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/raid1/www/Hosts/bankrupt/TCR_Public/990517.MBXT R O U B L E D C O M P A N Y R E P O R T E R Monday, May 17, 1999, Vol. 3, No. 94 Headlines AMERITRUCK: Seeks To Reject Five Leases ARROW AUTOMOTIVE: Seeks Authority For Sale of Inventory AUTOINFO: Announces First Quarter 1999 Results CODED COMMUNICATIONS: Seeks Authority for Sale CRIIMI MAE: First Quarter Results EIP MICROWAVE: Case Summary & 20 Largest Creditors FIRSTPLUS FINANCIAL: Committee Taps Lain Faulkner GENEVA STEEL: Seeks Extension of Exclusivity GOLDEN BOOKS: Disclosure Statement Gets Approved HARVARD INDUSTRIES: May Sell Unit LEASING SOLUTIONS: Preliminary 1998 Financial Results LOT$OFF: Creditors Agree To Withdraw Bankruptcy Petition MANHATTAN BAGEL: Creditors' Committee Seeks Trustee PARAGON TRADE: Court Order On Waiver of Privilege PARAGON TRADE: Files Reexamination With Patent Office PETSEC ENERGY: Reports First Quarter Loss PHILIP SERVICES: First Quarter Results PHONETEL: Seeks Acceptance of Plan PITTSBURGH PENGUINS: Lemieux Hires Zolfo Cooper SGL CARBON : Bloomberg Seeks To Unseal Court Records SEARCH FINANCIAL: Evans Seeks To Enforce Agreement SERVICE MERCHANDISE: Broadens Internet Possibilities SMITH CORONA: Reports Third-Quarter Financial Results STUDIO MAGIC: Canadian Firm Avoids Bankruptcy TELEGROUP: Cygnus Seeks Relief From Stay THORN APPLE: Committee Seeks To Terminate Exclusivity THORN APPLE: Restructures Sales Staff VENCOR INC: $19 Million Rental Due, Obtains Extension WESTMINSTER CAPITAL: Reports First Quarter Results WILSHIRE: Returns to Profitability in First Quarter ********* AMERITRUCK: Seeks To Reject Five Leases --------------------------------------- The debtors, AmeriTruck Distribution Corp., et al., seek to reject five (5)leases or subleases of nonresidential property under which the debtors are lessees or sublessees. A hearing is set for this motion for May 18, 1999 at 1:45 PM in the courtroom of the Honorable Harold C. Abramson, US Bankruptcy Judge, 1100 Commerce Street, 14th Floor, Dallas, Texas 75242. The debtors have implemented a program of contraction and consolidation of their business including their liquidation of their refrigerated trucking business. In the course of the consolidation the debtors have determined that five leases or subleases of nonresidential real property should be rejected. The debtors have no further use for these properties. The leases pertain to facilities located at Route 706, Wyalusing, PA; 3333 E. Bougainvillea, Tampa, FL; 9000 Empire Connector Drive, Florence, KY; and 1520 Terminal street, West Sacramento, CA. ARROW AUTOMOTIVE: Seeks Authority For Sale of Inventory ------------------------------------------------------- Arrow Automotive Industries, Inc. seeks entry of an order authorizing and approving the proposed sale of the debtor's on-hand inventory. The debtor seeks to sell the assets to BPS Cores, Inc. for a total cash purchase price of $1.75 million. The debtor believes that the proposed private sale of the assets rather than a public auction is in the best interest of the estate and the creditors. An attempt to sell the assets through a public sale or sales would raise significant logistical problems that could depress the estate's recovery. The assets are made up of thousands of inventory pieces located in four locations in two states. Any attempt to consolidate the assets in a single location for a public sale would be prohibitively expensive and result in material delay. The debtor believes that the proposed purchase price is fair and reasonable and appears to represent a premium above the market value of the assets. AUTOINFO: Announces First Quarter 1999 Results ----------------------------------------------- AutoInfo, Inc. (OTC BB:AUTO) announced results of its operations for the first quarter ended March 31, 1999. The Company reported revenues of approximately $36,000 and a net loss of $480,000, or $.06 per share, as compared with revenues of $25,000 and a net loss of $569,000, or $.07 per share, for the quarter ended March 31, 1998, which included a loss from discontinued operations of $186,000. During 1998, the Company ceased to operate as an automobile finance company. In January 1999, the Company's wholly- owned non-prime automobile subsidiary filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. Accordingly, the net liabilities of this subsidiary have been reclassified as Investment in and advances to subsidiary subject to compromise as they may be affected by the outcome of this bankruptcy filing. Accordingly, the results of operations for its non-prime automobile operations have been reclassified as discontinued operations for the period ended March 31, 1998. At March 31, 1999, the Company had cash and short term investments of approximately $1.4 million. William Wunderlich, President and Chief Financial Officer of AutoInfo, stated, "We are continuing to work toward the further restructuring of our remaining debt. We have a tax loss carryforward of approximately $27 million and are seeking a transaction that will maximize the benefit of this asset and enable us to begin to rebuild shareholder value." However, based upon the Company's poor financial condition, the are no assurances that the Company will be able to continue as a going concern. CODED COMMUNICATIONS: Seeks Authority for Sale ---------------------------------------------- Michael B. Joseph, the acting Chapter 7 trustee for the estates of Coded Communications Corporation, Coded Mobile Communications, Inc. and Decom Systems, Inc. is seeking a court order authorizing the Trustee to sell substantially all of the debtors' assets to GMSI, Inc. and Integrated Management Solutions, Inc. for $800,000. CRIIMI MAE: First Quarter Results --------------------------------- CRIIMI MAE Inc. (NYSE: CMM), reported results for the first quarter ended March 31, 1999, including higher tax basis income for the period compared to last year's first quarter. Tax basis income to common shareholders increased 30 percent from the first quarter of 1998 to 1999. Tax basis income, on a per share basis, increased from 34 cents per share in 1998 to 37 cents per share in 1999. The company also reported a higher net interest margin under both generally accepted accounting principles (GAAP) and on a tax basis. GAAP net income increased by approximately $1.2 million, or 9.5 percent, from the prior year's first quarter, though net earnings per basic share declined by four cents due to the increase in the number of shares outstanding. GAAP net income for the first quarter of 1999 included $5.5 million of reorganization expenses and $3.9 million of unrealized gains related to its mortgage warehouse purchase obligation. CRIIMI MAE's shareholders' equity increased to approximately $313 million ($4.83 per fully diluted share) at quarter end, from approximately $308 million ($4.89 per fully diluted share) at December 31, 1998. The increase in shareholders' equity at March 31, 1999 consisted of $13.4 million in undistributed net income, partially offset by a decrease in the fair value of securities of $8.7 million. As part of determining shareholders' equity, the company calculated the estimated fair market value of its portfolio of subordinated commercial mortgage-backed securities (CMBS) using a discounted cash flow method typically used in the marketplace. The company discounted its estimated cash flow using a discount rate that in its view was commensurate with the market's perception of risk and value. The company used a variety of information sources to determine its discount rates including institutionally available research reports and communications with dealers and active investors. Under GAAP, the net interest margin increased by 31 percent, or approximately $4.7 million, to approximately $19.8 million for the first quarter of this year from approximately $15.1 million for last year's first quarter. The net interest margin increase was due principally to an increase in CRIIMI MAE's holdings of subordinated CMBS. Net income available to common shareholders for the first quarter was approximately $13.4 million (25 cents per basic share), compared with approximately $12.3 million (29 cents per basic share) for last year's first quarter. This year's first quarter included reorganization expenses of approximately $5.5 million and unrealized gains of approximately $3.9 million on commitments related to the company's mortgage warehouse purchase obligation. Tax basis earnings available to common shareholders were $19.6 million, up 30 percent from $15.0 million for the prior year's first quarter. The increases in tax basis earnings and net interest margin during the first quarter of 1999 were primarily due to CRIIMI MAE's increased portfolio of subordinated CMBS and, to a lesser extent, earnings from the securitization of originated loans. On a per share basis, tax basis earnings available to common shareholders increased by three cents, to 37 cents from 34 cents. After receiving initial proposals for equity investments by institutional investors last month, CRIIMI MAE said that within the next few weeks it expects to receive final proposals that would be part of its plan of reorganization. A recently formed Special Reorganization Committee, composed of the four outside members of the Board of Directors, will evaluate the proposals. The Committee is also overseeing the ongoing development of the entire plan of reorganization under which the company could emerge from Chapter 11. The company anticipates filing a reorganization plan by August 2, 1999, which is the conclusion of the period during which CRIIMI MAE Inc. and two affiliates have the exclusive right to file a reorganization plan with the court. EIP MICROWAVE: Case Summary & 20 Largest Creditors -------------------------------------------------- Debtor: EIP Microwave, Inc. 109 Bonaventure San Jose, CA 95134 Court: Northern District of California Case No.: 99-53102 Filed: 05/03/99 Chapter: 11 Debtor's Counsel: Todd C. Ringstad 4 Park Plaza, 16th floor Irvine, California 92614 (949) 857-7450 20 Largest Unsecured Creditors: Name Nature Amount ---- ------ ------ Cutler, Jim term note plus int. 508,750 Platinum Software Corp. Consulting Services 142,000 Cascade Microwave Convertible note 200,000 Bainbridge Group Legal Services 93,252 Resources Connection LLC Consulting services 85,756 Aerotek, Inc. Trade Debt 64,301 MAI Industries, Inc. Leasehold Improve. 60,979 Fibres International Trade Debt 48,468 Accountants on Call Consulting Services 40,095 Works Systems SMBH Trade Debt 33,900 Electronic Resources, Inc. Trade Debt 33,822 Thomas Lovato Co. Trade Debt 32,463 Mahal, Charanbir S. Wages and PTO 30,385 Oak Frequency Control Trade Debt 26,219 DCI Inc. Trade Debt 24,303 Wodiske, Ernest Consulting Services 23,460 Hunter Technology Trade Debt 22,915 BDO Seidman LLP Accounting Services 22,818 AT&T Trade Debt 21,448 Design Masters Consulting Services 20,756 FIRSTPLUS FINANCIAL: Committee Taps Lain Faulkner ------------------------------------------------- The Official Unsecured Creditors' Committee of Firstplus Financial Inc. and Firstplus Special Funding Corp. seeks authority to employ and retain Lain Faulkner & Co. as accountants for the Committee. A hearing to consider the application has been set for May 21, 1999 at 2:00 PM. GENEVA STEEL: Seeks Extension of Exclusivity -------------------------------------------- The debtor, Geneva Steel Company seeks an order extending the exclusive periods during which the debtor may file a plan of reorganization to August 31, 1999 and an extension of the period within which the debtor has the exclusive right to solicit acceptances to November 1, 1999. The debtor reviews its progress in its Chapter 11 case. Liquidity has been a critical issue for the debtor. After the DIP facility was in place the debtor was required to devote a substantial amount of time to maximize the borrowing availability under the facility. The debtor has had two meetings with Bondholder Committee representatives during which reorganization plan concepts were discussed. The debtor has also discussed plan concepts with Creditors' Committee counsel and has begun drafting portions of a disclosure statement and plan document. The debtor and its financial advisors have been developing a long-term operating and financial business plan. Termination of the exclusivity periods may signal to vendors, customers and employees loss of confidence in the debtor and its reorganization efforts; and the debtor believes this would severely undermine the debtor's business operations and the successes achieved to date. In addition it would create serious distractions for management. The debtor believes that there exists reason for optimism about the steel market, and that market conditions will permit Geneva to emerge from Chapter 11 prior to year-end. GOLDEN BOOKS: Disclosure Statement Gets Approved ------------------------------------------------- Golden Books Family Entertainment Inc. won court approval of the disclosure statement following a hearing Monday, according to a spokesman for the children's book publisher. There were no objections to the disclosure statement and only minor modifications were made to the document after the hearing. A reorganization plan confirmation hearing likely would be in July but has not yet been scheduled. (The Daily Bankruptcy Review and ABI Copyright c May 14, 1999) HARVARD INDUSTRIES: May Sell Unit --------------------------------- Harvard Industries Inc., an auto-parts supplier to Ford Motor Co. and General Motors Corp., may sell a unit that makes molded rubber seals to reduce its debt and raise money for acquisitions. Harvard Industries hired Lehman Bros. to advise the company on alternatives such as the sale of its Kingston-Warren subsidiary, which also makes weather stripping and plastic seals. Kingston-Warren, based in Newfields, N.H., has 1,300 employees and generated about $140 million of the company's 1998 revenue of $690 million. The company said it identified possible businesses to buy as it seeks to bolster its units that supply parts for aerospace-and construction-equipment makers. Harvard Industries, which has about $70 million in debt, emerged from Chapter 11 bankruptcy reorganization in late November. (Record New Jersey -05/13/99) LEASING SOLUTIONS: Preliminary 1998 Financial Results ----------------------------------------------------- Leasing Solutions, Inc. (NYSE:LSN) announced preliminary, unaudited financial results for the fourth quarter and full year 1998. The company also provided an update regarding a forbearance agreement with its lenders. For the three months ended Dec. 31, 1998, Leasing Solutions expects to post revenues of approximately $79 million, compared to $64 million reported for the same period in 1997. However, the company estimates a net loss of approximately $(58) million for the quarter, compared to $4.1 million in net income for fourth quarter 1997. For the twelve months ended Dec. 31, 1998, Leasing Solutions expects to report revenues of approximately $299 million, compared to $225 million in 1997. The company also estimates a net loss of approximately $(53) million for the full year 1998, compared to net income of $13.1 million in 1997. Leasing Solutions notes that these expected financial results for fourth quarter and full year 1998 (as well as the detail provided in the following background section) are unaudited and preliminary and may change, and are subject to final review by the company's outside auditors. Leasing Solutions continues to negotiate with its senior lenders regarding payment defaults and other related matters, including a three-month forbearance agreement. Based on current limitations of financing, the company has suspended new operating lease financing activity in the U.S. Any future operating lease business will be dependent on the company's ability to finance such business. LOT$OFF: Creditors Agree To Withdraw Bankruptcy Petition -------------------------------------------------------- San Antonio-based LOT$OFF Corporation (OTC BB:LOTS) announced today that certain trade creditors have agreed to withdraw their involuntary bankruptcy petition against the Company. Such nine creditors alleged claims totaling $1,318,547.05 against the Company in their petition filed April 8, 1999, in the United States Bankruptcy Court for the Western District of Texas, San Antonio Division. The Company had planned to contest the involuntary filing at a Court hearing on May 18, 1999, and had filed a counter-claim against the petitioning creditors. The Company and the petitioning creditors have agreed to the dismissal of both the involuntary petition and the counter-claim and will attempt to work out their differences out-of-court. In this regard, the Company and its retail subsidiaries have agreed to the setting up of an ad hoc committee of 24 trade creditors, including the nine petitioning creditors, to attempt to resolve disputes between trade creditors and the Company and its subsidiaries. LOT$OFF Corporation, which had been pursuing the merger or sale of all or a part of the Company's retail subsidiaries, announced on Jan. 21, 1999, that it planned to accelerate the sale of its retail assets. While an event of default occurred and is continuing under the Company's revolving credit facility with General Electric Capital Corporation and under its Senior Subordinated Notes, GECC has been providing limited working capital to the retail subsidiaries to effect the sale discussed above. The initial sales, in-store inventories, began, with the counsel of Universal Capital Group LLC, in the retail subsidiaries' 47 stores Jan. 27, 1999. After 14 weeks of inventory clearance sales, LOT$OFF's retail subsidiaries have consolidated inventories into five Texas stores and, with the support of GECC and the continuing counsel of Universal, are currently augmenting such inventories with new product to enhance recoveries. Certain store leases have been assigned, and others have been terminated. Negotiations continue with landlords and potential assignees with respect to remaining store leases and with potential purchasers of other assets, principally furniture and fixtures. As previously reported, on Dec. 4, 1997, a court entered a judgment against Chase in the Company's favor for $148,575,000 plus costs of court and post-judgment interest at 5.42% from Dec. 4, 1997. Subsequently, Chase filed five post-judgment motions with the court, and, on Feb. 23, 1998, the court, having considered such motions, the supplements to such motions, the response of the Company to such motions and the entire record in the cause, denied all of Chase's post-judgment motions. Chase appealed the judgment entered by the court to the Fifth Circuit Court of Appeals in New Orleans. MANHATTAN BAGEL: Creditors' Committee Seeks Trustee --------------------------------------------------- The Official Unsecured Creditors' Committee of Manhattan Bagel company, Inc. submits an application for a court order approving the appointment of Donald F. Conway as the Trustee of the Manhattan Bagel Unsecured Creditor Trust in order to settle and reconcile claims and administer assets of the Trust. PARAGON TRADE: Court Order On Waiver of Privilege ------------------------------------------------- The Official Committee of the Equity Security Holders of Paragon Trade Brands, Inc. asked that the court order the Proctor & Gamble Company ("P&G")to produce all privileged documents and communications relating to the subject matter of debtor's motion to approve its settlement with P&G. The Equity Committee contends that in the course of P&G's briefing and testimony in connection with the Settlement Motion, P&G impliedly waived the attorney-client privilege as to those matters. P&G opposes the Equity Committee's request. The Equity Committee seeks to undertake discovery to obtain what would otherwise be privileged documents and communications relating to the Appeal, the Contempt Motion, and the P&G proof of claim. The Equity Committee contends that the implied waiver occurred because P&G "injected" the issue of its probability of success against the debtor into the litigation of the settlement motion. The court found that, "the Equity Committee's attorney may have led P&G close to the line between the privilege and its waiver but P&G did not cross it this time." The request to produce all privileged document and communications relating the debtor's motion to approve its settlement with P&G is denied. PARAGON TRADE: Files Reexamination With Patent Office ----------------------------------------------------- The Official Committee of Equity Security Holders of Paragon Trade Brands, Inc. filed a Reexamination Request with the US Patent and Trademark Office for a patent owned by the Procter & Gamble Company. The Committee asserts that it is clear that the newly identified prior art in question renders the alleged invention of the patent in controversy unpatentable, and establishes a substantial question of patentability with respect to the claims underpinning the judgment against Paragon Trade. The Committee presents a chart evidencing the similarities of the P&G patent with a certain Japanese patent in order to prove the unpatentability of the patent in question, which patent covers the design of the cuff of disposable diapers. PETSEC ENERGY: Reports First Quarter Loss ----------------------------------------- Petsec Energy, an independent oil and gas exploration and production company, announced an after tax net loss for the quarter ended March 31, 1999 as US$5.8 million, as compared to a net loss for the same period last year of US$8.9 million. In American Depositary Receipts this compares to a net loss in 1999 ADR of US$ .27 over the net loss in 1998 of US$ .41 per ADR. Petsec Energy's head office is in Sydney, Australia, while its operation is in the offshore Gulf of Mexico, based in Lafayette, Louisiana. No wells were drilled in the first quarter of 1999 but the company states it expects to commence drilling this quarter. The company was the high bidder for two leases at the OCS Central Gulf of Mexico Lease Sale in March 1999. A sole bid of US$1.7 million on Vermilion 258 was successful, and a joint bid with Coastal Corp. for West Delta 113 was also successful. Petsec's share of the latter bid was US$0.3 million. The leases are expected to be awarded within the next two months. Petsec indicated it's first quarter poor showing was due to the sale, effective January 1, 1999, of a 50% working interest in seventeen production leases and six exploration leases. Normal decline over the same first quarter period accounted for additional losses. On February 1, 1999 Petsec finalized the sale of the above interests to Apache Corp. for US $68.3 million. The proceeds were used to repay bank debt. PHILIP SERVICES: First Quarter Results -------------------------------------- Philip Services Corp. (TSE/ME: PHV) announced its financial results for the first quarter ended March 31, 1999. All currency figures are stated in US dollars. Allen Fracassi, interim Chief Executive Officer said, "Since the end of the first quarter, we have executed a lock-up agreement with our secured lenders and are moving ahead with a plan of reorganization that will ensure business as usual throughout our financial restructuring. Revenue for the first quarter of 1999 was $169 million less than the revenue reported in the same period in 1998. The Industrial Services Group revenue for the first quarter of 1999 was $280.4 million, compared with revenue of $286.8 million in the first quarter of 1998. The Metals Services Group revenue for the first quarter of 1999 was $98.6 million, compared with $260.9 for the first quarter in 1998. The decrease in revenue from the metals operations was primarily attributable to the sale of the Company's steel distribution business in July 1998 and a 35 percent drop in ferrous scrap average selling prices in the first quarter of 1998. Income from operations (before corporate expenses) was $2.2 million in the first quarter of 1999 compared with income of $25.9 million in the first quarter of 1998. PHONETEL: Seeks Acceptance of Plan ---------------------------------- PhoneTel Technologies Inc., Cleveland, announced that it has begun solicitation of acceptances of its pre-packaged reorganization plan from holders of its 12 percent Senior Notes due 2006 and holders of its 14 percent Cumulative Redeemable Convertible Preferred Stock, according to a newswire report. The terms of the pre-packaged plan are summarized in the disclosure statement mailed on May 11 to holders of record as of April 23. The voting deadline is June 11. Under the plain, the claims of employees, trade and certain other creditors, other than senior note claims, would be paid in full in the ordinary course, with the company retaining its rights and defense with respect to such claims. (ABI 14-May-99) PITTSBURGH PENGUINS: Lemieux Hires Zolfo Cooper ----------------------------------------------- Former Pittsburgh Penguin star Mario Lemieux announced yesterday that he hired Leonard LoBiondo of Zolfo Cooper, New York City, to work on his reorganization plan for the Pittsburgh Penguins franchise, which filed chapter 11 last year, The Pittsburgh Post-Gazette reported. LoBiondo's mission will be to examine team finances to determine whether the Penguins can be viable in Pittsburgh, said attorney Robert G. Sable of Sable, Makoroff & Gusky P.C., Pittsburgh. Sable said LoBiondo's input will add credibility in the financial world if he thinks the team can succeed. Separately, Mayor Murphy and Allegheny County Commissioners Mike Dawida and Bob Cranmer yesterday said they would not consider a new arena for the team until its finances are in order. "Discussions or assurances of a new arena should not be a part of any negotiations at this point," they said in a statement. So reorganization plans for the team will be required to demonstrate that the team can return to profitability at its 38-year-old Civic Arena, the oldest facility in the National Hockey League. (ABI 14-May-99) SGL CARBON : Bloomberg Seeks To Unseal Court Records ---------------------------------------------------- Bloomberg News, a division of Bloomberg LP filed a motion to intervene in the case of SGL Carbon and unseal the court record. Bloomberg argues that there is significant public interest in disclosure in this case, due to collusive activities in the industry. Bloomberg asserts that it does not seek access to documents containing trade secrets or truly proprietary information. It seeks access to information which may explain the activities of the parties in this case. Bloomberg asserts that unless the Creditors' Committee in this case can show with articulated and factually supported particularity that a certain sealed Docket puts them at a competitive disadvantage by releasing bona fide trade secrets, or contains truly scandalous and defamatory material within the meaning of the Bankruptcy Code, "then the record in this case must be open to the public." SEARCH FINANCIAL: Evans Seeks To Enforce Agreement -------------------------------------------------- George Evans filed a motion to enforce an employment agreement between Evans and Search Capital Group, Inc. referencing the employment of Evans as President, CEO and member of the Board of Directors. Evans filed an amended proof of claim for an unsecured nonpriority claim of $1,098,000 plus attorney fees. A hearing to consider the motion is scheduled for May 14, 1999 at 9:30 AM, US Bankruptcy Court, 1100 Commerce Street, 14th Floor, Dallas, Texas 75242. SERVICE MERCHANDISE: Broadens Internet Possibilities ---------------------------------------------------- The Tennessean reports on May 11, 1999 that in a move to put greater focus on the business potential of the Internet, retailer Service Merchandise Co. Inc. is creating an electronic commerce division. David Seifert, former senior vice president of B.A. Pargh, a Service Merchandise subsidiary selling office supplies and equipment to businesses, has been promoted to the position of vice president of e-commerce, assuming responsibility for the division. The new area will incorporate the company's Web-page sales, mail-order call center operations, fulfillment department and commercial sales, as well as B.A. Pargh. The creation of the e-commerce division comes at a time when the company is restructuring under the protection of Chapter 11 bankruptcy laws. The company, which had $3.2 billion in net revenues in 1998, filed its bankruptcy petition in March. Service Merchandise's Web site currently includes an online catalog, gift registry, store locator and information on sales and events. SMITH CORONA: Reports Third-Quarter Financial Results ----------------------------------------------------- Smith Corona Corp. (NASDAQ:SCCO) announced its financial results for the third quarter ended March 31, 1999. The company reported a net loss of $4.6 million, or $1.51 per share, on sales of $11.9 million, a 27 percent improvement in performance from its second-quarter net loss of $6.3 million, or $2.10 per share. For the third quarter last year, the company reported a net loss of $2.9 million, or $1.04 per share, on sales of $15.1 million. For the nine months ended March 31, 1999, Smith Corona reported a net loss of $16.5 million, or $5.51 per share, on sales of $35.8 million compared with a loss of $2.2 million, or $0.81 per share, on sales of $46.9 million for the same period last year. Results this year included nonrecurring restructuring expense of $1.3 million, while last year's results included a $3.7 million gain from the sale of the manufacturing facility and a $.5 million extraordinary gain from the company's financial reorganization. Sales declines were partially offset by newly sourced product sales of $2.1 million and $5.7 million for the three and nine months respectively, compared with new- product sales of $1.5 million and $2.0 million for the same periods last year. Gross margin improvement is anticipated in the fourth quarter as a result of two nonrecurring actions affecting the three- and nine-month periods: the successful elimination of negative margin inventories and the recording of retroactive price increases related to the core products procurement contract. "While we will continue to make improvements in our company, we began to turn the corner in the third quarter," stated John A. Bermingham, president and chief executive officer of Smith Corona. "The company's cash position was positively affected by third-quarter sales of excess telephony and facsimile product inventories and an additional $2.0 million boost in April from the sale of the company's former plant. With the reductions in operating expense achieved due to our restructuring program, we believe that Smith Corona is making real progress on the road back to profitability." Bermingham also noted positive shifts in the company's core typewriter business. "Industry data indicates that the sales decline in worldwide typewriter markets, which has been steep for the past several years, is now leveling off and remains a substantial worldwide business. This trend and Smith Corona's historical success in its core business have supported our current refocus on our typewriter business," he said. STUDIO MAGIC: Canadian Firm Avoids Bankruptcy --------------------------------------------- Business Press Ontario CA reports on May 10, 1999 that Studio Magic, a video production company in Temecula, has dropped its bankruptcy proceedings following several financial moves that eased its short-term cash problems. "We've got the problem covered," said Brian Padberg, company president. "We've revised arrangements with a landlord and two suppliers and are working on new financing." Additionally, Studio Magic is negotiating with private investors who will take an equity position in the company, Padberg said. He declined to name them, however. Although the company had plenty of assets, a shortage of cash led to its initial Chapter 11 bankruptcy filing on March 22. TELEGROUP: Cygnus Seeks Relief From Stay ---------------------------------------- Cygnus Telecommunications Technologies, LLC requests an order granting Cygnus relief from the automatic stay and to enjoin the debtor from infringing activity. Cygnus claims that the debtor, Telegroup, Inc. has and continues postpetition to generate substantial revenues from the sale and provision of long distance telephone service utilizing the Cygnus patented system and method for International Call-back without Cygnus' consent. The debtor recently announced a transfer of substantially all of its assets to Interoute, and Cygnus believes that Interoute intends to continue the sale and provision of International Call-back services to the debtor's and its subsidiaries' retail customers. Cygnus seeks relief from the automatic stay to take all actions necessary to commence and prosecute an Infringement Lawsuit against the debtor. THORN APPLE: Committee Seeks To Terminate Exclusivity ----------------------------------------------------- The Official Committee of Unsecured Creditors requests that the court terminate exclusivity immediately because the debtor, Thorn Apple Valley Inc. has consented to an order which deprives the debtor of the right to negotiate a plan of reorganization. The Committee alleges that it is unable to negotiate a plan with the debtor and the only way for the Committee to obtain plan provisions which it favors is for the Committee to propose its own plan. An interim order was entered by the court whereby the Lender has the right to veto any plan of reorganization proposed by the debtor due to language in a section regarding best efforts to effect a sale. The section states that the debtor will use its best efforts to effectuate a sale of its assets, or "if acceptable to Lenders in their sole and absolute discretion, a plan of reorganization." The Committee believes that it is at an unfair disadvantage with respect to the lender, and that it is in an impossible position because any negotiation concerning a plan of reorganization must take place with the Lender, which has veto power over any plan, but the Committee is arguably precluded from negotiating with the Lender while the debtors' exclusivity continues. THORN APPLE: Restructures Sales Staff ------------------------------------- Thorn Apple Valley, Inc. (OTC Bulletin Board: TAVIE), a Southfield, Michigan based meat producer, announced they have completed a strategic reorganization of their sales staff that began more than six months ago with the appointment of Mike Rozzano as Executive Vice President of Sales. As part of the new restructuring, Thorn Apple Valley announced the appointment of two new retail sales vice presidents, Ed Knoblich and Larry Swafford. There were several other promotions and additions of new personnel. The addition of the two new vice presidents and the restructuring of the sales department are part of a number of new changes taking place. TAV is changing their logos and packaging, as well as improving products for taste and texture. The company is also in the process of implementing what it believes will be the most comprehensive food safety program in the industry. TAV also announced that 8 sales representatives in Michigan left the company. VENCOR INC: $19 Million Rental Due, Obtains Extension ----------------------------------------------------- Vencor Inc., a long-term healthcare provider operating hospitals, nursing centers and contract ancillary services in 46 states, failed to pay rental to Ventas, Inc. when payment fell due May 7, 1999. Ventas served notices of non-payment under the Master Leases, however, the parties have since entered into further amendments of their prior Standstill and Tolling Agreements. Extended until June 6, 1999 is the time during which no remedies may be pursued by either party. Vencor now has until June 11, 1999 to cure it's failure to pay May rents. Chairman and CEO of Vencor, Edward L. Kuntz, while cautioning that uncertainties exist, states that he is optimistic that continuing discussions with Ventas, senior bank lenders, and holders of the company's 9 7/8% Guaranteed Senior Subordinated Notes, will lead to an improved capital structure for the Company. Mr. Kuntz cites as a key element in his optimism the approximately 60,000 employees dedicated to providing quality care and services to the Company's patients and nursing center residents. WESTMINSTER CAPITAL: Reports First Quarter Results -------------------------------------------------- Westminster Capital Inc., (PCX:WI), a holding company that makes opportunistic value-added investments in publicly- held and private companies, today reported net earnings of $402,000, or $0.05 per share diluted, for the three months ended March 31, 1999, compared to net income of $2,511,000, or $0.32 per share diluted, for the three months ended March 31, 1998. Revenues for the quarter were $6,999,000, compared to $8,577,000 for the three months ended March 31, 1998. The decrease in revenues resulted in part from a decline in sales at the Company's wholly owned subsidiary, Westland Associates, as well as the effect of $2,644,000 in interest earned on a franchise tax claim that was recorded in the three months ended March 31, 1998. Cash and marketable securities as of March 31, 1999 totaled $22,942,000. In January 1999, the Company announced that it had acquired an 80 percent interest in One Source Industries LLC, a privately held company that provides turnkey packaging and point-of-sale displays for a broad spectrum of consumer products ranging from computer software to food products, for a purchase price of $4.8 million at closing and up to an additional $2.6 million in deferred contingent payments over the next four years. Last year One Source reported net profits before income taxes of $1.8 million on revenues of $10.2 million. Westminster Capital's operations include, Westland Associates Inc., a group purchasing services for new-car dealerships, Global Telecommunications, a telephone service to military personnel on U.S. Navy bases, and One Source Industries, a provider of packaging and point-of-display materials. The Company also engages in certain lending activities, including origination and purchasing loans, as well as investing in securities which principally consists of U.S. Government securities and to a limited extent other equity based securities. WILSHIRE: Returns to Profitability in First Quarter --------------------------------------------------- Wilshire Real Estate Investment Trust Inc. (Nasdaq:WREI) a hybrid REIT specializing in diversified real estate investments, reported net income of $1.8 million, or $0.15 per share, for its first quarter ended March 31, 1999. Funds from operations were $3.3 million, or $0.29 per share. The results follow two quarters of net losses caused by the adverse market conditions of 1998. The Company commenced operations in April 1998, and did not report financial results for the comparable period last year. "We are pleased to report a return to profitability for the first quarter, which reflects improvement in the market for mortgage-backed securities as well as our intense activities during the past few months to stabilize our balance sheet and position the Company for this rebound," said Andrew Wiederhorn, chairman and chief executive officer. "As we resume acquisition activities, we plan to increase our investments in loans and to de-emphasize new investments in commercial operating properties. We believe that investments in loans provide higher yields and allow us to more efficiently leverage existing capital, thereby providing a higher return on equity. Consistent with our strategy, we also see attractive opportunities for additional investments in Europe, particularly in France. In addition to the direct acquisition of loans and other investments, we may seek to invest in other companies that invest in real estate related assets, especially in cases where the market capitalizations of such companies do not reflect the inherent values of the underlying assets or franchises." On April 29, 1999, the Company sold a loan held for sale secured by commercial properties in the United Kingdom with a carrying value of approximately $47.9 million as of March 31, 1999. As a result of this sale, the Company reversed $3.9 million of a valuation allowance previously provided for in the provision for losses in the accompanying interim consolidated statement of operations for the quarter ended March 31, 1999. This valuation allowance had been established in 1998 based upon management's estimate at that time of the ultimate recoverability of the asset in a sale. Interest income for the quarter was $7.1 million and net interest income before provisions for losses was $3.4 million, generated primarily from investments in mortgage- backed securities and mortgage loans. Provision for losses was a net recovery of $1.1 million, which reflects reversal of $3.9 million taken in prior periods for the above- referenced loan held for sale. WFSG, through its subsidiary, Wilshire Realty Services Corporation, manages the Company's investment affairs and advises it pursuant to a management agreement. WFSG was negatively impacted by adverse market conditions in 1998 and incurred significant losses. WFSG filed a prepackaged plan of reorganization as part of a Chapter 11 Bankruptcy filing, which was subsequently approved by the Bankruptcy Court. In connection with the restructuring, the Company agreed to provide WFSG with DIP financing of up to $10 million as part of a settlement of a $17.0 million receivable from WFSG. To the extent the Company funds less than $10 million of this facility, the unfunded prorated portion of the receivable is to be treated pari passu with claims of WFSG's unsecured senior note holders. The Company funded $5 million of the facility and has decided not to fund the remaining $5 million. As a result, during the quarter, a $2.7 million provision for loss was recorded to recognize the net economic impact of converting the remaining 50% of the $17.0 million receivable to new WFSG common stock. ********* The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. Bond pricing, appearing in each Friday edition of the TCR, is provided by DLS Capital Partners, Dallas, Texas. S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter, co- published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. 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