/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/031117.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, November 17, 2003, Vol. 7, No. 227 Headlines 1045 ANDERSON AVENUE: Case Summary & Largest Unsecured Creditor ADVANCED COMMS: Settles Additional $300K of Outstanding Debt AEGIS REALTY: Res Judicata Bars Fraud Claims Against Larry Langer ALPINE GROUP: Sept. 30 Net Capital Deficit Widens to $840 Mill. AMERCO: Reaches Agreement with Unsecured Creditors Committee AMERICAN HOMEPATIENT: Sept. Net Capital Deficit Narrows to $38MM AMERICAN RESTAURANT: Reports Decline in Third-Quarter Results ANC RENTAL: Asks Court to Sanction W. Clark for Violating Stay ANNUITY & LIFE: Sept.-Quarter Results Swing-Up to Positive Zone AQUILA: Agrees to Sell Interests in 12 Power Plants to ArcLight ARVINMERITOR INC: 4th-Quarter Fin'l Results Show Slight Decline ATLANTIC COAST: Tells Mesa "We Take Fiduciary Duties Seriously" BANC OF AMERICA: Fitch Drops Class B Notes Rating a Notch to BB BMC INDUSTRIES: Will Consider Bankruptcy Filing for Debt Workout CASTLE DENTAL: Sept. 30 Working Capital Deficit Narrows to $1.4M CHASE COMM'L: Series 2000-FL1 Note Ratings Lowered on 6 Classes CHESAPEAKE: Fitch Assigns Low-Bs to Note & Share Offerings CHI-CHI'S INC: Removes Green Onions from Entire Restaurant Chain CONE MILLS: Gets Court Nod to Employ Young Conaway as Co-Counsel CREDIT SUISSE: S&P Assigns Prelim. Ratings to Ser. 2003-C5 Notes CREST G-STAR: Fitch Affirms Ratings for Series 2001-2 Issues CWMBS INC: Series 1993-8 Class B4 Notes Rating Affirmed at BB- CYGNUS INC: Sept. 30 Balance Sheet Insolvency Widens to $64 Mil. DATA TRANSMISSION: Court Confirms Chapter 11 Prepackaged Plan DIAMTERICS MEDICAL: Sept. 30 Balance Sheet Upside-Down by $3.6MM DPL CAPITAL: S&P Watches Three Related Transaction Ratings DLJ COMM'L: Fitch Takes Rating Actions on Ser. 1999-CG1 Notes ELCOM INT'L: March 31 Balance Sheet Upside-Down by $2.5 Million ENCOMPASS: Asks Court to Clarify Omni Mechanical Sale Dispute ENRON CORP: Inks Stipulation Abandoning Surplus Collateral to GE FEDERAL-MOGUL: Seeking to Sell Brighton Property for $4 Million GAP INC: Hires Susan Burnett to New Talent Development Role GENZYME: Court Dumps Suit Filed by Biosurgery Div. Shareholders GILAT SATELLITE: Sept. 30 Net Capital Deficit Narrows to $7 Mil. GINGISS GROUP: Hiring Piper Rudnick as Special Corporate Counsel GLOBAL CROSSING: Seeks Go-Ahead to Assign 48 Contracts to New GX GREAT LAKES DREDGE: S&P Watching Pending Sale to Madison GREENWICH CAPITAL: Fitch Affirms BB Rating on Class B3 Notes HARRAH'S ENTERTAINMENT: Christopher J. Williams Joins Board HORIZON GROUP: Extends Odd Lot Share Repurchase Program to Dec 3 IT GROUP: Obtains More Time to Move Pending Actions to Delaware JP MORGAN COMM'L: Fitch Drops Class K & J Note Ratings to D/CCC KAISER ALUMINUM: Bankruptcy Court Expunges 2 Environmental Claims LA QUINTA: Proposes Public Offering for 25-Mill. Common Shares LEVI STRAUSS: S&P's B-Rating on Watch Negative After Announcement LEVI STRAUSS: Fitch's Sr. Unsecured Debt Rating Slips to B- MANDALAY: Fitch Rates $250M Senior Unsecured Debt Issue at BB+ MCDERMOTT INT'L: S&P Maintains Watch on Junk Rating METROPCS INC: Third-Quarter 2003 Results Show Marked Improvement MILLENNIUM CHEMICALS: Restated Balance Sheet Upside Down by $50M MIRANT CORP: Brings-In Gibson Dunn as Special Counsel NAT'L CENTURY: Obtains Clearance for Braintree Settlement Pact NAT'L WATERWORKS: Extends Pending Consent Solicitation to Nov. 19 NETBANK INC: Low-B Ratings Withdrawn After Early Debt Repayment NORTEL NETWORKS: Expects to File Q3 Form 10-Q on November 19 NORTHWESTERN: Sr. Vice President Daniel K. Newell Resigns NRG ENERGY: Reaches Claim Settlement Agreement with FirstEnergy OBAN MINING: Ex-Auditor Hoogendoorn Airs Going Concern Doubts OHIO AIR: Fitch Rates TE's Unsec. Pollution Control Bonds at BB OMI CORPORATION: S&P Assigns Low-B Level Credit & Debt Ratings ONEIDA LTD: Will Disclose Third Quarter Results on December 3 OWENS-ILLINOIS INC: Closes on Sale of Certain Closure Assets PARAMOUNT RESOURCES: Sept. 30 Working Capital Deficit Tops $290M PG&E NATIONAL: NEG Committee Turns to Kaye Scholer for Advice PITTSBURGH, PENN: PDP Board Endorses Plan to Solve Fiscal Crisis PRIME RETAIL: Lightstone Ends Voting Pact with Pref. Directors PRINT DATA: Retains Stonefield Josephson as New Auditors QUINTEK TECH: JF Research Commences Independent Coverage QUINTEK TECH: Completes Financial Restructuring of $600K Debt RAYOVAC: 4th-Quarter Results Meet First Call Consensus Estimates SAFETY-KLEEN: Asks Court to Settle Frontier Insurance Disputes SALOMON BROS: Fitch Ups & Affirms Series 2000-UP1 Note Classes SECURITIZED SALES: Fitch Affirms 3 Classes at Lower-B Levels SEAVIEW VIDEO: Needs Additional Financing to Continue Operations SEMCO ENERGY: Low Cash Flow Spurs S&P to Drop Rating to BB- SIERRA PACIFIC: Reports Improved Third-Quarter 2003 Results SMITHFIELD FOODS: Will Host Q2 Conference Call on Thursday SPECIALIZED LEASING: Signs-Up Chavez and Koch as New Accountant SPIEGEL: Moves to Terminate Retirees' Split Dollar Insurance STARBAND COMMS: Secures Clearance to Exit Bankruptcy Proceedings TENNECO AUTOMOTIVE: Adjusts Third Quarter 2003 Financial Results TISSERA INC: Auditor Doubts Ability to Continue Operations UNITEDGLOBALCOM: Reports Strong Growth for Third Quarter 2003 UNITY WIRELESS: September Net Loss Whittles Down to $1.14 Mill. U.S. WIRELESS DATA: Sept. 30 Balance Sheet Upside-Down by $286K V-ONE CORP: September 30 Balance Sheet Upside-Down by %2 Million WARRANTY GOLD LTD: Case Summary & 20 Largest Unsecured Creditors WEIRTON: Gets Conditional Nod to Participate in Loan Guarantee * Alvarez & Marsal Opens New Denver Office * Greenberg Traurig LLP Opens 20-Attorney Dallas Office * BOND PRICING: For the week of November 17 - 21, 2003 ********* 1045 ANDERSON AVENUE: Case Summary & Largest Unsecured Creditor --------------------------------------------------------------- Debtor: 1045 Anderson Avenue HDFC 1045 Anderson Avenue Bronx, New York 10452 Bankruptcy Case No.: 03-17188 Type of Business: The Debtor is an HDFC housing cooperative corporation which is the fee owner of the land and residential apartment building located at 1045 Anderson Avenue, Bronx, New York. The City of New York has scheduled an in rem foreclosure sale of the Apartment Building on November 14, 2003 for failure to pay real estate taxes. Chapter 11 Petition Date: November 13, 2003 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtor's Counsel: Scott S. Markowitz, Esq. Todtman, Nachamie, Spizz & Johns, P.C. 425 Park Avenue, 5th Floor New York, NY 10022 Tel: 212-754-9400 Fax: 212-754-6262 Total Assets: $1 Million to $10 Million Total Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ P. Michael Anderson Professional Fees $25,000 ADVANCED COMMS: Settles Additional $300K of Outstanding Debt ------------------------------------------------------------ Advanced Communications Technologies, Inc. (OTCBB:ADVC) reduced an additional $300,000 of outstanding debt through recent settlements with accounts payable creditors and convertible debenture holders, bringing the Company's total debt reduction to over $1.6 million since September. Wayne Danson, ACT's President and CFO stated "This debt reduction has generated an additional $105,000 of income to the Company. We are putting as much effort as possible into clearing all of our debt by year end, which will enhance our balance sheet significantly and allow us to move forward with our restructuring strategies." Danson continued "Our ability to reduce over $1.6 million of debt in such a short time has kept management very optimistic, as we continue to reshape the Company." The recent debt settlements and improved financial condition of the Company has been attributed to management's commitment, and the Company's access to its equity line facility with Cornell Capital Partners, L.P., that became available this past July. All favorable changes to ACT's balance sheet will be reflected in the Company's second quarter interim financial statements. Advanced Communications Technologies Inc. ("ACT") owns the exclusive marketing and distribution rights throughout the North and South American markets to SpectruCell, a software-defined radio (SDR) multiple protocol wireless system that is currently being developed by an unrelated party in Australia. At June 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $6 million. AEGIS REALTY: Res Judicata Bars Fraud Claims Against Larry Langer ----------------------------------------------------------------- In a Memorandum Decision, Bankruptcy Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York, grants Mr. Larry Langer's motion to dismiss the Debtors' adversary proceeding against him on the basis of res judicata. Plaintiff Debtors Aegis Realty Corp. and Broadway Heights Associates LLC claim that Mr. Langer fraudulently induced their entry into a partnership agreement, giving rise to actual and punitive damages. Mr. Langer moved to dismiss the Debtors' complaint on three bases: (1) because neither of the Debtors was actually in partnership with him and, therefore, the Court lacked subject matter jurisdiction; (2) that the Debtors are barred by res judicata from pursuing their fraud claim; and (3) that the Debtors' cause of action is barred by the six-year statute of limitations for fraud under N.Y. CPLR Sec. 213(B). Standard for a Motion to Dismiss A complaint may be dismissed, writes Judge Drain, for failure to state a claim upon which relief may be granted. But, he adds, dismissal will not be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Fed. R. Civ. P. 12(b)(6). Judge Drain explains further that the Court must accept all well- pleaded allegations in the complaint, together with exhibits and documents referred to, and must draw all reasonable inferences in favor of the plaintiffs. The issue, to be visited and examined, however, says Judge Drain, is not whether a plaintiff ultimately will prevail but whether the plaintiff is entitled to offer evidence to support the claims. There Was a Partnership Judge Drain, in his Memorandum Decision, notes that Defendant Larry Langer also has moved to dismiss for lack of subject matter jurisdiction. But Judge Drain points out that Mr. Langer's contention that the Court lacks subject matter jurisdiction over this proceeding because the Debtor Plaintiffs were not in partnership with Mr. Langer, is belied by Defendant's own assertion of a claim of the Debtors' breach of a partnership agreement with him in these Chapter 11 cases against the Debtors. Res Judicata Defense Wins Dismissal Judge Drain says that the state court ruling against the Debtors for breach of a partnership agreement with Mr. Langer is a solid basis for Defendant's res judicata defense. Judge Drain observes that the parties before him agree that for res judicata, or claim preclusion, to apply there must have been a final judgment on the merits in an earlier action by a court of competent jurisdiction. And Judge Drain notes further the first action must have involved the same parties -- or their privies -- in the same cause of action as the subsequent cause of action. Judge Drain writes that the parties also agree that the first three element of res judicata are met in the instant case, given Mr. Langer's reliance on the decision of the New York State Supreme Court, County of New York, entered on January 31, 2002, in Langer v. Miller, Aegis Realty Corp., Aegis Pension Plan, Broadway Heights Associates LLP and 3628 Broadway Realty Inc. Mr. Langer and each of the Debtors was a party to the State Court Action. The State Court Decision was rendered by a court of competent jurisdiction and is entitled to full faith and credit. The Decision also was on the merits, although, based on the Debtors' failure to provide discovery, the state court struck the Debtors' answer and precluded affirmative proof at the inquest over Debtors' objection. The Decision was not specifically a default judgment, but even if argued that it were, a number of cases have held that valid default judgments establish claim and defense preclusion in the same way as litigated judgments, and are equally entitled to enforcement in other jurisdictions. Morris v. Saud v. The Bank of New York, 929 F.2d 916 (2d Cir. 1991). The parties disagree about whether the Debtors' fraudulent inducement claim, advanced in this adversary proceeding, is a claim that was raised in the State Court Action and therefore precluded by the Decision. Obviously, Mr. Langer did not expressly raise a fraudulent inducement claim against himself in the State Court Action. But this does not necessarily prevent him from asserting the Decision as res judicata, or claim preclusion, against such a claim subsequently raised by the Debtors, writes Judge Drain. Under the doctrine of res judicata, a final adjudication on the merits of an action precludes the parties or their privies from relitigating issues that could have been raised in that action. Bank of India v. Trendi Sportswear Inc., 239 F.3d 428, 439 (2d Cir. 2000). Judge Drain explains the position of the Second Circuit on the issue of applying res judicata to claims that could have been raised in the first action. The Second Circuit, he says, considered whether a different judgment in the second action would impair or destroy rights or interests established by the judgment entered in the first action; whether the same evidence necessary to maintain the second cause of action was required in the first; and whether the essential facts and issues in the second action were present in the first. Judge Drain proceeds further with his analysis, saying that other courts have shortened the foregoing inquiry by comparing the factual predicates for the present and previously asserted claims. These other courts, he writes, point out that it is the facts surrounding the transaction or occurrence which operate to constitute the cause of action, not the legal theory upon which the litigant relies. Thus, whether or not the first judgment will have preclusive effect depends in part on whether the same transaction or connected series of transactions is at issue; whether the same evidence is needed to support both claims; and whether the facts essential to the second were present in the first. Examined in the light of these criteria, says the judge, the Debtors' fraudulent inducement claim is barred by res judicata. Judge Drain supports this conclusion further by giving a brief comparison of the complaints in the first and the present actions. The Debtors premise their complaint on the assertion that, unknown to them until recently, Mr. Langer had outstanding obligations resulting in substantial judgments against him that would have precluded performance of his partnership obligations to the Debtor. Therefore, the Debtors contend that Mr. Langer fraudulently induced the Debtors to enter into a partnership for which he did not have the financial wherewithal to comply with the obligations of the terms of the alleged partnership. The problem with Debtors' claim, says the judge, is that certain paragraphs of Mr. Langer's complaint in the State Court Action contradict the fundamental factual premise of the Debtor's complaint in the present adversary proceeding. Mr. Langer's complaint in the State Court Action , and thus the Decision in that Action, depended on the State Court's recognition of the validity of Mr. Langer's assertion that he fully performed his obligations under the partnership agreement. Therefore, Judge Drain says about his comparison of the two causes of action, that Debtors "are barred as to every matter that was offered and received to sustain or defeat [Langer's] cause of action, as well as to any other matter that the parties had a full and fair opportunity to offer for that purpose." Moreover, a judgment in favor of the Debtors in this adversary proceeding clearly would impair or effectively destroy rights or interests established by the Decision in Mr. Langer's favor in the State Court Action. And the judge asserts once more his conclusion that the Debtors are precluded from raising a claim based on Mr. Langer's inability to perform the partnership agreement. Accordingly, Mr. Langer's motion to dismiss is granted. Judge Drain's Memorandum Decision in In re Aegis Realty Corp., Debtor and Broadway Heights Associates LLC, Debtor v. Larry Langer, Defendant, Bankruptcy Nos. 02-16464 RDD and 03-10467 RDD, Adversary No. 0306156 (U.S. Bankruptcy Court, S.D. New York, October 31, 2003) is reported at 2003 WL 22520394. ALPINE GROUP: Sept. 30 Net Capital Deficit Widens to $840 Mill. --------------------------------------------------------------- The Alpine Group, Inc. (OTC Bulletin Board: ALPG.OB) reported results for its 2003 third quarter ended September 30, 2003. Revenues for the quarter ended September 30, 2003 were $76.2 million compared to $368.2 million for the quarter ended September 30, 2002. The comparative decrease is due primarily to the deconsolidation of the Company's former majority-owned subsidiary, Superior Telecom Inc., effective December 11, 2002. On December 11, 2002, Alpine acquired from Superior substantially all of the assets and related liabilities of Superior's electrical wire business and the capital stock of DNE Systems, Inc. Alpine's revenues for the current quarter decreased by $47.8 million or 39% from $124.0 million in revenues for the third quarter ended September 30, 2002, after excluding the deconsolidated revenues of Superior. This decrease in revenues is primarily due to lower sales volume at Essex Electric as a result of restructuring activities, which include the planned curtailment and consolidation of manufacturing capacity and production. Net loss for the quarter ended September 30, 2003 was $2.8 million or $0.21 per diluted share compared to a loss of $95.4 million or $6.41 per diluted share for the quarter ended September 30, 2002. The loss for the quarter ended September 30, 2003 includes pre tax restructuring and other charges of $3.3 million. Revenues for the nine months ended September 30, 2003 were $261.0 million, compared to revenues of $1,136.8 million for the nine months ended September 30, 2002. The comparative decrease is due primarily to the deconsolidation of Superior. After excluding the deconsolidated revenues of Superior, Alpine's revenues for the nine months ended September 30, 2002 were $390.7 million, a decrease of $129.7 million or 33% in the revenues for the nine month period ended September 30, 2003 compared to the same prior year period. This decrease in revenues for the 2003 period is primarily due to lower sales volume at Essex Electric as indicated in the previous paragraph. The net (loss) for the nine month period ended September 30, 2003 was $8.9 million or $0.62 per diluted share compared to a loss per diluted share before the cumulative effect of accounting changes of $141.5 million or $9.55 per diluted share for the nine month period ended September 30, 2002. The net (loss) for the nine months ended September 30, 2002 included a per share loss of $26.17 related to the cumulative effect of an accounting change for goodwill impairment. The loss for the nine months ended September 30, 2003 includes pretax restructuring and other charges of $8.3 million. At September 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $840 million. Steven S. Elbaum, Chairman and Chief Executive Officer stated that, "We continue to make good progress toward achieving our objective of building a low cost and competitive business at Essex Electric from which we can carefully and profitability regrow our market share. The aggressive restructuring actions implemented in 2003 and our investment in plant expansion, equipment upgrades and improved production in Florence, Alabama increases our confidence that we will be able to achieve a solid foundation for future growth. Our management team at Essex Electric, led by Harold Karp, is making steady progress towards establishing a strong foundation for long-term profitable growth at Essex Electric. During the quarter we completed the closure of our Sikeston, Missouri plant, exited an excess distribution facility in St. Joseph, Missouri and sold our Anaheim, California facility for approximately $6 million in cash with a lease back that gives Essex Electric the flexibility of being able to continue production at that facility through 2004. These actions further our restructuring objectives and strengthen the business going forward. "DNE Systems recorded strong results during the quarter and year to date. Operating income of $4.3 million for the year to date is up 7% over the prior year period. DNE continues to focus on key Department of Defense customers and prime contractors with tactical electronic products that meet rigorous specifications for secure communications. "Along with our investment in and progressing Essex Electric's restructuring plan, debt reduction and balance sheet strength have also been key focus areas for Alpine in 2003. Our team has achieved tremendous success in reducing consolidated debt from $79 million at its inception in December 2002 to $17 million at September 2003, while at the same time investing nearly $20 million to restructure Essex Electric into a low cost and profitable competitor in its growing market. "On November 10, 2003 we closed the previously announced rights offering made to our common shareholders to purchase our Series A Preferred Stock. Proceeds from the rights offering aggregated $3.8 million and the Company will be issuing 9,997 shares of Series A Preferred Stock to the subscribing shareholders." The Alpine Group, Inc., headquartered in New Jersey, is a holding company which owns approximately 90% of Essex Electric Inc. and 100% of DNE Systems, Inc. Essex Electric Inc. manufactures a broad range of copper electrical wire products for residential, commercial and industrial buildings for sale to electrical distributors and retailers. DNE Systems, Inc. is a designer and manufacturer of communications equipment, integrated access devices and other electronic equipment for defense, government and commercial applications. AMERCO: Reaches Agreement with Unsecured Creditors Committee ------------------------------------------------------------ AMERCO (Nasdaq: UHALQ) has reached an agreement with its Official Committee of Unsecured Creditors regarding the treatment of their claims under the Company's Plan of Reorganization. In return, the Company has secured the commitment of the Creditor's Committee to support the reorganization plan. Under the terms of the agreement, the holders of over $700 million of unsecured debt would receive a combination of cash and new notes in full payment of their claims, with no dilution of the Company's existing equity. The Company is amending its pending Plan of Reorganization to incorporate this treatment. The Committee has agreed to actively support confirmation of the amended Plan and to recommend that all parties in interest vote in favor of the Plan. The agreement in principle is subject to customary conditions. The Company must obtain the Court's approval of its Disclosure Statement before the Plan can proceed. A hearing is scheduled seeking Court approval of the Disclosure Statement. "From the first our intent has been to confirm a full payout plan for all creditors with no dilution of existing equity. We now have consensual restructuring agreements with the vast majority of our creditor constituencies. We will continue to work with our other creditors to reach consensual agreements for the full payment of their claims. At the same time, we will aggressively pursue reorganization efforts that will accomplish the preservation of value for our shareholders and an emergence from Chapter 11 in January," stated Joe Shoen, chairman of AMERCO. According to Richard Williamson, Managing Director of Alvarez and Marsal, Inc., "The definitive agreement with the Official Committee of Unsecured Creditors represents a significant advancement in the AMERCO restructuring process and has positioned the Company to confirm a full pay Plan of Reorganization in early 2004." Alvarez and Marsal, Inc. has served as the financial advisor to AMERCO since May 2003, with respect to its negotiations with creditors / stakeholders and in the restructuring of AMERCO's capital structure. AMERCO is the parent company of U-Haul International, Inc., Republic Western Insurance Company, Oxford Life Insurance Company and Amerco Real Estate Company. For more information about AMERCO, visit http://www.amerco.com AMERICAN HOMEPATIENT: Sept. Net Capital Deficit Narrows to $38MM ---------------------------------------------------------------- American HomePatient, Inc. (OTC:AHOM) reported net income of $0.4 million and revenues of $83.9 million for the third quarter ended September 30, 2003. For the nine months ended September 30, 2003, the Company reported net income of $9.3 million and revenues of $249.3 million. The Company's net income of $0.4 million for the third quarter of 2003 compares to a net loss of $2.4 million for the third quarter of 2002. Net income for the current quarter includes approximately $0.9 million of reorganization items related to the bankruptcy proceedings. Excluding these reorganization items in the current quarter, net income for the third quarter of 2003 would have been $1.3 million. Net income for the third quarter of 2002 does not include approximately $3.4 million of non-default interest expense that would have been paid had the Company not sought bankruptcy protection and includes $3.9 million of reorganization items and $0.5 million of Chapter 11 financial advisory expenses incurred prior to filing bankruptcy. Including the non-default interest expense not paid and excluding the reorganization items and the Chapter 11 financial advisory expenses, the Company would have had a net loss of $(1.4) million in the third quarter of 2002. The $2.7 million improvement in adjusted net income for the third quarter of 2003 compared to the same quarter of 2002 is primarily the result of increased same-location revenues. The Company's net income of $9.3 million for the first nine months of 2003 compares to a net loss of $69.3 million for the first nine months of 2002. Net income for the first nine months of 2003 includes approximately $3.8 million of reorganization items and does not include approximately $10.0 million of non-default interest expense that would have been paid during the period had the Company not sought bankruptcy protection. The Company's net loss of $69.3 million for the nine months ended September 30, 2002 does not include approximately $3.4 million of non-default interest expense that would have been paid during the period had the Company not sought bankruptcy protection and includes a $68.5 million charge for the cumulative effect of a change in accounting principle associated with the Company's adoption of Statement of Financial Accounting Standards No. 142 ("Goodwill and Other Intangible Assets"), a federal income tax benefit of $2.1 million, a gain on the sale of the assets of an infusion center of $0.7 million, reorganization items of $3.9 million, and Chapter 11 financial advisory expenses incurred prior to filing bankruptcy of $0.8 million. Excluding these items in 2002 and including the non- default interest expense that was not paid in 2002, the Company's net loss for the nine months ended September 30, 2002 would have been $(2.3) million. Excluding the reorganization items in 2003 and including the non-default interest expense that was not paid in 2003, the Company would have had net income of $3.1 million for the nine months ended September 30, 2003. The $5.4 million increase in adjusted net income for the nine months ended September 30, 2003 compared to the same period in 2002 is primarily the result of increased same-location revenues and lower bad debt expense. The Company's revenues of $83.9 million for the third quarter of 2003 represent an increase of $4.9 million, or 6.2%, over the third quarter of 2002. The Company's revenues for the first nine months of 2003 of $249.3 million represent an increase of $11.4 million, or 4.8%, over the first nine months of 2002. In March of 2002, the Company sold substantially all of the assets of an infusion center, which contributed $1.9 million in revenues during the first nine months of 2002. Excluding the revenues of the sold center in the first nine months of 2002, same-location revenues in the first nine months of 2003 increased $13.3 million, or 5.6%, compared to the same period of last year. The Company's revenue growth for the third quarter and nine months ended September 30, 2003 is attributable to the Company's sales and marketing efforts. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a non-GAAP financial measurement that is calculated as revenues less expenses other than interest, taxes, depreciation and amortization. EBITDA for the third quarter of 2003 and for the third quarter of 2002 was $11.3 million and $6.1 million, respectively. For the third quarter of 2003, EBITDA, excluding reorganization items of $0.9 million and other income of $0.4, was $11.8 million or 14.1% of revenues. For the third quarter of 2002, EBITDA, excluding reorganization items of $3.9 million, Chapter 11 financial advisory expenses incurred prior to filing bankruptcy of $0.5 million and other expense of $0.7 million was $11.2 million or 14.2% of revenues. For the first nine months of 2003, EBITDA, excluding reorganization items of $3.8 million and other income of $0.3 million, was $35.4 million or 14.2% of revenues. For the first nine months of 2002, EBITDA, excluding the cumulative effect of change in accounting principle of $68.5 million, reorganization items of $3.9, Chapter 11 financial advisory expenses incurred prior to filing bankruptcy of $0.8 million, a gain on sale of assets of a center of $0.7 million, and other expense of $0.6 million, was $33.6 million or 14.1% of revenues. Overall, operating expenses increased in the third quarter and first nine months of 2003 compared to the third quarter and first nine months of 2002 by approximately $1.3 million and $3.3 million, respectively, primarily due to increased insurance expenses and higher personnel-related expenses. These expenses were partially offset by lower bad debt expense for the first nine months of 2003. As a percent of revenues, bad debt expense declined from 4.0% in the first nine months of 2002 to 3.3% in the first nine months of 2003. The reduction in year to date bad debt expense primarily is the result of continued operational improvements and processing efficiencies at the Company's billing centers. At September 30, 2003, American HomePatient's balance sheet shows a total shareholders' equity deficit of about $38 million. Bankruptcy Proceeding Update As announced previously, American HomePatient, Inc. and 24 of its subsidiaries filed voluntary petitions for relief to reorganize under Chapter 11 of the U.S. Bankruptcy Code on July 31, 2002. On July 1, 2003, the Company's plan of reorganization became effective and the Company emerged from bankruptcy protection. Pursuant to the plan, all of the Company's creditors will be paid in full and the shareholders of the Company will retain all of their equity interests in the Company. As previously announced, the hearing before the Bankruptcy Court on confirmation of the plan of reorganization had been held on April 23-25 and 28-29, 2003, and on May 15, 2003, the Bankruptcy Court entered a memorandum opinion overruling the secured lenders' objections to the plan. On May 27, 2003, the Bankruptcy Court entered an order confirming the plan and on June 30, 2003, the United States District Court in the Middle District of Tennessee rejected the secured lenders' request to stay the effective date of the plan. The secured lenders filed an appeal to the District Court of the order confirming the plan, and on September 12, 2003, the District Court issued an opinion affirming in all respects the confirmation order. On October 14, 2003, the secured lenders filed a notice of appeal to the United States Court of Appeals for the Sixth Circuit. The Company intends to contest this appeal and to vigorously defend the confirmation order entered by the Bankruptcy Court and upheld by the District Court. American HomePatient, Inc. is one of the nation's largest home health care providers with 288 centers in 35 states. Its product and service offerings include respiratory services, infusion therapy, parenteral and enteral nutrition, and medical equipment for patients in their home. American HomePatient, Inc.'s common stock is currently traded in the over-the-counter market or, on application by broker-dealers, in the NASD's Electronic Bulletin Board under the symbol AHOM. AMERICAN RESTAURANT: Reports Decline in Third-Quarter Results ------------------------------------------------------------- American Restaurant Group, Inc. (S&P, CCC+ Corporate Credit Rating, Senior Secured Debt Ratings, Negative) announced its results for the third quarter ended September 29, 2003. Total revenues decreased from $70.1 million in the third quarter of 2002 to $66.4 million in the third quarter of 2003. Same-store sales decreased by 4.9% in the third quarter of 2003 compared to 2002. EBITDA, as adjusted below for nonrecurring expenses, for the third quarter of 2003 was $2.5 million. EBITDA, as adjusted, for the prior year's comparable quarter was $4.7 million. Of the year- over-year variance, a significant portion resulted from historically high beef costs. Nonrecurring reserves made during the quarter consist of reserves for asset impairment, store closures, and the SRG bankruptcy. (Amounts in 000's) Q3 2002 Q3 2003 ----------------- ------- ------- Operating Results: Revenues $70,119 $66,422 EBITDA: Operating Profit 2,800 (13,194) Plus: Depreciation and Amortization 1,864 1,762 EBITDA 4,664 (11,432) Plus: Nonrecurring Reserves 13,899 EBITDA, as adjusted $4,664 $2,467 Note: EBITDA is not a defined term under generally accepted accounting principles. EBITDA refers to earnings before interest, taxes, depreciation, and amortization. For comparison purposes, the Company computes EBITDA, as indicated above. Management believes EBITDA is one of the financial measures used by users of our financial statements to evaluate the Company's financial results of operations. For comparison purposes, EBITDA is also reflected in the above table as adjusted in the current period to exclude charges that the Company believes are nonrecurring in nature. Store-Closing Reserve As a result of the lower-than-expected sales performance at some of the older locations, the Company recorded a charge of $3.8 million during the third quarter related to the closure of two locations and the impairment of certain other locations. In connection with the impairment charge in the third quarter, the Company expects to close additional locations during the fourth quarter and record an additional $4.8 million in store-closing reserves associated with the closing of those locations in the fourth quarter. Spectrum Restaurant Group Bankruptcy In June 2000, the Company sold all of the outstanding stock of the Non-Black Angus Subsidiaries, and transferred certain rights and obligations, to Spectrum Restaurant Group, Inc. On August 6, 2003, Spectrum Restaurant Group, Inc. and its subsidiaries each filed in United Stated Bankruptcy Court a voluntary petition for bankruptcy and reorganization under Chapter 11. The Company was owed $0.4 million from SRG as of September 29, 2003 and has fully reserved an allowance against the receivable. Additionally, the Company has recorded a nonrecurring reserve of $9.7 million during the third quarter of 2003 in connection with actual and possible claims against the Company and its subsidiaries arising from SRG breaching various obligations. Additional Credit Facility As reported in the Company's form 8-K filed with the SEC on November 6, 2003, the Company has secured an additional $5 million credit facility from TCW and its affiliates. The purpose of this facility is to provide additional working capital. This facility is in addition to the $15 million revolving credit facility with Wells Fargo Foothill. CEO Ralph Roberts commented: "Our comparable-store sales decrease for the quarter resulted from our continued strategy of reducing the mix of product promotion sales, which also resulted in advertising savings of $1 million during the quarter. "During the quarter, although our cost of sales was negatively impacted by extraordinary beef costs, I want to commend our operators who saved over $600,000 in direct operating expenses through a variety of new cost-saving programs. "The quarter was adversely impacted by two nonrecurring events: the unanticipated reserve necessary to provide for the SRG bankruptcy, and the impairment reserve to allow for the strategic withdrawal from a market. These reserves will enhance our ability to enjoy improved operating cash flow in the future." There were 108 Black Angus Restaurants operating as of September 29, 2003, including our newest restaurant, which opened in Chandler, AZ on September 15, 2003. ANC RENTAL: Asks Court to Sanction W. Clark for Violating Stay -------------------------------------------------------------- Bonnie Glantz Fatell, Esq., at Blank Rome LLP, in Wilmington, Delaware, recounts that on June 30, 2000, AutoNation spun-off the ANC Rental Corporation Debtors' automotive rental business from its other retail businesses by means of a tax-free distribution of AutoNation's ownership interest in the Debtors to AutoNation's stockholders. Early in these Chapter 11 cases, the Official Committee of Unsecured Creditors began an investigation into spin- off claims and related causes of action against AutoNation. The Committee reviewed thousands of packages of documents relating to the Spin-off and interviewed the Debtors' numerous key former and current employees. The Committee believed that it had valuable claims against AutoNation with respect to the Spin-off. AutoNation denied that any claims existed. Subsequently, the Committee and AutoNation began extensive settlement negotiations, which culminated in a Settlement Agreement being reached on April 15, 2003 pursuant to which AutoNation agreed to guaranty certain of the Debtors' bonds and pay to the estate up to $20,000,000. The Debtors sought and obtained the Court's approval of the Settlement Agreement on May 23, 2003. Subsequent to the Petition Date, Ms. Fatell notes, William McDonald Clark sought to recover damages against AutoNation for breach of an employment contract he entered into with Debtor Alamo Rent-A-Car, Inc., a former subsidiary of AutoNation. Specifically, Mr. Clark sought certain salary continuation benefits from AutoNation under the terms of his written employment contracts with Alamo. Alamo has been in business for over 25 years and became a subsidiary of AutoNation on November 25, 1996. ANC Rental Corporation was incorporated in October 1999 as a wholly owned subsidiary of AutoNation, and Alamo became a subsidiary of ANC. ANC remained a wholly owned subsidiary of AutoNation until June 30, 2000, when ANC was spun-off and became an independent public company. Since Alamo was a subsidiary of ANC at the time that ANC became a public company, after June 2000, Alamo did not have any affiliation whatsoever with AutoNation. Mr. Clark was employed by Alamo as the Vice Chairman and Chief Marketing Officer before, during and after the period of time that Alamo was an AutoNation subsidiary. Mr. Clark tells Judge Walrath that he was employed as the Vice Chairman and Chief Marketing Officer of Alamo pursuant to a written proposal for compensation dated December 31, 1996. Mr. Clark alleges that on June 14, 2000, Alamo's parent corporation, ANC, advised him that the Employment Contract, as supplemented by a supplemental employment contract dated January 30, 1997 would not be renewed. Mr. Clark acknowledged that he agreed to the terms of the Non-Renewal Letter by signing and returning the Non- Renewal Letter to ANC. Mr. Clark alleges that on November 15, 2001, he was notified that ANC and Alamo filed voluntary petitions for relief under Chapter 11, and that ANC would not make any additional payments to him under the terms of the Employment Contract or Supplemental Employment Contract. Subsequently, Mr. Clark sued AutoNation in the Florida State Court seeking to hold it liable for Alamo's debt to him. Mr. Clark sought to recover damages against AutoNation based on the former parent/subsidiary relationship between AutoNation and Alamo under theories of vicarious liability, single enterprise, and alter ego. Ms. Fatell argues that to prevail on each of these counts, Mr. Clark must first establish liability against Alamo. Once liability is established against Alamo, Mr. Clark must establish liability against AutoNation by claiming that AutoNation and Alamo held themselves out to the public as a single enterprise, so that AutoNation is liable for Alamo's obligations. Ms. Fatell notes that these claims are more appropriately directed against Alamo's bankruptcy estate. However, Mr. Clark did not file a proof of claim against Alamo's estate. Instead, he attempts to circumvent Section 362 of the Bankruptcy Code as well as the Court Order approving the Debtors' Settlement with AutoNation by asserting these causes of action directly against AutoNation. In each of the counts, Mr. Clark does not contend that AutoNation is directly liable for the obligations under the Employment Contract and Supplemental Employment Contract. Rather, Mr. Clark maintains that AutoNation is somehow indirectly liable for Alamo's obligations under its contracts with him, as Alamo's former Vice Chairman and Chief Marketing Officer. Ms. Fatell argues that as a matter of law, Mr. Clark is not permitted to circumvent the automatic stay provisions of the Bankruptcy Code by attempting to impose liability for Alamo's obligations upon AutoNation. See In re S.I. Acquisition, 817 F. 2d 1142 (5th Cir 19870, St. Paul Fire and Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688(2d Cir 1989), In re Saunders, 101 B.R. 303, 306. Furthermore, the trustee or debtor-in-possession has the exclusive right to assert any alter ego or single enterprise claims to ensure fair and equitable treatment of all similarly situated creditors. See In re Enron Corp., No. 01 B 16034 (AJG). This is because if the alter ego allegations are proven, there are more assets available to the debtor to meet creditor claims. More importantly, the Debtors and the Committee, on behalf of all creditors, including Mr. Clark, already finally settled these claims under the Settlement Agreement. In fact, AutoNation is obligated to pay millions of dollars to the estate under the Settlement Agreement. The Debtors and the Committee released AutoNation of any and all wrongdoing, including alter ego and fraudulent transfer claims. The express language of the Committee's release applies uncontrovertibly to Mr. Clark's claims. Ms. Fatell asserts that the Settlement Agreement and the Settlement Order are binding on Alamo, as well as any and all creditors of Alamo, including Mr. Clark. Accordingly, on claims of vicarious liability, single enterprise and alter ego, Mr. Clark cannot independently pursue AutoNation without violating the automatic stay provisions of the Bankruptcy Code, the Release Agreement and Order Approving Release Agreement. Ms. Fatell tells Judge Walrath that Mr. Clark has been advised of all these circumstances. However, Mr. Clark knowingly continues to prosecute the state court action against AutoNation. AutoNation bargained for a release by all creditors of claims like the alter ego claim Mr. Clark is asserting against AutoNation. Accordingly, the Debtors and the Committee asks the Court to: (1) clarify the Settlement Order and declare that Mr. Clark's claim is extinguished; and (2) sanction Mr. Clark for his continued and willful violation of automatic stay and the Court Order approving the AutoNation Settlement. (ANC Rental Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANNUITY & LIFE: Sept.-Quarter Results Swing-Up to Positive Zone --------------------------------------------------------------- Annuity and Life Re (Holdings), Ltd. (NYSE: ANR) reported financial results for the three month period ended September 30, 2003. The Company reported a net income of $33,392 or $0.00 per fully diluted share for the three month period ended September 30, 2003 as compared to a net loss of $19,147,017 or $0.74 per fully diluted share for the three month period ended September 30, 2002. Net income in the third quarter of 2003 was primarily the result of a $9.0 million benefit resulting from a comprehensive settlement terminating all reinsurance relationships between XL Life and the Company, partially offset by losses on three life reinsurance agreements, litigation costs and compensation related expenses. Net realized investment losses for the three month period ended September 30, 2003 were $(52,025) or $(0.00) per fully diluted share, as compared with net realized investment gains of $9,297,351 or $0.36 per fully diluted share for the three month period ended September 30, 2002. Jay Burke, Chief Executive Officer and Chief Financial Officer of the Company, commented, "This quarter's results show a marked improvement over the recent past. Our results were favorably impacted by the Comprehensive Settlement with XL Life. While this is good news, it also means we still have losses in our remaining book of business. We have yet to fully reposition our investment portfolio and our expense reduction efforts will not completely take hold until the second quarter of 2004. "As of September 30, 2003 our unsecured letter of credit facility at Citibank stood at $26.7 million. Citibank has agreed that, provided the Company can reduce Citibank's unsecured letter of credit exposure to less than $17 million as of November 30, 2003, Citibank will renew all letters of credit outstanding at December 31, 2003 through December 31, 2004. "In addition, in the third quarter we were notified by the New York Stock Exchange that we are no longer facing delisting procedures and that the Exchange has removed the flag on our ticker symbol. "I continue to caution that not all of the Company's issues are resolved. Absent the net income benefit produced by the Comprehensive Settlement with XL Life we would have reported a loss for the quarter. While we believe the third quarter was impacted by some large claims and seasonal premium fluctuations, even adjusting for those items we still would have reported a loss. In addition, we still have significant issues to resolve involving our annuity reinsurance contract with Transamerica, pending shareholder litigation and GMIB / GMDB exposure through our reinsurance agreement with CIGNA. "Transamerica has alleged that the Company owes $14.9 million under its annuity reinsurance contract with Transamerica. The Company has not agreed that such amount is currently owed to Transamerica and the parties are attempting to resolve their disputes. Transamerica has indicated that if the parties cannot resolve their issues, it will attempt to put our Bermuda operating subsidiary into liquidation. "In addition to the discussions with Transamerica related to the alleged amounts owed to it, we have been attempting to engage Transamerica, and ultimately IL Annuity, in discussions aimed at improving investment returns from the convertible bond portfolio and potentially redesigning the VisionMark product to reduce the minimum guarantee exposures from the Transamerica agreement. If the Company is not successful in convincing Transamerica and IL Annuity to restructure the portfolio and/or to redesign the product, the Company may incur additional write downs of deferred acquisition costs in the future. "If we are able to reposition our general account investment portfolio to achieve a substantially higher yield within our investment guidelines, successfully defend ourselves against the shareholder class action suit, achieve a favorable outcome from the MetLife arbitration, and resolve our issues with Transamerica regarding our annuity reinsurance agreement, we can achieve a modest profit in 2004. While I am cautiously optimistic that we can accomplish these objectives, the Company continues to face significant challenges. Our failure to achieve any one of these objectives could have a material adverse effect on our financial condition and results of operations." Operating Results Our net income for the three months ended September 30, 2003 includes a net gain from reinsurance recaptures and terminations of approximately $7.9 million, which includes the impact of the Comprehensive Settlement with XL Life. Adverse mortality experience under the Company's largest life reinsurance treaty continued, resulting in a loss on that agreement of $(2,397,000) for the quarter. Another large life agreement included an unusually large claim for $900,000 and, coupled with the agreement's typically lower third quarter premiums, generated a loss of $2,174,000. We also incurred $1,004,000 for litigation costs and $1,000,000 in compensation-related expenses, and added $800,000 to our reserves for guaranteed minimum death and income benefits. Embedded derivatives associated with certain of our modified coinsurance agreements produced a net gain of $2,808,427 million for three months ended September 30, 2003. Unrealized gains on the Company's investments declined to $2,211,223 as of September 30, 2003 from $2,641,227 at June 30, 2003. The Company's investment portfolio currently maintains an average credit quality of AA-. Cash used by operations for the nine month period ended September 30, 2003 was $(97,859,548) compared to cash provided from operations of $27,726,444 for the comparable period ending September 30, 2002. At September 30, 2003, virtually all of the Company's invested assets were pledged as collateral for the benefit of its U.S.-based cedents. Book value per share at September 30, 2003 and June 30, 2003 was $5.52 and $5.53, respectively. Tangible book value, which is GAAP book value excluding deferred acquisition costs, improved to $2.70 at September 30, 2003 as compared to $1.44 at June 30, 2003. Life Segment Results Life segment income for the three month period ended September 30, 2003 was $601,214, as compared with segment loss of $(9,938,836) for the comparable prior period of 2002. As mentioned above, major contributors to the current quarter's result include a net gain from recaptures of $5,637,000, offset by net losses of $5,600,000 on three life reinsurance agreements, litigation and compensation related expenses. Annuity Segment Results Annuity segment income was $378,926 for the three month period ended September 30, 2003, as compared with a loss of $18,253,644 for the three month period ended September 30, 2002. Segment income for the third quarter of 2003 is the result of a net gain from embedded derivatives of $2,808,000, partially offset by $568,000 of losses from the recapture of two annuity reinsurance agreements during the quarter, an increase in our guaranteed minimum death benefit and guaranteed minimum income benefit reserve of $800,000 and expenses allocated to this segment. Annuity and Life Re (Holdings), Ltd. provides annuity and life reinsurance to insurers through its wholly owned subsidiaries, Annuity and Life Reassurance, Ltd. and Annuity and Life Reassurance America, Inc. * * * As previously reported, Fitch Ratings withdrew its 'C' insurer financial strength rating on Annuity & Life Reassurance, Ltd. The rating was withdrawn due to the company's announcement earlier this year that it had ceased writing new business and had notified its existing reinsurance clients that it could not accept additional cessions under previously established treaties. ENTITY/ISSUE/ACTION/PRIOR RATING Annuity & Life Reassurance, Ltd. -- Insurer financial strength Withdrawn/'C' AQUILA: Agrees to Sell Interests in 12 Power Plants to ArcLight --------------------------------------------------------------- Aquila, Inc. (NYSE:ILA) has entered into a definitive agreement to sell its interests in 12 power plants to Teton Power Funding, LLC, an affiliate of ArcLight Capital Partners, LLC, for $300.9 million, subject to pre- and post-closing adjustments. The sale is expected to be completed in the first quarter of 2004, and is subject to regulatory and third-party approvals. The power plant interests are a part of Aquila's residual energy merchant and trading organization. The plants are located in the states of California, Florida, Georgia, Maine, New York and Washington, as well as Jamaica, and represent a net ownership interest of 643 megawatts. Aquila's three uncontracted peaking power plants are not included in the sale. Aquila anticipates using the net proceeds from the transaction to reduce liabilities and strengthen the company's balance sheet. "The completion of this transaction, together with the completion of the recently announced agreements to sell our Canadian and United Kingdom utility businesses, will provide Aquila with the liquidity to meet 2004 debt maturities and allow management to focus more of its attention on the company's core businesses," said Keith Stamm, Aquila's chief operating officer. Lehman Brothers acted as exclusive financial advisor to Aquila in connection with the transaction. Based in Kansas City, Mo., Aquila (S&P, B+ Credit Facility Rating, Negative) operates electricity and natural gas distribution networks serving customers in Missouri, Kansas, Iowa, Minnesota, Colorado, Michigan and Nebraska, as well as in Canada and the United Kingdom. The company also owns and operates power generation assets. More information is available at http://www.aquila.com ARVINMERITOR INC: 4th-Quarter Fin'l Results Show Slight Decline --------------------------------------------------------------- ArvinMeritor, Inc. (NYSE: ARM) reported sales of $2.0 billion and net income of $33 million, or $0.48 per diluted share, for its fourth fiscal quarter ended Sept. 30, 2003, compared to last year's fourth-quarter net income of $41 million, or $0.61 per diluted share. Net income for the fourth quarter of fiscal year 2003 included a charge for the cumulative effect of a change in accounting principle due to the adoption of FIN 46, "Consolidation of Variable Interest Entities," of $4 million, or $0.06 per diluted share. Sales increased $231 million, or 13 percent, as compared to last year's fourth quarter. Excluding the effect of currency, and acquisitions and divestitures, sales would have been lower by one percent. Sales declined in North America and Europe by three percent, but were up by more than 20 percent in the rest of the world, driven by sales growth in the Asia/Pacific region. Operating income for the fourth quarter of fiscal year 2003 was $76 million, compared to $91 million for the same period last year. ArvinMeritor Chairman and Chief Executive Officer Larry Yost said, "We are responding to the current automotive market conditions by aggressively implementing actions to improve the profitability of our business, including leveraging our scale by rationalizing facilities, further restructuring and workforce consolidation; focusing on global sourcing initiatives; and reinforcing quality programs and continuous improvement performance systems throughout the organization." Specific business segment financial results include: * Light Vehicle Systems sales were $1,093 million, up 26 percent from the fourth quarter of fiscal year 2002. This increase was almost entirely due to foreign currency translation resulting from a stronger euro and the acquisition of Zeuna Starker. Operating income in the fourth quarter of fiscal year 2003 was favorably impacted by the $20-million gain on the previously announced sale of the exhaust tube manufacturing facility. This was offset by higher new product launch and steel costs of $10 million and a pre-tax charge of $11 million related to account reconciliations and information system implementation issues in a facility in Mexico, of which $6 million related to prior fiscal years. Management, after consulting with its independent auditors and outside counsel, has determined that the amount related to prior fiscal years is not material. LVS also recorded restructuring costs in this year's fourth fiscal quarter of $5 million associated with previously announced programs. The LVS business continues to focus on reducing cost through restructuring programs and other continuous improvement initiatives, while seeking new business wins in the marketplace. In October 2003, ArvinMeritor announced that Hyundai Motor Company has chosen our LVS business to become its North American door module supplier for Hyundai's popular Santa Fe and Sonata models, beginning production in 2005 and growing to one million door modules annually. * Commercial Vehicle Systems (CVS) sales were $616 million, up $4 million, or one percent, from the fourth quarter of fiscal year 2002. Sales were up, despite a decline in North American Class 8 truck production. Higher trailer volumes in North America and higher sales in Asia/Pacific offset declines in North American truck volumes. Productivity improvements were partially offset by higher engineering investments and warranty charges. Operating income declined by $1 million. The CVS business is well-positioned to benefit from the recovery expected in the North American heavy truck market in fiscal year 2004. CVS continues to geographically diversify its business. Recently, CVS signed a memorandum of understanding with the Volvo Group to form two new truck axle joint ventures in Europe. Subject to finalizing the agreement, it is intended that in 2004, the two new joint ventures, owned jointly by ArvinMeritor and Volvo, would assume control and operation of the two Volvo Group manufacturing operations in France. * Light Vehicle Aftermarket (LVA) sales were $219 million, down four percent from last year's fourth quarter. Without the impact of foreign currency translation, sales would have declined approximately $20 million. Lower volumes, higher product returns and lower pricing contributed to the decrease in operating income. The LVA business remains focused on reducing its costs through global outsourcing and rationalizing its distribution channels, while strengthening its business relationship with major customers. In September, for the second year in a row, the LVA Purolator filter business received the Toyota Quality Alliance Platinum award from Toyota Motor Sales, U.S.A. More recently, Grease Monkey International named Purolator the 2002 Vendor of the Year. Full-Year Fiscal 2003 Results Sales for the fiscal year were $7.8 billion, up $906 million, or 13 percent, compared to last year. Excluding the effect of acquisitions and divestitures, and the impact of foreign currency, revenue grew one percent. Operating income was $309 million, a decline of $34 million, compared to fiscal year 2002, reflecting an operating margin of 4.0 percent, down from 5.0 percent last year. Operating income for fiscal year 2003 was favorably impacted by the gain on the sale of the exhaust tube manufacturing facility, but was offset by higher steel costs, product launch costs, higher engineering investments, pricing pressures and the adjustment in Mexico. Net income for fiscal year 2003 was $136 million, or $2.00 per diluted share, up from $107 million, or $1.59 per diluted share last year. Included in net income were the effects of changes in accounting principles of $4 million, or $0.06 per diluted share, in fiscal year 2003 and $42 million, or $0.63 per diluted share, in fiscal year 2002. "Although we made progress in a number of areas, our fiscal year 2003 financial results did not achieve the expectations set by our management team," Yost said. "Our entire ArvinMeritor team is committed and dedicated to improving our company's financial performance. We will remain focused on reducing costs, leveraging our global resources, streamlining our asset base and improving return on invested capital and free cash flow. The strength of our entire team is focused on returning value to our shareowners." Outlook "Our fiscal year 2004 outlook for light vehicle production remains unchanged from our previous guidance at 15.8 million vehicles in North America and 16.2 million vehicles in Western Europe. We continue to remain optimistic about the growth in the North American Class 8 truck production to 222,000 units in fiscal year 2004," Yost said. "Our sales outlook for fiscal year 2004 is approximately $8.6 billion, up about ten percent from fiscal year 2003, and slightly higher than our previous guidance to reflect current foreign currency exchange rate expectations. "For the first quarter of fiscal year 2004, our sales forecast is $2.0 billion, and our outlook for diluted earnings per share is unchanged from our previous guidance of $0.25 to $0.30 per diluted share," Yost continued. "We anticipate that our first quarter results will continue to be affected by the product launch costs that also impacted our fiscal year 2003 fourth quarter. We expect these issues to be substantially resolved in the first quarter. "For the remainder of fiscal year 2004, we expect to achieve improved performance as volumes, particularly in the Commercial Vehicle business, return to more normal levels, our launch issues are resolved and performance improvement programs are achieved. We anticipate full-year diluted earnings per share in the range of $2.20 to $2.40 for fiscal year 2004." ArvinMeritor, Inc. is a premier $8-billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. ArvinMeritor, Inc. (S&P, BB+ Corporate Credit & Senior Unsecured Debt Ratings, Negative) is a premier $7-billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. In addition, ArvinMeritor is a leader in coil coating applications. The company is headquartered in Troy, Mich., and employs 32,000 people at more than 150 manufacturing facilities in 27 countries. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. For more information, visit the company's Web site at: http://www.arvinmeritor.com ATLANTIC COAST: Tells Mesa "We Take Fiduciary Duties Seriously" --------------------------------------------------------------- The Board of Directors of Atlantic Coast Airlines Holdings, Inc. (Nasdaq: ACAI) sent the following letter to the Board of Directors of Mesa Air Group, Inc. (Nasdaq: MESA): November 13, 2003 Board of Directors Mesa Air Group, Inc. 410 North 44th Street Suite 700Phoenix, AZ 85008 Ladies and Gentlemen: We are in receipt of your letter dated November 13, 2003. Rest assured that we take our fiduciary duties to our stockholders very seriously. The ACA Board has evaluated the Company's strategic direction, including a revised contract with United Airlines and creating an independent low-fare airline. Since Mesa provided no details with respect to the MOU with United announced [Wednes]day, we can only assume that the terms it agreed to are similar to the terms that ACA's Board previously reviewed and rejected. Some of the more problematic terms in the proposal that United last offered ACA included: * greater risk over the life of the contract, particularly with respect to costs that would be required to be borne by ACA but that would be solely within United's control; * margins based on operating performance standards that could be reset by United in its discretion; and * no assurance that the terms of the non-binding agreement would not be renegotiated by United when and if it finalizes its reorganization plan and actually emerges from bankruptcy. Additionally, we note that Mesa's MOU with United is further evidence that United and Mesa are working together to try to squash ACA's efforts to establish a low-fare, low-cost competitor at Dulles International Airport. The ACA Board of Directors is well aware of its fiduciary duties and will continue to act in the best interests of ACA stockholders. Kerry B. Skeen Chairman & Chief Executive Officer ACA currently operates as United Express and Delta Connection in the Eastern and Midwestern United States as well as Canada. On July 28, 2003, ACA announced plans to establish a new, independent low-fare airline to be based at Washington Dulles International Airport. The Company has a fleet of 148 aircraft-including a total of 120 regional jets-and offers over 840 daily departures, serving 84 destinations. Atlantic Coast Airlines (S&P, B- Corporate Credit Rating, Developing) employs over 4,800 aviation professionals. The common stock of parent company Atlantic Coast Airlines Holdings, Inc. is traded on the Nasdaq National Market under the symbol ACAI. For more information about ACA, visit the Web site at http://www.atlanticcoast.com BANC OF AMERICA: Fitch Drops Class B Notes Rating a Notch to BB --------------------------------------------------------------- Fitch Ratings downgrades Banc of America Structured Notes, Inc.'s series 2002-1 $36.7 million class A to 'BBB-' from 'BBB' and $24.5 million class B to 'BB' from 'BB+'. The ratings of the class A and B certificates are dependent on the ratings of the underlying certificates, classes H and J of the Banc of America Large Loan, Inc. Series 2002-FLT1, which were downgraded today due to the decline in market conditions for the Central Research Park loan. BMC INDUSTRIES: Will Consider Bankruptcy Filing for Debt Workout ---------------------------------------------------------------- BMC Industries, Inc. (OTCBB:BMMI) announced consolidated revenues from continuing operations of $40.8 million for the third-quarter ended September 30, 2003, compared to $42.5 million in the year- ago period. The company reported a consolidated net loss of $12.2 million, or $0.45 per share, for third quarter 2003, versus a consolidated net loss of $4.2 million, or $0.16 per share, in third quarter 2002. BMC incurred a net loss from continuing operations of $12.5 million, or $0.46 per share, during the third-quarter 2003, versus a net loss from continuing operations of $3.2 million, or $0.12 per share, in the prior-year quarter. "It clearly remains a difficult time for the company, as we continue to restructure our two businesses," said Douglas C. Hepper, chairman and chief executive officer of BMC Industries. "We are taking actions to improve efficiency, reduce costs, conserve cash and divest non-core assets." "As we continue restructuring, we remain firmly committed to the growth of Vision-Ease Lens, and are working closely with our financial advisors to maximize cash flow from our mask operations, in order to produce the best outcome for our stakeholders under very difficult circumstances," said Hepper. For the nine months ended September 30, 2003, BMC announced consolidated revenues from continuing operations of $124.6 million, compared to $140.6 million in the same period of 2002. BMC reported a consolidated net loss of $106.7 million, or $3.96 per share, for the first nine-months of 2003, versus a consolidated net loss of $61.4 million, or $2.28 per share, for the same period in 2002. The loss includes $77.4 million of charges against asset valuations taken in the second quarter of 2003. Excluding these charges, the company recorded an adjusted net loss from continuing operations of $23.7 million, or $0.88 per share, for the first nine-months of 2003, compared to an adjusted net loss of $12.3 million, or $0.46 per share, in the first nine- months of 2002. Optical Products Group Operations Third-quarter revenues for the Optical Products group totaled $24.8 million, compared to $25.1 million in the prior-year quarter. Sales of polycarbonate lenses increased $1.6 million versus the year-ago period. Vision-Ease Lens has implemented promotional programs and price changes, supported by lower manufacturing costs in Jakarta, in an effort to increase sales in the highly price sensitive commodity polycarbonate sector of the market. Lower-margin, plastic lens sales were down $0.9 million versus the third quarter 2002. Glass lens sales decreased $0.8 million compared to last year's third quarter. Although this product line remains profitable, glass as a percentage of the overall lens market has been declining as the market shifts to other lens materials. The Optical Products group reported a 2003 third-quarter operating loss of $2.0 million. This compares to a slight operating profit in the year-ago period of $449,000. Operating margins were negatively impacted by higher production costs in our Ramsey, Minn., plant in previous periods that were reflected in costs of products sold during the third quarter 2003. Also, additional inventory and other valuation reserves were adjusted totaling approximately $1.4 million during the third quarter 2003 as the group continues its restructuring efforts and cash flow initiatives. The group's initiatives have succeeded in reducing overall inventory and increasing supply chain efficiency, while maintaining high service levels. Since the end of the first quarter 2003, Vision-Ease Lens inventories have decreased by roughly $9.0 million. As a result of a review of the company's French lab subsidiary performed during the third quarter 2003, the company decided to discontinue operating this subsidiary. In October 2003, this French subsidiary filed for insolvency with a local court. As of November 5, 2003, the company has ceased all funding of this business but will work with the administrator to assist in continuing service to customers, including supplying lenses on cash-in-advance terms. Vision-Ease France operating results have been reclassified as results from discontinued operations. In October, the group completed the sale of one of its two former manufacturing plant buildings in Azusa, Calif. receiving proceeds of approximately $1.7 million. Net sales proceeds from the sale were used to pay deferred interest expense. Optical Products also has signed a purchase agreement with an interested party for the sale of the second Azusa building; this transaction is expected to be completed by year-end. The group also completed the sale of two non-essential optical lens coaters. Buckbee-Mears Group Operations For the Buckbee-Mears group (BMG), third-quarter 2003 revenues from continuing operations totaled $16.0 million compared to $17.4 million in the third quarter of 2002. The movement of picture tube production away from the group's home markets, North America and Europe, to Asian manufacturers continued to adversely affect sales, in terms of mix, price and volume. With worldwide aperture mask capacity continuing to exceed demand, aperture mask prices remain under pressure. Although entertainment mask sales were slightly higher than the same quarter last year, there was a dramatic shift toward higher-cost, lower-margin invar products in Asia. The discontinuing of several product lines since last year also impacted the group's year-over-year revenue comparison; including computer monitor masks and the non-mask, sheet-etching business. BMG reported an operating loss from continuing operations of $2.5 million during the third quarter 2003, versus operating income of $1.2 million in the prior-year quarter. The group's profitability was negatively impacted by several factors. Low production volumes during the 2003 third quarter resulted in $1.1 million of unabsorbed costs expensed in the period. The group also recorded severance and other one-time charges of $0.9 million during the third quarter. Price erosion negatively impacted margins by $0.6 million, and the shift toward lower-margin invar mask products in Asia further reduced margins by $0.6 million. On October 30, 2003, BMG announced the completion of the sale of its non-mask, hybrid-manufacturing line and related inventory to Tech-Etch, Inc., of Plymouth, Mass., for proceeds totaling $1.0 million. The hybrid-manufacturing line, part of BMG's recently discontinued non-mask operations in Cortland, N.Y., produced mid- to high-volume precision photo-etched components used in a variety of applications including parts for the medical, automotive, electronics and filtration markets. BMC used the net proceeds from the sale to pay deferred interest expense. BMC continues to assess its remaining mask operation's prospects. Once concluded, asset values will be reassessed, and the company expects that additional impairment charges may be recognized. Other Items Administrative expense for the third quarter 2003 was $5.8 million, compared to $1.5 million in the third quarter 2002. The increase was primarily the result of additional financial and legal advisory fees incurred by BMC in connection with the company's restructuring activities. Debt and Liquidity Total debt at September 30, 2003, was $130.7 million, equal to the $130.7 million in total debt at June 30, 2003, and up from $112.3 million at December 31, 2002. BMC's cash and cash equivalents balance at September 30, 2003, was $5.0 million, down slightly from $5.6 million at June 30, 2003, and up from $1.6 million at December 31, 2002. Since June 30, 2003, the company has been unable to borrow further funds under its bank credit facility. As of September 30, 2003, BMC did not comply with several covenants in its bank credit agreement, including failure to make scheduled principal payments of $3.5 million per quarter on both June 30, 2003 and September 30, 2003. The company also continues to defer $1.0 million in scheduled fees, which were due to the banks on July 1, 2003. The company also failed to meet a total debt to trailing 12-month EBITDA ratio, which was a covenant not to exceed 3.25 times at quarter end September 30, 2003. As a result of non-compliance with its credit agreement, the company's banks granted an initial two-week waiver to BMC on June 30, 2003, a subsequent 60-day waiver on July 15, 2003, and a further 60-day waiver on September 16, 2003. The last waiver extended the time period for BMC to make its scheduled principal and fee payments, and limited the company's obligation to make interest payment until November 14, 2003. The current agreement defers all unpaid, accrued interest totaling approximately $0.8 million. The company continues to work with its lenders and advisors to secure a longer-term alternative to BMC's existing financing arrangement or another agreement for the restructuring of outstanding debt, including relief from these covenants and deferral of payments due to the banks. If BMC is unable to achieve additional waivers or other relief from covenants, payment obligations and other requirements under its credit agreement, the company would be in default as of November 14, 2003. Given the current market environment, it is unlikely that BMC will be able to negotiate alternative financing before that date. The failure to maintain compliance with all covenants under the credit agreement would result in a default, which would give lenders the ability to accelerate all outstanding debt. If this occurs, BMC would need to refinance or restructure the company's debt and, if unsuccessful in these efforts, to consider all other options, including seeking protection under bankruptcy laws. At September 30, 2003, BMC Industries' balance sheet shows a working capital deficit of about $90 million and a total shareholders' equity deficit of about $45 million. Over-The-Counter Bulletin Board In late August, the company's common stock began trading on the Over-The-Counter Bulletin Board under the new symbol "BMMI" as a result of the New York Stock Exchange delisting process, which was affected on August 19, 2003. The change in trading venue has not had any material impact on the company's current operations or financial performance. The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. Investors should be aware that trading in BMC's common stock through market makers and quotation on the OTCBB and the "pink sheets" may involve risk, such as trades not being executed as quickly as when the common stock was listed on the NYSE. BMC Industries, Inc., founded in 1907, is comprised of two business segments: Optical Products and Buckbee-Mears. The Optical Products group, operating under the Vision-Ease Lens trade name, is a leading designer, manufacturer and distributor of polycarbonate and glass eyewear lenses. Vision-Ease Lens also distributes plastic eyewear lenses. Vision-Ease Lens is a technology and a market share leader in the polycarbonate lens segment of the market. Polycarbonate lenses are thinner and lighter than lenses made of other materials, while providing inherent ultraviolet filtering and impact resistant characteristics. The Buckbee-Mears group is the only North American manufacturer of aperture masks, a key component in color television picture tubes. For more information about BMC Industries, Inc., visit the company's Web site at http://www.bmcind.com CASTLE DENTAL: Sept. 30 Working Capital Deficit Narrows to $1.4M ---------------------------------------------------------------- Castle Dental Centers, Inc. (OTC Bulletin Board: CASL) earned net income of $43,000, or zero cents per share, for the three months ended September 30, 2003, compared to net income of $13.4 million, including a gain on extinguishment of debt of $17.3 million, in the third quarter of 2002. Operating income was $686,000 in the third quarter 2003, $62,000 or 10% better than operating income of $624,000, excluding unusual charges, in the third quarter 2002. Patient revenues for the three-month period ending September 30, 2003, were $23.3 million, $2.7 million, or 10.3% lower than the same period last year. The lower revenues resulted from a decline of $1.7 million, or 6.6%, in same store revenues and the closing of five dental centers during the past year that reduced revenues by $1.0 million, or 3.7%. Lower same store revenues are attributed to decreased patient flow in most of the Company's markets resulting from the planned reduction of lower margin managed care and discounted fee plans at certain dental centers and fewer affiliated dentists in the Dallas/Ft. Worth and Tennessee markets. For the nine months ended September 30, 2003, Castle Dental reported net income of $22.0 million, $0.15 per share, including a gain on early extinguishment of debt of $21.8 million recorded in May 2003, compared to a net loss of $26.4 million, $1.07 per share, in the first nine months of 2002. The loss in 2002 included a $37.0 million charge related to goodwill impairment resulting from the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". Excluding unusual charges and restructuring costs, the Company earned $1.1 million in the first nine months of 2003 compared to a loss of $2.3 million in the prior year period. Patient revenues of $71.8 million were $4.8 million, or 6.2% below patient revenues in the first nine months of 2002. The decline in revenues resulted from lower same store sales of $1.3 million, or 1.8%, and the closing of five dental centers in the past year that reduced revenues by $3.4 million. Excluding one-time charges, restructuring costs and severance costs associated with the previously announced resignation of the Company's president in June, earnings before interest, taxes, depreciation and amortization (EBITDA) was $1.4 million for the quarter ended September 30, 2003, $100,000 less than the prior year period. For the nine months ended September 30, 2003, EBITDA was $6.5 million, 34% higher than EBITDA of $4.9 million for the comparable period of 2002. On September 30, 2003, the Company completed the previously announced recapitalization plan through the sale of $624,000 in preferred stock and subordinated notes to key management employees, directors and third-party investors. In the aggregate, the sale of preferred stock and subordinated notes to Sentinel Capital Partners II, L.P., management, directors and other investors totaled $13.0 million. Including the conversion of preferred stock and warrants outstanding into common stock, as well as stock options and other conversion rights, the total equivalent shares of common stock outstanding at September 30, 2003 were approximately 218,000,000 shares. The proceeds of the sale were used to reduce debt and restructure the Company's balance sheet. At September 30, 2003, the Company's outstanding debt was $20.3 million, down from $49.5 million at December 31, 2002. Net income and loss excluding unusual charges, restructuring costs and other charges and EBITDA excluding unusual charges, restructuring costs and other charges, and severance costs are non-GAAP financial measures. Please see the attached Table 3 for a reconciliation of the most comparable GAAP measure to the non-GAAP measures presented in this press release. Castle Dental's September 30, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $1.4 million, while net capitalization was pegged at $6.3 million up from a deficit of about $22 million nine months ago. Castle Dental Centers, Inc. develops, manages and operates integrated dental networks through contractual affiliations with general, orthodontic and multi-specialty dental practices in the U.S., Castle manages 74 dental centers with approximately 170 affiliated dentists in Texas, Florida, Tennessee and California with annual patient revenues of approximately $95 million. CHASE COMM'L: Series 2000-FL1 Note Ratings Lowered on 6 Classes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes of Chase Commercial Mortgage Securities Corp.'s commercial mortgage pass-through certificates from series 2000-FL1. At the same time, ratings are affirmed on two other classes from the same transaction. The rating actions reflect the declines in operating performance for seven of the remaining 10 loans in the pool. The following five loans show the most significant decline in performance: -- The second-, third-, and fourth-largest loans (Moorings at Mesa Cove, Del Coronado Apartments, and Rancho Murietta Apartments, respectively) total $56.60 million (45% of the loan pool) and have an affiliated borrower. The loans are secured by multifamily properties in Tempe and Mesa, Ariz. All three loans reported a more-than-25% decline in net cash flow for year-end 2002 and year-to-date ending June 2003 compared to NCF at issuance, which is primarily due to increased competition and renters opting to purchase a home because of low interest rates. -- Glenville Business Center ($7.1 million, 6.1%, ninth-largest loan) is a 135,556-square-feet (sq. ft.) industrial/office center in Richardson, Texas (13 miles south of Dallas). The second largest tenant, Paul Reinhart Inc. (occupying 26,060 sq. ft.), vacated in July 2003. In addition, another large tenant, Emerson Energy (occupying 26,060 sq. ft.), has agreed to extend its lease for one year at a reduced rental rate when its lease expires December 2003. Consequently, occupancy at the property could decline to 40% by year-end 2004 (loan matures in 2005) from its current occupancy of 59%. The year-end 2002 NCF of $1.52 million was based on a 79% occupancy. -- Galena Office Building ($7.1 million, 6.1%, tenth-largest loan), is a 71,753-sq.-ft. class B/C building in Denver, Colorado. Several tenants vacated the property this year when their lease expired; consequently, occupancy has declined to 51%. The year-end 2002 NCF of $732,000 was based on a 67% occupancy. Two other loans have shown a decline in performance, but have a more positive outlook. One is Shaw's Portfolio ($8.43 million, 7.2%, sixth-largest loan), two grocery store-anchored retail centers consisting of 83,955 sq. ft. in Stratham, N.H. and 71,660 sq. ft. in Milford, Mass, respectively. Although the year-end 2002 NCF of $818,000 declined 18% compared to issuance NCF of $993,000, the decrease is due to increased expenses to re-lease 8,800 sq. ft. vacated by CVS Corp. in January 2002. As of November 2003, 4,800 sq. ft. has been re-leased, and the combined occupancy is now 97%, compared to 99% at issuance. The other loan is 200 and 220 Centennial Avenue ($8.15 million, 6.9%, seventh-largest loan), two single-story office buildings with 137,107 sq. ft. in Piscataway, N.J. The year-end 2002 NCF of $585,000, with 55% occupancy, reveals a 38% decline, compared to issuance NCF of $943,000, with 99% occupancy. The decline is due to several tenants vacating when leases expired as well as no financial reporting for the first quarter of 2002 because of a borrower change. However, as of November 2003, a recent rent roll reflects that the property's occupancy has increased to 64%, and the borrower has enlisted a New York real estate broker to market available space. Standard & Poor's expects that, given the property's favorable location and current market conditions, this property should perform well. Of the five loans (first, third, fourth, seventh, and eighth loans totaling $65.89 million, 53% of the loan pool) scheduled to mature by year-end 2003, four will be modified (using the third optional extension) to extend maturity until 2004. The fifth loan, Junipero Serra ($8.0 million, 6.0% of the loan pool and eighth-largest loan), recently paid off. Besides the weakened performance of the loans remaining in the pool, there is an increased percentage of borrower concentration, with two borrowers comprising 85% of the pool. The second, third, and fourth loans have an affiliated borrower; the fifth and ninth loans have an affiliated borrower. To date, there haven't been any realized losses. The transaction structure incorporates principal payments to all classes on a pro data basis. Also, any additional fees are distributed to the OC class. Principal payments will be allocated in a sequential structure when the pool pays down to 30% of the original balance or has five loans remaining. RATINGS LOWERED Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-thru certs series 2000-FL1 Rating Class To From Credit Support (%) C BBB+ A 28.25 D BBB A- 25.75 E BB BBB 20.50 F BB- BBB- 18.00 G B BB 10.25 H B- B 6.75 RATINGS AFFIRMED Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-thru certs series 2000-FL1 Class Rating Credit Support (%) A AAA 44.00 B AA 35.50 CHESAPEAKE: Fitch Assigns Low-Bs to Note & Share Offerings ---------------------------------------------------------- Fitch Ratings has assigned a 'BB-' rating to Chesapeake Energy's proposed $200 million senior note offering and a 'B' rating to Chesapeake's proposed $150 million convertible preferred stock offering. Fitch maintains its 'BB+' rating on its senior secured bank facility. The Rating Outlook for Chesapeake remains Positive. Chesapeake Energy recently announced that it priced $200 million of senior notes due 2016 and $150 million of perpetual convertible preferred stock. The net proceeds from these offerings will be used to permanently fund its recent acquisition of Laredo Energy, L.P. Recall that in late October, Chesapeake agreed to acquire $200 million of south Texas natural gas assets from Houston-based privately owned Laredo Energy, L.P. and its partners. In this transaction, Chesapeake acquired approximately 108 billion cubic feet of natural gas equivalent proved reserves and 30 million cubic feet of natural gas equivalent of daily production. The valuation of the proved reserves is about $1.85 per thousand cubic feet of natural gas equivalent. However, management stated that $48 million was allocated for 88 bcfe of probable and possible reserves, which would lower the proved reserve valuation to $1.41 per mcfe. This transaction increases reserves by approximately 4% to 3.1 trillion cubic feet of natural gas equivalent and daily production by about 4% to just over 800 mmcfe per day. Although these assets are in the Lobo Trend of South Texas, the properties have similar attributes to Chesapeake's existing asset base in the Mid Continent. The Laredo assets are 100% natural gas, have low lifting costs and are located in a region with good infrastructure. Chesapeake believes the deep drilling and tight sands completion expertise it has developed in the Mid Continent will transfer nicely to this region which has a similar geological makeup. In addition to this transaction, Chesapeake is considering offering to exchange, in a private placement, up to $500 million of its existing 8.125% senior notes due 2011 for additional notes issued from one or more of its existing series maturing after 2011 or the new notes. Fitch's ratings reflect Chesapeake Energy Corp.'s long-lived, focused natural gas reserve base, its ability to generate high margins and its improving credit profile. Chesapeake's proved reserves, pro forma for the latest property acquisitions are more than 3.1 trillion cubic feet of tcfe, and provide a reserve life of greater than 11 years. Approximately 91% of Chesapeake's proved reserves are natural gas and are primarily located in the very familiar Mid-Continent region. In addition, margins for production out of the Mid-Continent region are generally higher than production from other regions domestically because of greater price realizations and low lifting costs. Moreover, Fitch expects Chesapeake to achieve synergies through the previously mentioned acquisitions, which would allow for further credit improvement. In the latest 12 months, Chesapeake generated about $940 million of EBITDA, providing adjusted interest coverage of approximately 6.2 times and adjusted debt-to-EBITDA of 2.4x. Commensurate with its current rating, Chesapeake's $2.3 billion of debt provides a debt per mcfe of $0.72, or $4.34 per barrel of oil equivalent. The Positive Rating Outlook is based on several factors including the size of Chesapeake's reserve base, its production profile and external funding strategy. Since 2001, its reserves have increased nearly 70% and recent daily production of 772 mcfe is up 72% in that same time period. Additionally, Chesapeake has demonstrated its willingness to grow its asset base in a conservative fashion. Similar to this transaction, Chesapeake financed the El Paso, Vintage and ONEOK property acquisitions with proceeds from $300 million in debt offerings, the issuance of $400 million of common stock and $200 million of convertible preferred stock. To resolve the rating outlook, Fitch Ratings would like to see Chesapeake make further progress at reducing its debt per mcfe level, which currently stands at $0.72 per mcfe. CHI-CHI'S INC: Removes Green Onions from Entire Restaurant Chain ---------------------------------------------------------------- Chi-Chi's, Inc., a Mexican restaurant chain headquartered in Louisville, Kentucky, has decided to voluntarily remove green onions from every menu item at every location in the Chi-Chi's restaurant chain. While there has been no determination of the source of the recent outbreak of Hepatitis A in the Beaver Valley area, officials with the public health authorities have indicated that some products or ingredients are being focused on as a possible source of Hepatitis A contamination. "Our decision [Thurs]day reflects the fact that contaminated green onions are the prime suspect of recent Hepatitis A outbreaks in various other states. Our primary concern has been and continues to be to protect the health, safety and well being of our guests, our employees and the local community," said Bill Zavertnik, Chief Operating Officer of Chi-Chi's, Inc. "We have no definitive information that green onions were involved in this outbreak. But out of an abundance of caution we have decided to remove this ingredient from our menu, including its use as a garnish, in salsa and cooked dishes." The Company reiterated that no Chi-Chi's location outside of the Beaver Valley location has been involved in the Hepatitis A outbreak. Chi-Chi's has served millions of guests in mid-western and eastern states since 1976 and is a recognized leader in full service casual Mexican dining. The chain operates 100 company owned restaurants in the mid-west and eastern United States. For more information, go to http://www.chi-chis.com Chi-Chi's filed for Chapter 11 protection on October 8, 2003, in the U.S. Bankruptcy Court for the District of Delaware (Lead Bankr. Case No. 03-13063). CONE MILLS: Gets Court Nod to Employ Young Conaway as Co-Counsel ---------------------------------------------------------------- Cone Mills Corporation and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to employ Young Conaway Stargatt & Taylor, LLP as their bankruptcy co-counsel in these chapter 11 cases. The principal attorneys and paralegals presently designated to represent the Debtors and their current standard hourly rates are: Pauline K. Morgan $410 per hour Joseph M. Barry $245 per hour Sean T. Greecher $190 per hour Stefanie Hubloue $120 per hour Young Conaway will: a. provide legal advice with respect to the Debtors' powers and duties as debtors in possession in the continued operation of their business and management of their properties; b. prepare and pursue confirmation of a plan and approval of a disclosure statement; c. prepare on behalf of the Debtors necessary applications, motions, answers, orders, reports and other legal papers; d. appear in Court and to protect the interests of the Debtors before the Court; and e. perform all other legal services for the Debtors which may be necessary and proper in these proceedings. Headquartered in Greensboro, North Carolina, Cone Mills Corporation is one of the leading denim manufacturers in North America. The Debtor also produces fabrics and operates a commission finishing business. The Company, with its debtor- affiliates filed for chapter 11 protection on September 24, 2003 (Bankr. Del. Case No. 03-12944). Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $318,262,000 in total assets and $224,809,000 in total debts. CREDIT SUISSE: S&P Assigns Prelim. Ratings to Ser. 2003-C5 Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Credit Suisse First Boston Mortgage Securities Corp.'s $1.26 billion commercial mortgage pass-through certificates series 2003-C5. The preliminary rating is based on information as of Nov. 13, 2003. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying loans, and the geographic and property type diversity of the loans. Classes A-1, A-2, A-3, A-4, B, C, D, and E are currently being offered publicly. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.69x, a beginning loan- to-value of 83.5%, and an ending LTV of 70.1%. PRELIMINARY RATINGS ASSIGNED Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certs series 2003-C5 Class Rating Amount A-1 AAA 58,211,000 A-2 AAA 174,823,000 A-3 AAA 15,604,000 A-4 AAA 370,304,000 B AA 39,416,000 C AA- 15,766,000 D A 31,532,000 E A- 17,343,000 A-1-A AAA 340,549,000 F BBB+ 17,343,000 G BBB 14,190,000 H BBB- 14,189,000 J BB+ 9,460,000 K BB 6,307,000 L BB- 6,306,000 M B+ 7,883,000 N B 1,577,000 O B- 4,730,000 P N.R. 15,766,490 A-X* AAA 1,261,299,490** A-SP* AAA 1,149,463,000** *Interest only class. **Notional amount. CREST G-STAR: Fitch Affirms Ratings for Series 2001-2 Issues ------------------------------------------------------------ Fitch Ratings affirms all of the rated notes issued by Crest G- Star 2001-2, Ltd. The affirmation of these notes is a result of Fitch's annual rating review process. The following rating actions are effective immediately: -- $265,310,338 Class A Senior Secured Floating Rate Term Notes affirm at 'AAA'; -- $34,000,000 Class B-1 Second Priority Fixed Rate Term Notes affirm at 'A-'; -- $15,000,000 Class B-2 Second Priority Floating Rate Term Notes affirm at 'A-'; -- $21,000,000 Class C Third Priority Fixed Rate Term Notes affirm at 'BB+'; -- $9,311,993 Preferred Shares affirm at 'BB-'. Crest G-Star 2001-2 is a collateralized debt obligation (CDO), which closed December 18, 2001, supported by a static pool of asset backed securities (ABS; 1.8%), commercial mortgage-backed securities (CMBS; 35.5%) and real estate investment trusts (REITs; 62.6%). Fitch has reviewed the credit quality of the individual assets comprising the portfolio. According to the September 30, 2003 trustee report the class A over-collateralization was 131.66%, the class B over- collateralization was 111.14% and the class C was 104.18%, relative to test levels of 120.00%, 105.00% and 101.20%, respectively. The CDO has not experienced any significant credit migration and minimal change in weighted average rating factor. The Preferred Shares balance reflects paydowns of $4,688,007, based on distributions made to date. Additionally, Fitch's rating on the Preferred Shares addresses the ultimate payment of the original notional amount. Based on the stable performance of the underlying collateral and the over-collateralization tests, Fitch has affirmed all of the rated liabilities issued by Crest G-Star 2001-2. Fitch will continue to monitor this transaction. CWMBS INC: Series 1993-8 Class B4 Notes Rating Affirmed at BB- -------------------------------------------------------------- Fitch Ratings has taken rating actions on the following CWMBS (Countrywide Home Loans), Inc. residential mortgage-backed certificates: CWMBS (Countrywide Home Loans, Inc.) Mortgage Pass-Through Certificates, Series 1993-8 -- Class B2 affirmed at 'A-'; -- Class B3 affirmed at 'BBB-'; -- Class B4 affirmed at 'BB-'. The affirmations on the above classes reflect credit enhancement consistent with future loss expectations. CYGNUS INC: Sept. 30 Balance Sheet Insolvency Widens to $64 Mil. ---------------------------------------------------------------- Cygnus, Inc. (OTC Bulletin Board: CYGN) reported total revenues of $1.1 million for the three months ended September 30, 2003, compared to $1.6 million for the three months ended September 30, 2002. The Company posted a net loss of $9.1 million, or $0.24 per share, for the three months ended September 30, 2003, compared to a net loss of $10.2 million, or $0.27 per share, for the three months ended September 30, 2002. "On October 2, 2003 Sankyo Pharma Inc. stated that it was stopping performance of its contractual obligations related to the GlucoWatch(R) G2(TM) Biographer. Sankyo also announced that it would not pay us over $6.0 million in invoices it owes us or honor the balance of its binding purchase commitment to pay us $28.4 million in cash through March 2004. As a result, Cygnus finds itself in dire financial condition," stated John C Hodgman, Chairman, CEO and President of Cygnus. "On October 6, 2003, we filed a lawsuit complaint against Sankyo Pharma Inc. for breach of contract and against its Japanese parent company, Sankyo Co., Ltd., for intentional interference with contract. On November 6, 2003, Sankyo Pharma filed an answer and cross-claims against Cygnus for declaratory relief, breach of contract, and defamation. Cygnus has not yet filed a response to these claims. Cygnus believes that it has meritorious defenses to the causes of action asserted against it by Sankyo Pharma and intends to vigorously defend itself against these claims. This litigation is in its early stages, however, and is therefore inherently difficult to assess." Mr. Hodgman added, "Continuing as a going concern is dependent on our ability to generate sufficient cash to fund our operations and meet our debt and other obligations on a timely basis. The refusal of Sankyo Pharma Inc. to pay us the millions of dollars that it owes places the future of Cygnus in jeopardy. We believe that Sankyo Pharma Inc. and Sankyo Co., Ltd. are aware that the decision to withhold payments owed to Cygnus and otherwise stop performing under the contracts with Cygnus will substantially impair Cygnus' operations and could drive Cygnus into bankruptcy. We are currently pursuing various strategic options, including, but not limited to, pursuing a new partnership and/or selling some or all of our assets and intellectual property. If substantial additional resources are not available, we may need to cease our operations and/or seek protection under the bankruptcy laws. These conditions raise substantial doubt about our ability to continue as a going concern after March 31, 2004." "The GlucoWatch(R) Biographer line of products pioneered the concept of continuous glucose monitoring for patient use," Mr. Hodgman added. "Studies have demonstrated the important value of more frequent glucose information coupled with alarms, such as we have in the G2(TM) Biographer, and this has been reinforced by many calls we receive from people who now are using the G2 Biographer. Sankyo Pharma has stated they have approximately two years' worth of GlucoWatch G2 Biographer product inventory, so we anticipate they will continue to serve their customers by making the product available for an extended period of time." The Company reported that net product revenues for the three months ended September 30, 2003 were $1.0 million, compared to $1.5 million for the three months ended September 30, 2002. Net product revenues recognized for the three months ended September 30, 2003 resulted from sales by Sankyo Pharma to its third-party customers of Cygnus' GlucoWatch G2 Biographers in the United States, which had been deferred in previous periods in accordance with the Company's revenue recognition policy, as well as from sales to Sankyo Pharma of practice and sample Biographers. Most of the product revenues for the three months ended September 30, 2003 related to the sales by Sankyo Pharma recognized net of sales and marketing commissions. Net product revenues for the three months ended September 30, 2002 resulted from direct sales by the Company to end-user customers in the United States and the United Kingdom. Unit shipments of the GlucoWatch G2 Biographers for the three months ended September 30, 2003 were 2,346. For the three months ended September 30, 2003, substantially all of the Biographers were sample G2 Biographers sold to Sankyo Pharma. During the three months ended September 30, 2003, the Company shipped approximately 413,000 AutoSensors, substantially all of which were shipped to Sankyo Pharma. The total invoice amount of Biographer, AutoSensor and accessory shipments for the three months ended September 30, 2003 was $2.9 million. In accordance with the Company's revenue recognition policy; however, for the three months ended September 30, 2003, deferred product revenues related to product shipments were approximately $2.2 million. The amount of deferred product revenues recognized as revenues is subject to further adjustments for commissions owed to Sankyo Pharma and other pricing adjustments. Costs of product revenues for the three months ended September 30, 2003 were $7.5 million, compared to $1.3 million for the three months ended September 30, 2002. Costs of product revenues for the three months ended September 30, 2003 consisted of material, underabsorbed indirect overhead (including an $831,000 write-off of prepaid component orders to one of Cygnus' sole-source component suppliers) and other production costs associated with the manufacturing of the Company's products and a write-off of approximately $4.9 million of inventory resulting from Sankyo Pharma's decision to stop performing under the Sales, Marketing and Distribution Agreement and related contracts with the Company, as well as their instructions to the Company to stop product shipment. Costs of product revenues were also higher for the three months ended September 30, 2003 because costs were recognized on a greater number of AutoSensors compared to the equivalent periods of 2002. As a result of Sankyo Pharma's decision to stop performing under the Sales, Marketing and Distribution Agreement and related contracts, the Company has suspended its manufacturing activities and is not likely to continue to manufacture its products in the near future. For the three months ended September 30, 2003, there were deferred costs of product revenues of approximately $1.2 million related to product shipped in the quarter, and these costs appear as a component of "Deferred revenues from Sankyo Pharma net of deferred costs of product shipments" in the liability section of the condensed consolidated balance sheet. Costs of product revenues did not include certain material and other product costs previously written off as research and development or obsolete expenses. If material and other product costs previously written off that were later used in the manufacture of product had been included, costs of product revenues at current production levels would have been $130,000 greater than the reported amounts for the three months ended September 30, 2003, and $834,000 greater than the reported amounts for the three months ended September 30, 2002. Manufacturing costs included in the cost of each unit are greater at low unit volumes, such as have occurred during early commercialization in the United States. Any future adjustments of "Deferred revenues from Sankyo Pharma net of deferred costs of product shipments" reflected on the condensed consolidated balance sheet at September 30, 2003 will depend upon the resolution of Cygnus' dispute with Sankyo Pharma and its Japanese parent, Sankyo Co., Ltd. As of September 30, 2003, total revenues of $17.1 million were deferred, along with associated costs of $8.1 million. The net amount of $9.0 million is included on the condensed consolidated balance sheet as of September 30, 2003, under the caption "Deferred revenues from Sankyo Pharma net of deferred costs of product shipments." This balance was $8.2 million as of December 31, 2002. Research and development expenses for the three months ended September 30, 2003 were $860,000, compared to $4.5 million for the three months ended September 30, 2002. Research and development expenses have decreased as the Company's focus on commercialization efforts has increased, allowing for less spending on material costs related to manufacturing scale-up and process development. In addition, Cygnus' reversed its bonus accrual for 2003, which had been $358,000 at June 30, 2003. No bonuses are expected to be paid for 2003. The Company expects further decreases in research and development expenses in the future, given the recent reduction in force due to Sankyo Pharma's decision to stop performing under the Sales, Marketing and Distribution Agreement and related contracts. Cygnus has suspended its research and development efforts for future products and is not likely to continue to develop new products in the new future, although its third-generation product is currently under review by the U.S. Food and Drug Administration. Sales, marketing, general and administrative expenses for the three months ended September 30, 2003 were $1.3 million, compared to $5.2 million for the three months ended September 30, 2002. This decrease was primarily due to the assumption by Sankyo Pharma of product promotion, education, and training programs for health care professionals and patients, as required under the Sales, Marketing and Distribution Agreement between Cygnus and Sankyo Pharma. In addition, the Company reversed its bonus accrual for 2003, which had been $340,000 at June 30, 2003. No bonuses are expected to be paid for 2003. Given the ongoing litigation with Sankyo Pharma and Sankyo Co., Ltd., Cygnus expects an increase in legal expenses in the future; however, the overall sales, marketing, general and administrative expenses are expected to decrease, given the recent reduction in force and other cost- cutting measures. Interest and other income (expense), net for the three months ended September 30, 2003 was $25,000, compared to $68,000 for the three months ended September 30, 2002. This decrease was primarily due to the lower yields on a lower average balance invested. Interest expense for the three months ended September 30, 2003 was $516,000, compared to $850,000 for the three months ended September 30, 2002. The decrease is primarily attributable to the reduction of the interest rates on the Company's convertible debentures from 8.5% to 3.5%, effective October 1, 2002, based on the August 21, 2002 amendment to the Convertible Debenture and Warrant Purchase Agreement. As of September 30, 2003, Cygnus had cash, cash equivalents and investments of $9.1 million and total assets of $17.3 million. The Company had current liabilities of $70.2 million and total liabilities of $81.5 million. In the current liabilities section of the Company's balance sheet there are several line items relating to Sankyo Pharma totaling $45.5 million. In light of the Company's litigation with Sankyo Pharma and Sankyo Co., Ltd., these amounts may be subject to future adjustments. The current liabilities section of the Company's balance sheet also includes a line item called "Current portion of arbitration obligation," totaling $4.0 million. On November 10, 2003, the Company announced that Sanofi~Synthelabo has agreed to delay this payment and each future payment for one year periods; thus the next payment to Sanofi~Synthelabo for $4.0 million is due on February 28, 2005. Also in the current liabilities section of the Company's balance sheet is a line item called "Current portion of convertible debentures," totaling $18.3 million, $14.4 million of which is due in June 2004. Under the Company's amended agreement with the debenture holders, Cygnus may make prepayments that will result in equal amounts of principal being extended for one year, becoming due in 2005. For example, if Cygnus were to prepay $7.2 million prior to June 30, 2004, the remaining $7.2 originally due in 2004 would be delayed until June 2005. The Company is considering pursuing this prepayment approach. At September 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $64 million. Cygnus -- http://www.cygn.comand http://www.glucowatch.com-- founded in 1985 and headquartered in Redwood City, California, develops, manufactures and commercializes new and improved glucose-monitoring devices. Cygnus' products are designed to provide more data to individuals and their physicians and enable them to make better-informed decisions on how to manage diabetes. The GlucoWatch(R) Biographer was Cygnus' first approved product. The device and its second-generation model, the GlucoWatch(R) G2(TM) Biographer, are the only products approved by the FDA that provide frequent, automatic and non-invasive measurement of glucose levels. Cygnus believes its products represent the most significant commercialized technological advancement in self- monitoring of glucose levels since the advent of "finger-stick" blood glucose measurement approximately 20 years ago. The Biographer is not intended to replace the common "finger-stick" testing method, but is indicated as an adjunctive device to supplement blood glucose testing to provide more complete, ongoing information about glucose levels. DATA TRANSMISSION: Court Confirms Chapter 11 Prepackaged Plan ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York confirmed Data Transmission Network Corporation and its debtor- affiliates' Prepackaged Chapter 11 Plan of Reorganization after finding that the Plan complies with each of the 13 standards articulated in Section 1129 of the Bankruptcy Code: (1) the Plan complies with the Bankruptcy Code; (2) the Debtors have complied with the Bankruptcy Code; (3) the Plan was proposed in good faith; (4) all plan-related cost and expense payments are reasonable; (5) the Plan identifies the individuals who will serve as officers and directors post-emergence; (6) there are no rate changes provided for in the Plan for which a governmental regulatory commission will have jurisdiction; (7) creditors receive more under the plan than they would in a chapter 7 liquidation; (8) all impaired creditors have voted to accept the Plan , or, if they voted to reject, then the Plan complies with the absolute priority rule; (9) the Plan provides for full payment of Priority Claims; (10) at least one non-insider impaired class voted to accept the Plan; (11) the Plan is feasible and confirmation is unlikely to be followed by a liquidation or need for further financial reorganization; (12) all amounts owed to the Clerk and the U.S. Trustee will be paid; and (13) the Debtors are not a party to any retiree benefit plan. All executory contracts and unexpired leases are assumed as of the Effective Date. Notwithstanding the substantive consolidation of the Debtors' Chapter 11 Cases for purposes of the Plan, each of the Debtors will, as Reorganized Debtors, continue to exist after the Effective Date as separate corporate entities or limited liability companies. Headquartered in Omaha, Nebraska, Data Transmission Network Corporation, delivers targeted time-sensitive information via a comprehensive communications system, including: Internet, Satellite, leased lines and other technologies. The Company, together with its debtor-affiliates filed for chapter 11 protection on September 25, 2003 (Bankr. S.D.N.Y. Case No.: 03- 16051). Jeffrey D. Saferstein, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of more than $100 million and debts of over $50 million. DIAMTERICS MEDICAL: Sept. 30 Balance Sheet Upside-Down by $3.6MM ---------------------------------------------------------------- Diametrics Medical, Inc. (OTCBB:DMED) announced financial results for the third quarter and nine months ended September 30, 2003. As previously announced on September 30, 2003, the Company completed the sale of the assets of its intermittent testing business effective September 29, 2003. Continuing operations reflected in the financial results are made up of the Company's blood and tissue continuous monitoring systems. Net revenue from continuing operations for the third quarter of 2003 totaled $810,000, compared with revenue of $1,693,000 for the comparable three-month period last year. The decline in third quarter revenue from 2002 was primarily the result of the termination of the Company's exclusive distribution agreement with Philips Medical Systems on November 1, 2002. The Company's net loss before discontinued operations was $2,632,000 for the third quarter, compared to a $1,131,000 net loss for the same period last year. Included in third quarter 2003 results from continuing operations were restructuring and other nonrecurring charges of $651,000. The discontinued operations of the Company's intermittent testing business showed a net loss of $950,000 for the quarter, compared to a net loss of $45,000 for last year's third quarter. The Company realized a net gain of $1,832,000 from the sale of the intermittent testing business. The resulting net loss for the quarter was $1,750,000, or $.06 per share, compared to a net loss of $1,175,000, or $.04 per share, in the comparable prior-year quarter. For the nine months ended September 30, 2003, net revenue from continuing operations was $2,219,000, compared with $5,905,000 for the comparable period a year ago. The net loss before discontinued operations for this year's nine-month period was $5,627,000 compared with a net loss of $3,661,000 for the nine months ended September 30, 2002. The net loss attributable to common shareholders for the nine-month period was $6,825,000, or $.25 per share, after a one-time deemed dividend on the Company's preferred stock issued in May 2003. The deemed dividend resulted from a beneficial conversion feature of that offering. The net loss for the prior year period was $4,365,000, or $.16 per share. At September 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $3.6 million. "Our third quarter was full of intense activity, culminating in the sale of our intermittent testing business on September 29, 2003 to International Technidyne Corporation," said David B. Kaysen, President and CEO of Diametrics Medical. Kaysen went on to say, "We have significantly streamlined the Company and focused our business for the future on our TrendCare products for continuous blood gas monitoring." Kaysen added, "We are excited about the future for the "new" Diametrics. We have a solid base of business and a truly unique product line that has all the necessary approvals worldwide. Further, we have a team that is totally focused on this business and the desire and ability to execute our plans." Diametrics Medical is a leader in critical care technology. The Company is dedicated to creating solutions that improve the quality of healthcare delivery through products and services that provide continuous, accurate and cost-effective blood and tissue diagnostic information. Primary products include the TrendCare(R) continuous blood gas monitoring system, including Paratrend(R) and Neotrend(R) for use with adult, pediatric and neonatal patients; and the Neurotrend(R) cerebral tissue monitoring system. DPL CAPITAL: S&P Watches Three Related Transaction Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on three synthetic securities related to DPL Capital Trust II preferred capital securities on CreditWatch with negative implications. The CreditWatch actions follow the placement of the preferred stock rating on DPL Inc. on CreditWatch with negative implications on Nov. 10, 2003. These DPL Capital-backed transactions are swap-independent synthetic transactions that are weak-linked to the underlying collateral, DPL Capital Trust II preferred capital securities, which are guaranteed by DPL Inc. RATINGS PLACED ON CREDITWATCH NEGATIVE Structured Assets Trust Units Repackagings (SATURNS) DLP Capital Security Backed Series 2002-3 $54.55 million callable units series 2002-3 Rating Class To From A units BB+/Watch Neg BB+ B units BB+/Watch Neg BB+ SATURNS Trust No. 2002-4 $42.5 million DPL Capital security-backed series 2002-4 Rating Class To From A units BB+/Watch Neg BB+ B units BB+/Watch Neg BB+ Structured Asset Trust Unit Repackagings (SATURNS) DLP Capital Security Backed Series 2002-7 $25 million DPL Capital security-backed series 2002-7 Rating Class To From A units BB+/Watch Neg BB+ B units BB+/Watch Neg BB+ DLJ COMM'L: Fitch Takes Rating Actions on Ser. 1999-CG1 Notes ------------------------------------------------------------- Fitch Ratings affirms the following commercial mortgage pass- through certificates of DLJ Commercial Mortgage Corp's, series 1999-CG1: The following classes are affirmed by Fitch: -- $145.8 million class A-1A at 'AAA'; -- $686.2 million class A-1B at 'AAA'; -- Interest-only class S at 'AAA'; -- $58.9 million class A-2 at 'AA'; -- $65.1 million class A-3 at 'A'; -- $18.6 million class A-4 at 'A-'; -- $46.5 million class B-1 at 'BBB'; -- $15.5 million class B-2 at 'BBB-'; -- $37.2 million class B-3 at 'BB+'; -- $21.7 million class B-4 at 'BB'; -- $9.3 million class B-5 at 'BB-'; -- $12.4 million class B-6 at 'B+'; -- $12.4 million class B-7 at 'B'. In addition, Fitch places the following class on Rating Watch Negative: -- $12.4 million class B-8 at 'B-'. The $19.9 million class C is not rated by Fitch Ratings. The Rating Watch Negative status is attributed to Fitch's concerns of expected losses on certain specially serviced loans that will lower credit enhancement levels of the junior classes. Five loans (3%) are currently in special servicing. The largest specially serviced loan, Holiday Inn New Orleans Veterans (1.2%), is a limited-service hotel located in Metaire, Louisiana and is currently in foreclosure with a receiver in place. The second largest specially serviced loan is Becker Village Mall (0.9%), a retail property located in Roanoke Rapids, North Carolina. Kmart rejected their lease in June 2002 and the space remains vacant. To date, there have been losses in the transaction totaling $4.9 million. GEMSA Loan Services, the master servicer, collected year-end 2002 property financial statements for 98% of the pool. Based on year- end 2002 information, the pool's weighted average debt service coverage ratio is 1.60 times from 1.41x at issuance. As of the October 2003 distribution date, the pool's aggregate principal balance has been reduced by 6.2% to $1.16 billion from $1.24 billion at issuance. Fitch reviewed the performance and underlying collateral of the Winston Hotel Portfolio (5.6%), and has lowered its credit assessment due to its continued decline in performance. The Winston Hotel Portfolio is secured by mortgages on the fee interests in 14 limited service hotel properties located in nine states. The YE 2002 DSCR was 1.42x compared to 2.51x at issuance. The Fitch stressed DSCR for each loan is calculated using servicer provided net cash flow less Fitch stressed reserves divided by Fitch stressed debt service payments based on the current balance with a Fitch stressed refinance constant. Fitch Ratings will continue to monitor the transaction as surveillance is ongoing. ELCOM INT'L: March 31 Balance Sheet Upside-Down by $2.5 Million --------------------------------------------------------------- Elcom International, Inc., announced operating results for its third quarter ended September 30, 2003. As a result of the sale of certain assets and the assignment of the Company's United States information technology productsand services business in March 2002, the operating and balance sheet information and financial summary table contained herein has been prepared with all historical results of that IT Products and services business included in discontinued operations. As a result, net sales, gross profit, operating profit and net loss from continuing operations reflect the Company's ongoing U.S. and U.K. ePurchasing and eMarketplace technology licensing and consulting businesses. Net sales for the quarter ended September 30, 2003 were $367,000 compared to $1,155,000 from the same period of 2002, a decrease of $788,000 or 68%. Professional Services fees in the U.S. and U.K. decreased by $16,000 and License and associated fees decreased by $772,000. The reduction in License and associated fees was due primarily to the Company's receiving substantially larger license fees in 2002 under its contract with CGEY in the U.K. and the revenue recognition of the amounts thereof, and to fewer implementations of PECOS than anticipated for the quarter ended September 30, 2003, compared to the third quarter of 2002 ($94,000 and $850,000, respectively). License and associated fees include license fees, annual fees and joining fees. Annual fees, joining fees and user fees, if not associated directly with Professional Services, are recorded ratably over twelve months. Professional Services fees were $106,000, a decrease of $16,000 or 13% from the $122,000 in the third quarter of last year, due primarily to fewer implementations of PECOS than anticipated as stated above. Selling, general and administrative expenses for the quarter ended September 30, 2003 was $1,610,000 compared to $3,027,000 in the 2002 quarter, a decrease of $1,417,000 or 47%. Throughout 2002 and the first three quarters of 2003, the Company has continued to implement cost containment measures designed to align its SG&A expenses, and disbursements related thereto, with fewer than anticipated revenues. Those measures included personnel reductions throughout most areas, which resulted in a decrease in total personnel and associated expenses in the third quarter of 2003 of $609,000 from the comparable quarter last year. The Company also received a state income and franchise tax refund of $284,000, which was an offset to SG&A for the 2003 quarter. The Company reported an operating loss from continuing operations of $1,346,000 for the quarter ended September 30, 2003 compared to a loss of $2,383,000 reported for the comparable quarter of 2002, an improvement of $1,037,000 or 44%. The lower operating loss from continuing operations in the third quarter of 2003 compared to the 2002 quarter was due primarily to reductions in personnel and associated costs and a state income and franchise tax refund of $284,000, partially offset by a reduction in gross profit. Reductions in personnel resulted in a decrease in personnel and associated expenses in the third quarter of 2003 of $609,000, when compared to the third quarter of 2002. The Company's net loss from continuing operations for the quarter ended September 30, 2003 was $1,278,000, an improvement of $245,000 or 16% from the comparable quarterly loss in 2002 of $1,523,000. The improvement was due primarily to reductions of personnel and associated expenses, and a state tax refund of $284,000, partially offset by lower gross profit. Basic and fully diluted net loss from continuing operations per share for the third quarter of 2003 was $0.04, compared with a basic net loss from continuing operations per share of $0.05 in the comparable third quarter of 2002. The net loss from discontinued operations in the quarter ended September 30, 2003 was $197,000 compared to net income from discontinued operations in the quarter ended September 30, 2002 of $87,000. The third quarter loss is related to a leased facility that had been subleased. The sub-tenant filed for bankruptcy during the second quarter and the Company was forced to incur the expense and payments for the sub-tenant's lease payments. This lease and associated costs will terminate on December 31, 2003. Net sales from continuing operations for the nine months ended September 30, 2003 were $1,567,000 compared to $3,088,000 in the nine months of 2002, a decrease of $1,521,000 or 49%. Professional Services fees in the U.S. and U.K. decreased by $143,000 while License and associated fees decreased by $1,378,000. The reduction in License and associated fees was due primarily to the Company's receiving substantially larger license fees in 2002 under the Company's contract with CGEY in the U.K. and the revenue recognition of the amounts thereof, and to fewer implementations of PECOS than anticipated for the nine months ended September 30, 2003, compared to the nine months ended September 30, 2002 ($406,000 and $1,557,000, respectively). Professional Services fees for the nine months ended September 30, 2003 were $525,000 compared to $668,000 in the comparable nine months last year, a decrease of $143,000 or 21%, due primarily to fewer implementations of PECOS than anticipated as stated above. Selling, general and administrative expenses for the nine month period ended September 30, 2003 decreased to $6,417,000 from $10,174,000 in the 2002 period, a reduction of $3,757,000 or 37%. Throughout 2003, the Company has continued to implement cost containment measures designed to align its SG&A costs with lower than anticipated revenues. Those measures included personnel reductions throughout most areas. Reductions in personnel resulted in a decrease in total personnel and associated expenses for the nine months ended September 30, 2003 of $2,747,000 compared to the same nine month period last year. Additionally, the Company reversed a tax accrual of $506,000 during the nine months ended September 30, 2003 as payment was no longer considered probable. During the nine months ended September 30, 2003, depreciation expense was $1,000,000 lower and the Company received a state income and franchise tax refund of $284,000, which was an offset to SG&A. The Company reported an operating loss from continuing operations of $5,409,000 for the nine months ended September 30, 2003 compared to $9,116,000 reported for the comparable quarter of 2002, an improvement of $3,707000 or 41%. The lower operating loss from continuing operations in the third quarter of 2003 was due primarily to reduction in personnel and associated costs of $2,747,000, a state income and franchise tax refund of $284,000 and a reduction in depreciation expense of approximately $1,000,000, partially offset by a reduction in gross profit. The Company generated a net loss from continuing operations for the nine month period ended September 30, 2003 of $4.9 million, versus a net loss of $8.3 million, an improvement of $3.4 million or 41% from the comparable period of 2002, as a result of the factors described herein. Basic net loss from continuing operations per share for the nine month period of 2003 were $0.16, compared with a basic and fully diluted net loss from continuing operations per share of $0.27 in the comparable nine month period. Net income from discontinued operations for the nine month period ended September 30, 2003 was $110,000 compared to a net loss from discontinued operations for the nine month period ended September 30, 2002 of $1,420,000. Cash and cash equivalents as of September 30, 2003 were approximately $123,000. Although the Company recorded a net loss from total operations of $4,800,000 for the nine month period ended September 30, 2003, cash and cash equivalents decreased by only $2,179,000 between December 31, 2002 and September 30, 2003. The principal differences between the net loss and the decrease in cash and cash equivalents during the period included cash generated via the Company's issuance of its Senior Convertible Debentures in the gross amount of $949,000 (netting $702,000 in cash proceeds to the Company) and the advance of a license fee (accounted for as a loan) of $983,000 and the recording of non- cash expenses of $783,000, offset by a capital expenditure of $177,000 for software and payment on capital leases of $268,000. On April 25, 2003, the Company closed a private placement to accredited investors of ten-year 10% Senior Convertible Debentures, generating gross proceeds of $949,000 and net cash to the Company of $702,000. Robert J. Crowell, the Chairman and CEO invested $300,000, John E. Halnen, the President and COO invested $60,000, William W. Smith, the Company's Vice Chairman and Director invested $300,000, Andres Escallon, the Chief Technology Officer invested $50,000. Robert J. Crowell invested $300,000 in the Debentures and John E. Halnen invested $60,000 in the Debentures. Of these amounts, the Company paid Robert J. Crowell $187,000 and John E. Halnen $60,000 in repayment of a portion of their salaries which they had voluntarily suspended during 2002 in order to assist the Company in its efforts to retain cash. Robert J. Crowell and John E. Halnen immediately reinvested these proceeds into their purchase of the Debentures. In addition, Smith & Williamson LLC (U.K.) and other Elcom stockholders in the U.K. invested $239,000. Inside Investors are considered related parties and invested a total of $710,000 in the Company via purchases of Debentures. Subsequent Events Affecting Liquidity On October 16, 2003, the Company announced that it had effected a Second Closing of its Private Placement of Debentures (the "Second Closing") with Robert J. Crowell, William W. Smith, one other outside investor, and Smith & Williamson LLC (U.K.), investing $150,000, $50,000, $15,000 and $100,000, respectively. Having invested a total of $200,000 in this closing, in the aggregate, Inside Investors have invested $910,000 in the Debentures. On October 31, 2003, the Company received an unanticipated payment of 466,981 pounds sterling ($793,000) representing license fees in arrears, due to the termination of a license originally signed in September 1998, by a U.K.-based licensee. This amount will be recorded as license revenue in the quarter ending December 31, 2003. The Second Closing, combined with anticipated revenues and other monies received as described herein, is expected to fund the Company's operations through the end of the first quarter of 2004. Prior to that time, the Company intends to raise additional funding sufficient to support the Company's future operations. The Company's cash balance as of October 31, 2003 was $1,270,000. At March 31, 2003, the Company's balance sheet shows a working capital deficit of about $3.3 million, and a total shareholders' equity deficit of about $2.5 million. Robert J. Crowell, the Company's Chairman and CEO, stated, "Our quarterly earnings were in line with our current expectations and do not reflect the significant increase in current and forecasted activity under our contract with CGEY relating to the Scottish Executive -- http://www.scotland.gov.uk. Although there is a lag between activity and revenues for Elcom, we believe we will see a flurry of activity and announcements in Q4 2003 and Q1 2004, and beyond." Mr. Crowell continued, "We are also pleased by the second closing of the Company's debentures and monies recently received which has significantly increased our cash reserves. We expect our working capital to be sufficient to fund operations through the end of the first quarter during which time we intend to solicit 'permanent' funding for the Company. There are multiple potential licenses in progress and we believe 2004 will represent, after approximately two years, the beginning of a growth curve for the Company which will reflect the acceptance of our PECOS technology and a steadily recovering economy. We believe, given all these factors, combined with the Company's cost containment measures implemented over the last year and a half or so, will combine to produce profitability in late 2004." About Elcom International, Inc. Elcom International, Inc. (OTC Bulletin Board: ELCO) is a leading international provider of remotely-hosted eProcurement and private eMarketplace solutions. Elcom's innovative remotely-hosted technology establishes the next standard of value and enables enterprises of all sizes to realize the many benefits of eProcurement without the burden of significant infrastructure investment and ongoing content and system management. PECOS Internet Procurement Manager, elcom, inc.'s remotely-hosted eProcurement and eMarketplace enabling platform was the first "live" remotely-hosted eProcurement system in the world. Additional information can be found at http://www.elcominternational.com ENCOMPASS: Asks Court to Clarify Omni Mechanical Sale Dispute ------------------------------------------------------------- Omni Mechanical Company was one of the operations the Encompass Services Corporation Debtors sold in 2002. The Debtors obtained Judge Greendyke's authority to sell the Omni assets to Crawford- Beeson Companies, Inc., which sale transaction closed on December 31, 2002. Omni was an Oklahoma Corporation based in Tulsa, focused on providing mechanical contracting services. It had no employees. An Encompass sister company, Encompass Ind/Mech of Texas Inc., provided its labor force. This arrangement was similar to that of numerous other employee leasing companies. Under this scheme, the employees are hired by the employee leasing company, which in turn, leases those employees to the company for which the employees provide labor. This arrangement relieves the lessee company of many legally and administratively burdensome employee- related obligations that it would otherwise assume. Virtually all payroll and human resources functions are the responsibility of the employee leasing company. The primary difference with respect to Omni's leasing of employees was that the lessor, Encompass Ind/Mech, was not an independent third party, but an affiliated sister company. Omni did not pay Encompass Ind/Mech in the traditional sense for use of its employees. Instead, intercompany liabilities between Omni, Encompass Ind/Mech, and other Encompass sister companies were adjusted to account for the payments. Part of Omni's payment for the employees was a reduction in the amount Encompass Ind/Mech owed Omni on a $10,000,000 note. Crawford-Beeson Purchases Omni Shortly after the Petition Date, Jeffrey B. Price, Esq., at McClain, Leppert & Maney, PC, in Houston, Texas, recounts that the Debtors, Crawford-Beeson, and Omni began negotiations for the Omni sale. In conducting its due diligence analysis on the proposed transaction, Crawford-Beeson obtained and analyzed Omni's financial statements, which revealed numerous intricate and complicated intercompany liability accounts between Omni and several Encompass sister companies, including Encompass Ind/Mech. Some of these intercompany liabilities were related to Omni's compensation to Encompass Ind/Mech for the use of Encompass Ind/Mech's employees. Other intercompany liabilities included amounts due to Omni, like the amounts owed under the Encompass Ind/Mech Note. The intercompany account involved several million dollars of liabilities. Crawford-Beeson notified Omni that it did not intend to assume these various intercompany liabilities. Accordingly, the Parties agreed that all intercompany liabilities would be excluded from the transaction. The Asset Purchase Agreement that governs the Omni Sale was the same form of agreement that the Encompass Debtors were using in numerous other asset sales effected during the pendency of the main bankruptcy case. To reflect the Parties' agreement regarding the omission of intercompany liabilities, Crawford- Beeson wanted to change and clarify relevant provisions of the Purchase Agreement. However, the Debtors resisted these requests, insisting that the transaction had to be effected through the standard form of Purchase Agreement. Mr. Price notes that the Debtors acknowledged that they had agreed to eliminate the assumption of intercompany liabilities from the economic deal between the Parties. To manifest this agreement, Omni acceded to a provision of the Purchase Agreement in which intercompany liabilities were excluded. The Debtors were concerned about the effect of this exclusion on the December 2002 Encompass Ind/Mech payroll expenses incurred on account of Encompass Ind/Mech employees working on Omni projects. Crawford-Beeson accounted for this expense in calculating the offer that it submitted. Crawford-Beeson specifically notified the Debtors of this fact at the time the offer was submitted and clearly stated that the offer was contingent on the fact that Crawford-Beeson would not be responsible for any Omni debt to Encompass Ind/Mech or any other Encompass entity, including the Omni debt to Encompass Ind/Mech. The Debtors understood this and instructed Crawford-Beeson to note the exclusion in the Purchase Agreement's Schedules of Assumed Liabilities. The Reconciliation While the Parties relied on the November 30, 2002 financial statements in determining their responsibilities with respect to the Omni Sale, Omni continued to operate during the month of December 2002. A certain provision, Article 1.7, was included in the Purchase Agreement to account for Omni cash flows, which occurred after November 30, 2002. Article 1.7 requires the seller to provide the buyer with a reconciliation schedule within 30 days after the Omni Sale was closed, so that final adjustments to the sales price can be made and refund or additional premium could be paid. The reconciliation schedule was due to Crawford-Beeson by January 30, 2003, but was not received by that time. Crawford- Beeson subsequently requested the reconciliation schedule several times through April and May 2003, but it was not provided until June 23, 2003. As expected, the reconciliation schedule revealed that in the course of its business operations after November 30, 2002, Omni received income and paid expenses related to those operations. Many of the paid expenses were related to liabilities that Crawford-Beeson was to assume under the Purchase Agreement. However, the nature of many of Omni's listed payments was not expected. Initially, the Parties disputed a number of items in the reconciliation. All but one has been resolved. The parties disagree on the proper treatment of liabilities related to Omni's use of Encompass Ind/Mech employees. Crawford- Beeson contends that this is an intercompany liability for which it is not responsible and that as a result, it is owed $135,349 under a proper reconciliation. The Debtors, on the other hand, contend that the payment of the intercompany liability is proper and that it is owed an additional $147,472 based on the reconciliation performed pursuant to Article 1.7. By this motion, Crawford-Beeson seeks the Court's intervention to resolve the ambiguity and clarify the terms of the Purchase Agreement. Intercompany Liability Should Be Eliminated Under the Purchase Agreement, the Parties agreed to eliminate all accountings for intercompany liabilities from the Omni Sale. However, the Debtors are attempting to selectively revive a single Omni intercompany liability by paying it and seeking reimbursement for it under Article 1.7 of the Purchase Agreement. Mr. Price points out that Article 1.7 of the Purchase Agreement provides for Crawford-Beeson to reimburse Omni for payments made "on behalf of" or "for the benefit of" Crawford-Beeson. Yet, the Purchase Agreement does not specify what payments are considered "on behalf of" or "for the benefit of" Crawford-Beeson. These phrases, Mr. Price says, cannot be interpreted absent an analysis of the intent of the Parties. The Contract provisions clearly indicate that the Parties never intended for this debt to Encompass Ind/Mech, or any other intercompany liability, to be addressed in the reconciliation of the Omni Sale. The Debtors claim that Article 1.7 is the only contractual provision of the Purchase Agreement relevant to the dispute. But Mr. Price argues that under Oklahoma Law, the intent of contracting parties under the contract "is to be determined from their entire agreement construed as a whole and not from any single clause or provision." The Purchase Agreement, when viewed as a whole, clearly shows the Parties' intent to exclude intercompany liabilities from the Omni Sale. The Debtors' payment to Encompass Ind/Mech is a payment of an intercompany liability, which the Parties agreed and specifically stated, would not be assumed by Crawford-Beeson. The Debtors are now attempting to foist this liability on Crawford-Beeson by taking advantage of vague language in the reconciliation provision of the Purchase Agreement. The Omni Sale closed on December 31, 2002. Thus, the Omni debt to Encompass Ind/Mech is a pre-sale liability. As an intercompany liability existing at the time of the Omni Sale, this debt was excluded from the transaction and Crawford-Beeson was never liable for it. Mr. Price contends that the Debtors' transparent attempt to reinstate the debt by adding it to the reconciliation schedule should be rejected. Under the Debtors' strained construction of the Purchase Agreement, the Debtors could have paid any intercompany liability they chose and then demanded reimbursement from Crawford-Beeson under the rubric of "reconciliation." This defies common sense and the spirit and intent of the Purchase Agreement, particularly in light of the fact that Crawford-Beeson notified the Debtors that the Omni offer price of $2,181,219 included a premium to ensure that funds would be available to cover the same liability that Omni now asserts is owed by Crawford-Beeson. December 2002 Omni Liability Was Already Paid The Parties' actions with respect to the Omni Sale are also important in resolving of the ambiguity in the Purchase Agreement. The Parties' actions clearly demonstrate that the Parties never intended the amount Omni owed to Encompass Ind/Mech to be assumed by Crawford-Beeson or considered in the post-sale reconciliation. During the negotiation of the Omni Sale, several representatives of Crawford-Beeson, including its President, Accountant and Counsel, conferred with Scott Clingan and the Debtors' other representatives regarding the issue of the intercompany liability Omni owed to Encompass Ind/Mech. During these negotiations, the Parties realized that the ever-changing account balances for the intercompany liabilities between Omni and its sister companies made it extremely difficult, if not impossible, to conduct adequate due diligence and consummate the Omni Sale before Encompass' self-imposed December 31, 2002 deadline. To remedy this problem and accommodate the Debtors' desire to quickly close the sale, the Parties agreed to exclude all of the intercompany liabilities from the Omni Sale. In the course of the conversations between Crawford-Beeson's representatives and the Debtors' representatives, the Debtors contended that Crawford-Beeson should be responsible for the December 2002 Omni liability to Encompass Ind/Mech. Realizing that the Purchase Agreement specifically relieved Crawford-Beeson of this obligation, the Parties established another means to compensate the Debtors for this payment -- the Parties agreed that the Encompass Ind/Mech liability would be accounted for in the purchase price for the Omni Sale. Now, the Debtors are attempting to extort compensation for this intercompany liability again. Mr. Price tells the Court that Crawford-Beeson should not be required to pay the same liability twice. The Debtors agreed that the Omni Sale did not include the assumption of intercompany liabilities involving Encompass Ind/Mech or any other Encompass entity and that the proposed purchase price for the transaction adequately addressed the Debtors' concerns regarding the Omni liability to Encompass Ind/Mech. Crawford-Beeson relied on these representations in submitting its $2,181,219 offer and in closing on the Omni Sale at that price. These acts not only show the intent of the parties with respect to the intercompany liabilities that are the subject of the dispute, but also reveal the Debtors' inequitable conduct in attempting to recover these amounts from Crawford-Beeson. Accordingly, the Debtors are precluded from recovering the amount in dispute by the equitable doctrines of estoppel and unjust enrichment. Article 7 Dispute Mr. Price relates that the Parties also disagree on the proper interpretation of Article 7 of the Purchase Agreement. The Article provides for Crawford-Beeson's employment of "the Seller's" employees and the assumption of certain of "the Seller's" employee-related liabilities. The Seller under the Purchase Agreement is Omni. During the Omni Sale negotiations, Crawford-Beeson requested that Article 7 be deleted from the Purchase Agreement, since Omni had no employees, and thus there were no Omni employee-related liabilities to assume. Omni refused to change this provision, stating that the general form of Purchase Agreement was essentially unalterable. Now, the Debtors contend that Article 7 somehow transfers Encompass Ind/Mech's employee-related obligations to Omni. No assumption of liability is contemplated by the Purchase Agreement, nor was it ever discussed by the Parties. After the Omni Sale closed, Crawford-Beeson, which took over Omni's projects, hired some of the Encompass Ind/Mech employees. While at Encompass Ind/Mech, some of these employees had employee benefit packages that included severance. The Debtors refused to pay these obligations, and now contend that Crawford-Beeson assumed the obligations via Article 7 of the Purchase Agreement and that Encompass Ind/Mech or Encompass owe nothing to the employees. Since Omni had no employees, Mr. Price maintains that Crawford-Beeson did not assume any employee-related obligations under Article 7 of the Purchase Agreement, and the employee- related obligations remained with Encompass Ind/Mech after the Omni Sale. Disbursing Agent Responds Tony L. Visage, Esq., at Bracewell & Patterson, LLP, in Houston, Texas, argues that the Debtors and Omni paid for the work force that provided services and labor to Omni. Omni, and ultimately Crawford-Beeson, enjoyed the benefit of the actual cash payments made to the members of that work force. Mr. Visage admits that the Debtors relied on Omni's November 30, 2003 financial statements for certain components of the transaction. However, it is not true that Article 1.7 of the Purchase Agreement was to account for only Omni cash flows, which occurred after November 30, 2002. Rather, Article 1.7 was to account for the cash disbursements funded by Omni or any of the Debtors or their affiliates for Omni's benefit. Crawford-Beeson mischaracterizes the dispute and unnecessarily seeks a clarification from the Court on an unambiguous covenant in the Purchase Agreement. It is clear from the Purchase Agreement that Crawford-Beeson did not assume all intercompany liabilities. But then, Mr. Visage points out that Crawford- Beeson, under Article 1.7 of the Purchase Agreement, specifically and unambiguously agreed to remit the amount by which cash disbursements made by Omni or any of the Debtors or their affiliates for Omni's benefit, exceeded cash deposits made for the period November 30, 2002 to December 31, 2002. It is undisputed that the cash disbursements actually made by the Debtors to fund the services and labor provided by the Debtors' employees for Omni's benefit during the one-month period was $147,472. Oklahoma law is clear that the mere fact that the parties to a contract disagree or press for a different construction of an agreement does not make the agreement ambiguous. The language of Article 1.7 of the Purchase Agreement does not require an "analysis of the intent of the parties." Oklahoma law is clear that if a contract is complete in itself, and when viewed as a totality, is unambiguous, its language is the only legitimate evidence of what the parties intended. Furthermore, the Purchase Agreement states that it is the "entire agreement and understanding between [the parties] and supersede[s] any prior agreement and understanding. . . ." Encompass Disbursing Agent, Todd Matherne, agrees that Crawford- Beeson was not to assume liability for all time the intercompany liabilities. To the extent a promissory note existed as an intercompany liability or an account payable existed as an intercompany liability, the Disbursing Agent and the Debtors do not contend that Crawford-Beeson is generally responsible for the liabilities. However, regardless of its origin, if a cash disbursement was made by the Debtors for Omni's benefit during the One-Month Period, Crawford-Beeson is responsible for that cash disbursement. Crawford-Beeson's logic, Mr. Visage continues, is flawed. While the Parties agreed that Crawford-Beeson was not to assume intercompany liabilities, the Parties also agreed that Crawford-Beeson would reimburse the Debtors for cash disbursements made by the Debtors for Omni's benefit during the One-Month Period. Clearly, the funding of payroll, in the ordinary course of business, for services and labor provided to Omni, was done for Omni's benefit. The "equitable doctrines of estoppel and unjust enrichment" preclude Crawford-Beeson from unjustly benefiting from the cash disbursement made by the Debtors. According to Oklahoma law, a necessary component to establish a cause of action for promissory estoppel is a "clear and unambiguous promise." The Disbursing Agent asserts that the promises made in the Purchase Agreement were clear and unambiguous. Crawford-Beeson argued that ambiguities abound, yet it seeks equitable relief under the theory of promissory estoppel. It cannot have it both ways. Debtors Are Entitled to Payment Mr. Visage tells the Court that the Debtors are entitled to immediate payment under the terms of the Purchase Agreement. The Debtors made a demand on Crawford-Beeson for $239,087, but Crawford-Beeson refused to comply with this demand. It is undisputed that the cash disbursements actually made by the Debtors, during the period to: (i) fund the services and labor provided by the Debtors' employees for Omni's benefit was $147,472; (ii) pay the insurance benefits for the employees was $49,769; and (iii) pay the 401(k) contributions for the employees was $41,846. The Parties' unambiguous intent under the Purchase Agreement was for Article 1.7 to provide a cash "true-up" mechanism for the One-Month Period for the mutual benefit of the parties. Crawford-Beeson, therefore, owes the Debtors $239,087. The Disbursing Agent now asks the Court to deny Crawford-Beeson's request and order Crawford-Beeson to turn over $239,087, as well as pay the Disbursing Agent's reasonable legal costs incurred in connection with these requests. (Encompass Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENRON CORP: Inks Stipulation Abandoning Surplus Collateral to GE ---------------------------------------------------------------- Enron Corporation and General Electric Capital Corporation are parties to two Stipulations: -- dated January 18, 2002 that provides adequate protection payments to GE Capital; and -- dated January 16, 2003 that determines GE Capital's secured and unsecured claims in respect of certain property located at Enron Center South, provides for payment and satisfaction of claims and provides additional adequate protection. Pursuant to the January 16 Stipulation, GE Capital was paid $5,653,663 for its secured claim with respect to the GE Collateral identified in Schedules 2 and 3 and the monthly adequate protection payments of those collateral ended. The monthly adequate protection payment under Schedule 1 continued. On June 27, 2003, Enron sought to sell certain of the Schedule 1 Collateral free and clear of the GE Capital liens or alternatively, to abandon the Surplus Collateral. GE Capital objected to Enron's request. To settle their dispute, Enron and GE Capital stipulate that: A. Enron will not sell the Surplus Collateral and will withdraw that portion of the Surplus Collateral Motion seeking authority to sell the Surplus Collateral. The Surplus Collateral is abandoned pursuant to Section 554(a) of the Bankruptcy Code to GE Capital. GE Capital will remain subject to the provisions of the Stipulation it entered into with the Texas Taxing Authorities; B. The automatic stay pursuant to Section 362(a) with respect to the Surplus Collateral is terminated and annulled as to GE Capital and the Texas Taxing Authorities; C. Beginning August 1, 2003, the monthly adequate protection payment for the Schedule 1 Collateral that Enron is retaining will be reduced from $81,667 to $60,000 on an interim basis, until either the parties agree on what the final monthly adequate protection payment should be with the consent of the Creditors' Committee or the Court determines the amount. If the Final Payment Amount is greater than the Interim Payment Amount, Enron will pay the difference from August 1, 2003 to GE Capital. If the Final Payment Amount is less than the Interim Payment Amount, Enron will take a credit for the difference from August 1, 2003 against future payments to GE Capital until the difference is reduced to zero; provided that if future payments owing to GE Capital are insufficient to offset the difference, GE Capital will promptly refund the overpayment to Enron; C. On account of the period August 16, 2003 through August 31, 2003, GE Capital will be responsible for one-half of rent and other fees and related charges for the month of August 2003. Enron will pay the August Rent in its entirety to Navigation Realty Co., the landlord under the Lease, and offset one-half thereof against the adequate protection payment due to GE Capital for August 2003. For the month of September 2003, GE Capital will be responsible for the License Fee. Enron will pay the License Fee to Navigation and offset the amount against the adequate protection payment due to GE Capital for September 2003; D. The Surplus Collateral located on unused floors of Enron Center North may remain at its present location through December 31, 2003 without any liability to GE Capital or the Surplus Collateral for rent or storage costs with respect to the Surplus Collateral; and E. Enron will not cancel the existing insurance coverage for the Surplus Collateral until August 31, 2003. (Enron Bankruptcy News, Issue No. 86; Bankruptcy Creditors' Service, Inc., 215/945-7000) FEDERAL-MOGUL: Seeking to Sell Brighton Property for $4 Million --------------------------------------------------------------- The Federal-Mogul Corporation Debtors want to sell a real property located at 145 North Beacon Street in Brighton, Massachusetts. Debtor Federal-Mogul Friction Products Company no longer uses the Brighton Property as a manufacturing facility and the Brighton Property has substantial exposure to future clean-up costs. The facility contains certain asbestos and other environmental contamination that is currently in the process of being cleaned up pursuant to a postpetition contract with Environmental Strategies Corp. The Debtors want to sell the Brighton Property to 145 North Beacon Street LLC for $4,000,000, free and clear of all liens, claims and encumbrances, pursuant to a purchase and sale agreement. Among the nine bids obtained, Beacon LLC's bid was the highest bid that included the assumption of clean-up costs. The Purchase Agreement provides that Beacon LLC will purchase the Brighton Property for $4,000,000 in cash and assume the entire amount of the clean-up costs. Beacon LLC will also provide the Debtors with an irrevocable standby letter of credit for $1,800,000, as security to its obligation to complete the clean- up. Beacon LLC will also maintain a policy of environmental liability insurance that names the Debtors as insured. Beacon LLC will reimburse the Debtors for any clean-up costs they incurred through the closing of the sale, up to a maximum of $60,000. Beacon LLC has already paid the Debtors two deposits totaling $250,000 in cash. After the sale, the Debtors will receive an additional $3,750,000 in cash and be released from the associated clean-up costs. The Debtors and Beacon LLC agree that the Closing Date will be "the earlier of December 2, 2003 or 11 days after the entry of the Bankruptcy Court order approving the sale". The parties, however, may extend the Closing Date by mutual agreement but not to exceed 15 calendar days. James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young & Jones, P.C., in Wilmington, Delaware, assures the Court that the sale is the product of arm's-length, good faith negotiations between parties who are unaffiliated. To maximize the value of the Brighton Property, the Debtors will continue to accept competing offers for the Brighton Property before November 20, 2003, the hearing date of the sale. Any bidder, however, must file and serve notice of its propose overbid at least three days advance notice before the November 20 Hearing. According to Mr. O'Neill, pursuant to the Purchase Agreement, any first overbid will be in an increment of at least $200,000. Further overbids will be in increments of at least $50,000. In addition, the Purchase Agreement provides that the terms of any overbid will be at least as favorable to the Debtors as those offered by Beacon LLC. When evaluating any additional bids received before the November 20 Hearing, and comparing them to the terms of the Beacon LLC Agreement, Mr. O'Neill relates that the Debtors will consider, inter alia, the closing date of the alternative bids, and evidence of the bidder's financial ability to consummate the transaction, including the amount of the cash deposit, if any, that the alternative bidder provides at or before the November 20 Hearing. In the event that there is a successful overbid, Beacon LLC will have an allowed administrative expense claim against the Debtors' estates for the greater of: (a) its Court-approved documented expenses in connection with the Purchase Agreement; or (b) $100,000. The Break-up Fee is payable from the proceeds of the successful sale to a different buyer immediately after the Closing. Mr. O'Neill explains that the Break-up Fee was actually necessary to induce Beacon LLC to enter into the Agreement. In reliance on the right to receive the Break-up Fee, Beacon LLC performed substantial due diligence for more than one year, and during that due diligence, further refined the extent of the necessary clean- up. The availability of Break-up Fee also induced Beacon LLC to perform research and due diligence, which ultimately benefits all interested parties. Crystal and Guest Street Object Crystal Transport, Inc. leases and Guest Street LLC owns a real property located at 77A Guest Street in Boston, Massachusetts. The Guest Street Property is down gradient and abutting to the 145 North Beacon Property. Crystal and Guest Street inform the Court that the Guest Street property has been and continues to be contaminated by the ongoing postpetition migration of various contaminants from the 145 North Beacon Property onto the Guest Street Property. Crystal and Guest Street propose that, if the Court approves the sale of the 145 North Beacon Property, the Debtors should be required to place $355,000 in escrow from the sale proceeds to pay Crystal and Guest Street's administrative expense claim. The Claim will serve as reimbursement of Crystal and Guest Street's cost of cleaning up the Debtors' postpetition contamination of the Guest Street property. (Federal-Mogul Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 215/945-7000) GAP INC: Hires Susan Burnett to New Talent Development Role ----------------------------------------------------------- Gap Inc. (NYSE: GPS) announced that Susan L. Burnett will join the company in a newly created position as Senior Vice President, Talent Attraction and Development. Ms. Burnett will lead the strategic planning and execution of all staffing, learning and organization development activities companywide, and will report to Eva Sage-Gavin, Executive Vice President, Human Resources. Ms. Burnett joins Gap Inc. after 22 years with Hewlett-Packard, where she served in various capacities including Vice President, Workforce Development and Organization Effectiveness; and Chief Learning Officer. Her global duties at HP included the development of that company's workforce development, organization effectiveness, performance management and employee feedback systems. "This move underscores our commitment to developing and attracting world-class talent and investing in our talent to fuel Gap Inc.'s strategic growth," said Ms. Sage-Gavin. "With this new role, and Susan's appointment, we're underscoring our strong belief that our people are critical to our business success and achieving our long-term goals." Gap Inc. has a global workforce of approximately 165,000 employees. The company operates more than 3,000 store locations in the United States, United Kingdom, Canada, Germany, France and Japan, and has supply chain and compliance staff worldwide. Ms. Burnett holds a bachelor's degree in English and Education from Simmons College in Boston and a master's degree in Education and Instructional Technology from Columbia University in New York. Gap Inc. (Fitch, BB- Senior Unsecured Debt Rating, Stable Outlook) is a leading international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic and Old Navy brand names. Fiscal 2002 sales were $14.5 billion. As of November 1, 2003, Gap Inc. operated 4,210 store concepts (3,075 store locations) in the United States, the United Kingdom, Canada, France, Japan and Germany. In the United States, customers also may shop the company's online stores at gap.com, Banana Republic.com and oldnavy.com. GENZYME: Court Dumps Suit Filed by Biosurgery Div. Shareholders --------------------------------------------------------------- Genzyme Corp. (Nasdaq: GENZ) announced that a Massachusetts Superior Court judge has dismissed in its entirety a lawsuit brought against the company by Biosurgery division shareholders (Chokel v. Genzyme Corporation, et als.) related to the elimination of the corporation's tracking stock structure. The suit was filed in May following Genzyme's announced decision to consolidate its financial structure. In dismissing the suit, the Court's opinion stated that because Genzyme's Board of Directors followed precisely the provisions of the company's charter, the Corporation did not breach its implied covenant of good faith and fair dealing or the Board's fiduciary duties to shareholders. Genzyme Corporation (S&P, BB+ Subordinated Debt Rating, Positive) is a global biotechnology company dedicated to making a major positive impact on the lives of people with serious diseases. The company's broad product portfolio is focused on rare genetic disorders, renal disease, and osteoarthritis, and includes an industry-leading array of diagnostic products and services. Genzyme's commitment to innovation continues today with research into novel approaches to cancer, heart disease, and other areas of unmet medical need. Genzyme's more than 5,000 employees worldwide serve patients in more than 80 countries. GILAT SATELLITE: Sept. 30 Net Capital Deficit Narrows to $7 Mil. ---------------------------------------------------------------- Gilat Satellite Networks Ltd. (Nasdaq:GILTF), a worldwide leader in satellite networking technology, announced the final results of its offer to exchange its Ordinary Shares, par value NIS 0.20 per share, for its outstanding 4% Convertible Subordinated Notes due 2012. At the expiration of the offer on November 10, 2003, at 5:00 p.m., New York City time, US$74,381,667 principal amount of Notes, representing about 84% of the total Notes, had been validly tendered, and not properly withdrawn, in the offer. Gilat has accepted all such notes, except to the extent that the final tally shows that the tender would cause a single Noteholder to own 20% or more of the Company's ordinary shares. The Company will not accept the tendered notes to that extent and will return only those notes to the holder. Gilat offered 125 of its Ordinary Shares for each $1,000 principal amount of the Notes and accrued interest thereon. The Company also reported its results for the quarter-ended September 30, 2003. Revenues were US$44.6 million for the third quarter of 2003, an increase of US$1.3 million over the US$43.3 million result for the same period in 2002. Net loss for the third quarter was US$4.2 million or US$0.32 per share. The 2003 third- quarter net loss include a total of US$0.8 million other income, US$4.5 million gain from restructuring of debt and US$1.7 million charges relating to the company's restructuring process .The 2002 third-quarter net loss was US$108.4 million or US$91.58 per share which included write-offs associated with a partial impairment of GVT notes, inventory adjustment related to current sales level, adjustment for doubtful accounts, final costs associated with the closing of the rStar transaction, and certain transponder termination costs associated with StarBand Communications. The total cash and cash equivalents during the quarter decreased by US$4.8 million from US$44.9 million to US$40.1. This conversion significantly reduced the Company's debt and the related accrued interest by US$104 million bringing Gilat's shareholders' equity (deficiency) as of September 30, 2003 on a pro forma basis to US$97 million from a deficit of US$7 million, assuming no Noteholder will own 20% or more of the Company's ordinary shares. In the event that a single Noteholder will own 20% or more, the increase in shareholders' equity (deficiency) will be lower. The successful completion of the offer results in a significant improvement in Gilat's balance sheet, increased shareholders' equity, reduced debt and improved financial ratios. Former Noteholders of Gilat may direct questions concerning the closing of the offer to Gilat Satellite Networks Ltd. General Counsel, Telephone: +972-3-925-2736. StarBand Communications Inc. Cleared by Courts to Exit Chapter 11 Protection The Company also announced that StarBand Communications Inc. received approval from the U.S. Bankruptcy Court in Delaware to emerge from Chapter 11 protection. This is the final clearance required from the bankruptcy court for StarBand to implement its reorganization plan. The effective date of the emergence should occur by the end of November. The company filed for Chapter 11 bankruptcy protection on May 31, 2002 following a major dispute with a strategic partner. Through settlement of this dispute, renegotiations of key contracts, reductions in staffing offset by increased automation, creation of a new sales force and continued addition of new customers, StarBand is poised to emerge a more financially stable company. As part of the reorganization, StarBand and Gilat have also entered into a new technology and hardware supply agreement including up to $7.5 million in additional financing. Post reorganization, Gilat will hold approximately 49% equity in StarBand. In addition, Gilat announced that Mr. Pinchas Buchris has been elected to the Board of Directors, in place of Mr. Meir Shamir, who has resigned from the Board. Mr Buchris, a former senior IDF intelligence officer, is a Venture Partner of Apax Israel, and acts as a special advisor for technology start-ups and other companies. The Company announced the formation of a central and global executive team to oversee worldwide operations in order to maximize synergies, cooperation and efficiencies by Gilat and its subsidiaries and offices around the globe. During the quarter, the Company also appointed Avihu Bergman as an Executive Vice President for Sales, a new position in Gilat. Avihu Bergman joined the Company in September and is directly responsible for sales in Africa, Asia, Australia and Europe as well as worldwide coordination of the Company's sales efforts including North and Latin America. The Company also announced that Mr. Gidi Kaplan will be leaving his position as Vice President for Research and Development. Mr. Kaplan, who is a co-founder of the Company, will continue working in Gilat in the R&D department. In his place, Yossi Gal, a seasoned Gilat veteran, has been appointed VP for R&D. Mr. Gal assumes the position with more than 15 years of experience in R&D and operations at Gilat and other companies. He most recently served as Vice President of Engineering and Operations at StarBand Communications Inc. The change in positions will take place in the second half of January 2004. In addition, Arik Keshet will be appointed the Company's VP and Chief Technology Officer. Third Quarter Events During the quarter, the Company announced a series of new contracts and milestones. Gilat's subsidiary Spacenet continued to register successes in signing major new customers. -- AGCO Corporation chose Spacenet's Connexstar service to provide Internet access and networking services to up to 1,500 AGCO sites in North America. Agco is the world's third-largest agricultural equipment dealer. -- Spacenet signed a 5-year contract with Scientific Games International, Inc. for a broadband satellite communications network with 650 VSATs for the Iowa Lottery Authority. Gilat has provided more than 29,000 VSAT terminals for use by government-authorized lotteries worldwide. -- Spacenet was selected by Valero Energy Corporation to provide a broadband satellite communications network to its chain of 4,000 retail and wholesale outlets in the US and Canada. Spacenet also expands its service offering -- Spacenet recently announced the expansion of its Connexstar business satellite networking services with two new packages designed to address popular customer requests. With these additions, Connexstar now covers an even broader range of solutions, from low-bandwidth credit/retail applications to high-speed broadband connectivity packages capable of supporting multiple video, retail and Internet/data applications. The new offerings include: -- Connexstar TransAct - Designed exclusively to support credit authorization, point of sale, ATM and other light to medium duty cycle retail transactions. -- Connexstar CX-1000 - An ultra high-bandwidth option engineered to handle the most demanding requirements for fast video, retail data and Internet connectivity. Gilat achieves global milestones - expands cooperation with major players in Africa, Russia and India -- Gilat and Telkom SA Ltd. announced the launch of Telkom's satellite-based broadband VSAT Internet service, based on Gilat's Skystar 360E VSAT platform.. Telkom SA. Also expanded its existing DialAw@y IP rural telephony satellite communications network with an additional hub. -- Gilat announced that it has entered into an understanding for the cooperation in VSAT production with the Russian Satellite Communications Company, the JSC "CTS-Center" and the JSC "VSAT TEL". The agreement increases Gilat's potential access to the Russian market and enhances a growing cooperation with the Russian satellite operator, RSCC. -- Gilat announced that it had reached a major milestone in its business in India, crossing the landmark of shipping over 20,000 VSATs to customers in the country. Gilat Satellite Networks Ltd., with its global subsidiaries Spacenet Inc., Gilat Latin America and rStar Corporation (RSTRC), is a leading provider of telecommunications solutions based on Very Small Aperture Terminal (VSAT) satellite network technology - with nearly 400,000 VSATs shipped worldwide. Gilat, headquartered in Petah Tikva, Israel, markets the Skystar Advantage(R), DialAw@y IP(TM), FaraWay(TM), Skystar 360E(TM) and SkyBlaster(a) 360 VSAT products in more than 70 countries around the world. Gilat provides satellite-based, end-to-end enterprise networking and rural telephony solutions to customers across six continents, and markets interactive broadband data services. Gilat is a joint venture partner with SES GLOBAL, and Alcatel Space and SkyBridge LP, subsidiaries of Alcatel, in SATLYNX, a provider of two-way satellite broadband services in Europe. Skystar Advantage, Skystar 360E, DialAw@y IP and FaraWay are trademarks or registered trademarks of Gilat Satellite Networks Ltd. or its subsidiaries. Visit Gilat at http://www.gilat.com Gilat Satellite's September 30, 2003 balance sheet shows a total shareholders' equity deficit of about $7.4 million. GINGISS GROUP: Hiring Piper Rudnick as Special Corporate Counsel ---------------------------------------------------------------- The Gingiss Group, Inc., and its debtor-affiliates are seeking permission from the U.S. Bankruptcy Court for the District of Delaware to tap the services of Piper Rudnick LLP as their Special Corporate Counsel. The Debtors desire to employ the Firm as their special corporate counsel because of the Firm's extensive expertise and knowledge in the field of business litigation, intellectual property, franchise and distribution, and general corporate law. In preparing for its representation, the Firm has become familiar with the Debtors' business, and business affairs, and many of the potential legal issues that may arise with the Debtors' Chapter 11 cases. Since the Firm is already familiar with the Debtors' current business affairs and litigation status, it is fully prepared to address the legal issues that will come before it in this regard, which is critical to the successful reorganization of the Debtors' estates. The principal attorneys and staff professionals presently designated to represent the Debtors, and their current standard hourly rates, are: Allen J. Ginsburg $475 per hour Norman M. Leon $375 per hour Catherine M. Burkhardt $340 per hour Richard J. Morey $325 per hour George T. Plumb $475 per hour Mark I Feldman $525 per hour Kelli I. Toronyi $315 per hour Susan B. Cory $175 per hour In its capacity as Corporate Counsel, Piper Rudnick is expected to: a. provide legal advice with respect to issues relating to the franchise system and the Debtors' relationship with franchisees, intellectual property matters, and general corporate and business law issues; b. prepare and/or review on behalf of the Debtors necessary applications, motions, answers, declarations, orders, reports, and other legal papers relating to pending litigation and arbitration proceedings involving the Debtors; c. appear, to the extent required by special corporate counsel, in Court and before the arbitrators to protect the interests relating to business and litigation matters, and matters related or incidental thereto of the Debtors before the Court; and d. perform all other legal services for the Debtors that may be necessary and proper in these proceedings. Headquartered in Addison, Illinois, The Gingiss Group, Inc., a national men's formal wear rental and retail company, filed for chapter 11 protection on November 3, 2003 (Bankr. Del. Case No. 03-13364). James E. O'Neill, Esq., and Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub represent the Debtors in their restructuring efforts. The Debtors listed debts of over $50 million in their petition. GLOBAL CROSSING: Seeks Go-Ahead to Assign 48 Contracts to New GX ---------------------------------------------------------------- Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York, recounts that the Global Crossing Ltd. Debtors' Plan provides for a newly formed parent company -- New Global Crossing -- and a newly formed intermediate holding company -- New Global Crossing Holdings Ltd. -- to be the assignees of most of the assets and businesses currently held by the GX Debtors. New Global Crossing will be funded with, among other things, $250,000,000 in cash to be provided by Singapore Technologies Telemedia Pte Ltd. The Old Global Crossing Ltd. and GCHL will be liquidated in accordance with the Plan. On the other hand, the rest of the GX Debtors will emerge from Chapter 11 as reorganized subsidiaries of New Global Crossing and New GCHL. During the course of these cases, the Court approved the GX Debtors' assumption, upon the Effective Date of the Plan, 29 contracts Global Crossing Ltd. is a party or a beneficiary to and 19 contracts GCHL is a party or a beneficiary to. However, Mr. Basta notes that GCL and GCHL will cease to be a part of the Reorganized Global Crossing corporate group on the Effective Date of the Plan. Accordingly, the GX Debtors seek the Court's authority to assign the 48 Contracts to New Global Crossing and New GCHL, as appropriate, who will continue to operate the GX Debtors' businesses. Mr. Basta states that pursuant to Section 365(f)(2) of the Bankruptcy Code, a debtor-in-possession may assign an executory contract or unexpired non-residential real property lease if: "(A) the trustee assumes such contract or lease in accordance with the provisions of this section; and (B) adequate assurance of future performance by the assignee of such contract or lease is provided, whether or not there has been a default in such contract or lease." The Court already approved the GX Debtors' assumption of the Contracts and fixed the cure amounts. The Court also determined that, in connection with assumption of the Contracts, GCL and GCHL have demonstrated adequate assurance of future performance under the Bankruptcy Code, including, without limitation, Sections 365(b)(1) and (3). New Global Crossing and New GCHL will replace GCL and GCHL in the Global Crossing corporate group and, therefore, require the Contracts to efficiently operate their businesses. New Global Crossing and New GCHL are willing to assume GCL's and GCHL's obligations under the Contracts. In addition, Mr. Basta tells the Court that New Global Crossing and New GCHL have sufficient resources to meet GCL's and GCHL's obligations under the contracts, as they will be assignees of substantially all of the GX Debtors' assets and will be funded with STT's $250,000,000 equity investment. Under these circumstances, Mr. Basta contends that the assignment of the Contracts to New Global Crossing and New GCHL is warranted and satisfies the requirements of Section 365(f). (Global Crossing Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) GREAT LAKES DREDGE: S&P Watching Pending Sale to Madison -------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit rating on Great Lakes Dredge & Dock Corp. on CreditWatch with negative implications. The CreditWatch placement followed the company's recent announcement that Madison Dearborn Partners LLC (unrated) is acquiring Great Lakes for $340 million. Oak Brook, Illinois-based Great Lakes Dredge & Dock had total debt (including present value of operating leases) of about $275 million as of Sept. 30, 2003. Vectura Holding Co. LLC (unrated), the majority owner of Great Lakes Dredge & Dock, has signed a definitive agreement to sell the company to Madison Dearborn. Although the financing necessary to complete the transaction has been committed, details have not been disclosed. However, Madison Dearborn, as an equity sponsor with more than $7.5 billion of investments, may further increase debt leverage of Great Lakes Dredge & Dock. "We will meet with management to discuss the new capital structure, liquidity, and any changes to the business strategy under new ownership before taking a further rating action," said Standard & Poor's credit analyst Heather Henyon. GREENWICH CAPITAL: Fitch Affirms BB Rating on Class B3 Notes ------------------------------------------------------------ Fitch Ratings has taken rating actions on the following Greenwich Capital Acceptance, Inc. residential mortgage-backed certificates: Greenwich Capital Acceptance, Inc. Mortgage Pass-Through Certificates, Series 1994-HMC4: -- Class A1 affirmed at 'AAA'; -- Class A2 affirmed at 'AA'; -- Class B1 affirmed at 'A-'; -- Class B2 affirmed at 'BBB-'; -- Class B3 affirmed at 'BB'. The affirmations on the above classes reflect credit enhancement consistent with future loss expectations. HARRAH'S ENTERTAINMENT: Christopher J. Williams Joins Board ----------------------------------------------------------- Harrah's Entertainment, Inc. (NYSE: HET) announced that Christopher J. Williams, Chairman and Chief Executive Officer of The Williams Capital Group, L.P., and Williams Capital Management, LLC, has been appointed to serve on the Harrah's Entertainment Board of Directors, subject to regulatory approvals. "We are delighted to welcome Christopher Williams to our Board of Directors," said Phil Satre, Chairman of Harrah's Entertainment. "His extensive experience in investment banking and asset management, combined with his dedication to community service, will be invaluable to this company in the creation and execution of Harrah's long-term growth strategy." Williams Capital has been one of the 20 largest underwriters of investment grade corporate debt in the United States in each of the last three years, and was ranked the largest minority-owned investment bank in the country by Black Enterprise magazine in June 2002. In 2002, Williams was named one of the 50 most powerful Blacks in corporate America by Fortune magazine. Williams serves as a director of The Partnership of New York City, the National Association of Securities Professionals and the Securities Industry Association. He also serves on the boards of several non-profit organizations, including the National Dance Institute, WNYC Radio, and the Alvin Ailey Dance Foundation. Williams is one of nine outside directors on the 11-member Harrah's board. Satre and Gary Loveman, Harrah's Entertainment President and Chief Executive Officer, are the two company representatives on the board. The Williams Capital Group, L.P. is a registered broker-dealer and NASD member. Neither Harrah's Entertainment nor any of its subsidiaries have any investment or commercial banking relationship with Williams Capital. Founded 65 years ago, Harrah's Entertainment, Inc. (Fitch, BB+ Senior Subordinated Rating, Stable Outlook) operates 26 casinos in the United States, primarily under the Harrah's brand name. Harrah's Entertainment is focused on building loyalty and value with its target customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. HORIZON GROUP: Extends Odd Lot Share Repurchase Program to Dec 3 ---------------------------------------------------------------- Horizon Group Properties, Inc. (Nasdaq: HGPI), an owner, operator and developer of factory outlet centers and land developer, extended the expiration date of its odd lot share repurchase program for the purchase of all shares of its common stock held by persons owning 20 or fewer shares as of the close of business on September 26, 2003, to December 3, 2003, 5:00 p.m. New York City time. HGPI will pay $5.00 for each share submitted by stockholders eligible to participate in the program. Based in Chicago, Illinois, Horizon Group Properties, Inc. has 9 factory outlet centers in 7 states totaling more than 1.8 million square feet and a 650 acre mixed use land development in Huntley, Illinois. As reported in Troubled Company Reporter's November 11, 2003 edition, Horizon Group Properties completed the restructuring of the second of three loans which had been in default since October 2001. On November 6, 2003, HGPI paid off, at a discount, the loan secured by the outlet center in Gretna, Nebraska. As previously announced, HGPI paid off, at a discount, the loan secured by the outlet center in Sealy, Texas on November 3, 2003. The final portion of the restructuring of the GST Loans is the reinstatement to current status of the loan secured by the outlet center in Traverse City, Michigan, which is expected to be completed by November 20, 2003. IT GROUP: Obtains More Time to Move Pending Actions to Delaware --------------------------------------------------------------- The IT Group, Inc., and its debtor-affiliates remain parties to over 100 different judicial and administrative proceedings currently pending in various courts throughout the country. Because of the number of Actions involved and the wide variety of Claims, the Debtors require additional time to determine which, if any, of the Actions should be removed and, if appropriate, transferred to the Bankruptcy Court for the District of Delaware. Accordingly, the Debtors sought and obtained the Court's permission to further extend their removal period with respect to any actions pending on the Petition Date through the earlier of: (a) January 8, 2004; or (b) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. The extension will provide the Debtors sufficient opportunity to make fully informed decisions concerning the possible removal of Actions, protecting their valuable right economically to adjudicate lawsuits, if the circumstances warrant removal. (IT Group Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 215/945-7000) JP MORGAN COMM'L: Fitch Drops Class K & J Note Ratings to D/CCC --------------------------------------------------------------- J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass- through certificates series 1999-C8 is downgraded by Fitch Ratings as follows: -- $3.1 million class K to 'D' from 'CC'; -- $23.8 million class J to 'CCC' from 'B-'; In addition Fitch affirms the following classes: -- $119.4 million class A-1 'AAA'; -- $357.0 million class A-2 'AAA'; Interest-only class X at 'AAA'; -- $36.6 million class B 'AA+'; -- $32.9 million class C 'A+'; -- $14.6 million class D 'A'; -- $25.6 million class E 'BBB+'; -- $11.0 million class F 'BBB'; -- $16.5 million class G at 'BB+'; -- $20.1 million class H 'BB-'. The downgrades are attributed to the liquidation of two of the Horizon group properties: the Sealy Outlet Center (1.6%) and the Nebraska Crossing Factory Store (1.1%). The total loss to the trust from the liquidation of the two loans was approximately $16.9 million. KAISER ALUMINUM: Bankruptcy Court Expunges 2 Environmental Claims ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware disallows and expunges two Environmental Claims in the Chapter 11 cases of Kaiser Aluminum Corporation and its debtor-affiliates: (a) Claim No. 1880, filed by or on behalf of Eaton Corporation for the United States Environmental Protection Agency; and (b) Claim No. 1881, filed by or on behalf of Eaton Corporation. Stipulation Resolving 358 Tremont City Environmental Claims In a separate order, Judge Fitzgerald approves a stipulation, which resolves the liabilities and obligations arising under 358 Environmental Claims filed by the Tremont City Barrel Fill PRP Group. The Debtors and the Tremont City Barrel Fill PRP Group stipulate that: (a) Claim No. 2383, filed by or on behalf of the Tremont City Barrel Fill PRP Group, will be reduced to $82,500 and allowed as a general non-priority unsecured claim; and (b) Each of the 357 Tremont City Environmental Claims, aggregating $356,000,000, is disallowed and expunged in their entirety, pursuant to Section 113(f)(2) of the Comprehensive Environmental Response, Compensation and Liability Act, Section 9613(f)(2) of the Public Health and Welfare Code, and Section 502 of the Bankruptcy Code. (Kaiser Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) LA QUINTA: Proposes Public Offering for 25-Mill. Common Shares -------------------------------------------------------------- La Quinta Corporation and La Quinta Properties, Inc. (NYSE: LQI) intend to offer 25.00 million shares of common stock under their shelf registration statement previously declared effective by the Securities and Exchange Commission. The net proceeds of the offering are intended to be used for general corporate purposes, including for potential acquisitions of lodging properties, lodging companies and/or brands; debt reduction; and/or redemption of preferred stock. The Company has also granted the underwriters an option to purchase up to an additional 3.75 million shares of common stock to cover any over-allotments. Morgan Stanley is the bookrunning manager and Credit Lyonnais Securities (USA) Inc. and CIBC World Markets are serving as co-managers. Copies of the preliminary prospectus supplement and the accompanying prospectus relating to the offering may be obtained from the offices of Morgan Stanley & Co., Prospectus Department, 1585 Broadway, New York, NY 10036. Dallas-based La Quinta Corporation (NYSE: LQI) (Fitch, BB- Senior Unsecured Debt Rating, Negative), a leading limited service lodging company, owns, operates or franchises over 350 La Quinta Inns and La Quinta Inn & Suites in 33 states. Today's news release, as well as other information about La Quinta, is available on the Internet at http://www.LQ.com LEVI STRAUSS: S&P's B-Rating on Watch Negative After Announcement ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Levi Strauss & Co., including its 'B' long-term corporate credit rating, on CreditWatch with negative implications. San Francisco, California-based Levi Strauss had about $2.3 billion in total debt outstanding at Aug. 24, 2003. The CreditWatch listings follow Levi Strauss' announcement of adjusting its fiscal 2003 revenue and operating results downward. Although this announcement is not expected to adversely affect the company's liquidity position relative to its bank facility, Standard & Poor's finds the timing of this latest announcement especially troublesome, given the series of controversial events with the company in recent months. This development represents another in a series of challenges for the company as it seeks to execute a turnaround. "Standard & Poor's will closely monitor the company's progress, and continue to evaluate the company's relationship with its secured lenders. Standard & Poor's expects to meet with management shortly to review its business outlook and financial results. Resolution of the CreditWatch listing is expected by Dec. 19, 2003," said credit analyst Susan H. Ding. "However, any further announcements in the interim period will prompt an immediate review for a downgrade. Furthermore, any additional surprises or a lack of a prompt resolution of the company's tax audit review will also result in a rating review and/or downgrade." Levi Strauss designs and markets jeans and jeans related apparel under the well-recognized Levi's, Dockers, and the newly introduced Levi Strauss Signature brands. LEVI STRAUSS: Fitch's Sr. Unsecured Debt Rating Slips to B- ----------------------------------------------------------- Levi Strauss & Co.'s $1.7 billion senior unsecured debt is downgraded to 'B-' from 'B' by Fitch Ratings following Levi's revision in its earnings guidance for 2003. In addition, the company's $650 million asset-based loan is lowered to 'BB-' from 'BB' and its $500 million term loan is lowered to 'B+ from 'BB-'. The Rating Outlook remains Negative, reflecting the continued challenges Levi faces in stimulating top-line sales growth. The company's revised guidance has forecasted revenues to decline 2% in fiscal 2003 versus previous expectations that revenues would increase modestly. Softer sales are being driven by weakness at U.S. department stores as well as product mix changes in Europe, where sales of lower priced products, 580 jeans, are outpacing its sales of higher priced 501 jeans. In addition, sales of its Levi Strauss Signature line at Wal-Mart have also been slower than anticipated for its men's line, somewhat offset by stronger sales of its lower margin women's and children's lines. Weaker sales, coupled with persistent cost pressures, are expected to result in operating profit that is down dramatically from prior expectations. Though debt levels at year-end are forecasted to remain unchanged, credit measures will weaken significantly due to poorer operating performance. Leverage (total debt/EBITDA) is now expected to be above 6.0x versus 5.3x in the latest 12 months ended Aug. 24, 2003 and interest coverage is projected to weaken to below 1.5x. The company maintains adequate liquidity, with cash on the balance sheet and no borrowings expected on its asset-based revolver. Given the limited upcoming debt maturities, with the next significant payment not due until 2006, and absence of stringent covenant levels, Fitch believes Levi is operating with some financial flexibility to remain current on its financial commitments. Fitch still maintains that benefits from cost savings associated with the restructuring should begin to offset some of the weakness in 2004. Moreover, the full-year benefit of the Levi Strauss Signature line at Wal-Mart, as well as its expected expansion into other mass retailers in international markets, will also help 2004 results. Of ongoing concern is that while cannibalization of the company's core Red Tab products has been limited to date, the longer-term impact on the core product line remains unknown. Also, competitive pricing pressures at each of its channels of distribution are likely to continue. MANDALAY: Fitch Rates $250M Senior Unsecured Debt Issue at BB+ -------------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB+' to the $250 million senior notes due 2011 being issued by Mandalay Resort Group. Proceeds are to be used to pay down outstandings under the revolving credit facility. Ratings reflect MBG's leading Las Vegas assets, solid operating performance, significant discretionary free cash flow and growth potential for 'Mandalay Mile' Strip properties (principally Mandalay Bay) driven by the new $235 million convention center which opened in January 2003. Beyond FYE January 2004, MBG has no major capital projects in the pipeline and should have the capacity to delever. The Rating Outlook is Stable. These factors are partially offset by the company's aggressive financial policy (which entails a demonstrated propensity for share repurchases and more recently, dividends), heavy capital expenditure plans in FY 2004, the competitive threat of Native American Gaming in California to MBG's secondary Strip and other Nevada properties, and declining EBITDA contributions from major secondary markets, Detroit and Illinois. MBG boasted strong second quarter performance led by its Las Vegas Strip properties, aided by the opening of MBG's convention center in January 2003. The convention center enabled MBG's five Strip properties (including Monte Carlo) to achieve record room rates and healthy year over year EBITDA growth of 18.3%, as RevPAR increased 13%. This growth was partially offset by lower EBITDA (- 13.4%) at the company's non-Las Vegas properties, reflecting higher taxes in Illinois and competitive pressure from California tribal gaming in Reno and Laughlin. With the largest room base on the Las Vegas Strip, MBG is particularly leveraged to room rates. Through RevPAR gains, Fitch expects the convention center to continue to generate significant EBITDA growth and margin improvement through FY 2005, as utilization improves and the economy strengthens. In addition, the convention center should be a major source of demand for the new high-end $230 million 1,122- suite tower opens at Mandalay Bay in late-November. Total debt increased to $3.0 billion in the second quarter, up $200 million from first quarter end, and cash stood at $158 million. On an LTM basis, leverage (debt/EBITDAR) was 5.1 times (x) and interest coverage was 2.9x. Incremental debt reflects revolver borrowings and a new $150 million capital lease facility which were used to refinance off-balance sheet operating leases totaling $158 million. Fitch expects debt levels to remain in the $3.0 billion dollar range through fiscal year-end, as MBG closes out its $350 million capital spending program at Mandalay Bay (which includes the 1,122 suite tower and retail overpass to Luxor) and funds dividends. Better than expected EBITDA due to strong Strip RevPAR performance should put leverage in the 4.9x range by year-end, versus previous estimates of above 5.0x. Notably, if MBG continues to repurchase stock under their new 10- million share authorization, debt levels could significantly rise. Leverage above 5.0x would be viewed as high for the category, and uncomfortably close to current covenant restrictions, and could warrant review of the Rating Outlook or the rating. In FY 2005, committed investments should drop significantly. With no major capital projects officially in the pipeline, MBG should have the capacity to reduce debt. Nonetheless, the company could announce capital spending plans at any time that could usurp free cash flow and decelerate or eliminate potential deleveraging. Notably, the funding for the permanent casino in Detroit is expected to incorporate non-recourse debt, which could limit MBG's exposure. MCDERMOTT INT'L: S&P Maintains Watch on Junk Rating --------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to McDermott (J. Ray) S.A., a subsidiary of McDermott International Inc. (CCC+/Watch Pos/--), and its 'B-' rating to JRM's $200 million senior secured notes, due 2013, to be issued in accordance with SEC Rule 144A. The corporate credit rating was assigned under the assumption that the deal will be successfully completed. Proceeds from the offering will be used to fund anticipated negative cash flow from operations expected to occur over the next four quarters and to provide cash to collateralize letters of credit until JRM obtains a new letter of credit facility. The outlook is negative on JRM, Houston, Texas-based provider of marine construction services for offshore oil and gas field development. The 'CCC+' corporate credit ratings on McDermott and subsidiary McDermott Inc. remain on CreditWatch with positive implications, where they were placed on Oct. 17, 2003. "Following completion of the offering, the corporate credit ratings will be raised one notch to 'B-' and removed from CreditWatch, reflecting improved liquidity and easing of financial stress that will result from new stand-alone financings at McDermott's subsidiaries, JRM and unrated BWX Technologies Inc.," said Standard & Poor's credit analyst Daniel DiSenso. "The improved liquidity should give JRM time to complete work on three troubled, cash-draining projects. Previous going-concern issues would be mitigated." JRM's notes will be guaranteed by all of JRM's wholly owned restricted subsidiaries and secured by a first-priority lien on certain marine construction vessels owned by JRM or guarantors and capital stock of the subsidiary guarantors. Pledged vessels may not be liquid, especially since there exists sizable excess industry capacity and the value of collateral may decline over time. Therefore, the liquidation value of JRM's vessels may only provide modest funds to repay the notes in event of default or bankruptcy. While profitability at JRM is improving, cash flow is expected to be negative through the third quarter of 2004, reflecting working capital needed to complete work on three troubled projects. New JRM management is working to permanently improve profit prospects for the firm by strengthening project estimating, bidding, and project management procedures, and developing a more prudent risk-taking plan. METROPCS INC: Third-Quarter 2003 Results Show Marked Improvement ---------------------------------------------------------------- MetroPCS, Inc. announced third quarter 2003 financial results including growth in service revenue to $95.8 million from $30.0 million for the same quarter last year. Operating income for the quarter was $15.6 million compared with a loss of $25.2 million for the same period a year ago. Net income applicable to common stock, after the accrual of preferred stock dividends of $4.8 million, was $3.7 million. Last year's third quarter net loss applicable to common stock was $19.2 million after accrued unpaid preferred dividends of $3.0 million. The company added approximately 72,000 net new subscribers in the quarter, ending the quarter with approximately 859,200 subscribers. CPGA for the quarter was $100.50, which represents a 35% decline from the same quarter last year. CCPU for the quarter was $18.04, which represents a 47% decline over the same quarter last year. Adjusted EBITDA for the quarter was $26.5 million, which represents an increase of $45.9 million from last year's third quarter results. ARPU was $38.29 for the nine months ended September 30, 2003 and has declined principally as a result of the recognition of higher disconnects. ARPU for the quarter was $37.23. Year to date churn was 4.7 % for the nine months ended September 30, 2003. Churn for the third quarter was 5.5%. Our monthly churn has declined since peaking in July. Capital expenditures were $31.9 million in the quarter and related to both the expansion of the company's network and an increase in the capacity of the network. MetroPCS had a September 30, 2003 cash balance of $207 million, excluding the $35.4 million additional capital from a capital call that its preferred stockholders are expected to satisfy shortly. In addition to the results prepared in accordance with Generally Accepted Accounting Principles (GAAP), provided throughout this press release, MetroPCS, Inc. has presented non-GAAP financial measures, such as Adjusted EBITDA, CPGA, CCPU and ARPU. The non- GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. MetroPCS is a provider of wireless communications services in the greater Miami, San Francisco, Atlanta and Sacramento metropolitan areas. We hold 14 PCS licenses clustered in these markets with a total population of approximately 22.9 million. We launched service in all of our markets in the first quarter of 2002 with the exception of the San Francisco market, which was launched in September 2002. MetroPCS Inc. (S&P, CCC+ Corporate Credit Rating, Positive Outlook), headquartered in Dallas, offers local wireless phone service to customers who live, work and play in and around the metropolitan areas of Atlanta, Miami, San Francisco and Sacramento. MetroPCS holds 14 PCS licenses in these markets with a total population of approximately 22.9 million. The company launched service in all markets in the first quarter of 2002 with the exception of the San Francisco Market, which launched in September 2002. MetroPCS frees customers from the frustration of wireless offerings by providing one low monthly cost and one simple plan with unlimited anytime local and long distance minutes, and no contract. The company is among the first wireless operators to deploy an all-digital network based on third generation infrastructure and handsets. For more information visit http://www.metropcs.com MILLENNIUM CHEMICALS: Restated Balance Sheet Upside Down by $50M ---------------------------------------------------------------- Millennium Chemicals (NYSE:MCH) reported a net loss for the third quarter of 2003 of $(28) million or $(0.44) per common share. For the corresponding period of 2002, Millennium reported net income of $5 million or $0.08 per common share. The loss for the 2003 third quarter included the impact of a $15 million pre-tax ($10 million after-tax) special charge associated with the Company's cost reduction program announced in July 2003, which was partly offset by a $2 million after-tax gain on the collection of a note receivable, previously written off. Excluding these items, the third quarter 2003 per share loss was $(0.31) compared to income of $0.08 in the third quarter of 2002. Operating income from majority-owned businesses, excluding the special charge, was $10 million in the third quarter of 2003 compared to $30 million in the third quarter of 2002 and $25 million in the second quarter of 2003. The decline in operating income was due primarily to lower profits in the Titanium Dioxide segment, as discussed under "Titanium Dioxide," below. Sales from all majority-owned businesses were $431 million in the third quarter of 2003 compared to $411 million in the third quarter of 2002 and $416 million in the second quarter of 2003. Robert E. Lee, President and CEO, said, "Although we are very disappointed with the current financial performance, during the third quarter we progressed the implementation of the initiatives I outlined in August. We continue to focus on our balance sheet by actively managing our production rates to insure the proper balance between inventory and customer demand. In addition, our focus on tight cost management and prudent cash utilization continues. In our Titanium Dioxide business, we have begun to recover market share, in large part due to the success of new products that we have introduced for the paint, plastics and paper markets. Those new products, which accounted for approximately 40% of our total titanium dioxide sales volume during the third quarter, offer improved hiding power, dispersion and durability performance." Millennium also announced that it had filed with the Securities and Exchange Commission an amendment of its Annual Report on Form 10-K for the year 2002 to reflect restatements of its financial results for the five years then ended. The restatements were required as a result of errors discovered earlier this year, including those announced on August 6, 2003. Millennium also expects to file with the SEC on November 14, 2003 an amendment of its Quarterly Report on Form 10-Q for the three months ended March 31, 2003 to restate its results for that period as a result of those errors. The Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003, as filed with the Securities and Exchange Commission on August 19, 2003, included restated financial statements that reflected adjustments for these errors. Titanium Dioxide The Titanium Dioxide (TiO2) segment reported third quarter 2003 operating income of $7 million compared to $21 million in the third quarter of 2002 and $23 million in the second quarter of 2003. The sequential decline from the second quarter of 2003 to the third quarter of 2003 was due to higher manufacturing costs per metric ton due to planned slowdowns and unscheduled operating disruptions and lower global average TiO2 pricing. In local currencies, average third quarter prices decreased 2 percent from the second quarter of 2003 and increased 4 percent from the third quarter of 2002. In US dollar terms, the third quarter worldwide average selling prices decreased 2 percent from the second quarter of 2003 and increased 8 percent from the third quarter of 2002. Third quarter 2003 TiO2 sales volume was 149,000 metric tons. Sales volume was up 2 percent compared to the second quarter of 2003 and was down 8 percent from the third quarter of 2002. Third quarter 2003 manufacturing costs per metric ton were up 13 percent from third quarter 2002 and up 7 percent from second quarter 2003 primarily due to unfavorable exchange rates, higher energy costs, and scheduled and unscheduled outages. Unscheduled operating disruptions resulted from the European heat wave, the power blackout in the Northeast region of the US and Hurricane Isabel. The third quarter 2003 TiO2 operating rate was 84 percent of annual nameplate capacity of 690,000 metric tons compared to 90 percent in the third quarter of 2002 and 96 percent in the second quarter of 2003. Outlook Operating income in the TiO2 business segment is expected to be slightly down in the fourth quarter of 2003 compared to the third quarter of 2003. Production rates will continue to be low as required for normal seasonally slow demand conditions and to manage inventory levels. Pricing as measured in average US dollars per metric ton is expected to remain relatively flat. Acetyls The Acetyls segment reported third quarter operating income of $6 million compared to $8 million in the third quarter of 2002 and $5 million in the second quarter of 2003. The high cost inventory which flowed from the second quarter into the third quarter was offset by lower feedstock costs, higher sales volume and the return to normal operating rates in the acetic acid plant. In the aggregate, the weighted-average US dollar price for vinyl acetate monomer ("VAM") and acetic acid in the third quarter of 2003 increased 16 percent compared to the third quarter of 2002 and decreased 7 percent from the second quarter of 2003. Aggregate volume for VAM and acetic acid in the third quarter of 2003 increased 10 percent from the third quarter of 2002 and increased 23 percent from the second quarter of 2003. Outlook Operating profit in the Acetyls business segment for the fourth quarter of 2003 is expected to be higher than the third quarter of 2003, reflecting lower average opening inventory cost and stable market conditions. Specialty Chemicals The Specialty Chemicals segment reported a third quarter 2003 operating loss of $(1) million compared to an operating profit of $2 million in both the third quarter of 2002 and the second quarter of 2003. Sales volume increased 3 percent from the third quarter of 2002 and dropped 10 percent from the second quarter of 2003. Average selling prices decreased 7 percent compared to the third quarter of 2002 and increased 6 percent from the second quarter of 2003. The price of crude sulfate turpentine ("CST"), the key raw material, increased 60 percent from last year's third quarter and 23 percent from the second quarter of 2003. Outlook Results for the Specialty Chemicals business segment in the fourth quarter of 2003 are expected to be similar to the third quarter of 2003. Fragrance and Flavor chemical markets remain competitive, with continued price pressure in most markets. CST supply and demand balance remains tight and higher-cost alternative feedstock will be used as required. Supply chain improvements are reducing inventory levels, which is expected to result in lower fourth quarter operating rates. Equistar Millennium's 29.5 percent stake in Equistar generated a post- interest equity loss on investment of $(12) million in the third quarter of 2003 compared to earnings of $6 million in the third quarter of 2002 and a post-interest equity loss of $(14) million in the second quarter of 2003. On a 100% basis Equistar had a net loss of $(40) million in the third quarter of 2003. This is slightly more than the second quarter 2003 loss. The third quarter 2003 results include an $11 million write-off relating to a research and development facility and the second quarter 2003 included a $19 million financing charge. Although the financial results in the third quarter of 2003 were approximately equal to the second quarter of 2003 results, the underlying business drivers were quite different. The second quarter of 2003 was characterized by weak sales volume coupled with strong product margins from Equistar's olefins plants that produce ethylene from liquid based raw materials. In contrast, the third quarter of 2003 was characterized by higher sales volume and lower product margins. Compared to the second quarter of 2003, Equistar benefited from increased sales volume of ethylene and derivative products in the third quarter of 2003, which were approximately 435 million pounds (21 percent) higher than in the second quarter of 2003. This volume improvement was generally offset by lower third quarter 2003 product margins. Product prices tended to erode early in the third quarter; however, this was reversed partially as some product price increases began to take hold in September. Chemical Marketing Associates, Inc. (CMAI) reported that the cost of producing ethylene from liquid raw materials increased during the third quarter 2003 by approximately 4 cents per pound versus the second quarter of 2003. Millennium's share of Equistar's underlying third quarter 2003 sales was $484 million and operating income was $3 million. Equistar did not distribute any cash to Millennium in the third quarter of 2003. Outlook To date in the fourth quarter 2003 sales volume for the key ethylene products are keeping equivalent pace with late third quarter 2003 rates. Pricing initiatives in polyethylene and several of the key derivatives have been successful and ethylene production from liquid raw materials continues to have an advantage versus natural gas based production economics. At the beginning of October, Equistar began a seven week maintenance turnaround at one of its large liquid raw material based ethylene plants. To compensate for this activity Equistar will produce a greater than normal percentage of its ethylene from natural gas based raw materials. Based on current costs and co- product prices, this activity is estimated to negatively impact quarterly earnings by $5 to $10 million. The cash expenditures for the turnaround activities will be approximately $50 million. There are signs of improvement in the global economy; however, they are not yet sufficient to provide a clear trend line. In the near term, any improvements are being overshadowed by volatility in raw material and energy prices. Cost Reduction Program During the third quarter of 2003, Millennium incurred a pre-tax charge of $15 million related to its cost reduction and office closure program, which was announced on July 21, 2003. Millennium currently expects to incur $3 to $5 million of additional costs with respect to this program during the next several quarters. Debt and Capital Spending Net debt (total debt less cash) at September 30, 2003, totaled $1.205 billion compared to $1.196 billion at June 30, 2003. Net interest expense was $23 million in the third quarter of 2003 compared to $23 million in the second quarter of 2003. The Company was not in compliance with certain financial covenants under its bank Credit Agreement as of September 30, 2003. As a result, the Company obtained waivers to the provisions of these financial covenants, which will expire on December 31, 2003. The Company currently is seeking an amendment to the Credit Agreement to revise these financial covenants. Based on its discussions with the agent banks and the lending banks under the Credit Agreement, the Company expects that it will be able to obtain this amendment before December 31, 2003. The effectiveness of this amendment will be contingent upon the Company obtaining at least $110 million of long-term financing prior to the expiration of the current waiver. The funds so obtained are expected to be used to repay secured term loans of approximately $47 million issued under the Credit Agreement and to enable the Company to terminate its European accounts receivable securitization program of approximately $60 million. The Company expects that it will be able to obtain the requisite financing on or before December 31, 2003, at which time the amendment to the Credit Agreement would become effective. For the first nine months of 2003, capital spending was $29 million, compared to $43 million during the corresponding period in 2002. Depreciation and amortization was $83 million for Millennium's majority-owned businesses in the first nine months of 2003. Full year capital spending is expected to be approximately $50 million in 2003, while depreciation and amortization should total approximately $110 million. Millennium Chemicals (website: http://www.millenniumchem.com)is a major international chemicals company, with leading market positions in a broad range of commodity, industrial, performance and specialty chemicals. Millennium Chemicals is: -- The second-largest producer of TiO2 in the world, the largest merchant seller of titanium tetrachloride and a major producer of zirconia, silica gel and cadmium/based pigments; -- The second-largest producer of acetic acid and vinyl acetate monomer in North America; -- A leading producer of terpene-based fragrance and flavor chemicals; and, -- Through its 29.5% interest in Equistar Chemicals, LP, a partner in the second-largest producer of ethylene and third- largest producer of polyethylene in North America, and a leading producer of performance polymers, oxygenated chemicals, aromatics and specialty petrochemicals. At September 30, 2003, Millennium Chemicals Inc.'s restated balance sheet discloses a net capital deficit of about $50 Million. MIRANT CORP: Brings-In Gibson Dunn as Special Counsel ----------------------------------------------------- Mirant Corp. and its debtor-affiliates seek the Court's authority to employ Gibson Dunn & Crutcher LLP as their special counsel, nunc pro tunc to July 14, 2003, pursuant to Section 327(e) of the Bankruptcy Code. Prior to the Petition Date, Gibson provided advice to the Debtors regarding these matters: * Gibson has been representing Mirant Corporation as well as certain current and former Mirant employees in connection with an ongoing investigation by the U.S. Securities and Exchange Commission concerning, inter alia, certain issues pertaining to previously issued financial reports; and certain parallel, informal inquires by the U.S. Attorney's Office for the Northern District of Georgia; * Gibson has been representing Mirant in responding to the SEC's document and information requests, preparing current and former Mirant employees for SEC interviews, representing Mirant employees at SEC interviews, and investigating facts; and * Gibson has been representing Mirant in connection with certain of its SEC filings, providing SEC disclosure advice, related corporate governance advice, and other counseling regarding compliance with the Securities Exchange Act of 1934. The Debtors selected Gibson as their special counsel because of the firm's extensive experience with the knowledge of the Debtors' businesses and financial affairs. In addition, Ian T. Peck, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates that Gibson has a recognized national reputation and expertise in matters involving or relating to the interpretation and enforcement of the U.S. securities laws and in the conduct and defense of investigations related thereto. Since Gibson has been rendering advice to the Debtors on a variety of matters since February 1997, Mr. Peck contends that allowing Gibson to continue the representation will reduce the overall expenses of administering these cases. John H. Sturc, Esq., a partner at Gibson Dunn & Crutcher LLP, assures the Court the his firm will carefully coordinate its efforts with the bankruptcy counsel and other professionals the Debtors employed and make sure that its actions are not duplicative of the actions undertaken by the Debtors' other professionals. To the best of his knowledge, Mr. Sturc reports that Gibson and its partners and associates do not have any connection with or any interest adverse to the Debtors, their creditors or any other party-in-interest, or their respective attorneys and accountants, in the matters on which it is being employed. Gibson will apply to the Court for allowances of compensation and reimbursement of actual necessary out-of-pocket expenses in accordance with the applicable provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Bankruptcy Rules for the Northern District of Texas for all services performed and expenses incurred postpetition. Gibson's hourly rates of its attorneys and paraprofessionals currently ranges from $230 to $850 per hour. In addition, it is contemplated that certain of Gibson's services provided by its partner Brian Lane in connection with certain disclosure issues will be compensated by an annual retainer, which would be the same arrangement existing prior to the Petition date. The current annual retainer, which expires in February 2004 and which the Debtors already paid, is $50,000. Any future retainer will be in an amount that is comparable to market amounts for comparable services. According to Mr. Sturc, within the year prior to the Petition Date, Gibson received payment from the Debtors and their non- debtor affiliates $1,645,563 for professional services rendered and expenses incurred prepetition. Gibson is still owed $16,434 with respect to prepetition services. * * * The Court authorizes the employment of Gibson effective July 14, 2003 on an interim basis. (Mirant Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) NAT'L CENTURY: Obtains Clearance for Braintree Settlement Pact -------------------------------------------------------------- National Century Financial Enterprises, Inc., and its debtor- affiliates sought and obtained the Court's approval to enter into a Sale and Settlement Agreement with Braintree Manor Nursing LLC, Fall River Nursing LLC, Hollingsworth Nursing LLC, South Boston Nursing LLC and Stoughton Nursing LLC. Charles M. Oellermann, Esq., at Jones, Day, Reavis & Pogue, in Columbus, Ohio, recounts that prior to the Petition Date, the Debtors provided Braintree et al. financing pursuant to certain sales and subservicing agreements under the NPF XII accounts receivable financing program, where the Debtors purchased certain eligible accounts receivable from Braintree. The Settlement Agreement between the parties buys out Braintree's obligations under the Sale Agreements. The salient terms of the Settlement Agreement are: A. Settlement Amount Braintree must pay the Debtors $2,350,000 in cash. B. Termination of Security Interests Upon payment of the Settlement Amount, Braintree will be authorized to terminate the Debtors' ownership and security interests in Braintree's assets, including but not limited to Braintree's accounts receivable, and the Debtors' ownership and security interests in the assets will be deemed to have been terminated. Braintree will prepare, and the Debtors will execute and hold in escrow, appropriate UCC termination statements and deliver them to Braintree. C. Mail Forwarding Instructions Braintree will inform the Debtors where to send any payments or correspondence that the Debtors receive in the lockbox accounts related to Braintree's accounts receivable. Braintree will be responsible for informing all third party payors as to where incoming payments should be redirected. Any payments received by the Debtors after consummation of the Settlement Agreement will not be property of the Debtors' estates and will be turned over to Braintree or its assignee. D. Transfer of Liens to Proceeds The conclusion of the relationship between the Debtors and Braintree, and the termination of the Debtors' ownership and security interests in Braintree's assets, will bind any and all parties that may assert a lien, claim or interest in or to the Sale Agreements or any prior agreements, with any liens transferring to the proceeds. E. Mutual Releases The Settlement Agreement also provides for an exchange of mutual releases by the Debtors and Braintree on their own behalf and on behalf of each of their present and former directors, officers, employees, agents, representatives, attorneys, accountants, underwriters, advisors and certain affiliates. F. Termination of Bank Agreements The Debtors and Braintree will direct The Huntington National Bank to: (1) terminate the lockbox agreements relating to the Sale Agreements; (2) remit all funds that are in Braintree's Lockbox Accounts to the credit and direction of the Debtors and remit all funds and correspondence received to Braintree; (3) terminate the zero balance agreement relating to the Sale Agreements; and (4) use reasonable efforts to provide Braintree with documents relating to account activity in the Lockbox Accounts. Braintree will be responsible for all bank fees and charges related to Braintree's Lockbox Accounts. G. Dismissal of Actions The Debtors will file stipulations of dismissal, with prejudice, dismissing any and all claims brought against Braintree in the adversary proceeding pending against Braintree in the Ohio Bankruptcy Court and the Ohio state court action, NPF XII, Inc. et al. v. PhyAmerica Physicians Group, Inc., et al., Court of Common Pleas, Franklin County, Ohio. The Debtors will prepare, execute and hold in escrow the Stipulations pending payment of the Settlement Amount. (National Century Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000) NAT'L WATERWORKS: Extends Pending Consent Solicitation to Nov. 19 ----------------------------------------------------------------- National Waterworks, Inc. (NATLWW) announces an extension of its pending consent solicitation amend the Restricted Payments covenant in the indenture governing its 10.50% Senior Subordinated Notes due 2012 to permit payment of the dividend as described in the Consent Solicitation Statement dated October 29, 2003. The expiration date for the Consent Solicitation has been extended from 5 p.m., New York City time, on November 12, 2003, to 5 p.m., New York City time, on November 19, 2003, unless further extended. The Consent Solicitation is subject to the terms and conditions of the Consent Solicitation Statement, as amended hereby. This announcement amends and supplements the Consent Solicitation Statement solely with respect to the expiration date described above. All other terms and conditions of the Consent Solicitation Statement remain in full force and effect. Questions related to the Consent Solicitation should be directed to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attn: Credit Liability Management, (800) 828-3182, in its capacity as a solicitation agent in connection with the Consent Solicitation. National Waterworks (S&P, BB- Corporate Credit Rating, Negative) distributes a full line of pipes, fittings, valves, meters, fire hydrants and other components that are used to transport clean water and wastewater between reservoirs and treatment plants and residential and commercial locations. Its products are integral to building, repairing, and maintaining waste and wastewater (sewer) systems and serve as part of the basic municipal infrastructure. Through its network of over 130 branches in 35 states, it sells directly to municipalities and to contractors who serve municipalities and also perform residential, commercial and industrial waterworks projects. NETBANK INC: Low-B Ratings Withdrawn After Early Debt Repayment --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings, including its 'B+/Negative/B' counterparty credit ratings, on NetBank Inc. "The withdrawal of ratings is the result of the firm's early repayment of the $26 million remaining portion of its convertible subordinated debt due June 2004," said Standard & Poor's credit analyst Baylor A. Lancaster. NetBank Inc. is a $5.1 billion asset Internet-only bank, whose subsidiaries include Market Street Mortgage and Resource Bancshares Mortgage Group Inc., whose activities are focused on retail and wholesale mortgage originations. NORTEL NETWORKS: Expects to File Q3 Form 10-Q on November 19 ------------------------------------------------------------ Nortel Networks Corporation (NYSE:NT)(TSX:NT) announced that it will notify the United States Securities and Exchange Commission that it plans to avail itself of a five day extension to the November 14, 2003 deadline for the filing of its Form 10-Q Report for the quarterly period ended September 30, 2003. When filed, Nortel Networks does not expect to report any material differences from the preliminary financial results for the third quarter of 2003 released on October 23, 2003. On October 23, 2003, Nortel Networks announced its intention to restate its financial results for the years ended December 31, 2000, 2001 and 2002 and the quarterly periods ended March 31 and June 30, 2003 as a result of its previously announced comprehensive asset and liability review and other related reviews. The Company is working to finish the complex task of completing the restatements including the financial information to be included in the Third Quarter 2003 Form 10-Q. The Company expects to file its Third Quarter 2003 Form 10-Q with the SEC no later than November 19, 2003 and its applicable financial statements for the third quarter of 2003 with Canadian regulatory authorities no later than November 28, 2003 (within the periods permitted for timely filings). The Company continues to expect to file the restated financial statements for the other relevant periods at the earliest possible time in the fourth quarter of 2003. The financial results of Nortel Networks Limited, Nortel Networks Corporation's principal operating subsidiary, are fully consolidated into Nortel Networks results. NNL's financial statements will also be restated as a result of the comprehensive asset and liability review and other related reviews. NNL's preferred shares are publicly traded in Canada. NNL will also notify the SEC of its plan to avail itself of a five day extension to the November 14, 2003 deadline for the filing of the Third Quarter 2003 Form 10-Q. NNL expects to make its filings with the SEC and the Canadian regulatory authorities at the same time as the Nortel Networks filings. Nortel Networks (S&P, B Corporate Credit Rating, Stable) is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Enterprise Networks, Wireline Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. This press release and more information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com NORTHWESTERN: Sr. Vice President Daniel K. Newell Resigns --------------------------------------------------------- NorthWestern Corporation (OTC Pinksheets: NTHWQ) reported that Daniel K. Newell has resigned as senior vice president of NorthWestern effective immediately. Newell will remain as president and chief executive officer of Blue Dot Services Inc., NorthWestern's heating, ventilation and air conditioning subsidiary, a position he has held since June 2001, until Blue Dot completes the sale of its remaining businesses as part of NorthWestern's Chapter 11 restructuring. In addition, Newell is resigning his position as managing director and chief executive officer of NorthWestern Growth Corporation and is resigning from the board of directors of NorthWestern Growth and Expanets, Inc. Newell will remain on the board of directors of Blue Dot and CornerStone Propane Partners, G.P. during the transition. NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 598,000 customers in Montana, South Dakota and Nebraska. NorthWestern also has investments in Expanets, Inc., a nationwide provider of networked communications and data services to small and mid-sized businesses, and Blue Dot Services Inc., a provider of heating, ventilation and air conditioning services to residential and commercial customers. NRG ENERGY: Reaches Claim Settlement Agreement with FirstEnergy --------------------------------------------------------------- FirstEnergy Corp. (NYSE: FE) has reached an agreement with NRG Energy, Inc., with regard to a never-completed sale of four FirstEnergy power plants to NRG Energy. Under the agreement, FirstEnergy's claim against NRG Energy would be allowed in the amount of $396 million, subject to U.S. Bankruptcy Court approval. NRG Energy and certain of its subsidiaries filed voluntary bankruptcy petitions in U.S. Bankruptcy Court in the Southern District of New York in May of 2003. Pursuant to NRG Energy's proposed Plan of Reorganization, FirstEnergy, as an unsecured creditor, would receive a settlement value of approximately 50 cents on the dollar, or an estimated value of $198 million, with payment in the form of cash, notes and common stock, as indicated below: - 12 percent in cash, or $23.8 million, - 15.2 percent in notes, with an estimated value of $30.2 million, and - 72.8 percent in new NRG Energy common stock, which is expected to be issued by the reorganized company. Based on the stock's nominal value, as estimated in the Plan of Reorganization, the shares allocated to FirstEnergy would be worth approximately $144 million. The actual market value of the shares will be determined after trading begins in the public market. The settlement is related to NRG Energy's guarantee of obligations of its Able Acquisitions LLC affiliate's 2002 agreement to buy FirstEnergy's Ashtabula, Bay Shore, Eastlake, and Lakeshore plants for $1.5 billion. The sale was never completed. FirstEnergy is a registered public utility holding company headquartered in Akron, Ohio. Its subsidiaries and affiliates are involved in the generation, transmission and distribution of electricity; exploration and production of oil and natural gas; transmission and marketing of natural gas; and energy management and other energy-related services. OBAN MINING: Ex-Auditor Hoogendoorn Airs Going Concern Doubts ------------------------------------------------------------- Effective November 5, 2003, Oban Mining Inc.'s Board of Directors and the Audit Committee of the Board of Directors approved the appointment of Dohan & Company to serve as the Company's independent accountant to audit the Company's financial statements. The engagement of Dohan & Company was effective on November 5, 2003. Effective November 5, 2003, the Company dismissed Hoogendoorn Vellmer, Chartered Accountants, as independent auditors of Oban Mining Inc. The Audit Committee approved the dismissal. The audit reports of Hoogendoorn Vellmer on the financial statements of the Company as of and for the years ended December 31, 2002 and 2001 contained an emphasis paragraph as to the uncertainty of the Company's ability to remain a going concern. Hoogendoorn Vellmer has not reported on the Company's financial statements for any periods subsequent to December 31, 2002. OHIO AIR: Fitch Rates TE's Unsec. Pollution Control Bonds at BB --------------------------------------------------------------- Fitch Ratings has assigned a 'BB' rating to the anticipated issuance of $5.7 million Ohio Air Quality Development Authority pollution control revenue refunding bonds, series 1999-A (The Toledo Edison Company [TE] Project). The bonds are to be remarketed during the week of Dec. 1, 2003, with Morgan Stanley and McDonald Investments Inc. as remarketing agents, and are secured solely by payments from TE. The Rating Outlook is Stable. The ratings reflect TE's weak interest coverage ratios and high debt levels including off-balance sheet financing. The ratings also assume that Davis-Besse will restart around year-end 2003 allowing the de-leveraging process at TE, which has been slowed by cash flow pressures associated with the ongoing outage, to accelerate. The Stable Rating Outlook reflects Fitch's view that TE could withstand further delay to DB restart into the spring of 2004 without triggering a ratings downgrade. TE owns a 48.6% interest in the 883-mW nuclear plant and the remainder is owned by affiliate Cleveland Electric Illuminating. FirstEnergy will be required to demonstrate to the NRC that it has addressed all safety/management issues at the unit, including leadership and oversight issues, before the commission will allow the plant to resume commercial operation. Management expects to have the plant ready for restart in December 2003. TE recently filed a proposal with the Public Utility Commission of Ohio to adopt either a competitive bidding process that would shift energy supply and price risk to customers or a rate stabilization plan that would provide standard offer service at stable prices through 2008. The proposed RSP extends customer rate credits but offsets potentially reduced cash flows due to cessation of the generation transition charge with the adoption of a rate stability charge, and delays the required transfer of TE's generating capacity. The RSP also addresses PUCO concerns regarding energy supply price volatility. PUCO can elect to terminate the RSP 12 months after giving notice if a competitive bid process that would provide greater benefits to customers becomes a viable option. Fitch believes that PUCO adoption of TE's proposed RSP would be constructive for bond holders, with the benefit of relatively well-defined cash flows expected to outweigh the commodity risk associated with fixed tariffs through 2008, especially in light of the utility's generation portfolio. The filing requests an order from PUCO by year-end 2003. OMI CORPORATION: S&P Assigns Low-B Level Credit & Debt Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' corporate credit rating to Stamford, Connecticut-based OMI Corporation, an international shipper of crude oil and refined petroleum products. In addition, Standard & Poor's assigned its 'B+' senior unsecured rating to OMI's proposed $150 million debt offering. The senior unsecured notes are rated two notches below the corporate credit rating due to the large amount of secured debt relative to assets. The rating on the senior unsecured notes is based on a review of preliminary terms and conditions. The outlook is stable. "The corporate credit rating on OMI Corporation reflects the company's significant, but carefully managed, exposure to the volatile tanker spot markets, an active new vessel construction program, and participation in the competitive, volatile, highly fragmented, and fixed capital-intensive bulk ocean shipping industry," said Standard & Poor's credit analyst Kenneth L. Farer. "These negative factors are partly offset by OMI's favorable business position as a leading Suezmax and Product tanker operator with strong market share," the analyst continued. In addition, the company's average vessel age is young compared to the world fleet. Tanker rates increased dramatically late in the fourth quarter of 2002 and have continued at fairly strong levels in 2003, as a result of the strong demand for oil. Rates are expected to remain above average through the fourth quarter with continued premiums paid for double-hulled tankers due to heightened environmental concerns and the initiation of EU legislation to accelerate the phase-out of single-hull vessels carrying heavy grades of oil on Oct. 21, 2003. Global tanker fleets are expected to increase over the next few years, since the delivery schedule represents a higher percentage of the existing fleet compared with the capacity of ships over 20 years old that will likely be scrapped. This increase may have a negative impact on tanker rates, if the demand for oil does not increase at the same or higher rate. At Sept. 30, 2003, the company had approximately $650 million of lease-adjusted debt outstanding, an increase of over $180 million from year-end 2001, reflecting the company's many vessel deliveries. Lease-adjusted debt to capital was 55.9% at Sept. 30, 2003, compared with 54.1% at Dec. 31, 2001, somewhat elevated but appropriate for the rating. The company's base of fixed time charters (contracts for a vessel to a specific customer for a fixed period) and liquidity available under credit facilities should allow the company to maintain a credit profile consistent with the rating. Downside risks are limited by the favorable near to intermediate term industry fundamentals and the company's solid market position. However, dramatic improvements are unlikely due to the ongoing fleet renewal program and participation in a competitive and cyclical market. ONEIDA LTD: Will Disclose Third Quarter Results on December 3 ------------------------------------------------------------- Oneida Ltd. (NYSE:OCQ) will release its results for the third quarter ended October 25, 2003 after the market closes on Wednesday, December 3, 2003. Management will host a conference call with analysts and investors on Thursday, Dec. 4, 2003 at 9:00 a.m. ET to discuss the Company's results and operating performance for the third quarter of the fiscal year ending January 31, 2004. The conference call will be broadcast live over the Internet at www.oneida.com To access the webcast, participants should visit the Investor Relations section of the web site at least 15 minutes prior to the start of the conference call to download and install any necessary audio software. This will be archived for 30 days, beginning one hour after the call. Oneida Ltd. is a leading source of flatware, dinnerware, crystal, glassware and metal serveware for both the consumer and foodservice industries worldwide. * * * As previously reported, Oneida Ltd. (NYSE:OCQ) obtained waivers through November 21, 2003, from its lenders in regard to the company's financial covenants and in respect to certain payments that are due. Oneida's bank lenders have agreed to postpone a $5 million reduction in the company's credit availability until November 21, 2003, when the company expects to have provided them with updated financial information regarding the company's operations and its restructuring plans. This reduction previously was scheduled to take effect on November 3, 2003, under the company's revolving credit agreement. In addition, Oneida's senior note holders have agreed to defer until November 21, 2003 a $3.9 million payment from the company that was due on October 31, 2003. OWENS-ILLINOIS INC: Closes on Sale of Certain Closure Assets ------------------------------------------------------------ Owens-Illinois, Inc., (NYSE: OI) has closed on the sale of assets related to the production of plastic trigger sprayers and plastic finger pumps to Continental Sprayers International, Inc., headquartered in St. Peters, Missouri. Included in the sale are manufacturing facilities in Bridgeport, Conn., and El Paso, Texas, in addition to related production assets at the Erie, Pa., plant. Owens-Illinois will continue to own and operate the Erie plant as part of its Closure division, which includes a total of 15 facilities in North America, South America, Europe and the Asia Pacific region. "The sale of the trigger sprayer and finger pump product lines will allow us to focus on the Company's core businesses, improve liquidity, and allocate capital and other resources where we can best compete in a global marketplace. Going forward, we plan to concentrate on key closure product lines including child- resistant, tamper-evident and dispensing closures," said Terry L. Wilkison, O-I executive vice president and general manager of the Plastics Group. As announced in the Company's third quarter earnings press release, expected net cash proceeds from the sale are approximately $50 million, including liquidation of related working capital, which will be used to reduce debt. As part of the agreement, Continental has agreed to offer employment to substantially all active O-I employees associated with the divested assets. The Company will offer outplacement services for other affected employees, including the use of government agencies in helping them search for new jobs. Owens-Illinois (Fitch, BB- Bank Debt and Senior Unsecured Note Ratings, Stable) is the largest manufacturer of glass containers in North America, South America, Australia and New Zealand, and one of the largest in Europe. O-I also is a worldwide manufacturer of plastics packaging with operations in North America, South America, Europe, Australia and New Zealand. Plastics packaging products manufactured by O-I include consumer products (blow molded containers, injection molded closures and dispensing systems) and prescription containers. Copies of Owens-Illinois news releases are available at the Owens- Illinois Web site at http://www.o-i.com PARAMOUNT RESOURCES: Sept. 30 Working Capital Deficit Tops $290M ---------------------------------------------------------------- Paramount Resources Ltd. announced its financial and operating results for the three months ended September 30, 2003. FINANCIAL HIGHLIGHTS (unaudited) Three Months Nine Months FINANCIAL Ended September 30 ended September 30 (thousands of dollars except for % % per share amounts) 2003 2002 Change 2003 2002 Change ------------------- ---- ---- ------ ---- ---- ------ Gross Revenue 86,940 116,467 -25% 293,486 335,605 -13% Cash Flow (1) From operations 29,071 58,661 -50% 124,119 197,814 -37% Per share - basic 0.48 0.99 -52% 2.06 3.33 -38% - diluted 0.47 0.98 -52% 2.05 3.32 -38% Earnings (loss) Net earnings (loss) (7,851) 6,180 -227% (8,663) 51,706 -117% Per share - basic (0.13) 0.10 -230% (0.14) 0.87 -116% - diluted (0.13) 0.10 -230% (0.14) 0.86 -116% REVIEW OF OPERATIONS Kaybob Drilling, completion and construction activity in the Kaybob area increased dramatically in the third quarter compared to second quarter levels. Three drilling rigs and two service rigs have been kept active for most of the third quarter. Paramount participated in the drilling of 16 (12.7 net) wells in the third quarter resulting in 9 (7.3 net) gas wells, 2 (2.0 net) oil wells and 5 (3.4 net) standing wells. Construction of pipelines and lease facilities have kept pace with the drilling and completion rigs; as of November 1, 2003, ten of the wells drilled in the third quarter have been put on production. Capital spending increased from $4 million in the second quarter to $21 million in the third quarter. Gas volumes averaged 82 MMcf/d in the third quarter. This marginal increase in production over second quarter (80 MMcf/d) is the result of gas that was returned to production following plant maintenance and an increase in drilling and tie in activities which have added new gas wells to offset property declines. Current gas production from the Kaybob properties is approximately 90 MMcf/d. Oil and natural gas liquids production averaged 2,505 Bbl/d versus 2,111 Bbl/d in the second quarter 2003. This increase in production is due to the return of shut-in natural gas liquids, optimization at the Kaybob West oil property and two new oil wells that were drilled in the area. Construction was completed on Paramount's Kaybob North oil battery. This will significantly lower oil and condensate operating costs in the area. This facility provides an attractive alternative to third-party oil processing in the area, and will generate additional revenue to Paramount. Partner and regulatory approvals are being sought to expand the Kaybob North oil battery to include water disposal and heavy oil blending operations. Sour gas field compression was added in the Pine Creek area to permit the production of shut-in sour gas and increase the economic viability to develop sour gas plays in the area. Construction has started at the Clover gas plant to add plant inlet compression in order to be able to handle additional volumes of gas that we plan to place on production in the fourth quarter. Initial results from the wells drilled in the third quarter as part of our down-spacing program are very encouraging. Drilling activity will continue in the fourth quarter to exploit new gas reserves in existing gas pools. Paramount expects to have three drilling rigs active in this area for the remainder of the year, drilling an additional 17 net wells prior to year end. This activity is planned for the Pine Creek, Clover and Kaybob North properties. Operations will resume on two wells that were suspended in the second quarter due to the early spring break-up in 2003. Production volumes are now expected to exceed the year- end exit rate targets of 100 MMcf/d of gas and 2,500 Bbl/d of oil and natural gas liquids for the Kaybob Core Area. Grande Prairie The Sturgeon Lake/Mirage Core Area has been renamed the Grande Prairie Core Area following the sale of the Sturgeon Lake South assets, which was effective July 1, 2003, and closed October 1, 2003. The sale of Sturgeon Lake included daily production of 1,700 Bbl/d oil and 3.0 MMcf/d gas, and proven reserves at January 1, 2003 of 2.7 MMBbl oil and 4.2 Bcf gas, for a total consideration of $54.3 million. The Sturgeon Lake South property was our oldest oil property, having been developed in the late 1950's, and also incurred the highest per-unit operating costs of any Paramount property. The Grande Prairie area exited the third quarter with production rates of 15.1 MMcf/d of natural gas and 2,300 Bbl/d of oil and liquids (before the Sturgeon Lake sale). New drilling and tie ins before the end of the year are expected to increase natural gas exit rates for the year considerably despite the sale of the Sturgeon Lake assets. In Mirage, the shallow gas development program continued, with 13 (9.5 net) wells drilled during the quarter, nine of which were successful on initial completion and four are awaiting reworks. Production is presently at 6 MMcf/d from the program with five additional wells in the process of being tied in. At Saddle Hills, Paramount successfully drilled the 4-35 Wabamun well, which tested at rates in excess of 15 MMcf/d and 300 Bbl/d. The well is presently being tied in and will commence production in November 2003. The 6-25 Wabamun location spud November 3, 2003 as planned and should have results available prior to the end of the year. At Valhalla, production commenced through the newly constructed Paramount pipeline system; two wells are planned for the fourth quarter to take advantage of the new infrastructure. At Shadow and Goose River, three new wells were placed on production, opening up new properties, which will be areas of increased activity into the next drilling season. Budget planning has commenced for 2004, which will see continued high growth rates in this area. Already 65 potential locations have been identified with a projected budget tripling that of 2003. Northeast British Columbia and Liard, Northwest Territories All production in this area was adversely affected due to a 14-day turnaround at the Fort Nelson Plant. Net gas production has been relatively steady and we are exiting the third quarter at 11 MMcf/d Paramount has elected to participate in the Chevron Liard 3-K-29 and 2-M-25 wells anticipated to spud early next year. If successful this will be the fourth Chevron producing well in the Liard field. The Chevron Liard M-25 well workover was successfully recompleted for a current net daily production of 10 MMcf/d (0.2 MMcf/d net). The Clarke Lake c-15-J well was drilled and cased earlier in the third quarter and is still being evaluated. Paramount is currently participating in the Clarke Lake Petro-Canada b-57-I well. If successful, this well could be tied in before year-end. Northwest Alberta / Cameron Hills, Northwest Territories No new drilling or construction projects were initiated in the Northwest Alberta Core Area during the third quarter due to seasonal access constraints. Activities have been focused on identifying opportunities and preparatory efforts required to execute those projects during the coming winter season. Some of the more prominent projects include the drilling and tie in of four gross wells targeting oil in Cameron Hills, N.W.T., and follow-up drilling to the Haro gas discovery of the first quarter of 2003. Net production for the third quarter averaged 21.5 MMcf/d and 900 Bbl/d . Operational challenges associated with wax have prevented Paramount from realizing the full oil production capabilities from Cameron Hills this quarter. A wax blockage in the Cameron K-74 gathering line is expected to be cleared late in the fourth quarter of 2003 and will result in an additional 500 Bbl/d of production. Southern Alberta / Saskatchewan / Montana / North Dakota Production in the third quarter of 2003 from the Southern Core Area averaged 9 MMcf/d and 2,179 Bbls/d reflecting the results of continued property dispositions started late last year. Production from the Southern Core Area to date in 2003 has averaged 9.5 MMcf/d and 2,618 Bbl/d. Operations during the third quarter were focused in the Alder Flats, Chain/Craigmyle and Long Coulee areas of Alberta and Lougheed, Saskatchewan. In Alder Flats, two Mannville gas wells were tied in and commenced production in September at a gross rate of 1.0 MMcf/d. In Chain/Craigmyle, four wells were drilled or recompleted in the Edmonton formation resulting in four new gas wells, three of which are currently producing with the fourth waiting on compression. Gas production additions were also made from the reconfiguration of the Delia 7-15 compressor station to lower the inlet suction pressure and from the tie in of solution gas at the Craigmyle 8-35 Battery. In Long Coulee one Mannville and one Bow Island well were put on production and a successful recompletion for a second Bow Island gas well was undertaken. In Lougheed, Saskatchewan several successful recompletions for increased Midale oil production were undertaken. The Southern Core Area has completed the process of consolidation and focus in the third quarter of 2003. This process has seen the Southern Core Area divest of smaller interest and non- operated/non-core properties to pursue the growth of fewer, higher interest core properties. FINANCIAL Petroleum and natural gas sales before hedging totaled $96.8 million for the three months ended September 30, 2003, as compared to $101.6 million for the comparable period in 2002. The decrease is due to lower production as a result of the disposition of properties to Paramount Energy Trust in the first quarter of 2003, offset somewhat by higher natural gas prices as compared to the third quarter of 2002. Cash flow from operations for the three months ended September 30, 2003 totaled $29.1 million or $0.47 per diluted common share as compared to $58.7 million or $0.98 per diluted common share for the third quarter of 2002. Paramount recorded a net loss for the current quarter of $7.9 million or $0.13 per diluted common share as compared to net income of $6.2 million or $0.10 per diluted common share for the comparable period in 2002. The decreases in cash flow and net income are due primarily to third quarter pre- tax commodity hedging losses of $10.4 million and a bad debt charge of $6 million relating to the bankruptcy of Mirant Canada Energy Marketing Ltd. as compared to $14.4 million pre-tax commodity hedging gains in the third quarter of 2002. The majority of the Company's natural gas hedging contracts expired at the end of October 2003. The Company had a natural gas sales contract with Mirant Canada Energy Marketing Ltd., which was assigned to a third party effective July 1, 2003, prior to the purchaser filing for bankruptcy protection under the Companies' Creditors Arrangement Act on July 15, 2003. The Company was owed approximately $8 million for June natural gas sales which has not yet been received. The $6 million bad debt provision recorded represents the Company's best estimate of the portion of the receivable which may not be collected. U.S. Notes Offering Paramount Resources Ltd. issued U.S. $175 million of 7-7/8 percent unsecured Senior Notes due 2010 in the United States on October 27, 2003, and the proceeds from the offering were used to repay senior bank debt. In addition, Paramount also closed a new Senior Credit facility with its existing banking syndicate totalling $203 million on the same day. The combined debt financing available is now approximately $430 million. At the end of the third quarter the Company had $272 million of loans drawn against its credit facility. The subsequent close of the Sturgeon Lake property sale has reduced this by a further $54.3 million. OUTLOOK Paramount has now completed the 18-month process of creating the Paramount Energy Trust while at the same time maintaining a significant, albeit lonely, intermediate-sized Canadian exploration and production company. The Company is now well financed with a balance sheet positioned to allow it to react to opportunities which may present themselves; a well defined short to medium-term growth platform in particular with the down-spacing program at Kaybob and the inventory of opportunities for growth in Grande Prairie, and Paramount has established long-term growth projects at Cameron Hills, Liard, and Colville Lake, all in the Northwest Territories, as well as significant opportunities for bitumen development in Northeast Alberta. Paramount has maintained its long-term perspective on the energy industry in Canada and looks forward to a period of renewed growth as it moves forward from this process to unlock shareholder value. REVENUE Natural gas revenue before hedging totaled $267.3 million for the nine months ended September 30, 2003, as compared to $204.8 million during the same period in 2002. The increase in natural gas revenue results from higher commodity prices received during the period. Stronger natural gas demand resulted in an increase of 98 percent in Paramount's year-to-date average pre-hedged natural gas sales price to $6.25/Mcf as compared to $3.15/Mcf for the same period in 2002. Natural gas hedging losses for the nine months ended September 30, 2003 was $49.2 million. The 2003 year-to-date average natural gas price after hedging was $5.10/Mcf. For the three months ended September 30, 2003, natural gas revenue before hedging totaled $71.7 million as compared to $74.6 million for the same period in 2002. The 4 percent reduction in quarter- over-quarter sales was primarily due to the disposition of the Northeast Alberta assets to the Trust in March 2003. The Northeast Alberta assets contributed approximately $28 million of natural gas revenue in the third quarter of 2002. The decline in natural gas revenue as a result of the Northeast Alberta assets disposition was partially offset by the increase in the realized pre-hedged natural gas sales, which averaged $5.74/Mcf for the three months ended September 30, 2003 as compared to $3.04/Mcf for the same period in 2002. Natural gas sales volumes averaged 156.8 MMcf/d to September 30, 2003, as compared to 234.3 MMcf/d reported for the same period in 2002. Third quarter natural gas sales averaged 135.8 MMcf/d, a 48 percent decrease from 259.3 MMcf/d reported for the equivalent period in 2002. The decrease in natural gas sales is primarily the result of the disposition of the Northeast Alberta assets to the Trust and the minor non-core property dispositions. The Northeast Alberta assets contributed approximately 99 MMcf/d of natural gas sales volumes in the third quarter of 2002. Oil and natural gas liquids revenue before hedging for the nine months ended September 30, 2003 increased 82% to $80.7 million as compared to $44.4 million for the comparable period in 2002. The increase in oil and natural gas liquids revenue resulted from higher commodity prices, the addition of Summit's oil and natural gas liquids production and new oil production from Cameron Hills. Stronger oil and natural gas liquids demand resulted in an increase of 12 percent in Paramount's year-to-date average pre- hedged oil and natural gas liquids sales price to $38.86/Bbl as compared to $34.68/Bbl in the same period in 2002. Oil hedging losses for the nine months ended September 30, 2003 were $5.6 million. The 2003 year-to-date crude oil price after hedging was $36.18/Bbl. Oil and natural gas liquids production volumes increased 62 percent to average 7,605 Bbl/d for the nine months ended September 30, 2003 as compared to 4,690 Bbl/d for the comparable period in 2002. The increase was attributable to the combined impact of the acquisition of Summit, which at the time of acquisition produced approximately 5,000 Bbl/d of oil and natural gas liquids and the new oil production from Cameron Hills. Cameron Hills oil production contributed approximately 310 Bbl/d for the nine months ended September 30, 2003. For the three months ended September 30, 2003, oil and natural gas liquids revenue before hedging totaled $25.0 million as compared to $27.0 million for the same period in 2002. The average pre- hedged oil and natural gas liquids price received for the three months ended September 30, 2003 was $36.50/Bbl as compared to $37.45/Bbl for the same period in 2002. Oil and natural gas liquids production volumes totaled 7,461 Bbl/d in the third quarter of 2003, as compared to 7,832 Bbl/d for the comparable quarter of 2002. The 5 percent decrease in oil and natural gas liquids production was due primarily to minor non-core property dispositions closed during the year, offset somewhat by new oil production at Sturgeon Lake and Cameron Hills. ROYALTIES Alberta gas Crown royalties are a cash royalty calculated on the Crown's share of production using the Alberta Reference Price. The Alberta Reference Price is the monthly weighted average well head price for gas consumed in Alberta and gas exported from Alberta reduced by allowances for transportation and marketing. A subsequent cost of service credit is applied to account for the Crown's share of allowable capital and processing fees to arrive at the net royalty. Generally the Crown's share of production will increase in a higher price environment. Royalties for the nine months ended September 30, 2003 averaged $7.80/BOE or 21 percent of Paramount's average sales price of $37.78/BOE. This compares to $3.88/BOE or 19 percent of the average sales price reported for the same period in 2002. The increased rate results from the higher commodity prices received during the period, before hedging losses, as compared to prior year. For the three months ended September 30, 2003, royalties totaled $20.9 million as compared to $20.7 during the same period a year earlier. OPERATING COSTS For the nine months ended September 30, 2003, operating costs totaled $58.9 million compared to $62.6 million during the same period a year earlier. On a unit-of-production basis, average operating costs increased 22 percent to $6.40/BOE from $5.24/BOE in 2002. This increase is partially attributable to the higher operating costs of our mature Sturgeon Lake property, averaging $11.13/BOE for nine months ended September 30, 2003. The operational challenges that delayed Paramount in achieving full oil production from Cameron Hills also increased operating costs per unit in the third quarter of 2003. The cost optimization will be realized in the fourth quarter once the Cameron K-74 production is brought on-line. For the three months ended September 30, 2003, operating costs totaled $21.7 million as compared to $22.1 million for the same period in 2002. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses totaled $14.1 million for the nine months ended September 30, 2003, as compared to $10.4 million recorded for the same period a year earlier. On a unit-of- production basis, 2003 year-to-date general and administrative expenses increased to $1.53/BOE as compared to $0.87/BOE for the period ended September 30, 2002. The increase from 2002 is due primarily to lower overhead recoveries related to lower capital spending levels compared to prior year. Paramount does not capitalize any general and administrative expenses. BAD DEBT The Company had a natural gas sales contract with Mirant Canada Energy Marketing Ltd., which was assigned to a third party effective July 1, 2003, prior to Mirant filing for bankruptcy protection under the Companies' Creditors Arrangement Act on July 15, 2003. The Company is owed approximately $8 million for June natural gas sales which has not yet been received. The $6 million bad debt provision recorded represents the Company's best estimate of the portion of the receivable which may not be collected. DRY HOLE COSTS The Company follows the Successful Efforts Method of accounting for petroleum and natural gas operations. Under this method the Company capitalizes only those costs that result directly in the discovery of petroleum and natural gas reserves. The cost of unproductive wells, abandoned wells and surrendered leases are charged to earnings in the year of abandonment or surrender. For the nine months ended September 30, 2003, $21.0 million in dry hole costs were recorded, as compared to $4.1 million in the same period of 2002. Of the dry hole expense recorded in 2003, approximately $16.7 million results from wells drilled in prior years, which were determined in the current year to be incapable of production in economic quantities. WRITE-DOWN OF US PETROLEUM AND NATURAL GAS PROPERTIES During the nine months ended September 30, 2003, the Company recorded a write-down of $9.9 million, representing the remainder of its petroleum and natural gas assets in California. INCOME TAXES At December 31, 2002, the Company had accumulated tax pools of approximately $796 million, which will be available for deduction in 2003 in accordance with Canadian income tax regulations at varying rates of amortization. Paramount does not expect to pay current income taxes in 2003. In 2003, the Alberta provincial and Canadian federal governments introduced legislation to reduce corporate taxes. The changes are considered substantively enacted for the purposes of Canadian GAAP and, accordingly, the Company's future income tax liability has been reduced by $33.4 million. The effect of this reduction has been recognized in the future income tax expense (recovery) for the nine-month period ended September 30, 2003. CASH FLOW AND EARNINGS Cash flow from operations for the nine months ended September 30, 2003 totaled $124.1 million or $2.06 per basic common share ($2.05 per fully diluted common share), representing a 37 percent decrease from the $197.8 million, or $3.33 per basic common share ($3.32 per fully diluted common share) reported for the corresponding period in 2002. The decrease is due to lower production levels, as well as commodity hedging losses, offset somewhat by higher natural gas and oil and natural gas liquids prices, as compared to prior year. Fully diluted weighted average shares outstanding totaled 60.5 million for the nine months ended September 30, 2003. Cash flow will continue to be directed towards the Company's capital expenditure program funding ongoing working capital requirements. Net loss for the nine months ended September 30, 2003 totaled $8.7 million or $0.14 per basic and fully diluted common share, compared to net earnings of $51.7 million, or $0.87 per basic common share ($0.86 per fully diluted common share) reported for the same period a year earlier. The net loss for the nine month period is primarily the result of a commodity hedging loss of $54.7 million, offset by a $33.4 million future tax gain due to changes in federal and provincial tax rates. A one-time loss on sale of property and equipment of $21.7 million was recorded as a result of the disposition of a non-core property in Alberta. SUBSEQUENT EVENTS On October 1, 2003, the Company sold its Sturgeon Lake properties in the Grande Prairie Core Area, including the associated oil batteries and gas plants, to an unrelated third party for proceeds of $54.3 million. The carrying value of this property included in property, plant and equipment was approximately $36 million, resulting in a pre-tax gain on sale of approximately $18 million. On October 27, 2003, the Company replaced its existing credit facility with a new $203 million committed revolving/non-revolving term facility with the same syndicate of Canadian chartered banks. Borrowings under the facility bear interest at the bank's prime lending rate, bankers' acceptance or LIBOR rates plus applicable margins, ranging from 50 to 300 basis points, dependent on certain conditions. The revolving nature of the new facility expires on March 31, 2004. The Company may request an extension on the revolving credit facility of up to 364 days, subject to the approval of the lenders. To the extent that any lenders participating in the syndicate do not approve an extension, the amount due to those lenders will convert to a 1-year non-revolving term loan with principal due in full on March 31, 2005. Advances drawn on the facility are secured by a first floating charge over all the assets of the Company. The Company issued U.S. $175 million of 7 7/8 percent Senior Notes due 2010 on October 27, 2003. Interest on the notes is payable semi-annually, beginning in 2004. The Company may redeem some or all of the notes at any time after November 1, 2007 at redemption prices ranging from 100 percent to 103.938 percent of the principal amount, plus accrued and unpaid interest to the redemption date, depending on the year in which the notes are redeemed. In addition, the Company may redeem up to 35% of the notes prior to November 1, 2006 at 107.875 percent of the principal amount, plus accrued interest to the redemption date, using the proceeds of certain equity offerings. The notes are unsecured and rank equally with all of the Company's existing and future unsecured indebtedness. RECENT ACCOUNTING PRONOUNCEMENTS Variable Interest Entities The Canadian Institute of Chartered Accountants ("CICA") recently issued Accounting Guideline No. 15, Consolidation of Variable Interest Entities. The Guideline requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. The Guideline applies to annual and interim periods beginning on or after November 1, 2004, except for certain disclosure requirements. Entities should provide disclosures about variable interest entities in which they hold significant variable interests for periods beginning on or after January 1, 2004. The Company does not expect the implementation of this Guideline to have a material impact on its financial statements. Asset Retirement Obligation The Canadian Institute of Chartered Accountants recently issued section 3110 - Asset Retirement Obligation which addresses statutory, regulatory, contractual and other legal obligations associated with the retirement of a tangible long-lived asset that results from its acquisition, construction, development or normal operation. Under Section 3110, asset retirement obligations are initially measured at fair value at the time the obligation is incurred with a corresponding amount capitalized as part of the asset's carrying value and depreciated over the asset's useful life using a systematic and rational allocation method. On initial recognition, the fair value of an asset retirement obligation is determined based upon the expected present value of future cash flows. In subsequent periods, the carrying amount of the liability would be adjusted to reflect (a) the passage of time, and (b) revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The change in liability due to the passage of time is measured by applying an interest method of allocation to the opening liability and is recognized as an increase in the carrying value of the liability and an expense. The expense must be recorded as an operating item in the income statement, not as a component of interest expense. A change in the liability resulting from revisions to either the timing or the amount of the original estimate of undiscounted cash flows is recognized as an increase or decrease in the carrying amount of the liability with an offsetting increase or decrease in the carrying amount of the associated asset. As of January 1, 2003, the amount to be recorded as the fair value of the liability was estimated to be $30.2 million. Stock-Based Compensation and Other Stock-Based Payments In December 2001, The Canadian Institute of Chartered Accountants issued Handbook Section 3870, Stock-Based Compensation and Other Stock-Based Payments, which requires fair value accounting for all stock-based payments to non-employees, and for employees awards that are direct awards of stock, or call for settlement in cash or other assets, and for stock appreciation rights. For all other employee awards, the present standard allows disclosure of pro forma net income and pro forma earnings per share in the income statement. In October 2003, the Canadian Institute of Chartered Accountants amended Handbook Section 3870 to require recognition of expense, based on the fair value method, for all employee stock-based compensation transactions for fiscal years beginning on or after January 1, 2004. The Recommendations of the Section should also be applied to the following awards that are outstanding at the start of the first fiscal year beginning on or after January 1, 2002 in which date of adoption of this Section is initially applied: (a) awards that call for settlement in cash or other assets; (b) stock appreciation rights that call for settlement by the issuance of equity instruments; and (c) any other award that is modified so as to become an award included in (a) or (b) above. The award should be accounted for as a new award, and not using modification accounting. The cumulative amount, applicable to (a) or (b) above, that would have been recognized in prior years had this Section been applied, less any amount previously recognized, should be recognized as the effect of a change in accounting policy and charged to opening retained earnings for the fiscal year in which this Section is initially applied, without restatement of prior periods. For awards other than those described above, this Section is adopted for fiscal years beginning on or after January 1, 2004. We plan to adopt the fair-value method of accounting for stock options in the fourth quarter of 2003. We plan to apply the fair- value based method prospectively, whereby compensation cost will be recognized for all options granted on or after January 1, 2003. This alternative is only available to companies that elect to adopt the fair-value method of accounting for stock-based compensation for fiscal years beginning before January 1, 2004. The impact of adopting the fair-value based method is expected to be immaterial in 2003. At September 30, 2003, Paramount Resources' balance sheet shows that its total current liabilities exceeded its total current assets by about $290 million. Paramount Resources Ltd. is involved in the exploration and development of petroleum and natural gas primarily in western Canada. The interim consolidated financial statements are stated in Canadian dollars and have been prepared by management in accordance with Canadian generally accepted accounting principles. * * * As previously reported, Moody's rated Paramount Resources Ltd.'s proposed US$150 million of seven-year senior unsecured notes at B2. Proceeds will repay Canadian dollar bank debt. With a stable rating outlook, Moody's also assigned the following ratings: i) senior implied rating at B2 ii) senior unsecured issuer rating at B3 Paramount Resources Ltd. is located in Calgary, Alberta, Canada. PG&E NATIONAL: NEG Committee Turns to Kaye Scholer for Advice ------------------------------------------------------------- The Official Committee of Unsecured Creditors of National Energy and Gas Transmission Inc. sought and obtained the Court's authority to retain Kaye Scholer LLP as counsel, nunc pro tunc to August 6, 2003, pursuant to Section 1103(a) of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure. Kaye Scholer will: (a) advise the NEG Creditors Committee with respect to its rights, duties and powers in NEG's Chapter 11 proceeding; (b) assist and advise the NEG Creditors Committee in its consultation with NEG relative to the administration of its Chapter 11 case; (c) assist the NEG Creditors Committee in analyzing the claims of NEG creditors and NEG's capital structure and in evaluating NEG's negotiations with the holders of claims and equity interests; (d) assist the NEG Creditors Committee in its investigation of NEG's assets, liabilities, financial condition and operation of its businesses; (e) assist the NEG Creditors Committee in its analysis of, and negotiations with, NEG or any third party concerning matters related to: -- the assumption or rejection of non-residential real property leases and executory contracts; -- asset dispositions; -- financing and other transactions; and -- the terms of a reorganization plan and accompanying disclosure statement and related plan documents; (f) assist and advise the NEG Creditors Committee as to its communications to the general creditor body regarding significant matters in NEG's Chapter 11 case; (g) represent the NEG Creditors Committee at all hearings and other proceedings; (h) review and analyze applications, orders, statements or operations and schedules filed with the Court and advise the NEG Creditors Committee as to their propriety; (i) assist the NEG Creditors Committee in preparing pleadings and applications as may be necessary in furtherance of the NEG Creditors Committee's interests and objectives; and (j) perform other legal services as may be required or are otherwise deemed to be in the interest of the NEG Creditors Committee in accordance with its powers and duties as set forth in the Bankruptcy Code, Bankruptcy Rules or other applicable law. Kaye Scholer will be compensated on an hourly basis in accordance with its ordinary and customary hourly rates for services rendered. The firm's current hourly rates are: Partner $455 - 725 Counsel 430 - 525 Associates 205 - 465 Paraprofessionals 95 - 185 Kaye Scholer will also be reimbursed of its out-of-pocket expenses. All legal fees and related costs and expenses incurred by the NEG Creditors Committee on account of services rendered by Kaye Scholer in these Chapter 11 cases will be paid as administrative expenses of NEG's estate. Michael B. Solow, Esq., a partner and member of Kaye Scholer, attests that the firm does not represent or hold any interest adverse to NEG's estate or its creditors. (PG&E National Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) PITTSBURGH, PENN: PDP Board Endorses Plan to Solve Fiscal Crisis ---------------------------------------------------------------- Wednesday last week, the Pittsburgh Downtown Partnership's Board of Directors voted to endorse the Pittsburgh Financial Leadership Committee Plan as a viable solution to the City of Pittsburgh's fiscal crisis. The action makes the PDP, a nonprofit organization which advocates for Downtown businesses and property owners, one of the first such economic development groups to endorse the Pittsburgh Financial Leadership Committee Plan. "The City's current budget crisis and resulting challenges directly affect those who own Downtown properties and Downtown businesses," said William E. Hunt, president of the PDP Board of Directors. "As a result, the PDP Board voted yesterday to formally endorse the recommendations of the bi-partisan group led by David Roderick and Elsie Hillman, the Pittsburgh Financial Leadership Committee." The Pittsburgh Financial Leadership Committee Plan proposes cost reductions in 2004 of $40 million and increased revenues generated by a 1 mill increase in property taxes; a 3 percent increase in the parking tax; voluntary payments in lieu of taxes by nonprofits; an increase in the occupational privilege tax ($5/month for all employees making more than $10,000 per year); and a new tax on all for-profit employers ($8.25 per month for each employee earning more than $10,000 per year). "While the Pittsburgh Financial Leadership Committee Plan includes a parking tax increase and a new business tax that we would, under any other circumstances, find less than favorable, we as a Board agreed that their recommendations are the more reasonable and tolerable of any of the alternative plans, including relief under Act 47 or municipal bankruptcy," said Hunt. "Any resolution to this crisis will involve painful decisions. We believe this plan serves the best interests of the PDP and our constituents." Established in 1994 by the Downtown business community and corporate leaders, the Pittsburgh Downtown Partnership is the non- profit organization dedicated to fostering an accessible, vibrant clean and safe Downtown. As advocates for our partners in business, retail, education and the arts, we create and implement strategies focused on enhancing Downtown residential and commercial development and transportation, while adhering to our primary mission of maintaining a clean and safe Downtown. PRIME RETAIL: Lightstone Ends Voting Pact with Pref. Directors -------------------------------------------------------------- Prime Retail, Inc. (OTC Bulletin Board: PMRE, PMREP, PMREO) announced that Prime Outlets Acquisition Company, LLC, an affiliate of The Lightstone Group LLC, delivered a letter dated November 12, 2003 to Howard Amster and Gary J. Skoien, the two preferred directors of Prime Retail, terminating the voting agreement among the parties relating to the proposed merger between Prime Retail and the Acquisition Company. As previously announced, Prime Retail and the Acquisition Company had entered into an agreement and plan of merger, dated as of July 8, 2003, pursuant to which the Acquisition Company had agreed, subject to the terms and conditions contained in the Merger Agreement, to acquire Prime Retail through a merger. In connection with the execution of the Merger Agreement, the Acquisition Company and Messrs. Amster and Skoien entered into the Voting Agreement pursuant to which Messrs. Amster and Skoien agreed to, among other things, vote their shares of Prime Retail in favor of the Merger. Pursuant to amendments to the Schedule 13D of David Lichtenstein, who is the reporting person and owns 85% of the equity and voting interests of the Acquisition Company, filed with the Securities and Exchange Commission, the voting agreement was terminated in recognition of the Company's inability to date to procure the necessary votes to effectuate the Merger. The Amendment provides that, among other things, the reporting person may prior to the reconvening of the Company's October 30, 2003 special meeting, which the Company previously announced had been adjourned until Tuesday, November 18, 2003, and thereafter if the Merger is not approved, seek to purchase Series A Preferred Stock, Series B Preferred Stock, Common Stock and other obligations of the Company, as well as real estate assets of the Company. A copy of the Amendment can be obtained free of charge at http://www.sec.gov After learning about the termination of the Voting Agreement, the Company confirmed with Messrs. Amster and Skoien that they continued to support the Merger and intend to continue to vote their shares in favor of the Merger based on the current terms in the Merger Agreement. As previously announced, the vote with respect to the Merger, originally scheduled for October 30, 2003, has been adjourned to Tuesday, November 18, 2003. Prime Retail is a self-administered, self-managed real estate investment trust engaged in the ownership, leasing, marketing and management of outlet centers throughout the United States. Prime Retail currently owns and/or manages 36 outlet centers totaling approximately 10.2 million square feet of GLA. Prime Retail also owns 154,000 square feet of office space. Prime Retail has been an owner, operator and a developer of outlet centers since 1988. For additional information, visit Prime Retail's Web site at http://www.primeretail.com * * * As reported in the Troubled Company Reporter's August 18, 2003 edition, the Company's liquidity depends on cash provided by operations and potential capital raising activities such as funds obtained through borrowings, particularly refinancing of existing debt, and cash generated through asset sales. Although the Company believes that estimated cash flows from operations and potential capital raising activities will be sufficient to satisfy its scheduled debt service and other obligations and sustain its operations for the next year, there can be no assurance that it will be successful in obtaining the required amount of funds for these items or that the terms of the potential capital raising activities, if they should occur, will be as favorable as the Company has experienced in prior periods. During 2003, the Company's first mortgage and expansion loan (the "Mega Deal Loan") is anticipated to mature with an optional prepayment date on November 11, 2003. The Mega Deal Loan, which is secured by a 13 property collateral pool, had an outstanding principal balance of approximately $262.1 million as of June 30, 2003 and will require a balloon payment of $260.7 million at the anticipated maturity date. If the Mega Deal Loan is not satisfied on the optional prepayment date, its interest rate will increase by 5.0% to 12.782% and all excess cash flow from the 13 property collateral pool will be retained by the lender and applied to principal after payment of interest. Certain restrictions have been placed upon the Company with respect to refinancing the Mega Deal Loan in the short term. If the Mega Deal Loan is not refinanced, the loss of cash flow from the 13 property collateral pool would eventually have severe consequences on the Company's ability to fund its operations. Based on the Company's discussions with various prospective lenders, it believes a potential shortfall will likely occur with respect to refinancing the Mega Deal Loan as the Company does not currently intend to refinance all of the 13 assets. Nevertheless, the Company believes this shortfall can be alleviated through potential asset sales and/or other capital raising activities, including the placement of mezzanine level debt and mortgage debt on at least one of the assets the Company does not currently plan on refinancing. The Company cautions that its assumptions are based on current market conditions and, therefore, are subject to various risks and uncertainties, including changes in economic conditions which may adversely impact its ability to refinance the Mega Deal Loan at favorable rates or in a timely and orderly fashion and which may adversely impact the Company's ability to consummate various asset sales or other capital raising activities. As previously announced, on July 8, 2003 an affiliate of The Lightstone Group, LLC, a New Jersey-based real estate company, and the Company entered into a merger agreement. In connection with the execution of the Merger Agreement, certain restrictions were placed on the Company with respect to the refinancing of the Mega Deal Loan. Specifically, the Company is restricted from negotiating or discussing the refinancing of the properties securing the Mega Deal Loan with any lenders until September 15, 2003, at which time the Company is only able to enter into refinancing discussions with certain enumerated lenders. After November 11, 2003, the Company may seek refinancing from other lenders. In addition, the Company is precluded from closing any loans relating to the Mega Deal Loan until November 11, 2003. This November 11, 2003 date may be extended until January 11, 2004, at the election of Lightstone, if Lightstone elects prior to September 15, 2003 to (i) pay (A) one-half of the additional interest incurred by the Company between November 11, 2003 and December 31, 2003, and (B) all of the additional interest incurred by the Company between January 1, 2004 and January 11, 2004, if so extended, in respect of the Mega Deal Loan and (ii) loan the Company any shortfall in cash flow that results from the excess cash flow restrictions (all excess cash flow from the 13 property collateral pool will be retained by the lender and applied to principal after payment of interest) under the Mega Deal Loan that become effective on November 11, 2003 and thereafter until the Mega Deal Loan is paid in full. In addition to the restrictions with respect to the refinancing of the Mega Deal Loan, pursuant to the terms of the Merger Agreement, the Company has also agreed to certain conditions pending the closing of the proposed transaction. These conditions provide for certain restrictions with respect to the Company's operating and refinancing activities. These restrictions could adversely affect the Company's liquidity in addition to its ability to refinance the Mega Deal Loan in a timely and orderly fashion. If the Merger Agreement is terminated under certain circumstances, the Company would be required to make payments to Lightstone ranging from $3.5 million to $6.0 million which could adversely affect the Company's liquidity. In connection with the completion of the sale of six outlet centers in July 2002, the Company guaranteed to FRIT PRT Bridge Acquisition LLC (i) a 13% return on its $17.2 million of invested capital, and (ii) the full return of its invested capital by December 31, 2003. As of June 30, 2003, the Mandatory Redemption Obligation was approximately $14.9 million. The Company continues to seek to generate additional liquidity to repay the Mandatory Redemption Obligation through (i) the sale of FRIT's ownership interest in the Bridge Properties and/or (ii) the placement of additional indebtedness on the Bridge Properties. There can be no assurance that the Company will be able to complete such capital raising activities by December 31, 2003 or that such capital raising activities, if they should occur, will generate sufficient proceeds to repay the Mandatory Redemption Obligation in full. Failure to repay the Mandatory Redemption Obligation by December 31, 2003 would constitute a default, which would enable FRIT to exercise its rights with respect to the collateral pledged as security to the guarantee, including some of the Company's partnership interests in the 13 property collateral pool under the aforementioned Mega Deal Loan. Because the Mandatory Redemption Obligation is secured by some of the Company's partnership interests in the 13 property collateral pool under the Mega Deal Loan, the Company may be required to repay the Mandatory Redemption Obligation before, or in connection with, the refinancing of the Mega Deal Loan. Additionally, any change in control with respect to the Company accelerates the Mandatory Redemption Obligation. In connection with the execution of the Merger Agreement, Lightstone has agreed to provide sufficient financing, if necessary, to repay the Mandatory Redemption Obligation in full at its maturity. The new financing would be at substantially similar economic terms and conditions as those currently in place for the Mandatory Redemption Obligation and would have a one-year term. The Company has fixed rate tax-exempt revenue bonds collateralized by properties located in Chattanooga, Tennessee which contain (i) certain covenants, including a minimum debt-service coverage ratio financial covenant and (ii) cross-default provisions with respect to certain of its other credit agreements. Based on the operations of the collateral properties, the Company was not in compliance with the Financial Covenant for the quarters ended June 30, September 30 and December 31, 2002. In the event of non-compliance with the Financial Covenant or default, the holders of the Chattanooga Bonds had the ability to put such obligations to the Company at a price equal to par plus accrued interest. On January 31, 2003, the Company entered into an agreement with the Bondholders. The Forbearance Agreement provides amendments to the underlying loan and other agreements that enable the Company to be in compliance with various financial covenants, including the Financial Covenant. So long as the Company continues to comply with the provisions of the Forbearance Agreement and is not otherwise in default of the underlying loan and other documents through December 31, 2004, the revised financial covenants will govern. Additionally, certain quarterly tested financial covenants and other covenants become effective June 30, 2004. Pursuant to the terms of the Forbearance Agreement, the Company was required to fund $1.0 million into an escrow account to be used for conversion of certain of the retail space in the collateral properties to office space and agreed that an event of default with respect to the other debt obligations related to the property would also constitute a default under the Chattanooga Bonds. The Company funded this required escrow in February 2003. The outstanding balance of the Chattanooga Bonds was approximately $17.9 million as of June 30, 2003. With respect to the Chattanooga Bonds, based on the Company's current projections, it believes it will not be compliance with certain quarterly tested financial covenants when they become effective on June 30, 2004 which would enable the Bondholders to elect to put the Chattanooga Bonds to the Company at their par amount plus accrued interest. The Company continues to explore opportunities to (i) obtain alternative financing from other financial institutions, (ii) sell the properties securing the Chattanooga Bonds and (iii) explore other possible capital transactions in order to generate cash to repay the Chattanooga Bonds. There can be no assurance that the Company will be able to complete any such activity sufficient to repay the amount outstanding under the Chattanooga Bonds in the event the Bondholders are able and elect to exercise their put rights. These conditions raise substantial doubt about the Company's ability to continue as a going concern. PRINT DATA: Retains Stonefield Josephson as New Auditors -------------------------------------------------------- On October 29, 2003, Print Data Corporation's Board of Directors dismissed and terminated the engagement of Weinberg & Company, P.A. as its auditors. The audit reports of Weinberg & Company, P.A. on the Company's financial statements for the years ended December 31, 2002 and 2001 contained a modification expressing substantial doubt about Print Data's ability to continue as a going concern. The decision to change accountants was recommended and approved by the Board of Directors of the Company. On November 5, 2003, Print Data's Board of Directors ratified the engagement of Stonefield Josephson, Inc., as its auditors. The Company authorized Weinberg & Company, P.A. to fully respond to any and all inquires of Stonefield Josephson, Inc., concerning Weinberg & Company, P.A. QUINTEK TECH: JF Research Commences Independent Coverage -------------------------------------------------------- Quintek Technologies, Inc. (OTCBB:QTEK) announced independent coverage of the Company has been initiated by JF Research. A copy of the research report is currently available at http://www.stockupticks.com. Stock Up Ticks paid a fee to contract the services of JF Research to produce this report. Quintek secured Stock Up Ticks for financial consulting and advertising services. Quintek will be making the research available at its corporate Web site http://www.quintek.comin the near future. Quintek is the only manufacturer of a chemical-free desktop microfilm solution. The company currently sells hardware, software and services for printing large format drawings such as blueprints and CAD files (Computer Aided Design), directly to microfilm. Quintek does business in the content and document management services market, forecast by IDC Research to grow to $24 billion by 2006 at a combined annual growth rate of 44%. Quintek targets the aerospace, defense and AEC (Architecture, Engineering and Construction) industries. Quintek's printers are patented, modern, chemical-free, desktop- sized units with an average sale price of over $65,000. Competitive products for direct output of computer files to microfilm are more expensive, large, specialized devices that require constant replenishment and disposal of hazardous chemicals. The company's June 30, 2003, balance sheet discloses a total shareholders' equity deficit of about $1.3 million. QUINTEK TECH: Completes Financial Restructuring of $600K Debt ------------------------------------------------------------- Quintek Technologies, Inc. (OTCBB:QTEK) successfully restructured roughly $600,000 of its outstanding liabilities. Agreements have been put in place to reduce outstanding convertible debt by more than 75%. The debt will be reduced from over $342,000 down to approximately $75,000. In January of 2003, when new management was brought into Quintek, employees and the prior management team signed agreements to convert $252,213 into preferred stock at a rate of ($0.25) twenty- five cents per share. Company vendors have agreed to convert $98,955 in outstanding past due payables into $78,560 of 8% three year promissory notes. "This represents a milestone achievement for Quintek," stated Andrew Haag, Quintek's Chief Financial Officer. Haag continued, "This dramatic reduction in our liabilities will be evident in our financial statements and will allow the company to grow more effectively. Quintek will now be able to focus on growth by building revenues through increased sales efforts coupled with a solid product and business development strategy." Quintek is the only manufacturer of a chemical-free desktop microfilm solution. The company currently sells hardware, software and services for printing large format drawings such as blueprints and CAD files (Computer Aided Design), directly to microfilm. Quintek does business in the content and document management services market, forecast by IDC Research to grow to $24 billion by 2006 at a combined annual growth rate of 44%. Quintek targets the aerospace, defense and AEC (Architecture, Engineering and Construction) industries. Quintek's printers are patented, modern, chemical-free, desktop- sized units with an average sale price of over $65,000. Competitive products for direct output of computer files to microfilm are more expensive, large, specialized devices that require constant replenishment and disposal of hazardous chemicals. RAYOVAC: 4th-Quarter Results Meet First Call Consensus Estimates ---------------------------------------------------------------- Rayovac Corp. (NYSE: ROV) announced Fiscal 2003 fourth quarter diluted earnings per share of 39 cents and pro forma diluted earnings per share of 49 cents, meeting First Call Consensus estimates. This compares to diluted earnings per share of 41 cents and pro forma diluted earnings per share of 38 cents for the comparable prior year period. "In fiscal 2003, Rayovac transformed itself through the acquisition of both VARTA Consumer Batteries and Remington Products to become a larger global consumer products company with a portfolio of world-class brands," said David Jones, chairman and CEO. "During this year, we diversified our product portfolio, strengthened our position in international markets and introduced revolutionary new products, which are all significant accomplishments contributing to this transformation." Fourth Quarter Results Results for the fourth quarter and Fiscal 2003 year-end include those of the consumer battery business of VARTA, acquired on October 1, 2002. Quarterly comparative historical data for the acquired operations is not available in U.S. Generally Accepted Accounting Principles (GAAP) format. All comparisons to Fiscal 2002 exclude VARTA consumer battery business data in the prior year. For the fourth quarter, sales were $252.0 million, compared to $154.3 million for the same period last year. Most of the sales increase was attributable to the VARTA acquisition. Operating income was $28.3 million, up from the $25.5 million for the same period last year. Fiscal 2003 operating income benefited from the VARTA acquisition offset by $0.9 million of special charges and $3.9 million of retailer inventory repricing programs. Fiscal 2002 benefited from a $1.4 million change in estimate to 2001 restructuring initiatives. Pro forma operating income was $33.1 million, up from $24.1 million last year. The pro forma operating income increase was attributable to the sales growth and integration synergies from the VARTA acquisition partially offset by the impacts of lower sales in North America. Interest expense increased to $9.1 million from $3.8 million last year, the result of higher debt levels associated with the VARTA acquisition. Other (income) expense improved $1.3 million versus last year, the result of favorable foreign currency transaction gains. Diluted earnings per share were 39 cents compared to 41 cents last year. Pro forma diluted earnings per share were 49 cents, an increase of 29 percent over pro forma diluted earnings per share of 38 cents last year. North America sales for the fourth quarter were $108.8 million, down $13.8 million from the $122.6 million reported last year. This decline is reflected in part by the anticipated impact of retailer transition to the new alkaline ("50 percent more") program as the company completes SKU conversions in preparation for the important October through December selling period. Despite this decline in alkaline sales, three of the other product categories showed sales gains during the quarter; hearing aid battery sales were up six percent, lighting products increased 13 percent, and rechargeable battery and charger sales increased 20 percent during the quarter, the result of a successful retail sell-in of the Company's revolutionary new 15 Minute I-C3 rechargeable battery system. This new system will recharge the Company's I-C3 Nickel Metal Hydride (NiMH) batteries in as little as 15 minutes or less, setting a new standard for the category. North America segment profitability was $19.8 million, as compared to $33.0 million reported last year. The decrease in profitability was the result of the revenue shortfall, plus gross profit margin reduction due to product and customer mix changes and the impact of retailer inventory repricing programs. The Europe/Rest of World results reflect the benefits of the VARTA acquisition where sales were $108.7 million, up from $14.1 million last year. The continued strength of hearing aid battery sales and Rayovac branded general battery business also contributed to these favorable results. The region's segment profitability increased to $14.0 million from $2.0 million last year, largely due to the benefits of the VARTA acquisition. In Latin America, sales increased to $34.5 million, up $16.9 million from the same period last year. The sales improvement was attributable to the VARTA acquisition partially offset by economic weakness in the region. Latin America segment profitability was $6.8 million, an improvement of $8.0 million versus last year. This improvement was the result of stronger sales of alkaline and zinc carbon batteries, increased gross profit margins and lower operating expenses as a percent of sales, reflecting our leverage of fixed operating costs. 12-Month Results Sales for the 12 months ending September 30, 2003 were $922.1 million, compared to $572.7 million for the prior year. Operating income was $59.6 million, a decrease of five percent over last year. Fiscal 2003 year- to-date results include $32.6 million in special charges, and a $6.2 million reduction in net sales reflecting retailer inventory repricing programs. In Fiscal 2002, operating income included a $12.0 million bad debt expenses related to the Kmart bankruptcy and $1.2 million of special charges related to the closing of a manufacturing facility in Latin America. Pro forma operating income was $98.4 million versus $76.2 million last year, an increase of 29 percent. The increase was attributable to the benefit of the VARTA acquisition, partially offset by a decrease in North America segment profitability after excluding the impact of the Kmart bad debt expense in last year's results. Interest expense rose to $37.2 million from $16.0 million last year, the result of higher debt levels associated with the additional borrowing on the Company's amended credit facility to finance the VARTA acquisition. Non- operating expense includes the write-off of $3.1 million of unamortized debt issuance costs associated with our previous credit facility, which was replaced as part of the VARTA acquisition. Other (income) expense improved $5.0 million versus last year, the result of favorable foreign currency exchange rates. Diluted earnings per share for the 12-month period were 48 cents compared to 90 cents last year. Pro forma diluted earnings per share for the full Fiscal 2003 were $1.27, a nine percent increase compared to pro forma diluted earnings per share of $1.16 for the same period last year. North America sales were $376.0 million, down 14 percent from the $435.5 million reported last year. This decline was primarily driven by a decline in alkaline sales due to lower volume resulting from the intense competitive environment and to pricing adjustments made during the year. North America segment profitability was $64.8 million, a decrease from $85.5 million reported last year. The profitability decline is due mainly to the sales decline and changes in the sales mix. Last year's results included the Kmart bad debt expense of $12.0 million. The Europe/Rest of World results were significantly improved, reflecting the benefits of the VARTA acquisition. Sales in the region were $421.1 million, up from $52.5 million last year. Hearing aid battery sales and Rayovac branded battery sales also contributed to these favorable results. The region's segment profitability increased to $49.7 million from $5.1 million for the comparable period last year. In Latin America, sales increased to $125.0 million from $84.7 million in the same period last year. The sales improvement was attributable to the VARTA acquisition offset by continuing economic weakness and political instability in the region. Latin America segment profitability was $17.7 million versus $5.3 million last year. This improvement was the result of improved sales and gross profit margins, somewhat offset by increased operating expenses. Remington Acquisition On September 30, 2003, the Company closed the acquisition of Remington Products LLC., which was originally announced on August 22, 2003. Remington is a leading marketer of foil and rotary electric shavers, personal care and grooming products for men and women. Remington's core North American shaving and grooming products business has grown an average of 18 percent per year from 1998 through 2002. Internationally, Remington products are sold through a network of subsidiaries and distributors in more than 85 countries. Remington is the number one selling brand of men's and women's foil electric shavers in North America. To finance the transaction, Rayovac sold $350 million of 8.5 percent senior subordinated notes due 2013 and added $50.0 million to the term loan portion of the Company's senior credit facility. On October 29, 2003, Rayovac also successfully completed the redemption of the remaining Series B and Series D Senior Subordinated Notes issued by Remington Products Company and Remington Capital Corp that were not tendered at the time of the closing of the Remington transaction. Restructuring Initiatives On October 10, 2002, the Company announced and committed to a series of restructuring initiatives designed to optimize the global resources of the combined VARTA and Rayovac organizations, eliminate surplus manufacturing capacity and functional overhead, and to rationalize its main North America packaging and distribution facilities into a single modern facility. As part of this restructuring, the Company took additional actions in North America to relaunch its alkaline products, simplify its consumer product pricing and reduce its cost structure to align with its new pricing strategy. Total charges for all of the restructuring initiatives were $38.8 million of which $4.8 million occurred in the fourth quarter. Total cash costs of the program were $25.2 million for the fiscal year. There will be no additional charges for these initiatives. Fiscal Year 2004 Outlook For the fiscal year ending September 30, 2004 the Company expects diluted earnings per share to be approximately $1.60 to $1.70 based upon current business condition assumptions. This is an increase of approximately 26 percent to 34 percent over Fiscal 2003 and is based on expectations of the Remington acquisition, continued synergy benefits of the VARTA acquisition and internal earnings growth. Organic sales growth for the combined Company is estimated in the 3 to 4 percent range. Taking the Remington acquisition into account, we expect combined sales should total approximately $1.3 billion. Non-GAAP Measurements To assist investors in the reconciliation of GAAP financial reporting to pro forma results, which present operating results on a basis excluding restructuring items, the Company has placed a financial model on its website detailing all of the items that historically reconcile the GAAP vs. pro forma income statements. The model can be found at www.rayovac.com under About Rayovac/Investor Resources. Management, as well as certain investors, use these results of operations (excluding restructuring items) to help measure the Company's current and future financial performance and to identify trends in its financial condition and results of operations. We believe these measurements provide supplemental and useful information to assist management and investors in analyzing the Company's financial position and results of operations, but do not replace the presentation of the Company's GAAP financial results and should be read in conjunction with those GAAP results. The Company has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results; and as a means to identify the results of on-going core operations. Rayovac Corporation (S&P, B+ Corporate Credit Rating, Stable Outlook) is a global consumer products company with a diverse portfolio of world-class brands, including Rayovac, VARTA and Remington. The Company holds many leading market positions including: the world's leader in hearing aid batteries; the top selling rechargeable battery brand in North America and Europe; and the number one selling brand of men's and women's foil electric razors in North America. Rayovac markets its products in more than 100 countries and trades on the New York Stock Exchange under the ROV symbol. SAFETY-KLEEN: Asks Court to Settle Frontier Insurance Disputes -------------------------------------------------------------- For the entirety of these cases, the Safety-Kleen Debtors have insisted that a major event leading to the commencement of these proceedings occurred when Frontier Insurance Company entered into receivership and the Debtors' financial assurance bonds were cancelled. Gregg M. Galardi, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Wilmington, Delaware, reminds Judge Walsh that, before the sale of their Chemical Services Division to Clean Harbors Environmental Services, Inc., the Debtors were North America's largest hazardous and industrial waste enterprise, providing high-quality collection, processing, recycling and disposal services through a network of more than 250 operating facilities in 47 states and four Canadian provinces. Under the Resource Conservation and Recovery Act, the Toxic Substances Control Act, and analogous state statutes, owners and operators of waste management facilities must provide financial assurance of their corrective action obligations. Under applicable regulations, owners and operators of waste management facilities may provide financial assurance through a surety bond from an approved surety. Under federal regulations and in virtually all states, to qualify as an approved surety, a company must be listed on Circular 570, which is maintained and distributed by the United States Department of Treasury. In November 1997, Safety-Kleen Corporation's predecessor, Laidlaw Environmental Services, Inc., and LESI's then-parent corporation Laidlaw, Inc., entered into a Letter Agreement with Frontier pursuant to which Frontier ultimately provided LESI with more than $200,000,000 in surety bonds. Under the terms of the Letter Agreement, Laidlaw delivered to Frontier an Irrevocable Stand-By Letter of Credit dated November 6, 1997, to secure LESI's obligations to Frontier. The LOC was for $28,500,000 and issued by the Toronto Dominion Bank. On June 6, 2000, the Department of Treasury issued notification that Frontier no longer qualified as an acceptable surety on federal bonds and had been removed from Circular 570 as of May 31, 2000. Consequently, as of May 31, 2000, the Debtors no longer had compliant financial assurance for many of their facilities. Thereafter, and for an extended period of time, the Debtors negotiated with environmental agencies for additional time to replace Frontier coverage, and negotiated with providers of replacement coverage. The Debtors have replaced Frontier, or made arrangements for the replacement of Frontier, at all sites where financial assurance coverage is required, and have replaced virtually all of the surety bonds that Frontier provided. In October 2000, Frontier filed proofs of claim against the Debtors' cases relating to the Frontier Bonds. Disputes have arisen relating to the Frontier Bonds, including, without limitation, the amount of premium, if any, that the Debtors owe Frontier on account of the Frontier Bonds. Frontier is in rehabilitation proceedings pending before the New York Supreme Court for New York County. On October 15, 2001, the New York Court found that Frontier was insolvent and entered an Order of Rehabilitation for Frontier. The Rehabilitation Order appointed the Superintendent of the New York Insurance Department as Rehabilitator of Frontier and authorized the Rehabilitator to settle claims within his sole discretion. On June 7, 2002, Safety-Kleen filed a "Notice of Claim Against Frontier Insurance Company" in the New York Court for breach of contract for failure to remain an acceptable surety under federal regulations. Rather than litigate the matter, the Debtors and Frontier engaged in extensive discussions and negotiations in an effort to resolve the Proofs of Claim, the Notice of Claim and other disputes, including Frontier's demand for premium and interest with respect to the Bonds. These negotiations resulted in a successful resolution. The Debtors believe that the Settlement Agreement is a reasonable compromise and is in the best interests of their estates and creditors. The significant terms and conditions of the Settlement Agreement are: * The Debtors will pay Frontier $2,100,000 and deliver a form of Replacement Collateral to obtain release of the LOC and, along with other considerations, in full satisfaction of Frontier's Proofs of Claim and other demands on the Debtors. The cash payment will be delivered no later than one business day after the Effective Date. If the Effective Date occurs before the Final Approval Date, the Debtors will pay Frontier $2,100,000 no later than one business day after the Final Approval Date. * The Debtors will deliver to Frontier a form of Replacement Collateral acceptable to Frontier, in an amount equal to the aggregate face amount of the Bonds that have not yet been released on the date of the delivery. * Upon request by the Debtors, the Replacement Collateral will be adjusted so that its value is reduced to the aggregate face amount of the then-Remaining Frontier Bonds. * The Bonds pertaining to the Debtors' facility in Pinewood, South Carolina, will be deemed released on the date when, in accordance with the Pinewood Settlement Agreement, the South Carolina Department of Health and Environmental Control notifies Frontier in writing that the bonds have been released. * Any other Bond will be deemed released when the Debtors submit written evidence of the release to Frontier. * Beginning on the Final Approval Date, Safety-Kleen Systems, Inc., will pay premiums to Frontier for the Remaining Frontier Bonds when due. The premium will accrue at the same rate as applied during the calendar year 2000. * Frontier will deliver the original LOC with a statement canceling the Letter of Credit to TD, immediately upon the Debtors' delivery of (i) the $2,100,000 and (ii) the Replacement Collateral to Frontier. * Frontier will immediately deliver the Replacement Collateral to the Debtors -- or, if the Replacement Collateral is a letter of credit, to the issuing bank, with a statement canceling the letter of credit -- upon the release of the last Remaining Frontier Bonds. * The Proofs of Claim and the Notice of Claim will be deemed withdrawn as of the date the Debtors deliver the $2,100,000 and Replacement Collateral to Frontier. * Mutual general releases will be granted by the Debtors and Frontier. * As of the date the Debtors deliver the $2,100,000 and Replacement Collateral to Frontier, Frontier is deemed to hold a Class 7 General Unsecured Claim for $1,000,000 against Safety-Kleen Systems. Consequently, the Debtors ask Judge Walsh to approve the Settlement. (Safety-Kleen Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) SALOMON BROS: Fitch Ups & Affirms Series 2000-UP1 Note Classes -------------------------------------------------------------- Fitch Ratings has taken rating actions on the following Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass-Through Certificates: Salomon Brothers Mortgage Securities VII, Inc., Mortgage Pass- Through Certificates, Series 2000-UP1 -- Class A affirmed at 'AAA'; -- Class B-1 upgraded to 'AAA' from 'AA'; -- Class B-2 upgraded to 'AA' from 'A'; -- Class B-3 upgraded to 'BBB+' from 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. The upgrades reflect an increase in credit enhancement relative to future loss expectations and the affirmations on the above classes reflect credit enhancement consistent with future loss expectations. SECURITIZED SALES: Fitch Affirms 3 Classes at Lower-B Levels ------------------------------------------------------------ Fitch Ratings has upgraded 3 and affirmed 12 classes of Securitized Assets Sales, Inc. residential mortgage-backed certificate, as follows: Securitized Assets Sales, Inc. Mortgage Pass-Through Certificates, Series 1993-1 -- Class A upgraded to 'AAA' from 'AA' Securitized Assets Sales, Inc. Mortgage Pass-Through Certificates, Series 1993-3 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Securitized Assets Sales, Inc. Mortgage Pass-Through Certificates, Series 1993-5 -- Class A upgraded to 'AAA' from 'AA'; -- Class M upgraded to 'AA+' from 'A-'. Securitized Assets Sales, Inc. Mortgage Pass-Through Certificates, Series 1993-7 -- Classes T and F affirmed at 'AAA'; -- Class B1 affirmed at 'AA+'; -- Class B2 affirmed at 'A'; -- Class B3 affirmed at 'BB+'; Securitized Assets Sales, Inc. Mortgage Pass-Through Certificates, Series 1993-9 -- Class A affirmed at 'AAA'. The upgrades are being taken as a result of low delinquencies and losses, as well as increased credit support levels. The affirmations are due to credit enhancement consistent with future loss expectations. SEAVIEW VIDEO: Needs Additional Financing to Continue Operations ---------------------------------------------------------------- Seaview Video Technology Inc.'s financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has incurred operating losses of $2,293,000 and $3,866,000 during the nine months ended September 30, 2003 and 2002, respectively. In addition, during those periods, the Company has used cash of $2,289,000 and $711,000, respectively, in its operating activities. The Company has a net working capital deficiency of $347,000 at September 30, 2003. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company has devoted significant efforts in the further development and marketing of products in its Security Products Segment, which, while now showing improved revenues cannot yet be characterized as sufficient to fund operations for any period of time. The Company's ability to continue as a going concern is dependent upon (i) raising additional capital to fund operations (ii) the further development of the Security and DC Transportation Products Segment products and (iii) ultimately the achievement of profitable operations. During the nine months ended September 30, 2003, the Company raised $517,000 from the sale of convertible debt securities and an additional $1,961,000 from the sale of common stock. Management is currently addressing several additional financing sources to fund operations until profitability can be achieved. However, there can be no assurance that additional financing can be obtained on conditions considered by management to be reasonable and appropriate, if at all. SEMCO ENERGY: Low Cash Flow Spurs S&P to Drop Rating to BB- ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on gas distribution company SEMCO Energy Inc. to 'BB-' from 'BB'. The rating action reflects the reduction in SEMCO's expected cash flow, which pressures an already weak financial profile. The outlook is negative. Michigan-based SEMCO currently has about $490 million of long-term debt and trust preferred stock outstanding. "Cash flow deterioration has continued unabated at SEMCO in 2003, which precipitates this latest ratings downgrade," said Standard & Poor's credit analyst Scott Beicke. "Credit stability at this level is incumbent on the sale of Alaska Pipeline Co., the construction services business breaking even on a cash flow basis, and SEMCO's ability to continue to work successfully with its bank group." Construction services EBITDA figures underpinning the company's announcement on Nov. 12, 2003 show a dramatic decline from amounts management had projected as recently as June 2003. Because SEMCO announced it will pursue a sale of its construction services unit, Standard & Poor's no longer will incorporate positive cash flow from this business segment into its analysis. Due to the decline in expected EBITDA from this business unit relative to prior expectations, prospective consolidated cash flow protection metrics for SEMCO will deteriorate significantly from already weakened levels. Given the deterioration in SEMCO's cash flow generation capabilities, improving the company's highly leveraged balance sheet (total debt including trust-preferred securities accounts for more than 70% of capital) becomes extremely difficult. SEMCO is relying on proceeds from its announced sale of Alaska Pipeline, which carries a book value of roughly $90 million. Execution risk associated with this transaction will pressure the company until final closing, expected in early to mid-2004. In the longer term, the company will have limited cash flow after capital expenditures to reduce debt. Total expenditures for 2003, which include limited room for reductions, are budgeted at $30 million to $35 million, a representative run rate for the company. Cash flow before capital expenditures should not exceed $40 million annually. The debt to capital and fixed charge covenants in its bank credit facility pressure SEMCO to execute on its debt-reduction plan by the second quarter of 2004 to avoid piercing the 65% debt to capital maximum and the 1.5x fixed charge minimum. (These figures exclude charges associated with impairments at the construction services unit.) The lack of cash flow generated by the construction services business makes SEMCO increasingly reliant on its bank group. Though Standard & Poor's recognizes SEMCO has had a good working relationship with the bank group in the past, the continued deterioration of the company's nonregulated businesses could leave SEMCO in a weakened negotiating position. Standard & Poor's would view the sale of SEMCO's construction services unit as favorable for credit quality given the unreliable nature of the business' cash flow. Net proceeds of half the unit's book value (book value is about $40 million after the recent impairment) are factored into the current ratings. More importantly, separation from this high-risk business would strengthen SEMCO's business profile considerably by returning the company's focus solely to its gas distribution operations. SIERRA PACIFIC: Reports Improved Third-Quarter 2003 Results ----------------------------------------------------------- Sierra Pacific Resources (NYSE: SRP) reported net income of $86.9 million, or 28 cents per share, on 183 million shares outstanding, for the three months ended September 30, 2003. This compares with earnings of $79.4 million, or 78 cents per share, on 102 million shares outstanding, in the same quarter of 2002. For the nine months ended September 30, 2003, the company realized a loss of $103.1 million, compared with a $268 million loss for the same period in 2002. The 183 million shares include 65.7 million shares related to convertible securities. Overall, the effect of increased volumes resulting from warmer than normal weather and continuing strong customer growth experienced by the company's utility subsidiaries during the third quarter was largely offset by decreases in energy rates set by previous state regulatory decisions. These factors resulted in Nevada Power Company showing a modest increase in retail revenues while Sierra Pacific Power Company's retail electric revenues were slightly lower. Another factor impacting earnings for the quarter was higher interest costs on long-term debt. During the most recent quarter, the company's shareholders approved the issuance of up to 42.7 million additional shares of common stock related to the conversion option of convertible notes sold by the company in February 2003. The mark-to-market calculation of the fair value of the derivative, which was completed August 11, 2003, resulted in a pre-tax unrealized gain of approximately $61.5 million, or $40 million after taxes. As a result of a judgment issued on September 26 by the Enron Bankruptcy Court, the company, during the 2003 third quarter, also increased its reserves for termination payments related to terminated purchase power contracts, to $40.2 million in pre-tax interest, or $26.1 million after taxes. Nevada Power Company's net income in third quarter 2003 was $62.5 million, compared with $79.3 million for the same quarter in 2002. Sierra Pacific incurred a net loss of $1.3 million, compared with net income of $12.6 million for the comparable quarter the previous year. "The third quarter saw some of the hottest weather on record including three new power consumption peaks established at both Nevada Power Company and Sierra Pacific Power Company," said Walter M. Higgins, chairman and chief executive officer of Sierra Pacific Resources. "Las Vegas remains the fastest growing city in the nation and northern Nevada is also among the top growth areas in the West. I'm proud to say that despite these challenges our two utilities continue to provide adequate and reliable supplies of electricity to meet our customers' needs." Nevada Power Interest charges on long term debt increased as the result of the adoption of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," requiring the reclassification of the dividend requirement for Nevada Power Company's mandatorily redeemable preferred trust securities to interest charges on long- term debt. Interest charges on long-term debt for third quarter and nine month periods ending September 30, 2003 increased over the same periods in 2002. Additionally, interest charges on long-term debt increased due to the issuance in October 2002 of $250 million of Nevada Power's General and Refunding Mortgage Notes, at an interest rate of 10.875%, and the issuance in August 2003 of $350 million of Nevada Power's General and Refunding Mortgage Notes, at an interest rate of 9.00%. Also, the company experienced an increase in interest exposure on terminated contracts of $28 million, or $18 million after tax. Sierra Pacific Power For Sierra Pacific Power, interest charges for the three months ended September 30, 2003 increased slightly, compared to the same period in 2002. The company experienced higher interest expenses related to the issuance in October 2002 of $100 million of additional debt, plus an increase in interest on delayed/terminated contracts of $12 million, or $8 million after taxes. A detailed explanation of Sierra Pacific Resource's third quarter 2003 financial results is available in the company's Form 10-Q for the quarter ended September 30, 2003, which has been filed with the Securities and Exchange Commission and is available without charge through the EDGAR system at the SEC's Web site. The Form 10-Q report will also be posted on the Sierra Pacific Resources Web site at http://www.sierrapacificresources.com Headquartered in Nevada, Sierra Pacific Resources (S&P, B+ Corporate Credit Rating, Negative) is a holding company whose principal subsidiaries are Nevada Power Company, the electric utility for most of southern Nevada, and Sierra Pacific Power Company, the electric utility for most of northern Nevada and the Lake Tahoe area of California. Sierra Pacific Power Company also distributes natural gas in the Reno-Sparks area of northern Nevada. Other subsidiaries include the Tuscarora Gas Pipeline Company, which owns a 50 percent interest in an interstate natural gas transmission partnership. SMITHFIELD FOODS: Will Host Q2 Conference Call on Thursday ---------------------------------------------------------- Smithfield Foods, Inc. (NYSE: SFD) (S&P, BB+ Corporate Credit Rating, Negative), will announce its fiscal 2004 second quarter earnings on Thursday, November 20 before the market opens. The company will host a conference call at 10:00 a.m., Eastern Standard Time, Thursday, November 20 to discuss second quarter results as well as its recent Farmland Foods acquisition. The call can be accessed live on the Internet at Vcall, http://www.vcall.com/CEPage.asp?ID=85234. The webcast will be archived on the Smithfield Foods web site, http://www.smithfieldfoods.com/investor/calls. A fact sheet providing details of Farmland's operations and a Farmland profit and loss statement for the last 12 months have been posted on the Smithfield website at http://www.smithfieldfoods.com/Investor/Calls/. This information has also been filed on Form 8-K with the Securities and Exchange Commission. SPECIALIZED LEASING: Signs-Up Chavez and Koch as New Accountant --------------------------------------------------------------- On August 28, 2003, Spealized Leasing Inc.'s engaged Chavez and Koch, LLP, as its principal accountant to replace its former principal accountant, Rogelio G. Castro, CPA. Rogelio G. Castro was dismissed on August 28, 2003. The decision to change accountants was approved by the Audit Committee of the Company. The reports of the former principal accountants on the financial statements for the period ending March 31, 2002, March 31, 2003 and June 30, 2003 were modified to reflect an uncertainty as to the Company's ability to continue as a going concern. SPIEGEL: Moves to Terminate Retirees' Split Dollar Insurance ------------------------------------------------------------ In 1993, the Spiegel Group Debtors implemented a split dollar life insurance program for the benefit of its senior level associates, including both officers and non-officers. In 2000, the Debtors updated the Split Dollar Insurance Program to a variable split dollar product for active senior level associates only. Under the Split Dollar Insurance Program: (a) each participant owns an individual insurance policy; (b) before maturity, the Debtors and the Plan Participant share the cost of the policy. The Debtors pay majority of the annual premium, while the participant pays an annual term premium; (c) at maturity or termination, the Debtors and the Plan Participant share the policy cash value. The Debtors' cash value share of the policy is calculated as an amount equal to the cumulative premium payments made by the Debtors on the policy. At maturity or termination, that amount is transferred from the policy to the Debtors. The remaining cash value rests under the Plan Participant's control; and (d) the plan matures at the later of the date on which the Plan Participant turns 65 or the participant's 15th anniversary under the plan. James L. Garrity, Esq., at Shearman & Sterling LLP, in New York, tells the Court that the Debtors provided each Participant under the 1993 and 2000 Plans with a brochure describing the particular Plan and a Split Dollar Life Insurance Agreement. The agreements covering the 1993 and 2000 Plans are identical. By its terms, the Agreement is terminable by either party at any time. More specifically, the Agreement will terminate on "[t]he date on which either party to the Agreement provides notice in writing to the other party of the desire to terminate [the Agreement]." With the exception of two Plan Participants, each Plan Participant owns the insurance policies. Accordingly, upon termination of the Split Dollar Insurance Program, the Plan Participant has the right to continue the policies at the Participant's expense at the then current level or at a reduced benefit level. On December 31, 2002, the Debtors terminated the Split Dollar Insurance Program for their active associates, and terminated the associates' Agreements. However, at that time, the Debtors elected to continue the program for their retired associates. Mr. Garrity notes that since that time, the Debtors continued to pay the majority of the annual premiums payable under the life insurance policies for the retired associates. At present, the Split Dollar Insurance Program is being maintained for the benefit of 29 individuals. Certain of these individuals own multiple insurance policies. Thus, under the program, the Debtors are actually paying annual premiums on 39 insurance policies. Most, but not all, of the Current Plan Participants executed Agreements when they obtained their life insurance policies. According to James M. Brewster, Spiegel's Senior Vice President and Chief Financial Officer, 10 of the Current Plan Participants -- owning a total of 14 policies -- failed to execute the Agreements when they obtained their policies. Nonetheless, the Debtors have been paying premiums under those policies in accordance with the terms of the Agreement and the Participants have been accepting that benefit. As part of their restructuring, the Debtors have determined to terminate the Split Dollar Insurance Program and the Agreements with the Current Plan Participants. Although they believe that terminating the Split Dollar Insurance Program and the Agreements fall within the ordinary course of their business, out of abundance of caution, the Debtors seek the Court's authority to terminate their Split Dollar Life Insurance Program and immediately cease making payments on insurance policies purchased by the Current Plan Participants under the Program. Terminating the Split Dollar Insurance Program and the Agreements is warranted. In their discretion, the Debtors continued the Program for their retired associates in an effort to provide the retired associates with additional benefits at a time when the Debtors believed they had the financial ability to do so. In 2002 and 2003, the Debtors made premium payments totaling $336,660 and $192,100 for the Plan Participants' benefit. Currently, $147,307 remains outstanding for 2003. The Debtors project that in 2004 they will be obligated to make premium payments totaling $335,407, with the first premium payment due in January 2004. But in their present financial condition, Mr. Garrity says that the Debtors cannot justify the expenditure of those funds. Upon termination, the Debtors will be relieved of the obligation to pay the premiums and therefore realize significant savings. The Debtors will also recover $3,600,000, which represents Spiegel's share of the cash value of the policies that it has funded for the benefit of the Current Plan Participants. Mr. Garrity maintains that this cash infusion will benefit the Debtors. Under the program, Mr. Garrity explains that the insurer invests the premiums with the earnings on the investments held for the Plan Participants' benefit. Accordingly, the cash value of the policies is subject to fluctuating interest and investment earnings before plan maturity. The Debtors' share of the cash value of the policies is capped as the amount equal to the sum of the premiums that they pay. Whether the Debtors recover that amount upon termination or maturity will be dependent on market fluctuations, morality experience and insurance expenses. Although upon termination the Debtors will be paid $3,600,000, Mr. Garrity says that the sum does not represent 100% of the premiums the Debtors paid under the policies. Mr. Garrity ascertains that there is no undue prejudice to the Current Plan Participants. The Debtors have reserved their right to terminate the Split Dollar Insurance Program. In addition, upon the Program's termination, the Current Plan Participants do not forfeit their insurance policies. To the contrary, the Current Plan Participants have the right to continue their policies at their expense, at their current benefit level or a reduced benefit level to reduce their premiums. The termination of the program merely shifts the funding of the benefit of the policies to the Current Plan Participants. Mr. Garrity further explains that the Debtors' proposed termination of the Split Dollar Insurance Program does not violate the Employee Retirement Income and Security Act of 1974. The Split Dollar Insurance Program is an employee welfare benefit plan within the meaning of ERISA, and therefore, the benefits provided under the program are not vested absent a promise stating otherwise by the employer. The Agreements are terminable at will by the Debtors or the Plan Participant. (Spiegel Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) STARBAND COMMS: Secures Clearance to Exit Bankruptcy Proceedings ---------------------------------------------------------------- StarBand, America's first consumer high-speed, two-way satellite Internet provider, received approval from the U.S. Bankruptcy Court in Delaware to emerge from Chapter 11 protection. This is the final clearance required from the bankruptcy court for StarBand to implement its reorganization plan. The effective date of the emergence should occur by the end of November. The company filed for Chapter 11 bankruptcy protection on May 31, 2002 following a major dispute with a strategic partner. Through settlement of this dispute, renegotiations of key contracts, reductions in staffing offset by increased automation, creation of a new sales force and continued addition of new customers, StarBand is poised to emerge a stronger, more financially stable company. "StarBand's emergence from Chapter 11 protection is a great accomplishment and I am very proud of our employees and thankful to all our partners for helping StarBand these past 18 months," said Zur Feldman, StarBand Chairman and CEO. "StarBand launched great new products, opened many new sales channels, and improved StarBand's overall operating efficiencies during this period. StarBand is wiser, stronger, and ready to grow." Despite the challenges of operating while in Chapter 11, StarBand launched improved services such as the new commercial-grade StarBand 480 Pro service with faster speeds, an integrated 4-port Ethernet router and compatibility with most operating systems, new residential service plans with pricing as low as $39.99 per month, and an extended service protection plan providing post- manufacturer's warranty hardware replacement and repair reimbursement. The company's capital structure has significantly improved with the conversion of approximately $113 million of bank debt to equity. In addition, approximately $90 million of debt to Gilat Satellite Networks Ltd. will convert to equity and a $14 million post-emergence note. Further, StarBand and Gilat have entered into a new technology and hardware supply agreement providing for $7.5 million in additional financing. StarBand Communications Inc., headquartered in McLean, Virginia, is America's first nationwide provider of two-way, always-on, high-speed Internet access via satellite to residential and small office customers. In 2003, StarBand introduced its fourth generation satellite modem, the StarBand 480 Pro, a professional- strength, network-ready and business-grade modem delivering high speed connectivity and instant networking capability. StarBand also launched new Residential price plans with monthly fees as low as $39.99. The StarBand antenna accommodates both StarBand high- speed Internet service and DISH Network satellite TV programming in the continental U.S. StarBand's network comprises customers and service in all 50 states, Puerto Rico and the U.S. Virgin Islands. Visit StarBand at http://www.StarBand.com TENNECO AUTOMOTIVE: Adjusts Third Quarter 2003 Financial Results ---------------------------------------------------------------- Tenneco Automotive's (NYSE: TEN) third quarter results, as reported on October 21, 2003, understated net income by $1 million and earnings per diluted share by 1-cent and overstated revenue and earnings before interest and taxes for the quarter by $1 million. In filing its third quarter report on Form 10-Q Thursday, the company reported third quarter 2003 net income of $4 million, an increase from $3 million as announced on October 21, 2003, and earnings per share of 10-cents, an increase from previously reported 9-cents. The company reported third quarter revenue of $914 million, versus $915 million as previously reported, and the company's EBIT in the quarter was $38 million, down from $39 million as originally reported. These changes were made as a result of two adjustments. The first adjustment was identified in Germany during a routine monthly review of vehicle platform and customer financial performance. The revenue generated from one particular platform was not recorded properly during a period in the quarter when the company was transitioning its supply of product from one facility to a newly opened manufacturing facility. With the adjustment, European revenue for third quarter 2003 was $344 million versus the previously reported $345 million, and European EBIT was a loss of $3 million instead of a loss of $2 million. The second adjustment related to the write-off of debt issuance costs by the company in connection with the refinancing of some of its debt earlier this year. The company reported lower interest expense of $2 million following re-examination of the calculation of the write-off. Third quarter 2003 financial statements and reconciliations of GAAP to non-GAAP results reflecting the adjusted results are attached. Tenneco Automotive (S&P, B+ Senior Secured Bank Debt, B Senior Secured Notes, B- Subordinated Debt Ratings, Stable Outlook) is a $3.5 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,600 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers and DynoMax(R) performance exhaust products, and Monroe(R) Clevite(R) vibration control components. TISSERA INC: Auditor Doubts Ability to Continue Operations ---------------------------------------------------------- On November 4, 2003, Manning Elliott, Chartered Accountants resigned as Tissera, Inc.'s independent public accountants. Manning's opinion in its report on the Company's financial statements for the years ended July 31, 2002 and 2003 expressed substantial doubt with respect to the Company's ability to continue as a going concern. UNITEDGLOBALCOM: Reports Strong Growth for Third Quarter 2003 ------------------------------------------------------------- UnitedGlobalCom, Inc. (Nasdaq: UCOMA) announced its operating and financial results for the quarter ended September 30, 2003. UGC's significant and consolidated operating subsidiaries include UGC Europe, Inc. (Nasdaq: UGCE), a leading pan-European broadband communications company; and VTR GlobalCom S.A., the largest broadband communications provider in Chile. Third Quarter Highlights -- Revenue for the three months ended September 30, 2003 was $475 million, an increase of 23% when compared to the same period in 2002. Adjusting for the deconsolidation of UPC Germany for the prior period, revenue increased 25%. On a sequential basis from the quarter ended June 30, 2003, revenue increased by 2% or $9 million. -- Adjusted EBITDA for the three months ended September 30, 2003 was $171 million, a 102% or $86 million improvement from $85 million for the same period in 2002. Adjusting for the deconsolidation of UPC Germany for the prior period, Adjusted EBITDA improved by 105% or $88 million. On a sequential basis from the quarter ended June 30, 2003, Adjusted EBITDA increased by 15% or $22 million. -- Net Income for the three months ended September 30, 2003 was $1.7 billion, an increase of $2.0 billion when compared to the same period in 2002. This increase primarily relates to: (i) consummation of the United Pan-Europe Communications N.V. restructuring in September 2003, resulting in a gain of approximately $2.1 billion on the early extinguishment of debt, and (ii) improved operating results. -- RGUs at September 30, 2003 were over 9.0 million, a 3.4% increase or 298,200 from September 30, 2002. On a sequential basis from June 30, 2003, RGUs increased 78,700. -- Video subscribers at September 30, 2003 were 7.4 million, a 1.1% increase, or 83,000 from September 30, 2002. On a sequential basis from June 30, 2003, video subscribers increased 22,600. -- Voice and Internet subscribers at September 30, 2003 were nearly 1.6 million, a 16% increase or 215,200 from September 30, 2002. On a sequential basis from June 30, 2003, voice and Internet subscribers increased 56,100. UnitedGlobalCom, Inc.'s September 30, 2003 balance sheet shows a net capitalization of about $346 million, up from a deficit of about $4.2 billion recorded nine months ago. Management Comments Gene Schneider, Chairman and CEO of UGC, said, "We are very pleased to announce another record quarter for the company, including over $171 million of adjusted EBITDA. Several other important milestones were achieved during the period, most importantly the completion of our European balance sheet restructuring. UGC also launched an exchange offer for the balance of the shares in our subsidiary UGC Europe that we do not already own (approximately 33%). We believe this transaction is in the best interests of both UGC and UGCE shareholders and, as disclosed, we expect to complete the exchange offer in mid- December." Mike Fries, President and COO of UGC, added, "The third quarter represented a return to normalized subscriber growth in both Europe and Chile. During the three months we added over 78,000 RGUs, including over 42,000 Internet customers. These trends have continued through the fourth quarter with net subscriber additions of 28,000 in Europe and 10,000 in Chile through November 1, 2003. Just as significant, our performance in the quarter, together with the completion of our European restructuring, has brought our consolidated debt to adjusted EBITDA ratio to approximately 5.3x on a last quarter annualized basis. By all accounts, we sit in a very strong financial and operating position and currently expect to meet our key guidance targets for 2003. UGC Recent Events UGC Announces Tender Offer: On October 6, 2003, UGC announced that it had commenced an exchange offer for all of the outstanding shares of UGC Europe which it does not own. UGC currently owns 66.75% of the outstanding shares of UGC Europe common stock. On November 12, 2003, UGC announced revised terms to the exchange offer. Pursuant to the revised terms, UGC is offering to exchange 10.3 shares of its Class A common stock for each share of UGC Europe common stock that it does not own (approximately 16.6 million shares). The exchange offer is conditioned, among other things, upon the tender of a sufficient number of shares of UGC Europe common stock such that, upon completion of the exchange offer, UGC will own at least 90% of the outstanding common stock of UGC Europe. If the exchange offer is successfully completed, UGC will effect a "short-form" merger of UGC Europe, by which UGC would acquire the remaining shares of UGC Europe for the same consideration as in the exchange offer. The exchange offer is scheduled to expire on December 18, 2003. In connection with the exchange offer, UGC's majority shareholder, Liberty Media Corporation, has agreed to certain limitations on the exercise of its preemptive rights to acquire additional shares of UGC Class A common stock upon the closing of the exchange offer. Restructuring of Old UGC: UGC's wholly-owned subsidiary, Old UGC, Inc., which principally owns the company's interests in Latin America and Australia, has reached an agreement in principle with certain of its creditors, including UGC and IDT United, Inc. (in which UGC has a 93.7% fully diluted interest and a 33.3% common equity interest), on the economic terms for the restructure of Old UGC's outstanding 10.75% Senior Discount Notes and expects to formalize a restructuring proposal shortly. The outstanding principal balance of the Old UGC Notes is $1.262 billion. Of this amount, UGC holds $638 million directly and has an interest in another $599 million indirectly through IDT United. Third parties hold approximately $25 million of the Old UGC Notes. UGC expects that the proposal, if implemented, would result in the acquisition by Old UGC of the Old UGC Notes held by UGC and IDT United for Old UGC common stock. Subject to consummation of such acquisition, UGC expects to acquire the third party interests in IDT United in which case Old UGC would continue to be wholly owned by UGC. Restatement Effects Related to UPC Germany Accounting Issue: UGC consolidated the financial results of UPC Germany prior to July 2002, since UGC Europe held an indirect approximate 51% majority voting equity interest. At the end of July 2002, UGC Europe's ownership interest in UPC Germany was reduced from approximately 51% to approximately 29% as a result of a pre- existing call right held by the minority shareholder, which became exercisable in February 2002 as a result of certain events of default under several of UGC Europe's debt agreements. Accordingly, UGC Europe deconsolidated UPC Germany effective August 1, 2002. Upon deconsolidation, UGC Europe's net negative investment in UPC Germany was EUR 150.3 ($147.9) million. UGC Europe and UGC had previously concluded that generally accepted accounting principles precluded the recognition of a gain upon deconsolidation because there were significant uncertainties regarding the realization of such gain. Based on further analysis, UGC Europe and UGC revised their conclusion, and as such UGC Europe and UGC have restated their consolidated financial statements as of and for the year ended December 31, 2002 to recognize a gain from the reversal of this net negative investment, effective August 1, 2002, and UGC Europe and UGC have restated the unaudited condensed consolidated financial statements for the quarters ended March 31, 2003 and June 30, 2003 for the prospective effects of this gain. This accounting gain will have no impact on UGC Europe's or UGC's reported Adjusted EBITDA, cash flow, or future earnings. Founders' transaction update: On August 19, 2003 certain of our founding stockholders and Liberty entered into a share exchange agreement pursuant to which the Founders agreed to exchange an aggregate of 8,198,016 shares of Class B common stock (representing all of the outstanding shares of our Class B common stock) for securities of Liberty and cash. This transaction is now expected to close in early January 2004. Subscribers UGC continues to focus on growing its total customer base, particularly in areas where the Company has upgraded its networks to provide broadband services, primarily in Western Europe and Chile. RGUs, increased 3.4% or 298,200 from last year's third quarter to 9.0 million, and increased 78,700 on a sequential basis from June 30, 2003. Revenue UGC's revenue for the third quarter ended September 30, 2003 was $475 million, an increase of 23%, or $90 million from the same period last year. The increase was due to the appreciation of the euro relative to the U.S. dollar (approximately $53 million), as well as increases in RGUs and average revenue per unit in both Europe and Chile. Adjusted EBITDA UGC's Adjusted EBITDA for the third quarter was $171 million, a 102%, or $87 million improvement over the same period last year. Approximately $20 million of that increase was due to the appreciation of the euro relative to the U.S. dollar, while the Chilean Peso exchange rate impact was negligible. On a functional currency basis, UGC Europe and VTR both demonstrated a substantial increase in Adjusted EBITDA on a year-over-year basis (79% and 63%, respectively), as well as solid increases on a sequential basis. Capital Expenditures Capital expenditures for the nine months ended September 30, 2003 were $228 million, a decrease of 2.7%, or $6 million compared to the same period last year. Capital expenditures for the quarter ended September 30, 2003 were $95 million, an increase of 113%, or $50 million compared to the same period last year. On a sequential basis from the quarter ended June 30, 2003, capital expenditures increased by 27% or $20 million. Free Cash Flow Free Cash Flow for the three months ended September 30, 2003 was $4.2 million, an increase of $109 million compared to the same period last year. This change is due to a substantial increase in cash flow from operating activities, which is due to a combination of several factors, including an appreciation of the euro relative to the U.S. dollar, an increase in both RGUs and ARPU, ongoing cost savings (primarily in Europe) and improved working capital management. EUROPE (UGC Europe) UGC Europe is a leading pan-European broadband communications company offering cable television, telephony and high-speed Internet access services in 11 European countries and serving approximately 6.9 million video subscribers, 459,600 voice subscribers and 749,400 Internet subscribers. UGC owns approximately 66.75% of UGC Europe. Third Quarter Highlights -- Revenue increased 7.7% or EUR 26 million to EUR 367 million (US$414 million) for the three months ended September 30, 2003 compared to the same period last year. On a sequential basis from June 30, 2003, revenue increased by 2.2% or EUR 8 million. -- Adjusted EBITDA improved 76%, or EUR 60 million to EUR 138 million (US$155 million) for the three months ended September 30, 2003, compared to the same period last year. On a sequential basis from June 30, 2003, Adjusted EBITDA increased by 15%, or EUR 18 million. -- Video subscribers at September 30, 2003 were 6.9 million, a 0.9% increase or 60,100 from September 30, 2002. On a sequential basis from June 30, 2003, video subscribers increased 15,100. -- Voice subscribers at September 30, 2003, including UGC Europe's broadband cable-phone operations and its traditional voice network in Hungary, were 459,600, a 1.1% decrease from September 30, 2002. On a sequential basis from June 30, 2003, voice subscribers increased 400. -- Internet subscribers reached 749,400 at September 30, 2003, an increase of 20%, or 122,400 from September 30, 2002. On a sequential basis from June 30, 2003, Internet subscribers increased 26,100. -- Total RGUs were over 8.1 million at September 30, 2003, an increase of 177,600 from September 30, 2002. On a sequential basis from June 30, 2003, RGUs increased 41,600. During the first nine months of 2003, RGUs increased by more than 76,000, which on a run rate basis is below guidance for the year. This shortfall is almost entirely related to the implementation of a new subscriber management system, involving the consolidation of a number of customer databases in the Netherlands, (as highlighted in both our Q4 2002 and earlier 2003 results). This database consolidation began in Q4 2002 and was effectively complete at the end of Q2 2003. This process has had and will continue to have a positive impact on UGC Europe's cash flow as it has enabled us to improve our near-term cash collection. Recent Events - Europe -- Restructuring Completed: On September 3, 2003, the European restructuring was completed and UGC Europe commenced trading on the NASDAQ National Market (under ticker symbol UGCE). -- UPC Polska Restructuring Update: On October 30, 2003, UPC Polska, Inc., a subsidiary of UGC Europe, Inc., announced that the United States Court has approved UPC Polska's First Amended Disclosure Statement with respect to its First Amended Chapter 11 Plan of Reorganisation. UPC Polska will begin soliciting votes from creditors who would receive distributions under such Plan. The confirmation hearing on Plan is scheduled for December 3, 2003. -- Internet Marketing Campaign Update: Despite an increasingly competitive market for the internet product from ADSL providers especially in the Netherlands, UGC Europe's most significant internet market, the Company has added more than 73,000 internet subscribers during the first nine months of 2003, over 26,000 in the third quarter alone. In July and November 2003 UGC Europe announced extensions of its chello internet product range, offering subscribers a choice of products with different connection speeds and price points in the Netherlands, France and Austria. We expect these product launches will further boost demand for the chello product across our footprint, offsetting any downward pressure on average ARPU. CHILE (VTR) VTR, an indirect wholly-owned subsidiary of UGC, is a leading broadband communications company offering cable television, telephony and high-speed Internet access services in Chile and had approximately 1.7 million homes passed and 1.0 million two-way homes passed and 486,600 video subscribers, 258,300 voice subscribers and 114,800 Internet subscribers at September 30, 2003. Third Quarter Highlights -- VTR's revenue for the quarter ended September 30, 2003 increased 22% to CP 40,629 million (US$58.6 million) from CP33,407 million (US$47.2 million) for the same period in 2002 on a local currency basis. On a sequential basis from June 30, 2003, revenue increased 6.0%. -- VTR's Adjusted EBITDA for the quarter ended September 30, 2003 increased 63% to CP 13,110 million (US$18.9 million) from CP 8,055 million (US$11.4 million) for the same period in 2002 on a local currency basis. On a sequential basis from June 30, 2003, Adjusted EBITDA increased 12%. -- VTR's video subscribers at September 30, 2003 were 486,600, an increase of 5.1% or 23,800 from September 30, 2002. On a sequential basis from June 30, 2003, video subscribers increased 8,100. -- VTR's voice subscribers at September 30, 2003 were 258,300 a 19% increase or 40,400 from September 30, 2002. This represents a 25% penetration rate based on two-way homes serviceable as of September 30, 2003 compared to 23% as of September 30, 2002. On a sequential basis from June 30, 2003, voice subscribers Increased 13,300. -- VTR's Internet subscribers at September 30, 2003 were 114,800, a 94% increase from 59,100 at September 30, 2002. The increase was due to continued strong demand for VTR's 300Kbps Broadband product as well as its new 64Kbps "Broadband Light" service aimed at converting current dial-up users. On a sequential basis from June 30, 2003, Internet subscribers increased 15,700. Recent Events - Chile -- VTR awarded "Best Telecom Company in Latin America": Pyramid Research recently recognized VTR as the Best Telecom Company in Latin America. VTR's peer group consisted of all the Basic Telephony, CATV and Broadband companies throughout Latin America. -- VTR awarded "Best Broadband Service" in Chile: Several prominent Chilean organizations conducted research among 15,000 broadband users who selected VTR as the best broadband service provider in Chile. -- Continued strong growth in telephony: Voice lines in service increased 17% in the third quarter compared to the same period in the prior year, currently totaling 287,200 lines. This represents a 28% penetration rate based on two-way homes serviceable as of September 30, 2003. -- Bundling rollout: As of September 30, 2003, triple play subscribers were 85,700, an 88% increase compared to the same period in the prior year and 10% of total RGUs. As of September 30, 2003 bundled RGUs represented 64% of VTR's total RGUs within its triple play footprint. Other Investments Austar Update: In August, Austar United Communications Ltd. (Austar) completed its equity rights issue and raised approximately A$75.0 million in additional capital. As a result, UGC currently owns indirectly approximately 38% of Austar United. Based on the closing price of Austar's common stock (ASX: AUN.AX) of A$0.385 on November 12, 2003, UGC's 38% interest (446 million shares) has a market value of A$172 (US$123) million. -- Austar's revenue was flat for the nine months ended September 30, 2003 at A$240 million compared to the same period in the prior year, while adjusted EBITDA increased 285% to A$37.1 million over the same time period. In addition, subscribers as of September 30, 2003 were 421,700, an increase of 3.7% compared to September 30, 2002. SBS Broadcasting: UGC owns indirectly a 21% interest (6 million shares) of SBS Broadcasting. Based on the closing price of SBS Broadcasting's common stock (Nasdaq: SBTV) of $30.58 on November 12, 2003, UGC's interest has a market value of $183 million. UGC is the largest international broadband communications provider of video, voice, and Internet services with operations in numerous countries. Based on the Company's operating statistics at September 30, 2003, UGC's networks reached approximately 12.6 million homes passed and 9 million RGUs, including approximately 7.4 million video subscribers, 717,900 voice subscribers, and 868,000 high speed Internet access subscribers. UGC's significant and consolidated operating subsidiaries include UGC Europe, Inc. (UGC Europe) (Nasdaq: UGCE), a leading pan-European broadband communications company; and VTR GlobalCom S.A. (VTR), the largest broadband communications provider in Chile. UNITY WIRELESS: September Net Loss Whittles Down to $1.14 Mill. --------------------------------------------------------------- Unity Wireless Corporation (OTCBB: UTYW), a developer of fully integrated RF subsystems and power amplifiers, announced results for its third quarter and nine months ended September 30, 2003, as reported in the Company's Form 10Q-SB filed with the Securities and Exchange Commission. The Company also provided an overview of its current business. RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2003 Net sales for the nine months ended September 30, 2003 remained relatively constant at $2.156 million from $2.157 million for the nine months ended September 30, 2002. However, third quarter sales decreased by $292 thousand from the third quarter of last year and $1.59 million from the prior quarter. These decreases are primarily a factor of the slowness in the realization of projects from the Company's customer base. Despite sales remaining relatively constant, costs of sales, net of stock-based compensation and write-down of $190,616 in inventory, decreased by 20% or $369 thousand, resulting in a gross margin of 32% for the nine months ended September 30, 2003 compared to 15% for the nine months ended September 30, 2002. The decrease in cost of sales and increase in gross margin were primarily a factor of cost control measures that reduced material costs, wages and benefits, sub-contract labor and testing equipment costs. Total operating expenses for the nine months ended September 30, 2003, net of stock-based compensation, were $1.69 million, a 41% decrease from $2.84 million for the nine months ended September 30, 2002. Contributing to the decline, net of stock-based compensation, sales and marketing, decreased by 59% or $240 thousand, and general and administrative expenses, excluding facility and corporate expenses, decreased by 61% or $399 thousand. The decrease relates primarily to ongoing efforts to control operating costs, while ensuring adequate investment is made to support business growth. Net loss for the nine months ended September 30, 2003, net of stock-based compensation, was $1.14 million, a 53% decrease from $2.44 million for the nine months ended September 30, 2002. Overall, our results show that while sales for the nine-month periods remained relatively constant our ongoing efforts to control costs has improved our gross margins from 18% to 32% and reduced our net loss for the period by 53% or $1.3 million. Complete results for the third quarter ended September 30, 2003 as reported on Form 10Q-SB are available on the SEC's EDGAR database at http://www.sec.gov CURRENT BUSINESS OVERVIEW A significant milestone recently achieved was the release of the Company's first efficiency enhanced power amplifiers developed under its Smart Power Amplifier program. Initial results demonstrate that base stations and repeaters utilizing Unity's efficiency enhanced power amplifiers could reduce the operating expense of wireless service providers as their transmission infrastructure would require less power to achieve the same levels of performance. Currently, a selected group of tier 1 and tier 2 wireless network system vendors are awaiting these new power amplifiers for their internal evaluation. Unity Wireless is also proud to announce the receipt of a purchase order and development project from a new tier 1 customer for an integrated RF power amplifier and subsystem. While the relationship is still relatively new, to date Unity Wireless has met or exceeded this customer's development requirements and management anticipates production orders in fiscal 2004. In addition to the milestones mentioned above, management has also identified significant market opportunities that involve expanding the Company's current product line to include more integrated RF products. These products would combine the latest power amplifier technology with additional RF components in fully integrated RF subsystems. "In my experience, tier 1 and tier 2 wireless network vendors and OEM's are more approachable with a fully integrated solution," commented Myer Bentob, Unity's Executive Vice Chairman. "We feel that many significant opportunities are now before us that we can provide both technology and development cycles that can attract and retain business from tier 1 and tier 2 customers." Ilan Kenig, Unity's President and CEO stated, "As we have often reported, we believe that we have set Unity upon a course for a promising future. We have taken steps this year to enhance our products, to expand our list of customers and industry partners, and to reduce expenses, all in an effort to put our Company in position to benefit from an anticipated turnaround in the wireless infrastructure industry. However, any significant increase in revenue remains entirely dependant on increased capital spending by wireless network operators." "I can assure our investors that many challenges still lie ahead. We must work hard to stabilize our revenues and strengthen both our balance sheet and working capital positions in order that we may better capitalize on both present and future opportunities," continued Kenig. "Notwithstanding these challenges, in my two years here at Unity Wireless, I have never been more confident that we can overcome any challenge presented, and are on the right path to take a significant role in the wireless industry." Unity Wireless is a leading developer of fully integrated RF subsystems and Smart Power Amplifier technology. Our single-carrier and multi-carrier power amplifier products deliver world-class efficiency and performance with field-proven quality and reliability in thousands of base stations and repeaters around the world. Unity Wireless' June 30, 2003, balance sheet shows a working capital deficit of about $338,000. U.S. WIRELESS DATA: Sept. 30 Balance Sheet Upside-Down by $286K --------------------------------------------------------------- U.S. Wireless Data, Inc. (OTC: USWE), a leader in wireless transaction processing, released financial results for the three months ended September 30, 2003. USWD reported an increase in total revenue of 59% to $1,246,000, with service revenue rising 72% to $1,230,000, compared to the first quarter of the prior fiscal year. Total operating expenses declined 31%, while the net loss improved by 25%. "During the quarter, we made substantial operating progress, improving our revenues significantly along with continued cost reductions," said Chairman and Chief Executive Officer Dean M. Leavitt. "While we continue to face serious challenges relating to our immediate need for additional capital, the combination of sustained growth in our monthly recurring service revenue, the continuation of our various cost-cutting measures, and the anticipated commercial roll-out of our wireless vending initiative with Pepsi in early 2004, moves USWD that much further along the path toward profitability," commented Mr. Leavitt. REVENUE Revenue for the three months ended September 30, 2003, was $1,246,000, as compared to $783,000 for the same period in the prior fiscal year, a 59% increase. Service revenue was $1,230,000, up from $717,000 in the same period in the prior fiscal year, a 72% increase. Service revenue was derived primarily from the growing base of active wireless sites that use USWD's proprietary Synapse service to process transactions. Product sales decreased to $16,000, from $66,000 in last fiscal year's corresponding quarter. Product sales are expected to gradually increase as the company moves to the commercialization of its Synapse Enabler for Vending through Pepsi, its bottlers and licensees, and Synapse Enabler for multi-lane Point-of-Sale. GROSS PROFIT Gross profit for the three months ended September 30, 2003, was $502,000, compared to gross profit of $400,000 in the same period in the prior fiscal year. This 26% increase was primarily due to the growth in the number of active wireless sites for Synapse services. GROSS MARGIN Total gross margin for the three months ended September 30, 2003, decreased to 40.3%, from 51.1% for the same period in the prior fiscal year. This decrease was primarily attributed to changes in customer pricing plans that led to lower service margins and higher costs for certain wireless carrier services, and was partially offset by the greater percentage of total revenue from higher margin monthly fees due to the growth in the number of active wireless sites. NET LOSS/EBITDA Net loss for the quarter totaled $1.33 million or $0.08 per share, compared to a net loss of $1.76 million or $0.15 per share, for the corresponding quarter of the prior fiscal year. EBITDA is presented because it is a widely accepted indicator of funds available to service debt, although it is not a measure of liquidity or of financial performance under accounting principles generally accepted in the United States of America (GAAP). USWD uses EBITDA as an internal measure of operating performance, which is net loss excluding net interest, taxes, depreciation and amortization. The company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to net income or cash flows as determined under GAAP. The EBITDA loss for the three months ended September 30, 2003, was $1.10 million as compared to the same period in the prior fiscal year of $1.36 million. This improvement in EBITDA loss, of $0.26 million or approximately 19%, is primarily attributed to the increase in revenues and a reduction of operating expenses. FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY USWD needs additional capital in the immediate future in order to continue operations. Since the company's inception it has incurred significant losses and negative cash flow from operations. As of September 30, 2003, USWD had an accumulated deficit of approximately $144 million and the company's principal source of liquidity was approximately $185,000 in cash and cash equivalents. Based on current estimates of revenue levels, operating costs and other cash inflows and outlays, and excluding the remaining proceeds which may be available to the company from the bridge facility discussed below, USWD will not have cash balances adequate to continue operations beyond December 2003 without a sufficient capital infusion by such time. These concerns about capital have placed the company in a position where it may be required to take additional steps to raise funds and cut costs. If USWD is not successful in these efforts to raise additional capital, the company may be forced to eliminate or curtail certain projects, sell assets and take additional steps to conserve cash that may adversely affect operations. If unable to obtain additional capital as needed, the company will be required to cease operations altogether. The availability of funds from a bridge facility is pursuant to a previously executed fully secured loan documentation in the amount of $2.75 million with Brascan Financial Corporation, a subsidiary of Brascan Corporation, and advances under this Bridge Loan require USWD to satisfy certain conditions on a going-forward basis. As of November 10, 2003, the company has drawn down approximately $1.74 million against the $2.75 million Bridge Loan commitment. In connection with this Bridge Loan, and as part of an overall restructuring and strategic alliance with MIST Inc., a provider of card issuance and payments processing products and gateway services to banks, non-bank card issuers and the payments processing industry and a subsidiary of Brascan Corporation, we also entered into a term sheet that contemplated the agreement by Brascan, subject to a number of conditions, to arrange for the purchase of $12.5 million of a newly issued Series D Preferred Stock representing at least 60% of USWD's equity. The Bridge Loan allowed the company to continue operations while negotiating a definitive Series D Preferred Stock purchase agreement and to satisfy the anticipated closing conditions of such a financing. On October 30, 2003, USWD received notification from Brascan, on behalf of its designate MIST, that it no longer intends to pursue the equity financing transaction contemplated by the term sheet with USWD as previously announced on September 16, 2003. The company continues to explore alternative transactions with MIST, although there can be no assurance that any such transaction will be consummated, or consummated on terms favorable to USWD. Brascan indicated that despite certain technical defaults in connection with their Bridge Loan to the company, as previously reported in USWD's Annual Report on Form 10-KSB, as filed on October 14, 2003 (which defaults were waived through October 31, 2003), it is willing to discuss extending the balance of the remaining unadvanced amounts under the Bridge Loan that approximate $1 million. However, there can be no assurance that Brascan will continue to extend such remaining amounts or that it will not declare a default under the Bridge Loan documentation subsequent to October 31, 2003. In connection with MIST's determination not to proceed with the equity financing transaction as previously contemplated, Brascan has released USWD from its obligations to not solicit alternative financings from other potential investors, and the break-up fee that was associated with such a financing. The company is currently exploring such other options. In view of MIST's determination not to proceed with the equity financing transaction as contemplated, the warrant to purchase 10,000,000 shares of USWD's common stock issued to Brascan in connection with the Bridge Loan (i) will become exercisable on the earlier of (a) December 31, 2003, or (b) upon a consolidation or merger with another entity, or the sale, transfer or other disposition of all or substantially all of USWD's assets and properties to another entity; and (ii) will expire in September 2008. There can be no guarantees or assurances that any financing or other transaction will be completed, and in the absence of alternative financing or other transaction, the company will be forced to cease operations. Any contemplated financing or other transaction more than likely would be subject to a number of conditions, including, but not limited to, the execution of definitive documentation and the successful completion of a reorganization of USWD's capital structure, which may include the restructuring of the company's currently issued and outstanding Series C Convertible Preferred Stock and Series C Warrants. It is also anticipated that the terms and provisions of any contemplated financing or other transaction, if completed, would have a substantial dilutive effect on the ownership interests of USWD's existing stockholders. These conditions raise substantial doubt about the company's ability to continue as a going concern and if USWD is unable to obtain additional capital as needed, it will be required to cease operations altogether. The consolidated financial statements do not include any adjustments that might result from the company's inability to continue as a going concern. Nevertheless, the company anticipates its negative cash flow will continue to improve on a quarterly basis. A large percentage of the operating expenses are fixed and revenues are expected to continue increasing without incurring significant increases in operating expenses. USWD is also focused on conserving cash and improving cash flow through growth in the number of active wireless sites and various product sales, including revenues from services and products for vending, and a continued reduction in cash expenses. At September 30, 2003, the company's balance sheet shows working capital deficit of about $2.4 million, and a total shareholders' equity deficit of about $286,000. OPERATING HIGHLIGHTS USWD continues to make progress on key business objectives that are intended to establish Synapse services and products as the standard for wireless transaction payment services. Operating highlights for the quarter ended September 30, 2003, include: -- Pepsi wireless/cashless vending solution - On October 16, 2003, USWD announced that it entered into a multi-year exclusive supply agreement with PepsiCo, Inc. for cashless payment and wireless route management systems and service for use on the vending machines of Pepsi's bottlers, licensees and affiliates. Pending the completion of successful commercial testing, which is expected to be completed no later than December 31, 2003, the Pepsi-Cola North America division of Pepsi made a commitment to purchase a minimum of 10,000 SEVs from the company. USWD continues to deploy units in the field and, as such, over five hundred units have already been deployed in certain test markets by Pepsi anchor bottlers and licensees. These markets include Chicago, Illinois; Memphis, Tennessee; Las Vegas, Nevada; Orlando, Florida and St. Louis, Missouri. In addition, the company has shipped an additional 250 units to Pepsi in late August 2003 for expected installation in the quarter ending December 31, 2003, of which approximately 50 have already been installed. -- Active sites - Active sites have grown to approximately 32,500 as of September 30, 2003, an increase of 15,400 or 90% from the same date of the prior year. This follows the conversion in April 2003, of approximately 7,400 wireless sites for a major processor using Cingular's Mobitex network, to USWD's Synapse service on the same wireless network. This conversion has resulted in a substantial increase in activations and transactions, as several hundred new wireless activations are being made by this customer through the company's Synapse service each month. -- Transactions - Transactions processed for the three months ended September 30, 2003, were approximately 2,623,000, an increase of 850,000 or 48% from the same period in the prior fiscal year. This increase was primarily due to the growth in active sites. U.S. Wireless Data provides wireless transaction delivery and gateway services to the payments processing industry. Our customers include credit card processors, merchant acquirers, banks, automatic teller machine distributors and their respective sales organizations, as well as certain businesses seeking new solutions to make it easier for their customers to buy their products or services. We offer these entities turnkey wireless and other transaction management services. We also provide those entities with proprietary wireless enabling products designed to allow card acceptance where such acceptance has heretofore been either too expensive or technologically unfeasible, or to displace conventional telephone lines for increased speed, cost reduction and/or convenience. These services and products may be utilized by conventional card accepting retailers as well as emerging card accepting market segments such as vending machines, quickservice (fast-food) and quick casual restaurants, taxis and limousines, in-home service providers, door-to-door sales, contractors, delivery services, sporting events, and outdoor markets. Our services and products may also be used for gathering telemetric information such as mission critical operational data on a real- time basis from remote equipment (e.g., vending machines). Further information is available at http://www.uswirelessdata.com V-ONE CORP: September 30 Balance Sheet Upside-Down by %2 Million ---------------------------------------------------------------- V-One Corporation (OTCPK:VONE) reported revenue of $.9 million for the third quarter and $3.0 million for the first nine months of fiscal 2003. Revenue for the comparable three and nine month periods that ended September 30, 2002, was $1.2 million and $2.9 million, respectively. Funding of approximately $950 thousand for V-ONE products and services was approved as of September 30, 2003, for the National Anti-Terrorism Alert System with $400 thousand ordered on September 30, 2003 to begin implementation and roll out of this significant program as a component of the planned expansion of the FBI LEO program. "The Company had been advised by the program office that this order would be released in its entirety on September 30, 2003. However, approximately $550 thousand of the order was deferred as the FBI implemented program management changes to allow time to increase staff and expand existing infrastructure to mainstream LEO and position the program to support the future expansion not announced until late October," said Margaret Grayson, President and CEO of V-ONE Corporation. "We expect budgetary direction soon from the new program management, but do not have that direction at this time. Costs remained under tight control during the third quarter ended September 30, 2003 and will be increased only as needed to support clearly defined customer needs." Operating expenses dropped in the third quarter and first nine months of 2003 by approximately $875 thousand and $3.6 million, to $900 thousand and $3.1 million respectively, from $1.8 million and $6.7 million, a decrease of 49% and 54%, from the third quarter and first nine months of fiscal 2002, respectively. The Company incurred an operating loss of $58 thousand for the third quarter of 2003 and of $271 thousand for the nine months ended September 30, 2003, compared with $761 thousand and $4.2 million for the same periods last year. The loss attributable to holders of common stock for the third quarter of 2003 was $254 thousand or $(0.01) per basic and diluted share, compared with a loss attributable to holders of common stock of $1.3 million, or $(0.05) per basic and diluted share, based on the weighted average number of common shares outstanding of 27.2 million and 26.0 million, respectively, for the third quarter of 2003 and 2002. The loss attributable to holders of common stock for the first nine months of 2003 was $975 thousand, or $(0.04) per basic and diluted share, compared with a loss attributable to holders of common stock of $5.0 million, or $(0.20) per basic and diluted share, based on the weighted average number of common shares outstanding of 27.0 million and 24.8 million, respectively, for the first nine months of 2003 and 2002. V-One Corporation's September 30, 2003 balance sheet shows a working capital deficit of about $2 million, and a total shareholders' equity deficit of about $2 million. "Although we were disappointed by the FBI's decision to defer a portion of this order, we are pleased by the direction that the LEO program is taking. Combined with RISS and slated to incorporate other major law enforcement programs as they begin the process of sharing information across a large and growing information resource, RISS/LEO now serves more than 100,000 users already on the information sharing backbone," said Doug Hurt, Vice President of sales and marketing for V-ONE. An October 13 article published in Government Computer News, spokespersons for the FBI and the Department of Justice, Craig Sorum and M. Miles Matthews, outlined initial growth plans for this Information Sharing Backbone as follows: The FBI's Law Enforcement Online Unit and Justice's Counterdrug Intelligence Executive Secretariat (CDX) linked six networks to create a super-network that now serves about 100,000 law enforcement officers around the world. The six sensitive but unclassified networks are: -- The original FBI-only LEO -- The Regional Information Sharing System Network (riss.net), funded by Justice's Bureau of Justice Assistance -- The National Law Enforcement Telecommunications System (NLETS), run jointly by several state agencies -- The Anti-Drug Network-Unclassified, run by the Defense Department -- The Open Source Information System, run by the CIA's intelligence community CIO organization -- OpenNet Plus provided by the State Department to about 40 federal agencies operating at about 250 missions worldwide and in Washington. "We have added every secure law enforcement Internet system that has national reach," said M. Miles Matthews, senior management counsel and executive officer of CDX. On October 24, 2003, the International Association of Chiefs of Police presented its National Criminal Intelligence Sharing Plan, which was noted Oct. 27, 2003, Federal Computer Week, FCW.com, BY Dibya Sarkar, Philadelphia. "Pointing to inadequacies in the intelligence process that, in part, failed to prevent the 2001 terrorist attacks, law enforcement officials recently unveiled a national roadmap to help state, tribal and local agencies get a lot better at sharing information. At its annual conference here last week, the International Association of Chiefs of Police presented its National Criminal Intelligence Sharing Plan, which outlines 28 recommendations. It's a way to jumpstart agencies that may lack the knowledge in developing such systems." The recommendations involving V-ONE supported programs are excerpted below: The National Criminal Intelligence Sharing Plan The need for a National Criminal Intelligence Sharing Plan was recognized as critical after the tragic events of September 11, 2001... This report represents the first version of the Plan that is intended to be a living document... Recommendation 21: The Regional Information Sharing Systems(TM) (RISS) and the Federal Bureau of Investigation (FBI) Law Enforcement Online (LEO) systems, which interconnected September 1, 2002, as a virtual single system, shall provide the initial sensitive but unclassified secure communications backbone for implementation of a nationwide criminal intelligence sharing capability. This nationwide sensitive but unclassified communications backbone shall support fully functional, bi-directional information sharing capabilities that maximize the reuse of existing local, state, tribal, regional, and federal infrastructure investments... Recommendation 22: Interoperability with existing systems at the local, state, tribal, regional, and federal levels with the RISS/LEO communications capability should proceed immediately, in order to leverage information sharing systems and expand intelligence sharing. On October 24, 2003 the Attorney General joined the others in the Department of Justice in commending the work that has been done over the past two years and the approval to implement the recommendations as follows, "After looking at the recommendations of the Global Justice Information Sharing Advisory Committee, I am pleased to announce that I have just approved the National Intelligence Sharing Plan, a direct result of recommendations made at the IACP summit held in March of 2002." The growth potential of the Company's government programs is now providing opportunities to expand its sales base. Operation Respond, a first responders network with short term growth requirements, selected V-ONE's products to allow their information resources to reach both their community of users and to provide secure access to the law enforcement communities of RISS/LEO. Cash flow continues to be a concern as the Company makes its resource allocations. The Company continues to hover at or close to cash flow breakeven but has not yet reached the point of sustainability. V-ONE's primary focus will continue to be development of its product to meet the expanding needs of this large and diverse government information and communication resource. The audit, needed to bring the Company into compliance with the SEC, is now in progress. New resources will be added, as possible, to bring the V-ONE products more fully into the Company's growing base of commercial users. "We believe that the growth of our product sales to meet the needs of our current customer base can provide this sustainability and the platform from which we can develop the profitable revenue stream and internally generated cash flow to reach the potential that is now before us," said Margaret Grayson. V-ONE has come a long way and still has more work to do. We know now, with the adoption of the V-ONE products to provide security for the programs that comprise the current architecture for the National Information Sharing Plan, that the V-ONE product evolution has achieved a sustainable base. We must work a little harder to push revenue and cash flow to this level of our products." Providing enterprise-level network security protection since 1993, V-ONE Corporation's flagship product is SmartGate(R), a client/server Virtual Private Network technology. Fortune 1000 corporations, health care organizations and sensitive government agencies worldwide use SmartGate for their integrated authentication, encryption and access control. With its patented client deployment and management capabilities, SmartGate is a compelling solution for remote access intranets and secure extranets for electronic business between trading partners, for both conventional and wireless networks. V-ONE is headquartered in Germantown, MD. Product and network security information, white papers and the company's latest news releases may be accessed via http://www.v-one.com WARRANTY GOLD LTD: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Warranty Gold, Ltd. c/o Michael E. Kammerman 9111-B Research Blvd. Austin, Texas 78758 Bankruptcy Case No.: 03-15721 Type of Business: The Debtor sells extended vehicle warranties Online, and is asking the U.S. Bankruptcy Court for permission to void about 67,000 customer policies. Chapter 11 Petition Date: November 11, 2003 Court: Western District of Texas (Austin) Judge: Frank R. Monroe Debtor's Counsel: Lynn H. Butler, Esq. Porter Rogers Dahlman & Gordon 2600 Via Fortuna, Suite 130 Austin, TX 78746 Tel: 512-505-5900 Fax: 512-472-7316 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Southwest Re $479,160 (September Sales) 2400 Louisiana Blvd. NE, Bldg. 4 Albuquerque, NM 87110 Herman, Tim $79,589 Parsons, George $79,589 Southwest Re $48,000 Spellings, Robert $19,897 Kammerman, Michael E. $19,897 Blue Cross Blue Shield $11,286 AT&T $9,722 Framatome ANP, Inc. $8,455 Juan Diego Catholic High School $7,200 Dell Financial Services $5,542 Onramp Access $2,351 Lone Star Direct $1,981 Microsoft Corporation $1,730 Reserve Account $1,500 The Hartford $1,304 Met Life $1,185 Isotree, LLC- CarBuying.com $400 Altex Electornics $328 Extended Warranty Info $300 WEIRTON: Gets Conditional Nod to Participate in Loan Guarantee -------------------------------------------------------------- Weirton Steel Corp. (OTC Bulletin Board: WRTLQ) took a large step toward emerging from bankruptcy when it received conditional permission to participate in the Emergency Steel Loan Guarantee (ESLG) Program. The decision by the program's board will enable Weirton Steel to secure a $145 million loan to help the steelmaker exit bankruptcy. The company must comply with various conditions established by the program board which company personnel currently are evaluating. The final action needed for the company to emerge depends on approval of its reorganization plan currently before a federal bankruptcy judge. "This is tremendous news for our company, our employees, the State of West Virginia and the Upper Ohio Valley. We sincerely thank the loan board and its staff for their confidence in our company. I congratulate all of our employees. This effort was headed by company President Mark Kaplan, who worked very hard here and in Washington, D.C., to see this project through," said D. Leonard Wise, Weirton Steel chief executive officer. "I also thank our local congressional delegation from West Virginia, Pennsylvania and Ohio, especially Sen. Robert Byrd (D-W.Va.) who crafted the ESLG legislation several years ago. His effort to create the program is central to bringing this company out of bankruptcy and keeping a steel mill in Weirton." The ESLG Program will guarantee 88 percent, or $128 million, of Weirton Steel's bankruptcy emergence loan from Chicago-based Fleet Capital Corp. The bank will close on the loan if Judge L. Edward Friend II approves the company's reorganization plan before Dec. 31. The judge is expected to make his decision before that date. Weirton Steel, which has operated under Chapter 11 bankruptcy protection since May 19, would use the loan to offset the cost of emergence from bankruptcy and upgrade its mill equipment. Kaplan said the federal government guarantees $128 million of the loan, but the remaining $17 million is unprotected. "We have had several discussions with Gov. Wise and the state's Economic Development Authority about possibly having the state cover the remaining $17 million either through a guarantee, a loan or a combination of both," Kaplan noted. "The bankruptcy process is painful for everyone, but we must make difficult decisions if we want to keep this mill in the Northern Panhandle. Our business translates into jobs, tax dollars for government and an investment in the economy. We hope the state can help us fulfill this goal." Despite the approval by the ESLG Program Board, Kaplan added the company continues to seek an extension of the ESLG Program beyond its termination date of Dec. 31. The next step is to secure a new labor agreement with the company's unions and then ask the court to approve its reorganization plan in order to finalize the emergence loan. "There is still a tremendous amount of work to do by year's end. In the event we need to complete a few outstanding issues, the program extension would enable us to do so without disrupting our reorganization plan," Kaplan said. Currently, the House and the Senate are considering amendments to a budget bill that would extend the ESLG Program for two years. The House version was introduced by U.S. Rep. Alan Mollohan, D- W.Va., while Byrd offered the Senate amendment. Weirton Steel is the fifth largest U.S. integrated steel company and the nation's second leading producer of tin mill products. The company employs 3,500. * Alvarez & Marsal Opens New Denver Office ------------------------------------------ Alvarez & Marsal, a global professional services firm known since 1983 for large-scale and middle market corporate restructuring and turnaround work, has opened a new office at 1624 Market Street in Denver, Colorado, expanding the firm's already significant presence in the western United States. The new office brings to 13 the firm's total number of locations across the U.S., Europe, Asia and Latin America. A&M's existing locations in the western United States include Phoenix, Denver, Los Angeles and San Francisco, led by co-heads and managing directors Richard Williamson and Bill Kosturos. Veteran corporate restructuring experts, each is currently spearheading a turnaround at Amerco (U-Haul) and The Spiegel Group, respectively. Richard Jenkins, an A&M director with more than a decade of consulting and management experience, has been tapped to oversee the new Denver office. With a breadth and depth of expertise in analyzing strategic business plans, managing cash requirements of distressed companies and designing and implementing restructuring plans, Mr. Jenkins will be responsible for developing and serving A&M clients in the Rocky Mountain region. "Our growth since 1983 has been focused on providing efficient and effective services to troubled companies to help them solve and manage through operational and financial difficulties, and achieve the best possible outcome," said Bryan Marsal, the firm's co- founder. "More recently we have begun to also serve healthy businesses with a range of performance enhancing solutions to help them remain strong and solve problems before they become crises. Our Denver-based team will offer the full range of A&M services and capabilities to middle market and larger clients." Having established an outstanding reputation for improving outcomes and maximizing value for corporate and public sector clients, A&M recently has been involved in a number of high- profile bankruptcy, restructuring, and creditor and bondholder advisory engagements. These include: Prandium (Chi-Chi's); HealthSouth; The Spiegel Group; St. Louis Public School System; MCI/ WorldCom; Galey & Lord; and PG&E National Energy Group, among many others. A&M was recently honored with the Turnaround Management Association's 2003 "Large Turnaround of the Year Award" for its work on behalf of The Warnaco Group. As an extension of the firm's core services focused on corporate restructuring, crisis management and creditor and bondholder advisory, Alvarez & Marsal has expanded its offerings to include dispute analysis and forensic and real estate advisory services. About A&M Founded in 1983, Alvarez & Marsal is a global professional services firm that solves complex problems, improves outcomes and unlocks value for organizations and stakeholders across a varied industry spectrum. Renowned for its twenty-year track record in corporate restructuring, crisis management and creditor and bondholder advisory, Alvarez & Marsal provides comprehensive operational and financial management as well as advisory services to over-leveraged, under-performing and healthy businesses. Alvarez & Marsal serves the United States, Europe, Asia and Latin America through 13 offices and 220 people worldwide. With 94 experienced professionals, including 41 Managing Directors, 59 Directors, the firm brings a wealth of leadership and hands-on management skills to large scale, cross-border and middle market business challenges. Together, the A&M team serves draws from its distinct operational heritage to not only solve problems, but implement solutions. For more information visit http://www.alvarezandmarsal.com/ * Greenberg Traurig LLP Opens 20-Attorney Dallas Office ------------------------------------------------------- The international law firm of Greenberg Traurig LLP has opened a Dallas office with 20 attorneys who bring experience from such firms as Andrews & Kurth, Patton Boggs and Larson King. The group includes, among others, corporate attorney Scott Olson, tax attorney Daniel P. Novakov, real estate attorneys Ralph G. Santos and Tina M. Ross, corporate attorney Michael Thimmig, litigation attorney Scott Ryskoski and Michelle A. Mendez who is the President-Elect of the Bankruptcy Section of the Dallas Bar Association. Greenberg Traurig's move into the Dallas area, the nation's 9th largest metropolitan area, is the latest example of the firm's continued commitment to expand its key practice and industry groups and strengthen its national and international presence. "As our service industry started to consolidate, we also began a strategic expansion in the early 1990's to meet the geographic and legal needs of our clients and the legal marketplace. We wanted to create a different firm by combining the human capital resources that a large firm uniquely brings with the energy and client focus that only business-oriented, entrepreneurial lawyers can add. Today, we are thankful that we have been able to build that firm with more than 1,000 lawyers. Our expansion to the Dallas area continues this national strategy and commitment to serve our clients in all critical U.S. markets," said Cesar Alvarez, President and CEO of the firm. "With our new Dallas operation, we are now serving 10 of the top 15 metropolitan markets in the U.S. We are fortunate to have found a group of extremely talented attorneys who closely match our culture and share our business and entrepreneurial spirit. We found this a very attractive situation." "The decision to join Greenberg Traurig was an easy one," said Scott Olson, Managing Shareholder of the Dallas office. "Greenberg Traurig was a perfect complement for our practice, a good culture fit and will be of immediate value to our clients. Their depth, over 1,000 lawyers with experience in 35 key practice and industry groups, combined with strategic office locations, provides us with a unique platform." "Greenberg Traurig's presence in Texas will provide the firm and our clients access to a whole new network of strategic relationships," said Richard A. Rosenbaum, a National Operating Shareholder. "Dallas is an area which is attractive to the national and global economy. Current and future clients in the Texas market will benefit from Greenberg Traurig's large collaborative platform which will create a win-win situation for all." The Dallas office will initially be comprised of approximately 20 attorneys, to be supplemented by additional lawyers in the near future, who will focus on Greenberg Traurig's key practice areas, including corporate and securities, mergers and acquisitions, real estate, litigation, reorganization, restructuring and bankruptcy, tax, governmental affairs, structured finance, entertainment, employment, environmental and intellectual property. Greenberg Traurig LLP is a full-service international law firm with more than 1,000 lawyers that provides business-oriented solutions to clients worldwide. The firm has been ranked in The National Law Journal's list of five-year growth leaders and is one of the top 20 law firms in the country as reported by The National Law Journal's latest listing of the country's largest law firms. The firm's attorneys combine legal, business and governmental experience with creativity and a business-orientation for a broad spectrum of clients, ranging from emerging companies to Fortune 500 corporations. Greenberg Traurig has more than 1,050 lawyers and governmental professionals practicing in 21 offices throughout the United States and Europe: Amsterdam; Atlanta, Ga.; Boca Raton, Fla.; Boston, Mass.; Chicago, Ill.; Dallas, Texas; Denver, Colo.; Fort Lauderdale, Fla.; Los Angeles, Calif.; Miami, Fla; Morristown, N.J.; New York, N.Y.; Orlando, Fla.; Philadelphia, Pa.; Phoenix, Ariz.; Tallahassee, Fla.; Tysons Corner, Va.; Washington, D.C.; West Palm Beach, Fla.; Wilmington, Del.; and Zurich. For additional information about Greenberg Traurig, visit the firm's Web site at http://www.gtlaw.com * BOND PRICING: For the week of November 17 - 21, 2003 ------------------------------------------------------ Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia communications 6.000% 02/15/06 42 Advantica Restaurant 11.250% 01/15/08 64 AK Steel Corp. 7.750% 06/15/12 68 AK Steel Corp. 7.875% 02/15/09 70 American & Foreign Power 5.000% 03/01/30 67 AnnTaylor Stores 0.550% 06/18/19 72 Atlas Air Inc. 10.750% 08/01/05 55 Burlington Northern 3.200% 01/01/45 54 Calpine Corp. 7.875% 04/01/08 73 Calpine Corp. 8.500% 02/15/11 73 Calpine Corp. 8.625% 08/15/10 73 Coastal Corp. 6.950% 06/01/28 75 Comcast Corp. 2.000% 10/15/29 33 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 32 Cray Research 6.125% 02/01/11 45 Cummins Engine 5.650% 03/01/98 71 Delta Air Lines 8.300% 12/15/29 65 Delta Air Lines 9.000% 05/15/16 70 Delta Air Lines 9.250% 03/15/22 67 Delta Air Lines 9.750% 05/15/21 67 Delta Air Lines 10.375% 12/15/22 68s Dynex Capital 9.500% 02/28/05 1 Elwood Energy 8.159% 07/05/26 74 Fibermark Inc. 10.750% 04/15/11 64 Finova Group 7.500% 11/15/09 54 Gulf Mobile Ohio 5.000% 12/01/56 66 International Wire Group 11.75% 06/01/05 57 Internet Capital 5.500% 12/21/04 75 Iridium LLC/Capital 13.000% 07/15/05 9 Iridium LLC/Capital 14.000% 07/15/05 9 Level 3 Communications Inc. 6.000% 09/15/09 68 Level 3 Communications Inc. 6.000% 03/15/10 67 Levi Strauss 7.000% 11/01/06 71 Levi Strauss 12.250% 12/15/12 72 Liberty Media 3.750% 02/15/30 60 Liberty Media 4.000% 11/15/29 64 Mirant Corp. 2.500% 06/15/21 54 Mirant Corp. 5.750% 07/15/07 54 Northern Pacific Railway 3.000% 01/01/47 52 NTL Communications Corp. 7.000% 12/15/08 19 RCN Corporation 10.125% 01/15/10 44 Scotia Pacific Co. 6.550% 01/20/07 70 Universal Health Services 0.426% 06/23/20 64 US Timberlands 9.625% 11/15/07 65 Viropharma Inc. 6.000% 03/01/07 55 Worldcom Inc. 6.250% 08/15/03 36 Xerox Corp. 0.570% 04/21/18 65 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***