteretti, Senior Managing Director and New York Office Chief at Kroll, expects the professional search fees for each director to range between $20,000 and $25,000. Kroll's fees will not exceed $25,000 per director without prior approval from the Holding Company Debtors and the Creditors' Committee. Database usage fees will be included and are calculated by multiplying the database rate times the number of minutes spent in usage. The current rate is $7 per minute. (Conseco Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392- 0900) CORRPRO: Continues Negotiating Extension of Credit Facilities ------------------------------------------------------------- Corrpro Companies, Inc. (Amex: CO), announced that negotiations are continuing with its senior lenders to extend the maturity date of its domestic senior revolving credit facility that would otherwise expire on July 31, 2003, as well as extend the due date on a $7.6 million principal payment under its senior notes that is also scheduled on that date. "Our existing lenders have informed us that they are prepared to extend these obligations for a limited period of time while we seek alternative capital financing sources with the assistance of our investment bankers. The agreements for these extensions are not yet in place, however, they are being actively negotiated in order to get them in place as soon as possible," stated Joseph W. Rog, Chairman, President, and Chief Executive Officer of Corrpro. "At the same time, we are actively engaged in a review process with other qualified capital and financing sources who have expressed interest in our efforts to recapitalize our balance sheet and refinance our outstanding senior debt. Still, the process is ongoing, and there can be no assurances given at this time as to the ultimate outcome or terms of our efforts in this regard." The Company also announced that its annual report, which is being mailed to shareholders, is now available on its Web site at http://www.corrpro.com The Company has not established the date for its 2003 annual meeting of shareholders pending the negotiations of its refinancing and recapitalization efforts. Corrpro, headquartered in Medina, Ohio is the leading provider of corrosion control engineering services, systems and equipment to the infrastructure, environmental and energy markets around the world. Corrpro is the leading provider of cathodic protection systems and engineering services, as well as the leading supplier of corrosion protection services relating to coatings, pipeline integrity and reinforced concrete structures. As reported in Troubled Company Reporter's July 4, 2003 edition, the Company is currently not in compliance with certain financial ratios required to be maintained under its senior debt agreements. In addition, the Company's revolving credit facility agreement is scheduled to expire on July 31, 2003. The Company is also required to make a $7.6 million principal payment on its Senior Notes, which mature in 2008, by July 31, 2003. The Company is having continuing discussions with its lenders regarding an amendment to extend the maturity date of the revolving credit facility beyond July 31, 2003, and plans to negotiate arrangements with its lenders to, among other things, waive the covenant violations under the senior debt, extend the maturity of the senior bank facility and defer the principal payments due on the Senior Notes. There can be no assurance, however, that any waiver or extension will be obtained on terms acceptable to the Company or at all. Failure to do so would have a material adverse effect on the Company's liquidity and financial condition and could result in the Company's inability to operate as a going concern, in which case the Company would consider available alternatives. The Company is currently in default of certain financial ratios required to be maintained under it Senior Note and Revolving Credit Facility agreements. In addition, the Revolving Credit Facility is scheduled to expire on July 31, 2003 and the Company is required to make a $7.6 million principal payment on the Senior Notes by July 31, 2003. The Company is also, at the current time, not able to provide any assurances regarding its ability to make the $7.6 million Senior Note principal payment that is due on July 31, 2003. Further information about our Long-Term Debt is included in Note 3, Long-Term Debt, Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K. The Company has had preliminary discussions with its lenders regarding an amendment to the Revolving Credit Facility which would, among other things, extend the maturity date of the Revolving Credit Facility beyond July 31, 2003. The Company intends to continue its efforts to obtain such an amendment, however, there can be no assurances that the Company will be able to negotiate such an amendment at all or under terms and conditions acceptable to it. Until such time when the Company is able to refinance the Senior Notes and Revolving Credit Facility it will attempt to negotiate arrangement with its lenders to, among other things, waive the covenant violations under the Senior Notes and Revolving Credit Facility agreement, extend the maturity of the Revolving Credit Facility beyond July 31, 2003 and defer the principal payments due under the Senior Notes. If the Company is not able to negotiate mutually acceptable arrangements with its existing lenders, events could occur that would have a material adverse effect on the Company's liquidity and financial condition and could result in its inability to operate as a going concern. If the Company is unable to operate as a going concern, it may file, or have no alternative but to file, bankruptcy or insolvency proceedings or pursue a sale or sales of assets to satisfy creditors. COTT CORP: S&P Ups Corp. Credit & Senior Debt Ratings to BB/BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term corporate credit rating on beverage manufacturer Cott Corp., to 'BB' from 'BB-'. At the same time, the senior secured debt rating was raised to 'BB+' from 'BB'. According to Standard & Poor's criteria, when secured debt accounts for a significant proportion of assets and cash flow, unsecured debt is notched down from the corporate credit rating. In this case, Cott's junior-ranking subordinated notes are notched down twice from the long-term corporate credit rating. The company's priority debt is notched upward once from the long- term corporate credit rating, reflecting the strong likelihood of full recovery of principal in the event of default or bankruptcy. "The ratings actions reflect improved profitability and credit protection measures that have benefited from strong results from the company's U.S. operations, as well as a reduction in leverage," said Standard & Poor's credit analyst Don Povilaitis. These factors are offset by Cott's reliance on a few key accounts and improving, although still somewhat constrained, liquidity. Toronto, Ontario-based Cott is the world's leading supplier of premium retailer branded beverages and the world's fourth-largest manufacturer of carbonated soft drinks (CSDs). Core geographic operations are in the U.S., Canada, and the U.K. The company provides food retailers with production and concentrate formulation, packaging, and inventory management. The U.S. remains by far Cott's most important market, representing 72% of fiscal 2002 sales and an even greater portion of operating income. Cott's U.S. revenues grew 11.9% in 2002 and have grown about 18% thus far in 2003, while operating income grew 22.9% in 2002. Cott has benefited from the increased concentration of larger food retailers in the U.S. and the growth of private label products in the grocery channel, which grew at twice the rate of total grocery sales. Still, the company is exposed to client concentration risk; Cott's top 10 customers, including Wal-Mart Stores Inc., account for more than 70% of sales. In Canada, a mature market for retailer branded beverages, potential growth is somewhat constrained by the existing high penetration of retailer branded CSDs in the food retailing channel. Cott's share of the Canadian market is 97%, and hence growth prospects are less attractive than in the U.S. Despite a 6% increase in first-half 2003 sales, Canadian margins declined due to unseasonably cold weather, with some recovery expected for the second half of 2003. In the U.K. and Europe, where private label brands have the highest share of CSDs in the world, Cott's sales rose 16% in the first half of 2003, as the company focused on the introduction of new products and marketing while successfully reducing fixed costs per unit with plant efficiency improvements. The U.K. is expected to be profitable for the full year. The current ratings incorporate continued strength in operations, and the expectation that leverage will continue to be reduced and cash flow generation from the company's U.S. operations will continue to grow. CROWN CASTLE: Second Quarter Net Loss Hits $100 Million Mark ------------------------------------------------------------ Crown Castle International Corp. (NYSE: CCI) reported results for the second quarter ended June 30, 2003. Total revenue for the second quarter of 2003 was $224.2 million, compared to $225.5 million for the second quarter of 2002. Site rental and broadcast transmission revenue for the second quarter of 2003 increased 10% to $189.5 million, up from $172.0 million for the same period in 2002. Net loss (after deduction of dividends on preferred stock and net of losses on repurchases of preferred stock of $3.0 million for second quarter 2003) was $100.9 million for the second quarter of 2003 compared to a loss of $89.5 million for the same period in 2002. Second quarter 2003 loss per share was $0.47 compared to a loss per share of $0.41 in last year's second quarter. Net cash from operating activities for the second quarter of 2003 was $94.1 million, up from $53.9 million for the same period in 2002. Capital expenditures for the second quarter were $20.7 million, down from $126.3 million for the same period in 2002. Free cash flow, defined as cash from operating activities less capital expenditures, for the second quarter of 2003 improved $145.6 million to a source of cash of $73.3 million, from a use of cash of $72.3 million for the same period in the prior year. OPERATING RESULTS US site rental revenue for the second quarter of 2003 increased 6.9% to $110.5 million, up from $103.4 million for the same period in 2002, and UK site rental and broadcast transmission revenue for the second quarter of 2003 increased 16.7% to $72.8 million, up from $62.4 million for the same period in 2002. These revenue results approximate same tower sales as a result of the fact that approximately 98% of Crown Castle's sites on June 30, 2003 were in operation as of April 1, 2002. On a consolidated basis, site rental and broadcast transmission gross margin, defined as site rental and broadcast transmission revenue less site rental and broadcast transmission cost of operations, increased 9.2% to $115.8 million, up $9.8 million in the second quarter of 2003 from the same period in 2002. For the second quarter of 2003, US capital expenditures were $7.7 million, and UK capital expenditures were $12.8 million. During the second quarter of 2003, Crown Castle developed 13 sites in the UK under our agreement with British Telecom. "We are pleased with our core site rental and broadcast transmission business this quarter," stated John P. Kelly, President and Chief Executive Officer of Crown Castle. "During the quarter, our business units delivered solid revenue growth together with disciplined management of operating expenses, capital expenditures and working capital, which allowed us to exceed our free cash flow expectations. "While our outlook suggests that leasing activity will remain constant at current levels, we see some indications that US leasing activity may improve during the second half of 2003 and into 2004. A combination of several factors appears to be positively influencing US wireless carriers' desire to deploy additional cell sites to improve network quality." "We remain committed to driving free cash flow growth and have made significant progress in the last quarter," stated W. Benjamin Moreland, Chief Financial Officer of Crown Castle. "As a result of strong performance at the operating level, we have been able to invest some of our excess liquidity to retire more expensive debt securities. In the last twelve months, taking into account the shares of 12 3/4% Senior Exchangeable Preferred Stock we have purchased to date, we have eliminated $70.0 million of annual interest expense. We believe we can achieve significant interest savings through attractive refinancings and investing our liquidity, and we can foresee a scenario where run-rate total interest expense is less than $200 million by the end of 2004." During the second quarter of 2003, Crown Castle repaid $55.3 million of senior credit facility debt (including $4.7 million in its CCOC facility, $10.0 million in its CCA facility and $40.6 million in its UK facility). At June 30, 2003, Crown Castle had $909.4 million of total liquidity, comprised of $523.2 million of cash and cash equivalents and liquid investments, and total availability under its senior credit facilities of $386.2 million. Also during the second quarter, Crown Castle purchased 29,614 shares of its 12-3/4% Senior Exchangeable Preferred Stock for $32.6 million in cash. Subsequent to the end of the second quarter through July 31st, Crown Castle purchased an additional 59,272 shares of its 12-3/4% Senior Exchangeable Preferred Stock for $65.8 million in cash. After the purchases through July 31, 2003, the 12-3/4% Senior Exchangeable Preferred Stock due 2010 had an aggregate redemption value of $166.1 million. Crown Castle currently expects to purchase or redeem the remaining 12-3/4% Senior Exchangeable Preferred Stock outstanding no later than December 15, 2003, the first contractual optional redemption date for such securities. Pro forma for the previously announced redemption of the 10-5/8% Senior Discount Notes, the issuance of the 4% Convertible Senior Notes and purchases of 12-3/4% Senior Exchangeable Preferred Stock subsequent to the end of the second quarter, cash and cash equivalents and liquid investments are approximately $392 million. OUTLOOK The following statements and outlook table are based on current expectations and assumptions and assume a US dollar to UK pound exchange rate of 1.57 dollars to 1.00 pound and a US dollar to Australian dollar exchange rate of 0.60 US dollars to 1.00 Australian dollar. This Outlook section contains forward-looking statements, and actual results may differ materially. Information regarding potential risks which could cause actual results to differ from the forward-looking statements herein are set forth below and in Crown Castle's filings with the Securities and Exchange Commission. Based in part on improvements in working capital and operating results and lower than expected capital expenditures for the first half of 2003, Crown Castle has adjusted certain elements of its previously provided financial guidance for full year 2003, which results in expected free cash flow increasing from between $29 million and $59 million to between $75 million and $95 million for the full year 2003. Crown Castle's outlook for net cash provided by operating activities is based on interest expense on its existing debt balances and does not include savings from interest expense reductions that Crown Castle expects may be achieved through further debt reductions and refinancings. Crown Castle's 2003 and 2004 projected net cash provided by operating activities assumes the effect of converting paid-in-kind interest to cash pay for the 10-3/8% and 11-1/4% Senior Discount Notes and the 12-3/4% Senior Exchangeable Preferred Stock. Crown Castle engineers, deploys, owns and operates technologically advanced shared wireless infrastructure, including extensive networks of towers and rooftops as well as analog and digital audio and television broadcast transmission systems. Crown Castle offers near-universal broadcast coverage in the United Kingdom and significant wireless communications coverage to 68 of the top 100 United States markets, to more than 95 percent of the UK population and to more than 92 percent of the Australian population. Crown Castle owns, operates and manages over 15,500 wireless communication sites internationally. For more information on Crown Castle, visit: http://www.crowncastle.com As reported in Troubled Company Reporter's July 11, 2003 edition, Standard & Poor's Ratings Services assigned its 'CCC' rating to the $230 million convertible senior notes issued by wireless tower operator Crown Castle International Corp. Simultaneously, Standard & Poor's affirmed its 'B-' corporate credit rating on the Houston, Texas-based Crown Castle. The outlook remains negative. The company had total debt of about $3.2 billion at March 31, 2003. CWMBS INC: Fitch Assigns Lower-B Ratings to Classes B-3 & B-4 ------------------------------------------------------------- CWMBS, Inc.'s mortgage pass-through certificates, CHL Mortgage Pass-Through Trust 2003-34 classes A-1 through A-21, PO and A-R (senior certificates, $486,499,332) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates the following classes: -- $6,500,000 class M 'AA'; -- $2,750,000 class B-1 'A'; -- $1,500,000 class B-2 'BBB'; -- $1,000,000 privately offered class B-3 'BB'; -- $750,000 privately offered class B-4 'B'. The 'AAA' rating on the senior certificates reflects the 2.70% subordination provided by the 1.30% class M, 0.55% class B-1, 0.30% class B-2, 0.20% privately offered class B-3, 0.15% privately offered class B-4 and 0.20% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B', respectively, based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP (Countrywide Servicing; rated 'RPS1' by Fitch), a direct wholly owned subsidiary of Countrywide Home Loans, Inc. (CHL). The certificates represent an ownership interest in a pool of conventional, fully amortizing, 20- to 30-year fixed-rate mortgage loans, secured by first liens on one- to four-family residential properties. As of the closing date (July 31, 2003), the mortgage pool demonstrates an approximate weighted average loan-to-value ratio (OLTV) of 69.47%. Approximately 55.55% of the loans were originated under a reduced documentation program. Cash-out refinance loans represent 11.82% of the mortgage pool and second homes 2.68%. The average loan balance is $495,535. The weighted average FICO credit score is approximately 741. The three states that represent the largest portion of mortgage loans are California (49.98%), New Jersey (4.79%) and New York (4.31%). The deal is fully funded as of the closing date (July 31, 2003). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Approximately 96.01% and 3.99% of the mortgage loans were originated under CHL's standard underwriting guidelines and expanded underwriting guidelines, respectively. Mortgage loans underwritten pursuant to the expanded underwriting guidelines may have higher LTVs, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the standard underwriting guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as a real estate mortgage investment conduit. DENNY'S CORP: Poor Performance Spurs S&P to Downgrade Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on family dining restaurant operator Denny's Corp. to 'B-' from 'B', its senior secured bank loan rating to 'B+' from 'BB-', and its senior unsecured notes to 'CCC' from 'CCC+'. At the same time, all ratings were placed on CreditWatch with negative implications. "The rating actions are based on Denny's deteriorating operating performance and cash flow protection measures, and Standard & Poor's concern that continued poor performance will constrain its liquidity," said credit analyst Robert Lichtenstein. Spartanburg, South Carolina-based Denny's had total debt of $596 million at June 25, 2003. Operating performance continued to decline as EBITDA dropped 37% to $47.7 million in the first half of 2003. A weak economy, intense competition in the restaurant industry, and rising costs negatively affected operating performance. Same-store sales fell 0.5% in the first half of 2003, following a 1% decline in all of 2002. Operating margins for the 12 months ended June 25, 2003, fell to 17%, from 18.5% the year before, with most of the decline coming in the first half of 2003. Liquidity is limited to $4.5 million in cash and $36.8 million of availability on the company's $125 million revolving credit facility as of June 25, 2003. Subsequently, the company made its $21.3 million interest payment leaving it with $25.5 million of availability as of July 31, 2003. Financial covenants were recently amended to reflect the company's poor performance. Standard & Poor's believes the company will be challenged to service its debt and fund its capital expenditures of about $35 million in 2003, which are largely associated with remodeling and maintenance, through operating cash flow, asset sales, and availability under its revolving credit facility. Standard & Poor's will meet with Denny's management to discuss its operating and financial plan given its declining operating performance and cash flow protection measures. DENNY'S CORP: June 25 Balance Sheet Insolvency Stands at $293MM --------------------------------------------------------------- Denny's Corporation (OTCBB: DNYY) reported results for its second quarter ended June 25, 2003. Highlights included: -- Systemwide sales were $546 million for the quarter, a 3.0% decrease from last year's second quarter, reflecting 51 fewer restaurants systemwide. -- Systemwide same-store sales for the quarter declined 1.5% with company units down 0.6% and franchised units down 2.1%. -- Denny's ended the quarter with 1,663 restaurants systemwide (563 company and 1,100 franchised and licensed units). -- Total operating revenue declined 4.3% to $230 million for the quarter. -- Operating income of $13.8 million declined $2.4 million for the quarter, down from 6.7% of revenue to 6.0%. -- Net loss for the quarter was $5.4 million, or $0.13 per common share, compared with last year's net income of $16.2 million, or $0.40 per common share. -- Last year's net income included nonoperating income of $19.2 million from a gain on exchange of debt. -- At quarter end, Denny's had $49.9 million drawn under its credit facility and $38.3 million in letters of credit, leaving net availability of $36.8 million. Commenting on Denny's results for the second quarter of 2003, Nelson J. Marchioli, president and chief executive officer, said, "Our operating performance in the second quarter was disappointing, especially our decline in guest counts. This quarter we focused our marketing message on driving guests during our dinner and late night dayparts, as opposed to last spring and summer when we focused on breakfast with a Grand Slam promotion. Though we were successful in improving our dinner and late night sales, which resulted in an increase in our guest check average, we lost more guests than anticipated during the breakfast daypart. In response, this week we launched a new media campaign which promotes a choice of three "Complete Breakfasts," each for $4.99. This promotion builds on two core strengths of the Denny's brand - - breakfast and good value. "On the margin side of our business, we continue to experience cost pressures which have contributed to declining margins. The cost increases include higher meat prices, medical costs and natural gas prices. In addition, higher costs related to increased restaurant staffing and improved food quality are intentional investments in the long term success of Denny's. We are committed to doing what is right for the Denny's brand and are optimistic that these investments, which are beginning to contribute to improved consumer perceptions, will ultimately translate into increased guest traffic," Marchioli concluded. Second Quarter Results Denny's reported total operating revenue of $230.1 million for the second quarter, down $10.3 million from the prior year quarter. Company restaurant sales declined $9.0 million to $208.5 million, due primarily to 25 fewer company units. Franchise revenue decreased $1.3 million to $21.6 million, resulting from 26 fewer franchised and licensed restaurants. During the second quarter, company restaurant operating margin decreased by 5.8 percentage points to 11.2% of company sales compared with 17.0% of sales last year. Payroll and benefits costs accounted for 3.7 percentage points of the margin decline, resulting from increased restaurant staffing aimed at improving customer satisfaction, higher wage rates and increased health insurance costs. Product costs increased by 1.7 percentage points due to higher commodity costs as well as menu mix shifts resulting from our promotion of higher cost dinner items this quarter compared with a breakfast promotion in the same period last year. Operating income for the quarter decreased $2.4 million to $13.8 million compared with $16.2 million last year, reflecting the lower revenue and reduced operating margins. Operating income this quarter benefited from a $6.4 million reduction in depreciation and amortization expense. In January 1998, certain assets were revalued and assigned a five-year life as a result of the predecessor company's reorganization. Those assets became fully amortized in January 2003, resulting in lower depreciation and amortization expense in 2003. In addition, operating income in the second quarter benefited from a $1.0 million reduction in general and administrative expenses as well as a $3.8 million reduction in restructuring and exits costs compared with last year. For the second quarter, Denny's reported a net loss of $5.4 million, or $0.13 per diluted common share, compared with last year's second quarter net income of $16.2 million, or $0.40 per diluted common share. Last year's second quarter results included nonoperating income of $19.2 from gains on exchanges of debt. Revolving Credit Facility On June 25, 2003, our $125 million credit facility had outstanding revolver advances of $49.9 million compared with $60.2 million outstanding on March 26, 2003. Our outstanding letters of credit decreased to $38.3 million compared with $48.4 million on March 26, 2003, leaving a net availability of $36.8 million at the end of the second quarter. As of today, after making the scheduled $21.3 million semiannual interest payment on our 11.25% senior notes on July 15, revolver advances have increased to $61.0 million while letters of credit are $38.5 million, leaving a net availability of $25.5 million. Profitability was below our expectations for the first two quarters of 2003. Accordingly, we were required to obtain an amendment to the credit facility to provide less restrictive financial covenants effective for the quarter ended June 25, 2003 and for the remaining term of the facility. We were in compliance with the terms of the credit facility, as amended, as of June 25, 2003. At June 25, 2003, Denny's balance sheet shows a working capital deficit of about $107 million, and a total shareholders' equity deficit of about $293 million. Denny's is America's largest full-service family restaurant chain, operating directly and through franchisees 1,663 Denny's restaurants in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. DIAMOND ENTERTAINMENT: Requests Ex-Auditors to Submit SEC Report ---------------------------------------------------------------- Effective July 16, 2003, Diamond Entertainment Corporation's principal independent accountants, Stonefield Josephson, Inc., resigned as the Company's principal independent accountant. Stonefield Josephson, Inc., had been engaged, on August 8, 2002, by the Company as the principal independent accountant to audit the financial statements of the Company for the fiscal year ended March 31, 2003, replacing the firm of Merdinger, Fruchter, Rosen & Company, P.C. Stonefield Josephson, Inc., was subsequently engaged, on May 19, 2003, to audit the financial statements of the Company for the year ended March 31, 2003, and to re-audit the financial statements of the Company for the year ended March 31, 2002. Stonefield Josephson, Inc., has not rendered any report on the financial statements of the Company filed with the Securities and Exchange Commission. A letter of resignation from Stonefield Josephson, Inc., has been furnished to and accepted by the Board of Directors of the Company. Diamond Entertainment reports that Stonefield Josephson, Inc., has not presented a written report, or otherwise communicated in writing to the Company or its Board of Directors the existence of any "disagreement" or "reportable event" within the meaning of Item 304 of Regulation S-B. The Company has requested Stonefield Josephson, Inc., to furnish a letter addressed to the Securities & Exchange Commission stating whether it agrees with the above statements, and, if not, stating the respects in which it does not agree. Diamond Entertainment's December 31, 2002, balance sheet shows a working capital deficit of over $1 million, and a total shareholders' equity deficit of about $509,000. DILLARD'S INC: S&P Lowers and Removes Low-B Ratings from Watch -------------------------------------------------------------- Standard & Poor's Rating Services lowered its corporate credit and senior unsecured ratings on Dillard's Inc., its affiliate Dillard Investment Co. Inc., and Mercantile Stores Co. Inc. (acquired in 1998) to 'BB' from 'BB+', and its preferred stock rating on Dillard's Capital Trust I to 'B' from 'B+'. The preferred stock is guaranteed by Dillard's Inc. The ratings are removed from CreditWatch where they were placed June 9, 2003. The outlook is stable. This action affects about $2.7 billion of debt at the Little Rock, Ark.-based department store retailer. "The downgrade reflects a weakening of operating results, and Standard & Poor's expectation that Dillard's may fail to show the recovery in performance and in credit ratios that was incorporated into the previous rating," said credit analyst Gerald Hirschberg. Dillard's operations are being affected by intense competition, lagging consumer confidence, a poor economy, a rising unemployment rate that has pared disposable personal income, and consumer apathy to fashion merchandise. While this environment is affecting sales growth for the entire department store sector, as all major players have seen same-store sales declines for a protracted period of time, Dillard's results have been especially hard hit. After several years of poor performance, Dillard's managed a relatively good year in 2002, with improved operating margins, EBITDA, cash flow protection, and leverage. Maintenance of the rating was predicated on a continuation of progress in 2003, but many of the same adverse macroeconomic factors that Dillard's and the rest of the retail sector faced on 2002 are unchanged. First quarter results were disappointing, and the recent 7% and 6% drops in same-store sales for May and June 2003, respectively, suggest that the economy and low consumer confidence are taking a heavier- than-average toll on Dillard's business. At Feb. 1, 2003, Dillard's had $400 million of secured revolving credit facilities that expire in 2005. Dillard's also maintains a credit card securitization facility, which provides for up to $600 million of borrowing capacity. Balance sheet cash is minimal. The company's overall liquidity is considered good. Dillard's was in compliance with all covenants under the bank line of credit throughout 2002, and maintained full availability. In addition to its bank facilities, Dillard's has substantial unencumbered real estate assets, and has $750 million of availability from an outstanding shelf registration. Despite recent difficulties, Dillard's has been making some progress in improving its merchandise mix, and it is expected that business conditions will probably improve during the second half of 2003. This should be conducive to better top-line comparisons, and to at least more stable performance. Therefore, credit measures will probably be maintained at levels characteristic of the rating for the near term. EPOCH 2001-1: S&P Junks Ratings on Class III and IV Notes --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on EPOCH 2001-1 Ltd.'s class I, II, III, and IV tranches of secured floating-rate notes due Aug. 15, 2006. At the same time, the rating on the class IV tranche was placed on CreditWatch with negative implications. The rating actions follow four declared credit events, three of which were analyzed with final valuations and the fourth under current market value assumptions; and further deterioration of credit quality that has occurred in the underlying $1 billion reference portfolio. The ratings reflect the credit quality of the reference credits, the level of credit enhancement provided by subordination, and EPOCH 2001-1's ability to meet its payment obligations as issuer of the secured notes. RATINGS LOWERED EPOCH 2001-1 Ltd. Class Rating To From I A AA II BB BBB III CCC BB RATING LOWERED AND PLACED ON CREDITWATCH NEGATIVE EPOCH 2001-1 Ltd. Class Rating To From IV CCC-/Watch Neg CCC FEP RECEIVABLES: Fitch Affirms Note Ratings from 2 Transactions --------------------------------------------------------------- Fitch affirms the ratings of mutual fund fee transactions, FEP Receivables Trust 2001-1's class A1-L, A2-L, A3-L and B-L floating-rate notes, and class A and B fixed-rate notes. Fitch also affirms FEP 2002-2. FEP Receivables Trust 2001-1 -- $66,750,000 class A1-L floating-rate notes 'AA'; -- $44,250,000 class A2-L floating-rate notes 'BBB-'; -- $30,375,000 class A3-L floating-rate notes 'CCC'; -- $5,000,000 class B-L floating-rate notes 'CC'; -- $43,800,000 class A notes 'B-'; -- $5,000,000 class B notes 'CC'. FEP Receivables Trust 2002-2 -- Floating-rate notes 'AA'. The ratings are based upon review of the historical and expected performance of the mutual fund assets, the frequency of defaults as calculated through various financial models, as well as consideration for paydowns experienced on certain senior classes, break-even fund returns necessary to payback the notes by deal maturity, and the degree of expected loss to the extent notes may experience loss. Since the July 17 purchase of Constellation Financial Management and the assets and client contracts of FEP Holdings LP by Societe Generale, the funds are now under a new servicer, SG Constellation LLC. The above actions represent Fitch's assessment of the probability of the noteholders to receive timely interest and principal payments in accordance with the terms of the legal documents. FLEMING COMPANIES: Bringing-In Kekst & Company as PR Consultant --------------------------------------------------------------- Fleming Companies, Inc., and its debtor-affiliates sought and obtained the Court's consent to employ Kekst and Company Incorporated as public relations and corporate communications consultant. Kekst will render consulting services on public relations and corporate communication matters and provide communication services during the course of the Debtors' Chapter 11 cases. Kekst is a communications firm that has extensive experience in crisis communications involving corporate transactions, bankruptcies, restructurings and reorganizations. It has an excellent reputation for the services it has rendered in Chapter 11 cases on behalf of debtors throughout the United States. Kekst also specializes in corporate communications. Kekst has extensive experience in assisting financially troubled companies with public relations, including companies that have been in bankruptcy. Some of the large Chapter 11 cases in which Kekst has acted, or is currently acting, as public relations and corporate communications consultant to the debtor include Kmart, Pacific Gas and Electric Company, Big V Supermarkets, AT&T Canada, Owens Coming, Enron, Polaroid, WR Grace, Grand Union, Jitney Jungle Stores, Peter J. Schmit, Loews Cineplex, AMF Bowling and R.H. Macy and Company. Kekst also has extensive knowledge of the Debtors and their businesses. The firm has been the Debtors' public relations and corporate communications consultant since May 24, 2001. According to Scotta E. McFarland, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., many persons and entities, including employees, counter-parties to executory contracts and leases, equity holders, financial markets, potential investors, governmental entities, trade and other creditors, the media, and the general public will be interested in Debtors' bankruptcy. The cooperative participation of many of these persons and entities will be necessary for the Debtors to successfully reorganize. Ms. McFarland explains that Kekst will be able to assist the Debtors in protecting, retaining and developing the goodwill and confidence of these constituencies. Among other things, Kekst will assist the Debtors in: (i) communicating reliably, accurately and effectively; (ii) speaking with a unified, authoritative voice; (iii) presenting a coherent, consistent message; (iv) managing the Debtors' disclosure of information; (v) correcting, counteracting and controlling damage in regard to the rumors and misinformation that inevitably will arise; (vi) deterring and dissuading irrational, uninformed, panicked or other behavior deleterious to the estates and the reorganization; and (vii) protecting the Debtors' goodwill. The Debtors will compensate Kekst for its services in accordance with the firm's customary, standard hourly rates: Senior Partners $600 - 695 Partners 450 - 600 Senior Associates 425 - 450 Associates 250 - 325 The Debtors will also reimburse the firm for its out-of-pocket expenses. Ms. McFarland discloses that, before the Petition Date, Kekst received $325,000 from the Debtors, including a $152,075 retainer and a $172,925 prepayment for prepetition public relations services rendered to them. Ms. McFarland reports that the payments have been applied to outstanding balances for prepetition services related to the preparation for the filing of the Debtors' bankruptcy petitions. The Debtors have agreed that any portion of the retainer not used to compensate Kekst for its prepetition services and expenses ultimately will be used by the firm to apply against its postpetition billings and will not be placed in a separate account. The Debtors have also agreed to indemnify Kekst for any claims arising from, or related to its prepetition services. They will also indemnify and hold the firm harmless for any liabilities and claims arising from or in connection with the postpetition public relations and corporate communications services. The Debtors, however, will have no obligation to Kekst for any claims, actions or expenses arising or related to Kekst's breach of its employment agreement or gross negligence or willful misconduct. Gershon Kekst, president of Kekst, attests that the firm is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Kekst holds no interest adverse to the Debtors and their estates, creditors or equity security holders for the matters for which it is to be employed. The firm has no connection with the Debtors, their creditors or their related parties. (Fleming Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEXTRONICS: $500-Mil. Senior Subordinated Notes Gets BB- Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to Flextronics International Ltd.'s $500 million senior subordinated convertible notes due 2010. At the same time, Standard & Poor's affirmed Flextronics' 'BB+' corporate credit and its other ratings. The outlook is stable. Standard & Poor's expects proceeds from the notes issue to refinance existing senior subordinated debt. Singapore-based Flextronics, a leading provider of electronics manufacturing services (EMS), primarily to the communications, computing and consumer electronics industries, had total debt outstanding of $1.7 billion as of June 2003. Flextronics' sales growth has slowed, as revenue remained flat in the 12 months ended June 2003, with total sales of about US$13 billion. "We expect end-market demand in communications and computing to remain weak over the near term," said Standard & Poor's credit analyst Emile Courtney. "We believe it will be an ongoing challenge for Flextronics to maintain its operating performance while executing management's growth strategy in the midst of a severe downturn in end-market demand. On the other hand, the long- term nature of the company's customer relationships and its moderate financial profile provide ratings protection." GRAHAM PACKAGING: Commencing 8-3/4% Sr. Debt Exchange Offer ----------------------------------------------------------- Graham Packaging Company, L.P./GPC Capital Corp, I is offering to exchange all outstanding 8-3/4% Senior Subordinated Notes due 2008 for an equal amount of 8-3/4% Series B Senior Subordinated Notes due 2008, which have been registered under the Securities Act of 1933. THE EXCHANGE OFFER * The Company will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradeable in integral multiples of $1,000. * Stockholders may withdraw tenders of outstanding notes at any time prior to the expiration of the exchange offer. * The exchange offer expires at 5:00 p.m., New York City time, on , 2003, unless extended. The Company does not currently intend to extend the expiration date. * The exchange of outstanding notes for exchange notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. * The Company will not receive any proceeds from the exchange offer. THE EXCHANGE NOTES * The exchange notes are being offered in order to satisfy certain of Graham's obligations under the registration rights agreement entered into in connection with the placement of the outstanding notes. * The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradeable. RESALES OF EXCHANGE NOTES * The exchange notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. The Company does not plan to list the exchange notes on a national market. If broker-dealers receive exchange notes for their own account, they must acknowledge that they will deliver a prospectus in connection with any resale of such exchange notes. By making such acknowledgment, they will not be deemed to admit that they are an "underwriter" under the Securities Act of 1933, as amended. Broker-dealers may use the prospectus in connection with any resale of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by the broker- dealer as a result of market-making activities or trading activities. The Company has agreed that it will make its prospectus available to such broker-dealers for use in connection with any such resale. A broker-dealer may not participate in the exchange offer with respect to outstanding notes acquired other than as a result of market-making activities or trading activities. In its year-end 2002 balance sheet, the Company shows a working capital deficit of about $12 million, and a partners' capital deficit of about $460 million. G&C WHOLESALE: Leo M. Tahajian Charged in $5 Million Bank Fraud --------------------------------------------------------------- A Boston man was indicted Thursday for defrauding Fleet Bank of $5 million by providing the bank with false loan reports and taking millions of dollars in loans for which he had insufficient collateral. United States Attorney Michael J. Sullivan and Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation in New England, announced today that a federal grand jury in Boston has indicted LEO M. TAHAJIAN, age 43, of 134 Fulton Street, Boston, on charges of bank fraud and six counts of making false statements to a bank. The indictment charges that in 1999, TAHAJIAN owned and ran G&C Wholesale, Inc., a Boston wholesale jewelry business that had a line of credit with Fleet Bank. It is alleged that during the first half of 1999, TAHAJIAN repeatedly overstated G&C's accounts receivable (money that customers owed to the company) in the reports he submitted to Fleet, enabling G&C to borrow more money through its line of credit than it would otherwise have been able to borrow. It is alleged that TAHAJIAN used $2.5 million of the loan proceeds to fund his losses in speculative foreign currency trading and another $700,000 to cover his casino gambling debts. The indictment also alleges that TAHAJIAN paid himself $170,000 in salary during a seven-month period. It is alleged that when, in July 1999, Fleet discovered that TAHAJIAN had inflated the company's accounts receivables, G&C filed for bankruptcy protection. Even though the Bankruptcy Court gave Fleet control of G&C's assets and receivables, the bank ended up losing $5 million, because the collateral fell so far short of the amount the bank had loaned G&C. If convicted, TAHAJIAN faces maximum penalties of 30 years in prison and a $1 million fine for each count. Fleet Bank referred the matter to the government and cooperated with the investigation. The case was investigated by Special Agents with the Federal Bureau of Investigation and auditors from the U.S. Attorney's Office. It is being prosecuted by Assistant U.S. Attorney Adam J. Bookbinder in Sullivan's Economic Crimes Unit. GAYLORD ENTERTAINMENT: Reports Strong Growth for Second Quarter --------------------------------------------------------------- Gaylord Entertainment Company (NYSE: GET) reported its financial results for the second quarter of 2003. For the quarter, consolidated revenues from continuing operations were $105.5 million, an increase of 9.9% from $95.9 million in the same period last year. Consolidated operating loss for second- quarter 2003 was $1.5 million compared to operating income of $8.7 million in second-quarter 2002. For second-quarter 2003, the Company almost doubled net income to $11.4 million, from net income of $5.9 million for second-quarter 2002. The Company's sale of its 33.3% partnership interest in the Opry Mills shopping center resulted in a gain of $10.6 million to operating income and $6.5 million to net income in second-quarter 2002. EBITDA was $16.9 million in second-quarter compared to $13.6 million in the same quarter of 2002. Year-to-date, consolidated revenues from continuing operations were $219.9 million, an increase of 12.4% from $195.6 million in the same period last year. Consolidated operating income for the first six months of 2003 was $3.4 million compared to an operating loss of $6.9 million in the first six months of 2002. The Company had net income in the six-month period of 2003 of $4.9 million. This compares to a net loss of $2.3 million, or $0.07 per diluted share, in the first six months of 2002. The Company's sale of its 33.3% partnership interest in the Opry Mills shopping center resulted in a gain of $10.6 million to operating income and $6.5 million to net income in the 2002 year-to-date period. EBITDA for the first six months of 2003 was $39.9 million compared to $23.8 million in the same period of 2002, an increase of 67.6%. Commenting on the Company's results, Colin Reed, president and chief executive officer of Gaylord Entertainment, said, "We are delighted to have produced another solid quarter of results that demonstrate the strength of our meetings-focused business model. Our strong bookings at the outset of the quarter combined with lower-than-expected attrition resulted in performance that exceeded our expectations. Our two convention hotels saw increases in their operating fundamentals, further establishing Gaylord as a leader in the industry." Segment Operating Results Hospitality Hospitality revenue per available room ("RevPAR") increased 8.4% to $105.92 in second-quarter 2003 compared to second-quarter 2002, at the top end of the Company's guidance range. Occupancy rose 5.9 percentage points, or 8.9%, to 72.4% while average daily rate remained consistent at $146.30. In addition, Hospitality total revenue per available room, which includes items such as food and beverage, increased 12.1% to $215.94 in second-quarter 2003 compared to second-quarter 2002. Hospitality revenues were $90.2 million in second-quarter 2003, an increase of 12.1% over second- quarter 2002. Hospitality operating income was $8.5 million in second-quarter 2003 compared to an operating income of $5.3 million for second-quarter 2002, an increase of 61.3%. Hospitality EBITDA was $24.0 million for second-quarter 2003, an increase of $6.4 million over the same period last year. Hospitality EBITDA margins increased from 21.8% in second-quarter 2002 to 26.6% in second-quarter 2003, which reflects higher occupancy and RevPAR levels at Gaylord Palms and better expense management at Gaylord Opryland. Pre-opening expenses were $2.2 million and $0.7 million for the second quarter of 2003 and 2002, respectively. Due to the effect of GAAP straight-line lease payment recognition on the Gaylord Palms ground lease, non-cash lease expense included in operating income was $1.6 million for second-quarter 2003 and second-quarter 2002. Reflecting the consistently positive customer experience provided at Gaylord Hotels, strong bookings of approximately 248,000 room nights for all future periods were recorded in the quarter. Rotational bookings accounted for approximately 37% of these room nights. At the property level, Gaylord Opryland Nashville generated RevPAR of $94.35 in second-quarter 2003, which was consistent with second-quarter 2002. Total revenue per available room was $179.51 in second-quarter 2003, an increase of 2.1% from the same period in 2002. Occupancy increased 0.7 percentage points to 68.2% while ADR decreased slightly from second-quarter 2002. Gaylord Palms generated RevPAR of $141.15 in second-quarter 2003, an increase of 23.1% from the same period in 2002. Total revenue per available room at Gaylord Palms was $323.85 in second-quarter 2003, an increase of 27.3% over second-quarter 2002. The property achieved significantly higher occupancy rates (82.4% in second- quarter 2003), which helped drive substantial increases in revenues generated outside of rooms. According to Smith Travel Research, in the second quarter Gaylord Palms posted a 121% fair share RevPAR index, ranking it No. 1 among its in-market competitive set of convention properties. Year-to-date, Gaylord Palms registered a fair share RevPAR index of 117%, also ranking it No. 1 among its competitors. During the quarter, Gaylord Palms was named an elite Four-Diamond property by AAA for maintaining attentive service, upscale facilities and a superior standard of hospitality. The destination resort has also garnered Successful Meetings' Pinnacle Award and has been named Florida Monthly's "Best Florida Resort" for the second consecutive year. On schedule to open in less than 10 months, the state-of-the-art, 1,511-room Gaylord Opryland Texas Resort & Convention Center continues to progress with pre-opening preparations. Resort management is successfully attracting and hiring the finest hospitality talent in the Dallas-Fort Worth market, as well as from other parts of the country. As of second-quarter 2003, the Company had invested approximately $266.0 million in cash on the project and expects to invest an additional $215.3 million to complete construction. These figures include pre-opening expenses of approximately $13.5 million through the second quarter of 2003 and $14.9 million to be incurred through completion. "Our meetings-based hotel model delivered another quarter of solid results, and we're delighted to be on schedule to expand our Gaylord Hotels' network in Texas next April," Reed said. "Meeting planners continue to seek and demand the superior customer service, technology and facilities that Gaylord Hotels is uniquely positioned to provide. Our mix of top-of-the-line accommodations, unparalleled convention offerings and unique entertainment venues differentiates us from our competitors and makes us the ideal destination for large groups." Attractions Attractions revenues were $15.2 million in second-quarter 2003, a decrease of $0.2 million compared to second-quarter 2002. Operating income in the Attractions segment was $0.2 million in second-quarter 2003 compared to an operating income of $1.8 million in second-quarter 2002. Attractions EBITDA decreased to $1.4 million in the latest quarter from $3.1 million in the same period last year. Reduced Attractions revenue and EBITDA are due primarily to weakness at Corporate Magic, the Company's corporate- event production business. Grand Ole Opry revenues increased slightly in the second quarter over the same period last year. The Company has been able to drive attendance consistently at the Grand Ole Opry through improved marketing and by drawing the best performers in country music. On June 14, Capitol Records recording artist Trace Adkins was invited to become the newest member of the Grand Ole Opry. His formal induction will take place on Aug. 23. On May 2, "America's Grand Ole Opry Weekend" was successfully launched via Westwood One's syndication distribution. In addition, through the Company's previously announced marketing relationship with Cumulus Media, "America's Grand Ole Opry Weekend" is being broadcast on Cumulus-owned country stations. "The Opry continues to expand its reach in attracting country lifestyle enthusiasts from all over the world," Reed said. "Over the last several months, we have successfully launched more initiatives that support our goal of meeting the overwhelming demand for quality country entertainment." Corporate and Other Corporate and Other operating loss totaled $10.2 million for second-quarter 2003, compared to an operating loss of $8.8 million for second-quarter 2002. The higher operating loss in second- quarter 2003 is primarily the result of a change in long-term incentive compensation from an options based model to a combination of options and restricted stock units. Corporate and Other operating losses included non-cash and non-recurring charges of $1.8 million and $1.7 million for the second quarters of 2003 and 2002, respectively. These charges account for items such as depreciation, amortization and the non-cash portion of the Gaylord Entertainment Center naming rights agreement expense. Liquidity At June 30, 2003, the Company had total long-term debt outstanding of $470.7 million and cash of $172.9 million. In May 2003, the Company closed its previously announced financing facility of $225 million. The three-year, floating-rate credit facility is comprised of a $25 million senior revolving facility, a $150 million senior term loan and a $50 million subordinated term loan. The senior loans are priced at LIBOR + 3.50%, and the subordinated loan is priced at LIBOR + 8.00%, for a weighted average pricing of LIBOR + 4.50%. Simultaneous with closing, the Company engaged LIBOR interest rate swaps that effectively locked LIBOR at 1.48% in year one and at 2.09% in year two. The Company's $203.2 million senior loan and $66.0 million mezzanine loan secured by Gaylord Opryland Nashville mature on March 31, 2004, and April 1, 2004, respectively. Both loans provide two one-year extension options. The Company intends to exercise the extension option on the senior loan and to refinance the mezzanine loan. Accordingly, the mezzanine loan has been classified as a current liability. "Our balance sheet continued to improve in the quarter as we closed our $225 million financing facility," said David Kloeppel, chief financial officer of Gaylord Entertainment. "Through our successful divestiture program, we have also been able to retire debt on Gaylord Palms, to fund the Gaylord Opryland Texas project fully and to pursue appropriate growth opportunities selectively." As previously disclosed in January 2003, the Company restated its historical financial statements for 2000, 2001 and the first nine months of 2002 to reflect certain non-cash changes, which resulted primarily from a change to the Company's income tax accrual and the manner in which the Company accounted for its investment in the Nashville Predators. The Company has been advised by the Securities and Exchange Commission Staff that it is conducting a formal investigation into the financial results and transactions that were the subject of the restatement by the Company. The Company has been cooperating with the SEC Staff and intends to continue to do so. Although the Company cannot predict the ultimate outcome of the investigation, the Company does not currently believe that the investigation will have a material adverse effect on the Company's financial condition or results of operation. Outlook The following information is based on current information as of July 31, 2002. The Company does not expect to update guidance until next quarter's earnings release; however, the Company may update its full business outlook or any portion thereof at any time for any reason. "We have made significant progress establishing Gaylord Entertainment as a hospitality industry leader," Reed said. "We are continuing to book a significant number of room nights, and occupancy is building nicely for all future years. That said, we are seeing some short-term impact from the ongoing challenging economic environment. In one instance, three large groups scheduled for the third and fourth quarters at Gaylord Palms moved their stays to 2004. We accommodated their needs, waiving current attrition clauses to lock in long-term rotation programs for multiple years. However, this activity leaves occupancy gaps in both quarters. As we have noted previously, competition for short- term bookings remains intense. However, call volumes from our customers have increased, particularly in the corporate segment, and we are working with record levels of prospective customers. Looking forward, we remain cautiously optimistic for the coming 12 months." Even considering the aforementioned cancellations, the Company expects RevPAR for 2003 to be within the previously guided range of 4%-7%. The Company expects RevPAR to decline approximately 3% in third-quarter 2003 and approximately 2% in fourth-quarter 2003. Total revenues for third-quarter 2003 are expected to be between $95 million and $98 million, with EBITDA margin in the 10% range. Capital expenditures for third-quarter 2003 are expected to be between $55 million and $70 million and between $230 million and $240 million for 2003. Gaylord Entertainment, a leading hospitality and entertainment company based in Nashville, Tenn., owns and operates Gaylord Hotels branded properties, including the Gaylord Opryland Resort & Convention Center in Nashville and the Gaylord Palms Resort & Convention Center in Kissimmee, Fla., and the Radisson Opryland Hotel in Nashville. The company's entertainment brands include the Grand Ole Opry, the Ryman Auditorium, the General Jackson Showboat, the Springhouse Golf Club, the Wildhorse Saloon and WSM- AM. Gaylord Entertainment's stock is traded on the New York Stock Exchange under the symbol GET. For more information about the company, visit http://www.gaylordentertainment.com As reported in Troubled Company Reporter's May 27, 2003 edition, the National Hockey League's Nashville Predators filed suit against Gaylord Entertainment Company (NYSE:GET) for failure to meet its financial obligations regarding the naming rights of the Gaylord Entertainment Center. The suit was filed in the Chancery Court for Davidson County, Tenn. According to Predators attorney, Gaylord Entertainment did not make its scheduled semi-annual payment of $1,186,565.50 that was due in January 2003, despite formal written notification and verbal contact. As a result, Gaylord is now in default. In addition, the Predators reserve the right to pursue future claims (more than $60,000,000) for the entire remaining term of the naming rights agreement. GEO SPECIALTY: Obtains Covenant Waiver under Sr. Credit Facility ---------------------------------------------------------------- GEO Specialty Chemicals, Inc., has obtained a 2nd quarter covenant waiver from its senior lenders and will be in negotiations through August concerning a further amendment to the terms of its senior credit facility. The company has received a loan commitment which will, subject to its bank negotiations, permit GEO to make the $6.1 million interest payment due on its 10-1/8% Senior Subordinated Notes within the 30-day grace period commencing August 1st as provided in the governing indenture. As a result, the interest payment will not be made on August 1st. "The company is engaged in negotiations with its senior lenders towards agreement on the terms of the amendment and has adequate liquidity to meet its operating and trade obligations in the ordinary course," according to William P. Eckman, its Chief Financial Officer. The company cited weak demand in its electronic chemicals and wire and cable additives businesses. In addition, extraordinary price increases in key raw materials and energy costs has curtailed its first half profit performance. Management indicated that it expects the full impact of its recent price increases and cost reduction actions will improve second half earnings. GEO is a global manufacturer of specialty chemicals serving the water-treatment, rubber and plastics, coating, construction, opto- electronics and compound semiconductor industries. GEO has seventeen plants in the USA, two plants in Europe, and one in Australia. As reported in Troubled Company Reporter's March 5, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit and senior secured bank loan ratings on GEO Specialty Chemicals Inc., to 'B' from 'B+' and its subordinated debt rating to 'CCC+ from 'B-', citing the specialty chemicals company's continued profitability weakness that has elevated near-term liquidity concerns. At the same time, Standard & Poor's placed all of its ratings on GEO on CreditWatch with negative implications. The Cleveland, Ohio-based company had $216 million of debt outstanding as of September 30, 2002. GRAPHIC PACKAGING: Gets Consents to Amend 8-5/8% Note Indenture --------------------------------------------------------------- Graphic Packaging Corporation (NYSE: GPK) announced that as of 4:30 PM, New York City time, on July 31, 2003, it had received the consents of holders of at least a majority of the outstanding principal amount of its 8-5/8% Senior Subordinated Notes due 2012 (CUSIP No. 388684AB8) in the solicitation of consents to the proposed amendments to the indenture governing the Notes. By the terms of the tender offer and consent solicitation, as of the time of this announcement, consents to the proposed amendments may no longer be revoked and tenders of Notes may no longer be withdrawn. By the terms of the consent solicitation, the consent expiration date for the consent solicitation is 5:00 p.m., New York City time, on Friday, August 1, 2003. Each holder of Notes who validly consents to the proposed amendments at or prior to 5:00 p.m., New York City time, on Friday, August 1, 2003, will be entitled to a consent payment in the amount of $2.50 per $1,000 principal amount of Notes tendered by such holder with respect to which consents are delivered, if such Notes are accepted for purchase. Holders who tender their Notes after such time and date will not be entitled to receive the consent payment. The purpose of the consent solicitation is to amend the indenture governing the Notes to eliminate substantially all of the restrictive covenants and certain events of default and related provisions contained in the indenture. Graphic Packaging, the guarantors of the Notes and the trustee under the indenture intend to execute a supplemental indenture with respect to the indenture promptly after this announcement. As of 4:30 PM, New York City time, today, approximately $243.695 million of the $300 million outstanding principal amount of the 8-5/8% Senior Subordinated Notes due 2012 had been tendered. Consummation of the tender offer is subject to certain conditions, including (1) the consummation of the merger of Graphic Packaging International Corporation, a parent company of Graphic Packaging, with a subsidiary of Riverwood Holding, Inc. upon terms satisfactory to Graphic Packaging, (2) the consummation of certain financing transactions related to such merger upon terms satisfactory to Graphic Packaging, and (3) the receipt of the requisite consents with respect to the proposed amendments and the execution of the supplemental indenture to the indenture governing the Notes. Subject to applicable law, Graphic Packaging may, in its sole discretion, waive or amend any condition to the offer or solicitation, or extend, terminate or otherwise amend the offer or solicitation. The offer is being made in anticipation of a change of control offer required to be made by Graphic Packaging pursuant to the indenture governing the Notes following the consummation of the merger. Notes that are not tendered for purchase pursuant to this offer or the change of control offer will remain outstanding. Graphic Packaging does not currently plan to redeem any non- tendered Notes. Goldman, Sachs & Co. is the dealer manager for the offer and solicitation agent for the solicitation. MacKenzie Partners, Inc. is the information agent and Wells Fargo Bank Minnesota, National Association is the depositary in connection with the offer and solicitation. The offer is being made pursuant to an Offer to Purchase and Consent Solicitation Statement, dated July 10, 2003, and the related Consent and Letter of Transmittal (as each may be amended from time to time), which together set forth the complete terms of the offer and solicitation. Copies of the Offer to Purchase and Consent Solicitation Statement and related documents may be obtained from MacKenzie Partners, Inc. at (800) 322-2885. Additional information concerning the terms of the offers and the solicitations may be obtained by contacting Goldman, Sachs & Co. at (800) 828-3182. Graphic Packaging, headquartered in Golden, Colorado, is a leading provider of paperboard packaging solutions to multinational consumer products companies. As reported in Troubled Company Reporter's March 28, 2003 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating on folding carton producer Graphic Packaging Corp. on CreditWatch with negative implications. Standard & Poor's at the same time placed its 'B' corporate credit rating on paperboard manufacturer Riverwood International Corp. on CreditWatch with positive implications. Graphic Packaging had debt outstanding at Dec. 31, 2002, of about $480 million. Riverwood's debt at Sept. 30, 2002, was about $1.6 billion. Total debt for the combined company is initially expected to be about $2.2 billion. HYPERTENSION DIAGNOSTICS: Ernst & Young Airs Going Concern Doubt ---------------------------------------------------------------- Hypertension Diagnostics, Inc. is engaged in the design, development, manufacture and marketing of proprietary medical devices that it believes non-invasively detect subtle changes in the elasticity of both large and small arteries. Vascular compliance or arterial elasticity has been investigated for many years and clinical studies suggest that a lack of arterial elasticity is an early indicator of vascular disease. The Company's product provides important cardiovascular parameters which it believes provide clinically beneficial information useful in screening patients who may be at risk for future cardiovascular disease, provides assistance to physicians with their diagnosis of patients' cardiovascular disease, and allows for monitoring the effectiveness of various treatments of patients with diagnosed cardiovascular disease. As of March 31, 2003, the Company had an accumulated deficit of $20,047,351, attributable primarily to research and development and general and administrative expenses. Until it is able to generate significant revenue from its activities, the Company expects to continue to incur operating losses. As of March 31, 2003, it had cash and cash equivalents of $291,243, and anticipates that these funds, in conjunction with revenue anticipated to be earned from placements of its CVProfilor™ DO-2020 Systems, anticipated sales of our CR-2000 Research Systems, as well as anticipated operating cost reductions, are estimated to allow it to pursue its business development strategy for approximately the next four months following March 31, 2003. Because of these conditions, the Company's independent auditors, Ernst & Young LLP, have expressed substantial doubt about the Company's ability to continue as a going concern. INTERLINE BRANDS: June 27 Net Capital Deficit Widens to $248MM -------------------------------------------------------------- Interline Brands, Inc., a leading distributor and direct marketer of maintenance, repair and operations products, reported increases in operating income and cash flow from operations for the fiscal quarter and six month periods ending June 27, 2003 compared to the same periods in 2002. Operating income improved 4.5% for the second quarter and 7.4% for the first half of 2003 on slightly lower sales. Interline's President and Chief Executive Officer Michael Grebe commented on the company's performance for the period: "Our earnings improvement during 2003 resulted from the successful integration of Wilmar and Barnett onto a common operating platform, which we completed in the fourth quarter of last year. We expect to see additional benefits from the integration for the next few quarters. During the quarter we also refinanced our debt through a new bank facility led by JPMorgan and Credit Suisse First Boston and through the issuance of $200 million 11-1/2% Senior Subordinated Notes due 2011." Net sales decreased by $3.5 million, or 2.1%, to $159.7 million in the second quarter of fiscal 2003 from $163.1 million in the comparable period for the prior year on the same number of shipping days. Net sales decreased by $5.7 million, or 1.8%, to $314.6 million in the six months ended June 2003 from $320.3 million in the comparable period for the prior year. These sales results reflect continued weakness in the multi-family housing and professional contractor markets, which are Interline Brands' two largest customer markets. Gross profit increased $0.3 million to $60.5 million in the second quarter of fiscal 2003 from $60.2 million in the comparable period in 2002. As a percentage of sales, gross profit increased 100 basis points to 37.9% in the second quarter of 2003 from 36.9% in the second quarter of 2002. Selling, general and administrative expenses increased by $0.3 million, to $41.4 million in the second quarter of 2003 from $41.1 million in the comparable period for the prior year. SG&A expenses for the six months ended June 2003 increased $0.2 million, from the comparable period for the prior year. Operating income increased by $0.7 million, or 4.5%, to $16.1 million in the second quarter of 2003 from $15.4 million in the comparable period for the prior year. For the first six months of 2003, operating income increased $2.1 million, or 7.4%, to $30.6 million from $28.5 million for the first six months of 2002. Net cash provided by operating activities increased by $0.5 million to $2.2 million in the second quarter of 2003 from $1.7 million in the comparable period for the prior year and increased by $9.6 million to $12.6 million in the first six months of fiscal 2003 from $3.0 million in the comparable period for the prior year. The increase in net cash provided by operating activities was the result of higher operating income as well as successful working capital efficiency initiatives that resulted in a $17.9 million reduction in inventory levels from December 27, 2002. During the second quarter, the company entered into a new $205 million Senior Secured Credit Facility and issued $200 million of new 11.5% Senior Subordinated Notes due 2011. The proceeds from the new credit facility and notes were used to refinance all outstanding indebtedness under our prior credit facility and to redeem the Company's 16% Senior Subordinated Notes due 2008. The Company recorded a $14.9 million charge during the second quarter for the early extinguishment of debt associated with the refinancing transaction, including the write-off of unamortized debt issuance and original issue discount costs, and prepayment penalties on the senior subordinated notes. Net income before early extinguishment of debt was $9.5 million for the second quarter and $13.0 million for the first six months of 2003, compared to $1.8 million and $4.9 million during the respective periods in 2002. Net loss for the quarter and six months ended June 2003, including the $14.9 million charge for the early extinguishments of debt, was $5.4 million and $1.9 million, respectively, compared to net income of $1.8 million and $4.9 million for the second quarter and six months ended June 2002. Interline Brands' June 27, 2003 balance sheet shows a total shareholders' equity deficit of about $248 million. Interline Brands, Inc. is a privately held, direct marketing and specialty distribution company with corporate offices in Jacksonville, Florida. Interline sells maintenance, repair and operations products with guaranteed same-day or overnight shipping to professional contractors, facilities maintenance professionals, hardware stores, and other customers across North America and Central America. Interline's principal shareholders include Parthenon Capital, JPMorgan Partners, General Motors Pension Fund, Sterling Partners L.P. and management. To learn more about the company visit http://www.Interlinebrands.com INT'L UTILITY: Misses Interest Payment on 10.75% Sr. Sub. Notes --------------------------------------------------------------- International Utility Structures Inc., did not make the scheduled August 1, 2003 semi-annual interest payment in the aggregate amount of US$3,750,000 due on its 10.75% Senior Subordinated Notes due February 1, 2008 and its 13% Subordinated Notes due February 1, 2008. Under the terms of the Indentures governing such notes, the failure to pay will not become an Event of Default immediately and may be cured by the Company within a period of 30 days. During the next 30 days, the Company intends to consider all alternatives available to it in order to secure financing to make the interest payment and in order to commence the process of a financial restructuring. The Company and its financial advisors have already commenced discussions with various prospective lenders. As part of the process, the Company intends to commence discussions with the note holders immediately. In the interim, the Company intends to carry on business as usual and continue providing its high level of service and products to customers and continue paying its suppliers on a timely basis. Robert Jack, President & CEO said: "Our Company faces a difficult and challenging task in embarking on a financial restructuring. Every effort will be made by both management and the Board to maintain and build value for our stakeholders". International Utility Structures Inc., is a world leader in the manufacture and marketing of metal overhead lighting, power line, traffic and telecommunications support structures for customers in more than 100 countries. Headquartered in Calgary, Alberta, IUSI has manufacturing, design and engineering capacity in the United States, France and Ireland. The Company's common shares trade on the Toronto Stock Exchange under the symbol IUS. KAISER: Government Seeks Stay Relief to Permit Debt Set-Off ----------------------------------------------------------- The United States of America asks the Court to lift the automatic stay to administratively offset any debt the U.S. Customs Service owes to the Kaiser Aluminum Debtors against the Debtors' prepetition federal corporate income tax liabilities for 2000 and 2001. On January 30, 2003, the Customs Service filed a proof of claim for multiple, unliquidated prepetition entries, which could liquidate for an increase in duties pursuant to 19 CFR Part 159, if the amount of duties owed for the entries are determined to exceed the estimated duties the Debtors paid. The proof of claim discloses that Customs was holding $390,857 subject to set-off against debts the Debtors owed. On February 26, 2003, the Internal Revenue Service filed its third amended proof of claim that set out a $1,660,792 priority claim relating to the Debtors' federal corporate income tax and interest liability for tax years 2000 and 2001. The proof of claim also states that it could be subject to set-off in an amount not fixed from another federal agency. Trial attorney David M. Katinsky, Esq., of the Tax Division of the U.S. Department of Justice, states that the government can set off the debt its agencies owe to an entity against a debt that entity owes to another federal agency. Mr. Katinsky notes that Section 553 of the Bankruptcy Code provides that a creditor bankruptcy maintains its right outside of bankruptcy to offset a prepetition debt it owes the debtor against a mutual prepetition debt the debtor owes it. Thus, the United States is entitled to off set any debt its Customs Service owes the Debtors against the much larger debt the Debtor owes the IRS, provided that the government establishes a colorable claim to set-off. In Kaiser's case, Mr. Katinsky asserts that the Debtors owe the United States more than $1,600,000 and the United States has admitted in the Customs Service's proof of claim that it could owe the Debtors the $390,857 it is holding in estimated tax payments. Given that the United States and the Debtors have mutual debts, the stay should be lifted to allow debt setoff. (Kaiser Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: E. David Coolidge Discloses 10,000 Shares Ownership --------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission on July 11, 2003, E. David Coolidge, III, discloses that he beneficially owns 10,000 shares of Kmart Holdings Corporation Common Stock. Mr. Coolidge is the Chief Executive of William Blair & Company, a privately owned investment banking firm. Mr. Coolidge is a director of Kmart Holdings. (Kmart Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) LB-UBS COMMERCIAL: Fitch Assigns Low-B Ratings to 3 Note Classes ---------------------------------------------------------------- LB-UBS Commercial Mortgage Trust, series 2003-C5, commercial mortgage pass-through certificates are rated by Fitch Ratings as follows: -- $145,000,000 class A-1 'AAA'; -- $503,000,000 class A-2 'AAA'; -- $220,000,000 class A-3 'AAA'; -- $328,064,000 class A-4 'AAA'; -- $1,405,068,726 class X-CL* 'AAA'; -- $1,266,105,000 class X-CP* 'AAA'; -- $22,833,000 class B 'AA+'; -- $24,588,000 class C 'AA'; -- $15,807,000 class D 'AA-'; -- $15,807,000 class E 'A+'; -- $22,833,000 class F 'A'; -- $17,563,000 class G 'A-'; -- $15,807,000 class H 'BBB+'; -- $10,538,000 class J 'BBB'; -- $14,051,000 class K 'BBB-'; -- $12,294,000 class L 'BB+'; -- $5,269,000 class M 'BB'; -- $3,513,000 class N 'BB-'; -- $7,025,000 class P 'NR'; -- $3,513,000 class Q 'NR'; -- $3,513,000 class S 'NR'; -- $14,050,726 class T 'NR'. *Interest-Only Classes P, Q, S and T are not rated by Fitch. Classes A-1, A-2, A- 3, A-4, B, C, D, E, F, and G are offered publicly, while classes X-CL, X-CP, H, J, K, L, M, and N, are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 80 fixed-rate loans having an aggregate principal balance of approximately $1,405,068,727 as of the cutoff date. MADISON RIVER: Second Quarter 2003 Net Loss Narrows to $3.8 Mil. ---------------------------------------------------------------- Madison River Communications (MADRIV) announced its financial and operating results for the second quarter and six months ended June 30, 2003. 2003 Second Quarter Financial and Operating Results For the second quarter ended June 30, 2003, the Company reported operating income of $10.8 million, an increase of $4.4 million, or 68.5%, from operating income of $6.4 million for the second quarter ended June 30, 2002. Operating income in the Local Telecommunications Division increased $2.9 million, or 26.2%, to $14.0 million in the second quarter of 2003 from $11.1 million in the second quarter of 2002. The Integrated Communications Division reported an operating loss of $3.2 million in the second quarter of 2003 compared to an operating loss of $4.7 million in the second quarter of 2002, an improvement of $1.5 million, or 31.8%. For the second quarter ended June 30, 2003, Adjusted Operating Income, computed by taking operating income of $10.8 million and adding back depreciation and amortization expenses of $13.1 million and long-term incentive plan expenses of $0.9 million, was $24.8 million, an increase of $4.4 million, or 21.6%, from the $20.4 million in Adjusted Operating Income reported in the second quarter ended June 30, 2002. The ICD reported an operating loss of $3.2 million, depreciation and amortization expenses of $3.8 million, resulting in Adjusted Operating Income of $0.6 million for the second quarter of 2003, an improvement of $1.7 million over the second quarter of 2002. The improvement in the ICD is the result of lower cost of services and lower selling, general and administrative expenses. The LTD, with operating income of $14.0 million, depreciation and amortization expenses of $9.3 million and long-term incentive plan expenses of $0.9 million in the second quarter of 2003, reported Adjusted Operating Income of $24.2 million, an increase of $2.7 million, or 12.4%, over Adjusted Operating Income of $21.5 million in the second quarter of 2002. Approximately $1.5 million of the increase is attributed to bad debt charges recognized in the second quarter of 2002 for pre-bankruptcy filing amounts due from MCI Worldcom and Global Crossing. The remaining portion of the increase is attributed to lower cost of services and lower selling, general and administrative expenses. Revenues in the second quarter of 2003 were $46.0 million compared to $44.8 million in the second quarter of 2002, an increase of $1.2 million, or 2.7%. Revenues in the second quarter of 2003 in the ICD were $3.5 million, a decrease of $0.2 million from revenues of $3.7 million in the second quarter of 2002, or a 5.9% decrease. In the LTD, revenues in the second quarter of 2003 increased $1.4 million, or 3.5%, to $42.5 million from $41.1 million in the second quarter of 2002. The increase in revenues in the LTD is attributed to the $1.5 million in bad debt charges for MCI Worldcom and Global Crossing recognized in the second quarter of 2002 that resulted in lower revenues for that quarter. Excluding these charges, revenues for the LTD would have decreased $0.1 million and revenues for the Company would have decreased $0.3 million when compared to the second quarter of 2002. The Company incurred a net loss of $3.8 million in the second quarter of 2003 compared to a net loss of $9.3 million in the second quarter of 2002, an improvement of $5.5 million or 59.7%. The LTD reported net income of $6.1 million in the second quarter of 2003 compared to net income of $2.1 million in the second quarter of 2002, an increase of approximately $4.0 million. The increase is attributed primarily to the impact on net income in the second quarter of 2002 from the $1.5 million bad debt charge and a $2.1 million writedown of the carrying value of an equity method investment. No comparable charges impacted net income in the second quarter of 2003. In addition, interest expense in the second quarter of 2003 was $1.0 million lower than the second quarter of 2002 as a result of lower outstanding balances on long- term debt and lower interest rates. The ICD's net loss in the second quarter of 2003 was $9.9 million, an improvement of $1.5 million over the net loss of $11.4 million in the second quarter of 2002 and is attributed primarily to the ICD's expense reductions. For the second quarter of 2003, the LTD reported revenues of $42.5 million, Adjusted Operating Income of $24.2 million and an Adjusted Operating Income margin of 56.8%. The Adjusted Operating Income margin is computed by dividing the LTD's Adjusted Operating Income of $24.2 million by the LTD's revenues of $42.5 million. Sequentially, this compares to revenues of $41.5 million, Adjusted Operating Income of $25.8 million and an Adjusted Operating Income margin of 62.2% in the first quarter of 2003. Adjusted Operating Income decreased by $1.6 million, or 6.6%, on a sequential quarter basis. The LTD's Adjusted Operating Income in the first quarter of 2003 reflects a one- time, non-cash pension curtailment gain that lowered its operating expenses by $2.1 million. Excluding the impact of this gain on first quarter results, Adjusted Operating Income would have increased $0.5 million, or 1.9% primarily as the result of a $0.9 million increase in revenues. As of June 30, 2003, the LTD had approximately 206,985 voice access and DSL connections in service compared to approximately 209,530 connections in service at June 30, 2002, a decrease of approximately 2,545 connections, or 1.2%. The change consisted of a decrease in voice access lines of approximately 7,620 lines offset by an increase of approximately 5,075 DSL connections. Compared to the second quarter of 2002, DSL connections increased 35.3%. The LTD had approximately 187,545 voice access lines in service at June 30, 2003 compared to approximately 195,165 voice access lines in service at June 30, 2002. The decrease is primarily attributable to the weak economy, particularly in the Company's Illinois operations, and to the effect of the 3rd Infantry Division's deployment from Fort Stewart, Georgia. Approximately 84% of the decrease in voice access lines occurred in the Illinois and Georgia operations. The LTD's operating results continue to reflect the impact of the full troop deployment at Fort Stewart that took place early in 2003. Though the Georgia operations have seen some improvement in recent weeks, uncertainty still remains regarding when the return of significant numbers of troops will commence. Therefore, the full extent of the impact on operations continues to be difficult to predict and will vary depending on, among other factors, the duration of the troop deployment. Sequentially, voice access and DSL connections in the LTD at June 30, 2003 increased by approximately 740 connections, or 0.4%, from March 31, 2003. The increase is comprised of a decrease of approximately 760 voice access lines, or 0.4%, and an increase of approximately 1,500 DSL connections, or 8.4%. Of the 206,985 total connections, approximately 128,175 are residential lines, 59,370 are business lines and 19,440 are DSL connections. In addition, the LTD had approximately 93,900 long distance accounts and 25,780 dial-up Internet subscribers at June 30, 2003. The ICD reported Adjusted Operating Income in the second quarter of 2003 of $0.6 million, an improvement of $1.7 million from the $1.1 million Adjusted Operating Loss reported in the second quarter of 2002. The improvement in ICD's Adjusted Operating Income was primarily the result of lower operating expenses. ICD revenues in the second quarter of 2003 were $3.5 million compared to $3.7 million for the second quarter of 2002, a decrease of $0.2 million, or 5.9%. As of June 30, 2003, the ICD had approximately 15,965 voice and 713 DSL connections in service compared to approximately 15,895 voice and 680 DSL connections in service at June 30, 2002. On a sequential quarter basis, the ICD's revenues decreased $0.1 million, or 1.6%, while Adjusted Operating Income decreased $0.4 million, or 39.1%. The ICD's operating results in the first quarter of 2003 reflect the reduction in operating expenses from the one-time, non-cash pension curtailment gain of $0.6 million. Excluding the impact of this gain, Adjusted Operating Income would have increased $0.1 million, or 25.9%, on a sequential quarter basis. The ICD renewed approximately 81% of its expiring contracts with customers with an average increase in monthly recurring revenues of 20% in the first six months of 2003 compared to its renewal success rate in 2002 of 86% with a 32% increase in monthly recurring revenues. As of June 30, 2003, the ICD's days sales outstanding on net accounts receivable was approximately 34 days. J. Stephen Vanderwoude, Chairman and Chief Executive Officer, commented, "We are pleased with our performance this year particularly in light of the difficult economy and the troop deployments we have experienced. Our solid financial performance is due in no small part to the success we have experienced in DSL. We believe that the investments we made early in our network and training have contributed significantly to the success of our DSL product and its penetration. Similarly, we believe that it is time for us to look into video to assess its fit in our product mix. Finally, voice access line losses have slowed significantly and we have begun to see firming of demand in our North Carolina, Georgia and Alabama operations." 2003 Six Month Financial Results For the six months ended June 30, 2003 and 2002, revenues were $91.2 million and $90.8 million, respectively. By division, in the first six months of 2003, the LTD reported revenues of $84.0 million and the ICD reported revenues of $7.2 million. The LTD's revenues in the first six months of 2003 increased approximately $1.0 million over the first six months of 2002. The increase is primarily attributed to a $1.3 million increase in Internet and enhanced data service revenues and a $1.6 million increase in miscellaneous revenues. In the first six months of 2003, Internet and enhanced data service revenues increased as the number of DSL connections increased by approximately 5,075 connections, or 35.3%. Miscellaneous revenues reflect the negative impact of the $1.5 million bad debt charge on revenues in the first six months of 2002. These increases were offset by a $2.3 million decrease in local service revenues that is the result of voice access line losses and expected lower network access revenues. The ICD reported a decrease in revenues of $0.6 million, or 7.5%, for the six month period ended June 30, 2003 compared to the same period in 2002. The decrease is attributed to lower local service revenues of $0.5 million and lower transport revenues of $0.4 million. Adjusted Operating Income improved by $10.1 million, or 24.3%, to $51.7 million in the first six months of 2003 compared to $41.6 million in the first six months of 2002. Approximately $2.7 million of the $10.1 million increase in Adjusted Operating Income is attributed to the one-time, non-cash gain from the pension curtailment in the first quarter of 2003. The Company's non- contributory, defined benefit pension plan for qualified employees, sponsored by Madison River Telephone Company, was frozen in the first quarter of 2003. The curtailment resulted in an immediate net gain of $2.8 million, of which $2.7 million resulted in a reduction in pension expense and $0.1 million in a reduction of capital additions. The gain was recognized in the first quarter of 2003 and allocated between the Company and its affiliates who participate in the plan. Although further accrual of benefits by plan participants is frozen, the Company has a continuing obligation to fund the plan and continues to recognize net periodic pension expense. Approximately $2.1 million of the net gain was recognized as a reduction of expenses in the LTD and $0.6 million as a reduction of expenses in the ICD. In addition, Adjusted Operating Income for the first six months of 2002 includes a bad debt charge of $1.5 million for MCI Worldcom and Global Crossing. Excluding the impact of pension curtailment gain and the bad debt charges, Adjusted Operating Income would have increased approximately $5.9 million, or 13.6%. Adjusted Operating Income by division for first six months of 2003 was $50.0 million for the LTD and $1.7 million for the ICD. Adjusted Operating Income in the ICD in the first six months of 2003 improved $3.8 million over the same period in 2002. Approximately $0.6 million of the improvement is attributed to the pension curtailment gain with the remaining improvement coming primarily from reductions in operating expenses. In the LTD, Adjusted Operating Income in the first six months of 2003 increased $6.3 million over Adjusted Operating Income in the first six months of 2002. Approximately $2.1 million of the increase is attributed to the pension curtailment gain in 2003 and $1.5 million from the bad debt charge taken in 2002. Excluding the impact of these two items, Adjusted Operating Income in the LTD would have increased $2.6 million, or 5.9%. The remaining increase was primarily the result of expense reductions. As of June 30, 2003, the Company had approximately $42.9 million in liquidity consisting of $22.9 million in cash on hand and $20.0 million in fully available credit facilities with the Rural Telephone Finance Cooperative ("RTFC"). Capital expenditures for the six months ended June 30, 2003 of approximately $4.0 million are in line with our expectation of total capital expenditures of approximately $12.0 million to $13.0 million for 2003. The Company completed an amendment to its loan agreement with RTFC which, among other things, allows the Company greater operating flexibility through an increase in its liquidity. Under the terms of the amendment, the maturity of the loan will be extended by one year to 2016 with a reduction in scheduled principal payments through 2010. The amendment also provides for revised financial covenants including RTFC approval of capital expenditures and acquisitions, an average increase of approximately 45 basis points in the interest rates on long-term debt outstanding to the RTFC, and annual mandatory pre-payments of principal, beginning in 2005 utilizing 2004 fiscal year financial results, computed as cash flow from operations in excess of certain agreed upon expenditures as defined in the amendment. Madison River Capital, LLC operates as Madison River Communications and is a wholly owned subsidiary of Madison River Telephone Company, LLC. Madison River Communications operates and enhances rural telephone companies and uses advanced technology to provide competitive communications services in its edge-out markets. Madison River Telephone Company, LLC is owned by affiliates of Madison Dearborn Partners Inc., Goldman, Sachs & Co. and Providence Equity Partners, the former shareholders of Coastal Utilities, Inc. and members of management. As reported in Troubled Company Reporter's May 13, 2003 edition, Standard & Poor's Ratings Services revised the outlook on Madison River Telephone Co. LLC (corporate credit rating 'B') and related entities to negative from stable because of the continued loss in access lines related to the economy, and the uncertainty related to the full impact of Fort Stewart, Georgia's troop deployment on that local community's access lines. As of March 31, 2003, total debt outstanding was about $654.9 million. Net debt, excluding the Rural Telephone Finance Cooperative subordinated capital certificates, was about $611 million. MAGELLAN HEALTH: Files 2nd Amended Plan & Disclosure Statement -------------------------------------------------------------- Magellan Health Services, Inc., and its debtor-affiliates present the Court with their Second Amended Reorganization Plan and Disclosure Statement dated July 25, 2003. The Court will convene a hearing on August 7, 2003 at 2:30 p.m. to consider the adequacy of the information contained in the Debtors' Second Amended Disclosure Statement. After a series of discussions and negotiations with the Debtors' primary creditor constituencies, Onex and other potential third- party investors, regarding an equity proposal that would meet the condition provided for in the March 26 Plan, the Debtors determined that the last proposal submitted by Onex would be the most beneficial to both the Debtors' estates and their creditors. The Debtors' Second Amended Plan incorporates the agreements between the Debtors and Onex. Under the Second Amended Plan, the new capital structure for Reorganized Magellan will consist of: A. New Senior Secured Credit Agreement: Approximately $115,800,000 in term loans, $45,000,000 in loans under a rollover facility and $75,300,000 in reimbursement obligations for outstanding letters of credit, which will be obligations of Reorganized Magellan, guaranteed by the wholly owned subsidiaries of Reorganized Magellan and secured by substantially all of the assets of Reorganized Magellan and its subsidiaries that guarantee the New Facilities; B. New Senior Notes: Up to $275,000,000 in unsecured senior notes of Reorganized Magellan; C. New Aetna Note: $47,700,000 note of Reorganized Magellan; D. New Common Stock: Up to 12,631,579 shares of common stock of Reorganized Magellan, par value $0.01 per share, allocated as: -- 10,000,000 shares of New Common Stock issued to holders of Claims and Interests in the Debtors; provided that the holders in Class 8 and Class 9 have the right to elect to be distributed cash in lieu of the shares under the Partial Cash-Out election at a price of $22.50 per share for up to 2,222,222 shares; and -- up to 2,631,579 shares of New Common Stock issued upon exercise of the Equity Subscription Right and to the Equity Investor to the extent the Equity Subscription Rights are not exercised; E. MVS Securities: Up to 7,485,380 shares of MVS Securities, allocated as: -- 2,631,579 shares directly to Equity Investor at a price of $28.50 per share; -- up to 2,631,579 shares to Equity Investor to the extent shares if New Common Stock not purchased in Equity Offering at a price of $28.50 per share; and -- up to 2,222,222 shares to Equity Investor to the extent the Partial Cash-out Election is exercised at a price of $22.50 per share; E. New Warrants: Warrants to purchase 248,185 shares of New Common Stock; F. New Aetna Warrant: Warrants to purchase 100,000 shares of New Common Stock; and G. Option or other stock-based awards: 10% of the New Common Stock after giving effect to the Equity Offering and conversion of the MVS Securities issued in connection with the Investment reserved for issuance. A full-text copy of the Debtors' Second Amended Reorganization Plan is available for free at: http://bankrupt.com/misc/2nd_AmendedPlan.pdf A full-text copy of the Debtors' Second Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/2nd_AmendedDisclosureStatement.pdf (Magellan Bankruptcy News, Issue No. 11: Bankruptcy Creditors' Service, Inc., 609/392-0900) MARSH SUPERMARKETS: Hosting First Quarter Conference Call Today --------------------------------------------------------------- Marsh Supermarkets, Inc. (Nasdaq:MARSA) (Nasdaq:MARSB) will release first quarter fiscal 2004 earnings today. Marsh's management will discuss the quarter results at 4:00 p.m. eastern time (3:00 p.m. central time) in a conference call. The conference call will be simulcast on the internet and will be available for replay on the Marsh website at http://www.marsh.net or at http://www.irconnect.com/marsa Marsh is a leading regional chain, operating 67 Marsh(r) supermarkets, 34 LoBill Foods(r) stores, 3 Savin*$(r), 9 O'Malia Food Markets, and 167 Village Pantry(r) convenience stores in central Indiana and western Ohio. The Company also operates Crystal Food Services(tm), which provides upscale catering, cafeteria management, office coffee, vending and concessions; Primo Banquet Catering and Conference Centers; McNamara Florist and Enflora - Flowers for Business(r). Marsh is a publicly held company whose stock is traded on the NASDAQ National Market System (MARSA and MARSB). * * * As previously reported, Standard & Poor's Ratings Services lowered its corporate credit rating on Indianapolis, Ind.-based Marsh Supermarkets Inc. to 'BB-' from 'BB' based on weak sales trends and declining EBITDA in recent quarters. The outlook is negative. Approximately $206 million of debt is affected by this action. MDC CORPORATION: Completes Plan of Arrangement with Maxxcom Inc. ---------------------------------------------------------------- MDC Corporation Inc. of Toronto and Maxxcom Inc., announced the completion of the previously- announced acquisition by MDC of all of the issued and outstanding common shares of Maxxcom not already owned by MDC by way of a court-approved Plan of Arrangement. The Arrangement was approved by more than 99% of the shareholders of Maxxcom that voted on the Arrangement at Thursday's annual and special meeting of Maxxcom shareholders. The Arrangement also received final approval today by the Ontario Superior Court of Justice. Pursuant to the Arrangement, Maxxcom shareholders (other than MDC) received 1 MDC Class A subordinate voting share for every 5.25 Maxxcom common shares they owned, resulting in the issuance by MDC of approximately 2.47 million Class A Shares to such shareholders. After giving effect to the acquisition, MDC has approximately 18.94 million Class A Shares issued and outstanding. "We are delighted with the overwhelming support received for the transaction, which substantially completes the restructuring of MDC we began almost two years ago." said Miles S. Nadal, Chairman and CEO of MDC. "MDC has returned to its grass roots. We are once again a pure play in marketing communications but with greater strength and potential. With a strong balance sheet and upside potential in our non-core assets, we now have the ability to drive value organically and complement our growth with strategic acquisitions," added Nadal. MDC owned approximately 36.1 million Maxxcom common shares or approximately 74% of the approximately 49.1 million outstanding Maxxcom common shares prior to giving effect to the Arrangement. Miles S. Nadal, who is presumed to be acting jointly or in concert with MDC, owned 17,634 common shares of Maxxcom. MDC is a publicly traded international business services organization with operating units in Canada, the United States, United Kingdom and Australia. MDC provides marketing communication services, through Maxxcom, and offers security sensitive transaction products and services in three primary areas: electronic transaction products such as credit, debit, telephone & smart cards; secure ticketing products, such as airline, transit and event tickets, and stamps, both postal and excise. MDC Class A Shares are traded on the Toronto Stock Exchange under the symbol MDZ.A and on the NASDAQ National Market under the symbol MDCA. Maxxcom, a subsidiary of MDC, is a multi-national business services company with operating units in Canada, the United States and the United Kingdom. Maxxcom is built around entrepreneurial partner firms that provide a comprehensive range of communications services to clients in North America and the United Kingdom. Services include advertising, direct marketing, database management, sales promotion, corporate communications, marketing research, corporate identity and branding, and interactive marketing. Maxxcom common shares are traded on the Toronto Stock Exchange under the symbol MXX. As reported in Troubled Company Reporter's July 2, 2003 edition, Standard & Poor's Ratings Services withdrew its 'BB-' long-term corporate credit rating on marketing communications and secure transaction services provider MDC Corp. Inc., at the company's request. At the same time, Standard & Poor's withdrew its 'B' rating on the company's US$86.4 million 10.5% senior subordinated notes due 2006, following MDC's redemption of these notes. MIRANT CORP: Court Fixes November 19 Bar Date for All Creditors --------------------------------------------------------------- According to Tawana C. Marshall, the Clerk of the Bankruptcy Court for the Northern District of Texas, all creditors have until November 19, 2003, to file any proof of claim against Mirant's estates. Creditors wishing to file claim must submit a formal written proof of claim so that it is actually received by the Bankruptcy Clerk's office on or before Nov. 19. Claim forms should be mailed to: Bankruptcy Clerk's Office 501 W. Tenth Street Forth Worth, Texas 76102 Telephone No. 817-333-6000 Governmental units have until January 10, 2004 to file their claim, pursuant to Rule 3002(c) of the Federal Rules of Bankruptcy Procedure. (Mirant Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEWCOM INT'L: Operating Losses Prompt Going Concern Uncertainty --------------------------------------------------------------- On July 24, 2003, the firm of McKennon, Wilson & Morgan LLP was dismissed as independent auditors of NewCom International, Inc. The accounting firm of Phol, McNabola, Berg & Company was engaged by the Company to serve as the principal accountants to audit the Company's financial statements. The audit reports of McKennon, Wilson & Morgan LLP for the years ended December 31, 2000 and 2001 were qualified or modified as to uncertainty as follows: "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern...[T]he Company has incurred operating losses, and it has excess current liabilities over current assets, as well as a shareholders' deficit. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty." NORSKE SKOG: 16% US Dollar Slide Erodes Second Quarter Gains ------------------------------------------------------------ The sputtering U.S. economy and accompanying foreign exchange impact of the stronger Canadian dollar versus its American counterpart negatively impacted NorskeCanada's (Norske Skog Canada Limited) second quarter results. Despite significant currency hedging, the sharply depreciated U.S. dollar in the current quarter cost the company $13 million in lost operating earnings, as the majority of the company's sales are in U.S. dollars. "A 16 per cent slide in the U.S. dollar relative to the Canadian dollar since the beginning of 2003 effectively negated the positive impact of improved pulp and paper transaction prices", said Russell J. Horner, NorskeCanada's President and CEO. In spite of these challenges, the company recorded a number of highlights in the quarter, notably continued solid progress towards its December 2003 $100 million annualized run-rate performance improvement target and a US$150 million senior notes issue in May. "We delivered additional performance improvement savings of $5 million ($20 million annualized), on top of the $15 million ($60 million annualized) achieved in the previous quarter. This takes our annualized run-rate improvement to $80 million at the end of June," said Horner. Horner added that the successful US$150 million bond offering in May has significantly enhanced the company's liquidity. For the second quarter of 2003, the company recorded a net loss of $18.3 million and earnings before interest, taxes, depreciation and amortization, and before other non-operating income and expenses (EBITDA) of $9.6 million on net sales of $383.7 million. The net loss for the current quarter included an after-tax foreign exchange gain arising from the translation of U.S. dollar denominated debt of $19.5 million. For the first quarter of 2003, the company recorded a net loss of $24.8 million and EBITDA of $11.8 million on net sales of $385.8 million. The net loss for the first quarter included an after-tax gain on translation of US$ debt of $12.8 million. For the three months ended June 30, 2002, the company incurred a net loss of $24.4 million and generated EBITDA of $6.0 million on net sales of $359.8 million. The net loss included an after-tax gain on translation of US$ debt of $13.2 million. For the first six months of 2003, the company's net loss was $43.1 million and EBITDA was $21.4 million on net sales of $769.5 million. For the same period a year earlier, the company reported a net loss of $65.9 million and EBITDA of $3.9 million on net sales of $684.1 million. The net loss for the first half of 2003 included an after-tax gain on translation of US$ debt of $32.3 million, compared to $13.4 million for the same period in 2002. Market demand for most paper grades remained sluggish through the current period. Year-over-year newsprint advertising lineage showed a marginal improvement, and uncoated groundwood specialty grades also recorded only a moderate increase over the same period. On a more positive note, the recent pick-up in demand for coated papers continued through the quarter. Year-over- year sales volumes of the company's lightweight coated paper were up 23 per cent. The industry operated at less than full production, which kept mill newsprint inventories low. The conversion of machines out of certain specialty and newsprint grades continues to improve the market structure. North American newsprint prices, which have been very slow to recover to normal levels, got a boost during the quarter as the result of the implementation of a US$30 per tonne price increase. Horner said the company's pulp business was also affected by the weaker U.S. dollar as well as the SARS outbreak in Asia, and a drawdown of inventory by Chinese buyers. Pulp prices, which had been gaining strength earlier in the year, weakened late in the quarter in the face of softening demand and rising Norscan inventories. The sources of the company's performance improvement gains in the current quarter mirrored those in the first quarter, with improvements in productivity and input costs leading the way. "We remain well on track to achieve our targeted $100 million of annualized run-rate performance improvements over 2002 results, by the end of this year," said Horner. The company continued to maintain a tight control over working capital and capital spending during the current quarter. Cash flow from operations was $20.1 million during the quarter, an improvement from negative $5.6 million for the second quarter of 2002 and negative $32.3 million for the previous quarter ended March 31, 2003. Approximately $134 million of the $213 million proceeds from the issue of US$150 million senior notes were used to repay the outstanding balance on the company's revolving operating loan. The remaining cash is being applied for general corporate purposes, including the funding of capital expenditures. "With markets unsettled and many factors beyond our control, we remain highly focussed on those aspects of our business where we can make a difference," Horner said. In February 2003, Standard & Poor's lowered its credit rating of the Company's long-term corporate and senior unsecured debt by one level, from BB+ to BB, and affirmed its existing debt on its senior secured debt as BB+. S&P's outlook for the Company's business is stable. NORSKE SKOG: Extends Senior Debt Exchange Offer to August 15 ------------------------------------------------------------ Norske Skog Canada Limited (TSX: NS), announced that it is extending the expiration date for its offer to exchange U.S.$400,000,000 aggregate principal amount of its 8-5/8% Series D Senior Notes Due 2011, which have been registered under the Securities Act of 1933, as amended, for U.S.$250,000,000 aggregate principal amount of its 8-5/8% Senior Notes Due 2011 and U.S.$150,000,000 aggregate principal amount of its 8-5/8% Series C Senior Notes Due 2011 until 5:00 p.m. New York City time on August 15, 2003, unless further extended by Norske Skog Canada Limited prior to such time. The expiration date for the Exchange Offer was 5:00 p.m., New York City time, on July 31, 2003, at which point, approximately U.S.$246,865,000 of the U.S.$250,000,000 aggregate principal amount of the outstanding 8-5/8% Senior Notes Due 2011 and U.S.$150,000,000 of the U.S.$150,000,000 aggregate principal amount of the outstanding 8?% Series C Senior Notes Due 2011 had been tendered for exchange. The extension is intended to allow additional time for the holders of the remaining outstanding Old Notes to tender in exchange for the New Notes. As a result of the extension, tenders of the Old Notes, received to date, may continue to be withdrawn at any time on or prior to the new expiration date. This announcement shall serve to amend and supplement the Prospectus, dated June 18, 2003, relating to the Exchange Offer, and the related letter of transmittal and other documentation, solely with respect to the extension of the expiration date referred to herein. All other terms of the Exchange Offer Prospectus, the letter of transmittal and other documentation shall remain in full force and effect. Capitalized terms used herein which are not otherwise defined shall have the meanings given to them in the Exchange Offer Prospectus. Holders of Old Notes can obtain copies of the Exchange Offer Prospectus, and the related letter of transmittal and other documentation from the exchange agent, Wells Fargo Bank Minnesota, National Association, attention: Joseph O'Donnell. * * * In February 2003, Standard & Poor's lowered its credit rating of the Company's long-term corporate and senior unsecured debt by one level, from BB+ to BB, and affirmed its existing debt on its senior secured debt as BB+. S&P's outlook for the Company's business is stable. NRG ENERGY: Court Okays Leonard Street's Engagement as Counsel -------------------------------------------------------------- NRG Energy, Inc., and its debtor-affiliates sought and obtained the Court's authority to employ Leonard Street as its special regulatory counsel. In particular, Leonard Street will: (a) prepare and file pleadings with, and participate in various regulatory proceedings, conferences, and evidentiary hearings before, the Federal Energy Regulatory Commission on various matters involving NRG's generation assets, fuel supply and transportation arrangements; (b) prepare and file pleadings with, and participate in proceedings and hearings before, various state energy regulatory commissions on matters involving NRG's generation assets; (c) litigate matters arising out of NRG's ownership and operation of its generation facilities and any attendant fuel procurement and power marketing activities before federal and state courts and in any alternative dispute resolution proceedings; (d) advise the Debtors on the roles and operations of regional power markets administered by federally approved electric system operators and represent Debtors in rule changes proposed by the operators and in disputes with the operators; and (e) draft, negotiate mid finalize agreements, and advise Debtors regarding agreements, involving procurement of fuels or trading of electricity from Debtors' generation facilities. Leonard Street will charge for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates and seek reimbursement of actual and necessary out-of- pocket expenses. The current hourly rates for Leonard & Street's professionals are: Professional Position Hourly Rate ------------ -------- ----------- Fred Morris Attorney $337 Steve Weiler Attorney 355 Bob Hirasuna Attorney 355 James J. Bertrand Attorney 288 Marcia Stanford Attorney 238 Stan Wolf Attorney 270 Nancy Wiltgen Attorney 252 Doug Greenswag Attorney 324 Tammy Ptacek Attorney 324 Jean Hamm Attorney 202 Robert Striker Attorney 202 Larry Ricke Attorney 261 John Wachtler Attorney 166 Thanh Bui Attorney 135 Sue Patterson Paralegal 144 Rodney Coffer Paralegal 112 (NRG Energy Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) OGLEBAY NORTON: Defers Interest Payment on 10% Senior Sub. Notes ---------------------------------------------------------------- Oglebay Norton Company (Nasdaq: OGLE) reports its results for the second quarter and half-year ending on June 30, 2003. Results include: * Revenues for the quarter were $116.5 million compared to $112.6 million in the year-earlier period. Revenues for the six-month period were $179.4 million compared to $174.9 million in the prior-year six-month period. * The company recorded a $13.1 million, or $1.57 per diluted share, asset impairment charge to reduce the net book value of the Performance Minerals segment's mica operations to their estimated fair value, as determined by a third-party appraisal. * Operating loss for the quarter, including the impact of the asset impairment charge, was $6.2 million compared to operating income of $15.5 million in the second quarter of 2002. For the 2003 half-year period, including the impact of the asset impairment charge, operating loss was $8.4 million compared to operating income of $17.0 million for the 2002 half-year period. * Net loss for the quarter, including the impact of the asset impairment charge, was $12.6 million, or $2.47 per diluted share, compared to net income of $3.5 million, or $0.70 per diluted share, for the second quarter last year. Net loss for the six months, including the impact of the asset impairment charge, was $23.6 million, or $4.64 per share, compared to a net loss of $1.9 million, or $0.39 per share, for the same period last year. * Earnings before interest, taxes, depreciation and amortization (EBITDA) were $17.3 million compared to $24.9 million in the second quarter 2002. EBITDA for the half-year was $20.5 million compared to $31.1 million in the year-earlier six months (see attached financials for GAAP reconciliation). Oglebay Norton's June 30, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $257 million. Oglebay Norton President and Chief Executive Officer Michael D. Lundin said: "As previously disclosed, we are in ongoing negotiations with our syndicated bank group and senior note holders to amend our credit agreements. We remain committed to the negotiation process and to finalizing a definitive long-term agreement. To that end, the Company has chosen to defer paying bond interest due on August 1, 2003, on its 10%, 2/1/09, Senior Subordinated Notes. Although the Company has the financial ability to make the interest payment, we have elected to take advantage of the 30-day grace period and defer payment until we reach definitive agreements with our senior secured lenders. We are currently operating under waivers from our senior secured lenders, which expire on August 15, 2003." Commenting on the second quarter results, Lundin said, "Revenues for the quarter were essentially flat excluding the effect of the first quarter 2003 Erie Sand & Gravel acquisition. However, weak demand for limestone and shipping services in Great Lakes Minerals and for lawn and garden products in the Southeast caused us to reduce production volumes and draw down inventories. In addition, increased energy expenses and other costs further negatively impacted overall operating results." The Great Lakes Minerals segment's revenues for the quarter increased to $47.2 million from $46.9 million in the second quarter 2002. Decreased limestone shipments from the segment's quarries and decreased shipments on the segment's fleet resulting from reduced demand were offset by the increase in revenue due to the Erie Sand & Gravel acquisition. Operating margins declined to 6.0% for the quarter compared with 17.3% for the same period in 2002. Operating income decreased to $2.8 million compared to $8.1 million for the same period in 2002. The decrease in operating income and margin is primarily due to higher fuel and utility costs and the effect of lower production volumes. The Global Stone segment's revenues for the quarter were $47.3 million, up from $43.7 million in the 2002 second quarter. The increase in revenues is attributable to increased shipments of fillers and lime. This increase was partially offset by a decrease in shipments of lawn and garden products due in part to higher than normal rainfall along the Shenandoah Valley corridor. Operating margins declined to 10.3% for the quarter compared with 12.8% in last year's second quarter as operating income for the quarter was $4.9 million compared to $5.6 million in last year's second quarter. The decrease in operating income and margin is primarily due to increased energy expenses and lower production volume in the lawn and garden business. The Performance Minerals segment's revenues for the quarter were $22.9 million compared to $23.5 million in the same period last year. The decline in revenues is primarily the result of modest pricing erosion partially offset by a slight volume increase. The segment recorded an operating loss for the quarter of $9.5 million, including the $13.1 million asset impairment charge, compared with operating income of $4.6 million in last year's second quarter. Excluding the impairment charge, operating margins for the quarter were 15.9% compared with 19.5% in the year-earlier period. The decline resulted from increased energy expenses coupled with shifts in mix to lower margin products. Lundin concluded: "We have undertaken a number of measures to contain costs and improve working capital, including inventory management. We continue to seek strategic buyers for certain of our assets in order to permanently reduce our long-term debt. We have engaged Harris Williams & Company, one of the largest, middle-market M&A firms in the country, to assist us in this asset sale process." Oglebay Norton Company, a Cleveland, Ohio-based company, provides essential minerals and aggregates to a broad range of markets, from building materials and home improvement to the environmental, energy and metallurgical industries. Building on a 149-year heritage, our vision is to become the premier growth company in the industrial minerals industry. The company's Web site is located at http://www.oglebaynorton.com OM GROUP: Completes Sale of Precious Metals Business to Umicore --------------------------------------------------------------- OM Group, Inc. (NYSE: OMG) has completed the previously announced sale of its Precious Metals business to Umicore for euro 697 million, or $814 million. OMG will use net proceeds of approximately $730 million to reduce debt. "This transaction is a significant milestone in our strategic plan for several reasons," said James P. Mooney, chairman and chief executive officer. "It allows us to dramatically improve our balance sheet and to focus solely on continuing to increase the profitability of our core Base Metals business. Likewise, it enables us to meet all of the terms and conditions of our amended Revolving Credit Facility and Term Loan Agreement with respect to asset sales long before the December 31, 2003, deadline." According to Thomas R. Miklich, OMG's chief financial officer, "The resulting debt reduction from this transaction will give the Company increased financial flexibility for its Base Metals business." He added, "The Company has secured a commitment for a new underwritten credit facility, which is expected to close in early August. " Headquartered in Cleveland, Ohio, OM Group operates manufacturing facilities in the Americas, Europe, Asia, Africa and Australia. For more information on OM Group, visit the Company's Web site at http://www.omgi.com As reported in Troubled Company Reporter's July 24, 2003 edition, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on specialty chemical and refined metal products producer OM Group Inc. Standard & Poor's said that at the same time it has removed its ratings on Cleveland, Ohio-based OM from CreditWatch where they were placed Oct. 31, 2002. The current outlook is stable. PACIFICARE HEALTH: 2nd Quarter Results Show Marked Improvement -------------------------------------------------------------- PacifiCare Health Systems, Inc. (NYSE: PHS), announced that reported net income for the second quarter ended June 30, 2003 was $73.0 million. This compares with reported net income of $20.3 million in the second quarter of 2002. Earnings in the second quarter this year include a favorable change in estimates of $14 million for health care costs in 2002 and prior periods. The prior year's second quarter EPS included a $0.32 charge per diluted share related to the write-off of unamortized credit facility fees and recapitalization advisory fees. Operating income was $120.3 million, an increase of 149% year-over-year. "With commercial revenues per member per month up 18% over last year, our continued commitment to disciplined pricing combined with additional signs of mitigating cost trends resulted in another quarter of significant year-over- year improvement. Based on the continued improvement in our medical loss ratios we are very pleased to be in a position to raise full year EPS guidance from a range of $6.00 to $6.10 to a range of $6.45 to $6.55," said President and Chief Executive Officer Howard Phanstiel. The revised 2003 EPS guidance includes favorable changes in estimates of $0.67 reported in the first quarter and $0.22 in the second quarter for health care costs in 2002 and prior periods. Additionally, the revised guidance is based on an estimated weighted-average number of shares outstanding of approximately 38 million for the full year 2003. Revenue and Membership Second quarter 2003 revenue of $2.7 billion was 2% below the same quarter a year ago, primarily due to an expected 12% decrease in medical membership. This was partially offset by significant year- over-year increases in commercial revenue yields PMPM of 18%, as well as increases in senior revenue yields PMPM of 5%. Commercial membership at June 30, 2003 was comparable with the prior quarter, and was down 12% year-over-year due mainly to the loss of the CalPERS account as of January 1st of this year. Medicare+Choice membership was down 13% from the second quarter last year, primarily as a result of market exits and benefit reductions that also became effective on January 1st. Specialty and Other revenue grew 19% year-over-year, primarily due to the continued strong performance of the company's pharmacy benefit management subsidiary, Prescription Solutions. Prescription Solutions continued to grow its unaffiliated membership, which increased by approximately 348,000 members (19%) from the prior quarter, and rose by 836,000 (64%) over the second quarter of last year. PacifiCare Behavioral Health's unaffiliated membership grew by 25% over the second quarter last year. Health Care Costs The consolidated medical loss ratio of 83.8% decreased 370 basis points from the second quarter of 2002 and decreased 100 basis points sequentially. The private sector MLR, which is composed of commercial and Medicare Supplement members, decreased 310 basis points year-over-year and 70 basis points sequentially to 83.9%. The government sector MLR, which includes Medicare+Choice membership, was down 430 basis points from the second quarter last year and 130 basis points from the prior quarter to 83.7%. Selling, General & Administrative Expenses The SG&A expense ratio of 12.7% for the second quarter of 2003 increased by 130 basis points year-over-year, and was up 50 basis points sequentially. The increase in this ratio was primarily the result of new product development and marketing costs, increased accruals for performance-based incentive compensation and expensing stock-based compensation. The company began expensing stock-based compensation in the first quarter of this year. Other Financial Data Medical claims and benefits payable totaled $1.1 billion at June 30, 2003, which was comparable with the prior quarter. Days claims payable for the second quarter compared with the first quarter decreased to 42.9 days from 43.5 days. However, after excluding the non-risk, capitated portion of the company's business, days claims payable increased from 75.5 days to 75.6 days. "The slight overall decrease in days claims payable reflects favorable adjustments to reserves previously held for some capitated providers," said Executive Vice President and Chief Financial Officer Gregory W. Scott. PacifiCare Health Systems serves more than 3 million health plan members and approximately 9 million specialty plan members nationwide, and has annual revenues of about $11 billion. PacifiCare is celebrating its 25th anniversary as one of the nation's largest consumer health organizations, offering individuals, employers and Medicare beneficiaries a variety of consumer-driven health care and life insurance products. Specialty operations include behavioral health, dental and vision, and complete pharmacy and medical management through its wholly owned subsidiary, Prescription Solutions. More information on PacifiCare Health Systems is available at http://www.pacificare.com * * * As reported in Troubled Company Reporter's December 4, 2002 edition, Standard & Poor's assigned its 'B' rating to PacifiCare Health Systems Inc.'s $125 million 3% convertible subordinated debentures, which are due in 2032 and are being issued under SEC Rule 144A with registration rights. Standard & Poor's also said that it revised its outlook on PacifiCare to stable from negative. P-COM INC: June 30 Balance Sheet Insolvency Doubles to $30 Mill. ---------------------------------------------------------------- P-Com, Inc. (OTC Bulletin Board: PCOM), a worldwide provider of wireless telecommunications equipment, reported that net sales increased to $5.0 million for the quarter ended June 30, 2003, compared to $4.6 million for the first quarter of 2003 and $8.1 million for the corresponding quarter in 2002. Gross profit margins, excluding certain inventory and related charges, increased significantly to 23% in the quarter from 10% in the first quarter of 2003. Including certain inventory and related charges, gross profit margins amounted to 18% for the quarterly period ended June 30, 2003, compared to negative 65% in the quarterly period ended March 31, 2003 and 18% for the quarterly period ended June 30, 2002. The increase in gross margin, excluding certain inventory related charges, is attributable principally to a higher percentage of total revenue in the second quarter from the sale of unlicensed equipment and out-of-warranty repairs, which provide higher gross margins compared to newly developed product sales that have not yet reached the volume required for higher margins. Loss from continuing operations for the quarter was $4.2 million, compared to a loss of $8.5 million in the first quarter of 2003, and a loss of $6.7 million for the same period in 2002. Including the loss from discontinued operations of $1.8 million recorded in the quarter, P-Com reported a net loss for the second quarter of 2003 of $6.0 million. Operating expenses, excluding restructuring charges of $2.8 million for the quarter were $4.1 million, compared to $4.5 million in the first quarter of 2003, and $8.5 million for the same period in 2002. Operating expenses, including restructuring charges, amounted to $6.9 million for the quarterly period ended June 30, 2003, compared to $5.1 million for the quarterly period ended March 31, 2003. The restructuring charges were recorded for impairment of long-lived assets. P-Com, Inc.'s June 30, 2003 balance sheet show a working capital deficit of about $34 million, and a total shareholders' equity deficit of about $30 million. "Despite uncertain conditions in the telecommunications industry, we made steady progress in the second quarter in executing our restructuring program," said P-Com Chairman George Roberts. "We took steps to significantly improve our balance sheet, and we are benefiting from cost controls put in place over the past year. We've resized the business to match current revenue levels. Our products continue to sell around the world, and our margins are improving." P-Com, Inc., develops, manufactures, and markets point-to-point, spread spectrum and point-to-multipoint, wireless access systems to the worldwide telecommunications market. P-Com broadband wireless access systems are designed to satisfy the high-speed, integrated network requirements of Internet access associated with Business to Business and E-Commerce business processes. Cellular and personal communications service providers utilize P-Com point- to-point systems to provide backhaul between base stations and mobile switching centers. Government, utility, and business entities use P-Com systems in public and private network applications. For more information visit http://www.p-com.com PENN TRAFFIC: Court Approves Permanent $270-Mill. DIP Financing --------------------------------------------------------------- The Penn Traffic Company (OTC: PNFTQ.PK) announced that the U.S. Bankruptcy Court for the Southern District of New York in White Plains today approved $270 million of permanent debtor-in- possession financing for the Company. Fleet Capital Corporation and a syndicate of lenders that were lenders to the Company prior to the filing of its chapter 11 petition is providing the $270 million senior secured DIP financing facility to Penn Traffic. Approximately $200 million of the DIP facility will repay in full these lenders' senior secured pre-petition loans. "The permanent DIP financing enables the Company to conduct business as usual during the reorganization process," said Joseph V. Fisher, Penn Traffic's President and Chief Executive Officer. "We are gratified by the continued strong support of our lenders, which we view as an important vote of confidence in our Company, our people and our potential." Approval of the permanent DIP financing was one of a number of motions approved by the court today, including motions that extend the deadline for Penn Traffic to consider whether it will assume or reject unexpired real estate leases. "The effect of the approval of these motions is to give us more time and more flexibility to complete our business plan and our plan of reorganization," said Mr. Fisher. "While we still intend to reorganize and emerge from chapter 11 as quickly as possible, we also want to make certain that before completing our plans we consider all the options open to us for ensuring that we exit reorganization a stronger, more competitive company." The Penn Traffic Company operates 212 supermarkets in Ohio, West Virginia, Pennsylvania, upstate New York, Vermont and New Hampshire under the "Big Bear," "Big Bear Plus," "Bi-Lo," "P&C" and "Quality" trade names. Penn Traffic also operates a wholesale food distribution business serving 76 licensed franchises and 53 independent operators. PERSONNEL GROUP: Second Quarter Results Enter Positive Territory ---------------------------------------------------------------- Personnel Group of America, Inc. (OTCBB: PRGA.OB), a leading information technology and professional staffing services company, announced its results for the second quarter and six months ended June 29, 2003. For the second quarter, total revenues were $122.5 million, up sequentially from $120.7 million in the first quarter of 2003 but below the $141.7 million of revenues recorded in the second quarter of 2002. PGA's Staffing business contributed $62.7 million, or 51%, of total revenues during the second quarter, and the Company's Technology practice added $59.8 million, or 49%. Including certain restructuring and rationalization charges and a gain from the Company's recently completed financial restructuring, PGA reported net income of $83.0 million, or $0.62 per share, for the second quarter, compared with a net loss of $2.7 million in the second quarter last year. During the second quarter of 2003, the Company recorded restructuring and rationalization charges of $2.0 million, related primarily to its ongoing operational restructuring activities, and a net gain from the financial restructuring of $84.6 million. Due to the Company's income tax position, the Company recorded no tax provision during the first half of 2003. The gain from financial restructuring resulted from the reduction of over $120.0 million of outstanding indebtedness and was net of approximately $1.5 million of fees and expenses in the second quarter associated with the financial restructuring transaction. Financial restructuring related expenses were previously reported by the Company as restructuring and rationalization charges and have been reclassified to gain on financial restructuring, net. As of June 29, 2003, the Company's contractual obligations under the secured credit facility and the 5.75% Notes totaled $59.1 million, down from $218.0 million at December 29, 2002. Exclusive of restructuring and rationalization charges, the Company recorded operating income of $1.2 million for the second quarter, versus operating income, also exclusive of restructuring and rationalization charges, of $2.4 million in the second quarter last year. In other news, PGA reported that its shareholders had approved a charter amendment at the 2003 annual meeting of shareholders, which will, among other things, effectuate the 1-for-25 reverse stock split contemplated in the financial restructuring. The charter amendment also includes a formal change of the Company's name to "Venturi Partners, Inc.," which the shareholders had previously approved. PGA intends to file the charter amendment during the first week of August. "PGA's revenues improved sequentially in the second quarter, breaking a streak of over 10 consecutive quarters of revenue declines," commented Larry L. Enterline, PGA Chief Executive Officer. "Although the macroeconomic data continues to suggest that the timing of a recovery is uncertain, our revenue trends suggest that the worst is behind us and our second quarter results have caused some cautious optimism on our part that a revenue turnaround may be near. With the completion of our financial restructuring in April, we have reallocated attention and resources toward returning our operations to steady growth and profitability and believe these efforts are paying off. As the disruption from the financial restructuring process continues to subside, we believe these renewed efforts will translate into continuing improvements and position us extremely well to take advantage of the recovery. Based on what we achieved in the second quarter and as the result of our rededication to further improvements in our operations, we would expect our financial results to improve rapidly if the economy strengthens later this year as many expect. "The completion of our financial restructuring also marked a milestone in the evolution of PGA and coincides with the transformation of the Company from a loosely knit group of operating units functioning independently into a unified organization with local and regional branches operating as part of a national office network," Enterline continued. "This process is essentially complete and, as a result, our customers already know us as Venturi in the marketplace. Now that we have begun the next chapter in PGA's corporate life, we believe the time is right for a change in our corporate identity as well. We are excited about the change of our corporate name to Venturi Partners, Inc., and look forward to building a brand that is synonymous with the highest quality IT staffing and consulting and commercial staffing services." Technology Services Technology Services revenues in the second quarter decreased slightly to $59.8 million from $60.6 million in the first quarter of 2003, and were down from the $77.6 million recorded in the second quarter of 2002. Gross margins were 23.7% in the second quarter, up from 22.1% in the first quarter of 2003 but still below the second quarter 2002 level of 24.4%. Operating income margins, exclusive of the second quarter restructuring and rationalization charges, were 4.3%, compared with 2.0% in the first quarter and 4.8% in the second quarter of 2002. Billable headcount declined sequentially from the first quarter levels despite several consecutive weeks of increases in June, with an average of approximately 1,800 IT professionals on assignment during the second quarter and 1,800 on assignment at the end of the quarter. Staffing Services Revenues for PGA's Staffing Services unit in the second quarter increased 4.2% to $62.7 million from $60.2 million in the first quarter of 2003, but were lower than the $64.1 million of revenues recorded in the second quarter last year. Gross profit in the second quarter increased slightly to $12.4 million from $11.7 million in the first quarter of 2003. Operating income margins, exclusive of the second quarter restructuring and rationalization charges, were 3.5%, up from 1.7% in the first quarter but below last year's second quarter level of 4.2%. Permanent placement revenue in the second quarter as a percentage of total Staffing Services sales was 2.3% compared with 2.0% in the first quarter. Additionally, vendor-on-premise business represented 37.0% of division sales in the second quarter, down from 37.4% in the first quarter of 2003. As a result of the normal seasonal patterns, gross margin percentage for the second quarter of 2003 increased to 19.9% from 19.4% in the first quarter, but was lower than the 22.4% recorded in the second quarter of 2002. At June 29, 2003, the Company's balance sheet shows a net capitalization of about $46 million as compared to a net capital deficit of about $52 million six months ago. Personnel Group of America, Inc. is a nationwide provider of information technology consulting and custom software development services; high-end clerical, accounting and other specialty professional staffing services; and technology systems for human capital management. The Company's Technology Services operations now operate under the name "Venturi Technology Partners" and its Staffing Services operations operate as "Venturi Staffing Partners" and "Venturi Career Partners." PG&E NATIONAL: USGen Wants to Honor Prepetition Property Taxes -------------------------------------------------------------- USGen, a debtor-affiliate of PG&E National Energy Group Inc., wants to pay, in its sole discretion, the undisputed, prepetition claims of certain governmental units in respect of real and personal property taxes and other ancillary obligations, either if those claims have become due and payable prior to or after the Petition Date. USGen represents that it has sufficient cash reserves and will have sufficient cash from ongoing operations to pay taxes in the ordinary course of its business. USGen believes that it is substantially current on its obligations with respect to prepetition taxes. As a result, unpaid taxes relating to prepetition periods consist largely of those that are not due until after the Petition Date. Because of the various ways the USGen's taxing authorities calculate taxes, it cannot state with complete accuracy the prepetition amount of taxes currently due and owing. But USGen estimates that the total of all Property Tax Claims will not exceed $2,800,000. USGen explains that the payment of the Property Tax Claims will give the governmental entities no more than that to which they otherwise would be entitled under a reorganization plan. The payment will save USGen potential interest expense and penalties that otherwise might accrue on the Property Tax Claims during its Chapter 11 case. The payment will also keep USGen in the good graces of local communities which rely heavily on the payment of its taxes. John Lucian, Esq., at Blank Rome LLP, in Baltimore, Maryland, tells the Court that, even if the Property Tax Claims are unsecured, those claims most likely would be priority claims entitled to payment prior to general unsecured creditors. To the extent that the Property Taxes are entitled to eighth priority treatment under Section 507(a)(8)(B) of the Bankruptcy Code, the governmental units also may attempt to assess penalties. USGen's owned or leased facilities and the personal property at those premises are located in the states of Massachusetts, New Hampshire, Rhode Island and Vermont. Under applicable law, state and local governments in the jurisdictions in which the Facilities are located are granted the authority to levy taxes against real and personal property. Upon information and belief, Mr. Lucian reports, USGen is the largest taxpayer in many, if not all, of these jurisdictions. In some cases, the ultimate beneficiaries of USGen's tax payments are small towns and other municipalities whose economies rely heavily on the payment of taxes to fund basic, indispensable community services. Depending on the jurisdiction, USGen either pays its Property Taxes quarterly, semi-annually or annually, in the ordinary course as the taxes are invoiced or become due and payable under the Payment In Lieu Of Taxes (PILOT) Agreements or similar agreements. Each of the applicable taxing jurisdictions have their own fiscal year, determined either by state or local statute, for purposes of assessing, billing and collecting the Property Taxes. The Property Tax payments are generally due within the applicable fiscal year. Thus, as of the Petition Date, USGen owed Property Taxes for the current fiscal tax years, which taxes either (a) have become due and payable but have not been paid, or (b) will become due and payable postpetition. (PG&E National Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLAROID: Cardinale & Maiorelli Seeks Access to Produced Docs. -------------------------------------------------------------- The Polaroid Corporation Debtors' Examiner, Perry M. Mandarino, has reviewed more than 200,000 pages of documents -- Produced Material -- and has taken or scheduled examinations of more than 15 witnesses. Mr. Mandarino sought and obtained most of the Produced Material from FTI Consulting, Inc. and Houlihan Lokey Howard & Zukin. Frederick B. Rosner, Esq., at Jaspan Schlesinger Hoffman LLP, in Wilmington, Delaware, tells the Court that the various entities and persons from whom Mr. Mandarino has obtained and is continuing to seek discovery -- Producing Parties -- were authorized to respond to the Examiner's Rule 2004 Demands by: (a) providing copies of the Produced Material; or (b) providing a privilege log. In lieu of a privilege log, the Producing Parties were permitted to submit the Produced Material without waiving any privilege pursuant to terms of the Protocol Order. The Protocol Order allows the Examiner, and any Requesting Party, to contest the assertion and applicability of any privilege. Thus, FTI responded to Mr. Mandarino's production request by delivering all of the requested documents and asserting a global privilege. To facilitate requests for access to the Produced Material, Mr. Mandarino provided a Production Notice that sets forth: (a) the Name of the Producing Party; (b) contact information for the Producing Party or their counsel; (c) the date that the Produced Material were requested from the Producing Party; and (d) the date(s) the Produced Material were given to the Examiner. Mr. Rosner relates that on May 15, 2003, pursuant to the Protocol Order, William V. Cardinale and George Maiorelli sent written requests seeking access to the Produced Material FTI and Houlihan provided. Mr. Rosner tells Judge Walsh that Messrs. Cardinale and Maiorelli want access to the Produced Material because they need to: (1) participate in the Investigation; (2) conduct their own investigation and analysis; (3) evaluate their options; and (4) determine an appropriate course of action. On May 21, 2003, JPMorgan Chase Bank, as agent to the Debtors' prepetition secured lenders, objected to Messrs. Cardinale and Maiorelli's request to gain access to the Produced Material provided by FTI. JPMorgan asserts that the Produced Material is protected by the attorney-client privilege and the work-product doctrine. The Produced Material also "reflects the financial analysis of an independent third party creditor," therefore it is "not relevant nor appropriate for those interested in understanding the Debtors' financial picture and whether there were accounting irregularities at Polaroid." On May 23, 2003, the Creditors' Committee also objected to Messrs. Cardinale and Maiorelli's request for access to the Produced Material given to the Examiner by Houlihan. The Committee asserts that the Produced Material is either "Confidential" or protected by the "Work Product" doctrine. However, Mr. Rosner notes, the objections by JPMorgan and the Creditors' Committee do not provide adequate information to allow them to evaluate the privileges asserted. At a minimum, both JPMorgan and the Creditors' Committee must supplement their objections with detailed information concerning the nature of the documents and the application of the privilege to each. Furthermore, Mr. Rosner argues that the work-product doctrine is not applicable to the Objections because the doctrine applies to papers prepared in connection with pending or anticipated litigation. FTI provided financial analysis to JPMorgan, not legal advice. Thus, the prepared documents were only analysis of JPMorgan's financial risks and not directly related to legal strategy. Mr. Rosner says that the assertion that the Debtors' bankruptcy proceedings were "contested" is insufficient to invoke the protections of the work-product privilege. And even if the work- product doctrine were applicable, there is ample justification to set them aside based on well-established exceptions. The work-product doctrine, being not an absolute privilege, may be set aside when the requesting party demonstrates a "substantial need" and an "inability to obtain their equivalent without undue hardship." This warrants dissemination of the Produced Material to Messrs. Cardinale and Maiorelli because both are individual shareholders without the resources to independently obtain the information held by FTI and Houlihan. Currently, there are over 200,000 pages of documents in storage at the Debtors' counsel's offices in Boston, Massachusetts. And because the Examiner's Report is due in August this year, the time and expense in reviewing the documents is an enormous burden that Messrs. Cardinale and Maiorelli will be unable to undertake comprehensively. According to Mr. Rosner, one cannot simply place non-attorneys on the attorneys' payroll and thereby confer on them the protections specifically afforded to attorneys. Thus, JPMorgan may not assert that FTI is protected by attorney-client privilege because: (1) FTI is a non-attorney; and (2) FTI neither acted as an attorney, nor it provided legal advice. Mr. Rosner further remarks that the Confidentiality Agreement asserted by the Creditors' Committee is wholly without merit because it implies that the Creditors' Committee obtained confidential information from the Debtors, making its dissemination a violation to the Confidentiality Agreement. Moreover, the Creditors' Committee's Confidentiality Agreement is of no effect to the present case because: (a) the Debtors have not asserted a privilege to any of the Produced Material; and (b) Messrs. Cardinale and Maiorelli are both shareholders of the Debtors. In cases involving allegations of corporate misconduct, Mr. Rosner relates, the fiduciary exception to the attorney-client privilege allows shareholders to obtain access to confidential or privilege material. Since this is applicable to the present case, the Debtors would not, and could not, assert a privilege against Messrs. Cardinale and Maiorelli. Therefore, the Creditors' Committee cannot use the purported confidentiality privilege as a shield. Whereas the Examiner's Investigation is intended to address the Accounting Problems, the Protocol Order is designed to allow third parties -- including Messrs. Cardinale and Maiorelli -- to: (a) access the Produced Material; and (b) participate effectively in the Investigation. In addition, Mr. Rosner emphasizes that Messrs. Cardinale and Maiorelli have pledged to abide by the procedures set by the Protocol Order to provide confidentiality of the Produced Material. Therefore, Messrs. Cardinale and Maiorelli ask the Court to grant them access to the Produced Material. (Polaroid Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) PRIMEDEX HEALTH: Prepackaged Chapter 11 Filing in the Offing ------------------------------------------------------------ Primedex Health Systems Inc., has defaulted in its obligation to redeem the $16.3 million in its outstanding 10% convertible subordinated debentures due June 30, 2003. In connection with the default the Company has requested debenture holders to consent to the extension of the debenture for an additional five years through June 30, 2008 in return for which Primedex will (i) increase the annual interest rate to 11.5%; (ii) reduce the conversion rate to $2.50; and (iii) agree not to redeem the debentures prior to July 1, 2005. Assuming the Company receives the approval of a majority of the debenture holders and two thirds in amount of those responding Primedex intends to file a prepackaged Chapter 11 Plan of Reorganization with the Bankruptcy Court to confirm the Plan and to approve the change which will then bind all debenture holders. The Company has said that the Bankruptcy proceeding should have no other impact on Primedex Health Systems. PRIME HOSPITALITY: Second Quarter Net Loss Balloons to $18 Mill. ---------------------------------------------------------------- Prime Hospitality Corp. (NYSE: PDQ), a leading hotel owner, operator and franchisor, reported its results for the three and six months ended June 30, 2003. Net income before asset transactions for the second quarter of 2003 was $2.3 million, or $.05 per share, compared to $6.1 million, or $.13 per share, for the second quarter of 2002. Prime reported a net loss of $17.8 million, or $.40 per share, for the second quarter of 2003. Non-recurring items in the second quarter of 2003 were comprised primarily of a $35.0 million non- cash reserve against the net assets related to the HPT lease partially offset by gains on asset sales and debt retirements. For the second quarter of 2002, the net loss was $4.5 million, or $.10 per share. Non-recurring items in the second quarter of 2002 consisted of $12.9 million in charges associated with the retirement of debt and a $4.5 million litigation charge. "The sluggish economy combined with the war in Iraq resulted in continued weak business travel trends," said A.F. Petrocelli, Chairman and Chief Executive Officer of Prime. "With corporate travel down, we focused our sales efforts on local group and leisure travel and were able to increase our occupancy levels although at lower rates. While there is no strong indication of a recovery, we are encouraged by the improvements we saw beginning in May and continuing through July. "Although the industry continues to struggle, we continue to make improvements in our financial structure. In July, we made the decision to discontinue funding the operating losses on our subsidiary's lease with HPT. Over the past twelve months the lease had a negative cash flow impact of $11.5 million. We also sold two hotels for $17.4 million and financed our two joint venture deals at attractive rates realizing $12.5 million in proceeds. This resulted in a $25 million debt reduction in the quarter." For the six months ended June 30, 2003, the net loss before asset transactions was $3.3 million, or $.07 per share, compared to net income before asset transactions of $6.5 million, or $.14 per share, for the first half of 2002. The total net loss, which includes asset transactions and other one-time charges, for the six months ended June 30, 2003, was $24.5 million, or $.55 per share, compared to a net loss of $3.7 million, or $.08 per share, for the comparable period in 2002. Operating Results For the quarter, total revenues decreased by $6.5 million to $104.5 million due to lower revenues at comparable hotels and the impact of asset divestitures. Revenue per available room at Prime's comparable owned and leased hotels decreased by 3.7% in the second quarter of 2003 as compared to the second quarter of 2002. The decrease was driven by lower average daily rate due to a change in the mix of business from corporate to lower rated group and leisure travel. For the second quarter of 2003, ADR decreased by 12.2% to $64.44 while occupancy increased by 6.2 percentage points to 70.1%. Gross operating profit margins at comparable owned and leased hotels declined by 3.5 percentage points due to the lower ADR. Earnings before interest, taxes, depreciation and amortization decreased by $8.7 million to $18.4 million in the second quarter of 2003. The HPT lease contributed an EBITDA shortfall of approximately $1.4 million or $.02 per share for this quarter compared to a shortfall of $0.8 million or $.01 per share in the prior year's quarter. Interest expense declined by 29.5%, or $2.2 million, to $5.4 million for the quarter ended June 30, 2003 primarily due to debt reductions and lower interest rates. System-Wide Performance For the second quarter of 2003, Prime reported a 4.3% REVPAR decrease at its comparable AmeriSuites hotels, as occupancy increased by 4.5 percentage points to 71.4% and ADR decreased by 10.4% to $67.19. The major markets affected were Atlanta, Chicago, Dallas, Denver and the Northeast. For the second quarter of 2003, Prime reported a 0.2% REVPAR increase at its comparable Wellesley Inns & Suites hotels, as occupancy increased by 8.1 percentage points to 66.4% and ADR decreased by 12.0% to $53.25. The Atlanta and Phoenix markets reported increases while the New Jersey/New York and Austin markets reported decreases. Prime's comparable non-proprietary brand hotels, which consist primarily of upscale full-service hotels in the Northeast, reported a 9.7% REVPAR decrease for the second quarter of 2003 as occupancy decreased by 2.1 percentage points to 70.8% and ADR decreased by 7.0% to $104.61. The non-proprietary brands were impacted by reductions in corporate group travel and softness in the greater New York City market. Brand Developments As of June 30, 2003, Prime had 148 AmeriSuites and 80 Wellesley Inns & Suites hotels in operation. Prime intends to expand its brands primarily through franchising. During the second quarter, Prime added seven proprietary brand hotels to its system comprised of two AmeriSuites and five Wellesley Inns & Suites including three corporate Wellesley conversions. Three AmeriSuites hotels also were removed from the system in the quarter. The new hotels opened in the quarter were two AmeriSuites in Milwaukee and Wellesley Inns in Miamisburg, OH, Glen Ellyn, IL, Fort Smith, AR, Danbury, CT and Fairfield, NJ. In addition, in July an owned hotel was converted to a Wellesley Inn in Armonk, NY. Currently, Prime has two AmeriSuites under construction and a pipeline of 20 executed franchise agreements including six in the planning stage. There are also two Wellesley Inns under conversion. During the quarter, Prime extended its franchise and management agreements on 19 AmeriSuites hotels owned by Equity Inns, Inc. (NYSE: ENN). Currently, the agreements expire at various times between 2007 and 2008. Under the new agreements, Prime extended the existing franchise agreements to 2028 and management agreements to 2010 provided that Prime continues to be in compliance with the cash flow guarantee requirements under the current agreements. The cash flows guarantee requirements were not extended beyond their original terms. During the second quarter, Prime announced an agreement for the installation of high-speed internet access in its AmeriSuites, Wellesley Inns & Suites and Prime Hotels and Resorts brands. The new amenity will be available on both a wired and wireless basis in all guest and meeting rooms as well as wireless access in all common areas including hotel lobbies, fitness centers, pool areas and restaurants. Prime has already installed this feature in 40 hotels and expects the majority of the installations to be complete by year-end. In September 2001, Prime introduced a new expanded rewards program offering both points toward a free hotel stay and airline miles. Prime increased its membership in the program by almost 10% in the quarter and now has over 300,000 members. This has resulted in an increased revenue contribution from the rewards program with frequent guests accounting for approximately 14% of revenues at Prime's brands in the second quarter of 2003, up from 12% for the second quarter of 2002. During the quarter, Prime added United Airlines as an airline partner joining Continental, American, Delta and America West. Financial Condition/Asset Sales Glen Rock Holding Corp, a subsidiary of the Company, did not make its scheduled July 1 rent payment of approximately $2.0 million to Hospitality Properties Trust (NYSE: HPT) and received a default notice from HPT. The lease covers 24 AmeriSuites hotels owned by HPT. Over the past twelve months, cash flow was negatively impacted by $11.5 million as rent payments exceeded operating cash flow by $9.0 million and approximately $2.5 million was required to be set aside for capital improvements. The termination of the lease would result in the forfeiture of certain deposits and, accordingly, Prime has taken a $35.0 million non-cash charge against the net book value of the assets associated with the lease. Prime is continuing to operate the hotels as AmeriSuites and Prime and HPT have had discussions regarding the management and franchise agreements on the hotels which are subordinated to the lease obligations to HPT. During the second quarter, Prime sold one AmeriSuites and one Wellesley Inn for total proceeds of $17.4 million, retaining the franchise rights under 20-year franchise agreements. Prime also has one additional hotel under contract for sale. In April 2003, the Sheraton Meadowlands venture obtained a $25 million first mortgage loan at LIBOR + 2.75% due in 2006. Under the loan agreement, Prime and one of its partners, United Capital Corp., agreed to jointly guarantee $4 million of the loan with the remainder recourse to the hotel. Prime received approximately $10 million of the loan proceeds. In July 2003, the Quebec venture obtained an $8.2 million first mortgage loan at a fixed rate of 6.26% due in 2008. The loan is recourse to the hotel only. Prime received $2.5 million of the loan proceeds. With the financings of both hotels and the addition of a new partner earlier this year, Prime's 40% investment in both ventures is at approximately $12.0 million. Prime utilized the proceeds from the asset sales and joint venture financings to reduce its debt balance by approximately $25.3 million since March 31, 2003. The reduction included the retirement of $13.3 million of 8-3/8% Senior Subordinated Notes for $12.5 million in cash. As of June 30, 2003, Prime had $254.2 million in debt and $14.2 million in cash and cash equivalents. Prime's debt to book capitalization percentage in 27.2%. Adjusted on a pro-forma basis for the HPT lease which is required under its revolving credit facility, Prime's debt to last twelve months EBITDA ratio is 4.0 times, and its EBITDA to interest is 2.9 times. Under its revolving credit facility, the Company is required to maintain a debt to EBITDA ratio of 4.5 times (4.25 at September 30, 2003) and an EBITDA to interest ratio of 2.35 times (2.50 at September 30, 2003). Prime Hospitality Corp., one of the nation's premiere lodging companies, owns, manages and franchises 248 hotels throughout North America. The Company owns and operates three proprietary brands that compete in different segments: AmeriSuites(R) (all- suites), Wellesley Inns & Suites(R) (limited-service) and Prime hotels & Resorts (full-service). Also within its portfolio are owned and/or managed hotels operated under franchise agreements with national hotel chains including Hilton, Radisson, Sheraton, Holiday Inn and Ramada. Prime can be accessed over the internet at http://www.primehospitality.com As reported in Troubled Company Reporter's July 30, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit and 'B' subordinated debt ratings for Prime Hospitality Corp. At the same time, the ratings were removed from CreditWatch where they were placed on July 2, 2003. The outlook remains negative, reflecting the continued soft lodging environment. PRIMEDIA INC: Second Quarter Results Reflect Solid Performance -------------------------------------------------------------- PRIMEDIA Inc. (NYSE: PRM) announced that consolidated sales from continuing businesses were $365.0 million in second quarter 2003, compared to $384.2 million in the second quarter 2002. Operating Income was $32.0 million in second quarter 2003 versus $8.7 million in the comparable period of 2002. Net income was $88.9 million in second quarter 2003, including a $104.3 million gain on the Seventeen Asset Sale, compared to a net loss of $34.4 million in second quarter 2002. Income applicable to common shareholders per common share was $0.28 in second quarter 2003, improved from a loss of $0.12 per share in the same period last year. As previously announced, the company eliminated the non-core category at the end of the second quarter 2002, therefore reported and continuing businesses are identical subsequent to July 1, 2002. Charles McCurdy, President and Interim CEO of PRIMEDIA, said, "Our performance in the second quarter was solid. Management has sharpened its focus on our core businesses and is executing well, delivering excellent products to our audiences and creative marketing solutions to our advertisers. While B2B trade advertising remains weak, our Consumer Guides business continues to grow and enthusiast magazines remain solid. Our goals are to generate organic growth, continue to improve profitability, improve and simplify the balance sheet and deliver increasing value to our investors." Segment Results Consumer Consumer Segment sales from continuing businesses were $291.7 million in second quarter 2003, down $1.8 million or 0.6%. For the Consumer Magazine and Media Group, sales were down approximately $7 million, due to two fewer issues of New York magazine and the rate base reduction in the soap opera titles implemented earlier this year. Sales from Motor Trend and Automobile magazines, and the automotive enthusiast, action sports and crafts categories grew in second quarter 2003. For the Consumer Guides division, sales were up approximately $4 million in second quarter 2003, due primarily to continued growth in Apartment Guides and its distribution arm, Distributech. PRIMEDIA Television was soft in the second quarter 2003 due primarily to reduced advertising spending on Channel One from two large accounts, which more than offset sales from new advertisers. Sales for PRIMEDIA Television in the second quarter 2003 were down approximately $2 million. PRIMEDIA's Internet businesses and About continue to grow and improve their financial performance. Consumer Segment EBITDA from continuing businesses was $66.7 million in second quarter 2003, up by 21.3%, due primarily to cost reductions in most Consumer Segment businesses. B2B B2B Segment sales from continuing businesses were $74.8 million in second quarter 2003, down $17.6 million or 19.0%. Sales at trade magazines and trade shows declined by approximately $7 million in second quarter 2003, with weakness across numerous categories. Additionally, certain annual trade shows that occurred in the second quarter of last year occurred in the first quarter of this year. The difference in the timing of those trade shows caused the year over year comparison to decline by approximately $3 million. Also, the absence of revenues from certain products that were shut down caused a year over year decline of approximately $2 million in second quarter 2003. Sales for PRIMEDIA Workplace Learning were down by approximately $4 million in second quarter 2003, as demand for workplace training services continues to be weak. B2B Segment EBITDA from continuing businesses was $6.9 million in second quarter 2003, down 56.6%. Balance Sheet Debt Reduction In the second quarter 2003, the company permanently reduced its credit facilities by $50 million. At June 30, 2003, total long- term debt declined by approximately $140 million compared to March 31, 2003. Maturity Extended PRIMEDIA's next senior note maturity will now occur in 2008 and its interest expense will be reduced by approximately $1.5 million on an annual basis, as a result of issuing $300 million principal amount of 8% Senior Notes due 2013 on May 15, 2003 and redeeming all $291.5 million of its 8-1/2% Senior Notes due 2006 on June 16, 2003. Retirement of Preferred Stock The company will realize annualized dividend savings of approximately $1.5 million as a result of repurchasing approximately $16.4 million redemption value of Series D, F and H preferred stock, in two-step transactions completed in May 2003 for approximately $15.1 million in cash. To date, $22.5 million of total redemption value of preferred stock has been retired against the current $50 million repurchase program. Liquidity PRIMEDIA continues to have sufficient financial resources to meet its cash needs and service its debt and other fixed obligations for the foreseeable future. At June 30, 2003, the company had approximately $280 million of cash and available unused credit lines. Covenant Compliance During the second quarter 2003, the Credit Agreement amongst the company and various lenders was amended to provide for a one-year hiatus in each of the scheduled step-downs in the permitted leverage ratio, as defined in the Credit Agreement. As a result of the amendment, the leverage ratio remains at 6.0 and does not step down to 5.75 until the third quarter of 2004. This amendment enables the company to consider alternatives to improve its capital structure, but was not necessary to remain in compliance with all of its debt covenants. The leverage ratio for the 12 month period ended June 30, 2003 is expected to be approximately the same as the 4.8 times reported for the 12 month period ended March 31, 2003. Severance Related to Separated Senior Executives The company recorded a charge of approximately $5.6 million in the second quarter 2003 relating to severance payments for the former CEO and CFO. Provision for Impairment The company recorded a Provision for Impairment of Investments of $7.7 million in the second quarter 2003 for the write-down of assets for equity investments. There are no material assets for equity investments or related deferred revenues remaining on PRIMEDIA's balance sheet. Depreciation, Amortization and Interest Expense Depreciation expense was approximately $14.8 million in the second quarter 2003, lower than the same quarter last year, due primarily to lower fixed asset balances resulting from impairment charges as required by SFAS 144 in 2002. Amortization expense declined to $10.0 million in second quarter 2003, compared to $16.3 million in the same period of the prior year, due primarily to the divestiture of certain titles, intangibles that became fully amortized and lower intangible balances resulting from impairment charges as required by SFAS 144, all occurring in 2002. Interest expense was approximately $31.8 million in the second quarter 2003. Interest expense decreased year-over-year as a result of reduced debt levels and lower interest rates. Seventeen Asset Sale On May 30, 2003, PRIMEDIA closed the Seventeen Asset Sale for a total cash consideration of $182.4 million, subject to standard post closing adjustments. The company used the proceeds to repay borrowings under its revolving loan facilities. This sale resulted in a gain of $104.3 million recorded in second quarter 2003. 2003 Guidance Due to continued weakness in the B2B Segment, PRIMEDIA is lowering its target for full year 2003 sales to the $1,460-1,480 million range. Compared to prior year, consolidated sales declined in the first half of 2003 and are expected to be essentially flat in the second half of this year. In the second half of 2003, costs are expected to be lower than previously estimated and level to the same period in the prior year. Therefore, Segment EBITDA is expected to be essentially flat in the second half of 2003. Second half 2003 guidance is driven by expected growth in the Consumer Segment offset by weakness in the B2B Segment. Use of Consumer Segment EBITDA and B2B Segment EBITDA Consumer Segment EBITDA and B2B Segment EBITDA reconcile to Net Income in the attached Financial Highlights table. Segment EBITDA for a segment is defined as segment earnings before interest, taxes, depreciation, amortization and other credits (charges). Other credits (charges) include severance related to separated senior executives, non-cash compensation and non-recurring charges, provision for severance, closures and restructuring related costs and loss on sale of businesses and other, net. We believe that Segment EBITDA is the most accurate indicator of the company's segment results because it focuses on revenue and operating costs driven by operating managers' performance. These segment results are used by the company's chief operating decision maker to make decisions about resources to be allocated to the segments and to assess their performance. PRIMEDIA is the leading targeted media company in the United States, with positions in consumer and business-to-business markets. Our properties deliver content via print as well as video, the Internet and live events and offer highly effective advertising and marketing solutions in some of the most sought after niche markets. With 2002 sales from continuing businesses of $1.5 billion, PRIMEDIA is the #1 special interest magazine publisher in the U.S. with more than 250 titles. Our well known brands include Motor Trend, Automobile, New York, Fly Fisherman, Power & Motoryacht, Creating Keepsakes, Ward's Auto World, and Registered Rep. The company is also the #1 publisher and distributor of free consumer guides, including Apartment Guides. PRIMEDIA Television's leading brand is the Channel One Network and About is one of the largest sources of original content on the Internet. PRIMEDIA's stock symbol is: NYSE: PRM. As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services revised its outlook on publisher PRIMEDIA Inc., to stable from negative. At the same time, Standard & Poor's assigned its 'B' rating to PRIMEDIA's $300 million, privately placed, Rule 144A senior notes due 2013. In addition, Standard & Poor's affirmed its 'B' corporate credit and other outstanding ratings on New York City- based PRIMEDIA. Total debt and preferred stock as of March 31, 2003, totaled about $2.4 billion. PUTNAM LOVELL: Fitch Affirms Low-B/Junk Ratings on 3 Classes ------------------------------------------------------------ Fitch affirms the ratings on mutual fund fee transaction, Putnam Lovell Finance Trust's class A-2, B and C notes. -- $40,300,000 class A-2 notes 'B-'; -- $10,400,000 class B notes 'CC'; -- $5,600,000 class C notes 'CC'. The ratings are based upon review of the historical and expected performance of the mutual fund assets, the frequency of defaults as calculated through various financial models, and in addition, consideration for paydowns experienced on certain senior classes, break-even fund returns necessary to payback the notes by deal maturity, and the degree of expected loss to the extent notes may experience loss. The above actions represent Fitch's assessment of the probability of the noteholders to receive timely interest and principal payments in accordance with the terms of the legal documents. QUEBECOR MEDIA: 2nd Quarter Performance Improved Significantly -------------------------------------------------------------- Quebecor Media Inc. (TSX:QBR.A) (TSX:QBR.B) recorded revenues of $586.6 million in the second quarter of 2003, compared with $566.5 million in the same quarter of 2002, an increase of $20.1 million (3.5%). Surging revenues from Internet services and digital television in the Cable Television segment, higher advertising revenues in the Newspapers segment, and a considerable increase in the Broadcasting segment's broadcasting and publishing revenues account for the positive results. Operating income was $172.0 million, an increase of $12.9 million (8.1%) from $159.1 million in the same period of the previous year. Higher profits in the Cable Television and Broadcasting segments contributed strongly to Quebecor Media's improved profitability and compensated for lower operating income in the Business Telecommunications segment. The operating loss in the Web Integration/Technology segment was eliminated and the Internet/Portals segment posted operating income of $0.7 million. The Company generated net income of $24.6 million in the second quarter of 2003, compared with $0.5 million in the same quarter of 2002. The $24.1 million increase derived mainly from the growth in operating income combined with lower financial expenses, unusual charges and income taxes. Financial expenses decreased by $4.9 million from $72.7 million in the second quarter of 2002 to $67.8 million in the same quarter of 2003, due primarily to lower debt levels and the favourable impact of the conversion of the unhedged portion of the long-term debt. In the second quarter of 2002, the Company recorded a $7.5 million write-down of temporary investments and other assets, compared with $0.4 million in the same period of 2003. For the first six months of 2003, Quebecor Media's revenues totalled $1.13 billion, compared with $1.11 billion for the same period of 2002. Operating income was $314.2 million, an increase of $25.8 million (8.9%) from the previous year. Net income amounted to $32.2 million, compared with a net loss of $21.6 million in the same period of 2002. The growth in revenues, operating income and net income in the first half of 2003 was due to the same reasons as those noted above in the discussion of the second quarter results, as well as the recording in 2002 of a write-down of goodwill in the amount of $8.9 million. Cable Television The Cable Television segment's second quarter 2003 revenues amounted to $184.7 million, compared with $179.7 million in the same quarter of 2002, an increase of $5.0 million (2.8%). Revenue increases of 38.3% ($12.6 million) from Internet access services and nearly 50% ($6.6 million) from the illico digital television service more than compensated for lower revenues from other services, including analog cable television. The higher revenues from Internet services and illico were mainly due to customer growth combined with rate increases. At the end of the second quarter of 2003, there were 194,000 subscribers to illico, an increase of 42% from the same date of the previous year. The customer base for Internet services increased 33% to 352,000 as of June 30, 2003, compared with 265,000 last year. Monthly ARPU (average revenue per user) rose to $43.25 compared with $40.37 one year earlier, a significant 7.1% increase. Operating income amounted to $73.9 million, compared with $60.8 million in the second quarter of 2002, an increase of $13.1 million or 21.5%. The rise in operating income resulted primarily from the growth in the customer base for the high-speed Internet access service and higher rates, as well as the renegotiation of the service agreement with Videotron Telecom, which had a positive impact on the profit margin. These factors outweighed the impact of the net loss of subscribers to the analog cable television service and the decrease in other revenues. Lower operating expenses as a result of improved productivity and the recording in 2002 of costs related to the labour dispute also contributed to the increase in operating income. Videotron's average operating margin for all operations was 40.0%, up from 33.8% one year earlier. During the first six months of 2003, Videotron generated revenues of $365.1 million, compared with $359.6 million in the same period of the previous year. Operating income was $144.7 million, an increase of $16.6 million (13.0%). On May 12, 2003, Alentron, a subsidiary of Entourage Technology Solutions, and Videotron announced the signing of an agreement concerning the cancellation of the services contract signed in May 2002. Robert Depatie was appointed President and Chief Executive Officer of Videotron at the end of June 2003. Mr. Depatie was previously Senior Vice President, Sales, Marketing and Customer Service with Videotron. Newspapers In May 2003, Sun Media Corporation announced the sale of its interest in Florida Sun Publications to US-based Independent Publications. In the same month, Bowes Publishers Ltd., a wholly owned subsidiary of Sun Media, announced the sale of its British Columbia properties to Black Press Ltd. The businesses were sold for a cash consideration of $22.4 million and generated a gain on the sale of businesses of $3.0 million. The operations of these businesses are now accounted for as discontinued operations. The following discussion considers only the operating results of continued operations. Sun Media Corporation reported revenues of $225.2 million in the second quarter of 2003, an increase of $6.1 million (2.8%) from the same period of 2002. Operating income increased from $63.2 million to $64.0 million. A 4.5% rise in advertising revenues was partially offset by lower circulation revenues. The operating margin was virtually unchanged at 28.4% in the second quarter of 2003, compared with 28.8% last year. During the first half of 2003, revenues amounted to $421.2 million, compared with $413.4 million during the same period of 2002, an increase of $7.8 million (1.9%). Operating income was $108.7 million, compared with $107.1 million in the first six months of 2002. Broadcasting TVA Group's second quarter revenues rose from $80.7 million in 2002 to $92.4 million in 2003. The increase of $11.7 million or 14.5% was due primarily to higher broadcasting revenues resulting from increased viewing hours, and higher advertising rates. The inclusion of Publicor's results and higher newsstand revenues for the magazines that covered the Star Academie phenomenon were also factors, as were the inclusion of all the revenues (versus 50% previously) of Home Shopping Service Canada, which operates the La Boutique TVA teleshopping service, and the strong performance of the English-language specialty channels. These factors combined outweighed the decrease in distribution revenues resulting from TVA's repositioning in this area. Operating income surged $4.9 million (22.5%) to $26.7 million due to the increase in revenues, particularly from broadcasting and publishing. For the first six months of 2003, the segment's revenues were $176.7 million, an 11.8% increase. Operating income was up 17.4% to $41.2 million. Shortly after the end of the quarter, the Canadian Radio- television and Telecommunications Commission denied approval of the September 2002 transaction whereby a consortium formed by TVA Group and Radio Nord Communications acquired CFOM-FM and the seven AM Radiomedia stations. Leisure and Entertainment The Leisure and Entertainment segment reported revenues of $53.8 million in the second quarter of 2003, compared with $54.5 million in the same quarter of 2002. The 21.8% increase in Archambault Group's revenues almost entirely offset the transfer of Publicor to TVA Publishing and lower business volume in the Books segment. The increase in Archambault Group's distribution revenues resulted mainly from the retail success of the Star Academie CD. The segment's operating income amounted to $5.6 million, compared with $5.3 million in the same period of 2002. The increase stemmed from the improvement in Archambault Group's performance in comparison with 2002, particularly in the distribution sub- segment, which more than offset the decrease in operating income caused by the transfer of Publicor to TVA Group. For the first six months of 2003, the Leisure and Entertainment segment's revenues totalled $105.4 million, compared with $111.9 million in the same period of 2002. Operating income amounted to $11.1 million, virtually unchanged from $11.0 million in 2002. Business Telecommunications Videotron Telecom Ltd., recorded second quarter 2003 revenues of $20.1 million, compared with $23.9 million in the same period of the previous year. The positive impact of the acquisition of the assets of Stream Intelligent Networks in Ontario did not entirely compensate for the sharp decrease in Internet and telephony revenues as a result of the renegotiation of the service agreement with Videotron ltee and other factors. Operating income declined considerably to $3.4 million, compared with $8.8 million in the second quarter of 2002. The substantial decrease was caused by the lower revenues and reduced gross margins on account of the difficult market environment, as well as reduced capitalization and higher payroll in comparison with the second quarter of 2002. For the first six months of 2003, VTL's revenues declined 9.1% to $41.9 million and its operating income decreased to $9.2 million, compared with $16.3 million in the same period of 2002. Eugene Marquis, President and Chief Executive Officer of VTL, resigned in July 2003. Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Media, is serving as interim President of VTL. Web Integration/Technology The Web Integration/Technology segment recorded revenues of $17.3 million in the second quarter of 2003, compared with $19.2 million in the same quarter of 2002. The lower revenues reflect soft demand in the IT and Internet advertising markets, and lower revenues at subsidiary Mindready Solutions. The segment broke even, in terms of operating income, in the second quarter of 2003, whereas it reported an operating loss of $0.9 million in the same quarter of 2002. The improvement mainly reflects better results at Mindready. Nurun's e-Business Services segment was operating income positive for the fifth consecutive quarter, reporting $0.2 million in operating income. For the first six months of 2003, revenues totaled $34.4 million, compared with $38.6 million in 2002. The operating loss was only $77,000, compared with an $8.5 million loss in the same period of 2002. The reduction in Mindready's expenses partly accounts for the subsidiary's improved profitability in 2003. Mindready's 2002 results were also affected by a write-down of current assets and a charge for unoccupied office space. Internet/Portals The Internet/Portals segment's revenues held steady at $6.8 million in the second quarter of 2003. Higher revenues from the general-interest and special-interest portals in Canada offset lower sales at Progisia and the impact of the closing of Canoe's European portals. Operating income was $0.7 million, compared with an operating loss of $0.9 million in the same period of 2002. The strong performance was due to successful restructuring measures and the improved profitability of the special-interest portals, particularly Jobboom.com. Netgraphe posted a net profit for the first time in its history, reporting net income for both the second quarter and the first half of the 2003 financial year. For the first half of 2003, Netgraphe generated revenues of $13.8 million, compared with $14.1 million in the same period of 2002. Operating income amounted to $1.1 million, compared with an operating loss of $2.7 million in 2002. Financial position Quebecor Media's consolidated long-term debt (excluding redeemable preferred shares) and consolidated bank debt were reduced by $720.7 million in the first two quarters of 2003. The reduction reflects the repayment of a $429.0 million term loan that came due in April 2003 and the positive impact of exchange rate fluctuations on the value of debt denominated in foreign currency. At June 30, 2003, the Company and its wholly owned subsidiaries had cash and cash equivalents totaling $188.6 million, consisting mainly of short-term investments. The Company and its wholly owned subsidiaries also had unused lines of credit of $241.0 million available, for total available liquid assets of $429.6 million. At the same date, the consolidated debt, including the short-term portion of the long-term debt, totalled $2.78 billion. This figure includes Sun Media Corporation's $569.5 million debt, Videotron's $893.0 million debt and TVA Group's $31.2 million debt, as well as Quebecor Media Senior Notes in an aggregate amount of $1.21 billion and Quebecor Media's $75.0 million revolving credit facility. Quebecor Media Inc., a subsidiary of Quebecor Inc. (TSX: QBR.A, QBR.B), operates in Canada, the United States, France, Italy and the UK. It is engaged in newspaper publishing (Sun Media Corporation), cable television (Videotron ltee), broadcasting (TVA Group Inc.), Web technology and integration (Nurun Inc. and Mindready Solutions Inc.), Internet portals (Netgraphe Inc.), magazines (TVA Publishing Inc.), books (half a dozen associated publishing houses), distribution and retailing of cultural products (Archambault Group Inc. and Le SuperClub Videotron ltee) and business telecommunications (Videotron Telecom Ltd.). As reported in Troubled Company Reporter's February 13, 2003 edition, Standard & Poor's Ratings Services removed its ratings on diversified media company, Quebecor Media Inc., from CreditWatch with negative implications, where they were placed on Sept. 16, 2002, following the completion of Sun Media's refinancing that was carried out largely as expected. In addition, outstanding ratings on Quebecor Media, including the 'B+' long-term corporate credit rating, along with all ratings on subsidiaries Sun Media Corp., and Videotron Ltee, were affirmed. The outlook is stable. At the same time, ratings on Sun Media's US$97.5 million 9.5% senior subordinated notes due February 2007, and US$53.5 million 9.5% senior subordinated notes due May 2007, were withdrawn to reflect Sun Media's intention to call these notes in the near term. RIVERWOOD INT'L: Extends Consent Solicitations for Senior Notes --------------------------------------------------------------- Riverwood International Corporation announced today that it is extending the consent expiration date in its solicitations of consents to the proposed amendments to the indentures governing its outstanding 10-7/8% Senior Subordinated Notes due 2008 (CUSIP No. 769507AJ3), 10-5/8% Senior Notes due 2007 issued in July 1997 (CUSIP No. 769507AM6) and 10-5/8% Senior Notes due 2007 issued in June 2001 (CUSIP No. 769507AQ7). Each consent solicitation, which was set to expire at 5:00 p.m., New York City time, on Thursday, July 31, 2003, is extended to 12:01 a.m., New York City time, on Thursday, August 7, 2003. The tender offer expiration date for the related cash tender offers to purchase any and all outstanding Notes of each issue remains 12:01 a.m., New York City time, on Thursday, August 7, 2003. Each holder of Notes who validly consents to the proposed amendments with respect to such issue of Notes at or prior to 12:01 a.m., New York City time, on Thursday, August 7, 2003, will be entitled to a consent payment in the amount of $2.50 per $1,000 principal amount of Notes with respect to which consents are delivered. Holders will not be able to tender their notes or deliver their consents after such time and date. As previously announced on July 30, 2003, Riverwood has received the consents of holders at least of the majority of the outstanding principal amount of each issue of Notes, and by the terms of the consent solicitations, consents to the proposed amendments may no longer be revoked and related tenders of Notes may no longer be withdrawn. The purpose of each of the consent solicitations is to amend the applicable indenture to eliminate substantially all of the restrictive covenants, certain repurchase rights and certain events of default and related provisions contained in such indenture. As of 5:00 p.m., New York City time, today, the following principal amount of Notes had been tendered: approximately $300.4 million of the $400.0 million outstanding principal amount of the 10-7/8% Senior Subordinated Notes due 2008; approximately $167.0 million of the $250.0 million outstanding principal amount of the 10-5/8% Senior Notes due 2007 issued in July 1997; and approximately $221.6 million of the $250.0 million outstanding principal amount of the 10-5/8% Senior Notes due 2007 issued in June 2001. Riverwood is making a separate offer with respect to each issue of Notes, and no offer is conditioned on the consummation of any other offer. Consummation of each offer is subject to certain conditions, including (1) the consummation of the merger of Graphic Packaging International Corporation with a subsidiary of Riverwood's parent, Riverwood Holding, Inc. upon terms satisfactory to Riverwood, (2) the consummation of certain financing transactions related to such merger upon terms satisfactory to Riverwood, and (3) the receipt of the requisite consents with respect to the applicable proposed amendments and the execution of the related supplemental indenture to the indenture governing the relevant issue of Notes. Subject to applicable law, Riverwood may, in its sole discretion, waive or amend any condition to any offer or solicitation, or extend, terminate or otherwise amend any offer or solicitation. Goldman, Sachs & Co. is the dealer manager for the offers and solicitation agent for the solicitations. MacKenzie Partners, Inc. is the information agent and U.S. Bank National Association is the depositary in connection with the offers and solicitations. The offers and solicitations are being made pursuant to an Offer to Purchase and Consent Solicitation Statement, dated July 10, 2003, and the related Consent and Letter of Transmittal, which together set forth the complete terms of the offers and solicitations. Copies of the Offer to Purchase and Consent Solicitation Statement and related documents may be obtained from MacKenzie Partners, Inc. at (800) 322-2885. Additional information concerning the terms of the offers and the solicitations may be obtained by contacting Goldman, Sachs & Co. at (800) 828-3182. Riverwood (S&P, B Corporate Credit Rating, Positive), headquartered in Marietta, Georgia, is a leading provider of paperboard packaging solutions and paperboard to multinational beverage and consumer products companies. SAFETY-KLEEN: Delaware Court Confirms Plan of Reorganization ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware has confirmed Safety-Kleen's proposed Plan of Reorganization, the company announced. "Confirmation of the plan represents a tremendous step forward for the Company and everyone who has supported us in this process -- our employees, our customers and vendors, and our creditors," said Safety-Kleen Chairman, CEO and President Ronald A. Rittenmeyer. "We can now focus on completing the few final organizational steps that remain for us to emerge from bankruptcy as a stronger, healthier and more competitive company," he added. Safety-Kleen entered into Chapter 11 bankruptcy protection voluntarily on June 9, 2000. The Company expects to complete the remaining steps of the bankruptcy process and emerge within the third quarter of 2003. "We look forward to emerging as a new Safety-Kleen," said Rittenmeyer. "We have worked hard and invested strategically to improve every area of the Company, and we will continue to do so post-emergence. We're ready to put the most challenging time in Safety-Kleen's history behind us and concentrate totally on doing what we do best -- providing world-class service to our customers." Safety-Kleen is the leading parts cleaner and industrial waste management company in North America, serving hundreds of thousands of customers in the United States, Canada, Mexico and Puerto Rico. SAFETY-KLEEN: Wants Approval to Settle with Committee & Andersen ---------------------------------------------------------------- The Safety-Kleen Debtors, represented by Michael W. Yurkewicz, Esq., at Skadden Arps Slate Meagher & Flom LLP in Wilmington, bring a Settlement Agreement with Arthur Andersen LLP to Judge Walsh for approval. The Settlement Agreement resolves all compensation-related disputes with Andersen. Mr. Yurkewicz reminds Judge Walsh that he authorized the Debtors' employment of Andersen as auditors and accounting advisors to these estates, and subsequent expansions of their responsibilities. Andersen has made periodic applications for payment, and the Debtors, beginning with the 22nd such application, have objected. The Official Committee has joined the Debtors in those objections. Andersen has filed a limited objection to confirmation of the Debtors' Plan, asserting that as a result of its services to the Debtors, Andersen is owed the aggregate amount of fees of $56,042,000, and reimbursement of expenses totaling $5,122,000. After credit for interim payments made, Andersen asserts that the Debtors continue to owe it approximately $25,682,000, which is disputed. Rather than litigate, the parties chose to settle this dispute and the related Objection to Confirmation on these terms: (1) Remaining Compensation and Reimbursement to Andersen. Subject to: (i) the filing of the proposed Final Fee Application; (ii) the entry of a final Bankruptcy Court order on Andersen's proposed Final Fee Application allowing Andersen compensation and reimbursement in an amount equal to or greater than the aggregate of: (a) all interim payments received to date by Andersen, and (b) an additional payment to Andersen of $7,500,000.00, and (iii) the occurrence of the Effective Date for a Plan supported by the Creditors' Committee; Andersen shall be entitled to allowance of its claimed fees and expenses in an amount equal to the Aggregate Andersen Compensation and Reimbursement. (2) Debtors' Support. The Debtors will support allowance of Andersen's fees and expenses in such amount. (3) No Committee Objection. The Creditors' Committee will not object to allowance of Andersen's fees and expenses in such amount. (4) Cap on Compensation and Reimbursement to Andersen. Conditioned upon: (i) entry of any Andersen Allowance Order, and (ii) compliance by the Debtors and the Creditors' Committee with their obligations under the Settlement; Andersen shall waive the right to any additional payments from the Debtors or their estates over and above the Aggregate Andersen Compensation and Reimbursement. (5) Payments to Andersen. Upon the receipt by the Debtors with copies to counsel for the Creditors' Committee of ballots sufficient for the Class 3 creditors to accept the Plan, the Debtors shall pay Andersen $5,780,247.00. Upon entry of an order by the Bankruptcy Court approving this Settlement, the Debtors shall make the First Andersen Payment to the extent they have not previously done so, and shall also pay Andersen $1,719,753.00. Upon entry of the Andersen Allowance Order and the occurrence of the Effective Date, Andersen shall be entitled to retain the Additional Andersen Payment, as well as all other amounts previously received from the Debtors in the Debtors' chapter 11 cases. (6) Andersen's Obligations with Respect to Additional Andersen Payment. Upon receipt, Andersen shall hold the Additional Andersen Payment in trust for the benefit of SKC and its bankruptcy estate. Upon the earlier of: (i) withdrawal or material modification of the Plan by the Debtors without the consent of the Creditors' Committee; (ii) conversion of this case to a case under chapter 7 of the Bankruptcy Code; or (iii) failure of the Effective Date to occur prior to November 1, 2003; Andersen [sic] shall promptly remit the Additional Payment to SKC. Upon the occurrence of the Effective Date, and provided that Andersen has not received written notice of the occurrence of a Triggering Event, the trust provided in this Settlement shall terminate, and Andersen shall have no further duties to hold the Additional Andersen Payment in trust. (7) Release of Andersen Entities. Upon the Effective Date, the Debtors and the Committee, on behalf of themselves, their bankruptcy estates, and their respective present or former affiliates, members, partners, directors, officers, shareholders, employees, representatives, agents, attorneys, insurers, predecessors, successors and assigns of all of these, and for any person who seeks to assert claims by or through any of these, will release Andersen, Andersen Worldwide SC, Accenture LLP (f/k/a, Andersen Consulting LLP), Accenture Partners SC (f/k/a Andersen Consulting Partners, SC) and their respective present or former affiliates, member firms, members, partners, principals, directors, officers, shareholders, employees, representatives, agents, attorneys, predecessors, successors and assigns of all of these from any and all liability arising from, arising out of or relating to: (i) any objections to the allowance of Andersen's fees and expenses in the Debtors' chapter 11 cases in an amount up to the Aggregate Andersen Compensation and Reimbursement; (ii) any objections to the expansion of the scope of Andersen's retention in these Chapter 11 Cases; (iii) any services rendered by Andersen and its professionals to the Debtors in these Chapter 11 Cases and prior to the Chapter 11 cases; (iv) Andersen's withdrawal as auditors, accounting and tax advisors and business consultants to the Debtors; and (v) any claims or objections arising from or relating to the facts and arguments set forth in the Debtors' Objection, the Committee's Joinder, and the December 19, 2000 letter objection from Susheel Kirpalani to J. Gregory St. Clair. (8) Release of Safety-Kleen Entities. Upon the Effective Date, Andersen, on behalf of itself and for any other person who seeks to assert claims by or through it will release the Safety-Kleen Entities from any and all liability arising from, arising out of or relating to: (i) any services rendered by Andersen and its professionals to the Debtors in the Debtors' chapter 11 cases and prior to the Debtors' chapter 11 cases; (ii) Andersen's withdrawal as auditors, accounting and tax advisors and business consultants to the Debtors; and (iii) any claims or objections arising from or relating to the facts and arguments set forth in Andersen's Limited Objection. The Debtors and Committee's Arguments for Approval The Debtors submit that the settlement should be approved because it is in the best interests of these estates and creditors. The terms and conditions were reached only after arm's-length negotiations between the parties and resolve actual and potential disputes and controversies that, if permitted to continue, could involve time-consuming and expensive legal proceedings for the Debtors. Moreover, the Settlement is in the best interests of the Debtors and their estates and creditors because the Debtors will pay only $7,500,000.00 in full satisfaction of Andersen's claim of $25,682,000.00 and Andersen will withdraw its Limited Objection to confirmation of the Plan. By reaching this reasonable compromise, the Debtors' estate will also avoid incurring additional administrative expenses, including attorneys' fees and other costs that would be incurred if the dispute proceeded to a full trial on the merits. The Debtors are currently authorized to pay Andersen the First Andersen Payment in the amount of $5,780,247.00 pursuant to the interim compensation procedures applicable to the Debtors' chapter 11 cases. Pursuant to the Settlement, only the Debtors and the Creditors' Committee waive their rights to object to the Proposed Final Fee Application. The Settlement does not affect the right of other parties-in-interest, including the United States Trustee, to object to the Proposed Final Fee Application. (Safety-Kleen Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392-0900) SCHUFF: Operating Income Cut Prompts S&P to Lower Rating to B- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured note ratings on Phoenix, Arizona-based engineering and construction service provider Schuff International Inc. to 'B-' from 'B'. Both ratings were placed on CreditWatch with negative implications. The rating actions followed the company's announcements that operating income declined about 80% in the first half of 2003 from the year-earlier period, that backlog had declined to less than $97 million, and that its nominal liquidity may erode further in the second half of the year as it anticipates a rise in working capital. At June 30, 2003, Schuff had about $90 million in debt outstanding. Schuff provides construction services and fabricated steel products to highly cyclical industrial and commercial markets. The protracted weakness in these sectors, combined with intense pricing pressures, has resulted in poor operating results. Furthermore, although the company notes that it is seeing some recovery within certain markets, it will continue to need to work through poor-margin backlog. At June 30, 2003, Schuff had about $9 million of unrestricted cash, had no near-term debt, and was in the process of obtaining a new bank facility. "Nominal liquidity could weaken as the company uses cash for working capital and to support letters of credit," said Standard & Poor's credit analyst Joel Levington. "We will meet with management to discuss its operating initiatives to improve performance during this period of weak demand, as well as steps Schuff is taking to strengthen its liquidity position, before taking a further rating action." SERVICEWARE TECHNOLOGIES: Reports Improved Performance for Q2 ------------------------------------------------------------- ServiceWare Technologies, Inc. (OTC Bulletin Board: SVCW), a leading provider of Web-based knowledge management solutions for customer service and support, announced results for the second quarter ended June 30, 2003. The Company reported revenues of $3.1 million, up 45% from the first quarter 2003 results of $2.1 million, and up 4% compared with the second quarter 2002 results of $2.9 million. The net loss for the quarter was down 56% to $369,000, which compared to a net loss of $842,000 reported in the second quarter of 2002. The Company reported income from operations of $78,000. The Company also reported EBITDA of $363,000 for the quarter, in line with its previous forecast. Second Quarter Highlights: - The Company reported revenues of $3.1 million - The Company grew revenues 45% quarter over quarter - The Company reported EBITDA of $363,000 - The Company reported income from operations of $78,000 - The Company ended the quarter with cash and short-term investments equaling $1.1 million, an increase of 3% over March 31, 2003 - The Company signed contracts with 17 customers during the quarter, including: National Institutes of Health, Aventis Pharmaceuticals, Cingular Wireless, EDS Corporation, Fifth Third Bancorp, Stratacom and C3i - The Company recognized 53% of its license revenue during the quarter from new customers and 47% from its existing client base - The Company signed a global channel outsourcing agreement with a Fortune 100 technology company who has selected ServiceWare as their exclusive Knowledge Management provider - The Company announced its mid-market offering, ServiceWare Express(TM) - The Company recently announced a validated integration with Remedy(R), a BMC Software company ServiceWare Technologies' June 30, 2003 balance sheet shows that its total current liabilities eclipsed its total current assets by about $400,000. Also, at the same date, the Company's net capital is whittled down to $385,000 from about $2 million reported six months ago. "We are pleased with the continued progress the Company made during the quarter as we achieved EBITDA positive results, operating income, and revenue growth," said Kent Heyman, president and chief executive officer of ServiceWare Technologies. "We were able to lower our operating expense by 18% over last year, while growing our top line. I was also pleased with the revenue mix we saw during the quarter with our existing customers delivering 47% of our license revenues through expanded use of our solutions throughout the enterprise as well as upgrades to our new version." Mr. Heyman continued, "looking ahead to the remainder of the year, we are cautiously optimistic about our core business as our pipeline remains strong. We are also pleased to have signed a global outsourcing agreement with a Fortune 100 technology company as their designated Knowledge Management provider. We see this as a tremendous opportunity moving forward." ServiceWare is a leading provider of Web-based knowledge management solutions for customer service and support. ServiceWare software empowers organizations to deliver superior service while reducing support costs. Powered by ServiceWare's Cognitive Processor(R), a patented self-learning search technology, ServiceWare Enterprise(TM) and ServiceWare Express(TM) enable businesses to develop and manage a repository of knowledge to effectively answer inquiries over the Web and in the call center. Leading organizations have implemented ServiceWare software including EDS, H&R Block, AT&T Wireless, Cingular Wireless, Fifth Third Bancorp, Green Mountain Energy, Reuters, and QUALCOMM. Learn more about the Company by visiting http://www.serviceware.com SK GLOBAL: Seeks Court Injunction Against Utility Companies ----------------------------------------------------------- Section 366 of the Bankruptcy Code entitles all Utility Providers continuing to provide service to a debtor in bankruptcy "adequate assurance of future payments." In small bankruptcy cases, adequate assurance translates to a cash deposit equal to a month or two of actual usage. Determinations of what constitutes adequate assurance under Section 366, Albert Togut, Esq., at Togut, Segal & Segal LLP, argues, are entirely within the court's discretion, pointing Judge Blackshear to Virginia Elec. & Power Co. v. Caldor, Inc., 117 F.3d 646, 650 (2d Cir. 1997); In re Adelphia Bus Solutions, Inc., 280 B.R. 63, 81 (Bankr. S.D.N.Y. 2002); and In re Begley, 41 B.R. 402, 405-406 (E.D. Pa. 1984), aff'd, 760 F.2d 46 (3d Cir. 1985) ("[S]ection 366(b) vests in the bankruptcy court the exclusive responsibility for determining the appropriate security which a debtor must provide to his utilities to preclude termination of service for non-payment of prepetition utilities bills"). "Adequate assurance" under Section 366 is not synonymous with "adequate protection," Mr. Togut says. In determining what constitutes adequate assurance, the court is not required to give the utilities the equivalent of a guaranty of payment, but must only determine that the utility is not subject to an unreasonable risk of nonpayment for postpetition services. See Adelphia, 280 B.R. at 80; In re Caldor, Inc.-NY, 199 B.R. 1, 3 (S.D.N.Y. 1996); Massachusetts Elec. Co. v. Keydata Corp. (In re Keydata Corp.), 12 B.R. 156, 158 (1st Cir. 1989). Courts have recognized that requiring a debtor to allocate valuable liquidity for a deposit to provide further adequate assurance effectively can "prejudice the unsecured creditor body for the benefit of a single one." In re Magnesium Corp. of Am., 278 B.R. 698, 713-714 (Bankr. S.D.N.Y. 2002). The United States Court of Appeals for the Second Circuit has held that where, as in SK Global America Inc.'s case, the debtor has generally timely paid its utility bills prior to the commencement of its Chapter 11 case, the administrative expense priority provided in Sections 503(b) and 507(a)(1) of the Bankruptcy Code constitutes adequate assurance of payment, and no deposit or other security is required. See Virginia Elec. & Power Co. v. Caldor, Inc., 117 F.3d 646 (2d Cir. 1997). See also In re Demp, 22 B.R. 331, 332 (Bankr. E.D. Pa 1982); In re Shirley, 25 B.R. 247, 249 (Bankr. E.D. Pa. 1982) ("[S]ection 366(b) of the [Bankruptcy] Code does not permit a utility to request adequate assurance of payment for continued services unless there has been a default by the debtor on a prepetition debt owed for services rendered"). SK Global America, has the ability and will continue to pay all undisputed postpetition obligations for the Utility Companies in accordance with the parties' prepetition practices. The Debtor estimates its average monthly utility costs at about $50,000. SK Global has a good payment history with the Utility Companies and it will have ample cash resources to adequately assure the Utility Companies of timely future payment. Accordingly, by this motion, SK Global asks Judge Blackshear to: -- enjoin the Utility Companies from altering, refusing or discontinuing service because of non-payment of prepetition balances; and -- find that the company's history of prompt payment, ample postpetition liquidity, the statutory administrative priority and the debtor's promise to pay constitute adequate assurance under Section 366. (SK Global Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) SMTC CORP: Schedules Q2 Results Teleconference for Aug. 11, 2003 ---------------------------------------------------------------- SMTC Corporation (Nasdaq: SMTX) (TSX: SMX), a global electronics manufacturing services provider, has scheduled its second quarter results teleconference. The teleconference will be held on August 11, 2003 at 5:00 PM EST. Those wishing to listen to the teleconference should access the webcast at the investor relations section of SMTC's Web site http://www.smtc.com. A rebroadcast of the webcast will be available on SMTC's website following the teleconference. Participants should assure that they have a current version of Microsoft Windows Media Player before accessing the webcast. Members of the investment community wishing to ask questions during the teleconference may access the teleconference by dialing 416-640-4127 or 800-814-4859 ten minutes prior to the scheduled start time. A rebroadcast will be available following the teleconference by dialing 416-640-1917 or 877-289-8525, pass code 21012881 followed by the pound key. SMTC Corporation is a global provider of advanced electronic manufacturing services to the technology industry. SMTC offers technology companies and electronics OEMs a full range of value- added services including product design, procurement, prototyping, printed circuit assembly, advanced cable and harness interconnect, high precision enclosures, system integration and test, comprehensive supply chain management, packaging, global distribution and after-sales support. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com, for more information about the Company SMTC Corporation's March 30, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $7 million. SOLUTIA: Weak Performance & Refinancing Risk Cause Rating Drop -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Solutia Inc. to 'B-' from 'BB-,' citing increased refinancing risk and continued weak operating performance. All ratings were removed from CreditWatch where they were placed April 25, 2003. The current outlook is negative. St. Louis, Missouri-based Solutia is a manufacturer and marketer of specialty and industrial chemical products, including nylon fibers and polymers, and has $983 million of debt (excluding the capitalization of operating leases). "The downgrade reflects significant deterioration in the company's credit quality, liquidity concerns, and a meaningful increase in refinancing risk," said Standard & Poor's credit analyst Peter Kelly. "Adverse developments regarding the company's PCB litigation, including unfavorable verdicts and diminished prospects for a comprehensive resolution, along with weak earnings and cash flow generation, will make the company's refinancing efforts more difficult and will constrain the company's liquidity position," he said. Solutia has stated that it is examining all available alternatives with regards to the PCB issue and future liquidity needs. STEAKHOUSE PARTNERS: Obtains Court Nod for $5M DIP Financing Pact ----------------------------------------------------------------- On July 24, 2003, the United States Bankruptcy Court for the Central District of California - Riverside Division, authorized Steakhouse Partners, Inc., and certain of its affiliated debtors to obtain postpetition debtor-in-possession financing in the sum of $5,000,000 on a secured and superpriority basis. The Financing will be used to meet the Company's working capital needs pending final confirmation of the Company's forthcoming amended plan of reorganization. The Financing is being provided by Steakhouse Investors, LLC and is subject in part to final court order. Under the terms of the Financing, upon Confirmation, the Financing will convert into a ninety percent (90%) equity interest in the reorganized Company, with the remaining ten percent (10%) of the equity of the reorganized Company being issued to certain creditors of the Company. Under the forthcoming Plan, existing equity interests in Steakhouse Partners, Inc. would be cancelled upon Confirmation. STELCO: S&P Keeps Watch Due to Cost-Reduction Ability Concerns -------------------------------------------------------------- Standard & Poor's Ratings Services placed the ratings on integrated steel producer Stelco Inc., including the 'B' long-term corporate credit rating, on CreditWatch, with negative implications. "The CreditWatch action reflects Standard & Poor's opinion that significant changes in the company's cost structure are required in order to ensure its long-term viability," said Standard & Poor's credit analyst Chris Timbrell. Stelco's existing plans, including the planned sale of AltaSteel, should provide the company with adequate near to mid-term liquidity and financing based on current market conditions. Nevertheless, Standard & Poor's believes that there is a need for strong action to address the company's high cost structure. The recent departure of the company's CEO, James Alfano, demonstrates the company's acknowledgement that significant changes are necessary. To the extent that the change in management could indicate a heightened focus by the company on the need for change, and it should be a positive development in the long term. Stelco's financial performance is expected to be very weak for the remainder of 2003, with a cash loss projected for the year. Standard & Poor's views the next two quarters to be critical. In order to maintain the current ratings, Stelco will have to demonstrate that it can maintain at least twelve months liquidity (on a rolling basis) through careful cash management, and is positioning itself to start generating positive operating cash flows from operations. This will require a recovery in steel prices from current levels or substantial cost reductions. If the outlook for steel markets in 2004 does not reflect price increases, or the company cannot eliminate cash losses, Stelco's available cash and bank lines are not expected to last beyond 2004, although proceeds from the planned sale of AltaSteel could extend this timeframe. Under these circumstances, the rating could be lowered by two or more notches. Hamilton, Ontario-based Stelco is the largest steel producer in Canada, with both integrated and mini-mill production of rolled and manufactured steel products at multiple production sites. In 2002, Stelco shipped 4.7 million tons of steel, equal to about one-quarter of all Canadian steel consumption. About 85% of Stelco's sales are in Canada, with the remainder primarily in the U.S. SUMMIT PROPERTIES: Senior Unsecured Debt Rating Down to BB+ ----------------------------------------------------------- Standard & Poor's lowered its senior unsecured debt ratings on Summit Properties Partnership L.P. to 'BB+' from 'BBB-'. This rating action impacts $267 million of senior unsecured notes. At the same time, the corporate credit rating on Summit Properties Inc. is affirmed. The outlook is stable. "The lowering of the senior unsecured debt ratings follow the closing of a new $200 million secured credit facility due 2008, which is secured by nine formerly unencumbered properties. The new facility replaces Summit's previous $225 million unsecured credit facility, which was due to mature in September 2004," said Standard & Poor's credit analyst George Skoufis. While market conditions will likely remain challenging in certain of Charlotte, North Carolina-based Summit's core markets, recently developed communities have shown improved leasing trends, near-term capital needs are manageable, and there will be modest cost benefits associated with the new revolver. As a result, Summit's debt and fixed-charge coverage measures, which have been near the minimum acceptable for the current rating, should begin to see gradual improvement. Standard & Poor's would revisit the lower unsecured debt rating, should future financing activity result in a return to lower overall secured debt levels. SUPERIOR TELECOM: Files Chapter 11 Reorganization Plan in Del. -------------------------------------------------------------- Superior TeleCom Inc. (OTC: SRTOQ.OB) has filed its proposed Plan of Reorganization and related Disclosure Statement with the U.S. Bankruptcy Court for the District of Delaware, positioning the Company and its operating subsidiaries to emerge from Chapter 11 with a substantially improved balance sheet and a significantly deleveraged capital structure. The proposed Plan of Reorganization, which is the product of extensive negotiations with the largest holders of the Company's $1.15 billion pre-petition senior secured credit facility, contemplates a reduction in debt of more than $1 billion. The Company's total debt at June 30, 2003 totaled approximately $1.3 billion. A hearing before the Bankruptcy Court is scheduled for September 2, 2003 to consider approval of the Disclosure Statement. Upon Court approval, the Company will begin a solicitation of votes for acceptance of the Plan of Reorganization from its senior secured creditors and certain other creditor constituents (including holders of its senior subordinated notes and its general unsecured creditors). If the requisite votes are received, a hearing will be held before the Bankruptcy Court to consider confirmation of the Plan. David S. Aldridge, Chief Financial and Restructuring Officer of Superior TeleCom Inc. stated, "The filing of our Plan of Reorganization represents a major step towards a successful financial restructuring and emergence from Chapter 11. We are very pleased to have the support of certain of the largest holders of our senior secured bank debt for the principal terms and provisions of the Plan which should help to facilitate final ratification of this Plan by our senior secured lenders. While there can be no certainties as to timing and final Plan terms, we believe we can complete this restructuring, including final confirmation of our Plan and emergence from Chapter 11, in the fourth quarter of 2003. The substantial debt reduction contemplated by the Plan should leave Superior with a strong equity base and the ability to take advantage of strategic opportunities, and further strengthen our market leading positions in the Communications Cable and OEM (magnet wire) industries. "We are extremely grateful for the loyalty and support of our customers, vendors and employees over the past four months which has allowed us to continue to operate our businesses normally through this transition period. We are hopeful and confident that this support will continue through the remainder of the Chapter 11 restructuring process and will lead to even more fruitful relationships in the future." Under the Plan of Reorganization, holders of the Company's pre- petition senior secured debt will receive a pro rata distribution of: (i) 100% of the new Common Stock of the reorganized Company (subject to limited dilution from management options and stock purchase warrants); (ii) $145 million in new Senior Notes with a five-year term; and (iii) $5 million in new Preferred Stock with a mandatory redemption in 2013. Other distributions contemplated under the Plan include a pro rata allocation of $2 million in cash to general unsecured creditors if the class votes in favor of the Plan and a pro rata distribution of stock purchase warrants to acquire up to 5% of the new Common Stock (at a premium to equity value) to holders of the Company's $220 million senior subordinated notes. Certain other unsecured debt, including holders of the Company's $167 convertible debentures (formerly holders of the Company's Convertible Trust Preferred Securities) and existing common equity stockholders will receive no distribution under the Plan. The reorganized Company also expects to obtain a $120 million secured revolving credit "exit" facility, which will be used to repay borrowings under the DIP credit facility and to fund future working capital and general corporate requirements. The Company currently estimates total funded debt upon consummation of the Plan and emergence (including the Senior Notes and initial draws under the revolving credit facility) will be approximately $210 million. As announced on March 3, 2003, Superior TeleCom Inc.'s U.S. operations filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Superior TeleCom's United Kingdom and Mexican operations were not included in the filing. Superior TeleCom Inc. is one of the largest North American wire and cable manufacturers and among the largest wire and cable manufacturers in the world. Superior manufactures a broad portfolio of wire and cable products with primary applications in the communications and original equipment manufacturer (OEM) markets. The Company is a leading manufacturer and supplier of communications wire and cable products to telephone companies, distributors and system integrators and magnet wire for motors, transformers, generators and electrical controls. Additional information can be found on the Company's Web site at http://www.superioressex.com TELESYSTEM INT'L: Second Quarter Results Enter Positive Zone ------------------------------------------------------------ Telesystem International Wireless Inc. (TSX, "TIW", Nasdaq, "TIWI") reported its results for the second quarter and the first six months ended June 30, 2003. Consolidated operating income before depreciation and amortization (EBITDA) increased 70% to $97.4 million compared to $57.3 million for the second quarter of 2002. Operating income increased 120% to $48.4 million compared to $22.0 million for the same period last year. The strong growth in operating income reflects the continued solid financial performance in Romania and improved results in the Czech Republic where the Company's operating subsidiary recorded its first quarter of positive operating income. During the quarter, TIW's financial position improved significantly with the closing by its indirect subsidiary, MobiFon Holdings B.V., of $225,000,000 issue of 12.5% Senior Notes due July 31, 2010. The Notes were sold at 97.686% of par for a yield to maturity of 13%. As a result of proceeds distributed to ClearWave and TIW, TIW redeemed $124.9 million in principal amount of 14% Senior Guaranteed Notes plus accrued interest during the month of July 2003. Furthermore, TIW has notified the trustee of its 14% Senior Notes that it will redeem at par the remaining $23.3 million outstanding in principal amount of 14% Senior Notes plus accrued interest on August 8, 2003. At that time TIW will essentially be debt free at the corporate level. "The closing of the Notes offering removes the going concern uncertainty related to TIW and completes the recapitalization of the Company begun in 2001. TIW is now fully funded with two strong operations in Central and Eastern Europe that continue to record outstanding financial performances," said Bruno Ducharme, President and Chief Executive Officer of TIW. "We are pleased with our second quarter and year-to-date results," said Alexander Tolstoy, President and Chief Executive Officer of ClearWave. "During the second quarter, Cesky Mobil recorded its first positive operating income, only three years after commercial launch and its strategy of targeting postpaid subscriber growth is continuing to generate strong results. Postpaid subscribers now account for over 40% of Cesky Mobil's subscriber base, a remarkable accomplishment for a third entrant. "In Romania, MobiFon is continuing to generate strong EBITDA margin and higher operating income", added Mr. Tolstoy. Results of Operations TIW recorded net subscriber additions for the second quarter of 163,300 to reach total subscribers from continuing operations of 4,238,800, up 21% compared to 3,505,200 at the end of the second quarter of 2002. Consolidated service revenues increased 41% to $221.1 million compared to $156.4 million for the second quarter of 2002. The strong revenue growth, lower selling, general and administrative expenses ("SG&A") as a percent of revenues and continued cost management at the corporate level resulted in an operating income of $48.4 million compared to $22.0 million for the same period last year. Income from continuing operations was $6.5 million, or $0.07 per share basic and fully diluted compared to income from continuing operations of $39.9 million or $0.40 per share for the second quarter of 2002. The 2002 income from continuing operations includes a pre-tax non-cash gain of $43.5 million related to the expiry of the TIW Units on June 30, 2002. At that date, the ClearWave shares included in the TIW Units detached and became freely tradable. Net income for the second quarter 2003 amounted to $6.5 million or $0.07 per share basic and fully diluted compared to a net loss of $89.8 million or $0.90 per share for the second quarter 2002. The 2002 figure includes a loss from our Brazil discontinued operations of $129.6 million partially offset by the non-cash gain related to the expiry of the Units. For the first six months of 2003, consolidated service revenues increased 39% to $410.5 million compared to $295.1 million for the same period last year. Operating income doubled to $78.8 million from $38.6 million for the same period last year. Income from continuing operations was $18.3 million or $0.19 per share basic and fully diluted compared to $79.4 million, or $0.95 per share. The 2003 figure includes a gain of $19.8 million on the sale of a minority interest in MobiFon, while the 2002 income from continuing operations includes a pre-tax non-cash gain of $91.1 million related to the financial restructuring of the Company completed in the first quarter of 2002 and the expiry of the Units during the second quarter of 2002. Net income for the six month period ended June 30, 2003 was $9.5 million or $0.10 per share basic and fully diluted compared to a net loss of $50.2 million or $0.65 per share basic and fully diluted for the corresponding prior year period. These results included losses from discontinued operations of $8.8 million and $129.6 million, respectively, which related to our discontinued Brazilian cellular operations which were disposed of on March 26, 2003 for gross proceeds of $70,0 million. On June 23, 2003, TIW amended its share capital to implement a one for five (1:5) consolidation of its common shares. Following the consolidation, the number of issued and outstanding common shares was reduced from 467,171,850 to 93,432,101. The number of issued and outstanding preferred shares remained unchanged at 35,000,000 but their conversion ratio was changed from 1 common share for each preferred share to 1 common share for 5 preferred shares. All per share amounts included herein have been adjusted to reflect the share consolidation. MobiFon S.A. - Romania MobiFon, the market leader in Romania with an estimated 49% share of the cellular market, added 73,400 net subscribers for the second quarter for a total of 2,746,100, compared to 2,337,000 subscribers at the end of the same 2002 period, an increase of 17%. The prepaid/postpaid mix at the end of June 2003 of 64/36 was unchanged from a year ago. Service revenues reached $127.1 million, an increase of 23%, due to a larger subscriber base and an increase in monthly average revenue per user, compared to $103.0 million for the second quarter last year. ARPU for the second quarter reached $14.44 compared to $13.27 in the first quarter and $14.12 for the same period of last year. SG&A expenses decreased to 21% of service revenues compared to 23% for the 2002 corresponding period. EBITDA increased 28% to $71.4 million compared to $55.9 million for the same period last year and EBITDA as a percentage of service revenue improved to 56% compared to 54% in the quarter ending June 30, 2002. Operating income rose 30% to $45.9 million compared to $35.2 million for the second quarter of 2002. For the first six months, service revenues increased 21% to $240.2 million compared to $198.9 million for the same period last year. EBITDA increased 26% to $137.2 million compared to $108.5 million for the 2002 period. Operating income rose 22% to $81.7 million compared to $67.1 million for the first six months of 2002. Prior to June 30, 2003, as a result of operating in a highly inflationary economy, MobiFon used the Company's reporting currency, the U.S. dollar, as its functional currency. As of June 30, 2003, the cumulative inflation in Romania for the last three years was below 100% and consequently Romania ceased to be defined for accounting purposes as a highly inflationary economy. An assessment as to which currency is MobiFon's functional currency was made based on the collective economic factors of the environment in which it operates and the U.S. dollar has been determined to continue to be their functional currency. Cesky Mobil a.s. - Czech Republic Cesky Mobil added 66,900 net subscribers in the second quarter to reach 1,337,500, an increase of 25% compared to 1,071,300 subscribers at the end of the second quarter of 2002. The company's focus on postpaid growth continued to be successful with postpaid subscribers representing 70% of net additions during the quarter. As a result, the company's prepaid/postpaid mix as of June 30, 2003 was 59/41 compared to 73/27 at June 30, 2002. Cesky Mobil estimates it held a 15% share of the national cellular market as of June 30, 2003, compared to a 13% share at the same time last year. During the past 12 months, management estimates cellular penetration in the Czech Republic increased to 87% from 76% at the end of the second quarter of 2002. Service revenues increased 76% to $94.0 million compared to $53.5 million for the second quarter of 2002 due to the increase in the number of subscribers and an increase in ARPU. ARPU for the second quarter reached Czech Koruna 641.5 ($23.18) compared to Czech Koruna 590.7 ($20.03) in the first quarter and Czech Koruna 550.4 ($16.65) for the same period of last year. Cesky Mobil recorded EBITDA of $28.5 million, its sixth consecutive quarter of positive EBITDA, compared to EBITDA of $3.6 million for the same period last year. This improvement reflects the revenue impact of solid subscriber growth and the economies of scale realized as fixed costs are spread over the larger subscriber base. Also included in EBITDA in the second quarter of 2003, is the effect of a $3.3 million reduction in estimated interconnection costs mainly related to prior periods. SG&A expenses declined to 25% of service revenues compared to 38% for the same period last year. Cesky Mobil recorded positive operating income for the first time with operating income of $5.1 million for the second quarter 2003, compared to an operating loss of $10.9 million for the second quarter of 2002, an improvement of $16.0 million. For the first six months, service revenues increased 77% to $170.3 million compared to $96.2 million for the same period in 2002. EBITDA reached $45.8 million compared to EBITDA of $4.5 million for the first six months of last year, an improvement of $41.3 million. Operating income reached $1.3 million compared to a loss of $23.5 million for the same period in 2002. Corporate and Other The Company's wireless operations in India and other corporate activities recorded negative EBITDA of $2.5 million for the second quarter ended June 30, 2003 and negative EBITDA of $4.1 million for the first six months of 2003, compared to negative EBITDA of $2.2 million and of $5.0 million respectively for the same periods last year. Liquidity and Capital Resources For the second quarter of 2003, operating activities provided cash of $73.3 million and of $119.8 million for the first six months compared to $39.5 million and $57.6 million respectively in the corresponding 2002 periods, mainly explained by the increase in the 2003 EBITDA over the corresponding periods in 2002 offset by higher taxes paid by MobiFon in 2003. Investing activities used cash of $68.5 million for the quarter ended June 30, 2003, compared to $53.2 million in the corresponding 2002 period as a result of higher acquisitions of property, plant and equipment. For the first six months of 2003, investing activities used cash of $58.0 million compared to $107.0 million for the first six months of 2002. During the 2003 period, the Company received net proceeds of $41.5 million from the sale of a minority interest in MobiFon. Acquisitions of property, plant and equipment in the first six months of this year were slightly lower than in the corresponding period last year and were $100.8 million and $107.5 million, respectively. Financing activities provided cash of $81.3 million for the second quarter and $60.9 million year to date. The cash generated from financing activities on a year-to-date basis consisted of $246.9 million proceeds from debt issuance offset by $28.1 million in additions to restricted cash, $31.2 million distributed to minority shareholders of MobiFon, $47.4 million representing a full repayment of TIW's senior corporate bank facility, $6.8 million of deferred financing costs and $72.4 million in repayment of long-term debt. During the first six months of 2002, sources of cash from financing activities included proceeds of $41.2 million from TIW's recapitalization, $29.9 million from the issuance of subsidiaries' shares to minority interests and $27.9 million drawn on Cesky Mobil's credit facility. These were partially offset by $9.9 million in repayment of short-term loans, $24.4 million debt repayment and $4.2 million distributed to minority interests in MobiFon and resulted in $60.2 million being provided by financing activities. On April 23, 2003 MobiFon paid a dividend of Lei 1.974 trillion (approximately $ 59.1 million), to its shareholders. ClearWave's share of the dividend was approximately $33.5 million. On October 30, 2002, the shareholders of MobiFon approved distributions of up to $38.8 million by means of a share repurchase. Shareholders had the opportunity to tender their shares between October 30, 2002 and June 30, 2003 in order to realize their pro-rata share of this distribution. During 2002, ClearWave received its pro-rata share of such distributions which amounted to $24.6 million and other minority shareholders had received $0.8 million. During the second quarter of 2003 the remaining shareholders tendered their shares. A payment of $5.6 million relating to such tender was made during the second quarter and the remaining $7.8 million was paid on July 18, 2003. As a result, ClearWave's equity interest and TIW's ultimate equity interest in MobiFon increased to 57.7% and 49.4% from 56.6% and 48.4% at the end of the first quarter of 2003. On June 27, 2003, MobiFon Holdings, a wholly-owned subsidiary of ClearWave N.V., which holds the Company's investment in MobiFon, closed a $225 million issue of 12.5% Senior Notes by way of private placement. The Notes were sold at 97.686% of par for gross proceeds of $219.8 million and for a yield to maturity of 13%. Net proceeds to MobiFon Holdings from the offering, after deducting issuance expenses, were $211.6 million of which $28.1 million was used to establish a debt service reserve account for the benefit of the noteholders which has been reflected as restricted cash on the balance sheet and $182.5 million was distributed to ClearWave. The Notes mature on July 31, 2010. Interest on the Notes accrues at the rate at 12.5% per annum commencing on June 27, 2003 and will be payable in cash semi-annually in arrears on each January 31 and July 31 commencing on January 31, 2004. The Notes are unsecured, except to the extent of a security interest in the debt service reserve account. Before July 31, 2006, MobiFon Holdings may redeem up to 35% of the Notes with the proceeds of certain equity offerings at a redemption price of 112.50% of the principal amount. From July 31, 2007, MobiFon Holdings may redeem all or part of the Notes at declining prices ranging from 106.25% to 100.00% of the principal amount. Within 30 days after the end of the period beginning on June 27, 2003 and ending July 31, 2004 and for each 12-month period thereafter, MobiFon Holdings has an obligation to offer to purchase a portion of the Notes at par, plus accrued and unpaid interest, with 50% of its excess cash flow for that period. The indenture governing the Notes contains customary negative covenants which, among other things, limit the ability of MobiFon Holdings and that of its subsidiaries to incur additional debt, make investments, dispose of assets or make distributions not provided for by the indenture. In addition, MobiFon Holdings will not be permitted to engage in activities other than primarily holding its equity interests in MobiFon S.A. or to reduce its ownership in MobiFon S.A. to below 50.1%. Furthermore, MobiFon Holdings has committed to file a registration statement with the United States Securities and Exchange Commission whereby the existing Notes will be registered for resale or will be exchanged with substantially similar notes that are registered under the Securities Act and freely tradable. Failure to file such registration document may result in additional interest of up to 2.6% annually. Cash and cash equivalents, including restricted cash, at the end of the second quarter ended June 30, 2003 totaled $278.0 million, including $32.8 million at the TIW level, $159.5 million at ClearWave and $33.1 million at MobiFon Holdings which included $28.1 million in restricted cash. On June 30, 2003, Clearwave declared a dividend of $1.69 per share and consequently, on July 9, 2003, made distributions of share premium to shareholders, totaling $142.1 million. TIW's share of these distributions, before deducting withholding taxes, amounted to $121.6 million. TIW used the proceeds from these distributions and its cash on hand to redeem $124.9 million in principal amount of 14% Senior Notes plus accrued interest in July 2003 and will use the funds for the planned redemption of the remaining $23.3 million in 14% Senior Notes on August 8, 2003. As of June 30, 2003, total consolidated indebtedness was $1.17 billion, of which $149.5 million was at the TIW level, $283.7 million at MobiFon and $520.6 million at Cesky Mobil and $219.8 million at MobiFon Holdings. Total indebtedness at the TIW level was mainly comprised of $148.2 million in 14% Senior Notes which, as described above, were reduced in July 2003 to $23.3 million and will be fully redeemed on August 8, 2003. We expect to have future capital requirements, particularly in relation to the expansion of the Czech Republic cellular network, the addition of capacity to our Romanian network and to acquire, if options are exercised, a certain number of shares of our operating subsidiaries owned by minority interests. We intend to finance such future capital requirements from cash flows from operating activities and from Tranche II of our senior loan facility as it relates to MobiFon. For Cesky Mobil, it will be financed by the syndicated senior credit facility and by equity contributions from TIW Czech N.V. During the second quarter of 2003, the shareholders of TIW Czech N.V. committed to provide an additional Euro 22.0 million ($25.3 million) of equity funding of which the Company's share is Euro 5.3 million ($6.1 million). These commitments were fulfilled on July 15, 2003 and on July 18, 2003, Euro 21.6 million ($24.8 million) was advanced as a capital contribution to Cesky Mobil a.s. TIW (S&P/CCC+ Corporate Credit Rating/Positive) is a leading cellular operator in Central and Eastern Europe with almost 4.1 million managed subscribers. TIW is the market leader in Romania through MobiFon S.A. and is active in the Czech Republic through Cesky Mobil a.s. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). TOWER AUTOMOTIVE: Commences Exchange Offer for 12% Senior Notes --------------------------------------------------------------- Tower Automotive, Inc., is offering to exchange up to $258,000,000 of its new 12% Senior Notes due 2013, series B for a like amount of its outstanding 12% Senior Notes due 2013. The terms of the notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that the transfer restrictions and registration rights relating to the outstanding notes will not apply to the exchange notes. There is no existing public market for the outstanding notes or the exchange notes. The Company does not intend to list the exchange notes on any securities exchange or seek approval for quotation through any automated trading system. Noteholders may withdraw tender of notes at any time before the expiration of the exchange offer. Tower will exchange all of the outstanding notes that are validly tendered and not withdrawn. The expiration time and date for the exchange offer has not yet been determined by the Company. The Company indicates that the exchange of notes will not be a taxable event for U.S. federal income tax purposes. The exchange offer is not subject to any condition other than that it not violate applicable law or any applicable interpretation of the Staff of the SEC. Tower Automotive, Inc. will not receive any proceeds from the exchange offer. At June 30, 2003, the company's balance sheet shows that its total current liabilities outweighed its total current assets by about $82 million. VERTIS INC: Reports Net Loss of $72 Million for Second Quarter -------------------------------------------------------------- Vertis, Inc. reported results for the three and six months ended June 30, 2003. For the quarter ended June 30, 2003, net sales were $377.3 million, or 7.7% below the quarter ended June 30, 2002. For the six months ended June 30, 2003, net sales amounted to $748.6 million, or 7.7% below the comparable 2002 six-month period. The decline in net sales was largely the result of competitive pricing pressures, sluggish direct mail business domestically as well as in Europe, and weak advertising agency business at the Company's Advertising Technology Services segment. Donald Roland, Chairman, President, and Chief Executive Officer stated, "The challenging economic and geo-political conditions continued in the second quarter which resulted in increased unemployment, put pressure on retail sales, and dampened advertising spending. Our Direct Marketing and Europe segments began feeling the effects of these challenges in the third quarter of 2002 and our Retail and Newspaper Services segment felt the impacts in the fourth quarter of last year. These factors have negatively impacted our customers and in turn our industry and our business." Earnings before interest, taxes, depreciation, amortization and the cumulative effect of accounting change amounted to $39.2 million in the second quarter, a decline of $18.5 million, or 32.1% versus the second quarter of 2002. On a year-to-date basis, EBITDA amounted to $82.4 million, a decline of $22.0 million, or 21.1% when compared to the six months ended June 30, 2002. These results reflect the competitive pricing pressures and other downward pressures on net sales noted above. The Company continues to manage its costs, including reducing costs commensurate with changes in demand and continues to garner production efficiency improvements. These cost initiatives, however, did not fully cover the earnings decline associated with the decline in net sales. In addition, the first six months of 2003 benefited from a $10.1 million recovery from a settlement to a legal proceeding and a $3.9 million decline in restructuring and restructuring-related charges. Vertis reported a net loss of $71.9 million in the second quarter and $77.8 million net loss through the first six months of 2003 versus net losses of $1.7 million and $120.4 million in the comparable 2002 periods. The net loss in the three and six months ended June 30, 2003 reflects a non-cash tax provision of $48.8 million to provide a valuation allowance against previously recorded deferred tax benefits related to net operating loss carryforwards, as required by Statement of Financial Accounting Standards No. 109. The valuation allowance was recorded in the second quarter due to the continuation of the poor economic climate and the projected increase in annual interest expense resulting from the high-yield bond offering completed in June 2003. The 2002 net loss reflects the $108.4 million after-tax cumulative effect of adopting SFAS No. 142 as it relates to goodwill and other intangibles. Noted Mr. Roland, "Although we are disappointed in the lingering poor economic conditions and their impact on our results, we continue to see evidence that our strategy is sound. In these difficult times, we continue to manage our costs, capital spending, and working capital to maximize our cash flow." In addition to providing second quarter results, the Company provided an update to earnings guidance issued on May 19, 2003. Dean D. Durbin, Chief Financial Officer commented, "The conditions we experienced in May and June were worse than we expected. We cannot ignore the potential impact of a continuation of the uncertain economic climate and its impact on advertising spending. As such, we now expect the full-year 2003 EBITDA to be between $196.0 million and $206.0 million and the net loss to be between $75.1 million and $64.9 million." Mr. Durbin added, "Our management team is diligently pursuing profitable top-line gains and cost reductions to get back to the guidance we issued in May." Vertis is a leading international provider of integrated marketing solutions that seamlessly combines advertising, direct marketing, media, imaging and progressive technology. The Company's product and service offerings include: consumer and media research, media planning and placement, creative services, digital media production, targetable advertising insert programs, fully integrated direct marketing programs, circulation-building newspaper products, and interactive marketing. Serving more than 3,000 local, regional, national and international customers, Vertis is a privately held company. Vertis clients encompass numerous Fortune 500 companies across diverse industries, including ad agencies, automotive, consumer packaged goods, durable goods and manufacturing, financial services, fragrance and beauty, food and grocery, healthcare, media and publishing, newspapers, retailers and technology. To learn more about Vertis, visit http://www.vertisinc.com As reported in Troubled Company Reporter's May 27, 2003 edition, Standard & Poor's Ratings Services assigned its 'B-' rating to Vertis Inc.'s $350 million 9.75% senior secured second lien notes due April 1, 2009. The notes were sold at a discount to yield 10.375%, and proceeds will be used to repay amounts outstanding under the company's existing bank facility. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating and other ratings for the company. Upon retirement of the term A and B loans, Standard & Poor's will raise the senior secured debt rating of the company to 'BB-' from 'B+'. The outlook is negative for this Baltimore, Maryland-headquartered advertising and marketing services company. VICAR OPERATING: S&P Affirms B+/B- Ratings and Changes Outlook -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' corporate credit and secured bank loan ratings on animal hospital operator Vicar Operating Inc., and also affirmed the company's 'B-' subordinated debt rating. At the same time, the outlook on the company has been revised to positive from stable. The revision reflects both the company's improving operating performance and measures taken to improve its capital structure. Total debt outstanding as of June 30, 2003, was approximately $338 million. "The low-investment-grade ratings reflect Vicar's improving but still relatively weak financial profile," said Standard & Poor's credit analyst David Peknay. "However, this weakness is mitigated by the company's position as the leading operator of animal hospitals and veterinary diagnostic laboratories." Santa Monica, California-based Vicar (a wholly-owned subsidiary of holding company VCA ANTECH INC.) operates about 233 animal hospitals in 34 states and 20 veterinary diagnostic laboratories that service all 50 states. As a consolidator of hospitals in this fragmented and competitive industry, Vicar has a successful record of improving the operations that it acquires and implementing its systems and procedures to improve pricing. The company seeks to capitalize on economies of scale and on its ability to internally deliver laboratory services. Vicar's national and rapid-testing capability is a competitive advantage. Moreover, technical and pharmaceutical advancements provide future growth potential for both the hospital and laboratory segments. Nevertheless, the existence of numerous competitors in local markets may limit future pricing flexibility despite recent gains. WALKING COMPANY: Commences Store Closing Sales at 29 Locations -------------------------------------------------------------- Store closing sales have started at 29 Walking Company Stores. The stores are located in California, Florida, Georgia, Illinois, Maryland, Minnesota, Missouri, New Jersey, Nevada, Ohio, Oklahoma, Pennsylvania, Tennessee, and Texas. One store operating as Alan's Shoes in Tucson, Arizona is also closing. The 72 other Walking Company Stores not included on the following list of closing locations will remain open to conduct business as usual. The United States Bankruptcy Court in California approved The Walking Company selection of Hilco Merchant Resources to conduct the Store Closing sale at the 29 stores. The Walking Company is dedicated to bringing the finest collection of luxury comfort footwear to the consumer. Shoes that look as good as they feel. In addition to spectacular price reductions on the world's most comfortable footwear, the consumer will also find compelling discounts on fashion apparel including jackets, vests and hats. Rarely discounted brands now being offered at extraordinary values include Birkenstock, Cole Haan, Dansko, Ecco, Mephisto, Merrell, Naot, New Balance, Rockport, Saucony, Teva and Timberland. Come in early for the best selection of sizes and styles during this unprecedented savings opportunity. Greg Milne, Chief Executive Officer of The Walking Company stated: "The closing of the twenty-nine stores, not an easy decision, will result in a base of stores that is more productive. We will now concentrate on improving performance in the remaining stores." Michael Keefe, President of Hilco Merchant Resources stated: "We are extremely pleased to have been selected as a strategic partner to assist The Walking Company as it restructures. Our involvement will allow The Walking Company's management to devote its time to the remaining stores and business, while we at Hilco Merchant Resources will maximize the results in the closing stores and protect The Walking Company Brand." Hilco Merchant Resources, based in Chicago, IL provides high yield strategic retail inventory liquidation and store closing services. Over the years, Hilco principals have disposed of assets valued in excess of $30 billion. Hilco Merchant Resources is part of the Hilco Organization, a provider of asset valuation, acquisition, disposition and financing to an international marketplace through eight specialized business units. Hilco serves retailers, manufacturers, wholesalers, distributors and importers, direct and through their financial institutions and consulting professionals. Services include: retail store, warehouse and factory closings, and inventory liquidations, through sales and auctions; asset appraisals covering retail and industrial inventory, machinery, equipment, accounts receivables and real estate; disposition of commercial and industrial real estate and leaseholds; purchase and liquidation of distressed accounts receivables portfolios; acquisition and re-marketing of excess wholesale consumer goods inventories; and secured debt and equity financing. The Hilco organization, headquartered in Chicago, has offices in Boston; New York; Los Angeles; Miami; Atlanta; Flagstaff; Detroit; and London, England. For more information please visit http://www.hilcotrading.com WHEELING-PITTSBURGH: Formally Emerges from Bankruptcy Proceeding ---------------------------------------------------------------- Wheeling-Pittsburgh Corporation has formally exited bankruptcy. Wheeling-Pittsburgh Corporation President and CEO James G. Bradley said that the ratification of the labor agreement with WPC by the United Steel Workers of America was the "final, necessary piece of the puzzle" the company needed to exit bankruptcy. "With the labor agreement and new financing in place, the company is now ready to move forward. We look to the future with pride, enthusiasm and determination. We're ready to put our new strategic plan into action," said Bradley. "The men and women of this company have continued to produce high- quality products. In addition to our employees, I am grateful for the support of our lenders, our elected and government officials, our customers and our suppliers. We were able to work through a difficult time as a team," said Bradley. Wheeling-Pittsburgh Corporation filed for Chapter 11 bankruptcy protection in November 2000. WHEELING-PITTSBURGH: Consummates Plan of Reorganization ------------------------------------------------------- WHX Corporation (NYSE: WHX) announced that a Chapter 11 Plan of Reorganization for Wheeling-Pittsburgh Corporation and its debtor affiliates was consummated on August 1, 2003. The POR had been confirmed by the United States Bankruptcy Court for the Northern District of Ohio on June 18, 2003. Among other things, as a result of the consummation of the POR, each member of the WPC Group will cease to be a subsidiary of WHX Corporation. In connection with the consummation of the POR, WHX has made all contributions required under the POR, as previously disclosed. In addition, upon consummation of the POR, the previously announced agreement between WHX, the Pension Benefit Guarantee Corporation, WPC and the United Steel Workers of America became effective. This agreement results in a settlement of the civil action brought by the PBGC against WHX in the United States District Court for the Southern District of New York. Accordingly, the PBGC has agreed to withdraw its action to terminate the WHX Pension Plan. WHX is a holding company that has been structured to invest in and/or acquire a diverse group of businesses on a decentralized basis. WHX's primary business is Handy & Harman, a diversified manufacturing company with activities in precious metals fabrication, specialty wire and tubing and engineered materials. WHX also owns Canfield Metal Coating Corporation, a manufacturer of electrogalvanized products used in the construction and appliance industries. WORLDCOM: MCI Continues to Serve Federal Government Customers ------------------------------------------------------------- MCI (WCOEQ, MCWEQ) accepts the General Services Administration's decision for proposed debarment, which will not affect MCI's ability to serve its existing federal government customers. The company said that it has been communicating with GSA for some time and will continue to work diligently to implement new internal controls systems and strengthen its Ethics Office. The company will be allowed to seek new government business once it achieves these recommendations and receives approval by GSA. Michael Capellas, MCI chairman and CEO, said, "Throughout the events of the past year, our 55,000 employees have been working harder than ever to provide world-class service to all our customers, including government agencies. Today's announcement will not affect MCI's existing contracts with state and federal government customers who can continue to count on us to provide the industry's best service and support. "We are in the process of rebuilding our ethics program and understand that there is still more work to do. MCI has made significant progress on many fronts. We remain committed to operating with the utmost integrity. "[Thurs]day's news does not in any way affect the timing of our emergence from Chapter 11 protection." Irwin Gold, senior managing director, Houlihan Lokey Howard & Zukin, financial advisors to MCI's Creditors Committee, said: "MCI's creditors committee fully supports Michael Capellas and his management team as they rapidly work to fulfill GSA's recommendations so they can again compete for new government contracts. We remain very confident in the company's plan of reorganization." Bob Blakely, MCI chief financial officer, said: "No one has ever had to reconstruct three years of financial history for a company of this magnitude. We are working diligently and have no higher priority than to implement our new internal controls systems. The company's customer-facing transaction systems remain solid and we continue to operate with world-class network performance and the lowest FCC reportable outages in the industry." Blakely said that MCI has hired more than 400 accounting professionals, established a new internal controls team, brought in a new external auditor, KPMG, and retained Deloitte & Touche to assist the company with the internal controls project. WorldCom, Inc. (WCOEQ, MCWEQ), which currently conducts business under the MCI brand name, is a leading global communications provider, delivering innovative, cost-effective, advanced communications connectivity to businesses, governments and consumers. With the industry's most expansive global IP backbone, based on company-owned POPs, and wholly-owned data networks, WorldCom develops the converged communications products and services that are the foundation for commerce and communications in today's market. For more information, go to http://www.mci.com WORLDCOM INC: CWA President Morton Bahr Applauds GSA Decision ------------------------------------------------------------- President Morton Bahr of the Communications Workers of America issued the following statement: "The General Services Administration has taken welcome and appropriate action in suspending MCI/WorldCom from eligibility for doing business with the government. "MCI/WorldCom has the dubious distinction of having committed the largest corporate fraud in history and causing incalculable harm to tens of thousands of people. Its fraud-induced bankruptcy cost investors -- largely workers' pension funds -- more than $200 billion. MCI/WorldCom's lies and false financial reports destabilized the entire telecommunications industry and cost jobs and retirement savings of workers throughout the sector. "We have criticized the rewarding of this corporate lawbreaker with contracts to rebuild Iraq's wireless network and for other federal work. The GSA's announcement today helps to send the message to corporate America that indeed crime doesn't pay." ZALE CORPORATE: S&P Ratchets Rating to BB+ after Tender Offer ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on the specialty jewelry retailer Zale Corp. to 'BB+' from 'BBB-'. At the same time, Standard & Poor's withdrew its 'BBB-' senior unsecured debt ratings on Zale's $87 million outstanding 8.5% senior unsecured notes due 2007 and $225 million unsecured revolving credit facility. The rating withdrawal follows the company's announcement that it redeemed the senior notes and refinanced the revolving credit facility with a new $500 million secured revolving credit facility. All ratings have been removed from CreditWatch where they were placed July 2, 2003. The outlook is stable. About $87 million of total debt was outstanding at April 30, 2003. The downgrade follows Zale's announcement of the results of its "Dutch Auction" tender offer that expired July 29, 2003. In conjunction with the tender, Irving, Texas-based Zale intends to purchase 4.7 million shares of its common stock at a total cost of $225.6 million. Zale had previously expected to purchase up to 6.4 million shares at an aggregate amount of about $307 million. Given that the tender offer was under-subscribed, the company plans to purchase additional shares of its common stock under its stock repurchase program. Zale has about $48 million remaining under its $50 million share repurchase program as of April 30, 2003. The tender offer is expected to be funded with borrowings under the new credit facility and about $50 million of cash on hand. In connection with this transaction, Zale also announced the redemption of the remaining $87 million of its senior notes, which was funded with existing cash. "The downgrade reflects a significant increase in debt leverage following the completion of the tender offer and a more aggressive financial policy," said credit analyst Ana Lai. Because the tender offer will be largely debt financed, debt leverage is expected to increase materially, resulting in weaker- than-expected credit protection measures. Pro forma for the transaction, credit measures are expected to deteriorate to levels no longer consistent with the investment-grade rating with total debt to EBITDA increasing to over 3.0x from 2.6x for the 12 months ended April 30, 2003. Liquidity is adequate and will be largely provided by cash flow from operations and availability under its new five-year $500 million secured revolving credit facility, which is secured largely by inventory. After the completion of the tender offer, Zale will have about $175-$180 million drawn under the revolving credit facility. Zale does not have any debt maturities until 2008, when its revolving facility matures. Cash flow from operations and borrowings under its revolving credit facility should be sufficient to fund seasonal working capital and capital spending needs over the near to intermediate term. * BOND PRICING: For the week of August 4 - 8, 2003 -------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Communications 3.250% 05/01/21 27 Adelphia Communications 6.000% 02/15/06 27 Adelphia Communications 7.875% 05/01/09 66 Adelphia Communications 9.250% 10/01/02 65 Adelphia Communications 9.875% 03/01/07 67 Adelphia Communications 10.250% 11/01/06 65 Adelphia Communications 10.875% 10/01/10 66 Air 2 US 8.027% 10/01/19 74 AK Steel Corp. 7.750% 06/15/12 73 American & Foreign Power 5.000% 03/01/30 64 American Cellular 9.500% 10/15/09 62 AMR Corp. 9.000% 08/01/12 67 AMR Corp. 9.000% 09/15/16 63 AnnTaylor Stores 0.550% 06/18/19 65 Applied Extrusion 10.750% 07/01/11 68 Best Buy Co. Inc. 0.684% 06/27/21 72 Burlington Northern 3.200% 01/01/45 52 Burlington Northern 3.800% 01/01/20 74 Calpine Corp. 7.750% 04/15/09 74 Calpine Corp. 8.500% 02/15/11 74 Century Communications 8.750% 10/01/07 69 Century Communications 8.875% 01/15/07 70 Champion Enterprises 7.625% 05/15/09 74 Charter Communications 8.625% 04/01/09 74 Cincinnati Bell Telephone 6.300% 12/01/28 69 Comcast Corp. 2.000% 10/15/29 29 Coastal Corp. 6.950% 06/01/28 72 Conseco Inc. 8.750% 08/09/06 61 Conseco Inc. 10.750% 06/15/08 36 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 0.426% 04/19/20 50 Cox Communications Inc. 2.000% 11/15/29 36 Crown Cork & Seal 7.500% 12/15/96 75 Cummins Engine 5.650% 03/01/98 64 DDI Corp. 5.250% 03/01/08 6 Dynex Capital 9.500% 02/28/05 2 El Paso Corp. 7.750% 01/15/32 74 El Paso Energy 7.800% 08/01/31 74 Elwood Energy 8.159% 07/05/26 72 Finova Group 7.500% 11/15/09 45 Fleming Companies Inc. 10.625% 07/31/07 61 Foamex L.P. 9.875% 06/15/07 61 Goodyear Tire & Rubber 7.857% 08/15/11 73 Gulf Mobile Ohio 5.000% 12/01/56 64 International Wire Group 11.750% 06/01/05 62 JL French Auto 11.500% 06/01/09 53 Level 3 Communications Inc. 6.000% 09/15/09 63 Level 3 Communications Inc. 6.000% 03/15/10 62 Liberty Media 3.500% 01/15/31 68 Liberty Media 3.750% 02/15/30 56 Liberty Media 4.000% 11/15/29 58 Lucent Technologies 6.450% 03/15/29 65 Lucent Technologies 6.500% 01/15/28 65 Mirant Corp. 5.750% 07/15/07 42 Missouri Pacific Railroad 4.750% 01/01/30 70 Missouri Pacific Railroad 5.000% 01/01/45 62 NTL Communications Corp. 7.000% 12/15/08 19 Northern Pacific Railway 3.000% 01/01/47 50 Northwest Airlines 7.875% 03/15/08 72 Northwestern Corporation 7.875% 03/15/07 75 Northwestern Corporation 8.750% 03/15/12 73 Revlon Consumer Products 8.625% 02/01/08 46 Universal Health Services 0.426% 06/23/20 66 US Timberlands 9.625% 11/15/07 61 US West Communications 7.125% 11/15/43 74 Viropharma Inc. 6.000% 03/01/07 50 Xerox Corp. 0.570% 04/21/18 65 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***