/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030811.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 11, 2003, Vol. 7, No. 157 Headlines ACTERNA: Court OKs Settlement, Allowing JP Morgan to File Claim AIR CANADA: Seeks Clearance to Pay $4MM Obligation to Lufthansa AIR CANADA: June 30 Balance Sheet Insolvency Widens to $3 Bill. ALKERMES INC: June 30 Net Capital Deficit Balloons to $34 Mill. AMERCO: Committee Asks Court to Establish Trading "Ethical Wall" AMERICAN RESTAURANT: Kachani Replaces Roberts as Director AMERICREDIT: Fitch Keeps B Rating on Results Delay Announcement AMERICREDIT: S&P Places B+ Counterparty Rating on Watch Negative A NOVO BROADBAND: Gets Exclusivity Extension through August 29 AQUILA INC: Will Host Second Quarter Conference Call Tomorrow ARES III: Fitch Downgrades Ratings on Three Note Classes ARMSTRONG HOLDINGS: AWI Asks Court to Disallow Dal-Tile Claim ARTISOFT INC: June 30, 2003 Balance Sheet Upside-Down by $320K ASPEN TECHNOLOGY: Fiscal Fourth Quarter Net Loss Stands at $18MM BUILDING MATERIALS: S&P Assigns BB- Rating to $300M Bank Loan BURLINGTON: Files First Amended Plan and Disclosure Statement CALPINE: Prices $750 Million Term Loans & Secured Notes Offering CALPINE CONSTRUCTION: S&P Assigns B Corporate Credit Rating CARECENTRIC CORP: June 30 Balance Sheet Upside-Down by $15 Mill. CELLSTAR CORP: Brings-In Grant Thornton to Replace KPMG LLC CHAMPIONLYTE: Reclaims Old Fashioned Syrup Company Subsidiary CONGOLEUM CORP: Senior Bondholders Okay Indenture Amendments CONSOLIDATED FREIGHTWAYS: Auctioning-Off CFL Unit on August 25 CTC COMMS: Enters Investment Agreement with Columbia Ventures DANKA BUSINESS: Pricing Competition Spurs S&P's Negative Outlook DEAN FOODS: Second Quarter Results Reflect Slight Improvement E2 COMMS: Litigation Trust Employs Marjorie Firm as Counsel EASYLINK SERVICES: Staves-Off Nasdaq Delisting After Hearing E-CENTIVES INC: June 30 Working Capital Deficit Tops $1.7 Mill. ENERGY PARTNERS: Second Quarter Results Zooms into Positive Zone EQUITY INNS: Reports Weaker Performance for Second Quarter 2003 FLEMING COS: Court Okays Blackstone's Retention as Fin'l Advisor FOSTER WHEELER: June 27 Net Capital Deficit Widens to $830 Mill. FRANKLIN CLO IV: S&P Assigns BB Rating to $8 Mill. Class E Notes FREMONT GENERAL: Declares 33% Increase in Shares Cash Dividend GALEY & LORD: Wants More Time to Make Lease-Related Decisions GLIMCHER REALTY: Prices $60 Million Perpetual Preferred Offering GRESHAM STREET: S&P Assigns BB+ Preferred Share Rating HANOVER DIRECT: June 28 Balance Sheet Insolvency Widens to $65MM HYTEK MICROSYSTEMS: Q2 Results Swing-Down to Net Loss of $40K IASIS HEALTHCARE: S&P Ups Credit & Sec. Bank Loan Ratings to B- INTEGRATED HEALTH: Gets Court Clearance to Use $3.7M Trust Funds INTERNET CAPITAL: June 30 Net Capital Deficit Burgeons to $93MM KASPER A.S.L.: Jones Apparel Pitches Best Bid to Acquire Assets KENTUCKY ELECTRIC: Amends Asset Purchase Agreement with KES LAIDLAW: Judge Kaplan Says Yes to Cooper's $8.5MM Success Fee LEAP WIRELESS: Brings-In UBS Warburg as Financial Advisor MIRANT: Wants Court Nod to Hire Ordinary Course Professionals MMI PRODUCTS: S&P Cuts Ratings Due to Slumping Credit Measures MORTGAGE CAPITAL: S&P Affirms B/B- Ratings on Class H & J Notes MSF FUNDING: S&P Affirms BB/B Ratings on Class C and D Notes NANTICOKE HOMES: Hires Knupp Kodak as Collections Counsel NAPRO BIOTHERAPEUTICS: July 2 Working Capital Deficit Tops $7MM NAT'L STEEL: Obtains Go-Signal for USWA Memorandum of Agreement NATIONAL WARRANTY: Cayman Court Declares Insurer Insolvent NEXTCARD INC: Disclosure Statement Hearing Today in Wilmington NEXT GENERATION: Elects Carl Pahapill as New Board Chairman NOMURA CBO: S&P Further Junks Class A-3 Notes Rating to CCC- NORTEK INC: Reports Strong Growth for Second Quarter Results NPS PHARMA: S&P Assigns Low-B Credit and Sr. Unsec. Debt Ratings OHIO CASUALTY: Reports Slight Decline in Second Quarter Results OMNICARE INC: Board Declares Quarterly Cash Dividend OWENS CORNING: Wants to Make Contributions to Pension Plan PEGASUS SATELLITE: Closes $100 Million Senior Secured Facility PEGASUS SATELLITE: Redeeming 12.50% Senior Sub. Notes on Sept. 2 PENN TRAFFIC: Closes $270M DIP Financing & Joseph Fisher Resigns PENTON MEDIA: June 30 Net Capital Deficit Slides-Up to $75 Mill. PEREGRINE SYSTEMS: Completes Ch. 11 Reorganization Proceedings PEREGRINE SYSTEMS: Will File SEC Forms 10-K and 10-Q in October PEREGRINE SYSTEMS: Makes $18 Million Payment to Kilroy Realty PG&E NAT'L: U.S. Trustee Appoints NEG Unsecured Creditors' Panel PILLOWTEX: Turns to KPMG as Accountants and Financial Advisors PRIMUS TELECOMMS: Plans to Redeem $10 Million of 11.75% Bonds RADIO ONE: Reports Slightly Improved Second Quarter 2003 Results RURAL/METRO: Wins Five-Year Renewal Contract with Indy Motor SAFETY-KLEEN: Systems' $135 Mill. Senior Security Credit Terms SAMSONITE: S&P Ups & Removes Low-B & Junk Ratings from Watch SOTHEBY'S HOLDINGS: Q2 Financial Results Show Weaker Performance SPIEGEL GROUP: July 2003 Net Sales Tumble 29% to $99 Million SR TELECOM: Will Publish Second Quarter Results on August 29 SURGICARE: Engages Mann Frankfort as New Independent Auditors TANGRAM ENTERPRISE: June 30 Working Capital Deficit Tops $1MM TENET HEALTHCARE: June 30 Shareholder Deficit Stands at $5.5BB TRENWICK GROUP: Enters Long-Term Debt Restructuring Agreement TRITON AVIATION: Fitch Hatchets Ratings on 4 Classes to BB- & C TRITON PCS: June 30 Net Capital Deficit Balloons to $267 Million TYCO INT'L: SEC Declares Shelf Registration Statement Effective UNITED AIR LINES: Selected Aircraft Debt Ratings Downgraded UNITED AIRLINES: US Bank Demands Cure Default and Rent Payments UNIVERSAL ACCESS: June 30 Balance Sheet Upside-Down by $320,000 US ONCOLOGY: Reports Improved Second Quarter Financial Results US UNWIRED: June 30 Net Capital Deficit Doubles to $160 Million WACHOVIA BANK: S&P Assigns Low-B's to Six 2003-C6 Note Classes WHX CORP: Ratings Off Watch Following Separation from WPC Unit WINN-DIXIE: Fiscal Fourth-Quarter Net Loss Hits $22 Million WORLDCOM INC: Seeks Court Nod for Second Disclosure Statement Z-TEL TECHNOLOGIES: June 30 Equity Deficit Widens to $116 Million * Huron Consulting Brings-In Roy Ellegard as Managing Director * BOND PRICING: For the week of August 11 - 15, 2003 ********* ACTERNA: Court OKs Settlement, Allowing JP Morgan to File Claim --------------------------------------------------------------- A certain Credit Agreement dated as of May 23, 2000 involves the Acterna Corp. Debtors and these particular parties: * Acterna LLC as borrower; * JPMorgan Chase Bank -- successor to Morgan Guaranty Trust Company of New York -- as administrative agent; * Credit Suisse First Boston as syndication agent; * JPMorgan and Deutsche Bank Trust Company Americas as co-documentation agents for the Prepetition Credit Agreement; and * A consortium of various lenders. To avoid conflicts that may arise from the Bar Date Order and the filing of the Lenders' Claims under the Prepetition Credit Agreement, the Debtors and JPMorgan stipulate, consent and agree that: (1) JPMorgan will file a single consolidated proof of claim for all claims in connection with the Prepetition Credit Documents, provided that nothing will affect the right of JPMorgan or any Lender to: (i) vote independently on any reorganization plan proposed in any of the Debtors' Chapter 11 cases; or (ii) file separate, individual proof of claim that may or may not be connected with the Prepetition Credit Documents; (2) The Debtors acknowledge that any consolidated proof of claim filed by JPMorgan will be deemed filed against each of the Debtors who are party to any of the Prepetition Credit Documents; and (3) Each consolidated proof of claim filed will expressly designate each separate Debtor which the claimants contend is liable and will be executed by the officer JPMorgan authorized. Accordingly, Judge Lifland approves the Stipulation. (Acterna Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Seeks Clearance to Pay $4MM Obligation to Lufthansa --------------------------------------------------------------- Katherine L. Kay, Esq., at Stikeman Elliott LLP, advises the Court that Air Canada intends to pay to Lufthansa $4,171,197 in respect of its obligations pursuant to one of the Star Alliance Agreements. The amount was due on June 30, 2003. It is Air Canada's position that its relationship with Lufthansa and the Star Alliance relationship are of critical commercial importance and the discontinuance or termination of that relationship would cause grave financial consequences to Air Canada and, therefore, its stakeholders. (Air Canada Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: June 30 Balance Sheet Insolvency Widens to $3 Bill. --------------------------------------------------------------- For the second quarter ended June 30, 2003, Air Canada reported an operating loss before reorganization items of $270 million compared to income of $62 million in the same quarter of 2002. The revenue and traffic downturn experienced in the first quarter intensified in the second quarter of 2003 primarily as a result of the SARS crisis. On a network-wide basis, total operating revenues declined $600 million or 24 per cent from the second quarter of 2002 mainly due to a deterioration in passenger revenues. Loss before foreign exchange on long-term monetary items and income taxes was $765 million and included reorganization items totaling $426 million. Reorganization items represent revenues, expenses, gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business under the Companies' Creditors Arrangement Act (CCAA). The net loss was $566 million compared to net income of $30 million in the second quarter of 2002. On April 1, 2003, Air Canada obtained an order from the Ontario Superior Court of Justice providing creditor protection under CCAA. Air Canada also made a concurrent petition under Section 304 of the U.S. Bankruptcy Code. "The airline's restructuring is progressing at a rapid pace. Recognizing that the marketplace has changed forever, we made permanent structural changes to our cost base in the early stages of our restructuring," said Robert Milton, President and Chief Executive Officer. "In just four months, we have successfully restructured on a permanent basis a significant portion of our operating costs, including salaries and wages across all employee groups, and renegotiated many of our aircraft leases. The current focus is on renegotiating the company's unsecured claims, all significant commercial agreements and raising equity capital to ensure financial stability upon exit from CCAA. We expect to file a Plan of Arrangement in the fall with exit from CCAA anticipated by the end of the year. "While we achieved an operating cost reduction of $268 million or 11 per cent year over year, the significant and immediate revenue and traffic shortfall caused by the SARS crisis, the lingering impact of the war in Iraq as well as the continuing weak yield environment resulted in an operating loss. Given the nature of our business, I am satisfied that we reacted as quickly as feasible to remove costs when faced with the unanticipated fall-out from SARS, said Mr. Milton. "The revenue shortfall was progressively disclosed on a monthly basis throughout the quarter and as anticipated, over $400 million of the revenue loss in the quarter can be directly attributed to the impact of SARS following on the war in Iraq. Given two consecutive outbreaks in Toronto, our main hub, in addition to our extensive presence in Asia, Air Canada has been hit harder by SARS than any other airline worldwide with the exception of certain Asian Pacific carriers. The effect of the second Toronto outbreak in late May was devastating with travelers avoiding Toronto as both a destination and connecting point. Although the traffic decline did bottom out in May and traffic trends showed some improvement in June, international and transborder traffic to all points in Canada continues to be affected. As the SARS crisis in Toronto peaked at a time when travelers were firming up summer travel plans, many international travelers avoided all of Canada as a summer holiday destination with severe negative impact to the entire Canadian tourism industry. "Our quick actions to lower costs together with some recovery in traffic, in part due to seasonal demand, reduced the operating loss for June to $400,000 per day from a daily operating loss of over $5 million in April. "With the SARS crisis now largely over we are seeing some pick up in demand overall in our network although the pricing environment remains weak. While the third quarter should reflect some improvement relative to the significant revenue drop in prior months, the lingering effect of SARS is expected to continue for the balance of the year. We currently expect the revenue shortfall from SARS and the war in Iraq to be approximately $850 million for the year. The overall year over year decline in revenue is estimated to be well in excess of $1 billion. No meaningful recovery is expected before the third quarter of 2004," concluded Mr. Milton. OPERATING RESULTS For the quarter, consolidated passenger revenues declined $567 million or 26 per cent from the prior year on an 18 per cent reduction to available seat mile capacity. The SARS crisis, increased low cost competition, the lingering adverse effect on passenger volumes from the war in Iraq and a weak economy contributed to a passenger traffic decline of 21 per cent. Passenger revenue per revenue passenger mile was down 7 per cent from the second quarter of 2002 while passenger revenue per available seat mile for the quarter was down 10 per cent. Second quarter domestic passenger revenues were down $251 million or 26 per cent on a 13 per cent reduction to ASM capacity. Domestic passenger traffic was down 16 per cent due to lower domestic and international demand resulting from the SARS crisis in Toronto and to increased low cost competition. Reflecting price competition as well as initiatives to stimulate traffic, domestic yield was 12 per cent lower and domestic RASM declined 15 per cent from 2002. US transborder passenger revenues were down $137 million or 27 per cent on an 18 per cent reduction to ASM capacity. In a weak market with increased competition from US airlines, US transborder traffic declined 18 per cent and yield decreased 12 per cent. Other international passenger revenues were $179 million or 26 per cent below the prior year. Atlantic revenues declined 11 per cent with decreases of 8 per cent in yield and 4 per cent in both traffic and ASM capacity over the prior year. The Pacific market was severely impacted by the SARS crisis resulting in a 63 per cent decline in passenger revenues. Pacific traffic was down 62 per cent on a 52 per cent reduction to flying capacity. South Pacific, Caribbean, Mexico and South America revenues were down 8 per cent on reduced traffic. Reflecting the reduction to flying capacity, cargo revenues decreased $19 million or 13 per cent. Other revenues were $14 million or 6 per cent lower largely as a result of reduced Aeroplan revenues and a decrease in third party aircraft maintenance revenues in the Technical Services division. For the quarter, total operating revenues declined $600 million or 24 per cent compared to the second quarter of 2002. OPERATING EXPENSES Operating expenses were down $268 million or 11 per cent from the second quarter of 2002 on an 18 per cent reduction to ASM capacity. Salaries, wages and benefits expense declined $40 million or 5 per cent. This decrease was mainly due to a reduction of over 3,100 full-time equivalent employees and, starting in June, changes to work rules and salaries for unionized and non- unionized labor groups. Fuel expense decreased $25 million or 8 per cent due to reduced ASM capacity which was partly offset by higher fuel prices compared to last year. Aircraft rent of $261 million was expensed in the quarter, however, cash rental payments were not made due to the moratorium on aircraft lease payments allowed under the Court order. Airport and navigation fees decreased by $16 million or 8 per cent reflecting reduced aircraft departures partially offset by increases in landing fees and general terminal charges year-over-year. Aircraft maintenance materials and supplies expense was down $34 million or 28 per cent due to reduced flying activity and aircraft retirements/reductions. Commission expense was $39 million or 39 per cent below the prior year resulting from reduced passenger revenues and lower commission rates. Year-over-year cost reductions were recorded in other categories including communications and information technology, food, beverages and supplies expenses and other expense areas. REORGANIZATION ITEMS As a result of the CCAA filing, the Corporation is following accounting policies applicable to an entity under creditor protection. As per Note 2 to the Consolidated Financial Statements, revenues, expenses, gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business have been reported separately as "reorganization items". Reorganization items totaling $426 million were recorded in the second quarter of 2003 and were comprised of estimated claims for repudiated leases, hedging adjustments, write-off of deferred financing costs on compromised debt, amortization of DIP financing fees, labor-related items, claims for the termination of contracts and professional fees. NON-OPERATING EXPENSE While the Corporation is under creditor protection, interest expense has been reported only to the extent that it will be paid under the plan or that it is probable that it will be an allowed claim. Consequently, net interest expense decreased $49 million primarily due to the Corporation not recording interest expense on unsecured debt. A loss on disposal of assets of $46 million was recorded in the 2003 quarter mainly from a provision of $49 million related to the write-down of a B747-400 aircraft. "Other" non-operating expenses in 2003 amounted to $18 million largely related to foreign exchange adjustments. In the second quarter of 2003, Air Canada recorded $205 million of income from foreign exchange fluctuations on long-term monetary assets and liabilities mainly attributable to the strengthening of the Canadian dollar. This compared to income of $19 million in the second quarter of 2002. CASH FLOW The Court stay order enabled a moratorium on all aircraft lease payments. In addition, on the basis of the order, the Corporation has ceased making payments of principal and interest on debt as well as on pre-petition accounts payable subject to compromise. Cash flows from operations amounted to $188 million in the quarter, a $107 million improvement from the 2002 quarter. Cash flows from operations improved mainly due to payment deferrals under the CCAA filing and other factors as further described below: - accounts payable and accrued liabilities provided cash of $194 million in the quarter. This improvement was mostly as a result of the CCAA filing and Court order placing a stay on pre- petition accounts payable subject to compromise which was partially offset by cash outflows due to accelerated payment terms for certain goods and services received subsequent to the CCAA filing. - advance ticket sales provided cash of $57 million in the quarter; however, this was $70 million below the second quarter of 2002 due to lower advance bookings. - aircraft lease payments less than (in excess of) rent expense provided cash of $255 million due to the moratorium on aircraft lease payments allowed under the Court order. As a result of the moratorium on aircraft lease payments, contractual payments of approximately $326 million were not paid during the quarter. - "other" cash used for operations was $142 million due in large part to payments made to financial institutions, passenger settlement systems and other trade vendors following the CCAA filing. The Corporation received net proceeds of $315 million from the CIBC credit facility issued in connection with the new CIBC contract. The principal on this secured CIBC facility may be repaid through the purchase of Aeroplan miles by CIBC. DIP financing fees of $62 million were paid during the quarter. As of August 7, 2003, no funds have been drawn against the DIP facility with General Electric Capital Canada Inc. As at June 30, 2003, cash and cash equivalents amounted to $838 million. YEAR-TO-DATE For the first six months of 2003, the Corporation recorded an operating loss before reorganization items of $624 million compared to a loss of $98 million in 2002. Net loss, which included $426 million of reorganization items, was $836 million versus a net loss of $189 million in the prior year. RESTRUCTURING UPDATE Since filing for CCAA on April 1, 2003, Air Canada has achieved significant progress in its restructuring process, including: - development of a going-forward Restructuring Plan based on a new revenue model, major fleet restructuring, lower labour and other operating costs, reduced debt, enhanced liquidity and a revised product strategy; - completion of a US$700 million debtor-in-possession (DIP) secured financing facility from General Electric Capital Canada Inc. which has not been drawn; - restructuring of labour agreements with all Air Canada and Air Canada Jazz unions and implementation of productivity improvements and reductions to salary and wage costs across all employee groups which will allow the Corporation to achieve significant permanent cost reductions; - conclusion of an amended affinity agreement with CIBC with respect to the CIBC Aerogold Visa card program and completion of a credit agreement which provided for a secured credit facility from CIBC under which the Corporation received net proceeds of $315 million; - signing of a letter of intent with American Express with respect to a new co-branded consumer and corporate charge card program and Aeroplan's participation in American Express' Canadian and international Membership Rewards Programs; - completion of a memorandum of understanding with General Electric Capital Aviation Services on the lease restructuring of 106 GECAS financed and managed aircraft as well as on new exit and aircraft financing totaling approximately $1.8 billion; - completion of a memorandum of understanding with International Lease Finance Corporation on the lease restructuring of 12 aircraft; - commencement of process of soliciting qualified parties to act as equity plan sponsor in its plan of arrangement to assist in funding its emergence from CCAA and to provide the necessary liquidity to execute its business plan, and commencement of an ancillary process involving the sale of a minority investment in Air Canada's wholly-owned affiliate, Aeroplan Limited Partnership. The Company is targeting to raise approximately $700 million of new equity investment; - commencement of discussions with its largest lenders and detailed negotiations with its major suppliers; - commencement of discussions with the Office of the Superintendent of Financial Institutions and representatives of all employee groups on alternative funding scenarios related to its Canadian pension plan; - implementation of commercial restructuring initiatives such as a simplified, online domestic fare structure and the introduction of onboard restaurant service. Air Canada's 2003 second quarter results are being made available on Air Canada's Web site http://www.aircanada.comand at http://www.SEDAR.com At June 30, 2003, Air Canada's balance sheet shows a working capital deficit of about $700 million, and a total shareholders' equity deficit of about $3 billion. Creditor Protection and Restructuring On April 1, 2003, Air Canada obtained an order from the Ontario Superior Court of Justice providing creditor protection under the Companies' Creditors Arrangement Act. On April 1, 2003, Air Canada, through its Court-appointed Monitor, also made a concurrent petition for recognition and ancillary relief under Section 304 of the U.S. Bankruptcy Code. The CCAA and U.S. proceedings cover Air Canada and the following of its wholly-owned subsidiaries: Jazz Air Inc., ZIP Air Inc., 3838722 Canada Inc., Air Canada Capital Ltd., Manoir International Finance Inc., Simco Leasing Ltd., and Wingco Leasing Inc. Aeroplan Limited Partnership, Touram Inc., and Destina.ca Inc., are not included in the filings. The Court order provides for a general stay period that expires on September 30, 2003, subject to further extension as the Court may deem appropriate. This stay generally precludes parties from taking any action against the Applicants for breach of contractual or other obligations. The purpose of the stay period order is to provide the Applicants with relief designed to stabilize operations and business relationships with customers, vendors, employees and creditors. During the stay period, Air Canada is developing its revised business plan and negotiating new arrangements with creditors (including aircraft lessors) and labor unions with a view to having those arrangements completed prior to proposing a final plan of arrangement. Progress has been made in these discussions as further explained below. The Applicants continue operations under the provisions of the Court orders. The Applicants are undertaking an operational, commercial, financial and corporate restructuring and will propose a plan of arrangement, which will be submitted to the Court for confirmation after submission to any required vote to creditors for approval. A plan of arrangement would establish, among other things, the settlement of the Applicants' compromised liabilities and the reorganized entity's capital structure. The filings triggered defaults on substantially all of the Applicants' debt and lease obligations. The stay period order stays most actions against the Applicants, including actions to collect pre-filing indebtedness or to exercise control over the Applicants' property. As a result of the stay, the Applicants have ceased making payments of interest and principal on debt. As previously stated, Air Canada's restructuring plan contemplates that all unsecured debt will be converted into equity of the restructured entity. The order also grants the Applicants with the authority, among other things, a) to pay outstanding and future employee wages, salaries and employee benefits and other employee obligations; b) to honor obligations related to airlines tickets and Aeroplan redemptions; and c) to honor obligations related to the Applicants' interline, clearing house, code sharing and other similar agreements. Concurrent with the filing on April 1, 2003, the Corporation declared a moratorium on aircraft lease payments. Pursuant to such moratorium, contractual payments of approximately $326 were not paid during the quarter. The Corporation is currently in negotiations with its lessors to restructure its lease obligations. ALKERMES INC: June 30 Net Capital Deficit Balloons to $34 Mill. --------------------------------------------------------------- Alkermes, Inc. (NASDAQ:ALKS) today reported its financial results for the three-month period ended June 30, 2003. The net loss on a GAAP basis for the quarter ended June 30, 2003 was $30.6 million as compared to a net loss of $45.3 million for the three months ended June 30, 2002. Included in the net loss for the three months ended June 30, 2002 is a $24.2 million noncash charge related to the equity investment Alkermes made in Reliant Pharmaceuticals, LLC in December 2001. Pro Forma Results Pro forma net loss for the three months ended June 30, 2003 was $28.2 million compared to a pro forma net loss of $21.0 million for the three months ended June 30, 2002. The pro forma net loss for the three months ended June 30, 2003 excludes a $3.8 million noncash derivative charge associated with the provisional call structure of the Company's 6.52% convertible senior subordinated notes issued in December 2002, as well as $1.4 million of other noncash income recognized on the net increase in the fair value of warrants held in connection with licensing arrangements. Pro forma net loss for the quarter ended June 30, 2002 excludes a $24.2 million noncash charge related to our investment in Reliant. The increase in the pro forma net loss for the current period as compared to the same period of the prior year was primarily due to a reduction in the revenues reported relating to the Company's collaboration with Eli Lilly and Company following the restructuring of the programs in December 2002 to provide upfront funds for development activities in calendar 2003 and into 2004, and changes in the stage of several other collaborative agreements. Alkermes is providing pro forma results as a complement to results provided in accordance with accounting principles generally accepted in the U.S. The pro forma net loss excludes the noncash derivative charge related to the provisional call structure of the 6.52% Senior Notes, other noncash income recognized on the net increase in the fair value of warrants held in connection with licensing arrangements and the noncash charge related to the Company's investment in Reliant. The changes in the fair value of the warrants are likely to recur and will be recorded either as a gain or a loss, depending on the market value of the securities underlying the warrants. Management believes this pro forma measure helps indicate underlying trends in our ongoing operations by excluding the above items that are unrelated to our ongoing operations. Revenues Total revenues were $4.3 million for the quarter ended June 30, 2003 compared with $10.3 million for the three months ended June 30, 2002. Total manufacturing and royalty revenues were $1.5 million for the quarter ended June 30, 2003, including $1.1 million of manufacturing and royalty revenues for Risperdal Consta(TM). During the quarter, the Company conducted its semi- annual shutdown of the Risperdal Consta facility in Ohio. In July 2003, the Company resumed manufacturing and began multi-shift operations at this facility in anticipation of approval of Risperdal Consta in the U.S. Johnson & Johnson has filed for approval of Risperdal Consta around the world. To date, the product has been approved for sale in 35 countries outside the U.S. and Janssen-Cilag, a wholly owned subsidiary of Johnson & Johnson, is currently marketing Risperdal Consta in 15 of those countries. Research and development revenue under collaborative arrangements for the three months ended June 30, 2003 was $2.8 million compared to $10.3 million for the quarter ended June 30, 2002. The decrease was primarily a result of the restructuring of our AIR(R) insulin and AIR hGH programs with Lilly, changes in the Company's partners, as well as changes in the stage of several other collaborative programs. Beginning January 1, 2003, Alkermes no longer records research and development revenue for work performed on the Lilly programs, but instead uses the proceeds from Lilly's purchase of $30 million of the Company's Convertible Preferred Stock in December 2002 to pay for development costs into calendar year 2004. Also in December 2002, the royalty rate payable to Alkermes based on revenues of potential inhaled insulin products was increased. Lilly has the right to return the Convertible Preferred Stock to the Company in exchange for a reduction in this royalty rate. Alkermes Inc.'s June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $34 million. Cost of Goods Manufactured For the three months ended June 30, 2003, the cost of goods manufactured was $2.6 million, consisting of approximately $1.4 million for Risperdal Consta and approximately $1.2 million for Nutropin Depot(R). Research and Development/General and Administrative Expenses There were $21.7 million in research and development expenses and $5.8 million in general and administrative expenses for the three months ended June 30, 2003. This compares with $24.6 million in research and development expenses and $6.0 million in general and administrative expenses for the three months ended June 30, 2002. Research and development expenses were lower in the three months ended June 30, 2003 primarily because the Company is now separately reporting the cost of goods manufactured for its commercial products, Risperdal Consta and Nutropin Depot. This decrease was partially offset by an increase in occupancy costs and depreciation expense related to the expansion of the Company's facilities in both Massachusetts and Ohio. The decrease in general and administrative expenses for the three months ended June 30, 2003 reflects a decrease in consulting costs, which were partially offset by an increase in personnel costs and insurance costs. Interest Income/Expense Interest income for the three months ended June 30, 2003 was $1.0 million as compared with $1.4 million for the three months ended June 30, 2002. The decrease in interest income was primarily the result of a decline in interest rates. Interest expense was $3.5 million for the three months ended June 30, 2003 as compared to $2.1 million for the same period in the prior year. The increase resulted primarily from interest charges related to the 6.52% Senior Notes issued in December 2002. Other Income Other income, net was $1.4 million in the three months ended June 30, 2003 as compared to $0 for the three months ended June 30, 2002. This amount represents income recognized on the net increase in the fair value of warrants held in connection with licensing arrangements, which are recorded as derivatives in the consolidated balance sheets. The recorded value of such warrants can fluctuate significantly based on fluctuations in the market value of the underlying securities of the issuer of the warrants. Derivative Loss Related to 6.52% Convertible Senior Subordinated Notes On June 18, 2003, the Company announced it had exercised its right to automatically convert the 6.52% Senior Notes into its common stock on July 18, 2003. The 6.52% Senior Notes contained a provision that if the automatic conversion occurred on or prior to December 30, 2004 or if the holders voluntarily converted prior to December 30, 2004, the Company would pay additional interest equal to two full years of interest on the converted notes or the "Two- Year Interest Make-Whole," less any interest paid prior to conversion. The Two-Year Interest Make-Whole represented an embedded derivative. The value of the embedded derivative was increased by $3.8 million in the quarter to reflect the full value of amounts to be paid pursuant to the Two-Year Interest Make- Whole. The total value of the derivative was approximately $17.1 million at June 30, 2003 and is reflected as a liability on the consolidated balance sheets. On July 18, 2003, upon the conversion of the then outstanding 6.52% Senior Notes and payment of the Two- Year Interest Make-Whole, the embedded derivative was settled in full and the balance was reduced to zero. Cash and Investments At June 30, 2003, Alkermes had total cash and investments of $113.6 million as compared to $145.0 million at March 31, 2003. The decrease in cash and total investments during the three months ended June 30, 2003 was primarily a result of cash used to fund Alkermes' operations, to acquire fixed assets and to make interest and principal payments on its indebtedness. Conversion of 6.52% Senior Notes As discussed above, on June 18, 2003, the Company announced that it had exercised its right to automatically convert all of its outstanding 6.52% Senior Notes into shares of its common stock on July 18, 2003. During July 2003, $150.7 million principal amount of 6.52% Senior Notes were exchanged for shares of Alkermes' common stock. Alkermes issued an aggregate of 20.9 million shares of common stock in exchange for such notes, reflecting the value of both the principal and interest. On July 18, 2003, upon conversion of the remaining $23.8 million principal amount of the 6.52% Senior Notes, the Company issued 3.1 million shares of common stock and paid $2.3 million in cash to satisfy the Two-Year Interest Make-Whole payment. Alkermes converted each $1,000 principal amount of these notes into 130.1744 shares of common stock and paid the holder an interest payment of $97.80 in cash, representing the remaining 1.5 years of interest due on the 6.52% Senior Notes. Alkermes, Inc., is an emerging pharmaceutical company developing products based on our sophisticated drug delivery technologies to enhance therapeutic outcomes. Our areas of focus include: controlled, extended-release of injectable drugs utilizing our ProLease(R) and Medisorb(R) delivery systems and the development of inhaled pharmaceutical products based on our proprietary Advanced Inhalation Research, Inc. ("AIR(R)") pulmonary delivery system. Our business strategy is twofold. We partner our proprietary technology systems and drug delivery expertise with many of the world's finest pharmaceutical companies and also develop novel, proprietary drug candidates for our own account. In addition to our Massachusetts headquarters, research and manufacturing facilities, we operate research and manufacturing facilities in Ohio. AMERCO: Committee Asks Court to Establish Trading "Ethical Wall" ---------------------------------------------------------------- By this motion, the Official Committee of Unsecured Creditors in the Chapter 11 cases of AMERCO and its debtor-affiliates asks the Court to permit certain Committee members to trade in Amerco's securities upon the establishment and implementation of an "Ethical Wall". The term "Ethical Wall" refers to a procedure established by an institution to isolate its trading activities from its activities as a member of an official creditors' committee. An Ethical Wall requires, among other things, the employment of different personnel to perform committee functions and trading functions, physical separation of the office and file spaces, procedures for securing committee-related files, separate telephone and facsimile lines for trading activities and committee activities, and special procedures for the delivery and posting of telephone messages. Specifically, the Committee wants Judge Zive to declare that a Committee member acting in any capacity will not violate its duties as a Committee member -- and, therefore, will not subject its claims to possible disallowance, subordination or other adverse treatment -- by trading in Amerco's stock, notes, bonds debentures, buying or selling participations in any of Amerco's debt obligations, or other claims not covered by Rule 3001(e) of the Federal Rules of Bankruptcy Procedure during the pendency of Amerco's case, provided that the Committee member implements an Ethical Wall to insulate its trading activities from the activities related to its Committee service. David B. Zolkin, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in Los Angeles, California, relates that bankruptcy courts, with increasing regularity, permit creditors to trade in securities of a debtor while serving on an official creditors' committee, provided, such creditors establish an Ethical Wall to allow them to serve on a committee without jeopardizing their livelihoods. Accordingly, the Committee asks the Court to establish these procedures: (1) Each Securities Firm will cause a duly authorized representative of that Securities Firm to execute a memorandum acknowledging that Committee Personnel may receive non-public information regarding the Debtor and that they are aware of the Screening Wall Procedures; (2) The memorandum will state that the Securities Firm is in compliance with the provisions of the Court Order and a copy of each memorandum will be forwarded to the Committee's counsel; (3) Committee Personnel of each Securities Firm will be different from that Securities Firm's trading personnel and will use physically separate office space, file space, phone lines and facsimile lines for the performance of their responsibilities; (4) Committee Personnel will not directly or indirectly share any non-public information concerning the Debtor or this Chapter 11 case with any other employees of their Securities Firm, except: (a) senior management of the Securities Firm who, due to its duties and responsibilities, has a legitimate need to know the information, provided that these individuals otherwise comply with the Screening Wall Procedures and use the information only in connection with their senior managerial responsibilities; (b) regulators, auditors and designated legal personnel for the purpose of rendering legal and compliance advice to Committee Personnel who will not share the non-public information with any other employees; and (c) to the extent that the information may be accessible by internal computer systems, the Securities Firm's administrative personnel who service and maintain the systems each of whom will agree not to share the non-public information with other employees and will keep the information in files inaccessible to other employees; and (5) Committee Personnel will establish procedures for the maintenance of all documents containing non-public information received in connection with, or generated from, Committee activities in secured files, which are physically separated from, and inaccessible to, other employees of their Securities Firm. Mr. Zolkin contends that an Ethical Wall should be established because: (a) there is no impediment in the federal securities laws or the Bankruptcy Code that bars it; (b) the Securities and Exchange Commission has recognized the value and legitimacy of an Ethical Wall in the securities law context; (c) it prevents the misuse of non-public information obtained through their activities as Committee members; and (d) it allows creditors to serve on a committee without risking the loss of beneficial investment opportunities for their clients or foregoing service and possibly compromise those same responsibilities by taking a less active role in the reorganization. (AMERCO Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERICAN RESTAURANT: Kachani Replaces Roberts as Director --------------------------------------------------------- On July 31, 2003, Anwar S. Soliman, exercising his rights, as agent of the Management Stockholders, under the Securityholders Agreement dated February 25, 1998, designated Thomas Kachani to replace Ralph S. Roberts as a Director of American Restaurant Group, Inc. Mr. Roberts remains the Chief Executive Officer and President of American Restaurant Group, Inc. At March 31, 2003, American Restaurant Group's working-capital deficit was $25.5 million. As previously reported in Troubled Company Reporter, Standard & Poor's lowered its corporate credit and senior secured debt ratings on casual dining restaurant operator American Restaurant Group Inc., to 'B-' from 'B'. The outlook is negative. Los Altos, California-based American Restaurant Group had about $160 million of debt outstanding as of September 30 2002. AMERICREDIT: Fitch Keeps B Rating on Results Delay Announcement --------------------------------------------------------------- Fitch Ratings maintains the 'B' rating and Negative Rating Outlook for AmeriCredit Corp.'s senior unsecured debt following ACF's announcement of a delay in releasing operating results for quarter and fiscal year ended June 30, 2003. Approximately $375 million of debt is affected by this action. ACF and its independent accountants are reviewing the accounting treatment under Financial Accounting Standards Board's Statement 133, 'Accounting for Derivative Instruments and Hedging Activities', of certain interest rate swaps that were entered into prior to 2001 and used to hedge variable cash flows on credit enhancement assets. This review will determine whether unrealized losses originally classified in other accumulated other comprehensive income should be reclassified to net income for fiscal-year 2002 and the first nine months of fiscal-year 2003, which may ultimately result in a restatement. The amount of unrealized losses being reviewed totals approximately $50 million pre-tax. Fitch will evaluate the results of the review when finalized. Based on ACF's representation, Fitch does not believe that any restatement will have a material effect on previously reported cash flows or shareholders' equity because any such unrealized losses that may be reclassified to net income have already reduced shareholders' equity through other accumulated comprehensive income. Fitch notes that ACF appears to be performing to plan, and unrestricted cash is modestly better than expectation. Unrestricted cash balances increased by $79 million to $317 million at June 30, 2003, compared with $238 million at March 31, 2003. According to the company, ACF expects to hit required enhancement levels in all pools that have exceeded specified trigger levels during August, although additional pools will breach triggers later in the year. Fitch's concerns continue to emphasize asset quality performance relative to chargeoffs and delinquencies, coupled with continued pressures in used car prices. Annualized net charge-offs declined to 7.4% of average managed auto receivables for the fourth quarter of fiscal 2003, compared with net charge-offs of 7.6% for the March 2003 quarter. Although, net chargeoffs have shown modest improvement, the level continues to remain high. Based in Fort Worth, TX, ACF has become the largest independent subprime automobile finance company in North America. As of June 30, 2003, ACF maintained $14.9 billion in managed automobile finance receivables. AMERICREDIT: S&P Places B+ Counterparty Rating on Watch Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' long-term counterparty credit rating of AmeriCredit Corp. on CreditWatch with negative implications. This action follows the company's announcement that it will delay the release of operating results for the quarter and fiscal year ended June 30, 2003. The delay was prompted by a review by the company and its independent auditors of the accounting treatment of certain interest rate swap agreements. "The company has indicated no anticipated changes in cash flow or total equity as a result of the review; however, income statements and the components of equity may require restatement," said credit analyst Lisa J. Archinow, CFA. The impact of the review is estimated to be $50 million on a pretax basis. Standard & Poor's acknowledges, as management has stated, that any restatement as a result of this review will have no impact on cash flow or total equity and that certain of its operating metrics indicate improvement. Nevertheless, Standard & Poor's has consistently maintained that AmeriCredit's business model incorporates a relative high degree of risk. AmeriCredit has been under pressure in large part as a result of asset quality issues. Standard & Poor's will continue to monitor this situation, meet with management, and resolve the CreditWatch pending further developments. A NOVO BROADBAND: Gets Exclusivity Extension through August 29 -------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, A Novo Broadband, Inc., obtained an extension of its exclusive periods. The Court gives the Debtor until August 29, 2003 the exclusive right to file their plan of reorganization and until November 28, 2003 to solicit acceptances of that Plan. A Novo Broadband, Inc., a business engaged primarily in the repair and servicing of broadband equipment for equipment manufacturers and operators of cable and other broadband systems in North America, filed for chapter 11 petition on December 18, 2002 (Bankr. Del. Case No. 02-13708). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., at Young, Conaway, Stargatt & Taylor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $12,356,533 in total assets and $10,577,977 in total debts. AQUILA INC: Will Host Second Quarter Conference Call Tomorrow ------------------------------------------------------------- Aquila, Inc., (NYSE:ILA) will conduct a conference call and webcast to discuss 2003 second quarter results and information on its operations and restructuring, including the company's progress on international asset sales, tomorrow at 9:30 a.m. Eastern Time. Participants will be Chief Executive Officer Rick Green, Chief Operating Officer Keith Stamm and Chief Financial Officer Rick Dobson. To access the live webcast, go to Aquila's Web site at http://www.aquila.comand click on Investors to find the webcast link. Listeners should allow at least five minutes to register and access the presentation. For those unable to access the live broadcast, replays will be available for two weeks, beginning approximately two hours after the presentation. Web users can go to the Investors section of the Aquila Web site at http://www.aquila.comand choose Presentations & Webcasts. Replay also will be available by telephone through August 19 at 800-405-2236 in the United States, and at 303-590-3000 for international callers. Callers must enter the access code 546578 when prompted. Based in Kansas City, Mo., Aquila operates electricity and natural gas distribution networks serving customers in seven U.S. states, Canada and the United Kingdom. The company also owns and operates power generation assets. More information is available at http://www.aquila.com As reported in Troubled Company Reporter's April 15, 2003 edition, Fitch Ratings assigned a 'B+' rating to the new $430 million senior secured 3-year credit facility of Aquila, Inc. Fitch also downgraded the senior unsecured rating of ILA to 'B-' from 'B+'. Approximately $3 billion of debt has been affected. The senior unsecured rating of ILA is removed from Rating Watch Negative. The Rating Outlook for ILA's secured and unsecured ratings is Negative. Standard & Poor's Rating Services lowered its corporate credit and senior unsecured rating on electricity and natural gas distributor Aquila Inc., to 'B' from 'B+'. The ratings have also been removed from CreditWatch where they were placed with negative implications on Feb. 25, 2003. The outlook is negative. At the same time, Standard & Poor's Rating Services assigned a 'B+' rating to Aquila's new $430 million senior secured credit facility. The issuer rating of Aquila Merchant Services Inc., was withdrawn. ARES III: Fitch Downgrades Ratings on Three Note Classes -------------------------------------------------------- Fitch Ratings has downgraded three classes of notes issued by Ares III CLO Ltd. These downgrades are the result of Fitch's annual review process. The following rating actions are effective immediately: -- $13,000,000 class B-1 senior secured floating-rate notes to 'BBB-' from 'BBB'; -- $25,000,000 class B-2 senior secured fixed-rate notes to 'BBB-' from 'BBB'; -- $11,500,000 class C senior secured floating-rate notes to 'B' from 'BB'. Ares III is a collateralized loan obligation primarily consisting of senior secured loans, senior secured and unsecured debt, and subordinate debt. The CLO has retained Ares CLO Management LLC (Ares) as asset manager. The CLO is currently composed of 70.5% floating-rate assets and 29.5% fixed-rate assets and diversified among approximately 82 obligors. According to the Ares III July 2, 2003 trustee report; the $365.5 million portfolio includes a par amount of $22.6 million (6.2%) in defaulted assets. Additionally, the class A overcollateralization (OC) ratio failed its 120% trigger at 119.4%. The class B OC failed its 107.2% trigger at 106.6%, while the class C OC passed its 103% trigger at 103.3%. As a result of Ares III's recent OC failures, approximately $1.84 million was diverted to amortize the class A-1 notes. The weighted average rating factor has increased to approximately 51.6 ('B+/B'); from its initial WARF of 47.5 ('BB-/B+'). The structure is still in its revolving period, which ends January 2005. All classes of notes issued by Ares III are scheduled to mature January, 2012. Fitch has reviewed in detail the performance of Ares III. In conjunction with this review, Fitch discussed the current state of the portfolio with the collateral manager and their portfolio management strategy going forward and conducted cash flow modeling utilizing various default timing and interest rate scenarios. After discussing the portfolio with Ares, Fitch believes that the collateral manager is making efforts to improve the credit quality of the portfolio with purchases of higher quality assets. Ares is actively monitoring the portfolio on a daily basis. Fitch will continue to monitor Ares III closely to ensure that its ratings are accurate. Additional deal information and historical data are available on the Fitch Ratings web site at www.fitchratings.com'. ARMSTRONG HOLDINGS: AWI Asks Court to Disallow Dal-Tile Claim ------------------------------------------------------------- Rebecca L. Booth, Esq., at Richards Layton & Finger in Wilmington, on behalf of Armstrong World Industries, Inc.: (A) objects to allowance of any claim by Dal-Tile International, Inc., against the Debtors' estates; (B) asks Judge Newsome to disallow Dal-Tile's proof of claim in its entirety; and (C) asserts a counterclaims against Dal-Tile for affirmative recovery of at least $1,361,888.66, together with a declaratory judgment that Dal-Tile is obligated to make all future payments of retrospective premiums relating to workers' compensation claims of employees of American Olean Tile Company. In the alternative, AWI would be content with a declaratory judgment that it is entitled to reimbursement of $1,000,000 owed to Wachovia Bank NA, after a $1,000,000 drawdown by the Commonwealth of Pennsylvania on a letter of credit securing Dal- Tile's workers' compensation obligations for which the Commonwealth has filed a proof of claim against AWI. The American Olean Stock Purchase Agreement As of December 21, 1995, AWI, Armstrong Enterprises, Inc., Armstrong Finance Corporation and Dal-Tile entered into a Stock Purchase Agreement pursuant to which Dal-Tile purchased from AEF all of the outstanding stock of American Olean Tile Company, Inc., then a wholly owned subsidiary of AEF. The transaction under the SPA closed on December 29, 1995. Pursuant to the SPA, AWI agreed to indemnify Dal-Tile for certain "AWI Indemnified Environmental Losses." Under the terms of the SPA, Dal-Tile's right to indemnification is limited to matters "existing on or prior to" the Closing Date of the Stock Purchase. Moreover, the SPA imposes three monetary limits on Dal-Tile's right to indemnification: (1) An Environmental Loss subject to indemnification is only defined as a loss that exceeds $50,000; (2) AWI's indemnification obligation is only effective to the extent that the Environmental Losses exceed $1,000,000 in the aggregate; and (3) There is a cap on AWI's indemnification obligation of $43 million, subject to adjustment. Dal-Tile claims that it is entitled to indemnification for Environmental Losses and has demanded the amount of $1,132,065, representing amounts that it has incurred as of June 30, 2000. Dal-Tile claims that it incurred Environmental Losses in connection with six matters for which it alleges it is entitled to indemnification under the SPA. These matters and the alleged amounts incurred by Dal-Tile are: Site Amount Allegedly Incurred ---- ------------------------- North Penn 6 $142,930 Lansdale Pond Closure $314,056 Lansdale Hazardous Substances $959,943 Salford Quarry $102,342 Pine Grove Mine $359,372 Cotton $253,422 The total amount of Environmental Losses allegedly incurred by Dal-Tile is $2,132,065., As Dal-Tile recognizes, AWI would only be responsible for such Environmental Losses that exceed $1,000,000 in the aggregate; therefore, Dal-Tile claims $1,132,065, the amount by which its alleged losses exceed $1 million. Insurance Policies The SPA required AWI to maintain insurance policies relating to American Olean in effect between the date of that agreement (December 21, 1995) and the date of closing (December 29, 1995), eight days later. AWI met this obligation. Since the transaction involved the purchase of stock, American Olean remained responsible for all of its own liabilities that were not expressly assumed by AWI. Dal-Tile also claims that AWI is obligated to reimburse it $2,166,282.29 for insurance premiums that Dal Tile paid to cover insurance premiums on a workers' compensation policy covering American Olean's employees. The Objection AWI is objecting to the Dal-Tile Claim because Dal-Tile is not entitled to any recovery on any aspect of its claim. Although Dal-Tile provides a narrative addendum to the Dal-Tile Claim, Dal- Tile has not explained, either in the Dal-Tile Claim or otherwise: (1) how it incurred the Environmental Losses; (2) what the expenditures are for; or (3) how these expenditures relate to a matter "existing on or prior to" the date of closing. Without this documentation and evidence, AWI cannot determine whether the claimed losses are covered by the indemnification provisions of the SPA and therefore objects to the Dal-Tile Claim. No Compliance With Indemnification Procedures Moreover, Dal-Tile's right to indemnification is barred in whole or part by its failure to comply with the requirements of the SPA entitled "Procedures Relating to Indemnification." Section 10.2(a) provides that, with respect to certain American Olean Manufacturing Facilities (including the Lansdale, Pennsylvania plant), Dal-Tile may not undertake to settle third-party claims or undertake certain voluntary actions without AWI's consent. The amounts allegedly incurred by Dal-Tile in connection with the matters Dal-Tile describes as "Lansdale Pond Closure" and "Lansdale Hazardous Substances" (both at the Lansdale plant) were incurred without AWI's consent Also, the amounts incurred by Dal-Tile in connection with the North Penn 6 matter ($142,930) were incurred without AWI's consent. Improper Inclusion of Sale Costs Ms. Booth believes that the claimed amounts relate to costs incurred in connection with Dal-Tile's sale of the Lansdale property to a third party. Specifically, in order to sell this property, Dal-Tile elected to close a permitted surface impoundment and take other actions, including removing asbestos from parts of buildings where it was totally enclosed and therefore regulatory compliant. Such expenditures would not be subject to indemnification wider the SPA because they would not relate to a matter "existing on or prior to" the date of closing, but rather would relate to Dal-Tile's subsequent decisions concerning the use of the facility. No Claim for Voluntary Environmental Costs To the extent that Dal-Tile incurs any environmental costs as a result of any voluntary action undertaken in connection with the closure or sale of an American Olean Manufacturing Facility, such as the Lansdale, Pennsylvania, plant, Dal-Tile is required to credit the amount of the sales price against the amount of AWI's indemnification obligation. Ms. Booth also believes that Dal-Tile (which merged with American Olean) received more from its sale of the American Olean Lansdale, Pennsylvania, plant that it claims it incurred in the matters it calls "Lansdale Pond Closure" and "Lansdale Hazardous Substances." Accordingly, Dal-Tile is not entitled to indemnification in connection with those matters. The SPA also provides that with respect to Environmental Losses at facilities that are not specifically designated as American Olean Manufacturing Facilities under the Agreement, AWI is entitled to control the defense of third party claims and determine whether to undertake environmental response action, unless Dal-Tile or American Olean gives notice with respect to any property that it has closed or announced for closure, sale or other disposition. Because Dal-Tile and American Olean have not given such notice with respect to any of the three non-Lansdale matters identified by Dal-Tile (Salford Quarry, Pine Grove Mine and Cotton Grove Landfill), Dal-Tile is precluded from recovering on its Claim with respect to those matters because it is not authorized to incur such costs without AWI's consent. Further, under the SPA, Dal-Tile and American Olean are only entitled to recover with respect to Environmental Losses those expenses that are "commercially reasonable." The amounts alleged by Dal-Tile are not commercially reasonable. Because Dal-Tile is only entitled to recover the amount of its Environmental Losses in excess of $1 million, to the extent that portions of Dal-Tile's claim for Environmental Losses are disallowed so that the remainder of the Environmental Losses alleged by Dal-Tile would be less than $1 million, then Dal-Tile would not be entitled to any recovery for Environmental Losses. No Allowance of Contingent Claims To the extent that Dal-Tile seeks recovery for sums that it has not yet incurred, but for which it may be co-liable to the United States or a State, then Dal-Tile's claim is a contingent claim for indemnification, which must be disallowed pursuant to the Bankruptcy Code. Dal-Tile's Claim for Insurance Premiums Prior to the sale of American Olean in December 1995, workers' compensation and liability insurance coverage for American Olean was provided through insurance policies purchased by AWI from Liberty Mutual. The Liberty Policies are subject to a retrospective premium adjustment. Whenever Liberty Mutual makes a payment under the Liberty Policies, AWI may be required to pay an additional premium to Liberty Mutual according to a formula in the Liberty Mutual retrospective premium agreement. After the sale of American Olean to Dal-Tile, the two companies merged, so that Dal- Tile is the surviving company. Also, after the sale of American Olean to Dal-Tile, Liberty Mutual provided certain monthly bills to Dal-Tile attributable to American Olean's Pre-Purchase Period losses. At some point in 1998 or early 1999, Dal-Tile ceased to honor Liberty Mutual's invoices directly, and Liberty Mutual began to send these bills to AWI for payment. AWI paid Liberty Mutual for these invoices and requested reimbursement from Dal-Tile. On February 11, 1999, Liberty Mutual forwarded an invoice for certain retrospective premiums to Dal-Tile in the amount of $187,593 for claims arising out of Pre-Purchase Period liabilities. AWI satisfied this retrospective premium obligation when Dal-Tile refused to pay it. At first, Dal-Tile complied with AWI's reimbursement requests. Beginning in 2000, however, Dal-Tile refused to reimburse AWI for the retrospective premium payments AWI made on behalf of Dal-Tile and American Olean. Although AWI repeatedly requested reimbursement for retrospective premiums paid with respect to these monthly bills, Dal-Tile, principally through its risk manager, Debra Kiernan, declined to pay these amounts to AWI for the sole reason that Dal-Tile objected to the documentation provided by Liberty Mutual in support of these costs. Although AWI has provided more information to Dal-Tile, to date Dal-Tile has not reimbursed AWI for payments made to Liberty Mutual by AWI in the total amount of $361,888.66. Liberty Mutual has billed AWI for an additional $128,820.06 for retrospective premiums with respect to workers' compensation claims by American Olean employees. Further, Liberty Mutual has established additional reserves in the amount of $824,835.78 with respect to workers' compensation claims with respect to American Olean employees. "Inadvertent Payments" In its Claim, Dal-Tile seeks reimbursement for "inadvertent payments" that Dal-Tile made to AWI in satisfaction of certain monthly invoices that AWI paid on behalf of Dal-Tile when Dal-Tile refused to pay them. In all, Dal-Tile states in its proof of claim that it made $2,166,282.29 in "inadvertent payments" to Liberty Mutual directly and to AWI in response to AWI's requests for reimbursement. Under the terms of the SPA, the obligation to pay retrospective premiums for American Olean-related claims was transferred from AWI to Dal-Tile. Correspondence between Dal-Tile and AWI clearly indicates that Dal-Tile recognized that Dal-Tile ultimately is responsible for the payment of the retrospective premiums under the Liberty Policies. These communications demonstrate that Dal- Tile recognized and admitted that responsibility for the retrospective premium obligations arising out of Liberty payments with respect to American Olean obligations was transferred to Dal- Tile when it purchased the stock of American Olean and does not lie with AWI. The Counterclaim Starting in late 1998 and early 1999, AWI paid certain invoices from Liberty Mutual with respect to retrospective premiums for workers' compensation and liability insurance cover-age attributable to American Olean's pre-purchase period losses in the amount of $361,888.66. Under the terms of the SPA, AWI had no obligation to make these payments, and these payments were the responsibility of Dal-Tile and American Olean. In addition, Liberty Mutual has billed AWI for an additional $28,820.06 in retrospective premiums, and has created reserves in the amount of $824,835 78, with respect to retrospective premiums for workers' compensation claims of American Olean employees. AWI's Retrospective Premium Payments made to Liberty Mutual rendered a valuable benefit to Dal-Tile as successor by merger to American Olean by satisfying Dal-Tile's obligations to make insurance premium payments. AWI's Retrospective Premium Payments were made to Liberty Mutual with the knowledge and consent of Dal- Tile as the successor by merger to American Olean. The Drawdown On January 25, 2001, the Commonwealth of Pennsylvania Bureau of Workers' Compensation presented a sight draft to Wachovia Bank, N.A. to draw down $1,000,000 on Wachovia's Letter of Credit because of a default on the payment of the workers' compensation liability by Dal-Tile as the successor by merger to American Olean. Wachovia paid $1,000,000 as directed by the Commonwealth, and has filed a proof of claim in this case, seeking that amount. Dal-Tile knew that it had the responsibility to make the Retrospective Premium Payments to Liberty Mutual, which AWI paid on their behalf, and that AWI reasonably expected to be reimbursed for those amounts. Dal-Tile also knew that it was its responsibility, as successor by merger to American Olean, to remain current on workers' compensation payments for American Olean. AWI therefore asks for a money judgment against Dal-Tile based on theories of breach of contract, quantum meruit, and other causes of action, in at least the amount of $1,361,888.86, representing the Drawdown and the amounts paid as Retrospective Premium Payments. (Armstrong Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARTISOFT INC: June 30, 2003 Balance Sheet Upside-Down by $320K -------------------------------------------------------------- Artisoft(R), Inc. (Nasdaq: ASFTC), developer of the first software-based phone system, reported its financial results for the fourth quarter of fiscal 2003. Revenue increased 6% from the previous quarter, highlighted by a 21% increase in end user sales of the company's flagship TeleVantage(R) 5.0 products and a new record high in overall TeleVantage sales in a quarter. Artisoft reported revenue of $1.9 million and a net loss of $1.8 million. This sales figure includes a non-cash reduction of approximately $100,000 for the amortized cost of equity relating to Toshiba's investment in Artisoft in a prior period. These results compare to revenue of $1.8 million and a net loss of $1.7 million for the third quarter of fiscal 2003, including a non-cash reduction of approximately $25,000 for the amortized cost of equity relating to Toshiba's investment. Earnings were impacted by charges of approximately $400,000 for restructuring, as well as professional services relating to activity associated with recent registration statements and the company's Nasdaq listing. The loss per common share in the fourth quarter of fiscal 2003 was $.59 compared to $.56 in the third quarter of fiscal 2003. For the year ended June 30, 2003 Artisoft reported revenue of $6.6 million and a net loss of $7.0 million, which compares to revenue of $6 million and a net loss of $8.4 million during fiscal 2002. Reported revenue for 2003 and 2002 include a non-cash reduction of approximately $250,000 and $375,000, respectively, for the amortized cost of equity relating to Toshiba's investment in Artisoft in a prior period. Gross margins during fiscal 2003 improved to 96% from 85% for fiscal 2002, largely as a result of discontinuing hardware sales and growing high-margin TeleVantage software sales. Artisoft, Inc.'s June 30, 2003 balance sheet shows a working capital deficit of about $1 million, and a total shareholders' equity deficit of about $320,000. "We continue to see growing demand for TeleVantage in the small- to medium-size business market, where both our reseller and OEM channels are gaining momentum," said Steve Manson, Artisoft's president and CEO. "In addition, we are seeing increased interest from large enterprise customers who are attracted to the productivity and cost benefits of deploying TeleVantage over many sites. The telecom industry's shift away from proprietary hardware-based technologies to open systems solutions like TeleVantage is becoming more apparent, and Artisoft is well- positioned for leadership in the emerging, high-growth open systems communications market." Growing demand for TeleVantage also drove further expansion of the Open Communications Alliance Program, a coalition of over 30 leading technology vendors who are collaborating with Artisoft to develop standards-based solutions with TeleVantage as the focal point. During the fourth quarter, the company forged relationships with AudioCodes, Bits, Bytes & Megabytes, CoLinear Systems, Copia International, Euroline AS, Incotesy, Logicphone, Scitec, SpectraLink Corporation, Telephony Supply and Uniden to deliver best-of-breed solutions that combine Voice over IP (VoIP), contact management, order management, fax, predictive dialing, automatic billing, telesales, and wireless features with the advanced capabilities of TeleVantage. During the fourth quarter, Artisoft also announced that Customer Inter@ction Solutions(R) magazine has bestowed its CRM Excellence Award on TeleVantage for the improvements realized by Nationwide Home Loans. The annual award program honors products and services that have proven invaluable in helping their clients execute successful CRM strategies and maintain customer relationships from acquisition through retention. In addition, Artisoft launched the Artisoft Certified Engineers partner program, which is designed to certify, recognize, and promote telephony integrators with proven expertise in creating custom applications based on TeleVantage, using open systems and the TeleVantage Software Development Kit. Artisoft has begun mailing to its stockholders its definitive proxy materials relating to its special meeting of stockholders scheduled for September 9, 2003 concerning the proposed $4 million financing announced by Artisoft on June 30, 2003. Artisoft Inc., is a leading developer of open, standards-based telephone systems that bring together voice and data for more powerful and productive communications. Artisoft's TeleVantage delivers greater functionality, flexibility, and value than proprietary PBXs to a variety of customers, from small offices to large enterprise organizations with sophisticated call centers. The company's innovative products have consistently garnered industry recognition for technical excellence, winning more than 30 awards. The company distributes its products and services worldwide through a dedicated and growing channel of authorized resellers. For more information, visit http://www.artisoft.com ASPEN TECHNOLOGY: Fiscal Fourth Quarter Net Loss Stands at $18MM ---------------------------------------------------------------- Aspen Technology, Inc., (NASDAQ: AZPN) reported financial results for its fourth quarter and fiscal year ended June 30, 2003. Total revenues for the fourth quarter were $82.8 million, with software license revenues totaling $38.5 million, and services revenue totaling $44.2 million. On a Generally Accepted Accounting Principles basis, AspenTech reported a net loss to common shareholders of $18.2 million, or $0.47 per share. The GAAP net loss reflects $18.5 million of restructuring charges, approximately half of which relates to adjustments in accruals for facility costs. In addition, approximately $6 million of the charge relates to accruals for the company's upcoming Federal Trade Commission litigation. The company issued a separate announcement in which it responded to a formal complaint by the FTC challenging its acquisition of Hyprotech, which was completed in May 2002. On a pro forma basis, AspenTech posted net income of $2.7 million, or $0.07 per share. This represents the third consecutive quarter of growth in pro forma earnings per share. Pro forma results exclude the restructuring and other charges and $2.4 million in preferred stock dividend and discount accretion. "Our fourth quarter sequential license growth was driven by a substantial increase in contribution from our manufacturing/supply chain solutions, which exceeded our expectations for the first time in fiscal 2003," said David McQuillin, President and CEO of AspenTech. "Our performance was well balanced by geography and end-user market--a testament to improved sales force productivity. We believe this validates our actions over the past year to streamline our operations and enhance our organizational leadership. "I am very proud of the dramatic turnaround the company has made over the past nine months, improving operational performance in the midst of a very difficult environment for enterprise software providers. The best evidence of this improvement was the signing of a definitive agreement with Advent International for a $100 million private equity financing, which is subject to shareholder approval. We believe these financial resources will help us to show year-on-year improvement in earnings and cash flow in fiscal 2004." During the fourth fiscal quarter, AspenTech signed significant license transactions with Sinopec, Sasol, Huntsman Corp., Valero, Eli Lilly, Citgo, Celanese Chemicals and Cargill. At June 30, 2003, the Company's balance sheet shows that a continued depletion of its net capital, which dwindled to about $40 million from about $254 million a year ago. Aspen Technology, Inc. (S&P, B Corporate Credit Rating), is a leading supplier of enterprise software to the process industries, enabling its customers to increase their margins and optimize their business performance. AspenTech's engineering solutions, including Hyprotech's technologies, help companies design and improve their plants and processes, maximizing returns throughout their operational life. AspenTech's manufacturing/supply chain solutions allow companies to run their plants and supply chains more profitably, from customer demand through to the delivery of the finished products. Over 1,200 leading companies rely on AspenTech's software every day to drive improvements across their most important engineering and operational processes. AspenTech's customers include: Air Liquide, AstraZeneca, Bayer, BASF, BP, ChevronTexaco, Dow Chemical, DuPont, ExxonMobil, GlaxoSmithKline, Lyondell Equistar, Merck, Mitsubishi Chemical, Shell, Southern Company, TXU Energy and Unilever. For more information, visit http://www.aspentech.com BUILDING MATERIALS: S&P Assigns BB- Rating to $300M Bank Loan ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' senior secured bank loan rating to Building Materials Holding Corp.'s planned $300 million bank facility. The facility consists of a $175 million revolving credit facility due in 2008 and a $125 million term loan due in 2010. Net proceeds will be used to refinance the company's existing bank loan facility that matures in 2004. The secured bank loan is rated the same as the corporate credit rating, reflecting the likelihood of meaningful recovery of principal in the event of a default or bankruptcy. The 'BB-' corporate credit rating on the company was affirmed. The outlook is stable. San Francisco, California-based Building Materials is a leading construction services and building materials supply company, with 60 business units in 12 states in the West and South. The company competes in the fragmented and cyclical building materials supplies industry, primarily with small regional building supply companies. "Because of its large size and superior information systems, the company has achieved competitive advantages over many of these smaller players," said credit analyst Patrick Jeffrey. However, its operations are highly correlated to the performance of the single-family housing industry, which is highly cyclical but has prospered in recent years despite the weakened U.S. economy. Recent weakness in Building Materials' Colorado and Texas markets, however, contributed to weaker operating trends in the second quarter of 2003. Increased expenses in its KBI Norcal operations, which were acquired in July 2002, also contributed to the company's weaker second quarter trends. In addition, Building Materials' operations can be negatively impacted by declines in lumber prices. To reduce its exposure to these risks, the company has been focusing more on premade, value-added products -- such as roof trusses and preframed windows -- which are higher-margin products than raw lumber. These initiatives account for more than 50% of the company's sales. The company's target market of professional builders has allowed it to avoid most direct competition with larger home improvement companies, such as Lowe's Cos. Inc. and Home Depot Inc. Liquidity is provided by a planned $175 million revolving credit facility that matures in 2008 and will replace the existing $190 million facility. At closing, availability under the new revolver is expected to be about $128 million. Term loan amortization on the $125 million facility is minimal until the loan matures in 2010. Building Materials also had about $15 million in cash as of Mar. 31, 2003. These sources of liquidity are expected to help fund minimal debt maturities over the next several years. BURLINGTON: Files First Amended Plan and Disclosure Statement ------------------------------------------------------------- Burlington Industries, Inc. and its debtor-subsidiaries present its First Amended Plan of Reorganization and Disclosure Statement to the Court dated August 1, 2003. The primary objectives of the Plan are to: A. implement the transactions contemplated by the WLR Purchase Agreement and distribute the proceeds to the Debtors' creditors; B. maximize the value of the ultimate recoveries to all creditor groups on a fair and equitable basis; and C. settle, compromise or otherwise dispose of certain claims and interests on terms that the Debtors believe to be fair and reasonable and in the best interests of their Estates and creditors. John D. Englar, Senior Vice President of Burlington Industries, Inc., explains that the Amended Plan provides for: (1) the establishment of the BII Distribution Trust to hold the net proceeds of the WLR Transaction, the Excluded Assets and the funds in the Burlington Fabrics Irrevocable Trust; (2) the sale and transfer of the Purchased Assets in exchange for the Purchase Price, subject to adjustment for working capital and the underfunding of Burlington's Retirement System, and the assumption and satisfaction in full by WLR or the Reorganized Purchased Debtors, as applicable, of all the Assumed Liabilities; (3) the cancellation of certain indebtedness in exchange for cash; (4) the cancellation of the Old Common Stock, the Old Non-voting Common Stock and the Old Subsidiary Equity Interests, including any option or any associated share purchase right relating to such stock or interests; and (5) the assumption, assumption and assignment or rejection of Executory Contracts or Unexpired Leases to which any Debtor is a party. The salient parts of the Plan include: A. The WLR Transaction The Plan provides for the implementation of the WLR Transaction. The Purchase Price WLR paid will be subject to adjustment for variances in working capital and the underfunding of Burlington's Retirement System. Pursuant to the Plan, all Assumed Liabilities will be assumed and satisfied in full by WLR or the Reorganized Purchased Debtors, as applicable. All Excluded Liabilities will be satisfied by the BII Distribution Trust. B. Assumed Liabilities The WLR Purchase Agreement contemplates that the Assumed Liabilities will be assumed and satisfied in full by WLR or the Reorganized Purchased Debtors, as applicable. "Assumed Liabilities" means Burlington's liabilities, contingent or otherwise, that are not discharged under the Plan and that are reflected on Burlington's March 2003 balance sheet, in the amounts as they exist on the Closing. The Assumed Liabilities, as reflected on the projected September 27, 2003 balance sheet, are expected to be approximately $90,000,000. However, the final amount is necessarily dependent on a variety of factors. C. Excluded Liabilities WLR or the Reorganized Purchased Debtors, as applicable, will only assume the Assumed Liabilities and will not assume other Burlington liabilities, including, without limitation, liabilities relating to: (a) guarantee obligations to Bank of America, NA under the IGP joint venture facility; (b) any unasserted obligations under warranties and indemnitees in prepetition asset and business sale agreements, as well as certain postpetition real estate and equipment sales agreements; (c) income taxes that are due or become due prior to the Closing, and deferred income taxes; (d) unasserted potential indemnification obligations of directors and officers; (e) unasserted claims to issuing bank under outstanding postpetition or assumed prepetition letters of credit relating to Insuratex, Ltd. or other excluded liabilities; (f) fees and expenses of professionals in the Reorganization Cases that have been incurred, but unbilled, as well as success fees payable in connection with the Reorganization Cases; (g) unasserted claims under performance bonds Burlington or third parties issued to the extent they relate to the Excluded Assets; (h) payments due or that become due under the Key Employee Retention Program; (i) severance and insurance payments due or that become due to individuals who are not Transferred Employees; (j) accrued interest on Burlington's bank debt; (k) restructuring reserves; (l) environmental liabilities related to Excluded Assets; (m) statutory fees; and (n) except to the extent described under "Operations During the Reorganization Cases -- The WLR Transaction -- Treatment of Pension and Benefit Plans and Employees," payments due or that become due under the 1999 SERF, the Pre-1999 SERP and the Benefit Equalization Plan Burlington estimates that the aggregate amount of all the Excluded Liabilities, will be approximately $805,000,000 on the Effective Date. The actual amount of the Excluded Liabilities is necessarily dependent on a variety of factors and, as a result, the actual amount could be greater than or less than this amount. D. Excluded Assets The WLR Purchase Agreement contemplates that Burlington's assets that were held for sale as of March 29, 2003, but that are not actually sold as of the Closing, will be excluded from the WLR Transaction. The assets, together with those assets otherwise left with the Estates on the Effective Date pursuant to the terms of the WLR Purchase Agreement or otherwise, will be transferred to the BII Distribution Trust at the Closing. Burlington estimates that the Excluded Assets will be approximately $13,400,000 on the Effective Date. E. BII Distribution Trust The Plan provides for the establishment of a trust -- the BII Distribution Trust -- by the Distribution Trust Representative to hold: (a) Excluded Assets, Excluded Balance Sheet Assets, Sale Proceeds, Recovery Actions, Working Capital Amount Due and any other cash, assets or property that are to be held for and distributed to holders of Allowed Claims under the Plan; (b) the proceeds of the foregoing; and (c) the funds in the Burlington Fabrics Irrevocable Trust. Burlington estimates that the Distribution Trust Assets will be approximately $591,500,000 on the Effective Date. On the Effective Date, the Distribution Trust Assets will be transferred to and vest in the BII Distribution Trust. Except as otherwise provided in the Plan or the WLR Purchase Agreement, the BII Distribution Trust will be responsible for resolving all Disputed Claims and for making distributions to holders of Allowed Claims. F. Transfer of Burlington Fabrics Irrevocable Trust The Plan provides for: (a) the liquidation of the Burlington Fabrics Irrevocable Trust; (b) the transfer of the funds in the Burlington Fabrics Irrevocable Trust for approximately $13,700,000 to the BII Distribution Trust; and (c) the distribution of the proceeds to creditors. A free copy of Burlington's First Amended Plan is available for free at: http://bankrupt.com/misc/burlington_1stamended_plan.pdf A free copy of Burlington's First Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/burlington_1stamended-disclosurestat.pdf (Burlington Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALPINE: Prices $750 Million Term Loans & Secured Notes Offering ---------------------------------------------------------------- Calpine Corporation (NYSE: CPN), a leading North American power company, announced that its wholly owned subsidiary, Calpine Construction Finance Company, L.P., has priced its $750 million institutional term loans and secured notes offering. The offering will include: -- $385 million of First Priority Secured Institutional Term Loans Due 2009 offered at 99% of par and priced at Libor plus 600 basis points, with a Libor floor of 150 basis points. -- $365 million of Second Priority Secured Floating Rate Notes Due 2011 offered at 98.01% of par and priced at Libor plus 850 basis points, with a Libor floor of 125 basis points. The noteholders' recourse will be limited to CCFC I's seven natural gas-fired electric generating facilities located in various power markets in the United States, and related assets and contracts. The transaction is expected to close on Thursday, August 15, 2003. Net proceeds from the offering will be used to refinance a portion of CCFC I's existing indebtedness, which matures in November 2003. The remaining balance of CCFC I will be repaid from cash on hand. Current outstanding indebtedness, including letters of credit under the CCFC I credit facility, is approximately $910 million. The First Priority Secured Institutional Term Loans Due 2009 will be placed in the institutional term loan market. The Second Priority Secured Floating Rate Notes Due 2011 will be offered in a private placement under Rule 144A, have not been and will not be registered under the Securities Act of 1933, and may not be offered in the United States absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy. Securities laws applicable to private placements under Rule 144A limit the extent of information that can be provided at this time. * * * As previously reported, Standard & Poor's Ratings Services assigned its 'B' rating to Calpine Corp.'s $3.3 billion second- priority senior debt. The $3.3 billion includes: a $750 million term loan due 2007, $500 million floating rates notes due 2007, $1.15 billion 8.5% secured notes due 2010, and $900 million secured notes due 2013. The notes carry the same rating as other Calpine senior secured debt and are rated two notches higher than the 'CCC+' rated senior unsecured debt. At the same time, Standard & Poor's affirmed its 'B' corporate credit rating on Calpine, its 'B' rating on Calpine's secured debt, its 'CCC+' rating on Calpine's senior unsecured bonds, and its 'CCC' rating on Calpine's preferred stock. The 'BB-' rating on the existing $950 million secured term loan and the $950 million secured revolver are withdrawn, as this debt was refinanced with the proceeds of the recent $3.8 billion financing. CALPINE CONSTRUCTION: S&P Assigns B Corporate Credit Rating ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Calpine Construction Finance Co. L.P. (CCFC1). Standard & Poor's also assigned its 'B+' rating to CCFC1's $385 million first priority institutional term loan and a 'B-' rating to CCFC1's $365 million second priority floating-rate notes. The outlook is negative, reflecting the direct linkage between the subsidiary, CCFC1, and Calpine Corp.'s rating, whose outlook is also negative. A rating downgrade for Calpine Corp. would likely result in a downgrade for CCFC1 and its debt by an equal number of notches. "The one notch elevation to 'B+' from the CCR of 'B' on the first priority term loan is due to the strong likelihood of recovery of principal in the event of a bankruptcy of CCFC1," said Standard & Poor's credit analyst Jeffrey Wolinsky. "The second priority floating-rate notes are rated one notch below the CCR at 'B-' to reflect structural subordination to the first priority term loan," continued Mr. Wolinsky. The ratings reflect a number of risks, including the predominantly merchant revenue stream, which is volatile, and a high level of interest rate risk. Additional concerns include the potentially high level of execution risk associated with refinancing the term loan in 2009 and the floating rate notes in 2011. The debt does not amortize significantly and CCFC1 is highly dependant on market conditions for refinancing the plants. Furthermore, CCFC1 is not structurally separate from Calpine and could be consolidated into a potential Calpine bankruptcy. Risk is partially offset by a Goldman Sachs hedge that should cover interest expense and fixed costs if spark spreads decline significantly through 2009, a $250 million working capital facility that should cover interest expense and fixed costs after the Goldman Sachs hedge expires, and a geographically diversified portfolio of seven natural gas generating assets operating in five different energy markets. CARECENTRIC CORP: June 30 Balance Sheet Upside-Down by $15 Mill. ---------------------------------------------------------------- CareCentric, Inc. (OTC Bulletin Board: CURA), a leading provider of management information systems to the home health care community, reports its financial results for the calendar quarter ended June 30, 2003. Net Income for the three months ended June 30, 2003, was $0.2 million, which represented an increase of $0.2 million over the nominal Net Loss reported for the three months ended June 30, 2002. The Company reported a slight decrease in revenues of 3.8% for the three months ended June 30, 2003, to $5.6 million against revenues of $5.8 million for the three months ended June 30, 2002. The Net Cash provided from Operating Activities during the three months ended June 30, 2003 of $0.4 million represented a $1.1 million improvement when compared against the Use of Net Cash from Operating Activities of $0.7 million reported for the 2nd quarter of 2002. At June 30, 2003, the Company's balance sheet shows a working capital deficit of about $9 million, and a total shareholders' equity deficit of about $15 million. "Our second quarter results for 2003 represent the fourth consecutive quarter of profitability," stated John R. Festa, President and CEO of CareCentric. "We are pleased to report that during the second quarter, the Company funded both its new product development efforts and $0.8 million of bank debt payments from operating cash flow. These objectives were met while second quarter sales of new systems remained somewhat soft and six-month revenues of $11.1 million are unchanged from six-month revenues reported in 2002. We have found," continued Mr. Festa, "that the combination of changing HIPAA regulations and the 15% reduction in reimbursement rates has caused delays in many of our customers' decisions to upgrade their IT systems." Mr. Festa added, "We continue to work diligently on improving our customer service levels and collaborating with our customers to ensure our new product development efforts deliver a family of products which will strongly facilitate our customers' profitable management of their home care agencies and medical equipment provider businesses. We remain confident that our continuing enhancements to existing products and our expenditures for development of products leveraging new technology platforms will help grow our future revenues as regulatory cost reductions stabilize and the economy strengthens." "The Board remains very pleased with the continuing financial performance of the Company," said John Reed, Chairman of the Board of Directors. "The investment of operating cash into new products and the repayment of bank debt is consistent with the best interests of both our customers and shareholders." CareCentric provides information technology systems and services to over 1,500 customers. CareCentric provides freestanding, hospital-based and multi- office home health care providers (including skilled nursing, private duty, home medical equipment and supplies, IV pharmacy and hospice) complete information solutions that enable these home care operations to generate and utilize comprehensive and integrated financial, operational and clinical information. With offices nationwide, CareCentric is headquartered in Atlanta, Georgia. CELLSTAR CORP: Brings-In Grant Thornton to Replace KPMG LLC ----------------------------------------------------------- CellStar Corporation (Nasdaq: CLST), a value-added wireless logistics and distribution services leader, has retained Grant Thornton LLP as the new independent accountant of the Company. Grant Thornton LLP takes over from KPMG LLP, which resigned as the independent accountant of the Company. "We are pleased to have Grant Thornton join us as our new independent accountants," said CellStar Corporation Chief Executive Officer Terry S. Parker. "With the strategic actions that we've taken over the past year in reducing the number of foreign locations subject to audit, we believe that Grant Thornton can provide us with very efficient and effective audit services. Grant Thornton brings a wealth of talent and experience, and we look forward to working with them." For further information on the engagement of Grant Thornton LLP and the resignation of KPMG LLP, see the Form 8-K filed by the Company with the Securities and Exchange Commission. CellStar Corporation (S&P, SD Corporate Credit Rating) is a leading global provider of value-added logistics services to the wireless communications industry, with operations in the Asia- Pacific, North American, Latin American, and European regions. CellStar facilitates the effective and efficient distribution of handsets, related accessories and other wireless products from leading manufacturers to network operators, agents, resellers, dealers and retailers. CellStar also provides activation services in some of its markets that generate new subscribers for wireless carriers. For the year ended November 30, 2002, the Company generated revenues of $2.2 billion. Additional information about CellStar may be found on its Web site at http://www.cellstar.com CHAMPIONLYTE: Reclaims Old Fashioned Syrup Company Subsidiary ------------------------------------------------------------- ChampionLyte Holdings, Inc., (OTC Bulletin Board: CPLY) has reached a settlement agreement in a lawsuit brought to reclaim its Old Fashioned Syrup Company subsidiary. The subsidiary historically accounted for a substantial percentage, at times greater than 90 percent, of the Company's revenues. The suit, which was filed in the 15th Judicial Circuit in Palm Beach County, alleged that former Company Chairman and CEO Alan Posner, former Chief Financial Officer, Chris Valleau, InGlobalVest, Inc., a New York-based firm, and its principals fraudulently conveyed the subsidiary for grossly inadequate consideration and without notice to several critical parties. The settlement is with defendants, InGlobalVest, its principals and Valleau. Negotiations with Posner are ongoing and if a settlement cannot be reached within a reasonable period of time the litigation against Posner will continue. Pursuant to the terms of the Settlement Agreement, InGlobalvest has agreed to deliver all stock certificates in the Old Fashioned Syrup Company as well as all books and records to ChampionLyte Holdings by August 20, 2003. InGlobalVest has also agreed to appoint a representative to assist in the change in control and management, as well as enter into a non-interference agreement with the Company. Additionally, InGlobalVest has warranted and represented to the Company that the financial conditions depicted in the books and records tendered to ChampionLyte Holdings on July 15, 2003 were "true, accurate and complete as of that date to the best of InGlobalvest's knowledge and that no known liabilities were omitted from disclosure in such records." In consideration for the return of the Old Fashioned Syrup Company, ChampionLyte Holdings, Inc. has agreed to pay InGlobalVest $125,000 by August 20, 2003. This figure was agreed to as a result of an infusion of capital into the Old Fashioned Syrup Company by InGlobalvest, the outstanding original loan made to ChampionLyte and a restructuring of the Old Fashioned Syrup Company by InGlobalVest during its ownership that diminished certain of the outstanding liabilities of the entity. In addition, Valleau will receive $3,000 in consideration for the forfeit of the balance of any unpaid salary and retirement of all stock and options. Valleau has agreed to release the appropriate parties for such payment, which represents a significantly small portion of the back payroll owed to him. The Company has further agreed to dismiss the lawsuit with prejudice and issue releases to InGlobalVest and its principals and to dismiss the lawsuit against Valleau without prejudice. ChampionLyte Holdings will issue a written statement, which exculpates InGlobalVest, Inc. and its principals from any fraudulent acts as alleged in the complaint. Such statement will not apply to Valleau and Posner. The Old Fashioned Syrup Company was generating nearly $1 million in annual revenues, historically representing a significant percentage of the Company's total sales. The Company manufactures, distributes and markets three flavors of Sweet'N Low(R) brand sugar-free syrups. The products are sold in more than 20,000 retail outlets including some of he nation's largest supermarket chains, i.e. Publix, ShopRite, etc. ChampionLyte Holdings, through its wholly owned subsidiary ChampionLyte Beverages, Inc., manufactures, markets, sells and distributes ChampionLyte(R), the first completely sugar-free entry in the multi-billion dollar isotonic sports drink market. "This settlement agreement represents a significant moment in the short history of the restructured ChampionLyte Holdings, Inc. which we believe will have an immediate, positive impact on the Company," said current ChampionLyte Holdings, Inc. President David Goldberg. "The Old Fashioned Syrup Company will not only add revenues to our ongoing operations through the sales of the very popular Sweet'N Lowr brand, but it will open up a number of valuable opportunities to enhance the distribution and sales of our sugar-free isotonic products. "We're delighted we've reached this agreement without engaging in a protracted and costly legal battle," Goldberg said. "We believe the sum we paid for this extremely valuable asset is more than warranted and will increase shareholder value now that it is back into the rightful ownership of the Company and its shareholders." ChampionLyte Holdings, Inc., is a fully reporting public company whose shares are quoted on the OTC Bulletin Board under the trading symbol CPLY. Its recently formed beverage division, ChampionLyte Beverages, Inc., a Florida corporation, manufactures, markets and sells ChampionLyte(R), the first completely sugar-free entry into the multi-billion dollar isotonic sports drink market. At September 30, 2002, Championlyte Products' balance sheet shows a working capital deficit of about $1 million and a total shareholders' equity deficit of about $9 million. CONGOLEUM CORP: Senior Bondholders Okay Indenture Amendments ------------------------------------------------------------ Congoleum Corporation (AMEX:CGM) announced that Congoleum and the trustee for Congoleum's 8-5/8% Senior Notes Due 2008 have adopted certain amendments to the indenture governing the notes. Those adopted 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. Congoleum sought the bondholders' approval of those amendments as part of its strategy to resolve its asbestos liabilities. Holders of a majority of the outstanding notes as of the record date consented to the proposed amendments, which satisfied the vote required to amend the indenture. The solicitation was made upon the terms and subject to the conditions set forth in the Consent Solicitation Statement dated July 30, 2003 and related documents. Roger S. Marcus, Chairman of the Board, commented "We are continuing with our reorganization plan and appreciate this further affirmation of support from our bondholders." 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. CONSOLIDATED FREIGHTWAYS: Auctioning-Off CFL Unit on August 25 -------------------------------------------------------------- Consolidated Freightways Corporation plans to sell the operations of Canadian Freightways and its subsidiaries at auction to the highest bidder on August 25, 2003. CFL is financially and operationally independent from its parent company, CF, and is not part of the September 2002 bankruptcy proceedings filed by CF. CFL's traditional high-quality customer service and profitable operations have continued throughout this time period. A potential buyer, an entity led by a Canadian capital management firm ("Proposed Purchaser"), has signed an agreement to purchase the assets of CFL and other Canadian assets owned by CF and affiliates for approximately $90 million (US), which amount includes CFL liabilities being assumed. This agreement and the Proposed Purchaser's offer are expressly subject to higher and better bids from competing bidders. The bankruptcy court last week issued a bidding procedure order, which sets a process for competitive bids to be considered at the August 25 auction. The order designates the Proposed Purchaser as the "stalking horse" bidder and indicates processes that an over-bidder must take to submit a competing offer. Interested bidders should contact CF's investment banker, Chanin Capital Partners, at 310-445-4010. John Brincko, CF's chief executive officer, stated, "We're pleased with the progress thus far in the sale of our Canadian franchise and with the now-established process which we believe will realize maximum value from this premium property." CFL is an industry-leading supply chain services company, specializing in time-sensitive and expedited services. Operations in Canada and the United States include less-than-truckload (LTL), full-load (TL), and parcel transportation, sufferance warehouses, customs brokerage, international freight forwarding, fleet management and logistics management. Canadian Freightways won the 2002 Consumers Choice Award for best transportation company in Calgary and Edmonton. CTC COMMS: Enters Investment Agreement with Columbia Ventures ------------------------------------------------------------- CTC Communications Group, Inc., Columbia Ventures Corporation and Columbia Ventures Broadband LLC have entered into an investment agreement and filed a motion with the Bankruptcy Court seeking approval of the investor, the agreement and certain investor protections. The agreement provides for an investment of $32 million in cash by Columbia Ventures Broadband in exchange for 100% of the equity of a reorganized CTC Communications. The investment agreement also provides for a combination of cash, warrants representing a 5% equity interest in the reorganized CTC Communications and other consideration to be made available for distribution to CTC's creditors in its Chapter 11 proceedings. The agreement is subject to a number of conditions to closing, including Bankruptcy Court and regulatory approvals. The investment from Columbia Ventures Broadband will form the basis of CTC's Chapter 11 plan of reorganization, which it expects to file within the next few weeks. Lenders holding a majority of CTC's senior secured debt have advised CTC that they support CTC's decision to move forward with the investment agreement with Columbia Ventures and Columbia Ventures Broadband. CTC's committee of unsecured creditors has advised CTC that it intends to support Bankruptcy Court approval of the investment agreement and the investor, subject to CTC's plan of reorganization being confirmed by the Bankruptcy Court. Michael Katzenstein, CTC's interim CEO and a principal of crisis, restructuring and turnaround manager, CXO, L.L.C., said, "Columbia Venture Corporation's investment demonstrates the value and strength of CTC's business, network, customers and people. I am pleased that CTC has reached this important milestone." Mr. Katzenstein also stated that Columbia Ventures has indicated its intention to continue to serve CTC's PowerPath(R) and resale customers with its current services, network and technologies. Kenneth D. Peterson, Jr., Columbia Ventures CEO, said, "We were attracted to CTC by the opportunity to pursue an aggressive growth plan, new product roll-outs employing CTC's superior IP-based network and cross-marketing opportunities with our other businesses." Miller Buckfire Lewis Ying & Co., LLC, investment banker to CTC, advised on the transaction. Mr. Katzenstein added, "I am looking forward to working with Ken Peterson and his team to complete the investment transaction, exiting Chapter 11 and watching CTC resume its growth and development under new ownership." CTC is a "next generation" Integrated Communications Carrier utilizing advanced technology and providing its customers with converged voice, data, Internet and video services on a broadband, packet-based network, called the PowerPath(R) Network. The Company serves medium and larger business customers from Virginia to Maine, which includes the most robust telecommunications region in the world -- the Washington D.C. to Boston corridor. CTC's Cisco Powered IP+ATM packet network and its top-tier sales and service teams provide contiguous marketing and technology coverage throughout the Northeast and Mid-Atlantic States. The Company, through its dedicated commitment to exceptional customer service, has achieved an industry-leading market share in the Northeast. CTC can be found on the worldwide Web at http://www.ctcnet.com Columbia Ventures Corporation owns and operates telecommunications and industrial businesses. The most recent addition to CVC's operations is Hibernia Atlantic, a transatlantic fiber optic network with landing stations in Boston, Halifax, Liverpool and Dublin. The Hibernia Atlantic system includes a fully protected terrestrial system linking Boston and Halifax via New York City. CVC also operates a fiber optic metropolitan network in Spokane, Washington and is the largest shareholder in Og Vodafone, the second largest telecommunications provider in Iceland. The industrial businesses of CVC include Nordural, an aluminum smelter developed and constructed by CVC in Iceland, as well as aluminum manufacturing and fabrication operations in the United States and Mexico. CVC and its related businesses began operations in 1987; the company's headquarters are located in Vancouver, Washington. DANKA BUSINESS: Pricing Competition Spurs S&P's Negative Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Danka Business Systems PLC to negative from stable. At the same time, Standard & Poor's affirmed its 'B+' corporate credit and senior unsecured ratings on the company. The outlook revision is primarily due to margin pressure in the June quarter from a competitive pricing environment, as well as a turn to negative free operating cash flow in the period. St. Petersburg, Florida-based Danka Business Systems PLC is an independent supplier of office imaging equipment and related services and supplies. Total debt was about $345 million as of June 2003, adjusted for operating leases. "If the heightened competitive pricing environment continues, it may dampen profits and prevent the recovery in the second half," said Standard & Poor's credit analyst Martha Toll-Reed. Revenues are expected to stabilize over the near-to-intermediate term, despite a modest decline in the June quarter, as growth in digital product sales and installed base and related service revenues offsets the declining analog product base. DEAN FOODS: Second Quarter Results Reflect Slight Improvement ------------------------------------------------------------- Dean Foods Company (NYSE: DF) announced record results for the quarter ended June 30, 2003. Net income for the second quarter totaled $83.8 million, compared with $73.2 million in the second quarter of 2002. Diluted earnings per share were $0.54, compared with $0.48 per share in the second quarter of 2002. Second quarter net sales totaled $2.2 billion in 2003, a decline of 3% over the second quarter of 2002, due primarily to lower raw material costs that are passed on to customers in the form of lower selling prices. On a pro forma basis, diluted earnings per share for the second quarter totaled $0.56, an increase of 10% compared with pro forma earnings of $0.51 per share in last year's second quarter. Dean Foods noted that its second quarter pro forma earnings were in line with its announced target of $0.55 to $0.56 per share, on a split-adjusted basis. Pro forma net income for the second quarter grew 11% to $85.6 million compared with pro forma net income of $77.3 million in the second quarter of 2002. "We are pleased with our performance and delivered earnings per share at the high end of our previously-stated guidance," said Gregg Engles, chairman and chief executive officer. "Our Dairy Group and Specialty segments continued to turn in outstanding results, and our strategic brand portfolio continues to grow at an impressive rate." The company reported second quarter operating income of $184.5 million versus $178.4 million in the second quarter of 2002. Pro forma operating income totaled $187.5 million, an increase of 2% over pro forma operating income of $183.6 million in the second quarter of 2002. Pro forma second quarter 2003 operating income margins were 8.44%, an increase of 44 basis points versus the pro forma results from the second quarter of last year. Operating income margin improvement was due primarily to improved results in the Dairy Group and Specialty Foods segments, offset by a decline in Morningstar margins due primarily to increased investment behind the company's strategic brands. The company's strategic brand portfolio includes Silk(R) and Sun Soy(R) soymilk, International Delight(R) and Land O Lakes(R) coffee creamers, Hershey's(R) milks and milkshakes, Land O Lakes Dairy Ease(R), Folgers(R) Jakada(R) single-serve chilled coffee and milk beverages, Marie's(R) dips and dressings and Dean's(R) dips. Long-term debt at June 30, 2003 was approximately $2.8 billion, including $175.5 million due within one year that is reported as part of current liabilities. At the end of the quarter, approximately $667 million of the company's $2.7 billion bank facility was available for future borrowings. STOCK SPLIT AND TIPES CONVERSION On June 9, Dean Foods completed a three-for-two common stock split. All of the per share information in this release has been adjusted to reflect the split. As of June 23, the company completed the redemption of its $600 million Dean Capital Trust 5-1/2% Trust Issued Preferred Equity Securities (TIPES), successfully converting over 99% into common stock. ACQUISITIONS AND DIVESTITURES In June 2003, Dean Foods completed the acquisition of Melody Farms, based in Livonia, Mich. With annual sales of approximately $116 million, Melody Farms is a leading processor and distributor of dairy products in the Michigan marketplace and operates under the brand names of Melody Farms(R), Stroh's(R), Mooney's(R), Nafzinger's(R) and Sealtest(R). On June 30, Dean Foods announced that it had signed a definitive agreement to purchase Horizon Organic Holdings Corp. for $24 per share and assume approximately $40 million in debt. In 2002, Horizon Organic reported revenues of approximately $187 million, and in April 2003, the company announced that it had reached a milestone of $200 million in annual sales. The transaction is subject to approval by Horizon Organic's shareholders and expiration of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act. The companies continue to expect the transaction to close in the fourth quarter of 2003. At the end of July, Dean Foods completed the sale of Morningstar Foods' frozen whipped topping and frozen creamer business based in Arlington, Tenn., to Rich Products Corporation. In 2002, the divested business had sales of approximately $55 million, and cash proceeds from the sale totaled $91 million. The sale of the frozen business is approximately 5 cents dilutive to earnings per share on an annual basis. However, the company noted that due to its significant seasonality, approximately 4 cents of the dilution from the sale of this business will be reflected in the balance of 2003. The company noted that the anticipated accretion from the acquisition of Melody Farms and the pending acquisitions of Horizon Organic and Kohler Mix Specialties is expected to offset the dilutive impact of the frozen business divestiture in 2004. As a result, the net effect of all these transactions is expected to be neutral to earnings in 2004. However, because the pending Horizon Organic and Kohler acquisitions are not expected to occur until late 2003, the pre-whip topping divestiture is expected to be dilutive to the third and fourth quarters of 2003. "As we create a world-class food and beverage company, we continue to sharpen our focus and look at acquisitions and divestitures that make strong strategic sense for our business," said Engles. "This quarter's announced acquisitions and divestiture have the effect of redeploying our resources into those areas where we have the greatest competitive advantage and opportunity. "Melody Farms is a valuable tuck-in acquisition for our Dairy Group and reflects our commitment to continue to build our core business. With the acquisition of Horizon Organic, we will add the leading organic milk brand in the U.S. and the U.K. to our portfolio. In our Silk and Horizon Organic brands, we will have the nation's number one and number two organic brands. With aggregate 2003 sales of approximately $475 million and growing rapidly, Silk and Horizon Organic, both based in Boulder, Colorado, will form the basis of a powerful wellness platform from which we intend to build a family of innovative, value-added and better-for-you products," Engles continued. OUTLOOK The company re-affirmed its 12-14% growth expectations for 2003, before adjusting for the dilutive effect of the sale of Morningstar's frozen business. "We expect 2003 earnings to be in the range of $2.03 to $2.07 per share, which reflects our earlier guidance of $2.07 to $2.11 per share, reduced by 4 cents for the dilution of the sale of the frozen business," Engles said. "Rising raw milk prices in the coming months have been incorporated into our outlook for the year, and we are confident we will manage through this environment effectively," continued Engles. "We anticipate third quarter earnings will be in the range of $0.51 to $0.53 per share, and we expect to deliver $0.54 to $0.56 per share in the fourth quarter. We have accomplished a great deal so far this year and remain enthusiastic and committed to increasing shareholder value at Dean Foods." SECOND QUARTER RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS For the second quarter of 2003, the pro forma results reported above differ from the company's results under Generally Accepted Accounting Principles by excluding a $3.0 million charge ($1.9 million net of income tax) related primarily to closing an ice cream plant in Hawaii. For the second quarter of 2002, the pro forma results reported above differ from the company's results under GAAP by excluding $5.3 million of restructuring charges ($3.3 million net of income tax) related to closing a Dairy Group plant in Vermont and a distribution center in Virginia, as well as a $0.8 million net loss related to discontinued operations in Puerto Rico. Pro forma results are provided in order to allow investors to make meaningful comparisons of Dean Foods' operating performance between periods and to view the company's business from the same perspective as the company's management. SEGMENT RESULTS Dairy Group net sales for the second quarter totaled $1.7 billion, a decline of 4% from $1.8 billion in the second quarter of 2002. The second quarter sales decline was due primarily to lower raw material costs that are passed on to customers in the form of lower selling prices. Dairy Group pro forma operating income in the second quarter improved 16% to $165.4 million, and pro forma operating margins increased 169 basis points to 9.61% of sales, due primarily to lower raw milk costs and realized synergies. The second quarter average Class I mover, which is an indicator of the company's Class I raw milk prices, was $9.70 per hundred-weight in the second quarter of 2003, a 14% decline versus last year. Morningstar/White Wave net sales in the second quarter totaled $262.9 million, down 0.3% compared to last year. Strong results at White Wave offset the previously-announced termination of the Nestle co-packing business at Morningstar; lower selling prices due to the decline in raw material costs; and increased couponing, slotting and market development spending for Morningstar's strategic brands, which under GAAP are recorded as a reduction to sales. Pro forma operating income in the second quarter for Morningstar/White Wave was $10.5 million, and pro forma operating margins were down 768 basis points to 4.01%, in line with the company's previously announced expectations for heavy spending against its strategic brands. Most of the decline in the segment's margin is attributable to increased year-over-year brand spending at Morningstar and White Wave, partially offset by operating improvements at White Wave. Specialty Foods' net sales totaled $175.7 million, a decline of 1% over the prior year second quarter, and operating income was $27.0 million, an increase of 7%. Second quarter operating income margin increased 108 basis points to 15.38%. RESULTS FOR SIX MONTHS ENDED JUNE 30, 2003 The company's net sales declined 3% to $4.4 billion for the six months ended June 30, 2003, compared with $4.5 billion during the first six months of 2002. The decline is due primarily to lower raw material costs in the first half of the year that are passed on to customers in the form of lower selling prices. Net income for the first half of the year totaled $147.0 million, compared with $43.6 million in 2002. Diluted earnings per share for the six months ended June 30, 2003 totaled $0.97, compared with $0.33 in the first six months of 2002. Pro forma net income for the six months (as defined below) totaled $147.8 million, an increase of 11% over $132.7 million last year. Pro forma diluted earnings per share for the first six months of 2003 totaled $0.98, an increase of 11% compared with $0.88 in the first six months of 2002. The company reported operating income for the period ended June 30, 2003 of $341.4 million versus $324.2 million in 2002, an increase of 5%. Pro forma operating income for the first six months of 2003 totaled $342.8 million, an increase of 4% over pro forma operating income of $330.7 million last year. Pro forma operating income margins for the six months were 7.85%, an increase of 54 basis points versus the pro forma results of the prior year's first six months. SIX MONTH RECONCILIATION OF PRO FORMA RESULTS WITH GAAP RESULTS For the six months ended June 30, 2003 the pro forma results reported above differ from the company's results reported under GAAP by excluding restructuring charges of $1.3 million ($0.8 million net of income tax) related to plant closings. For the first six months of 2002, the pro forma results reported above differ from the company's 2002 results reported under GAAP by excluding the following: $6.5 million ($4.0 million net of income tax) in plant closing charges; $0.1 million net loss from discontinued operations; and a one-time total charge of $85.0 million, net of income tax, related to the write-down of certain trademarks and goodwill due to the implementation of Financial Accounting Standard 142, "Goodwill and Other Intangible Assets." Pro forma results are provided in order to allow investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as the company's management. Dean Foods Company is one of the nation's leading food and beverage companies. The company produces a full line of company- branded and private label dairy and dairy-related products such as milk and milk-based beverages, ice cream, coffee creamers, half and half, whipping cream, whipped toppings, sour cream, cottage cheese, yogurt, dips, dressings and soy milk. The company is also a leading manufacturer of pickles and other specialty food products, juice, juice drinks and water. The company operates over 120 plants in 36 U.S. states and Spain, and employs approximately 28,000 people. As reported in Troubled Company Reporter's July 24, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit ratings on Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co. The ratings were removed from CreditWatch, where they were placed on June 2, 2003. The outlook is positive. Dallas, Texas-based Dean Foods has about $3.4 billion in rated debt. E2 COMMS: Litigation Trust Employs Marjorie Firm as Counsel ----------------------------------------------------------- Steven C. Metzger, the putative Successor Trustee of the Litigation Trust, wants to employ The Majorie Firm LP as Counsel for the Litigation Trust. Mr. Metzger has sought and obtained the advice and consent of James W. Lincoln and Joseph U. Barton, the members of the Litigation Trust Committee. The Committee reports that Karen G. Nicolau, the original trustee of the Litigation Trust, tendered her resignation letter dated July 10, 2003. Ms. Nicolau's letter also indicates that she has also accepted the resignation of the law firm of Diamond McCarthy Taylor Finley Bryant & Lee, LLP as counsel for the Litigation Trust. Contemporaneously, the Committee seeks to appoint Steven C. Metzger as Successor Trustee of the Litigation Trust. Although the application to appoint Mr. Metzger has not yet been granted by the Court, in the interest of time, the Committee wants Mr. Metzger to proceed with the filing in order that his appointment and the employment of his chosen counsel may be considered simultaneously. The Majorie Firm will serve as counsel for the Litigation Trust to pursue causes of action against the former officers and directors of e2 Communications, Inc. and professionals formerly engaged by e2. The Majorie Firm is a well-respected and experienced firm in all aspects of civil litigation. The principal and founder of The Majorie Firm is Francis B. Majorie PC. Mr. Majorie has been responsible for handling over $500 million of business problems for clients during his career, and has personally obtained over a dozen jury verdicts or settlement payments for clients of seven figures or more. Mr. Metzger believes that The Majorie Firm is well qualified to handle any and all litigation matters on behalf of the Litigation Trust. Mr. Majorie and all other lawyers working for The Majorie Firm shall provide professional services at a reduced rate of $125 per hour with fee charges capped at $212,500. Additionally, The Majorie Firm shall receive a contingent fee of 15% of recoveries on any causes of action pursued by that firm until all "Participating Investors" recover 60% of the amount of their original prepetition investment in the common or preferred stock of e2 and, after such 60% recovery is made, the contingent fee percentage shall increase to 33%. e2 Communications, Inc., is e-Synergies' wholly owned subsidiary. A Chapter 11 Involuntary Petition was filed against the Debtor on February 25, 2002 (Bankr. N.D. Tex. Case No. 02-30574). The Petitioners are represented by Dane Scott Field, Esq., and Franklin L. Broyles, Esq., at Goins, Underkofler, Crawford & Langdon. EASYLINK SERVICES: Staves-Off Nasdaq Delisting After Hearing ------------------------------------------------------------ EasyLink Services Corporation announced that a Nasdaq Listing Qualifications Panel has determined to continue the listing of EasyLink's common stock on the Nasdaq National Market. The Company had attended an oral hearing on July 31, 2003, to request continued listing on the Nasdaq National Market. The hearing was originally scheduled because the Company had failed to regain compliance with the $1 minimum bid price requirement contained in Marketplace Rule 4450(a)(5) by June 23, 2003. The Panel determined after the hearing, however, that the Company had demonstrated a closing bid price of at least $1 per share for the 15 consecutive business days ended August 1, 2003 and was otherwise in compliance with Nasdaq's requirements for continued listing. Accordingly, the Company is now in compliance with all of Nasdaq's continued listing requirements. * * * As previously reported, EasyLink Services said it was seeking to restructure substantially all of approximately $86.2 million of outstanding indebtedness, including approximately $10.7 million of capitalized future interest obligations. The Company is currently in discussions with holders of its debt relating to the proposed restructuring. To date, the holders of approximately 70% of this debt have expressed interest in completing a restructuring on the terms discussed. Management seeks to restructure substantially all of the debt. If all of the debt were successfully eliminated on the currently proposed terms, the Company would pay approximately $2.0 million in cash and issue up to 35 million shares of its Class A common stock, including the shares issued to fund the cash payment. The number of shares to be exchanged for each class of debt was determined based on a deemed per share price of between $2.00 and $3.00. E-CENTIVES INC: June 30 Working Capital Deficit Tops $1.7 Mill. --------------------------------------------------------------- E-centives, Inc. (SWX: ECEN), a leading provider of online direct marketing technologies and services for global marketers, announced financial results for the second quarter and first six months of 2003. BUSINESS HIGHLIGHTS - Improved quarter-over-quarter (Q2 '03 vs. Q2 '02) net loss and adjusted EBITDA loss by $4.7M and $2.3M, respectively, as a result of business restructuring and cost control initiatives, among other things, as referenced in the Company's March 27, 2003 press release discussing its 2002 calendar year financial results. These initiatives contributed to the company's improved net loss and adjusted EBITDA loss for the first six months of '03 compared to the first six months of '02 by $8.4M and $5.0M, respectively. - Expanded activity with client Reckitt Benckiser by adding additional brands using E-centives' IDBM platform, including Spray & Wash, Woolite, Veet (US) and 4 others in the UK, Germany and Spain. Introduced the first (2) on-line printable coupons in Germany for eight brands including Woolite, Veet, Airwick and Calgon. - Successfully implemented and launched a pilot program for an online coupon distribution agreement with a major US media company that included coupons from approximately 40 major consumer packaged goods brands. Revenue for this program will begin to be recognized in the third quarter. - Executed new technology licensing and e-marketing service agreements with Georgia- Pacific Corporation, and Gerber Products Company. - The company's ConsumerREVIEW.com business unit generated a 53% revenue improvement on a quarter-over-quarter (Q2 '03 vs. Q2 '02) basis, and a 75% revenue improvement for the first six months of '03 compared to the first six months of '02, as a result of continued e-commerce and advertisement successes. (The Q2 and first six months '02 revenues of ConsumerREVIEW.com were derived from information previously provided by ConsumerREVIEW.com, Inc., prior to the acquisition by E-centives in December 2002.) The ConsumerREVIEW division has continued to build momentum as evidenced by new agreements with several leading industry players, including Overture Services, Inc. and BizRate.com. Its network of sites currently average in excess of 30M page visits per month. In addition, PCPhotoREVIEW.com, one of the unit's user review sites, recently received a "Best Bet" award from PC World Magazine, one of the most sought after honors in software and technology. Revenues for Q2 2003 were $1.4M compared to $1.9M in Q2 2002. The Q2 2002 revenues include approximately $500K of accelerated contract revenue as a result of the early termination of a significant contract associated with the closure of the company's Commerce Division during 2002. Excluding the accelerated revenue, quarter-over-quarter revenue remained comparable for the reporting periods. The company realized a net loss in Q2 2003 of $2.5M or $.06 per diluted share compared to a net loss of $7.2M or $.19 per diluted share in Q2 2002. The company reported a Q2 2003 adjusted EBITDA loss of $1.6M compared to an adjusted EBITDA loss of $3.9M in Q2 2002. Revenues for the first six months of 2003 were $3.0M compared to $3.3M for the first six months of 2002. During this period, the company realized a net loss of $5.3M or $.14 per diluted share for the first six months of 2003 compared to a net loss of $13.7M or $.36 per diluted share for the first six months of 2002. The company reported an adjusted EBITDA loss of $3.5M compared to $8.5M for the comparable prior year's period. During the quarter, the Company received $950K in debt financing from investors through a syndicate arranged by Friedli Corporate Finance. Shares used to compute diluted net loss per common share are based on the weighted average number of common shares outstanding at the end of the referenced periods, which periods include 20M additional common shares associated with the company's fourth quarter 2001 rights offering. At June 30, 2003, E-centives Inc.'s balance sheet shows that its total current liabilities outweighed its total current assets by about $1.7 million, while the Company's net capital further narrowed to about $1.8 million from about $7 million six months ago. "We're delighted with the addition of our new consumer packaged goods clients, and continue to be cautiously optimistic with our pipeline of prospective clients. Our pilot online coupon distribution also helps pave the way for additional revenues in the near term. Our Consumer Review business unit continues its progress by posting improved revenue performance," commented Kamran Amjadi, E-centives, Inc.'s Chairman and Chief Executive Officer. "We will continue to maintain our efforts on delivering best-in-class products and solutions to the market with strong patent protection on key elements of our technologies and with a clear focus on generating positive ROI for our customers." "Aggressively managing the company's operating cost structure is and will continue to be a top priority for us to ensure success with all of our business initiatives. We are also pleased with our revenue potential over the next few quarters," added David Samuels, E-centives, Inc.'s Chief Financial Officer. E-centives, Inc., is a leading provider of online direct marketing technologies and services that enable companies to acquire and retain customers and promote more profitable relationships with them. Clients include global businesses from the consumer packaged goods, retail and media industries. Headquartered in Bethesda, MD, just outside Washington, D.C., and with west coast offices in the San Francisco Bay Area, E-centives, Inc. is traded on the SWX Swiss Exchange under the symbol "ECEN." ENERGY PARTNERS: Second Quarter Results Zooms into Positive Zone ---------------------------------------------------------------- Energy Partners, Ltd. (NYSE: EPL) (S&P, B+ Corporate Credit Rating, Stable), announced net income available to common stockholders for the second quarter of 2003 of $6.6 million. In the same period a year ago, the Company reported a loss available to common stockholders of $421,000. EPL's second quarter 2003 cash flows from operating activities totaled $36.1 million as compared to cash flows of $4.9 million in the same quarter of 2002. Second quarter 2003 discretionary cash flow, which is cash flows from operating activities before changes in working capital and before total exploration expenditures, totaled $36.1 million as compared to $18.9 million in the same quarter of 2002. The Company said second quarter 2003 results benefited from record high production volumes and significantly higher oil and natural gas prices. Partially offsetting these benefits were higher costs and expenses, which were up largely as a result of increased production and higher exploratory activity levels. In the second quarter of 2003, natural gas sales volumes rose 30% to a record high 73.6 million cubic feet of natural gas per day from 56.6 Mmcf per day in the same period a year ago. Crude oil production averaged 7,483 barrels per day compared with 9,067 barrels per day in 2002's second quarter. Total production on a barrel of oil equivalent basis rose 7% to a record high 19,751 Boe per day, up from 18,492 Boe per day in the same period last year. Realized natural gas prices rose 62% to $5.36 per thousand cubic feet of natural gas net of hedging in 2003's second quarter from $3.31 per Mcf in the same quarter of 2002. Realized oil prices rose 12% to $26.84 per barrel net of hedging in the second quarter of 2003 from $23.90 per barrel in the same period a year ago. Richard A. Bachmann, EPL's Founder, Chairman, President and Chief Executive Officer, commented, "Increasing production volumes from our successful drilling program combined with very attractive commodity prices yielded strong financial results in the second quarter. In addition, our cash operating costs were kept within our target ranges even as we ramped up our drilling and development programs. We are well on our way to generating record cash flow in 2003, and we are working diligently to re-deploy that cash flow in growing the Company." For the six months ended June 30, 2003, EPL's net income available to common stockholders totaled $19.9 million, or $0.63 per diluted share. Net income in the period included an after-tax benefit of $2.3 million, or $0.06 per diluted share, related to the cumulative effect of a change in accounting principle as a result of the adoption of Financial Accounting Standards Board Statement No. 143, "Accounting for Asset Retirement Obligations" which was effective January 1, 2003. In the same period a year ago, EPL reported a loss available to common stockholders of $7.0 million, or $0.25 per diluted share. The 2002 period included a charge of $1.2 million for expenses relating to the rationalization of EPL's organization following the acquisition of Hall-Houston Oil Company. For the six months ended June 30, 2003, cash flow from operating activities was $60.9 million, compared to a negative $2.4 million in the same period of 2002. Discretionary cash flow for the six months ended June 30, 2003 and June 30, 2002 totaled $73.7 million and $28.4 million, respectively (see reconciliation of discretionary cash flow schedule in the tables). Significantly greater total production volumes and sharply higher oil and natural gas prices were the primary reasons for the increase in earnings and cash flow in 2003. For the first six months of 2003, natural gas sales volumes rose 31% to 71.8 Mmcf per day compared with 55.0 Mmcf per day in the same period in 2002. Crude oil production averaged 7,746 barrels per day in the first six months of 2003 compared with 8,972 barrels per day in the same period a year ago. Total production on a Boe basis rose 9% to 19,716 Boe per day from 18,131 Boe per day in the same period last year. In the first half of 2003, natural gas prices averaged $5.46 per Mcf net of hedging, up 79% from $3.05 per Mcf realized in the same period last year. Realized oil prices averaged $28.59 per barrel net of hedging, up 29% compared with $22.14 per barrel in the same 2002 period. EPL's capital expenditures totaled $32.3 million during the second quarter of 2003, nearly a four-fold increase from $6.8 million invested in the second quarter of 2002. For the first six months of 2003 capital expenditures totaled $56.7 million, up more than three-fold compared with the same period a year ago. As previously announced, on April 16, 2003, the Company completed a public offering of 4,210,526 primary shares and 2,585,590 secondary shares, which was priced at $9.50 per share. The over- allotment option for 1,019,417 additional secondary shares was subsequently exercised. The Company used the net proceeds of $37.6 million from the sale of primary shares to repay a portion of its outstanding credit facility. The full proceeds from the sale of secondary shares and the over-allotment option went to the selling shareholders. As of June 30, 2003, EPL's long-term debt totaled $78.7 million while cash and cash equivalents stood at $8.8 million. Debt represented 24% of total capitalization. On August 5, 2003, the Company completed an offering of $150 million of senior unsecured notes. These notes mature in 2010 and have a coupon of 8.75% paid semi-annually. The Company is using the net proceeds after commissions and expenses of $145.3 million to redeem at par the full $38.4 million of its existing 11% Senior Subordinated Notes, to reduce outstanding bank indebtedness and for general corporate purposes including acquisitions. Hedging Positions The Company further increased its hedging positions on its oil and natural gas production during the second quarter. A summary of its current hedging positions is available under the Investor Relations section at the Company's Web site at http://www.eplweb.com Operational Highlights During the second quarter of 2003, the Company successfully completed five of seven wells drilled. All five of the successful wells were exploratory discoveries. The Company also successfully completed nine workovers/recompletions, of which six were natural gas and three were oil. In addition, production was initiated during the quarter at West Cameron 210 and South Marsh Island 24, both of which were successful exploratory wells in the fourth quarter of 2002. Production also commenced at Eyeball, a successful exploratory well drilled at Greater Bay Marchand in the first quarter of 2003. On July 28, 2003, the Company initiated production from its Eugene Island 27 field, which was a 2002 exploratory discovery. The Company owns a 100% working interest in this field. During the second quarter, the Company was awarded the six leases on which it was high bidder during the Central Gulf of Mexico Lease Sale 185 held in March 2003. The six new leases total approximately 30,000 gross acres. The Company also said that it had successfully drilled the East Cameron 161 A1 sidetrack well. This exploratory well was drilled from an existing platform to a total vertical depth of 8,235 ft. and encountered approximately 50 ft. of net natural gas pay. The well is currently being completed and is expected to be onstream by the end of August. EPL is the operator and owns a 100% working interest in the well. Bachmann continued, "So far this year, we have successfully drilled seven of eight exploratory wells for an 88% success rate. Our strong cash flow combined with our ongoing drilling success has encouraged us to expand our capital and exploration budget for 2003. We recently announced that we intend to invest $110 million in that program, a 22% increase over the $90 million budget established at the beginning of the year. The second half of 2003 will be particularly busy, as we now plan to drill as many as 16 to 17 additional exploratory wells by year end. Furthermore, we anticipate that at current price levels we will generate additional free cash flow that will be available to fund acquisitions or for other purposes." Founded in 1998, EPL is an independent oil and natural gas exploration and production company based in New Orleans, Louisiana. The company's operations are focused in the shallow to moderate depth waters of the Gulf of Mexico Shelf. EQUITY INNS: Reports Weaker Performance for Second Quarter 2003 --------------------------------------------------------------- Equity Inns, Inc. (NYSE: ENN) (S&P, B+ Corporate Credit Rating, Negative), a premier hotel real estate investment trust, announced its results for the second quarter ended June 30, 2003. Income from continuing operations for the second quarter of 2003 was down $177,000 at $3.4 million compared to $3.6 million, for the second quarter of 2002. Net loss to common shareholders for the second quarter 2003 was $1.8 million, compared to net income of $2.1 million for the second quarter 2002. The decline was primarily due to a $3.6 million impairment charge related to three hotels categorized as held-for-sale on the balance sheet. Two of the three properties are exterior corridor hotels, which the Company intends to dispose of over time as part of its long-term strategic plan. Highlights for the Quarter: -- Funds From Operations per share of $0.28 exceeds analyst consensus estimates -- Improving balance sheet - no significant debt maturities until 2007 -- Market share increases across the portfolio -- Prime Hospitality agreements updated -- Dividend of $0.13 per share in line with guidance Funds from operations: Funds from operations for the second quarter 2003 were $11.8 million compared to FFO of $12.4 million for the period ended June 30, 2002. EBITDA was $20.5 million in the second quarter of 2003 versus $20.7 million in the same period last year. Equity Inns' second quarter FFO decrease is primarily the result of the Company's same store hotel portfolio RevPAR decreasing 2.2% to $54.32 from $55.55 versus the same period a year earlier. In the second quarter, Equity Inns' RevPAR performance outperformed the industry's RevPAR decline of 3.1%. The Company's occupancy was flat at 71.4%, while average daily rate was down 2.2% to $76.11 compared to $77.85 in the second quarter of 2002. While RevPAR results are primarily the cause of the decrease in FFO, the Company's hotel expenses declined $522,000 compared to the same period last year. The decline in hotel costs was driven by a reduction in repairs and maintenance of $368,000, for major equipment repairs that had been completed in the prior year, $262,000 from real estate tax reductions and savings on property insurance and an increase in shortfall contributions from Prime Hospitality of $321,000 to compensate Equity Inns for the reduced earnings of the Company's AmeriSuites. These hotel costs were offset for the most part by increases in wages, benefits, utilities, and health insurance. The reduction in FFO was also impacted by increases in corporate general and administrative costs of $253,000 and amortization of debt costs of approximately $390,000 in connection with the early refinancing of the Company's line of credit that was originally set to expire in October 2003. During the quarter, the hotel gross operating profit margin was 42.6% versus 42.9% in the same period of 2002. GOP margin is defined as hotel revenues minus hotel operating costs before property taxes, insurance and management fees, divided by hotel revenues. The reduction in GOP margin in the quarter came primarily from lower revenue. Equity Inns' RevPar for April, May and June, decreased 3.5%, 1.7%, and 1.5% respectively, versus the same periods last year. The Company's preliminary RevPAR results for the month of July were up 0.9%, the first monthly increase in 2003. In the second quarter more than 41% of Equity Inns' hotels had positive RevPAR growth. In fact, two of the Company's regions generated positive increases in RevPAR. The most meaningful increase was a 0.8% increase in the South Atlantic region, which represents approximately 28% of Equity Inns' hotels. This was the fourth consecutive quarter this region posted a year over year RevPAR increase. One of the Company's strongest brands, Homewood Suites produced a RevPar increase of 5.3% during the second quarter driven primarily by the 233-room downtown Chicago Homewood Suites where RevPar increased over 11.0% for the quarter. The hotel benefited from its strong market share position and the improving Chicago marketplace. Throughout the Company's nine Homewood Suites, strong occupancy gains and slightly increased rates combined to impact the brand's performance for the quarter. In addition, as measured by Smith Travel Research, Equity Inns hotel portfolio's occupancy penetration increased 3.0% to 109.9%, while RevPAR yield increased 1.5% to 116.0%, indicating that the Company's share is increasing in each of its markets. The improved occupancy penetration and RevPAR yield during the quarter was due to a number of factors, including additional emphasis on leisure weekend business and better utilization of e-commerce distribution channels. One example of strong occupancy growth in the second quarter was the AmeriSuites brand, which increased efforts to regain market share. While rates suffered in short-term, Equity Inns' AmeriSuites posted an occupancy increase of 3.5 points in the second quarter ended June 30, 2003. "We are quite proud that we have outperformed or met industry RevPAR growth for eight out of the last ten quarters and continue to increase market share. Our strategy of prudently managing costs, and hiring the right management companies for a particular hotel property is helping Equity Inns produce these positive results," commented Howard Silver, President and COO. For the six months ended June 30, 2003, Equity Inns reported FFO of $18.7 million or $0.45 per share compared to $20.3 million or $0.51 per share last year. RevPAR for the first six months of 2003 was $50.62 compared to $51.76, while occupancy was relatively flat at 66.8%. ADR during the six-month period was $75.75 compared to $77.27 year over year. In the first half of fiscal 2003, Equity Inns' results continued to outperform the industry for the six- month period, with a RevPAR decrease of 2.2% versus an industry decrease of 2.5% (as measured by Smith Travel Research). Capital Structure: During the second quarter, Equity Inns closed on a $110 million senior secured revolving credit facility. The credit facility is non- amortizing and is secured by 26 operating hotels. The facility has a three-year term with a one-year extension option, and bears interest at a variable rate of LIBOR plus 2.25% to 3.0%, as determined by the Company's percentage of total debt to EBITDA. The new credit facility replaced the Company's previous $125 million senior secured revolving line of credit. At June 30, 2003, Equity Inns' debt outstanding was $364.1 million, which included $92.7 million drawn under its $110 million line of credit. The weighted average life of the Company's fixed rate debt was 6 years. The Company's total debt represented approximately 38% of the cost of its hotels, the lowest level in five years. Recent Events: During the quarter the Company updated its current franchise contracts and management agreements with Prime Hospitality on its 19 AmeriSuites hotels. The cash flow guarantee agreements were not extended beyond their original terms and are set to expire between 2007 and 2008. Under the new agreements, Prime and Equity Inns extended the existing franchise agreements to 2028 and management agreements to 2010 as long as Prime continues to be in compliance with the cash flow guarantees previously agreed to in the original agreements. On July 10, 2003 the Company priced an offering of 3,000,000 shares of 8.75% Series B Cumulative Preferred Stock (liquidation preference of $25 per share) that is expected to close on August 11, 2003. The Company granted the underwriters an overallotment option to purchase 450,000 additional shares of the Series B Preferred Stock, which is exercisable within 30 days after closing. Net proceeds from the issuance, excluding any proceeds from the overallotment, will be approximately $72.3 million. The Company will use approximately $68.8 million to redeem the Company's outstanding 9.5% Series A Cumulative Preferred Stock and the balance to repay a portion of outstanding borrowings under the Company's line of credit. Assuming that the overalloment is issued, the Company will realize approximately $14 million that will be used primarily to reduce debt. Mr. Silver continued, "We are pleased that we were able to take advantage of market conditions. We will save 75 basis points by replacing our preferred stock yielding 9.5% with a preferred stock that will yield 8.75%. With no significant debt maturing until 2007, we increased our financial flexibility and capacity. As we pursue our strategy of growth and diversification we intend to maintain strict operating and financial disciplines at each of our properties." Dividend: The level of Equity Inns' common dividend will continue to be determined each quarter, based upon the operating results of that quarter, economic conditions, and other operating trends. For the second quarter 2003, Equity Inns paid a $0.13 per share dividend on its common stock. At this time, we remain confident in our ability to manage the business despite industry trends," commented Phillip H. McNeill, Sr., Chairman and CEO of Equity Inns stated. "We are pleased that compared to second quarter 2000, a historical high point for the industry for performance, Equity Inns' occupancy is down just 0.6% and ADR is down only $4.22. We attribute this to our ability to manage risk and our platform of diversity: segment, geographic and management company. This helps to position the Company to take advantage of opportunities and mitigate the traditional volatility associated with the lodging industry." Mr. McNeill concluded, "Our ability to improve our cost structure and strengthen our balance sheet provides the Company with the financial flexibility to meet the challenges and opportunities that categorize the current lodging industry. The fact that we have been able to maintain our dividend policy is a tribute to management and the success of our long-term strategy. As we execute on our business plan, Equity Inns is positioned to increase shareholder value." 2003 Guidance: While Equity Inns exceeded second quarter FFO expectations, the Company refined its guidance for fiscal 2003, taking into account the uncertainty of the economy and the competitive landscape. Based on these factors and current conditions, the Company expects 2003 FFO to be in the range of $0.87 to $0.94 per share, including a $0.15 to $0.18 per share income tax benefit. Management also adjusted its RevPAR range to negative 3.0% to a positive 1.0% for the year. In addition, Equity Inns believes that its 2003 results will follow the historical quarterly FFO breakdown, with the third quarter contributing approximately 31% to 33% and the fourth quarter contributing approximately 18% to 19%. Subsequently, for the third quarter ending September 30, 2003, Equity Inns expects FFO to be in the $0.27 to $0.31 per share range, including a $0.02 to $0.04 per share income tax benefit. The Company is currently anticipating 2003 capital expenditures of approximately $15-$16 million. Equity Inns, Inc. is a self-advised REIT that focuses on the upscale extended stay, all-suite and midscale limited-service segments of the hotel industry. The Company owns 95 hotels with 12,210 rooms located in 34 states. For more information about Equity Inns, visit the Company's Web site at http://www.equityinns.com FLEMING COS: Court Okays Blackstone's Retention as Fin'l Advisor ---------------------------------------------------------------- Fleming Companies, Inc., and its debtor-affiliates sought and obtained the Court's permission to hire The Blackstone Group LP as financial advisor. As Advisor, Blackstone will: a. assist in the evaluation of their businesses and prospects; b. assist in the development of a long-term business plan and related financial projections; c. assist in the development of financial data and presentations to their Board of Directors, various creditors and other third parties; d. analyze their financial liquidity and evaluate alternatives to improve such liquidity; e. analyze various restructuring scenarios and the potential impact of these scenarios on the recoveries of those stakeholders impacted by their restructuring; f. provide strategic advice with regard to restructuring or refinancing their obligations; g. evaluate their debt capacity and alternative capital structures; h. participate in negotiations among them and their creditors, suppliers, lessors and other interested parties; i. value securities that they will offer in connection with a restructuring; j. advise them and negotiate with lenders with respect to potential waivers or amendments of various credit facilities; k. assist them in preparing marketing materials in conjunction with a possible sale, merger, or other disposition of all or a portion of their assets; l. assist them in identifying potential buyers or parties-in- interest to a merger or sale transaction and assist in the due diligence process; m. assist and advise them concerning the terms, conditions and impact of any proposed Transaction; n. provide expert witness testimony concerning any of the subjects encompassed by the other financial advisory services; and o. provide other advisory services as are customarily provided in connection with the analysis and negotiation of a restructuring or a Transaction. The Debtors will compensate the firm for its services pursuant to this fee structure: -- a $200,000 monthly advisory fee in cash. Approximately 50% of the aggregate Monthly Fees paid to Blackstone during its engagement will be credited against a restructuring fee, as applicable; -- a $10,000,000 restructuring fee upon the completion of a restructuring, less any transaction fee; and -- on the consummation of a merger or sale Transaction, a transaction fee with respect to that Transaction payable in cash calculated according to this scale: * 1.5% for any consideration up to $100,000,000; and * 1.0% for any consideration in excess of $100,000,000. If there are multiple transactions, this calculation will be applied to each Transaction. With respect to the sale of the Debtors' retail assets, the corresponding Transaction Fee will be equal to 50% of the amount as calculated according to the formula. Blackstone will also be reimbursed for its actual and necessary costs and expenses. The Debtors will also indemnify Blackstone from any claims and causes of action related to its financial advisory services. (Fleming Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) FOSTER WHEELER: June 27 Net Capital Deficit Widens to $830 Mill. ---------------------------------------------------------------- Foster Wheeler Ltd. (NYSE: FWC) reported a net loss for the second quarter of 2003 of $29.3 million, compared to a net loss of $86.0 million for the same quarter last year. Revenues for the second quarter of 2003 totaled $935.8 million compared to $958.9 million in the second quarter of last year. The results for the quarter included expenses of $16.0 million for professional services and severance benefits driven by the company's restructuring process, legacy expenses of $6.1 million resulting from pension curtailment and revaluation, and net charges of $19.5 million related to five North American projects. "We think the results, when examined in the context of the charges outlined above along with the relative market weakness, would indicate that our operating initiatives and cost-cutting measures are yielding results," said Raymond J. Milchovich, chairman, president and chief executive officer. "Our European businesses and our North American power business posted second-quarter earnings at or above plan and last year's performance." "In terms of domestic liquidity, as expected, cash balances declined during the quarter primarily due to the timing of cash flows on certain domestic projects combined with planned, but significant levels of restructuring-related spending," added Mr. Milchovich. "This trend is forecasted to continue over the next several quarters and is expected to make domestic liquidity more challenging in the fourth quarter. We are addressing this issue by seeking to repatriate additional funds from our non-U. S. subsidiaries and/or successfully completing a major asset monetization." "We are making significant progress on what has been and will continue to be a very extensive operational and balance sheet restructuring," continued Mr. Milchovich. "We believe there exists substantial upside potential in our worldwide operations but that this potential can only be reached with a materially improved financial structure." The net loss included pre-tax charges of $41.6 million and $89.0 million for the second quarter 2003 and 2002, respectively. Charges for the second quarter of 2003 include: $22.0 million for revisions to project cost estimates and related receivable reserves; a gain of $2.5 million on the recovery of a project claim; and planned pre-tax expenses of $22.1 million for professional fees, severance and other expenses related to the company's ongoing restructuring. Worldwide, cash balances at the end of the quarter were $419 million, compared to $473 million at the end of the first quarter of 2003, and $385 million at the end of the second quarter of 2002. Of the $419 million in cash at the end of the second quarter, $342 million was held by non-U.S. subsidiaries. The company is currently subject to legal and contractual restrictions on the ability to repatriate much of this cash. In certain instances, the company must obtain third party consents and is currently working with the appropriate constituencies with the intent of modifying certain contractual restrictions. As of June 27, 2003, the company's indebtedness was $1.1 billion, essentially unchanged from year-end 2002 and the end of the second quarter of 2002. For the six months ended June 27, 2003, revenues were $1.7 billion, down slightly from $1.8 billion in the first six months of last year. The net loss for the period was $49.2 million compared to a net loss of $262.1 million in the first six months of 2002. Pre-tax charges of $60.8 million and $274.7 million were included in the first six months of 2003 and 2002, respectively. Reported results for the second quarter and first six months of 2003 and 2002 are supplemented with related amounts. A full reconciliation with reported amounts and details of the charges are included in the attached tables. Management believes these supplemental financial measures provide useful information and a more comprehensive understanding of the financial results. Foster Wheeler's June 27, 2003 balance sheet shows a working capital deficit of about $150 million, and a total shareholders' equity deficit of about $830 million. Bookings and Segment Performance New orders booked during the second quarter of 2003 were $647.1 million compared to $533.2 million in the second quarter of last year, excluding orders of $115.2 million related to the assets of the environmental business that were sold in the first quarter of 2003. The company's backlog was $3.3 billion, compared to $3.9 billion at the end of the second quarter of 2002, excluding $1.8 billion related to the environmental business. Second-quarter new bookings for the Engineering and Construction (E&C) Group were $460.4 million, up 16% compared to $397.3 million during the year-ago quarter, excluding the environmental orders. The increase was due to growth in orders in Europe. The Group's backlog was $2.2 billion, compared to $2.6 billion at quarter-end 2002, excluding backlog of $1.8 billion for the environmental business. Revenues for the E&C Group in the second quarter of 2003 were $529.2 million, up 9% compared to $485.7 million in the second quarter of 2002, excluding environmental revenues of $74.5 million. The increase was primarily due to higher revenues in the UK. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $12.4 million this quarter, compared to a loss of $9.5 million for the same period last year. New bookings in the second quarter for the Energy Group increased to $187.4 million, compared to $138.0 as orders increased in both the North American and European operations. Backlog at quarter-end was $1.2 billion, compared to $1.4 billion at quarter-end 2002. Energy Group revenues for the quarter were $409.3 million, essentially flat with $411.9 million in the same quarter of 2002, as improvements in the European power business offset the U.S. power operations decline. EBITDA for the quarter was $27.0 million compared to a loss of $7.8 million last year. Operations in Europe continue to improve on revenue growth while the U.S. business is benefiting from cost reductions and better execution on existing projects. Foster Wheeler Ltd., is a global company offering, through its subsidiaries, a broad range of design, engineering, construction, manufacturing, project development and management, research and plant operation services. Foster Wheeler serves the refining, oil and gas, petrochemical, chemicals, power, pharmaceuticals, biotechnology and healthcare industries. The corporation is based in Hamilton, Bermuda, and its operational headquarters are in Clinton, New Jersey, USA. For more information about Foster Wheeler, visit its Web site at http://www.fwc.com FRANKLIN CLO IV: S&P Assigns BB Rating to $8 Mill. Class E Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Franklin CLO IV Ltd./Franklin CLO IV Corp.'s $350 million floating-rate notes due 2015. The preliminary ratings are based on information as of Aug. 7, 2003. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- The cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. PRELIMINARY RATINGS ASSIGNED Franklin CLO IV Ltd./Franklin CLO IV Corp. Class Rating Amount (mil. $) A AAA 256.00 B AA 25.00 C A 18.50 D BBB 15.30 E BB 8.00 Preferred equity certificates N.R. 27.35 Combination securities N/A N/A N/A-Not applicable. FREMONT GENERAL: Declares 33% Increase in Shares Cash Dividend -------------------------------------------------------------- The Board of Directors of Fremont General Corporation (NYSE: FMT) declared a quarterly cash dividend of $0.04 cents per share on its common stock, payable October 31, 2003 to shareholders of record on September 30, 2003. This represents a 33% increase over the previous quarter's dividend. The declaration of the quarterly dividend represents the 107th consecutive quarterly cash dividend to be paid by the Company. Fremont General Corporation is a financial services holding company and its common stock is traded on the New York Stock Exchange under the symbol "FMT". * * * Junk Ratings As reported in Troubled Company Reporter's May 29, 2003 edition, Fitch Ratings upgraded the senior debt ratings of Fremont General Corporation to 'CCC+' from 'CCC-'. The trust preferred securities issued by Fremont's affiliate Fremont General Financing I remain at 'CC'. The Rating Outlook is revised to Stable from Evolving. Fremont has used excess cash flows generated by its remaining subsidiary, Fremont Investment and Loan, a California-chartered industrial bank, to repurchase its senior debt in the open market. The amount of senior debt outstanding has declined considerably, to $213 million currently from $260 million at year-end 2002 and $425 million when originated in 1999. Trust preferred securities outstanding remain at $100 million. GALEY & LORD: Wants More Time to Make Lease-Related Decisions ------------------------------------------------------------- Galey & Lord, Inc., and its debtor-affiliates want more time to make lease-related decisions. In the ordinary course of their business, the Debtors relate, they are party to numerous unexpired leases of non-residential real property. The Debtors have still not determined whether it is in the best interests of their estates and their creditors to assume or reject the Leases. The Debtors are currently in the process of analyzing the Leases as they formulate their disclosure statement and plan of reorganization. Absent the extension, the Debtors would be obligated to assume or reject each of the Leases before they had a full opportunity to examine each such Lease in the context of the Debtors' long term plans. Consequently, the Debtors ask the Court to move their time period to assume, assume and assign, or reject unexpired nonresidential real property leases through December 12, 2003. The Debtors says there's good cause for an extension. As an initial matter, many of the Leases remain necessary to the Debtors' ongoing operations and thus are vital assets to the Debtors. Furthermore, the Debtors have made significant progress in formulating a reorganization strategy and drafting a disclosure statement and plan of reorganization, but have not yet completed such strategy and drafting. A continuing analysis of the Leases is an integral part of this process and the Debtors are still analyzing the Leases from this perspective. Galey & Lord, a leading global manufacturer of textiles for sportswear, including cotton casuals, denim, and corduroy, and is a major international manufacturer of workwear fabrics, filed for chapter 11 protection on February 19, 2002 together with its affiliates (Bankr. S.D.N.Y. Case No. 02-40445). When the Company filed for protection from its creditors, it listed $694,362,000 in total assets and $715,093,000 in total debts. Joel H. Levitin, Esq., Esq., at Dechert represents the Debtors and Michael J. Sage, Esq., at Stroock & Stroock & Lavan LLP, represents the Official Committee of Unsecured Creditors. GLIMCHER REALTY: Prices $60 Million Perpetual Preferred Offering ---------------------------------------------------------------- Glimcher Realty Trust (NYSE: GRT) announced a $60 million public offering of 2,400,000 shares of 8.75% Series F Cumulative Redeemable Shares of Beneficial Interest at a price of $25.00 per share. The net proceeds of the offering of approximately $57.8 million will be used to partially fund the Company's pending acquisition of WestShore Plaza, an enclosed regional mall located in Tampa, Florida, and to repay a portion of the outstanding balance on the Company's $170 million secured credit facility. Deutsche Bank Securities acted as sole book running manager and McDonald Investments Inc., acted as co-manager of the offering. A shelf registration statement relating to these securities was previously filed with the Securities and Exchange Commission and declared effective. This press release shall not constitute an offer to sell or a solicitation of an offer to buy Series F Preferred Shares. The offering of Series F Preferred Shares is being made only by means of a prospectus supplement and prospectus. The prospectus supplement and prospectus shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such states. A copy of the prospectus and prospectus supplement may be obtained from Deutsche Bank Securities. Glimcher Realty Trust -- a real estate investment trust whose corporate credit and preferred stock ratings are rated by Standard & Poor's at BB and B, respectively -- is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. Visit Glimcher at: http://www.glimcher.com GRESHAM STREET: S&P Assigns BB+ Preferred Share Rating ------------------------------------------------------ Standard & Poor's Ratings Services today assigned its ratings to Gresham Street CDO Funding 2003-1 Ltd./Gresham Street CDO Funding 2003-1 Corp.'s (Gresham Street CDO Funding 2003-1) notes and preference shares. Gresham Street CDO Funding 2003-1 is a collateralized debt obligation backed primarily by CDOs and ABS and is structured as a cash flow transaction. The transaction is static with the collateral administered by Structured Credit Partners LLC, a subsidiary of Wachovia Corp. The ratings are based on the following: -- Adequate credit support provided by subordination and excess spread; -- Characteristics of the underlying collateral pool, consisting primarily of RMBS, CMBS, and REIT debt securities; -- Hedge agreements entered into with an appropriately rated counterparty to mitigate the interest rate risk created by having certain fixed-rate assets and floating-rate liabilities; -- Scenario default rates of 10.66% for class A, 10.66% for class B, 7.16% for class C, 3.88% for class D, and 2.23% for the preference shares; and break-even loss rates of 18.57% for class A, 15.19% for class B, 7.34% for class C, 5.99% for class D, and 3.84% for the preference shares that provide cushions of 7.91% for class A, 4.53% for class B, 0.18% for class C, 2.11% for class D, and 1.6% for the preference shares; -- Weighted average maturity (WAM) of 5.065 years for the portfolio; -- Default measure of 0.11%; -- Variability measure of 0.60 %; and -- Correlation measure of 1.23% for the portfolio. Under Standard & Poor's stresses, interest on the class C and D notes is deferred for some periods; thus, the ratings on the these notes address the ultimate payment of interest and principal. The rating on the preference shares addresses the ultimate payment of the notional principal amount. RATINGS ASSIGNED Gresham Street CDO Funding 2003-1 Ltd./ Gresham Street CDO Funding 2003-1 Corp. Class Rating Amount (mil. $) A AAA 226.7 B AAA 17.6 C AA 8.6 D BBB 5.3 Preference shares BB+ 5.3 HANOVER DIRECT: June 28 Balance Sheet Insolvency Widens to $65MM ---------------------------------------------------------------- Hanover Direct, Inc., (Amex: HNV) announced operating results for the 13- and 26-weeks ended June 28, 2003. The Company reported that internet sales continue to show strong growth, comprising 27.0% of total revenues for the 26-week period ended June 28, 2003. Internet net revenues for the 13-week and 26- week periods ended June 28, 2003 were $27.5 million and $53.1 million, respectively, or 31.9% and 32.2% above the comparable fiscal periods in 2002. Total net revenues for the 13-weeks and 26-weeks ended June 28, 2003 were $105.8 million and $208.2 million, respectively, a decrease of $8.1 million (7.1%) and $15.2 million (6.8%), respectively, from the prior year 13-week and 26- week results. The decreases were due primarily to softness in demand related to general economic conditions. For the 26-weeks ended June 28, 2003, the Company reported a net loss of $7.0 million compared with a net loss of $6.4 million for the 26-weeks ended June 29, 2002. The results for the 26-week periods ended June 28, 2003 and June 29, 2002 include $1.9 million and $0.3 million, respectively, in after tax gains resulting from the sale of the Improvements business in June 2001. Net loss per common share was $.05 for both the 26-weeks ended June 28, 2003 and June 29, 2002. The per share amounts were calculated after deducting preferred dividends and accretion of $7.9 million and $6.4 million for the 26-weeks ended June 28, 2003 and June 29, 2002, respectively. The Company also announced that EBITDA (earning before interest, taxes, depreciation and amortization) adjusted to add back stock option expense was $6.1 million for the 26-weeks ended June 28, 2003 compared with $6.4 million for the comparable period in 2002. The Company also reported net income of $0.7 million for the 13- weeks ended June 28, 2003 compared with $1.8 million for the 13- weeks ended June 29, 2002. The results for the 13-weeks ended June 29, 2002 include $0.3 million in after tax gains resulting from the sale of the Improvements business in June 2001. Net loss per common share was $.03 for the 13-weeks ended June 28, 2003 compared to a net loss per common share of $.01 for the 13-weeks ended June 29, 2002. The per share amounts were calculated after deducting preferred dividends and accretion of $4.3 million and $3.5 million for the 13-weeks ended June 28, 2003 and June 29, 2002, respectively. The Company also announced that EBITDA (earning before interest, taxes, depreciation and amortization) adjusted to add back stock option expense was $3.1 million for the 13-weeks ended June 28, 2003 compared with $5.0 million for the comparable period in 2002. Hanover Direct's June 28, 2003 balance sheet shows a working capital deficit of about $$12 million, and a total shareholders' equity deficit of about $65 million. Hanover Direct, Inc. (Amex: HNV) and its business units provide quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers, as well as a comprehensive range of Internet, e-commerce, and fulfillment services to businesses. The Company's catalog and Internet portfolio of home fashions, apparel and gift brands include Domestications, The Company Store, Company Kids, Silhouettes, International Male, Scandia Down, and Gump's By Mail. The Company owns Gump's, a retail store based in San Francisco. Each brand can be accessed on the Internet individually by name. Keystone Internet Services, LLC (www.keystoneinternet.com), the Company's third party fulfillment operation, also provides the logistical, IT and fulfillment needs of the Company's catalogs and web sites. Information on Hanover Direct, including each of its subsidiaries, can be accessed on the Internet at http://www.hanoverdirect.com HYTEK MICROSYSTEMS: Q2 Results Swing-Down to Net Loss of $40K ------------------------------------------------------------- Hytek Microsystems, Inc. (OTC: HTEK) announced unaudited results for the three and six month periods ended June 28, 2003. The Company incurred a net loss of $39,886 for the three months ended, as compared to net income of $121,988 for the same period last year. Revenues were $2.7 million for the second quarter of 2003, a 14% decrease over prior years second quarter revenues of $3.2 million. For the first six months of fiscal 2003, the Company had a net loss of $206,551, as compared to net income of $318,257 for the first six months of fiscal 2002. Revenues for the six-month period in 2003 were $5.1 million, representing a 25% decrease from net revenues of $6.8 million for the same period in 2002. At June 28, 2003, the portion of the Company's backlog representing customer orders scheduled to ship during the remainder of 2003 remained relatively unchanged from the prior quarter end. Current backlog was approximately $6.54 million at June 28, 2003 as compared to $6.55 million at March 29, 2003, due in part to additional contract awards in the geo-physical and custom markets. Although Hytek incurred a net loss of $39,886 for the second quarter of 2003, operating results beat the Company's internal forecasts. The net loss was entirely due to a settlement of a litigation matter. Production efficiencies with yield improvements and scrap reductions, combined with a modest increase in revenue, and the effect of variable operating expense reductions implemented in prior quarters continue to contribute positively to revenues and operating margins. "For the second half of the fiscal year, we expect a very modest increase in revenue and continued improvement in bottom line performance over the first half. For fiscal year 2003, we anticipate revenues of approximately $10.3 million, with an overall net loss, but significantly less than fiscal year 2002," said John Cole. "Hytek's front end of the business activity continues to increase, with focus on our existing major customers in both military and medical markets. The Company has also directed attention to business opportunities with new customers in our markets. Internally there is incremental improvement in the key manufacturing parameters and there is progress in the development of a stronger material supplier base," noted Cole. Founded in 1974, Hytek, headquartered in Carson City, Nevada, specializes in hybrid microelectronic circuits that are used in oil exploration, military applications, satellite systems, industrial electronics, opto-electronics and other OEM applications. As reported in Troubled Company Reporter's May 15, 2003 edition, the Company, during the first quarter, paid down its loan with Bank of the West by $20,000. As of March 29, 2003, the bank declared the Company to be in default with a financial covenant of the business loan agreement dated May 21, 2001. The Company failed to maintain a minimum tangible net worth of not less than $5,000,000. IASIS HEALTHCARE: S&P Ups Credit & Sec. Bank Loan Ratings to B- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit and secured bank loan ratings on IASIS Healthcare Corp. to 'B+' from 'B'. At the same time, Standard & Poor's raised its subordinated debt rating on IASIS to 'B-' from 'CCC+'. The outlook is stable. Total debt outstanding as of June 30, 2003, was $664 million. The ratings upgrade is based on Standard & Poor's increased confidence that IASIS will be able to sustain its recently improved credit profile at a level that is consistent with the higher rating. "The speculative-grade rating on Franklin, Tenn.-based IASIS Healthcare Corp. reflects the competitive nature of the company's key markets and the industry challenges it faces, including increasing insurance expenses and reimbursement risk," said Standard & Poor's credit analyst David Peknay. IASIS owns and operates 14 medium-sized hospitals in growing but competitive urban and suburban markets. It maintains relatively well-established positions in Salt Lake City, Utah; Phoenix, Arizona; Tampa and St. Petersburg, Florida; and Texas. Health Choice, the company's owned Medicaid health plan in Arizona, has more than 60,000 members and is a key component of IASIS' strategy in that market. Though it struggled at first, IASIS has improved on its ability to operate hospitals since its formation in 1999. Operating results have improved through the improvement of the company's corporate infrastructure, the pruning of unprofitable businesses, and a physician recruitment program. INTEGRATED HEALTH: Gets Court Clearance to Use $3.7M Trust Funds ---------------------------------------------------------------- Pursuant to Section 363(b) of the Bankruptcy Code, Integrated Health Services, Inc., and its debtor-affiliates sought and obtained the Court's authority to use funds being held in trust by Citicorp Trust Bank, as successor by merger to Smith Barney Private Trust Company, pursuant to a December 22, 1997 Trust Agreement; and to direct Citicorp to distribute the Funds to Debtor Integrated Health Services. The Court order enables the Debtors to have access to the Funds in the event that the Debtors determine that it is necessary to use the Funds to fund working capital needs. (Integrated Health Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTERNET CAPITAL: June 30 Net Capital Deficit Burgeons to $93MM --------------------------------------------------------------- Internet Capital Group, Inc. (Nasdaq: ICGE) reported its results for the second quarter ended June 30, 2003. "Our private Core companies continue to make progress in a challenging market as evidenced by the fact that companies like NBC, DuPont and Gap continue to select and to leverage the solutions our partner companies are providing to increase efficiencies and reduce costs within their organizations," said Walter Buckley, ICG's chairman and CEO. ICG Financial Results The Company reported a net loss for the quarter of $26 million versus a net loss of $13 million for the corresponding 2002 period. The 2003 period was negatively impacted by $7 million in impairment and restructuring charges. The 2002 period was positively impacted by $63 million in gains associated with the repurchase of convertible notes, offset by $34 million in impairment and restructuring charges. ICG reported consolidated GAAP revenue of $24 million for the quarter versus $26 million for the comparable 2002 period. For the six month period ended June 30, 2003, ICG reported a net loss of $44 million versus a net loss of $75 million for the corresponding 2002 period. ICG reported consolidated GAAP revenue of $49 million for the six months ended June 30, 2003 versus $50 million for the corresponding 2002 period. Private Core Company Results In an effort to illustrate macro trends within its private Core companies, ICG provides an aggregation of revenue and net loss figures reflecting 100% of the revenue and EBITDA for these companies. ICG does not own its Core companies in their entirety and, therefore, this information should be considered in this context. Total revenue and EBITDA, in this context, represents certain of the financial measures used by the Company's management to evaluate the performance for Core companies. EBITDA consists of earnings/(losses) before interest, tax, depreciation and amortization; stock- based compensation, other non-cash and non- recurring items have also been excluded. The Company's management believes these non-GAAP financial measures provide useful information to investors, potential investors, securities analysts and others so each group can evaluate private Core companies' current and future prospects in the same manner as the Company's management. "This quarter, the private Core group reported revenue growth and EBITDA improvement, illustrating progress against our primary corporate goal of driving growth and profitability at our Core companies," added Buckley. Total revenue for ICG's private Core companies was $92 million for the quarter, or a 6% increase over total revenue of $87 million during the first quarter of 2003, and a 7% increase over the second quarter of 2002 revenue of $86 million. For the quarter, ICG's private Core companies also reported a total $14 million net loss as compared with a $18 million net loss in the first quarter of 2003 and a $36 million net loss in the second quarter of 2002. ICG's private Core companies also reported a total $3 million EBITDA loss for the quarter, excluding non-cash and non-recurring items, as compared with $8 million EBITDA loss in the first quarter of 2003 and a $16 million EBITDA loss in the second quarter of 2002. Since last quarter, ICG's average primary ownership in its private Core companies decreased from 48% to 44%, due primarily to funding of eCredit.com by new investors. Capital Allocation As of June 30, 2003, cash on an ICG corporate basis totaled $65 million. The $19 million decrease from March 31, 2003 is comprised primarily of $10 million in fundings to existing partner companies, $7.5 million in interest and other net costs. As of August 6, 2003 ICG's cash totaled $60 million on a corporate basis. At June 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $93 million, as compared to a deficit of about $52 million six months ago. Internet Capital Group, Inc. -- http://www.internetcapital.com-- is an information technology company actively engaged in delivering software solutions and services designed to enhance business operations by increasing efficiency, reducing costs and improving sales results. ICG operates through a network of partner companies that deliver these solutions to customers. To help drive partner company progress, ICG provides operational assistance, capital support, industry expertise, access to operational best practices, and a strategic network of business relationships. Internet Capital Group is headquartered in Wayne, Pa. KASPER A.S.L.: Jones Apparel Pitches Best Bid to Acquire Assets --------------------------------------------------------------- Kasper A.S.L., Ltd. (OTC Bulletin Board: KASPQ) reported the results of the auction which was conducted pursuant to Court- approved bidding procedures. Jones Apparel Group, Inc. (NYSE: JNY) was determined by the Special Committee of the Board of Directors to have made the highest offer to purchase the Company. The bid purchase price consists of $204 million in cash and the assumption of deferred liabilities, primarily pre-paid royalties, projected to be approximately $12.6 million at closing, for an aggregate value of $216.6 million. In addition, the purchase price is subject to adjustments. The transaction has the support of the Official Creditors' Committee. John D. Idol, Chairman and Chief Executive Officer, said, "We are pleased with the bidding process and believe that it has enabled us to maximize the value of the Company and produce the best results for our customers, suppliers, creditors, and shareholders." Jones' bid is subject to confirmation at a hearing in the Bankruptcy Court scheduled for August 14, 2003. If the bid is confirmed, the sale of the Company will be implemented through an amended plan of reorganization that will require, among other things, the approval of the requisite majority of the Company's creditors and confirmation by the Bankruptcy Court. The Company anticipates that the transaction will be consummated by the end of the year. Kasper A.S.L., Ltd., is a leading marketer and manufacturer of women's suits and sportswear. The Company's brands include Albert Nipon, Anne Klein, Kasper and Le Suit. These brands are sold in over 3,000 retail locations throughout the United States, Europe, the Middle East, Southeast Asia and Canada. The Company also licenses its Albert Nipon, Anne Klein, and Kasper brands for various men's and women's products. Jones Apparel Group, Inc. -- http://www.jny.com-- a Fortune 500 Company, is a leading designer and marketer of branded apparel, footwear and accessories. The Company's nationally recognized brands include: Jones New York; Lauren by Ralph Lauren, Ralph by Ralph Lauren, and Polo Jeans Company, which are licensed from Polo Ralph Lauren Corporation; Evan-Picone, Rena Rowan, Norton McNaughton, Gloria Vanderbilt, Erika, l.e.i., Energie, Currants, Jamie Scott, Todd Oldham, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, Napier and Judith Jack. The Company also markets costume jewelry under the Tommy Hilfiger brand licensed from Tommy Hilfiger Corporation and the Givenchy brand licensed from Givenchy Corporation, and footwear and accessories under the ESPRIT brand licensed from Esprit Europe, B.V. Celebrating more than 30 years of service, the Company has built a reputation for excellence in product quality and value, and in operational execution. KENTUCKY ELECTRIC: Amends Asset Purchase Agreement with KES ----------------------------------------------------------- Kentucky Electric Steel, Inc., has entered into an amendment of the Asset Purchase Agreement, dated July 7, 2003, under which KES Acquisition Company, LLC would purchase substantially all of the Company's assets. The amendment provides that KES Acquisition will receive a $348,414 credit to the $2,998,414 purchase price at closing, so that the net purchase price to be paid by KES Acquisition is $2,650,000. The sale remains subject to approval by the Bankruptcy Court at a hearing to be held on August 14, 2003. As previously announced, the transaction is also subject to higher or better bids for the Company's assets, which may be obtained at an auction to be held on August 13, 2003, pursuant to the approved Bankruptcy Court procedures. The Company has the right to accept a higher and better bid which might be received at the auction and terminate the Agreement with KES Acquisition, subject to payment of a break-up fee. Any competing bids must be submitted by August 11, 2003. The Company does not anticipate that any proceeds from the disposition of its assets to KES Acquisition will be distributed to its general unsecured creditors or its stockholders. The Company intends to promptly file a liquidating plan of reorganization. As previously reported, a shut down of the Company's production facilities has been implemented and on February 5, 2003, the Company filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Kentucky with the stated intention to facilitate the orderly sale of its assets. LAIDLAW: Judge Kaplan Says Yes to Cooper's $8.5MM Success Fee ------------------------------------------------------------- The Court previously authorized the Laidlaw Inc. Debtors to employ Stephen Cooper as Chief Restructuring Officer in accordance with the terms and conditions of the employment agreements with The Stephen F. Cooper Corporation, on August 20, 2001. Pursuant to the employment terms, the Debtors paid Cooper Corporation $225,000 per month for Mr. Cooper's services, and reimbursed Cooper Corporation for reasonable out-of-pocket expenses. Garry M. Graber, Esq., at Hodgson Russ LLP, in New York, related that the Debtors also agreed to pay Mr. Cooper an $8,500,000 Success Fee after the consummation and implementation of any reorganization plan, provided that the Debtors succeeded in obtaining a final judicial order approving a plan of reorganization under Chapter 11 of the Bankruptcy Code. Mr. Graber pointed out that the ultimate success of the Debtors' Chapter 11 would not have occurred without the numerous significant contributions made by the Restructuring Officers, led by Mr. Cooper. Therefore, the Debtors sought the Court's permission to pay Cooper Corporation the $8,500,000 Success Fee. The diligence and achievements of the Restructuring Officers amply justify payment of the Success Fee in accordance with the terms of the Cooper Employment Agreement. U.S. Trustee Objects Mary Powers, Esq., as trial attorney for the U.S. Trustee of Region 2, informs Judge Kaplan that the Laidlaw Inc. Debtors' request fails to disclose the total fees and expenses paid to Cooper Corp. since the Petition Date. The assessment of the value of the services provided and the reasonableness of the success fee cannot be determined without a complete disclosure of all fees and expenses paid to date. Ms. Powers contends that no measurable basis or concrete formula is provided to justify the requested success fee since time records or any documentation does not support the amount. Ms. Powers asserts that the award of the success fee without meeting the reasonable and necessary standards as provided by Section 330 of the Bankruptcy Code may result in a potentially unjust windfall to the Debtors. Thus, the U.S. Trustee asks the Court to determine and allow only the reasonable and necessary fees to Cooper Corp. * * * Judge Kaplan approves the payment of the $8,500,000 success fee to Cooper Corp. and overrules the U.S. Trustee's objection. (Laidlaw Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEAP WIRELESS: Brings-In UBS Warburg as Financial Advisor --------------------------------------------------------- Judge Adler authorizes Leap Wireless International Inc., and its debtor-affiliates to employ and compensate on the terms and for the purposes set forth in the Engagement Letter, Smith Declaration, Application, and Stipulation, the firm of UBS Warburg LLC as their financial advisors in these Chapter 11 cases, nunc pro tunc as of the commencement of these cases. Furthermore, the Court orders that: (1) The terms and conditions of UBS' retention set forth in the Engagement Letter, Smith Declaration, Application, and Stipulation are approved, pursuant to Section 328(a) of the Bankruptcy Code; (2) So long as the Debtors' cases are pending in Court, all requests for indemnification will be made by means of application and will be subject to the Court's review, to ensure that any indemnification payment conforms to the Engagement Letter and the review, to ensure that any indemnification payment conforms to the Engagement Letter and the Stipulation is reasonable, based upon the circumstances of the claim for which indemnity is sought; and (3) If UBS seeks reimbursement for attorneys' fees from the Debtors under the Engagement Letter, it will include the invoices and supporting time records of its attorneys with its fee applications. Those invoices and time records will be subject to the Bankruptcy Court's approval under the standards of Section 330 and 331 of the Bankruptcy Code, without regard to whether UBS's attorneys have been retained under Section 327 of the Bankruptcy Code or to whether their services satisfy Section 330(a)(3)(C) of the Bankruptcy Code. UBS Warburg LLC, as financial advisors, will: -- provide advisory services in connection with restructuring the Debtors' liabilities, -- assist with evaluating any business combination, settlement, merger or acquisition opportunities, -- assist in the efforts to obtain confirmation of the Debtors' plan of reorganization, and, if needed, -- provide testimony at confirmation regarding feasibility and financial matters pursuant to the Debtors' plan of reorganization. UBS Warburg will charge Leap and Cricket these fees for its professional services: A. A $400,000 retainer fee, which the Debtors paid in September 2002; B. A $200,000 monthly cash advisory fee. After the commencement of these Chapter 11 cases, the Monthly Advisory Fee will be paid by Cricket Communications, Inc., in advance, on the 15th day of each month during the term of the engagement. No portion of the Monthly Advisory Fee will be credited against any other fee payable to UBS Warburg; C. In the event the Restructuring Transaction is consummated, a $3,350,000 transaction fee, to be paid by Cricket Communications, Inc. The Transaction Fee will be earned and payable after the effective date of a plan of reorganization by the Debtors; D. If the Company consummates a Private Equity Financing other than a Qualcomm Transaction, Cricket Communications, Inc. will pay UBS Warburg in cash at the closing a 5% gross spread on the aggregate amount of the financing; and E. The reimbursement of all reasonable expenses incurred by UBS Warburg in connection with the services rendered to the Debtors, including the reasonable fees, disbursements and other charges of its legal counsel. (Leap Wireless Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) MIRANT: Wants Court Nod to Hire Ordinary Course Professionals ------------------------------------------------------------- Pursuant to Sections 327 and 328 of the Bankruptcy Code, the Mirant Corp. Debtors seek the Court's authority to employ professionals in the ordinary course of their business. According to Ian Peck, Esq., at Haynes and Boone LLP, in Dallas, Texas, the Debtors employ several Ordinary Course Professionals prior to the Petition Date. The services provided include legal services with regard to specialized areas of the law, certain accounting services, environmental and engineering consulting services and related services, which are necessary to the day-to- day continuation of the Debtors' operations and are unrelated to the administration of these Chapter 11 cases. Mr. Peck relates that in light of the additional cost associated with the preparation of employment applications for professionals who will receive relatively small fees and the substantial number of Ordinary Course Professionals, it is impractical and cost inefficient for the Debtors to submit individual applications and proposed retention orders for each professional. The Debtors seek the Court's permission to pay each Ordinary Course Professional, without a prior application to the Court by each professional, the full amount of the fees and disbursements billed, upon the submission to and approval by the Debtors of an appropriate invoice setting forth in reasonable detail the nature of the services rendered and disbursements actually incurred and calculated in accordance with such Ordinary Course Professional's standard billing practices without prejudice to the Debtors' right to dispute any invoices. However, if any Ordinary Course Professional's fees and disbursements exceed $50,000 per month, then the payments to that Ordinary Course Professional for the excess amounts will be subject to the Court's prior approval in accordance with Sections 330 and 331 of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Rules and Orders of the Court and the Fee Guidelines promulgated by the Executive Office of the United States Trustee. Although certain of the Ordinary Course Professionals may hold unsecured claims against the Debtors in respect of prepetition services rendered to the Debtors, the Debtors do not believe that any of the Ordinary Course Professionals have an interest materially adverse to the Debtors, their creditors or other parties-in-interest that should preclude the Ordinary Course Professional from continuing to represent the Debtors. Mr. Peck contends that the proposed employment of the Ordinary Course Professionals and the payment of compensation will: (a) save the estates the expense of separately applying for the employment of each professional; and (b) spare the Court and the U.S. Trustee from having to consider numerous fee applications involving relatively modest amounts of fees and expenses. (Mirant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) MMI PRODUCTS: S&P Cuts Ratings Due to Slumping Credit Measures -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Houston, Texas-based MMI Products Inc. to 'B-' from 'B'. The current outlook is negative. MMI, a manufacturer of fencing and concrete reinforcing products, has total debt, including holding company debt, of about $300 million. "The rating action reflects deteriorating credit measures caused by depressed volumes, rising steel prices, and lower product pricing that have squeezed MMI's operating margins during a period already challenged by the company's substantial restructuring and consolidation efforts," said Standard & Poor's credit analyst Pamela Rice. The current ratings reflect the assumption that the company will be able to obtain a waiver of a second quarter financial covenant violation, which should leave it with enough liquidity to meet its operating, capital, and debt servicing requirements in the near term. MORTGAGE CAPITAL: S&P Affirms B/B- Ratings on Class H & J Notes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on five classes of Mortgage Capital Funding Inc.'s multifamily/commercial mortgage pass-through certificates series 1996-MC1. At the same time, ratings are affirmed on four classes from the same series. The rating actions reflect the increased subordination levels due to amortization and loan pay offs, a loan pool that has performed well (with no losses to date), and an improved weighted average debt service coverage ratio for year-end 2002 (93% of loans reporting) of 1.56x, up from 1.52x at issuance. As of July 2003, the loan pool had paid down 42% since issuance, with a balance of $281.74 million and 110 fixed-rate loans (average mortgage rate is 8.574%); the loan pool balance at issuance was $482.36 million with 162 loans. As of July 2003, two loans were delinquent totaling $6.18 million (2.2% of loan pool), and one loan ($2.9 million, 1.1%), current with debt service payments, was being specially serviced. One of the delinquent loans is 90-plus days delinquent ($1.3 million, 0.47%; total exposure is $1.6 million) and is secured by a healthcare facility located in Longwood, Fla. The court has approved an order authorizing the receiver to sell the property. In July 2003, the special servicer, GMAC Commercial Mortgage Corp., advised that there has been interest to purchase the property. The other delinquent loan is 60-plus days delinquent ($6.18 million, 2.2%; total exposure is $6.3 million) and is secured by two retail properties that are cross-collateralized and cross-defaulted where Kmart is a tenant. One of the Kmart stores, located in Elizabeth City, N.C., closed in March 2003. The other Kmart store, located in Rocky Mount, N.C., is not scheduled to close and remains open for business. GMACCM has received a $2.5 million discounted pay-off offer on the closed property and is now analyzing the proposal, along with other resolution alternatives. The master servicer, GMACCM, placed 33 loans on its watchlist ($76.05 million, 26.9%). Fifteen of the loans ($22.13 million, 7.9%) reported DSCRs below 1.0x (includes first and ninth largest loan). The other 18 loans ($53.75 million, 19.0%) reflect a decline in occupancy at the properties. The following two watchlist loans (from the top 10) are of concern to Standard & Poor's: -- The largest loan ($16.8 million, 5.9%), is secured by a 298,242 square-feet (sq. ft.) community shopping center in Philadelphia, Pa. In September 2002, one anchor, Pharmor, occupying 62,754 sq. ft., sought bankruptcy protection and vacated the center. While the 2002 year-end DSCR of 1.21x was nearly the same as the DSCR of 1.23x at issuance, a March 2003 rent roll reflected that the occupancy had declined to 78% from 97% at issuance. The borrower reported in June 2003 that another anchor, Sears, is currently negotiating to expand into the former Pharmor space sometime in 2004. -- The ninth largest loan ($6.5 million, 2.3%), secured by 1,236 self-storage units in Thousand Oaks, Calif. Although the 2002 year-end DSCR declined to 0.90x from 1.38x at issuance, the DSCR for the first three months of 2003 showed an increase of 1.18x with 94% occupancy. The property is located in a very competitive area. The borrower recently completed improvements to the exterior of the property and is working with a marketing specialist. Standard & Poor's stressed the delinquent loans and weaker performing watchlist loans in its analysis, and the stressed credit enhancement levels adequately support the raised and affirmed ratings. The loan pool remains diverse with multiple property types that include multifamily (40%), retail (37%), and self-storage (12%). The pool also remains geographically diverse with properties located in 27 states; California, New York, and North Carolina, have concentrations at 16%, 13%, and 11%, respectively. RATINGS RAISED Mortgage Capital Funding Inc. Multifamily/commercial mtg pass-thru certs series 1996-MC1 Rating Class To From Credit Support (%) C AAA AA 39.08 D AA+ A+ 32.23 E A+ BBB+ 26.24 F A BBB 23.67 G BBB- BB 12.12 RATINGS AFFIRMED Mortgage Capital Funding Inc. Multifamily/commercial mtg pass-thru certs series 1996-MC1 Class Rating Credit Support (%) A-2B AAA 55.35 B AAA 50.21 H B 5.70 J B- 4.41 MSF FUNDING: S&P Affirms BB/B Ratings on Class C and D Notes ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on MSF Funding LLC's $80 million floating-rate asset-backed notes series 2000-1. The notes are backed by medical equipment leases originated by DVI Inc.'s Brazilian operations. DVI, which is headquartered in the U.S., announced Aug. 1, 2003, that it would not make an interest payment due on its 9 7/8% senior notes due 2004. This prompted Standard & Poor's to lower DVI's counterparty credit and senior unsecured debt ratings to 'D'. DVI's Brazilian operations--Medical Systems Finance S.A., Healthcare Systems Finance S.A., and Oferil S.A.--sold the medical equipment leases to MSF Funding. MSF and HSF are the master servicers of the portfolio of medical equipment leases. Standard & Poor's credit and legal analysis for the ratings on the MSF Funding notes assumes that the structure can withstand an insolvency of DVI's Brazilian operations. Upon such insolvency, a backup servicer, JPMorganChase Bank (formerly Chase Manhattan Bank), would assume the servicing of the lease portfolio. Funds in MSF Funding's accounts may be used to cover expenses relating to the transfer of servicing to JPMorganChase. The reserve account, currently at $4.3 million, is sized by assuming a base amount of $600,000 plus 400 days of interest on the class A, B, and C notes calculated using an interest rate assumption of 14.5%. The entire reserve amount can be used to cover the cost of servicing transfer, commingling risk, and/or liquidity issues relating to delinquent leases. Standard & Poor's analysis assumed the default frequency on the lease portfolio was multiples of the historical performance and no recovery value would be obtained on the liquidation of any defaulted leases. Performance on the Brazilian lease portfolio to date has been steady--only seven leases, or 2.6% of the total pool balance, have defaulted. The current (July 2003) quarterly average of 90-day- plus delinquencies is 2.96% of the portfolio, and all of the reserve accounts are funded to their required amounts. The outstanding balances of the class A, B, C, and D notes are $15.36 million, $1.65 million, $1.89 million, and $1.18 million, respectively. When the outstanding balances of the class D and the unrated class E notes equals 25% of their original issuance amounts (currently at 30%), principal amortization will cease on these two classes until all of the class A, B, and C notes have been redeemed. Interest on the notes is paid monthly on a timely basis. Principal on the notes is not due until the stated maturity date in July 2007. Standard & Poor's will continue to monitor developments as they unfold. RATINGS AFFIRMED MSF Funding LLC Class Rating A A B BBB C BB D B E N.R. NANTICOKE HOMES: Hires Knupp Kodak as Collections Counsel --------------------------------------------------------- Nanticoke Homes, Inc., asks the U.S. Bankruptcy Court for the District of Delaware's approval to retain Knupp, Kodak and Imblum, PC as Special Collection Counsel, nunc pro tunc to June 12, 2003. The Debtor relates that on December 2000, Custom Decorative Mouldings, Inc., a company whose owners were some of the same persons at the stockholders of the Debtor, entered into a settlement agreement with Innovative Plastics, Technology, Inc., Edge Building Products, Inc., and Jeffrey E. Nesbitt. In accordance with the Settlement Agreement, Edge was to pay the total sum of $360,000 to OLD CDM without interest, in equal yearly installments of $60,000 due on the second of January. On the same date the Settlement Agreement was signed, OLD CDM attempted to assign its right to the payments to Nanticoke Homes, Inc. The Settlement Agreement required that all parties consent to any assignment of the rights of OLD CDM to receive the payments under the Settlement Agreement. An assignment was prepared, signed by OLD CDM and Nanticoke Homes, Inc. and forwarded to the other parties to the Settlement Agreement in December 2000. To the best of the Debtor's knowledge, the fully executed assignment has never been returned to Nanticoke Homes, Inc. In any event, OLD CDM received the payment due January 2002 and turned over the payment to Nanticoke Homes, Inc. In January 2003, Edge only paid $15,000, with a promise to pay the remainder by March 2003. The remaining $45,000 has not been forthcoming. Regardless of whether the payments are to be collected by OLD CDM and then turned over to NHI, Inc. or collected by NHI, Inc., the Debtor wishes to retain special counsel to pursue collection. Consequently, the Debtor employs Knupp Kodak as its special counsel to perform collection services that the Debtor's Estate has determined are necessary to secure these funds that the Debtor believes belong to the Estate. Robert D. Kodak, a principal of Knupp Kodak agreed to take the case for a fee of 20% of the amount collected. Nanticoke Homes, Inc., filed for chapter 11 protection on March 01, 2002 (Bankr. Del. Case No. 02-10651). Stephen W. Spence, Esq., at Philippe, Goldman & Spence, P.A., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $10 million each. NAPRO BIOTHERAPEUTICS: July 2 Working Capital Deficit Tops $7MM --------------------------------------------------------------- NaPro BioTherapeutics, Inc. (Nasdaq: NPRO) announced the results of operations for the second quarter and six months ended July 2, 2003. The operating loss for the second quarter of 2003 was $1.8 million compared to $4.4 million for the same quarter last year, representing a 60% improvement year-over-year. The net loss for the second quarter of 2003 was $2.1 million on sales of $7.6 million. This compares to net income of $3.1 million (including a one-time milestone payment of $8.0 million) on sales of $9.5 million during the comparable quarter in 2002. Similarly, for the six months ended July 2, 2003, NaPro reduced its operating loss to $4.3 million, a 61% improvement from the first half of 2002 operating loss of $11.1 million. The net loss for this period was $4.9 million, or $(0.16) per share, on sales of $14.4 million, compared to a loss of $3.6 million (including the one-time milestone payment of $8.0 million), or $(0.12) per share, on sales of $16.2 million for the same period last year. NaPro BioTherapeutics' July 2, 2003 balance sheet shows that its total current liabilities outweighed its total current assets by about $7 million, while its net capitalization is down to $2 million from about $7 million six months ago. "Increased manufacturing efficiencies and cost cutting measures dramatically decreased our operating losses over comparable periods last year," stated Leonard P. Shaykin, NaPro's Chairman and Chief Executive Officer. "The guidance given last November regarding the first half of 2003 proved to be conservative with sales coming in at the high end of the range of $10-$15 million and our net loss per share of $0.16 improved over the guidance of a net loss $0.25-$0.30. "The operational and financial measures we have taken, plus the decision to sell our worldwide injectable generic paclitaxel business have allowed us to focus on our core strategy of bringing new therapeutic solutions to those afflicted with cancer and hereditary diseases. Both of these programs are moving forward on plan." Second Quarter Highlights The Company reported several specific advances at this year's American Society of Gene Therapy Annual Meeting in June: -- We announced the development of a clinically-applicable protocol to achieve specific gene alteration in human hematopoietic stem/progenitor cells. These results represent a milestone achieved for NaPro in the development of its procedures for potential treatment of sickle cell disease. NaPro accomplished its initial proof of concept, which was to produce a sickle mutation in normal human hematopoietic stem/progenitor cells and detect the production of sickle hemoglobin. -- We announced the results of a study using our proprietary technology in a novel approach to treating Huntington's disease. The results highlighted the discovery that certain proprietary single-strand oligonucleotides inhibit aggregation and extend the life of neuronal cells by at least 40 percent in a cell culture model system. NaPro also announced research collaborations with The Children's Hospital of Philadelphia and with Jefferson Medical College of Thomas Jefferson University, for the development of NaPro's gene editing therapy for patients with sickle cell disease. NaPro BioTherapeutics, Inc., is a life science company focused in two distinct areas: the development and in-licensing of anti- cancer agents and the development of genomic therapies, primarily through the use of "gene editing" with additional applications in diagnostics, pharmacogenomics, and agribiotechnology. NAT'L STEEL: Obtains Go-Signal for USWA Memorandum of Agreement --------------------------------------------------------------- National Steel Corporation and its debtor-affiliates ask the Court to approve their agreement with USWA pursuant to Rule 9010 of the Federal Rules of Bankruptcy Procedure and Sections 1113 and 1114 of the Bankruptcy Code. As previously reported, the debtors and the United Steelworkers of America have maintained a collective bargaining relationship for decades and have been parties to numerous agreements, including various benefit programs. Under the Collective Bargaining Agreements, the Debtors could have significant pension plan, legacy and other post-employment benefits obligations for their current employees and retirees. The USWA also asserted claims against the Debtors based on amounts owed to the retirees it represents. In connection with the sale of substantially all of their assets to United States Steel Corporation, the Debtors agreed that it would be appropriate for the USWA to receive: (i) reimbursement of fees and expenses of certain USWA- employed professionals, subject to an overall cap, to assist the USWA with the negotiations; and (ii) payment of a success fee to USWA's investment banker, based on a formula tied to the amount actually received by National Steel in a sale. The Debtors sought assurance that if a sale with a new collective bargaining agreement with a buyer were accomplished, the USWA would agree to a consensual termination of the Collective Bargaining Agreements. Under these Collective Bargaining Agreements, USWA and its represented workers and retirees continued to have significant claims against the Debtors' estates, which claims the Debtors desired to minimize and settle on consensual terms. The Debtors believe that the administrative claims the USWA seek exceed $10,000,000. To resolve all remaining issues, the Debtors entered into negotiations with the USWA regarding the terms of the consensual termination of the Collective Bargaining Agreements. These negotiations culminated into a memorandum of agreement. The salient terms of the MOA are: (1) Termination of all Collective Bargaining Agreements, any of the Debtors' obligations related to these agreements, and a mutual release of claims; (2) Transition to U.S. Steel of certain benefits and benefit programs, like workers' compensation and conversion privileges for life insurance, and the parties' cooperation in this process, including with respect to the transfer of 401(k) plan assets and pro-rata share of the National Voluntary Employee Beneficiary Association; (3) Treatment of claims incurred by employees or their eligible dependents before the date of the U.S. Steel Sale Closing for medical, vision or dental services, sickness and accident benefits and life insurance; (4) Payment of health and life insurance benefits for retirees through July 31, 2003 at a cost to be paid for by the VEBA; (5) COBRA continuation rights with premium costs covered by retirees and former employees for the period from August 2003 through December 2003, with the VEBA covering costs in excess of premiums up to $1,410,000 in aggregate for retirees; (6) Retention by the USWA of a $650,000,000 general unsecured claim against the Debtors relating to other post- employment benefit liabilities; and (7) Payment of certain actual costs and expenses incurred by the USWA during the cases amounting to $1,600,000. (National Steel Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL WARRANTY: Cayman Court Declares Insurer Insolvent ---------------------------------------------------------- National Warranty Insurance Co., which is based in Lincoln Nebraska and incorporated in the Cayman Islands, has been declared insolvent in a Cayman Islands court, Tribune Business News reports, citing the Automotive News. Founded in 1984, NWIG insures, reinsures, designs, and administers mechanical related warranties. National Warranty insures service contracts under the Smart Choice program. Cayman Liquidation Theo Bullmore and Simon Whicker, partners of KPMG in the Cayman Islands were appointed as Joint Official Liquidators of National Warranty Insurance Risk Retention Group on August 1, 2003, by Order of the Grand Court of the Cayman Islands. A copy of that Liquidation Order is posted at: http://www.nwig.com/Official%20Liquidation%20Order.PDF The Order was made after hearing a winding up petition presented to the Court by NWIG on June 4, 2003, which was supported by the Cayman Islands Monetary Authority. NWIG was placed into Provisional Liquidation by order of the Court on June 6, 2003. Based on the work undertaken by them since that date, the Joint Provisional Liquidators formed the view that NWIG is insolvent and that there was no viable alternative to the appointment of JOLs. For that reason they also supported NWIG's petition. In short, the objectives of the JOLs are to achieve the maximum possible return to the creditors of NWIG as expeditiously as possible, as well as to effect an orderly wind down of NWIG's affairs. The JOLs will now progress these matters by forming a Creditors Committee and initiating a Proof of Debt process. The latest Order of the Court, and periodic updates as to the progress of the liquidation will be posted by the JOLs onto NWIG's website, the address of which is http://www.NWIG.com/ Sec. 304 Proceeding The JOLs, to restrain U.S. Creditors from grabbing U.S. assets, commenced ancillary proceedings under Sec. 304 (Bankr. D. Neb. Case No. 03-42145) of the U.S. Bankruptcy Code in June in the U.S. Bankruptcy Court for the District of Nebraska. Ken Coleman, Esq., and Stephen Doody, Esq., at Allen & Overy in New York, represent the JOLs. NEXTCARD INC: Disclosure Statement Hearing Today in Wilmington -------------------------------------------------------------- On June 16, 2003, NextCard, Inc., filed its Proposed Chapter 11 Liquidating Plan and an accompanying Disclosure Statement explaining the Plan with the U.S. Bankruptcy Court for the District of Delaware. The Honorable Jerry W. Venters will convene a hearing today at 2:00 p.m. Eastern Standard Time to rule on the adequacy of the Disclosure Statement within the meaning of Sec. 1125 of the Bankruptcy Code. The Court will find out whether the Disclosure Statement contains the right kind and amount of information that creditors will need to decide whether to accept or reject the Plan. NextCard, Inc., was founded to operate an internet credit card business. The Debtor's business was to use the Internet as a distribution channel for credit card marketing and to issue credit cards and extend customer credit through NextBank, a bank that was a wholly-owned subsidiary. The Company filed for chapter 11 petition on November 14, 2002 (Bankr. Del. Case No. 02-13376). Brendan Linehan Shannon, Esq., at Young, Conaway, Stargatt & Taylor and Kathryn A. Coleman, Esq., at Gibson, Dunn & Cruther LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $18,000,000 in total assets and $5,000,000 in total debts. NEXT GENERATION: Elects Carl Pahapill as New Board Chairman ----------------------------------------------------------- Next Generation Technology Holdings, Inc. (NASDAQ-OCTBB:NGTH) announced that, on July 24th, 2003, it filed for voluntary petition for Chapter 11 reorganization with the U.S. Bankruptcy Court for the Southern District of New York. The voluntary filing will allow the Company to continue operating in the ordinary course of business, while it develops a reorganization plan to maximize recovery for the Company's stakeholders. On July 22nd, 2003, Mr. Donald C. Schmitt, tendered his resignation as Chairman of the Board of Directors and Chief Financial Officer. Mr. Carl Pahapill was elected as the new Chairman of the Board of Directors of the Company. The Company also announced that pursuant to a Secured Promissory Note dated May 5th, 2003 and a Stock Pledge Agreement of the same date, entered into as between the Company and Mr. Donald C. Schmitt, it received a notice from Mr. Schmitt on July 22nd, 2003, declaring that the outstanding principle of the Note in the amount of $100,000 and all accrued interest be immediately due and payable by virtue of the fact that the Company is insolvent, an event of default under the agreement. As such, Mr. Schmitt exercised his right to receive all of the shares of the Company's wholly owned subsidiary, namely HealthyConnect, Inc. which were pledged as security of the Note, thereby becoming the sole shareholder of HealthyConnect, Inc. NOMURA CBO: S&P Further Junks Class A-3 Notes Rating to CCC- ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on the class A-2 and A-3 notes issued by Nomura CBO 1997-2 Ltd., a high- yield arbitrage CBO transaction originated in October 1997. At the same time, the ratings on these notes are removed from CreditWatch with negative implications, where they were placed April 22, 2003. In addition, the 'AAA' rating on the class A-1 notes is affirmed due to the level of overcollateralization available to support the notes. The rating on the class A-3 notes was previously lowered June 28, 2002. The lowered ratings reflect several factors that have negatively affected the credit enhancement available to support the class A-2 and A-3 notes since the last rating action. These factors include continuing par erosion of the collateral pool securing the rated notes, a negative migration in the credit quality of the performing assets in the pool, and a decline in the weighted average coupon generated by the performing assets in the pool. The transaction has experienced $124.34 million in defaults since its origination, of which $29.61 million has occurred since the last rating action. As of the most recently available monthly trustee report (July 2, 2003), the transaction holds $66.52 million worth of securities in the collateral pool that are in default. Standard & Poor's noted that, as a result of asset defaults, the overcollateralization ratios for the transaction have suffered since the June 2002 rating action. According to the July 2, 2003 trustee report, the class A overcollateralization was 97.86%, versus the minimum required ratio of 130%, and compared to a ratio of 105.29% at the time of the previous rating action. The class B overcollateralization ratio was 85.92%, versus the minimum required ratio of 110%, and compared to a ratio of 93.14% at the time of the last rating action. The credit quality of the collateral pool has deteriorated somewhat since the previous rating action. As of the July 2, 2003 trustee report, $28.41 million (or approximately 11.15%) of the assets in the collateral pool currently come from obligors with Standard & Poor's ratings in the 'CCC' range. As of the July 2, 2003 trustee report, 28.7% of the assets in the collateral pool are rated 'B+' and above by Standard & Poor's, versus a minimum percentage of 30%. Assets rated 'B' and above by Standard & Poor's constitute 46.3% of the collateral pool, versus a minimum percentage of 65%. Assets rated 'B-' and above by Standard & Poor's constitute 64.7% of the collateral pool, versus a minimum of 95%. According to the trustee report, the weighted average coupon was 10.242%, versus a minimum required ratio of 10.25%. Standard & Poor's has reviewed the results of the current cash flow runs generated for Nomura CBO 1997-2 Ltd. to determine the level of future defaults the rated classes can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. After the results of these cash flow runs were compared with the projected default performance of the performing assets in the collateral pool, it was determined that the ratings currently assigned to the class A-2 and A-3 notes were no longer consistent with the amount of credit enhancement available, resulting in the lowered ratings. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings reflect the amount of credit enhancement available. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Nomura CBO 1997-2 Ltd. Rating Class To From Current Balance ($ mil.) A-2 AA+ AAA/Watch Neg 150.0 A-3 CCC- CCC/Watch Neg 105.3 RATING AFFIRMED Nomura CBO 1997-2 Ltd. Class Rating Current Balance ($ mil.) A-1 AAA 15.406 NORTEK INC: Reports Strong Growth for Second Quarter Results ------------------------------------------------------------ Nortek, Inc., a leading international designer, manufacturer and marketer of high-quality brand name building products, announced increased second quarter financial results building on a continuing strong residential housing and home improvement market. Key financial highlights from continuing operations for the second quarter included: -- Net sales of $545 million, an increase of 4.8 percent compared to the $520 million recorded for the second quarter of 2002. -- Operating earnings of $65.7 million, an increase of 7.4 percent compared to last year's $61.2 million. -- EBITDA of $76.4 million, an increase of 6.1 percent compared to $72 million for the prior year. Richard L. Bready, Chairman and Chief Executive Officer, said, "All three of Nortek's operating groups reported solid sales growth in the quarter despite continued softness in commercial HVAC and manufactured housing markets. "Our sales gains reflect the continued strength of the residential building products markets - strength that is expected to continue in the second half of the year." On January 9, 2003, certain affiliates of Kelso & Company, L.P. and certain members of management acquired control of Nortek in a recapitalization transaction. Net sales for the nine-day period ending January 9, 2003 and the period from January 10 to July 5, 2003 were $34 million and $980 million, respectively. Operating loss for the nine-day period ending January 9, 2003 and the period from January 10 to July 5, 2003 were $86.8 million and $101.1 million, respectively. EBITDA for the nine-day period ending January 9, 2003 and the period from January 10 to July 5, 2003 was a deficit of $85.9 million and $126.1 million, respectively. Excluding expenses and charges of approximately $87.7 million arising from the Recapitalization, as adjusted EBITDA was $1.8 million for the nine-day period ending January 9, 2003. The 2003 six-month results presented include the nine-day period from January 1 to January 9 (pre-recapitalization) and the post- recapitalization period from January 10 to July 5. The Company's net sales from continuing operations for the combined periods of January 1 to July 5, 2003 were $1,014 million, an increase of 7 percent over the $947 million reported for the first six months of 2002. Operating earnings for the combined periods from January 1 to July 5, 2003 was $14.3 million (including $87.7 million of expense related to the recapitalization) compared to $98.9 million last year. As adjusted, EBITDA from continuing operations for the combined period from January 1 to July 5, 2003, excluding costs related to the recapitalization, was $128 million, compared to $126 million for the prior year. Mr. Bready noted as "highly encouraging" that, "Sales of new homes in June rose to a second consecutive record-breaking high and that housing sector economists have forecast near-certain record new home sales for the year." Nortek continued in the second quarter its long-term strategy of increasing market share and expanding its product branding strategy, particularly in the air conditioning and heating products segment. However, Mr. Bready also noted that Nortek operating earnings in the first half were affected by high energy costs, particularly impacting resin-based materials. He said, "Continuation of these price pressures and softness in the HVAC markets could impact second-half results." As of July 5, 2003, Nortek had approximately $110 million in unrestricted cash, equivalents and marketable securities, of which approximately $58 million was subsequently used by Nortek's Linear Corporation subsidiary for the acquisition of SpeakerCraft in July 2003. SpeakerCraft is a leading designer and supplier of architectural loudspeakers and audio products used in residential custom applications. SpeakerCraft's product lines and dealer networks complement those of other Linear subsidiaries: ELAN, Xantech and Multiplex. Nortek (a wholly owned subsidiary of Nortek Holdings, Inc.) is a leading international manufacturer and distributor of high- quality, competitively priced building, remodeling and indoor environmental control products for the residential and commercial markets. Nortek offers a broad array of products for improving the environments where people live and work. Its products include: range hoods and other spot ventilation products; heating and air conditioning systems; vinyl products, including windows and doors, siding, decking, fencing and accessories; indoor air quality systems; and specialty electronic products. * * * As previously reported in Troubled Company Reporter, Moody's Investors Service assigned and confirmed ratings to Nortek, Inc., with Stable outlook. Rating Actions * B1 senior implied rating * B1 Issuer rating * Ba3 on the $200 million senior secured revolving credit facility due 2007 * B1 on $175 million of 9.25% senior notes due 3/15/2007 * B1 on $310 million of 9.125% senior notes due 9/1/2007 * B1 on $210 million of 8.875% senior notes due 8/1/2008 * B3 on $250 million of 9.875% senior subordinated notes due 6/15/2011 The ratings reflect Nortek's high debt leverage due to its acquisition-based growth strategy and its negative tangible equity of about $370 million at June 29, 2002. NPS PHARMA: S&P Assigns Low-B Credit and Sr. Unsec. Debt Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to NPS Pharmaceuticals Inc. At the same time, Standard & Poor's assigned its 'B-' senior unsecured debt rating to the company's $192 million 3% convertible notes due 2008. The outlook is stable. NPS has approximately $192 million of debt outstanding. "The low, speculative-grade ratings reflect the emerging biopharmaceutical company's expected negative cash flows and operating losses in the intermediate term as it funds significant research and development programs," said Standard & Poor's credit analyst Arthur Wong. "These negative factors are partially offset by the potential commercialization of drugs in NPS' clinical pipeline and the financial cushion of on-hand cash." Salt Lake City, Utah-based NPS focuses on the development of therapies to treat bone and mineral disorders, gastrointestinal diseases, and disorders that affect the central nervous system. Historically, NPS has drawn revenues from licenses and milestone payments from other pharmaceutical companies that have developed the drugs it has identified. A possible near-term revenue generating opportunity for NPS is Cinacalcet-HCL, which has been licensed to Amgen Inc. and Kirin Brewing Co. and which is in phase III trials for the treatment of secondary hyperparathyroidism (HPT). Amgen expects to file a new drug application (NDA) in the second half of 2003, and NPS may receive future milestone payments based on Cinacalcet's successful approval as well as royalty payments on product sales. NPS also has a proprietary drug candidate in phase III trials, its osteoporosis treatment PREOS. The drug is a recombinant, full- length, human parathyroid hormone that has shown success at stimulating actual bone growth more quickly than other currently marketed treatments. Nevertheless, while the successful development and launch of a proprietary product would be a milestone for the company, the drug is not expected to reach the market before late 2005. NPS currently has no products on the market, and like most other development-stage biopharmaceutical companies, it will continue to generate operating losses during the next several years. These are the overarching considerations for the rating. OHIO CASUALTY: Reports Slight Decline in Second Quarter Results --------------------------------------------------------------- Ohio Casualty Corporation (Nasdaq:OCAS) announced the following results for its second quarter ended June 30, 2003, compared with the second quarter of 2002: -- net income of $11.0 million versus $13.1 million, -- statutory combined ratio of 106.2%, a 3.1 point improvement despite higher catastrophe losses, and -- net income before realized gains and losses of $6.6 million versus $6.9 million. President and Chief Executive Officer Dan Carmichael, CPCU, commented, "I am pleased with the progress we made in the second quarter against our strategic plan, both as measured by our quarterly financial results and by our strides to make Ohio Casualty more efficient and customer-focused. Our reported operating results for the second quarter were affected by much larger catastrophe losses than the same period last year, by higher commission costs, and by our withdrawal from certain markets beginning in 2002. Our homeowners and specialty product lines improved significantly during the quarter, and several other product lines are showing strength. We are pleased with our progress as we drive toward the goal of a competitive underwriting expense ratio. Our technology investments are beginning to pay off in improved productivity and better support for agents, including fast, online application and rating services and we are adding quality agents to our producer force. Our focus is to continue to execute our strategic plan in order to move Ohio Casualty Corporation toward stronger financial performance for our shareholders." Underwriting expenses and operating results on a GAAP basis were negatively impacted by commission expenses that were higher on a statutory basis in the last two quarters of 2002, as previously announced. The GAAP basis expense was recognized in part during the first two quarters of 2003 as premiums were earned on business written in 2002. Second-quarter net investment income increased in 2003 compared with 2002 despite lower average investment yields. The Company has completed its two-year initiative to reduce equity holdings. This restructuring reduces the effect on statutory surplus of future stock market volatility. Amortization and impairment write-downs of the agent relationships intangible asset were $7.7 million in the second quarter of 2003, compared with $5.1 million in the second quarter of 2002. Statutory Results Insurance industry regulators require Ohio Casualty Corporation and its subsidiaries to report certain financial measures on a statutory accounting basis. Management also uses statutory financial criteria to analyze property and casualty results, including loss and loss adjustment expense ratios, underwriting expense ratios, combined ratios, net premiums written and net premiums earned. Supplemental financial information for the second quarter, including many of the statutory financial measures described above, is available on Ohio Casualty Corporation's website at www.ocas.com and was also filed on Form 8-K with the Securities and Exchange Commission. A discussion of the differences between statutory accounting principles and GAAP in the United States is included in Item 15 of the Corporation's Form 10-K for the year ended December 31, 2002. Statutory Net Premiums Written Statutory net premiums written were flat for the second quarter, and down slightly for the first six months. Double-digit price increases and new business growth in the quarter matched the effects of market withdrawals in Personal Lines, higher reinsurance costs, stricter commercial underwriting guidelines and a competitive small to mid-sized commercial market. Commercial Lines written premium growth was driven by price increases and new business production, offset in part by competition and also by restrictions and non-renewals of certain underperforming classes of business. Average renewal price increases for Commercial Lines were 10.9% in the second quarter 2003. Renewal price increases have declined for four of the last five consecutive quarters, part of a broad trend as Commercial Lines policies approach price adequacy and competitive pricing pressures increase. More conservative underwriting of workers' compensation and certain construction classes of business continued, which offset some of the benefit of premium growth for other commercial product lines. Specialty Lines net premiums written declined from last year's level as a result of higher reinsurance costs for commercial umbrella. Although second quarter net premiums written were below last year's levels, Specialty Lines continued to generate higher average renewal prices and significant levels of new business production. Specialty Lines premiums before reinsurance increased 19.1% over second quarter 2002. Higher reinsurance costs in 2003 were driven by the addition of a ceding commission and by increased reinsurance rates per dollar of premium. The addition of ceding commissions on the current reinsurance contract causes a corresponding increase to ceded premiums. Renewal price increases for commercial umbrella insurance, the largest volume Specialty Lines product, averaged 22.4% for the second quarter 2003, compared to 20.5% and 33.1%, respectively, in the first quarter 2003 and fourth quarter 2002. Personal Lines net premiums written declined slightly due to management's decisions to cancel certain agents and to withdraw from selected markets. The combined effect of those decisions was an approximate $10.0 million decrease in net premiums written for the second quarter of 2003 compared to the same period one year ago. Higher levels of new business production and increased average rates on homeowners policies offset much of the withdrawal activity. Market withdrawals are expected to have less impact on Personal Lines written premiums during the second half of the year. Statutory Combined Ratio The statutory combined ratio is a commonly used gauge of underwriting performance measuring the percentage of premium dollars used to pay insurance losses and related expenses. The loss and loss adjustment expense ratios measure losses and LAE as a percentage of net earned premiums and the underwriting expense ratio measures underwriting expenses as a percentage of net written premiums. The combined ratio is the sum of the loss ratio, the LAE ratio, and the underwriting expense ratio. All combined ratio references in this press release are calculated on a calendar year basis unless specified as calculated on an accident year basis. All references in this press release to combined ratio or its components are calculated on a statutory accounting basis. The All Lines combined ratio improved compared to second quarter last year due primarily to the Group's exit from the New Jersey Private Passenger Auto market and lower personnel related expenses, offset somewhat by higher catastrophe losses, additional large non-catastrophe losses and increased technology costs. Catastrophe losses in the second quarter were significantly above last year and included the largest tornado event on record -- 410 tornadoes during 10 days in early May. Catastrophe losses for the quarter were in line with previously announced estimates, adding 4.0 points in the second quarter this year, compared with 2.8 points in the same quarter of 2002. Non- catastrophe commercial large losses were higher than normal for the quarter; a year earlier, they were lower than normal. Withdrawal from NJPPA lowered the combined ratio by 1.9 points compared to last year. Improvements in other areas, including higher pricing and improved underwriting, contributed to the improvement in the All Lines combined ratio. Commercial Lines combined ratio increased 6.0 points for the quarter. Higher catastrophe losses and other large non-catastrophe property and casualty losses were principal factors. Hardest hit was commercial multiple peril while commercial auto and general liability also experienced more large losses than last year. The loss frequency trend for workers' compensation continued to improve. Commercial auto had a combined ratio for the quarter of 101.7% despite the negative effects of an increase in large losses. The Specialty Lines combined ratio benefited from a significantly improved loss ratio, which decreased 17.7 points compared to last year because of favorable development on prior accident years. Withdrawal from New Jersey personal auto accounted for essentially all of the 9.4 point improvement in the Personal Lines combined ratio for the quarter. Also contributing to the improvement in the Personal Lines combined ratio for the quarter was substantial improvement in the loss ratio for homeowners. Personal auto for states other than New Jersey was negatively impacted by adverse development on prior accident years, which added 7.2 points to the combined ratio for the quarter. The accident year 2003 combined ratio for personal auto in states other than New Jersey was 102.8% for the first six months of 2003. Lower underwriting costs and lower loss adjustment expense also contributed, offset in part by higher catastrophe losses in the quarter. Loss and LAE Development The loss and LAE ratio component of the accident year combined ratio measures losses and LAE arising from insured events that occurred in the respective accident year. The current accident year excludes losses and LAE for insured events that occurred in prior accident years. Other Highlights For the second quarter of 2003 compared to the second quarter of 2002: -- Catastrophe losses were $13.9 million vs. $10.3 million; the $3.6 million increase added 1.2 points to the All Lines combined ratio. -- LAE ratio improvement reflected previously announced staff reductions and improved management of claims legal expenses. -- Employee count was down 10.3% to 2,800 at June 30, 2003, which helped reduce the personnel related expense portion of the underwriting expense ratio by .9 points, and contributed to a 2.9 point reduction in the LAE ratio to 11.8%. -- Technology costs expensed in second quarter 2003 for amortization and maintenance of the P.A.R.I.S.(s.m.) software added 0.8 points to the underwriting expense ratio. -- Premiums to surplus ratio improved to 1.8 to 1 from 1.9 to 1, also improving from last quarter's 1.9 to 1. -- Book value per share of $18.75 has increased 3.5% from second quarter 2002 and 7.6% from fourth quarter 2002. Looking forward, the Corporation reaffirmed its guidance for calendar year 2003 as follows: -- net premiums written of $1,450 million to $1,550 million, -- statutory calendar year combined ratio of 103.0% to 105.0% -- investment income of $195 million to $215 million, and -- agent relationships intangible asset amortization and write- downs of approximately $25 million to $35 million. Additionally, the Corporation expects to achieve significant progress toward its strategic goals of cost reduction and prudent underwriting, while improving internal and agent business processes through technology. Past and future investment in technology is directed at achieving productivity gains and making it easier for our agents to do business with Ohio Casualty Corporation. Management of the Corporation is convinced that focused execution of the strategy will result in continued benefits later this year and beyond. Quiet Period The Corporation observes a quiet period and will not comment on financial results or expectations during quiet periods. The quiet period for the third quarter will start October 1, 2003 extending through the time of the earnings conference call scheduled for November 7, 2003. Ohio Casualty Corporation is the holding company of The Ohio Casualty Insurance Company, which is one of six property-casualty subsidiary companies that make up Ohio Casualty Group. The Ohio Casualty Insurance Company was founded in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked 45th among U.S. property/casualty insurance groups based on net premiums written (Best's Review, July 2003). The Group's member companies write auto, home and business insurance. Ohio Casualty Corporation trades on the NASDAQ Stock Market under the symbol OCAS and had assets of approximately $5.0 billion as of June 30, 2003. As reported in Troubled Company Reporter's May 15, 2003 edition, Standard & Poor's Ratings Services assigned its preliminary 'BB' senior unsecured debt, 'B+' subordinated debt, and 'B' preferred stock ratings to Ohio Casualty Corp.'s $500 million universal shelf registration filed May 8, 2003. The ratings assignments are based on the counterparty credit and financial strength ratings on Ohio Casualty and its insurance subsidiaries, which Standard & Poor's affirmed on April 30, 2003. "The ratings reflect the group's adequate business position, improved strategic focus, good investment strategy, and improved financial flexibility at the holding company level," said Standard & Poor's credit analyst John Iten. Partially offsetting these factors are the slower-than-expected improvements to operating performance since the implementation of its new strategic plan in 2001, modestly declining premium volume because of continued restructuring and reunderwriting actions, lower-than-expected capital adequacy at the operating level, and continued high expense structure. OMNICARE INC: Board Declares Quarterly Cash Dividend ---------------------------------------------------- The board of directors of Omnicare, Inc. (NYSE: OCR) declared a quarterly cash dividend of 2.25 cents per share on its common stock. The dividend is payable September 11, 2003, to stockholders of record on August 28, 2003. Omnicare, based in Covington, Kentucky, is a leading provider of pharmaceutical care for the elderly. Omnicare serves residents in long-term care facilities comprising approximately 981,000 beds in 47 states, making it the nation's largest provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers. Omnicare also provides clinical research services for the pharmaceutical and biotechnology industries in 29 countries worldwide. For more information, visit the company's Web site at http://www.omnicare.com As reported in Troubled Company Reporter's June 6, 2003 edition, Standard & Poor's Ratings Services assigned its 'BBB-' rating to Omnicare Inc.'s $500 million unsecured revolving credit facility due 2007 and its $250 million senior unsecured term loan due 2007. Standard & Poor's also assigned a 'BB+' rating to the company's $250 million senior subordinated notes due 2013, and a 'BB' rating to the company's $250 million convertible trust preferred income equity redeemable securities (Trust PIERS) due 2033. Both the senior subordinated notes and the Trust PIERS are shelf drawdowns. At the same time, Standard & Poor's affirmed the 'BBB-' corporate credit rating on Omnicare, an institutional pharmacy chain. The ratings are removed from CreditWatch, where they were originally placed after Omnicare announced that it would acquire rival institutional pharmacy provider NCS Healthcare Inc. OWENS CORNING: Wants to Make Contributions to Pension Plan ---------------------------------------------------------- For decades, the Owens Corning Debtors have sponsored pension plans to provide retirement income to eligible employees, which are now embodied in a merged pension plan called the Owens Corning Merged Retirement Plan. The Pension Plan is an Employee Retirement Income Security Act of 1974 defined benefit pension plan qualified under the Internal Revenue Code. It now has 30,200 participants. The Pension Plan covers eligible salaried and hourly employees. When a Plan Participant retires, the Pension Plan provides a pension benefit based on formulas set forth in the plan document. A participant's benefit, whether paid as an annuity or lump sum, is independent of the Pension Plan's investment performance. For most participating hourly employees, the benefit formulas typically provide a monthly pension at retirement multiplied by years of service. This retirement formula varies by employee group and can be different for past and future years of service. For most hourly employees, benefits earned for service after January 1, 1995 can only be received in the form of an annuity; a lump sump option may be available on benefits earned prior to January 1, 1995. Prior to January 1, 1996, salaried employees were covered by a traditional final average pay pension formula. The formula provided a monthly benefit at retirement based on a percentage determined by the average compensation earned over the prior three years. On January 1, 1996, the salaried pension formula was converted to a cash balance formula. Cash balance accounts work like savings accounts. They grow monthly by Pay/Service Credits and Interest Credits. The Pay/Service Credits are based on defined percentages of covered compensation or defined dollar amounts. The Interest Credits are based on five-year U.S. Treasury rates. When the employment relationship ends, participants may receive the value of their benefit in a lump sum or an annuity. Both the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code mandate that every employer maintaining a qualified benefit plan must make minimum funding contributions if plan funding falls below certain levels. Failure to pay required minimum funding contributions to an Employee Retirement Income Security Act plan might result in termination of a plan. Pursuant to Section 412 of the Internal Revenue Code, the Pension Plan's actuary must annually determine whether required minimum funding contributions must be made and in what amount. The Pension Plan's actuary, Buck Consultants, has projected that the Debtors will be required to make mandatory minimum funding contributions under applicable laws and regulations, plus variable premiums to the Pension Benefit Guaranty Corporation over the next five years. By this motion, the Debtors seek the Court's authority under Sections 105 and 363 of the Bankruptcy Code to make a contribution to the Pension Plan on or before September 15, 2003, thereby substantially reducing the otherwise projected required contributions over the five-year period. Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, points out that this reduction in projected aggregate contributions over the five-year period, is primarily achieved by avoiding the very large mandatory minimum contributions that would otherwise be projected to be required in subsequent years, by increasing the Plan's Current Liability Funding Ratio, which in turn allows the Pension Plan's assets to grow and compound over time on a tax free basis, and eliminates the need to pay significant excess insurance premiums to the Pension Benefit Guaranty Corporation. The Debtors believe that the projected mandatory minimum funding contributions are in the ordinary course of their business and, in any event, have previously been authorized by the Court. Assuming that the Debtors' proposed contribution schedule is not in the ordinary course, the Debtors ask the Court to approve their proposed contribution. In accordance with the mandated minimum funding requirements, as prescribed by applicable laws and regulations, the Debtors must make a significant contribution to the Pension Plan over the next five years. The Debtors have determined that a payment is significantly more desirable because: 1. it satisfies the same legal minimum funding requirements with substantially less aggregate contributions over the projection period; 2. the contributions to the Pension Plan in 2004 is projected to be required in any event; and 3. it eliminates the Pension Benefit Guaranty Corporation variable premiums. The Debtors estimated making cash payments to the Pension Plan in the range of $300,000,000 to $400,000,000 over 2003 and 2004. Moreover, the Debtors and their professionals have been personally and telephonically in contact with the Committees and the Future Representative and their representatives, including their professionals, to review the request and its basis. Owens Corning has more than sufficient cash to make the requested contributions. Payment of the requested contributions will not require Owens Corning to borrow funds, and can be made without exhausting cash-on-hand. Debtors Want to File Documents Under Seal According to the Debtors, the unedited Pension Motion, which states the amount to be paid to the Pension Plan, and the Affidavit of Steven M. Rabinowitz, F.S.A., are confidential and commercial in nature and should not be subject to disclosure to the general public. To protect the confidential information contained in the Motion and the Rabinowitz Affidavit, the Debtors seek the Court's permission to file the documents under seal for in camera review by the Court only and to redact the Pension Motion for public dissemination. The unredacted Pension Motion and the Affidavit contain actuarial assumptions, projections, and determinations, including specific projected mandatory minimum pension fund contributions, which the Debtors must make under applicable laws and regulations, as well as projected, required pension fund contributions. In addition, the Pension Motion addresses the ramifications for failure to make Pension Plan contributions. Mr. Pernick asserts that protection of the confidential pension information is of critical importance to the preservation of the Debtors' estates for several reasons. First, the Debtors could be irreparably harmed by disclosure of pension fund information, including projected future liabilities, particularly at this critical stage of their reorganization efforts. The Pension Motion contains material non-public disclosures that could affect the securities market and trading if disclosed. Second, disclosure of confidential pension information may place the Debtors at a competitive disadvantage in the marketplace by revealing certain of the Debtors' financial goals and targets. Third, and perhaps more significantly, protection of detailed pension information is warranted because of the potential impact it may have on the 30,200 Plan Participants. Absent explanation, Plan Participants may misconstrue or misinterpret actuarial data and funding information. No purpose would be served by the disclosure of actuarial assumptions, projections and determinations to the general public. The Debtors believe that Court authorization to file the pension information under seal will ensure that the information is not misconstrued by Plan Participants or misused by any person or entity. Finally, the Court previously recognized the confidential nature of the information contained in the Pension Motion and authorized the Debtors' to file the information under seal. An unredacted copy of the Pension Motion and the Affidavit will be provided to the United States Trustee and counsel for the Committees and the Future Representative. The Debtors submit that the redacted Pension Motion contains sufficient information to permit other interested parties a full and fair opportunity to consider the merits of the Pension Motion, and to formulate and file a response, if any. (Owens Corning Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 609/392-0900) PEGASUS SATELLITE: Closes $100 Million Senior Secured Facility -------------------------------------------------------------- On August 1, 2003, Pegasus Satellite Communications, Inc., (S&P/B/Negative) entered into and completed the closing under a $100 million senior secured term loan with a group of institutional lenders. This facility amends and restates a loan facility established, but not closed, on April 2, 2003, with the same lenders. The entire $100 million was borrowed. Proceeds of the loan financing are being used to redeem the 12.5% senior subordinated notes of Pegasus Media & Communications, Inc, a subsidiary of Pegasus Satellite Communications, Inc., and to partially fund a $59 million letter of credit facility for a subsidiary of Pegasus Media & Communications, Inc.. The security for the term loans consists principally of a second-priority security interest in the stock of Pegasus Media & Communications, Inc. held by Pegasus Satellite Communications, Inc. The loan has a six-year term and an interest rate of 12.5% per annum with 6% payable in cash quarterly and 6.5% to be accrued and added to principal and paid at loan maturity. As additional consideration, the lenders received warrants to purchase shares of non-voting common stock of Pegasus Communications Corporation for an exercise price of $16.00 per share (shares of non-voting common stock received on exercise of the warrants may, in certain circumstances, be exchanged for an equal number of shares of Class A common stock). One of the closing conditions of the PSC senior secured term loan was that the lenders of the Pegasus Media & Communications, Inc. credit facility give their consent. On July 22, 2003, the lenders of the PM&C credit facility gave their consent and the lenders and PM&C also entered into a third amendment to the PM&C credit agreement. PM&C has received indications of interest from a syndicate of lenders regarding the terms of a new credit facility. The new PM&C credit facility would replace the existing PM&C credit facility. PM&C expects to use borrowings under the new credit facility to repay PM&C's existing indebtedness and for working capital. At March 31, 2003, the company's working capital deficit tops $100 million. PEGASUS SATELLITE: Redeeming 12.50% Senior Sub. Notes on Sept. 2 ---------------------------------------------------------------- On August 1, 2003, Pegasus Media & Communications, Inc. (S&P/B/Negative) gave the holders of its 12-1/2% Senior Subordinated Notes due 2005 in the original principal amount of $85 million ($67.9 million of which are currently outstanding) notice that it will redeem the Notes on September 2, 2003. The redemption price of the Notes will be approximately $69.3 million, which is equal to 100% of the principal amount of the Notes plus accrued and unpaid interest thereon to but not including September 2, 2003, the redemption date. PM&C deposited the redemption price with the trustee on August 1, 2003. Pegasus Communications Corporation previously announced that it planned to hold its 2003 annual meeting of stockholders on August 9, 2003. The Company has determined to postpone the 2003 annual meeting and will announce a rescheduled annual meeting date at a later time. PENN TRAFFIC: Closes $270M DIP Financing & Joseph Fisher Resigns ---------------------------------------------------------------- The Penn Traffic Company (OTC: PNFTQ.PK) announced that Joseph Fisher has resigned as President and Chief Executive Officer for personal family reasons, effective August 6, 2003. The Board of Directors has appointed Steven G. Panagos to serve as interim CEO. Mr. Fisher will remain a Director of the Company and be available to assist with the transition of leadership. "Joe Fisher has worked tirelessly for Penn Traffic for five years," said Peter L. Zurkow, Penn Traffic's Chairman of the Board. "His leadership of our employees and of our day-to-day operations will be sorely missed, but we are glad that he has agreed to stay on the Board of Directors, where he will continue to contribute his substantial knowledge of the supermarket business to our Company." "The Board strongly believes that Steve Panagos' appointment as interim CEO is the best course for Penn Traffic, its creditors, and its employees," said Mr. Zurkow. "We have already begun our search for Joe Fisher's permanent replacement, but we are confident that in the interim Steve Panagos is the right person to lead Penn Traffic." Mr. Panagos is currently Penn Traffic's Chief Restructuring Officer and will remain in that position. He has been actively engaged in advising the Company on reorganization matters and working with the senior management team to prepare Penn Traffic for completion of its reorganization as a strong and viable company. Mr. Panagos has vast retail operating experience. As interim CEO of Crown Books, he led that company out of chapter 11, and has also helped numerous other companies with financial restructuring counsel, including Federated Department Stores, Maidenform, Metromedia Fiber Network and Montgomery Ward. Mr. Panagos is a Managing Director of Kroll Zolfo Cooper, a prominent New York-based financial consulting firm with extensive experience in financial restructurings. Penn Traffic has established a CEO search committee comprising Mr. Zurkow, Kevin P. Collins, Chairman of the Company's Audit Committee, and David B. Jenkins and Byron E. Allumbaugh, Directors, who together have more than 75 years of experience in the supermarket industry. Mr. Zurkow will serve as chair of the search committee. Penn Traffic closed Thursday a $270 million permanent debtor-in- possession (DIP) financing, which was approved on July 31 by the U.S. Bankruptcy Court for the Southern District of New York. 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. "The Company is gratified by the strong support of our lenders as evidenced by the closing of the DIP financing which we view as an important vote of confidence in our Company, our people and our potential," said Mr. Panagos. "I am looking forward to continuing to work with all of our employees, vendors and other business partners to strengthen Penn Traffic." 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. PENTON MEDIA: June 30 Net Capital Deficit Slides-Up to $75 Mill. ---------------------------------------------------------------- Penton Media, Inc. (OTCBB:PTON), a diversified business-to- business media company, reported an operating loss of $8.9 million for the second quarter of 2003, compared with a loss of $9.4 million in the same year-ago quarter. Second-quarter adjusted EBITDA (operating income (loss) before depreciation and amortization, non-cash compensation, impairment of assets, provision for loan impairment, and restructuring charges) was $4.8 million, compared with $5.1 million last year. Operating loss in the second quarter included a $7.6 million non- cash charge relating to a provision for loan impairment and $1.9 million in restructuring and other expenses, of which $1.3 million was a restructuring charge. Last year's second quarter operating loss included a $7.7 million restructuring charge. Penton reported a net loss of $18.3 million in the quarter compared with a loss of $12.1 million in the second quarter of 2002. The net loss applicable to common stockholders was $20.2 million, compared with a loss of $56.6 million in the second quarter last year. Comparability between the quarters was impacted primarily by a $44.5 million non-cash charge in last year's second quarter related to the immediate recognition in retained earnings of the unamortized beneficial conversion feature resulting from stockholders' approval to remove Penton's preferred stock mandatory redemption date. Penton's second-quarter revenues declined 19.8% to $50.5 million from $62.9 million in the same quarter last year. Revenues for ongoing businesses, excluding media properties sold by the Company in 2002, declined 13.2%. Penton's second-quarter revenues were also affected by the shift in timing of two trade shows that ran in the second quarter in 2002 but will run in the fourth quarter this year. Revenues for ongoing businesses, adjusted for this show timing shift, declined 8.8%. "Our second-quarter operating results illustrate the benefits of our cost reductions and portfolio management efforts over the past several quarters," said Thomas L. Kemp, chairman and chief executive officer of Penton. "However, revenues in the quarter were under pressure as our customers, primarily in global technology and manufacturing markets, remained cautious about marketing communications spending in what continues to be a difficult business environment. "We are responding to our revenue challenges by aggressively developing new media products that provide our customers with cost-effective, highly efficient marketing channels to their sales prospects," said Kemp. "We are generating new business by providing our customers with creative, customized media solutions that can be combined with Penton's traditional business-to- business media to achieve their marketing objectives." Kemp noted that the diversification of Penton's market coverage has served the Company well during the prolonged business-to- business media industry recession. "Our media products serving the natural products, foodservice, construction, and government markets have performed well this year, helping to partially offset declines in our technology and manufacturing portfolios. We expect continued solid performance from these portfolios throughout the year." SECOND-QUARTER OPERATING REVIEW Segments Adjusted segment EBITDA is defined as operating income (loss) before depreciation and amortization, non-cash compensation, impairment of assets, restructuring charge, provision for loan impairment, and general and administrative costs. General and administrative costs include functions such as finance, accounting, human resources, and information systems, which cannot be reasonably allocated to each segment. Adjusted segment EBITDA margins are calculated by dividing adjusted segment EBITDA by segment revenues. The Industry Media segment, which produced 41.6% of total company revenues, experienced a revenue decline of $2.7 million, or 11.4%, in the second quarter compared with the same 2002 period, due primarily to year-on-year advertising declines in magazines serving manufacturing markets and the absence of revenues from a divested trade show. Revenues for ongoing businesses in the Industry Media segment declined 6.4%. Adjusted segment EBITDA increased $0.5 million, or 12.5%, due to aggressive cost management and operational restructuring initiatives. The Technology Media segment represented 39.8% of total company revenues in the 2003 quarter. Revenues for the segment declined $10.5 million, or 34.4%, from second quarter 2002. The decline was due largely to continuing advertising weakness in media properties serving the electronics OEM market and the elimination of revenues from divested media properties and technology events that were held last year but not repeated this year due to depressed market conditions. Revenues for ongoing businesses in the segment declined by 25.9%; adjusted for show timing, ongoing segment revenues declined 19.3%. Adjusted segment EBITDA for Technology Media declined $1.7 million as aggressive cost reduction and portfolio management efforts offset revenue declines. The Retail Media segment produced 12.0% of the Company's second- quarter 2003 revenues. Adjusting for certain reclassifications recorded in the prior-year period, revenues for the segment increased 23.5% on the strength of publishing properties serving the foodservice and hospitality markets. On the same basis, adjusted segment EBITDA grew approximately 51.0% due primarily to segment revenue growth. The Lifestyle Media segment generated 6.7% of total company revenues in the 2003 quarter. Segment revenues declined by $0.9 million, or 21.5%, due primarily to the change in timing of Natural Products Expo Asia to the fourth quarter of 2003. Adjusted segment EBITDA loss of $0.7 million was slightly higher than the prior-year loss of $0.5 million and was due primarily to the trade show timing shift. Product Lines Second-quarter 2003 results were driven primarily by Publishing operations, which represented 78.1% of total company revenues. Publishing revenues declined 7.8%, due primarily to advertising sales softness in manufacturing and electronics markets. Trade Shows and Conferences revenues, which represented 14.1% of total company revenues in the quarter, declined 57.7% due to the decline in performance of technology trade shows, the impact of discontinued and divested technology events, and the change in timing of two trade shows from the second quarter of 2002 to the fourth quarter of 2003. Adjusting for sold properties and the trade show timing shift, revenues declined $2.7 million, or 27.4%. Online Media revenues increased 16.7% to $3.9 million, extending a trend of revenue growth that this product line has been experiencing over the past several quarters. Adjusting for sold media properties, Online Media revenues increased 23.2%. YEAR-TO-DATE RESULTS Revenues for the first six months of 2003 declined 15.5% to $104.9 million from $124.1 million in the first half of 2002. Revenues for ongoing businesses declined 11.7% compared with the same period in 2002. The decreases related primarily to declines in performance of the Company's technology and manufacturing media portfolios and the shift in timing of trade shows. Year-to-date revenues for ongoing businesses, adjusted for trade show timing shifts, declined 9.6%. Operating loss for the six-month period was $4.1 million compared with an operating loss of $8.5 million in the year-ago period. The improvement was primarily due to a $23.0 million, or 20.2%, reduction in operating costs year over year. The six-month operating loss includes a $7.6 million non-cash charge relating to a provision for loan impairment and $1.8 million in restructuring and other expenses, of which $1.2 million was a restructuring charge. The 2002 period included a restructuring charge of $7.4 million. Adjusted EBITDA for the six-month period grew 36.8% to $14.1 million from $10.3 million in the year-ago period, with adjusted EBITDA margin expanding to 13.4% from 8.3% in 2002. The Company reported a net loss of $23.4 million for the first six months of the year compared with a $56.0 million loss last year. The net loss applicable to common stockholders for the six-month period was $26.0 million, compared with a loss of $100.9 million in the year-ago period. Comparability between the quarters was impacted by a non-cash impairment charge in first-quarter 2002 of $39.7 million, related to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" and by a $44.5 million non-cash charge in last year's second quarter related to the immediate recognition in retained earnings of the unamortized beneficial conversion feature resulting from stockholders' approval to remove Penton's preferred stock mandatory redemption date. LIQUIDITY, BALANCE SHEET AND LOAN IMPAIRMENT PROVISION DISCUSSION Penton's June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $75 million, up from about $62 million six months ago. Penton's cash balance at June 30, 2003, totaled $40.8 million. At the end of the second quarter, the Company had a revolving credit facility commitment of $20.1 million. The current borrowing capacity on the facility is $19.7 million. The facility is currently undrawn. Penton's long-term debt at the end of the quarter was $328.4 million. Long-term debt comprises $156.9 million carrying value of the Company's 11-7/8% senior secured notes, due October 2007, and $171.5 million carrying value of its 10-3/8% senior subordinated notes, due 2011. As noted earlier, Penton recorded a $7.6 million non-cash charge relating to a provision for loan impairment in the second quarter. The impairment refers to notes receivable under Penton's Executive Loan Program, which was established by the Company's Board of Directors in January 2000 to allow Penton to issue shares of the Company's common stock at fair market value to certain executives in exchange for full recourse notes. During the second quarter, the Company determined that the individuals for whom notes remain outstanding may not be able to repay the notes when due in 2007. The Company's recording of this non-cash provision does not constitute a forgiveness of any portion of the notes. BUSINESS OUTLOOK Due to sustained global economic uncertainty and difficult trading conditions in various markets served by Penton, visibility for the Company's businesses, particularly advertising sales, remains limited. Until these factors improve significantly and allow for better visibility of future results, the Company will refrain from providing specific financial performance guidance, but will provide investors with general guidance and trending information for its markets and businesses. The Company expects third-quarter 2003 revenue to grow year over year due to the shift in timing of two major trade shows into the third quarter from last year's fourth quarter. Third-quarter adjusted EBITDA is expected to improve compared with a loss of $1.0 million in the third quarter of 2002, even after adjusting for the trade show timing change. Barring significant revenue deterioration from current forecasts, Penton expects a meaningful improvement in adjusted EBITDA and adjusted EBITDA margins as the year progresses, owing to the cost reductions put in place during 2002 and the first half of 2003. Penton does not forecast a recovery in its manufacturing or technology portfolios in 2003, although rates of decline seem to be slowing in these businesses. Penton's natural products, foodservice, construction, and government market portfolios are expected to generate growth through the remainder of the year. "While several of our operating groups seem to have reached stability after a difficult two-year period, spending in traditional business-to-business media has not recovered," said Kemp. "Our imperative in this environment is to drive revenues by developing marketing solutions for our customers that address their need for rapid, high-quality lead generation. We've made very good progress, particularly in the areas of customized events and e-media solutions. "With continuing pressure on revenues, we are managing costs very closely throughout Penton, and working to improve key business processes to create permanent reductions in the Company's cost structure." Penton Media -- http://www.penton.com-- is a diversified business-to-business media company that produces market-focused magazines, trade shows and conferences, and online media. Penton's integrated media portfolio serves the following industries: aviation; design/engineering; electronics; food/retail; government/compliance; Internet/information technology; leisure/hospitality; manufacturing; mechanical systems/construction; natural products; and supply chain. PEREGRINE SYSTEMS: Completes Ch. 11 Reorganization Proceedings -------------------------------------------------------------- Peregrine Systems, Inc., a global provider of Consolidated Asset and Service Management software, has completed all requirements for emerging from bankruptcy court supervision under Chapter 11 and will implement its confirmed Plan of Reorganization. Peregrine's restructuring plan provides full recovery by many creditors, a substantial equity stake in the reorganized company to existing shareholders and sustains the company's business in enterprise software. The Plan of Reorganization of Peregrine Systems, Inc., was confirmed by the U.S. Bankruptcy Court for the District of Delaware on July 18, and it will become effective Thursday. The Plan was modified -- from the original version initially filed by Peregrine on Jan. 20 -- to reflect a consensus among all major constituencies in the company's reorganization, including the Official Committee of Unsecured Creditors and the Official Committee of Equity Security Holders. "We are proud to be the first enterprise software company to reorganize successfully under Chapter 11 as a public entity," said Gary Greenfield, Peregrine's CEO. "Last year was a remarkable one for Peregrine. We owe our success to the loyalty of our customers and partners, and an extraordinary commitment among employees worldwide to move the company forward. "We have focused and mobilized the company in Consolidated Asset and Service Management with software products that enable organizations to manage IT for the business," said Greenfield. "We are continuing to deliver new product releases that drive out costs through asset management best practices and improved service delivery across global operations. As we develop the next- generation enterprise IT management software, Peregrine is poised for new opportunities and growth." Colleen Niven, vice president of research at AMR Research, said, "As Peregrine continues to emerge and deliver on commitments, sticking to core competencies and listening to customers bode well for its success. As a leader in the service and asset management space, it has a great opportunity." Serving Customers and Partners During the past year, Peregrine continued to work with partners and serve its worldwide customers. Gary Bullard, general manager of IBM Global Solutions, said, "Peregrine's Consolidated Asset and Service Management software is an important component of our e- business on demand solutions to help customers reduce costs. We look forward to continuing to work with Peregrine in the future." Jorg Matz, senior consultant in the Peregrine Competence Center at Lufthansa Systems, commented, "We have been committed to Peregrine for the last 14 years because its products are the best available on the market. ServiceCenter(R)'s great flexibility allows us to adapt the software exactly to our needs. Last year, we enhanced the solution by implementing AssetCenter(R) and all Get-It(TM) modules." Among Peregrine's 3,500 customers are Global 1000 companies with enterprise-wide implementations, as well as midsize organizations and departments. They include: AAA of Michigan; Aeroports de Paris; ActewAGL; AXA Asia Pacific Holdings; Bank of America; Bayer Corp.; Circuit City; Danske Bank; Enterprise Rent-A-Car; First Data International, Australia, New Zealand, South Asia; IMS Health, Inc.; Japan Tobacco, Inc.; Kokuyo Co., Ltd.; Kawasaki Heavy Industries, Ltd./Benic Solutions Corp.; Lufthansa Systems; Panasonic; and the University of New Mexico. Peregrine's strategic partners include leading global service delivery organizations, which deploy Consolidated Asset and Service Management offerings to serve large numbers of their own customers. As a result, Peregrine has established important relationships with managed service providers, systems integrators and resellers (such as IBM Corp., Evergreen Systems, Inc., Infrasolve Ltd., ITM Brazil, Linium and Rubik). New Board of Directors The Plan called for the creation of a new, seven-member board of directors, effective today. Pursuant to the Bankruptcy Court's Confirmation Order dated July 18, the Official Committee of Unsecured Creditors named four of the new directors, while the Official Committee of Equity Security Holders selected three. Accordingly, the new board will consist of the following directors: -- Carl Goldsmith, 37, managing director and portfolio manager at MW Post Advisory Group, LLC, and a director of Pacific Aerospace & Electronics, Inc.; -- James Harris, 57, president and founder of Seneca Financial Group, Inc., and a director of El Paso Electric Company's board, member of its Executive Committee and chairman of its Nominating and Governance Committee; -- Robert Horwitz, 51, managing member of RH Capital Associates, LLC, and a director of Dice, Inc.; -- Mark Israel, 48, director of distribution and channel sales for Magellan Products, a division of Thales Navigation; -- James Jenkins, 55, portfolio manager at Mellon HBV Alternative Strategies, LLC, and a director of Telespectrum Worldwide, Inc.; -- John Mutch, 47, general partner and founder of MVenture Holdings, LLC, and a director of Brio Software, Inc. and Overland Storage; and -- Ben Taylor, 41, managing director at Weiss, Peck & Greer Investments, a division of Robeco USA, LLC. "The management team looks forward to working with these incoming directors as Peregrine begins a new chapter," said Greenfield. In addition, he saluted the outgoing board members, saying: "These leaders in business and technology formed a truly world-class board that has served us well in recent months. We thank them all for the guidance and insight they brought to Peregrine as we navigated a difficult period in the company's history." Milestones in Reorganization Within the past year, Peregrine achieved a number of significant milestones. The company successfully reorganized its business in core areas of strength in enterprise software, continuing to offer best-in-class solutions for asset and service management. Peregrine introduced new versions of its flagship products, ServiceCenter and AssetCenter, established Customer Advisory Councils in North America and EMEA (Europe, Middle East and Asia) and continued to invest resources in research and development, customer support and professional services. Earlier this year, Peregrine completed a restatement of financial results for 11 quarters in fiscal years 2002, 2001 and 2000. Recently, the company reached agreement with the Securities and Exchange Commission in a civil action it has filed against the company, and the agency announced it would not seek financial damages in the case. Pursuant to Peregrine's agreement with the SEC, the company today filed a Form 8-K containing an assessment of its internal controls and financial reporting procedures. Peregrine is also continuing to implement a compliance program with a focus on company-wide processes and procedures. In addition, the board of directors is in the process of completing the selection of a new compliance officer. Following the effective date of the Plan, Nasdaq Market Operations and Participants Services will issue a new symbol for Peregrine's common stock. The new stock symbol will be posted on Peregrine's Web site as soon as it becomes available. Peregrine filed a voluntary Chapter 11 petition on Sept. 22, 2002 after accounting irregularities came to light, requiring a restatement of 11 quarters of financial results. Founded in 1981, Peregrine Systems, Inc. develops and sells enterprise software to enable its 3,500 customers worldwide to manage IT for the business. The company's Consolidated Asset and Service Management offerings allow organizations to improve asset management and gain efficiencies in service delivery -- driving out costs, increasing productivity and accelerating return on investment. The company's flagship products -- ServiceCenter and AssetCenter -- are complemented by Employee Self Service, Automation and Integration capabilities. Peregrine is headquartered in San Diego, Calif. and conducts business from offices in the Americas, Europe and Asia Pacific. For more information, please visit: http://www.peregrine.com Peregrine Systems, ServiceCenter, AssetCenter, and Get-It are trademarks of Peregrine Systems, Inc. or its affiliates. All other marks are the property of their respective owners. Partner Quotes: Don Casson, CEO, Evergreen Systems, Inc., said, "Over the past year Peregrine has returned to its roots, focusing on Consolidated Asset and Service Management solutions. Peregrine solutions have always been top of class -- well built and designed to meet the business needs of enterprise level customers. We welcome Peregrine's emergence from Chapter 11. We expect it to add more strength to their renewed focus and help re-establish clear leadership in the marketplace." Evergreen is a Reston, Va. based IT infrastructure management consulting firm. Joe McKenna, managing director, Infrasolve Ltd., said, "Infrasolve has worked closely with Peregrine over the past year to win new business and implement new projects. Our joint customers continue to view Peregrine as a market leader, and they have been greatly reassured by Peregrine's straightforward communication, the dedication of their employees and their continued strong investment in product development. Infrasolve shares Peregrine's strategic vision and looks forward to the further development of our joint market." Infrasolve is a UK-based IT infrastructure management company. ITM Brasil president Alberto Kushima said, "Our customers have continued to choose Peregrine's Consolidated Asset and Service Management software because they are clearly the best in the industry. We have completed many successful implementations in the last year, and we're looking forward to continued growth in the years to come. We are delighted that Peregrine is emerging from Chapter 11, and we will continue to partner with Peregrine to deliver solutions that will help our customers drive out costs and better align IT with their organizations' strategic business goals." ITM Brasil is a leading IT consulting company based in Sao Paulo, Brazil. Jesse White, managing partner of Linium, said, "We are very pleased to be working with Peregrine for the last eight years, providing best-in-class Consolidated Asset and Service Management solutions. In our customers' experience, the Peregrine solution has dramatically reduced the total cost of ownership for the enterprise. Linium supports Peregrine's vision and their commitment to delivering proven products to market in a timely manner in these challenging times. We celebrate Peregrine's diligence, and look forward to continuing to work with them as the leading Consolidated Asset and Service Management vendor as the company emerges from Chapter 11." Linium is an IT consulting firm based in Albany, N.Y. Rubik's business manager Gunnar H. Wiik said, "As a Peregrine partner for the past five years, we continue to see demand for Peregrine's Consolidated Asset and Service Management solutions because they deliver real value in today's tough economy. We applaud their emergence from Chapter 11 and anticipate continued growth." Rubik is a provider of IT value management solutions in Nordic region. Customer Quotes: Roland Manfredi, chief of IT infrastructure at Aeroports de Paris, said, "ServiceCenter, Peregrine Systems' service management solution, allows Aeroports de Paris to support and radically increase the level of service to ADP users by simplifying, securing and reducing the time to close incidents. ADP will continue to invest in Peregrine solutions because they are the foundation of our long-term technology infrastructure management." ADP is the airport authority for Paris. Roger Marsden, head of managed services for O2 Airwave, said, "In the last year, Peregrine has returned to its roots in Consolidated Asset and Service Management solutions, and despite the problems they have faced, we've been impressed by its continuing dedication to product innovations and customer service. We have been extremely pleased with AssetCenter and ServiceCenter and plan to reinforce our use in the near future." O2 Airwave is a digital emergency communications service from mmO2 plc, a UK-based provider of mobile services and communications solutions. Lisa Jerrard, infrastructure project manager, IMS Health, Inc., said, "We've been using Peregrine ServiceCenter and AssetCenter since December 2000, and Peregrine's technical support team has always responded quickly, proactively and professionally. The Peregrine products are key to our operations, and therefore effective support is critical to our success. The Peregrine team has always lived up to the challenge and made us feel comfortable about calling and asking for help." IMS is a global provider of pharmaceutical market intelligence with a presence in more than 100 countries. PEREGRINE SYSTEMS: Will File SEC Forms 10-K and 10-Q in October --------------------------------------------------------------- Peregrine Systems, Inc., commented on its expectations for the release of operating results and other financial information following the effective date of its Plan of Reorganization. As previously announced, the reorganization plan became effective on Aug. 7, 2003. The company reminded investors that it has not filed Annual Reports on Form 10-K for the fiscal years ended March 31, 2003 and 2002 nor Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 2003, Dec. 31, 2002, Sept. 30, 2002 or June 30, 2002. In addition, Forms 10-K and 10-Q on file with the Securities and Exchange Commission for periods prior to this date may not be reliable. The company is in discussions with the SEC concerning its historical filings. Currently, the company believes that it will be able to file its Form 10-K for the fiscal year ended March 31, 2003 and its Form 10-Q for the fiscal quarter ended June 30, 2003 by the end of October of this year. However, there can be no assurance that the filings will be made by that time. The company's filing schedule could be impacted by a number of factors, including, among others things, its discussions with the SEC and the ability of management to devote sufficient resources to completion of the reports in view of numerous other post-bankruptcy priorities, including completing the documentation and implementation of a variety of internal controls, as detailed in the company's Current Report on Form 8-K filed Aug. 7, 2003. Until the company files current reports with the SEC, investors in the company's securities will not have current financial information. Investors are cautioned to take this into account in making decisions to purchase or sell the company's securities. Founded in 1981, Peregrine Systems, Inc. develops and sells enterprise software to enable its 3,500 customers worldwide to manage IT for the business. The company's Consolidated Asset and Service Management offerings allow organizations to improve asset management and gain efficiencies in service delivery -- driving out costs, increasing productivity and accelerating return on in vestment. The company's flagship products -- ServiceCenter(R) and AssetCenter(R) -- are complemented by Employee Self Service, Automation and Integration capabilities. Peregrine is headquartered in San Diego, Calif. and conducts business from offices in the Americas, Europe and Asia Pacific. For more information, please visit: http://www.peregrine.com PEREGRINE SYSTEMS: Makes $18 Million Payment to Kilroy Realty ------------------------------------------------------------- Kilroy Realty Corporation (NYSE:KRC) has received $18.3 million from Peregrine Systems, Inc. as part of a previously announced settlement resulting from Peregrine's 2002 bankruptcy filing. In accordance with the settlement, Kilroy Realty will also receive approximately $750,000 to be paid annually in August over the next four years. Kilroy Realty Corporation, a member of the S&P Small Cap 600 Index, is a Southern California-based real estate investment trust active in the office and industrial property sectors. For more than 50 years, the company has owned, developed, acquired and managed real estate assets primarily in the coastal regions of California and Washington. Principal submarkets for KRC's current development program include El Segundo and coastal San Diego. At June 30, 2003, the company owned 6.9 million square feet of commercial office space and 4.9 million square feet of industrial space. More information can be found at www.kilroyrealty.com. Peregrine filed a voluntary Chapter 11 petition on Sept. 22, 2002 after accounting irregularities came to light, requiring a restatement of 11 quarters. Founded in 1981, Peregrine Systems develops and sells application software to help large global organizations manage and protect their technology resources. With a heritage of innovation and market leadership in Consolidated Asset and Service Management software, the company's flagship offerings include ServiceCenter(R) and AssetCenter(R), complemented by employee self service, automation and integration functionalities. Headquartered in San Diego, Calif., Peregrine's solutions facilitate the automation of business processes, resulting in increased productivity, reduced costs and accelerated return on investment for its more than 3,500 customers worldwide. For more information, visit http://www.peregrine.com Peregrine Systems, Inc. (OTC: PRGNQ), a leading provider of Consolidated Asset and Service Management software, announced that the U.S. Bankruptcy Court has confirmed its Plan of Reorganization. Judge Judith Fitzgerald, presiding judge in the Bankruptcy Court in the District of Delaware in Wilmington, approved the proposed order submitted by Peregrine, ruling that the company had satisfied the necessary requirements for confirmation of its Plan. Earlier this month, Peregrine reached consensus on the Plan with the Official Committee of Unsecured Creditors and the Official Committee of Equity Holders, which represents the company's creditors and shareholders respectively. PG&E NAT'L: U.S. Trustee Appoints NEG Unsecured Creditors' Panel ---------------------------------------------------------------- On July 17, 2003, W. Clarkson McDow, Jr., the United States Trustee for Region 4, appoints these entities to the Official Committee of PG&E National Energy Group Inc. Unsecured Creditors, pursuant to Section 1102(a)(1) of the Bankruptcy Code: A. ABN AMRO Bank N.V. Attn: William J. Fitzgerald 350 Park Avenue, 2nd Floor, New York, NY 10022 Phone: (212)251-9685 Fax: (212)251-9685; B. Citibank N.A./Citicorp USA, Inc. Attn: Gregory Frenzel/Marni McManus 250 West St., 8th Floor, New York, NY 10013 Phone: (212)723-3106 Fax: (212)723-3964; C. Credit Lyonnaise New York Branch Attn: John-Charles van Essche 1301 Avenue of the Americas, New York, NY 10019 Phone: (212)261-7746 x 7891 Fax: (212)261-3259 x 3421; D. JP Morgan Chase Bank Attn: Agnes Levy 270 Park Avenue, New York, NY 10017 Phone: (212)270-0420 Fax: (917)464-8909; E. Liberty Electric Power, LLC Attn: Catherine B. Callaway 1111 Louisiana, Room 4313, Houston, TX 77002 Phone: (713)497-5715 Fax: (713)497-0161; F. Societe Generale Attn: Nina M. Ross 1221 Avenue of Americas, New York, NY 10020 Phone: (212)278-7024 Fax: (212)278-6460; and G. The Royal Bank of Scotland, PLC Attn: Colin Bickle 101 Park Avenue, New York, NY 10178 Phone: (212)401-1383 Fax: (212)401-3759 (PG&E National Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX: Turns to KPMG as Accountants and Financial Advisors -------------------------------------------------------------- Pillowtex Corporation and its debtor-affiliates seek to employ and retain the firm of KPMG LLP, pursuant to Section 327 of the Bankruptcy Code, as their accountants and financial advisors during the Chapter 11 cases and all related matters, effective as of the Petition Date. KPMG will provide, among other things, audit, tax and other services to the Debtors. KPMG has served as Pillowtex's accountants and financial advisors for years. Because of this, KPMG possesses a great deal of institutional knowledge of the Debtors and is already familiar with the Debtors' business affairs to the extent necessary for the scope of the proposed and anticipated services. KPMG has also indicated a willingness to act on behalf of the Debtors and to subject itself to the jurisdiction and supervision of the Court. Furthermore, Scott B. Davis, in his affidavit, assures the Court that KPMG is a disinterested person as the term is defined in Sections 101(14) and 1107(b). Thus, the Debtors believe that, KPMG is qualified to serve them as accountants, auditors and advisors and to represent them in a cost-effective, efficient and timely manner. These are services that KPMG will provide to the Debtors: A. Accounting and Auditing Services (1) audits of the financial statements of the Debtors as may be required from time to time, and advice and assistance in the preparation and filing of financial statements and disclosure documents required by the Securities and Exchange Commission including Forms 10-K as required by applicable law or as requested by the Debtors in accordance with the April 2, 2003 engagement letter; (2) audits of any benefit plans as may be required by the Department of Labor or the Employee Retirement Income Security Act, as amended in accordance with the October 1, 2002 engagement letter; (3) review of the unaudited quarterly financial statements of the Debtors as required by applicable law or as requested by the Debtors in accordance with the April 2, 2003 engagement letter; and (4) assistance in the preparation and filing of the Debtors' registration statements required by the Securities and Exchange Commission in relation to debt and equity offerings in accordance with the April 2, 2003 engagement letter; B. Tax Advisory Services (1) review of and assistance in the preparation of the filing of the Debtors' federal tax return and work papers in accordance with the May 27, 2002 engagement letter and any other tax return as requested by the Debtors; (2) advice and assistance regarding tax planning issues, including calculating net operating loss carry forwards and the tax consequences of any proposed plans of reorganization, and assistance in the preparation of any Internal Revenue Service ruling requests regarding the future tax consequences of alternative reorganization structures; (3) assistance regarding existing and future Internal Revenue Service, state and local tax examinations; (4) assistance regarding real and personal property tax matters, including review of real and personal property tax return, tax research, negotiation of values with appraisal authorities, preparation and presentation of appeals to local taxing jurisdiction and assistance in litigation of property tax appeals; and (5) assistance regarding federal, state and local payroll and unemployment tax matters including inquiries and examinations relating to the North Carolina SUI restructuring initiatives in accordance with the November 6, 2002 engagement letter; C. Financial Advisory Services (1) advice and assistance in the preparation of reports or filings as required by the Bankruptcy Court or the Office of the United States Trustee, including any monthly operating reports and Schedules of Assets and Liabilities or Statements of Financial Affairs and Executory Contracts; (2) assistance in various analyses of creditor claims; (3) assistance with preference or other avoidance actions; (4) advice and assistance, as requested, with the continuing operation of the Debtors' business in order to consummate the proposed transaction with SB Capital, to maintain and preserve the assets of the Debtors' estates, and to maximize distribution to creditors; (5) advice and assistance in the preparation of financial information and documents necessary for confirmation of the Chapter 11 cases including information contained in the disclosure statement; (6) attendance at meetings of the Debtors' management and counsel focused on the coordination of resources related to the continued operation of the Debtors' business in order to consummate the proposed transaction with SB Capital, to maintain and preserve the assets of the Debtors' estates, and to maximize distributions to creditors; (7) advice and assistance to the Debtors in the identification of and, to the extent requested, consultation related to the implementation of internal cost reduction plans; (8) advice and assistance in the review or development of labor and employee compensation arrangements; and (9) analysis of assumption and rejection issues regarding executory contracts and leases. The Debtors have agreed to pay KPMG fixed fees for these audit services: (i) $72,000 for audit services related to each review of the Debtors' consolidated financial statements for the quarters ending March 29, June 28 and September 27, 2003; and (ii) $15,500 for the 2002 audit of some of the Debtors' defined benefit plans and health and welfare plans. To note, the fees for the examination of financial statements for year ended December 31, 2003 will be determined at the appropriate time, subject to approval of the Court and the Audit Committee of the Debtors' Board of Directors. The Debtors have agreed to compensate KPMG for Hourly Fee services performed postpetition in accordance with the indicated hourly rate of each KPMG professional providing services under the proposed engagement: Professional Rate ------------ ------------ Partners $400 - 600 Managing Directors/Directors 380-510 Senior Managers/Managers 320-420 Senior Associates 230-330 Associates 120-240 Paraprofessionals 90-120 (Pillowtex Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) PRIMUS TELECOMMS: Plans to Redeem $10 Million of 11.75% Bonds ------------------------------------------------------------- PRIMUS Telecommunications Group, Incorporated (Nasdaq:PRTL), a global telecommunications services provider offering an integrated portfolio of voice, data, Internet and hosting services, has given notice to the Trustee under the Indenture for the 11.75% Senior Notes due August 2004 of its intent to redeem $10 million principal amount of the bonds on September 15, 2003. Currently, $43.5 million principal amount of the 2004 Senior Notes are outstanding. The bonds will be redeemed at par plus accrued interest to the date of redemption. PRIMUS Telecommunications Group, Incorporated (NASDAQ:PRTL) -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $127 million -- is a global telecommunications services provider offering integrated voice, data, Internet, digital subscriber line, Web hosting, enhanced application, virtual private network, and other value-added services. PRIMUS owns and operates an extensive global backbone network of owned and leased transmission facilities, including approximately 250 points-of-presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 international gateway and domestic switches, a satellite earth station and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global state-of-the-art broadband fiber optic ATM+IP network and data centers to offer customer Internet, data, hosting and e-commerce services. Founded in 1994 and based in McLean, VA, PRIMUS serves corporate, small- and medium-sized businesses, residential and data, ISP and telecommunication carrier customers primarily located in the North America, Europe and Asia Pacific regions of the world. News and information are available at PRIMUS's Web site at http://www.primustel.com RADIO ONE: Reports Slightly Improved Second Quarter 2003 Results ---------------------------------------------------------------- Radio One, Inc. (NASDAQ:ROIAK and ROIA) (S&P, B+ Corporate Credit Rating, Positive) reported its results for the quarter ended June 30, 2003. Net broadcast revenue was approximately $80.9 million, an increase of 1% from the same period in 2002. Cash advertising revenue for the quarter grew approximately 2% while special events and non- traditional revenue (which represented approximately 3% of the Company's revenue in the quarter) declined 13% as less profitable revenue-generating events were terminated or downsized. Operating income was approximately $35.3 million, a decrease of 1% from the same period in 2002. Station operating income was approximately $43.1 million, a decrease of 1% from the same period in 2002. EBITDA was approximately $40.2 million, relatively unchanged from the same period in 2002. Net income was approximately $15.7 million, or $0.15 per share, an increase of 19% from net income of approximately $13.2 million, or $0.13 per share (which represents a 15% increase on a per share basis), for the same period in 2002. Free cash flow was $22.5 million, an increase of 25% from free cash flow of approximately $18.0 million for the same period in 2002. Alfred C. Liggins, III, Radio One's CEO and President stated, "This quarter was even more difficult than the first quarter of 2003, as the war had a negative impact on advertisers' buying decisions and industry pricing throughout the period. Nevertheless, Radio One managed to grow its revenue in the face of this difficult environment and results were above the mid-point of our revenue guidance for the second quarter. It is also important to note that underperformance relative to market growth at our Houston stations resulted in an approximate 150 basis point reduction in our overall revenue performance. We are focused on correcting the problems at our Houston properties and believe that the worst of that market's performance is now behind us. We are pleased that things appear to be improving in the industry, although that improvement is slow and somewhat inconsistent. Further, we are excited by the recent signing of our joint venture agreement with Comcast with regard to the formation of TV One, the African-American targeted cable channel we expect to launch in the first quarter of 2004. We look forward to reporting other exciting developments at TV One in upcoming quarters." With the adoption of Regulation G by the SEC, station operating income replaces broadcast cash flow as the metric used by management to assess the performance of our stations. Station operating income is calculated in the same manner as broadcast cash flow. It is important to note that EBITDA, station operating income and free cash flow are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles. Management believes that these measures are useful as a way to evaluate the Company and the means for management to evaluate our radio stations' performance and operations. Management believes that these measures are useful to an investor in evaluating our performance because they are widely used in the broadcast industry to measure a radio company's operating performance. You should not consider these non-GAAP measures in isolation or as substitutes for net income, operating income, or any other measure for determining our operating performance that is calculated in accordance with generally accepted accounting principles. These non-GAAP measures are not necessarily comparable to similarly titled measures employed by other companies. Net broadcast revenue increased to approximately $80.9 million for the quarter ended June 30, 2003 from approximately $80.2 million for the quarter ended June 30, 2002 or 1%. Net broadcast revenue increased to approximately $144.3 million for the six months ended June 30, 2003 from approximately $138.5 million for the six months ended June 30, 2002 or 4%. These increases were the result of net broadcast revenue growth in several of Radio One's markets, including Atlanta, Cleveland, Dallas and Los Angeles, partially offset by revenue declines in several other markets, including Baltimore, Houston, Philadelphia and Richmond. Operating expenses increased to approximately $45.6 million for the quarter ended June 30, 2003 from approximately $44.6 million for the quarter ended June 30, 2003 or 2%. Operating expenses increased to approximately $88.1 million for the six months ended June 30, 2003 from approximately $84.4 million for the six months ended June 30, 2002 or 4%. Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $40.7 million for the quarter ended June 30, 2003 from approximately $39.9 million for the quarter ended June 30, 2002 or 2%. Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $78.2 million for the six months ended June 30, 2003 from approximately $75.0 million for the six months ended June 30, 2002 or 4%. These increases in expenses were related primarily to (1) increased variable expenses associated with increased revenue and (2) higher programming expenses in certain markets with new radio station formats and/or programming, such as with two relatively young stations in Atlanta and the syndication of the Steve Harvey Morning Show to one of Radio One's Dallas stations. Interest expense decreased to approximately $10.7 million for the quarter ended June 30, 2003 from approximately $14.8 million for the quarter ended June 30, 2002 or 28%. Interest expense decreased to approximately $21.1 million for the six months ended June 30, 2003 from approximately $31.7 million for the six months ended June 30, 2002 or 33%. These decreases relate primarily to a reduction of outstanding bank debt (starting in the middle of the second quarter of 2002) with the proceeds received from the Company's April 2002 equity offering and from principal payments made, utilizing free cash flow, beginning at the end of the first quarter of 2003, as well as lower interest rates on that bank debt as a result of declining leverage and lower market interest rates over the past 12 months. Income before provision for income taxes and cumulative effect of an accounting change increased to approximately $25.3 million for the quarter ended June 30, 2003 compared to income before provision for income taxes and cumulative effect of an accounting change of approximately $21.3 million for the quarter ended June 30, 2002 or 19%. This increases was due primarily to lower interest expense as described above. Income before provision for income taxes and cumulative effect of an accounting change increased to approximately $36.4 million for the six months ended June 30, 2003 compared to income before provision for income taxes and cumulative effect of an accounting change of approximately $23.4 million for the six months ended June 30, 2002 or 56%. This increase was due primarily to higher operating income due to higher revenue and lower interest expense as described above. Net income increased to approximately $15.7 million for the quarter ended June 30, 2003 from approximately $13.2 million for the quarter ended June 30, 2002 or 19%. Net income increased to approximately $22.6 million for the six months ended June 30, 2003 compared to a net loss of approximately $15.3 million for the six months ended June 30, 2002. These increases were due to higher income before provision for income taxes and cumulative effect of an accounting change, as well as the effect of the accounting change in the first quarter of 2002, which reduced net income in that period by approximately $29.8 million. Station operating income decreased to approximately $43.1 million for the quarter ended June 30, 2003 from approximately $43.4 million for the quarter ended June 30, 2002 or 1%. Station operating income increased to approximately $72.2 million for the six months ended June 30, 2003 from approximately $69.2 million for the six months ended June 30, 2002 or 4%. These changes were attributable primarily to the increase in net broadcast revenue more than offset in the second quarter of 2003 (and partially offset for the six month period of 2003) by higher operating expenses associated with Radio One's overall growth as described above. EBITDA was relatively unchanged at approximately $40.2 million for the quarter ended June 30, 2003 compared to approximately $40.3 million for the quarter ended June 30, 2002. EBITDA increased to approximately $66.1 million for the six months ended June 30, 2003 from approximately $63.5 million for the six months ended June 30, 2002 or 4%. This change was attributable primarily to the increase in net broadcast revenue partially offset by higher operating expenses and higher corporate expenses associated with Radio One's overall growth as described above. Capital expenditures totaled approximately $2.9 million in the second quarter of 2003 compared to capital expenditures of approximately $3.1 million in the second quarter of 2002. In the second quarter of 2003, deferred portion of the income tax provision was approximately $9.5 million. In the second quarter of 2003, amortization of debt financing costs, unamortized debt discount and deferred interest was approximately $0.4 million and is included in interest expense on Radio One's income statement. As of June 30, 2003, Radio One had total debt (net of cash balances) of approximately $539.0 million. Radio One Information and Guidance For the third quarter of 2003, Radio One expects to report an increase in net broadcast revenue that will be in the range of 1% to 4% greater than the approximately $80.5 million of net broadcast revenue generated in the third quarter of 2002. Radio One expects third quarter 2003 station operating expenses (defined as programming and technical and selling, general and administrative expenses) to be essentially flat as compared to last year's third quarter amount of approximately $37.4 million and corporate expenses to increase in the low single digit percentage range from last year's third quarter amount of approximately $3.3 million. Radio One, Inc. -- http://www.radio-one.com-- is the nation's seventh largest radio broadcasting company (based on 2002 net broadcast revenue) and the largest company that primarily targets African-American and urban listeners. Radio One owns and/or operates 66 radio stations located in 22 urban markets in the United States and reaches approximately 12.5 million listeners every week. Radio One also programs five channels on the XM Satellite Radio Inc. system. RURAL/METRO: Wins Five-Year Renewal Contract with Indy Motor ------------------------------------------------------------ Rural/Metro Corporation (Nasdaq:RUREC), a leading national provider of ambulance and fire protection services, has been awarded a five-year renewal contract to continue as the emergency medical services provider to the Indianapolis Motor Speedway. The contract expands Rural/Metro's current role at the Speedway to include paramedic staffing in all pit areas, as well as managing a fully staffed first-aid station in the garage area. The company provides care during all other events at the venue, including practice sessions, tire testing, and a variety of community events. Rural/Metro has provided emergency medical services to the Speedway since 1995. The Indianapolis Motor Speedway occupies more than 300 acres on the northwest side of the city and is host to the three largest single-day sporting events in the world: the Indianapolis 500, the Brickyard 400, and the United States Grand Prix Formula One Race. Jack Brucker, President and Chief Executive Officer, said, "We are very proud to extend our long-standing relationship with the Indianapolis Motor Speedway and look forward to continuing to serve the EMS needs of race professionals and patrons in Indianapolis." On race days, Rural/Metro provides staffing and resources including 24 ambulances, 120 paramedics and emergency medical technicians, seven quick-response specialty EMS teams, 14 first aid stations, medical dispatching services, and on-site management. Dr. Henry Bock, Medical Director for Indianapolis Motor Speedway, said, "Rural/Metro has demonstrated high-quality care and commitment to the Indianapolis Motor Speedway and to the safety of its patrons for many years. We continue to be pleased with their services and look forward to our renewed partnership to provide patient care." John Karolzak, Regional Division General Manager for Rural/Metro operations in Indiana, said, "Our employees are committed to providing top-quality emergency medical services by ensuring that race fans and participants are given the very best care possible. We are excited about the opportunity to strengthen and enhance that role in the future." Rural/Metro Corporation, whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $160 million, provides emergency and non-emergency medical transportation, fire protection, and other safety services in approximately 400 communities throughout the United States. For more information, visit the Rural/Metro Web site at http://www.ruralmetro.com SAFETY-KLEEN: Systems' $135 Mill. Senior Security Credit Terms -------------------------------------------------------------- Safety-Kleen Systems, Inc., a surviving Reorganized Debtor, presents the terms of an Initial Commitment Letter embodying a $135,000,000 Senior Secured Term Loan Facility. The Commitment Letter is signed by representatives of Goldman Sachs Credit Partners LP and Silver Point Capital, LP, as Lead Lenders. The purpose of this financing is to: (a) consummate the Modified First Amended Joint Plan of Reorganization of Safety-Kleen Corp. and certain of its direct and indirect subsidiaries; (b) refinance certain of the Debtors' existing indebtedness; (c) provide for the on-going working capital needs of the Borrower; and (d) provide for other general corporate purposes of the Borrower, including certain expenses associated with the Debtors' emergence from Chapter 11 bankruptcy protection. Safety-Kleen Services, Inc., entered into the Proposal Letter dated July 8, 2003, with GSCP, Silver Point and WF Foothill, under which GSCP, Silver Point and Foothill proposed to structure, arrange and syndicate senior secured credit facilities for the Borrower in an aggregate amount of up to $300,000,000. The Proposal Letter - which did not constitute a commitment to provide the Credit Facilities -- contemplated that commitments to provide the Credit Facilities would be provided in two stages -- the first of which would be the delivery of a commitment for a term loan in an amount not to exceed $135,000,000, and the second of which would be the delivery of a commitment for a revolving loan and letter of credit facility. GSCP will provide commitments in an amount not to exceed $90,000,000 and Silver Point will provide commitments in an amount not to exceed $90,000,000, up to a maximum combined amount of $135,000,000. Syndication The Debtors and the Lead Lenders agree that GSCP will act as sole lead arranger and sole lead bookrunner for the Credit Facilities and that GSCP will, in such capacity, perform the duties and exercise the authority customarily performed and exercised by it in such role. The Lead Lenders will have sole discretion in the appointment of, and awarding of titles to, other agents, co- agents, arrangers or bookrunners, and will determine if any compensation will be paid - it being understood that: (i) there will be compensation payable to WF Foothill in connection with the Credit Facilities, which will be consistent with the terms set forth in the Proposal Letter and in the Revolving Term Sheet, and (ii) WF Foothill will have the titles and perform the duties in the Proposal Letter and the Revolving Term Sheet. The Lead Lenders intend -- together with Foothill -- to syndicate the Credit Facilities to a group of financial institutions identified by the Lead Lenders. The Lead Lenders will manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. Costs and Expenses In consideration of the commitment of the Lead Lenders and the costs and expenses they incur, the Debtors agree to pay those expenses, regardless of whether any of the transactions contemplated are consummated. The Debtors also agree to pay all reasonable costs and expenses of each of the Lead Lenders incurred in connection with the enforcement of any of their rights and remedies under the transactions. Upon acceptance of the commitment letter, the Safety-Kleen Debtors agree to pay to Silver Point, for the benefit of the Lead Lenders, a work fee equal to $250,000, which will be applied to the payment of costs and expenses payable by the Debtors. Silver Point, for the benefit of the Lead Lenders, will retain the Work Fee regardless of whether the Term Loan Facility is consummated; provided, however, that if either: (a) the closing date occurs under Transaction and the Lead Lenders are paid the fees payable to them on such closing date; or (b) the Lead Lenders indicate that they are no longer willing to pursue the proposed financing, any unapplied balance of the Work Fee will be refunded to the Debtors. The Terms The significant terms and conditions of this commitment are: Borrower: Safety-Kleen Systems, Inc. and its subsidiaries. Lenders: Silver Point Finance, LLC or its affiliates and Goldman Sachs Credit Partners LP. Sole Lead Arranger and Sole Lead Book-Runner: GSCP Co-Collateral Agent: Silver Point Facility: A senior secured term loan facility with a Maximum Credit Amount of $135,000,000. Under the Facility, the Lead Lenders would provide a term loan in an amount equal to: (a) $115,000,000, plus (b) an amount, up to a maximum of $20,000,000, equal to the sum of: -- the positive difference of $100,000,000, minus the Revolver Borrowing Base, if any, and -- the positive difference of $60,000,000, minus the aggregate of the L/C Facility Borrowing Base, if any. At the Debtors' option, the Maximum Credit Amount may be reduced to $115,000,000 at any time prior to the Closing Date. Leverage Covenant: The aggregate amount outstanding under the Revolver, under the L/C Facility, and under the Term Loan will be limited to 4.0 times trailing 12 months EBITDA at close, reducing to 3.50 times at September 30, 2004, and reducing to 3.25 times at January 30, 2005. EBITDA would be adjusted for restructuring charges plus other non-recurring/unusual charges, with leverage limitations reducing pursuant to covenants to be negotiated. Amortization: None. The Term Loan would be payable at maturity, subject only to mandatory prepayments. Interest Rate: Amounts outstanding under the Term Loan would bear interest at LIBOR plus 7.50%, with a 2.50% LIBOR floor, paid current interest in cash, plus 3.50%, per annum, paid in kind. Term: Four years from the closing date. L/C Interest Rates: Advances outstanding under the Revolver would bear interest, at Systems' option, at: (a) the Base Rate plus 1.25%, or (b) the LIBOR Rate plus 3.75%. L/C Fees: Systems would be charged a letter of credit fee at a rate equal to: (1) the LIBOR margin -- plus bank issuance charges -- for Letters of Credit issued and outstanding under the Revolver, and (2) 4.25% -- plus bank issuance charges -- for Letters of Credit issued and outstanding under the L/C Facility; provided, however, that if all conditions to Systems' exercise of the L/C Facility Increase Option are satisfied or waived by the Lead Lenders and Systems exercises the L/C Facility Increase Option, the L/C Facility Rate for the portion of the L/C Facility in excess of the L/C Facility Borrowing Base will be 8.25%. Mandatory Prepayments and Commitment Reductions: Mandatory prepayments to include: (a) 100% of the net proceeds of any sale or issuance of certain equity or incurrence of certain indebtedness after the Closing Date by any of the Borrower Parties or certain of their affiliates; (b) 100% of the net proceeds of any sale or other disposition -- including any purchase price refund in respect of any acquisition -- by any of the Borrower Parties or certain of their affiliates of any assets, subject to customary exceptions; (c) 75% of excess cash flow for each fiscal year of the Borrower -- commencing with the fiscal year in which the Closing Date occurs, subject to a liquidity test; and (d) if an Event of Default is existing, 100% of net proceeds of any disposition resulting from a casualty or condemnation -- including insurance proceeds -- by any of the Borrower Parties or certain of their affiliates of any assets subject to customary exceptions. So long as any loans under the Revolver and L/C Facility are outstanding and any letters of credit under the L/C Facility are not fully cash-collateralized, the Term Loans will not be required to be prepaid. Prepayment Premium: 6% during year 1, 4% during year 2, 2% during year 3, and 0 during year 4; provided that no prepayment premium will be applicable to Mandatory Prepayments. Collateral: A shared first-priority, perfected security interest in substantially all of Borrower's now owned or hereafter acquired property and assets; and third party agreements or consents as Lead Lenders may reasonably require. Collection: Systems would direct all of its customers to remit all payments to deposit accounts that are the subject of tri-party agreements among Systems, the Revolver Agent, and the depositary banks and would be required promptly to remit any payments received by it to these deposit accounts. Financial Covenants: In addition to other customary financial covenants for transactions of this type, Systems to maintain minimum levels of EBITDA and to be subject to a limitation on annual capital expenditures, to be agreed upon, based on a discount of Systems' projected operations. Financial Reporting: Customary for the Lead Lenders' loans of this type and those deemed appropriate by the Lead Lenders for this transaction, including monthly financial statements and annual audited financial statements and projections. Affirmative Covenants: Customary for the Lead Lenders' transactions of this type; and at the Lead Lenders' option, agreement to obtain interest rate protection on terms and conditions satisfactory to the Lead Lenders. Negative Covenants: Customary for the Lead Lenders' transactions of this type. Events of Default: Customary for the Lead Lenders' transactions of this type, Scheduled Closing Date: Closing Date to occur on or before October 15, 2003. (Safety-Kleen Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) SAMSONITE: S&P Ups & Removes Low-B & Junk Ratings from Watch ------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on luggage and travel-related products manufacturer Samsonite Corp., to 'B' from 'B-'. At the same time, Standard & Poor's raised Samsonite's subordinated debt rating to 'CCC+' from 'CCC'. The ratings have been removed from CreditWatch, where they were placed Oct. 7, 2002. In addition, Standard & Poor's assigned its 'B+' rating to Samsonite's new $60 million senior secured revolving credit facilities due 2007. The bank loan rating is rated one notch higher than the corporate credit rating, because Standard & Poor's believes that lenders could expect full recovery of principal in a stressed scenario. Standard & Poor's also assigned its 'CCC' rating to Samsonite's new series of 8% convertible preferred stock. Proceeds from the sale of the new preferred stock were used to repay the company's existing bank debt. The rating on the previous bank loan has been withdrawn. In addition, the company has retired all of the outstanding shares of its 13-7/8% senior redeemable preferred stock in exchange for new preferred and common stock. The rating on the company's previous series of senior redeemable preferred stock has been withdrawn. These actions follow Samsonite's July 31, 2003, announcement that it has closed its previously announced recapitalization transaction with ACOF Management LP, Bain Capital (Europe) LLC, and Teachers' Merchant Bank, the private equity arm of Ontario Teachers' Pension Plan. The transaction not only improves the company's financial profile by lowering its total debt and preferred stock burden, but also eliminates onerous near-term bank maturities. The outlook is stable. Denver, Colorado-based Samsonite had about $429 million of total debt and about $332 million of preferred stock outstanding at April 30, 2003. "The ratings on Samsonite reflect its leveraged financial profile, narrow business focus, challenging industry conditions, and the industry's exposure to the depressed travel industry," said Standard & Poor's credit analyst David Kang. "These factors are somewhat mitigated by the company's leading market position, portfolio of well-recognized brands, and its global presence, as well as by management's focus on controlling costs." Samsonite is a global manufacturer and distributor of luggage, casual bags, business cases, and other travel-related products. Despite a somewhat narrow business focus, Samsonite has a leading market position in the competitive hard and soft-sided luggage industry with well-known brands that include Samsonite, Lark, and American Tourister. Furthermore, the company benefits from its global sourcing capabilities and broad, geographically diverse distribution network, selling in more than 100 countries worldwide. SOTHEBY'S HOLDINGS: Q2 Financial Results Show Weaker Performance ---------------------------------------------------------------- Sotheby's Holdings, Inc. (NYSE: BID; LSE) (S&P, B Corporate Credit Rating, Developing), the parent company of Sotheby's worldwide live auction business, art-related financial services and real- estate brokerage activities, announced results for the second quarter and first half ended June 30, 2003. For the second quarter ended June 30, 2003, the aggregate hammer price of property sold at auction by the Company, which includes buyer's premium, decreased $103.9 million, or 15%, compared to the same period in 2002. However, auction revenues over the same period decreased only a fraction of that amount by $4.9 million, or 4%, primarily as a result of the buyer's premium rate increase that became effective in January 2003, as well as improved consignor commission rates. For the second quarter ended June 30, 2003, net income was $14.2 million, or $0.23 per share, compared to net income of $17.9 million, or $0.29 per share, for the same period in 2002. Results for the second quarter of 2003 include employee retention costs of $2.9 million, a net benefit in restructuring charges of $0.5 million and antitrust related special charges of $0.6 million. Excluding these pre-tax items, the Company's adjusted net income for the second quarter of 2003 would have been $16.1 million, or $0.26 per share. Results for the second quarter of 2002 included pre-tax charges of $6.2 million primarily relating to employee retention costs. Excluding these pre-tax charges, the Company's adjusted net income for the second quarter of 2002 would have been $21.8* million, or $0.35* per share. As a result of the successful completion of the sale- leaseback of Sotheby's York Avenue headquarters in February of this year, the Company's liquidity position has greatly improved. However, as expected, this transaction adversely affected our results for the second quarter of 2003 as compared to the same quarter of 2002, through higher depreciation expense of $0.9 million, or 14%, as well as an increase in interest expense of $2.0 million, or 33%. The Company reported total revenues of $119.0 million for the second quarter of 2003, compared to total revenues of $127.0 million for the same period of 2002. This represents an $8.0 million decrease primarily due to the decrease in Auction Sales discussed above, as well as lower Real Estate revenues. For the first half of 2003, net loss was $13.4 million or $0.22 per share, compared to a net loss of $5.3 million, or $0.09 per share, for the first half of 2002. Included in the 2003 first half results are pre-tax retention charges of $6.3 million, net restructuring charges of $5.3 million and antitrust related special charges of $1.4 million. Excluding these items, adjusted net loss for the first half of 2003, would have been $4.8 million or $0.08 per share. Results for the first half of 2002 included net pre- tax charges of $9.4 million, primarily relating to the Company's employee retention programs. Excluding these items, the Company would have reported adjusted net income of $0.8 million, or $0.01 per share, for the first half of 2002. The Company reported total revenues of $166.7 million for the first half of 2003, compared to total revenues of $172.5 million for the same period of 2002. Direct costs for the first half of 2003 are down by $4.4 million, or 15%, from the first half of 2002. This is primarily due to lower catalogue production and mailing costs primarily resulting from the lower level of Auction Sales, as well as other catalogue savings initiatives. Also, as anticipated, retention costs were down by $6.2 million in the first half of 2003 compared to the same period of 2002. Excluding the unfavorable impact of foreign currency movements, total operating expenses for the first half of 2003 as compared to the same period in 2002 have decreased by approximately $9.6 million (excluding retention costs, net restructuring charges and antitrust related special charges), which is in addition to the over $70.0 million in cost savings already achieved in 2001 and 2002. For the six months ended June 30, 2003, the Company's Real Estate segment was adversely affected by market conditions in certain real estate markets where the Company operates. Revenues were $15.9 million for the first half of 2003, representing a $2.9 million, or 16%, decrease from the same period of 2002. Our overall results for the first half of 2003 were favorably impacted by the weakening of the U.S. Dollar against the British Pound Sterling and the Euro, which resulted in a decrease in the Company's operating loss of approximately $1.1 million. "We had a profitable second quarter with expenses very well controlled and we are satisfied with the outcome of the second quarter and first half, given the difficult circumstances that prevailed during the period," said William F. Ruprecht, President and Chief Executive Officer of Sotheby's Holdings, Inc. "The build up to the war in Iraq occurred at the prime property gathering period for our major spring sales in New York and directly affected New York consignments." Mr. Ruprecht explained: "While we saw a sizable decline in Auction Sales (-15%) in the second quarter of 2003, auction and related revenues over the same period decreased only a fraction of that (-4%), which demonstrates our ability to effectively withstand an unpredictable environment. "Our spring Impressionist and Modern art sales in New York and London performed well and Sotheby's led in this important auction category with a combined total of $155.1 million. The resilience of the art market was also evident in a number of other sales, most notably in our American Paintings sale in New York which brought $31.9 million, close to the high estimate, and our July Old Masters sales in London, which brought $38.7 million, well exceeding the high estimate. The demand for works of art that are fresh to the market and of high quality was as strong as ever, despite the challenges of the current global economic and political environment." In looking to the second half of the year, Mr. Ruprecht noted: "We are encouraged by the level of consignments, which appears to be due in part to the offering in the fall of property withheld from the spring auctions as a result of economic uncertainties related to the build up to the war in Iraq. We are also seeing an improvement in the real estate market, with properties under contract at the end of the second quarter of 2003 at a thirteen- month high for this segment of our business." Spring/Summer Highlights Pierre-Auguste Renoir's Dans les Roses (Portrait de Madame Leon Clapisson) sold for $23.5 million in New York and was the highest individual price achieved among all the Impressionist and Modern works sold in the New York and London spring sales. The highlight of the June London Impressionist sale was Egon Schiele's landscape painting, Krumauer Landschaft (Stadt und Fluss), which brought $21.1 million (12.7 million pounds), more than doubling its pre- sale low estimate. This price set a world auction record for the artist and became the highest priced restituted work of art ever auctioned. At Sotheby's sale of American Paintings, Drawings and Sculpture in New York, which totaled $31.9 million, the Collection of Meyer and Vivian Potamkin brought in $15.3 million, over $2.0 million above its high estimate. The highest price achieved at the sale was $3.0 million for John Sloan's Easter Eve, a painting depicting a nighttime New York scene, setting a record for the artist at auction. The July Old Masters sales in London achieved $38.7 million (23.7 million pounds) surpassing its high estimate of $31.5 million by $7.2 million, or 23%. The most notable lot of the sale was Rembrandt's rediscovered Self-Portrait with Shaded Eyes which sold for $11.3 million (6.9 million pounds), setting an auction record for a Rembrandt self-portrait. This Rembrandt has a remarkable history, having been hidden behind layers of overpaint for over 300 years when it was transformed into a study of an extravagantly dressed Russian aristocrat. Many other paintings achieved well above their estimates and two other artists, Jean-Marc Nattier and Giulio Cesare Procaccini, also set world records. The working manuscript of Ludwig von Beethoven's Ninth Symphony brought $3.5 million (2.1 million pounds) on May 22nd, setting the auction record for a single musical work as well as for a Beethoven manuscript. This manuscript, the first of the full score ever to come to market, is arguably the single most important musical work ever to come to auction. Karl Lagerfeld's collection of Art Deco and Works of Art which was sold in Paris on May 15th was an outstanding success. The contents of his house in Biarritz and his apartment in Monaco, which were primarily Modernist furniture and decorative arts from the 1920's and 30's, achieved $8.0 million in sales, almost tripling its low estimate of $3.0 million. Sotheby's Asia experienced an excellent spring season, despite the on-going, widespread concern surrounding the SARS viral epidemic that limited travel by many of our international clients. Sales results in Asia totaled $48.0 million for the second quarter of 2003, as compared to $47.7 million in second quarter 2002, with particular strength in the Chinese ceramics market in Hong Kong and the paintings market in Australia. Upcoming Single Owner Sales A major highlight of the upcoming auction season is the collection of American fashion legend, Bill Blass. The sale contents come from Mr. Blass' Manhattan apartment and home in Connecticut and are comprised mainly of English furniture, Old Master paintings, Italian bronzes, fine European paintings and Antiquities. The collection will be sold in New York from October 21st to 23rd and, with Pablo Picasso's Nu couche which will be sold in our November Impressionists sale, is expected to achieve in excess of $10.0 million. Also in New York, Sotheby's will be selling the Inventory and Reference Library of H. P. Kraus, the venerable New York dealers in books and manuscripts, which Sotheby's recently acquired directly from the owner. Hans P. Kraus was known to bibliophiles and book collectors the world over as the foremost dealer in rare books and manuscripts of his time and the books and manuscripts, including the renowned reference library, are estimated between $9-12 million. On October 15th, in Paris, Empire furniture and decorations, works of art, silver, ceramics, carpets, and Old Master drawings from the collection of Barbara Piaseka Johnson, will be auctioned. This wonderful collection was assembled jointly with her late husband, J. Seward Johnson Sr., co-founder of the firm Johnson & Johnson and is expected to achieve $5.0 to $7.0 million. The contents of the London home of world-renowned entertainer and philanthropist Sir Elton John will be auctioned in our London salesroom on September 30th. The vast collection of furniture, paintings and works of art from his house in Holland Park is estimated in excess of $1.3 million. Sotheby's Holdings, Inc. is the parent company of Sotheby's worldwide live auction businesses, art-related financing and real estate brokerage activities. The Company operates in 34 countries, with principal salesrooms located in New York and London. The Company also regularly conducts auctions in 13 other salesrooms around the world, including Australia, Hong Kong, France, Italy, the Netherlands, Switzerland and Singapore. Sotheby's Holdings, Inc. is listed on the New York Stock Exchange and the London Stock Exchange. For more information on the Company, visit its Web site at http://www.sothebys.com SPIEGEL GROUP: July 2003 Net Sales Tumble 29% to $99 Million ------------------------------------------------------------ The Spiegel Group reported net sales of $99.2 million for the four weeks ended July 26, 2003, a 29 percent decrease from net sales of $139.1 million for the four weeks ended July 27, 2002. For the 30 weeks ended July 26, 2003, net sales declined 22 percent to $939.4 million from $1.210 billion in the same period last year. The company also reported that comparable-store sales for its Eddie Bauer division decreased 5 percent for the four-week period and 8 percent for the 30-week period ended July 26, 2003, compared to the same periods last year. Eddie Bauer retail sales reflect strong customer response to its women's apparel offer, offset by weaker response to its men's apparel offer and home merchandise. The Group's net sales from retail and outlet stores fell 17 percent compared to last year, primarily reflecting the impact of store closings as well as the decline in comparable-store sales. At the end of July, the company's store base was 18 percent lower than last year. Year-to-date the company has closed 80 Eddie Bauer retail and outlet stores, 18 Spiegel outlet and clearance stores and nine Newport News outlet stores. The majority of these store closings were a result of the company's ongoing reorganization process. Direct net sales (catalog and e-commerce) for the Group decreased 39 percent compared to last year, primarily due to lower customer demand, the ongoing negative effect of the company's decision in early March to cease honoring the private-label credit cards issued by First Consumer National Bank to customers of its merchant companies and a planned reduction in catalog circulation. In addition, Eddie Bauer shifted the mailing of its Ultimate Summer Sale catalog to June this year from July last year which negatively impacted direct net sales for July. The Spiegel Group is a leading international specialty retailer marketing fashionable apparel and home furnishings to customers through catalogs, specialty retail and outlet stores, and e-commerce sites, including eddiebauer.com , newport-news.com and spiegel.com . The Spiegel Group's businesses include Eddie Bauer, Newport News and Spiegel Catalog. Investor relations information is available on The Spiegel Group Web site at http://www.thespiegelgroup.com SR TELECOM: Will Publish Second Quarter Results on August 29 ------------------------------------------------------------ SR Telecom(TM) Inc. (TSX: SRX) will release second quarter 2003 earnings on Friday, August 29, 2003. Revenue for the second quarter is expected to be slightly above first quarter results. As previously announced, revenue for the first half of 2003 remains lower than in the comparable period of 2002, mainly due to the impact of the war in Iraq on its customers in the Middle East region. The Company also expects to report lower losses in the second quarter than those experienced in the first quarter of this year. The Company also stated that delays in closing a number of significant new orders may prevent it from achieving its previously stated revenue target of meeting 2002 revenue levels. However, the Company continues to believe that its backlog will improve over the coming quarters in light of the increased level of bidding activity in its traditional markets. Further details will be provided by management during the Company's Q2 conference call on August 29th at 10:00 a.m. Eastern time. The Company also announced that its registration statement on Form F-4 concerning the definitive agreement to acquire Netro Corporation (NASDAQ: NTRO) has been declared effective by the United States Securities and Exchange Commission and that a proxy statement/prospectus related to the proposed acquisition is being mailed to Netro shareholders of record as of July 31, 2003. Completion of the transaction requires that a majority of Netro shares outstanding be voted in favor of the transaction at a special meeting of Netro shareholders, which is scheduled for August 27, 2003 in San Jose, California. The transaction is expected to be completed shortly after shareholder approval. The board of directors of Netro Corp. has determined unanimously that the merger is in the best interests of Netro shareholders, and has recommended that Netro shareholders approve the merger. Under the terms of the merger agreement, announced on March 27, 2003, Netro shareholders will receive total consideration that will be comprised of a dividend payout of US$100 million paid by Netro immediately prior to the closing, and the issuance by SR Telecom of 41.5 million SR Telecom common shares, as adjusted to reflect the previously announced reverse stock split. Upon completion of the transaction, SR Telecom will be one of the world's premiere providers of fixed wireless access solutions with a global client base and distribution network, industry-leading turnkey solutions capabilities and the broadest portfolio of fixed wireless access products to extend the reach of carrier-class networks. SR Telecom serves customers from 24 offices in 18 countries, including the United States, Canada, Mexico, Brazil, France, Germany, Saudi Arabia, China, the Philippines, Indonesia, Thailand, and Australia. Under the merger agreement, completion of the transaction is subject to customary conditions and government approval. The Federal Trade Commission granted early termination of the waiting period for pre-merger notification under the US Hart-Scott-Rodino Antitrust Improvements Act. Any outstanding options to purchase common shares of Netro not exercised prior to the closing of the merger will be terminated. SR TELECOM (TSX: SRX) is a world leader and innovator in Fixed Wireless Access technology, which links end-users to networks using wireless transmissions. SR Telecom's solutions include equipment, network planning, project management, installation and maintenance services. The Company offers the industry's broadest portfolio of fixed wireless products, designed to enable carriers and service providers to rapidly deploy high-quality voice, high- speed data and broadband applications. These products, which are used in over 110 countries, are among the most advanced and reliable available today. * * * As reported, Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit and senior unsecured debt ratings on SR Telecom Inc. At the same time, the outlook was revised to negative from stable due to weak first-quarter results. The ratings on SR Telecom reflect the company's strong position in this market and the extent of its customer and geographic diversity. This is offset by the company's limited near-term financial flexibility, its reliance on the successful rollout of its new products to restore profitability growth, and ongoing exposure to emerging markets and prolonged economic weakness in South America, which continues to negatively affect SR Telecom's Chilean subsidiary. SURGICARE: Engages Mann Frankfort as New Independent Auditors ------------------------------------------------------------- On July 28, 2003, SurgiCare, Inc., dismissed Weinstein & Spira LLP as its independent auditors and retained Mann Frankfort Stein & Lipp LLP as its new independent auditors. The decision to change auditors was approved by SurgiCare's Board of Directors. Weinstein & Spira's report on the Company's financial statements for the year ended December 31, 2002 was modified by the inclusion of an explanatory paragraph addressing the ability of the Company to continue as a going concern. * * * As reported in the July 1, 2003, isssue of the Troubled Company Reporter, SurgiCare stated that it is continuing the restructuring of the company. DVI has given SurgiCare a 60-day extension on its Forbearance Agreement. All transactions for complete restructuring are anticipated to be completed within the forbearance period. TANGRAM ENTERPRISE: June 30 Working Capital Deficit Tops $1MM ------------------------------------------------------------- Tangram Enterprise Solutions, Inc. (OTC BB: TESI), the global leader for automated IT asset management, announced operating results for the second quarter, ended June 30, 2003. "While the overall economy, the technology sector, and specifically the IT asset management marketplace remain depressed, we have continued to improve our Net Revenues and Cash Flow in 2003," said Norm Phelps, President and CEO of Tangram. "We're pleased with our second quarter results. This performance highlights our second straight quarter with positive operating cash flow and moreover, was ahead of both the previous quarter of 2003 and the comparable second quarter of 2002. Last year's cost- restructuring measures are now paying off." "We continue to see improvements in our sales performance and balance sheet. We have gotten good sales traction with new releases of our IT asset management solutions in spite of the difficult technology marketplace," said Ron Nabors, Tangram's Senior Vice President and Chief Marketing Officer. "In addition, our license revenue from new customers increased in the second quarter over first quarter." For the quarter ended June 30, 2003, the company reported total revenues of $2.61 million, an increase of approximately 15 percent over that of the first quarter of 2003 of $2.26 million, and a 2 percent increase when compared with $2.57 million in the second quarter of 2002. Cash and cash equivalents were at $746,000 on June 30, 2003, a seventy-eight 78 percent increase from the beginning of the year at the same time reducing total long-term debt by $614,000, or 25%. Net loss for the second quarter of 2003 was $54,000, down from a net loss of $1.13 million for the second quarter of 2002. The second quarter net loss figure represents a 95% reduction in net losses versus the comparable quarter of 2002. For the six months ended June 30, 2003, the company reported total revenues of $4.88 million, compared with $5.72 million in the comparable period in 2002. Net loss for the six months ended June 30, 2003 was $102,000, down from a net loss of $1.55 million in the comparable period last year. Net cash provided by operating activities improved to $1.56 million for the six months ended June 30, 2003, compared to $837,000 in the six-month period ended June 30, 2002. At June 30, 2003, Tangram's balance sheet shows that its total current liabilities eclipsed its total current assets by about $1 million, while its total shareholders' equity is down to $2.3 million. Tangram Enterprise Solutions, Inc. is the leading provider of cohesive, automated IT asset management software and services for large and midsize organizations across all industries, in both domestic and international markets. Tangram's core business strategy and operating philosophy center on delivering world-class customer care, creating a more personal and productive IT asset management experience through a phased solution implementation, providing tailored solutions that support evolving customer needs, and maintaining a leading-edge technical position. Today, Tangram's solutions manage more than two million workstations, servers, and other related assets. Tangram is a partner company of Safeguard Scientifics, Inc. -- http://www.safeguard.com-- an operating company creating long-term value by taking controlling interest in and developing its companies through superior operations and management. Safeguard operates businesses that provide business decision and life science software-based product and service solutions. To learn more about Tangram, visit http://www.tangram.com TENET HEALTHCARE: June 30 Shareholder Deficit Stands at $5.5BB -------------------------------------------------------------- Tenet Healthcare Corporation (NYSE:THC) reported results for its fiscal second quarter ended June 30, 2003. Net operating revenues were $3.38 billion in the quarter, down 1.5 percent from $3.43 billion in the prior-year quarter. The decrease reflects reduced Medicare outlier payments, offset by increases in other payor categories and increases in admissions. The company reported a net loss of $195 million, compared with net income of $242 million in the prior-year quarter. The net loss for the current quarter reflects the impact of lower outlier revenue, as well as the following items which total $0.69 per share. These items include non-cash impairment charges of $198 million ($124 million after taxes, or $0.27 per share); restructuring charges of $77 million ($48 million after taxes, or $0.10 per diluted share); $68 million in charges related to litigation and investigations ($45 million after taxes, or $0.10 per diluted share); $59 million of various other charges, the most significant of which relate to the change in the discount rates used to value unfunded retirement plan and malpractice liabilities ($35 million after taxes, or $0.08 per share); and a $70 million after-tax charge, including interest costs, for a disputed income tax deduction that the company intends to appeal related to its discontinued psychiatric hospital business ($0.15 per diluted share). The $68 million charge related to litigation and investigations includes $54 million for the previously announced settlement of federal and state investigations regarding allegations of unnecessary cardiac procedures performed by two physicians at Redding Medical Center in Redding, Calif. Net income in the prior-year period reflects goodwill amortization of $16 million ($14 million after taxes, or $0.03 per share) and a loss from early extinguishment of debt of $96 million ($60 million after taxes, or $0.12 per share). At June 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $5.5 billion. The current-year period results reflect Tenet's adoption of Statement of Financial Accounting Standards (SFAS) No. 142 on accounting for goodwill. All periods have been adjusted to reflect certain assets held for sale as discontinued operations, and a change in accounting under SFAS No. 123 and SFAS No. 148 to expense stock options and employee stock purchase plan discounts. "These results are consistent with the earnings guidance we provided to investors in June," said Trevor Fetter, Tenet's president and acting chief executive officer. "While we continue to face revenue pressures in the near term, as well as rising cost pressures, we are aggressively moving to reduce costs and bring them in line with our current revenue stream. We expect to realize the benefits of these actions later this year and in 2004, and in the interim we are experiencing margin compression as expected. "We are stabilizing the company by working our way through the most difficult issues," Fetter continued. "For example, in terms of managed care pricing we're well along the way to reaching a stable baseline from which we can resume growth more consistent with industry norms. In fact, since November we have renegotiated or renewed contracts representing approximately 40 percent of our managed care revenues. We also have reached an important milestone addressing one of the most serious issues facing the company -- a settlement with the federal and California authorities regarding the investigation of two physicians practicing at Redding Medical Center. "At the same time we are resolving specific issues, our underlying hospital volumes remain strong," said Fetter. "I am particularly gratified that patient satisfaction with our services remains high and that admissions to our hospitals continue to grow at solid rates." Admissions to Tenet hospitals rose 2.5 percent overall and 3.0 percent on a same-facility basis in the second quarter, compared with the prior-year quarter. The company saw continued strong growth among the Baby Boomer age groups, with same-facility admissions rising 3.7 percent among patients aged 41-50 years and 5.1 percent among those aged 51-60 years. Outpatient visits declined 1.2 percent overall and 0.7 percent on a same-facility basis, compared with the prior-year quarter. In addition, during the second quarter, 84 percent of patients surveyed rated Tenet's hospitals either a 9 or 10 on a 10-point scale, steady with the March quarter results and slightly higher than a year ago. "These are encouraging results," said Fetter. "While we continue to operate in a difficult environment, our patients feel they are receiving the kind of care they deserve and appreciate. No doubt this is one of the key reasons why admissions to Tenet hospitals continue to grow at solid rates, even during these tough times." Details on Second Quarter Results Outlier revenues were $16 million in the second quarter, compared with $223 million in the prior-year quarter. Reflecting this decline, and partially offset by increases in other payor categories, same-facility unit revenue (GAAP same-facility net inpatient revenue per admission) declined 6.6 percent versus the prior-year quarter. Pro forma same-facility unit revenues (a non- GAAP measure the company defines as GAAP same-facility net inpatient revenue, less Medicare outlier revenue, per admission) would have increased 2.8 percent. Because of the significant impact of the loss of outlier revenue, the company has provided in the financial tables below an analysis of 2003 results compared with 2002 results, excluding, on a pro forma basis, all outlier revenue from all periods. The company believes that these pro forma figures, while compiled on a non-GAAP basis, highlight the impact of the reduction in outlier revenue and provide important insight into its operations in terms of other underlying business trends. A reconciliation of net operating revenues to pro forma net operating revenues, as well as a more complete description of how the company uses this measure and why the company believes this metric is useful, are provided in the tables below titled Additional Supplemental Non-GAAP Disclosures. Same-facility net outpatient revenue per visit rose 0.6 percent in the period. During the quarter, salaries and benefits costs were $1.47 billion, or 43.6 percent of net operating revenues, up from $1.46 billion, or 42.4 percent, in the March quarter. These costs included $36 million ($0.05 per share) for the expensing of stock options and employee stock purchase plan discounts in the second quarter; the March quarter reflected $39 million ($0.05 per share) and the prior-year June quarter, as restated, reflected $37 million ($0.04 per share) of the same expense. Supplies expense was $525 million, or 15.5 percent of net operating revenues, versus $527 million, or 15.3 percent, in March. Bad debt expense totaled $288 million, or 8.5 percent of net operating revenues, up from $274 million, or 7.9 percent, in March, reflecting a deterioration in self-pay collections. Other operating expense was $753 million, or 22.3 percent of net operating revenues, up from $722 million, or 20.9 percent, in March, reflecting higher consulting costs and malpractice expense. In the quarter, malpractice expense totaled $86 million, including a $10 million charge related to a change in discount rate. Reflecting the reduction in outlier revenue and the impact of impairment, restructuring, litigation and investigation costs, the company posted an operating loss of $124 million for the quarter, compared with operating income of $463 million in the year-ago quarter. Loss from continuing operations was $129 million, compared to income from continuing operations of $226 million in the prior-year quarter. During the quarter, the company repurchased 6.5 million shares of its common stock for a total cost of approximately $98 million, at an average cost of $15.14 per share. These purchases were transacted by May 15 and the company has not made additional repurchases since that time. As it indicated in June, the company does not anticipate making further share repurchases through Dec. 31, 2003. Net cash provided by operating activities was $359 million in the quarter versus $722 million in the prior-year quarter. At June 30, 2003, accounts receivable from continuing operations was $2.49 billion, down from $2.55 billion at March 31, 2003. Accounts receivable days outstanding from continuing operations were 67.1 days, up from 66.4 days at March 31, 2003. During the second quarter, the company reinvested $198 million in capital expenditures in its facilities. Six-Month Results For the six months ended June 30, 2003, net operating revenues increased 0.4 percent to $6.83 billion, compared to $6.80 billion in the year-ago period. Tenet reported a net loss of $215 million, or $0.46 per share, compared with net income of $520 million, or $1.03 per share, in the prior-year six-month period. The net loss in the current period reflects the impact of lower outlier revenue, as well as several items totaling $1.07 per share. These items include impairment charges of $385 million ($264 million after taxes, or $0.57 per share); restructuring charges of $86 million ($54 million after taxes, or $0.11 per diluted share); $74 million in charges for litigation and investigation costs ($48 million after taxes, or $0.10 per diluted share); a $65 million impairment charge to discontinued operations for long-lived assets ($45 million after taxes, or $0.10 per diluted share); various charges, the most significant of which relate to the change in the discount rate used to value unfunded retirement and malpractice liabilities, totaling $33 million ($20 million after taxes, or $0.04 per share); and a $70 million after-tax charge, including interest costs, for a disputed tax deduction now in appeal related to the company's discontinued psychiatric hospital business ($0.15 per diluted share). Net income in the prior-year period reflects goodwill amortization of $40 million ($34 million after taxes, or $0.07 per share) and loss from extinguishment of debt of $102 million ($64 million after taxes, or $0.13 per share). For the first six months of the new fiscal year, Tenet's admissions rose 1.8 percent overall and 2.4 percent on a same- facility basis, compared with the prior-year period. Outpatient visits declined 0.6 percent overall and 0.2 percent on a same- facility basis, while same-facility net outpatient revenue per visit rose 4.4 percent. Medicare outlier revenue dropped to $34 million in the current six-month period, compared with $420 million in the same period a year ago. Reflecting this decline, and partially offset by increases in other payor categories, same-facility net inpatient revenue per admission declined 4.6 percent from the prior-year period. Excluding outlier revenue from both periods, pro forma same-facility unit revenues (a non-GAAP measure the company defines as GAAP same-facility net inpatient revenue, less Medicare outlier revenue, per admission) would have increased 4.3 percent. For the first six months of fiscal 2003, salaries and benefits costs were $2.94 billion, or 43 percent of net operating revenues. These costs included stock-based compensation expense of $75 million ($0.10 per share) for the first six months of 2003 versus $74 million ($0.09 per share) in the year-ago six months. Supplies expense was $1.05 billion, or 15.4 percent of net operating revenues. Bad debt expense totaled $562 million, or 8.2 percent of net operating revenues. Other operating expense was $1.48 billion, or 21.6 percent of net operating revenue. For the current six-month period, net cash provided by operating activities was $583 million versus $1.33 billion in the prior-year six-month period. Capital expenditures for the first six months of 2003 amounted to $418 million, compared with $484 million in the prior-year six-month period. Additional Information Last week, the Centers for Medicare and Medicaid Services announced the final inpatient payment system rule for the federal fiscal year beginning Oct. 1, 2003. Of particular note, the final rule lowered the outlier payment threshold to $31,000, versus the current $33,560. Although this modification is mildly beneficial to the company, the company still expects outlier payments to its hospitals to approximate $18 million per quarter as other elements of the outlier rule change will offset any benefit from the lower threshold in future periods. Other changes in the overall inpatient payment system rule have moderately positive and negative effects. While the net impact of these changes is slightly positive to Tenet, it is not significant enough to warrant a change in the guidance Tenet provided in June. Tenet Healthcare Corporation, through its subsidiaries, owns and operates 114 acute care hospitals with 27,765 beds and numerous related health care services. Tenet and its subsidiaries employ approximately 116,500 people serving communities in 16 states. Tenet's name reflects its core business philosophy: the importance of shared values among partners -- including employees, physicians, insurers and communities -- in providing a full spectrum of health care. Tenet can be found on the World Wide Web at http://www.tenethealth.com TRENWICK GROUP: Enters Long-Term Debt Restructuring Agreement ------------------------------------------------------------- Trenwick Group Ltd., (OTC: TWKGF) has entered into a letter of intent with respect to an agreement in principle on a long-term restructuring of Trenwick's debt obligations, the sale of its business operations at Lloyd's, and the runoff of its remaining businesses with (i) the majority of the beneficial holders of the 6.70% Senior Notes of its wholly owned subsidiary, Trenwick America Corporation, (ii) the steering committee of the lending institutions that have issued letters of credit under a senior secured credit facility on behalf of certain subsidiaries of Trenwick in support of Trenwick's Lloyd's operations, and (iii) a group composed of current members of management of Trenwick's Lloyd's operations. Trenwick America did not pay principal and interest on the Senior Notes due on August 1, 2003, which also created an event of default with respect to the LoC Facility and under certain other indebtedness of Trenwick America. The restructuring will be implemented through various means, including but not limited to the following: (i) the filing by Trenwick and/or one or more of its subsidiaries of Chapter 11 bankruptcy proceedings in the United States and the filing of similar proceedings in Bermuda, Barbados or the United Kingdom, as the case may be; (ii) the sale by Trenwick of substantially all of its Lloyd's operations to a company controlled by the Management Team and with capital provided by the Management Team, third-party investors and the Banks and (iii) the retention of third party run-off advisors and the continued runoff or disposition of all of Trenwick's other insurance and reinsurance operations. In light of the foregoing, Trenwick believes that it is unlikely that any of the holders of the shares of Trenwick or of its wholly-owned Bermuda subsidiary, LaSalle Re Holdings Ltd will receive any return on their investment in the near term if at all. The terms of the restructuring are subject to the satisfaction of numerous conditions precedent including, but not limited to, the following: (i) approval of the restructuring by the Banks; (ii) negotiation of definitive documentation (iii) receipt of all requisite regulatory and other approvals in the United States, Bermuda and the United Kingdom; (iv) due diligence by Englefield Capital LLP, the proposed equity sponsor of the Management Team, which has entered into an exclusive negotiation agreement with Trenwick, and (v) approval of any court having jurisdiction over the above-referenced insolvency proceedings. Trenwick is a Bermuda-based specialty insurance and reinsurance underwriting organization with subsidiaries located in the United States, the United Kingdom and Bermuda. Trenwick's operations at Lloyd's, London underwrite specialty insurance as well as treaty and facultative reinsurance on a worldwide basis. Trenwick's United States specialty program business, specialty London market insurance company, Trenwick International Limited, and its United States reinsurance business through Trenwick America Reinsurance Corporation are now in runoff. In 2002, Trenwick sold the in-force business of LaSalle Re Limited, its Bermuda based subsidiary. TRITON AVIATION: Fitch Hatchets Ratings on 4 Classes to BB- & C --------------------------------------------------------------- Fitch Ratings has taken the following rating actions for Triton Aviation Finance as outlined below: -- Class A-1 notes are downgraded to 'BBB-' from 'AA-'; -- Class A-2 notes are downgraded to 'BBB-' from 'AA-'; -- Class B-1 notes are downgraded to 'BB-' from 'BBB'; -- Class B-2 notes are downgraded to 'BB-' from 'BBB'; -- Class C-1 notes are downgraded to 'C' from 'BB'; -- Class C-2 notes are downgraded to 'C' from 'BB'; -- All classes are removed from Rating Watch Negative. The downgrades reflect the deterioration in lease cash flows during the first seven months of 2003 as well as Fitch's expectation that any recovery in lease cash flows is unlikely until late in 2005. Triton's lease cash flows were $44.8 million the first seven months of 2003 compared to $53.8 million in the first seven months of 2002. The reduced cash flows are primarily attributable to increased non-performing aircraft and aircraft that have been released at rates well below historical levels. The non-performing aircraft include aircraft leased to Air Canada, and aircraft that were not subject to lease. Triton leased eight B737-200 aircraft to Air Canada. Air Canada filed for bankruptcy protection in April 2003 and has stopped making lease payments. On May 9, 2003, Air Canada rejected three of the aircraft under Canadian bankruptcy law. These aircraft have been returned to Triton for re-marketing. On July, 22, 2003, Air Canada rejected the remaining five aircraft which should be returned shortly. Triton leases nine B737-200 aircraft to Austral of Argentina. While Austral has resumed its current lease payments, although at reduced levels, it continues to owe past rentals and reserves. Triton's lease expirations during 2003-2004 are not large by historic standards and include twenty-four aircraft. Unfortunately, the expirations include aircraft such as MD80s and 737-200s that could be difficult to remarket in the current weak lease rate environment. Triton is a Delaware business trust formed to conduct limited activities, including the issuance of debt, and the buying, owning, leasing and selling of commercial jet aircraft. Triton originally issued $720 million of rated notes in June 2000, while as of July 2003 it had $531.8 million of notes outstanding. Primary servicing on twenty-three aircraft and back-up servicing is being performed by International Lease Finance Corporation ('AA-/F1+' by Fitch), while Triton Aviation Services Limited services the remaining 28 aircraft. TRITON PCS: June 30 Net Capital Deficit Balloons to $267 Million ---------------------------------------------------------------- Triton PCS Holdings, Inc., (NYSE: TPC) reported a 41.3% increase in second-quarter Adjusted EBITDA to a record $65.0 million, driven by a 12.8% rise in revenue to $206.5 million from continued subscriber and ARPU growth. The customer churn rate declined in the second quarter to 2.07% from 2.12% in the first quarter as a result of the company's ongoing focus on attracting quality post- paid subscribers and providing outstanding customer care. "We achieved record Adjusted EBITDA in the second quarter along with a solid expansion of our Adjusted EBITDA margin to 33% and solid growth in revenue, underscoring our commitment to deliver quality results," said Michael E. Kalogris, Triton PCS chairman and chief executive officer. "These results were fueled by steady growth in subscriber and roaming revenue as well as our continued emphasis on cost control." In addition, Kalogris said, "Our successful debt refinancing has further strengthened our liquidity, resulting in interest savings and reinforcing our confidence in achieving positive free cash flow in 2004." In June, the company issued $725 million in 8-1/2% senior notes, using the proceeds to repurchase its 11% subordinated notes as well as to repay amounts outstanding under its credit facility. "Taking into consideration the full redemption of the 11% notes completed in July, we now have approximately $245 million in cash and available credit, which includes a new $100 million revolving credit facility," he said. Kalogris said the company launched a new, multi-media advertising campaign in July aimed at punctuating the exclusive benefits of the SunCom UnPlan and to support additional UnPlan service offerings - a $79.95 UnPlan Gold and $99.95 UnPlan Platinum. "UnPlan continues to attract high-value customers because of its exceptional value proposition and has also contributed to ARPU growth and churn improvement," he said. In July, the company completed its rollout of commercial service of its GSM/GPRS network to all markets in the state of Virginia. In addition, the company has turned on its GSM/GPRS network in selected markets in North Carolina, South Carolina and Georgia to provide GSM/GPRS services to customers of its roaming partners. In conjunction with the expanded GSM/GPRS launch, the company introduced its first data-centric device - SunCom Hiptop, based on Danger Inc.'s Hiptop(R) Wireless Solution. "We selected the SunCom Hiptop as our first data service offering for our new GSM/GPRS network because of its comprehensive feature set, innovative design and affordable price," Kalogris said. The SunCom Hiptop is an all-in-one device that combines a mobile phone with data communication features such as Web browsing, email, AOL Instant Messenger, personal information management, games and an optional digital camera accessory. "In addition to the SunCom Hiptop, our customers have a wide choice of feature-rich GSM/GPRS handsets that support data applications," he added. Triton PCS's June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $267 million. Financial Highlights Second quarter 2003 total revenue increased 12.8% year-over-year to $206.5 million, with service revenue increasing by 13.7% and roaming revenue rising 8.4%. Adjusted EBITDA increased 43.4% from $45.9 million to $65.0 million sequentially and 41.3% compared with the second quarter of 2002. The company's Adjusted EBITDA margin expanded to 33.3% in the quarter from 26.5% for the second quarter of 2002. The company added 19,031 net new subscribers in the quarter, ending the quarter with 880,685 subscribers, a 15.3% increase from the second quarter of 2002. The company's bad debt as a percent of service revenue was 1.2%. Cash costs per user declined 8.0% year-over-year to $37.41 in the quarter. General and administrative cost controls were a significant contributor to the overall decline in cost per user as G&A per user declined 20.0% from the same period last year. Cost per gross addition was $440 in the second quarter versus $418 in the second quarter of 2002. The company reported churn of 2.07%, its lowest level since the second quarter of 2002. The company expects churn to remain in the low 2% range for the full year of 2003. ARPU increased nearly $3 from the first quarter to $56.51. The increase was driven by seasonally strong usage, full-quarter effect of certain price increases and higher ARPU of new subscribers. Roaming minutes totaled 279.4 million for the quarter, representing an increase of 19.0% from the year-earlier period and 16.8% from the first quarter of 2003. Capital expenditures of $26.9 million in the second quarter related to both the expansion of the company's GSM/GPRS network as well as for capacity expansion of its TDMA network. The company's full-year expectation for capital expenditures remains between $120 million and $140 million. The company ended the quarter with $345.1 million of available liquidity, comprised of $245.1 million in cash and $100.0 million of undrawn borrowings under its credit facility. Triton PCS, based in Berwyn, Pennsylvania, is an award-winning wireless carrier providing service in the Southeast. The company markets its service under the brand SunCom, a member of the AT&T Wireless Network. Triton PCS is licensed to operate a digital wireless network in a contiguous area covering 13.6 million people in Virginia, North Carolina, South Carolina, northern Georgia, northeastern Tennessee and southeastern Kentucky. For more information on Triton PCS and its products and services, visit the company's Web sites at: http://www.tritonpcs.comand http://www.suncom.com TYCO INT'L: SEC Declares Shelf Registration Statement Effective --------------------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced that its shelf registration statement on Form S-3 has been declared effective by the U.S. Securities and Exchange Commission. Tyco announced earlier today that it had requested that the Securities and Exchange Commission accelerate the effectiveness of the registration statement. The registration statement was filed pursuant to a registration rights agreement entered into in January 2003 upon the private placement of Tyco International Group S.A.'s 2.750% Series A Convertible Senior Debentures due 2018 and 3.125% Series B Convertible Senior Debentures due 2023 under Rule 144A of the Securities Act. Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of pecialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. * * * As previously reported, Fitch Ratings affirmed its ratings on the senior unsecured debt and commercial paper of Tyco International Ltd., as well as the unconditionally guaranteed debt of its wholly owned direct subsidiary Tyco International Group S. A., at 'BB'/'B', respectively. The Rating Outlook has been changed to Stable from Negative. The ratings affect approximately $21 billion of debt securities. The change to Outlook Stable reflects Tyco's progress with respect to reestablishing access to capital, addressing its liability structure, implementing steps to improve operating performance, and demonstrating cash generation despite a difficult economic environment in a number of key end-markets. The impact of fundamental favorable changes in Tyco's financial policies and profile since late fiscal 2002 is constrained by economic weakness in its markets, potential legal liabilities related to shareholder lawsuits and SEC investigations, and the possibility, although reduced, of further accounting charges and adjustments. The ratings could improve over time as Tyco demonstrates more consistent results and that it has put behind it the accounting concerns that have obscured the transparency of its financial reporting in the past. UNITED AIR LINES: Selected Aircraft Debt Ratings Downgraded ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on selected equipment trust certificates and enhanced equipment trust certificates of United Air Lines Inc. (rated 'D'). All ratings on obligations still paying remain on CreditWatch with negative implications. "The downgrades of selected United aircraft-backed debt are based on reduced collateral coverage, changes in the perceived likelihood of full and timely repayment as United continues in negotiations with creditors, or on actual payment defaults, depending on the particular debt instruments involved," said Standard & Poor's credit analyst Philip Baggaley. The downgrades to 'D' of ETCs and junior classes of EETCs that do not have a liquidity facility reflect defaults that have occurred as payments have come due since United's bankruptcy filing on Dec. 9, 2002. In some cases, United has made partial payment under interim agreements with creditors, but not full, timely payment. The downgrades of classes of EETCs reflect perceived greater risk of default, based on ongoing deterioration in aircraft values and the status of United's negotiations with holders of aircraft-backed debt. Prospects for full repayment vary significantly from case to case. The Jet Equipment Trust Series EETCs, issued in the mid- 1990s and backed by older Boeing planes, all have weak collateral coverage; indeed almost all are undercollateralized. Although United may well continue to operate many of these planes, existing financings are likely to be significantly renegotiated, with prospects for full repayment ranging from uncertain to virtually nil. United's 1997-1A EETC is still overcollateralized, but much less so than originally (the loan-to-value is estimated to be in the 80%-90% range). This EETC has a final legal maturity of March 2, 2004 (the expected maturity has already passed), meaning that to avoid default either United would have to fully repay the debt by that date or the certificateholders would have to repossess the planes and sell them by that date, realizing sufficient proceeds to pay off the debt. Although United and the holders of this EETC might negotiate a debt extension that fully repays the class A certificates, the odds of full repayment by the final maturity are lengthening. Downgrades of other, more recent EETCs affect junior classes, whose collateral coverage is weakening as limited payments from United are directed first to class A certificates and as aircraft values have weakened. A large group of class A certificateholders continue in negotiations with United, which is seeking to reduce its debt obligations commensurately with the lower collateral coverage. United has stated that it is willing to turn back to creditors both newer and older planes, focusing on near-term cash costs of the planes, rather than their long-term utility, and in July returned three B777-200ERs and one A320-200 backing these EETCs. If revised payment terms are agreed between the class A certificates of these EETCs and United, prospects for full and timely repayment of those certificates still look good, but payment prospects for more junior certificates vary from moderate to poor. Exactly how the EETCs would be restructured, if that occurred, is not clear, as there are limits on the ability to make changes in payment terms without the consent of all certificateholders. Standard & Poor's ratings on the EETCs could be lowered further if payment prospects suffer further erosion due either to reduced collateral coverage or negotiated settlements that do not provide for full and timely payment. UNITED AIRLINES: US Bank Demands Cure Default and Rent Payments --------------------------------------------------------------- U.S. Bank, as successor to and agent for State Street Bank and Trust, as Trustee, asks the Court to require United Airlines Inc. to immediately cure prepetition defaults in accordance with elections under Section 1110(a) of the Bankruptcy Code. U.S. Bank also wants United to make current rental payments due and owing. Both requests relate to the aircraft registered with Tail Nos. N322UA and N321UA. Richard Hiersteiner, Esq., at Palmer & Dodge, in Boston, Massachusetts, reminds the Court that as a result of the Section 1110 Election, United was required to perform all obligations related to the Aircraft. United was given 60 days, until February 7, 2003 to complete the obligations. But to date, United has failed to cure its prepetition default for approximately $3,197,390 plus interest for Aircraft N322UA and $3,028,091 for Aircraft N321UA. Debtors Respond James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge Wedoff that in determining the value and treatment of the Section 1110 Aircraft, United divided them into four groups: 1) Aircraft whose fair market values and utility to United justified their contractual cost to the estate. United was willing to make cure payments and perform under the terms of the applicable leases. 2) Aircraft whose fair market values exceeded their contractual costs to the estate. United attempted to enter into Section 1110(b) Agreements to gain more time to restructure the financings. 3) Aircraft that lacked sufficient value to justify elections under Section 1110(a) and curing defaults. United was unable to reach Section 1110(b) Agreements for these Aircraft. 4) Aircraft where no cure payment was due. United believed that, if successfully restructured, these Aircraft could prove valuable to its restructured fleet. Once payment came due, the Debtors would either make the payments or permit the automatic stay to lapse. On February 7, 2003, the Court authorized United to perform all obligations and cure defaults under their existing aircraft financing transactions. At that time, United believed that no cure payments were due for Aircraft bearing Tail Nos. N643UA, N321UA and N322UA. Based on this mistake, United agreed to perform all obligations for these Aircraft. Later, United realized that these payments would be due: Tail No. Amount Due -------- ---------- N321UA $592,405 N322UA $557,371 N643UA $5,003,271 United has not cured these prepetition defaults to date. If United realized these amounts were due, it would not have attempted election under Section 1110(a) and would not have agreed to pay the defaulted amounts. When United learned of these arrearages, it chose not to make the payments. Therefore, the automatic stay lapsed and U.S. Bank was entitled to repossess the Aircraft. U.S. Bank subsequently entered into adequate protection stipulations with United for these Aircraft and United is paying for their use. Thus, the Debtors ask Judge Wedoff to partially vacate the Section 1110 Order to the extent it applies to the U.S. Bank Aircraft. United was under the mistaken belief that no defaults existed so no cure payments were required when they asked the Court for the Section 1110 Orders. This mistake was due to the fact that United had only 60 days to review each of the financings of its 460 aircraft. The Debtors received no benefit from its promise to perform, because the failure to make cure payments prohibited a Section 1110(a) extension of the automatic stay. Therefore, U.S. Bank was not stayed from repossession of its Aircraft and United and their creditors should not be saddled with the burden of curing prevention defaults on the Leases. (United Airlines Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) UNIVERSAL ACCESS: June 30 Balance Sheet Upside-Down by $320,000 --------------------------------------------------------------- Universal Access Global Holdings Inc. (Nasdaq: UAXS), a leading communications network integrator, announced its results for the second quarter ended June 30, 2003. Quarterly results reflect management's continuing efforts to manage operating expenses and cash burn. "We have continued to stabilize our business by managing our costs and completing the CityNet transaction in July 2003," said Randy Lay, CEO of Universal Access. "These actions will allow us to focus on revenue growth as we move forward." Second Quarter Operating Results For the quarter ended June 30, 2003, revenues decreased 3% to $18.6 million from $19.2 million in the first quarter of 2003. The decline in revenue, which was due primarily to disconnections, was partly offset by customer settlements of $1.3 million and new installations. Gross profit for the second quarter was $6.0 million, a decline of 6% from $6.4 million in the first quarter. Gross margin was 32.3% versus 33.4% in the preceding quarter. Operations and administration expense (excluding stock compensation) in the second quarter was $6.5 million compared to $8.8 million in the first quarter. Operations and administration expense declined primarily due to lower salary and consulting expenses of $0.8 million, the positive effect of improved cash collections of previously written-off accounts receivable of $0.7 million, and the positive impact of $0.6 million due to a higher valuation of officer notes receivable during the second quarter. Due to a decline in revenue streams related to a specific asset during the second quarter, Universal Access recorded an impairment of $1.2 million related to a UTX facility during the quarter. The net loss was $4.0 million or $0.04 per share versus $5.2 million or $0.05 in the first quarter. For the first half of 2003, revenues were $37.7 million, down 29% from $53.2 million in the first half of 2002. Cash Position The Company finished the quarter with $12.6 million in cash (including cash, cash equivalents, short-term investments and restricted cash) compared to $12.2 million at the end of the first quarter. After adjusting for $5 million in loan proceeds received during the quarter, second quarter cash burn was approximately $4.6 million, compared to $4.0 million in the first quarter. The Company's June 30, 2003 balance sheet shows a working capital deficit of about $14 million, and a total shareholders' equity deficit of about $320,000. "We continue to manage our operating expenses which, together with the CityNet transaction, will allow us to take advantage of opportunities in the marketplace," said Brian Coderre, Universal Access' CFO. Universal Access (Nasdaq: UAXS) specializes in telecommunications network integration and off-network provisioning for carriers, service providers, cable companies, system integrators and government customers worldwide. The company is dedicated to alleviating communication bottlenecks by leveraging its proprietary information databases in combination with its strategically deployed network interconnection facilities. By provisioning across multiple networks of competing global service providers, Universal Access provides its clients with a timely and cost-effective means of extending their network reach and maximizing the utilization of their own network assets. Universal Access' customers include a wide range of leading companies. Universal Access is headquartered in Chicago, IL. Additional information is available on the company's Web site at http://www.universalaccess.net US ONCOLOGY: Reports Improved Second Quarter Financial Results -------------------------------------------------------------- US Oncology, Inc. (Nasdaq: USON) (S&P, BB Corporate Credit Rating, Negative) reported results for the second quarter ended June 30, 2003. US Oncology recorded year-over-year increases in net operating revenue, net income and earnings per share for the second quarter of 2003. "Our second quarter results reflect the demand in local communities across the country for the integrated patient-care services offered by our network of cancer-care providers," said R. Dale Ross, US Oncology chairman and chief executive officer. "Net operating revenue grew at 17.9 percent, while same practice net operating revenue increased 23.3 percent, over the second quarter of 2002. This growth is a strong indication that our commitment to clinical advances in oncology, including new pharmaceuticals, combined with cutting-edge radiation and diagnostic technologies, is making a difference in communities served by our affiliated practices." US Oncology highlights for 2003 are detailed below. -- US Oncology's EBITDA(R) for the second quarter was $52.4 million, compared to $48.3 million for the second quarter of 2002 and $50.2 million for the first quarter of 2003. EBITDA excludes unusual charges for the 2002 period. -- The company's percentage of Field EBITDAc for the second quarter was 34 percent, which was relatively stable when compared to its percentage of Field EBITDA of 35 percent for the second quarter of 2002 and 34 percent for the first quarter of 2003. Field EBITDA excludes unusual charges for the 2002 period. -- The company's affiliated practices' accounts receivable days outstanding were 43 at the end of the second quarter, compared to 48 at the end of the second quarter of 2002 and 50 at the end of the first quarter of 2003. -- Currently, 76 percent of US Oncology's net operating revenue is generated by non-net revenue model practices, an increase from 66 percent at the end of the second quarter of 2002 and 73 percent at the end of the first quarter of 2003. -- The company's operating cash flow for the three months ended June 30, 2003 was $117.7 million, which reflects improved business office operational efficiencies, as well as reduced expenditures on pharmaceuticals in the second quarter of 2003 as a result of advanced payments for pharmaceutical products during the first quarter of 2003. As of Aug. 6, 2003, US Oncology had approximately $123.0 million in cash and cash equivalents, an increase from $96.6 million at the end of the second quarter of 2003. -- US Oncology repurchased 4.4 million shares of its common stock at a total cost of $37.5 million in the second quarter, completing its $50 million stock repurchase authorization announced in 2002. -- During the quarter, US Oncology disaffiliated from 52 physicians, including a group of 39 diagnostic radiologists, consistent with the company's continuing program to exit relationships not aligned with the company's long-term strategy. These disaffiliations resulted in a net reduction in the number of affiliated network physicians for the quarter. Radiology equipment previously used by the diagnostic radiology group has been redeployed to be used in a cancer center managed by US Oncology. Medical Oncology Second quarter medical oncology net operating revenue increased by 20.4 percent year-over-year to $527.3 million. This increase is attributed to growth in pharmaceutical revenue and same practice medical oncology visits, partially offset by practice disaffiliations. US Oncology's network experienced growth in same practice medical oncology visits of 7.6 percent over the second quarter of 2002 and 4.7 percent over the first quarter of 2003. "This growth underscores the importance of our nationwide network of community-based cancer caregivers," said Ross. "More than 80 percent of all cancer care in this country is delivered in the community setting, providing patients with treatment close to their homes and in a manner that is as convenient as possible, as they confront this devastating disease." During the first six months of 2003, US Oncology recruited 67 new physicians for its affiliated practices, including 53 medical oncologists, 15 of whom have started practicing. The remaining physicians are scheduled to begin throughout the rest of the year. In the service line segment of the business, US Oncology commenced operations at a new four-physician practice in the second quarter. Since the end of the second quarter, the company converted an existing net revenue model practice, representing 16 physicians, to the service line model, and entered into service line agreements with a practice in California, as well as two practices in West Virginia, expanding the company's network to 30 states. Currently, 14 practices -- representing 90 oncologists -- have contracted to receive medical oncology services under the service line model. These practices include both new affiliates and existing practices that have converted to the model. Cancer Center and Cancer Research Services The Cancer Center Services segment of the company also experienced growth in the second quarter. The division's net operating revenue increased 5.9 percent, as compared to the second quarter of 2002, with same practice radiation treatments per day increasing 3.2 percent over the second quarter of 2002. This level was consistent with the first quarter of 2003. A significant initiative in Cancer Center Services during the second quarter was the continued implementation of advanced radiation therapy technology across the US Oncology network. Currently, 12 US Oncology cancer centers have implemented intensity modulated radiation therapy (IMRT) as part of the integrated cancer-care services they provide. IMRT is a state-of- the- art technology that takes radiation therapy to a new level, intensifying radiation delivery to tumors, while minimizing damage to surrounding healthy tissue. An additional 15 cancer centers are scheduled to start using the technology within the next year. This implementation of IMRT will make the US Oncology network the leading group of independent oncology practices utilizing this technology in the United States. "Technologies such as IMRT give our affiliated physicians the best possible tools to help their patients battle cancer," said Ross. "The capability to deliver the latest technology, in the community-based setting easily accessible by patients and their family members, is the best possible strategy to help patients overcome cancer and live full, productive lives." US Oncology's development pipeline in the division consists of an additional cancer center to open in 2003, bringing to 77 the number of outpatient, patient-care facilities across the country. The company also installed two positron emission tomography (PET) systems in the second quarter, increasing the number of systems operating in the US Oncology network to 19. These systems serve a total of 35 patient-care locations. An additional four PET systems are scheduled to be operational by the end of 2003. The company's use of mobile PET technology allows the network to serve many underserved rural communities across the country that otherwise would not have access to this state-of-the-art diagnostic technology. In the area of Cancer Research Services, new patients enrolled in research studies (research accruals) increased 24 percent, compared to the second quarter of 2002. This increase is primarily in clinical trials for breast cancer and supportive-care therapies. US Oncology's research network now has the ability to conduct large trials, which would typically have to be conducted in multiple sites around the country, completely within its network. The creation of a focused early phase network for more complex trials has further added to US Oncology's growth in research. Reimbursement and Business Outlook The company and its network remain highly engaged in the ongoing issue of Medicare reform. Provisions to reduce reimbursement for cancer care are currently included in Medicare prescription drug legislation being considered by Congress. Separate bills passed by the House and Senate would significantly reduce the amount that Medicare reimburses oncologists for pharmaceutical products by reducing reimbursement from an amount based on average wholesale price (AWP) to reimbursement based on average sales price to providers or acquisition cost for providers. Differences in the bills are scheduled to be resolved in the conference committee process during late summer and fall. Additionally, Wednesday's edition of the New York Times reported that the Centers for Medicare & Medicaid Services intends to introduce new rules that would propose various options for reducing Medicare reimbursement for cancer drugs. The options include reducing reimbursement to AWP minus 15 percent, matching Medicare reimbursement to private reimbursements or reimbursing for pharmaceuticals based on a government survey measuring the prices generally available to providers. US Oncology recognizes that the reimbursement environment has historically been an area of significant risk for the company. At this time, the ultimate outcome of the Medicare reform debate remains unclear. However, the reduction in Medicare reimbursement could materially and adversely affect the company's business. "We are continuing our efforts to inform members of Congress about the need for balanced reimbursement reform to ensure patient access to high- quality, community-based cancer care," said Ross. Until such a time as there is more clarity regarding the outcome of the current reimbursement reform debate, it is not possible to provide specific guidance for the company that tries to account for the impact of potential changes to the current reimbursement model. In the meantime, assuming stable reimbursement, the company expects 2003 year-over-year growth in EBITDA of approximately 8 to 12 percent and earnings- per-share growth of approximately 15 to 20 percent, both excluding unusual charges. The company's growth expectations are based upon a stabilized operating platform, an expectation that charges relating to additional transition activities will be limited, and management's belief that development activities will increase over the remainder of the year. In addition, US Oncology's expectation of earnings-per-share growth includes the effect of the company's completed stock repurchases as of the end of the second quarter of 2003, the impact of depreciation of the assets in the company's leasing facility (which was brought onto the company's balance sheet as of Dec. 31, 2002) and reduced amortization expense due to the company's previously recorded impairment of intangible assets. These estimates are forward-looking statements, subject to uncertainty. Investors should refer to the company's cautionary advice regarding forward-looking statements appearing elsewhere in this news release and in the company's filings with the Securities and Exchange Commission. US Oncology, headquartered in Houston, Texas, is America's premier cancer-care services company. The company provides comprehensive services to a network of affiliated practices -- comprised of more than 825 affiliated physicians in over 440 sites, including 76 integrated cancer centers -- in 30 states, with the mission of expanding access to and improving the quality of cancer care in local communities. These practices care for approximately 15 percent of the country's new cancer cases each year. The services the company offers include: -- Oncology Pharmaceutical Services. The company purchases and manages specialty oncology pharmaceuticals for affiliated practices. -- Cancer Center Services. The company develops and manages comprehensive, community-based cancer centers for affiliated practices. These centers integrate a comprehensive array of outpatient cancer care services, from chemotherapy and radiation therapy to laboratory and diagnostic radiology. -- Cancer Research Services. The company facilitates a broad range of cancer research and development activities through its network of affiliated practices. -- Other Practice Management Services. Under the company's physician practice management arrangements, it acts as the exclusive manager and administrator of all day-to-day nonmedical business functions connected with affiliated practices. US Oncology operates with its affiliated practices under three economic models. In its practice-management business, the company generally offers all of the above services under two models: the "earnings model," in which management fees are based on practice earnings before income taxes; and the "net revenue model," in which the management fee consists of a fixed fee, a percentage fee of the practice's net revenues and, if certain performance criteria are met, a performance fee. In certain states, the company's fee is a fixed fee. The company also markets its core services under separate agreements through a non-physician management model, the "service line model," in which each service is offered under a separate contract and the company does not necessarily provide all of the practice management services described above. US UNWIRED: June 30 Net Capital Deficit Doubles to $160 Million --------------------------------------------------------------- US Unwired Inc. (OTCBB:UNWR), a PCS Affiliate of Sprint (NYSE:FON, PCS), reported revenues of $137.5 million for the three-month period ended June 30, 2003. PCS operations generated $133.5 million in total revenue for the quarter. Subscriber revenue and roaming revenue from PCS operations were $96.4 million and $31.7 million, respectively. The company posted a net loss of $35 million for second quarter of 2003 and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the consolidated operations was $16.3 million, which included $1.1 million of non-cash compensation expense. These results included $5.1 million of EBITDA generated from the company's wholly-owned subsidiary, IWO Holdings, Inc., and a charge of $3.9 million associated with a withdrawn debt exchange offer. "We posted record EBITDA during the second quarter because we continued to successfully execute a business plan that reduced costs while maintaining solid long-term growth prospects," said Robert Piper, US Unwired's President and Chief Executive Officer. "Our per-subscriber operating costs set record lows, yet we continue to achieve strong network performance metrics. Although we reduced sales and marketing costs, 70% of our new subscribers had prime credit ratings. We invested resources in churn reduction programs that have generated our best rates since 2001. We began executing this business plan last year and these results show that it is setting the foundation for our company's success." At the end of the second quarter of 2003, total wireless subscribers (including PCS, cellular and resale) were 650,110, while PCS subscribers were 593,068. Of the 8,878 PCS net subscriber additions during the second quarter, 4,474 were from the Company's IWO Holdings subsidiary's operations. For the second quarter of 2003, PCS subscriber acquisition cost was $353; monthly average minutes of use were 750 per average PCS subscriber with roaming and 575 without roaming; total PCS system minutes of use were approximately 1.4 billion, including 427 million roaming minutes; postpay PCS churn, net of 30-day returns, was 2.7%. Average monthly revenue per PCS subscriber, including roaming, was $72.43 for the second quarter, up from $68.97 in the first quarter. Total capital expenditures were $8.4 million for the quarter, $8.3 million of which were related to the company's portion of the Sprint wireless network that as of June 30, 2003, covered 12.7 million residents with 1,850 sites. On a consolidated basis, US Unwired had unrestricted cash of approximately $74.6 million and restricted cash of $30.3 million at June 30, 2003. All of the restricted cash and $21.3 million of the unrestricted cash were held by IWO Holdings, Inc. US Unwired was in full compliance with its $170 million bank credit facility covenants and had $70.4 million of availability. Subsequent to the quarter's end, the company was notified by the FDIC that it had been appointed as receiver for one of the participants in the company's $170 million Amended and Restated Credit Facility. The FDIC repudiated and disaffirmed its obligations with respect to the credit agreement, effectively eliminating $5.5 million of the company's availability under its revolver. Also, the Company cannot state with certainty that US Unwired will be in compliance with certain financial covenants stipulated in the credit agreement during the remaining portion of 2003. IWO was not in compliance with the covenants of its $240 million bank credit facility as of June 30, 2003 and has no additional availability. In addition, IWO is delinquent on its interest payments under the credit facility which, combined with its covenant violations, may result in IWO's bankruptcy. US Unwired has not guaranteed or otherwise become responsible for IWO's debt. US Unwired's June 30, 2003 balance sheet shows a working capital deficit of about $94 million, and a total shareholders' equity deficit of about $160 million. US Unwired Inc., headquartered in Lake Charles, La., holds direct or indirect ownership interests in five PCS Affiliates of Sprint: Louisiana Unwired, Texas Unwired, Georgia PCS, IWO Holdings and Gulf Coast Wireless. Through Louisiana Unwired, Texas Unwired, Georgia PCS and IWO Holdings, US Unwired is authorized to build, operate and manage wireless mobility communications network products and services under the Sprint brand name in 68 markets, currently serving over 500,000 PCS customers. US Unwired's PCS territory includes portions of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, Texas, Massachusetts, New Hampshire, New York, Pennsylvania, and Vermont. In addition, US Unwired provides cellular and paging service in southwest Louisiana. For more information on US Unwired and its products and services, visit the company's Web site at http://www.usunwired.com US Unwired is traded on the OTC Bulletin Board under the symbol "UNWR". Sprint operates the largest, 100-percent digital, nationwide wireless network in the United States, serving more than 4,000 cities and communities across the country. Sprint has licensed PCS coverage of more than 280 million people in all 50 states, Puerto Rico and the U.S. Virgin Islands. In August 2002, Sprint became the first wireless carrier in the country to launch next generation services nationwide delivering faster speeds and advanced applications on PCS Vision Phones and devices. For more information on products and services, visit http://www.sprint.com/mr PCS is a wholly-owned tracking stock of Sprint Corporation trading on the NYSE under the symbol "PCS." Sprint is a global integrated communications provider serving more than 26 million customers in over 100 countries. With approximately 70,000 employees worldwide and nearly $27 billion in annual revenues, Sprint is widely recognized for developing, engineering and deploying state-of-the art network technologies. WACHOVIA BANK: S&P Assigns Low-B's to Six 2003-C6 Note Classes -------------------------------------------------------------- Standard & Poor's Rating Services assigned its preliminary ratings to Wachovia Bank Commercial Mortgage Trust's $952.8 million commercial mortgage pass-through certificates series 2003-C6. This presale report is based on information as of Aug. 7, 2003. The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying loans, and the geographic and property type diversity of the loans. Classes A-1, A-2, A-3, A-4, B, C, D, and E are currently offered publicly. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage ratio of 1.54x, a beginning loan- to-value (LTV) ratio of 94.9%, and an ending LTV ratio of 80.8%. PRELIMINARY RATINGS ASSIGNED Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certs series 2003-C6 Class Rating Amount ($) A-1 AAA 94,000,000 A-2 AAA 215,000,000 A-3 AAA 143,000,000 A-4 AAA 317,373,000 B AA 29,774,000 C AA- 13,101,000 D A 25,010,000 E A- 14,292,000 F BBB+ 17,865,000 G BBB 13,101,000 H BBB- 13,100,000 J BB+ 14,292,000 K BB 9,528,000 L BB- 4,764,000 M B+ 4,764,000 N B 4,764,000 O B- 3,572,000 P N.R. 15,483,999 IO* N.R. 952,783,999 *Interest-only class. N.R.-Not rated. WHX CORP: Ratings Off Watch Following Separation from WPC Unit -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B-' corporate credit rating on steelmaker WHX Corp. and removed all ratings from CreditWatch. The current outlook is negative. "The rating actions follow the company's announcement that it has been relieved of any future cash obligations to its former subsidiary, Wheeling-Pittsburgh Corp. and its affiliates, associated with WPC's Chapter 11 reorganization," said Standard & Poor's credit analyst Paul Vastola. WPC recently completed its Chapter 11 reorganization and is no longer a subsidiary of WHX. In addition, the Pension Benefit Guarantee Corp. also rescinded its pursuit of the involuntary termination of WHX's pension plan and agreed to withdraw its civil complaint devoid of any required cash outlays from WHX. Despite this favorable outcome, Standard & Poor's said that concerns remain about WHX's significant refinancing risk, as the majority of its $254 million of debt matures in less than two years. WINN-DIXIE: Fiscal Fourth-Quarter Net Loss Hits $22 Million ----------------------------------------------------------- Winn-Dixie Stores, Inc. (NYSE: WIN) (S&P, BB+ Corporate Credit Rating, Negative) announced sales and earnings for its fourth quarter and fiscal year ended June 25, 2003. Net earnings from continuing operations for the quarter were $62.5 million, compared to $52.8 million for the same quarter last year. For the year, net earnings from continuing operations were $239.2 million, as compared to $187.2 million for the previous year. Net loss for the prior year including discontinued operations were $21.9 million for the quarter and net income of $86.9 million for the year. During the current quarter, the company-owned life insurance issues were settled with the Internal Revenue Service, which resulted in the reversal of tax reserves totaling $28.0 million, or $0.20 per diluted share. In addition, an expense was incurred for the retirement payments to the former CEO under his employment agreement that totaled $5.0 million after tax, or $0.04 per diluted share. Sales from continuing operations for the 12 weeks ended June 25, 2003 were $2.7 billion, a decrease of $130.0 million or 4.5% compared with the same quarter last year. For the 52 weeks ended June 25, 2003, sales from continuing operations were $12.2 billion, a decrease of $166.0 million or 1.3% compared with the prior year. Identical and comparable store sales decreased 4.5% for the quarter and 0.7% for the year. The Easter holiday fell in the fourth quarter of fiscal 2003 and the third quarter of fiscal 2002. Adjusted for the estimated impact of the timing of the Easter holiday, identical and comparable sales for the fourth quarter would have decreased 5.5%. Identical stores include enlargements and exclude the sales from stores that opened or closed during the fiscal year. Comparable stores include replacement stores. Frank Lazaran, Winn-Dixie's President and Chief Executive Officer stated, "During the fourth quarter we experienced an increase in competitive activity that negatively impacted our identical store sales. Many of our competitors lowered their earnings estimates over the past few months in order to significantly increase their promotional activity. In addition, military troop deployments and general economic conditions contributed to weaker sales in the fourth quarter. We have adjusted our earnings estimate for fiscal 2004 to reflect a more aggressive pricing and promotional stance going forward using our reward card to deliver those savings. We are also making improvements in our shrink and in-stock conditions." For the 52 weeks ended June 25, 2003, the Company opened 13 new stores, averaging 45,500 square feet, closed 13 stores, averaging 34,600 square feet and enlarged or remodeled 62 store locations, for a total of 1,073 locations in operation on June 25, 2003, unchanged from June 26, 2002. As of June 25, 2003, retail space totaled 47.6 million square feet, which is relatively flat as compared to the previous year. Winn-Dixie Stores, Inc. (NYSE: WIN) is one of the largest food retailers in the nation and ranks 149 on the FORTUNE 500 (R) list. Founded in 1925, the company is headquartered in Jacksonville, FL and operates 1,073 stores in 12 states and the Bahama Islands. Frank Lazaran serves as President and Chief Executive Officer. For more information, visit http://www.winn-dixie.com WORLDCOM INC: Seeks Court Nod for Second Disclosure Statement ------------------------------------------------------------- The Worldcom Debtors delivered to the Court on August 4, 2003 a second Disclosure Statement supplement. These matters are addressed in the Supplement: A. Proposed Debarment by the United States General Services Administration The United States General Services Administration proposes to bar WorldCom from participating in federal procurement and non-procurement programs, citing weaknesses in the Debtors' accounting controls and the need to improve and enhance their newly established ethics office. As a result, until the Debtors remedy these concerns, WorldCom will be ineligible to be awarded new contracts with the federal government and existing contracts will not be renewed or otherwise extended. The proposed debarment will not affect WorldCom's existing contracts with state and federal government customers. B. Investigation of the Department of Justice into Allegations of Improper Routing of Network Traffic The United States Attorney for the Southern District of New York has issued a subpoena and opened an investigation relating to alleged projects that would have resulted in the routing of network traffic or alteration of transmission data in a manner intended to unlawfully avoid or reduce charges payable to the local exchange company serving the called party. Based on a preliminary internal review, the Debtors believe that their current practices in terminating calls comply with all legal and regulatory requirements. Alleging injury based on these practices, AT&T filed an objection to confirmation of the Plan in the Bankruptcy Court seeking to amend certain provisions of the Plan to protect its rights to file a claim that it asserts arose during the postpetition, pre-confirmation period. The Debtors responded to AT&T's allegations describing the true factual circumstances that are involved in AT&T's charges and explaining why AT&T's legal claims are without foundation. C. Investigation of the FCC into Allegations of Improper Routing of Network Traffic The Enforcement Bureau of the FCC has also initiated an investigation into allegations that WorldCom may have violated certain FCC rules by withholding, substituting, or modifying information associated with interstate inter- exchange traffic. WorldCom is promptly acting to provide the FCC the information requested. The Debtors believe that on a review of the information relating to these practices, the FCC will similarly conclude that the allegations are baseless. A copy of the Second Supplement is available for free at: http://bankrupt.com/misc/Second_Disclosure_Statement.pdf Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, asserts that the Second Supplement satisfies the Court's requirements and contains adequate information of a kind and in sufficient detail to enable a hypothetical, reasonable investor typical of the Debtors' creditors to make an informed judgment whether to accept or reject the Plan. Accordingly, the Debtors ask the Court to approve the form and content of the Second Supplement in accordance with Sections 105 and 1125 of the Bankruptcy Code and Rule 3017 of the Federal Rules of Bankruptcy Procedure. The Debtors also want Judge Gonzalez to find that the Second Supplement, together with the First Supplement and the Disclosure Statement, contains "adequate information" within the meaning of Bankruptcy Code Section 1125. Ms. Goldstein assures the Court that the information set forth in the Second Supplement provides a detailed explanation of each of the Governmental Actions and the Debtors' position with respect to those Actions. The Debtors have articulated the potential consequences arising from the Governmental Actions and the impact such consequences may have on their estates. The Debtors have also included projected financial information, including a recovery matrix, that indicate the financial impact on their estates and creditor recoveries that may result from the Governmental Actions. The Debtors will promptly distribute a copy of the Supplement to interested parties upon its approval. (Worldcom Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) Z-TEL TECHNOLOGIES: June 30 Equity Deficit Widens to $116 Million ----------------------------------------------------------------- Z-Tel Technologies, Inc. (Nasdaq/SC:ZTEL) reported its financial results for the second quarter of 2003. Z-Tel's principal operating entity is Z-Tel Communications, Inc., a leading provider of local, long distance and enhanced telecommunications services. For the three-month period ended June 30, 2003, the company reported revenues of $69.9 million, up 16% over the $60.3 million the company reported for the first quarter of 2003. Net loss was $6.0 million, compared to net loss of $3.1 million for the first quarter of 2003. Net loss attributable to common stockholders was $10.7 million versus $7.4 million for the first quarter of 2003. The company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $0.4 million for the second quarter of 2003, compared to $2.7 million for the first quarter of 2003. For the six-month period ended June 30, 2003, the company reported revenues of $130.2 million, compared to $119.5 million for the prior year period. Net loss was $9.1 million versus $10.3 million for the prior year six-month period. Net loss attributable to common stockholders was $18.1 million compared to $18.2 million for the prior year six-month period. For the first half of 2003, the company reported $3.2 million in EBITDA, compared to $1.8 million for the first half of 2002. At the end of the second quarter, the company reported approximately 262,000 active residential retail lines in service, up approximately 30% since the end of 2002. Z-Tel Technologies' June 30, 2003 balance sheet shows a working capital deficit of about $24 million, and a total shareholders' equity deficit of about $116 million. Gregg Smith, president and chief executive officer for Z-Tel, said, "We're very pleased with our performance for the second quarter. As we noted in the first quarter of 2003, we expected MCI's departure to cause us to experience a period of time in which the drop in MCI fee income would not be offset by other growth in our wholesale business. We estimate that the gap for the second quarter resulted in a reduction in EBITDA of approximately $4 million. If MCI had stayed on as a customer, however, we would have experienced a record quarter. "We have diligently pursued a three-pronged approach to our business for a long period of time now and have evolved each of those areas - consumer retail, business retail, and wholesale services," added Mr. Smith. "The second quarter marked growing contributions from Sprint, which is now becoming the substantial partner that MCI was for us for a period of time, and we believe that they're on track to achieve their UNE-P growth forecasts for the year. On the retail front, our residential business has been growing again for several quarters, and activity in our Business Services Group is surpassing even our own internal estimates." Mr. Smith continued, "Our Business Services Group is off to an excellent start and has already seen some major contract wins, including Darden Restaurants and several others that we'll announce in the near term. We now have more than 10,000 active business subscriber lines and plan to add another 9,000 lines in August alone. In fact, business lines now account for over 40 percent of all newly provisioned lines at Z-Tel. Our nationwide footprint and strategic relationships with providers such as Covad and XO put us in a strong position to become the go-to provider for multi-location businesses, even when up against much larger competitors." In addition to expanding its commercial retail initiatives, by September 1, 2003, all of the company's new and existing products should be equipped with its proprietary, voice-activated feature, Personal Voice Assistant, or PVA. PVA has already achieved high acceptance rates with Z-LineHOME(R) customers, with over 30% of those signed up using the service. In addition, release 1.5 of Z- Line(R) is scheduled for early September, which will allow groups of all kinds to set up community Address Books and sponsor PVA free trials for all of their members. The group members can then sign up for any Z-Tel fee-based product, such as Z-LineHOME or Z- LineLD(TM), or they may keep PVA on a stand-alone basis for $4.95 per month. Smith continued, "PVA makes communicating among family members, churches, sports leagues, and other groups simpler and easier. In addition to being a highly attractive feature for any user of communications services, PVA has become the foundation of Z-Tel's distribution and delivery strategy. Acquiring customers one at a time is an increasingly challenging task for any communications provider. Providing group solutions with real value from day one allows for attractive partnership opportunities and offers distribution economics that are unmatched in the industry today. While we have to demonstrate that this model has legs, we're more than pleased with the initial marketplace reception." For example, the company recently announced a relationship with SportsLine.com, through which Z-Tel will offer PVA to SportsLine.com's over one million fantasy football league participants nationwide. Football Commissioner users will be able to register directly on SportsLine.com's Web site and use PVA free for a trial period. Participants will be able to use PVA to communicate directly with other league members or team owners, hold impromptu conference calls, trash talk fellow participants, and discuss mid-season trades and roster moves. After the free trial period, they may upgrade seamlessly to any Z-Tel fee-based product. This model provides users with a low-commitment way to try Z-Tel services. As a result, Z-Tel is negotiating similar relationships with other organizations that will offer PVA-based products as an added benefit to their established memberships. The company increasingly expects its relationships with member- based organizations and other sales operations improvements, such as stricter customer quality requirements and the refining of the company's independent sales organization programs, to contribute to the growth of its consumer retail business in future quarters. Z-Tel's chief financial officer, Trey Davis, stated, "At June 30, 2003, we had approximately $14.2 million of cash on hand. The company should maintain a solid liquidity position for the second half of 2003, and we expect our cash balance to remain close to the $15 million level. We also recently renewed our receivables financing agreement with RFC Capital Corporation for an additional year, and we are being approached by other sources of financing, principally related to equipment leasing." Mr. Davis added, "As a result of the steady growth we expect to see from Sprint for the remainder of the year and any activity that additional wholesale customers we acquire may generate, the operating profit gap created by the substantial departure of MCI should be largely behind us now. Given the emerging growth that is now occurring in our commercial business and Sprint's anticipated expansion, we are once again looking to expand EBITDA in the second half of the year." Consistent with the recently adopted Regulation G by the SEC, the following table provides a reconciliation of EBITDA to the Generally Accepted Accounting Principles measure of net income. EBITDA is commonly used as an analytical indicator within the telecommunications industry. EBITDA is not a measure of financial performance under GAAP, and the items excluded from EBITDA are significant components in understanding and assessing financial performance. Founded in 1998, Z-Tel offers consumers and businesses nationwide traditional and enhanced telecommunications services. Z-Tel's enhanced services, such as Internet-accessible and voice-activated calling and messaging features, are designed to meet customers' communications needs intelligently and intuitively. Z-Tel also makes its services available on a wholesale basis. For more information about Z-Tel and its innovative services, please visit http://www.ztel.com * Huron Consulting Brings-In Roy Ellegard as Managing Director -------------------------------------------------------------- Huron Consulting Group announced that Roy Ellegard, a leading national figure in the field of engineering valuation, has joined the company as a managing director in the national Valuation Services practice. He will be based in Huron's New York office. "Roy's 22 years of experience with companies in the greater New York/New Jersey area will further strengthen our ability to service clients in all of Huron's business segments, including such areas as litigation support, restructuring and compliance," said Edward Murray, chief operations officer of Huron's Valuation Services practice. "The fact that Roy has performed valuations in almost every state will enable him to provide national leadership in this specialty service line." In his new role, Ellegard will be working with specialists in all of the major valuation disciplines, including machinery and equipment, real estate, economic modeling, business enterprise and intellectual property. His specific experience includes the preparation of expert valuation reports for disputes, all forms of tax reporting, accounting compliance, reorganizations, asset management, collateral, insurance adequacy, and all aspects of leasing transactions. Ellegard has concentrated industry experience in a range of areas, from heavy manufacturing and process facilities to retail and high technology companies. Prior to joining Huron, Ellegard was a managing director with Standard & Poor's (S&P)/PricewaterhouseCoopers (PwC) value consulting division. Before S&P/PwC, he was a national director with the Capital Equipment Valuation Advisors Group at Ernst & Young. Ellegard earned his Bachelor of Arts in Economics from the University of Richmond in Virginia. He is an Accredited Senior Appraiser with the American Society of Appraisers and an Arbitrator in The American Arbitration Association. Huron Consulting Group is a 475-person business consulting organization created on the belief that our people are our greatest asset and that our clients deserve the very best in terms of effort, care, and intellectual capacity - focused on results. Huron Consulting Group provides valuation, corporate finance, restructuring, and turnaround services to companies and lenders. It performs financial investigations, litigation analysis, expert testimony and forensic accounting for attorneys. Huron provides strategic planning, operational consulting, strategic sourcing, and organizational and technology assessments in a variety of industries including manufacturing, healthcare and pharmaceutical, higher education, law firm and corporate law departments, transportation, and energy. Huron Consulting Group operates nationwide with offices in Boston, Charlotte, Chicago, Houston, Miami, New York, San Francisco and Washington, D.C. Learn more at http://www.huronconsultinggroup.com * BOND PRICING: For the week of August 11 - 15, 2003 ---------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Communications 9.875% 03/01/07 63 Ahold Financial USA 6.875% 05/01/29 73 AK Steel Corp. 7.750% 06/15/12 73 Allmerica Financial 7.625% 10/15/25 75 American & Foreign Power 5.000% 03/01/30 62 American Cellular 9.500% 10/15/09 63 AMR Corp. 9.000% 08/01/12 61 AMR Corp. 9.000% 09/15/16 61 Best Buy Co. Inc. 0.684% 06/27/21 72 Burlington Northern 3.200% 01/01/45 51 Burlington Northern 3.800% 01/01/20 73 Calpine Corp. 8.500% 02/15/11 69 Calpine Corp. 8.625% 08/15/10 69 Calpine Corp. 8.750% 07/15/07 73 Century Communications 8.875% 01/15/07 68 Champion Enterprises 7.625% 05/15/09 74 Charter Communications 8.625% 04/01/09 73 Charter Communications 9.625% 11/15/09 73 Cincinnati Bell Telephone 6.300% 12/01/28 68 Comcast Corp. 2.000% 10/15/29 29 Coastal Corp. 6.950% 06/01/28 68 Coastal Corp. 7.420% 02/15/37 71 Conseco Inc. 8.750% 08/09/06 64 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 36 Crown Cork & Seal 7.500% 12/15/96 70 Cummins Engine 5.650% 03/01/98 62 Delta Air Lines 7.900% 12/15/09 75 DVI Inc. 9.875% 02/01/04 50 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 70 GB Property Funding 11.000% 09/29/05 65 Globalstar LP 11.250% 06/15/04 3 Goodyear Tire & Rubber 7.000% 03/15/28 74 Goodyear Tire & Rubber 7.857% 08/15/11 73 Gulf Mobile Ohio 5.000% 12/01/56 64 Hasbro Inc. 6.600% 07/15/28 73 Health Management Associates 0.250% 08/16/20 63 HealthSouth Corp. 3.250% 04/01/03 75 IMC Global Inc. 7.300% 01/15/28 71 International Wire Group 11.750% 06/01/05 56 JL French Auto 11.500% 06/01/09 50 Level 3 Communications Inc. 6.000% 03/15/10 59 Liberty Media 3.750% 02/15/30 56 Liberty Media 4.000% 11/15/29 59 Lucent Technologies 6.450% 03/15/29 63 Lucent Technologies 6.500% 01/15/28 63 MCI Communications 8.250% 01/20/23 73 Mirant Americas 8.300% 05/01/11 69 Mirant Corp. 5.750% 07/15/07 41 Missouri Pacific Railroad 4.750% 01/01/30 70 Missouri Pacific Railroad 5.000% 01/01/45 60 NGC Corp. 7.125% 05/15/18 69 NGC Corp. 7.625% 10/15/26 68 Northern Pacific Railway 3.000% 01/01/47 50 Northwest Airlines 9.875% 03/15/07 72 Northwestern Corporation 7.875% 03/15/07 73 Northwestern Corporation 8.750% 03/15/12 71 NTL Communications Corp. 7.000% 12/15/08 19 Qwest Capital Funding 7.750% 02/15/11 75 Qwest Capital Funding 7.750% 02/15/31 71 RCN Corporation 10.125% 01/15/10 39 Revlon Consumer Products 8.125% 02/01/06 64 Revlon Consumer Products 8.625% 02/01/08 46 Revlon Consumer Products 9.000% 11/01/06 64 Silicon Graphics 5.250% 09/01/04 71 Solutia Inc. 7.375% 10/15/27 71 Sonat Inc. 7.000% 02/01/18 74 Tennessee Gas 7.000% 10/15/28 74 Universal Health Services 0.426% 06/23/20 63 US Timberlands 9.625% 11/15/07 60 US West Communications 6.875% 09/15/33 70 US West Communications 7.125% 11/15/43 72 US West Communications 7.200% 11/10/26 74 US West Communications 7.250% 10/15/35 74 Worldcom Inc. 6.250% 08/15/03 27 Worldcom Inc. 6.400% 08/15/05 27 Worldcom Inc. 6.950% 08/15/28 27 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 ***