/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030814.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, August 14, 2003, Vol. 7, No. 160 Headlines 3D SYSTEMS: June 27 Working Capital Deficit Narrows to $1.4 Mil. ABACUS COMMS: Wants Approval to Use Lenders' Cash Collateral ACP HOLDING: Gets Interim Okay to Use Lenders' Cash Collateral ACTERNA: Gets Go-Signal to Continue Key Employee Retention Plan ADELPHIA BUSINESS: Court Approves Amendments to DIP Financing ADELPHIA COMMS: Sells Excess Assets to Ten Buyers for $1.6 Mill. AIR CANADA: Reports Stable Ops. and Improved Customer Service AIR CANADA: Initiates Unexpired Leases & Contracts Restructuring AMES DEPARTMENT: Wants to Halt 2003 Life Insurance Plan Payments APPLIED DIGITAL: Special Shareholders' Meeting Set for Sept. 10 AQUILA INC: Second Quarter Net Loss Trimmed Further to $80 Mill. ARMOR HOLDINGS: Reports Improved 2nd Quarter Operating Results ARMOS HOLDINGS: Completes $150 Million Sr. Sub. Note Offering ASPECT: Closes Mandatory Repurchase of Zero Coupon Debentures ATCHISON CASTING: UST Appoints Official Creditors' Committee AVCORP INDUSTRIES: Closes Financial Restructuring Initiatives BRIDGEWATER SPORTS: Section 341(a) Meeting Slated for Sept. 15 BUDGET GROUP: Sixth Exclusivity Extension Hearing Set for Monday BURLINGTON IND.: Pension and Benefit Plans Under Amended Plan CLARION TECHNOLOGIES: June Net Capital Deficit Narrows to $51MM COLLINS & AIKMAN: Hosting Second Quarter Teleconference Today CONGOLEUM: Second Quarter Results Swing to $2-Million Net Loss CONSECO: Wants Approval to Assume Federal Insurance Agreement COVANTA ENERGY: Wins Nod to Implement US Trust Company Agreement DAY INT'L GROUP: S&P Rates Proposed $187M Sr Sec. Bank Loan at B DELPHAX: Harris Trust Relaxes Fin'l Covenants & Waives Defaults DIGITAL FUSION: Red Ink Continued to Flow in Second Quarter 2003 EAGLE FOOD: Court Fixes September 8 as General Claims Bar Date FARMLAND INDUSTRIES: Smithfield Designated as Stalking Horse FC CBO: S&P Cuts Senior Notes Rating Down 2 Notches to BB- FLEMING COS.: Court OKs Pepper Hamilton as Committee Co-Counsel GALAXY NUTRITIONAL: Hosting Fiscal Q1 Conference Call Tomorrow GENSCI REGENERATION: Inks Cross Distribution Pact with IsoTis GLOBAL CROSSING: Enters Marketing Partnership with IDT Solutions GLOBAL CROSSING: Launches Business Continuity Solutions Program GLOBAL CROSSING: Wants Court Approval of $100MM DIP Financing HAIGHTS CROSS: S&P Rates 2nd Priority Loan & Sr Notes at B-/CCC+ HEALTHSOUTH CORP: Makes $117MM Payment for All Past Due Interest HOUSE2HOME INC: Creditors' Ballots Due by August 25, 2003 IFCO SYSTEMS: Reports Continued Profitability Improvement for Q2 INTEGRATED HEALTH: Court Approves Stipulation with Sysco Corp. INTERPUBLIC GROUP: Second Quarter Net Loss Stands at $13 Million INVENTRONICS LTD: Reports Improved Second Quarter 2003 Results J.C. PENNEY: Red Ink Continued to Flow in Second Quarter 2003 JH WHITNEY: Fitch Further Junks Class D Sec. Notes Rating to C KOSA B.V.: S&P Keeps Watch over Likely DuPont Interiors Merger LEAP WIRELESS: Court Fixes September 2 Supplemental Bar Date LORAL SPACE: Gets Okay to Hire Key Consulting for Financial Advice M/I SCHOTTENSTEIN: Board Declares Fourth Quarter Cash Dividend MASTEC INC: Reports Above-Estimates Second Quarter 2003 Earnings MIRANT CORP: Turning to Blackstone Group for Financial Advice MOBILE COMPUTING: Conv. Debentures Maturity Extended to Monday MOBILE TOOL INT'L: Proofs of Claim Due by August 29, 2003 MOTELS OF AMERICA: Has Until September 17 to File Schedules NATIONAL STEEL: Seeks Fourth Open-Ended Removal Period Extension NEPTUNE SOCIETY: Cures Likely Events of Default Under Debentures NORTHWEST AIRLINES: Registration Statement Declared Effective NTELOS INC: Virginia Court Confirms Joint Plan of Reorganization NUEVO ENERGY: Second Quarter 2003 Results Reflect Slight Decline OWENS CORNING: Reports $18 Million of Net Income in 3rd Quarter OWENS CORNING: Files Third Amended Joint Plan in Delaware OWENS CORNING: Court Approves Joint Professionals Use Agreement PACIFIC GAS: Court Approves Settlement Plan Disclosure Statement PANAVISION: S&P Withdraws B- Rating on Postponed Debt Offerings PEGASUS COMMS: June 30 Working Capital Deficit Narrows to $60MM PERLE SYSTEMS: Advances Restructuring Talks with Royal Capital PETROLEUM GEO: Taps BSI as Court Claims, Ballot and Notice Agent PG&E NATIONAL: Appointing Bankruptcy Services as Claims Agent PHARMACEUTICAL FORMULATIONS: Posts Improved June Quarter Results PILGRIM'S PRIDE: S&P Affirms Low-B Level Credit & Debt Ratings PILLOWTEX CORP: Seeks Court Injunction against Utility Companies PINNACLE ENTERTAINMENT: Hosting Q2 2003 Conference Call Today PINNACLE ENTERTAINMENT: Enters Agreement on Argentina Properties PLANVISTA CORP: June 30 Net Capital Deficit Narrows to $16 Mill. RADNOR HLDGS: Liquidity Concerns Prompts S&P to Keep Watch Neg. RITE AID: Amends and Restates New $1.85 Billion Credit Facility RJ REYNOLDS: S&P Affirms Ratings & Revises Outlook to Negative SAFETY-KLEEN: Proposes Post-Confirmation Management & Salaries SAMUELS JEWELERS: US Trustee to Meet with Creditors on Sept. 12 SATURN (SOLUTIONS): Bank Lender Agrees to Forbear Until Oct. 31 SCOTIA PACIFIC: Class A-3 Rating Cut to Speculative Grade Level SIMULA INC: Expects Weaker Performance Results for 2nd Quarter SLMSOFT: Canadian Court Extends CCAA Protection until October 15 STONE & WEBSTER: Files Amended Joint Reorganization Plan in Del. SUN HEALTHCARE: Enters Stipulation Allowing 2 Employees' Claims TROPICAL SPORTSWEAR: Initiates Changes in Sr. Management & Board UNITED AIRLINES: Wants Go-Signal to Implement Selective KERP U.S. CONCRETE: Gets Waivers of Certain Loan Covenant Violations USG CORP: Committee Gets OK to Litigate Preferential Transfers WEIRTON STEEL: Wants Nod to Assume Kaplan Employment Agreement WESTPOINT STEVENS: Wants to Assume Wellman Supply Agreements WINSTAR COMMS: Court Approves Seneca Financial's Engagement WORLDHEART CORP: June 2003 Balance Sheet Upside-Down By C$53MM WORLDCOM INC: Seeking Stay Relief to Continue Siemens Lawsuit * Fasken Martineau Opens 3rd International Off. in Johannesburg * DebtTraders' Real-Time Bond Pricing ********* 3D SYSTEMS: June 27 Working Capital Deficit Narrows to $1.4 Mil. ---------------------------------------------------------------- 3D Systems Corp. (Nasdaq:TDSC) announced revenues for the quarter ended June 27, 2003, were $26.9 million, compared with revenues of $28.5 million in the second quarter a year ago, a decrease of 5.9%. Net loss available to common shareholders for Q2 2003 was $3.8 million, or $.30 per fully diluted share, compared with a net loss available to common shareholders of $5.6 million, or $.44 per fully diluted share, in the prior-year period. Gross profit margins rose to 40% in Q2 2003, compared with gross margins of 38% for the same period a year ago, reflecting improved materials margins resulting from the shift from distribution of Vantico materials to the production and distribution of the Company's Accura(R) materials. Total operating expenses decreased 36% to $12.5 million in Q2 2003 from $19.3 million in the second quarter 2002, reflecting a concerted effort to reduce costs and expenses which began in the third quarter of 2002. During the quarter we had one-time unusual expenses of approximately $1.4 million related to the now completed investigation of the Audit Committee of the Board of Directors into revenue recognition issues, increased professional fees associated with the investigation, the write-off of deferred financing costs associated with the repayment of the term loan, and other one-time costs relating to severance. Revenues for the first six months of 2003 were $49.9 million, compared with revenues of $56.1 million in the first half of 2002. Net loss available to common shareholders for the first six months was $10.6 million, or $.84 per fully diluted share, compared with net income available to common shareholders of $3.1 million, or $.21 per fully diluted share, in the first six months a year ago. Results for the first half 2002 include an $18.5 million pretax benefit associated with the Vantico arbitration settlement and also include approximately $2.8 million in costs associated with the investigation of the Audit Committee, increased professional fees associated with the investigation, the write-off of deferred financing costs associated with the repayment of the term loan, and other one-time costs relating to severance. On May 5, 2003, the Company completed a private placement resulting in net proceeds to the Company of $15.2 million. Of these proceeds, $9.6 million was used to pay down bank debt incurred in conjunction with the acquisition of DTM Corp. in 2001. At June 27, 2003, the Company had cash balances of $9 million. At June 27, 2003, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $1.4 million. "The past six months have been a very difficult period for our Company," said G. Walter Loewenbaum II, chairman of the Board of Directors. "A decrease in revenues principally resulting from the continuing downturn in capital expense purchasing, combined with the time, attention, and costs required by the Audit Committee's investigation and the need to obtain additional finances severely strained our resources. I am pleased to report that by the end of the second quarter, the Audit Committee had completed its investigation, we paid down bank debt, reduced costs, developed and begun implementing new systems of internal controls, and we are fully compliant with SEC and Nasdaq regulations relating to the timely filing of our reports. "There is sustained interest in our ADM applications. In the second quarter 2003, ADM revenues were $9.1 million," Mr. Loewenbaum continued. "We begin the second half of the year with the decks cleared, ready to move forward throughout the remainder of 2003 and into 2004." Founded in 1986, 3D Systems(R), the solid imaging company(SM), provides solid imaging products and solutions that reduce the time and cost of designing products and facilitate direct and indirect manufacturing. Its systems utilize patented technologies to create physical objects from digital input that can be used in design communication, prototyping, and as functional end-use parts. 3D Systems currently offers the ThermoJet(R) solid object printer, SLA(R) (stereolithography) systems, SLS(R) (selective laser sintering) systems, and Accura(R) materials (including photopolymers, metals, nylons, engineering plastics, and thermoplastics). 3D Systems is the originator of the advanced digital manufacturing (ADM(SM)) solution for manufacturing applications. ADM is the utilization of 3D Systems solid imaging technologies to accelerate production of smaller volumes of customized/specialized parts. A typical ADM center is expected to contain multiple 3D Systems' SLA, MJM, and/or SLS systems dedicated to full-time manufacturing applications. More information on the company is available at http://www.3dsystems.com As reported in Troubled Company Reporter's August 8, 2003 edition, Deloitte and Touche LLP informed 3D Systems in April that it did not intend to stand for reelection as the Company's principal independent accountant. On July 16, 2003, Deloitte advised the Company that the client-auditor relationship between the Company and Deloitte had ceased. Deloitte's 2002 report contained an explanatory paragraph relating to a going concern uncertainty. During the fiscal years ended December 31, 2002 and 2001 and the period from January 1, 2003 to July 16, 2003, (a) there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreements in connection with its report, and (b) there were no "reportable events" as the term is defined in Item 304(a)(1)(v) of Regulation S-K, except as follows: Deloitte informed the Company that material weaknesses in the Company's internal controls existed. Specifically, Deloitte advised the Company that: - The Company's accounting and finance staff are inadequate to meet the needs of a complex, multinational SEC registrant. The Company needs to strengthen its capability to implement existing generally accepted accounting principles, as well as understand and implement new accounting standards. In addition, the Company needs to strengthen its capabilities in performing routine accounting processes involved in closing its books, such as account reconciliations and analyses. - The Company needs to strengthen its controls and processes related to revenue recognition. During 2002, 2001 and 2000, revenue was recognized for transactions that did not meet the requirements for revenue recognition under the Company's policies or generally accepted accounting principles. ABACUS COMMS: Wants Approval to Use Lenders' Cash Collateral ------------------------------------------------------------ Abacus Communications LC seeks approval from the U.S. Bankruptcy Court for the Eastern District of Virginia to continue using its Lenders' Cash Collateral to fund day-to-day operating expenses, subject to this weekly Budget: 8-Aug 15-Aug 22-Aug ----- ------ ------ Beginning Cash 547,867 508,236 569,236 Total Income 263,906 98,700 125,733 Total Payments (303,537) (37,700) (290,000) Cash Over (39,631) 61,000 (164,267) Ending Cash 508,236 569,236 404,969 29-Aug 5-Sep 12-Sep ------ ----- ------ Beginning Cash 404,969 435,969 210,149 Total Income 98,700 253,717 98,700 Total Payments (67,700) (379,537) (37,700) Cash Over 31,000 (125,820) 61,000 Ending Cash 435,969 310,149 371,149 When Abacus filed for chapter 11 protection, it owed each of its employees accrued wages, including payroll taxes, which were and are not yet payable in the ordinary course of the Debtor's payroll. The Debtor desires to pay each employee the full amount of his or her accrued wage and pay the accrued payroll tax, even though a portion would constitute a prepetition claim against the Debtor. The Debtor believes that failure to timely pay such accrued payroll, all of which, if unpaid, would constitute priority claims against the estate, will cause many employees to leave the employ of the Debtor and potentially force the Debtor to close down its operations entirely. The loss of the Debtor's employees will result in irreparable injury to the Debtor and eliminate its ability to effectively reorganize. Cash in the Debtor's bank accounts and coming in the door secures repayment of a $5,600,000 loan from Wachovia Bank, N.A. The Debtor's primary lending relationship, over the years, has been with Wachovia. Pursuant to a Loan and Security Agreement, the Notes are secured by a lien against all of the personal property of Abacus. As of July 28, 2003, $5.6 million of principal was due and owing under the Loan Agreement. The Debtor point out that using cash collateral at this point will preserve its assets through a successful reorganization. The Debtor reports that it has been negotiating with the Senior Lender with respect to the terms upon which it would agree to the its use of cash collateral. Furthermore, the Senior Lender expresses its willingness to consider providing postpetition financing to the Debtor, in the event that such financing is necessary or beneficial to the Debtor's reorganization. For the Senior Lender' adequate protection, the Debtor will place any and all cash, checks or monies it collects, receives or derives from the operation of its business or the use of the Senior Lender's Collateral into the Debtor's Debtor-in-Possession bank account. The Debtor will also provide the Senior Lender with replacement liens pursuant and in accordance with Section 361(2). Abacus Communications LC, headquartered in Virginia Beach, Virginia is an outsourcing service bureau. The Company filed for chapter 11 protection on August 1, 2003 (Bankr. E.D. Va. Case No. 03-75562). Frank J. Santoro, Esq., and Karen M. Crowley, Esq., at Marcus, Santoro & Kozak, P.C., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $12,750,352 in total assets and $13,049,014 in total debts. ACP HOLDING: Gets Interim Okay to Use Lenders' Cash Collateral -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave its nod of approval, on an interim basis, to ACP Holding Company and its debtor-affiliates' request to use their Lenders' cash collateral to finance their ongoing operations while restructuring under chapter 11. The Debtors disclose that as of the filing of their chapter 11 petitions, they owed JP Morgan Chase Bank and a consortium of lenders $146,626,932 on account of pre-petition loans and $864,675 in respect of letters of credit. The Lenders assert and the Debtors concede that the Lenders' interests in the Prepetition Loan are adequately protected. The Court has found out that the Debtors have an immediate need to use Cash Collateral in order to permit, among other things, the orderly continuation of the operation of their businesses, to maintain business relationships with vendors, suppliers and customers, to make payroll, to make capital expenditures and to satisfy other working capital needs. The ability of the Debtors to obtain sufficient working capital and liquidity through the use of Cash Collateral is vital to the preservation and maintenance of the going concern values of the Debtors and to their successful reorganization. Additionally, the Debtors are unable to obtain financing from other sources on more favorable terms and are unable to obtain adequate unsecured credit allowable under Section 503(b)(1) of the Bankruptcy Code as an administrative expense. The Debtors assure the Court that the aggregate value of the Prepetition Collateral exceeds the aggregate amount of the Prepetition Obligations. Accordingly, the Court allows the Debtors' use of cash collateral pursuant to this Weekly Budget: 8-Aug 15-Aug 22-Aug ----- ------ ------ Receipts 9,243 8,315 8,338 Disbursements 11,525 5,614 5,799 Receipts O/U Disbursements (2,282) 2,701 2,539 Ending Cash Balance 5,283 7,984 10,523 29-Aug 5-Sep 12-Sep ------ ----- ------ Receipts 7,121 8,634 8,272 Disbursements 5,970 11,854 8,106 Receipts O/U Disbursements 1,151 (3,220) 166 Ending Cash Balance 11,674 8,454 8,620 The Final Hearing is scheduled for August 28, 2003 at 9:30 a.m. before the Honorable Judge Peter J. Walsh. Any objections to the Debtors' request for final use of cash collateral must be in writing and received by: i) counsel for the Debtors Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC 919 N. Market Street, 16th Floor Wilmington, Delaware 19801 Attn: Laura Davis Jones; Kirkland & Ellis LLP 200 East Randolph Drive Chicago, Illinois 60601 Attn: James W. Kapp III, Esq., ii) counsel for the Agent Morgan, Lewis & Bockius LLP 101 Park Avenue, New York, New York 10178 Attn: Richard S. Toder, Esq.; Klett Rooney Lieber & Schorling 100 West Street, Suite 1410 Wilmington, Delaware 19801 Attn: Theresa Currier, Esq.; and iii) the Office of the United States Trustee Suite 2313, J. Caleb Boggs Federal Building 844 N. King Street, Wilmington, Delaware 19801 on or before August 25, 2003 at 12:00 noon. Neenah Foundry Company, the operating subsidiary of ACP Holding Company is headquartered in Neenah, Wisconsin. The Company is in the business of gray & ductile iron foundries, metal machining to specifications and steel forging. The Company filed for chapter 11 protection on August 5, 2003 (Bankr. Del. Case No. 03-12414). Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young Jones & Weintraub P.C., and James H.M. Sprayregen, P.C., Esq., and James W. Kapp III, Esq., at Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $494,046,000 in total assets and $580,280,000 in total debts. ACTERNA: Gets Go-Signal to Continue Key Employee Retention Plan --------------------------------------------------------------- Acterna Corp., and its debtor-affiliates obtained the Court's approval to continue the implementation of its Key Employee Retention Plan. The KERP Based on the recommendations of Deloitte and the Debtors' Chief Restructuring Officer, and after extensive negotiations with the Lenders, the Debtors modified the retention payments owing to key employees by extending the vesting and payment dates, and significantly reduced the severance benefits provided under the Prepetition Retention Plan to develop the Key Employee Retention and Severance Plan. In addition, although the KERP provides participants with reduced benefits, it covers 20 additional employees and runs deeper through the organization than the Prepetition Retention Plan in order to address the broader need to retain employees in Chapter 11. In drafting the KERP, the Debtors considered the magnitude and difficulty of the proposed restructuring, balancing the need to conserve cash against establishing the appropriate incentives for Key Employees to: (1) implement the ambitious cost-reduction initiatives already underway; (2) implement a strategic refocus of the product portfolio, site and line of business shutdowns; (3) drive revenue opportunities in new directions; and (4) continue their business operations with the least amount of disruption to their major customers, vendors and suppliers. The KERP has two principal components: (i) a retention component designed to retain the Key Employees, and (ii) a severance component designed to provide competitive job security for the Key Employees. The Retention Program The Retention Program provides for: -- bonuses that are designed to encourage Key Employees to remain employed by the Debtors throughout the restructuring process. In the ordinary course of their business and consistent with the Prepetition Retention Plan, the Debtors have made two payments, aggregating $2,800,000, to the Prepetition Key Employees pursuant to the Prepetition Retention Plan. These two prepetition payments, which were made on December 15, 2002 and April 15, 2003, total 50% of the payments due under the Prepetition Retention Plan. -- a stay bonus if the employee remains employed by the Debtors on specific target dates. The aggregate amount of Retention Payments to be paid to the Key Employees under the Plan is $2,700,000. The Debtors propose to make the Retention Payments on occurrence of the earlier of: (i) one month after the effective date of a reorganization plan in these Chapter 11 cases; and (ii) May 6, 2004. A Key Employee is obligated to return the April 15, 2003 Prepetition Retention Plan payment in the event that the employee is not employed by the Debtors on October 1, 2003. However, if a Key Employee is involuntarily terminated without cause before the Payment Date, then the Key Employee will be entitled to retain the April 15, 2003 Prepetition Retention Plan payment and to receive a pro rata portion of the Retention Payment. This payment will be pro rated based on the time of service during the period commencing on April 15, 2003 and continuing through the earlier of: (i) the effective date of a reorganization plan in these Chapter 11 cases; and (ii) May 6, 2004. -- the establishment of a $500,000 discretionary bonus pool for those individuals not entitled to an individual Retention Payment. Eligibility for and awards from the discretionary pool will be based on recommendations from management, with the approval of the Chief Executive Officer and the Chief Restructuring Officer. Awards under the discretionary pool are capped at $30,000 per individual. The Severance Program The Severance Program is intended to provide competitive security for the Debtors' employees. Benefits under the Severance Program are calculated as a percentage of Base Salary. Potential severance amounts range from a low of one and one-half months' Base Salary, to a maximum of nine months' Base Salary. An employee is not eligible for Severance Payments if: (i) the employee's employment with the Debtors is terminated for "Cause," or (ii) the employee voluntarily terminates employment with the Debtors before the effective date of a reorganization plan, provided, however, that an employee will be eligible for Severance Payments if the employee voluntarily terminates employment with the Debtors after a change of control, unless the employee is offered comparable employment. A "Change of Control" is deemed to have occurred if: (1) an entity is or becomes the "beneficial owner" -- as determined pursuant to Rule 13d-3 of Section 13(d) of the Securities Exchange Act of 1934, as amended -- of Acterna securities representing more than 50% of the combined voting power of Acterna's then outstanding securities; (2) the Debtors will merge with or consolidate into any other corporation; (3) Acterna stockholders approve a plan of complete liquidation of Acterna or such a plan is commenced; (4) the sale and disposition of all or substantially all of the Debtors' assets; or (5) a Chapter 11 reorganization plan is confirmed and becomes effective in these Chapter 11 cases. There are 38 Key Employees who have either letter agreements or other contractual arrangements with the Debtors, which entitle them to certain benefits, including severance. Severance payments to employees with employment contracts are made over time, and are subject to mitigation by the recipients. The KERP provides that Key Employees who are severed will be entitled to severance not to exceed nine months' Base Salary. Moreover, the Debtors' prepetition severance program will be continued for those employees who do not have contractual arrangements with the Debtors. However, severance payments to these employees will be modified from the prepetition program so that payments will be made over time. Consistent with the prepetition severance program, the payments will not be subject to mitigation by the recipients. The Debtors' severance program provides for, upon termination, three-eighth month's Base Salary per year of service with Acterna, with a minimum of one and one- half months' Base Salary and a maximum of four and one-half months' Base Salary. For employees at or above the director level, one additional month's Base Salary will be provided, although the total amount will not exceed four and one-half months' pay. Based on the current business plan, the Debtors contemplate that domestic severance obligations will reach $3,500,000 during these Chapter 11 cases. Other KERP Conditions Benefits for a Key Employee are conditioned on the Key Employee's release of all claims against the Debtors, including those arising out of employment or the termination thereof, but excluding rights under the KERP, postpetition compensation and benefits, all ERISA plan claims, workers compensation, unemployment insurance, and directors and officer indemnification coverage. In addition, a Key Employee's participation in the KERP automatically terminates, without notice to or consent of the Key Employee, on the first to occur of: -- termination of employment for cause; or -- voluntary termination of employment by the employee for any reason, other than as contemplated in the Change of Control provisions. To the extent that an employee is otherwise entitled to a KERP payment, the payment obligation will be triggered if there is a Change of Control and the employee is not offered comparable employment for a period of no less than three months at the same base salary and with severance benefits that are comparable to those offered in the KERP. Moreover, the rejection of an employment agreement with a Key Employee pursuant to Section 365 of the Bankruptcy Code will not create an entitlement to severance, unless a Change of Control has occurred and the employee is not offered comparable employment for a period of no less than three months at the same base salary and with severance benefits that are comparable to those offered in the KERP. (Acterna Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA BUSINESS: Court Approves Amendments to DIP Financing ------------------------------------------------------------- Adelphia Business Solutions, Inc., and its debtor-affiliates obtained the Court's approval to: (a) approve the Amendment and authorize the extension of the Senior DIP Credit Agreement pursuant to the terms and conditions presented; (b) modify the Final DIP Order to reflect the terms of the Amendment; and (c) approve the recording of a deed reflecting a previous transfer. Pursuant to the Adelphia Business Solutions, Inc.'s Senior DIP Credit Agreement and the Final DIP Order, the $15,000,000 DIP Loan from Beal Bank, S.S.B. matures on the earlier of: -- July 31, 2003, -- the Effective date of a Chapter 11 Plan or Reorganization, or -- the Termination Date. The salient terms of the Amendment will be: A. Scheduled Maturity: Extend scheduled Maturity to April 30, 2004; B. Administration Fee: Increase the monthly administration fee from $15,000 to $25,000; C. Extension Fee: $100,000; D. Eligible Receivable Covenant: Modify covenant to permit the Debtors to include available cash for purposes of covenant compliant. Minimum aggregate requirement to be $20,000,000 in eligible receivables and available cash. Certain cash is included, including cash used to satisfy the new cash collateral covenant; E. Cash Collateral Covenant: Add a requirement to maintain at least $5,000,000 in a restricted cash collateral account at Beal Bank; F. Free Cash Flow Covenant: Adjust the minimum cumulative free cash flow covenant for July 2003 and add cumulative monthly minimum through extended maturity; and G. Fee for Future Amendments/Waivers: A $50,000 amendment and waiver fee will be charged for each future amendment or waiver. Not charged in connection with this pending amendment; the extension fee applies instead. (Adelphia Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMS: Sells Excess Assets to Ten Buyers for $1.6 Mill. ---------------------------------------------------------------- Pursuant to the Court-approved Excess Assets Sale Procedure, the Adelphia Communications Debtors inform Judge Gerber that they are selling these properties: 1. Property: One Real Property in Coudersport, Pennsylvania Purchaser: Anne Acker Agent: Four Seasons Real Estate, Inc. Amount: $30,120 Deposit: $1,000 Appraised Value: $27,000 2. Property: Two Real Properties in Coudersport, Pennsylvania Purchaser: Stanley Goodwin Agent: God's Country Real Estate, Inc. Amount: $108,650 Deposit: $1,000 Appraised Value: $102,500 3. Property: One real property at 105 Mill Street, Coudersport, Pennsylvania Purchaser: Kenneth J. Cole and Terry S. Cole Agent: Four Seasons Real Estate, Inc. Amount: $55,000 Deposit: $1,000 Appraised Value: $39,000 4. Property: Lot #28 at 1002 South Main Street, Coudersport, Pennsylvania Purchaser: Stephen and Marie Minor Agent: Four Seasons Real Estate, Inc. Amount: $33,000 Deposit: $1,000 Appraised Value: $27,500 5. Property: One real property at 402 Dwight Street, Coudersport, Pennsylvania Purchaser: Potter County Habitat for Humanity Agent: Four Seasons Real Estate, Inc. Amount: $28,620 Deposit: $1,000 Appraised Value: $27,000 6. Property: One real property located in Brooklyn, Ohio Purchaser: Gilfred Company Agent: none Amount: $180,000 Deposit: none Appraised Value: no appraisal made in connection with the sale 7. Property: 75 vehicles Purchaser: State Line Auction Agent: none Amount: $77,048 Deposit: none Appraised Value: no appraisal was done in connection with the sale 8. Property: One real property in Coudersport, Pennsylvania Purchaser: Scott Majot and Harry Deutschlander Agent: Field and Stream Real Estate, Inc. Amount: $28,900 Deposit: $500 Appraised Value: $27,000 9. Property: One real property in Homer Township, Pennsylvania Purchaser: Robert Brandt Agent: Field and Stream Real Estate, Inc. Amount: $142,250 Deposit: $1,000 Appraised Value: $134,000 10. Property: Telecommunications Switch located in Los Angeles, California Purchaser: Lucent Technologies, Inc. Agent: none Amount: $989,428 in the form of purchase credits Deposit: none Appraised Value: no appraisal was made in connection with the sale (Adelphia Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Reports Stable Ops. and Improved Customer Service ------------------------------------------------------------- Air Canada reported stable operations and improved customer service levels on early morning departures at Montr�al, Ottawa and Toronto airports Tuesday as of 0900 EDT. "The situation has progressively improved in the past two days and we expect that customer service levels will continue to improve in the coming days at airports throughout the country," said Captain Rob Giguere, Executive Vice President, Operations. "We apologize to those customers who have been inconvenienced in any way over the past 48 hours." Air Canada advises that due to peak passenger volumes during the traditionally high demand summer travel season, customers should arrive at the airport 30 minutes earlier than its normal recommended check-in times: - One hour (instead of 30 minutes) for Rapidair flights between Toronto, Montr�al and Ottawa, and between Vancouver, Calgary and Edmonton; - One and a half hours (instead of one hour) for other domestic Canada flights; - Two hours (instead of 1.5 hours) for transborder U.S. flights; - Two and a half hours (instead of two hours) for international flights. The airline recommends that customers do not arrive at the airport earlier than these revised check-in times in order to avoid contributing to longer queues and wait times. "As a result of contractual changes introduced on August 10 there are more agents working at peak times at Toronto, Montr�al and Vancouver than we have had in previous weeks. We will continue to monitor customer volumes in the coming days and make any adjustments to staffing levels that may be required to ensure customer service is at satisfactory levels," said Captain Giguere. "As is traditionally the case, we expect passenger traffic at airports to taper off in three weeks time, following the Labour Day long weekend." "Effective [Tues]day and for the duration of the transition period, the airline's executives will join other non-airport management employees at key airports throughout the country to offer their support to airport customer service agents during this busy period. "While the contractual changes are a necessary requirement for our successful restructuring, we are committed to implement these changes quickly and with ongoing improvement to customer service levels. The enhanced management presence at key airports throughout the country is a reflection of that commitment," concluded Captain Giguere. AIR CANADA: Initiates Unexpired Leases & Contracts Restructuring ---------------------------------------------------------------- As part of its restructuring strategy, Air Canada continues to analyze all its contractual commitments and outsourcing contracts with a view to: (i) consolidate purchasing to benefit from volume discounts; and (ii) identify contracts, which do not reflect current market pricing and should be disclaimed. To date, Air Canada has achieved $24,400,000 in annual savings and a $1,200,000 one-time savings from the renegotiation and repudiation of various contracts. Further potential annual operating savings have been identified by the Company and are expected to be implemented in the next 30 days. At the same time, Air Canada currently reviews all its real estate facilities and obligations with a view to eliminate unused or under-utilized facilities and consolidate its operations in line with its restructuring plans. With Ernst & Young's consent, a total of 20 real property leases have been repudiated since April 1, 2003. The rejected leases represent $2,200,000 in annual savings for 2004 and a total $16,900,000 for the balance of the lease term. Additional lease repudiations and facility consolidations are expected in the near future as workforce reductions are implemented and the business plan is refined and implemented. Air Canada has also issued repudiation letters for 16 Air Canada aircraft and five Jazz aircraft. Of these repudiations, nine were to expire before December 31, 2004. The estimated annualized cash savings resulting from these terminations is $52,000,000. Air Canada expects that the remaining 19 aircraft will be returned in the next 30 to 60 days based on the outcome of the current lease renegotiations with aircraft lessors and the restructuring of its fleet requirements. Air Canada has reached agreements in principle with respect to another 53 aircraft and is in the process of documenting the agreements. Air Canada expects to finalize the majority of the agreements and resume payments in respect of these aircraft within the next two to three weeks. The Company expects to complete the aircraft lease renegotiations by August 31, 2003. (Air Canada Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMES DEPARTMENT: Wants to Halt 2003 Life Insurance Plan Payments ---------------------------------------------------------------- In 1985, Ames Department Stores, Inc., and its debtor-affiliates acquired GC Murphy Company, including its obligations under a group life insurance plan for its retirees. The Life Insurance Plan, which originated in 1918, provides for modest death benefits for the Murphy Retirees and provides that the Debtors can unilaterally modify or terminate the Life Insurance Plan at any time. From time to time, summary plan descriptions were provided to Murphy Retirees covered under the Life Insurance Plan. Each SPD disclosed that the Life Insurance Plan is subject to unilateral termination. For example, in 1972, the SPD distributed to Murphy Retirees provided that: "The Company reserves the right to terminate or modify or amend, in whole or in part, any or all of the provisions of the Free Group Life Insurance Plan." In 1977 and 1987, the SPD distributed to Murphy Retirees provided that: "Plan Termination: The right is reserved in the Plan for [Murphy] to terminate, suspend, withdraw, amend or modify the Plan in whole or in part at any time, subject to the applicable provisions of the group insurance policy." After the acquisition of GC Murphy, the Debtors continued to satisfy the then existing premium obligations under the Life Insurance Plan. Throughout their first Chapter 11 cases starting in 1990, the Debtors continued to make premium payments pursuant to the Life Insurance Plan and, when they emerged in 1992, the Life Insurance Plan remained in place. On July 1, 1995, the Debtors purchased an annuity from the Metropolitan Life Insurance Company to provide for payments of the outstanding premiums then due under the Life Insurance Plan. Under the Met Life Plan, the Debtors are required to make ten annual premium payments, six of which have already been made. The seventh payment was due on July 7, 2003 amounting to $313,747. Pursuant to the Met Life Plan, the Debtors have a 31- day grace period for the payment of any premium. As of July 17, 2003, there were 1,381 Murphy Retirees covered by the Life Insurance Plan. Assuming the Life Insurance Plan continues uninterrupted: -- 1,195 individuals will receive a life insurance benefit of $1,000; -- 71 individuals will receive benefits ranging from $1,200 to $6,000; -- 111 individuals will receive a benefit of $7,250; -- two individuals will receive a benefit of $8,500; -- one individual will receive a benefit of $9,000; and -- one individual will receive a benefit of $20,000. If all premiums are paid, the total amount of benefits to be paid under the Life Insurance Plan is $2,357,800. Based on payments and costs to date, if the Debtors determine not to pay the 2003 Premium, the Debtors believe that the Murphy Retirees will receive 38% of the face amount of their life insurance benefits under the Life Insurance Policy. To satisfy administrative claims before prepetition claims and prevent elevating general unsecured claims to administrative claims, the Debtors, with the full support of the Official Committee of Unsecured Creditors, believe that the premiums should not be paid at this time. Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, in New York, says that while the Debtors face a risk of administrative insolvency, there is no meritorious basis for their estates to pay one prepetition claim, when others may not be paid at all and when postpetition claims may not be paid in full. Mr. Bienenstock explains that the Debtors have an unequivocal desire to pay all their prepetition unsecured claims, including the benefits under the Life Insurance Plan, but they have ceased operations and are liquidating their assets. Accordingly, it is inevitable that the Debtors will cease to exist before completing payments on the Met Life Plan on the tenth anniversary of its inception date, which will result in termination of benefits under the Life Insurance Plan. The Debtors and the Committee believe that the Debtors should refrain from making any further premium payments under the Met Life Plan, including the 2003 Premium, so that the savings realized would be available first for satisfaction of all administrative claims against the Debtors' estates. By this motion, the Debtors seek the Court's authority to cease paying its 2003 Insurance Premium under the Life Insurance Plan. According to Mr. Bienenstock, the Debtors' determination not to pay the 2003 premium is supported by the equality principle underlying the Bankruptcy Code and sound business reasons. The Debtors recognize that Section 1114 of the Bankruptcy Code governs changes to a retiree plan in Chapter 11 but is inapplicable in Ames' case because they have an unambiguous right to terminate the Life Insurance Plan at any time in their discretion inside or outside a reorganization. Mr. Bienenstock points out that the overwhelming majority of decisions interpreting Section 1114 support the Debtors' contention that they are not prevented from terminating the Life Insurance Plan when it provides them with the unilateral right to terminate the benefits. The issue on the termination of the Life Insurance Plan was previously considered during the Debtors' first Chapter 11 proceeding and denied by the Bankruptcy Court. The Bankruptcy Court decision was later affirmed on appeal. Mr. Bienenstock emphasizes that should the Debtors determine to withhold the 2003 Premium payment, the Murphy Retirees will receive 38% of the face amount of the benefit currently available under the Life Insurance Plan. To guarantee a 100% recovery of the face amount of the Insurance Plan benefits, the Debtors would have to make four more annual premium payments. Hence, the 2003 Premium payment will only increase the ultimate recovery to the Murphy Retirees by a fraction while reducing the cash available to satisfy creditors by $313,747. The benefit to the Murphy Retirees is not outweighed by the concomitant reduction in cash for the payment of all creditors. Moreover, the Debtors believe that the 2003 Premium should not be made because doing so would completely disregard the priority scheme set forth in the Bankruptcy Code. Mr. Bienenstock adds that when weighed against the effect a sizeable expenditure will have on the administration of the Debtors' chapter 11 cases, the balancing of the equities falls in favor of non-payment. Committee's Statement of Support The Official Committee of Unsecured Creditors supports the Debtors' non-payment of the remaining insurance premiums and the termination of the Life Insurance Plan, given these reasons: -- The administrative solvency remains a critical issue and any attempt to treat prepetition claims as administrative claims is "particularly offensive"; and -- The express language of the Life Insurance Plan permits unilateral termination of the plan, which places the Debtors outside of Section 1114 of the Bankruptcy Code. The Committee maintains that the rulings of the Bankruptcy and District Courts are "wholly unpersuasive, and are quite distinguishable and inapplicable to the current facts and case law." The Committee notes that while Judge Conrad denied the Debtors' request to terminate the Life Insurance Plan, he did not issue a formal opinion and only one paragraph addressing the issue was read into the record. Similarly, while Judge Duffy affirmed the Bankruptcy Court's decision on appeal and held that the Debtors needed to proceed under Section 1114 of the Bankruptcy Code if it wanted to terminate the Plan, the District Court decision contains no authority in support of the ruling. While the Second Circuit Court of Appeals' consideration on appeal was limited to the denial of attorneys' fees, the Committee notes that the Appellate Court opinion strongly suggests that the Second Circuit would have followed In re Doskocil Co., 130 B.R. 870 (Bankr. D. Kan. 1991) and ruled in favor of the Debtors' right to unilaterally terminate the Life Insurance Plan had it been called upon to address the issue. Furthermore, the Second Circuit criticized the Bankruptcy and District Court's failure to incorporate any authoritative case law into their opinions. The Second Circuit stated: "We think that there is substantial room for disagreement with the categorical holding in the district court's orders that the debtor was required to follow the requirements of section 1114 . . ." The Doskocil Court indicated that "if benefits under life insurance plan can otherwise be modified outside bankruptcy because of language in the plan documents reserving the right to change or terminate benefits, a debtor may exercise such right to modify a plan without proceeding under section 1114 of the Bankruptcy Code." The Second Circuit further observed that at the time the Bankruptcy Court issued its decision, the leading authority was Doskocil and that before the District Court issued its ruling, New Valley Corp. had been decided. The Second Circuit went on to criticize the two lower courts: "Not one of the foregoing authorities was discussed or even mentioned by either the bankruptcy court or the district court. More importantly, neither court cited any interpretive authority that conflicted with that cited above." The District Court for the District of New Jersey in Retired Western Union Employees Ass'n v. New Valley Corp. (In re New Valley Corp.), Civ. A. No. 92-4884, 1993 WL 818245 (D.N.J. Jan. 28, 1993), reached the same conclusion that compliance with Section 1114 is not required where the debtor retained a unilateral right to terminate an employee benefit plan. The Committee believes that the Bankruptcy Court should not be bound by the lower court decisions that are devoid of any persuasive authority. Rather, the Committee maintains that the better approach would be for the Bankruptcy Court to embrace the dicta included in the Second Circuit's opinion, which clearly supports Doskocil, and apply that reasoning to the Debtors' cases. Doing so would be a logical extension of the prevailing view set forth in the case law today, the Committee says. (AMES Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) APPLIED DIGITAL: Special Shareholders' Meeting Set for Sept. 10 --------------------------------------------------------------- A Special Meeting of Shareholders of Applied Digital Solutions, Inc., a Missouri corporation, will be held at the West Palm Beach Marriott Hotel, 630 Clearwater Park Road, West Palm Beach, Florida 33401, on September 10, 2003, at 8:00 a.m. Eastern Daylight Time, for the following purposes: 1. To approve the potential issuance of more than 7,210,679 shares of the Company's common stock upon the conversion of the Company's $10,500,000 aggregate principal amount of 8.5% Convertible Exchangeable Debentures and exercise of related Stock Purchase Warrants, which share amount in excess of 7,210,679 shares represents 20% or more of the outstanding common stock of the Company on a pre- transaction basis when combined with the 50,000,000 shares of common stock issued by the Company under three separate securities purchase agreements dated May 8, 2003, May 22, 2003, and June 4, 2003; 2. To approve the issuance of up to 30,000,000 shares of the Company's common stock after effectiveness of the Company's registration statement on Form S-1 (File No. 333-106300), which was filed with the Securities and Exchange Commission on June 20, 2003, which share amount when combined with the issuance of the Debentures, Warrants and common stock issued pursuant to the Securities Purchase Agreements, represents more than 20% of the outstanding common stock of the Company on a pre- transaction basis; and 3. To approve the granting of discretionary authority to the Board of Directors, for a period of twelve months after the date the Company's shareholders approve this proposal, to approve a reverse stock split in a ratio not to exceed 1-for-25, to determine the effective date of the reverse stock split, and to file an amendment to the Company's Third Restated Articles of Incorporation, as amended, effecting the reverse stock split of the Company's common stock, or to determine not to proceed with the reverse stock split. The Board of Directors has set July 22, 2003 as the record date for the meeting. This means that owners of the Company's common stock at the close of business on that date are entitled to (1) receive notice of the meeting and (2) vote, or exercise voting rights through a voting trust, as the case may be, at the meeting and any adjournments or postponements of the meeting. * * * As reported in Troubled Company Reporter's June 9, 2003 edition, Applied Digital Solutions signed Securities Purchase Agreements to sell an additional 12.5 million previously registered shares to the same investors who have already agreed to purchase 37.5 million shares as announced on May 9, 2003, and May 23, 2003. The Company said it will use the proceeds from this sale towards the satisfaction of its debt obligation to its senior lender, IBM Credit LLC. Under the Forbearance Agreement with IBM Credit (announced on March 27, 2003), the Company has the right to purchase all of its debt of approximately $95 million (including accrued interest) with a payment of $30 million by June 30, 2003, subject to continued compliance with the terms of the Forbearance Agreement. If this payment is made on or before June 30, 2003, Applied Digital would satisfy its full obligation to IBM Credit. As of this date, the Company is in compliance with all terms of the Forbearance Agreement. Applied Digital Solutions is an advanced technology development company that focuses on a range of life-enhancing, personal safeguard technologies, early warning alert systems, miniaturized power sources and security monitoring systems combined with the comprehensive data management services required to support them. Through its Advanced Technology Group, the Company specializes in security-related data collection, value-added data intelligence and complex data delivery systems for a wide variety of end users including commercial operations, government agencies and consumers. Applied Digital Solutions is the beneficial owner of a majority position in Digital Angel Corporation (AMEX: DOC). For more information, visit the Company's Web site at http://www.adsx.com AQUILA INC: Second Quarter Net Loss Trimmed Further to $80 Mill. ---------------------------------------------------------------- Aquila, Inc. (NYSE:ILA) reported a second quarter 2003 net loss that reflects actions taken under the company's ongoing plan to wind down its wholesale energy business, complete asset sales and restructure certain contractual obligations. Aquila's net loss for the quarter was $80.6 million or $.41 per fully diluted share, including $14.5 million of net income from discontinued operations, compared to the 2002 second quarter net loss of $810.0 million or $5.69 per fully diluted share, which included $15.5 million in net income from discontinued operations. "While losses were anticipated, our transition plan to strengthen Aquila as a financially sound owner and operator of utilities in the United States is progressing very well," said Richard C. Green, Jr., Aquila's chairman and chief executive officer. "We have achieved several major components of our plan by selling our Australian assets, exiting the Acadia tolling agreement and continuing to strengthen our domestic networks business. "We will continue our restructuring through this year and next," Green said, "especially our work to address our remaining long- term natural gas contracts and fixed capacity payments for merchant power plants." The loss in this year's second quarter is primarily due to restructuring and impairment charges related to last year's decision to reshape the business to be a regulated utility. In addition, both operating costs and interest expense were higher in 2003 due to the company's non-investment grade credit rating. Aquila had impairment charges and a loss on the sale of assets totaling $103.0 million, primarily due to the termination of a tolling contract. The company also recorded $20.8 million in restructuring charges, including $17.8 million related to unfavorable interest rate swaps from which the company fully exited in the second quarter. Lower results from International Networks reflect the October 2002 sale of Aquila's interests in New Zealand and the fact Aquila did not recognize equity earnings from Midlands Electricity in the United Kingdom in the 2003 second quarter. Restructuring Charges Aquila recorded restructuring charges of $20.8 million in the second quarter of 2003, and $71.4 million in the 2002 second quarter. The 2003 charges included $17.8 million to exit portions of interest rate swaps related to construction financing for two merchant power plants in Illinois. There was also $3.6 million in severance costs for additional workforce reductions. Impairment Charges Aquila recorded impairment charges and net loss on sale of assets totaling $103.0 million in the second quarter of 2003, compared to impairment charges of $894.6 million in the 2002 second quarter. In this year's quarter, Capacity Services incurred a charge of $105.5 million for the termination of the Acadia tolling agreement and realized a gain of $5.1 million on the sale of its gas turbines. International Networks recorded a $2.6 million loss on the sale of Aquila's interest in AlintaGas in Australia. Asset Sales Including proceeds from the Australian sale closed in July, Aquila has now generated total proceeds of $1.7 billion from the asset sale program it began in the second quarter of 2002. Proceeds from asset sales will continue to be used to reduce liabilities and fund working capital needs. Recently completed and pending sales include: -- Australia. In April 2003, Aquila agreed to sell its interests in United Energy Limited, Multinet Gas and AlintaGas Limited to a consortium consisting of AlintaGas, AMP Henderson and their affiliates. In May 2003, the sale of the company's 22.5 percent interest in AlintaGas Limited was closed and Aquila received approximately $97.0 million in cash proceeds in May and July. Aquila recorded a loss of $2.6 million from the Alinta sale. In July 2003, Aquila completed the sale of its 33.8 percent interest in United Energy and 25.5 percent interest in Multinet Gas and received additional cash proceeds of $513.0 million. After fees, expenses and taxes, the sales of the three Australian investments are expected to yield net cash proceeds of $477.0 million. Approximately $200.0 million of the proceeds was used to retire the borrowings under the 364-day secured credit facility that was arranged in April 2003. A gain is expected to be recorded in the 2003 third quarter in connection with the sale of United Energy and Multinet Gas. -- Canada. In the second quarter of 2003, the company began a process to solicit interested buyers for its Canadian network business. Indicative bids were received in July 2003 and subject to receipt of acceptable offers from the bidders, Aquila expects to negotiate a definitive agreement in the third quarter of 2003 and close the sale in the first quarter of 2004, following the receipt of regulatory approvals and satisfaction of other closing conditions. -- United Kingdom. In May 2003, Aquila agreed to sell its 79.9 percent interest in Aquila Sterling Limited, the owner of Midlands Electricity plc, for approximately $56.0 million. Completion of the sale is subject to various conditions, including the successful redemption of outstanding bonds issued by Avon Energy Partners Holdings, an Aquila Sterling subsidiary, at 86 percent of their par value plus accrued interest. If Aquila does not close the sale of this investment by November 2003, the agreement to sell will terminate unless the parties agree otherwise. Domestic Networks Domestic Networks showed improved 2003 second quarter EBIT of $10.0 million, compared to a loss before interest and taxes of $718.3 million a year earlier, primarily due to 2002 impairment losses of $692.9 million from Aquila's investment in Quanta Services, Inc. and $23.1 million from communications technology investments. Aquila sold its remaining interest in Quanta during the first quarter of 2003. EBIT from utility operations was $10.9 million in the 2003 second quarter, up from $9.2 million a year earlier, reflecting $2.1 million in EBIT from interim rate increases in Michigan and Iowa. In 2002, Domestic Networks had $19.9 million of restructuring charges that were recorded in the second quarter. Negative factors in the 2003 second quarter were unfavorable weather, higher fuel costs, a reduction in off-system sales and lower EBIT due to the sale of Domestic Networks' non-regulated wholesale gas operation in September 2002 and its appliance repair business in January 2003. Aquila's communications business narrowed its loss before interest and taxes to $1.4 million, compared to a loss of $29.0 million in the 2002 quarter that included $23.1 million of impairment charges on communications technology investments. An increase in customers at Everest Connections added $4.9 million to gross profit in the 2003 quarter. Utility Rate Cases Domestic Networks was granted increases in rates this year in four of the seven states in which it operates. In Iowa, a settlement was approved in February 2003 for a $4.3 million increase in gas rates. In Michigan, a gas rate increase of $9.1 million was approved in March. The increase was partially offset by a separate depreciation case, which reduced rates by $700,000 but had little impact on earnings. In Colorado, the company settled an electric rate request with an increase of $16.0 million effective in June. Minnesota regulators approved a $5.7 million gas rate increase in July. Several additional rate increase requests are pending. In June 2003, the company filed for gas rate increases in three rate areas of Nebraska totaling $9.9 million. It expects interim rates to take effect in October 2003, with hearings to be held on each request and decisions reached by January 2004. In July 2003, Aquila filed for rate increases totaling $80.9 million for its electric territories in Missouri. These increases were requested primarily due to increased costs of natural gas used to fuel power plants, necessary capital expenditures since the last rate case, increased pension costs and lower off-system sales. Hearings are expected to be held in February 2004. In August 2003, Aquila filed for rate increases totaling $6.4 million for its gas territories in Missouri, primarily to recover the cost of system improvements and higher operating costs. Hearings are expected in March 2004. International Networks International Networks reported EBIT of $9.1 million for the second quarter of 2003 compared to $26.8 million in the 2002 quarter. Equity in earnings of investments decreased $19.1 million in 2003 compared to the 2002 second quarter, primarily due to the October 2002 sale of the company's interest in UnitedNetworks Limited in New Zealand. UnitedNetworks contributed equity earnings of $9.3 million in the second quarter of 2002. In addition, the 2002 second quarter included $8.4 million of equity earnings from Aquila's investment in Midlands Electricity plc while no equity earnings were recorded in 2003. Australia. EBIT from Australian investments declined $12.5 million in the second quarter of 2003 compared to the 2002 quarter mainly due to the costs of foreign exchange options that locked in the value to the company of a stronger Australian dollar on the Australian sale proceeds. Canada. Aquila has reclassified the current and prior year operating results of its Canadian network as discontinued operations due to the pending sale of these assets. United Kingdom. Although during the second quarter of 2003 Aquila's share of undistributed earnings from Midlands Electricity was $19.9 million, Aquila did not recognize any of the equity earnings from this investment. Due to regulatory limitations on cash payments by Midlands to its owners, the company intends to record equity earnings and management fees only to the extent cash is received. Capacity Services Capacity Services reported a loss before interest and taxes of $115.6 million for the second quarter of 2003 compared to EBIT of $20.4 million in the 2002 quarter. The loss resulted primarily from the termination of the Acadia tolling agreement, higher gas prices which made it uneconomical to operate merchant plants, and a $28.6 million decrease in mark-to-market gains that occurred in 2002 but did not recur in 2003 due to lower liquidity and electricity prices in the forward market. In connection with its merchant power plants, Aquila makes fixed capacity payments evenly throughout the year. For the second quarter of 2003, capacity payments increased by $4.6 million compared to a year earlier as new plants became operational late in 2002. This additional capacity was used on a limited basis at prices that were not sufficient to cover the fixed capacity payments. In May 2003, Aquila ended its 20-year tolling contract for the Acadia power plant through a termination payment of $105.5 million. This was partially offset by a $5.1 million gain related to the contract termination and the sale of turbines previously written down to estimated fair value in 2002. Equity in earnings of investments increased $16.4 million mainly due to increased earnings resulting from mark-to-market gains occurring at the operating level of one of Aquila's equity investments. These gains are non-cash, mark-to-market gains that will reverse over time as power is delivered. Aquila does not expect Capacity Services to be profitable during the next two to three years because of the industry's excess generation capacity that became operational in 2002, the continued construction of additional power plants and the decreasing liquidity in the marketplace. The resulting downward pressure on power prices has reduced the value of unsold merchant generation capacity. Wholesale Services Wholesale Services reported EBIT of $11.5 million in the 2003 second quarter compared to a loss before interest and taxes of $191.2 million a year earlier that included a $178.6 million impairment charge on associated goodwill. Aquila began its exit from the wholesale energy trading business in last year's second quarter and did not add to its trading portfolio in 2003. The business therefore had limited opportunities for earnings. The EBIT results for the 2003 quarter include non-cash earnings of approximately $47.7 million related to the trading portfolio. Substantially all of these earnings relate to long-term gas contracts. During the quarter, average gas prices rose over the life of these contracts by $.63 per million Btu, which caused both the price risk management asset and price risk management liability related to these contracts to increase in value. The price risk management liabilities are discounted based on Aquila's credit standing, while on the receivable side these transactions are discounted based on the credit ratings of Aquila's counterparties (which are on average substantially higher than Aquila's rating). As a result, non-cash mark-to-market earnings were created. In 2002, Aquila recorded $34.0 million of similar mark-to-market earnings due to its credit rating downgrades. As of June 30, 2003, Aquila has recorded $110.0 million of these mark-to-market gains related to gas prices and the widening of the company's credit spreads compared to its counterparties. The company expects these gains to be reversed in later periods as contracts settle, its credit rating improves and/or gas prices decline. Corporate and Other Corporate and Other reported EBIT of $28.8 million for the second quarter of 2003, up from $3.2 million in the 2002 quarter. The improved results are primarily due to $35.8 million of foreign currency gains in 2003, reflecting favorable movements in the Australian and New Zealand dollar exchange rates. Income tax benefits decreased $48.2 million in 2003 compared to the second quarter of 2002, primarily due to the decrease in Aquila's loss before income taxes in 2003 compared to a year earlier, partially offset by tax benefits not being recorded on a significant amount of the 2002 losses due to income tax valuation allowances being provided and certain losses not being tax- deductible. Discontinued Operations In 2002 and early 2003, Aquila sold its Texas natural gas storage facility, its Texas and Mid-Continent natural gas pipeline systems, including its natural gas and natural gas liquids processing assets and its ownership interest in the Oasis Pipe Line Company, its coal terminal and handling facility and its Merchant loan portfolio. The results of operations of all those assets have been reported as discontinued operations for all periods reported. In the second quarter of 2003, Aquila began a formal process to sell its Canadian network and began to report the results from that business as discontinued operations. Earnings from all discontinued operations totaled $14.5 million, net of tax, or $.08 per diluted share in the second quarter of 2003, down from $15.5 million or $.11 per share in the 2002 quarter. Based in Kansas City, Mo., Aquila operates electricity and natural gas distribution networks serving customers in seven U.S. states and in Canada and the United Kingdom. The company also owns and operates power generation assets. At June 30, 2003, Aquila had total assets of $8.4 billion. 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. ARMOR HOLDINGS: Reports Improved 2nd Quarter Operating Results -------------------------------------------------------------- Armor Holdings, Inc. (NYSE: AH) announced revenues and earnings for the three-months and six-months ended June 30, 2003. For the three-month period ended June 30, 2003, revenue from continuing operations increased 14.0% to $81.7 million compared to $71.6 million reported for the three-month period ended June 30, 2002. Products Division revenue increased 14.6% to $49.3 million for the three-month period ended June 30, 2003, compared to $43.1 million reported in the same period last year. Mobile Security Division revenue increased 13.2% to $32.3 million for the three- month period ended June 30, 2003, compared to $28.5 million reported in the same period last year. Internal revenue growth from continuing operations was 7.8% in total, 10.8% for the Products Division and 3.5% for the Mobile Security Division. The Company's consolidated net income and diluted earnings per share for the three-months ended June 30, 2003 and 2002, were $4.6 million, or $0.17 per share, and $4.1 million, or $0.13 per share, respectively. The three-month results for the period ended June 30, 2003 include a $3.3 million ($2.1 million non-cash) severance charge related to the recent departure of the Company's former Chief Executive Officer. Remaining integration and other non- recurring charges for the period ended June 30, 2003 associated with acquisitions completed in the prior twelve months decreased to $522,000 from $1.7 million in the comparable period in the prior year. Net income and diluted earnings per share from continuing operations after integration and other non-recurring charges were $3.5 million and $0.13 per share for the three-months ended June 30, 2003, compared to $4.8 million and $0.15 per share in the comparable period in the prior year. Net income from continuing operations before integration and other non-recurring charges was $5.8 million for the three-months ended June 30, 2003, compared to $5.9 million for the comparable period in 2002. Diluted earnings per share from continuing operations before integration and other non-recurring charges was $0.21 per share for the three-months ended June 30, 2003, compared to $0.18 per share for the comparable period in 2002. For the three-months ended June 30, 2003, the net income from discontinued operations was $1.1 million, or $0.04 per share compared to a net loss from discontinued operations of $749,000, or $0.02 per share for the three- months ended June 30, 2002. "We are pleased with our second quarter revenue results," said Robert R. Schiller, Chief Operating Officer and Chief Financial Officer of Armor Holdings. "The Products Division generated strong results in spite of a late release of the matching funds under the Bulletproof Vest Partnership Act and a challenging domestic economy. The Mobile Security Division experienced an increase in order volume as combat operations in Iraq converted to policing and restructuring operations. We believe the Company is well positioned for continued growth in the second half of 2003." For the six-month period ended June 30, 2003, revenue from continuing operations increased 14.8% to $162.1 million compared to $141.2 million reported for the six-month period ended June 30, 2002. Products Division revenue increased 13.8% to $93.4 million for the six-month period ended June 30, 2003, compared to $82.0 million reported in the same period last year. Mobile Security Division revenue increased 16.2% to $68.8 million for the six- month period ended June 30, 2003, compared to $59.2 million reported in the same period last year. Internal revenue growth from continuing operations was 8.6% for the Products Division and 3.6% for the Mobile Security Division. The Company's consolidated net income and diluted earnings per share for the six-months ended June 30, 2003 and 2002 were $9.7 million, or $0.34 per share, and $10.0 million, or $0.31 per share, respectively. These six-month results include a $3.3 million ($2.1 million non-cash) severance charge related to the recent departure of the Company's former Chief Executive Officer. Remaining integration and other non-recurring charges for the six- months ended June 30, 2003 associated with acquisitions completed in the prior twelve months decreased to $944,000 from $3.1 million during the same period in 2002. Net income and diluted earnings per share from continuing operations after integration and other non-recurring charges were $8.7 million and $0.31 per share for the six-months ended June 30, 2003, compared to $10.4 million and $0.32 per share in the comparable period in the prior year. Net income from continuing operations before integration and other non-recurring charges was $11.4 million for the six-months ended June 30, 2003, compared to $12.3 million for the comparable period in 2002. Diluted earnings per share before these items for the six-months ended June 30, 2003, was $0.40 per share compared to $0.38 per share for the comparable period in 2002. For the six-months ended June 30, 2003, net income from discontinued operations was $977,000, or $0.03 per share compared to a net loss from discontinued operations of $356,000, or $0.01 per share for the six-months ended June 30, 2002. Gross margins from continuing operations for the three and six- months ended June 30, 2003, were 29.9% and 29.4%, respectively, compared to 31.7% and 31.6% in the comparable period in 2002. For the three and six-months ended June 30, 2003, gross margins in the Products Division were 33.1% and 33.6%, compared to 38.6% and 38.0% reported in the same period last year. The decline in the Products Division's gross margins resulted primarily from: 1) an increase in "low margin" training revenues; 2) an increase in low margin gas mask sales; 3) an increase in lower margin international body armor sales produced overseas at Armor Products International; and 4) lower production volumes within our less lethal, automotive, and hard armor businesses lines, which resulted in reduced fixed cost absorption and certain labor inefficiencies. Excluding the training division, the Products Division's gross margins were 35.3% and 35.9%, respectively, compared to 40.8% and 40.3% reported in the same period last year. For the three and six-months ended June 30, 2003, gross margins in the Mobile Security Division were 25.0% and 23.7%, compared to 21.4% and 22.9% reported in the same period in the prior year. The increase in the Mobile Security Division's gross margins is primarily attributable to: 1) favorable manufacturing overhead cost absorption relating to increased manufacturing volumes in our Cincinnati manufacturing facility; 2) operational efficiencies in our Cincinnati manufacturing facility; and 3) a smaller number of purchased base vehicles sold in 2003 compared to 2002. The Mobile Security Division often purchases and resells base vehicles to customers as a pass-through service without normal gross profit. At June 30, 2003, the Company's continuing operations business segments had cash balances of $10.8 million and total long-term debt, including current portion, of $21.7 million compared to $16.0 million and $26.7, respectively, reported at March 31, 2003. As of June 30, 2003, the Company had $15.0 million outstanding on its $120 million revolving line of credit compared to $20.0 million at March 31, 2003. For the three and six-months ended June 30, 2003, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations were $7.6 million and $18.1 million, compared to $9.4 million and $19.7 million in the comparable periods in 2002. For the three and six-months ended June 30, 2003, the Company's EBITDA from continuing operations before integration and non-recurring charges were $11.4 million and $22.2 million, compared to $11.1 million and $22.8 million, respectively, in the comparable periods in 2002. Attached to this press release is a reconciliation of net income as reported to EBITDA from continuing operations before integration and other non-recurring charges. On July 23, 2003, the Company announced that it had executed a Letter of Intent to acquire Simula, Inc. (Amex: SMU), for $110.5 million, payable in cash or, at the option of Armor Holdings, in a combination of cash and registered shares of Armor Holdings' common stock. The Company expects to execute a merger agreement in late August and complete the transaction in the fourth quarter of 2003. Simula is a safety technology company and supplier of human safety and survival systems to all branches of the U.S. military, major aerospace and defense contractors, international military forces, and consumer markets. Its core markets are military aviation safety, military personnel safety, and land and marine safety. Serving the defense industry for almost 30 years, Simula provides ground vehicle armor and mine blast kits for military vehicles, personnel protective equipment, including military body armor, energy absorbing seating systems and lightweight armor for aircraft, inflatable restraints for military aircraft, and other protective equipment and technology to the military for the protection of soldiers in a variety of life-threatening or catastrophic situations. On August 12, 2003, the Company closed its previously announced private placement of $150 million aggregate principal amount of 8.25% Senior Subordinated Notes due 2013. The Notes were rated B1/B+ by Moody's Investors' Service and Standard & Poor's Rating Services, respectively. The Company intends to use the net proceeds of the planned offering to fund future acquisitions, including its potential acquisition of Simula, Inc., repay a portion of its outstanding debt and for general corporate and working capital purposes, including the funding of capital expenditures. Concurrently with the issuance of the Notes, the Company terminated its existing credit facility and entered into a new secured revolving credit facility with Bank of America N.A., Wachovia Bank, National Association and a syndicate of other financial institutions arranged by Bank of America Securities LLC. The new credit facility is a five-year revolving credit facility and, among other things, provides for: 1) total maximum borrowings of $60 million; 2) a $25 million sub-limit for the issuances of standby and commercial letters of credit; 3) a $5 million sub- limit for swing-line loans; and 4) a $5 million sub-limit for multi-currency borrowings. All borrowings under the new credit facility will bear interest at either 1) a rate equal to LIBOR, plus an applicable margin ranging from 1.125% to 1.625%; 2) an alternate base rate which will be the higher of (a) the Bank of America prime rate and (b) the Federal Funds rate plus .50%; or 3) with respect to foreign currency loans, a fronted offshore currency rate, plus an applicable margin ranging from 1.125% to 1.625%, depending on certain conditions. "With the pending acquisition of Simula, Inc., the newly placed $150 million in notes and the policing and reconstruction effort in Iraq, the Company is building momentum and well-positioned for growth in the second half of the year and into 2004," said Mr. Schiller. "Given the effect of additional interest from the notes, we expect our third quarter net income from continuing operations before integration and non-recurring charges to be $0.23 or $0.24 per diluted share." Armor Holdings (S&P, BB Corporate Credit Rating, Stable), included in FORBES magazine's list of "200 Best Small Companies" in 2002, and a member of the S&P Smallcap 600 Index, is a leading manufacturer of security products for law enforcement personnel around the world through its Armor Holdings Products division and is one of the world's largest and most experienced passenger vehicle armoring manufacturers through its Mobile Security division. Armor Holdings Products manufactures and sells a broad range of high quality branded law enforcement equipment. Such products include ballistic resistant vests and tactical armor, less-lethal munitions, safety holsters, batons, anti-riot products and a variety of crime scene related equipment, including narcotic identification kits. Armor Holdings Mobile Security, through its commercial business, armors a variety of vehicles, including limousines, sedans, sport utility vehicles, and money transport vehicles, to protect against varying degrees of ballistic and blast threats. Through its military program, it is the prime contractor to the U.S. Military for the supply of armoring and blast protection for High Mobility Multi-purpose Wheeled Vehicles, commonly known as HMMWVs. ARMOS HOLDINGS: Completes $150 Million Sr. Sub. Note Offering ------------------------------------------------------------- Armor Holdings, Inc. (NYSE: AH), has completed a private placement of $150,000,000 aggregate principal amount of 8.25% senior subordinated notes due 2013. The notes are guaranteed by certain domestic subsidiaries of the Company on a senior subordinated basis. The Company intends to use the net proceeds of the planned offering to fund future acquisitions, including its potential acquisition of Simula, Inc., repay a portion of its outstanding debt and for general corporate purposes, including the funding of working capital and capital expenditures. The senior subordinated notes have been sold to qualified institutional buyers in reliance on Rule 144A of the Securities Act of 1933 and to non-U.S. persons in reliance on Regulation S under the Securities Act of 1933. The senior subordinated notes will not be registered under the Securities Act of 1933. Therefore, the senior subordinated notes will not be offered or sold in the United States absent registration under the Securities Act of 1933 or an exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws. Armor Holdings (S&P, BB Corporate Credit Rating, Stable), included in FORBES magazine's list of "200 Best Small Companies" in 2002, and a member of the S&P Smallcap 600 Index, is a leading manufacturer of security products for law enforcement personnel around the world through its Armor Holdings Products division and is one of the world's largest and most experienced passenger vehicle armoring manufacturers through its Mobile Security division. Armor Holdings Products manufactures and sells a broad range of high quality branded law enforcement equipment. Such products include ballistic resistant vests and tactical armor, less-lethal munitions, safety holsters, batons, anti-riot products and a variety of crime scene related equipment, including narcotic identification kits. Armor Holdings Mobile Security, through its commercial business, armors a variety of vehicles, including limousines, sedans, sport utility vehicles, and money transport vehicles, to protect against varying degrees of ballistic and blast threats. Through its military program, it is the prime contractor to the U.S. Military for the supply of armoring and blast protection for High Mobility Multi-purpose Wheeled Vehicles, commonly known as HMMWVs. ASPECT: Closes Mandatory Repurchase of Zero Coupon Debentures ------------------------------------------------------------- Aspect Communications Corporation (Nasdaq: ASPT), the leading provider of enterprise customer contact solutions, has concluded the mandatory repurchase of its outstanding zero coupon convertible subordinated debentures as previously announced on July 15, 2003. In connection with the repurchase, Aspect paid approximately $122.8 million in cash to repurchase approximately $298.1 million in principal amount at maturity of the company's outstanding debentures due in 2018. The debentures were originally issued on Aug. 10, 1998, with a principal amount at maturity of $490 million and generated net proceeds to the company of approximately $146 million. The company previously repurchased a total of approximately $189.6 million in principal amount at maturity of the zero coupon debentures. Aspect was obligated to purchase all notes properly tendered to the company on Aug. 11, 2003, at a repurchase price of $412 for each $1,000 principal amount at maturity. Following the completion of the mandatory repurchase, as of Aug. 12, 2003, $2.3 million in principal amount at maturity of the notes remain outstanding. Under the terms of the debentures, the company may redeem the debentures in whole or in part at its option at any time on or after Aug. 12, 2003, at a price equal to the issue price plus the accrued original issue discount up to the redemption date. Aspect Communications Corporation (S&P, B Corporate Credit & CCC+ Subordinated Debt Ratings, Stable) is the leading provider of business communications solutions that help companies improve customer satisfaction, reduce operating costs, gather market intelligence and increase revenue. Aspect is a trusted mission- critical partner with more than two-thirds of the Fortune 50, daily managing more than 3 million customer sales and service professionals worldwide. Aspect is the only company that provides the mission-critical software platform, development environment and applications that seamlessly integrate voice-over-IP, traditional telephony, e-mail, voicemail, Web, fax and wireless business communications, while guaranteeing investment protection in a company's front-office, back-office, Internet and telephony infrastructures. Aspect's leadership in business communications solutions is based on more than 17 years of experience and more than 8,000 implementations deployed worldwide. The company is headquartered in San Jose, Calif., with offices around the world and an extensive global network of systems integrators, independent software vendors and distribution partners. For more information, visit Aspect's Web site at http://www.aspect.com ATCHISON CASTING: UST Appoints Official Creditors' Committee ------------------------------------------------------------ The United States Trustee for Region 13 appointed 5 members to serve on an Official Committee of Unsecured Creditors in Atchison Casting Corporation's Chapter 11 cases: 1. Caterpillar World Trading Corporation 100 N.E. Adams St. Peoria, Illinois 61629-6321 Telephone: 309-494-0570 Telecopier: 309-494-0526 Email: rich.olmsted@cat.com Contact: Rich Olmsted, Chairperson 2. H A International, LLC 180 E. Broad St., 29th Floor Columbus, Ohio 43215 Telephone: 614-225-4695 Telecopier: 614-627-8371 Email: maguirepb@bordenchem.com Contact: Paul B. Maguire 3. Canton Drop Forge 4575 Southway St. SW Canton, Ohio 44706 Telephone: 330-477-4511 Telecopier: 330-477-2046 Email: ggilbertson@cantondropforge.com Contact: Glen Gilbertson 4. Canfield & Joseph 6536 E. 42nd St. Tulsa, Oklahoma 74145 Telephone: 918-663-8380 Telecopier: 918-663-4645 Email: kjoseph@canfieldjoseph.com Contact: Kerry Joseph 5. Standard Steel 500 N. Walnut St. Burnham, Pennsylvania 17009 Telephone: 717-242-4672 Telecopier: 717-248-2381 Email: TBA Contact: TBA Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Atchison Casting Corporation, headquartered in St. Joseph, Missouri, together with its affiliates, produce iron, steel and non-ferrous castings and machining for a wide variety of equipment, capital goods and consumer markets. The Company filed for chapter 11 protection on August 4, 2003 (Bankr. W.D. MO. Case No. 03-50965). Mark G. Stingley, Esq., and Cassandra L. Writz, Esq., at Bryan Cave LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $136,750,000 in total assets and $96,846,000 in total debts. AVCORP INDUSTRIES: Closes Financial Restructuring Initiatives ------------------------------------------------------------- Avcorp Industries Inc., has reached several significant milestones in its financial restructuring program initiated in the fall of 2002. The Company has closed its Private Placement for 15,000,000 units at a price of $0.30 per unit for gross proceeds of $4.5 million before expenses and commissions. Each unit comprising one common share and one share purchase warrant. Two share purchase warrants will entitle the holder to subscribe for one additional common share at $0.35 per share for a six-month period from August 6, 2003. Certain insiders, directors and officers of the Company participated in the private placement, acquiring approximately 44% of the Units offered. The proceeds will be used to reduce bank debt by approximately $2.5 million and the balance for general working capital purposes. On July 17, 2003, the Company closed the sale and leaseback of its premises located at 10025 River Way, Delta, British Columbia. Pursuant to the terms of the sale between the Company and the real estate division of a major Canadian insurance corporation, the Company sold its premises for $16,000,000, of which $1,500,000 represents prepaid rent relating to the 15-year leaseback of the premises. The balance of the proceeds was applied towards the discharge of mortgages on the Company's premises, commissions, reduction of current bank debt and for general working capital purposes. In connection with the sale and leaseback of the Company's premises, the Company negotiated the forgiveness of $3,300,000 of principal indebtedness and any accrued interest to a secured lender, which is expected to close this quarter. The Company has negotiated, and expects to close this quarter, a principal reduction and forgiveness of accrued interest totaling $1,458,000 with a related party unsecured lender. The balance of the indebtedness to the lender is, by agreement, to be repaid in full on or before December 31, 2003. As consideration of the principal reduction and interest forgiveness, the Company has agreed to issue 500,000 share purchase warrants exercisable at a price of $0.35 per share for a period of six months from the date of issue of the warrants, which has been conditionally approved by the regulatory authorities. The Company is also currently negotiating with various lenders for the purposes of securing an operating line of credit. Currently, the Company has outstanding credit facilities with a Canadian chartered bank of approximately $3,000,000, which is to be repaid on or before September 30, 2003 or upon the finalization of an operating line of credit. The transactions above significantly strengthen the Company's balance sheet and capital resources and will reduce operating costs. The Company's 2003 third and fourth quarter financial statements will reflect the positive effects of the financial restructuring. Avcorp Industries Inc. is a Canadian aerospace industry manufacturer. The Company is a single-source supplier for engineering design, manufacture and assembly of subassemblies and complex major structures for aircraft manufacturers. At March 31, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $27 million. BRIDGEWATER SPORTS: Section 341(a) Meeting Slated for Sept. 15 -------------------------------------------------------------- The United States Trustee will convene a meeting of Bridgewater Sports Arena, LP's creditors on September 15, 2003, 12:00 p.m., at Clarkson S. Fisher Federal Courthouse, Room 129, 402 East State Street, Trenton, New Jersey 08608-1507. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Bridgewater Sports Arena, L.P., headquartered in Bridgewater, New Jersey, is a recreational facility in Central New Jersey. The Company filed for chapter 11 protection on August 5, 2003 (Bankr. N.J. Case No. 03-35809). Brian L. Baker, Esq., and Morris S. Bauer, Esq., at Ravin Greenberg, PC represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million each. BUDGET GROUP: Sixth Exclusivity Extension Hearing Set for Monday ---------------------------------------------------------------- No much progress has been made since the fifth extension of the Budget Group Debtors' exclusive periods. The Debtors, with the cooperation of the Committee, have filed two omnibus objections to certain duplicative claims and claims that properly reflect equity interests. Additionally, the Debtors and their tax advisors continue to work through the 1,300 tax-related claims and interact with the various taxing authorities regarding audit requests and tax assessments. The Debtors anticipate that the parties will continue to negotiate in good faith in finalizing a plan and disclosure statement, taking into account the proposed resolution mechanism for the allocation and intercompany claim issues, the needs of the UK Administrator regarding the parallel UK Administration proceeding and continuing input from the Committee. By this motion, the Debtors ask Judge Walrath to extend their Exclusive Filing Period through and including September 2, 2003 and their Exclusive Solicitation Period through and including December 1, 2003. The Debtors believe that continued exclusivity in these cases will foster the process of formulating and confirming a consensual Chapter 11 plan. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, asserts that the requested extension will not prejudice the legitimate interests of any creditor. The Debtors, the Committee, and the UK Administrator continue to work cooperatively through the myriad issues associated with the UK Administration, the allocation and other intercompany issues and the plan. Additionally, the Debtors continue to make timely payment of all of their postpetition obligations. The Court will convene a hearing on August 18, 2003 to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the exclusive filing period is automatically extended through the conclusion of that hearing. (Budget Group Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON IND.: Pension and Benefit Plans Under Amended Plan ------------------------------------------------------------- Pursuant to the terms of the WLR Purchase Agreement, effective as of the earlier of immediately after the Closing or September 30, 2003, Burlington Industries, Inc., will amend these pension and employee benefit plans: A. Retirement System The Retirement System will be amended so that: (a) no person who is not a participant in the Retirement System as of the effective date of the amendment may thereafter become a participant in the Retirement System, (b) no person who is a participant in the Retirement System after the effective date of the amendment may thereafter make any further contribution to the Retirement System, and (c) benefit accruals under the Retirement System will cease to be effective no later than September 30, 2003 and thereafter, no participant will earn any additional benefits under the terms of the Retirement System; provided, however, that this will not result in the reduction of the accrued benefit of any participant under the Retirement System or in the altering of the method of calculating the lump sum distributions under the Retirement System. B. Early Retirees Health Care Plan The Early Retirees Health Care Plan will be amended so that: (a) no person who is not a participant in the Early Retirees Health Care Plan as of the effective date of the amendment may thereafter become a participant in the Early Retirees Health Care Plan, (b) no person who is a participant in the Early Retirees Health Care Plan after the Effective Date of the amendment may thereafter make any further contribution to the Early Retirees Health Care Plan other than premiums, and (c) premiums paid by the participants under the Early Retirees Health Care Plan will be adjusted in accordance with written instructions from WLR no earlier than the Closing Date or September 30, 2003. New Benefit Plans to Be Adopted Effective as of the Closing Date, WLR or the Reorganized Purchased Debtors, as applicable, will adopt a new supplemental retirement plan and a new benefits equalization plan that will cover each Transferred Employee who furnished Burlington with a written waiver of benefits under the Pre-1999 SERP, the 1999 SERP and the Burlington Benefits Equalization Plan within 45 days of the Closing. The New SERP and the New Benefits Equalization Plan will provide each the Transferred Employee with vested benefits that are equivalent to the benefits each employee had accrued and vested as of the Effective Date under the Pre-1999 SERP, the 1999 SERP and the Burlington Benefits Equalization Plan and will recognize service with Burlington for all purposes. In addition, subject to the consent of each Transferred Employee, Burlington will amend each Split-Dollar Agreement between Burlington and the Transferred Employee to replace Burlington with WLR or the Reorganized Purchased Debtors, as applicable, with respect to all Burlington's rights and liabilities under the agreements. Immediately after the Effective Date, WLR or the Reorganized Purchased Debtors, as applicable, will be deemed to have reinstated, and agreed to assume and honor, or adopt these employee benefit plans: -- Retirement System of Burlington Industries, Inc. (amended), -- 401(K) Savings Plan of Burlington Industries, Inc., -- Weekly Disability Benefits Plan, -- Long-Term Disability Plan for Salaried Employees, -- Long-Term Disability Plan for Wage Earners, -- Active Employees' Medical Benefit Plan, -- Health Maintenance Benefit Plan, -- Dental Care Assistance Plans, -- Career Life Plan, -- Insurance Protection Plan, -- Retired Employee Medical Benefit Plan (amended), -- Burlington Retired Employees Medicare Supplement, -- Partners Medicare Choice Medical Benefit, -- Dental Care Assistance Plans -- Retired Employees, -- Flexible Spending Accounts Plan, -- VEBA Death Benefit, -- Paid Holiday Policy, -- Paid Vacation Policy, -- Adoption Assistance Policy, -- Tuition Aid/Matched Giving Policies, -- Bereavement Pay Policy, -- Jury Duty Pay Policy, -- Relocation Benefits, -- Severance Benefits, -- New Split Dollar Agreements, -- New Supplemental Executive Retirement Plan, -- New Benefits Equalization Plan, -- Directors', Officers' and Fiduciary Insurance Policies, -- Salary Continuation Policy, -- International Medical and Dental Benefit Plans, and -- Military Pay Policy. In addition, for at least two years after the Closing, WLR or the Reorganized Purchased Debtors, as applicable, will provide the Transferred Employees with compensation and benefits that are not less favorable, in the aggregate, than was received immediately prior to the WLR Transaction. With respect to each person that is not a Transferred Employee, WLR or the Reorganized Purchased Debtors, as applicable, will not assume any liabilities with respect to Burlington's employment of the person, including any benefits the person may have under any Employment Agreement, the Pre-1999 SERP and the 1999 SERP. As a result, Burlington will treat all the agreements and obligations as Executory Contracts, and the applicable Debtor will reject the contracts in accordance with Section 365 of the Bankruptcy Code. Treatment of Employees On the Effective Date, WLR or the Reorganized Purchased Debtors, as applicable, will offer to hire each employee primarily involved in the business acquired in the WLR Transaction. The employees who accept the offer are referred to as the Transferred Employees. Interests of Directors and Executive Officers Certain of Burlington's executive officers and employees participate in the KERP implemented in the Reorganization Cases. The KERP consists of two components, the Retention Incentive Plan and the Severance Plan. Certain executives and employees are entitled to payments under the Emergence Bonus Plan. A. Emergence Bonus The Emergence Bonus is payable upon the earlier to occur of: (a) 90 days after the Effective Date, and (b) termination for any reason of the particular KERP Participant's employment after the Effective Date. The amount of the Emergence Bonus payable to seven of Burlington's executive officers is $665,000, and the amount payable to two other executive officers is dependent on the ultimate return to unsecured creditors. The Debtors agreed to defer seeking Bankruptcy Court approval of the Emergence Bonus until the culmination of the Plan confirmation process. B. Retention Incentive Plan The Retention Incentive Plan provides for Time-Based Payments and Performance-Based Payments. Five Time-Based Payments have already been paid to executive officers for about $2,300,000 in the aggregate. The sixth and final Time-Based Payment of approximately $559,500 is payable to: (a) three of Burlington's executive officers on October 1, 2003 if emergence has not occurred on or before that date, and (b) the other three executive officers upon emergence if emergence has not occurred on or before October 1, 2003. The Performance Payments to executive officers, which were paid previously, aggregated approximately $1,100,000. C. Severance Plan Under the Severance Plan, certain executive officers will be entitled to receive between 12 and 36 months of severance depending on their seniority and if they were terminated after a "change of control" or if they voluntarily terminate for good reason. Change of control is defined under the KERP as a sale or other disposition of assets and business units of Burlington representing 50% or more of the preceding 12 months' earnings before interest, taxes, depreciation, amortization and restructuring charges. If all executive officers are entitled to receive their severance as a result of a change of control, the aggregate amount to be payable is estimated to be $11,100,000, plus the value of benefits during the severance period. Certain executive officers also hold or will, at the Effective Date, hold unsecured and administrative claims against the Estates with respect to Burlington's SERP and Benefits Equalization Plan as a result of the treatment of the plans under the WLR Purchase Agreement. The Claim amounts are expected to be reach $5,900,000 in respect of the SERP and $675,000 in respect of the Benefits Equalization Plan. Prior to the Effective Date, Burlington will make arrangements to acquire for the benefit of its directors, officers and employees, and will fully pay for, insurance extending for a six-year period for all directors and officers liability to the extent applicable to acts or omissions occurring in whole or in part prior to the Effective Date. (Burlington Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) CLARION TECHNOLOGIES: June Net Capital Deficit Narrows to $51MM --------------------------------------------------------------- Clarion Technologies, Inc. (OTC Bulletin Board: CLAR) announced financial results for the fiscal period ended June 28, 2003. Clarion's 2003 sales for the period were $25.48 million versus $22.21 million in 2002, a 15% increase in revenues. Clarion's net income from continuing operations for this period in 2003 was $754,000 versus a net loss of $682,000 in 2002. These improvements in revenue and income were attributable to sales growth and continued focus on operational performance. Clarion Technologies' June 28, 2003 balance sheet shows a working capital deficit of about $20 million, and a total shareholders' equity deficit of about $51 million. Clarion Technologies' President, Bill Beckman, commented, "We are pleased with the Company's results for the first and second quarters . With continued sales momentum and operational execution, Clarion looks forward to continued positive results." Clarion Technologies, Inc. operates five manufacturing facilities in Michigan and South Carolina with approximately 155 injection molding machines ranging in size from 55 to 1500 tons of clamping force. The Company's headquarters are located in Grand Rapids, Michigan. Further information about Clarion Technologies can be obtained on the Web at http://www.clariontechnologies.com COLLINS & AIKMAN: Hosting Second Quarter Teleconference Today ------------------------------------------------------------- Collins & Aikman Corporation (NYSE: CKC), which is traded as CKC on the NYSE, rescheduled a briefing with automotive institutional investors and security analysts, news media representatives and other interested parties to 3:00 p.m. EDT today. On this briefing, C&A will discuss its second quarter 2003 results, released earlier today, along with other matters. C&A's Chairman of the Board and CEO David A. Stockman and Vice Chairman and Chief Financial Officer J. Michael Stepp will co-host the call. To participate by phone, please dial: (877) 780-2276 from the United States (973) 582-2757 from outside the United States Callers should ask to be connected to the Collins & Aikman earnings conference call. C&A will broadcast the briefing via a live audio webcast, which may be accessed through Collins & Aikman's, Web site at: http://www.collinsaikman.com/investor/confcalls.html A replay will be available from 5:00 p.m. EDT on August 14, 2003 until 5:00 p.m. EDT August 20, 2003. To listen to the replay please dial: (877) 519-4471 or (973) 341-3080. When prompted, callers should enter conference reservation number 4094578. Collins & Aikman Corporation, a Fortune 500 company, is a global leader in cockpit modules and automotive floor and acoustic systems and a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company's current operations span the globe through 15 countries, more than 100 facilities and over 25,000 employees who are committed to achieving total excellence. Collins & Aikman's high- quality products combine superior design, styling and manufacturing capabilities with NVH "quiet" technologies that are among the most effective in the industry. Information about Collins & Aikman is available on the Internet at http://www.collinsaikman.com As reported in Troubled Company Reporter's August 12, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on Collins & Aikman Corp., to 'B+' from 'BB-'. At the same time, Standard & Poor's lowered the ratings on the company's senior secured bank credit facility to 'B+' from 'BB-' and on its senior unsecured debt and subordinated notes to 'B-' from 'B'. All ratings were removed from CreditWatch where they were placed on May 16, 2003. The outlook is negative. The downgrade reflects weakened credit protection measures for the Troy, Michigan-based auto-supply company as a result of lower- than-expected financial performance combined with difficult market conditions. CONGOLEUM: Second Quarter Results Swing to $2-Million Net Loss -------------------------------------------------------------- Congoleum Corporation (AMEX:CGM) reported its financial results for the second quarter ended June 30, 2003. Sales for the three months ended June 30, 2003 were $55.0 million, compared with sales of $68.0 million reported in the second quarter of 2002, a decrease of 19.1%. The net loss for the quarter ended June 30, 2003 was $2.0 million versus net income of $.8 million in the second quarter of 2002. The loss per share for the quarter ended June 30, 2003 was $.24, compared with earnings per share of $.10 in the second quarter of 2002. Sales for the six months ended June 30, 2003 were $108.6 million, compared with sales of $125.9 million reported in the first six months of 2002, a decrease of 13.8%. The net loss for the six months ended June 30, 2003 was $4.6 million, or $.55 per share, versus net income (before a required accounting change) of $.2 million, or $.02 per share, in the first six months of 2002. During the first quarter of 2002, Congoleum recorded a non-cash transition charge of $10.5 million, or $1.27 per share, for impairment of goodwill as required for adoption of Statement of Financial Accounting Standards No. 142. Roger S. Marcus, Chairman of the Board, commented "Our disappointing performance reflects the weakest manufactured housing market in years, considerable softness in residential remodel demand, competitive pressures on margin and product mix driven by the poor economy, and increased costs for pensions, medical benefits, insurance, energy, and raw materials. While the factors influencing this performance are largely out of our control, it is not satisfactory and we are committed to major steps that we expect should considerably reduce our break-even point. These include cost reduction initiatives as well as an already announced price increase of 3-5% that will be effective September 1." Mr. Marcus continued "We are continuing to proceed with our planned pre-packaged Chapter 11 reorganization, and while progress at times is frustratingly slow for those of us close to it, much has in fact been accomplished, and we continue to anticipate filing in September with the hope of emerging with our plan confirmed by the end of the year. We continue to enjoy the support of our customers, suppliers, and lenders as we move forward, most recently evidenced by our bondholders' agreement last week to transactions contemplated in our plan. We have seen no apparent negative effects on our day to day business related to the coming reorganization, which I believe is the benefit we have obtained by structuring the plan to protect their interests." "We are committed to achieving profitability in the second half of 2003, and believe this is a realistic goal even without a meaningful improvement in sales. We have taken and are taking a number of steps that should provide better results in the third, and particularly fourth, quarters as the savings phase in. In addition, the reception to our two latest new product introductions, DuraCeramic and Pacesetter, has been highly favorable. Finally, while we are not allowing optimism to diffuse our cost reduction fervor, we have seen recent indications of economic improvement. Orders from the manufactured housing industry have shown some strengthening over the last six weeks and there are also indications that remodel demand is picking up. Any improvement in industry conditions should further amplify the benefit of the changes we are making in our cost structure." 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. Congoleum is planning to seek confirmation of a pre-packaged plan of reorganization to resolve its asbestos liabilities. In connection with that plan, it is expected that pursuant to Congoleum's anticipated pre-packaged Chapter 11 plan of reorganization, American Biltrite would receive certain relief as may be afforded under section 524(g)(4) of the United States Bankruptcy Code of 1978, as amended, from asbestos claims that derive from claims made against Congoleum, which claims are expected to be channeled to the trust established upon consummation of Congoleum's confirmed pre-packaged Chapter 11 plan of reorganization. Pursuant to the terms of Congoleum's anticipated pre-packaged Chapter 11 plan of reorganization, American Biltrite expects to pledge all of the shares of Congoleum stock that it owns pursuant to the terms of a pledge agreement to serve as collateral securing Congoleum's obligations under a promissory note that it is expected Congoleum will contribute to the Plan Trust. Furthermore, under the terms of the Congoleum plan, American Biltrite expects to pledge amounts it could receive relating to certain indemnity rights as additional collateral securing Congoleum's obligations under the Congoleum Note until after any amounts due and payable to the Plan Trust under the Congoleum Note have been paid in full to the Plan Trust. In addition, under the Congoleum plan, American Biltrite expects that it would be obligated to contribute $250 thousand to the Plan Trust upon confirmation of Congoleum's plan of reorganization. American Biltrite also expects the plan will include provisions requiring additional payment to the Plan Trust, under certain circumstances, in the event American Biltrite sells all or substantially all of its interest in Congoleum before the later of June 30, 2008 or four years following confirmation of Congoleum's plan of reorganization. These provisions may affect the timing and amount of any ultimate value to be derived from American Biltrite's investment in Congoleum. CONSECO: Wants Approval to Assume Federal Insurance Agreement ------------------------------------------------------------- Conseco Inc., and its debtor-affiliates want Judge Doyle's permission to assume a January 1, 2000 and another October 1, 2000 Reimbursement Indemnification and Security Agreement with Federal Insurance Company, a unit of Chubb Group of Insurance Companies. Conseco and Chubb, of Warren, New Jersey, are parties to insurance policy agreements pursuant to which Chubb provides insurance coverage. The Policies relate to Worker's Compensation Insurance, General Liability Insurance and Automotive Insurance. Under the Reimbursement Agreements, Conseco is obligated to reimburse Chubb for all payments Chubb makes for claims covered by the Policies, along with associated costs and expenses. To secure reimbursement, Conseco transferred $1,261,201 to Chubb. On February 19, 2003, Chubb filed its Proof of Claim No. 49372- 006398 asserting a secured claim for $885,536, plus postpetition fees and costs. Conseco objected to the Claim stating that there is no liability. On April 25, 2003, Chubb filed a response and indicated that the Reimbursement Obligation was lowered to $860,377. To date, Chubb calculates that the Reimbursement Obligations it has paid total $116,346 in claim-related payments plus $9,066 in fees and costs. Conseco wants to assume the Reimbursement Agreements as executory contracts to reinstate prepetition practice where: (1) Chubb continues to service insurance claims; (2) Chubb invoices Conseco for reimbursement; (3) Conseco timely pays the invoices; and (4) Chubb continues to retain the Conseco Fund as security for amounts due under the Reimbursement Agreements. (Conseco Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVANTA ENERGY: Wins Nod to Implement US Trust Company Agreement ---------------------------------------------------------------- Covanta Energy Corporation, its debtor-affiliates and its creditor constituencies discussed various aspects of the proposed Agreement with U.S. Trust Company. As a result of these discussions, the Debtors renegotiated the terms of the Agreement in order to obtain greater flexibility and to reduce the initial cost of entering into the Agreement. The Amended Agreement provides that: A. The engagement of U.S. Trust will take place in two stages: -- An Initial Retention beginning on the Retention Date and ending on the earlier of: (i) the date when the Agreement terminates; and (ii) the date of a determination by the Company, based on its business judgment and consultation with its creditor constituencies -- Affirmative Determination. -- A Second Retention beginning on the Affirmative Determination Date and ending on the earlier of: (i) the date of the Transaction; and (ii) the date U.S. Trust is prepared to make a final decision with respect to the Proposed ESOP's participation in the Transaction. B. With respect to the Initial Retention, U. S. Trust's responsibilities to the Proposed ESOP will be to conduct appropriate due diligence on the Company and the Proposed ESOP, so that it will be in a position to proceed expeditiously in reaching a decision with regard to the proposed ESOP if, and when, the Secondary Retention begins. C. With respect to the Secondary Retention, U.S. Trust's responsibilities will be to: -- conduct appropriate due diligence on the Company and the Proposed ESOP; -- negotiate the terms governing the contribution or sale of the Company's common stock to the Proposed ESOP; and -- determine, on behalf of the Proposed ESOP, whether to: (i) accept a proposed contribution of the Company's common stock; or (ii) purchase Company Stock. It is understood that in exercising its responsibilities with respect to the Secondary Retention, U.S. Trust may rely on the written opinion of its financial advisor, Duff & Phelps, that the terms and conditions of the Transaction are fair and reasonable to the Proposed ESOP from a financial point of view. D. The Company will furnish U.S. Trust with reasonably requested information necessary for U.S. Trust to perform its obligations. The information includes: -- all current and historical financial; -- all public information regarding the Company and its subsidiaries; and -- all non-public information regarding the Company and its subsidiaries. E. In the event that U.S. Trust is required by law, regulation, or supervisory authority to disclose the Material, U.S. Trust or any U.S. Trust Representative will provide the Company with prompt notice so that the Company may seek protective order or other appropriate remedy. F. U.S. Trust agrees to refrain from purchasing any evidence of indebtedness of, or other claims against, the Company for the duration of the bankruptcy proceedings that the Company is subject to. This is in the condition that the agreement will not prevent the purchase, if the purchase is: -- made under the direction and control of employees independent and separate from those individuals rendering services in connection with the Agreement; and -- not based in any way on the Material. G. All Material disclosed by the Company will be, and will remain the property of the Company. U.S. Trust will promptly return, or destroy with the Company's certification, the material, including: -- all analytical material prepared based on Material; and -- all copies thereof. H. U.S. Trust understands and acknowledges that neither the Committee, nor the Company, makes any representation or warranty on the accuracy or completeness of the Material, or any other information provided to U.S. Trust. I. Notwithstanding anything to the contrary, U.S. Trust may disclose to any and all persons the: -- U.S. federal income tax treatment and tax structure of the Transaction; and -- all materials of any kind related to the tax treatment and tax structure that are provided to U.S. Trust. J. The Company will pay U.S. Trust, as compensation for the services that U.S. Trust will perform: -- in connection with the Initial Retention, $100,000; -- in connection with the Transaction, $200,000; and -- monthly reimbursement for all reasonable out-of-pocket expenses, including: (i) travel and lodging; (ii) communications; and (iii) other incidentals. However, even though the Company will pay the reasonable fees and expenses incurred by U.S. Trust, it is understood that U.S. Trust's sole professional responsibilities are to the Proposed ESOP and the Proposed ESOP participants. K. U.S. Trust will engage the Financial Advisor. The Company agrees to pay the Financial Advisor's fees and the other expenses incurred in connection with rendering the Financial Opinion; provided that the fee does not exceed $175,000 and the expenses do not exceed $25,000. L. U.S. Trust will engage legal counsel to advise it in the services to be performed pursuant to the Secondary Retention. The Company agrees to pay the legal counsel on a monthly basis, within 15 days of billing, for reasonable fees and expenses incurred while providing services to U.S. M. The Company and its successors will indemnify U.S. Trust harmless against any and all Losses. N. The engagement of U.S. Trust in the Agreement may be terminated at any time by the Committee or U.S. Trust through 30 days' written notice. O. Any right to trial by jury arising out of, or relating to, the Agreement, or the services to be provided by U.S. Trust is expressly and irrevocably waived. Accordingly, Judge Blackshear orders that: 1. The Debtors are authorized to enter and implement the Amended Agreement, including engaging: (i) U.S. Trust as fiduciary, with respect to the proposed ESOP; and (ii) D&P as U.S. Trust's financial advisor, with respect to the Debtors' decision to proceed with the Secondary Retention. 2. Covanta is authorized to make the compensation and reimbursement of expenses payments to U.S. Trust and D&P. 3. All compensation and reimbursement of expenses to be paid to U.S. Trust and D&P will be subject to the Court's final approval. 4. All requests of U.S. Trust for payment of indemnity will be: -- made by means of an application; and -- subject to review by the Court to ensure that payment of the indemnity: (a) conforms to the terms of the Amended Agreement; and (b) is reasonable based upon the circumstances of the litigation or settlement. 5. In no event will U.S. Trust be indemnified if: -- the Debtor or a representative of the estate, asserts a claim; and -- a court determines that the claim arose out of U.S. Trust's own bad-faith, self-dealing, breach of fiduciary duty, if any, negligence, or willful misconduct. 6. In the event that U.S. Trust seeks reimbursement for attorney's fees from the Debtors, the invoices and supporting time records from the attorney will be: -- included in U.S. Trust's own applications, both interim and final; and -- subject to: (a) the United States Trustee's guidelines for compensation and reimbursement of expenses; and (b) the approval of the Bankruptcy Court under the standards of Sections 330 and 331 of the Bankruptcy Code. (Covanta Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) DAY INT'L GROUP: S&P Rates Proposed $187M Sr Sec. Bank Loan at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' secured bank loan rating to Day International Group Inc.'s proposed $187 million senior secured credit facilities due in 2009. At the same time, Standard & Poor's lowered its rating on Day's preferred stock to 'D' from 'CCC', affirmed its 'B' corporate credit rating on the company and its 'CCC+' subordinated debt rating, and revised the outlook to stable from negative. Proceeds from the credit facilities will be used to repurchase Day's $100 million 11-1/8% senior unsecured notes due 2005, to repay debt under the current bank facility, and to fund a potential acquisition. The rating on the senior unsecured notes will be withdrawn upon completion of the transaction and successful tender offer. The lowering of the rating on Day's preferred stock followed the nonpayment of the cash dividend that was due on the company's 12-1/4% senior exchangeable preferred stock due in 2010. Day was restricted from making the cash payment under its current bank agreement and note indentures. "The outlook was revised because of the modest improvement in operations, reduced interest cost and loan amortization, and elimination of refinancing risk as a result of the refinancing," said Standard & Poor's credit analyst John Sico. The Dayton, Ohio-based printing-equipment company has about $250 million in debt outstanding. "We expect Day to be disciplined on acquisitions, where it has a successful track record," Mr. Sico said. Day is currently negotiating on a potential acquisition of modest size. The new $187 million bank credit facility is comprised of a five- year $32 million delayed-draw term loan to finance a possible acquisition; a six-year term loan A of $30 million; a six-year term loan B of $105 million; and a five-year revolving credit facility of $20 million. The facilities are secured by a perfected first-priority security interest in all of the company's tangible and intangible assets. The new credit facility will have an early maturity of Sept. 15, 2007, in the event that the 9-1/2% senior subordinated notes due in March 2008 are not refinanced by then. In Standard & Poor's analysis, Day's cash flows were stressed because of a significant downturn in the economy, which resulted in severely reduced demand for its products. Under this distressed case, there is the likelihood of meaningful recovery of principal in event of default or bankruptcy, despite potentially significant loss exposure. DELPHAX: Harris Trust Relaxes Fin'l Covenants & Waives Defaults --------------------------------------------------------------- Delphax Technologies Inc. (Nasdaq: DLPX) reported sales of $14.8 million for its third fiscal quarter ended June 30, 2003, a 9 percent increase from $13.5 million for the same period a year ago. Due primarily to the growth in revenues, the company reported third quarter operating income of $201,000, compared with $44,000 in the third quarter of last year, a substantial improvement despite the adverse impact of higher international costs due to the weakened U.S. dollar. A net foreign exchange loss of $160,000 contributed to a net loss for the third fiscal quarter of $105,000, or $0.02 per share, compared with a net loss of $10,000 or $0.00 per share for the same period last year. "We are pleased with the continued progress we are making to improve our underlying business model despite the lack of any real recovery in the worldwide printing equipment market," said Jay Herman, chairman and chief executive officer. "In this difficult economy, we have grown our revenues, optimized our operating structure, and continued to execute our technology plan. Although we are disappointed in our industry's inability to break out of this downturn, we are on target in our transformation program given that we have just begun our second year as essentially a 'new' company since redefining our strategy and potential with a dramatic expansion of our product line and our marketplace. "It is unfortunate that foreign exchange losses and higher international costs associated with the weakened U.S. dollar have offset some of our base business improvements, and masked some of the real progress we have made in the expansion of our product offerings and our markets," Herman said. "We are convinced that our patented electron-beam imaging (EBI) digital print technology will become the printing technology of the future, and are seeing the evidence of this now. Digital roll- fed and cut-sheet printing technology is emerging as a preferred solution for short and medium run length printing opportunities at a time of transition for the traditional offset printing market. Our strategy is to concentrate on markets where the speed, quality, flexibility and efficiency advantages of EBI technology can be leveraged to create superior competitive differentiation for our products, customers and partners." Third quarter sales of printing equipment were $2.6 million, an improvement of 9 percent from the $2.3 million for the same period a year ago. Revenues from maintenance, spares and supplies also increased 9 percent to $12.2 million from $11.2 million in the third quarter a year ago, due to increased usage of the Imaggia(R) installed base, and the on-going revenue generated by the company's new CR Series high-speed digital presses. For the nine months ended June 30, 2003, sales increased 16 percent to $44.5 million from $38.4 million last year. The company reported a net loss of $1.3 million, or $0.20 per share, for the nine months, compared with net income of $50,000, or $0.01 per share, for the same period last year. Results for the first nine months of the current fiscal year include a $1.2 million restructuring charge in the first fiscal quarter related to the consolidation of the company's North American manufacturing and engineering operations in Mississauga, Ontario. The restructuring charge reduced current year earnings by approximately $0.19 per share. The company said the North American restructuring program is on track and still expected to be completed by the end of calendar 2003. The consolidation is expected to eliminate annual operating expenses of more than $1.6 million, and contributed to a portion of the reduction in operating expenses for this year's third quarter compared to last year. The company said that following the end of the quarter it completed an amendment to its credit facility with Harris Trust and Savings Bank. The amendment increases the company's revolving credit facility from $10.5 million to $12.0 million, relaxes certain financial covenants and waives covenant defaults that would have existed prior to the amendment. The amendment did not change the maturity date, interest rates or principal payments schedule for the loans under the credit agreement. Delphax Technologies Inc. is a global leader in the design, manufacture and delivery of advanced digital print production systems based on its patented electron-beam imaging technology. Delphax digital presses deliver industry-leading throughput for both roll-fed and cut-sheet printing environments. These flagship products are extremely versatile, providing unparalleled capabilities in handling a wide range of substrates from ultra lightweight paper to heavy stock. Delphax provides digital printing solutions to publishers, direct mailers and other printers that require systems capable of supporting a wide range of commercial printing applications. The company also licenses and manufactures EBI technology for OEM partners that create differentiated product solutions for additional markets. There are currently over 4,000 installations using Delphax EBI technology in more than 60 countries worldwide. Headquartered in Minneapolis, with subsidiary offices in Canada, the United Kingdom and France, the company's common stock is publicly traded on the National Market tier of the Nasdaq Stock Market under the symbol: DLPX. Additional information is available on the company's Web site at http://www.delphax.com DIGITAL FUSION: Red Ink Continued to Flow in Second Quarter 2003 ---------------------------------------------------------------- Digital Fusion, Inc. (OTCBB:DIGF), a business and information technology services provider, announced financial results for the second quarter ended June 30, 2003. Financial Comparisons For the quarter ended June 30, 2003, revenues were $1.6 million versus $2.6 million for the same quarter previous year. The decrease in revenues during the first quarter 2003 compared to the same period last year was primarily due to the reduction in IT spending by our customers. Net loss for the quarter ended June 30, 2003 was $164,000 versus $170,000 for the same quarter previous year. For the six months ended June 30, 2003, revenues were $3.2 million versus $5.4 million for the six-month period the previous year. The decrease in revenues during the six months ended 2003 compared to the same period last year was primarily due to the reduction in IT spending by our customers. Net loss for the six months ended June 30, 2003 was $530,000 compared to net income for the six months ended June 30, 2002 of $1,277,000. During the six months ended June 30, 2002, the Company recorded a gain on forgiveness of legacy debts of $1.5 million and reduced its severance and restructuring accrual by $182,000. The net loss excluding these items for the six months ended June 30, 2002 was $444,000. Business Discussion The gross profit increase of $150,000 on equal revenue between the first and second quarter of 2003 was primarily due to increased consultant utilization. Selling, general and administrative expenses fell an additional $50,000 between the first and second quarter of 2003. Management Comments "We are pleased that we significantly narrowed our operational loss compared to last quarter. However, we are disappointed that sluggish new sales prevented us from further closing the gap," said Roy Crippen, president and chief executive officer. "To help grow our sales pipeline in both the commercial and government sectors we have made some organizational changes centered around improved support for our sales team and have decided to hire two new sales representatives." Digital Fusion is a business and information technology consulting company helping its customers make the most of technology to access business information, enhance the performance of their human resources and meet their business needs. Digital Fusion provides a range of services in business process and application strategy and development, including Application Development and Data Management, Systems Integration and IT Support. Based in the eastern U.S., Digital Fusion has offices in New York, Washington D.C., Philadelphia, Orlando, Huntsville, and New Jersey. For additional information about Digital Fusion visit http://www.digitalfusion.com * * * As previously reported, IBS Interactive d.b.a. Digital Fusion incurred losses of $11,412,000 and $18,062,000 in 2001 and 2000, respectively and cash flow deficiencies from operations of $513,000 and $6,837,000 in 2001 and 2000, respectively. The losses and cash flow deficiencies in 2000 and prior years caused the Company to receive an unqualified opinion with an explanatory paragraph for a going concern in its December 31, 2000 consolidated financial statements. During late 2000 and early 2001, the Company restructured its operations. This included selling or shutting down unprofitable business units/division, streamlining its continuing business units and settling its debts associated with business units/division that were shut down or sold. EAGLE FOOD: Court Fixes September 8 as General Claims Bar Date -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois fixes September 8, 2003, as the General Claims Bar Date by which creditors of Eagle Food Centers, Inc., and it debtor-affiliates must file their Proofs of Claim against the Estates or be forever barred from asserting their claims. The Court also sets October 6, 2003, as the Governmental Claims' Bar Date. To be deemed timely, Proof of Claim forms must be received by the Court-appointed Claims Agent, Logan & Company, Inc. before 4:00 on the bar date. Forms must be sent to: Logan & Company, Inc. Attn: Eagle Foods Claims Processing Center 546 Valley Road Upper Montclair, NJ 07043 Proofs of Claim need not be filed if they are on account of: 1. Claims not listed as disputed, unliquidated or contingent; 2. Claims already properly filed with the Bankruptcy Court; 3. Administrative expense claims against the Debtors; 4. Claims of one Debtor against another; or 5. Claims previously allowed or paid pursuant to an Order of the Court. Eagle Food Centers Inc., a leading regional supermarket chain headquartered in Milan, Illinois, filed for chapter 11 protection on April 7, 2003 (Bankr. N.D. Ill. Case No. 03-15299). George N. Panagakis Esq., at Skadden Arps Slate Meagher & Flom represents the Debtors in their restructuring efforts. As of Nov. 2, 2002, the Debtors listed $180,208,000 in assets and $177,440,000 in debts. FARMLAND INDUSTRIES: Smithfield Designated as Stalking Horse ------------------------------------------------------------ Goldsmith Agio Helms announced the completed sale of Farmland Industries, Inc.'s interest in Farmland National Beef Packing Company, L.P., to a group of investors led by U.S. Premium Beef Ltd. Goldsmith Agio Helms was retained by Farmland Industries to represent it in the sale of both National Beef and Farmland Foods, Inc. Farmland Industries previously held a 71 percent stake in National Beef while USPB held the remaining 29 percent. USPB paid $232 million for Farmland Industries' interest. In addition, U.S. District Court Judge Jerry Venters of the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City has approved the bid and auction procedures for the sale of Farmland Foods, Inc. The "stalking horse" is Smithfield Foods, Inc. with a bid of $363.5 million. The auction and sale are expected to be completed later this fall. Kevin G. Jach, managing director and partner of Goldsmith Agio Helms, commented, "National Beef is a well-run, growing beef packer with continued opportunity ahead of it. Its existing relationship with USPB should help the transition of ownership from Farmland Industries to USPB go smoothly." David G. Iverson, vice president of Goldsmith Agio Helms, added "With the completion of this sale, National Beef will continue its tradition of producer ownership and further its commitment to vertically integrating the beef packing industry to the benefit of all constituents." Farmland Industries, Inc., headquartered in Kansas City, Missouri, is a diversified agricultural cooperative with interests in food, fertilizer, petroleum, grain, and animal feed businesses. Farmland National Beef Packing Company, L.P., headquartered in Kansas City, Missouri, processes and markets fresh beef, boxed beef and beef byproducts for domestic and international markets. It holds a 10 percent market share in the United States. U.S. Premium Beef Ltd, headquartered in Kansas City, Missouri, is a producer-owned, beef marketing company with more than 1,850 producer members in 37 states representing all segments of the U.S. beef industry. Farmland Foods, Inc., headquartered in Kansas City, Missouri, is one of the largest producers and marketers of pork products in the U.S. Smithfield Foods, Inc (NYSE:SFD), headquartered in Smithfield, Virginia, is a leading processor and marketer of fresh pork and processed meats in the U.S., as well as the largest producer of hogs. Goldsmith Agio Helms -- http://www.agio.com-- is one of the nation's leading private investment banking firms providing expert financial advisory services to middle-market businesses. Goldsmith Agio Helms provides a full array of services, including mergers and acquisitions advisory, distressed advisory and restructurings, valuations and fairness opinions, and private placements of debt and equity. The firm's 55 professionals advise public and private businesses engaged in a wide variety of industries through its offices in Minneapolis, New York, Chicago, Los Angeles, and Naples, Florida. FC CBO: S&P Cuts Senior Notes Rating Down 2 Notches to BB- ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the senior notes issued by FC CBO Ltd./FC CBO Corp., an arbitrage CBO transaction originated in 1997, and removed it from CreditWatch with negative implications, where it was placed July 28, 2003. The rating on the senior notes was previously lowered Aug. 1, 2002, March 12, 2003, and May 15, 2003. The rating on the second priority senior notes was previously lowered April 3, 2002, Aug. 1, 2002, and March 12, 2003. The lowered rating reflects factors that have negatively affected the credit enhancement available to support the rated notes since the prior rating action in May 2003, primarily continued asset defaults and a decline in the weighted average coupon generated by the performing fixed-rate assets in the pool. According to the most recent monthly trustee report (July 10, 2003), Standard & Poor's noted that $150.726 million, or approximately 23.9%, of the total assets in the collateral pool come from obligors rated 'D', 'SD', or 'CC'. Furthermore, according to the most recent trustee report, the weighted average coupon has deteriorated to 9.054%, compared to 9.183% at the time of the May 2003 rating action. The minimum required weighted average coupon is 9.50%. As part of its analysis, Standard & Poor's reviewed the results of recent cash flow runs generated for FC CBO Ltd./FC CBO Corp. to determine the level of future defaults the rated tranches can withstand under various stressed default timing and LIBOR scenarios, while still paying all of the rated interest and principal due on the notes. When 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 rating assigned to the senior notes was no longer consistent with the credit enhancement available. Standard & Poor's will remain in contact with the Bank of Montreal, the collateral manager for the transaction. RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE FC CBO Ltd./FC CBO Corp. Rating Class To From Balance (mil. $) Senior BB- BB+/Watch Neg 526.440 OTHER OUTSTANDING RATING FC CBO Ltd./FC CBO Corp. Rating Balance (mil. $) 2nd Priority Senior CC 109.109 FLEMING COS.: Court OKs Pepper Hamilton as Committee Co-Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Fleming Companies, Inc., and debtor-affiliates, obtained the Court's authority to retain Pepper Hamilton nunc pro tunc to April 10, 2003. As co-counsel, Pepper Hamilton will: (a) advise the Committee with respect to its rights, powers and duties in the Debtors' Chapter 11 Cases; (b) assist and advise the Committee in its consultations with the Debtors relative to the administration of their Chapter 11 Cases; (c) assist the Committee in analyzing and in negotiating the claims of Fleming's creditors; (d) assist with the Committee's investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtors and the operation of their businesses to maximize the value of their assets for the benefit of the creditors; (e) assist the Committee in its analysis of, and negotiations with, the Debtors or any third party concerning matters related to, among other things, the terms of a plan or plans of reorganization for the Debtors; (f) assist and advise the Committee with respect to its communications with the general creditor body regarding significant matters in the Debtors' Chapter 11 cases; (g) commence and prosecute necessary and appropriate actions or proceedings on the Committee's behalf that may be relevant to the Debtors' Chapter 11 Cases; (h) review and analyze all or prepare, on behalf of the Committee, all necessary applications, motions, answers, orders, reports, schedules, and other legal papers; (i) represent the Committee in all hearings and proceedings; (j) confer with professional advisors retained by the Committee so as to more properly advise the Committee; and (k) perform all other necessary legal services need by the Committee in the Debtors' Chapter 11 Cases; In connection with its engagement, Pepper Hamilton will charge for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates and for its actual, reasonable, and necessary out-of-pocket disbursements incurred in connection of the Debtors' Chapter 11 Cases. Pepper Hamilton's current hourly rates are: Partner $280 - 550 Associate 150 - 295 Paralegal 65 - 175 (Fleming Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GALAXY NUTRITIONAL: Hosting Fiscal Q1 Conference Call Tomorrow -------------------------------------------------------------- Galaxy Nutritional Foods (Amex: GXY), a leading producer of nutritious plant-based dairy alternatives for the retail and foodservice markets, announces a teleconference and web-cast of the Company's 1ST Quarter Fiscal 2004 earnings results at 10:00am EDT tomorrow. The conference call invites all shareholders and interested parties to call in on a toll free line to ask questions about the Company's results and discuss future plans. The toll free number for U.S. and Canada callers is 1-800- 289-0572. All other international callers should dial: 1-913-981- 5543. The conference call pass code for all participants is 756075. The call will be simultaneously web-cast at the following link: http://www.firstcallevents.com/service/ajwz387497383gf12.html Individuals within the U.S. and Canada that cannot access the call are invited to listen to a digitally recorded version by calling the toll free number: 1-888-203-1112. All other international callers should dial the following number for a digital playback: 1-719-457-0820. It will be required to reference the pass code # 756075 for all digital playbacks. The playback will be available after 1:00 p.m. EDT Monday, August 18, 2003 through Friday, August 22, 2003 until midnight. The call will be posted to our website the following week at: http//www.galaxyfoods.com. Galaxy Nutritional Foods is the leading producer of great-tasting, health-promoting plant-based dairy and dairy-related alternatives for the retail and foodservice markets. These phytonutrient- enriched products, made from nature's best grains -- soy, rice and oats -- are low and no fat (no saturated fat and no trans-fatty acids), have no cholesterol, no lactose, are growth hormone and antibiotic free and have more calcium, vitamins and minerals than conventional dairy products. Because they are made with plant proteins, they are more environmentally friendly and economically efficient than dairy products derived solely from animal proteins. Galaxy's products are part of the nutritional or functional foods category, the fastest growing segment of the retail food market. Galaxy brand names include: Galaxy Nutritional Foods(R), Veggie(R), Veggie Nature's Alternative to Milk(R), Veggie Slices(R), Soyco(R), Soymage(R), Wholesome Valley(R), formagg(R), and Lite Bakery(R). For more information, please visit Galaxy's Web site at http://www.galaxyfoods.com * * * LIQUIDITY AND CAPITAL RESOURCES In its Form 10-Q for the period ended December 31, 2002, the Company reported: "Net cash provided by operating activities was $1,901,996 for the nine months ended December 31, 2002 compared to net cash used of $1,504,597 for the same period ended December 31, 2001. The increase in cash from operations is primarily attributable to a net income of $1,275,187 evidencing the improved gross margins and reduction in cash operating expenditures in fiscal 2003 along with further collections on accounts receivable and reductions in inventory levels. In fiscal 2002, the Company used a significant portion of its cash to decrease its amounts payable to vendors and to fund operating losses. "The Company's ability to continue as a going concern depends upon successfully obtaining sufficient financing to pay down or replace the FINOVA debts due in July 2003. In the event the Company cannot extend the loans, or raise the capital to pay off or replace the debt in July 2003, FINOVA Capital and FINOVA Mezzanine could exercise their respective rights under their loan documents to, among other things, declare a default under the loans and pursue foreclosure of the Company's assets which are pledged as collateral for such loans. In the event that FINOVA exercises their right to pursue foreclosure, then SouthTrust has the ability to do the same based on a cross- default provision in their loan agreement. The Company is seeking to obtain the necessary funds through its positive cash flows from operating activities, equity financing, and/or refinancing with FINOVA or a substitute lender. There are no assurances, however, that such financing, if available will be at a price that will not cause substantial dilution to the Company's shareholders. If the Company is not able to generate sufficient cash through its operating and financing activities in fiscal 2003, it will not be able to pay its debts in a timely manner. However, the Company, with direct involvement from key new board and management members, is currently discussing terms with several independent parties to provide the funds required to replace FINOVA Capital as the Company's primary asset-based lender and to pay off the debt to FINOVA Mezzanine." Early last month, Textron Financial Corporation replaced Finova Capital Corporation as the Company's asset-based lender. The Company's new revolving line of credit from Textron Financial has a maximum facility amount of $7.5 million and an interest rate that is 2.25% lower than the rate previously charged by Finova Capital, whose line was due to mature July 1, 2003. GENSCI REGENERATION: Inks Cross Distribution Pact with IsoTis ------------------------------------------------------------- Biosurgery company IsoTis S.A. (SWX/Euronext Amsterdam: ISON) and GenSci OrthoBiologics, Inc. (Toronto: GNS) have signed a cross distribution agreement that will allow the companies to actively move forward with the integration of their commercial organizations in anticipation of the proposed merger. Under the agreements, the companies will market and sell each other's products in their respective main markets, and will be positioned among the few companies offering surgeons a broad suite of superior natural (demineralized bone matrix/DBM) and synthetic bone graft substitutes. IsoTis will initiate distribution in Europe and the rest of the world of GenSci's DBM products (DynaGraft(R) II Putty and Gel, OrthoBlast(R) II Paste and Putty, and Accell(R) DBM100); GenSci will start distributing IsoTis' synthetic bone graft substitute OsSatura(TM) and its cement restrictor SynPlug(TM) in the Americas. The distribution agreements are fully reciprocal. On June 24, 2003, the companies signed a pre-merger licensing agreement under which IsoTis gains access to the advanced carrier and delivery systems of GenSci OrthoBiologics. Jacques Essinger, Chief Executive Officer, IsoTis S.A. said: "This cross distribution deal, which follows on the back of our earlier licensing agreement, allows us to leverage our product portfolio throughout our respective commercial organizations in anticipation of the merger. The agreement will enable us to start to bring out the competitive advantage of our joint organization, and is expected to yield tangible results as of Q1, 2004. Having started with integrating our product development capabilities, these commercial agreements are a clear sign that the joint organization is taking shape on all levels as a result of the excellent chemistry between IsoTis and GenSci." Douglass Watson, President and Chief Executive Officer, GenSci commented: "The ability to offer both high quality DBM bone graft substitutes and synthetic bone graft substitutes will strengthen our sales and marketing efforts, and is commercially very exciting. It will allow us to present orthopedic, oral, and craniofacial surgeons with a unique range of products for various indications. Through these agreements, GenSci and IsoTis will effectively advance their collaboration on all levels, building with drive and enthusiasm on our rapidly developing relationship." On June 3, 2003, IsoTis and GenSci announced their intention to merge to create a leading orthobiologics player with a global presence. The official announcement can be found on http://www.isotis.comor http://www.gensciinc.com Summary of merger rationale: The merger will create a dedicated and global orthobiologics player focused on the double-digit growth market of bone substitutes. The combined IsoTis/GenSci product portfolio will have a broad presence in both "natural" demineralized bone matrix products and "synthetic" bone substitutes. As DBM products are more common in North America and synthetic bone substitutes are more common in Europe, the IsoTis/GenSci product portfolio is well positioned to capitalize on significant commercial opportunities in both of these major markets. Further, IsoTis/GenSci expects to sustain continued long-term growth in revenues through aggressive development of its innovative orthobiologics pipeline. The two companies have already identified a variety of ongoing product development programs that have the potential to lead to breakthrough products in musculoskeletal repair. Combining the companies: With product sales exceeding US $22 million and positive cash flow from operations in 2002, GenSci is recognized as a significant participant in the North American bone graft substitute market. Its OrthoBlast(R) II, DynaGraft(R) II, and Accell(R) DBM100 product lines are well recognized and accepted in the orthopedic community. IsoTis contributes its innovative synthetic bone substitute OsSatura(TM) to the combination, together with a range of small medical devices, and its highly promising PolyActive BCP program, which constitutes a potential advance in the treatment of osteochondral knee defects. In the first half of 2003, OsSatura(TM) received both the CE mark (on the claim of osteoinductivity) and FDA 510(k) clearance in quick succession and has been contributing to revenues as of Q1, 2003. IsoTis' total 2002 sales amounted to 2 million euros (US$ 2.25 million). IsoTis has a solid cash position of 75 million euros (US$ 85 million) at March 31, 2003, an innovative product pipeline, and proven ability to execute a complex cross border merger on a timely and efficient basis. IsoTis, the Leading European Biosurgery Company IsoTis was created in Q4 2002 through the merger of Modex, a Swiss biotechnology company, and IsoTis, a Dutch biomedical company. The company operates out of its corporate headquarters in Lausanne, Switzerland, and its facilities in Bilthoven, The Netherlands. In Q1, 2003, it completed a restructuring of the company by rationalizing its product portfolio and substantially reducing its cash burn. IsoTis currently has 100 employees, a product portfolio with several orthobiologic medical devices on the market and in development, and is traded under the symbol "ISON" on both the Official Market Segment of Euronext Amsterdam and the Main Board of the Swiss Exchange. GenSci, the Orthobiologics Technology Company(TM) GenSci Regeneration Sciences, Inc. is a publicly traded company listed on the Toronto Stock Exchange (Toronto: GNS) with corporate headquarters in Toronto, Ontario. GenSci OrthoBiologics, Inc., the company's wholly-owned subsidiary based in Irvine, California, focuses on the research, development, production, and distribution of bioimplant products for the orthopedic and spine markets. GenSci OrthoBiologics is the company's principal operating subsidiary. The company's products are currently sold in over 1,550 hospitals across North America, with a growing international presence throughout Latin America, Europe, and Asia. GenSci has 85 employees. As reported in Troubled Company Reporter's August 7, 2003 edition, GenSci Regeneration Sciences and IsoTis S.A. announced that the U.S. Bankruptcy Court, Central District of California, entered an order dismissing GenSci Regeneration Sciences Inc., from Chapter 11. This marks an important step towards completion of the proposed merger between IsoTis and GenSci announced in early June. Both companies further confirmed that reciprocal due diligence has now been successfully completed. Chapter 11 Proceedings GenSci Regeneration requested that the dismissal order be granted, with the support of its creditors, to allow GenSci Regeneration to proceed toward completion of the planned merger of its wholly owned subsidiary, GenSci OrthoBiologics Inc., with IsoTis. GenSci OrthoBiologics will remain under the protection of Chapter 11 pending a confirmation hearing expected to be held in October 2003. In order to effectuate the dismissal, IsoTis has funded US$200,000 for payment of GenSci Regeneration's pre-petition unsecured claims and post- petition administrative claimants, including, but not limited to professional fees, excluding (i) post-petition creditors whose claims are paid in the ordinary course of business and not yet due, and (ii) Osteotech, Inc. Based upon an agreement between GenSci Regeneration, the Creditors' Committee appointed in GenSci OrthoBiologics' Chapter 11 case, IsoTis, and Osteotech, in the event that the merger of GenSci OrthoBiologics and IsoTis is not completed by January 31, 2004 the dismissal order shall be vacated, and the Chapter 11 case of GenSci Regeneration would be reinstated. GLOBAL CROSSING: Enters Marketing Partnership with IDT Solutions ---------------------------------------------------------------- Building upon its expertise in bringing to market innovative, flexible voice and data services, Global Crossing has entered into a marketing partnership with IDT Solutions, marketing arm of Winstar Communications, L.L.C.(R), to provide enterprises with a leading-edge business continuity services bundle that leverages Global Crossing's high-performance data communications services and IDT Solutions' wireless local access services. IDT Solutions is a division of IDT Corporation (NYSE: IDT, IDT.C). The partnership brings together industry leading data services such as Global Crossing IP VPN Service(TM) and Winstar's fixed wireless network that offers true end-to-end diversity in the event of network outage or service interruption. Typical business continuity planning includes data diversity planning between two or more carriers. Problems, however, can still occur if multiple carriers share common interface points, making enterprises equally vulnerable to the same potential disaster. "Achieving true end-to-end business continuity with fixed wireless connectivity is innovation at its best," said Global Crossing CEO John Legere. "This provides our customers with a truly reliable, cost-efficient backup connectivity solution and customer service not found elsewhere in the industry." The bundle will be offered by Global Crossing and powered by Winstar's fixed wireless solution. The offer will be available in 22 cities nationwide, with initial service availability in Chicago, New York, Philadelphia and Dallas. "This marketing partnership is just another example of our expanding commercial relationship with Global Crossing," said Jim Courter, vice chairman and CEO of IDT. "Global Crossing continues to be a top-notch service provider to IDT. This agreement strengthens our commitment to Global Crossing and our belief in their ability to deliver services that are needed by business customers." IDT Solutions' services are delivered over one of the country's largest and most reliable broadband communications networks. This high-capacity broadband network uses the 38 GHz, 28 GHz and other portions of the radio spectrum to reach customers directly in major markets nationwide. Fixed wireless services provide fiber- quality transmissions at speeds up to OC-3 -- enough capacity to transmit the entire Library of Congress card catalog in just 20 seconds. Global Crossing's business continuity solutions are comprised of innovative voice and data services such as diversity, avoidance, and customer specified routing for circuit and route redundancy. DACSR is a private line service that allows customers to deploy redundant private line connectivity or specify routing paths on circuit connections. Enterprises can also use Global Crossing IP VPN Service for data backup or carrier diverse enterprise voice services solutions. "The key to a robust business continuity solution is to provide true end- to-end diversity by incorporating the right technology to minimize or eliminate network vulnerability," said Brian Finkelstein, CEO of Winstar Communications, L.L.C. "This offer provides a highly reliable diverse local route in the form of fixed wireless broadband." All of Global Crossing's voice and data services are delivered via its worldwide IP network, which provides connectivity to 200 cities in more than 27 countries. Global Crossing's Tier 1 IP backbone leverages a single autonomous system number with MPLS traffic engineering to deliver the minimum number of hops, for the fastest transmission speeds worldwide. IDT Corporation, through its IDT Telecom, Inc. subsidiary, is a facilities-based, multinational carrier that provides a broad range of telecommunications services to its retail and wholesale customers worldwide. IDT Telecom, by means of its own national telecommunications backbone and fiber optic network infrastructure, provides its customers with integrated and competitively priced international and domestic long distance telephony and prepaid calling cards. Winstar Communications, L.L.C. is a facilities-based, national carrier offering voice, data, Internet and private line telecommunications services to retail, wholesale and government customers nationally. IDT Solutions services are provided over a unique hybrid fiber and wireless network that delivers connectivity to thousands of buildings throughout major U.S. markets serving businesses and government agencies. IDT Solutions' network services feature proven technology, reliability, diversity and security. The US government has approved using the same network to support its Critical Infrastructure Protection and Homeland Defense initiatives. Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. On November 18, 2002, Asia Global Crossing Ltd., a majority-owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. Please visit http://www.globalcrossing.comfor more information about Global Crossing. GLOBAL CROSSING: Launches Business Continuity Solutions Program --------------------------------------------------------------- Global Crossing announced a program that enables enterprises worldwide to create an ongoing business continuity strategy with the flexibility of designing tailored contingency plans in the event of unforeseen network outages. The program is designed to achieve service diversity and redundancy, backup and restoration of customers' access to key critical voice and data applications, and provide mobility tools, such as remote access, in the event of a service interruption or crisis. Since continuous network operation is critical, the program enforces the need for strong partnerships between carrier and customer in ongoing contingency planning. "This program is ideal for enterprises that want to take a holistic, proactive approach to insuring business continuity," said Anthony Christie, Global Crossing's senior vice president for offer and product management. "Using our innovative voice and data solutions, we help customers assess vulnerabilities and risks and implement appropriate countermeasures." The business continuity program leverages Global Crossing's expertise in designing integrated global network-based voice and data solutions built on a fully redundant, self-healing global network infrastructure. "Having constructed and maintained the world's first global IP-based fiber-optic network, Global Crossing is uniquely positioned to provide enterprises with leading end-to- end business continuity solutions," Christie added. Global Crossing's business continuity solutions are supported by a global service delivery model, which includes dedicated 24/7 customer service from network operations centers, call centers worldwide, streamlined ordering and service provisioning, and managed service capabilities that provide network monitoring and management backed by global service level agreements. "Business continuity has become an issue of the highest importance to IT managers as corporations comply with increasingly strict legislative and regulatory requirements for un-interrupted operations," stated Eileen Eastman, vice president of business communications services & strategies at The Yankee Group. "Global Crossing has configured a business continuity offer that provides a back-up solution which leverages their unique facilities-based network on a global scale." The Global Crossing business continuity program consists of the following voice and data services: Service Diversity and Redundancy Tools -- Diversity and Customer Specified Routing DACSR is a private line service that allows customers to deploy redundant connectivity or specify alternative routing paths on circuit connections globally. It is ideal for customers whose business needs require continuous circuit connectivity, especially in environments threatened by outage risks from natural disasters or other disturbances, or to provide redundant routing that further ensures uninterrupted mission-critical data flow. With the option to specify routing paths, customers can avoid outage risks in a particular geographic area. -- Service Management System Emergency ReRoute SMS Emergency ReRoute is an easy-to-use, powerful feature that allows the customer to create customized specifications when preparing for a crisis and take appropriate action. The customer can choose from nine plans to re-route toll-free voice traffic between two or more carriers in real time. Re-routing is performed with a toll-free call and touchtone phone using a simple command menu. The service is ideal for large enterprises using toll-free service for mission-critical applications and redundancy, disaster recovery, and diversity requirements. Customers can create a contingency plan based on multiple disaster scenarios by simply dialing a toll-free number from any touch-tone phone. When combined with other toll-free features, such as enhanced routing, the service provides enterprises with the ability to optimize and balance toll-free voice traffic between call centers or carriers as a key component of contingency planning. Backup and Service Restoration Tools -- Disaster Recovery Service for Trader Voice Trader voice is a private line voice service that provides reliable, desk- to-desk "ring-down" connections between financial trading companies. A ring- down is a private line-based phone link between two traders requiring a constant, open phone connection. Global Crossing recently introduced disaster recovery service for trader voice, which is designed to define one or multiple site recovery plans and to meet business-critical uptime requirements of the financial trading industry. It enables customers to rapidly restore their trading lines to a pre- determined back-up location should an outage at a primary trading location occur. Service recovery time is fast, reliable, and backed by a four-hour maximum SLA, with typical recovery times expected to be two hours or less. -- Fixed Wireless Service Typical business continuity planning includes data diversity planning between two or more carriers as in the business continuity agreement between Global Crossing and Winstar Communications, L.L.C.(R) -- an IDT Solutions company -- which was also announced today. By combining leading data services such as Global Crossing's IP VPN Service(TM) with Winstar's fixed wireless network, the combined solution offers true technology diversity in the event of network outages or service interruptions. Problems, however, can still occur if multiple carriers share common interface points, making enterprises equally vulnerable to the same potential disaster. This problem can be avoided by having a backup plan in which traffic is transmitted wirelessly. Transmission speeds up to OC-3 are delivered over Winstar Communications' fixed wireless network. -- IP VPN Service(TM) Global Crossing's IP VPN Service(TM) can be deployed to provide global enterprises with the technology redundancy and security of a fully provisioned, alternate network with unprecedented flexibility as a reliable, secure backup to primary wide area network connections. With no committed bandwidth costs, customers only pay for the bandwidth used. No unique customer premise equipment or additional staffing resources are required, making this an ideal backup alternative. Mobility Tools If workers who telecommute or travel cannot access their network, enterprises can suffer significant delays in their business. Using Global Crossing's mobility tools, enterprise customers gain access to secure, remotely accessible tools, particularly in times when travel plans are interrupted. Global Crossing's Remote Access Service as well as its complete suite of audio, video and Web- based conferencing services help mobile and remote workers stay connected. -- Global Crossing Remote Access Service Whether traveling across the country, working on the other side of the world, or simply telecommuting from home, remote users can use Global Crossing's Remote Access Service to access a connection that establishes a secure tunnel across the Internet to take them to work on their network. Regardless of the situation, employees may access their private networks from home or hotels when travel is restricted or offices are closed down. Global Crossing RAS works with any frame relay or IP VPN service from Global Crossing or any other carrier. -- Global Crossing Conferencing Services Ready-Access(R) Service, Global Crossing's on-demand audio conferencing service, enables users to establish instant toll-free conference calls to hold emergency conference calls that keep associates connected and productive during times of business interruptions. In addition, Global Crossing's videoconferencing service eliminates the time and expense of travel for meetings and group presentations during times that travel is restricted. Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. On November 18, 2002, Asia Global Crossing Ltd., a majority-owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. Please visit http://www.globalcrossing.comfor more information about Global Crossing. GLOBAL CROSSING: Wants Court Approval of $100MM DIP Financing ------------------------------------------------------------- To recall, on August 9, 2002, the Court approved the Purchase Agreement among Global Crossing Ltd., Global Crossing Holdings Ltd., the Joint Provisional Liquidators, Singapore Technologies Telemedia Pte Ltd. and Hutchison Telecommunications Limited. Pursuant to the Purchase Agreement, the Debtors were required to file a plan of reorganization to implement the transactions contemplated by the Purchase Agreement. The Debtors' business plan and cash flow projections were based on the assumption that the Effective Date would occur some time in the first two quarters of 2003. On the Effective Date, the Debtors will receive an equity investment equal to $250,000,000 and anticipate arranging a working capital facility for up to $150,000,000 to support their business operations. The Debtors have had extensive discussions and negotiations with General Electric Capital Corporation and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services, Inc. -- the Proposed Lenders -- in connection with the proposed Working Capital Facility. On April 14, 2003, the Debtors obtained the Court's authority to enter into a commitment letter for the Working Capital Facility on certain terms and conditions and to pay related fees and expenses to the Proposed Lenders. Since that time, the Proposed Lenders have completed extensive diligence with respect to the Debtors' receivables and other assets in anticipation of providing the Working Capital Facility. Michael F. Walsh, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that due to a delay in obtaining regulatory approval for the investment by the Investors, Hutchison terminated its obligations in accordance with the provisions of the Purchase Agreement. At the same time, ST Telemedia exercised its rights under the Purchase Agreement to take over the entire investment. However, the increase in ST Telemedia ownership of the restructured Debtors to 61.5% required restarting certain aspects of the regulatory approval process. The Debtors now anticipate receiving regulatory approval some time in the third quarter or early fourth quarter of 2003. Mr. Walsh notes that the delay in the getting the regulatory approvals affected the Debtors' projections as: (a) The additional time in Chapter 11 will increase the administrative costs associated with the Chapter 11 cases themselves, including the continued payment of professional fees; (b) The delay interfered with the Debtors' marketing plan and the willingness of customers to renew existing contracts and enter into new agreements for the purchase of telecommunications services from the Debtors; (c) The Debtors' working capital position has been restricted during the continuance of the Chapter 11 cases due to unfavorable payable terms required from its suppliers; and (d) The continuation of the Chapter 11 cases delayed the receipt of additional liquidity from the ST Telemedia equity investment and implementation of the Working Capital Facility. Hence, the Debtors have revised their near-term business plan and projections to conserve their existing cash through the balance of the expected regulatory process. The Debtors are confident that their existing liquidity is more than sufficient for that purpose. However, the Debtors believe that it is prudent to implement postpetition financing to provide a cushion to protect against unexpected delays or an economic downturn. In the unlikely event that the Debtors are unable to obtain regulatory approval for the investment by ST Telemedia, they will implement alternative restructuring strategies, including discussions with other potential investors. However, Mr. Walsh points out that this event would further delay the Debtors' emergence from Chapter 11. The proposed postpetition financing would provide additional liquidity for the Debtors' business operations in that event. Mr. Walsh informs Judge Gerber that the Debtors received a proposal letter, dated July 25, 2003, from the prospective lenders for the Working Capital Facility, outlining the terms under which they would consider providing postpetition financing -- the Proposal Letter. To expedite the postpetition financing, the Debtors propose to obtain Court approval of the basic terms of the financing as stated in the Proposal Letter. Accordingly, the Debtors seek Judge Gerber's consent of: (i) the postpetition financing on the terms provided in the Proposal Letter, including approval of the Proposal Letter and payment of commitment and other fees and expenses upon execution of a commitment letter; and (ii) certain Documentation Procedures. The Proposed Letter provides: A. Borrowers GCL and certain of its U.S. subsidiaries who are Debtors in these cases. B. Guarantors All wholly owned domestic subsidiaries of the Borrowers and certain foreign subsidiaries of the Borrowers, to the extent legally feasible in their jurisdictions, all of whom are Debtors in these Chapter 11 cases. C. Agents GE Capital as Administrative Agent, Documentation Agent and Collateral Agent, and Merrill Lynch as Syndication Agent. D. Lenders GE Capital, Merrill Lynch, and other lenders acceptable to the Agents. E. Arrangers GECC Capital Markets Group, Inc. and Merrill Lynch. F. Amount Up to $100,000,000, including a Letter of Credit Sub-facility of up to $10,000,000. F. Term The earlier of 12 months or the Effective Date. G. Availability The lesser of (i) $100,000,000, or (ii) the sum of (a) up to 85% of the Borrowers' eligible billed accounts receivable and (b) up to 40% of eligible unbilled accounts receivable, less reserves, including a dilution reserve to be determined based upon historical levels, less, in each of section (i) and (ii), $25,000,000 and an up to $7,500,000 carve-out for certain unpaid professional fees and other administrative expenses of Borrowers in the Chapter 11 cases allowed by the Bankruptcy Court on a final basis and certain unpaid fees and expenses of the JPLs and their advisors, which are approved by the Supreme Court of Bermuda. H. Use of Proceeds For funding working capital and general corporate purposes. I. Interest At the Borrower's option, either (i) absent a default, 1, 2, or 3-month reserve adjusted LIBOR plus the Applicable Margin(s) or (ii) floating at the Index Rate -- higher of Prime or 50 basis points over Fed. Funds -- plus the Applicable Margins. J. Applicable Margins (a) Revolver Index Margin 2.00%; (b) Revolver LIBOR Margin 3.50%; and (c) L/C Margin 3.50%. K. Fees (1) Administrative Fee: $200,000 per annum, payable at closing, for the sole account of GE Capital. If the Agents provide post-Effective Date financing to the Borrowers and the Borrowers enter into the financing prior to December 31, 2003, 25% of the Administrative Fee will be credited towards any administrative fee to be paid thereunder; (2) Commitment Fee: $1,250,000, payable as: (a) if the Agents issue a commitment letter with availability, as of the closing date of at least $75,000,000, net of all reserves: -- $750,000 of the commitment fee will be fully earned, due, payable and non-refundable upon approval of the DIP Facility and issuance of the commitment letter for $100,000,000 on the terms and conditions set forth in the Proposal Letter, and -- $500,000 of which will be fully earned, due, payable and non-refundable upon acceptance of the commitment letter by the Borrowers; or (b) if the Agents issue a commitment letter with availability, as of the closing date, of less than $75,000,000, net of all reserves: -- $375,000 of the commitment fee will be fully earned, due, payable and non-refundable upon approval of the DIP Facility and issuance of the commitment letter for $100,000,000 on the terms and conditions set forth in the Proposal Letter, and -- $875,000 of which will be fully earned, due, payable and non-refundable upon acceptance of the commitment letter by the Borrowers. (3) DIP Closing Fee: $2,500,000 payable at closing, against which would be credited the Commitment Fee. If the Debtors enter into a post-Effective Date facility with the Agents prior to December 31, 2002, any closing fee associated therewith will be credited for the lesser of 25% of the facility closing fee, or $625,000; (4) Letter of Credit Fee: equal to the L/C Margin; (5) Expense Deposit: $250,000, payable within three days of approval of the Proposal Letter by the Bankruptcy Court; (6) Unused commitment fee: (i) 1% per annum, if the daily average used portion of the financing during any month is less than 33 1/3%, (ii) 0.75% per annum, if the daily average used portion of the financing is greater than or equal to 33 1/3% but less than 66 2/3%, and 0.50% per annum, if the daily average used portion of the financing during any month is greater than or equal to 66 2/3% of the total commitment for the DIP Facility, which commitment fee will accrue and be payable monthly in arrears and on the maturity date. L. Default Rates Up to 2% above the rate otherwise applicable. M. Security Fully perfected first priority security interest in all of the existing and after acquired real and personal, tangible and intangible assets of the Borrowers, including without limitation, all cash, with the exception of restricted cash pledged to the Debtors' prepetition lenders consisting of $300,000,000 cash, together with all interest thereon; provided, however, that the restricted cash: (a) will not be pledged, hypothecated or transferred to any third party, (b) will not be used by the Debtors' without the Agents' consent and the cash will be subject to the Agents' liens if, as and when it becomes unrestricted, and (c) must remain restricted until payment in full of the DIP Facility. The Collateral will not include any of the shares of stock of any direct or indirect subsidiary of GCL or any lien or other security interest in approximately $13,000,000 in GCL's bank account maintained at Butterfield Asset Management Limited in Bermuda, together with all interest and earnings thereon. All collateral will be free and clear of other liens, claims, and encumbrances, except for prior encumbrances acceptable to Agents and subject only to a carve-out of up to $7,500,000 for certain unpaid professional fees and other administrative expenses of Borrowers in these Chapter 11 cases allowed by the Court on a final basis and certain unpaid fees and expenses of the JPLs and their advisors. The Guarantors would guarantee the obligations of the Borrowers. The Agents would receive a security interest in all of the assets of each domestic Guarantor. N. Priority All obligations under the DIP Facility are joint and several among the Borrowers and have superpriority over any and all other administrative expenses pursuant to Section 364(c)(1) of the Bankruptcy Code, subject to the carve-out. O. Mandatory Prepayments Customary mandatory prepayment upon disposition of assets and other transactions to be determined. In connection with the Proposal Letter, the Debtors propose to follow these procedures in getting approval of the final loan documentation: -- The Debtors will file the final loan documents and a proposed order approving the postpetition financing and the final documentation with the Court; -- The Debtors will provide notice to all parties on the service list that the filing has occurred and how to obtain printed copies from the Debtors; -- Parties-in-interest will have five business days from the notice to file and serve an objection to the loan documents, which objection will be limited to those matters in the final documentation that are either not specifically referenced in the Proposal Letter or are inconsistent with the Proposal Letter; -- If no objections are filed by the deadline, the Debtors will submit an order to the Court approving the final documentation; and -- If an objection is timely filed, the Court will hear the objection at the next regularly scheduled hearing. Mr. Walsh asserts that the Court should approve the proposed postpetition financing because: (a) based on review of comparable financing facilities in other cases, no potential lender would be willing to provide the Debtors with unsecured financing with respect to the DIP Facility; (b) the terms of the Proposed Letter were negotiated at arm's length between independent third parties, are fair and reasonable and are adequate under the circumstances; (c) it will provide additional liquidity to the Debtors so that they can prosecute their Chapter 11 cases and continue to restructure their businesses in preparation for emergence; (d) the existence of the DIP Facility will enhance the Debtors' ability to obtain beneficial economic terms from suppliers and vendors and help relieve any uncertainty that customers, vendors or suppliers may have about the Debtors' reorganization efforts; and (e) the DIP Facility includes a letter of credit sub-facility for $10,000,000 that allows the Debtors to replace those letters of credit that will expire during the course of these cases. Furthermore, Mr. Walsh asserts that the Documentation Procedures will provide parties-in-interest with sufficient notice of final documentation concerning the DIP Facility. In addition, the Debtors will file all final documentation concerning the DIP Facility with the Court as soon as it is finalized, and provide parties-in-interest with notice of the filing of the final documentation. The Debtors propose to provide parties-in- interest with five business days to review the final documentation and, if appropriate, file an objection. Currently, the Debtors expect to file final documentation with the Court on or before September 5, 2003. If an objection is timely filed, the Debtors propose to have a hearing on September 15, 2003. In the absence of any timely filed objections, the Debtors will present a final order approving the DIP Facility to the Court on September 15, 2003. (Global Crossing Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) HAIGHTS CROSS: S&P Rates 2nd Priority Loan & Sr Notes at B-/CCC+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Haights Cross Communications Inc.'s subsidiary Haights Cross Operating Co.'s $100 million second priority senior secured loan due 2008, and 'CCC+' rating to the company's privately placed, $140 million 11.75% senior notes due 2011. Issue proceeds will be used to refinance HCOC's existing $136.8 million senior secured credit facility and $62.6 million of 14% senior subordinated pay-in-kind notes, and add $14 million to cash balances. White Plains, N.Y.-based HCC is a supplemental education publisher serving the school and library markets. As of June 30, 2003, debt, pro forma for the refinancing, was $240 million, and debt-like preferred stock was $100 million. Standard & Poor's withdrew its ratings on HCC's proposed $80 million senior discount notes due 2013 and HCOC's proposed $260 million senior unsecured notes due 2011, both of which are not being marketed. At the same time, Standard & Poor's affirmed its 'B+' bank loan rating on HCOC and 'B' corporate credit rating on HCC. HCC's $100 million 16% series B senior preferred stock due 2011 is not being currently redeemed, as planned in the prior transaction. The revised refinancing structure will have minimal effect on credit measures as Standard & Poor's treats the series B preferred stock as debt-like. The ratings outlook is stable. "The ratings reflect the company's high debt leverage, recently soft operating performance, and an uncertain near-term outlook for higher EBITDA," said Standard & Poor's credit analyst Hal Diamond. Ratings also consider HCC's portfolio of supplemental educational and library publishing businesses. The lack of intermediate-term debt maturities until the $100 million second priority senior secured loan and $30 million undrawn revolving credit mature in 2008 provide some cushion. Standard & Poor's is concerned that the company may not be able to improve operating performance and generate increasing free cash flow sufficiently in order to service cash dividend payments on the $100 million 16% series B senior preferred stock, which are required beginning March 2005. The failure to pay four consecutive or six quarterly cash dividends would give holders of the preferred stock the right to elect one additional director to HCC's board of directors. HEALTHSOUTH CORP: Makes $117MM Payment for All Past Due Interest ---------------------------------------------------------------- HealthSouth Corporation (OTC Pink Sheets: HLSH), as a result of its improving liquidity from its operations and asset sales, has paid $117 million, representing all past due interest currently owed under the Company's various borrowing agreements. The Company said it currently intends to pay upcoming interest payments. The Company also announced that it has initiated discussions regarding an exchange offer for its 3.25% Convertible Subordinated Debentures which matured on April 1, 2003. A term sheet for the proposed exchange offer was circulated last week to advisors to the holders of the Company's Convertible Subordinated Debentures. The Company owes approximately $344 million in principal to holders of its Convertible Subordinated Debentures. The Company expects the exchange offer to be conditioned upon, among other things, obtaining the requisite consents from its bank lenders and other noteholders. "With these interest payments, we have fulfilled not only a legal but also a moral obligation to our bank lenders and noteholders," said Joel C. Gordon, HealthSouth's Interim Chairman. "We appreciate the time our bank lenders and noteholders have given us to address our financial situation. Thanks to their support and patience, in just five months, we have been able to strengthen and improve our liquidity while protecting and supporting our core clinical and patient operations." "We also believe [Tues]day's announcement, in conjunction with the proposed exchange offer, will help further restore our financial credibility. In turn, we believe this will help to enhance HealthSouth's ability to make operational improvements and implement growth initiatives," concluded Gordon. HealthSouth said that it had $445 million of cash prior to the above interest payments. This balance does not include any proceeds from pending asset sales. Credit Suisse First Boston LLC is serving as financial advisor to HealthSouth. HealthSouth is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations in all 50 states and abroad. HealthSouth can be found on the Web at http://www.healthsouth.com HOUSE2HOME INC: Creditors' Ballots Due by August 25, 2003 --------------------------------------------------------- On June 18, 2003, the U.S. Bankruptcy Court for the Central District of California ruled on the adequacy of the Disclosure Statement prepared by House2Home, Inc. (f/k/a HomeBase, Inc.) and its debtor-affiliates to explain their Fourth Amended Joint Liquidating Chapter 11 Plan. The Bankruptcy Court found that the Disclosure Statement contains the right kind and amount of information that creditors need to make informed decisions whether to accept or reject the Debtors' Plan. Creditors have until 5:00 p.m., Eastern Time, on August 25, 2003, to cast their Ballots. Ballot forms must be delivered, if by U.S. Mail, to the Debtors' Voting Agent: House2Home, Inc. c/o King & Associates Attn: Glenda Presley PO Box 2742 Carefree, AZ 85377 and if by fax, overnight courier, or hand delivery, to: House2Home, Inc. c/o King & Associates Attn: Glenda Presley 7301 E. Sundance Trail Carefree, AZ 85377 Tel: 480-595-0064 Fax: 480-595-2957 A hearing to consider confirmation of the Debtors' Plan will convene on Sept. 24, 2003, at 11:00 a.m., Pacific Time, before the Honorable James N. Barr. House2Home, Inc. stores offer an expansive selection of specialty home decor merchandise across four broad product categories -- outdoor living, indoor living, home decor and accessories, and seasonal goods. The Company filed for chapter 11 protection on November 7, 2001, (Bankr. C.D. Calif. Case No. 01-19244). Oscar Garza, Esq., at Gibson, Dunn & Crutcher represents the Debtor in its liquidating efforts. When the Debtor filed for protection from its creditors, it listed $181,244,162 in assets and $192,961,553 in liabilities. IFCO SYSTEMS: Reports Continued Profitability Improvement for Q2 ---------------------------------------------------------------- IFCO Systems N.V. (Frankfurt:IFE1) reports its second quarter and YTD 2003 results, with the these highlights: -- Continuing revenues grew by 1.2% to $105.5 million for Q2 2003 and by 1.2% to $206.3 million for YTD 2003 compared to comparable 2002 periods. -- Adjusted EBITDA increased by 16.8% to $14.4 million for Q2 2003 and by 20.5% to $27.3 million for YTD 2003 compared to comparable 2002 periods. -- Adjusted EBIT improved by $4.9 million to $6.0 million in Q2 2003 and by $8.6 million to $11.2 million YTD 2003 compared to comparable 2002 periods. -- YTD 2003 US GAAP net result of $3.1 million, or $0.07 income per share. -- YTD 2003 US GAAP operating cash flows increased 104.4% over YTD 2002 to $13.8 million Note: Significant exchange rate volatility has existed since Q1 2002 between the Euro, the U.S. dollar, and the Canadian dollar, which are our primary functional currencies. Accordingly, unless otherwise indicated, any references to Q2 2002 or YTD 2002 figures have been translated to U.S. dollars using applicable 2003 currency exchange rates. Revenues: Continuing revenues, as mentioned above, which exclude granulate sales, grew 1.2% to $105.5 million in Q2 2003 from $104.3 million in Q2 2002. YTD revenues grew 1.2% to $206.3 million from $203.9 million in 2002. Following a new RPC supply agreement (effective April 2002), granulate sales, which were $2.7 million during Q1 2002, are now excluded from the Company's revenues. RPC revenues increased 7.1% to $44.3 million in Q2 2003 from $41.3 million in Q2 2002. YTD revenues increased 2.9% to $86.2 million in 2003 from $83.8 million in 2002. The RPC business segment made approximately 63.4 million and 55.2 million trips during Q2 2003 and Q2 2002, respectively, an increase of 14.9%. While our average trip price has remained nearly unchanged between Q2 02 and Q2 03, our reported revenue growth has lagged our relative trip development due to substantial deferrals of invoiced revenues, in accordance with our revenue recognition policy, as a result of significantly higher invoiced revenues during Q2 03 as compared to Q1 03. These deferred revenues will be recognized as revenue in the subsequent fiscal quarter. YTD trips increased 5.4% to 120.1 million in 2003 from 113.9 million in 2002. The increase in revenues and trips during Q2 2003 are the result of strong development in trip volume in all European markets, while our RPC US trip volume was behind expectations. As a result of the ongoing RPC replacement and upgrade program, our global RPC pool level at June 30, 2003 decreased to 65.9 million RPCs from 66.6 million RPCs at March, 31, 2003. Pallet Services revenues were $56.7 million in Q2 2003 compared to $57.3 million in Q2 2002, a decrease of 1.2%. YTD revenues were $111.3 million in 2003 compared to $110.4 million in 2002, an increase of $0.9 million, or 0.8%. The decrease in revenues were entirely caused by a decline of the company's custom crating business, while the pallet recycling business has grown in line with GDP. The crating business suffered from a depressed demand in the lawn and garden business, which is the primary industry of our custom crating business services. Adjusted EBITDA: Total Adjusted EBITDA (see definition and reconciliation to reported U.S. GAAP results below), increased by 16.8% to $14.4 million in Q2 2003 from $12.3 million in Q2 2002. YTD Adjusted EBITDA increased by 20.5% to $27.3 million in 2003 from $22.7 million in 2002. The related margin as a percentage of continuing revenues increased by 1.8 percentage points to 13.6% in Q2 2003 from 11.8% in Q2 2002 and increased by 2.2 percentage points to 13.3% for YTD 2003 from 11.1% YTD 2002. RPC Adjusted EBITDA increased by 39.4% to $11.1 million in Q2 2003 from $8.0 million in Q2 2002. YTD Adjusted EBITDA increased by 27.2% to $20.4 million in 2003 from $16.1 million in 2002. The related margin as a percentage of revenues grew by 5.8 percentage points to 25.1% in Q2 2003 from 19.3% in Q2 2002 and by 4.5 percentage points to 23.7% for YTD 2003 from 19.2% for YTD 2002. The margin improvements resulted from strong trip volume related economies of scale in Europe, lower operating costs due to further logistics improvements, and continued aggressive management of SG&A costs. Pallet Services Adjusted EBITDA decreased by 10.9% to $4.4 million in Q2 2003 from $4.9 million in Q2 2002. YTD Adjusted EBITDA decreased by 1.2% to $8.8 million in 2003 from $8.9 million in 2002. The related margin as a percentage of revenues also decreased to 7.7% in Q2 2003 (7.9% YTD 2003) from 8.6% in Q2 2002 (8.1% YTD 2002). The reduction of the Adjusted EBITDA was only caused by our custom crating business, due to reduced volume and unusually higher material costs for lumber, while the Adjusted EBITDA in pallet recycling business grew. Gross Profit as a percentage of related revenues increased to 15.8% in Q2 2003 from 12.3% in Q2 2002. YTD gross profit as a percentage of related revenues increased to 15.1% in 2003 from 12.9% in 2002. Selling, general and administrative costs declined to $10.4 million, or 9.9% of revenues in Q2 2003, compared to $11.7 million, or 11.3% of revenues, in Q2 2002. YTD 2003 costs declined to $19.6 million, or 9.5% of revenues, compared to $23.7 million, or 11.6% of revenues, for YTD 2002. These decreases reflect continuing aggressive management of all expenses categories. Results of Discontinued Operations. Two lawsuits have recently been filed against IFCO and certain of our subsidiaries based upon alleged emissions of toxic substances from an industrial container reconditioning facility in Chicago, Illinois, formerly operated by our Chicago subsidiary. The Company has accrued $1.0 million during Q2 03 based on our best current estimate of the legal and other costs which we may be required to pay in defending these lawsuits. While the Company maintains its belief that its environmental insurance policy should be available to address claims under the lawsuits, thus far, the carrier has agreed to defend only certain of our North American holding companies under a reservation of rights. The Company may be exposed to additional costs relating to these lawsuits, which are not currently estimable. Headcount: The Company employed 3,045 personnel in its continuing operations at June 30, 2003, as compared to 3,202 personnel at June 30, 2002. Liquidity and Cash Flows: The Company's cash and cash equivalents decreased to $10.9 million as of June 30, 2003, from $16.9 million as of December 31, 2002. However, the Company has reduced its total debt levels, including capital lease obligations, by approximately $10.3 million during the six months ended June 30, 2003, to $114.1 million. Liquidity, which is defined as cash and cash equivalents on hand plus available borrowings, as of August 8, was $16.1 million. Operating activities provided $13.8 million in cash during the first six months of 2003 compared to $6.8 million during the comparable period in 2002, an improvement of $7.1 million, or 104.4%. While operating cash flow before changes in operating assets and liabilities increased by $11.2 million to $19.7 million during 2003, working capital used a total of approximately $5.8 million in cash during the six months ended June 30, 2003. This increase in operating assets and liabilities for the first half of 2003 is principally the result of increased levels of accounts receivable due to the strong sequential development in our RPC revenues. Net cash used by investing activities was $13.1 million for the first six months of 2003 compared to $29.8 million provided during the comparable period in 2002. This variance was primarily the result of the Company's receipt of $36.8 million in cash from the sale of a discontinued business segment in Q1 2002. Capital expenditures increased 39.1% in 2003 to $13.1 million, compared to $9.4 million in 2002. This increase in capital expenditures is due to the accelerating rollout of the Company's RPC upgrade program in Europe and is in line with management expectations. Net cash used in financing activities was $7.8 million during the first six months of 2003 compared to $29.5 million used in financing activities during the comparable period in 2002. This variance was primarily the result of the paydown of approximately $36.8 million in debt in Q1 02 following the Company's receipt of cash from the sale of a discontinued business segment, offset by significant borrowings earlier in Q1 2002. Karl Pohler, IFCO Systems' CEO, said: "While we have experienced relatively flat revenue development on a group level, we are happy to see continuous improvements in the Company's profitability and are encouraged by the strong demand of our European RPC business. We are confident we will maintain this positive earnings trend during the remainder of 2003." The Second Quarterly Report 2003 will be filed with the Deutsche Borse AG and the SEC on or about August 12, 2003, and will be available at http://www.ifco.deor http://www.ifcosystems.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's withdrew its double-'C' bank loan rating on IFCO Systems N.V.'s $178 million secured bank credit facility. At the same time Standard & Poor's withdrew its corporate credit and subordinated debt ratings on the company, which was lowered to 'D' on March 15, 2002, after IFCO failed to make its interest payment on its 10.625% senior subordinated notes due 2010. INTEGRATED HEALTH: Court Approves Stipulation with Sysco Corp. -------------------------------------------------------------- Integrated Health Services, Inc., and its debtor-affiliates obtained the Court's approval of a Stipulation with Sysco Corporation settling the remaining Sysco prepetition claims. Backgrounder Prior to the Petition Date, Sysco Corporation provided food distribution services to hospitals and skilled nursing facilities operated by the Integrated Health Debtors throughout the country. These services include coordination of the deliveries of foods that the Debtors purchased from third parties and directly from Sysco. On July 27, 2000, the Sysco Entities filed 40 proofs of claim, which asserted $1,159,754.31 in secured claims and $5,845,179.67 in unsecured, non-priority claims. The secured portion of the Claims was premised on the Sysco Entities' alleged reclamation claims against the Debtors. The Debtors and the Sysco Entities resolved the secured/reclamation portion of the Claims in a stipulation approved by the Court on June 6, 2000. Pursuant to the Reclamation Stipulation, the Debtors were required to pay the Sysco Entities $1,216,149.29 in full and complete satisfaction of the secured/reclamation portion of the Sysco Claims. The Debtors and the Claimants agreed to settle the Sysco Entities' remaining prepetition claims rather than bear the costs and risks associated with litigation. Accordingly, the parties agreed that the Sysco Entities will have an allowed, general unsecured claim for $3,387,562.58. Thus, the Debtors ask the Court to approve the Sysco Stipulation settling the remaining Sysco prepetition claims. Pursuant to the Stipulation, except for the Allowed Claims, all other debts or obligations evidenced by the Sysco Claims and the Debtors' schedules, and any and all other prepetition claims that the Sysco Entities may have against the Debtors, are disallowed. The parties have further agreed that all distributions made on account of the Allowed Claims will be made to Sysco Corporation. The Sysco Entities agree that Sysco Corporation will, in turn, make distributions to the Sysco Entities pro rata based on the amount of each Sysco Entities' claim. The Sysco Entities further agree that they will hold the Debtors harmless for any failure on Sysco Corporation's part to distribute any Distributions received from the Debtors. (Integrated Health Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTERPUBLIC GROUP: Second Quarter Net Loss Stands at $13 Million ---------------------------------------------------------------- The Interpublic Group of Companies, Inc. (NYSE:IPG), reported its financial results for the second quarter ended June 30, 2003. Financial Performance -- For the quarter, the company reported a net loss of $13.5 million or $.04 per share. -- Continuing operations generated a loss of $.06 per share, while discontinued operations contributed $.02 per share. -- Restructuring and long-lived asset impairment charges penalized operating earnings by $105.4 million. -- Revenue increased slightly in the quarter including the benefit of currency translation. -- Organic revenue performance improved sequentially in the second quarter, declining 3.0%, compared to a larger decline in the first quarter. -- Domestic organic revenue increased 1.4%, a significant improvement over previous quarters. Debt and Liquidity -- Debt at June 30 was $2.7 billion, compared to $2.95 billion a year earlier and the ratio of debt to total capital continued to decline. -- The sale of NFO was completed July 10. The transaction generated $400 million in cash and equity securities valued at $35.4 million at closing. For reporting purposes, NFO was reclassified as a discontinued operation, and prior periods have been restated accordingly. -- On August 8, the company used part of the proceeds from NFO to repay $142.5 million principal amount of term loans, which had the highest interest rates of all of Interpublic's debt. -- Cash flow from operations and cash generated from improvements in working capital will be used to further reduce debt by the end of 2003. David Bell, Chairman and CEO, The Interpublic Group, commented: "As I have indicated previously, Interpublic is in the early stages of a turnaround. "Our results this quarter hold no surprises. We delivered on our pledge to strengthen the balance sheet and further improve liquidity. The restructuring actions we promised are underway and will yield savings in future quarters. Setting aside restructuring costs and other specified items, the underlying performance of our ongoing operations appears to be stabilizing and we saw encouraging organic growth performance in the United States. We also delivered on our promise to launch a company-wide Organic Growth Initiative and to begin upgrading management talent at a number of our companies. "We continue to believe that the back half of this year and the first six months of 2004 will finally provide a firm benchmark from which to assess Interpublic's future prospects." Revenue grew less than one percent in the second quarter to $1.5 billion. Although many operations continued to experience weak demand for services, revenue comparisons benefited from foreign currency translation. To calculate constant currency results, the company applies the current period translation exchange rate to local currency results for the current and year-earlier periods. On this constant currency basis, operating revenue declined 3.6% in the second quarter. Organic revenue--defined as revenue in constant currency adjusted for acquisitions and dispositions--fell 3.0% in the second quarter. In the United States, reported revenue increased 1.7%, while organic revenue increased 1.4%. In international markets, revenue declined 0.7%. In constant currency, international revenue declined 9.6%, while organic revenue fell 8.1%. Revenue by Discipline Advertising and media revenue increased 1.4% to $970 million in the second quarter. Advertising and media revenue remained flat in the United States at $500 million. In international markets, reported revenue increased 2.8% to $470 million, as the benefit of foreign currency translation masked continuing softness in demand. Marketing services revenue fell 0.8% to $529 million. In the United States, marketing services revenue increased 4.1% to $336 million, while international marketing services revenue fell 8.3% to $193 million. New Business Interpublic's agency brands posted $319 million of net new business in the second quarter. Gross new business wins totaled $1.1 billion, including Capital One, Rainbow Satellite, AG Edwards, L'Oreal Plenitude, Macy's, Symbicort (Astra Zeneca), Dell Computer, Sony PlayStation and the Coffee Growers of Colombia. Losses in the period totaled $778 million, approximately half of which were represented by previously reported account shifts at Abbott Labs, Burger King and Pfizer. Significant wins already announced in the third quarter include Monster.com, Samsung and John Deere. Operating Expenses Salary and related expenses increased 4.7% in the second quarter to $878.4 million, reflecting in part the impact of currency translation. Since year-end 2002, headcount has declined from 46,900 to 44,500. Office and general expenses were also affected by currency translation, increasing 5.4% to $459.6 million. Included in general expenses are higher professional fees related to audit and legal matters. These fees totaled $37.6 million, compared to $22.9 million in the second quarter of 2002. In addition, the company recorded an $11.0 million charge related to the impairment of long-lived assets at its MotorSports division. Including this charge, the MotorSports division reported an operating loss of $21.0 million in the second quarter. Restructuring Initiative During the second quarter of 2003, the company announced that it would undertake restructuring initiatives, including severance and lease terminations. The total amount of pre-tax charges the company expects to incur, over several periods, is up to approximately $200 million. In the second quarter, in connection with this plan, the company recorded a pre-tax restructuring charge of $94.4 million in charges ($61.6 million after tax), of which $88.6 million will be cash. Further actions in this restructuring program will be undertaken in the third and fourth quarters of 2003. The company expects annualized savings from the full restructuring program to be approximately $140 - $150 million. Non-Operating Expenses and Taxes Interest expense increased 25% to $46.1 million in the quarter, reflecting the issuance of $800 million 4.5% convertible notes on March 11, the proceeds of which were used in part to redeem the company's zero-coupon notes on April 4. Higher average cash balances generated interest income of $10.2 million during the period, compared to $8.1 million in the 2002 quarter. Interpublic periodically reviews the carrying value of its equity investments to determine whether the amounts are consistent with market value. In the second quarter review, Interpublic determined that certain equity investments had become impaired, and incurred a non-cash charge of $9.8 million to adjust the carrying value of these assets. The company's tax rate in the second quarter was negatively impacted by restructuring charges, long-lived asset impairment charges and non-deductible equity impairment charges. Debt and Liquidity On June 30, 2003, Interpublic's total debt was $2.7 billion, compared to $2.95 billion a year earlier. Cash and equivalents totaled $700 million on June 30. On July 10, Interpublic received $400 million in cash and equity securities valued at $35.4 million in exchange for the assets of NFO WorldGroup, a market research concern. On August 8th, the Company repaid $142.5 million of principal amount of term loans bearing interest rates of 8% to 10%. In addition to the principal amount paid, the company paid a prepayment penalty of $24.5 million, which will be recorded as a charge in the third quarter. Outlook and Guidance Business conditions remain difficult, particularly in international markets. In the United States, however, client management is increasingly focused on investing in marketing instead of cutting costs. This psychological shift could represent an inflection point which could produce a positive impact on revenue trends within six months. While revenue comparisons improved sequentially in the second quarter, the company's cost structure must be further reduced to generate improved profit margins. Actions in the continuing restructuring program during the third and fourth quarters will contribute to these efforts. As part of its turnaround plan, new management has begun to transform the company's culture, simplify its structure, significantly improve financial systems and re-cast leadership within a number of operating units. The accelerating pace of change relative to these priorities will enhance long-term shareholder value, but entail less short-term clarity and potentially higher costs. In light of this complex set of variables, and a business environment that remains challenging, the company has decided to withdraw previous earnings guidance. Interpublic is one of the world's leading organizations of advertising agencies and marketing services companies. Its four global operating groups are McCann-Erickson WorldGroup, The Partnership, FCB Group and Interpublic Sports and Entertainment Group. Major global brands include Draft, Foote, Cone & Belding Worldwide, Golin/Harris International, Initiative Media, Lowe & Partners Worldwide, McCann-Erickson, Octagon, Universal McCann and Weber Shandwick Worldwide. As reported in Troubled Company Reporter's May 16, 2003 edition, Fitch Ratings downgraded the following debt ratings for The Interpublic Group of Companies, Inc.: senior unsecured debt to 'BB+' from 'BBB-', multi-currency bank credit facility to 'BB+' from 'BBB-', convertible subordinated notes to 'BB-' from 'BB+'. The short-term debt rating is lowered to 'B' from 'F3' and has been withdrawn. The Rating Outlook remains Negative. Approximately $2.7 billion of debt is affected by this action. INVENTRONICS LTD: Reports Improved Second Quarter 2003 Results -------------------------------------------------------------- Inventronics Limited (IVT:TSX), a designer and manufacturer of custom metal enclosures for the communications, electronics and other industries, announced that aggressive cost cutting has helped the Corporation achieve a dramatic reduction in its second- quarter loss, while significantly improving gross margins. Inventronics achieved a $602,000 or 36-per-cent reduction in ongoing fixed costs in the second quarter, compared to the same period a year earlier. The fixed-cost reductions through the first half of 2003 have totaled $1.1 million. Inventronics also achieved $257,000 of additional second-quarter savings through various efficiency initiatives, and coupled with similar gains in the first quarter, the first-half efficiency savings were $490,000. The combined savings from fixed-cost reductions, efficiency gains, and a 16-per-cent reduction in selling and administrative expenses, totalled $859,000 in the second quarter and almost $1.7 million throughout the entire first half. Much of these savings helped Inventronics to almost triple its second-quarter gross margin before depreciation to 17 per cent from six per cent in 2002. Inventronics achieved positive though modest cash flow in the second quarter and EBITDA of $155,000. The second-quarter net loss was reduced to $266,000 (4 cents a share) in 2003 from $3.4 million (50 cents a share) in 2002, and the six-month net loss stands at $757,000 in 2003 compared to $4.2 million in 2002. Second-quarter sales increased eight per cent to $3,531,000 compared to $3,281,000 in the first quarter of 2003. The Corporation's six-month sales of $6,812,000 in 2003 were still well below the $14,581,000 achieved in 2002 as a result of continued spending constraints in the telecom sector, and further delays in capital projects in other industries that Inventronics has identified through its customer and market diversification efforts. More than $3.4 million of the reduction in sales resulted from a contract alteration with the Corporation's principal customer, wherein the customer now direct-purchases components instead of Inventronics purchasing and invoicing for these items at no net margin. The rapid strengthening of the Canadian dollar against the U.S. currency has offset some of the significant margin improvements that Inventronics achieved in 2003. Most of the Corporation's revenues are denominated in U.S. funds and as a result, currency conversion cost Inventronics approximately $159,000 in the second quarter and $277,000 through the first half of the year. "We are pleased with the impact that Inventronics' restructuring and cost-reduction programs are having on the Corporation's operating results," said Dan Stearne, President and CEO. "The programs have significantly reduced our losses and brought us much closer to being profitable again," Mr. Stearne added. "However, despite some encouraging signs to the contrary, spending in the telecommunications sector remains depressed. This highlights the importance for Inventronics to remain focused upon tight cost controls and the generation of more sales outside the telecom sector." At June 30, 2003, the Company's balance sheet shows that its working capital has narrowed to about $756,000 from about $1.3 million six months ago. Likewise, the Company's net capital is down to $4.6 million from $5.4 million six months ago. Inventronics Limited designs and manufactures custom metal enclosures and related products for a growing variety of customers in the telecommunications, electronics, cable television, electric utilities, computer services and energy resources industries throughout North America. Inventronics' enclosures are sophisticated products that address a variety of customer concerns including security, protection from the outside environment, ventilation and thermal management, noise abatement, aesthetics and styling, electromagnetic compatibility, seismic compatibility and component integration. The Corporation owns its ISO 9001- registered production facility in Brandon, Manitoba, and has sales and corporate offices in Calgary, Alberta. Shares of Inventronics trade on the Toronto Stock Exchange under the symbol "IVT." For more information about the Corporation, its products and its services, go to http://www.inventronics.com Inventronics' 2003 second-quarter results will be filed with SEDAR at http://www.sedar.com/by August 29, 2003. J.C. PENNEY: Red Ink Continued to Flow in Second Quarter 2003 ------------------------------------------------------------- J. C. Penney Company, Inc., (NYSE:JCP) reported a second quarter loss of $0.02 per share compared with a loss of $0.05 per share in last year's quarter. Allen Questrom, Chairman and Chief Executive Officer said, "I am pleased with the rebound in Department Stores and encouraged by the turnaround in Catalog/Internet sales. Eckerd's sales and operating profits were clearly disappointing. As we begin the second half, we anticipate benefits from a more favorable consumer environment supported by the positive impacts that the tax package will have on our customers. We believe our Department Store and Catalog/Internet business will continue to improve in the second half, beginning with the back-to-school selling season. This improvement reflects greater experience working with our centralized business model, and delivering a more compelling value to both Department Store and Catalog/Internet customers. At Eckerd, we are making changes to improve the business, but recognize that it will take time for these changes to register with our customers. Accordingly, Eckerd's operating profits are likely to be below last year's level in the third quarter, and about equal to last year's profit in the fourth quarter. On a consolidated basis, we currently expect third quarter earnings to be in the range of $0.25 to $0.30 per share, and the full year to be in the range of $1.25 to $1.35 per share." Department Stores and Catalog Second quarter LIFO operating profit more than doubled to $51 million compared with $22 million last year, an increase of 80 basis points as a percent of sales. Comparable department store sales increased 2.1 percent in a challenging retail environment. All merchandise divisions had comparable store sales increases. Catalog/Internet sales increased 3.9 percent, representing the first quarterly sales gain in three years. Sales benefited from improved print media, including a positive early customer response to the Fall/Winter Big Book. In addition, Internet sales continue to experience strong growth, increasing by more than 60 percent during the quarter and 40 percent year-to-date. Department Stores and Catalog gross margin decreased by 20 basis points as a percent of sales, reflecting a more aggressive merchandise clearance strategy. Comparable department store inventory levels increased about three percent over last year, and are balanced and in line with current sales expectations. SG&A expense dollars were $22 million lower than last year, and were leveraged, improving by 100 basis points as a percent of sales. The decrease related primarily to salary savings and lower Catalog expenses that more than offset transition costs for the new store distribution network and higher non-cash pension expense. Eckerd Drugstores LIFO operating profit was $54 million in this year's second quarter compared with $73 million last year. Operating profit margin decreased by 60 basis points as a percent of sales. Total drugstore sales increased 2.3 percent. Comparable store sales decreased 0.8 percent during the quarter, with pharmacy sales increasing 1.7 percent and non-pharmacy, or front-end, sales decreasing 6.0 percent. Pharmacy sales were negatively impacted by approximately 430 basis points from the effects of higher generic dispensing rates and other changes in branded drugs. The best performing front-end categories for the quarter were seasonal items and over-the-counter medications, while photo and cigarette sales declined significantly. Eckerd's sales reflect increased competitor store openings, particularly in Florida and south Texas, coupled with execution issues. These issues are being addressed through merchandise and marketing changes, as well as a more competitive store opening program beginning in 2003. Gross margin for the quarter decreased by 40 basis points as a percent of sales. Gross margin for the quarter includes a LIFO charge of $11 million compared with a charge of $9 million last year. SG&A expenses increased 3.2 percent and were not leveraged as a percent of sales. Other Unallocated Other unallocated in this year's second quarter was a net credit of $11 million. The credit includes $30 million of real estate gains on the sale of closed department store facilities and the charges include $24 million of previously announced Catalog restructuring and department store closings. Financial Condition The Company's financial condition and liquidity remain strong. At the end of the quarter, cash investments were approximately $2.6 billion and represented in excess of 40 percent of long-term debt. Capital expenditures are currently expected to be at the lower end of previous guidance of $900 million to $1.1 billion. Full year free cash flow is expected to be in line with previous guidance. J. C. Penney Corporation, Inc., the wholly-owned operating subsidiary of the Company, is one of America's largest department store, drugstore, catalog, and e-commerce retailers, employing approximately 230,000 associates. As of July 26, 2003, it operated 1,040 JCPenney department stores throughout the United States, Puerto Rico, and Mexico, and 56 Renner department stores in Brazil. Eckerd Corporation operated 2,710 drugstores throughout the Southeast, Sunbelt, and Northeast regions of the U.S. JCPenney Catalog, including e-commerce, is the nation's largest catalog merchant of general merchandise. J. C. Penney Corporation, Inc. is a contributor to JCPenney Afterschool Fund, a charitable organization committed to providing children with high quality after school programs to help them reach their full potential. As reported in Troubled Company Reporter's July 3, 2003 edition, Fitch Ratings affirmed the 'BB+' rating on J. C. Penney Co., Inc.'s $1.5 billion secured bank facility, the 'BB' rating on Penney's senior unsecured notes, and the 'B+' rating on the company's convertible subordinated notes. In addition, the 'B' commercial paper rating of J.C. Penney Funding Corp., was withdrawn. The Rating Outlook was revised to Negative from Stable. Approximately $5.8 billion of debt is affected by the rating actions. JH WHITNEY: Fitch Further Junks Class D Sec. Notes Rating to C -------------------------------------------------------------- Fitch Ratings downgrades the class D junior subordinated participating secured notes issued by J.H. Whitney Market Value Fund, L.P., a market value collateralized debt obligation. At this time Fitch also affirms the ratings for the class B notes and the class C notes. These rating actions are effective immediately. -- $38,900,000 class B first senior subordinated secured notes affirmed at 'BBB'; -- $25,000,000 class C second senior subordinated secured notes affirmed at 'B'; -- $25,000,000 class D junior subordinated participating secured notes downgraded to 'C' from 'CC'. Fitch previously downgraded the class D notes on Feb. 25, 2002 from their original rating of 'B' to 'CCC+'. The downgrade was due to a significant decline in the market value of the fund's assets, which caused J.H. Whitney Market Value Fund, L.P. (the fund) to fail its class D overcollateralization test on Jan. 18, 2002. Since the fund was unable to cure the original failure of the class D OC test within the 10 business day grace period, the trustee provided a notice to note holders on March 11, 2002 that the fund was formally in default. Due to the ongoing stress on the market prices of the portfolio assets, the fund began to fail its class C OC test on July 12, 2002. On Sept. 10, 2002 Fitch downgraded the class D notes from to 'CC' from 'CCC+', as well as class C notes to 'B' from 'BB'. At the July 25, 2003 measurement date, the latest valuation report available, the class C OC test failed by a margin of $1,500,000, while the class D OC test failed by a margin of $22,000,000. The fund also continues to fail its minimum net worth test as of the latest applicable measurement date, March 31, 2003. Given that the fund has an ongoing default, none of the notes below the senior most class may receive current interest payments. Instead, proceeds are used to pay down the senior most notes outstanding. As of April 2003, the class A notes were paid down completely. The class B notes are currently the controlling class, receiving all proceeds to pay current interest and principal. At this time, all interest payments to the class C, D and E notes are blocked. These notes will not receive any current interest unless the controlling class waives the event of default. Additionally, the event of default gives the controlling class the right to give the trustee notice of acceleration that would cause a liquidation of all the portfolio assets, and the notes to become due and payable. The rating action at this time reflects the less liquid nature of the fund's assets due to the ongoing redemption of the notes and their inability to support the class D notes at their current market value. As of the July 25, 2003 valuation date, the market value of the assets was approximately $75,800,000 and the total amount of rate notes outstanding through the class D notes was $88,900,000. Whitney Market Value Management Co. continues to review alternatives with the controlling class to look for opportunities to maximize the value of the assets. Fitch originally rated the liabilities of J.H. Whitney Market Value Fund, L.P. on March 31, 1999. KOSA B.V.: S&P Keeps Watch over Likely DuPont Interiors Merger -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB+' corporate credit rating on polyester producer KoSa B.V. on CreditWatch with developing implications. Houston, Texas-based KoSa has about $664 million of total debt outstanding. "The CreditWatch placement follows the announcement that KoSa's parent, Koch Industries Inc. has entered into exclusive negotiations with E.I. DuPont de Nemours & Co. regarding the possible purchase of DuPont's DuPont Textiles & Interiors (DTI) business," said Standard & Poor's credit analyst Franco DiMartino. DTI, with about $6.5 billion in sales, consists of DuPont's nylon fiber, polyester fiber and Lycra brand fiber businesses. In addition, Koch subsequently revealed that it could combine DTI with its KoSa B.V. polyester business, although the structure of any such combination and related financing plan have not been announced. "Accordingly," said Mr. DiMartino, "the ratings on KoSa could be lowered, affirmed, or raised depending on the financial structure of the proposed transaction, as well as following a full assessment of the business profile of the combined entity." KoSa, with about $2.5 billion in annual sales, is one of the world's largest polyester producers with operations in polyethylene terephthalate packaging resins, technical fibers, and polyester intermediates. While competition in many of these segments is intense and often based primarily on price, KoSa benefits from diversity across polyester products, global scale and vertical integration. Standard and Poor's said that it will continue to monitor developments and will resolve the CreditWatch listing as more information is made available. LEAP WIRELESS: Court Fixes September 2 Supplemental Bar Date ------------------------------------------------------------ Pursuant to Rule 3003(c) of the Federal Rules of Bankruptcy Procedure, Leap Wireless International Inc., and its debtor- affiliates ask the Court to set a supplemental bar date -- a deadline by which all known and unknown persons who didn't receive actual notice of the first bar date must file their claims. According to Robert A. Klyman, Esq., at Latham & Watkins, in Los Angeles, California, subsequent to filing the Schedules and Statements of Financial Affairs, the Debtors discovered the existence of Possible Claimants and that the Debtors had not mailed the Notice to that small group. The Debtors ask the Court to fix a supplemental Bar Date for the Possible Claimants that is 30 days after the service of the Supplemental Bar Date Notice. This will be the final date and time by which the Possible Claimants must file a proof of claim in these cases. The proposed Supplemental Bar Date does not extend the Bar Date for any other creditors. Mr. Klyman asserts that the circumstances of these cases justify fixing the Supplemental Bar Date. The Debtors and their estates need to be in position to determine the amount of claims asserted against them as soon as possible. In addition, the Debtors participated in intense negotiations with the Informal Vendor Debt Committee and the Official Unsecured Creditors' Committee to prepare a pre-negotiated plan of reorganization. The Debtors have amended Plan and disclosure statement accompanying the Plan. The proposed Supplemental Bar Date will provide the Debtors with an opportunity prior to Plan confirmation to review all claims and provide notice to any objection to the Potential Claimants, Mr. Klyman maintains. * * * Judge Adler requires each of the Possible Claimants holding a Claim against any of the Debtors to file, with respect to each of the Debtors against which a Claim is asserted, a separate, completed and executed a proof of claim on account of any and all Claims the Potential Claimant holds or wishes to assert against each Debtor or its property on or before the Supplemental Bar Date, which is 35 days from the entry of this Order on the Possible Claimants or September 2, 2003. (Leap Wireless Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392- 0900) LORAL SPACE: Gets Okay to Hire Key Consulting for Financial Advice ------------------------------------------------------------------ Loral Space & Communications Ltd., and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Southern District of New York to employ Key Consulting, LLC as their financial consultants in connection with the commencement and prosecution of their chapter 11 cases. The professionals at Key Consulting are experienced financial consultants, with extensive background in the areas of financial planning and reporting and the design of financial instruments. In this retention, the Debtors expect Key Consulting to: a. assist Greenhill in connection with the development of a range of strategic alternatives, including, specifically, appropriate debt reduction strategies and contingency planning; b. assist the Debtors in developing materials necessary to analyze information related to the generation of revenues and profits and cash flows among the Debtors' various business units; c. assist the Debtors in identifying and assessing the significant assumptions and business and financial strategies underlying the budget and financial projections in the Debtors' business plan; d. update the Debtors' lenders and the lenders' advisor as to the progress of the development of the Debtors' business plan and of any material developments in the Debtors' business or financial condition; e. assist the Debtors in the formulation of the scope and form of items to be included in the Debtors' additional periodic reports that may be required pursuant to any amendments to the Debtors' bank agreements; f. assist the Debtors in negotiations with other parties in interest, including the Debtors' current lenders; g. assist the Debtors in assessing methods and systems for developing budgets, collecting and presenting financial information and preparing financial and other projections; h. attend and participate in hearings and meetings on matters within the scope of the services to be performed under the Key Agreement; and i. provide advice and recommendations with respect to other related matters as the Debtors or their professionals may request from time to time and as may be agreed to by Key. Key Consulting, at the request of the Debtors and as agreed to by Key, may provide additional financial consulting services deemed appropriate and necessary to the benefit of the Debtors' estates. Key has agreed to provide services to the Debtors at the rate of $5,000 per day or $500 per hour for partial days and for reimbursement of all reasonable and necessary expenses. Loral Space & Communications Ltd., headquartered in New York, New York, and together with its affiliates, is one of the world's leading satellite communications companies with substantial activities in satellite-based communications services and satellite manufacturing. The Company filed for chapter 11 protection on July 15, 2003 (Bankr. S.D.N.Y. Case No. 03-41710). Stephen Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $2,654,000,000 in total assets and $3,061,000,000 in total debts. M/I SCHOTTENSTEIN: Board Declares Fourth Quarter Cash Dividend -------------------------------------------------------------- M/I Schottenstein Homes, Inc.'s (NYSE: MHO) board of directors declared a cash dividend of $0.025 per share for the fourth quarter of 2003. The dividend is payable on October 23, 2003 to stockholders of record on October 1, 2003. M/I Schottenstein Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 53,000 homes. The Company's homes are marketed and sold under the trade names M/I Homes and Showcase Homes. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Tampa, Orlando and Palm Beach County, Florida; Charlotte and Raleigh, North Carolina; Virginia and Maryland. As reported in Troubled Company Reporter's June 11, 2003 edition, Fitch Ratings affirmed the implied rating of 'BB' for the senior unsecured debt of M/I Schottenstein Homes, Inc. The rating applied to the unsecured bank credit facility. The 'B+' rating for the company's senior subordinated notes was affirmed. The Rating Outlook is Stable. The ratings reflect MHO's healthy financial structure, solid coverages and strong operating performance consistent with the current point in the housing cycle. The company's debt-to-EBITDA of 0.6 times and debt-to-capital ratio of approximately 19% are considered conservative for the rating and enhance financial flexibility in the event of an economic downturn. The rating incorporates the potential for leverage to rise from current levels. MASTEC INC: Reports Above-Estimates Second Quarter 2003 Earnings ---------------------------------------------------------------- MasTec, Inc. (NYSE: MTZ) (S&P, BB Corporate Credit Rating, Negative) announced results for the second quarter of 2003. For the quarter ended June 30, 2003, the Company had revenue of $209.1 million and a net income of $2.8 million, compared with revenue of $213.0 million and net income of $1.8 million for the comparable quarter of 2002. Net income per share was $0.06 and $0.04 for the quarters ended June 30, 2003 and 2002, respectively. Austin J. Shanfelter, President and CEO stated, "We are pleased with the second quarter earnings performance. These results represent solid evidence, as can be seen in our improving margins and growth, that our restructuring activities in the fourth quarter of 2002 were successful. A visible trend has emerged that has set the stage for increasing profitability and cash flow." For the third quarter of 2003, MasTec expects revenue to be from $230 million to $245 million with earnings per share between $0.11 and $0.13. Included in the third quarter earnings estimate is a one time gain, net of costs to close, on the sale of certain non- operating international assets in the amount of $0.02 per share. Looking forward to the entire year, we expect revenue ranging from $825 to $870 million and EPS ranging from $0.22 to $0.28 per share. Additionally, the Company expects an EBITDA margin of 10% by year end. At the end of the second quarter of 2003, the Company had no outstanding draws on its credit facility and was in full compliance with all of the respective covenants. Cash was used to fund MasTec's ongoing expansion efforts with several customers. "We are very encouraged that the strong top line growth was supported by cash flows from operations," said Donald P. Weinstein, MasTec's Executive Vice President and CFO. MIRANT CORP: Turning to Blackstone Group for Financial Advice ------------------------------------------------------------- In October 2002, the Mirant Debtors retained Blackstone Group LP to assist them in the evaluation of strategic alternatives and to render financial advisory services in connection with their restructuring efforts. Since its retention, Blackstone has provided financial advisory services in connection with the commencement of the Debtors' Chapter 11 cases. The Debtors expect that Blackstone, in its role as financial advisor, will continue to provide services to them in connection with their restructuring efforts. Accordingly, pursuant to Sections 327(a), 328(a) and 504 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure, the Debtors seek the Court's authority to employ Blackstone as financial advisors nunc pro tunc to July 14, 2003. Ian T. Peck, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates that as a result of its prior and current representation of the Debtors, Blackstone has the necessary background to deal effectively and efficiently with many of the potential financial issues and problems that may arise in the context of the Debtors' Chapter 11 cases. Moreover, Blackstone is uniquely qualified to advise the Debtors in connection with maximizing the Debtors' business enterprise value in these Chapter 11 cases, and its professionals have extensive experience in matters involving complex financial restructurings. Blackstone is a prominent financial and restructuring advisor, with a reputation for creativity in complex situations. Blackstone and its principals have been involved as restructuring/bankruptcy advisors to a diverse group of debtors, creditors, bondholders, and creditors' committees in the Chapter 11 cases of many companies, including, among numerous others, Enron Corporation, Williams Communications Corporation, Flag Telecom Holdings, LTD., Exide Technologies, Fleming Companies, Inc., The Singer Company, N.V., Texaco, JPS Textile Group. Inc., Alliance Entertainment, Barney's Inc., Levitz Furniture, Inc., and R.H. Macy & Co., Inc. In addition, Blackstone has extensive experience working on cases involving financially troubled foreign companies and companies with foreign exposures, including, Dow Corning Corp. (Asia/Europe), American Banknote Corp. (Brazil), Guandong Enterprises (China), and Iridium (Asia/Europe/Africa/South America). Pursuant to an agreement dated June 1, 2003, Blackstone agreed to: (a) assist in the evaluation of the Debtors' businesses, operations and prospects, including evaluation of proposed divestitures and other strategic transactions; (b) assist in the development, review and analysis of the Debtors' long-term business plan and related financial projections, including the development of a detailed financial model of the Debtors and the assessment of the restructuring objectives developed by the Debtors; (c) assist in the development of financial data and presentations to the Debtors' Boards of Directors -- or committees thereof -- various creditors, any official committees formed in a Chapter 11 proceeding, and other third parties; (d) analyze the Debtors' financial liquidity and evaluate alternatives to improve such liquidity; (e) analyze various restructuring scenarios and the potential impact of these scenarios on the value of the Debtors and the recoveries of those stakeholders impacted by the Chapter 11 proceeding; (f) assist in the development of a restructuring plan and provide strategic advice with regard to restructuring or refinancing the Debtors' obligations; (g) evaluate and assist in the determination of the Debtors' liquidity needs, debt capacity and alternative capital structures; (h) render financial advice to the Debtors and participate in meetings or negotiations among the Debtors and their creditors, suppliers, lessors and other interested parties with respect to any of the transactions contemplated in the Blackstone Agreement; (i) value securities offered by the Debtors in connection with a restructuring and determine a range of values of the Debtors on a going concern basis; (j) advise the Debtors and participate in negotiations with lenders with respect to potential waivers or amendments of various credit facilities; (k) advise the Debtors on the timing, nature and terms of new securities, other consideration and other inducements to be offered to creditors pursuant to the restructuring; (l) assist the Debtors in matters related to the Debtors' proposed DIP financing, and any other financing in these cases, including identifying potential sources of capital, assisting in the due diligence process, and negotiating the terms of any proposed financing, as requested; (m) provide testimony in any Chapter 11 case concerning any of the subjects encompassed by Blackstone's financial advisory services, if appropriate and as required; (n) assist the Debtors and the Debtors' counsel in preparing documentation required in connection with the restructuring; (o) assist the Debtors in the preparation of a liquidation analysis in connection with any proposed plan of reorganization; (p) assist and advise the Debtors concerning the terms, conditions and impact of any transaction; (q) provide advice to and attend meetings of the Board of Directors of the Debtors, and any relevant committees thereof; and (r) provide other advisory services as are customarily provided in connection with the analysis and negotiation of a restructuring as requested and mutually agreed. Tim Coleman, a Senior Managing Director of Blackstone, informs the Court that to the best of his knowledge, the officers and employees of Blackstone do not have any connection with or any interest adverse to the Debtors, their creditors, or any other party-in-interest, or their attorneys and accountants, except as disclosed. Furthermore, Mr. Coleman assures the Court that Blackstone is not and was not an underwriter for any outstanding securities of the Debtors. Thus, Blackstone is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Prior to the Petition Date, Mr. Coleman informs Judge Lynn that Blackstone received from the Debtors payments for fees, expenses and expense deposits amounting to $2,523,120 in the aggregate for services rendered in connection with these Chapter 11 cases and other matters. These amounts have been applied to all outstanding fees and expenses incurred. However, at this juncture, a final reconciliation has not been completed. After the completion of the reconciliation, Blackstone will file a subsequent disclosure with the Court. To the extent Blackstone holds amounts that exceed the amount of fees and expenses incurred to date, Blackstone will hold the amounts as a retainer to be applied against future fees and expenses incurred by Blackstone in these Chapter 11 cases. In connection with its employment, Blackstone will charge the Debtors in accordance with this Fee Structure: (a) A $225,000 monthly non-refundable advisory fee in cash with the first two Monthly Fees payable on the execution of the Blackstone Agreement by both parties and additional installments of the Monthly Fee payable in advance on each monthly anniversary of the Effective Date until the earlier of the completion of the Restructuring or the termination of Blackstone hereunder. Blackstone agrees that if during any period its activity in connection with its retention is de minimis, the Blackstone will reduce the Monthly Fee for the period to reflect the lack of activity; (b) A Restructuring Fee equal to $7,000,000. The Restructuring Fee will be deemed earned when the Company first sends definitive offer documents seeking to refinance, restructure, repurchase, modify or extend in a material respect a substantial portion of its existing credit facilities, existing notes, bonds or debentures, which mature prior to 2006 pursuant to terms approved by the Board of Directors. The Restructuring Fee will be payable upon the consummation of a plan of reorganization; and (c) Reimbursement of all necessary, reasonable and documented third party out-of-pocket expenses incurred during its engagement, including but not limited to, travel and lodging, direct identifiable data processing, word processing and communication charges, courier services, working meals, and other necessary expenditures, payable upon rendition of invoices setting forth in reasonable detail the nature and amount of such expenses. In connection therewith, the Debtors will maintain a $25,000 expense advance for which Blackstone will account upon termination of the Agreement. Subject to certain limitations, the Debtors agreed to indemnify Blackstone against, and reimburse it for reasonable costs and expenses in relation to, any claim in connection with the engagement. The Debtors may terminate the Blackstone Agreement without cause at any time upon seven days' written notice or by Blackstone without cause upon 30 days' written notice. Notwithstanding, any termination will not affect the Debtors' obligations under the Indemnification Agreement and Blackstone will be entitled to the Restructuring Fee in the event that the Restructuring is completed at any time prior to the expiration of 12 full months after the termination of the Agreement by the Debtors without cause or by Blackstone with cause. With respect to a termination by the Company, "cause" will include gross negligence, willful misconduct, or a material breach by Blackstone of the terms of the Blackstone Agreement. (Mirant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) MOBILE COMPUTING: Conv. Debentures Maturity Extended to Monday -------------------------------------------------------------- Mobile Computing Corporation announced that the holders of its convertible debentures have agreed to further extend the maturity date until August 18, 2003 for that portion of the debentures that were originally due August 8, 2003. The Company continues to negotiate definitive agreements and pursue necessary regulatory approvals relating to the previously announced significant restructuring of the Company. The transactions contemplated by the restructuring are subject to shareholder approval and the receipt of all necessary regulatory approvals, including the approval of the Toronto Stock Exchange. The Company intends to seek shareholder approval at an annual and special meeting of shareholders, currently expected to be scheduled for mid September, 2003. Accordingly, there can be no assurance that the proposed restructuring will be completed as proposed or at all. Mobile Computing Corporation -- http://www.mobilecom.com-- is a supplier of wireless information solutions for mobile workers. These systems enable companies to communicate with, monitor and manage the activities of their vehicles and field personnel. MCC solutions enable improved management of the movement and delivery of goods and services, improving productivity and profitability. MCC specializes in delivering fully integrated solutions that link mobile workers with corporate information systems utilizing wireless data communications services. Mobile Computing Corporation trades on the Toronto Stock Exchange under the symbol "MBL" and has approximately 45 million shares outstanding. At December 31, 2002, Mobile Computing's balance sheet shows a total shareholders' equity deficit of about C$7.7 million. MOBILE TOOL INT'L: Proofs of Claim Due by August 29, 2003 --------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware fixes August 29, 2003, as the last day for creditors of Mobile Tool International, Inc., and its debtor-affiliate to file their proofs of claim against the Debtors or be forever barred from asserting their claims. To be timely, Proofs of Claim must be received by the Court- appointed Claims Agent, Delaware Claims Agency, LLC, on or before 4:00 p.m. on Aug. 29. Proof of Claim forms must be sent to: Delaware Claims Agency, LLC, Mobile Tool International, Inc./MTI Insulated Products, Inc. Claims Agent PO Box 515 Wilmington, Delaware 19899 Mobile Tool International, Inc., is an employee owned manufacturer and distributor of equipment, including aerial lifts, digger derricks and pressurization and monitoring systems, for the telecommunications, CATV, electric utility and construction industries. The Company filed for chapter 11 protection on September 30, 2002 (Bankr. Del. Case No. 02-12826). Steven M. Yoder, Esq., and Christopher A. Ward, Esq., at The Bayard Firm represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $65,250,000 in total assets and $46,580,000 in total debts. MOTELS OF AMERICA: Has Until September 17 to File Schedules ----------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois gave Motels of America, LLC an extension of their deadline by which they must file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtor has until September 17, 2003 to file these required documents. Motels of America LLC, headquartered in Des Plaines, Illinois filed its chapter 11 protection on July 10, 2003 (Bankr. N.D. Ill. Case No. 03-29135). Mohsin N. Khambati, Esq., Nathan F. Coco, Esq., and Stephen Selbst, Esq., at McDermott Will & Emery represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million each. NATIONAL STEEL: Seeks Fourth Open-Ended Removal Period Extension ---------------------------------------------------------------- National Steel Corporation and its debtor-affiliates are parties to numerous judicial and administrative proceedings currently pending in various state courts or administrative agencies throughout the United States and the world. Mark A. Berkoff, Esq., at Piper Rudnick, in Chicago, Illinois, relates that the Debtors require additional time to determine which of the state court actions they will remove. Thus, the Debtors ask the Court to extend the period within which they may remove pending actions pursuant to Rule 9027 of the Federal Rules of Bankruptcy Procedure to: -- the Confirmation of their Plan, or in the event the Plan is rejected, until 30 days after the Confirmation Hearing; or -- 30 days after termination of the automatic stay with respect to any particular action to be removed. The Debtors' current deadline to remove actions is September 5, 2003. Because of the number of actions involved and the wide variety of claims, a further extension will afford the Debtors sufficient opportunity to make fully informed decisions concerning the possible removal of actions, protecting their valuable right to economically adjudicate lawsuits. The Debtors attest that their adversaries will not be prejudiced by a further extension because these adversaries may not prosecute the actions absent relief from the automatic stay. (National Steel Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392- 0900) NEPTUNE SOCIETY: Cures Likely Events of Default Under Debentures ---------------------------------------------------------------- The Neptune Society, Inc., paid the remaining $1.8 million balance of the acquisition debt related to its 1999 purchase of the Neptune Society business. The Company satisfied this obligation, in part, from the proceeds of a $1,500,000 debt financing by Capex, LLP, of Denver, Colorado. In connection with the debt financing, the Company also restructured its obligation under the 13% Debentures held by Capex and another debentureholder. This restructuring favorably amended the previous fixed charge coverage ratio obligation and cured certain possible conditions of default under the debentures. The restructured debentures in the aggregate principal amount of $7.4 million are repayable over the upcoming four years, with the Company holding the right to prepay the debentures at any time without penalty. The Company paid a refinancing fee of 600,000 shares and the parties replaced the convertibility rights under the Debentures with warrants granting the lenders the right to acquire the equivalent number of shares (1,666,667) up to July 31, 2008 at a price of $3.00 per share. The number of shares reserved under the warrants may be subject to increase in connection with future equity issuances by the Company. On July 28, 2003, the Company held its Annual General Meeting of the Shareholders where the shareholders reelected the Company's existing four Directors. The Neptune Society is one of North America's largest cremation specialists, and is the only publicly traded company with a business strategy that focuses solely on providing cremation services. Neptune Society, operating for nearly three decades, has locations in California, Florida, New York, Washington, Oregon, Arizona, Colorado, Missouri, Iowa and Illinois and has provided thousands of cremation services and currently has in excess of 80,000 active contracts and in excess of $40 million in trust funds for its unique Pre-Need Program. Neptune Society's business strategy is to become the largest and most trusted brand name in the cremation service industry. The Company believes that continued growth and development of the Neptune Society brand name will assist the Company in achieving its goal of becoming the largest provider of simple, dignified and economical cremation services in the United States. NORTHWEST AIRLINES: Registration Statement Declared Effective ------------------------------------------------------------- Northwest Airlines Corporation (Nasdaq: NWAC) announced that the Registration Statement on Form S-3 (File Nos. 333-107068 and 333- 107068-01) filed by the company and the Northwest Airlines, Inc. under the Securities Act of 1933, as amended, with the Securities and Exchange Commission relating to the resale from time to time, by the holders thereof, of up to $150,000,000 aggregate principal amount of the Company's 6.625% Senior Convertible Notes due 2023, guaranteed on an unsecured, unsubordinated basis by the Guarantor and 9,270,705 shares of the company's common stock, par value $0.01 per share, initially issuable upon the conversion of the Notes, has been declared effective by the Securities and Exchange Commission. The Notes were originally issued on May 20, 2003 in a private placement. Copies of the prospectus relating to these securities may be obtained from: Vice President, Law and Secretary Northwest Airlines Corporation 2700 Lone Oak Parkway Eagan, Minnesota 55121 (612) 726-2111 Northwest Airlines (S&P, B+ Corporate Credit Rating) is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents. In 2002, consumers from throughout the world recognized Northwest's efforts to make travel easier. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for second place among large domestic airports in overall customer satisfaction. Readers of TTG Asia and TTG China named Northwest "Best North American airline." For more information pertaining to Northwest, visit Northwest's Web site at http://www.nwa.com NTELOS INC: Virginia Court Confirms Joint Plan of Reorganization ---------------------------------------------------------------- NTELOS Inc. announced that the United States Bankruptcy Court for the Eastern District of Virginia entered an order confirming the company's Joint Plan of Reorganization earlier today. At a confirmation hearing held August 11, 2003, the Court heard evidence that NTELOS had met all of the statutory requirements necessary for confirmation of its Joint Plan of Reorganization. Consummation of the Joint Plan of Reorganization is subject to compliance with the terms and conditions set forth in the plan, including closing of the company's proposed new exit financing facility and the sale of its new convertible notes, and receipt of certain regulatory approvals. The company expects to finalize these matters soon and emerge from Chapter 11 within a few weeks. James Quarforth, Chief Executive Officer of NTELOS, said, "We are pleased with the smooth progress that we have made in our comprehensive financial restructuring, and grateful for the strong support that we have received from our principal debtholders for our Joint Plan of Reorganization. We also appreciate the continuing support of our customers and suppliers throughout this time." Quarforth continued, "Importantly, our operations -- both wireless and wireline -- have continued to grow and have remained strong throughout the Chapter 11 process, due in large part to the talent and dedication of our employees, who are focused on serving our customers. As a result of our comprehensive financial restructuring, we will have a strong financial foundation to support long-term success across all of our business lines." Upon emergence, the company will receive $75 million from the sale of new 9% convertible notes, as described in the Joint Plan of Reorganization. In accordance with the plan, $36 million of these proceeds will be used to pay down borrowings under the existing senior credit facility revolver. The remaining proceeds will be available to fund the operations of the company on a going forward basis and to pay existing creditors. NTELOS Inc. is an integrated communications provider with headquarters in Waynesboro, Virginia. NTELOS provides products and services to customers in Virginia, West Virginia, Kentucky, Tennessee and North Carolina, including wireless digital PCS, dial-up Internet access, high-speed DSL (high-speed Internet access), and local and long distance telephone services. Detailed information about NTELOS is available online at http://www.ntelos.com NUEVO ENERGY: Second Quarter 2003 Results Reflect Slight Decline ---------------------------------------------------------------- Nuevo Energy Company (NYSE:NEV) reported net income of $7.4 million, or $0.38 per diluted share in the second quarter 2003, compared to $16.6 million, or $0.96 per diluted share in the second quarter 2002. Income from continuing operations for the second quarter 2003 was $6.6 million, or $0.34 per diluted share versus $14.6 million, or $0.84 per diluted share in the year ago period. The second quarter 2003 results include a $2.7 million after-tax ($0.14 per diluted share) gain on disposition of properties and a $6.7 million after-tax ($0.34 per diluted share) loss on early extinguishment of debt. The comparable item in the second quarter 2002 was a $9.1 million after-tax ($0.53 per diluted share) gain on disposition of properties. Net cash provided by operating activities was $37.9 million in the second quarter 2003 compared to $16.7 million in the same period in 2002. Discretionary cash flow, a non-GAAP financial measure, was $37.2 million in the second quarter 2003 compared to $33.2 million in the second quarter 2002. "On top of strong financial results for the quarter we significantly improved our capitalization by redeeming approximately $160 million of high cost debt," commented Jim Payne, Chairman, President and CEO. "We have made great strides in improving our balance sheet, and in a relatively short time period we reduced our debt to capital to 48% at June 30, 2003 versus 62% at December 31, 2001. We will continue to pursue our disciplined financial and operating strategy." Production and Prices Total production from continuing operations was 48.2 thousand barrels of oil equivalent (MBOE) per day in the second quarter 2003 compared to 46.0 MBOE per day in the comparable period in 2002. Production from our discontinued operations and assets held for sale was 1.2 MBOE per day in the second quarter 2003 and 5.0 MBOE per day in the second quarter 2002. Crude oil production of 42.1 thousand barrels (MBbls) per day was slightly higher than 41.3 MBbls per day in the comparable period in 2002 due to increased production from the Point Pedernales Field offshore California and production from our September 2002 West Texas acquisition. The realized crude oil price increased 14% to $21.09 per barrel in the second quarter 2003 versus $18.47 per barrel in the year ago period. Included in the realized crude oil prices are hedging losses of $1.59 per barrel for the second quarter 2003 and $0.58 per barrel in the comparable period a year ago. Nuevo's second quarter 2003 natural gas production increased 30% to 36.4 million cubic feet (MMcf) per day from 28.1 MMcf per day in the second quarter 2002 due to production from our West Texas acquisition which more than offset lower production in California. Nuevo's realized natural gas price increased 31% to $4.06 per thousand cubic feet (Mcf) in the second quarter 2003 compared to $3.10 per Mcf in the year ago period. Included in the realized gas price is a hedging loss of $0.20 per Mcf in the second quarter 2003. No gas was hedged in the 2002 period. Drilling Update The Diatomite drilling program at the Cymric and Midway-Sunset Fields onshore California has been completed and the steaming of these new wells and surrounding wells has commenced. As a result of this activity, production at these fields should average 1,500 barrels per day higher in the second half of 2003 compared to the second quarter. The Cymric and Midway-Sunset Fields represent about 49% of Nuevo's California production. Year-to-date, five wells have been drilled and completed at the Pakenham Field in West Texas and production has increased 26% to 24 MMcfe (million cubic feet of gas equivalent) per day from 19 MMcfe per day at the time of acquisition. For the balance of 2003, Nuevo will drill an additional five wells at the Pakenham Field including a deep Ellenberger test which was spudded in July. Costs and Expenses Total costs and expenses in the second quarter 2003 were $61.6 million versus $42.0 million in the year ago period. Excluding the gain on disposition of properties and steam costs, total costs and expenses were $53.4 million in the second quarter 2003 compared to $49.2 in the second quarter 2002. Lease operating expenses represented a significant portion of the quarter-over-quarter increase in total costs due to natural gas costs which increased 61% to $5.03 per Mcf versus the second quarter 2002. Natural gas is used to generate steam which in turn facilitates production of heavy oil in California. Excluding the natural gas cost, lease operating expense was $29.5 million in the second quarter 2003 versus $24.3 million in the comparable period in 2002. The main increase quarter-over-quarter is attributable to increased major maintenance and workover activity. Nuevo continues to maintain cost discipline over other controllable lease operating expenses. General and administrative costs also declined significantly to $6.3 million in the second quarter 2003 versus $7.2 million in the same period in 2002 mainly due to lower outsourcing costs. DD&A of $17.7 million was up $0.2 million from the second quarter of 2002, but included $2.4 million of accretion expense required by SFAS No. 143. DD&A expense averaged $4.04 per barrel oil equivalent (BOE) in the second quarter 2003 compared to $4.17 per BOE in the year ago period. Interest expense was $9.0 million in the second quarter 2003, a $0.2 million decline versus the year ago period. Due to the redemption of the 9-1/2% Notes with cash on hand supplemented by low cost bank debt, subsequent quarters will reflect a substantial interest expense reduction. During the second quarter 2003, Nuevo terminated two remaining interest rate swaps and received $4.1 million of cash which will be amortized into income over the life of the Notes. Capital Expenditures Capital expenditures in the second quarter 2003 were $15.7 million, primarily spent on our Cymric, Belridge and Pakenham fields. Capital expenditures for the first half 2003 were $32.6 million compared to $30.6 million in the comparable period in 2002. Our 2003 capital program will be in the range of $65 - $70 million. Balance Sheet In the second quarter 2003, Nuevo redeemed $157.2 million of 9-1/2% Senior Subordinated Notes due 2008 and $2.4 million of 9-1/2% Senior Subordinated Notes due 2006. At June 30, 2003, total debt outstanding was $316.2 million versus $438.3 million at year- end 2002. At the end of the second quarter 2003, Nuevo's debt to capital ratio as defined in our credit agreement declined to 48% compared to 57% at year-end 2002. The fixed charge coverage ratio improved to 5.0 times for the four quarters ending June 30, 2003 versus 2.6 times in the comparable period a year ago. As of June 30, 2003, Nuevo had assets held for sale with a book value of approximately $48.2 million related to certain California real estate and a non-core oil field. Nuevo Energy Company (S&P/BB-/Stable) is a Houston, Texas-based company primarily engaged in the acquisition, exploitation, development, exploration and production of crude oil and natural gas. Nuevo's domestic producing properties are located onshore and offshore California and in West Texas. Nuevo is the largest independent producer of oil and gas in California. The Company's international producing property is located offshore the Republic of Congo in West Africa. To learn more about Nuevo, please refer to the Company's internet site at http://www.nuevoenergy.com OWENS CORNING: Reports $18 Million of Net Income in 3rd Quarter --------------------------------------------------------------- Owens Corning (OTC: OWENQ) reported financial results for the quarter ended June 30, 2003. For the quarter, the company had net sales of $1.239 billion, compared to net sales of $1.285 billion for the same period in the prior year. For the quarter, the company had a net income of $18 million. This compares to a net income of $36 million for the second quarter of 2002. Owens Corning reported income from operations of $43 million for the quarter, including charges of $38 million of Chapter 11- related charges, $13 million for restructuring and other charges and $4 million of income from asbestos-related insurance recoveries. For the second quarter of 2002, the company reported $70 million in income from operations, including charges of $25 million of Chapter 11-related charges, a $3 million credit for restructuring and other credits and $5 million of income from asbestos-related insurance recoveries. Owens Corning ended the quarter with a cash balance of $807 million. "Given the higher energy and raw material costs we experienced in the second quarter compared to last year, we were very pleased with our operational performance," said Dave Brown, Owens Corning's chief executive officer. "As we continue to evaluate our results, excluding the charges related to our Chapter 11 process and other restructuring costs, we are pleased with our progress," he added. Owens Corning is a world leader in building materials systems and composite systems. Founded in 1938, the company had sales of $4.9 billion in 2002. Additional information is available on Owens Corning's Web site at http://www.owenscorning.com OWENS CORNING: Files Third Amended Joint Plan in Delaware --------------------------------------------------------- On October 5, 2000, Owens Corning and 17 United States subsidiaries filed voluntary petitions for relief under Chapter 11 of the U. S. Bankruptcy Code in the U. S. Bankruptcy Court for the District of Delaware. The Debtors are currently operating their businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors are being jointly administered under Case No. 00-3837 (JKF). The Chapter 11 cases do not include other U. S. subsidiaries of Owens Corning or any of its foreign subsidiaries. The Debtors filed for relief under Chapter 11 to address the growing demands on Owens Corning's cash flow resulting from the substantial costs of asbestos personal injury liability. On August 8, 2003, the Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for future asbestos personal injury claimants, filed a proposed third Amended Joint Plan of Reorganization in the U. S. Bankruptcy Court for the District of Delaware. The Plan is subject to confirmation by the Bankruptcy Court. Under the Plan, as filed, it is expected that all classes of creditors will be impaired. Therefore, the Plan also provides that the existing common stock of Owens Corning will be cancelled, and that current shareholders will receive no distribution or other consideration in exchange for their shares. "It is impossible to predict at this time the terms and provisions of any plan of reorganization that may ultimately be confirmed, when a plan will be confirmed, or the treatment of creditors thereunder," the Company says. OWENS CORNING: Court Approves Joint Professionals Use Agreement --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Owens Corning and its debtor-affiliates, sought and obtained Court approval of a Joint Professionals Use Agreement. On January 17, 2001, the Court authorized the Committee to retain Davis Polk & Wardwell as its counsel nunc pro tunc to October 25, 2000. On January 1, 2001, Judge Fitzgerald also permitted the Committee to retain Houlihan Lokey Howard & Zukin Capital as its financial advisors. On June 6, 2001, Judge Fitzgerald authorized the Committee to retain Chambers Associates Incorporated as its asbestos-estimation claims expert. The Joint Professionals Use Agreement provides that in the case of settlement or other arrangements by some but not all of the Creditors' Committee members, the non-settling group would be allowed to continue to use the services of the Joint Professionals through the termination date, as defined in the Agreement. The Agreement further provides that the settling group is bound to maintain confidentiality. By May 7, 2003, all members of the Creditors Committee had duly agreed to and executed the Agreement. (Owens Corning Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392- 0900) PACIFIC GAS: Court Approves Settlement Plan Disclosure Statement ---------------------------------------------------------------- Notwithstanding Pacific Gas and Electric Company's Settlement Plan Disclosure Statement objections, Judge Montali rules that the Disclosure Statement contains adequate information within the meaning of Section 1125 of the Bankruptcy Code. Accordingly, Judge Montali put his stamp of approval on the Disclosure Statement and approves its distribution to creditors for a vote. (Pacific Gas Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392-0900) PANAVISION: S&P Withdraws B- Rating on Postponed Debt Offerings --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B-' rating on Panavision Inc.'s two postponed proposed debt offerings--a $20 million senior secured revolving credit facility and a $275 million senior secured note issue. At the same time, Standard & Poor's lowered its corporate credit rating on the company to 'CCC' from 'B-' and its subordinated debt rating on the notes of affiliate PX Escrow Corp. to 'CC' from 'CCC' based on the postponement of two proposed debt offerings due to unfavorable pricing. The 'CCC' rating on the company's existing bank loan was affirmed. The outlook is negative. Woodland Hills, Calif.-based Panavision is the leading designer and manufacturer of high-quality camera systems. As of June 30, 2003, the company has about $350 million in debt. "The postponed debt offerings were critical to alleviating Standard & Poor's concerns about the company's capital and maturity structure," according to Standard & Poor's credit analyst Steve Wilkinson. He added, "Panavision's current financial profile is not sustainable, and the company will need to amend its capital structure to improve liquidity and substantially defer near-term debt maturities by March 31, 2004, to avoid a default." Panavision continues to maintain a dominant position in its core business of renting cameras to the feature film and film-based television industries and a solid position in supplying cameras for independent films and commercials. However, these strengths are overshadowed by its high financial risk stemming from its weak discretionary cash flow, limited liquidity, and considerable near- term debt maturities. Support from Panavision's parent company, Mafco Holdings Inc., has been important to its ability to meet its financial obligations and negotiate amendments to its bank facility during the past year, including loosening financial covenants and deferring scheduled maturities. Parent support has included converting about $91 million in subordinated bonds to perpetual, pay-in-kind preferred stock and injecting $10 million in cash. Even so, the company's cash flow potential remains limited by the heavy capital expenditure requirements required to keep its camera inventory up to date, its vulnerability to fluctuating motion picture production levels, and logistical impediments to achieving higher equipment utilization rates. PEGASUS COMMS: June 30 Working Capital Deficit Narrows to $60MM --------------------------------------------------------------- Pegasus Communications Corporation (NASDAQ:PGTV) reported financial results for the three and six month periods ended June 30, 2003. (Amounts and changes specified are for the three and six months ended June 30, 2003 compared to the same corresponding periods in the prior year, unless indicated otherwise.) Results of Operations Three Months Ended June 30, 2003 Consolidated net revenues decreased $9.8 million, or 4%, to $214.2 million. Consolidated loss from operations decreased $4.7 million, or 72%, to $1.8 million. The Company's net loss applicable to common shares increased $6.6 million, or 17%, to $45.4 million. Net cash provided by operating activities decreased $11.0 million, or 39%, to $17.3 million. Direct broadcast satellite net revenues decreased $10.6 million, or 5%, to $205.8 million. EBITDA for the direct broadcast satellite business decreased $2.4 million, or 4%, to $52.2 million. EBITDA for the direct broadcast satellite business as a percentage of direct broadcast satellite net revenues remained at 25%. Free cash flow for the direct broadcast satellite business increased $4.3 million, or 11%, to $43.0 million. Six Months Ended June 30, 2003 Consolidated net revenues decreased $18.5 million, or 4%, to $427.3 million. Consolidated loss from operations decreased $13.1 million, or 64%, to $7.5 million. The Company's net loss applicable to common shares increased $10.2 million, or 13%, to $88.8 million. Net cash provided by operating activities decreased $14.3 million, or 60%, to $9.4 million. Direct broadcast satellite net revenues decreased $19.8 million, or 5%, to $411.4 million. EBITDA for the direct broadcast satellite business increased $1.5 million, or 1%, to $104.8 million. EBITDA for the direct broadcast satellite business as a percentage of direct broadcast satellite net revenues increased to 25% from 24%. Free cash flow for the direct broadcast satellite business increased $12.9 million, or 18%, to $83.9 million. At June 30, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $60 million. Pegasus Communications Corporation -- http://www.pgtv.com-- provides digital satellite television to rural households throughout the United States. We are the 10th largest pay television company in the United States. Pegasus also owns and/or operates television stations affiliated with CBS, FOX, UPN, and The WB networks. As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services lowered its corporate credit rating on satellite TV provider Pegasus Communications Corp., and its related entities, to 'CCC+' from 'B' based on increased concerns about the adequacy of its liquidity. In addition, Standard & Poor's removed the rating from CreditWatch where it was placed on May 16, 2002. The outlook is negative. Bala Cynwyd, Pennsylvania-based Pegasus had total debt outstanding of approximately $1.3 billion at September 30, 2002. PERLE SYSTEMS: Advances Restructuring Talks with Royal Capital -------------------------------------------------------------- Perle Systems Limited (OTCBB: PERL; TSE: PL), a leading provider of networking products for Internet Protocol and e-business access, is in advanced discussions with Royal Capital Management Inc., the holder of all of Perle's senior secured debt, with a view to reaching agreement on a formal capital restructuring. The board of directors of Perle Systems Limited have created a special committee of its independent directors to conduct the negotiations and make a recommendation to the full board. While the parties indicate that they are considering various restructuring alternatives, Perle believes the restructuring would in all likelihood yield little or no value to holders of their common shares, given the size of the secured and unsecured debt. Perle Systems -- whose February 28, 2003 balance sheet shows a total shareholders' equity deficit of about $4 million -- is a leading developer, manufacturer and vendor of award-winning networking products. These products are used to connect remote users reliably and securely to central servers for a wide variety of e-business and general business applications. Perle specializes in Internet Protocol connectivity applications, with an increasing focus on mid-size IP routing solutions. Product lines include routers, remote access servers, serial/console servers, emulation adapters, multi-port serial cards, multi-modem cards, print servers and network controllers. Perle distinguishes itself by its ownership of extensive networking technology, depth of experience in major network connectivity environments and long-term channel relationships in major world markets. Perle Systems has offices and representative offices in 12 countries in North America, The United Kingdom, Europe, and Asia and sells its products through distribution channels worldwide. Its stock is traded on the OTCBB (symbol PERL) and the Toronto Stock Exchange (symbol PL). For more information about Perle and its products, access the Company's Web site at http://www.perle.com PETROLEUM GEO: Taps BSI as Court Claims, Ballot and Notice Agent ---------------------------------------------------------------- Petroleum Geo-Services ASA, seeks approval from the U.S. Bankruptcy Court for the Southern District of New York in its application to employ Bankruptcy Services LLC as the claims, noticing and balloting agent in connection with this proceedings. The Debtor reports that it has in excess of 200 creditors, potential creditors and numerous other parties in interest in this chapter 11 case. The Debtor respectfully submits that the engagement of an independent third party to act as agent for the Court is the most effective and efficient manner by which to perform certain tasks. As agreed, BSI will: a. assist the Debtor with all required notices in this case including, among others: -- a notice of the commencement of this chapter 11 case and the initial meeting of creditors under Section 341(a) of the Bankruptcy Code; -- notice of objections to claims and interests, if necessary; -- notices of any hearings on the Debtor's disclosure statement and confirmation of the Debtor's chapter 11 plan of reorganization; and -- such other miscellaneous notices as the Debtor or the Court may deem necessary or appropriate for the orderly administration of this chapter 11 case; b. promptly after the service of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes: (i) a copy of the notice served; (ii) a list of persons upon whom the notice was served, along with their addresses; and (iii) the date and manner of service; c. comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; d. promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; e. provide such other claims processing, noticing and related administrative services as may be requested from time to time by the Debtor; f. oversee the distribution of the applicable solicitation materials to each holder of a claim against or interest in the Debtor; g. respond to mechanical and technical distribution and solicitation inquiries; h. receive, review and tabulate the ballots cast, and making determinations with respect to each ballot as to its timeliness, compliance with the Bankruptcy Code, Bankruptcy Rules and procedures ordered by this Court subject, if necessary, to review and ultimate determination by the Court; i. report the results of the balloting to the Court; and j. perform such other related plan-solicitation services as may be requested by the Debtor. BSI's professional fees are: Kathy Gerber $210 per hour Senior Consultants $185 per hour Programmer $130 to $160 per hour Associate $135 per hour Data Entry/Clerical $40 to $60 per hour Schedules Preparation $225 per hour Petroleum Geo-Services ASA, headquartered in Lysaker, Norway is a technology-based service provider that assists oil and gas companies throughout the world. The Company filed for chapter 11 protection on July 29, 2003 (Bankr. S.D.N.Y. Case No. 03-14786). Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher represents the Debtor in its restructuring efforts. As of May 31, 2003, the Debtor listed total assets of $3,686,621,000 and total debts of $2,444,341,000. PG&E NATIONAL: Appointing Bankruptcy Services as Claims Agent ------------------------------------------------------------- The PG&E National Energy Group Debtors and USGen each have several hundred creditors and potential creditors on a consolidated basis. The sheer size and magnitude of the creditor body makes it impracticable for the office of the Clerk of the United States Bankruptcy Court for the District of Maryland to serve notice efficiently and effectively on such a large number of creditors at the onset of these Chapter 11 cases onward without creating an administrative burden. By separate applications, USGen and the NEG Debtors sought and obtained the Court's authority to employ Bankruptcy Services, LLC as notice and claims agent, inter alia, to assist them in: -- distributing notices, as necessary, to the creditor body and other appropriate parties; -- processing other administrative information pertaining to their Chapter 11 cases, including the dissemination of solicitation materials relating to the reorganization plan; and -- transmitting, receiving, docketing, maintaining, photocopying and microfilming claims for the cases. BSI is qualified to serve as Claims Agent because it has extensive experience in handling large Chapter 11 cases. BSI is a data- processing firm whose principals and senior staff have more than 10 years of in-depth experience in performing noticing, claims processing, claims reconciliation and other administrative tasks for Chapter 11 Debtors. BSI is also experienced in performing plan voting and distribution services, and other services relating to its role as a Claims and Balloting Agent in many districts throughout the United States. At the Debtors' or the Clerk's request, BSI will: (a) prepare and serve certain required notices, including: (1) the Notice of the commencement of the Chapter 11 cases and the initial meeting of creditors under Section 341(a) of the Bankruptcy Code; (2) the Notice of the bar date for filing proofs of claim; (3) the Notice of the objections to claims; (4) the Notice of any hearings on a disclosure statement and confirmation of a reorganization plan; and (5) other miscellaneous notices to any entities; (b) file with the Clerk's Office a certificate or affidavit of service within 10 days after each service, including a copy of the notice, a list of persons to whom it was mailed, and the mailing date; (c) maintain an up-to-date mailing list for all entities that have requested service of pleadings, which list will be available upon request of the Clerk's Office; (d) comply with applicable state, municipal and local laws and rules, orders, regulations and requirements of Federal Government Departments and Bureaus; (e) assist the Debtors in preparation of schedules of assets and liabilities; (f) at ay time, upon request, satisfy the Court that the Claims Agent has the capability to efficiently and effectively notice, docket and maintain proofs of claim; (g) furnish a notice of the bar date approved by the Court for the filing of a proof of claim and a proof of claim form to each creditor notified of the filing; (h) maintain all proofs of claim and proofs of interest filed; (i) maintain an official claims register by docketing all proofs of claim on a register containing certain information, including: (1) the name and address of a claimant and the agent, if the agent filed the proof of claim; (2) the date received; (3) the claim number assigned; (4) the amount and classification asserted; (5) the comparative, scheduled amount of the creditor's claim if applicable; (6) pertinent comments concerning disposition of claims; and (7) the applicable Debtor against which the claim or interest is asserted; (j) maintain the original proofs of claim in correct claim number order, in an environmentally secure area, and protect the integrity of these original documents from theft or alteration; (k) transmit to the Clerk's Office an official copy of the claims register on a monthly basis, unless requested in writing by the Clerk's Office on a frequent basis; (l) maintain an up-to-date mailing list for all entities that have filed a proof of claim, which list will be available on request of a party-in-interest or the Clerk's Office; (m) be open to the public for examination of the original proofs of claim without charge during regular business hours; (n) record all transfers of claims pursuant to Rule 3001(e) of the Federal Rules of Bankruptcy Procedure and provide notice of the transfer; (o) record court orders concerning claims resolution; (p) make all original documents available to the Clerk's Office on an expedited, immediate basis; (q) provide other claims processing, noticing and related administrative services as may be requested from time to time by the Debtors; (r) oversee the distribution of the applicable solicitation material to each holder of a claim against or interest in the Debtors; (s) respond to mechanical and technical distribution and solicitation inquiries; (t) receive, review and tabulate the ballots cast, and make determinations with respect to each ballot as to its timeliness, compliance with the Bankruptcy Code, Bankruptcy Rules and procedures ordered by the Court subject, if necessary, to review and ultimate determination by the Court; (u) certify the results of the balloting to the Court; (v) perform other related plan-solicitation services as may be necessary; (w) comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders or other requirements; and (x) promptly comply with such further conditions and requirements as the Clerk's Office may prescribe. The Debtors will compensate BSI in accordance with its customary rates. BSI professionals, who will be primarily responsible in assisting the Debtors, and their hourly rates are: BSI Personnel Professional Fee ------------- ---------------- Kathy Gerber $210 Senior Consultants 185 Programmer 130 - 160 Associate 135 Data Entry/Clerical 40 - 60 Schedule Preparation 225 BSI received a $25,000 retainer from the NEG Debtors and $10,000 from USGen. The retainer will be applied against the firm's final invoice. BSI President Ron Jacobs attests that the firm does not hold any interest adverse to the Debtors or its estates and it has no prior connection with them. (PG&E National Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) PHARMACEUTICAL FORMULATIONS: Posts Improved June Quarter Results ---------------------------------------------------------------- Pharmaceutical Formulations, Inc. reported net sales of $33.8 million for the six months ended June 28, 2003, compared to net sales of $26.3 million for the six months ended June 29, 2002, an increase of 28.3%. PFI had a net loss of $915,000 for the six months ended June 28, 2003, compared to a net loss of $1.9 million for the comparable six-month period of the prior year. For the quarter ended June 28, 2003, PFI had net sales of $17.6 million and a net loss of $367,000, compared to net sales of $13.7 million and a net loss of $655,000 for the comparable quarter of the prior year. This marks the eighth consecutive quarter in which net sales and operating results have improved over the comparable quarter of the prior year. During December 2002, PFI changed its fiscal year-end from the 52-53 week period which ends on the Saturday closest to June 30 to the 52-53 week period which ends on the Saturday closest to December 31. The quarter ended June 29, 2002 was also a fiscal year-end which included certain favorable year-end tax adjustments. On May 15, 2003 PFI completed its acquisition of the stock of Konsyl Pharmaceuticals, Inc. of Fort Worth, Texas, a manufacturer and distributor of powdered, dietary natural fiber supplements. The results of operations for Konsyl are included in the consolidated results of operations from May 16, 2003. PFI believes this acquisition provides an opportunity to increase its presence in both the private label and branded pharmaceutical markets. It also affords PFI the opportunity to introduce new products and product line extensions under the "Konsyl(R)" brand and PFI's own laxative products. PFI believes that considerable opportunities exist for cost savings through consolidation of the two companies. PFI's consolidated gross sales for the six months ended June 28, 2003 were $34.6 million, compared to $26.9 million in the comparable period of the prior year, an increase of 28.8%. Konsyl's gross sales were $1.3 million for the period from May 16, 2003 to June 28, 2003. In July 2002, PFI began shipments to a major national retailer. This new relationship contributed approximately $3.5 million of gross sales in the current six months and $1.6 million in the current quarter ended June 28, 2003. The balance of the sales increase came from established private label customers. Gross sales for the quarter ended June 28, 2003 were $18.1 million, compared to $13.9 million in the comparable period in the prior year, an increase of 29.9%. Cost of sales as a percentage of net sales was 84.3% for the six months ended June 28, 2003 as compared to 86.6% in the prior year period. This decrease resulted from the inclusion of Konsyl and the efficiencies gained from increased levels of production. Selling, general and administrative expenses were $3 million and $5.3 million for the three and six months ended June 28, 2003, compared to $2.6 million and $4.8 million in the respective prior year periods. The increases reflect the inclusion of Konsyl and related transition costs, but do not reflect anticipated future cost reductions from the consolidation of PFI and Konsyl. Interest expense was $898,000 and $1.7 million for the three and six months ended June 28, 2003, compared to $1.1 million and $2.1 million for the comparable prior year periods. The decrease is primarily a result of lower interest rates. On December 21, 2001, ICC Industries Inc. increased its ownership to 85.6% of the outstanding common shares of PFI. Therefore, the Company has been included in the consolidated tax return of ICC since that date. As a result, PFI has recorded a tax benefit of $334,000 and $630,000 for the three and six months ended June 28, 2003 compared with a benefit of $574,000 and $1,237,000 in the three and six months ended June 29, 2002. On August 4, 2003, Dr. James C. Ingram was appointed Chairman of the Board and Chief Executive Officer of PFI and Mr. Michael A. Zeher was appointed President and Chief Operating Officer. Dr. Ingram had been the Company's President, Chief Operating Officer and a director of PFI since October 2000. He will remain fully involved in the day-to-day operations of the Company through December 31, 2003, and has indicated his intention to remain as Chairman and Chief Executive Officer until at least March 31, 2006. Mr. Zeher was President and Chief Executive Officer of Lander Co., Inc., a privately held manufacturer and marketer of personal care products, from 1994-2002. Prior to that, he was Vice President of Sales and Business Development of Johnson & Johnson from 1991-1994 and Director of Sales of Marion Merrell Dow Consumer Products Division from 1989-1991. It is the Company's plan that Mr. Zeher will take over full responsibility for the day-to-day operations of PFI as of January 1, 2004. ICC Industries Inc. is the holder of approximately 74.5 million shares (about 87%) of the common stock of PFI. As a majority- owned subsidiary of ICC, PFI enjoys the resources associated with ICC's position as a global leader in the manufacturing, marketing and trading of chemical, plastic and pharmaceutical products. Founded as a trading enterprise in 1952, ICC has expanded its line of business to include manufacturing and production facilities in 23 locations throughout the United States, Europe, Israel, Russia, China and Turkey. The Company's March 29, 2003, balance sheet posted a shareholders' equity deficiency of about $17.8 million. PILGRIM'S PRIDE: S&P Affirms Low-B Level Credit & Debt Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit and senior secured ratings on poultry producer and processor Pilgrim's Pride Corp., as well as the company's 'B+' subordinated debt rating. At the same time, Standard & Poor's removed all the ratings from CreditWatch where they were placed Oct. 16, 2002. The outlook is negative. Standard & Poor's also assigned a 'BB-' to Pilgrim's Pride's $100 million senior unsecured notes due 2011 (the notes are an add-on to the firm's $200 million 9-5/8 senior notes due 2011, issued Aug. 9, 2001). Proceeds will be used to pay a portion of the purchase price for the poultry assets of ConAgra Foods Inc. (BBB+/Stable/A-2). Pilgrim's Pride, based in Pittsburg, Texas, will have about $900 million of lease-adjusted total debt at the closing of the ConAgra transaction, which is expected in the third quarter of 2003. "The ratings incorporate Standard & Poor's expectations that Pilgrim's Pride's credit protection measures will weaken following the proposed partially-debt financed acquisition of ConAgra's fresh chicken division for $615 million," said credit analyst Ronald Neysmith. Pilgrim's Pride announced the acquisition of ConAgra's fresh chicken division, the fourth-largest chicken producer in the U.S., on June 9, 2003. Pilgrim's will fund the transaction will a combination of cash, stock, and debt. Under the terms of the agreement, it will pay about $207 million in cash, $308 million in its own Class A stock (based on the June 6, 2003, closing price), and $100 million of subordinated notes due in 2011. Pilgrim's Pride is currently the third-largest player in the commodity-based U.S. chicken industry, and the second-largest fresh chicken company in Mexico. The ConAgra acquisition, however, will make it the second-largest U.S. player, with revenues of about $5 billion, behind Tyson Foods Inc. (BBB/Watch Neg/A-3). The acquisition will also provide Pilgrim's with broader national distribution and additional raw materials to expand its value- added strategy. Pilgrim's Pride also operates processing and further processing plants, distribution centers, hatcheries, and feed mills in the U.S. and Mexico. The company's products are sold to food service, retail, and frozen entree customers. Despite the inherent volatility of the commodity-based U.S. chicken industry (results are affected by several factors outside of the firm's control including weather, protein supply, disease, etc.) the ConAgra acquisition will diversify Pilgrim's U.S. geographic distribution capabilities and provide it with an adequate supply of raw materials for its higher margined, value- added programs over time. Moreover, in connection with the transaction, Pilgrim's Pride will also become a preferred supplier of chicken products to ConAgra. PILLOWTEX CORP: Seeks Court Injunction against Utility Companies ---------------------------------------------------------------- Pursuant to Section 366(b) of the Bankruptcy Code, Pillowtex asks the Court to: (a) restrain utilities from discontinuing, altering or refusing service; (b) determine that these constitutes adequate assurance of payment for future utility services: -- the Debtors' history of prompt and full payments to the gas, water, electric, telephone and other utility companies providing services to the Debtors; -- the Debtors' demonstrable ability to pay future utility bills; and -- the administrative priority status afforded the Utility Companies' postpetition claims; and (c) approve the Determination Procedures. Donna L. Harris, Esq., at Morris, Nochols, Arsht & Tunnell, in Wilmington, Delaware, relates that prior to ceasing operations at all of their facilities, the Debtors utilized gas, water, electric, telephone and other utility services provided by about 142 Utility Companies. With the Chapter 11 filing of the Debtors, Utility Companies may terminate their services after 20 days from the Petition Date if the Debtors have not furnished adequate assurance of payment. While the Debtors have ceased operations at all of their facilities and their use of the services provided by the Utility Companies has accordingly diminished, it is vitally important to the preservation and liquidation of the Debtors' estates that utility services continue uninterrupted after the expiration of the 20-day Stay Period. Ms. Harris points out that if the utility services were discontinued or altered, even briefly, the Debtors' property would be placed at risk. For the benefit of their creditors and estates, the Debtors must have access to uninterrupted utility services. Ms. Harris informs Judge Walsh that the Debtors have an excellent payment history with each of the Utility Companies. Except for the utility bills not yet due and owing as of the Petition Date, the Debtors historically paid their prepetition utility bills in full when due. In any case, the Debtors anticipate they'll have sufficient financing to pay promptly, on an ongoing basis and in the ordinary course of their businesses, all of their respective obligations to the Utility Companies for those postpetition utility services that will be used postpetition. Moreover, all claims will be entitled to administrative priority treatment under Sections 503(b) and 507(a)(1) of the Bankruptcy Code, providing additional assurance that future obligations to the Utility Companies will be satisfied in full. Hence, Ms. Harris contends that it is unnecessary, and would be improvident use of available cash, for the Debtors to make cash security deposits with each of the Utility Companies. According to Ms. Harris, the Debtors issued letters of credit to several of the Utility Companies as adequate protection during the previous bankruptcy. On of these letters of credit, issued to Duke Power, remains outstanding. Duke Power can draw down on this letter of credit if the Debtors do not make payment. Thus, the Duke Power is already adequately protected. For those Utility Companies who will seek further adequate assurance, the Debtors propose these Determination Procedures: A. Within 10 business days after the entry of an Interim Utility Order, the Debtors will mail a copy of the Order to the Utility Companies on the Utility Service List; B. A Utility Company that wishes to seek additional assurance of future payment from the Debtors must make a written request for the additional assurance within 30 days after service of the Interim Utility Order to the Debtors and their counsel; C. Without further Court order, the Debtors may enter into agreements granting to the Utility Companies that have submitted requests for any additional assurance of future payment that the Debtors, in their sole discretion, determine is reasonable; D. If a Utility Company timely requests additional assurance of future payment that the Debtors believe is unreasonable, the Debtors will promptly: (a) file a motion seeking a determination of adequate assurance of future payment with respect to the requesting Utility Company; and (b) schedule the Determination Motion to be heard by the Court at the next omnibus hearing; E. Any Utility Company that does not timely request additional assurance will automatically be deemed, on a final basis, to have adequate assurance of payment for future utility services under Section 366, and as to the Utility Company, the Interim Utility Order will become final order on the day after the Request Deadline; and F. If a Determination Motion is filed or a Determination Hearing is scheduled, the requesting Utility Company will be deemed to have adequate assurance of payment for future utility services without the need for payment of additional deposits or other security until a Court order is entered in this connection. (Pillowtex Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) PINNACLE ENTERTAINMENT: Hosting Q2 2003 Conference Call Today ------------------------------------------------------------- Pinnacle Entertainment, Inc. (NYSE: PNK) will release financial results for its 2003 second quarter today prior to the market opening, followed by a conference call at 11:00 a.m. EDT (8:00 a.m. PDT). To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 792-8395. International callers please call (706) 679-7241. There is no pass code required for this call. Hosting the call will be Pinnacle Entertainment's Chairman & CEO Dan Lee, CFO Steve Capp and COO Wade Hundley. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties at http://www.pinnacle-entertainment-inc.com To listen to the live call, please go to the Web site at least fifteen minutes early to register, download, and install any necessary audio software. Pinnacle Entertainment (S&P - B Corporate Credit Rating - Stable) owns and operates seven casinos (four with hotels) in Nevada, Mississippi, Louisiana, Indiana and Argentina, and receives lease income from two card club casinos, both in the Los Angeles metropolitan area. The Company is also developing a major casino resort in Lake Charles, Louisiana, subject to continued compliance with the conditions of the Louisiana Gaming Control Board. PINNACLE ENTERTAINMENT: Enters Agreement on Argentina Properties ---------------------------------------------------------------- Pinnacle Entertainment, Inc., (NYSE: PNK) has executed an agreement modifying the terms of the extension of its concession agreement in the Province of Neuquen, Argentina. The Company's Casino Magic Argentina subsidiary operates casinos under exclusive licenses in the Capital City of Neuquen and the Andean resort community of San Martin de los Andes and has certain other rights of exclusivity throughout the Province of Neuquen. Pinnacle's existing concession agreement expires in December 2006. The Company can extend this agreement through 2021 through construction of a new facility in Neuquen. At year end 2002, the Company had approximately $3 million in funds held in Argentine banks. Under the revised agreement, the Company's concession is extended to December 2016 provided that it builds the envisioned new facility utilizing the cash assets of the Argentine subsidiary plus the net income of its Argentine operations through 2006. The Company receives an additional five-year extension, to December 2021, if it additionally invests five million pesos in a three-star hotel facility with a minimum of ten guest rooms. Pinnacle's Argentine operations provided $8.8 million, $9.0 million, and $7.1 million of operating cash flow (EBITDA) in 1999, 2000, 2001, respectively. EBITDA declined to $1.9 million in 2002 due to a weak Argentine economy and dramatic devaluation of the Argentine peso relative to the dollar. The Argentine economy and currency seem to be stabilizing in recent periods. As a result, Pinnacle's first-quarter 2003 Argentine results included EBITDA of $ 0.6 million versus $ 0.2 million for the same quarter of last year. "We are very pleased to have reached this modified agreement with Governor Jorge Sobisch and the Province of Neuquen," stated Daniel R. Lee, Chairman and CEO of Pinnacle. "It allows us to move ahead and reinvest our Argentine profits in expansion in Neuquen, knowing that Casino Magic Argentina will be an active part of that important community for the long term." Pinnacle owns approximately twenty acres of land along National Highway 22, near the center of the city of Neuquen. National Highway 22 is the principal highway connecting Buenos Aires and the major cities of Northern Argentina with the Andean resorts of San Martin de los Andes and Bariloche, as well as the southern tip of South America. The first phase of Pinnacle's reinvestment in Neuquen will be to build a casino, restaurant and nightclub complex on that site, replacing the existing twenty-two year-old facility which is located at the back of the parking lot of the regional airport. While small by U.S. standards, it is expected to be the region's entertainment center. The region has a population of over 300,000 individuals. Later phases may include additional hotel rooms, additional restaurants, movie theaters, bowling alleys and other entertainment amenities. Grading has already begun on the site in preparation of further construction. Pinnacle has been assisted in the conceptual design of the Neuquen complex by the Las Vegas firm of Marnell Corrao Associates. Pinnacle Entertainment (S&P - B Corporate Credit Rating - Stable) owns and operates seven casinos (four with hotels) in Nevada, Mississippi, Louisiana, Indiana and Argentina, and receives lease income from two card club casinos, both in the Los Angeles metropolitan area. The Company is also developing a major casino resort in Lake Charles, Louisiana, subject to continued compliance with the conditions of the Louisiana Gaming Control Board. PLANVISTA CORP: June 30 Net Capital Deficit Narrows to $16 Mill. ---------------------------------------------------------------- PlanVista Corporation (OTCBB:PVST), which provides medical cost containment and business outsourcing solutions to the medical insurance and managed care industries, reported net income of $0.5 million for the quarter ended June 30, 2003, including a previously-announced after-tax expense of $0.7 million for costs related to a transaction with ProxyMed, Inc. and severance pay, compared to net income of $1.2 million during the same period in 2002. Adjusted for the ProxyMed expense and severance pay, net income for the quarter ended June 30, 2003 would have been $1.2 million. Financial Results The Company reported operating revenue of $7.9 million for the second quarter, compared to $8.5 million for the same period in 2002. Income before income taxes totaled $0.8 million in the second quarter of 2003, compared to $1.5 million for the second quarter of 2002. For the quarter ended June 30, 2003, net income totaled $0.5 million ($0.03 per diluted common share), compared to $1.2 million ($0.07 per diluted common share) during the second quarter of 2002. The Company's EBITDA (a non-GAAP measure defined as earnings before interest, taxes, depreciation and amortization) for the second quarter of 2003 was $1.6 million ($2.6 million excluding the ProxyMed expenses and severance pay referenced above), compared to $2.8 million for the same period in 2002 and $2.7 million during the first quarter of 2003. For the six months ended June 30, 2003, the Company reported operating revenue of $15.9 million, compared to $16.4 million for the same period in 2002. Income before income taxes totaled $2.6 million for the six months ended June 30, 2003, compared to $1.2 million for the same period in 2002. For the six months ended June 30, 2003, net income totaled $2.0 million ($0.11 per diluted common share), compared to $1.8 million ($0.11 per diluted common share) for the 2002 period. The Company's EBITDA for the first six months of 2003 was $4.3 million ($5.2 million excluding the ProxyMed expenses and severance pay referenced above), compared to $5.3 million for the same period in 2002. The 2003 results include previously-announced pre-tax expenses totaling $1.0 million taken in the second quarter of 2003, which relate to the agreement with ProxyMed ($0.9 million) and severance pay ($0.1 million). The amount relating to ProxyMed includes a non-cash expense of $0.5 million for a warrant issued to ProxyMed that will allow for the purchase of 15% of the Company's common stock for $1.95 per share if exercised, as well as cash payments totaling $0.4 million over the first six months of the agreement for exclusivity and for various data services. The Company's June 30, 2003 balance sheet shows a working capital deficit of about $36 million, and a total shareholders' equity deficit of about $16 million. "While we are disappointed with the absence of growth in revenues compared to the prior year, we are pleased that the level of sales is relatively stable as we continue our efforts to improve our balance sheet and capital structure," said Phillip S. Dingle, PlanVista's Chairman and Chief Executive Officer. "We continue to believe we are better positioned to penetrate the payer market, because of our continued enhancement of our core and new business products and the support of our new financial partners. Our expected new revenue of up to $5 million from new business since March 2003 reflects that positioning. In addition, we are excited about the potential new business from our relationship with ProxyMed. ProxyMed is the second largest healthcare transaction processing business in the United States. Our out-of-network claims repricing services have been packaged with ProxyMed's core transaction processing business, and we believe that ProxyMed's customers will be receptive to this value-added product offering." Business Highlights The Company announced that since March 2003, it has sold new business which is expected to contribute up to $5.0 million in revenue in 2003. The new customers include American Republic Insurance Company, HealthScope Benefits, National Rural Electric Cooperative Association, and other national customers. Under the terms of the new arrangements, which have effective start dates between March and September 2003, PlanVista has established network access and is delivering medical claim repricing solutions utilizing the Company's own internally- developed EDI and internet claim repricing systems. By processing medical claims electronically, PlanVista is able to enhance the repricing accuracy, speed, and claim turnaround time for the payer. According to PlanVista President and Chief Operating Officer Jeffrey L. Markle: "We are pleased to welcome these significant payers to PlanVista. Being chosen in a competitive process reinforces the value that our customers place in our network access, repricing technology, and medical claim cost containment services." Markle continued, "Since our March 2003 announcement regarding Commonwealth Associates' investment in PlanVista, we have seen a renewed payer confidence in our products, services, and long-term growth strategy." The Company's preferred provider network business sold and implemented 11 new payers in the second quarter resulting in new business revenues of $0.5 million during the quarter. The increase in operating revenue from new business, compared to the second quarter of 2002, was offset by a decrease in operating revenue due to the departure of customers that are no longer in business, a reduction in utilization of our services by other customers, and a lower percentage of high-dollar claims. The Company's other cost containment products, which generated revenues of $1.8 million in fiscal year 2002 and include business process outsourcing products PayerServ and PlanServ, as well as bill negotiation, accelerated funding, and other services, generated revenues of $0.7 million and $1.6 million in the three and six months ended June 30, 2003, respectively, compared to $0.1 million and $0.6 million during the same periods in 2002, respectively. These revenues represented 10.1% of the Company's operating revenue in the first six months of 2003. The Company's ClaimPassXL(R) internet repricing system generated $2.6 million in revenue in the second quarter of 2003, or 33.0% of the Company's operating revenue for the quarter, compared to $2.4 million during the second quarter of 2002. The Company processed 145,000 medical claims via the Internet in the second quarter, compared to 146,000 claims during the same period in 2002. In total, the Company processed 929,000 medical claims in the second quarter, compared to 921,000 claims during the same period in 2002. Dingle concluded: "We are pleased with our business prospects and growth opportunities, particularly with the potential prospects generated by our joint sales and marketing efforts with ProxyMed, which have been encouraging to date. Accordingly, we remain confident of meeting the previously-announced revenue estimates of between $34 million and $36 million for 2003. Further, we are continuing to explore alternatives, including the possible sale of equity securities, to refinance our debt, reduce our obligations, recapitalize the Company, and provide additional liquidity. As these activities progress, we hope to resolve the uncertainties surrounding the number of fully diluted shares outstanding, which relate primarily to our convertible preferred stock and pro forma ownership of the Company, and place our Company in a better position to grow." Preferred Stock Accretion In connection with our April 12, 2002 debt restructuring, the Company was required to adopt the accounting principles prescribed by Emerging Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments" ("EITF 00-27"). In accordance with the accounting requirements of EITF 00-27, to date the Company has reflected approximately $78.6 million as an increase to the carrying value of its Series C Convertible Preferred Stock with a comparable reduction to its additional paid-in capital. The amount accreted to the convertible preferred stock is calculated based on (a) the difference between the closing price of the Company's common stock on April 12, 2002 and the conversion price per share available to the holders of the convertible preferred stock, multiplied by (b) our estimate of the number of shares of common stock that will be issued if or when the convertible preferred stock is converted. This amount is accreted through October 12, 2003, the contractual life of the convertible preferred stock. This non-cash transaction does not affect the Company's net income or its total stockholders' equity but does reduce the net income deemed available to common stockholders for reporting purposes. Net income deemed available to common stockholders is further reduced by dividends paid on the convertible preferred stock. As a result of the dividends and accretion on the convertible preferred stock, net loss deemed available to common stockholders per diluted share was $(0.99) and $(0.78) for the three months ended June 30, 2003 and 2002, respectively, and $(1.92) and $(0.77) for the six months ended June 30, 2003 and 2002, respectively. (i) EBITDA is a metric that Company management believes is a meaningful measure of operating performance. The calculation of EBITDA has no basis in Generally Accepted Accounting Principles. PlanVista Solutions provides medical cost containment and business process outsourcing solutions to the medical insurance and managed care industries. Specifically, we provide integrated national preferred provider organization network access, electronic claims repricing, and network and data management services to health care payers, such as self-insured employers, medical insurance carriers, third party administrators, health maintenance organizations, and other entities that pay claims on behalf of health plans. We also provide network and data management services to health care providers, such as individual providers and provider networks. Visit the Company's Web site at http://www.planvista.com RADNOR HLDGS: Liquidity Concerns Prompts S&P to Keep Watch Neg. --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Radnor Holdings Corp. to negative from stable as a result of the company's significantly weaker-than-expected financial performance in the second quarter of 2003, which has eroded the company's liquidity position. Standard & Poor's said that it has affirmed its 'B+' corporate credit rating on the Radnor, Pennsylvania-based company. "The outlook revision highlights the risk of a downgrade sometime this year given the disappointing second-quarter operating results and weaker than expected operating trend for the rest of 2003," said Standard & Poor's credit analyst Liley Mehta. "Weak results were the result of the company's inability to fully recoup higher raw material costs from customers, volume declines in the packaging segment, and the impact of higher natural gas costs." Standard & Poor's said that its ratings reflect Radnor's very aggressive financial leverage, weaker-than-expected financial flexibility, and its narrow scope of operations, which overshadows its below-average business profile. With annual sales of about $326 million, Radnor produces expanded polystyrene (EPS) foam disposable cups and containers for the foodservice industry (about 60% of revenues) and EPS resins in the U.S. and Europe (40%). Radnor is the second-largest player with an estimated share of 35% in the foam segment of the U.S. disposable cup and container market, mainly producing hot drink cups. RITE AID: Amends and Restates New $1.85 Billion Credit Facility --------------------------------------------------------------- Rite Aid Corporation has amended and restated its new $1.85 billion senior secured credit facility due April 2008, resulting in a lower interest rate on the term loan borrowings under the facility. The senior secured credit facility, which was entered into in May 2003, consists of a $1.15 billion term loan and a $700 million revolving credit facility. The interest rate on the term loan borrowings under the facility has been reduced by 0.5 percent. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of nearly $16 billion and approximately 3,400 stores in 28 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's Web site at http://www.riteaid.com As reported in Troubled Company Reporter's April 25, 2003 edition, Standard & Poor's Ratings Services raised the corporate credit rating on Rite Aid Corp. and Rite Aid Lease Management Co. to 'B+' from 'B', and the ratings on the senior secured second-lien notes to 'B+' from 'B-'. At the same time, Standard & Poor's assigned its 'BB' rating to Rite Aid's pending $2.0 billion senior secured credit facility, which matures in 2008. Concurrently, Standard & Poor's affirmed its 'B-' rating on senior unsecured notes and its 'CCC+' rating on Rite Aid's preferred stock. All ratings were removed from CreditWatch where they were placed April 14, 2003. The outlook is stable. The Camp Hill, Pennsylvania-based company has $3.8 billion of funded debt as of March 1, 2003. RJ REYNOLDS: S&P Affirms Ratings & Revises Outlook to Negative -------------------------------------------------------------- Standard & Poor's Ratings Services revised its rating outlook for RJ Reynolds Tobacco Holdings Inc. to negative from stable. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit and senior unsecured debt ratings on RJR. Standard & Poor's also affirmed its 'BB' senior unsecured ratings on those selected debt issues that are not guaranteed by RJR's material operating subsidiaries (including RJ Reynolds Tobacco Company). About $2.0 billion of total debt was outstanding at RJR at June 30, 2003. The outlook revision reflects Standard & Poor's assessment of the U.S. tobacco industry environment and RJR's competitive position. Last week, RJR reported its second-quarter earnings, which included a 47% decline in operating earnings before $55 million of restructuring charges. Although Standard & Poor's had anticipated a weak second quarter for RJR, industry conditions do not appear to be improving. Recent earnings releases from other industry participants indicate that promotional and discounting activity is still at high levels, and it is unclear when this trend will begin to reverse. In addition, RJR expects to announce a significant restructuring charge in the September/October time period as part of an ongoing review of its business strategy and cost structure. It is uncertain as to how quickly any recommendations or changes to RJR's business can be implemented in order to stem further erosion of volume and operating profit. "The ratings on RJ Reynolds Tobacco Holdings Inc. (RJR) and related entities are based on the company's No. 2 position in the declining domestic tobacco market, its declining brand volume and market share, weakened competitive position, and significant uncertainties about future domestic operating performance and pricing strategies," said Standard & Poor's credit analyst Nicole Delz Lynch. "Furthermore, the U.S. tobacco industry continues to face significant litigation challenges. These factors are somewhat mitigated by the firm's strong financial condition and conservative financial policies." RJR continues to face intense competition in the U.S. cigarette market and future pricing uncertainty arising from increased state excise taxes and the corresponding growth of deep discount manufacturers. Standard & Poor's believes that these factors will result in continued declines in RJR's domestic cigarette volume and cash flow. SAFETY-KLEEN: Proposes Post-Confirmation Management & Salaries -------------------------------------------------------------- D. J. Baker, Esq., at Skadden Arps, in New York, notes that Section 1129(a)(5)(A) of the Bankruptcy Code requires the proponent of a plan of reorganization to disclose the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor participating in a joint plan with the debtor, or a successor to the debtor under the plan. The Bankruptcy Code further requires the proponent of a plan of reorganization to disclose the "identity of any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation for such insider." Mr. Baker points out that the Plan provides that the existing officers of Safety-Kleen Corporation will serve as the officers of one or more of the Reorganized Debtors in their current capacities after the Effective Date. Mr. Baker identifies the individuals expected to serve as the initial officers of the Reorganized Debtors and the nature of compensation for the Initial Officers. Mr. Baker informs Judge Walsh that negotiations with respect to the exact amount of the salaries, bonuses and other compensation have not been completed between the senior management and the lenders. Accordingly, these amounts may change. Once a final agreement is reached with respect to the salaries, bonuses and other compensation, these items will be brought to the Board of Directors for approval. Name and Anticipated Annual Anticipated Annual Principal Position Salary ($)* Bonus ($)* ------------------ ------------------ ------------------ Ronald A. Rittenmeyer 800,000 900,000 -- Chairman of the Board, Chief Executive Officer and President Larry W. Singleton 300,000 350,000 -- Executive Vice President, and Chief Financial Officer David M. Sprinkle 300,000 300,000 -- Executive Vice President for Operations Thomas W. Arnst 300,000 350,000 -- Executive Vice President and Chief Administrative Officer Bruce E. Roberson 350,000 500,000 -- Executive Vice President for Sales & Marketing In addition to this compensation, the Reorganized Debtors expect to adopt and are continuing to negotiate with the Lenders the terms of a management incentive plan to promote the long-term growth and profitability of the Reorganized Debtors. Mr. Baker relates that the Management Incentive Plan will "provide members of the Reorganized Debtors' senior management with incentives to improve stockholder value and to contribute to the growth and financial success of the Reorganized Debtors and enable the Reorganized Debtors to attract, retain and reward the best available persons for positions of substantial responsibility." The Management Incentive Plan will likely grant select members of the Reorganized Debtors' senior management an opportunity to receive New Common Stock of the Reorganized Debtors through: (a) direct grants of shares of New Common Stock; (b) purchases of shares of New Common Stock; and/or (c) warrants or options to purchase shares of New Common Stock. In addition, the Management Incentive Plan will likely provide for other compensation, awards and benefits. Any Management Incentive Plan adopted and the criteria for awards will be subject to the Board of Directors' approval. (Safety-Kleen Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) SAMUELS JEWELERS: US Trustee to Meet with Creditors on Sept. 12 --------------------------------------------------------------- The United States Trustee for Region III will convene a meeting of Samuels Jewelers, Inc.'s creditors on September 12, 2003, 10:00 p.m., at J. Calebs Boggs Federal Building, 2nd Floor, Room 2112, in Wilmington, Delaware. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Samuels Jewelers, Inc., headquartered in Austin, Texas, operates a national chain of specialty retail jewelry stores located in regional shopping malls, power centers, strip centers and stand- alone stores. The Company filed for chapter 11 protection on August 4, 2003 (Bankr. Del. Case No. 03-12399). Scott D. Cousins, Esq., William E. Chipman Jr., Victoria W. Counihan, Esq., at Greenberg Traurig LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $42,500,000 in total assets and $78,400,000 in total debts. SATURN (SOLUTIONS): Bank Lender Agrees to Forbear Until Oct. 31 --------------------------------------------------------------- Saturn (Solutions) Inc., expects to release its results for the fiscal year ended May 31, 2003 during the month of September. According to Saturn's CEO, George Hurlburt, "While we are not yet in a position to release our results for the fiscal year, we know that they will be very disappointing. While a slight seasonal downturn was expected for the quarter ended May 31, many other factors added to the decline in demand for CD and Turnkey services provided by our Montreal and Ireland facilities". In light of the results, Saturn is currently in default of certain covenants under the loan agreement with Saturn's principal Canadian bank. Saturn has entered into a standstill agreement with the bank under which the bank has agreed to continue to provide support to Saturn, subject to compliance by Saturn with a number of conditions, and to forbear until at least October 31, 2003 from taking action against Saturn. Saturn further announced that it has taken a number of measures in light of its difficult financial condition. These include the engagement of experienced external financial advisors to assess the strategic alternatives available to the Company, recommend possible courses of action with respect to mergers or partnerships, and develop a business plan to reflect the challenges of Saturn's industry and Saturn's on-going operations. In addition, Saturn is considering various options with respect to its wholly-owned Irish subsidiary, Saturn Fulfilment Services Limited, in light of the subsidiary's financial condition. Saturn also announced the resignations of Messrs. Raymond Fullam and Sylvain Duval as directors of the Company. Mr. Fullam has served as a director of Saturn since 1996 and Mr. Duval since November 2002. George Hurlburt said: "We thank Ray Fullam and Sylvain Duval for their valued contribution to Saturn and for their devoted service as directors." Mr. Hurlburt continued, "We are working with our external financial advisors to address the situation at Saturn. We appreciate the patience that has been demonstrated by the Company's financiers and suppliers during this continuing period of transition. While there is no guarantee that we will be successful, Saturn's Board of Directors and management will explore every means of improving Saturn's financial condition. In this regard, we are gratified that preliminary sales results from our North American operations for the months of June and July were better than we forecasted." SCOTIA PACIFIC: Class A-3 Rating Cut to Speculative Grade Level --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on all classes of timber-collateralized notes issued by Scotia Pacific Co. LLC. Additionally, the ratings remain on CreditWatch with negative implications, where they were placed Nov. 25, 2002. The lowered ratings reflect the negative impact that depressed timber prices, lower-than-expected harvest levels, and higher- than-expected capital/operating expenses have had on the cash flow available for debt service. Given these factors, ScoPac has increasingly relied upon borrowings under the line of credit to make required interest payments on the bonds, and draws upon the scheduled amortization reserve account to make payments of principal in accordance with the scheduled amortization schedule. While ScoPac has continued to make all semi-annual scheduled principal amortization payments to date (as opposed to the minimum principal amortization payments representing the minimum amount of principal that ScoPac must pay), more than $26 million has been withdrawn from the scheduled amortization reserve account (SAR account), beginning with the January 2002 payment and continuing through all subsequent payment dates including July 2003, in order to meet the scheduled principal amortization payment. Additionally, while permissible under the transaction documents, it should be noted that $29.4 million from the SAR account was released from the lien of the indenture to the issuer in March 2002 after ScoPac notified the trustee that it had met all of the necessary requirements (i.e. achieving certain cumulative harvest levels, inventory of company timber covered by timber harvest plans, and no outstanding LOC borrowings) as of the SAR reduction date. The SAR Account, which was not part of the original credit enhancement at closing, was subsequently established in November 1999. The deposit of the funds into the SAR account was as a result of the release of a portion of the funds received from the consummation of the Headwaters Agreement. (On March 1, 1999, ScoPac, Pacific Lumber Co., and Salmon Creek Corp., another wholly owned subsidiary of Pacific Lumber Co., consummated the Headwaters Agreement with the U.S. and California). The amount on deposit in the SAR account (post July 2003 payment date) is $105.9 million, versus the required SAR account balance of $117.5 million. Furthermore, beginning with the July 2002 payment date, the amount of borrowings under the LOC facility has increased with each subsequent payment date. The LOC borrowings on the July 2002, January 2003, and July 2003 payment dates were $13.89 million, $23.86 million, and $29.43 million, respectively. Moreover, the July 2003 payment date represented the first time that outstanding borrowings under the LOC, from the prior payment date, were not fully repaid. Including the current request for borrowings under the LOC, the current outstanding borrowing under the LOC is $30.67 million against a $58.50 million borrowing capacity. ScoPac, a special-purpose Delaware Limited Liability Co., wholly owned by the Pacific Lumber Co. (B/Negative/-), was organized by Pacific Lumber to facilitate its July 1998 debt issuance. While it is expected that substantially all of ScoPac's revenue will be generated from the sale of logs to Pacific Lumber, the new master purchase agreement entered into by ScoPac and Pacific Lumber, dated July 20, 1998, does allow for the sale of logs to third parties. The cash flow available to make debt service payments on the timber collateralized notes depends primarily upon the sale prices received for logs harvested from ScoPac's timberlands, in addition to the quantities and timing of log sales. The purchase price for each log purchase agreement shall be at least equal to or greater than the then published SBE price. The SBE price, for any species and category of timber, is the stumpage price for each such species and category. The stumpage price is set forth in the most recent Harvest Value Schedule published by the California State Board of Equalization applicable to the timber sold during the period covered by such Harvest Value Schedule. Although SBE prices have recently trended upward from 2002 SBE prices, which exhibited the lowest pricing levels since 1992 (after SBE prices peaked in mid to late 2000), SBE price trends continue to be below pricing scenarios utilized in conjunction with the original analysis. Pricing in conjunction with the lower-than-projected harvest levels, as well as higher-than-expected capital/operating expenses, do not allow the transaction to sustain stresses consistent with the existing ratings. The ratings on all classes of the aforementioned transaction will remain on CreditWatch negative for the next three to four months as Standard & Poor's continues to monitor the performance of the key performance-related variables. If during this time period SBE prices can exhibit stability, and if harvest levels meet ScoPac projections, the ratings on all classes will be removed from CreditWatch with negative implications. RATINGS LOWERED AND REMAINING ON CREDITWATCH NEGATIVE Scotia Pacific Co. LLC Timber collateralized notes Rating Class To From Balance (mil. $) A-1 BBB+/Watch Neg A/Watch Neg 83.860 A-2 BBB/Watch Neg A/Watch Neg 243.200 A-3 BB/Watch Neg BBB/Watch Neg 463.348 SIMULA INC: Expects Weaker Performance Results for 2nd Quarter -------------------------------------------------------------- Simula Inc. (AMEX: SMU), it expects to report revenues for the second quarter ended June 30, 2003 of $17.2 million, a decrease of 20% from $21.6 million in the second quarter of 2002. Revenues were impacted by delays in funding for certain programs and production line interruptions occurring in connection with consolidation of the Company's Asheville, N.C. operations into the Phoenix operation. The Company will report a net loss for the second quarter ended June 30, 2003, of $1.8 million. The second quarter was impacted by one time items including a $1 million fee under a leverage ratio loan covenant, a $0.4 million charge related to the early retirement of a mortgage note related to the closing of the Company's Asheville facility, and moving and restructuring charges of approximately $0.6 million. "Results were consistent with our internal expectations. Revenue is expected to grow substantially in the third and fourth quarter. Our defense business remains robust and bookings are strong. We expect the second-half of the year will represent record production and deliveries," said Brad Forst, President & CEO. The Company reconfirms 2003 guidance for revenue growth in the Aerospace and Defense Group in the range of 15% over 2002, and for profitability in 2003. The Company expects 2003 Earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $15 million, excluding the impact of the $1 million covenant fee discussed above and approximately $1 million in estimated one-time moving and restructuring costs. The Company believes EBITDA excluding one-time charges to be a useful performance measure due to its leveraged status. 2003 Expected EBITDA (in millions) Expected Income Before Discontinued Operations $ 1.2 Add: Expected Depreciation & Amortization 1.2 Add: Expected Interest Expense 10.5 Add: Expected Income Tax Expense .1 Add: Expected One-Time Moving & Restructuring Costs 1.0 Add: One-Time Covenant Fee 1.0 ---- 2003 Expected EBITDA $ 15.0 ==== In July, Simula announced that it had signed a letter of intent to be acquired by Armor Holdings, Inc. The Company confirmed that the process toward a definitive merger agreement remains on track. The Company expects to file its Form 10Q on August 14, 2003. Simula -- whose March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $40 million -- designs and makes systems and devices that save human lives. Its core markets are military aviation safety, military personnel safety, and land and marine safety. Simula's core technologies include energy- absorbing seating systems, inflatable restraints, advanced polymer materials, lightweight transparent and opaque armor products, emergency bailout parachutes and military personnel protective equipment. For more information, go to http://www.simula.com SLMSOFT: Canadian Court Extends CCAA Protection until October 15 ---------------------------------------------------------------- SLMsoft Inc. (TSX: ESP.a, ESP.b), a leading global provider of e- financial solutions, announced that an extension of the stay of proceedings contained in the Initial Order of May 27, 2003 under the Companies' Creditors Arrangement Act, until October 15th, 2003. On September 10, 2003, a motion to determine the amount of debt owed to Insight, an unsecured creditor shall be presented to the Court for determination. Thereafter, SLM will create a plan of arrangement for approval by its creditors and finalize restructuring efforts. STONE & WEBSTER: Files Amended Joint Reorganization Plan in Del. ---------------------------------------------------------------- Stone & Webster, Incorporated (OTC: SWBIQ.PK) and Stone & Webster Engineers and Constructors, Inc., filed their Third Amended Joint Plan of Reorganization with the United States Bankruptcy Court for the District of Delaware. The Amended Plan, which has the support of Federal Insurance Company and Maine Yankee Atomic Power Company, the companies' two largest unsecured creditors, as well as the Official Committee of Unsecured Creditors and the Official Committee of Equity Holders, provides for the creation of separate consolidated estates for Stone & Webster, Incorporated and certain of its debtor subsidiaries and Stone & Webster Engineers and Constructors, Inc. and certain of its debtor subsidiaries, with each estate to be separately funded and administered. Equity holders as of August 27, 2003 who vote to accept the Amended Plan and tender their shares on ballot forms that are expected to be distributed in early to mid-September may receive an initial distribution of up to $.62 per share in cash, $.50 of which is contingent upon Federal Insurance Company first receiving an initial distribution of $25 million. The Amended Plan, which remains subject to confirmation by the Bankruptcy Court and is subject to a number of other conditions, is expected to become effective during the fourth quarter of 2003 or the first quarter of 2004. Interested parties are urged to read the Amended Plan and the related Disclosure Statement, copies of which have been filed with the Bankruptcy Court and will be filed with the Securities and Exchange Commission in the near future. More information is available on the companies' Web site at http://www.stonewebinc.com SUN HEALTHCARE: Enters Stipulation Allowing 2 Employees' Claims --------------------------------------------------------------- On the grounds of wrongful termination, two claimants filed claims against the Sun Healthcare Debtors on June 12, 2000: Claimant Claim No. Claim Amount -------- --------- ------------ Marjorie Davis 09355 $1,500,000 Jocelyn L. Tichenor 09269 15,000,000 However, the Claims had duplicate proofs of claim on the Debtors' Claims register: Claim No. Duplicate Claim Nos. --------- -------------------- 09355 09357, 09359 and 09361 09269 09270, 09271 and 09273 After arm's-length and good faith negotiations, the parties settled the dispute through a stipulation, which provides that: (a) Ms. Davis' Claim No. 09355 is amended and allowed as a general unsecured claim for $630,000 against the estate of Phoenix Associates, Inc. while Claim Nos. 09270, 09271 and 09273 are expunged in their entirety; and (b) Ms. Tichenor's Claim No. 09269 is amended and allowed as a general unsecured claim for $1,500,000 against the estate of Phoenix Associates, Inc. while Claim Nos. 09357, 09359 and 09361 are expunged in their entirety. Both Claimants further agree not to assert any other Proofs of Claim in the Debtors' cases. Accordingly, the Debtors ask the Judge Fitzgerald to approve the Stipulations in all respects. (Sun Healthcare Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 609/392-0900) TROPICAL SPORTSWEAR: Initiates Changes in Sr. Management & Board ---------------------------------------------------------------- Tropical Sportswear Int'l Corporation (Nasdaq:TSIC) announced that its Board of Directors has concluded the review of strategic alternatives that began with the appointment of Merrill Lynch on June 2, 2003. The Board of Directors has determined that it is in the best long-term interest of the Company, and the best alternative for increasing shareholder value, that the Company continues pursuing its present strategic business plan. The Company also announced several changes in senior management and the Board of Directors. Eloy S. Vallina-Laguera has been appointed Chairman of the Board, succeeding Michael Kagan, and Mr. Kagan has been appointed Chief Executive Officer and will remain a member of the Board of Directors. Mr. Vallina has been a member of the Board since 1989. Mr. Kagan was appointed as a director and Chairman of the Board in November 2002. Prior to that appointment, Mr. Kagan had been a director and the Company's Chief Financial Officer from November 1989 until his retirement in August 2002. Mr. Kagan has over 30 years of apparel related experience. The Company also announced that Richard J. Domino will become President and Robin J. Cohan will become Chief Financial Officer and Treasurer. Mr. Domino has been with the Company since 1988 serving in various capacities, including as President of the Company's private brand division. Mr. Domino has over 30 years of experience in the apparel industry. Ms. Cohan has been with the Company since March 2000 serving as Senior Vice President of Finance. Ms. Cohan is a C.P.A. and has over 10 years of experience as a financial executive for public companies. Ms. Cohan also spent 5 years in public accounting with PricewaterhouseCoopers. The Company has decided to terminate the employment of Christopher B. Munday, the former President and CEO, N. Larry McPherson, the former Executive Vice President and CFO, and Gregory Williams, the former Executive Vice President and General Counsel, each effective August 15, 2003. Michael R. Mitchell, the former President of the Savane division, has agreed to step down and pursue other interests, also effective August 15, 2003. The one- time charges associated with the management changes will be reflected in the fourth quarter results. Mr. Kagan commented, "We believe that we can better enhance long- term shareholder value by remaining independent and restructuring the business. The former management team had initiated and completed a number of positive changes in the business and these additional structural changes will further streamline the business by focusing the operations under one well-qualified president. We are getting back to our core operations, and these are the additional steps we need to take in getting there." TSI is a designer, producer and marketer of high-quality branded and retailer private branded apparel products that are sold to major retailers in all levels and channels of distribution. Primary product lines feature casual and dress-casual pants, shorts, denim jeans, and woven and knit shirts for men, women, boys and girls. Major owned brands include Savane(R), Farah(R), Flyers(TM), The Original Khaki Co.(R), Bay to Bay(T), Two Pepper(R), Royal Palm(R), Banana Joe(R), and Authentic Chino Casuals(R). Licensed brands include Bill Blass(R) and Van Heusen(R). Retailer national private brands that we produce include Puritan(R), Member's Mark(R), Sonoma(R), Croft & Barrow(R), St. John's Bay(R), Charter Club(R), Roundtree & Yorke(R), Geoffrey Beene(R), G.H. Bass(R), Izod(R), and White Stag(R). TSI distinguishes itself by providing major retailers with comprehensive brand management programs and uses advanced technology to provide retailers with customer, product and market analyses, apparel design, and merchandising consulting and inventory forecasting with a focus on return on investment. As reported in Troubled Company Reporter's July 25, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on apparel manufacturer Tropical Sportswear International Corp. to 'B+' from 'BB-', and its subordinated debt to 'B-' from 'B'. These ratings remain on CreditWatch with developing implications where they were placed June 3, 2003, following the company's announcement that it has retained Merrill Lynch & Co. to act as a financial advisor to explore strategic alternatives to maximize long-term shareholder value. UNITED AIRLINES: Wants Go-Signal to Implement Selective KERP ------------------------------------------------------------ UAL Corporation's first Key Employee Retention Plan was limited to 350 participants at a cost of no more than $20,700,000. Recently, the Debtors experienced significant attrition from the Key Professional and Technical Employees in their Information Services Division. Many of these employees are critical to the Debtors' continuing business and have been actively recruited and/or have left for alternative employment within and outside the airline industry. The Debtors have had difficulty retaining similar employees, and replacing the departing ones has proved "extremely challenging." The Debtors, with the assistance of their employee benefits advisors, Towers Perrin, have developed a Technical Employee KERP to assist in retaining their Key Professional and Technical Employees. The Plan provides for financial awards that will not exceed $9,500,000 and will be extended to no more than 600 participants. James H.M. Sprayregen, Esq., at Kirkland & Ellis, explains that the Technical Employee KERP is essential to retain employees that will assist the Debtors in operating and emerging from Chapter 11. These employees are experienced, talented and intimately familiar with the Debtors' business. They possess highly marketable technical skills making them difficult to replace. Traditionally, the ISD turnover has been about 6.3% annually. However, for the period from January 2003 to June 2003, the turnover was 16% and appears to be increasing. The titles eligible for participation in the Technical Employee KERP include: (1) Applications Development Project Leader; (2) Senior Analyst; (3) Programmer Analyst; (4) Applications Development Engineer; (5) Senior Staff Planner -- Routes/Schedules; and (6) Staff Specialist -- Pricing. Exit interviews indicate that employees are leaving due to financial instability, potential future pay cuts and limited career development. The Technical Employee KERP is designed to motivate participants to maximize the value of the Debtors' estates. Mr. Sprayregen assures the Court that the KERP was constructed with the Debtors' financial constraints in mind to avoid unnecessary or excessive incentives. The costs of the Technical Employee KERP are outweighed by the damage to the Debtors and their estates if these Employees leave the Debtors. Each participant will receive 20% of their annual base pay, to be transferred in two installments. The first 50% will be paid on the effective date of a confirmed Plan of Reorganization. The remaining 50% will be paid six months thereafter. (United Airlines Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) U.S. CONCRETE: Gets Waivers of Certain Loan Covenant Violations --------------------------------------------------------------- U.S. Concrete, Inc. (Nasdaq: RMIX) reported results for the three and six months ended June 30, 2003. Revenues in the second quarter of 2003 were $124.6 million compared to $140.2 million in the second quarter of 2002. The 11.1 percent decline in revenues was primarily due to a volume decrease in the Company's ready-mixed concrete operations as a result of a general weakening in construction activities in most of the Company's markets, continued poor weather in the Company's Tennessee, Michigan and Northeast markets, and exiting certain non- core businesses in the Company's Dallas/Ft. Worth operation during the fourth quarter of 2002. Sequentially, the 11.1 percent revenue decline in the second quarter compares favorably with the 18.9 percent decline in revenue the Company experienced during the first quarter of 2003 from the first quarter of 2002. Net income for the second quarter of 2003 was $3.5 million, or $0.13 per diluted share on 28.1 million shares, compared to net income of $6.7 million, or $0.25 per diluted share on 26.8 million shares, for the same period last year. "The second quarter was challenging, particularly in light of abnormally wet weather in certain of our markets and the continued effects of a sluggish economy on construction activity," stated Eugene Martineau, Chief Executive Officer. "While the quarterly financial results are disappointing, we remain committed to our operating strategy and are not waiting for market conditions to simply improve. During the second quarter, we further focused our efforts on controlling costs and capital spending. In addition, our increased emphasis on value added marketing and sales is beginning to yield positive results. We remain optimistic that these efforts will generate improved results for the remainder of the year, assuming seasonally normal weather conditions." For the six months ended June 30, 2003, revenues were $209.7 million compared to revenues of $245.1 million for the first six months of 2002. The net loss for the first half of 2003 was $0.5 million, or $0.02 per diluted share, compared to net income, before cumulative effect of accounting change of $6.0 million, or $0.22 per diluted share, during the same period last year. The cumulative effect of the adoption of SFAS No 142 regarding goodwill had a negative net income effect of $24.3 million, or $0.91 per diluted share, for the first half of 2002. At June 30, 2003, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $22 million. As a result of the difficult operating environment the Company has endured over the past several quarters, the Company failed to comply with the total leverage ratio covenant contained in its $200 million senior credit agreement and in its note agreement covering $95 million of senior subordinated notes, as of June 30, 2003. The Company has obtained waivers for those covenant requirements and, in connection with obtaining those waivers, has agreed to limit its borrowings under the credit agreement to $125 million during the waiver period, which borrowings stood at $73 million at June 30, 2003. The Company is in discussions to replace its senior credit agreement, which matures in May 2004, and modify its note agreement. OUTLOOK U.S. Concrete expects revenue for the third quarter of 2003 in the range of $135 million to $145 million and net income per share in the range of $0.25 to $0.29. For the full year 2003, U.S. Concrete now expects revenue in the range of $460 million to $480 million and net income per share in the range of $0.40 to $0.45. This revised guidance assumes seasonally normal weather conditions. Previous guidance for the full year 2003 was revenue in the range of $500 million to $510 million and net income per share in the range of $0.53 to $0.59. U.S. Concrete, Inc. provides ready-mixed concrete and related concrete products and services to the construction industry in several major markets in the United States. The Company has 91 fixed and nine portable ready-mixed concrete plants, eight pre- cast concrete plants, three concrete block plants and one aggregates quarry. During 2002, these facilities produced 5.4 million cubic yards of ready-mixed concrete, 7.1 million eight- inch equivalent block units and 1.2 million tons of aggregates. For more information on U.S. Concrete visit http://www.us-concrete.com USG CORP: Committee Gets OK to Litigate Preferential Transfers -------------------------------------------------------------- In a Court-approved Stipulation, the USG Corp. Debtors and the Official Committee of Unsecured Creditors agree that: (a) the Committee is authorized to file preferential transfer complaints against the USG creditors; and (b) the time by which the summons and the complaint are to be served on the Defendants is extended, pursuant to Rule 9006(b) of the Federal Rules of Bankruptcy Procedure, until 90 days after the confirmation of a reorganization plan in the Debtors' Chapter 11 cases. The complaint may not be served on the Defendants until the Court has determined which of the actions may be prosecuted and whether the Debtors, the Committee, or both should be the party prosecuting the actions asserted in the complaint. Either the Debtors or the Committee, at any time, may bring a request for the determination or any issue reserved by the parties. (USG Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-0900) WEIRTON STEEL: Wants Nod to Assume Kaplan Employment Agreement -------------------------------------------------------------- Robert G. Sable, Esq., at McGuireWoods LLP, in Pittsburgh, Pennsylvania, tells the Court that Mark Kaplan is Weirton Steel's current Chief Financial Officer. Weirton's Existing Employment Agreement with Mr. Kaplan includes these terms: A. Term Three years from the Effective Date, unless terminated. B. Compensation (1) a $260,000 annual base salary; (2) an annual bonus equal to at least 50% of base salary for attaining certain incentive goals; (3) a bonus for the year 2003 as approved by the Compensation Committee of the Board; (4) automobile expense reimbursement; (5) participation in Weirton's retirement plan; and (6) participation in Weirton's Supplemental Employee Retirement Plan. C. Indemnification Weirton will indemnify Mr. Kaplan to the fullest extent permitted by Delaware law and Weirton's charter in connection with any cause of action arising as a result of Mr. Kaplan's employment and positions with Weirton. D. Termination The Existing Employment Agreement and Mr. Kaplan's employment may be terminated in these circumstances: (1) Death; (2) As a Result of Disability In this event, Mr. Kaplan will continue to receive base salary and benefits until the earlier of his death or the date he becomes eligible for disability income under Weirton's then applicable long-term disability plan or workers' compensation insurance plan; and (3) By Weirton, for cause. Pursuant to the terms of the Employment Agreement, Mr. Kaplan was entitled for a one-year period to resign as Weirton's officer and receive a substantial severance benefit equal to: (i) two times the annual gross salary, payable within 10 days of resignation, plus (ii) the present value of lifetime executive health benefits. In waiving his resignation rights and corresponding right to severance payment arising from the failed charter amendment, Mr. Kaplan was paid a $933,297 supplemental retirement plan contribution on February 7, 2003. However, in light of Weirton's deteriorating financial condition, Mr. Kaplan repaid the entire $933,297 on April 7, 2003, out of his own volition and without Weirton's request. As a result of his conversations with numerous parties-in- interest, Mr. Kaplan agrees to remain employed by Weirton during the remainder of its reorganization process, with expanded responsibilities, provided that his Employment Agreement would be amended and approved by the Court. The salient terms of Mr. Kaplan's Amended Employment Agreement are: A. Position: President, Chief Financial Officer and Director B. Base Salary: $350,000 per annum effective as of July 1, 2003 C. Immediate Bonus: $600,000 cash payable: -- $200,000 upon the Bankruptcy Court's approval of the Amended Employment Agreement; -- $200,000 on the 30th day after the Bankruptcy Court approves the Amended Employment Agreement; and -- $200,000 on the 60th day after the Bankruptcy Court approves the Amended Employment Agreement. In the event Mr. Kaplan ceases employment with Weirton at any time within 180 days after the Amended Employment Agreement is approved for a reason other than (i) death or incapacity, (ii) consummation of a sale of all or substantially all of Weirton's assets, (iii) the occurrence of the effective date of a plan of reorganization within this 180-day period, (iv) termination of Good Reason, or (v) in the event, Weirton terminates Mr. Kaplan's employment without cause, Mr. Kaplan will repay Weirton a ratable portion of the $600,000 received. D. Subsequent Bonus: -- $500,000 cash upon earlier of the closing of a sale, or the effective date of a plan of reorganization; and -- The Bonus can be up to an additional $300,000, determined by multiplying $300,000 times a fraction, the numerator of which is the amount by which the gross sale price or going concern value of Weirton, as determined by the financial advisor or investment banker to the proponent of a confirmed plan of reorganization, exceeds the amount of the DIP loan balance at the time the DIP loan is paid or otherwise satisfied, and the denominator of which is $140,00,000. E. Severance: One times base salary with tax gross up, payable upon: (i) termination without cause; (ii) resignation for Good Reason; or (iii) death or disability. F. Other: (a) Entry of a Court order, simultaneous with the entry of an order approving Mark Kaplan's Amended Employment Agreement, authorizing Weirton to retain Leonard Wise as Chief Executive Officer; (b) Entry of a Court order, simultaneous with the entry of an order approving Mark Kaplan's Amended Employment Agreement and an order approving Weirton's employment of Mr. Wise, authorizing Weirton to implement and pay consideration under a Key Employee Retention Plan in a form and of a substance acceptable to Mr. Kaplan and as approved by the Board's Compensation Committee; and (c) Upon entry of order approving Mark Kaplan's Amended Employment Agreement, the full amount of Bonus consideration to which Mr. Kaplan may be paid and severance consideration will be funded into escrow, with Fleet and Weirton's counsel, to serve as joint escrow agents. Mr. Sable asserts that Weirton's continued employment of Mr. Kaplan is critical to its restructuring efforts. In fact, the DIP Loan and Security Agreement dated May 20, 2003 provides that an Event of Default is: "[T]he failure of one of John Walker or Mark Kaplan to function as chief executive officer of Borrower, unless replaced within ten days thereafter with a chief executive officer or chief restructuring officer acceptable to Agent and Majority Lenders." On the other hand, Fleet Bank has expressed its intention to immediately choose and appoint Weirton's chief restructuring officer, and charged with the task of expeditiously selling Weirton's operations in the event that Mr. Kaplan either determines to leave Weirton's employment or does not remain employed by Weirton in a capacity with responsibilities greater than those currently assigned to him. Pursuant to Sections 105(a), 363(b) and 365(a) of the Bankruptcy Code, the Debtor seeks the Court's authority to: (i) assume the Existing Employment Agreement, as modified, with Mark Kaplan and perform under the Amended Employment Agreement; and (ii) pay the salaries and benefits provided. Mr. Sable relates that the proposed use of the estate funds to pay the salary and other benefits associated with the Amended Employment Agreement is supported by the requisite reasonable exercise of the Debtor's business judgment. Stable, experienced management is critical to Weirton's successful reorganization and the implementation of its restructuring efforts, including endeavoring to maintain a two blast furnace operation. Mr. Sable explains that Weirton will only be able to retain Mr. Kaplan if he is provided with the security of and consideration provided under the Amended Employment Agreement. Moreover, the terms of the Amended Employment Agreement are reasonable and customary for transactions of this nature. (Weirton Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392- 0900) WESTPOINT STEVENS: Wants to Assume Wellman Supply Agreements ------------------------------------------------------------ The WestPoint Stevens Debtors and Wellman Inc. are parties to various contracts for the purchase of polyester fibers and related materials the Debtors use in their business. For more than 15 years now, Wellman supplies the Debtors with high-quality polyester fiber fill material at reasonable prices for the manufacture of mattress pads, pillows, and comforters in their bedding and sheeting divisions. Wellman is one of the largest established polyester fiber fill suppliers. It has become the Debtors' sole current supplier of the type of polyester fiber used in their production of comforters, mattress pads and pillows, with average yearly purchases aggregating 42,000,000 pounds of raw material. The Debtors purchase polyester fibers from Wellman through two separate contracts -- the Sheeting Contract and the Bedding Contract. The Sheeting Contract is for a three-month term and establishes the payment terms, quantities and prices for that period. Historically, the Debtors renew the Sheeting Contract on the same terms as previous contracts except for the price of the fibers, which fluctuate based on the market price for crude oil. The Sheeting Contract in place as of the Petition Date covered the period from April 1, 2003 through June 30, 2003. The prices under the Sheeting Contract established a ceiling for any subsequent contracts entered into during the course of the 2003 calendar year. The Sheeting Contract is contingent on Wellman maintaining 100% of the Debtors' total polyester fiber requirements, other than samples used for testing. As of the Petition Date, the Debtors owed Wellman $802,073 for unpaid invoices under the Sheeting Contract. The Bedding Contract is for a one-year term and governs the purchase of polyester fibers used as fill in the manufacture of basic bedding and pillows. Pursuant to its terms, the Bedding Contract is currently set to expire on December 31, 2003. As of the Petition Date, the Debtors owed Wellman $802,607 for unpaid invoices under the Bedding Contract. Subsequent to the Petition Date, Wellman informed the Debtors that it would not renew the Sheeting Contract upon its expiration on June 30, 2003, unless and until the Debtors agreed to modify the existing Sheeting Contract, assume both Contracts, and cure any existing defaults. After reviewing their options, the Debtors determined that even if suppliers could be found that offered the same favorable pricing terms as those in the Contracts, investing the time necessary to identify and secure replacement suppliers for Wellman would entail shutting down their operations for a significant period of time -- a situation that would have severe economic consequences on their operations. Because of their critical need to maintain a steady supply of fiber to avoid a shut down of operations, the Debtors, with the assistance of their professionals, engaged in good faith, arm's- length negotiations with Wellman to assume, extend and modify certain of the provisions contained in the Contracts. As a result of those negotiations, Wellman and the Debtors agreed that the Sheeting Contract would be extended for three additional months, with prices set consistent with the ceiling imposed by the March 21, 2003 contract. The Debtors will cure outstanding prepetition balance by paying Wellman $1,203,510 -- a 25% reduction of their prepetition obligation on unpaid invoices. During the pendency of their Chapter 11 cases, the Cure Payment will be subject to disgorgement in the event of Wellman's refusal to negotiate new contracts with the Debtors in good faith or due to Wellman's default under the Contracts. The Debtors will have the right to terminate the Contracts on 60 days' written notice to Wellman, subject to payment of any remaining amounts due with respect to the Cure Payment. "The process of identifying and negotiating beneficial contracts with a sufficient number of smaller suppliers to replace Wellman would be an undertaking that the Debtors determined would result in an extended stoppage of production at the Debtors' manufacturing facilities," John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP, tells Judge Drain. Given the Debtors' efforts to restructure their business operations and effectively prosecute these Chapter 11 cases, Mr. Rapisardi emphasizes that an untimely shutdown of their manufacturing process could be disastrous. Moreover, dealing with numerous, smaller replacement suppliers would result in increased costs for the Debtors due to the lost efficiencies associated with the Debtors' ability to secure favorable contracts for polyester fiber from only one supplier. For these reasons, the Debtors seek the Court's authority to assume the Wellman Contracts. (WestPoint Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: Court Approves Seneca Financial's Engagement ----------------------------------------------------------- Christine C. Shubert, the Chapter 7 Trustee in the cases of Winstar Communications, Inc., and its debtor-affiliates, obtained permission from the Court to employ Seneca Financial Group, Inc., nunc pro tunc to July 7, 2003, in matters related to an adversary proceeding against CitiCapital Commercial Corporation, General Motors Acceptance Corporation and Lucent Technologies, Inc. As expert, Seneca will: 1. prepare the expert report and rebuttal report contemplated by the Scheduling Order; 2. assist the Trustee's professionals in their review and analysis with respect to the proper allocation of the Sale Proceeds among the Acquired Assets; 3. serve as testifying expert at trial of the Adversary Proceeding; 4. assist the Trustee in any negotiations that may ensue with the Defendants; and 5. perform any other services commensurate with the Trustee's needs and Seneca's expert knowledge in connection with issues concerning the Adversary Proceeding, including rendering assistance to the Trustee's professionals in connection with discovery and trial preparation. Seneca is typically compensated at these hourly rates: President James W. Harris $600 Managing Directors 550 Associates 270 Analysts 150 The Trustee also seeks the Court's authority to reimburse Seneca's reasonable out-of-pocket expenses. Backgrounder The Defendants asserted liens in the Sale Proceeds pursuant to certain agreements that they entered into with the Debtors. As a result of their assertions, the Trustee commenced an adversary proceeding seeking to: 1. require these Defendants to prove the validity, priority and extent of their liens; 2. determine the validity, priority and extent of the Defendants' alleged liens; and 3. to the extent the Defendants have valid, perfected liens that rightfully attach to the Sale Proceeds: a. determine the value of the collateral securing the liens; and b. determine the appropriate allocation of the Sale Proceeds, if any, that may be attributable to any valid secured claims the Defendants may hold. On June 3, 2003, the Court entered a scheduling order directing the parties to designate experts by July 2, 2003, complete expert reports by July 16, 2003 with rebuttal reports to be completed by July 25, 2003, complete discovery on August 8, 2003 and that a trial of the Adversary Proceeding will commence on September 8, 2003. (Winstar Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDHEART CORP: June 2003 Balance Sheet Upside-Down By C$53MM -------------------------------------------------------------- World Heart Corporation (OTCBB: WHRTF, TSX: WHT) released its unaudited consolidated financial results for the quarter and six months ended June 30, 2003. For the first six months of 2003, revenues were up by 14% and the gross margin was $1,143,859 compared with negative gross margin of $258,576 for the same period last year. As previously announced, second quarter Novacor(R) LVAS (Left Ventricular Assist System) pump sales were 35 units compared with 31 units sold in the first quarter this year, and 23 during the second quarter of 2002. For the quarter ended June 30, 2003, revenues were $2,724,286, compared with $2,523,164 a year ago, generating a contribution in the second quarter of this year of $582,959, compared with a negative contribution of $297,668 for the same quarter last year. Net loss for the second quarter this year was $4,057,408, or $0.18 per share, compared with $9,853,918, or $0.55 per share last year. Total cash applied to operations during the second quarter this year was $1,263,819, compared with $6,299,941 for the same period one year ago. Revenues for the first six months of 2003 were $5,873,777, compared with $5,142,248 for the same period last year. Net loss for the six months was $12,633,880, or $0.59 per share, compared with $ 23,002,843, or $1.31 per share last year. Total cash applied to operations during the first six months of this year was $11,126,473, compared with $15,629,887 a year ago. Cash at June 30, 2003 totaled $41,551, compared with $248,181 at December 31, 2002. The quarter-end cash position does not include approximately $1.2 million received early in the third quarter by way of a previously announced private placement of secured convertible debentures. The company has maintained operations through such interim financings, as well as through sales revenues and ongoing expense reimbursements by Industry Canada through its Technology Partnerships program. However, payables are being carried at a level that is not sustainable. In this regard, the process of completing additional funding is ongoing, and is expected to be concluded over the next few weeks. World Heart Corporation's June 30, 2003, balance sheet disclosed a working capital deficit of about CDN$16.8 million while net capital deficit topped CDN$53 million. The previously announced customer financing arrangement with Export Development Canada has been well received, and initial utilization of the arrangement is anticipated during the third quarter. This arrangement will assist in optimizing WorldHeart's working capital management, and following implementation in the U.S., WorldHeart would expect to expand the program to other key markets, including Europe, early in 2004. During the quarter, evidence continued to build that the incidence of stroke is substantially reduced when the ePTFE inflow conduit is used with Novacor LVAS implants. As at July 15, 2003, a total of 137 implants had used the ePTFE conduit in the U.S., Europe and Canada with incidence of stroke of 10.9%, of which 3.6% was attributed to specific causes unrelated to the device. These results, together with the continued freedom from device failure, are contributing to the competitive strength of Novacor LVAS. In the U.S., approval for use of Novacor LVAS by NYHA Class IV heart-failure patients who are not candidates for transplantation continues to be a priority. Discussions with the U.S. Food and Drug Administration (FDA) were ongoing during the quarter and supplementary analyses were submitted to the FDA early in the third quarter. The company expects a decision before year-end respecting expansion of the Novacor LVAS indication. Novacor LVAS is an electromagnetically driven pump that provides circulatory support by taking over part or all of the workload of the left ventricle. It is commercially approved as a bridge to transplantation in the U.S. and Canada. On November 22, 2002, the FDA filed WorldHeart's Premarket Approval (PMA) Supplement seeking destination-therapy indication for its Novacor LVAS. In Europe, the Novacor LVAS device has unrestricted approval for use as a bridge to transplantation, an alternative to transplantation and to support patients who may have an ability to recover the use of their natural heart. In Japan, the device is currently commercially approved for use in cardiac patients at risk of imminent death from non-reversible left ventricular failure for which there is no alternative except heart transplantation. World Heart Corporation, a global medical device company based in Ottawa, Ontario and Oakland, California, is currently focused on the development and commercialization of pulsatile ventricular assist devices. Its Novacor(R) LVAS (Left Ventricular Assist System) is well established in the marketplace and its next- generation technology, HeartSaverVAD(TM), is a fully implantable assist device intended for long-term support of patients with end- stage heart failure. WORLDCOM INC: Seeking Stay Relief to Continue Siemens Lawsuit ------------------------------------------------------------- MCI WorldCom Communications, Inc., as successor-in-interest to Real Com Office Communications, Inc., is one of the plaintiffs in a lawsuit against Siemens Rolm Communications, Inc. commenced before the U.S. District Court for the Eastern District of Texas on July 7, 1994. The Federal Court Action was subsequently transferred to the U.S. District Court for the Northern District of Georgia on February 24, 1995 and is currently on appeal before the Eleventh Circuit Court of Appeals. The Plaintiffs assert that Siemens violated the Sherman Antitrust Act. In their complaint, the Plaintiffs, which are independent service companies who repair and service Siemens' PBX equipment, allege, among other things, that Siemens refused to sell them parts and manipulated its control over software unique to Siemens' PBX equipment, thereby unlawfully leveraging its parts and software market to monopolize the aftermarket for service. The Plaintiffs seek unspecified damages which, after trebling under the Sherman Antitrust Act, could potentially result in a multi-million dollar verdict. MCI WorldCom Communications' antitrust claims alone were valued by an expert witness to be in excess of $22,000,000, before trebling. Siemens counterclaimed for patent and copyright infringement, misappropriation of trade secrets, and tortious interference with prospective contractual relationships. Siemens filed a summary judgment motion which was initially denied by the District Court. Subsequently, however, the U.S. Federal Circuit Court of Appeals, in In re Independent Service Organizations Litigation, 203 F.3d 1322 (Fed Cir. 2000), ruled that certain antitrust claims, asserted in factual situations which Siemens asserted are similar to the facts underlying the claims the Plaintiffs asserted in the Federal Court Action, failed as a matter of law. On considering Siemens' renewed motion for summary judgment, the District Court agreed that the Independent Service Organizations Litigation decision represented relevant new law and subsequently dismissed the Plaintiffs' causes of action, by order dated August 10, 2000. In the Summary Judgment Order, the District Court noted that Siemens' patent infringement counterclaims granted the Federal Circuit exclusive jurisdiction to hear any appeal of the Federal Court Action and implicitly acknowledged that the Independent Service Organizations Litigation decision represented binding authority. In addition, after a jury trial on the counterclaims, the District Court entered a $1,250,000 judgment on August 10, 2000, in Siemens' favor. MCI WorldCom Communication's share of the judgment is $37,500. The District Court postponed considering motions by Siemens for costs and by MCI and the other Plaintiffs for partial attorneys' fees and costs. The Plaintiffs' appealed the Summary Judgment Order and the Final Judgment to the Federal Circuit. Although Siemens opposes the Plaintiffs' appeal, Siemens filed its own cross-appeal, which it later dropped. While the Plaintiffs' appeal was pending before the Federal Circuit, the United States Supreme Court, in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 122 S. Ct. 1889 (2002) ruled that the Federal Circuit lacks jurisdiction in cases, such as the Federal Court Action, where patent violation causes of action are asserted only as counterclaims in the action. Thus the primary basis for the District Court's grant of summary judgment against the Plaintiffs -- that the Independent Service Organizations Litigation decision represented binding case law -- was removed. Accordingly, the Plaintiffs' appeal was transferred to the Eleventh Circuit, where the appeal is fully briefed and awaiting oral argument. However, by order dated February 11, 2003, the Eleventh Circuit stayed the appeal in its entirety in view of MCI WorldCom Communication's Chapter 11 petition, pending further order by the Bankruptcy Court. The Eleventh Circuit stayed the appeal because of a concern that Siemens' $37,500 counterclaim judgment against MCI WorldCom Communication implicated the automatic stay arising by virtue of the commencement of MCI WorldCom Communication's Chapter 11 case. Although the automatic stay is designed to give a debtor a breathing spell, an opportunity to rehabilitate its business and to enable the debtor to generate revenue, the Debtors believe that continuing the prosecution of the antitrust claims in the Federal Court Action is important. The Debtors explain that allowing the appeal to proceed will permit MCI WorldCom Communications to challenge the dismissal of its antitrust claims, the core claims in the Federal Court Action. If permitted to pursue the antitrust claims in the Federal Court Action, MCI could potentially recover a multi-million dollar judgment against Siemens. In contrast, the Debtors ascertain that there is no risk of harm to them or their estates associated with Siemens' counterclaim. That claim has been liquidated by judgment in a small amount and Siemens has not cross-appealed from that judgment. The Debtors believe that continuation of the appeal is the most efficient way to resolve Siemens' claim against them, as well as their much more substantial claims against it. At the Debtors' behest, the Court lifts the automatic stay and allows the Debtors to continue litigating MCI WorldCom Communication's claims in the Federal Court Action. (Worldcom Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Fasken Martineau Opens 3rd International Off. in Johannesburg --------------------------------------------------------------- Fasken Martineau, one of Canada's leading business law and litigation firms, has opened its 3rd international office in Johannesburg, South Africa. The move makes Fasken Martineau the first Canadian law firm to establish an office on the African continent. "We see Johannesburg as being important on a number of levels but fundamentally, it is a client need-inspired decision," said Louis Bernier, Managing Partner. "It means that particularly for our mining clients, we can truly be the 'on the ground' business advisors they need us to be, now and in the years ahead as Africa transforms its economic base." With developments such as the recent adoption of Black Empowerment legislation, and other international initiatives, South Africa is on the brink of what is expected to be an unrivalled period of economic development. It is anticipated that the advent of this empowerment era in the African mining sector will require upwards of US$ 14 billion of new capital over a ten-year period. Canada is likely to feature prominently as a source of capital through its capital markets. Fasken Martineau's global mining practice represents a key strength of the firm both domestically with leadership from Tookie Angus, the firm's global mining practice group leader in Vancouver, John Turner in Toronto and Jean M. Gagn� in Qu�bec City, and with the support of its London office, particularly in respect of its mining finance expertise. Integral to the firm's long association with South Africa has been the firm's ongoing sponsorship of and active participation at Indaba, the largest mining conference that is hosted annually on the African continent. The Fasken Martineau Johannesburg office will be staffed by one senior partner from Canada. Peter Stafford, a native born South African, will be the resident partner. While drawing on the firm as a whole, Mr. Stafford and a senior level associate will also work closely with their United Kingdom colleagues to serve a growing global mining clientele. "I am delighted to be returning to South Africa to build upon our firm's already considerable profile and reputation in the mining sector", said Mr. Stafford. "By being physically present, our clients are assured of real time access to the resources of our firm. This move demonstrates our commitment to partnering with our clients, and to increasing their probability for success when we are 'just around the corner' from their offices, rather than half way around the world." Fasken Martineau is a leading Canadian business law and litigation firm that is recognized for its strength and expertise in mining and mining finance, financial services, corporate finance, securities, mergers and acquisitions, environmental, tax, insolvency and restructuring, litigation and arbitration, labour and employment, intellectual property and information technology. With more than 500 lawyers, the firm provides expertise in both of Canada's legal systems, common and civil law, and in both official languages. Along with its broad national presence in Vancouver, Calgary, Yellowknife, Toronto, Montreal and Qu�bec City, Fasken Martineau also practises Canadian law from offices in New York, London, and later this year, Johannesburg. Fasken Martineau DuMoulin LLP is a limited liability partnership under the laws of Ontario. * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 14.5 - 16.5 0.0 Finova Group 7.5% due 2009 43.5 - 44.5 +0.5 Freeport-McMoran 7.5% due 2006 102.5 - 103.5 0.0 Global Crossing Hldgs 9.5% due 2009 4.5 - 5.0 +0.25 Globalstar 11.375% due 2004 3.0 - 3.5 -0.5 Lucent Technologies 6.45% due 2029 68.25 - 69.25 -0.75 Polaroid Corporation 6.75% due 2002 11.0 - 12.0 0.0 Westpoint Stevens 7.875% due 2005 20.0 - 22.0 0.0 Xerox Corporation 8.0% due 2027 84.0 - 86.0 -1.5 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 ********* 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. 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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. 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