Braun's Fashions Corporation Plan of Reorganization Confirmed
Company Reports Strong Post-Filing Performance
MINNEAPOLIS, MN - Nov. 22, 1996 - Braun's Fashions Corporation
(Nasdaq-NNM: BFCI) today announced that its Plan of Reorganization was
approved today by the United States Bankruptcy Court for the District of Delaware.
Creditors and shareholders overwhelmingly voted in favor of the Plan. The Company
expects to officially emerge from Chapter 11 on December 2, only 5 months after
filing for protection under Chapter 11 of the Bankruptcy Code on July 2, 1996. Under
the Plan, creditors are to be paid 100% of their allowed claims, with distributions to
begin as early as December 1996. Norwest Bank, the Company's
debtor-in-possession lender, has agreed to provide a $10 million (subject to
inventory levels) postpetition Revolving Credit Facility through April 1, 1999.
The Company further reported that same store sales (sales from stores open more
than one year) in the 171 continuing store group have increased 11% from the July 2,
1996 petition date to November 21. Gross margins during this period have improved
from last year's levels as well. Performance is running above the Company's business
Nicholas H. Cook, Chairman and Chief Executive Officer stated, "We are extremely
pleased that we have concluded our reorganization quickly and successfully. Our
mission was clearly accomplished. We are also pleased with the strong support
given our Plan of Reorganization by our creditors and shareholders as well as the
continuing support of our many vendors. Performance in our core of continuing
stores, following the closing of 48 unprofitable locations, has exceeded expectations
and our financial position has been strengthened. We look forward with optimism to
the upcoming holiday season."
Braun's Fashions Corporation is based in Minneapolis, Minn., and is a specialty
retailer of women's fashions. Braun's currently has 171 stores in 20 states, primarily
in the Midwest and Pacific Northwest.
SOURCE Braun's Fashions Corporation/CONTACT: Stephen W. Clark, Vice
President and Chief Financial Officer of Braun's Fashions Corporation,
Consumat Systems Restates Earnings
RICHMOND, Va., Nov. 22, 1996 - Consumat Systems, Inc. (OTC Bulletin Board:
CSMT), announced today that in filing its 10- QSB for the period ended September
30, 1996, the Company has restated its earnings as reported on October 18, 1996.
The income originally reported for the Third Quarter was $116,095 or $.12 per share
and for the nine months was $383,074 or $.38 per share. The adjusted income for the
Third Quarter is $73,906 or $.06 per share and for the period March 12 through
September 30, 1996 is $217,388 or $.17 per share.
The adjustments are necessary because generally accepted accounting principles
("GAAP") require the Company to report only those earnings that have occurred
since the Company's emergence from its Chapter 11 bankruptcy proceeding on March
12, 1996. In addition, GAAP requires that the income tax effect on those earnings be
reported as a current expense. This adjustment will have minimal impact on
operating cash flows because only $7,500 of the $133,000 of income tax expense
recorded for the period ended September 30, 1996 is currently payable. This is due
to the utilization of net operating loss carryforwards available to the Company from
prior operations. At September 30, 1996, the Company has approximately $3.8
million of net operating loss carryforwards available to be used to offset future
Also, the Company reported that on October 18, 1996, KPMG Peat Marwick LLP
was selected to serve as the Company's Independent Public Accounts for fiscal 1996.
Consumat Systems is the Richmond, Virginia based Company which designs and
manufactures incineration and air pollution control equipment.
SOURCE Consumat Systems, Inc. /CONTACT: Mark E. Hills, Consumat Systems,
Holly Products announces settlement on behalf of Country World Casinos
BALA CYNWYD, Pa.--Nov. 22, 1996--Holly Products Inc. (NASDAQ: HOPR,
HOPRW, HOPRP; BSE: HOP, HOPP) today announced a settlement between
Country World Casinos Inc. and Tommyknocker Casino Corp./New Allied
Development Corp. in accordance with the bankruptcy court order of Nov. 5, 1996.
It is estimated that Country World saved approximately $700,000 in the ruling put
forth by the court.
William H. Patrowicz, president of Holly Products Inc., stated, "It is of great comfort
to have this milestone behind us. We will now diligently work with the remaining
unsecured creditors in accordance with the court's May 1996 order, to resolve and
pay everyone in the shortest possible time frame."
Holly Products Inc., headquartered in Bala Cynwyd, has a wholly owned subsidiary,
Navtech Industries Inc. of Shiprock, N.M., and a majority-owned subsidiary, Country
World Casinos Inc. of Denver. Navtech is a manufacturer and tester of electronic
components for casino equipment, hotel equipment and signage. Country World
Casinos Inc. is a development corporation whose plan is to construct a casino in
Black Hawk, Colo., as well as a hotel complex.
CONTACT: Holly Products, Bala Cynwyd William H. Patrowicz, 610-617-0400 or
Martin E. Janis & Co., Chicago Elliott Jacobson, 312/943-1100
Ernst Home Center Inc. receives court approval for total liquidation
SEATTLE, WA --Nov. 22, 1996--Ernst Home Center Inc. announced today that the
company has received approval from the U.S. Bankruptcy Court to liquidate its
A liquidation sale to sell all merchandise and furniture, fixtures and equipment will
begin on Saturday, Nov. 23 and will continue until these assets are sold. The
disposition of real estate is expected to take several months.
Ernst has over $150 million worth of merchandise in its stores and its distribution
center. The company will empty its warehouse by shipping newly received
merchandise to its stores.
The court's ruling allows Ernst to retain the Alamo/Ozer/Schottenstein (AOS) Group,
a team of liquidation specialists to aid in the disposition of its inventory, real estate
According to Mark Stein, a principal of the AOS Group, "This is an excellent
opportunity for the public to save a significant amount of money on a wide range of
products, just in time for holiday shopping. Ernst still has a huge inventory of basic
merchandise as well as a large selection of Christmas merchandise. We anticipate
that it will go fast."
Forty-nine of Ernst's 53 stores will participate in the liquidation. The remaining four,
located in Longview, Wash.; Casper, Wyo.; Coeur d'Alene, Idaho; and Bozeman,
Mont. will conduct business as usual. There are investors that potentially plan to bid
on these stores, and if the transaction is completed, continue to operate them.
Ernst Home Center Inc. based in Seattle, operates in Washington, Oregon, Idaho,
Montana, Utah and Wyoming.
CONTACT: Ernst Liquidation: AOS Group, Seattle Mark Stein, 206/621-6657 or
Four remaining stores: Ernst Home Center, Seattle Jim Fox, 206/621-3656
Ithaca Industries' Plan of Reorganization Confirmed; Reorganization Plan Reduces
Debt by 50%; Trade Creditors Unimpaired
WILKESBORO, N.C., Nov. 22, 1996 - Ithaca Industries, Inc. announced today that
its pre-packaged plan of reorganization has been confirmed by the bankruptcy court
for the district of Delaware. Ithaca filed the plan on October 8, 1996 when it
commenced Chapter 11 proceedings.
The plan gives holders of Ithaca's 11.125% Senior Subordinated Notes 100% of the
outstanding common stock of the Company and provides for a restructured bank
credit agreement, effectively eliminating 50% of Ithaca's debt. The plan also
provides that the claims of Ithaca's trade creditors will be paid in full.
Ithaca said that trade creditors have been paid according to normal terms throughout
the Chapter 11 proceeding and that employee wages and benefits have also been paid
Ithaca Industries, Inc. is a leading designer, marketer and manufacturer of private
label and branded underwear, hosiery and T- shirts.
SOURCE Ithaca Industries, Inc. /CONTACT: Krista Grossman of Sawyer Miller
Consulting, 212-484- 7760, for Ithaca Industries, Inc./
Microelectronic Packaging announces results for third quarter, nine months;
management and director changes
SAN DIEGO, CA --Nov. 21, 1996--Microelectronic Packaging Inc. ("MPI")
(Nasdaq National Market: MPIX) Thursday announced operating results for the third
quarter and nine months ended Sept. 30, 1996.
In addition, the board of directors has engaged The Watley Group in Los Angeles to
advise the company on strategic, management and financial restructuring matters. The
company also has named an interim president and chief executive officer and
appointed two new board directors, one of whom will serve as chairman.
For the third quarter of 1996, the company reported a net loss of $722,000, equal to
$0.13 per share, compared with a net income of $457,000, or $0.10 per share, last
year. Net sales for the third quarter were $11,958,000 versus $15,779,000 in last
year's third quarter.
For the first nine months, net income was $453,000 or $0.08 per share, compared
with a loss of $1,936,000, or $0.42 per share, for the same period in 1995. Net sales
increased nine percent to $45,532,000 from $41,659,000 the year before.
The company noted that the current year's third quarter results were adversely
affected by a decrease in revenues from sales of pressed ceramics products at the
company's Microelectronic Packaging (S) Pte Ltd. (MPS) subsidiary in Singapore.
Nine month sales and operating results were positively impacted by an increase of
$5.1 million in revenues from the company's CTM Electronics (CTM) subsidiary.
Sales from CTM would have been even higher had it not been for a temporary lack of
availability of integrated circuit (IC) chips during the third quarter of fiscal 1996.
Also contributing to the company's net income for the first nine months of 1996 was
an appreciation of the value of the U.S. dollar relative to the Japanese yen resulting
in a net foreign exchange gain of $380,000. This compared favorably with net foreign
exchange losses of $1,171,000 in the comparable period of 1995. The combination of
these factors more than offset higher interest expense associated with increased
borrowings and increased research and development costs associated with new
For the quarter ended Sept. 30, 1996, the company also announced that its MPS
subsidiary was not in compliance with certain financial covenants of its borrowing
agreement with its major bank lender. Due to cross default provisions of other loan
agreements, the company and its subsidiaries are or may be considered to be in
default with other debt obligations.
The outstanding balance of all debt obligations in default are classified as "current
portion of long-term debt" in the company's Condensed Consolidated Balance Sheets,
a copy of which is attached. Although the company and its MPS subsidiary have not
yet been able to obtain a waiver of compliance, regular communication with the bank
is continuing and attempts to renegotiate the covenants of the loan agreement are in
In addition, the board named Alfred Jay Moran Jr., senior managing director of The
Watley Group, a firm that specializes in corporate restructurings, management
consulting, mergers and acquisitions and equity investing, as interim president and
chief executive officer. He replaces Timothy da Silva, who has submitted his
resignation effective Dec. 31, 1996, to join a subsidiary of Xerox Corporation in a
senior management position. Da Silva will remain on MPI's board of directors.
Prior to joining The Watley Group, Moran was chairman, president and chief
executive officer of SeraCare Inc. He was responsible for SeraCare's restructuring
and conversion to a profitable publicly traded company. Moran also is a former
senior consultant of Kibel, Green Inc., the largest turnaround management consulting
firm in the western United States. During his career, Moran has been responsible for
the restructuring of 17 companies. He will assume full control over MPI pending
completion of a search by Spencer/Stuart, an international executive search firm, for
a permanent president and chief executive officer.
The company also announced the appointment of Lewis Solomon and Anthony J. A.
Bryan to the board, increasing the number of directors to five.
Solomon, who was named chairman of the MPI board, also is chairman of G&L
Investments in New York. In addition he was executive vice president of Alan
Patricof Associates, an international venture fund. Previously Mr. Solomon was
senior vice president of General Instrument Corporation, assistant to the chief
executive officer, and was named to sit on the company's operating committee.
His responsibilities included corporate strategy, worldwide marketing and sales
development as well as several general management responsibilities during his
tenure. Solomon serves as a director on the boards of Anadigics Inc., Anacomp Inc.,
Computer Products Inc., ICTV Inc., and Terayon Corporation.
Bryan is a senior managing director of The Watley Group LLC. He was formerly
chairman, president and chief executive officer of Copperweld Co. and president and
chief executive officer of Cameron Ironworks, both Fortune 500 companies. Prior to
that he was vice president, division general manager and member of the board of
directors of Monsanto.
He was responsible for the company's international businesses. He was also on the
boards of many companies including Federal Express, Chrysler, Pittsburgh National
Bank and Hamilton Oil. He is a trustee of the Carnegie Mellon University.
Commenting on the management changes, Moran said, "We are fortunate that under
Tim da Silva's guidance, MPI has done a fine job of building a foundation for future
growth and profitability. At the directive of the board of directors, I am looking
forward to the challenge of significantly focusing the companies' efforts in a number
of attractive opportunities which are based on the companies' technology, low cost
manufacturing, experienced management and strong customer base.
"We will be looking for an experienced chief executive from the electronics industry
who can insure that the company exploits the opportunities ahead. I am particularly
looking forward to working with management to execute the next phase of the
Microelectronic Packaging Inc. is a leading international semiconductor packaging
company with design services, manufacturing and sales capability to support the
device packaging and electronic systems interconnection requirements of integrated
circuit (IC) and electronic systems manufacturers.
At its San Diego headquarters and Singapore manufacturing facilities, the company
develops, manufactures, markets and sells pressed ceramic packages, advanced IC
packaging products and multichip modules to customers in the IC, communications,
automatic test equipment and other electronics-related industries.
Any forward looking statements in this news release involves risks and uncertainties.
The company's actual results could differ materially from those anticipated in any
such forward looking statements as a result of many factors, including those set forth
in the company's quarterly report on Form 10-Q for the quarter ended Sept. 30, 1996,
and the Form-10K for the year ended Dec. 31, 1995, both available from the chief
financial officer of the company at 9350 Trade Place, San Diego, California 92126.
MICROELECTRONIC PACKAGING INC.
Condensed Consolidated Statements of Operations
(in thousands, except share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Product sales $ 11,247 $ 15,779 $ 44,005 $ 41,659
Other sales 711 -- 1,527 --
11,958 15,779 45,532 41,659
Cost of goods sold:
Product sales 9,765 12,097 36,462 34,283
Other sales 597 -- 1,326 --
10,362 12,097 37,788 34,283
Gross profit 1,596 3,682 7,744 7,376
and administrative 1,378 1,636 4,352 5,013
product development 725 644 2,010 1,695
Provision for revaluation
of subsidiary and other
related assets -- -- -- 1,000
Income (loss) from
operations (507) 1,402 1,382
Other income (expense):
gain (loss) 80 (576) 380 (1,171)
Interest (expense), net (643) (399) (1,728) (855)
Other income, net 348 30 466 422
Income (loss) before
provision for income taxes (722) 457 500
Provision for income taxes -- -- 47 --
Net income (loss) $ (722) $ 457 $ 453 $
Net income (loss)
per common share $ (0.13) $ 0.10 $ 0.08 $
shares used in per
share calculation 5,622,000 4,770,000 5,493,000 4,660,000
MICROELECTRONIC PACKAGING, INC.
Condensed Consolidated Balance Sheets
September 30, December 31,
Cash $ 2,559 $ 2,923
Accounts receivable, net 4,491 6,815
Inventories 8,021 7,158
Other current assets 6,132 3,659
Total current assets 21,203 20,555
Property, plant and equipment, net 24,162 16,943
Deferred facility start-up costs, net 6,185 1,920
Other non-current assets 3,156 3,009
$ 54,706 $ 42,427
LIABILITIES AND SHAREHOLDERS' EQUITY
Line of credit borrowings,
due on demand $ 9,073 $ 9,245
Accounts payable 6,564 7,767
Accrued liabilities 4,575 4,538
Deferred revenue 753 572
Current portion of long-term debt 20,123 3,316
Total current liabilities 41,088 25,438
Long-term debt 3,755 9,573
Subsequent events, commitments
Total shareholders' equity 9,863 7,416
$ 54,706 $ 42,427
CONTACT: Microelectronic Packaging, Inc. Denis J. Trafecanty, Chief Financial
Officer 619/530-1660 Ext. 14 or Craig Parsons/Michael Pollock Pondel, Parsons &
Shareholder Brings Class Action Against MobileMedia for Misleading Statements
Regarding FCC Applications and MobileComm Acquisition
ARDMORE, Pa., Nov. 22, 1996 - A pension plan which purchased share s of
MobileMedia Corporation stock during the period September 14, 1995 to September
27, 1996, (the "Class Period") has commenced a Class Action in the United States
District Court for the District of New Jersey pursuant to the federal securities laws.
The named defendants in the litigation are MobileMed ia Corporation, former CEO
and Director Gregory Rorke; former Chairman and acting CEO David A. Bayer;
former CEO Michael K. Lorelli; and former President and Chief Operating Officer
John M. Kealey.
In summary, plaintiff claims that statements by the Company during the Cla ss Period
concerning problems MobileMedia was experiencing in integrating its new
acquisition, MobileComm, were false and misleading, and failed to reveal the scope
and depth of problems resulting from the acquisition. Further, plaintif f claims that
defendants failed to disclose serious violations of Federal Communications
Commission ("FCC") regulations with respect to its applications for local
transmission one-way licenses. Plaintiff's counsel in the litigatio n are Richard D.
Greenfield and Donald P. Alexander of the Ardmore, Pennsylvania firm of
Greenfield & Rifkin LLP, and Daniel W. Krasner and Peter C. Harrar of the New
York law firm of Wolf Haldenstein Adler Freeman & Herz LLP.
Under the federal securities law that is the basis for this action, purchasers of
MobileMedia common stock during the Class Period may make claims as plaintiff
has done here for the misrepresentation of material facts bearing upon such an
investment, and seek recovery for their out-of-pocket losses.
MobileMedia is the second largest paging company in the United States, wit h
approximately 4.5 million subscribers in all 50 States, Canada and the Caribbean.
The Company offers local, regional and national paging services to its subscribers.
The Company operates two one-way nationwide networks and own s two nationwide
narrowband personal communications services ("PCS") licenses. Since November 8,
1995, shares of MobileMedia have plunged from $24.00 to $1.50 per share in trading
on the Nasdaq national market.
False Information About the MobileComm Acquisition The Company on September
14, 1995, reported through the Dow Jones Newswire that it would acquire BellSouth
Corporation's paging subsidiary, MobileComm. Defendant Rorke, in commenting on
MobileMedia's acquisition of MobileComm, stated that significant efficiencies
would be realized by the acquisition:
"This acquisition represents a breakthrough in the personal communications industry
... The combined entity will have two nationwide one-way wireless networks, two
nationwide narrowband two- way PCS licenses, a sales presence in 85 of the top
100 markets, an extensive retail distribution network that encompasses more than
15,000 stores and the most efficient back-office in the industry - a great combination.
"Our recent Dial Page acquisition along with this pending acquisition accelerates our
corporate objective - to create the preeminent wireless messaging company by
combining economies of scale in our spectrum and sales coverage along with first
class customer service."
The class action Complaint contends that the foregoing statement was false and
misleading because it suggested seamless synergies and economies of scale of
integrating MobileComm into MobileMedia when, in fact, MobileComm's retail-
oriented business was fundamentally different from MobileMedia's prior busines s-
customer focus, with wholly divergent marketing, sales and billing approaches and
systems. According to the Complaint, these dissimilarities prevented read y
realization of any "economies of scale" and in the short run, could only hinde r the
The Company announced the completion of the MobileComm acquisition in a January
4, 1996 press release through the Dow Jones Newswire and further state d that
"MobileMedia, combined with MobileComm, will have more than 4 million
subscribers and total revenues in excess of $560 million and will be the secon d
largest provider of paging services in the United States." According to the Complaint,
this statement was false and misleading and was made without reasonable basis
because it failed to disclose or take into account the effect on earnings of the churn
rate (the rate of customer loss), particularly arisin g from the confusion created by the
integration of MobileComm into MobileMedia, and was not tempered by meaningful
The 1995 MobileMedia 10-K further perpetuated defendants' portrayal of the
MobileComm acquisition as seamless:
"The Company believes the MobileComm acquisition has solidified and will
continue to enhance its competitive position due to increased scale, wider sal es
coverage, greater spectrum capacity and penetration of a broader range of
distribution channels, particularly retail sales to individual customers."
(1995 10-K at 1.) The Complaint contends that, although defendants made a
boilerplate disclaimer that "the success of the resulting combined business wi ll
depend on management's ability to integrate effectively the Company's and
MobileComm's business," no mention was made of the actual integration problems
that the Company was then suffering as a result of the historically differing marketing
approaches of MobileMedia and MobileComm and the continuing customer erosion
created by the growing churn rate.
On May 13, 1996, the Company reported through a press release, disseminate d to the
public through the Dow Jones Newswire, record net revenues for the firs t quarter
ended March 31, 1996. The Complaint contends that the press release failed to give
any indication to the investing public of the problems that the Company was
experiencing in integrating MobileComm and the resulting adverse financial effect
that was expected on the Company. In touting the Company's financial well-being,
plaintiff alleges, defendants emphasized the contributio n of MobileMedia's new
acquisition, MobileComm, and led plaintiff and the investing public to believe
falsely that MobileComm was being smoothly assimilated into MobileMedia.
Defendants Rorke and Kealey stated as follows:
"Our first quarter was an exciting time," Gregory M. Rorke, MobileMedia Chief
Executive Officer, stated. "We cleared regulatory hurdles in our acquisition of
MobileComm more than two months ahead of schedule, which saved us $16.3
million off the purchase price and allowed us to start the integration process sooner
than we expected. Thanks to the dedication of all our employee s we are fast
becoming one dynamic, nationwide company."
"The integration of MobileComm is ahead of schedule," John M. Kealey,
MobileMedia's president and chief operating officer, added. "The speed of the
integration will impact short-term results due to the acceleration of expenses , but we
believe that the consolidation of operations (customer service, billing , credit and
collections, and inventory distribution) will position the company for long-term
success. Our integration strategy, first with Dial Page and now with MobileComm,
continues to build on the MobileMedia consolidated nationwide platform."
Thus, the Complaint contends, defendants continued to mislead plaintiff an d the
investment community as to MobileMedia's true financial condition and the problems
that it was encountering with regard to the integration of MobileComm .
On June 6, 1996, Reuters reported that the Company announced that it expected its
customer churn rate to stay at a similar rate in the second quart er as the 3.8 percent
reported in the first quarter 1996. Although the Company partially disclosed news
concerning its churn rate, i.e., they "(were) seeing some of the same impact as in the
first quarter," the Complaint contends that defendants still failed to disclose the full
magnitude of the problems that th e Company was experiencing in integrating
MobileComm and the effects that these problems were having and would have on the
Company's business and financial condition.
The Company announced on July 15, 1996, that the Board of Directors had decided
to make several management changes. As reported by the Newswire, the Company
announced, among other things, that Board member David A. Bayer had be en named
Chairman of the Board of Directors and acting Chief Executive Officer. The
Company also announced that Gregory M. Rorke, Chief Executive Officer, Joh n M.
Kealey, President and Chief Operating Officer, and Rodolfo O. Ploder, Senio r Vice
President of Operations, had resigned from their positions. The Company further
announced that Kealey's and Ploder's resignations would become effecti ve
September 15, 1996 and that the Board was commencing "an active search for a n ew
Chief Executive and Chief Operating Officer."
On July 25, 1996, defendants announced to the public, in a press release through the
Dow Jones Newswire, impressive growth in net revenues but, accordi ng to the
Complaint, once again failed to disclose the ongoing problems that the Company was
experiencing with regard to MobileComm's integration:
"MobileMedia Corporation (Nasdaq: MBLM) announced net revenues (revenues
from services, rents and maintenance plus product sales, less the cost of products
sold) for the second quarter ended June 30, 1996 of $144.3 million, compared to
$49.6 million as reported for the second quarter, 1995. For the s ix months ended
June 30, 1996, revenues totaled $289.9 million compared to $97.3 million for the six
months ended June 30, 1995."
The Complaint contends that defendant Bayer further propagated the Company 's
misleading statements by averring that MobileComm was being successfully
integrated into the Company:
"The wireless messaging industry continues to grow at a strong pace, and
MobileMedia continues to capture a large share of that growth. In addition, w e
continue to make good progress in working through the challenges involved with
integrating our acquisition of MobileComm, and expect to have the integration
completed within our planned 18-month time frame."
False Information About the FCC Licenses The Company made a secondary offering
of 13,500,000 Class A shares pursuan t to a registration statement dated November 7,
1995. The Company in the Registration Statement described the regulation of the
Company's operations by the FCC. Although the Company indicated that the FCC had
the ultimate power t o revoke a license or deny an application for a license, the
Complaint charges that the Company made light of any possible violation of FCC
"Although the Company is unaware of any circumstances which would prevent the
grant of pending or future renewal applications, no assurance can be given that any of
the Company's licenses will be renewed by the FCC ... None of the Company's
licenses has ever been revoked or modified involuntarily."
According to the Complaint, the Company made no mention of the possibility or
likelihood that its own actions or inactions could or would place it in violation of
FCC regulations. On the contrary, plaintiff charges, the Registration Statement made
every effort to give the opposite impression; i.e. , that it was unfathomable that the
Company could find itself in violation of FC C regulations as a result of any actions
taken or not taken by the Company or it s employees.
The Company in its Form 10-K filed with the SEC on March 29, 1996, describ ed the
regulation of the Company's operations by the FCC. The Complaint contends that
although the Company indicated that the FCC had the ultimate power to revoke a
license or deny an application for a license, the Company again made light of any
possible violation of FCC regulations:
"Although the Company is unaware of any circumstances which would prevent the
grant of pending or future renewal applications, no assurance can be given that any of
the Company's licenses will be renewed by the FCC ... None of the Company's
licenses has ever been revoked or modified involuntarily."
According to the Complaint, this statement was never corrected before the September
27, 1996 announcement of the Company's violation of FCC regulations in
applications for local one-way transmission licenses, as described below.
"Plaintiff charges that the Company, in repeating the same statements made in the
Registration Statement, misled investors by failing to make any mention of the
possibility or likelihood that its own actions or inactions could or would place it in
violation of FCC regulations. On the contrary, the Complaint contends, the
Company's Form 10-K made every effort to give the opposite impression; i.e., that it
was unfathomable that the Company could find itself in violation of FCC regulations
as a result of any actions taken or not taken by the Company or its employees."
Bad News and Market Reactions On September 27, defendants announced that
MobileMedia's third quarter results would be "significantly" affected by the
acquisition of MobileComm and that MobileMedia's poor third quarter performance,
resulting from its difficulties with the integration of MobileComm, placed it in
violation of certain covenants in its bank credit agreements:
"MobileMedia Corporation (Nasdaq: MBLM), today estimated that, due to
continuing costs and increased subscriber churn associated with the integration of the
operations of MobileComm, earnings before interest, taxes, depreciation and
amortization (EBITDA) for the third quarter ending September 30, 1996 are expected
to be approximately $35 million. These expected results also include approximately
$1 million of non-recurring costs related to the separation of three senior executives
in July and the hiring of a new Chief Executive Officer, Michael K. Lorelli. The
Company plans to release final revenue and earnings figures for the third quarter on
October 24, 1996. In addition, the Company intends to discuss operating
performance, the progress of its integration efforts and its financial position in more
detail at that time.
"The Company noted that third quarter results would, absent waivers or certain other
events, place the company in violation of certain covenants in its bank credit
agreement. The Company is working with its banks as well as its financial advisors
on measures to address these issues.
"The Company also said that it had discovered certain errors in the licensing process
for a number of its local transmission one-way paging stations. The Company has
appointed outside counsel to conduct an independent investigation into the licensing
errors. The Company also has commenced discussions with the Federal
Communications Commission (FCC) regarding the errors and will deliver the report
of its investigation to the FCC upon completion. The Company cannot be certain what
action the FCC may take in regard to this matter, but such actions could have a
material adverse effect upon the financial condition or operations of the Company.
None of the Company's nationwide or PCS licenses appear to be involved in the
"Mr. Lorelli said, 'Third quarter earnings have been significantly impacted by the
effects of the integration of the operations of MobileComm, the largest acquisition
ever in the paging industry, which doubled the size of the Company. As the Company
has previously stated, we expect to carry additional costs throughout the integration
period, which is expected to be completed by the end of the second quarter of 1997.
In addition, the difficulties associated with the integration of two sizable companies
have caused subscriber churn to increase from that reported for the first half of 1996.'
Also on September 27, 1996, the Complaint contends, defendants shocked the stock
market by disclosing for the first time that the Company had violated FCC regulations
in many of its applications for local transmission one-way licenses and the severe
problems that it was encountering with the integration of MobileComm. Defendants
announced that they had discovered certain material errors in the licensing process
for a number of its local transmission one-way paging stations that could place the
Company in violation of FCC regulations and that such violations "could have a
material adverse effect upon the financial condition or operations of the Company."
According to the Complaint, the announcement was in direct contradiction of
defendants' prior optimistic representations concerning the Company's business,
management, the success of its integration process and future prospects, and prior
pronouncements assuring the investing public that the Company could not envisage
any problems occurring with its FCC licenses due to the actions or failure to take
actions by the Company or its employees.
The Company's Director of Investor Relations, Laura Wilker, was quoted in the
October 4, 1996 edition of Land Mobile Radio News as stating that the Company
discovered errors in 225 "Form-489" documents, which are filed with the FCC to
report a transmitter's construction. Wilker was reported to have stated that in each
incident the Company had filed the form before it had constructed the relevant site.
The Company further stated through Wilker that it had filed another 200 "Form-489's"
late. Wilker was reported as stating that the errors affected roughly 6 percent to 7
percent of the Company's local transmitter sites.
Experts began to speculate about the seriousness of the FCC violations. Analysts,
such as Robert Waldman of Salomon Brothers in "The American Banker Inc.'s High
Yield Report" dated October 7, 1996, when referring to the license application
violations, expressed concern that there may be "a fraud issue here." A Company
representative quoted in a Dow Jones report dated October 22, 1996, went as far as
to call the license application errors "filing misrepresentations" and stated that the
Company could be fined by the FCC. The Company was reported in the same Dow
Jones report as stating that the "filing misrepresentations" could "have a material
adverse effect upon the financial condition and operations of the company."
Furthermore, the Complaint charges, the Company's appointment of outside counsel
to conduct an independent investigation of the "filing misrepresentations" indicates
the seriousness of the incident and that the violations were more than mere technical
oversights. Since filing of the Complaint, a Dow Jones report has stated that
violations may affect as many as 400- 500 MobileMedia transmission stations.
According to the Complaint, defendants in their prior public pronouncements and
filings with the SEC failed to reveal the possibility of problems with their FCC
license applications or the fact that employee supervision was so lax that there could
be no assurance that all steps had been taken to properly comply with FCC
regulations. The investing public was in fact given the contrary impression by
defendants, plaintiff contends, to the effect that no action or failure to act on the
Company's or its employees' part would or could lead to the revocation of any
license or the denial of any applications.
The market's reaction to defendants' dramatic disclosures of September 27, 1996,
was swift and sure, with the Company's stock dropping $2.00 from $6.50 to $4.50 on
extremely heavy volume of over 2.5 million shares. The stock continued its slide on
September 30, 1996, the first trading day after the Company's disclosure of its true
financial condition, when it fell an additional 8% to close at $4.125. As reported by
the Associated Press, Moody's analyst Eric Goldstein said, "the ratings agency was
concerned about the Company's ability (to) borrow money, now that it had admitted
having problems with its outstanding loans."
The Company's stock continued to fall steadily after the close of the Class Period
until its plunge accelerated on October 21, 1996, when it dropped an additional
$1.325, or 40% to $1.9375 on further news that the Company's violation of several of
its loan agreements would endanger interest payments on its publicly traded bonds.
Separately, Moody's lowered its rating on MobileMedia's senior subordinated notes
to Caa from B-3. The closing price of the stock on November 20 was $1.469.
The Complaint alleges that the evidence will show that at the time of the statements
alleged above, defendants knew, or were reckless in not knowing, and
misrepresented or failed to disclose, that:
a. the acquisition of MobileComm was likely to lead to serious inefficiencies;
b. the acquisition of MobileComm was likely to place the Company in violation of its
c. there were serious violations of FCC regulations which could result in substantial
penalties to the Company; and
d. statements that were made were likely to inflate the price of the stock during the
Class Period, causing plaintiff and other members of the Class to purchase stock at
Persons who identify themselves as member of the Class can obtain further
information with respect to the litigation by calling or writing to:
Donald P. Alexander, Esquire, Greenfield & Rifkin LLP. 800 Times Building,
Ardmore, PA 19003. Telephone, 610-649-3900. Fax, 610-642-6017.
The motion to certify this litigation as a class action is to be filed shortly. If members
of the Class wish to join in this litigation and/or otherwise obtain the benefits of it, if
any, they may contact Mr. Alexander for further information.
The formal caption of the litigation is: Dr. David Kirschner, Defined Benefit Pension
Plan and Trust v. MobileMedia Corporation, et al. (D.N.J. 1996). This early notice
to class members is being made pursuant to applicable federal law.
SOURCE: Greenfield & Rifkin LLP. /CONTACT: Donald P. Alexander, Esquire,
610-649-3900, or Richard D. Greenfield, Esquire, 610-649-3900, or 407-582-4884,
both of Greenfield and Rifkin/
Law Firms Announce Notice of Pendency of Class Action Against MobileMedia
Corporation and Others
NEW YORK, NY - Nov. 22, 1996 - On November 21, 1996, a class action lawsuit
was filed in the United States District Court for the District of New Jersey on behalf
of purchasers of common stock of MobileMedia Corporation ("MobileMedia" or the
"Company") between September 14, 1995 and September 27, 1996, inclusive (the
The complaint charges MobileMedia (Nasdaq: MBLM) and certain of its officers
and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 by, among other things, misrepresenting and/or omitting material
information concerning, inter alia, MobileMedia's violation of Federal
Communications Commission regulations in its applications for local transmission
licenses and the adverse financial consequences arising from the problems
MobileMedia was experiencing in integrating its new acquisition, MobileComm.
Plaintiff seeks to recover damages on behalf of Class members and is represented by
the law firms of Wolf Haldenstein Adler Freeman & Herz LLP and Greenfield &
Rifkin LLP, who have significant experience and expertise prosecuting class actions
on behalf or investors and shareholders.
If you are a member of the class described above, you may, no later than December
9, 1996, move the court to serve as lead plaintiff of the Class, if you so choose. In
order to serve as lead plaintiff, however, you must meet certain legal requirements.
If you wish to discuss this action or have any questions concerning this notice or your
rights or interests with respect to these matters, please contact:
Wolf Haldenstein Adler Greenfield & Rifkin LLP Freeman & Herz LLP 800 Times
Building 270 Madison Avenue Ardmore, PA 19003 New York, New York 10016
SOURCE Wolf Haldenstein Adler Freeman & Herz LLP /CONTACT: Wolf
Haldenstein Adler Freeman & Herz LLP, 212-545-4600 or Greenfield & Rifkin LLP,