FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): May 22, 1998
Zenith Electronics Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-4115 36-1996520
(State or jurisdiction (Commission File (IRS Employer
of incorporation) Number) identification No.)
1000 Milwaukee Avenue
Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (847) 391-7000
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
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On May 21, 1998, Zenith Electronics Corporation (the "Company") announced
that its Board of Directors has unanimously approved in principle a financial
restructuring to be implemented through a prepackaged plan of reorganization.
The terms of the financial restructuring were separately reviewed by a
special committee of independent directors, which recommended approval to
the board. The restructuring is subject to a number of significant
conditions referred to below. In connection with the financial restructuring,
the Company is also implementing a broad operational restructuring plan
designed to leverage the Company's technology, brand and distribution
strengths.
Under the proposed reorganization plan, trade creditors and vendors will
not be impaired and will continue to be paid in the ordinary course of
business. In addition, the Company expects to continue to pay employees'
wages, salaries and benefits and to fulfill obligations to customers
throughout the reorganization.
The Company also has reached an agreement in principle with LG Electronics
Inc. ("LGE"), the Company's majority stockholder, for LGE's support and
participation in the plan. Under the plan, LGE will convert approximately
$200 million of the Company's obligations to LGE into common stock of the
Company, representing 100 percent of the equity in the restructured
Company. In addition, the plan provides for approximately $210 million of
claims held by LGE to be exchanged for certain of the Company's
manufacturing assets in Mexico and secured notes due 2008 on which interest
may be paid in kind under certain circumstances. LGE will provide an
additional $60 million of credit support to help finance the implementation
of the plan. The Company and LGE are in discussions with third-party
lenders about additional financing.
The plan provides for current holders of the Company's 6-1/4% convertible
subordinated debentures to receive $40 million of new 6-1/4% subordinated
debentures maturing in 2010. It is currently contemplated that the
claims of all other creditors will either not be impaired by the plan or be
consensually restructured.
Under the plan, all outstanding common stock will be canceled, and
holders of common stock will receive no distribution.
The restructuring is subject to a number of conditions, including
definitive documentation and receipt of necessary approvals from the
Company's creditors and the court presiding over the prepackaged plan.
LGE's support is subject to the Company securing additional financing,
executing its business plan and other conditions. In addition, LGE's
ability to participate fully in the proposed restructuring remains
subject to approval by Republic of Korea regulatory authorities. There
can be no assurance that the proposed restructuring will be consummated
or that completion of such restructuring will not be delayed.
The full text of the press release issued by the Company is included as
an exhibit hereto and incorporated herein by reference.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Certain statements in this Current Report on Form 8-K (including the
exhibits hereto), such as statements regarding the Company's strategies,
plans, objectives and expectations, are forward-looking statements that
involve known and unknown risks, uncertainties and other factors which
may cause the actual results of the Company or its efforts to execute a
business and financial restructuring to be materially different from
any future results expressed or implied by such forward-looking
statements. Such factors include, among others, the following:
general economic and business conditions, both in the United States and
other countries in which the Company sells its products and from which
the Company obtains supplies; the effect of competition in the markets
served by the Company; required approvals of the Republic of Korea for
additional financing, if any, that LGE may desire to extend to the
Company and other aspects of LGE's participation in the restructuring;
the availability and terms of financing from LGE or other financing
sources to fund the Company's operating losses, restructuring charges and
the other costs and expenses of its new business plan; the satisfaction of
the conditions to the proposed restructuring; and the willingness of
existing creditors to continue to forbear from enforcing available rights
and remedies and to grant additional waivers of potential defaults and to
agree to the terms of any proposed financial restructuring. Given these
uncertainties, stockholders and debtholders are cautioned not to place
undue reliance on any forward-looking statement contained herein. The
Company disclaims any obligation to update such factors or forward-
looking statements or to publicly announce the result of any revisions
to any of the forward-looking statements contained herein or to reflect
future events or developments.
Item 7. Financial Statements, Pro forma Financial Information and Exhibits.
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(c) The following exhibits are included as part of this report:
Exhibit 20 - Zenith Electronics Corporation Press Release
dated May 21, 1998.
SIGNATURES
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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 hereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
By: /s/ Richard F. Vitkus
------------------------
Richard F. Vitkus,
Senior Vice President,
General Counsel and
Secretary
Date: May 22, 1998
<PAGE>
Exhibit Index
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Exhibit
Number Exhibit Description
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20 Press Release dated May 21, 1998.
FOR IMMEDIATE RELEASE
----------------------
ZENITH ANNOUNCES RESTRUCTURING PLAN
________________________________
Financial Restructuring to be Implemented Through
Prepackaged Plan of Reorganization
________________________________
Operational Restructuring De-emphasizes Manufacturing,
Focuses on Optimizing Brand, Products, Technologies
GLENVIEW, Ill., May 21, 1998 - Zenith Electronics Corporation
(NYSE:ZE) today announced a comprehensive restructuring
plan designed to reduce its debt, enhance its competitiveness, and
position the company for growth and consistent profitability.
Zenith's board of directors has unanimously approved in
principle a financial restructuring to be implemented through a
prepackaged plan of reorganization. Zenith said the financial
restructuring is key to management's plan to execute a comprehensive
operational restructuring. The terms of the financial restructuring
were separately reviewed by a special committee of independent
directors, which recommended approval to the board.
"Today, we are taking a major step forward in our efforts to improve
Zenith's financial health and to rebuild Zenith into a brand and
technology leader," said Jeffrey P. Gannon, Zenith president and
chief executive officer.
FINANCIAL RESTRUCTURING
Under the proposed reorganization plan, trade creditors
and vendors will not be impaired and will continue to be paid in
the ordinary course of business. In addition, Zenith will continue
to pay employees' wages, salaries and benefits, and will continue
to fulfill obligations to customers throughout the reorganization.
The company also has reached an agreement in principle
with LG Electronics Inc. (LGE), Zenith's majority stockholder,
for LGE's support and participation in the plan. Under the plan,
LGE will convert approximately $200 million of Zenith obligations
to LGE into common stock of the company, representing
100 percent of the equity in the restructured Zenith. In addition,
approximately $210 million of claims held by LGE will be
exchanged for certain Zenith manufacturing assets in Mexico and
secured notes due 2008 on which interest may be paid in kind
under certain circumstances. LGE will provide an additional $60
million of credit support to help finance the implementation of
the plan. Zenith and LGE are in discussions with third-party
lenders about additional financing.
The plan provides for current holders of the company's
6-1/4% convertible subordinated debentures to receive $40 million
of new 6-1/4% subordinated debentures maturing in 2010. It is
currently contemplated that the claims of all other creditors will
either not be impaired by the plan or be consensually restruc-
tured. The restructuring will reduce Zenith's outstanding debt by
approximately $250 million.
Under the plan, all outstanding common stock will be
canceled, and holders of common stock will receive no distribution.
Zenith will file the restructuring plan with the Securities and
Exchange Commission shortly and thereafter solicit acceptance of the
plan. Upon receiving the necessary level of acceptance, Zenith intends
to initiate a prepackaged reorganization proceeding under Chapter 11.
Completing the plan will permit Zenith to emerge from the reorganization
as a stronger, revitalized company before year-end 1998.
"Zenith's future depends on a comprehensive financial
and operational restructuring," Gannon said. "Our plan will
permit us to restructure credit agreements, reduce debt and operating
costs, and make the operational changes necessary to position
Zenith for future growth and profitability. A prepackaged
reorganization is our best alternative because it will allow us to
complete the process quickly and minimize the impact of our
restructuring on our vendors, customers and employees."
OPERATIONAL RESTRUCTURING
In connection with the financial restructuring, Zenith
also is implementing a broad operational restructuring plan
designed to leverage Zenith's technology, brand and distribution
strengths. "We will make fundamental changes in the way Zenith
does business," Gannon said. "That means focusing on our high-tech
engineering talents and our strong brand name, while
de-emphasizing costly manufacturing operations."
A key element of the plan is to outsource more products
and components. For example, while continuing its leading-edge
technology developments, Zenith plans to purchase certain
finished goods from LGE, which has agreed in principle to buy
several of Zenith's Reynosa, Mexico, TV plants through an
exchange of debt for those assets. Zenith also said it is seeking
buyers and/or strategic alliances for other ongoing businesses,
including its color TV picture tube and computer display tube
operations in Melrose Park, Ill., and its wood cabinet and
projection TV operations in Juarez, Mexico.
The operational restructuring also will involve maintaining
Zenith's strong research and engineering capabilities, capitalizing
on its patented digital television technologies, focusing on
more profitable consumer electronics product segments and
distribution channels, enhancing customer service and parts
operations, and expanding its accessories business. Additionally,
the company is seeking an investor for Zenith's digital set-top box
and cable modem Network Systems business.
John Koo, president and chief executive officer of LG Electronics,
said, "Zenith is an important part of LG's North American
strategy, and we support Zenith's decision to seek a prepackaged
reorganization as a prudent and efficient way to restore Zenith to
operational and financial health. Jeff Gannon and his management
team have developed a business plan that we believe is the right one
to return Zenith to a position of strength and technological leadership."
Upon completion of the reorganization, the company will be
a subsidiary of LG Electronics with Gannon continuing as Zenith
president and CEO. Gannon and his management team will continue
to lead the U.S.-based company.
The restructuring is subject to a number of conditions,
including definitive documentation and receipt of necessary approvals
from Zenith creditors and the court presiding over the prepackaged
plan. LGE's support is subject to Zenith securing additional financing,
executing its business plan and other conditions. In addition,
LGE's ability to participate fully in the proposed restructuring
remains subject to approval by Republic of Korea regulatory
authorities. There can be no assurance that the proposed
restructuring will be consummated or that completion of such
restructuring will not be delayed.
Zenith, based in Glenview, Ill., is a leading developer,
manufacturer and marketer of electronic entertainment products. Zenith's
largest stockholder is LG Electronics, a global leader in consumer
electronics with operations in 180 countries and annual sales of more
than $9 billion. Together with its affiliate LG Semicon, LGE owns 55
percent of the company's outstanding shares. LGE acquired its majority
interest in November 1995.
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CONTACTS:
Media:
John Taylor, Zenith (847) 391-8181;
Robert Mead, BSMG Worldwide (212) 445-8208
Investors:
Kevin Brindley, Zenith (847) 391-7010;
Mark Valenta, BSMG Worldwide (847) 391-7010
LG Electronics:
Ian Woods, LGE (847) 391-7052;
Andrew Brimmer, Abernathy MacGregor (212) 371-5999
Certain statements in this announcement, such as statements regarding
the company's strategies, plans, objectives and expectations, are
forward-looking statements that involve known and unknown risks,
uncertainties and other factors which may cause the actual results of the
company or of its efforts to execute a business and financial restructuring
to be materially different from any future results expressed or
implied by such forward-looking statements. Such factors include, among
others, general economic and business conditions, the effect of
competition in the markets served by the company, the availability and
terms of additional financing for the company, the actions of the company's
existing creditors and majority stockholder, the ability of the company
and LGE to secure necessary Korean and U.S. governmental approvals
with respect to the restructuring plan, and other factors referred to in
the company's 1997 Annual Report on Form 10-K. Given these uncertainties,
undue reliance should not be placed on any forward-looking statement
contained herein.
