<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to ________
Commission File Number: 000-23883
PHOENIXSTAR, INC.
--------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
State of Delaware 84-1441684
------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
8085 South Chester Street, Suite 110
Englewood, Colorado 80112
--------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 712-4609
PRIMESTAR, INC.
---------------------------------
(Former name)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days [X] Yes [ ] No
None of Phoenixstar, Inc.'s shares of common stock were publicly traded
as of July 30, 1999. The number of shares outstanding of Phoenixstar, Inc.'s
common stock as of July 30, 1999 was:
Class A common stock 179,143,934 shares;
Class B common stock 8,465,324 shares; and
Class C common stock 13,332,365 shares.
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- -------------
amounts in thousands
<S> <C> <C>
Assets
Cash and cash equivalents $ 36,232 --
Receivables:
Trade receivables -- 117,655
Other receivables 4,445 29,387
Due from TCI Satellite Entertainment, Inc.
(note 2) 13,106 --
--------------- -------------
17,551 147,042
Less allowance for doubtful accounts -- 7,442
--------------- -------------
17,551 139,600
--------------- -------------
Prepaid expenses 393 3,967
Investment in General Motors Corporation
(note 2) 195,074 --
Property and equipment, at cost, net -- 1,148,590
Intangible assets, net of accumulated
amortization -- 786,373
Deferred financing costs and other assets,
net of accumulated amortization -- 33,557
--------------- -------------
$ 249,250 2,112,087
=============== =============
(continued)
</TABLE>
I-1
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Condensed Consolidated Balance Sheets, continued
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- ------------
amounts in thousands
<S> <C> <C>
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
Accounts payable $ 1,298 195,873
Accrued expenses 51,566 136,901
Accrued charges from related parties 5,080 14,792
Deferred revenue -- 100,948
General Motors Corporation share appreciation
right liability (note 2) 45,365 --
Debt (note 2) 3,893 1,833,195
Deferred income taxes -- 75,057
Other liabilities 6,566 40,095
------------ -----------
Total liabilities 113,768 2,396,861
------------ -----------
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value; authorized
350,000,000 shares; none issued -- --
Class A common stock, $.01 par value;
authorized 850,000,000 shares;
issued 179,143,934 in 1999 and 1998 1,791 1,791
Class B common stock, $.01 par value;
authorized 50,000,000 shares;
issued 8,465,324 in 1999 and 1998 85 85
Class C common stock, $.01 par value;
authorized 30,000,000 shares;
issued 13,332,365 in 1999 and 1998 133 133
Class D common stock, $.01 par value;
authorized 150,000,000 shares;
none issued -- --
Additional paid-in capital 1,967,435 1,511,041
Accumulated deficit (1,833,962) (1,797,824)
------------ -----------
Total stockholders' equity (deficit) 135,482 (284,774)
------------ ------------
Commitments and contingencies (notes 2 and 7)
$ 249,250 2,112,087
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-2
<PAGE>
PHOENIXSTAR, INC. AND SUBSISDIARIES
(formerly PRIMESTAR, INC.)
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- ----------------
amounts in thousands, except per share amounts
<S> <C> <C> <C> <C>
Revenue:
Programming and equipment rental $ 150,636 354,675 535,902 508,932
Installation 1,430 16,837 10,028 31,080
---------------- ---------------- ---------------- ----------------
152,066 371,512 545,930 540,012
---------------- ---------------- ---------------- ----------------
Operating costs and expenses:
Charges from PRIMESTAR Partners L.P.
("PPLP") (note 6) -- -- -- 82,235
Operating (note 6) 82,794 182,753 282,458 192,600
Selling, general and administrative
(note 6) 155,784 144,207 260,989 204,417
Depreciation 50,976 112,390 165,437 177,495
Amortization 8,125 32,368 32,500 32,368
---------------- ---------------- ---------------- ----------------
297,679 471,718 741,384 689,115
---------------- ---------------- ---------------- ----------------
Operating loss (145,613) (100,206) (195,454) (149,103)
Other income (expense):
Interest expense (19,843) (49,447) (62,271) (63,624)
Gain on sale of assets 110,695 -- 110,695 --
Other, net 1,920 (110) 2,193 (6,553)
---------------- ---------------- ---------------- ----------------
92,772 (49,557) 50,617 (70,177)
---------------- ---------------- ---------------- ----------------
Loss before income taxes and
extraordinary item (52,841) (149,763) (144,837) (219,280)
Income tax benefit 75,057 62,372 75,057 62,372
---------------- ---------------- ---------------- ----------------
Earnings (loss) before extraordinary
item 22,216 (87,391) (69,780) (156,908)
Extraordinary item - gain on
extinguishment of debt (note 2) 33,642 -- 33,642 --
---------------- ---------------- ---------------- ----------------
Net earnings (loss) 55,858 (87,391) (36,138) (156,908)
Other comprehensive income:
Unrealized holding gain on
available for sale securities 11,475 -- 11,475 --
Unrealized loss on share
appreciation rights (11,475) -- (11,475) --
---------------- ---------------- ---------------- ----------------
-- -- -- --
---------------- ---------------- ---------------- ----------------
Comprehensive income (loss) $ 55,858 (87,391) (36,138) (156,908)
================ ================ ================ ================
Basic and diluted earnings (loss) per
common share (note 4) $ .28 (.43) (.18) (1.17)
================ ================ ================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-3
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
Six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Total
Common stock Additional stockholders'
----------------------------------------------- paid-in Accumulated equity
Class A Class B Class C Class D capital deficit (deficit)
----------- ---------- ---------- ---------- ---------- ----------- ----------
amounts in thousands
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ 1,791 85 133 -- 1,511,041 (1,797,824) (284,774)
Net loss -- -- -- -- -- (36,138) (36,138)
Contribution from stockholders -- -- -- -- 456,394 -- 456,394
----------- ---------- ---------- ---------- ---------- ----------- ----------
Balance at June 30, 1999 $ 1,791 85 133 -- 1,967,435 (1,833,962) 135,482
=========== ========== ========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-4
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1999 1998
------------ ------------
amounts in thousands
(see note 5)
<S> <C> <C>
Cash flows from operating activities:
Net loss before extraordinary item $ (69,780) (156,908)
Adjustments to reconcile net loss before extraordinary
item to net cash provided (used) by operating activities:
Depreciation and amortization 197,937 209,863
Accretion of debt discount 7,966 10,452
Stock compensation 427 9,986
Payments related to stock appreciation rights (1,577) --
Payments related to restructuring charges (12,811) --
Gain on sale of assets (110,695) --
Deferred tax benefit (75,057) (62,372)
Noncash payment to TSAT 66,143 --
Other non-cash charges 799 7,678
Changes in operating assets and liabilities, net of the
effects of sales and acquisitions:
Change in receivables 16,734 (21,671)
Change in prepaid expenses and other assets 1,716 (299)
Change in accruals and payables (198,296) 45,644
Change in deferred revenue 4,005 890
------------ ------------
Net cash provided (used) by operating activities (172,489) 43,263
------------ ------------
Cash flows from investing activities:
Capital expended for property and equipment (146,900) (216,198)
Proceeds from sale of assets 1,650,959 --
Cash paid in Restructuring -- (54,894)
Other investing activities (4,554) (75)
------------- ------------
Net cash provided (used) by investing activities 1,499,505 (271,167)
------------ ------------
Cash flows from financing activities:
Borrowings of debt 22,000 451,561
Repayments of debt (1,769,178) (222,025)
Payment of deferred financing costs -- (8,705)
Stockholder contributions 456,394 --
Proceeds from issuance of common stock -- 989
------------ ------------
Net cash provided (used) by financing activities (1,290,784) 221,820
------------ ------------
Net increase (decrease) in cash and cash
equivalents 36,232 (6,084)
Cash and cash equivalents:
Beginning of period -- 6,084
------------ ------------
End of period $ 36,232 --
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
I-5
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(Unaudited)
(1) Organization and Basis of Presentation
--------------------------------------
The accompanying condensed consolidated financial statements of
Phoenixstar, Inc. (formerly PRIMESTAR, Inc.) ("Phoenixstar" or the
"Company") include the historical financial information of (i) TCI
Satellite Entertainment, Inc. ("TSAT") and its consolidated
subsidiaries for the period prior to the April 1, 1998 Restructuring
and (ii) Phoenixstar and its consolidated subsidiaries for the period
subsequent to March 31, 1998. All significant intercompany transactions
have been eliminated.
Phoenixstar was incorporated on August 27, 1997. Through the Hughes
Closing Date, as defined below, the Company owned and operated the
PRIMESTAR(R) direct to home satellite service throughout the
continental U.S. The PRIMESTAR(R) service is transmitted via a
satellite ("GE-2") owned and operated by GE American Communications
("GE Americom") at the 85(Degree) West Longitude ("W.L.") orbital
position. As a result of the consummation of the Hughes Medium Power
Transaction, as defined below, the Company is no longer engaged in the
digital satellite-based television services industry. The Company is in
the process of satisfying its remaining liabilities, terminating any
remaining contracts and winding up its business affairs.
Interim Financial Statements
----------------------------
The accompanying interim condensed consolidated financial statements of
the Company are unaudited. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) have been
made which are necessary to present fairly the financial position of
the Company as of June 30, 1999 and the results of its operations for
the periods ended June 30, 1999 and 1998. The results of operations for
any interim period are not necessarily indicative of the results for
the entire year. These financial statements should be read in
conjunction with the financial statements and related notes thereto
included in the Company's December 31, 1998 Annual Report on Form 10-K.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
-----------------
Certain amounts have been reclassified for comparability with the 1999
presentation.
(continued)
I-6
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
(2) The Hughes Transactions
-----------------------
Effective April 28, 1999 (the "Hughes Closing Date") and pursuant to an
asset purchase agreement dated January 22, 1999 (the "Hughes Medium
Power Agreement"), the Company sold its medium-power direct broadcast
satellite business to Hughes Electronics Corporation ("Hughes"), a
subsidiary of General Motors Corporation, for aggregate consideration
of $1,358.2 million (the "Hughes Medium Power Transaction"). Such
consideration was comprised of $1,100 million in cash (before working
capital adjustments and transaction costs) and 4.871 million shares of
General Motors Class H common stock ("GMH Stock") valued at $258.2
million on the Hughes Closing Date. The Company recognized a gain of
approximately $99 million, before income tax effects, upon consummation
of the Hughes Medium Power Transaction. The purchase price is subject
to working capital adjustments to be settled within 150 days after the
Hughes Closing Date.
Concurrently with the Hughes Medium Power Transaction, Phoenixstar
reached an agreement (the "Lock-up Agreement") with holders of
approximately 84% of the aggregate principal amount of its 10-7/8%
Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"),
12-1/4% Senior Subordinated Discount Notes due 2007 (the "Senior
Subordinated Discount Notes" and, together with the Senior Subordinated
Notes, the "Notes"), and notes issued under its Senior Subordinated
Credit Facility dated as of April 1, 1998 (the "Bridge Loans"). Holders
participating in the privately negotiated transaction agreed to sell
their Notes and Bridge Loans to the Company for cash equal to 85.6% of
the aggregate principal amount thereof, plus stock appreciation rights
("SARs") on the shares of GMH Stock received by Phoenixstar in the
Hughes Medium Power Transaction. The Company recognized a gain on the
extinguishment of debt equal to $33,642,000 or $.17 per share in
connection with the Lock-up Agreement.
Each SAR issued in the transaction entitles the holder to receive a
payment from Phoenixstar at the end of one year from the date of
issuance in the amount, if any, by which the market price per share of
GMH Stock at such time exceeds $47.00 per share. At June 30, 1999, such
obligation aggregated $45,365,000. Participating Note holders and
bridge lenders received approximately 7.8 SARs per $1,000 principal
amount of debt sold to Phoenixstar pursuant to the Lock-up Agreement.
Participating Note holders and bridge lenders also agreed to (i)
consent to the transaction with Hughes and (ii) amend the indentures
and credit agreement governing such debt obligations to remove
substantially all covenants, other than covenants to pay interest on
and principal of the Notes and Bridge Loan when due and covenants
relating to certain required purchase offerings.
Under the terms of the indentures and credit agreement governing
Phoenixstar's subordinated debt, Phoenixstar was required to make an
offer to purchase the remainder of the outstanding Notes and Bridge
Loans at a purchase price equal to 101% of par plus any accrued and
unpaid interest. In that connection, the Company purchased
substantially all of the remaining Notes and Bridge Loans as of June
30, 1999.
(continued)
I-7
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
In connection with the Hughes Medium Power Transaction and pursuant to
a funding agreement, dated as of March 31, 1999 (the "Funding
Agreement"), affiliates of the stockholders of the Company, other than
TSAT, and an affiliate of Tele-Communications, Inc. (collectively, the
"Stockholder Affiliates") committed to make funds available to the
Company, either in the form of capital contributions or loans, up to an
aggregate of $1,013.3 million, subject to certain conditions and
triggering events set forth in the Funding Agreement (the "Stockholder
Commitment"). Pursuant to such commitment, the Stockholder Affiliates
contributed to the Company $307.7 million on the Hughes Closing Date
(the "Initial Funding Amount"). On the Hughes Closing Date, the Company
used a portion of the cash proceeds from the Hughes Medium Power
Transaction and the Initial Funding Amount to (i) repay principal,
interest and fees due under the Company's senior bank credit facility
($537.5 million) and (ii) fund amounts due pursuant to the Lock-up
Agreement ($543.5 million) and (iii) fund amounts to holders of Bridge
Loans who were not party to the Lock-up Agreement ($10.1 million).
Subsequent to the Hughes Closing Date, the Stockholder Affiliates
contributed to the Company an additional $148.7 million pursuant to the
Funding Agreement. In addition, Stockholder Commitments in the amount
of $382.6 million expired. As a result of the foregoing, remaining
Stockholder Commitments at June 30, 1999 aggregated $174.3 million.
In connection with their approval of the Hughes Medium Power
Transaction and other transactions, the stockholders of Phoenixstar
also approved the payment to TSAT of consideration in the form of 1.407
million shares of GMH Stock (the "Phoenixstar Payment"), subject to the
terms and conditions set forth in an agreement dated as of January 22,
1999 (the "Phoenixstar Payment Agreement"). In consideration of the
Phoenixstar Payment, TSAT agreed to approve the Hughes Medium Power
Transaction and Hughes High Power Transaction (as defined below) as a
stockholder of Phoenixstar, to modify certain agreements to facilitate
the Hughes High Power Transaction, and to issue the Company a share
appreciation right with respect to the shares of GMH Stock received as
the Phoenixstar Payment, granting the Company the right to any market
price appreciation in such GMH Stock over the one year period following
the date of issuance, over an agreed strike price of $47.00. At June
30, 1999, the value of such share appreciation right equaled
$13,106,000, based upon the market value of GMH Stock on such date.
Pursuant to the Phoenixstar Payment Agreement, TSAT has also agreed to
forego any liquidating distribution or other payment that may be made
in respect of the outstanding shares of Phoenixstar upon any
dissolution and winding-up of Phoenixstar, or otherwise in respect of
Phoenixstar's existing equity. On the Hughes Closing Date, the Company
issued to TSAT 1.407 million shares of GMH Stock in satisfaction of the
Phoenixstar Payment.
At June 30, 1999, the Company is responsible for (i) the payment of
certain obligations not assumed by Hughes and (ii) the payment of
costs, estimated to range from $180 million to $200 million, associated
with the termination of certain vendor and service contracts and lease
agreements not assumed by Hughes. The Company currently expects to fund
such obligations with available cash and additional advances and/or
contributions from the Stockholder Affiliates pursuant to the
Stockholder Commitment.
(continued)
I-8
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
In a separate transaction and effective June 4, 1999, the Company and
TSAT completed the sale of their high power direct broadcast satellite
("DBS") assets to Hughes pursuant to an asset purchase agreement dated
as of January 22, 1999 (the "Hughes High Power Agreement"), among Tempo
Satellite, Inc., ("Tempo") a wholly-owned subsidiary of TSAT, the
Company, PPLP, a wholly-owned subsidiary of the Company, and Hughes.
The assets transferred by Tempo pursuant to the Hughes High Power
Agreement consisted of Tempo's two high-power DBS satellites, one of
which was in orbit at 119(Degrees) W.L. (the "In-Orbit Satellite") and
one of which was used as a ground spare (the "Ground Satellite"), its
FCC authorizations with respect to the 119(Degrees) W.L. orbital
location (the "FCC License"), and certain related assets (collectively,
the "Tempo High Power Assets").
Tempo had previously granted the Company the transferable right and
option (the "Tempo Purchase Option") to purchase 100% of the Tempo High
Power Assets for aggregate consideration of $2.5 million in cash and
the assumption of all liabilities. In addition, Tempo had previously
granted to PPLP the right to purchase or lease 100% of the capacity of
the DBS system being constructed by Tempo (the "Tempo Capacity Rights),
and PPLP had made advances to Tempo to fund the construction of Tempo's
DBS system in the aggregate amount of $465 million (the "Tempo
Reimbursement Obligation").
Accordingly, the Hughes High Power Agreement provided for (i) the sale
by the Company to Hughes of the Tempo Purchase Option, (ii) the
exercise of the Tempo Purchase Option by Hughes, and (iii) the
termination of the Tempo Capacity Rights (collectively, the "Hughes
High Power Transaction"). The aggregate consideration payable by Hughes
in the Hughes High Power Transaction was $500 million, payable as
described below.
As regulatory approval was required to transfer the In-Orbit Satellite
and the FCC License, the Hughes High Power Agreement provided for the
Hughes High Power Transaction to be completed in two steps. To
facilitate the transaction, the Tempo Purchase Option was amended to
provide for a two-stage exercise process. The parties allocated 70% of
the total consideration under the Hughes High Power Agreement to the
In-Orbit Satellite and related assets and 30% of the total
consideration thereunder to the Ground Satellite and related assets.
The first closing under the Hughes High Power Agreement was consummated
effective March 10, 1999. In the first closing, Hughes acquired the
Ground Satellite and related assets for aggregate consideration of $150
million, comprised of (i) $9,750,000 paid by Hughes to the Company and
PPLP for the transfer to Hughes of that portion of the Tempo Purchase
Option allocable to the Ground Satellite and the termination of that
portion of the Tempo Capacity Rights allocable to the Ground Satellite,
(ii) $750,000 paid by Hughes to Tempo to exercise that portion of the
Tempo Purchase Option allocable to the Ground Satellite; and (iii) the
assumption and payment by Hughes of a portion of the Tempo
Reimbursement Obligation in the amount of $139,500,000.
In addition, as required by the Hughes High Power Agreement, the
Company and TSAT agreed to terminate the previously announced merger of
TSAT with and into the Company, effective as of such first closing.
(continued)
I-9
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
The FCC approved the transfer of the FCC License to Hughes on May 28,
1999, and the second closing under the Hughes High Power Agreement was
consummated effective June 4, 1999. In the second closing, Hughes
acquired the In-Orbit Satellite and related assets, including all
rights of Tempo with respect to the FCC License, for aggregate
consideration of $350 million comprised of (i) $22,750,000 paid by
Hughes to the Company and PPLP for the transfer to Hughes of that
portion of the Tempo Purchase Option allocable to the In-Orbit
Satellite and the termination of that portion of the Tempo Capacity
Rights allocable to the In-Orbit Satellite, (ii) $1,750,000 paid by
Hughes to Tempo to exercise that portion of the Tempo Purchase Option
allocable to the In-Orbit Satellite; and (iii) the assumption and
payment by Hughes of the remainder of the Tempo Reimbursement
Obligation, in the amount of $325,500,000. In addition, the Company
agreed to forgive amounts due from Tempo not assumed by Hughes in the
amount of $9,346,000.
(3) The Restructuring
-----------------
Effective April 1, 1998 (the "Restructuring Closing Date") and pursuant
to (i) a Merger and Contribution Agreement dated as of February 6, 1998
(the "Restructuring Agreement"), among TSAT, the Company, Time Warner
Entertainment Company, L.P. ("TWE"), Advance/Newhouse Partnership
("Newhouse"), Comcast Corporation ("Comcast"), Cox Communications, Inc.
("Cox"), MediaOne of Delaware, Inc. ("MediaOne"), and GE Americom, and
(ii) an Asset Transfer Agreement dated as of February 6, 1998, between
TSAT and the Company, a business combination (the "Restructuring") was
consummated. In connection with the Restructuring, TSAT contributed and
transferred to the Company (the "TSAT Asset Transfer") all of TSAT's
assets and liabilities except (i) the capital stock of Tempo, (ii) the
consideration received by TSAT in the Restructuring and (iii) the
rights and obligations of TSAT under agreements with the Company and
others. In addition, (i) the business of PPLP, (ii) the business of
distributing the PRIMESTAR(R) programming service ("PRIMESTAR(R)"),
including certain related assets and liabilities of each of TWE,
Newhouse, Comcast, Cox and affiliates of MediaOne, and (iii) the
interest in PPLP of each of TWE, Newhouse, Comcast, Cox, affiliates of
MediaOne and GE Americom (collectively, the "Non-TSAT Parties") were
consolidated into the Company.
In connection with the Restructuring, each of TSAT, Comcast, Cox,
MediaOne, Newhouse, TWE and GE Americom received from the Company (i)
cash or an assumption of indebtedness, (ii) shares of Class A Common
Stock, $.01 par value per share, of the Company, (iii) in the case of
TSAT only, shares of Class B Common Stock, $.01 par value per share, of
the Company, and (iv) except in the case of TSAT and GE Americom,
shares of Class C Common Stock, $.01 par value per share, of the
Company, in each case in an amount determined pursuant to the
Restructuring Agreement. The total consideration paid by Phoenixstar to
the Non-TSAT Parties (including assumed liabilities) aggregated
approximately $2.2 billion comprising $1.3 billion of cash and assumed
liabilities and $900 million of common stock.
(continued)
I-10
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
The TSAT Asset Transfer was recorded at TSAT's historical cost, and the
remaining elements of the Restructuring, as set forth above, were
accounted for using the purchase method of accounting. The fair value
of the consideration issued to the Non-TSAT Parties was allocated to
the assets and liabilities acquired based upon the estimated fair
values of such assets and liabilities.
TSAT was identified as the acquirer for accounting purposes and the
predecessor for financial reporting purposes due to the fact that TSAT
owned the largest interest in the Company immediately following
consummation of the Restructuring.
On a pro forma basis, the Company's revenue, net loss and loss per
common share for the six months ended June 30, 1998 would have been
$744,075,000, $247,418,000 and $1.62 assuming the Restructuring had
been consummated on January 1, 1998. Such unaudited pro forma financial
information is based upon historical results of operations adjusted for
acquisition costs and, in the opinion of management, is not necessarily
indicative of the results had the Restructuring been consummated on
January 1, 1998.
(4) Earnings (Loss) Per Common Share
--------------------------------
The earnings (loss) per common share for the three months and six
months ended June 30, 1999 and 1998 is based on the weighted average
number of shares outstanding during the period (200,942,000 for the
three months and six months ended June 30, 1999; and 200,942,000 and
134,287,000 for the three months and six months ended June 30, 1998,
respectively).
(5) Supplemental Disclosures to Consolidated Statements of Cash Flows
-----------------------------------------------------------------
Cash paid for interest was $68,558,000 and $51,179,000 during the six
months ended June 30, 1999 and 1998, respectively. Cash paid for income
taxes was not material during such periods.
Significant non-cash investing and financing activities for the six
months ended June 30, 1998 are reflected in the following table
(amounts in thousands):
Cash paid in Restructuring:
Property and equipment acquired $ 716,821
Intangible assets 1,500,034
Current liabilities assumed, net of
current assets (116,849)
Debt assumed (903,299)
Deferred tax liability (222,585)
Common stock issued (919,228)
--------------
$ 54,894
==============
(continued)
I-11
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Notes to Condensed Consolidated Financial Statements
(6) Transactions With Related Parties
---------------------------------
The Company was a party to a satellite transponder service agreement,
as amended (the "GE-2 Agreement") with an affiliate of GE Americom for
satellite service on GE-2. Charges to the Company for the use of GE-2
and other services provided by GE Americom aggregated $28,392,000 and
$17,085,000 for the six months ended June 30, 1999 and 1998,
respectively and are included in operating expenses in the accompanying
consolidated statements of operations.
TCI and the Non-TSAT Parties, other than GE Americom, arranged for
letters of credit (the "GE-2 Letters of Credit") to support the
Company's obligations under the GE-2 Agreement. Pursuant to the
Restructuring Agreement, the Company reimburses TCI and the Non-TSAT
Parties for fees related to the Partnership Letters of Credit and the
GE-2 Letters of Credit. Such reimbursements aggregated $4,143,000 and
$5,474,000 during the six months ended June 30, 1999 and 1998,
respectively and are included in interest expense in the accompanying
consolidated statement of operations.
From April 1, 1998 to April 28, 1999, a subsidiary of TCI provided
satellite uplink services to the Company. Charges for such services
aggregated $4,843,000 and $4,014,000 for the six months ended June 30,
1999 and 1998, respectively and are included in operating expenses in
the accompanying consolidated statements of operations.
TCI also provided the Company with customer support services from TCI's
Boise, Idaho call center. Amounts charged by TCI to the Company for
such services aggregated $12,024,000 and $10,243,000 during the six
months ended June 30, 1999 and 1998, respectively and are included in
selling, general and administrative expenses in the accompanying
consolidated statements of operations.
Prior to the Restructuring, the Partnership provided programming
services to TSAT and other authorized distributors in exchange for a
fee based upon the number of subscribers receiving programming
services. In addition, the Partnership arranged for satellite capacity
and uplink services, and provided national marketing and administrative
support services in exchange for a separate authorization fee.
(7) Commitments and Contingencies
-----------------------------
The Company has contingent liabilities related to legal proceedings and
other matters arising in the ordinary course of business. Although it
is reasonably possible the Company may incur losses upon conclusion of
such matters, an estimate of any loss or range of loss cannot be made.
In the opinion of management, it is expected that amounts, if any,
which may be required to satisfy such contingencies will not be
material in relation to the accompanying consolidated financial
statements.
I-12
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
----------
General
- -------
The following discussion and analysis provides information concerning
the financial condition and results of operations of Phoenixstar and should be
read in conjunction with (i) the accompanying consolidated financial statements
of Phoenixstar, and (ii) the financial statements and related notes of the
Company, and Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations included in the Company's Annual Report on Form 10-K for
- ---------------------
the year ended December 31, 1998.
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of Phoenixstar to differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such risks, uncertainties and other factors
include, among others: general economic and business conditions and industry
trends; uncertainties inherent in proposed business strategies and development
plans; future financial performance, including availability, terms and
deployment of capital; availability of qualified personnel; changes in, or the
failure or the inability to comply with, government regulations, including,
without limitation, regulations of the FCC, and adverse outcomes from regulatory
proceedings; reliance on software programs used by the Company or its business
partners containing problems related to the Year 2000; and other factors
referenced in this Report. These forward-looking statements speak only as of the
date of this Report. Phoenixstar expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in Phoenixstar's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
Material Changes in Results of Operations
- -----------------------------------------
As discussed in note 2 to the accompanying consolidated financial
statements, the Hughes Medium Power Transaction was consummated on April 28,
1999. As a result of such consummation, the Company is no longer engaged in the
digital satellite-based television service industry. The Company is in the
process of satisfying its remaining liabilities, terminating any remaining
contracts and winding up its business affairs.
As discussed in note 3 to the accompanying consolidated financial
statements, the Restructuring was consummated on April 1, 1998. As a result of
the Restructuring, the Company owned and operated the PRIMESTAR(R) digital
satellite business. The Company offered a direct to home satellite service with
over 160 channels of digital video and audio programming throughout the
continental United States. Prior to the Restructuring, the PRIMESTAR(R) service
was owned and operated by the Partnership and separately distributed and
serviced by affiliates of the partners of the Partnership (the "Distributors").
As a result of the Restructuring, the entire PRIMESTAR(R) digital satellite
business was consolidated into the Company.
I-13
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Material Changes in Results of Operations, continued
- ----------------------------------------------------
TSAT was identified as the acquiror for accounting purposes and the
predecessor for financial reporting purposes due to the fact that TSAT owned the
largest interest in the Company immediately following the consummation of the
Restructuring. Accordingly, the periods prior to the Restructuring represent the
results of operations of TSAT, and the periods subsequent to the Restructuring
include the results of operations of TSAT, the Partnership and the Non-TSAT
Parties. To the extent not otherwise described, increases in the Company's
revenue and operating, selling, general and administrative expenses, as detailed
below, are primarily related to the Restructuring.
The Company added 20,000 net customers during the three months ended
March 31, 1999 for a total of 2,316,000 customers at March 31, 1999. During the
three months ended March 31, 1999 and 1998 and the years ended December 31, 1998
and 1997, (i) the Company's annualized subscriber churn rate (which represents
the annualized number of subscriber terminations divided by the weighted average
number of subscribers during the period) was 37.3%, 27.1%, 33.2% and 30.1%,
respectively and (ii) the average subscriber life implied by such subscriber
churn rate was 2.7 years, 3.7, years 3.0 years and 3.3 years, respectively. The
Company believes that the higher churn rate in 1999 is due to increased
competitive pressures in 1999 and the announcement of the Hughes Medium Power
Transaction. In addition, the Company reduced its marketing efforts in the first
quarter of 1999 as a result of the announcement of the Hughes Medium Power
Transaction.
During 1998, in an effort to remain competitive, attract new customers
and retain existing customers, the Company implemented various new service
offerings and changed the pricing of certain of its existing offerings. For
example, the Company implemented a national pricing and programming package
structure effective July 1, 1998, whereby customers would receive the same
programming packages for the same price throughout the country. Such national
pricing structure had the effect of lowering certain rates for certain packages
in certain areas of the country. In addition, the Company initiated promotional
offers including installation rebates and packages with reduced rental fees. The
Company believes that such new service offerings, pricing changes and
promotional offers attracted new customers and helped retain existing customers,
but had a negative impact on the Company's recurring revenue per customer and
installation revenue per new customer installed.
Revenue decreased 59% and increased 1% during the three and six months
ended June 30, 1999 and 1998 respectively, as compared to the corresponding
prior year periods. The Company's average monthly programming and equipment
rental revenue per customer decreased from $57 during 1998 to $55 during 1999.
Such decrease was primarily the result of the aforementioned changes in the
price structure of the Company's service offerings. The average installation
revenue from each customer installed decreased from $95 in 1998 to $36 in 1999.
Such decrease is primarily due to a $50 rebate offer that was initiated by the
Company in April 1998 and increased to $100 in September 1998.
Through the Restructuring Closing Date, the Partnership provided
programming services to the Company and other authorized Distributors in
exchange for a fee based upon the number of customers receiving programming
services. The Partnership also arranged for satellite capacity and uplink
services, and provided national marketing and administrative support services,
in exchange for a separate authorization fee from each Distributor, including
the Company, based on such Distributor's total number of authorized satellite
receivers.
I-14
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Material Changes in Results of Operations, continued
- ----------------------------------------------------
Subsequent to the Restructuring Closing Date, operating expenses were
primarily comprised of programming, satellite capacity and uplink costs (costs,
which prior to the Restructuring were included in charges from the Partnership)
and amounts related to customer fulfillment activities. Also included in
operating expenses for the three months ended June 30, 1999 is $15,192,000
related to the cancellation of the Company's high power uplinking contract.
Selling and marketing expenses, which represented 20% of revenue during
the six months ended June 30, 1999, include sales salaries and commissions,
marketing and advertising expenses, and costs associated with the operation of
customer service call centers. General and administrative expenses represented
27% and 11% of revenue during the six months ended June 30, 1999 and 1998,
respectively. The increase in such percentage is primarily attributable to (i)
the Phoenixstar Payment ($66,143,000) (ii) the accrual of severance payments in
connection with the Hughes Medium Power Transaction ($25,740,000) and (iii)
contract and lease cancellation fees incurred as a result of the Hughes Medium
Power Transaction ($10,393,000).
During the second half of 1997, the Company began offering a marketing
program that allowed subscribers to purchase the Company's proprietary satellite
reception equipment at a price that was less than the Company's cost. Losses
incurred by the Company on such sales of satellite reception equipment are
included in selling expense in the period such sales are consummated. As the
Company stopped aggressively marketing such program in the fourth quarter of
1998, such losses decreased to $299,000 in 1999 from $12,077,000 during 1998.
The $12,058,000 or 7% decrease in depreciation expense during the six
months ended June 30, 1999, as compared to the corresponding prior year period,
is the result of the sale of the Company's depreciable assets in connection with
the Hughes Medium Power Transaction.
The Company recognized a gain of $99,080,000 upon consummation of the
Hughes Medium Power Transaction and a gain of $11,615,000 upon the consummation
of the Hughes High Power Transaction. In addition, the Company recognized a gain
on the extinguishment of debt of $33,642,000 in connection with the Lock-up
Agreement.
The Company's loss before extraordinary item of $69,780,000 for the six
months ended June 30, 1999 represents a decrease of $87,128,000 as compared to a
loss before extraordinary item of $156,908,000 for the six months ended June 30,
1998. Such decreased loss before extraordinary item is due primarily to the
gains recorded in connection with the Hughes Transactions partially offset by an
increased operating loss.
I-15
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Material Changes in Financial Position
- --------------------------------------
Concurrently with the Hughes Medium Power Transaction, Phoenixstar
reached agreement with holders of approximately 84% of the aggregate principal
amount of its Senior Subordinated Notes, Senior Subordinated Discount Notes and
Bridge Loans. Holders participating in the privately negotiated transaction
agreed to consent to the transaction with Hughes, amend the indentures and
credit agreement governing such debt obligations to remove substantially all
covenants, and sell their Notes and Bridge Loans to the Company for cash equal
to 85.6% of the aggregate principal amount thereof, plus stock appreciation
rights on the shares of GMH Stock received by Phoenixstar in the Hughes Medium
Power Transaction. Each SAR issued in the transaction entitles the holder to
receive a payment from Phoenixstar at the end of one year from the date of
issuance in the amount, if any, by which the market price per share of GMH Stock
at such time exceeds $47.00 per share. Participating note holders and bridge
lenders received approximately 7.8 SARs per $1,000 principal amount of debt sold
to Phoenixstar pursuant to the Lock-up Agreement.
Under the terms of the indentures and credit agreement governing
Phoenixstar's subordinated debt, Phoenixstar was required to make an offer to
purchase the remainder of the outstanding Notes and Bridge Loans at a purchase
price equal to 101% of par plus any accrued and unpaid interest. In that
connection, the Company purchased substantially all of the remaining Notes and
Bridge Loans as of June 30, 1999.
In connection with the Hughes Medium Power Transaction and pursuant to
the Funding Agreement, the Stockholder Affiliates committed to make funds
available to the Company, either in the form of capital contributions or loans,
up to an aggregate of $1,013.3 million, subject to certain conditions and
triggering events set forth in the Funding Agreement. Pursuant to such
commitment, the Stockholder Affiliates contributed to the Company $307.7 million
on the Hughes Closing Date. On the Hughes Closing Date, the Company used a
portion of the cash proceeds from the Hughes Medium Power Transaction and the
Initial Funding Amount to (i) repay principal, interest and fees due under the
Company's bank credit facility ($537.5 million), (ii) fund amounts due pursuant
to the Lock-up Agreement ($543.5 million) and (iii) fund amounts to holders of
Bridge Loans who were not party to the Lock-up Agreement ($10.1 million).
Subsequent to the Hughes Closing Date, the Stockholder Affiliates
contributed to the Company an additional $148.7 million pursuant to the Funding
Agreement. In addition, Stockholder Commitments in the amount of $382.6 million
expired. As a result of the foregoing, remaining Stockholder Commitments at June
30, 1999 aggregated $174.3 million.
I-16
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Material Changes in Financial Position, continued
- -------------------------------------------------
In addition, the stockholders of Phoenixstar approved the payment to
TSAT of consideration in the form of 1.407 million shares of GMH Stock, subject
to the terms and conditions set forth in the Phoenixstar Payment Agreement. In
consideration of the Phoenixstar Payment, TSAT agreed to approve the Hughes
Medium Power Transaction and Hughes High Power Transaction as a stockholder of
Phoenixstar, to modify certain agreements to facilitate the Hughes High Power
Transaction, and to issue the Company a share appreciation right with respect to
the shares of GMH Stock received as the Phoenixstar Payment, granting the
Company the right to any market price appreciation in such GMH Stock over the
one year period following the date of issuance, over an agreed strike price of
$47.00. Pursuant to the Phoenixstar Payment Agreement, TSAT has also agreed to
forego any liquidating distribution or other payment that may be made in respect
of the outstanding shares of Phoenixstar upon any dissolution and winding-up of
Phoenixstar, or otherwise in respect of Phoenixstar's existing equity. On the
Hughes Closing Date, the Company issued to TSAT 1.407 million shares of GMH
Stock in satisfaction of the Phoenixstar Payment.
The obligations under the Bridge Loan Agreement were due in full one
year from the Closing Date. However, the Company had the option to convert any
outstanding principal amount of the Bridge Loan on such date to a term loan
maturing on April 1, 2008. The Company gave notice of such conversion on March
29, 1999, in accordance with the terms of the Bridge Loan Agreement.
In addition, on the Conversion Date, the Company became obligated to
enter into a stock warrant agreement with the Lenders providing for the issuance
of warrants to purchase common stock of the Company equal to 2% of the Company's
outstanding common stock on the Conversion Date. The warrants are to be
exercisable over a ten-year period at a nominal exercise price. At June 30,
1999, no such agreement had been entered into.
During the second quarter of 1999, the Company used the cash proceeds
from the Hughes High Power Transaction and funds provided by the Stockholder
Affiliates pursuant to the Funding Agreement to repay the Partnership Credit
Facility. In connection with such repayment, letters of credit which
collateralized the Partnership Credit Facility and which were arranged for by
the Stockholder Affiliates were terminated.
At June 30, 1999, the Company is responsible for (i) the payment of
certain obligations not assumed by Hughes and (ii) the payment of costs,
currently estimated to range from $180 million to $200 million, associated with
the termination of certain vendor and service contracts and lease agreements not
assumed by Hughes. The Company currently expects to fund such obligations with
available cash and additional advances and/or contributions from the Stockholder
Affiliates pursuant to the Stockholder Commitments.
As noted above, the consideration received by the Company in the Hughes
Medium Power Transaction comprised of $1.1 billion in cash and 4.871 million
shares of GMH Stock. Pursuant to the terms of the Hughes Medium Power Agreement,
Phoenixstar will not be able to dispose of the GMH Stock for a period of one
year from the closing of the Hughes Medium Power Transaction except for certain
transfers to affiliates. Phoenixstar is considering its options with respect to
the GMH Stock, but has not yet made any decisions as to the ultimate disposition
of such stock.
I-17
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
Material Changes in Financial Position, continued
- -------------------------------------------------
The Company has a history of operating losses and reported an
accumulated deficit at June 30, 1999. The Stockholder Affiliates have committed
to make funds available to the Company, either in the form of capital
contributions or loans, up to an aggregate of $174.3 million, subject to certain
conditions and triggering events set forth in the Funding Agreement. Management
of the Company believes, but cannot assure, that when such funds are combined
with the Company's existing sources of liquidity, that the Company will be able
to meet its obligations as they become due and payable.
The Company is in the process of identifying and addressing issues
surrounding the Year 2000 ("Y2K") and their impact on the Company's operations.
The issue surrounding the Year 2000 is whether the Company's operations and
financial systems, or the systems used by the companies with whom the Company
conducts business, will properly recognize and process date sensitive
information before and after January 1, 2000. The following discussion is based
on information currently available to the Company.
Prior to the Hughes Closing Date, the Company completed an initial
assessment which identified areas of risk associated with the Year 2000. The
Year 2000 Program Office was established to oversee the Company's Year 2000
project. Detailed inventories were gathered and cost estimates were finalized.
For each functional area of the project, detailed work plans were developed and
put into place. Separate test environments completed construction and testing
was initiated in the first quarter of 1999.
In connection with the Hughes Medium Power Transaction, Hughes acquired
substantially all of the Company's systems. The Company has analyzed and
continues to analyze its remaining internal IT and non-IT systems. The Company
believes that such systems are currently capable of functioning without
substantial Y2K compliance problems.
Through June 1999, the Company has spent approximately $1,375,000 for
Y2K issues, $1,125,000 of which was spent in 1999, and does not currently expect
to spend any additional amounts for Y2K related issues.
The Company does not currently believe that any of the foregoing will
have a material adverse effect on its financial condition or its results of
operations. However, the process of evaluating the Company's products and third
party products and systems is ongoing. Although not expected, failures of
critical suppliers and/or systems could have a material adverse effect on the
Company's financial condition or results of operations. As widely publicized,
Y2K compliance has many issues and aspects, not all of which the Company is able
to accurately forecast or predict. There is no way to assure that Y2K will not
have adverse effects on the Company, some of which could be material.
I-18
<PAGE>
PHOENIXSTAR, INC. AND SUBSIDIARIES
(formerly PRIMESTAR, Inc.)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibit
27 - Financial Data Schedule
(b) Reports on Form 8-K filed during quarter ended June 30,
1999:
<TABLE>
<CAPTION>
Date of Report Items Reported Financial Statements Filed
-------------- -------------- --------------------------
<S> <C> <C> <C>
May 13, 1999 Items 2, 5 and 7 Phoenixstar, Inc. - Condensed pro
forma combined financial statements
- December 31, 1999
June 18, 1999 Items 2 and 7 Phoenixstar, Inc. - Condensed pro
forma combined financial statements
- March 31, 1999
</TABLE>
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHOENIXSTAR, INC.
Date: August 11, 1999 By: /s/ Kenneth G. Carroll
--- --------------------------------------
Kenneth G. Carroll
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PHOENIXSTAR, INC.'S (FORMERLY PRIMESTAR, INC.) QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTER ENDED JUNE 30,1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 36,232
<SECURITIES> 195,074
<RECEIVABLES> 17,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 249,250
<CURRENT-LIABILITIES> 0
<BONDS> 3,893
0
0
<COMMON> 2,009
<OTHER-SE> 133,473
<TOTAL-LIABILITY-AND-EQUITY> 249,250
<SALES> 0
<TOTAL-REVENUES> 545,930
<CGS> 0
<TOTAL-COSTS> 282,458
<OTHER-EXPENSES> 197,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,271
<INCOME-PRETAX> (144,837)
<INCOME-TAX> (75,057)
<INCOME-CONTINUING> (69,780)
<DISCONTINUED> 0
<EXTRAORDINARY> 33,642
<CHANGES> 0
<NET-INCOME> (36,138)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
