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/raid1/www/Hosts/bankrupt/TCR_Public/980121.MBXT R O U B L E D C O M P A N Y R E P O R T E R Wednesday, January 21, 1998, Vol. 2, No. 14 Headlines CAJUN ELECTRIC: SW Electric Pays $930 Mil For Assets FLAGSTAR: Provides SEC with Plan Documents KDI HOLDINGS: Proposed Sale of Assets LAMONTS APPAREL: Files Registration Statement OXFORD HEALTH: Forms New Executive Committee PAYLESS CASHWAYS: Cuts 5 Executives and 175 HQ Employees PAYLESS CASHWAYS: Reports 4th Quarter & Fiscal Year Results TOSHOKU AMERICA: Files for Chapter 11 VENTURE: Initiates Chapter 11 Reorganization Proceedings ********* CAJUN ELECTRIC: SW Electric Pays $930 Mil For Assets ---------------------------------------------------- Investor's Business Daily reported on January 19, 1998 Southwestern Electric Power increased its previous offer of $780 million for Cajun Electric Power Cooperative's non- nuclear assets. Shreveport, La.-based Southwestern is a unit of Dallas based Central and South West. The offer was included in an amended reorganization plan in the Chapter 11 bankruptcy of Cajun. The Pittsburgh Post-Gazette reported on January 17, 1998 that Southwestern Electric, a Shreveport, La., utility, wants to expand its territory by purchasing Cajun's two power plants with 1,683 megawatts of capacity and 25-year contracts to sell power to eight of the 11 members of the cooperative. Cajun declared bankruptcy in December 1994 after it couldn't restructure $4.2 billion in debt. FLAGSTAR: Provides SEC with Plan Documents ------------------------------------------ Advantica Restaurant Group Inc., formerly known as Flagstar, filed an 8-K form on January 15, 1998 and provided the SEC with copies of the following documents: Joint Plan of Reorganization of Flagstar Companies, Inc. and Flagstar, amended November 7, 1997, and as confirmed by order of the United States Bankruptcy Court for the District of South Carolina filed November 12, 1997. Indenture, dated as of January 7, 1998, between Advantica and First Trust National Association, as Trustee, relating to the Advantica 11 1/4% Senior Notes Due 2008. Warrant Agreement, dated January 7, 1998, between Advantica and Continental Stock Transfer and Trust Company. Registration Rights Agreement, dated as of January 7, 1998, among Advantica and each holder of registrable securities named therein. Credit Agreement, dated January 7, 1998, among Denny's, Inc., El Pollo Loco, Inc.Flagstar Enterprises, Inc., Flagstar Systems, Inc.,and Quincy's Restaurants, Inc., as Borrowers, Advantica, as a Guarantor, the Lenders named therein, and The Chase Manhattan Bank as administrative agent. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/cgi-bin/srch-edgar?ADVANTICA KDI HOLDINGS: Proposed Sale of Assets ------------------------------------- KDI Holdings, Inc., Kolpen Distributors, Inc., KDI Speciality Foods, Inc., and KDI Atlantic Foods, Inc., debtors, seek approval of the terms and conditions of an Asset Purchase Agreement, which provides for the sale to Distribution Acquisition, Inc. (DAI), of substantially all of the debtors' assets and authorizing the debtors to assume and assign as executory contracts their leases, contracts and purchase orders. A hearing will be held on January 29, 1998. An auction will be conducted at the sale hearing. At the conclusion of the auction, the debtors shall determine the final highest and best bids for the assets. Pursuant to the Asset Purchase Agreement, DAI will assume the debtors' obligations to CIT provided that such obligations do not exceed $8.6 million and $75,000 in cash and a promissory note in the principle amount of $425,000 and the assumption of certain obligations of the debtors. LAMONTS APPAREL: Files Registration Statement --------------------------------------------- Lamonts Apparel, Inc. filed a FORM S-1, REGISTRATION STATEMENT with the SEC registering the new shares of common stock under their recently confirmed plan of registration. A full-text copy of the filing is available via the Internet at: http://www.sec.gov/cgi-bin/srch-edgar?LAMONTS+and+APPAREL OXFORD HEALTH: Forms New Executive Committee -------------------------------------------- On January 8, 1998 Oxford Health Plans, Inc. (Nasdaq: OXHP) announced the formation of an executive committee, consisting of two outside directors and Chairman of the Board Stephen F. Wiggins, to strengthen and enhance the company's ability to manage its growth. The committee's first order of business will be to supervise the external search for a new chief executive officer, as well as a new chief financial officer. William Sullivan will remain president and chief executive officer of the company until the CEO search is completed and is expected to remain in a senior management capacity with the company after a new CEO is appointed. The company also announced that Albert A. Koch, chief operating officer of Jay Alix & Associates, will serve as interim chief financial officer. Fred F. Nazem, managing general partner of Nazem and Company and a member of the board of directors since 1989, will chair the new committee. He is joined by Mr. Wiggins and James B. Adamson, Chairman, chief executive officer and president of Advantica Restaurants Group, formerly Flagstar Companies Inc. In addition to the executive searches, the charter of the committee includes supervision of regulatory matters, board practices and corporate governance issues. James B. Adamson, 49, is chairman, chief executive officer and president of Advantica Restaurant Group, Inc. Al Koch specializes in financial consulting and restructuring services. He is the Chief Operating Officer of Jay Alix & Associates. Fred Nazem is the founder and Managing Partner of Nazem and Company, a New York City-based venture capital firm. PAYLESS CASHWAYS: Cuts 5 Executives and 175 HQ Employees -------------------------------------------------------- The Kansas City Star reported on January 20, 1998 that amid collapsing sales, the new board of Payless Cashways Inc. on Monday announced sweeping changes, including the elimination of one-fourth of its headquarters staff and the exit of five top executives. The news comes just seven weeks after Payless emerged from a fast-track Chapter 11 bankruptcy reorganization and two weeks after Chief Executive Officer David Stanley and President Susan Stanton agreed to leave. The Kansas City- based home improvement retailer also reported Monday that it lost $288.6 million in the year ended Nov. 29. As part of its latest turnaround plan, Payless said it would lay off 175 persons at its headquarters, eliminate two of six operating divisions and cut spending. Across-the-board cuts at Payless' headquarters will reduce staff to about 500 employees from just under 700. Two thousand employees, including about 100 at the headquarters, lost their jobs in the July bankruptcy reorganization. That restructuring included the closing of 29 stores. No stores will be closed in the latest restructuring, but regional offices in Dallas and Indianapolis will close and two regional vice presidents, Michael Owen and Michael Stucky, will leave the company. Other top executives departing are Steve Lightstone, chief financial officer; Ned Holland, senior vice president of administration; and Michael Buchen, senior vice president of merchandising. The company said Monday that it had expected depressed fourth-quarter results because of the Chapter 11 but that it had looked for improvement after it emerged from bankruptcy Dec. 2. "The company anticipated that sales would be stronger in 1998 than we are now seeing," said Donald Roller, Payless' acting chief executive officer. "The impact of Chapter 11 reorganization on the fourth quarter has not dissipated." December sales are included in Payless' 1998 fiscal year. Perhaps even more alarming was a 12.1 percent drop in same- store sales for the quarter. Same-store sales are sales at stores open at least one year and are considered the best measure of sales strength. "While lower results are to be expected in a Chapter 11 restructuring period, it is our responsibility to take the difficult and determined actions necessary to restore the company to appropriate performance levels," Roller said. The company said the first two weeks of January showed some improvement in same-store sales, but it did not give any figures. Markets where Payless still does OK, including Dallas, are being ringed by the big-and-bold players in the industry, namely Home Depot and Lowe's. The news Monday has industry watchers questioning Payless' viability and wondering why more drastic measures weren't taken in the company's breakneck Chapter 11 reorganization. "I think, and this has been the ongoing discussion around here in recent days, to what extent is this reorganization plan a masquerade?" said John Caulfield, senior editor of National Home Center News. Caulfield questioned the ability of the board of directors, which replaced the previous board when Payless emerged from bankruptcy, to make not only the tough decisions but also the right decisions. "It remains to be seen whether they have an awareness of Payless' position in the market, where they need to be and who is running the organization," Caulfield said. The board's immediate concerns are finding someone to replace both Stanley and Stanton and deciding the fate of its salvation strategy, called dual-path. Dual-path, to a degree, caters to two segments of the market - the do-it- yourself consumer and the professional builder/renovator. Until the new board makes a decision, pursuit of the strategy has been put on hold. The timing of the announcement, particularly the departure of Lightstone, the company's top financial officer, left some observers puzzled and wondering whether a new slate of officers might be waiting. "Absent wrongdoing, it's quite unusual for a public enterprise of this size, particularly one that does 2 billion bucks in sales, to run without a chief financial officer," said investment adviser Jerry Duggan of Leawood. "One would hope they have their new team in the box." Aside from the timing, Duggan wasn't surprised to hear of the departure of Lightstone, Holland and Buchen. "One would assume as the new broom comes through the door, he's going to bring his own team," Duggan added. Payless completed its Chapter 11 reorganization, the largest ever in the Western District of Missouri, in less than five months. Many retail bankruptcies of this size take one to two years. In the results announced Monday, Payless said it lost $201.8 million in the fourth quarter compared with net income of $5.56 million a year earlier. When extraordinary items are excluded, Payless' loss was $10.4 million for the quarter and $35.5 million for the year. Net quarterly sales were $504.4 million, down from $710 million a year earlier. Net sales for the year were $2.3 billion, down from $2.6 billion. PAYLESS CASHWAYS: Reports 4th Quarter & Fiscal Year Results ----------------------------------------------------------- Payless Cashways, Inc. (OTC Bulletin Board: PCSH), the Kansas City-based building materials specialty retailer, today reported operating results for its fourth quarter and fiscal year ended November 29, 1997 and indicated that December sales were below expectations. Because results have been slow to rebound following the Chapter 11 restructuring, the new Board, working closely with senior management under the direction of Acting CEO Donald E. Roller, announced sweeping changes designed to have an immediate impact on the financial outlook of the Company. For the fourth quarter and the fiscal year, sales, EBITDA, and earnings were down compared to last year. Losses for the quarter reflect the impact of both competition and the period spent in Chapter 11. Negative pressure on sales continued into December with same-store sales down 12.2% compared to last year. For the first two weeks of January, same-store sales comparisons have improved. Measures announced today, which are aimed at moving the Company toward profitability, include: .. Consolidation of the CEO and President positions and separation of five additional officers .. Significant expense reduction, including an approximately 25% reduction in force at the headquarters and a consolidation of the operating regions from six to four .. Approval of new merchandising and sales initiatives .. Reduced and more targeted capital expenditures .. Realignment of store management structure Actions under way as of today include a national search for a President/CEO, notification earlier this morning to employees affected by the workforce reductions, and assignment of a dedicated store manager in each retail location. Due to competitive considerations, the Company did not disclose any detail concerning the merchandising and sales initiatives or the targeting of capital expenditures. Reductions in the headquarters staff are taking place at all levels, including senior management. The focus for the Company will be targeted to buying and selling, and accounting for those activities. Significantly reduced staff will handle other functions. Acting CEO Don Roller said, "This is a potentially strong company with an important position in the industry. While lower results are to be expected in a Chapter 11 restructuring period, it is our responsibility to take the difficult and determined actions necessary to restore the Company to appropriate performance levels." Net sales for the fourth quarter were $504.4 million, a total decrease of 23.8%, and 12.1% on a same-store sales basis compared to the same quarter of 1996 when presented on a thirteen-week basis. The total sales decrease reflects the closing of 29 stores during the quarter. For financial reporting purposes, the fourth quarter of 1996 was a fourteen-week sales period compared to a thirteen- week sales period for the fourth quarter of 1997. On that basis, total sales for the quarter decreased 29.0%. Earnings before interest, taxes, depreciation, and amortization (EBITDA), a measure of the Company's operating cash flow, decreased to $17.3 million compared to $43.4 million for the fourth quarter of last year. Fourth quarter 1997 EBITDA benefited from a $5.1 million LIFO credit compared to a $7.5 million LIFO credit in the same period of 1996. During the fourth quarter of fiscal 1997, the Company recorded non-routine charges in connection with its reorganization under Chapter 11 of the Bankruptcy Code. The Company incurred reorganization charges of $20.3 million ($12.5 million after tax) in the quarter ended November 29, 1997, which were primarily professional and administrative fees incurred in connection with the Chapter 11 case, as well as amounts accrued under an employee retention program. The Company adopted fresh- start accounting as of November 29, 1997, and recorded a $355.6 million ($312.1 million after tax) fresh-start revaluation charge and an extraordinary gain, net of tax, of $138.2 million related to the discharge of indebtedness in the case. The Company also recorded an extraordinary charge, net of tax, of $5.0 million related to the early extinguishment of the Amended Credit Agreement and a mortgage loan on December 3, 1997. Both of these debt instruments were replaced with new debt instruments. The Company reported fourth quarter pro forma net loss of $10.4 million compared to fourth quarter 1996 net income of $5.6 million. Pro forma net loss for fourth quarter 1997 excludes the reorganization items, fresh-start revaluation charges, and extraordinary items related to the Company's reorganization under Chapter 11 previously discussed. Including these non-routine charges recorded in the quarter, net loss for the fourth quarter of 1997 was $201.8 million. Commenting on the fourth quarter of 1997, acting CEO Don Roller said, "Continuing, intense competitive pressure, combined with the impact of the Chapter 11 restructuring, had a decidedly negative impact on the quarter. Sales to professional customers, as well as consumers, were lower than expected." Net sales for the 1997 fiscal year were $2.3 billion, a decrease of 11.9% in total, and 6.6% on a same-store basis compared to fiscal 1996 when presented on a 52-week basis. Again, the total sales decrease reflects the closing of 29 stores during the fourth quarter of 1997. For financial reporting purposes, the 1996 fiscal year was a 53-week sales period compared to a 52-week sales period for the 1997 fiscal year. Without adjusting for the 53rd week of 1996, total sales for the 1997 fiscal year decreased 13.5%. Pro forma EBITDA decreased to $65.4 million compared to $134.6 million for last year. Pro forma EBITDA for 1997 excludes third quarter 1997 inventory write- downs of $10.7 million related to the closing of 29 under-performing stores, and pro forma EBITDA for 1996 excludes third quarter 1996 inventory write- downs of $5.8 million related to the closing of nine under-performing stores. EBITDA for fiscal 1997 benefited from a $0.7 million LIFO credit compared to a $3.2 million LIFO credit in fiscal 1996. For the 1997 fiscal year, the Company reported a net loss of $288.6 million compared to a net loss of $19.1 million in the previous year. The net loss for the 1997 fiscal year reflects reorganization items, fresh-start revaluation charges, a store closing charge, an asset impairment charge, and extraordinary items recorded in the third and fourth quarters of 1997. Excluding the non- routine items recorded in these quarters of 1997 and the third quarter of 1996, pro forma net loss for the 1997 fiscal year would have been $35.5 million compared to net income for the 1996 fiscal year of $7.4 million. Commenting on the fiscal year 1997, Don Roller said, "Disappointing results in the first and second quarters led to the voluntary filing under Chapter 11 of the Bankruptcy Code. The results for the year following the July 21 filing were significantly impacted by the filing. Disruption in availability of some products and general uncertainty among both professional and do-it-yourself customers produced sales declines that the Company is still working to overcome." The Company also announced that early operating results for 1998 were tracking below its expectations. Same-store sales for December 1997, the first month of fiscal 1998, of $143.7 million, were 12.2% below last year. The Company expected some improvement in December after exiting the Chapter 11 reorganization, but negative fourth quarter 1997 sales trends continued into December. Don Roller said, "The Company anticipated that sales would be stronger in 1998 than we are seeing now. The impact of the Chapter 11 reorganization on the fourth quarter has not yet dissipated. Soft sales in the early weeks of the new year increase the need for a strong Spring selling season and continued tight expense control." He continued, "Payless Cashways is a company with a strong tradition of perseverance and commitment. It has struggled under a heavy load of debt since 1988, as the competitive landscape has become more and more challenging. I believe it has the potential to continue to be among the best building materials retailers in the industry, serving millions of customers each month. I have been impressed with the quality of both the people and the facilities at Payless Cashways. The Company's challenge is to successfully attract and retain customers." TOSHOKU AMERICA: Files for Chapter 11 ------------------------------------- Toshoku America, Inc. filed for Chapter 11 on December 24, 1997 in the Southern District of New York. The company serves as an agent for its parent company, Toshoku, Ltd. in the import/export business. Attorney to the debtor is Alan Nisselson of Brauner Baron Rosenzweig & Klein, LLP. Nature TOP CREDITORS of Claim Amount ------------ -------- ------ The Sakura Bank, Ltd. Bank Loan 71,821,224 The Bank of Tokyo-Mitsubishi, Ltd. Bank Loan 39,752,375 The Dai-Ichi Kangyo Bank, Ltd. Bank Loan 20,425,276 The Asahi Bank, Ltd. Bank Loan 35,740,947 The Sanwa Bank, Ltd. Bank Loan 15,131,250 The Sumitomo Bank, Ltd. Bank Loan 8,690,478 The Yasuda Trust & Banking Co., Ltd. Bank Loan 27,055,192 The Mitsui Trust & Banking Co., Ltd. Bank Loan 17,257,656 The Industrial Bank of Japan, Ltd. Bank Loan 33,524,200 Long-Term Credit Bank of Japan, Ltd. Bank Loan 18,192,097 The Norinchukin Bank Bank Loan 18,579,670 The Toyo Trust & Banking Co., Ltd Bank Loan 14,260,105 The Hokuriku Bank, Ltd. Bank Loan 9,132,636 The Bank of Yokohama, Ltd. Bank Loan 5,000,000 Dai-Ichi Life (U.S.A.) Inc. Loan 5,000,000 Seaboard Farms, Inc. Trade Debt 433,120 Pasternak, Baum & Co., Inc. Trade Debt 39,178 Farmland Foods, Inc. Trade Debt 77,934 Arancia-CPC, SA Dec V Trade Debt 2,590,000 VENTURE: Initiates Chapter 11 Reorganization Proceedings -------------------------------------------------------- Venture Stores, Inc. (NYSE: VEN) today filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code to give the company time to continue its strategic repositioning and evaluate other options. The company also announced that it has obtained from its current bank group, led by BT Commercial Corp., a new $190 million debtor-in- possession revolving credit facility that will provide the company with adequate capital to continue operations during its reorganization. "We have fought for longer than anyone thought we could to complete Venture's repositioning, retain value for shareholders and give the company a chance for success," explained Robert N. Wildrick, the company's chairman and chief executive officer. "At this point, however, we need the time out afforded by a Chapter 11 reorganization to cut expenses, rebuild sales and customer confidence, and get our merchandise mix balanced to achieve profitability." Since March 1996, Venture has been implementing a major program to reposition the company's stores from a general merchandise discount format to a new family value retail concept. Venture has focused on offering time-pressed, value-minded shoppers an expanded assortment of high quality home, family, and leisure merchandise at low prices. "Customer response to the repositioning initiatives that we have been able to execute effectively has been very positive, which demonstrates that our overall strategy is sound," Wildrick noted. "Unfortunately, we started from an extremely difficult position and have been hampered at every step of the process by a series of external factors." According to Wildrick, Venture has had ongoing problems with receiving timely merchandise shipments from many vendors because of constant rumors and speculation about the company's future. This meant that stores were frequently out of stock on advertised merchandise and basic items, which undermined sales and customer confidence. In addition, Venture was unable to achieve the right merchandise mix, which had a negative impact on margins and profitability. The resulting poor financial results made vendors even more reluctant to ship merchandise, continuing the cycle. "Despite a tremendous amount of effort on the part of the entire Venture team, we have been caught in a cycle that has been impossible to break outside of Chapter 11," he added. "Now, we will be able to correct many of the in- stock problems we have faced, win back customer confidence and achieve a more profitable mix of goods." Venture's 93 family value stores in the Midwest will remain open and continue to offer a selection of high quality merchandise at everyday low prices. Stores will honor all gift certificates, merchandise credits, customer returns and layaway arrangements. While the company plans to review the profitability of each of its stores on a case- by-case basis and will likely close some locations, no decisions regarding any specific store closings have been finalized at this point. The company will also begin immediately to implement efforts to reduce expenses by approximately $8 million to $10 million, including consolidations at its headquarters in O'Fallon, Mo. Specific plans have not been finalized, but affected associates will be notified as soon as possible. The reorganization will have no immediate impact on staffing at Venture's stores, and will not affect its existing medical insurance, retirement or profit sharing plans. Venture Stores, Inc. operates 93 family value stores in nine states. The company's common stock is traded on the New York Stock Exchange under the symbol VEN. --------- A listing of meetings, conferences and seminars appears every Tuesday. Bond pricing, appearing each Friday, is supplied by DLS Capital Partners, Dallas, Texas. 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., Princeton, NJ, and Beard Group, Inc., Washington, DC. Debra Brennan, Editor. Copyright 1998. All rights reserved. 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 $575 for six 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 301/951-6400. * * * End of Transmission * * *