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/raid1/www/Hosts/bankrupt/TCR_Public/991111.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, November 11, 1999, Vol. 3, No. 219 Headlines AHERF: Coventry Finalizes Settlement of AHERF-related Disputes BAPTIST FOUNDATION: Files Plan of Reorganization and Petition COLUMBIA HCA: Seeks To Withdraw Registration Statement FACTORY CARD: Engages Avalon Group FACTORY CARD: Investor Joins Management To Seek New Capital FILENE'S BASEMENT: Court Approves Accountants Arthur Andersen FILENE'S BASEMENT: Court Approves Atlantic Realty Properties FILENE'S BASEMENT: Court Authorizes Financial Advisor FORCENERGY: Order Approves Amended Disclosure Statement GENESIS DIRECT: Seeks To Extend Time To Assume or Reject Leases HARBOR FINANCIAL: Applies for Appointment of Responsible Person ICO GLOBAL: Court Approves Bid from McCaw IRIDIUM: Creditor Panel Wins Nod For Screening Wall LESLIE FAY: Reports Third Quarter Results LOEHMANN'S: Order Extends Time to Assume or Reject Leases NUCENTRIX BROADBAND: Feinberg Owner Of 1,306,266 Shares ONSALE: Shareholders Approve Merger With Egghead.com PARAGON TRADE: Announces Third Quarter Results PINNACLE BRANDS: Seeks Extension of Exclusivity PURINA MILLS: Making Progress on Fast-Track Reorganization SCOOP INC: Acquires Substantially All of 24STORE.com Stock SPECTRUM INFORMATION: Barclay Powers Holds 20.3% Of Common Stock STUART ENTERTAINMENT: Order Approves Headquarters Lease TELEPAD: Amended Plan Confirmed THORN APPLE VALLEY: PBGC Assumes Control of Underfunded Plans VENCOR: Potential Conflict Of Interest Dictates Auditor Change WASTE MANAGEMENT: Appoints Turnaround Specialist as CEO ********* AHERF: Coventry Finalizes Settlement of AHERF-related Disputes -------------------------------------------------------------- Coventry Health Care, Inc. (Nasdaq/NM:CVTY) announced that it and its subsidiary HealthAmerica Pennsylvania, Inc. have executed a final settlement with Allegheny General Hospital (AGH), formerly owned by the Allegheny Health Education and Research Foundation (AHERF), and its new owner, Western Pennsylvania Health Care System (West Penn). The settlement resolves all liability issues surrounding AHERF's failure to fulfill its contractual obligations, concludes all AHERF-related litigation, and cements a new 3-year provider contract. As a result of the settlement, Coventry expects to release $ 6.3 million of the AHERF-related reserves, originally established in the second quarter of 1998. The gain will be reflected in fourth quarter and year-end 1999 results. "We are pleased to solidify our relationship with AGH and continue to include the entire West Penn system in our provider network," said Dale B. Wolf, chief financial officer of Coventry. "Our business in Western Pennsylvania is performing well, and, although AHERF's bankruptcy proceedings continue, this resolution marks the end of the AHERF chapter for us." Coventry Health Care is a managed health care company operating health plans under the names Principal Health Care, HealthAmerica, HealthAssurance, HealthCare USA, Group Health Plan, Southern Health and Carelink. The Company provides a full range of managed care products and services including HMO, PPO, POS, Medicare Risk and Medicaid to 1.4 million members in a broad cross section of employer and government-funded groups in 16 markets throughout the Midwest, Mid-Atlantic and Southeast United States. BAPTIST FOUNDATION: Files Plan of Reorganization and Petition ------------------------------------------------------------- Baptist Foundation of Arizona, Inc. ("BFA") today filed a pre- negotiated plan of reorganization and a petition to reorganize under Chapter 11 of the Federal Bankruptcy Code. The reorganization documents were filed in the U.S. Bankruptcy Court in Phoenix. The filings were made following an announcement last week that BFA and an Ad Hoc Committee of Investors had entered into a formal Restructuring Agreement. Its purpose is to secure and maximize the existing value in BFA's investment portfolio and to provide the more than 13,000 holders of BFA's various debt securities the best possible opportunity to recover a substantial portion of their investment. The Restructuring Agreement and plan of reorganization set forth the principal terms for the restructuring of BFA, its subsidiaries and affiliated entities. The file number for the case is 9913275. Jock Patton, Chairman of a Restructuring Committee that has been formed to oversee the restructuring process, said a Chapter 11 proceeding was required to effect the restructuring because of the size and complexity of the reorganization process. With the Chapter 11 filing, the assets of BFA are under the control and management of the independent Restructuring Committee under the review of the Bankruptcy Court. None of those involved in the prior management of BFA during the past several years are connected in any way to the new management structure being established under the Chapter 11 proceeding, Mr. Patton said. "For those BFA investors who are concerned about the management of the assets in which their funds are invested, it is important for them to understand that there is a new management team in place. It is not connected with prior management of BFA. Those involved in management of the assets going forward are highly skilled professionals whose sole purpose is to return to investors as much of their funds as possible, as rapidly as possible," Mr. Patton said. As explained in last week's announcement, due to the economic circumstances of some of the investors, the Restructuring Agreement permits each investor to choose one of two alternatives. Under the first alternative, known as the "Cash Out Option," each investor will receive cash amounting to approximately 20 percent of the principal and interest due to them as of the date of the filing. Under the second alternative, known as the "New Securities Option," investors may elect to receive a unit comprised of two securities in a new, for-profit company that will be formed as part of the restructuring (the "New Company"). A unit is comprised of preferred stock with a dividend rate equal to 6 percent per year, plus common stock representing 100 percent of the initial ownership of the New Company. Investors may also choose to split their debt securities or related claims between the cash out option and the securities option. BFA listed total liabilities of $640 million in the filing, of which $590 million is owed to investors. The net equity value of BFA's assets is currently anticipated to be between $160 million and $200 million. If the Cash Out Option is selected by investors to the full $40 million cap, and the net equity value of assets is in the range expected, the preferred shares would thus have a face value of approximately 40 percent to 50 percent of the investor's funds. To further enhance the potential recovery to investors, the Restructuring Agreement also requires the formation of a litigation trust to pursue potential claims against certain professional firms previously employed by BFA and other third parties previously employed by or doing business with BFA. The litigation trust will be funded with up to $5 million to pursue such claims. Each investor will be entitled to share proportionally in the recovery from the litigation trust, regardless of which investment option they select. The Restructuring Agreement will be subject to a vote by the investors and final approval by the Bankruptcy Court. It is expected that the restructuring proceeding will be concluded and the distributions made to investors in early 2000. Upon the successful completion of the restructuring, BFA will no longer exist. Instead, a new non-profit Baptist charitable organization will be established. The new charitable organization will be involved in traditional Baptist charitable activities, including, for example, ministries, education and providing routine trust and estate planning. The new Baptist charitable organization will be expressly prohibited from selling debt securities. Individuals receiving distributions under the restructuring may choose, at their discretion, to make a charitable donation of such distributions to the new Baptist charitable organization. COLUMBIA HCA: Seeks To Withdraw Registration Statement ------------------------------------------------------- Since Columbia/HCA Healthcare Corporation is no longer a limited guarantor of LifePoint Hospitals Holdings, Inc. the company has requested of the Securities & Exchange Commission, the withdrawal of the registration statement which relates to the registration of the 10 3/4% Senior Subordinated Notes due 2009 of LifePoint Hospitals Holdings Inc. The Securities and Exchange Commission accepted the registration on August 9, 1999. Subsequent to that date, Columbia/HCA has been fully, unconditionally and irrevocably released from its obligations as a guarantor of the notes. Therefore, the request that the registration statement be withdrawn from the Securities and Exchange Commission's database for Columbia/HCA Healthcare Corp. only. All other co-registrants remain guarantors of the notes and should not be withdrawn. The primary obligor on the notes, LifePoint Hospitals Holdings Inc., also remains and should not be withdrawn. FACTORY CARD: Engages Avalon Group ---------------------------------- Factory Card Outlet Corp., Naperville, Ill., announced that it has engaged Avalon Group Ltd., an investment banking firm in New York, subject to the bankruptcy court's approval. Factory Card Outlet, which filed chapter 11 on March 2, said Avalon's mission is to seek an infusion of capital to aid Factory Card's reorganization. (ABI 10-Nov-99) FACTORY CARD: Investor Joins Management To Seek New Capital ----------------------------------------------------------- Chicago investor Ron Chez today announced that he is joining forces with the management of Factory Card Outlet Corp. (Nasdaq: FPYQ) and its new investment bankers in an effort to seek new capital for the company. This announcement follows yesterday's report that the company had retained the Avalon Group, Ltd., New York City, as investment bankers for a recapitalization mission, subject to Bankruptcy Court approval. "With the recent appointment of new CEO Bill Freeman we're optimistic that others will join us in recognizing the exceptional potential of this company and help facilitate its prompt emergence from court jurisdiction. My own confidence is reflected by my intention, subject to satisfactory terms, to invest additional capital in the enterprise and I will be talking with other investors to do likewise," Chez stated. Chez is currently the second largest shareholder of Factory Card Outlet, owning just over one million shares out of its total 7.3 million shares outstanding. Factory Card is a chain of 182 company owned retail stores offering a vast assortment of party supplies, greeting cards, gift wrap and other special occasion merchandise at everyday value prices. On March 23, 1999, the company filed a petition for reorganization under Chapter II. of the United States Code and is currently operating as a debtor in possession. FILENE'S BASEMENT: Court Approves Accountants Arthur Andersen ------------------------------------------------------------- On November 1, 1999, the US Bankruptcy Court for the District of Massachusetts, Eastern Division entered an order authorizing the debtors to employ Arthur Andersen LLP, accountant. The debtors are authorized to pay to Andersen a retainer in the amount of $100,000. The firm will complete the audit of the annual financial statements for the year ended January 28, 2000 and will render tax return preparation and other compliance tax and consulting services. The firm will render accounting assistance and will provide pension plan audit services and analysis and will provide expert testimony as required. FILENE'S BASEMENT: Court Authorizes Financial Advisor ----------------------------------------------------- On November 1, 1999, the US Bankruptcy Court for the District of Massachusetts, Eastern Division entered an order authorizing the debtor to employ Altman and Co. as financial advisor and consultant to the debtor. The firm will assist in the preparation of financial information for distribution to creditors, including cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transactions for which court approval is sought. The firm will attend meetings and assist in negotiations with banks and other secured lenders, and the creditors' committee. The firm will assist in the preparation of monthly operating reports, and will assist regarding the valuation of the present level of operations. FILENE'S BASEMENT: Court Approves Atlantic Realty Properties ------------------------------------------------------------ By court order dated November 1, 1999, the US Bankruptcy Court for the District of Massachusetts, Eastern Division entered an order authorizing the debtors to employ Atlantic Retail Properties as special real estate consultant. The firm will develop and design a marketing program for the sale and/or assignment of leasehold interests relating to twenty stores listed in the Retention Agreement that are closed or are in the process of conducting going-out-of business sales. They will implement a marketing plan, soliciting offers from prospective purchasers and making recommendations to the debtors. They will also help coordinate and organized the bidding procedures and sale process. FORCENERGY: Order Approves Amended Disclosure Statement ------------------------------------------------------- The First Amended Joint Disclosure statement was approved by the US Bankruptcy Court for the Eastern District of Louisiana on October 28, 1999. A hearing on confirmation of the plan will be held in Courtroom 709, Hale Boggs Federal building, 501 Magazine Street, New Orleans, Louisiana on Monday December 13, 1999 at 10:00 AM. The plan provides for the continuationf o the debtors' business operations through on-going development, exploitation, exploration, acquisition and production of oil and natural gas. The plan contemplates a re-capitalization of the debtors pursuant to which holders of Allowed General Unsecured Claims shall receive 23,040,000 shares of New Forcenergy Common Stock on a pro rata basis, and the holders of Forcenergy Equity Interests shall receive 960,000 shares of New Forcenergy Common Stock and the Warrrants on a pro rata basis, subject in each case to the shares of New Forcenergy Common Stock held in Reserve and the Warrants held in Reserve. Classification and Treatment of Claims and Equity Interests: Class 1 - Allowed other Priority claims: $1,500 - unimpaired, payment in full. Class 2 - Allowed Secured Tax Claims - $305,200 - unimpaired, payment in full. Class 3 - Allowed Secured Bank Group Claim - $339,800,000 - Impaired - estimated percentage recovery - 100% - treatment depends on acceptance or rejection of plan, as more particularly described in the plan. Class 4A- Allowed Senior Miscellaneous Secured Claims - $1,989,000 - Unimpaired - Estimated percentage recovery: 100% Class 4B - Allowed Junior Miscellaneous Secured Claims - $15,824,000 - Impaired. At option of debtors, either payment in full in cash or semi-annual cash payments over a period of 3 1/2 years, with 8% interest. Estimated percentage recovery: 100% Class 5 - Allowed Interior Claims and Allowed Governmental Mineral Lessor Claims - $0 Unimpaired. Estimated percentage recovery: 100% Class 6 - Claims of Bonding Entities. - N/A - unimpaired If the new bonds are authorized, they will be entitled to treatment as administrative. Class 7 - Allowed Convenience Claims - $1,670,000 - Unimpaired. Each holder shall receive cash in an amount equal to 100% of such allowed convenience claim. Class 8 - Allowed General Unsecured Claims - $404,100,000 - Impaired. Each holder shall receive a pro rata share of 23,040,000 shares of New Forcenergy Common Stock less the number of shares of New Forcenergy Common Stock held in the Reserve in respect of Disputed General Unsecured Claims. Each holder of an Allowed General Unsecured Claim will also be entitled to participate in the Rights Offering to acquire Subscription Preferred Stock and Subscription Warrants. Estimated Percentage recovery: 62% Class 9 - Allowed Intercompany Claims - $11,470,803 - Impaired. Each holder shall receive $1.00 on account of such claim. Estimate d percentage recover: $1 per claim; $6 total. Class 10 - Allowed Forcenergy Equity Interests. Impaired. Shall receive a pro rata share of 960,000 shares of New Forcenergy Common Stock and the four year warrants and the five year warrants. The holders of Forcenergy Equity Interests will receive on share of New Forcenergy Common Stock per 28.6 shares of old common stock. Class 11 - Allowed Resources Equity Interests - Unimpaired. Forcenergy shall retain its Resources Equity Interest. GENESIS DIRECT: Seeks To Extend Time To Assume or Reject Leases --------------------------------------------------------------- The debtors, Genesis Direct Inc., et al. seek to extend their time to assume or reject five unexpired non-residential real property leases for a period of 120 days. They seek to extend the time until February 15, 2000. The debtors state that they have been focusing their efforts on reducing their costs and expenses. Additional time is needed to analyzed the value of the subject leases. HARBOR FINANCIAL: Applies for Appointment of Responsible Person --------------------------------------------------------------- The debtors, harbor Financial Group, Inc., et al. seek appointment of a "responsible person" to exercise debtor powers. On October 28, 1999, Rick R. Hagelstein, Harbor's sole remaining director and Chief Executive Officer submitted his resignation effective October 31, 1999. The debtor argues that the appointment of a responsible person would be more efficient and cost effective since it is approved by the Bank Group and the Creditors' Committee, and appointment of a Chapter 11 trustee would cause delays and unwarranted costs. ICO GLOBAL: Court Approves Bid from McCaw ----------------------------------------- ICO Global Communications Ltd., New York, said yesterday that the bankruptcy court in Delaware approved an interim restructuring plan for the company that will give wireless pioneer Craig McCaw control of the company, The Wall Street Journal reported. McCaw's group of investors was chosen over a last-minute competing bid from Indian media magnate Subhash Chandra. Late yesterday the court approved a $225 million investment in ICO by McCaw's group that will prevent ICO's liquidation. The satellite telephone company, which filed chapter 11 in August, plans to provide global phone service through a network of 12 satellites to be launched by the end of next year. McCaw also pledged to invest another $275 million in January to lead a $700 million investment round in June. ICO may emerge from bankruptcy as early as January. (ABI 10-Nov-99) IRIDIUM: Creditor Panel Wins Nod For Screening Wall --------------------------------------------------- Members of Iridium LLC's official creditors' committee won court approval to erect a "screening wall" at their firms allowing the members to trade Iridium securities without damaging their claims against the company. U.S. Bankruptcy Judge Cornelius Blackshear mandated that, as evidence of the implementation of the screening wall, committee members that seek to trade Iridium securities must file an affidavit of each individual performing committee- related activities stating that the individual will comply with the screening wall procedures. (The Daily Bankruptcy Review and ABI November 10, 1999) LESLIE FAY: Reports Third Quarter Results ----------------------------------------- The Leslie Fay Company, Inc. (Nasdaq: LFAY) reported today a 20.2% increase in net sales to $58.6 million for its third quarter ended October 2, 1999, from $48.8 million for its third quarter ended October 2, 1998. Leslie Fay's net income for the third quarter of 1999, including one-time charges related to the company's August 25 merger with a Three Cities affiliate, decreased to $3.1 million, or $0.56 per basic share and $0.52 per diluted share, from net income of $3.8 million, or $0.58 per basic share and $0.55 per diluted share, for the year-ago quarter. Excluding these one-time charges, both basic and diluted EPS would have risen by $0.06 to $0.62 per basic and $0.58 per diluted share, an improvement over the third-quarter 1998 performance. Gross profit margin of 25.2% for the third quarter of 1999 compared with 24.9% for the year-ago quarter. Excluding the operations of Warren Apparel Group acquired on October 27, 1998, Leslie Fay's net sales for the third quarter of 1999 declined 8.6% to $44.6 million from $48.8 million for the year ago period, and the gross profit margin was 22.0%. "Our performance for the third quarter reflects lower than expected unit sales for our Leslie Fay dress business, higher markdowns in the Sportswear business, the continued integration of the Warren business acquired last October, and one-time expenses caused by the merger," John J. Pomerantz, Leslie Fay's chairman and CEO, said in making the announcement. "Except for one-time merger-related expenses, our per share earnings for the quarter would have been $0.03 greater than a year ago. "Sales volume for Leslie Fay Dresses was lower than expected due to timing issues," Pomerantz added. "Sales results for Leslie Fay Sportswear and Haberdashery by Leslie Fay reflect greater price reductions than last year. Beginning with 2000, we will be combining these two product lines to provide a more cohesive product offering with less overlap. Our new Warren Group business continues to perform ahead of plan. The launch of a Leslie Fay Evenings line is being well received. "Our higher operating expenses reflect the addition of Warren, the launch of Leslie Fay Evenings and also increased stock-based compensation as a result of the early vesting of middle management options due to the merger. Our increased interest expense and increased debt reflect greater borrowing to fund working capital for our new businesses and the completion in August of our cash exchange offer to shareholders. As a result of the exchange of cash for shares, the Company repurchased one million shares for $7 per share. The company expects to incur future quarterly interest charges of about $140,000 in connection with the merger. Weighted average shares outstanding, assuming dilution and reflecting the Company's stock repurchases, were 6.0 million for the third quarter of 1999 and 6.8 million for the year-ago quarter. Due to the August 25 cash exchange transaction, there were, as of October 2, 1999, 5,053,138 basic shares outstanding. The company's EBITDA for its third quarter of 1999, excluding merger related expenses, was $5.3 million, or $84,000 below that for the year-ago quarter. The company defines EBITDA as operating income before interest, taxes, depreciation, amortization, stock-based compensation, and amortization of excess revalued net assets over equity. Leslie Fay's results for the third quarter for 1999 and 1998 each include a $1.1 million offset to operating expenses, representing the amortized portion of the amount by which revalued net assets exceeded stockholder equity on June 4, 1997, the date the company emerged from bankruptcy. This positive, non cash offset to expenses amounted to $0.19 per diluted share for the 1999 period and to $0.17 per diluted share for the 1998 period. For the first nine months of fiscal 1999, ended October 2, Leslie Fay's net sales increased 28.9% to $158.2 million from $122.7 million for the first nine months of fiscal 1998, which ended October 3. Gross profit margin of 26.1% for the first nine months of 1999 compared with 25.8% for the first nine months a year ago. Excluding the operations of Warren Apparel Group, Leslie Fay's net sales for the first nine months of 1999 increased 1.1% to $124.1 million from $122.7 million for the comparable year ago period, and the gross profit margin for the first nine months of was 24.1%. Leslie Fay's net income for the first nine months of 1999 decreased to $8.4 million, or $1.42 per basic share and $1.36 per diluted share, from net income of $8.9 million, or $1.33 per basic share and $1.26 per diluted share, for the comparable nine months a year ago. Excluding the one- time costs in connection with its completed merger agreement, income per basic share was $1.54 and income per diluted share was $1.47. The company's EBITDA for its first nine months of 1999, exclusive of Other Expenses, which relate to the merger, grew 11.6% to $13.2 million from $11.8 million for the comparable year-ago period. The Leslie Fay Company, Inc. sells its career, evening and social occasion dresses and its sportswear through leading department and specialty stores nationwide. LOEHMANN'S: Order Extends Time to Assume or Reject Leases --------------------------------------------------------- The debtor, Loehmann's Inc., was granted an extension of the time within which the debtor may assume or reject unexpired leases of nonresidential real property to and including January 13, 2000. The court also approved the rejection of the following leases: Arcadia Hub Shopping Center, Arcadia, CA Danbury Square Shopping Center, Danbury, CT 2701 N. Federal Highway, Fort Lauderdale, FL Rego Park, 60-06 99th Ave, Rego Park, NY Pavilion Shopping Center, Beachwood, Ohio Park Place Mall, Memphis , Tennessee NUCENTRIX BROADBAND: Feinberg Owner Of 1,306,266 Shares ------------------------------------------------------- Stephen Feinberg is reported as beneficial owner of 1,306,266 shares of the common stock of Nucentrix Broadband Networks Inc. Of this amount Cerberus Partners, L.P. is the holder of 302,100 shares of common stock of Nucentrix Broadband Networks, Inc.; Cerberus International, Ltd. is the holder of 606,200 shares of common stock of the company; Cerberus Institutional Partners, L.P. is the holder of 87,066 shares of common stock of the company; and certain private investment funds in the aggregate are the holders of 310,900 shares of common stock of the company. Stephen Feinberg possesses sole power to vote and direct the disposition of all securities of the company owned by each of Cerberus, International, Institutional and the Funds. Thus, Stephen Feinberg is deemed to beneficially own 1,306,266 shares of common stock of the company, or 13.0% of those issued and outstanding. ONSALE: Shareholders Approve Merger With Egghead.com ---------------------------------------------------- Onsale, Inc., a leading Internet retailer, has received the shareholder vote required to approve a proposed merger with Egghead.com. Egghead.com convened its shareholders meeting November 4, 1999, and adjourned it to November 19, 1999, in order to allow Egghead.com shareholders additional time to return their proxies. To date, more than 97 percent of the Egghead.com proxies returned have been in favor of the merger, but additional shareholder votes are required to meet Egghead.com's requirement of a two-thirds vote in favor of the merger. Onsale shareholders also approved an amendment to Onsale's 1995 Equity Incentive Plan. Onsale, a leading Internet retailer, provides low prices and personalized service through automation. Onsale atCost offers computer equipment at wholesale prices directly to businesses and consumers. Onsale atAuction offers bargains on excess merchandise and services through online auctions, such as personal computers, consumer electronics, sports and fitness equipment, and vacation packages. Onsale atCost and Onsale atAuction are located on the World Wide Web at www.onsale.com. PARAGON TRADE: Announces Third Quarter Results ---------------------------------------------- Paragon Trade Brands, Inc. (OTC Bulletin Board: PGNFQ) today reported a loss of $5.2 million, or $.44 per share, for the quarter ended September 26, 1999, compared to net earnings of $4.0 million, or $.34 per share for the third quarter of 1998. Net sales for the quarter were $128.5 million, compared to $137.0 million for the third quarter of 1998. Third quarter net earnings reflect the positive net impact of a $1.3 million transfer price adjustment with a foreign affiliate. Earnings before interest, taxes, depreciation and amortization and bankruptcy costs, ("EBITDA"), for the third quarter totaled $5.9 million. Sales volume in the third quarter improved over the second quarter reflecting the impact of the rollout of the Company's newly launched Destination Store Brand programs. As a result, third quarter sales increased 9% from $117.8 million in the second quarter to $128.5 million. Earnings were affected by the combination of added costs for the Destination Store Brand programs, manufacturing inefficiencies and added royalties. For the nine months ended September 26, 1999, the Company reported a net loss of $20.8 million or $1.74 per share, compared to net earnings of $13.4 million or $1.12 per share, for the same period last year. Net sales for the nine months were $372.6 million, compared to $402.3 million for the same period last year. EBITDA for the nine months totaled $10.5 million. The net sales trend for the nine month period continues to reflect the impact of a number of factors, including increased consumer preference for premium priced products in a strong overall economy and increased competitive pressures. With the launch of new Destination Store Brand programs, the Company is shipping new products to compete more effectively with these trends. Operating results continued to be impacted by underutilized manufacturing capacity, royalty payments to P&G and K-C, increased product costs and manufacturing inefficiencies due to the new product start-ups. Increased selling, general and administrative (SG&A) expense reflects increased marketing and promotional expenses as well as the amortization of information technology investments. Commenting further, Chief Executive Officer, Bobby Abraham, said, "We are pleased that third quarter sales have picked up. Nevertheless, we expect fourth quarter earnings to be affected by slower sales and the added costs of machine changeovers as we extend the roll out of our new products. We do expect increased sales and manufacturing efficiencies to improve earnings during 2000 as we put behind us the disruptive environment of operating in Chapter 11." As has previously been reported, on October 15, 1999, the Company announced that it has accepted a commitment by Wellspring Capital Management LLC to acquire Paragon as part of a plan of reorganization and has filed, along with its Official Committee of Unsecured Creditors, as a co-proponent, an amended plan of reorganization and disclosure statement in the United States Bankruptcy Court for the Northern District of Georgia for protection under Chapter 11 of the United States Bankruptcy Code. Commenting on the Chapter 11 filing and the status of the Company's reorganization, Mr. Abraham noted, "We are encouraged by the significant progress we have made in the process of emerging from Chapter 11. With the acceptance of the Wellspring Commitment in October and the filing of our plan of reorganization and disclosure statement, we believe that we are well on our way to completing the reorganization process. With our disclosure statement hearing now set for November 17, 1999, we believe we are on track to emerge from Chapter 11 as expeditiously as possible." Paragon Trade Brands is the leading manufacturer of store brand infant disposable diapers in the United States and, through its wholly owned subsidiary, Paragon Trade Brands (Canada) Inc., is the leading marketer of store brand infant disposable diapers in Canada. Paragon manufactures a line of premium and economy diapers, training pants, feminine care and adult incontinence products, which are distributed throughout the United States and Canada, primarily through grocery and food stores, mass merchandisers, warehouse clubs, toy stores and drug stores that market the products under their own store brand names. Paragon has also established international joint ventures in Mexico, Argentina, Brazil and China for the sale of infant disposable diapers and other absorbent personal care products. PINNACLE BRANDS: Seeks Extension of Exclusivity ----------------------------------------------- The debtors, Pinnacle Brands, Inc., seek an order extending the debtors' exclusive periods within which to file a plan or plans of reorganization and solicit acceptances thereof. The debtors seek an extension of approximately 60 days, to and including January 3, 2000 to file a plan, and to and including March 3, 2000, to solicit acceptances to the plan. The debtors need the additional time to conclude the plan process with their creditor constituencies and to work towards the implementation of such a consensual plan which would provide for the distribution of the proceeds from the Performance and Playoff sales and the disposition of any remaining assets. The debtors claim, "Termination of the debtors' exclusivity at this juncture would create an uncertain, chaotic environment, which would inevitably disrupt the plan process, thereby potentially reducing distributions to the debtor's creditors." PURINA MILLS: Making Progress on Fast-Track Reorganization ----------------------------------------------------------- Purina Mills, Inc. announced that it filed a Form 8-K with the Securities and Exchange Commission, which includes preliminary drafts of a plan of reorganization and a disclosure statement. As described in the preliminary draft disclosure statement, a potential settlement has been negotiated between Koch Industries, Inc. and an unofficial committee representing the Purina Mills Inc. subordinated noteholders. At this time, noteholders representing approximately 55 percent of the total amount of $350 million of the Company's 9% Senior Subordinated Notes due 2010, have agreed to the terms of the settlement. Purina Mills is not a party to the settlement, but is reviewing and analyzing the terms of the settlement. If Purina Mills determines that the settlement is appropriate, the Company will revise and update the plan of reorganization and disclosure statement to include provisions consistent with the settlement. The potential settlement with the subordinated noteholders proposes a $60 million cash contribution by Koch Industries, Inc. and contemplates Koch receiving no consideration for its current equity interest in Purina Mills. The Company continues on a targeted fast-track schedule and anticipates filing the Company's revised plan of reorganization and disclosure statement with the Bankruptcy Court shortly and Purina Mills' management is targeting to emerge from Chapter 11 during early 2000. Purina Mills is America's largest producer and marketer of animal nutrition products. Based in St. Louis, Missouri, the Company has 49 plants and 2500 employees nationwide. Purina Mills is not affiliated with Ralston Purina Company, which is the registered owner of the trademarks "Purina," the checkerboard logo and Purina Dog Chow brand and Purina Cat Chow brand pet foods. SCOOP INC: Acquires Substantially All of 24STORE.com Stock ---------------------------------------------------------- Scoop, Inc., a Delaware corporation (OTC: SCPI) ("Scoop"), announced that, on November 5, 1999, it acquired substantially all of the stock of 24STORE.com Limited, a Swedish internet company, in exchange for newly issued shares of Scoop stock. As a result of the transaction, which was effectuated pursuant to Scoop's Second Amended Plan of Reorganization, Scoop's stockholders prior to the transaction will own approximately nine percent of the post-transaction of shares of Scoop. InfiniCom AB (publ), a Swedish holding company which formerly held 100% of the stock of 24STORE.com, was issued shares representing approximately 91% of the post-transaction shares in the transaction. Scoop's Chief Executive Officer, Rand Bleimeister, who will be replaced as CEO by an InfiniCom executive, stated "I am pleased with the result of the transaction and expect that Scoop's shareholders will be pleased with the direction that 24STORE.com is headed." Scoop is represented in its Chapter 11 case by Robert E. Opera and Hamid R. Rafatjoo of the Irvine-based law firm of Lobel, Opera & Friedman LLP (www.lobelopera.com). Scoop's corporate and securities counsel are William J. Cernius and Scott Shean of the Costa Mesa office of Latham & Watkins. InfiniCom is represented by Brian L. Holman and Daniel H. Peters of the Los Angeles office of White & Case LLP. SPECTRUM INFORMATION: Barclay Powers Holds 20.3% Of Common Stock ---------------------------------------------------------------- Barclay Powers holds 1,685,000 shares of the common stock of Spectrum Information Technologies I, exercising sole power to vote or dispose of the shares. 1,685,000 shares represents 20.3% of the outstanding shares of common stock of the company. Barclay Powers is a Director of Spectrum Information Technologies I. On or about December 27, 1998, Powers & Co. issued transfer instructions effectuating its December 12, 1998 gift to Barclay Powers of 995,000 shares of Spectrum's common stock and an option for 690,000 shares of common stock. In addition, on December 24, 1998, Barclay Powers exercised his option in its entirety and purchased 690,000 additional shares of common stock for $103,500, using personal funds which he received by gift from Lawrence Powers. As a result of the above transactions, Barclay Powers Co. owns 1,685,000 shares of common stock and no options to acquire any additional shares. At the time the above transactions were reported, Lawrence Powers and Barclay Powers entered into a verbal understanding that Barclay Powers's shares would be voted and disposed of by either of them. On or about October 25, 1999, Lawrence Powers and Barclay Powers terminated their understanding, and Barclay Powers thereby assumed sole voting and dispositive power over said shares. The source of the consideration paid by Barclay Powers for the exercise of all of his option was $103,500 from his personal funds which he received by gift from Lawrence Powers. Barclay Powers intends to hold his shares of common stock for investment purposes. To that end, he will continuously review his investment in the company. In reaching any decision with respect to such investment, he will take into consideration various factors, such as Spectrum's business prospects and financial position, other developments concerning the company, the price level of the common stock, conditions in the securities markets, and general economic and industry conditions. Depending upon the results of review of any or all of the aforementioned factors, he may decide to acquire additional securities of the company or to dispose of all or a portion of his common stock. STUART ENTERTAINMENT: Order Approves Headquarters Lease ------------------------------------------------------- The debtor, Stuart Entertainment, Inc. is authorized to enter into a commercial office space lease with L&B 8200 Normandale, Inc. for its corporate headquarters. Following the objection of the creditors' committee, certain amendments were made to the lease, and the lease, as amended was approved by the court. The premises is designated as Suite #400 located on the fourth floor of the building at 8200 Normandale Boulevard, Bloomington, Minnesota. The lease terms is sixty months commencing On Ocotbelr 15, 1999, at a base rent commencing at $18,877 per month. TELEPAD: Amended Plan Confirmed ------------------------------- The United States Bankruptcy Court in Wilmington, Delaware, entered an order on October 8, 1999 confirming the Modified Amended Plan of Reorganization dated October 8, 1999 proposed by Kurt F. Gwynne as Chapter 11 Trustee for TelePad Corporation. The Plan was confirmed 37 days after Mr. Gwynne was appointed as Chapter 11 Trustee. Mr. Gwynne filed a Disclosure Statement and a Plan of Reorganization with the Bankruptcy Court on September 15. The Plan was since modified to, among other things, reflect agreements between TelePad and its purported secured lenders. The Modified Amended Plan of Reorganization provides for the payment in full of allowed claims entitled to priority under the Bankruptcy Code. The Plan contemplates a pro rata payment of remaining proceeds to holders of allowed nonpriority, unsecured claims. The Plan, however, specifically extinguishes all legal and other interests of the holders of the company's common stock, preferred stock and redeemable warrants effective as of November 7, 1999. In addition, the Bankruptcy Court has set January 14, 2000 as the bar date for filing prepetition claims and post-petition administrative expense claims against TelePad's estate. Copies of the Plan can be obtained from the United States Bankruptcy Court in Wilmington, Delaware. THORN APPLE VALLEY: PBGC Assumes Control of Underfunded Plans ------------------------------------------------------------- The Pension Benefit Guaranty Corp. is assuming control of four underfunded pension plans that cover 3,400 present and past workers for Thorn Apple Valley, which has a bacon plant in Holly Ridge with 400 employees. The workers and retirees will receive the same pension benefits they have been accustomed to, said a PBGC spokesman. Thorn Apple Valley filed for Chapter 11 bankruptcy protection in March, and its assets were sold to IBP Foods Inc. in August. The Thorn Apple Valley company was liquidated, and the plant operates under the IBP Foods banner now. IBP owns the rights to the Thorn Apple Valley brand name. But the Iowa meat processor didn't pick up the pension plans when it bought the assets, including the Holly Ridge plant. So the PBGC will manage the pension plans, which have $ 14 million in assets to cover benefit liabilities of more than $ 25 million. Taxpayers don't make up the shortfall, said Gary Pastorius, public affairs officer for the PBGC. The agency's operations are financed by insurance premiums paid by companies that sponsor pension plans. He said retirees will continue to receive their pension checks without interruption. "There'll be no change except there will be a different name on the check," he said. (Wilmington, NC Morning Star 10-Nov-99) VENCOR: Potential Conflict Of Interest Dictates Auditor Change -------------------------------------------------------------- Vencor, Inc., upon approval of its Board of Directors, appointed PricewaterhouseCoopers LLP as its independent auditors for the fiscal year ending December 31, 1999 to replace Ernst & Young LLP effective November 2, 1999. The appointment of PricewaterhouseCoopers LLP is subject to approval by the United States Bankruptcy Court. The Board of Directors of Vencor, Inc. was advised by counsel that the participation of Ernst & Young in the company's 1998 spin off from Ventas, Inc. presented a potential conflict of interest that would significantly jeopardize the ability of Ernst & Young to be approved as independent auditors for the company by the Bankruptcy Court. With reference to the audit of the company's consolidated financial statements for the year ended December 31, 1998, Ernst & Young informed the company and its Audit and Compliance Committee of a condition that it believed constituted a material weakness in the company's internal controls. Ernst & Young communicated that certain of the company's account reconciliations had not been completed on a timely basis. Additionally, Ernst & Young stated that there was a lack of appropriate follow up and resolution of reconciling items, including adjustments of the accounting records on a timely basis, and there was a lack of evidence of review of the reconciliations by an independent person. The company did reconcile all accounts and recorded the appropriate adjustments prior to the filing of its Annual Report for the year ended December 31, 1998. Ernst & Young advised the company that, in completing its audit, it considered the aforementioned material weakness in determining the nature, timing and extent of procedures performed to enable it to issue its opinion on the consolidated financial statements. The company has authorized Ernst & Young to respond fully to the inquiries of PricewaterhouseCoopers LLP concerning these matters. WASTE MANAGEMENT: Appoints Turnaround Specialist as CEO ------------------------------------------------------- Reporting a net loss for the third quarter of $948 million, Houston-based Waste Management Inc. announced that it has appointed corporate turnaround specialist Maurice Myers as its new CEO and president, according to a newswire report. Myers comes from Kansas-based trucking firm Yellow Corp., which he restored to profitability in 1997. Previously he was president and COO of America West Airlines Inc.; he joined the company in 1993 and helped it to emerge from bankruptcy the next year. Myers has already voiced support for the key elements of a Waste Management plan, including the sale of non-strategic assets, debt reduction and an improved system for allocating capital. S&P Equity Group Analyst Stewart Scharf said that recruiting someone from outside the garbage industry was good but that he thought this would be Myers "greatest challenge." (ABI 10-Nov-99) ********* 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, Yvonne L. Metzler, Editors. Copyright 1999. 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 $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 * * *