JURY CLEARS GRANT THORNTON LLP FROM NEGLIGENCE IN AUDIT OF TEXAS DEPARTMENT
STORE CHAIN FIRM SHOWS PLAINTIFF USED FALSIFIED EVIDENCE; JUDGE AWARDS
$165,000 IN SANCTIONS
CHICAGO, Ill.--May 23, 1995--A jury absolved
Thornton LLP from charges that its 1986 audit of a Fort Worth, Texas,
department store chain was negligent. The verdict was confirmed by the
trial judge by order dated May 17.
The two-week trial followed a contested hearing before the trial judge
in which the national accounting and management consulting firm
established that the plaintiff, Kenneth E.
Landers, a bankrupt Forth Worth developer, attempted to use falsified
evidence in order to hold Grant Thornton responsible for his own mismanagement.
According to Margaret Maxwell Zagel, general counsel for Grant
Thornton LLP, the jury affirmed on May 5 that the firm's audit was
performed in accordance with professional standards. The trial judge
held that the false evidence by plaintiff could not be used at trial
and awarded the firm $165,000 in fees as sanctions for the actions of
plaintiff, she adds.
"We are pleased to have been vindicated," Zagel says. "The audit was
performed professionally, and we worked very hard to explain the
complex audit issues to the jury. As have other businesses in going to
trial in Texas, we faced the enormous risk of a large damage award."
The plaintiff's attempt to use false evidence was a critical factor in
this case, Zagel adds. "This was the worst case of lawsuit abuse I've
seen," she says. "A serious injustice might have been done had he been
successful in using the false evidence."
The trial was the culmination of a lawsuit originally commenced in
June 1988. Landers and his company, Vingt Trois, Inc., acquired
Monnigs and its holding company, M.D.G.C., in 1986. The three
corporations were subsequently bankrupt.
Landers originally sued Texas American Bank and two of its officers
for conspiring with the prior management of Monnigs to misstate
financial statements in order to induce Landers to purchase the
In October 1988, Grant Thornton, the former auditors of Monnigs, was
added as a defendant. Texas American Bank was subsequently dismissed
when it was placed in receivership by the Federal Deposit Insurance
The case then proceeded in a state court in Fort Worth with Grant
Thornton as the sole remaining defendant. The plaintiffs sought more
than $13 million in out-of-pocket damages, plus $40 million to $60
million additional damages.
Although a previous trial resulted in a hung jury, the firm was
committed to defending the professionalism of its audit rather than
pay an unjustified settlement, Zagel says.
Robert W. Coleman, John E. Richards, and Tracy W. Berry of the law
firm of Vial, Hamilton, Koch & Knox represented Grant Thornton LLP in
both trials with the assistance of Zagel.
/CONTACT: Liz DeIuliis or John Koegel of Grant Thornton LLP, Public
Relations Dept., 212-599-0100; or Margaret Maxwell Zagel, General
Counsel for Grant Thornton, 312-856-0001/
CENTRAL AND SOUTH WEST CORPORATION REPORTS SENDING EL PASO ELECTRIC COMPANY
BREACH LETTER RECEIVES EL PASO ELECTRIC REQUEST TO EXTEND MERGER
DALLAS, Texas--May 23, 1995-- Central and South West
Corporation (NYSE: CSR) said it notified El Paso
Electric Company (Nasdaq-NNM: ELPAQ) today in a letter that El Paso Electric
is in breach of the companies' proposed merger agreement.
Central and South West also said it had received on May 22, 1995, a
request from El Paso Electric to extend the merger agreement for six
months until Dec. 8, 1995, but had not made a decision about the
Central and South West said it was notifying El Paso Electric to
protect its rights and to give El Paso Electric 10 days to remedy the
breaches, as required in the merger agreement. The company said it was
not terminating the merger and was continuing to use its best efforts
to fulfill its obligations under the merger agreement.
"EPE's failure to remedy its breaches will be among the factors CSW
considers in deciding what action to take on or after the Termination
Date" of the merger agreement, which is June 8, 1995, the company said
in its letter to El Paso Electric.
Central and South West cited a number of actions by El Paso Electric
that constitute breaches of the agreement.
On May 11, 1995, El Paso Electric made a filing in federal bankruptcy
court, seeking a temporary restraining order to prevent the Public
Utility Commission of Texas from issuing an interim order in El Paso
Electric's rate and merger case pending before the commission (Docket
12700). As a result, the Texas PUC on May 12, 1995, suspended
indefinitely a decision in the proceedings, "thereby severely
jeopardizing the prospects of timely and favorable action by the
PUCT," the company said.
On Sept. 12, 1994, Central and South West had advised El Paso Electric
that adverse developments could constitute material adverse effects
unless resolved in a timely manner by El Paso Electric. Central and
South West cited El Paso Electric's lack of timely remedy of these
adverse developments that could prevent closing of the proposed merger
"Instead of undertaking to remedy the Material Adverse Effects
identified in the Sept. 12, 1994 letter and directing its efforts to
satisfying the closing conditions under the Merger Agreement," Central
and South West said, "EPE has pursued a course of conduct...to promote
a stand-alone plan in lieu of the proposed merger. In so doing, EPE
committed other breachers of the Merger Agreement."
Central and South West said El Paso Electric has breached the merger
agreement by participating in discussions and spending large sums on a
possible stand-alone reorganization plan.
The proposed merger between Central and South West and El Paso
Electric was announced May 4, 1993. El Paso Electric's plan of
reorganization was confirmed by the federal bankruptcy court on Dec.
The proposed merger is contingent upon receiving regulatory approvals
or authorizations from state and federal agencies as well as on other
conditions. The merger agreement provides that the proposed merger can
be terminated by either company if any required regulatory approvals
have not been obtained within 18 months after confirmation by the
federal bankruptcy court of a reorganization plan for El Paso
Central and South West Corporation is a public utility holding company
based in Dallas. It owns Central Power and Light Company, Public
Service Company of Oklahoma, Southwestern Electric Power Company and
West Texas Utilities Company. These four subsidiaries provide electric
utility service to 1.6 million customers in Texas, Oklahoma, Louisiana
and Arkansas. Central and South West also owns Transok, Inc., an
Oklahoma intrastate natural gas pipeline company, and several other
El Paso Electric Company is an electric utility serving approximately
268,000 customers in El Paso, Texas, and an area of the Rio Grande
Valley in West Texas and southern New Mexico as well as wholesale
customers located in Southern California and Mexico.
/CONTACT: Media, Gerald R. Hunter, manager of external communications,
214-777-1165, or Analysts, Sharon R. Peavy, director of investor
relations, 214-777-1277, both of Central and South West Corporation/
SLM INTERNATIONAL ANNOUNCES 1994 YEAR END AND 1995 FIRST QUARTER
NEW YORK, N.Y.--May 24, 1995--SLM International, Inc.
(Nasdaq:SLMIE), announced operating results for the year ended
December 31, 1994 and first quarter ended April 1, 1995. The Company
also announced it had filed both its Form 10-K for the year ended
December 31, 1994 and its first quarter Form 10-Q for the quarter
ended April 1, 1995 with the Securities and Exchange Commission on May
Net sales from continuing operations for the year ended December 31,
1994 increased 43.5% to $180.8 million, compared to $126.0 million for
the same period in 1993. Loss from continuing operations was $6.2
million, or $0.33 per share, in 1994, compared to income of $5.7
million, or $0.30 per share, in 1993. The net loss for 1994 was $112.0
million, or $5.94 per share, compared to net income of $8.1 million,
or $0.42 per share, for the prior year. The 1994 loss from continuing
operations which includes the Company's sporting goods business
primarily reflected the impact of the baseball and hockey strikes,
unusual charges and acquisition related items. The 1994 net loss was
principally attributable to the Company's toy and fitness businesses
which have been accounted for as discontinued operations.
Net sales from continuing operations for the first quarter ended April
1, 1995 increased 23.7% to $30.8 million, compared to $24.9 million
for the same period in 1994. Loss from continuing operations was $7.3
million, or $0.39 per share, in 1995, compared to a loss of $0.8
million, or $0.03 per share, in 1994. The net loss for 1995 was $7.3
million, or $0.39 per share, compared to a net loss of $1.4 million,
or $0.07 per share, for the prior year. The Company's results in the
first quarter of 1995 were adversely impacted by an inventory
reduction program, selling, general and administrative expenses,
higher professional fees and interest costs.
Howard Zunenshine, Chief Executive Officer of SLM International,
noted, "We are continuing with plans to concentrate our efforts on
maximizing profits in our sporting goods division, an effort which
will be advanced by our decision to exit Buddy L. We have expanded our
product offerings of in-line roller skates in response to a surge in popularity of
recreational skating and roller hockey. Additionally, sales of our hockey skates
and protective equipment increased as a result of the growing popularity of
ice hockey reflective of the expansion of the National Hockey League into
warm weather markets."
On May 9, 1995, Buddy L Inc. accepted the
bid of Empire of Carolina, Inc. to purchase certain assets and liabilities of
Buddy L's toy business, as the highest and best bid in the bankruptcy court
sanctioned auction process. Upon closing of the transaction Empire
will pay the creditors of Buddy L a combination of common stock, cash
and an earnout with a minimum consideration equal to $15 million. As
part of the transaction, Empire will also purchase certain accounts
receivable and inventories of Buddy L, subject to certain terms.
Although Empire's offer has been approved by the Bankruptcy Court for
the District of Delaware at a court hearing held on May 19, 1995, it
is still subject to the satisfaction of certain other conditions. It
is currently expected that the sale of these discontinued operations
will be completed by June 30, 1995, although there can be no assurance
that this transaction will be completed.
Mr. Zunenshine continued, "We are pleased to note that the sale of
Buddy L, which is expected to be completed by June 30, 1995, will
significantly reduce our total indebtedness. We look forward to
continuing our initiatives to build SLM International into a leader in
the sporting goods industry in the future." The Company and its
lenders are in discussions regarding a standstill agreement that would
provide for a period of continued financing by its lenders, a sharing
of certain collateral by its lenders and provide the Company a period
in which to restructure its debt without further judicial proceedings.
However, there can be no assurance that the Company will be able to
complete the standstill agreement.
SLM International, Inc. designs, develops, manufactures and markets a
broad range of sporting goods products on a worldwide basis.
SLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)
Net Sales $ 180,806 $126,034
Cost of goods sold 113,577 75,104
Gross profit 67,229 50,930
Selling, general and administrative expenses 67,031 38,600
Operating income 198 12,330
Interest expense 6,713 3,356
Other (income) (260) (499)
(Loss) income from continuing operations
before income taxes (6,255) 9,473
Income taxes (11) 3,779
(Loss) income from continuing operations (6,224) 5,694
(Loss) income from discontinued operations
net of income taxes(a) (94,390) 2,402
(Loss) from disposition of discontinued
operations, net of income taxes (11,335)
Net (loss) income $(111,969) $ 8,096
(Loss) income per share from continuing
operations $ (0.33) $ 0.30
(Loss) income per share from discontinued
operations(a) (5.01) 0.12
(Loss) per share from discontinued operations (0.60)
Net (loss) income per share $ (5.94) $ 0.42
Weighted average common and common
equivalent shares outstanding 18,844,097 19,232,700
(a) Loss from discontinued operations primarily consist of Buddy L
toy and fitness businesses
SLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)
Three Months Ended
April 1, April 2,
Net Sales $30,778 $24,885
Cost of goods sold 20,247 15,630
Gross profit 10,531 9,255
Selling, general and administrative expenses 13,171 9,061
Debt related fees (a) 1,721
Operating (loss) income (4,361) 194
Interest expense 2,872 1,065
Other expense (income) 34 (82)
(Loss) from continuing operations before
income taxes (7,267) (789)
Income taxes (264)
(Loss) from continuing operations (7,267) (525)
(Loss) from discontinued operations,
net of income tax benefit (b) (877)
Net (loss) $(7,267) $(1,402)
(Loss) per share from continuing operations (0.39) (0.03)
(Loss) per share from discontinued operations(b) (0.04)
Net (loss) per share $ (0.39) $ (0.07)
Weighted average common and common equivalent
shares outstanding 18,859,679 18,825,000
a) Legal and professional fees associated with additional debt
incurred by the Company
b) Loss from discontinued operations primarily consist of Buddy L
toy and fitness businesses
CONTACT: SLM International, Inc.
Chief Executive Officer
John A. Sarto
Chief Financial Officer
Amy Weisman/Melissa Garelick
Press: Lisa Bradlow